<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996
REGISTRATION NO. 333-06609
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SPRINT SPECTRUM L.P.
(EXACT NAME OF CO-REGISTRANT ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 48-1165245
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
---------------
SPRINT SPECTRUM FINANCE CORPORATION
(EXACT NAME OF CO-REGISTRANT ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 43-1746537
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
---------------
4717 GRAND AVENUE--FIFTH FLOOR JOSEPH M. GENSHEIMER, ESQ.
KANSAS CITY, MISSOURI 64112 SPRINT SPECTRUM HOLDING COMPANY, L.P.
(816) 559-1000 4717 GRAND AVENUE--FIFTH FLOOR
(ADDRESS, INCLUDING ZIP CODE, AND KANSAS CITY, MISSOURI 64112
TELEPHONE NUMBER, (816) 559-1000
INCLUDING AREA CODE, OF EACH (NAME, ADDRESS, INCLUDING ZIP CODE,
REGISTRANT'S PRINCIPAL EXECUTIVE AND TELEPHONE NUMBER,
OFFICES) INCLUDING AREA CODE, OF AGENT FOR
SERVICE)
---------------
COPIES TO:
JOHN B. TEHAN, ESQ. JONATHAN A. SCHAFFZIN, ESQ.
SIMPSON THACHER & BARTLETT DANIEL J. ZUBKOFF, ESQ.
425 LEXINGTON AVENUE CAHILL GORDON & REINDEL
NEW YORK, NEW YORK 10017 80 PINE STREET
(212) 455-2000 NEW YORK, NEW YORK 10005
(212) 701-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As promptly
as practicable after this Registration Statement becomes effective.
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, 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 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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
Cross Reference Sheet pursuant to Rule 404(a) of the Securities Act of 1933
and Item 501(b) of Regulation S-K showing the location or heading in the
Prospectus of the Information required by Part I of Form S-1.
<TABLE>
<CAPTION>
ITEM FORM S-1 CAPTION HEADING OR LOCATION IN PROSPECTUS
---- ---------------- ---------------------------------
<C> <S> <C>
1. Outside Front Cover of
Prospectus.................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Prospectus Summary; Risk Factors;
Selected Historical and Pro Forma
Financial Data
4. Use of Proceeds................ Use of Proceeds
5. Determination of Offering
Price......................... *
6. Dilution....................... *
7. Selling Security Holders....... *
8. Plan of Distribution........... Underwriting
9. Description of Securities to be
Registered.................... Description of the Notes; Certain
Federal Income Tax Consequences
10. Interests of Named Experts and
Counsel....................... *
11. Information with Respect to the
Registrants................... Prospectus Summary; Risk Factors; The
Company; Capitalization; Selected
Historical and Pro Forma Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships and
Related Transactions; Principal
Security Holders; The Partnership
Agreements; Description of Vendor
Contracts and Financing; Description of
the Notes; Certain Federal Income Tax
Consequences; Underwriting; Financial
Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... *
</TABLE>
- - --------
* Omitted because inapplicable or the answer is in the negative.
<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 SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 30, 1996
PROSPECTUS
- - ----------
[LOGO OF SPRINT(R) APPEARS HERE]
$650,000,000 GROSS PROCEEDS
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
$150,000,000 % SENIOR NOTES DUE 2006
$ % SENIOR DISCOUNT NOTES DUE 2006
----------
Sprint Spectrum L.P. ("Sprint Spectrum") and Sprint Spectrum Finance
Corporation ("FinCo" and, together with Sprint Spectrum, the "Issuers") are
offering (the "Offering") $150,000,000 aggregate principal amount of their %
Senior Notes due 2006 (the "Senior Notes") and $ aggregate principal amount
at maturity of their % Senior Discount Notes due 2006 (the "Senior Discount
Notes" and, together with the Senior Notes, the "Notes"). While Sprint Spectrum
and FinCo are jointly and severally liable for the obligations under the Notes,
FinCo, a wholly-owned subsidiary of Sprint Spectrum, has only nominal assets,
does not conduct any operations and was formed solely to act as a co-issuer of
the Notes. The Senior Discount Notes will be issued at a discount to their
aggregate principal amount at maturity and will generate gross proceeds to the
Issuers of approximately $500,000,000. The yield to maturity of the Senior
Discount Notes is % (computed on a semi-annual bond equivalent basis),
calculated from , 1996. See "Certain Federal Income Tax Consequences."
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NOTES.
----------
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>
PRINCIPAL UNDERWRITING
AMOUNT AT PRICE TO DISCOUNTS AND PROCEEDS TO
MATURITY PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Senior Note........ % % % %
- - ----------------------------------------------------------------------------------
Total.................. $ $ $ $
- - ----------------------------------------------------------------------------------
Per Senior Discount
Note.................. % % % %
- - ----------------------------------------------------------------------------------
Total.................. $ $ $ $
</TABLE>
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(1) Plus accrued interest, if any, in the case of the Senior Notes, and accrued
original issue discount, if any, in the case of Senior Discount Notes, in
each case from , 1996.
(2) The Issuers, jointly and severally, have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Issuers estimated at $ .
----------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by the Underwriters, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject any orders in whole or in part. It is expected that
delivery of the Notes offered hereby will be made in New York, New York on or
about , 1996.
----------
Joint Book-Running Managers
LEHMAN BROTHERS MERRILL LYNCH & CO.
----------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
----------
The date of this Prospectus is , 1996.
<PAGE>
(continued from previous page)
Cash interest on the Senior Notes will accrue at a rate of % per annum and
will be payable semi-annually in arrears on each and , commencing
, 1997. Cash interest will not accrue or be payable on the Senior
Discount Notes prior to , 2001. Thereafter, cash interest on the Senior
Discount Notes will accrue at a rate of % per annum and will be payable
semi-annually in arrears on each and , commencing , 2002.
The Notes will be redeemable at the option of the Issuers, in whole or in
part, at any time on or after , 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption.
In addition, prior to , 1999, the Issuers may redeem up to 35% of the
originally issued principal amount of Senior Notes and up to 35% of the
originally issued principal amount at maturity of Senior Discount Notes at a
redemption price equal to % of the principal amount of the Senior Notes so
redeemed, plus accrued and unpaid interest, if any, thereon to the redemption
date and % of the Accreted Value (as defined) at the redemption date of the
Senior Discount Notes so redeemed with the net proceeds of one or more Public
Equity Offerings (as defined) of Common Equity Interests, of Sprint Spectrum,
Sprint Spectrum Holding Company, L.P. ("Holdings") or a Special Purpose
Corporation (as defined) in any such case, resulting in gross proceeds of at
least $100 million; provided that at least 65% of the originally issued
principal amount of Senior Notes and 65% of the originally issued principal
amount at maturity of Senior Discount Notes would remain outstanding
immediately after giving effect to such redemption. Holdings is the general
partner of, and owns a greater than 99% general partnership interest in,
Sprint Spectrum.
The Notes will be senior unsecured joint and several obligations of the
Issuers ranking pari passu in right and priority of payment with all existing
and future indebtedness of the Issuers that is not by its terms subordinated
in right and priority to the Notes. A substantial portion of the assets of
Sprint Spectrum on a consolidated basis will be owned by Sprint Spectrum's
subsidiaries and, accordingly, claims of holders of the Notes will be
effectively subordinated to claims of creditors (including trade creditors) of
such subsidiaries. Sprint Spectrum and its subsidiaries are expected to incur
substantial additional indebtedness following the Offering, including up to
$3.1 billion under vendor credit facilities and $2.0 billion under a bank
credit facility.
In the event of a Change of Control (as defined) the Issuers will be
obligated to make an offer to purchase all outstanding Notes at a purchase
price equal to (i) 101% of the principal amount thereof, in the case of the
Senior Notes, plus accrued and unpaid interest, if any, thereon to the date of
purchase and (ii) (a) 101% of the Accreted Value thereof, in the case of the
Senior Discount Notes, if purchased on or before , 2001, and (b) 101% of
the principal amount at maturity of the Senior Discount Notes, plus accrued
and unpaid interest, if any, thereon, if purchased after , 2001. In
addition, the Issuers will, subject to certain conditions, be obligated to
make an offer to purchase Notes with the net cash proceeds of certain sales or
other dispositions of assets. See "Description of the Notes--Certain
Covenants." There can be no assurance that the Issuers will have the financial
resources necessary to purchase the Notes upon a Change of Control.
The Senior Notes and the Senior Discount Notes will each be represented by
one or more global securities (collectively, the "Global Securities") in
registered form, which will be deposited with a custodian for, and registered
in the name of, The Depository Trust Company ("DTC") or its nominee in New
York, New York. Beneficial interests in the Global Securities will be
represented, and transfers thereof will be effected, through book-entry
accounts maintained by DTC and its participants. Except as described herein,
Notes in definitive form will not be issued. See "Description of the Notes--
Book-Entry; Delivery and Form." The Issuers do not intend to list the Notes on
any national securities exchange or include the Notes for quotation through an
inter-dealer quotation system.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, the term "Holdings" refers to Sprint Spectrum Holding
Company, L.P., and the term "Company" refers to Sprint Spectrum L.P. ("Sprint
Spectrum") and its direct and indirect subsidiaries, including Sprint Spectrum
Finance Corporation ("FinCo"), WirelessCo, L.P. ("WirelessCo"), Sprint Spectrum
Realty Company, L.P. ("RealtyCo") and Sprint Spectrum Equipment Company, L.P.
("EquipmentCo"). Sprint Spectrum and FinCo are collectively referred to as the
"Issuers." See "The Company" and "Business--General." For the financial periods
presented herein, substantially all wireless operations of the Company and
Holdings have been conducted at Holdings and all assets, with the exception of
the interest in American PCS, L.P. ("APC") and the PCS (as defined under "--The
Company") licenses which are held by WirelessCo, are held at Holdings. Holdings
and the Company are reorganizing (the "Reorganization") operations so that the
assets used in the Company's PCS business are owned by subsidiaries of Sprint
Spectrum and the investment in APC will be transferred to Holdings. Effective
July 1, 1996, Holdings' assets used in the Company's PCS business were
transferred to subsidiaries of Sprint Spectrum; the transfer of the interest in
APC is expected to occur after the Offering. Unless otherwise indicated, all
information in this Prospectus assumes that all elements of the Reorganization
have occurred. Certain of the statements contained in this summary and
elsewhere in this Prospectus, including information with respect to the
Company's expected PCS operations and buildout, its strategy for its PCS
business and related financings are forward-looking statements. See "Risk
Factors" for a discussion of important factors that could affect such matters.
The term population equivalents ("Pops") means the Donnelley Marketing Service
estimate of the December 31, 1995 population of a geographic area. A glossary
of additional terms appearing herein has been included in this Prospectus. See
"Glossary of Selected Terms."
THE COMPANY
Sprint Spectrum intends to become a leading provider of wireless
communications products and services in the United States. The Company is the
largest broadband wireless personal communications services ("PCS") company in
the United States in terms of total licensed Pops, with licenses (including
those to be contributed to the Company and those owned by licensees that have
affiliated or have agreed to affiliate with the Company) to provide service in
33 major trading areas ("MTAs") covering 190.9 million Pops (73% of the total
United States population), including eight of the nation's ten largest MTAs.
The Company intends to initiate the commercial launch of its service in the
fourth quarter of 1996 with service in all MTAs by the end of the first quarter
of 1997. Pop coverage at the end of the first quarter of 1997 is expected to
reach approximately 60% in the aggregate across all of the Company's markets.
The timing of launch in individual markets will be determined by various
factors, principally zoning and microwave relocation factors, equipment
delivery schedules and local market and competitive considerations. The Company
intends to continue to expand its coverage in its PCS markets to reach
approximately 70% of the Pops in its existing license areas in the aggregate by
the end of 1997. Thereafter, the Company will evaluate further coverage
expansion on a market-by-market basis, eventually targeting coverage of 80% of
the Pops in its existing license areas in the aggregate, thereby substantially
completing its planned network buildout of its existing license areas.
The general partner of Sprint Spectrum is Holdings, a limited partnership
formed by Sprint Enterprises, L.P., which has a 40% partnership interest in
Holdings, TCI Telephony Services, Inc. (as successor in interest to TCI Network
Services), which has a 30% partnership interest in Holdings, and Comcast
Telephony Services and Cox Telephony Partnership, each of which has a 15%
partnership interest in Holdings (collectively, the "Partners"). Each Partner
is both a general partner holding 99% of its interest as a general partner and
a limited partner holding 1% of its interest as a limited partner. Holdings has
a greater than 99% general partnership interest in the Company. The Partners
are subsidiaries of, respectively, Sprint Corporation ("Sprint"), Tele-
Communications, Inc. ("TCI"), Comcast Corporation ("Comcast") and Cox
Communications, Inc. ("Cox" and, together with Sprint, TCI and Comcast, the
"Parents").
3
<PAGE>
The Company is at an early stage of development, has not commenced commercial
PCS operations and has no revenues from operations. The Company will require
significant funds for development, construction, testing and deployment of its
PCS network before commencement of commercial operations. The Partners have
agreed to contribute up to an aggregate of $4.2 billion of equity to Holdings,
to the extent required by the annual budgets of Holdings through fiscal 1999 as
approved by the Partners. As of March 31, 1996, approximately $2.4 billion had
been contributed to Holdings, of which $2.2 billion had been contributed to the
Company and the remaining $0.2 billion had been contributed or advanced to APC.
The Company currently intends to obtain up to $1.4 billion of additional equity
following March 31, 1996 (of which up to $0.9 billion as of March 31, 1996 is
committed to be provided to the Company by the Parents to the extent required
by the Company to fund any projected cash shortfall), resulting in $3.6 billion
in aggregate invested equity capital in the Company. See "Description of Vendor
Contracts and Financing--Capital Contribution Agreement." There can be no
assurance that any additional capital will be obtained in the form of equity
from the Partners or otherwise. See "--Network Buildout and Financing Plan."
The Company was the successful bidder for 29 PCS licenses in the Federal
Communications Commission's ("FCC") A Block and B Block PCS auction which
concluded in March 1995. The Company's 29 wholly-owned markets cover 150.3
million Pops and include, among others, the New York, San Francisco, Detroit,
Dallas/Fort Worth and Boston/Providence MTAs. Additionally, Cox has agreed to
contribute to the Company, upon FCC approval which is pending, a PCS license
for the Omaha MTA that it purchased in the broadband PCS auction in March 1995.
In order to increase its Pop coverage, the Company has affiliated and expects
to continue to affiliate with other PCS providers, including those in which
Holdings or affiliates of its Partners have an interest. Pursuant to
affiliation agreements, each affiliated PCS service provider will be included
in the Company's national network and will use the Sprint(R) (a registered
trademark of Sprint Communications Company, L.P.) brand name. Each affiliated
PCS provider is expected to pay to the Company an affiliation fee, agree to
adhere to certain network technical standards and agree to provide certain
wireless communication products offered by the Company. Holdings owns a 49%
limited partnership interest in APC, which owns a PCS license for, and operates
a broadband PCS system in, the Washington D.C./Baltimore MTA. APC has
affiliated with Sprint Spectrum and is marketing its products and services
under the Sprint brand name. APC launched its PCS service in November 1995 and
is the nation's first commercially operational PCS system. As of May 15, 1996,
APC had approximately 80,000 subscribers. See "Business--General" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Holdings also expects to acquire a 49% limited partnership
interest in Cox California PCS, L.P. ("Cox-California"), a partnership that
will be formed to hold a PCS license for the Los Angeles-San Diego MTA covering
21.5 million Pops. Cox, which currently owns this license, has agreed to
contribute the license to Cox-California and will manage and control Cox-
California. The Company expects to sign an affiliation agreement with Cox-
California by the end of the third quarter of 1996. At the same time, the
Company also expects to affiliate with, and provide various services to,
PhillieCo, L.P. ("PhillieCo"), a limited partnership organized by and among
subsidiaries of Sprint, TCI and Cox, that owns a PCS license for the
Philadelphia MTA. In addition, as part of an overall strategy to increase the
Company's Pop coverage, either or both of Holdings and the Company may elect to
bid on, or affiliate with or invest in other entities who are bidding on, PCS
licenses to be awarded in the FCC auction of PCS licenses for the D, E and F
Blocks.
4
<PAGE>
The table below presents the owned and affiliated Pops after giving effect to
such affiliation arrangements:
<TABLE>
<CAPTION>
1995 AVERAGE LICENSE
POPULATION PURCHASE PRICE
OWNED/AFFILIATED # OF MTAS IN MTA(S) PER 1990 POP(1)
---------------- --------- ------------- ---------------
(MILLIONS)
<S> <C> <C> <C>
Owned.................................... 29 150.3 $14.54
Omaha (to be contributed by Cox)(2)...... 1 1.7 $ 3.06
Affiliated:
APC (Baltimore/Washington)(3).......... 1 8.3 $13.16
Cox-California (Los Angeles/San Die-
go)(4)................................ 1 21.5 $13.16
PhillieCo (Philadelphia)(5)............ 1 9.1 $ 9.52
--- -----
Total................................ 33 190.9
=== =====
</TABLE>
- - --------
(1) Cost to winning bidder in FCC auction(s) or in connection with the award of
Pioneer's Preference license (as defined under "Business--Regulation").
(2) Contribution will be credited towards capital contributions required of Cox
under the Holdings Partnership Agreement (as defined under "The Partnership
Agreements") to the same extent as if Cox had made a cash contribution in
an amount equal to the sum of (i) $995,564, together with interest at the
annual rate of 13.4% computed from November 17, 1994 through the date the
Omaha license is contributed, plus (ii) $4,062,400, together with interest
at the annual rate of 13.4% computed from June 30, 1995 through the date
the Omaha license is contributed.
(3) Holdings owns a 49% limited partnership interest in APC, which has signed
an affiliation agreement with the Company.
(4) Holdings intends to acquire a 49% limited partnership interest in, and the
Company expects to sign an affiliation agreement with, Cox-California.
(5) Owned by subsidiaries of Sprint, TCI and Cox. The Company expects to sign a
services and affiliation agreement with PhillieCo.
5
<PAGE>
STRATEGY
The Company intends to achieve its objective of becoming a leading provider
of wireless communications products and services in the United States by
employing strategies for network construction, service offering, branding and
marketing which utilize the Company's competitive advantages. These competitive
advantages are expected to include:
. State-of-the-art technology. The Company is implementing a state-of-the-
art PCS network using Code Division Multiple Access ("CDMA") digital
technology which, the Company believes, provides benefits relative to
current analog systems. The Company believes that its digital technology
will increase system capacity by approximately 7 to 10 times, offer
better call quality and clarity and provide a wider variety of advanced
features and applications.
. National network. Sprint Spectrum intends to offer wireless service on a
national basis with a single technology (CDMA) operating on a uniform
spectrum (1.9 GHz), thereby providing consistent functionality and high
quality service. The Company currently owns (including the Omaha license
to be contributed to the Company), or expects to have affiliate
relationships with PCS providers who own, PCS licenses covering 190.9
million Pops and intends to pursue additional coverage on a market-by-
market basis through license acquisitions and affiliation or resale
agreements with other CDMA-based PCS providers. Together the Company and
other PCS licensees that have announced their intentions to implement
CDMA technology, have licenses covering territories representing
approximately 89% of the United States population. The Company expects to
gain cost advantages in purchasing power, operations and marketing
because of the national scope and operating scale of its network. The
Company believes it will have the flexibility to utilize pricing and
promotional programs on a national basis to provide incentives for
customer subscription and increased usage.
. National brand. The Company will market and promote its wireless products
and services under the Sprint brand which is one of the most widely
recognized and respected brands in the telecommunications market. The
Company expects that the use of the Sprint brand will build consumer
confidence and accelerate consumer acceptance of the Company's products
and services.
. Strong Parent sponsorship. The Company intends to capitalize on the
communications expertise of the Parents, including local exchange carrier
services, cable television services and long distance telephone services.
In addition, the size and breadth of the customer base of each Parent
provides a key advantage for the Company's distribution and marketing
efforts. Subject to certain exceptions, the Parents and the Company
intend to cross-market the Company's wireless services with the long
distance, local telephone and cable-based entertainment services of the
Parents in order to accelerate subscriber growth and increase retention
rates while improving overall customer satisfaction. Sprint has a
combined customer base of 14 million long distance and local telephone
subscribers and TCI, Comcast and Cox (collectively, the "Cable Parents")
have 20 million cable television customers. See "Business--Relationship
with Partners and Parents."
6
<PAGE>
NETWORK BUILDOUT AND FINANCING PLAN
The Company intends to initiate the commercial launch of its service in the
fourth quarter of 1996 with service in all MTAs by the end of the first quarter
of 1997. Pop coverage at the end of the first quarter of 1997 is expected to
reach approximately 60% in the aggregate across all of the Company's markets.
The timing of launch in individual markets will be determined by various
factors, principally zoning and microwave relocation factors, equipment
delivery schedules and local market and competitive considerations. The Company
intends to continue to expand its coverage in its PCS markets to reach
approximately 70% of the Pops in its existing license areas in the aggregate by
the end of 1997. Thereafter, the Company will evaluate further coverage
expansion on a market-by-market basis, eventually targeting coverage of 80% of
the Pops in its existing license areas in the aggregate, thereby substantially
completing its planned network buildout of its existing license areas.
The Company is developing a network infrastructure, including network
management systems, to support a range of wireless services, including voice,
data, messaging, paging and facsimile. A planning and engineering team,
comprised of approximately 1,500 engineering and operations employees and
thousands of independent contractors, consultants, agents and other third
parties, is designing and constructing the Company's network based on national
and regional marketing product requirements to meet the Company's targets for
consistency, uniformity and reliability.
The Company has selected Lucent Technologies Inc. ("Lucent") and Northern
Telecom Inc. ("Nortel" and, together with Lucent, the "Vendors"), two of the
leading telecommunications equipment manufacturers, to construct the Company's
wireless network. The Vendors were selected because of their extensive
experience in wireless technology and their willingness to deliver against
specifications developed by the Company. The Company has entered into
procurement and services contracts (the "Procurement Contracts") with each of
Lucent and Nortel pursuant to which the Vendors will bear a significant portion
of the responsibility for the construction of the Company's network. To
mitigate against a substantial portion of the risks of completion delay and
performance of the network and to ensure the Company has received competitive
terms and conditions, the Procurement Contracts include, among other things,
deferred payment schedules, liquidated damages provisions, extended warranty
periods and "most favored customer" status.
The buildout of the Company's PCS network and the marketing and distribution
of the Company's PCS products and services will require substantial capital.
The Company currently estimates that its capital requirements (capital
expenditures, the cost of its existing licenses, working capital, debt service
requirements and anticipated operating losses) for the period from inception
through the end of 1998 (assuming substantial completion of the Company's
network buildout to cover 80% of the Pops in its current license areas in the
aggregate by the end of 1998), will total approximately $7.9 billion (of which
approximately $2.2 billion had been expended as of March 31, 1996). The Company
will also require substantial additional capital for new license acquisitions
or investments in entities making license acquisitions (if any) and, after
1998, for coverage expansion, volume-driven network capacity and other capital
expenditures for existing and new license areas (if any), working capital, debt
service requirements and anticipated further operating losses. The Company will
have certain commitments that must be funded in any event, including lease
obligations for cell and switch sites, minimum purchase obligations under the
Procurement Contracts and amortization under the Secured Financing (as defined
in the second succeeding paragraph). Actual amounts of the funds required may
vary materially from these estimates and additional funds would be required in
the event of significant departures from the current business plan, new license
acquisitions, unforeseen delays, cost overruns, unanticipated expenses,
regulatory changes, engineering design changes and other technological risks.
The Company currently has no sources of revenue to meet its capital
requirements. The Partners have agreed to contribute up to an aggregate of $4.2
billion of equity to Holdings to the extent required by the annual budgets of
Holdings through fiscal 1999 as approved by the Partners. As of March 31, 1996,
approximately $2.4 billion had been contributed to Holdings, of which $2.2
billion had been contributed to the Company and the remaining $0.2 billion had
been contributed or advanced to APC. The Company currently intends to obtain up
to $1.4 billion of additional equity following March 31, 1996, resulting in
$3.6 billion in aggregate invested equity capital in the Company, although
there can be no assurance that any additional capital will be obtained in the
form of equity from the Parents or otherwise. The Parents have agreed to make
available or cause Holdings to make available to the Company up to $0.9 billion
of such additional equity, to the extent required by the Company to fund any
projected cash shortfall. Such $0.9 billion is committed under a Capital
Contribution
7
<PAGE>
Agreement among Sprint Spectrum and the Parents that provides for $1.0 billion
in aggregate equity commitments (less amounts of cash equity contributed to
Sprint Spectrum after December 31, 1995, including amounts invested in Sprint
Spectrum to fund APC prior to its transfer to Holdings). The Company's business
plan and the financial covenants and other terms of the Secured Financing will
require such additional equity financing prior to the end of 1998, absent a new
financing source. The portion of the $4.2 billion not invested in the Company
that may be available to Holdings from the Partners may be used by Holdings to
fund Holdings' other affiliate commitments, to make other wireless investments
and/or to make new license acquisitions. See "Risk Factors--Substantial Capital
Requirements and Liquidity; Highly Leveraged Capital Structure." See also
"Description of Vendor Contracts and Financing--Capital Contribution Agreement"
and "The Partnership Agreements--Holdings Partnership Agreement--Capital
Contributions" for a discussion of the equity capital commitments to Holdings
and Sprint Spectrum.
Sprint Spectrum has obtained commitment letters for up to an aggregate of
$5.1 billion of senior secured loans from certain third-parties. Sprint
Spectrum has obtained a commitment letter from Nortel in which Nortel has
committed to provide up to $1.3 billion in senior secured loans (the "Nortel
Financing") to finance purchases of Nortel's PCS equipment and related
services. Sprint Spectrum has also obtained a commitment letter from Lucent to
provide up to $1.8 billion in senior secured loans (the "Lucent Financing" and,
together with the Nortel Financing, the "Vendor Financing") to finance
purchases of Lucent's PCS equipment and related services. Under the Procurement
Contracts, the Company is required to purchase minimum amounts of equipment and
services from each Vendor. Sprint Spectrum has also obtained a commitment
letter from Chase Securities Inc. and The Chase Manhattan Bank ("Chase") in
which Chase has committed to provide a $2.0 billion fully underwritten senior
secured credit facility (the "Bank Credit Facility" and, together with the
Vendor Financing, the "Secured Financing") to finance working capital, capital
expenditures, operating losses and other partnership purposes. There can be no
assurance that the conditions to the commitments under the Vendor Financing or
the Bank Credit Facility will be met. See "Description of Vendor Contracts and
Financing."
The following table describes the estimated sources and uses of capital by
the Company since inception and through 1998, assuming the Company covers
approximately 80% of the Pops in its current license areas in the aggregate,
thereby substantially completing the planned buildout of its PCS network. See
"Business--Network Buildout." This table is based on certain assumptions as to
the terms and covenant requirements of the Secured Financing and as to how the
Company will elect to use available amounts under those facilities. See "Use of
Proceeds" and "Description of Vendor Contracts and Financing."
<TABLE>
<CAPTION>
SOURCES:
-------- (IN BILLIONS)
<S> <C>
Equity Contributions Received(1)............................... $2.2
Vendor Financing(2)............................................ 2.6
Bank Credit Facility(3)........................................ 1.1
Net Proceeds to the Company from the Offering.................. 0.6
Unfunded Equity and Future Capital Required(4)................. 1.4
----
Total Sources................................................ $7.9
====
USES:
Existing PCS Licenses.......................................... $2.1
PCS Network Buildout........................................... 3.8
Cash Debt Service Requirements(5).............................. 0.2
Operating Losses and Working Capital........................... 1.8
----
Total Uses................................................... $7.9
====
</TABLE>
- - --------
(1) As of March 31, 1996.
(2) Sprint Spectrum has obtained commitments from Nortel for an aggregate $1.3
billion secured credit facility and from Lucent for an aggregate $1.8
billion secured credit facility. Of this aggregate amount of $3.1 billion
of Vendor Financing, the Company expects to have borrowed approximately
$2.6 billion prior to December 31, 1998, based upon availability
thereunder.
(3) Sprint Spectrum has obtained a commitment from Chase to provide a $2.0
billion fully underwritten secured credit facility, of which $1.1 billion
is expected to have been drawn prior to December 31, 1998, based upon
availability thereunder.
(4) Of such amount, approximately $1.0 billion of additional financing is
expected to be obtained in the form of equity from Holdings. The Parents
have committed to provide, or cause Holdings to provide, $1.0 billion of
financing subsequent to December 31, 1995, of which $0.9 billion was
available at March 31, 1996. See "Description of Vendor Contracts--Capital
Contribution Agreement." The Partners' capital contribution commitments are
to Holdings and are subject to the conditions described above and under
"The Partnership Agreements--Holdings Partnership Agreement--Capital
Contributions." The Company's business plan assumes that additional
required capital will be obtained in the form of equity (from the Partners
or other sources), but a portion of it may be obtained through other means
including the following: debt offerings, bank financing and vendor
financing. There can be no assurance that these sources will be available
when needed or on terms acceptable to the Company.
(5) Includes interest expense and assumes certain interest rates.
8
<PAGE>
THE OFFERING
Securities Offered.......... $150,000,000 aggregate principal amount of %
Senior Notes due 2006 (the "Senior Notes").
$ aggregate principal amount at maturity of
% Senior Discount Notes due 2006 (the "Senior
Discount Notes" and, together with Senior Notes,
the "Notes"). The Senior Discount Notes will be
issued at a discount to their aggregate principal
amount at maturity and will generate gross pro-
ceeds to the Issuers of approximately
$500,000,000. The yield to maturity of the Senior
Discount Notes will be % (computed on a semi-
annual bond equivalent basis), calculated from
, 1996. See "Certain Federal Income Tax
Consequences."
Issuers..................... The Notes will be joint and several obligations
of the Issuers. Sprint Spectrum will receive all
of the net proceeds from the Offering.
Non-Recourse to Holdings,
the Partners and the
Parents....................
The Senior Notes and the Senior Discount Notes
are non-recourse to Holdings, the Partners and
the Parents.
Maturity Date............... , 2006.
Ranking.....................
The Notes will rank pari passu in right of
payment and priority with all other existing and
future indebtedness of the Issuers that is not by
its terms subordinated in right of payment and
priority to the Notes and will rank senior in
right of payment to all indebtedness of the
Issuers that is expressly subordinated to the
Notes. A substantial portion of the assets of
Sprint Spectrum on a consolidated basis will be
owned by Sprint Spectrum's subsidiaries, and
accordingly, claims of holders of the Notes will
be effectively subordinated to claims of
creditors (including trade creditors) of such
subsidiaries, the amount of which are expected to
be substantial. See "Risk Factors--Structural
Subordination of the Notes to Subsidiary
Indebtedness; Asset Encumbrances."
Interest Rate and Payment
Dates: The Senior
Notes.................
Cash interest on the Senior Notes will accrue at
a rate of % per annum and will be payable
semi-annually in arrears on each and
, commencing , 1997.
The Senior Discount Cash interest will not accrue or be payable on
Notes... the Senior Discount Notes prior to , 2001.
Thereafter, cash interest on the Senior Discount
Notes will accrue at a rate of % per annum and
will be payable semi-annually in arrears on each
and , commencing , 2002.
Original Issue Discount..... For federal income tax purposes, the Senior Dis-
count Notes will be treated as having been issued
with "original issue discount" equal to the dif-
ference between the issue price of the Senior
Discount Notes and the sum of all cash payments
(whether denominated as
9
<PAGE>
principal or interest) to be made thereon. Each
holder of a Senior Discount Note must include as
gross income for federal income tax purposes a
portion of such original issue discount for each
day during each taxable year in which a Senior
Discount Note is held even though no cash inter-
est payments will be received prior to ,
2002. See "Certain Federal Income Tax
Consequences."
Optional Redemption.........
The Notes will be redeemable at the option of the
Issuers, in whole or in part, at any time on or
after , 2001 at the redemption prices set
forth under "Description of the Notes--Optional
Redemption," plus accrued and unpaid interest, if
any, thereon to the date of redemption. In addi-
tion, prior to , 1999, the Issuers may redeem
up to 35% of the originally issued principal
amount of Senior Notes and up to 35% of the orig-
inally issued principal amount at maturity of the
Senior Discount Notes at a redemption price equal
to % of the Senior Notes so redeemed, plus ac-
crued and unpaid interest, if any, thereon to the
redemption date and % of the Accreted Value at
the redemption date of the Senior Discount Notes
so redeemed, in each case with the net proceeds
of one or more Public Equity Offerings (as de-
fined under "Description of the Notes--Certain
Definitions") of Common Equity Interests (as de-
fined under "Description of the Notes--Certain
Definitions") of Sprint Spectrum, Holdings or a
Special Purpose Corporation (as defined under
"Description of the Notes--Optional Redemption"),
in either case, resulting in gross proceeds of at
least $100 million; provided that at least 65% of
the originally issued principal amount of Senior
Notes and 65% of the originally issued principal
amount at maturity of Senior Discount Notes would
remain outstanding immediately after giving ef-
fect to such redemption.
Change of Control...........
In the event of a Change of Control (as defined
under "Description of the Notes--Certain Defini-
tions"), the Issuers will be obligated to make an
offer to purchase all outstanding Notes at a pur-
chase price equal to (i) 101% of the principal
amount thereof, in the case of the Senior Notes,
plus accrued and unpaid interest, if any, thereon
to the purchase date and (ii)(a) 101% of the Ac-
creted Value thereof on the Change of Control
Payment Date, in the case of the Senior Discount
Notes, if the Change of Control Payment Date is
on or before , 2001, and (b) 101% of the
principal amount at maturity of the Senior Dis-
count Notes, plus accrued and unpaid interest, if
any, thereon to the purchase date, if the Change
of Control Payment Date is after , 2001.
See "Description of the Notes--Certain Cove-
nants--Change of Control" for a discussion of
such covenant and potential consequences atten-
dant to the existence of such covenant.
Asset Sale Offer............ The Issuers will, under certain circumstances, be
obligated to make an offer to purchase Notes with
the proceeds of certain asset sales at a purchase
price equal to (i) 100% of the principal amount
of the
10
<PAGE>
Senior Notes, plus accrued and unpaid interest,
if any, thereon to the purchase date and (ii)(a)
100% of the Accreted Value of the Senior Discount
Notes on the purchase date, if such date is on or
before , 2001, and (b) 100% of the princi-
pal amount of the Senior Discount Notes, plus ac-
crued and unpaid interest, if any, thereon to the
purchase date, if such date is after ,
2001. See "Description of the Notes--Certain Cov-
enants--Disposition of Proceeds of Asset Sales."
Certain Covenants...........
The indentures under which the Notes will be is-
sued (the "Indentures") will contain certain re-
strictive covenants, including (i) limitations on
additional indebtedness, (ii) limitations on re-
stricted payments, (iii) limitations on liens,
(iv) limitations on dividends and other payment
restrictions affecting Restricted Subsidiaries
(as defined under "Description of the Notes--Cer-
tain Definitions"), (v) limitations on equity in-
terests of Restricted Subsidiaries, (vi) limita-
tions on transactions with equity holders and af-
filiates, (vii) limitations on issuances of cer-
tain guarantees by Restricted Subsidiaries,
(viii) limitations on activities of the Issuers
and the Restricted Subsidiaries, (ix) limitations
on the disposition of proceeds of asset sales and
(x) limitations on designations of Unrestricted
Subsidiaries (as defined under "Description of
the Notes--Certain Definitions"). In addition,
the Indentures will limit the ability of the Is-
suers to consolidate, merge or sell all or sub-
stantially all of their assets. These covenants
are subject to important exceptions and qualifi-
cations. See "Description of the Notes--Certain
Covenants."
Use of Proceeds.............
The net proceeds to Sprint Spectrum from the sale
of the Notes offered hereby will be approximately
$631 million, after deducting estimated dis-
counts, commissions and offering expenses. The
Company intends to use the net proceeds from the
Offering to fund capital expenditures, including
the buildout of a nationwide PCS network, to fund
working capital as required and debt service re-
quirements, to fund operating losses and for
other partnership purposes. In addition, a por-
tion of the net proceeds may be used for new PCS
license acquisitions or investments in entities
owning PCS licenses. See "Use of Proceeds."
RISK FACTORS
Prospective investors should carefully consider, in addition to the other
information in this Prospectus, the information set forth under the heading
"Risk Factors" beginning on page 13 before purchasing the Notes offered hereby.
11
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents summary historical consolidated financial data
for the Company as of the dates and for the periods indicated. The consolidated
financial data for the period from October 24, 1994 to December 31, 1994 and
for the year ended December 31, 1995 were derived from the audited consolidated
financial statements of the Company. The consolidated financial data for the
quarters ended March 31, 1995 and March 31, 1996, respectively, and for the
cumulative period from October 24, 1994 to March 31, 1996 were derived from the
unaudited financial statements of the Company. Due to the development stage
nature of the Company, period-to-period comparisons of financial data are not
indicative of results for subsequent periods or the full year and should not be
relied upon as an indication of the future performance of the Company. The
following data should be read in conjunction with "Pro Forma Condensed
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.
The Company's historical consolidated financial information does not reflect
the Reorganization. To assist prospective investors, the pro forma and as
adjusted data set forth below reflect the historical financial information of
the Company as adjusted to give effect to (1) the Reorganization on a pro forma
basis as if it had occurred at the beginning of the periods presented or as of
the date presented and (2) the Reorganization and the Offering as if they had
occurred on March 31, 1996.
<TABLE>
<CAPTION>
FOR THE PRO FORMA
FOR THE CUMULATIVE FOR THE
PERIOD FROM PERIOD FROM REORGANIZATION
OCTOBER 24, OCTOBER 24, -------------------------
1994 FOR THE THREE 1994 FOR THE
(DATE OF FOR THE MONTHS ENDED (DATE OF FOR THE THREE MONTHS
INCEPTION) TO YEAR ENDED MARCH 31, INCEPTION) TO YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, ----------------- MARCH 31, DECEMBER 31, MARCH 31,
1994 1995 1995 1996 1996 1995 1996
------------- ------------ ------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(IN THOUSANDS):
Operating expenses:
General and
administrative........ $ 1,371 $ 1,221 $ 1,273 $ -- $ 2,592 $ 37,460 $ 19,862
Professional and legal
fees.................. 1,923 2,310 2,335 -- 4,233 26,849 10,862
Depreciation........... 38 47 47 -- 85 211 254
------- -------- ------- -------- -------- -------- --------
Total operating
expenses.............. 3,332 3,578 3,655 -- 6,910 64,520 30,978
Other income (expense):
Interest income........ 24 253 275 (67) 210 260 (358)
Other income........... -- -- -- -- -- 38 143
Equity in loss of
unconsolidated
partnership........... -- (46,206) (3,409) (36,232) (82,438) -- --
------- -------- ------- -------- -------- -------- --------
Total other income
(expense)............. 24 (45,953) (3,134) (36,299) (82,228) 298 (215)
------- -------- ------- -------- -------- -------- --------
Net loss................ $(3,308) $(49,531) $(6,789) $(36,299) $(89,138) $(64,222) $(31,193)
======= ======== ======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
---------- ---------- ----------
BALANCE SHEET DATA
(IN THOUSANDS):
<S> <C> <C> <C>
Assets:
Current assets............ $ 1,298 $ 4,974 $ 635,974(1)
Investment in PCS
licenses................. 2,124,594 2,124,594 2,124,594
Investment in
unconsolidated
partnership.............. 49,314 -- --
Note receivable--
unconsolidated
partnership.............. 83,655 -- --
Property, plant and
equipment (net).......... -- 76,129 76,129
Other assets.............. -- -- 19,000(1)
---------- ---------- ----------
Total assets.............. $2,258,861 $2,205,697 $2,855,697
========== ========== ==========
Liabilities and partners'
capital:
Current liabilities....... $ 456 $ 96,870 $ 96,870
Deferred compensation..... -- 4,247 4,247
Note payable to
affiliate................ 5,000 5,000 5,000
Long-term debt............ -- -- 650,000(2)
Limited partner interest
in consolidated
subsidiary............... 5,000 10,000 10,000
Partners' capital......... 2,248,405 2,089,580 2,089,580
---------- ---------- ----------
Total liabilities and
partners' capital........ $2,258,861 $2,205,697 $2,855,697
========== ========== ==========
</TABLE>
- - -------
(1) Reflects estimated net proceeds of $631 million and debt issuance costs of
$19 million from the Offering.
(2) Reflects gross proceeds of $650 million from the Offering before
underwriting discounts and commissions and expenses.
12
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the Notes offered hereby.
DEVELOPMENT STAGE COMPANY; ABSENCE OF COMMERCIAL OPERATIONS
The Company is at an early stage of development and, as of the date of this
Prospectus, has not commenced commercial PCS operations. The Company will
require expenditures of significant funds for development, construction,
testing and deployment of its PCS network before commencement of commercial
operations, which is expected to occur in the fourth quarter of 1996. Such
development, construction, testing and deployment of the Company's PCS network
are expected to place significant demands on the Company's managerial,
operational and financial resources. The Company's future performance will
depend, in part, on the Company's ability to implement its operational and
financial systems, to expand its employee base and to train and manage its
employees, including engineering, customer support, marketing and sales
personnel. There can be no assurance that the Company will be able to manage
operations successfully. Management's failure to guide and control growth
effectively (including implementing adequate systems, procedures and controls
in a timely manner) could have a material adverse effect on the Company. In
addition, there can be no assurance that the Company will be able to attract
or retain the highly qualified personnel required to operate its network
successfully. See "Business--General" and "Management."
OPERATING LOSSES AND NEGATIVE CASH FLOW FROM OPERATIONS
As of March 31, 1996, after giving effect to the Reorganization, the Company
had incurred cumulative net losses of approximately $98.7 million since its
inception. The Company expects to continue to incur significant operating
losses and to generate significant negative cash flow from operating
activities during the next several years while it develops and constructs its
PCS network and builds its customer base. If and when the Company has
successfully completed its network buildout and started to provide products
and services to customers, the Company's operating profitability will depend
upon many factors, including, among others, its ability to market its products
and services successfully, achieve its projected market penetration, manage
customer turnover rates effectively and price its products and services
competitively. There can be no assurance that the Company will achieve or
sustain operating profitability or positive cash flow from operating
activities in the future. If the Company does not achieve and maintain
operating profitability and positive cash flow from operating activities on a
timely basis, it may not be able to meet its debt service requirements,
including its obligations with respect to the Notes.
SUBSTANTIAL CAPITAL REQUIREMENTS AND LIQUIDITY; HIGHLY LEVERAGED CAPITAL
STRUCTURE
The buildout of the Company's PCS network and the marketing and distribution
of the Company's PCS products and services will require substantial capital.
The Company currently estimates that its capital requirements (capital
expenditures, the cost of its existing licenses, working capital, debt service
requirements and anticipated operating losses) for the period from inception
through the end of 1998 (assuming substantial completion of the Company's
network buildout to cover 80% of the Pops in its current license areas in the
aggregate by the end of 1998), will total approximately $7.9 billion (of which
approximately $2.2 billion had been expended as of March 31, 1996). The
Company will also require substantial additional capital for new license
acquisitions or investments in entities making new license acquisitions (if
any) and, after 1998, for coverage expansion, volume-driven network capacity
and other capital expenditures for existing and new license areas (if any),
working capital, debt service requirements and anticipated further operating
losses. Due to its highly leveraged capital structure, there can be no
assurance that the Company will be able to arrange additional financing to
fund capital requirements until the Company achieves positive operating cash
flow or that such financing will be on terms acceptable to the Company.
Following the receipt of additional financing, there can be no assurance that
the Company will be able to generate sufficient funds to meet fixed charges or
other obligations. The Company will have certain commitments that must be
funded in any event, including lease obligations for cell and switch sites,
minimum purchase obligations under the Procurement Contracts and amortization
under the Secured Financing. Actual amounts of the funds required may vary
materially from these
13
<PAGE>
estimates and additional funds would be required in the event of significant
departures from the current business plan, new license acquisitions,
unforeseen delays, cost overruns, unanticipated expenses, regulatory changes,
engineering design changes and other technological risks. The Company may
participate in the FCC auction of the PCS licenses of the D, E and F Blocks.
See "Use of Proceeds."
The Company currently has no sources of revenue to meet its capital
requirements. Sprint Spectrum has obtained commitments from Nortel for $1.3
billion and from Lucent for $1.8 billion of senior secured loans to finance
purchases of PCS equipment and related services and costs. Under the
Procurement Contracts, the Company is required to purchase minimum amounts of
equipment and services from each Vendor. The Nortel Financing requires, as a
condition to funding, the commitment of additional financing from third-
parties, including the Offering, the Bank Credit Facility or other debt
financing and equity financing. The Vendor Financing will contain numerous
conditions which must be satisfied in order for the Company to access funds.
Sprint Spectrum has also received a commitment from Chemical Bank to provide a
fully underwritten $2.0 billion Bank Credit Facility to finance working
capital, capital expenditures, operating losses and other partnership
purposes. The Bank Credit Facility will also include certain conditions to
borrowing availability. These commitments are subject to, among other things,
the execution and delivery of definitive documentation. The Offering is not
contingent upon the execution and delivery of such documentation. There can be
no assurance that the conditions to the Vendor Financing or the Bank Credit
Facility will be satisfied. The inability of the Company to access such funds
may have a material adverse effect on the Company, and there can be no
assurance that the Company will be able to obtain replacement funds from
alternative sources. See "Description of Vendor Contracts and Financing--
Vendor Financing" and "--Bank Credit Facility."
The Partners have agreed to contribute up to an aggregate of $4.2 billion of
equity to Holdings to the extent required by the annual budgets of Holdings
through fiscal 1999 as approved by the Partners. As of March 31, 1996,
approximately $2.4 billion had been contributed to Holdings, of which $2.2
billion had been contributed to the Company and the remaining $0.2 billion had
been contributed or advanced to APC. The Company currently intends to obtain
up to $1.4 billion of additional equity following March 31, 1996, resulting in
$3.6 billion in aggregate invested equity capital in the Company, although
there can be no assurance that any additional capital will be obtained in the
form of equity. The Parents have agreed to make available or cause Holdings to
make available to the Company up to $0.9 billion (as of March 31, 1996) of
such additional equity, to the extent required by the Company to fund any
projected cash shortfall. Such $0.9 billion is committed under a Capital
Contribution Agreement among Sprint Spectrum and the Parents that provides for
$1.0 billion in aggregate equity commitments (less amounts of cash equity
contributed to Sprint Spectrum after December 31, 1995, including amounts
invested in Sprint Spectrum to fund APC prior to its transfer to Holdings).
The Company's business plan and the financial covenants and other terms of the
Secured Financing will require such additional equity financing prior to the
end of 1998, absent a new financing source. The portion of the $4.2 billion
not invested in the Company that may be available to Holdings from the
Partners may be used by Holdings to fund Holdings' other affiliate
commitments, to make other wireless investments and/or to make new license
acquisitions. Amounts budgeted by the Company, as approved by the Partners in
future years, will determine the extent to which the commitments beyond the
Capital Contribution Agreement will actually be utilized. See "--Substantial
Capital Requirements and Liquidity; Highly Leveraged Capital Structure." See
"Description of Vendor Contracts and Financing--Capital Contribution
Agreement" and "The Partnership Agreements--Holdings' Partnership Agreement--
Capital Contributions" for a discussion of the equity capital commitments to
Holdings.
Sources of funding for the Company's further financing requirements may
include additional vendor financing, public offerings or private placements of
equity and/or debt securities, commercial bank loans and/or capital
contributions from Holdings or the Partners. There can be no assurance that
the Secured Financing, the funds committed by the Parents or any other
additional financing will be available to the Company or, if available, that
such financing can be obtained on a timely basis and on terms acceptable to
the Company and within limitations contained in the Indentures, the agreements
governing the Vendor Financing, the Bank Credit Facility and any new financing
arrangements. Failure to obtain any such financing could result in the delay
or
14
<PAGE>
abandonment of the Company's development and expansion plans or the failure to
meet regulatory requirements. It also could impair the Company's ability to
meet its debt service requirements (including its obligations with respect to
the Notes) and could have a material adverse effect on its business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
NETWORK BUILDOUT AND SYSTEM IMPLEMENTATION RISKS
In order for the Company to complete its PCS network and provide its
wireless communications products and services to customers on a nationwide
basis it must successfully (i) relocate microwave paths that may affect the
Company's operations, (ii) lease, acquire or otherwise attain rights to a
sufficient number of cell and switch sites, (iii) complete the radio frequency
("RF") design, including cell site design, frequency planning and network
optimization, for each of the Company's markets, (iv) complete the fixed
network design, which encompasses engineering network switching systems, radio
systems, interconnecting facilities and systems and operating support systems,
(v) establish sufficiently broad population and geographic coverage across the
continental United States and (vi) develop and implement sophisticated
information systems. There can be no assurance that these events will occur on
a timely basis or on the cost basis assumed by the Company or at all.
Implementation of the network involves various risks and contingencies, many
of which are not within the control of the Company and all of which could have
a material adverse effect on the implementation of the Company's system should
there be delays or other problems.
Relocation of microwave paths. For a period of up to five years after the
grant of a PCS license (subject to extension), a PCS licensee will be required
to share spectrum with existing microwave licensees that operate certain
microwave paths within its license area, but PCS licensees may not interfere
with existing licensees. See "Business--Network Buildout--Microwave
Relocation." The Company believes it must relocate a total of 1,400 microwave
paths, of which approximately 600 need to be relocated to launch commercial
service. As of July 19, 1996, 405 relocation agreements were under
negotiation, 639 agreements had been reached and 136 paths had been relocated.
The Company expects to have the 600 microwave paths required for launch in all
MTAs relocated during the fourth quarter of 1996 and the first quarter of
1997. The remaining 800 microwave paths will be relocated as business
requirements for service coverage expansion dictate and as FCC negotiation
periods expire. In places where relocation is necessary to permit operation of
the Company's PCS system, any delay in the relocation of such licensees may
affect adversely the Company's ability to commence commercial operations,
which could have a material adverse effect on the Company. The Company's
estimated capital requirements of $7.9 billion for its existing license areas
through 1998 include $0.5 billion allocated to the cost of relocating certain
microwave paths. There can be no assurance that the relocation of incumbent
microwave operators can be achieved for the amounts currently estimated and
actual amounts of funds required may vary materially from these estimates.
The FCC has adopted a transition plan to facilitate the relocation of
existing microwave operators to other spectrum blocks. This transition plan
allows non-public safety entities 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 services
operations, the voluntary negotiation period is three years, with a two-year
mandatory negotiation period. The exact number of microwave paths that are
operated by public safety entities cannot be ascertained, but the Company
estimates that of the 1,400 total microwave paths that need to be relocated
and of the 600 paths required for launch, approximately 420 and 112,
respectively, are operated by public safety entities. 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. The voluntary negotiation period began
with the grant of licenses to the Company in March 1995. See "Business--
Regulation--FCC Relocation Requirements." There can be no assurance that the
Company will be successful in reaching timely agreements with the existing
microwave licensees or that any such agreements will be on terms favorable to
the Company. Further, depending on the terms of such agreements, the Company's
ability to operate its PCS systems profitably may be adversely affected.
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Site acquisition. The successful implementation of the Company's PCS system
will be dependent, to a significant degree, upon the Company's ability to
lease or acquire cell sites for the location of its base station equipment.
The cell site selection process will require the lease or acquisition of
approximately 5,700 sites in 31 MTAs prior to commencement of commercial
operations of the Company's PCS network, many of which are likely to require
the Company to obtain zoning variances or other local governmental or third-
party approvals or permits. As of July 19, 1996, the Company had signed leases
or options for 3,281 sites of which 913 were pending zoning and 1,308 were
zoned and ready for construction. There are currently 255 sites under
construction. The Company expects to complete the acquisition and construction
of all 5,700 cell sites during the second half of 1996 and the first quarter
of 1997. The inability of the Company to lease, acquire or otherwise attain
rights to the requisite number of cell sites or to obtain the requisite zoning
and other local approvals in a timely and cost-effective manner could have a
material adverse effect on the Company. As the Company expands the geographic
coverage of the system, it expects that the site acquisition process will
continue, subject to site availability and the continued need to receive
zoning and other local approvals.
Radio frequency design implementation. There can be no assurance that the
Company and the Vendors will be able to implement the RF designs as scheduled
to meet the proposed service launch date or that changes to the RF design
resulting from site location, microwave interference or construction
difficulties will not have a negative impact on the ability of the Company to
operate the network successfully. Failure to implement RF designs could delay
such proposed launch and could delay completion of the initial buildout. Any
such significant delay could have a material adverse effect on the Company.
Network design and equipment. The Procurement Contracts require the Vendors
to provide the network infrastructure equipment and to assume much of the
responsibility for the design, engineering and construction of the network.
The Vendors, in turn, have subcontracted certain design, engineering and
construction responsibilities to major engineering and construction companies.
Any failure of the Vendors to manage the construction of the network or to
meet the Company's schedule will have an adverse impact on the ability of the
Company to commence commercial operations or to complete the initial buildout
of the network in a timely fashion. Problems in equipment availability and
performance and construction could delay the Company's launch of commercial
operations and initial network buildout or result in increased costs, which in
turn, could have a material adverse effect on the Company.
Lack of complete nationwide footprint. In order for the Company's
subscribers to use their handsets in areas outside the Company's network,
another CDMA-based PCS provider must operate in such area or the subscriber
must have a dual-mode, dual-band handset which would allow access to analog
cellular or other digital systems and, in either case, the Company must have
arrangements with such other PCS or cellular providers permitting the
Company's subscribers to access their respective services. The Company
currently does not have a license or any affiliation agreement enabling it to
provide coverage for 27% of the Pops in the United States, including those in
the following major cities and surrounding regions: Atlanta, Charlotte,
Chicago, Cincinnati, Cleveland, Columbus, El Paso, Houston, Jacksonville,
Knoxville, Memphis, Richmond and Tampa. Although there can be no assurance
that CDMA-based PCS providers will operate in these areas, the Company may
enter into affiliation agreements or contracts permitting subscribers to
utilize the services of any CDMA-based PCS providers in each of these areas.
The failure to obtain coverage for such areas may significantly impair the
Company's ability to provide nationwide service to its customers, which may
discourage potential customers from subscribing or encourage existing
customers to cancel their subscriptions. The ability of the Company's
subscribers to use other providers' PCS services will be limited by certain
technological constraints as well as the current lack of availability of dual-
mode, dual-band handsets which would permit the Company's subscribers to
utilize the services of non-CDMA-based PCS providers. See "--Technology Risks;
Availability of Handsets."
Information systems. The successful implementation and launch of the
Company's PCS system is dependent on the Company's ability to develop and
implement an integrated customer care, network management and billing system.
The majority of the systems work (including integration of hardware and
software) will be performed by the vendors using their platforms, some of
which are currently in development, some of which
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have not been tested in a commercial environment and most of which have not
been tested together to ensure that they work as an integrated whole.
Integration requires that numerous and diverse hardware and software platforms
work together through interfaces that have not yet been tested together. The
billing system that will be a key component of the system operations is in
testing and is not currently used in commercial production by any wireless
provider. The Company expects to complete an information system sufficient to
enable it to launch commercial service by the fourth quarter of 1996. Any
failure to develop an integrated information systems solution on schedule will
have an adverse effect on the ability of the Company to commence PCS
commercial operations in the fourth quarter of 1996.
Other factors. The Company's success in the implementation and operation of
its system is subject to other factors beyond the Company's control. These
factors include, without limitation, changes in general and local economic
conditions, availability of equipment necessary to operate the PCS system,
changes in communications service rates charged by others, fluctuations in the
supply and demand for PCS and the commercial viability of PCS systems as a
result of competition with wireline and wireless operators in the same
geographic area, demographic changes that might affect negatively the
potential market for PCS, changes in federal and state regulation of PCS
systems (including the enactment of new statutes and the promulgation of
changes in the interpretation or enforcement of existing or new rules and
regulations) and advancements in technology that have the potential of
rendering obsolete the technology and equipment that the Company is using to
construct its PCS system. There can be no assurance that the occurrence of one
or more of these factors will not have a material adverse effect on the
Company's financial condition and results of operations.
TECHNOLOGY RISKS; AVAILABILITY OF HANDSETS
To date, CDMA technology has only recently been deployed in the United
States or internationally. Although the Company has selected CDMA technology
because the Company believes it will offer several advantages over other
technologies, CDMA may not provide the advantages expected by the Company. See
"Business--CDMA Technology."
CDMA is incompatible with other PCS technologies such as TDMA or GSM.
Although the Company believes that CDMA will become the dominant PCS
technology in North America, there can be no assurance that this will be the
case. See "Business--CDMA Technology." In order for the Company's subscribers
to use non-dual-mode handsets in other PCS markets (and vice versa), at least
one PCS licensee in the other market must deploy CDMA (as opposed to the other
competing PCS technologies) and such licensee must agree to allow subscribers
to utilize its network. There can be no assurance that the Company will be
able to reach satisfactory agreements with such licensees. While several major
PCS providers have publicly announced that they intend to deploy CDMA-based
PCS systems, there can be no assurance that such providers will do so.
The Company's network will not be compatible with existing analog cellular
networks. The Company's network operates at a different frequency and uses a
different technology than analog cellular systems. If the Company desires to
make roaming available, it would be required to provide dual-mode, dual-band
handsets, which are not currently available. Additionally, for the Company's
subscribers to access another provider's cellular system, that provider must
agree to allow the Company's subscribers to roam on its network. There can be
no assurance that such dual-mode, dual-band handsets will be available or
that, should the Company determine that it desires roaming agreements with
other providers, such agreements can be obtained on terms acceptable to the
Company.
Currently there are expected to be limited suppliers of CDMA handsets.
Although Sprint Spectrum has entered into an agreement with one such supplier
to purchase quantities of handsets it believes are sufficient to satisfy the
anticipated demand when commercial operations commence, there can be no
assurance that the supplier will be able to manufacture and deliver the number
of handsets ordered or that such supply will in fact be sufficient to meet
initial demand. Sprint Spectrum is currently negotiating with other suppliers
for the delivery of additional CDMA handsets commencing in the second quarter
of 1997. There can be no assurance, however,
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that terms satisfactory to Sprint Spectrum will be reached with these
suppliers or that these suppliers will commence production or, if they do
commence production, that they will be able to deliver quality handsets in
sufficient quantities in a timely manner.
While the Company believes that dual-mode, dual-band handsets that allow a
user to access both PCS systems and cellular networks will be commercially
available in the first half of 1997 (although sufficient quantities may not be
commercially available until the third quarter of 1997), there can be no
assurance that such handsets can be manufactured successfully or that the
Company's subscribers can obtain such handsets at competitive prices. In
addition, such dual-mode, dual-band handsets are expected to be more expensive
than single-mode handsets. Although the Company has been working closely with
its suppliers to develop high-quality dual-mode, dual-band handsets, such
handsets may fail to operate as expected. The lack of interoperability or the
comparatively higher cost of such handsets may impede the Company's ability to
attract current cellular subscribers or potential new wireless communications
subscribers.
SEARCH FOR A CHIEF EXECUTIVE OFFICER AND OTHER SENIOR MANAGEMENT
The Company is currently conducting a search for a new Chief Executive
Officer to succeed Ronald LeMay, who has been appointed President and Chief
Operating Officer of Sprint. Mr. LeMay is continuing as Chief Executive
Officer and President of the Company until such time as a successor is named.
There can be no assurance that the Company will be able to attract and retain
the type of individual capable of leading the Company through this early stage
of development and beyond. In addition, the Company is actively searching for
a Senior Marketing Executive. See "Management."
AFFILIATE TRANSACTIONS; CONFLICTS OF INTEREST
The Company currently engages and intends to continue to engage in
transactions with Holdings and the Parents, including those transactions
described below. The Company has entered into and expects to enter into
affiliation agreements with other affiliates of Holdings, such as APC, Cox-
California and PhillieCo. Subject to certain conditions, the Company expects
to enter into sales agency agreements with the Parents for co-marketing of the
Company's wireless products and services, Sprint's long distance and local
telephone services and the Cable Parents' cable-based entertainment services.
The Parents and certain of their affiliates will be non-exclusive sales agents
for the Company's wireless services. The Company, in turn, will be a non-
exclusive sales agent for those services Sprint and the Cable Parents make
available to the Company. In addition, Sprint currently serves as the
Company's agent for selling paging services and will market these services
through direct mail, direct sales, employee programs, advertising and
promotions. While the Company will endeavor to negotiate all transactions with
the Parents and their affiliates on an arm's-length basis, there can be no
assurance that all such transactions will be on terms no less favorable to the
Company than could reasonably be obtained in a comparable arm's length
transaction with a non-affiliate or that significant conflicts of interest
between the Company and Holdings or any of the Parents will not develop. See
"The Partnership Agreements--Holdings Partnership Agreement" and "Certain
Relationships and Related Transactions."
DEADLOCK EVENT
The Holdings Partnership Agreement provides that Holdings will be dissolved
upon the failure of the General Partners (as defined under "The Partnership
Agreements--Holdings Partnership Agreement") of Holdings to resolve a
"Deadlock Event," which is deemed to occur if the Partnership Board (as
defined under "The Partnership Agreements--Holdings Partnership Agreement")
(i) fails to approve a proposed annual budget or business plan for two
consecutive fiscal years or (ii) if the position of chief executive officer
remains vacant for sixty days after a candidate has been proposed by at least
two Partners having an aggregate of at least 33% of the voting Percentage
Interest (as defined under "The Partnership Agreements--Holdings Partnership
Agreement"). Upon the occurrence of a Deadlock Event, the General Partners
will first try for a period of 20 days to use their good faith efforts to
resolve the Deadlock Event. If the General Partners are unable to resolve the
matter, such matter will be referred to the chief executive officers of the
Parents. In the event the chief
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executive officers fail to reach a resolution, the matter will be referred to
a mediation service. If the mediator and the General Partners fail to resolve
the Deadlock Event, Holdings will be liquidated unless the Partnership Board,
by a majority vote of 75%, determines not to dissolve or the buy-sell
arrangements contained in the Holdings Partnership Agreement are employed.
There can be no assurance that a Deadlock Event will not occur or if such
event does occur that resolution procedures will be successful or that the
Deadlock Event will not have a material adverse effect on the ability of
Sprint Spectrum's management to operate the Company's PCS business in the
ordinary course. See "The Partnership Agreements--Holdings Partnership
Agreement."
ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS; REFINANCING RISKS
The Company expects to incur, and the Indentures will permit the Company to
incur, substantial indebtedness in addition to the Notes, including
indebtedness under the $2.0 billion Bank Credit Facility and the $3.1 billion
Vendor Financing. See "--Substantial Capital Requirements and Liquidity;
Highly Leveraged Capital Structure."
The Secured Financing and the respective credit agreements relating thereto
will contain, and any additional financing agreements may contain, certain
restrictive covenants. The restrictions contained in the Indentures and those
expected to be contained in the Secured Financing will affect, and in some
cases will limit or prohibit significantly, among other things, the ability of
the Company to incur additional indebtedness (beyond specified amounts), make
prepayments of certain indebtedness, pay dividends, make investments, engage
in transactions with equityholders and affiliates, issue equity of
subsidiaries, create liens, sell assets and engage in mergers and
consolidations. If the Company fails to comply with the restrictive covenants
in the Indentures, the Company's obligation to repay the Notes may be
accelerated. However, the limitations set forth in the Indentures will be
subject to a number of important qualifications and exceptions. In particular,
while the Indentures will restrict the Company's ability to incur additional
indebtedness by requiring compliance with certain financial ratios, they will
permit the Company and its subsidiaries to incur substantial additional
indebtedness. See "Description of the Notes." In addition to the restrictive
covenants described above, the Secured Financing will require the Company to
maintain certain financial ratios and other operating performance tests. The
failure of the Company to maintain such ratios or comply with such tests would
constitute events of default under the Secured Financing notwithstanding the
ability of the Company to meet its debt service obligations. An event of
default under the Secured Financing would allow the lenders thereunder to
accelerate the maturity of the indebtedness thereunder. In such event, a
significant portion of the Company's other indebtedness (including the Notes)
may be declared immediately due and payable. See "Description of Vendor
Contracts and Financing."
The Company's ability to meet its debt obligations will be dependent upon
the Company's successful completion of its planned PCS network and the
Company's future performance, which is subject to numerous factors, many of
which are beyond the Company's control. See "--Network Buildout and System
Implementation Risks." There can be no assurance that the Company can complete
construction of its wireless network or that, if completed, the Company will
generate sufficient cash flow from operating activities to meet its debt
service, capital expenditure and working capital requirements. Substantially
all of the indebtedness under the Secured Financing is likely to mature prior
to the maturity of the Notes. The Company expects that such indebtedness and
the Notes may need to be refinanced at their maturity. The Company's ability
to refinance such indebtedness will depend on, among other things, its
financial condition at the time, the restrictions in the instruments governing
its indebtedness and other factors, including market conditions, beyond the
control of the Company. In addition, in the event the completion of its
wireless network is delayed or the Company does not generate sufficient cash
flow from operating activities to meet its debt service requirements, the
Company may need to seek additional financing not currently contemplated.
There can be no assurance that any such financing or refinancing could be
obtained on terms that are acceptable to the Company, if at all. In the
absence of such financing or refinancing, the Company could be forced to
dispose of assets in order to cover any shortfall in the payments due on its
indebtedness and such disposition may occur under circumstances that might not
be favorable to realizing the highest price for such assets.
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STRUCTURAL SUBORDINATION OF THE NOTES TO SUBSIDIARY INDEBTEDNESS; ASSET
ENCUMBRANCES
The Notes will not be obligations of any of the subsidiaries of Sprint
Spectrum (other than FinCo). A substantial portion of the assets of Sprint
Spectrum will be owned by Sprint Spectrum's subsidiaries and, accordingly,
claims of holders of Notes will be structurally subordinated to the claims of
such subsidiaries' creditors, including lenders and trade creditors, of such
subsidiaries. The Indentures will permit Sprint Spectrum and its subsidiaries
to incur substantial indebtedness, including indebtedness expected to be
incurred under the Secured Financing. See "Description of the Notes--Certain
Covenants."
The Notes will not be secured by any of the Company's assets. The
obligations of the Company and its principal subsidiaries under the Secured
Financing will be secured by substantially all of the assets of Sprint
Spectrum including the partnership interests it holds in WirelessCo, RealtyCo
and EquipmentCo. If the Company becomes insolvent or is liquidated, or if
payment under the Secured Financing is accelerated, the lenders under the
Secured Financing would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to the terms of the Secured
Financing. Accordingly, any claims of such lenders with respect to such assets
will be prior to any claim of the holders of the Notes with respect to such
assets. There can be no assurance that the Company's assets could be sold
quickly enough, or for sufficient amounts, to enable the Company to meet its
obligations (including its obligations with respect to the Notes). See
"Description of Vendor Contracts and Financing."
LIMITED PCS OPERATING HISTORY IN THE UNITED STATES; SIGNIFICANT CHANGE IN
WIRELESS INDUSTRY
PCS systems have no significant operating history in the United States and
there can be no assurance that operation of these systems 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
inability of the Company to establish PCS service or to obtain appropriate
equipment for its PCS system could have a material adverse effect on the
Company's financial condition and results of operations. The wireless
telecommunications industry is experiencing significant technological change,
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
well as the extent to which airtime and monthly access rates may continue to
decline. As a result, the future prospects of the industry and the Company and
the success of PCS and other competitive services remain uncertain.
COMPETITION
There is substantial competition in the wireless telecommunications
industry. In addition, the Company expects competition in the wireless
telecommunications business to intensify as a result of the entrance of new
competitors and the development of new technologies, products and services.
Each of the markets in which the Company competes will be served by other two-
way wireless service providers, including cellular and PCS operators and
resellers. Many of these competitors have been operating for a number of
years, currently serve a substantial subscriber base and have significantly
greater financial and technical resources than those available to the Company.
Certain of the Company's competitors are operating, or planning to operate,
through joint ventures and affiliation arrangements, wireless
telecommunications systems that encompass most of the United States. Principal
PCS competitors in the Company's markets include American Portable Telecom,
Inc., AT&T Wireless Services, Inc., Omnipoint Corporation, Pacific Bell Mobile
Systems, Inc., PCS PrimeCo L.P. and Western Wireless Corporation.
The Company also expects that existing cellular providers, some of which
have an infrastructure in place and have been operational for a number of
years, will upgrade their systems and provide expanded and digital services to
compete with the Company's PCS system. Principal cellular providers in the
Company's markets include AirTouch Communications, Inc., BellSouth Mobility,
Inc., Ameritech Mobile Communications, Inc., Bell Atlantic NYNEX Mobile,
Southwestern Bell Mobile Systems, AT&T Wireless Services, Inc., GTE Mobilnet,
Inc. and 360(degrees) Communications Company.
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The Company anticipates that market prices for two-way wireless services
generally will decline in the future based upon increased competition. The
Company intends to compete to attract and retain customers principally on the
basis of services and features and packages thereof, its emphasis on customer
care, the size and location of its service areas and pricing. The Company's
ability to compete successfully will also depend, in part, on its ability to
anticipate and respond to various competitive factors affecting the industry,
including new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors all of which could adversely affect the Company's
operating margins.
Handsets used for CDMA-based PCS systems will not be compatible with
cellular systems and vice versa. The Company expects dual-mode, dual-band
handsets to be commercially available in the first half of 1997 (although
sufficient quantities may not be commercially available until the third
quarter of 1997). Once such handsets are available, if the Company decides to
offer roaming services and is able to negotiate satisfactory roaming
agreements, subscribers will be able to roam by using the existing cellular
wireless system in other markets. Until then, this lack of interoperability
may impede the Company's ability to attract current cellular subscribers or
potential new wireless communication subscribers that desire the ability to
access different service providers in the same and other markets.
Initially the cost to the Company of PCS handsets may not be competitive
with the cost to cellular operators of analog cellular handsets. While the
Company believes that its PCS handsets will be competitively priced as
compared to digital cellular handsets of comparable size, weight and features,
cellular operators may subsidize the sale of digital handset units at prices
below those with which the Company can compete.
The Company's ability to compete successfully in the wireless communications
market will be dependent upon, among other things, its ability to complete the
buildout of its wireless network and offer its products and services to
customers on a timely basis. There can be no assurance that the Company will
be able to compete successfully in this environment or that new technologies
and products that are more commercially effective than the Company's
technologies and products will not be developed.
COMPETITION WITH THE PARTNERS
Pursuant to the terms of the Holdings Partnership Agreement, each of the
Partners or its respective affiliates may, subject to compliance with FCC and
other applicable regulatory restrictions, engage in activities which compete
directly or indirectly with the activities of Holdings or its affiliates. Each
Partner or its affiliates may (i) continue to engage in certain of the
business activities in which they engaged prior to the formation of Holdings,
(ii) maintain voting equity interests of 5% or less in persons that are not
affiliates of Holdings and are engaged in wireless communications services
utilizing radio spectrum for cellular, PCS, ESMR (as defined in "Business--
Competition"), paging, mobile communications and any other voice or data
wireless services (collectively, the "Wireless Business"), subject to certain
limitations, (iii) provide on a non-exclusive basis certain services
incidental to the Wireless Business to persons that are not affiliates of
Holdings, (iv) pursue new business opportunities related to the Wireless
Business after having informed Holdings of any such opportunity and providing
Holdings or its affiliates an adequate right of first refusal with respect to
pursuit of such opportunity and (v) engage, upon unanimous consent of the
Partnership Board, in activities which may compete with or adversely affect
the business interests or activities of Holdings or its affiliates.
The Holdings Partnership Agreement provides that Comcast and its controlled
affiliates may acquire an interest in a PCS license (10MHz) in (i) any of the
Basic Trading Areas ("BTAs") located within the Philadelphia MTA and the
Allentown, Pennsylvania BTA and (ii) in certain cellular license areas in New
Jersey. If Comcast or its affiliates acquire an interest in any such licenses,
they will compete with the wireless services provided by PhillieCo, a PCS
provider with which the Company intends to affiliate.
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CONFLICTS OF INTEREST WITH COMCAST
Pursuant to the Holdings Partnership Agreement, Comcast has retained the
right to continue to offer cellular telephone service in and around the
Philadelphia area. The Company expects to affiliate with PhillieCo and, under
such an affiliation agreement, will compete directly with Comcast in this
area. The Company, under the affiliation agreement, will provide various
services to PhillieCo including management, operations, engineering, marketing
and advertising and back office support. While representatives of Comcast are
excluded from any discussions concerning PhillieCo at the Company or Holdings,
there can be no assurance that Comcast will not benefit from its general
knowledge of the Company's plans and strategies which could provide Comcast
with a competitive advantage over the Company in the Philadelphia area.
GOVERNMENT REGULATION
The licensing, construction, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the FCC and, depending on the jurisdiction, state and local
regulatory agencies. In addition, the FCC, in conjunction with the Federal
Aviation Administration (the "FAA"), regulates tower marking and lighting.
There can be no assurance that either the FCC, the FAA or those state agencies
having jurisdiction over the Company's business will not adopt regulations or
take other actions that would adversely affect the business of the Company.
FCC licenses to provide PCS services are subject to renewal and revocation.
The Company's PCS licenses will expire in 2005. There may be competition for
the licenses held by the Company upon their expiration and there can be no
assurance that the Company's licenses will be renewed. FCC rules require all
PCS licensees to meet certain requirements including, without limitation,
coverage of 33% of Pops in each MTA within the first five years and 67% within
the first 10 years of the award of a license. There can be no assurance that
the Company will be able to obtain the requisite coverage in each MTA. Failure
to comply with these requirements could cause revocation or forfeiture of the
Company's PCS licenses or the imposition of fines on the Company by the FCC.
See "Business--Regulation."
RADIO FREQUENCY EMISSION CONCERNS; MEDICAL DEVICE INTERFERENCE
Certain interest groups have requested that the FCC investigate claims that
wireless communications technology poses health concerns and causes
interference with hearing aids and other medical devices. The Center for the
Study of Electromagnetic Compatibility at the University of Oklahoma, which
was founded in 1994 with funds from the wireless industry, is studying this
issue and has released results from the first phase of its study which focused
on worst case (operation at full-power) interaction and which indicated that
the three wireless technologies tested, including CDMA, caused interference in
some instances, but not all, with hearing aids. In addition, the Personal
Communications Industry Association (the "PCIA") announced in July 1995 that
it was undertaking an industry-wide study to gather information on possible
PCS interference with medical devices for all PCS protocols. There can be no
assurance that the findings of such studies will not have an adverse effect on
the Company's financial condition and results of operations or that such
findings will not lead to additional governmental regulations that will have
an adverse effect on the Company's financial condition and results of
operations.
Preliminary results from researchers working under the guidance of the
Wireless Technology Research LLC ("WTR") indicate that digital wireless
telephones cause interference to some users of cardiac pacemakers. The
researchers have recommended that patients dependent on pacemakers avoid using
digital telephones and that nondependent users keep such telephones away from
implanted devices. Permanent recommendations from the WTR are expected in July
or August of 1996. There can be no assurance that such recommendations will
not lead to governmental regulation or that such recommendations will not have
a material adverse effect on the Company.
Media reports have suggested that certain RF emissions from portable
cellular telephones might be linked to cancer. Concerns over RF emissions may
have the effect of discouraging the use of cellular telephones and other
wireless communications services, including PCS, which could have an adverse
effect upon the Company's financial condition and results of operations. The
FCC has a rulemaking proceeding pending to update the guidelines and methods
it uses for evaluating RF emissions from radio equipment, including cellular
telephones.
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Although PCS handsets operate at lower power than cellular handsets and are
therefore likely to comply with the new proposed standards, the same concerns
about RF emissions could be present with PCS handsets.
REPURCHASE OF THE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control (as defined under "Description of the Notes--
Certain Definitions"), the Company must offer to purchase the (i) Senior Notes
then outstanding at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase and (ii)
Senior Discount Notes then outstanding at a purchase price equal to 101% of
the Accreted Value if the Change of Control Payment Date (as defined under
"Description of the Notes--Certain Definitions") is on or before , 2001
and 101% of the principal amount at maturity of the Senior Discount Notes,
plus accrued and unpaid interest thereon to the Change of Control Payment
Date, if such date is after , 2001. See "Description of the Notes--
Certain Covenants--Change of Control."
The Change of Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. In addition, a "change of control" or the loss of the Company's right
to use the Sprint trademark under the trademark license agreement will
constitute an event of default under the Bank Credit Facility and the Vendor
Financing, permitting the lenders thereunder to accelerate their secured
claims against Sprint Spectrum and its subsidiaries. There can be no assurance
that Sprint Spectrum will have sufficient funds available at the time of any
Change of Control, or following satisfaction of such prior claims, to effect a
Change of Control Offer (as defined under "Description of the Notes--Certain
Definitions").
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF SENIOR DISCOUNT NOTES
The Senior Discount Notes will be issued at a substantial discount from
their principal amount at maturity. Although cash interest will not accrue on
the Senior Discount Notes prior to , 2001, and there will be no periodic
payments of cash interest on the Senior Discount Notes prior to , 2002,
original issue discount (the difference between the stated redemption price at
maturity and the issue price of the Senior Discount Notes) will accrue from
the issue date of the Senior Discount Notes. Consequently, purchasers of
Senior Discount Notes generally will be required to include amounts in gross
income for United States federal income tax purposes in advance of their
receipt of the cash payments to which the income is attributable. Such amounts
in the aggregate will be equal to the difference between the stated redemption
price at maturity (inclusive of stated interest on the Senior Discount Notes)
and the issue price of the Senior Discount Notes. See "Certain Federal Income
Tax Consequences" for a more detailed discussion of the federal income tax
consequences of the purchase, ownership and disposition of the Senior Discount
Notes.
In the event a bankruptcy case is commenced by or against the Company under
the United States Bankruptcy Code after the issuance of the Senior Discount
Notes, the claim of a holder of Senior Discount Notes may be limited to an
amount equal to the sum of (i) the initial offering price and (ii) that
portion of the original issue discount which is not deemed to constitute
"unmatured interest" for purposes of the Bankruptcy Code. Any original issue
discount that was not amortized as of the date of any such bankruptcy filing
would constitute "unmatured interest." To the extent that the Bankruptcy Code
differs from the Internal Revenue Code in determining the method of
amortization of original issue discount, a holder of Senior Discount Notes may
realize taxable gain or loss on payment of such holder's claim in bankruptcy.
ABSENCE OF PUBLIC MARKET
There is no existing trading market for the Notes. The Issuers do not intend
to have the Notes listed for trading on any national securities exchange or
quoted through an inter-dealer quotation system. Although each Underwriter has
advised the Company that it presently intends to make a market in the Notes,
it is not obligated to do so and any such market-making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
prices or liquidity of, or trading markets for, the Notes. The liquidity of
any market for the Notes will depend upon the number of holders of such Notes,
the interest of securities dealers in making a market in the Notes and other
factors. The absence of an active market for the Notes offered hereby could
adversely affect their market price and liquidity. The liquidity of, and
trading markets for, the Notes may also be negatively affected by general
declines in the market for noninvestment grade debt independent of the
financial performance of, or prospects for, the Company.
23
<PAGE>
THE REORGANIZATION
Prior to July 1, 1996, substantially all wireless operations of the Company
and Holdings were conducted at Holdings and all assets, with the exception of
the interest in APC and the PCS licenses which are held by WirelessCo, were
held at Holdings. As of July 1, 1996, Holdings assigned these assets and
agreements related to the wireless operations to which it was a party to
Sprint Spectrum, and Sprint Spectrum, in turn, assigned such assets and
agreements to its subsidiaries. Specifically, the network infrastructure
equipment and Holdings' rights under the Procurement Contracts were ultimately
assigned to EquipmentCo, and all property leases, including, without
limitation, leases on cell sites, switch sites and administrative office space
were ultimately assigned to RealtyCo. In addition, effective as of July 1,
1996, Sprint Spectrum entered into (i) an equipment lease with EquipmentCo,
pursuant to which Sprint Spectrum leases the infrastructure equipment used in
the PCS network from EquipmentCo, and (ii) a property use agreement, pursuant
to which Sprint Spectrum has the right to use the properties on which RealtyCo
holds leases. No amounts were paid for the transfer of the assets or agreement
rights.
The Company also intends to transfer the Company's investment in APC to
Sprint Spectrum, which, in turn, will transfer such interest to Holdings. In
connection with that transfer, WirelessCo's rights and duties with respect to
certain call and put options pertaining to the 51% interest in APC not held by
the Company will also be assigned ultimately to Holdings. Such transfer will
take place following the Offering. The transfer of the assets and agreements
referred to in the preceding paragraph and the transfer of the Company's
investment in APC to Holdings are collectively referred to as the
"Reorganization." The Offering is not contingent on the completion of the
Reorganization.
THE COMPANY
Sprint Spectrum (formerly known as MajorCoSub, L.P.) was formed on March 28,
1995 as a Delaware limited partnership. Sprint Spectrum was formed as part of
the reorganization of the operations of an existing partnership, WirelessCo,
which was formed on October 24, 1994 in anticipation of the FCC's A Block and
B Block auctions. In March 1995, the partners of WirelessCo transferred their
interests in WirelessCo to Holdings. WirelessCo subsequently was awarded 29
PCS licenses in the FCC auction. Sprint Spectrum currently has three limited
partnership subsidiaries: WirelessCo which owns all of the Company's PCS
licenses; RealtyCo which will own the cell site leases and other real
property; and EquipmentCo which will own the vendor-provided network
infrastructure equipment. See "Prospectus Summary--the Company" and
"Business." FinCo, a Delaware corporation and wholly-owned subsidiary of
Sprint Spectrum, was incorporated in Delaware on May 20, 1996 solely for the
purpose of acting as a co-obligor of the Notes. FinCo has only nominal assets,
does not conduct any operations and will receive none of the proceeds of the
Offering. Accordingly, investors in the Notes should look only to the cash
flow and assets of Sprint Spectrum for payment of the Notes. Holdings
(formerly known as MajorCo, L.P.) is the general partner of, and owns a
greater than 99% general partnership interest in, Sprint Spectrum. Holdings
was organized as a Delaware limited partnership on March 28, 1995 and its
primary business activity consists of its ownership of Sprint Spectrum and
other limited partnership interests in wireless affiliates, including APC and
Cox-California. MinorCo, L.P. ("MinorCo"), a Delaware limited partnership,
owns a less than 1% limited partnership interest in Sprint Spectrum. Sprint
Spectrum and FinCo will be the sole obligors of the Notes.
24
<PAGE>
The following is a chart of the ownership structure of Holdings and the
Company:
[CHART]
["FLOWCHART" CHART SHOWING OWNERSHIP STRUCTURE OF HOLDINGS AND THE COMPANY]
The principal executive offices of each registrant are located at 4717 Grand
Avenue, Fifth Floor, Kansas City, Missouri 64112, and each registrant's
telephone number is (816) 559-1000.
THE PARENTS
Sprint Corporation. Sprint, through its subsidiaries and affiliates,
provides domestic and international long distance and local exchange
telecommunications services as well as the wholesale distribution of
telecommunications products and the publishing and marketing of white and
yellow page telephone directories. Sprint's long distance division is the
nation's third largest long distance telephone company, operating a nationwide
all-digital long distance communications network utilizing state-of-the-art
fiber optic and electronic technology. The long distance division provides
domestic and international long distance voice, video and data communications
services to approximately 8.0 million customers. The local division is
comprised of local exchange carriers ("LECs") that service approximately 6.8
million access lines in 19 states. In addition to providing local exchange
services, the division provides intraLATA toll service and access by other
carriers to Sprint's local exchange facilities. Because FCC regulations
prohibit a single provider from holding both cellular and PCS licenses for the
same territory, in March 1996 Sprint divested its cellular unit (now known as
360(degrees) Communications Company) via a spin-off to shareholders.
Tele-Communications, Inc. TCI is principally engaged in the construction,
acquisition, ownership and operation of cable television systems and the
provision of satellite-delivered video entertainment, information
25
<PAGE>
and home shopping programming services to various video distribution media,
principally cable television systems. TCI also has investments in cable and
telecommunications operations and television programming in certain
international markets as well as investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. TCI is one of the largest cable television
operators in the United States in terms of the number of basic subscribers,
with consolidated systems serving approximately 13.0 million subscribers at
March 31, 1996. Through Liberty Media Corporation, TCI is involved in (i) the
production, acquisition and distribution of branded entertainment, educational
and informational programming and software, (ii) electronic retailing, direct
marketing, advertising sales related programming services, infomercials and
transaction processing and (iii) domestic programming businesses, including,
among others, Turner Broadcasting System, The Discovery Channel, Home Shopping
Network, Inc. and QVC, Inc.
Comcast Corporation. Comcast and its subsidiaries are principally engaged in
the development, management and operation of cable and cellular telephone
communications systems and the production and distribution of cable
programming. Comcast has approximately 3.5 million cable television
subscribers in the United States. In the United Kingdom, Comcast is
constructing a cable telecommunications network that will pass approximately
229,000 homes and holds investments in cable television and telecommunications
companies that have the potential to serve an additional 1.2 million homes.
Comcast also provides cellular telephone communications services in markets
with a population of over 7.9 million, including the area in and around
Philadelphia and parts of Delaware and New Jersey.
Cox Communications, Inc. Cox is a fully integrated, diversified media and
broadband communications company with operations and investments in four
related areas: (i) United States cable televisions systems (3.3 million
wholly-owned and affiliated subscribers); (ii) international cable television
systems; (iii) programming; and (iv) telecommunications and technology. Cox
has invested significantly in cable systems in the United Kingdom and in
Denmark. Cox also holds substantial investments in several cable television
networks, including The Discovery Channel, The Learning Channel, E!
Entertainment, UK Gold and Viewer's Choice. Cox has numerous investments in
the telecommunications and technology industries, including businesses
involved in residential and business telephony, on-screen programming guides,
computer software and interactive services.
26
<PAGE>
USE OF PROCEEDS
The net proceeds to Sprint Spectrum from the sale of the Notes offered
hereby are estimated to be approximately $631 million, after deducting
estimated discounts, commissions and offering expenses. FinCo will not receive
any proceeds from the Offering. The Company intends to use the net proceeds
from the Offering to fund capital expenditures, including the buildout of a
nationwide PCS network, to fund working capital as required and debt service
requirements, to fund operating losses and for other partnership purposes. The
specific uses of the net proceeds cannot be determined at this date since the
Company will expend the net proceeds as funds are required. In addition, as
part of an overall strategy to increase the Company's Pop coverage, either or
both of Holdings and the Company may elect to bid on, or affiliate with or
invest in other entities who are bidding on, PCS licenses to be awarded in the
FCC auction of PCS licenses for the D, E and F Blocks. To the extent that the
Company directly acquires new PCS licenses or invests in an entity that
acquires new licenses, the Company may finance such acquisition or investment
and any related capital expenditures, working capital and other funding
requirements with a portion of the net proceeds of the Offering or through
additional debt and/or equity financing. See "Prospectus Summary--Network
Buildout and Financing Plan" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
CAPITALIZATION
The following tables set forth as of March 31, 1996 the actual
capitalization of the Company and the capitalization of the Company on a pro
forma basis to reflect the Reorganization and as adjusted for the Offering.
This information should be read in conjunction with the consolidated financial
statements of the Company and notes thereto appearing elsewhere in this
Prospectus. It is expected that the Company will incur substantial additional
indebtedness following the Offering, including up to $5.1 billion in aggregate
principal amount under the Secured Financing.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------
PRO FORMA FOR THE
REORGANIZATION
AND AS ADJUSTED
ACTUAL FOR THE OFFERING
---------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents...................... $ 16 $ 634,135 (1)
========== ==========
Long-term debt:
Note payable to affiliate.................... $ 5,000 $ 5,000
Senior Notes offered hereby.................. -- 150,000
Senior Discount Notes offered hereby......... -- 500,000 (2)
---------- ----------
Total long-term debt....................... 5,000 655,000 (3)
Limited partner interest in consolidated sub-
sidiary....................................... 5,000 10,000
Partners' capital and accumulated deficit:
Partners' capital............................ 2,337,543 2,188,303
Deficit accumulated during the development
stage....................................... (89,138) (98,723)
---------- ----------
Total partners' capital.................... 2,248,405 2,089,580
---------- ----------
Total capitalization..................... $2,258,405 $2,754,580
========== ==========
</TABLE>
- - --------
(1) Reflects estimated net proceeds of $631 million from the Offering.
(2) Reflects gross proceeds from the issuance of the Senior Discount Notes.
(3) Reflects gross proceeds of $650 million from the Offering before
underwriting discounts and commissions and expenses.
27
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents selected historical consolidated financial data
for the Company as of the dates and for the periods indicated. The
consolidated financial data for the period from October 24, 1994 to December
31, 1994 and for the year ended December 31, 1995 were derived from the
audited consolidated financial statements of the Company. The consolidated
financial data for the quarters ended March 31, 1995 and March 31, 1996,
respectively, and for the cumulative period from October 24, 1994 to March 31,
1996 were derived from the unaudited financial statements of the Company. Due
to the development stage nature of the Company, period-to-period comparisons
of financial data are not indicative of results for subsequent periods or the
full year and should not be relied upon as an indication of the future
performance of the Company. The following data should be read in conjunction
with "Pro Forma Condensed Financial Statements," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
The Company's historical consolidated financial information does not reflect
the Reorganization. To assist prospective investors, the pro forma and as
adjusted data set forth below reflect the historical financial information of
the Company as adjusted to give effect to (1) the Reorganization on a pro
forma basis as if it had occurred at the beginning of the periods presented or
as of the date presented and (2) the Reorganization and the Offering as if
they had occurred on March 31, 1996.
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE THREE CUMULATIVE
PERIOD FROM MONTHS ENDED PERIOD FROM PRO FORMA FOR THE
OCTOBER 24, MARCH 31, OCTOBER 24, REORGANIZATION
1994 ----------------- 1994 --------------------------
(DATE OF FOR THE (DATE OF FOR THE FOR THE THREE
INCEPTION) TO YEAR ENDED INCEPTION) TO YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1994 1995 1995 1996 1996 1995 1996
------------- ------------ ------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(IN THOUSANDS):
Operating expenses:
General and
administrative........ $ 1,371 $ 1,221 $ 1,273 $ -- $ 2,592 $ 37,460 $ 19,862
Professional and legal
fees.................. 1,923 2,310 2,335 -- 4,233 26,849 10,862
Depreciation........... 38 47 47 -- 85 211 254
------- -------- ------- -------- ---------- ---------- ----------
Total operating
expenses.............. 3,332 3,578 3,655 -- 6,910 64,520 30,978
Other income (expense):
Interest income........ 24 253 275 (67) 210 260 (358)
Other income........... -- -- -- -- -- 38 143
Equity in loss of
unconsolidated
partnership........... -- (46,206) (3,409) (36,232) (82,438) -- --
------- -------- ------- -------- ---------- ---------- ----------
Total other income
(expense)............. 24 (45,953) (3,134) (36,299) (82,228) 298 (215)
------- -------- ------- -------- ---------- ---------- ----------
Net loss................ $(3,308) $(49,531) $(6,789) $(36,299) $(89,138) $(64,222) $(31,193)
======= ======== ======= ======== ========== ========== ==========
RATIO OF EARNINGS TO
FIXED CHARGES(1) -- -- -- -- -- -- --
<CAPTION>
AT MARCH 31, 1996
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------- ------------ -------------
BALANCE SHEET DATA (IN THOUSANDS):
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets...................................................... $ 1,298 $ 4,974 $ 635,974 (2)
Investment in PCS licenses.......................................... 2,124,594 2,124,594 2,124,594
Investment in unconsolidated partnership............................ 49,314 -- --
Note receivable--unconsolidated partnership......................... 83,655 -- --
Property, plant and equipment (net)................................. -- 76,129 76,129
Other assets........................................................ -- -- 19,000 (2)
---------- ---------- ----------
Total assets........................................................ $2,258,861 $2,205,697 $2,855,697
========== ========== ==========
Liabilities and partners' capital:
Current liabilities................................................. $ 456 $ 96,870 $ 96,870
Deferred compensation............................................... -- 4,247 4,247
Note payable to affiliate........................................... 5,000 5,000 5,000
Long-term debt...................................................... -- -- 650,000 (3)
Limited partner interest in consolidated subsidiary................. 5,000 10,000 10,000
Partners' capital................................................... 2,248,405 2,089,580 2,089,580
---------- ---------- ----------
Total liabilities and partners' capital............................. $2,258,861 $2,205,697 $2,855,697
========== ========== ==========
</TABLE>
- - -------
(1) For purposes of determining the ratio of earnings to fixed charges,
earnings (loss) is defined as losses from continuing operations excluding
equity in losses of unconsolidated partnerships. Losses as defined were
$3,308,000, $3,325,000 and $6,633,000 for the period October 24, 1994 to
December 31, 1994, the year ended December 31, 1995 and for the cumulative
period from October 24, 1994 to December 31, 1995, respectively. On a pro
forma basis after giving effect to the Reorganization, such losses would
have been $3,308,000, $64,222,000 and $67,530,000, respectively. Fixed
charges consist of interest expense on all indebtedness (including
amortization of deferred debt issuance (costs) and the portion of rental
expense that is representative of the interest factor. The Company had no
fixed charges as defined for any of the periods indicated.
(2) Reflects estimated net proceeds of $631 million and debt issuance costs of
$19 million from the Offering.
(3) Reflects gross proceeds of $650 million from the Offering before
underwriting discounts and commissions and expenses.
28
<PAGE>
PRO FORMA CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma condensed financial statements set forth below have
been prepared assuming that the Reorganization occurred on March 31, 1996 for
pro forma condensed balance sheet purposes, January 1, 1995 for pro forma
condensed statement of operations purposes for the year ended December 31,
1995, and January 1, 1996 for pro forma condensed statement of operations
purposes for the three months ended March 31, 1996. THE UNAUDITED PRO FORMA
BALANCE SHEET PRESENTED BELOW DOES NOT PURPORT TO REPRESENT WHAT THE COMPANY'S
FINANCIAL POSITION ACTUALLY WOULD HAVE BEEN HAD THE REORGANIZATION OCCURRED ON
THE DATE INDICATED OR TO PROJECT THE COMPANY'S FINANCIAL POSITION FOR ANY
FUTURE DATE. THE UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996,
SET FORTH BELOW, DO NOT PURPORT TO REPRESENT WHAT THE COMPANY'S OPERATIONS
ACTUALLY WOULD HAVE BEEN HAD THE REORGANIZATION OCCURRED ON THE DATE INDICATED
OR TO PROJECT THE COMPANY'S OPERATING RESULTS FOR ANY FUTURE PERIOD. The
unaudited pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The unaudited
pro forma condensed financial statements should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of the Company and the
notes thereto appearing elsewhere in this Prospectus.
29
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Current assets........................... $ 1,298 $ 3,676 (1) $ 4,974
Investment in PCS licenses............... 2,124,594 -- 2,124,594
Investment in unconsolidated
partnership............................. 49,314 (49,314)(2) --
Note receivable-unconsolidated
partnership............................. 83,655 (83,655)(2) --
Property, plant and equipment (net)...... -- 76,129 (1) 76,129
---------- -------- ----------
Total assets........................... $2,258,861 $(53,164) $2,205,697
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Current liabilities...................... $ 456 $ 96,428 (1) $ 96,870
(14) (3)
Deferred compensation.................... -- 4,247 (1) 4,247
Note payable to affiliate................ 5,000 (5,000) (1) 5,000
5,000 (3)
Limited partner interest in consolidated 8,237 (1)
subsidiary.............................. 5,000 10,000
(3,237)(3)
Partners' capital........................ 2,248,405 (24,107)(1) 2,089,580
(1,749)(3)
(132,969)(2)
---------- -------- ----------
Total liabilities and partners'
capital............................... $2,258,861 $(53,164) $2,205,697
========== ======== ==========
</TABLE>
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, FOR THE THREE MONTHS ENDED
1995 MARCH 31, 1996
----------------------------------- ----------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
General and adminis-
trative.............. $ 1,221 $ 36,239 (1) $ 37,460 $ -- $19,862 (1) $ 19,862
Professional and legal
fees................. 2,310 22,508 (1) 26,849 -- 10,862 (1) 10,862
2,031 (3)
Depreciation.......... 47 164 (1) 211 -- 254 (1) 254
-------- -------- -------- -------- ------- --------
Total operating ex-
penses............. 3,578 60,942 64,520 -- 30,978 30,978
OTHER INCOME (EXPENSE):
Interest income....... 253 207 (1) 260 (67) (224)(1) (358)
(200)(3) (67)(3)
Other income.......... -- 38 (1) 38 -- 143 (1) 143
Equity in loss of un-
consolidated partner-
ship................. (46,206) 46,206 (2) -- (36,232) 36,232 (2) --
Limited partner inter-
est in net loss of
consolidated
subsidiary........... -- 1,830 (1) -- -- (67)(1) --
(1,830)(3) 67 (3)
-------- -------- -------- -------- ------- --------
Total other income
(expense).......... (45,953) 46,251 298 (36,299) 36,084 (215)
-------- -------- -------- -------- ------- --------
Net loss.............. $(49,531) $(14,691) $(64,222) $(36,299) $ 5,106 $(31,193)
======== ======== ======== ======== ======= ========
</TABLE>
- - --------
(1) Reflects the transfer of the operations from Holdings to the Company
(including the operations of NewTelCo, L.P., an insignificant subsidiary
of Holdings) resulting from the Reorganization, as derived from the
historical financial statements.
(2) Reflects the transfer of WirelessCo's investment in APC to Holdings,
resulting from the Reorganization.
(3) Reflects the elimination of NewTelCo, L.P. from the transfer of
operations from Holdings to the Company as noted by (1) above.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. The Company's consolidated financial information
does not reflect the transfer of all of Holdings' assets used in the Company's
PCS business to subsidiaries of Sprint Spectrum (which occurred on July 1,
1996) and the planned distribution of the Company's interest in APC to
Holdings (which is expected to occur following the Offering). To assist
prospective investors, pro forma and as adjusted information reflecting the
Reorganization and the Offering have been set forth in "Selected Historical
and Pro Forma Financial Data," "Pro Forma Condensed Financial Statements" and
certain of the discussion below is presented on a pro forma basis as though
the Reorganization had occurred.
GENERAL
The Company is a development stage enterprise formed for the purpose of
establishing a nationwide PCS wireless telecommunications network. The Company
acquired 29 PCS licenses in the FCC's A Block and B Block PCS auction which
concluded in March 1995. The Company also has an affiliation agreement with
APC and expects to have affiliation agreements with Cox-California and
PhillieCo. In addition, Cox has agreed to contribute to the Company, upon FCC
approval, which is pending, a PCS license for the Omaha MTA. The Company has
four subsidiaries: WirelessCo, RealtyCo, EquipmentCo and FinCo.
To date, the Company has incurred expenditures in conjunction with PCS
license acquisitions, initial design and construction of the PCS network,
engineering, marketing, administrative and other start up related expenses.
The Company has not yet commenced commercial operations and, as a result, has
not yet generated operating revenue or earnings. The Company intends to
initiate the commercial launch of its service in the fourth quarter of 1996
with service in all MTAs by the end of the first quarter of 1997. Pop coverage
at the end of the first quarter of 1997 is expected to reach approximately 60%
in the aggregate across all of the Company's markets. The timing of launch in
individual markets will be determined by various factors, principally zoning
and microwave relocation factors, equipment delivery schedules and local
market and competitive considerations. The Company intends to continue to
expand its coverage in its PCS markets to reach approximately 70% of the Pops
in its existing license areas in the aggregate by the end of 1997. Thereafter,
the Company will evaluate further coverage expansion on a market-by-market
basis, eventually targeting coverage of 80% of the Pops in its existing
license areas in the aggregate, thereby substantially completing its planned
network buildout of its existing license areas. The extent to which the
Company is able to generate operating revenue and earnings is dependent on a
number of business factors, including securing financing to complete network
construction and fund initial operations and operating losses, successfully
deploying the PCS network and attaining profitable levels of market demand for
the Company's products and services.
LIQUIDITY AND CAPITAL RESOURCES
The buildout of the Company's PCS network and the marketing and distribution
of the Company's PCS products and services will require substantial capital.
The Company currently estimates that its capital requirements (capital
expenditures, the cost of its existing licenses, working capital, debt service
requirements and anticipated operating losses) for the period from inception
through the end of 1998 (assuming substantial completion of the Company's
network buildout to cover 80% of the Pops in its current license areas in the
aggregate by the end of 1998) will total approximately $7.9 billion (of which
approximately $2.2 billion had been expended as of March 31, 1996). The
Company will also require substantial additional capital for new license
acquisitions or investments in entities making license acquisitions (if any)
and, after 1998, for coverage expansion and volume-driven network capacity and
other capital expenditures for existing and new license areas (if any),
working capital, debt service requirements and anticipated further operating
losses. Costs associated with the network buildout include switches, base
stations, towers, antennae, radio frequency engineering, cell site
construction and microwave relocation. Management estimates that capital
expenditures associated with the
31
<PAGE>
buildout will total approximately $3.8 billion from inception through 1998,
including $3.0 billion in 1996. Under the Procurement Contracts, the Company
is required to purchase minimum amounts of equipment and services from each
Vendor. Actual amounts of the funds required may vary materially from these
estimates and additional funds would be required in the event of significant
departures from the current business plan, new license acquisitions,
unforeseen delays, cost overruns, unanticipated expenses, regulatory expenses,
engineering design changes and other technological risks.
The Company currently has no sources of revenue to meet its capital
requirements and has relied upon capital contributions and advances from
Holdings. Holdings also requires capital for its affiliate investments and
other partnership purposes. The Partners have agreed to contribute up to an
aggregate of $4.2 billion of equity to Holdings to the extent required by the
annual budgets of Holdings through fiscal 1999 as approved by the Partners. As
of March 31, 1996, approximately $2.4 billion had been contributed to Holdings
of which $2.2 billion had been contributed to the Company and the remaining
$0.2 billion had been contributed or advanced to APC. The Company currently
intends to obtain up to $1.4 billion of additional equity following March 31,
1996, resulting in $3.6 billion in aggregate invested equity capital in the
Company, although there can be no assurance that any additional capital will
be obtained in the form of equity from the Parents or otherwise. The Parents
have agreed to make available or cause Holdings to make available to the
Company up to $0.9 billion of such additional equity, to the extent required
by the Company to fund any projected cash shortfall. Such $0.9 billion is
committed under a Capital Contribution Agreement among Sprint Spectrum and the
Parents that provides for $1.0 billion in aggregate equity commitments (less
amounts of cash equity contributed after December 31, 1995, including amounts
invested in Sprint Spectrum to fund APC prior to its transfer to Holdings).
The Company's business plan and the financial covenants and other terms of the
Secured Financing are expected to require such additional equity financing
prior to the end of 1998, absent a new financing source. The portion of the
$4.2 billion not invested in the Company that may be available to Holdings
from the Partners may be used by Holdings to fund Holdings' other affiliate
commitments, to make other wireless investments and/or to make new license
acquisitions. Amounts budgeted by the Partners in future years will determine
the extent to which the commitments will actually be utilized. See "Risk
Factors--Substantial Capital Requirements and Liquidity; Highly Leveraged
Capital Structure." See also "Description of Vendor Contracts and Financing--
Capital Contribution Agreement" and "The Partnership Agreements--Holdings
Partnership Agreement--Capital Contributions" for a discussion of the equity
capital commitments to Holdings and Sprint Spectrum.
The Company has obtained commitments from Nortel for $1.3 billion and from
Lucent for $1.8 billion of senior secured loans to finance purchases of PCS
equipment and related services and costs. The Nortel Financing requires, as a
condition to funding, the commitment of additional financing from third-
parties, including the Offering, the Bank Credit Facility or other debt
financing and equity financing. The Company will use the proceeds of the
Vendor Financing to fund the purchase of the equipment and software
manufactured by the vendors as well as substantially all of the construction
and ancillary equipment (e.g., towers, antennae, cable) required to construct
the Company's PCS network. These facilities would serve as the primary
financing mechanism for the buildout of the network. See "Risk Factors--
Substantial Capital Requirements and Liquidity; Highly Leveraged Capital
Structure." The Company has received a commitment from Chase to provide a
fully underwritten $2.0 billion Bank Credit Facility to finance working
capital, capital expenditures, operating losses and other partnership
purposes. The Company will have amortization obligations under the Secured
Financing and minimum purchase obligations under the Procurement Contracts.
These commitments are subject to numerous conditions, including the execution
and delivery of definitive documentation for the Secured Financing. See
"Description of Vendor Contracts and Financing--Vendor Financing" and "--Bank
Credit Facility."
Sources of funding for the Company's further financing requirements may
include additional vendor financing, public offerings or private placements of
equity and/or debt securities, commercial bank loans and/or capital
contributions from Holdings or the Partners. There can be no assurance that
the Secured Financing or any additional financing will be available to the
Company or, if available, that such financing can be obtained on a timely
basis and on terms acceptable to the Company and within limitations contained
in the Indentures, the agreements governing the Secured Financing and any new
financing arrangements. Failure to obtain any such
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financing could result in the delay or abandonment of the Company's
development and expansion plans and expenditures or the failure to meet
regulatory requirements. It also could impair the Company's ability to meet
its debt service requirements (including its obligations with respect to the
Notes) and could have a material adverse effect on its business.
The Company's net cash used in 1994 totaled $118.4 million which consisted
primarily of deposits placed with the FCC in advance of the auction for the
PCS licenses. For the year ended December 31, 1995, the Company had a net cash
usage of $2.1 billion. Cash used in operations was $6.8 million which
consisted of the operating loss of $49.5 million (which includes the equity in
the loss at APC) and is offset, in part, by increased payables and other
accruals. Cash used in investing activities totaled $2.1 billion, consisting
of a $2.0 billion purchase of PCS licenses from the FCC and a $131.8 million
investment in APC. For the quarter ended March 31, 1996, total cash usage was
$84.1 million. Cash used in operations consisted of operating losses of $36.3
million offset, in part, by equity in the loss of APC. Cash used in investing
activities totaled $83.0 million and was primarily for an advance to APC.
Since the Company's inception, all of the cash used in operations and for
investing activities has been provided by the Partners in the form of cash
equity contributions which totalled $2.4 billion at March 31, 1996.
As part of an overall strategy to increase the Company's Pop coverage,
either or both of Holdings and the Company may elect to bid on, or affiliate
with or invest in other entities who are bidding on, PCS licenses to be
awarded in the FCC auction of the PCS licenses of the D, E and F Blocks. To
the extent that Holdings acquires new PCS licenses or invests in an entity
that acquires new PCS licenses, it is expected that an affiliation arrangement
with the Company will be entered into with respect to such Pop coverage. To
the extent that the Company directly acquires new PCS licenses or invests in
an entity that acquires new licenses, the Company may finance such acquisition
or investment and any related capital expenditures, working capital and other
funding requirements with a portion of the net proceeds of the Offering or
through additional debt and/or equity financing. There can be no assurance
that the Company or Holdings will pursue such an expansion strategy.
Prior to the transfer of APC to Holdings, WirelessCo will have certain
obligations in respect of APC. During the initial five year build-out period
ending December 1999, American Personal Communications, Inc. ("APC, Inc."),
the 51% owner of APC, and WirelessCo are obligated as follows: (a) APC, Inc.
is obligated to make capital contributions in an amount equal to the aggregate
principal and interest payments to the FCC for APC's PCS license, provided
APC, Inc. has sufficient cash flow or can obtain financing from a third party;
(b) if APC, Inc. is unable to meet such obligation, WirelessCo is required to
contribute the shortfall; (c) WirelessCo is required to contribute to APC cash
necessary for operations up to an amount of approximately $98 million; and (d)
WirelessCo is obligated to fund the cash requirements of APC in excess of that
described in (a), (b), and (c) above, in the form of either loans or
additional capital up to an aggregate of $275 million. As of December 31,
1995, $98 million of equity had been contributed and $654,982 of partner
advances had been extended to APC. An additional $83 million of partner
advances was extended to APC during the quarter ended March 31, 1996.
Outstanding partner advances are non-recourse to the partners, bear interest
at an agreed-upon rate and will be payable at such time as APC has sufficient
funds to permit repayment. In addition, prior to the transfer of APC to
Holdings, WirelessCo will be subject to a put option pursuant to which,
annually during the initial five-year period and at various times thereafter,
APC, Inc. may require WirelessCo to purchase all or a portion of APC, Inc.'s
interest in APC (equal to 100% of its interest in the aggregate). Under
certain circumstances, APC, Inc. has the right and is obligated to exercise
its put rights to the extent necessary to fund its additional capital
contribution obligations.
RESULTS OF OPERATIONS
From the Date of Inception to December 31, 1994.
General and administrative costs associated with salary, benefits and
expenses of administrative personnel were $1.4 million. Professional and legal
fees associated with market research and consulting, contractor and legal cost
incurred in conjunction with participation in the PCS auction totaled $1.9
million. There was nominal
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depreciation expense in 1994. The Company had a loss for the period from
October 24, 1994 (date of inception) to December 31, 1994 of $3.3 million.
For the Year Ended December 31, 1995.
The PCS business activities of the Company were conducted by Holdings after
April 1995. APC continued as a subsidiary of the Company during 1995 and 1996.
The Company incurred $1.2 million ($37.5 million after giving effect to the
Reorganization) of general and administrative costs associated with the start-
up of operations. At year end, Holdings had 739 full-time employees, all of
whom are working on behalf of the Company. Professional and legal costs
associated with WirelessCo's participation in the PCS auction totaled $2.3
million ($26.8 million after giving effect to the Reorganization). The Company
incurred a loss of $46.2 million as its share of APC's losses associated with
commencement of operations. There was nominal depreciation and no amortization
recorded in 1995. The Company will commence amortization of its PCS license
investment upon launch of commercial operations and will amortize such
investment over a period of 40 years. The Company had a loss of $49.5 million
($64.2 million after giving effect to the Reorganization) for the year ended
December 31, 1995.
For the Quarter Ended March 31, 1996.
Other than APC, all PCS business activities of the Company were conducted
by Holdings from April 1995 through June 30, 1996. The Company incurred a loss
of $36.2 million as its share of APC's losses associated with customer
acquisition and operations. There was no amortization of licenses during the
period as PCS service had not been launched commercially. The Company had a
loss of $36.3 million ($31.2 million after giving effect to the
Reorganization) for the quarter ended March 31, 1996.
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BUSINESS
GENERAL
Sprint Spectrum intends to become a leading provider of wireless
communications products and services in the United States. The Company is the
largest broadband wireless PCS company in the United States in terms of total
licensed Pops, with licenses (including those owned by licensees that have
affiliated or have agreed to affiliate with the Company) to provide service in
33 MTAs covering 190.9 million Pops (73% of the total United States
population), including eight of the nation's ten largest MTAs. The Company
intends to initiate the commercial launch of its service in the fourth quarter
of 1996 with service in all MTAs by the end of the first quarter of 1997. Pop
coverage at the end of the first quarter of 1997 is expected to reach
approximately 60% in the aggregate across all of the Company's markets. The
timing of launch in individual markets will be determined by various factors,
principally zoning and microwave relocation factors, equipment delivery
schedules and local market and competitive considerations. The Company intends
to continue to expand its coverage in its PCS markets to reach approximately
70% of the Pops in its existing license areas in the aggregate by the end of
1997. Thereafter, the Company will evaluate further coverage expansion on a
market-by-market basis, eventually targeting coverage of 80% of the Pops in
its existing license areas in the aggregate, thereby substantially completing
its planned network buildout of its existing license areas.
The general partner of Sprint Spectrum is Holdings, a limited partnership
formed by Sprint Enterprises, L.P., which has a 40% partnership interest in
Holdings, TCI Telephony Services, Inc. which has a 30% partnership interest in
Holdings, and Comcast Telephony Services and Cox Telephony Partnership, each
of which has a 15% partnership interest in Holdings. Each Partner is both a
general partner holding 99% of its interest as a general partner and a limited
partner holding 1% of its interest as a limited partner. Holdings has a
greater than 99% general partnership interest in the Company. The Partners are
subsidiaries of, respectively, Sprint, TCI, Comcast and Cox.
The Company is at an early stage of development, has not commenced
commercial PCS operations and has no revenues from operations. The Company
will require significant funds for development, construction, testing and
deployment of its PCS network before commencement of commercial operations.
The Partners have agreed to contribute up to an aggregate of $4.2 billion of
equity to Holdings to the extent required by the annual budgets of Holdings
through fiscal 1999, as approved by the Partners. As of March 31, 1996,
approximately $2.4 billion had been contributed to Holdings, of which $2.2
billion had been contributed to the Company and the remaining $0.2 billion had
been contributed or advanced to APC. The Company currently intends to obtain
up to $1.4 billion of additional equity following March 31, 1996, resulting in
$3.6 billion in aggregate invested equity capital in the Company, although
there can be no assurance that any additional capital will be obtained in the
form of equity from the Parents or otherwise. The Parents presently expect to
make available or cause Holdings to make available to the Company up to $1.0
billion of such additional equity, to the extent required by the Company to
fund any projected cash shortfall. The Company's business plan and the
financial covenants and other terms of the Secured Financing will require such
additional equity financing prior to the end of 1998, absent a new financing
source. The portion of the $4.2 billion not invested in the Company that may
be available to Holdings from the Partners may be used by Holdings to fund the
Company's capital needs and Holdings' other affiliate commitments or to make
other wireless investments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "The Partnership Agreements--Holdings Partnership Agreement--
Capital Contributions."
The Company believes that rapid growth in consumer and business demands for
wireless services, technological advances, increased customer expectations for
quality and convenience of use and deregulation are reshaping the
telecommunications market. In order to compete in this changing environment,
accelerate subscriber growth and increase customer retention, the Company
intends to offer customers integrated telecommunications packages and national
service offerings. The Parents and the Company expect to package the Company's
wireless services with other of the Parents' communications products and
services, including the local and long distance telecommunications services
and the cable-based entertainment services of Sprint and
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the Cable Parents. The Company and the Parents will market PCS wireless
products and services nationally under the Sprint brand name through diverse
distribution channels including those of the Parents.
The Company believes it will be able to differentiate itself in the wireless
marketplace through the implementation of a state-of-the-art digital network,
featuring CDMA technology. The Company selected CDMA technology because the
Company believes it offers increased system capacity, better quality of
transmission and lower infrastructure and ongoing support costs. The Company's
CDMA technology will enable it to offer, when the necessary equipment is
available, high-speed data transmission to and from portable computers,
advanced paging services, facsimile services and Internet access.
Broadband PCS systems differ from traditional analog cellular telephone
service principally in that PCS systems operate at a higher frequency band
(1850-1990 MHz radio spectrum), have more spectrum allotted and have different
license areas. PCS is expected to be the first all-digital wireless service
and will be able to provide enhanced integrated services not currently offered
by traditional analog cellular providers, including integrated voicemail and
short messaging.
The Company believes that these enhanced features and services, in
conjunction with increased competition within the industry, will contribute to
the acceleration of growth in the wireless telecommunications market. The
number of cellular telephone subscribers nationwide has grown from
approximately 680,000 in 1986 to an estimated 34 million as of December 31,
1995. PCIA estimates that the number of cellular and PCS wireless services
subscribers will be over 104 million by the year 2005 and that PCS
subscriptions will account for approximately 40 million of such subscriptions.
The Company was the successful bidder for 29 PCS licenses in the FCC's A
Block and B Block PCS auction which concluded in March 1995. The Company's 29
wholly-owned markets cover 150.3 million Pops and include, among others, the
New York, San Francisco, Detroit, Dallas/Fort Worth and Boston/Providence
MTAs. Additionally, Cox has agreed to contribute to the Company, upon FCC
approval which is pending, a PCS license for the Omaha MTA that it purchased
in the broadband PCS auction in March 1995.
In order to increase its Pop coverage, the Company has affiliated and
expects to continue to affiliate with other PCS providers, including those in
which Holdings or affiliates of its Partners have an interest. Pursuant to
affiliation agreements, each affiliated PCS service provider will be included
in the Company's national network and will use the Sprint brand name. In
return for this right, the affiliated PCS provider agrees to offer among its
products at least certain products designated by Sprint Spectrum, agrees to
adhere to certain technical standards for the affiliated PCS provider's
network and agrees to share in certain costs such as advertising that benefit
both the affiliated PCS provider and Sprint Spectrum. The affiliated PCS
provider pays a fee for the services and reimburses Sprint Spectrum for
certain direct costs attributable to the affiliate. The affiliation agreements
between Sprint Spectrum and other PCS providers are not presently subject to
regulation by the FCC. Holdings owns a 49% limited partnership interest in
APC, which owns a PCS license for, and operates a broadband PCS system in, the
Washington D.C./Baltimore MTA. APC has affiliated with Sprint Spectrum and is
marketing its products and services under the Sprint brand name. APC launched
its PCS service in November 1995 and is the nation's first commercially
operational PCS system. As of May 15, 1996, APC had approximately 80,000
subscribers. See "--Early PCS Industry Experience." Holdings also expects to
acquire a 49% limited partnership interest in Cox-California, a partnership
that will be formed to hold a PCS license for the Los Angeles/San Diego MTA
covering 21.5 million Pops. Cox, which currently owns this license, will
contribute the license to Cox-California and will manage and control Cox-
California. The Company expects to sign an affiliation agreement with Cox-
California by the end of the third quarter of 1996. At the same time, the
Company also expects to affiliate with, and provide various services to
PhillieCo, a limited partnership organized by and among subsidiaries of
Sprint, TCI and Cox that owns a PCS license for the Philadelphia MTA.
Including affiliates, the Company has licenses and affiliate relationships
in 33 MTAs covering nearly 191 million Pops (73% of the United States
population.) There are 18 MTAs currently not served by the Company's licenses
and affiliations. The Company continues to explore a number of possibilities
to expand Pop coverage. Opportunities exist for affiliations with or
investments in other PCS providers (including other affiliates of
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Holdings) operating in territories not covered by the Company's licenses. The
Company may participate, directly or through others, in the FCC auction of PCS
licenses for the D, E and F Blocks. See "--Regulation--PCS Licensing."
Likewise, the ability to exchange capacity or enter into resale agreements
with other providers or enter into roaming arrangements with other providers'
systems are options under consideration. Finally, the Company is also
considering entering into the 10 MHz auctions as a viable method of expanding
coverage. There can be no assurance, however, that the Company will be
successful in expanding its Pop coverage beyond that currently covered by
existing licenses and existing and expected affiliation agreements.
The table below presents the owned and affiliated Pops after giving effect
to such affiliation agreements:
<TABLE>
<CAPTION>
1995 AVERAGE LICENSE
POPULATION PURCHASE PRICE
OWNED/AFFILIATED # OF MTAS IN MTA(S) PER 1990 POP(1)
---------------- --------- ---------- ---------------
(MILLION)
<S> <C> <C> <C>
Owned....................................... 29 150.3 $14.54
Omaha (to be contributed by Cox)............ 1 1.7 $ 3.06
Affiliated:
APC (Baltimore/Washington)(3)............. 1 8.3 $13.16
Cox-California (Los Angeles/San
Diego)(4)................................ 1 21.5 $13.16
PhillieCo (Philadelphia)(5)............... 1 9.1 $ 9.52
--- -----
Total................................... 33 190.9
=== =====
</TABLE>
- - --------
(1) Cost to winning bidder in FCC auction(s) or in connection with the award
of Pioneer's Preference license.
(2) Contribution will be credited towards capital contributions required of
Cox under the Holdings Partnership Agreement to the same extent as if Cox
had made a cash contribution in an amount equal to the sum of (i)
$995,564, together with interest at the annual rate of 13.4% computed from
November 17, 1994 through the date the Omaha license is contributed, plus
(ii) $4,062,400, together with interest at the annual rate of 13.4%
computed from June 30, 1995 through the date the Omaha license is
contributed.
(3) Holdings owns a 49% limited partnership interest in APC, which has signed
an affiliation agreement with the Company.
(4) Holdings intends to acquire a 49% limited partnership interest in, and the
Company expects to sign an affiliation agreement with, Cox-California.
(5) Owned by subsidiaries of Sprint, TCI and Cox. The Company expects to sign
a services and affiliation agreement with PhillieCo.
STRATEGY
The Company intends to achieve its objective of becoming a leading provider
of wireless communications products and services in the United States by
employing strategies for its network construction, service offering, branding
and marketing which utilize the Company's competitive advantages. These
competitive advantages are expected to include:
. State-of-the-art technology. The Company is implementing a state-of-the-
art PCS network using CDMA digital technology which, the Company
believes, provides benefits relative to current analog systems. The
Company believes that its digital technology will increase capacity in
the system by approximately 7 to 10 times, offer better call quality and
clarity and a wider variety of advanced features and applications.
. National network. Sprint Spectrum intends to offer wireless service on a
national basis with a single technology (CDMA) operating on a uniform
spectrum (1.9 GHz), thereby providing consistent functionality and high
quality service. The Company currently owns (including the Omaha license
to be contributed to the Company), or expects to have affiliation
relationships with PCS providers who own, PCS licenses covering 190.9
million Pops and intends to pursue additional coverage on a market-by-
market basis through license acquisitions and affiliation or resale
agreements with other CDMA-based PCS providers. Together, the Company and
other PCS licensees that have announced their intentions to implement
CDMA technology have licenses covering territories representing
approximately 89% of the United States population. The Company expects to
gain cost advantages in purchasing power, operations and marketing
because of the national scope and operating scale of its network. The
Company believes it
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will have the flexibility to utilize pricing and promotional programs on a
national basis to provide incentives for customer subscription and
increased usage.
. National brand. The Company will market and promote its wireless products
and services under the Sprint brand, which is one of the most widely
recognized and respected brands in the telecommunications market. The
Company expects that the use of the Sprint brand will build consumer
confidence and accelerate consumer acceptance of the Company's products
and services.
. Strong Parent sponsorship. The Company intends to capitalize on the
communications expertise of the Parents, including local exchange carrier
services, cable television services and long distance telephone services.
In addition, the size and breadth of the customer base of each Parent
provide a key advantage for the Company's distribution and marketing
efforts. Subject to certain exceptions, the Parents and the Company
intend to cross-market the Company's wireless services with the long
distance, local telephone and cable-based entertainment services of the
Parents in order to accelerate subscriber growth and increase retention
rates while improving overall customer satisfaction. Sprint has a
combined customer base of 14 million long distance and local telephone
subscribers and collectively the Cable Parents have 20 million cable
television customers. See "--Relationship with Partners and Parents."
MARKETING AND DISTRIBUTION
The Company's current marketing strategy is to differentiate itself through
its state-of-the-art network, use of the established and respected Sprint
brand name, customer-care systems, diverse distribution channels and sales and
packaging arrangements with the Parents. The Company will build on Sprint's
strong national identity, using regional and local marketing to tailor
programs to the demands of individual markets. Additionally, the Company
believes that its all-digital network will provide customers with consistency
of service and features on a national basis, improving customer satisfaction.
The Company has formed segmentation and distribution strategies targeted at
both consumer and business markets.
Consumer Market
Customer segmentation. The Company plans to use both mass-marketing and
specific customer segment marketing to focus its efforts on consumers who have
significant work or personal telecommunication demands. Mass-marketing efforts
are expected to emphasize the quality of Sprint Spectrum's network in
comparison to traditional cellular service and will be supported by the Sprint
brand. For each targeted segment, the Company expects to create a number of
specific marketing programs including a service package, tiered pricing plans,
promotional strategies and distinctive distribution channels. An important
aspect of specific customer segment marketing is the ability, subject to
certain exceptions, to integrate the Company's wireless services with the
Parents' long distance and local telephone services and cable-based
entertainment services.
Distribution. The Company intends to use multiple methods of distribution in
each of its markets; and will continue to review and implement new
distribution channels in the future as it determines the most effective
combination of options. The Company believes that multiple distribution
channels in each of its markets will enable it to provide effective and
extensive marketing of products and services and to minimize its reliance on
any single distribution source. Traditional distribution sources such as
dealers and direct sales representatives may be important factors in achieving
the Company's objectives but alternatives, such as Company retail stores, may
also be an important part of the Company's distribution system.
Direct channels. The Company intends to build its direct distribution
channel over time. The core of this strategy is the introduction, currently
scheduled for the fourth quarter of 1996, of Sprint Spectrum Retail Stores
("Stores"). Based on APC's experience with its flagship stores, the Company
believes that the Stores will increase Sprint Spectrum's market presence
and build awareness for its services. In addition, the Stores should also
satisfy customer preferences to deal directly with the provider. Finally,
the Stores will ensure a venue where the Company can have complete control
of its image and selling message while providing the
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Company an opportunity to display the full array of its products and
services. The Company expects to complement its Stores with other direct
channels such as its direct sales force and telemarketing.
Indirect and third-party channels. The Company believes its products and
services have significant mass market potential and believes that it will
have key advantages in using traditional retail distribution channels. The
Company believes that the following capabilities and features, which it
will introduce over time, will make it attractive to national and regional
retailers: (i) a national offering, which allows retailers to use one
service provider; (ii) single technology and frequency range, which
simplifies handset options and reduces accounting and inventory management
requirements; (iii) over-the-air activation, which simplifies training,
selling and marketing efforts; (iv) optional pre-paid billing, which
expands the potential customer base; (v) elimination of long-term customer
service contracts, which may increase the number of potential customers and
decrease customer dissatisfaction; (vi) providing for an equipment sales
margin versus selling commissions, which enables retailers to realize
profits at the time of sale; and (vii) the Sprint brand name.
Cross-selling and Parent channels. Subject to certain exceptions, the
Parents and the Company intend to cross-market the Company's wireless
services with the long distance, local telephone and cable-based
entertainment services of the Parents in order to increase customer
acquisition and retention. Sprint has a combined customer base of 14
million long distance and local telephone subscribers and collectively the
Cable Parents have 20 million cable television customers. See "The
Partnership Agreements." By using the Cable Parents' regular contacts with
their customers, including bill inserts and customer service contacts, the
Company intends to build market share of its wireless services efficiently.
The Company also expects to be able to build on Sprint's distribution
capabilities, through Sprint's long distance and local telephone divisions.
Business Market
Customer segmentation. The Company plans to initially target small to
medium-sized business customers with a locally-oriented wireless offering.
This segment includes satellite offices of larger organizations that purchase
wireless services on a decentralized basis. The Company expects to highlight
its all-digital network which it believes offers customers superior quality,
increased security and improved functionality as compared to traditional
analog cellular service. Customers in this segment are likely to have locally-
oriented communications needs and will be suitable targets for the Company's
initial product offering as the wireless network is being constructed and
prior to its nationwide deployment. The Company plans to offer flexible
billing options that address cross-product opportunities such as long distance
services.
The Company also intends to approach large business customers with its
initial product offering. Many large business customers are regional or
national in scope and require consistent pricing, service functionality and
account support on a regional or national basis. In marketing its service to
this segment, the Company intends to emphasize the following competitive
advantages: (i) ability to offer nationwide wireless services contracts, (ii)
consistent quality derived from Sprint Spectrum's all-digital network, (iii)
feature consistency across the Company's national network, (iv) volume
purchase capabilities and (v) packaging of Sprint long distance and other
Parent services.
Distribution. The Company intends to emphasize the Parents' business-to-
business selling resources in order to develop a comprehensive distribution
capability quickly. The Parents may provide access to their salesforces which
are comprised of over 2,000 salespeople nationwide focused on the business
market. The Company expects to augment existing Parent channels with direct
channels to expand its presence. The Company's direct channels likely will
include the Stores to target very small businesses, account executives to
target small, medium and large businesses and national account managers to
target national accounts. As of May 31, 1996, Holdings had a distribution and
marketing staff of approximately 85 employees working on behalf of the
Company.
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PRODUCTS AND SERVICES
With its all-digital national wireless network, the Company plans to
introduce a wide array of services and features that are designed to enhance
utility, provide consumers greater capabilities in call management and
increase usage for both outgoing and incoming calls.
Outgoing Calls
Features that encourage customers to make outgoing calls include: improved
call quality, advanced handsets, national consistency and customer-driven
local calling areas.
Improved call quality. The quality of the digital network continues to
approach that of wireline systems, which is expected to encourage increased
consumer usage.
Advanced handsets. The advanced, menu-driven handsets are designed to be
more user friendly and will be equipped for a variety of enhanced features and
applications.
National consistency. The consistency of product features across the
Company's network is expected to simplify use and ensure that handset
functions are similar in all markets.
Customer-driven local calling areas. The provision of customer-driven local
calling areas is designed for customers who frequently travel between multiple
regions.
Incoming Calls
Features that encourage customers to receive calls include: caller ID,
message management, including voicemail and integrated paging and improved
battery technology.
Caller ID. The Company's system is designed to enable the display of the
telephone number of the incoming caller on the customer's handset, allowing
the customer to decide to answer or decline the call or forward it to
voicemail.
Message management. Features like voicemail with call screening will allow
customers to listen while callers leave messages. The introduction of
integrated paging, expected by the end of 1997, will allow the handset to
signal receipt of an incoming message and provide text messaging via the
handset.
Improved Battery Technology. With advances in battery technology, longer
lasting batteries will enable customers to leave their handsets on while not
in use, which will promote the receipt of incoming calls.
The Company believes that the market for wireless communications will shift
over time from today's traditional voice mobility applications which
supplement customers' wireline service to an environment in which wireless
begins to expand into the wireline market, both as a primary communications
device and as a means of providing advanced functionality. The Company intends
to develop products, services and features which will serve to increase
network utilization above historical cellular usage while simultaneously
containing costs.
EARLY PCS INDUSTRY EXPERIENCE
On November 15, 1995, APC launched the first commercial PCS operation in the
United States with the initiation of service in the Washington/Baltimore MTA.
Holdings owns a 49% limited partnership interest in APC, which currently
provides service coverage to an area containing approximately 5.9 million
Pops, or approximately 71% of the Pops in the MTA. APC currently provides
service to the metropolitan areas of Washington and Baltimore and the
connecting highways and roads to Annapolis and the Eastern Shore. APC plans to
continue to expand the range of its geographic and population coverage.
APC's service is marketed under the Sprint brand name and is positioned in
the market as having excellent call clarity, privacy and feature integration.
In its market, APC is providing unique product offerings which
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include: (i) no requirement for long-term service contracts, which encourages
customers to try the service; (ii) no charge for the first minute of inbound
calls, which encourages customers to give out their PCS number and increases
overall minutes of use; (iii) over-the-air-activation, which, due to its
simplicity, encourages customers to acquire the service; (iv) off-the-shelf
retail distribution; and (v) 24-hour-a-day customer service. Under the current
APC marketing plan, customers are required to pay, on average, more to buy PCS
handsets than for cellular handsets utilized by traditional analog cellular
systems; however, monthly and per minute service charges are lower than those
of incumbent cellular providers. APC is also combining the Sprint trademark
with significant level of consumer advertising and tie-ins with Sprint long
distance telephone services.
While APC's operations are still in a preliminary stage, initial results
have been encouraging. As of May 15, 1996, APC had more than 80,000
subscribers. Customers appear willing to pay more for handsets in exchange for
higher quality service, lower airtime rates and no long-term service
contracts. In addition, customers are using the PCS service for more minutes
each month than traditional cellular services and usage patterns differ from
those of traditional analog cellular users. In particular, customers use their
PCS service throughout the day, rather than primarily at commuting hours.
Sprint Spectrum is also monitoring the incumbent cellular providers' response
which, to date, has been primarily focused on APC's geographic coverage.
Sprint Spectrum recognizes that there are limitations to translating APC's
experience to the Company's nationwide markets. First, APC currently has only
two competitors whereas Sprint Spectrum may compete with four or five wireless
competitors in each MTA. Second, while APC intends to add a CDMA protocol, it
is initially deploying GSM technology which is more mature than CDMA will be
at launch. Third, the quality of existing cellular service in the
Washington/Baltimore MTA is inconsistent. In addition, the limited period of
APC's operations is also not necessarily a reliable indicator of future
demand, revenue or the rate at which customers may return handsets or
deactivate their service ("churn").
CDMA TECHNOLOGY
Wireless digital signal transmission is accomplished through the use of
various frequency management technologies, or "protocols." The FCC has not
mandated a universal digital protocol for PCS systems. Currently, various
vendors have proposed three principal competing, incompatible protocols for
use in PCS systems: CDMA, GSM and TDMA (IS-136).
The GSM protocol is an updated, up-banded version of the TDMA-based protocol
now in use in Europe. TDMA (IS-136) is an up-banded version of the TDMA-based
digital cellular protocol now used by cellular operators in the United States.
CDMA is a first-generation technology that is just beginning to be
commercially deployed in the United States. See "Risk Factors--Technology
Risks; Availability of Handsets." The Company believes that the CDMA protocol
will be the most widely adopted PCS protocol in the United States. See "--The
Wireless Telecommunications Industry."
The Company has selected CDMA technology rather than the other technologies
because it believes it will have increased subscriber capacity, higher quality
of transmission and lower infrastructure and ongoing support costs. The
Company believes that CDMA provides the following benefits:
Performance: Because of its allocation of voice channels, CDMA offers better
voice quality when compared to analog and other digital standards. Recently
completed tests indicate that CDMA systems' voice quality is almost as clear
as the typical home (wireline) telephone. CDMA systems are expected to have
more powerful error correction, less susceptibility to fading, reduced
interference and "soft" hand-offs resulting in fewer dropped calls. In a
"soft" hand-off, the mobile customer's handset establishes a connection with a
new cell before disconnecting with the current cell. As a result, fewer calls
are dropped compared to analog or TDMA/GSM networks that use a "hard" hand-off
(i.e., disconnecting the call from the current cell before connecting it in
the new cell).
Cost effectiveness: Cells using CDMA are expected to achieve a greater
radius of coverage and require fewer cells for a given geographical coverage
than newer TDMA/GSM systems for PCS. Fewer cells should
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result in significant reductions in overall capital requirements, lower
ongoing maintenance and operating costs, fewer cell sites to be acquired and
greater flexibility in network design.
Functionality: CDMA offers Sprint Spectrum the capability to customize its
service offerings, enabling customers to select advanced features such as
simultaneous voice and data transmission and, eventually, high speed data
applications.
Security: CDMA technology is inherently more secure than analog technologies
because CDMA works by "digitizing" each call, which is then coded and
transmitted using spread spectrum across a 1.25 MHz channel. This constantly
changing coding scheme enhances security and privacy by decreasing the
opportunity for nonusers to break into the system.
Capacity: CDMA technology allows a greater number of calls by using the
entire frequency spectrum in each cell. The Company believes that CDMA has the
capability to increase subscriber capacity to as much as 7 to 10 times that of
a typical analog system. Additionally, CDMA technology has the ability to
tolerate greater amounts of interference than other digital protocols, which
will permit the system to temporarily increase call capacity in a particular
cell thereby reducing call blocking. The Company plans to offer advanced
features such as wireless data, paging and voice messaging while maintaining
the marketing flexibility to offer high volume packages without straining
system capacity.
Recent CDMA networks that have been completed or are in late stage
development include:
. Hong Kong: Hutchison Telecommunications Ltd. launched the world's first
commercial CDMA digital wireless network in Hong Kong on October 1, 1995
with 1,000 users. The company began active marketing of its CDMA service
in January 1996. By the beginning of July 1996, the company had more than
40,000 CDMA subscribers.
. South Korea: On January 1, 1996, Korea Mobile Telecommunications Corp.
launched CDMA commercial service in an area west of Seoul with 36 CDMA
cell sites. The company launched CDMA service in Seoul in April 1996.
Shinsegi Telecommunications Inc. launched CDMA commercial service in the
Seoul and Taejon regions of South Korea on April 1, 1996 with 149 cell
sites.
. United States: In the United States, PCS service providers that have
indicated their intention of introducing commercial CDMA service include,
Ameritech Corporation (1997 or later), Centennial Cellular Corp. (second
half of 1996), GTE Mobilnet, Inc. (first quarter of 1997) and PCS PrimeCo
L.P. (fourth quarter of 1996). These companies together with Sprint
Spectrum comprise 225.6 million Pops or 89.3% of the United States
population. In addition, several of the successful bidders in the C Block
auctions have announced their intention to adopt CDMA. Winning bidders in
the D, E and F Block auctions, which have yet to occur, may also select
CDMA. See "--Regulation--PCS Licensing."
In addition to these PCS networks, traditional cellular providers may use
CDMA-based systems as a digital overlay to their existing analog systems in
order to improve and expand the range of services they provide. In mid-May,
AirTouch Communications, Inc. ("AirTouch") became the first cellular provider
to deploy a CDMA-based digital overlay. AirTouch's CDMA-based service is
currently only available to selected high-usage customers in Los Angeles.
EQUIPMENT VENDORS
Sprint Spectrum has selected Lucent and Nortel, two of the leading
telecommunications equipment manufacturers, to construct the wireless network
because of their extensive experience in wireless technology and their
willingness to guarantee delivery against specifications developed by the
Company. In addition, the Company has obtained from Nortel and Lucent
financing to fund the purchase of their respective equipment and the
construction of their assigned portions of the network. To mitigate against a
substantial portion of the risks of completion delay and performance of the
network and to ensure the Company has received competitive terms and
conditions, the Procurement Contracts include, among other things, deferred
payment schedules, liquidated
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damages provisions, extended warranty periods and "most favored customer"
status. See "Description of Vendor Contracts and Financing--Vendor Contracts."
Sprint Spectrum has entered into a three-year purchase and supply agreement
for CDMA handsets with Qualcomm Personal Electronics, which is a partnership
formed by QUALCOMM Incorporated ("Qualcomm") and Sony Electronics Inc. See
"Description of Vendor Contracts and Financing--Vendor Contracts--Handset
Agreement". Pursuant to the agreement, Qualcomm will manufacture CDMA handsets
for the Company. In addition, Qualcomm will provide training for the Company's
sales personnel and will work with the Company to develop new products for the
Company's PCS network. The Company also expects to source handsets from other
vendors in mid-1997 and is currently negotiating purchase and supply
agreements on a preliminary basis with such other vendors.
NETWORK BUILDOUT
The buildout of the Company's network involves systems design, acquisition
of cell sites, equipment procurement, relocation of existing microwave users,
interconnection with other communications providers, construction of cell
sites, installation of switches, and implementation of advanced management
information and billing systems. A planning and engineering team, comprised of
approximately 1,500 engineering and operations employees and thousands of
independent contractors and consultants, is designing and constructing the
Sprint Spectrum network based on the regional marketing and product
requirements to meet the Company's targets for consistency, uniformity and
reliability.
Rollout methodology. The Company's principal objective is to maximize
population coverage levels within targeted demographic segments and geographic
areas. Sprint Spectrum intends to offer commercial service in the fourth
quarter of 1996 and expand market coverage to reach approximately 70% of the
Pops in its existing license areas in the aggregate by the end of 1997.
Thereafter, the Company will evaluate further coverage expansion on a market-
by-market basis, eventually targeting coverage of 80% of the Pops in its
existing license areas in the aggregate, thereby substantially completing its
planned network buildout. In developing its PCS network Sprint Spectrum will
consider, among other things, population and traffic density, FCC coverage
requirements and the ability to cluster groups of markets.
RF design. The Vendors have completed and the Company has approved the RF
design for coverage of 60% of the Pops in the Company's license areas in the
aggregate. This process includes cell site design, frequency planning and
network optimization for each of Sprint Spectrum's markets. RF engineering
also allocates voice channels and assigns frequencies to cell sites taking
into consideration both PCS and microwave interference issues.
Property acquisition. The Company employs 32 MTA directors initially to
manage the buildout process and subsequently to have responsibility for
operating the network. Property acquisition managers are located within each
MTA and are responsible for identifying and obtaining the required property
for buildout of the PCS network.
The Company has hired property acquisition firms for each MTA to assist with
acquisition, zoning, permitting and appropriate surveying. The Company will
attempt to minimize property acquisition activity through utilization of the
Parents' assets and cable infrastructure, where possible. The cell site
selection process will require the lease or acquisition of approximately 5,700
sites in 31 MTAs prior to commencement of commercial operations of the
Company's PCS network, many of which are likely to require the Company to
obtain zoning variances or other local governmental or third-party approvals
or permits. As of July 19, 1996, the Company had signed leases or options for
3,281 sites, of which 913 were pending zoning and 1,308 were zoned and ready
for construction. There are currently 255 sites under construction.
Construction and installation. The equipment Vendors are overseeing the
deployment of the PCS network and are subcontracting the construction to
Bechtel National, Inc., Black & Veatch and MFS Communications
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Company, Inc. These firms will act as general construction contractors and
employ local construction firms to build the cell sites.
Microwave relocation. To become operational, Sprint Spectrum must relocate
existing 2GHz commercial microwave service users within its MTAs in order to
clear its spectrum. The Company has contracted with national vendors to assist
in microwave relocation process. Recently, the FCC adopted a microwave
relocation cost-sharing plan that limits permissible relocation costs and
outlines new procedures for the sharing of relocation costs where the
relocation of private microwave facilities benefits multiple broadband PCS
licensees. However, the FCC did not shorten the period for mandatory
negotiations between broadband PCS licensees and affected private microwave
licensees. See "--Regulation."
Approximately 1,400 co-channel and adjacent-channel microwave paths which
may affect Sprint Spectrum's rollout need to be relocated by the Company, of
which approximately 600 are required for the service launch. As of July 19,
1996, 405 relocation agreements were under negotiation, 639 agreements had
been reached and 136 paths had been relocated. The Company has entered into
various cost-sharing arrangements that provide for sharing among affected PCS
license holders of expenses associated with microwave relocation. See "Risk
Factors--Network Buildout and System Implementation Risks."
Interconnection. Sprint Spectrum's network will connect to the Public
Switched Telephone Network. Such interconnection is required to facilitate
originating and terminating traffic between the Company's facilities and both
the incumbent local exchange and long distance carriers. The Company is
negotiating, or intends to negotiate, interconnection agreements with
telephone companies operating or providing service in the areas where the
Company is deploying its PCS network. The Company intends to use Sprint as its
interexchange carrier and the agreement for such service is covered under the
Holdings Partnership Agreement.
Roaming. Wireless service providers are able to offer service to subscribers
from other systems who are traveling in or through their service area.
Customers typically pay higher rates while "roaming" outside of their home
market. Roaming is made possible in today's analog cellular environment by
virtue of common frequency and signaling technology. PCS and analog cellular
systems operate on different frequencies and with different signaling
technologies.
Within its own network, the Company plans to offer "traveling" plans for
subscribers who use the Company's network outside of their home markets.
Features and services will operate identically across all of the Company's
markets. As a result, travelers will be encouraged to access the network
anytime and anywhere.
In areas where CDMA-based PCS service is not available, the Company may
offer a roaming option on the traditional analog cellular system via dual-
mode, dual-band handsets capable of transmitting over either cellular and PCS
frequencies. Access to cellular coverage is dependent on availability of dual-
mode, dual-band handsets which the Company believes will become available in
the first half of 1997. The Company has not entered into any such agreements
with any cellular providers nor can there be any assurance that the Company
will enter into any agreements. Cellular roaming may not be a service option
the Company chooses to offer.
Based upon public announcements by other PCS licensees and cellular service
providers, the Company estimates that CDMA technology will be employed by both
cellular and PCS service providers whose networks cover approximately 95% of
the United States population. While there can be no assurance that CDMA
technology will be deployed to the extent and within the time frames proposed
by the various service providers, it is the Company's belief that CDMA will be
the most widely used wireless digital protocol in the United States.
Information technology. The Company will require advanced and sophisticated
management information systems to handle customer care, billing, network
management and financial and administrative services. The Company has system
development plans directed at launch programs and long-term integrated system
solutions. The plans are focused on three primary areas: (i) customer care,
including billing systems and customer service and support systems, (ii)
network management, including service activation, traffic and usage
monitoring, trouble
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management and operational support systems and (iii) business systems
including financial, purchasing, human resources and other administrative
systems.
The Company has retained a number of consultants and contractors to evaluate
and implement management information systems to provide billing and customer
care. Trials of the billing and service software are expected to begin in the
second half of 1996 in anticipation of the fourth quarter of 1996 launch of
the Company's PCS services. The long-term vision for the Company's billing
system is to integrate all products and services of the Company and,
potentially, those of the Parents. Although the Company intends to offer
customized billing and may offer a variety of billing services, features and
delivery systems, these advanced features will not be available at launch.
There can be no assurance that the billing services and customer care services
currently planned for launch will be developed on a timely basis. Any delay in
the development of such features could cause the Company to alter its initial
pricing and promotional structures.
The Company, through its equipment vendors, plans to introduce sophisticated
network management and operations support systems which will facilitate
network fault detection, correction and management, performance and usage
monitoring and security. System capabilities are being developed which will
allow over-the-air activation of the handset and provision of services. The
Company has chosen to use Cincinnati Bell Information Systems' Precedent 2000,
which is a third-generation, UNIX based customer care and billing system.
Information systems to support general business applications such as
accounting, payroll, accounts payable, and human resources are being obtained
or developed in time for the Company's initial launch. A number of financial
systems have been installed and are being tested.
RELATIONSHIP WITH PARTNERS AND PARENTS
The Company's relationship with the Partners and the Parents is an important
aspect of its strategy for achieving its objective of becoming a leading
provider of wireless communications products and services in the United
States. In order to capitalize on the rapid growth in business and consumer
demand for a single provider of telecommunications services, the Company
intends to use its own marketing efforts, the marketing services of the
Partners' affiliates, existing distribution channels and customer
relationships. The Company intends to capitalize on the communications
expertise of each Parent including local exchange carrier services, cable
services and long distance services. Subject to certain exceptions, the
Partners and the Parents have agreed to cooperate with the Company to cross-
market the Company's wireless services with the long distance, local telephone
and cable-based entertainment services of the Parents in order to accelerate
subscriber growth and increase retention rates while improving overall
customer satisfaction. The Company will promote its wireless services using
the Sprint brand among Sprint's 14 million long distance and local telephone
customers and the Cable Parents' 20 million cable television customers. See
"--Trademarks."
The Holdings Partnership Agreement governs the basic relationships between
the Partners and the Company and provides a structure for subsequent
agreements with the Partners and their affiliates, including the Parents. See
"The Partnership Agreements--Holdings Partnership Agreement." The Company
recently entered into an agreement with Sprint to sell the Company's paging
services. Sprint will serve as the Company's agent for selling traditional
paging services and will market these services through direct mail, direct
sales, employee programs, advertising and promotions. The foregoing agreement
will not affect the Company's ability to offer paging services as part of its
integrated wireless service package, once it is able to do so. With the
exception of this agreement, an agreement regarding use of the Sprint
trademark (described below) and certain immaterial leases, the Company has not
yet entered into any additional agreements with the Partners or the Parents.
Pursuant to the Holdings Partnership Agreement, each Partner, except Comcast
in certain areas, has agreed to provide certain services to the Company in
connection with the operation of the network, which services include antenna
siting and installation, signal transmission between cell sites and switching
locations and provision of primary power, standby power and maintenance. The
pricing and details relating to the provision of such services will be
negotiated at the local level and are not governed by the Holdings Partnership
Agreement. Comcast is not required to provide such services within the
Philadelphia MTA and certain surrounding areas in Pennsylvania,
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New Jersey, Delaware and Maryland (the "Comcast Area") because it owns
cellular licenses for such areas. See "The Partnership Agreements--Holdings
Partnership Agreement."
Subject to certain conditions, the Company expects to enter into sales
agency agreements with the Partners for the co-marketing of wireless services,
local and long distance telephone services and the cable-based entertainment
services by Sprint and the Cable Parents. Sprint and the Cable Parents and
their respective subsidiaries (except for Comcast and its subsidiaries in the
Comcast Area) will be non-exclusive sales agents for the Company's wireless
services. The Company, in turn, will be a non-exclusive sales agent for those
services Sprint and the Cable Parents make available to the Company. The
Company has not entered into any such sales agency agreements with the
Parents.
THE WIRELESS TELECOMMUNICATIONS INDUSTRY
Overview. Wireless telecommunications networks use a variety of radio
frequencies to transmit voice and data in place of, or in addition to,
standard landline telephone networks. Wireless telecommunications technologies
include one-way radio applications, such as paging services, and two-way radio
applications, such as cellular telephone and specialized mobile radio ("SMR")
networks. Each application operates in a distinct radio frequency block.
Since its initial introduction in 1983, commercial cellular telephone
service has grown dramatically and now dominates the wireless
telecommunications market. Annual service revenues for the cellular telephone
industry set a record of over $19 billion during 1995 (an increase from
approximately $482 million in 1985). The number of cellular telephone
subscribers nationwide has grown from approximately 680,000 in 1986 to an
estimated 34 million at December 31, 1995. The number of cellular telephone
subscribers has grown at a compounded annual rate of 46.7% over the last three
years. PCIA estimates that the number of cellular and PCS wireless service
subscriptions will be over 104 million by the year 2005 and that PCS
subscriptions will account for approximately 40 million of such subscriptions.
Most cellular services currently 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. Digital systems, on the
other hand, convert voice or data signals into a stream of digits that is
compressed before transmission, enabling a single radio channel to carry
multiple simultaneous signal transmissions. This enhanced capacity, along with
enhancements in digital protocols, allows digital-based wireless technologies
to offer new and enhanced services, such as greater call privacy, and more
robust data transmission features, such as "mobile office" applications
(including facsimile, electronic mail and connecting notebook computers with
computer/data networks).
While digital technology generally reduces the effect of transmission
interference relative to analog technology, capacity limitations in the 8 Kb
cellular digital handsets now deployed by most digital wireless operators also
cause a perceptible decline in voice quality. This gap in voice quality has
proven to be a significant barrier to cellular operators seeking to switch
their customers from analog to digital service. Enhanced 13 Kb digital
handsets are now being developed by vendors for both PCS and digital cellular
systems and are expected to be available by mid-1997. These new handsets are
expected to offer digital transmission quality comparable to, if not better
than, current analog cellular handsets.
PCS is expected to be the first all-digital wireless service and will be
able to provide enhanced integrated services not currently offered by
traditional analog cellular providers, a wider range of service options,
including integrated voicemail, enhanced custom-calling and short-messaging.
The Company expects to offer, when the necessary equipment is available, high-
speed data transmissions to and from computers, advanced paging services,
facsimile services and internet access service.
The Company believes that these enhanced features and increased services
will contribute to the acceleration of growth in the wireless
telecommunications market and that PCS providers will be the first direct
wireless competitors to cellular providers and the first to offer mass market
all-digital mobile networks.
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The Company believes that the initial experience of service providers in
international markets where PCS has already been introduced provides support
for the forecasted rapid growth of PCS in the United States. For example, the
launch of PCS networks in the U.K. and Japan has initially increased
competition, stimulated demand and increased penetration rates in the entire
wireless market. In less than two years, the U.K.'s two PCS operators have
gained over 600,000 subscribers, representing approximately 15.5% market share
of the total wireless market and 40% of new wireless subscribers over the same
period. In Japan, the two new PCS licensees activated 87,000 new subscribers
in their first month of operations. The rate of new PCS subscriber activations
is now over one million per year.
PCS licenses differ from existing cellular and SMR licenses in three basic
ways: frequency assignment, amount of spectrum and geographic license areas.
PCS networks will operate in a higher-frequency band (1850-1990 MHz) compared
to the cellular and SMR frequency (800-900 MHz). PCS will also be comprised of
either 10 MHz of spectrum or 30 MHz of spectrum versus 25 MHz of spectrum for
cellular networks. As a result of the improved capacity of the infrastructure
and large allocation of spectrum, PCS will have more capacity for new wireless
services such as data and video transmission. Finally, the geographic areas
for PCS licenses are divided differently than for cellular licenses. PCS is
segmented among 51 MTAs or 493 BTAs as opposed to cellular's 306 metropolitan
statistical areas ("MSAs") and 428 rural service areas ("RSAs"). An MTA
license generally covers a much larger geographic area than a BTA, MSA or RSA
license. SMR service areas are defined by the United States Department of
Commerce Bureau of Economic Analysis Economic Areas ("EAs"). There are 175 EAs
covering the continental United States and its possessions. EAs are smaller
than MTAs, but are larger than BTAs, MSAs and RSAs.
Operation of wireless systems. Two-way wireless service areas are divided
into multiple regions called "cells," each of which contains a base station
consisting of a transmitter, a receiver and signaling equipment. The cells are
typically configured on a grid in a honeycomb-like pattern, although terrain
factors (including natural and man-made obstructions) and signal coverage
patterns may result in irregularly shaped cells and overlaps or gaps in
coverage. Cellular system cells generally have a radius ranging from two miles
to 25 miles. PCS system cells are expected to have a radius ranging from one-
quarter mile to 12 miles, depending on the PCS technology being used and the
terrain. The base station in each cell is connected by microwave, fiber optic
cable or telephone wires to a switching office, which uses computers to
control the operation of the wireless telephone system for its entire service
area. The switching office controls the transfer of calls from cell to cell as
a subscriber's handset travels, manages call delivery to handsets, allocates
calls among the cells within the system and connects calls to the local
landline telephone system or to a long distance telephone carrier. Wireless
service providers have entered into interconnection agreements with various
local exchange carriers and interexchange carriers, thereby integrating the
wireless telephone system with landline telecommunications systems. Once two-
way wireless systems are fully interconnected with landline telephone networks
and long distance networks, subscribers can receive and originate both local
and long distance calls from their wireless telephones.
The signal strength of a transmission between handset and a base station
declines as the handset moves away from the base station, the switching office
and the base stations monitor the signal strength of calls in progress. When
the signal strength of a call declines to a predetermined level, the switching
office may "hand off" the call to another base station that can establish a
stronger signal with the handset. If a handset leaves the service area of the
wireless service provider, the call is disconnected unless an appropriate
technical interface is established to hand off the call to an adjacent system.
Operators of wireless systems frequently agree to provide service to
subscribers from other compatible systems who are temporarily located in or
traveling through the service area. Such subscribers are called "roamers."
Agreements among system operators allocate revenues received from roamers.
With automatic roaming, wireless subscribers are preregistered in certain
systems outside their service area and receive service automatically while
they are roaming, without having to notify the switching office. Other roaming
features permit calls to a subscriber to "follow" the subscriber into
different systems, so that the subscriber will continue to receive calls in a
different system just as if the subscriber were within his or her service
area.
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While PCS and cellular networks utilize similar technologies and hardware,
they operate on different frequencies and use different signaling protocols.
As a result, it generally will not be possible for users of one type of
network to roam on a different type of network outside of their service area,
or to hand off calls from one type of network to another. Digital signal
transmission is accomplished through the use of frequency management
technologies, or protocols. These protocols manage the radio channel either by
dividing it into distinct time slots (TDMA) or by assigning specific coding
instructions to each packet of digitized data that comprises a signal (CDMA).
While the FCC has mandated that licensed cellular networks in the United
States must utilize compatible analog signaling protocols, the FCC has not
mandated a universal digital signaling protocol. Currently, three principal
competing, incompatible signaling protocols have been proposed by various
vendors for use in PCS networks: GSM, CDMA and TDMA. Because these protocols
are incompatible, a subscriber of a network that relies on GSM technology, for
example, will be unable to use his or her handset when traveling in an area
served only by CDMA or TDMA-based wireless operators, unless he carries a
dual-mode, dual-band handset that permits the subscriber to use the cellular
network in that area. Currently, such dual-mode, dual-band handsets are not
commercially available. For this reason, the success of each protocol will
depend both on its ability to offer enhanced wireless service and on the
extent to which its users will be able to use their handsets when roaming
outside their service area.
Wireless subscribers generally are charged separately for monthly access,
air time, long distance calls and custom calling features (although custom
calling features may be included in monthly access charges in certain pricing
plans). Wireless system operators pay fees to local exchange companies for
access to their networks and toll charges based on standard or negotiated
rates. When wireless operators provide service to roamers from other systems,
they generally charge roamer air time usage rates, which usually are higher
than standard air time usage rates for their own subscribers, and additionally
may charge daily access fees. Special, discounted rate roaming arrangements,
often between neighboring operators who wish to stimulate usage in their
respective territories, provide for reduced roaming fees and no daily access
fees.
COMPETITION
General. The wireless telecommunications industry is experiencing
significant technological change, as evidenced by the increasing pace of
improvements in the capacity and quality of digital technology, shorter cycles
for new products and enhancements and changes in consumer preferences and
expectations. Accordingly, the Company expects competition in the wireless
telecommunications business to be dynamic and intense as a result of the
entrance of new competitors and the development of new technologies, products
and services.
Each of the markets in which the Company competes will be served by other
two-way wireless service providers, including cellular and PCS operators and
resellers. Many of these competitors have been operating for a number of
years, currently serve a substantial subscriber base and have significantly
greater financial and technical resources than those available to the Company.
Certain of the Company's competitors are operating, or planning to operate,
through joint ventures and affiliation arrangements, wireless
telecommunications systems that encompass most of the United States.
The Company also will face competition from other current or developing
technologies, such as paging, Enhanced Specialized Mobile Radio ("ESMR") and
satellite networks. In addition, as a result of advances in digital
technology, ESMR operators have begun to design and deploy digital mobile
networks that increase the channel capacity of ESMR systems to a level that
may be competitive with that of cellular systems. A limited number of ESMR
operators have recently begun offering short messaging, data services and
interconnected voice telephony services on a limited basis. Several ESMR
licensees have recently merged into one company and plan to build and operate
digital mobile networks in most major United States markets.
In addition, several entities have received and several others are seeking
FCC authorization to construct and operate global satellite networks to
provide domestic and international mobile communications services from
geostationary and low earth orbit ("LEO") satellites. While geostationary
orbiting satellites are subject to transmission delays inherent in high earth
orbit satellite communications, a mobile satellite system could reduce
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transmission delays with LEO satellites and could augment or replace
communications with segments of land-based wireless systems. Based on current
technologies, however, satellite transmission services are not expected to be
competitively priced relative to the Company's product offering in its
markets. Sprint has an interest in a satellite-based mobile telecommunications
business entity.
Continuing technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based technologies make it
impossible to predict the extent of future competition. The FCC has adopted
rules that provide preferences, including discounted licenses, to companies
that develop new spectrum-based communications technologies without bidding in
FCC-sanctioned auctions. Such a preference may encourage the development of
new technologies that compete with cellular and PCS service. In addition, the
Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") requires, among
other things, the allocation to commercial use of a portion of 200 MHz of the
spectrum currently reserved for government use. It is possible that some
portion of the spectrum that is reallocated will be used to create new land-
mobile services or to expand existing land-mobile services.
The Company expects to compete with other communications technologies that
now exist, such as conventional mobile telephone service, ESMR systems and
paging services and with cellular and PCS resellers. In the future, cellular
service and PCS will also compete more directly with traditional landline
telephone service providers and with cable operators who expand into the
offering of traditional communications services over their cable systems. In
addition, the Company may face competition from technologies that may be
introduced in the future.
The Company anticipates that market prices for two-way wireless services
generally will decline in the future based upon increased competition. The
Company will compete to attract and retain customers principally on the bases
of services and features, its customer service, the size and location of its
service areas and pricing. The Company's ability to compete successfully will
also depend, in part, on its ability to anticipate and respond to various
competitive factors affecting the industry, including new services that may be
introduced, changes in consumer preferences, demographic trends, economic
conditions and discount pricing strategies by competitors, which could
adversely affect the Company's operating margins.
The Company's PCS business will directly compete with several other PCS
providers in each of its PCS markets, including AT&T Wireless Services, Inc.,
BellSouth Telecommunications, Inc., Omnipoint Corporation, Pacific Bell Mobile
Services, Inc., PCS PrimeCo L.P. and Western Wireless Corporation. The Company
also expects that existing analog wireless service providers in the PCS
markets, some of which have been operational for a number of years and have
significantly greater financial and technical resources than those available
to the Company, will upgrade their systems to provide comparable services in
competition with its PCS system. These cellular competitors include AirTouch,
AT&T Wireless Services, Inc., BellSouth Mobility, Inc., Ameritech Mobile
Communications, Inc., Bell Atlantic NYNEX Mobile, Southwestern Bell Mobile
Systems, GTE Mobilnet, Inc. and U.S. Cellular Corp.
Handsets used for CDMA-based PCS systems will not be automatically
compatible with cellular systems, and vice versa. The Company expects dual-
mode, dual-band telephones to be commercially available in the first half of
1997 (although sufficient quantities may not be commercially available until
the third quarter of 1997). Once such handsets are available, if the Company
decides to offer roaming services, subscribers may be able to roam by using
the existing cellular wireless system in other markets. Until then, this lack
of interoperability may impede the Company's ability to attract current
cellular subscribers or potential new wireless communication subscribers that
desire the ability to access different service providers in the same market.
Initially, the cost to the Company of PCS handsets may not be competitive
with the cost to analog operators of analog cellular handsets. While the
Company believes that its PCS handsets will be competitively priced as
compared to digital cellular handsets of comparable size, weight and features,
cellular operators may subsidize the sale of digital handset units at prices
below those with which the Company can compete through the Company's handset
subsidies.
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REGULATION
The FCC regulates the licensing, construction, operation, acquisition and
interconnection arrangements of wireless telecommunications systems in the
United States under the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 (the "Communications Act"). Pursuant to the
Communications Act, the FCC has promulgated a series of rules, regulations and
policies to (i) grant or deny licenses for PCS frequencies, (ii) grant or deny
PCS license renewals, (iii) rule on assignments and/or transfers of control of
PCS licenses, (iv) govern the interconnection of PCS networks with other
wireless and wireline carriers, (v) impose fines and forfeitures for
violations of any of the FCC's rules and (vi) regulate the technical standards
of PCS networks.
PCS licensing. The FCC established service areas for PCS throughout the
United States and its possessions and territories based upon the Rand McNally
market definition of 51 MTAs and 493 smaller BTAs. At least two BTAs are
contained within each MTA.
The FCC has allocated 120 MHz of radio spectrum in the 1850 to 1990 MHz
band, divided into six separate spectrum blocks, for licensed broadband PCS
services. The A and B Blocks are 30 MHz each and are allocated to the 51 MTAs.
The FCC sponsored auctions for the A and B Blocks that ended in March 1995,
and the FCC granted the A and B Block licenses in June 1995. Aggregate bids in
the A and B Block auction totalled $7.72 billion representing an average price
of $15.29 per Pop. WirelessCo was granted licenses in 29 of 51 MTAs.
PhillieCo, which will become affiliated with Sprint Spectrum, was granted a
license for one MTA. The remaining blocks, C (30 MHz), D (10 MHz), E (10 MHz),
and F (10 MHz), are allocated to the 493 BTAs. The C Block auctions ended on
May 6, 1996. The Company did not participate in the C Block auctions as these
licenses were available only to small businesses and other designated
entities. As part of an overall strategy to increase the Company's Pop
coverage, either or both of Holdings and the Company may elect to bid on, or
affiliate with or invest in other entities who are bidding on, PCS licenses to
be awarded in the FCC auction of the licenses for the D, E and F Blocks. To
the extent that Holdings acquires new PCS licenses or invests in an entity
that acquires new licenses, it is expected that an affiliation arrangement
with the Company will be entered into with respect to such Pop coverage. These
auctions are scheduled to begin in late August 1996. There can be no assurance
that the Company or Holdings will pursue such an expansion strategy.
Eventually, a PCS license will be awarded for each block in every MTA or BTA
for a total of more than 2,000 licenses. The licenses in each block
collectively cover the United States and its territories. Therefore, any one
location may have up to six PCS service providers who own a license to serve
that location, in addition to the two incumbent cellular license holders. It
is expected that some or all of the PCS license holders who offer services
will be in competition with the Company.
The FCC recently revised its rules regarding spectrum aggregation limits
that may affect PCS licensees. The FCC now prohibits a single entity from
having a combined attributable interest (20% or greater interest in any
license) in broadband PCS, cellular and SMR licenses totalling more than 45
MHz in any geographic area.
In compliance with FCC restrictions on common ownership of cellular and
broadband PCS interests in overlapping market areas, Sprint, with prior FCC
approval, in March 1996 undertook a tax-free spin-off of its cellular
interests to Sprint's shareholders. Sprint's former cellular interests are now
held by 360(degrees) Communications Company. Subsequent to the spin-off,
360(degrees) Communications Company operates as an independent entity.
Pioneer's preference program. Holdings has a non-controlling equity interest
in APC, one of three recipients of an FCC broadband PCS Pioneer's Preference
license ("Pioneer's Preference") which effectively reduces the cost of a
license by awarding it outside of the auction process. Holdings also expects
to have a non-controlling interest in Cox-California, which will hold a
broadband PCS Pioneer's Preference license awarded to Cox. Following several
parties' unsuccessful legal challenges in the United States Court of Appeals
for the District of Columbia Circuit to the FCC's awards of Pioneer's
Preferences, the FCC in March 1996 ruled that the Pioneer's Preference
licensees must begin making installment payments on their licenses. The FCC
has
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determined that Cox and APC, who were not required to participate in the PCS
auctions, nonetheless must pay, respectively, approximately $252 million, plus
interest, for the Los Angeles-San Diego MTA and approximately $102 million,
plus interest, for the Washington-Baltimore MTA over a five-year period. The
Company is not obligated to make any payments to the FCC with respect to the
Pioneer's Preference licenses held by APC or Cox-California.
Transfers and assignments of PCS licenses. Pursuant to the Communications
Act, the FCC must give prior approval to the assignment or transfer of control
of a PCS license. In addition, the FCC has established transfer disclosure
requirements that require licensees that assign or transfer control of a PCS
license within the first three years to file associated contracts for sale,
option agreements, management agreements or other documents disclosing the
total consideration that the applicant would receive in return for the
transfer or assignment of the license. Non-controlling interests in an entity
that holds a PCS license or PCS networks generally may be bought or sold
without prior FCC approval.
Foreign ownership restrictions. The Communications Act restricts foreign
investment in and ownership of certain FCC radio licensees, including PCS
licensees. Non-United States citizens or their representatives, foreign
governments or their representatives, or corporations organized under the laws
of a foreign country may not own more than 20% of a common carrier PCS
licensee directly or more than 25% of the parent of a common carrier PCS
licensee. If it would serve the public interest, the FCC has the authority to
permit the parent of the licensee to exceed the 25% limit. However, the FCC
lacks the authority to permit a licensee itself to exceed the 20% limit on
foreign ownership.
If an entity fails to comply with the foreign ownership requirements, the
FCC may order the entity to divest alien ownership to bring the entity into
compliance with the Communications Act. Other potential sanctions include
fines, a denial of renewal or revocation of the license. The Company has no
knowledge of any present foreign ownership in violation of the Communications
Act.
The Telecommunications Act of 1996 ("1996 Act") eliminates the existing
restrictions on the number of alien officers and directors of FCC licensee
companies and companies controlling FCC licensees.
Conditions on PCS licenses. All PCS licenses are granted for 10-year terms
conditioned upon timely compliance with the FCC's buildout requirements.
Pursuant to the FCC's buildout requirements, all 30 MHz broadband PCS
licensees must construct facilities that offer coverage to one-third of the
population of their service area(s) within five years of their initial license
grant(s) and to two-thirds of the population within 10 years. Licensees that
fail to meet the buildout requirements may be subject to license forfeiture.
The FCC intends to conduct random audits to ensure that licensees are in
compliance with the FCC's holding period and attribution rules. Rule
violations could result in license revocations, forfeitures or fines.
PCS license renewal. PCS licensees can renew their licenses for an
additional 10 years. PCS renewal applications are not subject to auctions.
However, under the FCC's rules, third parties may oppose renewal applications
and/or file competing applications. If one or more competing applications are
filed, a renewal application will be subject to a comparative renewal hearing.
The FCC's rules afford PCS renewal applicants involved in comparative renewal
hearings with a "renewal expectancy." The renewal expectancy is the most
important comparative factor in a comparative renewal hearing and is
applicable if the PCS renewal applicant has: (i) provided "substantial"
service during its license term; and (ii) substantially complied with all
applicable FCC rules and policies as well as the Communications Act. The FCC's
rules define "substantial" service as service that is sound, favorable and
substantially above the level of mediocre service that might minimally warrant
renewal.
FCC relocation requirements. The spectrum allocated by the FCC for PCS
services is now occupied by existing microwave facilities. PCS licensees must
relocate such incumbent microwave facilities operating on the same frequencies
to avoid interference problems. The FCC's rules require the PCS licensee to
provide the
51
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microwave licensee with comparable facilities at the PCS licensee's own
expense and to ensure the facilities are "equal to or superior to existing
facilities." In order to encourage parties to negotiate relocation agreements,
the FCC's rules require, for existing licensees other than public safety
agencies, a two-year voluntary negotiation period followed by a one-year
mandatory negotiation period if voluntary negotiations fail. Separate
negotiation periods are applicable to public safety agencies, which are
entities dedicating a majority of their communications systems for police,
fire or emergency medical services operations involving safety of life and
property. The FCC's rules require public safety agencies to undertake a three-
year voluntary negotiation period followed by a two-year mandatory negotiation
period, if necessary. If an agreement is not reached, the incumbent microwave
licensee may be involuntarily relocated provided that the PCS licensee pays
for comparable facilities. The FCC recently revised its microwave relocation
rules to clarify permissible relocation costs that must be assumed by PCS
licensees during the mandatory period and to implement new procedures for the
sharing of relocation costs where the relocation of private microwave
facilities benefits multiple broadband PCS licensees.
FCC interconnection requirements. The FCC regulates the terms of
interconnection between broadband PCS networks and the networks of wireline
and other wireless providers of interstate communications services. Pending
FCC proceedings address the various interconnection obligations that could
affect broadband PCS and other wireless service providers. In one proceeding,
the FCC is reviewing its policies regarding proper compensation arrangements
between interconnecting broadband PCS providers and LECs when the carriers
terminate each other's calls. The FCC is also examining whether to mandate
direct interconnections between wireless networks. A number of compensation
arrangements have been suggested. The most beneficial arrangement for the
Company would be "bill & keep," which, on an interim basis, would require
carriers to terminate each other's calls at no charge. The FCC also is
considering symmetrical compensation arrangements, which would require
carriers to charge each other the same fee to terminate each other's calls.
There is no assurance that the FCC will adopt either compensation scheme.
The 1996 Act contains specific provisions regarding the interconnection
obligations of telecommunications carriers. The FCC has initiated a rulemaking
to determine, among other things, the extent to which certain provisions of
the 1996 Act apply to PCS/LEC interconnection agreements. If these provisions
are applied to PCS, state public utility commissions will be required to
approve interconnection agreements between PCS providers and LECs.
Other FCC requirements. In June 1996, the FCC adopted rules that prohibit
broadband PCS providers from unreasonably restricting or disallowing resale of
their services or unreasonably discriminating against resellers. Resale
obligations will automatically expire five years after the FCC has concluded
its initial round of licensing of currently allocated broadband PCS spectrum.
The FCC is expected to conclude its initial licensing round by early 1997. The
FCC is considering whether wireless providers should be required to offer
unbundled communications capacity to resellers who intend to operate their own
switching facilities.
The FCC recently extended an existing rule to require broadband PCS and
other Commercial Mobile Radio Service ("CMRS") providers to provide "manual"
roaming service that allows customers of one wireless provider to obtain
service while roaming in another wireless provider's service area. Such
customers must first establish a service relationship with the host system,
by, for example, supplying a valid credit card number to the host system. In
addition, the FCC is considering whether broadband PCS and other CMRS
providers should be required also to offer "automatic" roaming agreements on a
nondiscriminatory basis that would allow customers to roam by simply turning
on their handsets in a host market.
The FCC recently adopted rules permitting broadband PCS networks and other
CMRS providers to provide wireless local loop and other fixed services that
would directly compete with the wireline services of LECs. In June 1996, the
FCC adopted rules requiring broadband PCS and other CMRS providers to
implement enhanced emergency 911 capabilities within 18 months after the
effective date of the FCC's rules.
The Company may use common carrier point-to-point microwave and traditional
landline facilities to connect cell sites and to link them to their respective
main switching offices. The FCC will license separately these microwave
facilities and regulates the technical parameters and service requirements of
these facilities.
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Other federal regulations. Wireless systems must comply with certain FCC and
FAA regulations regarding the siting, lighting and construction of transmitter
towers and antennaes. In addition, certain FCC environmental regulations may
cause wireless networks to become subject to regulation under the National
Environmental Policy Act.
Recent events: The Telecommunications Act of 1996. On February 8, 1996,
Congress enacted the 1996 Act. The 1996 Act is supposed to create a
procompetitive, deregulatory national policy to accelerate competitive
development of telecommunications offerings, expand the availability of
telecommunications services to all segments of the public and streamline
regulation of the telecommunications industry by removing regulatory burdens.
The FCC, state public utilities commissions and a federal-state joint board
are charged with implementing the 1996 Act. On February 12, 1996, the FCC
released its tentative schedule for implementation of the 1996 Act's mandates,
many of which will be implemented within six to 18 months. Some specific
provisions of the 1996 Act are expected to affect PCS service providers.
Expanded interconnection obligations. Under the 1996 Act, all
telecommunications carriers, likely including broadband PCS providers, must
interconnect with other carriers. The 1996 Act also imposes a detailed list of
"interconnect" obligations upon LECs including resale, number portability,
dialing parity, access to rights-of-way and reciprocal compensation.
Review of universal service requirements. Although the 1996 Act contemplates
that wireless providers will "make an equitable and non-discriminatory
contribution" to support the cost of providing universal service, the FCC is
authorized to exempt carriers if their contribution would be de minimis.
Public utility "telecommunications" services. The 1996 Act modifies the
Public Utilities Holding Company Act of 1935 to permit public utilities
subject to that act to engage in the provision of telecommunications and
information services.
BOC entry into in-region interLATA services. Before engaging in in-region
interLATA services, the 1996 Act requires Bell Operating Companies ("BOCs") to
provide access and interconnection to one or more unaffiliated competing
providers of telephone exchange service. BOCs must offer the following
interconnection services on a non-discriminatory basis: interconnection and
unbundled access; access to poles, ducts, conduits and rights-of-way owned or
controlled by BOCs; unbundled local loops; unbundled local transport;
unbundled local 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 permits BOCs immediately to provide "incidental" interLATA
services including the provision of CMRS. The FCC intends to open a proceeding
to assess under what conditions BOCs that provide CMRS, including PCS, can
provide long distance services over their CMRS networks.
BOC commercial mobile joint marketing. Under the 1996 Act, BOCs and any
other company may jointly market and sell commercial mobile services,
including cellular and PCS, together with telephone exchange service, exchange
access, intraLATA telecommunications service, interLATA telecommunications
service and information services. A BOC, however, may not jointly market
telephone exchange service and any long distance service until certain
conditions have been met.
Wireless facilities siting. Under the 1996 Act, states and localities cannot
regulate the placement of wireless facilities so as to "prohibit" the
provision of wireless services or to "discriminate" among providers of such
services. In addition, so long as a wireless system complies with the FCC's
rules, the 1996 Act prohibits states and localities from using environmental
effects as a basis to regulate the placement, construction or operation of
wireless facilities.
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Equal access. Under the 1996 Act, wireless providers are not required to
provide equal access to common carriers for toll services. However, the FCC is
authorized to require unblocked access to toll carriers subject to certain
conditions.
Deregulation. The 1996 Act requires the FCC to forebear from applying any
statutory or regulatory provision if it is not necessary to keep
telecommunications rates and terms reasonable or to protect customers.
Correspondingly, a state may not apply a statutory or regulatory provision
that the FCC decides not to apply. In addition, the FCC must review its
telecommunications regulations every two years to determine if any can be
eliminated or modified as no longer in the public interest as a result of
increased competition.
Elimination of alien officer/director restrictions. The 1996 Act eliminates
the existing restrictions on the number of alien officers and directors of FCC
licensee companies and companies controlling FCC licensees.
FACILITIES AND EMPLOYEES
As of March 31, 1996, the Company occupied approximately 47,000 square feet
of leased headquarters space in Kansas City, Missouri. The Company is planning
to relocate its headquarters to new leased space of approximately 156,000
square feet in Kansas City this summer. The Company believes that this new
facility should serve its needs adequately for the foreseeable future. The
Company currently has leased 33 MTA offices (approximately 486,000 square feet
in aggregate) and expects that additional facilities will be needed eventually
to house customer service and network monitoring personnel. Management
believes that the Company will be able to lease office space as needed on
acceptable terms. The Company is also leasing space for base station towers
and switch sites as it constructs its nationwide network. As of July 19, 1996,
the Company had leased or purchased 39 switch sites and had entered into
leases or options for a total of 3,281 cell sites. The Company anticipates
leasing, acquiring or otherwise obtaining up to a total of approximately 5,700
such sites in preparation for initial commercial launch.
At July 19, 1996, the Company employed approximately 1,850 personnel, all of
whom are working on behalf of the Company. None of the Company's employees is
represented by a labor union. Management believes that the Company's employee
relations are good. The Company and Holdings are engaging independent
contractors to perform a variety of functions, including construction and
maintenance of the Company's network, research, advertising, accounting and
data processing.
TRADEMARKS
The Company does not currently own any trademarks or patents, though it
expects to apply for and develop trademarks, service marks and patents in the
ordinary course of business. Sprint is a registered trademark of Sprint
Communications Company, L.P. ("Sprint Communications") and is licensed to
Holdings on a royalty-free basis pursuant to a trademark license agreement
between Sprint Communications and Holdings. Sprint Communications may
terminate this agreement (i) upon the dissolution and winding up of the
Company, (ii) upon the bankruptcy of the Company, (iii) upon the failure of
the Company to perform in accordance with the material terms of the agreement
or for a breach of its representations and warranties or (iv) if the Company
challenges Sprint's rights to the Sprint trademark and the associated logo.
The Company may terminate the agreement (i) if Sprint Communications abandons
or fails to support its trademark and associated logo, (ii) upon the
bankruptcy of Sprint Communications, (iii) if Sprint conflicts with the
Company's rights to use the trademark and associated logo or (iv) if Sprint
Communications breaches its covenant to license the trademark and associated
logo to additional licensees in accordance with the terms of the agreement.
Subject to certain conditions, each of the Company and Sprint Communications
may terminate the agreement if a controlled affiliate of Sprint ceases to own
any equity interest in Holdings. Within thirty days of termination, or, in
certain circumstances on a specified termination date, the Company's rights to
use the trademark and associated logo will cease.
Pursuant to certain of its third party supplier contracts, Sprint Spectrum
has certain rights to use third party supplier trademarks in connection with
the buildout, marketing and operation of its network.
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LEGAL PROCEEDINGS
On March 14, 1996, the Company filed a lawsuit against the City of Medina,
Washington in the United States District Court for the Western District of
Washington. The Medina City Council passed a resolution on February 13, 1996
creating a six-month moratorium (which may be extended) on approval of permits
for wireless communication facilities in the City of Medina. The Company is
seeking injunctive and declaratory relief against this resolution under the
1996 Act. The Court denied the Company's motion for preliminary injunctive
relief in May 1996. Although the ultimate outcome of this litigation is
uncertain, the Company is confident that adjudication of this matter will not
delay the introduction of service in the Seattle, Washington MTA. While the
Company does not believe that the outcome of this litigation will,
individually, have a material adverse effect on the Company, there can be no
assurance that similar actions taken by other government authorities in other
locations will not, in the aggregate, have a material adverse effect on the
Company. See "--Regulation."
The Company is involved in various legal proceedings incidental to the
conduct of its business. While it is not possible to determine the ultimate
disposition of each of these proceedings, the Company believes that the
outcome of such proceedings, individually and in the aggregate, will not have
a material adverse effect on the Company's financial condition or results of
operations.
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MANAGEMENT
EXECUTIVE OFFICERS OF THE ISSUERS AND HOLDINGS PARTNERSHIP BOARD
REPRESENTATIVES
The executive officers of the Issuers and their respective positions with
Sprint Spectrum and FinCo are set forth below. In addition, the
representatives of the Partnership Board of Holdings are set forth below.
Sprint Spectrum does not have a partnership board but is managed by Holdings
in its capacity as general partner. The Board of Directors of FinCo is
comprised of Ronald T. LeMay, Robert M. Neumeister, Jr. and Joseph M.
Gensheimer. The ages of the individuals set forth below are as of June 1,
1996.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Ronald T. LeMay*............... 50 Chief Executive Officer and President of
Sprint Spectrum; President of FinCo;
Chairman of the Partnership Board of
Holdings
Arthur A. Kurtze............... 51 Chief Technology Officer of Sprint Spectrum
Bernard A. Bianchino........... 47 Chief Business Development Officer of
Sprint Spectrum
Robert M. Neumeister, Jr....... 46 Chief Financial Officer of Sprint Spectrum;
Vice President and Treasurer of FinCo
F. Edward Mattix............... 43 Chief Public Relations Officer of Sprint
Spectrum
Joseph M. Gensheimer........... 44 General Counsel and Secretary of Sprint
Spectrum; Secretary of FinCo
William T. Esrey............... 56 Holdings Partnership Board Representative
Gary D. Forsee................. 46 Holdings Partnership Board Representative
Gerald W. Gaines............... 40 Holdings Partnership Board Representative
Arthur B. Krause............... 54 Holdings Partnership Board Representative
James O. Robbins............... 53 Holdings Partnership Board Representative
Lawrence S. Smith.............. 48 Holdings Partnership Board Representative
</TABLE>
- - --------
* Mr. LeMay has returned to Sprint as President and Chief Operating Officer,
although he is continuing to serve as Chief Executive Officer and President
until a successor is named.
RONALD T. LEMAY, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Ronald T. LeMay is Chief Executive Officer and President of the Company and
President and Chief Operating Officer of Sprint. Mr. LeMay began his telephony
career with Southwestern Bell Telephone Company in 1972. In 1983, Mr. LeMay
was appointed Regional Vice President of External Affairs for AT&T
Communications in Kansas City and in February 1985, he was named Vice
President and Comptroller for AT&T Communications where he served until July
1985 when he joined United Telephone System, Inc. (a Sprint company) as Vice
President and General Counsel. In 1986, Mr. LeMay became Senior Vice President
of Operations for the United Telephone System. He became Executive Vice
President of Corporate Affairs for Sprint in 1987 and Executive Vice President
of Staff for the Long Distance Division in November 1988. In October of 1989,
Mr. LeMay was appointed President and Chief Operating Officer for the Long
Distance Division, a position he held until assuming responsibility for the
Company in March 1995. Mr. LeMay is the Vice Chairman of the Board of
Directors of Sprint and a director of the Mercantile Bank of Kansas City and
Yellow Corporation.
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ARTHUR A. KURTZE, CHIEF TECHNOLOGY OFFICER
Arthur A. Kurtze was appointed Chief Technology Officer of the Company in
June 1995. Prior to joining the Company, Mr. Kurtze was Senior Vice
President--Operations for Sprint's Local Telecommunications Division. Prior to
joining Sprint in March 1993, Mr. Kurtze was Executive Vice President in
charge of strategic planning and corporate development for Centel Corp.
Mr. Kurtze joined Centel in 1972 and served in various positions there,
including Vice President of Centel Communications Co., Vice President--Staff
of Centel Business Systems, Vice President--Market Planning for Centel Corp.,
Group Vice President of Centel Cable Television Co. and Senior Vice
President--Planning and Technology.
BERNARD A. BIANCHINO, CHIEF BUSINESS DEVELOPMENT OFFICER
Bernard A. Bianchino was appointed Chief Business Development Officer of the
Company in September 1995. Most recently, Mr. Bianchino was Executive Vice
President, General Counsel and External Affairs for Qwest Communications
Corporation. He served as Vice President--Law, General Business for Sprint
from 1992 to 1994 and as General Attorney; Vice President and Associate
General Counsel for US Sprint Communications Company from 1986 to 1992. From
1978 to 1986, Mr. Bianchino was counsel to a number of affiliates of Exxon
Corporation in its Enterprises Group, including Reliance Comm/Tec (now RELTEC)
and Exxon Office Systems. Prior to joining Exxon, he was an attorney with the
United States Department of Energy.
ROBERT M. NEUMEISTER, JR., CHIEF FINANCIAL OFFICER
Robert M. Neumeister, Jr. was named Chief Financial Officer of the Company
in September 1995. Prior to joining the Company, Mr. Neumeister served in
various capacities at Northern Telecom Ltd., which he joined in 1978. In June
1991, Mr. Neumeister was named Vice President of Finance and Information
Services for Northern Telecom--Canada. He continued with Northern Telecom as
Senior Vice President and Chief Financial Officer of Motorola Nortel
Communications Co., Vice President of Finance--Americas, Vice President--
Broadband Networks, Customer Network Solutions and Vice President of Finance.
F. EDWARD MATTIX, CHIEF PUBLIC RELATIONS OFFICER
F. Edward Mattix was named Chief Public Relations Officer of the Company in
April 1996. Prior to joining the Company, he was Vice President--Public
Relations for U S WEST Communications, Inc. Mr. Mattix served in various
management level positions relating to public relations or governmental
affairs since joining U S WEST, Inc. in 1976.
JOSEPH M. GENSHEIMER, GENERAL COUNSEL AND SECRETARY
Joseph M. Gensheimer was named General Counsel of the Company in October
1995. Mr. Gensheimer is responsible for all legal and regulatory functions.
Prior to joining the Company, he was Senior Counsel for IBM's mainframe and
supercomputer divisions. Prior to joining IBM in 1988, he was General Counsel
and Secretary of RealCom Communications Corporation, a telecommunications
services provider. From 1982 to 1984, Mr. Gensheimer was Senior Attorney and
Assistant Secretary for GTE Corporation. Prior to joining GTE, he was an
associate at Morgan, Lewis & Bockius and an attorney for the United States
Department of Justice.
WILLIAM T. ESREY, REPRESENTATIVE
William T. Esrey was appointed as a representative of the Partnership Board
in March 1995. He has been the Chairman of Sprint since 1990 and its Chief
Executive Officer since 1985. Mr. Esrey is also a director of Sprint,
Equitable Life Assurance Society of America, General Mills, Inc., PanEnergy
Corporation and Everen Capital Corporation. Mr. Esrey currently serves on the
compensation committee of each of PanEnergy Corporation and Everen Capital
Corporation.
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GARY D. FORSEE, REPRESENTATIVE
Gary D. Forsee was appointed as a representative of the Partnership Board in
March 1995. He has been the President--Long Distance Division of Sprint since
March 1995. Prior to such appointment, Mr. Forsee served for more than five
years in other capacities at Sprint, including President--Government Systems
Division, President--Business Services Group and Chief of Staff--Long Distance
Division.
GERALD W. GAINES, REPRESENTATIVE
Gerald W. Gaines was appointed as a representative of the Partnership Board
in March 1995. He has been the President of TCI Telephony Services, Inc. and
Senior Vice President of TCI Communications, Inc. since 1994. Prior to joining
TCI Communications, Mr. Gaines founded GCG, Inc. a management services firm
advising the telecommunications industry. From 1986 to 1991, Mr. Gaines served
as a senior-level executive of U S WEST, Inc. as President and Chief Executive
Officer for U S WEST Service Link. Mr. Gaines is a director of Teleport
Communications Group Inc.
ARTHUR B. KRAUSE, REPRESENTATIVE
Arthur B. Krause was appointed as a representative of the Partnership Board
in March 1995. He is the Executive Vice President and Chief Financial Officer
of Sprint, positions which he has held since 1988. Prior to such appointment,
Mr. Krause served in other management capacities at Sprint, including
President of United Telephone-Eastern Group.
JAMES O. ROBBINS, REPRESENTATIVE
James O. Robbins was appointed as a representative of the Partnership Board
in March 1995. He has served as President of Cox since September 1985, and as
Chief Executive Officer since May 1994. Mr. Robbins joined Cox in September
1983 and has served as Vice President, Cox Cable New York City and as Senior
Vice President, Operations of Cox. Prior to joining Cox, Mr. Robbins held
management and executive positions with Viacom Communications, Inc. and
Continental Cablevision. Mr. Robbins is a director of Telewest Plc, Teleport
Communications Group Inc. and Cox.
LAWRENCE S. SMITH, REPRESENTATIVE
Lawrence S. Smith was appointed as a representative of the Partnership Board
in March 1995. He has been Executive Vice President of Comcast since December
1995. Prior to that time, Mr. Smith served as Senior Vice President of Comcast
for more than five years. Mr. Smith is the Principal Accounting Officer of
Comcast. Mr. Smith is a Director of Comcast UK Cable Partners Limited.
COMMITTEES OF THE PARTNERSHIP BOARD; COMPENSATION; COMMITTEE INTERLOCKS
There are no standing committees of the Partnership Board. Representatives
receive no compensation for serving on the Partnership Board. There are no
compensation committee interlocks between Holdings and any affiliated entity.
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EXECUTIVE COMPENSATION
Summary Compensation of Executive Officers. The following table sets forth
certain information regarding the compensation of the Company's Chief
Executive Officer and the four most highly compensated executive officers
other than the Chief Executive Officer whose total salary and bonus exceeded
$100,000 during the year ended December 31, 1995 (the "Named Executives"). In
each case, Sprint paid each Named Executive and Holdings reimbursed Sprint for
such costs. The amounts set forth below are for only that portion of 1995 that
the Named Executives were employed by Holdings. See "--Executive Officers of
the Issuers and Holdings Partnership Board Representatives" for the month
during which each Named Executive commenced employment with Holdings.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- LONG TERM
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER INCENTIVE PLAN
--------------------------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
Ronald T. LeMay.............. $408,333 $313,250 $ -- $514,383(1)(2)
Chief Executive Officer
Arthur A. Kurtze............. 171,320 107,500 -- 40,769(1)(3)
Chief Technology Officer
Bernard Bianchino............ 58,741 68,300 17,718(4) --
Chief Business Development
Officer
Robert M. Neumeister, Jr. ... 79,023 35,950 34,822(5) --
Chief Financial Officer
Joseph M. Gensheimer......... 78,161 31,150 233,381(6) --
General Counsel
</TABLE>
- - --------
(1) Messrs. LeMay and Kurtze were employed by Sprint Corporation immediately
prior to their employment by Holdings, and as former employees, they
participated in certain long-term incentive plans at Sprint Corporation not
available to the other executives listed in this table.
(2) Of the $514,383 shown as long-term compensation, $97,008 represents a cash
pay-out from Sprint Corporation and $417,375 represents stock options
granted with respect to Sprint Corporation stock. The Company has reimbursed
Sprint Corporation for the payment of such amounts.
(3) Of the $40,769 shown as long-term compensation, $18,351 represents a cash
pay-out from Sprint Corporation and $22,418 represents stock options granted
with respect to Sprint Corporation stock. The Company has reimbursed Sprint
Corporation for the payment of such amounts.
(4) Of the $17,718 shown as other compensation, $16,684 represents relocation
expenses paid on behalf of Mr. Bianchino.
(5) Of the $34,822 shown as other compensation, $31,818 represents relocation
expenses paid on behalf of Mr. Neumeister.
(6) Of the $233,381 shown as other compensation, $83,287 represents relocation
expenses paid on behalf of Mr. Gensheimer and $150,000 represents foregone
incentive compensation from his former employer.
LONG-TERM COMPENSATION PLAN
The Company intends to adopt a long-term compensation plan for the benefit
of specified employees.
SHORT-TERM INCENTIVE PLAN SUMMARY
The Partnership Board has adopted a Short-Term Incentive Compensation Plan
(the "Plan"). The Plan is administered by the Partnership Board, which is
authorized to interpret Plan provisions, determine membership, approve
incentive targets and payouts and otherwise manage the Plan. The Plan has no
specified termination date and may be amended or terminated without
constraint.
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The Partnership Board selects eligible employees to participate in the Plan.
Eligibility is limited to employees within exempt salary bands. Participation
in the Plan precludes participation in any other short-term compensation
plans.
Payouts are granted based on pre-set targeted opportunities. Performance
periods are one year long and incentive targets ("Incentive Targets") are
approved by the Partnership Board for each performance period. An Incentive
Target is established for each position based on the Company's overall
compensation strategy. Incentive Targets contain unit objective, Company
objective, and personal components, which are approved by the Chief Executive
Officer, the Partnership Board and the Chief Officer of the relevant operating
unit, respectively. Maximum earnings for the Company objective and unit
objective components are determined by the Board for each performance period.
Participants may earn a maximum of 120% of the incentive opportunity allocated
to the personal objective component. However, a minimum level of performance
may be required to generate a payout for the personal objective component.
Payouts for employees selected to participate in the Plan after the start of
a performance period are prorated as are certain payouts for Plan participants
whose employment with the Company terminates prior to the end of a performance
period. Payouts for Plan participants who change positions during a
performance period will be prorated according to the opportunities applicable
to the positions which were held. Notwithstanding the above, employees may not
begin participation in the Plan within two calendar months prior to the
completion of a performance period.
The 1996 Incentive Targets are based on, among other things, the following
factors (i) markets launched by November 1, 1996, (ii) markets that are
launched or are positioned to launch during the period from November 1, 1996
through February 15, 1997, (iii) population covered by the markets launched
and (iv) expense control.
Participation in the Plan is terminated upon the transfer to a
nonparticipating position in the Company, employment by a Partner, death,
disability or separation from the Company for lack of work. Terminated
participants are eligible for a prorated payment based upon the time served
under the Plan. If a participant is terminated for any but the aforementioned
reasons, that participant's Plan payment is deemed forfeited. Participants who
complete a performance period will be eligible to receive a Plan payment
regardless of the reason for termination.
SAVINGS AND RETIREMENT PLAN
The Company maintains a savings and retirement program (the "Savings Plan")
for certain of its employees, which is qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"). Most permanent full-
time, and certain part-time, employees are eligible to become participants in
the plan. Participants make contributions to a basic before tax account and a
supplemental before tax account. The maximum contribution for any participant
for any year is 16% of such participant's compensation--up to six percent of
which may be contributed to the basic tax account--subject to maximum amounts
set by federal taxation law and certain additional limitations for Highly
Compensated Individuals (as defined in the Savings Plan). For each eligible
employee who elects to participate in the Savings Plan and makes a
contribution to the basic before tax account, the Company makes a matching
contribution equal to 50% of the amount of the basic before tax contribution
of each participant up to 6% of such employee's contribution. In addition, the
Company makes contributions to the Plan for each participant based on
compensation, attained age and number of completed years of the vesting
period, as well as certain additional qualified contributions for the accounts
of participants who are not Highly Compensated Employees. Contributions to the
Savings Plan are paid into a trust fund that is held in trust by the trustee
under the trust established pursuant to the Saving Plan. Contributions to the
Savings Plan are invested, at the participant's direction, in several
designated investment funds. Distributions from the Savings Plan generally
will be made only upon retirement or other termination of employment, unless
deferred by the participant.
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PROFIT SHARING PLAN (RETIREMENT COMPONENT)
Employees become eligible to participate in the Profit Sharing Plan after
completing 12 consecutive months of service. The Company's profit sharing
contribution will be based on eligible compensation (as defined by the plan).
A combination of age and years of service will determine the amount
contributed, which will range from two to ten percent of eligible
compensation. It will be deposited into individual accounts of the Company
sponsored 401(k) plan. Such accounts will be established for employees who do
not participate in the 401(k) plan. For employees that do participate in the
401(k) plan, the contribution will be subject to the applicable 401(k)
investment percentage criteria. The contribution vests after completion of
five years of service; once vested the plan is considered portable.
EMPLOYMENT AGREEMENTS
Holdings has entered into an employment agreement with Joseph M. Gensheimer.
In connection with the Reorganization, Holdings assigned such employment
agreement to Sprint Spectrum. The agreement provides for an annual base salary
of $300,000, as well as a short-term incentive opportunity of $125,000 per
annum. In addition, under the long-term incentive plan, which the Company
intends to adopt, Mr. Gensheimer will be entitled to an annualized long-term
target opportunity of $200,000. Mr. Gensheimer received a payment of $150,000
in 1995 and, subject to continued employment with the Company, will receive an
additional $150,000 from Sprint Spectrum on the first anniversary of
employment with Sprint Spectrum for foregone stock options and 1995 incentive
compensation related to his previous employer.
Sprint Spectrum may terminate Mr. Gensheimer's employment for any reason at
any time, provided, however, that if termination is other than for cause,
total disability or the voluntary resignation of Mr. Gensheimer, Sprint
Spectrum shall be required to pay special compensation which includes, among
other things, (i) bi-weekly compensation for a period of 18 months (the
"Severance Period"), (ii) subject to certain conditions, a bonus under any
short-term incentive plan maintained during the Severance Period, (iii) a
prorated award under any long-term incentive plan in which Mr. Gensheimer
participates, (iv) life, medical and retirement benefits throughout the
Severance Period and (v) outplacement counseling.
Pursuant to the terms of his employment agreement, Mr. Gensheimer has agreed
that for 18 months following termination of employment for any reason he will
not accept any position where, within any 90-day period, he dedicates his time
and efforts principally to the Wireless Business anywhere in the United
States.
Sprint Spectrum expects to enter into employment agreements, on terms
substantially similar to those contained in Mr. Gensheimer's agreement, with
Messrs. Kurtze, Bianchino and Neumeister.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The general partner of Sprint Spectrum is Holdings, which has a greater than
99% general partnership interest in Sprint Spectrum. There are four general
partners of Holdings, Sprint Enterprises, L.P., which has a 40% partnership
interest, TCI Telephony Services, Inc. which has a 30% partnership interest,
and Comcast Telephony Services and Cox Telephony Partnership, each of which
has a 15% partnership interest. Each of the Partners is a subsidiary of
Sprint, TCI, Cox or Comcast, as the case may be. See "Principal Security
Holders." Sprint is a leading provider of domestic and international long
distance and local exchange telecommunications services. In March 1996, Sprint
divested its cellular unit in a spin-off to its shareholders due to
overlapping cellular and PCS territories which is prohibited by the FCC. TCI
is one of the largest cable television operators in the United States in terms
of numbers of basic subscribers served, with consolidated systems serving
approximately 13.0 million basic subscribers as of March 31, 1996. Comcast is
engaged in the development, management and operation of cable and cellular
telephone communications systems and the production and distribution of cable
programming and has approximately 3.5 million subscribers in the United
States. Comcast also provides cellular telephone communications services in
markets with an aggregate population of over 7.9 million, including the area
in and around Philadelphia and parts of Delaware and New Jersey. Cox is a
fully integrated, diversified media and broadband communications company with
operations and investments in U.S. cable televisions systems (3.3 million
wholly-owned and affiliated subscribers), international cable television
systems, programming and telecommunications and technology.
The Company and Holdings expect to have extensive relationships with the
Partners and their affiliates, including the Parents, but the nature and terms
of such relationships have not yet been determined. The Holdings Partnership
Agreement sets forth guidelines for business dealings between the Company
and/or Holdings and the Partners and their affiliates, including the Parents.
The Holdings Partnership Agreement permits Holdings and its subsidiaries,
including the Company, to enter into transactions with the Partners and their
affiliates in the normal course of their respective businesses; provided,
however, that (i) any contract, agreement, relationship or transaction between
Holdings or any of its subsidiaries and any person in which any of the
Partners or their affiliates has a direct or indirect material interest must
be approved (after full disclosure by the interested Partner(s) of all
material facts relating to such matter) by the Partnership Board, with the
Partnership Board representatives of the interested Partner(s) abstaining from
deliberations and voting and (ii) the Partnership Board has determined that
the price and terms of such transaction are fair to Holdings and its
subsidiaries, including the Company, and that the price and terms of such
transaction are no less favorable than comparable transactions involving non-
affiliates. Subject to certain conditions, including, without limitation,
unanimous approval of appropriate procedures, the Partnership Board may elect
from time to time to provide rights of first opportunity to various Partners
or their affiliates. In addition, the Holdings Partnership Agreement contains
other provisions relating to transactions between Holdings and its
subsidiaries, including the Company, on the one hand, and the Partners and
their affiliates, on the other hand. No procedures have been adopted by the
Company to determine the fairness of related party transactions.
Holdings reimburses Sprint for certain accounting, data processing, and
other related services, and for certain cash payments made by Sprint on behalf
of Holdings and the Company. The costs of such services are allocated based on
direct usage. The aggregate amount of such expenses was approximately
$2,646,000 for 1995. No reimbursement was made through December 31, 1994.
PhillieCo and a Cox affiliate were formed by certain Partners, individually
and collectively, for the purposes of providing PCS wireless services in
Philadelphia and Los Angeles-San Diego, respectively. Holdings, having made
certain cash payments on behalf of PhillieCo and Cox's affiliate, will receive
reimbursements for direct costs incurred plus an amount for management
services provided to PhillieCo and Cox's affiliate. The aggregate amount of
such services provided as of December 31, 1995 was $183,225 and $156,528, due
from PhillieCo and Cox's affiliate, respectively.
Subject to certain exceptions, the Holdings Partnership Agreement restricts
any Partner and its controlled affiliates from bidding on, acquiring or,
directly or indirectly, owning, managing, operating, joining, controlling or
financing, or participating in the management, operation, control or financing
of, or being connected as a
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principal, agent, representative, consultant, beneficial owner of an interest
in any person or entity, or otherwise with, or use or permit its name to be
used in connection with, any business that engages in the bidding for or
acquisition of any Wireless Business license or engages in any Wireless
Business or provides, offers, promotes or brands services that are within
Holdings' core business. Unless approved by a unanimous vote of the Partners
and subject to certain provisions, (i) as a result of Comcast's ownership of a
PCS license for the Philadelphia MTA, Holdings and its subsidiaries (including
the Company) are prohibited from engaging in any of the activities listed in
the preceding sentence, including bidding for or acquiring any PCS license, in
Philadelphia and (ii) no Partner or controlling affiliate may bid in a PCS
auction for any Wireless Business license, and at no time may any Partner bid
for or acquire a Wireless Business if such bid or acquisition would violate or
cause the Partnership or other Partners to violate any rules of the FCC.
The Holdings Partnership Agreement provides that the marketing channels of
the Company will include each of the Partners and certain of their affiliates.
Each of the Partners will be non-exclusive sales agents for the Company's
services, and the Company will be a non-exclusive sales agent for those
services Sprint and the Cable Parents make available to the Company. No agency
agreements formalizing the specific terms of these arrangements between the
Company and the Partners have been signed. Any commissions payable as a result
of the sales agency relationships between and among the Company and the
Partners are required to be no less favorable to the agent than those for
comparable agency arrangements with third parties irrespective of volume.
Subject to certain exceptions, the Company's services will be offered,
promoted and packaged solely under the Sprint trademark and the logo used in
connection therewith. Nothing in the Holdings Partnership Agreement, however,
precludes or prohibits the Partners and their affiliates from marketing,
selling or distributing their own products and services.
The Holdings Partnership Agreement provides that each Partner and its
controlled affiliates and Holdings, as a whole will cause their respective
agents to keep secret and maintain in confidence all confidential and
proprietary information and data of Holdings, the Partners and such
affiliates. Subject to such confidentiality restrictions, Holdings, and its
subsidiaries will grant each Partner and its controlled affiliates access to
technical information of Holdings and its subsidiaries.
Pursuant to the Holdings Partnership Agreement, each Partner has agreed to
provide certain services to the Company in connection with the operation of
the network, including antenna sites and/or strand mounting of RF and
transmission equipment, transmission facilities between cell sites and
designated switching locations and provision of primary power, standby power
and maintenance. The provisions of any such services by Comcast within the
Philadelphia MTA and certain surrounding areas in Pennsylvania, New Jersey,
Delaware and Maryland is not required. See "The Partnership Agreements" and
"Business--Relationship with Partners and Parents."
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PRINCIPAL SECURITY HOLDERS
The following table sets forth, as of the date of this prospectus, the
ownership of the Issuers, Holdings and MinorCo, L.P. For a more detailed
discussion of certain ownership interests, see "Business" and "Certain
Relationships and Related Transactions."
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
OF BENEFICIAL OWNER TYPE OF INTEREST INTEREST
------------------- ---------------- ----------
<S> <C> <C>
Sprint Spectrum Holding Company, L.P.
Sprint Enterprises, L.P.(1)................ Partnership(2) 40%
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
TCI Telephony Services, Inc.(3)............ Partnership(2) 30%
5619 DTC Parkway
Englewood, Colorado 80111
Comcast Telephony Services(4).............. Partnership(2) 15%
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Cox Telephony Partnership(5)............... Partnership(2) 15%
1400 Lake Hearn Drive
Atlanta, Georgia 30319-1464
Sprint Spectrum L.P.
Sprint Spectrum Holding Company, L.P.(6)... General Partnership 99%
4717 Grand Avenue--Fifth Floor
Kansas City, Missouri 64112
MinorCo, L.P.(6)........................... Limited Partnership 1%
4717 Grand Avenue--Fifth Floor
Kansas City, Missouri 64112
MinorCo, L.P.
Sprint Enterprises, L.P.(1)................ Partnership(2) 40%
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
TCI Telephony Services, Inc.(3)............ Partnership(2) 30%
5619 DTC Parkway
Englewood, Colorado 80111
Comcast Telephony Services(4).............. Partnership(2) 15%
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Cox Telephony Partnership(5)............... Partnership(2) 15%
1400 Lake Hearn Drive
Atlanta, Georgia 30319-1464
Sprint Spectrum Finance Corporation
Sprint Spectrum L.P........................ Common Stock 100%
4717 Grand Avenue--Fifth Floor
Kansas City, Missouri 64112
</TABLE>
- - --------
(1) An indirect wholly-owned subsidiary of Sprint Corporation. The general
partner of Sprint Enterprises, L.P. is US Telecom, Inc., a subsidiary of
Sprint Corporation. The limited partner of Sprint Enterprises, L.P. is
UCOM, Inc., a subsidiary of Sprint Corporation.
(2) Each Partner is both a general partner and a limited partner and holds 99%
of its partnership interest as a general partner and 1% as a limited
partner.
(3) A subsidiary of Tele-Communications, Inc. Interest was originally held by
TCI Network Services and subsequently transferred to TCI Telephony
Services, Inc.
(4) Comcast Telephony Services is a general partnership. The general partners
are COM Telephony Services, Inc. and Comcast Telephony Services, Inc.
(5) Cox Telephony Partnership is a general partnership. The general partners
are Cox Communications Wireless, Inc. and Cox Telephony Partners, Inc.
(6) As of June 30, 1996, Holdings, the sole general partner of Sprint
Spectrum, owned a greater than 99.75% partnership interest in Sprint
Spectrum, and MinorCo, the sole limited partner, owned a partnership
interest equal to less than 0.25%. The interests held by each of Holdings
and MinorCo fluctuate based on the amount of equity contributed by
Holdings to Sprint Spectrum because MinorCo's limited partnership interest
is equal to the ratio of $5.0 million (its investment in Sprint Spectrum)
to the total contributed equity in Sprint Spectrum.
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THE PARTNERSHIP AGREEMENTS
The following sets forth a summary of certain provisions of the Amended and
Restated Agreement of Limited Partnership of Holdings (the "Holdings
Partnership Agreement") and the Agreement of Limited Partnership of Sprint
Spectrum (the "Sprint Spectrum Partnership Agreement" and together with the
Holdings Partnership Agreement, the "Partnership Agreements"). The Partnership
Agreements are included as exhibits to the Registration Statement of which
this Prospectus constitutes a part. The following discussion is qualified in
its entirety by reference to the Partnership Agreements.
SPRINT SPECTRUM PARTNERSHIP AGREEMENT
Sprint Spectrum was formed as a limited partnership pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership Act, as amended
(the "Partnership Act"). A certificate of limited partnership of Sprint
Spectrum was filed with the Secretary of State of the State of Delaware on
March 28, 1995. Sprint Spectrum will continue until its dissolution and
winding up in accordance with the terms of the Sprint Spectrum Partnership
Agreement. See "--Dissolution and Winding Up." The general partner (the
"General Partner") of Sprint Spectrum is Holdings, which holds a greater than
99% general partnership interest. The remaining limited partnership interest
is owned by MinorCo (the "Limited Partner"). See "Business--General".
The purposes of Sprint Spectrum are (i) to engage, through one or more
subsidiaries, in the Wireless Business and to provide certain services related
thereto; (ii) to act as the general partner for WirelessCo; (iii) to make
capital contributions to, and receive distributions from, WirelessCo; and (iv)
to perform such activities in furtherance of the foregoing as may be
determined to be necessary from time to time by the General Partner. The
General Partner appoints the senior management of Sprint Spectrum.
The General Partner will conduct the business and affairs of Sprint
Spectrum, and all powers of Sprint Spectrum, except those specifically
reserved to the Limited Partner by the Partnership Act, have been granted to
and vested in the General Partner.
Limitation on Liability and Indemnification. The Sprint Spectrum Partnership
Agreement provides that any partner or former partner, or any affiliate
thereof, any partner, shareholder, director, officer, employee or agent of any
of the foregoing, or any officer or employee of Sprint Spectrum will not be
liable in damages for any act or failure to act in such person's capacity as a
partner or otherwise on behalf of Sprint Spectrum or any of its subsidiaries
unless such act or omission constituted bad faith, gross negligence, fraud or
willful misconduct of such person or a violation of the Sprint Spectrum
Partnership Agreement or any agreement between such person and Sprint Spectrum
or any of its subsidiaries. In addition, each partner or former partner, or
each affiliate thereof, each partner, shareholder, director, officer, employee
or agent or any of any of the foregoing, and each officer and employee of
Sprint Spectrum will be indemnified and held harmless by Sprint Spectrum from
and against any liability for damages and expenses, including reasonable
attorney's fees and disbursements and amounts paid in settlement, resulting
from any threatened, pending or completed action, suit or proceeding relating
to or arising out of such person's acts or omissions in such person's capacity
as a partner or otherwise involving such person's activities on behalf of
Sprint Spectrum or any of its subsidiaries, except to the extent that such
damages or expenses result from bad faith, gross negligence, fraud or willful
misconduct of such person or a violation of the Sprint Spectrum Partnership
Agreement or any agreement between such person and Sprint Spectrum or any of
its subsidiaries.
Dissolution and Winding Up. Sprint Spectrum will dissolve and commence
winding up and liquidation upon the first to occur of (i) the sale of all or
substantially all of its property; (ii) the sale of WirelessCo or all or
substantially all of its property and the distribution of the net proceeds
therefrom to Sprint Spectrum; (iii) the written consent of all of the partners
to dissolve, wind up and liquidate Sprint Spectrum; or (iv) subject to certain
conditions, the withdrawal of a general partner, the assignment by a general
partner of its entire partnership interest or any other event that causes a
general partner to cease to be a general partner under the Partnership
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Act. Upon the occurrence of any such event, the General Partner shall be
responsible for overseeing the dissolution and winding up of Sprint Spectrum.
HOLDINGS PARTNERSHIP AGREEMENT
Holdings was formed as a limited partnership by Sprint Enterprises, L.P.,
TCI Telephony Services, Inc., Comcast Telephony Services and Cox Telephony
Partnership (TCI Telephony Services, Inc., Comcast Telephony Services and Cox
Telephony Partnership are herein collectively referred to as the "Cable
Partners") pursuant to the provisions of the Partnership Act. Each Partner is
both a general partner (in such capacity a "General Partner") holding 99% of
its interest as a general partner and a limited partner (in such capacity, a
"Limited Partner") holding 1% of its interest as a limited partner.
A certificate of limited partnership of Holdings was filed with the
Secretary of State of the State of Delaware on March 28, 1995. Holdings will
continue until its winding up and liquidation in accordance with the terms of
the Holdings Partnership Agreement. See "--Dissolution and Winding Up."
The purposes of Holdings, as set forth in the Holdings Partnership
Agreement, are (i) to engage in the Wireless Business and to provide certain
services related thereto, either directly or through one or more subsidiaries,
and (ii) to perform any activities in the furtherance of such Wireless
Business and the provision of such related services as may be approved from
time to time by the Partnership Board.
Capital Contributions. Each of the Partners has made an initial capital
contribution ("Initial Capital Contribution") of both cash and property that
total $ 2.4 billion in the aggregate for all four Partners. The initial
percentage interest (the "Percentage Interest") of each of Sprint Enterprises,
L.P., TCI Telephony Services, Inc., Comcast Telephony Services and Cox
Telephony Partnership is 40%, 30%, 15% and 15%, respectively. Each Partner is
required, subject to the limitations described below, to make additional
capital contributions ("Additional Capital Contributions") in cash and, in the
case of Cox, the Omaha MTA PCS license and an undivided fractional interest in
the PCS license for the Los Angeles-San Diego MTA that ultimately will be held
by Cox-California (the "Licenses"), in an amount up to its initial Percentage
Interest times an amount equal to $4.2 billion (including the amount of the
Initial Capital Contributions) plus the agreed upon value of the Licenses
(together, the "Total Mandatory Contributions").
The Partnership Board and, under certain circumstances, the Chief Executive
Officer, may request that the Partners make Additional Capital Contributions
of cash to fund the needs of Holdings for the ensuing six months or for such
shorter period as may be determined by the Partnership Board and as such needs
are reflected in the applicable annual budget. Such contributions, in the
aggregate, may not exceed the cumulative amount of Additional Capital
Contributions contemplated in the annual budget for the fiscal year, unless
otherwise approved by the Partnership Board. In addition, if such fiscal year
falls within the initial two-year period (January 1, 1996 to December 31,
1997), such Additional Capital Contribution shall not exceed (i) with respect
to the first fiscal year in the initial two-year period, the product of 150%
times the planned capital amount for such fiscal year as set forth in the
annual budget ($1,131 million for fiscal 1996), and (ii) with respect to the
second fiscal year in the initial two-year period, the product of 150% times
the planned capital amount for such fiscal year ($767 million for fiscal 1997)
(less any portion of such planned capital amount for which Additional Capital
Contributions were requested in the first fiscal year in the initial two-year
period) plus any portion of the planned capital amount for the first fiscal
year in the initial two-year period for which Additional Capital Contributions
were not requested, in each case unless otherwise approved by a unanimous vote
of the Partnership Board. The amount so requested from each Partner by the
Partnership Board or the Chief Executive Officer, as the case may be, shall be
equal to such Partner's pro rata share of such Additional Capital Contribution
based upon its initial Percentage Interest.
No Partner may decline a request to make an Additional Capital Contribution
at any time prior to December 31, 1999, except to the extent such Additional
Capital Contribution, when added to the aggregate amount of such Partner's
capital contributions prior to the time of such Additional Capital
Contribution, exceeds such Partner's share of the Total Mandatory
Contribution. After the earlier of (i) December 31, 1999 or (ii) such time as
the
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aggregate amount of Initial Capital Contributions and Additional Capital
Contributions made or requested to be made by the Partners first equals or
exceeds the Total Mandatory Contributions (the "Cut-Off Time"), such Partner
may decline a request for an Additional Capital Contribution during any fiscal
year provided that none of such Partner's Representatives (as defined below)
voted in favor of the fiscal year's budget calling for the Additional Capital
Contributions and none of such Representatives voted in favor of requesting
such Additional Capital Contributions. In the event of a shortfall due to a
partner declining (a "Declining Partner") to make such an Additional Capital
Contribution, however, the Chief Executive Officer will request that each
Partner that made its respective Additional Capital Contribution in full make
Additional Capital Contributions in an aggregate amount equal to the amount
not contributed by the Declining Partner. Each Partner that is willing to fund
the shortfall may do so up to 100% of such shortfall and if the amount
committed by all Partners agreeing to fund the shortfall exceeds 100%, except
as otherwise provided in the following sentence, each such Partner will be
entitled to contribute that amount equal to the percentage of the shortfall
equal to the ratio that such Partner's Percentage Interest bears to the
aggregate Percentage Interests of all Partners. If the Declining Partner is a
Cable Partner, and no Cable Partner's Percentage Interest is equal to or
greater than Sprint's Percentage Interest, the shortfall first shall be
allocated among the Cable Partners that committed to fund the shortfall as if
Sprint had not so committed, until such time as at least one Cable Partner's
Percentage Interest is equal to Sprint's Percentage Interest, after which such
shortfall shall be allocated pro rata among all Partners that committed to
fund such shortfall in accordance with their respective Percentage Interests.
If any Partner declines a request for an Additional Capital Contribution
relating to the first $800 million of Additional Capital Contributions
requested after the Cut-Off Time (a "Second Tranche Call") and the Partnership
Board determines that the Partners' aggregate adjusted net equity in Holdings
is less than the aggregate amount of capital contributions previously made by
the Partners, the Partnership Board may elect to convert such Second Tranche
Call to a "Premium Call," pursuant to which the Partners, including the
Declining Partner, will be given another opportunity to make the Additional
Capital Contributions requested pursuant to such Second Tranche Call. If any
Partner then declines to make its Additional Capital Contribution, all amounts
contributed by the other Partners pursuant to such Second Tranche Call shall
be treated as "Premium Dollars," meaning that, for purposes of adjusting the
contributing Partners' Percentage Interests, each such dollar will be valued
on the basis of adjusted net equity divided by the sum of all previously made
Initial Capital Contributions and Additional Capital Contributions, thereby
increasing the dilutive impact on the Declining Partner's Percentage Interest.
In the event that any Partner fails to make all or any portion of an
Additional Capital Contribution (other than an Additional Capital Contribution
that such Partner is entitled to decline to make under the circumstances
described above), a penalty will accrue with respect to such unpaid amount at
the applicable floating rate from and including the date of the requested
Additional Capital Contribution until such unpaid amount and the penalty
imposed thereon are paid or until the period during which such Partner may
cure its failure to make such unpaid amount, and the penalty imposed thereon,
has expired. In the event such Partner fails to make the requested Additional
Capital Contribution and to pay the related penalty within ten days after the
date such Additional Capital Contribution was due, the Chief Executive Officer
will request that each Partner that made its respective Additional Capital
Contribution in full make loans to Holdings in an aggregate amount equal to
the amount of the Additional Capital Contribution that such delinquent Partner
failed to make. The amount of the loan that each such Partner shall be
entitled to make will be determined in the same manner as described above with
respect to the Additional Capital Contributions that the Partners are entitled
to make with respect to a shortfall caused by a Declining Partner. Any such
delinquent Partner may cure its default within 90 days from the date of the
above-referenced loans by transferring to an account of Holdings the amount of
the unpaid amount and the unpaid penalty. The failure of such delinquent
Partner to cure such default would result in such Partner becoming a
"Defaulting Partner" and would constitute an Adverse Act (as defined under--
"Management"), which would permit the Partnership Board to elect (i) to
commence procedures to allow the other Partners to purchase such Defaulting
Partner's interest in Holdings at a discount or (ii) to cause Holdings to seek
to obtain specific performance of such Defaulting Partner's obligations or to
sue for money damages.
Each Partner also may contribute from time to time such additional cash or
property as the Partnership Board approves.
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The Percentage Interests of the Partners will be adjusted from time to time
to reflect the failure of any Partner to make an Additional Capital
Contribution. Percentage Interests will be adjusted as follows: (i) with
respect to Additional Capital Contributions requested prior to the time that
the aggregate amount of Initial Capital Contributions and Additional Capital
Contributions made or requested to be made exceeds the Total Mandatory
Contributions, Percentage Interests will be adjusted on a pro rata basis to
give effect to the aggregate Initial Capital Contribution and Additional
Capital Contributions made by each Partner, (ii) with respect to an Additional
Capital Contribution that is converted to a Premium Call, Percentage Interests
shall be adjusted based upon the Premium Dollars procedures described above,
and (iii) with respect to an Additional Capital Contribution requested after
the time that the aggregate amount of Initial Capital Contributions and
Additional Capital Contributions made or requested to be made exceeds $5
billion, Percentage Interests will be adjusted on a pro rata basis to give
effect to each Partner's adjusted net equity in its interest in Holdings
(taking into account the Additional Capital Contribution made by such Partner
with respect to the requested Additional Capital Contribution to which such
adjustment of Percentage Interests relates).
Management. The General Partners of Holdings conduct the business and
affairs of Holdings and have all the powers of Holdings except for those
specifically reserved to all of the general and limited partners by the
Partnership Act or the Holdings Partnership Agreement. The General Partners
conduct such business and exercise such powers through their representatives
on the Partnership Board (the "Representatives"). The Partnership Board
currently has six voting Representatives, three of whom are designated by
Sprint and one of whom is designated by each of the Cable Partners. The Chief
Executive Officer is a non-voting member of the Partnership Board. In the
event that the Percentage Interests change, the Holdings Partnership Agreement
provides for different allocations of Representatives among the Partners and,
in certain situations, a change in the size of the Partnership Board,
provided, however, that Sprint will be entitled to designate two
Representatives as long as its Percentage Interest is at least 20%.
If any Partner becomes an "Adverse Partner" through, among other things,
becoming a Defaulting Partner, disposition of its Partnership Interest other
than in accordance with the Holdings Partnership Agreement, default or a
material breach of a material covenant (each, an "Adverse Act"), such Partner
shall forfeit the right to designate a member of the Partnership Board, and
any existing Representatives of such Partner shall cease to be members of the
Partnership Board.
The Representative or Representatives designated by each General Partner
have voting power equal to the voting Percentage Interest of the Partner
appointing him or them. If a General Partner designates more than one
Representative such Representatives are required to vote the entire voting
power held by such General Partner as a single unit. Except for Partners that
are controlled affiliates of the same parent, none of the Partners may enter
into any agreements with any other Partner (or its controlled affiliates)
regarding the voting of their respective Representatives on the Partnership
Board.
Each Representative holds his or her office at the pleasure of the General
Partner that designated such Representative. Any General Partner may at any
time, and from time to time, remove any or all of its Representatives and
appoint substitute Representatives. Representatives are not entitled to
compensation from Holdings for serving in such capacity and the costs incurred
by each Representative are borne by the Partner designating such
Representative.
Except as set forth below, all actions required or permitted to be taken by
the Partnership Board must be approved by the affirmative vote of
Representatives having voting power of 75% or more of the Percentage Interests
entitled to vote on such action (other than those required to abstain pursuant
to the terms of the Holdings Partnership Agreement). The decision to convert a
Second Tranche Call to a Premium Call and certain related matters requires a
simple majority vote of more than 50% of the voting Percentage Interest of all
Partners whose Representatives are not required to abstain. The unanimous vote
of the Partnership Board is required for specified matters including, but not
limited to, admission of new Partners or equity holders, actions that would
result in voluntary bankruptcy or the dissolution of Holdings or any
subsidiary, approval of transactions which would subject Holdings to certain
restrictions relating to FCC regulatory oversight, actions relating to the
incurrence of
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indebtedness that is recourse to the Partners, certain acquisitions and
dispositions of assets and the approval of a request for withdrawal by a
General Partner.
The unanimous consent of all of the Partners (other than those required to
abstain pursuant to the terms of the Holdings Partnership Agreement) is
required for any amendment to, or material deviation from, the Initial
Business Plan (as defined in the Holdings Partnership Agreement) during the
fiscal year ending December 31, 1996, engagement by Holdings in businesses
outside those specified in the Holdings Partnership Agreement or the
conducting of business by Holdings or its subsidiaries in the Philadelphia
MTA, the loan or advancement by Holdings or any subsidiary of funds to, or the
guarantee of any obligations of, a Partner or any affiliate thereof, the
making of any non-pro rata cash or in-kind distributions to a Partner other
than in accordance with the terms of the Holdings Partnership Agreement, the
approval of, amendment, modification or supplement to, procedures relating to
the winding up of the affairs of Holdings and, subject to certain exceptions,
the incurrence of any debt for loans made by a Partner or affiliate thereof
and any amendment, modification or supplement to the Holdings Partnership
Agreement. If any such action is not so approved solely due to the failure of
one or more Partners who is not entitled to representation on the Partnership
Board to consent, the Holdings Partnership Agreement provides means by which
the consenting Partners may purchase all of such non-consenting Partner's
interest.
The Partnership Board is responsible for appointing the senior management of
Holdings and its subsidiaries and for establishing policies and guidelines for
the hiring of employees by Holdings and its subsidiaries. The Partnership
Board may delegate authority to officers, employees, agents and
representatives as it deems appropriate and each Representative may authorize
by proxy another person to vote for such Representative at a Partnership Board
meeting. The Partnership Board has delegated to the Chief Executive Officer
the responsibility for appointing the senior management of Holdings and its
subsidiaries.
The Chief Executive Officer shall submit annually to the Partnership Board,
within 90 days of the start of a fiscal year, both a proposed budget for the
upcoming fiscal year and a proposed business plan covering such fiscal year
and the succeeding four fiscal years. The day-to-day business and operations
of the Partnership and its subsidiaries shall be conducted in accordance with
the approved business plan and annual budget then in effect and the policies,
strategies and standards established by the Partnership Board.
Liability of Partners, Representatives and Partnership Employees. The
Holdings Partnership Agreement provides that no Partner or former Partner,
Representative or former Representative, no Affiliate (as defined in the
Holdings Partnership Agreement) of any thereof, no partner, shareholder,
director, officer, employee or agent of any of the foregoing, nor any officer
or employee of Holdings, will be liable in damages for any act or failure to
act in such person's capacity as a Partner or Representative or otherwise on
behalf of Holdings or any of its subsidiaries unless such act or omission
constituted bad faith, gross negligence, fraud or willful misconduct of such
person or a violation by such person of the Holdings Partnership Agreement or
an agreement between such person and Holdings or a subsidiary thereof. Subject
to certain conditions, each Partner, former Partner, Representative and former
Representative, each Affiliate of any thereof, each partner, shareholder,
director, officer, employee and agent of any of the foregoing, and each
officer and employee of Holdings, will be indemnified and held harmless by
Holdings, from and against any liability for damages and expenses, including
reasonable attorneys' fees and disbursements and amounts paid in settlement,
resulting from any threatened, pending or completed action, suit or proceeding
relating to or arising out of such person's acts or omissions in such person's
capacity as a Partner or Representative or otherwise involving such person's
activities on behalf of the partnership or any of its subsidiaries, except to
the extent that such damages or expenses result from the bad faith, gross
negligence, fraud or willful misconduct of such person or a violation by such
person of the Holdings Partnership Agreement or an agreement between such
person and Holdings or any of its subsidiaries. Any indemnity by Holdings will
be provided out of, and to the extent of partnership property only.
Conversion to Corporate Form. The Holdings Partnership Agreement provides
that in the event the Partnership Board determines that it is desirable for
the business of Holdings to be conducted in a corporate
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form, the Partnership Board shall incorporate Holdings in the state of
Delaware. In the event of such a conversion, Holdings and MinorCo shall be
consolidated, and the Partners will receive, in exchange for their respective
Holdings and MinorCo interests, shares of capital stock of such corporation in
the same relative economic interests--defined in terms of net equity--as such
Partners hold in Holdings. Upon conversion to corporate form, the corporate
successor shall grant to each of the Partners certain rights to require such
successor to register under the Securities Act the shares of capital stock
received by the Partners in exchange for their interests in Holdings. After
August 1, 2003, the Partners have certain rights either to cause Holdings to
convert to corporate form or to have their Partnership Interests purchased by
the other Partners.
Competition with Partners. Subject to certain exceptions, the Holdings
Partnership Agreement restricts any Partner and its controlled affiliates from
bidding on, acquiring or, directly or indirectly, owning, managing, operating,
joining, controlling or financing, or participating in the management,
operation, control or financing of, or being connected as a principal, agent,
representative, consultant, beneficial owner of an interest in any person or
entity, or otherwise with, or use or permit its name to be used in connection
with, any business that engages in the bidding for or acquisition of any
Wireless Business license or engages in any Wireless Business or provides,
offers, promotes or brands services that are within Holdings' core business.
Unless approved by a unanimous vote of the Partners and subject to certain
provisions, (i) within the Philadelphia MTA Holdings is prohibited from
engaging in any of the activities listed in the preceding sentence, including
bidding for or acquiring any PCS licenses and (ii) no Partner or its
controlled affiliate shall bid in a PCS auction for any Wireless Business
license, and at no time may any Partner bid for or acquire a Wireless Business
if such bid or acquisition would violate or cause the Partnership or other
Partners to violate any rules of the FCC.
The Holdings Partnership Agreement permits Holdings and its subsidiaries to
enter into transactions with the Partners and their affiliates in the normal
course of their respective businesses provided, however, that the Partnership
Board has determined that the price and terms of such transaction are fair to
Holdings and its subsidiaries and that the price and terms of such transaction
are no less favorable than comparable transactions involving non-affiliates.
Subject to certain conditions, including without limitation, unanimous
approval of appropriate procedures, the Partnership Board may elect from time
to time to provide rights of first opportunity to various Partners or their
affiliates. In addition, any transaction between Holdings and its subsidiaries
on the one hand and the Partners and their affiliates (including the Parents)
on the other hand shall be approved by the Partnership Board by the requisite
affirmative vote of the Representatives of the disinterested Partners.
Business Relationship with Partners. The Holdings Partnership Agreement
provides that the marketing channels of the Company will include each of the
Partners and certain of their affiliates. Each of the Partners will be non-
exclusive sales agents for the Company's services and the Company will be a
non-exclusive sales agent for those services Sprint and the Cable Parents make
available to the Company. As of the date of this Prospectus, no agency
agreements formalizing the specific terms of these arrangements between the
Company and the Partners have been signed. Any commissions payable as a result
of the sales agency relationships between and among the Company and the
Partners are required to be no less favorable to the agent than those for
comparable agency arrangements with third parties. The Company's services will
be offered, promoted and packaged solely under the Sprint trademark and the
logo used in connection therewith. Nothing in the Holdings Partnership
Agreement, however, precludes or prohibits the Partners and their affiliates
from marketing, selling or distributing their own products and services.
The Holdings Partnership Agreement provides that each Partner and its
controlled affiliates and Holdings, as a whole shall cause their respective
agents to keep secret and maintain in confidence all confidential and
proprietary information and data of Holdings, the Partners and such
affiliates. Subject to such confidentiality restrictions, Holdings and its
subsidiaries shall grant each Partner and its controlled affiliates access to
technical information of Holdings and its subsidiaries.
Pursuant to the Holdings Partnership Agreement, each Partner has agreed to
provide certain services to the Company in connection with the operation of
the network, including antenna sites and/or strand mounting of RF
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and transmission equipment, transmission facilities between cell sites and
designated switching locations and provision of primary power, standby power
and maintenance. The provisions of any such services by Comcast within the
Philadelphia MTA and certain surrounding areas in Pennsylvania, New Jersey,
Delaware and Maryland is not required.
The Partnership Agreement also provides that the Partners and the Company
will coordinate, to the extent permitted by law and as is commercially
reasonably, their respective buying efforts from third party vendors.
Dispositions of Interests. Subject to certain restrictions, a Partner may at
any time transfer all or a portion of its interest (i) to any controlled
affiliate of such Partner, (ii) in connection with certain permitted
transactions involving such Partner, (iii) to the administrator or trustee of
such Partner to whom such interest is transferred in an involuntary
bankruptcy, (iv) pursuant to and in compliance with certain sections of the
Holdings Partnership Agreement, including sections relating to Adverse Acts,
rights of first refusal, tag-along rights, offer and registration rights and
rights of first offer and buy-sell arrangements and (v) with the prior written
consent of the other Partners.
After March 1, 2000, a Partner may transfer all or any portion of its
partnership interest to a person that is not a controlled affiliate of such
Partner (a "Purchaser") provided that such Partner first offers to sell such
partnership interest or portion thereof to the other Partners and provided
that such transfer would not result in the occurrence of an Adverse Act. If
such Purchaser after such transfer would own more than 55% of the Percentage
Interests, then the transfer will not be permitted unless such Purchaser
offers to purchase the entire interest of any other Partner wishing to sell
its interest.
Termination of Status as General Partner. A General Partner will cease to be
a General Partner upon (i) the permitted transfer of such Partner's entire
interest as a Partner, (ii) the unanimous vote of the Partnership Board
approving a request by such General Partner to withdraw, (iii) any Adverse Act
with respect to such Partner, (iv) such Partner's failure to satisfy an 8%
minimum ownership requirement or (v) in the case of Comcast only, the
occurrence of specified events that cause Comcast to become solely a limited
partner.
Dissolution and Winding Up. Holdings will be dissolved upon the earliest to
occur of (i) the sale of all or substantially all of the property of Holdings,
(ii) a unanimous vote of the Partnership Board to dissolve, wind up, and
liquidate Holdings in accordance with the terms of the Holdings Partnership
Agreement, (iii) the failure of the General Partners to resolve a "Deadlock
Event," which is deemed to occur if the Partnership Board fails to approve a
proposed annual budget or business plan for two consecutive fiscal years or if
the position of Chief Executive Officer remains vacant for 60 days after a
candidate has been proposed by at least two Partners with an aggregate of at
least 33% of the voting Percentage Interests and (iv) the withdrawal of a
General Partner, the assignment by a General Partner of its entire interest or
any other event that causes a General Partner to cease to be a general partner
under the Partnership Act; provided, that upon the occurrence of the events
set forth in clause (iv) above, Holdings will not be dissolved or required to
be wound up if (x) at the time of such event there is at least one remaining
General Partner, or (y) if there is not at least one remaining General
Partner, within 90 days after such event all remaining Partners agree in
writing to continue the business of Holdings and to the appointment, effective
as of the date of such event, of one or more additional General Partners.
Upon the occurrence of the events described in clauses (ii), (iii) and (iv)
above, and subject to the satisfaction of certain conditions, the Holdings
Partnership Agreement provides for buy/sell arrangements pursuant to which a
General Partner or a group of General Partners may purchase all of the
partnership interests thereby preventing the winding up and liquidation. In
the event such procedures fail to cause the sale of such partnership interests
in accordance with the buy/sell provisions, the Partnership Board shall be
responsible for overseeing the dissolution and winding up of Holdings, shall
cause the Holdings's property to be liquidated and shall apply and distribute
the proceeds therefrom in accordance with the terms of the Holdings
Partnership Agreement.
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DESCRIPTION OF VENDOR CONTRACTS AND FINANCING
VENDOR CONTRACTS
In connection with the construction of its PCS network and the preparation
for launch of commercial service, the Company has entered into numerous
contracts with various of its vendors. Copies of the Procurement Contracts
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. The following summary of certain provisions of the
Procurement Contracts does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Procurement Contracts.
Procurement Contracts
In connection with the network buildout, Holdings has entered into
Procurement Contracts with each of Nortel and Lucent, pursuant to which each
of Nortel and Lucent will provide certain of the fundamental infrastructure
products and services required for the establishment of the Company's PCS
network. The Procurement Contracts are non-recourse to the Parents and the
Partners or any intermediary partnership and have been assigned to the Company
in connection with the Reorganization. The Vendors may select and retain
subcontractors for performance of their obligations provided that such
subcontractors meet the standards and requirements as set forth in the
Procurement Contracts.
The initial term of each of the Procurement Contracts is 10 years subject to
extension by annual renewals. The Procurement Contracts generally require
payment for construction on a current basis and, for equipment and software on
every PCS system, 15-25% on delivery, 58-65% upon substantial completion and
18-20% on final acceptance, in each case with payment due within 30-45 days
from invoice. The amount of such contract price will be reduced by all amounts
saved as a result of certain engineering changes suggested by the Company that
are incorporated into the specifications by the Vendors; provided that the
Vendors reasonably believe that such changes would not make it impossible or
impracticable for the Vendors to comply with their obligations under the
Procurement Contracts. If at any time a Vendor is in material breach of the
Procurement Contract with respect to any PCS system, the Company shall have no
obligation to make any payment for work done in addition to those amounts
previously paid until and unless such breach is cured or waived by the
Company.
The minimum purchase commitments for the initial term are $0.8 billion and
$1.0 billion for Lucent and Nortel, respectively, which include, but are not
limited to, all CDMA equipment required for the establishment and installation
of the Network.
The Procurement Contracts provide for warranties of generally one to three
years from the final acceptance of equipment, services and PCS systems
provided by the applicable Vendor and warranty damages for the breach thereof.
Each Vendor has agreed to provide substantial training at no extra cost and
"most favored customer" status is generally applicable to all terms including
pricing, availability and payment terms. Payment for a majority of the
infrastructure costs is delayed until the Vendors achieve substantial
completion and deliver a functional system within their allocated MTAs. These
substantially turnkey arrangements as well as the liquidated damages discussed
below place the impetus for timely, high-quality network completion on the
Vendors and reduce the Company's exposure to buildout delays and technology
concerns.
The Procurement Contracts provide for significant liquidated damages for
interim project milestone delays and PCS system completion delays. Liquidated
damages are triggered by non-performance, inadequate performance or late
performance of the Vendor's obligations. Damages are calculated as a specified
percentage of the contract value and are subject to certain caps. Damages may
be offset against amounts owed by the Company to such Vendor and the Vendors
have defined cure periods to reach the appropriate milestone or system
completion date to avoid damages being assessed.
The Procurement Contracts contain various termination provisions. Once the
Company has purchased the minimum amount of Vendor products and services that
it had committed to purchase, it may terminate the contracts at its sole
option at any time, without cause. the Company may terminate the Procurement
Contracts for cause, without penalty, if the Vendor defaults. Vendor defaults
include, but are not limited to, (i) events of bankruptcy or otherwise seeking
relief from creditors, (ii) violations of applicable laws or permits, (iii)
failure to
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keep PCS systems free of liens and encumbrances, (iv) failure to meet
construction and/or payment requirements, (v) material breaches of the
contract, (vi) failure to comply with the contract's change of control
provision or (vii) persistent material failure to correct defects and
deficiencies in a timely manner. The Vendor may cure any event of default
except bankruptcy within a defined cure period.
Upon the Company's termination of the Procurement Contract, the Vendor is
due only undisputed amounts due and payable. If the termination results from a
Vendor event of default, the Vendor must pay to the Company the costs of
completing the project above the contract price, notwithstanding any
liquidated damages owed by Vendor to the Company.
The Vendors may terminate the Procurement Contracts upon the Company's
default. The events of default applicable to the Company are (i) events of
bankruptcy or otherwise seeking relief from creditors, (ii) the Company's
failure to make undisputed payments that are more than 60 days overdue to the
Vendor after an appropriate period of notice, (iii) failure of the Company's
to meet its initial commitments within five years of January 31, 1996, where
such failure is not due to site acquisition difficulties, microwave
relocations, force majeure events or the Vendor's acts or omissions or (iv)
the Company's materially breaches the contract and the breach does not involve
site acquisition, microwave relocation and/or network interconnection.
The Procurement Contracts also include special termination provisions
implicated by a failure of buildout financing or changes in law. The Company
may terminate the Procurement Contracts if acceptable financing with the
Vendors for the initial phase of the national buildout has not been finalized
within 180 days of January 31, 1996. Nortel may terminate the agreement at any
time within the same 180 day period if Nortel reasonably believes that
financing for the national buildout will not be finalized within that 180 day
period. The Company may also terminate the contract, in whole or in part, if
there is a change in applicable law or the interpretation thereof, or there is
a decision by a judicial or administrative body, such that the Company
reasonably believes that operating a PCS system would be illegal or onerous.
Before terminating a Procurement Contract subject to this provision, the
Company must use its best efforts to ameliorate the effects of such a change.
Handset Agreement
Sprint Spectrum has entered into a three-year purchase and supply agreement
for CDMA handsets with Qualcomm Personal Electronics, which is a partnership
formed by Qualcomm and Sony Electronics Inc. (the "Handset Agreement"). A copy
of the Handset Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the Handset Agreement does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Handset Agreement. Under the Handset Agreement, Sprint
Spectrum is entitled to resell the handsets through its own retail outlets as
well as other retail and direct sales distribution channels. In addition,
under the Handset Agreement, Sprint Spectrum receives most favored customer
status. Sprint Spectrum is obligated to make certain purchases during each
year of the contract, provided that Sprint Spectrum may buy-down its
commitments if it should choose to do so. Subject to certain conditions, the
vendor will warrant the handsets for two years from delivery to the Company
and for one or two years (at Sprint Spectrum's option) after the purchase of
the handset by a consumer. In addition, the vendor will provide sales training
for the marketing and sales personnel of the Company. The Agreement obligates
Qualcomm to meet specified product delivery intervals or be subject to certain
penalties.
VENDOR FINANCING
The Company has obtained financing commitments from Nortel for $1.3 billion
and from Lucent for $1.8 billion of multiple drawdown term loan facilities.
Such commitments are subject to numerous conditions, including the execution
and delivery of definitive documentation. Copies of the commitment letters for
such Vendor Financing have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the commitment letters does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the commitment letters. The proceeds of such facilities will be
used to finance the purchase price of goods and services provided by the
Vendors under the Procurement Contracts. The Vendor Financing will be non-
recourse to the Parents and the Partners.
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Borrowings under the Vendor Financing will be secured by a perfected first
priority lien (the "Shared Lien") on (i) all of the partnership interests in
WirelessCo, RealtyCo and EquipmentCo, (ii) intangible property assets on which
a lien can be perfected by certain Uniform Commercial Code and/or federal
filings and (iii) any real property having a value greater than $15.0
million. The Shared Lien will secure equally and ratably the Bank Credit
Facility, the Vendor Financing, other indebtedness of Sprint Spectrum for
borrowed money and interest rate swaps, indebtedness of Sprint Spectrum not to
exceed a designated basket at any time outstanding and any refinancing of the
foregoing (collectively, the "Secured Debt"). See "--Bank Credit Facility."
The Secured Debt will be unconditionally guaranteed by WirelessCo, RealtyCo
and EquipmentCo on a joint and several, pari passu basis.
Loans made under the Vendor Financing will amortize quarterly over a five-
year period commencing on the date which is 39 months after the end of the
one-year period during which such loans were made. Under the Vendor Financing,
subject to certain conditions, the Company will be required to make mandatory
prepayments of 100% of the net cash proceeds of any sale or disposition of
subsidiaries or any sale of material assets that are not reinvested in the
Company's wireless telecommunications business.
The Company will be able to elect that all or a portion of the borrowings
under the Vendor Financing bear interest at a rate per annum equal to either
(i) the ABR plus an applicable margin or (ii) the Eurodollar rate (LIBOR) plus
an applicable margin. The ABR is the higher of (x) the rate of interest
publicly announced by a commercial bank to be determined as its prime rate in
effect at its principal office in New York City and (y) the federal funds
effective rate plus 0.5%.
The Nortel Financing will require, as a condition to funding, the commitment
of additional financing from third-parties, including the Offering, the Bank
Credit Facility or other debt financing, and equity financing. Pursuant to the
Lucent Financing, the Company's access to $0.8 billion of additional funds
during the second phase of the facility is conditioned upon (i) Sprint
Spectrum maintaining at least a B rating on the Notes from Standard & Poor's
Corporation through the end of 1996 and (ii) the Issuers issuing at least $500
million aggregate gross proceeds of Notes. The maximum availability under such
financing is $1.0 billion in 1996, $1.5 billion in 1997 and $1.8 billion in
1998. The Vendor Financing will contain numerous other conditions which must
be satisfied in order for the Company to access funds. There can be no
assurance that the conditions to the commitments will be satisfied.
The Vendor Financing will contain a number of significant covenants that,
among other things, limit the ability of the Company to incur additional
indebtedness (beyond specified amounts), create liens and other encumbrances,
make guarantee obligations, make certain payments and investments, sell or
otherwise dispose of assets, make capital expenditures, make distributions to
partners and repurchases of equity, make acquisitions, investments, loans and
advances, merge or consolidate with another entity or engage in any business
other than the telecommunications business and related businesses as well as
restrictions on the ability of WirelessCo, RealtyCo and EquipmentCo to incur
liabilities or engage in non-designated activities. In addition, the Vendor
Financing is expected to require the maintenance of certain specified
financial and operating covenants, including, without limitation, ratios of
total debt to total capitalization, total debt to EBITDA, EBITDA to interest
expense and capital expenditure limitations.
The Vendor Financing will contain representations, warranties, covenants,
conditions and events of default customary for such senior credit facilities
of similar size and nature. In addition, the Vendor Financing will contain
change of control provisions regarding Sprint's ownership of a direct or
indirect interest in the Company. The loss of the Company's right to use the
Sprint trademark under the trademark license agreement will constitute an
event of default under the Vendor Financing. Although the particular
provisions of the Vendor Financing are being negotiated, it is expected that a
change of control will include Sprint ceasing to beneficially own at least 25%
of the Company.
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BANK CREDIT FACILITY
Sprint Spectrum has received a commitment from Chase to provide a fully
underwritten senior credit facility in the amount of $2.0 billion. The
commitment is subject to numerous conditions, including the execution and
delivery of definitive documentation. A copy of the commitment letter for the
Bank Credit Facility has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the commitment letter does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the commitment letter. The proceeds of the loans under the Bank
Credit Facility will be used to finance capital expenditures, operating
losses, the working capital needs of the Company and for partnership purposes.
Borrowings under the Bank Credit Facility will be unconditionally guaranteed
by WirelessCo, RealtyCo and EquipmentCo. In addition, borrowings under the
Bank Credit Facility will be secured by the Shared Lien. See "--Vendor
Financing." The Bank Credit Facility will be non-recourse to, and will not be
guaranteed by, the Parents or the Partners.
Outstanding amounts under the Bank Credit Facility will reduce quarterly
commencing five years and three months following the closing date and ending
nine years after the closing date. Under the Bank Credit Facility, subject to
certain conditions, the Company will be required to make mandatory prepayments
of 100% of the net cash proceeds of any sale or disposition of subsidiaries or
any material assets that are not reinvested in the Wireless Business. In
addition, beginning in the fiscal year ended 2000, Sprint Spectrum will be
required to apply a portion of excess cash flow to ratably reduce commitments
and loans under the Bank Credit Facility and prepay loans under the Vendor
Financing.
The Company will be able to elect that all or a portion of the borrowings
under the Bank Credit Facility bear interest at a rate per annum equal to (i)
the ABR plus an applicable margin or (ii) the Eurodollar Rate (LIBOR) plus an
applicable margin. The ABR is the higher of (x) the rate of interest publicly
announced by the administrative agent as its prime rate in effect at its
principal office in New York City and (y) the federal funds effective rate
from time to time plus 0.5%.
In connection with the Bank Credit Facility, Sprint Spectrum will pay a
commitment fee on the average daily unused and available amounts under the
Bank Credit Facility which fee will be determined based on specified tests and
payable quarterly in arrears.
The Bank Credit Facility will contain a number of significant covenants
that, among other things, limit the ability of Sprint Spectrum to incur
additional indebtedness, create liens and other encumbrances, make guarantee
obligations, make certain payments and investments, sell or otherwise dispose
of assets, make capital expenditures, make distributions to partners and
repurchases of equity, make acquisitions, investments, loans and advances,
merge or consolidate with another entity or engage in any business other than
the telecommunications business and related businesses as well as restrictions
on the ability of WirelessCo, RealtyCo and EquipmentCo to incur liabilities or
engage in non-designated activities. In addition, the Bank Credit Facility is
expected to require the maintenance of certain specified financial and
operating covenants, including, without limitation, capital expenditure
limitations and ratios of total debt to total capitalization, total debt to
EBITDA and EBITDA to interest expense.
The Bank Credit Facility will contain representations, warranties,
covenants, conditions and events of default customary for senior credit
facilities of similar size and nature, including, without limitation, the
delivery and execution of definitive documentation relating thereto. The loss
of the Company's right to use the Sprint trademark under the trademark license
agreement will constitute an event of default under the Bank Credit Facility.
Although the particular provisions of the Bank Credit Facility are being
negotiated, it is expected that a change of control will include the Parents
ceasing to beneficially own 50% of the Company.
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CAPITAL CONTRIBUTION AGREEMENT
Pursuant to the terms of the commitment letters for the Bank Credit Facility
and the Vendor Financing, the Parents must enter into a capital contribution
agreement with Sprint Spectrum, the terms of which are satisfactory to and
have been approved by each of the lenders and the Vendors (the "Required
Capital Contribution Agreement"). The Company has entered into a capital
contribution agreement with the Parents, but, as such agreement had not been
approved by either the lenders or the Vendors, there can be no assurance that
such capital contribution agreement will qualify as the Required Capital
Contribution Agreement.
The Capital Contribution Agreement provides that, upon proper notification
from the Company regarding the extent to which the expected cash expenditures
of the Company and its subsidiaries during the three months following the date
of such notification exceed the funds available, or expected to become
available, during such three month period to the Company and its subsidiaries
(the "Cash Shortfall"), each of the Parents shall contribute to the Company
that percentage of the Cash Shortfall which is equal to such Parent's
percentage ownership interest in the Company (the "Percentage Interest"). The
calculation of the Cash Shortfall is required to be made at least on a
quarterly basis. In no event shall any Parent's contribution exceed such
Parent's Percentage Interest of (i) the sum of (A) $1.0 billion, (B) the value
of an undivided fractional interest in the Cox-California license and (C) the
value of the Omaha license less (ii) the sum of (A) the amount of any cash
equity contributions not otherwise required to be made that are made under the
Capital Contribution Agreement by such Parent, directly or indirectly through
its affiliates, to the Company subsequent to December 31, 1995 (other than
cash equity contributions which are the proceeds of any indebtedness incurred
by an affiliate of the Company in respect of which the Company is entitled to
fund through the making of permitted distributions ("Specified Affiliate
Debt") or which are used to fund the acquisition of any entity which does not
become a Restricted Subsidiary (as defined in the Capital Contribution
Agreement) upon such acquisition), (B) such Parent's Percentage Interest of
the amount of aggregate cash proceeds of equity capital (other than equity
capital which is the proceeds of Specified Affiliate Debt) obtained by the
Company from sources other than the Parents or any of the respective
subsidiaries subsequent to December 31, 1995 and (C) in the case of Cox, the
sum of the value of both an undivided fractional interest in the Cox-
California license and the Omaha license,
Based upon the foregoing calculation, at March 31, 1996, approximately $0.9
billion of the commitments under the Capital Contribution Agreement was
available to fund any future Cash Shortfalls.
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DESCRIPTION OF THE NOTES
The Senior Notes will be issued under an Indenture (the "Senior Notes
Indenture") to be dated as of , 1996 among Sprint Spectrum L.P. ("Sprint
Spectrum") and Sprint Spectrum Finance Corporation ("FinCo" and, together with
Sprint Spectrum, the "Issuers"), as joint and several obligors, and The Bank
of New York, as trustee (the "Senior Notes Trustee"). The Senior Discount
Notes will be issued under an Indenture (the "Senior Discount Notes Indenture"
and, together with the Senior Notes Indenture, the "Indentures") to be dated
as of , 1996 among the Issuers, as joint and several obligors, and The Bank
of New York, as trustee (the "Senior Discount Notes Trustee" and, together
with the Senior Notes Trustee, the "Trustees"). The Senior Notes and the
Senior Discount Notes are referred to together herein as the "Notes." A copy
of the form of each Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary of certain
provisions of the Indentures does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), and to all of the provisions
of the Indentures, including the definitions of certain terms therein and
those terms made a part of the Indentures by reference to the Trust Indenture
Act, as in effect on the date of the Indentures. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions."
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Issuers will
appoint The Bank of New York to serve as registrar and paying agent under the
Indentures at its offices at 101 Barclay Street, New York, New York 10281. No
service charge will be made for any registration of transfer or exchange of
the Notes, except for any tax or other governmental charge that may be imposed
in connection therewith.
MATURITY, INTEREST AND PRINCIPAL OF THE SENIOR NOTES
The Senior Notes will be senior obligations of the Issuers, limited to
$150,000,000 aggregate principal amount, and will mature on , 2006. Cash
interest on the Senior Notes will accrue at a rate of % per annum and will be
payable semi-annually in arrears on each and , commencing , 1997, to
the holders of record of Senior Notes at the close of business on and ,
respectively, immediately preceding such interest payment date. Cash interest
will accrue from the most recent interest payment date to which interest has
been paid or, if no interest has been paid, from , 1996. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Interest on
overdue principal and on overdue installments of interest will accrue at the
rate of interest borne by the Senior Notes.
MATURITY, INTEREST AND PRINCIPAL OF THE SENIOR DISCOUNT NOTES
The Senior Discount Notes will be senior obligations of the Issuers, limited
to $ principal amount at maturity, and will mature on , 2006. The Senior
Discount Notes will be issued at a discount to their aggregate principal
amount at maturity and will generate gross proceeds to the Issuers of
approximately $500,000,000. Based on the issue price thereof, the yield to
maturity of the Senior Discount Notes is % (computed on a semi-annual bond
equivalent basis), calculated from , 1996. See "Certain Federal Income Tax
Consequences."
Cash interest will not accrue or be payable on the Senior Discount Notes
prior to , 2001. Thereafter, cash interest on the Senior Discount Notes
will accrue at a rate of % per annum and will be payable semi-annually in
arrears on each and , commencing on , 2002, to the holders of record
of the Senior Discount Notes at the close of business on the and ,
respectively, immediately preceding such interest payment date. Cash interest
will accrue from the most recent interest payment date to which interest has
been paid or, if no interest has been paid, from , 2001. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Interest on
overdue principal and on overdue installments of interest will accrue at the
rate of interest borne by the Senior Discount Notes.
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OPTIONAL REDEMPTION
Optional Redemption of Senior Notes. The Senior Notes will be redeemable at
the option of the Issuers, in whole or in part, at any time on or after ,
2001, at the redemption prices (expressed as a percentage of principal amount)
set forth below, plus accrued and unpaid interest, if any, to the redemption
date, if redeemed during the 12 month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.............................. %
2002.............................. %
2003.............................. %
2004 and thereafter............... 100%
</TABLE>
In addition, prior to , 1999, the Issuers may redeem up to 35% of the
originally issued principal amount of Senior Notes at a redemption price equal
to % of the principal amount of the Senior Notes so redeemed, plus accrued
and unpaid interest, if any, to the redemption date with the net proceeds of
one or more Public Equity Offerings of Common Equity Interests of (i) Sprint
Spectrum, (ii) Holdings or (iii) a special purpose corporation (a "Special
Purpose Corporation") formed to own Common Equity Interests of Sprint Spectrum
or Holdings, in any such case, resulting in gross proceeds of at least $100
million in the aggregate; provided that at least 65% of the originally issued
principal amount of Senior Notes would remain outstanding immediately after
giving effect to such redemption.
Optional Redemption of Senior Discount Notes. The Senior Discount Notes will
be redeemable at the option of the Issuers, in whole or in part, at any time
on or after , 2001, at the redemption prices (expressed as a percentage of
principal amount) set forth below, plus accrued and unpaid interest, if any,
to the redemption date, if redeemed during the 12 month period beginning on
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.............................. %
2002.............................. %
2003.............................. %
2004 and thereafter............... 100%
</TABLE>
In addition, prior to , 1999, the Issuers may redeem up to 35% of the
originally issued principal amount at maturity of Senior Discount Notes at a
redemption price equal to % of the Accreted Value at the redemption date of
the Senior Discount Notes so redeemed with the net proceeds of one or more
Public Equity Offerings (as defined) of Common Equity Interests of (i) Sprint
Spectrum, (ii) Holdings or (iii) a Special Purpose Corporation, in any such
case, resulting in gross proceeds of at least $100 million in the aggregate;
provided that at least 65% of the originally issued principal amount at
maturity of Senior Discount Notes would remain outstanding immediately after
giving effect to such redemption.
Selection and Notice of Redemption. In the event that less than all of the
Senior Notes or the Senior Discount Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the applicable Trustee
in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the applicable Trustee shall deem fair and appropriate;
provided that no Notes of a principal amount or principal amount at maturity,
as the case may be, of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of an Initial
Public Offering, selection of the Notes or portions thereof for redemption
shall be made by the applicable Trustee only on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to the procedures of The
Depository Trust Company), unless such method is otherwise prohibited. Notice
of redemption shall be mailed by first-class mail at least 30 but not more
than 60 days before the redemption date to each holder of Senior Notes or
Senior Discount Notes, as the case may be, to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount or
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principal amount at maturity, as the case may be, thereof to be redeemed. A
new Senior Note or Senior Discount Note, as the case may be, in a principal
amount or principal amount at maturity, as the case may be, equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Issuers have deposited with the applicable paying
agent for the Notes funds in satisfaction of the applicable redemption price
pursuant to the applicable Indenture.
CERTAIN COVENANTS
Set forth below are certain covenants that will be contained in the
Indentures.
Limitation on Additional Indebtedness. The Indentures will provide that
Sprint Spectrum will not, and will not permit any Restricted Subsidiary to,
create, incur, assume, issue, guarantee or in any other manner become directly
or indirectly liable, contingently or otherwise, for or with respect to (in
any such case, to "incur") any Indebtedness (including any Acquired
Indebtedness); provided that the Issuers and the Restricted Subsidiaries may
incur Indebtedness (including Acquired Indebtedness) if after giving pro forma
effect to such incurrence (including the application or use of the net
proceeds therefrom to repay Indebtedness or make any Restricted Payment),
either (a) the ratio of (x) Total Consolidated Indebtedness to (y) Annualized
Pro Forma Consolidated Operating Cash Flow would be less than (A) 7.0 to 1.0,
if the Indebtedness is to be incurred prior to July 1, 2002, or (B) 6.0 to
1.0, if the Indebtedness is to be incurred on or after July 1, 2002, or (b) in
the case of any incurrence of Indebtedness prior to July 1, 2002 only, Total
Consolidated Indebtedness would be equal to or less than 70% of Total Invested
Capital.
Notwithstanding the foregoing, the Issuers and, to the extent specified, the
Restricted Subsidiaries will be permitted to incur each and all of the
following (each of which shall be given independent effect):
(a) Indebtedness under the Notes, any Subsidiary Guarantee and the
Indentures;
(b) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to any of the Vendor Credit
Facilities;
(c) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to the Bank Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed $2.0
billion;
(d) Indebtedness of an Issuer or a Restricted Subsidiary owed to and held
by an Issuer or another Restricted Subsidiary so long as any such
Indebtedness owing by an Issuer is unsecured and subordinated in right of
payment to the Notes, except that (x) any direct or indirect transfer of
such Indebtedness by an Issuer or a Restricted Subsidiary (other than to an
Issuer or a Restricted Subsidiary), as the case may be, or (y) any direct
or indirect sale, transfer or other disposition by an Issuer or a
Restricted Subsidiary of Equity Interests of a Restricted Subsidiary that
is owed Indebtedness of an Issuer or a Restricted Subsidiary such that it
ceases to be a Restricted Subsidiary shall, in each such event, be an
incurrence of Indebtedness by the Issuer or such Restricted Subsidiary, as
the case may be, subject to the other provisions of this covenant;
(e) Interest Rate Protection Obligations of an Issuer or a Restricted
Subsidiary relating to Indebtedness of an Issuer or a Restricted Subsidiary
otherwise permitted under the Indentures that are entered into for the
purpose of protecting against fluctuations in interest rates in respect of
such Indebtedness and not for speculative purposes;
(f) Indebtedness of an Issuer or a Restricted Subsidiary under Currency
Agreements; provided that (x) such Currency Agreements relate to
Indebtedness otherwise permitted under the Indentures or the purchase price
of goods purchased or sold by an Issuer or a Restricted Subsidiary in the
ordinary course of its business and (y) such Currency Agreements do not
increase the Indebtedness or other obligations of an Issuer or a Restricted
Subsidiary outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(g) Indebtedness of an Issuer or a Restricted Subsidiary represented by
letters of credit for the account of an Issuer or a Restricted Subsidiary
in order to provide security for workers' compensation claims,
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payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(h) other Indebtedness of the Issuers and the Restricted Subsidiaries in
an aggregate principal amount not to exceed $100 million at any one time
outstanding; and
(i) Refinancing Indebtedness.
Indebtedness of a person existing at the time such person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by
Sprint Spectrum or a Restricted Subsidiary (whether or not such Indebtedness
is assumed by the acquiring person) shall be deemed incurred at the time the
person becomes a Restricted Subsidiary or at the time of the asset
acquisition, as the case may be.
Limitation on Restricted Payments. The Indentures will provide that Sprint
Spectrum will not, and will not permit any of the Restricted Subsidiaries to,
make, directly or indirectly, any Restricted Payment on or prior to December
31, 1999; and, thereafter, will not, and will not permit any of the Restricted
Subsidiaries to, make, directly or indirectly, any Restricted Payment unless:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, Sprint
Spectrum would be able to incur $1.00 of additional Indebtedness under
clause (a) of the proviso to the first paragraph of the covenant described
under "--Limitation on Additional Indebtedness"; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date (including any Designation Amount) would not exceed an
amount equal to the sum of, without duplication, (1) the amount of (x) the
Available Operating Cash Flow of Sprint Spectrum after December 31, 1999
through the end of the latest full fiscal quarter for which consolidated
financial statements of Sprint Spectrum are available preceding the date of
such Restricted Payment (treated as a single accounting period) less (y)
150% of the cumulative Consolidated Interest Expense of Sprint Spectrum
after December 31, 1999 through the end of the latest full fiscal quarter
for which consolidated financial statements of Sprint Spectrum are
available preceding the date of such Restricted Payment (treated as a
single accounting period), plus (2) the aggregate net cash proceeds (other
than Excluded Cash Proceeds) received by Sprint Spectrum as a capital
contribution in respect of existing Equity Interests (other than
Disqualified Equity Interests) of Sprint Spectrum made after the Issue Date
or from the issue or sale (other than to a Restricted Subsidiary) by Sprint
Spectrum of its Equity Interests (other than Disqualified Equity Interests)
made after the Issue Date, plus (3) the aggregate net cash proceeds
received by Sprint Spectrum or any Restricted Subsidiary from the sale,
disposition or repayment (other than to Sprint Spectrum or a Restricted
Subsidiary) of any Investment (other than an Investment made pursuant to
clause (vi) of the following paragraph) made after the Issue Date and
constituting a Restricted Payment in an amount equal to the lesser of (x)
the return of capital with respect to such Investment and (y) the initial
amount of such Investment, in either case, less the cost of disposition of
such Investment, plus (4) an amount equal to the consolidated net
Investment on the date of Revocation made by Sprint Spectrum and/or any of
the Restricted Subsidiaries in any Subsidiary that has been designated as
an Unrestricted Subsidiary after the Issue Date upon its redesignation as a
Restricted Subsidiary in accordance with the covenant described under "--
Limitation on Designations of Unrestricted Subsidiaries." For purposes of
the preceding clause (2), the value of the aggregate net cash proceeds
received by Sprint Spectrum upon the issuance of Equity Interests either
upon the conversion of convertible Indebtedness or in exchange for
outstanding Indebtedness or upon the exercise of options, warrants or
rights will be the net cash proceeds received upon the issuance of such
Indebtedness, options, warrants or rights plus the incremental amount
received by Sprint Spectrum upon the conversion, exchange or exercise
thereof.
For purposes of determining the amount expended for Restricted Payments,
cash distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its Fair Market Value.
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The provisions of this covenant shall not prohibit (i) the payment of any
dividend or distribution within 60 days after the date of declaration thereof,
if at such date of declaration such payment would comply with the provisions
of the applicable Indenture; (ii) so long as no Default shall have occurred
and be continuing, the purchase, redemption, retirement or other acquisition
of any Equity Interests of Sprint Spectrum out of the net cash proceeds of the
substantially concurrent capital contribution in respect of existing Equity
Interests (other than Disqualified Equity Interests) of Sprint Spectrum or
from the issue or sale (other than to a Restricted Subsidiary) of Equity
Interests (other than Disqualified Equity Interests) of Sprint Spectrum;
provided that any such net cash proceeds are excluded from clause (iii)(2) of
the second preceding paragraph; (iii) so long as no Default shall have
occurred and be continuing, the purchase, redemption, retirement, defeasance
or other acquisition of Subordinated Indebtedness of an Issuer made by
exchange for or conversion into, or out of the net cash proceeds of, a
concurrent issue and sale (other than to a Restricted Subsidiary) of (a)
Equity Interests (other than Disqualified Equity Interests) of Sprint Spectrum
(provided that any such net cash proceeds are excluded from clause (iii)(2) of
the second preceding paragraph) or (b) other Subordinated Indebtedness of an
Issuer that has an Average Life to Stated Maturity equal to or greater than
the Average Life to Stated Maturity of the Subordinated Indebtedness being
purchased, redeemed, retired, defeased or otherwise acquired; (iv) so long as
no Default shall have occurred and be continuing, the making of a direct or
indirect Investment constituting a Restricted Payment out of the proceeds of a
concurrent capital contribution in respect of existing Equity Interests (other
than Disqualified Equity Interests) of Sprint Spectrum or from the issue or
sale (other than to a Restricted Subsidiary) of Equity Interests (other than
Disqualified Equity Interests) of Sprint Spectrum; provided that any such net
cash proceeds are excluded from clause (iii)(2) of the second preceding
paragraph; (v) so long as no Default shall have occurred or be continuing and
provided Sprint Spectrum is then a partnership for federal income tax
purposes, distributions in respect of, and repurchases of, Equity Interests of
Sprint Spectrum owned by the Partners, to the extent necessary to pay current
tax liabilities payable in respect of income of Sprint Spectrum in an amount
not to exceed in any calendar year the product of (a) the ordinary income from
trade or business activities and giving effect to other items of income, loss
and deduction reported by Sprint Spectrum for the most recently ended tax year
for federal income tax purposes multiplied by (b) a percentage equal to the
sum of (x) the highest applicable federal corporate income tax rate for such
tax year (expressed as a percentage) plus (y) 5% multiplied by the excess of
100% over the highest applicable federal corporate income tax rate for such
tax year (expressed as a percentage); provided that nothing in this clause (v)
shall be deemed to permit any such distribution or repurchase to pay any tax
liabilities of Sprint Spectrum's partners resulting from the conversion of
Sprint Spectrum from partnership to corporate form; (vi) so long as no Default
shall have occurred and be continuing, any direct or indirect Investment
constituting a Restricted Payment by Sprint Spectrum or any Restricted
Subsidiary in any person (including any Unrestricted Subsidiary) whose
operations consist principally of, or has been formed principally to operate,
a Permitted Business in an amount not to exceed $100 million in the aggregate
at any time outstanding or (vii) any transfer of any Investment in APC held by
Sprint Spectrum or any Restricted Subsidiary to Holdings or any Wholly-Owned
Subsidiary of Holdings; provided APC has not been made a Restricted Subsidiary
under the covenant described under "--Limitation on Designations of
Unrestricted Subsidiaries."
Restricted Payments made pursuant to clause (i) of the immediately preceding
paragraph shall be included in making the determination of available amounts
under clause (iii) of the third preceding paragraph and Restricted Payments
made pursuant to clauses (ii), (iii), (iv), (v) and (vii) of the immediately
preceding paragraph shall not be included in making the determination of
available amounts under clause (iii) of the third preceding paragraph.
Limitation on Issuances of Certain Guarantees by, and Debt Securities of,
Restricted Subsidiaries. The Indentures will provide that Sprint Spectrum will
not permit (i) any Restricted Subsidiary to, directly or indirectly, guarantee
any Debt Securities of any of the Issuers or (ii) any Restricted Subsidiary to
issue any Debt Securities, unless, in either such case, such Restricted
Subsidiary simultaneously executes and delivers a guarantee (a "Subsidiary
Guarantee") of the Senior Notes and the Senior Discount Notes. Any such
Subsidiary Guarantee shall not be subordinate in right of payment to any
Indebtedness of the Restricted Subsidiary providing the Subsidiary Guarantee.
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Limitation on Liens Securing Certain Indebtedness. The Indentures will
provide that Sprint Spectrum will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens upon any
property or assets of Sprint Spectrum or any Restricted Subsidiary securing
either (i) Subordinated Debt Securities unless the Notes and the Subsidiary
Guarantees, as applicable, are secured by a Lien on such property or assets
that is senior in priority to the Liens securing such Subordinated Debt
Securities or (ii) Pari Passu Debt Securities unless the Notes and the
Subsidiary Guarantees, as applicable, are equally and ratably secured with the
Liens securing such Pari Passu Debt Securities.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indentures will provide that Sprint Spectrum will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create
or otherwise enter into or cause to become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends, in cash or otherwise, or make any
distributions on its Equity Interests or any other interest or participation
in, or measured by, its profits owned by Sprint Spectrum or any Restricted
Subsidiary, (ii) pay any Indebtedness owed to Sprint Spectrum or a Restricted
Subsidiary, (iii) make any Investment in Sprint Spectrum or any Restricted
Subsidiary or (iv) transfer any of its property or assets to Sprint Spectrum
or any Restricted Subsidiary, except for (a) any such customary encumbrance or
restriction contained in a security document creating a Lien permitted under
the Indentures to the extent relating to the property or asset subject to such
Lien (including, without limitation, customary restrictions relating to assets
securing any indebtedness under any of the Vendor Credit Facilities or the
Bank Credit Facility under the applicable security documents), (b) any such
encumbrance or restriction with respect to a Restricted Subsidiary that is not
a Restricted Subsidiary on the Issue Date which encumbrance or restriction is
in existence at the time such person becomes a Restricted Subsidiary but not
created in contemplation thereof and which encumbrance or restriction pertains
only to that Restricted Subsidiary and (c) any such encumbrance or restriction
imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of
such Restricted Subsidiary.
Limitation on Ownership of Equity Interests of Restricted Subsidiaries. The
Indentures will provide that, notwithstanding any other provision of the
Indentures to the contrary, (i) each of WirelessCo, RealtyCo, EquipmentCo and
FinCo shall at all times remain a direct Wholly-Owned Restricted Subsidiary of
Sprint Spectrum (except that FinCo may be merged with and into Sprint Spectrum
or a Wholly-Owned Restricted Subsidiary if Sprint Spectrum or such Wholly-
Owned Restricted Subsidiary is then a corporation) and (ii) none of
WirelessCo, RealtyCo or EquipmentCo will, directly or indirectly, sell,
convey, transfer, lease or otherwise dispose of any assets or property used or
useful in the operation of the business of the Company and the Restricted
Subsidiaries in the geographic areas for which Sprint Spectrum or a Restricted
Subsidiary owns or holds a Federal Communications Commission license for the
transmission of wireless telecommunications services on the Issue Date other
than, in the case of this clause (ii), to a person not an Affiliate of Sprint
Spectrum or any of the Restricted Subsidiaries or to a Wholly-Owned Subsidiary
if all of the outstanding Equity Interests of such Wholly-Owned Subsidiary are
concurrently sold to a person that is not an Affiliate of Sprint Spectrum or
any of the Restricted Subsidiaries, in each case in compliance with the
covenant described under "--Disposition of Proceeds of Asset Sales."
Notwithstanding the foregoing, WirelessCo, RealtyCo, EquipmentCo and FinCo may
issue Disqualified Equity Interests that do not entitle the holders thereof to
participate in the earnings, profits or cash flow of such Restricted
Subsidiary pursuant to and in compliance with the covenant described under "--
Limitation on Additional Indebtedness."
Limitation on Transactions with Equityholders and Affiliates. The Indentures
will provide that Sprint Spectrum will not, and will not permit, cause, or
suffer any Restricted Subsidiary to, conduct any business or enter into, renew
or extend any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with or for the benefit of any of
their respective Affiliates or any beneficial holder of 5% or more of any
class of Equity Interests of Sprint Spectrum (each an "Affiliate
Transaction"), except on terms that are no less favorable to Sprint Spectrum
or such Restricted Subsidiary than those that could reasonably be obtained in
a comparable arm's-length transaction with a person that is not such a holder
or Affiliate. Each Affiliate Transaction involving aggregate payments or
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other Fair Market Value in excess of $15.0 million shall be approved by (i) if
Sprint Spectrum is a Wholly-Owned Subsidiary of Holdings, either (a) if the
current provisions of Section 8.6 ("Interested Party Transactions") of the
Holdings Partnership Agreement are in effect, members of the Holdings'
Partnership Board exercising votes representing at least a majority (or such
other percentage vote as required by the Holdings Partnership Agreement) of
votes entitled to be exercised by members of such Board selected by the
Partners not having any financial interest in any such Affiliate Transaction,
or (b) if the current provisions of Section 8.6 ("Interested Party
Transactions") of the Holdings Partnership Agreement are not in effect, a
majority of the Disinterested Directors of Holdings, in each case, as
evidenced by a Resolution of the Board of Holdings and (ii) if Sprint Spectrum
is not a Wholly-Owned Subsidiary of Holdings, a majority of the Disinterested
Directors of Sprint Spectrum as evidenced by a Resolution of Sprint Spectrum.
In the event Sprint Spectrum obtains a written opinion from an Independent
Financial Advisor stating that the terms of an Affiliate Transaction are fair
to Sprint Spectrum or a Restricted Subsidiary, as the case may be, from a
financial point of view, it will conclusively meet the requirements of the
first sentence of this paragraph and there shall be no need to comply with the
second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions between or among Sprint Spectrum and/or
any of the Restricted Subsidiaries, (ii) any dividend or distribution
permitted by the covenant described under "--Limitation on Restricted
Payments," (iii) directors' fees, indemnification and similar arrangements,
officers' indemnification, employee stock option or employee benefit plans and
employee salaries and bonuses paid or created in the ordinary course of
business, (iv) any Affiliate Transaction pursuant to the Services Agreements
or any other agreement in effect on the Issue Date, as the same shall be
amended from time to time; provided that any material amendment shall be
required to comply with the provisions of the preceding paragraph of this
covenant, (v) transactions involving the marketing of products and services of
Sprint Spectrum or any Restricted Subsidiary jointly with products and
services of an Affiliate of Sprint Spectrum or a beneficial holder of 5% or
more of any class of Equity Interests of Sprint Spectrum (such holder or
Affiliate being a "Related Party"); provided all payments made by Sprint
Spectrum or any Restricted Subsidiary to the Related Party are made to
reimburse the Related Party for its share of any expenses incurred by the
Related Party on behalf of Sprint Spectrum or any Restricted Subsidiary, (vi)
transactions involving the leasing or sharing or other use by Sprint Spectrum
or any Restricted Subsidiary of communications network facilities (including,
without limitation, cable or fiber lines, equipment or transmission capacity)
of a Related Party on terms that are no less favorable (when taken as a whole)
to Sprint Spectrum or such Restricted Subsidiary, as applicable, than those
available from such Related Party to unaffiliated third parties, (vii)
transactions involving the provision of telecommunication services by a
Related Party in the ordinary course of its business to Sprint Spectrum or any
Restricted Subsidiary, or by Sprint Spectrum or any Restricted Subsidiary to a
Related Party, on terms that are no less favorable (when taken as a whole) to
Sprint Spectrum or such Restricted Subsidiary, as applicable, than those
available from such Related Party to unaffiliated third parties, and (viii)
any sales agency agreements pursuant to which a Partner or any of its
Affiliates has the right to market any or all of the products or services of
Sprint Spectrum or any of the Restricted Subsidiaries on a "most favored
nation" basis (without regard to volume), as contemplated by the Holdings
Partnership Agreement as in effect on the Issue Date.
Limitation on Activities of the Issuers and the Restricted Subsidiaries. The
Indentures will provide that (i) Sprint Spectrum will not, and will not permit
any Restricted Subsidiary to, engage in any business other than a Permitted
Business and (ii) FinCo will not own any operating assets or other properties
or conduct any business other than to serve as an Issuer and obligor on the
Notes and other Indebtedness permitted under the Indentures.
Change of Control. The Indentures will provide that following the occurrence
of a Change of Control (the date of such occurrence being the "Change of
Control Date"), the Issuers shall notify the holders of the Notes, in the
manner prescribed by the Indentures, of such occurrence and shall make an
offer to purchase (a "Change of Control Offer"), on a business day (the
"Change of Control Payment Date") not later than 60 days following the Change
of Control Date, all Notes then outstanding at a purchase price equal to (i)
101% of the principal amount thereof, in the case of the Senior Notes, plus
accrued and unpaid interest, if any, thereon to any Change
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of Control Payment Date and (ii) (a) 101% of the Accreted Value on the Change
of Control Payment Date, in the case of the Senior Discount Notes, if the
Change of Control Payment Date is on or before , 2001, and (b) 101% of the
principal amount at maturity of the Senior Discount Notes, plus accrued and
unpaid interest, if any, thereon to the Change of Control Payment Date, if
such date is after , 2001. Notice of a Change of Control Offer shall be
given to holders of Notes not less than 30 days nor more than 60 days before
the Change of Control Payment Date. The Change of Control Offer is required to
remain open for at least 20 business days or such longer period as may be
required by law and until the close of business on the Change of Control
Payment Date. The Issuers' obligations may be satisfied if a third party makes
the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made
by the Issuers and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
If a Change of Control occurs which also constitutes a default under the
Secured Financing, the lenders under the Secured Financing would be entitled
to exercise the remedies available to a secured lender under applicable law
and pursuant to the terms of the Secured Financing. Accordingly, any claims of
such lenders with respect to the assets of Sprint Spectrum will be prior to
any claim of the holders of the Notes with respect to such assets.
If a Change of Control Offer is made, there can be no assurance that the
Issuers will have available funds sufficient to pay for all of the Notes that
might be delivered by holders of Notes seeking to accept the Change of Control
Offer.
If the Issuers make a Change of Control Offer, the Issuers will comply with
all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed.
Disposition of Proceeds of Asset Sales. The Indentures will provide that
Sprint Spectrum will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale unless (i) Sprint Spectrum or such Restricted Subsidiary,
as the case may be, receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the assets sold or otherwise disposed
of and (ii) at least 80% of such consideration consists of cash or Cash
Equivalents; provided that the amount of any liabilities of the Company or
such Restricted Subsidiary that are assumed (and from which Sprint Spectrum or
such Restricted Subsidiary is unconditionally released) in connection with
such Asset Sale by the transferee or purchaser of such assets or on behalf of
such transferee or purchaser by a third party shall be deemed to be cash for
purposes of this clause (ii); provided, further, that up to $25.0 million of
consideration in the aggregate that is not in the form of cash or Cash
Equivalents may be received in excess of the amount permitted by the foregoing
provisions during the term of the Notes. Sprint Spectrum or the applicable
Restricted Subsidiary, as the case may be, may (i) apply such Net Cash
Proceeds within 365 days of receipt thereof to repay Indebtedness (other than
Subordinated Indebtedness of an Issuer or any Subsidiary Guarantor) of Sprint
Spectrum or a Restricted Subsidiary and elect to permanently reduce the
commitments thereunder by the amount of such Indebtedness so repaid or (ii)
apply such Net Cash Proceeds within 365 days of receipt thereof to an
investment in properties and assets that will be used in a Permitted Business
(or in Equity Interests of any person that will become a Restricted Subsidiary
as a result of such investment to the extent such person's operations consist
of Permitted Businesses) of Sprint Spectrum or any Restricted Subsidiary
("Replacement Assets"). Net Cash Proceeds from any Asset Sale that are neither
used to repay, and permanently reduce the commitments under, any Indebtedness
(other than Subordinated Indebtedness of an Issuer or any Subsidiary
Guarantor) of Sprint Spectrum or a Restricted Subsidiary nor invested in
Replacement Assets within such 365-day period shall constitute "Excess
Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds equals or exceeds $20.0
million, the Issuers shall make an offer to purchase Notes (an "Asset Sale
Offer"), from all holders of Notes, at a price in cash equal to (i) 100% of
the principal amount of Senior Notes, plus accrued and unpaid interest, if
any, to the purchase date and (ii) (a)
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100% of the Accreted Value on the purchase date in the case of the Senior
Discount Notes, if such purchase date is on or before , 2001, and (b) 100%
of the principal amount at maturity of the Senior Discount Notes, plus accrued
and unpaid interest, if any, thereon to the purchase date, if such date is
after , 2001. Each Asset Sale Offer shall remain open for a period of 20
business days or such longer period as may be required by law. To the extent
that the aggregate purchase price for the Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds available for such offer, Sprint
Spectrum and the Restricted Subsidiaries may use such deficiency for general
partnership or corporate purposes, as the case may be. If the aggregate
purchase price for the Notes) validly tendered and not withdrawn by holders
thereof exceeds the Excess Proceeds available for such offer, the Senior Notes
and Senior Discount Notes to be purchased will be selected on a pro rata basis
among the holders of Notes (based upon the principal amount of Senior Notes,
Accreted Value of Senior Discount Notes tendered by each holder); provided
that (i) the Senior Notes Pro Rata Share of any Excess Proceeds required to be
used to repurchase Notes pursuant to such Asset Sale Offer shall be applied to
repurchase Senior Notes tendered pursuant to such Asset Sale Offer prior to
such Excess Proceeds being used to repurchase or repay Senior Discount Notes
and (ii) the Senior Discount Notes Pro Rata Share of any Excess Proceeds
required to be used to repurchase Notes pursuant to such Asset Sale Offer
shall be applied to repurchase or repay Senior Discount Notes prior to such
Excess Proceeds being used to repurchase Senior Notes. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, Sprint Spectrum
and the Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale consists of cash, Cash Equivalents and/or
Permitted Assets and (ii) such consideration at the time of such Asset Sale is
at least equal to the Fair Market Value of the assets sold or otherwise
disposed of; provided that (x) any Net Cash Proceeds received by Sprint
Spectrum or any of the Restricted Subsidiaries in connection with any such
Asset Sale shall be subject to the provisions of the two immediately preceding
paragraphs and (y) if any of the assets disposed of are assets otherwise
required to be held by WirelessCo, RealtyCo or EquipmentCo under the covenant
described under""--Limitation on Ownership of Equity Interests of Restricted
Subsidiaries," the Permitted Assets received shall be held by, or promptly
transferred to, WirelessCo, RealtyCo or EquipmentCo.
If the Issuers are required to make an Asset Sale Offer, the Issuers will
comply with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act,
and any other applicable Federal or state securities laws and regulations and
any applicable requirements of any securities exchange on which the Notes are
listed.
Amendments to Capital Contribution Agreement. The Indentures will provide
that Sprint Spectrum will not amend, modify or waive, or refrain from
enforcing, any provision of the Capital Contribution Agreement dated as of
July 15, 1996 among Sprint Corporation, Tele-Communications, Inc., Comcast
Corporation, Cox Communications, Inc. and Sprint Spectrum in any manner
adverse to Sprint Spectrum or the holders of the Notes in any material
respect.
Reports. So long as any of the Notes are outstanding, Sprint Spectrum will
file with the Commission the annual reports, quarterly reports and other
documents that Sprint Spectrum would have been required to file with the
Commission pursuant to Sections 13(a) and 15(d) of the Exchange Act whether or
not Sprint Spectrum is then obligated to file reports pursuant to such
Sections, and Sprint Spectrum will promptly provide to all registered holders
of the Notes and file, within 30 days of filing with the Commission, with each
Trustee copies of such reports and documents.
Limitation on Designations of Unrestricted Subsidiaries. The Indentures will
provide that Sprint Spectrum may designate any Subsidiary of Sprint Spectrum
(other than FinCo, WirelessCo, RealtyCo and EquipmentCo) as an "Unrestricted
Subsidiary" under the Indentures (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(ii) Sprint Spectrum would be permitted under the Indentures to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount")
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equal to the Fair Market Value of the aggregate amount of its Investments
in such Subsidiary on such date; and
(iii) except in the case of a Subsidiary in which an Investment is being
made pursuant to and as permitted by the third paragraph of the covenant
"Limitation on Restricted Payments," Sprint Spectrum would be permitted to
incur $1.00 of additional Indebtedness pursuant to clause (a) of the
proviso to the first paragraph of the covenant described under "--
Limitation on Additional Indebtedness" at the time of Designation (assuming
the effectiveness of such Designation).
In the event of any such Designation, Sprint Spectrum shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to the
covenant described under "--Limitation on Restricted Payments" for all
purposes of the Indentures in the Designation Amount. The Indentures will
further provide that Sprint Spectrum shall not, and shall not permit any
Restricted Subsidiary to, at any time (x) provide direct or indirect credit
support for or a guarantee of any Indebtedness of any Unrestricted Subsidiary
(including of any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except, in the case of clause (x) or (y), to the
extent permitted under the covenant described under "--Limitation on
Restricted Payments."
Notwithstanding anything herein to the contrary, APC shall not, at any time,
be considered a Restricted Subsidiary absent a Revocation in compliance with
the following paragraph.
The Indentures will further provide that Sprint Spectrum may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation"),
whereupon such Subsidiary shall then constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indentures.
All Designations and Revocations must be evidenced by Resolutions of Sprint
Spectrum delivered to the Trustees certifying compliance with the foregoing
provisions.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indentures will provide that Sprint Spectrum will not, in any
transaction or series of transactions, merge or consolidate with or into, or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to, any person
or persons, and Sprint Spectrum will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
a sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of Sprint Spectrum and the
Restricted Subsidiaries, taken as a whole, to any other person or persons,
unless at the time of and after giving effect thereto (i) either (a) if the
transaction or series of transactions is a merger or consolidation, Sprint
Spectrum shall be the surviving person of such merger or consolidation, or (b)
the person formed by any such consolidation or into which Sprint Spectrum or
such Restricted Subsidiary is merged or to which the properties and assets of
Sprint Spectrum and/or any Restricted Subsidiary, as the case may be, are
transferred (any such surviving person or transferee person being a "Surviving
Entity") shall be a partnership or corporation organized and existing under
the laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture executed and
delivered to each of the Trustees, in form reasonably satisfactory to the
Trustees, all the obligations of Sprint Spectrum under the Notes and the
Indentures, and, in each case, the Indentures shall remain in full force and
effect; (ii) immediately before and immediately after giving effect to
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such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
no Default shall have occurred and be continuing; and (iii) immediately after
giving effect to such transaction or series of transactions on a pro forma
basis (including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or series
of transactions), Sprint Spectrum or the Surviving Entity, as the case may be,
could incur $1.00 of additional Indebtedness pursuant to the proviso to the
first paragraph of the covenant described under "--Certain Covenants--
Limitation on Additional Indebtedness"; provided that in the event of a
conversion of Sprint Spectrum from partnership to corporate form in a
transaction the primary purpose of which is to effect such conversion and in
which no additional Indebtedness is incurred or anticipated to be incurred by
Sprint Spectrum, the Surviving Entity or any Restricted Subsidiary, the
Surviving Entity shall not be required to be able to incur such $1.00 of
additional Indebtedness.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, Sprint Spectrum shall deliver, or cause
to be delivered, to the Trustees, in form and substance reasonably
satisfactory to the Trustees, an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, transfer, lease,
assignment or other disposition and the supplemental indentures in respect
thereof comply with the requirements under the Indentures.
The Indentures will provide that for all purposes of the Indentures and the
Notes (including the provisions of this covenant and the covenants described
under "--Certain Covenants--Limitation on Additional Indebtedness," "--Certain
Covenants--Limitation on Restricted Payments" and "--Certain Covenants--
Limitation on Liens Securing Certain Indebtedness"), Subsidiaries of any
Surviving Entity will, upon such transaction or series of transactions, become
Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to
the covenant described under "--Certain Covenants--Limitation on Designations
of Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property
or assets, of Sprint Spectrum and the Restricted Subsidiaries immediately
prior to such transaction or series of transactions will be deemed to have
been incurred upon such transaction or series of transactions; provided that
in the event of a conversion of Sprint Spectrum from partnership to corporate
form in a transaction the purpose of which is to effect such conversion and in
which no additional Indebtedness is incurred or anticipated to be incurred by
Sprint Spectrum, the Surviving Entity or any Restricted Subsidiary, no
Indebtedness of Sprint Spectrum and the Restricted Subsidiaries shall be
deemed to have been incurred upon such transaction or series of transactions.
The Indentures will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of a person
subject to, and in accordance with, the foregoing, the Surviving Entity shall
succeed to, and be substituted for, and may exercise every right and power of
Sprint Spectrum under the Indentures with the same effect as if such Surviving
Entity had been named as such; provided that, solely for purposes of computing
Available Operating Cash Flow for purposes of clause (iii) of the first
paragraph of the covenant described under "--Certain Covenants--Limitation on
Restricted Payments," the Available Operating Cash Flow of any persons other
than Sprint Spectrum and the Restricted Subsidiaries shall only be included
for periods subsequent to the effective time of such consolidation,
combination, merger or transfer of assets.
EVENTS OF DEFAULT
The following are "Events of Default" under each of the Indentures:
(i) default in the payment of the principal of, or premium, if any, on
the applicable Notes when due, at maturity, upon redemption or otherwise
(including pursuant to a Change of Control Offer or an Asset Sale Offer);
or
(ii) default in the payment of interest on the applicable Notes when it
becomes due and payable and continuance of such default for a period of 30
days; or
(iii) default in the performance, or breach, of any covenant described
under "--Consolidation, Merger, Sale of Assets, Etc."; or
(iv) default in the performance of or compliance with, or breach of, any
term, covenant, condition or provision of the applicable Notes or the
applicable Indenture (other than those specified in clause (i) or (ii)
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above) and such default continues for a period of 30 days after written
notice to Sprint Spectrum thereof by the applicable Trustee or holders of
at least 25% of the aggregate principal amount of the Senior Notes or
holders of 25% of the aggregate principal amount at maturity of the Senior
Discount Notes, as the case may be, then outstanding; or
(v) either (a) one or more default or defaults in the payment of any
principal under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness (each, a "Debt Instrument")
under which Sprint Spectrum or one or more Restricted Subsidiaries or
Sprint Spectrum and one or more Restricted Subsidiaries then have
outstanding Indebtedness in excess of $50.0 million, individually or in the
aggregate, or (b) any other default or defaults under one or more Debt
Instruments under which Sprint Spectrum or one or more Restricted
Subsidiaries or Sprint Spectrum and one or more Restricted Subsidiaries
then have outstanding Indebtedness in excess of $50.0 million, individually
or in the aggregate, and, in the case of this clause (b), either (x) such
Indebtedness is already due and payable in full by its terms or (y) such
default or defaults have resulted in the acceleration of the maturity of
such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $50.0 million, either individually or in the aggregate, shall
be entered against Sprint Spectrum or any Restricted Subsidiary or any of
their respective properties and shall not be discharged or fully bonded and
there shall have been a period of 60 days after the date on which any
period for appeal has expired and during which a stay of enforcement of
such judgment, order or decree shall not be in effect; or
(vii) any holder of at least $50.0 million in aggregate principal amount
of Indebtedness of Sprint Spectrum or any of the Restricted Subsidiaries,
or its trustee, agent or representative, shall commence (or have commenced
on its behalf) judicial proceedings to foreclose upon assets of Sprint
Spectrum or any of the Restricted Subsidiaries having an aggregate Fair
Market Value, individually or in the aggregate, in excess of $50.0 million
or shall have exercised any right under applicable law or applicable
security documents to take ownership of any such assets in lieu of
foreclosure; or
(viii) any Subsidiary Guarantee ceases to be in full force and effect or
is declared null and void or a Subsidiary Guarantor denies that it has any
further liability under its Subsidiary Guarantee or gives notice to such
effect; or
(ix) certain events of bankruptcy, dissolution, insolvency,
reorganization, administration, sequestration or similar proceedings
involving an Issuer or a Material Restricted Subsidiary.
If an Event of Default (other than an Event of Default specified in clause
(ix) with respect to an Issuer) occurs and is continuing, the applicable
Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Senior Notes or holders of at least 25% in aggregate principal
amount at maturity of the outstanding Senior Discount Notes, as the case may
be, may declare the principal of all the outstanding Senior Notes or the
Accreted Value of all the outstanding Senior Discount Notes, as the case may
be, to be due and payable immediately, together with all accrued and unpaid
interest and premium, if any, thereon. Upon any such declaration, such amount
shall become due and payable immediately. If an Event of Default specified in
clause (ix) with respect to an Issuer occurs, then such amount will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the applicable Trustee or any holder of Notes.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Senior Notes or the holders of a majority in
aggregate principal amount at maturity of outstanding Senior Discount Notes,
as the case may be, may, by notice to the applicable Trustee, rescind such
declaration of acceleration if all existing Events of Default under the
applicable Indenture, other than nonpayment of the principal of or Accreted
Value of, and accrued and unpaid interest, if any, on, the applicable Notes
that has become due solely as a result of such acceleration, have been cured
or waived and if the rescission of acceleration would not conflict with any
judgment or decree. The holders of a majority in principal amount of the
outstanding Senior Notes or the holders of a majority in aggregate principal
amount at maturity of the outstanding Senior Discount Notes, as the case may
be, also have the right to waive past defaults under the applicable Indenture,
except a default in the payment of the principal of or Accreted Value of, or
any interest on, any outstanding
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applicable Note, or in respect of a covenant or a provision that cannot be
modified or amended without the consent of all holders of the applicable
Notes.
No holder of any of the Notes has any right to institute any proceeding with
respect to the applicable Indenture or any remedy thereunder, unless the
holders of at least 25% in principal amount of the outstanding Senior Notes or
the holders of at least 25% in principal amount at maturity of the outstanding
Senior Discount Notes, as the case may be, have made written request, and
offered reasonable indemnity, to the applicable Trustee to institute such
proceeding, and the applicable Trustee has failed to institute such proceeding
within 30 days after receipt of such notice and such Trustee has not within
such 30-day period received directions inconsistent with such written request
by holders of a majority in principal amount of the outstanding Senior Notes
or the holders of a majority in aggregate principal amount at maturity of the
outstanding Senior Discount Notes, as the case may be. Such limitations do not
apply, however, to a suit instituted by a holder of a Note for the enforcement
of the payment of the principal or Accreted Value of, or any accrued and
unpaid interest on, such Note on or after the respective due dates expressed
in such Note.
During the existence of an Event of Default under the applicable Indenture,
the applicable Trustee is required to exercise such rights and powers vested
in it under such Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise under the circumstances in
the conduct of such person's own affairs. Subject to the provisions of the
Indentures relating to the duties of the Trustees, if an Event of Default
under the applicable Indenture shall occur and be continuing, the applicable
Trustee is not under any obligation to exercise any of its rights or powers
under the applicable Indenture at the request or direction of any of the
holders of the applicable Notes unless such holders shall have offered to such
Trustee reasonable security or indemnity. Subject to certain provisions
concerning the rights of the Trustees, the holders of a majority in principal
amount of the outstanding Senior Notes or the holders of a majority in
principal amount at maturity of the outstanding Senior Discount Notes, as the
case may be, have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the applicable Trustee, or
exercising any trust or power conferred on such Trustee.
Each of the Indentures provides that the applicable Trustee will, within 30
days after the occurrence of any Default under the applicable Indenture, give
to the holders of the applicable Notes notice of such Default known to it,
unless such Default shall have been cured or waived; provided that, except in
the case of a Default in payment of principal of or interest on any Note, the
applicable Trustee shall be protected in withholding such notice if it
determines in good faith that the withholding of such notice is in the
interest of such holders.
Sprint Spectrum is required to furnish to the Trustees annually a statement
as to compliance with all conditions and covenants under the Indentures.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURES
The Issuers may, at their option and at any time, terminate the obligations
of the Issuers and any Subsidiary Guarantor with respect to the applicable
outstanding Notes and Subsidiary Guarantees ("defeasance"). Such defeasance
means that the Issuers shall be deemed to have paid and discharged the entire
Indebtedness represented by the applicable outstanding Notes, except for (a)
the rights of holders of such outstanding Notes to receive payment in respect
of the principal of, premium, if any, and interest on such Notes when such
payments are due, (b) the Issuers' obligations to issue temporary Notes,
register the transfer or exchange of any Notes, replace mutilated, destroyed,
lost or stolen Notes and maintain an office or agency for payments in respect
of the Notes, (c) the rights, powers, trusts, duties and immunities of the
applicable Trustee, and (d) the defeasance provisions of the applicable
Indenture. In addition, the Issuers may, at their option and at any time,
elect to terminate the obligations of the Issuers and any Subsidiary
Guarantors with respect to certain covenants that are set forth in the
applicable Indenture ("covenant defeasance"), some of which are described
under "--Certain Covenants" above and any subsequent failure to comply with
such obligations shall not constitute a Default or an Event of Default with
respect to the applicable Notes.
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In order to exercise either defeasance or covenant defeasance, (a) the
Issuers must irrevocably deposit with the applicable Trustee, in trust, for
the benefit of the holders of the applicable Notes, cash in United States
dollars, United States government obligations, or a combination thereof, in
such amounts as will be sufficient to pay the principal of, premium, if any,
and interest on the applicable outstanding Notes to redemption or maturity
(except lost, stolen or destroyed Notes which have been replaced or paid); (b)
the Issuers shall have delivered to the applicable Trustee an opinion of
counsel to the effect that the holders of the applicable outstanding Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance
had not occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax laws); (c) no Default under the applicable Indenture shall
have occurred and be continuing on the date of such deposit; (d) such
defeasance or covenant defeasance shall not cause the applicable Trustee to
have a conflicting interest with respect to any securities of the Issuers; (e)
such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any agreement or instrument to
which the Issuers or any of their Subsidiaries is a party or by which it is
bound; (f) the Issuers shall have delivered to the applicable Trustee an
opinion of counsel to the effect that after the 91st day following their
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally or to the rights of any creditor of the Issuers or any
Subsidiary Guarantor other than those continuing rights of the applicable
holders of Notes; and (g) the Issuers shall have delivered to the applicable
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent under the applicable Indenture to either defeasance
or covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Senior Notes Indenture or the Senior Discount Notes Indenture, as the
case may be, will be discharged and will cease to be of further effect (except
as to surviving rights of registration of transfer or exchange of the
applicable Notes) as to all outstanding Senior Notes or Senior Discount Notes,
as the case may be, when either (i) all such Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes that have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust with the applicable Trustee and thereafter repaid to the Issuers or
discharged from such trust) have been delivered to the applicable Trustee for
cancellation; or (ii)(a) all such Notes not theretofore delivered to the
applicable Trustee for cancellation have become due and payable by their terms
and the Issuers have irrevocably deposited or caused to be deposited with the
applicable Trustee as trust funds an amount of money in U.S. dollars
sufficient to pay and discharge the entire Indebtedness on such Notes not
theretofore delivered to the applicable Trustee for cancellation, for the
principal amount, premium, if any, and accrued and unpaid interest to the date
of such deposit; (b) the Issuers have paid all other sums payable by them
under the applicable Indenture; and (c) the Issuers have delivered irrevocable
instructions to the applicable Trustee to apply the deposited money toward the
payment of such Notes at maturity or redemption, as the case may be. In
addition, the Issuers must deliver to the applicable Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent to
satisfaction and discharge have been complied with.
AMENDMENT AND WAIVERS
From time to time the Issuers and any Subsidiary Guarantor, when authorized
by Resolutions of their respective Boards, and the applicable Trustee, without
the consent of the holders of the Notes, may amend, waive or supplement the
Indentures, the Notes and any Subsidiary Guarantee for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of an Indenture under the Trust
Indenture Act or making any change that does not adversely affect the rights
of any holder of Notes. Other amendments and modifications of the Indentures,
the Notes and any Subsidiary Guarantee may be made by the Issuers, any
Subsidiary Guarantor and the applicable Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Senior Notes or holders of not less than a majority of the
aggregate principal amount at maturity of the outstanding Senior Discount
Notes, as the case may be; provided that no such modification or amendment
may, without the consent of the holder of each
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outstanding Note affected thereby, (i) reduce the principal amount of or
Accreted Value of, extend the fixed maturity of, or alter the redemption
provisions of, the Notes, (ii) change the currency in which any Notes or any
premium or the accrued interest thereon is payable, (iii) reduce the
percentage in principal amount of outstanding Notes which must consent to an
amendment, supplement or waiver or consent to take any action under the
Indentures, the Notes or any Subsidiary Guarantees, (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to the
Notes or any Subsidiary Guarantee, as the case may be, (v) waive a default in
payment with respect to the Notes, (vi) reduce the rate or extend the time for
payment of interest on the Notes or amend the rate of accretion on the Senior
Discount Notes or amend the definition of Accreted Value, (vii) alter the
obligation to purchase the Notes in accordance with the Indentures following
the occurrence of an Asset Sale or a Change of Control or waive any default in
the performance thereof, or (viii) adversely affect the ranking of the Notes
or any Subsidiary Guarantee or (ix) release any Subsidiary Guarantee other
than in accordance with the Indentures.
REGARDING THE TRUSTEES
The Bank of New York will serve as the Senior Notes Trustee and the Senior
Discount Notes Trustee. The Indentures provide that, except during the
continuance of an Event of Default under the applicable Indenture, the Trustee
thereunder will perform only such duties as are specifically set forth in such
Indenture. If an Event of Default has occurred and is continuing, the Trustee
will exercise such rights and powers vested in it under the applicable
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indentures and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of an Issuer to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. Each Trustee is permitted to engage
in other transactions; provided that if a Trustee acquires any conflicting
interest (as defined) it must eliminate such conflict or resign.
NON-RECOURSE TO HOLDINGS, PARTNERS OR THE PARENTS
The Senior Notes and the Senior Discount Notes are non-recourse to Holdings,
the Partners or the Parents.
CERTAIN DEFINITIONS
Set forth below are certain defined terms to be used in the Indentures.
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at maturity of Senior Discount Notes:
(i) if the Specified Date is one of the following dates (each a "Semi-Annual
Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------ ----------
<S> <C>
Issue Date........................ $
, 1997.........................
, 1997.........................
, 1998.........................
, 1998.........................
, 1999.........................
, 1999.........................
, 2000.........................
, 2000.........................
, 2001.........................
, 2001......................... $1,000.00;
</TABLE>
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(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the immediately following Semi-Annual
Accrual Date less the Accreted Value for the immediately preceding Semi-
Annual Accrual Date and (y) a fraction, the numerator of which is the
number of days actually elapsed from the immediately preceding Semi-Annual
Accrual Date to the Specified Date and the denominator of which is 180; and
(iii) if the Specified Date is after , 2001, $1,000.
"Acquired Indebtedness" means Indebtedness of a person existing at the time
such person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by such person and not incurred in connection with, or in
anticipation of, such person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Affiliate" of any specified person means any other person which, directly
or indirectly, controls, is controlled by or is under direct or indirect
common control with, such specified person. For the purposes of this
definition, (i) "control" when used with respect to any person means the power
to direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing and (ii) each of the Partners shall be deemed an Affiliate of Sprint
Spectrum.
"Affiliate Transaction" has the meaning set forth under "--Certain
Covenants--Limitation on Transactions with Equityholders and Affiliates."
"Annualized Pro Forma Consolidated Operating Cash Flow" means Consolidated
Operating Cash Flow for the latest two full fiscal quarters for which
consolidated financial statements of Sprint Spectrum are available multiplied
by two. For purposes of calculating "Consolidated Operating Cash Flow" for any
period for purposes of this definition only, (i) any Subsidiary of Sprint
Spectrum that is a Restricted Subsidiary on the date of the transaction giving
rise to the need to calculate "Annualized Pro Forma Consolidated Operating
Cash Flow" (the "Transaction Date") shall be deemed to have been a Restricted
Subsidiary at all times during such period and (ii) any Subsidiary of Sprint
Spectrum that is not a Restricted Subsidiary on the Transaction Date shall be
deemed not to have been a Restricted Subsidiary at any time during such
period. In addition to and without limitation of the foregoing, for purposes
of this definition only, "Consolidated Operating Cash Flow" shall be
calculated after giving effect on a pro forma basis for the applicable period
to, without duplication, any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of Sprint Spectrum or one of the Restricted
Subsidiaries (including any person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness) occurring during the period commencing on the first
day of such two fiscal quarter period to and including the Transaction Date
(the "Reference Period"), as if such Asset Sale or Asset Acquisition occurred
on the first day of the Reference Period.
"Asset Acquisition" means (i) any purchase or other acquisition (by means of
transfer of cash or other property to others or payment for property or
services for the account or use of others, or otherwise) of Equity Interests
of any person by Sprint Spectrum or any Restricted Subsidiary, in either case,
pursuant to which such person shall become a Restricted Subsidiary or shall be
merged with or into Sprint Spectrum or any Restricted Subsidiary or (ii) any
acquisition by Sprint Spectrum or any Restricted Subsidiary of the assets of
any person which constitute substantially all of an operating unit or line of
business of such person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition to any person other than Sprint Spectrum or a Wholly-
Owned Restricted Subsidiary, in one transaction or a series of related
transactions, of (i) any Equity Interests of any Restricted Subsidiary, (ii)
any FCC license for the provision of wireless telecommunications services held
by Sprint Spectrum or any Restricted Subsidiary (whether by sale of Equity
Interests or otherwise) or (iii) any other property or asset of Sprint
Spectrum or any Restricted Subsidiary outside of the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include any disposition of properties or assets of Sprint Spectrum or one or
more of the Restricted
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Subsidiaries in a transaction that either (x) involves aggregate consideration
of $5.0 million or less or (y) is governed by and complies with the covenant
described under "--Consolidation, Merger, Sale of Assets, Etc."
"Asset Sale Offer" has the meaning set forth under "--Certain Covenants--
Disposition of Proceeds of Asset Sales."
"Available Operating Cash Flow" means, for any period, the positive
cumulative Consolidated Operating Cash Flow realized during such period or, if
such cumulative Consolidated Operating Cash Flow for such period is negative,
the negative amount by which cumulative Consolidated Operating Cash Flow is
less than zero.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years (or any fraction thereof) from such
date to the date or dates of each successive scheduled principal payment
(including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Facility" means the credit facilities contemplated by the
Commitment Letter dated June 7, 1996 among Sprint Spectrum and Chase
Securities Inc. and Chemical Bank, as the same may be amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Board" of any person means the board of directors, management committee or
other governing body of such person. For purposes of this definition, while
Sprint Spectrum is a partnership, "Board" shall mean, with respect to Sprint
Spectrum, the Partnership Board established under the Holdings Partnership
Agreement and any person to whom appropriate authority has been delegated by
such Partnership Board.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP and, for the
purpose of the Indentures, the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
365 days or less issued by or directly, fully and unconditionally guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) deposits, certificates of deposit
or acceptances with a maturity of 365 days or less of any institution that is
a member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $500.0 million; (iii) commercial paper with
a maturity of 365 days or less issued by a corporation (other than an
Affiliate of Sprint Spectrum) incorporated or organized under the laws of the
United States or any state thereof or the District of Columbia and rated at
least "A-1" by S&P or "P-1" by Moody's; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued by or
directly, fully and unconditionally guaranteed or insured by the United States
of America or any agency or instrumentality thereof (provided that the full
faith and credit of the United States of America is pledged in support
thereof), in each case, maturing within 365 days from the date of acquisition
and (v) any "Cash Equivalents" as defined in the Bank Credit Facility as in
effect on the Issue Date.
"Change of Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) other than a Permitted Holder or Permitted Holders or a
person or group controlled by a Permitted Holder or Permitted Holders is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, upon the happening of an event or otherwise), directly or indirectly, of
more than 40% of the total Voting Equity Interests of Sprint Spectrum or
Holdings; provided a Permitted Holder or Permitted Holders or a group
controlled by a Permitted Holder or Permitted
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Holders does not own a greater percentage of the total Voting Equity Interests
of Sprint Spectrum or Holdings; (ii) Sprint Spectrum or Holdings consolidates
with, or merges with or into, another person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any person, or any person consolidates with, or merges with or into,
Sprint Spectrum or Holdings, in any such event pursuant to a transaction in
which the outstanding Voting Equity Interests of Sprint Spectrum or Holdings
are converted into or exchanged for cash, securities or other property, and
immediately after such transaction a "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted
Holder or Permitted Holders or a person or group controlled by a Permitted
Holder or Permitted Holders is the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more than 40% of the total Voting Equity Interests of the
surviving or transferee person; provided a Permitted Holder or Permitted
Holders or a person or group controlled by a Permitted Holder or Permitted
Holders does not own a greater percentage of the total Voting Equity Interests
of such person; and (iii) the approval by the holders of Equity Interests of
Sprint Spectrum or Holdings of any plan or proposal for the liquidation or
dissolution of Sprint Spectrum or Holdings.
"Change of Control Date" has the meaning set forth under "--Certain
Covenants--Change of Control."
"Change of Control Offer" has the meaning set forth under "--Certain
Covenants--Change of Control."
"Change of Control Payment Date" has the meaning set forth under "--Certain
Covenants--Change of Control."
"Commission" means the Securities and Exchange Commission.
"Common Equity Interests" means (i) with respect to a person which is a
corporation, any and all shares, interests or other participations in, and
other equivalents (however designated and whether voting or nonvoting) of,
such person's common stock and includes, without limitation, all series and
classes of such common stock and (ii) with respect to a person which is not a
corporation, Equity Interests which have characteristics similar in all
material respects to those of common stock of a corporation.
"Consolidated Income Tax Expense" means, with respect to any period, the
provision for Federal, state, local, foreign and other income taxes of Sprint
Spectrum and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, without
duplication, the sum of (i) the interest expense of Sprint Spectrum and the
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP and shall, in any event, include, without limitation,
(a) any amortization of debt discount, (b) the net cost or net benefit, as the
case may be, under any Currency Agreements and Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bills of
exchange, promissory notes and bankers' acceptance financing and (e) all
accrued interest, (ii) all but the principal component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by Sprint
Spectrum and the Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP and (iii) the aggregate amount of
dividends and distributions paid or accrued during such period in respect of
Preferred Equity Interests of Sprint Spectrum and the Restricted Subsidiaries
(other than such dividends or distributions paid or accrued on or with respect
to Preferred Equity Interests owned by Sprint Spectrum or a Wholly-Owned
Restricted Subsidiary) determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
(loss) of Sprint Spectrum and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP,
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adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (i) all extraordinary gains or losses, (ii) the portion
of net income (but not losses) of Sprint Spectrum allocable to minority
interests in unconsolidated persons, except to the extent that cash dividends
or distributions have actually been received by Sprint Spectrum or any
Restricted Subsidiary, (iii) net income (or loss) of any person combined with
Sprint Spectrum or a Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) gains in
respect of any Asset Sales, (v) the net income of any Unrestricted Subsidiary,
except to the extent that cash dividends or distributions have actually been
received by Sprint Spectrum or a Restricted Subsidiary, (vi) the portion of
net income (but not losses of Sprint Spectrum allocable to minority interests
in Restricted Subsidiaries (other than a Subsidiary Guarantor) of such person
and (vii) the net income of any Restricted Subsidiary (other than a Subsidiary
Guarantor) for such period to the extent the declaration of dividends or
similar distributions by that Restricted Subsidiary is not at the time
permitted, directly or indirectly, by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or regulation
applicable to that Restricted Subsidiary.
"Consolidated Operating Cash Flow" means, with respect to any period, the
Consolidated Net Income of Sprint Spectrum and the Restricted Subsidiaries for
such period (i) increased by (to the extent included in computing Consolidated
Net Income) the sum of (a) Consolidated Income Tax Expense for such period;
(b) Consolidated Interest Expense for such period; (c) depreciation of Sprint
Spectrum and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; (d) amortization of Sprint
Spectrum and the Restricted Subsidiaries for such period, including, without
limitation and without duplication, amortization of any Consolidated Interest
Expense and amortization of capitalized debt issuance costs for such period,
all determined on a consolidated basis in accordance with GAAP; and (e) any
other non-cash charges that were deducted in computing Consolidated Net Income
(excluding any non-cash charge which requires an accrual or reserve for cash
charges for any future period) of Sprint Spectrum and the Restricted
Subsidiaries for such period in accordance with GAAP and (ii) decreased by any
non-cash gains that were included in computing Consolidated Net Income.
"covenant defeasance" has the meaning set forth under "--Defeasance or
Covenant Defeasance of Indentures."
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
against fluctuations in currency values.
"Debt Instrument" has the meaning set forth under "--Events of Default."
"Debt Securities" means any debt securities (including any guarantee of such
securities) issued by any Issuer and/or any Restricted Subsidiary in
connection with a public offering (whether or not underwritten) or a private
placement (provided such private placement is underwritten for resale pursuant
to Rule 144A, Regulation S or otherwise under the Securities Act or sold on an
agency basis by a broker-dealer or one of its Affiliates to 10 or more
beneficial holders); it being understood that the term "Debt Securities" shall
not include any evidence of indebtedness under any of the Vendor Credit
Facilities or the Bank Credit Facility or any other commercial bank borrowings
or similar borrowings, recourse transfers of financial assets, capital leases
or other types of borrowings incurred in a manner not customarily viewed as a
"securities offering."
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default as set forth under "--Events of Default."
"defeasance" has the meaning set forth under "--Defeasance or Covenant
Defeasance of Indentures."
"Designation" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
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"Disinterested Director" means, with respect to any transaction or series of
transactions, a member of the Board of Sprint Spectrum or Holdings, as the
case may be, other than any such Board member who has any material direct or
indirect financial interest in or with respect to such transaction or series
of transactions.
"Disqualified Equity Interest" means, with respect to any person, any Equity
Interest that, by its terms (or by the terms of any security into which it is
convertible or for which it is mandatorily exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for Indebtedness at
the option of the holder thereof, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the final maturity date of the
Notes.
"EquipmentCo" means Sprint Spectrum Equipment Company, L.P., a Delaware
limited partnership.
"Equity Interest" in any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
in such person.
"Excess Proceeds" has the meaning set forth under "--Certain Covenants--
Disposition of Proceeds of Asset Sales."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Cash Proceeds" means (i) any net cash proceeds used to make a
concurrent Investment constituting a Restricted Payment pursuant to clause
(iv) of the third paragraph of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" and (ii) the first $1.4 billion
of net cash proceeds received by Sprint Spectrum after December 31, 1995 from
capital contributions in respect of existing Equity Interests (other than
Disqualified Equity Interests) of Sprint Spectrum or from the issue or sale
(other than to a Restricted Subsidiary) of Equity Interests (other than
Disqualified Equity Interests) of Sprint Spectrum; provided that (A) net cash
proceeds referred to in the immediately preceding clause (i), (B) net cash
proceeds used to make an Investment in APC or (C) net cash proceeds used to
make an investment pursuant to clauses (ii) or (iii)(a) of the third paragraph
of the covenant described under "--Certain Covenants--Limitation on Restricted
Payments" shall not be included as part of the first $1.4 billion referred to
in this clause (ii).
"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arms'-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in the applicable Indenture, Fair Market Value shall be determined by the
Board of Sprint Spectrum acting in good faith.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable on the Issue
Date.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), directly or indirectly, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation (other than an agreement to make a capital
contribution that otherwise is permitted by the covenant described under "--
Certain Covenants--Limitation on Restricted Payments"), including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit.
"Holdings" means Sprint Spectrum Holding Company, L.P., a Delaware limited
partnership.
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"Holdings Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Holdings dated as of January 31, 1996.
"incur" has the meaning set forth under "--Certain Covenants--Limitation on
Additional Indebtedness."
"Indebtedness" means, with respect to any person, without duplication, (i)
any liability, contingent or otherwise, of such person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such person or only to a portion thereof), whether as a cash advance, bill,
overdraft or money market facility loan, or (b) evidenced by a note, debenture
or similar instrument or letters of credit (including a purchase money
obligation) or by any book-entry mechanism or (c) for the payment of money
relating to a Capitalized Lease Obligation or other obligation relating to the
deferred purchase price of property or (d) in respect of any Interest Rate
Protection Obligation or any Currency Agreement; (ii) any liability of others
of the kind described in the preceding clause (i) which the person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a Lien to which the property or assets of such person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such person's legal liability; and (iv) the greater of the
maximum repurchase or redemption price or liquidation preference of any
Disqualified Equity Interests of such person or, with respect to any
Restricted Subsidiary of such person, of any Equity Interests (other than
Common Equity Interests) of such Restricted Subsidiary. In no event shall
"Indebtedness" include trade payables incurred in the ordinary course of
business. For purposes of the covenant described under "--Certain Covenants--
Limitation on Additional Indebtedness" and for purposes of "--Events of
Default," in determining the principal amount of any Indebtedness (l) to be
incurred by Sprint Spectrum or a Restricted Subsidiary or which is outstanding
at any date, (x) the principal amount of any Indebtedness which provides that
an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be the accreted value thereof at the
date of determination and (y) effect shall be given to the impact of any
Currency Agreements with respect to such Indebtedness and (2) outstanding at
any time under any Currency Agreement of Sprint Spectrum or any Restricted
Subsidiary, the principal amount shall be the net payment obligation under
such Currency Agreement at such time.
"Independent Financial Advisor" means an investment banking firm of national
standing in the United States which, in the good faith judgment of the Board
of Sprint Spectrum, is independent with respect to Sprint Spectrum and its
Affiliates and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Obligation" means the obligation of any person
pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include without limitation, interest rate
swaps, caps, floors, collars, forward interest rate agreements and similar
agreements.
"Investment" means, with respect to any person, any advance, loan or other
extension of credit (including, without limitation, by means of any guarantee)
or any capital contribution to (by means of transfer of property to others,
payment for property or services for the account or use of others, or
otherwise), or any purchase or other acquisition of any Equity Interests,
bonds, notes, debentures or other securities of, any other person. In
addition, any foreign exchange contract, currency swap agreement or other
similar agreement made or entered into by any person shall constitute an
Investment by such person.
"Issue Date" means the original date of issuance of the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation or assignment for security.
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"Lucent Credit Facility" means the credit facility contemplated by the
commitment letter dated June 21, 1996 between Sprint Spectrum and Lucent
Technologies, Inc., as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Material Restricted Subsidiary" means any Restricted Subsidiary which, at
any date of determination, is (i) a "Significant Subsidiary" (as that term is
defined in Regulation S-X, as in effect on the Issue Date, issued under the
Securities Act) and/or (ii) holds any FCC license for the transmission of
wireless telecommunications services and/or (iii) any of WirelessCo, RealtyCo
or EquipmentCo.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
therefrom in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any person (other than Sprint
Spectrum or any Restricted Subsidiary) owning a beneficial interest in or
having a Lien on the assets subject to the Asset Sale and (iv) appropriate
amounts to be provided by Sprint Spectrum or any Restricted Subsidiary, as the
case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by Sprint Spectrum or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities under any indemnification obligations associated
with such Asset Sale.
"Nortel Credit Facility" means the credit facility contemplated by the
commitment letter dated June 11, 1996 between Sprint Spectrum and Northern
Telecom Inc., as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Pari Passu Debt Securities" means any Debt Securities (and any guarantee of
any Debt Security) which would not constitute Subordinated Indebtedness.
"Partners" means, collectively, Sprint Enterprises, L.P., TCI Telephony
Services, Inc. Comcast Telephony Services and Cox Telephony Partnership, to
the extent they are Partners in Holdings, and any permitted transferee of such
Partner's interest pursuant to the Holdings Partnership Agreement.
"Permitted Assets" means property or assets that will be used in a Permitted
Business referred to in clause (i) of the definition of "Permitted Business"
(or Equity Interests of any person that will become a Restricted Subsidiary as
a result of the applicable Asset Sale to the extent such person's operations
consist of such a Permitted Business).
"Permitted Business" means (i) the delivery or distribution of
telecommunications, voice, data or video services, (ii) any business or
activity reasonably related thereto, including, without limitation, any
business conducted by Sprint Spectrum or any Restricted Subsidiary on the
Issue Date and the acquisition, holding or exploitation of any license
relating to the delivery of the services described in clause (i) of this
definition or(iii) any other business or activity in which Sprint Spectrum and
the Restricted Subsidiaries are expressly contemplated to be engaged in
pursuant to the provisions of the Holdings Partnership Agreement as in effect
on the Issue Date.
"Permitted Holder" means (i) each of Sprint Corporation, Tele-
Communications, Inc., Comcast Corporation and Cox Communications, Inc. and the
respective successors (by merger, consolidation, transfer or otherwise) to all
or substantially all of the respective businesses and assets of any of the
foregoing, (ii) any
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transferee of the assets resulting from a Permitted Transaction and (iii) each
person controlled by one or more persons identified in clause (i) or (ii) of
this definition.
"Permitted Investments" means any of the following: (i) Investments in any
Restricted Subsidiary (including any person that pursuant to such Investment
becomes a Restricted Subsidiary) and any person that is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets
to, Sprint Spectrum or any Restricted Subsidiary at the time such Investment
is made; (ii) Investments in Cash Equivalents;(iii) Investments in Currency
Agreements and Interest Rate Protection Obligations permitted by the covenant
described under "--Certain Covenants--Limitation on Additional Indebtedness";
(iv) loans or advances to officers or employees of Sprint Spectrum and the
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes of Sprint Spectrum and the Restricted Subsidiaries
(including travel and moving expenses) not in excess of $5.0 million in the
aggregate at any one time outstanding, (v) Investments in evidences of
Indebtedness, securities or other property received from another person by
Sprint Spectrum or any of the Restricted Subsidiaries in connection with any
bankruptcy proceeding or by reason of a composition or readjustment of debt or
a reorganization of such person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities
or other property of such person held by Sprint Spectrum or any of the
Restricted Subsidiaries, or for other liabilities or obligations of such other
person to Sprint Spectrum or any of the Restricted Subsidiaries that were
created in accordance with the terms of the Indentures; and (vi) Investments
made by Sprint Spectrum and the Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance
with the covenant described under "--Certain Covenants--Disposition of
Proceeds of Asset Sales."
"Permitted Transaction" with respect to a Partner means a transaction or
series of related transactions in which (i) such Partner ceases to be a
Subsidiary of its Parent or such Partner Transfers its Interest to a Person
that is not a Controlled Affiliate of such Partner and (ii) the new Parent of
such Partner (or such Partner if it is its own Parent) or the Parent of the
transferee of the Interest after giving effect to such transaction, or the
last transaction in a series of related transactions, owns, directly and
indirectly through its Controlled Affiliates, all or a Substantial Portion of
the cable television system assets (in the case of a Cable Partner) or long
distance telecommunications business assets (in the case of Sprint) owned by
the Parent of such Partner, directly and indirectly through its Controlled
Affiliates, immediately prior to the commencement of such transaction or
series of transactions. As used herein, "Substantial Portion" means (x) in the
case of a Cable Partner, cable television systems serving 75% or more of the
aggregate number of basic subscribers served by cable television systems in
the United States of America (including its territories and possessions other
than Puerto Rico) owned by the Parent of such Cable Partner, directly and
indirectly through its Controlled Affiliates, and (y) in the case of Sprint,
long distance telecommunications business assets serving 75% or more of the
aggregate number of customers served by the long distance telecommunications
business in the United States of America (including its territories and
possessions other than Puerto Rico) owned by the Parent of Sprint, directly
and indirectly through its Controlled Affiliates. All capitalized terms used
in this definition shall have the meanings ascribed to them in the Holdings
Partnership Agreement as in effect on the Issue Date.
"Public Equity Offering" means an underwritten public offering of Common
Equity Interests made on a primary basis by Sprint Spectrum, Holdings or a
Special Purpose Corporation pursuant to a registration statement filed with,
and declared effective by, the Commission in accordance with the Securities
Act; provided that Holdings or the Special Purpose Corporation, as the case
may be, will be required to contribute as equity to, or purchase Common Equity
Interests in, Sprint Spectrum with proceeds from the Initial Public Offering
of not less than the greater of (x) $100.0 million or (y) the amount required
to effect any redemption pursuant to the second paragraphs under "--Optional
Redemption--Optional Redemption of Senior Notes" and "--Optional Redemption of
Senior Discount Notes."
"RealtyCo" means Sprint Spectrum Realty Company, L.P., a Delaware limited
partnership.
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"Refinancing Indebtedness" means (i) Indebtedness of Sprint Spectrum to the
extent the proceeds thereof are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of Sprint Spectrum or
any of the Restricted Subsidiaries and (ii) Indebtedness of any Restricted
Subsidiary to the extent the proceeds thereof are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of such
Restricted Subsidiary, in each such event, incurred under the first paragraph
of the covenant described under "--Certain Covenants--Limitation on Additional
Indebtedness" or clause (a) of the second paragraph of such covenant; provided
that (a) the principal amount of Refinancing Indebtedness incurred pursuant to
this definition (or, if such Refinancing Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the accreted value of
such Indebtedness) shall not exceed the principal amount or accreted value, as
the case may be, of the Indebtedness refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of such Indebtedness or the amount of any premium reasonably
determined by the Board of Sprint Spectrum as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated purchase, plus
the amount of reasonable expenses in connection therewith and (b) in the case
of Refinancing Indebtedness incurred by an Issuer or a Subsidiary Guarantor,
such Indebtedness has an Average Life to Stated Maturity greater than or equal
to either (A) the Average Life to Stated Maturity of the Indebtedness
refinanced or (B) the remaining Average Life to Stated Maturity of the Notes
and (iii) if the Indebtedness to be refinanced is Subordinated Indebtedness of
an Issuer or a Subsidiary Guarantor, the Indebtedness to be incurred pursuant
to this definition shall also be Subordinated Indebtedness of the Issuer or
the Subsidiary Guarantor, as applicable, whose Indebtedness is to be
refinanced.
"Replacement Assets" has the meaning set forth under "--Certain Covenants--
Disposition of Proceeds of Asset Sales."
"Resolution" means, with respect to any person, a copy of a resolution
certified by the Secretary or Assistant Secretary of such person to have been
duly adopted by its Board and to be in full force and effect on the date of
such certification, and delivered to the applicable Trustee.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or distribution on Equity Interests of Sprint Spectrum
or any Restricted Subsidiary or any payment made to the direct or indirect
holders (in their capacities as such), including any Special Purpose
Corporation, of Equity Interests of Sprint Spectrum or any Restricted
Subsidiary (other than dividends or distributions (a) payable solely in Equity
Interests (other than Disqualified Equity Interests) of Sprint Spectrum or in
options, warrants or other rights to purchase Equity Interests (other than
Disqualified Equity Interests) of Sprint Spectrum, (b) paid to Sprint Spectrum
or a Wholly-Owned Restricted Subsidiary or (c) paid in respect of Equity
Interests of a Restricted Subsidiary to persons other than Sprint Spectrum or
Wholly-Owned Restricted Subsidiaries on not more favorable than a pro rata
basis with dividends or distributions then being paid in respect of Equity
Interests held by Sprint Spectrum or a Wholly-Owned Restricted Subsidiary);
(ii) the purchase, redemption or other acquisition or retirement for value of
any Equity Interests of Sprint Spectrum or a Restricted Subsidiary (other than
any such Equity Interests owned by Sprint Spectrum or a Wholly-Owned
Restricted Subsidiary); (iii) the making of any principal payment on, or the
purchase, redemption, defeasance or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Subordinated Indebtedness of an Issuer or any Subsidiary
Guarantor (other than any such Subordinated Indebtedness owned by Sprint
Spectrum or a Restricted Subsidiary); or (iv) the making of any Investment
(other than a Permitted Investment) in any person (other than an Investment by
a Restricted Subsidiary in Sprint Spectrum or an Investment by Sprint Spectrum
or a Restricted Subsidiary in either (x) a Restricted Subsidiary or (y) a
person that becomes a Restricted Subsidiary as a result of such Investment).
"Restricted Subsidiary" means any Subsidiary of Sprint Spectrum that has not
been designated by the Board of the Company, by a Resolution delivered to the
applicable Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "--Certain Covenants--Limitation
on Designations of Unrestricted Subsidiaries." Any such Designation may be
revoked by a Resolution of Sprint Spectrum delivered to the applicable
Trustee, subject to the provisions of such covenant.
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"Revocation" has the meaning set forth under "--Certain Covenants--
Limitation on Designations of Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Corporation.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes Pro Rata Share" means the amount of the applicable
Excess Proceeds obtained by multiplying the amount of such Excess Proceeds by
a fraction, (i) the numerator of which is the aggregate Accreted Value of all
Senior Discount Notes outstanding at the time of the applicable Asset Sale
Offer and (ii) the denominator of which is the sum of (a) the aggregate
Accreted Value of all Senior Discount Notes outstanding at the time of the
applicable Asset Sale Offer, (b) the aggregate principal amount of all Senior
Notes outstanding at the time of the applicable Asset Sale Offer and (c) the
aggregate principal amount or the aggregate accreted value, as the case may
be, of all other Indebtedness (other than Subordinated Indebtedness of an
Issuer or a Subsidiary Guarantor) outstanding at the time of the applicable
Asset Sale Offer with respect to which an Issuer or a Restricted Subsidiary,
as the case may be, is required to use the applicable Excess Proceeds to offer
to repay or make an offer to purchase.
"Senior Notes Pro Rata Share" means the amount of the applicable Excess
Proceeds obtained by multiplying the amount of such Excess Proceeds by a
fraction, (i) the numerator of which is the aggregate principal amount of all
Senior Notes outstanding at the time of the applicable Asset Sale Offer and
(ii) the denominator of which is the sum of (a) the aggregate principal amount
of all Senior Notes outstanding at the time of the applicable Asset Sale
Offer, (b) the aggregate Accreted Value of all Senior Discount Notes
outstanding at the time of the applicable Asset Sale Offer and (c) the
aggregate principal amount or the aggregate accreted value, as the case may
be, of all other Indebtedness (other than Subordinated Indebtedness of an
Issuer or a Subsidiary Guarantor) outstanding at the time of the applicable
Asset Sale Offer with respect to which an Issuer or a Restricted Subsidiary,
as the case may be, is required to use the applicable Excess Proceeds to offer
to repay or make an offer to purchase.
"Subordinated Debt Securities" means any Debt Securities (and any guarantee
of any Debt Security) that would constitute Subordinated Indebtedness.
"Subordinated Indebtedness" of any person means any Indebtedness of such
person that is expressly subordinated in right of payment to any other
Indebtedness of such person.
"Subsidiary" means, with respect to any person, (i) any corporation of which
the outstanding Equity Interests having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such person, or (ii) any other person of which at
least a majority in value of Equity Interests or Voting Equity Interests are
at the time, directly or indirectly, owned by such person.
"Subsidiary Guarantee" has the meaning set forth under "--Certain
Covenants--Limitation on Issuance of Certain Guarantees by, and Debt
Securities of, Restricted Subsidiaries."
"Subsidiary Guarantor" means a Restricted Subsidiary that issues a
Subsidiary Guarantee pursuant to the covenant described under "--Certain
Covenants--Limitation on Issuance of Certain Guarantees by, and Debt
Securities of, Restricted Subsidiaries."
"Surviving Entity" has the meaning set forth under "--Consolidation, Merger,
Sale of Assets, Etc."
"Total Consolidated Indebtedness" means, at any date of determination, an
amount equal the aggregate principal amount of all Indebtedness of Sprint
Spectrum and the Restricted Subsidiaries outstanding as of the date of
determination.
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"Total Invested Capital" means, at any time of determination, the sum of,
without duplication, (i) the total amount of equity contributed to Sprint
Spectrum as of the Issue Date (as set forth on the March 31, 1996 consolidated
balance sheet of Sprint Spectrum), plus (ii) the aggregate net cash proceeds
received by Sprint Spectrum from capital contributions or the issuance or sale
of Equity Interests (other than Disqualified Equity Interests but including
Equity Interests issued upon the conversion of convertible Indebtedness or
from the exercise of options, warrants or rights to purchase Equity Interests
(other than Disqualified Equity Interests)) subsequent to the Issue Date,
other than to a Restricted Subsidiary, plus (iii) the aggregate net cash
proceeds received by Sprint Spectrum or any Restricted Subsidiary from the
sale, disposition or repayment of any Investment made after the Issue Date and
constituting a Restricted Payment in an amount equal to the lesser of (a) the
return of capital with respect to such Investment and (b) the initial amount
of such Investment, in either case, less the cost of the disposition of such
Investment, plus (iv) an amount equal to the consolidated net Investment on
the date of Revocation made by Sprint Spectrum and/or any of the Restricted
Subsidiaries in any Subsidiary that has been designated as an Unrestricted
Subsidiary after the Issue Date upon its redesignation as a Restricted
Subsidiary in accordance with the covenant described under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries," plus (v)
Total Consolidated Indebtedness minus (vi) the aggregate amount of all
Restricted Payments (including any Designation Amount, but other than a
Restricted Payment of the type referred to in clause (iii)(b) of the third
paragraph of the covenant described under "--Certain Covenants--Limitation on
Restricted Payments") declared or made from and after the Issue Date.
"Unrestricted Subsidiary" means any Subsidiary of Sprint Spectrum (other
than FinCo, WirelessCo, RealtyCo and EquipmentCo) designated after the Issue
Date as such pursuant to and in compliance with the covenant described under
"--Certain Covenants--Limitation on Designations of Unrestricted
Subsidiaries." Any such designation may be revoked by a Resolution of Sprint
Spectrum delivered to the applicable Trustee, subject to the provisions of
such covenant.
"Vendor Credit Facilities" means, collectively, (i) the Lucent Credit
Facility; (ii) the Nortel Credit Facility; and (iii) any other credit facility
entered into with any vendor or supplier (or any financial institution acting
on behalf of such a vendor or supplier); provided that, in the case of each of
clauses (i), (ii) and (iii), the Indebtedness thereunder is incurred solely
for the purpose of financing the cost (including the cost of design,
development, site acquisition, construction, integration, handset manufacture
or acquisition or microwave relocation) of wireless telecommunications
networks or systems or for which Sprint Spectrum or any Restricted Subsidiary
has obtained the applicable licenses or authorizations to utilize the radio
frequencies necessary for the operation of such systems or networks.
"Voting Equity Interests" means, with respect to any person, Equity
Interests of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body
of such person.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of
which 100% of the outstanding Equity Interests is owned by Sprint Spectrum or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition,
(i) any directors' qualifying shares or investments by foreign nationals
mandated by applicable law and (ii) Equity Interests of a person not to exceed
1% of the total voting power of all outstanding Equity Interests of such
person and representing a right to receive not greater than 1% of the profits
of such partnership shall be disregarded in determining the ownership of a
Restricted Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any person, any other
person 100% of whose outstanding Equity Interests are owned by such person or
another Wholly-Owned Restricted Subsidiary of such person. For purposes of
this definition, (i) any directors' qualifying shares or investments by
foreign nationals mandated by applicable law and (ii) Equity Interests of a
person not to exceed 1% of the total voting power of
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all outstanding Equity Interests of such person and representing a right to
receive not greater than 1% of the profits of such partnership shall be
disregarded in determining the ownership of a Subsidiary.
"WirelessCo" means WirelessCo, L.P., a Delaware limited partnership.
BOOK-ENTRY; DELIVERY AND FORM
The Notes will be issued in the form of one or more fully registered global
certificates (the "Global Certificates"). The Global Certificates will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York (the "Depositary") and registered in the name of the Depositary's
nominee. The Depositary will maintain the Notes in denominations of $1,000 and
integral multiples thereof through its book-entry facilities.
Except as set forth below, the Global Certificates may be transferred, in
whole and not in part, only to another nominee of the Depositary or to a
successor of the Depositary or its nominee.
The Depositary has advised the Issuers and the Underwriters as follows: It
is a limited-purpose trust company organized under the Banking Law of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary was created to hold securities for its
participating organizations (the "Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants"). Persons who are not Participants may
beneficially own securities held by the Depositary only through Participants
or indirect participants.
The Depositary has also advised that pursuant to procedures established by
it (i) upon the issuance by the Issuers, of the Notes, the Depositary will
credit the accounts of Participants designated by the Underwriters with the
principal amount of the Senior Notes or principal amount at maturity of the
Senior Discount Notes, as the case may be, purchased by the Underwriters, and
(ii) ownership of beneficial interests in the Global Certificates will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary (with respect to Participants'
interests), the Participants and the indirect participants. A beneficial owner
is the person who has the right to sell, transfer or otherwise dispose of an
interest in the Notes and the right to receive the proceeds therefrom, as well
as principal, premium (if any) and interest payable in respect of the Notes.
The beneficial owner must rely on the foregoing arrangements to evidence its
interest in the Notes. Beneficial ownership of the Notes may be transferred
only by complying with the procedures of a beneficial owner's Participant
(e.g., a brokerage firm) and the Depositary. The laws of some states require
that certain persons take physical delivery in definitive form of securities
which they own. Consequently, the ability to transfer beneficial interests in
the Global Certificates is limited to such extent.
So long as a nominee of the Depositary is the registered owner of the Global
Certificates, such nominee will be considered the sole owner or holder of the
Notes for all purposes under the Indentures and any applicable laws. Except as
provided below, owners of beneficial interests in the Global Certificates will
not be entitled to have Notes registered in their names, will not receive or
be entitled to receive physical delivery of Notes in definitive form and will
not be considered the owners or holders thereof under the Indentures.
All rights of ownership must be exercised through the Depositary and the
book-entry system, and notices that are to be given to registered owners by
the Issuers or the Trustees will be given only to the Depositary. It is
expected that the Depositary will forward notices to the Participants who will
in turn forward notices to the beneficial owners. Neither the Issuers, the
Trustees, the paying agents nor the Notes registrars will have any
responsibility or obligation to assure that any notices are forwarded by the
Depositary to any Participant or by any Participant to the beneficial owners.
Neither the Issuers, the Trustees, the paying agents nor the Notes
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registrars will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Certificates, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Principal and interest payments on the Global Certificates registered in the
name of the Depositary's nominee will be made by the Issuers, either directly
or through a paying agent, to the Depositary's nominee as the registered owner
of the Global Certificates. Under the terms of the Indentures, the Issuers and
the Trustees will treat the persons in whose names the Notes are registered as
the owners of such Notes for the purpose of receiving payments of principal
and interest on such Notes and for all other purposes whatsoever. Therefore,
neither the Issuers, the Trustees nor any paying agent has any direct
responsibility or liability for the payment of principal or interest on the
Notes to owners of beneficial interests in the Global Certificates. The
Depositary has advised the Issuers and the Trustees that its present practice
upon receipt of any payment of principal or interest is to credit immediately
the accounts of the Participants with payment in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
Global Certificates as shown on the records of the Depositary. Payments by
Participants and indirect participants to owners of beneficial interests in
the Global Certificates will be governed by standing instructions and
customary practices as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name" and will be the
responsibility of such Participants or indirect participants.
As long as the Notes are represented by the Global Certificates, the
Depositary's nominee will be the holder of the Notes and therefore will be the
only entity that can exercise a right to repayment or repurchase of the Notes.
See "--Certain Covenants--Change of Control" and "Certain Covenants--
Disposition of Proceeds of Asset Sales." Notice by Participants or indirect
participants or by owners of beneficial interests in the Global Certificates
held through such Participants or indirect participants of the exercise of the
option to elect repayment of beneficial interests in Notes represented by the
Global Certificates must be transmitted to the Depositary in accordance with
its procedures on a form required by the Depositary and provided to
Participants. In order to ensure that the Depositary's nominee will timely
exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other Participant or
indirect participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have deadlines for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other
Participant or indirect participant through which it holds an interest in a
Note in order to ascertain the deadline by which such an instruction must be
given in order for timely notice to be delivered to the Depositary. The
Issuers will not be liable for any delay in delivery of notices of the
exercise of the option to elect repayment.
The Issuers will issue Notes in definitive form in exchange for the Global
Certificates if, and only if, either (i) the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Issuers within 90 days, or (2) an Event of Default has
occurred and is continuing and the applicable Notes registrar has received a
request from the Depositary to issue Notes in definitive form in lieu of all
or a portion of the Global Certificates. In either instance, an owner of a
beneficial interest in the Global Certificates will be entitled to have the
applicable Notes equal in principal amount or principal amount at maturity, as
the case may be, to such beneficial interest registered in its name and will
be entitled to physical delivery of such Notes in definitive form. Notes so
issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, the following summary
describes the material United States federal income tax consequences of the
purchase, ownership and disposition of Notes as of the date hereof. It is
intended only as a summary and does not purport to be a complete analysis or
listing of all potential tax considerations that may be relevant and is
generally limited to those persons who are original purchasers of Notes and
who hold Notes as capital assets ("Holders"). The discussion does not include
special rules that may apply to certain Holders (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign persons and persons in special situations such as those who hold Notes
as part of a straddle, hedge or conversion transaction). In addition, the
discussion does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
The discussion is based upon currently existing provisions of the Code,
existing and proposed Treasury regulations promulgated thereunder and current
administrative rulings and court decisions. All of the foregoing are subject
to change and any such change could affect the continuing validity of this
discussion. The Company has not sought and will not seek any rulings from the
IRS with respect to the positions of the Company discussed below and there can
be no assurance that the IRS will not take positions concerning the tax
consequences of the purchase, ownership or disposition of Notes which are
different from those discussed herein.
THE FOLLOWING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF SUCH HOLDER'S
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER SHOULD CONSULT
SUCH HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER
OF THE OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
STATED INTEREST ON SENIOR NOTES
A Holder of a Senior Note will be required for federal income tax purposes
to report stated interest on the Senior Notes as ordinary income in accordance
with the Holder's method of accounting for tax purposes.
STATED INTEREST ON SENIOR DISCOUNT NOTES
Stated interest on Senior Discount Notes is discussed below in "Amount of
Original Issue Discount on Senior Discount Notes" and "Taxation of Original
Issue Discount on Senior Discount Notes."
AMOUNT OF ORIGINAL ISSUE DISCOUNT ON SENIOR DISCOUNT NOTES
The Senior Discount Notes will be issued with original issue discount for
federal income tax purposes. The amount of original issue discount ("OID") on
a Senior Discount Note is the excess of its "stated redemption price at
maturity" (the sum of all payments to be made on the Senior Discount Note,
whether denominated as interest or principal) over its "issue price." The
"issue price" of each Senior Discount Note will be the initial offering price
at which a substantial amount of the Senior Discount Notes are sold (not
including sales to bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters or wholesalers).
TAXATION OF ORIGINAL ISSUE DISCOUNT ON SENIOR DISCOUNT NOTES
Each Holder (whether a cash or accrual method taxpayer) will be required to
include in income OID as it accrues, in advance of the receipt of some or all
of the related cash payments.
The amount of OID includable in income by a Holder is the sum of the "daily
portions" of OID with respect to the Senior Discount Note for each day during
the taxable year or portion of the taxable year on which such Holder held such
Senior Discount Note ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The accrual
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periods for a Senior Discount Note will be periods that are selected by the
Holder that are no longer than one year, provided that each scheduled payment
occurs either on the final day or on the first day of an accrual period. The
amount of OID allocable to any accrual period other than the initial short
accrual period (if any) and the final accrual period is an amount equal to the
product of the Senior Discount Note's "adjusted issue price" at the beginning
of such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period). The amount of OID allocable to the final
accrual period is the difference between the amount payable at maturity and
the adjusted issue price of the Senior Discount Note at the beginning of the
final accrual period. The amount of OID allocable to any initial short accrual
period may be computed under any reasonable method. The yield to maturity is
the discount rate that, when used in computing the present value of all
principal and interest payments to be made on a Senior Discount Note, produces
an amount equal to its issue price. The adjusted issue price of a Senior
Discount Note at the start of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period determined without
regard to the amortization of any acquisition or bond premium, as described
below, and reduced by any prior payments and any payment on the first day of
the current accrual period with respect to such Senior Discount Note. The
Company is required to report the amount of OID accrued on Senior Discount
Notes held of record by persons other than corporations and other exempt
Holders, which may be based on accrual periods other than those chosen by the
Holder.
MARKET DISCOUNT
If a Note is acquired at a "market discount," some or all of any gain
realized upon a disposition (including a sale or a taxable exchange) or
payment at maturity of such Note will be treated as ordinary income provided
that the Holder has not elected to include market discount in income
currently. "Market discount" with respect to a Note is the excess of (1) the
adjusted issue price of the Note over (2) such Holder's tax basis in the Note
immediately after its acquisition. However, if such excess is less than .25
percent of the stated redemption price at maturity multiplied by the number of
complete years to maturity (after the Holder acquired the Note), then the
market discount shall be considered to be zero. The amount of market discount
treated as having accrued will be determined either on a straight-line basis,
or, if the Holder so elects, on a constant interest method. Upon any
subsequent disposition (including a gift or payment at maturity) of such Note
(other than in connection with certain nonrecognition transactions), the
lesser of any gain on such disposition (or appreciation, in the case of a
gift) or the portion of the market discount that accrued while the Note was
held by such Holder will be treated as ordinary interest income. In lieu of
including accrued market discount in income at the time of disposition, a
Holder may elect to include market discount in income currently. Unless a
Holder makes such an election, such Holder will be required to defer a portion
of any interest expense that may otherwise be deductible on any indebtedness
incurred or maintained to purchase or carry such Note until the Holder
disposes of the Note provided such interest expense exceeds the amount of
interest (including OID) includible in gross income with respect to such Note.
ACQUISITION PREMIUM
If a Holder's purchase price for a Note exceeds the adjusted issue price at
the time of acquisition but is equal to or less than the sum of all amounts
payable on the Note after its purchase by the Holder, the excess (referred to
as "acquisition premium") is offset ratably against the amount of OID
otherwise includable in such Holder's taxable income.
BOND PREMIUM
A Senior Note is purchased with bond premium if its adjusted basis,
immediately after its purchase by the Holder, exceeds its face amount. A
Senior Discount Note is purchased with bond premium if its adjusted basis,
immediately after its purchase by the Holder exceeds the sum of all amounts
payable on the Senior Discount Note after its purchase by the Holder. A Holder
who purchases a Note with bond premium is not required to include any OID in
gross income and may elect to amortize such premium, using a constant yield-
to-maturity method, over the remaining term of the Note or the period to an
earlier call date, if it results in a smaller
106
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allowance. Such bond premium generally is deemed to be an offset to interest
otherwise includable in income in respect of a Note. Any election to amortize
bond premium applies to all debt instruments (other than debt instruments the
interest on which is excludable from gross income) held by the Holder at the
beginning of the first taxable year to which the election applies or
thereafter acquired by the Holder, and is irrevocable without the consent of
the IRS. Amortizable bond premium on a Note held by a Holder that does not
make such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Note. See "--Election to Treat All Interest
as OID."
ELECTION TO TREAT ALL INTEREST AS OID
Holders may elect to treat all interest on any Note as OID and calculate the
amount includable in gross income under the constant yield method described
above. For the purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. The election is to be made for the taxable year in which
the United States Holder acquired the Note, and may not be revoked without the
consent of the Internal Revenue Service (the "IRS"). HOLDERS MAY WANT TO
CONSULT WITH THEIR OWN TAX ADVISORS ABOUT WHETHER TO MAKE SUCH AN ELECTION IN
LIGHT OF THEIR OWN PARTICULAR SITUATIONS.
SALE, EXCHANGE, REDEMPTION OR OTHER TAXABLE DISPOSITION
A Holder will recognize gain or loss upon the sale, exchange, redemption,
retirement or other taxable disposition of a Note measured by the difference
between (a) the amount of cash and fair market value of property received
(except, with respect to a Senior Note, to the extent attributable to the
payment of accrued interest) in exchange therefor and (b) the Holder's
adjusted tax basis in such Note. Any amount attributable to accrued interest
on a Senior Note would be treated as ordinary interest income rather than an
amount received in exchange for the Note if such amount has not previously
been included in income.
A Holder's initial tax basis in a Note will equal the price paid by such
Holder for such Note. The Holder's adjusted tax basis in a Senior Discount
Note will be such Holder's initial tax basis increased from time to time by
the portion of OID included in gross income to the date of disposition and
decreased from time to time by amortized premium or any payments received on
such Senior Discount Note. A Holder's tax basis in a Note would also be
increased by any market discount the Holder elected to include in income
currently.
Any gain or loss on the sale, exchange, redemption, retirement, or other
taxable disposition of a Note will be capital gain or loss (except for any
amount treated as ordinary income under the market discount rules discussed
above). Any capital gain or loss will be long-term capital gain or loss if the
Note had been held for more than one year and otherwise will be short-term
capital gain or loss. Under current law, net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary
income.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(a) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor in the manner required or otherwise qualify for an exemption, (b) the
IRS notifies the payor that the TIN furnished by the payee is incorrect, (c)
the payee has failed to report properly the receipt of "reportable payments"
and the IRS has notified the payor that withholding is required or (d) there
has been a failure of the payee to certify under penalties of perjury that a
payee is not subject to withholding under Section 3406 of the Code. As a
result, if any one of the events discussed above occurs, the Company, its
paying agent or other withholding agent will be required to withhold a tax
equal to 31% of any "reportable payment" made in connection with the Notes. A
"reportable payment" includes, among other things, interest actually paid,
original issue discount and amounts paid through brokers in retirement of
Notes. Any amounts withheld from a payment to a Holder under the backup
withholding rules will be allowed as a refund or credit against such Holder's
federal income tax, provided that the required information is furnished to the
IRS. Certain Holders (including, among others, corporations and certain tax
exempt organizations) generally are not subject to the backup withholding and
information reporting requirements.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Issuers and each of the underwriters named
below (collectively, the "Underwriters"), the Issuers have agreed to sell to
the Underwriters, and each of the Underwriters has severally agreed to
purchase from the Issuers, the entire principal amount of the Senior Notes and
principal amount at maturity of the Senior Discount Notes set forth opposite
its name below. The Underwriters are committed to purchase all of the Senior
Notes and the Senior Discount Notes if any are purchased.
The Purchase Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the Senior Notes and the Senior Discount Notes
are subject to the approval of certain legal matters by counsel and to various
other conditions.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT AT
PRINCIPAL MATURITY OF
AMOUNT OF SENIOR
SENIOR DISCOUNT
UNDERWRITERS NOTES NOTES
------------ --------- -----------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................. $ $
Lehman Brothers Inc. .................................
Chase Securities Inc. ................................
Donaldson, Lufkin & Jenrette Securities Corporation...
Salomon Brothers Inc .................................
---- ----
Total............................................ $ $
==== ====
</TABLE>
The Underwriters propose to offer the Senior Notes directly to the public at
the public offering price set forth on the cover page hereof, and to certain
dealers at such price less a concession not in excess of % of the principal
amount of Senior Notes. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of % of the principal amount of the Senior
Notes. After the initial public offering of the Senior Notes, the public
offering price and such concession may be changed.
The Underwriters propose to offer the Senior Discount Notes directly to the
public at the public offering price set forth on the cover page hereof, and to
certain dealers at such price less a concession not in excess of % of the
principal amount at maturity of the Senior Discount Notes. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of % of
the principal amount at maturity of the Senior Discount Notes. After the
initial public offering of the Senior Discount Notes, the public offering
price and such concession may be changed.
The Issuers do not intend to apply for listing of either issue of the Notes
on a national securities exchange, but have been advised by the Underwriters
that they presently intend to make a market in the Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Notes, and any such market making may be discontinued
at any time at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the
Notes.
The Issuers have agreed, jointly and severally, to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
Lehman Brothers Inc. ("Lehman") and Merrill Lynch & Co. ("Merrill Lynch")
have entered into agreements with the Company pursuant to which Lehman and
Merrill Lynch have provided general financial advisory services to the Company
and have assisted and represented the Company in arranging, structuring and
negotiating the Vendor Financings. In connection with such services, the
Company paid customary fees to each
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of Lehman and Merrill Lynch. Merrill Lynch Trust Company, an affiliate of
Merrill Lynch, is the trustee under a retirement plan of the Company for which
it has received customary fees. Chase Securities Inc. is an affiliate of
Chase, which has provided a commitment for the Bank Credit Facility for which
it expects to receive customary fees. In addition, each of the Underwriters
has provided, and may continue in the future to provide, investment and/or
commercial banking and other services to the Parents and their respective
affiliates.
LEGAL MATTERS
Certain legal matters relating to the Offering will be passed upon for the
Issuers by their counsel Simpson Thacher & Bartlett, New York, New York (a
partnership which includes professional corporations) and by their regulatory
counsel, Morrison & Foerster, Washington D.C. Certain legal matters with
respect to the Notes offered hereby will be passed upon for the Underwriters
by their counsel Cahill Gordon & Reindel (a partnership which includes a
professional corporation), New York, New York.
EXPERTS
The financial statements as of December 31, 1994 and 1995, for the period
October 24, 1994 to December 31, 1994, for the year ended December 31, 1995
and for the cumulative period from October 24, 1994 to December 31, 1995
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the Registration Statement
(which reports express an unqualified opinion and include an explanatory
paragraph referring to the development stage of Sprint Spectrum L.P. and
subsidiary and Sprint Spectrum Holding Company, L.P. and subsidiaries), and
have been so included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of American PCS, L.P. as of December 31, 1994 and
1995 and March 31, 1996, and for the years ended December 31, 1994 and 1995
and for the three months ended March 31, 1996, included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
The Issuers have filed with the Commission, a Registration Statement on Form
S-1 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Notes offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Certain items are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Notes offered hereby, reference is made to the Registration
Statement and to the exhibits and schedules filed as part thereof. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the principal office
of the Commission in Washington, D.C. and copies may be obtained from the
Public Reference Section at the Commission's principal office, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Web Site
(http://www.sec.gov.) maintained by the Commission; and at the Commission's
regional offices at Seven World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment of the
fees prescribed by the Commission.
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GLOSSARY OF SELECTED TERMS
AIN: Advanced Intelligent Network. A term adopted by most telecommunications
companies to indicate the architecture of a company's communications network.
Although each company's AIN differs, it generally has three components: (1)
Signal Control Points (SCPs) which are computers that hold databases in which
customer-specific information used to route calls is stored; (ii) Signal
Switching Points (SSPs) which are digital telephone switches which talk to
SCPs in order to obtain customer-specific instructions as to how a call should
be completed; and (ii) Signal Transfer Points (STPs) which are packet switches
that shuttle messages between SSPs and SCPs.
ANALOG: A method of transmission where the wave form of the output signal is
analogous to the wave form of the input signal.
BTA: Basic Trading Area.
CDMA: Code Division Multiple Access. A digital spread-spectrum wireless
technology which allows a large number of users to access a single frequency
band that assigns a code to all speech bits, sends a scrambled transmission of
the encoded speech over the air and reassembles the speech to its original
format.
CMRS: Commercial Mobile Radio Service.
CHURN RATE: Expressed as a rate for a given measurement period, equal to the
number of subscriber units disconnected divided by the number of subscribers
at the beginning of the measurement period.
CTIA: The Cellular Telecommunications Industry Association. An industry
group in North America comprised primarily of cellular telephone service
companies and recently some PCS license holders.
DRT: Design Review Team.
DIGITAL PROTOCOLS: Technologies such as CDMA and TDMA which manage the
communication for digital signal transmission.
ESMR: Enhanced Specialized Mobile Radio. A radio communications system that
employs digital technology with a multi-site configuration that permits
frequency reuse but used in the SMR frequencies, offering enhanced dispatch
services to traditional analog SMR users.
FCC: Federal Communications Commission.
FREQUENCY: The number of cycles per second, expressed in hertz, of a
periodic oscillation or wave in radio propagation.
GSM: Global System for Mobile Communications. The standard digital cellular
telephone service in Europe and Japan, guided by a set of standards specifying
the infrastructure for digital cellular service, including the radio interface
(900 MHz), switching, signaling, and intelligent network.
HAND-OFF: The act of transferring communication with a mobile unit from one
base station to another. A hand-off transfers a call from the current base
station to the new base station. A "soft" hand-off establishes communications
with a new cell before terminating communications with the old cell.
LATA: Local access and transport area. One of 161 local telephone exchange
areas in the United States. InterLATA service refers to the service between
two LATAs and intraLATA service refers to the provision of service within a
LATA. The 1996 Act limits the ability of the Bell operating companies to
engage in interLATA service. See "Business--Regulation."
LEC: Local Exchange Carrier.
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LEO SATELLITE: Low Earth Orbit Satellite. A LEO satellite moves a few
hundred miles in orbit around the Earth. The primary advantage of LEOs is that
the terrestrial-based transmitting terminal does not have to be very powerful
because the LEO satellite is closer to the Earth than traditional
geostationary satellites which are placed in geosynchronous orbit (22,300
miles) directly over the earth's equator.
MICROWAVE RELOCATION: The transferral of the businesses and public safety
agencies which currently utilize radio spectrum within or adjacent to the
spectrum allocated to PCS licensees by the FCC.
MSA: Metropolitan Statistical Area.
MTA: Major Trading Area.
PCS: Personal Communications Services.
POPS: A short hand abbreviation for the population covered by a license or
group of licenses. Unless otherwise noted, as used herein Pops means the
Donnelley Marketing Service estimate of the December 31, 1995 population of a
geographic area.
PCIA: The Personal Communications Industry Association is a North American
trade association whose members either have PCS or paging licenses.
PSTN: Public Switched Telephony Network.
RF: Radio Frequency.
RSA: Rural Statistical Area.
ROAMING: A service offered by mobile communications carriers which allows
subscribers to use their handset while in the service area of another carrier.
Roaming agreements are negotiated between carriers.
SMR: Specialized Mobile Radio. A two-way analog mobile radio telephone
system typically used for dispatch services such as truck and taxi fleets.
TDMA: Time Division Multiple Access. A digital spread-spectrum technology
which allocates a discrete amount of frequency bandwidth to each user in order
to permit more than one simultaneous conversation on a single RF channel.
111
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and at March 31,
1996..................................................................... F-3
Consolidated Statements of Operations for the period from October 24, 1994
to December 31, 1994, the year ended December 31, 1995, the cumulative
period from October 24, 1994 to December 31, 1995, the three months ended
March 31, 1995 and 1996, and the cumulative period from October 24, 1994
to March 31, 1996........................................................ F-4
Consolidated Statements of Changes in Partners' Capital for the period
from October 24, 1994 to December 31, 1994, the year ended December 31,
1995, the cumulative period from October 24, 1994 to December 31, 1995,
the three months ended March 31, 1995 and 1996, and the cumulative period
from October 24, 1994 to March 31, 1996 ................................. F-5
Consolidated Statements of Cash Flows for the period from October 24, 1994
to December 31, 1994, the year ended December 31, 1995, the cumulative
period from October 24, 1994 to December 31, 1995, the three months ended
March 31, 1995 and 1996, and the cumulative period from October 24, 1994
to March 31, 1996........................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
Independent Auditors' Report.............................................. F-13
Consolidated Balance Sheets at December 31, 1994 and 1995 and at March 31,
1996..................................................................... F-14
Consolidated Statements of Operations for the period from October 24, 1994
to December 31, 1994, the year ended December 31, 1995, the cumulative
period from October 24, 1994 to December 31, 1995, the three months ended
March 31, 1995 and 1996, and the cumulative period from October 24, 1994
to March 31, 1996........................................................ F-15
Consolidated Statements of Changes in Partners' Capital for the period
from October 24, 1994 to December 31, 1994, the year ended December 31,
1995, the cumulative period from October 24, 1994 to December 31, 1995,
the three months ended March 31, 1995 and 1996, and the cumulative period
from October 24, 1994 to March 31, 1996.................................. F-16
Consolidated Statements of Cash Flows for the period from October 24, 1994
to December 31, 1994, the year ended December 31, 1995, the cumulative
period from October 24, 1994 to December 31, 1995, the three months ended
March 31, 1995 and 1996, and the cumulative period from October 24, 1994
to March 31, 1996........................................................ F-17
Notes to Consolidated Financial Statements................................ F-18
AMERICAN PCS, L.P.
Report of Independent Accountants......................................... F-26
Balance Sheets at December 31, 1994 and 1995 and at March 31, 1996........ F-27
Statements of Loss for the year ended December 31, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 .......................... F-28
Statements of Cash Flows for the year ended December 31, 1994 and 1995 and
for
the three months ended March 31, 1995 and 1996........................... F-29
Statements of Changes in Partners' Capital as of December 31, 1994 and
1995 and
as of March 31, 1996..................................................... F-30
Notes to Financial Statements............................................. F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners of Sprint Spectrum L.P.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets of Sprint
Spectrum L.P. (formerly known as MajorCo Sub, L.P.) and subsidiary (the
"Partnership"), a development stage enterprise, as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the year ended December 31, 1995, for the
period from October 24, 1994 (date of inception) to December 31, 1994, and for
the cumulative period from October 24, 1994 (date of inception) to December
31, 1995. These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Sprint Spectrum L.P.
and subsidiary at December 31, 1995 and 1994, and the results of their
operations and their cash flows for the year ended December 31, 1995, for the
period from October 24, 1994 (date of inception) to December 31, 1994, and for
the cumulative period from October 24, 1994 (date of inception) to December
31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, Sprint
Spectrum L.P. and its subsidiary are in the development stage as of December
31, 1995.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
March 29, 1996
(July 8, 1996 as to Note 4)
F-2
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(IN 000'S)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ----------------
1994 1995 1996
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 5,014 $ 1,123 $ 16
Prepaid expenses and other assets.... 10 -- 1,282
-------- ---------- ----------
Total current assets............... 5,024 1,123 1,298
INVESTMENT IN PCS LICENSES............. 118,438 2,124,594 2,124,594
INVESTMENT IN UNCONSOLIDATED
PARTNERSHIP........................... -- 85,546 49,314
NOTE RECEIVABLE--UNCONSOLIDATED
PARTNERSHIP........................... -- 655 83,655
PROPERTY, PLANT AND EQUIPMENT, Net..... 413 -- --
-------- ---------- ----------
TOTAL ASSETS........................... $123,875 $2,211,918 $2,258,861
======== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable..................... $ 3,745 $ -- $ 160
Accrued interest--affiliate.......... -- 214 296
-------- ---------- ----------
Total current liabilities.......... 3,745 214 456
-------- ---------- ----------
NOTE PAYABLE--AFFILIATE................ -- 5,000 5,000
LIMITED PARTNER INTEREST IN
CONSOLIDATED SUBSIDIARY............... -- 5,000 5,000
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL AND ACCUMULATED
DEFICIT:
Partners' capital.................... 123,438 2,254,543 2,337,543
Deficit accumulated during the
development stage................... (3,308) (52,839) (89,138)
-------- ---------- ----------
Total partners' capital............ 120,130 2,201,704 2,248,405
-------- ---------- ----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL............................... $123,875 $2,211,918 $2,258,861
======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM THREE MONTHS PERIOD FROM
OCTOBER 24, 1994 OCTOBER 24, 1994 ENDED OCTOBER 24, 1994
(DATE OF INCEPTION) YEAR ENDED (DATE OF INCEPTION) MARCH 31, (DATE OF INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, ----------------- TO MARCH 31,
1994 1995 1995 1995 1996 1996
------------------- ------------ ------------------- ------- -------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
General
and administrative..... $ 1,371 $ 1,221 $ 2,592 $ 1,273 $ -- $ 2,592
Professional and
legal fees............. 1,923 2,310 4,233 2,335 -- 4,233
Depreciation............ 38 47 85 47 -- 85
------- -------- -------- ------- -------- --------
Total operating
expenses............. 3,332 3,578 6,910 3,655 -- 6,910
------- -------- -------- ------- -------- --------
OTHER INCOME (EXPENSE):
Interest income
(expense).............. 24 253 277 275 (67) 210
Equity in loss of
unconsolidated
partnership............ -- (46,206) (46,206) (3,409) (36,232) (82,438)
------- -------- -------- ------- -------- --------
Total other income
(expense)............ 24 (45,953) (45,929) (3,134) (36,299) (82,228)
------- -------- -------- ------- -------- --------
NET LOSS................ $(3,308) $(49,531) $(52,839) $(6,789) $(36,299) $(89,138)
======= ======== ======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 24, 1994 OCTOBER 24, 1994 THREE MONTHS ENDED OCTOBER 24, 1994
(DATE OF INCEPTION) YEAR ENDED (DATE OF INCEPTION) MARCH 31, (DATE OF INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, -------------------- TO MARCH 31,
1994 1995 1995 1995 1996 1996
------------------- ------------ ------------------- -------- ---------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL:
Balance at beginning of
period................. $ -- $ 123,438 $ -- $123,438 $2,254,543 $ --
Contributions of
capital................ 123,438 2,131,105 2,254,543 390,999 83,000 2,337,543
Receivable for capital
contributions.......... -- -- -- (3,462) -- --
-------- ---------- ---------- -------- ---------- ----------
Balance at end of
period................. 123,438 2,254,543 2,254,543 510,975 2,337,543 2,337,543
DEFICIT ACCUMULATED
DURING THE DEVELOPMENT
STAGE:
Balance at beginning of
period................. -- (3,308) -- (3,308) (52,839) --
Net loss................ (3,308) (49,531) (52,839) (6,789) (36,299) (89,138)
-------- ---------- ---------- -------- ---------- ----------
Balance at end of
period................. (3,308) (52,839) (52,839) (10,097) (89,138) (89,138)
-------- ---------- ---------- -------- ---------- ----------
TOTAL PARTNERS'
CAPITAL................ $120,130 $2,201,704 $2,201,704 $500,878 $2,248,405 $2,248,405
======== ========== ========== ======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 24, 1994 OCTOBER 24, 1994 THREE MONTHS OCTOBER 24, 1994
(DATE OF (DATE OF ENDED (DATE OF
INCEPTION) TO YEAR ENDED INCEPTION) TO MARCH 31, INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------- MARCH 31,
1994 1995 1995 1995 1996 1996
---------------- ------------ ---------------- --------- -------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. $ (3,308) $ (49,531) $ (52,839) $ (6,789) $(36,299) $ (89,138)
Adjustments to
reconcile net loss to
net cash provided
(used) by operating
activities:
Equity in loss of
unconsolidated
partnership.......... -- 46,206 46,206 3,409 36,232 82,438
Depreciation.......... 38 47 85 47 -- 85
Changes in assets and
liabilities:
Prepaid expenses and
other assets........ (10) 10 -- (343) (1,282) (1,282)
Accounts payable..... 3,745 (3,745) -- 287 160 160
Accrued interest
payable to
affiliate........... -- 214 214 -- 82 296
--------- ----------- ----------- --------- -------- -----------
Net cash provided
(used) by operating
activities......... 465 (6,799) (6,334) (3,389) (1,107) (7,441)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures.. (451) 366 (85) (190) -- (85)
Purchase of PCS
licenses............. (118,438) (2,006,156) (2,124,594) (318,092) -- (2,124,594)
Loan to unconsolidated
partnership.......... -- (655) (655) -- (83,000) (83,655)
Investment in
unconsolidated
partnership.......... -- (131,752) (131,752) (47,946) -- (131,752)
--------- ----------- ----------- --------- -------- -----------
Net cash used by
investing
activities......... (118,889) (2,138,197) (2,257,086) (366,228) (83,000) (2,340,086)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Limited partner
interest in
consolidated
subsidiary........... -- 5,000 5,000 5,000 -- 5,000
Partner capital
contributions........ 123,438 2,131,105 2,254,543 382,537 83,000 2,337,543
Borrowings from
affiliates........... -- 5,000 5,000 -- -- 5,000
--------- ----------- ----------- --------- -------- -----------
Net cash provided by
financing
activities......... 123,438 2,141,105 2,264,543 387,537 83,000 2,347,543
--------- ----------- ----------- --------- -------- -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS........... 5,014 (3,891) 1,123 17,920 (1,107) 16
CASH AND CASH
EQUIVALENTS, Beginning
of period............. -- 5,014 -- 5,014 1,123 --
--------- ----------- ----------- --------- -------- -----------
CASH AND CASH
EQUIVALENTS, End of
period................ $ 5,014 $ 1,123 $ 1,123 $ 22,934 $ 16 $ 16
========= =========== =========== ========= ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sprint Spectrum L.P. (the "Partnership") is a limited partnership formed in
Delaware on March 28, 1995, by Sprint Spectrum Holding Company, L.P.
("Holdings") and MinorCo, L.P. (collectively, the "Partners") which were
formed by Sprint Enterprises, L.P. ("Sprint"), TCI Telephony Services, Inc.
("TCI"), Cox Telephony Partnership ("Cox") and Comcast Telephony Services
("Comcast"). The Partnership was formed pursuant to a reorganization of the
operations of an existing partnership, WirelessCo, L.P. In March 1995, the
partners of WirelessCo, L.P. transferred their interest in WirelessCo, L.P. to
Holdings. The Partnership and certain other affiliated partnerships are doing
business as Sprint Spectrum.
The Partnership is consolidated with its subsidiary, WirelessCo, L.P. These
entities are development stage enterprises. The Partners of Sprint Spectrum
L.P. have the following ownership interests as of December 31, 1995:
<TABLE>
<S> <C>
Sprint Spectrum Holding Company, L.P. (general partner)................ 99%
MinorCo, L.P. (limited partner)........................................ 1%
</TABLE>
On February 29, 1996, the Partnership's name was changed from MajorCo Sub,
L.P. to Sprint Spectrum L.P.
Venture Formation and Structure--A Joint Venture Formation Agreement ( the
"Formation Agreement"), dated as of October 24, 1994, and subsequently amended
as of March 28, 1995, and January 31, 1996, was entered into by Sprint
Corporation, Tele-Communications, Inc., Cox Communications, Inc., and Comcast
Corporation (collectively, the "Parents"), pursuant to which the parties
agreed to form certain entities to (i) provide national wireless
telecommunications services, including acquisition and development of personal
communications services ("PCS") licenses, (ii) develop a PCS wireless system
in the Los Angeles--San Diego Major Trading Area ("MTA") and (iii) take
certain other actions.
On October 24, 1994, WirelessCo, L.P. was formed and on March 28, 1995,
additional partnerships were formed consisting of Holdings, MinorCo, L.P.,
NewTelco, L.P. and Sprint Spectrum L.P. As of December 31, 1995, Holdings held
ownership interests in NewTelco, L.P. and Sprint Spectrum L.P. (which holds a
99% general partner interest in WirelessCo, L.P.). MinorCo, L.P. held the
remaining ownership interests in NewTelco, L.P., Sprint Spectrum L.P. and
WirelessCo, L.P. at December 31, 1995. An additional partnership, Cox-
California PCS, L.P., is proposed to be formed by Holdings and another entity
affiliated with Cox Communications, Inc. for the purpose of holding and
developing a PCS system using the LA--San Diego Pioneer's Preference License.
The Partners have agreed to contribute up to an aggregate of $4.2 billion of
equity to Holdings to the extent required by the annual budget of Holdings, as
approved by the Partners. As of March 31, 1996, approximately $2.4 billion had
been contributed to Holdings, of which approximately $2.2 billion had been
contributed to Sprint Spectrum L.P. and its subsidiary and the remaining $0.2
billion had been contributed or advanced to an unconsolidated partnership
investee (see Note 3).
Partnership Agreement--The Amended and Restated Agreement of Limited
Partnership of MajorCo Sub, L.P., (the "MajorCo Sub Agreement"), dated as of
March 28, 1995, among Holdings and MinorCo, L.P. provides that the purpose of
the Partnership is to engage in wireless communications services. The MajorCo
Sub Agreement provides for the governance and administration of partnership
business, allocation of profits and losses (including provisions for special
and curative allocations), tax allocations, transactions with partners,
disposition of partnership interests and other matters.
The MajorCo Sub Agreement provides for capital to be contributed by the
Partners, pursuant to circumstances defined in the MajorCo Sub Agreement,
equal to Holdings' interest in WirelessCo, L.P. and cash in the amount of
$5,000,000 for MinorCo, L.P.'s interest.
F-7
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The MajorCo Sub Agreement generally provides for the allocation of profits
and losses first to the general partner (Holdings) and second to the limited
partner (MinorCo, L.P.), after giving effect to special allocations. After
special allocations, profits are allocated first to the general partner to the
extent of cumulative net losses previously allocated. Subsequently, the
limited partner is allocated profits to the extent of cumulative net losses
previously allocated and then up to the cumulative Preferred Return, as
defined. Finally, the general partner is allocated all remaining profits.
Losses are allocated, after considering special allocations, to the general
partner until its capital account is zero and then to the limited partner to
the extent of its capital account balance. Any remaining losses are allocated
to the general partner.
Parent Undertaking--In addition to the MajorCo Sub Agreement, each Parent
has entered into an agreement which provides for certain undertakings by each
Parent in favor of other Partners and which addresses certain obligations of
the Parent pertaining to items including provision of services,
confidentiality, foreign ownership, purchasing, restrictions on disposition
and certain other matters.
Development Stage Enterprises--The Partnership and its subsidiary are
development stage enterprises. The success of their development is dependent
on a number of business factors, including securing financing to complete
network construction and fund initial operations, successfully deploying the
PCS network and attaining profitable levels of market demand for Partnership
products and services. The Partnership has not yet generated operating
revenues. Substantially all operating expenses, exclusive of the Partnership's
equity in loss of unconsolidated partnership, were borne by Holdings for the
year ended December 31, 1995 and through March 31, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The financial statements have been prepared from the
date of inception, October 24, 1994 for WirelessCo, L.P., and March 28, 1995,
for Sprint Spectrum L.P., through December 31, 1995. The assets, liabilities,
results of operations and cash flows in which the Partnerships have a
controlling interest have been consolidated.
The financial information as of March 31, 1996, and for the three month
periods ended March 31, 1996 and 1995 is unaudited. The Partnership believes
such information includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the consolidated financial position,
results of operations and cash flows.
The limited partnership interest of MinorCo, L.P. in WirelessCo, L.P. is
reflected as a minority interest. Pursuant to the Amended and Restated
Agreement of Limited Partnership of WirelessCo, L.P. ("WirelessCo,
Agreement"), MinorCo, L.P. has not been allocated any losses incurred by
WirelessCo, L.P. The WirelessCo Agreement stipulates that all losses are to be
allocated to Sprint Spectrum L.P., the general partner, until the general
partner's capital account is depleted. All significant intercompany accounts
and transactions have been eliminated.
Cash and Cash Equivalents--The Partnership considers all highly liquid
instruments with original maturities of three months or less to be cash
equivalents.
Property, Plant and Equipment--Property, plant and equipment are stated at
cost. Property, plant and equipment are depreciated using the straight-line
method based on estimated useful lives of the assets. Depreciable lives range
from 3 to 20 years. At December 31, 1994, property, plant and equipment
consisted of office furniture and fixtures with a cost of $450,910 and related
accumulated depreciation of $37,716.
F-8
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investment in PCS Licenses--During 1994 and 1995, the Federal Communications
Commission ("FCC") auctioned PCS licenses in specific geographic service
areas. The FCC grants licenses for terms of up to ten years, and generally
grants renewals if the licensee has complied with its license obligations. The
Partnership believes it has met and will continue to meet all requirements
necessary to secure renewal of its PCS licenses. Amortization of PCS licenses
will commence as each service area becomes operational, over estimated useful
lives of 40 years. No amortization expense was recorded in 1995 or in the
period from October 24, 1994 (date of inception) to December 31, 1994. No
interest expense has been incurred or capitalized pertaining to the
acquisition of the PCS Licenses.
The ongoing value and remaining useful life of intangible assets are subject
to periodic evaluation. The Partnership currently expects the carrying amounts
to be fully recoverable. Impairments of intangibles and long-lived assets are
assessed based on an undiscounted cash flow methodology.
Income Taxes--The Partnership has not provided for federal or state income
taxes since such taxes are the responsibility of the individual Partners.
Financial Instruments--All of the Partnership's financial instruments,
including cash and cash equivalents and accounts payable, are short-term in
nature. Accordingly, the balance sheet amounts approximate the fair value of
the Partnership's financial instruments.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
On January 9, 1995, WirelessCo, L.P. acquired a 49% limited partnership in
American PCS, L.P. ("APC"). American Personal Communications, Inc. ("APC,
Inc.") is the general partner. The investment in APC is accounted for under
the equity method. Summarized financial information of APC as of and for the
year ended December 31, 1995, is as follows:
<TABLE>
<S> <C>
Total assets................................................... $ 237,325,784
Total liabilities.............................................. 171,179,908
Total revenues................................................. 5,153,469
Net loss....................................................... 51,551,446
</TABLE>
The following table summarizes the status and results of WirelessCo, L.P.'s
investment in APC as of December 31, 1995:
<TABLE>
<S> <C>
Beginning investment........................................... $ 23,422,000
Payment for call option........................................ 10,000,000
Capital contribution........................................... 98,330,068
Equity in losses............................................... (46,206,097)
------------
Ending investment.............................................. $ 85,545,971
============
</TABLE>
The unamortized excess of WirelessCo, L.P.'s investment over its equity in
the underlying net assets of APC at the date of acquisition was $10,139,459.
The excess investment amount is amortized on a straight-line basis over an
estimated useful life of 40 years. Amortization expense included in equity in
loss of unconsolidated partnership was $239,727 for the year ended December
31, 1995.
F-9
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
WirelessCo, L.P. receives an affiliation fee of 3% of gross revenues from
APC for APC's affiliation with the Sprint Spectrum business.
The call option in APC, acquired on January 9, 1995, provides WirelessCo,
L.P. the right to purchase an additional interest in APC from APC, Inc. in
annual increments beginning five years after the initial PCS network build-out
is completed. The first increment, an additional 20% of the APC, Inc.
ownership interest, can be acquired in each of the fifth through seventh years
with the remaining interest available for purchase in the eighth through tenth
year. APC, Inc. also has the right to put a portion of its ownership interest
to WirelessCo, L.P. on an annual basis in an amount representing the greater
of (i) one-fifth of APC, Inc.'s initial percentage interest of 51% in APC or
(ii) the portion of APC, Inc.'s interest equal to APC, Inc.'s obligation for
annual FCC payments to be made by APC, beginning one year after the completion
of the initial PCS network build-out, through the fifth anniversary date. The
exercise price of the call and put options are based on the Fair Value, as
defined, of APC at the date of exercise.
During the initial five year build-out period, which began in December 1994,
APC, Inc. and WirelessCo, L.P. are obligated as follows: (a) APC, Inc. is
obligated to make capital contributions in an amount equal to the aggregate
principal and interest payments to the FCC, provided APC, Inc. has sufficient
cash flows or can obtain financing from a third party; (b) if APC, Inc. is
unable to meet such obligation, WirelessCo, L.P. is required to contribute the
shortfall, upon ten days prior notice; (c) WirelessCo, L.P. is required to
contribute equity to APC necessary for operations up to an amount of
approximately $98 million; and (d) WirelessCo, L.P. is obligated to fund the
cash requirements of APC in excess of that described in (a), (b), and (c)
above, in the form of either loans or additional capital up to a total of $275
million (including the amount in (c) above). Contributions in excess of $275
million, however, require approval of WirelessCo, L.P. and may be made in the
form of additional equity or loans. Under certain circumstances, APC, Inc. has
the right and is obligated to exercise its put right to the extent necessary
to fund additional capital contributions. As of December 31, 1995, $98 million
of equity had been contributed and $654,982 of partner advances had been
extended. Outstanding partner advances will be non-recourse and bear interest
at an agreed upon rate and will be payable at such time when APC has
sufficient funds to permit repayment. Subsequent to December 31, 1995 and
through March 29, 1996, $83 million of additional advances were extended to
APC.
The partnership agreement between WirelessCo, L.P. and APC, Inc. specifies
that losses are allocated based on capital contributions and certain other
factors. Under the equity method, WirelessCo, L. P. has recognized the
majority of the partnership losses to date in its financial statements based
on its capital contributions and commitments to provide initial funding. Loss
allocations in the future may vary depending on additional contributions of
APC, Inc.
4. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
On May 15, 1996, Sprint Spectrum Equipment Company, L.P. ("EquipmentCo") and
Sprint Spectrum Realty Company, L.P. ("RealtyCo") were organized as
subsidiaries of Sprint Spectrum L.P. and MinorCo, L.P. for the purpose of
holding PCS network-related assets. On May 20, 1996, an additional subsidiary
of Sprint Spectrum L.P., Sprint Spectrum Finance Corporation, was also formed
to be a co-obligor of certain proposed debt financing.
Procurement Contracts--On January 31, 1996, Holdings entered into
procurement and services contracts (the "Procurement Contracts") with AT&T
Corp. (subsequently assigned to Lucent Technologies, Inc., "Lucent") and
Northern Telecom, Inc. ("Nortel" and together with Lucent, the "Vendors") for
the engineering and construction of a PCS network. The Procurement Contracts
were assigned to Sprint Spectrum L.P. and then to EquipmentCo by Holdings on
June 21, 1996 for the Lucent contract and June 26, 1996 for the Nortel
contract.
F-10
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Each contract provides for an initial term of ten years with renewals for
additional one-year periods. The Vendors must achieve substantial completion
of the PCS network within an established time frame and in accordance with
criteria specified in the Procurement Contracts. Pricing for the initial
equipment, software and engineering services has been established in the
Procurement Contracts. The Procurement Contracts provide for payment terms
based on delivery dates, substantial completion dates and final acceptance
dates. In the event of delay in the completion of the PCS network, the
Procurement Contracts provide for certain amounts to be paid to Holdings by
the Vendors. The minimum commitments for the initial term are $0.8 billion and
$1.0 billion from Lucent and Nortel, respectively, which include, but are not
limited to, all equipment required for the establishment and installation of
the PCS network.
Purchase Commitments--Holdings has also entered into agreements to acquire
various cell and switch sites. Commitments to site acquisition vendors are
approximately $152 million and commitments for construction contracts and
purchases of equipment, handsets and other services are approximately $469
million. Such agreements have been executed by, or assigned to, Sprint
Spectrum L.P. or its subsidiaries on or before July 1, 1996.
Vendor Financing--Sprint Spectrum L.P. has obtained financing commitments
from Nortel dated June 11, 1996 for $1.3 billion and from Lucent dated June
21, 1996 for $1.8 billion of multiple drawdown term loan facilities (the
"Vendor Financing"). The proceeds of such facilities would be used to finance
the purchase of goods and services provided by the Vendors under the
Procurement Contracts. The Vendor Financing would be non-recourse to, and will
not be guaranteed by, the Parents and the Partners.
Borrowings under the Vendor Financing will be collateralized by a first
priority lien (the "Shared Lien") on (i) all of the partnership interests in
WirelessCo, L.P., RealtyCo and EquipmentCo, (ii) certain intangible property
assets and (iii) any real property having a value greater than $15 million.
The Shared Lien would serve as collateral for the Vendor Financing and certain
other financing from banks or other parties, not to exceed a specified level.
Such financing will be unconditionally guaranteed by WirelessCo, L.P.,
RealtyCo and EquipmentCo.
Loans under the Vendor Financing would amortize quarterly over a five year
period commencing on the date that is 39 months after the end of the one-year
period during which such loans were made.
Under the Vendor Financing, subject to certain conditions, the Partnership
would be required to make mandatory prepayments of 100% of the net cash
proceeds of any sale or disposition of subsidiaries or any sale of material
assets that are not reinvested in the wireless telecommunications businesses.
Sprint Spectrum L.P. would be able to elect that all or any portion of the
borrowings under the Vendor Financing bear interest at a rate per annum equal
to either (i) the ABR plus an applicable margin or (ii) the Eurodollar rate
(LIBOR) plus an applicable margin. The ABR is the higher of (x) the rate of
interest publicly announced by a commercial bank to be determined as its prime
rate in effect at its principal office in New York City and (y) the federal
funds effective rate plus 0.5%.
The Nortel portion of the Vendor Financing requires, as a condition to
funding, the commitment of certain additional financing from third parties.
Bank Credit Facility--Sprint Spectrum L.P. has received a commitment from
Chemical Bank to provide a fully underwritten senior credit facility (the
"Bank Credit Facility") in the amount of $2.0 billion. The proceeds of the
loans under the Bank Credit Facility would be used to finance capital
expenditures, operating losses, the working capital needs of the Partnership
and for partnership purposes.
F-11
<PAGE>
SPRINT SPECTRUM L.P. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Borrowings under the Bank Credit Facility would be unconditionally
guaranteed by WirelessCo, L.P., RealtyCo and EquipmentCo. In addition,
borrowings under the Bank Credit Facility would be collateralized by the
Shared Lien. The Bank Credit Facility would be non-recourse to, and would not
be guaranteed by, the Parents or the Partners.
The Bank Credit Facility is expected to automatically reduce quarterly
commencing five years and three months following the closing date of such
facility and ending nine years after the closing date. Subject to certain
conditions, Sprint Spectrum L.P. will be required to make mandatory
prepayments or apply a portion of its excess cash flow to ratably reduce
commitments under the Bank Credit Facility and prepay loans under the Vendor
Financing.
Sprint Spectrum L.P. would be able to elect that all or any portion of the
borrowings under the Bank Credit Facility bear interest at a rate per annum
equal to (i) the ABR plus an applicable margin or (ii) the Eurodollar rate
(LIBOR) plus an applicable margin. The ABR is the higher of (x) the rate of
interest publicly announced by the administrative agent as its prime rate in
effect at its principal office in New York City and (y) the federal funds
effective rate from time to time plus 0.5%.
The Bank Credit Facility and the Vendor Financing would contain a number of
financial and operating covenants that, among other things, limit the ability
of Sprint Spectrum L.P. to incur additional indebtedness, create liens and
other encumbrances, make guarantee obligations, make distributions to partners
and repurchases of equity, make acquisitions, investments, loans and advances,
merge or consolidate with another entity or engage in any business other than
the telecommunications business and related businesses as well as restrictions
on the ability of WirelessCo, L.P., RealtyCo and EquipmentCo to incur
liabilities or engage in non-designated activities.
5. RELATED PARTY TRANSACTIONS
The Partnership reimburses Sprint Corporation for certain accounting, data
processing, employee benefits and other related services and for certain cash
payments made by Sprint Corporation on behalf of the Partnership. The
Partnership is allocated the costs of such services based upon direct usage.
The amounts paid to Sprint Corporation for the year ended December 31, 1995
and for the period from October 24, 1994 to December 31, 1994 were not
significant.
As of December 31, 1995, the Partnership had a note payable of $5,000,000,
bearing interest at 6.5%, and interest payable of $213,556 due to an
affiliated entity, NewTelco, L.P.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners of Sprint Spectrum Holding Company, L.P.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets of Sprint Spectrum
Holding Company, L.P. (formerly known as MajorCo, L.P.) and subsidiaries (the
"Partnership"), a development stage enterprise, as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the year ended December 31, 1995, for the
period from October 24, 1994 (date of inception) to December 31, 1994, and for
the cumulative period from October 24, 1994 (date of inception) to December 31,
1995. These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Sprint Spectrum
Holding Company, L.P. and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for the year ended December
31, 1995, for the period from October 24, 1994 (date of inception) to December
31, 1994, and for the cumulative period from October 24, 1994 (date of
inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, Sprint
Spectrum Holding Company, L.P. and its subsidiaries are in the development
stage as of December 31, 1995.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
March 29, 1996
(July 8, 1996 as to Note 6)
F-13
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(IN 000'S)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
-------- ---------- -----------
(UNADUITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................. $ 5,014 $ 1,123 $ 3,119
Receivables from affiliates............... -- 340 1,629
Prepaid expenses and other assets......... 10 188 226
-------- ---------- ----------
Total current assets.................... 5,024 1,651 4,974
INVESTMENT IN PCS LICENSES.................. 118,438 2,124,594 2,124,594
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP.... -- 85,546 49,314
NOTE RECEIVABLE--UNCONSOLIDATED
PARTNERSHIP................................ -- 655 83,655
PROPERTY, PLANT AND EQUIPMENT, Net.......... 413 31,897 76,129
-------- ---------- ----------
TOTAL ASSETS............................ $123,875 $2,244,343 $2,338,666
======== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.......................... $ 3,745 $ 49,548 $ 87,006
Accrued expenses.......................... -- 1,700 9,878
-------- ---------- ----------
Total current liabilities............... 3,745 51,248 96,884
DEFERRED COMPENSATION....................... -- 1,856 4,247
LIMITED PARTNER INTEREST IN CONSOLIDATED
SUBSIDIARY................................. -- 13,170 13,237
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL AND ACCUMULATED DEFICIT:
Partners' capital......................... 123,438 2,291,806 2,405,460
Deficit accumulated during the development
stage.................................... (3,308) (113,737) (181,162)
-------- ---------- ----------
Total partners' capital................. 120,130 2,178,069 2,224,298
-------- ---------- ----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL................................ $123,875 $2,244,343 $2,338,666
======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM THREE MONTHS PERIOD FROM
OCTOBER 24, 1994 OCTOBER 24, 1994 ENDED OCTOBER 24, 1994
(DATE OF INCEPTION) YEAR ENDED (DATE OF INCEPTION) MARCH 31, (DATE OF INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, ----------------- TO MARCH 31,
1994 1995 1995 1995 1996 1996
------------------- ------------ ------------------- ------- -------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
General and
administrative......... $ 1,371 $ 37,460 $ 38,831 $ 1,273 $ 19,862 $ 58,693
Professional and legal
fees................... 1,923 28,880 30,803 2,335 10,862 41,665
Depreciation............ 38 211 249 47 254 503
------- --------- --------- ------- -------- ---------
Total operating
expenses............. 3,332 66,551 69,883 3,655 30,978 100,861
------- --------- --------- ------- -------- ---------
OTHER INCOME (EXPENSE):
Interest income......... 24 460 484 275 (291) 193
Other income............ -- 38 38 -- 143 181
Equity in loss of
unconsolidated
partnership............ -- (46,206) (46,206) (3,409) (36,232) (82,438)
Limited partner interest
in net (income) loss of
consolidated
subsidiary............. -- 1,830 1,830 -- (67) 1,763
------- --------- --------- ------- -------- ---------
Total other income
(expense)............ 24 (43,878) (43,854) (3,134) (36,447) (80,301)
------- --------- --------- ------- -------- ---------
NET LOSS................ $(3,308) $(110,429) $(113,737) $(6,789) $(67,425) $(181,162)
======= ========= ========= ======= ======== =========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(IN 000'S)
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 24, 1994 OCTOBER 24, 1994 THREE MONTHS ENDED OCTOBER 24, 1994
(DATE OF INCEPTION) YEAR ENDED (DATE OF INCEPTION) MARCH 31, (DATE OF INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, --------------------- TO MARCH 31,
1994 1995 1995 1995 1996 1996
------------------- ------------ ------------------- -------- ----------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL:
Balance at beginning of
period................. $ -- $ 123,438 $ -- $123,438 $ 2,291,806 $ --
Contributions of
capital................ 123,438 2,168,368 2,291,806 390,999 113,654 2,405,460
Receivable for capital
contributions.......... -- -- -- (3,462) -- --
-------- ----------- ---------- -------- ----------- ----------
Balance at end of
period................. 123,438 2,291,806 2,291,806 510,975 2,405,460 2,405,460
DEFICIT ACCUMULATED
DURING THE DEVELOPMENT
STAGE:
Balance at beginning of
period................. -- (3,308) -- (3,308) (113,737) --
Net loss................ (3,308) (110,429) (113,737) (6,789) (67,425) (181,162)
-------- ----------- ---------- -------- ----------- ----------
Balance at end of
period................. (3,308) (113,737) (113,737) (10,097) (181,162) (181,162)
-------- ----------- ---------- -------- ----------- ----------
TOTAL PARTNERS'
CAPITAL................ $120,130 $ 2,178,069 $2,178,069 $500,878 $ 2,224,298 $2,224,298
======== =========== ========== ======== =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE CUMULATIVE
OCTOBER 24, 1994 PERIOD FROM PERIOD FROM
(DATE OF OCTOBER 24, 1994 THREE MONTHS ENDED OCTOBER 24, 1994
INCEPTION) YEAR ENDED (DATE OF INCEPTION) MARCH 31, (DATE OF INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, ------------------- TO MARCH 31,
1994 1995 1995 1995 1996 1996
---------------- ------------ ------------------- --------- -------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $ (3,308) $ (110,429) $ (113,737) $ (6,789) $(67,425) $ (181,162)
Adjustments to
reconcile net loss to
net cash provided
(used) by operating
activities:
Equity in loss of
unconsolidated
partnership.......... -- 46,206 46,206 3,409 36,232 82,438
Limited partner
interest in net
income (loss) of
consolidated
subsidiary........... -- (1,830) (1,830) -- 67 (1,763)
Depreciation.......... 38 211 249 47 254 503
Loss on sale of
equipment............ -- 31 31 -- -- 31
Changes in assets and
liabilities:
Receivables from
affiliates, prepaid
expenses and other
assets.............. (10) (518) (528) (343) (1,327) (1,855)
Accounts payable..... 3,745 45,803 49,548 (14) 37,458 87,006
Accrued expenses..... -- 1,700 1,700 301 8,178 9,878
Deferred
compensation........ -- 1,856 1,856 -- 2,391 4,247
--------- ----------- ----------- --------- -------- -----------
Net cash provided
(used) by operating
activities......... 465 (16,970) (16,505) (3,389) 15,828 (677)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (451) (31,763) (32,214) (190) (44,486) (76,700)
Proceeds on sale of
equipment............. -- 37 37 -- -- 37
Purchase of PCS
licenses.............. (118,438) (2,006,156) (2,124,594) (318,092) -- (2,124,594)
Investment in
unconsolidated
partnership........... -- (131,752) (131,752) (47,946) -- (131,752)
Loan to unconsolidated
partnership........... -- (655) (655) -- (83,000) (83,655)
--------- ----------- ----------- --------- -------- -----------
Net cash used in
investing
activities......... (118,889) (2,170,289) (2,289,178) (366,228) (127,486) (2,416,664)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Limited partner
interest in
consolidated
subsidiary............ -- 15,000 15,000 5,000 -- 15,000
Partner capital
contributions......... 123,438 2,168,368 2,291,806 382,537 113,654 2,405,460
--------- ----------- ----------- --------- -------- -----------
Net cash provided by
financing
activities......... 123,438 2,183,368 2,306,806 387,537 113,654 2,420,460
--------- ----------- ----------- --------- -------- -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 5,014 (3,891) 1,123 17,920 1,996 3,119
CASH AND CASH
EQUIVALENTS, Beginning
of period.............. -- 5,014 -- 5,014 1,123 --
--------- ----------- ----------- --------- -------- -----------
CASH AND CASH
EQUIVALENTS, End of
period................. $ 5,014 $ 1,123 $ 1,123 $ 22,934 $ 3,119 $ 3,119
========= =========== =========== ========= ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sprint Spectrum Holding Company, L.P. (the "Partnership") is a limited
partnership formed in Delaware on March 28, 1995, by Sprint Enterprises L.P.
("Sprint"), TCI Network Services ("TCI"), Cox Telephony Partnership ("Cox")
and Comcast Telephony Services ("Comcast") (the "Partners"). The Partnership
was formed pursuant to a reorganization of the operations of an existing
partnership, WirelessCo, L.P. In March 1995, the partners of WirelessCo, L.P.
transferred their interest in WirelessCo, L.P. to Sprint Spectrum Holding
Company, L.P. The Partnership and certain other affiliated partnerships are
doing business as Sprint Spectrum.
The Partnership is consolidated with certain subsidiaries, including Sprint
Spectrum L.P., WirelessCo, L.P. and NewTelco, L.P. These entities are
development stage enterprises. The Partners of Sprint Spectrum have the
following ownership interests in Sprint Spectrum Holding Company, L.P. as of
December 31, 1995:
<TABLE>
<S> <C>
Sprint Enterprises, L.P. ............................................. 40%
TCI Network Services.................................................. 30%
Cox Telephony Partnership............................................. 15%
Comcast Telephony Services............................................ 15%
</TABLE>
Each Partner's ownership interest consists of a 99% general partner interest
and a 1% limited partnership interest.
On February 29, 1996, the Partnership's name was changed to Sprint Spectrum
Holding Company, L.P. from MajorCo, L.P. and MajorCo Sub, L.P. changed its
name to Sprint Spectrum L.P.
Venture Formation and Affiliated Partnerships--A Joint Venture Formation
Agreement ( the "Formation Agreement"), dated as of October 24, 1994, and
subsequently amended as of March 28, 1995, and January 31, 1996, was entered
into by Sprint Corporation, Tele-Communications, Inc., Cox Communications,
Inc., and Comcast Corporation (collectively, the "Parents"), pursuant to which
the parties agreed to form certain entities to (i) provide national wireless
telecommunications services, including acquisition and development of personal
communications service ("PCS") licenses, (ii) develop a PCS wireless system in
the Los Angeles-San Diego Major Trading Area ("MTA") and (iii) take certain
other actions.
On October 24, 1994, WirelessCo, L.P. was formed and on March 28, 1995,
additional partnerships were formed consisting of Sprint Spectrum Holding
Company, L.P., MinorCo, L.P., NewTelco, L.P., and Sprint Spectrum L.P. As of
December 31, 1995, the Partnership held ownership interests in NewTelco, L.P.
and Sprint Spectrum L.P. (which holds a 99% general partner interest in
WirelessCo, L.P.). MinorCo, L.P. held the remaining ownership interests in
NewTelco, L.P., Sprint Spectrum L.P. and WirelessCo, L.P. at December 31,
1995. An additional partnership, Cox-California PCS, L.P., is proposed to be
formed by the Partnership and another entity affiliated with Cox
Communications, Inc. for the purpose of holding and developing a PCS system
using the LA-San Diego Pioneer's Preference License.
Partnership Agreement--The Amended and Restated Agreement of Limited
Partnership of MajorCo, L.P. (the "MajorCo Agreement"), dated as of January
31, 1996, among Sprint, TCI, Comcast and Cox provides that
F-18
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the purpose of the Partnership is to engage in wireless communications
services. The MajorCo Agreement provides for the governance and administration
of partnership business, allocation of profits and losses (including
provisions for special and curative allocations), tax allocations,
transactions with partners, disposition of partnership interests and other
matters.
The MajorCo Agreement provides for a planned capital amount to be
contributed by the Partners, pursuant to circumstances defined in the MajorCo
Agreement, equal to the sum of $1.898 billion over an initial period from
January 1, 1996, through December 31, 1997. Such amount is included as a
portion of "Total Mandatory Contributions", defined in the MajorCo Agreement
as the sum of $4.2 billion, plus agreed upon values attributable to the
contributions of certain additional PCS licenses by a Partner. Approximately
$2.3 billion of such Total Mandatory Contributions amount has been previously
contributed to Sprint Spectrum Holding Company, L.P., WirelessCo, L.P. and
other affiliated partnerships.
The planned capital amount would be contributed in accordance with a capital
contribution schedule in the approved budget. The partnership board may
request capital contributions be made more quickly than that provided for in
the budget, but always subject to the Total Mandatory Contributions limit. The
Partners may agree to contribute capital in excess of the Total Mandatory
Contributions limit.
The MajorCo Agreement generally provides for the allocation of profits and
losses according to each Partner's proportionate percentage interest, after
giving effect to special allocations. After special allocations, profits are
allocated to partners to the extent of and in proportion to cumulative net
losses previously allocated. Losses are allocated, after considering special
allocations, according to each Partner's allocation of net profits previously
allocated.
Parent Undertaking--In addition to the MajorCo Agreement, each Parent has
entered into an agreement which provides for certain undertakings by each
Parent in favor of other Partners and which addresses certain obligations of
the Parent pertaining to items including provision of services,
confidentiality, foreign ownership, purchasing, restrictions on disposition
and certain other matters.
Trademark Agreement--Sprint(R) is a registered trademark of Sprint
Communications Company, L.P. and is licensed to the Partnership on a royalty-
free basis pursuant to a trademark license agreement between the Partnership
and Sprint.
Development Stage Enterprises--The Partnership and its subsidiaries are
development stage enterprises. The success of their development is dependent
on a number of business factors, including securing financing to complete
network construction and fund initial operations, successfully deploying the
PCS network and attaining profitable levels of market demand for Partnership
products and services. The partnership and its subsidiaries have not yet
generated operating revenues.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The financial statements have been prepared from the
date of inception, October 24, 1994, for WirelessCo, L.P., and March 28, 1995,
for other consolidated subsidiaries, through December 31, 1995. The assets,
liabilities, results of operations and cash flows of entities in which the
Partnership has a controlling interest have been consolidated.
The financial information as of March 31, 1996 and for the three month
periods ended March 31, 1996 and 1995 is unaudited. The Partnership believes
such information includes all adjustments (consisting only of normal
F-19
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and cash flows.
The limited partnership interest of MinorCo, L.P. in WirelessCo, L.P.,
Sprint Spectrum L.P. and NewTelco, L.P. is reflected as a minority interest.
Pursuant to the Amended and Restated Agreement of Limited Partnership of
WirelessCo, L.P. ("WirelessCo Agreement"), MinorCo, L.P. has not been
allocated any losses incurred by WirelessCo, L.P. The WirelessCo Agreement
stipulates that all losses are to be allocated to Sprint Spectrum L.P., the
general partner, until the general partner's capital account is depleted.
Pursuant to the Agreement of Limited Partnership of NewTelco, L.P. ("NewTelco
Agreement"), MinorCo, L.P., the limited partner, has been allocated $1,829,882
of losses incurred by NewTelco, L.P. for the year ended December 31, 1995, as
losses in excess of the general partner's capital account (which consisted of
$1,000) are to be allocated to the limited partner to the extent of its
capital account. All significant intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents--The Partnership considers all highly liquid
instruments with original maturities of three months or less to be cash
equivalents.
Property, Plant and Equipment--Property, plant and equipment are stated at
cost. Construction work in progress represents costs incurred to design and
construct the PCS network. Repair and maintenance costs are charged to expense
as incurred. When telecommunications plant is retired, or otherwise disposed
of, its book value, net of salvage, is charged to accumulated depreciation.
Property, plant and equipment are depreciated using the straight-line method
based on estimated useful lives of the assets. Depreciable lives range from 3
to 20 years.
Investment in PCS Licenses and Other Intangibles--During 1994 and 1995, the
Federal Communications Commission ("FCC") auctioned PCS licenses in specific
geographic service areas. The FCC grants licenses for terms of up to ten
years, and generally grants renewals if the licensee has complied with its
license obligations. The Partnership believes it has and will continue to meet
all requirements necessary to secure renewal of its PCS licenses. The
Partnership has also incurred costs associated with microwave relocation in
the construction of the PCS network. Amortization of PCS licenses and
microwave relocation costs will commence as each service area becomes
operational, over estimated useful lives of 40 years. No amortization expense
was recorded in 1995, or in the period from October 24, 1994 (date of
inception) to December 31, 1994. No interest expense has been incurred or
capitalized pertaining to the acquisition of the PCS licenses.
The ongoing value and remaining useful life of intangible assets are subject
to periodic evaluation. The Partnership currently expects the carrying amounts
to be fully recoverable. Impairments of intangibles and long-lived assets are
assessed based on an undiscounted cash flow methodology.
Income Taxes--The Partnership has not provided for federal or state income
taxes since such taxes are the responsibility of the individual Partners.
Financial Instruments--All of the Partnership's financial instruments,
including cash and cash equivalents, receivables from affiliates and accounts
payable are short-term in nature. Accordingly, the balance sheet amounts
approximate the fair value of the Partnership's financial instruments.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-20
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31,
1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- -----------
<S> <C> <C>
Office furniture and fixtures....................... $450,910 $ 2,901,633
Telecommunications plant--construction work in pro-
gress.............................................. -- 29,200,467
-------- -----------
450,910 32,102,100
Less accumulated depreciation....................... (37,716) (204,721)
-------- -----------
$413,194 $31,897,379
======== ===========
</TABLE>
4. INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
On January 9, 1995, WirelessCo, L.P., acquired a 49% limited partnership
interest in American PCS, L.P. ("APC"). American Personal Communications, Inc.
("APC, Inc.") is the general partner. The investment in APC is accounted for
under the equity method. Summarized financial information of APC as of and for
the year ended December 31, 1995, is as follows:
<TABLE>
<S> <C>
Total assets.................................................... $237,325,784
Total liabilities............................................... 171,179,908
Total revenues.................................................. 5,153,469
Net loss........................................................ 51,551,446
</TABLE>
The following table summarizes the status and results of WirelessCo, L.P.'s
investment in APC as of December 31, 1995:
<TABLE>
<S> <C>
Beginning investment........................................... $ 23,422,000
Payment for call option........................................ 10,000,000
Capital contributions.......................................... 98,330,068
Equity in losses............................................... (46,206,097)
------------
Ending investment.............................................. $ 85,545,971
============
</TABLE>
The unamortized excess of WirelessCo, L.P.'s investment over its equity in
the underlying net assets of APC at the date of acquisition was $10,139,459.
The excess investment amount is amortized on a straight line basis over an
estimated useful life of 40 years. Amortization included in equity in loss of
unconsolidated partnership was $239,727 for the year ended December 31, 1995.
WirelessCo, L.P. receives an affiliation fee of 3% of gross revenues from
APC for APC's affiliation with the Sprint Spectrum business.
The call option in APC acquired on January 9, 1995, provides WirelessCo,
L.P. with the right to purchase an additional interest in APC from APC, Inc.
in annual increments beginning five years after the initial PCS network build-
out is completed. The first increment, an additional 20% of the APC, Inc.
ownership interest, can be acquired in each of the fifth through seventh years
with the remaining interest available for purchase in the eighth through tenth
year. APC, Inc. also has the right to put a portion of its ownership interest
to WirelessCo, L.P. on an annual basis in an amount representing the greater
of (i) one-fifth of APC, Inc.'s initial percentage interest of 51% in APC or
(ii) the portion of APC, Inc.'s interest equal to APC, Inc.'s obligation for
annual FCC
F-21
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payments to be made by APC, beginning after the completion of the initial PCS
network build-out, through the fifth anniversary date. The exercise price of
the call and put options are based on the Fair Value, as defined, of APC at
the date of exercise.
During the initial five year build-out period, which began in December 1994,
APC, Inc. and WirelessCo, L.P. are obligated as follows: (a) APC, Inc. is
obligated to make capital contributions in an amount equal to the aggregate
principal and interest payments to the FCC, provided APC, Inc. has sufficient
cash flows or can obtain financing from a third party; (b) if APC, Inc. is
unable to meet such obligation, WirelessCo, L.P. is required to contribute the
shortfall, upon ten days prior notice; (c) WirelessCo, L.P. is required to
contribute equity to APC necessary for operations up to an amount of
approximately $98 million; and (d) WirelessCo, L.P. is obligated to fund the
cash requirements of APC in excess of that described in (a), (b), and (c)
above, in the form of either loans or additional capital up to a total of $275
million (including the amount in (c) above). Contributions in excess of $275
million, however, require approval of WirelessCo, L.P. and may be made in the
form of additional equity or loans. Under certain circumstances, APC, Inc. has
the right and is obligated to exercise its put right to the extent necessary
to fund additional capital contributions. As of December 31, 1995, $98 million
of equity had been contributed and $654,982 of partner advances had been
extended. Outstanding partner advances will be non-recourse and bear interest
at an agreed upon rate and will be payable at such time when APC has
sufficient funds to permit repayment. Subsequent to December 31, 1995, and
through March 29, 1996, $83 million of additional advances were extended to
APC.
The partnership agreement between WirelessCo, L.P. and APC, Inc. specifies
that losses are allocated based on capital contributions and certain other
factors. Under the equity method, WirelessCo, L.P. has recognized the majority
of the partnership losses to date in its financial statements based on its
capital contributions and commitments to provide initial funding. Loss
allocations in the future may vary depending on additional capital
contributions of APC, Inc.
5. EMPLOYEE BENEFITS
The Partnership maintains short-term and long-term incentive plans. All
exempt employees are eligible for the short-term incentive plan commencing at
date of hire. Short-term incentive compensation is based on incentive targets
established for each position based on the Partnership's overall compensation
strategy. Targets contain both an objective Partnership component and a
personal objective component.
Employees meeting certain eligibility requirements are considered
participants in the long-term incentive plan. Long-term incentive compensation
is based upon individual performance, the achievement of certain partnership
goals and the management of departmental costs.
Employees performing services for the Partnership were employed by Sprint
Corporation through December 31, 1995. Amounts paid to Sprint Corporation
relating to pension expense and employer contributions to the Sprint
Corporation 401(k) plan for these employees approximated $323,000 in 1995. No
payments were made through December 31, 1994.
Savings and Retirement Plan--Effective January, 1996, the Partnership
established a savings and retirement program (the "Savings Plan") for certain
employees, which is intended to qualify under Section 401(k) of the Internal
Revenue Code. Most permanent full-time, and certain part-time, employees are
eligible to become participants in the plan. Participants make contributions
to a basic before tax account and supplemental before tax account. The maximum
contribution for any participant for any year is 16% of such participant's
compensation. For each eligible employee who elects to participate in the
Savings Plan and makes a contribution
F-22
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to the basic before tax account, the Partnership makes a matching
contribution. The matching contributions equal 50% of the amount of the basic
before tax contribution of each participant up to 6% of such employee's
contribution. Contributions to the Savings Plan are invested, at the
participants discretion, in several designated investment funds. Distributions
from the Savings Plan generally will be made only upon retirement or other
termination of employment, unless deferred by the participant.
Profit Sharing (Retirement) Plan--Effective January, 1996, the Partnership
established a profit sharing plan for its employees. Employees are eligible to
participate in the plan after completing one year of service. Profit sharing
contributions are based on the compensation, age, and years of service of the
employee. Profit sharing contributions are deposited into individual accounts
of the Partnership's 401(k) plan. Vesting occurs once a participant completes
five years of service.
6. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
Operating Leases--Minimum rental commitments as of December 31, 1995, for
all noncancelable operating leases, consisting principally of leases for
office space and cell and switch sites, are as follows:
<TABLE>
<S> <C>
1996.............................................................. $1,642,415
1997.............................................................. 1,315,215
1998.............................................................. 1,318,578
1999.............................................................. 1,335,398
2000.............................................................. 1,231,998
Thereafter........................................................ 40,370
----------
$6,883,974
==========
</TABLE>
Subsequent to December 31, 1995, and through March 29, 1996, the Partnership
entered into several significant operating leases with minimum rental
commitments over the lives of the leases of approximately $58 million.
Gross rental expense aggregated $687,486 and $104,573 for the year ended
December 31, 1995 and for the period from October 24, 1994 (date of inception)
to December 31, 1994, respectively, and is included in general and
administrative expense in the consolidated statements of operations. Certain
leases contain renewal options that may be exercised from time to time and are
excluded from the above amounts.
On May 15, 1996, Sprint Spectrum Equipment Company, L.P. ("EquipmentCo") and
Sprint Spectrum Realty Company, L.P. ("RealtyCo") were organized as
subsidiaries of Sprint Spectrum L.P. and MinorCo, L.P. for the purpose of
holding PCS network-related asssets. On May 20, 1996, an additional subsidiary
of Sprint Spectrum L.P., Sprint Spectrum Finance Corporation, was also formed
to be a co-obligor of certain proposed debt financing.
Procurement Contracts--On January 31, 1996, the Partnership entered into
procurement and services contracts (the "Procurement Contracts") with AT&T
Corp. (subsequently assigned to Lucent Technologies, Inc., "Lucent") and
Northern Telecom, Inc. ("Nortel" and together with Lucent, the "Vendors") for
the engineering and construction of a PCS network. The Procurement Contracts
were assigned to Sprint Spectrum L.P. and then to EquipmentCo by the
Partnership on June 21, 1996 for the Lucent contract and June 26, 1996 for the
Nortel contract. Each contract provides for an initial term of ten years with
renewals for additional one-year periods. The Vendors must achieve substantial
completion of the PCS network within an established time frame and in
F-23
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accordance with criteria specified in the Procurement Contracts. Pricing for
the initial equipment, software and engineering services has been established
in the Procurement Contracts. The Procurement Contracts provide for payment
terms based on delivery dates, substantial completion dates, and final
acceptance dates. In the event of delay in the completion of the PCS network,
the Procurement Contracts provide for certain amounts to be paid to the
Partnership by the Vendors. The minimum commitments for the initial term are
$0.8 billion and $1.0 billion from Lucent and Nortel, respectively, which
include, but are not limited to, all equipment required for the establishment
and installation of the PCS network.
Purchase Commitments--The Partnership has also entered into agreements to
acquire various cell and switch sites. Commitments to site acquisition vendors
are approximately $152 million and commitments for construction contracts and
purchases of equipment, handsets and other services are approximately $469
million. Such agreements have been executed by, or assigned to, Sprint
Spectrum L.P. or its subsidiaries on or before July 1, 1996.
Vendor Financing--Sprint Spectrum L.P. has obtained financing commitments
from Nortel dated June 11, 1996 for $1.3 billion and from Lucent dated June
21, 1996 for $1.8 billion of multiple drawdown term loan facilities (the
"Vendor Financing"). The proceeds of such facilities would be used to finance
the purchase of goods and services provided by the Vendors under the
Procurement Contracts. The Vendor Financing would be non-recourse to, and will
not be guaranteed by, the Parents and the Partners.
Borrowings under the Vendor Financing would be collateralized by a first
priority lien (the "Shared Lien") on (i) all of the partnership interests in
WirelessCo, L.P., RealtyCo and EquipmentCo, (ii) certain intangible property
assets and (iii) any real property having a value greater than $15 million.
The Shared Lien would serve as collateral for the Vendor Financing and certain
other financing from banks or other parties, not to exceed a specified level.
Such financing would be unconditionally guaranteed by WirelessCo, L.P.,
RealtyCo and EquipmentCo.
Loans under the Vendor Financing would amortize quarterly over the five year
period commencing on the date that is 39 months after the end of the one-year
period during which such loans were made.
Under the Vendor Financing, subject to certain conditions, Sprint Spectrum
L.P. would be required to make mandatory prepayments of 100% of the net cash
proceeds of any sale or disposition of subsidiaries or any sale of material
assets that are not reinvested in the wireless telecommunications businesses.
Sprint Spectrum L.P. would be able to elect that all or any portion of the
borrowings under the Vendor Financing bear interest at a rate per annum equal
to either (i) the ABR plus an applicable margin or (ii) the Eurodollar rate
(LIBOR) plus an applicable margin. The ABR is the higher of (x) the rate of
interest publicly announced by a commercial bank to be determined as its prime
rate in effect at its principal office in New York City and (y) the federal
funds effective rate plus 0.5%.
The Nortel portion of the Vendor Financing requires, as a condition to
funding, the commitment of certain additional financing from third-parties.
Bank Credit Facility--Sprint Spectrum L.P. has received a commitment from
Chemical Bank to provide a fully underwritten senior credit facility, (the
"Bank Credit Facility") in the amount of $2.0 billion. The proceeds of the
loans under the Bank Credit Facility would be used to finance capital
expenditures, operating losses, the working capital needs of Sprint Spectrum
L.P. and for partnership purposes.
F-24
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Borrowings under the Bank Credit Facility would be unconditionally guaranteed
by WirelessCo L.P., RealtyCo and EquipmentCo. In addition, borrowings under the
Bank Credit Facility would be collateralized by the Shared Lien. The Bank
Credit Facility would be non-recourse to, and would not be guaranteed by, the
Parents or the Partners.
The Bank Credit Facility is expected to automatically reduce quarterly
commencing five years and three months following the closing date of such
facility and ending nine years after the closing date. Subject to certain
conditions, Sprint Spectrum L.P. would be required to make mandatory
prepayments or apply a portion of its excess cash flow to ratably reduce
commitments under the Bank Credit Facility and prepay loans under the Vendor
Financing.
Sprint Spectrum L.P. would be able to elect that all or any portion of the
borrowings under the Bank Credit Facility bear interest at a rate per annum
equal to (i) the ABR plus an applicable margin or (ii) the Eurodollar Rate
(LIBOR) plus an applicable margin. The ABR is the higher of (x) the rate of
interest publicly announced by the administrative agent as its prime rate in
effect at its principal office in New York City and (y) the federal funds
effective rate from time to time plus 0.5%.
The Bank Credit Facility and the Vendor Financing would contain a number of
financial operating covenants that, among other things, limit the ability of
Sprint Spectrum L.P. to incur additional indebtedness, create liens and other
encumbrances, make guarantee obligations, make distributions to partners and
repurchases of equity, make acquisitions, investments, loans and advances,
merge or consolidate with another entity or engage in any business other than
the telecommunications business and related businesses as well as restrictions
on the ability of WirelessCo, L.P., RealtyCo, and EquipmentCo to incur
liabilities or engage in non-designated activities.
7. RELATED PARTY TRANSACTIONS
The Partnership reimburses Sprint Corporation for certain accounting, data
processing, and other related services, and for certain cash payments made by
Sprint Corporation on behalf of the Partnership. The Partnership is allocated
the costs of such services based on direct usage. Allocated expenses of
approximately $2,646,000 are included in general and administrative expense in
the consolidated statement of operations for 1995. No reimbursement was made
through December 31, 1994.
PhillieCo, L.P. and a Cox affiliate were formed by certain Partners,
individually and collectively, for the purposes of providing PCS wireless
services in their respective geographic areas. The Partnership, having made
certain cash payments on behalf of PhillieCo, L.P. and Cox's affiliate, will
receive reimbursements for direct costs incurred plus an amount for management
services provided to PhillieCo, L.P. and Cox's affiliate. Included in
receivables from affiliates are receivables for services provided as of
December 31, 1995, of $183,225 and $156,528 due from PhillieCo, L.P. and, Cox's
affiliate, respectively.
Sprint acts as agent for the Partnership in sales of paging services,
purchased for resale by the Partnership from a third-party provider.
* * * * * *
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
of American PCS, L.P.
In our opinion, the accompanying balance sheets and the related statements
of loss, of cash flows and of changes in partners' capital present fairly, in
all material respects, the financial position of American PCS, L.P. at
December 31, 1994 and 1995 and at March 31, 1996, and the results of its
operations and its cash flows for the years ended December 31, 1994 and 1995
and the three months ended March 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Washington, D.C.
June 19, 1996
F-26
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 1,671,728 $ 7,637,436 $ 12,711,657
Accounts receivable, less
allowance of $250,000 and
$1,225,000 at December 31, 1995
and March 31, 1996,
respectively..................... -- 3,909,169 9,444,464
Inventory......................... -- 5,186,190 10,406,230
Receivable from limited partner... 122,781 -- --
Prepaid expenses.................. 248,218 1,049,003 1,169,605
------------ ------------ ------------
Total current assets............ 2,042,727 17,781,798 33,731,956
Property and equipment, net......... 9,625,926 116,547,158 125,148,817
License, net of accumulated
amortization of $320,567 at
December 31, 1995 and $961,701 at
March 31, 1996..................... 92,876,203 102,260,322 101,619,188
Other assets........................ 765,749 736,506 671,909
------------ ------------ ------------
Total assets.................... $105,310,605 $237,325,784 $261,171,870
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued
expenses......................... $ 2,325,016 $ 71,323,125 $ 45,616,778
Accrued interest.................. -- 6,509,983 8,320,769
Due to related parties............ 141,435 2,151,323 89,472,501
Accrued payroll and related
expenses......................... 677,444 2,397,947 1,169,879
Current portion of long-term
debt............................. 1,326,625 2,532,219 2,559,901
------------ ------------ ------------
Total current liabilities....... 4,470,520 84,914,597 147,139,828
Long-term debt...................... 81,472,831 86,265,311 86,980,016
------------ ------------ ------------
Total liabilities............... 85,943,351 171,179,908 234,119,844
Commitments (Note 8)
Partners' capital................... 19,367,254 66,145,876 27,052,026
------------ ------------ ------------
Total liabilities and partners'
capital........................ $105,310,605 $237,325,784 $261,171,870
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF LOSS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------- -------------------------
1994 1995 1995 1996
----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Airtime and access
charges............... $ -- $ 598,768 $ -- $ 5,488,846
Handset sales.......... -- 4,406,383 -- 6,102,444
Other.................. -- 148,318 1,700 7,051
----------- ------------ ----------- ------------
-- 5,153,469 1,700 11,598,341
----------- ------------ ----------- ------------
Cost and expenses:
Cost of handset sales.. -- 13,621,834 -- 18,681,368
Operating expenses..... -- 3,792,048 -- 7,213,114
Selling, general and
administrative........ 7,413,659 35,767,479 3,784,545 16,722,629
Depreciation and amor-
tization.............. 491,447 2,751,841 137,959 4,536,881
----------- ------------ ----------- ------------
7,905,106 55,933,202 3,922,504 47,153,992
----------- ------------ ----------- ------------
Operating loss......... (7,905,106) (50,779,733) (3,920,804) (35,555,651)
Other (income) expense:
Interest income........ (27,448) (1,201,461) (23,631) (314,787)
Interest expense....... 566 1,976,856 141,147 4,839,774
Other, net............. 5,929 (3,682) 15 13,212
----------- ------------ ----------- ------------
Net loss................. $(7,884,153) $(51,551,446) $(4,038,335) $(40,093,850)
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------- -------------------------
1994 1995 1995 1996
------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss................ $ (7,884,153) $(51,551,446) $(4,038,335) $(40,093,850)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation and
amortization......... 491,447 2,751,841 137,958 4,536,881
Provision for
allowance............ -- 250,000 -- 975,000
Accretion of debt
discount............. -- -- -- 999,094
Loss on sale of
assets............... 5,125 3,682 -- --
Change in assets and
liabilities:
Increase in accounts
receivable......... -- (4,159,169) -- (6,510,295)
Increase in
inventory.......... -- (5,186,190) -- (5,220,040)
Increase in prepaid
expenses........... (195,410) (800,785) (90,420) (120,602)
(Increase) decrease
in other
receivables........ (21,921) 122,781 122,781 --
Increase in other
assets............. (188,517) (274,506) (29,190) (12,392)
Increase (decrease)
in accounts payable
and accrued
expenses........... 1,190,590 68,998,109 1,156,271 (25,706,347)
Increase in accrued
interest........... -- 1,312,828 -- 1,810,786
Increase in due to
related parties.... 141,435 1,354,907 70,277 4,321,178
Increase (decrease)
in accrued payroll
and related
expenses........... 677,444 1,720,503 (400,571) (1,228,068)
------------ ------------ ----------- ------------
Net cash (used in)
provided by
operating
activities......... (5,783,960) 14,542,555 (3,071,229) (66,248,655)
------------ ------------ ----------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures,
net.................. (8,773,442) (105,439,229) (8,859,884) (12,420,417)
License costs......... (3,069,740) (515,366) (140,663) --
------------ ------------ ----------- ------------
Net cash used in
investing
activities......... (11,843,182) (105,954,595) (9,000,547) (12,420,417)
------------ ------------ ----------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Partners' capital
contributions........ 19,100,000 98,330,068 14,524,000 1,000,000
Repayment of notes
payable.............. -- (1,326,625) -- --
Principal payments
under capital lease
obligations.......... -- (280,676) -- (256,707)
Advances from related
party................ -- 654,981 -- 83,000,000
------------ ------------ ----------- ------------
Net cash provided by
financing
activities......... 19,100,000 97,377,748 14,524,000 83,743,293
------------ ------------ ----------- ------------
Net increase in cash and
cash equivalents....... 1,472,858 5,965,708 2,452,224 5,074,221
Beginning cash and cash
equivalents............ 198,870 1,671,728 1,671,728 7,637,436
------------ ------------ ----------- ------------
Ending cash and cash
equivalents............ $ 1,671,728 $ 7,637,436 $ 4,123,952 $ 12,711,657
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
AMERICAN
PERSONAL THE WASHINGTON
COMMUNICATIONS, INC. WIRELESSCO, L.P. POST COMPANY TOTAL
-------------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31,
1993 (unaudited)....... $ -- $ -- $ 8,151,407 $ 8,151,407
Capital
contributions........ -- -- 19,100,000 19,100,000
Allocation of net
loss................. -- -- (7,884,153) (7,884,153)
----------- ----------- ------------ ------------
Balance, December 31,
1994................... -- -- 19,367,254 19,367,254
----------- ----------- ------------ ------------
Allocation of net loss
for the period
January 1, 1995 to
January 9, 1995...... -- -- (392,195) (392,195)
Allocation of net loss
for the period
January 10, 1995 to
December 31, 1995.... (5,001,957) (45,908,065) (249,229) (51,159,251)
----------- ----------- ------------ ------------
1995 net loss...... (5,001,957) (45,908,065) (641,424) (51,551,446)
----------- ----------- ------------ ------------
Change in ownership
interest............. 5,285,910 13,282,541 (18,568,451) --
----------- ----------- ------------ ------------
Capital
contributions........ -- 98,330,068 -- 98,330,068
----------- ----------- ------------ ------------
Balance, December 31,
1995................... 283,953 65,704,544 157,379 66,145,876
----------- ----------- ------------ ------------
Capital contribution.. 1,000,000 -- -- 1,000,000
Allocation of net
loss................. (3,708,873) (36,227,598) (157,379) (40,093,850)
----------- ----------- ------------ ------------
Balance, March 31,
1996................... $(2,424,920) $29,476,946 $ -- $ 27,052,026
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND BUSINESS
General
American PCS, L.P. (the Partnership) is a Delaware limited partnership
operating a personal communications services (PCS) system in the greater
Washington, D.C./Baltimore area. Development stage activities during the
period from September 20, 1990 (inception) through November 14, 1995 consisted
principally of forming the partnership, obtaining experimental and commercial
licenses from the Federal Communications Commission (FCC), and designing and
constructing a communications system. At November 15, 1995, the Partnership
had finished the design and the construction of a significant portion of the
communications system, and had commenced operations. Accordingly, as of
November 1995, the Partnership was no longer considered a development stage
enterprise for financial reporting purposes.
In 1990, the Partnership was awarded an experimental license by the FCC and
subsequently operated an experimental PCS system in the Washington,
D.C./Baltimore area. In December 1993, the Partnership was awarded a pioneer's
preference by the FCC, which guaranteed the Partnership receipt of one of two
30 MHZ PCS commercial licenses for the intended area. In December 1994, the
Partnership obtained the commercial license and began construction of a
communication system shortly thereafter.
Partnership Agreement
The Partnership was formed on September 20, 1990 in accordance with a
limited partnership agreement between American Personal Communications, Inc.
(APC) and The Washington Post Company (the Post). In January 1995, the Post
sold substantially all of its interest in the Partnership to two parties: APC
and WirelessCo, L.P. (WirelessCo) a subsidiary of Sprint Spectrum L.P. In
March 1996, the Post sold its remaining interest to APC. As a result of these
transactions, APC's interest is 51% and WirelessCo's interest is 49%. APC is a
General and Limited Partner and WirelessCo is a Limited Partner with no voting
rights or management control.
During the initial five year buildout period, which began in December 1994,
APC and WirelessCo are obligated as follows: (a) APC is obligated to make
capital contributions in an amount equal to the aggregate principal and
interest payments to the FCC, provided APC has sufficient cash flows or can
obtain financing from a third party; (b) if APC is unable to meet such
obligation, WirelessCo is required to contribute the shortfall, upon ten days
prior notice; (c) WirelessCo is required to contribute equity to the
Partnership necessary for operations up to an amount of approximately $98
million; and (d) WirelessCo is obligated to fund the cash requirements of the
Partnership in excess of that described in (a), (b) and (c) above, in the form
of either loans or additional capital up to a total of $275 million (including
the amount in (c) above). Contributions in excess of the $275 million,
however, require approval of WirelessCo and may be made in the form of
additional equity or loans.
Profit and losses will be allocated to the partners in accordance with
certain special allocations and formulas set forth in the partnership
agreement. These formulas are based on amounts which include, among others,
capital contributions, prior year losses and distributions of property and
cash to the partners. Once these provisions are satisfied, profit and losses
will be allocated in proportion to the partners' percentage interests.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Partnership prepares its financial statements on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements. Actual results
may differ from those estimates.
F-31
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue recognition
Airtime and access charges are recorded as revenue based on the amount of
communications services rendered as measured principally by traffic processed
after deducting an estimate of the traffic that will neither be billed nor
collected. Revenue from the sale of handsets and related accessories is
recognized upon shipment or point-of-sale.
Cash and cash equivalents
All highly liquid investments with an original maturity of three months or
less at the date of acquisition are considered cash equivalents.
Inventory
Inventory, consisting of handsets and related accessories, is stated at the
lower of cost or replacement value. Costs are based on the first-in, first-out
method.
Property and equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the related assets' estimated useful lives
ranging from five to forty years. Leasehold improvements are amortized over
the shorter of the term of the related lease or the estimated useful lives of
the assets.
Equipment under capital leases
The Partnership leases certain of its office and other equipment under
capital lease agreements. The assets and liabilities under capital leases are
recorded at the lesser of the present value of aggregate future minimum lease
payments, including estimated bargain purchase options, or the fair value of
the assets under lease. Assets under these capital leases are depreciated over
their estimated useful lives of five to seven years, which are generally
longer than the terms of the leases.
License
The PCS license includes FCC, legal and consulting fees and capitalized
interest. The FCC license fee has been recorded at its fair value on the basis
of the payment terms to the FCC and the Partnership's estimated incremental
borrowing rate for similar debt at the date of award. The license expires in
December 2004; however, FCC rules provide for renewal expectancy provisions.
The Partnership expects to exercise the renewal provisions, and accordingly
the license is being amortized using the straight-line method over a period of
40 years. Amortization of these amounts commenced upon launch of the system in
November 1995.
Amortization of the license cost was $320,567 and $641,134 for the year
ended December 31, 1995 and the three months ended March 31, 1996,
respectively. Additionally, interest capitalized during 1995 as part of the
license cost was $9,193,528.
The ongoing value and remaining useful life of intangible assets are subject
to periodic evaluation. The Partnership currently expects the carrying amounts
to be fully recoverable. Impairments of intangible assets are assessed based
on an undiscounted cash flow methodology.
Organizational costs
Certain costs, totaling $1,539,780, were incurred during the formation of
the Partnership and have been deferred and included in other assets. These
costs are being amortized on a straight-line basis over a period of five
years. Accumulated amortization at December 31, 1994 and 1995 and March 31,
1996 was $975,194, $1,283,151 and $1,360,140, respectively.
F-32
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Preoperating costs
Prior to commencement of operations, preoperating costs, such as salaries,
marketing, recruiting and administrative costs, were expensed as incurred.
Preoperating costs, totaling $7,905,106 and $28,805,236 for the years ended
December 31, 1994 and 1995, respectively, are classified as selling, general
and administrative expenses and depreciation and amortization expenses in the
Statements of Loss.
Income taxes
No provision has been made for Federal and state income taxes since such
taxes, if any, are the responsibility of the individual partners.
Concentration of credit risk
The Partnership's subscribers are dispersed throughout the Washington,
D.C./Baltimore area. No single subscriber accounted for a significant amount
of the Partnership's revenue. A significant portion of handset sales revenue
is earned through certain retailers. Sales to one retailer accounted for 25%
and 37% of total handset sales revenue for the year ended December 31, 1995
and the three months ended March 31, 1996, respectively. The Partnership
reviews the credit histories of potential subscribers and retailers prior to
extending credit and maintains allowances for potential credit losses. The
Partnership maintains cash and cash equivalents in high credit financial
institutions. The Partnership believes that its risk from concentration of
credit is limited.
Interim financial statements
The interim financial data for the three months ended March 31, 1995 is
unaudited. However, in the opinion of the Partnership, the interim financial
data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
periods.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1995 and at March 31, 1996
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ------------
1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Communications system.................. $ -- $106,225,628 $114,304,350
Office and other equipment............. 830,297 913,290 954,520
Leasehold improvements................. 77,894 1,959,463 2,032,897
---------- ------------ ------------
908,191 109,098,381 117,291,767
Less accumulated depreciation and
amortization........................ (304,778) (2,144,822) (5,789,103)
---------- ------------ ------------
603,413 106,953,559 111,502,664
---------- ------------ ------------
Leased office and other equipment...... -- 3,609,002 3,609,002
Less accumulated depreciation........ -- (279,576) (454,053)
---------- ------------ ------------
-- 3,329,426 3,154,949
---------- ------------ ------------
Communications system construction in
progress.............................. 9,022,513 6,264,173 10,491,204
---------- ------------ ------------
Net property and equipment............. $9,625,926 $116,547,158 $125,148,817
========== ============ ============
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994
and 1995 and the three months ended March 31, 1996 was $183,490, $2,123,317
and $3,808,030, respectively.
F-33
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 and at March 31, 1996 consists
of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Due to FCC less unamortized discount of
$23,978,236, $19,981,863 and
$18,982,770........................... $78,365,303 $82,361,676 $83,360,769
Note payable, less unamortized discount
of $1,010,360, $522,146
and $423,228.......................... 4,434,153 3,107,528 3,107,528
Capital lease obligations at interest
rates ranging from 8.33%
to 10.94%............................. -- 3,328,326 3,071,620
----------- ----------- -----------
82,799,456 88,797,530 89,539,917
Less current portion................. (1,326,625) (2,532,219) (2,559,901)
----------- ----------- -----------
Total long-term debt................... $81,472,831 $86,265,311 $86,980,016
=========== =========== ===========
</TABLE>
The Partnership became obligated to the FCC for $102,343,539 upon receipt
of the commercial PCS license. In March 1996, the FCC determined that interest
on the amount due will begin to accrue on March 8, 1996 (at an interest rate
of 7.75%). Beginning with the first payment due in April 1996, the FCC has
granted two years of interest-only payments followed by three years of
principal and interest payments. Principal payments total $23,420,619,
$33,400,477, $36,065,221 and $9,457,222 in 1998, 1999, 2000 and 2001,
respectively. Based on the interest and payment provisions determined by the
FCC and the Partnership's incremental borrowing rate for similar debt, the
Partnership has accrued interest beginning upon receipt of the license at an
effective rate of 13%. The unamortized discount is reflected as a reduction to
the cost of the license.
The note payable was issued in exchange for services received in obtaining
the license. The non-interest bearing note requires three equal payments of
$1,814,837, the first of which was paid on October 13, 1995, and the remaining
two payments are to be made on August 13, 1996 and June 13, 1997. The
unamortized discount was calculated using an interest rate of prime plus 2%,
or 10.5% at the time the debt was issued, which approximated the Partnership's
incremental borrowing rate for similar debt.
The estimated fair value of the Partnership's debt approximated its carrying
value at March 31, 1996.
Interest paid was $1,000, $664,000 and $85,513 for the years ended December
31, 1994 and 1995 and the three months ended March 31, 1996, respectively.
NOTE 5--LEASES
The Partnership has various non-cancellable operating leases for office
space and communications system sites. Rental expense related to operating
leases was $695,482, $1,681,276 and $1,977,398 for the years ended December
31, 1994 and 1995 and the three months ended March 31, 1996, respectively.
During 1995, the Partnership incurred capital lease obligations of
$3,609,002. The Partnership did not enter into any new capital lease
obligations during the first three months of 1996. The capital lease
obligations are generally repayable in 36-60 monthly installments from the
dates of purchase.
F-34
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments required under capital leases and non-
cancellable operating leases as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
EAR ENDINGY CAPITAL OPERATING
DCEMBER 31,E LEASES LEASES
- - ------------ ---------- -----------
<S> <C> <C>
1996 (nine months ending December 31,)................ $1,013,468 $ 6,776,189
1997.................................................. 1,351,320 8,996,509
1998.................................................. 998,978 9,079,073
1999.................................................. 96,271 8,981,275
2000.................................................. 65,477 7,372,796
Thereafter............................................ -- 19,892,775
---------- -----------
3,525,514 $61,098,617
---------- ===========
Less amounts representing interest.................... (453,894)
----------
Present value of minimum lease payments............... $3,071,620
==========
</TABLE>
NOTE 6--RETIREMENT SAVINGS PLAN
The Partnership has an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue code. All
employees completing one year of service are eligible and may contribute up to
15% of their pretax earnings. The Partnership matches 100% of the first 3% of
the employee's contribution. Employees are immediately fully vested in the
Partnership's contributions. In addition, the Partnership makes discretionary
contributions on behalf of eligible participants in the amount of 2% of
employee's compensation. The Partnership's expenses relating to the employee
savings plan were $38,000, $109,000 and $44,005 for the years ended December
31, 1994 and 1995 and the three months ended March 31, 1996, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS
Certain contributions from WirelessCo aggregating $654,981, exceeded amounts
required under the partnership agreement as capital contributions. As of March
31, 1996, such amounts aggregated $86,254,346 including $2,599,365 of accrued
interest. Such amounts are not evidenced by a note agreement and accordingly,
have been classified as due to related parties.
The Partnership is a party to an affiliation agreement with WirelessCo under
which the Partnership agrees to conform to certain standards established by
WirelessCo and receives the right to use the "Sprint" brand in connection with
its offering of wireless products and services. The Partnership is obligated
as part of this agreement to pay a fee of 3% of its service revenue and to
reimburse WirelessCo for a certain portion of national expenses that are
deemed to benefit all WirelessCo markets, including the Partnership's markets.
During 1995, the Partnership was not allocated any national expenses by
WirelessCo. Total fees incurred and owed to WirelessCo at March 31, 1996 are
$3,487,639. WirelessCo allocated $1,360,627 of national expenses to the
Partnership for the three months ended March 31, 1996.
The Partnership has a Sales Agency and Billing Collection agreement with
Sprint Communications Company, L.P. ("Sprint") under which the Partnership
acts as an agent to sell, bill and collect for Sprint long distance service
provided to its customers. Additionally, the Partnership purchases various
communications services from Sprint in support of its network infrastructure
and general business and obtains supplemental customer service support from
Sprint. The net cost of services received from Sprint for the year ended
December
F-35
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
31, 1995 and the three months ended March 31, 1996 was $882,306 and
$1,556,930, respectively. Amounts outstanding at December 31, 1995 and March
31, 1996 totaled $711,517 and $2,483,744, respectively.
A company that is partially owned by the chairman of the General Partner
performed consulting services for the Partnership related to the determination
and acquisition of base station sites for the communications system. Amounts
capitalized for these services totaled $1,468,994 and $2,407,400 for the years
ended December 31, 1994 and 1995, respectively. At December 31, 1994 and 1995
and at March 31, 1996, the Partnership owed the company approximately
$141,435, $759,325 and $28,768, respectively.
During 1995, APC granted to certain executives of the Partnership 27,147
stock appreciation rights. All stock appreciation rights entitle the holder to
receive the difference between the fair value of the rights exercised, based
on the fair value of APC's common stock, and the base price ($1,118 per share)
of the exercised rights. The stock appreciation rights are exercisable upon
the sale of a general or limited interest in the Partnership by APC which
results in available cash proceeds, as defined in the respective agreements,
of at least $5 million. Upon exercise of the rights, the holder will receive
cash unless certain conditions are present which would allow APC to pay the
holder in APC stock, promissory notes, or a combination thereof. The stock
appreciation rights terminate upon the earlier to occur of (a) the tenth
anniversary of the grant date, (b) the exercise in full of such rights or (c)
the termination of such rights. In general, the rights expire upon the
employees' termination of employment. Substantially all of the rights were
vested at the grant date.
As of December 31, 1995 and March 31, 1996, there were 21,498 rights
outstanding. During the year ended December 31, 1995, 5,649 rights were
forfeited. No rights were forfeited during the three months ended March 31,
1996. No stock appreciation rights have been exercised. The estimated
liability related to the stock appreciation rights, based on the fair value of
APC's common stock, was approximately $10 million and $22 million at December
31, 1995 and March 31, 1996, respectively, and is being amortized over a
period of approximately six years.
The Partnership leases office space from a limited partnership owned by
officers of APC. Lease payments of $65,215 and $13,560 were paid to the
limited partnership during the year ended December 31, 1995 and the three
months ended March 31, 1996, respectively.
A corporation owned by the chairman of the General Partner provided certain
consulting services in 1994, and in return, the Partnership made payments of
approximately $357,000. In addition, the Partnership paid the owner of the
corporation $100,000 in 1994 for consulting fees.
NOTE 8--COMMITMENTS
In February 1995, the Partnership selected Ericsson, Inc. and Northern
Telecom as the companies to supply the infrastructure equipment for the
communications network. Ericsson supplies switching and base station radio
equipment for the Washington-Baltimore corridor, while Northern Telecom
provides base stations for Maryland's Eastern Shore and western portions of
the Partnership's major trading area.
The contract with Ericsson is a five year acquisition agreement for certain
network hardware, software, handsets and documentation. Although the agreement
is for five years, the initial purchase commitment relates only to the initial
network configuration, which was substantially completed in December 1995 at a
contract price of approximately $47 million. Subsequent to December 31, 1995,
the Partnership has agreed to acquire additional equipment totaling $33.5
million. At June 19, 1996 the Partnership had approximately a $20.7 million
commitment remaining under the agreement.
F-36
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Northern Telecom agreement is for 2 1/2 years and provides for the
purchase of network hardware, software and documentation as well as the
installation of the equipment. During the agreement period, the Partnership is
required to purchase at least $12 million in communication equipment. At June
19, 1996, the Partnership had approximately a $2.9 million commitment
remaining under the agreement.
The Partnership has handset supply agreements with various vendors extending
over the next 12 to 18 months. At June 19, 1996, the Partnership had
approximately a $51.8 million commitment remaining under these agreements.
F-37
<PAGE>
SPRINT SPECTRUM L.P.
- - --------------------------------------------------------------------------------
Pop Data Regarding Sprint Spectrum Market Areas
<TABLE>
<CAPTION>
MTA ESTIMATED PRICE
NUMBER SPRINT SPECTRUM MARKETS 1995 POPS PER POP (A)
------ -------------------------------------- ------------- -----------
(in Millions)
OWNED MARKETS:
--------------
<S> <C> <C> <C>
1 New York 26.8 $16.76
4 San Francisco-Oakland-San Jose 13.0 17.37
5 Detroit 10.0 8.61
7 Dallas-Ft. Worth 10.5 9.12
8 Boston-Providence 9.7 13.44
12 Minneapolis-St. Paul 6.1 6.63
15 Miami-Ft. Lauderdale 5.7 25.64
17 New Orleans-Baton Rouge 5.0 19.07
19 St. Louis 4.7 24.51
20 Milwaukee 4.6 18.73
21 Pittsburgh 4.0 7.00
22 Denver 4.1 16.60
24 Seattle 4.2 27.48
26 Louisville-Lexington-Evansville 3.6 13.10
27 Phoenix 4.0 21.54
29 Birmingham 3.3 10.97
30 Portland 3.2 11.16
31 Indianapolis 3.0 23.34
32 Des Moines-Quad Cities 2.9 7.00
33 San Antonio 3.2 18.21
34 Kansas City 3.0 8.11
35 Buffalo-Rochester 2.8 6.80
36 Salt Lake City 2.7 17.95
40 Little Rock 2.1 6.01
41 Oklahoma City 1.9 7.00
42 Spokane-Billings 1.9 3.32
43 Nashville 1.9 9.26
46 Wichita 1.1 4.36
48 Tulsa 1.1 15.32
----- ------
TOTAL 150.3 $14.54
45 Omaha (to be contributed) 1.7 3.06
AFFILIATED MARKETS:
-------------------
10 Washington, D.C.-Baltimore (APC) 8.3 $13.16
2 Los Angeles-San Diego (Cox-California) 21.5 $13.16
9 Philadelphia (PhillieCo) 9.1 $9.52
-----
SPRINT SPECTRUM AND AFFILIATES TOTAL 190.9
National Total (A and B Blocks) $15.29
National Total (C Block) $40.00(b)
</TABLE>
- - --------
(a) Based on 1990 Census.
(b) Includes re-auctioned licenses, net of 25% bidding credit.
<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 13
The Reorganization....................................................... 24
The Company.............................................................. 24
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Selected Historical and Pro Forma Financial Data......................... 28
Pro Forma Condensed Financial Statements................................. 29
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 31
Business................................................................. 35
Management............................................................... 56
Certain Relationships and Related Transactions........................... 62
Principal Security Holders............................................... 64
The Partnership Agreements............................................... 65
Description of Vendor Contracts and Financing............................ 72
Description of the Notes................................................. 77
Certain Federal Income Tax Consequences.................................. 105
Underwriting............................................................. 108
Legal Matters............................................................ 109
Experts.................................................................. 109
Available Information.................................................... 109
Glossary of Selected Terms............................................... 110
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
$650,000,000 GROSS PROCEEDS
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
$150,000,000 % SENIOR NOTES
DUE 2006
$ % SENIOR DISCOUNT NOTES
DUE 2006
---------------
PROSPECTUS
---------------
LEHMAN BROTHERS
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
, 1996
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which, except as
otherwise indicated, will be paid solely by the Registrants. All the amounts
shown are estimates, except the Securities and Exchange Commission
("Commission") registration fee and the NASD filing fee:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 224,138
NASD filing fee.................................................. 30,500
Accountants' fees and expenses .................................. 100,000
Printing expenses................................................ 600,000
Legal fees and expenses.......................................... 550,000
Blue Sky fees and expenses....................................... 35,000
Trustees' fees and expenses...................................... 10,000
Miscellaneous fees and expenses.................................. 100,362
Other............................................................ 100,000
----------
Total.......................................................... $1,750,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subject to any terms, conditions or restrictions set forth in the
Partnership Agreement of Sprint Spectrum L.P. ("Sprint Spectrum"), Section 17-
108 of the Delaware Uniform Revised Limited Partnership Act empowers a
Delaware limited partnership to indemnify and hold harmless any partner or
other person from and against all claims and demands whatsoever. The
Partnership Agreement of Sprint Spectrum provides that no Partner, former
Partner or Representative or former Representative, no affiliate of any
thereof, no partner, shareholder, director, officer, employee or agent of any
of the foregoing, nor any officer or employee of Sprint Spectrum will be
liable in damages for any act or failure to act in such person's capacity as a
Partner or Representative or otherwise on behalf of Sprint Spectrum or any of
its subsidiaries unless such act or omission constituted bad faith, gross
negligence, fraud or willful misconduct of such person or a violation by such
person of the Partnership Agreement of Sprint Spectrum or an agreement between
such person and Sprint Spectrum or a subsidiary thereof. Subject to certain
conditions, each Partner, former Partner, Representative and former
Representative, each affiliate of any thereof, each partner, shareholder,
director, officer, employee and agent of any of the foregoing, and each
officer and employee of Sprint Spectrum, will be indemnified and held harmless
by Sprint Spectrum from and against any liability for damages and expenses,
including reasonable attorneys' fees and disbursements and amounts paid in
settlement, resulting from any threatened, pending or completed action, suit
or proceeding relating to or arising out of such person's acts or omissions in
such person's capacity as a Partner or Representative or otherwise involving
such person's activities on behalf of Sprint Spectrum or any of its
subsidiaries, except to the extent that such damages or expenses result from
the bad faith, gross negligence, fraud or willful misconduct of such person or
a violation by such person of the Partnership Agreement of Sprint Spectrum, or
an agreement between such person and Sprint Spectrum or any of its
subsidiaries.
Under Section 145 of the Delaware General Corporation Law (the "Delaware
Law"), a corporation may indemnify its directors, officers, employees and
agents and its former directors, officers, employees and agents and those who
serve, at the corporation's request, in such capacity with another enterprise,
against expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of
II-1
<PAGE>
them were or are made parties or are threatened to be made parties by reason
of their serving or having served in such capacity. The Delaware Law provides,
however, that such person must have acted in good faith and in a manner such
person reasonably believed to be in (or not opposed to) the best interests of
the corporation and, in the right of the corporation, where such person has
been adjudged liable to the corporation, unless, and only to the extent that a
court determines that such person fairly and reasonably is entitled to
indemnity for costs the court deems proper in light of liability adjudication.
Indemnity is mandatory to the extent a claim, issue or matter has been
successfully defended.
Sprint Spectrum Finance Corporation's Certificate of Incorporation and By-
Laws provide for mandatory indemnification of directors and officers on
generally the same terms as permitted by the Delaware Law. Under the By-Laws,
the Company is required to advance expenses incurred by an officer or director
in defending any such action if the director or officer undertakes to repay
such amount if it is determined that the director or officer is not entitled
to indemnification.
Reference is made to the form of Underwriting Agreement, filed as Exhibit
1.1 to this Registration Statement, which provides for the indemnification of
the partnership board representatives and officers of each of the Registrants
signing this Registration Statement and certain controlling persons of each of
the Registrants against certain liabilities (including those arising under the
Securities Act), in certain instances by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
There have been no sales of securities of either of the Registrants.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Purchase Agreement, dated as of [ ], 1996 among the
Underwriters and the Registrants with respect to the Notes
3.1* [Intentionally omitted]
3.2* Certificate of Limited Partnership of Sprint Spectrum L.P.
3.3* Certificate of Incorporation of Sprint Spectrum Finance Corporation
3.4* By-laws of Sprint Spectrum Finance Corporation
3.5* Amended and Restated Agreement of Limited Partnership of MajorCo, L.P.
(renamed Sprint Spectrum Holding Company, L.P.), dated January 31,
1996, among Sprint Spectrum, L.P. (renamed Sprint Enterprises, L.P.),
TCI Network Services, Comcast Telephony Services and Cox Telephony
Partnership
3.6* Agreement of Limited Partnership of MajorCo Sub, L.P. (renamed Sprint
Spectrum L.P.), dated as of March 28, 1995, among MajorCo, L.P. and
MinorCo, L.P.
4.1 Form of Senior Note Indenture between the Registrants and The Bank of
New York, as Trustee
4.2 Form of Senior Note (included in Exhibit 4.1)
4.3 Form of Senior Discount Note Indenture between the Registrants and The
Bank of New York, as Trustee
4.4 Form of Senior Discount Note (included in Exhibit 4.3)
5.1 Opinion of Simpson Thacher & Bartlett regarding the legality of the
Notes being registered
8.1 Opinion of Simpson Thacher & Bartlett regarding material United States
federal income tax consequences of the purchase, ownership and
disposition of the Notes being registered
10.1** Procurement and Services Contract, dated as of January 31, 1996,
between MajorCo, L.P. and Northern Telecom, Inc. [Schedules omitted]
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.2** Procurement and Services Contract, dated as of January 31, 1996,
between MajorCo, L.P. and AT&T Corp. [Schedules omitted]
10.3 Amended and Restated Sprint Trademark License Agreement, dated as of
January 31, 1996, between Sprint Communications Company, L.P. and
MajorCo, L.P.
10.4 Paging Sales Agency Agreement, dated as of January 17, 1996, between
MajorCo, L.P. and Sprint Communications Company, L.P. [Schedules
omitted]
10.5 WirelessCo Affiliation Agreement, dated as of January 9, 1995 between
American PCS, L.P. and WirelessCo, L.P.
10.6 Second Amended and Restated Limited Partnership Agreement of American
PCS, L.P., dated as of January 9, 1995, among American Personal
Communications, Inc., WirelessCo, L.P. and The Washington Post Company
10.7** Purchase and Supply Agreement, dated as of June 21, 1996, between
Sprint Spectrum L.P. and QUALCOMM Personal Electronics and QUALCOMM
Incorporated and Sony Electronics Inc. [Schedules omitted]
10.8 Commitment Letter of Northern Telecom Inc. to Sprint Spectrum L.P.
dated as of June 11, 1996 [Annex omitted]
10.9 Commitment Letter of Chase Securities Inc. and Chemical Bank to Sprint
Spectrum L.P. dated June 7, 1996 [Annexes omitted]
10.10 Commitment Letter of Lucent Technologies, Inc. to Sprint Spectrum L.P.
dated June 21, 1996 [Annexes omitted]
10.11 Employment Agreement, dated as of September 29, 1995, by and among
MajorCo, L.P. and
Joseph M. Gensheimer
10.12 Assignment, Assumption and Amendment No. 1, dated as of June 21, 1996,
to Procurement and Services Agreement, dated as of January 31, 1996,
between MajorCo, L.P. and AT&T Corp.
10.13 Assignment, Assumption and Amendment No. 1, dated as of June 26, 1996,
to Procurement and Services Contract, dated as of January 31, 1996,
between MajorCo, L.P. and Northern Telecom, Inc.
10.14 Assignment and Assumption, dated as of July 1, 1996, between Sprint
Spectrum Holding Company, L.P., Sprint Spectrum L.P. and Sprint
Spectrum Realty Company, L.P.
10.15 Property Use Agreement, dated as of July 1, 1996, between Sprint
Spectrum Realty Company, L.P. and Sprint Spectrum L.P.
10.16 Assignment and Assumption, dated as of July 1, 1996, between Sprint
Spectrum Holding Company, L.P., Sprint Spectrum L.P. and Sprint
Spectrum Equipment Company, L.P.
10.17 Equipment Lease Agreement, dated as of July 1, 1996, between Sprint
Spectrum Equipment Company, L.P. and Sprint Spectrum L.P. [Schedule
omitted]
10.18 Customer Account and Billing System Agreement, dated as of February
26, 1996, between Sprint Spectrum L.P. and Cincinnati Bell Information
Systems Inc. [Schedules omitted]
10.19 Capital Contribution Agreement, dated as of July 15, 1996, among
Sprint Corporation, Tele- Communications, Inc., Comcast Corporation,
Cox Communications, Inc. and Sprint Spectrum L.P.
12.1 Not applicable
21.1* Subsidiaries of the Registrants
23.1 Consents of Simpson Thacher & Bartlett (included in Exhibits 5.1 and
8.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Price Waterhouse LLP
24.1* Powers of Attorney (included on signature pages to Registration
Statement)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, on Form T-1 of The Bank of New York, as Trustee under the
Senior Note Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, on Form T-1 of The Bank of New York, as Trustee under the
Senior Discount Note Indenture
</TABLE>
- - --------
*Previously filed.
** Portions of these Exhibits have been redacted. These portions have been
separately filed with the Commission pursuant to a request for confidential
treatment under Rule 406.
(b) Financial Statement Schedules
Schedules are omitted for the reason that they are not required or are not
applicable.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 14 above, or
otherwise, the registrants have been advised that in the opinion of the
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 any
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrants 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, the registrants 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 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 Registrants hereby undertake:
(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 the 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, SPRINT SPECTRUM
L.P. HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, MISSOURI, ON JULY 29, 1996.
Sprint Spectrum L.P.
By: Sprint Spectrum Holding Company,
L.P., its General Partner
/s/ Robert M. Neumeister, Jr.
By: _________________________________
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
* Chief Executive
- - ------------------------------------- Officer and July 29, 1996
RONALD T. LEMAY President
* Chief Technology
- - ------------------------------------- Officer July 29, 1996
ARTHUR A. KURTZE
* Chief Business
- - ------------------------------------- Development Officer July 29, 1996
BERNARD A. BIANCHINO
II-5
<PAGE>
SIGNATURES TITLE DATE
* Chief Financial
- - ------------------------------------- Officer July 29, 1996
ROBERT M. NEUMEISTER, JR.
* General Counsel and
- - ------------------------------------- Secretary July 29, 1996
JOSEPH M. GENSHEIMER
*
- - ------------------------------------- Partnership Board July 29, 1996
WILLIAM T. ESREY Representative from
Sprint Spectrum
Holding Company,
L.P.
*
- - ------------------------------------- Partnership Board July 29, 1996
GARY D. FORSEE Representative from
Sprint Spectrum
Holding Company,
L.P.
*
- - ------------------------------------- Partnership Board July 29, 1996
GERALD W. GAINES Representative from
Sprint Spectrum
Holding Company,
L.P.
*
- - ------------------------------------- Partnership Board July 29, 1996
ARTHUR B. KRAUSE Representative from
Sprint Spectrum
Holding Company,
L.P.
*
- - ------------------------------------- Partnership Board July 29, 1996
JAMES O. ROBBINS Representative from
Sprint Spectrum
Holding Company,
L.P.
*
- - ------------------------------------- Partnership Board July 29, 1996
LAWRENCE S. SMITH Representative from
Sprint Spectrum
Holding Company,
L.P.
/s/ Robert M. Neumeister, Jr.
*By__________________________________
ROBERT M. NEUMEISTER, JR.
ATTORNEY-IN-FACT
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SPRINT SPECTRUM
FINANCE CORPORATION HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF KANSAS CITY, MISSOURI, ON JULY 29, 1996.
Sprint Spectrum Finance Corporation
/s/ Robert M. Neumeister, Jr.
By: _________________________________
VICE PRESIDENT AND TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
* President and
- - ------------------------------------- Director July 29, 1996
RONALD T. LEMAY
* Vice President,
- - ------------------------------------- Treasurer July 29, 1996
ROBERT M. NEUMEISTER, JR. (Principal
Financial and
Accounting
Officer), and
Director
* Secretary and
- - ------------------------------------- Director July 29, 1996
JOSEPH M. GENSHEIMER
/s/ ROBERT M. NEUMEISTER, JR.
*By__________________________________
ROBERT M. NEUMEISTER, JR.
ATTORNEY-IN-FACT
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
1.1 Form of Purchase Agreement, dated as of [ ], 1996
among the Underwriters and the Registrants with respect
to the Notes
3.1* [Intentionally omitted]
3.2* Certificate of Limited Partnership of Sprint Spectrum
L.P.
3.3* Certificate of Incorporation of Sprint Spectrum Finance
Corporation
3.4* By-laws of Sprint Spectrum Finance Corporation
3.5* Amended and Restated Agreement of Limited Partnership
of MajorCo, L.P. (renamed Sprint Spectrum Holding
Company, L.P.), dated January 31, 1996, among Sprint
Spectrum, L.P. (renamed Sprint Enterprises, L.P.), TCI
Network Services, Comcast Telephony Services and Cox
Telephony Partnership
3.6* Agreement of Limited Partnership of MajorCo Sub, L.P.
(renamed Sprint Spectrum L.P.), dated as of March 28,
1995, among MajorCo, L.P. and MinorCo, L.P.
4.1 Form of Senior Note Indenture between the Registrants
and The Bank of New York, as Trustee
4.2 Form of Senior Note (included in Exhibit 4.1)
4.3 Form of Senior Discount Note Indenture between the
Registrants and The Bank of New York, as Trustee
4.4 Form of Senior Discount Note (included in Exhibit 4.3)
5.1 Opinion of Simpson Thacher & Bartlett regarding the
legality of the Notes being registered
8.1 Opinion of Simpson Thacher & Bartlett regarding
material United States federal income tax consequences
of the purchase, ownership and disposition of the Notes
being registered
10.1** Procurement and Services Contract, dated as of January
31, 1996, between MajorCo, L.P. and Northern Telecom,
Inc. [Schedules omitted]
10.2** Procurement and Services Contract, dated as of January
31, 1996, between MajorCo, L.P. and AT&T Corp.
[Schedules omitted]
10.3 Amended and Restated Sprint Trademark License
Agreement, dated as of January 31, 1996, between Sprint
Communications Company, L.P. and MajorCo, L.P.
10.4 Paging Sales Agency Agreement, dated as of January 17,
1996, between MajorCo, L.P. and Sprint Communications
Company, L.P. [Schedules omitted]
10.5 WirelessCo Affiliation Agreement, dated as of January
9, 1995 between American PCS, L.P. and WirelessCo, L.P.
10.6 Second Amended and Restated Limited Partnership
Agreement of American PCS, L.P., dated as of January 9,
1995, among American Personal Communications, Inc.,
WirelessCo, L.P. and The Washington Post Company
10.7** Purchase and Supply Agreement dated as of June 21,
1996, between Sprint Spectrum L.P. and QUALCOMM
Personal Electronics and QUALCOMM Incorporated and Sony
Electronics Inc. [Schedules Omitted]
10.8 Commitment Letter of Northern Telecom Inc. to Sprint
Spectrum L.P. dated June 11, 1996. [Annex omitted]
10.9 Commitment Letter of Chase Securities Inc. and Chemical
Bank to Sprint Spectrum L.P. dated June 7, 1996.
[Annexes omitted]
10.10 Commitment Letter from Lucent Technologies, Inc. to
Sprint Spectrum L.P. dated June 21, 1996. [Annexes
omitted]
10.11 Employment Agreement, dated as of September 29, 1995,
by and among MajorCo, L.P. and Joseph M. Gensheimer.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
10.12 Assignment, Assumption and Amendment No. 1, dated as of
June 21, 1996, to Procurement and Services Agreement,
dated as of January 31, 1996, between MajorCo, L.P. and
AT&T Corp.
10.13 Assignment, Assumption and Amendment No. 1, dated as of
June 26, 1996, to Procurement and Services Contract,
dated as of January 31, 1996, between MajorCo, L.P. and
Northern Telecom, Inc.
10.14 Assignment and Assumption, dated as of July 1, 1996,
between Sprint Spectrum Holding Company, L.P., Sprint
Spectrum L.P. and Sprint Spectrum Realty Company, L.P.
10.15 Property Use Agreement, dated as of July 1, 1996,
between Sprint Spectrum Realty Company, L.P. and Sprint
Spectrum L.P.
10.16 Assignment and Assumption, dated as of July 1, 1996,
between Sprint Spectrum Holding Company, L.P., Sprint
Spectrum L.P. and Sprint Spectrum Equipment Company,
L.P.
10.17 Equipment Lease Agreement, dated as of July 1, 1996,
between Sprint Spectrum Equipment Company, L.P. and
Sprint Spectrum L.P. [Schedule omitted]
10.18 Customer Account and Billing System Agreement, dated as
of February 26, 1996, between Sprint Spectrum L.P. and
Cincinnati Bell Information Systems Inc. [Schedules
omitted]
10.19 Capital Contribution Agreement, dated as of July 15,
1996, among Sprint Corporation, Tele-Communications,
Inc., Comcast Corporation, Cox Communications, Inc. and
Sprint Spectrum L.P.
12.1 Not applicable.
21.1* Subsidiaries of the Registrants
23.1 Consents of Simpson Thacher & Bartlett (included in
Exhibits 5.1 and 8.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Price Waterhouse LLP
24.1* Powers of Attorney (included on signature pages to
Registration Statement)
25.1 Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, on Form T-1 of The Bank of New
York, as Trustee under the Senior Note Indenture
25.2 Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, on Form T-1 of The Bank of New
York, as Trustee under the Senior Discount Note
Indenture
</TABLE>
- - -------
*Previously filed.
** Portions of these Exhibits have been redacted. These portions have been
separately filed with the commission pursuant to a request for confidential
treatment under Rule 406.
<PAGE>
GRAPHICS APPENDIX LIST
----------------------
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS-REFFERENCE
- - ---------- ------------------------------------------
Inside A map of the continental United States
Front Gate divided into MTAs showing the PCS
license coverage of the Company through
direct ownership or affiliation.
<PAGE>
Sprint Spectrum L.P.
Sprint Spectrum Finance Corporation
$[ ] [ ]% Senior Notes due 2006
$[ ] [ ]% Senior Discount Notes due 2006
PURCHASE AGREEMENT
------------------
[ ], 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
LEHMAN BROTHERS INC.
CHASE SECURITIES INC.
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
and
---
Lehman Brothers Inc.
Three World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
Sprint Spectrum, L.P., a Delaware limited partnership (the "Company"), and
Sprint Spectrum Finance Corporation, a Delaware corporation ("Finco" and,
together with the Company, the "Issuers"), confirm their agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Lehman Brothers Inc. ("Lehman"), Chase Securities Inc. ("Chase"),
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Salomon Brothers
Inc ("Salomon" and, together with Merrill Lynch, Lehman, Chase and
<PAGE>
-2-
DLJ, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), with respect to the
issue and sale by the Issuers and the purchase by the Underwriters, acting
severally and not jointly, of (i) the respective principal amounts set forth in
Schedule A hereto of the $150,000,000 aggregate principal amount of the Issuers'
[ ]% Senior Notes due 2006 (the "Senior Notes") and (ii) the respective
principal amounts at maturity set forth in Schedule A hereto of the $[ ]
aggregate principal amount at maturity of the Issuers' [ ]% Senior Discount
Notes due 2006 (the "Senior Discount Notes" and, together with the Senior Notes,
the "Notes"). The Senior Notes are to be issued pursuant to an indenture to be
dated as of [ ], 1996 (the "Senior Notes Indenture") by and among the
Issuers and The Bank of New York, as trustee (the "Senior Notes Trustee"). The
Senior Discount Notes will be issued pursuant to an indenture to be dated as of
[ ], 1996 (the "Senior Discount Notes Indenture" and, together with the
Senior Notes Indenture, the "Indentures") by and among the Issuers and The Bank
of New York, as trustee (the "Senior Discount Notes Trustee" and, together with
the Senior Notes Trustee, the "Trustees").
Sprint Spectrum Holding Company, L.P., a Delaware limited partnership
("Holdings"), the Company and Sprint Spectrum Equipment Company, L.P., a
Delaware limited partnership ("EquipmentCo"), have entered into an Assignment
and Assumption Agreement (Equipment) dated as of July 1, 1996 (the "Assignment
and Assumption (Equipment)"), pursuant to which Holdings assigned its rights to
all of its equipment used in the PCS business to the Company and the Company
assigned its rights to such equipment. EquipmentCo, Holdings, the Company and
Sprint Spectrum Realty Company, L.P., a Delaware limited partnership
("RealtyCo"), have entered into an Assignment and Assumption Agreement (Leases
and Employees) dated as of July 1, 1996 (the "Assignment and Assumption (Leases
and Employees)") pursuant to which Holdings assigned to the Company its rights
under all of its leases used in the PCS business and the Company assigned its
rights under such lease to RealtyCo. EquipmentCo and the Company have entered
into an Equipment Lease Agreement dated as of July 1, 1996 (the "Equipment Lease
Agreement") pursuant to which EquipmentCo has agreed to lease certain equipment
to the Company. The Company and RealtyCo have entered into a Property Use
Agreement dated as of July 1, 1996 (the "Property Use Agreement") pursuant to
which RealtyCo
<PAGE>
-3-
has agreed to allow the Company to use certain properties. The Assignment and
Assumption (Equipment), the Assignment and Assumption (Leases and Employees),
the Equipment Lease Agreement and the Property Use Agreement are collectively
referred to herein as the "Reorganization Agreements." The transactions
consummated pursuant to the Reorganization Agreements are referred to herein as
the "Reorganization."
The Issuers understand that the Underwriters propose to make a public
offering of the Securities as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered and the Indentures have been qualified
under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Issuers have filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-06609) covering the
registration of the Notes under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus. Promptly after
execution and delivery of this Agreement, the Issuers will either (i) prepare
and file a prospectus in accordance with the provisions of Rule 430A ("Rule
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the
1933 Act Regulations or (ii) if the Issuers have elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term
Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto, if any, at the
time it became effective and including the Rule 430A Information and the Rule
434 Information, as
<PAGE>
-4-
applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the Underwriters
for use in connection with the offering of the Notes is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to
the preliminary prospectus dated [ ], 1996 together with the Term
Sheet and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet.
Section 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Issuers. Each of the Issuers,
---------------------------------------------
jointly and severally, represents and warrants to each Underwriter as of the
date hereof and as of the Closing Time referred to in Section 2(b) hereof, and
agrees with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Issuers, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time, the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules
and regulations of the Commission under the 1939 Act (the "1939 Act
Regulations"), and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or
<PAGE>
-5-
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time, included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. If Rule 434 is used, the Issuers will
comply with the requirements of Rule 434 and the Prospectus shall not be
"materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective. The representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or
Prospectus or any amendments or supplements thereto made in reliance upon
and in conformity with information furnished to the Issuers in writing by
any Underwriter expressly for use in the Registration Statement or
Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations.
(ii) Independent Accountants. Deloitte & Touche LLP, the
-----------------------
accountants who certified the consolidated financial statements and
supporting schedules of the Company included in the Registration Statement,
are independent public accountants as required by the 1933 Act and the 1933
Act Regulations. Price Waterhouse LLP, the accountants who certified the
financial statements of APC included in the Registration Statement, are
independent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iii) Financial Statements. The consolidated financial
--------------------
statements of Holdings and the Company included in the Registration
Statement and the Prospectus, together with the related schedules and
notes, present fairly in all material respects the financial position of
Holdings and the Company, respectively, and its consolidated subsidiaries
at the dates indicated and the statements of
<PAGE>
-6-
operations, changes in partners' capital and cash flows of Holdings and the
Company, respectively, and their consolidated subsidiaries for the periods
specified; said consolidated financial statements of Holdings and the
Company, respectively, have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any, to such
consolidated financial statements included in the Registration Statement
present fairly in accordance with GAAP the information required to be
stated therein. The selected financial data and the summary financial
information included in the Prospectus present fairly in all material
respects the information shown therein and have been compiled on a basis
consistent with that of the audited consolidated financial statements of
Holdings and the Company included in the Registration Statement. The
financial statements of APC included in the Registration Statement and the
Prospectus, together with the related schedules and notes, present fairly
in all material respects the financial position of APC at the dates
indicated and the statements of loss, changes in partners' capital and cash
flows of APC for the periods specified; said financial statements of APC
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved. The pro forma financial information
included in the Registration Statement and the Prospectus presents fairly
in all material respects the information shown therein, has been prepared
in accordance with the Commission's rules and guidelines with respect to
pro forma financial information and has been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A) there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business or business prospects of the
Company and the Subsidiaries (as defined herein) considered as one
enterprise, whether or not
<PAGE>
-7-
arising in the ordinary course of business (a "Material Adverse Effect"),
(B) there have been no transactions entered into by the Company or any of
the Subsidiaries, other than those in the ordinary course of business, that
are material with respect to the Company and the Subsidiaries considered
as one enterprise and (C) there has been no distribution of any kind
declared, paid or made by the Company on any of its equity interests.
(v) Good Standing of the Issuers. Each of the Issuers is a
----------------------------
Delaware limited partnership or corporation, as the case may be, duly
organized or incorporated, as the case may be, validly existing and in good
standing under the laws of Delaware, and has full partnership or corporate,
as the case may be, power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement; and each of
the Issuers is duly qualified as a foreign limited partnership or
corporation, as the case may be, to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not result in a
Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant
-----------------------------
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (collectively, the "Subsidiaries") has been duly organized
or incorporated, as the case may be, and is validly existing as a limited
partnership or corporation, as the case may be, in good standing under the
laws of its jurisdiction of formation or incorporation, as the case may be,
has all partnership or corporate, as the case may be, power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified to transact business as a
foreign limited partnership or corporation, as the case may be, and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Prospectus
<PAGE>
-8-
and the Registration Statement, all of the issued and outstanding equity
interests of each such Subsidiary have been duly authorized and validly
issued and are owned by the Company, directly or through Subsidiaries, free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding equity interests of any
Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. All of the Subsidiaries are listed
on Exhibit 21 to the Registration Statement.
(vii) Capitalization. The capitalization of the Company (A) as
--------------
of March 31, 1996 is as set forth in the Prospectus under the column
entitled "Actual" in the section "Capitalization" and (B) as of March 31,
1996, giving pro forma effect to the Reorganization and as adjusted for the
offering of the Notes is as set forth in the Prospectus under the column
entitled "Pro Forma for the Reorganization and As Adjusted for the
Offering" in the section "Capitalization."
(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by each of the Issuers.
(ix) Authorization of the Indentures. Each of the Indentures has been
-------------------------------
duly authorized by each of the Issuers and duly qualified under the 1939
Act and, when duly executed and delivered by the Issuers and the Senior
Notes Trustee or the Senior Discount Notes Trustee, as the case may be,
will constitute a valid and binding agreement of each of the Issuers,
enforceable against each of the Obligors in accordance with its terms,
subject to the effects of bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless
of whether such enforcement may be sought in a proceeding at law or in
equity) and an implied covenant of good faith and fair dealing.
(x) Authorization of the Senior Notes. The Senior Notes have
---------------------------------
been duly authorized by each of the Issuers and, at Closing Time, the
Senior Notes will have been duly executed by each of the Issuers and, when
<PAGE>
-9-
authenticated in the manner provided for in the Senior Notes Indenture and
delivered against payment of the purchase price therefor, the Senior Notes
will constitute valid and binding obligations of each of the Issuers,
enforceable in accordance with their terms and entitled to the benefits of
the Senior Notes Indenture, subject to the effects of bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforcement may be
sought in a proceeding at law or in equity) and an implied covenant of good
faith and fair dealing.
(xi) Authorization of the Senior Discount Notes. The Senior
------------------------------------------
Discount Notes have been duly authorized by each of the Issuers and, at
Closing Time, the Senior Discount Notes will have been duly executed by
each of the Issuers and when authenticated in the manner provided for in
the Senior Discount Notes Indenture and delivered against payment of the
purchase price therefor, the Senior Discount Notes will constitute valid
and binding obligations of each of the Issuers, enforceable in accordance
with their terms and entitled to the benefits of the Senior Discount Notes
Indenture, subject to the effects of bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforcement may be sought in a proceeding at
law or in equity) and an implied covenant of good faith and fair dealing.
(xii) Description of the Notes and the Indentures. The Notes
-------------------------------------------
and the Indentures will conform in all material respects to the respective
statements relating thereto contained in the Prospectus and will be in
substantially the respective forms filed as exhibits to the Registration
Statement.
(xiii) Authorization of Reorganization Agreements. Each of the
------------------------------------------
Reorganization Agreements has been duly authorized, executed and delivered
by each of Holdings, the Company, RealtyCo and EquipmentCo, to the extent a
party thereto, and constitutes a valid and binding
<PAGE>
-10-
obligation of each of Holdings, the Company, RealtyCo and EquipmentCo, to
the extent a party thereto, enforceable in accordance with its terms,
subject to the effects of bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by enforcement may be sought in a proceeding
at law or in equity) and an implied covenant of good faith and fair
dealing.
(xiv) Absence of Defaults and Conflicts. None of the Issuers or
---------------------------------
any of the Subsidiaries is in violation of its partnership or incorporation
documents or by-laws ("Organization Documents") or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease, partnership agreement or document or
other agreement or instrument to which such Issuer or Subsidiary is a party
or by which any of them may be bound, or to which any of the property or
assets of an Issuer or any Subsidiary is subject (collectively, "Agreements
and Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement, the Indentures, the Notes and the Reorganization Agreements
and the consummation of the transactions contemplated herein and therein
(including the issuance and sale of the Notes and the use of the proceeds
from the sale of the Notes as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Issuers, Holdings, EquipmentCo and
RealtyCo with their obligations, if any, hereunder and under the
Indentures, the Notes and the Reorganization Agreements have been duly
authorized by all necessary partnership or corporate action, as the case
may be, and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of any of the Issuers or any Subsidiary pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not result in a Material
Adverse Effect), nor will such action result in any violation of
<PAGE>
-11-
(i) the provisions of the Organization Documents of any Issuer or any
Subsidiary or (ii) any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over any Issuer or any
Subsidiary or any of their respective assets, properties or operations,
except, in the case of clause (ii), for such violations that would not
result in a Material Adverse Effect. As used herein, a "Repayment Event"
means any event or condition that gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by any Issuer or any Subsidiary.
(xv) Absence of Proceedings. There is no action, suit,
----------------------
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Issuers, threatened, against or affecting any of the
Issuers or any Subsidiary, or to which any of their respective property or
assets is subject, that is required to be disclosed in the Registration
Statement (other than as disclosed therein), or that could reasonably be
expected to result in a Material Adverse Effect, or that could reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement or the performance by the
Issuers of their obligations hereunder; the aggregate of all pending legal
or governmental proceedings to which any of the Issuers or any Subsidiary
is a party or of which any of their respective property or assets is the
subject that are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xvi) Accuracy of Exhibits. There are no contracts or documents
--------------------
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto that have not been so
described and filed as required.
<PAGE>
-12-
(xvii) Possession of Intellectual Property. Each of the Issuers
-----------------------------------
and the Subsidiaries owns or possesses, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them or as contemplated to be operated by them in the
Prospectus, and none of the Issuers or the Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances that would render any Intellectual Property
invalid or inadequate to protect the interest of the Issuers or the
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xviii) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Issuers of their
obligations hereunder, in connection with the offering, issuance or sale of
the Notes hereunder or the consummation of the transactions contemplated by
this Agreement or the Reorganization Agreements or for the due execution,
delivery or performance of the Indentures by the Issuers, except such as
have been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and except for the
qualification of the Indentures under the 1939 Act.
(xix) Possession of Licenses and Permits. Each of the Issuers
----------------------------------
and the Subsidiaries possesses such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state or local regulatory agencies or bodies
necessary to conduct the business now operated by them or as contemplated
to be operated by them in the Prospectus, except where the
<PAGE>
-13-
failure to possess any such Governmental License would not reasonably be
expected to have a Material Adverse Effect; each of the Issuers and the
Subsidiaries is in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except where
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and none of the Issuers or any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses that, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xx) Title to Property. Each of the Issuers and the Subsidiaries
-----------------
has good and marketable title to all real property owned by it and good
title to all other properties owned by it, in each case, free and clear of
all mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the Prospectus
or (b) do not, singly or in the aggregate, materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Issuers or any of the Subsidiaries; and all of
the leases and subleases material to the business of the Issuers and the
Subsidiaries, considered as one enterprise, and under which the Issuers or
any of the Subsidiaries holds properties described in the Prospectus, are
in full force and effect, and none of the Issuers or any Subsidiary has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of any of the Issuers or any Subsidiary under any of
the leases or subleases mentioned above, or affecting or questioning the
rights of the Issuers or such Subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xxi) Compliance with Cuba Act. Each of the Issuers and the
------------------------
Subsidiaries has complied with, and is and will be in compliance with, the
provisions of that certain Florida act relating to disclosure of doing
business with
<PAGE>
-14-
Cuba, codified as Section 517.075 of the Florida statutes, and the rules
and regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xxii) Investment Company Act. None of the Issuers is, and upon
----------------------
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will be, an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxiii) Registration Rights. There are no persons with
-------------------
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Issuers under the 1933 Act.
(b) Officer's Certificates. Any certificate signed by any officer of
----------------------
any of the Issuers or any of the Subsidiaries delivered to the Underwriters or
to counsel for the Underwriters shall be deemed a representation and warranty by
the Issuers to each Underwriter as to the matters covered thereby.
Section 2. Sale and Delivery to
Underwriters; Closing.
---------------------
(a) Notes. On the basis of the representations and warranties herein
-----
contained and subject to the terms and conditions herein set forth, the Issuers,
as joint and several obligors, agree to sell to each Underwriter, severally and
not jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Issuers, at the prices set forth in Schedule B-1, with respect to the
Senior Notes, and Schedule B-2, with respect to the Senior Discount Notes, the
aggregate principal amount of Senior Notes and the aggregate principal amount at
maturity of Senior Discount Notes set forth in Schedule A opposite the name of
such Underwriter, plus any additional principal amount of Senior Notes or
principal amount at maturity of Senior Discount Notes that such Underwriter may
become obligated to purchase pursuant to the provisions of Section 10 hereof.
<PAGE>
-15-
(b) Payment. Payment of the purchase price for, and delivery of
-------
certificates for, the Notes shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York, or at such other place as shall be
agreed upon by the Underwriters and the Issuers, at 10:00 A.M. (Eastern time),
on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on
any given day) business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later than
ten business days after such date as shall be agreed upon by the Underwriters
and the Issuers (such time and payment and delivery being herein called "Closing
Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Underwriters for the respective accounts of the Underwriters of certificates
for the Notes to be purchased by them. It is understood that each Underwriter
has authorized Merrill Lynch and Lehman, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for the Notes that it has
agreed to purchase.
(c) Denominations; Registration. Certificates for the Notes shall be
---------------------------
in such denominations ($1,000 principal amount of Senior Notes or integral
multiples thereof and $1,000 principal amount at maturity of Senior Discount
Notes or integral multiples thereof) and registered in such names as the
Underwriters may request in writing at least one full business day before the
Closing Time. The Notes will be made available for examination and packaging by
the Underwriters in The City of New York not later than 10:00 A.M. (Eastern
time) on the business day prior to the Closing Time.
3.Covenants of the Issuers. Each of the Issuers covenants with each
------------------------
Underwriter as follows:
(a) Compliance with Notes Regulations and Commission Requests. The
---------------------------------------------------------
Issuers, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Underwriters
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
<PAGE>
-16-
filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus,
or of the suspension of the qualification of the Notes for offering or sale
in any jurisdiction, or of the initiation or threatening of any proceedings
for any of such purposes. The Issuers will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as they deem
necessary to ascertain promptly whether the form of prospectus transmitted
for filing under Rule 424(b) was received for filing by the Commission and,
in the event that it was not, it will promptly file such prospectus. The
Issuers will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof
at the earliest possible moment.
(b) Filing of Amendments. The Issuers will give the Underwriters
--------------------
notice of their intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to the Prospectus, will furnish the Underwriters with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Underwriters or counsel for the Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Issuers have furnished
-----------------------------------
or will deliver to each of the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith) and signed copies of all consents and certificates of experts.
(d) Delivery of Prospectuses. The Issuers have delivered to each
------------------------
Underwriter, without charge, as many
<PAGE>
-17-
copies of each preliminary prospectus as such Underwriter reasonably
requested, and the Issuers hereby consent to the use of such copies for
purposes permitted by the 1933 Act. The Issuers will furnish to each
Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the Notes Exchange Act of
1934, as amended (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request.
(e) Continued Compliance with Securities Laws. The Issuers will
-----------------------------------------
comply with the 1933 Act and the 1933 Act Regulations and the 1939 Act and
the 1939 Act Regulations so as to permit the completion of the distribution
of the Notes as contemplated in this Agreement and in the Prospectus. If
at any time when a prospectus is required by the 1933 Act to be delivered
in connection with sales of the Notes, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel
for the Underwriters or counsel for the Issuers, to amend the Registration
Statement or amend or supplement the Prospectus in order that the
Prospectus will not include 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 existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Issuers will promptly prepare
and file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectus comply with such
requirements, and the Issuers will furnish to the Underwriters such number
of copies of such amendment or supplement as the Underwriters may
reasonably request.
(f) Blue Sky Qualifications. The Issuers will use their best efforts,
-----------------------
in cooperation with the Underwriters, to qualify the Notes for offering and
sale under the applicable securities laws of such states and other
jurisdictions as the Underwriters may designate and to maintain such
qualifications in effect for a period of not
<PAGE>
-18-
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however,
that the Issuers shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which they are not so qualified or to
subject themselves to taxation in respect of doing business in any
jurisdiction in which they are not otherwise so subject. In each
jurisdiction in which the Notes have been so qualified, the Issuers will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not
less than one year from the effective date of the Registration Statement
and any Rule 462(b) Registration Statement. The Issuers will also supply
the Underwriters with such information as is necessary for the
determination of the legality of the Notes for investment under the laws of
such jurisdictions as the Underwriters may request.
(g) Rule 158. The Issuers will timely file such reports pursuant to
--------
the 1934 Act as are necessary in order to make generally available to their
securityholders as soon as practicable an earning statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
---------------
from the sale of the Notes in the manner specified in the Prospectus under "Use
of Proceeds."
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. Each of the Issuers agrees, jointly and severally, to
--------
pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement Among
Underwriters, the Indentures and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the Notes,
(iii) the preparation, issuance and delivery to the Underwriters of the
<PAGE>
-19-
certificates for the Notes, (iv) the fees and disbursements of the Issuers'
counsel, accountants and other advisors, (v) the qualification of the Notes
under state securities laws in accordance with the provisions of Section 3(f)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and the
Prospectus and any amendments or supplements thereto, and the Blue Sky Survey
and any supplement thereto, (vii) the fees and expenses of the Trustees,
including the fees and disbursements of counsel for the Trustees in connection
with the Indentures and the Notes, (viii) any fees payable in connection with
the rating of the Notes and (ix) the filing fees incident to the review by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Notes.
(b) Termination of Agreement. If this Agreement is terminated by the
------------------------
Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Issuers shall reimburse the Underwriters for all of their out-of-
pocket expenses, including the reasonable fees and disbursements of counsel for
the Underwriters.
SECTION 5. Conditions of the Underwriters' Obligations. The
-------------------------------------------
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Issuers contained in Section 1 hereof
or in certificates of any officer of the Issuers or any Subsidiary delivered
pursuant to the provisions hereof, to the performance by each of the Issuers of
its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of
<PAGE>
-20-
counsel to the Underwriters. A prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements
of Rule 430A) or, if the Issuers have elected to rely upon Rule 434, a Term
Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for the Issuers. At the Closing Time, the
----------------------------------
Underwriters shall have received the favorable opinion, dated as of the
Closing Time, of Simpson, Thacher & Bartlett, counsel for the Issuers, in
form and substance satisfactory to counsel for the Underwriters, to the
effect set forth in Exhibit A hereto.
(c) Opinion of Special Counsel for the Issuers. At the Closing Time,
------------------------------------------
the Underwriters shall have received the favorable opinion, dated as of the
Closing Time, of Morrison & Forester, special counsel for the Issuers, in
form and substance satisfactory to counsel for the Underwriter, to the
effect set forth in Exhibit B hereto.
(d) Opinion of Associate General Counsel of the Company. At the
---------------------------------------------------
Closing Time, the Underwriters shall have received the favorable opinion,
dated as of the Closing Time, of Charles R. Wunsch, Associate General
Counsel of the Company, in form and substance satisfactory to counsel for
the Underwriters, to the effect set forth in Exhibit C hereto.
(e) Opinion of Counsel for Underwriters. At Closing Time, the
-----------------------------------
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Cahill Gordon & Reindel, counsel for the Underwriters, with
respect to the matters set forth in clauses (vi) through (xi), inclusive,
and the view expressed in the last paragraph of Exhibit A hereto. In
giving such opinions such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States, the General Corporation Law of the State
of Delaware and the Delaware Revised Uniform Limited Partnership Act, upon
the opinions of counsel satisfactory to the Underwriters. Such counsel may
also state that,
<PAGE>
-21-
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Issuers and
the Subsidiaries and certificates of public officials.
(f) Officers' Certificate. At Closing Time, there shall not have
---------------------
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business or business
prospects of the Company and the Subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Underwriters shall have received a certificate of the President or a
Vice President of each of the Issuers and of the chief financial or chief
accounting officer of each of the Issuers, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
in all material respects with the same force and effect as though expressly
made at and as of Closing Time, (iii) each of the Issuers has complied in
all material respects with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Time and (iv)
no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or
are pending or, to such officers' knowledge, are contemplated by the
Commission.
(g) Accountants' Comfort Letters. At the time of the execution of
----------------------------
this Agreement, the Underwriters shall have received from each of Deloitte
& Touche LLP and Price Waterhouse LLP a letter dated such date, in form and
substance satisfactory to the Underwriters, containing statements and
information of the type ordinarily included in the accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus.
(h) Bring-down Comfort Letters. At Closing Time, the Underwriters
--------------------------
shall have received from each of Deloitte & Touche LLP and Price Waterhouse
LLP a letter, dated as of the Closing Time, to the effect that they
reaffirm the
<PAGE>
-22-
statements made in their respective letters furnished pursuant to
subsection (g) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to Closing Time.
(i) Maintenance of Rating. At Closing Time, the Notes shall be rated
---------------------
at least [ ] by Moody's Investor's Service Inc. and [ ] by Standard
& Poor's Corporation, and the Issuers shall have delivered to the
Underwriters a letter dated the Closing Time, from each such rating agency,
or other evidence satisfactory to the Underwriters, confirming that the
Notes have such ratings; and since the date of this Agreement, there shall
not have occurred a downgrading in the rating assigned to the Notes by any
nationally recognized securities rating agency, and no such securities
rating agency shall have publicly announced that it has under surveillance
or review its rating of the Notes.
(j) Additional Documents. At Closing Time, counsel for the
--------------------
Underwriters shall have been furnished with such documents as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Notes as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Issuers in connection with the issuance and sale of the Notes
as herein contemplated shall be reasonably satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(k) Capital Contribution Agreement. The Company shall have entered
------------------------------
into a Capital Contribution Agreement with Sprint Corporation, Tele-
Communications, Inc., Comcast Corporation and Cox Communications, Inc. on
terms reasonably acceptable to the Underwriters.
(l) Termination of Agreement. If any condition specified in this
------------------------
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Underwriters by notice to the
Issuers at any time at or prior to Closing Time, and such termination shall
be without liability of any party to any other party except as provided in
Section 4 and except
<PAGE>
-23-
that Sections 1, 6, 7 and 8 shall survive any such termination and remain
in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters. Each of the Issuers agrees to
-------------------------------
jointly and severally indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Issuers; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen jointly by Merrill
Lynch and Lehman), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or
<PAGE>
-24-
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- - -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuers by any
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided further that, as to any preliminary
----------------
prospectus, this indemnity agreement shall not inure to the benefit of any
Underwriter or any person controlling that Underwriter on account of any loss,
claim, damage, liability or action arising from the sale of Notes to any person
by that Underwriter if that Underwriter failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the 1933 Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in such preliminary prospectus was corrected in the Prospectus, unless such
failure resulted from non-compliance by the Issuers with Section 3(d).
(b) Indemnification of Issuers, Directors and Officers. Each
--------------------------------------------------
Underwriter severally agrees to indemnify and hold harmless the Issuers, their
respective directors, partnership board representatives or similar officials,
each of its officers who signed the Registration Statement, and each person, if
any, who controls an Issuer within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Issuers by such Underwriter expressly for
use
<PAGE>
-25-
in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party
-------------------------------------
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability that it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected jointly by
Merrill Lynch and Lehman, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected jointly
by the Issuers. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. Notwithstanding the second preceding
sentence, if it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably approved by the indemnified parties defendant in such action, unless
such indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them that are different from or in
addition to those available to such indemnifying party. If an indemnifying
party assumes the defense of such action in accordance with the preceding
sentence, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the
<PAGE>
-26-
entry of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Settlement Without Consent if Failure to Reimburse. If at any
--------------------------------------------------
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel reimbursable
under Section 6(a), such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 6(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Underwriters on the other hand from the offering
of the Notes pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such losses,
<PAGE>
-27-
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Issuers on the one hand and the
Underwriters on the other hand in connection with the offering of the Notes
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Notes pursuant to
this Agreement (before deducting expenses) received by the Issuers and the total
underwriting discount and commission received by the Underwriters, in each case
as set forth on the cover page of the Prospectus or, if Rule 434 is used, the
corresponding location on the Term Sheet, bear to the aggregate initial public
offering price of the Notes as set forth on such cover.
The relative fault of the Issuers on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Notes underwritten by it and distributed to the public were
<PAGE>
-28-
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director, partnership board representative or similar official of the
Issuers, each officer of the Issuers who signed the Registration Statement and
each person, if any, who controls an Issuer within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Issuers. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the principal
amount of Senior Notes and principal amount at maturity of Senior Discount Notes
set forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- - --------
Agreement or in certificates of officers of the Issuers submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Issuers or any Controlling Person, and shall survive
delivery of the Notes to the Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Underwriters may terminate this
--------------------
Agreement, by notice to the Issuers, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business
<PAGE>
-29-
prospects of the Company and the Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Underwriters,
impracticable to market the Notes or to enforce contracts for the sale of the
Notes, or (iii) if trading generally on the American Stock Exchange or the New
York Stock Exchange or in the Nasdaq National Market has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
-----------
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If any
------------------------------------------
Underwriter shall fail at Closing Time to purchase the Notes that it is
obligated to purchase under this Agreement (the "Defaulted Notes"), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for the non-defaulting Underwriters, or any other underwriter, to
purchase all, but not less than all, of the Defaulted Notes in such amounts as
may be agreed upon and upon the terms herein set forth; if, however, the
Underwriters shall not have completed such arrangements within such 24-hour
period, then:
(a) if the principal amount of Defaulted Notes does not exceed 10% of
the principal amount of Notes to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
<PAGE>
-30-
(b) if the principal amount of Defaulted Notes exceeds 10% of the
principal amount of Notes to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or
either of the Issuers, except that the Issuers will continue to be liable for
the payment of expenses to the extent set forth in Section 4.
No action pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either the Underwriters or the Issuers shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other document or arrangement. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to Merrill Lynch at North Tower, World Financial
Center, New York, New York 10281-1201, attention of Bennett Rosenthal and to
Lehman at Three World Financial Center, 200 Vesey Street, New York, New York
10285, attention of Robert D. Redmond; and notices to the Issuers shall be
directed to the Company at 4900 Main Street, 12th Floor, Kansas City, Missouri
64112, attention of Joseph M. Gensheimer, Esq.
SECTION 12. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Underwriters and each of the Issuers and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm, partnership or
corporation, other than the Underwriters and the Issuers and their respective
successors and the controlling persons and officers and directors or similar
officials referred in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended
<PAGE>
-31-
to be for the sole and exclusive benefit of the Underwriters and each of the
Issuers and their respective successors, and said controlling persons and
officers, directors and partnership board representatives or similar officials
and their heirs and legal representatives, and for the benefit of no other
person, firm, partnership or corporation. No purchaser of Notes from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings
------------------
herein are for convenience only and shall not affect the construction hereof.
<PAGE>
-32-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and each of the Issuers in accordance with its terms.
Very truly yours,
SPRINT SPECTRUM, L.P.
By: Sprint Spectrum Holding
Company, L.P., its General
Partner
By:
-------------------------------
Name:
Title:
SPRINT SPECTRUM FINANCE
CORPORATION
By:
-------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By:
-------------------------------
Name:
Title:
<PAGE>
-33-
CHASE SECURITIES INC.
By:
-------------------------------
Name:
Title:
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Principal
Amount of
Name of Underwriter Senior Notes
------------------- ------------
Merrill Lynch, Pierce, Fenner &
Smith Incorporated . . . . . . . . . . . . . . . .
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . .
Chase Notes Inc. . . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities
Corporation . . . . . . . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . .
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $150,000,000
============
Principal Amount
at Maturity
of Senior
Name of Underwriter Discount Notes
------------------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . .
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . .
Chase Notes Inc. . . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities
Corporation . . . . . . . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . .
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $150,000,000
============
Sch. A-1
<PAGE>
SCHEDULE B-1
Sprint Spectrum L.P.
Sprint Spectrum Finance Corporation
$150,000,000 aggregate principal amount
of [ ]% Senior Notes due 2006
1. The initial public offering price of the Senior Notes, determined
as provided in said Section 2, shall be [ ]% of the principal amount thereof,
plus accrued interest, if any, from [ ], 1996.
2. The purchase price of the Senior Notes to be paid by the
Underwriters shall be [ ]% of the principal amount thereof.
3. The interest rate to be borne by the Senior Notes shall be [ ]%
per annum.
4. The Senior Notes will mature on [ ], 2006.
5. The Senior Notes will be redeemable at the election of the Issuers
at [ ]% of their principal amount at any time on or after [ ], 2001 and
prior to [ ], 2002, at [ ]% of their principal amount on or after [
], 2002 and prior to [ ], 2003, at [ ]% of their principal amount on or
after [ ], 2003 and prior to [ ], 2004, and at 100% of their principal
amount at any time on or after [ ], 2004, in each case plus accrued and
unpaid interest, if any to the redemption date.
6. The redemption price of the Senior Notes upon a Public Equity
Offering (as defined in the Registration Statement) shall be [ ]% of the
originally issued principal amount thereof.
7. The interest payment dates shall be each [ ] and [ ],
commencing [ ], 1997.
Sch. B-1
<PAGE>
SCHEDULE B-2
Sprint Spectrum L.P.
Sprint Spectrum Finance Corporation
$[ ] aggregate principal amount at maturity of
[ ]% Senior Discount Notes due 2006
1. The initial public offering price of the Senior Discount Notes,
determined as provided in said Section 2, shall be [ ]% of the principal
amount at maturity thereof, plus accrued Accreted Value (as defined in the
Senior Discount Notes Indenture), if any, from [ ], 1996.
2. The purchase price of the Senior Discount Notes to be paid by the
Underwriters shall be [ ]% of the principal amount at maturity thereof.
3. The interest rate to be borne by the Senior Discount Notes shall
be [ ]% per annum.
4. The Senior Discount Notes will mature on [ ], 2006.
5. The Senior Discount Notes will be redeemable at the election of
the Issuers at [ ]% of their principal amount at maturity at any time on or
after [ ], 2001 and prior to [ ], 2002, at [ ]% of their principal
amount at maturity on or after [ ], 2002 and prior to [ ], 2003, at [
]% of their principal amount at maturity on or after [ ], 2003 and prior to
[ ], 2004, and at 100% of their principal amount at maturity at any time on
or after [ ], 2004, in each case plus accrued and unpaid interest, if any
to the redemption date.
6. The redemption price of the Senior Discount Notes upon a Public
Equity Offering (as defined in the Registration Statement) shall be [ ]% of
Accreted Value thereof.
7. The interest payment dates shall be each [ ] and [ ],
commencing [ ], 2002.
Sch. B-2
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(B)
1. FinCo has been duly incorporated and is validly existing and in
good standing as a corporation under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus.
2. Sprint Spectrum has been duly organized and is validly existing
and in good standing as a limited partnership under the laws of the State of
Delaware and has full partnership power and authority to conduct its business as
described in the Registration Statement and Prospectus.
3. Each of the Indentures has been duly authorized, executed and
delivered by each of the Issuers and duly qualified under the Trust Indenture
Act, and, assuming due authorization, execution and delivery thereof by the
applicable Trustee, constitutes a valid and legally binding obligation of each
of the Issuers enforceable against each of the Issuers in accordance with its
terms.
4. The Notes have been duly authorized, executed and issued by each
of the Issuers and, assuming due authentication thereof by the Trustees and upon
payment and delivery in accordance with the Purchase Agreement, will constitute
valid and legally binding obligations of each of the Issuers enforceable against
each of the Issuers in accordance with their terms and entitled to the benefits
of the Indentures.
5. The statements made in the Prospectus under the caption
"Description of the Notes," insofar as they purport to constitute summaries of
certain terms of documents referred to therein, constitute accurate summaries of
the terms of such documents in all material respects.
6. The Purchase Agreement has been duly authorized, executed and
delivered by each of the Issuers.
7. The issue and sale of the Notes by each of the Issuers and the
compliance by each of the Issuers with all of the provisions of the Purchase
Agreement and the Indentures will not breach or result in a default under or
result in the creation or imposition of any lien, charge or encumbrance upon
<PAGE>
any property or assets of the Issuers pursuant to any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument filed as an exhibit to
the Registration Statement and which the Issuers have represented lists all
material agreements and instruments to which the Issuers or any of their
subsidiaries is a party or by which the Issuers or any of their subsidiaries is
bound or to which any of the property or assets of the Issuers or any of their
subsidiaries is subject, nor will such action violate the Certificate of
Incorporation or By-laws of FinCo or the Certificate of Limited Partnership or
Partnership Agreement of Sprint Spectrum or any Federal or New York statute or
the Delaware General Corporation Law or the Delaware Revised Uniform Limited
Partnership Act or any rule or regulation that has been issued pursuant to any
Federal or New York statute or the Delaware General Corporation Law or the
Delaware Revised Uniform Limited Partnership Act or any order known to us issued
pursuant to any Federal or New York statute or the Delaware General Corporation
Law or the Delaware Revised Uniform Limited Partnership Act by any court or
governmental agency or body or court having jurisdiction over the Issuers or any
of their subsidiaries or any of their properties.
8. No consent, approval, authorization, order, registration or
qualification of or with any Federal or New York governmental agency or body or
any Delaware governmental agency or body acting pursuant to the Delaware General
Corporation Law or the Delaware Revised Uniform Limited Partnership Act or, to
our knowledge, any Federal or New York court or any Delaware court acting
pursuant to the Delaware General Corporation Law or the Delaware Revised Uniform
Limited Partnership Act is required for the issue and sale of the Notes by the
Issuers and the compliance by the Issuers with all of the provisions of the
Purchase Agreement and the Indentures, except for the registration under the Act
of the Notes, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the Underwriters.
9. The Registration Statement has become effective under the Act and
the Prospectus was filed on ___________ __, 1996 pursuant to Rule 424(b)( ) of
the rules and regulations of the Commission under the Act and, to our knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued or proceeding for that purpose has been instituted or threatened by
the Commission.
2
<PAGE>
10. The statements made in the Prospectus under the captions
"Business -- Legal Proceedings", insofar as they purport to constitute summaries
of the terms of legal and governmental proceedings constitute accurate summaries
of the terms of such legal and governmental proceedings in all material
respects.
11. To our knowledge, there are no statutes or pending or threatened
legal or governmental proceedings required to be described in the Prospectus
which are not described as required, or any contracts or documents of a
character required to be described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement which are not described
and filed as required.
12. The statements made in the Prospectus under the caption "Certain
Federal Income Tax Consequences," insofar as they purport to constitute
summaries of matters of United States federal tax law and regulations or legal
conclusions with respect thereto, constitute accurate summaries of the matters
described therein in all material respects.
13. Neither of the Issuers is an "investment company" within the
meaning of and subject to regulation under the Investment Company Act of 1940,
as amended.
Our opinions set forth in paragraphs 3 and 4 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor, except as and to the extent set
forth in paragraphs 5, 10 and 12 above. In the course of the preparation by the
Issuers of the Registration Statement and the Prospectus, we participated in
conferences with certain officers and employees of the Issuers, with
representatives of Deloitte & Touche LLP and Price Waterhouse LLP and with
staff counsel of the Issuers. Based upon our examination of the Registration
Statement and the Prospectus, our investigations made in connection with the
preparation of the Registration Statement and the Prospectus and our
participation in the conferences referred to above, (i) we are of the opinion
that the Registration Statement, as of its effective date, and the
3
<PAGE>
Prospectus, as of ___________ __, 1996, complied as to form in all material
respects with the requirements of the Act, the Trust Indenture Act and the
applicable rules and regulations of the Commission, except that in each case we
express no opinion with respect to the financial statements or other financial
data contained in the Registration Statement or the Prospectus, and (ii) we have
no reason to believe that the Registration Statement, as of its effective date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that in each case we express no
belief with respect to the financial statements or other financial data
contained in the Registration Statement or the Prospectus.
4
<PAGE>
Exhibit B
FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(c)
We have been requested to provide you with this opinion pursuant to
Section 5(c) of the Purchase Agreement dated ___________, 1996 (the "Purchase
Agreement") among the Company, Merrill Lynch & Co., Lehman Brothers Inc., Chase
Securities Inc., Donaldson, Lufkin & Jenrette, and Salomon Brothers Inc. This
opinion addresses certain licenses listed in Schedule A that are held by
WirelessCo, L.P. ("WirelessCo"), a wholly owned subsidiary of the Company.
Except as otherwise provided herein, capitalized terms used in this opinion
shall be defined as set forth in the Purchase Agreement.
This Firm has been engaged as special Federal Communications
Commission ("FCC") counsel to the Company in connection with the Purchase
Agreement. WirelessCo has been authorized by the FCC to provide Personal
Communications Services ("PCS"). As special FCC counsel, this opinion is
limited to those matters within the jurisdiction of the FCC pertaining to PCS.
As to questions of law, the following opinions are based upon only the
Communications Act of 1934, as amended by the Telecommunications Act of 1996
("Communications Act"), and the rules, regulations and published opinions of the
FCC relating thereto. We offer no opinion as to any other federal law or the
laws, rules or regulations of any state or local governmental or regulatory
authority.
In connection with this opinion, we have examined, and relied upon the
FCC licensing records and copies of documents filed by WirelessCo with the FCC
and have compared these records to the licenses listed in Schedule A. We also
have obtained, and relied upon without independent investigation, such
certifications from officers of the Company (the "Officers' Certificates") as we
have deemed necessary for purposes of this opinion. We have also examined FCC
orders and other records of the FCC's Wireless Telecommunications Bureau (the
"FCC Files") and have made telephone inquiries to FCC staff in the FCC's
Wireless Telecommunications Bureau with respect to the opinions stated in
paragraphs (iv), (v), and (vi) herein.
As to matters of fact, we have relied upon and assumed the accuracy
and completeness of the FCC files, the documents filed by WirelessCo with the
FCC, and the Officers' Certificate(s). In rendering this opinion, we have not
independently investigated, established or verified the factual basis of any
<PAGE>
opinion set forth herein, and, unless otherwise indicated herein, have relied
for such matters solely upon the FCC Files, the documents filed by WirelessCo
with the FCC and the Officers' Certificate(s). In particular, we have assumed
that there have been no modifications to, assignments of, name changes or any
other changes to the licenses listed in Schedule A.
We have assumed: (i) the authenticity of all documents submitted to
us as originals and the conformity with the original documents of any copies
thereof submitted to us as certified, conformed or photostatic copies for our
examination; (ii) that the signatures on all documents examined by us are
genuine; (iii) that where any such signature purports to have been made in a
corporate, governmental, fiduciary or other capacity, the person who affixed
such signature to such documents had authority to do so; and (iv) that all
public files, records and certificates of, or furnished by, governmental or
regulatory agencies or authorities are true, correct and complete.
Based upon our examination of the foregoing documents, records and
disclosures and subject to the qualifications, assumptions and limitations set
forth herein, we are of the opinion that:
(i) The issuance and sale of each of the Senior Notes and the Senior
Discount Notes and the consummation by the Issuers of all of the transactions
contemplated by the Purchase Agreement will not result in a violation of the
Communications Act or any order, rule or regulation of the FCC.
(ii) No consent, approval, authorization, order, registration or
qualification of or with any governmental agency or body is required under the
Communications Act or the rules and regulations of the FCC for the issuance and
sale of each of the Senior Notes and the Senior Discount Notes or the
consummation by the Issuers of the transactions contemplated by the Purchase
Agreement.
(iii) WirelessCo owns or has the right to use or manage all of the
Governmental Licenses listed in Schedule A, without any known conflict with the
rights of others or which, taken in the aggregate, would not materially or
adversely affect: (i) the business, operations, assets or financial condition
of the Issuers and the Subsidiaries (taken as a whole), or (ii) the ability of
the Issuers to perform their obligations under the Purchase Agreement. Such
Governmental Licenses are in full force and effect and such counsel is not
2
<PAGE>
aware of any other licenses required by the Issuers or the Subsidiaries to
conduct its business as now operated or as contemplated to be operated by it.
(iv) Such counsel is not aware of any material respect in which the
operation of the Issuers' and the Subsidiaries' businesses is not in accordance
with the Governmental Licenses, the Communications Act and all orders, rules and
regulations of the FCC.
(v) Except as described in the Prospectus, such counsel does not know
of any material proceedings threatened, pending or contemplated before the FCC
against or involving the properties, businesses or Governmental Licenses of the
Issuers and the Subsidiaries.
(vi) To the best of such counsel's knowledge, subject to the
qualification in (v) above, no event has occurred that permits, or with notice
or lapse of time or both would permit the revocation or termination of any of
the Governmental Licenses or that might result in any other material impairment
of the rights of the Issuers or the Subsidiaries therein.
(vii) The statements made in the Prospectus under the captions "Risk
Factors -- Network Buildout and System Implementation Risks -- Relocation of
Microwave Paths"; "-- Government Regulation" and "Business -- The Wireless
Telecommunications Industry"; "-- Regulation," insofar as such statements
purport to constitute summaries of relevant Federal communications laws or
related legal and governmental proceedings, constitute accurate summaries of the
terms of such laws and proceedings in all material respects.
Whenever our opinion herein with respect to the existence or absence
of facts is indicated to be based on the best of our knowledge or words to such
effect it is intended to signify that, in the course of our representation of
the Company, in connection with the Purchase Agreement, none of Cheryl A. Tritt,
Joan E. Neal and Joyce H. Jones (the only attorneys of this Firm with
substantive involvement in this matter) acquired actual knowledge of the
existence or absence of any such facts. Please be advised that the above-named
persons are the only attorneys of this firm who have been actively engaged in
the representation of the Company in connection with the Purchase Agreement.
Except to the extent expressly stated herein, we have not undertaken any
independent investigation to determine the existence or absence of such facts,
and no inference as to
3
<PAGE>
our knowledge of the existence of such facts should be drawn from the fact of
our representation of the Company.
The opinion expressed herein is rendered as of the date of this letter
and is specific to the transactions and the documents referred to herein. This
opinion may not be relied upon for any other purpose or by any other person or
entity without our prior written consent. This opinion is furnished solely for
your benefit, upon the understanding that we are not hereby assuming
professional responsibility to any other person or entity whatsoever and have no
responsibility to advise you of any changes in the facts, or of any
circumstances or developments after the date hereof that would or might conflict
with any of the assumptions herein stated.
4
<PAGE>
Exhibit C
FORM OF OPINION OF ASSOCIATE GENERAL COUNSEL
OF THE COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(d)
(i) Each of Wireless Co, L.P., Sprint Spectrum Equipment Company, L.P.,
Sprint Spectrum Realty Company, L.P. and Sprint Spectrum Finance Corporation,
which are subsidiaries of the Company (the "Subsidiaries"), has been duly
organized and is validly existing as a limited partnership or corporation, as
the case may be, in good standing under the laws of its jurisdiction of
organization or incorporation, and each such Subsidiary has full partnership or
corporate power and authority, as the case may be, to conduct its business as
described in the Registration Statement and Prospectus. Each Subsidiary is duly
qualified as a foreign partnership or corporation to transact business and is in
good standing in each jurisdiction set forth in Exhibit A hereto; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding equity interests of each Subsidiary have been duly authorized and
validly issued and is owned by the Company, directly or through Subsidiaries, to
the best of my knowledge, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding equity
interests of any Subsidiary was issued in violation of the preemptive or similar
rights of any securityholder of such Subsidiary.
(ii) Each of Sprint Spectrum Holding Company, L.P. and Sprint Spectrum,
L.P. is and since the date of its organization has been treated for federal
income tax purposes as a partnership and not as a publicly-traded partnership.
(iii) To the best of my knowledge, neither the Issuers nor any of the
Subsidiaries are in violation of their respective Organization Documents, and no
default by the Issuers or any Subsidiary exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease,
partnership document or other agreement or instrument that is described in the
Registration Statement or the Prospectus or filed as an exhibit to the
Registration Statement.
<PAGE>
(iv) Except as provided in Section 12.6 of the Partnership Agreement
of Sprint Spectrum Holding Company, L.P., to my knowledge, there are no
contracts or agreements between the Issuers and any person granting such person
the right to require the Issuers to include any securities of the Issuers owned
or to be owned by such person in the securities registered pursuant to the
Registration Statement.
(v) The statements made in the Prospectus under the caption "The
Partnership Agreements," insofar as they purport to constitute summaries of the
terms of contracts and other documents constitute accurate summaries of the
terms of such contracts and other documents in all material respects.
I have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor, except as and to the extent set
forth in paragraph (v) above. In the course of the preparation by the Issuers
of the Registration Statement and the Prospectus, I participated in conferences
with certain officers and employees of the Issuers, with representatives of
Deloitte & Touche LLP and Price Waterhouse LLP and with counsel to the Issuers.
Based upon my examination of the Registration Statement and the Prospectus, my
investigations made in connection with the preparation of the Registration
Statement and the Prospectus and my participation in the conferences referred to
above, I have no reason to believe that the Registration Statement, as of its
effective date, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading or that the Prospectus contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that in each
case I express no belief with respect to the financial statements or other
financial data contained in the Registration Statement or the Prospectus.
2
<PAGE>
EXHIBIT 4.1
- - --------------------------------------------------------------------------------
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION,
as Issuers,
and
THE BANK OF NEW YORK,
as Trustee
---------------------------
INDENTURE
Dated as of [ ], 1996
---------------------------
$150,000,000
[ ]% Senior Notes due 2006
- - --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Section Indenture Section
- - ----------- -----------------
<S> <C>
(S) 310(a)(1)................................. 7.10; 11.1
(a)(2)................................. 7.10; 11.1
(a)(3)................................. N.A.
(a)(4)................................. N.A.
(b).................................... 7.8; 7.10; 11.2
(c).................................... N.A.
(S) 311(a).................................... 7.11
(b)...................................... 7.11
(c)...................................... N.A.
(S) 312(a).................................... 2.5
(b)...................................... 11.3
(c)...................................... 11.3
(S) 313(a).................................... 7.6
(b)(1)................................... 7.6
(b)(2)................................... 7.6
(c)...................................... 7.6; 11.2
(d)...................................... 7.6
(S) 314(a).................................... 4.6; 4.7; 11.2
(b)...................................... N.A.
(c)(1)................................... 11.4
(c)(2)................................... 11.4
(c)(3)................................... 11.4
(d)...................................... N.A.
(e)...................................... 11.5
(f)...................................... N.A.
(S) 315(a).................................... 7.1(b)
(b)...................................... 7.5; 11.2
(c)...................................... 7.1(a)
(d)...................................... 7.1(c)
(e)...................................... 6.11
(S) 316(a) (last sentence).................... 2.9
(a)(1)(A)................................ 6.5
(a)(1)(B)................................ 6.4
(a)(2)................................... N.A.
(b)...................................... 6.7
(S) 317(a)(1)................................. 6.8
(a)(2)................................... 6.9
(b)...................................... 2.4
(S) 318(a).................................... 11.1
</TABLE>
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- - ------- ----
ARTICLE I
DEFINITIONS AND
INCORPORATION BY REFERENCE
1.1 Definitions................................................
1.2 Incorporation by Reference of Trust Indenture Act..........
1.3 Rules of Construction......................................
ARTICLE II
THE SECURITIES
2.1 Form and Dating............................................
2.2 Execution and Authentication...............................
2.3 Registrar and Paying Agent.................................
2.4 Paying Agent To Hold Money in Trust........................
2.5 Securityholder Lists.......................................
2.6 Transfer and Exchange......................................
2.7 Replacement Securities.....................................
2.8 Outstanding Securities.....................................
2.9 Treasury Securities........................................
2.10 Temporary Securities.......................................
2.11 Cancellation...............................................
2.12 Defaulted Interest.........................................
2.13 CUSIP Number...............................................
2.14 Deposit of Moneys..........................................
ARTICLE III
REDEMPTION
3.1 Election To Redeem; Notices to Trustee.....................
3.2 Selection of Securities To Be Redeemed.....................
3.3 Notice of Redemption.......................................
3.4 Effect of Notice of Redemption.............................
3.5 Deposit of Redemption Price................................
3.6 Securities Redeemed in Part................................
ARTICLE IV
COVENANTS
4.1 Payment of Securities......................................
4.2 Maintenance of Office or Agency............................
4.3 Corporate or Partnership Existence.........................
4.4 Payment of Taxes and Other Claims..........................
-i-
<PAGE>
Section Page
- - ------- ----
4.5 Maintenance of Properties; Insurance; Books
and Records; Compliance with Law.........................
4.6 Compliance Certificates....................................
4.7 Reports....................................................
4.8 Limitation on Additional Indebtedness......................
4.9 Limitation on Restricted Payments..........................
4.10 Limitation on Liens Securing Certain
Indebtedness.............................................
4.11 Limitation on Issuance of Certain Guarantees
by, and Debt Securities of, Restricted
Subsidiaries.............................................
4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries...........
4.13 Disposition of Proceeds of Asset Sales.....................
4.14 Limitation on Transactions with Equityholders
and Affiliates...........................................
4.15 Change of Control..........................................
4.16 Limitation on Designations of Unrestricted
Subsidiaries.............................................
4.17 Limitation on Activities of the Issuers and
the Restricted Subsidiaries..............................
4.18 Limitation on Ownership of Equity
Interests of Restricted Subsidiaries.....................
4.19 Waiver of Stay, Extension or Usury Laws....................
ARTICLE V
SUCCESSOR CORPORATION
5.1 Consolidation, Merger, Sale of Assets, Etc.................
5.2 Successor Entity Substituted...............................
5.3 Status of Subsidiaries.....................................
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Events of Default..........................................
6.2 Acceleration...............................................
6.3 Other Remedies.............................................
6.4 Waiver of Past Default.....................................
6.5 Control by Majority........................................
6.6 Limitation on Suits........................................
6.7 Rights of Holders To Receive Payment.......................
6.8 Collection Suit by Trustee.................................
6.9 Trustee May File Proofs of Claim...........................
6.10 Priorities.................................................
6.11 Undertaking for Costs......................................
-ii-
<PAGE>
Section Page
- - ------- ----
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee..........................................
7.2 Rights of Trustee..........................................
7.3 Individual Rights of Trustee...............................
7.4 Trustee's Disclaimer.......................................
7.5 Notice of Defaults.........................................
7.6 Reports by Trustee to Holders..............................
7.7 Compensation and Indemnity.................................
7.8 Replacement of Trustee.....................................
7.9 Successor Trustee by Merger, Etc...........................
7.10 Eligibility; Disqualification..............................
7.11 Preferential Collection of Claims Against
Issuers..................................................
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
8.1 Satisfaction and Discharge.................................
8.2 Legal Defeasance and Covenant Defeasance...................
8.3 Application of Trust Money.................................
8.4 Repayment to the Issuers or a Subsidiary
Guarantor................................................
8.5 Reinstatement..............................................
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.1 Without Consent of Holders.................................
9.2 With Consent of Holders....................................
9.3 Compliance with Trust Indenture Act........................
9.4 Revocation and Effect of Amendments and Consents...........
9.5 Notation on or Exchange of Securities......................
9.6 Trustee To Sign Amendments, Etc............................
ARTICLE X
GUARANTEE
10.1 Unconditional Guarantee....................................
10.2 Severability...............................................
10.3 Limitation of Liability....................................
10.4 Subsidiary Guarantors May Consolidate, Etc.,
on Certain Terms.........................................
10.5 Contribution...............................................
-iii-
<PAGE>
Section Page
- - ------- ----
10.6 Waiver of Subrogation......................................
10.7 Execution of Guarantee.....................................
10.8 Waiver of Stay, Extension or Usury Laws....................
ARTICLE XI
MISCELLANEOUS
11.1 Trust Indenture Act Controls...............................
11.2 Notices....................................................
11.3 Communications by Holders with Other Holders...............
11.4 Certificate and Opinion of Counsel
as to Conditions Precedent...............................
11.5 Statements Required in Certificate and
Opinion of Counsel.......................................
11.6 Rules by Trustee, Paying Agent, Registrar..................
11.7 Legal Holidays.............................................
11.8 Governing Law..............................................
11.9 No Recourse Against Others.................................
11.10 Successors.................................................
11.11 Duplicate Originals........................................
11.12 Separability...............................................
11.13 Table of Contents, Headings, Etc...........................
SIGNATURES.......................................................
EXHIBIT A - Form of Security
EXHIBIT B - Form of Subsidiary Guarantee
-iv-
<PAGE>
INDENTURE dated as of [ ], 1996 by and among SPRINT
SPECTRUM L.P., a Delaware limited partnership (the "Company"), SPRINT SPECTRUM
FINANCE CORPORATION, a Delaware corporation ("FinCo" and, together with the
Company, the "Issuers"), and THE BANK OF NEW YORK, a New York banking
corporation, as Trustee (the "Trustee").
The Issuers have duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Securities to be issued as provided
for in this Indenture. All things necessary to make the Securities the valid
and binding obligations of the Issuers, and to make this Indenture a valid and
binding agreement of each of the Issuers, have been done.
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions.
-----------
"Accreted Value" as of any date (the "Specified Date") means, with
respect to each $1,000 principal amount at maturity of the Senior Discount
Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------ --------
Issue Date ......................... $[ ]
[ ], 1997.............. [ ]
[ ], 1997.............. [ ]
[ ], 1998.............. [ ]
[ ], 1998.............. [ ]
[ ], 1999.............. [ ]
[ ], 1999.............. [ ]
[ ], 2000.............. [ ]
[ ], 2000.............. [ ]
[ ], 2001.............. [ ]
[ ], 2001.............. $1,000.00;
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x)
<PAGE>
-2-
the Accreted Value for the immediately following Semi-Annual Accrual Date
less the Accreted Value for the immediately preceding Semi-Annual Accrual
Date and (y) a fraction, the numerator of which is the number of days
actually elapsed from the immediately preceding Semi-Annual Accrual Date to
the Specified Date and the denominator of which is 180; and
(iii) if the Specified Date is after [ ], 2001,
$1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by such Person and not incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, (i) "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing and (ii) each of the Partners shall be deemed an Affiliate of the
Company.
"Affiliate Transaction" has the meaning provided in Section
4.14.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest two full fiscal quarters for
which consolidated financial statements of the Company are available multiplied
by two. For purposes of calculating "Consolidated Operating Cash Flow" for any
period for purposes of this definition only, (i) any Subsidiary of the Company
that is a Restricted Subsidiary on the date of the transaction giving rise to
the need to calculate "Annualized Pro Forma Consolidated Operating Cash Flow"
(the "Transaction Date") shall be deemed to have been a Restricted Subsidiary at
all times during such period and (ii) any Subsidiary of the Company that is not
a Restricted Subsidiary on the Transaction Date shall be deemed not to have been
a Restricted Subsidiary at any time
<PAGE>
-3-
during such period. In addition to and without limitation of the foregoing, for
purposes of this definition only, "Consolidated Operating Cash Flow" shall be
calculated after giving effect on a pro forma basis for the applicable period
--- -----
to, without duplication, any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the period commencing on the first day of such
two fiscal quarter period to and including the Transaction Date (the "Reference
Period"), as if such Asset Sale or Asset Acquisition occurred on the first day
of the Reference Period.
"APC" means American PCS, L.P., a Delaware limited partnership.
"Asset Acquisition" means (i) any purchase or other acquisition (by
means of transfer of cash or other property to others or payment for property or
services for the account or use of others, or otherwise) of Equity Interests of
any Person by the Company or any Restricted Subsidiary, in either case, pursuant
to which such Person shall become a Restricted Subsidiary or shall be merged
with or into the Company or any Restricted Subsidiary or (ii) any acquisition by
the Company or any Restricted Subsidiary of the assets of any Person which
constitute substantially all of an operating unit or line of business of such
Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease or other disposition to any Person other than the Company or a Wholly-
Owned Restricted Subsidiary, in one transaction or a series of related
transactions, of (i) any Equity Interests of any Restricted Subsidiary, (ii) any
FCC license for the provision of wireless telecommunications services held by
the Company or any Restricted Subsidiary (whether by sale of Equity Interests or
otherwise) or (iii) any other property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include any disposition of
properties or assets of the Company or one or more of the Restricted
Subsidiaries in a transaction that either (x) involves aggregate consideration
of $5.0 million or less or (y) is governed by and complies with Section 5.1.
<PAGE>
-4-
"Asset Sale Offer" has the meaning provided in Section 4.13.
"Asset Sale Payment Date" has the meaning provided in Section 4.13.
"Available Operating Cash Flow" means, for any period, the positive
cumulative Consolidated Operating Cash Flow realized during such period or, if
such cumulative Consolidated Operating Cash Flow for such period is negative,
the negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years (or any fraction thereof)
from such date to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bank Credit Facility" means the credit facilities contemplated by the
Commitment Letter dated June 7, 1996 among the Company, Chase Securities Inc.
and Chemical Bank, as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Bankruptcy Law" means Title 11 of the U.S. Code or any other similar
Federal, state or foreign law for the relief of debtors.
"Board" of any Person means the board of directors, management
committee or other governing body of such Person. For purposes of this
definition, while the Company is a partnership, "Board" shall mean, with respect
to the Company, the Partnership Board established under the Holdings Partnership
Agreement and any Person to whom appropriate authority has been delegated by
such Partnership Board.
"Business Day" means any day except a Saturday, a Sunday or any day on
which banking institutions in New York, New York or Kansas City, Missouri, are
required or authorized by law or other governmental action to be closed.
"Cable Partner" means TCI Telephony Services, Inc., Comcast Telephony
Service and Cox Telephony Partnership.
<PAGE>
-5-
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP and, for the purpose
of this Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 365 days or less issued by or directly, fully and unconditionally
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) deposits, certificates of
deposit or acceptances with a maturity of 365 days or less of any institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500.0 million; (iii) commercial
paper with a maturity of 365 days or less issued by a corporation (other than an
Affiliate of the Company) incorporated or organized under the laws of the United
States or any state thereof or the District of Columbia and rated at least "A-1"
by S&P or "P-1" by Moody's; (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued by or directly,
fully and unconditionally guaranteed or insured by the United States of America
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof), in each
case, maturing within 365 days from the date of acquisition and (v) any "Cash
Equivalents" as defined in the Bank Credit Facility as in effect on the Issue
Date.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than a Permitted Holder or Permitted
Holders or a Person or a group controlled by a Permitted Holder or Permitted
Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-
5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise), directly or indirectly,
of more than 40% of the total Voting Equity Interests of the Company or
Holdings; provided a Permitted Holder or Permitted Holders or a group controlled
--------
by a Permitted Holder or Permitted Holders does not own a greater percentage of
the total Voting
<PAGE>
-6-
Equity Interests of the Company or Holdings, as the case may be; (ii) the
Company or Holdings consolidates with, or merges with or into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company or Holdings, in any such event pursuant to a
transaction in which the outstanding Voting Equity Interests of the Company or
Holdings are converted into or exchanged for cash, securities or other property,
and immediately after such transaction a "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted
Holder or Permitted Holders or a Person or group controlled by a Permitted
Holder or Permitted Holders is the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise), directly or indirectly,
of more than 40% of the total Voting Equity Interests of the surviving or
transferee Person; provided a Permitted Holder or Permitted Holders or a Person
--------
or group controlled by a Permitted Holder or Permitted Holders does not own a
greater percentage of the total Voting Equity Interests of such Person; and
(iii) the approval by the holders of Equity Interests of the Company or Holdings
of any plan or proposal for the liquidation or dissolution of the Company or
Holdings.
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Commission" means the Securities and Exchange Commission.
"Common Equity Interests" means (i) with respect to a Person which is
a corporation, any and all shares, interests or other participations in, and
other equivalents (however designated and whether voting or nonvoting) of, such
Person's common stock and includes, without limitation, all series and classes
of such common stock and (ii) with respect to a Person which is not a
corporation, Equity Interests which have
<PAGE>
-7-
characteristics similar in all material respects to those of common stock of a
corporation.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"Consolidated Income Tax Expense" means, with respect to any period,
the provision for Federal, state, local, foreign and other income taxes of the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period,
without duplication, the sum of (i) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP and shall, in any event, include, without limitation, (a)
any amortization of debt discount, (b) the net cost or net benefit, as the case
may be, under any Currency Agreements and Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bills of exchange, promissory
notes and bankers' acceptance financing and (e) all accrued interest, (ii) all
but the principal component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP and (iii) the aggregate amount of dividends and
distributions paid or accrued during such period in respect of Preferred Equity
Interests of the Company and the Restricted Subsidiaries (other than such
dividends or distributions paid or accrued on or with respect to Preferred
Equity Interests owned by the Company or a Wholly-Owned Restricted Subsidiary)
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net
income (loss) of the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted, to the
extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses, (ii) the portion of net
income (but not losses) of the Company allocable to minority interests in
unconsolidated Persons, except to the extent that cash dividends or
distributions have actually been received by the Company or any Restricted
Subsidiary, (iii) net
<PAGE>
-8-
income (or loss) of any Person combined with the Company or a Restricted
Subsidiary on a "pooling of interests" basis attributable to any period prior to
the date of combination, (iv) gains in respect of any Asset Sales, (v) the net
income of any Unrestricted Subsidiary, except to the extent that cash dividends
or distributions have actually been received by the Company or a Restricted
Subsidiary, (vi) the portion of net income (but not losses) of the Company
allocable to minority interests in Restricted Subsidiaries (other than a
Subsidiary Guarantor) of such person and (vii) the net income of any Restricted
Subsidiary (other than a Subsidiary Guarantor) for such period to the extent the
declaration of dividends or similar distributions by that Restricted Subsidiary
is not at the time permitted, directly or indirectly, by the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
regulation applicable to that Restricted Subsidiary.
"Consolidated Operating Cash Flow" means, with respect to any period,
the Consolidated Net Income of the Company and the Restricted Subsidiaries for
such period (i) increased by (to the extent included in computing Consolidated
Net Income) the sum of (a) Consolidated Income Tax Expense for such period; (b)
Consolidated Interest Expense for such period; (c) depreciation of the Company
and the Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP; (d) amortization of the Company and the
Restricted Subsidiaries for such period, including, without limitation and
without duplication, amortization of any Consolidated Interest Expense and
amortization of capitalized debt issuance costs for such period, all determined
on a consolidated basis in accordance with GAAP; and (e) any other non-cash
charges that were deducted in computing Consolidated Net Income (excluding any
non-cash charge which requires an accrual or reserve for cash charges for any
future period) of the Company and the Restricted Subsidiaries for such period in
accordance with GAAP and (ii) decreased by any non-cash gains that were included
in computing Consolidated Net Income.
"consolidation" means, with respect to the Company, the consolidation
of the accounts of the Restricted Subsidiaries with those of the Company, all in
accordance with GAAP; provided that "consolidation" will not include
--------
consolidation of the accounts of any Unrestricted Subsidiary with the accounts
of the Company. The term "consolidated" has a correlative meaning to the
foregoing.
"covenant defeasance" has the meaning provided in Section 8.2.
<PAGE>
-9-
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
against fluctuations in currency values.
"Debt Instrument" has the meaning provided in Section 6.1.
"Debt Securities" means any debt securities (including any guarantee
of such securities) issued by any Issuer and/or any Restricted Subsidiary in
connection with a public offering (whether or not underwritten) or a private
placement (provided such private placement is underwritten for resale pursuant
to Rule 144A, Regulation S or otherwise under the Securities Act or sold on an
agency basis by a broker-dealer or one of its Affiliates to 10 or more
beneficial holders), it being understood that the term "Debt Securities" shall
not include any evidence of Indebtedness under any of the Vendor Credit
Facilities or the Bank Credit Facility or any other commercial bank borrowings
or similar borrowings, recourse transfers of financial assets, capital leases or
other types of borrowings incurred in a manner not customarily viewed as a
"securities offering."
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Default Amount" means 100% of the principal amount of all outstanding
Securities, plus accrued and unpaid interest, if any, thereon.
"Designation" has the meaning provided in Section 4.16.
"Designation Amount" has the meaning provided in Section 4.16.
"Disinterested Director" means, with respect to any transaction or
series of transactions, a member of the Board of the Company or Holdings, as the
case may be, other than any such Board member who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Equity Interest" means, with respect to any Person, any
Equity Interest that, by its terms (or by the terms of any security into which
it is convertible or for which it is mandatorily exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for
<PAGE>
-10-
Indebtedness at the option of the holder thereof, or is redeemable at the option
of the holder thereof, in whole or in part, on or prior to the final maturity
date of the Securities.
"EquipmentCo" means Sprint Spectrum Equipment Company, L.P., a
Delaware limited partnership.
"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person.
"Event of Default" has the meaning provided in Section 6.1.
"Excess Proceeds" has the meaning provided in Section 4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Cash Proceeds" means (i) any net cash proceeds used to make
a concurrent Investment constituting a Restricted Payment pursuant to clause
(iv) of the third paragraph of Section 4.9 and (ii) the first $1.4 billion of
net cash proceeds received by the Company after December 31, 1995 from capital
contributions in respect of existing Equity Interests (other than Disqualified
Equity Interests) of the Company or from the issue or sale (other than to a
Restricted Subsidiary) of Equity Interests (other than Disqualified Equity
Interests) of the Company; provided that (A) net cash proceeds referred to in
--------
the immediately preceding clause (i), (B) net cash proceeds used to make an
Investment in APC or (C) net cash proceeds used to make an investment pursuant
to clauses (ii) or (iii)(a) of the third paragraph of Section 4.9 shall not be
included as part of the first $1.4 billion referred to in this clause (ii).
"Fair Market Value" means, with respect to any asset or property, the
price that could be negotiated in an arms'-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in this Indenture, Fair Market Value shall be determined by the Board of the
Company acting in good faith.
<PAGE>
-11-
"FinCo" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"FCC" means the Federal Communications Commission.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable on the Issue
Date.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), directly or indirectly, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation (other than an agreement to make a capital
contribution that otherwise is permitted by Section 4.9), including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Holdings" means Sprint Spectrum Holding Company, L.P., a Delaware
limited partnership.
"Holdings Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Holdings dated as of January 31, 1996.
"incur" has the meaning provided in Section 4.8.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any liability, contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), whether as a cash advance, bill,
overdraft or money market facility loan, or (b) evidenced by a note, debenture
or similar instrument or letters of credit (including a purchase money
obligation) or by any book-entry
<PAGE>
-12-
mechanism or (c) for the payment of money relating to a Capitalized Lease
Obligation or other obligation relating to the deferred purchase price of
property or (d) in respect of any Interest Rate Protection Obligation or any
Currency Agreement; (ii) any liability of others of the kind described in the
preceding clause (i) which the Person has guaranteed or which is otherwise its
legal liability; (iii) any obligation secured by a Lien to which the property or
assets of such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such Person's legal
liability; and (iv) the greater of the maximum repurchase or redemption price or
liquidation preference of any Disqualified Equity Interests of such Person or,
with respect to any Restricted Subsidiary of such Person, of any Equity
Interests (other than Common Equity Interests) of such Restricted Subsidiary.
In no event shall "Indebtedness" include trade payables incurred in the ordinary
course of business. For purposes of Section 4.8 and for purposes of Section
6.1, in determining the principal amount of any Indebtedness (l) to be incurred
by the Company or a Restricted Subsidiary or which is outstanding at any date,
(x) the principal amount of any Indebtedness which provides that an amount less
than the principal amount thereof shall be due upon any declaration of
acceleration thereof shall be the accreted value thereof at the date of
determination and (y) effect shall be given to the impact of any Currency
Agreements with respect to such Indebtedness and (2) outstanding at any time
under any Currency Agreement of the Company or any Restricted Subsidiary, the
principal amount shall be the net payment obligation under such Currency
Agreement at such time.
"Indenture" means this Indenture as amended or supplemented
from time to time pursuant to the terms hereof.
"Independent Financial Advisor" means an investment banking firm of
national standing in the United States which, in the good faith judgment of the
Board of the Company, is independent with respect to the Company and its
Affiliates and qualified to perform the task for which it is to be engaged.
"Interest Payment Date," when used with respect to any Security, means
the stated maturity of an installment of interest specified in such Security.
"Interest Rate Protection Obligation" means the obligation of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of
<PAGE>
-13-
interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars, forward interest rate agreements and similar agreements.
"Investment" means, with respect to any Person, any advance, loan or
other extension of credit (including, without limitation, by means of any
guarantee) or any capital contribution to (by means of transfer of property to
others, payment for property or services for the account or use of others, or
otherwise), or any purchase or other acquisition of any Equity Interests, bonds,
notes, debentures or other securities of, any such Person. In addition, any
foreign exchange contract, currency swap agreement or other similar agreement
made or entered into by any Person shall constitute an Investment by such
Person.
"Issue Date" means the date of original issuance of Securities under
this Indenture.
"Issuers" means the Company and FinCo.
"legal defeasance" has the meaning provided in Section 8.2.
"Legal Holiday" means any day other than a Business Day.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation or assignment for security.
"Lucent Credit Facility" means the credit facility contemplated by the
commitment letter dated June 21, 1996 between the Company and Lucent
Technologies, Inc., as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Material Restricted Subsidiary" means any Restricted Subsidiary
which, at any date of determination, is (i) a "Significant Subsidiary" (as that
term is defined in Regulation S-X, as in effect on the Issue Date, issued under
the Securities Act), and/or (ii) holds any FCC license for the transmission of
wireless telecommunications services and/or (iii) any of WirelessCo, RealtyCo or
EquipmentCo.
<PAGE>
-14-
"Maturity Date" means, with respect to any Security, the date
specified in such Security as the fixed date on which principal of such Security
is due and payable.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds therefrom in the form of cash or Cash Equivalents, including payments
in respect of deferred payment obligations when received in the form of cash or
Cash Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment bankers) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in or having a Lien on
the assets subject to the Asset Sale and (iv) appropriate amounts to be provided
by the Company or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities and liabilities under any indemnification
obligations associated with such Asset Sale.
"Nortel Credit Facility" means the credit facility contemplated by the
commitment letter dated June 11, 1996 between the Company and Northern Telecom
Inc., as the same may be amended, modified, renewed, refunded, replaced or
refinanced from time to time.
"Obligations" means any principal of and interest on, and any other
amounts owing in respect of, the Securities payable pursuant to the terms of the
Securities or this Indenture or upon acceleration, including amounts received
upon the exercise of rights of rescission or other rights of action (including
claims for damages) or otherwise, to the extent relating to the purchase price
of the Securities or amounts corresponding to such principal of, interest on, or
other amounts owing with respect to, the Securities.
"Officer" means the Chief Executive Officer, Chairman of the
Partnership Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary, the Chief Technology Officer, the Chief
Business Development Officer, the Chief Public Relations Officer or any Director
or Partnership
<PAGE>
-15-
Board Representative of either of the Issuers or any Subsidiary Guarantor, as
the case may be.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of either of the
Issuers or any Subsidiary Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee, which may include an individual employed as counsel
to an Issuer or a Subsidiary Guarantor.
"Pari Passu Debt Securities" means any Debt Securities (and any
guarantee of any Debt Security) which would not constitute Subordinated
Indebtedness.
"Partners" means, collectively, Sprint Enterprises, L.P., TCI
Telephony Services, Inc., Comcast Telephony Service and Cox Telephony
Partnership, to the extent they are Partners in Holdings and any permitted
transferee of such Partner's interest pursuant to the Holdings Partnership
Agreement.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Assets" means property or assets that will be used in a
Permitted Business referred to in clause (i) of the definition of "Permitted
Business" (or Equity Interests of any Person that will become a Restricted
Subsidiary as a result of the applicable Asset Sale to the extent such Person's
operations consist of such a Permitted Business).
"Permitted Business" means (i) the delivery or distribution of
telecommunications, voice, data or video services, (ii) any business or activity
reasonably related thereto, including, without limitation, any business
conducted by the Company or any Restricted Subsidiary on the Issue Date and the
acquisition, holding or exploitation of any license relating to the delivery of
the services described in clause (i) of this definition or (iii) any other
business or activity in which the Company and the Restricted Subsidiaries are
expressly contemplated to be engaged pursuant to the provisions of the Holdings
Partnership Agreement as in effect on the Issue Date.
"Permitted Holder" means (i) each of Sprint Corporation, Tele-
Communications, Inc., Comcast Corporation and Cox Communications, Inc. and the
respective successors (by merger, consolidation, transfer or otherwise) to all
or
<PAGE>
-16-
substantially all of the respective businesses and assets of the foregoing, (ii)
any transferee of the assets resulting from a Permitted Transaction and (iii)
each Person controlled by one or more Persons identified in clause (i) or (ii)
of this definition.
"Permitted Investments" means any of the following: (i) Investments
in any Restricted Subsidiary (including any Person that pursuant to such
Investment becomes a Restricted Subsidiary) and any Person that is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or any Restricted Subsidiary at the time such
Investment is made; (ii) Investments in Cash Equivalents; (iii) Investments in
Currency Agreements and Interest Rate Protection Obligations permitted by
Section 4.8; (iv) loans or advances to officers or employees of the Company and
the Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes of the Company and the Restricted Subsidiaries (including
travel and moving expenses) not in excess of $5.0 million in the aggregate at
any one time outstanding; (v) Investments in evidences of Indebtedness,
securities or other property received from another Person by the Company or any
of the Restricted Subsidiaries in connection with any bankruptcy proceeding or
by reason of a composition or readjustment of debt or a reorganization of such
Person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Indebtedness, securities or other property of such
Person held by the Company or any of the Restricted Subsidiaries, or for other
liabilities or obligations of such other Person to the Company or any of the
Restricted Subsidiaries that were created in accordance with the terms of this
Indenture; and (vi) Investments made by the Company and the Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with Section 4.13.
"Permitted Transaction" with respect to a Partner means a transaction
or series of related transactions in which (i) such Partner ceases to be a
Subsidiary of its Parent or such Partner Transfers its Interest to a Person that
is not a Controlled Affiliate of such Partner and (ii) the new Parent of such
Partner (or such Partner if it is its own Parent) or the Parent of the
transferee of the Interest after giving effect to such transaction, or the last
transaction in a series of related transactions, owns, directly and indirectly
through its Controlled Affiliates, all or a Substantial Portion of the cable
television system assets (in the case of a Cable Partner) or long distance
telecommunications business assets (in the case of Sprint Corporation) owned by
the Parent of such Partner, directly and indirectly through its Controlled
Affiliates, immediately
<PAGE>
-17-
prior to the commencement of such transaction or series of transactions. As
used herein, "Substantial Portion" means (x) in the case of a Cable Partner,
cable television systems serving 75% or more of the aggregate number of basic
subscribers served by cable television systems in the United States of America
(including its territories and possessions other than Puerto Rico) owned by the
Parent of such Cable Partner, directly and indirectly through its Controlled
Affiliates, and (y) in the case of Sprint Corporation, long distance
telecommunications business assets serving 75% or more of the aggregate number
of customers served by the long distance telecommunications business in the
United States of America (including its territories and possessions other than
Puerto Rico) owned by the Parent of Sprint Corporation, directly and indirectly
through its Controlled Affiliates. All capitalized terms used in this
definition and not otherwise defined in this Indenture shall have the meanings
ascribed to them in the Holdings Partnership Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"principal" of a debt security (including the Securities) means the
principal amount of the security plus, when appropriate, the premium, if any, on
the security. Such amount shall, if applicable, be calculated by reference to
the last sentence of "Indebtedness."
"Public Equity Offering" means an underwritten public offering of
Common Equity Interests made on a primary basis by the Company, Holdings or a
Special Purpose Corporation pursuant to a registration statement filed with, and
declared effective by, the Commission in accordance with the Securities Act;
provided that Holdings or the Special Purpose Corporation, as the case may be,
- - --------
shall contribute as equity to, or purchase Common Equity Interests in, the
Company with proceeds from the Initial Public Offering of not less than the
greater of (x) $100.0 million or (y) the amount required to effect any
redemption pursuant to Paragraph 7 of the Securities.
"RealtyCo" means Sprint Spectrum Realty Company, L.P., a Delaware
limited partnership.
"Redemption Date" means, with respect to any Security, the date on
which such Security is to be redeemed by the Company pursuant to the terms of
the Securities.
<PAGE>
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"Refinancing Indebtedness" means (i) Indebtedness of the Company to
the extent the proceeds thereof are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of the Company or any
of the Restricted Subsidiaries and (ii) Indebtedness of any Restricted
Subsidiary to the extent the proceeds thereof are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of such
Restricted Subsidiary, in each such event, incurred under the first paragraph of
Section 4.8 or clause (a) of the second paragraph of such Section; provided that
--------
(a) the principal amount of Refinancing Indebtedness incurred pursuant to this
definition (or, if such Refinancing Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the accreted value of such Indebtedness)
shall not exceed the principal amount or accreted value, as the case may be, of
the Indebtedness refinanced, plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of such Indebtedness
or the amount of any premium reasonably determined by the Board of the Company
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of reasonable expenses in
connection therewith and (b) in the case of Refinancing Indebtedness incurred by
an Issuer or a Subsidiary Guarantor, such Indebtedness has an Average Life to
Stated Maturity greater than or equal to either (A) the Average Life to Stated
Maturity of the Indebtedness refinanced or (B) the remaining Average Life to
Stated Maturity of the Securities and (iii) if the Indebtedness to be refinanced
is Subordinated Indebtedness of an Issuer or a Subsidiary Guarantor, the
Indebtedness to be incurred pursuant to this definition shall also be
Subordinated Indebtedness of the Issuer or the Subsidiary Guarantor, as
applicable, whose Indebtedness is to be refinanced.
"Registrar" has the meaning provided in Section 2.3.
"Replacement Assets" has the meaning provided in Section 4.13.
"Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or Assistant Secretary of such Person to have been
duly adopted by its Board and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or distribution on Equity Interests of the Company or
any Restricted Subsidiary or
<PAGE>
-19-
any payment made to the direct or indirect holders (in their capacities as
such), including any Special Purpose Corporation, of Equity Interests of the
Company or any Restricted Subsidiary (other than dividends or distributions) (a)
payable solely in Equity Interests (other than Disqualified Equity Interests) of
the Company or in options, warrants or other rights to purchase Equity Interests
(other than Disqualified Equity Interests) of the Company, (b) paid to the
Company or a Wholly-Owned Restricted Subsidiary or (c) paid in respect of Equity
Interests of a Restricted Subsidiary to Persons other than the Company or
Wholly-Owned Restricted Subsidiaries (on not more favorable than a pro rata
--- ----
basis with dividends or distributions then being paid in respect of Equity
Interests held by the Company or a Wholly-Owned Restricted Subsidiary); (ii) the
purchase, redemption or other acquisition or retirement for value of any Equity
Interests of the Company or a Restricted Subsidiary (other than any such Equity
Interests owned by the Company or a Wholly-Owned Restricted Subsidiary); (iii)
the making of any principal payment on, or the purchase, redemption, defeasance
or other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Subordinated
Indebtedness of an Issuer or any Subsidiary Guarantor (other than any such
subordinated Indebtedness owned by the Company or a Restricted Subsidiary); or
(iv) the making of any Investment (other than a Permitted Investment) in any
Person (other than an Investment by a Restricted Subsidiary in the Company or an
Investment by the Company or a Restricted Subsidiary in either (x) a Restricted
Subsidiary or (y) a Person that becomes a Restricted Subsidiary as a result of
such Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated by the Board of the Company, by a Resolution delivered to
the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with
Section 4.16. Any such Designation may be revoked by a Resolution of the
Company delivered to the Trustee, subject to the provisions of such Section.
"Revocation" has the meaning provided in Section 4.16.
"S&P" means Standard & Poor's Corporation.
"Securities" means the [ ]% Senior Notes Due 2006 issued,
authenticated and delivered under this Indenture, as amended or supplemented
from time to time pursuant to the terms of this Indenture.
<PAGE>
-20-
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes" means the [ ]% Senior Discount Notes due 2006
of the Issuers.
"Senior Discount Notes Indenture" means the indenture governing the
Senior Discount Notes dated as of [ ], 1996 by and among the Issuers and
The Bank of New York, as Trustee, as amended or supplemented from time to time.
"Senior Notes Pro Rata Share" means the amount of the applicable
Excess Proceeds obtained by multiplying the amount of such Excess Proceeds by a
fraction, (i) the numerator of which is the aggregate principal amount of all
Securities outstanding at the time of the applicable Asset Sale Offer and (ii)
the denominator of which is the sum of (a) the aggregate principal amount of all
Securities outstanding at the time of the applicable Asset Sale Offer, (b) the
aggregate Accreted Value of all Senior Discount Notes outstanding at the time of
the applicable Asset Sale Offer and (c) the aggregate principal amount or the
aggregate accreted value, as the case may be, of all other Indebtedness (other
than Subordinated Indebtedness of an Issuer or a Subsidiary Guarantor)
outstanding at the time of the applicable Asset Sale Offer with respect to which
an Issuer or a Restricted Subsidiary, as the case may be, is required to use the
applicable Excess Proceeds to offer to repay or make an offer to purchase.
"Services Agreement" means [to come].
"Special Purpose Corporation" means a corporation formed to own Common
Equity Interests of the Company or Holdings in accordance with Paragraph 7 of
the Security.
"Subordinated Debt Securities" means any Debt Securities (and any
guarantee of any Debt Security) that would constitute Subordinated Indebtedness.
"Subordinated Indebtedness" of any Person means any Indebtedness of
such Person that is expressly subordinated in right of payment to any other
Indebtedness of such Person.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Equity Interests having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (ii) any other Person of which at
least a
<PAGE>
-21-
majority in value of Equity Interests or Voting Equity Interests is at the time,
directly or indirectly, owned by such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.11.
"Subsidiary Guarantor" means a Restricted Subsidiary that issues a
Subsidiary Guarantee pursuant to Section 4.11.
"Surviving Entity" has the meaning provided in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture.
"Total Consolidated Indebtedness" means, at any date of determination,
an amount equal to the aggregate principal amount of all Indebtedness of the
Company and the Restricted Subsidiaries outstanding as of the date of
determination.
"Total Invested Capital" means, at any time of determination, the sum
of, without duplication, (i) the total amount of equity contributed to the
Company as set forth on the March 31, 1996 consolidated balance sheet of the
Company, plus (ii) the aggregate net cash proceeds received by the Company from
----
capital contributions or the issuance or sale of Equity Interests (other than
Disqualified Equity Interests but including Equity Interests issued upon the
conversion of convertible Indebtedness or from the exercise of options, warrants
or rights to purchase Equity Interests (other than Disqualified Equity
Interests)) subsequent to the Issue Date, other than to a Restricted Subsidiary,
plus (iii) the aggregate net cash proceeds received by the Company or any
- - ----
Restricted Subsidiary from the sale, disposition or repayment of any Investment
made after the Issue Date and constituting a Restricted Payment in an amount
equal to the lesser of (a) the return of capital with respect to such Investment
and (b) the initial amount of such Investment, in either case, less the cost of
the disposition of such Investment, plus (iv) an amount equal to the
----
consolidated net Investment on the date of Revocation made by the Company and/or
any of the Restricted Subsidiaries in any Subsidiary that has been designated as
an Unrestricted Subsidiary after the Issue Date upon its redesignation as a
Restricted Subsidiary in accordance with Section 4.16, plus (v) Total
----
Consolidated Indebtedness, minus (vi) the aggregate amount of all Restricted
-----
Payments (including any Designation Amount, but other than a Restricted Payment
of the type referred to in clause (iii)(b) of the third
<PAGE>
-22-
paragraph of Section 4.9) declared or made from and after the Issue Date.
"Trust Officer" means an officer or assistant officer of the Trustee
assigned to the Corporate Trustee Department (or any successor group) of the
Trustee, or any successor to such department or, in the case of a successor
trustee, an officer or assistant officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other
than FinCo, WirelessCo, RealtyCo and EquipmentCo) designated after the Issue
Date as such pursuant to and in compliance with Section 4.16. Any such
designation may be revoked by a Resolution of the Company delivered to the
Trustee, subject to the provisions of such Section 4.16.
"U.S. Government Obligations" has the meaning provided in Section
8.2(d).
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Vendor Credit Facilities" means, collectively, (i) the Lucent Credit
Facility; (ii) the Nortel Credit Facility; and (iii) any other credit facility
entered into with any vendor or supplier (or any financial institution acting on
behalf of such a vendor or supplier); provided that, in the case of each of
--------
clauses (i), (ii) and (iii), the Indebtedness thereunder is incurred solely for
the purpose of financing the cost (including the cost of design, development,
site acquisition, construction, integration, handset manufacture or acquisition
or microwave relocation) of wireless telecommunications networks or systems or
for which the Company or any Restricted Subsidiary has obtained the applicable
licenses or authorizations to utilize the radio frequencies necessary for the
operation of such systems or networks.
"Voting Equity Interests" means, with respect to any Person, Equity
Interests of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body of
such Person.
<PAGE>
-23-
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary
of which 100% of the outstanding Equity Interests is owned by the Company or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition,
(i) any directors' qualifying shares or investments by foreign nationals
mandated by applicable law and (ii) Equity Interests of a Person not to exceed
1% of the total voting power of all outstanding Equity Interests of such Person
and representing a right to receive not greater than 1% of the profits of such
partnership shall be disregarded in determining the ownership of a Restricted
Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, any other
Person 100% of whose outstanding Equity Interests are owned by such Person or
another Wholly-Owned Restricted Subsidiary of such Person. For purposes of this
definition, (i) any directors' qualifying shares or investments by foreign
nationals mandated by applicable law and (ii) Equity Interests of a Person not
to exceed 1% of the total voting power of all outstanding Equity Interests of
such Person and representing a right to receive not greater than 1% of the
profits of such partnership shall be disregarded in determining the ownership of
a Subsidiary.
"WirelessCo" means WirelessCo, L.P., a Delaware limited partnership.
Section 1.2 Incorporation by Reference
of Trust Indenture Act.
--------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "indenture securities" means the Securities;
(b) "indenture security holder" means a Holder or Securityholder;
(c) "indenture to be qualified" means this Indenture;
(d) "indenture trustee" or "institutional trustee" means the Trustee;
and
(e) "obligor" on the indenture securities means the Company, FinCo,
each Subsidiary Guarantor, if any, or any other obligor on the Securities.
<PAGE>
-24-
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings so assigned to them therein.
Section 1.3 Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the plural
include the singular;
(d) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subsection; and
(e) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP.
ARTICLE II
THE SECURITIES
--------------
Section 2.1 Form and Dating.
---------------
The Securities and the Trustee's certificates of authentication with
respect thereto shall be substantially in the form set forth in Exhibit A, which
is annexed hereto and hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements
(including notations relating to any Subsidiary Guarantee) required by law, rule
or usage to which the Issuers or any Subsidiary Guarantor are subject. Each
Security shall be dated the date of its authentication. The terms and
provisions contained in the Securities shall constitute, and are expressly made,
a part of this Indenture.
Section 2.2 Execution and Authentication.
----------------------------
Two Officers (each of whom shall have been duly authorized by all
requisite partnership or corporate action, as
<PAGE>
-25-
the case may be) shall execute the Securities on behalf of each of the Issuers
by manual or facsimile signature. Each of the Issuers' seals shall be
impressed, affixed, imprinted or reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security or at any time
thereafter, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security. Such
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for original issue in an
aggregate principal amount not to exceed $150,000,000 upon receipt of the
Officers' Certificates of each of the Issuers signed by two Officers of each of
the Issuers directing the Trustee to authenticate the Securities and certifying
that all conditions precedent to the issuance of the Securities contained herein
have been complied with. The aggregate principal amount of Securities
outstanding at any time may not exceed $150,000,000, except as provided in
Section 2.8.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same rights as the Trustee in any dealings hereunder with the Issuers
or with any of the Issuers' Affiliates.
The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 principal amount and any integral
multiple thereof.
Section 2.3 Registrar and Paying Agent.
--------------------------
The Issuers shall maintain an office or agency (which shall be located
in the Borough of Manhattan in The City of New York, State of New York) where
(a) Securities may be presented for registration of transfer or for exchange
(the "Registrar"), (b) Securities may be presented for payment (the "Paying
Agent") and (c) notices and demands to or upon the Issuers and any
<PAGE>
-26-
Subsidiary Guarantor in respect of the Securities, the Subsidiary Guarantees and
this Indenture may be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Issuers may have one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. Neither the Issuers nor any
Affiliate thereof may act as Paying Agent.
The Issuers shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture that shall incorporate the provisions of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. The Issuers shall notify the Trustee of the name and address of
any such Agent. If the Issuers fail to maintain a Registrar or Paying Agent, or
fail to give the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee located at the address set
forth in Section 11.2 as Registrar, Paying Agent and agent for service of
notices and demands in connection with the Securities, any Subsidiary Guarantee
and this Indenture.
Section 2.4 Paying Agent To Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities (whether such money has
been paid to it by the Issuers or any other obligor on the Securities), and the
Issuers and the Paying Agent shall notify the Trustee of any default by the
Issuers (or any other obligor on the Securities) in making any such payment.
Money held in trust by the Paying Agent need not be segregated except as
required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder. The Issuers at any time may
require the Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default specified in Section 6.1(a)(i) or (ii), upon written
request to the Paying Agent, require such Paying Agent to pay forthwith all
money so held by it to the Trustee and to account for any funds disbursed. Upon
making such payment, the Paying Agent shall have no further liability for the
money delivered to the Trustee.
Section 2.5 Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of
<PAGE>
-27-
the names and addresses of the Holders of Securities. If the Trustee is not
the Registrar, the Issuers shall furnish to the Trustee at least five Business
Days before each Interest Payment Date, and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of the Holders of Securities,
if any.
Section 2.6 Transfer and Exchange.
---------------------
(a) When Securities are presented to the Registrar or a co-registrar
with a request from the Holder of such Securities to register a transfer, the
Registrar shall register the transfer as requested. Every Security presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer in form satisfactory to the
Issuers and the Registrar, duly executed by the Holder thereof or his attorneys
duly authorized in writing.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at the office
or agency maintained for such purpose pursuant to Section 2.3.
To permit registrations of transfers and exchanges, the Issuers shall
issue and execute and the Trustee shall authenticate new Securities evidencing
such transfer or exchange at the Registrar's request.
Section 2.7 Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Registrar or the Trustee
or if the Holder of a Security claims that the Security has been lost, destroyed
or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate
a replacement Security. If required by the Trustee or the Issuers, an indemnity
bond shall be posted, sufficient in the judgment of each of the Issuers and the
Trustee to protect the Issuers, the Trustee or any Paying Agent from any loss
that any of them may suffer if such Security is replaced. The Issuers may
charge such Holder for the Issuers' reasonable out-of-pocket expenses in
replacing such Security and the Trustee may charge the Issuers for the Trustee's
expenses in replacing such Security. Every replacement Security shall
constitute an additional obligation of each of the Issuers.
<PAGE>
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Section 2.8 Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for (a) those cancelled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 8.1
and 8.2, on or after the date on which the conditions set forth in Section 8.1
or 8.2 have been satisfied, those Securities theretofore authenticated and
delivered by the Trustee hereunder and (d) those described in this Section 2.8
as not outstanding. Subject to Section 2.9, a Security does not cease to be
outstanding because the Issuers or one of their Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser in whose hands such Security
is a legal, valid and binding obligation of each of the Issuers.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional redemption date, money sufficient to pay all accrued
interest and principal with respect to such Securities payable on that date and
is not prohibited from paying such money to the Holders thereof pursuant to the
terms of this Indenture, then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue.
Section 2.9 Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any declaration of acceleration or notice of
default or direction, waiver or consent or any amendment, modification or other
change to this Indenture, Securities owned by the Issuers or an Affiliate of an
Issuer shall be disregarded as though they were not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent or any amendment, modification or other
change to this Indenture, only Securities that the Trustee actually knows are so
owned shall be so disregarded.
Section 2.10 Temporary Securities.
--------------------
Until definitive Securities are prepared and ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have
<PAGE>
-29-
variations that the Issuers consider appropriate for temporary Securities.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
Section 2.11 Cancellation.
------------
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment or purchase. The Trustee shall cancel all Securities surrendered for
registration of transfer, exchange, payment, replacement or cancellation or
purchase and shall dispose of cancelled Securities unless the Issuers direct the
Trustee to return such Securities to the Issuers, and, if so disposed, shall
deliver a certificate of disposition thereof to the Issuers. The Issuers may
not reissue or resell, or issue new Securities to replace, Securities that the
Issuers have redeemed or paid or purchased, or that have been delivered to the
Trustee for cancellation.
Section 2.12 Defaulted Interest.
------------------
If the Issuers default on a payment of interest on the Securities,
they shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Holders of Securities on a subsequent special record
date, which date shall be at least five Business Days prior to the payment date.
The Issuers shall fix such special record date and payment date in a manner
satisfactory to the Trustee. At least 15 days before such special record date,
the Issuers shall mail to each Holder of Securities a notice that states the
special record date, the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.
Section 2.13 CUSIP Number.
------------
The Issuers in issuing the Securities may use a "CUSIP" number, and if
so, such CUSIP number shall be included in notices of redemption or exchange as
a convenience to Holders; provided that any such notice may state that no
--------
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed only
on the other identification numbers printed on the Securities.
<PAGE>
-30-
The Issuers will promptly notify the Trustee of any change in the CUSIP number.
Section 2.14 Deposit of Moneys.
-----------------
On each Interest Payment Date and Maturity Date and on any Business
Day immediately following any acceleration of the Securities pursuant to Section
6.2, the Issuers shall have deposited with the Paying Agent in immediately
available funds money sufficient to make cash payments, if any, due on such
Interest Payment Date, Maturity Date or Business Day, as the case may be, in a
timely manner that permits the Trustee to remit payment to the Holders on such
Interest Payment Date, Maturity Date or Business Day, as the case may be.
ARTICLE III
REDEMPTION
----------
Section 3.1 Election To Redeem; Notices to Trustee.
--------------------------------------
If the Issuers elect to redeem Securities pursuant to Paragraph 6 or 7
of the Securities, they shall notify the Trustee and the Paying Agent in writing
of the Redemption Date and the principal amount of Securities to be redeemed.
The Issuers shall give each notice provided for in this Section 3.1 at
least 30 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate of
each of the Issuers stating that such redemption will comply with the conditions
contained herein and in the Securities.
Section 3.2 Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in compliance with the requirements
of the principal national securities exchange, if any, on which the Securities
are listed or, if the Securities are not then listed on a national securities
exchange, on a pro rata basis, by lot or by such other method as the Trustee
--- ----
deems fair and appropriate; provided that any redemption pursuant to Paragraph 7
--------
of the Securities shall be made on a pro rata basis or on as nearly a pro rata
--- ----
basis as is practicable (subject to the procedures of The Depository Trust
Company) based on the aggregate principal amount of Securities held by each
Holder. The Trustee shall make the selection from the Securities outstanding
and not previously called for
<PAGE>
-31-
redemption. The Trustee shall promptly notify the Issuers in writing of such
Securities selected for redemption and, in the case of Securities selected for
partial redemption, the principal amount to be redeemed. The Trustee may select
for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.3 Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Issuers shall mail or cause the mailing of a notice of redemption by first-
class mail to each Holder of Securities to be redeemed at such Holder's
registered address. A copy of such notice shall be mailed to the Trustee on the
same day the notice is mailed to Holders of Securities.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the paragraph of the Securities pursuant to which the Securities
are being redeemed;
(c) the redemption price and the amount of accrued interest, if any,
to be paid;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price and accrued interest, if any;
(f) that, unless the Issuers default in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the redemption price upon surrender to
the Paying Agent of the Securities redeemed;
(g) if any Security is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any
<PAGE>
-32-
integral multiple thereof) of such Security to be redeemed and that, on or
after the Redemption Date, upon surrender of such Security, a new Security
or Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued without charge to the Securityholder;
(h) if less than all of the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption; and
(i) the CUSIP number, if any, pursuant to Section 2.13.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense.
Section 3.4 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the redemption price. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price plus accrued interest, if any, to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption Date will be
payable on the relevant Interest Payment Dates to the Holders that would
otherwise have been entitled thereto pursuant to this Indenture and the
Securities.
Section 3.5 Deposit of Redemption Price.
---------------------------
At least one Business Day prior to the Redemption Date, the Issuers
shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
redemption price of and accrued interest, if any, on all Securities or portions
thereof to be redeemed on that date.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Issuers to deposit with the Paying Agent U.S. Legal Tender, the principal
and accrued and unpaid interest, if any, thereon shall, until paid or duly
provided for, bear interest as provided in Section 4.1 with respect to any
payment default.
<PAGE>
-33-
Section 3.6 Securities Redeemed in Part.
---------------------------
Upon the surrender to the Paying Agent of a Security that is redeemed
in part, the Issuers shall execute and the Trustee shall authenticate for the
Holder a new Security equal in principal amount to the principal amount of the
unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
---------
Section 4.1 Payment of Securities.
---------------------
The Issuers shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and this Indenture.
An installment of principal or interest shall be considered paid on
the date due if the Trustee or the Paying Agent holds on such date U.S. Legal
Tender designated for and sufficient to pay such installment.
The Issuers shall pay cash interest on overdue principal and (to the
extent permitted by law) on overdue installments of interest at the rate borne
by the Securities. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Section 4.2 Maintenance of Office or Agency.
-------------------------------
The Issuers shall maintain the office or agency required under Section
2.3. The Issuers will give prompt written notice to the Trustee of the
location, and any change in the location, of each such office or agency. If at
any time the Issuers shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2.
The Issuers may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
- - --------
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such
<PAGE>
-34-
purposes. The Issuers will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Issuers hereby initially designate the corporate trust office of
the Trustee set forth in Section 11.2 as an agency of the Issuers with respect
to the Securities in accordance with Section 2.3.
Section 4.3 Corporate or Partnership Existence.
----------------------------------
Subject to Article V, the Issuers shall do or cause to be done, at
their own cost and expense, all things necessary to, and will cause each
Restricted Subsidiary to, preserve and keep in full force and effect the
corporate or partnership existence and rights (charter and statutory), licenses
and/or franchises of each of the Issuers and each Restricted Subsidiary;
provided that none of the Issuers or any Restricted Subsidiaries shall be
- - --------
required to preserve any such rights, licenses or franchises if such rights,
licenses or franchises will be replaced or if the Board of the Company shall
reasonably determine that the preservation thereof is no longer desirable in the
conduct of the business of the Issuers or such Restricted Subsidiary, as the
case may be, and the loss thereof is not adverse in any material respect to the
Holders; provided, further, that any Restricted Subsidiary may be wound up and
-------- -------
liquidated into an Issuer or any other Restricted Subsidiary.
Section 4.4 Payment of Taxes and Other Claims.
---------------------------------
The Issuers shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon their or their Subsidiaries' income,
profits or property and (b) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of an Issuer or a
Restricted Subsidiary; provided that the Issuers shall not be required to pay or
--------
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate negotiations or proceedings and for which disputed amounts any
reserves required in accordance with GAAP have been made.
<PAGE>
-35-
Section 4.5 Maintenance of Properties; Insurance;
Books and Records; Compliance with Law.
--------------------------------------
(a) Each of the Issuers shall, and shall cause each of the Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
(b) Each of the Issuers shall, and shall cause each of the Restricted
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) Each of the Issuers shall, and shall cause each of the
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all of its financial transactions and the
assets and business, in accordance with GAAP consistently applied.
(d) Each of the Issuers shall and shall cause each of the Subsidiaries
to comply with all statutes, laws, ordinances, or government rules and
regulations to which it is subject, non-compliance with which would materially
adversely affect the business, earnings, properties, assets or financial
condition of the Issuers and the Restricted Subsidiaries, taken as a whole.
Section 4.6 Compliance Certificates.
-----------------------
(a) Each of the Issuers shall deliver to the Trustee, within 45 days
after the end of each of the first three quarters of the Issuers' fiscal year,
and within 90 days after the end of such fiscal year, an Officers' Certificate
stating (i) that a review of the activities of the respective Issuer during the
preceding fiscal quarter or year, as the case may be, has been made under the
supervision of the signing Officers with a view to determining whether the
respective Issuer has kept, observed, performed and fulfilled its obligations
under this Indenture and (ii) that, to the best knowledge of each Officer
signing such certificate, the respective Issuer has kept, observed, performed
and fulfilled each and every covenant and condition contained in this Indenture
and is not in default in the performance or observance of any of the terms,
provisions, conditions and covenants hereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of
<PAGE>
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which such Officers may have knowledge, their status and what action the
defaulting Issuer is taking or proposes to take with respect thereto).
(b) The annual financial statements delivered pursuant to Section 4.7
shall be accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of such
annual financial statements nothing as to which such accountants have
professional competence has come to their attention that would lead them to
believe that either of the Issuers has violated any provisions of this Indenture
as to which such accountants have professional competence, or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) Each of the Issuers shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly after any Officer of either of the
Issuers becomes aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the
applicable Issuer is taking or proposes to take with respect thereto.
Section 4.7 Reports.
-------
So long as any of the Securities are outstanding, the Company will
file with the Commission the annual reports, quarterly reports and other
documents that the Company would have been required to file with the Commission
pursuant to Sections 13(a) and 15(d) of the Exchange Act whether or not the
Company is then obligated to file reports pursuant to such Sections, and the
Company will promptly provide to all registered Holders of the Securities and
file, within 30 days of filing with the Commission, with the Trustee copies of
such reports and documents.
Section 4.8 Limitation on Additional
Indebtedness.
------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume, issue, guarantee or in any other manner become
directly or indirectly liable, contingently or otherwise, for or with respect to
(in any such case, to "incur") any Indebtedness (including any Acquired
Indebtedness); provided that the Issuers and the Restricted Subsidiaries may
--------
incur Indebtedness (including Acquired
<PAGE>
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Indebtedness) if after giving pro forma effect to such incurrence (including the
--- -----
application or use of the net proceeds therefrom to repay Indebtedness or make
any Restricted Payment) either (a) the ratio of (x) Total Consolidated
Indebtedness to (y) Annualized Pro Forma Consolidated Operating Cash Flow would
be less than (A) 7.0 to 1.0, if the Indebtedness is to be incurred prior to July
1, 2002, or (B) 6.0 to 1.0, if the Indebtedness is to be incurred on or after
July 1, 2002, or (b) in the case of any incurrence of Indebtedness prior to July
1, 2002 only, Total Consolidated Indebtedness would be equal to or less than 70%
of Total Invested Capital.
Notwithstanding the foregoing, the Issuers and, to the extent
specified, the Restricted Subsidiaries will be permitted to incur each and all
of the following (each of which shall be given independent effect):
(a) Indebtedness under the Securities, any Subsidiary Guarantee and
this Indenture;
(b) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to any of the Vendor Credit
Facilities;
(c) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to the Bank Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed $2.0
billion;
(d) Indebtedness of an Issuer or a Restricted Subsidiary owed to and
held by an Issuer or another Restricted Subsidiary so long as any such
Indebtedness owing by an Issuer is unsecured and subordinated in right of
payment to the Securities, except that (x) any direct or indirect transfer
of such Indebtedness by an Issuer or a Restricted Subsidiary (other than to
an Issuer or a Restricted Subsidiary), as the case may be, or (y) any
direct or indirect sale, transfer or other disposition by an Issuer or a
Restricted Subsidiary of Equity Interests of a Restricted Subsidiary that
is owed Indebtedness of an Issuer or a Restricted Subsidiary such that it
ceases to be a Restricted Subsidiary shall, in each such event, be an
incurrence of Indebtedness by the Issuer or such Restricted Subsidiary, as
the case may be, subject to the other provisions of this Section 4.8;
(e) Interest Rate Protection Obligations of an Issuer or a Restricted
Subsidiary relating to Indebtedness of an
<PAGE>
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Issuer or a Restricted Subsidiary otherwise permitted under this Indenture
that are entered into for the purpose of protecting against fluctuations in
interest rates in respect of such Indebtedness and not for speculative
purposes;
(f) Indebtedness of an Issuer or a Restricted Subsidiary under
Currency Agreements; provided that (x) such Currency Agreements relate to
--------
Indebtedness otherwise permitted under this Indenture or the purchase price
of goods purchased or sold by an Issuer or a Restricted Subsidiary in the
ordinary course of its business and (y) such Currency Agreements do not
increase the Indebtedness or other obligations of an Issuer or a Restricted
Subsidiary outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(g) Indebtedness of an Issuer or a Restricted Subsidiary represented
by letters of credit for the account of an Issuer or a Restricted
Subsidiary in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(h) other Indebtedness of the Issuers and the Restricted Subsidiaries
in an aggregate principal amount not to exceed $100 million at any one time
outstanding; and
(i) Refinancing Indebtedness.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by the
Company or a Restricted Subsidiary (whether or not such Indebtedness is assumed
by the acquiring Person) shall be deemed incurred at the time the Person becomes
a Restricted Subsidiary or at the time of the asset acquisition, as the case may
be.
Section 4.9 Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not permit any of the Restricted
Subsidiaries to, make, directly or indirectly, any Restricted Payment on or
prior to December 31, 1999; and, thereafter, will not, and will not permit any
of the Restricted Subsidiaries to, make, directly or indirectly, any Restricted
Payments unless:
<PAGE>
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(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment,
the Company would be able to incur $1.00 of additional Indebtedness under
clause (a) of the proviso to the first paragraph of Section 4.8; and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments declared or made on or
after the Issue Date (including any Designation Amount) would not exceed an
amount equal to the sum of, without duplication, (1) the amount of (x) the
Available Operating Cash Flow of the Company after December 31, 1999
through the end of the latest full fiscal quarter for which consolidated
financial statements of the Company are available preceding the date of
such Restricted Payment (treated as a single accounting period) less (y)
150% of the cumulative Consolidated Interest Expense of the Company after
December 31, 1999 through the end of the latest full fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment (treated as a single
accounting period), plus (2) the aggregate net cash proceeds (other than
----
Excluded Cash Proceeds) received by the Company as a capital contribution
in respect of existing Equity Interests (other than Disqualified Equity
Interests) of the Company made after the Issue Date or from the issue or
sale (other than to a Restricted Subsidiary) by the Company of its Equity
Interests (other than Disqualified Equity Interests) made after the Issue
Date, plus (3) the aggregate net cash proceeds received by the Company or
----
any Restricted Subsidiary from the sale, disposition or repayment (other
than to the Company or a Restricted Subsidiary) of any Investment (other
than an Investment made pursuant to clause (vi) of the following paragraph)
made after the Issue Date and constituting a Restricted Payment in an
amount equal to the lesser of (x) the return of capital with respect to
such Investment and (y) the initial amount of such Investment, in either
case, less the cost of disposition of such Investment, plus (4) an amount
----
equal to the consolidated net Investment on the date of Revocation made by
the Company and/or any of the Restricted Subsidiaries in any Subsidiary
that has been designated as an Unrestricted Subsidiary after the Issue Date
upon its redesignation as a Restricted Subsidiary in accordance with
Section 4.16. For purposes of the preceding clause (2), the value of the
aggregate net
<PAGE>
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cash proceeds received by the Company upon the issuance of Equity Interests
either upon the conversion of convertible Indebtedness or in exchange for
outstanding Indebtedness or upon the exercise of options, warrants or
rights will be the net cash proceeds received upon the issuance of such
Indebtedness, options, warrants or rights plus the incremental amount
received by the Company upon the conversion, exchange or exercise thereof.
For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
The provisions of this Section 4.9 shall not prohibit (i) the payment
of any dividend or distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture; (ii) so long as no Default shall have occurred and
be continuing, the purchase, redemption, retirement or other acquisition of any
Equity Interests of the Company out of the net cash proceeds of the
substantially concurrent capital contribution in respect of existing Equity
Interests (other than Disqualified Equity Interests) of the Company or from the
issue or sale (other than to a Restricted Subsidiary) of Equity Interests (other
than Disqualified Equity Interests) of the Company; provided that any such net
--------
cash proceeds are excluded from clause (iii)(2) of the second preceding
paragraph; (iii) so long as no Default shall have occurred and be continuing,
the purchase, redemption, retirement, defeasance or other acquisition of
Subordinated Indebtedness of an Issuer made by exchange for or conversion into,
or out of the net cash proceeds of, a concurrent issue and sale (other than to a
Restricted Subsidiary) of (a) Equity Interests (other than Disqualified Equity
Interests) of the Company (provided that any such net cash proceeds are excluded
--------
from clause (iii)(2) of the second preceding paragraph) or (b) other
Subordinated Indebtedness of an Issuer that has an Average Life to Stated
Maturity equal to or greater than the Average Life to Stated Maturity of the
Subordinated Indebtedness being purchased, redeemed, retired, defeased or
otherwise acquired; (iv) so long as no Default shall have occurred and be
continuing, the making of a direct or indirect Investment constituting a
Restricted Payment out of the proceeds of a concurrent capital contribution in
respect of existing Equity Interests (other than Disqualified Equity Interests)
of the Company or from the issue or sale (other than to a Restricted Subsidiary)
of Equity Interests (other than Disqualified Equity Interests) of the Company;
provided that any such net cash
- - --------
<PAGE>
-41-
proceeds are excluded from clause (iii)(2) of the second preceding paragraph;
(v) so long as no Default shall have occurred or be continuing and provided the
Company is then a partnership for federal income tax purposes, distributions in
respect of, and repurchases of, Equity Interests of the Company owned by the
Partners, to the extent necessary to pay current tax liabilities payable in
respect of income of the Company in an amount not to exceed in any calendar year
the product of (a) the ordinary income from trade or business activities and
giving effect to other items of income, loss and deduction reported by the
Company for the most recently ended tax year for federal income tax purposes
multiplied by (b) a percentage equal to the sum of (x) the highest applicable
federal corporate income tax rate for such tax year (expressed as a percentage)
plus (y) 5% multiplied by the excess of 100% over the highest applicable federal
corporate income tax rate for such tax year (expressed as a percentage);
provided that nothing in this clause (v) shall be redeemed to permit any such
- - --------
distribution or repurchase to pay any tax liabilities of the Company's partners
resulting from the conversion of the Company from partnership to corporate form;
(vi) so long as no Default shall have occurred and be continuing, any direct or
indirect Investment constituting a Restricted Payment by the Company or any
Restricted Subsidiary in any Person (including any Unrestricted Subsidiary)
whose operations consist principally of, or has been formed principally to
operate, a Permitted Business in an amount not to exceed $100 million in the
aggregate at any time outstanding; or (vii) any transfer of any Investment in
APC held by the Company or any Restricted Subsidiary to Holdings or any Wholly-
Owned Subsidiary of Holdings; provided APC has not been made a Restricted
--------
Subsidiary under Section 4.16.
Restricted Payments made pursuant to clause (i) of the immediately
preceding paragraph shall be included in making the determination of available
amounts under clause (iii) of the third preceding paragraph and Restricted
Payments made pursuant to clauses (ii), (iii), (iv), (v) and (vii) of the
immediately preceding paragraph shall not be included in making the
determination of available amounts under clause (iii) of the third preceding
paragraph.
Section 4.10 Limitation on Liens Securing
Certain Indebtedness.
----------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Liens upon any property or
assets of the Company or any Restricted Subsidiary securing either (i)
Subordinated Debt
<PAGE>
-42-
Securities unless the Securities and the Subsidiary Guarantees, as applicable,
are secured by a Lien on such property or assets that is senior in priority to
the Liens securing such Subordinated Debt Securities or (ii) Pari Passu Debt
Securities unless the Securities and the Subsidiary Guarantees, as applicable,
are equally and ratably secured with the Liens securing such Pari Passu Debt
Securities.
Section 4.11 Limitation on Issuance of Certain
Guarantees by, and Debt Securities
of, Restricted Subsidiaries.
----------------------------------
The Company will not permit (i) any Restricted Subsidiary to, directly
or indirectly, guarantee any Debt Securities of any of the Issuers or (ii) any
Restricted Subsidiary to issue any Debt Securities, unless, in either such case,
such Restricted Subsidiary simultaneously executes and delivers a guarantee (a
"Subsidiary Guarantee") of the Securities in accordance with Article X. Any
such Subsidiary Guarantee shall not be subordinate in right of payment to any
Indebtedness of the Restricted Subsidiary providing the Subsidiary Guarantee.
Section 4.12 Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
---------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise enter into or cause to become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make
any distributions on its Equity Interests or any other interest or participation
in, or measured by, its profits owned by the Company or any Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Company or a Restricted
Subsidiary, (iii) make any Investment in the Company or any Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
Restricted Subsidiary, except for (a) any such customary encumbrance or
restriction contained in a security document creating a Lien permitted under
this Indenture to the extent relating to the property or asset subject to such
Lien (including, without limitation, customary restrictions relating to assets
securing any indebtedness under any of the Vendor Credit Facilities or the Bank
Credit Facility under the applicable security documents), (b) any such
encumbrance or restriction with respect to a Restricted Subsidiary that is not a
Restricted Subsidiary on the Issue Date, which encumbrance or restriction is in
existence at the time such Person becomes a
<PAGE>
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Restricted Subsidiary but not created in contemplation thereof and which
encumbrance or restriction pertains only to that Restricted Subsidiary and (c)
any such encumbrance or restriction imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Restricted Subsidiary.
Section 4.13 Disposition of Proceeds of
Asset Sales.
--------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sale unless (i) the Company or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 80% of such consideration consists of cash or Cash Equivalents;
provided that the amount of any liabilities of the Company or such Restricted
- - --------
Subsidiary that are assumed (and from which the Company or such Restricted
Subsidiary is unconditionally released) in connection with such Asset Sale by
the transferee or purchaser of such assets or on behalf of such transferee or
purchaser by a third party shall be deemed to be cash for purposes of this
clause (ii); provided, further, that up to $25.0 million of consideration in the
-------- -------
aggregate that is not in the form of cash or Cash Equivalents may be received in
excess of the amount permitted by the foregoing provisions during the term of
the Securities. The Company or the applicable Restricted Subsidiary, as the
case may be, may (i) apply such Net Cash Proceeds within 365 days of receipt
thereof to repay Indebtedness (other than Subordinated Indebtedness of an Issuer
or any Subsidiary Guarantor) of the Company or a Restricted Subsidiary and elect
to permanently reduce the commitments thereunder by the amount of such
Indebtedness so repaid or (ii) apply such Net Cash Proceeds within 365 days of
receipt thereof to an investment in properties and assets that will be used in a
Permitted Business (or in Equity Interests of any Person that will become a
Restricted Subsidiary as a result of such investment to the extent such Person's
operations consist of Permitted Businesses) of the Company or any Restricted
Subsidiary ("Replacement Assets"). Net Cash Proceeds from any Asset Sale that
are neither used to repay, and permanently reduce the commitments under, any
Indebtedness (other than Subordinated Indebtedness of an Issuer or any
Subsidiary Guarantor) of the Company or a Restricted Subsidiary nor invested in
Replacement Assets within such 365-day period shall constitute "Excess Proceeds"
subject to disposition as provided below.
<PAGE>
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When the aggregate amount of Excess Proceeds equals or exceeds $20.0
million, the Issuers shall make an offer to purchase Securities (an "Asset Sale
Offer"), on a Business Day not more than 60 days after the day the amount of
Excess Proceeds equals or exceeds $20.0 million (and "Asset Sale Payment Date")
from all holders of Securities, at a price in cash equal to 100% of the
principal amount of the Securities, plus accrued and unpaid interest, if any,
thereon to the applicable Asset Sale Payment Date. Each Asset Sale Offer shall
remain open for a period of 20 Business Days or such longer period as may be
required by law. To the extent that the aggregate purchase price for the
Securities tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds available for such offer, the Company and the Restricted Subsidiaries
may use such deficiency for general partnership or corporate purposes, as the
case may be. If the aggregate Accreted Value and/or principal amount of
Securities, Senior Discount Notes and other Debt Securities (other than
Subordinated Indebtedness) validly tendered pursuant to an Asset Sale Offer or
contractually required offer to purchase or repay Indebtedness under the Senior
Discount Notes Indenture or an agreement governing such Debt Securities exceeds
the Excess Proceeds available for such offers, the Securities to be purchased
will be selected on a pro rata basis among the holders of Securities, Senior
--------
Discount Notes and such Debt Securities (based upon the principal amount of the
Securities, the Accreted Value of the Senior Discount Notes and/or the principal
amount or accreted value of such Debt Securities tendered by each holder
thereof); provided that the Senior Notes' Pro Rata Share of any Excess Proceeds
--------
required to be used to repurchase Securities, Senior Discount Notes or such Debt
Securities pursuant to such Asset Sale Offer and other offer(s) shall be applied
to repurchase Securities tendered pursuant to such Asset Sale Offer prior to
such Excess Proceeds being used to repurchase or repay Senior Discount Notes or
such Debt Securities. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, the Company
and the Restricted Subsidiaries shall be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale consists of cash, Cash Equivalents and/or
Permitted Assets and (ii) such consideration at the time of such Asset Sale is
at least equal to the Fair Market Value of the assets sold or otherwise disposed
of; provided that (x) any Net Cash Proceeds received by the Company or any of
--------
the Restricted Subsidiaries in connection with any such Asset Sale shall be
subject to the provisions of the two immediately preceding
<PAGE>
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paragraphs and (y) if any of the assets disposed of are assets otherwise
required to be held by WirelessCo, RealtyCo or EquipmentCo under Section 4.18,
the Permitted Assets received shall be held by, or promptly transferred to,
WirelessCo, RealtyCo or EquipmentCo.
Not less than 30 nor more than 60 days before the Asset Sale Payment
Date, the Issuers shall send, by first class mail, a notice to every Holder of
Securities, with a copy to the Trustee and Paying Agent. The notice, which
shall govern the terms of the Asset Sale Offer, shall include such disclosures
as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this Section
4.13;
(2) the purchase price to be paid for Securities purchased pursuant to
the Asset Sale Offer (including the amount of accrued interest, if any)
and the Asset Sale Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Asset Sale Payment Date;
(5) that Holders electing to have a Security purchased pursuant to the
Asset Sale Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Asset Sale Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Asset Sale Payment Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount
<PAGE>
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equal to the unpurchased portion of the Securities surrendered.
On or before the Asset Sale Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Asset Sale
Offer in accordance with this Section 4.13, (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the purchase price, plus accrued interest,
if any, of all Securities to be purchased in accordance with this Section 4.13
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, plus
accrued interest, if any, thereon. For purposes of this Section 4.13, the
Trustee shall act as the Paying Agent.
If the Company is required to make an Asset Sale Offer, the Company
will comply with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and
any other applicable Federal or state securities laws and regulations and any
applicable requirements of any securities exchange on which the Securities are
listed.
SECTION 4.14 Limitation on Transactions with
Equityholders and Affiliates.
-------------------------------
The Company will not, and will not permit, cause, or suffer any
Restricted Subsidiary to, conduct any business or enter into, renew or extend
any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with or for the benefit of any of their respective
Affiliates or any beneficial holder of 5% or more of any class of Equity
Interests of the Company (each an "Affiliate Transaction"), except on terms that
are no less favorable to the Company or such Restricted Subsidiary than those
that could reasonably be obtained in a comparable arm's-length transaction with
a Person that is not such a holder or Affiliate. Each Affiliate Transaction
involving aggregate payments or other Fair Market Value in excess of $15.0
million shall be approved by (i) if the Company is a Wholly-Owned Subsidiary of
Holdings, either (a) if the current provisions of Section 8.6 ("Interested Party
Transactions") of the Holdings Partnership Agreement are in effect, members of
the Board of Holdings exercising votes representing at least a majority (or such
other percentage vote as required by the Holdings Partnership Agreement) of
votes
<PAGE>
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entitled to be exercised by members of such Board selected by the Partners not
having any financial interest in any such Affiliate Transaction, or (b) if the
current provisions of Section 8.6 ("Interested Party Transactions") of the
Holdings Partnership Agreement are not in effect, a majority of the
Disinterested Directors of Holdings, in each case, as evidenced by a Resolution
of the Board of Holdings and (ii) if the Company is not a Wholly-Owned
Subsidiary of Holdings, a majority of the Disinterested Directors of the Company
as evidenced by a Resolution of the Company. In the event the Company obtains a
written opinion from an Independent Financial Advisor stating that the terms of
an Affiliate Transaction are fair to the Company or a Restricted Subsidiary, as
the case may be, from a financial point of view, it shall conclusively meet the
requirements of the first sentence of this paragraph and there shall be no need
to comply with the second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in this
Section 4.14 shall not apply to (i) transactions between or among the Company
and/or any of the Restricted Subsidiaries, (ii) any dividend or distribution
permitted by Section 4.9, (iii) directors' fees, indemnification and similar
arrangements, officers' indemnification, employee stock option or employee
benefit plans and employee salaries and bonuses paid or created in the ordinary
course of business, (iv) any Affiliate Transaction pursuant to the Services
Agreements or any other agreement in effect on the Issue Date, as the same shall
be amended from time to time; provided that any material amendment shall be
--------
required to comply with the provisions of the preceding paragraph of this
Section 4.14, (v) transactions involving the marketing of products and services
of the Company or any Restricted Subsidiary jointly with products and services
of an Affiliate of the Company or a beneficial holder of 5% or more of any class
of Equity Interests of the Company (such holder or Affiliate bring a "Related
Party"); provided all payments made by the Company or any Restricted Subsidiary
--------
to the Related Party are made to reimburse the Related Party for its share of
any expenses incurred by the Related Party on behalf of the Company or any
Restricted Subsidiary, (vi) transactions involving the leasing or sharing or
other use by the Company or any Restricted Subsidiary of communications network
facilities (including, without limitation, cable or fiber lines, equipment or
transmission capacity) of a Related Party on terms that are no less favorable
(when taken as a whole) to the Company or such Restricted Subsidiary, as
applicable, than those available from such Related Party to unaffiliated third
parties, (vii) transactions involving the provision of telecommunication
services by a Related Party in the ordinary course of its business to the
Company or any
<PAGE>
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Restricted Subsidiary, or by the Company or any Restricted Subsidiary to a
Related Party, on terms that are no less favorable (when taken as a whole) to
the Company or such Restricted Subsidiary, as applicable, than those available
from such Related Party to unaffiliated third parties, and (viii) any sales
agency agreements pursuant to which a Partner or any of its Affiliates has the
right to market any or all of the products or services of the Company or any of
the Restricted Subsidiaries on a "most favored nation" basis (without regard to
volume), as contemplated by the Holdings Partnership Agreement as in effect on
the Issue Date.
SECTION 4.15 Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Issuers shall notify the
holders of the Securities, in the manner prescribed by this Indenture, of such
occurrence and shall make an offer to purchase (a "Change of Control Offer"), on
a Business Day (the "Change of Control Payment Date") not later than 60 days
following the Change of Control Date, all Securities then outstanding at a
purchase price equal to 101% of the principal amount of the Securities, plus
accrued and unpaid interest, if any, thereon to the Change of Control Payment
Date. The Change of Control Offer shall remain open for at least 20 Business
Days or such longer period as may be required by law and until the close of
business on the Change of Control Payment Date. The Issuers' obligations under
this Section 4.15 may be satisfied if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Issuers and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
(b) Not less than 30 days nor more than 60 days before the Change of
Control Payment Date, the Issuers shall send, by first class mail, a notice to
each Holder of Securities, with a copy to the Trustee and the Paying Agent.
The notice, which shall govern the terms of the Change of Control Offer, shall
include such disclosures as are required by law and shall state:
(i) that a Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities tendered will be accepted for payment;
(ii) the purchase price (including the amount of accrued interest,
if any) for each Security and the Change of Control Payment Date;
<PAGE>
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(iii) that any Security not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(iv) that, unless the Issuers default on making the payment, any
Security or portion thereof accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(v) that Holders electing to have Securities or any portion thereof
purchased pursuant to a Change of Control Offer will be required to
surrender their Securities to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the Business Day
preceding the Change of Control Payment Date with the "Option of Holder to
Elect Purchase" on the reverse thereof completed and must complete any form
of letter of transmittal proposed by the Issuers and acceptable to the
Trustee and the Paying Agent;
(vi) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Business Day preceding the Change of Control Payment
Date, a tested telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Securities the Holder delivered
for purchase and a statement that such Holder is withdrawing his election
to have such Securities purchased; and
(vii) that Holders whose Securities are purchased only in part
will be issued Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
On the Change of Control Payment Date, the Issuers shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so accepted together
with an Officers' Certificate of each of the Issuers setting forth the
Securities or portions thereof tendered to and accepted for payment by the
Issuers. The Paying Agent shall promptly (but in any case no later than 10
calendar days after the Change of Control Payment Date) mail or deliver to the
Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Security equal in
<PAGE>
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principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Issuers
to the Holder thereof.
For purposes of this Section 4.15, the Trustee shall act as Paying
Agent.
In connection with the purchase of Securities pursuant to a Change of
Control Offer, the Issuers shall comply with all applicable tender offer laws
and regulations, including, to the extent applicable, Section 14(e) and Rule
14(e)-1 under the Exchange Act, and any other applicable Federal or state
securities laws and regulations and any applicable requirements of any
securities exchange on which the Securities are listed.
SECTION 4.16 Limitation on Designations
of Unrestricted Subsidiaries.
----------------------------
The Company may designate any Subsidiary of the Company (other than
FinCo, WirelessCo, RealtyCo and EquipmentCo) as an "Unrestricted Subsidiary"
under this Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and
(ii) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the Fair
Market Value of the aggregate amount of its Investments in such Subsidiary
on such date; and
(iii) except in the case of a Subsidiary in which an Investment is
being made pursuant to and as permitted by the third paragraph of Section
4.9, the Company would be permitted to incur $1.00 of additional
Indebtedness pursuant to clause (a) of the proviso to the first paragraph
of Section 4.8 at the time of Designation (assuming the effectiveness of
such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
4.9 for all purposes of this Indenture in the Designation Amount. The Company
shall not, and shall not permit any Restricted Subsidiary to, at any time (x)
provide direct or indirect credit support for or a guarantee
<PAGE>
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of any Indebtedness of any Unrestricted Subsidiary (including of any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the Holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except,
in the case of clause (x) or (y), to the extent permitted under Section 4.9.
Notwithstanding anything herein to the contrary, APC shall not, at any
time, be considered a Restricted Subsidiary absent a Revocation in compliance
with the following paragraph.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), whereupon such Subsidiary shall then
constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
SECTION 4.17 Limitation on Activities of
the Issuers and the Restricted
Subsidiaries.
------------------------------
(i) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than a Permitted Business and (ii)
FinCo will not own any operating assets or other properties or conduct any
business other than to serve as an Issuer and obligor on the Securities and
other Indebtedness permitted under this Indenture.
<PAGE>
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SECTION 4.18 Limitation on Ownership of Equity
Interests of Restricted Subsidiaries.
------------------------------------
Notwithstanding any other provision of this Indenture to the contrary,
(i) each of WirelessCo, RealtyCo, EquipmentCo and FinCo shall at all times
remain a direct Wholly-Owned Restricted Subsidiary of the Company (except that
FinCo may be merged with and into the Company or a Wholly-Owned Restricted
Subsidiary if the Company or such Wholly-Owned Restricted Subsidiary is then a
corporation) and (ii) none of WirelessCo, RealtyCo or EquipmentCo will, directly
or indirectly, sell, convey, transfer, lease or otherwise dispose of any assets
or property used or useful in the operation of the business of the Company and
the Restricted Subsidiaries in the geographic areas for which the Company or a
Restricted Subsidiary owns or holds an FCC license for the transmission of
wireless telecommunications services on the Issue Date other than, in the case
of this clause (ii), to a Person not an Affiliate of the Company or any of the
Restricted Subsidiaries or to a Wholly-Owned Subsidiary if all of the
outstanding Equity Interests of such Wholly-Owned Subsidiary are concurrently
sold to a Person that is not an Affiliate of the Company or any of the
Restricted Subsidiaries, in each case in compliance with Section 4.13.
Notwithstanding the foregoing, WirelessCo, RealtyCo, EquipmentCo and FinCo may
issue Disqualified Equity Interests that do not entitle the Holders thereof to
participate in the earnings, profits or cash flow of such Restricted Subsidiary
pursuant to and in compliance with Section 4.8.
SECTION 4.19 Waiver of Stay, Extension
or Usury Laws.
-------------------------
Each of the Issuers covenants, and each Subsidiary Guarantor shall be
deemed to covenant, (to the extent permitted by law) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Issuers or such Subsidiary Guarantor, as the case
may be, from paying all or any portion of the principal of or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or that may affect the covenants or the performance of this
Indenture; and (to the extent permitted by law) each of the Issuers hereby
expressly waives and each Subsidiary Guarantor shall be deemed to expressly
waive, all benefit or advantage of any such law, and covenants, and each
Subsidiary Guarantor shall be deemed to covenant, that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
<PAGE>
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will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
Section 5.1 Consolidation, Merger, Sale
of Assets, Etc.
---------------------------
The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to, any Person or Persons, and the Company will not permit any of the
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company and the Restricted Subsidiaries, taken as a whole, to any other Person
or Persons, unless at the time of and after giving effect thereto:
(i) either (a) if the transaction or series of transactions is a
merger or consolidation, the Company shall be the surviving Person of such
merger or consolidation, or (b) the Person formed by any such consolidation
or into which the Company or such Restricted Subsidiary is merged or to
which the properties and assets of the Company and/or any Restricted
Subsidiary, as the case may be, are transferred (any such surviving Person
or transferee Person being a "Surviving Entity") shall be a partnership or
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and shall expressly
assume by a supplemental indenture executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture, and, in each case, this
Indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
--- -----
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series
<PAGE>
-54-
of transactions), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
--- -----
limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), the Company or the Surviving Entity, as the case may be,
could incur $1.00 of additional Indebtedness pursuant to the proviso to the
first paragraph of clause (a) of Section 4.8; provided that in the event of
--------
a conversion of the Company from partnership to corporate form in a
transaction the primary purpose of which is to effect such conversion and
in which no additional Indebtedness is incurred or anticipated to be
incurred by the Company, the Surviving Entity or any Restricted Subsidiary,
the Surviving Entity shall not be required to be able to incur such $1.00
of additional Indebtedness; and
(iv) the Company or its surviving entity, as the case may be, shall
deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, transfer,
lease, assignment or other disposition and the supplemental indenture in
respect thereof comply with the requirements of this Indenture.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Subsidiary Guarantee and this Indenture in connection with any transaction
complying with the provisions of Section 4.17) will not, and the Company will
not cause or permit any Subsidiary Guarantor to, consolidate with or merge with
or into any Person other than the Company or another Subsidiary Guarantor
unless: (a) the entity formed by or surviving any such consolidation or merger
(if other than the Subsidiary Guarantor) is a corporation or partnership
organized and existing under the laws of the United States or any state thereof
or the District of Columbia; (b) such entity assumes by supplemental indenture
all of the obligations of the Subsidiary Guarantor under its Subsidiary
Guarantee; (c) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (d) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of
--- -----
clause (iii) of the first paragraph of
<PAGE>
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this Section. Any merger or consolidation of a Subsidiary Guarantor with and
into the Company (with the Company being the Surviving Entity) or another
Subsidiary Guarantor need only comply with clause (ii) of the first paragraph of
this Section.
SECTION 5.2 Successor Entity Substituted.
----------------------------
Upon any consolidation, combination, merger or any transfer of all or
substantially all of the assets of a Person subject to, and in accordance with
Section 5.1, the Surviving Entity formed by such consolidation or combination or
into which the Company is merged or to which such transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such Surviving Entity
had been named as the Company herein; provided that, solely for purposes of
--------
computing Available Operating Cash Flow for purposes of clause (iii) of the
first paragraph of Section 4.9, the Available Operating Cash Flow of any Persons
other than the Company and the Restricted Subsidiaries shall only be included
for periods subsequent to the effective time of such consolidation, combination,
merger or transfer of assets.
SECTION 5.3 Status of Subsidiaries.
----------------------
For all purposes of this Indenture and the Securities (including the
provisions of this Article V and Sections 4.8, 4.9 and 4.10), Subsidiaries of
any Surviving Entity will, upon such transaction or series of transactions,
become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant
to Section 4.16 and all Indebtedness, and all Liens on property or assets, of
the Company and the Restricted Subsidiaries immediately prior to such
transaction or series of transactions will be deemed to have been incurred to
upon such transaction or series of transactions; provided that in the event of a
--------
conversion of the Company from partnership to corporate form in a transaction
the purpose of which is to effect such conversion and in which no additional
Indebtedness is incurred or anticipated to be incurred by the Company, the
Surviving Entity or any Restricted Subsidiary, no Indebtedness of the Company
and the Restricted Subsidiaries shall be deemed to have been incurred upon such
transaction or series of transactions.
<PAGE>
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ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default.
-----------------
(a) An "Event of Default" occurs if:
(i) there is a default in the payment of the principal of the
Securities when due, at maturity, upon redemption or otherwise (including
pursuant to a Change of Control Offer or an Asset Sale Offer); or
(ii) there is a default in the payment of interest on the
Securities when it becomes due and payable and continuance of such default
for a period of 30 days; or
(iii) there is a default in the performance, or breach, of any
covenant described in Section 5.1; or
(iv) there is a default in the performance of or compliance with,
or breach of, any term, covenant, condition or provision of the Securities
or this Indenture (other than those specified in clause (i), (ii) or (iii)
above) and such default continues for a period of 30 days after written
notice to the Company thereof by the Trustee or holders of at least 25% of
the aggregate principal amount of the Securities then outstanding; or
(v) either (a) one or more default or defaults in the payment of
any principal under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness (each, a "Debt Instrument")
under which the Company or one or more Restricted Subsidiaries or the
Company and one or more Restricted Subsidiaries then have outstanding
Indebtedness in excess of $50.0 million, individually or in the aggregate,
or (b) any other default or defaults under one or more Debt Instruments
under which the Company or one or more Restricted Subsidiaries or the
Company and one or more Restricted Subsidiaries then have outstanding
Indebtedness in excess of $50.0 million, individually or in the aggregate,
and, in the case of this clause (b), either (x) such Indebtedness is
already due and payable in full by its terms or (y) such default or
defaults have resulted in the acceleration of the maturity of such
Indebtedness; or
<PAGE>
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(vi) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $50.0 million, either individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during which
a stay of enforcement of such judgment, order or decree shall not be in
effect; or
(vii) any holder of at least $50.0 million in aggregate principal
amount of Indebtedness of the Company or any of the Restricted
Subsidiaries, or its trustee, agent or representative, shall commence (or
have commenced on its behalf) judicial proceedings to foreclose upon assets
of the Company or any of the Restricted Subsidiaries having an aggregate
Fair Market Value, individually or in the aggregate, in excess of $50.0
million or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in lieu
of foreclosure; or
(viii) any Subsidiary Guarantee ceases to be in full force and
effect or is declared null and void or a Subsidiary Guarantor denies that
it has any further liability under its Subsidiary Guarantee or gives notice
to such effect; or
(ix) an Issuer, any Subsidiary Guarantor or any Material Restricted
Subsidiary (a) admits in writing its inability to pay its debts generally
as they become due, (b) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (c) consents to the entry of a
judgment, decree or order for relief against it in an involuntary case or
proceeding under any Bankruptcy Law, (d) consents to the appointment of a
Custodian of it or for substantially all of its property, (e) consents to
or acquiesces in the institution of a bankruptcy or an insolvency
proceeding against it, (f) makes a general assignment for the benefit of
its creditors or (g) takes any partnership or corporate action, as the case
may be, to authorize or effect any of the foregoing;
(x) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of an Issuer, any Subsidiary Guarantor or any
Material Restricted Subsidiary in an involuntary case or proceeding under
any
<PAGE>
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Bankruptcy Law, which shall (a) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in respect
of an Issuer, any Subsidiary Guarantor or any Material Restricted
Subsidiary, (b) appoint a Custodian of an Issuer, a Subsidiary Guarantor or
any Material Restricted Subsidiary or for substantially all of any of their
property or (c) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days.
(b) For purposes of this Article VI: the term "Custodian" means any
receiver, interim receiver, receiver and manager, trustee, assignee, liquidator,
sequestrator or similar official charged with maintaining possession or control
over property for one or more creditors, whether under any Bankruptcy Law or
otherwise.
SECTION 6.2 Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.1(a)(ix) or (x) with respect to an Issuer) occurs and is continuing,
the Holders of at least 25% in principal amount of the outstanding Securities
may, by written notice to the Issuers and the Trustee, and the Trustee upon the
request of the Holders of not less than 25% in principal amount of the
outstanding Securities shall by written notice to the Issuers, declare the
Default Amount to be due and payable immediately. Upon any such declaration
such amounts shall become due and payable immediately. If an Event of Default
specified in Section 6.1(a)(ix) or (x) occurs with respect to an Issuer, then
the Default Amount shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of outstanding
Securities may, by notice to the Trustee, rescind such declaration of
acceleration if all existing Events of Default have been cured or waived, other
than the non-payment of the Default Amount and any accrued interest on the
Securities that has become due solely as a result of such acceleration and if
the rescission of acceleration would not conflict with any judgment or decree.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 6.3 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or
<PAGE>
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in equity to collect the payment of principal of or interest on the Securities,
or to enforce the performance of any provision of the Securities, this Indenture
or any Subsidiary Guarantee.
All rights of action and claims under this Indenture, or the
Securities or any Subsidiary Guarantee may be enforced by the Trustee even if
the Trustee does not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Default.
----------------------
Subject to Sections 6.7 and 9.2, the Holders of, in the aggregate, a
majority in aggregate principal amount of the outstanding Securities by notice
to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default specified in Section 6.1(a)(i) or (ii) or in
respect of any provision hereof that cannot be modified or amended without the
consent of the Holder so affected pursuant to Section 9.2. When a Default or
Event of Default is so waived, it shall be deemed cured and shall cease to
exist.
SECTION 6.5 Control by Majority.
-------------------
The Holders of at least a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it; provided that the Trustee may refuse to follow any
-------
direction that (i) conflicts with law or this Indenture, (ii) the Trustee
determines may be unduly prejudicial to the rights of another Securityholder, or
(iii) may involve the Trustee in personal liability unless the Trustee has
indemnification satisfactory to it in its sole discretion against any loss or
expense caused by its following such direction; and provided, further, that the
-------- -------
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction.
SECTION 6.6 Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture, the Securities or any Subsidiary Guarantee unless:
<PAGE>
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(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(e) during such 30-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of the Default Amount, principal of or
accrued interest on the Securities on or after the respective due dates set
forth or provided for in the Securities.
A Securityholder may not use this Indenture to obtain a preference or
priority over any other Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of the Default Amount, principal of and interest
on a Security, on or after the respective due dates expressed or provided for in
the Security, or to bring suit for the enforcement of any such payment on or
after such respective dates, is absolute and unconditional and shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.1(a)(i) or (ii) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Issuers or any other obligor on the
Securities for the whole amount of principal and accrued interest remaining
<PAGE>
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unpaid, together with interest overdue on principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the interest rate borne by the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
--------------------------------
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Securityholders allowed in any judicial proceedings
relative to the Issuers or any Subsidiary Guarantor (or any other obligor upon
the Securities), their creditors or their property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.7. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
SECTION 6.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article VI, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Securities, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for interest;
<PAGE>
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Fourth: to the Issuers or any Subsidiary Guarantor, as their
respective interests may appear.
The Trustee, upon prior written notice to the Issuers, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
Section 6.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate
principal amount of the outstanding Securities.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee undertakes to perform such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this
<PAGE>
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Indenture; provided, however, that in the case of any such certificates or
-------- -------
opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates and
opinions to determine whether they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.5 or 6.6.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) The Trustee may refuse to perform any duty or exercise any right
or power unless it is provided adequate funds to enable it to do so and it
receives indemnity satisfactory to it in its sole discretion against any loss,
liability, fee or expense.
Section 7.2 Rights of Trustee.
-----------------
Subject to TIA (S)(S) 315(a)-(d) and except as provided in Section
7.1:
<PAGE>
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(a) The Trustee may rely upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice, to examine the books, records
and premises of the Issuers, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate from each of the Issuers or an Opinion of Counsel from each of
the Issuers, that shall conform to the provisions of Section 11.5. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent (other than
the negligence or willful misconduct of an agent who is an employee of the
Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it reasonably believes to be authorized or
within its rights or powers; provided, however, that the foregoing shall
-------- -------
apply only if the Trustee's conduct does not constitute negligence or bad
faith.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any Holder pursuant to this Indenture, unless such Holder shall have
offered to
<PAGE>
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the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such
request or direction.
SECTION 7.3 Individual Rights of Trustee.
----------------------------
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Issuers or their Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities or any
Subsidiary Guarantee, it shall not be accountable for the Company's use of the
proceeds from the issuance of the Securities and it shall not be responsible for
any statement of the Issuers in this Indenture or any document issued in
connection with the sale of Securities or any statement in the Securities other
than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
------------------
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and is known to the Trustee, the Trustee shall give
notice of the Default or Event of Default within 30 days after the Trustee
acquires knowledge of the occurrence thereof to all Holders as their names and
addresses appear on the Register, unless such Default shall have been cured or
waived before the mailing of such notice. Except in the case of a Default or an
Event of Default in payment of principal of or interest on any Security, the
Trustee may withhold the notice to the Securityholders if a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interest of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
-----------------------------
To the extent required by TIA (S) 313(a), within 60 days after May 15
of each year commencing with 1997 and for as long as there are Securities
outstanding hereunder, the Trustee shall mail to each Securityholder the
Trustee's brief report dated as of such date that complies with TIA (S) 313(a).
The Trustee also shall comply with TIA (S) 313(b) and TIA (S) 313(c) and (d). A
copy
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of such report at the time of its mailing to Securityholders shall be filed with
the Commission, if required, and each stock exchange, if any, on which the
Securities are listed.
SECTION 7.7 Compensation and Indemnity.
--------------------------
The Issuers shall pay to the Trustee, the Paying Agent and the
Registrar from time to time reasonable compensation for their respective
services rendered hereunder. The Trustee's, the Paying Agent's and the
Registrar's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee, the
Paying Agent and the Registrar upon request for all reasonable out-of-pocket
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by each of them in addition to the compensation for
their respective services. Such expenses shall include the reasonable
compensation, out-of-pocket disbursements and expenses of the Trustee's, the
Paying Agent's and the Registrar's agents and counsel.
The Issuers shall indemnify the Trustee, the Paying Agent and the
Registrar for, and hold each of them harmless against, any claim, demand,
expense (including but not limited to reasonable attorneys' fees and expenses),
loss or liability incurred by each of them arising out of or in connection with
the administration of this Indenture and their respective duties hereunder or
thereunder. Each of the Trustee, the Paying Agent and the Registrar shall
notify the Issuers promptly of any claim asserted against it for which it may
seek indemnity. However, failure by the Trustee, the Paying Agent or the
Registrar to so notify the Issuers shall not relieve the Issuers of their
obligations hereunder. The Issuers need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee, the Paying Agent or the
Registrar through the Trustee's, the Paying Agent's or the Registrar's, as the
case may be, own willful misconduct, negligence or bad faith.
To secure the Issuers' payment obligations in this Section 7.7 and in
Section 6.9 (insofar as the Trustee is concerned), each of the Trustee, the
Paying Agent and the Registrar shall have a lien prior to the Securities on all
money or property held or collected by it, in its capacity as Trustee, Paying
Agent or Registrar, as the case may be, except money or property held in trust
to pay principal of or interest on particular Securities. Such lien shall
survive the satisfaction and discharge of this Indenture or any other
termination under the Bankruptcy Law.
<PAGE>
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Subject to any other rights available to the Trustee, the Registrar
and the Paying Agent under any Bankruptcy Law, when any of the Trustee, the
Paying Agent and the Registrar incurs expenses or renders services after an
Event of Default specified in Section 6.1(a)(ix) or (x) with respect to an
Issuer occurs, the parties hereto and the Securityholders, by acceptance of the
Securities, hereby agree that the expenses and the compensation for the services
are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Issuers in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Issuers' consent, which consent shall not
be unreasonably withheld. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7), the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
<PAGE>
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Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 25% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Issuers' obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee provided such corporation shall be otherwise
qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1) and (2). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA (S)
310(b) subject to its rights to apply for a stay of its duty to resign under the
penultimate paragraph of TIA (S) 310(b). The provisions of TIA (S) 310 shall
refer to the Issuers and any Subsidiary Guarantor as obligors in respect of the
Securities.
SECTION 7.11 Preferential Collection of
Claims Against Issuers.
--------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall
<PAGE>
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refer to the Issuers and any Subsidiary Guarantor, if applicable, as obligors in
respect of the Securities.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.1 Satisfaction and Discharge.
--------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when:
(1) either (a) all the Securities, theretofore authenticated and
delivered (except lost, stolen or destroyed Securities that have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Issuers and
thereafter repaid to the Issuers or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Securities not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Issuers have irrevocably deposited or caused to be
deposited with the Trustee U.S. Legal Tender in an amount sufficient to pay
and discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of and interest on
the Securities to the date of deposit together with irrevocable
instructions from the Issuers directing the Trustee to apply such funds to
the payment thereof at maturity or redemption, as the case may be;
(2) the Issuers have paid all other sums payable under this Indenture
by them; and
(3) each of the Issuers has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 8.2 Legal Defeasance and Covenant
Defeasance.
-----------------------------
(a) The Issuers may, at their option by Resolution, at any time, with
respect to the Securities, elect to have either paragraph (b) or paragraph (c)
below be applied to the
<PAGE>
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outstanding Securities upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (b), the Issuers and any Subsidiary Guarantor, if
any, shall be deemed to have been released and discharged from its obligations
with respect to the outstanding Securities on the date the conditions set forth
below are satisfied (hereinafter, "legal defeasance"). For this purpose, such
legal defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Securities,
which shall thereafter be deemed to be "outstanding" only for the purposes of
paragraph (e) below and the other Sections of and matters under this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Issuers, shall execute
proper instruments acknowledging the same), except for the following that shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in paragraph (d) below and as more fully set forth in such paragraph,
payments in respect of the principal of and interest on such Securities when
such payments are due, (ii) the Issuers' obligations with respect to such
Securities under Sections 2.2, 2.3, 2.6, 2.7, 2.8, 4.1, 4.2 and 4.19, and, with
respect to the Trustee, under Sections 7.7 and 7.8, (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.2
and Sections 8.3, 8.4 and 8.5. Subject to compliance with this Section 8.2, the
Issuers may exercise their option under this paragraph (b) notwithstanding the
prior exercise of their option under paragraph (c) below with respect to the
Securities.
(c) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (c), the Issuers shall be released and discharged
from their obligations under any covenant contained in Article V and in Sections
4.4 through 4.18 (except for obligations mandated by the TIA) with respect to
the outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"), and the Securities and each
Subsidiary Guarantee, if any, shall thereafter be deemed to be not "outstanding"
for the purpose of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to the
outstanding
<PAGE>
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Securities, the Issuers and any Subsidiary Guarantor, if any, may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Sections 6.1(a)(iii) or 6.1(a)(iv), but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Issuers must irrevocably deposit with the Trustee, in
trust, for the benefit of the holders of the Securities, cash in United
States Dollars, direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the payment of
which obligation or guarantee the full faith and credit of the United
States is pledged ("U.S. Government Obligations"), or a combination
thereof, in such amounts as will be sufficient to pay the principal of and
interest on the outstanding Securities to redemption or maturity (except
lost, stolen or destroyed Securities that have been replaced or paid);
(ii) each of the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that the holders of the outstanding
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such legal defeasance or covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance or covenant defeasance had not occurred (in the case of legal
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable Federal income tax
laws);
(iii) no Default under this Indenture shall have occurred and be
continuing on the date of such deposit;
(iv) such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any securities
of the Issuers;
<PAGE>
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(v) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any agreement
or instrument to which the Issuers or any of their Subsidiaries is a party
or by which it is bound;
(vi) each of the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following their
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally or to the rights of any creditor of the Issuers
or any Subsidiary Guarantor other than those continuing rights of the
applicable holders of Securities; and
(vii) each of the Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent under this Indenture to either legal defeasance or
covenant defeasance, as the case may be, have been complied with.
(e) All United States Dollars and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this paragraph (e), the "Trustee")
pursuant to paragraph (d) above in respect of the outstanding Securities shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Securities and this Indenture, to the payment, either directly or
through any Paying Agent as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal and interest received
in respect thereof other than any such tax, fee or other charge that by law is
for the account of the Holders of the outstanding Securities.
Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request,
in writing, by the Issuers any money or U.S. Government Obligations held by it
as provided in paragraph (d) above that, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
<PAGE>
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written certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
SECTION 8.3 Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of and interest on the
Securities.
SECTION 8.4 Repayment to the Issuers
or a Subsidiary Guarantor.
-------------------------
Subject to Sections 7.7, 8.1 and 8.2, the Trustee and the Paying Agent
shall promptly pay to the Issuers, or if deposited with the Trustee by any
Subsidiary Guarantor, to such Subsidiary Guarantor upon receipt by the Trustee
and the Paying Agent of Officers' Certificates stating the amount to which each
of the Issuers or such Subsidiary Guarantor, as the case may be, is entitled,
any excess money, determined in accordance with Section 8.2(e), held by it at
any time. The Trustee and the Paying Agent shall pay to the Issuers or such
Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or the
Paying Agent, as the case may be, of Officers' Certificates stating the amount
to which the Issuers or such Subsidiary Guarantor, as the case may be, is
entitled, any money held by it for the payment of principal or interest that
remains unclaimed for two years after payment to the Holders is required;
provided, however, that the Trustee and the Paying Agent before being required
- - -------- -------
to make any payment may, but need not, at the expense of the Issuers, mail by
first-class mail to each Holder of Securities entitled to such money at such
Holder's address as set forth on the Register notice that such money remains
unclaimed and that after a date specified therein, which shall be at least one
year from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Issuers or such Subsidiary Guarantor,
as the case may be. After payment to the Issuers or such Subsidiary Guarantor,
as the case may be, Securityholders entitled to money must look solely to the
Issuers and such Subsidiary Guarantor for payment as general creditors unless an
applicable abandoned property law designates another Person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
<PAGE>
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SECTION 8.5 Reinstatement.
-------------
With respect to the circumstances referred to in Section 8.1 and 8.2,
if the Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with this Indenture by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then and only
then the Issuers' and any Subsidiary Guarantor's (if any) obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided, that if the Issuers or
--------
any such Subsidiary Guarantor has made any payment of principal of or interest
on any Securities because of the reinstatement of its obligations, the Issuers
or any such Subsidiary Guarantor, as the case may be, shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders.
--------------------------
The Issuers and any Subsidiary Guarantors, when authorized by
Resolutions of their respective Boards, and the Trustee may amend, waive or
supplement this Indenture and the Securities without notice to or consent of any
Securityholder:
(a) to cure any ambiguity, defect or inconsistency, provided that such
amendment or supplement does not adversely affect the rights of any Holder;
(b) to comply with any requirements of the Commission under the TIA;
(c) to evidence the succession in accordance with Article V hereof of
another Person and the assumption by any such successor of the covenants of
any of the Issuers or any Subsidiary Guarantor herein and in the
Securities;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
<PAGE>
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(e) to make any change that does not adversely affect the rights of any
Holder; or
(f) to add a Subsidiary Guarantor pursuant to Section 4.11.
SECTION 9.2 With Consent of Holders.
-----------------------
Subject to Section 6.7 and the provisions of this Section 9.2, the
Issuers and any Subsidiary Guarantors, when authorized by Resolutions of their
respective Boards, and the Trustee may amend or supplement this Indenture or the
Securities in any respect with the written consent of the Holders of not less
than a majority in aggregate principal amount of the Securities then
outstanding. Subject to Section 6.7 and the provisions of this Section 9.2, the
Holders of, in the aggregate, at least a majority in aggregate principal amount
of the outstanding Securities affected may waive compliance by the Issuers or
any Subsidiary Guarantor with any provision of this Indenture, the Securities or
any Subsidiary Guarantee, as the case may be, without notice to any other
Securityholder.
Notwithstanding the foregoing, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.4, may not:
(a) reduce the principal amount of, extend the fixed maturity of, or
alter the redemption provisions of, the Securities;
(b) change the currency in which any Securities or the accrued
interest thereon is payable;
(c) reduce the percentage in principal amount of outstanding
Securities which must consent to an amendment, supplement or waiver or
consent to take any action under this Indenture, the Securities or any
Subsidiary Guarantees;
(d) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities or any Subsidiary Guarantee;
(e) waive a default in payment with respect to the Securities;
(f) reduce the rate or extend the time for payment of interest on the
Securities;
<PAGE>
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(g) alter the obligation to purchase the Securities in accordance with
this Indenture following the occurrence of an Asset Sale or a Change of
Control or waive any default in the performance thereof;
(h) adversely affect the ranking of the Securities or any Subsidiary
Guarantees;
(i) release any Subsidiary Guarantee other than in accordance with
this Indenture; or
(j) modify this Section 9.2 or Section 6.4.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment or waiver under this Section 9.2 becomes effective,
the Issuers shall mail to the Holders affected thereby a notice briefly
describing the amendment or waiver. Any failure of the Issuers to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amendment or waiver.
Promptly after the execution by the Issuers and any Subsidiary
Guarantors and the Trustee of any supplemental indenture pursuant to the
provisions of this Section 9.2, the Trustee shall give notice thereof, at the
expense of the Issuers, to the Holders of then outstanding Securities, by
mailing a notice thereof by first-class mail to such Holders at their addresses
as they shall appear on the books of the Registrar, and such notice shall set
forth in general terms the substance of such supplemental indenture. Any
failure of the Trustee to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.3 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities
or any Subsidiary Guarantee shall comply with the TIA as then in effect.
<PAGE>
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SECTION 9.4 Revocation and Effect
of Amendments and Consents.
--------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Any such Holder or subsequent Holder, however, may revoke the consent
as to his Security or portion of a Security. Such revocation shall be effective
only if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective. Notwithstanding the above,
nothing in this paragraph shall impair the right of any Securityholder under (S)
316(b) of the TIA.
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the second and third sentences of the immediately preceding
paragraph, those Persons who were Holders of Securities at such record date (or
their duly designated proxies), and only those Persons, shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders of
Securities after such record date. Such consent shall be effective only for
actions taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder (and every subsequent Securityholder), unless it makes
a change described in any of clauses (a) through (j) of Section 9.2; if it makes
such a change, the amendment, supplement or waiver shall bind every Holder
consenting thereto and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.5 Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee shall (in accordance with the specific direction of the Issuers)
request the Holder of the Security to deliver it to the Trustee. The Trustee
shall (in accordance with the specific direction of the Issuers) place an
appropriate notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Issuers or the Trustee so determines, the
Issuers in exchange for the Security shall issue
<PAGE>
-78-
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article IX if the amendment, supplement or waiver does not
adversely affect the rights, duties or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it.
ARTICLE X
GUARANTEE
SECTION 10.1 Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor, if any, hereby unconditionally guarantees
in accordance with the provisions of Section 4.11, to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (i) the principal of and interest on the Securities will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise and interest on the overdue principal,
if any, and interest on any interest, to the extent lawful, of the Securities to
the Holders or the Trustee will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any extension
of time of payment or renewal of any Securities, the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, subject to any applicable grace period, whether at stated maturity, by
acceleration or otherwise, subject, however, in the case of clauses (i) and (ii)
above, to the limitations set forth in Section 10.03. Each Subsidiary
Guarantor, if any, hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Issuers, and action
to enforce the same or any other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Subsidiary
Guarantor, if any, hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Issuers,
<PAGE>
-79-
any right to require a proceeding first against the Issuers, protest, notice and
all demands whatsoever and covenants that its Subsidiary Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, this Indenture and in its Subsidiary Guarantee. If any
Securityholder or the Trustee is required by any court or otherwise to return to
the Issuers, any Subsidiary Guarantor or any custodian, trustee, liquidator or
other similar official acting in relation to the Issuers or any such Subsidiary
Guarantor, any amount paid by the Issuers or any such Subsidiary Guarantor to
the Trustee or such Securityholder, each Subsidiary Guarantee to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Subsidiary Guarantor further agrees that, as between it and all other Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of a Subsidiary Guarantee
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article VI, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purpose of the Subsidiary
Guarantees.
SECTION 10.2 Severability.
------------
In case any provision of this Article X shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 10.3 Limitation of Liability.
-----------------------
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by each Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders and each Subsidiary Guarantor hereby irrevocably agree that the
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any of the
other Subsidiary Guarantors in respect
<PAGE>
-80-
of the obligations of such other Subsidiary Guarantors under the other
Subsidiary Guarantees or pursuant to Section 10.05, result in the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee not constituting such
fraudulent transfer or conveyance.
SECTION 10.4 Subsidiary Guarantors May
Consolidate, etc., on Certain Terms.
-----------------------------------
(a) Nothing contained in this Indenture or in the Securities shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into an
Issuer or another Subsidiary Guarantor or shall prevent any sale of assets or
conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to an Issuer or another Subsidiary Guarantor.
Upon any such consolidation, merger, sale or conveyance, the Subsidiary
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect.
(b) Upon the sale or disposition as an entirety (whether by merger,
stock purchase, asset sale or otherwise) of a Subsidiary Guarantor (or all or
substantially all its assets) to a Person that is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with Section
4.17 and the other terms of this Indenture, such Subsidiary Guarantor shall be
deemed released from all obligations under this Article X without any further
action required on the part of the Trustee or any Holder.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Issuers accompanied by Officers'
Certificates and Opinions of Counsel certifying as to the compliance with this
Section 10.04. Any Subsidiary Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article X.
SECTION 10.5 Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under any of the Subsidiary Guarantees, such Funding
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined
--- ----
below) of each of the Subsidiary Guarantors (including the Funding Guarantor)
for all payments, damages and expenses
<PAGE>
-81-
incurred by that Funding Guarantor in discharging the Issuers' obligations with
respect to the Securities or any obligations of any of the other Subsidiary
Guarantors with respect to any of the Subsidiary Guarantees. "Adjusted Net
Assets" of any Person at any date shall mean the lesser of the amount by which
(x) the fair value of the property of such Person exceeds the total amount of
liabilities, including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date), but excluding liabilities under a Subsidiary Guarantee of such Person at
such date and (y) the present fair salable value of the assets of such Person at
such date exceeds the amount that will be required to pay the probable liability
of such Person on its debts (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), excluding debt in
respect of the Subsidiary Guarantee of such Person, as they become absolute and
matured.
SECTION 10.6 Waiver of Subrogation.
---------------------
Until all Obligations under each of the Subsidiary Guarantees, the
Securities and this Indenture are paid in full, each of the Subsidiary
Guarantors hereby irrevocably waives any claims or other rights that it may now
or hereafter acquire against the Issuers that arise from the existence, payment,
performance or enforcement of its obligations under its Subsidiary Guarantee and
this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification and any right to participate in any
claim or remedy of any Holder of Securities against the Issuers, whether or not
such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Issuers, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any of the Subsidiary Guarantors in violation of
the preceding sentence and the Securities shall not have been paid in full, such
amount shall have been deemed to have been paid to such Person for the benefit
of, and held in trust for the benefit of, the Holders of the Securities, and
shall, forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, whether matured or unmatured, in
accordance with the terms of this Indenture. Each of the Subsidiary Guarantors
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 10.06 is knowingly made in contemplation of such benefits.
<PAGE>
-82-
SECTION 10.7 Execution of Guarantee.
----------------------
To evidence their guarantee to the Securityholders set forth in this
Article X, each Subsidiary Guarantor hereby agrees to execute a Subsidiary
Guarantee in substantially the form of Exhibit B to this Indenture, which shall
---------
be endorsed on each Security ordered to be authenticated and delivered by the
Trustee. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee
set forth in this Article X shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of a
Subsidiary Guarantee. A Subsidiary Guarantee shall be signed on behalf of a
Subsidiary Guarantor by two Officers, or an Officer and an Assistant Secretary,
or one Officer shall sign and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
or partnership actions) shall attest to the Subsidiary Guarantee prior to the
authentication of the Security on which it is endorsed, and the delivery of such
Security by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of the Subsidiary Guarantee on behalf of such Subsidiary
Guarantor. Such signatures upon a Subsidiary Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Subsidiary Guarantee and in case any such officer who shall
have signed a Subsidiary Guarantee shall cease to be such officer before the
Security on which the Subsidiary Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Issuers, such
Security nevertheless may be authenticated and delivered or disposed of as
though the Person who signed the Subsidiary Guarantee had not ceased to be such
officer of the Subsidiary Guarantor.
SECTION 10.8 Waiver of Stay, Extension or Usury
Laws.
----------------------------------
Each Subsidiary Guarantor, if any, covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive such
Subsidiary Guarantor from performing a Subsidiary Guarantee as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) each Subsidiary Guarantor, if any, hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted
<PAGE>
-83-
to the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 Trust Indenture Act Controls.
----------------------------
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with another provision (an
"incorporated provision") included in this Indenture by operation of, Sections
310 to 318, inclusive, of the TIA, such imposed duties or incorporated provision
shall control.
SECTION 11.2 Notices.
-------
Any notice or communication shall be deemed given if in writing and
delivered in Person or mailed by first-class mail, addressed as follows, and
received by the addressee:
(a) if to the Issuers or any Subsidiary Guarantor:
Sprint Spectrum L.P.
4900 Main Street
12th Floor
Kansas City, Missouri 64112
Attention: Joseph M. Gensheimer, Esq.
(b) if to the Trustee:
The Bank of New York
[ ]
[ ]
[ ]
Attention: [Corporate Trustee Administration
Department]
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of a Security,
including any notice delivered in connection with TIA (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be
<PAGE>
-84-
mailed to him, first-class postage prepaid, at his address as it appears on the
registration books of the Registrar and shall be deemed given to him if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.3 Communications by Holders with Other
Holders.
------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
SECTION 11.4 Certificate and Opinion of Counsel
as to Conditions Precedent.
----------------------------------
Upon any request or application by the Issuers or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Issuers or
any Subsidiary Guarantor, as the case may be, shall furnish to the Trustee (a)
Officers' Certificates in form and substance satisfactory to the Trustee stating
that, in the opinion of the signers, all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(b) Opinions of Counsel in form and substance satisfactory to the Trustee
stating that, in the opinion of such counsel, all such conditions have been
complied with and (c) where applicable, a certificate or opinion by an
accountant that complies with TIA (S) 314(c).
SECTION 11.5 Statements Required in Certificate
and Opinion of Counsel.
----------------------------------
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or Opinion of
Counsel has read such covenant or condition;
<PAGE>
-85-
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements contained in such certificate or
Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.6 Rules by Trustee, Paying Agent,
Registrar.
-------------------------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Securityholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7 Legal Holidays.
--------------
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.8 Governing Law.
-------------
The internal laws of the State of New York shall govern this
Indenture, the Securities and any Subsidiary Guarantees without regard to
principles of conflict of laws.
SECTION 11.9 No Recourse Against Others.
--------------------------
A trustee, director, officer, employee, stockholder, partner,
organizer or incorporator, as such, of the Issuers or a Subsidiary Guarantor
shall not have any liability for any obligations of the Issuers or a Subsidiary
Guarantor under the Securities, this Indenture or any Subsidiary Guarantee or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability.
<PAGE>
-86-
SECTION 11.10 Successors.
----------
All agreements of the Issuers and any Subsidiary Guarantors in this
Indenture, the Securities and any Subsidiary Guarantees shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.11 Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.12 Separability.
------------
In case any provision in this Indenture, the Securities or in any
Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 11.13 Table of Contents, Headings, Etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-87-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
SPRINT SPECTRUM L.P., as
Co-Issuer
By: Sprint Spectrum Holding
Company, L.P., its
General Partner
By: _______________________________
Name:
Title:
SPRINT SPECTRUM FINANCE
CORPORATION, as Co-Issuer
By: _______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: _______________________________
Name:
Title:
<PAGE>
Exhibit A
---------
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
Cusip No.: [ ]
No. [ ] $[ ]
[ ]% SENIOR NOTE DUE 2006
Each of SPRINT SPECTRUM L.P. and SPRINT SPECTRUM FINANCE CORPORATION
promises to pay to [ ] upon surrender hereof the principal sum of [
] Dollars on [ ], 2006.
Interest Payment Dates: [ ], [ ] and at stated maturity
[seal]
By: Sprint Spectrum L.P.
By: Sprint Spectrum Holding
Company, L.P., its General
Partner
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
By: Sprint Spectrum Finance
Corporation
By: ______________________________
Name:
Title:
<PAGE>
A-2
By: ______________________________
Name:
Title:
Dated:
<PAGE>
A-3
Certificate of Authentication
This is one of the Senior Notes due 2006
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: ______________________________
Authorized Officer
<PAGE>
A-4
(REVERSE OF SECURITY)
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
[ ]% SENIOR NOTE DUE 2006
1. Interest. SPRINT SPECTRUM L.P., a Delaware limited partnership
--------
(the "Company"), and SPRINT SPECTRUM FINANCE CORPORATION, a Delaware corporation
("FinCo" and, together with the Company, the "Issuers"), promise to pay to the
registered holder of this Security, until the principal hereof is paid or duly
provided for, interest on the principal amount set forth on the face of this
Security at a rate of % per annum. Interest on the Securities will accrue
--- -----
from and including the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from and
including [ ], 1996 through but excluding the date on which interest is
paid or duly provided for. Interest shall be payable in arrears on each [ ]
and [ ] and at stated maturity, commencing [ ], 1997. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Issuers will pay interest on the
-----------------
Securities (except defaulted interest) to the Holder of this Security upon
surrender hereof. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Issuers will pay principal and interest in money of the
United States that at the time of payment is legal tender for the payment of
public and private debts ("U.S. Legal Tender"). However, the Issuers may pay
principal and interest by wire transfer of Federal funds or interest by check
payable in U.S. Legal Tender.
3. Paying Agent. Initially, The Bank of New York (the "Trustee")
------------
will act as a Paying Agent. The Issuers may change any Paying Agent without
notice. Neither the Issuers nor any of their Affiliates may act as Paying Agent.
4. Indenture. The Issuers issued the Securities under an Indenture
---------
dated as of [ ], 1996 (the "Indenture") among the Issuers and the
Trustee. This Security is one of an issue of Securities of the Issuers issued,
or to be issued, under the Indenture. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture
<PAGE>
A-5
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code (S)(S) 77aaa-77bbbb), as amended from time to time. The
Securities are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of them. The Securities are senior
obligations of the Issuers limited in aggregate principal amount to
$150,000,000.
5. Subsidiary Guarantees. This Security may after the date hereof
---------------------
be entitled to certain Subsidiary Guarantees made for the benefit of the Holders
pursuant to Section 4.11 of the Indenture.
6. Optional Redemption. The Issuers, at their option, may redeem
-------------------
all or any of the Securities, in whole or in part, at any time on or after
[ ],2001, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
redemption date, if redeemed during the 12-month period beginning on
[ ] of the years indicated below:
Year Redemption Price
---- ----------------
2001...................................... [ ]%
2002...................................... [ ]%
2003...................................... [ ]%
2004 and thereafter....................... 100.0%
7. Redemption Upon Public Equity Offering. Prior to [ ],
--------------------------------------
1999, the Issuers may redeem up to 35% of the originally issued principal amount
of the Securities at a redemption price equal to [ ]% of the principal amount
of the Securities so redeemed with the net proceeds of one or more Public Equity
Offerings of Common Equity Interests of (i) the Company, (ii) Holdings or (iii)
a Special Purpose Corporation, in any case, resulting in gross proceeds of at
least $100 million in the aggregate; provided that at least 65% of the
--------
originally issued principal amount of the Securities would remain outstanding
immediately after giving effect to such redemption.
8. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed. On and after the Redemption Date, unless
the Issuers default in making the redemption payment, interest ceases to accrue
on Securities or portions thereof called for redemption.
9. Offers To Purchase. The Indenture provides that upon the
------------------
occurrence of a Change of Control or an Asset Sale and
<PAGE>
A-6
subject to further limitations contained therein, the Issuers shall make an
offer to purchase outstanding Securities in accordance with the procedures set
forth in the Indenture.
10. Denominations. The Securities are in registered form without
-------------
coupons and only in denominations of $1,000 of principal amount and integral
multiples thereof.
11. Persons Deemed Owners. The registered Holder of this Security
---------------------
may be treated as the owner of this Security for all purposes.
12. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for one year, the Trustee or Paying Agent will pay
the money back to the Issuers or a Subsidiary Guarantor, as the case may be, at
its request. After that, Holders entitled to the money must look to the Issuers
or a Subsidiary Guarantor for payment as general creditors unless an "abandoned
property" law designates another Person.
13. Amendment, Supplement, Waiver, Etc. The Issuers, any Subsidiary
----------------------------------
Guarantors and the Trustee (if a party thereto) may, without the consent of the
Holders of any outstanding Securities, amend, waive or supplement the Indenture,
the Securities or any Subsidiary Guarantee for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
maintaining the qualification of the Indenture under the Trust Indenture Act of
1939, as amended, and making any change that does not adversely affect the
rights of any Holder. Other amendments and modifications of the Indenture, the
Securities or any Subsidiary Guarantee may be made by the Issuers, any
Subsidiary Guarantor and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the outstanding Securities,
subject to certain exceptions requiring the consent of the Holders of the
particular Securities to be affected.
14. Successor Corporation. When a successor corporation or
---------------------
partnership, as the case may be, assumes all the obligations of its predecessor
under the Securities or a Subsidiary Guarantee, as the case may be, and the
Indenture and the transaction complies with the terms of Article V of the
Indenture, the predecessor corporation or partnership, as the case may be,
will, except as provided in Article V, be released from those obligations.
15. Restrictive Covenants. The Indenture contains certain covenants
---------------------
that, among other things, limit the ability of
<PAGE>
A-7
the Company and the Restricted Subsidiaries to make restricted payments, to
incur indebtedness, to create liens, to sell assets, to permit restrictions on
dividends and other payments by Restricted Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets, to engage in
transactions with affiliates or to engage in certain businesses. The
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
16. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(ix) or (x)
of the Indenture with respect to an Issuer) occurs and is continuing, then the
Holders of not less than 25% in aggregate principal amount of the outstanding
Securities may, and the Trustee upon the request of the Holders of not less than
25% in aggregate principal amount of the outstanding Securities shall, declare
the Default Amount of and any accrued interest on all of the Securities to be
due and payable immediately. If an Event of Default specified in Section
6.1(a)(ix) or (x) of the Indenture occurs with respect to an Issuer, the Default
Amount shall ipso facto become and be immediately due and payable without any
---- -----
declaration or other act on the part of the Trustee or any Holder. Holders may
not enforce the Indenture, the Securities or any Subsidiary Guarantee except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture, the Securities or any Subsidiary Guarantee.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing
default (except a default in payment of the Default Amount, principal or
interest) if it determines that withholding notice is in their interests.
17. Trustee Dealings with Issuers. The Trustee, in its individual or
-----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if it were not Trustee.
18. No Recourse Against Others. A director, officer, employee,
--------------------------
partner, stockholder or incorporator, as such, of the Issuers or any Subsidiary
Guarantor shall not have any liability for any obligations of the Issuers or any
such Subsidiary Guarantor under the Indenture, the Securities or any Subsidiary
Guarantee or for any claim based on, in respect of, or by reason
<PAGE>
A-8
of, such obligations or their creation. Each Holder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities and any Subsidiary Guarantee.
19. Discharge. The Issuers' and any Subsidiary Guarantor's
---------
obligations pursuant to the Indenture will be discharged, except for obligations
pursuant to certain sections thereof, subject to the terms of the Indenture,
upon the payment of all the Securities or upon the irrevocable deposit with the
Trustee of U.S. Legal Tender or U.S. Government Obligations sufficient to pay
when due principal of and interest on the Securities to maturity or redemption,
as the case may be.
20. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
The internal laws of the State of New York shall govern this Security
without regard to principles of conflict of laws.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
SPRINT SPECTRUM L.P.
4900 Main Street
12th Floor
Kansas City, Missouri 64112
Attention: Joseph M. Gensheimer, Esq.
<PAGE>
A-9
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number) __________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint
________________________________________________________________________________
agent to transfer this Security on the books of the Issuers. The agent may
substitute another to act for him.
________________________________________________________________________________
Date:______________ Your Signature: _________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: _________________________________________________________
<PAGE>
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuers pursuant to
Section 4.13 or 4.15 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the
Issuers pursuant to Section 4.13 or 4.15 of the Indenture, state the amount:
$____________
Date: ________________ Your Signature: ____________________
Signature Guarantee: _______________________
<PAGE>
EXHIBIT B
---------
SUBSIDIARY GUARANTEE
--------------------
The undersigned hereby unconditionally guarantees on a senior
unsecured basis to the Holder of this Security the payments of principal of and
interest on this Security in the amounts and at the time when due and interest
on the overdue principal and interest, if any, of this Security, if lawful, and
the payment or performance of all other obligations of the Issuers under the
Indenture or the Securities, to the Holder of this Security and the Trustee, all
in accordance with and subject to the terms and limitations of this Security,
Article X of the Indenture and this Subsidiary Guarantee. This Subsidiary
Guarantee will become effective in accordance with Article X of the Indenture
and its terms shall be evidenced therein. The validity and enforceability of
any Subsidiary Guarantee shall not be affected by the fact that it is not
affixed to any particular Security.
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article X of the Indenture and reference is hereby made
to the Indenture for the precise terms of this Subsidiary Guarantee and all of
the other provisions of the Indenture to which this Subsidiary Guarantee
relates.
The internal laws of the State of New York shall govern this
Subsidiary Guarantee without regard to principles of conflict of laws.
[ ]
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.3
- - --------------------------------------------------------------------------------
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION,
as Issuers,
and
THE BANK OF NEW YORK,
as Trustee
---------------------
INDENTURE
Dated as of [ ], 1996
---------------------
$[ ] Principal Amount at Maturity
[ ]% Senior Discount Notes due 2006
- - --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Section Indenture Section
- - ----------- -----------------
<S> <C>
(S) 310(a)(1)............................................. 7.10; 11.1
(a)(2)............................................. 7.10; 11.1
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(b)................................................ 7.8; 7.10; 11.2
(c)................................................ N.A.
(S) 311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
(S) 312(a)................................................ 2.5
(b)................................................ 11.3
(c)................................................ 11.3
(S) 313(a)................................................ 7.6
(b)(1)............................................. 7.6
(b)(2)............................................. 7.6
(c)................................................ 7.6; 11.2
(d)................................................ 7.6
(S) 314(a)................................................ 4.6; 4.7; 11.2
(b)................................................ N.A.
(c)(1)............................................. 11.4
(c)(2)............................................. 11.4
(c)(3)............................................. 11.4
(d)................................................ N.A.
(e)................................................ 11.5
(f)................................................ N.A.
(S) 315(a)................................................ 7.1(b)
(b)................................................ 7.5; 11.2
(c)................................................ 7.1(a)
(d)................................................ 7.1(c)
(e)................................................ 6.11
(S) 316(a) (last sentence)................................ 2.9
(a)(1)(A).......................................... 6.5
(a)(1)(B).......................................... 6.4
(a)(2)............................................. N.A.
(b)................................................ 6.7
(S) 317(a)(1)............................................. 6.8
(a)(2)............................................. 6.9
(b)................................................ 2.4
(S) 318(a)................................................ 11.1
- - ------------------------
</TABLE>
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- - ------- ----
ARTICLE I
DEFINITIONS AND
INCORPORATION BY REFERENCE
1.1 Definitions................................................
1.2 Incorporation by Reference of Trust Indenture
Act........................................................
1.3 Rules of Construction......................................
ARTICLE II
THE SECURITIES
2.1 Form and Dating............................................
2.2 Execution and Authentication...............................
2.3 Registrar and Paying Agent.................................
2.4 Paying Agent To Hold Money in Trust........................
2.5 Securityholder Lists.......................................
2.6 Transfer and Exchange......................................
2.7 Replacement Securities.....................................
2.8 Outstanding Securities.....................................
2.9 Treasury Securities........................................
2.10 Temporary Securities.......................................
2.11 Cancellation...............................................
2.12 Defaulted Interest.........................................
2.13 CUSIP Number...............................................
2.14 Deposit of Moneys..........................................
ARTICLE III
REDEMPTION
3.1 Election To Redeem; Notices to Trustee.....................
3.2 Selection of Securities To Be Redeemed.....................
3.3 Notice of Redemption.......................................
3.4 Effect of Notice of Redemption.............................
3.5 Deposit of Redemption Price................................
3.6 Securities Redeemed in Part................................
ARTICLE IV
COVENANTS
4.1 Payment of Securities......................................
4.2 Maintenance of Office or Agency............................
4.3 Corporate or Partnership Existence.........................
<PAGE>
Section Page
- - ------- ----
4.4 Payment of Taxes and Other Claims..........................
4.5 Maintenance of Properties; Insurance; Books and
Records; Compliance with Law
4.6 Compliance Certificates....................................
4.7 Reports....................................................
4.8 Limitation on Additional Indebtedness......................
4.9 Limitation on Restricted Payments..........................
4.10 Limitation on Liens Securing Certain
Indebtedness.............................................
4.11 Limitation on Issuance of Certain Guarantees
by, and Debt Securities of, Restricted
Subsidiaries.............................................
4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted
Subsidiaries.............................................
4.13 Disposition of Proceeds of Asset Sales.....................
4.14 Limitation on Transactions with Equityholders
and Affiliates...........................................
4.15 Change of Control..........................................
4.16 Limitation on Designations of Unrestricted
Subsidiaries.............................................
4.17 Limitation on Activities of the Issuers and
the Restricted Subsidiaries..............................
4.18 Limitation on Ownership of Equity Interests
of Restricted Subsidiaries...............................
4.19 Waiver of Stay, Extension or Usury Laws....................
ARTICLE V
SUCCESSOR CORPORATION
5.1 Consolidation, Merger, Sale of Assets, Etc.................
5.2 Successor Entity Substituted...............................
5.3 Status of Subsidiaries.....................................
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Events of Default..........................................
6.2 Acceleration...............................................
6.3 Other Remedies.............................................
6.4 Waiver of Past Default.....................................
6.5 Control by Majority........................................
6.6 Limitation on Suits........................................
6.7 Rights of Holders To Receive Payment.......................
6.8 Collection Suit by Trustee.................................
6.9 Trustee May File Proofs of Claim...........................
6.10 Priorities.................................................
6.11 Undertaking for Costs......................................
ii
<PAGE>
Section Page
- - ------- ----
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee..........................................
7.2 Rights of Trustee..........................................
7.3 Individual Rights of Trustee...............................
7.4 Trustee's Disclaimer.......................................
7.5 Notice of Defaults.........................................
7.6 Reports by Trustee to Holders..............................
7.7 Compensation and Indemnity.................................
7.8 Replacement of Trustee.....................................
7.9 Successor Trustee by Merger, Etc...........................
7.10 Eligibility; Disqualification..............................
7.11 Preferential Collection of Claims Against
Issuers..................................................
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
8.1 Satisfaction and Discharge.................................
8.2 Legal Defeasance and Covenant Defeasance...................
8.3 Application of Trust Money.................................
8.4 Repayment to the Issuers or a Subsidiary
Guarantor................................................
8.5 Reinstatement..............................................
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.1 Without Consent of Holders.................................
9.2 With Consent of Holders....................................
9.3 Compliance with Trust Indenture Act........................
9.4 Revocation and Effect of Amendments and
Consents.................................................
9.5 Notation on or Exchange of Securities......................
9.6 Trustee To Sign Amendments, Etc............................
ARTICLE X
GUARANTEE
10.1 Unconditional Guarantee....................................
10.2 Severability...............................................
10.3 Limitation of Liability....................................
10.4 Subsidiary Guarantors May Consolidate, etc.,
on Certain Terms.........................................
iii
<PAGE>
Section Page
- - ------- ----
10.5 Contribution...............................................
10.6 Waiver of Subrogation......................................
10.7 Execution of Guarantee.....................................
10.8 Waiver of Stay, Extension or Usury Laws....................
ARTICLE XI
MISCELLANEOUS
11.1 Trust Indenture Act Controls...............................
11.2 Notices....................................................
11.3 Communications by Holders with Other Holders...............
11.4 Certificate and Opinion of Counsel as to
Conditions Precedent.....................................
11.5 Statements Required in Certificate and Opinion
of Counsel...............................................
11.6 Rules by Trustee, Paying Agent, Registrar..................
11.7 Legal Holidays.............................................
11.8 Governing Law..............................................
11.9 No Recourse Against Others.................................
11.10 Successors.................................................
11.11 Duplicate Originals........................................
11.12 Separability...............................................
11.13 Table of Contents, Headings, Etc...........................
SIGNATURES
EXHIBIT A - Form of Security.....................................
EXHIBIT B - Form of Subsidiary Guarantee.........................
iv
<PAGE>
INDENTURE dated as of [ ], 1996 by and among SPRINT SPECTRUM
L.P., a Delaware limited partnership (the "Company"), SPRINT SPECTRUM FINANCE
CORPORATION, a Delaware corporation ("FinCo" and, together with the Company, the
"Issuers"), and THE BANK OF NEW YORK, a New York banking corporation, as Trustee
(the "Trustee").
The Issuers have duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Securities to be issued as provided
for in this Indenture. All things necessary to make the Securities the valid
and binding obligations of the Issuers, and to make this Indenture a valid and
binding agreement of each of the Issuers, have been done.
The parties hereto agree as follows for the benefit of each other and for
the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions.
-----------
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at maturity of the Securities:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------ --------
Issue Date................... $[ ]
[ ], 1997....... [ ]
[ ], 1997....... [ ]
[ ], 1998....... [ ]
[ ], 1998....... [ ]
[ ], 1999....... [ ]
[ ], 1999....... [ ]
[ ], 2000....... [ ]
[ ], 2000....... [ ]
[ ], 2001....... [ ]
[ ], 2001....... $1,000.00;
(ii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the sum of (a) the Accreted Value for the Semi-Annual
Accrual Date immediately preceding the Specified Date and (b) an amount
equal to the product of (x)
<PAGE>
-2-
the Accreted Value for the immediately following Semi-Annual Accrual
Date less the Accreted Value for the immediately preceding Semi-Annual
Accrual Date and (y) a fraction, the numerator of which is the number of
days actually elapsed from the immediately preceding Semi-Annual Accrual
Date to the Specified Date and the denominator of which is 180; and
(iii) if the Specified Date is after [ ], 2001,
$1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Restricted Subsidiary or assumed in connection
with an Asset Acquisition by such Person and not incurred in connection with,
or in anticipation of, such Person becoming a Restricted Subsidiary or such
Asset Acquisition.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of
this definition, (i) "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing and (ii) each of the Partners shall be deemed an
Affiliate of the Company.
"Affiliate Transaction" has the meaning provided in Section 4.14.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest two full fiscal quarters for
which consolidated financial statements of the Company are available
multiplied by two. For purposes of calculating "Consolidated Operating Cash
Flow" for any period for purposes of this definition only, (i) any
Subsidiary of the Company that is a Restricted Subsidiary on the date of the
transaction giving rise to the need to calculate "Annualized Pro Forma
Consolidated Operating Cash Flow" (the "Transaction Date") shall be deemed to
have been a Restricted Subsidiary at all times during such period and (ii)
any Subsidiary of the Company that is not a Restricted Subsidiary on the
Transaction Date shall be deemed not to have been a Restricted Subsidiary at
any time
<PAGE>
-3-
during such period. In addition to and without limitation of the foregoing,
for purposes of this definition only, "Consolidated Operating Cash Flow"
shall be calculated after giving effect on a pro forma basis for the
--- -----
applicable period to, without duplication, any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the Company or one
of the Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the period
commencing on the first day of such two fiscal quarter period to and
including the Transaction Date (the "Reference Period"), as if such Asset
Sale or Asset Acquisition occurred on the first day of the Reference Period.
"APC" means American PCS, L.P., a Delaware limited partnership.
"Asset Acquisition" means (i) any purchase or other acquisition (by
means of transfer of cash or other property to others or payment for property
or services for the account or use of others, or otherwise) of Equity
Interests of any Person by the Company or any Restricted Subsidiary, in
either case, pursuant to which such Person shall become a Restricted
Subsidiary or shall be merged with or into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted
Subsidiary of the assets of any Person which constitute substantially all of
an operating unit or line of business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease or other disposition to any Person other than the Company or
a Wholly-Owned Restricted Subsidiary, in one transaction or a series of
related transactions, of (i) any Equity Interests of any Restricted
Subsidiary, (ii) any FCC license for the provision of wireless
telecommunications services held by the Company or any Restricted Subsidiary
(whether by sale of Equity Interests or otherwise) or (iii) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any disposition of properties or assets of the
Company or one or more of the Restricted Subsidiaries in a transaction that
either (x) involves aggregate consideration of $5.0 million or less or (y) is
governed by and complies with Section 5.1.
<PAGE>
-4-
"Asset Sale Offer" has the meaning provided in Section 4.13.
"Asset Sale Payment Date" has the meaning provided in Section 4.13.
"Available Operating Cash Flow" means, for any period, the positive
cumulative Consolidated Operating Cash Flow realized during such period or,
if such cumulative Consolidated Operating Cash Flow for such period is
negative, the negative amount by which cumulative Consolidated Operating Cash
Flow is less than zero.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years (or any
fraction thereof) from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means the credit facilities contemplated by
the Commitment Letter dated June 7, 1996 among the Company, Chase Securities
Inc. and Chemical Bank, as the same may be amended, modified, renewed,
refunded, replaced or refinanced from time to time.
"Bankruptcy Law" means Title 11 of the U.S. Code or any other
similar Federal, state or foreign law for the relief of debtors.
"Board" of any Person means the board of directors, management
committee or other governing body of such Person. For purposes of this
definition, while the Company is a partnership, "Board" shall mean, with
respect to the Company, the Partnership Board established under the Holdings
Partnership Agreement and any Person to whom appropriate authority has been
delegated by such Partnership Board.
"Business Day" means any day except a Saturday, a Sunday or any day
on which banking institutions in New York, New York or Kansas City, Missouri,
are required or authorized by law or other governmental action to be closed.
"Cable Partner" means each of TCI Telephony Services, Inc., Comcast
Telephony Service and Cox Telephony Partnership.
<PAGE>
-5-
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to
use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP and,
for the purpose of this Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 365 days or less issued by or directly, fully and unconditionally
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof); (ii) deposits,
certificates of deposit or acceptances with a maturity of 365 days or less of
any institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500.0
million; (iii) commercial paper with a maturity of 365 days or less issued by
a corporation (other than an Affiliate of the Company) incorporated or
organized under the laws of the United States or any state thereof or the
District of Columbia and rated at least "A-1" by S&P or "P-1" by Moody's;
(iv) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued by or directly, fully and
unconditionally guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof), in each case,
maturing within 365 days from the date of of acquisition and (v) any "Cash
Equivalents" as defined in the Bank Credit Facility as in effect on the Issue
Date.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) other than a Permitted Holder or
Permitted Holders or a Person or group controlled by a Permitted Holder or
Permitted Holders is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed
to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly
or indirectly, of more than 40% of the total Voting Equity Interests of the
Company or Holdings; provided a Permitted Holder or Permitted Holders or a
--------
group controlled by a Permitted Holder or Permitted Holders does not own a
greater percentage of the total Voting
<PAGE>
-6-
Equity Interests of the Company or Holdings, as the case may be; (ii) the
Company or Holdings consolidates with, or merges with or into, another Person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company or Holdings, in any such event
pursuant to a transaction in which the outstanding Voting Equity Interests of
the Company or Holdings are converted into or exchanged for cash, securities
or other property, and immediately after such transaction a "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) other than a Permitted Holder or Permitted Holders or a Person or group
controlled by a Permitted Holder or Permitted Holders is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening
of an event or otherwise), directly or indirectly, of more than 40% of the
total Voting Equity Interests of the surviving or transferee Person; provided
--------
a Permitted Holder or Permitted Holders or a Person or group controlled by a
Permitted Holder or Permitted Holders does not own a greater percentage of
the total Voting Equity Interests of such Person; and (iii) the approval by
the holders of Equity Interests of the Company or Holdings of any plan or
proposal for the liquidation or dissolution of the Company or Holdings.
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in
Section 4.15.
"Commission" means the Securities and Exchange Commission.
"Common Equity Interests" means (i) with respect to a Person which
is a corporation, any and all shares, interests or other participations in,
and other equivalents (however designated and whether voting or nonvoting)
of, such Person's common stock and includes, without limitation, all series
and classes of such common stock and (ii) with respect to a Person which is
not a corporation, Equity Interests which have
<PAGE>
-7-
characteristics similar in all material respects to those of common stock of
a corporation.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture
and, thereafter, means the successor.
"Consolidated Income Tax Expense" means, with respect to any
period, the provision for Federal, state, local, foreign and other income
taxes of the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period,
without duplication, the sum of (i) the interest expense of the Company and
the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP and shall, in any event, include, without
limitation, (a) any amortization of debt discount, (b) the net cost or net
benefit, as the case may be, under any Currency Agreements and Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit,
bills of exchange, promissory notes and bankers' acceptance financing and (e)
all accrued interest, (ii) all but the principal component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP and (iii) the aggregate amount of
dividends and distributions paid or accrued during such period in respect of
Preferred Equity Interests of the Company and the Restricted Subsidiaries
(other than such dividends or distributions paid or accrued on or with
respect to Preferred Equity Interests owned by the Company or a Wholly-Owned
Restricted Subsidiary) determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, with respect to any period, the
net income (loss) of the Company and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by
excluding, without duplication, (i) all extraordinary gains or losses, (ii)
the portion of net income (but not losses) of the Company allocable to
minority interests in unconsolidated Persons, except to the extent that cash
dividends or distributions have actually been received by the Company or any
Restricted Subsidiary, (iii) net
<PAGE>
-8-
income (or loss) of any Person combined with the Company or a Restricted
Subsidiary on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) gains in respect of any Asset Sales, (v) the
net income of any Unrestricted Subsidiary, except to the extent that cash
dividends or distributions have actually been received by the Company or a
Restricted Subsidiary, (vi) the portion of net income (but not losses) of the
Company allocable to minority interests in Restricted Subsidiaries (other
than a Subsidiary Guarantor) of such person and (vii) the net income of any
Restricted Subsidiary (other than a Subsidiary Guarantor) for such period to
the extent the declaration of dividends or similar distributions by that
Restricted Subsidiary is not at the time permitted, directly or indirectly,
by the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or regulation applicable to that Restricted Subsidiary.
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and the Restricted
Subsidiaries for such period (i) increased by (to the extent included in
computing Consolidated Net Income) the sum of (a) Consolidated Income Tax
Expense for such period; (b) Consolidated Interest Expense for such period;
(c) depreciation of the Company and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; (d)
amortization of the Company and the Restricted Subsidiaries for such period,
including, without limitation and without duplication, amortization of any
Consolidated Interest Expense and amortization of capitalized debt issuance
costs for such period, all determined on a consolidated basis in accordance
with GAAP; and (e) any other non-cash charges that were deducted in
computing Consolidated Net Income (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period) of the
Company and the Restricted Subsidiaries for such period in accordance with
GAAP and (ii) decreased by any non-cash gains that were included in computing
Consolidated Net Income.
"consolidation" means, with respect to the Company, the
consolidation of the accounts of the Restricted Subsidiaries with those of
the Company, all in accordance with GAAP; provided that "consolidation" will
--------
not include consolidation of the accounts of any Unrestricted Subsidiary with
the accounts of the Company. The term "consolidated" has a correlative
meaning to the foregoing.
"covenant defeasance" has the meaning provided in Section 8.2.
<PAGE>
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"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
against fluctuations in currency values.
"Debt Instrument" has the meaning provided in Section 6.1.
"Debt Securities" means any debt securities (including any
guarantee of such securities) issued by any Issuer and/or any Restricted
Subsidiary in connection with a public offering (whether or not underwritten)
or a private placement (provided such private placement is underwritten for
resale pursuant to Rule 144A, Regulation S or otherwise under the Securities
Act or sold on an agency basis by a broker-dealer or one of its Affiliates to
10 or more beneficial holders), it being understood that the term "Debt
Securities" shall not include any evidence of Indebtedness under any of the
Vendor Credit Facilities or the Bank Credit Facility or any other commercial
bank borrowings or similar borrowings, recourse transfers of financial
assets, capital leases or other types of borrowings incurred in a manner not
customarily viewed as a "securities offering."
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Default Amount" means, (i) as of any date prior to [ ],
2001, the Accreted Value of all outstanding Securities (plus any applicable
premium thereon) as of such date and (ii) as of any date on or after [
], 2001, 100% of the principal amount at maturity of all outstanding
Securities (plus any applicable premium thereon), plus accrued and unpaid
interest, if any, thereon.
"Designation" has the meaning provided in Section 4.16.
"Designation Amount" has the meaning provided in Section 4.16.
"Disinterested Director" means, with respect to any transaction or
series of transactions, a member of the Board of the Company or Holdings, as
the case may be, other than any such Board member who has any material direct
or indirect financial interest in or with respect to such transaction or
series of transactions.
"Disqualified Equity Interest" means, with respect to any Person,
any Equity Interest that, by its terms (or by the
<PAGE>
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terms of any security into which it is convertible or for which it is
mandatorily exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is exchangeable for Indebtedness at the option of the holder thereof, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Securities.
"EquipmentCo" means Sprint Spectrum Equipment Company, L.P., a
Delaware limited partnership.
"Equity Interest" in any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, in such Person.
"Event of Default" has the meaning provided in Section 6.1.
"Excess Proceeds" has the meaning provided in Section 4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Cash Proceeds" means (i) any net cash proceeds used to
make a concurrent Investment constituting a Restricted Payment pursuant to
clause (iv) of the third paragraph of Section 4.9 and (ii) the first $1.4
billion of net cash proceeds received by the Company after December 31, 1995
from capital contributions in respect of existing Equity Interests (other
than Disqualified Equity Interests) of the Company or from the issue or sale
(other than to a Restricted Subsidiary) of Equity Interests (other than
Disqualified Equity Interests) of the Company; provided that (A) net cash
--------
proceeds referred to in the immediately preceding clause (i), (B) net cash
proceeds used to make an Investment in APC or (C) net cash proceeds used to
make an investment pursuant to clauses (ii) or (iii)(a) of the third
paragraph of Section 4.9 shall not be included as part of the first $1.4
billion referred to in this clause (ii).
"Fair Market Value" means, with respect to any asset or property,
the price that could be negotiated in an arms'-length free market
transaction, for cash, between a willing seller and a willing buyer, neither
of whom is under pressure or compulsion to complete the transaction. Unless
otherwise specified in this
<PAGE>
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Indenture, Fair Market Value shall be determined by the Board of the Company
acting in good faith.
"FinCo" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture
and, thereafter, means the successor.
"FCC" means the Federal Communications Commission.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States of America, which are
applicable on the Issue Date.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), directly or indirectly, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the effect of which is to assure in any way the
payment or performance (or payment of damages in the event of non-
performance) of all or any part of such obligation (other than an agreement
to make a capital contribution that otherwise is permitted by Section 4.9),
including, without limiting the foregoing, the payment of amounts drawn down
under letters of credit.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Holdings" means Sprint Spectrum Holding Company, L.P., a Delaware
limited partnership.
"Holdings Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Holdings dated as of January 31, 1996.
"incur" has the meaning provided in Section 4.8.
"Indebtedness" means, with respect to any Person, without
duplication, (i) any liability, contingent or otherwise, of such Person (a)
for borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), whether as a cash
advance,
<PAGE>
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bill, overdraft or money market facility loan, or (b) evidenced by a note,
debenture or similar instrument or letters of credit (including a purchase
money obligation) or by any book-entry mechanism or (c) for the payment of
money relating to a Capitalized Lease Obligation or other obligation relating
to the deferred purchase price of property or (d) in respect of any Interest
Rate Protection Obligation or any Currency Agreement; (ii) any liability of
others of the kind described in the preceding clause (i) which the Person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a Lien to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (iv) the greater of the
maximum repurchase or redemption price or liquidation preference of any
Disqualified Equity Interests of such Person or, with respect to any
Restricted Subsidiary of such Person, of any Equity Interests (other than
Common Equity Interests) of such Restricted Subsidiary. In no event shall
"Indebtedness" include trade payables incurred in the ordinary course of
business. For purposes of Section 4.8 and for purposes of Section 6.1, in
determining the principal amount of any Indebtedness (l) to be incurred by
the Company or a Restricted Subsidiary or which is outstanding at any date,
(x) the principal amount of any Indebtedness which provides that an amount
less than the principal amount thereof shall be due upon any declaration of
acceleration thereof shall be the accreted value thereof at the date of
determination and (y) effect shall be given to the impact of any Currency
Agreements with respect to such Indebtedness and (2) outstanding at any time
under any Currency Agreement of the Company or any Restricted Subsidiary, the
principal amount shall be the net payment obligation under such Currency
Agreement at such time.
"Indenture" means this Indenture as amended or supplemented from
time to time pursuant to the terms hereof.
"Independent Financial Advisor" means an investment banking firm of
national standing in the United States which, in the good faith judgment of
the Board of the Company, is independent with respect to the Company and its
Affiliates and qualified to perform the task for which it is to be engaged.
"Interest Payment Date," when used with respect to any Security,
means the stated maturity of an installment of interest specified in such
Security.
"Interest Rate Protection Obligation" means the obligation of any
Person pursuant to any arrangement with any
<PAGE>
-13-
other Person whereby, directly or indirectly, such Person is entitled to
receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in exchange
for periodic payments made by such Person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars, forward
interest rate agreements and similar agreements.
"Investment" means, with respect to any Person, any advance, loan
or other extension of credit (including, without limitation, by means of any
guarantee) or any capital contribution to (by means of transfer of property
to others, payment for property or services for the account or use of others,
or otherwise), or any purchase or other acquisition of any Equity Interests,
bonds, notes, debentures or other securities of, any such Person. In
addition, any foreign exchange contract, currency swap agreement or other
similar agreement made or entered into by any Person shall constitute an
Investment by such Person.
"Issue Date" means the date of original issuance of Securities
under this Indenture.
"Issuers" means the Company and FinCo.
"legal defeasance" has the meaning provided in Section 8.2.
"Legal Holiday" means any day other than a Business Day.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation or assignment for security.
"Lucent Credit Facility" means the credit facility contemplated by
the commitment letter dated June 21, 1996 between the Company and Lucent
Technologies, Inc., as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Material Restricted Subsidiary" means any Restricted Subsidiary
which, at any date of determination, is (i) a "Significant Subsidiary" (as
that term is defined in Regulation S-X, as in effect on the Issue Date,
issued under the Securities Act), and/or (ii) holds any FCC license for the
transmission of
<PAGE>
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wireless telecommunications services and/or (iii) any of WirelessCo, RealtyCo
or EquipmentCo.
"Maturity Date" means, with respect to any Security, the date
specified in such Security as the fixed date on which principal of such
Security is due and payable.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds therefrom in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations when received in the form
of cash or Cash Equivalents, net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as
a result of such Asset Sale, (iii) amounts required to be paid to any Person
(other than the Company or any Restricted Subsidiary) owning a beneficial
interest in or having a Lien on the assets subject to the Asset Sale and (iv)
appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities and liabilities under any indemnification obligations
associated with such Asset Sale.
"Nortel Credit Facility" means the credit facility contemplated by
the commitment letter dated June 11, 1996 between the Company and Northern
Telecom Inc., as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Obligations" means any principal of, premium, if any, and interest
on, and any other amounts owing in respect of, the Securities payable
pursuant to the terms of the Securities or this Indenture or upon
acceleration, including amounts received upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Securities or
amounts corresponding to such principal, premium, if any, interest on, or
other amounts owing with respect to, the Securities.
"Officer" means the Chief Executive Officer, Chairman of the
Partnership Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary, the Chief
<PAGE>
-15-
Technology Officer, the Chief Business Development Officer, the Chief Public
Relations Officer or any Director or Partnership Board Representative of
either of the Issuers or any Subsidiary Guarantor, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers
or by an Officer and an Assistant Treasurer or Assistant Secretary of either
of the Issuers or any Subsidiary Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee, which may include an individual employed as
counsel to an Issuer or a Subsidiary Guarantor.
"Pari Passu Debt Securities" means any Debt Securities (and any
guarantee of any Debt Security) which would not constitute Subordinated
Indebtedness.
"Partners" means, collectively, Sprint Enterprises, L.P., TCI
Telephony Services, Inc., Comcast Telephony Service and Cox Telephony
Partnership, to the extent they are Partners in Holdings and any permitted
transferee of such Partner's interest pursuant to the Holdings Partnership
Agreement.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Assets" means property or assets that will be used in a
Permitted Business referred to in clause (i) of the definition of "Permitted
Business" (or Equity Interests of any Person that will become a Restricted
Subsidiary as a result of the applicable Asset Sale to the extent such
Person's operations consist of such a Permitted Business).
"Permitted Business" means (i) the delivery or distribution of
telecommunications, voice, data or video services, (ii) any business or
activity reasonably related thereto, including, without limitation, any
business conducted by the Company or any Restricted Subsidiary on the Issue
Date and the acquisition, holding or exploitation of any license relating to
the delivery of the services described in clause (i) of this definition or
(iii) any other business or activity in which the Company and the Restricted
Subsidiaries are expressly contemplated to be engaged pursuant to the
provisions of the Holdings Partnership Agreement as in effect on the Issue
Date.
"Permitted Holder" means (i) each of Sprint Corporation, Tele-
Communications, Inc., Comcast Corporation and
<PAGE>
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Cox Communications, Inc. and the respective successors (by merger,
consolidation, transfer or otherwise) to all or substantially all of the
respective businesses and assets of the foregoing, (ii) any transferee of the
assets resulting from a Permitted Transaction and (iii) each Person
controlled by one or more Persons identified in clause (i) or (ii) of this
definition.
"Permitted Investments" means any of the following: (i)
Investments in any Restricted Subsidiary (including any Person that pursuant
to such Investment becomes a Restricted Subsidiary) and any Person that is
merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or any Restricted Subsidiary
at the time such Investment is made; (ii) Investments in Cash Equivalents;
(iii) Investments in Currency Agreements and Interest Rate Protection
Obligations permitted by Section 4.8; (iv) loans or advances to officers or
employees of the Company and the Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes of the Company and the
Restricted Subsidiaries (including travel and moving expenses) not in excess
of $5.0 million in the aggregate at any one time outstanding; (v) Investments
in evidences of Indebtedness, securities or other property received from
another Person by the Company or any of the Restricted Subsidiaries in
connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such Person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for evidences
of Indebtedness, securities or other property of such Person held by the
Company or any of the Restricted Subsidiaries, or for other liabilities or
obligations of such other Person to the Company or any of the Restricted
Subsidiaries that were created in accordance with the terms of this
Indenture; and (vi) Investments made by the Company and the Restricted
Subsidiaries as a result of consideration received in connection with an
Asset Sale made in compliance with Section 4.13.
"Permitted Transaction" with respect to a Partner means a
transaction or series of related transactions in which (i) such Partner
ceases to be a Subsidiary of its Parent or such Partner Transfers its
Interest to a Person that is not a Controlled Affiliate of such Partner and
(ii) the new Parent of such Partner (or such Partner if it is its own Parent)
or the Parent of the transferee of the Interest after giving effect to such
transaction, or the last transaction in a series of related transactions,
owns, directly and indirectly through its Controlled Affiliates, all or a
Substantial Portion of the cable television system assets (in the case of a
Cable Partner) or long distance telecommunications business assets (in the
case of
<PAGE>
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Sprint Corporation) owned by the Parent of such Partner, directly and
indirectly through its Controlled Affiliates, immediately prior to the
commencement of such transaction or series of transactions. As used herein,
"Substantial Portion" means (x) in the case of a Cable Partner, cable
television systems serving 75% or more of the aggregate number of basic
subscribers served by cable television systems in the United States of
America (including its territories and possessions other than Puerto Rico)
owned by the Parent of such Cable Partner, directly and indirectly through
its Controlled Affiliates, and (y) in the case of Sprint Corporation, long
distance telecommunications business assets serving 75% or more of the
aggregate number of customers served by the long distance telecommunications
business in the United States of America (including its territories and
possessions other than Puerto Rico) owned by the Parent of Sprint
Corporation, directly and indirectly through its Controlled Affiliates. All
capitalized terms used in this definition and not otherwise defined in this
Indenture shall have the meanings ascribed to them in the Holdings
Partnership Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"principal" of a debt security (including the Securities) means the
principal amount of the security plus, when appropriate, the premium, if any,
on the security. Such amount shall, if applicable, be calculated by
reference to the last sentence of "Indebtedness" and, with respect to the
Securities, shall mean the Accreted Value, plus any premium, for periods
prior to [ ], 2001.
"Public Equity Offering" means an underwritten public offering of
Common Equity Interests made on a primary basis by the Company, Holdings or a
Special Purpose Corporation pursuant to a registration statement filed with,
and declared effective by, the Commission in accordance with the Securities
Act; provided that Holdings or the Special Purpose Corporation, as the case
--------
may be, shall contribute as equity to, or purchase Common Equity Interests
in, the Company with proceeds from the Initial Public Offering of not less
than the greater of (x) $100.0 million or (y) the amount required to effect
any redemption pursuant to Paragraph 7 of the Securities.
"RealtyCo" means Sprint Spectrum Realty Company, L.P., a Delaware
limited partnership.
<PAGE>
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"Redemption Date" means, with respect to any Security, the date on
which such Security is to be redeemed by the Company pursuant to the terms of
the Securities.
"Refinancing Indebtedness" means (i) Indebtedness of the Company to
the extent the proceeds thereof are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of the Company or
any of the Restricted Subsidiaries and (ii) Indebtedness of any Restricted
Subsidiary to the extent the proceeds thereof are used solely to refinance
(whether by amendment, renewal, extension or refunding) Indebtedness of such
Restricted Subsidiary, in each such event, incurred under the first paragraph
of Section 4.8 or clause (a) of the second paragraph of such Section;
provided that (a) the principal amount of Refinancing Indebtedness incurred
--------
pursuant to this definition (or, if such Refinancing Indebtedness provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, the accreted
value of such Indebtedness) shall not exceed the principal amount or accreted
value, as the case may be, of the Indebtedness refinanced, plus the amount of
any premium required to be paid in connection with such refinancing pursuant
to the terms of such Indebtedness or the amount of any premium reasonably
determined by the Board of the Company as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated purchase, plus
the amount of reasonable expenses in connection therewith and (b) in the case
of Refinancing Indebtedness incurred by an Issuer or a Subsidiary Guarantor,
such Indebtedness has an Average Life to Stated Maturity greater than or
equal to either (A) the Average Life to Stated Maturity of the Indebtedness
refinanced or (B) the remaining Average Life to Stated Maturity of the
Securities and (iii) if the Indebtedness to be refinanced is Subordinated
Indebtedness of an Issuer or a Subsidiary Guarantor, the Indebtedness to be
incurred pursuant to this definition shall also be Subordinated Indebtedness
of the Issuer or the Subsidiary Guarantor, as applicable, whose Indebtedness
is to be refinanced.
"Registrar" has the meaning provided in Section 2.3.
"Replacement Assets" has the meaning provided in Section 4.13.
"Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or Assistant Secretary of such Person
to have been duly adopted by its Board and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
<PAGE>
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"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or distribution on Equity Interests of
the Company or any Restricted Subsidiary or any payment made to the direct or
indirect holders (in their capacities as such), including any Special Purpose
Corporation, of Equity Interests of the Company or any Restricted Subsidiary
(other than dividends or distributions) (a) payable solely in Equity
Interests (other than Disqualified Equity Interests) of the Company or in
options, warrants or other rights to purchase Equity Interests (other than
Disqualified Equity Interests) of the Company, (b) paid to the Company or a
Wholly-Owned Restricted Subsidiary or (c) paid in respect of Equity Interests
of a Restricted Subsidiary to Persons other than the Company or Wholly-Owned
Restricted Subsidiaries (on not more favorable than a pro rata basis with
--- ----
dividends or distributions then being paid in respect of Equity Interests
held by the Company or a Wholly-Owned Restricted Subsidiary); (ii) the
purchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or a Restricted Subsidiary (other than any
such Equity Interests owned by the Company or a Wholly-Owned Restricted
Subsidiary); (iii) the making of any principal payment on, or the purchase,
redemption, defeasance or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Subordinated Indebtedness of an Issuer or any Subsidiary
Guarantor (other than any such subordinated Indebtedness owned by the Company
or a Restricted Subsidiary); or (iv) the making of any Investment (other than
a Permitted Investment) in any Person (other than an Investment by a
Restricted Subsidiary in the Company or an Investment by the Company or a
Restricted Subsidiary in either (x) a Restricted Subsidiary or (y) a Person
that becomes a Restricted Subsidiary as a result of such Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that
has not been designated by the Board of the Company, by a Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with Section 4.16. Any such Designation may be revoked by a
Resolution of the Company delivered to the Trustee, subject to the provisions
of such Section.
"Revocation" has the meaning provided in Section 4.16.
"S&P" means Standard & Poor's Corporation.
"Securities" means the [ ]% Senior Discount Notes Due 2006
issued, authenticated and delivered under this Indenture, as
<PAGE>
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amended or supplemented from time to time pursuant to the terms of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes Pro Rata Share" means the amount of the
applicable Excess Proceeds obtained by multiplying the amount of such Excess
Proceeds by a fraction, (i) the numerator of which is the aggregate Accreted
Value of all Securities outstanding at the time of the applicable Asset Sale
Offer and (ii) the denominator of which is the sum of (a) the aggregate
Accreted Value of all Securities outstanding at the time of the applicable
Asset Sale Offer, (b) the aggregate principal amount of all Senior Notes
outstanding at the time of the applicable Asset Sale Offer and (c) the
aggregate principal amount or the aggregate accreted value, as the case may
be, of all other Indebtedness (other than Subordinated Indebtedness of an
Issuer or a Subsidiary Guarantor) outstanding at the time of the applicable
Asset Sale Offer with respect to which an Issuer or a Restricted Subsidiary,
as the case may be, is required to use the applicable Excess Proceeds to
offer to repay or make an offer to purchase.
"Senior Notes" means the [ ]% Senior Notes due 2006 of the
Issuers.
"Senior Notes Indenture" means the indenture governing the Senior
Notes dated as of [ ], 1996 by and among the Issuers and The Bank of
New York, as Trustee, as amended or supplemented from time to time.
"Services Agreement" means [to come].
"Special Purpose Corporation" means a corporation formed to own
Common Equity Interests of the Company or Holdings in accordance with
Paragraph 7 of the Security.
"Subordinated Debt Securities" means any Debt Securities (and any
guarantee of any Debt Security) that would constitute Subordinated
Indebtedness.
"Subordinated Indebtedness" of any Person means any Indebtedness of
such Person that is expressly subordinated in right of payment to any other
Indebtedness of such Person.
"Subsidiary" means, with respect to any Person, (i) any corporation
of which the outstanding Equity Interests having at
<PAGE>
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least a majority of the votes entitled to be cast in the election of
directors shall at the time be owned, directly or indirectly, by such Person,
or (ii) any other Person of which at least a majority in value of Equity
Interests or Voting Equity Interests is at the time, directly or indirectly,
owned by such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.11.
"Subsidiary Guarantor" means a Restricted Subsidiary that issues a
Subsidiary Guarantee pursuant to Section 4.11.
"Surviving Entity" has the meaning provided in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture.
"Total Consolidated Indebtedness" means, at any date of
determination, an amount equal to the aggregate principal amount of all
Indebtedness of the Company and the Restricted Subsidiaries outstanding as of
the date of determination.
"Total Invested Capital" means, at any time of determination, the
sum of, without duplication, (i) the total amount of equity contributed to
the Company as set forth on the March 31, 1996 consolidated balance sheet of
the Company, plus (ii) the aggregate net cash proceeds received by the
----
Company from capital contributions or the issuance or sale of Equity
Interests (other than Disqualified Equity Interests but including Equity
Interests issued upon the conversion of convertible Indebtedness or from the
exercise of options, warrants or rights to purchase Equity Interests (other
than Disqualified Equity Interests)) subsequent to the Issue Date, other than
to a Restricted Subsidiary, plus (iii) the aggregate net cash proceeds
----
received by the Company or any Restricted Subsidiary from the sale,
disposition or repayment of any Investment made after the Issue Date and
constituting a Restricted Payment in an amount equal to the lesser of (a) the
return of capital with respect to such Investment and (b) the initial amount
of such Investment, in either case, less the cost of the disposition of such
Investment, plus (iv) an amount equal to the consolidated net Investment on
----
the date of Revocation made by the Company and/or any of the Restricted
Subsidiaries in any Subsidiary that has been designated as an Unrestricted
Subsidiary after the Issue Date upon its redesignation as a Restricted
Subsidiary in accordance with Section 4.16, plus (v) Total Consolidated
----
Indebtedness, minus (vi) the aggregate amount of all Restricted Payments
-----
<PAGE>
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(including any Designation Amount, but other than a Restricted Payment of
the type referred to in clause (iii)(b) of the third paragraph of Section
4.9) declared or made from and after the Issue Date.
"Trust Officer" means an officer or assistant officer of the
Trustee assigned to the Corporate Trustee Department (or any successor group)
of the Trustee, or any successor to such department or, in the case of a
successor trustee, an officer or assistant officer assigned to the
department, division or group performing the corporate trust work of such
successor.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company
(other than FinCo, WirelessCo, RealtyCo and EquipmentCo) designated after the
Issue Date as such pursuant to and in compliance with Section 4.16. Any such
designation may be revoked by a Resolution of the Company delivered to the
Trustee, subject to the provisions of such Section 4.16.
"U.S. Government Obligations" has the meaning provided in Section
8.2(d).
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Vendor Credit Facilities" means, collectively, (i) the Lucent
Credit Facility; (ii) the Nortel Credit Facility; and (iii) any other credit
facility entered into with any vendor or supplier (or any financial
institution acting on behalf of such a vendor or supplier); provided that, in
--------
the case of each of clauses (i), (ii) and (iii), the Indebtedness thereunder
is incurred solely for the purpose of financing the cost (including the cost
of design, development, site acquisition, construction, integration, handset
manufacture or acquisition or microwave relocation) of wireless
telecommunications networks or systems or for which the Company or any
Restricted Subsidiary has obtained the applicable licenses or authorizations
to utilize the radio frequencies necessary for the operation of such systems
or networks.
"Voting Equity Interests" means, with respect to any Person, Equity
Interests of any class or kind ordinarily having
<PAGE>
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the power to vote for the election of directors, managers or other voting
members of the governing body of such Person.
"Wholly-Owned Restricted Subsidiary" means any Restricted
Subsidiary of which 100% of the outstanding Equity Interests is owned by the
Company or another Wholly-Owned Restricted Subsidiary. For purposes of this
definition, (i) any directors' qualifying shares or investments by foreign
nationals mandated by applicable law and (ii) Equity Interests of a Person
not to exceed 1% of the total voting power of all outstanding Equity
Interests of such Person and representing a right to receive not greater than
1% of the profits of such partnership shall be disregarded in determining the
ownership of a Restricted Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
other Person 100% of whose outstanding Equity Interests are owned by such
Person or another Wholly-Owned Restricted Subsidiary of such Person. For
purposes of this definition, (i) any directors' qualifying shares or
investments by foreign nationals mandated by applicable law and (ii) Equity
Interests of a Person not to exceed 1% of the total voting power of all
outstanding Equity Interests of such Person and representing a right to
receive not greater than 1% of the profits of such partnership shall be
disregarded in determining the ownership of a Subsidiary.
"WirelessCo" means WirelessCo, L.P., a Delaware limited
partnership.
SECTION 1.2 Incorporation by Reference
of Trust Indenture Act.
--------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
(a) "indenture securities" means the Securities;
(b) "indenture security holder" means a Holder or Securityholder;
(c) "indenture to be qualified" means this Indenture;
(d) "indenture trustee" or "institutional trustee" means the
Trustee; and
<PAGE>
-24-
(e) "obligor" on the indenture securities means the Company, FinCo,
each Subsidiary Guarantor, if any, or any other obligor on the
Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings so assigned to them
therein.
SECTION 1.3 Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the
plural include the singular;
(d) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subsection; and
(e) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP.
ARTICLE II
THE SECURITIES
--------------
SECTION 2.1 Form and Dating.
---------------
The Securities and the Trustee's certificates of authentication
with respect thereto shall be substantially in the form set forth in Exhibit
A, which is annexed hereto and hereby incorporated in and expressly made a
part of this Indenture. The Securities may have notations, legends or
endorsements (including notations relating to any Subsidiary Guarantee)
required by law, rule or usage to which the Issuers or any Subsidiary
Guarantor are subject. Each Security shall be dated the date of its
authentication. The terms and provisions contained in the Securities shall
constitute, and are expressly made, a part of this Indenture.
<PAGE>
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SECTION 2.2 Execution and Authentication.
----------------------------
Two Officers (each of whom shall have been duly authorized by all
requisite partnership or corporate action, as the case may be) shall execute
the Securities on behalf of each of the Issuers by manual or facsimile
signature. Each of the Issuers' seals shall be impressed, affixed, imprinted
or reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security or at any time
thereafter, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security.
Such signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in an
aggregate principal amount at maturity not to exceed $[ ] upon
receipt of the Officers' Certificates of each of the Issuers signed by two
Officers of each of the Issuers directing the Trustee to authenticate the
Securities and certifying that all conditions precedent to the issuance of
the Securities contained herein have been complied with. The aggregate
principal amount at maturity of Securities outstanding at any time may not
exceed $[ ], except as provided in Section 2.8.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent
shall have the same rights as the Trustee in any dealings hereunder with the
Issuers or with any of the Issuers' Affiliates.
The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 principal amount at maturity and
any integral multiple thereof.
<PAGE>
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SECTION 2.3 Registrar and Paying Agent.
--------------------------
The Issuers shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New
York) where (a) Securities may be presented for registration of transfer or
for exchange (the "Registrar"), (b) Securities may be presented for payment
(the "Paying Agent") and (c) notices and demands to or upon the Issuers and
any Subsidiary Guarantor in respect of the Securities, the Subsidiary
Guarantees and this Indenture may be served. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Issuers
may have one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. Neither the
Issuers nor any Affiliate thereof may act as Paying Agent.
The Issuers shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture that shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture
that relate to such Agent. The Issuers shall notify the Trustee of the name
and address of any such Agent. If the Issuers fail to maintain a Registrar
or Paying Agent, or fail to give the foregoing notice, the Trustee shall act
as such.
The Company initially appoints the Trustee located at the address
set forth in Section 11.2 as Registrar, Paying Agent and agent for service of
notices and demands in connection with the Securities, any Subsidiary
Guarantee and this Indenture.
SECTION 2.4 Paying Agent To Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities (whether such money has
been paid to it by the Issuers or any other obligor on the Securities), and
the Issuers and the Paying Agent shall notify the Trustee of any default by
the Issuers (or any other obligor on the Securities) in making any such
payment. Money held in trust by the Paying Agent need not be segregated
except as required by law and in no event shall the Paying Agent be liable
for any interest on any money received by it hereunder. The Issuers at any
time may require the Paying Agent to pay all money held by it to the Trustee
and account for any funds disbursed and the Trustee may at any time during
the continuance of any Event of Default
<PAGE>
-27-
specified in Section 6.1(a)(i) or (ii), upon written request to the Paying
Agent, require such Paying Agent to pay forthwith all money so held by it to
the Trustee and to account for any funds disbursed. Upon making such
payment, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.5 Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of the Holders of Securities. If the Trustee is not the Registrar, the
Issuers shall furnish to the Trustee at least five Business Days before each
Interest Payment Date, and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Securities,
if any.
SECTION 2.6 Transfer and Exchange.
---------------------
(a) When Securities are presented to the Registrar or a co-
registrar with a request from the Holder of such Securities to register a
transfer, the Registrar shall register the transfer as requested. Every
Security presented or surrendered for registration of transfer or exchange
shall be duly endorsed or be accompanied by a written instrument of transfer
in form satisfactory to the Issuers and the Registrar, duly executed by the
Holder thereof or his attorneys duly authorized in writing.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like
aggregate principal amount at maturity, upon surrender of the Securities to
be exchanged at the office or agency maintained for such purpose pursuant to
Section 2.3.
To permit registrations of transfers and exchanges, the Issuers
shall issue and execute and the Trustee shall authenticate new Securities
evidencing such transfer or exchange at the Registrar's request.
<PAGE>
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SECTION 2.7 Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Registrar or the
Trustee or if the Holder of a Security claims that the Security has been
lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee
shall authenticate a replacement Security. If required by the Trustee or the
Issuers, an indemnity bond shall be posted, sufficient in the judgment of
each of the Issuers and the Trustee to protect the Issuers, the Trustee or
any Paying Agent from any loss that any of them may suffer if such Security
is replaced. The Issuers may charge such Holder for the Issuers' reasonable
out-of-pocket expenses in replacing such Security and the Trustee may charge
the Issuers for the Trustee's expenses in replacing such Security. Every
replacement Security shall constitute an additional obligation of each of the
Issuers.
SECTION 2.8 Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities that have
been authenticated by the Trustee except for (a) those cancelled by it, (b)
those delivered to it for cancellation, (c) to the extent set forth in
Sections 8.1 and 8.2, on or after the date on which the conditions set forth
in Section 8.1 or 8.2 have been satisfied, those Securities theretofore
authenticated and delivered by the Trustee hereunder and (d) those described
in this Section 2.8 as not outstanding. Subject to Section 2.9, a Security
does not cease to be outstanding because the Issuers or one of their
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser in whose hands such
Security is a legal, valid and binding obligation of each of the Issuers.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional redemption date, money sufficient to pay all accrued
interest and principal with respect to such Securities payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant
to the terms of this Indenture, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
<PAGE>
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SECTION 2.9 Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount
at maturity of Securities have concurred in any declaration of acceleration
or notice of default or direction, waiver or consent or any amendment,
modification or other change to this Indenture, Securities owned by the
Issuers or an Affiliate of an Issuer shall be disregarded as though they were
not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or
consent or any amendment, modification or other change to this Indenture,
only Securities that the Trustee actually knows are so owned shall be so
disregarded.
SECTION 2.10 Temporary Securities.
--------------------
Until definitive Securities are prepared and ready for delivery,
the Issuers may prepare and the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuers consider
appropriate for temporary Securities. Without unreasonable delay, the
Issuers shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities. Until such exchange,
temporary Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities.
SECTION 2.11 Cancellation.
------------
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for registration of transfer,
exchange or payment or purchase. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation or purchase and shall dispose of cancelled Securities unless the
Issuers direct the Trustee to return such Securities to the Issuers, and, if
so disposed, shall deliver a certificate of disposition thereof to the
Issuers. The Issuers may not reissue or resell, or issue new Securities to
replace, Securities that the Issuers have redeemed or paid or purchased, or
that have been delivered to the Trustee for cancellation.
<PAGE>
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SECTION 2.12 Defaulted Interest.
------------------
If the Issuers default on a payment of interest on the Securities,
they shall pay the defaulted interest, plus (to the extent permitted by law)
any interest payable on the defaulted interest, in accordance with the terms
hereof, to the Persons who are Holders of Securities on a subsequent special
record date, which date shall be at least five Business Days prior to the
payment date. The Issuers shall fix such special record date and payment
date in a manner satisfactory to the Trustee. At least 15 days before such
special record date, the Issuers shall mail to each Holder of Securities a
notice that states the special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if
any, to be paid.
SECTION 2.13 CUSIP Number.
------------
The Issuers in issuing the Securities may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
--------
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities and that reliance may be
placed only on the other identification numbers printed on the Securities.
The Issuers will promptly notify the Trustee of any change in the CUSIP
number.
SECTION 2.14 Deposit of Moneys.
-----------------
On each Interest Payment Date and Maturity Date and on any Business
Day immediately following any acceleration of the Securities pursuant to
Section 6.2, the Issuers shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date, Maturity Date or Business Day, as the case
may be, in a timely manner that permits the Trustee to remit payment to the
Holders on such Interest Payment Date, Maturity Date or Business Day, as the
case may be.
ARTICLE III
REDEMPTION
----------
SECTION 3.1 Election To Redeem; Notices to Trustee.
--------------------------------------
If the Issuers elect to redeem Securities pursuant to Paragraph 6
or 7 of the Securities, they shall notify the
<PAGE>
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Trustee and the Paying Agent in writing of the Redemption Date and the
principal amount at maturity of Securities to be redeemed.
The Issuers shall give each notice provided for in this Section 3.1
at least 30 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
of each of the Issuers stating that such redemption will comply with the
conditions contained herein and in the Securities.
SECTION 3.2 Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Securities are listed or, if the Securities are not then listed on a
national securities exchange, on a pro rata basis, by lot or by such other
--- ----
method as the Trustee deems fair and appropriate; provided that any
--------
redemption pursuant to Paragraph 7 of the Securities shall be made on a pro
---
rata basis or on as nearly a pro rata basis as is practicable (subject to the
----
procedures of The Depository Trust Company) based on the aggregate principal
amount at maturity of Securities held by each Holder. The Trustee shall make
the selection from the Securities outstanding and not previously called for
redemption. The Trustee shall promptly notify the Issuers in writing of such
Securities selected for redemption and, in the case of Securities selected
for partial redemption, the principal amount at maturity to be redeemed. The
Trustee may select for redemption portions of the principal amount at
maturity of Securities that have denominations equal to or larger than $1,000
principal amount at maturity. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 principal amount at maturity or
integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.3 Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption
Date, the Issuers shall mail or cause the mailing of a notice of redemption
by first-class mail to each Holder of Securities to be redeemed at such
Holder's registered address. A copy of such notice shall be mailed to the
Trustee on the same day the notice is mailed to Holders of Securities.
<PAGE>
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The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the paragraph of the Securities pursuant to which the
Securities are being redeemed;
(c) the redemption price and the amount of accrued interest, if
any, to be paid;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price and accrued interest,
if any;
(f) that, unless the Issuers default in making the redemption
payment, Accreted Value and interest on Securities called for redemption
ceases to accrete or accrue, as the case may be, on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the redemption price upon surrender
to the Paying Agent of the Securities redeemed;
(g) if any Security is to be redeemed in part, the portion of the
principal amount at maturity (equal to $1,000 or any integral multiple
thereof) of such Security to be redeemed and that, on or after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in aggregate principal amount at maturity equal to the
unredeemed portion thereof will be issued without charge to the
Securityholder;
(h) if less than all of the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount at maturity of
Securities to be redeemed and the aggregate principal amount at maturity
of Securities to be outstanding after such partial redemption; and
(i) the CUSIP number, if any, pursuant to Section 2.13.
<PAGE>
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At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense.
SECTION 3.4 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the
redemption price. Upon surrender to the Paying Agent, such Securities shall
be paid at the redemption price plus accrued interest, if any, to the
Redemption Date, but interest installments whose maturity is on or prior to
such Redemption Date will be payable on the relevant Interest Payment Dates
to the Holders that would otherwise have been entitled thereto pursuant to
this Indenture and the Securities.
SECTION 3.5 Deposit of Redemption Price.
---------------------------
At least one Business Day prior to the Redemption Date, the Issuers
shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
redemption price of and accrued interest, if any, on all Securities or
portions thereof to be redeemed on that date.
If any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid on the Redemption Date due to the
failure of the Issuers to deposit with the Paying Agent U.S. Legal Tender,
the principal, premium, if any, and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Section 4.1 with respect to any payment default.
SECTION 3.6 Securities Redeemed in Part.
---------------------------
Upon the surrender to the Paying Agent of a Security that is
redeemed in part, the Issuers shall execute and the Trustee shall
authenticate for the Holder a new Security equal in principal amount at
maturity to the principal amount at maturity of the unredeemed portion of the
Security surrendered.
<PAGE>
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ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Securities.
---------------------
The Issuers shall pay the principal of, premium, if any, and
interest on the Securities on the dates and in the manner provided in the
Securities and this Indenture.
An installment of principal, premium or interest shall be
considered paid on the date due if the Trustee or the Paying Agent holds on
such date U.S. Legal Tender designated for and sufficient to pay such
installment.
The Issuers shall pay cash interest on overdue principal and (to
the extent permitted by law) on overdue installments of interest at the rate
borne by the Securities. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 4.2 Maintenance of Office or Agency.
-------------------------------
The Issuers shall maintain the office or agency required under
Section 2.3. The Issuers will give prompt written notice to the Trustee of
the location, and any change in the location, of each such office or agency.
If at any time the Issuers shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2.
The Issuers may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve
--------
the Issuers of their obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Issuers
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Issuers hereby initially designate the corporate trust office
of the Trustee set forth in Section 11.2 as an agency of the Issuers with
respect to the Securities in accordance with Section 2.3.
<PAGE>
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SECTION 4.3 Corporate or Partnership Existence.
----------------------------------
Subject to Article V, the Issuers shall do or cause to be done, at
their own cost and expense, all things necessary to, and will cause each
Restricted Subsidiary to, preserve and keep in full force and effect the
corporate or partnership existence and rights (charter and statutory),
licenses and/or franchises of each of the Issuers and each Restricted
Subsidiary; provided that none of the Issuers or any Restricted Subsidiaries
--------
shall be required to preserve any such rights, licenses or franchises if such
rights, licenses or franchises will be replaced or if the Board of the
Company shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of the business of the Issuers or such Restricted
Subsidiary, as the case may be, and the loss thereof is not adverse in any
material respect to the Holders; provided, further, that any Restricted
-------- -------
Subsidiary may be wound up and liquidated into an Issuer or any other
Restricted Subsidiary.
SECTION 4.4 Payment of Taxes and Other Claims.
---------------------------------
The Issuers shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges levied or imposed upon their or their
Subsidiaries' income, profits or property and (b) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of an Issuer or a Restricted Subsidiary; provided that the
--------
Issuers shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
negotiations or proceedings and for which disputed amounts any reserves
required in accordance with GAAP have been made.
SECTION 4.5 Maintenance of Properties; Insurance;
Books and Records; Compliance with Law.
--------------------------------------
(a) Each of the Issuers shall, and shall cause each of the
Restricted Subsidiaries to, at all times cause all properties used or useful
in the conduct of its business to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied
with all necessary equipment, and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereto.
<PAGE>
-36-
(b) Each of the Issuers shall, and shall cause each of the
Restricted Subsidiaries to, maintain insurance (which may include self-
insurance) in such amounts and covering such risks as are usually and
customarily carried with respect to similar facilities according to their
respective locations.
(c) Each of the Issuers shall, and shall cause each of the
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all of its financial transactions and the
assets and business, in accordance with GAAP consistently applied.
(d) Each of the Issuers shall and shall cause each of the
Subsidiaries to comply with all statutes, laws, ordinances, or government
rules and regulations to which it is subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
financial condition of the Issuers and the Restricted Subsidiaries, taken as
a whole.
SECTION 4.6 Compliance Certificates.
-----------------------
(a) Each of the Issuers shall deliver to the Trustee, within 45
days after the end of each of the first three quarters of the Issuers' fiscal
year, and within 90 days after the end of such fiscal year, an Officers'
Certificate stating (i) that a review of the activities of the respective
Issuer during the preceding fiscal quarter or year, as the case may be, has
been made under the supervision of the signing Officers with a view to
determining whether the respective Issuer has kept, observed, performed and
fulfilled its obligations under this Indenture and (ii) that, to the best
knowledge of each Officer signing such certificate, the respective Issuer has
kept, observed, performed and fulfilled each and every covenant and condition
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions, conditions and covenants hereof
(or, if a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which such Officers may have knowledge,
their status and what action the defaulting Issuer is taking or proposes to
take with respect thereto).
(b) The annual financial statements delivered pursuant to Section
4.7 shall be accompanied by a written statement of the Company's independent
public accountants that in making the examination necessary for certification
of such annual financial statements nothing as to which such
<PAGE>
-37-
accountants have professional competence has come to their attention that
would lead them to believe that either of the Issuers has violated any
provisions of this Indenture as to which such accountants have professional
competence, or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) Each of the Issuers shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly after any Officer of either of
the Issuers becomes aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the
applicable Issuer is taking or proposes to take with respect thereto.
SECTION 4.7 Reports.
-------
So long as any of the Securities are outstanding, the Company will
file with the Commission the annual reports, quarterly reports and other
documents that the Company would have been required to file with the
Commission pursuant to Sections 13(a) and 15(d) of the Exchange Act whether
or not the Company is then obligated to file reports pursuant to such
Sections, and the Company will promptly provide to all registered Holders of
the Securities and file, within 30 days of filing with the Commission, with
the Trustee copies of such reports and documents.
SECTION 4.8 Limitation on Additional
Indebtedness.
------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume, issue, guarantee or in any other manner become
directly or indirectly liable, contingently or otherwise, for or with respect
to (in any such case, to "incur") any Indebtedness (including any Acquired
Indebtedness); provided that the Issuers and the Restricted Subsidiaries may
--------
incur Indebtedness (including Acquired Indebtedness) if after giving pro
---
forma effect to such incurrence (including the application or use of the net
-----
proceeds therefrom to repay Indebtedness or make any Restricted Payment)
either (a) the ratio of (x) Total Consolidated Indebtedness to (y) Annualized
Pro Forma Consolidated Operating Cash Flow would be less than (A) 7.0 to 1.0,
if the Indebtedness is to be incurred prior to July 1, 2002, or (B) 6.0 to
1.0, if the Indebtedness is to be incurred on or after
<PAGE>
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July 1, 2002, or (b) in the case of any incurrence of Indebtedness prior to
July 1, 2002 only, Total Consolidated Indebtedness would be equal to or less
than 70% of Total Invested Capital.
Notwithstanding the foregoing, the Issuers and, to the extent
specified, the Restricted Subsidiaries will be permitted to incur each and
all of the following (each of which shall be given independent effect):
(a) Indebtedness under the Securities, any Subsidiary Guarantee and
this Indenture;
(b) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to any of the Vendor Credit
Facilities;
(c) Indebtedness of the Issuers and the Restricted Subsidiaries
outstanding from time to time pursuant to the Bank Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed
$2.0 billion;
(d) Indebtedness of an Issuer or a Restricted Subsidiary owed to
and held by an Issuer or another Restricted Subsidiary so long as any
such Indebtedness owing by an Issuer is unsecured and subordinated in
right of payment to the Securities, except that (x) any direct or
indirect transfer of such Indebtedness by an Issuer or a Restricted
Subsidiary (other than to an Issuer or a Restricted Subsidiary), as the
case may be, or (y) any direct or indirect sale, transfer or other
disposition by an Issuer or a Restricted Subsidiary of Equity Interests
of a Restricted Subsidiary that is owed Indebtedness of an Issuer or a
Restricted Subsidiary such that it ceases to be a Restricted Subsidiary
shall, in each such event, be an incurrence of Indebtedness by the
Issuer or such Restricted Subsidiary, as the case may be, subject to the
other provisions of this Section 4.8;
(e) Interest Rate Protection Obligations of an Issuer or a
Restricted Subsidiary relating to Indebtedness of an Issuer or a
Restricted Subsidiary otherwise permitted under this Indenture that are
entered into for the purpose of protecting against fluctuations in
interest rates in respect of such Indebtedness and not for speculative
purposes;
<PAGE>
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(f) Indebtedness of an Issuer or a Restricted Subsidiary under
Currency Agreements; provided that (x) such Currency Agreements relate
--------
to Indebtedness otherwise permitted under this Indenture or the purchase
price of goods purchased or sold by an Issuer or a Restricted Subsidiary
in the ordinary course of its business and (y) such Currency Agreements
do not increase the Indebtedness or other obligations of an Issuer or a
Restricted Subsidiary outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(g) Indebtedness of an Issuer or a Restricted Subsidiary
represented by letters of credit for the account of an Issuer or a
Restricted Subsidiary in order to provide security for workers'
compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(h) other Indebtedness of the Issuers and the Restricted
Subsidiaries in an aggregate principal amount not to exceed $100 million
at any one time outstanding; and
(i) Refinancing Indebtedness.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by
the Company or a Restricted Subsidiary (whether or not such Indebtedness is
assumed by the acquiring Person) shall be deemed incurred at the time the
Person becomes a Restricted Subsidiary or at the time of the asset
acquisition, as the case may be.
SECTION 4.9 Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not permit any of the Restricted
Subsidiaries to, make, directly or indirectly, any Restricted Payment on or
prior to December 31, 1999; and, thereafter, will not, and will not permit
any of the Restricted Subsidiaries to, make, directly or indirectly, any
Restricted Payments unless:
(i) no Default shall have occurred and be continuing at the
time of or after giving effect to such Restricted Payment;
<PAGE>
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(ii) immediately after giving effect to such Restricted
Payment, the Company would be able to incur $1.00 of additional
Indebtedness under clause (a) of the proviso to the first paragraph of
Section 4.8; and
(iii) immediately after giving effect to such Restricted
Payment, the aggregate amount of all Restricted Payments declared or
made on or after the Issue Date (including any Designation Amount) would
not exceed an amount equal to the sum of, without duplication, (1) the
amount of (x) the Available Operating Cash Flow of the Company after
December 31, 1999 through the end of the latest full fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment (treated as a single
accounting period) less (y) 150% of the cumulative Consolidated Interest
Expense of the Company after December 31, 1999 through the end of the
latest full fiscal quarter for which consolidated financial statements
of the Company are available preceding the date of such Restricted
Payment (treated as a single accounting period), plus (2) the aggregate
----
net cash proceeds (other than Excluded Cash Proceeds) received by the
Company as a capital contribution in respect of existing Equity
Interests (other than Disqualified Equity Interests) of the Company made
after the Issue Date or from the issue or sale (other than to a
Restricted Subsidiary) by the Company of its Equity Interests (other
than Disqualified Equity Interests) made after the Issue Date, plus (3)
----
the aggregate net cash proceeds received by the Company or any
Restricted Subsidiary from the sale, disposition or repayment (other
than to the Company or a Restricted Subsidiary) of any Investment (other
than an Investment made pursuant to clause (vi) of the following
paragraph) made after the Issue Date and constituting a Restricted
Payment in an amount equal to the lesser of (x) the return of capital
with respect to such Investment and (y) the initial amount of such
Investment, in either case, less the cost of disposition of such
Investment, plus (4) an amount equal to the consolidated net Investment
----
on the date of Revocation made by the Company and/or any of the
Restricted Subsidiaries in any Subsidiary that has been designated as an
Unrestricted Subsidiary after the Issue Date upon its redesignation as a
Restricted Subsidiary in accordance with Section 4.16. For purposes of
the preceding clause (2), the value of the aggregate net cash proceeds
received by the Company upon the issuance of Equity Interests either
upon the conversion of convertible
<PAGE>
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Indebtedness or in exchange for outstanding Indebtedness or upon the
exercise of options, warrants or rights will be the net cash proceeds
received upon the issuance of such Indebtedness, options, warrants or
rights plus the incremental amount received by the Company upon the
conversion, exchange or exercise thereof.
For purposes of determining the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof and
property other than cash shall be valued at its Fair Market Value.
The provisions of this Section 4.9 shall not prohibit (i) the
payment of any dividend or distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would comply
with the provisions of this Indenture; (ii) so long as no Default shall have
occurred and be continuing, the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company out of the net cash
proceeds of the substantially concurrent capital contribution in respect of
existing Equity Interests (other than Disqualified Equity Interests) of the
Company or from the issue or sale (other than to a Restricted Subsidiary) of
Equity Interests (other than Disqualified Equity Interests) of the Company;
provided that any such net cash proceeds are excluded from clause (iii)(2) of
--------
the second preceding paragraph; (iii) so long as no Default shall have
occurred and be continuing, the purchase, redemption, retirement, defeasance
or other acquisition of Subordinated Indebtedness of an Issuer made by
exchange for or conversion into, or out of the net cash proceeds of, a
concurrent issue and sale (other than to a Restricted Subsidiary) of (a)
Equity Interests (other than Disqualified Equity Interests) of the Company
(provided that any such net cash proceeds are excluded from clause (iii)(2)
---------
of the second preceding paragraph) or (b) other Subordinated Indebtedness of
an Issuer that has an Average Life to Stated Maturity equal to or greater
than the Average Life to Stated Maturity of the Subordinated Indebtedness
being purchased, redeemed, retired, defeased or otherwise acquired; (iv) so
long as no Default shall have occurred and be continuing, the making of a
direct or indirect Investment constituting a Restricted Payment out of the
proceeds of a concurrent capital contribution in respect of existing Equity
Interests (other than Disqualified Equity Interests) of the Company or from
the issue or sale (other than to a Restricted Subsidiary) of Equity Interests
(other than Disqualified Equity Interests) of the Company; provided that any
--------
such net cash proceeds are excluded from clause (iii)(2) of the second
preceding paragraph; (v) so
<PAGE>
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long as no Default shall have occurred or be continuing and provided the
Company is then a partnership for federal income tax purposes, distributions
in respect of, and repurchases of, Equity Interests of the Company owned by
the Partners, to the extent necessary to pay current tax liabilities payable
in respect of income of the Company in an amount not to exceed in any
calendar year the product of (a) the ordinary income from trade or business
activities and giving effect to other items of income, loss and deduction
reported by the Company for the most recently ended tax year for federal
income tax purposes multiplied by (b) a percentage equal to the sum of (x)
the highest applicable federal corporate income tax rate for such tax year
(expressed as a percentage) plus (y) 5% multiplied by the excess of 100% over
the highest applicable federal corporate income tax rate for such tax year
(expressed as a percentage); provided that nothing in this clause (v) shall
--------
be redeemed to permit any such distribution or repurchase to pay any tax
liabilities of the Company's partners resulting from the conversion of the
Company from partnership to corporate form; (vi) so long as no Default shall
have occurred and be continuing, any direct or indirect Investment
constituting a Restricted Payment by the Company or any Restricted Subsidiary
in any Person (including any Unrestricted Subsidiary) whose operations
consist principally of, or has been formed principally to operate, a
Permitted Business in an amount not to exceed $100 million in the aggregate
at any time outstanding; or (vii) any transfer of any Investment in APC held
by the Company or any Restricted Subsidiary to Holdings or any Wholly-Owned
Subsidiary of Holdings; provided APC has not been made a Restricted
--------
Subsidiary under Section 4.16.
Restricted Payments made pursuant to clause (i) of the immediately
preceding paragraph shall be included in making the determination of
available amounts under clause (iii) of the third preceding paragraph and
Restricted Payments made pursuant to clauses (ii), (iii), (iv), (v) and (vii)
of the immediately preceding paragraph shall not be included in making the
determination of available amounts under clause (iii) of the third preceding
paragraph.
SECTION 4.10 Limitation on Liens Securing
Certain Indebtedness.
----------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Liens upon any property or
assets of the Company or any Restricted Subsidiary securing either (i)
Subordinated Debt Securities unless the Securities and the Subsidiary
Guarantees,
<PAGE>
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as applicable, are secured by a Lien on such property or assets that is
senior in priority to the Liens securing such Subordinated Debt Securities or
(ii) Pari Passu Debt Securities unless the Securities and the Subsidiary
Guarantees, as applicable, are equally and ratably secured with the Liens
securing such Pari Passu Debt Securities.
SECTION 4.11 Limitation on Issuance of Certain
Guarantees by, and Debt Securities
of, Restricted Subsidiaries.
----------------------------------
The Company will not permit (i) any Restricted Subsidiary to,
directly or indirectly, guarantee any Debt Securities of any of the Issuers
or (ii) any Restricted Subsidiary to issue any Debt Securities, unless, in
either such case, such Restricted Subsidiary simultaneously executes and
delivers a guarantee (a "Subsidiary Guarantee") of the Securities in
accordance with Article X. Any such Subsidiary Guarantee shall not be
subordinate in right of payment to any Indebtedness of the Restricted
Subsidiary providing the Subsidiary Guarantee.
SECTION 4.12 Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
---------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise enter into or cause to become
effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends, in cash or
otherwise, or make any distributions on its Equity Interests or any other
interest or participation in, or measured by, its profits owned by the
Company or any Restricted Subsidiary, (ii) pay any Indebtedness owed to the
Company or a Restricted Subsidiary, (iii) make any Investment in the Company
or any Restricted Subsidiary or (iv) transfer any of its property or assets
to the Company or any Restricted Subsidiary, except for (a) any such
customary encumbrance or restriction contained in a security document
creating a Lien permitted under this Indenture to the extent relating to the
property or asset subject to such Lien (including, without limitation,
customary restrictions relating to assets securing any indebtedness under any
of the Vendor Credit Facilities or the Bank Credit Facility under the
applicable security documents), (b) any such encumbrance or restriction with
respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the
Issue Date, which encumbrance or restriction is in
<PAGE>
-44-
existence at the time such Person becomes a Restricted Subsidiary but not
created in contemplation thereof and which encumbrance or restriction
pertains only to that Restricted Subsidiary and (c) any such encumbrance or
restriction imposed pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Equity Interests
or assets of such Restricted Subsidiary.
SECTION 4.13 Disposition of Proceeds of
Asset Sales.
--------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sale unless (i) the Company or such Restricted Subsidiary,
as the case may be, receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the assets sold or otherwise disposed
of and (ii) at least 80% of such consideration consists of cash or Cash
Equivalents; provided that the amount of any liabilities of the Company or
--------
such Restricted Subsidiary that are assumed (and from which the Company or
such Restricted Subsidiary is unconditionally released) in connection with
such Asset Sale by the transferee or purchaser of such assets or on behalf of
such transferee or purchaser by a third party shall be deemed to be cash for
purposes of this clause (ii); provided, further, that up to $25.0 million of
-------- -------
consideration in the aggregate that is not in the form of cash or Cash
Equivalents may be received in excess of the amount permitted by the
foregoing provisions during the term of the Securities. The Company or the
applicable Restricted Subsidiary, as the case may be, may (i) apply such Net
Cash Proceeds within 365 days of receipt thereof to repay Indebtedness (other
than Subordinated Indebtedness of an Issuer or any Subsidiary Guarantor) of
the Company or a Restricted Subsidiary and elect to permanently reduce the
commitments thereunder by the amount of such Indebtedness so repaid or (ii)
apply such Net Cash Proceeds within 365 days of receipt thereof to an
investment in properties and assets that will be used in a Permitted Business
(or in Equity Interests of any Person that will become a Restricted
Subsidiary as a result of such investment to the extent such Person's
operations consist of Permitted Businesses) of the Company or any Restricted
Subsidiary ("Replacement Assets"). Net Cash Proceeds from any Asset Sale
that are neither used to repay, and permanently reduce the commitments under,
any Indebtedness (other than Subordinated Indebtedness of an Issuer or any
Subsidiary Guarantor) of the Company or a Restricted Subsidiary nor invested
in Replacement Assets within such 365-day period shall constitute "Excess
Proceeds" subject to disposition as provided below.
<PAGE>
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When the aggregate amount of Excess Proceeds equals or exceeds
$20.0 million, the Issuers shall make an offer to purchase Securities (an
"Asset Sale Offer"), on a Business Day not more than 60 days after the day
the amount of Excess Proceeds equals or exceeds $20.0 million (an "Asset Sale
Payment Date") from all holders of Securities, at a price in cash equal to
(a) 100% of the Accreted Value on the applicable Asset Sale Payment Date, if
such Asset Sale Payment Date is on or before [ ], 2001, and (b) 100%
of the principal amount at maturity of the Securities, plus accrued and
unpaid interest, if any, thereon to the applicable Asset Sale Payment Date,
if such Asset Sale Payment Date is after [ ], 2001. Each Asset Sale
Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law. To the extent that the aggregate purchase
price for the Securities tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds available for such offer, the Company and the
Restricted Subsidiaries may use such deficiency for general partnership or
corporate purposes, as the case may be. If the aggregate Accreted Value
and/or principal amount of Securities, Senior Notes and other Debt Securities
(other than Subordinated Indebtedness) validly tendered pursuant to an Asset
Sale Offer or contractually required offer to purchase or repay Indebtedness
under the Senior Notes Indenture or an agreement governing such Debt
Securities exceeds the Excess Proceeds available for such offers, the
Securities to be purchased will be selected on a pro rata basis among the
--------
holders of Securities, Senior Notes and such Debt Securities (based upon the
Accreted Value of the Securities, the principal amount of the Senior Notes
and/or the principal amount or accreted value of such Debt Securities
tendered by each holder thereof); provided that the Senior Discount Notes'
--------
Pro Rata Share of any Excess Proceeds required to be used to repurchase
Securities, Senior Notes or such Debt Securities pursuant to such Asset Sale
Offer and other offer(s) shall be applied to repurchase Securities tendered
pursuant to such Asset Sale Offer prior to such Excess Proceeds being used to
repurchase or repay Senior Notes or such Debt Securities. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, the
Company and the Restricted Subsidiaries shall be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent (i) at least
80% of the consideration for such Asset Sale consists of cash, Cash
Equivalents and/or Permitted Assets and (ii) such consideration at the time
of such Asset Sale is at least equal to the Fair
<PAGE>
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Market Value of the assets sold or otherwise disposed of; provided that (x)
--------
any Net Cash Proceeds received by the Company or any of the Restricted
Subsidiaries in connection with any such Asset Sale shall be subject to the
provisions of the two immediately preceding paragraphs and (y) if any of the
assets disposed of are assets otherwise required to be held by WirelessCo,
RealtyCo or EquipmentCo under Section 4.18, the Permitted Assets received
shall be held by, or promptly transferred to, WirelessCo, RealtyCo or
EquipmentCo.
Not less than 30 nor more than 60 days before the Asset Sale
Payment Date, the Issuers shall send, by first class mail, a notice to every
Holder of Securities, with a copy to the Trustee and Paying Agent. The
notice, which shall govern the terms of the Asset Sale Offer, shall include
such disclosures as are required by law and shall state:
(1) that the Asset Sale Offer is being made pursuant to this
Section 4.13;
(2) the purchase price to be paid for Securities purchased pursuant
to the Asset Sale Offer (including the amount of accrued interest, if
any) and the Asset Sale Payment Date;
(3) that any Security not tendered will continue to accrete
Accreted Value and accrue interest, as the case may be;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete Accreted Value and accrue interest, as the case may
be, after the Asset Sale Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
the Asset Sale Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Asset Sale Payment
Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to
the Asset Sale Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of the
<PAGE>
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Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount at maturity equal to the
unpurchased portion of the Securities surrendered.
On or before the Asset Sale Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Asset Sale Offer in accordance with this Section 4.13, (ii) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the purchase price, plus
accrued interest, if any, of all Securities to be purchased in accordance
with this Section 4.13 and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price, plus accrued interest, if any, thereon. For
purposes of this Section 4.13, the Trustee shall act as the Paying Agent.
If the Company is required to make an Asset Sale Offer, the Company
will comply with all applicable tender offer laws and regulations, including,
to the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange
Act, and any other applicable Federal or state securities laws and
regulations and any applicable requirements of any securities exchange on
which the Securities are listed.
SECTION 4.14 Limitation on Transactions with
Equityholders and Affiliates.
-------------------------------
The Company will not, and will not permit, cause, or suffer any
Restricted Subsidiary to, conduct any business or enter into, renew or extend
any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with or for the benefit of any of their
respective Affiliates or any beneficial holder of 5% or more of any class of
Equity Interests of the Company (each an "Affiliate Transaction"), except on
terms that are no less favorable to the Company or such Restricted Subsidiary
than those that could reasonably be obtained in a comparable arm's-length
transaction with a Person that is not such a holder or Affiliate. Each
Affiliate Transaction involving
<PAGE>
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aggregate payments or other Fair Market Value in excess of $15.0 million
shall be approved by (i) if the Company is a Wholly-Owned Subsidiary of
Holdings, either (a) if the current provisions of Section 8.6 ("Interested
Party Transactions") of the Holdings Partnership Agreement are in effect,
members of the Board of Holdings exercising votes representing at least a
majority (or such other percentage vote as required by the Holdings
Partnership Agreement) of votes entitled to be exercised by members of such
Board selected by the Partners not having any financial interest in any such
Affiliate Transaction, or (b) if the current provisions of Section 8.6
("Interested Party Transactions") of the Holdings Partnership Agreement are
not in effect, a majority of the Disinterested Directors of Holdings, in each
case, as evidenced by a Resolution of the Board of Holdings and (ii) if the
Company is not a Wholly-Owned Subsidiary of Holdings, a majority of the
Disinterested Directors of the Company as evidenced by a Resolution of the
Company. In the event the Company obtains a written opinion from an
Independent Financial Advisor stating that the terms of an Affiliate
Transaction are fair to the Company or a Restricted Subsidiary, as the case
may be, from a financial point of view, it shall conclusively meet the
requirements of the first sentence of this paragraph and there shall be no
need to comply with the second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in this
Section 4.14 shall not apply to (i) transactions between or among the Company
and/or any of the Restricted Subsidiaries, (ii) any dividend or distribution
permitted by Section 4.9, (iii) directors' fees, indemnification and similar
arrangements, officers' indemnification, employee stock option or employee
benefit plans and employee salaries and bonuses paid or created in the
ordinary course of business, (iv) any Affiliate Transaction pursuant to the
Services Agreements or any other agreement in effect on the Issue Date, as
the same shall be amended from time to time; provided that any material
--------
amendment shall be required to comply with the provisions of the preceding
paragraph of this Section 4.14, (v) transactions involving the marketing of
products and services of the Company or any Restricted Subsidiary jointly
with products and services of an Affiliate of the Company or a beneficial
holder of 5% or more of any class of Equity Interests of the Company (such
holder or Affiliate bring a "Related Party"); provided all payments made by
--------
the Company or any Restricted Subsidiary to the Related Party are made to
reimburse the Related Party for its share of any expenses incurred by the
Related Party on behalf of the Company or any Restricted Subsidiary,
<PAGE>
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(vi) transactions involving the leasing or sharing or other use by the
Company or any Restricted Subsidiary of communications network facilities
(including, without limitation, cable or fiber lines, equipment or
transmission capacity) of a Related Party on terms that are no less favorable
(when taken as a whole) to the Company or such Restricted Subsidiary, as
applicable, than those available from such Related Party to unaffiliated
third parties, (vii) transactions involving the provision of
telecommunication services by a Related Party in the ordinary course of its
business to the Company or any Restricted Subsidiary, or by the Company or
any Restricted Subsidiary to a Related Party, on terms that are no less
favorable (when taken as a whole) to the Company or such Restricted
Subsidiary, as applicable, than those available from such Related Party to
unaffiliated third parties, and (viii) any sales agency agreements pursuant
to which a Partner or any of its Affiliates has the right to market any or
all of the products or services of the Company or any of the Restricted
Subsidiaries on a "most favored nation" basis (without regard to volume), as
contemplated by the Holdings Partnership Agreement as in effect on the Issue
Date.
SECTION 4.15 Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Issuers shall notify the
holders of the Securities, in the manner prescribed by this Indenture, of
such occurrence and shall make an offer to purchase (a "Change of Control
Offer"), on a Business Day (the "Change of Control Payment Date") not later
than 60 days following the Change of Control Date, all Securities then
outstanding at a purchase price equal to (i) 101% of the Accreted Value on
the Change of Control Payment Date of the Securities, if the Change of
Control Payment Date is on or before [ ], 2001, and (ii) 101% of the
principal amount at maturity of the Securities, plus accrued and unpaid
interest, if any, thereon to the Change of Control Payment Date, if such date
is after [ ], 2001. The Change of Control Offer shall remain open for
at least 20 Business Days or such longer period as may be required by law and
until the close of business on the Change of Control Payment Date. The
Issuers' obligations under this Section 4.15 may be satisfied if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Issuers and purchases all Securities validly
tendered and not withdrawn under such Change of Control Offer.
<PAGE>
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(b) Not less than 30 days nor more than 60 days before the Change
of Control Payment Date, the Issuers shall send, by first class mail, a
notice to each Holder of Securities, with a copy to the Trustee and the
Paying Agent. The notice, which shall govern the terms of the Change of
Control Offer, shall include such disclosures as are required by law and
shall state:
(i) that a Change of Control Offer is being made pursuant to
this Section 4.15 and that all Securities tendered will be accepted for
payment;
(ii) the purchase price (including the amount of accrued
interest, if any) for each Security and the Change of Control Payment
Date;
(iii) that any Security not tendered for payment will
continue to accrete Accreted Value and accrue interest, as the case may
be, in accordance with the terms thereof;
(iv) that, unless the Issuers default on making the payment,
any Security or portion thereof accepted for payment pursuant to the
Change of Control Offer shall cease to accrete Accreted Value and accrue
interest, as the case may be, after the Change of Control Payment Date;
(v) that Holders electing to have Securities or any portion
thereof purchased pursuant to a Change of Control Offer will be required
to surrender their Securities to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New York City time, on the
Business Day preceding the Change of Control Payment Date with the
"Option of Holder to Elect Purchase" on the reverse thereof completed
and must complete any form of letter of transmittal proposed by the
Issuers and acceptable to the Trustee and the Paying Agent;
(vi) that Holders of Securities will be entitled to withdraw
their election if the Paying Agent receives, not later than 5:00 p.m.,
New York City time, on the Business Day preceding the Change of Control
Payment Date, a tested telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased;
and
<PAGE>
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(vii) that Holders whose Securities are purchased only in
part will be issued Securities equal in principal amount at maturity to
the unpurchased portion of the Securities surrendered.
On the Change of Control Payment Date, the Issuers shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price of all Securities or portions thereof so
tendered and accepted and (iii) deliver to the Trustee the Securities so
accepted together with an Officers' Certificate of each of the Issuers
setting forth the Securities or portions thereof tendered to and accepted for
payment by the Issuers. The Paying Agent shall promptly (but in any case no
later than 10 calendar days after the Change of Control Payment Date) mail or
deliver to the Holders of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail
or deliver to such Holders a new Security equal in principal amount at
maturity to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the
Issuers to the Holder thereof.
For purposes of this Section 4.15, the Trustee shall act as Paying
Agent.
In connection with the purchase of Securities pursuant to a Change
of Control Offer, the Issuers shall comply with all applicable tender offer
laws and regulations, including, to the extent applicable, Section 14(e) and
Rule 14(e)-1 under the Exchange Act, and any other applicable Federal or
state securities laws and regulations and any applicable requirements of any
securities exchange on which the Securities are listed.
SECTION 4.16 Limitation on Designations
of Unrestricted Subsidiaries.
----------------------------
The Company may designate any Subsidiary of the Company (other than
FinCo, WirelessCo, RealtyCo and EquipmentCo) as an "Unrestricted Subsidiary"
under this Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; and
<PAGE>
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(ii) the Company would be permitted under this Indenture to
make an Investment at the time of Designation (assuming the
effectiveness of such Designation) in an amount (the "Designation
Amount") equal to the Fair Market Value of the aggregate amount of its
Investments in such Subsidiary on such date; and
(iii) except in the case of a Subsidiary in which an
Investment is being made pursuant to and as permitted by the third
paragraph of Section 4.9, the Company would be permitted to incur $1.00
of additional Indebtedness pursuant to clause (a) of the proviso to the
first paragraph of Section 4.8 at the time of Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed
to have made an Investment constituting a Restricted Payment pursuant to
Section 4.9 for all purposes of this Indenture in the Designation Amount.
The Company shall not, and shall not permit any Restricted Subsidiary to, at
any time (x) provide direct or indirect credit support for or a guarantee of
any Indebtedness of any Unrestricted Subsidiary (including of any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the Holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except, in the case of clause (x) or (y), to the extent
permitted under Section 4.9.
Notwithstanding anything herein to the contrary, APC shall not, at
any time, be considered a Restricted Subsidiary absent a Revocation in
compliance with the following paragraph.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), whereupon such Subsidiary shall
then constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
<PAGE>
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(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Resolutions
of the Company delivered to the Trustee certifying compliance with the
foregoing provisions.
SECTION 4.17 Limitation on Activities of
the Issuers and the Restricted
Subsidiaries.
------------------------------
(i) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than a Permitted Business and
(ii) FinCo will not own any operating assets or other properties or conduct
any business other than to serve as an Issuer and obligor on the Securities
and other Indebtedness permitted under this Indenture.
SECTION 4.18 Limitation on Ownership of Equity
Interests of Restricted Subsidiaries.
------------------------------------
Notwithstanding any other provision of this Indenture to the
contrary, (i) each of WirelessCo, RealtyCo, EquipmentCo and FinCo shall at
all times remain a direct Wholly-Owned Restricted Subsidiary of the Company
(except that FinCo may be merged with and into the Company or a Wholly-Owned
Restricted Subsidiary if the Company or such Wholly-Owned Restricted
Subsidiary is then a corporation) and (ii) none of WirelessCo, RealtyCo or
EquipmentCo will, directly or indirectly, sell, convey, transfer, lease or
otherwise dispose of any assets or property used or useful in the operation
of the business of the Company and the Restricted Subsidiaries in the
geographic areas for which the Company or a Restricted Subsidiary owns or
holds an FCC license for the transmission of wireless telecommunications
services on the Issue Date other than, in the case of this clause (ii), to a
Person not an Affiliate of the Company or any of the Restricted Subsidiaries
or to a Wholly-Owned Subsidiary if all of the outstanding Equity Interests of
such Wholly-Owned Subsidiary are concurrently sold to a Person that is not an
Affiliate of the Company or any of the Restricted Subsidiaries, in each case
in compliance with Section 4.13. Notwithstanding the foregoing, WirelessCo,
RealtyCo, EquipmentCo and FinCo may issue Disqualified Equity Interests that
do not entitle the Holders thereof to participate in the earnings, profits or
cash flow of such
<PAGE>
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Restricted Subsidiary pursuant to and in compliance with Section 4.8.
SECTION 4.19 Waiver of Stay, Extension
or Usury Laws.
-------------------------
Each of the Issuers covenants, and each Subsidiary Guarantor shall
be deemed to covenant, (to the extent permitted by law) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Issuers or such Subsidiary Guarantor,
as the case may be, from paying all or any portion of the principal of or
interest on the Securities as contemplated herein, wherever enacted, now or
at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture; and (to the extent permitted by law) each of
the Issuers hereby expressly waives and each Subsidiary Guarantor shall be
deemed to expressly waive, all benefit or advantage of any such law, and
covenants, and each Subsidiary Guarantor shall be deemed to covenant, that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Consolidation, Merger, Sale
of Assets, Etc.
---------------------------
The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease
or otherwise dispose of all or substantially all of its properties and assets
as an entirety to, any Person or Persons, and the Company will not permit any
of the Restricted Subsidiaries to enter into any such transaction or series
of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and the Restricted Subsidiaries, taken as a whole, to any other
Person or Persons, unless at the time of and after giving effect thereto:
<PAGE>
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(i) either (a) if the transaction or series of transactions is
a merger or consolidation, the Company shall be the surviving Person of
such merger or consolidation, or (b) the Person formed by any such
consolidation or into which the Company or such Restricted Subsidiary is
merged or to which the properties and assets of the Company and/or any
Restricted Subsidiary, as the case may be, are transferred (any such
surviving Person or transferee Person being a "Surviving Entity") shall
be a partnership or corporation organized and existing under the laws of
the United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture executed
and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Securities and
this Indenture, and, in each case, this Indenture shall remain in full
force and effect;
(ii) immediately before and immediately after giving effect to
such transaction or series of transactions on a pro forma basis
--- -----
(including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or
series of transactions), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
--- -----
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of
transactions), the Company or the Surviving Entity, as the case may be,
could incur $1.00 of additional Indebtedness pursuant to the proviso to
the first paragraph of clause (a) of Section 4.8; provided that in the
--------
event of a conversion of the Company from partnership to corporate form
in a transaction the primary purpose of which is to effect such
conversion and in which no additional Indebtedness is incurred or
anticipated to be incurred by the Company, the Surviving Entity or any
Restricted Subsidiary, the Surviving Entity shall not be required to be
able to incur such $1.00 of additional Indebtedness; and
(iv) the Company or its surviving entity, as the case may be,
shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger,
<PAGE>
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transfer, lease, assignment or other disposition and the supplemental
indenture in respect thereof comply with the requirements of this
Indenture.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Subsidiary Guarantee is to be released in accordance with the terms of
the Subsidiary Guarantee and this Indenture in connection with any
transaction complying with the provisions of Section 4.17) will not, and the
Company will not cause or permit any Subsidiary Guarantor to, consolidate
with or merge with or into any Person other than the Company or another
Subsidiary Guarantor unless: (a) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor) is a
corporation or partnership organized and existing under the laws of the
United States or any state thereof or the District of Columbia; (b) such
entity assumes by supplemental indenture all of the obligations of the
Subsidiary Guarantor under its Subsidiary Guarantee; (c) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; and (d) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis,
--- -----
the Company could satisfy the provisions of clause (iii) of the first
paragraph of this Section. Any merger or consolidation of a Subsidiary
Guarantor with and into the Company (with the Company being the Surviving
Entity) or another Subsidiary Guarantor need only comply with clause (ii) of
the first paragraph of this Section.
SECTION 5.2 Successor Entity Substituted.
----------------------------
Upon any consolidation, combination, merger or any transfer of all
or substantially all of the assets of a Person subject to, and in accordance
with Section 5.1, the Surviving Entity formed by such consolidation or
combination or into which the Company is merged or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if
such Surviving Entity had been named as the Company herein; provided that,
--------
solely for purposes of computing Available Operating Cash Flow for purposes
of clause (iii) of the first paragraph of Section 4.9, the Available
Operating Cash Flow of any Persons other than the Company and the Restricted
Subsidiaries shall only be included for periods subsequent to the effective
time of such consolidation, combination, merger or transfer of assets.
<PAGE>
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SECTION 5.3 Status of Subsidiaries.
----------------------
For all purposes of this Indenture and the Securities (including
the provisions of this Article V and Sections 4.8, 4.9 and 4.10),
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to Section 4.16 and all Indebtedness, and all Liens on
property or assets, of the Company and the Restricted Subsidiaries
immediately prior to such transaction or series of transactions will be
deemed to have been incurred to upon such transaction or series of
transactions; provided that in the event of a conversion of the Company from
--------
partnership to corporate form in a transaction the purpose of which is to
effect such conversion and in which no additional Indebtedness is incurred or
anticipated to be incurred by the Company, the Surviving Entity or any
Restricted Subsidiary, no Indebtedness of the Company and the Restricted
Subsidiaries shall be deemed to have been incurred upon such transaction or
series of transactions.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default.
-----------------
(a) An "Event of Default" occurs if:
(i) there is a default in the payment of the principal of, or
premium, if any, on the Securities when due, at maturity, upon
redemption or otherwise (including pursuant to a Change of Control Offer
or an Asset Sale Offer); or
(ii) there is a default in the payment of interest on the
Securities when it becomes due and payable and continuance of such
default for a period of 30 days; or
(iii) there is a default in the performance, or breach, of
any covenant described in Section 5.1; or
(iv) there is a default in the performance of or compliance
with, or breach of, any term, covenant, condition or provision of the
Securities or this Indenture (other than those specified in clause (i)
or (ii) above) and such default continues for a period of 30 days after
written notice to the Company thereof by the Trustee or
<PAGE>
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holders of at least 25% of the aggregate principal amount at maturity of
the Securities then outstanding; or
(v) either (a) one or more default or defaults in the payment
of any principal under one or more agreements, instruments, mortgages,
bonds, debentures or other evidences of Indebtedness (each, a "Debt
Instrument") under which the Company or one or more Restricted
Subsidiaries or the Company and one or more Restricted Subsidiaries then
have outstanding Indebtedness in excess of $50.0 million, individually
or in the aggregate, or (b) any other default or defaults under one or
more Debt Instruments under which the Company or one or more Restricted
Subsidiaries or the Company and one or more Restricted Subsidiaries then
have outstanding Indebtedness in excess of $50.0 million, individually
or in the aggregate, and, in the case of this clause (b), either (x)
such Indebtedness is already due and payable in full by its terms or (y)
such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $50.0 million, either individually or in
the aggregate, shall be entered against the Company or any Restricted
Subsidiary or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during
which a stay of enforcement of such judgment, order or decree shall not
be in effect; or
(vii) any holder of at least $50.0 million in aggregate
principal amount of Indebtedness of the Company or any of the Restricted
Subsidiaries, or its trustee, agent or representative, shall commence
(or have commenced on its behalf) judicial proceedings to foreclose upon
assets of the Company or any of the Restricted Subsidiaries having an
aggregate Fair Market Value, individually or in the aggregate, in excess
of $50.0 million or shall have exercised any right under applicable law
or applicable security documents to take ownership of any such assets in
lieu of foreclosure; or
(viii) any Subsidiary Guarantee ceases to be in full force
and effect or is declared null and void or a Subsidiary Guarantor denies
that it has any further
<PAGE>
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liability under its Subsidiary Guarantee or gives notice to such effect;
or
(ix) an Issuer, any Subsidiary Guarantor or any Material
Restricted Subsidiary (a) admits in writing its inability to pay its
debts generally as they become due, (b) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (c) consents
to the entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (d) consents to
the appointment of a Custodian (as defined below) of it or for
substantially all of its property, (e) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (f)
makes a general assignment for the benefit of its creditors or (g) takes
any partnership or corporate action, as the case may be, to authorize or
effect any of the foregoing;
(x) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of an Issuer, any Subsidiary
Guarantor or any Material Restricted Subsidiary in an involuntary case
or proceeding under any Bankruptcy Law, which shall (a) approve as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of an Issuer, any Subsidiary
Guarantor or any Material Restricted Subsidiary, (b) appoint a Custodian
of the Company or any of its Subsidiaries or for substantially all of
any of their property or (c) order the winding-up or liquidation of its
affairs; and such judgment, decree or order shall remain unstayed and in
effect for a period of 60 consecutive days.
(b) For purposes of this Article VI: the term "Custodian" means
any receiver, interim receiver, receiver and manager, trustee, assignee,
liquidator, sequestrator or similar official charged with maintaining
possession or control over property for one or more creditors, whether under
any Bankruptcy Law or otherwise.
SECTION 6.2 Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.1(a)(ix) or (x) with respect to an Issuer) occurs and is
continuing, the Holders of at least 25% in principal amount at maturity of
the outstanding Securities may, by written notice to the Issuers and the
<PAGE>
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Trustee, and the Trustee upon the request of the Holders of not less than 25%
in principal amount at maturity of the outstanding Securities shall by
written notice to the Issuers, declare the Default Amount to be due and
payable immediately. Upon any such declaration such amounts shall become due
and payable immediately. If an Event of Default specified in Section
6.1(a)(ix) or (x) occurs and is continuing with respect to an Issuer, then
the Default Amount shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any
Holder. The Holders of a majority in aggregate principal amount at maturity
of outstanding Securities may, by notice to the Trustee, rescind such
declaration of acceleration if all existing Events of Default have been cured
or waived, other than the non-payment of the Default Amount and any accrued
interest on the Securities that has become due solely as a result of such
acceleration and if the rescission of acceleration would not conflict with
any judgment or decree. No such rescission shall affect any subsequent
default or impair any right consequent thereto.
SECTION 6.3 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities, or to enforce the
performance of any provision of the Securities, this Indenture or any
Subsidiary Guarantee.
All rights of action and claims under this Indenture, or the
Securities or any Subsidiary Guarantee may be enforced by the Trustee even if
the Trustee does not possess any of the Securities or does not produce any of
them in the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.4 Waiver of Past Default.
----------------------
Subject to Sections 6.7 and 9.2, the Holders of, in the aggregate,
a majority in aggregate principal amount at maturity of the outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default specified in Section 6.1(a)(i)
or (ii) or in respect of any provision hereof that cannot be
<PAGE>
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modified or amended without the consent of the Holder so affected pursuant to
Section 9.2. When a Default or Event of Default is so waived, it shall be
deemed cured and shall cease to exist.
SECTION 6.5 Control by Majority.
-------------------
The Holders of at least a majority in principal amount at maturity
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it; provided that the Trustee may
-------
refuse to follow any direction that (i) conflicts with law or this Indenture,
(ii) the Trustee determines may be unduly prejudicial to the rights of
another Securityholder, or (iii) may involve the Trustee in personal
liability unless the Trustee has indemnification satisfactory to it in its
sole discretion against any loss or expense caused by its following such
direction; and provided, further, that the Trustee may take any other action
-------- -------
deemed proper by the Trustee that is not inconsistent with such direction.
SECTION 6.6 Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture, the Securities or any Subsidiary Guarantee unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount at maturity of
the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee security or indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, provision
of indemnity; and
(e) during such 30-day period the Holders of a majority in
principal amount at maturity of the outstanding Securities do not give
the Trustee a direction inconsistent with the request.
<PAGE>
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The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of the Default Amount, principal of
or accrued interest on the Securities on or after the respective due dates
set forth or provided for in the Securities.
A Securityholder may not use this Indenture to obtain a preference
or priority over any other Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of the Default Amount, principal of and
interest on a Security, on or after the respective due dates expressed or
provided for in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.1(a)(i) or (ii)
occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Issuers or any other obligor
on the Securities for the whole amount of principal and accrued interest
remaining unpaid, together with interest overdue on principal and, to the
extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the interest rate borne by the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
--------------------------------
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Securityholders allowed in any judicial proceedings
relative to the Issuers or any Subsidiary Guarantor (or any other obligor
upon the Securities), their creditors or their property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any
<PAGE>
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Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section
7.7. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 6.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article VI, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for interest;
Third: to Holders for Accreted Value or principal amounts, as the
case may be, owing under the Securities, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal; and
Fourth: to the Issuers or any Subsidiary Guarantor, as their
respective interests may appear.
The Trustee, upon prior written notice to the Issuers, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and
<PAGE>
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the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in
aggregate principal amount at maturity of the outstanding Securities.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee undertakes to perform such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture; provided, however, that in the case of any such certificates
-------- -------
or opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such certificates
and opinions to determine whether they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.1;
<PAGE>
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(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.2, 6.5 or 6.6.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.1.
(f) The Trustee may refuse to perform any duty or exercise any
right or power unless it is provided adequate funds to enable it to do so and
it receives indemnity satisfactory to it in its sole discretion against any
loss, liability, fee or expense.
SECTION 7.2 Rights of Trustee.
-----------------
Subject to TIA (S)(S) 315(a)-(d) and except as provided in Section
7.1:
(a) The Trustee may rely upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, upon reasonable notice, to examine
the books, records and premises of the Issuers, personally or by agent
or attorney.
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(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate from each of the Issuers or an Opinion of Counsel from each
of the Issuers, that shall conform to the provisions of Section 11.5.
The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or willful misconduct of an agent who is an employee
of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it reasonably believes to be authorized
or within its rights or powers; provided, however, that the foregoing
-------- -------
shall apply only if the Trustee's conduct does not constitute negligence
or bad faith.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any Holder pursuant to this Indenture, unless such Holder
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
SECTION 7.3 Individual Rights of Trustee.
----------------------------
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Issuers or their Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee
is subject to Sections 7.10 and 7.11.
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SECTION 7.4 Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the
Securities or any Subsidiary Guarantee, it shall not be accountable for the
Company's use of the proceeds from the issuance of the Securities and it
shall not be responsible for any statement of the Issuers in this Indenture
or any document issued in connection with the sale of Securities or any
statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.5 Notice of Defaults.
------------------
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and is known to the Trustee, the Trustee shall give
notice of the Default or Event of Default within 30 days after the Trustee
acquires knowledge of the occurrence thereof to all Holders as their names
and addresses appear on the Register, unless such Default shall have been
cured or waived before the mailing of such notice. Except in the case of a
Default or an Event of Default in payment of principal of or interest on any
Security, the Trustee may withhold the notice to the Securityholders if a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interest of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
-----------------------------
To the extent required by TIA (S) 313(a), within 60 days after May
15 of each year commencing with 1997 and for as long as there are Securities
outstanding hereunder, the Trustee shall mail to each Securityholder the
Trustee's brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S) 313(b) and TIA (S) 313(c)
and (d). A copy of such report at the time of its mailing to Securityholders
shall be filed with the Commission, if required, and each stock exchange, if
any, on which the Securities are listed.
SECTION 7.7 Compensation and Indemnity.
--------------------------
The Issuers shall pay to the Trustee, the Paying Agent and the
Registrar from time to time reasonable compensation for their respective
services rendered hereunder. The Trustee's, the Paying Agent's and the
Registrar's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the
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Trustee, the Paying Agent and the Registrar upon request for all reasonable
out-of-pocket disbursements, expenses and advances (including reasonable fees
and expenses of counsel) incurred or made by each of them in addition to the
compensation for their respective services. Such expenses shall include the
reasonable compensation, out-of-pocket disbursements and expenses of the
Trustee's, the Paying Agent's and the Registrar's agents and counsel.
The Issuers shall indemnify the Trustee, the Paying Agent and the
Registrar for, and hold each of them harmless against, any claim, demand,
expense (including but not limited to reasonable attorneys' fees and
expenses), loss or liability incurred by each of them arising out of or in
connection with the administration of this Indenture and their respective
duties hereunder or thereunder. Each of the Trustee, the Paying Agent and
the Registrar shall notify the Issuers promptly of any claim asserted against
it for which it may seek indemnity. However, failure by the Trustee, the
Paying Agent or the Registrar to so notify the Issuers shall not relieve the
Issuers of their obligations hereunder. The Issuers need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee,
the Paying Agent or the Registrar through the Trustee's, the Paying Agent's
or the Registrar's, as the case may be, own willful misconduct, negligence or
bad faith.
To secure the Issuers' payment obligations in this Section 7.7 and
in Section 6.9 (insofar as the Trustee is concerned), each of the Trustee,
the Paying Agent and the Registrar shall have a lien prior to the Securities
on all money or property held or collected by it, in its capacity as Trustee,
Paying Agent or Registrar, as the case may be, except money or property held
in trust to pay principal of or interest on particular Securities. Such lien
shall survive the satisfaction and discharge of this Indenture or any other
termination under the Bankruptcy Law.
Subject to any other rights available to the Trustee, the Registrar
and the Paying Agent under any Bankruptcy Law, when any of the Trustee, the
Paying Agent and the Registrar incurs expenses or renders services after an
Event of Default specified in Section 6.1(a)(ix) or (x) with respect to an
Issuer occurs, the parties hereto and the Securityholders, by acceptance of
the Securities, hereby agree that the expenses and the compensation for the
services are intended to constitute expenses of administration under any
Bankruptcy Law.
<PAGE>
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SECTION 7.8 Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Issuers in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount at maturity of the
outstanding Securities may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee with the Issuers' consent, which
consent shall not be unreasonably withheld. The Issuers may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Issuers shall promptly
appoint a successor Trustee. Within one year after the successor Trustee
takes office, the Holders of a majority in principal amount of the Securities
may appoint a successor Trustee to replace the successor Trustee appointed by
the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee (subject to the lien provided in Section 7.7), the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers
or the Holders of at least 25% in principal amount at maturity of the
outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
<PAGE>
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If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Issuers' obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation or national banking association, the resulting, surviving
or transferee corporation or national banking association without any further
act shall be the successor Trustee provided such corporation shall be
otherwise qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1) and (2). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA (S)
310(b) subject to its rights to apply for a stay of its duty to resign under
the penultimate paragraph of TIA (S) 310(b). The provisions of TIA (S) 310
shall refer to the Issuers and any Subsidiary Guarantor as obligors in
respect of the Securities.
SECTION 7.11 Preferential Collection of
Claims Against Issuers.
--------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any
creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned
or been removed shall be subject to TIA (S) 311(a) to the extent indicated
therein. The provisions of TIA (S) 311 shall refer to the Issuers and any
Subsidiary Guarantor, if applicable, as obligors in respect of the
Securities.
<PAGE>
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.1 Satisfaction and Discharge.
--------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when:
(1) either (a) all the Securities, theretofore authenticated and
delivered (except lost, stolen or destroyed Securities that have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Issuers
and thereafter repaid to the Issuers or discharged from such trust) have
been delivered to the Trustee for cancellation or (b) all Securities not
theretofore delivered to the Trustee for cancellation have become due
and payable and the Issuers have irrevocably deposited or caused to be
deposited with the Trustee U.S. Legal Tender in an amount sufficient to
pay and discharge the entire Indebtedness on the Securities not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Securities to the date of deposit
together with irrevocable instructions from the Issuers directing the
Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(2) the Issuers have paid all other sums payable under this
Indenture by them; and
(3) each of the Issuers has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 8.2 Legal Defeasance and Covenant
Defeasance.
-----------------------------
(a) The Issuers may, at their option by Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the
<PAGE>
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outstanding Securities upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (b), the Issuers and any Subsidiary Guarantor,
if any, shall be deemed to have been released and discharged from its
obligations with respect to the outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "legal defeasance").
For this purpose, such legal defeasance means that the Issuers shall be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of paragraph (e) below and the other Sections of and
matters under this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of
the Issuers, shall execute proper instruments acknowledging the same), except
for the following that shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Securities to receive
solely from the trust fund described in paragraph (d) below and as more fully
set forth in such paragraph, payments in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due,
(ii) the Issuers' obligations with respect to such Securities under Sections
2.2, 2.3, 2.6, 2.7, 2.8, 4.1, 4.2 and 4.19, and, with respect to the Trustee,
under Sections 7.7 and 7.8, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Section 8.2 and Sections
8.3, 8.4 and 8.5. Subject to compliance with this Section 8.2, the Issuers
may exercise their option under this paragraph (b) notwithstanding the prior
exercise of their option under paragraph (c) below with respect to the
Securities.
(c) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (c), the Issuers shall be released and
discharged from their obligations under any covenant contained in Article V
and in Sections 4.4 through 4.18 (except for obligations mandated by the TIA)
with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities and each Subsidiary Guarantee, if any, shall
thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue
<PAGE>
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to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the outstanding
Securities, the Issuers and any Subsidiary Guarantor, if any, may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or
an Event of Default under Sections 6.1(a)(iii) or 6.1(a)(iv), but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Issuers must irrevocably deposit with the Trustee, in
trust, for the benefit of the holders of the Securities, cash in United
States Dollars, direct non-callable obligations of, or non-callable
obligations guaranteed by, the United States of America for the payment
of which obligation or guarantee the full faith and credit of the United
States is pledged ("US Government Obligations"), or a combination
thereof, in such amounts as will be sufficient to pay the principal of,
premium, if any, and interest on the outstanding Securities to
redemption or maturity (except lost, stolen or destroyed Securities that
have been replaced or paid);
(ii) each of the Issuers shall have delivered to the Trustee
an Opinion of Counsel to the effect that the holders of the outstanding
Securities will not recognize income, gain or loss for Federal income
tax purposes as a result of such legal defeasance or covenant legal
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such legal defeasance or covenant legal defeasance had not
occurred (in the case of legal defeasance, such opinion must refer to
and be based upon a ruling of the Internal Revenue Service or a change
in applicable Federal income tax laws);
(iii) no Default under this Indenture shall have occurred and
be continuing on the date of such deposit;
<PAGE>
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(iv) such legal defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any
securities of the Issuers;
(v) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
agreement or instrument to which the Issuers or any of their
Subsidiaries is a party or by which it is bound;
(vi) each of the Issuers shall have delivered to the Trustee
an Opinion of Counsel to the effect that after the 91st day following
their deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally or to the rights of any creditor
of the Issuers or any Subsidiary Guarantor other than those continuing
rights of the applicable holders of Securities; and
(vii) each of the Issuers shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent under this Indenture to either legal defeasance
or covenant defeasance, as the case may be, have been complied with.
(e) All United States Dollars and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this paragraph (e), the
"Trustee") pursuant to paragraph (d) above in respect of the outstanding
Securities shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Securities and this Indenture, to the payment,
either directly or through any Paying Agent as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Issuers shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to paragraph (d) above or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge that by law is for the account of the Holders of the
outstanding Securities.
<PAGE>
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Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the
request, in writing, by the Issuers any money or U.S. Government Obligations
held by it as provided in paragraph (d) above that, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent legal defeasance or covenant defeasance.
SECTION 8.3 Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Sections 8.1 and 8.2, and shall
apply the deposited money and the money from U.S. Government Obligations in
accordance with this Indenture to the payment of principal of, premium, if
any, and interest on the Securities.
SECTION 8.4 Repayment to the Issuers
or a Subsidiary Guarantor.
-------------------------
Subject to Sections 7.7, 8.1 and 8.2, the Trustee and the Paying
Agent shall promptly pay to the Issuers, or if deposited with the Trustee by
any Subsidiary Guarantor, to such Subsidiary Guarantor upon receipt by the
Trustee and the Paying Agent of Officers' Certificates stating the amount to
which each of the Issuers or such Subsidiary Guarantor, as the case may be,
is entitled, any excess money, determined in accordance with Section 8.2(e),
held by it at any time. The Trustee and the Paying Agent shall pay to the
Issuers or such Subsidiary Guarantor, as the case may be, upon receipt by the
Trustee or the Paying Agent, as the case may be, of Officers' Certificates
stating the amount to which the Issuers or such Subsidiary Guarantor, as the
case may be, is entitled, any money held by it for the payment of principal,
premium, if any, or interest that remains unclaimed for two years after
payment to the Holders is required; provided, however, that the Trustee and
-------- -------
the Paying Agent before being required to make any payment may, but need not,
at the expense of the Issuers, mail by first-class mail to each Holder of
Securities entitled to such money at such Holder's address as set forth on
the Register notice that such money remains unclaimed and that after a date
specified therein, which shall be at least one year from the date of such
publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Issuers or such Subsidiary Guarantor, as the case may
be. After payment to the
<PAGE>
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Issuers or such Subsidiary Guarantor, as the case may be, Securityholders
entitled to money must look solely to the Issuers and such Subsidiary
Guarantor for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.5 Reinstatement.
-------------
With respect to the circumstances referred to in Section 8.1 and
8.2, if the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Issuers' and any Subsidiary Guarantor's
(if any) obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had been made pursuant to this Indenture
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Indenture;
provided, that if the Issuers or any such Subsidiary Guarantor has made any
--------
payment of principal of, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Issuers or any such
Subsidiary Guarantor, as the case may be, shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders.
--------------------------
The Issuers and any Subsidiary Guarantors, when authorized by
Resolutions of their respective Boards, and the Trustee may amend, waive or
supplement this Indenture and the Securities without notice to or consent of
any Securityholder:
(a) to cure any ambiguity, defect or inconsistency, provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(b) to comply with any requirements of the Commission under the
TIA;
<PAGE>
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(c) to evidence the succession in accordance with Article V hereof
of another Person and the assumption by any such successor of the
covenants of any of the Issuers or any Subsidiary Guarantor herein and
in the Securities;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
(e) to make any change that does not adversely affect the rights of
any Holder; or
(f) to add a Subsidiary Guarantor pursuant to Section 4.11.
SECTION 9.2 With Consent of Holders.
-----------------------
Subject to Section 6.7 and the provisions of this Section 9.2, the
Issuers and any Subsidiary Guarantors, when authorized by Resolutions of
their respective Boards, and the Trustee may amend or supplement this
Indenture or the Securities in any respect with the written consent of the
Holders of not less than a majority in aggregate principal amount at maturity
of the Securities then outstanding. Subject to Section 6.7 and the
provisions of this Section 9.2, the Holders of, in the aggregate, at least a
majority in aggregate principal amount at maturity of the outstanding
Securities affected may waive compliance by the Issuers or any Subsidiary
Guarantor with any provision of this Indenture, the Securities or any
Subsidiary Guarantee, as the case may be, without notice to any other
Securityholder.
Notwithstanding the foregoing, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a
waiver pursuant to Section 6.4, may not:
(a) reduce the principal amount of or Accreted Value of, extend the
fixed maturity of, or alter the redemption provisions of, the
Securities;
(b) change the currency in which any Securities or any premium or
the accrued interest thereon is payable;
(c) reduce the percentage in principal amount of outstanding
Securities which must consent to an amendment, supplement or waiver or
consent to take any action under this Indenture, the Securities or any
Subsidiary Guarantees;
<PAGE>
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(d) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities or any Subsidiary
Guarantee;
(e) waive a default in payment with respect to the Securities;
(f) reduce the rate or extend the time for payment of interest on
the Securities or amend the rate of accretion on the Securities or amend
the definition of Accreted Value;
(g) alter the obligation to purchase the Securities in accordance
with this Indenture following the occurrence of an Asset Sale or a
Change of Control or waive any default in the performance thereof;
(h) adversely affect the ranking of the Securities or any
Subsidiary Guarantees;
(i) release any Subsidiary Guarantee other than in accordance with
this Indenture; or
(j) modify this Section 9.2 or Section 6.4.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or waiver under this Section 9.2 becomes
effective, the Issuers shall mail to the Holders affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Issuers to
mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amendment or waiver.
Promptly after the execution by the Issuers and any Subsidiary
Guarantors and the Trustee of any supplemental indenture pursuant to the
provisions of this Section 9.2, the Trustee shall give notice thereof, at the
expense of the Issuers, to the Holders of then outstanding Securities, by
mailing a notice thereof by first-class mail to such Holders at their
addresses as they shall appear on the books of the Registrar, and such notice
shall set forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to give such notice, or any defect
therein, shall not,
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however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.3 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the
Securities or any Subsidiary Guarantee shall comply with the TIA as then in
effect.
SECTION 9.4 Revocation and Effect
of Amendments and Consents.
--------------------------
Until an amendment or waiver becomes effective, a consent to it by
a Holder is a continuing consent by the Holder and every subsequent Holder of
that Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on
any Security. Any such Holder or subsequent Holder, however, may revoke the
consent as to his Security or portion of a Security. Such revocation shall
be effective only if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective. Notwithstanding
the above, nothing in this paragraph shall impair the right of any
Securityholder under (S) 316(b) of the TIA.
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Securities entitled to consent
to any amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the second and third sentences of the immediately preceding
paragraph, those Persons who were Holders of Securities at such record date
(or their duly designated proxies), and only those Persons, shall be entitled
to consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders of
Securities after such record date. Such consent shall be effective only for
actions taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder (and every subsequent Securityholder), unless
it makes a change described in any of clauses (a) through (j) of Section 9.2;
if it makes such a change, the amendment, supplement or waiver shall bind
every Holder consenting thereto and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security.
<PAGE>
-80-
SECTION 9.5 Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee shall (in accordance with the specific direction of the
Issuers) request the Holder of the Security to deliver it to the Trustee.
The Trustee shall (in accordance with the specific direction of the Issuers)
place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Issuers or the Trustee so
determines, the Issuers in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment, supplement or waiver
does not adversely affect the rights, duties or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it.
ARTICLE X
GUARANTEE
---------
SECTION 10.1 Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor, if any, hereby unconditionally
guarantees in accordance with the provisions of Section 4.11, to each Holder
of a Security authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, the Securities that: (i) the principal of,
premium, if any, and interest on the Securities will be promptly paid in full
when due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities to the
Holders or the Trustee will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Securities, the same will be
promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, subject, however, in the case
of clauses (i) and (ii) above, to the
<PAGE>
-81-
limitations set forth in Section 10.03. Each Subsidiary Guarantor, if any,
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Securities
or this Indenture, the absence of any action to enforce the same, any waiver
or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Issuers, and
action to enforce the same or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Subsidiary Guarantor, if any, hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Issuers, any right to require a proceeding first against
the Issuers, protest, notice and all demands whatsoever and covenants that
its Subsidiary Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture
and in its Subsidiary Guarantee. If any Securityholder or the Trustee is
required by any court or otherwise to return to the Issuers, any Subsidiary
Guarantor or any custodian, trustee, liquidator or other similar official
acting in relation to the Issuers or any such Subsidiary Guarantor, any
amount paid by the Issuers or any such Subsidiary Guarantor to the Trustee or
such Securityholder, each Subsidiary Guarantee to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Subsidiary
Guarantor further agrees that, as between it and all other Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article VI for the purposes of a Subsidiary
Guarantee notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article VI, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Subsidiary Guarantors for the purpose of the
Subsidiary Guarantees.
SECTION 10.2 Severability.
------------
In case any provision of this Article X shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE>
-82-
SECTION 10.3 Limitation of Liability.
-----------------------
Each Subsidiary Guarantor, and by its acceptance hereof each
Holder, hereby confirms that it is the intention of all such parties that the
guarantee by each Subsidiary Guarantor pursuant to its Subsidiary Guarantee
not constitute a fraudulent transfer or conveyance for purposes of any
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effectuate the
foregoing intention, the Holders and each Subsidiary Guarantor hereby
irrevocably agree that the obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any of the other Subsidiary Guarantors in
respect of the obligations of such other Subsidiary Guarantors under the
other Subsidiary Guarantees or pursuant to Section 10.05, result in the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not
constituting such fraudulent transfer or conveyance.
SECTION 10.4 Subsidiary Guarantors May
Consolidate, etc., on Certain Terms.
-----------------------------------
(a) Nothing contained in this Indenture or in the Securities shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into an
Issuer or another Subsidiary Guarantor or shall prevent any sale of assets or
conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to an Issuer or another Subsidiary Guarantor.
Upon any such consolidation, merger, sale or conveyance, the Subsidiary
Guarantee given by such Subsidiary Guarantor shall no longer have any force
or effect.
(b) Upon the sale or disposition as an entirety (whether by merger,
stock purchase, asset sale or otherwise) of a Subsidiary Guarantor (or all or
substantially all its assets) to a Person that is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with Section
4.17 and the other terms of this Indenture, such Subsidiary Guarantor shall
be deemed released from all obligations under this Article X without any
further action required on the part of the Trustee or any Holder.
<PAGE>
-83-
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Issuers accompanied by Officers'
Certificates and Opinions of Counsel certifying as to the compliance with
this Section 10.04. Any Subsidiary Guarantor not so released remains liable
for the full amount of principal of and interest on the Securities as
provided in this Article X.
SECTION 10.5 Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under any of the Subsidiary Guarantees, such Funding
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined
--- ----
below) of each of the Subsidiary Guarantors (including the Funding Guarantor)
for all payments, damages and expenses incurred by that Funding Guarantor in
discharging the Issuers' obligations with respect to the Securities or any
obligations of any of the other Subsidiary Guarantors with respect to any of
the Subsidiary Guarantees. "Adjusted Net Assets" of any Person at any date
shall mean the lesser of the amount by which (x) the fair value of the
property of such Person exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date), but
excluding liabilities under a Subsidiary Guarantee of such Person at such
date and (y) the present fair salable value of the assets of such Person at
such date exceeds the amount that will be required to pay the probable
liability of such Person on its debts (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date), excluding debt
in respect of the Subsidiary Guarantee of such Person, as they become
absolute and matured.
SECTION 10.6 Waiver of Subrogation.
---------------------
Until all Obligations under each of the Subsidiary Guarantees, the
Securities and this Indenture are paid in full, each of the Subsidiary
Guarantors hereby irrevocably waives any claims or other rights that it may
now or hereafter acquire against the Issuers that arise from the existence,
payment, performance or enforcement of its obligations under its Subsidiary
Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement,
<PAGE>
-84-
exoneration, indemnification and any right to participate in any claim or
remedy of any Holder of Securities against the Issuers, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Issuers, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any of the Guarantors in violation of
the preceding sentence and the Securities shall not have been paid in full,
such amount shall have been deemed to have been paid to such Person for the
benefit of, and held in trust for the benefit of, the Holders of the
Securities, and shall, forthwith be paid to the Trustee for the benefit of
such Holders to be credited and applied upon the Securities, whether matured
or unmatured, in accordance with the terms of this Indenture. Each of the
Subsidiary Guarantors acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 10.06 is knowingly made in
contemplation of such benefits.
SECTION 10.7 Execution of Guarantee.
----------------------
To evidence their guarantee to the Securityholders set forth in
this Article X, each Subsidiary Guarantor hereby agrees to execute a
Subsidiary Guarantee in substantially the form of Exhibit B to this
---------
Indenture, which shall be endorsed on each Security ordered to be
authenticated and delivered by the Trustee. Each Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee set forth in this Article X shall remain
in full force and effect notwithstanding any failure to endorse on each
Security a notation of a Subsidiary Guarantee. A Subsidiary Guarantee shall
be signed on behalf of a Subsidiary Guarantor by two Officers, or an Officer
and an Assistant Secretary, or one Officer shall sign and one Officer or an
Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate or partnership actions) shall attest to
the Subsidiary Guarantee prior to the authentication of the Security on which
it is endorsed, and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee on behalf of such Subsidiary Guarantor. Such signatures
upon a Subsidiary Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Subsidiary
Guarantee and in case any such officer who shall have signed a Subsidiary
Guarantee shall cease to be such officer before the Security on
<PAGE>
-85-
which the Subsidiary Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Issuers, such Security
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed the Subsidiary Guarantee had not ceased to be such officer
of the Subsidiary Guarantor.
SECTION 10.8 Waiver of Stay, Extension or Usury
Laws.
----------------------------------
Each Subsidiary Guarantor, if any, covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive
such Subsidiary Guarantor from performing a Subsidiary Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and
(to the extent that it may lawfully do so) each Subsidiary Guarantor, if any,
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 Trust Indenture Act Controls.
----------------------------
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with another provision
(an "incorporated provision") included in this Indenture by operation of,
Sections 310 to 318, inclusive, of the TIA, such imposed duties or
incorporated provision shall control.
SECTION 11.2 Notices.
-------
Any notice or communication shall be deemed given if in writing and
delivered in Person or mailed by first-class mail, addressed as follows, and
received by the addressee:
<PAGE>
-86-
(a) if to the Issuers or any Subsidiary Guarantor:
Sprint Spectrum L.P.
4900 Main Street
12th Floor
Kansas City, Missouri 64112
Attention: Joseph M. Gensheimer, Esq.
(b) if to the Trustee:
The Bank of New York
[ ]
[ ]
[ ]
Attention: [Corporate Trustee Administration
Department]
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of a Security,
including any notice delivered in connection with TIA (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to him, first-
class postage prepaid, at his address as it appears on the registration books
of the Registrar and shall be deemed given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given
only when received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 11.3 Communications by Holders with Other
Holders.
------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Issuers, the Trustee, the Registrar and any other Person
shall have the protection of TIA (S) 312(c).
<PAGE>
-87-
SECTION 11.4 Certificate and Opinion of Counsel
as to Conditions Precedent.
----------------------------------
Upon any request or application by the Issuers or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Issuers
or any Subsidiary Guarantor, as the case may be, shall furnish to the Trustee
(a) Officers' Certificates in form and substance satisfactory to the Trustee
stating that, in the opinion of the signers, all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, (b) Opinions of Counsel in form and substance satisfactory to
the Trustee stating that, in the opinion of such counsel, all such conditions
have been complied with and (c) where applicable, a certificate or opinion by
an accountant that complies with TIA (S) 314(c).
SECTION 11.5 Statements Required in Certificate
and Opinion of Counsel.
----------------------------------
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in such
certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
<PAGE>
-88-
SECTION 11.6 Rules by Trustee, Paying Agent,
Registrar.
-------------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.7 Legal Holidays.
--------------
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.8 Governing Law.
-------------
The internal laws of the State of New York shall govern this
Indenture, the Securities and any Subsidiary Guarantees without regard to
principles of conflict of laws.
SECTION 11.9 No Recourse Against Others.
--------------------------
A trustee, director, officer, employee, stockholder, partner,
organizer or incorporator, as such, of the Issuers or a Subsidiary Guarantor
shall not have any liability for any obligations of the Issuers or a
Subsidiary Guarantor under the Securities, this Indenture or any Subsidiary
Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability.
SECTION 11.10 Successors.
----------
All agreements of the Issuers and any Subsidiary Guarantor in this
Indenture, the Securities and any Subsidiary Guarantees shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.11 Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
<PAGE>
-89-
SECTION 11.12 Separability.
------------
In case any provision in this Indenture, the Securities or in any
Subsidiary Guarantee shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
SECTION 11.13 Table of Contents, Headings, Etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no
way modify or restrict any of the terms or provisions hereof.
<PAGE>
-90-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
SPRINT SPECTRUM L.P., as
Co-Issuer
By: Sprint Spectrum Holding
Company, L.P., its
General Partner
By: __________________________________
Name:
Title:
SPRINT SPECTRUM FINANCE
CORPORATION, as Co-Issuer
By: __________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: __________________________________
Name:
Title:
<PAGE>
Exhibit A
---------
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
[THIS SECURITY HAS BEEN ISSUED AT A DISCOUNT THAT FOR TAX PURPOSES IS THE
DIFFERENCE BETWEEN THE ISSUE PRICE AND THE REDEMPTION AMOUNT. FOR TAX
PURPOSES, THIS DISCOUNT WILL BE THE INCOME ELEMENT FOR THE INCOME PERIODS
FROM ISSUE TO REDEMPTION.]
Cusip No.: [ ]
No. [ ] $[ ]
[ ]% SENIOR DISCOUNT NOTE DUE 2006
Each of SPRINT SPECTRUM L.P. and SPRINT SPECTRUM FINANCE
CORPORATION promises to pay to [ ] upon surrender hereof the
principal sum of [ ] Dollars on [ ], 2006.
Interest Payment Dates: [ ], [ ] and at stated maturity
[seal]
By: Sprint Spectrum L.P.
By: Sprint Spectrum Holding
Company, L.P., its General
Partner
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
<PAGE>
A-2
By: Sprint Spectrum Finance
Corporation
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
Dated:
<PAGE>
A-3
Certificate of Authentication
This is one of the Senior Discount Notes due 2006 referred to in
the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: _________________________________
Authorized Officer
<PAGE>
A-4
(REVERSE OF SECURITY)
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
[ ]% SENIOR DISCOUNT NOTE DUE 2006
1. Interest. SPRINT SPECTRUM L.P., a Delaware limited
--------
partnership (the "Company"), and SPRINT SPECTRUM FINANCE CORPORATION, a
Delaware corporation ("FinCo" and, together with the Company, the "Issuers"),
promise to pay to the registered holder of this Security, until the principal
hereof is paid or duly provided for, interest on the principal amount set
forth on the face of this Security at a rate of % per annum. Interest on
--- -----
the Securities will accrue from and including the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid
or duly provided for, from and including [ ], 2001 through but
excluding the date on which interest is paid or duly provided for. Interest
shall be payable in arrears on each [ ] and [ ] and at
stated maturity, commencing [ ], 2002. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest
until [ ], 2001, except in the case of a default in payment of
principal and/or premium, if any, upon acceleration, redemption or purchase
and, in such case, the overdue principal and any overdue premium shall bear
interest at the rate of [ ]% per annum (compounded semiannually on each
--- -----
and ) (to the extent that the payment of such interest shall be
legally enforceable), from the dates such amounts are due until they are paid
or duly provided for. To the extent, but only to the extent, interest on
amounts in default constituting original issue discount prior to [ ],
2001 is not permitted by law, original issue discount shall continue to
accrete until paid or duly provided for. On or after [ ], 2001,
interest on overdue principal and premium, if any, and, to the extent
permitted by law, on overdue installments of interest will accrue, until the
principal and premium, if any, is paid or duly provided for, at the rate of [
]% per annum. Interest on any overdue principal or premium shall be payable
--- -----
on demand.
2. Method of Payment. The Issuers will pay interest on the
-----------------
Securities (except defaulted interest) to the Holder of this Security upon
surrender hereof. Holders must
<PAGE>
A-5
surrender Securities to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for the payment of
public and private debts ("U.S. Legal Tender"). However, the Issuers may pay
principal, premium, if any, and interest by wire transfer of Federal funds or
interest by check payable in U.S. Legal Tender.
3. Paying Agent. Initially, The Bank of New York (the "Trustee")
------------
will act as a Paying Agent. The Issuers may change any Paying Agent without
notice. Neither the Issuers nor any of their Affiliates may act as Paying
Agent.
4. Indenture. The Issuers issued the Securities under an
---------
Indenture dated as of [ ], 1996 (the "Indenture") among the Issuers
and the Trustee. This Security is one of an issue of Securities of the
Issuers issued, or to be issued, under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb), as amended from time to time. The
Securities are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of them. The Securities are senior
obligations of the Issuers limited in aggregate principal amount at maturity
to $ .
5. Subsidiary Guarantees. This Security may after the date
---------------------
hereof be entitled to certain Subsidiary Guarantees made for the benefit of
the Holders pursuant to Section 4.11 of the Indenture.
6. Optional Redemption. The Issuers, at their option, may redeem
-------------------
all or any of the Securities, in whole or in part, at any time on or after [
], 2001, at the redemption prices (expressed as percentages of principal
amount at maturity) set forth below, plus accrued and unpaid interest, if
any, to the redemption date, if redeemed during the 12-month period beginning
on [ ] of the years indicated below:
Year Redemption Price
---- ----------------
2001.................................. [ ]%
2002.................................. [ ]%
2003.................................. [ ]%
2004 and thereafter................... 100.0%
<PAGE>
A-6
7. Redemption Upon Public Equity Offering. Prior to [
--------------------------------------
], 1999, the Issuers may redeem up to 35% of the originally issued principal
amount at maturity of the Securities at a redemption price equal to [ ]%
of the Accreted Value at the redemption date of the Securities so redeemed
with the net proceeds of one or more Public Equity Offerings of Common Equity
Interests of (i) the Company, (ii) Holdings or (iii) a Special Purpose
Corporation, in any case, resulting in gross proceeds of at least $100
million in the aggregate; provided that at least 65% of the originally issued
--------
principal amount at maturity of the Securities would remain outstanding
immediately after giving effect to such redemption.
8. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed. On and after the Redemption Date,
unless the Issuers default in making the redemption payment, Accreted Value
ceases to accrete and interest ceases to accrue on Securities or portions
thereof called for redemption.
9. Offers To Purchase. The Indenture provides that upon the
------------------
occurrence of a Change of Control or an Asset Sale and subject to further
limitations contained therein, the Issuers shall make an offer to purchase
outstanding Securities in accordance with the procedures set forth in the
Indenture.
10. Denominations. The Securities are in registered form without
-------------
coupons and only in denominations of $1,000 of principal amount at maturity
and integral multiples thereof.
11. Persons Deemed Owners. The registered Holder of this Security
---------------------
may be treated as the owner of this Security for all purposes.
12. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for one year, the Trustee or Paying Agent will pay
the money back to the Issuers or a Subsidiary Guarantor, as the case may be,
at its request. After that, Holders entitled to the money must look to the
Issuers or a Subsidiary Guarantor for payment as general creditors unless an
"abandoned property" law designates another Person.
13. Amendment, Supplement, Waiver, Etc. The Issuers, any
----------------------------------
Subsidiary Guarantors and the Trustee (if a party thereto) may, without the
consent of the Holders of any
<PAGE>
A-7
outstanding Securities, amend, waive or supplement the Indenture, the
Securities or any Subsidiary Guarantee for certain specified purposes,
including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act of 1939, as amended, and making any change that does not
adversely affect the rights of any Holder. Other amendments and
modifications of the Indenture, the Securities or any Subsidiary Guarantee
may be made by the Issuers, any Subsidiary Guarantor and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount at maturity of the outstanding Securities, subject to certain
exceptions requiring the consent of the Holders of the particular Securities
to be affected.
14. Successor Corporation. When a successor corporation or
---------------------
partnership, as the case may be, assumes all the obligations of its
predecessor under the Securities or a Subsidiary Guarantee, as the case may
be, and the Indenture and the transaction complies with the terms of Article
V of the Indenture, the predecessor corporation or partnership, as the case
may be, will, except as provided in Article V, be released from those
obligations.
15. Restrictive Covenants. The Indenture contains certain
---------------------
covenants that, among other things, limit the ability of the Company and the
Restricted Subsidiaries to make restricted payments, to incur indebtedness,
to create liens, to sell assets, to permit restrictions on dividends and
other payments by Restricted Subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in
transactions with affiliates or to engage in certain businesses. The
limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
16. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(ix) or
(x) of the Indenture with respect to an Issuer) occurs and is continuing,
then the Holders of not less than 25% in aggregate principal amount at
maturity of the outstanding Securities may, and the Trustee upon the request
of the Holders of not less than 25% in aggregate principal amount at maturity
of the outstanding Securities shall, declare the Default Amount of and any
accrued interest on all of the Securities to be due and payable
<PAGE>
A-8
immediately. If an Event of Default specified in Section 6.1(a)(ix) or (x)
of the Indenture occurs with respect to an Issuer, the Default Amount shall
ipso facto become and be immediately due and payable without any declaration
---- -----
or other act on the part of the Trustee or any Holder. Holders may not
enforce the Indenture, the Securities or any Subsidiary Guarantee except as
provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture, the Securities or any Subsidiary
Guarantee. Subject to certain limitations, Holders of a majority in
principal amount at maturity of the then outstanding Securities may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders notice of any continuing default (except a default in payment of
the Default Amount, principal or interest) if it determines that withholding
notice is in their interests.
17. Trustee Dealings with Issuers. The Trustee, in its individual
-----------------------------
or any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if it were not Trustee.
18. No Recourse Against Others. A director, officer, employee,
--------------------------
partner, stockholder or incorporator, as such, of the Issuers or any
Subsidiary Guarantor shall not have any liability for any obligations of the
Issuers or any such Subsidiary Guarantor under the Indenture, the Securities
or any Subsidiary Guarantee or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities and any Subsidiary
Guarantee.
19. Discharge. The Issuers' and any Subsidiary Guarantor's
---------
obligations pursuant to the Indenture will be discharged, except for
obligations pursuant to certain sections thereof, subject to the terms of
the Indenture, upon the payment of all the Securities or upon the irrevocable
deposit with the Trustee of U.S. Legal Tender or U.S. Government Obligations
sufficient to pay when due principal of and interest on the Securities to
maturity or redemption, as the case may be.
20. Authentication. This Security shall not be valid until the
--------------
Trustee signs the certificate of authentication on the other side of this
Security.
<PAGE>
A-9
The internal laws of the State of New York shall govern this
Security without regard to principles of conflict of laws.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
SPRINT SPECTRUM, L.P.
4900 Main Street
12th Floor
Kansas City, Missouri 64112
Attention: Joseph M. Gensheimer, Esq.
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Security to
___________________________________________________________________________
(Insert assignee's social security or tax ID number) __________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint
___________________________________________________________________________
agent to transfer this Security on the books of the Issuers. The agent may
substitute another to act for him.
___________________________________________________________________________
Date:______________ Your Signature: _________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: ________________________________________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Issuers pursuant
to Section 4.13 or 4.15 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the
Issuers pursuant to Section 4.13 or 4.15 of the Indenture, state the amount:
$____________
Date: ________________ Your Signature: ____________________
Signature Guarantee: _______________________
<PAGE>
EXHIBIT B
---------
SUBSIDIARY GUARANTEE
--------------------
The undersigned hereby unconditionally guarantees on a senior
unsecured basis to the Holder of this Security the payments of principal of,
premium, if any, and interest on this Security in the amounts and at the time
when due and interest on the overdue principal, premium, if any, and
interest, if any, of this Security, if lawful, and the payment or performance
of all other obligations of the Issuers under the Indenture or the
Securities, to the Holder of this Security and the Trustee, all in accordance
with and subject to the terms and limitations of this Security, Article X of
the Indenture and this Subsidiary Guarantee. This Subsidiary Guarantee will
become effective in accordance with Article X of the Indenture and its terms
shall be evidenced therein. The validity and enforceability of any
Subsidiary Guarantee shall not be affected by the fact that it is not affixed
to any particular Security.
The obligations of the undersigned to the Holders of Securities and
to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article X of the Indenture and reference is hereby
made to the Indenture for the precise terms of this Subsidiary Guarantee and
all of the other provisions of the Indenture to which this Subsidiary
Guarantee relates.
The internal laws of the State of New York shall govern this
Subsidiary Guarantee without regard to principles of conflict of laws.
[ ]
By: ________________________________________
Name:
Title:
By: ________________________________________
Name:
Title:
<PAGE>
EXHIBIT 5.1
[SIMPSON THACHER & BARTLETT LETTERHEAD]
(212) 455-2000
July 30, 1996
Sprint Spectrum L.P.
Sprint Spectrum Finance Corporation
4717 Grand Avenue - Fifth Floor
Kansas City, Missouri 64112
Ladies and Gentlemen:
We have acted as counsel to Sprint Spectrum L.P., a Delaware limited
partnership ("Sprint Spectrum"), and Sprint Spectrum Finance Corporation, a
Delaware corporation ("FinCo" and, together with Sprint Spectrum, the
"Registrants") in connection with the Registration Statement on Form S-1 (the
"Registration Statement") filed by the Registrants with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the issuance by the Registrants of
$150,000,000 aggregate principal amount of Senior Notes due 2006 (the "Senior
Notes") and $___________ aggregate principal amount at maturity of Senior
Discount Notes due 2006 (the "Senior Discount Notes" and, together with the
Senior Notes, the "Notes").
We have examined the Registration Statement and the Indentures, each
dated as of _________, 1996 (the "Indentures"), each among the Registrants and
The Bank of New York, as Trustee (the "Trustee"), which have been filed with the
Commission as exhibits to the Registration Statement. In addition, we have
examined, and have relied as to matters of fact upon, the originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments and such certificates or
comparable documents of public officials and of officers and representatives of
the Registrants, and have made such other and further investigations, as we have
deemed relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as
<PAGE>
Sprint Spectrum L.P. -2- July 30, 1996
Sprint Spectrum Finance Corporation
certified or photostatic copies, and the authenticity of the originals of such
latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, when (i) the Indentures have been duly authorized and
validly executed and delivered by the parties thereto, (ii) the Indentures have
been duly qualified under the Trust Indenture Act of 1939, as amended, (iii) the
Partnership Board of the general partner of Sprint Spectrum and the Board of
Directors of FinCo, duly constituted and acting committees thereof or duly
authorized officers thereof (such boards, committees or authorized officers
being hereinafter referred to as the "Board") have taken all necessary
partnership or corporate action, as the case may be, to approve the issuance and
terms of the Notes, the terms of the offering thereof and related matters, and
(iv) the Notes have been duly executed, authenticated, issued and delivered in
accordance with the provisions of the applicable Indenture and the applicable
definitive purchase agreement approved by the Board upon payment of the
consideration therefor provided for therein, we are of the opinion that the
Notes will constitute valid and legally binding obligations of the Registrants
enforceable against the Registrants in accordance with their terms and entitled
to the benefits of the Indentures.
Our opinion set forth above is subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any law other than the law of the State of New
York, the federal law of the United States, the Delaware General Corporation Law
and the Delaware Revised Uniform Limited Partnership Act.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein. This opinion is rendered to you in
connection with the above described transactions. This opinion may not be
relied upon by you for any other purpose, or relied upon by, or furnished to,
any other person, firm or corporation without our prior written consent.
<PAGE>
Sprint Spectrum L.P. -3- July 30, 1996
Sprint Spectrum Finance Corporation
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 8.1
July 30, 1996
Sprint Spectrum L.P.
4717 Grand Avenue, Fifth Floor
Kansas City, Missouri 64112
Ladies and Gentlemen:
We have acted as counsel to Sprint Spectrum L.P. (the "Company") in
connection with the preparation and filing of the Registration Statement on Form
S-1 filed with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended, in respect of Senior Notes and Senior Discount Notes to
be offered by the Company. In that connection, we have given the opinion
contained in the section entitled "Certain Federal Income Tax Consequences" in
the Registration Statement.
We hereby confirm that our opinion referenced in this letter is accurate
in all material respects and hereby consent to the filing of this letter as an
Exhibit to the Registration Statement and to the use of our name in the section
entitled "Certain Federal Income Tax Consequences" in the Registration
Statement.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the federal law of the
United States.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED
SPRINT TRADEMARK LICENSE AGREEMENT
dated as of January 31, 1996
by and between
SPRINT COMMUNICATIONS COMPANY, L.P.
and
MAJORCO, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS....................................................... 2
Section 1.1. Certain Definitions...................................... 2
Section 1.2. Terms Generally.......................................... 5
ARTICLE 2 GRANT OF TRADEMARK RIGHTS; EXCLUSIVITY............................ 5
Section 2.1. License.................................................. 5
Section 2.2. Exclusivity.............................................. 6
ARTICLE 3 QUALITY STANDARDS; MAINTENANCE.................................... 7
Section 3.1. Maintenance of Quality................................... 7
Section 3.2. Rights of Inspection..................................... 9
Section 3.3. Marking; Compliance with Trademark Laws.................. 9
Section 3.4. Other Use Restrictions................................... 9
ARTICLE 4 CONFIDENTIAL INFORMATION.......................................... 9
Section 4.1. Maintenance of Confidentiality........................... 9
Section 4.2. Permitted Disclosures....................................10
Section 4.3. Financial Institutions...................................10
Section 4.4. Procedures...............................................11
Section 4.5. Survival.................................................11
ARTICLE 5 REPRESENTATIONS, WARRANTIES AND
COVENANTS OF LICENSEE...................................................11
Section 5.1. LICENSOR's Ownership.....................................11
Section 5.2. No Challenge by LICENSEE.................................12
ARTICLE 6 LICENSOR'S REPRESENTATIONS, WARRANTIES
AND COVENANTS...........................................................12
Section 6.1. Title to the Licensed Mark...............................12
Section 6.2. Other Licensees..........................................12
Section 6.3. Abandonment..............................................13
-i-
<PAGE>
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES....................13
Section 7.1. Representations and Warranties...........................13
Section 7.2. Survival.................................................14
ARTICLE 8 PROSECUTION OF INFRINGEMENT CLAIMS................................14
Section 8.1. Notice and Prosecution of Infringement...................14
Section 8.2. Other Infringement Actions...............................15
Section 8.3. Right of LICENSOR to Join In LICENSEE's Actions..........15
Section 8.4. LICENSOR Right to Institute Infringement Actions.........15
ARTICLE 9 LICENSEE DEFENSE AND INDEMNIFICATION OF LICENSOR..................16
Section 9.1. Indemnification..........................................16
Section 9.2. Control of Litigation....................................16
Section 9.3. Taxes....................................................18
ARTICLE 10 OBLIGATIONS/SETOFF...............................................19
Section 10.1. Obligations/Setoff.......................................19
ARTICLE 11 LIMITATIONS ON USE OF LICENSED MARK..............................19
Section 11.1. Restrictions on Use......................................19
Section 11.2. Adherence to Trademark Usage Guidelines..................19
Section 11.3. Use of Similar Trademarks................................20
Section 11.4. Services of Public Figures...............................20
ARTICLE 12 CONTROL OF BRAND IMAGE...........................................20
Section 12.1. Exclusive Use of Licensed Mark...........................20
Section 12.2. Consistency With Brand Image and Principles..............20
Section 12.3. Management of Brand Image................................20
Section 12.4. Advertising Agencies; Promotions.........................21
Section 12.5. Ownership of Advertising Materials.......................21
ARTICLE 13 RELATIONSHIP OF PARTIES..........................................22
Section 13.1. Relationship of Parties..................................22
ARTICLE 14 TERM; TERMINATION; EFFECTS OF TERMINATION........................22
-ii-
<PAGE>
Section 14.1. Term.....................................................22
Section 14.2. Events of Termination....................................22
Section 14.3. LICENSOR'S Right to Terminate Upon Event of Termination..23
Section 14.4. LICENSEE'S Right to Terminate............................23
Section 14.5. Right to Terminate upon Transfer of LICENSOR's
Interest in LICENSEE....................................24
Section 14.6.Effects of Termination.....................................24
ARTICLE 15 ASSIGNMENT; SUBLICENSING.........................................24
Section 15.1. LICENSEE Right to Assign.................................24
Section 15.2. LICENSOR Right to Assign the Licensed Mark...............24
Section 15.3. Licenses to Additional Licensees.........................25
ARTICLE 16 MISCELLANEOUS....................................................25
Section 16.1. Notices..................................................25
Section 16.2. Binding Effect...........................................26
Section 16.3. Construction.............................................26
Section 16.4. Time.....................................................26
Section 16.5. Table of Contents; Headings..............................26
Section 16.6. Severability.............................................26
Section 16.7. Further Action...........................................26
Section 16.8. Governing Law............................................26
Section 16.9. Counterpart Execution....................................27
Section 16.11. Entire Agreement.........................................27
Section 16.12. Limitation on Rights of Others...........................27
Section 16.13. Waivers; Remedies........................................27
Section 16.14. Jurisdiction; Consent to Service of Process..............27
Section 16.15. Waiver of Jury Trial.....................................28
Section 16.16. Consents.................................................28
-iii-
<PAGE>
AMENDED AND RESTATED SPRINT TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT, made as of the 31st day of January, 1996, by and between
Sprint Communications Company, L.P., a limited partnership organized under the
laws of the State of Delaware, as licensor ("LICENSOR"), and MajorCo, L.P., a
limited partnership organized under the laws of the State of Delaware, as
licensee ("LICENSEE");
W I T N E S S E T H:
WHEREAS, LICENSOR is the registered owner of the U.S. trademark "Sprint",
together with related "Diamond" logo, and the goodwill of the business
symbolized thereby;
WHEREAS, pursuant to that certain Sprint Trademark License Agreement (the
"Original License Agreement"), dated as of the 28th day of March, 1995, by and
between LICENSOR and Sprint Spectrum, L.P., a limited partnership organized
under the laws of the State of Delaware ("Sprint Spectrum"), LICENSOR granted to
Sprint Spectrum certain rights to use the Licensed Mark (as defined below) in
connection with the marketing, promotion, advertisement, distribution, lease and
sale of the Authorized Products and Services and Premium and Promotional Items
(as such terms are defined below, subject to the terms and conditions set forth
in this Agreement);
WHEREAS, pursuant to that certain Assignment and Acceptance Agreement,
dated as of the 28th day of March, 1995, by and between Sprint Spectrum and
LICENSEE, Sprint Spectrum assigned all of its rights and obligations under the
Original License Agreement to LICENSEE, and LICENSEE assumed all of the
obligations of Sprint Spectrum under the Original License Agreement; and
WHEREAS, the Parties desire to amend and restate the Original License
Agreement to modify the definition of Authorized Products and Services and
certain other provisions therein;
NOW, THEREFORE, the Parties, in consideration of the mutual agreements
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, do hereby agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1. Certain Definitions. Capitalized terms and phrases
-------------------
used in this Agreement shall have the following meanings:
"Additional Licensee" has the meaning specified in Section 15.3.
-------------------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this
definition, the term "controls" (including its correlative meanings "controlled
by" and "under common control with") shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Amended and Restated Sprint Trademark License
---------
Agreement, including all Exhibits hereto, as amended from time to time.
"Authorized Products and Services" shall consist of the Wireless
--------------------------------
Exclusive Services and Non-Exclusive Services; provided, however, that
Authorized Products and Services shall in no event include any products or
services that constitute, or the marketing, promotion, advertisement,
distribution, lease or sale of which would constitute, an Excluded Business.
"Bankruptcy" has the meaning set forth in Section 14.2(a).
----------
"Business Day" means a day of the year on which banks are not required
------------
or authorized to be closed in the State of New York.
"Confidential Information" has the meaning set forth in Section 4.1.
------------------------
"Controlled Affiliate" of any Person means the Parent of such Person
--------------------
and each Subsidiary of such Parent. As used in Section 2.2 and Article 4, the
term "Controlled Affiliate" shall also include any Affiliate of a Person that
such Person or its Parent can directly or indirectly unilaterally cause to take
or refrain from taking any of the actions required, prohibited or otherwise
restricted by such Section, whether through ownership of voting securities,
contractually or otherwise.
"Designated Vendor" means a vendor authorized by LICENSOR to
-----------------
manufacture Related Equipment under the Licensed Mark (as contemplated in
Section 2.1(b)) or to manufacture Premium and Promotional Items under the
Licensed Mark (as contemplated in Section 2.1(c)).
"Event of Termination" has the meaning set forth in Section 14.2.
--------------------
-2-
<PAGE>
"Excluded Business" has the meaning set forth in Exhibit A.
----------------- ---------
"Involuntary Bankruptcy" has the meaning set forth in Section 14.2(a).
----------------------
"Law" means all laws (statutory or otherwise), ordinances, rules,
---
regulations, bylaws, Orders and codes of all governmental and regulatory
authorities, whether United States Federal, state or local, which are applicable
to the Authorized Products and Services.
"Licensed Mark" means the trademark "SPRINT" and the "DIAMOND" logo
-------------
used in association therewith.
"LICENSEE" means MajorCo, L.P. (and its Controlled Affiliates) and any
--------
Permitted Assignee.
"LICENSOR" has the meaning set forth in the Preamble.
--------
"Loss" means any and all damage, loss, liability, claim, out-of-pocket
----
cost and expense, including reasonable expenses of investigation and reasonable
attorneys' fees and expenses, but excluding consequential or special damages.
"MajorCo Partnership Agreement" means that certain Amended and
-----------------------------
Restated Agreement of Limited Partnership of MajorCo, dated as of January ___,
1996, among Sprint Spectrum, L.P., TCI Network Services, Comcast Telephony
Services and Cox Telephony Partnership, as the same shall be amended or restated
from time to time.
"Marketing Agreement" means that certain Marketing Agreement, to be
-------------------
entered into after the date hereof in accordance with the provisions of Section
8.3 of the MajorCo Partnership Agreement.
"Marketing Communications Guidelines" has the meaning set forth in
-----------------------------------
Section 12.3.
"Non-Exclusive Services" has the meaning set forth in Exhibit A.
----------------------
"Order" means any order, writ, injunction, decree, judgment, award or
-----
determination of any court or governmental or regulatory authority.
"Parent", with respect to any Person, means the ultimate parent entity
------
(as determined in accordance with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder) of such
Person; provided, that if such ultimate parent entity is an individual, the
Parent shall be the highest entity in the ownership chain from the ultimate
parent entity to and including such Person which is not an individual.
-3-
<PAGE>
"Parties" means LICENSOR and LICENSEE, and "Party" shall mean LICENSOR
------- -----
or LICENSEE, as the context may require.
"Permitted Assignee" means any assignee of the rights and obligations
------------------
of LICENSEE hereunder pursuant to an assignment consented to in writing by
LICENSOR, in its sole discretion, in accordance with Section 15.1, or any
subsequent permitted assignee of any such permitted assignee.
"Person" means any individual, partnership, corporation, trust or
------
other entity.
"Premium and Promotional Items" means all items, including clothing,
-----------------------------
memorabilia and novelties, used to display the Licensed Mark for the purpose of
promoting the awareness, sale or image of the Authorized Products and Services;
provided, however, that Premium and Promotional Items shall not include
marketing and advertising materials prepared by LICENSEE which are subject to
the Marketing Communications Guidelines described in Section 12.3 (e.g., printed
materials such as bill stuffers, brochures and similar materials).
"Quality Standards" has the meaning set forth in Section 3.1(a).
-----------------
"Related Equipment" means customer-controlled equipment for use in
-----------------
connection with the Authorized Products and Services including telephones,
wireless handsets and related accessories, PCMCIA cards, "smart" cards, PDA's,
PBX's, set-top boxes and data terminals.
"Subsidiary" of any Person as of any relevant date means a
----------
corporation, company or other entity (i) more than fifty percent (50%) of whose
outstanding shares or equity securities are, as of such date, owned or
controlled, directly or indirectly through one or more Subsidiaries, by such
Person, and the shares or securities so owned entitle such Person and/or its
Subsidiaries to elect at least a majority of the members of the board of
directors or other managing authority of such corporation, company or other
entity notwithstanding the vote of the holders of the remaining shares or equity
securities so entitled to vote or (ii) which does not have outstanding shares or
securities, as may be the case in a partnership, joint venture or unincorporated
association, but more than fifty percent (50%) of whose ownership interest is,
as of such date, owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person, and in which the ownership interest so owned
entitles such Person and/or Subsidiaries to make the decisions for such
corporation, company or other entity.
"Territory" means the United States of America and its territories and
---------
possessions, other than Puerto Rico.
"Trademark Usage Guidelines" means the rules governing the depiction
--------------------------
and presentation of the Licensed Mark then generally in use by LICENSOR, to be
furnished by LICENSOR to LICENSEE (as the same may be amended and updated from
time to time by LICENSOR).
-4-
<PAGE>
"Voluntary Bankruptcy" has the meaning set forth in Section 14.2(a).
--------------------
"Wireless Affiliate" means any Person which intends to become an
------------------
affiliate of WirelessCo's (or its successor's) wireless telecommunications
network by entering into an affiliation agreement with WirelessCo (or its
successor) or a Subsidiary thereof and offering Authorized Products and Services
under the Licensed Mark as part of such wireless telecommunications network.
"Wireless Exclusive Services" has the meaning set forth in Exhibit A.
--------------------------- ---------
"WirelessCo" means WirelessCo, L.P., the Delaware limited partnership
----------
formed by the partners thereof pursuant to that certain Agreement of Limited
Partnership dated as of October 24, 1994, as amended and restated as of March
28, 1995, to cause WirelessCo to become a Subsidiary of MajorCo.
Section 1.2. Terms Generally.
---------------
The definitions in Section 1.1 and those contained elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." The words "herein," "hereof" and "hereunder" and words of similar
import refer to this Agreement (including any Exhibit hereto) in its entirety
and not to any part hereof unless the context shall otherwise require. All
references herein to Articles, Sections and Exhibits shall be deemed references
to Articles and Sections of, and Exhibits to, this Agreement unless the context
shall otherwise require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
or regulation, to any corresponding provisions of successor statutes or
regulations). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
ARTICLE 2
GRANT OF TRADEMARK RIGHTS; EXCLUSIVELY
Section 2.1. License.
-------
(a) Grant of License. Subject to the terms and conditions hereof,
----------------
LICENSOR hereby grants to LICENSEE, and LICENSEE hereby accepts from LICENSOR,
for the term of this Agreement, a non-transferable, royalty-free license to use
the Licensed Mark solely for and in
-5-
<PAGE>
connection with the marketing, promotion, advertisement, distribution, lease or
sale of Authorized Products and Services and Premium and Promotional Items in
the Territory.
(b) Related Equipment. The rights granted hereunder to LICENSEE shall
-----------------
not include the right to manufacture equipment under the Licensed Mark. However,
subject to the terms and conditions hereof, LICENSOR hereby grants to LICENSEE,
and LICENSEE hereby accepts from LICENSOR, for the term of this Agreement, a
non-transferable, royalty-free license to market, promote, advertise, distribute
and resell and lease Related Equipment (including Related Equipment bearing the
Licensed Mark that has been manufactured by vendors authorized by LICENSOR for
such purpose) in connection with the marketing, promotion, advertisement,
distribution, lease or sale by LICENSEE of Authorized Products and Services, and
to furnish services relating to such Related Equipment (including installation,
repair and maintenance of Related Equipment), under the Licensed Mark. LICENSOR
shall, at the request of LICENSEE, authorize, pursuant to a separate license,
Designated Vendors designated by LICENSEE to manufacture Related Equipment under
the Licensed Mark for resale or lease by LICENSEE, provided that the vendor
meets the applicable quality standards established by LICENSOR for the
manufacture of such equipment.
(c) Premium and Promotional Items. LICENSOR shall, at the request of
-----------------------------
LICENSEE, authorize, pursuant to a separate license, Designated Vendors
designated by LICENSEE to manufacture Premium and Promotional Items under the
Licensed Mark, provided that the vendor meets the applicable quality standards
established by LICENSOR for the manufacture of such items.
Section 2.2. Exclusivity. The rights granted as contemplated in
-----------
Section 2.1 above shall be exclusive with respect to Wireless Exclusive Services
and non-exclusive with respect to Non-Exclusive Services; provided that LICENSOR
shall retain the right to use (and to authorize Affiliates of LICENSOR and third
parties to use) the Licensed Mark for any and all purposes, including without
limitation, the marketing, promotion, advertisement, distribution, lease and
sale of any and all products and services and in connection with the
manufacture, marketing, promotion, advertisement, distribution, lease and sale
of equipment (including Related Equipment), subject to the obligations of
LICENSOR and its Controlled Affiliates under Section 6 of the MajorCo
Partnership Agreement. It is understood and agreed that under the foregoing
provisions, LICENSOR will not be entitled to authorize any other Person to use
the Licensed Mark in connection with a Competitive Activity (as defined in
Section 6 of the MajorCo Partnership Agreement), except that (i) LICENSOR shall
be entitled to authorize Sprint Parent (as defined in the MajorCo Partnership
Agreement) and its Controlled Affiliates to use the Licensed Mark in connection
with any Competitive Activities to the limited extent that Sprint Parent (and
its Controlled Affiliates) are permitted to engage in such Competitive
Activities under Section 6 of the MajorCo Partnership Agreement (but only for so
long as such Person remains a Controlled Affiliate of Sprint Parent), and (ii)
if Sprint Parent or any of its Controlled Affiliates transfers its interest,
directly or indirectly, in any Person engaged in a Competitive Activity (or the
related assets held by such Person) in which Sprint Parent or its Controlled
Affiliates is permitted to engage under Section 6 of the MajorCo Partnership
Agreement (the "Transferred Business") to any Person other than Sprint Parent or
a Controlled Affiliate of Sprint Parent (the "Transferee"), then LICENSOR shall
be entitled to authorize such Transferee and its
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Controlled Affiliates to use the Licensed Mark in connection with such
Transferred Business for a period not to exceed one (1) year from the closing of
such transfer.
ARTICLE 3
QUALITY STANDARDS; MAINTENANCE
Section 3.1. Maintenance of Quality.
----------------------
(a) Adherence to Quality Standards. In the course of marketing,
------------------------------
promoting, advertising, distributing, leasing and selling Authorized Products
and Services and Premium and Promotional Items under the Licensed Mark, LICENSEE
shall maintain and adhere to standards of quality and specifications that
conform to or exceed those quality standards and technical and operational
specifications adopted and/or amended in the manner provided below ("Quality
Standards") and those imposed by Law. Such Quality Standards are designed to
ensure that the quality of the Authorized Products and Services and Premium and
Promotional Items marketed, promoted, advertised, distributed, leased and sold
under the Licensed Mark is consistent with the high reputation of the Licensed
Mark and in conformity with applicable Laws.
(b) Establishment of Quality Standards. The Parties acknowledge that
----------------------------------
the initial Quality Standards for the Authorized Products and Services and
Premium and Promotional Items will be proposed by LICENSOR as soon as
practicable after the date hereof. The Quality Standards shall (i) be consistent
with the reputation for quality associated with the Licensed Mark and (ii) be
commensurate with a high level of quality (taking into account LICENSEE'S
fundamental underlying technology and standards), consistent with the level of
quality being offered in the market for products and services of the same kind
as the Authorized Products and Services. In the event that LICENSEE has not
responded pursuant to Section 3.1(d) to the initial Quality Standards proposed
by LICENSOR as contemplated in the first sentence of this Section 3.1(b), within
thirty (30) days following receipt of such initial proposed Quality Standards by
LICENSEE, such initial proposed Quality Standards will be deemed adopted and
shall be the initial Quality Standards for purposes hereof. It is further
understood and agreed that the Quality Standards adopted in accordance with the
foregoing provisions will not be more burdensome than any standards for the
Authorized Products and Services that are hereafter initially approved by
LICENSOR and adopted in accordance with the provisions of the MajorCo
Partnership Agreement.
(c) Changes in Quality Standards. In the event that LICENSOR wishes to
----------------------------
change the Quality Standards, it will notify LICENSEE in writing of such
proposed amendments, and will afford LICENSEE a reasonable time period in which
to adopt such changes as may be required in order for LICENSEE to conform to the
amended Quality Standards. If LICENSEE has not responded pursuant to Section
3.1(d) to any proposed amendments to the Quality Standards made by LICENSOR,
within thirty (30) days following receipt of notice thereof by LICENSEE, such
amendments will be deemed adopted and shall become part of the Quality
Standards. It is further
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understood and agreed that LICENSOR will not propose any changes in the Quality
Standards pursuant to the foregoing provisions if such changes would result in
amended Quality Standards that would be more burdensome than any standards for
the Authorized Products and Services that are hereafter initially approved by
LICENSOR and adopted in accordance with the provisions of the MajorCo
Partnership Agreement, as the same may thereafter be amended from time to time
with the approval of LICENSOR or a Controlled Affiliate of LICENSOR in
accordance with the provisions of the MajorCo Partnership Agreement.
(d) Resolution of Disputes Concerning Quality Standards. LICENSEE
---------------------------------------------------
may notify LICENSOR in writing within thirty (30) days following receipt of the
initial proposed Quality Standards or any proposed amendments to the Quality
Standards, as the case may be, that LICENSEE objects to such initial proposed
Quality Standards (or proposed amendments thereto) on the grounds that such
Quality Standards are inconsistent with the requirements for Quality Standards
specified in the second and fourth sentences of Section 3.1(b) and the third
sentence of Section 3.1(c), as applicable (a "Notice of Objection"). Each Notice
of Objection shall identify with specificity the provisions of the proposed
Quality Standards (or amendments thereto) to which LICENSEE objects and the
reasons for its objection thereto. In the event that LICENSEE delivers such a
Notice of Objection to LICENSOR within the thirty (30) day time period specified
above, LICENSOR and LICENSEE will discuss LICENSEE'S objections to the proposed
Quality Standards and will attempt to resolve any differences between the
Parties as necessary to make the proposed Quality Standards consistent with the
requirements for Quality Standards specified in the second and fourth sentences
of Section 3.1(b) and the third sentence of Section 3.1(c), as applicable. In
the event that the Parties are unable to resolve any remaining differences
within thirty (30) days after delivery of the Notice of Objection, then the
Parties shall (at the insistence of either of them) refer the matter to their
respective chief executive officers for resolution. If the chief executive
officers of the Parties fail to resolve this matter within twenty (20) Business
Days after it is referred to them, then each party shall prepare a brief (a
"Brief"), which includes a summary of each issue, its proposed resolution of
each issue and considerations in support of such proposed resolution, not later
than ten (10) days following the expiration of the time period for the chief
executive officers to resolve such dispute, and such Briefs will be referred to
a single arbitrator (to be selected in accordance with the procedures specified
in Exhibit B) who is reputable and is a recognized expert in the engineering and
technical requirements relating the Authorized Products and Services in
question, and such arbitrator will determine (x) whether the Quality Standards
proposed by LICENSOR conform to the requirements of the second and fourth
sentences of Section 3.1(b) and the third sentence of Section 3.1(c), as
applicable, and (y) if such proposed Quality Standards do not so conform, the
changes in the proposed Quality Standards that are required in order to cause
the proposed Quality Standards to so conform. Any such arbitration proceeding
shall be governed in accordance with the procedures specified in Exhibit B
---------
hereto, and the decision of the arbitrator will be binding upon the Parties.
In the event that LICENSEE proposes to begin offering any new
Authorized Products and Services not contemplated under the Quality Standards
then in effect, the Parties will discuss appropriate standards and
specifications for such new product or service, and new standards and
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specifications to become part of the Quality Standards will be
established by LICENSOR in accordance with the procedures specified above.
Section 3.2. Rights of Inspection. In order to ensure that the
--------------------
Quality Standards are maintained, LICENSOR and its authorized agents and
representatives shall have the right, but not the obligation, with prior notice
to LICENSEE, to enter upon the premises of any office or facility operated by or
for LICENSEE with respect to Authorized Products and Services and Premium and
Promotional Items at all reasonable times, to inspect, monitor and test in a
reasonable manner facilities and equipment used to furnish Authorized Products
and Services and Premium and Promotional Items and, with prior written notice to
LICENSEE, to inspect the books and records of LICENSEE in a manner that does not
unreasonably interfere with the business and affairs of LICENSEE, all as they
relate to compliance with the Quality Standards maintained hereunder.
Section 3.3. Marking; Compliance with Trademark Laws. LICENSEE
---------------------------------------
shall cause the appropriate designation "TM" or the registration symbol "R" to
be placed adjacent to the Licensed Mark in connection with the use thereof and
to indicate such additional information as LICENSOR shall reasonably specify
from time to time concerning the license rights under which LICENSEE uses the
Licensed Mark. LICENSEE shall place the following notice on all printed or
electronic materials on which the Licensed Mark appears: "SPRINT" is a trademark
of Sprint Communications Company, L.P., used under license by [LICENSEE]" or
such other notice as LICENSOR may specify from time to time.
Section 3.4. Other Use Restrictions. LICENSEE shall not use the
----------------------
Licensed Mark in any manner that would reflect adversely on the image of quality
symbolized by the Licensed Mark.
ARTICLE 4
CONFIDENTIAL INFORMATION
Section 4.1. Maintenance of Confidentiality. Each of LICENSOR and
------------------------------
LICENSEE and their respective Controlled Affiliates (each a "Restricted Party"),
shall cause their respective officers and directors (in their capacity as such)
to, and shall take all reasonable measures to cause their respective employees,
attorneys, accountants, consultants and other agents and advisors (collectively,
and together with their respective officers and directors, "Agents") to, keep
secret and maintain in confidence the terms of this Agreement and all
confidential and proprietary information and data of the other Party or its
Affiliates disclosed to it (in each case, a "Receiving Party") in connection
with the performance of its obligations under this Agreement (the "Confidential
Information") and shall not, shall cause their respective officers and directors
not to, and shall take all reasonable measures to cause their respective other
Agents not to, disclose Confidential Information to any Person other than the
Parties, their Controlled Affiliates and their respective Agents that need to
know such Confidential Information. Each Party further agrees that it shall not
use the Confidential Information for any purpose other than determining and
performing its
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obligations and exercising its rights under this Agreement. Each Party shall
take all reasonable measures necessary to prevent any unauthorized disclosure of
the Confidential Information by any of their respective Controlled Affiliates or
any of their respective Agents. The measures taken by a Restricted Party to
protect Confidential Information shall be not deemed unreasonable if the
measures taken are at least as strong as the measures taken by the disclosing
party to protect such Confidential Information.
Section 4.2. Permitted Disclosures. Nothing herein shall prevent any
---------------------
Restricted Party or its Agents from using, disclosing, or authorizing the
disclosure of Confidential Information it receives and which:
(i) has been published or is in the public domain, or
which subsequently comes into the public domain, through no fault of the
Receiving Party;
(ii) prior to receipt hereunder was properly within the
legitimate possession of the Receiving Party or, subsequent to receipt
hereunder is lawfully received from a third party having rights therein
without restriction of the third party's right to disseminate the
Confidential Information and without notice of any restriction
against its further disclosure;
(iii) is independently developed by the Receiving Party
through Persons who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(iv) is disclosed to a third party with the written approval
of the party originally disclosing such information, provided that such
--------
Confidential Information shall cease to be confidential and proprietary
information covered by this Agreement only to the extent of the
disclosure so consented to;
(v) subject to the Receiving Party's compliance with
Section 4.4 below, is required to be produced under order of a court of
competent jurisdiction or other similar requirements of a governmental
agency, provided that such Confidential Information to the extent covered
--------
by a protective order or its equivalent shall otherwise continue to be
Confidential Information required to be held confidential for purposes
of this Agreement; or
(vi) subject to the Receiving Party's compliance with
Section 4.4 below, is required to be disclosed by applicable Law or a stock
exchange or association on which such Receiving Party's securities
(or those of its Affiliate) are listed.
Section 4.3. Financial Institutions. Notwithstanding this
----------------------
Article 4, any Party may provide Confidential Information to any financial
institution in connection with borrowings from such
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financial institution by such Party or any of its Controlled Affiliates,
so long as prior to any such disclosure such financial institution executes a
confidentiality agreement that provides protection substantially equivalent to
the protection provided the Parties in this Article 4.
Section 4.4. Procedures. In the event that any Receiving Party
----------
(i) must disclose Confidential Information in order to comply with applicable
Law or the requirements of a stock exchange or association on which such
Receiving Party's securities or those of its Affiliates are listed or (ii)
becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands or otherwise)
to disclose any Confidential Information, the Receiving Party shall provide the
disclosing party with prompt written notice so that in the case of clause (i),
the disclosing party can work with the Receiving Party to limit the disclosure
to the greatest extent possible consistent with legal obligations, or in the
case of clause (ii), the disclosing party may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Agreement. In
the case of clause (ii), (A) if the disclosing party is unable to obtain a
protective order or other appropriate remedy, or if the disclosing party so
directs, the Receiving Party shall, and shall cause its employees to, exercise
all commercially reasonable efforts to obtain a protective order or other
appropriate remedy at the disclosing party's reasonable expense, and (B) failing
the entry of a protective order or other appropriate remedy or receipt of a
waiver hereunder, the Receiving Party shall furnish only that portion of the
Confidential Information which it is advised by opinion of its counsel is
legally required to be furnished and shall exercise all commercially reasonable
efforts to obtain reliable assurance that confidential treatment shall be
accorded such Confidential Information, it being understood that such reasonable
efforts shall be at the cost and expense of the disclosing party whose
Confidential Information has been sought.
Section 4.5. Survival. The obligations under this Article 4 shall
--------
survive, as to any Party, until two (2) years following the date of termination
of this Agreement, and, as to any Controlled Affiliate of a Party, until two (2)
years following the earlier to occur of (A) the date that such Person is no
longer a Controlled Affiliate of a Party, or (B) the date of the termination of
this Agreement; provided that such obligations shall continue indefinitely with
respect to any trade secret or similar information which is proprietary to a
Party or its Controlled Affiliates and provides such Party or its Controlled
Affiliates with an advantage over its competitors.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSEE
Section 5.1. LICENSOR's Ownership. LICENSEE acknowledges LICENSOR's
--------------------
exclusive right, title and interest in and to the Licensed Mark and
acknowledges that nothing herein shall be construed to accord to LICENSEE any
rights in the Territory in the Licensed Mark except as expressly provided
herein. LICENSEE acknowledges that its use in the Territory of the Licensed Mark
shall not create in LICENSEE any right, title or interest in the Territory in
the Licensed Mark
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<PAGE>
and that all use in the Territory of the Licensed Mark and the goodwill
symbolized by and connected with such use of the Licensed Mark will inure solely
to the benefit of LICENSOR.
Section 5.2. No Challenge by LICENSEE. LICENSEE covenants
------------------------
that (i) LICENSEE will not at any time challenge LICENSOR's rights, title or
interest in the Licensed Mark (other than to assert the specific rights granted
to LICENSEE under this Agreement), (ii) LICENSEE will not do or cause to be done
or omit to do anything, the doing, causing or omitting of which would contest or
in any way impair or tend to impair the rights of LICENSOR in the Licensed Mark,
and (iii) LICENSEE will not represent to any third party that LICENSEE has any
ownership or rights in the Territory with respect to the Licensed Mark other
than the specific rights conferred by this Agreement.
ARTICLE 6
LICENSOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1. Title to the Licensed Mark. LICENSOR represents and
--------------------------
warrants that:
(a) LICENSOR has good title to the Licensed Mark and has the
right to grant the licenses provided for hereunder in accordance with the terms
and conditions hereof, free of any liabilities, charges, liens, pledges,
mortgages, restrictions, adverse claims, security interests, rights of others,
and encumbrances of any kind (collectively, "Encumbrances"), other than
Encumbrances which will not restrict or interfere in any material respect with
the exercise by LICENSEE of the rights granted to LICENSEE hereunder.
(b) There is no claim, action, proceeding or other litigation
pending or, to the knowledge of LICENSOR, threatened with respect to LICENSOR's
ownership of the Licensed Mark or which, if adversely determined, would restrict
or otherwise interfere in any material respect with the exercise by LICENSEE of
the rights purported to be granted to LICENSEE hereunder.
Except as expressly provided above in this Section 6.1, LICENSOR
makes no representation or warranty of any kind or nature whether express or
implied with respect to the Licensed Mark (including freedom from third party
infringement of the Licensed Mark).
The representations and warranties provided for in this Section 6.1
shall survive the execution and delivery of this Agreement.
Section 6.2. Other Licensees. In the event LICENSOR grants to
---------------
any third party any licenses or rights with respect to the Licensed Mark,
LICENSOR shall not, in connection with the grant of any such license or rights,
take any action, or suffer any omission that would adversely affect the
existence or validity of the Licensed Mark or conflict with the rights granted
to LICENSEE hereunder.
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<PAGE>
Section 6.3. Abandonment. LICENSOR covenants and agrees
-----------
that, during the term of this Agreement, it will not abandon the Licensed Mark.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES
Section 7.1. Representations and Warranties. Each Party hereby
------------------------------
represents and warrants to the other Party as follows:
(a) Due Incorporation or Formation; Authorization of Agreement.
----------------------------------------------------------
Such Party is a corporation duly organized or a partnership duly formed, validly
existing and, if applicable, in good standing under the laws of the jurisdiction
of its incorporation or formation and has the corporate or partnership power and
authority to own its property and carry on its business as owned and carried on
at the date hereof and as contemplated hereby. Such Party is duly licensed or
qualified to do business and, if applicable, in good standing in each of the
jurisdictions in which the failure to be so licensed or qualified would have a
material adverse effect on its financial condition or its ability to perform its
obligations hereunder. Such Party has the corporate or partnership power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate or partnership action. Assuming
the due execution and delivery by the other Party hereto, this Agreement
constitutes the legal, valid and binding obligation of such Party enforceable
against such Party in accordance with its terms, subject as to enforceability to
limits imposed by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and the availability of equitable remedies.
(b) No Conflict with Restrictions; No Default. Neither the execution,
-----------------------------------------
delivery and performance of this Agreement nor the consummation by such Party of
the transactions contemplated hereby (i) will conflict with, violate or result
in a breach of any of the terms, conditions or provisions of any law,
regulation, order, writ, injunction, decree, determination or award of any
court, any governmental department, board, agency or instrumentality, domestic
or foreign, or any arbitrator, applicable to such Party or any of its Controlled
Affiliates, (ii) will conflict with, violate, result in a breach of or
constitute a default under any of the terms, conditions or provisions of the
articles of incorporation, bylaws or partnership agreement of such Party or any
of its Controlled Affiliates or of any material agreement or instrument to which
such Party or any of its Controlled Affiliates is a party or by which such Party
or any of its Controlled Affiliates is or may be bound or to which any of its
material properties or assets is subject (other than any such conflict,
violation, breach or default that has been validly and unconditionally waived),
(iii) will conflict with, violate, result in a breach of, constitute a default
under (whether with notice or lapse of time or both), accelerate or permit the
acceleration of the performance required by, give to others any material
interests or rights or require any consent, authorization or approval under any
indenture, mortgage, lease agreement or instrument to which such Party or any of
its Controlled Affiliates is a party or by which such Party or any of its
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Controlled Affiliates is or may be bound, or (iv) will result in the
creation or imposition of any lien upon any of the material properties or assets
of such Party or any of its Controlled Affiliates, which in any such case could
reasonably be expected to materially impair such Party's ability to perform its
obligations under this Agreement or to have a material adverse effect on the
consolidated financial condition of such Party or its Parent.
(c) Governmental Authorizations. Any registration, declaration
---------------------------
or filing with, or consent, approval, license, permit or other authorization or
order by, any governmental or regulatory authority, domestic or foreign, that is
required to be obtained by such Party in connection with the valid execution,
delivery, acceptance and performance by such Party under this Agreement or the
consummation by such Party of any transaction contemplated hereby has been
completed, made or obtained, as the case may be.
(d) Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of such Party, threatened against or
affecting such Party or any of its Controlled Affiliates or any of their
properties, assets or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or foreign, or any
arbitrator which could, if adversely determined (or, in the case of an
investigation could lead to any action, suit or proceeding, which if adversely
determined could), reasonably be expected to materially impair such Party's
ability to perform its obligations under this Agreement or to have a material
adverse effect on the consolidated financial condition of such Party or its
Parent; and such Party or any of its Controlled Affiliates has not received any
currently effective notice of any default, and such Party or any of its
Controlled Affiliates is not in default, under any applicable order, writ,
injunction, decree, permit, determination or award of any court, any
governmental department, board, agency or instrumentality, domestic or foreign,
or any arbitrator, which default could reasonably be expected to materially
impair such Party's ability to perform its obligations under this Agreement or
to have a material adverse effect on the consolidated financial condition of
such Party or its Parent.
Section 7.2. Survival. The representations and warranties
--------
provided for under this Article 7 will survive the execution and delivery of
this Agreement.
ARTICLE 8
PROSECUTION OF INFRINGEMENT CLAIMS
Section 8.1. Notice and Prosecution of Infringement. LICENSEE
--------------------------------------
shall provide LICENSOR with prompt notice of any alleged, actual or threatened
infringement of the Licensed Mark within the Territory which relates to the
Wireless Exclusive Services of which LICENSEE becomes aware, and LICENSOR shall
provide LICENSEE with prompt notice of any alleged, actual or threatened
infringement of the Licensed Mark within the Territory which relates to the
Wireless Exclusive Services of which LICENSOR becomes aware. LICENSEE shall have
the obligation to take action to institute and prosecute any actions for any
such infringement (or alleged infringement) which relates to the Wireless
Exclusive Services, and otherwise to take appropriate action to protect
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and preserve the value of LICENSOR's rights in and to the Licensed Mark
as relates to the Wireless Exclusive Services. Any recoveries, damages and costs
recovered through such proceedings shall belong exclusively to LICENSEE, and
LICENSEE shall be solely responsible for all costs and expenses (including
attorney fees) of prosecuting such actions. LICENSOR shall provide LICENSEE with
all reasonably requested assistance in connection with such proceedings, and
LICENSEE shall reimburse LICENSOR's reasonable out-of-pocket costs of providing
such assistance. LICENSEE shall keep LICENSOR informed of the status of any such
proceeding and supply LICENSOR with any reasonably requested documents regarding
such proceeding. LICENSEE shall obtain LICENSOR's approval before entering into
any compromise, settlement or stipulation with respect to such proceeding, which
approval LICENSOR shall not unreasonably withhold.
Section 8.2. Other Infringement Actions. Notwithstanding
--------------------------
Section 8.1 above, each of LICENSOR and LICENSEE agrees that it will cooperate
in, and bear its own costs and expenses incurred in connection with, the
prosecution of any infringement action which relates to both the Wireless
Exclusive Services and other fields of use reserved to LICENSOR (including the
Non-Exclusive Services and the Wireless Exclusive Services (to the limited
extent permitted by Section 6 of the MajorCo Partnership Agreement)), and the
Parties will share any recoveries therefrom in proportion to the relative Loss
suffered by LICENSOR and LICENSEE, respectively, as a result of such
infringement.
Section 8.3. Right of LICENSOR to Join In LICENSEE's Actions. LICENSOR
-----------------------------------------------
will have the right to join any action brought by LICENSEE
pursuant to Section 8.1, at the expense of LICENSOR, and LICENSOR and LICENSEE
will cooperate in the conduct of such action and share any recoveries in
proportion to their relative shares of the expenses of the action.
Section 8.4. LICENSOR Right to Institute Infringement Actions.
------------------------------------------------
In the event LICENSEE does not take action to institute or prosecute an action
as contemplated in the second sentence of Section 8.1 or otherwise prevent the
continued infringement of the Licensed Mark, within sixty (60) days of the
giving of the notice described in the first sentence of Section 8.1, then
LICENSOR shall have the right to take such action (but shall not be obligated to
do so), either in its own name or, if necessary, in the name of LICENSEE.
LICENSEE shall be solely responsible for all costs and expenses (including
attorney fees) of prosecuting such proceeding and LICENSEE shall promptly pay
(following receipt of invoices therefor) to LICENSOR the amount of such
reasonable costs and expenses as incurred by LICENSOR. Any amounts recovered in
connection with such proceeding shall first be used to reimburse LICENSEE for
the costs of such action advanced to LICENSOR as required in the preceding
sentence, and any remaining amounts shall be divided between LICENSOR and
LICENSEE in proportion to the relative Loss suffered by LICENSOR and LICENSEE,
respectively, as a result of the infringement.
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ARTICLE 9
LICENSEE DEFENSE AND INDEMNIFICATION OF LICENSOR
Section 9.1. Indemnification. (a) Each Party hereby agrees to
---------------
indemnify the other Party against and agrees to hold it harmless from any Loss
incurred or suffered by such other Party arising out of or in connection with:
(i) the material breach of any representation or warranty
made by such Party in this Agreement; and
(ii) the material breach of any covenant or agreement by
such Party contained in this Agreement.
(b) In addition to the indemnification provided for in
Section 9.1(a), LICENSEE agrees to indemnify LICENSOR against and hold it
harmless from any Loss suffered or incurred by LICENSOR or its Controlled
Affiliates by reason of a third party claim arising out of or relating to (i)
the use of the Licensed Mark by LICENSEE (or any permitted sublicensee) or by
any Additional Licensee; or (ii) the marketing, promotion, advertisement,
distribution, lease or sale by LICENSEE (or any permitted sublicensee) or by any
Additional Licensee of any Authorized Products and Services, Related Equipment
or Premium and Promotional Items under the Licensed Mark pursuant to this
Agreement (or pursuant to any license granted by LICENSOR to an Additional
Licensee pursuant hereto), including unfair or fraudulent advertising claims,
warranty claims and product defect or liability claims, pertaining to the
Authorized Products and Services, Related Equipment or Premium and Promotional
Items. Notwithstanding the foregoing, LICENSEE will not be required under this
paragraph (b) to indemnify any Loss arising out of (A) LICENSEE's compliance
with any of the requirements imposed by LICENSOR under the Trademark Usage
Guidelines or Marketing Communications Guidelines, (B) a breach by LICENSOR of
any of its representations and warranties hereunder, or (C) any infringement of
the trademark rights of any third party arising out of the use of the Licensed
Mark; provided further that LICENSEE will not be obligated to indemnify under
this paragraph (b) any Loss to the extent that such Loss results from the
negligence, bad faith or willful misconduct of LICENSOR or any of its Controlled
Affiliates.
(c) In addition to the indemnification provided for in
Section 9.1(a), LICENSOR agrees to indemnify LICENSEE against and hold it
harmless from any Loss suffered or incurred by LICENSEE or its Controlled
Affiliates by reason of a third party claim arising out of or relating to the
use of the Licensed Mark by LICENSOR or any of its Controlled Affiliates;
provided that LICENSOR will not be obligated to indemnify any Loss to the extent
that such Loss results from the negligence, bad faith or wilfull misconduct of
LICENSEE or any of its Controlled Affiliates.
Section 9.2. Control of Litigation. Any Person asserting a
---------------------
right to indemnification under Section 9.1 shall so notify the other Party in
writing. If the facts giving rise to such indemnification shall involve any
actual or threatened claim or demand by or against a third party, the
indemnified Party shall give such notice promptly (but the failure to so notify
shall not relieve the
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indemnifying Party from any liability which it otherwise may have to
such indemnified Party hereunder except to the extent the indemnifying Party is
actually prejudiced by such failure to notify). The indemnifying Party shall be
entitled to control the defense or prosecution of such claim or demand in the
name of the indemnified Party, with counsel satisfactory to the indemnified
Party, if it notifies the indemnified Party in writing of its intention to do so
within twenty (20) days of its receipt of such notice, without prejudice,
however, to the right of the indemnified Party to participate therein through
counsel of its own choosing, which participation shall be at the indemnified
Party's expense unless (i) the indemnified Party shall have been advised by its
counsel that use of the same counsel to represent both the indemnifying Party
and the indemnified Party would present a conflict of interest (which shall be
deemed to include any case where there may be a legal defense or claim available
to the indemnified Party which is different from or additional to those
available to the indemnifying Party), in which case the indemnifying Party shall
not have the right to direct the defense of such action on behalf of the
indemnified Party, or (ii) the indemnifying Party shall fail vigorously to
defend or prosecute such claim or demand within a reasonable time. Whether or
not the indemnifying Party chooses to defend or prosecute such claim, the
Parties shall cooperate in the prosecution or defense of such claim and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may reasonably be
requested in connection therewith. The indemnifying Party may not control the
defense of any claim or demand that involves any material risk of the sale,
forfeiture or loss of, or the creation of any lien (other than a judgment lien)
on, any material property of the indemnified Party or could entail a risk of
criminal liability to the indemnified Party, without the consent of such
indemnified Party.
The indemnified Party shall not settle or permit the settlement
of any claim or action for which it is entitled to indemnification without the
prior written consent of the indemnifying Party (which shall not be unreasonably
withheld), unless the indemnifying Party shall have been entitled to assume the
defense thereof pursuant to this Section but failed to do so after the notice
and in the manner provided in the preceding paragraph.
The indemnifying Party may not without the consent of the
indemnified Party agree to any settlement (i) that requires such indemnified
Party to make any payment that is not indemnified hereunder, (ii) that does not
grant a general release to such indemnified Party with respect to the matters
underlying such claim or action, or (iii) that involves the sale, forfeiture or
loss of, or the creation of any lien on, any material property of such
indemnified Party. Nothing contained in this Section 9.2 is intended to
authorize the indemnifying Party, in connection with any defense or settlement
as to which it has assumed control, to take or refrain from taking, without the
consent of the indemnified Party, any action which would reasonably be expected
to materially impair the indemnification of such indemnified Party hereunder or
would require such indemnified Party to take or refrain from taking any action
or to make any public statement, which such indemnified Party reasonably
considers to materially adversely affect its interests.
Upon the request of any indemnified Party, the indemnifying
Party shall use reasonable efforts to keep such indemnified Party reasonably
apprised of the status of those aspects of such defense
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controlled by the indemnifying Party and shall provide such information
with respect thereto as such indemnified Party may reasonably request. If the
defense is controlled by the indemnified Party, such indemnified Party, upon the
request of the indemnifying Party, shall use reasonable efforts to keep the
indemnifying Party reasonably apprised of the status of those aspects of such
defense controlled by such indemnified Party and shall provide such information
with respect thereto as the indemnifying Party may reasonably request.
Notwithstanding any other provision of this Agreement (including
this Section 9.2) to the contrary, it is expressly understood and agreed that:
(i) If LICENSEE is required or elects to defend any claim,
demand, action, suit or proceeding that includes or involves any
claim relating to the Licensed Mark or which could affect the
Licensed Mark or LICENSOR's rights in and with respect to the
Licensed Mark (including any claim that the Licensed Mark
infringes the rights of a third party or that the Licensed Mark
is invalid or unenforceable in any respect), LICENSOR will have
the right, in its sole discretion, but not the obligation, to
assume control of and to direct the defense of, that portion of
any such claim, action, suit or proceeding relating to the
Licensed Mark, at the sole cost and expense of LICENSOR, and to
settle such claim, action, suit or proceeding. If LICENSOR does
not elect to control the defense of any such claim described in
this subparagraph (i), LICENSEE will keep LICENSOR reasonably
apprised of the status of such claim and will provide such
information with respect thereto as LICENSOR may reasonably
request; and
(ii) LICENSEE will not, without the prior written consent
of LICENSOR (in its sole discretion), settle or compromise, or
permit the settlement or compromise of, any claim, demand,
action, suit or proceeding relating to the Licensed Mark or which
could affect the Licensed Mark or LICENSOR's rights in and with
respect to the Licensed Mark (including any claim that the
Licensed Mark infringes the rights of a third party or that the
Licensed Mark is invalid or unenforceable in any respect);
provided, that nothing in this subparagraph (ii) is intended to
prevent LICENSEE from settling or compromising a claim, demand,
action, suit or proceeding brought by LICENSEE against a third
party infringer of the Licensed Mark in accordance with Section
8.1 if such settlement or compromise would not adversely affect
the Licensed Mark or LICENSOR's rights in and with respect to the
Licensed Mark.
Section 9.3. Taxes. LICENSEE shall be responsible for, and
-----
shall pay, all federal, state, county, municipal, or other fees and taxes of
whatever nature, including but not limited to sales, use and gross receipts, and
taxes, penalties and additions to tax and interest thereon, which are incurred
as the result of the license granted pursuant hereto or the exercise by LICENSEE
of the
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rights granted hereunder, excepting only taxes based on or measured by the net
income of LICENSOR.
ARTICLE 10
OBLIGATIONS/SETOFF
Section 10.1. Obligations/Setoff. The obligations of the Parties
------------------
as set forth in this Agreement shall be unconditional and irrevocable, and shall
not be subject to any defense or be released, discharged or otherwise affected
by any matter, including impossibility, illegality, impracticality, frustration
of purpose, force majeure, act of government, the bankruptcy or insolvency of
any Party hereto, and the obligations of each Party shall not be subject to any
right of setoff or recoupment which such Party may now or hereafter have against
the other Party.
ARTICLE 11
LIMITATIONS OF USE OF LICENSED MARK
Section 11.1. Restrictions on Use. LICENSEE shall not be
-------------------
permitted to make any use of the Licensed Mark in connection with products or
services other than the Authorized Products and Services, and as specifically
authorized in Sections 2.1(b) and (c) above with respect to Related Equipment
and Premium and Promotional Items.
Section 11.2. Adherence to Trademark Usage Guidelines. LICENSEE
---------------------------------------
shall comply with and adhere to Trademark Usage Guidelines for the depiction or
presentation of the Licensed Mark, as furnished by LICENSOR. LICENSEE will have
the right to display and promote the Licensed Mark with any other trademark or
service mark owned or licensed by LICENSEE, so long as such use is not likely to
cause confusion among such marks and is consistent with the Trademark Usage
Guidelines. LICENSOR will have the right to review and approve any advertising,
marketing or promotional materials to be prepared by LICENSEE which bear the
Licensed Mark in order to confirm that the Licensed Mark is being used correctly
and in accordance with the Trademark Usage Guidelines, and LICENSEE will, at the
request of LICENSOR, furnish samples of such marketing, advertising or
promotional materials to LICENSOR. Prior to LICENSEE depicting or presenting the
Licensed Mark on any type of marketing, advertising or promotional materials,
LICENSEE shall submit samples of such materials to LICENSOR in order to confirm
that the materials prepared by LICENSEE which bear the Licensed Mark were
prepared in accordance with the Trademark Usage Guidelines. LICENSOR shall have
fourteen (14) days from the date LICENSOR receives such materials to approve or
object to any such materials submitted to LICENSOR for review. In the event
LICENSOR does not object to such materials within such fourteen (14) day period,
such materials shall be deemed approved by LICENSOR. Thereafter, LICENSEE shall
not be obligated to submit to LICENSOR materials prepared in accordance with the
samples previously approved by LICENSOR and the Trademark Usage Guidelines;
provided, however, LICENSEE shall, at the
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reasonable request of LICENSOR, continue to furnish samples of
such marketing, advertising and promotional materials to LICENSOR from time to
time during the term hereof at the request of LICENSOR.
Section 11.3. Use of Similar Trademarks. LICENSEE shall not
-------------------------
use (a) any trademark which is confusingly similar to, or a colorable imitation
of, the Licensed Mark or any part thereof, or (b) any word, symbol, character,
or set of words, symbols, or characters, which in any language would be
identified as the equivalent of the Licensed Mark or which is otherwise
confusingly similar to, or a colorable imitation of, the Licensed Mark, whether
during the term of this Agreement or at any time following termination of this
Agreement. LICENSEE shall not knowingly engage in any conduct which may place
the Authorized Products and Services, the Licensed Mark or LICENSOR in a
negative light or context.
Section 11.4. Services of Public Figures. LICENSEE shall
--------------------------
obtain LICENSOR's prior written approval (which approval will not be
unreasonably withheld) before engaging the services of any celebrity or publicly
known individual for endorsement of any Authorized Products or Services or
Premium or Promotional Items.
ARTICLE 12
CONTROL OF BRAND IMAGE
Section 12.1. Exclusive Use of Licensed Mark. The Authorized
------------------------------
Products and Services shall be marketed by LICENSEE solely under the Licensed
Mark and, except as otherwise permitted under Sections 6.3(q) and (r) of the
MajorCo Partnership Agreement, Authorized Products and Services shall be
marketed by Additional Licensees and their respective authorized sub-agents and
distributors solely under the Licensed Mark; provided, however, that it is
understood and agreed that nothing in this Agreement is intended to preclude the
inclusion of the Authorized Products and Services under the Licensed Mark or,
under the circumstances permitted in the MajorCo Partnership Agreement, a
Permitted Brand (as defined in the MajorCo Partnership Agreement) as part of a
package of any products or services offered, promoted or packaged by Licensee or
an Additional Licensee or its respective authorized sub-agents or distributors
that bears a mark or brand other than the Licensed Mark.
Section 12.2. Consistency With Brand Image and Principles.
-------------------------------------------
LICENSEE shall use the Licensed Mark in a manner that is consistent with the
brand image and principles established by LICENSOR, and mechanics to ensure
consistency will be included in the Marketing Agreement.
Section 12.3. Management of Brand Image. LICENSOR shall be
-------------------------
responsible for the overall management of the brand image for the Licensed Mark.
All advertising, marketing and promotional materials using the Licensed Mark
prepared by LICENSEE shall, in addition to the provisions set forth in Section
12.2 above, comply with the Marketing Communications Guidelines (the "Marketing
Communications Guidelines") to be furnished by LICENSOR to LICENSEE as such
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Marketing Communications Guidelines may be amended and updated by
LICENSOR from time to time. Such Marketing Communications Guidelines shall
establish reasonable principles to be followed in the development of
advertising, marketing and promotional campaigns in order to ensure a consistent
and coherent brand image. All advertising, marketing and promotional campaigns
conducted by LICENSEE shall be conducted in a manner consistent with the
Marketing Communications Guidelines.
Section 12.4. Advertising Agencies; Promotions. LICENSEE and
--------------------------------
any Additional Licensee may select its own advertising agencies for development
of its advertising and promotional campaigns; provided, however, that all media
buys shall be coordinated by LICENSEE with the buying agency of LICENSOR.
LICENSEE and LICENSOR shall conduct ongoing reviews of upcoming advertising,
marketing and promotional campaigns of each Party and shall use good faith
efforts to coordinate their respective campaigns in a manner that will maximize
the advertising, marketing and promotional efforts of the Parties and be
consistent with the Marketing Communications Guidelines. LICENSEE and any
Additional Licensee shall not initiate any products or promotions under names
which are confusingly similar to any names of national product offerings or
promotions by LICENSOR. Neither LICENSOR nor any of its Controlled Affiliates
shall initiate any products or promotions under names which are confusingly
similar to any names of national product offerings or promotions by LICENSEE. In
addition, LICENSOR will use its commercially reasonable efforts to ensure that
no third party licensee under the Licensed Mark initiates any products or
promotions in the Territory under names which are confusingly similar to any
names of national product offerings or promotions by LICENSEE.
Section 12.5. Ownership of Advertising Materials. All agreements
----------------------------------
entered into by LICENSEE with advertising agencies shall provide that LICENSOR
shall own all advertising materials (including concepts, themes, characters and
the like) created or developed thereunder to the extent associated with the
Licensed Mark; provided, that any such use by LICENSOR of such materials is
consistent with the last sentence of Section 12.4 and LICENSOR's obligations
under the last sentence of Section 2.2; and provided further, that if LICENSOR
uses any such advertising materials in any advertising, marketing or promotional
campaigns, LICENSOR shall reimburse LICENSEE for the reasonable, out-of-pocket
costs incurred by LICENSEE in connection with the creation or development of the
materials used by LICENSOR. Subject to the terms and conditions set forth
herein, LICENSEE shall receive a perpetual, non-exclusive, royalty-free license
to use such materials in connection with advertising and promotional materials
developed by LICENSEE; provided, however, that the rights granted under such
perpetual license shall be limited solely to the use of such materials and shall
not extend the term of the license with respect to the Licensed Mark provided
for hereunder.
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ARTICLE 13
RELATIONSHIP OF PARTIES
Section 13.1. Relationship of Parties. It is the express intention of
-----------------------
the Parties that LICENSEE is and shall be an independent contractor and no
partnership shall exist between LICENSEE and LICENSOR pursuant hereto. This
Agreement shall not be construed to make LICENSEE the agent or legal
representative of LICENSOR for any purpose whatsoever (except as expressly
provided in Articles 8 and 9), and LICENSEE is not granted any right or
authority to assume or create any obligations for, on behalf of, or in the name
of LICENSOR (except as expressly provided in Articles 8 and 9). LICENSEE agrees,
and shall require its permitted sublicensees to agree, not to incur or contract
any debt or obligation on behalf of LICENSOR, or commit any act, make any
representation, or advertise in any manner that may adversely affect any right
of LICENSOR in or with respect to the Licensed Mark or be detrimental to
LICENSOR's image.
ARTICLE 14
TERM; TERMINATION; EFFECTS OF TERMINATION
Section 14.1. Term. Unless earlier terminated in accordance with the
----
terms set forth in this Article 14, this Agreement shall continue in full force
and effect until, and shall automatically terminate upon, the occurrence of a
Liquidating Event within the meaning of Section 14.1 of the MajorCo Partnership
Agreement. Upon the termination of this Agreement, the rights granted hereunder
to all permitted sublicensees of LICENSEE shall likewise terminate, and all
sublicenses shall so provide.
Section 14.2. Events of Termination. If any of the following events
---------------------
shall occur with respect to LICENSEE, each such occurrence shall be deemed an
"Event of Termination":
(a) Bankruptcy. The occurrence of a "Bankruptcy" with respect to
----------
LICENSEE. For this purpose, "Bankruptcy" means a "Voluntary Bankruptcy" or an
"Involuntary Bankruptcy." A "Voluntary Bankruptcy" means the inability of a
Party generally to pay its debts as such debts become due, or an admission in
writing by such Party of its inability to pay its debts generally or a general
assignment by such Party for the benefit of creditors; the filing of any
petition or answer by such Party seeking to adjudicate it a bankrupt or
insolvent, or seeking for itself any liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of such Party or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking, consenting to, or acquiescing in the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for such Party or for any substantial part of its property; or
corporate action taken by such Party to authorize any of the actions set forth
above. An "Involuntary Bankruptcy" means without the consent or acquiescence of
a Party, the entering of an order for relief or approving a petition for relief
or reorganization or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy, insolvency or similar statute, law or
regulation, or the filing
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of any such petition against such Party which petition shall not be dismissed
within ninety (90) days, or, without the consent or acquiescence of such Party,
the entering of an order appointing a trustee, custodian, receiver or liquidator
of such Party or of all or any substantial part of the property of such Party
which order shall not be dismissed within ninety (90) days.
(b) Breach of Agreements. LICENSEE fails to perform in accordance with
--------------------
any of the material terms and conditions contained herein in any material
respect.
(c) Material Misrepresentation. LICENSEE breaches any material
--------------------------
representation or warranty of LICENSEE made in Section 5.2 or Article 7 in any
material respect.
Section 14.3. LICENSOR'S Right to Terminate Upon Event of Termination.
-------------------------------------------------------
LICENSOR may, at its option, without prejudice to any other remedies it may
have, terminate this Agreement by giving written notice of such termination to
LICENSEE as follows: (a) immediately, upon the occurrence of any Event of
Termination pursuant to Section 14.2(a) with respect to LICENSEE; or (b) after
the expiration of thirty (30) days from LICENSEE's receipt of written notice
from LICENSOR of the occurrence of any Event of Termination pursuant to Sections
14.2(b) or 14.2(c), if such failure to perform or breach is then still uncured,
provided that if such failure to perform or breach is of such a nature that it
- - --------
cannot reasonably be cured within such thirty (30) day cure period, but is
curable and LICENSEE in good faith begins efforts to cure it within such thirty
(30) day period and continues diligently to do so, LICENSEE shall have a
reasonable additional period thereafter to effect the cure (which shall in no
event exceed an additional ninety (90) days); or (c) immediately upon the
repeated or continuing occurrence of Events of Termination pursuant to Section
14.2(b) (regardless of whether such continuing failures to perform or breaches
have been cured by LICENSEE in accordance with the provisions of clause (b) of
this Section 14.3).
Section 14.4. LICENSEE'S Right to Terminate. LICENSEE may, at its
-----------------------------
option, without prejudice to any other remedies it may have, terminate this
Agreement by giving written notice of such termination to LICENSOR as follows:
(a) immediately, in the event that LICENSOR abandons the Licensed Mark or
otherwise ceases to support the Licensed Mark in LICENSOR's business; or (b)
immediately, in the event of the occurrence of a Bankruptcy with respect to
LICENSOR; or (c) after the expiration of thirty (30) days from LICENSOR's
receipt of written notice from LICENSEE of the occurrence of a material breach
of LICENSOR's representations and warranties under Section 6.1, if such breach
is then still uncured, provided that if such breach is of such a nature that it
--------
cannot reasonably be cured within such thirty (30) day cure period, but is
curable and LICENSOR in good faith begins efforts to cure it within such thirty
(30) day period and continues diligently to do so, LICENSOR shall have a
reasonable additional period thereafter to effect the cure (which shall in no
event exceed an additional ninety (90) days); or (d) after the expiration of
thirty (30) days from LICENSOR's receipt of written notice from LICENSEE of the
occurrence of a breach by LICENSOR of its covenants under Sections 2.1, 2.2,
6.2, or 15.3, if such breach would restrict or interfere in any material respect
with the exercise by LICENSEE of the rights granted to LICENSEE hereunder and
such breach is then still uncured, provided that if such breach
--------
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is of such a nature that it cannot reasonably be cured within such thirty (30)
day cure period, but is curable and LICENSOR in good faith begins efforts to
cure it within such thirty (30) day period and continues diligently to do so,
LICENSOR shall have a reasonable additional period thereafter to effect the cure
(which shall in no event exceed an additional ninety (90) days); or (e)
immediately upon the repeated or continuing occurrence of breaches by LICENSOR
of its covenants under Sections 2.1, 2.2, 6.2, or 15.3, if such breaches would
restrict or interfere in any material respect with the exercise by LICENSEE of
the rights granted to LICENSEE hereunder, regardless of whether such continuing
breaches have been cured by LICENSOR in accordance with the provisions of clause
(d) of this Section 14.4.
Section 14.5. Right to Terminate upon Transfer of LICENSOR's Interest
-------------------------------------------------------
in LICENSEE. In addition to the rights specified in this Article 14, each of the
- - -----------
Parties will have the right to terminate this Agreement in the event that a
Controlled Affiliate of Sprint Parent (as defined in the MajorCo Partnership
Agreement) ceases to own any equity interest in LICENSEE or its successor, if a
Liquidating Event (within the meaning of the MajorCo Partnership Agreement) has
not otherwise occurred, subject to the right of LICENSEE to extend the term
hereof for one (1) year following receipt of notice from LICENSOR of its
election to terminate this Agreement pursuant to this Section 14.5.
Section 14.6. Effects of Termination. Upon the termination of this
----------------------
Agreement for any reason, all rights of LICENSEE in and to the Licensed Mark in
the Territory shall cease within thirty (30) days following the date on which
this Agreement terminates (except in the case of a termination resulting from an
Event of Termination described in Section 14.2(b) or (c), in which case such
rights to use the Licensed Mark will terminate immediately upon the date of
termination); provided, however, that LICENSEE may thereafter sell, transfer or
otherwise dispose of any Related Equipment and Premium and Promotional Items
that are then in LICENSEE's inventory (or which LICENSEE has purchased or is
then legally obligated to purchase) for an additional reasonable period not to
exceed three (3) months. LICENSEE's right of disposal under this Section 14.6
shall not prohibit LICENSOR from granting to third parties during the disposal
period licenses and other rights with respect to the Licensed Mark. The
provisions of Articles 4, 5, 6, 7 and 9 will survive any termination of this
Agreement.
ARTICLE 15
ALIGNMENT; SUBLICENSING
Section 15.1. LICENSEE Right to Assign. LICENSEE, without the prior
------------------------
written consent of LICENSOR (in its sole discretion), shall have no right to
assign any of its rights or obligations hereunder.
Section 15.2. LICENSOR Right to Assign the Licensed Mark. Nothing
------------------------------------------
herein shall be construed to limit the right of the LICENSOR to transfer or
assign its interests in the Licensed
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Mark, subject to the agreement of the assignee to be bound by the terms and
conditions of this Agreement.
Section 15.3. Licenses to Additional Licensees.
--------------------------------
(a) Sublicenses; Licenses to Additional Licensees. LICENSEE shall not
---------------------------------------------
sublicense (or attempt to sublicense) any of its rights hereunder without the
prior written consent of LICENSOR, in the sole discretion of LICENSOR; provided,
however, that LICENSOR shall, at the request of LICENSEE, grant to any
Additional Licensee proposed by LICENSEE, a non-exclusive license to (i) use the
Licensed Mark in connection with the marketing, promotion, advertisement,
distribution, lease and sale of Authorized Products and Services and Premium and
Promotional Items in the Territory, and (ii) market, promote, advertise,
distribute and resell and lease Related Equipment (including Related Equipment
bearing the Licensed Mark that has been manufactured by vendors authorized by
LICENSOR for such purpose) in connection with the marketing, promotion,
advertisement, distribution, lease or sale by such Additional Licensee of
Authorized Products and Services, and to furnish services relating to such
Related Equipment (including installation, repair and maintenance of Related
Equipment), under the Licensed Mark. For purposes hereof, the term "Additional
Licensee" shall include Wireless Affiliates, distributors and sales agents of
LICENSEE'S Authorized Products and Services and manufacturers of Related
Equipment and Premium and Promotional Items. LICENSOR shall grant such license
to any Additional Licensee so designated by LICENSEE, provided that such
Additional Licensee satisfies the applicable standards for Additional Licensees
established and revised from time to time by LICENSOR and then generally in
effect.
(b) Compliance by Additional Licensees. LICENSEE shall act as
----------------------------------
LICENSOR's agent in enforcing the terms and conditions of the licenses granted
by LICENSOR to Additional Licensees at the request of LICENSEE as contemplated
under Section 15.3(a) above. LICENSEE shall be responsible for ensuring
compliance by such Additional Licensees with the terms and conditions of such
licenses, and LICENSEE shall be responsible for the expenses incurred in
connection with ensuring such compliance. LICENSEE shall promptly notify
LICENSOR of any breach or alleged breach of the terms of the license by any such
Additional Licensee.
(c) Termination of Licenses to Additional Licensees. Subject to
-----------------------------------------------
Section 14.6, all licenses granted by LICENSOR to Additional Licensees as
contemplated under this Section 15.3 will terminate simultaneously with the
termination of this Agreement, and all such licenses shall so provide.
ARTICLE 16
MISCELLANEOUS
Section 16.1. Notices. Any notice, payment, demand, or communication
-------
required or permitted to be given by any provision of this Agreement shall be in
writing and mailed (certified
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or registered mail, postage prepaid, return receipt requested) or sent by hand
or overnight courier, or by facsimile (with acknowledgment received), charges
prepaid and addressed as specified in Exhibit C, or to such other address or
---------
number as such Party may from time to time specify by written notice to the
other Party in accordance with the provisions of this Section 16.1. All notices
and other communications given to a Party in accordance with the provisions of
this Agreement shall be deemed to have been given and received (i) four (4)
Business Days after the same are sent by certified or registered mail, postage
prepaid, return receipt requested, (ii) when delivered by hand or transmitted by
facsimile (with acknowledgment received and, in the case of a facsimile only, a
copy of such notice is sent no later than the next Business Day by a reliable
overnight courier service, with acknowledgment of receipt) or (iii) one (1)
Business Day after the same are sent by a reliable overnight courier service,
with acknowledgment of receipt.
Section 16.2. Binding Effect. Except as otherwise provided in this
--------------
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, transferees, and assigns.
Section 16.3. Construction. This Agreement shall be construed simply
------------
according to its fair meaning and not strictly for or against any Party.
Section 16.4. Time. Time is of the essence with respect to this
----
Agreement.
Section 16.5. Table of Contents; Headings. The table of contents and
---------------------------
section and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement.
Section 16.6. Severability. Every provision of this Agreement is
------------
intended to be severable. If any term or provision hereof is illegal, invalid or
unenforceable for any reason whatsoever, that term or provision will be enforced
to the maximum extent permissible so as to effect the intent of the Parties, and
such illegality, invalidity or unenforceability shall not affect the validity or
legality of the remainder of this Agreement. If necessary to effect the intent
of the Parties, the Parties will negotiate in good faith to amend this Agreement
to replace the unenforceable language with enforceable language which as closely
as possible reflects such intent.
Section 16.7. Further Action. Each Party, upon the reasonable request
--------------
of the other Party, agrees to perform all further acts and execute, acknowledge,
and deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the intent and purposes of this Agreement.
Section 16.8. Governing Law. The internal laws of the State of New
-------------
York (without regard to principles of conflict of law) shall govern the validity
of this Agreement, the construction of its terms, and the interpretation of the
rights and duties of the Parties.
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Section 16.9. Counterpart Execution. This Agreement may be executed in
---------------------
any number of counterparts with the same effect as if all the Parties had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
Section 16.10. Specific Performance. Each Party agrees with the other
--------------------
Party that the other Party would be irreparably damaged if any of the provisions
of this Agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.
Accordingly, in addition to any other remedy to which the nonbreaching Party may
be entitled, at law or in equity, the nonbreaching Party shall be entitled to
injunctive relief to prevent breaches of this Agreement and specifically to
enforce the terms and provisions hereof.
Section 16.11. Entire Agreement. The provisions of this Agreement set
----------------
forth the entire agreement and understanding between the Parties as to the
subject matter hereof and supersede all prior agreements, oral or written, and
other communications between the Parties relating to the subject matter hereof.
Section 16.12. Limitation on Rights of Others. Nothing in this
------------------------------
Agreement, whether express or implied, shall be construed to give any Party
other than the Parties any legal or equitable right, remedy or claim under or in
respect of this Agreement.
Section 16.13. Waivers; Remedies. The observance of any term of this
-----------------
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party or parties against which such waiver is to be asserted. Except as
otherwise provided herein, no failure or delay of any Party in exercising any
power or right under this Agreement 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 right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.
Section 16.14. Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each Party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court sitting in the County of New York or any Federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each Party hereby irrevocably and unconditionally agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court.
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(b) Each Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any New York State court sitting in the County of
New York or any Federal court sitting in the Southern District of New York. Each
Party hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such Party.
(c) Each Party irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to this Agreement, provided
--------
that such service shall be deemed to have been given only when actually received
by such Party. Nothing in this Agreement shall affect the right of a party to
serve process in any other manner permitted by law.
Section 16.15. Waiver of Jury Trial. Each Party waives, to the fullest
--------------------
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or relating to this
Agreement.
Section 16.16. Consents. Whenever this Agreement requires or permits
--------
consent by or on behalf of a Party, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in Section 16.13, with appropriate notice in accordance with Section 16.1 of
this Agreement.
-28-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have duly executed under seal and
delivered this Amended and Restated Sprint Trademark License Agreement, as of
the day and year first above written.
LICENSOR:
SPRINT COMMUNICATIONS COMPANY, L.P.
By: /s/ J. Richard Devlin
-------------------------------------------
Name:
Title:
LICENSEE:
MAJORCO, L.P.
By: /s/ Ronald T. LeMay
-------------------------------------------
Name:
Title:
-29-
<PAGE>
EXHIBIT A
---------
WIRELESS EXCLUSIVE SERVICES; NON-EXCLUSIVE
SERVICES; EXCLUDED BUSINESSES
-------------------------------------------
I. Wireless Exclusive Services
---------------------------
"Wireless Exclusive Services" shall mean all wireless communications
services that use radio spectrum for cellular, PCS, ESMR, paging, mobile
telecommunications and any other voice or data wireless services, whether fixed
or mobile, conducted in the United States of America, including all territories
and possessions thereof except for Puerto Rico, but shall not include the
provision of video wireless services, the provision of satellite or broadband
microwave transmission services, the Non-Exclusive Services and the Excluded
Businesses.
The Wireless Exclusive Services are not restricted by form (e.g., analog or
----
digital), method of origination (e.g., voice, data, telemetry, etc.), or the
----
content transmitted by the customer.
Wireless Exclusive Services will be provided by the Partnership only within
Wireless Local Service Areas except as permitted by Section III.1. of this
Schedule 1.10(a).
II. Non-Exclusive Services
----------------------
The following services are "Non-Exclusive Services":
1. Incidental services to the other services of the Partnership
including billing services and the installation, maintenance,
repair, sale or lease of customer premises equipment or customer
controlled equipment.
2. 500 Services.
3. Meeting services, such as video or other teleconferencing in
which the provider does not create nor resell the content of such
service.
4. Server-based content services customarily provided by local
exchange telephone companies, initially consisting of directory
assistance, operator service, time, temperature and similar
information services that are voice only and TDD relay. The
Partners may (by Unanimous Vote of the Partnership Board) revise
such list of server-based content services from time to time to
<PAGE>
reflect additional services customarily offered by local exchange
telephone companies.
5. Incidental data services to support signaling, billing and system
diagnostics and management for audio/video connectivity.
6. Incidental audio/video content (e.g., logos, customer service,
sales), as determined by a Unanimous Vote of the Partnership
Board, that are directly related to the provision of video
telephony.
7. Enhanced services such as voice mail, e-mail, facsimile store and
forward.
8. Video telephony enhanced services, such as video mail, store and
forward, and customer service, but excluding any such enhanced
service that is an Excluded Business (including, without
limitation, under any of clauses 3., 4. or 5. of Section III of
this Schedule 1.10(a)).
9. Construction and lease or sale of telecommunications facilities
to others.
10. The provision of products or services that are ancillary value-
added additions to a Wireless Exclusive Service and which does
not itself require an FCC license (including, but not limited to,
operator services, location services and weather, sports and
other information services).
III. Excluded Businesses
-------------------
The following activities are "Excluded Businesses":
1. Wireless calls originating in a Wireless Local Service Area and
terminating outside of such Wireless Local Service Area except:
a. If Wireless calls are generally subject to Equal Access but
the Partnership is permitted to provide and transport
Wireless calls on its interconnected wireless network
without regard to Equal Access boundaries, then the
Partnership may provide and transport such Wireless calls
using its interconnected wireless network.
b. If Wireless calls are not generally subject to Equal Access,
the Partnership is permitted to provide such inter-Wireless
Local Service Area call within the boundaries of an extended
calling area offering if the transport required for the
Partnership to provide the inter-Wireless Local Service Area
portion of the call is provided by Sprint
-2-
<PAGE>
Parent and its Controlled Affiliates pursuant to Section 8.4
of the Partnership Agreement (Preferred Provider); provided,
--------
however, to the extent that Sprint Parent and its Controlled
-------
Affiliates fail to provide to the Partnership such inter-
Wireless Local Service Area transport pursuant to Section
8.4 of the Partnership Agreement at a price equal to the
lower of (i) the best unit price at which comparable
transport services are then being made available by Sprint
Parent and its Controlled Affiliates to unaffiliated third
parties irrespective of volume, or (ii) the price at which
the Partnership could obtain such transport services from an
unaffiliated third party provider then the Partnership shall
be entitled to obtain such transport services from an
unaffiliated third party provider on terms no less favorable
to the Partnership than the terms offered to the Partnership
by Sprint Parent and its Controlled Affiliates. Thus, the
parties intend that if the Partnership has two Wireless
Local Service Areas and calls between such areas are not
subject to Equal Access, then the Partnership may acquire
interconnection between such areas in accordance with the
preceding sentence (and thereby provide such inter-Wireless
Local Service Area calls). Consequently the Partnership
could provide an extended calling area, but the facilities
of Sprint Parent (or, if applicable, such third party
provider) and its Controlled Affiliates would be used for
the transport required for the Partnership to provide the
inter-Wireless Local Service Area portion of the calls
between the Wireless Local Service Areas.
2. Intentionally omitted.
3. The provision of entertainment and, except to the limited extent
permitted under Non-Exclusive Services, other content-based
services.
4. The provision or transport of wireline services using
unidirectional transmission capacity.
5. The provision or transport of wireline services using unequal
bidirectional transmission capacity.
6. The self provisioning of transport of intra-Wireless Local
Service Area 75 Mile Plus Calls, whether by dedicated or switched
facilities, unless such transport can be accomplished at costs
less than the prices available from Sprint under Section 8.4 of
the Partnership Agreement.
-3-
<PAGE>
IV. Definitions
-----------
As used in this Exhibit:
1. The term "Equal Access" shall mean a requirement imposed by law
or regulation whereby an end user is granted the right to
designate the interexchange carrier of the end user's choice on a
presubscribed basis for calls traveling outside a local service
area within which the Partnership is not otherwise obligated to
provide the end user with a choice of interexchange carriers.
2. The term "ESMR" means any commercial mobile radio service, and
the resale of such service, authorized under the rules for
Specialized Mobile Radio services designated under Subpart S of
Part 90 of the FCC's rules in effect on the date hereof,
including the networking, marketing, distribution, sales,
customer interface and operations functions relating thereto.
3. The term "LATA" means a Local Access and Transport Area
established pursuant to the criteria set forth in Section 4(g) of
the MFJ, as approved in United States v. Western Electric
---------------------------------
Company, Inc., et al., 569 F. Supp. 990 (D.D.C. 1983), and as
-------------
amended by subsequent orders, regardless of whether the LATA
boundaries continue to be applied in future governmental
regulation of the wireline telecommunications industry. In the
event of the cessation of use of LATA boundaries by a
telecommunications governmental regulation or court order, then
the LATA boundaries in effect at the time of cessation of such
use shall be deemed to be the LATA boundaries for purposes of
this Agreement.
4. The term "PCS" means any radio communications service authorized
under the rules for personal communications services designated
as Subpart E of Part 24 of the FCC's rules in effect on the date
hereof, or any revision thereto or successor thereof which may be
in effect from time to time, including the network, marketing,
distribution, sales, customer interface and operations functions
relating thereto.
5. The term "Rate Center" means a point within a geographic area
designated by the Partnership as the Rate Center and shall be
used for measuring distances to and from such geographic area.
Each geographic area shall have one Rate Center. The Rate Center
shall be near the geographic center of the geographic area.
6. The term "75 Mile Plus Calls" means calls between end users whose
Rate Centers are greater than 75 miles apart.
-4-
<PAGE>
7. The term "Wireless" means telecommunications made through radio
spectrum for cellular, PCS, ESMR, paging and mobile
telecommunications.
8. The term "Wireless Local Service Area" shall mean the following:
a. If Partnership Wireless calls are subject to Equal Access
then the service area in which calls are not subject to
Equal Access, but if such service area would be smaller than
a LATA, then such Wireless Local Service Area will be the
LATA.
b. If Partnership Wireless calls are not subject to Equal
Access then the service area in which the Partnership can
complete calls on an interconnected wireless network. The
interconnected wireless network shall consist of the
wireless switches and the dedicated connections between such
switches which the Partnership may use to complete calls.
The Wireless Local Service Area may be expanded if the
initial Wireless Local Service Areas place the Partnership
at a competitive disadvantage.
-5-
<PAGE>
EXHIBIT B
---------
ARBITRATION PROCEDURES
Any dispute arising under Section 3.1 that has not been resolved by negotiation
within the time periods provided in Section 3.1(d) shall be finally settled by
arbitration conducted expeditiously in accordance with the rules of the American
Arbitration Association. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. 1 et seq. The location of the arbitration shall be New
------
York City, New York, or such other location agreed upon by the Parties. If the
Parties have not mutually agreed upon a single arbitrator prior to the delivery
of the Briefs in accordance with Section 3.1(d), then within ten (10) days
following delivery of the Briefs, each Party will designate in writing an
arbitrator who satisfies the requirements specified in Section 3.1(d). The two
arbitrators so designated by the Parties will meet within twenty (20) days
following delivery of the Briefs in order to select a single arbitrator who
satisfies the requirements specified in Section 3.1(d), and the arbitrator so
selected will act as the arbitrator as provided in Section 3.1(d).
<PAGE>
EXHIBIT C
---------
NOTICE PROVISIONS
Notices provided for in Section 16.1 of the Agreement shall be addressed as
follows:
(a) If to the LICENSOR, as follows:
Sprint Communications Company, L.P.
8140 Ward Parkway
Kansas City, Missouri 64114
Attention: Vice President-Law: Business
and Technology Group
Facsimile: 913-624-5234
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Attention: Bruce N. Hawthorne, Esq.
Facsimile: 404-572-5100
(b) If to the LICENSEE, as follows:
MajorCo, L.P.
c/o Sprint Telecommunications Venture
4717 Grand
Kansas City, MO 64112
Attention: General Counsel
Facsimile: 816-559-2281
<PAGE>
EXHIBIT 10.4
PAGING SALES AGENCY AGREEMENT
BETWEEN
MAJORCO, L.P.
AND
SPRINT COMMUNICATIONS COMPANY, L.P.
JANUARY 17, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS.............................................................. 1
1.1 General................................................................. 1
1.2 Rules of Construction................................................... 3
2. RELATIONSHIP OF PARTIES;................................................. 3
2.1 Agency.................................................................. 3
2.1.1 Appointment of Agent................................................ 3
2.1.2 Execution of Program Schedule....................................... 3
2.1.3 Customers........................................................... 4
2.1.4 Compliance.......................................................... 4
2.2 Program Schedule........................................................ 4
2.2.1 Contents............................................................ 4
2.2.2 Effect.............................................................. 5
2.3 Subagents............................................................... 5
2.4 Tariffs and Prices...................................................... 6
2.5 Marketing............................................................... 6
2.5.1 General............................................................. 6
2.5.2 Packaging........................................................... 6
2.5.3 Telemarketing....................................................... 6
2.5.4 Trademark........................................................... 7
2.5.5 Joint Marketing Agreement........................................... 7
2.6 Restriction on Agent Authority.......................................... 7
2.7 Outsourcing............................................................. 7
2.7.1 General............................................................. 7
2.7.2 Outsourcing to Agent................................................ 8
2.8 Order Acceptance and Cancellation; Discontinuation of Service........... 9
2.9 Cooperation............................................................. 9
2.10 Resale Agreement....................................................... 9
2.10.1 General............................................................ 9
2.10.2 Notice............................................................. 9
2.10.3 Vendor intellectual property....................................... 10
2.10.4 Misuse............................................................. 10
2.11 Access................................................................. 10
3. PAYMENTS................................................................. 11
3.1 Determination........................................................... 11
3.2 Commissions of Subagents................................................ 11
3.3 Sole Compensation....................................................... 11
3.4 Taxes................................................................... 12
4. ETHICAL CONDUCT AND RELATED COVENANTS.................................... 12
5. CONFIDENTIALITY; TRADE SECRETS........................................... 12
5.1 Restriction............................................................. 12
5.2 Use..................................................................... 12
5.3 Copying................................................................. 13
5.4 Care.................................................................... 13
5.5 Ownership............................................................... 13
5.6 Limitation.............................................................. 13
5.7 Relief.................................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.8Term.................................................................... 14
5.9Right to Disclose....................................................... 14
6.INSURANCE................................................................ 15
6.1Required Insurance of Agent............................................. 15
6.2Required Insurance of Principal......................................... 15
6.3Policies of Insurance................................................... 15
6.4No Limitation on Liability.............................................. 15
6.5Compliance.............................................................. 16
6.6Release................................................................. 16
7.REPRESENTATIONS AND WARRANTIES........................................... 16
7.1Due Incorporation or Formation; Authorization of Agreements............. 16
7.2No Conflict; No Default................................................. 17
7.3Litigation.............................................................. 17
8.LIABILITY OF PARTIES..................................................... 17
9.INDEMNIFICATION.......................................................... 18
9.1Indemnification by Agent................................................ 18
9.2Indemnification by Principal............................................ 19
9.3Procedure............................................................... 19
9.3.1 Notice........................................................... 19
9.3.2 Defense by Indemnitor............................................ 19
9.3.3 Defense by Indemnitee............................................ 20
9.3.4 Costs............................................................ 20
10.DISPUTE RESOLUTION....................................................... 20
10.1Negotiation............................................................. 20
10.2Arbitration............................................................. 21
10.3Attorneys and Intent.................................................... 21
11.TERMINATION.............................................................. 21
11.1Termination by Breach................................................... 21
11.2Voluntary Termination................................................... 22
11.3Transition Period....................................................... 22
11.4Effects of Termination.................................................. 23
11.5Sale of Customers....................................................... 23
12.GENERAL PROVISIONS....................................................... 24
12.1Notices and Inquiries................................................... 24
12.2Construction............................................................ 25
12.3Time.................................................................... 25
12.4Headings................................................................ 25
12.5Severability............................................................ 25
12.6Further Action.......................................................... 26
12.7Governing Law........................................................... 26
12.8Counterpart Execution................................................... 26
12.9Specific Performance.................................................... 26
12.10Entire Agreement....................................................... 26
12.11Parties in Interest; Limitation on Rights of Others.................... 27
12.12Assignability.......................................................... 27
12.13Waivers; Remedies...................................................... 27
12.14Force Majeure.......................................................... 27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
12.15 Continuation of Exclusivity........................................... 28
12.16 Consistency........................................................... 28
12.17 Disclosure............................................................ 28
</TABLE>
Exhibit A: Form of Program Schedule
Exhibit B: Senior Executives for Dispute Resolution
iii
<PAGE>
THIS PAGING SALES AGENCY AGREEMENT is entered into as of the 17th day of
January, 1996, by and between SPRINT COMMUNICATIONS COMPANY L.P., a Delaware
limited partnership ("Sprint"), and MAJORCO, L.P., a Delaware limited
partnership ("MajorCo").
1. DEFINITIONS
1.1 GENERAL
- - -----------
As used in this agreement, the following terms have the meanings set forth
below:
"AGENT" means Sprint.
"AGREEMENT" means this agreement, any exhibit to this agreement and any Program
Schedule made pursuant to this agreement.
"CUSTOMER" means customers of Principal for purposes of Paging Services. The
term does not include persons who are customers of Agent for non-Paging
Services.
"DISTRIBUTOR" means an Entity authorized by an Agent or Subagent pursuant to
Section 3 in this Agreement to market Paging Services directly to end-users.
"ENTITY" means any firm, corporation, company, partnership, group, trust, joint
venture, association, Governmental Authority or other legal entity or
organization.
"GOVERNMENTAL AUTHORITY" means any federal, state, or local court,
administrative agency, board, bureau, or commission or other governmental
department, authority, or instrumentality.
"LICENSED MARK" means the trademark "Sprint" together with the related "Diamond"
logo.
"MAJORCO AGREEMENT" means the Agreement of Limited Partnership of MajorCo, L.P.
"MARK" means the tradename, service mark, brand, or trademark of a Party.
"PAGING SERVICE" means that paging service identified as the paging service on a
Program Schedule pursuant to Section 2 in this Agreement.
"PARTY" means Sprint or MajorCo individually, and "PARTIES" means Sprint and
MajorCo collectively.
"PERSON" means any individual or Entity.
1
<PAGE>
"PRINCIPAL" means MajorCo.
"PROGRAM SCHEDULE" means a program schedule that is Issued pursuant to Section 2
in this Agreement.
"PROPRIETARY INFORMATION" as described in Section 5.1.
"RESALE AGREEMENT" means an agreement between a Vendor and Principal under
which Principal purchases paging services from Vendor for resale by Principal.
"RESPONSIBILITY" means a responsibility undertaken by Agent in connection with
its marketing of Paging Services offered by Principal under this Agreement.
"SPRINT TRADEMARK LICENSE AGREEMENT" means the Sprint Trademark License
Agreement of March 28, 1995, between Sprint and MajorCo.
"SUBAGENT" means an Entity authorized by an Agent to appoint Distributors and
to market Paging Services directly to end-users.
"SUBSIDIARY" of any Person means an Entity
(a) of which more than fifty percent (50%) of the outstanding shares or
securities are owned or controlled, directly or indirectly through one or
more Subsidiaries, by such Person, and the shares or securities so owned
entitle such Person and/or Subsidiaries to elect at least a majority of
the members of the board of directors or other managing authority of such
Entity or
(b) which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture or unincorporated association, but of
which more than fifty percent (50%) (by value) of the ownership interest is
owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person, or in which the ownership interest so owned
entitles such Person and/or Subsidiaries to make the decisions for such
Entity,
provided, in each case, that such Entity will be deemed to be a Subsidiary only
so long as such ownership or control exists.
"TARIFF" means a tariff filed with the Federal Communications Commission and/or
a state regulatory Commission and pursuant to which Principal offers Paging
Services.
"TRANSITION PERIOD" as described in section 11.3.
"VENDOR" means a provider of paging service to Principal.
2
<PAGE>
1.2 RULES OF CONSTRUCTION
- - -------------------------
The definitions in this Agreement apply equally to both the singular and plural
forms of the terms defined.
Whenever the context may require, any pronoun includes the corresponding
masculine, feminine and neuter formS.
The words "include", "includes" and "including" are deemed to be followed by the
phrase "without limitation".
Unless the context otherwise requires, any references to any agreement or other
instrument or statute or regulation are to it as amended and supplemented from
time to time (and, in the case of a statute or regulation, to any corresponding
provisions of successor statutes or regulations).
Any reference in this Agreement to a "day" or number of "days" is a reference to
a calendar day or number of calendar days.
If any action or notice is to be taken or given on or by a particular calendar
day, and such calendar day is not a business day for Principal then such action
or notice will be deferred until, or may be taken or given on, the next business
day.
2. RELATIONSHIP OF PARTIES;
AGENT RESPONSIBILITIES
2.1 AGENCY
- - ----------
2.1.1 APPOINTMENT OF AGENT
MajorCo ("Principal") appoints Sprint ("Agent") to be its agent for the sale of
Paging Services. The Paging Services are all of the Paging Services that
MajorCo, now or in the future, has the right to resell as a reseller pursuant to
a paging resale agreement between MajorCo and any paging company and which
agreement is identified on a Program Schedule, as described in section 11.3
2.1.2 EXECUTION OF PROGRAM SCHEDULE
Concurrently with the execution of this Agreement, the Parties will execute an
initial Program Schedule with respect to those Paging Services that MajorCo has
the right to resell as of the date of this Agreement. If MajorCo subsequently
obtains the right to sell additional Paging Services (e.g. 2-way paging and
voice paging) then Majorco and Sprint will use commercially reasonable efforts
to negotiate a Program Schedule covering such additional Paging Services. The
parties may
3
<PAGE>
designate on the Program Schedule certain paging network features that Agent may
provide rather than using the paging network feature as provided by Principal.
2.1.3 CUSTOMERS
All Customers obtained by Agent are the Customers of Principal. Upon termination
of this Agreement Agent does not have the right to take the Customers, rather
the Customers remain the Customers of Principal. The Agent and Principal may
communicate with Customers at such time and on such conditions as each
separately determines. Agent and Principal will use commercially reasonable
efforts to coordinate their communications to the Customer to ensure the
Customer is receiving a consistent message regarding Paging Services. Agent and
Principal will send to the other a copy of any communication directed to
Customers and relating to paging services, including copies of print ads, tapes
of commercials, and samples of mailing insert within a reasonable time after the
communication with the Customer.
2.1.4 COMPLIANCE
Agent agrees to comply with all procedures and operating guidelines established
by Principal, including procedures required by law, contract or policies adopted
by Principal (e.g. advising Customers of the terms and conditions of the
limitations of liability relevant to the Paging Services or pre-approval of
marketing packets). Principal will notify Agent in writing 30 business days in
advance of the adoption, modification, or termination of any such procedure and
operating guideline, unless a shorter time period is required by law.
2.2 PROGRAM SCHEDULE
- - --------------------
2.2.1 CONTENTS
Program Schedules will be in the form of Exhibit A. The terms and conditions
included in the Program Schedule will include the following:
a) the specific Paging Services;
b) the marketing and sales vehicles in addition to those authorized in
Section 2.5 through which the Paging Services may be offered;
c) the Tariff under which, or price at which, the Paging Services are to
be offered by Agent;
4
<PAGE>
d) the specific Responsibilities, in addition to those provided in this
Agreement, that the Agent is to perform in connection with the
marketing and sales of such Paging Services;
e) the payments to be made between Principal and Agent with respect to
the agency relationship and any other services provided by one to the
other pursuant to this Agreement;
f) the duration of the Program Schedule. If no duration is indicated
then the Program Schedule will continue until this Agreement is
terminated;
g) the redacted Resale Agreement.
The Program Schedule may specify additional terms and conditions, including
without limitation restrictions on the Agent's authority with respect to
Customers, territories, sales vehicles, sales channels and appointment of
Subagents and Distributors.
2.2.2 EFFECT
If there are any inconsistencies between the Resale Agreement and the Program
Schedule of which the Resale Agreement is a part, then the terms and conditions
of the Resale Agreement are controlling. If there are any inconsistencies
between the Program Schedule (as modified to be consistent with the Resale
Agreement) and this Agreement, then the terms and conditions of the Program
Schedule are controlling.
2.3 SUBAGENTS
- - -------------
Unless expressly restricted from doing so in a Program Schedule, Agent has
authority to appoint any of its Subsidiaries as Subagents and Distributors to
market and sell Paging Services, subject to the provisions of this Agreement.
Agent is responsible for ensuring compliance by its Subagents and Distributors
with all the terms and conditions of this Agreement and the applicable Program
Schedule. Agent does not have authority to appoint persons other than its
Subsidiaries as Subagents or Distributors, unless expressly authorized to do so
in a Program Schedule.
5
<PAGE>
2.4 TARIFFS AND PRICES
- - ----------------------
Paging Services offered by Principal pursuant to Tariff will be marketed by
Agent pursuant to the appropriate Tariff. Paging Services not offered by
Principal pursuant to Tariff will be marketed by Agent pursuant to a price
schedule to be mutually agreed upon. Each Party will use commercially reasonable
efforts in negotiating the price schedule. If Principal and Agent cannot agree
upon a price schedule, then Principal may establish a price schedule and such
price schedule is subject to change, modification, or withdrawal by Principal
upon 120 days prior written notice by Principal to Agent, except as otherwise
provided in a Program Schedule or as the Parties may otherwise agree. Tariffs
are subject to change, modification, or withdrawal by Principal upon 120 days
prior written notice by Principal to Agent, except as otherwise provided in a
Program Schedule or as the Parties may otherwise agree.
2.5 MARKETING
- - -------------
2.5.1 GENERAL
Agent may market the Paging Services by means of any of its existing, directly
owned marketing and sales vehicles which Agent chooses, including
outbound/inbound telemarketing, billing inserts, direct mail, direct sales,
employee programs, advertising and promotions. Agent is responsible for all
expenses and obligations that it incurs as a result of its efforts to market
Paging Services.
Without Principals prior written consent, which will not be unreasonably
withheld, Agent will not use any other marketing and sales vehicles ( e.g.
retail channels or third party affinity programs like USAA) to market the Paging
Services, except that Agent may use existing affinity channels (e.g. USAA) as of
the date of this Agreement. The Principal may withhold the consent only to
ensure effective market coordination or to comply with other obligations or
restrictions imposed by other contracts to which Principal is a party and in any
event such consent will not be unreasonably withheld.
2.5.2 PACKAGING
Agent may package any of the Paging Services with any of the Agent's long
distance services, including personal number service (a/k/a "PNS").
2.5.3 TELEMARKETING
Agent may solicit orders by means of telemarketing. Agent must coordinate its
activities with Principal to ensure that activation of Paging Services are in
6
<PAGE>
accordance with federal and state law. Principal may confirm compliance with
this section including, without limitation, contacting Customers solicited by
Agent.
2.5.4 TRADEMARK
All advertising, marketing, and promotional activities undertaken by Agent with
respect to Paging Services, and all other usage by Agent of trademarks, service
marks, brands, and tradenames owned by Principal, will be in accordance with the
terms of the Sprint Trademark License Agreement.
2.5.5 JOINT MARKETING AGREEMENT
The parties acknowledge that the parties are negotiating with the other partners
of MajorCo, L.P. a Joint Marketing Agreement that will define the manner in
which the parties to that agreement market various telecommunications products.
To the extent the Joint Marketing Agreement once effective contains terms
inconsistent with the terms of this Agreement then the Joint Marketing Agreement
will control and this Agreement will be deemed amended to conform to the Joint
Marketing Agreement as of the date the Joint Marketing Agreement becomes
effective.
2.6 RESTRICTION ON AGENT AUTHORITY
- - ----------------------------------
Agent has no authority to act on behalf of Principal, nor may Agent bind
Principal in any manner whatsoever, except as expressly provided in this
Agreement and the Program Schedules. Principal will incur no obligation to
employees or agents utilized by Agent to market Paging Services offered by
Principal and such persons will at all times remain employees and agents of
Agent. Agent will function as a non-exclusive, independent contractor and will
use reasonable commercial efforts to perform its Responsibilities. Agent will
not act outside the scope of its authority granted in this Agreement.
2.7 OUTSOURCING
- - ---------------
2.7.1 General
Principal may in its sole discretion contract with third-parties to provide
various aspects of the operation of the paging business, including activation,
fulfillment, billing, customer service, collections, and sales and marketing.
Principal may make such contracts exclusive or non-exclusive. Principal will
remain liable for all obligations outsourced to third parties. All materials
developed for such operations, including without limitation collateral
materials, scripts, marketing pieces, screen designs, and any intellectual
property remains the property of Principal regardless of whether Principal or
Agent directed the development of such material. Principal
7
<PAGE>
may provide such material to Agent and any other agents of Principal on the cost
basis described in Article 3.
2.7.2 OUTSOURCING TO AGENT
At present Principal is outsourcing all operations, except certain sales and
marketing operations, to the Vendor. Principal agrees to consider a written
proposal from Agent to provide the operations presently outsourced to the
Vendor. If the proposal is to be approved by Principal it must provide at least
the following:
a) specification of the operations to be performed by Agent,
b) terms and conditions must be commercially reasonable and the terms
and conditions must be at least as favorable to Principal as
Principal may obtain from the current vendor of such outsourced
operations (e.g. performance standards must be at least what
Principal receives from the current vendor and pricing would be the
same or less than that of the current vendor)
c) Principal will have the right to terminate the outsourcing upon 180
days notice to Agent.
d) the outsourced services will be on a non-exclusive basis (i.e. Agent
can have other vendors for the same operation such as permitting
cable companies to bill the Customers they obtain for Principal).
e) the one-time and ongoing costs to Principal and a statement of the
benefits to Principal from the outsourcing.
f) a transition plan and timeline for assumption of functionality by
Agent.
g) a statement of the proposed remedies if Agent fails to meet the
timeline or provide the functionality.
Principal will respond to Agent's completed proposal within 30 days of delivery
to Principal. Principal may accept, reject, or propose revisions to the
proposal. If the proposal is accepted then Principal and Agent will use
commercially reasonable efforts to negotiate a definitive contract for the
outsourcing within 30 days. The timeline will be adjusted to reflect the time
taken to negotiate the contract. Any outsourcing contract between Principal and
Agent will contain such other terms and conditions as the parties agree.
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2.8 ORDER ACCEPTANCE AND CANCELLATION; DISCONTINUATION OF SERVICE
- - -----------------------------------------------------------------
Orders submitted by Agent are not binding until accepted by Principal. Principal
may, in its sole discretion, reject any order solicited or taken by Agent.
Principal may discontinue offering or selling any Paging Service without
liability to Agent, if Principal voluntarily terminates this Agreement in
accordance with Article 11.
2.9 COOPERATION
- - ---------------
Agent must:
a) notify its sales force to cease sales efforts immediately upon
receiving written notice from Principal of termination of this
Agreement;
b) cooperate with Principal to resolve customer service problems
consistent with Principal's customer service policy;
c) designate, within five (5) business days after execution of this
Agreement, a program manager to represent Agent in all Agent's
dealings with Principal; and
d) Agent must submit any reports reasonably requested by Principal.
2.10 RESALE AGREEMENT
- - ---------------------
2.10.1 GENERAL
Agent will take no action that if taken by Principal would be contrary to any
provision of the Resale Agreement.
2.10.2 NOTICE
If the Resale Agreement requires a notice to be given by Principal regarding the
occurrence of an event, then if the event occurs with respect to Agent, Agent
must give notice of the event to Principal, in the manner and in the time
periods provided in this schedule. An event includes, without limitation, the
providing of information necessary for Principal to make required reports to
Vendor.
If the Resale Agreement requires a notice to be given by Principal to Vendor
within a specified time period and if the event requiring notice by Principal
to Vendor occurs to Agent, then Agent must give notice to Principal of such
event within a
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time period equal to one-half the time period available for notice from
Principal to Vendor.
2.10.3 VENDOR INTELLECTUAL PROPERTY
Agent recognizes the right, title and interest of the Vendor and its affiliated
and associated companies to all service marks, logos, trademarks and trade names
used on or in connection with their business activities and agrees not to engage
in any activities or commit any acts, directly or indirectly, which may contest,
dispute or otherwise impair such right, title and interest. Agent agrees that
all its uses of such service marks, logos, trademarks and trade names of the
Vendor must only be according to reasonable and uniform standards furnished by
the Principal, and must be subject to prior written approval by the Principal
which approval may be revoked at any time upon 15 days' notice, and must be in
such manner as to inure at all time to the benefit of the Principal and its
Vendor.
2.10.4 MISUSE
Agent must not misuse the Paging Services. Misuse of Paging Services includes
intentionally and wrongfully obtaining Paging Services by rearranging, tampering
or making unpermitted connection with any facilities of Vendor, or the use of a
PIN for more than one pager unless such PIN is used for a pre-established group
call and Principal is appropriately billed for the group-call format. Misuse
does not include use of the PIN number for Principal's or Agents other services
to a Subscriber. Any misuse of Services by Customer is a material breach of this
Agreement.
2.11 ACCESS
- - -----------
Agent may obtain access and associated telephone numbers for Customers it has
acquired for Principal, provided the following conditions are met:
a) the access and telephone numbers are obtained from a reputable
telecommunications company with a history of providing high quality
service;
b) the access and telephone numbers are obtained at the sole cost and
expense of the Agent; and
c) the agreement for access and telephone number is in writing and
provides that it is assignable by Agent to Principal without the
prior consent of the telephone provider.
Agent agrees that if for whatever reason it ceases to be the agent of Principal
and the Customers are to remain the Customers of Principal, then Agent will
assign the
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agreement for access and telephone numbers to Principal as soon as commercially
reasonable to facilitate the Customers remaining Customers of Principal and in
no event later than Agent ceasing to be an agent of Principal.
3. PAYMENTS
3.1 DETERMINATION
- - -----------------
Agent must pay Principal for Principal's direct costs relating to the provision
of Paging Services pursuant to this Agreement. Principal will provide Agent with
documentation sufficient to show the cost was incurred by Principal and the
amount of the cost. Direct costs include without limitation all amounts due from
Principal to a Vendor, employee expense (including base salary, short term
compensation if any, and cost of benefits), sales, use and excise taxes,
telecommunications charges, cost of lost pagers and mail expense.
Principal may establish from time to time accounting procedures for determining
the direct costs. Such procedures will be binding upon Agent so long as the
procedure is commercially reasonable, or in accordance with industry custom and
usage, or is required in order for Principal to maintain its books and records
in accordance with generally accepted accounting practices.
All costs that are incurred with a third party by Principal and must be paid by
Agent will be paid by Agent without reduction or offset and paid in a timely
fashion in accordance with any Agreement between the third party and Principal.
If Agent disagrees with such cost Agent may submit to Principal an invoice
requesting reimbursement of the contested portion of the payment made to the
third party. If the Parties cannot agree on the amount of the reimbursement, if
any, then the matter will be resolved pursuant to the dispute resolution
mechanisms provided in this Agreeement.
3.2 COMMISSIONS OF SUBAGENTS
- - ----------------------------
Agent will establish the commission structure and level for its Subagents and
Distributors. Agent is responsible for paying to Subagents and Distributors
their commissions.
3.3 SOLE COMPENSATION
- - ---------------------
Agent must collect for Principal the revenues from the Customers. Agents sole
compensation with respect to Paging Services is the difference between the
revenue collected and the payments made to Principal pursuant to Section 2.1 and
any applicable Program Schedule. In no event will Agent additionally receive
separate
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<PAGE>
reimbursement of costs incurred in connection with its marketing and sale of
Paging Services.
3.4 TAXES
- - ---------
Agent is responsible for payment of all taxes due as a result of payments made
to Agent by Principal. Principal is responsible for the payment of all excise,
sales and use taxes arising with respect to sales of Paging Services to
Customers. If requested by Principal, Agent will file all excise, sales and use
tax returns relating to the Paging Services for Principal.
4. ETHICAL CONDUCT AND RELATED COVENANTS
Each Party must perform its obligations under this Agreement in a legal,
ethical and professional manner. Neither Party will commit any act that would
reflect unfavorably on the other. Neither Party will misrepresent Paging
Services nor the prices of Paging Services. Agent will not sponsor or
participate in any pyramid or illegal multilevel marketing system. Each Party
will require its respective employees and agents to comply with all terms of
this Agreement. Agent will not package any of its business activities in such a
manner that Customers must pay any fees, initiation charges or minimums as an
Agent-imposed charge for Paging Services, except with the prior written consent
of Principal.
5. CONFIDENTIALITY; TRADE SECRETS
5.1 RESTRICTION
- - ---------------
All information, including without limitation all oral, visual and written
information, including all information disclosed prior to the date of this
Agreement pursuant to the negotiations between the parties, disclosed to the
other party is deemed to be confidential, restricted and proprietary to the
disclosing party (the "Proprietary Information").
5.2 USE
- - -------
Each party agrees to use the Proprietary Information received from the other
party only for the purpose of this Agreement. No other rights, and particularly
licenses, to trademarks, inventions, copyrights, patents, or any other
intellectual property rights are implied or granted under this Agreement or by
the conveying of Proprietary Information between the parties.
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5.3 COPYING
- - -----------
Proprietary Information supplied is not to be reproduced in any form except as
required to accomplish the intent of this Agreement.
5.4 CARE
- - --------
The receiving party must provide the same care to avoid disclosure or
unauthorized use of the Proprietary Information as it provides to protect its
own similar proprietary information. All Proprietary Information must be
retained by the receiving party in a secure place with access limited to only
such of the receiving party's employees, lenders or agents who need to know such
information for purposes of this Agreement and to such third parties as the
disclosing party has consented to by prior written approval.
5.5 OWNERSHIP
- - -------------
All Proprietary Information, unless otherwise specified in writing, (a) remains
the property of the disclosing party, (b) must be used by the receiving party
only for the purpose intended, and (c) such Proprietary Information, including
all copies of such information, must be returned to the disclosing party or
destroyed after the receiving party's need for it has expired or upon request of
the disclosing party, and, in any event, upon termination of this Agreement. At
the request of the disclosing party, the receiving party will furnish a
certificate of an officer of the receiving party certifying that Proprietary
Information not returned to disclosing party has been destroyed.
5.6 LIMITATION
- - --------------
The parties agree that the term "Proprietary Information" does not include
information which:
(a) has been or may in the future be published or is now or may in the
future be otherwise in the public domain through no fault of the
receiving party;
(b) prior to disclosure pursuant to this Agreement is properly within
the legitimate possession of the receiving party;
(c) subsequent to disclosure pursuant to this Agreement is lawfully
received from a third party having rights in the information without
restriction of the third party's right to disseminate the information
and without notice of any restriction against its further disclosure;
13
<PAGE>
(d) is independently developed by the receiving party through parties
who have not had, either directly or indirectly, access to or knowledge
of such Proprietary Information; or
(e) is obligated to be produced under order of a court of competent
jurisdiction or other similar requirement of a governmental agency, so
long as the party required to disclose the information provides the
other party with prior notice of such order or requirement.
5.7 RELIEF
- - ----------
Because damages may be difficult to ascertain, the parties agree that in the
event of violation of this Article, without limiting any other rights and
remedies of each other, an injunction may be sought against the party who has
breached or threatened to breach this Agreement.
5.8 TERM
- - --------
A party must not disclose the Proprietary Information for a period which is
the longer of (a) three years from the date of disclosure or (b) the date of
termination of this Agreement.
5.9 RIGHT TO DISCLOSE
- - ---------------------
Each party warrants that it has the right to disclose all Proprietary
Information which it has disclosed to the other party pursuant to this
Agreement, and each party agrees to indemnify and hold harmless the other from
all claims by a third party related to the wrongful disclosure of such third
party's information. Except as expressly provided otherwise in this Agreement,
neither party makes any representation or warranty, express or implied, with
respect to any Proprietary Information.
14
<PAGE>
6. INSURANCE
6.1 REQUIRED INSURANCE OF AGENT
- - -------------------------------
Agent must, during the term of this Agreement and at its sole expense, obtain
and keep in force, the following insurance:
(a) Commercial General Liability Coverage, including personal injury,
bodily injury, property damage, operations hazard, independent
contractor coverage, contractual liability, and products and completed
operations liability, in limits not less than $5,000,000 for each
occurrence (combined single limit); with Agent named as insured in the
policy and Principal named as additional insured in the policy as their
respective interests may appear; and
(b) Worker's Compensation and Employer's Liability insurance.
6.2 REQUIRED INSURANCE OF PRINCIPAL
- - -----------------------------------
Principal must, during the term of this Agreement and at its sole expense,
obtain and keep in force, the following insurance:
Commercial General Liability Coverage, including personal injury, bodily
injury, property damage, operations hazard, independent contractor
coverage, contractual liability, and products and completed operations
liability, in limits not less than $5,000,000 for each occurrence (combined
single limit) with Principal named as insured in the policy and Agent named
as additional insured in the policy as their respective interests may
appear.
6.3 POLICIES OF INSURANCE
- - -------------------------
All required insurance policies must be taken out with reputable national
insurers that are licensed to do business in the jurisdiction where the Agent is
doing business. Each party agrees that certificates of insurance will be
delivered to the other party as soon as practicable after the execution of this
Agreement. All policies must contain an undertaking by the insurers to notify
the other party in writing not less than 15 days before any material change,
reduction in coverage, cancellation, or termination of the insurance.
6.4 NO LIMITATION ON LIABILITY
- - ------------------------------
The provision of insurance required in this Agreement will not be construed to
limit or otherwise affect the liability of any party to the other party.
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<PAGE>
6.5 COMPLIANCE
- - --------------
Agent will not do or permit to be done anything that:
(a) is prohibited by any insurance policy carried by Principal at the
time of execution of this Agreement, or
(b) is prohibited by any insurance policy carried by Agent, or
(c) will in any way increase the existing premiums for any such policy.
6.6 RELEASE
- - -----------
Principal and Agent release each other, and their respective principals,
employees, representatives and agents, from any claims for damage to any person
or property, that are caused by, or result from, risks insured against under any
insurance policies carried by the parties and in force at the time of any such
damage. Each party will cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against the other party in connection with any damage covered by any policy.
Neither party will be liable to the other for any damage caused by fire or any
of the risks insured against under any insurance policy required by this
Section.
7. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other that:
7.1 DUE INCORPORATION OR FORMATION; AUTHORIZATION OF AGREEMENTS
- - ---------------------------------------------------------------
The Party is a limited partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. The Party has
the full power and authority to own its property and carry on its business as
owned and carried on at the date of this Agreement. The Party has the full power
and authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement by the
Party has been duly authorized by all necessary partnership action. This
Agreement constitutes the legal, valid and binding obligation of the Party,
enforceable in accordance with its terms, subject as to enforceability limits
imposed by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and the availability of equitable remedies.
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7.2 NO CONFLICT; NO DEFAULT
- - ---------------------------
Neither the execution, delivery and performance of this Agreement nor the
consummation by the Party of the transactions contemplated hereby
(i) will conflict with, violate or result in a breach of any of the
terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any Governmental Authority
or any arbitrator, applicable to such Party,
(ii) will conflict with, violate, result in a breach of or constitute a
default under any of the terms, conditions or provisions of the
certificate or articles of incorporation or bylaws (or other governing
documents) of such Party or of any material agreement or instrument to
which such Party is or may be bound or to which any of its material
properties or assets is subject, or
(iii) will conflict with, violate, result in a breach of, constitute a
default under (whether with notice or lapse of time or both), accelerate
or permit the acceleration of the performance required by, give to
others any interests or rights or require any consent, authorization or
approval under any indenture, mortgage, lease agreement or instrument to
which such Party or by which such Party is or may be bound.
7.3 LITIGATION
- - --------------
There are no actions, suits, proceedings or investigations pending or, to the
knowledge of the Party, threatened against or affecting the Party or any of its
properties, assets or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or foreign, or any
arbitrator which could, if adversely determined (or, in the case of an
investigation, could lead to any action, suit or proceeding, which if adversely
determined could) reasonably be expected to have a material adverse effect on
the Party's ability to perform its obligations under this Agreement, except
those described in the Securities Exchange Commission filings of the Party's
ultimate parent entity. The Party has not received any currently effective
notice of any default. The Party is not in default under any applicable order,
writ, injunction, decree, permit, determination or award of any Governmental
Authority or any arbitrator which could reasonably be expected to have a
material adverse effect on the Party.
8. LIABILITY OF PARTIES
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL,
EXEMPLARY OR CONSEQUENTIAL DAMAGES, OR LOSS OF PROFITS ARISING FROM THE
RELATIONSHIP OR THE CONDUCT OF
17
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BUSINESS UNDER THIS AGREEMENT. LIABILITY OF EITHER PARTY IN ANY AND ALL
CATEGORIES, INCLUDING BUT NOT LIMITED TO MISTAKE, NEGLIGENCE, ACT OR OMISSION,
INTENTIONAL ACTS, AND BREACH, WILL NOT EXCEED IN THE AGGREGATE ONE (1) MONTH'S
AVERAGE PAYMENT PAID TO AGENT. THE AVERAGE IS BASED ON THE IMMEDIATELY
PRECEDING TWELVE CALENDAR MONTHS OF PAYMENTS CALCULATED FROM THE DATE OF THE
OCCURRENCE OF THE EVENT GIVING RISE TO THE LIABILITY, OR, IF LESS THAN TWELVE
MONTHS OF OPERATIONS, THEN ON THE NUMBER OF MONTHS OF OPERATIONS.
9. INDEMNIFICATION
9.1 INDEMNIFICATION BY AGENT
- - ----------------------------
Agent must indemnify Principal and save it harmless from and against any and all
claims, actions, damages, liability and expense in connection with the loss of
life, personal injury, and/or damage to property arising from or out of
a) any occurrence caused by the act or omission of Agent; or
b) any occurrence caused by any act or omission claimed to have been
caused by the Agent or its agents, customers, invitees,
concessionaires, contractors, servants, vendors, materialmen or
suppliers, except to the extent caused by the negligence or willful
misconduct of Principal, its agents, customers, invitees,
concessionaires, contractor, servants, vendors, materialmen or
suppliers; or
c) any occurrence caused by the violation of any law, regulation or
ordinance applicable to Agent; or
d) any occurrence caused by Agent's failure to file correct or timely
excise, sales and use tax returns for the benefit of Principal or the
failure to pay for the benefit of Principal any tax shown as due on
such returns.
If Principal is made a party to any litigation commenced by or against Agent for
any of the above reasons, then Agent will protect and hold Principal harmless
and pay all costs, penalties, charges, damages, expenses and reasonable
attorneys' fees incurred or paid by Principal.
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9.2 INDEMNIFICATION BY PRINCIPAL
- - --------------------------------
Principal must indemnify Agent and save it harmless from and against any and all
claims, actions, damages, liability and expense in connection with the loss of
life, personal injury, and/or damage to property arising from or out of
a) any occurrence caused by the act or omission of Principal; or
b) any occurrence caused by any act or omission claimed to have been
caused by the Principal or its agents, customers, invitees,
concessionaires, contractors, servants, vendors, materialmen or
suppliers, except to the extent caused by the negligence or willful
misconduct of Agent, its agents, customers, invitees,
concessionaires, contractor, servants, vendors, materialmen or
suppliers; or
c) any occurrence caused by the violation of any law, regulation or
ordinance applicable to Principal: or
d) any occurrence caused by the infringement by Principal of any patent
relating to the Paging Services.
If Agent is made a party to any litigation commenced by or against Principal for
any of the above reasons, then Principal will protect and hold Agent harmless
and pay all costs, penalties, charges, damages, expenses and reasonable
attorneys' fees incurred or paid by Principal.
9.3 PROCEDURE
- - -------------
9.3.1 NOTICE
Any party being indemnified ("Indemnitee") will give the party making the
indemnification ("Indemnitor") written notice within 30 days if:
(i) any claim or demand will be made or liability asserted against
Indemnitee or
(ii) any suit, action, or administrative or legal proceedings will be
instituted or commenced in which any Indemnitee is involved or is named
as a defendant either individually or with others.
9.3.2 DEFENSE BY INDEMNITOR
If, within 30 days after the giving of such notice, the Indemnitee receives
written notice from Indemnitor stating that the Indemnitor disputes or intends
to defend against such claim, demand, liability, suit, action or proceeding,
then Indemnitor
19
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will have the right to select counsel of its choice and to dispute or defend
against such claim, demand, liability, suit, action or proceeding, at its
expense.
Indemnitee will fully cooperate with Indemnitor in such dispute or defense so
long as Indemnitor is conducting such dispute or defense diligently and in good
faith; provided, however, that Indemnitor will not be permitted to settle such
dispute or claim without the prior written approval of Indemnitee, which will
not be unreasonably withheld. Even though Indemnitor selects counsel of its
choice, Indemnitee has the right to additional representation by counsel of its
choice to participate in such defense at Indemnitee's sole cost and expense.
9.3.3 DEFENSE BY INDEMNITEE
If no such notice of intent to dispute or defend is received by Indemnitee
within the said 30-day period, or if diligent and good faith defense is not
being, or ceases to be, conducted, Indemnitee has the right to dispute and
defend against the claim, demand or other liability at the sole cost and expense
of Indemnitor and to settle such claim, demand or other liability, and in either
event to be indemnified as provided for in this Section. Indemnitee is not
permitted to settle such dispute or claim without the prior written approval of
Indemnitor, which approval will not be unreasonably withheld.
9.3.4 COSTS
The Indemnifying Party's indemnity obligation includes reasonable attorneys'
fees, investigation costs, and all other reasonable costs and expenses incurred
by the Indemnified Party from the first notice that any claim or demand has been
made or may be made, and is not limited in any way by any limitation on the
amount or type of damages, compensation, or benefits payable under applicable
workers' compensation acts, disability benefit acts, or other employee benefit
acts. The provisions of this Section will survive the termination of this
Agreement with respect to any damage, injury, or death occurring before such
termination.
10. DISPUTE RESOLUTION
10.1 NEGOTIATION
- - ----------------
The Parties will attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between or among
representatives who have authority to settle the controversy. Any Party may
escalate any dispute not resolved in the normal course of business to the senior
20
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executives for dispute resolution listed on Exhibit B (the "Senior Executives")
by providing written notice.
Within ten business days after delivery of such notice, the Senior Executives of
each Party will meet at a commonly acceptable time and place, and thereafter as
often as they deem reasonably necessary, to exchange relevant information and to
attempt to resolve the dispute. If the matter has not been resolved within 60
days of the disputing Party's notice, or if the Parties fail to meet within ten
days, any Party may initiate arbitration of the dispute as provided in this
Agreement.
10.2 ARBITRATION
- - ----------------
Any dispute arising out of or relating to this Agreement that has not been
resolved by negotiation within the time periods specified in Section 10.1 will
be finally settled by arbitration conducted expeditiously in accordance with the
rules of the American Arbitration Association. The arbitration is governed by
the United States Arbitration Act, 9 U.S.C. Section 1 et seq., and judgment upon
the award rendered by the arbitrator(s) may be entered by any court with
jurisdiction. The location of the arbitration is the Kansas City metropolitan
area which consists of Wyandotte and Johnson Counties in Kansas and Jackson,
Clay and Platter Counties in Missouri, or such other location agreed upon by the
Parties. The arbitrator(s) are not empowered to award damages in excess of those
permitted under this Agreement, and each Party irrevocably waives any damages in
excess of those permitted under this Agreement. The arbitrator(s) will have
current or prior telecommunications industry experience. The arbitrator(s) will
render a written decision setting forth the facts and the basis for their award.
10.3 ATTORNEYS AND INTENT
- - -------------------------
If a Senior Executive intends to be accompanied at a meeting by an attorney, all
other Senior Executives will be given at least three business days prior notice
of such intention and may also be accompanied by an attorney. All negotiations
pursuant to this Section are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and State
rules of evidence.
11. TERMINATION
11.1 TERMINATION BY BREACH
- - --------------------------
If a PartY is in
21
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(a) breach of any representation, warranty or agreement set forth in
this Agreement or
(b) defaults in the performance of any of its obligations with respect
to any Program Schedule,
which default
(x) continues for a period of more than 30 days after receipt of written
notice from the other Party specifying such default, or
(y) is of a nature to require more than 30 days for remedy and continues
beyond such time reasonably necessary to cure (and the defaulting Party
has not undertaken procedures to cure the default within such 30 day
period and diligently and continuously thereafter pursued such efforts
to complete cure),
the other Party may, in addition to any other remedy available at law or in
equity, at its option upon written notice,
(x) terminate the applicable Program Schedule, or
(y) terminate this Agreement and all Program Schedules issued pursuant
to this Agreement.
11.2 VOLUNTARY TERMINATION
- - --------------------------
This Agreement will terminate as follows:
(a) On January 16, 1997, provided Agent may give notice to Principal at
least 30 days in advance of such date that the termination date is
January 16, 1998.
(b) This Agreement will terminate if the agreement between Principal and
the Vendor terminates. If Principal receives advance notice of such
termination pursuant to the terms of the agreement with the Vendor,
Principal will use reasonable efforts to give Agent notice of such
pending termination. Failure of Principal to give such notice does not
prevent the termination pursuant to this subsection.
11.3 TRANSITION PERIOD
- - ----------------------
If this Agreement is terminated then the Parties agree to cooperate to enable
all Customers to continue to use the Paging Services upon the terms and
conditions of
22
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this Agreement with no disruption during the Transition Period so long as
payment for Paging Services is made. The Transition Period is as follows:
If the termination is by reason of a breach pursuant to Section 11.1
then there is no Transition Period.
If the termination is by reason of a Voluntary Termination pursuant to
Section 11.2(a) then the Transition Period is for three months.
If the termination is by reason of a Voluntary Termination pursuant to
Section 11.2(b) then the Transition Period is for the transition period
provided in the agreement with the Vendor.
11.4 EFFECTS OF TERMINATION
- - ---------------------------
Termination of this Agreement is without prejudice to any other rights or
remedies of the parties and is without liability for any loss or damage
occasioned by the termination. Termination of this Agreement for any cause does
not release either party from any liability which, at the time of termination,
has already accrued to the other party, or which may accrue in respect of any
act or omission prior to termination or from any obligation which is expressly
stated to survive the termination.
Upon termination of this Agreement, Agent will deliver to Principal, in ready to
use form, the entire customer data base which will include information customary
in the telecommunication industry to be kept on customer and must include,
without limitation, name, address, contact number, pager identification,
customer payment history and current status, service profile and any special
arrangements with the customer, IXC for customer paging service. Agent will
provide to Principal all materials in whatever form regarding operating and
internal or Vendor provided customer care procedures. Upon termination of this
Agreement, the parties will use commercially reasonable efforts to transfer
management of the customer accounts and customer care to Principal without
disruption of paging service, billing or customer care.
11.5 SALE OF CUSTOMERS
- - ----------------------
If Principal leaves the paging business, then Agent will have the right to
purchase from the Principal for fair market value the Customers (including all
accounts and contract rights relating to the customer) of Principal for which
Principal is then paying Agent a payment. Payment will be in cash at the
closing. The sale will be on terms and conditions customary and reasonable for
sales of customers in the telecommunications industry and on such other terms
and conditions as the parties may reasonably agree.
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If Agent does not complete the purchase of the Customers within 30 days of being
notified by Principal of its right to purchase the Customers, then Principal may
sell the Customers to a third party of its choice. Upon a sale to a third party
the sale of Customers must be subject to the payment rights of Agent.
12. GENERAL PROVISIONS
12.1 NOTICES AND INQUIRIES
- - --------------------------
All notices and inquiries required or permitted to be given by any provision of
this Agreement will be in writing and mailed (certified or registered mail,
postage prepaid, return receipt requested) or sent by hand or overnight courier,
or by facsimile (with acknowledgment received by overnight courier), charges
prepaid and addressed as follows:
If to Sprint:
Sprint Communications Company L.P.
8140 Ward Parkway
Kansas City, Missouri 64114
Attention: Vice President ___________________
with a copy to:
Sprint Communications Company L.P.
8140 Ward Parkway
Kansas City, Missouri 64114
Attention: Director of Wireless Marketing
24
<PAGE>
If to MajorCo:
MajorCo, L.P.
(d/b/a Sprint Telecommunications Venture)
4717 Grand
5th Floor
Kansas City, Missouri 64112
Attention: Chief Marketing Officer
With a copy to:
MajorCo, L.P.
(d/b/a Sprint Telecommunications Venture)
4717 Grand
5th Floor
Kansas City, Missouri 64112
Attention: General Counsel
Any Party may from time to time specify a different address by notice to the
other Party. Any such notice will be deemed to be delivered, given, and received
for all purposes as of the date so delivered.
12.2 CONSTRUCTION
- - -----------------
This Agreement will be construed simply according to its fair meaning and not
strictly for or against any Party. No rule of construction requiring
interpretation against the draftsman will apply in the interpretation of this
Agreement.
12.3 TIME
- - ---------
Time is of the essence with respect to this Agreement (including its Exhibits).
12.4 HEADINGS
- - -------------
The article and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define, or limit the
scope, extent, or intent of this Agreement or any provision of this Agreement.
12.5 SEVERABILITY
- - -----------------
Every provision of this Agreement is intended to be severable. If any term or
provision of this Agreement is illegal, invalid or unenforceable for any reason
whatsoever, that term or provision will be enforced to the maximum extent
permissible so as to effect the intent of the Parties, and such illegality,
invalidity or
25
<PAGE>
unenforceability will not affect the validity or legality of the remainder of
this Agreement. If necessary to effect the intent of the Parties, the Parties
will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
12.6 FURTHER ACTION
- - -------------------
Each Party, upon the reasonable request of the other Party, agrees to perform
all further acts and execute, acknowledge, and deliver any documents which may
be reasonably necessary, appropriate, or desirable to carry out the intent and
purposes of this Agreement.
12.7 GOVERNING LAW
- - ------------------
The internal laws of the State of Missouri (without regard to principles of
conflict of law) will govern the validity of this Agreement, the construction of
its terms, and the interpretation of the rights and duties of the Parties under
this Agreement.
12.8 COUNTERPART EXECUTION
- - --------------------------
This Agreement may be executed in any number of counterparts with the same
effect as if each Party had signed the same document. All counterparts will be
construed together and will constitute one agreement.
12.9 SPECIFIC PERFORMANCE
- - -------------------------
Each Party agrees with the other Party that the other Party would be irreparably
damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that monetary damages would not provide
an adequate remedy in such event. Accordingly, it is agreed that, in addition to
any other remedy to which the non-breaching Party may be entitled, at law or in
equity, the non-breaching Party is entitled to injunctive relief to prevent
breaches of the provisions of this Agreement and specifically to enforce the
terms and provisions of this Agreement in any action instituted in any court of
the United States or any state thereof having subject matter jurisdiction
thereof.
12.10 ENTIRE AGREEMENT
- - ----------------------
The provisions of this Agreement including the Exhibits and Schedules hereto,
set forth the entire agreement and understanding between the Parties as to the
subject matter of this Agreement and supersede all prior agreements, oral or
written, and
26
<PAGE>
other communications between the Parties relating to the subject matter of this
Agreement.
12.11 PARTIES IN INTEREST; LIMITATION ON RIGHTS OF OTHERS
- - ---------------------------------------------------------
Except as otherwise provided in this Agreement, the terms of this Agreement will
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns. Nothing in this Agreement, whether express or
implied, will be construed to give any Person other than the Parties any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
covenants, conditions or provisions contained in this Agreement.
12.12 ASSIGNABILITY
- - -------------------
Neither Party may assign this Agreement without the prior written consent of the
other Party, except that either Party may assign its rights and obligations
under this Agreement to an Entity which is controlled by, under common control
with, or controlling such Party without consent. The assigning Party will give
notice of any such assignment to the other Party.
12.13 WAIVERS; REMEDIES
- - -----------------------
The observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) by the Party
entitled to enforce such term, but any such waiver is effective only if in
writing signed by the Party against which such waiver is to be asserted. Except
as otherwise provided in this Agreement, no failure or delay of any Party in
exercising any power or right under this Agreement will operate as a waiver
thereof, nor will any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.
12.14 FORCE MAJEURE
- - -------------------
No Party is liable for failure to perform its obligations under this Agreement
due such failure arises directly out of causes beyond its control, including]
act of God, fire, flood, other natural cause, or terrorist event; laws, orders,
rules, regulations, directions, or action of any Governmental Authority having
jurisdiction or any civil or military authority; national emergency, riot, or
war; or labor difficulties. The Party suffering an event of force majeure is
excused on a day-to-day basis, provided, however, that such Party will use all
commercially reasonable efforts to avoid or remove such force majeure event.
27
<PAGE>
12.15 CONTINUATION OF EXCLUSIVITY
- - ---------------------------------
This Agreement does not constitute a waiver of the non-compete and exclusivity
provisions of Article 6 of the MajorCo Partnership Agreement and such provisions
remain in full force and effect.
12.16 CONSISTENCY
- - -----------------
If this Agreement is inconsistent with any term of the MajorCo, L.P. Partnership
Agreement or the Joint Marketing Agreement as finally agreed between the MajorCo
partners and Principal, then the terms of the other agreement will control.
12.17 DISCLOSURE
- - ----------------
All media releases and public announcements or disclosures by either party
relating to this Agreement, its subject matter or the purpose of this Agreement
are to be coordinated with and consented to by the other party in writing prior
to the release thereof.
EXECUTED effective the date first above written.
MajorCo L.P. Sprint Communications Company, L.P.
By /s/ Bernie Bianchino By /s/ Gerald A. Rhodes
---------------------- ---------------------------
Name: BERNIE BIANCHINO Name:
Title: CHIEF BUSINESS DEVELOPMENT OFFICER Title:
28
<PAGE>
EXHIBIT A
PROGRAM SCHEDULE NO. ___
to
PAGING SALES AGENCY AGREEMENT
between
MAJORCO, L.P. AND SPRINT COMMUNICATIONS COMPANY,
L.P. DATED JANUARY 17 1995
PAGING VENDOR: The vendor providing the paging services to Principal is
__________. The paging services are provided by vendor to Principal pursuant to
the paging services agreement, a redacted copy of which is attached as Exhibit
1.
PAGING SERVICES:. Only the following Paging Services will be marketed pursuant
to the Agreement: _____________________________
ADDITIONAL MARKETING AND SALES VEHICLES.
ADDITIONAL RESPONSIBILITIES. The Responsibilities of the Agent will be as
follows:
TARIFF OR PRICE SCHEDULE.
RESTRICTIONS ON THE MARKETING OF PAGING SERVICES.
PAYMENTS.
SALES VOLUME COMMITMENT.
PROGRAM TERM. From to .
------------- -------------
ACKNOWLEDGMENT OF EXHIBIT:
By Agent:
-------------------
By Principal:
-----------------
29
<PAGE>
EXHIBIT B
SENIOR EXECUTIVES FOR DISPUTE RESOLUTION
Principal: Chief Marketing Officer
Agent: Chief Marketing Officer
30
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P.
(Subsidiaries)
Sprint Spectrum L.P.
NewTelCo, L.P.
SPRINT SPECTRUM L.P.
(Subsidiaries)
WirelessCo, L.P.
Sprint Spectrum Realty Company, L.P.
Sprint Spectrum Equipment Company, L.P.
Sprint Spectrum Finance Corporation
<PAGE>
EXHIBIT 10.5
WIRELESSCO AFFILIATION AGREEMENT
THIS WIRELESSCO AFFILIATION AGREEMENT is entered into as of the 9
day of January, 1995, by and between WIRELESSCO, L.P., a Delaware limited
partnership ("WirelessCo"), and AMERICAN PCS, L.P., a Delaware limited
partnership ("APC, L.P.").
W I T N E S S E T H:
WHEREAS, APC, L.P. holds the License and intends to build out, own,
operate, manage and maintain a PCS system in the Washington-Baltimore MTA under
the License; and
WHEREAS, APC, L.P. has determined that it is in the best interests of
APC, L.P. and its future subcribers to operate such PCS system as an affiliate
of a seamless, integrated national wireless services network offering uniform
and consistent products and services to customers under a single national brand,
particularly in light of the national alliances being formed by APC, L.P.'s
competitors; and
WHEREAS, WirelessCo intends to establish the WirelessCo Network as a
national wireless services network offering seamless, integrated voice and data
services using wireless technology, and to present such services to customers of
the WirelessCo Network in a seamless, integrated, cohesive and consistent manner
under a single national brand, the Sprint Brand; and
WHEREAS, APC, L.P. wishes to enter into this Affiliation Agreement in
order to become an affiliate of such WirelessCo Network, and WirelessCo desires
to have APC, L.P. become an affiliate of the WirelessCo Network in accordance
with the terms of this Affiliation Agreement; and
WHEREAS, the parties recognize that, in order to establish and operate
the WirelessCo Network successfully by providing such seamless, integrated voice
and data services and presenting such services to customers in a seamless,
integrated, cohesive and consistent manner, it is essential that all affiliates
of the WirelessCo Network, including APC, L.P., operate in accordance with
minimum standards and guidelines established by WirelessCo with respect to
certain aspects of wireless products and services and the presentation of such
products and services to customers; and
WHEREAS, WirelessCo desires to obtain the benefit of APC, L.P.'s
technological developments, particularly its PathGuard technology, by having
such developments available to it on a non-exclusive basis to assist in its
implementation of a nationwide PCS network;
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the sufficiency of which are hereby
acknowledged, the Parties hereto, intending to be bound, agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Capitalized words and phrases used in this Agreement have
the following meanings:
"Agreement" means this WirelessCo Affiliation Agreement, including all
---------
Exhibits hereto, as amended from time to time.
"APC, L.P." means American PCS, L.P., a Delaware limited partnership.
---------
"APC Network" means the PCS network to be developed and operated by
-----------
APC, L.P. in the Washington-Baltimore MTA pursuant to the License.
"Buildout Implementation Schedule" means APC, L.P.'s schedule setting
--------------------------------
forth the specifications and timetable for buildout of the APC Network, which
schedule is attached hereto as Exhibit 9.1.
-----------
"Business Day" means a day of the year on which banks are not required
------------
or authorized to close in the State of New York.
"Confidential Information" means any information that a Party keeps,
------------------------
or is required to keep, confidential.
"Default Rate" means an arm's-length rate of interest that would apply
------------
to a loan from WirelessCo to APC, L.P. in the amount subject to the Default
Rate; that is, a rate of interest not less favorable to APC, L.P. and WirelessCo
than that generally available in comparable transactions among unaffiliated
parties and consistent with FCC rules and regulations.
"FCC" means the Federal Communications Commission.
---
"GAAP" means generally accepted accounting principles, consistently
----
applied.
"Governmental Authority" means any foreign, federal, state or local
----------------------
court, administrative agency, board, bureau or commission or other governmental
department, authority or instrumentality.
-2-
<PAGE>
"IXC Service Provider" means any interexchange carrier or provider
--------------------
(other than WirelessCo or Sprint), including AT&T Corp., MCI Communications
Corporation and British Telecommunications plc and their respective Related
Parties.
"License" means the 30 MHz Block "A" PCS license for the Washington-
-------
Baltimore MTA held by APC, L.P. and such 10 MHz PCS licenses within the
Washington-Baltimore MTA as APC, L.P. may hereafter acquire.
"Major Ownership Change" means, with respect to American Personal
----------------------
Communications, Inc., an event or series of events which result in more than
fifty percent (50%) of the outstanding voting securities of American Personal
Communications, Inc. being owned by Persons other than (i) the current
stockholders of American Personal Communications, Inc. and their immediate
families, (ii) Persons who currently are officers or directors of American
Personal Communications, Inc. or APC, L.P. and their immediate families, and
(iii) trusts for the benefit of any of the foregoing Persons. With respect to
APC, L.P., a "Major Ownership Change" shall mean an event or series of events
which result in more than fifty percent (50%) of the outstanding equity
interests of APC, L.P. being owned by Persons other than WirelessCo and American
Personal Communications, Inc.
"MajorCo" means an entity to be formed as a Related Party of
-------
WirelessCo which will to enter into the Master Services Agreement.
"Marketing Communications Guidelines" has the meaning set forth in
-----------------------------------
Section 1.1 of the Sprint Trademark License Agreement.
"Master Services Agreement" means that certain Master Services
-------------------------
Agreement to be entered into between Sprint and MajorCo after the date hereof,
pursuant to which Sprint will furnish certain network services to MajorCo and
certain of MajorCo's Related Parties, including WirelessCo, as amended from time
to time thereafter (it is possible that WirelessCo will enter into the Master
Services Agreement directly with Sprint).
"MTA" means a Major Trading Area as defined in the FCC rules to be
---
codified at 47 C.F.R. Section 24.13.
"National Accounts Guiding Principles" means those principles set
------------------------------------
forth on Exhibit 7.2 attached hereto which shall be used to formulate the
-----------
initial terms and conditions of the WirelessCo National Accounts Program
pursuant to Section 7.2 hereof.
"Parties" means WirelessCo and APC, L.P. and "Party" means WirelessCo
-------
or APC, L.P., as the context may require.
-3-
<PAGE>
"PCS" means radio communications services authorized under the rules
---
for broadband personal communications services designated as Subpart E of Part
24 of the FCC's rules, including the marketing, distribution, sales, customer
interface and operations functions relating thereto.
"Person" means any individual, partnership, corporation, trust, or
------
other entity.
"Rand-McNally Population Survey" means the most recent population
------------------------------
survey published by Rand-McNally, or, in the event Rand-McNally no longer
publishes such surveys, the most recent population survey published by any
successor organization to Rand-McNally or organization similar to Rand-McNally.
"Related Party" means, with respect to any Person, any other Person
-------------
that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this
definition, the term "controls" (including its correlative meanings "controlled
by" and "under common control with") shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Sprint" means Sprint Communications Company, L.P., a Delaware limited
------
partnership.
"Sprint Brand" means the trademark "Sprint" together with the related
------------
"Diamond" logo.
"Sprint Trademark License Agreement" means that certain Sprint
----------------------------------
Trademark License Agreement between Sprint and APC, L.P., dated as of the date
hereof, as the same may be amended from time to time hereafter.
"Transfer" means, as a noun, any sale, exchange, assignment or
--------
transfer and, as a verb, to sell, exchange, assign or transfer.
"Washington-Baltimore MTA" means the MTA encompassing Washington, D.C.
------------------------
and Baltimore, Maryland, which MTA is identified in the FCC Public Notice
regarding the PCS Auction as Market No. M-10 (Report No. 94-04, Auction No. 4).
"WirelessCo" means WirelessCo, L.P., a Delaware limited partnership.
----------
"WirelessCo Affiliate" means any Person with which WirelessCo has
--------------------
entered into an affiliation arrangement pursuant to which such Person has
affiliated with WirelessCo and such Person's wireless network has been
integrated with, and into, the WirelessCo Network on terms substantially similar
to those set forth herein.
-4-
<PAGE>
"WirelessCo Customer Service Standards" means those customer service
-------------------------------------
standards developed by WirelessCo with respect to customer service and
maintenance as described in Section 10.2 hereof, as the same may be amended from
time to time by WirelessCo.
"WirelessCo National Accounts Program" means the program maintained by
------------------------------------
WirelessCo with respect to national accounts development, maintenance and
management, as the same may be amended from time to time by WirelessCo.
"WirelessCo Network" means the national wireless network to be
------------------
developed by WirelessCo and the WirelessCo Affiliates in the United States and
its territories and possessions (excluding Puerto Rico), which network shall
include the APC Network.
"Wireless Products and Services" means those wireless products and
------------------------------
services marketed, promoted, advertised, distributed, leased or sold by APC,
L.P. from time to time during the term of this Agreement.
"WirelessCo Products and Services" means those wireless products and
--------------------------------
services designated by WirelessCo as products and services to be offered by
WirelessCo and all WirelessCo Affiliates as the products and services of the
WirelessCo Network.
Section 1.2 Additional Definitions.
----------------------
Defined Term Defined in
------------ ----------
"Affiliation Fee" Section 13.2
"Allocable Expenses" Section 13.2
"Allocation Percentage" Section 13.2
"Allocation Period" Section 13.2
"APC Capital Investment" Section 13.2
"APC Customers" Section 13.2
"APC Gross Revenues" Section 13.2
"APC Network POPs" Section 13.2
"Bankruptcy" Section 14.3(f)
"BTA" Section 13.2
"Capital Investment Percentage" Section 13.2
"Customer Percentage" Section 13.2
"Direct Costs" Section 13.2
"Event of Termination" Section 14.3
"Initial Term" Section 14.1
"IT" Section 2.1
"Involuntary Bankruptcy" Section 14.3(f)
-5-
<PAGE>
"Network Capital Investment" Section 13.2
"Network Customers" Section 13.2
"Network Gross Revenues" Section 13.2
"Network POPs" Section 13.2
"PCS Auction" Section 13.2
"PCS License" Section 13.2
"Platform" Section 11.1
"Pre-Auction WirelessCo Network
Transition Period" Section 13.2
"POPs" Section 13.2
"POPs Percentage" Section 13.2
"Post-Auction WirelessCo Network
Transition Period" Section 13.2
"Reimbursable Costs" Section 13.2
"Revenue Percentage" Section 13.2
"Technical Standards" Section 8.1
"Voluntary Bankruptcy" Section 14.3(f)
"WirelessCo Network Transition Period" Section 13.2
"WirelessCo Network Transition Period
Allocation Percentage" Section 13.2
Section 1.3 Terms Generally.
---------------
The definitions in Section 1.1 and those contained elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The words "herein," "hereof" and "hereunder" and words of similar
import refer to this Agreement (including the Exhibits hereto) in its entirety
and not to any part hereof unless the context shall otherwise require. All
references herein to Articles, Sections and Exhibits shall be deemed references
to Articles and Sections of, and Exhibits to, this Agreement unless the context
shall otherwise require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
or regulation, to any corresponding provisions of successor statutes or
regulations). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
-6-
<PAGE>
ARTICLE 2
PURPOSE
Section 2.1 Purpose. The foundation of the WirelessCo Network
-------
and the essence of this Affiliation Agreement is the adherence to the standards
established by WirelessCo to ensure uniform and consistent operation of all
wireless systems within the WirelessCo Network and the presentation of the
products and services of the WirelessCo Network to customers in a uniform and
consistent manner under the Sprint Brand; including (i) offering and promoting,
at a minimum, all products and services designated by WirelessCo as products and
services of the WirelessCo Network; (ii) adherence to minimum product and
quality standards and technical standards established by WirelessCo in order to
ensure seamless interoperability throughout each of the systems comprising the
WirelessCo Network (permitting any customer of the WirelessCo Network to roam
throughout the WirelessCo Network), and uniformity and consistency of product
quality; (iii) adherence to minimum customer service standards established by
WirelessCo; (iv) use of the WirelessCo information technology ("IT") platforms
in order to ensure uniform operations and consistency in interactions with
customers (including billing, customer service operations, etc.); and (v)
adherence to standards and guidelines relating to the marketing and promotion of
products and services under the Sprint Brand. The manner and means of ensuring
compliance with such standards and guidelines, as well as the terms upon which
its services shall be offered to subscribers and the prices it shall charge for
such services, shall be within the sole discretion of APC, L.P.
ARTICLE 3
USE OF SPRINT BRAND
Section 3.1 Use of Sprint Brand.
-------------------
(a) Except as the Parties may otherwise agree in writing, APC, L.P.
shall use the Sprint Brand exclusively in connection with the marketing,
promotion, advertisement, distribution, lease or sale of any Wireless Products
and Services. In connection with the execution and delivery of this Agreement,
APC, L.P. shall enter into the Sprint Trademark License Agreement, the terms of
which shall govern APC, L.P.'s use of the Sprint Brand.
(b) Except as the Parties may otherwise agree in writing, APC, L.P.
shall not market, promote, advertise, distribute, lease or sell on a non-branded
or "private label" basis any Wireless Product or Service or otherwise market,
promote, advertise, distribute, lease or sell any Wireless Product or Service
under any brand, trademark, tradename or trade dress other than the Sprint
Brand.
Section 3.2 Conformance to Marketing Communications Guidelines.
--------------------------------------------------
In addition to such other obligations set forth herein, including Section 3.1
and Article 4, and subject to the provisions of Section 17.1 hereof, APC, L.P.
shall conform to the Marketing Communications
-7-
<PAGE>
Guidelines (as revised by Sprint from time to time) in connection with the
marketing, promotion, advertisement, distribution, lease and sale of any
Wireless Product or Service.
Section 3.3 Joint Marketing With Third Parties. APC, L.P. may
----------------------------------
engage in various joint marketing activities with third parties in the
Washington-Baltimore MTA from time to time during the term of this Agreement
with respect to the Wireless Products and Services; provided, however, that such
joint marketing activities (i) are conducted in accordance with the terms and
conditions of the Sprint Trademark License Agreement and the Marketing
Communications Guidelines, (ii) are not likely (as shall be determined by
WirelessCo, in its sole discretion) to cause confusion among the Sprint Brand
and any other trademark or service mark used in connection with such activities,
and (iii) are not likely (as shall be determined by WirelessCo, in its sole
discretion) to give rise to the perception that the Wireless Products and
Services are being advertised, marketed or promoted under any trademark or
service mark other than the Sprint Brand. Notwithstanding any provision
contained herein to the contrary, APC, L.P. shall not engage in any activity
that includes co-branding involving use of the Sprint Brand (that is, the
marketing, promotion, advertisement, distribution, lease or sale of any Wireless
Product or Service under the Sprint Brand and any other trademark or service
mark).
ARTICLE 4
ADVERTISING AND PROMOTION
Section 4.1 National Advertising and Promotion. WirelessCo shall
----------------------------------
be responsible for all national advertising and promotion of the WirelessCo
Products and Services (including spot advertising in the Washington-Baltimore
MTA that is part of a national advertising or promotional campaign). APC, L.P.
shall be responsible for its proportionate share of the costs and expenses
incurred by WirelessCo in conducting national advertising and promotion
activities on behalf of WirelessCo and the WirelessCo Affiliates, including APC,
L.P., pursuant to the provisions of Article 13 hereof.
Section 4.2 In-Territory Advertising.
------------------------
(a) APC, L.P. may engage in advertising and promotion activities
within the Washington-Baltimore MTA with respect to Wireless Products and
Services. Such advertising and promotion activities shall be conducted by APC,
L.P. in accordance with the terms and conditions of this Agreement, the Sprint
Trademark License Agreement and the Marketing Communication Guidelines. APC,
L.P. shall be responsible for the costs and expenses incurred by APC, L.P. with
respect to such advertising and promotion activities.
(b) APC, L.P. may obtain advertising and promotion services from
WirelessCo with respect to the advertising and promotion of the Wireless
Products and Services in the Washington-Baltimore MTA as the Parties may
mutually agree in writing from time to time during the term of this Agreement.
-8-
<PAGE>
(c) WirelessCo shall have the right, but not the obligation, to use
any advertising materials developed by, or on behalf of, APC, L.P. with respect
to the Wireless Products and Services. In the event WirelessCo determines to use
such advertising materials, WirelessCo shall reimburse APC, L.P. for the
reasonable direct and out-of-pocket costs incurred by APC, L.P. in developing
such materials; provided, however, that such costs shall be included in
Allocable Expenses to be allocated to the WirelessCo Affiliates, including APC,
L.P., under Article 13 hereof.
Section 4.3 Cooperative Advertising and Promotion. WirelessCo
-------------------------------------
and APC, L.P. may engage in cooperative advertising or promotional activities
from time to time during the term of this Agreement as the Parties may mutually
agree in writing.
ARTICLE 5
PRODUCTS AND SERVICES, IXC SERVICES
Section 5.1 Products and Services Specified by WirelessCo.
---------------------------------------------
Except as otherwise agreed upon by the Parties in writing, APC, L.P. shall, at a
minimum, offer, promote and support all products and services specified by
WirelessCo from time to time as WirelessCo Products and Services (that is, those
products and services designated by WirelessCo as products and services to be
offered by WirelessCo and all WirelessCo Affiliates as the products and services
of the WirelessCo Network).
Section 5.2 Other Products and Services. APC, L.P. shall be
---------------------------
permitted to offer wireless products and services in addition to those specified
by WirelessCo pursuant to Section 5.1 above on such terms as APC, L.P.
determines (to the extent not otherwise inconsistent with the obligations of
APC, L.P. hereunder).
Section 5.3 IXC Services. APC, L.P. shall act as a sales agent
------------
for IXC services furnished by WirelessCo (either acting as agent for Sprint or
as a direct provider of IXC services) and shall not act as a sales agent or
reseller of any other IXC Service Provider (to the extent permitted under
applicable law and regulation). The terms and conditions applicable to such
sales agency relationships shall be set forth in sales agency agreements among
Sprint, WirelessCo and APC, L.P. to be entered into as soon as practicable after
the date hereof, and such terms and conditions shall be at least as favorable to
APC, L.P. (in all material respects) as those offered to any other WirelessCo
Affiliate. For purposes of this Section 5.3, complying with specific customer
requests to use an IXC Service Provider other than WirelessCo shall not be
deemed acting as a sales agent or reseller.
-9-
<PAGE>
ARTICLE 6
DISTRIBUTION
Section 6.1 Territorial Limitations of APC, L.P.'s Distribution
---------------------------------------------------
Activities. Except as otherwise agreed upon by the Parties in writing, APC, L.P.
- - ----------
shall not market, sell or distribute Wireless Products and Services outside of
the Washington-Baltimore MTA.
Section 6.2 Use of Third Party Distributors. APC, L.P. may,
-------------------------------
from time to time during the term of this Agreement, appoint sub-distributors or
sub-agents of the Wireless Products and Services in accordance with (and subject
to) the terms of the Sprint Trademark License Agreement. APC, L.P. shall be
responsible for ensuring compliance by its sub-distributors or sub-agents with
the terms and conditions of the Sprint Trademark License Agreement.
ARTICLE 7
NATIONAL ACCOUNTS
Section 7.1 Participation in WirelessCo National Accounts Program.
-----------------------------------------------------
During the term hereof, APC, L.P. shall participate in the WirelessCo National
Accounts Program (as in effect from time to time), and shall be entitled to
compensation for such participation in accordance with the terms and conditions
set forth therein.
Section 7.2 Establishment of WirelessCo National Accounts Program.
-----------------------------------------------------
The Parties acknowledge that the terms of the WirelessCo National Accounts
Program will be established by WirelessCo as soon as practicable after the date
hereof. The terms of the initial WirelessCo National Accounts Program shall
embody the National Accounts Guiding Principles set forth in Exhibit 7.2
attached hereto.
ARTICLE 8
TECHNICAL STANDARDS
Section 8.1 Conformance to Technical Standards. In the course of
----------------------------------
providing the Wireless Products and Services and operating the APC Network, APC,
L.P. shall conform to the operating and technical performance standards
(collectively, the "Technical Standards") established by WirelessCo from time to
time for the WirelessCo Network.
Section 8.2 Establishment of Technical Standards. The Parties
------------------------------------
acknowledge that the initial Technical Standards will be established by
WirelessCo as soon as practicable after the date hereof. The Technical Standards
shall include: voice quality, interoperability, consistency (seamlessness) of
coverage, RF design parameters, system-capacity and call blocking ratio. The
Parties acknowledge that WirelessCo has selected GSM as the initial air
interface technology for the
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WirelessCo Network (subject to change in accordance with Section 8.3 below) and
that APC, L.P. has independently selected GSM for its system.
Section 8.3 Changes to Technical Standards. WirelessCo may, from
------------------------------
time to time during the term of this Agreement, change the Technical Standards
to which APC, L.P. is obliged to conform pursuant to Section 8.1. Subject to the
provisions of Section 17.1 hereof, any costs and expenses incurred by APC, L.P.
in connection with conforming to any change to the Technical Standards during
the term of this Agreement shall be the responsibility of APC, L.P.
Section 8.4 PathGuard Technology. APC, L.P. agrees to make its
--------------------
PathGuard technology for spectrum sharing available to WirelessCo and WirelessCo
Affiliates for their use in implementing PCS systems throughout the WirelessCo
Network. Such PathGuard technology shall be provided by APC, L.P. to WirelessCo
and the WirelessCo Affiliates on a nonexclusive basis, on terms and conditions
(including royalty obligations) that are no less favorable to WirelessCo and the
WirelessCo Affiliates than those offered to any other PCS licensee. APC, L.P.
further agrees to provide such technical and engineering assistance to
WirelessCo as WirelessCo may request in connection with WirelessCo's
implementation and use of the PathGuard technology; provided, however, that
WirelessCo shall reimburse APC, L.P. for the costs incurred by APC, L.P. in
providing such engineering assistance on a mutually agreed basis.
Section 8.5 Rights of Inspection. To ensure that APC, L.P. has
--------------------
complied or is in compliance with all covenants and obligations of APC, L.P.
hereunder, including APC, L.P.'s obligation to conform to the Technical
Standards pursuant to this Article 8, WirelessCo and its authorized agents and
representatives shall have the right, but not the obligation, to enter upon the
premises of any office or facility operated by or for APC, L.P. at all
reasonable times, with prior notice to APC, L.P., to inspect, monitor and test
in a reasonable manner the Wireless Products and Services and the APC Network,
including the facilities and equipment and books and records of APC, L.P., all
as they relate to compliance with APC, L.P.'s covenants and obligations
hereunder.
ARTICLE 9
BUILDOUT COMMITMENTS
Section 9.1 Buildout Commitment. Except as the Parties may
-------------------
otherwise agree in writing, APC, L.P. shall use its best efforts to build out
the APC Network in accordance with APC, L.P.'s Buildout Implementation Schedule,
which is attached hereto as Exhibit 9.1.
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ARTICLE 10
CUSTOMER SERVICE
Section 10.1 Conformance to WirelessCo Customer Service Standards.
----------------------------------------------------
APC, L.P. shall conform to the WirelessCo Customer Service Standards (as in
effect from time to time) in providing the Wireless Products and Services to any
customer of APC, L.P., WirelessCo or any WirelessCo Affiliate. APC, L.P. shall
remain free to adopt additional and more stringent customer service standards
than those established by WirelessCo. Subject to the provisions of Section 17.1
hereof, any costs and expenses incurred by APC, L.P. in connection with
conforming to the WirelessCo Customer Service Standards (including changes
thereto) shall be the responsibility of APC, L.P.
Section 10.2 Establishment of WirelessCo Customer Service
--------------------------------------------
Standards. The Parties acknowledge that the initial WirelessCo Customer Service
- - ---------
Standards will be established by WirelessCo as soon as practicable after the
date hereof. The WirelessCo Customer Service Standards shall include (i) minimum
ratio of customer service representatives per subscriber and minimum training to
be provided to customer service representatives, (ii) minimum response time for
customer service inquiries, (iii) ability to provide on-site repair and service,
(iv) minimum customer service and support resources, (v) problem resolution,
(vi) minimum customer satisfaction ratings, (vii) quality and service programs
to be initiated, and (viii) minimum hours of operation.
Section 10.3 Local Customer Service Capability. APC, L.P. shall
---------------------------------
provide local customer service capability, including local customer service
representatives and repair and installation facilities, for customers of the APC
Network and WirelessCo Network in the Washington-Baltimore MTA (including
roamers) as part of its normal operations. APC, L.P. shall provide the same
level of customer service capability and customer service to customers of the
WirelessCo Network (other than the APC Network) as it provides to customers of
the APC Network.
ARTICLE 11
INFORMATION TECHNOLOGY PLATFORM
Section 11.1 Information Technology Platform. WirelessCo intends
-------------------------------
to contract for the development and operation of IT that will integrate wireless
and wireline functions (the "Platform"), including:
(a) Provision of a common face to the customers of the WirelessCo
Network through common billing and customer support systems;
(b) Provision of national services through common interfaces and
shared databases;
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(c) Integration of service creation and management systems for rapid
national introduction of new services; and
(d) Provision of tools and systems for cooperative marketing and
service delivery across local affiliates/operators.
Due to the integration of multiple services and functions, APC, L.P. shall use
the Platform exclusively in operating the APC Network and providing Wireless
Products and Services. APC, L.P.'s use of the Platform and Platform software
shall be subject to customary terms and conditions applicable to the use of
software, including provisions limiting the use of the Platform and underlying
software to the operation of the APC Network and customary terms of
confidentiality and nondisclosure.
Section 11.2 Costs of Platform. APC, L.P. shall be responsible
-----------------
for its proportionate share of the costs and expenses incurred by WirelessCo in
connection with the development, operation and maintenance of the Platform on
behalf of WirelessCo and the WirelessCo Affiliates, including APC, L.P. APC,
L.P. shall reimburse WirelessCo for its proportionate share of such costs and
expenses pursuant to the provisions of Article 13 hereof.
Section 11.3 Evaluation and Acquisition of APC, L.P. Systems.
-----------------------------------------------
In connection with the development and acquisition of the Platform as
contemplated under this Article 11, WirelessCo may, but shall not be required
to, evaluate the specifications for and functionality of APC, L.P.'s IT systems.
In the event WirelessCo determines, in its discretion, to acquire all or a
portion of APC, L.P.'s IT systems for use as part of the Platform, APC, L.P.
shall transfer to WirelessCo any and all rights APC, L.P. has in such IT systems
and WirelessCo shall reimburse APC, L.P. for APC, L.P.'s direct and out-of-
pocket costs and expenses in developing and/or acquiring such systems, together
with a mutually agreed portion of allocable overhead expenses incurred by APC,
L.P. in connection with the development of its platform.
ARTICLE 12
NETWORK SERVICES
Section 12.1 Network Services to be Provided. APC, L.P. shall
-------------------------------
obtain all of its network services from Sprint pursuant to the Master Services
Agreement, by joining such Master Services Agreement as an additional party. The
terms and conditions applicable to the purchase and sale of such network
services shall be substantially the same as those applicable to the purchase and
sale by WirelessCo of network services, as specified in the Master Services
Agreement to be executed after the date hereof.
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ARTICLE 13
REIMBURSABLE COSTS, DIRECT COSTS AND
AFFILIATION FEES
Section 13.1 Reimbursable Costs, Direct Costs and Affiliation Fees.
-----------------------------------------------------
APC, L.P. shall pay WirelessCo the Reimbursable Costs, Direct Costs and
Affiliation Fees determined pursuant to this Article 13.
Section 13.2 Definitions. For purposes of this Agreement, the
-----------
following terms shall have the following meanings:
"Affiliation Fee" means the fee to be paid by APC, L.P. to
---------------
WirelessCo pursuant to Section 13.6 hereof.
"Allocable Expenses" means those costs and expenses set forth on
------------------
Exhibit 13.2(a) attached hereto (as the same may be amended from time to time by
the Parties in writing) incurred by WirelessCo in connection with the WirelessCo
Network, including the APC Network, during a given Allocation Period. WirelessCo
will review particular expense items included in Allocable Expenses from time to
time and, wherever practicable and appropriate, will track an expense item
directly and bill it as a Direct Cost to the affiliate receiving the relevant
service (rather than including such expense item in Allocable Expenses).
"Allocation Percentage" means that percentage for a given Allocation
---------------------
Period occurring after the WirelessCo Network Transition Period determined by
dividing (A) the sum of the (i) Capital Investment Percentage, (ii) Customer
Percentage, (iii) POPs Percentage, and (iv) Revenue Percentage by (B) four (4).
"Allocation Period" means each calendar month during the term hereof
-----------------
during which Reimbursable Costs, Direct Costs or Affiliation Fees are to be
determined pursuant to this Article 13.
"APC Capital Investment" means the property, plant and equipment (net
----------------------
of depreciation) of APC, L.P. as of the last day of the applicable Allocation
Period as determined in accordance with GAAP.
"APC Customers" means the aggregate number of current and active
-------------
customers of APC, L.P. as of the last day of the applicable Allocation Period.
"APC Gross Revenues" means the gross revenues of APC, L.P. during the
------------------
applicable Allocation Period as determined in accordance with GAAP.
"APC Network POPs" means the total POPs (as of the last day of the
----------------
applicable Allocation Period) of the Washington-Baltimore MTA as the same shall
be determined pursuant to the most recent Rand-McNally Population Survey with
respect to the Washington-Baltimore MTA.
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"BTA" means a Basic Trading Area, as defined in the FCC rules to be
---
codified at 47 C.F.R. Section 24.13.
"Capital Investment Percentage" means that percentage for a given
-----------------------------
Allocation Period determined by dividing the APC Capital Investment by the
Network Capital Investment.
"Customer Percentage" means that percentage for a given Allocation
-------------------
Period determined by dividing the APC Customers by the Network Customers.
"Direct Costs" means those costs and expenses incurred by WirelessCo
------------
in connection with rendering services to, or on behalf of, APC, L.P., including
WirelessCo's cost of capital in funding the expenses incurred by WirelessCo in
connection with rendering such services, which costs and expenses are
specifically attributable to the Washington-Baltimore MTA.
"Network Capital Investment" means the property, plant and equipment
--------------------------
(net of depreciation) of WirelessCo and the WirelessCo Affiliates, including
APC, L.P., as of the last day of the applicable Allocation Period as determined
in accordance with GAAP.
"Network Customers" means the aggregate number of current and active
-----------------
customers of WirelessCo and the WirelessCo Affiliates, including APC, L.P., as
of the last day of the applicable Allocation Period.
"Network Gross Revenues" means the gross revenues of WirelessCo and
----------------------
the WirelessCo Affiliates, including APC, L.P., during the applicable Allocation
Period as determined in accordance with GAAP; provided, however, such gross
revenues shall not include any Affiliation Fees received by or payable to
WirelessCo from any WirelessCo Affiliate.
"Network POPs" means the total POPs (as of the last day of the
------------
applicable Allocation Period) of all MTAs and BTAs for which WirelessCo and the
WirelessCo Affiliates, including APC, L.P., hold a PCS license, as the same
shall be determined pursuant to the most recent Rand-McNally Population Survey
for each such MTA and BTA.
"PCS Auction" means the series of simultaneous multiple round auctions
-----------
for broadband PCS licenses to be conducted by the FCC under the authority of
Section 309(j) of the Communications Act, U.S.C. (S)309(j) (1993), in accordance
with the rules promulgated thereunder by the FCC.
"PCS license" means any 30 MHz or 10MHz broadband PCS license held by
-----------
WirelessCo or any WirelessCo Affiliate for any MTA or BTA.
"Pre-Auction WirelessCo Network Transition Period" means the period
------------------------------------------------
commencing on January 1, 1995 through the date of completion of the PCS Auction
(that is, the date on which
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bidders in the PCS Auction are no longer permitted generally to submit bids for
PCS licenses in accordance with the FCC's PCS Auction rules, regardless of
whether disputes, challenges or other proceedings are pending with respect to
particular MTAs or BTAs).
"POPs" means the population in a given MTA or BTA set forth in the
----
Rand-McNally Population Survey.
"POPs Percentage" means that percentage for a given Allocation Period
---------------
determined by dividing the APC Network POPs by the Network POPs.
"Post-Auction WirelessCo Network Transition Period" means the period
-------------------------------------------------
commencing on the day following the expiration of the Pre-Auction WirelessCo
Network Transition Period and ending on December 31, 1999.
"Reimbursable Costs" shall be an amount determined (A) in the case of
------------------
an Allocation Period occurring during the WirelessCo Network Transition Period,
by multiplying (i) the WirelessCo Network Transition Period Allocation
Percentage by (ii) the Allocable Expenses, or (B) in the case of an Allocation
Period occurring following expiration of the WirelessCo Network Transition
Period, by multiplying (iii) the Allocation Percentage by (iv) the Allocable
Expenses.
"Revenue Percentage" means that percentage for a given Allocation
------------------
Period determined by dividing the APC Gross Revenues by the Network Gross
Revenues.
"WirelessCo Network Transition Period" means that period commencing on
------------------------------------
January 1, 1995 and ending on December 31, 1999.
"WirelessCo Network Transition Period Allocation Percentage" means
----------------------------------------------------------
that percentage for a given Allocation Period occurring during the WirelessCo
Network Transition Period determined as follows:
(i) for an Allocation Period occurring during the Pre-Auction
WirelessCo Network Transition Period, by dividing (A) the number of POPs for the
Washington-Baltimore MTA by (B) one hundred fifty million (150,000,000);
(ii) for an Allocation Period occurring during the period beginning on
the first day of the Post-Auction WirelessCo Network Transition Period and
ending on December 31, 1997, the POPs Percentage; and
(iii) for an Allocation Period occurring during the portion of the
Post-Auction WirelessCo Network Transition Period beginning on January 1, 1998
and ending on December 31, 1999, by determining the sum of (Y) one-half of the
POPs Percentage plus (Z) one-sixth of the sum of the Capital Investment
Percentage, Revenue Percentage and Customers Percentage.
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Section 13.3 Reimbursement of Direct Costs. In addition to the
-----------------------------
Reimbursable Costs and Affiliation Fees to be paid by APC, L.P. to WirelessCo
pursuant to this Article 13, APC, L.P. shall reimburse WirelessCo for all Direct
Costs incurred by WirelessCo during each Allocation Period. Within thirty (30)
days following the expiration of each Allocation Period during which WirelessCo
incurs any Direct Costs, WirelessCo shall deliver to APC, L.P. a statement
setting forth the Direct Costs incurred by WirelessCo during such Allocation
Period. APC, L.P. shall pay the amount of Direct Costs set forth on such
statement within thirty (30) days of the date of such statement.
Section 13.4 Payment of Reimbursable Costs During the WirelessCo
---------------------------------------------------
Network Transition Period. In addition to the Direct Costs and Affiliation Fees
- - -------------------------
to be paid by APC, L.P. to WirelessCo pursuant to this Article 13, during the
WirelessCo Network Transition Period, APC, L.P. shall pay to WirelessCo the
Reimbursable Costs for each Allocation Period in accordance with the provisions
set forth in this Section 13.4.
(a) Not later than thirty (30) days following the end of each
Allocation Period during the WirelessCo Network Transition Period,
WirelessCo shall deliver to APC, L.P. a statement setting forth the
Reimbursable Costs to be paid by APC, L.P. to WirelessCo with respect to
such Allocation Period. Such statement shall set forth, in addition to
the Reimbursable Costs payable by APC, L.P., the calculation of the
WirelessCo Network Transition Period Allocation Percentage and a list of
the Allocable Expenses for such Allocation Period. APC, L.P. shall pay
to WirelessCo the amount of Reimbursable Costs set forth on such
statement within thirty (30) days of the date of such statement.
(b) An illustration of the determination of Reimbursable Costs
determined during the Post-Auction WirelessCo Network Transition Period
is included on Exhibit 13.4 attached hereto.
------------
Section 13.5 Payment of Reimbursable Costs Following Expiration
--------------------------------------------------
of the WirelessCo Network Transition Period. In addition to the Direct Costs and
- - -------------------------------------------
Affiliation Fees to be paid by APC, L.P. to WirelessCo pursuant to this Article
13, following expiration of the WirelessCo Network Transition Period, APC, L.P.
shall pay to WirelessCo the Reimbursable Costs for each Allocation Period in
accordance with the provisions set forth in this Section 13.5.
(a) Not later than fifteen (15) days following the end of each
Allocation Period following the WirelessCo Network Transition Period,
APC, L.P. shall deliver to WirelessCo a report, certified by the chief
financial officer of APC, L.P., setting forth the (1) APC Capital
Investment, (2) APC Customers, (3) APC Gross Revenues, and (4) APC
Network POPs for such Allocation Period.
(b) Not later than thirty (30) days following the expiration of
each Allocation Period following the WirelessCo Network Transition
Period, WirelessCo shall deliver to
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APC, L.P. a statement setting forth the Reimbursable Costs to be paid by
APC, L.P. to WirelessCo with respect to such Allocation Period. Such
statement shall set forth, in addition to the Reimbursable Costs payable
by APC, L.P., (i) the calculation of the Allocation Percentage
(including the Capital Investment Percentage, Customer Percentage, POPs
Percentage and Revenue Percentage used in the determination of such
Allocation Percentage), and (ii) a list of the Allocable Expenses for
such Allocation Period. APC, L.P. shall pay to WirelessCo the amount of
Reimbursable Costs set forth on such statement within thirty (30) days
of the date of such statement.
(c) An illustration of the determination of Reimbursable Costs
following the WirelessCo Network Transition Period is included on
Exhibit 13.5 attached hereto.
------------
Section 13.6 Affiliation Fee. In addition to the Direct Costs
---------------
and Reimbursable Costs to be paid by APC, L.P. to WirelessCo pursuant to this
Article 13, APC, L.P. shall pay to WirelessCo the Affiliation Fee for each
Allocation Period in accordance with the provisions set forth in this Section
13.6.
(a) WirelessCo shall receive a monthly fee (the "Affiliate Fee")
consisting of an amount equal to three percent (3%) of APC's Gross
Revenue. Not later than thirty (30) days following the end of each
Allocation Period, APC, L.P. shall deliver to WirelessCo a report,
certified by the Chief Financial Officer of APC, L.P., setting forth (i)
APC's Gross Revenue for such Allocation Period, and (ii) the calculation
of the Affiliation Fee for such Allocation Period. Simultaneously with
the delivery of such statement, APC, L.P. shall deliver to WirelessCo
the Affiliation Fee respecting such Allocation Period.
(b) APC, L.P. acknowledges that the expectancy of WirelessCo of
receipt of Affiliation Fees pursuant to this Section 13.6 constitutes a
material inducement to WirelessCo to enter into this Agreement.
Accordingly, APC, L.P. undertakes to employ its reasonable best efforts
during the term hereof to promote the distribution, lease and sale of
Wireless Products and Services in order to generate such Affiliation
Fees.
Section 13.7 Late Payments. Any payment due under this Article
-------------
13 which is not paid by APC, L.P. to WirelessCo in accordance with the terms
hereof shall bear interest from (but not including) the date due to (but not
including) the date paid at a per annum rate equal to the Default Rate.
ARTICLE 14
TERM; TERMINATION; EFFECT OF TERMINATION
Section 14.1 Initial Term. This Agreement shall commence on the
------------
date first above written and, unless terminated earlier in accordance with the
provisions of this Article 14, shall continue for a period of ten (10) years
(the "Initial Term").
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Section 14.2 Renewal Terms. Following expiration of the Initial
-------------
Term, this Agreement shall automatically be renewed for successive five (5) year
renewal periods (for a maximum of 50 years) unless one (1) year prior to the
commencement of any such renewal period either Party shall notify the other
Party that it does not wish to renew this Agreement.
Section 14.3 Events of Termination. The occurrence of any of the
---------------------
following events shall be deemed an "Event of Termination":
(a) Breach of Agreements. At the election of the non-breaching
--------------------
Party, the breach by either Party of any material term contained in this
Agreement, in the event such breach has not been cured following the
expiration of thirty (30) days from the breaching party's receipt of
written notice from the non-breaching party of the occurrence of such
breach;
(b) Major Ownership Change with Respect to American Personal
--------------------------------------------------------
Communications, Inc. or APC, L.P. At the election of WirelessCo, if a
---------------------------------
Major Ownership Change has occurred with respect to American Personal
Communications, Inc. or APC, L.P.;
(c) Dissolution of WirelessCo. At the election of APC, L.P., if
-------------------------
WirelessCo is dissolved in accordance with the provisions of Section 14
of the Agreement of Limited Partnership of WirelessCo, L.P., dated as of
October 24, 1994 (unless the business of the WirelessCo Network is
continued by a successor of WirelessCo);
(d) Regulatory Considerations. At the election of either Party upon
-------------------------
the occurrence of any event that would require this Agreement to
terminate under applicable law; provided, however, that if, at any time,
any provision of this Agreement is inconsistent with FCC regulations or
other applicable law, the Parties shall use their reasonable best
efforts to modify this Agreement, preserving to the extent possible the
economic arrangements set forth herein, as necessary to comply with such
regulations and applicable law;
(e) Termination of Sprint Trademark License Agreement. At the
-------------------------------------------------
election of either Party (except as provided below), if the Sprint
Trademark License Agreement is terminated in accordance with its terms,
provided that any Party whose breach of the Sprint Trademark License
Agreement caused such termination may not elect to terminate this
Agreement under this paragraph (e); or
(f) Bankruptcy of a Party. At the election of either Party upon the
---------------------
occurrence of a "Bankruptcy" with respect to the other Party. For this
purpose, "Bankruptcy" means a "Voluntary Bankruptcy" or an "Involuntary
Bankruptcy." A "Voluntary Bankruptcy" means the inability of a Party
generally to pay its debts as such debts become due, or an admission in
writing by a Party of its inability to pay its debts generally or a
general assignment by a Party for the benefit of creditors; the filing
of any petition or answer by a Party seeking to adjudicate it a bankrupt
or insolvent, or seeking for itself any liquidation, winding up,
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reorganization, arrangement, adjustment, protection, relief, or
composition of a Party or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking, consenting to, or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for a Party or for any substantial part of its
property; or corporate action taken by a Party to authorize any of the
actions set forth above. An "Involuntary Bankruptcy" means without the
consent or acquiescence of a Party, the entering of an order for relief
or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief under any
present or future bankruptcy, insolvency or similar statute, law or
regulation, or the filing of any such petition against a Party which
petition shall not be dismissed within sixty (60) days, or, without the
consent or acquiescence of a Party, the entering of an order appointing
a trustee, custodian, receiver or liquidator of a Party or of all or any
substantial part of the property of a Party which order shall not be
dismissed within sixty (60) days.
Section 14.4 Effect of Termination. Upon the occurrence of an
---------------------
Event of Termination, all rights and obligations of each Party under this
Agreement shall immediately thereafter cease; provided, however, that the
provisions of this Section 14.4 and Sections 16.1, 16.2 and 16.3 shall survive
any termination of this Agreement, and further provided, that the payment
obligations under Article 13 shall survive any termination of this Agreement if,
and to the extent, any Reimbursable Costs, Direct Costs, or Affiliation Fees
have accrued or are otherwise due and owing from APC, L.P. to WirelessCo as of
the date of termination of this Agreement.
Section 14.5 Availability of Injunctive Relief. The Parties
---------------------------------
agree that the remedy at law for any act or event which constitutes an Event of
Termination under this Agreement will be inadequate and that, in addition to
such remedies as are set forth herein or as may be provided at law, either Party
shall be entitled to injunctive relief, specific performance, or other equitable
relief, and that the Party against which such relief is sought shall not urge in
any such proceeding that an adequate remedy exists at law.
ARTICLE 15
OBLIGATION TO MAINTAIN LICENSE; FCC ACTION
Section 15.1 Maintenance of License. APC, L.P. shall take all
----------------------
actions necessary in order to maintain the License in accordance with the terms
of the License and all applicable laws, policies and regulations and to comply
with all other legal requirements applicable to the operation of the APC Network
and its business.
Section 15.2 FCC Action.
----------
(a) Should a change in FCC policy or rules make it necessary to obtain
FCC consent for the implementation, continuation or further effectuation of any
term or provision of this
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Agreement, both Parties shall use all commercially reasonable efforts to
diligently prepare, file and prosecute before the FCC all petitions, waivers,
construction applications, amendments, rulemaking comments and other related
documents necessary to secure and/or retain FCC approval of all aspects of this
Agreement. The Parties shall bear in equal measure the costs of preparation of
such documents and prosecution of such actions. Notwithstanding any provision in
this Agreement to the contrary, the Parties acknowledge and agree that no such
filing shall be made with the FCC with respect to this Agreement unless both
Parties have reviewed said filing and consented to its submission.
(b) In the event the FCC determines that this Agreement is
inconsistent with the terms and conditions of the License or is otherwise
contrary to FCC policies, rules and regulations, or if regulatory or legislative
action subsequent to the date hereof alters the permissibility of this Agreement
under the FCC's rules or other applicable law, rules or regulations, the Parties
shall renegotiate this Agreement in good faith and recast this Agreement,
preserving to the extent possible the economic and other arrangements set forth
herein.
ARTICLE 16
BOOKS AND RECORDS; CONFIDENTIAL
INFORMATION; INSURANCE
Section 16.1 Books and Records. Each Party shall keep and
-----------------
maintain complete and accurate books and records in accordance with GAAP to
support and document any fees, costs, expenses or other charges due in
connection with the provisions set forth in this Agreement, including those
Reimbursable Costs, Direct Costs and Affiliation Fees payable by APC, L.P. to
WirelessCo pursuant to Article 13 hereof. Such records shall be retained for a
period of at least three (3) years after such fees, costs, expenses or other
charges to which such records relate have accrued and have been paid, or such
other period as may be required by law. Not more frequently than twice each
calendar year, on thirty (30) days advance written notice, each Party shall
provide access to appropriate records to the other Party or its duly authorized
representatives for purposes of auditing the amount of fees, costs, expenses or
other charges payable with respect to the period audited.
Section 16.2 Confidential Information. Except as specifically
------------------------
authorized by this Agreement, each of the Parties shall, for the term of this
Agreement and ten (10) years thereafter, keep confidential, not disclose to
others and use only for the purposes authorized herein, all Confidential
Information disclosed by each Party to the other Party in connection herewith
(including, without limitation, the Marketing Communications Guidelines,
National Accounts Guiding Principles, Technical Standards, WirelessCo Customer
Service Standards and the financial and other information provided by each Party
pursuant to Article 13 and Section 16.1 hereof); provided, however, that the
foregoing obligation shall not apply to the extent that any such Confidential
Information (i) is or becomes, after disclosure to a Party, publicly known by
any means other than through unauthorized acts or omissions of such Party, or
(ii) is disclosed in good faith to a Party by a third party entitled
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to make such disclosure. Notwithstanding the foregoing, a Party may disclose any
of the Confidential Information (A) to any governmental agency where such
disclosure is required by law or applicable regulation, (B) to any third party
in order to allow such Party to perform its obligations hereunder, or (C) if
otherwise required to be disclosed by law or by a final court order, in each of
which cases such Party shall inform the disclosing Party as promptly as is
reasonably necessary to enable the disclosing Party to take action to, and use
such Party's reasonable best efforts to, limit the disclosure and maintain
confidentiality to the extent practicable.
Section 16.3 Insurance. APC, L.P. shall submit to WirelessCo
---------
proof, in form and substance satisfactory to WirelessCo, that APC, L.P. has
purchased comprehensive liability insurance in amounts reasonably specified by
WirelessCo for personal injury and for property damage, including product
liability insurance, for each occurrence during the term of this Agreement
related to the Wireless Products and Services. APC, L.P. shall maintain such
insurance in full force and effect at all times during the term hereof and
thereafter (as necessary to cover claims with respect to occurrences prior to
termination hereof). Such insurance shall name WirelessCo as an additional
insured party and shall require the insurer to give WirelessCo at least thirty
(30) days notice of cancellation before any cancellation shall be effective as
to WirelessCo. APC, L.P. shall submit to WirelessCo proof of renewal of such
insurance coverage at least thirty (30) days prior to the expiration date of any
such policy. APC, L.P. shall require each contractor and sub-contractor which
render services to APC, L.P. with respect to any product or service to provide
substantially similar insurance protection.
ARTICLE 17
WIRELESSCO NETWORK TRANSITION PROVISIONS
Section 17.1 WirelessCo Network Transition Provisions. The
----------------------------------------
provisions of this Agreement are subject to the provisions specified in Exhibit
-------
17.1.
- - ----
ARTICLE 18
MISCELLANEOUS
Section 18.1 Notices. Any notice, payment, demand, or
-------
communication required or permitted to be given by any provision of this
Agreement shall be in writing and mailed (certified or registered mail, postage
prepaid, return receipt requested) or sent by hand or overnight courier, or by
facsimile (with acknowledgment received), charges prepaid and addressed as
follows, or to such other address or number as such Person may from time to time
specify by notice to the Parties:
(a) if to WirelessCo,
WirelessCo, L.P.
9221 Ward Parkway
-22-
<PAGE>
Kansas City, Missouri 64114
Telephone: (913) 624-6526
Telecopier: (913) 624-5667
Attention: Chief Executive Officer
(b) if to APC, L.P.,
American PCS, L.P.
One Democracy Center
6901 Rockledge Drive, Suite 600
Bethesda, Maryland 20817
Telephone: 301-214-9214
Telecopier: 301-214-9490
Attention: Gerald T. Vento
Vice Chairman and Chief
Executive Officer
Either Party may from time to time specify a different address by notice to the
other Party. All notices and other communications given to a Party in accordance
with the provisions of this Agreement shall be deemed to have been given and
received (i) four (4) Business Days after the same are sent by certified or
registered mail, postage prepaid, return receipt requested, (ii) when delivered
by hand or transmitted by facsimile (with acknowledgment received and, in the
case of a facsimile only, a copy of such notice is sent no later than the next
Business Day by a reliable overnight courier service, with acknowledgment of
receipt) or (iii) one (1) Business Day after the same are sent by a reliable
overnight courier service, with acknowledgment of receipt.
Section 18.2 Construction. This Agreement shall be construed
------------
simply according to its fair meaning and not strictly for or against either
Party.
Section 18.3 Headings. The section and other headings
--------
contained in this Agreement are for reference purposes only and are not intended
to describe, interpret, define or limit the scope, extent or intent of this
Agreement.
Section 18.4 Further Action. Each Party agrees to perform
--------------
all further acts and execute, acknowledge, and deliver any documents which may
be reasonably necessary, appropriate, or desirable to carry out the intent and
purposes of this Agreement.
Section 18.5 Counterpart Execution. This Agreement may be
---------------------
executed in any number of counterparts with the same effect as if both Parties
had signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
-23-
<PAGE>
Section 18.6 Specific Performance. Each Party agrees with
--------------------
the other Party that such Party would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their specific
terms and that monetary damages would not provide an adequate remedy in such
event. Accordingly, in addition to any other remedy to which the nonbreaching
Party may be entitled, at law or in equity, the nonbreaching Party shall be
entitled to injunctive relief to prevent breaches of this Agreement and
specifically to enforce the terms and provisions hereof.
Section 18.7 Entire Agreement, Amendments. The provisions
----------------------------
of this Agreement set forth the entire agreement and understanding between the
Parties as to the subject matter hereof and supersede all prior agreements, oral
or written, and other communications between the Parties relating to the subject
matter hereof. This Agreement may be modified or amended only by a written
amendment signed by Persons authorized to bind each Party.
Section 18.8 Limitation on Rights of Others. Nothing in this
------------------------------
Agreement, whether express or implied, shall be construed to give any Person
other than the Parties any legal or equitable right, remedy or claim under or in
respect of this Agreement.
Section 18.9 Waivers; Remedies. The observance of any term
-----------------
of this Agreement may be waived (whether generally or in a particular instance
and either retroactively or prospectively) by the Party entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
Party against which such waiver is to be asserted. Except as otherwise provided
herein, no failure or delay of either Party in exercising any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any power, preclude any other or
further exercise thereof or the exercise of any other right or power.
Section 18.10 Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each Party hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court sitting in the County of New York or any Federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each Party hereby irrevocably and unconditionally agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court.
(b) Each Party hereby irrevocably and unconditionally waives,
to the fullest extent it may legally do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any New York State court
sitting in the County of New York or any Federal court sitting in the Southern
District of New York. Each Party hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such suit, action or proceeding in any such court and
-24-
<PAGE>
further waives the right to object, with respect to such suit, action or
proceeding, that such court does not have jurisdiction over such Party.
(c) Each Party irrevocably consents to service of process in
the manner provided for the giving of notices pursuant to this Agreement,
provided that such service shall be deemed to have been given only when actually
received by such Party. Nothing in this Agreement shall affect the right of a
party to serve process in any other manner permitted by law.
Section 18.11 Waiver of Jury Trial. Each Party waives, to
--------------------
the fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any action, suit or proceeding arising out this Agreement.
Section 18.12 Binding Effect. Except as otherwise provided
--------------
in this Agreement, this Agreement shall be binding upon and inure to the benefit
of the Parties and their respective and permitted successors, transferees, and
assigns, including any permitted successor, transferee or assign of the APC
Network.
Section 18.13 Governing Law. The internal laws of the State
-------------
of New York (without regard to principles of conflict of law) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Parties.
Section 18.14 Severability. Every provision of this Agreement
------------
is intended to be severable. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable for any reason whatsoever, that provision
will be enforced to the maximum extent permissible so as to effect the intent of
the Parties, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If necessary to
effect the intent of the Parties, the Parties shall negotiate in good faith to
amend this Agreement to replace the unenforceable language with enforceable
language which as closely as possible reflects such intent.
Section 18.15 No Assignment.
-------------
(a) Except as specifically provided herein, neither Party shall,
directly or indirectly, assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other Party.
(b) Any attempted assignment of this Agreement in violation of
this Section 18.15 shall be void and of no effect.
Section 18.16 Disclaimer of Agency. Except for provisions
--------------------
herein expressly authorizing one Party to act for the other, this Agreement
shall not constitute either Party as a legal representative or agent of the
other Party, nor shall a Party have the right or authority to assume,
-25-
<PAGE>
create or incur any liability or any obligation of any kind, expressed or
implied, against or in the name or on behalf of the other Party unless otherwise
expressly permitted by such Party.
IN WITNESS WHEREOF, the Parties have entered into this Agreement
as of the day first above set forth.
WIRELESSCO, L.P.
By: /s/ Gary D. Forsee
--------------------------
Title: Chief Executive Officer
-----------------------
AMERICAN PCS, L.P.
By: American Personal Communications, Inc.,
its Managing General Partner
By: /s/ Wayne N. Schelle
--------------------------
Title: Chairman
-----------------------
-26-
<PAGE>
Exhibit 13.2(a)
ALLOCABLE EXPENSES
1. National Advertising
. National Placement
. Creative - National
. Agency Fees (for creative)
. Production Fees
. Major Media
. Cooperative Advertising
. Events Sponsorship/Charitable Contributions
2. Marketing
. Brand Management
. National Agent Relations
. Retail - Mass Merchandising
. New Distribution Channels
. Sprint/Cable Programs
. Fulfillment
. National Account Sales
. Pricing (National, Roaming)
. Marketing Research
. Promotions (National)
. Development of National Promotions
. Referral fees/commissions for national sales
3. IT
. Clearinghouse/Billing
. Development
. Systems Development
. Systems Enhancement
. Systems Maintenance
4. G&A
. Regulatory/External Affairs
. Staffing of WirelessCo
<PAGE>
. Strategy Development
5. Accounting & Finance
. Affiliate (Capital Calls, Disbursements)
. Management (Cost to Acquire, Rev/Sub, Rev/Location)
. Roaming - Billing and Payments
6. Technology
. Cable System Standards
. Standards
Without limiting the expenses to be included in each of the Allocable Expenses
set forth above, Allocable Expenses shall include the following:
Salaries
Benefits
Travel/meeting/meals
Training/education
Professional fees/use of
consultants/dues/subscriptions/memberships
Recruiting/hiring/relocation
Depreciation/amortization
Property taxes
Office expenses: supplies, telecommunications, software, general
office equipment and computers, utilities, rent, insurance
-2-
<PAGE>
Exhibit 13.4
Illustration of Determination of Reimbursable
Costs During the Post-Auction WirelessCo Network Transition Period
------------------------------------------------------------------
The following is an illustration of the determination of Reimbursable
Costs to be paid by APC, L.P. to WirelessCo for a given Allocation Period during
the Post-Auction WirelessCo Network Transition Period.
A For the Period Ending December 31, 1997:
---------------------------------------
1. Assumptions
-----------
Allocable Expenses $ 1,000,000
POPs for Washington-Baltimore MTA 8,000,000
Network POPs 200,000,000
2. Determination of Transition Period Allocation Percentage
--------------------------------------------------------
WirelessCo Network Transition Period Allocation Percentage = (A)
Number of POPs for the Washington-Baltimore MTA, divided by (B)
Network POPs (8,000,000/200,000,000 = 4%)
3. Determination of Reimbursable Costs
-----------------------------------
Reimbursable Costs = (A) WirelessCo Network Transition Period
Allocation Percentage, multiplied by (B) Allocable Expenses
(4% x $1,000,000 = $40,000)
B. For the Period from January 1, 1998 to December 31, 1999:
--------------------------------------------------------
1. Assumptions
-----------
Allocable Expenses $ 1,000,000
POPs Percentage 4%
Capital Investment Percentage 5%
Customer Percentage 6.25%
Revenue Percentage 6.67%
<PAGE>
2. Determination of Transition Period Allocation Percentage
--------------------------------------------------------
WirelessCo Network Transition Period Allocation Percentage = (A) one-half of
the POPs Percentage, plus (B) one-sixth of the sum of the Capital Investment
Percentage, Customer Percentage and Revenue Percentage (2% plus one-sixth of
the sum of 5% + 6.25% + 6.67% = 4.99%)
3. Determination of Reimbursable Costs
-----------------------------------
Reimbursable Costs = (A) WirelessCo Network Transition Period Allocation
Percentage, multiplied by (B) Allocable Expenses
(4.99% x $1,000,000 = $49,900)
This Exhibit is for illustrative purposes only and is provided for purposes of
demonstrating the allocation provisions set forth in Article 13 of the
Agreement. The Parties acknowledge and agree that the information set forth in
this Exhibit is not intended to represent actual or projected Reimbursable Costs
(or any component thereof, including Allocable Expenses and POPs figures) for
any given Allocation Period for either Party.
-2-
<PAGE>
Exhibit 13.5
------------
Illustration of Determination of Reimbursable Costs
Following Expiration of the WirelessCo Network Transition Period
----------------------------------------------------------------
The following is an illustration of the determination of Reimbursable
Costs to be paid by APC, L.P. to WirelessCo for a given Allocation Period
(following expiration of the WirelessCo Network Transition Period).
1. Assumptions
-----------
Allocable Expenses $ 1,000,000
APC Capital Investment $ 200,000,000
APC Customers 500,000
APC Network POPs 8,000,000
APC Gross Revenues $ 100,000,000
Network Capital Investment $4,000,000,000
Network Customers 8,000,000
Network POPs 200,000,000
Network Gross Revenues $1,500,000,000
2. Determination of Component Percentages
--------------------------------------
. Capital Investment Percentage = APC Capital Investment/Network Capital
-----------------------------
Investment
($200,000,000/$4,000,000,000 = 5%)
. Customer Percentage = APC Customers/Network Customers
-------------------
(500,000/8,000,000 = 6.25%)
. POPs Percentage = APC Network POPs/Network POPs
---------------
(8,000,000/200,000,000 = 4%)
. Revenue Percentage = APC Gross Revenues/Network Gross Revenues
------------------
($100,000,000/$1,500,000,000 = 6.67%)
3. Determination of Allocation Percentage
--------------------------------------
Allocation Percentage = (A) sum of Capital Investment Percentage, Customer
Percentage, POPs Percentage and Revenue Percentage divided by (B) four (4).
(5% + 6.25% + 4% + 6.67%)/4 = 5.48%
<PAGE>
4. Determination of Reimbursable Costs
-----------------------------------
Reimbursable Costs = (A) Allocation Percentage multiplied by (B) Allocable
Expenses
(5.48% x $1,000,000 = $54,800)
This Exhibit is for illustrative purposes only and is provided for
purposes of demonstrating the allocation provisions set forth in Article 13 of
the Agreement. The Parties acknowledge and agree that the information set forth
in this Exhibit is not intended to represent actual or projected Reimbursable
Costs (or any component thereof, including Allocable Expenses and POPs figures)
for any given Allocation Period for either Party.
-2-
<PAGE>
Exhibit 17.1
------------
WIRELESSCO NETWORK TRANSITION PROVISIONS
In addition to the terms and conditions set forth in the Agreement,
the Parties agree to be bound by the following terms and conditions:
1. Marketing Communications Guidelines.
-----------------------------------
(a) The Parties acknowledge that the initial Marketing Communications
Guidelines will be established by Sprint as soon as practicable after the date
hereof.
(b) Prior to the date Sprint adopts the Marketing Communications
Guidelines, APC, L.P. shall submit to Sprint and WirelessCo for their review
marketing and advertising materials to be utilized by APC, L.P. in connection
with the marketing, promotion, advertisement, distribution, lease or sale of any
Wireless Product or Service. APC, L.P. shall be permitted to continue to utilize
materials approved by Sprint regardless of whether such materials otherwise
conflict with or are not in accordance with the Marketing Communications
Guidelines, as the same exist on the date of Sprint's approval of the APC
materials or are subsequently established or amended (but subject to the terms
of any such approvals that may be granted by Sprint (e.g., a limit on the time
period during which such consent will continue in effect)).
2. Changes to Technical Standards.
------------------------------
(a) WirelessCo shall consult with APC, L.P. regarding the development and
adoption of the Technical Standards; provided, however, that APC, L.P.
acknowledges and agrees that the terms and conditions of the Technical Standards
shall be determined by WirelessCo in its sole discretion.
(b) In the event WirelessCo changes the Technical Standards or
establishes new Technical Standards during the WirelessCo Network Transition
Period and as a result of such action on the part of WirelessCo, APC, L.P. is
required (pursuant to GAAP) to write-off the value of any equipment (including
any computer software utilized in the operation of such equipment) existing on
the books and records of APC, L.P., WirelessCo shall, subject to paragraph 2(d)
below, reimburse APC, L.P. for the amount of any such write-off in accordance
with the provisions of paragraph 2(c) below.
(c) In the event APC, L.P. is required to write-off the value of
any equipment existing on the books and records of APC, L.P. due to a change in
the Technical Standards or the establishment of new Technical Standards pursuant
to Section 8.3 of the Agreement during the WirelessCo Network Transition Period,
APC, L.P. shall provide to WirelessCo a detailed list of such equipment
(including related software), together with the adjusted tax basis (as the same
is reflected in the books and records, including federal tax returns, of APC,
L.P.) of each such item of equipment (and related
<PAGE>
software) and the date on which such equipment and software was taken
out of service. Within sixty (60) days following receipt of such list,
WirelessCo shall pay to APC, L.P. the aggregate adjusted tax basis for such
equipment. Upon receipt of such payment from WirelessCo, APC, L.P. shall (i)
transfer all right, title and interest in and to such equipment to WirelessCo,
and (ii) deliver (as soon as practicable following receipt of such payment) such
equipment to WirelessCo, at the expense of WirelessCo, in accordance with the
instructions of WirelessCo. Notwithstanding the foregoing, it is understood and
agreed that WirelessCo will not be obligated to reimburse APC, L.P. for any
equipment (or related software) prior to the date on which the equipment (and
related software) is actually taken out of service (notwithstanding the fact
that GAAP may require that such equipment and software be written off at an
earlier date).
(d) During the WirelessCo Network Transition Period, APC, L.P.
shall consult with WirelessCo with respect to APC, L.P.'s adoption or
implementation of any operating or technical performance standards with respect
to the Wireless Products and Services and the APC Network. Notwithstanding any
provision contained herein to the contrary, including the provisions of
paragraph 2(c) above, if APC, L.P. adopts or implements any such operating or
technical performance standards over the objection of WirelessCo and, as a
result of a subsequent change in the Technical Standards or the establishment of
new Technical Standards during the WirelessCo Network Transition Period, APC,
L.P. is required to write-off the value of any equipment (and related software)
existing on the books and records of APC, L.P., WirelessCo shall have no
obligation to reimburse APC, L.P. for the amount of such write-off.
3. WirelessCo Customer Service Standards.
-------------------------------------
(a) WirelessCo agrees that it shall consult with APC, L.P.
regarding the development and adoption of the WirelessCo Customer Service
Standards; provided, however, that APC, L.P. acknowledges and agrees that the
terms and conditions of the WirelessCo Customer Service Standards shall be
determined by WirelessCo in its sole discretion.
(b) In the event WirelessCo changes the Customer Service
Standards or establishes new Customer Service Standards during the WirelessCo
Network Transition Period and as a result of such action on the part of
WirelessCo, APC, L.P. is required (pursuant to GAAP) to write-off the value of
any computer equipment or software utilized in customer service functions, such
changes will be deemed a change in the Platform subject to the provisions of
4(c) of this Exhibit 17.1 below.
(c) If APC, L.P. establishes customer services facilities before
the initial Customer Service Standards are established, and such facilities are
approved by WirelessCo in advance, APC, L.P. will not be required to rebuild or
reconstruct any such facilities despite the fact that such facilities may not
conform to specifications for customer service facilities included in the
Customer Service Standards.
4. IT Platform Development and Transition.
--------------------------------------
-2-
<PAGE>
(a) WirelessCo shall consult with APC, L.P. during the WirelessCo
Network Transition Period with respect to the specifications, development and
acquisition of the Platform; provided, however, that WirelessCo shall have sole
authority and responsibility with respect to the selection of specifications and
the development and acquisition of the Platform.
(b) WirelessCo shall use commercially reasonable efforts to develop
the Platform (including key systems such as customer service and billing
systems) as soon as practicable. In the event WirelessCo fails to deliver a key
system on a timely basis, APC, L.P. may implement a substitute system; provided,
however, that if APC, L.P. implements a substitute system, it will agree to do
so in a way that facilitates transition to the WirelessCo Platform (where
commercially reasonable) and will transition to the WirelessCo Platform on a
commercially reasonable timetable.
(c) In the event that APC, L.P. is required to transition to a
different IT platform as the WirelessCo Platform in accordance with Article 11,
APC, L.P. will not be required under Article 13 to reimburse WirelessCo for
expenses incurred by WirelessCo in the development of the WirelessCo IT Platform
through the date on which APC, L.P. first implements the WirelessCo IT Platform;
as provided in Article 13, APC, L.P. will be required to reimburse continuing
expenses incurred by WirelessCo in connection with the Platform from and after
the date on which APC, L.P first implements the WirelessCo Platform. WirelessCo
further agrees to reimburse APC, L.P. for reasonable direct and out-of-pocket
expenses incurred by APC, L.P. in connection with the conversion to the
WirelessCo Platform (subject to the obligation of APC, L.P. under paragraph 4(b)
above to use commercially reasonable efforts to implement APC L.P.'s platform in
a manner which facilitates conversion to the WirelessCo Platform).
(d) During the WirelessCo Network Transition Period, APC, L.P.
shall consult with WirelessCo with respect to APC, L.P.'s adoption of substitute
systems pursuant to paragraph 4(b) above. Notwithstanding any provisions
contained herein to the contrary, if APC, L.P. adopts or implements any such
substitute system over the objection of WirelessCo and, as a result of a
subsequent change in the WirelessCo Platform or establishment of a new
WirelessCo Platform during the WirelessCo Network Transition Period, APC, L.P.
is required to write-off the value of any software existing on the books and
records of APC, L.P., WirelessCo shall have no obligation to reimburse APC, L.P.
for the amount of such write-off.
5. Employee Benefit Matters.
------------------------
(a) At such time as WirelessCo shall establish employee benefit
plans for the benefit of WirelessCo's employees (the "Plans"), APC, L.P. may
elect, during the WirelessCo Network Transition Period, to adopt such Plans for
the benefit of APC, L.P.'s employees in accordance with the terms and conditions
of this paragraph 5.
-3-
<PAGE>
(b) APC, L.P. may elect to adopt such Plans for the benefit of
APC, L.P.'s employees subject to such terms and conditions as WirelessCo deems
necessary or appropriate, in its sole discretion, to avoid any adverse
consequences with respect to such election, including:
A. A determination by WirelessCo that participation in the Plans
by APC, L.P. and APC, L.P.'s employees will not subject the
Plans to any additional federal, state or local laws, rules or
regulations;
B. A determination by WirelessCo that participation in the Plans by
APC, L.P. and APC, L.P.'s employees will not (i) change the tax
status of any benefits payable to WirelessCo's employees under the
Plans, (ii) change the tax status of any trust which is a part of any
such Plan, or (iii) violate any federal, state or local laws, rules or
regulations;
C. APC, L.P.'s agreement to make all such contributions to the
Plans as shall be necessary or required to pay the benefits
payable under such Plans to, or on behalf of, the APC, L.P. employees,
and to pay all costs and expenses arising out of or relating to the
participation by APC, L.P. and APC, L.P.'s employees in the Plans;
D. APC, L.P.'s agreement that WirelessCo shall have the right
to amend or terminate the Plans in its sole discretion;
E. APC, L.P.'s agreement to indemnify WirelessCo and WirelessCo's
officers and employees for any expense, liability or loss which such
person may incur as a result of the participation by APC, L.P. and
APC, L.P.'s employees in the Plans; and
F. APC, L.P. shall have no employees who are members of a collective
bargaining unit.
(c) The terms and conditions on which employees of APC, L.P. are
permitted to participate in WirelessCo Plans will be no less favorable to APC,
L.P. than the terms offered to other WirelessCo Affiliates for the same
arrangements.
6. Network Services.
----------------
The parties acknowledge that, as of the date hereof, Sprint and
WirelessCo have not yet entered into the Master Services Agreement. However,
Sprint has furnished APC, L.P. with a redacted copy of the most recent draft of
such agreement, and the parties anticipate that the final agreement will be
substantially in the form of such draft furnished to APC, L.P. (including as to
subject matter) and in no event will such Agreement impose obligations on APC,
L.P. which exceed in any material respect those reflected in the draft furnished
to APC, L.P.
-4-
<PAGE>
EXHIBIT 10.6
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
AMERICAN PCS, L.P.
A DELAWARE LIMITED PARTNERSHIP
dated as of January 9, 1995
by and among
AMERICAN PERSONAL COMMUNICATIONS, INC.,
WIRELESSCO, L.P.
and
THE WASHINGTON POST COMPANY
<PAGE>
TABLE OF CONTENTS
SECTION 1 THE PARTNERSHIP ...................................... 7
1.1 Continuation ......................................... 7
1.2 Name ................................................. 7
1.3 Purpose............................................... 7
1.4 Principal Executive Office............................ 7
1.5 Term ................................................. 8
1.6 Filings; Agent for Service of Process................. 8
1.7 Title to Property..................................... 8
1.8 Payments of Individual Obligations.................... 8
1.9 Independent Activities................................ 8
1.10 Definitions........................................... 9
1.11 Additional Definitions............................... 26
1.12 Terms Generally...................................... 28
SECTION 2 PERCENTAGE INTERESTS; PARTNERS' CAPITAL CONTRIBUTIONS;
WIRELESSCO FINANCING OBLIGATIONS......................28
2.1 Percentage Interests; Preservation of Percentages of
Interests Held as General Partners and as Limited
Partners............................................28
2.2 Partners' Previous Capital Contributions..............29
2.3 Additional Capital Contributions During Initial
Five-Year Period....................................30
2.4 Financing Obligations of WirelessCo...................33
2.5 Other Additional Capital Contributions................35
2.6 Partnership Funds.....................................36
2.7 Partner Loans; Other Borrowings.......................36
2.8 Other Matters.........................................37
SECTION 3 ALLOCATIONS...........................................38
3.1 Profits...............................................38
3.2 Losses ...............................................38
3.3 Special Allocations...................................39
3.4 Curative Allocations..................................41
3.5 Loss Limitation.......................................42
3.6 Other Allocation Rules................................42
3.7 Tax Allocations: Code Section 704(c).................42
<PAGE>
SECTION 4 DISTRIBUTIONS.........................................43
4.1 Available Cash........................................43
4.2 Amounts Withheld......................................44
SECTION 5 MANAGEMENT............................................44
5.1 Authority of the Managing Partner.....................44
5.2 Business Plan and Annual Budget.......................45
5.3 Employees.............................................47
5.4 Limitation of Agency..................................48
5.5 Liability of Partners.................................48
5.6 Indemnification.......................................48
5.7 Temporary Investments.................................50
5.8 Unanimous Consent of Partners.........................50
SECTION 6 PARTNERSHIP OPPORTUNITIES; CONFIDENTIALITY............50
6.1 Engaging in Wireless Businesses.......................50
6.2 Enforceability and Enforcement........................51
6.3 General Exceptions to Section 6.1.....................51
6.4 Freedom of Action.....................................54
6.5 Confidentiality.......................................54
SECTION 7 ROLE OF EXCLUSIVE LIMITED PARTNERS....................56
SECTION 8 TRANSACTIONS WITH PARTNERS; CERTAIN
ADDITIONAL AGREEMENTS................................56
8.1 Transactions with Partners............................56
8.2 Additional Agreements of the Partners.................58
8.3 Additional Agreements of APC..........................59
8.4 Effect of Breach......................................60
SECTION 9 REPRESENTATIONS AND WARRANTIES........................60
9.1 Representations and Warranties of the Partners........60
9.2 Representations and Warranties of APC Regarding the
Existing Business....................................62
9.3 Liability for Breach..................................65
SECTION 10 ACCOUNTING, BOOKS AND RECORDS....................65
10.1 Accounting, Books and Records.........................65
ii
<PAGE>
10.2 Reports...............................................66
10.3 Tax Returns and Information...........................67
10.4 Proprietary Information...............................68
SECTION 11 ADVERSE ACT......................................69
11.1 Remedies..............................................69
11.2 Adverse Act Purchase..................................70
11.3 Net Equity............................................72
11.4 Gross Appraised Value.................................72
11.5 Extension of Time.....................................73
SECTION 12 DISPOSITIONS OF INTERESTS........................74
12.1 Restriction on Dispositions...........................74
12.2 Permitted Transfers...................................74
12.3 Conditions to Permitted Transfers.....................74
12.4 Right of First Refusal................................77
12.5 Tagalong Right of Certain Partners....................79
12.6 Prohibited Dispositions...............................80
12.7 Representations Regarding Transfers...................80
12.8 Distributions and Allocations in Respect of
Transferred Interests................................80
SECTION 13 CONVERSION OF INTERESTS..........................81
13.1 Conversion of WirelessCo Interest.....................81
13.2 Termination of Status as General Partner..............81
13.3 Restoration of Status General Partner.................82
SECTION 14 DISSOLUTION AND WINDING UP.......................82
14.1 Liquidating Events....................................82
14.2 Winding Up............................................83
14.3 Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts.........................85
14.4 Deemed Distribution and Recontribution................85
14.5 Rights of Partners....................................85
14.6 Notice of Dissolution.................................86
14.7 Buy/Sell Arrangements.................................86
iii
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SECTION 15 MISCELLANEOUS....................................88
15.1 Notices...............................................88
15.2 Binding Effect........................................88
15.3 Construction..........................................88
15.4 Time..................................................88
15.5 Table of Contents; Headings...........................88
15.6 Severability..........................................89
15.7 Incorporation by Reference............................89
15.8 Further Action........................................89
15.9 Governing Law.........................................89
15.10 Waiver of Action for Partition; No Bill For
Partnership Accounting.............................89
15.11 Counterpart Execution................................89
15.12 Sole and Absolute Discretion.........................90
15.13 Specific Performance.................................90
15.14 Entire Agreement.....................................90
15.15 Limitation on Rights of Others.......................90
15.16 Waivers; Remedies....................................90
15.17 Jurisdiction; Consent to Service of Process..........90
15.18 Waiver of Jury Trial.................................91
iv
<PAGE>
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
AMERICAN PCS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
------------------------------
This SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is
entered into as of the 9th day of January, 1995, by and among American Personal
Communications, Inc., a Delaware corporation ("APC"), as a General Partner and a
Limited Partner, WirelessCo, L.P., a Delaware limited partnership
("WirelessCo"), as an Exclusive Limited Partner, and The Washington Post
Company, a Delaware corporation (the "Post"), as an Exclusive Limited Partner,
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act.
W I T N E S S E T H:
-------------------
WHEREAS, APC and the Post entered into that certain Limited
Partnership Agreement, dated as of September 20, 1990 (the "Original
Agreement"), pursuant to which American PCS, L.P. (the "Partnership") was formed
by the filing of a certificate of limited partnership with the Secretary of
State of Delaware;
WHEREAS, APC and the Post amended the Original Agreement pursuant to
that certain Amended and Restated Limited Partnership Agreement of American PCS,
L.P., dated as of October 29, 1990, which Amended and Restated Limited
Partnership Agreement was further amended by that certain Amendment No. 1, dated
as of July 1, 1992, to First Amended and Restated Limited Partnership Agreement
of American PCS, L.P., and that certain Amendment No. 2, dated as of January 8,
1995, to First Amended and Restated Limited Partnership Agreement of American
PCS, L.P.;
WHEREAS, pursuant to that certain Purchase and Sale Agreement
Regarding American PCS, L.P. of even date herewith among APC, WirelessCo and the
Post (the "Purchase Agreement"), the Post has conveyed 49/70 of its interest in
the Partnership to WirelessCo and 19.5/70 of its interest in the Partnership to
APC and, as a result thereof, the Post's interest in the Partnership has been
reduced to 1.5%; and
WHEREAS, APC, WirelessCo and the Post wish to continue the Partnership
and to amend and restate the agreement governing the Partnership;
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein, the sufficiency of which hereby are
acknowledged, and in order to set
<PAGE>
forth the respective rights, obligations, and interests of the parties to one
another, the parties, intending to be legally bound, hereby agree as follows:
SECTION 1
THE PARTNERSHIP
1.1 Continuation.
------------
The Partners hereby continue the Partnership as a limited partnership
pursuant to the provisions of the Act for the purposes and upon the terms and
conditions set forth in this Agreement.
1.2 Name.
----
The name of the Partnership shall continue to be American PCS, L.P.,
and all business of the Partnership shall be conducted in such name or, in the
discretion of the Managing Partner, under any other names (but excluding a name
that includes the name of a Partner unless such Partner has consented thereto).
1.3 Purpose.
-------
(a) Subject to, and upon the terms and conditions of this Agreement,
the purposes and business of the Partnership shall be to hold the Washington-
Baltimore MTA Block "A" 30 MHz PCS license (the "License") and to build out,
own, operate and maintain a PCS system in the Washington-Baltimore MTA under the
License.
(b) The Partnership shall have all the powers now or hereafter
conferred by the laws of the State of Delaware on limited partnerships formed
under the Act and, subject to the limitations of this Agreement, may do any and
all lawful acts or things that are necessary, appropriate, incidental or
convenient for the furtherance and accomplishment of the purposes of the
Partnership. Without limiting the generality of the foregoing, and subject to
the terms of this Agreement, the Partnership may enter into, deliver and perform
all contracts, agreements and other undertakings and engage in all activities
and transactions that may be necessary or appropriate to carry out its purposes
and conduct its business.
1.4 Principal Executive Office.
--------------------------
The principal executive office of the Partnership shall be located in
such place as is determined by the Managing Partner, and the Managing Partner
may change the location of the principal executive office of the Partnership to
any other place within or without the State of Delaware upon ten (10) Business
Days' prior notice to each of the Partners, provided that such principal
--------
executive office shall be located in the United States. The Managing Partner
may establish
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<PAGE>
and maintain such additional offices and places of business of the Partnership,
within or without the State of Delaware, as it deems appropriate.
1.5 Term.
----
The term of the Partnership shall continue until the completion of the
winding up, liquidation and business of the Partnership following a Liquidating
Event, as provided in Section 14.
1.6 Filings; Agent for Service of Process.
-------------------------------------
(a) Promptly following the execution of this Agreement, APC shall
cause to be filed in the office of the Secretary of State of Delaware any
amendment to the Partnership's certificate of limited partnership required to be
filed pursuant to Section 17-201 of the Act (the "Certificate"). The General
Partner shall take any and all other actions reasonably necessary to perfect and
maintain the status of the Partnership as a limited partnership under the laws
of Delaware. The General Partner shall cause additional amendments to the
Certificate to be filed whenever required by the Act. Each of the Partners shall
be provided with a copy of each document filed or recorded as contemplated by
this Section 1.6 promptly following the filing or recording thereof.
(b) The General Partner shall execute and cause to be filed original
or amended Certificates and shall take any and all other actions that may be
reasonably necessary to perfect and maintain the status of the Partnership as a
limited partnership or similar type of entity under the laws of any other states
or jurisdictions in which the Partnership engages in business.
(c) The registered agent for service of process on the Partnership
shall be The Corporation Trust Company or any successor as appointed by the
Managing Partner in accordance with the Act. The registered office of the
Partnership in the State of Delaware is located at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801.
1.7 Title to Property.
-----------------
No Partner shall have any ownership interest or right in its
individual name in any real or personal property owned, directly or indirectly,
by the Partnership, and each Partner's Interest shall be personal property for
all purposes. The Partnership shall hold all of its real and personal property
in the name of the Partnership or its nominee and not in the name of any
Partner.
1.8 Payments of Individual Obligations.
----------------------------------
The Partnership's credit and assets shall be used solely for the
benefit of the Partnership, and no asset of the Partnership shall be transferred
or encumbered for, or in payment of, any individual obligation of any Partner.
-3-
<PAGE>
1.9 Independent Activities.
----------------------
Each Partner and any of its Affiliates shall be required to devote
only such time to the affairs of the Partnership as such Partner determines in
its sole discretion may be necessary to manage and operate the Partnership to
the extent contemplated by this Agreement, and each such Person, except as
expressly provided herein, shall be free to serve any other Person or enterprise
in any capacity that it may deem appropriate in its discretion.
1.10 Definitions.
-----------
Capitalized words and phrases used in this Agreement have the
following meanings:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
set forth in Del. Code Ann. tit. 6, (S)(S) 17-101 to 17-1109.
"Accountants" means, as of any time, such firm of nationally
recognized independent certified public accountants that, as of such time, has
been appointed by the Managing Partner as the accountants for the Partnership.
"Additional Capital Contributions" means, with respect to each
Partner, as applicable, the Capital Contributions made by such Partner (or such
Partner's predecessor in interest) pursuant to (or as described in) Sections
2.2(b), 2.3, 2.4, 2.5 and 6.1(b) reduced by the amount of any liabilities of
such Partner assumed by the Partnership in connection with such Capital
Contributions or which are secured by any property contributed by such Partner
as a part of such Capital Contributions. In the event all or a portion of an
Interest is Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Additional Capital Contributions of the
transferor to the extent they relate to the Transferred Interest.
"Additional Contribution Agreement" means a contribution agreement
pursuant to which a Partner makes an Additional Capital Contribution to the
Partnership pursuant to Section 2.5(b), the terms of which have been approved by
the written consent of all Partners.
"Adjusted Capital Account Deficit" means, with respect to any
Exclusive Limited Partner, the deficit balance, if any, in such Exclusive
Limited Partner's Capital Account as of the end of the relevant Allocation Year,
after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Exclusive
Limited Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
- - - - - -
the Regulations.
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<PAGE>
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
-
and shall be interpreted consistently therewith.
"Adverse Act" means, with respect to each Partner, as applicable, the
occurrence of any of the following:
(i) (A) WirelessCo failing to make a required Additional Capital
Contribution under Section 2.3(b) or to fulfill its financing obligation under
Section 2.4, or (B) APC or WirelessCo failing to make a required Additional
Capital Contribution under the first sentence of Section 6.1(b), in either case
within ten (10) days following its receipt of written notice from any other
Partner that it has failed to satisfy its obligations under such Section;
(ii) Such Partner Disposes, or has Disposed of, all or any part of its
Interest except as required or permitted by this Agreement; provided, however,
-------- -------
that no Adverse Act shall be deemed to have occurred until thirty (30) days
following the involuntary encumbrance of all or any part of such Interest if
during such thirty (30) day period the affected Partner acts diligently to, and
prior to the end of such thirty (30) day period does, remove any such
encumbrance, including effecting the posting of a bond to prevent foreclosure
where necessary;
(iii) Such Partner commits, or has committed, a material breach of
any covenant contained in this Agreement (other than as otherwise expressly
enumerated in this definition) or a material default on any obligation provided
for in this Agreement (other than as otherwise expressly enumerated in this
definition) and such breach or default continues for thirty (30) days after the
date written notice thereof has been given to such Partner by any other Partner;
provided that if such breach or default is not a failure to pay money and is of
- - --------
such a nature that it cannot reasonably be cured within such thirty (30) day
period, but is curable and such Partner in good faith begins efforts to cure it
within such thirty (30) day period and continues diligently to do so, such
Partner shall have a reasonable additional period thereafter to effect the cure
(which shall not exceed an additional ninety (90) days unless otherwise approved
by the Managing Partner in accordance with Section 8.2(b)); and provided further
-------- -------
that if, within thirty (30) days after the date written notice of such breach or
default has been given to such Partner, such Partner delivers written notice
(the "Contest Notice") to each other Partner that it contests such notice of
breach or default, such breach or default shall not constitute an Adverse Act
unless and until (and assuming that such breach or default has not theretofore
been cured in full and that any applicable cure period has expired) there is a
Final Determination that such Partner's actions or failures to act constituted
such a breach or default; and provided further that (A) this clause (iii) shall
-------- -------
not apply in the event of a breach of Section 8.2(a) hereof, which breach shall
constitute an Adverse Act (if at all) pursuant to clause (vi) below and (B) this
clause (iii) shall not apply in the event of a breach of Section 8.2(e), which
breach shall constitute an Adverse Act (if at all) pursuant to clause (viii)
below;
-5-
<PAGE>
(iv) The Bankruptcy of such Partner (excluding any Special Limited
Partner) or the occurrence of any other event which would permit a trustee or
receiver to acquire control of the affairs or assets of such Partner (excluding
any Special Limited Partner);
(v) An IXC Transaction occurs, or has occurred and is continuing, with
respect to such Partner;
(vi) The occurrence of, or the existence of, any event with respect to
such Partner (A) that causes such Partner or the Partnership to become a BOC or
(B) that causes the Partnership to become a BOC Affiliated Enterprise or an
entity subject to any restriction or limitation under Section II of the MFJ,
provided, however, that (x) in the case of an event specified in clause (B)
- - -------- --------
above, such event must have a material adverse effect on the business, assets,
liabilities, results of operations, financial condition or prospects of the
Partnership and (y) no Adverse Act shall be considered to have occurred if such
Partner has taken actions which have cured the event that would otherwise have
constituted an Adverse Act under clause (B) of this clause (vi) within ninety
(90) days following its receipt of notice from any other Partner of the
occurrence of such event; and provided further that if, within ninety (90) days
-------- -------
after the date written notice of such occurrence has been given to such Partner,
such Partner delivers a Contest Notice to each other Partner that it contests
such occurrence (or contests whether such occurrence constitutes an Adverse Act
under this clause (vi)), such occurrence shall not constitute an Adverse Act
unless and until (and assuming that such event has not theretofore been cured in
full) there is a Final Determination that such occurrence constitutes an Adverse
Act under this clause (vi);
(vii) The occurrence of a Change in Control of such Partner without
the prior written consent of all Group Partners, provided that the occurrence of
--------
a Change in Control of such Partner prior to the date occurring 180 days
following the Initial Buildout Completion Date shall constitute an Adverse Act
unless consented to by all Partners;
(viii) APC or WirelessCo commits, or has committed, a breach of
Section 8.2(e); or
(ix) Such Partner otherwise causes a dissolution of the Partnership in
contravention of the terms of this Agreement (other than solely by reason of the
Bankruptcy of such Partner).
An "Adverse Partner" is any Partner with respect to which an Adverse
Act has occurred.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls" (including its correlative meanings
"controlled by" and "under common control with") shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person,
-6-
<PAGE>
whether through the ownership of voting securities, by contract or otherwise.
No partner of WirelessCo shall be deemed an Affiliate of WirelessCo unless such
partner, together with its Controlled Affiliates, owns seventy-five percent
(75%) or more of the voting percentage interests of WirelessCo.
"Agreement" or "Partnership Agreement" means this Second Amended and
Restated Limited Partnership Agreement, including all Schedules hereto, as
amended from time to time.
"Allocation Year" means (i) the period commencing on the effective
date of this Agreement and ending on December 31, 1995, (ii) any subsequent
twelve (12) month period commencing on January 1 and ending on December 31, or
(iii) any portion of the period described in clauses (i) or (ii) for which the
Partnership is required to allocate Profits, Losses, and other items of
Partnership income, gain, loss or deduction pursuant to Section 3. An Allocation
Year shall end on each date on which a recalculation of Percentage Interests is
made pursuant to Section 2.5(a)(ii), and a new Allocation Year shall begin on
the subsequent day.
"APC Preferred Capital" means the remainder, if any, of (i) the
aggregate Additional Capital Contributions made by APC pursuant to Section
2.3(c)(iii) minus (ii) the cumulative amount of money distributed to APC
pursuant to Section 4.1(b). If all or any portion of APC's Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the APC Preferred Capital to the extent it relates to the Transferred
Interest.
"Available Cash" means as of any date the cash of the Partnership as
of such date less such portion thereof as the Managing Partner determines to
reserve for Partnership expenses, debt payments, capital improvements,
replacements, and contingencies.
"Bankruptcy" means, with respect to any Person, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means,
with respect to any Person, the inability of such Person generally to pay its
debts as such debts become due (other than any obligation of such Person to make
Capital Contributions under this Agreement), or an admission in writing by such
Person of its inability to pay its debts generally or a general assignment by
such Person for the benefit of creditors; the filing of any petition or answer
by such Person seeking to adjudicate it bankrupt or insolvent, or seeking for
itself any liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of such Person or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking, consenting to, or acquiescing in the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
such Person or for any substantial part of its property; or corporate action
taken by such Person to authorize any of the actions set forth above. An
"Involuntary Bankruptcy" means, with respect to any Person, without the consent
or acquiescence of such Person, the entering of an order for relief or approving
a petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or other similar
-7-
<PAGE>
relief under any present or future bankruptcy, insolvency or similar statute,
law or regulation, or the filing of any such petition against such Person which
petition shall not be dismissed within ninety (90) days, or, without the consent
or acquiescence of such Person, the entering of an order appointing a trustee,
custodian, receiver or liquidator of such Person or of all or any substantial
part of the property of such Person which order shall not be dismissed within
sixty (60) days.
"BOC" means "BOC" or "Bell Operating Companies" as defined in Section
IV.C of the MFJ.
"BOC Affiliated Enterprise" has the same meaning as the term
"affiliated enterprise" as used with respect to "BOC" or "Bell Operating
Companies" in Section II.D of the MFJ.
"Business Day" means a day of the year on which banks are not required
or authorized to close in the State of New York.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of Profits
and any items in the nature of income or gain which are specially allocated
pursuant to Section 3.3 or Section 3.4, and the amount of any Partnership
liabilities which are assumed by such Partner or secured by any Property
distributed to such Partner as permitted by this Agreement. The principal
amount of a promissory note which is not readily traded on an established
securities market and which is contributed to the Partnership by the maker of
the note (or a Partner related to the maker of the note within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital
-
Account of any Partner until the Partnership makes a taxable disposition of the
note or until (and to the extent) principal payments are made on the note, all
in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
- -
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property distributed or deemed
to be distributed to such Partner pursuant to any provision of this Agreement,
such Partner's distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 3.3 or
Section 3.4, and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such Partner to
the Partnership.
(iii) In the event all or a portion of an Interest is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the Transferred
Interest.
(iv) In determining the amount of any liability for purposes of the
definitions of "Additional Capital Contributions" and "Original Capital
Contribution" and
-8-
<PAGE>
subparagraphs (i) and (ii) of this definition of "Capital Account," there shall
be taken into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Managing Partner determines
that it is prudent to modify the manner in which the Capital Accounts, or any
debits or credits thereto (including debits or credits relating to liabilities
which are secured by contributed or distributed property or which are assumed by
the Partnership or any Partner), are computed in order to comply with such
Regulations, the Managing Partner may make such modification, provided that it
--------
is not likely to have a material effect on the amounts distributable to any
Partner pursuant to Section 14 upon the dissolution of the Partnership. The
Managing Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
-
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b). Any action permitted to be taken by the
Managing Partner under this paragraph shall require the prior written consent of
all Partners.
"Capital Contribution" means, with respect to any Partner, the amount
of money and the initial Gross Asset Value of any property (other than money)
contributed or deemed to be contributed to the Partnership with respect to the
Interest held by such Partner.
"Carrier" has the meaning set forth in the definition of "IXC" below.
"Change in Control" means, with respect to any Partner that has a
Parent other than itself, such Partner's ceasing to be a Subsidiary of any
Parent of such Partner. With respect to APC, a "Change in Control" shall be
deemed to occur if fifty percent (50%) or more of the outstanding voting
securities of APC are owned by Persons other than (i) the current stockholders
of APC and their immediate families, (ii) Persons who currently are officers or
directors of APC or the Partnership and their immediate families, and (iii)
trusts solely for the benefit of any of the foregoing Persons or any nonprofit
organization, provided that Persons described in clauses (i) and (ii) above
--------
retain voting control over such securities.
"Chief Executive Officer" means the chief executive officer of the
Partnership, including any interim chief executive officer.
"Code" means the Internal Revenue Code of 1986.
"Comcast" means Comcast Telephony Services, a Delaware general
partnership.
-9-
<PAGE>
"Consumer Price Index" means the Consumer Price Index "All Urban
Consumers: U.S. city average, all items" (1982-1984 = 100) published by the
Bureau of Labor Statistics of the United States Department of Labor, or any
equivalent successor or substitute index selected by the Managing Partner and
published by the Bureau of Labor Statistics or a successor or substitute
governmental agency selected by the Managing Partner.
"Contest Notice" has the meaning set forth in clause (iii) of the
definition of "Adverse Act."
"Controlled Affiliate" of any Person means any Parent of such Person
and each Subsidiary of such Parent. As used in Sections 6, 8.1(b), 8.2(a),
8.2(b), 8.2(c) and 8.2(d) the term "Controlled Affiliate" shall also include any
Affiliate of a Person that such Person or any Parent of such Person can directly
or indirectly unilaterally cause to take or refrain from taking any of the
actions required, prohibited or otherwise restricted by such Section, whether
through ownership of voting securities, contractually or otherwise. As used in
Section 12.4, the term "Controlled Affiliate" shall also include any Affiliate
of a Person that such Person or any Parent of such Person can directly or
indirectly unilaterally cause to take or refrain from taking any action
regarding the Partnership, whether through ownership of voting securities,
contractually or otherwise. Except solely for purposes of Sections 6.1, 6.2 and
6.3 under which Controlled Affiliate shall include, with respect to WirelessCo,
any general partner of WirelessCo for so long as it is a general partner of
WirelessCo, no partner of WirelessCo shall be deemed a Controlled Affiliate of
WirelessCo unless such partner, together with its Controlled Affiliates, owns
seventy-five percent (75%) or more of the voting percentage interests of
WirelessCo.
"Debt" means (i) any indebtedness for borrowed money or deferred
purchase price of property as evidenced by a note, bond, or other instrument,
(ii) obligations to pay money as lessee under capital leases, (iii) obligations
to pay money secured by any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind existing on any asset owned or held by the
Partnership whether or not the Partnership has assumed or become liable for the
obligations secured thereby, (iv) any obligation under any interest rate swap
agreement (the principal amount of such obligation shall be deemed to be the
notional principal amount on which such swap is based), and (v) obligations
under direct or indirect guarantees of (including obligations (contingent or
otherwise) to assure a creditor against loss in respect of) indebtedness or
obligations of the kinds referred to in clauses (i), (ii), (iii) and (iv) above,
provided that Debt shall not include obligations in respect of any accounts
- - --------
payable that are incurred in the ordinary course of the Partnership's business
and are not delinquent or are being contested in good faith by appropriate
proceedings.
"Depreciation" means, for each Allocation Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Allocation Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning
-10-
<PAGE>
adjusted tax basis; provided, however, that if the adjusted basis for federal
-------- -------
income tax purposes of an asset at the beginning of such Allocation Year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Managing Partner.
"Dispose" (including its correlative meanings, "Disposed of",
"Disposition" and "Disposed"), with respect to any Interest means to Transfer,
pledge, hypothecate or otherwise dispose of such Interest, in whole or in part,
voluntarily or involuntarily, except by operation of law in connection with a
merger, consolidation or other business combination of the Partnership and
except that such term shall not include any pledge or hypothecation of, or
granting of a security interest in, an Interest that is approved by the
Managing Partner in connection with any financing obtained on behalf of the
Partnership, or that otherwise is permitted under the terms of this Agreement.
"ESMR" means any commercial mobile radio service, and the resale of
such service, authorized under the rules for Specialized Mobile Radio Services
designated under Subpart S of Part 90 of the FCC's rules in effect on the date
hereof, including the networking, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"Exclusive Limited Partner" means any Limited Partner that is not also
a General Partner.
"Existing Business" means the License and the activities conducted
prior to the date of this Agreement by APC in the establishment of the business
to be operated by the Partnership, including the assets identified on Schedule
1.10(a) hereto, but excluding those assets transferred by the Partnership
pursuant to Section 9.14 of the Purchase Agreement and those activities
specifically contemplated as not constituting a part of the Existing Business
under Section 10.14 of the Purchase Agreement.
"Experimental Licenses" means the experimental authorizations issued
by the FCC to the Partnership or APC (including the experimental licenses issued
to APC on February 23, 1990, and July 31, 1990) for purposes of constructing,
owning and operating experimental PCS systems.
"FCC" means the Federal Communications Commission.
"FCC Approval" means the consent or approval of the FCC in connection
with the operation of the provisions of this Agreement, which approval shall be
deemed to have been received upon the issuance of any FCC order or ruling, or
the failure by the FCC to take any action within applicable time periods,
regardless of whether any period for reconsideration has expired or whether any
period for seeking judicial review of such FCC action or inaction has expired or
whether any such review is pending; provided if any Governmental Authority has
--------
issued a stay or injunction with
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<PAGE>
respect to the operation of a provision of this Agreement, FCC Approval shall
not be deemed to have been received for so long as such stay or injunction is in
effect.
"FCC Payments" means the payments (including principal and interest)
to be made by the Partnership to the FCC in payment for the License (it being
understood that FCC Payments shall not include any costs incurred by the
Partnership in defending or otherwise maintaining the License).
"FCC Principal Payments" means the amount of the FCC Payments
attributable to the principal portion thereof.
"FCC Interest Payments" means the amount of the FCC Payments
attributable to the interest portion thereof.
"Final Determination" means (i) a determination set forth in a binding
settlement agreement between the Partnership and the Partner alleged to have
committed the Adverse Act, which settlement agreement has been approved by the
Managing Partner in accordance with Section 8.2(b), or (ii) a final judicial
determination, not subject to further appeal, by a court of competent
jurisdiction.
"Fiscal Year" means (i) the period commencing on the date of this
Agreement and ending on December 31, 1995, (ii) any subsequent twelve (12) month
period commencing on January 1, and ending on December 31, or (iii) the period
commencing on the immediately preceding January 1 and ending on the date on
which all Property is distributed to the Partners pursuant to Section 14.2.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"General Partner" means any Person who (i) is referred to as such in
the first paragraph of this Agreement or has become a General Partner pursuant
to the terms of this Agreement, and (ii) has not, at any given time, ceased to
be a General Partner pursuant to the terms of this Agreement. Unless the
context indicates otherwise, "General Partner" also shall mean all such Persons.
"Governmental Authority" means any foreign, federal, state or local
court, administrative agency, board, bureau or commission or other governmental
department, authority or instrumentality.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the Managing
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<PAGE>
Partner in accordance with Section 8.2(b); provided, however, that the Gross
-------- --------
Asset Value of each asset deemed contributed to the Partnership for federal
income tax purposes as a result of the deemed termination of the Partnership
pursuant to Code Section 708(b)(1)(b) caused by the sale of a portion of the
Post's interest to APC and WirelessCo shall be that asset's adjusted basis for
federal income tax purposes in the hands of the contributing Partner on the date
of such deemed contribution;
(ii) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their gross fair market value, as determined by the Managing Partner as
of the following times: (A) the acquisition of an Interest by any new Partner
in exchange for more than a de minimis Capital Contribution; (B) the
----------
distribution by the Partnership to a Partner of more than a de minimis amount of
----------
Property as consideration for an Interest; (C) the liquidation of the
Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); (D)
the recalculation of Percentage Interests pursuant to Section 2.5(a)(ii) as of
the Optional Funding Date with respect to which such recalculation is made; and
(E) the conversion of a General Partner to an Exclusive Limited Partner if, and
only if, in the judgment of the Managing Partner such adjustment would either
cause the Person who is being converted to an Exclusive Limited Partner to have
a deficit balance in its Capital Account or an increase the amount of such a
deficit balance;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be adjusted to equal the gross fair market value of such asset
on the date of distribution, as determined by the distributee and the Managing
Partner in accordance with Section 8.2(b);
(iv) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
-
definition of "Profits" and "Losses" and Section 3.3(g); provided, however, that
-------- -------
Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent the Managing Partner determines that an adjustment pursuant to
subparagraph (ii) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iv) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
"Group Partner" means any Partner other than a Special Limited
Partner.
"Initial Buildout Completion Date" means the earlier to occur of (i)
December 14, 1997 or (ii) the date on which the Partnership has fully satisfied
the construction requirements
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<PAGE>
applicable to the five-year buildout period specified in Section 24.203(a) of
the FCC rules and regulations and has filed with the FCC appropriate
documentation demonstrating its compliance with such requirements pursuant to
Section 24.203(c) of the FCC rules and regulations.
"Initial Buildout Period" means the period from the date hereof until
the Initial Buildout Completion Date.
"Initial Five-Year Period" means the period from the date of this
Agreement through the fifth anniversary of the date of this Agreement.
"Intermediate Subsidiary" means, with respect to any Parent of a
Partner, a Subsidiary of such Parent that holds a direct or indirect equity
interest in such Partner.
"Interest" means, as to any Partner, all of the interests of such
Partner in the Partnership, including any and all benefits to which the holder
of an interest in the Partnership may be entitled as provided in this Agreement
and under the Act, together with all obligations of such Partner to comply with
the terms and provisions of this Agreement.
"IXC" means each of AT&T Corp., MCI Communications Corporation and
British Telecommunications plc (each, a "Carrier") and each of their respective
Affiliates.
"IXC Transaction" means, with respect to any Partner, that (i) an IXC
has become the beneficial owner of an equity interest in such Partner or an
equity interest in any Intermediate Subsidiary (other than a Publicly Held
Intermediate Subsidiary) of any Parent of such Partner, (ii) an IXC has become
the beneficial owner of securities representing fifteen percent (15%) or more of
the voting power of the outstanding voting securities of any Parent of such
Partner or any Publicly Held Intermediate Subsidiary of such Parent, and, if
such Parent or Publicly Held Intermediate Subsidiary is subject to a State
Statute or has a shareholder rights plan, such Parent or Publicly Held
Intermediate Subsidiary or the board of directors or other governing body of
such Parent or Publicly Held Intermediate Subsidiary has approved such
beneficial ownership or otherwise has taken action to waive any applicable
restrictions with respect to such ownership under any State Statute or to permit
the exercise by the IXC of its rights under any shareholder rights plan, (iii)
an IXC has become the beneficial owner of securities representing twenty-five
percent (25%) or more of the voting power of the outstanding voting securities
of any such Parent or Publicly Held Intermediate Subsidiary, provided that, if
--------
such IXC is an Affiliate of a Carrier, such Affiliate has identified a Carrier
as a Person controlling such Affiliate either (a) pursuant to General
Instruction C to Schedule 13D, in a Schedule 13D (filed with the Securities and
Exchange Commission in accordance with Section 13(d) of the Securities Exchange
Act of 1934) or (b) pursuant to General Instruction C to Schedule 14D-1, in a
Schedule 14D-1 (filed with the Securities Exchange Commission in accordance with
Section 14(d) of the Securities Exchange Act of 1934), (iv) any such Parent or
Publicly Held Intermediate Subsidiary has sold or issued beneficial ownership in
any equity interest in such Parent or Publicly Held Intermediate Subsidiary to
an IXC or granted to an IXC any rights with respect to the governance of such
Parent or Publicly Held Intermediate Subsidiary that are not possessed
-14-
<PAGE>
generally by the owners of outstanding equity interests in such Parent or
Publicly Held Intermediate Subsidiary; or (v) such Partner has otherwise become
an Affiliate of an IXC. Solely for the purposes of this definition, the terms
"beneficial owner" and "beneficial ownership" shall have the same meaning as in
Rule 13d-3 under the Securities Exchange Act of 1934.
"Letters of Credit" means the irrevocable letters of credit provided
to WirelessCo by each partner of WirelessCo pursuant to Section 2.3(b)(ii) of
the Agreement of Limited Partnership of WirelessCo, L.P., dated as of October
24, 1994.
"Licensed Rights" means rights to use Technical Information that have
been licensed to the Partnership.
"Lien" means any lien, pledge, claim, encumbrance, mortgage or
security interest in real or personal property.
"Limited Partner" means any Person (i) who is referred to as such in
the first paragraph of this Agreement or who has become a substitute Limited
Partner pursuant to the terms of this Agreement, and (ii) who, at any given
time, holds an Interest. "Limited Partners" means all such Persons.
"Managing Partner" means the General Partner that will conduct the
business and affairs of the Partnership pursuant to Section 5.1. From the date
of this Agreement until the last day prior to the beginning of the WirelessCo
Majority Period, APC shall be the Managing Partner, and thereafter, subject to
FCC Approval, if required, WirelessCo shall be the Managing Partner; provided
--------
that APC shall continue to serve as Managing Partner until all required FCC
Approvals relating to WirelessCo becoming Managing Partner have been received.
"MFJ" means the Modification of Final Judgment agreed to by the
American Telephone and Telegraph Company and the U.S. Department of Justice and
approved by the U.S. District Court for the District of Columbia on August 24,
1982, as reported in United States v. Western Electric Company, Inc., et al.,
------------------------------------------------------
552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom Maryland v. United States, 460
-------------------------
U.S. 1001 (1983) and any subsequent orders or amendments issued in connection
therewith. Any reference in this Agreement to Section II of the MFJ shall also
include any subsequent statute, rule, regulation, order or decree which modifies
or supersedes Section II of the MFJ (or any material portion thereof) and
imposes any restriction(s) substantially similar to any of the material
restrictions imposed by Section II of the MFJ.
"MTA" means a Major Trading Area as defined in FCC rules to be
codified at 47 C.F.R. (S) 24.13.
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<PAGE>
"Nonrecourse Deductions" has the meaning set forth in Section 1.704-
2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section 1.704-
2(b)(3) of the Regulations.
"Original Capital Contribution" means, with respect to each Partner,
the Capital Contribution made by such Partner (or its predecessor in interest)
as described in Section 2.2(a). In the event all or a portion of an Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Original Capital Contribution of the transferor to the extent it
relates to the transferred Interest.
"Parent" means (i) with respect to WirelessCo (and its Controlled
Affiliates (other than such Parent)), WirelessCo, (ii) with respect to APC (and
its Controlled Affiliates (other than such Parent)), APC, and (iii) with respect
to the Post (and its Controlled Affiliates (other than such Parent)) the Post.
With respect to any other Person hereafter admitted to the Partnership as a
Partner, the Parent with respect to such Partner shall be the Person identified
as such in a Schedule to be attached to this Agreement in connection with the
admission of such Partner. In the event of a Permitted Transfer, the new Parent
of the applicable Partner immediately following such Permitted Transfer will be
the ultimate parent entity (as determined in accordance with the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 and the rules and regulations
promulgated thereunder (the "HSR Act")) of such Partner (or such Partner if it
is its own ultimate parent entity); provided that if such ultimate parent entity
--------
is not a Publicly Held Person then the next highest corporate entity in the
ownership chain from such ultimate parent entity to and including such Partner
which is a Publicly Held Person shall be deemed to be the new Parent. If there
is no intermediate Publicly Held Person or if the ultimate parent entity is an
individual, the Parent shall be the highest entity in the ownership chain from
the ultimate parent entity to and including such Partner which is not an
individual. For purposes of the definition of Controlled Affiliate, the Parent
of a Person that is neither a Partner nor a Controlled Affiliate of a Partner is
the ultimate parent entity (as determined in accordance with the HSR Act) of
such Person.
"Partner Nonrecourse Debt" has the meaning set forth in Section 1.704-
2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
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<PAGE>
"Partners" means all General Partners and all Limited Partners.
"Partner" means any one of the Partners.
"Partnership" means American PCS, L.P., a Delaware limited
partnership, the partnership continued pursuant to this Agreement, and any
partnership continuing the business of the Partnership in the event of
dissolution as provided herein.
"Partnership Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"PathGuard Technology" means that technology, sometimes known for non-
commercial purposes as the F.A.S.T. Technology, that is the subject of
Application Number 07/874,370 filed on April 27, 1992, in the United States
Patent and Trademark Office by J. Barclay Jones, together with any other
proprietary rights required in order to utilize such technology (such as
copyrights in software and the like).
"PCS" means a radio communications system authorized under the rules
for broadband personal communications services designated as Subpart E of Part
24 of the FCC's rules, including the network, marketing, distribution, sales,
customer interface and operations functions relating thereto.
"PCS Auction" means the series of simultaneous multiple round auctions
for broadband PCS licenses to be conducted by the FCC under the authority of
Section 309(j) of the Communications Act of 1934, 47 U.S.C. (S) 309(j) (1993),
in accordance with the rules promulgated thereunder by the FCC.
"Percentage Interest" means, with respect to APC, WirelessCo and the
Post, 49.5%, 49.0% and 1.5%, respectively; provided that such Percentage
--------
Interests may be adjusted from time to time as provided in Sections
2.3(c)(ii)(B) and 2.5(a)(ii), provided that no Partner's Percentage Interest
--------
shall exceed fifty percent (50%) without prior FCC Approval, if required. If
all or any portion of an Interest is Transferred in accordance with the terms of
this Agreement (including a Transfer of all or a portion of APC's Interest to
WirelessCo and vice versa), the transferee shall succeed to the Percentage
Interest of the transferor to the extent it relates to the Transferred Interest.
"Person" means any individual, partnership, corporation, trust, or
other entity.
"Post-Buildout Period" means the period beginning on the Initial
Buildout Completion Date and ending on the last day preceding the beginning of
the WirelessCo Majority Period.
"Preferred Return" means, with respect to WirelessCo or APC, as the
case may be, as of any date of determination, an amount computed like simple
interest at the rate of fourteen
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<PAGE>
percent (14%), per annum, on the amount from time to time of WirelessCo's
Preferred Capital or APC Preferred Capital, as the case may be. Such amount
shall be cumulative, and shall be determined on the basis of a year of 365 or
366 days, as the case may be, for the actual number of days in the period for
which such Preferred Return is being determined. If all or any portion of an
Interest is Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the accrued but unpaid Preferred Return, if any, to
the extent it relates to the Transferred Interest.
"Principal Business" means the principal business of WirelessCo or of
any partner of WirelessCo (other than a Wireless Business).
"Profits" and "Losses" means, for each Allocation Year, an amount
equal to the Partnership's taxable income or loss for such Allocation Year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of "Profits" and "Losses" shall be added to such taxable
income or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
-
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses," shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Allocation Year, computed in
accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) is required pursuant to
Regulations Section 1.704-
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<PAGE>
1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Partner's Interest,
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Profits or Losses; and
(vii) Notwithstanding any other provision of this definition of
"Profits" or "Losses," any items which are specially allocated pursuant to
Section 3.3 or Section 3.4 shall not be taken into account in computing Profits
or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Sections 3.3 and 3.4 shall be
determined by applying rules analogous to those set forth in this definition of
"Profits" and "Losses."
"Property" means all real and personal property acquired by the
Partnership and any improvements thereto, and shall include both tangible and
intangible property.
"Publicly Held" means, with respect to any Person, that such Person
has a class of equity securities registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934.
"Publicly Held Intermediate Subsidiary" means, with respect to any
Parent of a Partner, an Intermediate Subsidiary of such Parent that is Publicly
Held.
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code.
"Special Limited Partner" means any Limited Partner whose Percentage
Interest is less than two and one-half percent (2 1/2%).
"Sprint Brand" means the trademark "Sprint" together with the related
"Diamond" logo.
"Sprint" means Sprint Communications Company, L.P., a Delaware limited
partnership.
"State Statutes" means any business combination statute, anti-takeover
statute, fair price statute, control share acquisition statute or any other
state statute or regulation that contains any similar prohibition, limitation,
obligation, restriction or other provision adopted and in effect in the
jurisdiction of organization of a Person that affects the rights of any other
Person that acquires a specified percentage ownership interest in such Person
without the consent or approval of the board of directors or other governing
body of such Person.
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<PAGE>
"Subsidiary" of any Person means a corporation, company or other
entity (i) more than fifty percent (50%) of whose outstanding shares or equity
securities (voting or nonvoting) are, as of the time of such determination,
owned or controlled, directly or indirectly through one or more Subsidiaries, by
such Person, and the shares or equity securities so owned entitle such Person
and/or its Subsidiaries to elect at least a majority of the members of the board
of directors or other managing authority of such corporation, company or other
entity notwithstanding the vote of the holders of the remaining shares or equity
securities so entitled to vote or (ii) which does not have outstanding shares or
securities, as may be the case in a partnership, joint venture or unincorporated
association, but more than fifty percent (50%) of whose ownership interest is,
as of the time of such determination, owned or controlled, directly or
indirectly through one or more Subsidiaries, by such Person, or in which the
ownership interest so owned entitles such Person and/or Subsidiaries to make the
decisions for such corporation, company or other entity.
"Technical Information" means all technical information developed or
owned by the Partnership or licensed to the Partnership, regardless of form and
however transmitted and shall include, among other forms, computer software,
including computer program code, and system and user documentation, drawings,
illustrations, diagrams, reports, designs, specifications, formulae, know-how,
procedural protocols and methods and manuals.
"Technical Information Rights" means all intellectual property rights
which protect or cover Technical Information.
"Transfer" means, as a noun, any sale, exchange, assignment or
transfer and, as a verb, to sell, exchange, assign or transfer.
"Unreturned Capital" means, for any Partner as of any date, the
remainder, if any of (i) the aggregate Original Capital Contribution and
Additional Capital Contributions made by such Partner (or its predecessors in
interest) pursuant to (or as described in) Sections 2.2, 2.3, 2.5 and 6.1(b)
(excluding, however, Additional Capital Contributions made by APC pursuant to
Section 2.3(a)(ii) and by WirelessCo pursuant to Section 2.3(b)(ii)), minus (ii)
the cumulative amount of money and the Gross Asset Value of any Property (other
than money) distributed to such Partner (or its predecessors in interest)
pursuant to Section 4.1(c). In the event all or a portion of an Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Unreturned Capital of the transferor to the extent such
Unreturned Capital relates to the Transferred Interest.
"Voluntary Bankruptcy" has the meaning set forth in the definition of
"Bankruptcy."
"Washington-Baltimore MTA" means the MTA encompassing Washington, D.C.
and Baltimore, Maryland, which MTA is identified in the FCC Public Notice
regarding the PCS Auction as Market No. M-10 (Report No. AUC-94-04, Auction No.
4).
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<PAGE>
"Wireless Business" means the use of radio spectrum for cellular, PCS,
ESMR, paging, mobile telecommunications and any other voice or data wireless
services, whether fixed or mobile, conducted in the Washington-Baltimore MTA,
but not including the delivery of video or the provision of satellite or
broadband microwave transmission services.
"WirelessCo Loans" means any loans made by WirelessCo to the
Partnership pursuant to Section 2.4.
"WirelessCo Majority Period" means the period beginning on the earlier
to occur of (i) the second anniversary of the Initial Buildout Completion Date
or (ii) the earliest date on which WirelessCo's Percentage Interest exceeds
fifty percent (50%); provided, that in no event shall the WirelessCo Majority
--------
Period begin prior to the Initial Buildout Completion Date and, provided,
--------
further, that in no event shall the WirelessCo Majority Period begin prior to
- - -------
the receipt of all required FCC Approvals relating thereto.
"WirelessCo's Preferred Capital" means the remainder, if any, of (i)
the aggregate Additional Capital Contributions made by WirelessCo pursuant to
Section 2.3(b)(ii) minus (ii) the cumulative amount of money distributed to
WirelessCo pursuant to Section 4.1(b). If all or any portion of WirelessCo's
Interest is Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to WirelessCo's Preferred Capital to the extent it
relates to the Transferred Interest.
1.11 Additional Definitions.
----------------------
Defined Term Defined in
------------ ----------
"Accepting Offerees" Section 12.4(d)
"Additional Cash Notice" Section 2.4(c)(iii)
"Additional Cash Requirements" Section 2.4(c)(i)
"Adjusted Capital Account" Section 3.5
"Adverse Proceedings" Section 8.2(a)
"Agents" Section 6.5(a)
"Annual Budget" Section 5.2(b)
"APC Special Contributions" Section 2.3(a)(ii)
"Approved Business Plan" Section 5.2(b)
"Budgeted Cash Requirements" Section 2.4(b)
"Business Plan" Section 5.2(a)
"Buy-Sell Price" Section 11.2(a)
"Cash Requirements" Section 2.4(a)
"Certificate" Section 1.6(a)
"Comcast Area" Section 6.3(g)
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<PAGE>
"Competitive Activity" Section 6.1(a)
"Confidential Information" Section 6.5(a)
"Contribution Date" Section 2.3(c)(ii)(A)
"Damages" Section 11.1(a)
"Default Budget" Section 5.2(c)
"Dilution Percentage" Sections 2.3(c)(ii)(B)
and 2.5(a)(ii)
"Election Notice" Section 11.2(a)
"Election Period" Section 11.2(b)
"Firm Offer" Section 12.4(b)
"First Appraiser" Section 11.4
"Free to Sell Period" Section 12.4(f)
"Funding Date" Section 2.4(b)
"Funding Notice" Section 2.4(c)(iii)
"General Partner Percentage
Interests" Section 2.1
"Gross Appraised Value" Section 11.4
"Hazardous Substances" Section 9.2(j)(i)
"Initial Business Plan" Section 5.2(a)
"Initial Offer" Section 14.7(b)
"Interested Person" Section 8.2(b)
"In-Territory Customers" Section 6.3(g)
"In-Territory Distributors" Section 6.3(g)
"License" Section 1.3(a)
"Liquidating Events" Section 14.1(a)
"Limited Partner Percentage
Interests" Section 2.1
"Loan Amount" Section 2.4(b)
"Loan Notice" Section 2.4(b)
"Net Equity" Section 11.3
"Net Equity Notice" Section 11.3
"Offer Notice" Section 12.4(b)
"Offer Period" Section 12.4(c)
"Offer Price" Section 12.4(a)
"Offered Interest" Section 12.4
"Offerees" Section 12.4(b)
"Original Agreement" Preamble
"Optional Funding Date" Section 2.5(a)(i)
"Optional Funding Notice" Section 2.5(a)(i)
"Ownership Restrictions" Section 8.2(c)
"Partner Loan" Section 2.7
"Permitted Transfer" Section 12.2
"Proposed Budget" Section 5.2(c)
"Proposed Business Plan" Section 5.2(c)
"Purchase Agreement" Preamble
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<PAGE>
"Purchase Commitment" Section 11.2(b)
"purchase commitment" Section 12.4(d)
"Purchase Notice" Section 11.2(b)
"Purchase Offer" Section 12.4(a)
"Purchaser" Section 12.4(a)
"Purchasing Partner" Section 11.2(b)
"receiving party" Section 6.5(a)
"Regulatory Allocations" Section 3.4
"Remaining Deficit Balance" Section 14.3
"Restricted Party" Section 6.5(a)
"Sale Notice" Section 12.4(e)
"Second Appraiser" Section 11.4
"Seller" Section 11.4
"Senior Credit Agreement" Section 2.7
"Tagalong Interest" Section 12.5(a)
"Tagalong Offer" Section 12.5(a)
"Tagalong Period" Section 12.5(a)
"Tagalong Purchaser" Section 12.5(a)
"Tagalong Transaction" Section 12.5(a)
"Tax Matters Partner" Section 10.3(a)
"Third Appraiser" Section 11.4
"Transferring Partner" Section 11.5(a)
1.12 Terms Generally.
---------------
The definitions in Section 1.10 and elsewhere in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "herein," "hereof" and "hereunder" and words of similar import refer
to this Agreement (including the Schedules hereto) in its entirety and not to
any part hereof unless the context shall otherwise require. All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Unless the context shall otherwise
require, any references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any corresponding provisions of successor
statutes or regulations). Any reference in this Agreement to a "day" or number
of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
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<PAGE>
SECTION 2
PERCENTAGE INTERESTS; PARTNERS' CAPITAL CONTRIBUTIONS;
WIRELESSCO FINANCING OBLIGATIONS
2.1 Percentage Interests; Preservation of Percentages of Interests
--------------------------------------------------------------
Held as General Partners and as Limited Partners.
------------------------------------------------
The initial Percentage Interest of each of APC, WirelessCo and the
Post as of the date of this Agreement shall be 49.5%, 49.0% and 1.5%,
respectively, and represents, with respect to APC, the sum of the "General
Partner Percentage Interest" and "Limited Partner Percentage Interest" of APC
and, with respect to WirelessCo and the Post, the "Limited Partner Percentage
Interest" of WirelessCo and the Post, respectively. Except as expressly
provided by Sections 2.3(c)(ii)(B) and 2.5(a)(ii) or as may result from a
Transfer of Interests required or permitted by this Agreement, the Percentage
Interest of a Partner shall not be subject to increase or decrease without such
Partner's prior consent. For purposes of this Agreement, each Partner is
treated as though it holds a single Interest, even though such Partner (unless
it is or becomes an Exclusive Limited Partner) holds ninety-nine percent (99.0%)
of its Interest as a General Partner and one percent (1.0%) of its Interest as a
Limited Partner. Each Partner, unless it is or becomes an Exclusive Limited
Partner, will hold ninety-nine percent (99.0%) of its Interest as a General
Partner and one percent (1.0%) of its Interest as a Limited Partner. In the
event that a General Partner Transfers all or any portion of its Interest
pursuant to this Agreement, ninety-nine percent (99.0%) of the aggregate
Interest so acquired by any Person shall be treated as attributable to the
Interest held by the transferring Partner as a General Partner and one percent
(1.0%) of the aggregate Interest so acquired shall be treated as attributable to
the Interest held by the transferring Partner as a Limited Partner. In the
event that the Interest of a General Partner is otherwise increased or decreased
pursuant to this Agreement, the amount of the increase or decrease, as the case
may be, shall be allocated ninety-nine percent (99.0%) to the Interest held by
such Partner as a General Partner and one percent (1.0%) to the Interest held by
such Partner as a Limited Partner. In the case of an Exclusive Limited Partner,
such Partner shall be deemed for all purposes under this Agreement to hold one
hundred percent (100%) of its Interest as a Limited Partner, but only so long as
such Partner is an Exclusive Limited Partner.
2.2 Partners' Previous Capital Contributions.
----------------------------------------
(a) Original Capital Contributions. Upon formation of the
------------------------------
Partnership, (i) APC contributed to the capital of the Partnership its entire
interest in the Experimental Licenses, which APC and the Post agreed had a Gross
Asset Value on such date of $120,000 and (ii) the Post contributed to the
capital of the Partnership certain consent rights it held with respect to the
services of certain third parties, which APC and the Post agreed had a Gross
Asset Value of $380,000. Upon their purchases of a portion of the Post's
interest in the Partnership, APC and WirelessCo succeeded to their respective
shares of the original capital contribution made by the Post. Accordingly, the
Original Capital Contributions of APC, WirelessCo and the Post as of the date
hereof are as follows:
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<PAGE>
Amount of Original
Partner Capital Contribution
------- --------------------
APC $225,857
WirelessCo $266,000
Post $ 8,143
(b) Additional Contributions Previously Made by APC and the Post.
------------------------------------------------------------
Prior to the acquisition by APC and WirelessCo of the Post's interest in the
Partnership, APC made additional contributions of cash to the capital of the
Partnership in the aggregate amount of $280,000, and the Post made additional
contributions of cash to the capital of the Partnership in the aggregate amount
of $33,080,000. Upon their purchases of the Post's interest in the Partnership,
APC and WirelessCo succeeded to their respective shares of the additional
capital contributions previously made by the Post. Accordingly, APC, WirelessCo
and the Post are considered to have made aggregate Additional Capital
Contributions as of the date hereof in the amounts set forth below:
Amount of Additional
Partner Capital Contribution
------- --------------------
APC $ 9,495,143
WirelessCo $23,156,000
Post $ 708,857
2.3 Additional Capital Contributions During Initial Five-Year Period.
----------------------------------------------------------------
(a) Required Additional Capital Contributions by APC During Initial
---------------------------------------------------------------
Five-Year Period. APC shall be obligated to make Additional Capital
- - ----------------
Contributions to the Partnership of cash in an amount equal to:
(i) the aggregate FCC Principal Payments, plus
(ii) the aggregate FCC Interest Payments (such FCC Interest
Payments being referred to herein as the "APC Special Contributions");
provided that, not later than forty-five (45) days prior to the due date of
- - ---------
any FCC Payment, the Managing Partner shall provide the Partners with written
notice setting forth the due date and amount of such FCC Payment (including the
amount attributable to an FCC Principal Payment and/or FCC
-25-
<PAGE>
Interest Payment) and a request that APC make an Additional Capital Contribution
of cash in an amount equal to such FCC Payment; and provided further that, with
-------- -------
respect to any specific FCC Payment, if APC is unable to obtain financing on
commercially reasonable terms to fund its entire obligation under this Section
2.3(a) with respect to such FCC Payment after using commercially reasonable
efforts to obtain such financing, and APC notifies the Managing Partner and
WirelessCo in writing no later than ten (10) Business Days prior to the date
such FCC Payment is due of its inability to obtain such financing, then APC
shall not be obligated to make an Additional Capital Contribution pursuant to
this Section 2.3(a) with respect to such FCC Payment to the extent it is unable
to obtain such financing. If, pursuant to the second proviso in the preceding
sentence, APC's Additional Capital Contribution obligation with respect to a
specific FCC Payment is reduced, but not eliminated, the Additional Capital
Contribution made by APC with respect to such FCC Payment shall first be applied
against APC's obligation under Section 2.3(a)(ii) with respect to such FCC
Payment and then, to the extent such Additional Capital Contribution exceeds the
amount of the Section 2.3(a)(ii) obligation, against APC's obligation under
Section 2.3(a)(i) with respect to such FCC Payment. Additional Capital
Contributions made pursuant to this Section 2.3(a) shall be made no later than
two (2) Business Days prior to the due date of the FCC Payment to which such
contribution relates and in cash by wire transfer of immediately available
funds; provided that APC shall, no later than five (5) Business Days prior to
--------
the due date of any such FCC Payment, provide evidence reasonably satisfactory
to WirelessCo that APC is financially able to make such Additional Capital
Contribution. Except to the extent the transferee has assumed APC's obligation
under this Section 2.3(a) in connection with the Transfer by APC of all or any
portion of its Interest, APC shall be obligated to make the Additional Capital
Contributions provided for in this Section 2.3(a) regardless of its Percentage
Interest at the time any such Additional Capital Contribution is required to be
made.
(b) Required Additional Capital Contributions by WirelessCo During
--------------------------------------------------------------
Initial Five-Year Period. WirelessCo shall make the following Additional
- - ------------------------
Capital Contributions:
(i) In General. WirelessCo shall be obligated to contribute to the
----------
Partnership cash in an amount equal to the product of (A) 49/51 multiplied by
(B) the amount of the Additional Capital Contributions required to be made by
APC pursuant to Section 2.3(a)(i) (whether or not such Additional Capital
Contributions are then due and payable or are to become due and payable),
determined without reference to the second provision set forth therein.
WirelessCo shall be obligated to make the Additional Capital Contributions
provided for in this Section 2.3(b)(i) regardless of its Percentage Interest at
the time any such Additional Capital Contribution is required to be made.
Additional Capital Contributions made pursuant to this Section 2.3(b)(i) shall
be made in cash by wire transfer of immediately available funds in accordance
with the following procedures:
(A) On or before February 1, 1995, WirelessCo shall contribute to the
Partnership an amount equal to the projected cash needs (other than cash needs
attributable to FCC Payments) of the Partnership during the fiscal quarter
ending March 31, 1995, as reflected in the Initial Business Plan; and
-26-
<PAGE>
(B) Thereafter, and continuing until such time as the amount of the
aggregate Additional Capital Contributions made by WirelessCo pursuant to this
Section 2.3(b)(i) equals WirelessCo's Additional Capital Contribution obligation
under the first sentence of this Section 2.3(b)(i), WirelessCo shall contribute
to the Partnership, within forty (40) days of receipt of a written request from
the Managing Partner an amount equal to the then-current cash needs (other than
cash needs attributable to FCC Payments) of the Partnership, provided that (I)
---------
the Managing Partner will use its best efforts not to make such requests more
often than on a quarterly basis and (II) the amount of the contribution
requested shall not exceed the amount reasonably anticipated to be required to
fund the cash needs (other than cash needs attributable to FCC Payments) of the
Partnership for the ensuing six (6) months as determined by the Managing
Partner.
(ii) Contributions Related to FCC Payments. WirelessCo shall be
-------------------------------------
obligated to contribute to the Partnership cash in an amount equal to any
Additional Capital Contribution APC would be required to make pursuant to
Section 2.3(a) but for the second provision set forth therein to the extent APC
notifies the Managing Partner and WirelessCo of its inability to obtain
financing required for such Additional Capital Contribution as contemplated in
such proviso or otherwise fails to make such Additional Capital Contribution.
Any Additional Capital Contributions required to be made pursuant to this
Section 2.3(a)(ii) shall be made no later than one (1) Business Day prior to the
due date of the FCC Payment to which such contribution relates and in cash by
wire transfer of immediately available funds.
(c) Optional Additional Capital Contributions During Initial Five-Year Period.
-------------------------------------------------------------------------
(i) WirelessCo. During the Initial Five-Year Period, WirelessCo may
----------
elect, to the extent, but only to the extent, permitted by Section 2.4(c)(iii)
to provide funds for Additional Cash Requirements in the form of Additional
Capital Contributions. Any Additional Capital Contribution made pursuant to
this Section 2.3(c)(i) shall be made in cash by wire transfer of immediately
available funds.
(ii) Other Partners.
--------------
(A) Right to Make Proportionate Additional Capital Contribution. If
-----------------------------------------------------------
WirelessCo elects to make an Additional Capital Contribution pursuant to Section
2.3(c)(i), then each other Partner shall be entitled to elect to make a
simultaneous Additional Capital Contribution of cash, the maximum amount of
which shall not exceed the product of (I) the amount of the Additional Capital
Contribution set forth in the Funding Notice delivered by WirelessCo pursuant to
Section 2.4(c)(iii) multiplied by (II) such Partner's Percentage Interest at
such time. If any Partner elects to make an Additional Capital Contribution
pursuant to this Section 2.3(c)(ii)(A), such contribution must be made on the
same date as WirelessCo is required under Section 2.4(c)(iii) to make such
Additional Capital Contribution (a "Contribution Date"), and the amount of the
related Additional Capital Contribution WirelessCo is obligated to make under
Section 2.4(c)(iii) shall be
-27-
<PAGE>
reduced by the amount of any Additional Capital Contribution actually made by
the other Partners pursuant to this Section 2.3(c)(ii)(A).
(B) Adjustment of Percentage Interests. If, as of any Contribution
----------------------------------
Date, any other Partner does not contribute the maximum Additional Capital
Contribution which it is entitled to make pursuant to Section 2.3(c)(ii)(A),
then the Percentage Interests of each such other Partner shall be recalculated,
subject to FCC Approval, if required, as of such Contribution Date in accordance
with this Section 2.3(c)(ii)(B). The new Percentage Interest of each such other
Partner shall be equal to the remainder of (I) such other Partner's Percentage
Interest immediately prior to such Contribution Date minus (II) the Dilution
Percentage, provided, that such Percentage Interest may not be less than zero
--------
percent (0%). For purposes of this Section 2.3(c)(ii)(B), the "Dilution
Percentage" shall be equal to a fraction, expressed as a percentage, the
numerator of which is the excess of (w) the maximum amount of the Additional
- - ---------
Capital Contribution such other Partner was entitled to make under Section
2.3(c)(ii)(A) on the applicable Contribution Date minus (x) the amount of the
Additional Capital Contribution such other Partner actually made pursuant to
Section 2.3(c)(ii)(A) on such Contribution Date, and the denominator of which is
-----------
the sum of (y) the aggregate Additional Capital Contributions (other than APC
Special Contributions) made by the Partners prior to such Contribution Date plus
(z) the aggregate Additional Capital Contributions made by the Partners on such
Contribution Date pursuant to Sections 2.3(c)(i) and (ii). The new Percentage
Interest of WirelessCo and each other Partner that contributed the maximum
Additional Capital Contribution that it was entitled to make pursuant to Section
2.3(c)(ii)(A) shall be equal to the sum of (I) WirelessCo's or such other
Partner's, as the case may be, Percentage Interest immediately prior to the
applicable Contribution Date plus (II) WirelessCo's or such other Partner's, as
the case may be, proportionate share of the sum of the Dilution Percentages
calculated in accordance with this Section 2.3(c)(ii)(B), provided that such
--------
Percentage Interest may not exceed one-hundred percent (100%).
(iii) Other APC Additional Capital Contributions. If WirelessCo
------------------------------------------
shall fail to timely make an Additional Capital Contribution required to be made
pursuant to Section 2.3(b)(i), then APC shall be entitled to make such
Additional Capital Contribution.
2.4 Financing Obligations of WirelessCo.
-----------------------------------
(a) Intent of the Partners. The Partners intend that (i) the cash
----------------------
needs of the Partnership attributable to the FCC Payments will be funded by the
Additional Capital Contributions of APC, as supplemented, where appropriate, by
WirelessCo, as provided for under Section 2.3(a) and Section 2.3(b)(ii),
respectively, and (ii) that the remaining cash needs of the Partnership during
the Initial Five-Year Period (the "Cash Requirements") will be funded by the
Additional Capital Contributions of WirelessCo provided for under Section
2.3(b)(i) and by borrowings of the Partnership under credit facilities with
third-party lenders; and the Partners agree that the Partnership will use all
commercially reasonable efforts to obtain such third-party debt financing to the
extent the Cash Requirements exceed the amount of the Additional Capital
Contributions WirelessCo is obligated to make under Section 2.3(b)(i). If the
Additional Capital Contributions WirelessCo is
-28-
<PAGE>
obligated to make under Section 2.3(b)(i) are insufficient to fully fund the
Cash Requirements, WirelessCo shall make additional funds available to the
Partnership in accordance with the provisions of this Section 2.4.
(b) Budgeted Cash Requirements. During the Initial Five-Year Period,
--------------------------
WirelessCo shall, upon request by the Managing Partner and subject to Sections
2.4(a) and 2.4(d), loan funds to the Partnership on terms that are not less
favorable to the Partnership or to WirelessCo than those generally available in
comparable transactions among unaffiliated parties (including the taking by
WirelessCo of security interests in Partnership Property) and are consistent
with applicable FCC rules and regulations, in an amount equal to the excess, if
any, of (i) the Budgeted Cash Requirements minus (ii) the sum of (A) the
aggregate amount of cash Capital Contributions WirelessCo is obligated to make
to the Partnership under Section 2.3(b)(i) plus (B) the aggregate amount of
funds that have been borrowed or are available for borrowing by the Partnership
under credit facilities with third-party lenders (following the commercially
reasonable efforts of the Partnership to obtain such financing). Such loans
shall be nonrecourse against any Partner. "Budgeted Cash Requirements" shall be
equal to the sum of (i) $275,000,000 plus (ii) any cash required, as determined
by the Managing Partner, in connection with the buildout of a PCS system
relating to any 10 MHz PCS license contributed to the Partnership by WirelessCo
pursuant to Section 6.1(b) plus (iii) any cash required, as determined by the
Managing Partner, in connection with any costs incurred by the Partnership in
connection with the furnishing of network interface devices on or at customers'
premises, if the Partnership is required to furnish such devices. The amount of
any loan required to be made by WirelessCo pursuant to this Section 2.4(b) (the
"Loan Amount") shall be set forth in a written notice (a "Loan Notice")
delivered by the Managing Partner to WirelessCo and shall set forth the date
(the "Funding Date") on which the Loan Amount shall be advanced to the
Partnership by wire transfer of immediately available funds. The Funding Date
shall not be earlier than the fortieth (40th) day following delivery of the Loan
Notice.
(c) Additional Cash Requirements.
----------------------------
(i) If the Cash Requirements of the Partnership exceed the Budgeted
Cash Requirements (any such excess being referred to herein as the "Additional
Cash Requirements"), WirelessCo shall, subject to Sections 2.4(a) and 2.4(d),
take the actions set forth in this Section 2.4(c).
(ii) WirelessCo first will use all commercially reasonable efforts
(which shall not be required to include (A) providing any guarantee or
collateral to secure any such obligation; (B) making any Capital Contribution in
addition to those it is otherwise obligated to make under this Agreement; or (C)
incurring any out-of-pocket expenses unless such expenses are reimbursed by the
Partnership) to assist the Partnership in obtaining additional financing under
credit facilities with third-party lenders to fund the Additional Cash
Requirements, and the Partners agree
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<PAGE>
that the Partnership will use all commercially reasonable efforts to obtain such
third-party debt financing.
(iii) If the Partnership is unable to obtain additional financing
from third-party lenders to fund the Additional Cash Requirements and the
Managing Partner reasonably determines that further efforts to obtain such
additional financing are unlikely to result in the Partnership obtaining such
financing on commercially reasonable terms, the Managing Partner shall deliver a
written notice (an "Additional Cash Notice") to WirelessCo setting forth the
amount of the Additional Cash Requirements for which it has not obtained
financing. Within ten (10) Business Days of the Managing Partner's delivery of
an Additional Cash Notice, WirelessCo shall notify the Managing Partner and the
other Partners in writing (the "Funding Notice") of whether it will fund the
Additional Cash Requirements by means of a loan to the Partnership and/or an
Additional Capital Contribution pursuant to Section 2.3(c)(i). If WirelessCo
elects to fund such Additional Cash Requirements in whole or in part by means
of an Additional Capital Contribution, the Funding Notice shall set forth the
amount of such Additional Capital Contribution. On the fortieth (40th) day
following the delivery of an Additional Cash Notice, WirelessCo will, at its
option and consistent with the Funding Notice, (A) loan funds to the Partnership
on terms that are not less favorable to the Partnership or to WirelessCo than
those generally available in comparable transactions among unaffiliated parties
(including the taking by WirelessCo of security interests in Partnership
Property) and consistent with FCC rules and regulations, and/or (B) make an
Additional Capital Contribution pursuant to Section 2.3(c)(i), in any case in an
aggregate amount equal to the amount set forth in the Additional Cash Notice.
(d) Condition to WirelessCo Financing Obligations. Notwithstanding
---------------------------------------------
any contrary provision of this Section 2.4, WirelessCo shall not be obligated to
fulfill its financing obligations under this Section 2.4 to the extent the
Partnership's capital expenditures deviate in any material respect not
previously approved by WirelessCo from the type and amount of such expenditures
included in the capital expenditures budget contained in the Initial Business
Plan.
2.5 Other Additional Capital Contributions.
--------------------------------------
(a) Optional Additional Capital Contributions Following Initial
-----------------------------------------------------------
Five-Year Period.
----------------
(i) Right to Make Contributions. Following the Initial Five-Year
---------------------------
Period, each Partner shall have the right, but not the obligation, to make
Additional Capital Contributions of cash to the Partnership in an amount equal
to all or any portion of such Partner's proportionate share (based upon its
Percentage Interest on the date of the Optional Funding Notice) of the projected
cash needs of the Partnership pursuant to the Annual Budget then in effect;
provided, however, that, unless the Managing Partner otherwise agrees, such
- - -------- -------
Additional Capital Contributions may not be made more frequently than once per
fiscal quarter. A Partner electing to make an Additional Capital Contribution
pursuant to this Section 2.5(a)(i) shall deliver on the first Business Day of
the relevant fiscal quarter a written notice of such election (an "Optional
Funding Notice") to the Managing Partner and each other Partner setting forth
the amount of such Additional Capital Contribution (calculated in
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<PAGE>
accordance with the preceding sentence) and the date on which it intends to make
such Additional Capital Contribution (the "Optional Funding Date"), provided
--------
that such Optional Funding Date shall be no earlier than the thirtieth (30th)
day following the date of the related Optional Funding Notice. Within fifteen
(15) days of the receipt of an Optional Funding Notice, each Partner who did not
deliver an Optional Funding Notice with respect to such fiscal quarter shall
again be entitled to elect to make an Additional Capital Contribution pursuant
to this Section 2.5(a)(i) by delivering an Optional Funding Notice to the
Managing Partner and each other Partner setting forth the amount of its
Additional Capital Contribution (calculated in accordance with the first
sentence of this Section 2.5(a)(i)). All Additional Capital Contributions made
pursuant to this Section 2.5(a)(i) shall be made on the Optional Funding Date in
cash by wire transfer of immediately available funds.
(ii) Dilution of Percentage Interests. If any Partner does not
--------------------------------
exercise its right to make an Additional Capital Contribution on any particular
Optional Funding Date in an amount equal to its proportionate share of the
Additional Capital Contribution requested in the applicable Optional Funding
Notice, then the Percentage Interests of the Partners shall be recalculated,
subject to FCC Approval, if required, as of such Optional Funding Date in
accordance with this Section 2.5(a)(ii). The new Percentage Interest of a
Partner as of such Optional Funding Date shall be equal to a fraction, expressed
as a percentage, the numerator of which is the sum of (A) the amount that would
---------
be distributed to such Partner in liquidation of the Partnership pursuant to
Section 14.2(d) if (I) all of the Partnership's business and assets were sold
substantially as an entirety for Gross Appraised Value as most recently
determined in accordance with the provisions of Section 11.4, provided that if
--------
such Gross Appraised Value was last determined more than one year prior to such
Optional Funding Date, the Gross Appraised Value shall be determined as of the
Optional Funding Date in accordance with the provisions of Section 11.4, in
which case the Optional Funding Notice shall identify the First Appraiser
selected by the Partner delivering such Optional Funding Notice for the purpose
of determining Gross Appraised Value, and the Partners receiving such Optional
Funding Notice shall notify the other Partner of the Second Appraiser within ten
(10) days following receipt of such Optional Funding Notice, (II) Profit or Loss
and items specially allocated in accordance with Sections 3.3 and 3.4 for the
Allocation Year ending on such Optional Funding Date, including any gain or loss
resulting from the deemed sale described in clause (I), were allocated in
accordance with Section 3, (III) all distributions and contributions (other than
any Additional Capital Contribution made by such Partner on such Optional
Funding Date) were given effect in such Partner's Capital Account, and (IV) the
Partnership paid its known liabilities and established reserves pursuant to
Section 14.3 for the payment of reasonably anticipated contingent or unknown
liabilities, provided that the amount determined pursuant to this clause (A)
--------
with respect to a Partner shall be reduced by the sum of the amounts described
in Sections 14.2(d)(i) and (ii) as of such Optional Funding Date with respect to
such Partner, plus (B) the Additional Capital Contribution made by such Partner
on such Optional Funding Date, and the denominator of which is the sum of (C)
-----------
the aggregate amounts determined pursuant to clause (A) for the Partners plus
(D) the aggregate Additional Capital Contributions made by the Partners on such
Optional Funding Date.
-31-
<PAGE>
(b) Additional Capital Contributions Generally. Each Partner may
------------------------------------------
contribute from time to time such additional cash or other Property as may be
approved by all Group Partners or as may be expressly contemplated by this
Agreement, provided that any Capital Contribution of property (other than cash)
--------
made pursuant to this Section 2.5(b) shall be subject to the terms and
provisions of an Additional Contribution Agreement.
(c) Required Additional Capital Contributions Relating to 10 MHz
------------------------------------------------------------
Licenses. Each Partner shall be obligated to make Additional Capital
- - --------
Contributions to the Partnership as and to the extent required under the first
sentence of Section 6.1(b).
2.6 Partnership Funds.
-----------------
The funds of the Partnership shall be deposited in such bank accounts
or invested in such investments as shall be designated by the Managing Partner.
Partnership funds shall not be commingled with those of any Person other than a
wholly owned subsidiary of the Partnership without the consent of all Partners.
The Partnership shall not lend or advance funds to, or guarantee any obligation
of, a Partner or any Affiliate thereof without the prior written consent of all
Partners.
2.7 Partner Loans; Other Borrowings.
-------------------------------
In order to satisfy any financial needs of the Partnership in excess
of the Capital Contributions and debt financing required to be made available to
the Partnership by APC and/or WirelessCo or otherwise obtained by the
Partnership under Sections 2.3 and 2.4, the Partnership may, if so approved by
the Managing Partner, borrow from (i) banks, lending institutions or other
unrelated third parties, and may pledge Partnership properties or the production
of income therefrom to secure and provide for the repayment of such loans and
(ii) any Partner or an Affiliate of a Partner. Such loans made by any Partner
or an Affiliate of a Partner (a "Partner Loan," which definition shall not
include any WirelessCo Loan) shall be evidenced by a promissory note of the
Partnership in the form attached hereto as Exhibit 2.7 and, subject to the last
two sentences of the second paragraph of this Section 2.7, shall bear interest
payable quarterly from the date made until paid in full at a rate per annum to
be determined by the Managing Partner that is no less favorable to the
Partnership than if the loan had been made by an independent third party.
Unless otherwise determined by the Managing Partner all Partner Loans
shall be unsecured and the promissory notes evidencing the same shall be
nonnegotiable and, except as otherwise provided in this Section 2.7 or Section
12.3(c), nontransferable. Repayment of the principal amount of and accrued
interest on all Partner Loans shall be subordinated to the repayment of the
principal of and accrued interest on any indebtedness of the Partnership to
third party lenders to the extent required by the applicable provisions of the
instruments creating such indebtedness to third party lenders ("Senior Credit
Agreements"). All amounts required to be paid in accordance with the terms of
such notes and all amounts permitted to be prepaid shall be applied to the notes
held by the Partners in accordance with the order of payment contemplated by
Section 14.2(c)(ii) and (iii). Subject to the terms of applicable Senior Credit
Agreements and after payment in full of any
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<PAGE>
WirelessCo Loans, Partner Loans shall be repaid to the Partners at such times as
the Partnership has sufficient funds to permit such repayment without
jeopardizing the Partnership's ability to meet its other obligations on a timely
basis. Nothing contained in this Agreement or in any promissory note issued by
the Partnership hereunder shall require the Partnership or any Partner to pay
interest or any amount as a penalty at a rate exceeding the maximum amount of
interest permitted to be collected from time to time under applicable usury
laws. If the amount of interest or of such penalty payable by the Partnership
or any Partner on any date would exceed the maximum permissible amount, it shall
be automatically reduced to such amount, and interest or the amount of the
penalty for any subsequent period, to the extent less than that permitted by
applicable usury laws, shall, to that extent, be increased by the amount of such
reduction.
An election by a Partner to purchase all or any portion of another
Partner's Interest pursuant to Sections 11, 12.4, or 14.7 shall also constitute
an election to purchase an equivalent portion of any outstanding Partner Loans
held by such selling Partner, and each purchasing Partner shall be obligated to
purchase a percentage of such Partner Loans equal to the percentage of the
selling Partner's Interest such purchasing Partner is obligated to purchase for
a price equal to the outstanding principal and accrued and unpaid interest on
such Partner Loans through the date of the closing of such purchase (except in
the case of a transfer pursuant to Section 12.4, in which case the terms of the
Purchase Offer shall apply).
2.8 Other Matters.
-------------
(a) No Partner shall have the right to demand or, except as otherwise
provided in Sections 4.1 and 14.2, receive a return of all or any part of its
Capital Account or its Capital Contributions or withdraw from the Partnership
without the consent of all Partners. Under circumstances requiring a return of
all or any part of its Capital Account or Capital Contributions, no Partner
shall have the right to receive Property other than cash.
(b) No Partner shall have any personal liability for the repayment
of any Capital Contributions of any other Partner.
(c) No Partner shall be entitled to receive interest on its Capital
Contributions or Capital Account.
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<PAGE>
SECTION 3
ALLOCATIONS
3.1 Profits.
-------
After giving effect to the special allocations set forth in Sections
3.3 and 3.4, Profits for any Allocation Year shall be allocated in the following
order and priority:
(a) First, to the Partners in an amount sufficient to offset all
Losses allocated for all prior Allocation Years under (i) first, Section 3.5,
(ii) second, Section 3.2(e), (iii) third, Section 3.2(d), (iv) fourth, Section
3.2(c), and (v) fifth, Section 3.2(b), in each case in proportion to the amount
of such Losses previously allocated to such Partners and to the extent that such
Losses have not been offset by a prior allocation of Profits pursuant to this
Section 3.1(a);
(b) Second, to WirelessCo and APC in proportion to, and to the extent
of, an amount equal to the excess, if any, of (i) the cumulative Preferred
Return computed through the end of such Allocation Year with respect to
WirelessCo and APC, as the case may be, over (ii) the cumulative Profits
allocated to WirelessCo and APC, as the case may be, pursuant to this Section
3.1(b) for all prior Allocation Years; and
(c) The balance, if any, to the Partners in proportion to their
Percentage Interests.
Notwithstanding any other provision of this Section 3.1 to the
contrary, to the extent Profits arise during or after the Allocation Year in
which all or substantially all of the Partnership's assets are disposed of, such
Profits shall be allocated to the Partners in such ratios and amounts as may be
necessary to cause the balance in each Partner's Capital Account to be as nearly
as possible equal to the amount of liquidating distributions such Partner is
intended to receive as set forth in Sections 14.2(d)(i), (ii), (iii) and (iv).
3.2 Losses.
------
After giving effect to the special allocations set forth in Sections
3.3 and 3.4 and subject to Section 3.5, Losses for any Allocation Year shall be
allocated in the following order and priority:
(a) First, to the Partners in proportion to, and to the extent of, the
excess, if any, of (i) the cumulative Profits allocated to each such Partner
pursuant to Section 3.1(c) for all prior Allocation Years, over (ii) the
cumulative Losses allocated to such Partner pursuant to this Section 3.2(a) for
all prior Allocation Years;
(b) Second, to the Partners in proportion to, and to the extent of,
the excess, if any, of (i) their respective amounts of Unreturned Capital
computed as of the end of such Allocation
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Year over (ii) the cumulative losses allocated to such Partner pursuant to this
Section 3.2(b) for all prior Allocation Years; provided, however, that Losses
-------- -------
will not be allocated to a Partner pursuant to this Section 3.2(b) to the extent
that such Losses would exceed the sum of (i) such Partner's Capital Account
balance, (ii) such Partner's share of Partnership Minimum Gain, and (iii) such
Partner's share of Partner Nonrecourse Debt Minimum Gain;
(c) Third, to WirelessCo and APC in proportion to, and to the extent
of, (i) in the case of WirelessCo, the excess, if any, of WirelessCo's Preferred
Capital computed as of the end of such Allocation Year over the cumulative
Losses allocated to WirelessCo pursuant to this Section 3.2(c) for all prior
Allocation Years, and (ii) in the case of APC, the excess, if any, of APC
Preferred Capital computed as of the end of such Allocation Year over the
cumulative Losses allocated to APC pursuant to this Section 3.2(c);
(d) Fourth, to WirelessCo and APC in proportion to, and to the extent
of, the excess, if any, of (i) the cumulative Profits allocated to them pursuant
to Section 3.1(b) for all prior Allocation Years, over (ii) the cumulative
Losses allocated to them pursuant to this Section 3.2(d) for all prior
Allocation Years; and
(e) The balance, if any, to the Partners in proportion to their
Percentage Interests.
Notwithstanding any other provision of this Section 3.2 to the
contrary, to the extent Losses arise during or after the Allocation Year in
which all or substantially all of the Partnership's assets are disposed of, such
Losses shall be allocated to the Partners in such ratio and amounts as may be
necessary to cause the balance in each Partner's Capital Account to be as nearly
as possible equal to the amount of liquidating distributions such Partner is
intended to receive as set forth in Section 14.2(d)(i), (ii), (iii) and (iv).
3.3 Special Allocations.
-------------------
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
-----------------------
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 3, if there is a net decrease in Partnership Minimum Gain during any
Allocation Year, each Partner shall be specially allocated items of Partnership
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations.
This
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Section 3.3(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
-------------------------------
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 3, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Allocation Year, each
Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Partnership income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Partner's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.
This Section 3.3(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
(c) Qualified Income Offset. In the event any Exclusive Limited
-----------------------
Partner unexpectedly receives any adjustments, allocations, or distributions
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-
- - - -
1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain shall
- -
be specially allocated to each such Exclusive Limited Partner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Exclusive Limited Partner as quickly as
possible, provided that an allocation pursuant to this Section 3.3(c) shall be
--------
made only if and to the extent that such Exclusive Limited Partner would have an
Adjusted Capital Account Deficit after all other allocations provided for in
this Section 3 have been tentatively made as if this Section 3.3(c) were not in
the Agreement.
(d) Gross Income Allocation. In the event any Exclusive Limited
-----------------------
Partner has a deficit Capital Account at the end of any Allocation Year which is
in excess of the sum of (i) the amount such Exclusive Limited Partner is
obligated to restore pursuant to any provision of this Agreement, and (ii) the
amount such Exclusive Limited Partner is deemed to be obligated to restore
pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-
2(i)(5) of the Regulations, each such Exclusive Limited Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
--------
Section 3.3(d) shall be made only if and to the extent that such Exclusive
Limited Partner would have a deficit Capital Account in excess of such sum after
all other allocations provided for in this Section 3 have been made as if
Section 3.3(c) and this Section 3.3(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
----------------------
Year shall be specially allocated among the Partners in proportion to their
Percentage Interests.
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<PAGE>
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any Allocation Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the
-----------------------
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
- - - -
determining Capital Accounts as the result of a distribution to a Partner in
complete liquidation of its Interest, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made
- -
in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
- -
(h) Special Allocation of Interest Deduction. In each Allocation Year
----------------------------------------
deductions of the Partnership attributable to the FCC Interest Payments shall be
specially allocated to APC in an amount equal to the excess, if any, of (i) the
cumulative APC Special Contributions made by APC for the current and all prior
Allocation Years minus (ii) the cumulative deductions specially allocated to APC
pursuant to this Section 3.3(h) for all prior Allocation Years. Notwithstanding
the immediately preceding sentence, if APC fails to make an Additional Capital
Contribution pursuant to Section 2.3(a)(ii) necessary to fund an FCC Interest
Payment and WirelessCo makes an Additional Capital Contribution pursuant to
Section 2.3(b)(ii) to fund such FCC Interest Payment, then all deductions
attributable to such FCC Interest Payment shall be specially allocated to
WirelessCo.
3.4 Curative Allocations.
--------------------
The allocations set forth in Sections 3.3(a), 3.3(b), 3.3(c), 3.3(d),
3.3(e), 3.3(f) and 3.3(g) (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Partners
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Section 3 (other than the
Regulatory Allocations), the Managing Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Partner's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items were
allocated pursuant to Sections 3.1, 3.2 and 3.3(h). In exercising its
discretion under this Section 3.4, the Managing Partner shall take into account
future Regulatory Allocations
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<PAGE>
under Sections 3.3(a) and 3.3(b) that, although not yet made, are likely to
offset other Regulatory Allocations previously made under Section 3.3(e) and
3.3(f).
3.5 Loss Limitation.
---------------
The Losses allocated pursuant to Section 3.2 shall not exceed the
maximum amount of Losses that can be so allocated without causing (or increasing
the amount of) any Exclusive Limited Partner to have an Adjusted Capital Account
Deficit at the end of any Allocation Year. All Losses in excess of such
limitation shall be allocated first, to Partners who have positive Adjusted
Capital Account balances in proportion to such balances, and second, to the
Partners who are not Exclusive Limited Partners in proportion to their
Percentage Interests. For purposes of this Section 3.5, the term "Adjusted
Capital Account" means, with respect to a Partner, the sum of (i) such Partner's
Capital Account balance, (ii) such Partner's share of Partnership Minimum Gain,
and (iii) such Partner's share of Partner Nonrecourse Debt Minimum Gain.
3.6 Other Allocation Rules.
----------------------
(a) For purposes of determining the Profits, Losses, or any other
items allocable to any period, Profits, Losses, and any such other items shall
be determined on a daily, monthly, or other basis, as determined by the Managing
Partner using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) The Partners are aware of the income tax consequences of the
allocations made by this Section 3 and hereby agree to be bound by the
provisions of this Section 3 in reporting their shares of Partnership income and
loss for income tax purposes.
(c) Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Section 1.752-3(a)(3) of the Regulations, the Partners' interests in Partnership
profits are in proportion to their Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Managing Partner shall endeavor to treat distributions of cash
as having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such distributions would cause or
increase an Adjusted Capital Account Deficit for any Exclusive Limited Partner.
3.7 Tax Allocations: Code Section 704(c).
-------------------------------------
In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes and
its initial Gross Asset Value (computed in accordance with the definition of
Gross Asset Value).
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<PAGE>
In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Managing Partner in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 3.7 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Partner's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
SECTION 4
DISTRIBUTIONS
4.1 Available Cash.
--------------
The Partnership shall pay in full all WirelessCo Loans and then all
Partner Loans (in accordance with the order of payment contemplated by Sections
14.2(b) and (c)) prior to making any distributions to the Partners pursuant to
this Section 4.1. Except as otherwise provided in Section 14.2, Available Cash
as of the end of any calendar quarter shall be distributed not later than the
fifteenth (15th) day following the end of such quarter in the following amounts,
order and priority:
(a) First, to WirelessCo and APC in proportion to, and to the extent
of, the excess, if any, of (i) the cumulative Preferred Return with respect to
WirelessCo and APC, as the case may be, computed as of the end of such quarter
minus (ii) all prior distributions to WirelessCo and APC, as the case may be,
pursuant to this Section 4.1(a);
(b) Second, to WirelessCo and APC in proportion to, and to the extent
of, WirelessCo's Preferred Capital and APC Preferred Capital, as the case may
be, computed as of the end of such quarter;
(c) Third, to the Partners in proportion to, and to the extent of,
their respective amounts of Unreturned Capital computed as of the end of such
quarter; and
(d) The balance, if any, to the Partners in proportion to their
respective Percentage Interests as of the end of such quarter.
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<PAGE>
4.2 Amounts Withheld.
----------------
All amounts withheld pursuant to the Code or any provision of any
state or local tax law from any payment or distribution to a Partner shall be
treated as amounts paid or distributed to such Partner pursuant to this Section
4 for all purposes under this Agreement. The Partnership is authorized to
withhold from payments and distributions to any Partner and to pay over to any
federal, state, or local government any amounts required to be so withheld
pursuant to the Code or any provisions of any other federal, state, or local
law.
SECTION 5
MANAGEMENT
5.1 Authority of the Managing Partner.
---------------------------------
(a) General Authority. Subject to the limitations and restrictions
-----------------
set forth in this Agreement, the Managing Partner shall conduct the business and
affairs of the Partnership, and all powers of the Partnership, except those
specifically reserved to the Partners by the Act or this Agreement, hereby are
granted to and vested in the Managing Partner.
(b) Delegation. The Managing Partner shall have the power to delegate
----------
authority to such officers, employees, agents and representatives of the
Partnership as it may from time to time deem appropriate. Any delegation of
authority to take any action must be approved in the same manner as would be
required for the Managing Partner to approve such action directly.
(c) Regular Meetings. The Managing Partner shall hold regular
----------------
meetings of the Partners no less frequently than quarterly and shall establish
meeting times, dates and places and requisite notice requirements and adopt
rules or procedures consistent with the terms of this Agreement. At such
meetings, the Managing Partner shall provide an overview of the business and
affairs of the Partnership and provide such other information concerning the
Partnership that the other Partners may reasonably request.
(d) Required Approvals.
------------------
(i) Subject to Section 8.2(b), during the Initial Buildout Period, no
action may be taken by the Managing Partner or the Partnership in connection
with any of the matters listed on Schedule 5.1(d)(i) without the prior written
consent of WirelessCo.
(ii) Subject to Section 8.2(b), during the period beginning on the
Initial Buildout Completion Date and ending on the earlier to occur of (A) the
first anniversary of the Initial Buildout Completion Date or (B) the beginning
of the WirelessCo Majority Period, no action may be taken by the Managing
Partner or the Partnership in connection with any of the matters listed on
Schedule 5.1(d)(ii) hereto without the prior written consent of WirelessCo.
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<PAGE>
(iii) Subject to Section 8.2(b), during the period beginning on the
earlier to occur of (A) the first anniversary of the Initial Buildout Completion
Date or (B) the beginning of the WirelessCo Majority Period, subject to the
Partnership having made all necessary filings with the FCC and having received
FCC Approval of all such filings, all actions required or permitted to be taken
by the Managing Partner shall require the prior approval of Partners holding
more than seventy percent (70%) of the Percentage Interests of all Partners.
Notwithstanding the foregoing, during such period and for so long as APC's
Percentage Interest is not less than twenty percent (20%), no action may be
taken by the Managing Partner or the Partnership in connection with any of the
matters listed on Schedule 5.1(d)(ii) without the prior written consent of APC.
(e) Rights of Adverse Partners. Any Partner who is an Adverse Partner
--------------------------
at any time following the Initial Buildout Period shall, subject to FCC
Approval, if required, immediately forfeit its right to serve as Managing
Partner, if applicable, and to exercise its approval rights under this Section
5.1, without any further act by the Adverse Partner; provided that if a Partner
--------
becomes an Adverse Partner as the result of the occurrence of an Adverse Act
described in clause (iv), (v) or (vi) of the definition of such term in Section
1.10, such Partner will regain (or its transferee will be entitled to, as
applicable) such rights if (i) a Partner that is an Adverse Partner Transfers
its Interest in compliance with Section 12 to a Person that is not an Adverse
Partner and does not become an Adverse Partner as a result of such Transfer,
(ii) a Partner that is an Adverse Partner as a consequence of Bankruptcy ceases
to be in a state of Bankruptcy, (iii) a Partner that is an Adverse Partner as a
consequence of the occurrence of any IXC Transaction ceases to have the
relationship with the IXC which caused such IXC Transaction to occur, or (iv) a
Partner that is an Adverse Partner as a consequence of the occurrence of an
event described in clause (vi) of the definition of the term "Adverse Act" in
Section 1.10 takes actions that eliminate the circumstances that constituted
such an Adverse Act within the meaning of such clause (vi).
5.2 Business Plan and Annual Budget.
-------------------------------
(a) APC, in its capacity as the Managing Partner, will adopt the
business plan ("Business Plan") for the Partnership covering the period from the
date of this Agreement to the end of the Initial Five-Year Period (such initial
Business Plan being referred to herein as the "Initial Business Plan"). The
Initial Business Plan will include capital expenditure and operating budgets for
each Fiscal Year covered thereby.
(b) The Chief Executive Officer shall submit annually to the Managing
Partner at least ninety (90) days prior to the start of each Fiscal Year after
the first full Fiscal Year (i) a proposed budget (the "Proposed Budget") for the
forthcoming Fiscal Year including an income statement (prepared on an accrual
basis), which shall show in reasonable detail the revenues and expenses
projected for the Partnership's business for the forthcoming Fiscal Year, and a
cash flow statement, which shall show in reasonable detail the receipts and
disbursements projected for the Partnership's business for the forthcoming
Fiscal Year and the amount of any corresponding cash
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<PAGE>
deficiency or surplus, and the required Additional Capital Contributions, if
any, and any contemplated borrowings (including WirelessCo Loans) of the
Partnership and (ii) a proposed revised Business Plan ("Proposed Business
Plan") for the Fiscal Year covered by the Proposed Budget and the succeeding
four Fiscal Years in substantially the same or greater detail as the Initial
Business Plan and containing such additional categories of information as may be
appropriate to reflect the progress of the development of the Partnership's
business. Such Proposed Budget and Proposed Business Plan shall be prepared on
a basis consistent with the Partnership's audited financial statements. If such
Proposed Budget or such Proposed Business Plan is approved by the Managing
Partner, then such Proposed Budget or such Proposed Business Plan, as the case
may be, shall be considered approved and shall constitute the "Annual Budget" or
the "Approved Business Plan," as the case may be, for all purposes of this
Agreement and shall supersede any previously approved Annual Budget or Approved
Business Plan, as the case may be. The approval of each Proposed Budget and
Proposed Business Plan and action by the Partnership constituting any material
deviation from any Annual Budget or Approved Business Plan shall require the
approval of the Managing Partner. No Approved Business Plan or Annual Budget
shall be inconsistent with the provisions of this Agreement, nor shall this
Agreement be deemed amended by any provision of an Approved Business Plan or
Annual Budget. If a Proposed Budget or a Proposed Business Plan is not approved
by the Managing Partner, then the Partners will cooperate in good faith and
confer with the Chief Executive Officer and other senior officers of the
Partnership for the purpose of attempting to arrive at a Proposed Budget or
Proposed Business Plan, as the case may be, that can secure the approval of the
Managing Partner.
(c) If, notwithstanding the foregoing procedures, on January 1 of any
Fiscal Year no Proposed Budget has been approved by the Managing Partner for
such Fiscal Year, then the Annual Budget for the prior Fiscal Year, adjusted
(without duplication) to reflect increases or decreases resulting from the
following events, shall govern until such time as the Managing Partner approves
a new Proposed Budget:
(i) the operation of escalation or de-escalation provisions in
contracts in effect at the time of approval of the prior Fiscal Year's Annual
Budget solely as a result of the passage of time or the occurrence of events
beyond the control of the Partnership to the extent such contracts are still in
effect;
(ii) elections made in any prior Fiscal Year under contracts
contemplated by the Annual Budget for the prior Fiscal Year regardless of which
party to such contracts makes such election;
(iii) increases or decreases in expenses attributable to the
annualized effect of employee additions or reductions during the prior Fiscal
Year contemplated by the Annual Budget for the prior Fiscal Year;
(iv) changes in interest expense attributable to any loans made to or
retired by the Partnership (including WirelessCo Loans and Partner Loans);
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<PAGE>
(v) increases in overhead expenses in an amount equal to the total of
overhead expenses reflected in the Annual Budget for the prior Fiscal Year
multiplied by the increase in the Consumer Price Index for the prior year, but
in no event more than five percent (5%);
(vi) the anticipated incurrence of costs during such Fiscal Year for
any legal, accounting and other professional fees or disbursements in connection
with events or changes not contemplated at the time of preparation of the Annual
Budget for the prior Fiscal Year;
(vii) the continuation of the effects of a decision made by the
Managing Partner or the Partners in the prior Fiscal Year with respect to any of
the matters referred to on Schedules 5.1(d)(i), 5.1(d)(ii) or 5.8 that are not
reflected in the Annual Budget for the prior Fiscal Year; and
(viii) decreases in expense attributable to non-recurring items
reflected in the prior Fiscal Year's Annual Budget.
Any budget established pursuant to this Section 5.2(c) is herein referred
to as a "Default Budget."
(d) If a Proposed Business Plan is submitted for approval pursuant to
this Section 5.2 and is not approved by the Managing Partner, the Business Plan
most recently approved by the Managing Partner pursuant to Section 5.2(b) shall
remain in effect as the Approved Business Plan; provided, that, if a Proposed
--------
Budget is approved pursuant to Section 5.2(b) (and the corresponding Proposed
Business Plan is not so approved), the Approved Business Plan then in effect
shall be deemed to be amended so that the Fiscal Year therein corresponding to
the Fiscal Year for which such Annual Budget has been approved shall be
consistent with such Annual Budget.
(e) The day-to-day business and operations of the Partnership shall be
conducted in accordance with the Approved Business Plan and the Annual Budget
(or Default Budget) then in effect and the policies, strategies and standards
established by the Managing Partner. The Managing Partner and the officers and
employees of the Partnership shall implement the Annual Budget and Approved
Business Plan.
5.3 Employees.
---------
The Managing Partner will appoint the senior management of the
Partnership and will establish policies and guidelines for the hiring of
employees to permit the Partnership to act as an operating company with respect
to its business. The Managing Partner may adopt appropriate management
incentive plans and employee benefit plans.
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<PAGE>
5.4 Limitation of Agency.
--------------------
The Partners agree not to exercise any authority to act for or to
assume any obligation or responsibility on behalf of the Partnership except (i)
as approved by written agreement among the Partners and (ii) as expressly
provided herein. No Partner shall have any authority to act for or to assume
any obligations or responsibility on behalf of the other Partners under this
Agreement except (i) as approved by written agreement among the Partners and
(ii) as expressly provided herein. Subject to Section 5.6, in addition to the
other remedies specified herein, each Partner agrees to indemnify and hold the
Partnership and the other Partners harmless from and against any claim, demand,
loss, damage, liability or expense (including reasonable attorneys' fees and
disbursements and amounts paid in settlement, but excluding any indirect,
special or consequential damages) incurred by or against such other Partner or
the Partnership and arising out of or resulting from any action taken by the
indemnifying Partner in violation of this Section 5.4.
5.5 Liability of Partners.
---------------------
No Partner or former Partner, or any Affiliate thereof, nor any
partner, shareholder, director, officer, employee or agent of any of the
foregoing, shall be liable in damages for any act or failure to act in such
Person's capacity as a Partner or otherwise on behalf of the Partnership unless
such act or omission constituted bad faith, gross negligence, fraud or willful
misconduct of such Person or a violation of this Agreement. Subject to Section
5.6, each Partner or former Partner, each Affiliate thereof, and each partner,
shareholder, director, officer, employee and agent of any of the foregoing,
shall be indemnified and held harmless by the Partnership, its receiver or
trustee from and against any liability for damages and expenses, including
reasonable attorneys' fees and disbursements and amounts paid in settlement,
resulting from any threatened, pending or completed action, suit or proceeding
relating to or arising out of such Person's acts or omissions in such Person's
capacity as a Partner or (except as provided in Section 5.4) otherwise involving
such Person's activities on behalf of the Partnership, except to the extent that
such damages or expenses result from the bad faith, gross negligence, fraud or
willful misconduct of such Person or a violation by such Person of this
Agreement or an agreement between such Person and the Partnership. Any
indemnity by the Partnership, its receiver or trustee under this Section 5.5
shall be provided out of and to the extent of Partnership Property only.
5.6 Indemnification.
---------------
Any Person asserting a right to indemnification under Section 5.4, 5.5
or 9.3 shall so notify the Partnership or the other Partners, as the case may
be, in writing. If the facts giving rise to such indemnification shall involve
any actual or threatened claim or demand by or against a third party, the
indemnified Person shall give such notice promptly (but the failure to so notify
shall not relieve the indemnifying Person from any liability which it otherwise
may have to such indemnified Person hereunder except to the extent the
indemnifying Person is actually prejudiced by such failure to notify). The
indemnifying Person shall be entitled to control the defense or prosecution of
such claim or demand in the name of the indemnified Person, with counsel
satisfactory to the indemnified
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Person, if it notifies the indemnified Person in writing of its intention to do
so within twenty (20) days of its receipt of such notice, without prejudice,
however, to the right of the indemnified Person to participate therein through
counsel of its own choosing, which participation shall be at the indemnified
Person's expense unless (i) the indemnified Person shall have been advised by
its counsel that use of the same counsel to represent both the indemnifying
Person and the indemnified Person would present a conflict of interest (which
shall be deemed to include any case where there may be a legal defense or claim
available to the indemnified Person which is different from or additional to
those available to the indemnifying Person), in which case the indemnifying
Person shall not have the right to direct the defense of such action on behalf
of the indemnified Person, or (ii) the indemnifying Person shall fail vigorously
to defend or prosecute such claim or demand within a reasonable time. Whether or
not the indemnifying Person chooses to defend or prosecute such claim, the
Partners shall cooperate in the prosecution or defense of such claim and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may reasonably be
requested in connection therewith. The indemnifying Person may not take control
of any investigation or defense, without the consent of any indemnified Person,
if the claims involved in such proceedings involve any material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a judgment
lien) on, any material property of such indemnified Person or could entail a
risk of criminal liability to such indemnified Person.
The indemnified Person shall not settle or permit the settlement of
any claim or action for which it is entitled to indemnification without the
prior written consent of the indemnifying Person, unless the indemnifying Person
shall have failed to assume the defense thereof after the notice and in the
manner provided above.
The indemnifying Person may not without the consent of the indemnified
Person agree to any settlement (i) that requires such indemnified Person to make
any payment that is not indemnified hereunder, (ii) that does not grant a
general release to such indemnified Person with respect to the matters
underlying such claim or action, or (iii) that involves the sale, forfeiture or
loss of, or the creation of any Lien on, any material property of such
indemnified Person.
Notwithstanding any contrary provision of this Section 5.6, the
indemnifying Person may not in connection with any such investigation, defense
or settlement, without the consent of the indemnified Person, take or refrain
from taking any action that would reasonably be expected to materially impair
the indemnification of such indemnified Person hereunder or would require such
indemnified Person to take or refrain from taking any action or to make any
public statement, which such indemnified Person reasonably considers would
materially adversely affect its interests.
Upon the request of any indemnified Person, the indemnifying Person
shall use reasonable efforts to keep such indemnified Person reasonably apprised
of the status of those aspects of such investigation and defense controlled by
the indemnifying Person and shall provide such information with respect thereto
as such indemnified Person may reasonably request.
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5.7 Temporary Investments.
---------------------
All Property in the form of cash not otherwise invested shall be
deposited for the benefit of the Partnership in one or more accounts of the
Partnership, or any of its wholly owned subsidiaries, maintained in such
financial institutions as the Managing Partner shall determine or shall be
invested in short-term liquid securities or other cash-equivalent assets or
shall be left in escrow, and withdrawals shall be made only for Partnership
purposes on such signature or signatures as the Managing Partner may determine
from time to time.
5.8 Unanimous Consent of Partners.
-----------------------------
Notwithstanding any contrary provision of this Agreement, no action
may be taken by the Managing Partner or the Partnership in connection with any
of the matters listed on Schedule 5.8 without the prior written consent of all
of the Partners other than any Partner required to abstain from such a decision
with respect to a particular matter by Section 8.2(b) or any other express
provision of this Agreement.
SECTION 6
PARTNERSHIP OPPORTUNITIES;
CONFIDENTIALITY
6.1 Engaging in Wireless Businesses.
-------------------------------
(a) In General. For so long as any Person is a Partner, neither such
----------
Person nor any of its Controlled Affiliates shall engage in any Competitive
Activity in the Washington-Baltimore MTA except (i) through the Partnership,
(ii) as provided in Section 6.1(b) or (iii) as permitted by Section 6.3. The
term "Competitive Activity" means to bid on, acquire or, directly or indirectly,
own, manage, operate, join, control, or finance or participate in the ownership,
management, operation, control or financing of, or to be connected as a
principal, agent, representative, consultant, beneficial owner of an interest in
any Person, or otherwise with, or to use or permit its name to be used in
connection with, any business or enterprise that engages in the bidding for or
acquisition of any Wireless Business license or engages in any Wireless
Business.
(b) Acquisition of Interests in Washington-Baltimore MTA. Any Partner
----------------------------------------------------
may acquire any 10 MHz PCS license in the Washington-Baltimore MTA (in the PCS
Auction or otherwise) or an interest in any entity holding or acquiring any such
license, provided, that as a condition of the right of a Partner to acquire any
--------
such license or interest such Partner shall contribute the license or interest
to the Partnership as an Additional Capital Contribution immediately following
the issuance or acquisition thereof and the receipt of all necessary regulatory
approvals for such contribution. The other Partners shall be entitled to make
an Additional Capital Contribution to the Partnership of an amount in cash
necessary to prevent any dilution of their Percentage Interests immediately
prior to the contribution of such license or interest to the Partnership by such
Partner.
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Any such dilution shall be calculated pursuant to Section 2.3(c)(ii)(B), if such
contribution is made during the Initial Five-Year Period, or pursuant to Section
2.5(a)(ii), if such contribution is made subsequent to the Initial Five-Year
Period. The Partner contributing any such license or interest shall be
obligated to pay all costs associated with the acquisition of such license or
interest. For purposes of paragraph (i) of the definition of Gross Asset Value
in Section 1.10, such license or interest shall have an initial Gross Asset
Value equal to the amount paid by such Partner for such license or interest.
The obligations of the Partners under this Section 6.1(b) are in addition to any
obligations any Partner may otherwise have pursuant to Section 2 (other than
pursuant to Section 2.5(c)) to make Additional Capital Contributions to the
Partnership, and any Additional Capital Contribution made by a Partner pursuant
to this Section 6.1(b) shall not be credited against or otherwise reduce the
obligations of such Partner to make Additional Capital Contributions required
under Section 2 (other than Section 2.5(c)).
6.2 Enforceability and Enforcement.
------------------------------
(a) The Partners acknowledge and agree that the time, scope,
geographic area and other provisions of Section 6.1 have been specifically
negotiated by sophisticated parties and agree that such time, scope, geographic
area, and other provisions are reasonable under the circumstances. If, despite
this express agreement of the Partners, a court should hold any portion of
Section 6.1 to be unenforceable for any reason, the maximum restrictions of
time, scope and geographic area reasonable under the circumstances, as
determined by the court, will be substituted for the restrictions held to be
unenforceable.
(b) The Partnership shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages or posting
any bond or other security, to prevent any breach of Section 6.1, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Partnership may be entitled.
6.3 General Exceptions to Section 6.1.
---------------------------------
The restrictions set forth in Section 6.1 on Competitive Activities
shall not be construed to prohibit any of the following actions by a Partner and
its Controlled Affiliates except to the extent any such action would (i) cause
the Partnership (including the ownership of its assets and the conduct of its
business) to be in violation of any law or regulation or otherwise result in any
restriction or other limitation on the Partnership's ownership of its assets or
conduct of its business or (ii) in any way impair, prevent or delay the ability
of the Partnership to hold, utilize or maintain the License:
(a) The acquisition or ownership of any debt or equity securities
registered pursuant to the Securities Exchange Act of 1934, so long as such
securities (i) do not represent more than five percent (5%) of the aggregate
voting power of the outstanding capital stock of any Person
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that engages in a Competitive Activity (assuming the conversion, exercise or
exchange of all such securities held by such Partner or its Controlled
Affiliates that are convertible, exercisable or exchangeable into or for voting
stock) or (ii) in the case of debt securities, entitle the holder to receive
only interest or other returns that are fixed, or vary by reference to an index
or formula that is not based on the value or results of operations of such
Person;
(b) The acquisition (through merger, consolidation, purchase of stock
or assets, or otherwise) of a Person or an interest in a Person, which engages
(directly or indirectly through an Affiliate that is controlled by such Person)
in any Competitive Activity if the Competitive Activity does not constitute a
material portion, in terms of revenues or fair market value, of the businesses
acquired in such acquisition or conducted by the Person in which such interest
is acquired, provided, in each case, that such Partner or Controlled Affiliate
divests itself of the Competitive Activity or interest therein as soon as is
practicable, but in no event later than twenty-four (24) months, after the
acquisition;
(c) The continued holding of an equity interest in a Person that
commences a Competitive Activity following the acquisition of such equity
interest if neither the Partner nor its Controlled Affiliate has any
responsibility or control over the conduct of such Competitive Activity, does
not permit its name to be used in connection with such Competitive Activity and
uses all commercially reasonable efforts, including voting its equity interest,
to cause such Person to cease such Competitive Activity;
(d) The conduct by any Partner or its Controlled Affiliates of any
Competitive Activity involving the provision of any product or service that is
an ancillary value-added addition to a Wireless Business and which does not
itself require an FCC license (including operator services, location services
and weather, sports and other information services), provided that the Post or
--------
its Controlled Affiliates may provide such products and services whether or not
the provision thereof requires an FCC license;
(e) The conduct by WirelessCo or any of its Controlled Affiliates of
any Competitive Activity that is a necessary component of or an incidental part
of the conduct of a Principal Business or the entering into by WirelessCo or any
of its Controlled Affiliates of an arrangement with an independent third party
for the provision of any services included in the Wireless Business that is a
necessary component of or an incidental part of the conduct of a Principal
Business, so long as, in each case, WirelessCo (or its Controlled Affiliate)
shall first use all commercially reasonable efforts to negotiate agreements with
the Partnership, which are reasonable in the independent judgment of both
parties, pursuant to which the Partnership would provide such services included
in such Principal Business on terms no less favorable to WirelessCo (or its
Controlled Affiliate) than WirelessCo (or its Controlled Affiliate) could obtain
from an independent third party or could provide itself;
(f) The conduct by any Partner or its Controlled Affiliates of any
Competitive Activity in the Washington-Baltimore MTA or any part thereof, either
directly or indirectly through
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an ownership interest in or other relationship with any other Person, where such
Competitive Activity involves the development of technology or the provision of
any product or service on a regional or national basis, provided that the
conduct of the Competitive Activity in the Washington-Baltimore MTA does not
constitute a material portion, in terms of revenues or fair market value,
thereof;
(g) Comcast and its Controlled Affiliates may participate in regional
marketing activities within the Comcast Area for the purpose of: (i) selling to
its "In-Territory Customers" (as defined below) wireless services within the
Washington-Baltimore MTA; and (ii) obtaining distribution from its "In-Territory
Distributors" (as defined below) of wireless services within the Washington-
Baltimore MTA; provided that (A) Comcast and its Controlled Affiliates do not
maintain or deploy any sales personnel, sales office or other direct sales
presence, or otherwise advertise or promote the Comcast brand or any other
brand, in the Washington-Baltimore MTA outside of the Comcast Area, (B) Comcast
and its Controlled Affiliates do not own or lease any wireless transmission
facilities outside of the Comcast Area in connection therewith and (C) in
obtaining the distribution contemplated under clause (ii) above, Comcast and its
Controlled Affiliates subcontract the provision of wireless services outside the
Comcast Area to a third party provider only if such services cannot be
subcontracted to the Partnership without material adverse consequences for
Comcast's and its Controlled Affiliates' ability to participate in such regional
marketing activities. For the purposes of this Agreement, an "In-Territory
Customer" is a customer that has a business location in the Comcast Area and
places the order for the services described above through Comcast and its
Controlled Affiliates in the Comcast Area. For the purposes of this Agreement,
an "In-Territory Distributor" is a distributor that has a business location in
the Comcast Area and requires that a regional contract be entered into by
Comcast and its Controlled Affiliates in the Comcast Area. The term "Comcast
Area" means (i) the following cellular license areas (or portions thereof) in
New Jersey: Hunterdon NJ1 RSA, New Brunswick MSA, Long Branch MSA, Trenton MSA,
Allentown, PA MSA, Philadelphia MSA, Ocean NJ2 RSA, Atlantic City MSA, Vineland-
Millville MSA, and Wilmington, DE MSA; (ii) Delaware; (iii) Maryland RSA2; (iv)
counties in Pennsylvania in which Comcast and its Controlled Affiliates engage
in the cellular business on the date hereof, and all counties in Pennsylvania
contiguous thereto; (v) the Philadelphia MTA; and (vi) minor overlaps into any
territory adjoining any of the areas included in clauses (i) - (v) above
required to efficiently provide services in such area, and shall include any
area in which Comcast and its Controlled Affiliates at such time own a
controlling interest in a PCS license which was permitted to be acquired under
Section 6.4(b) of the Agreement of Limited Partnership of WirelessCo, L.P.,
dated as of October 24, 1994; and
(h) Subject to the limitations set forth in Section 6.4 of the
Agreement of Limited Partnership of WirelessCo, L.P., dated as of October 24,
1994, Comcast and its Controlled Affiliates may engage in any Competitive
Activities with respect to any Wireless Business in the Comcast Area.
Notwithstanding anything to the contrary in this Section 6, (i) any investment
fund in which a Partner or any of its Controlled Affiliates has an investment
(including pension funds) that invests funds on
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behalf of and has a fiduciary duty to third party investors shall be permitted
to engage in or invest in entities engaged in any activity whatsoever, provided
--------
that neither such Partner nor any of its Controlled Affiliates, directly or
indirectly, exercises any management or operational control whatsoever in any
such entity engaging in a Wireless Business, and (ii) this Section 6 shall not
prevent any partner of WirelessCo or any of such partner's Controlled Affiliates
from engaging in any Competitive Activity that it is permitted to engage in
under the terms of the Agreement of Limited Partnership of WirelessCo, dated
October 24, 1994, without the requirement of any waiver of or amendment to the
provisions of such partnership agreement.
6.4 Freedom of Action.
-----------------
Except as set forth in this Section 6, no Partner or Affiliate of a
Partner shall have any obligation not to (i) engage in the same or similar
activities or lines of business as the Partnership or develop or market any
products or services that compete, directly or indirectly, with those of the
Partnership, (ii) invest or own any interest publicly or privately in, or
develop a business relationship with, any Person engaged in the same or similar
activities or lines of business as, or otherwise in competition with, the
Partnership, (iii) do business with any client or customer of the Partnership,
or (iv) employ or otherwise engage a former officer or employee of the
Partnership.
6.5 Confidentiality.
---------------
(a) Maintenance of Confidentiality. Each Partner and its Controlled
------------------------------
Affiliates (each a "Restricted Party") shall, and shall cause their respective
officers, directors, employees, attorneys, accountants, consultants and other
agents and advisors (collectively, "Agents") to, keep secret and maintain in
confidence the terms of this Partnership Agreement and all confidential and
proprietary information and data of the Partnership and the other Partners or
their Affiliates disclosed to it (in each case, a "receiving party") in
connection with the formation of the Partnership and the conduct of the
Partnership's business (the "Confidential Information") and shall not disclose
Confidential Information, and shall cause their respective Agents not to
disclose Confidential Information, to any Person other than the Partners, their
Controlled Affiliates, their respective Agents that need to know such
Confidential Information, or the Partnership. Each Partner further agrees that
it shall not use the Confidential Information for any purpose other than
monitoring and evaluating its investment, determining and performing its
obligations and exercising its rights under this Agreement, and WirelessCo
further agrees that it will disclose Confidential Information to its partners
only pursuant to undertakings (for the benefit of WirelessCo and the
Partnership) by its partners that they will use the Confidential Information
solely for the purpose of monitoring and evaluating their investment in
WirelessCo and determining and performing their obligations and exercising their
rights under the WirelessCo partnership agreement. The Partnership and each
Partner shall take all reasonable measures necessary to prevent any unauthorized
disclosure of the Confidential Information by any of their respective Controlled
Affiliates or any of their respective Agents.
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(b) Permitted Disclosures. Nothing herein shall prevent the
---------------------
Partnership, any Restricted Party or its Agents from using, disclosing, or
authorizing the disclosure of Confidential Information it receives in the course
of the business of the Partnership which:
(i) has been published or is in the public domain through no fault
of the receiving party;
(ii) prior to receipt hereunder (or under that certain Non-Disclosure
Agreement, dated as of November 30, 1994, by and between WirelessCo and the
Partnership) was properly within the legitimate possession of the receiving
party or, subsequent to receipt hereunder (or under such agreement), is lawfully
received from a third party having rights therein without restriction of the
third party's right to disseminate the Confidential Information and without
notice of any restriction against its further disclosure;
(iii) is independently developed by the receiving party through
parties who have not had, either directly or indirectly, access to or knowledge
of such Confidential Information;
(iv) is disclosed to a third party with the written approval of the
party originally disclosing such information, provided that such Confidential
--------
Information shall cease to be confidential and proprietary information covered
by this Agreement only to the extent of the disclosure so consented to;
(v) subject to the receiving party's compliance with paragraph (d)
below, is required to be produced under order of a court of competent
jurisdiction or other similar requirements of a Governmental Authority, provided
--------
that such Confidential Information to the extent covered by a protective order
or equivalent shall otherwise continue to be Confidential Information required
to be held confidential for purposes of this Agreement; or
(vi) subject to the receiving party's compliance with paragraph (d)
below, is required to be disclosed by applicable law or a stock exchange or
association on which such receiving party's securities (or those of its
Affiliate) are listed.
(c) Notwithstanding this Section 6.5, any Partner may provide
Confidential Information (i) to other Persons considering the acquisition
(whether directly or indirectly) of all or a portion of such Partner's Interest
pursuant to Section 12 of this Agreement or (ii) to any financial institution in
connection with the provision of funds by such financial institution to such
Partner, so long as prior to any such disclosure such other Person or financial
institution executes a confidentiality agreement that provides protection
substantially equivalent to the protection provided the Partners and the
Partnership in this Section 6.5.
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(d) In the event that any receiving party (i) must disclose
Confidential Information in order to comply with applicable law or the
requirements of a stock exchange or association on which such receiving party's
securities or those of its Affiliates are listed or (ii) becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands or otherwise) to disclose any
Confidential Information, the receiving party shall provide the disclosing party
with prompt written notice so that in the case of clause (i) above, the
disclosing party can work with the receiving party to limit the disclosure to
the greatest extent possible consistent with legal obligations, or in the case
of clause (ii) above, the disclosing party may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Agreement.
In the event that the disclosing party is unable to obtain a protective order or
other appropriate remedy, or if the disclosing party so directs, the receiving
party shall, and shall cause its employees to, exercise all commercially
reasonable efforts to obtain a protective order or other appropriate remedy at
the disclosing party's reasonable expense. Failing the entry of a protective
order or other appropriate remedy or receipt of a waiver hereunder, the
receiving party shall furnish only that portion of the Confidential Information
which it is advised by opinion of its counsel is legally required to be
furnished and shall exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment shall be accorded such
Confidential Information, it being understood that such reasonable efforts shall
be at the cost and expense of the disclosing party whose Confidential
Information has been sought.
(e) Any press release concerning this Agreement or the operation of
the Partnership shall be approved by all Partners.
(f) The obligations under this Section 6.5 shall survive (i) as to all
Partners, the termination of the Partnership, (ii) as to any Partner, such
Partner's withdrawal therefrom (or otherwise ceasing to be a Partner) and (iii)
as to any Person, such Person's ceasing to be an Affiliate or Agent of a
Partner, in each case for a period of two (2) years from the date of such
termination, withdrawal or cessation, as the case may be; provided, that such
--------
obligations shall continue indefinitely with respect to any trade secret or
similar information that is proprietary to the Partnership and provides the
Partnership with an advantage over its competitors.
SECTION 7
ROLE OF EXCLUSIVE LIMITED PARTNERS
Except as otherwise provided in this Agreement, an Exclusive Limited
Partner shall not have any right or power to take part in the management or
control of the Partnership or its business and affairs or to act for or bind the
Partnership in any way.
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SECTION 8
TRANSACTIONS WITH PARTNERS; CERTAIN ADDITIONAL AGREEMENTS
8.1 Transactions with Partners.
--------------------------
(a) Preferred Provider. The Partnership shall contract with each
------------------
Partner, its Affiliates and third parties, as appropriate, on a negotiated arms-
length basis, for services it may require, which may include billing and
information systems and marketing and sales services. The Partnership may in
the normal course of its business enter into transactions with the Partners and
their respective Affiliates, provided that the Managing Partner, acting in
--------
accordance with Section 8.2(b), has determined that the price and other terms of
such transactions are fair to the Partnership and that the price and other terms
of such transaction are not less favorable to the Partnership than those
generally prevailing with respect to comparable transactions involving non-
Affiliates of Partners. Subject to the foregoing, the Managing Partner, acting
in accordance with Section 8.2(b), may in its discretion elect from time to time
to provide rights of first opportunity to the Partners or their Affiliates to
provide services to the Partnership; provided that the Managing Partner shall
--------
have adopted procedures (including conflict avoidance procedures) relating
generally to such right of first opportunity arrangements, and the provision of
such rights and all matters related to the exercise thereof shall be subject to
and effected in a manner consistent with such procedures. The Partnership is
expressly authorized to enter into the agreements expressly referred to in this
Section 8.1.
(b) Access to Technical Information. Subject to the provisions of
-------------------------------
Sections 6 and 11.4 of this Agreement and to applicable confidentiality
restrictions, the Partnership shall grant to each Group Partner and its
Controlled Affiliates access to Technical Information. Such access shall be
granted at such reasonable times and locations and on such other reasonable
terms as the Managing Partner may approve in accordance with Section 8.2(b).
Subject to Section 6 and, in the case of Licensed Rights, to the terms and
conditions contained in the related license to the Partnership, the Partnership
shall grant to any such Partner or its Controlled Affiliate a license to use any
Technical Information Rights to which it is granted access pursuant to this
Section 8.1(b), which license shall provide for royalties and fees and other
terms and conditions that are generally prevailing with respect to comparable
transactions involving unrelated third parties and are at least as favorable to
such Partner or its Controlled Affiliate as those generally prevailing with
respect to comparable licenses (if any) granted to non-Affiliates of Partners.
(c) Support By WirelessCo Partners. To the extent permitted by
------------------------------
applicable law, WirelessCo agrees that it will use all commercially reasonable
efforts to cause its partners to provide appropriate services to the Partnership
in the Washington-Baltimore MTA. Such services may include antenna sites and/or
strand mounting of RF and transmission equipment owned by the Partnership or any
Affiliate of the Partnership, and transmission facilities between cell sites and
designated switching locations. Services also may include provision of primary
power, standby power
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and maintenance. Pricing of the foregoing services will be negotiated at a
local level and is expected to reflect all relevant costs plus a reasonable
return.
(d) FCC Action.
----------
(i) Should a change in FCC policy or rules make it necessary to obtain
FCC Approval for the implementation, continuation or further effectuation of any
term or provision of this Agreement, the Partners shall use all commercially
reasonable efforts to diligently prepare, file and prosecute before the FCC all
petitions, waivers, construction applications, amendments, rulemaking comments
and other related documents necessary to secure and/or retain FCC Approval of
all aspects of this Agreement or conformance with FCC rules or regulations. The
Group Partners shall bear in equal measure the costs of preparation of such
documents and prosecution of such actions. Notwithstanding any provision in
this Agreement to the contrary, the Partners acknowledge and agree that no such
filing shall be made with the FCC with respect to this Agreement unless all
Partners have reviewed such filing and consented to its submission.
(ii) In the event the FCC determines that this Agreement is
inconsistent with the terms and conditions of the License or is otherwise
contrary to FCC policies, rules and regulations, or if regulatory or legislative
action subsequent to the date hereof alters the permissibility of this Agreement
under the FCC's rules or other applicable law, rules or regulations, the
Partners shall renegotiate this Agreement in good faith and recast this
Agreement, preserving to the extent possible the economic and other arrangements
set forth herein.
8.2 Additional Agreements of the Partners.
-------------------------------------
(a) MFJ. Each Partner agrees that neither it nor any of its
---
Controlled Affiliates shall take any action which (i) causes such Partner or the
Partnership to become a BOC or (ii) which causes the Partnership to become a BOC
Affiliated Enterprise or an entity subject to any restriction or limitation
under Section II of the MFJ if, in the case of an event specified in clause (ii)
above, such event would have a material adverse effect on the business, assets,
liabilities, results of operations, financial condition or prospects of the
Partnership.
(b) Interested Party Transactions. Each Partner agrees that any
-----------------------------
contract, agreement, relationship or transaction between the Partnership or any
of its subsidiaries, on the one hand, and such Partner or any Person in which
such Partner (including its Controlled Affiliates) has a direct or indirect
material financial interest or which has a direct or indirect material financial
interest in such Partner (provided that a Person shall not be deemed to have
such an interest solely as a result of its ownership of less than 10% (by value)
of the outstanding economic interests in a Publicly Held Parent of a Partner (or
a Publicly Held Intermediate Subsidiary of such Parent)) (each, an "Interested
Person") on the other hand, shall be approved and all decisions with respect
thereto (including the determination to amend, terminate or abandon any such
contract or agreement, whether there has been a breach thereof and whether to
exercise, waive or release any rights of the Partnership with respect thereto)
shall be made (after full disclosure by the interested Partner of all material
facts
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relating to such matter) by the Managing Partner; provided, however, if the
-------- --------
Managing Partner is an interested Partner, all actions to be taken or decisions
to be made pursuant to this Section 8.2(b) shall require the approval of the
Group Partners (excluding the Managing Partner) holding more than fifty percent
(50%) of the Percentage Interests then held by all Group Partners (excluding the
Managing Partner), which approval shall not be unreasonably withheld. For
purposes of the foregoing, a disinterested Partner is a Partner that is not a
party to, and does not have an Interested Person that is a party to, the
contract, agreement, relationship or transaction in question.
(c) Foreign Ownership. Each Partner agrees that neither it nor any of
-----------------
its Controlled Affiliates will take any action that (i) causes the Partnership
to violate any federal laws or regulations restricting foreign ownership of the
Partnership (including 47 U.S.C. 310(b) and the rules and regulations
promulgated thereunder by the FCC) (the "Ownership Restrictions") or (ii) would
cause the Partnership to be in violation of the Ownership Restrictions assuming
that Sprint Corporation is twenty-eight percent (28%) foreign owned (as measured
by the Ownership Restrictions).
(d) Advice of Changes in Government Filings; Petitions to Deny. Each
----------------------------------------------------------
Partner shall promptly advise the other Partners orally and in writing of any
change or event known to such Partner having or which, insofar as can reasonably
be foreseen, could have a material adverse effect on the right of the
Partnership to hold or use the License. Each Partner shall promptly provide the
other Partners with copies of all filings made by it or any of its Controlled
Affiliates with any Governmental Authority in connection with the License.
Each Partner shall promptly provide the other Partners with copies of all
petitions to deny or similar petitions with the FCC or any other Governmental
Authority by any Person challenging or questioning the right of the Partnership
to hold or use the License or otherwise in connection with this Agreement and
the transactions contemplated hereby.
(e) Actions Affecting the License. Neither APC or WirelessCo, nor any
-----------------------------
of their Controlled Affiliates, shall take or fail to take, or cause the
Partnership to take or fail to take, any action (including actions relating to
the initial buildout of the Partnership's PCS system) that would result in the
revocation of the Partnership's right to hold or use the License.
(f) WirelessCo Financial Obligations. If necessary, WirelessCo shall
--------------------------------
draw on the Letters of Credit to fund its Additional Capital Contribution and
other funding obligations under Sections 2.3(b) and 2.4; provided if the
--------
aggregate commitment represented by the Letters of Credit falls below $250
million, WirelessCo shall provide to the Partnership and to APC evidence
reasonably satisfactory to the Partnership and to APC that WirelessCo is able to
satisfy its Additional Capital Contribution and other funding obligations under
Sections 2.3(b) and 2.4. WirelessCo shall be deemed to have satisfied the
condition set forth in the proviso contained in the immediately preceding
sentence if (i) WirelessCo delivers to APC a balance sheet of WirelessCo
certified as accurate by WirelessCo's chief financial officer reflecting a net
worth of at least $250 million, or (ii) WirelessCo
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certifies to APC that WirelessCo has obtained credit facilities that would
permit WirelessCo to borrow an amount equal to or greater than WirelessCo's
remaining unfunded Additional Capital Contribution and other funding obligations
under Sections 2.3(b) and 2.4.
8.3 Additional Agreements of APC.
----------------------------
APC hereby covenants and agrees (except as expressly contemplated or
permitted by this Agreement or to the extent that WirelessCo shall otherwise
consent in writing):
(a) Completion of Initial Buildout. APC shall, in its capacity as
------------------------------
Managing Partner, cause the Partnership to satisfy the initial buildout
requirement under the License on or before the third (3rd) anniversary of the
date the License was issued to the Partnership. Notwithstanding the foregoing,
no breach of this Section 8.3(a) shall be deemed to have occurred if the
Partnership's failure to satisfy the initial buildout requirement under the
License by such date was caused by WirelessCo's failure to satisfy its
Additional Capital Contribution and other funding obligations under Sections 2.3
and 2.4, and such three (3) year period shall be tolled to the extent, and for
so long as such condition exists, the Partnership's failure to satisfy the
initial buildout requirement under the License was caused by (i) an FCC order or
any other injunction issued by any Governmental Authority prohibiting the
Partnership from continuing construction of its PCS system, or (ii) any act of
God, act of war or insurrection, civil unrest or general work stoppage.
(b) Additional Financing. APC will use commercially reasonable
--------------------
efforts to obtain, to the extent APC does not otherwise have access to
sufficient funds, additional financing to fund its obligations to make
Additional Capital Contributions pursuant to Section 2.3(a).
8.4 Effect of Breach.
----------------
If any Partner commits, or has committed, a breach of any of the
provisions of Sections 8.2(e), 8.3(a), 9.2(a), 9.2(b) or 9.2(c), and such breach
results in the forfeiture or cancellation of the Partnership's right to hold or
use the License, the non-breaching Partners shall be released, effective as of
the date of such forfeiture or cancellation, from their obligations under this
Agreement except (A) as otherwise provided in Section 6, (B) any obligations or
liabilities arising out of a breach of this Agreement or pursuant to Section
5.5, and (C) any obligations or liabilities based on events occurring, arising
or maturing prior to the date that such breach occurred.
SECTION 9
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of the Partners.
----------------------------------------------
Each Partner hereby represents and warrants that as of the date hereof:
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(a) Due Formation; Authorization of Agreement. Such Partner is a
-----------------------------------------
corporation duly organized or a partnership duly formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or partnership power and authority to own its
property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby. Such Partner is duly licensed or qualified to do
business and in good standing in each of the jurisdictions in which the failure
to be so licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations hereunder. Such
Partner has the corporate or partnership power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and the
execution, delivery and performance of this Agreement has been duly authorized
by all necessary corporate or partnership action. Assuming the due execution
and delivery by the other parties hereto, this Agreement constitutes the legal,
valid and binding obligation of such Partner enforceable against such Partner in
accordance with its terms, subject as to enforceability to limits imposed by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
the availability of equitable remedies.
(b) No Conflict with Restrictions; No Default. Neither the execution,
-----------------------------------------
delivery and performance of this Agreement nor the consummation by such Partner
of the transactions contemplated hereby
(i) will conflict with, violate or result in a breach of any of the
terms, conditions or provisions of any law, regulation, order, writ, injunction,
decree, determination or award of any court, any other Governmental Authority,
or any arbitrator, applicable to such Partner or any of its Controlled
Affiliates,
(ii) will conflict with, violate, result in a breach of or constitute
a default under any of the terms, conditions or provisions of the articles of
incorporation, bylaws or partnership agreement of such Partner or any of its
Controlled Affiliates or of any material agreement or instrument to which such
Partner or any of its Controlled Affiliates is a party or by which such Partner
or any of its Controlled Affiliates is or may be bound or to which any of its
material properties or assets is subject (other than any such conflict,
violation, breach or default that has been validly and unconditionally waived),
(iii) will conflict with, violate, result in a breach of, constitute
a default under (whether with notice or lapse of time or both), accelerate or
permit the acceleration of the performance required by, give to others any
material interests or rights or require any consent, authorization or approval
under any indenture, mortgage, lease agreement or instrument to which such
Partner or any of its Controlled Affiliates is a party or by which such Partner
or any of its Controlled Affiliates is or may be bound, or
(iv) will result in the creation or imposition of any Lien upon any of
the material properties or assets of such Partner or any of its Controlled
Affiliates,
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in each case which could reasonably be expected to have a material adverse
effect on the Partnership or to materially impair such Partner's ability to
perform its obligations under this Agreement or to have a material adverse
effect on the consolidated financial condition of such Partner.
(c) Governmental Authorizations. Any registration, declaration or
---------------------------
filing with, or consent, approval, license, permit or other authorization or
order by, any Governmental Authority that is required to be obtained by such
Partner as of the date hereof in connection with the valid execution, delivery,
acceptance and performance by such Partner under this Agreement or the
consummation by such Partner of any transaction contemplated hereby has been or
will be completed, made or obtained on or before the effective date of this
Agreement.
(d) Litigation. Except as set forth on Schedule 9.2(c) hereto, there
----------
are no actions, suits, proceedings or investigations pending or, to the
knowledge of such Partner, threatened against or affecting such Partner or any
of its Controlled Affiliates or any of their properties, assets or businesses in
any court or before or by any other Governmental Authority or any arbitrator
which could, if adversely determined (or, in the case of an investigation could
lead to any action, suit or proceeding, which if adversely determined could),
reasonably be expected to materially impair such Partner's ability to perform
its obligations under this Agreement or to have a material adverse effect on the
consolidated financial condition of such Partner; and such Partner or any of its
Controlled Affiliates has not received any currently effective notice of any
default, and such Partner or any of its Controlled Affiliates is not in default,
under any applicable order, writ, injunction, decree, permit, determination or
award of any court, any other Governmental Authority, or any arbitrator which
default could reasonably be expected to materially impair such Partner's ability
to perform its obligations under this Agreement or to have a material adverse
effect on the consolidated financial condition of such Partner.
(e) MFJ. Such Partner is not a BOC, a BOC Affiliated Enterprise or an
---
entity subject to any restrictions under Section II of the MFJ.
(f) Finders Fees. There is no investment banker, broker or finder
------------
which has been retained by or is authorized to act on behalf of such Partner who
might be entitled to any fee or commission from any other Partner or the
Partnership upon consummation of the transactions contemplated by this
Agreement.
9.2 Representations and Warranties of APC Regarding the Existing Business.
---------------------------------------------------------------------
APC hereby represents and warrants to WirelessCo as follows:
(a) License. The Partnership has satisfied all terms and conditions
-------
required to be satisfied on or before the date hereof imposed by the FCC, by any
other Governmental Authority, or by federal law as a condition of the award of
the License, including, but not limited to, the FCC's pioneers' preference rules
as codified at 47 C.F.R. Sections 1.402, 1.403 and 5.207 (1993); orders issued
in Federal Communications Commission dockets ET Docket No. 93-266, GEN Docket
No.
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90-314 and GEN Docket No. 90-217; and conditions imposed as of the date hereof
in response to APC's application for authority to provide broadband PCS service
on frequency block "A" of the Washington-Baltimore MTA.
(b) Compliance with Laws. The Partnership has not made any untrue
--------------------
statement of fact, or omitted to disclose any facts, to the FCC or any other
Governmental Authority or taken or failed to take any action, which
misstatements, omissions, actions or failures to act, individually or in the
aggregate, subject or could reasonably be expected to subject the Partnership to
forfeit its right to hold or use the License.
(c) Litigation. Except as set forth on Schedule 9.2(c) hereto, there
----------
are no actions, suits, proceedings or investigations pending or, to the
knowledge of APC, threatened against or affecting the Partnership in, before or
by any Governmental Authority or any arbitrator which could, if adversely
determined (or, in the case of an investigation could lead to any action, suit
or proceeding, which if adversely determined could) reasonably be expected to
affect the right of the Partnership to hold or use the License or impose any
material restrictions or limitations on the Partnership's ownership of the
License or the operation of its business; and the Partnership has not received
any currently effective notice of any default, and the Partnership is not in
default, under any applicable order, writ, injunction, decree, permit,
determination or award of any Governmental Authority or any arbitrator that
could reasonably be expected to affect the right of the Partnership to hold or
use the License or impose any material restrictions or limitations on the
Partnership's ownership of the License or the operation of its business.
(d) Certain Conditions Not Present. Except as set forth on Schedule
------------------------------
9.2(d) attached hereto, to the knowledge of APC, there are no liabilities of the
Partnership of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, except for those liabilities and
obligations (i) reflected or reserved against in (A) the balance sheet of the
Partnership at December 31, 1993 and the related statements of income (loss) and
changes in partners' capital for the year then ended (including the notes
thereto, if any) or (B) the balance sheet of the Partnership at November 30,
1994 and the related statements of income (loss) and changes in partners'
capital for the eleven-month period then ended (including the notes thereto, if
any), (ii) incurred or accrued since November 30, 1994 in the ordinary and
normal course of the Existing Business (including obligations relating to
employee salaries and benefits), (iii) arising under the contracts, commitments,
and agreements listed on Schedule 1.10(a) attached hereto, or (iv) that,
individually or in the aggregate, are not material to the Existing Business
taken as a whole.
(e) Condition of Equipment. The machinery, equipment, furniture,
----------------------
vehicles and other tangible personal property of the Partnership are in adequate
operating condition for the continued conduct of the Existing Business as it is
presently conducted.
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<PAGE>
(f) Title to Property; Liens. Except as set forth in Schedule 1.10(a)
------------------------
or in Schedule 9.2(f) attached hereto, the Partnership has title to all of the
assets included in the Existing Business, free and clear of all Liens, except
for Liens that, individually or in the aggregate, are not material to the
Existing Business taken as a whole.
(g) Leases. Each lease for real or personal property included in the
------
Existing Business (i) is in full force and effect in accordance with its terms,
and (ii) has not been modified or amended; and APC has not received any written
notice of any breach or default with respect to such leases, the consequences of
which would result, individually or in the aggregate, in a material adverse
effect on the Existing Business taken as a whole.
(h) No Breach. Each permit, contract, agreement, lease, policy,
---------
license, plan, commitment, arrangement and understanding (whether evidenced by a
written document or otherwise) referred to in this Agreement or in Schedule
1.10(a) hereto, under which the Partnership has any right, interest or
obligation (i) is in full force and effect and (ii) to the knowledge of APC, is
not subject to any threatened amendment, cancellation or outstanding dispute;
and the Partnership is not in breach of, and there does not exist any default,
or event which, with the giving of notice or the lapse of time or both, would
become a breach or default, and there is no basis for any valid claim of a
default in any respect, under such permits, contracts, agreements, leases,
policies, licenses, plans, commitments, arrangements or understandings, the
consequences of which would result, individually or in the aggregate, in a
material adverse effect on the Existing Business taken as a whole.
(i) Assets Necessary to Existing Business. (i) The Partnership (A)
-------------------------------------
owns or has a valid leasehold interest in, all tangible and intangible assets
and properties necessary to allow it to conduct the Existing Business, (B)
possesses all consents, authorizations, approvals and permits that are material
to the Existing Business, and all such consents, authorizations, approvals and
permits are valid, and (C) is a party to all agreements, in each case necessary
to permit the Partnership to continue to carry on the Existing Business
substantially as being conducted on the date of this Agreement, and (ii) all of
the assets, properties and contract rights relating to the Existing Business are
set forth on Schedule 1.10(a).
(j) Environmental Protection. Except as set forth on Schedule
------------------------
9.2(j) attached hereto,
(i) The Partnership (with respect to the Existing Business) has
obtained all permits relating to pollution or protection of health, safety or
the environment required under applicable law, including, without limitation,
those regulating emissions, discharges or releases of Hazardous Substances (as
defined in CERCLA, as amended by SARA, "Hazardous Waste," and "Regulated
Substances," as defined by RCRA) into ambient air, surface water, ground water,
or land, or the resulting treatment, storage or disposal of Hazardous
Substances, except for such permits the failure of the Partnership to obtain
which, individually or in the aggregate, would not have a material adverse
effect on the Existing Business taken as a whole;
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(ii) The Partnership has taken all actions necessary under applicable
law to register any regulated products or materials relating to the Existing
Business, required to be registered thereunder, except to the extent that the
failure to take any such actions, individually or in the aggregate, would not
have a material adverse effect on the Existing Business taken as a whole;
(iii) APC is not aware of, nor has APC received notice of, any
events, conditions, circumstances, activities, practices, incidents, actions or
plans which APC reasonably expects would result in claims or liabilities, based
on or related to alleged on-site or off-site contamination with respect to or
affecting the Existing Business and property related thereto that, individually
or in the aggregate, would have a material adverse effect on the Existing
Business taken as a whole; and
(iv) To the knowledge of APC, there is not now on or in any of the
properties currently owned, leased or rented by or otherwise used in the
Existing Business any leaking underground storage tanks or surface impoundments
which, if determined by any Governmental Authority to be in violation of any law
related to public or occupational safety, pollution and protection of the
environment, would have a material adverse effect on the Existing Business taken
as a whole.
(k) Intellectual Property. Except as set forth on Schedule 9.2(k)
---------------------
attached hereto, (i) the Partnership has the sole and exclusive right to use the
PathGuard Technology, and the consummation of the transactions contemplated by
this Agreement would not alter or impair any such rights, (ii) no claims have
been asserted by any Person for the use of the PathGuard Technology or
challenging or questioning the validity or effectiveness of any patent or other
license or agreement to use the PathGuard Technology, and APC has no knowledge
of any valid basis for any such claim, and (iii) to the knowledge of APC, the
use of the PathGuard Technology by the Partnership does not infringe upon the
rights of any other Person.
(l) Control. The Post is not, nor has it ever been, in de facto
------- -- -----
control of the Partnership under applicable FCC rules and regulations.
9.3 Liability for Breach.
--------------------
APC shall indemnify WirelessCo for any Damages incurred by WirelessCo
as a result of APC's breach of any representation and warranty set forth in
Section 9.2 in accordance with the procedures set forth in Section 5.6. APC's
liability for any such breach shall be limited to the excess, if any, of the
amount of the Damages incurred by WirelessCo as a result of such breach over the
indemnification obligation of the Post to WirelessCo pursuant to the terms of
the Purchase Agreement. Notwithstanding any contrary provision of this Section
9.3, in no event shall APC's aggregate liability to WirelessCo for any and all
breaches except for any breach caused by a fraudulent
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misrepresentation of the representations and warranties set forth in Section
9.2, taken together, exceed the sum of $12,000,000.
SECTION 10
ACCOUNTING, BOOKS AND RECORDS
10.1 Accounting, Books and Records.
-----------------------------
The Partnership shall maintain at its principal office separate books
of account for the Partnership which (i) shall fully and accurately reflect all
transactions of the Partnership, all costs and expenses incurred, all charges
made, all credits made and received, and all income derived in connection with
the conduct of the Partnership and the operation of its business in accordance
with GAAP or, to the extent inconsistent therewith, in accordance with this
Agreement and (ii) shall include all documents and other materials with respect
to the Partnership's business as are usually entered and maintained by persons
engaged in similar businesses. The Partnership shall use the accrual method of
accounting in preparation of its annual reports and for tax purposes and shall
keep its books and records accordingly. Subject to Section 10.4, any Partner or
its designated representative shall have the right, at any reasonable time and
for any lawful purpose related to the affairs of the Partnership or the
investment in the Partnership by such Partner, (i) to have access to and to
inspect and copy the contents of such books or records, (ii) to visit the
facilities of the Partnership and (iii) to discuss the affairs of the
Partnership with its officers, employees, attorneys, accountants, customers and
suppliers. The Partnership shall not charge such Partner for such examination
and each Partner shall bear its own expenses in connection with any examination
made for any such Partner's account.
10.2 Reports.
-------
(a) In General. The chief financial officer of the Partnership shall
----------
be responsible for the preparation of financial reports of the Partnership and
the coordination of financial matters of the Partnership with the Accountants.
(b) Periodic and Other Reports. The Partnership shall cause to be
--------------------------
delivered to each Partner the financial statements listed in clauses (i) through
(iii) below, prepared, in each case, in accordance with GAAP (and, if required
by any Partner or its Controlled Affiliates for purposes of reporting under the
Securities Exchange Act of 1934, Regulation S-X), and such other reports as any
Partner may reasonably request from time to time, provided that, if the Managing
--------
Partner so determines within thirty (30) days thereof, such other reports shall
be provided at such requesting Partner's sole cost and expense. Such financial
statements shall be accompanied by an analysis, in reasonable detail, of the
variance between the financial condition and results of operations reported
therein and the corresponding amounts for the applicable period or periods in
the Approved Business Plan. The monthly and quarterly financial statements
referred to in clauses (ii) and (iii) below may be subject to normal year-end
audit adjustments.
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(i) As soon as practicable following the end of each Fiscal Year (and
in any event not later than seventy-five (75) days after the end of such Fiscal
Year) and at such time as distributions are made to the Partners pursuant to
Section 14.2 following the occurrence of a Liquidating Event, a balance sheet of
the Partnership as of the end of such Fiscal Year and the related statements of
operations, Partners' Capital Accounts and changes therein, and cash flows for
such Fiscal Year, together with appropriate notes to such financial statements
and supporting schedules, all of which shall be audited and certified by the
Accountants, and in each case, to the extent the Partnership was in existence,
setting forth in comparative form the corresponding figures for the immediately
preceding Fiscal Year (in the case of the balance sheet) and the two (2)
immediately preceding Fiscal Years (in the case of the statements).
(ii) As soon as practicable following the end of each of the first
three fiscal quarters of each Fiscal Year (and in any event not later than forty
(40) days after the end of each such fiscal quarter), a balance sheet of the
Partnership as of the end of such fiscal quarter and the related statements of
operations, Partners' Capital Accounts and changes therein, and cash flows for
such fiscal quarter and for the Fiscal Year to date, in each case, to the extent
the Partnership was in existence, setting forth in comparative form the
corresponding figures for the prior Fiscal Year's fiscal quarter and interim
period corresponding to the fiscal quarter and interim period just completed.
(iii) As soon as practicable following the end of each of the first
two calendar months of each fiscal quarter (and in any event not later than
thirty (30) days after the end of such calendar month), a balance sheet as of
the end of such month and statements of operations for the interim period
through such month and the monthly period then ended, setting forth in
comparative form the corresponding figures from the Business Plan for such month
and the interim period through such month.
The quarterly or monthly statements described in clauses (ii) and
(iii) above shall be accompanied by a written certification of the chief
financial officer of the Partnership that such statements have been prepared in
accordance with GAAP or this Agreement, as the case may be.
(c) Reporting Obligations During Initial Buildout Period.
----------------------------------------------------
(i) During the Initial Buildout Period, the Managing Partner shall
cause to be delivered to each other Partner, as soon as practicable following
the end of each fiscal quarter of each Fiscal Year (and in any event not later
than fifteen (15) days after the end of each such fiscal quarter), a status
report certified by the chief financial officer of the Partnership evaluating
the Partnership's progress with respect to the buildout of the Partnership's PCS
system.
(ii) During the Initial Buildout Period, the Partnership shall
promptly provide to each Partner copies of all filings, notices and other
correspondence with the FCC relating to the License.
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10.3 Tax Returns and Information.
---------------------------
(a) APC shall act as the "Tax Matters Partner" of the Partnership
within the meaning of Section 6231(a)(7) of the Code (and in any similar
capacity under applicable state or local law) (the "Tax Matters Partner");
provided that WirelessCo shall act as such "Tax Matters Partner" for any taxable
- - --------
year during which (i) WirelessCo is a general partner for any portion thereof
and (ii) WirelessCo's Percentage Interest is fifty percent (50.0%) or greater on
the last day of such taxable year. The Tax Matters Partner shall take
reasonable action to cause each other Partner to be treated as a "notice
partner" within the meaning of Section 6231(a)(9) of the Code. All reasonable
expenses incurred by a Partner while acting in its capacity as Tax Matters
Partner shall be paid or reimbursed by the Partnership. Each other Partner
shall have the right to have five (5) Business Days advance notice from the Tax
Matters Partner of the time and place of, and to participate in (i) any material
aspect of any administrative proceeding relating to the determination of
Partnership items at the Partnership level and (ii) any material discussions
with the Internal Revenue Service relating to the allocations pursuant to
Section 3 of this Agreement. The Tax Matters Partner shall not initiate any
action or proceeding in any court, extend any statute of limitations, or take
any other action contemplated by Sections 6222 through 6232 of the Code that
would legally bind any other Partner or the Partnership without the unanimous
written consent of all Group Partners. The Tax Matters Partner shall from time
to time upon request of any other Partner confer, and cause the Partnership's
tax attorneys and Accountants to confer, with such other Partner and its
attorneys and accountants on any matters relating to a Partnership tax return or
any tax election.
(b) The Tax Matters Partner shall cause all federal, state, local and
other tax returns and reports (including amended returns) required to be filed
by the Partnership to be prepared and timely filed with the appropriate
authorities and shall cause all income or franchise tax returns or reports
required to be filed by the Partnership to be sent to each Partner for review at
least fifteen (15) Business Days prior to filing. Unless otherwise determined
by the Managing Partner, all such income or franchise tax returns of the
Partnership shall be prepared by the Accountants. The cost of preparation of
any returns by the Accountants or other outside preparers shall be borne by the
Partnership. In the event of a Transfer of all or part of an Interest, the Tax
Matters Partner shall at the request of the transferee cause the Partnership to
elect, pursuant to Section 754 of the Code, to adjust the basis of the
Partnership's property; provided, however, that such transferee shall reimburse
-------- -------
the Partnership promptly for all costs associated with such basis adjustment,
including bookkeeping, appraisal and other similar costs. Except as otherwise
expressly provided herein, all other elections required or permitted to be made
by the Partnership under the Code (or applicable state or local tax law) shall
be made in such manner as may be determined by the Managing Partner to be in the
best interests of the Partners as a group.
(c) The Tax Matters Partner shall cause to be provided to each other
Partner as soon as possible after the close of each Fiscal Year (and, in any
event, no later than one hundred thirty-five (135) days after the end of each
Fiscal Year), a schedule setting forth such Partner's distributive share of the
Partnership's income, gain, loss, deduction and credit as determined for federal
income tax purposes and any other information relating to the Partnership that
is reasonably
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required by such Partner to prepare its own federal, state, local and other tax
returns. At any time after such schedule and information have been provided,
upon at least two (2) Business Days' notice from any other Partner, the Tax
Matters Partner shall also provide each Partner with a reasonable opportunity
during ordinary business hours to review and make copies of all work papers
related to such schedule and information or to any return prepared under
paragraph (b) above. The Tax Matters Partner shall also cause to be provided to
each other Partner, at the time that the quarterly financial statements are
required to be delivered pursuant to Section 10.2(b)(ii) above, an estimate of
each Partner's share of all items of income, gain, loss, deduction and credit of
the Partnership for the fiscal quarter just completed and for the Fiscal Year to
date for federal income tax purposes.
10.4 Proprietary Information.
-----------------------
Notwithstanding anything to the contrary in this Section 10, an
Adverse Partner shall only have access to such information regarding the
Partnership as is required by applicable law and shall not have access for such
time as the Managing Partner deems reasonable to such information relating to
the Partnership's business which the Managing Partner reasonably believes to be
in the nature of trade secrets or other information the disclosure of which the
Managing Partner in good faith believes is not in the best interest of the
Partnership or could damage the Partnership or its business or which the
Partnership is required by law or by agreement with a third party to keep
confidential.
SECTION 11
ADVERSE ACT
11.1 Remedies.
--------
(a) If an Adverse Act has occurred or is continuing with respect to
any Partner, any non-Adverse Group Partner may elect:
(i) with respect to any Adverse Act occurring or continuing after the
Initial Buildout Period (or, with respect to an Adverse Act committed by any
Special Limited Partner, occurring or continuing after the date occurring 180
days following the Initial Buildout Completion Date), except for any Adverse Act
resulting from a failure to pay money as required under this Agreement, to cause
the Partnership to commence the procedures specified in Section 11.2 for the
purchase of the Adverse Partner's Interest; or
(ii) to seek to enjoin such Adverse Act or to obtain specific
performance of the Adverse Partner's obligations or Damages (as defined and
subject to the limitations specified below) in respect of such Adverse Act.
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Notwithstanding anything to the contrary contained in this Section 11,
(A) none of the remedies specified above (nor any other provision of this
Section 11) shall apply to an Adverse Act specified in clause (v) of the
definition of such term in Section 1.10, (B) the remedies specified in clause
(ii) shall not be available to the Group Partners with respect to an Adverse Act
specified in clause (vi) of such definition unless the circumstances under which
such event arose also constituted a breach by the Adverse Partner of the
covenant contained in Section 8.2(a) of this Agreement, (c) the remedy specified
in clause (i) above and the right to seek Damages under clause (ii) above may
not be pursued and Section 11.1(b) will not apply to an Adverse Act specified in
clause (iii) of such definition until such time as there is a Final
Determination that the Partner's actions or failure to act constituted an
Adverse Act, if the affected Partner timely delivered a Contest Notice, and (D)
the remedy specified in clause (i) above and the right to seek Damages under
clause (ii) above may not be pursued and Section 11.1(b) will not apply to an
Adverse Act specified in clause (vii) of such definition if such Adverse Act
occurs with respect to APC during the WirelessCo Majority Period, during which
the sole remedy available to the other Group Partners with respect to such
Adverse Act shall be APC's forfeiture of its approval rights under Section 5.1.
The election of a remedy specified in clause (i) or (ii) above may be
exercised by notice given to the Adverse Partner (A) in case of an Adverse Act
specified in clause (i) of the definition of the term "Adverse Act" in Section
1.10, within ninety (90) days after the occurrence of such Adverse Act or (B) in
the case of any other Adverse Act with respect to which such remedy is
available, within ninety (90) days after the Group Partner making such election
obtains actual knowledge of the occurrence of such Adverse Act, including, if
applicable, that any cure period has expired; provided that, if an election
--------
pursuant to clause (ii) above is made to seek an injunction, specific
performance or other equitable relief and a final judgment in such action is
rendered denying such equitable remedy, then, by notice given within ten (10)
days thereafter, the non-Adverse Group Partner may elect to pursue the remedies
specified in clause (i) above unless (x) prior to the giving of such notice, the
Adverse Partner has cured in full (or caused to be cured in full) the Adverse
Act in question and no other Adverse Act with respect to such Adverse Partner
has occurred and is continuing or (y) the final judgment denying equitable
relief specifically held that there was no Adverse Act.
The foregoing remedies shall not be deemed to be mutually exclusive,
and selection or resort to any thereof shall not preclude selection or resort to
the others. The resort to any remedy pursuant to this Section 11.1(a) shall not
for any purpose be deemed to be a waiver of any other remedy available hereunder
or under applicable law. Except as provided in Section 11.1(b), the failure to
elect a remedy within the time periods provided in the preceding paragraph shall
be conclusively presumed to be a waiver of the remedies provided in this Section
11 with respect to the subject Adverse Act; and provided further, that if an
election is made pursuant to clause (i) above, the amount the Partnership may
recover in any action for Damages shall be reduced by an amount equal to any
positive difference between the Net Equity of the Adverse Partner's Interest and
the applicable Buy-Sell Price.
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Unless resort to such remedy has been waived as set forth in the
immediately preceding paragraph, the Partnership shall be entitled to recover
from the Adverse Partner in an appropriate proceeding any and all damages,
losses and expenses (including reasonable attorneys' fees and disbursements)
(collectively, "Damages") suffered or incurred by the Partnership as a result of
such Adverse Act; provided that the Partnership shall not have or assert any
--------
claim against the Adverse Partner for punitive Damages or for indirect, special
or consequential Damages suffered or incurred by the Partnership as a result of
an Adverse Act.
(b) If the Partnership is dissolved pursuant to Section 14.1(a) at any
time as a result of a Liquidating Event that occurs prior to a remedy having
been elected pursuant to Section 11.1(a) with respect to any Adverse Partner,
the time periods for such election shall thereupon expire and the Managing
Partner shall deduct from any amounts to be paid to such Adverse Partner that
amount which it reasonably estimates to be sufficient to compensate the non-
Adverse Group Partners for Damages incurred by them as a result of the Adverse
Act (subject to the limitations of Section 11.1(a)) and shall pay the same to
the non-Adverse Group Partners.
11.2 Adverse Act Purchase.
--------------------
(a) Determination of Net Equity of Adverse Partner's Interest. If any
---------------------------------------------------------
Group Partner makes an election pursuant to Section 11.1(a)(i) to commence the
purchase procedures set forth in this Section 11.2, the Net Equity of the
Adverse Partner's Interest shall be determined in accordance with this Section
11 as of the last day of the fiscal quarter immediately preceding the fiscal
quarter in which notice of such election (the "Election Notice") was given to
the Adverse Partner, and the Adverse Partner shall be obligated to sell to the
Purchasing Partner all but not less than all of the Adverse Partner's Interest
in accordance with this Section 11.2 at a purchase price (the "Buy-Sell Price")
equal to (A) in the case of any Adverse Act (other than an Adverse Act
identified in clause (iv) of the definition of such term or, unless such Adverse
Act occurred in connection with any breach by such Partner of its obligations
under Section 8.2(a), an Adverse Act identified in clause (vi) of the definition
of such term), ninety percent (90%) of the Net Equity thereof as so determined,
and (B) in the case of an Adverse Act specified in clause (iv) or, unless such
Adverse Act occurred in connection with any breach by such Partner of its
obligations under Section 8.2(a), clause (vi) of the definition of such term in
Section 1.10, the Net Equity thereof. Such Election Notice shall designate the
First Appraiser as required by Section 11.4 and the Adverse Partner shall
appoint the Second Appraiser within ten (10) Business Days of receiving such
notice designating the First Appraiser.
(b) Election to Purchase Interest of Adverse Partner. For a period
------------------------------------------------
ending at 11:59 p.m. (local time at the Partnership's principal office) on the
thirtieth (30th) day following the day on which notice of the Adverse Partner's
Net Equity is given pursuant to Section 11.3 (the "Election Period"), each non-
Adverse Group Partner may elect, by notice to the Adverse Partner (the "Purchase
Notice"), to purchase all or any portion of the Interest of the Adverse Partner,
which notice shall state the maximum Percentage Interest that such non-Adverse
Group Partner (the "Purchasing Partner")
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is willing to purchase (each a "Purchase Commitment"). If the aggregate
Purchase Commitments made by the Purchasing Partners are equal to at least one
hundred percent (100%) of the Adverse Partner's Interest, then subject to the
following sentence, each Purchasing Partner shall be obligated to purchase, and
the Adverse Partner shall be obligated to sell to such Purchasing Partner, that
portion of the Adverse Partner's Interest that corresponds to the ratio of the
Percentage Interest of such Purchasing Partner to the aggregate Percentage
Interests of all Purchasing Partners; provided if any Purchasing Partner's
--------
Purchase Commitment was for an amount less than its proportionate share of the
Adverse Partner's Interest as so determined, then the portion of the Adverse
Partner's Interest not so committed to be purchased shall be allocated to the
other Purchasing Partner; and provided further, that such other Purchasing
-------- -------
Partner shall not be obligated to purchase in excess of the Percentage Interest
set forth in the Purchase Commitment delivered by such other Purchasing Partner.
If the other Group Partners do not elect to purchase the entire Interest of the
Adverse Partner, the Adverse Partner shall be under no obligation to sell any
portion of its Interest to any Partner.
(c) Terms of Purchase; Closing. Unless the Purchasing Partner and the
--------------------------
Adverse Partner otherwise agree, the closing of the purchase and sale of the
Adverse Partner's Interest and Partner Loans and/or WirelessCo Loans shall occur
at the principal office of the Partnership at 10:00 a.m. (local time at the
place of the closing) on the first Business Day occurring on or after the
thirtieth (30th) day following the last day of the Election Period (subject to
Section 11.5). At the closing, the Purchasing Partner shall pay to the Adverse
Partner, by cash or other immediately available funds, the purchase price for
the Adverse Partner's Interest and Partner Loans and/or WirelessCo Loans and the
Adverse Partner shall deliver to the Purchasing Partner good title, free and
clear of any Liens (other than those created by this Agreement and those
securing financing obtained by the Partnership) to the Adverse Partner's
Interest and Partner Loans and/or WirelessCo Loans thus purchased.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to effectuate the
transactions contemplated hereby, including the Transfer of the Adverse
Partner's Interest and Partner Loans and/or WirelessCo Loans to the Purchasing
Partner and the assumption by the Purchasing Partner of the Adverse Partner's
obligations with respect to the Adverse Partner's Interest Transferred to such
Purchasing Partner. The Partnership and each Partner shall bear its own costs of
such Transfer and closing, including attorneys' fees and filing fees. The cost
of determining Net Equity shall be borne one-half by the Adverse Partner and
one-half by the Purchasing Partner.
11.3 Net Equity.
----------
The "Net Equity" of a Partner's Interest, as of any day, shall be the
amount that would be distributed to such Partner in liquidation of the
Partnership pursuant to Section 14.2(d) if (i) all of the Partnership's business
and assets were sold substantially as an entirety for Gross Appraised Value,
(ii) the Partnership paid its known liabilities and established reserves
pursuant to Section 14.3 for the payment of reasonably anticipated contingent or
unknown liabilities and (iii) the Partnership distributed the remaining proceeds
to the Partners in liquidation, all as of such day, provided that in determining
--------
such Net Equity, no reserve for contingent or unknown liabilities shall be taken
into
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account if such Partner (or its successor in interest) agrees to indemnify the
Partnership and all other Partners for that portion of any such reserve as would
be treated as having been withheld pursuant to Section 14.3 from the
distribution such Partner would have received pursuant to Section 14.2 if no
such reserve were established.
The Net Equity of a Partner's Interest shall be determined, without
audit or certification, from the books and records of the Partnership by the
Accountants. The Net Equity of a Partner's Interest shall be determined within
thirty (30) days of the day upon which the Accountants are apprised in writing
of the Gross Appraised Value of the Partnership's business and assets, and the
amount of such Net Equity shall be disclosed to the Partnership and each of the
Partners by written notice ("Net Equity Notice"). The Net Equity determination
of the Accountants shall be final and binding in the absence of a showing of
manifest error.
11.4 Gross Appraised Value.
---------------------
"Gross Appraised Value," as of any day, means the price at which a
willing seller would sell, and a willing buyer would buy, the business and
assets of the Partnership, free and clear of all Liens, substantially as an
entirety and as a going concern in a single arm's-length transaction for cash,
without time constraints and without being under any compulsion to buy or sell.
Each provision of this Agreement that requires a determination of
Gross Appraised Value also provides the manner and time for the appointment of
two (2) appraisers (the "First Appraiser" and the "Second Appraiser"). If the
Second Appraiser is not timely designated, the determination of the Gross
Appraised Value shall be made by the First Appraiser. The First Appraiser, or
each of the First Appraiser and the Second Appraiser if the Second Appraiser is
timely designated, shall submit its determination of the Gross Appraised Value
to the Partnership, the Partners and the Accountants within thirty (30) days of
the date of its selection (or the selection of the Second Appraiser, as
applicable). If there are two (2) Appraisers and their respective
determinations of the Gross Appraised Value vary by less than ten percent (10%)
of the higher determination, the Gross Appraised Value shall be the average of
the two determinations. If such determinations vary by ten percent (10%) or
more of the higher determination, the two Appraisers shall promptly designate a
third appraiser (the "Third Appraiser"). Neither the Partnership nor any
Partner shall provide, and the First Appraiser and Second Appraiser shall be
instructed not to provide, any information to the Third Appraiser as to the
determinations of the First Appraiser and the Second Appraiser or otherwise
influence such Third Appraiser's determination in any way. The Third Appraiser
shall submit its determination of the Gross Appraised Value to the Partnership,
the Partners and the Accountants within thirty (30) days of the date of its
selection. The Gross Appraised Value shall be equal to the average of the two
closest of the three determinations, provided that, if the difference between
--------
the highest and middle determinations is no more than one hundred and five
percent (105%) and no less than ninety-five percent (95%) of the difference
between the middle and lowest determinations, then the Gross Appraised Value
shall be equal to the middle determination.
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The determination of the Gross Appraised Value in accordance with the foregoing
procedure shall be final and binding on the Partnership and each Partner. If
any Appraiser is only able to provide a range in which Gross Appraised Value
would exist, the average of the highest and lowest value in such range shall be
deemed to be such Appraiser's determination of the Gross Appraised Value of the
Partnership's business and assets. Each Appraiser selected pursuant to the
provisions of this Section shall be an investment banking firm or other
qualified Person with prior experience in appraising businesses comparable to
the business of the Partnership and that is not an Interested Person with
respect to any Partner.
11.5 Extension of Time.
-----------------
If any Transfer of a Partner's (including any Special Limited Partner
only for purposes of Section 12 or 14.7) Interest in accordance with this
Section 11 or Section 12 or 14.7 requires the consent, approval, waiver, or
authorization of any Governmental Authority or of the stockholders of a Partner
(including any Special Limited Partner only for purposes of Section 12 or 14.7)
or any of its Affiliates as a condition to the lawful and valid Transfer of such
Partner's Interest to the proposed transferee thereof, then each of the time
periods provided in this Section 11 or Section 12 or 14.7, as applicable, for
the closing of such Transfer shall be suspended for the period of time during
which any such consent, approval, waiver, or authorization is being diligently
pursued; provided, however, that in no event shall the suspension of any time
-------- -------
period pursuant to this Section 11.5 extend for more than three hundred sixty-
five (365) days other than in the case of a purchase of an Adverse Partner's
Interest. Each Partner (including any Special Limited Partner only for purposes
of Section 12 or 14.7) agrees to use its diligent efforts (which shall not, with
respect to any Special Limited Partner, be required to include incurring any
out-of-pocket expenses unless such expenses are reimbursed by the Partnership)
to obtain, or to assist the affected Partner or the Managing Partner in
obtaining, any such consent, approval, waiver, or authorization and shall
cooperate and use its diligent efforts to respond as promptly as practicable to
all inquiries received by it, by the affected Partner or by the Managing Partner
from any Governmental Authority for initial or additional information or
documentation in connection therewith.
SECTION 12
DISPOSITIONS OF INTERESTS
12.1 Restriction on Dispositions.
---------------------------
Except as otherwise permitted by this Agreement, no Partner shall
Dispose of all or any portion of its Interest.
12.2 Permitted Transfers.
-------------------
Subject to the conditions and restrictions set forth in Section 12.3,
(i) a Partner may pledge its Interest as collateral to secure any Debt incurred
by such Partner to fund its Additional
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Capital Contribution or other financing obligations under this Agreement and may
Transfer its Interest in the event of any foreclosure relating to such pledge,
(ii) WirelessCo may distribute all or any portion of its Interest in a pro rata
distribution to its partners, and (iii) a Partner may at any time Transfer all
or any portion of its Interest (A) to any Controlled Affiliate of such Partner,
(B) to the administrator or trustee of such Partner to whom such Interest is
transferred in an Involuntary Bankruptcy, (C) pursuant to and in compliance with
Sections 11.2, 12.4 and 14.7, (D) to any other Partner, or (E) with the prior
written consent of the other Group Partners (each a "Permitted Transfer").
After any Permitted Transfer, the transferred Interest shall continue
to be subject to all the provisions of this Agreement, including the provisions
of this Section 12 with respect to the Disposition of Interests. Except in the
case of a Transfer of a Partner's entire Interest made in compliance herewith,
no Partner shall withdraw from the Partnership, except with the prior written
consent of all Partners. The withdrawal of a Partner, whether or not permitted,
shall not relieve the withdrawing Partner of its obligations under Section 5.5
or 6.5 and shall not relieve such Partner or any of its Affiliates of its
obligations under, or result in a termination of or otherwise affect, any
agreement between the Partnership and such Partner or Affiliate then in effect,
except to the extent provided therein.
12.3 Conditions to Permitted Transfers.
---------------------------------
A Transfer shall not be treated as a Permitted Transfer unless and until
the following conditions are satisfied:
(a) Except in the case of a Transfer involuntarily by operation of
law, the transferor and transferee shall execute and deliver to the Partnership
such documents as may be necessary or appropriate in the opinion of counsel to
the Partnership to effect such Transfer. In the case of a Transfer of Interests
involuntarily by operation of law, the Transfer shall be confirmed by
presentation to the Partnership of legal evidence of such Transfer, in form and
substance satisfactory to counsel to the Partnership. In all cases, the
Partnership shall be reimbursed by the transferor and/or transferee for all
costs and expenses that it reasonably incurs in connection with such Transfer
(including reasonable attorneys' fees and expenses).
(b) Except in the case of a Transfer involuntarily by operation of
law, the transferee of an Interest (other than, with respect to clauses (i) and
(ii) below, a transferee that was a Partner prior to the Transfer) shall, by
written instrument in form and substance reasonably satisfactory to the Managing
Partner (and, in the case of clause (iii) below, the transferor Partner), (i)
make representations and warranties to each nontransferring Partner equivalent
to those set forth in Section 9.1, (ii) accept and adopt the terms and
provisions of this Agreement, including this Section 12, and (iii) assume the
obligations of the transferor Partner under this Agreement with respect to the
transferred Interest. The transferor Partner shall be released from all such
assumed
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obligations except (i) as otherwise provided in Section 6, (ii) those
obligations or liabilities of the transferor Partner arising out of a breach of
this Agreement or pursuant to Section 5.5, (iii) in the case of a Transfer to
any Person other than a Partner or any of its Controlled Affiliates, those
obligations or liabilities of the transferor Partner based on events occurring,
arising or maturing prior to the date of Transfer, and (iv) in the case of a
Transfer to any of its Controlled Affiliates, any Additional Capital
Contribution or other financing obligation of the transferor Partner under this
Agreement.
(c) Except in the case of a Transfer involuntarily by operation of
law, the transferor and its Affiliates will be obligated to sell to the
transferee, and the transferee will be obligated to buy from the transferor and
its Affiliates, all Partner Loans and WirelessCo Loans of the Partnership held
directly or indirectly by the transferor or an Affiliate thereof. If the
transferee is a Partner or a Controlled Affiliate thereof, the terms of such
purchase will be as provided in Section 2.7.
(d) Except in the case of a Transfer involuntarily by operation of
law, if required by the Managing Partner the transferee shall deliver to the
Partnership an opinion, satisfactory in form and substance to the Managing
Partner, of counsel reasonably satisfactory to the Managing Partner to the
effect that the Transfer of the Partnership Interest is in compliance with
applicable state and Federal securities laws.
(e) Except in the case of a Transfer involuntarily by operation of
law, if required by the Managing Partner, the transferee (other than a
transferee that was a Partner prior to the Transfer) shall deliver to the
Partnership evidence of the authority of such Person to become a Partner and to
be bound by all of the terms and conditions of this Agreement, and the
transferee and transferor shall each execute and deliver such other instruments
as the Managing Partner reasonably deems necessary or appropriate to effect, and
as a condition to, such Transfer, including amendments to the Certificate or any
other instrument filed with the State of Delaware or any other state or
Governmental Authority.
(f) Unless otherwise approved by the Managing Partner, no Transfer of
an Interest shall be made except upon terms which would not, in the opinion of
counsel chosen by and mutually acceptable to the Managing Partner and the
transferor Partner, result in the termination of the Partnership within the
meaning of Section 708 of the Code or cause the application of the rules of
Sections 168(g)(1)(B) and 168(h) of the Code or similar rules to apply to the
Partnership. If the immediate Transfer of such Interest would, in the opinion
of such counsel, cause a termination within the meaning of Section 708 of the
Code, then if, in the opinion of such counsel, the following action would not
precipitate such termination, the transferor Partner shall be entitled (or
required, as the case may be) (i) immediately to Transfer only that portion of
its Interest as may, in the opinion of counsel to the Partnership, be
transferred without causing such a termination and (ii) to enter into an
agreement to Transfer the remainder of its Interest, in one or more Transfers,
at the earliest date or dates on which such Transfer or Transfers may be
effected without causing such termination. The purchase price for the Interest
shall be allocated between the immediate Transfer and the deferred
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Transfer or Transfers pro rata on the basis of the percentage of the aggregate
Interest being transferred, each portion to be payable when the respective
Transfer is consummated, unless otherwise agreed by the parties to the Transfer.
In the case of a Transfer by one Partner to another Partner, the deferred
purchase price shall be deposited in an interest-bearing escrow account unless
another method of securing the payment thereof is agreed upon by the transferor
Partner and the transferee Partner(s). In determining whether a particular
proposed Transfer will result in a termination of the Partnership, counsel to
the Partnership shall take into account the existence of prior written
commitments to Transfer made pursuant to this Agreement and such commitments
shall always be given precedence over subsequent proposed Transfers.
(g) The transferor or transferee shall furnish the Partnership with
the transferee's taxpayer identification number, sufficient information to
determine the transferee's initial tax basis in the Interest transferred, and
any other information reasonably necessary to permit the Partnership to file all
required federal and state tax returns and other legally required information
statements or returns. Without limiting the generality of the foregoing, the
Partnership shall not be required to make any distribution otherwise provided
for in this Agreement with respect to any transferred Interest until it has
received such information.
(h) Except in the case of a Transfer involuntarily by operation of
law, if the transferor is a General Partner, the transferor and transferee shall
provide the Partnership with an opinion of counsel, which opinion of counsel
shall be reasonably satisfactory to the other Partners, to the effect that such
Transfer will not cause the Partnership to become taxable as a corporation for
federal income tax purposes.
(i) Except in the case of a Transfer involuntarily by operation of
law, the Partnership shall have received FCC Approval, if required, with respect
to such Transfer.
Upon completion of any Permitted Transfer and compliance with the
provisions of this Section 12.3, the transferee of the Interest (if not already
a Partner) shall be admitted as a Partner without any further action.
12.4 Right of First Refusal.
----------------------
Following the fifth anniversary of the date of this Agreement, a
Partner may Transfer all or any portion of its Interest (the "Offered Interest")
if (i) such Partner (the "Seller") first offers to sell the Offered Interest to
the other Group Partners pursuant to the terms of this Section 12.4, and (ii)
the Transfer of the Offered Interest to the Purchaser (as defined below) would
not cause an Adverse Act under clause (vi) of the definition thereof.
(a) Limitation on Transfers. No Transfer may be made under this
-----------------------
Section 12.4 unless the Seller has received a bona fide written offer (the
"Purchase Offer") from a Person
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(including another Partner) who is not a Controlled Affiliate of such Partner
(the "Purchaser") to purchase the Offered Interest for a purchase price (the
"Offer Price") denominated and payable in United States dollars at closing,
which offer shall be in writing signed by the Purchaser and shall be irrevocable
for a period ending no sooner than the Business Day following the end of the
Offer Period, as hereinafter defined.
(b) Offer Notice. Prior to accepting the Purchase Offer, the Seller
------------
shall give to the Partnership and the other Group Partners (other than any
Partner that is an Adverse Partner) written notice (the "Offer Notice") which
shall include a copy of the Purchase Offer and an offer (the "Firm Offer") to
sell the Offered Interest to the other Group Partners (excluding any Partner
that is an Adverse Partner, the "Offerees") for the Offer Price, payable
according to the same terms (without regard to any FCC filing or approval
requirements or delays associated therewith) as (or on more favorable terms
than) those contained in the Purchase Offer, provided that the Firm Offer shall
--------
be made without regard to the requirement of any earnest money or similar
deposit required of the Purchaser prior to closing. If the Person making the
Purchase Offer is not an entity that is subject to the periodic reporting
requirements of Section 12 or Section 15(d) of the Securities Exchange Act of
1934, the Seller shall also provide any information concerning the ownership of
the Person making the Purchase Offer that may be reasonably requested by any
Offeree, to the extent such information is available to the Seller.
(c) Offer Period. The Firm Offer shall be irrevocable for a period
------------
(the "Offer Period") ending at 11:59 P.M., local time at the Partnership's
principal place of business, on the sixtieth (60th) day following the day of the
Offer Notice.
(d) Acceptance of Firm Offer. At any time during the Offer Period,
------------------------
any Offeree may accept the Firm Offer as to all or any portion of the Offered
Interest, by giving written notice of such acceptance to the Seller and each
other Offeree, which notice shall indicate the maximum Percentage Interest that
such Offeree is willing to purchase (a "purchase commitment"). If the
aggregate purchase commitments made by Offerees accepting the Firm Offer
("Accepting Offerees") are equal to at least one hundred percent (100%) of the
Offered Interest, then, subject to the following sentence, each Accepting
Offeree shall be obligated to purchase, and the Seller shall be obligated to
sell to such Accepting Offeree that portion of the Offered Interest that
corresponds to the ratio of the Percentage Interest of such Accepting Offeree to
the aggregate Percentage Interests of all Accepting Offerees; provided if any
--------
Accepting Offeree's purchase commitment was for an amount less than its
proportionate share of the Offered Interest as so determined, then the portion
of the Offered Interest not so committed to be purchased shall be allocated to
the other Accepting Offeree; and provided further, that such other Accepting
-------- -------
Offeree shall not be obligated to purchase in excess of the Percentage Interest
set forth in the purchase commitment delivered by such other Accepting Offeree.
If Offerees do not accept the Firm Offer as to all of the Offered Interest
during the Offer Period, the Firm Offer shall be deemed to be rejected in its
entirety.
(e) Closing of Purchase Pursuant to Firm Offer. If all of the Offered
------------------------------------------
Interest has been subscribed for in accordance with the terms of Section
12.4(d), the Seller shall give notice to
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such effect (the "Sale Notice") to all Offerees within five (5) days after the
end of the Offer Period. Unless the Accepting Offerees and the Seller otherwise
agree, the closing of any purchase pursuant to this Section 12.4 shall be held
at the principal office of the Seller at 10:00 a.m. (local time at the place of
closing) on the first Business Day on or after the thirtieth (30th) day
following the date on which the Sale Notice is given (subject to the provisions
of Section 11.5). At the closing, each Accepting Offeree shall pay to the
Seller, by cash or other immediately available funds, that portion of the
purchase price for the Offered Interest, and the Seller shall deliver to each
Accepting Offeree good title, free and clear of any Liens (other than those
created by this Agreement and those securing financing obtained by the
Partnership), to the portion of the Offered Interest thus purchased. Each
Accepting Offeree shall be liable to the Seller only for its individual portion
of the purchase price for the Offered Interest.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to effectuate the
transactions contemplated hereby, including the Transfer of the Offered Interest
to the Accepting Offerees and the assumption by each Accepting Offeree of the
Seller's obligations with respect to the portion of the Seller's Interest
Transferred to such Accepting Offeree. Each Partner and the Partnership shall
bear its own costs of such Transfer and closing, including attorneys' fees and
filing fees.
(f) Sale Pursuant to Purchase Offer If Firm Offer Rejected. If the
------------------------------------------------------
Firm Offer is not accepted in the manner hereinabove provided, or the Accepting
Offerees fail to close the purchase on the closing date, then in either such
event, but subject to the last sentence of this Section 12.4(f) and to Section
12.3, the Seller shall be free for the period described below (the "Free to Sell
Period") to sell the Offered Interest to the Purchaser upon terms and conditions
that are the same as, or more favorable to the Seller than, those contained in
the Purchase Offer (including at the same or greater price). The Free to Sell
Period shall be the applicable of (i) if the Firm Offer is not accepted, sixty
(60) days after the last day of the Offer Period or (ii) sixty (60) days
(subject to the provisions of Section 11.5) after the scheduled closing date,
provided that if the last sentence of this Section 12.4(f) becomes applicable,
- - --------
then such sixty (60) day period shall be measured from the fifth Business Day
after the previously scheduled closing date or, if applicable, from the
subsequently scheduled closing date contemplated by such sentence (assuming the
required purchase elections are made). If the Offered Interest is not so sold
within the Free to Sell Period, the Seller's right to transfer its Interest
shall again be subject to the restrictions of this Section 12.4.
Notwithstanding the foregoing, if more than one Offeree elected to purchase the
Offered Interest and at least one Accepting Offeree tendered its proportionate
share of the purchase price therefor at the closing but any other Accepting
Offeree failed to make such tender, then any tendering Accepting Offeree may
elect, by notice given to the Seller within five (5) Business Days thereafter,
to purchase the portion of the Offered Interest for which payment was not
tendered (provided that, after giving effect to such election, the entire
--------
Offered Interest is being purchased) and shall be provided an additional fifteen
(15) days from the previously scheduled closing date in which to tender payment
therefor.
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(g) Restrictions on Notice. No notice initiating the procedures
----------------------
contemplated by this Section 12.4 may be given by any Partner while any notice,
purchase or Transfer is pending under Section 11 or this Section 12.4 or after a
Liquidating Event (including an event that would constitute a Liquidating Event
but for the application of Section 14.1(b)) has occurred. No Partner may accept
a Purchase Offer during any period that, as provided above, such Partner may not
give the notice initiating the procedures contemplated by this Section 12.4 or
thereafter until it has given such notice and otherwise complied with the
provisions of this Section 12.4.
12.5 Tagalong Right of Certain Partners.
----------------------------------
(a) In the event that (i) WirelessCo proposes to Transfer all or any
part of its Interest (as part of a single transaction or a series of related
transactions) to any Person (other than pursuant to a Permitted Transfer) after
the fifth anniversary of the date of this Agreement (a "Tagalong Transaction")
and (ii) if the Firm Offer relating to such Transfer is not accepted in the
manner provided in Section 12.4, the Tagalong Transaction shall not be permitted
hereunder unless the proposed transferee (a "Tagalong Purchaser") offers to
purchase the Tagalong Interest of APC and the Post at the same price per each
one percent (1.0%) Percentage Interest and on the same terms and conditions as
the Tagalong Purchaser has offered to WirelessCo. Prior to effecting any
Tagalong Transaction, WirelessCo shall deliver to APC and the Post a binding,
irrevocable offer (the "Tagalong Offer") by the Tagalong Purchaser to purchase
the respective Tagalong Interests of APC and the Post at the same price per each
one percent (1.0%) Percentage Interest and on the same terms and conditions as
the Tagalong Purchaser has offered to WirelessCo, except to the extent that FCC
Approval may be required with respect to one, but not all, of such purchases.
The Tagalong Offer shall be irrevocable for a period (the "Tagalong Period")
ending at 11:59 p.m., local time at the Partnership's principal place of
business, on the fifth Business Day following the date the Tagalong Offer is
delivered to APC and the Post. At any time during the Tagalong Period, APC and
the Post, or either of them, may accept the Tagalong Offer by giving written
notice of such acceptance to the Tagalong Purchaser. The Tagalong Purchaser's
purchase of the Tagalong Interest of APC and/or the Post shall occur within
sixty (60) days following the expiration of the Tagalong Period or within five
(5) Business Days after receipt of FCC Approval, if required, whichever is
later. At the closing of a Tagalong Transaction, the Tagalong Purchaser shall
pay to APC and/or the Post the purchase price for the Tagalong Interest being
sold by such Partner, and APC and the Post shall deliver to the Tagalong
Purchaser good title to their respective Tagalong Interests, free and clear of
any Liens. At any such closing, APC and/or the Post shall execute such
documents and instruments of conveyance as may be necessary or appropriate to
effectuate such Tagalong Transaction, including the Transfer of their respective
Tagalong Interests to the Tagalong Purchaser and the assumption by the Tagalong
Purchaser of the obligations with respect to the Tagalong Interests. Each
Partner and the Partnership shall bear its own costs of such Transfer and
closing, including attorneys' fees and filing fees. As used in this Section
12.5(a), "Tagalong Interest" means that portion of APC's or the Post's
Percentage Interest based upon the ratio, expressed as a percentage, that the
Percentage Interest WirelessCo proposes to Transfer pursuant to the Tagalong
Transaction bears to WirelessCo's aggregate Percentage Interest on the date that
the Tagalong Offer is delivered to APC.
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<PAGE>
(b) No Adverse Partner may accept a Tagalong Offer during any period
that an election may be made to pursue the remedy specified in Section 11.1(a)
against such Adverse Partner and, if an election pursuant to clause (i) thereof
to purchase the Adverse Partner's Interest is made, pending the closing of the
purchase thereof, unless, in any such case, such Adverse Partner agrees that the
purchase price for its Interest under this Section 12.5 will not be greater than
the price at which such Interest could then be purchased under Section 11.
12.6 Prohibited Dispositions.
-----------------------
Any purported Disposition of all or any part of an Interest that is
not a Permitted Transfer shall be null and void and of no force or effect
whatever; provided that, if the Partnership is required to recognize a
--------
Disposition that is not a Permitted Transfer (or if the Managing Partner, acting
in accordance with Section 8.2(b), elects to recognize a Disposition that is not
a Permitted Transfer), the Interest Disposed of shall be strictly limited to the
transferor's rights to allocations and distributions as provided by this
Agreement with respect to the Transferred Interest, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Partnership) to satisfy any debts, obligations, or liabilities for
damages that the transferor or transferee of such Interest may have to the
Partnership.
12.7 Representations Regarding Transfers.
-----------------------------------
Each Partner hereby represents and warrants to the Partnership and
each other Partner that such Partner's acquisition of Interests hereunder is
made as principal for such Partner's own account and not for resale or
distribution of such Interests.
12.8 Distributions and Allocations in Respect of Transferred Interests.
-----------------------------------------------------------------
If any Interest is Transferred during any Fiscal Year in compliance
with the provisions of this Section 12, Profits, Losses, each item thereof, and
all other items attributable to the Transferred Interest for such Fiscal Year
shall be divided and allocated between the transferor and the transferee by
taking into account their varying Percentage Interests during the Fiscal Year in
accordance with Code Section 706(d), using any conventions permitted by law and
selected by the Managing Partner. All distributions on or before the date of
such Transfer shall be made to the transferor, and all distributions thereafter
shall be made to the transferee. Solely for purposes of making such allocations
and distributions, the Partnership shall recognize such Transfer not later than
the end of the calendar month during which it is given notice of such Transfer,
provided that, if the Partnership is given notice of a Transfer at least ten
- - --------
(10) Business Days prior to the Transfer, the Partnership shall recognize such
Transfer as of the date of such Transfer, and provided further, that if the
-------- -------
Partnership does not receive a notice stating the date such Interest was
transferred and such other information as the Managing Partner may reasonably
require within thirty (30) days after the end of the Fiscal Year during which
the Transfer occurs, then all such items shall be allocated, and
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all distributions shall be made, to the Person who, according to the books and
records of the Partnership, was the owner of the Interest on the last day of
such Fiscal Year. Neither the Partnership nor the Managing Partner shall incur
any liability for making allocations and distributions in accordance with the
provisions of this Section 12.8, whether or not the Managing Partner or the
Partnership has knowledge of any Transfer of ownership of any Interest.
SECTION 13
CONVERSION OF INTERESTS
13.1 Conversion of WirelessCo Interest.
---------------------------------
Effective as of the first day of the WirelessCo Majority Period,
subject to FCC Approval, if required, WirelessCo's Interest shall be converted
to both a General Partner Interest and a Limited Partner Interest and shall
thereafter be deemed held by WirelessCo ninety-nine percent (99.0%) as a General
Partner and one percent (1.0%) as a Limited Partner, all as provided in Section
2.1.
13.2 Termination of Status as General Partner.
----------------------------------------
(a) Subject to FCC Approval, if required, a General Partner shall
cease to be a General Partner upon the first to occur of (i) the Transfer of
such Partner's entire Interest as a Partner in a Permitted Transfer (in which
event the transferee of such Interest shall be admitted as a successor General
Partner and a Limited Partner upon compliance with Section 12.3), (ii) the prior
written consent of all Group Partners to approve a request by such General
Partner to withdraw, (iii) any Adverse Act occurs or is continuing with respect
to such Partner after the Initial Buildout Completion Date, or (iv) such
Partner's Percentage Interest falling below twenty percent (20%). In the event
a Person ceases to be a General Partner pursuant to clauses (ii) or (iv) above,
the Interest of such Person as a General Partner shall automatically and without
any further action by the Partners be converted into an Interest solely as a
Limited Partner, and such Partner shall thereafter be an Exclusive Limited
Partner. In the event a Person ceases to be a General Partner pursuant to
clause (iii) above, the Interest of such Person as a General Partner shall
automatically and without any further action by the Partners be converted into
an Interest solely as a Limited Partner, and such Partner shall thereafter be an
Exclusive Limited Partner and an Adverse Partner.
(b) The Partners intend that the Partnership not dissolve as a result
of the cessation of any Person's status as a General Partner; provided, however,
-------- -------
that if it is determined by a court of competent jurisdiction that the
Partnership has dissolved, the provisions of Section 14.1 shall govern.
13.3 Restoration of Status General Partner.
-------------------------------------
An Adverse Partner whose rights to serve as Managing Partner and to
exercise its approval rights under Section 5.1 have been restored as provided in
Section 5.1(e) shall, subject to
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FCC Approval, if required, be restored to the status of a General Partner and
its Interest shall thereafter be deemed held in part as a General Partner and in
part as a Limited Partner as provided in Section 2.1.
SECTION 14
DISSOLUTION AND WINDING UP
14.1 Liquidating Events.
------------------
(a) In General. Subject to Section 14.1(b), the Partnership shall
----------
dissolve and commence winding up and liquidating upon the first to occur of any
of the following ("Liquidating Events"):
(i) The sale of all or substantially all of the Property;
(ii) The written consent of all Partners to dissolve, wind up, and
liquidate the Partnership in accordance with Section 5; and
(iii) The withdrawal of a General Partner, the assignment by a
General Partner of its entire Interest or any other event that causes a General
Partner to cease to be a general partner under the Act, provided, that any such
--------
event shall not constitute a Liquidating Event if the Partnership is continued
pursuant to this Section 14.1.
The Partners hereby agree that, notwithstanding any provision of the Act or the
Delaware Uniform Partnership Act, the Partnership shall not dissolve prior to
the occurrence of a Liquidating Event. Upon the occurrence of any event set
forth in Section 14.1(a)(iii) the Partnership shall not be dissolved or required
to be wound up if (x) at the time of such event there is at least one remaining
General Partner and that General Partner carries on the business of the
Partnership (any such remaining General Partner being hereby authorized to carry
on the business of the Partnership), or (y) within ninety (90) days after such
event all remaining Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of such event, of
one or more additional General Partners.
(b) Special Rules. The events described in Sections 14.1(a)(ii) or
-------------
14.1(a)(iii) shall not constitute Liquidating Events until such time as the
Partnership is otherwise required to dissolve, and commence winding up and
liquidating, in accordance with Section 14.7.
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14.2 Winding Up.
----------
Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners
and neither the Managing Partner nor any Partner shall take any action that is
inconsistent with, or not appropriate for, the winding up of the Partnership's
business and affairs. To the extent not inconsistent with the foregoing, this
Agreement shall continue in full force and effect until such time as the
Partnership's Property has been distributed pursuant to this Section 14.2 and
the Certificate has been cancelled in accordance with the Act. The Managing
Partner shall be responsible for overseeing the winding up and dissolution of
the Partnership, shall take full account of the Partnership's liabilities and
Property, shall cause the Partnership's Property to be liquidated as promptly as
is consistent with obtaining the fair value thereof, and shall cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed in the following order:
(a) First, to the payment of all of the Partnership's debts and
liabilities (other than WirelessCo Loans and Partner Loans) to creditors other
than the Partners and to the payment of the expenses of liquidation;
(b) Second, to the payment of all WirelessCo Loans in the following
order and priority:
(i) first, to the payment of all accrued and unpaid interest
on WirelessCo Loans; and
(ii) second, to the payment of the unpaid principal amount
of all WirelessCo Loans;
(c) Third, to the payment of all Partner Loans and all of the
Partnership's debts and liabilities to the Partners in the following order and
priority:
(i) first, to the payment of all debts and liabilities owed
to any Partner other than in respect of Partner Loans;
(ii) second, to the payment of all accrued and unpaid
interest on Partner Loans, such interest to be paid to each Partner and its
Affiliates (considered as a group) pro rata in proportion to the interest owed
to each such group; and
(iii) third, to the payment of the unpaid principal amount of
all Partner Loans, such principal to be paid to each Partner and its Affiliates
(considered as a group) pro rata in proportion to the outstanding principal owed
to each such group; and
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(d) The balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions, and
allocations for all periods; provided, however, that it is the intent of the
-------- -------
Partners that the distributions made pursuant to this Section 14.2(d) result in
each Partner's receiving the same amount of distributions such Partner would
have received had the amounts distributable under this Section 14.2(d) been
distributed as follows:
(i) First, to WirelessCo and APC in proportion to, and to
the extent of, the excess, if any, of (A) the cumulative Preferred Return with
respect to WirelessCo and APC, as the case may be, computed as of the date of
such distribution minus (B) all prior distributions to WirelessCo and APC, as
the case may be, pursuant to Section 4.1(a);
(ii) Second, to WirelessCo and APC in proportion to, and to
the extent of, WirelessCo's Preferred Capital and APC Preferred Capital, as the
case may be, computed as of the date of such distribution;
(iii) Third, to the Partners in proportion to, and to the
extent of, their respective amounts of Unreturned Capital computed as of the
date of such distribution; and
(iv) The balance, if any, to the Partners in proportion to
their respective Percentage Interests as of the date of such distribution.
In the discretion of the Managing Partner, a pro rata portion of the
distributions that would otherwise be made to the Partners pursuant to this
Section 14.2 may be:
(i) distributed to a trust established for the benefit of
the Partners for the purposes of liquidating Partnership assets, collecting
amounts owed to the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner arising
out of or in connection with the Partnership. The assets of any such trust shall
be distributed to the Partners from time to time, in the reasonable discretion
of the Managing Partner, in the same proportions as the amount distributed to
such trust by the Partnership would otherwise have been distributed to the
Partners pursuant to Section 14.2; or
(ii) withheld to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership, provided that
--------
such withheld amounts shall be distributed to the Partners as soon as
practicable.
Each Partner and each of its Affiliates (as to Partner Loans only) agrees that
by accepting the provisions of this Section 14.2 setting forth the priority of
the distribution of the assets of the Partnership to be made upon its
liquidation, such Partner or Affiliate expressly waives any right which it, as a
creditor of the Partnership, might otherwise have under the Act to receive
distributions of
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assets pari passu with the other creditors of the Partnership in connection with
---- -----
a distribution of assets of the Partnership in satisfaction of any liability of
the Partnership, and hereby subordinates to said creditors any such right.
14.3 Compliance With Certain Requirements of Regulations; Deficit
------------------------------------------------------------
Capital Accounts.
----------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), (a) distributions shall be made
-
pursuant to this Section 14 to the Partners who have positive Capital Accounts
in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (b) if any
- -
Partner's Capital Account has any deficit balance (after giving effect to all
contributions, distributions, and allocations for all taxable years, including
the year during which such liquidation occurs), such Partner (other than any
Special Limited Partner) shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance to zero in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(3); provided, however, that the
- - -------- -------
obligation of a Partner who at any time was a General Partner and subsequently
became an Exclusive Limited Partner to contribute capital pursuant to this
sentence shall be limited to the amount of the deficit balance, if any, that
existed in such Exclusive Limited Partner's Capital Account at the time it
became an Exclusive Limited Partner (taking into account for this purpose any
revaluation of Partnership assets pursuant to subparagraph (ii)(D) of the
definition of Gross Asset Value made as a result of such Partner's becoming an
Exclusive Limited Partner).
14.4 Deemed Distribution and Recontribution.
--------------------------------------
Notwithstanding any other provision of this Section 14, in the event
the Partnership is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g)
-
of the Regulations but no Liquidating Event has occurred, the Property shall not
be liquidated, the Partnership's liabilities shall not be paid or discharged,
and the Partnership's affairs shall not be wound up. Instead, solely for
federal income tax purposes, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts and, if any Partner's Capital Account has a deficit
balance that such Partner would be required to restore pursuant to Section 14.3
(after giving effect to all contributions, distributions, and allocations for
all Fiscal Years, including the Fiscal Year during which such liquidation
occurs), such Partner shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance to zero in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(3). Immediately thereafter, the
- -
Partners shall be deemed to have recontributed the Property in kind to the
Partnership, which shall be deemed to have assumed and taken subject to all such
liabilities.
14.5 Rights of Partners.
------------------
Except as otherwise provided in this Agreement, (a) each Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or
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power to demand or receive property other than cash from the Partnership, and
(b) no Partner shall have priority over any other Partner as to the return of
its Capital Contributions, distributions, or allocations. If, after the
Partnership ceases to exist as a legal entity, a Partner is required to make a
payment to any Person on account of any activity carried on by the Partnership,
such paying Partner shall be entitled to reimbursement from each other Partner
consistent with the manner in which the economic detriment of such payment would
have been borne had the amount been paid by the Partnership immediately prior to
its cessation.
14.6 Notice of Dissolution.
---------------------
In the event a Liquidating Event occurs or an event described in
Section 14.1(a)(iii) occurs that would, but for provisions of Section 14.1(b),
result in a dissolution of the Partnership, the Managing Partner shall, within
thirty (30) days thereafter, provide written notice thereof to each of the
Partners.
14.7 Buy/Sell Arrangements.
---------------------
(a) As soon as practicable after the occurrence of an event described
in Section 14.1(a)(ii), or, subject to the proviso contained therein, Section
14.1(a)(iii), the Net Equity of the Interests shall be determined and delivered
to each General Partner. Such Net Equity shall be determined in accordance with
Section 11.3. For purpose of such determination of Net Equity pursuant to this
Section 14.7(a), the Partner that (together with its Controlled Affiliates)
holds the largest Percentage Interest shall designate the First Appraiser as
required by Section 11.4 and the other Partner shall appoint the Second
Appraiser within ten (10) days of receiving notice of the First Appraiser.
(b) Within thirty (30) days after its receipt of the determination of
Net Equity, each Group Partner must submit simultaneously to each other Partner
sealed statements (the "Initial Offer") notifying each other Partner in writing
either (i) that such Group Partner offers to sell all of its Interest, or (ii)
that such Group Partner offers to buy all of the other Partners' Interests. Any
Special Limited Partner shall automatically be deemed to have offered to sell
its Interest hereunder and shall for all purposes under this Section 14.7 be
treated as a Partner that has offered to sell its Interest.
(c) If the Initial Offers indicate that one Group Partner wishes to
buy and the other Partners wish to sell, the Net Equity of the Interests shall
thereupon be the price at which the Interests will be sold.
(d) If the Initial Offers indicate that all Partners wish to sell
their Interests, the Partnership shall dissolve, and commence winding up and
liquidating in accordance with Section 14.2.
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(e) If the Initial Offers indicate that more than one Group Partner
wishes to purchase the other Partners' Interests, then such Group Partners (each
Partner, a "Bidding Partner") shall begin the bidding process described below
and the highest bidder (determined as the amount bid per each Percentage
Interest in the Partnership) shall buy the other Partners' Interests. Each of
the Bidding Partners can make an initial offer to purchase the Interests of the
other Partners, which offer cannot be less than the Net Equity of the Interests
to be purchased and shall be made within fifteen (15) days of receipt of the
last of the Initial Offers. If no Bidding Partner makes an initial offer within
such fifteen (15) day period, the Partnership shall dissolve, and commence
winding up and liquidating in accordance with Section 14.2. If only one Bidding
Partner makes an initial offer, such offer shall thereupon be the price at which
the other Partners' Interests shall be sold to such Bidding Partner. If more
than one Bidding Partner makes an initial offer, each such Bidding Partner must
respond within fifteen (15) days of receiving such initial offer either by
accepting the highest of such initial offers or delivering a counteroffer to
purchase the Interests of the other Partners. A counteroffer must be at least
one percent (1%) higher than the prior offer of which the Bidding Partner has
received notice. The bidding process shall continue until all Bidding Partners
have either responded by accepting the highest immediate prior offer or failed
to make a timely response, in which case the highest immediate prior offer shall
be deemed accepted. For purposes of this Section 14.7, all offers, acceptances
and counteroffers must be in writing, in a form which is firm and binding and
delivered to the Chief Executive Officer (who shall promptly notify each other
Partner of the amount of such bid); all offers must be responded to within
fifteen (15) days of receipt of notice of a prior offer. If no response to an
offer or counteroffer is received within such fifteen (15) day period, the
highest immediate prior offer shall be deemed to be accepted.
(f) The purchase and sale of each selling Partner's Interest and
Partner Loans and/or WirelessCo Loans shall be subject to FCC Approval, if
required, and the closing of such purchase and sale shall occur at the principal
office of the Partnership at 10:00 a.m. (local time at the place of the closing)
on the first Business Day occurring on or after the thirtieth (30th) day
following the date of the final determination of the purchase price pursuant to
Section 14.7(e) (subject to the provisions of Section 11.5). At the closing,
the purchasing Partner shall pay to each selling Partner, by cash or other
immediately available funds, the purchase price for such selling Partner's
Interest and Partner Loans and/or WirelessCo Loans, and the selling Partner
shall deliver to the purchasing Partner good title, free and clear of any Liens
(other than those created by this Agreement and those securing financing
obtained by the Partnership), to the selling Partner's Interest and Partner
Loans and/or WirelessCo Loans thus purchased.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to effectuate the
transactions contemplated hereby, including the Transfer of the Interest and
Partner Loans and/or WirelessCo Loans of the selling Partner to the purchasing
Partner and the assumption by each purchasing Partner of the selling Partner's
obligations with respect to the selling Partner's Interest Transferred to the
purchasing Partner. Each Partner shall bear its own costs of such Transfer and
closing, including attorneys' fees and filing fees. The costs of determining
Net Equity shall be borne by the Partners (pro rata based on their respective
Percentage Interests as of the occurrence of the Liquidating Event).
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SECTION 15
MISCELLANEOUS
15.1 Notices.
-------
Any notice, payment, demand, or communication required or permitted to
be given by any provision of this Agreement shall be in writing and mailed
(certified or registered mail, postage prepaid, return receipt requested) or
sent by hand or overnight courier, or by facsimile (with acknowledgment
received), charges prepaid and addressed as follows, or to such other address or
number as such Person may from time to time specify by notice to the Partners:
(a) If to the Partnership, to the address or number set forth on
Schedule 15.1;
(b) If to a Partner, to the address or number set forth in
Schedule 15.1;
(c) If to the Managing Partner, to the Partnership and to each
Partner.
Any Person may from time to time specify a different address by notice to the
Partnership and the Partners. All notices and other communications given to a
Person in accordance with the provisions of this Agreement shall be deemed to
have been given and received (i) four (4) Business Days after the same are sent
by certified or registered mail, postage prepaid, return receipt requested, (ii)
when delivered by hand or transmitted by facsimile (with acknowledgment received
and, in the case of a facsimile only, a copy of such notice is sent no later
than the next Business Day by a reliable overnight courier service, with
acknowledgment of receipt) or (iii) one (1) Business Day after the same are sent
by a reliable overnight courier service, with acknowledgment of receipt.
15.2 Binding Effect.
--------------
Except as otherwise provided in this Agreement, this Agreement shall
be binding upon and inure to the benefit of the Partners and their respective
successors, transferees, and assigns.
15.3 Construction.
------------
This Agreement shall be construed simply according to its fair
meaning and not strictly for or against any Partner.
15.4 Time.
----
Time is of the essence with respect to this Agreement.
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15.5 Table of Contents; Headings.
---------------------------
The table of contents and section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement.
15.6 Severability.
------------
Every provision of this Agreement is intended to be severable. If any
term or provision hereof is illegal, invalid or unenforceable for any reason
whatsoever, that term or provision will be enforced to the maximum extent
permissible so as to effect the intent of the Partners, and such illegality,
invalidity or unenforceability shall not affect the validity or legality of the
remainder of this Agreement. If necessary to effect the intent of the Partners,
the Partners will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
15.7 Incorporation by Reference.
--------------------------
Unless expressly provided otherwise in this Agreement, no exhibit
(other than the Schedules attached hereto) attached to this Agreement and
referred to herein shall be incorporated in this Agreement by reference.
15.8 Further Action.
--------------
Each Partner, upon the reasonable request of the Managing Partner,
agrees to perform all further acts and execute, acknowledge, and deliver any
documents which may be reasonably necessary, appropriate, or desirable to carry
out the intent and purposes of this Agreement.
15.9 Governing Law.
-------------
The internal laws of the State of Delaware (without regard to
principles of conflict of law) shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the Partners.
15.10 Waiver of Action for Partition; No Bill For Partnership Accounting.
------------------------------------------------------------------
Each Partner irrevocably waives any right that it may have to maintain
any action for partition with respect to any of the Property; provided that the
--------
foregoing shall not be construed to apply to any action by a Partner for the
enforcement of its rights under this Agreement.
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15.11 Counterpart Execution.
---------------------
This Agreement may be executed in any number of counterparts with the
same effect as if all the Partners had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
15.12 Sole and Absolute Discretion.
----------------------------
Except as otherwise provided in this Agreement, all actions which the
Managing Partner may take and all determinations which the Managing Partner may
make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of the Managing Partner.
15.13 Specific Performance.
--------------------
Each Partner agrees with the other Partners that the other Partners
would be irreparably damaged if any of the provisions of this Agreement are not
performed in accordance with their specific terms and that monetary damages
would not provide an adequate remedy in such event. Accordingly, in addition to
any other remedy to which the nonbreaching Partners may be entitled, at law or
in equity, the nonbreaching Partners shall be entitled to injunctive relief to
prevent breaches of this Agreement and specifically to enforce the terms and
provisions hereof.
15.14 Entire Agreement.
----------------
The provisions of this Agreement set forth the entire agreement and
understanding between the Partners as to the subject matter hereof and supersede
all prior agreements (including the Original Agreement, as amended and restated
and as further amended to the date of this Agreement, and that certain
Exclusivity Agreement, dated as of October 24, 1994, by and between APC and the
partners of WirelessCo), oral or written, and other communications between the
Partners relating to the subject matter hereof.
15.15 Limitation on Rights of Others.
------------------------------
Nothing in this Agreement, whether express or implied, shall be
construed to give any Person other than the Partners any legal or equitable
right, remedy or claim under or in respect of this Agreement.
15.16 Waivers; Remedies.
-----------------
The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the party or parties entitled to enforce such term, but any such waiver shall
be effective only if in a writing signed by the party or
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<PAGE>
parties against which such waiver is to be asserted. Except as otherwise
provided herein, no failure or delay of any Partner in exercising any power or
right under this Agreement 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 right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.
15.17 Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each Partner hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court sitting in the County of New York or any Federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to the Partnership or this Agreement, or for recognition or
enforcement of any judgment, and each Partner hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court.
(b) Each Partner hereby irrevocably and unconditionally waives, to the
fullest extent it may legally do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to the Partnership or this Agreement in any New York State court
sitting in the County of New York or any Federal court sitting in the Southern
District of New York. Each Partner hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such suit, action or proceeding in any such court and further waives the
right to object, with respect to such suit, action or proceeding, that such
court does not have jurisdiction over such Partner.
(c) Each Partner irrevocably consents to service of process in the
manner provided for the giving of notices pursuant to this Agreement, provided
--------
that such service shall be deemed to have been given only when actually received
by such Partner. Nothing in this Agreement shall affect the right of a party to
serve process in any other manner permitted by law.
15.18 Waiver of Jury Trial.
--------------------
Each Partner waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to the Partnership or this Agreement.
[SIGNATURES FOLLOW ON A SEPARATE PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Second Amended
and Restated Limited Partnership Agreement as of the day first above set forth.
AMERICAN PERSONAL COMMUNICATIONS, INC.,
By: /s/ Wayne N. Schelle
___________________________________________
Title: Chairman
________________________________________
WIRELESSCO, L.P.
By: /s/ Gary D. Forsee
___________________________________________
Title: Chief Executive Officer
________________________________________
THE WASHINGTON POST COMPANY
By: /s/ Alan Spoon
___________________________________________
Title: President
________________________________________
THIS IS A SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF AMERICAN PCS, L.P.
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<PAGE>
The undersigned partners of WirelessCo hereby agree to comply with the
provisions of Sections 6.1, 6.2 and 6.3 of this Second Amended and Restated
Limited Partnership Agreement, and have executed and delivered this counterpart
signature page solely for the purposes of confirming their agreement with such
provisions.
SPRINT SPECTRUM, INC.,
By: /s/ Don A. Jensen
_______________________________________
Title: Vice President
____________________________________
TCI NETWORK, INC.
By: /s/ Gerald W. Gaines
_______________________________________
Title: Senior Vice President
____________________________________
COMCAST TELEPHONY SERVICES
By: Comcast Telephony Services, Inc.,
its General Partner
By: /s/ Lawrence S. Smith
_______________________________________
Title: Senior Vice President
____________________________________
COX COMMUNICATIONS WIRELESS, INC.
By: /s/ David M. Woodrow
_______________________________________
Title: Vice President
____________________________________
SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF AMERICAN PCS, L.P.
-90-
<PAGE>
Schedule 1.10(a)
- - ----------------
Assets Included in the Existing Business
----------------------------------------
<PAGE>
Schedule 5.1(d)(i)
- - ------------------
Initial Buildout Period WirelessCo Consent
------------------------------------------
The following matters with respect to the Partnership require the
written consent of WirelessCo during the Initial Buildout Period:
1. selling, issuing or otherwise disposing of any equity interest in
the Partnership or any option, warrant or other debt or equity interest
convertible into or evidencing the right to acquire (whether or not for
additional consideration) any equity interest in the Partnership, or making or
permitting any Partner to make any Capital Contribution not required under this
Agreement;
2. the incurrence of any Debt by the Partnership or any Subsidiary of
the Partnership in an aggregate amount which, together with all other Debt of
the Partnership and its Subsidiaries, is in excess of $15,000,000;
3. purchasing or otherwise acquiring any assets in one or a series of
related transactions unless such purchase or acquisition is reasonably related
to the buildout and operation of the Partnership's PCS system in the Baltimore-
Washington MTA;
4. disposing of, by sale, merger, consolidation, lease or otherwise,
in one transaction or in a series of transactions, any assets of the Partnership
(including stock or other equity interests) that have an aggregate value in
excess of ten percent (10%) of the book value of the consolidated assets of the
Partnership as determined in accordance with GAAP, except upon the liquidation
and dissolution of the Partnership in accordance with Section 14 of this
Agreement;
5. subjecting to any security interests, liens, claims, options,
pledges or other encumbrances of any nature any assets of the Partnership
(except for pledges to secure permitted indebtedness);
6. the merger, consolidation or other business combination by the
Partnership or any subsidiary of the Partnership into or with any other entity,
or entering into a joint venture, partnership or other like relationship with
any other entity, other than any transaction involving only the Partnership
and/or one or more wholly owned subsidiaries of the Partnership;
7. admitting any new Partner to the Partnership (other than a
permitted transferee of all or part of an Interest in the Partnership);
<PAGE>
8. entering into any agreement restricting the ability of the
Partnership to make distributions to its Partners with respect to their
Interests (except for loan agreements relating to permitted indebtedness);
9. distributing any asset (including cash) with respect to any
Interest in the Partnership during the Initial Buildout Period and the Post-
Buildout Period;
10. making any material change in the Partnership's tax or accounting
practices, other than as required by changes in tax law or generally accepted
accounting practices;
11. converting the Partnership to corporate form; or
12. redeeming or repurchasing any Interest.
-2-
<PAGE>
Schedule 5.1(d)(ii)
- - -------------------
Pre-WirelessCo Majority Period WirelessCo Consent/WirelessCo
------------------------------------------------------------
Majority Period APC Consent
---------------------------
The following matters with respect to the Partnership require (i)
during the period beginning on the earlier to occur of (A) the first anniversary
of the Initial Buildout Completion Date or (B) the beginning of the WirelessCo
Majority Period, the written consent of WirelessCo or (ii) during the WirelessCo
Majority Period and until such time as APC's Percentage Interest falls below
twenty percent (20%), the written consent of APC:
1. all matters listed on Schedule 5.1(d)(i);
2. approving any Proposed Budget or Proposed Business Plan; or
3. appointing, but not removing, the Chief Executive Officer of
the Partnership.
<PAGE>
Schedule 5.8
- - ------------
Unanimous Consent of Partners
-----------------------------
The following matters with respect to the Partnership require the prior
written consent of all Partners:
1. entering into any agreement or transaction with an Affiliate of a
Partner unless such agreement or transaction is in the ordinary course of
business and is on terms that could have been obtained by the Partnership in an
arm's-length transaction with a Person that is not an Affiliate;
2. dissolving or liquidating the Partnership, except as permitted
by, and in accordance with, this Agreement;
3. doing any act that would make it impossible to carry on the
business of the Partnership except upon dissolution of the Partnership in
accordance with this Agreement;
4. using any funds or assets of the Partnership other than for the
benefit of the Partnership or commingling funds of the Partnership with those of
any other Person;
5. taking any action constituting a voluntary bankruptcy of the
Partnership;
6. making any amendment to this Agreement that adversely affects a
Partner's rights and obligations under this Agreement; or
7. engaging in any business not contemplated under Section 1.3 of
this Agreement, provided that any decision described in this Item 7 shall only
--------
require the prior written consent of all Group Partners.
<PAGE>
Schedule 9.2(c)
- - ---------------
Litigation
----------
<PAGE>
Schedule 15.1
- - -------------
Notice Addresses
----------------
PARTNER
- - -------
WirelessCo:
- - ----------
WirelessCo, L.P.
9221 Ward Parkway
Kansas City, Missouri 64114
Attn: Chief Executive Officer
----
with copy to:
WirelessCo, L.P.
9221 Ward Parkway
Kansas City, Missouri 64114
Attn: General Counsel
----
APC:
- - ---
American Personal Communications, Inc.
2212 Old Court Road
Baltimore, Maryland 21208-3432
Attn: Wayne N. Schelle
----
with copy to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
Attn: Jonathan D. Blake
----
<PAGE>
Post:
-----
The Washington Post Company
1150 15th Street, N.W.
Washington, D.C. 20071
Attn: Alan Spoon, President
----
with copy to:
The Washington Post Company
1150 15th Street, N.W.
Washington, D.C. 20071
Attn: Diana Daniels, General Counsel
----
-2-
<PAGE>
Exhibit 2.7
- - -----------
Form of Partner Note
--------------------
Principal Amount:
U.S. $__________ Date:_____________
FOR VALUE RECEIVED, the undersigned, American PCS, L.P., a partnership organized
under the laws of the State of Delaware (hereinafter the "Maker"), does hereby
promise to pay to the order of [NAME OF PARTNER OR AFFILIATE], A
[CORPORATION/PARTNERSHIP] ORGANIZED UNDER THE LAWS OF THE STATE OF __________
[AND AN AFFILIATE OF [NAME OF PARTNER/PARTNERSHIP], A [CORPORATION/PARTNERSHIP]
ORGANIZED UNDER THE LAWS OF THE STATE OF __________] (hereinafter the "Payee"),
on __________, 19__, in lawful money of the United States of America, the
principal amount of [PRINCIPAL AMOUNT] (U.S. $__________), together with, and
without necessity for demand for, interest on the principal amount from time to
time outstanding hereunder payable on the last Business Day of __________,
__________, __________, and __________ of each year from the above date until
paid at the rates hereinafter set forth. Notwithstanding any provision to the
contrary, this Note shall become due and payable without necessity for demand
upon the Bankruptcy of the Maker.
SECTION 1.
DEFINITIONS
As used in this Note, the following capitalized terms shall have the
respective meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Bankruptcy" means, with respect to any Person, a "Voluntary
----------
Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means,
with respect to any Person, the inability of such Person generally to pay its
debts as such debts become due, or an admission in writing by such Person of its
inability to pay its debts generally or a general assignment by such Person for
the benefit of creditors; the filing of any petition or answer by such Person
seeking to adjudicate it bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking,
consenting to,
<PAGE>
adjudicate it bankrupt or insolvent, or seeking for itself any liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of such Person or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking, consenting to,
or acquiescing in the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for such Person or for
any substantial part of its property; or corporate or partnership action taken
by such Person to authorize any of the actions set forth above. An "Involuntary
Bankruptcy" means, with respect to any Person, without the consent or
acquiescence of such Person, the entering of an order for relief or approving a
petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or other similar relief under any present or future bankruptcy, insolvency or
similar statute, law or regulation, or the filing of any such petition against
such Person which petition shall not be dismissed within ninety (90) days, or,
without the consent or acquiescence of such Person, the entering of an order
appointing a trustee, custodian, receiver or liquidator of such Person or of all
or any substantial part of the property of such Person which order shall not be
dismissed within sixty (60) days.
"Business Day" means a day of the year on which banks are not required
------------
or authorized to close in the state of New York.
"Payee" means the initial Payee named herein, its successors and
-----
assigns, and each subsequent holder or assignee hereof.
"Person" means any individual, partnership, corporation, trust,
------
or other entity.
"Securities Act" means the United States Securities Act of 1933, and
--------------
any similar or successor United States Federal statute, as the same shall be in
effect at the time.
"Subsidiary" means each subsidiary of the specified Person (whether
----------
now existing or hereafter created or acquired and including partnerships) the
financial statements of which are consolidated with the financial statements of
such Person in accordance with generally accepted accounting principles.
SECTION 2.
PAYMENTS OF PRINCIPAL AND INTEREST
Section 2.1 Interest. Interest on the principal amount from
--------
time to time outstanding hereunder shall accrue at all times at a
rate per annum equal to ___%; provided, however, that upon the occurrence and
during the continuance of any default by the Maker in the payment of any amount
due under this Note, interest shall accrue and be payable by the Maker on such
unpaid amount at a rate per annum equal to ________ percent (__%) above the rate
set forth above.
-2-
<PAGE>
Section 2.2 Costs. The Maker promises to pay, in addition to
-----
the foregoing principal and interest, all reasonable out-of-pocket
costs of collection, including reasonable attorneys' fees, if this Note is
collected by or through an attorney-at-law or in judicial proceedings.
Section 2.3 Payment. All payments hereunder shall be made
-------
in immediately available funds at the Payee's office located at
______________________________ or at such other location as the holder hereof
shall designate in writing to the Maker.
Section 2.4 Prepayment. The Maker may at its option, and without
----------
any penalty whatsoever, prepay this Note in whole or in part at any time.
Payments shall be applied first, to the payment of any sums (other than
principal and interest) that may be due and payable under this Note, second, to
the payment of all accrued and unpaid interest, and last, to the outstanding and
unpaid principal balance.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
The Maker represents and warrants to the Payee
as of the date of this Note the following:
Section 3.1 Organization and Good Standing. The Maker (a) is
------------------------------
a partnership duly organized, validly existing and in good standing
under the laws of Delaware; (b) has all requisite power and has all material
government licenses, authorizations, consents and approvals necessary to own its
properties and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted makes such qualification necessary, except
where the failure to do so shall not effect the validity or enforceability of
this Note.
Section 3.2 Authorization, etc. The execution, delivery and
------------------
performance of this Note are within the Maker's partnership powers,
have been duly authorized by all necessary partnership action, and do not
contravene (i) its partnership agreement or (ii) any law, rule, regulation or
order of any court or governmental agency or any contractual restriction binding
on or affecting the Maker. This Note constitutes the legal, valid and binding
obligation of the Maker enforceable against the Maker in accordance with its
terms.
Section 3.3 Governmental Authorizations, etc. No consents,
---------------------------------
approvals or authorizations of, or registrations, filings or
declarations with, any governmental or regulatory
-3-
<PAGE>
authority or agency are necessary for the execution and delivery or for the
performance by the Maker of this Note or for the validity or enforceability
thereof.
Section 3.4 Private Offering. Neither the Maker nor
----------------
anyone acting on its behalf has taken any action which would subject the
issuance or sale of this Note to Section 5 of the Securities Act.
Section 3.5 Ranking. All obligations and liabilities of the
-------
Maker under this Note constitute and will constitute, until discharged in full,
direct, unsecured and unconditional obligations of the Maker, and rank, and
until discharged in full will continue or rank, pari passu without preference or
priority among each other, and at least equally and ratably, with all other
unsecured and unsubordinated indebtedness of the Maker to the Payee and any
other partner of Maker.
Section 3.6 Solvency. The Maker is, and after giving effect to
--------
the borrowing hereunder will be, individually and together with its
Subsidiaries, solvent.
SECTION 4.
MISCELLANEOUS
Section 4.1 Governing Law. This Note shall be governed by,
-------------
and construed in accordance with, the laws of Delaware (without
giving effect to the principles of conflict of laws in such jurisdiction).
Section 4.2 Waiver. PRESENTMENT, PROTEST, AND NOTICE OF DISHONOR
------
ARE HEREBY WAIVED BY THE MAKER.
Section 4.3 Usury. It is the intention of Maker and Payee to
-----
conform strictly to the usury laws in force in the State of Delaware and the
United States of America. It is therefore agreed that (i) the aggregate of all
interest and other charges constituting interest under applicable law and
contracted for, chargeable or receivable under this Note or otherwise in
connection with this loan transaction shall never exceed the maximum amount of
interest, or produce a rate in excess of the maximum rate of interest that Payee
may charge Maker under applicable law and in regard to which Maker may not
successfully assert the claim or defense of usury, and (ii) if any excess
interest is provided for, it shall be deemed a mistake and the same shall either
be refunded to Maker or credited on the unpaid principal amount hereof, and this
Note shall be automatically deemed reformed so as to permit only the collection
of the maximum non-usurious rate and amount of interest allowed by applicable
law.
-4-
<PAGE>
____________________, Attention: _______________; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective when deposited in the
mails, telecopied, delivered to the telegraph company, confirmed by telex
answerback or delivered to the cable company, respectively.
Section 4.5 Binding Effect. This Note shall be binding upon
--------------
and inure to the benefit of the Maker and the Payee and their respective
successors and assigns, except that the Maker shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Payee.
Executed and delivered as of the date first above written by the
duly authorized officer of the Maker.
American PCS, L.P.
By:___________________________________________
Title: General Partner
By:___________________________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT 10.8
Northern Telecom Inc. Tel: (615) 734-4000
Northern Telecom Plaza
200 Athens Way
Nashville, Tennessee
U.S.A. 37228-1397
[LOGO]
NORTHERN TELECOM
June 11, 1996
Sprint Spectrum L.P.
4717 Grand Avenue
Kansas City, Missouri 64114
Attention: Bob Neumeister
Ladies and Gentlemen:
Sprint Spectrum L.P., a Delaware limited partnership (the "Borrower" or "you"),
has advised Northern Telecom Inc. (the "Vendor" or "we") that the Borrower has
need for a credit facility in the amount of up to $1,300,000,000 in connection
with the purchase of goods and services to be provided by or through the Vendor
in connection with the build-out of the Borrower's national wireless network
(the "Project"). You have requested that the Vendor provide such credit facility
(the "Credit Facility"), and you and we have engaged in extensive negotiations
concerning the principal terms of such a Credit Facility.
Attached hereto as Exhibit A to this letter is a Statement of Terms and
---------
Conditions (the "Term Sheet") setting forth, as negotiated, the principal terms
and conditions on and subject to which the Vendor is willing to make the Credit
Facility available and the Borrower is willing to incur, secure and repay the
financing described therein. Capitalized terms used but not defined herein shall
have the meanings given to them in the Term Sheet.
In agreeing to provide the Credit Facility, we have assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information provided to us by the Borrower and its advisors. We have
further assumed that the Sprint Spectrum Business Plan Overview, dated March
1996, has been approved by the Partnership Board of Sprint Spectrum Holding
Company, L.P. With respect to financial forecasts and projections, we have
assumed that such financial forecasts and projections have been reasonably
prepared using the best currently available estimates and judgments of the
Borrower and its advisors.
In addition to the conditions to the availability of the Credit Facility set
forth in the Term Sheet, the Vendor's commitment to enter into the Credit
Facility is subject to (a) completion of the Vendor's ongoing due diligence
investigation relating to the Borrower and the Project and the results of such
due diligence investigation being satisfactory to the Vendor; (b) there not
having occurred any material adverse change (as defined in the Term Sheet); and
(c) the negotiation, execution and delivery of definitive documentation relating
to the Credit Facility and the security therefore satisfactorv in form and
substance to the Vendor and its counsel.
<PAGE>
By executing this letter, you and we acknowledge that this letter, the side
letters, dated the date hereof, and the Term Sheet are the only agreements
between you and the undersigned with respect to the Credit Facility and set
forth the principal terms and conditions thereof, and that any additional terms
and conditions will not be inconsistent with the terms and conditions set forth
herein, in the side letter and in the Term Sheet. This letter may not be amended
except pursuant to a writing signed by each of the parties hereto. This letter
shall be governed by, and construed in accordance with, the laws of the State of
New York.
You agree that this commitment letter is for your confidential use only and
neither this commitment letter nor the Term Sheet, nor the contents thereof,
will he disclosed by you without the prior written consent of the Vendor to any
person other than your accountants, attorneys and other advisors and each of the
Parents and their respective accountants, attorneys and other advisors, in each
case only in connection with the transactions contemplated hereby and on a
confidential hasis.
If you are in agreement with the foregoing, please sign and return to the
undersigned the enclosed copies of this letter. The commitment evidenced by
this letter will expire if we have not received a signed counterpart of this
letter by June 21, 1996.
We look forward to working with you on this transaction.
Very truly yours,
NORTHERN TELECOM INC.
By: /s/ D.A. Twyver
-----------------------
Title: Vice President
--------------------
Accepted and agreed to as of the date
first above written.
SPRINT SPECTRUM L.P.
By: /s/ Ronald T. LeMay
-----------------------
Title: CEO
---------------------
<PAGE>
SPRINT SPECTRUM L.P.
VENDOR CREDIT FACILITY
(NORTHERN TELECOM INC.)
Summary of Terms and Conditions
June 11, 1996
--------------------
I. Parties
-------
Borrower: Sprint Spectrum L.P. (the "Borrower").
--------
Lenders: Northern Telecom Inc. or any affiliate of Northern
Telecom Inc. the obligations of which shall have been
guaranteed by Northern Telecom Inc. (the "Vendor"). At
------
or subsequent to the Closing Date (as defined below) the
Vendor may assign (in accordance with the provisions of
"Assignments and Participations" below) portions of the
credit facility described herein (the "Credit Facility")
---------------
to one or more Eligible Lenders (as defined below)
(together with the Vendor, the "Lenders").
-------
II. The Credit Facility
-------------------
Vendor's Commitment; The Vendor will commit (the "Commitment") to
Type and Amount of provide a multiple drawdown term loan facility in the
Facility: amount set forth on Annex A hereto (the loans
thereunder, the "Loans").
-----
<PAGE>
2
Purpose: As set forth on Annex A hereto.
Availability: The Loans shall be made on not more than one drawdown
date per month during the period commencing on the date
of the initial drawdown and ending on the fifth
anniversary of such date (but in no event later than
December 31, 2000). The Credit Facility will terminate
if no Loans are drawn by March 31, 1997.
III. General Payment Provisions
--------------------------
Amortization: The Loans made during each of the five consecutive one-
year periods following the date of the initial drawdown
(each, a "Borrowing Year") shall be repayable in 20
consecutive quarterly installments, commencing on the
date which is 39 months after the last day of such
Borrowing Year and ending on the date which is eight
years after such last day, in an aggregate amount for
each year following such last day set forth below equal
to the percentage set forth opposite such year
multiplied by the aggregate principal amount of the
Loans made during such Borrowing Year (with the
installments during each such year being equal in
amount):
Year Percentage
---- ----------
4 10%
5 15
6 20
7 25
8 30
Interest Rates and As set forth on Annex A hereto:
Interest Payment
Dates:
Capitalization Interest will accrue on each Loan from the date of
of Interest: drawdown thereof. No interest will be payable in cash on
the Loans made during any Borrowing Year until the first
applicable interest payment date following the first
anniversary of the last day of such Borrowing Year.
Prior to such first anniversary, accrued interest will
be capitalized quarterly and will bear interest at the
rate applicable to the related Loan.
<PAGE>
3
Optional Prepayments: Loans may be prepaid by the Borrower in minimum amounts
of $10,000,000. Optional prepayments of the Loans shall
be applied pro rata to the then remaining installments
--- ----
thereof.
Mandatory Prepayments: 100% of the net cash proceeds of any sale or other
disposition by the Borrower or any of its Restricted
Subsidiaries (as defined below) of any material assets
that are not reinvested in the Borrower's business
within 270 days after receipt thereof shall be used to
prepay ratably the Loans and (to the extent required by
such other indebtedness or the Borrower determines to do
so) all other indebtedness secured by such assets. The
Credit Documentation (as defined below) will contain
provisions requiring the Borrower to give notice to the
Lenders, at the time of any such asset sale or other
disposition, if it intends to reinvest the proceeds
thereof in its business, and to provide evidence that
such reinvestment has been accomplished within 270 days
after receipt of such proceeds. To the extent the net
cash proceeds of such sale or other disposition exceed
$100,000,000, such excess shall be deposited in a cash
collateral account with the Trustee (as defined below),
to be disbursed therefrom as and when such reinvestments
are made or, as the case may be, such prepayment is
required.
If the Borrower shall make any voluntary prepayment of
the other Vendor Financing (as defined below) or a
voluntary prepayment of term loans under the Bank
Credit Facilities (as defined below) or a voluntary
reduction of the revolving credit commitments under the
Bank Credit Facilities (except to the extent that the
amount of such reduction does not exceed the amount, if
any, by which the commitments in effect immediately
prior to such reduction exceeds the then outstanding
revolving credit loans), it shall (unless the same shall
have been made in connection with a Permitted
Refinancing (as defined below)) make a mandatory
prepayment of the Loans in a ratable amount. A
"Permitted Refinancing" shall mean (a) a refinancing of
---------------------
any Vendor Financing other than the Credit Facility,
provided that the Vendor is given the option to have its
--------
Loans repaid pro rata with the lenders under such other
--- ----
Vendor Financing on substantially equivalent terms and
conditions and (b)
<PAGE>
4
any refinancing of the Bank Credit Facilities.
Each such prepayment of the Loans shall be applied pro
---
rata to the then remaining installments thereof.
----
Waiver of Set-Off: The Borrower will not be entitled to set off any amount
owing to it by the Vendor under the procurement
agreement between the Vendor and the Borrower against
any amount payable by the Borrower under the Credit
Facility.
IV. Collateral; Capital Contribution Agreement; Guarantees
------------------------------------------------------
Collateral: The assets of the Borrower and its Restricted
Subsidiaries related to the wireless business shall, for
collateral purposes, be allocated to one of the four
following categories: (i) PCS FCC licenses ("FCC
---
Licenses"), (ii) non-real property assets (the
--------
"Direct-Lien Assets") on which a lien can be perfected
------------------
by a limited number of UCC and/or Federal filings and
deliveries of pledged instruments (such as accounts,
patents, trademarks, the Capital Contribution Agreement
(as defined below) and other general intangibles), (iii)
substantially all other personal property (which will
include equipment) ("Personal Propertv Assets") and (iv)
------------------------
all real estate interests other than Mortgaged
Properties (as defined below) ("Real Estate Assets").
------------------
All FCC Licenses, Personal Property Assets and Real
Estate Assets will be acquired in or transferred to
separate, wholly owned, single purpose partnership
subsidiaries of the Borrower ("License Subsidiary",
------------------
"Equipment Subsidiary," and "Real Estate Subsidiary",
-------------------- ----------------------
respectively). The Direct-Lien Assets and the Mortgaged
Properties will remain with the Borrower. Assets that
are acquired with purchase-money indebtedness permitted
by clause 1.(e) under "Negative Covenants" below
("Permitted Purchase Money Indebtedness") will be owned
-------------------------------------
by the Borrower but will not constitute Collateral (as
defined below).
The obligations of the Borrower in respect of the Credit
Facility shall be secured by a perfected first priority
lien (the "Shared Lien") on (a) all the partnership
interests in the Equipment Subsidiary, the
<PAGE>
5
License Subsidiary and the Real Estate Subsidiary, (b)
the Direct-Lien Assets and (c) any Mortgaged Properties.
All assets that are subject to the Shared Lien are
herein called the "Collateral".
----------
The Shared Lien will secure equally and ratably the
following indebtedness (the "Secured Debt"): (i) the
------------
Bank Credit Facilities, (ii) all Vendor Financing, (iii)
other indebtedness of the Borrower for borrowed money
and interest rate swaps, (iv) indebtedness of the
Borrower (other than for borrowed money, but including
handset financing and refinancings of all indebtedness
referred to in this clause) in an aggregate amount not
to exceed $500,000,000 and (v) any refinancings of any
of the indebtedness described in clauses (i), (ii) and
(iii) above; provided that the Shared Lien will not
--------
secure any (a) Permitted Purchase Money Indebtedness or
(b) indebtedness of the Borrower (other than the Credit
Facility) which is guaranteed by any of the Parents or
any other affiliate of the Borrower or which is the
beneficiary of any other credit enhancement provided
directly or indirectly by any of the Parents or any
other affiliate of the Borrower unless such indebtedness
refinances, or constitutes, (1) any Vendor Financing
other than the Credit Facility or (2) the Bank Credit
Facilities, and, in each case, the Vendor or its
assignee under the Credit Facility is given the option
to receive a guarantee or other credit enhancement on
substantially identical terms and conditions.
Capital Contribution The four ultimate partners of the Borrower (the
Agreement: "Parents") will enter into a capital contribution
-------
agreement substantially in form and substance
satisfactory to the Borrower and the Vendor (the
"Capital Contribution Agreement"). The Parents shall
------------------------------
have entered into the Capital Contribution Agreement as
a condition precedent to the signing of the Credit
Agreement.
Guarantees: The Equipment Subsidiary, the License Subsidiary and the
Real Estate Subsidiary will each guarantee the Secured
Debt on a joint and several, pari passu basis (the
---- -----
"Guarantees").
----------
<PAGE>
6
V. Certain Conditions
------------------
Initial Conditions: The availability of the Credit Facility shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent (the date upon which
all such conditions precedent shall be satisfied, the
"Closing Date"):
------------
1. The Borrower, the License Subsidiary, the
Equipment Subsidiary, the Real Estate Subsidiary and
each of the Parents (collectively, the "Credit Parties")
--------------
shall have executed and delivered definitive financing
documentation with respect to the Credit Facility
consistent with this Summary of Terms and Conditions
(the "Credit Documentation").
--------------------
2. All 29 of the FCC Licenses acquired by a
subsidiary of the Borrower for the Borrower's use shall
have been paid for in full and shall have been
transferred to the License Subsidiary.
3. The Borrower shall have (i) entered into a
satisfactory collateral trust agreement pursuant to
which an independent trustee appointed by the Borrower
(the "Trustee") shall act as collateral trustee to hold
-------
all of the Collateral and the Guarantees for the benefit
of the holders of the indebtedness secured thereby in
accordance with the provisions described above, (ii)
executed and delivered to the Trustee satisfactory
security documents to create the liens on the Collateral
described above, (iii) completed all such filings and
other actions as is necessary to perfect such liens,
(iv) provided to the Trustee results of lien searches in
each of the offices where liens on the Collateral would
be recorded, revealing no liens on any of the Collateral
and (v) provided to the Vendor satisfactory evidence
that the Vendor and the Lenders are entitled to the
benefit of said collateral trust agreement.
4. The Vendor shall have received a satisfactory
business plan of the Borrower that shall have been
approved by the Parents.
5. The Vendor shall have received such legal
opinions (including FCC counsel to the Borrower),
<PAGE>
7
documents and other instruments as are customary or
reasonably requested by the Vendor for transactions of
this type.
6. The amount of Contributed Capital (as defined
below) shall be at least $2.2 billion.
7. The Vendor shall have received audited financial
statements of the Borrower for the fiscal year ended
December 31, 1995.
8. The Vendor shall have received copies of all
documentation evidencing all Vendor Financing (other
than the Credit Facility) and the Bank Credit
Facilities; provided that the provisions thereof
--------
relating to those matters covered by Annex A hereto
shall not be required to be delivered by the Borrower.
On-Going Conditions: The making of each Loan shall be conditioned upon (i)
all representations and warranties by the Credit Parties
in the Credit Documentation (including, without
limitation, the material adverse change and litigation
representations) being true and correct in all material
respects, (ii) there being no default or event of
default in existence at the time of, or after giving
effect to the making of, such Loan and (iii) the
Borrower not having terminated the Vendor's procurement
agreement with the Borrower with respect to future
orders unless prior to such termination the Borrower
shall have placed equipment orders with the Vendor in an
aggregate amount of at least the amount set forth on
Annex A hereto. As used herein and in the Credit
Documentation a "material adverse change" shall mean any
event, development or circumstance that has had or could
reasonably be expected to have a material adverse effect
on (a) the business, assets, results of operations or
financial condition of the Borrower and its Restricted
Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform its obligations under the Credit
Documentation or (c) the validity or enforceability of
any of the Credit Documentation or the rights and
remedies of the Vendor and the Lenders thereunder.
<PAGE>
8
VI. Representations, Warranties,
Covenants and Events of Default
-------------------------------
The Credit Documentation shall contain representations,
warranties, covenants and events of default customary
for financings of this type, including the following and
others reasonably satisfactory to the Borrower and the
Vendor (all of which will be substantially identical in
the documentation relating to each Vendor Financing):
Representations and Accuracy of financial statements; material adverse
Warranties: change; partnership existence; compliance with law;
partnership power and authority; ownership of the
Borrower, the License Subsidiary, the Equipment
Subsidiary and the Real Estate Subsidiary; absence of
any material obligations or liabilities of the License
Subsidiary, the Equipment Subsidiary and the Real Estate
Subsidiary (other than the Guarantees); enforceability
of Credit Documentation; no conflict with law or
contractual obligations; no material litigation; no
default; ownership of property; liens; intellectual
property; no burdensome restrictions; taxes; FCC
compliance; existence and validity of all material
governmental consents and permits; Federal Reserve
regulations; ERISA; Investment Company Act;
subsidiaries; environmental matters; accuracy of
disclosure; and creation and perfection of security
interests. The foregoing representations and warranties
shall contain such materiality and other exceptions as
shall be reasonably satisfactory to the Borrower and the
Vendor.
Affirmative Covenants: Delivery of financial statements (including annual
audited financial statements, quarterly unaudited
statements, quarterly operating budgets with comparisons
to actual for the current quarter and year-to-date and
the annual business plans prepared pursuant to the
Borrower's partnership agreement (in the case of the
annual business plans, the Borrower shall provide
personnel of the Borrower reasonably necessary to
discuss such business plans with the Lenders on a
reasonably timely basis)), reports, officers'
certificates (including, without limitation, a quarterly
officer's certificate certifying compliance with the
covenant relating to affiliate transactions
<PAGE>
9
below) and other information reasonably requested by the
Lenders; payment of other obligations; continuation of
business and maintenance of existence and material
rights and privileges (provided that the Borrower will
--------
be permitted to convert to corporate form if (a) after
giving effect to such conversion, (i) the Borrower shall
be in pro forma compliance with the financial covenants
--- -----
contained in the Credit Documentation (calculated as if
such conversion had occurred at the end of the then most
recently ended fiscal quarter for which financial
statements shall then have been delivered to the
Lenders), (ii) no Event of Default shall have occurred
and be continuing, and (iii) no material adverse change
shall have resulted from such conversion (it being
agreed that the fact that the Borrower would then be
subject to the payment of income taxes as a corporation
shall not, in and of itself, be deemed to constitute a
material adverse change) and (b) the following other
conditions shall be satisfied: (i) in the case the
resultant corporate Borrower is not a public company,
the Parents shall have entered into an agreement in
favor of the Trustee pursuant to which they will agree
that, so long as the Borrower remains a non-public
corporation, they will make capital contributions to the
Borrower in amounts equal to the excess, if any, of the
amount of income taxes payable by the Borrower (as a
corporation) over the amount of distributions that could
have been made to the Parents during the period (the
"Relevant Period") from the date of such conversion
---------------
through the final maturity of the Loans pursuant to
6.(a) under "Negative Covenants" below if the Borrower
had remained a partnership during such period, (ii) in
the case the resultant corporate Borrower is a public
company, the Borrower shall have delivered to the
Lenders a certificate to the effect that the amount of
Federal, state and local income and franchise taxes
based upon income reasonably projected to be payable by
the Borrower as a corporation after such conversion will
not be materially greater than the sum of (x) the
aggregate amount of distributions that could be made to
the Parents during the Relevant Period pursuant to
paragraph 6.(a) under "Negative Covenants" below if the
Borrower had remained a partnership during the Relevant
Period (based on reasonable projections but
<PAGE>
10
without regard to clause (ii) of paragraph 6.(a)) and
(y) the aggregate amount of taxes based upon income that
would have been payable by the Borrower during the
Relevant Period if the Borrower had remained a
partnership during the Relevant Period, (iii) any
write-offs and other deductions which shall have been
made in connection with any tax returns filed by the
Borrower prior to such conversion shall have been
consistent with past practice and (iv) neither the
Borrower nor its Parents shall have taken any
unreasonable action with the effect of decreasing the
income of the Borrower prior to such conversion and
increasing the future income of the Borrower after such
conversion); compliance with laws and material
contractual obligations (including obligations under FCC
Licenses); maintenance by the Borrower and its
Restricted Subsidiaries of property and liability
insurance in accordance with prevailing standards in the
industry; maintenance of books and records; notices of
defaults, litigation and other material events;
compliance with environmental laws; and agreement to
transfer any after-acquired FCC Licenses to the License
Subsidiary, to transfer any after-acquired Personal
Property Assets to the Equipment Subsidiary, to transfer
any after-acquired Real Estate Assets to the Real Estate
Subsidiary, to grant security interests in after-
acquired Direct-Lien Assets and to create a mortgage in
favor of the Trustee on any real property having a value
greater than $15,000,000 (a "Mortgaged Property"). The
------------------
foregoing affirmative covenants shall contain such
materiality and other exceptions as shall be reasonably
satisfactory to the Borrower and the Vendor.
Financial Covenants: The Borrower and its Restricted Subsidiaries shall not
(see Section VIII below for certain definitions used
herein):
(a) Total Debt to Total Capitalization. Permit the
----------------------------------
ratio of (i) Total Debt outstanding on any of the
dates set forth below to (ii) Total Capitalization
on such date to exceed the ratio set forth opposite
such date:
<PAGE>
11
Date Ratio
---- -----
12/31/96 .50 to 1
3/31/97 .55 to 1
6/30/97 .55 to 1
9/30/97 .57 to 1
12/31/97 .57 to 1
3/31/98 .60 to 1
6/30/98 .61 to 1
9/30/98 .61 to 1
12/31/98 .61 to 1
3/31/99 .62 to 1
6/30/99 .64 to 1
9/30/99 .66 to 1
12/31/99 .68 to 1
3/31/00 .69 to 1
6/30/00 .69 to 1
9/30/00 .70 to 1
12/31/00 .70 to 1
3/31/01 .70 to 1
6/30/01 .70 to 1
9/30/01 .70 to 1
12/3l/01 .70 to 1
(b) Total Debt to Annualized Adjusted EBITDA. Permit
----------------------------------------
the ratio of (i) Total Debt outstanding on any of
the dates set forth below to (ii) Annualized
Adjusted EBITDA for the period ending on such date
to be more than the ratio set forth opposite such
date:
Date Ratio
---- -----
12/31/98 23.0 to 1
3/31/99 14.0 to 1
6/30/99 10.0 to 1
9/30/99 8.0 to 1
12/31/99 6.0 to 1
3/31/00 5.0 to 1
6/30/00 4.5 to 1
9/30/00 4.0 to 1
12/31/00 4.0 to 1
(c) Total Debt to Annualized EBITDA. Permit the ratio of (i) Total Debt
--------------------------------
outstanding on the last day of any fiscal quarter set forth below to (ii)
<PAGE>
12
Annualized EBITDA for the period ending on such date
to exceed the ratio set forth opposite such date:
Date Ratio
---- -----
12/31/00 11.0 to 1
3/31/01 8.5 to 1
6/30/01 7.5 to 1
9/30/01 7.0 to 1
12/31/01 6.0 to 1
Thereafter 5.0 to 1
(d) Annualized EBITDA to Interest Expense.
-------------------------------------
Permit the ratio of (i) Annualized EBITDA for the
period ending on any date set forth below to (ii)
Interest Expense for the four consecutive fiscal
quarters ending on such date to be less than the
ratio set forth below opposite such date:
Date Ratio
---- -----
3/31/01 1.25 to 1
6/30/01 1.25 to 1
9/30/01 1.50 to 1
12/31/01 2.00 to 1
3/31/02 2.25 to 1
6/30/02 2.25 to 1
Thereafter 2.50 to 1
(e) Capital Expenditures. Permit Capital
--------------------
Expenditures for any of the periods set forth below
to exceed the amount set forth opposite such
period:
Period Amount
------ ------
Date of formation of the
Borrower through 12/31/98 $4,500,000,000
1/1/99 through 12/31/99 1,000,000,000
1/1/00 through 12/31/00 1,000,000,000
1/1/01 through 12/31/01 1,000,000,000;
<PAGE>
13
provided that any permitted amount which is not
--------
expended in any of the periods specified above may
be carried over for expenditure in any subsequent
period.
(f) Covered POPS. Incur any indebtedness at any time
------------
after any of the dates set forth below if the number
of Covered POPS on the last of such dates prior to
the date of such incurrence is less than the number
set forth opposite such date:
Date Number
---- ------
12/31/97 80,000,000
12/31/98 95,000,000
12/31/99 105,000,000
12/31/00 110,000,000
(g) Wireless Subscribers. Incur any indebtedness at any
--------------------
time after any of the dates set forth below if the
average of the numbers of Wireless Subscribers in
existence on the last of such dates prior to the
date of such incurrence and on the last day of each
of the three previous calendar quarters is less than
the number set forth opposite such date:
Date Number
---- ------
12/31/97 450,000
6/30/98 850,000
12/31/98 1,350,000
6/30/99 2,300,000
12/31/99 3,500,000;
provided that each relevant number set forth above
--------
shall be reduced by a proportion equal to the ratio
of (A) the number of POPS described in clause (b) of
the definition of "Covered POPS" to (B) the
aggregate number of POPS which the Borrower then has
the right to serve.
<PAGE>
14
Negative Covenants: Limitations, imposed on the Borrower and its
Restricted Subsidiaries, as appropriate, on (it
being understood that, where appropriate, the
exceptions described below to such limitations will
be subject to mutually agreeable limits):
1. indebtedness, other than:
(a) indebtedness of the Borrower in respect of
the Loans,
(b) indebtedness of the Borrower in respect of
bank credit facilities (the "Bank Credit
-----------
Facilities"),
----------
(c) indebtedness of the Borrower in respect of
other vendor financing for vendors which
supply PCS equipment and services to the
Borrower and its Restricted Subsidiaries in
a material amount (excluding handsets)
(together with the Credit Facility, the
"Vendor Financing"),
------ --------
(d) indebtedness of the Borrower in respect of
interest rate swaps,
(e) indebtedness of the Borrower in respect of
other purchase money indebtedness (including
capital leases); provided that the assets
--------
acquired therewith shall not be integral to
the infrastructure of the Borrower's
national wireless network (and shall in no
extent include any FCC License) and that the
aggregate amount thereof at any one time
outstanding does not exceed an amount to be
agreed upon,
(f) indebtedness of the Borrower in respect of
handset financing,
(g) indebtedness of any acquired entity
outstanding at the time of acquisition,
(h) subordinated indebtedness of the Borrower
(having subordination terms to
<PAGE>
15
be approved by the Lenders in the Credit
Documentation),
(i) capital lease obligations of the Borrower
arising out of sale-leaseback transactions,
(j) Permitted Refinancings and refinancings of
indebtedness permitted under (a) and (d)
through (i) above and (k) below, and
(k) other indebtedness of the Borrower; provided
--------
that the incurrence of such other
indebtedness shall be permitted only if the
Borrower would be in compliance on a pro
---
forma basis with the covenants set forth in
-----
paragraphs (a) through (d) under "Financial
Covenants" above (on the basis of Total Debt
and Total Capitalization then outstanding
and Annualized Adjusted EBITDA and
Annualized EBITDA as projected as at the end
of the then current fiscal quarter);
2. liens, other than
(a) the Shared Liens,
(b) customary permitted liens,
(c) liens on assets acquired with Permitted
Purchase Money Indebtedness to secure
such Indebtedness,
(d) liens on assets that are the subject of
sale-leaseback transactions securing the
related capital leases, and
(e) others to be agreed upon;
3. guarantee obligations, with exceptions to be agreed
upon; provided that the incurrence of any guarantee
--------
obligations other than the Guarantees shall be
permitted only if the Borrower would be in
compliance on a pro forma basis with the covenants
---------
set forth in paragraphs (a) through (d) under
"Financial Covenants" above (on the basis
<PAGE>
16
of Total Debt and Total Capitalization then
outstanding and Annualized Adjusted EBITDA and
Annualized EBITDA as projected as at the end of the
then current fiscal quarter);
4. mergers, consolidations, liquidations and
dissolutions, other than, so long as no default or
event of default is in existence or would result
therefrom:
(a) liquidations of subsidiaries (other than
License Subsidiary, Equipment Subsidiary and
Real Estate Subsidiary),
(b) mergers in which the Borrower or a
subsidiary of the Borrower is the surviving
entity (including mergers among the Borrower
and its subsidiaries but excluding any such
merger involving License Subsidiary,
Equipment Subsidiary or Real Estate
Subsidiary (in which it is not the surviving
entity or in which it acquires any material
indebtedness or obligations)), and
(c) others to be agreed upon;
5. sales of assets, other than (in each case, for cash,
cash equivalents and an aggregate amount to be
agreed upon of promissory notes or other deferred
payment obligations):
(a) in the ordinary course of business (it being
agreed that no sale of a FCC License and the
related assets and business shall be
considered to be in the ordinary course of
business),
(b) sales of immaterial assets; provided that if
--------
the aggregate amount of assets sold pursuant
to this clause during any period of two
consecutive calendar years exceeds
$100,000,000, such excess shall be applied
as described in the first paragraph under
"Mandatory Prepayments" above,
<PAGE>
17
(c) so long as no default or event of default is
in existence or would result therefrom,
sales of material assets (including, without
limitation, pursuant to sale-leaseback
transactions) the net cash proceeds of which
are applied as described under "Mandatory
Prepayments" above, provided that the
--------
consent of the Requisite Aggregate Lenders
(as defined below) will be required in the
case of a sale or series of related sales
which includes or include FCC Licenses if,
after giving effect thereto, the aggregate
number of POPS which the Borrower then has
the right to serve would be less than 120
million, and
(d) others to be agreed upon;
6. distributions to partners and repurchases of equity,
other than, so long as no default or event of
default is in existence or would result therefrom:
(a) to the extent necessary to pay current tax
liabilities payable in respect of the income
of the Borrower; provided that (i) nothing
--------
in this clause shall be deemed to permit any
such distribution or repurchase to pay any
tax liabilities of the Parents resulting
from the conversion of the Borrower from
partnership to corporate form and (ii) no
distributions or repurchases shall be
permitted under this clause unless after
giving effect to such distributions or
repurchases, the ratio of Total Debt to
Annualized EBITDA is not greater than 5.0 to
1 and the ratio of Annualized EBITDA to
Interest Expense is not less than 2.5 to 1,
(b) to the extent necessary to service Specified
Affiliate Debt, if at the time such
distribution is made, the Borrower is in pro
---
forma compliance with the covenants in the
-----
Credit Documentation,
<PAGE>
18
and
(c) distributions and repurchases of equity to
the extent that (i) after giving effect to
such distributions or repurchases, the ratio
of Total Debt to Annualized EBITDA is not
greater than 5.0 to 1 and the ratio of
Annualized EBITDA to Interest Expense is not
less than 2.5 to 1 and (ii) the Borrower
applies an equal amount toward prepayment of
indebtedness secured by the Collateral;
7. acquisitions, other investments, loans and
advances, other than:
(a) among the Borrower and its Restricted
Subsidiaries,
(b) acquisitions of entities engaged in the
telecommunications business and
businesses related thereto,
(c) acquisitions of entities engaged in other
businesses subject to a limit to be agreed
upon, and
(d) others to be agreed upon;
8. transactions with affiliates except on terms no less
favorable to the Borrower than as could be obtained
on an arm's length basis from a third party;
9. engaging in any business other than the
telecommunications business and businesses related
thereto; and
10. the ability of the License Subsidiary, the Equipment
Subsidiary or the Real Estate Subsidiary to incur
any liabilities or to engage in any business or
activities other than the holding of FCC Licenses,
Personal Property Assets or Real Estate Assets,
respectively.
<PAGE>
19
Events of Default: Nonpayment of principal; nonpayment of interest or other
amounts after a 3 business day grace period; material
inaccuracy of representations and warranties (subject to
a 30-day grace period); violation of covenants (subject
to a 30-day grace period); cross-default to the Bank
Credit Facilities and to any other indebtedness of the
Borrower in an amount greater than the lesser of (i)
$50,000,000 and (ii) 10% of the aggregate then
outstanding principal amount of indebtedness of the
Borrower; the commencement by the Trustee of foreclosure
proceedings with respect to any of the Collateral;
bankruptcy of the Borrower, a Restricted Subsidiary or
any other material subsidiary; bankruptcy of any of the
partners of the Borrower; bankruptcy of any Parent prior
to the time when the entire capital contribution amount
has been contributed under the Capital Contribution
Agreement, unless within 30 days after such bankruptcy
one or more of the other Parents shall have assumed the
obligations of such bankrupt Parent under the Capital
Contribution Agreement; the failure of the full amount
of any required capital contribution to be made under
the Capital Contribution Agreement for a period of more
than 30 days after the date when due; certain ERISA
events; unpaid judgments in an amount greater than the
lesser of (i) $50,000,000 and (ii) 10% of the aggregate
then outstanding principal amount of indebtedness of the
Borrower; invalidity or termination of any guarantee,
security document or the Capital Contribution Agreement;
termination of the Borrower's right to use the "Sprint"
trademark prior to the time at which the Borrower has an
actual or implied long-term debt rating of at least BBB-
from S&P or at least Baa3 from Moody's ("Investment
----------
Grade Status"); termination, revocation or non-renewal
------------
by the FCC of FCC Licenses if, after giving effect
thereto, the aggregate number of POPS which the Borrower
then has the right to serve is less than 120 million;
and a change in control (to be defined as (i) prior to
the time at which the Borrower has Investment Grade
Status, the amount of Committed Capital and Contributed
Capital held, directly or indirectly, by Sprint
Corporation is reduced to an amount less than
$500,000,000 or (ii) prior to the date (the "Public
------
Offering Date") on which there has been a public
-------------
offering of equity interests of the
<PAGE>
20
Borrower (or of any partner of the Borrower formed for
the purpose of effecting a public offering), Sprint
Corporation shall cease to own, directly or indirectly,
at least 25% of the equity interests in the Borrower).
VII. Certain Other Terms
-------------------
Voting: Amendments and waivers with respect to representations,
warranties, covenants and events of default which are
common to the Credit Documentation and to the
documentation regarding the other Vendor Financing shall
require the approval of lenders (the "Requisite
---------
Aggregate Lenders") holding (a) during the period when
-----------------
either vendor holds more than 50% of the aggregate
amount of the outstanding loans under its Vendor
Financing, a majority of the outstanding loans under
each Vendor Financing and (b) after the date on which
neither vendor holds more than 50% of the aggregate
amount of the outstanding loans under its Vendor
Financing, a majority of the outstanding loans under all
Vendor Financing.
Amendments and waivers with respect to other matters
shall require the approval of a majority of the
outstanding Loans, except that (a) the consent of each
Lender directly affected thereby shall be required with
respect to (i) reductions in the amount or extensions of
the scheduled date of any installment of any Loan, (ii)
reductions in the rate of interest or fees or extensions
of any due date thereof and (iii) increases in the
amount or extensions of the expiry date of any Lender's
commitment, and (b) the consent of 100% of the Lenders
shall be required with respect to modifications to any
of the voting percentages described in this section.
To accelerate any Vendor Financing, (a) if there is a
payment default under such Vendor Financing, the
approval of a majority of the outstanding loans under
such Vendor Financing will be required, (b) if there is
a bankruptcy default, acceleration will be automatic,
and (c) for all other events of default, the approval of
the Requisite Aggregate Lenders will be required.
<PAGE>
21
To foreclose on any Collateral or enforce any Guarantee,
the approval of a majority of all amounts secured by the
Collateral will be required. To release any Collateral
or Guarantee, the approval of 75% of the Loans will be
required.
Assignments Each of the Vendor and other Lenders shall be permitted,
and Participations: in accordance with applicable law, to assign its Loans
and sell participations in its Loans and commitments
(i) at any time, to a person, subject to the consent of
the Borrower (which consent shall not be unreasonably
withheld), which is neither a bank, insurance company or
mutual fund nor an entity, affiliate or investment
vehicle described in the proviso to the definition of
the term "Eligible Lender" (provided that prior to the
date which is 90 days from the date of the initial Loan,
no such assignment or sale may be made pursuant to this
clause (i) to any person other than those three the
names of which have been disclosed to the Borrower prior
to the date of this Term Sheet, (ii) at any time after
the date which is 90 days from the date of the initial
Loan, to one or more Eligible Lenders and (iii) at any
time, to an Eligible Lender (provided that such Eligible
Lender shall be the beneficiary of an unconditional
guarantee by the Vendor or QUALCOMM Incorporated for the
full term of the affected Loan and that such guarantee
shall have been included as part of the original offer
of such assignment or sale to such Eligible Lender);
provided that the Borrower shall have received notice
--------
(a) in the case such assignment shall be made in a
situation in which the Vendor or such other Lender shall
have offered to assign more than $100,000,000 of Loans
to more than one other person, at least 60 days prior to
the date of such offers or (b) in all other cases, prior
to the date of such assignment. In the case of partial
assignments, the minimum assignment amount shall be
$10,000,000 (or such lesser amount as constitutes the
assigning Lender's entire Loans), and, after giving
effect thereto, the assigning Lender (unless it shall
have assigned 100% of its Loans) shall have Loans
aggregating at least $10,000,000. Subject to the proviso
to the second succeeding sentence, voting rights of
participants and other holders of indirect interests in
the Loans shall be limited to those matters
<PAGE>
22
with respect to which the affirmative vote of the Lender
from which it purchased its participation would be
required as described in "Voting" above. Pledges of
Loans in accordance with applicable law shall be
permitted without restriction. "Eligible Lenders" means
(i) banks, insurance companies and other financial
institutions and (ii) other entities whose primary
business is to extend credit or invest in extensions of
credit; provided, that (a) any entity engaged in, and,
--------
in the case of clause (ii) of this sentence, affiliates
of any entity engaged in, the telecommunications
business and businesses related thereto shall not be
Eligible Lenders and (b) in the case of any investment
vehicle that becomes a Lender and sells direct or
indirect beneficial interests in such entity's rights
under the Credit Facility, (x) any voting rights of the
holders of such beneficial interests shall be limited so
that the required percentage vote of such holders with
respect to actions to be taken by such entity under the
Credit Documentation shall be based on the same
percentage as the required vote of the Lenders under the
Credit Documentation with respect to such action and (y)
the only financial statements and other reports that
such entity and holders shall be entitled to receive
shall be the annual audited and quarterly unaudited
financial statements referred to under Affirmative
Covenants above. Notwithstanding any of the foregoing
restrictions contained in this "Assignments and
Participations" section, the Vendor shall be entitled to
assign Loans and sell participations in its Loans and
commitments to QUALCOMM Incorporated at any time and
from time to time without any restriction.
The Borrower and its Restricted Subsidiaries will
cooperate with the Vendor and its lead agents in each
syndication of the Loans undertaken by the Vendor and
such lead agents; provided that the Vendor and its lead
--------
agents shall give the Borrower prior written notice of
their intent to commence each such syndication and,
provided, further, that the Borrower and its Restricted
-------- -------
Subsidiaries shall not be required to take the actions
described in this paragraph in connection with more than
two such syndication commencement notices in any twelve-
month period and no more than three such syndication
<PAGE>
23
commencement notices during the term of the Credit
Facility. Such cooperation will include (a) making
senior officers of the Borrower and its Restricted
Subsidiaries available for a meeting with prospective
assignees and the Vendor and its lead agents (provided
that the Borrower shall have received at least 60 days'
notice of such meeting), and (b) providing such other
assistance as may be reasonably requested by the Vendor
and such lead agents (including providing information
to, and responding to questions from, prospective
assignees with respect to the operations, business
plans, results and other matters relating to the
Borrower's business on a timely basis and in any manner
reasonably requested by the Vendor or such lead agents).
Customary representations and restrictions designed to
preserve the private placement status of the Credit
Facilities will be included in the Credit Documentation.
Yield Protection: The Credit Documentation shall contain customary
provisions indemnifying the Lenders for "breakage costs"
incurred in connection with prepayment of a Eurodollar
Loan (as defined in Annex A hereto) on a day other than
the last day of an interest period with respect thereto.
The Credit Documentation shall also contain customary
increased costs and illegality provisions.
Expenses: The Vendor will bear all its own costs and expenses in
connection with the Credit Facility, except that the
Borrower shall pay all reasonable out-of-pocket expenses
of the administrative agent under the Credit Facility
in connection with the enforcement of the Credit
Documentation (including the reasonable fees and the
reasonable disbursements and other charges of one
counsel to the administrative agent and the Lenders).
Confidentiality: The Credit Documentation will contain a customary
confidentiality provision.
Non-Recourse: Except (i) as expressly provided above under the
provisions of "Capital Contribution Agreement" above and
(ii) in the case of fraud or of misrepresentation
<PAGE>
24
by the Parents in the Capital Contribution Agreement,
the Credit Facility shall be non-recourse to the
partners of the Borrower, the Parents or any
intermediate partnerships.
Governing Law and State of New York.
Forum:
Preparation of Credit The Credit Documentation will be prepared by
Documentation: Simpson Thacher & Bartlett, counsel to the Borrower,
at the expense of the Borrower.
VIII. Certain Definitions
-------------------
"Adjusted EBITDA": for any fiscal period, the sum of (a) EBITDA for such
--------------- period plus (b) the aggregate amount deducted in
----
determining Net Income or Net Loss for such period in
respect of sales, marketing and advertising expenses and
consumer-related equipment subsidy expenses.
"Annualized Adjusted for the period ending on any date, the product of (a)
------------------- Adjusted EBITDA for the two consecutive fiscal quarters
EBITDA": ending on such date multiplied by (b) two.
- - ------ -------------
"Annualized EBITDA": for the period ending on any date, the product of (a)
----------------- EBITDA for the two consecutive fiscal quarters ending on
such date multiplied by (b) two.
-------------
"Capital expenditures made by the Borrower and its Restricted
------- Subsidiaries for the purpose of acquiring or
Expenditures": constructing fixed assets, real property or equipment
- - ------------ and all systems and development expenditures related to
the build-out of the Borrower's and its Restricted
Subsidiaries' networks to provide Wireless Services in
accordance with GAAP, provided that no expenditure
--------
related to the acquisition of FCC Licenses and no amount
of capitalized interest shall be considered to be a
Capital Expenditure.
<PAGE>
25
"Committed Capital": at any time, the aggregate amount of cash
----------------- contributions then available to be made by the Parents
or their affiliates pursuant to the Capital Contribution
Agreement.
"Contributed Capital": at any time, the aggregate amount of equity contributed
------------------- to the Borrower and, without duplication, its Restricted
Subsidiaries.
"Covered POPS": at any time, the aggregate number of POPS within
------------ each geographic area for which facilities providing
service to that geographical area either (a) have
achieved "substantial completion" pursuant to the
terms of the applicable vendor procurement agreement
or (b) have not achieved "substantial completion"
pursuant to the terms of the Vendor's procurement
agreement as a result of a failure by the Vendor to
perform its obligations thereunder.
"EBITDA": for any fiscal period, the Net Income or Net Loss, as
------ the case may be, for such fiscal period, after restoring
thereto amounts deducted for, without duplication,
(a) interest expense of the Borrower and its Restricted
Subsidiaries paid or accrued in respect of Total Debt
for such fiscal period determined in conformity with
GMP (including, to the extent such amounts would
be included as interest expense in conformity with
GAAP, the interest component of payments made
under capitalized leases and any fees associated with
Total Debt), (b) taxes based upon Net Income, (c)
depreciation and amortization and (d) other non-cash
charges.
"Interest Expense": for any fiscal period, the amount of (a) interest
---------------- expense of the Borrower and its Restricted Subsidiaries
paid or accrued in respect of Total Debt for such
fiscal period determined in conformity with
GAAP (including, to the extent such amounts would
be included as interest expense in conformity with
GAAP, the interest component of payments made
under capitalized leases and any fees associated with
Total Debt) plus (b) interest expense in respect of
----
Specified Affiliate Debt for such fiscal period
determined in conformity with GAAP.
<PAGE>
26
"Net Income" or for any fiscal period, the amount which, in conformity
---------- with GAAP, would constitute the net income or net loss,
"Net Loss": as the case may be, of the Borrower and its Restricted
-------- Subsidiaries for such fiscal period; provided that Net
--------
Income or Net Loss shall exclude gains and losses on the
sales of assets (other than in the ordinary course of
business) and extraordinary gains and losses.
"POPS": the population of a geographic area based upon the 1990
---- U.S. census.
"Restricted any Subsidiary of the Borrower that is not an
---------- Unrestricted Subsidiary.
Subsidiary":
- - ----------
"Specified Affiliate indebtedness of affiliates of the Borrower the proceeds
------------------- of which was advanced to the Borrower and the Borrower
Debt": has identified such indebtedness as Specified Affiliate
- - ---- Debt.
"Total at any date, the sum of (a) Total Debt outstanding on
----- such date plus (b) Contributed Capital on such date
Capitalization": ----
- - --------------
plus (c) Committed Capital on such date less (d) the
----
amount of restricted payments made to Partners through
such date.
"Total Debt": at any time, the sum of (a) the aggregate amount of
---------- consolidated indebtedness (including capitalized
leases) of the Borrower and its Restricted Subsidiaries
then outstanding (including capitalized and accreted
interest) plus (b) the aggregate amount of Specified
----
Affiliate Debt then outstanding (including capitalized
and accreted interest) minus (c) the aggregate amount
-----
of cash and cash equivalents then owned by the
Borrower and its Restricted Subsidiaries to the extent
such amount exceeds $25,000,000.
"Unrestricted any of Teleport, APC, PhillieCo, PioneerCo and
------------ NewTelCo.
Subsidiary":
- - -----------
"Wireless Service": the provision of broadband personal communications
---------------- services.
<PAGE>
27
"Wireless at any time, all customers then receiving Wireless
-------- Services from the Borrower or any of its Restricted
Subscribers": Subsidiaries.
- - -----------
<PAGE>
EXHIBIT 10.9
CHASE SECURITIES INC.
June 7, 1996
Sprint Spectrum L.P.
--------------------
Senior Secured Revolving Credit Facilities
------------------------------------------
Commitment Letter
-----------------
Sprint Spectrum L.P.
4717 Grand Avenue
Kansas City, Missouri 64114
Attention: Mr. Robert Sleet
Ladies and Gentlemen:
You have advised Chemical Bank ("Chemical") and Chase Securities Inc.
("CSI") that Sprint Spectrum L.P. (the "Borrower"), intends to develop and
operate a national wireless telephone system. You have requested that CSI agree
to structure, arrange and syndicate senior secured revolving credit facilities
in an aggregate principal amount of up to $2,000,000,000 (the "Facilities") to
be used to finance working capital needs, subscriber acquisition costs and
capital expenditures of the Borrower and its subsidiaries and for general
partnership purposes and that Chemical commit to provide the entire principal
amount of and to serve as administrative agent for the Facilities. The terms of
the Facilities will be as set forth in the Summary of Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet").
You hereby appoint CSI, and CSI agrees to act, as advisor and arranger
for the Facilities. You hereby appoint Chemical, and Chemical agrees to act,
as administrative agent for the Facilities. Chemical is pleased to advise you
of its commitment to provide the entire amount of the Facilities upon the terms
and subject to the conditions set forth or referred to in this Commitment Letter
and in the Term Sheet.
It is agreed that Chemical will act as the sole Administrative Agent and
that CSI will act as the sole advisor and lead arranger for the Facilities and
that each will perform the duties and exercise the authority customarily
performed and exercised by it in its respective role or roles. It is agreed
that the titles and roles to be awarded to other financial institutions and any
related compensation (other than that expressly
<PAGE>
2
contemplated by the Term Sheet and the Fee Letter referred to below) will be
subject to the agreement of the Borrower, CSI and Chemical.
CSI intends to syndicate the Facilities to a group of financial
institutions (together with Chemical, the "Lenders") identified by us in
consultation with you. CSI intends to commence syndication efforts promptly
upon the execution of this Commitment Letter, and you agree actively to assist
CSI in completing a syndication satisfactory to it. Such assistance shall
include (a) your using, and endeavoring in good faith to cause the Parents (as
defined in the Term Sheet) to use, your and their best efforts to ensure that
the syndication benefits materially from your and their existing lending
relationships, (b) direct contact between senior management and advisors of the
Borrower and the proposed Lenders, (c) assistance in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication and (d) the hosting, with CSI, of one or more
meetings of prospective Lenders.
CSI, in consultation with the Borrower, will manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. To assist CSI in its syndication efforts, you agree promptly to
prepare and provide to CSI and Chemical all information with respect to the
Borrower, including all financial information and projections (the
"Projections"), as we may reasonably request in connection with the arrangement
and syndication of the Facilities. You hereby represent and covenant that (a)
all information other than the Projections (the "Information") that has been or
will be made available to Chemical or CSI by you or any of your representatives
is and will be, when furnished, complete and correct in all material respects
and does not and will not, when furnished, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections made
available to Chemical or CSI by you or any of your representatives have been and
will be prepared in good faith based upon reasonable assumptions. You
understand that in arranging and syndicating the Facilities we may use and rely
on the Information and Projections without independent verification thereof.
As consideration for Chemical's commitment hereunder and CSI's agreement
to perform the services described herein, you agree to pay to Chemical the
nonrefundable fees set forth in Annex I to the Term Sheet and in the Fee Letter
dated the date hereof and delivered herewith (the "Fee Letter").
Chemical's commitment hereunder and CSI's agreement to perform the
services described herein are subject to (a) there not occurring or becoming
known to us
<PAGE>
3
any condition or change that affects or would be likely to affect in any
material and adverse respect the business, operations, financial condition or
contractual arrangements of the Borrower and its subsidiaries taken as a whole,
(b) our not becoming aware after the date hereof of any event or circumstance
affecting the Borrower or the transactions contemplated hereby that is
inconsistent in a material and adverse manner with information disclosed to us
by the Borrower prior to the date hereof, (c) there not having occurred a
material disruption of or material adverse change in financial, banking or
capital market conditions generally that, in our judgment, could reasonably be
expected materially to impair the syndication of the Facilities, (d) our
satisfaction that prior to and during the syndication of the Facilities there
shall be no competing offering, placement or arrangement of any debt securities
or bank financing by or for the use of the Borrower, except as expressly
contemplated by the Term Sheet or described in Schedule I hereto, (e) the
negotiation, execution and delivery on or before September 30, 1996, of
definitive documentation with respect to the Facilities satisfactory to Chemical
and its counsel and (f) the other conditions set forth or referred to in the
Term Sheet. We wish to advise you that, on the basis of our discussions and due
diligence to date, we are aware of no event or circumstance that would prevent
any of the foregoing conditions from being satisfied. The terms and conditions
of Chemical's commitment hereunder and of the Facilities are not limited to
those set forth herein and in the Term Sheet, and matters not covered by the
provisions hereof and of the Term Sheet are subject to the approval and
agreement of Chemical, CSI and the Borrower.
You agree (a) to indemnify and hold harmless Chemical, CSI, their
affiliates and the respective officers, directors, employees, advisors, and
agents of such persons (each, an "indemnified person") from and against any and
all losses, claims, damages and liabilities to which any such indemnified person
may become subject arising out of or in connection with this Commitment Letter,
the Facilities, the use of the proceeds thereof, the transactions contemplated
hereby or any claim, litigation, investigation or proceeding relating to any of
the foregoing, regardless of whether any indemnified person is a party thereto,
and to reimburse each indemnified person upon demand for any legal or other
expenses incurred in connection with investigating or defending any of the
foregoing, provided that the foregoing indemnity will not, as to any indemnified
--------
person, apply to losses, claims, damages, liabilities or related expenses to the
extent they arise from the willful misconduct or gross negligence of such
indemnified person, and (b) to reimburse Chemical, CSI and their affiliates on
demand for all reasonable out-of-pocket expenses (including due diligence
expenses, syndication expenses, consultant's fees and expenses, travel expenses,
and reasonable fees, charges and disbursements of counsel) incurred in
connection with the Facilities and any related documentation (including this
Commitment Letter, the Term Sheet, the Fee Letter and the definitive financing
documentation) or the administration, amendment, modification or waiver thereof.
No indemnified person shall be liable for any indirect or consequential damages
in connection with its activities related to the Facilities.
<PAGE>
4
This Commitment Letter shall not be assignable by you without the prior
written consent of Chemical and CSI (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you, Chemical and CSI. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature
page of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter and
the Fee Letter are the only agreements that have been entered into among us with
respect to the Facilities and set forth the entire understanding of the parties
with respect thereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance will be disclosed, directly or indirectly, to any other
person except (a) to your officers, agents and advisors, and the officers,
agents and advisors of your Parents, who are directly involved in the
consideration of this matter or (b) as may be compelled in a judicial or
administrative proceeding or otherwise required by law (in which case you agree
to inform us promptly thereof), provided, that the foregoing restrictions shall
--------
cease to apply (except in respect of the Fee Letter and its terms and substance)
after this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or Chemical's commitment hereunder.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter, not later
than 5:00 p.m., New York City time, on June 14, 1996, failing which Chemical's
commitment and CSI's agreements herein will expire at such time.
<PAGE>
5
Chemical and CSI are pleased to have been given the opportunity to
assist you in connection with this important financing.
Very truly yours,
CHEMICAL BANK
By: /s/ Ann B. Kerns
-----------------------------
Name: Ann B. Kerns
Title: Vice President
CHASE SECURITIES INC.
By: /s/ James L. Stine
-----------------------------
Name: James L. Stine
Title: Managing Director
Accepted and agreed to
as of the date first
written above by:
SPRINT SPECTRUM L.P.
By: /s/ Robert E. Sleet, Jr.
--------------------------
Name: Robert E. Sleet, Jr.
Title: Vice President & Treasurer
<PAGE>
SCHEDULE I
----------
1. Proposed Senior Note Offering.
2. Vendor Financing with Lucent Technologies Inc.
3. Vendor Financing with Northern Telecom Inc.
4. Possible handset financing.
<PAGE>
SPRINT SPECTRUM L.P.
BANK CREDIT FACILITY
Summary of Terms and Conditions
June 7, 1996
--------------------
I. Parties
-------
Borrower: Sprint Spectrum L.P. (the "Borrower").
--------
Lenders: The banks, financial institutions and other entities
selected in the syndication effort (collectively, the
"Lenders").
-------
Arranger: Chase Securities Inc. (in such capacity, the
"Arranger").
--------
Administrative Agent: Chemical Bank (in such capacity, the "Administrative
--------------
Agent").
------
Co-Arrangers and To be determined
Other Roles:
II. The Credit Facility
-------------------
Facilities: Three Senior Secured Revolving Credit Facilities (the
"Credit Facilities") in an aggregate principal amount of
-----------------
$2,000,000,000 (the loans thereunder being referred to
herein as the "Loans"), such aggregate principal amount
-----
to be allocated between (a) a Tranche A Revolving Credit
Facility in an aggregate principal amount of
$750,000,000 (the "Tranche A Facility"), (b) a Tranche B
------------------
Revolving Credit Facility in an aggregate principal
amount of $750,000,000 (the "Tranche B Facility") and
------------------
(c) a Tranche C Revolving Credit Facility in an
aggregate principal amount of $500,000,000 (the "Tranche
-------
C Facility").
----------
Availability: (A) Loans under the Tranche A Facility will be
available during the period commencing on the date
<PAGE>
2
that the Tranche A Conditions (as defined in Annex I
hereto) are satisfied and ending on the Maturity Date
(as defined below).
(B) Loans under the Tranche B Facility will be available
during the period commencing on the date that the
Tranche A Conditions and the Tranche B Conditions (as
defined in Annex I hereto) are satisfied and ending on
the Maturity Date (as defined below).
(C) Loans under the Tranche C Facility will, subject to
the satisfaction of the Tranche C Condition (as defined
in Annex I), be available during the period commencing
on the later of (i) the date that the Tranche A
Conditions and the Tranche B Conditions are satisfied
and (ii) December 31, 1997, and ending on the Maturity
Date (as defined below).
Automatic Reductions The commitments under the Credit Facilities will
of Credit Facilities: automatically reduce in 16 consecutive quarterly
installments, commencing on the date that is five years
and three months after the Closing Date, in an aggregate
amount for each installment equal to the product of (a)
the percentage set forth opposite such installment below
and (b) $2,000,000,000.
Installment Reduction Percentage
----------- --------------------
1-4 3.75%
5-8 5.00%
9-12 7.50%
13-16 8.75%
The amounts of such reductions will be distributed
ratably among the Credit Facilities.
Maturity: The Credit Facilities will mature on the date (the
"Maturity Date") that is nine years after the Closing
-------------
Date (as defined below).
Closing Date: On or before September 30, 1996.
<PAGE>
3
Purpose: The proceeds of the Loans shall be used to finance
working capital needs, subscriber acquisition costs,
capital expenditures and other general partnership
purposes of the Borrower and its Restricted Subsidiaries
(as defined below).
III. General Payment Provisions
--------------------------
Fees, Interest Rates As set forth on Annex I hereto.
and Interest Payment
Dates:
Optional Prepayments Loans may be prepaid and commitments may be reduced by
and Commitment the Borrower in minimum amounts of $10,000,000 or
Reductions: integral multiples of $1,000,000 in excess thereof.
Optional commitment reductions shall be applied ratably
to the remaining "Automatic Reductions of the Credit
Facilities" described above.
Mandatory Prepayments (a) 100% of the net cash proceeds of any sale or
and Commitment other disposition by the Borrower or any of its
Reductions: Restricted Subsidiaries of any material assets (subject
to a basket to be determined) that are not reinvested in
the Borrower's business within 270 days after receipt
thereof shall be applied ratably to reduce the Credit
Facilities and prepay all other indebtedness secured by
such assets. The Credit Documentation (as defined below)
will contain provisions requiring the Borrower to give
notice to the Lenders, at the time of any such asset
sale or other disposition, if it intends to reinvest the
proceeds thereof in its business ("Reinvestment
------------
Proceeds"), and to provide evidence that such
--------
reinvestment has been accomplished within 270 days after
receipt of such proceeds. The Reinvestment Proceeds will
be applied to the temporary prepayment of the Credit
Facilities, and availability under the Credit Facilities
equal to the amount of Reinvestment Proceeds will be
reserved for drawings for such purpose, provided,
--------
however, that to the extent the Reinvestment Proceeds of
-------
any asset sale or other disposition exceed $100,000,000,
such excess shall be deposited in a cash collateral
account with the Trustee (as defined below), to be
disbursed therefrom and when such reinvestment is made
or,
<PAGE>
4
as the case may be, the Credit Facilities reductions and
prepayments described in the first sentence of this
paragraph are required.
(b) Beginning with the fiscal year ended 2000, 50% of
Excess Cash Flow (as defined in Section VIII below)
shall be applied ratably to reduce the Credit
Facilities, prepay the loans under the Vendor Financing
and reduce or prepay, as applicable, all other Secured
Debt outstanding under instruments requiring the
Borrower to do so.
Any reductions of the Credit Facilities pursuant to the
foregoing two paragraphs shall be applied ratably to the
then remaining "Automatic Reductions of the Credit
Facilities" described above and shall be accompanied by
prepayment of the Loans to the extent such Loans exceed
the amount of the Credit Facilities as so reduced.
IV. Collateral; Capital Contribution Agreement; Guarantees
------------------------------------------------------
Collateral: The assets of the Borrower and its Restricted
Subsidiaries shall, for collateral purposes, be
allocated to one of the four following categories: (i)
PCS FCC licenses ("FCC Licenses"), (ii) non-real
------------
property assets (the "Direct-Lien Assets") on which a
------------------
lien can be perfected by a limited number of UCC and/or
Federal filings and deliveries of pledged instruments
(such as accounts, patents, trademarks, the Capital
Contribution Agreement (as defined below) and other
general intangibles), (iii) substantially all other
personal property (which will include equipment)
("Personal Property Assets") and (iv) all real estate
------------------------
interests ("Real Estate Assets"). All FCC Licenses,
------------------
Personal Property Assets and Real Estate Assets will be
acquired in or transferred to separate, wholly owned,
single purpose partnership subsidiaries of the Borrower
("License Subsidiary", "Equipment Subsidiary," and "Real
------------------ -------------------- ----
Estate Subsidiary", respectively). The Direct-Lien
-----------------
Assets and the Mortgaged Properties (as defined below)
will remain with the Borrower. Assets that are acquired
with
<PAGE>
5
purchase-money Indebtedness permitted by clause 1.(d)
under "Negative Covenants" below ("Permitted Purchase
------------------
Money Indebtedness") will be owned by the Borrower but
------------------
will not constitute Collateral (as defined below).
The obligations of the Borrower in respect of the Credit
Facilities shall be secured by a perfected first
priority lien (the "Shared Lien") on (a) all the
-----------
partnership interests in the License Subsidiary, the
Equipment Subsidiary and the Real Estate Subsidiary (the
"Partnership Interests") and all the partnership
---------------------
interests in, and the capital stock of, the other
Restricted Subsidiaries of the Borrower and (b) the
Direct-Lien Assets. All assets that are subject to the
Shared Lien are herein called the "Collateral".
----------
The Shared Lien will secure equally and ratably the
following indebtedness (the "Secured Debt"): (i) the
------------
Credit Facilities, (ii) the Vendor Financing (as defined
below), (iii) specified other indebtedness of the
Borrower for borrowed money, and interest rate swaps
that are (a) provided by the Lenders or the lenders
under the Vendor Financing and (b) related to other
Secured Debt, (iv) indebtedness of the Borrower other
than for borrowed money) in an aggregate amount not
exceeding an amount to be determined at any time
outstanding and (v) any Permitted Refinancing
Indebtedness (as defined in Section VIII below) in
respect of any of the foregoing; provided that the
--------
Shared Lien will not secure any Permitted Purchase Money
Indebtedness.
Capital Contribution The four ultimate partners of the Borrower (the
Agreement: "Parents") will enter into a capital contribution
agreement (the "Capital Contribution Agreement") in form
and substance satisfactory to the Borrower and the
Administrative Agent.
Guarantees: The Equipment Subsidiary, the License Subsidiary,
the Real Estate Subsidiary and each other Subsidiary of
the Borrower that is a Restricted Subsidiary will each
guarantee the Secured Debt on a joint and several, pari
----
passu basis (the "Guarantees").
----- ----------
<PAGE>
6
V. Certain Conditions
------------------
Initial Conditions: The availability of the Credit Facilities shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent (the first date upon
which all such conditions precedent shall be satisfied,
the "Closing Date"):
------------
1. The Borrower, the License Subsidiary, the
Equipment Subsidiary, the Real Estate Subsidiary and
each of the Parents (collectively, the "Credit Parties")
--------------
shall have executed and delivered definitive financing
documentation with respect to the Credit Facilities
consistent with this Summary of Terms and Conditions
(the "Credit Documentation").
--------------------
2. All 29 of the FCC Licenses acquired by a
subsidiary of the Borrower for the Borrower's use shall
have been paid for in full and shall have been
transferred to the License Subsidiary.
3. The Borrower shall have (i) entered into a
satisfactory collateral trust agreement pursuant to
which an independent trustee appointed by the Borrower
(the "Trustee") shall act as collateral trustee to hold
-------
all of the Collateral and the Guarantees for the benefit
of the holders of the indebtedness secured thereby in
accordance with the provisions described above; (ii)
executed and delivered to the Trustee satisfactory
security documents to create the liens on the Collateral
described above; (iii) completed all such filings and
other actions as is necessary to perfect such liens;
(iv) provided to the Trustee results of lien searches in
each of the offices where liens on the Collateral would
be recorded, revealing no liens on any of the
Collateral; and (v) provided to the Administrative Agent
satisfactory evidence that the Administrative Agent and
the Lenders are entitled to the benefit of said
collateral trust agreement.
4. The Lenders shall have received a satisfactory
business plan of the Borrower.
<PAGE>
7
5. The Lenders shall have received such legal
opinions (including FCC counsel to the Borrower),
documents and other instruments as are customary for
transactions of this type.
6. The amount of Contributed Capital (as defined
below) shall be at least $2.2 billion.
7. The Lenders shall have received audited
financial statements of the Borrower for the fiscal year
ended December 31, 1995.
8. The Lenders shall have satisfactorily completed
a due diligence investigation of the Borrower and its
subsidiaries.
9. Each of the partnership agreements for Sprint
Spectrum Holding Company, L.P. and the Borrower and its
subsidiaries, the Capital Contribution Agreement, the
"Sprint" trademark license agreement, the Vendor
procurement agreements, the Vendor Financing and other
agreed upon agreements shall be in full force and effect
and in form and substance satisfactory to the Lenders.
On-Going Conditions The making of each Loan shall be conditioned upon (i)
all representations and warranties by the Credit Parties
in the Credit Documentation (including, without
limitation, the material adverse change and litigation
representations) being true and correct in all material
respects and (ii) there being no default or event of
default in existence at the time of, or after giving
effect to the making of, such Loan .
VI. Representations, Warranties,
Covenants and Events of Default
-------------------------------
The Credit Documentation shall contain representations,
warranties, covenants and events of default customary
for financings of this type, including the following and
others reasonably satisfactory to the Borrower and the
Lenders.
<PAGE>
8
Representations and Accuracy of financial statements; material adverse
Warranties: change; partnership existence; compliance with law;
partnership power and authority; ownership of the
Borrower, the License Subsidiary, the Equipment
Subsidiary, the Real Estate Subsidiary and (so long as
and to the extent owned as permitted under the Credit
Documentation) any other Restricted Subsidiaries;
absence of any material obligations or liabilities of
the License Subsidiary, the Equipment Subsidiary and the
Real Estate Subsidiary (other than the Guarantees);
enforceability of Credit Documentation; no conflict with
law or contractual obligations; no material litigation;
no default; ownership of property; liens; intellectual
property; no burdensome restrictions; taxes; FCC
compliance; existence and validity of all matenal
governmental consents and permits; Federal Reserve
regulations; ERISA; Investment Company Act;
subsidiaries; environmental matters; accuracy of
disclosure and creation, perfection and priority
(subject to customary qualifications) of security
interests. The foregoing representations and warranties
shall contain such materiality and other exceptions as
shall be reasonably satisfactory to the Borrower and the
Lenders.
Affirmative Covenants: Delivery of financial statements (including annual
audited financial statements, quarterly unaudited
statements, quarterly operating budgets with comparisons
to actual for the current quarter and year to-date),
reports, officers' certificates and other information
reasonably requested by the Lenders; payment of other
obligations; continuation of business and maintenance of
existence and material rights and privileges (provided
that the Borrower will be permitted to convert to
corporate form); compliance with laws and material
contractual obligations (including obligations under FCC
Licenses); maintenance by the Borrower and its
Restricted Subsidiaries of property and liability
insurance in accordance with prevailing standards in the
industry; maintenance of books and records; notices of
defaults, litigation and other material events;
compliance with environmental laws; agreement to
transfer any after-acquired FCC Licenses to the License
Subsidiary, to
<PAGE>
9
transfer any afer-acquired Personal Property Assets to
the Equipment Subsidiary, to transfer any after-acquired
Real Estate Assets to the Real Estate Subsidiary and to
grant security interests in after-acquired Direct-Lien
Assets and to create a mortgage in favor of the Trustee
on any real property having a value greater than
$15,000,000 (a "Mortgaged Property") (with certain
--------- --------
exceptions to be agreed upon); agreement that all FCC
Licenses will be held by the License Subsidiary, all
Personal Property Assets will be held by the Equipment
Subsidiary and all Real Estate Assets will be held by
the Real Estate Subsidiary (with certain exceptions to
be agreed upon); agreement to obtain interest rate
protection for a portion of the Loans on satisfactory
terms and conditions; agreement to cause each newly
acquired Restricted Subsidiary to guarantee the Credit
Facilities; and agreement to pledge all the equity
interests in each newly acquired Restricted Subsidiary
as collateral for the Secured Debt. The foregoing
affirmative covenants shall contain such materiality
and other exceptions as shall be reasonably satisfactory
to the Borrower and the Lenders.
Financial Covenants: The Borrower and its Restricted Subsidiaries shall not
(see Section VIII below for certain definitions used
herein):
(a) Total Debt to Total Capitalization. Permit the
----------------------------------
ratio of (i) Total Debt outstanding on the last day
of any fiscal quarter ending during any fiscal year
set forth below to (ii) Total Capitalization on such
last day to exceed the ratio set forth opposite such
fiscal year:
Fiscal Year Ratio
----------- -----
1996 .50 to 1
1997 .60 to 1
1998 .65 to 1
1999 through 2001 .70 to 1
(b) Total Debt to Annualized Adjusted EBITDA. Permit
----------------------------------------
the ratio of (i) Total Debt outstanding at
<PAGE>
10
the end of any fiscal quarter to (ii) Annualized
Adjusted EBITDA for the period ending on such date
to be more than the ratio set forth below opposite
the period during which such quarter ends:
Date Ratio
---- -----
12/31/98 23.0 to 1
03/31/99 20.0 to 1
06/30/99 through 09/30/99 15.0 to 1
12/31/99 through 03/31/00 6.0 to 1
06/30/00 through 09/30/00 5.0 to 1
12/31/00 4.0 to 1
(c) Total Debt to Annualized EBITDA. Permit the ratio
-------------------------------
of (i) Total Debt outstanding on the last day of any
fiscal quarter ending during any period set forth
below to (ii) Annualized EBITDA for the period
ending on such date to exceed the ratio set forth
opposite such period:
Date Ratio
---- -----
12/31/00 11.00 to 1
03/31/01 10.0 to 1
06/30/01 through 09/30/01 8.0 to 1
12/31/01 6.0 to 1
Thereafter 5.0 to 1
(d) Annualized EBITDA to Total Cash Interest Expense.
------------------------------------------------
Permit the ratio of (i) Annualized EBITDA at the
end of any fiscal quarter ending during any period
set forth below to (ii) Total Cash Interest Expense
for the four consecutive fiscal quarters ending on
such date to be less
<PAGE>
11
than the ratio set forth below opposite such period:
Period Ratio
------ -----
03/31/01 through 09/30/01 1.25 to 1
12/31/01 through 09/30/02 2.00 to 1
Thereafter 2.50 to 1
(e) Capital Expenditures. Permit Capital
--------------------
Expenditures for any of the periods set forth below
to exceed the amount set forth opposite such period:
Period Amount
------ ------
Date of formation of the
Borrower through 12/31/98 $4,500,000,000
1/1/99 through 12/31/99 1,000,000,000
1/1/00 through 12/31/00 1,000,000,000
1/1/01 through 12/31/01 1,000,000.000;
provided that any permitted amount which is not
--------
expended in any of the periods specified above may
be carried over for expenditure in any subsequent
period.
(f) Covered POPS. Incur any indebtedness at any
------------
time after any of the dates set forth below if the
number of Covered POPS on the last of such dates
prior to the date of such incurrence is less than
the number set forth opposite such date:
Date Number
---- ------
12/31/97 80,000,000
12/31/98 95,000,000
12/31/99 105,000,000
12/31/00 110,000,000
<PAGE>
12
(g) EBITDA to Fixed Charges. Permit the ratio of (a)
-----------------------
EBITDA for the four consecutive fiscal quarter
period ending on the last day of each fiscal
quarter during any period set forth below to (b)
Fixed Charges for such four consecutive quarter
periods to be less than the ratio set forth
opposite such period:
Period Ratio
------ -----
03/31/01 through 12/31/01 1.05 to 1
Thereafter 1.10 to 1
(h) Secured Debt to Total Capitalization. Permit (i)
------------------------------------
Secured Debt on the last day of any fiscal quarter
during any fiscal year set forth below divided by
(ii) Total Capitalization on such last day to
exceed the ratio opposite such fiscal year:
Fiscal Year Ratio
----------- -----
1996 .45 to 1
1997 .55 to 1
1998 .60 to 1
1999 through 2001 .65 to 1
Negative Covenants: Limitations, imposed on the Borrower and its Restricted
Subsidiaries, as appropriate, on (it being understood
that, where appropriate, the exceptions described below
to such limitations will be subject to mutually
agreeable limits):
1. indebtedness, other than:
(a) indebtedness of the Borrower in respect of
the Loans,
(b) indebtedness of the Borrower in respect of
vendor financing (the "Vendor Financing"),
----------------
(c) indebtedness of the Borrower in respect of
interest rate swaps,
<PAGE>
13
(d) indebtedness of the Borrower in respect of
other purchase money indebtedness (including
capital leases); provided that the assets
--------
acquired therewith shall not be integral to
the infrastructure of the Borrower's
national wireless network (and shall in no
event include any FCC License) and that the
aggregate amount thereof at any one time
outstanding does not exceed an amount to be
agreed upon,
(e) indebtedness of the Borrower in respect of
handset financing in an aggregate principal
amount not exceeding $300,000,000 at any
time outstanding,
(f) indebtedness of any acquired entity
outstanding at the time of acquisition,
provided such indebtedness is not created in
--------
contemplation of such acquisition,
(g) subordinated indebtedness of the Borrower
(having subordination and other material
terms to be approved by the Lenders in the
Credit Documentation) (the "Subordinated
------------
Debt"),
----
(h) capital lease obligations of the Borrower
arising out of sale-leaseback transactions,
(i) Permitted Refinancing Indebtedness (as
defined in Section VIII below), and
(j) additional indebtedness of the Borrower,
provided, however, that (i) the Weighted
-------- -------
Average Life thereof is not shorter than the
Weighted Average Life of the Credit
Facilities, (ii) the terms of such
indebtedness and of any agreement entered
into and of any instrument issued in
connection therewith (including, without
limitation, those relating to collateral (if
any), subordination (if any) and covenant
protection are not, taken as
<PAGE>
14
a whole, in the good faith judgment of the
Borrower's management, materially less
favorable to the Borrower than the terms and
conditions of the Credit Facilities and
(iii) at the time of incurrence of any of
the indebtedness referred to in this clause
(j), both before and after giving effect
thereto, no default or event of default
shall have occurred and be continuing and
the Borrower shall be in pro forma
compliance with the covenants set forth
under "Financial Covenants" above (on the
basis of Total Debt, Total Capitalization
and Secured Debt then outstanding and
Annualized Adjusted EBITDA, Annualized
EBITDA and Debt Service calculated using
such amounts for the most recently ended
fiscal quarter for which financial
statements have been delivered to the
Lenders multiplied by 4) ("Pro Forma
---------
Compliance"); provided, further, that
---------- -------- -------
indebtedness incurred for general
partnership purposes in an aggregate
principal amount equal to not more than
S200,000,000 will not be required to comply
with the requirements set forth in clauses
(i) and (ii) above;
2. liens, other than:
(a) the Shared Liens,
(b) customary permitted liens,
(c) liens on assets acquired with Permitted
Purchase Money Indebtedness to secure such
Indebtedness,
<PAGE>
15
(d) liens on assets that are the subject of
sale-leaseback transactions securing the
related capital leases, and
(e) others to be agreed upon;
3. guarantee obligations, with exceptions to be agreed
upon;
4. mergers, consolidations, liquidations and
dissolutions, other than, so long as, after giving
effect thereto, the Borrower is in Pro Forma
Compliance:
(a) liquidations of subsidiaries (other than
License Subsidiary, Equipment Subsidiary and
Real Estate Subsidiary),
(b) mergers in which a subsidiary of the
Borrower or, if the merger involves the
Borrower, the Borrower, is the surviving
entity (including mergers among the Borrower
and its subsidiaries but excluding any such
merger involving the License Subsidiary,
Equipment Subsidiary or Real Estate
Subsidiary), and
(c) others to be agreed upon;
5. sales, transfers or other dispositions of assets,
other than (in each case, for cash, cash equivalents
and an aggregate amount to be agreed upon of
promissory notes or other debt obligations):
(a) sales of assets (other than FCC Licenses,
Direct Lien Assets, the Partnership
Interests and material Restricted
Subsidiaries) in the ordinary course of
business, provided that the Credit
--------
Documentation will contain exceptions to be
negotiated allowing sales of Direct Lien
Assets, including exemptions for sales of
receivables for collection (and
<PAGE>
16
not for financing purposes) and other sales
of Direct Lien Assets in amounts up to an
amount to be negotiated,
(b) so long as no default or event of default is
in existence or would result therefrom and
after giving effect thereto, the Borrower
would be in Pro Forma Compliance, sales of
material assets (including, without
limitation, pursuant to sale-leaseback
transactions and receivables financing
transactions under terms to be negotiated,
but excluding the Partnership Interests, the
Borrower's right to use the "Sprint"
trademark, the Capital Contribution
Agreement) for cash and for fair value the
net cash proceeds of which (to the extent
they exceed a basket to be determined) are
applied as described under "Mandatory
Prepayments" above, provided that the
--------
consent of the Required Lenders (as defined
below) will be required in the case of a
sale or series of related sales which
includes or include FCC Licenses if, after
giving effect thereto, the aggregate number
of POPS which the Borrower then has the
right to serve would be less than 120
million, and
(c) others to be agreed upon;
6. distributions to partners and repurchases of equity,
other than, so long as no default or event of
default is in existence or would result therefrom:
(a) to the extent necessary to pay current tax
liabilities payable in respect of the income
of the Borrower,
(b) to the extent necessary to service Specified
Affiliate Debt (as defined in Section VIII
below), if at the time such
<PAGE>
17
distribution is made, the Borrower is in Pro
Forma Compliance, and
(c) distributions and repurchases of equity to
the extent that (i) after giving effect to
such distributions or repurchases, the ratio
of Total Debt to Annualized EBITDA is not
greater than 4.75 to 1 and the ratio of
Annualized EBITDA to Interest Expense is not
less than 2.5 to 1 and (ii) the Borrower
applies an equal amount toward prepayment
of indebtedness secured by the Collateral.
7. acquisitions, other investments, loans and
advances, other than:
(a) among the Borrower and its Restricted
Subsidiaries, provided that none of the
--------
License Subsidiary, the Equipment Subsidiary
and the Real Estate Subsidiary may make any
acquisitions, other investments, loans and
advances (other than in or to the Borrower
and certain other specific exceptions to be
agreed upon),
(b) acquisitions of entities engaged in the
telecommunications business and businesses
related thereto, provided that (i) after
--------
giving effect to such acquisition, the
Borrower is in Pro Forma Compliance and (ii)
such entity becomes a Restricted Subsidiary
unless (A) such entity shall be acquired
with (I) proceeds of equity contributed to
the Borrower expressly for such purpose
(which equity shall not be considered for
purposes of determining compliance with the
conditions to availability of Tranche A or
Tranche B) or (II) funds of the Borrower
which the Borrower would be permitted to use
to make distributions pursuant to, and in
accordance with, paragraph 6.(c)
<PAGE>
18
under "Negative Covenants" above and (B) the
Borrower designates such entity an
"Unrestricted Subsidiary",
(c) acquisitions of entities engaged in other
businesses, subject to a limit to be agreed
upon, provided that (i) after giving effect
--------
to such acquisition, the Borrower is in Pro
Forma Compliance and (ii) such entity
becomes a Restricted Subsidiary unless (A)
such entity was acquired with (I) proceeds
of equity contributed to the Borrower
expressly for such purpose (which equity
shall not be considered for purposes of
determining compliance with the conditions
to availability of Tranche A or Tranche B)
or (II) funds of the Borrower which the
Borrower would be permitted to use to make
distributions pursuant to, and in accordance
with, paragraph 6.(c) under "Negative
Covenants" above and (B) the Borrower
designates such entity an "Unrestricted
Subsidiary", and
(d) others to be agreed upon;
8. transactions with affiliates except on terms no less
favorable to the Borrower than as could be obtained
on an arm's length basis from a third party;
9. engaging in any business other than the
telecommunications business and businesses related
thereto, provided that the Borrower may be a
--------
reseller or distributor of products and services of
the Parents;
10. the ability of the License Subsidiary, the Equipment
Subsidiary or the Real Estate Subsidiary to incur
any liabilities or to engage in any business or
activities other than the holding of FCC Licenses,
Personal Property Assets or Real Estate Assets
respectively;
<PAGE>
19
11. prepaying Vendor Financing, Subordinated Debt and
other indebtedness for borrowed money, except with
(a) the proceeds of Permitted Refinancing
Indebtedness, (b) the proceeds of equity contributed
to the Borrower expressly for such purpose (which
equity shall not be considered for purposes of
determining compliance with the conditions to
availability of Tranche A or Tranche B) and (c)
funds of the Borrower which the Borrower would be
permitted to use to make distributions pursuant to,
and in accordance with, paragraph 6.(c) under
"Negative Covenants" above; and
12. amending the Capital Contribution Agreement or
amending provisions to be agreed upon contained in
the Borrower's and Sprint Spectrum Holding Company,
L.P.'s partnership agreements, the "Sprint"
trademark license agreement, the vendor procurement
agreements or other material agreements to be agreed
upon, in each case in any manner that is materially
adverse to the interests of the Lenders.
Events of Default: Nonpayment of principal; nonpayment of interest or
other amounts after a 5-day grace period; material
inaccuracy of representations and warranties; violation
of covenants (subject to a 30-day grace period where
customary and appropriate); cross-default to the Vendor
Financing and to any other indebtedness of the Borrower
in an amount greater than the lesser of (i) $50,000,000
and (ii) 10% of the aggregate then outstanding principal
amount of indebtedness of the Borrower; bankruptcy of
the Borrower, a Restricted Subsidiary or any other
material subsidiary; bankruptcy of any of the partners
of the Borrower; bankruptcy of any Parent prior to the
time when the entire capital contribution amount has
been contributed under the Capital Contribution
Agreement, unless within 30 days after such bankruptcy
one or more of the other Parents shall have assumed the
obligations of such bankrupt Parent under the Capital
Contribution Agreement; certain ERISA events; unpaid
judgments in an amount greater than the lesser
<PAGE>
20
of (i) $50,000,000 and (ii) 10% of the aggregate then
outstanding principal amount of indebtedness of the
Borrower; invalidity or termination of any guarantee,
security document or the Capital Contribution Agreement;
termination of the Borrower's right to use the "Sprint"
trademark; termination, revocation or non-renewal by the
FCC of FCC Licenses, if after giving effect thereto, the
aggregate number of POPS which the Borrower then has the
right to serve is less than 120 million; and a change in
control (to be defined as one or more of the Parents
failing to hold in the aggregate over 50% of the equity
interests in the Borrower).
VII. Certain Other Terms
-------------------
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of Lenders (the
"Required Lenders") holding Loans and commitments
----------------
representing more than 50% of the aggregate amount of
the Loans and commitments under the Credit Facility,
except that (a) the consent of each Lender directly
affected thereby shall be required with respect to (i)
reductions in the amount or extensions of the scheduled
date of any installment of any Loan, (ii) reductions in
the rate of interest or the amount of any fees or
extensions of any due date thereof and (iii) increases
in the amount or extensions of the expiry date of any
Lender's commitment, and (b) the consent of 100% of
the Lenders shall be required with respect to
modifications to any of the voting percentages
described in this section.
To accelerate the Credit Facility, (i) if there is a
bankruptcy default, acceleration will be automatic and
(ii) for all other events of default, the approval of
the Required Lenders will be required.
<PAGE>
21
To foreclose on any Collateral or enforce any
Guarantee, the approval of a majority of all amounts
secured by the Collateral will be required. To release
any Collateral or Guarantee, the approval of 75% of
the Loans and commitments under the Credit Facility
will be required.
Assignments and The Lenders shall be permitted to assign their Loans
Participations: sell participations in their Loans and commitments
subject, in the case of assignments (other than to
another Lender or to an affiliate of the assigning
Lender), with the consent of the Borrower and the
Administrative Agent (which consent shall not be
unreasonably withheld). In the case of partial
assignments, the minimum assignment amount shall be
$10,000,000, and, after giving effect thereto, the
assigning Lender (unless it shall have assigned 100%
of its Loans and commitments) shall have Loans and
unused commitment aggregating at least $10,000,000.
Assignments will require the payment of a service fee
(to be determined) by the Assignor to the
Administrative Agent. Voting rights of participants
shall be limited to those matters with respect to
which the affirmative vote of the Lender from which it
purchased its participation would be required as
described in "Voting" above. Pledges of Loans in
accordance with applicable law shall be permitted
without restriction. Promissory notes shall be issued
under the Credit Facility.
Clear Market Agreement: Any commitment issued with respect to the Credit
Facility will be conditioned on a "clear market" in
the bank loan syndication market with respect to
syndication of the Vendor Financing for a period not
to exceed 60 days after the Closing Date; provided
--------
that such condition shall not apply after September
30, 1996.
Yield Protection, etc.: The Credit Documentation shall contain customary
provisions indemnifying the Lenders for "breakage
costs" incurred in connection with prepayment of a
Eurodollar Loan (as defined in Annex A hereto) on a
day other than the last day of an interest period with
respect thereto. The Credit Documentation shall also
<PAGE>
22
contain customary indemnification, increased costs,
capital adequacy, illegality and unavailability of
Eurodollar funding provisions.
Expenses: The Borrower shall, to the extent agreed upon in a
letter agreement among them, reimburse the Arrangers for
their reasonable out-of-pocket expenses (including
reasonable fees and expenses of Cravath, Swaine & Moore,
as counsel to the Arranger and the Administrative Agent,
and of trademark counsel to the Arranger) incurred by
them in the negotiation, syndication and execution of
the Credit Facility. The Borrower shall also reimburse
(a) the Administrative Agent for all reasonable out-of-
pocket expenses (including reasonable fees and expenses
of counsel) in connection with its administration of
the Credit Documentation and (b) the Lenders for their
reasonable out-of-pocket expenses incurred in enforcing
the Credit Documentation; provided that the Borrower
--------
shall only reimburse the reasonable fees and reasonable
disbursements and other charges of one counsel to the
Arrangers, the Administrative Agent and the Lenders in
connection with any amendment, restructuring or work-out
of the Credit Facility.
Confidentiality: The Credit Documentation will contain a customary
confidentiality provision.
Non-Recourse: Except (i) as expressly provided above under the
provisions of "Capital Contribution Agreement" above
and (ii) in the case of fraud or of misrepresentation
by the Parents in the Capital Contribution Agreement,
the Credit Facility shall be non-recourse to the
partners of the Borrower, the Parents or any
intermediate partnerships.
Governing Law and State of New York.
Forum:
Counsel to Arranger Cravath, Swaine & Moore.
and Administrative
Agent:
Preparation of Credit The Credit Documentation will be prepared by Simpson
Documentation: Thacher & Bartlett, counsel to the Borrower, at the
expense of the Borrower.
<PAGE>
23
VIII. Certain Definitions
-------------------
"Adjusted EBITDA": for any fiscal period, the sum of (a) EBITDA for such
--------------- period plus (b) the aggregate amount deducted in
----
determining Net Income or Net Loss for such period
in respect of sales, marketing and advertising
expenses and equipment subsidy expenses.
"Annualized Adjusted for the period ending on the last day of any fiscal
------------------- quarter, the product of (a) Adjusted EBITDA for the
EBITDA": two consecutive fiscal quarters ending on such date
------ multiplied by (b) two.
-------------
"Annualized EBITDA": for the period ending on the last day of any fiscal
----------------- quarter, the product of (a) EBITDA for the two
consecutive fiscal quarters ending on such date
multiplied by (b) two.
-------------
"Capital Expenditures":expenditures made by the Borrower and its Restricted
-------------------- Subsidiaries for the purpose of acquiring or
constructing fixed assets, real property or equipment
and all systems and development expenditures related to
the build-out of the Borrower's and its Restricted
Subsidiaries' networks to provide Wireless Services in
accordance with GAAP, provided that no expenditure
--------
related to the acquisition of FCC Licenses and no
amount of capitalized interest shall be considered to be
a Capital Expenditure.
"Committed Capital": at any time, the aggregate amount of cash
----------------- contributions then available to be made by the Parents
or their affiliates pursuant to the Capital Contribution
Agreement.
"Contributed Capital": at any time, the aggregate amount of equity
------------------- contributed to the Borrower.
"Covered POPS": at any time, the aggregate number of POPS within
------------ each geographic area for which facilities owned by
the Borrower and its Restricted Subsidiaries that
provide service to such geographic area have achieved
<PAGE>
24
"substantial completion" pursuant to the terms of the
applicable vendor procurement contract.
"EBITDA": for any fiscal period, the Net Income or Net Loss, as
the case may be, for such fiscal period, after restoring
thereto amounts deducted for, without duplication,
(a) interest expense of the Borrower and its Restricted
Subsidiaries for such fiscal period determined in
conformity with GAAP, (b) taxes based upon Net
Income, (c) depreciation and amortization and (d)
other non-cash charges.
"Excess Cash Flow": for any period, the sum of (a) Net Income (or Net
Loss) for such period, plus (b) the aggregate amount
----
of all non-cash charges deducted in arriving at such
Net Income (or Net Loss), less the aggregate amount
----
of all cash Capital Expenditures made by the
Borrower and its Restricted Subsidiaries during such
period, less the aggregate amount of all scheduled
----
repayments and mandatory prepayments of indebtedness
for borrowed money, less the aggregate amount of
----
distributions made by the Borrower for such period
necessary to pay current tax liabilities payable in
respect of income of the Borrower (to the extent such
tax liabilities are not deducted in arriving
at such Net Income), less any net increases in
----
working capital (excluding cash) during such period,
plus any net decreases in working capital (excluding
cash) during such period.
"Fixed Charges" for any period of four fiscal quarters, the sum of (a)
------------- Total Cash Interest Expense for such four fiscal
quarters plus (b) the aggregate amount of all required
permanent principal payments made in respect of
indebtedness of the Borrower during SUCH FOUR FISCAL
quarters plus (c) from and after the date on which the
Borrower becomes a corporation, all PAYMENTS MADE
by the Borrower in respect of taxes during such four
fiscal quarters.
"Interest Expense": for any fiscal period, the sum of (a) interest expense
---------------- of the Borrower and its Restricted Subsidiaries for
such fiscal period determined in conformity with
GAAP plus (b) interest expense in respect of
----
<PAGE>
25
Specified Affiliate Debt for such fiscal period
determined in conformity with GAAP.
"Net Income" or for any fiscal period, the amount which, in
---------- conformity with GAAP, would constitute the net income
"Net Loss": or net loss, as the case may be, of the Borrower and
-------- its Restricted Subsidiaries for such fiscal period;
provided that Net Income or Net Loss shall exclude
--------
extraordinary gains and losses.
"Permitted Refinancing indebtedness of the Borrower to the extent the proceeds
--------------------- thereof are used to refinance existing indebtedness of
Indebtedness": the Borrower; provided that (a) are giving effect to the
------------ --------
incurrence of such indebtedness, the Borrower is in Pro
Forma Compliance, (b) the documents under which such
indebtedness is incurred are not inconsistent with the
Credit Documentation, (c) such indebtedness. if secured,
will not be secured by any assets other than those
securing the indebtedness being refinanced thereby, (d)
such indebtedness, if senior, cannot be used to
refinance existing subordinated indebtedness of the
Borrower if such subordinated indebtedness, when
created, was permitted to be issued only under clause
(g) of paragraph I under "Negative Covenants" above (and
under no other clause under said paragraph), (e) the
final maturity of such indebtedness is no earlier than
the final maturity of the indebtedness being refinanced
thereby and (f) the terms of such indebtedness and of
any agreement entered into and of any instrument issued
in connection therewith (including, without limitation,
those relating to collateral (if any), subordination (if
any) and covenant protection) are not, taken as a whole,
materially less favorable to the Borrower than the terms
and conditions of the indebtedness being refinanced
thereby.
"POPS": the population of a geographic area based upon the 1990
---- U.S. census.
"Restricted any Subsidiary of the Borrower that is not an
---------- Unrestricted Subsidiary.
Subsidiary":
----------
"Specified Affiliate indebtedness of affiliates of the Borrower the
-------------------
Debt":
----
<PAGE>
26
proceeds of which was advanced to the Borrower and the
Borrower has identified such indebtedness as Specified
Affiliate Debt.
"Total Capitalization":at any date, the sum of (a) Total Debt outstanding on
-------------------- such date plus (b) Contributed Capital on such date
----
plus (c) Committed Capital on such date less (d) the
----
amount of restricted payments made to Partners through
such date.
"Total Cash Interest for any fiscal period, Interest Expense for such period
------------------- less the sum of (a) pay-in-kind Interest Expense
Expense" (including accreted interest) and (b) to the extent
------- included in Interest Expense, any portion of up front
fees and other financing expenses in connection with the
Credit Facilities amortized during such fiscal period.
"Total Debt": at any time, the sum of (a) the aggregate amount of
---------- consolidated indebtedness of the Borrower and its
Restricted Subsidiaries for borrowed money then
outstanding (including capitalized and accreted
interest) plus (b) the aggregate amount of Specified
----
Affiliate Debt then outstanding (including capitalized
and accreted interest) minus (c) the aggregate amount
-----
of cash and cash equivalents then owned by the
Borrower and its Restricted Subsidiaries.
"Unrestricted any subsidiary of the Borrower (other than the
------------ License Subsidiary, the Equipment Subsidiary and the
Subsidiary": Real Estate Subsidiary) that the Borrower designates
---------- as an Unrestricted Subsidiary in accordance with the
terms set forth in paragraphs 7.(b) and (c) under
"Negative Covenants" above.
"Wireless Service": the provision of broadband personal communications
---------------- services.
"Wireless Subscribers" at any time, all customers then receiving Wireless
Services from the Borrower or any of its Restricted
Subsidiaries.
<PAGE>
EXHIBIT 10.10
LUCENT TECHNOLOGIES INC.
June 21, 1996
COMMITMENT LETTER
-----------------
Sprint Spectrum L.P.
4717 Grand Avenue
Kansas City, Missouri 64114
Attention: Bob Neumeister
Ladies and Gentlemen:
Sprint Spectrum L.P., a Delaware limited partnership (the "Borrower"), has
--------
advised Lucent Technologies Inc. (the "Vendor") that the Borrower has need for a
------
credit facility in the amount of $1,800,000,000 to finance the purchase of goods
and services to be provided by the Vendor in connection with the build-out of
the Borrower's national wireless network. You have requested that the Vendor
provide such credit facility (the "Credit Facility"), and the Vendor is pleased
---------------
to advise that it is willing to provide the Credit Facility.
Attached as Exhibit A to this letter is a Summary of Terms and Conditions
---------
(the "Term Sheet") setting forth the principal terms and conditions on and
----------
subject to which the Vendor is willing to make the Credit Facility available.
The Vendor's commitment hereunder is subject to (a) the negotiation,
execution and delivery of definitive documentation with respect to the Credit
Facility satisfactory in form and substance to the Vendor and its counsel and
(b) the absence of a material adverse change with respect to the Borrower.
By executing this letter, you acknowledge that this letter is the only
agreement between you and the undersigned with respect to the Credit Facilities
and sets forth the entire understanding of the parties with respect thereto.
This letter may not be changed except pursuant to a writing signed by each of
the parties hereto. This letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
Our commitment under this letter does not require subsequent approval from
the Board of Directors of the Vendor.
<PAGE>
2
This letter will terminate on December 31, 1996.
If you are in agreement with the foregoing, please sign and return to the
undersigned the enclosed copies of this letter.
We look forward to working with you on this transaction.
Very truly yours,
LUCENT TECHNOLOGIES INC.
By: /s/ Donald K. Peterson
-------------------------------
Title: EVP & CFO
Accepted and agreed to as of
the date first above written.
SPRINT SPECTRUM L.P.
By: /s/ Robert M. Neumeister, Jr.
------------------------------
Title: CFO
<PAGE>
EXHIBIT A
---------
SPRINT SPECTRUM L.P.
VENDOR CREDIT FACILITY
(LUCENT TECHNOLOGIES INC.)
Summary of Terms and Conditions
June 21, 1996
-------------------------------
I. Parties
-------
Borrower: Sprint Spectrum L.P. (the "Borrower").
--------
Lender: Lucent Technologies Inc. (the
"Vendor"). At or subsequent to the
------
Closing Date (as defined below) the
Vendor may assign (in accordance with
the provisions of "Assignments and
Participations" below) portions of
the credit facility described herein
(the "Credit Facility") to one or
---------------
more Eligible Lenders (as defined
below) (together with the Vendor, the
"Lenders"). If the Vendor does make
-------
such assignments to other Lenders,
the Vendor or another Lender
reasonably acceptable to the Borrower
and the Vendor will be appointed to
act as administrative agent for the
Lenders (the Vendor or such other
Lender, in such capacity, the
"Administrative Agent").
--------------------
II. The Credit Facility
-------------------
Vendor's Commitment; The Vendor will commit (the
Type and Amount of "Commitment") to provide a multiple
Facility: ----------
drawdown term loan facility in the
amount set forth on Annex A hereto
(the loans thereunder, the "Loans").
-----
Purpose: As set forth on Annex A hereto.
<PAGE>
2
Availability: The Loans shall be made on not more
than one drawdown date per month
during the period commencing on the
date of the initial drawdown and
ending on the fifth anniversary of
such date (but in no event later than
December 31, 2000).
At the option of the Vendor, the
Credit Facility may be made available
through a newly-formed trust or other
special purpose entity in a manner
and under a structure so as to
preserve the economic terms and
relative rights, obligations and
intercreditor arrangements otherwise
outlined herein, provided that such
--------
manner and structure shall be
reasonably satisfactory to the
Borrower.
III. General Payment Provisions
--------------------------
Amortization: The Loans made during each of the five
consecutive one-year periods following the date
of the initial drawdown (each, a "Borrowing
---------
Year") shall be repayable in 20 consecutive
----
quarterly installments, commencing on the date
which is 39 months after the last day of such
Borrowing Year and ending on the date which is
eight years after such last day, in an aggregate
amount for each year following such last day set
forth below equal to the percentage set forth
opposite such year multiplied by the aggregate
principal amount of the Loans made during such
Borrowing Year (with the installments during each
such year being equal in amount):
Year Percentage
---- ----------
4 10%
5 15
6 20
7 25
8 30
Interest Rates and As set forth on Annex A hereto.
Interest Payment Dates:
Capitalization of Interest: Interest will accrue on each Loan from the date
of drawdown thereof. No interest will be payable
in
<PAGE>
3
cash on the Loans made during any Borrowing Year
until the first applicable interest payment date
following the first anniversary of the last day
of such Borrowing Year. Prior to such first
anniversary, accrued interest will be capitalized
quarterly and will bear interest at the rate
applicable to the related Loan.
Optional Prepayments: Loans may be prepaid by the Borrower in minimum
amounts of $10,000,000, subject to the provisions
of "Refinancing Provisions" set forth on Annex A
hereto. Optional prepayments of the Loans shall
be applied pro rata to the then remaining
--- ----
installments thereof.
Mandatory Prepayments: 100% of the net cash proceeds of any sale or
other disposition by the Borrower or any of its
subsidiaries of any material assets not in the
ordinary course of business (subject to a basket
to be determined) that are not reinvested in the
Borrower's business within 270 days after receipt
thereof shall be used to prepay ratably the Loans
and all other indebtedness secured by such
assets. The Credit Documentation (as defined
below) will contain provisions requiring the
Borrower to give notice to the Lenders, at the
time of any such asset sale or other disposition,
if it intends to reinvest the proceeds thereof in
its business, and to provide evidence that such
reinvestment has been accomplished within 270
days after receipt of such proceeds.
If the Borrower shall make any voluntary
prepayment of the other Vendor Financing (as
defined below) or a voluntary prepayment of term
loans under the Bank Credit Facilities (as
defined below) or a voluntary reduction of the
revolving credit commitments under the Bank
Credit Facilities (except any voluntary reduction
of "excess commitments" under the Bank Credit
Facilities, which will be defined to reflect
outstandings under the Bank Credit Facilities for
the prior six month period), it shall (unless the
same shall have been made in connection with a
Permitted Refinancing (as defined below)) make a
mandatory prepayment of the Loans in a ratable
amount. A "Permitted Refinancing" shall mean (a)
---------------------
a refinancing of any Vendor Financing other than
the Credit Facility, provided that the Vendor is
--------
given the option
<PAGE>
4
to have its Loans repaid pro rata with the
--- ----
lenders under such other Vendor Financing on
substantially equivalent terms and conditions and
(b) any refinancing of the Bank Credit
Facilities.
Each such prepayment of the Loans shall be
applied pro rata to the then remaining
--- ----
installments thereof.
Waiver of Set-Off: The Borrower will not be entitled to set off any
amount owing to it by the Vendor under the
procurement agreement between the Vendor and the
Borrower against any amount payable by the
Borrower under the Credit Facility.
IV. Collateral; Capital Contribution Agreement; Guarantees
------------------------------------------------------
Collateral: The assets of the Borrower and its subsidiaries
related to the wireless business shall, for
collateral purposes, be allocated to one of the
four following categories: (i) PCS FCC licenses
("FCC Licenses"), (ii) non-real property assets
------------
(the "Direct-Lien Assets") on which a lien can be
------------------
perfected by a limited number of UCC and/or
Federal filings and deliveries of pledged
instruments (such as accounts, patents,
trademarks, the Capital Contribution Agreement
(as defined below) and other general
intangibles), (iii) substantially all other
personal property (which will include equipment)
("Personal Property Assets") and (iv) all real
------------------------
estate interests ("Real Estate Assets"). All FCC
------------------
Licenses, Personal Property Assets and Real
Estate Assets will be acquired in or transferred
to separate, wholly owned, single purpose
partnership subsidiaries of the Borrower
("License Subsidiary", "Equipment Subsidiary,"
------------------ --------------------
and "Real Estate Subsidiary", respectively). The
----------------------
Direct-Lien Assets will remain with the Borrower.
Assets that are subject to permitted purchase-
money liens will be owned by the Borrower but
will not constitute Collateral (as defined
below).
The obligations of the Borrower in respect of the
Credit Facility shall be secured by a perfected
first priority lien (the "Shared Lien") on (a)
-----------
all the
<PAGE>
5
partnership interests in the Equipment
Subsidiary, the License Subsidiary and the Real
Estate Subsidiary and (b) the Direct-Lien Assets.
All assets that are subject to the Shared Lien
are herein called the "Collateral".
----------
The Shared Lien will secure equally and ratably
the following indebtedness (the "Secured Debt"):
------------
(i) the Bank Credit Facilities (as defined
below), (ii) all other Vendor Financing (as
defined below), (iii) other indebtedness of the
Borrower for borrowed money and interest rate
swaps, (iv) indebtedness of the Borrower (other
than for borrowed money) in an aggregate amount
to be determined at any time outstanding and (v)
any refinancings of any of the foregoing;
provided that the Shared Lien will not secure (a)
--------
any indebtedness to any affiliate of the Borrower
or (b) any indebtedness which is guaranteed by
any affiliate of the Borrower except (1)
indebtedness which refinances, or constitutes,
(x) any Vendor Financing other than the Credit
Facility or (y) the Bank Credit Facilities, if,
in each case, the Vendor or its assignee under
the Credit Facility is given the option to
receive a guarantee on substantially identical
terms and conditions (provided that to the extent
--------
the Shared Lien secures any indebtedness
referenced in the foregoing clause (1), the
holders of such indebtedness shall have no voting
rights with respect to decisions relating to the
collateral subject to the Shared Lien) and (2)
indebtedness under the Credit Facility.
Capital Contribution The four ultimate partners of the Borrower (the
Agreement: "Parents") will enter into a capital contribution
-------
agreement (the "Capital Contribution Agreement")
------------------------------
in form and substance satisfactory to the
Borrower and the Vendor.
Guarantees: The Equipment Subsidiary, the License Subsidiary
and the Real Estate Subsidiary will each
guarantee the Secured Debt on a joint and
several, pari passu basis (the "Guarantees").
---- ----- ----------
<PAGE>
6
V. Certain Conditions
------------------
Initial Conditions: The availability of the Credit Facility shall be
conditioned upon satisfaction of, among other
things, the following conditions precedent (the
date upon which all such conditions precedent
shall be satisfied, the "Closing Date"):
------------
1. The Borrower, the License Subsidiary, the
Equipment Subsidiary, the Real Estate Subsidiary
and each of the Parents (collectively, the
"Credit Parties") shall have executed and
--------------
delivered definitive financing documentation with
respect to the Credit Facility consistent with
this Summary of Terms and Conditions (the "Credit
------
Documentation").
-------------
2. All 29 of the FCC Licenses acquired by a
subsidiary of the Borrower for the Borrower's use
shall have been paid for in full and shall have
been transferred to the License Subsidiary.
3. The Borrower shall have (i) entered into
a satisfactory collateral trust agreement
pursuant to which an independent trustee
appointed by the Borrower (the "Trustee") shall
-------
act as collateral trustee to hold all of the
Collateral and the Guarantees for the benefit of
the holders of the indebtedness secured thereby
in accordance with the provisions described
above, (ii) executed and delivered to the Trustee
satisfactory security documents to create the
liens on the Collateral described above, (iii)
completed all such filings and other actions as
is necessary to perfect such liens, (iv) provided
to the Trustee results of lien searches in each
of the offices where liens on the Collateral
would be recorded, revealing no liens on any of
the Collateral and (v) provided to the Vendor
satisfactory evidence that the Vendor and the
Lenders are entitled to the benefit of said
collateral trust agreement. The terms and
provisions of such collateral trust agreement
shall contain provisions regarding collateral
sharing, voting rights, amendments and waivers
and other intercreditor matters reasonably
acceptable to the Vendor.
<PAGE>
7
4. The Vendor shall have received a
satisfactory business plan of the Borrower.
5. The Vendor shall have received such
legal opinions (including FCC counsel to the
Borrower), documents and other instruments as are
customary for transactions of this type.
6. The amount of Contributed Capital (as
defined below) shall be at least $2.2 billion.
7. The Vendor shall have received
audited financial statements of the Borrower for
the fiscal year ended December 31, 1995 and
unaudited quarterly financial statements of the
Borrower for all subsequent fiscal quarters for
which such statements are available.
8. The partnership agreements of the
Borrower, the License Subsidiary, the Equipment
Subsidiary and the Real Estate Subsidiary shall
contain provisions reasonably satisfactory to the
Vendor ensuring that any assignee of the
partnership interests will be entitled to the
management and voting rights of the partners
pledging the partnership interests.
On-Going Conditions: The making of each Loan shall be conditioned upon
(i) all representations and warranties by the
Credit Parties in the Credit Documentation
(including, without limitation, the material
adverse change and litigation representations)
being true and correct in all material respects,
(ii) there being no default or event of default
in existence at the time of, or after giving
effect to the making of, such Loan and (iii) the
Borrower not having terminated the Vendor's
procurement agreement with the Borrower with
respect to future orders unless prior to such
termination the Borrower shall have placed
equipment orders with the Vendor in an aggregate
amount of at least the amount set forth on Annex
A hereto. As used herein and in the Credit
Documentation a "material adverse change" shall
mean any event, development or circumstance that
has had or could reasonably be expected to have a
material adverse
<PAGE>
8
effect on (a) the ability of the Borrower to
perform its obligations under the Credit
Documentation, (b) the validity or enforceability
of any of the Credit Documentation or the rights
and remedies of the Administrative Agent and the
Lenders thereunder or (c) the business, assets or
financial condition of the Borrower and its
Restricted Subsidiaries.
VI. Representations, Warranties,
Covenants and Events of Default
-------------------------------
The Credit Documentation shall contain
representations, warranties, covenants and events
of default customary for financings of this type,
including the following and others reasonably
satisfactory to the Borrower and the Vendor (all
of which will be substantially identical in the
documentation relating to each Vendor Financing):
Representations and
Warranties: Accuracy of financial statements; material
adverse change; partnership existence; compliance
with law; partnership power and authority;
ownership of the Borrower, the License
Subsidiary, the Equipment Subsidiary and the Real
Estate Subsidiary; absence of any material
obligations or liabilities of the License
Subsidiary, the Equipment Subsidiary and the Real
Estate Subsidiary (other than the Guarantees);
enforceability of Credit Documentation; no
conflict with law or contractual obligations; no
material litigation; no default; ownership of
property; liens; intellectual property; no
burdensome restrictions; taxes; FCC compliance;
existence and validity of all material
governmental consents and permits; Federal
Reserve regulations; ERISA; Investment Company
Act; subsidiaries; environmental matters;
accuracy of disclosure; and creation and
perfection of security interests. The foregoing
representations and warranties shall contain such
materiality and other exceptions as shall be
reasonably satisfactory to the Borrower and the
Vendor.
Affirmative Covenants: Delivery of financial statements (including
annual audited financial statements, quarterly
unaudited statements, quarterly operating budgets
with
<PAGE>
9
comparisons to actual for the current quarter and
year-to-date), reports, officers' certificates
(including, without limitation, a quarterly
officer's certificate certifying compliance with
the covenant relating to affiliate transactions
below) and other information reasonably requested
by the Lenders; payment of other obligations;
continuation of business and maintenance of
existence and material rights and privileges
(provided that the Borrower will be permitted to
convert to corporate form); compliance with laws
and material contractual obligations (including
obligations under FCC Licenses); maintenance by
the Borrower and its Restricted Subsidiaries of
property and liability insurance in accordance
with prevailing standards in the industry;
maintenance of books and records; notices of
defaults, litigation and other material events;
compliance with environmental laws; and agreement
to transfer any after-acquired FCC Licenses to
the License Subsidiary, to transfer any after-
acquired Personal Property Assets to the
Equipment Subsidiary, to transfer any after-
acquired Real Estate Assets to the Real Estate
Subsidiary and to grant security interests in
after-acquired Direct-Lien Assets. The foregoing
affirmative covenants shall contain such
materiality and other exceptions as shall be
reasonably satisfactory to the Borrower and the
Vendor.
Financial Covenants: The Borrower and its Restricted Subsidiaries (on
a consolidated basis) shall not (see Section VIII
below for certain definitions used herein):
(a) Total Debt to Total Capitalization. Permit
----------------------------------
the ratio of (i) Total Debt outstanding on
any of the dates set forth below to (ii)
Total Capitalization on such date to exceed
the ratio set forth opposite such date:
Date Ratio
---- ------
12/31/96 .50 to 1
3/31/97 .55 to 1
6/30/97 .55 to 1
9/30/97 .57 to 1
12/31/97 .57 to 1
3/31/98 .60 to 1
6/30/98 .62 to 1
<PAGE>
10
9/30/98 .62 to 1
12/31/98 .62 to 1
3/31/99 .64 to 1
6/30/99 .64 to 1
9/30/99 .67 to 1
12/31/99 .70 to 1
3/31/00 .70 to 1
6/30/00 .70 to 1
9/30/00 .70 to 1
(b) Total Debt to Annualized Adjusted EBITDA.
----------------------------------------
Permit the ratio of (i) Total Debt
outstanding on any of the dates set forth
below to (ii) Annualized Adjusted EBITDA for
the period ending on such date to be more
than the ratio set forth opposite such date:
Date Ratio
---- -----
12/31/98 23.0 to 1
3/31/99 14.0 to 1
6/30/99 10.0 to 1
9/30/99 8.0 to 1
12/31/99 6.0 to 1
3/31/00 5.0 to 1
6/30/00 4.5 to 1
9/30/00 4.0 to 1
12/31/00 4.0 to 1
(c) Total Debt to Annualized EBITDA. Permit the
-------------------------------
ratio of (i) Total Debt outstanding on the
last day of any fiscal quarter set forth
below to (ii) Annualized EBITDA for the
period ending on such date to exceed the
ratio set forth opposite such date:
Date Ratio
---- -----
12/31/00 11.0 to 1
3/31/01 9.0 to 1
6/30/01 7.5 to 1
9/30/01 7.0 to 1
12/31/01 6.0 to 1
Thereafter 5.0 to 1
(d) Annualized EBITDA to Interest Expense.
-------------------------------------
Permit the ratio of (i) Annualized EBITDA
for
<PAGE>
11
the period ending on any date set forth
below to (ii) Interest Expense for the four
consecutive fiscal quarters ending on such
date to be less than the ratio set forth
below opposite such date:
Date Ratio
---- -----
3/31/01 1.25 to 1
6/30/01 1.25 to 1
9/30/01 1.50 to 1
12/31/01 1.75 to 1
3/31/02 2.00 to 1
6/30/02 2.25 to 1
Thereafter 2.50 to 1
(e) Capital Expenditures. Permit Capital
--------------------
Expenditures for any of the periods set
forth below to exceed the amount set forth
opposite such period:
Period Amount
------ ------
Date of formation of the
Borrower through 12/31/98 $4,500,000,000
1/1/99 through 12/31/99 1,000,000,000
1/1/00 through 12/31/00 1,000,000,000
1/1/01 through 12/31/01 1,000,000,000;
provided that any permitted amount which is
--------
not expended in any of the periods specified
above may be carried over for expenditure in
any subsequent period.
(f) Covered POPS. Incur any indebtedness at any
------------
time after any of the dates set forth below
if the number of Covered POPS on the last of
such dates prior to the date of such
incurrence is less than the number set forth
opposite such date:
<PAGE>
12
Date Number
---- ------
12/31/97 80,000,000
12/31/98 95,000,000
12/31/99 105,000,000
12/31/00 110,000,000
(g) Wireless Subscribers. Incur any indebtedness
--------------------
at any time after any of the dates set forth
below if the number of Wireless Subscribers
on the last of such dates prior to the date
of such incurrence is less than the number
set forth opposite such date:
Date Number
---- ------
12/31/97 450,000
6/30/98 850,000
12/31/98 1,350,000
6/30/99 2,300,000
12/31/99 3,500,000;
provided that such covenant shall be
--------
suspended so long as the Borrower would not
be in compliance with the covenant specified
in clause (f) above but for the operation of
clause (b) of the definition of the term
"Covered POPS" and for a period of nine
months thereafter.
Negative Covenants: Limitations, imposed on the Borrower and its
Restricted Subsidiaries, as appropriate, on
(it being understood that, where
appropriate, the exceptions described below
to such limitations will be subject to
mutually agreeable limits):
1. indebtedness, other than:
(a) indebtedness of the Borrower
in respect of the Loans,
(b) indebtedness of the Borrower
in respect of bank credit facilities
(the "Bank Credit Facilities"),
----------------------
<PAGE>
13
(c) indebtedness of the Borrower in
respect of other vendor financing
(together with the Credit Facility,
the "Vendor Financing"),
----------------
(d) indebtedness of the Restricted
Subsidiaries under the Guarantees,
(e) indebtedness of the Borrower in
respect of interest rate swaps,
(f) indebtedness of the Borrower in
respect of other purchase money
indebtedness (including capital
leases),
(g) indebtedness of the Borrower in
respect of handset financing,
(h) indebtedness of any acquired entity
outstanding at the time of
acquisition,
(i) subordinated indebtedness of the
Borrower (having subordination terms
to be approved by the Lenders in the
Credit Documentation),
(j) capital lease obligations of the
Borrower arising out of sale-
leaseback transactions,
(k) refinancing indebtedness, and
(l) other indebtedness of the Borrower;
provided, however, that, at the time
-------- -------
of incurrence of any of the
indebtedness referred to in the
foregoing clauses (a) - (1), after
giving effect thereto, the Borrower
shall be in pro forma compliance with
the covenants set forth in paragraphs
(a) through (d) under "Financial
Covenants" above (on the basis of
Total Debt and Total Capitalization
then outstanding and Annualized
Adjusted EBITDA and Annualized EBITDA
as projected as at the end of the
then current fiscal quarter) and no
Default or Event of Default shall be
in existence ("Pro Forma Compliance").
--------------------
2. liens, other than:
<PAGE>
14
(a) the Shared Liens,
(b) customary permitted liens,
(c) liens on assets acquired with
permitted purchase money
indebtedness to secure such
indebtedness,
(d) liens on assets that are the subject
of sale-leaseback transactions
securing the related capital leases,
and
(e) others to be agreed upon;
3. guarantee obligations, with
exceptions to be agreed upon;
4. mergers, consolidations,
liquidations and dissolutions, other
than, so long as, after giving
effect thereto, the Borrower is in
Pro Forma Compliance:
(a) liquidations of subsidiaries (other
than License Subsidiary, Equipment
Subsidiary and Real Estate
Subsidiary),
(b) mergers in which the Borrower or a
subsidiary of the Borrower is the
surviving entity (including mergers
among the Borrower and its
subsidiaries but excluding any such
merger involving License Subsidiary,
Equipment Subsidiary or Real Estate
Subsidiary), and
(c) others to be agreed upon;
5. sales of assets, other than:
(a) in the ordinary course of business,
(b) so long as after giving effect
thereto, the Borrower is in Pro
Forma Compliance, sales of material
assets (including, without
limitation, pursuant to sale-
leaseback transactions) the net cash
proceeds of which (to the extent
they exceed a basket to be
determined) are
<PAGE>
15
applied as described under
"Mandatory Prepayments" above,
provided that the consent of the
--------
Requisite Aggregate Lenders (as
defined below) will be required in
the case of a sale or series of
related sales which includes or
include FCC Licenses and other
assets that provide the Borrower
with the right to serve 15% of the
aggregate number of POPS which the
Borrower then has the right to
serve, and
(c) others to be agreed upon;
6. distributions to partners and
repurchases of equity, other than,
so long as after giving effect
thereto, the Borrower is in Pro
Forma Compliance:
(a) to the extent necessary to pay
current tax liabilities payable in
respect of the income of the
Borrower,
(b) to the extent necessary to service
Specified Affiliate Debt (as defined
in Section VIII below), if at the
time such distribution is made, the
Borrower is in Pro Forma Compliance,
and
(c) distributions and repurchases of
equity to the extent (i) the
Borrower is, after giving effect to
such distributions or repurchases,
the ratio of Total Debt to
Annualized EBITDA is not greater
than 5.0 to 1 and the ratio of
Annualized EBITDA to Interest
Expense is not less than 2.5 to 1
and (ii) the Borrower applies an
equal amount toward pro rata
prepayment of indebtedness secured
by the Collateral;
7. acquisitions, other investments,
loans and advances, other than so
long as after giving effect thereto,
the Borrower is in Pro Forma
Compliance:
<PAGE>
16
(a) among the Borrower and its
Restricted Subsidiaries,
(b) acquisitions of entities engaged in
the telecommunications business or
businesses related thereto,
(c) acquisitions of entities engaged in
other businesses subject to a limit
to be agreed upon, and
(d) others to be agreed upon;
8. transactions with affiliates except
on terms no less favorable to the
Borrower than as could be obtained
on an arm's length basis from a
third party;
9. engaging in any business other than
the telecommunications business and
businesses related thereto; and
10. the ability of the License
Subsidiary, the Equipment Subsidiary
or the Real Estate Subsidiary to
incur any liabilities (other than
the Guarantees) or to engage in any
business or activities other than
the holding of FCC Licenses,
Personal Property Assets or Real
Estate Assets respectively.
Events of Default: Nonpayment of principal; nonpayment
of interest or other amounts after a
5-day grace period; material
inaccuracy of representations and
warranties (subject to a 30-day grace
period); violation of covenants
(subject to a 30-day grace period);
cross-default to the Bank Credit
Facilities and to any other
indebtedness of the Borrower in an
amount greater than the lesser of (i)
$50,000,000 and (ii) 10% of the
aggregate then outstanding principal
amount of indebtedness of the
Borrower; bankruptcy of the Borrower,
a Restricted Subsidiary or any other
material subsidiary; bankruptcy of
any of the partners of the Borrower;
bankruptcy of any Parent prior to the
time when the entire capital
contribution amount has been
contributed under the Capital
Contribution Agreement, unless within
30 days after such bankruptcy one or
more of the other Parents shall have
assumed the
<PAGE>
17
obligations of such bankrupt Parent
under the Capital Contribution
Agreement; certain ERISA events;
material judgments; invalidity or
termination of any guarantee,
security document or the Capital
Contribution Agreement; termination
or material impairment of the
Borrower's right to use the "Sprint"
trademark; termination, revocation or
non-renewal by the FCC of FCC
Licenses providing the Borrower with
the right to serve 15% of the
aggregate number of POPS which the
Borrower then has the right to serve;
and a change in control (to be
defined as (i) prior to the time at
which the Borrower has an actual or
implied long-term debt rating of at
least BBB-from S&P or at least Baa3
from Moody's, the amount of Committed
Capital and Contributed Capital held,
directly or indirectly, by Sprint
Corporation is reduced to an amount
less than $500,000,000 or (ii) prior
to the date (the "Public Offering
---------------
Date") on which there has been a
----
public offering of equity interests
of the Borrower (or of any partner of
the Borrower formed for the purpose
of effecting a public offering),
Sprint Corporation shall cease to
own, directly or indirectly, at least
25% of the equity interests in the
Borrower).
VII. Certain Other Terms
-------------------
Voting: Amendments and waivers with respect
to representations, warranties,
covenants and events of default which
are common to the Credit
Documentation and to the
documentation regarding the other
Vendor Financing shall require the
approval of lenders (the "Requisite
---------
Aggregate Lenders") holding (a)
-----------------
during the period when either vendor
holds more than 50% of the aggregate
amount of the outstanding loans under
its Vendor Financing, a majority of
the outstanding loans under each
Vendor Financing and (b) after the
date on which neither vendor holds
more than 50% of the aggregate amount
of the outstanding loans under its
Vendor Financing, a majority of the
outstanding loans under all Vendor
Financing.
Amendments and waivers with respect
to other matters shall require the
approval of a majority of the
outstanding Loans under the Credit
Facility, except that (i) the consent
of each Lender directly affected
<PAGE>
18
thereby shall be required with
respect to (a) reductions in the
amount or extensions of the scheduled
date of any installment of any Loan,
(b) reductions in the rate of
interest or extensions of any due
date thereof and (c) increases in the
amount or extensions of the expiry
date of any Lender's commitment, and
(ii) the consent of 100% of the
Lenders shall be required with
respect to modifications to any of
the voting percentages described in
this section.
To accelerate any Vendor Financing,
(i) if there is a payment default
under such Vendor Financing, the
approval of a majority of the
outstanding loans under such Vendor
Financing will be required, (ii) if
there is a bankruptcy default,
acceleration will be automatic, and
(iii) for all other events of
default, the approval of the
Requisite Aggregate Lenders will be
required.
To foreclose on any Collateral or
enforce any Guarantee, the approval
of a majority of all amounts secured
by the Collateral will be required.
To release any Collateral or
Guarantee, the approval of 75% of the
outstanding Loans under the Credit
Facility will be required.
Assignments and Each of the Vendor and other Lenders
Participations: shall be permitted, in accordance
with applicable law, to assign its
Loans and sell participations in its
Loans and commitments to (i) an
Eligible Lender (as defined below)
and (ii) more than one Eligible
Lender in a situation in which the
offer to assign or sell was made to
more than one other person; provided
--------
that the Borrower shall have received
notice (a) in the case such
assignment shall be made in a
situation in which the Vendor or such
other Lender shall have offered to
assign more than $100,000,000 of
Loans to more than one other person,
at least 60 days prior to the date of
such assignment or (b) in all other
cases, prior to the date of such
assignment; and provided, further
-------- -------
that no such assignment or sale may
be offered prior to October 1, 1996.
In the case of partial assignments,
the minimum assignment amount shall
be $10,000,000 (or such lesser amount
as constitutes the Lender's entire
Loans), and, after giving effect
thereto, the assigning Lender (unless
it shall have assigned 100% of its
Loans) shall have Loans aggregating
at least
<PAGE>
19
$10,000,000. Subject to clause (x)
of the proviso to the second
succeeding sentence, voting rights of
participants and other holders of
indirect interests in the Loans shall
be limited to those matters with
respect to which the affirmative vote
of the Lender from which it purchased
its participation would be required
as described in "Voting" above.
Pledges of Loans in accordance with
applicable law shall be permitted
without restriction. "Eligible
Lenders" means (i) banks, insurance
companies and other financial
institutions and (ii) other entities
whose primary business is to extend
credit or invest in extensions of
credit; provided, that (a) any entity
--------
engaged in, and, in the case of
clause (ii) of this sentence,
affiliates of any entity engaged in,
the telecommunications business and
businesses related thereto shall not
be Eligible Lenders and (b) in the
case of any investment vehicle that
becomes a Lender and sells direct or
indirect beneficial interests in such
entity's rights under the Credit
Facility, (x) any voting rights of
the holders of such beneficial
interests shall be limited so that
the required percentage vote of such
holders with respect to actions to be
taken by such entity under the Credit
Documentation shall be based on the
same percentage as the required vote
of the Lenders under the Credit
Documentation with respect to such
action and (y) the only financial
statements and other reports that
such entity and holders shall be
entitled to receive shall be the
annual audited and quarterly
unaudited financial statements (and
such certificates and notices as
shall be agreed upon) referred to
under Affirmative Covenants above.
Customary representations and
restrictions designed to preserve the
private placement status of the
Credit Facilities will be included in
the Credit Documentation.
Yield Protection: The Credit Documentation shall
contain customary provisions
indemnifying the Lenders for
"breakage costs" incurred in
connection with prepayment of a
Eurodollar Loan (as defined in Annex
A hereto) on a day other than the
last day of an interest period with
respect thereto. The Credit
Documentation shall also contain
customary increased costs and
illegality provisions.
<PAGE>
20
Expenses: The Vendor will bear all its own
costs and expenses in connection with
the Credit Facility, except that the
Borrower shall pay all reasonable
out-of-pocket expenses of the
Administrative Agent in connection
with the enforcement of the Credit
Documentation (including the
reasonable fees and the reasonable
disbursements and other charges of
one counsel to the Administrative
Agent and the Lenders).
Confidentiality: The Credit Documentation will contain
a customary confidentiality provision.
Non-Recourse: Except (i) as expressly provided
above under the provisions of
"Capital Contribution Agreement"
above and (ii) in the case of fraud
or of misrepresentation by the
Parents in the Capital Contribution
Agreement, the Credit Facility shall
be non-recourse to the partners of
the Borrower, the Parents or any
intermediate partnerships.
Governing Law and Forum: State of New York.
Preparation of Credit The Credit Documentation will be
Documentation: prepared by Simpson Thacher &
Bartlett, counsel to the Borrower, at
the expense of the Borrower.
VIII. Certain Definitions
-------------------
"Adjusted EBITDA": for any fiscal period, the sum of (a)
--------------- EBITDA for such period plus (b) the
----
aggregate amount deducted in
determining Net Income or Net Loss
for such period in respect of sales,
marketing and advertising expenses
and equipment subsidy expenses.
"Annualized Adjusted EBITDA": for the period ending on any date,
-------------------------- the product of (a) Adjusted EBITDA
for the two consecutive fiscal
quarters ending on such date
multiplied by (b) two.
-------------
"Annualized EBITDA": for the period ending on any date,
----------------- the product of (a) EBITDA for the two
consecutive fiscal quarters ending on
such date multiplied by (b) two.
"Capital Expenditures": expenditures made by the Borrower and
-------------------- its Restricted Subsidiaries for the
purpose of acquiring or constructing
fixed assets, real property or
equipment and all systems and
development expenditures related to
the build-out of the Borrower's and
its Restricted
<PAGE>
21
Subsidiaries' networks to provide
Wireless Services in accordance with
GAAP, provided that no expenditure
--------
related to the acquisition of FCC
Licenses and no amount of capitalized
interest shall be considered to be a
Capital Expenditure.
"Committed Capital": at any time, the aggregate amount of
----------------- cash contributions then available to
be made by the Parents or their
affiliates pursuant to the Capital
Contribution Agreement.
"Contributed Capital": at any time, the aggregate amount of
------------------- equity contributed to the Borrower
and, without duplication, its
Restricted Subsidiaries.
"Covered POPS": at any time, the aggregate number of
------------ POPS within each geographic area for
which facilities providing service to
that geographical area either (a)
have achieved "substantial
completion" pursuant to the terms of
the applicable vendor procurement
agreement or (b) have not achieved
"substantial completion" pursuant to
the terms of the vendor procurement
agreement between the Borrower and
the Vendor as a result of a failure
by the Vendor to perform its
obligations thereunder.
"EBITDA": for any fiscal period, the Net Income
------ or Net Loss, as the case may be, for
such fiscal period, after restoring
thereto amounts deducted for, without
duplication, (a) interest expense of
the Borrower and its Restricted
Subsidiaries for such fiscal period
determined in conformity with GAAP,
(b) taxes based upon Net Income, (c)
depreciation and amortization and (d)
other non-cash charges.
"Interest Expense": for any fiscal period, the amount of
---------------- (a) interest expense of the Borrower
and its Restricted Subsidiaries for
such fiscal period determined in
conformity with GAAP plus (b)
----
interest expense in respect of
Specified Affiliate Debt for such
fiscal period determined in
conformity with GAAP.
"Net Income" or "Net Loss": for any fiscal period, the amount
---------- -------- which, in conformity with GAAP, would
constitute the net income or net
loss, as the case may be, of the
Borrower and its Restricted
Subsidiaries for such fiscal
period;
<PAGE>
22
provided that Net Income or Net Loss
--------
shall exclude extraordinary gains and
losses.
"POPS": the population of a geographic area
---- based upon the 1990 U.S. census.
"Restricted Subsidiary": any Subsidiary of the Borrower that
--------------------- is not an Unrestricted Subsidiary.
"Specified Affiliate Debt": indebtedness of affiliates of the
------------------------ Borrower the proceeds of which was
advanced to the Borrower as equity.
It is understood that the amount of
equity contributed to date plus the
amounts to be contributed pursuant to
the Capital Contribution Agreement
shall not be considered Specified
Affiliate Debt.
"Total Capitalization": at any date, the sum of (a) Total
-------------------- Debt outstanding on such date plus
----
(b) Contributed Capital on such date
plus (c) Committed Capital on such
----
date less (d) the amount of
restricted payments made to Partners
through such date.
"Total Debt": at any time, the sum of (a) the
---------- aggregate amount of consolidated
indebtedness of the Borrower and its
Restricted Subsidiaries for borrowed
money then outstanding (including
capitalized and accreted interest)
plus (b) the aggregate amount of
----
Specified Affiliate Debt then
outstanding (including capitalized
and accreted interest) [minus (c) the
-----
aggregate amount of cash and cash
equivalents then owned by the
Borrower and its Restricted
Subsidiaries].
"Unrestricted Subsidiary": any of Teleport, APC, PhillieCo,
----------------------- PioneerCo and NewTelCo.
"Wireless Service": the provision of broadband personal
---------------- communications services.
"Wireless Subscribers": at any time, all customers then
-------------------- receiving Wireless Services from the
Borrower or any of its Restricted
Subsidiaries.
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made on the 29th day of September, 1995, by
and among MAJORCO, L.P., a Delaware limited partnership ("Employer"), and JOSEPH
M. GENSHEIMER ("Executive").
W I T N E S E T H:
WHEREAS, Employer and its affiliates are engaged in the
telecommunications business ;
WHEREAS, Executive has expertise, experience and capability in the
business of Employer and the telecommunications business in general;
WHEREAS, Executive has been, and now is employed at a different company
unrelated to Employer ;
WHEREAS, Employer desires to enter into this Agreement to induce
Executive to serve in the capacity of General Counsel of Employer and to provide
severance and other benefits for Executive and obtain Executive's agreements
regarding confidentiality and post-employment restrictive covenants for
Employer; and
WHEREAS, Executive is willing to provide such agreements to Employer.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which consideration are mutually acknowledged by the parties, it
is hereby agreed as follows:
1. RECITALS.
--------
The recitals set forth above constitute an integral part of this
Agreement, evidencing the intent of the parties in executing this Agreement, and
describing the circumstances surrounding its execution. Those recitals are made
a part of the covenants of this Agreement, and this Agreement shall be construed
in light thereof.
2. DUTIES AND RESPONSIBILITIES.
---------------------------
The duties and responsibilities of Executive shall be of an executive
nature as shall be required by Employer in the conduct of its business.
Executive's powers and authority shall include such duties and responsibilities
as from time to time may be assigned to him. Executive recognizes that during
his employment under this Agreement he owes an undivided duty of loyalty to
Employer, and agrees to devote his entire business time and attention to the
performance of his duties and responsibilities and to use his best efforts to
promote and develop the business of Employer.
<PAGE>
3. EMPLOYMENT TERM.
---------------
This Agreement shall become effective as of October 2, 1995 and shall
continue until Executive's employment is terminated by either party in
accordance with Sections 5, 6, 7, or 8 of this Agreement.
4. COMPENSATION AND BENEFITS.
-------------------------
During employment, Executive shall be entitled to receive a base annual
salary and other compensation as outlined in the August 25, 1995, employment
offer letter to Executive from the Chief Executive Officer of Employer, shall be
reimbursed for reasonable expenses incurred and accounted for in accordance with
the policies and procedures of Employer, and shall be entitled to five weeks
vacation pay and other benefits applicable to employees generally, each as may
from time to time be established, amended or terminated. Upon execution of this
Agreement, Executive shall be entitled to the Special Compensation set forth in
Section 5 hereof in accordance with the terms of this Agreement.
In addition, as an inducement to Executive to become General Counsel of
Employer prior to the December 31, 1995, vesting date of the annual incentive
compensation due Executive from his current employer and the February 27, 1996,
vesting date of certain incentive stock options due Executive from his current
employer, Executive shall receive a payment of $150,000 on or before October 30,
1995 (less applicable withholding taxes) and, if Executive is still employed by
Employer at that time, an additional $150,000 (less applicable withholding
taxes) on the first anniversary date of Executive's employment with Employer. As
an additional inducement for Executive to relocate to the Kansas City
metropolitan area, Executive will receive for Executive's residence in
Poughkeepsie, New York, a guaranteed buy-out offer under Section 3.16 of the
Sprint Executive Relocation Program of $363,000, provided Executive first
provides the Sprint Relocation Manager with documentation of an original
purchase price for and capital improvements to the residence of at least
$420,000.
Because Executive is joining Employer prior to the establishment of
definitive benefit plans, Employer will give Executive the same benefits as
given to any other similarly situated employee (such as nonqualified retirement
plans if they should exist). Nothing contained herein, however, shall require
Employer to increase Executive's salary, up-front payment, or short and long-
term incentives to reflect differences in the salaries, up-front payments, or
short and long-term incentives given to other employees of Employer.
5. TERMINATION BY EMPLOYER: SPECIAL COMPENSATION.
---------------------------------------------
At any time, Employer may terminate Executive's employment for any
reason. If Executive's termination by Employer is other than pursuant to Section
6, Executive shall, subject to the other provisions of this Section 5, be
entitled to the following Special Compensation (as that term is defined in this
Section 5) in lieu of any benefits available under any and all
-2-
<PAGE>
Employer separation plans or policies, except as noted in Section 17. If
Executive is terminated pursuant to this Section 5, Executive's obligations
under Sections 11, 12, 13 and 14 hereof shall continue.
For purposes of this Agreement, "Special Compensation" shall entitle
Executive:
(a) to continue to receive for a period of eighteen months from
the date of termination (the "Severance Period") bi-weekly compensation
at the rate equal to the bi-weekly amount of his base annual salary in
effect at the date of termination of employment;
(b) to receive a bonus, based on actual performance results, up
to the target amount, under any short-term incentive plan maintained by
Employer throughout the Severance Period in which Executive participated
prior to the termination of his employment, provided that the amount, if
any, payable under such plan for the award period including the last day
of the Severance Period shall be prorated based upon the number of
months of the Severance Period that fall within the award period and the
total number of months in such award period;
(c) to receive an award under any long-term incentive plan in
which Executive participated prior to the termination of his employment,
prorated based on the Executive's last day worked, exclusive of any
Severance Period, determined in accordance with the terms of said Plan;
(d) to continue to receive throughout the Severance Period any
life, health, medical, dental, and qualified or nonqualified retirement
benefits which the Executive was receiving or was entitled to receive at
the time of termination of his employment, except that any long-term
disability and short-term disability benefits cease on the last day
worked; and
(e) to receive outplacement counseling by a firm selected by
Employer to continue until Executive becomes employed.
Employer shall pay or cause to be paid the amounts payable under
paragraph (a) above in equal installments, bi-weekly in arrears, and the amount
payable under paragraphs (b) and (c) in accordance with the terms of those
plans, if any. All payments pursuant to this Section shall be subject to
applicable income tax, unemployment insurance and social security withholdings
and other deductions required by law.
In addition to the Special Compensation described above, Executive shall
also be entitled to vacation pay for any vacation accrued by Executive in the
calendar year of termination but not taken at the time of termination.
-3-
<PAGE>
In the event Executive becomes employed full-time during the Severance
Period, Executive's entitlement to continuation of the benefits described in
paragraph (e) shall immediately cease, however, Executive shall retain any
rights to continue medical insurance coverage under the COBRA continuation
provisions of the group medical insurance plan by paying the applicable premium
therefor.
The payments and benefits provided for in this Section shall be in
addition to all other sums then payable and owing to Executive hereunder and,
except as expressly provided herein, shall not be subject to reduction for any
amounts received by Executive for employment or services provided after
termination of employment hereunder, and shall be in full settlement and
satisfaction of all of Executive's claims and demands.
In all events, Executive's right to receive severance and/or other
benefits pursuant to this Section shall cease immediately in the event (a)
Executive is re-employed by Employer, (b) Executive is employed by any person,
firm, corporation or other entity that has an ownership interest in Employer, or
any of their affiliates, or (c) Executive breaches his Confidential Information
covenant (as defined in Section 11 hereof), or breaches Sections 12, 13 or 14
hereof. In all cases, Employer's rights under Section 15 shall continue.
6. VOLUNTARY RESIGNATION BY EXECUTIVE; TERMINATION FOR CAUSE; TOTAL
-----------------------------------------------------------------
DISABILITY.
- - ----------
Upon termination of Executive's employment by either Voluntary
Resignation, Termination For Cause (as those terms are defined in this Section
6), or Total Disability, as that term is defined in Employer's Long-Term
Disability Plan, Executive shall have no right to compensation, severance pay or
other benefits described in this Agreement following the termination of his
employment, but Executive's obligations under Sections ll, 12, 13 and 14 hereof
shall continue.
(a) Voluntary Resignation by Executive. At any time, Executive
has the right, by written notice to Employer, to terminate his services
hereunder ("Voluntary Resignation"), effective as of thirty (30) days
after such notice.
(b) Termination for Cause by Employer. At any time, Employer has
the right to terminate Executive's employment for cause. Termination
upon the occurrence of any of the following shall be deemed termination
for cause ("Termination for Cause"):
(i) Conduct by the Executive which reflects adversely on
the Executive's honesty, trustworthiness or fitness as an Executive;
or
(ii) Executive's willful engagement in conduct which is
demonstrably and materially injurious to the Employer.
-4-
<PAGE>
Termination for failure to meet performance expectations, unless
willful, continuing and substantial, shall not be deemed a Termination
for Cause. For Termination for Cause, written notice of the termination
of Executive's employment by Employer shall be served upon Executive and
shall be effective as of the date of such service. Such notice given by
Employer shall specify the act or acts of Executive underlying such
termination.
(c) Total Disability. Upon the total disability of the Executive,
as that term is defined in Employer's Long-Term Disability Plan,
Executive shall have no right to compensation or severance pay described
in this Agreement, but shall be entitled to long-term disability and
other such benefits afforded under the applicable policies and plans.
7. RESIGNATION FOLLOWING CONSTRUCTIVE DISCHARGE.
--------------------------------------------
If at any time, except in connection with a termination pursuant to
Section 5 or 6, Executive is Constructively Discharged (as that term is defined
in this Section 7) then Executive shall have the right, by written notice to
Employer within sixty (60) days of the event causing him to be Constructively
Discharged, to terminate his services hereunder, effective as of thirty (30)
days after such notice. Executive shall in such event be entitled to the
compensation and benefits as if such employment were terminated pursuant to
Section 5 of this Agreement. If Executive terminates his employment pursuant to
this Section 7, Executive's obligations under Sections 11, 12, 13, and 14 hereof
shall continue.
For purposes of this Agreement, the Executive shall be "Constructively
Discharged" upon the occurrence of any one of the following events:
(a) Executive is removed from his position with Employer other
than as a result of Executive's appointment to positions of equal or
superior scope and responsibility; or
(b) Executive's targeted total compensation is reduced by more
than 10% (other than across-the-board reductions similarly affecting all
executives of Employer having comparable responsibilities).
8. EFFECT OF CHANGE IN CONTROL.
---------------------------
In the event that within one year of a Change in Control (as that term
is defined in this Section 8), Executive's employment is terminated:
(a) by Employer other than pursuant to Section 6,
(b) by Executive pursuant to Section 7 hereof,
-5-
<PAGE>
(c) by Executive if Executive is required to be based anywhere
other than his location at the time or the Kansas City metropolitan
area, except for required travel on business to an extent substantially
consistent with Executive's business travel obligations immediately
prior to the Change in Control; then Executive shall be entitled to the
Special Compensation described in Section 5 and shall be bound by
Sections 11, 13 and 14, but shall not have any continuing obligations
under Section 12 except as otherwise required by common law or statute.
For purposes of this Agreement, a "Change in Control" shall be deemed to
have occurred if any natural person, corporation, trust, partnership, limited
liability company or other entity (a "Person"), other than (i) a trustee or
other fiduciary holding securities under an employee benefit plan of Employer or
any of its affiliates, or (ii) the current partners of Employer or any Person
that, directly or indirectly, owns or controls, is owned or controlled by, or is
under common ownership of control with, the current partners of Employer, is or
becomes the owner, directly or indirectly, of 50% or more of the outstanding
partnership interests in Employer.
9. DISPUTE RESOLUTION.
------------------
All disputes arising under this Agreement, other than those disputes
relating to Executive's alleged violations of Sections ll through 14 herein,
shall be submitted to arbitration by the American Arbitration Association in
Kansas City, Missouri. Costs of arbitration shall be borne equally by the
parties. The decision of the arbitrators shall be final and there shall be no
appeal from any award rendered. Any award rendered may be entered as a judgment
in any court of competent jurisdiction. In any judicial enforcement proceeding,
the losing party shall reimburse the prevailing party for its reasonable costs
and attorneys' fees for enforcing its rights under this Agreement, in addition
to any damages or other relief granted. This Section 8 does not apply to any
action by Employer to enforce Sections ll through 14 of this Agreement and does
not in any way restrict Employer's rights under Section 15 herein.
10. ENFORCEMENT.
-----------
In the event Employer shall fail to pay any amounts due to Executive
under this Agreement as they come due, Employer agrees to pay interest on such
amounts at a rate of prime plus two percent (2%) per annum. Employer agrees that
Executive and any successor shall be entitled to recover all costs of
successfully enforcing any provision of this Agreement, including reasonable
attorney fees and costs of litigation.
11. CONFIDENTIAL INFORMATION.
------------------------
Executive acknowledges that during the course of his employment he will
learn or develop Confidential Information (as that term is defined in this
Section ll). Executive further acknowledges that unauthorized disclosure or use
of such Confidential Information, other than in discharge of Executive's duties
on behalf of Employer, will cause Employer irreparable harm.
-6-
<PAGE>
For purposes of this Section, Confidential Information means trade
secrets (such as technical and non-technical data, a formula, pattern,
compilation, program, device, method, technique, drawing, process) and other
proprietary information concerning the products, processes or services of
Employer or its partners, and its or their affiliates, including but not limited
to, computer programs; unpatented inventions, discoveries or improvements;
marketing, manufacturing, or organizational research and development; business
plans; methods of operation; sales forecasts; personnel information, including
the identity of other employees of Employer, their responsibilities, competence,
abilities, and compensation; pricing and financial information; current and
prospective customer and supplier lists and information on customers, suppliers
or their employees; information concerning planning or pending acquisitions or
divestitures; and information concerning purchases of major equipment or
property, which information has not been made generally available to the public.
Except in the course of his employment and in the pursuit of the
business of Employer, Executive shall not, during the course of his employment,
or at any time following termination of his employment for any reason, directly
or indirectly, disclose, publish, communicate or use on his behalf or another's
behalf, any Confidential Information of Employer.
Executive acknowledges that Employer operates and competes nationally,
and that Employer will be harmed by unauthorized disclosure or use of
Confidential Information regardless of where such disclosure or use occurs, and
that therefore this confidentiality agreement is not limited to any single state
or other jurisdiction.
12. NON-COMPETITION.
---------------
Executive acknowledges that use or disclosure of Confidential
Information described in Section 11 is likely if Executive were to perform
telecommunications functions relating to wireless and wireline services on
behalf of a competitor of Employer. Therefore, Executive shall not, for eighteen
(18) months following termination of employment for any reason (the "Non-Compete
Period"), accept any position where Executive, within any 90-day period,
dedicates his time and efforts principally to managing, controlling,
participating in, investing in, acting as a consultant or advisor to, rendering
services for or otherwise assisting any person, firm, corporation or other
entity in the Wireline Business or the Wireless Business in competition with the
Wireless Business or Wireline Business of Employer, anywhere in the United
States of America; provided, however, that the ownership of less than a 5%
interest in the securities of a corporation which are traded on a national
securities exchange or quoted on NASDAQ shall not be deemed to constitute a
violation hereof.
Executive acknowledges that Employer operates and competes nationally,
and that therefore this non-competition agreement appropriately is not limited
to any single state or other jurisdiction.
-7-
<PAGE>
13. INDUCEMENT OF OTHER EMPLOYEES.
-----------------------------
For an eighteen (18) month period following termination of employment
for any reason, Executive will not directly or indirectly solicit, induce or
encourage any employee or agent of Employer to terminate his relationship with
Employer.
14. RETURN OF EMPLOYER'S PROPERTY.
-----------------------------
All books, records, files, notes, reports, sketches, plans, published
memoranda or other documents, and any other tangible forms of information
(whether stored magnetically, electronically, or otherwise, including, but not
limited to, computer diskettes or compact disks), created, developed, generated
or held by Executive during employment, concerning or related to Employer's
business, and whether containing or relating to Confidential Information or not,
are the property of Employer and will be promptly delivered to Employer upon
termination of Executive's employment for any reason whatsoever. During the
course of employment, Executive shall not remove any of the above property
containing Confidential Information, or reproductions or copies thereof, or any
apparatus from Employer's premises without authorization.
15. REMEDIES.
--------
Executive acknowledges that the restraints and agreements herein
provided are fair and reasonable, that enforcement of the provisions of Sections
11, 12, 13 and 14 will not cause him undue hardship and that said provisions are
reasonably necessary and commensurate with the need to protect Employer and its
legitimate and proprietary business interests and property from irreparable
harm.
Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer. Therefore, Executive agrees
that, in addition to any other remedies at law or in equity available to
Employer for Executive's breach or threatened breach of this Agreement, Employer
is entitled to specific performance or injunctive relief, without bond, against
Executive to prevent such damage or breach, and the existence of any claim or
cause of action Executive may have against Employer will not constitute a
defense thereto. Executive further agrees to pay reasonable attorneys' fees and
costs of litigation incurred by Employer in any proceeding relating to the
enforcement of the Agreement or to any alleged breach thereof in which Employer
shall prevail in whole or those reasonable fees and costs attributable to the
extent that Employer prevails in part.
In the event of a breach or a violation by Executive of any of the
covenants and provisions of this Agreement, the running of the Non-Compete
Period (but not of Executive's obligation thereunder), shall be tolled during
the period of the continuance of any actual breach or violation.
-8-
<PAGE>
16. CONFIDENTIALITY OF AGREEMENT.
----------------------------
As a specific condition to Executive's right to Special Compensation or
other benefits described herein, Executive agrees that he will not disclose or
discuss: the existence of this Agreement; the Special Compensation provided
hereunder; or any other terms of the Agreement except: (1) to members of his
immediate family; (2) to his financial advisor or attorney but then only to the
extent necessary for them to assist him; (3) to a potential employer on a
strictly confidential basis and then only to the extent necessary for reasonable
disclosure in the course of serious negotiations; or (4) as required by law or
to enforce legal rights.
17. ENTIRE UNDERSTANDING.
--------------------
This Agreement and the employment offer letter of August 25, 1995 from
the Chief Executive Officer of Employer constitute the entire understanding
between the parties relating to Executive's employment hereunder and supersedes
and cancels all prior written and oral understandings and agreements with
respect to such matters, except for the terms and provisions of the employee
benefit or other compensation plans (or any agreements or awards thereunder)
referred to in or contemplated by this Agreement.
18. BINDING EFFECT.
--------------
This Agreement shall be binding upon and inure tO the benefit of
Executive's executors, administrators, legal representatives, heirs and legatees
and the successors and assigns of Employer.
19. PARTIAL INVALIDITY.
------------------
The various provisions of this Agreement are intended to be severable
and to constitute independent and distinct binding obligations. Should any
provision of this Agreement be determined to be void and unenforceable, in whole
or in part, it shall not be deemed to affect or impair the validity of any other
provision or part thereof, and such provision or part thereof shall be deemed
modified to the extent required to permit enforcement. Without limiting the
generality of the foregoing, if the scope of any provision contained in this
Agreement is too broad to permit enforcement to its full extent, but may be made
enforceable by limitations thereon, such provision shall be enforced to the
maximum extent permitted by law, and Executive hereby agrees that such scope may
be judicially modified accordingly.
20. STRICT CONSTRUCTION.
-------------------
The language used in this Agreement will be deemed to be the language
chosen by Employer and Executive to express their mutual intent and no rule of
strict construction shall be applied against any person.
-9-
<PAGE>
21. Waiver.
------
The waiver of any party hereto of a breach of any provision of this
Agreement by any other party shall not operate or be construed as a waiver of
any subsequent breach.
22. NOTICES.
-------
Any notice or other communication required or permitted to be given
hereunder shall be determined to have been duly given to any party (a) upon
delivery to the address of such party specified below if delivered personally or
by courier; (b) upon dispatch if transmitted by telecopy or other means of
facsimile, provided a copy thereof is also sent by regular mail or courier; or
(c) within forty-eight (48) hours after deposit thereof in the U.S. mail,
postage prepaid, for delivery as certified mail, return receipt requested,
addressed, in any case to the party at the following addresses or telecopy
numbers:
If to Executive:
Joseph M. Gensheimer
---------------------------------
---------------------------------
If to Employer:
Sprint Telecommunications Venture
9221 Ward Parkway
Kansas City, MO 64114
Attention: Chief Executive Officer
or to such other addresses or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
23. GOVERNING LAW.
-------------
This Agreement shall be governed by, and interpreted, construed and
enforced in accordance with, the laws of the State of Kansas
24. GENDER.
------
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and the
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine or neuter.
-10-
<PAGE>
25. HEADINGS.
--------
The headings of the Sections of this Agreement are for reference
purposes only and do not define or limit, and shall not be used to interpret or
construe the contents of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date above set forth.
EMPLOYER:
MAJORCO. L.P.
By:/s/ Ronald T. LeMay
-----------------------------
Authorized Officer
EXECUTIVE:
/s/ Joseph M. Gensheimer
------------------------------
Joseph M. Gensheimer
-11-
<PAGE>
EXHIBIT 10.12
ASSIGNMENT, ASSUMPTION AND AMENDMENT NO. 1 dated as of June 21,
------------------------------------------
1996, to Procurement and Services Agreement dated as of January 31, 1996
between Sprint Spectrum Holding Company, L.P , a Delaware limited partnership
("Holdings"), formerly known as MajorCo L.P., and Lucent Technologies Inc., a
Delaware corporation, the full successor to the Network Systems Group of AT&T
Corp., a New York corporation (the "Vendor", and together with Holdings, and any
successor thereto by way of assignment, the "Parties").
RECITALS:
---------
WHEREAS, Holdings and the Vendor are parties to a certain Procurement
-------
and Services Contract dated as of January 31, 1996 (the "Contract") wherein
Holdings agreed to have the Vendor engineer and construct PCS Systems in the
System Areas and the Vendor, itself or through its Subcontractors, agreed to
provide Products and Services to Holdings in connection with the engineering and
construction of PCS Systems in the System Areas pursuant to and in accordance
with the terms of the Contract.
WHEREAS, Holdings wishes to assign all of its rights under the
-------
Contract to Sprint Spectrum L.P., a Delaware limited partnership ("SSLP") and
SSLP wishes to assume all of Holdings' obligations under the Contract and the
Vendor wishes to release Holdings from all further liability under the Contract.
WHEREAS, SSLP wishes to further assign all of its rights (once
-------
assigned to SSLP by Holdings) under the Contract to Sprint Spectrum Equipment
Company, L.P., a Delaware limited partnership ("EquipmentCo") and EquipmentCo
wishes to assume all of SSLP's obligations under the Contract.
WHEREAS, the Parties desire to amend subsection 22.1 of the Contract.
-------
NOW THEREFORE, in consideration of the mutual covenants and conditions
-------------
set forth herein, the Parties hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, all capitalized terms
-----------
used in this Assignment, Assumption and Amendment will have the meaning given to
such terms in the Contract.
2. Assignment to and Assumption by SSLP.
------------------------------------
(a) Holdings hereby, transfers and conveys to SSLP as of the date
hereof all of Holdings' right, title and interest in and to the Contract and
hereby delegates all of its duties and obligations thereunder to SSLP. SSLP
hereby accepts this
<PAGE>
2
assignment as of the date hereof and assumes and agrees to perform all duties
and obligations of Holdings under the Contract.
(b) Pursuant to and in accordance with subsection 27.4 of the
Contract, the Vendor hereby consents to and agrees with the assignment and
assumption set forth in clause (a) of this paragraph 2 (the "First Assignment")
and further, the Vendor hereby fully releases Holdings of any and all liability,
obligations or duties whatsoever under or in respect of the Contract.
3. ASSIGNMENT TO AND ASSUMPTION BY EQUIPMENTCO.
--------------------------------------------
(a) Pursuant to this Assignment, Assumption and Amendment and
immediately after the First Assignment, SSLP hereby transfers and conveys to
EquipmentCo as of the date hereof all of SSLP's right, title and interest in and
to the Contract and hereby delegates all of its duties and obligations
thereunder to EquipmentCo; provided that such assignment by SSLP to EquipmentCo
-------- ----
in no way constitutes a release of SSLP's duties and obligations under the
Contract. EquipmentCo hereby accepts this assignment as of the date hereof and
assumes and agrees to perform all duties and obligations of SSLP under the
Contract.
(b) Pursuant to and in accordance with subsection 27.4. of the
Contract, the Vendor hereby consents to and agrees with the assignment and
assumption set forth in clause (a) of this paragraph 3.
4. AMENDMENT TO SUBSECTION 22.1. Subsection 22.1 of the Contract is
----------------------------
hereby amended by deleting the last sentence thereof in its entirety and
replacing it with the following sentence:
"Prior to acquiring title to the Equipment, the Owner
will not cause or permit the Equipment to be sold,
leased or subjected to a lien or other encumbrance."
5. NO OTHER AMENDMENTS. EXCEPT AS EXPRESSLY AMENDED, MODIFIED AND
-------------------
SUPPLEMENTED HEREBY, THE PROVISIONS OF THE CONTRACT ARE AND WILL REMAIN IN
FULL FORCE AND EFFECT AND NOTHING IN THIS ASSIGNMENT, ASSUMPTION AND
AMENDMENT WILL BE CONSTRUED AS A WAIVER OF ANY OF THE RIGHTS OR OBLIGATIONS OF
THE PARTIES UNDER THE CONTRACT.
6. Governing Law. This Amendment will be construed in accordance with
-------------
and governed by the laws of the State of Missouri without regard to the laws and
principles thereof which would direct the application of the laws of another
jurisdiction.
<PAGE>
3
7. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
---------------------
and will not control or affect the meaning or construction of any provisions of
this Assignment, Assumption and Amendment.
8. COUNTERPARTS. This Assignment, Assumption and Amendment may be
-------------
executed in any number of identical counterparts, each of which will constitute
an original but all of which when taken together will constitute but one
instrument.
* * * * *
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Assignment,
Assumption and Amendment to be signed by their duly authorized representatives
on the date first above written.
SPRINT SPECTRUM HOLDING COMPANY, L.P.,
as Holdings
By: /s/ Robert M. Neumeister, Jr.
---------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM L.P.,
as SSLP
By: /s/ Robert M. Neumeister, Jr.
---------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM EQUIPMENT COMPANY,
L.P., as EquipmentCo
By: /s/ Robert M. Neumeister, Jr.
---------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
LUCENT TECHNOLOGIES INC.,
as Vendor
By: /s/ William K. Nelson
---------------------------------
Name: William K. Nelson
Title: Vice President - Sprint Global/Sprint
Spectrum.
<PAGE>
EXHIBIT 10.13
EXECUTION COPY
ASSIGNMENT, ASSUMPTION AND AMENDMENT NO. 1 dated as of June 26, 1996,
to the procurement and services contract dated as of January 31, 1996, between
Sprint Spectrum Holding Company, L.P., a Delaware-limited partnership
("Holdings"), formerly known as MajorCo L.P., and Northern Telecom Inc., a
Delaware corporation (the "Vendor", and together with Holdings, and any
successor thereto by way of assignment, the "Parties").
RECITALS:
--------
WHEREAS, Holdings and the Vendor are parties to a certain Procurement
and Services Contract dated as of January 31, 1996 (the "Contract") wherein
Holdings agreed to have the Vendor engineer and construct PCS Systems in the
System Areas and the Vendor, itself or through its Subcontractors, agreed to
provide Products and Services to Holdings in connection with the engineering and
construction of PCS Systems in the System Areas pursuant to and in accordance
with the terms of the Contract.
WHEREAS, Holdings wishes to assign all of its rights under the
Contract to Sprint Spectrum L.P., a Delaware limited partnership ("SSLP") and
SSLP wishes to assume all of Holdings' obligations under the Contract and the
Vendor wishes to release Holdings from all further liability under the Contract.
WHEREAS, SSLP wishes to further assign all of its rights (once
assigned to SSLP by Holdings) under the Contract to Sprint Spectrum Equipment
Company, L.P., a Delaware limited partnership ("EquipmentCo") and EquipmentCo
wishes to assume all of SSLP's obligations under the Contract.
WHEREAS, the Parties desire to amend subsection 22.1 of the Contract.
NOW THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the Parties hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
-----------
used in this Assignment, Assumption and Amendment will have the meaning given to
such terms in the Contract.
2. Assignment to and Assumption by SSLP.
------------------------------------
(a) Holdings hereby, transfers and conveys to SSLP as of the date
hereof all of Holdings' right, title and interest in and to the Contract and
hereby delegates all of its duties and obligations thereunder to SSLP. SSLP
hereby accepts this assignment as of the date hereof and assumes and agrees to
<PAGE>
perform all duties and obligations of Holdings under the contract.
(b) Pursuant to and in accordance with subsection 27.4 of the
Contract, the Vendor hereby consents to and agrees with the assignment and
assumption set forth in clause (a) of this paragraph 2 (the "First Assignment")
and further, the Vendor hereby fully releases Holdings of any and all liability,
obligations or duties whatsoever under or in respect of the Contract.
3. ASSIGNMENT TO AND ASSUMPTION BY EQUIPMENTCO
-------------------------------------------
(a) Pursuant to this Assignment, Assumption and Amendment and
immediately after the First Assignment, SSLP hereby transfers and conveys to
EquipmentCo as of the date hereof all of SSLP's right, title and interest in and
to the Contract and hereby delegates all of its duties and obligations
thereunder to EquipmentCo; provided that such assignment by SSLP to EquipmentCo
-------- ----
in no way constitutes a release of SSLP's duties and obligations under the
Contract; and provided further that pursuant to this paragraph 3(a) SSLP will
-------- -------
retain all of its rights under the Contract to exercise any remedies under the
Contract in lieu of any such exercise by EquipmentCo. EquipmentCo hereby accepts
this assignment as of the date hereof and assumes and agrees to perform all
duties and obligations of SSLP under the Contract.
(b) Pursuant to and in accordance with subsection 27.4 of the
Contract, the Vendor hereby consents to and agrees with the assignment and
assumption set forth in clause (a) of this paragraph 3.
4. AMENDMENT TO SUBSECTION 22.1. Subsection 22.1 of the Contract
----------------------------
is hereby amended by deleting the last sentence thereof in its
entirety and replacing it with the following sentence:
"Prior to acquiring title to the Equipment, the Owner
will not cause or permit the Equipment to be sold, leased
or subjected to a lien other encumbrance."
5. NO OTHER AMENDMENTS. EXCEPT AS EXPRESSLY AMENDED,
-------------------
MODIFIED AND SUPPLEMENTED HEREBY, THE PROVISIONS OF THE CONTRACT ARE AND WILL
REMAIN IN FULL FORCE AND EFFECT AND NOTHING IN THIS ASSIGNMENT, ASSUMPTION AND
AMENDMENT WILL BE CONSTRUED AS A WAIVER OF ANY OF THE RIGHTS OR OBLIGATIONS OF
THE PARTIES UNDER THE CONTRACT.
6. Governing Law. This Amendment will be construed in accordance with
-------------
and governed by the laws of the State of Missouri
<PAGE>
without regard to the laws and principles thereof which would direct the
application of the laws of another jurisdiction.
7. Descriptive Headings. Descriptive Heading are for convenience
--------------------
only and will not control or affect the meaning or construction
of any provisions of this Assignment, Assumption and Amendment.
8. Counterparts. This Assignment, Assumption and Amendment may be
------------
executed in any number of identical counterparts, each of which will constitute
an original but all of which when taken together will constitute but one
instrument.
* * * * *
<PAGE>
In WITNESS WHEREOF, the parties hereto have caused this Assignment,
Assumption and Amendment to be signed by their duly authorized representatives
on the date first above written
SPRINT SPECTRUM HOLDING COMPANY, L.P.,
as Holdings
By: /s/ Robert M. Neumeister,Jr
--------------------------
Name: Robert M. Neumeister,Jr
Title: Chief Financial Officer
SPRINT SPECTRUM L.P.,
as SSLP
By: /s/ Robert M. Neumeister, Jr
----------------------------
Name: Robert M. Neumeister,Jr
Title: Chief Financial Officer
SPRINT SPECTRUM EQUIPMENT COMPANY,
L.P., as EquipmentCo
By: /s/ Robert M. Neumeister, Jr
-----------------------------
Name: Robert M. Neumeister,Jr
Title: Chief Financial Officer
NORTHERN TELECOM INC.,
as the Vendor
By: /s/ Matthew J. Desch
------------------------------
Name: Matthew J. Desch
Title: Group VP & GM
<PAGE>
EXHIBIT 10.14
ASSIGNMENT AND ASSUMPTION
(LEASES AND EMPLOYEES)
This Assignment and Assumption between Sprint Spectrum Holding Company,
L.P., a Delaware limited partnership ("HOLDINGS"), Sprint Spectrum L.P., a
Delaware limited partnership ("SPECTRUM"), and Sprint Spectrum Realty Company,
L.P., a Delaware limited partnership ("REALTYCO") is dated as of July 1, 1996.
RECITALS:
A. Holdings desires to assign to Spectrum all of Holdings' rights, title and
interest in, to and under, and Spectrum desires to assume all of Holdings'
duties and obligations under, all of Holdings' leasehold interests held, as
of the close of business on June 30, 1996, on property used for cell sites;
for switch sites; for office space for administrative, technical or customer
support; and otherwise for purposes related to the administration and
operation of the business of Spectrum (the "HOLDINGS' LEASES"); and
B Holdings desires to assign to Spectrum all of Holdings' rights, title and
interest in, to and under, and delegates its duties and obligations in
connection with and under, all employee benefit plans and employment
agreements and arrangements (the "EMPLOYEE PLANS AND AGREEMENTS"), including,
without limitation, all payroll and tax withholding obligations, and Spectrum
desires to assume all of such duties and obligations under the Employee Plans
and Agreements; and
C Spectrum desires to assign to RealtyCo all of Spectrum's rights, title and
interest in, to and under, and RealtyCo desires to assume all of such duties
and obligations under, all of the Holdings' Leases and all of Spectrum's
leasehold interests held, as of the close of business on June 30, 1996, on
property used for cell sites; for switch sites; for office space for
administrative, technical or customer support; and otherwise for purposes
related to the administration and operation of the business of Spectrum
(together with the Holdings' Leases, the "LEASES");
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the parties agree as follows:
<PAGE>
l. ASSIGNMENT TO AND ASSUMPTION BY SPECTRUM. (a) Holdings transfers, conveys and
-----------------------------------------
assigns all of its rights, title and interest in, to and under, and delegates
its duties and obligations under, the Holdings' Leases, to Spectrum. Spectrum
accepts this assignment and assumes all of Holdings' duties and obligations
under the Holdings' Leases. (b) Holdings transfers, conveys and assigns all of
its rights, title and interest in, to and under, and delegates its duties and
obligations in connection with and under, the Employee Plans and Agreements,
to Spectrum. Spectrum accepts this assignment and assumes all of Holdings'
duties and obligations in connection with and under the Employee Plans and
Agreements.
2. ASSIGNMENT TO AND ASSUMPTION BY REALTYCO. Immediately after the assignment
-----------------------------------------
and assumption of the Holdings' Leases described in Section 1 of this
Assignment and Assumption, Spectrum transfers, conveys and assigns all of its
rights, title and interest in, to and under the Leases, and delegates its
duties and obligations under the Leases, to RealtyCo. RealtyCo accepts this
assignment and assumes all of Spectrum's duties and obligations under the
Leases.
3. GENERAL PROVISIONS. This Assignment and Assumption will be effective as of
------------------
the commencement of business on July 1, 1996. This Assignment and Assumption
is governed by, and construed and interpreted in accordance with, the laws of
the State of Missouri without reference to applicable choice of law
provisions. The headings used in this Assignment and Assumption are for
convenience only and must not in any way affect the meaning or interpretation
of this Assignment and Assumption.
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
to be executed by their duly authorized officers as of the day and year first
above written.
SPRINT SPECTRUM HOLDING COMPANY, L.P.
By: /s/ Robert M. Neumeister Jr
---------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
<PAGE>
SPRINT SPECTRUM L.P.
By: /s/Robert M. Neumeister, Jr.
--------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM REALTY
COMPANY, L.P.
By: /s/Robert M. Neumeister, Jr.
--------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.15
PROPERTY USE AGREEMENT
This Property Use Agreement between Sprint Spectrum Realty Company,
L.P., a Delaware limited partnership ("REALTYCO"), and Sprint Spectrum L.P., a
Delaware limited partnership ("SPECTRUM"), is dated as of July 1, 1996.
RECITALS:
A. Spectrum is in the business of developing, operating and managing a
personal communications services ("PCS") network; and
B. RealtyCo has certain leasehold interests in properties that Spectrum
needs for cell or switch site placement or desires for office space or
other uses in connection with the development, operation and management
of a PCS network; and
C. RealtyCo is willing to allow Spectrum to use such properties on the terms
and conditions more fully set forth in this Property Use Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the parties agree as follows:
1. GRANT OF USAGE RIGHT. RealtyCo grants Spectrum the right to use any or all of
--------------------
the properties in which RealtyCo holds a leasehold interest (whether such
leasehold interest exists now or is created in the future) that Spectrum
needs for cell or switch site placement or that Spectrum desires for office
space or other uses in connection with the development, operation and
management of its PCS network (the "PROPERTIES"). Nothing in this Agreement
restricts RealtyCo's right to permit other parties ("OTHER USERS") from using
the Properties so long as such Other Users' uses do not interfere with
Spectrum's ability to operate its PCS network in a manner satisfactory to
Spectrum.
2. TERM OF PROPERTY USE. Spectrum shall have the right to use the Properties for
--------------------
the shorter of (a) the duration of RealtyCo's leasehold, including any
renewal terms of such leasehold or (b) a term of five (5) years, commencing
on the date of this Agreement (the "INITIAL TERM"). At the end of the Initial
Term, this Agreement will renew automatically on July 1 of each year for a
one-year term unless terminated by either party giving written notice to the
other party at least 90 days prior to such renewal date.
<PAGE>
3. PROPERTY USE FEE. Spectrum shall pay to RealtyCo, on a monthly basis, the
----------------
amount equal to the aggregate monthly lease payments due from RealtyCo with
respect to the Properties less all monthly payments due to RealtyCo from
Other Users for their use of any of the Properties.
4. PAYING AGENT. Spectrum may, as agent for RealtyCo, make payments due with
-------------
respect to the Properties, including any rent, property tax or other fees.
Any such amounts paid by Spectrum will reduce the Property Use Fee set forth
in Section 3 above by a corresponding amount.
5. GENERAL PROVISIONS. This Agreement will be effective as of the commencement
------------------
of business on July 1, 1996. This Agreement may not be assigned by either
party without the written consent of the other party. This Agreement is
binding upon and inures to the benefit of the parties' respective successors
and permitted assigns. This Agreement is governed by, and construed and
interpreted in accordance with, the laws of the State of Missouri without
reference to applicable choice of law provisions. The headings used in this
Agreement are for convenience only and must not in any way affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
SPRINT SPECTRUM REALTY COMPANY, L.P.
By: /s/ Robert M. Neumeister, Jr.
--------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM L.P.
By: /s/ Robert M. Neumeister, Jr.
---------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.16
ASSIGNMENT AND ASSUMPTION
(EQUIPMENT)
This Assignment and Assumption between Sprint Spectrum Holding Company,
L.P., a Delaware limited partnership ("HOLDINGS"), Sprint Spectrum L.P., a
Delaware limited partnership ("SPECTRUM"), and Sprint Spectrum Equipment
Company, L.P., a Delaware limited partnership ("EQUIPMENTCO"), is dated as of
July 1, 1996.
RECITALS:
A. Holdings desires to assign to Spectrum all of Holdings' rights, title
and interest in, to and under, and delegate its duties and
obligations in connection with or under, (A) all of the equipment
related to the operation of Spectrum's personal communication
services ("PCS") network that is set forth on the books and records
of Holdings, as of the close of business on June 30, 1996, and any
equipment not set forth on such books and records that is owned by
Holdings (including, without limitation, all wireless communications
switches, base station tranceiver systems, base station controllers,
monitoring equipment, towers, antennae and coax cables) (the
"INFRASTRUCTURE ASSETS") and (B) all of the agreements relating to
the acquisition, construction or maintenance of the Infrastructure
Assets (other than that certain Procurement and Services Contract
dated as of January 31, 1996, between Holdings and Northern Telecom,
Inc., as amended, and that certain Procurement and Services Contract
dated as of January 31, 1996, between Holdings and AT&T Corp. (now
Lucent Technologies Inc.), as amended) (the "RELATED AGREEMENTS"),
and Spectrum desires to assume all of Holdings' duties and
obligations under the Related Agreements; and
B. Spectrum desires to assign to EquipmentCo all of Spectrum's rights,
title and interest in, to and under, and delegate its duties and
obligations in connection with or under, the Infrastructure Assets
and the Related Agreements, and EquipmentCo desires to assume all of
such duties and obligations under the Related Agreements;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the parties agree as follows:
<PAGE>
1. ASSIGNMENT TO AND ASSUMPTION BY SPECTRUM. Holdings transfers, conveys
----------------------------------------
and assigns all of its rights, title and interest in, to and under the
Infrastructure Assets and the Related Agreements, and delegates all of
its duties and obligations under the Related Agreements, to Spectrum.
Spectrum accepts this assignment of rights, title and interest and
assumes all of Holdings' duties and obligations under the Related
Agreements.
2. RELEASE OF HOLDINGS. Spectrum releases Holdings from any further
duties and obligations with respect to the Infrastructure Assets and
Related Agreements.
3. ASSIGNMENT TO AND ASSUMPTION BY EQUIPMENTCO. Immediately after the
-------------------------------------------
assignment and assumption described in Section 1 of this Assignment
and Assumption, Spectrum transfers, conveys and assigns all of its
rights, title and interest in, to and under the Infrastructure Assets
and the Related Agreements, and delegates all of its duties and
obligations under the Related Agreements, to EquipmentCo. EquipmentCo
accepts this assignment of rights, title and interest and assumes all
of Spectrum's duties and obligations under the Related Agreements.
4. NO RELEASE OF SPECTRUM. EquipmentCo and Spectrum do not intend to
----------------------
release Spectrum from any duties and obligations it may have as
assignor of the Infrastructure Assets anal Related Agreements.
5. GENERAL PROVISIONS. This Assignment and Assumption will be effective
------------------
as of the commencement of business on July 1, 1996. This Assignment
and Assumption is governed by, and construed and interpreted in
accordance with, the laws of the State of Missouri without reference
to applicable choice of law provisions. The headings used in this
Assignment and Assumption are for convenience only and must not in any
way affect the meaning or interpretation of this Assignment and
Assumption.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
to be executed by their duly authorized officers as of the day and year first
above written.
SPRINT SPECTRUM HOLDING COMPANY, L.P.
By: /s/ Robert M. Neumeister, Jr.
-------------------------------
Name: Robert M. Neumeister, Jr.
Title Chief Financial Officer
SPRINT SPECTRUM L.P.
By: /s/ Robert M. Neumeister, Jr.
------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM EQUIPMENT COMPANY, L.P.
By: /s/ Robert M. Neumeister, Jr.
-------------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.17
EQUIPMENT LEASE AGREEMENT
This Equipment Lease Agreement between Sprint Spectrum Equipment Company,
L.P., a Delaware limited partnership ("EQUIPMENTCO"), with its principal office
and place of business at 4900 Main Street, Kansas City, Missouri 64112, and
Sprint Spectrum L.P., a Delaware limited partnership ("SPECTRUM"), with its
principal office and place of business at 4900 Main Street, Kansas City,
Missouri 64112, is dated as of July 1, 1996.
RECITALS:
A. Spectrum is in the business of developing, operating and managing a
personal communications services ("PCS") network; and
B. EquipmentCo owns equipment that is designed for use in the operation
of a PCS network (the "INFRASTRUCTURE EQUIPMENT"); and
C. For the development, operation and management of a PCS network,
Spectrum desires to lease all of the Infrastructure Equipment owned by
EquipmentCo; and
D. EquipmentCo is willing to allow Spectrum to use the Infrastructure
Equipment on the terms and conditions more fully set forth in this
Equipment Lease Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the parties agree as follows:
1. LEASE OF EQUIPMENT. EquipmentCo leases all of its Infrastructure
-------------------
Equipment, whether now owned or hereafter acquired, to Spectrum.
EquipmentCo agrees to acquire and subsequently lease to Spectrum such
additional Infrastructure Equipment as Spectrum may reasonably request.
Spectrum will use the Infrastructure Equipment at all times in a
workmanlike manner and in such manner as will not injure or damage the
same, reasonable wear and tear excepted, and any cost or expense for
repairs will be borne by Spectrum. The installation, location and use
of the Infrastructure Equipment by Spectrum will comply with all
federal, state and local laws and regulations.
<PAGE>
2. RESERVATION OF TITLE. Title to all of the Infrastructure Equipment will not
---------------------
pass to Spectrum, but will remain in EquipmentCo.
3. TERM OF LEASE. Except as provided in Schedule A attached (which schedule
--------------- ----------
will not reduce the lease term below five (5) years), the lease of the
Infrastructure Equipment is for a term of five (5) years, commencing on the
date of this Agreement, unless terminated earlier by either party giving at
least 90 days prior written notice to the other party.
4. LEASE PAYMENTS. Spectrum will make lease payments to EquipmentCo in
---------------
accordance with Schedule A attached.
----------
5. DELIVERY OF INFRASTRUCTURE EQUIPMENT. EquipmentCo will deliver the
------------------------------------
Infrastructure Equipment to the address designated by Spectrum, freight
prepaid. At the termination of the lease, Spectrum will return the
Infrastructure Equipment to EquipmentCo at the address designated by
EquipmentCo in good condition, reasonable wear and tear excepted. The price
of any required reconditioning will be borne by Spectrum.
6. DISCLAIMER OF WARRANTIES. The parties agree that THERE ARE NO EXPRESS
------------------------
WARRANTIES OTHER THAN THOSE APPEARING IN THIS AGREEMENT, AND THERE ARE NO
IMPLIED WARRANTIES, EITHER OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, IN CONNECTION WITH EITHER THE LEASE OF THE INFRASTRUCTURE EQUIPMENT
OR ANY EXERCISE OF THE OPTION TO PURCHASE UNDER THIS AGREEMENT.
7. DEFAULT. If Spectrum sells, assigns or attempts to sell, assign or otherwise
-------
transfer the Infrastructure Equipment or any interest in such equipment, or
if Spectrum fails to perform its duties and obligations, or fails to comply
with any provisions of this lease, EquipmentCo has the right to terminate
this lease immediately. Spectrum's obligation to make lease payments will
continue until such time as EquipmentCo leases the Infrastructure Equipment
to another party.
8. GENERAL PROVISIONS. This Agreement will be effective as of the commencement
------------------
of business on July 1, 1996. This Agreement may not be assigned by either
party without the written consent of the other party. This Agreement is
binding upon and will inure to the benefit of the parties' respective
successors and permitted assigns.
<PAGE>
This Agreement is governed by, and construed and interpreted in accordance with,
the laws of the State of Missouri without reference to applicable choice of law
provisions. The headings used in this Agreement are for convenience only and
must not in any way affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
SPRINT SPECTRUM EQUIPMENT
COMPANY, L.P.
BY: /s/ Robert M.Neumeister, Jr.
---------------------------
Name: Robert M. Neumeister, Jr.
Title: Chief Financial Officer
SPRINT SPECTRUM L.P.
By: /s/ Robert M. Neumeister, Jr.
-----------------------------
Name: Robert M. Neumeister,Jr.
Title: Chief Financia Officer
<PAGE>
EXHIBIT 10.18
================================================================================
PROPRIETARY INFORMATION
SPRINT SPECTRUM L.P.
AND
CBIS
CUSTOMER ACCOUNT
AND
BILLING SYSTEM
AGREEMENT
================================================================================
<PAGE>
Contract Number 96-0032
TABLE OF CONTENTS
1.0 DEFINITIONS..................................................7
2.0 COMPENSATION.................................................9
2.1 INVOICE FREQUENCY AND REQUIREMENTS ..........................9
2.1.1 Invoicing of Exhibit H..................................9
2.1.1.1 Upfront Fee.........................................9
2.1.1.2 Monthly Subscriber Fee.............................10
2.1.1.3 Annual Minimum Amount..............................10
2.1.1.4 Annual Release Fees................................10
2.1.1.5 Early Termination Fee..............................10
2.1.1.6 Object Code License Fee............................10
2.1.1.7 Wind-down Transition Period Fee....................10
2.1.1.8 Source Code License Fee............................10
2.1.2 Invoicing of Work Order................................10
2.1.2.1 Rates..............................................10
2.1.2.2 Reimbursement......................................10
2.1.2.3 Flat Rate..........................................10
2.2 PAYMENTS AND INVOICE TERMS..................................11
2.3 INVOICE ADDRESS.............................................11
2.4 TAXES, DUTIES AND FEES......................................11
2.5 RIGHT TO OFFSET.............................................11
3.0 AFFILIATE TRANSACTIONS......................................11
3.1 AFFILIATES..................................................11
3.2 AFFILIATE RIGHTS............................................12
4.0 TERM........................................................12
4.1 AGREEMENT TERM..............................................12
4.1 AGREEMENT EXTENSION.........................................12
5.0 TERMINATION.................................................12
5.1 TERMINATION UPON SUPPLIER MERGER, SALE, OR COMPETITION......12
5.1.1 Breach of Service Level Obligations....................12
5.1.2 Breach of System Subscriber Volume Capacity............12
5.1.3 Breach of Payment Obligations..........................13
5.1.4 Breach of Material Obligation or Covenant..............13
5.2 TERMINATION UPON SUPPLIER MERGER, SALE, OR COMPETITION......13
5.3 TERMINATION DUE TO BANKRUPTCY...............................13
5.4 EARLY TERMINATION...........................................13
5.5 TERMINATION OF WORK.........................................13
5.6 COMPENSATION AFTER TERMINATION..............................13
5.7 EXPIRATION OF RIGHT TO TERMINATE............................13
6.0 ORDERS......................................................14
6.1 INITIAL ORDER...............................................14
6.2 ORDERS FOR OTHER SERVICES...................................14
6.3 ORDER MODIFICATIONS.........................................14
6.4 AFFILIATE ORDERS............................................14
7.0 TRANSITION SERVICES.........................................14
7.1 SERVICES IMPLEMENTATION.....................................14
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<PAGE>
Contract Number 96-0032
7.1.1 Milestones.............................................14
7.1.2 Service Levels.........................................14
7.1.3 Customer's Agents, Contractors, and Third Parties......15
7.2 WIND-DOWN OF TRANSITION PERIOD..............................15
7.2.1 Transfer of Data.......................................15
7.2.2 Service Levels.........................................15
7.2.3 Future Supplier........................................15
7.3 PARTIAL TRANSITION..........................................15
8.0 SUPPLIER SOFTWARE...........................................15
8.1 SUPPLIER SOFTWARE...........................................16
8.2 MAINTENANCE OF SUPPLIER'S SOFTWARE..........................16
8.3 GRANT OF RIGHTS TO SUPPLIER'S SOFTWARE......................16
8.4 SUPPLIER'S SOURCE CODE......................................16
8.5 LICENSING OF SUPPLIER'S SOFTWARE............................16
8.6 SUPPLIER PROVIDED THIRD PARTY SOFTWARE......................17
8.7 SUPPLIER SOFTWARE AND PROVIDED THIRD PARTY SOFTWARE
DOCUMENTATION............................................17
8.8 SOURCE CODE ESCROW..........................................17
9.0 CUSTOMER SOFTWARE...........................................17
9.1 CUSTOMER SOFTWARE...........................................17
9.2 EXCLUSION OF RIGHTS.........................................17
10.0 SOFTWARE ENHANCEMENT AND DEVELOPMENT SERVICES..............18
10.1 FUTURE ENHANCEMENT PLANNING PROCESS........................18
10.2 ENHANCEMENT REQUEST PROCESS................................18
10.2.1 Enhancement Requests..................................18
10.2.2 Preliminary Work Order................................18
10.2.3 Customer's Client Board...............................18
10.2.4 Functional Requirement Specification..................18
10.2.5 Final Work Order......................................18
10.2.6 Supplier Product Change Control Board.................18
10.2.7 Enhancement Acceleration..............................19
10.3 WORK ORDER SPECIFICATION...................................19
10.4 SYSTEM DEVELOPMENT METHODOLOGY.............................19
10.5 SUPPLIER STATUS............................................19
10.6 RIGHTS TO ENHANCEMENTS AND CUSTOMER PROPRIETARY
SUPPLEMENTAL SOFTWARE......................................19
11.0 TESTING....................................................20
11.1 PARTICIPATION IN TESTING ..................................20
11.2 TEST PLANS.................................................20
11.3 TEST ENVIRONMENT...........................................20
11.4 CORRECTION OF SOFTWARE NON-CONFORMANCE.....................20
11.5 TEST APPROVAL..............................................21
12.0 TRAINING...................................................21
12.1 SUPPLIER PROVIDED TRAINING.................................21
12.2 SUPPLIER TRAINING DOCUMENTATION............................21
12.3 RIGHT TO COPY..............................................21
12.4 SUPPLIER PERSONNEL.........................................21
13.0 CUSTOMER EQUIPMENT.........................................21
13.1 CUSTOMER EQUIPMENT.........................................21
13.2 ASSET TAG..................................................21
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<PAGE>
Contract Number 96-0032
13.3 MAINTENANCE................................................21
13.4 RETURN.....................................................22
14.0 DATA CENTER SERVICES.......................................22
14.1 HELP DESK..................................................22
14.2 TECHNICAL SUPPORT..........................................22
14.3 BUSINESS UNIT SUPPORT......................................22
14.4 TABLE MAINTENANCE..........................................22
14.4.1 Table Documentation...................................22
14.5 PROBLEM MANAGEMENT.........................................22
14.6 CHANGE MANAGEMENT..........................................23
14.6.1 Software Change Management............................23
14.6.2 Data Center Change Management.........................23
14.7 DISASTER RECOVERY..........................................23
14.8 OPERATIONS REVIEWS.........................................23
14.9 ACCESS TO SUPPLIER'S LOCATIONS.............................24
14.10 PROCESSING................................................24
14.10.1 Back-outs............................................24
14.10.2 Reports..............................................24
14.10.3 Cycle Verification...................................24
14.11 THIRD PARTY REVIEW........................................24
14.12 SECURITY..................................................24
14.13 CAPACITY PLANNING ........................................24
14.14 OPERATIONAL RESPONSIBILITIES..............................25
15.0 INDEPENDENT CONTRACTOR.....................................25
15.1 SUPPLIER RESPONSIBILITY....................................25
15.2 INDEPENDENT CONTRACTOR.....................................25
15.3 CUSTOMER RESPONSIBILITY....................................25
15.4 DEFEND AGAINST CLAIM.......................................26
15.5 REPLACEMENT OF PERSONNEL...................................26
15.6 AGREEMENT COMPLIANCE.......................................26
16.0 PROPRIETARY INFORMATION....................................26
16.1 PROPRIETARY INFORMATION....................................26
16.2 PROTECTION OF PROPRIETARY INFORMATION......................26
16.3 EXCLUSIONS.................................................26
16.4 NON-COMPETE................................................27
16.5 INJUNCTIVE RELIEF..........................................27
17.0 SUPPLIER WARRANTIES........................................27
17.1 SERVICES WARRANTY..........................................27
17.2 SOFTWARE WARRANTY..........................................27
17.3 MEDIA WARRANTY.............................................27
17.4 NON-INFRINGEMENT WARRANTY..................................28
17.5 SUPPLIER PERSONNEL WARRANTY................................28
17.6 PERFORMANCE WARRANTY.......................................28
17.7 WARRANTY TERM..............................................28
17.8 EXPRESS WARRANTY...........................................28
18.0 SUBCONTRACTS...............................................28
19.0 FEDERAL REQUIREMENTS.......................................28
19.1 FEDERAL ACQUISITION REQUIREMENTS...........................28
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<PAGE>
Contract Number 96-0032
19.2 SUBCONTRACTING OPPORTUNITIES...............................29
20.0 LIABILITY AND INDEMNIFICATION..............................29
20.1 INDEMNIFICATION OF LIABILITY...............................29
20.2 INDEMNIFICATION OF INFRINGEMENT............................29
20.2.1 Supplier Responsibility...............................29
20.3 ENJOINED DELIVERABLE......................................29
20.3.1 Replacement...........................................29
20.3.2 Refund................................................30
20.4 LIMITATION.................................................30
21.0 INSURANCE..................................................30
21.1 WORKER'S COMPENSATION......................................30
21.2 GENERAL....................................................30
21.3 AUTO.......................................................30
21.4 PROPERTY...................................................31
21.5 DISHONESTY.................................................31
21.6 CERTIFICATES OF INSURANCE..................................31
21.7 MUTUAL WAIVER OF SUBROGATION...............................31
22.0 REMEDIES...................................................31
22.1 SERVICES AND REMEDIES......................................31
22.2 PERFORMANCE ADJUSTMENT.....................................31
22.3 OTHER DAMAGES AND RELIEF...................................32
22.4 DISPUTED INVOICES..........................................32
23.0 RIGHT OF AUDIT.............................................32
24.0 NOTICE.....................................................33
25.0 DISPUTE RESOLUTION.........................................33
25.1 NEGOTIATION................................................33
25.2 MEDIATION..................................................34
25.3 ARBITRATION................................................34
25.4 CONTINUING PERFORMANCE.....................................34
25.5 LIMITATION OF CLAIMS.......................................34
26.0 STRATEGIC ALLIANCE.........................................34
26.1 CUSTOMER PARTICIPATION.....................................34
26.2 ADVISORY FORUM.............................................34
26.3 MUTUAL VALUE...............................................34
26.4 IMPROVEMENT................................................34
26.5 COMMITMENT.................................................35
26.6 PROCESS....................................................35
26.7 EFFECTIVENESS..............................................35
26.8 EFFICIENCY.................................................35
26.9 PREFERRED PROVIDER.........................................35
26.10 RIGHT OF FIRST ORDER......................................35
26.11 SYSTEMS INTEGRATION.......................................36
27.0 OWNERSHIP..................................................36
27.1 OWNERSHIP..................................................36
27.2 ASSIGNMENT OF OWNERSHIP....................................36
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<PAGE>
Contract Number 96-0032
28.0 GENERAL....................................................36
28.1 SUPPLIER PERFORMANCE.......................................36
28.2 MATERIAL/MECHANIC'S LIEN...................................37
28.3 ASSIGNMENT.................................................37
28.4 GOVERNING LAW..............................................37
28.5 LAW AND REGULATIONS........................................37
28.6 PERMITS AND LICENSES.......................................37
28.7 WAIVER.....................................................37
28.8 SEVERABILITY...............................................37
28.9 SURVIVAL...................................................37
28.10 PUBLICITY.................................................37
28.11 FORCE MAJEURE.............................................37
29.0 SAFETY.....................................................38
29.1 OSHA.......................................................38
29.2 INJURY PREVENTION..........................................38
29.3 WEAPONS PROHIBITION........................................38
30.0 SECURITY...................................................38
31.0 AGREEMENT MANAGEMENT.......................................38
31.1 AGREEMENT MANAGERS.........................................38
31.2 SERVICE LEVEL REPORTING....................................38
31.3 GENERAL NOTIFICATION.......................................38
31.4 DETERMINATION OF LAUNCH....................................38
32.0 ACCEPTANCE.................................................39
32.1 TEST ACCEPTANCE............................................39
32.2 IMPLEMENTATION ACCEPTANCE..................................39
32.3 WORK ORDER ACCEPTANCE......................................39
32.4 FINAL ACCEPTANCE...........................................39
36.0 ENTIRE AGREEMENT...........................................40
SIGNATURE.......................................................40
EXHIBIT A: WORK ORDER...........................................41
EXHIBIT B: JOB CLASSIFICATIONS AND PAY RATES....................42
EXHIBIT C: TRAVEL AND LIVING EXPENSE RATES......................43
EXHIBIT D: SUPPLIER PERFORMANCE LIMITATION......................44
EXHIBIT E: APPROVED SUBCONTRACTORS..............................45
EXHIBIT F: SERVICE LEVELS.......................................46
EXHIBIT G: SERVICE IMPLEMENTATION PLAN..........................51
EXHIBIT H: PAYMENTS AND PAYMENT SCHEDULE........................52
EXHIBIT I: P2K FUNCTIONAL SPECIFICATIONS RELEASE 1.1............57
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<PAGE>
Contract Number 96-0032
EXHIBIT J: AUGUST 9, 1996 ENHANCEMENT REQUIREMENTS..............58
EXHIBIT K: OCTOBER 1, 1996 ENHANCEMENT REQUIREMENTS.............61
EXHIBIT L: SOFTWARE FACTORY PLAN................................62
EXHIBIT M: OPERATIONAL SEVERITY LEVELS..........................63
EXHIBIT N: CUSTOMER EQUIPMENT...................................64
EXHIBIT O: SUPPLIER PROVIDED THIRD PARTY SOFTWARE...............65
EXHIBIT P: SPRINT SPECTRUM L.P. INITIAL ORDER...................66
EXHIBIT Q: AGREEMENT REPORTING..................................67
EXHIBIT R: ESCALATION PROCEDURES................................68
EXHIBIT S: SUPPLIER SOFTWARE....................................69
EXHIBIT T: SUPPLIER CERTIFICATE(S) OF INSURANCE.................70
EXHIBIT U: SEVERITY OF SOFTWARE NON-CONFORMANCE.................71
EXHIBIT V: SUPPLIER SOFTWARE DEVELOPMENT METHODOLOGY............72
EXHIBIT W: PRE-RELEASE DELIVERABLES.............................73
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<PAGE>
Contract Number 96-0032
SERVICES AGREEMENT
BETWEEN
SPRINT SPECTRUM L.P.
AND
CINCINNATI BELL INFORMATION SYSTEMS INC.
This Services Agreement ("Agreement") is effective February 26, 1996 ("Effective
Date" ) between SPRINT SPECTRUM L.P., a Delaware limited partnership
("Customer"), with offices located at 4717 Grand, Kansas City, Missouri 64112
and CINCINNATI BELL INFORMATION SYSTEMS INC., an Ohio corporation ("Supplier"),
with its principal place of business at 600 Vine Street, Cincinnati, Ohio,
45202.
RECITALS:
It is essential for Customer to utilize customer information and billing
software as a foundation for its business operations and that such software is
operated and maintained in a data processing environment. Supplier is providing
proprietary software ("Software"), Customer ordered enhancements and additions
to the Software features, functionality, and outputs and inputs, periodic
maintenance and upgrade of the Software, the secured data processing environment
and associated services ("Data Center"), and the professional resources with the
knowledge and skills of Supplier's business (all are collectively referred to as
"Services").
Supplier has frequently assured Customer that it is able and willing to
provide Services as described in this Agreement for use by Customer within the
time periods and performance capabilities required by this Agreement.
In consideration of the foregoing premises and the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
1.0 DEFINITIONS
"Acceptance Testing" is testing performed by Customer of the System after
Supplier has completed successful System Test to verify performance of new
functionality introduced through maintenance, Upgrade and Enhancement and assure
continued level of performance of pre-existing functionality.
"Account", is a financially responsible entity for a subscription or group of
subscriptions.
"Answer Time" is the measure of elapsed time as recorded by the automatic call
distributor for an agent to respond.
"Business Day" is any calendar Day, Monday through Friday, from 8:00 a.m. to
5:00 p.m. at Customer's local time, excluding Holidays.
"Customer Proprietary Supplemental Software" will mean new Software produced
under this Agreement by Supplier pursuant to a Work Order which is not a
derivative of Supplier Software but is separable, stand-alone Software
interfaced to Supplier Software and which the parties agree is the property of
Customer under Sections 10 and 27.
"Day" is any calendar day, Monday through Sunday, including Holidays.
"Documentation" includes, in all forms of media, configuration requirements and
parameters, design requirements, data definitions, design memoranda, technical
diagrams, templates, data models, data and file record layouts, interface
definitions and layouts, performance studies, System evaluations, network
transmission definition and layout, network design, flowcharts, contact logs,
trouble tickets, problem reports, test conditions, test scripts, test plans and
test results. Documentation also includes quick guides, tutorials, training and
help scripts.
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<PAGE>
Contract Number 96-0032
"Enhancement Types" are as follows:
"Enhancements" will mean changes, improvements or additions, other than
Maintenance Release, to the Software and related Documentation,
including all new Software Releases, which affect the functions or
performance of the Software, and will include Initial Enhancements, Non-
Restricted Enhancements, and Restricted Enhancements.
"Initial Enhancements" will mean Enhancements to the Software as more
fully described in Exhibits J and K which will be developed by Supplier
prior to the Launch.
"Non-Restricted Enhancements" will mean those Enhancements which, are to
be available for use by any customer of Supplier, as mutua1ly agreed on
the Work Order for such Enhancement. All Initial Enhancements are deemed
Non-Restricted Enhancements.
"Restricted Enhancements" will mean those Enhancements the use of which
is expressly limited to Customer or Independent Affiliates for a period
of one (1) year pursuant to subsection 10.6 as mutually agreed on the
Work Order for such Enhancement.
"Holidays" are New Year's, Memorial Day (Monday), Fourth of July, Labor Day
(Monday), Thanksgiving (Thursday), Day after Thanksgiving (Friday), Christmas.
"Hour" is the 60 minute interval occurring 7 Days per week, 24 equal intervals
per Day, and 365 (or 366 as the case may be) Days per year.
"Implementation" is the establishment of all Services Ordered under this
Agreement such that Services perform, where appropriate, per this Agreement
including any corresponding Service Levels.
"Integration Test" is the assembly and testing by Supplier of the results of
multiple components of Software maintenance, Upgrade and Enhancements that have
passed Unit test.
"Interoperability" is all Software, equipment, and network connections
interfacing at full capability.
"Launch" is the specific date that Customer starts providing product and
service to its customers for the purpose of receiving compensation.
"Maintenance Release" is a Supplier initiated release of Software to correct
Non-conformance or other Supplier initiated corrections of the Software.
"Milestones" are significant dates established to ensure timely Implementation
of the Services under this Agreement.
"Non-conformance" is the provision of a deliverable or Service that does not
meet the performance, time or acceptance criteria established under this
Agreement.
"On-Line" is data stored in the Precedent 2000 database that is accessible by
the user in near Real-Time through the Precedent 2000 User interface.
"Order" is Customer's and/or Customer Affiliates' request to purchase Services
from Supplier.
"Partners" means the collective reference to Sprint Corporation ("Sprint"), TCI
Network Service. a Delaware general partnership ("TCI"), Cox Telephony
Partnership, a Delaware general parrnership ("Cox"), and Comcast Telephony
Services, a Delaware general partnership ("Comcast").
7/8/96 keo. Sprint Spectrum L.P. Proprietary Information Page 8
<PAGE>
Contract Number 96-0032
"Precedent 2000" is the name of Supplier's Software, as detailed in Exhibit S,
which is used by Supplier to provide call record collection and processing and
customer care hereunder.
"Professional Services" includes any Supplier provided consulting, estimating,
development, testing or other incremental Service that is billable at the rate
in Exhibit B and is not included in the annual and recurring charges of this
Agreement.
"Real-Time" is the System interaction that provides for immediate response or
On-Line access with instant data interface.
"Service Levels" are the performance requirement parameters for measuring the
delivery of certain Services provided by Supplier to Customer under this
Agreement.
"Software" includes any computer code, modules and programs, and any
modification, patch, bug fix, update, release to such, in object code form,
including related data files, rules, parameters, interfaces, and Documentation.
"Software Factory" means a dedicated team of Supplier personnel responsible for
providing Restricted Enhancment and Customer Proprietary Supplemental Software
pursuant to the terms of a plan mutually agreed to by Supplier and Customer by
January 15, 1997 with scheduled availability of the Service by March 1, 1997.
"SoftWare Release" means the Upgrade of Precedent 2000 by Supplier no less
frequently than annually.
"Subscriber" is a customer record On-Line in Precedent 2000 for a customer with
or without a Subscription(s).
"Subscription" is a grouping of services a customer has purchased. A
subscription can have zero (0) or one (1) active access number.
"System" is the combined functionality of Software, equipment, and any
connectivity, that provides but is not limited to applications, databases,
transactions, On-Lines, batch processing and outputs.
"System Test" is testing performed by Supplier to ensure new functionality
introduced through maintenance, Upgrade and Enhancement that has passed
Integration Test, performs as specified by the requirements and that
pre-existing functionality performs at least to the level of performance prior
to the introduction of new functionality.
"Third Party" is any party other than Customer, Customer Affiliates, Partner or
Supplier which is referenced in this Agreement.
"Upgrade" is Non-Restricted Enhancements to the Software delivered through a
Software Release which improves functionality, value, or performance by adding
one or more new functions not present in the most current version deployed.
"Unit Test" is individual testing by Supplier of each module introduced
through maintenance, Upgrade or Enhancement that provides the initial assurance
of successful development.
2.0 COMPENSATION
2.1 Invoice Frequency and Requirements. Supplier will only invoice
Customer for the Services identified in the following, as
applicable:
2.l.l Invoicing of Exhibit H. Supplier will invoice Customer
in accordance with Exhibit H for the following:
2.1.1.1 Upfront Fee. A fee payable in respect of
start-up fees, implementation fees and release
fees through February, 1997, including the
development of
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Contract Number 96-0032
functionality in accordance with the provisions
of Exhibits I, J and K assuming Implementation
of all Customer and Customer Affiliate markets
in accordance with the draft Implementation Plan
in existence as of the date of this Agreement
("Upfront Fee").
2.1.1.2 Monthly Subscriber Fee. Monthly Subscriber Fees
paid based upon the total number of Subscribers.
2.1.1.3 Annual Minimum Amount. Annual minimums payable
with respect to aggregate monthly Subscriber
Fees ("Annual Minimum Amount").
2.1.1.4 Annual Release Fee. Annual release fee payable
in prorata installments upon installation of
Software Releases ("Annual Release Fee").
2.1.1.5 Early Termination Fee. Fee for early termination
pursuant to subsection 5.4 herein, as
applicable, payable upon the date of termination
("Early Termination Fee").
2.1.1.6 Object Code License Fee. Fees due upon exercise
of the object code licensing in accordance with
subsection 8.5 hereof ("Object Code License
Fee").
2.1.1.7 Wind-down Transition Period Fee. Wind-down
Transition Period Fees due under subsection 7.2
hereof in lieu of monthly Subscriber Fees.
2.1.1.8 Source Code License Fee. Fee due upon exercise
of rights to source code license in accordance
with subsection 8.8 hereof ("Source Code License
Fee").
2.1.2 Invoicing of a Work Order. Supplier will invoice
Customer separately for Professional Services rendered
pursuant to Section 10 and authorized per the request
form in Exhibit A ("Work Order"). The Work Order will
state additional invoicing instructions if Supplier must
provide an additional copy of the invoice. Supplier will
invoice Customer monthly in arrears unless otherwise
stated in the Work Order.
2.1.2.1 Rates. Customer will pay Supplier in accordance
with the billing rate set forth in the
applicable authorized Work Order. Supplier's
blended billing rate for varying levels of
skills, per Exhibit B, will be utilized to
develop the billing rate in the Work Order.
2.1.2.2 Reimbursement. Supplier will be reimbursed for
travel, living, and other expenses authorized by
Customer in the Work Order at the rates listed
in Exhibit C. For non-flat rate Services
Supplier must maintain and submit itemized time
records and expense reports with each invoice.
The time records and expense reporting must be
detailed on a form acceptable to Customer and
supporting documentation must be included.
Customer will not reimburse Supplier for
personal expenses including long distance phone
calls, in-room movies, dry-cleaning and laundry
expenses.
2.1.2.3 Flat Rate. Customer will pay Supplier in
accordance with the project bid price for a set
of deliverables set forth in an applicable
proposal by Supplier and authorized by Customer
in a Work Order.
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Contract Number 96-0032
2.1.2.4 Supplier Annual Price Adjustments. Supplier
reserves the right to raise its Monthly
Subscriber Fees one-half (1/2) of the increase
in the Consumer Price Index-Urban (CPI-U) in
January of any year after any year (January
through December) in which that increase is
greater than eight percent (8%). The first
potential application of this increase will be
for Subscribers in January, 1998 based on the
CPI-U for January, 1997. In addition, Supplier
reserves the right to raise its Professional
Services rates in Exhibit B in January of any
year beginning in January of 1998 by one-hundred
percent (100%) of the increase in the CPI-U over
the preceding January to December timeframe.
2.2 Payments and Invoice Terms. Customer payment of invoices is due
within thirty (30) Days after receipt by Customer of a valid
invoice, per this Section 2, at the proper invoice location.
Amounts due shall be subject to the performance adjustments set
forth in Exhibit F and H hereof. Any disputed item on an invoice
will be resolved as set forth in subsection 22.4 of this
Agreement. The foregoing withstanding, if payment is not made
when due, Supplier will provide Customer written notice of non-
payment. If payment is not made within a ten (10) Day cure
period following the receipt of written notice, the amount of
delinquent non-payment will be subject to Supplier's late
payment fee of one and a half percent (1.5%) per month from the
original due date.
2.3 Invoice Address. Supplier's invoice will be delivered to the
Customer addresses listed below. Customer change in address will
be provided to Supplier in writing.
Original sent to:
Sprint Spectrum
Attn: Accounts Payable
4717 Grand
Kansas City, MO 64112
With a copy to:
Sprint Spectrum
Attn: CBIS Agreement Manager
4900 Main Street
Kansas City, MO 64112
2.4 Taxes, Duties and Fees. Customer will pay when due only sales,
use or similar state or local tax in connection with the
Services provided in this Agreement. Taxes to be paid by
Customer will be separately stated on the invoice. Supplier's
prices will not include any taxes based on Supplier's personal
property or net income.
2.5 Right to Offset. Amounts due Customer from Supplier under
provisions of this Agreement will be credited to Customer by
Supplier by deduction from invoices rendered to Customer; or, if
Supplier fails to so credit such amounts after notice from
Customer, Customer, without waiver or limitation of any rights,
may deduct from any amounts otherwise due Supplier in connection
with this Agreement, or any other agreement between Supplier and
Customer, any amounts owed by Supplier to Customer for which
Supplier has failed to credit Customer in invoices rendered
since receipt of notice of Customer's valid claim to such
credit.
3.0 AFFILIATE TRANSACTIONS
3.1 Affiliates. This Agreement is entered into by Customer on its
own behalf and for the benefit of all Customer affiliated
entities ("Customer Affiliates"). All Customer Affiliates for
whom Customer is Supplier's day-to-day contact and responsible
party for accounts receivable and which run on the same version
of the Software as Customer (except for minor deviations such as
some interfaces which do not interfere with Supplier's ability
to continue operational transparency in running the
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Contract Number 96-0032
Supplier Software for such Customer Affiliates) are "Embedded
Affiliates". All other Customer Affiliates which do not qualify
as Embedded Affiliates shall be referred to as "Independent
Affiliates". Cox Califomia PCS shall be deemed to be an
Independent Affiliate except (i) Cox California PCS Subscriber
volumes shall be aggregated with Customer's Subscriber volumes
for purposes of determining the applicable monthly Subscriber
Fees for both Cox Califomia PCS and Customer for the term of
this Agreement and any extension thereof; (ii) Cox Califomia PCS
shall not pay a separate Upfront Fee; and (iii) until such time
as Cox California PCS or Customer implement changes to the
Supplier Software unique to that party, Cox Califomia PCS shall
not be liable to Supplier for Annual Release Fees. All
references to Customer in this Agreement will be deemed to refer
equally to Embedded Affiliates and any Independent Affiliate
executing an Order hereunder, excepting as otherwise set forth
in such Order. No commitment is made, nor any liability accepted
by Customer or any Independent Affiliate, and none will be
inferred from this Agreement, except as set forth in a properly
executed Order to this Agreement. All invoices and statements
will reference the particular Order by number and must be
directed to Customer (for Customer and Embedded Affiliates), or
to the Independent Affiliate executing such Order pursuant to
instructions issued in the Order. No work performed on behalf
of, nor product nor services delivered to any Independent
Affiliate will be billed to, or collected from, any other
Customer Affiliate or Customer. For purposes of this Agreement,
the term affiliated entity, affiliate, or Customer Affiliate
will mean any corporation, parmership, joint venture, or other
entity in which Customer owns, controls or otherwise holds (with
power to vote) five percent (5%) or more of the outstanding
voting shares (or of a similar equity or other ownership
interest) of such entity, directly or indirectly, by or through
one or more intermediaries.
3.2 Affiliate Rights. Notwithstanding anything herein to the
contrary, during the Implementation period of this Agreement,
Independent Affiliates may exercise the right to Order Services
only with the prior written approval of Customer.
4.0 TERM
4.1 Agreement Term. Subject to the terms and conditions of this
Agreement, the initial term of this Agreement shall commence
upon execution by Customer and Supplier and continue through
December 31, 2001, or such later date that is established per
subsection 31.4 ("Initial Term").
4.2 Agreement Extension. This Agreement will automatically renew and
extend under the same terms and conditions for two (2)
successive two (2) year periods, unless Customer notifies
Supplier of its intention not to renew this Agreement at least
six (6) months prior to the expiration of the then current term.
5.0 TERMINATION
5.1 Termination for Material Uncured Breach. Either party may
terminate this Agreement in the event of a Material Uncured
Breach, as defined in subsections 5.1.1 through 5.1.4 hereof by
the other party, which breach has not been cured within two (2)
Business Days beyond the escalation path set forth in Section
25 or thirty (30) Days from receipt of notice when no
escalation path exists. The termination effective date will be
as determined during the Wind-down Transition Period set forth
in subsection 7.2 hereof.
5.1.1 Breach of Service Level Obligations. Supplier agrees
that its failure to meet five (5) Service Level
categories indicated as critical in Exhibit F for three
(3) months out of six (6) months at any time Shall
constitute a Material Uncured Breach subject to
subsection 5.1 hereof.
5.1.2 Breach of System Subscriber Volume Capacity. Customer
and Supplier agree that the failure of the System to
process the number of Subscribers by the dates set forth
in
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Contract Number 96-0032
Exhibit D and at any time thereafter as evidenced by
missed applicable Service Levels shall constitute a
Material Uncured Breach subject to subsection 5.1
hereof.
5.1.3 Breach of Payment Obligations. Customer and Supplier
agree that the failure of Customer to pay non-disputed
amounts within sixty (60) Days after receipt ot written
notice to cure such failure to pay shall constitute a
Material Uncured Breach subject to subsection 5.1
hereof.
5.1.4 Breach of Material Obligation or Covenant. Customer and
Supplier agree that either party's breach of a Material
Obligation or Covenant under this Agreement shall
constitute a Material Uncured Breach subject to
subsection 5.1 hereof.
5.2 Termination Upon Supplier Merger, Sale, or Consolidation. This
Agreement may be terminated by Customer without penalty if there
is any merger, consolidation, sale of all of the assets or any
other change in control or ownership of Supplier (excluding any
mergers, consolidations or sale with or to a Customer Partner or
Customer Affiliate) such that Supplier has licenses to provide
cellular and/or PCS services for more than thirty million
(30,000,000) POPs which overlap with Customer and Customer
Affiliate PCS POPs. Supplier shall give Customer no less than
thirty (30) Days written notice of any such occurrence subject
to SEC and Confidentiality provisions. The termination effective
date will be as determined during the Wind-down Transition
Period as set forth in subsection 7.2.
5.3 Termination Due to Bankruptcy. The commencement of an action by
or against either party under applicable bankruptcy law or any
assignment for the benefit of creditors or the appointment of a
receiver to take charge of such party's assets may cause the
other party to provide notice of intent to Terminate this
Agreement. The termination effective date will be as
determined during the Wind-down Transition Period as set
forth in subsection 7.2.
5.4 Early Termination. Customer may Terminate this Agreement without
cause by providing written notice at any time after the period
ending two (2) years after the end of the month in which
Subscriber bill processing commences hereunder. From the
beginning of the month following receipt of notice through the
following twelve (12) months, Supplier and Customer shall
coordinate Wind-down Transition of call record collection and
processing and customer care activities performed by Supplier.
This Agreement shall terminate at the end of such twelve (12)
month period and Customer shall pay the applicable Early
Termination Fees as set forth in Exhibit H.
5.5 Termination of Work. Following the Wind-down Transition period,
Supplier will immediately cease the terminated work and deliver
to Customer within thirty (30) Days all Customer materials,
either delivered to Supplier or produced by Supplier pursuant to
subsection 27.2 of this Agreement including but not limited to
completed work, work in process, designs, drawings,
specifications, plans, lists or other material, and any monies
paid to Supplier not due and payable before or upon termination.
5.6 Compensation After Termination. Following the Wind-down
Transition period, Supplier will submit to Customer its written
claim for compensation up to the date of termination, within
thirty (30) Days. Failure to submit a claim within ninety (90)
Days will constitute a waiver of all claims and a release of all
liability arising out of such termination. Supplier's final
invoice will be adjusted for all performance adjustments,
incentives, and credits that are due under this Agreement.
5.7 Expiration of Right to Terminate. Unless a party has exercised
its rights to terminate this Agreement within ninety (90) Days
following the event giving rise to such right to terminate,
such right shall be deemed waived as to such event.
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Contract Number 96-0032
6.0 ORDERS
6.1 Initial Order. On the Effective Date of this Agreement Customer
is subscribing to Services to be provided by Supplier as defined
within this Agreement, and per the Order in Exhibit P.
6.2 Orders for Other Services. Upon mutual agreement by the parties,
amendments to this Agreement may be executed to document the
provision of additional or different Services by Supplier to
Customer for which Customer will execute an Order.
6.3 Order Modifications. Customer may modify the Services subscribed
to in an Order by providing written notice of the change to
Supplier. Upon mutual agreement of Customer's
Director-Negotiations, and the Supplier, an amendment to this
Agreement will be executed.
6.4 Affiliate Orders. Customer Affiliates may subscribe to Services
from Supplier under this Agreement by executing an Order
identifying the required Services and any special requests for
Service delivery. Based on agreement between the Customer
Affiliate, Customer's Director-Business Development, and
Supplier, an amendment to this Agreement will be executed.
7.0 TRANSITION SERVICES
Supplier agrees to provide the appropriate quantity and skill level of resources
to provide the following Services and any other work related to the start-up and
wind-down of Supplier's provision of Services to Customer under this Agreement
("Transition").
7.1 Services Implementation. The Implementation of Supplier's
Services will be jointly defined in a plan that will be
incorporated into and made a part of this Agreement as Exhibit G
no later than thirty (30) Days from the signing of this
Agreement (the "Implementation Plan"). The Implementation Plan
will include all activities necessary for planning, designing,
developing, building, testing, acceptance, training, set-up of
the model office, data load, development of methods, procedures
and processes, and production turn-up and verification. The
Implementation Plan end date shall be mutually agreed upon and
shall be no earlier then the Implementation of the February,
1997 release. Customer can initiate modifications to the plan,
and upon mutual agreement, such modifications will be
incorporated into the plan. Supplier will commit the necessary
level of effort to meet the deliverables and Milestones of the
plan.
7.1.1 Milestones. The following Milestones, at a minimum, will
be incorporated into the Implementation plan.
7.1.1.1 Delivery of User Documentation
for Exhibit I Software Contract Signing
7.1.1.2 Delivery of Software for
Exhibits I and J August 9, 1996
(Incomplete System Testing)
7.1.1.3 Final delivery of
Exhibits I and J August 7, 1996
(System Testing Cormplete)
7.1.1.4 Delivery of Software for
Exhibit K October 1, 1996
7.1.1.5 Implementation of the
February, 1997 release Unknown
7.1.2 Service Levels. Supplier and Customer agree that
Supplier may delay the start of Service Level
measurement of Service Levels in Exhibit F only if the
start date for such
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Contract Number 96-0032
delayed Service Level is a stated Milestone on the Implementation
Plan and such start date is no greater than four (4) months from
November 1, 1996. Service Levels not defined on the
Implementation Plan with a Milestone for delayed start shall
commence concurrent with the Implementation of the applicable
Service. Notwithstanding the foregoing, the Service Level for the
initial four (4) months of bill cycle timeliness, as stated in
Exhibit F, shall commence November 1, 1996. Additional Service
Levels may be mutually agreed to and incorporated into this
Agreement. Both parties will mutually agree to the source and
precise calculation of measurement that will be used for the
Service Levels in Exhibit F.
7.1.3 Customer's Agents, Contractors, and Third Parties. Supplier
agrees to provide cooperative and professional interaction with
Customer and any Customer agents, contractors and Third Parties
during the Implementation and any subsequent interaction subject
to appropriate non-disclosure agreements.
7.2 Wind-down Transition Period. Upon receipt of notice of termination of
this Agreement under Section 5 hereof, Supplier agrees to continue
providing Services under this Agreement until the effective date of
the termination ("Wind-down Transition Period"). The Wind-down
Transition Period for termination under subsection 5.4 hereof shall be
twelve (12) months. The Wind-down Transition Period for termination
under subsections 5.1, 5.2 or 5.3 hereof shall be no fewer than four
(4) months nor more than twelve (12) months at the discretion of
Customer, if termination is initiated by Customer, or, at the
discretion of Supplier, if termination is initiated by Supplier.
Furthermore, Supplier agrees to assist Customer in an orderly and
effective Transition to Customer or any future Customer supplier and
perform other mutually agreed to work related to the Transition. The
Wind-down Transition plan will be mutually developed by all parties
and Customer will make the final decision at its reasonable
discretion.
7.2.1 Transfer of Data. Supplier will provide all Customer data in
Customer defined medium(s) to Customer System(s) or any Third
Party System(s), including that of a future Customer supplier,
in a Customer defined time-frame, and in a format designated by
the Customer per the authorized Work Order for such Service.
7.2.2 Service Levels. Supplier will prevent degradation of any
Services particularly any Service Levels under this Agreement.
Furthermore, Supplier's Milestones during the Wind-down
Transition Period will require Supplier's timely and effective
performance.
7.2.3 Future Supplier. Supplier agrees to provide cooperative and
professional interaction with Customer and any future Customer
supplier during the Wind-down Transition Period and any
subsequent interaction.
7.2.4 Payment During The Wind-down Transition Period. Customer shall
pay the Subscriber Fees during the Wind-down Transition Period
as set forth in Exhibit H.
7.3 Partial Transition. Supplier agrees that Customer may request a
Transition of certain Subscribers' data from Supplier's Software to
Customer's System(s) or Partner's System(s) and/or, during a Wind-down
Transition Period, to any Third Party's System(s), including that of a
future supplier of Customer in a Customer defined medium, time-frame,
and format. Furthermore, Supplier agrees to assist Customer in an
orderly and effective Transition to Customer, Partner and/or any
future Customer supplier, perform other mutually agreed to work
related to the Transition, and comply with subsections 7.2.1 and
7.2.3. The partial Transition plan will be mutually developed by all
parties and Customer will make the final decision at its reasonable
discretion.
8.0 SUPPLIER SOFTWARE
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Contract Number 96-0032
8.1 Supplier Software. Supplier is providing Software for use by Customer
per the list in Exhibit S ("Supplier Software"), including all
interfaces to other Software. Supplier Software includes the
functionality set forth in Exhibit I and Enhancements reflected on
Exhibit J and K.
8.2 Maintenance and Upgrade of Supplier's Software. At all times during
the term or an extension of the term of this Agreement prior to
delivery or release to Customer of source code for Supplier's Software
under subsection 8.4 or subsection 8.8, Supplier will provide for
maintenance of the Software through the distribution of a Maintenance
Release and Upgrade of the Software through the distribution of a
Software Release to Supplier's Software and must provide Customer
reasonable advance notice of such releases. Supplier will include in
the Software Release functional and/or performance Upgrades that
Supplier distributes to all its customers of the Precedent 2000
System. Supplier's Software Releases for Precedent 2000 will occur at
least annually and will be charged prorata at the fee set forth in
Exhibit H ("Annual Release Fee"). Supplier's Maintenance Releases for
Precedent 2000 will occur at least annually and is included in the
monthly Subscriber Fee set forth in Exhibit H. Customer agrees that it
is a condition of Supplier's provision of Maintenance and Software
Release Services that Customer be using the current or current less
one (1) release of the Supplier Software at all times. Supplier will
provide written notice as soon as reasonably practicable prior to the
Release Schedule date of any Maintenance Release or Software Release
that requires any Customer equipment or Customer Software changes of
which are known to Supplier. In the event that Supplier does not
provide for at least one (1) annual Maintenance Release to Supplier's
Software then the action in subsection 8.4 will occur.
8.3 Grant of Rights to Supplier's Software. During the term of this
Agreement and any extensions thereof, Supplier hereby grants to
Customer all rights to utilize Supplier's Software and Documentation
which are reasonably necessary to performance under this Agreement,
with such utilization to be on Customer's then-current premises or
portions thereof, and at such locations as business considerations
dictate Customer's personnel, and Customer's agents and contractors as
approved by Supplier, utilizing Software to be located.
8.4 Supplier's Source Code. If for any reason Supplier Maintenance
Releases are not available from Supplier as set forth in subsection
8.2 hereof, source code license will be made available to Customer in
a form suitable for reproduction by Customer which will comprise the
full source code language statement and Documentation of the Supplier
Software excluding any Third Party Software; provided, however, that
prior to such source code license and Documentation being provided to
Customer, the parties will mutually agree upon and execute a
non-exclusive, non-transferable, limited license specifying the scope
of Customer's use of such source code and Documentation. The Source
Code License Fee payable by Customer is set forth in Exhibit H and is
due in full before release of source code.
8.5 Licensing of Supplier's Software. Supplier's pricing for licensing of
Supplier's Software exercisable by Customer coincident with the
expiration of the term or an extension of term of this Agreement is as
follows:
8.5.1 Supplier's non-exclusive, personal, non-transferable,
world-wide, perpetual license fee for software in object code
form: A fully paid-up license fee plus a royalty payable monthly
in proportion to the volume of active Subscribers being processed
on Supplier's Software object code by or on behalf of Customer by
persons other than Supplier, as set forth in Exhibit H. Provided,
however, that such monthly royalty shall cease to be payable if a
condition of subsection 8.8 for release from source code escrow
has been met and source code has been delivered to Customer.
8.5.2 Supplier's on-going support of the Software, including
corrections of Non-conformance,
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phone support and annual Software Releases, as developed by
Supplier, shall be payable at the then-current Supplier Annual
Release Fee.
8.6 Supplier provided Third Party Software. Supplier is providing Third
Party Software as set forth in Exhibit O as an enhancement or integral
part of Supplier's Software. During, the term of this Agreement,
Supplier shall maintain interoperability of Supplier's Software with
such Third Party Software and remain on a currently supported version
of such Third Party Software. Supplier shall have the right to
substitute and add Third Party Software provided that such
substitution or addition shall not adversely affect Customer's
functionality or Service Levels under this Agreement. Supplier shall
provide reasonable advance written notice of such substitutions or
additions and the parties shall amend Exhibit O in accordance with the
foregoing. Supplier shall make additional Third Parry Software, which
it makes available to all of Supplier's Precedent 2000 customers,
available to Customer at Supplier's charges then in effect. Supplier
shall provide written notice to Customer of availability of such Third
Party Software. Supplier shall also provide a list to Customer of
Third Parry Software which Customer shall be required to license
directly from such Third Party Software licensors for use on
Customer's premises in order for Supplier to provide Services under
this Agreement.
8.7 Supplier Software and Provided Third Party Software Documentation.
Supplier shall provide adequate Documentation in electronic media
formats to support the implementation of the System by Customer's
personnel, which Customer may reproduce in whole or in part for use
internal to Customer only. To the extent that Supplier makes any
changes in the rules of operation, accessibility, procedures, type of
terminal equipment, programming languages, or similar changes to the
System either on its own or at Customer's request, Supplier shall
regularly update such Documentation to reflect such changes. Supplier
shall provide applicable Third Party user Documentation in the same
format made available to Supplier by such Third Parties.
8.8 Source Code Escrow. Supplier will provide for the escrow of Supplier's
Software source code through an agreement in terms mutually acceptable
to Customer with an escrow agent mutually acceptable to both parties,
under which delivery of the source code to Customer will be directed
upon payment by Customer of the Source Code License Fee set forth in
Exhibit H and the occurrence of the bankruptcy of Supplier, whereas
such bankruptcy does not promptly produce affirmation of this
Agreement and substantial continuation of Supplier's performance
hereunder, its subjection to an equity receivership, its withdrawal
from the business of providing Services through use of Supplier's
Software or the conditions of unavailability of continuing Maintenance
Release from Supplier described in subsection 8.4, which approved
escrow agreement must be in place by August 9, 1996, and will provide
that the cost of the escrow will be borne by Supplier. Additionally,
Supplier will maintain the escrow with a deposit of source code for
each Maintenance Release and Software Release within thirty (3O) Days
following, the date that Supplier places the Maintenance Release or
Software Release into production for Customer. The escrow will provide
that the source code be used by Customer only to maintain and enhance
the object code of Supplier's Software for Customer's internal use
only and not for time share, service bureau or sublicense.
9.0 CUSTOMER SOFTWARE
9.1 Customer Software. Any Software that is owned by Customer or for which
Customer has a license or acquires a license, including Customer
developed and Third Party Software and Software to which Customer has
a right under the provisions of one of its Partners' licenses, or is
Customer Proprietary Supplemental Software that is developed by
Supplier for Customer under the provisions of Sections 10 and 27.
9.2 Exclusion of Rights. Customer Software is limited to Customer's use
and is not offered to Supplier for Supplier's use, excepting for the
explicit provision of Services pursuant to this Agreement.
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Contract Number 96-0032
10.0 SOFTWARE ENHANCEMENT AND DEVELOPMENT SERVICES
10.1 Future Enhancement Planning Process. Supplier and Customer agree to
establish a forum to meet, no less frequently than annually, for the
purposes of jointly planning the desired Enhancements and improvements
to Supplier's System.
10.2 Enhancement Request Process.
10.2.1 Enhancement Requests. Customer may initiate an Enhancement
Request by sending a Preliminary Work Order (sent by US Mail or
by facsimile) or by electronic message via the Supplier Work
Management System used for Customer (receipt of which Work Order
shall be confirmed in writing to Customer within three (3)
Business Days).
10.2.2 Preliminary Work Order. Each such Preliminary Work Order Form
shall contain: (1) an identification of the Customer employee or
agent responsible for implementation of the Work Order; (2) a
detailed functional description of the Enhancement; (3) an
identification of the business priority, e.g. high priority,
medium priority or low priority, and requested implementation
date; and (4) an indication as to whether Customer requests that
the Enhancement be developed for Restricted or Non-Restricted
use. Customer and Supplier agree to define a process by August 1,
1996 to ensure delivery of Customer's high priority Enhancements
within the annual hour allocation set forth in subsection 10.2.6
hereof.
10.2.3 Customer's Client Board. Preliminary Work Order Form will be
submitted to Customer's Client Board. This Board will consist of
representation of Customer and Supplier, with the majority of
representatives being from Customer. This Board shall prioritize
the requests, initially classify each request (Non-Restricted or
Restricted). Supplier shall then produce a rough order of
magnitude estimate (a "ROM") of the total number of Hours of
Professional Services required to develop and implement such
Enhancement ("Required Hours"). All Restricted Enhancements or
Enhancements accelerated at Customer request pursuant to
subsection 10.2.7 hereof, shall be developed and paid for under
the Software Factory plan.
10.2.4 Functional Requirement Specification. Within a mutually agreed
upon timeframe, Customer may authorize Supplier to develop
detailed Functional Requirement Specifications and a final
estimate for completion of the Work Order at Supplier's
Professional Services rates set forth in Exhibit B, cancel the
Preliminary Work Order, or submit a revised Preliminary Work
Order for a revised Enhancement to Customer's Client Board.
10.2.5 Final Work Order. Upon completion of the Functional
Requirements Specification, an estimate of Required Hours and the
Functional Requirements Specification is submitted to the
Customer. Customer may thereafter deliver a Final Work Order to
Supplier, as it may solely determine.
10.2.6 Supplier Product Change Control Board. Customer's Client Board
shall submit all Enhancements classified by it as Non-Restricted
to the Supplier Product Change Control Board, for consideration
of their inclusion in future product releases. If the Product
Change Control Board accepts an Enhancement and sets the
Enhancement for inclusion in a future Software Release per a
formal commitment letter, Customer may accept the timing
established by the Product Change Control Board, in which case
the Enhancement shall be included in such future release as part
of Software Releases
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provided hereunder. Supplier agrees that its designation of an
Enhancement to a release shall be a commitment and is not
subject to change.
If Customer's Client Bond has designated a requested Enhancement
as Restricted or has requested Customer Proprietary Supplemental
Software, such request shall be referred to the Software Factory.
Supplier agrees that Customer shall be allocated twelve thousand
(12,000) Hours annually during the Software Release estimation
phase in Software Releases beginning in 1997 for
Customer-initiated Non-Restricted Enhancements.
10.2.7 Enhancement Acceleration. If any Enhancements proposed by
Customer to the Product Change Control Board are accepted for
inclusion in a fissure Software Release, but at a time that is
not satisfactory for Customer's requirements, Customer may, by
Preliminary Work Order, request acceleration of the schedule for
such Enhancement. Customer may likewise request by Preliminary
Work Order, the acceleration of any other Enhancement announced
by Supplier for a future Software Release at a time that is not
satisfactory to Customer. Such Preliminary Work Order shall be
processed in accordance with subsection 10.2.3.
10.3 Work Order Modifications. Customer may change the Work Order by
additional or revised specifications, criteria, location, delivery
date, skill level, and deliverable by providing a modified Work Order
to the Client Board change control process. The Client Board will
evaluate the impact of the modification and assess the appropriate
action based upon the type of Enhancement. If the change is
accepted and Supplier believes the compensation, due date, or other
agreed to term of the Work Order should be modified as a result of a
change made by Customer, Supplier must give Customer written notice
thereof within fourteen (14) Days after receipt of Customer's change.
Supplier must include with its notice a detailed estimate of the
effect on compensation, delivery date and any other term of the Work
Order. Supplier agrees to continue performance pending resolution of
the change.
10.4 System Development Methodology. A summary of Supplier's Software
development methodology is incorporated into this Agreement as Exhibit
V. This methodology will be utilized by the Supplier in support of all
Enhancements and Maintenance Releases to the Software.
10.5 Supplier Status. The Supplier will provide the Customer with access to
the deliverables listed in Exhibit W as they are available for all
Enhancement activity. The Supplier will provide Customer with
quantifiable project management reports on a weekly basis that will
provide a status of each Customer-requested Enhancement and will
include the scheduled or actual start date and schedule or actual
completion date for the phases. Phases included in this view are
requirements, design, and code/Unit Testing. The Supplier will also
provide a view of the scheduled or actual start date and scheduled or
actual completion date for Integration Testing and System Testing for
the overall Software Release. The Supplier will provide the percent
expended and percent of effort for each Customer-requested
Enhancement. (The percent expended is defined as the actual
Hours/actual Hours + estimated time to complete; the percent of
effort is defined as the number of Hours for each Customer-requested
Enhancement/number of baselined Hours for the entire Software
Release.)
The Supplier will also identify major jeopardy issues and actions
taken to resolve and identify any potential variance to the schedule
for the Customer-requested Enhancements. The format and delivery of
this information will be mutually agreed upon by both parties.
Customer may participate in detail design walk-thru sessions.
10.6 Rights to Enhancements and Customer Proprietary Supplemental Software.
Customer and/or Independent Affiliate requested Restricted
Enhancements to Supplier's Software and Customer
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Contract Number 96-0032
Proprietary Supplemental Software are subject to the rights of the
Customer or the Independent Affiliate, per the pertinent
understandings recorded in the Work Order pursuant to subsection
10.2.6 and Section 27, for the purpose of imposing limitations upon
Supplier for distribution to, or servicing of, any person or entity
other than Customer or Independent Affiliate, unless otherwise
specifically stated in the Work Order. Restricted Enhancements will be
limited from distribution for a period of one (1) year following the
final invoice date of the applicable Work Order. Customer Proprietary
Supplemental Software will not be available for distribution. Upon
written notice, Supplier may request an earlier availability date of
release for a Restricted Enhancement. If Customer agrees to such
request, Supplier will be responsible to Customer for the payment of
an early release fee in the amount of a percentage of the Customer or
Independent Affiliate Work Order related to such Restricted
Enhancement which is thereupon agreed between Supplier and the
ordering Customer or Independent Affiliate.
11.0 TESTING
11.1 Participation in Testing. Customer has the right, which may be
assigned to Customer's agents and subcontractors who are under
appropriate non-disclosure, but not the obligation, to witness and
participate in System testing and to obtain test results and test
documentation. Customer participation in other Supplier conducted
testing may be requested by Customer and such participation will be
subject to joint agreement between Customer and Supplier.
Notwithstanding the foregoing, Supplier will have the right to deny
participation in testing situations where such participation would
expose Customer to the proprietary information of another party.
Supplier will (i) provide Customer advance notice of such testing
within the Implementation Plan: or (ii) within any other Supplier or
Customer plan for modifications of the Services provided under this
Agreement; or (iii) provide notice two (2) weeks in advance during the
regular joint project management sessions.
11.2 Test Plans. Test plans are required of the responsible party as stated
below including but not limited to entry and exit criteria, scripts,
data, deliverables, and acceptance criteria. Supplier is responsible
for the Unit Test plan, the Integration Test plan and the System Test
plan. The System Test plan will verify conformance of the requirements
specifications and Supplier will review the System Test plan with
Customer prior to the System Test period. Supplier will be responsible
for the creation of test data used during the System Test period.
Customer will develop Acceptance Test plans from requirements
specifications and will review with Supplier prior to the Acceptance
Test period. Customer will be responsible for the creation of test
data used during Acceptance Testing. Customer will have the option to
request a copy of Supplier test data for its use in Acceptance
Test.
11.3 Test Environment. Supplier will provide a test environment, that is
separate from the production environment, which substantially provides
the ability to simulate production operations for all aspects of the
approved test plans. Supplier agrees to provide adequate testing
resources as specified by testing plans. Furthermore, Supplier agrees
to perform an initial test of the test environment to ensure
stability and operational effectiveness prior to the start of a
testing period per the test plan.
11.4 Correction of Software Non-Conformance. The Supplier will correct all
Non-conformance in any Supplier Software, Software Enhancement or
Maintenance Release. The Supplier will take full responsibility to
provide timely correction or other appropriate action in response to
any Non-conformance in Supplier-provided Third Party Software as set
forth in Exhibit F. The Customer and Supplier will agree to severity
level and priority for corrections, as appropriate, to meet Customer
business requirements. The time-frame for Non-conformance correction
will not exceed the allowed duration defined in Exhibit U. The
corrections will meet Interoperability and requirement specifications
and will perform in accordance with Customer business requirements and
the Service Levels defined in Exhibit F.
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Contract Number 96-0032
11.5 Test Approval. Test approval will be based on the conformance to the
acceptance criteria established in the test plan. Acceptance of a test
plan must occur prior to the start of the successive test plan.
Notwithstanding the foregoing, Customer reserves the right to
preliminarily accept the test plan deliverables based on substantial
conformance and to start the Acceptance Test plan which may indicate
an unacceptable amount of Non-conformance in the Software requiring
Customer to return the deliverables to Supplier for correction and
re-initiation of System Test. Supplier will apply commercially
reasonable effort to ensure timely correction and testing and provide
the corrected deliverables to Customer for resumption of Acceptance
Test.
12.0 TRAINING
12.1 Supplier Provided Training. Supplier will provide to Customer initial
training on Supplier's Software and applicable Supplier provided Third
Party Software, and subsequent training for Enhancements and
Maintenance Releases of Supplier's Software and Supplier provided
Third Party Software. Supplier's training will be provided at a
mutually agreed upon location for requisite Customer training
personnel, consultants and agents (i.e., train the trainer). The
schedule, deliverables, materials, location and attendees for training
during Implementation will be mutually developed and agreed to by both
parties during the development of the Implementation Plan.
12.2 Supplier Training Documentation. Supplier training Documentation for
Supplier and Customer will be made available to Customer, its
consultants, and agents, in at least electronic media.
12.3 Right to Copy. Customer recognizes the confidential nature of training
Documentation and will treat such Documentation as it would treat its
own confidential information. End user training Documentation may be
copied by Customer and distributed on a need to know basis to users of
the System provided that all Proprietary legends are reproduced on
such copies. System Administration training Documentation may not be
copied without Supplier's prior written consent, which will not be
unreasonably withheld.
12.4 Supplier Personnel. Supplier agrees that all Supplier personnel
directly assigned to provide Services under this Agreement will be
adequately trained on Supplier's Software or Data Center by the
Supplier including measurable experience in applying such training.
Furthermore, Supplier will provide for the periodic technical training
of Supplier's personnel such that the Supplier personnel providing
Services subscribed to by Customer will receive the necessary
understanding of current technology and capabilities.
13.0 CUSTOMER EQUIPMENT
13.1 Customer Equipment. Supplier will identify the required Customer
equipment, connectivity and software set forth on Exhibit N, that will
be located at Supplier's location. Per the dates established on the
Implementation plan, Supplier will prepare the location for the
installation of such equipment and Customer will provide for the
authorized installation of the equipment. Supplier will allow
Customer, Customer's agent or contractor access to the location and
will provide Supplier resources necessary to secure a valid, safe, and
working installation and connection of such equipment. Access will be
permitted under the conditions set forth in subsection 14.9 of this
Agreement.
13.2 Asset Tag. Customer will provide a Customer Use asset tag on all
equipment and prepare an inventory of all Customer property provided
to Supplier. Supplier will sign for the inventory and will be
responsible for any loss or damage to the equipment to the extent that
such loss or damage is covered under the Supplier's insurance.
13.3 Maintenance. Customer will provide for the routine monitoring,
maintenance, and repair of Customer's equipment. Supplier will provide
maintenance timeframes to Customer for the purpose of scheduling
Customer's Third Party maintenance supplier. Furthermore, in the event
the Supplier
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Contract Number 96-0032
schedules maintenance for Supplier's like-equipment, Customer may
schedule the maintenance for Customer's equipment to occur at the same
time. Supplier will provide Customer at least fifteen (15) Days
advance notice of scheduling of maintenance for Supplier's
like-equipment.
13.4 Return. Customer will be responsible for all tear down and shipping
charges related to returning the equipment to Customer upon
termination of this Agreement.
14.0 DATA CENTER SERVICES
14.1 Help Desk. Supplier will provide Customer with access to technical
support professionals for phone inquiry which includes but is not
limited to operational questions, technical understanding, status, and
availability, and for problem reporting, diagnosis and resolution
("Help Desk"). The Help Desk will provide Services in conformance
with the Service Levels in Exhibit F. Each phone inquiry will be
documented by Supplier and made available to Customer. Additionally,
as part of the Implementation plan, Supplier and Customer will
mutually develop the escalation path for issues and problems and
incorporate herein as Exhibit R.
14.2 Technical Support. Supplier agrees to provide the call-out, tracking,
and statusing of Severity level problems, per Exhibit M, that occur
outside of the Business Day. The process for call-out will be mutually
developed and agreed to by both parties by the date indicated on the
Implementation plan.
14.3 Business Unit Support. Supplier will provide dedicated technical
support professionals to provide production and back office support to
Customer during Business Hours and on a call-out basis during
non-Business Hours ("Business Unit Support") including but not limited
to information, procedural questions, job scheduling, production
status, message processing, error processing, cycle management,
reporting, assist with inquiries regarding the use of the ad hoc query
and report writing tool and table maintenance. Supplier's methods,
procedures, and processes for the Business Unit Support job functions
will be included as Documentation and provided to Customer. Customer
and Supplier will mutually agree to the methods, procedures and
processes that will apply to Services under this Agreement during
Implementation planning. Supplier will provide a System for the
tracking of reported and resolved problems, Enhancements, information
requests and fixes and will provide Customer Real-Time access,
training and Documentation to such System.
14.4 Table Maintenance. Supplier will provide designated technical support
professionals for the duration of this Agreement that will provide
knowledge, skill, and technical understanding and know-how to Customer
for the purpose of accurately and effectively loading and modifying
tables within the Supplier's Software. Supplier will provide for the
initial loading of all tables with production-ready data supplied and
approved by Customer and will maintain such tables until such date as
mutually agreed upon by both parties. Furthermore if the tables cannot
be accessed by Customer then Supplier will retain the responsibility
to load and modify the tables. Supplier will provide table maintenance
per the Service Level in Exhibit F, whereas table maintenance that is
nonimpacting to the functionality of the System ("Typical") can be
made readily and table maintenance that is impacting to the
functionality of the System ("Exception") will take additional effort
and review.
14.4.1 Table Documentation. Supplier will provide to Customer textual
definitions, and edit rules, for every table element in tables
for which Customer is responsible to update.
14.5 Problem Management. Supplier will utilize a problem management system
for the tracking of reported and resolved Data Center problems.
Customer will notify Supplier of an identified problem, including
Customer's assignment of the severity of such problem as defined in
Exhibit M. If Supplier detects a problem, then Supplier will promptly
contact Customer and Customer will make the assignment of the severity
of the problem. Supplier will promptly commence and diligently pursue
all efforts to correct the problem. Supplier's problem tracking system
will include but is not
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Contract Number 96-0032
limited to, time opened, time resolved, date opened, date resolved,
contact name, contact number, severity level, problem description,
problem resolution, interim status, and elapsed time of resolution.
Supplier's problem resolution performance will conform to the Service
Levels in Exhibit F. Supplier will provide, upon Customer's request,
the actual problem reports of impact to Customer from Supplier's
System. Additionally, as part of the Implementation plan, Supplier and
Customer will mutually develop the escalation path for issues and
problems and incorporate herein as Exhibit R.
14.6 Change Management. Planned and unplanned changes that have impact to
Services provided to Customer or have a known impact to other elements
of Customer's business will not be made by the Supplier (except under
emergency conditions) until coordination with all impacted parties
occurs and agreement between Supplier and Customer is reached. Such
agreement does not extinguish Supplier's responsibilities under this
Agreement.
14.6.1 Software Change Management. Supplier will provide a change
management system for the tracking of planned and unplanned
changes and will provide Customer Real-Time access, training, and
Documentation to such system. Supplier will track all Customer
Work Orders and all Customer reported Software Non-conformance
problems in the change management system. Customer and Supplier
agree to establish the priority for a11 Customer Work Orders and
problems and will assign a severity level for each problem, the
resolution of which will be measured by the Service Levels in
Exhibit F. Customer has the right to participate in Supplier's
scheduling of such changes. Information in the Work Order that
will be entered in the change management system includes but is
not limited to the number, date, requester, requested completion
date, estimated delivery date, description, value, number of
days, actual delivery date, and Customer acceptance date.
Information related to Software Non-conformance problems that
will be entered in the change management system includes but is
not limited to the number, date and time opened, reported by,
assigned to, date and time assigned, severity level, priority,
scheduled migration date and time, actual migration date and time
and status text.
14.6.2 Data Center Change Management. Supplier will track all changes
to the Data Center environment. If Supplier's planned change has
the possibility of impacting Customer's Service Levels per
Exhibit F, then Supplier will notify Customer of such change at
least ten (10) Business Days prior to the planned change and
Supplier and Customer must mutually agree to the date and time of
the change. Change due to a severe problem per Exhibit M requires
mutual agreement of Supplier and Customer on the date, time, and
method for the change to occur.
14.7 Disaster Recovery. Supplier will provide for all planning and
requirements associated with establishing and maintaining a disaster
recovery plan, which such Disaster Recovery Plan shall be completed
and presented for Customer's acceptance by no later than September 1,
1996. Such disaster recovery plan must provide for the continued
Services of this Agreement after an initial recovery period as set
forth in the Disaster Recovery plan and will include the frequency
of simulation disaster recovery testing that Supplier performs.
Supplier will provide Customer the proposed coldsite disaster recovery
plan by September 1, 1996, and any requirements for successful
disaster recovery that Customer must provide and will reach mutual
agreement with Customer on the provision of disaster recovery for the
Services in this Agreement. Supplier will keep Customer's copy of the
disaster recovery plan current and will provide to Customer all
published simulation disaster recovery test results.
14.8 Operations Reviews. Upon commencement of Subscriber processing,
Supplier agrees to provide Customer with a daily status report
covering the previous Day of processing, including but not limited to
cycle completion and any exceptions to normal operations. Furthermore,
Supplier agrees to participate in regularly scheduled monthly
operational reviews, including but not limited to review of the
performance of Service Levels in Exhibit F.
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14.9 Access to Suppliers Locations. Customer will be provided access to
Supplier's Data Center only as is necessary, in Supplier's reasonable
judgment, to fulfill Customer's obligations and rights under this
Agreement. Such access will be granted under security measures,
including execution of appropriate non-disclosure agreements, in a
form that Supplier will require.
14.10 Processing. Supplier and Customer will develop and mutually agree to
the initial job schedule for all daily, weekly, monthly, and annual
Subscriber processing within the time-frame indicated in the
Implementation Plan. Modifications to the processing schedule will be
made through mutual agreement of the parties. Notwithstanding the
foregoing, Customer will provide the cycle processing schedule
("Cycle Schedule") to Supplier by the date indicated on the
Implementation Plan and will provide written notice of modification
forty-five (45) Days in advance. Supplier will confirm receipt of any
such written notice. The Cycle Schedule will not be considered
modified in such case that a change occurs in the processing of a
cycle due to (i) Customer requirement driven by any applicable
legislative or federal, state, or local agency (ii) cycle rejection
(iii) authorized Customer written request at least twenty-four (24)
Hours prior to the scheduled start of the cycle processing.
14.10.1 Back-outs. Customer will have the right to request
cancellation of cycles prior to cycle approval.
14.10.2 Reports. Customer reports and copies of Customers reports will
be available per the frequency, medium (e.g. paper, On-Line), and
distribution of reports to selected printers as is mutually
agreed to as a feature of the System.
14.10.3 Cycle Verification. Customer will perform the cycle
verification of all Customer cycles within the time-frame allowed
by the Cycle Schedule and will provide Supplier with
notification of acceptance, rejection, or partial rejection. Upon
notification of acceptance of the cycle or a portion thereof,
Supplier will release the cycle for the next step of
processing.
14.11 Third Party Review. Supplier will allow Third Party(ies), as
determined by Customer and agreed to by Supplier, but no more often
than annually, to review the Data Center Services for validation of
performance efficiencies and controls. Such Third Party(ies) are the
sole responsibility of Customer to engage and to pay all associated
fees. Such Third Party(ies) shall also execute appropriate
non-disclosure agreements, as Supplier deems necessary, prior to
access to Supplier's premises or information.
14.12 Security. Supplier will provide an appropriate level of location
security to protect against incidental or planned harm, disruption, or
destruction to Supplier's locations, to the System or a part of the
System, and to any point of connectivity at Supplier's locations or
unauthorized access to Customer data. Furthermore, Supplier will
provide for data security management as an integrated safety
precaution against misuse of Supplier's Software through the
appropriate access, as mutually defined during Implementation
planning, of both parties' employees, agents or subcontractors to have
create, read, update, delete, and ad hoc query capability. Any breach
of security within the scope of the Services provided under this
Agreement will be immediately reported to Customer by Supplier in
writing.
14.13 Capacity Planning. The Supplier's capacity planning process will be
driven by statistical forecasting models utilizing Natural Forecasting
Units (NFUs) as the modeling parameters. NFUs are external system
variables that can be forecasted by the Customer or derived by
Supplier through historical data. Customer's NFUs could include volume
counts for Subscribers, messages, users and user locations. Supplier's
use of NFUs and application of statistical modeling rigor will
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Contract Number 96-0032
be used to forecast the total CPU resources required to meet the
Customer's forecasted requirements.
The Supplier's capacity planning process will include a monthly report
of forecast to actual CPU utilization. There will be an analysis of
variances of actual CPU utilization to forecast to determine root
cause and take appropriate action. Supplier's management of System
capacity and Customer forecast will take into consideration seasonal
volume increases in processing to prevent Non-conformance to Service
Levels in Exhibit F.
Customer will provide Supplier a forecast of it's required NFU's every
three (3) months and such forecast will be for a rolling six (6)
months. The Supplier's forecasting models will be revalidated
quarterly, adjustments made to the model, as necessary, and a new CPU
forecast view created. Customer's most current three (3)month forecast
of its NFUs will be no greater than twenty percent (20%) less than
actual NFUs. If Customer's forecast to actual varies by more than
twenty percent (20%) for a month, then performance adjustments
pursuant to subsection 22.2 will not apply.
14.14 Operational Responsibilities. Supplier's operational responsibilities
include, but are not limited to, managing, monitoring, planning, and
configuring of the network up to the points of entry/exit to/from
Supplier's Data Center, Systems, Software, applications, queues,
performance, On-Lines, libraries, file structures, history logs,
storage, problem prevention, redundancy, high availability in
accordance with Exhibit F, security, full and incremental backups with
off-site storage and recovery management, creation and management of
media, capacity management and planning and interfaces. Supplier's
System will only include Customer's data and process such data only
for Services provided to Customer per this Agreement. Each Independent
Affiliate will be established on an independent and separate System.
15.0 INDEPENDENT CONTRACTOR
15.1 Supplier Responsibility. Supplier must comply with laws, regulations
and orders relating to equal employment opportunity, workers'
compensation, unemployment compensation and FICA. Upon request,
Supplier will furnish Customer with its EEO policies and procedures,
verification of workers' compensation, unemployment compensation, FICA
and the number of hours any individual performs Services directly for
Customer at any Customer site(s) specified in Customer's request
within any period of twelve (12) consecutive months.
15.2 Independent Contractor. Supplier, its subcontractors, employees or
agents are independent contractors for all purposes and at all times.
Supplier has the responsibility for, and control over, the means and
details of performing the Services, subject to Customer's inspection.
Supplier will provide all training, hiring, supervising, hours of
work, work policies and procedures, work rules, compensation, payment
for expenses and discipline and termination of its employees.
15.3 Customer Responsibility. Customer will incur no responsibility or
obligation to employees, agents, subcontractors or other parties
utilized by Supplier to perform the Services set forth in this
Agreement. Such person or parties will, at all times, remain
employees, agents or subcontractors (whichever is applicable) of
Supplier. Customer agrees not to knowingly solicit or hire any
Supplier employees to become employees, agents or subcontractors of
Customer, during the term of this Agreement, and for a period of one
(1) year thereafter except that Customer will be under no such
prohibition regarding engaging or contracting with persons formerly
employees of Supplier whose relationship with Supplier has ceased more
than three (3) months before the event. Upon reasonable, well-founded
notice, however, that a relationship with Customer violates or would
violate a contractual covenant of the other party to Supplier,
Customer will refrain from establishing or continuing such a
relationship.
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15.4 Defend Against Claim. Supplier is solely responsible for payment of
wages, salaries, fringe benefits and other compensation of, or claimed
by, Supplier's employees including, without limitations, contributions
to any employee benefit, medical or savings plan and is responsible
for all payroll taxes including, without limitation, the withholding
and payment of all federal, state and local income taxes, FICA,
unemployment taxes and all other payroll taxes. Supplier is also
solely responsible for compliance with applicable Workers'
Compensation laws with respect to maintenance of workers' compensation
coverages on Supplier's employees. Supplier will indemnify and defend
Customer from all claims by any person, government or agency relating
to payment of taxes and benefits, including without limitation, any
penalties and interest which may be assessed against Customer.
Supplier will similarly indemnify and defend Customer from all claims
by any person or government agency which arise directly or indirectly
from any failure by Supplier to comply with applicable Workers'
Compensation laws with respect to maintenance of Workers' Compensation
coverage on Supplier's employees.
15.5 Replacement of Personnel. If either party reasonably determines that
an employee, agent or subcontractor of the other party is not
performing satisfactorily under this Agreement, such party will advise
the other party and may request the other party to remove that
individual or subcontractor. Customer will only pay for work actually
performed by the removed individual or subcontractor if under an
authorized Work Order and prior to Supplier's removal of the
individual or subcontractor.
15.6 Agreement Compliance. Supplier will require its employees, agents and
subcontractors to comply with the terms and conditions of this
Agreement.
16.0 PROPRIETARY INFORMATION
16.1 Proprietary Information. Each party acknowledges that while performing
this Agreement it may have access to the other party's trade secrets
and other confidential and proprietary information, including but not
limited to products, planned products, service or planned service,
customers, prospective customers, contractors, customer call detail
records, data, financial information, computer software, processes,
methods, knowledge, inventions, ideas, marketing promotions,
discoveries, current or planned activities, research, development or
other information relating to the other party's business activities or
operations or those of its customers or suppliers ("Proprietary
Information").
16.2 Protection of Proprietary Information. This Agreement creates a
confidential relationship between Customer and Supplier. Each party
will keep Proprietary Information confidential and, except as
authorized by the other party in writing, each party may only use
Proprietary Information to perform its obligations as required under
this Agreement, and may only make copies necessary for performing its
obligations. Each party will exercise the same degree of care in
protecting the Proprietary Information of the other party as its uses
to protect its own information of like nature provided such degree is
not less than that reasonably required to prevent unauthorized use or
disclosure, including but not limited to, advising its employees and
authorized agents and contractors of the restriction on disclosure
provisions contained herein and their obligation to comply with such
provisions. Each party will return all documents and other materials
in their control that contain or relate to Proprietary Information of
the other party upon cessation of work under this Agreement or the
request of the other party.
16.3 Exclusions. Proprietary Information does not include information that
can be demonstrated by written documentation and;
16.3.1 is rightfully known to the receiving party prior to the
analysis leading to this Agreement; or
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16.3.2 is independently developed by the receiving party without any
reliance on Proprietary Information; or
16.3.3 is or later becomes part of the public domain or is lawfully
obtained by the receiving party from a Third Party.
16.4 Non-Compete. Supplier will not assign its Software Factory employees,
agents or subcontractors, or employees, agents or subcontractors who
have been assigned to development of Restricted Enhancements for more
than incidental periods (with any cumulative total of Hours of
Professional Services by an individual on a single Restricted
Enhancement of more than forty (40) Hours being deemed more than
incidental unless Customer agrees otherwise in writing) to perform
Services similar to that provided to Customer defined per Section 10
as Restricted Enhancement or Customer Proprietary Supplemental
Software for at least a period of three (3) months after completion of
the Work Order for such Services.
16.5 Injunctive Relief. Supplier and Customer acknowledge that disclosure
of Proprietary Information of one party by the other may cause
irreparably injury to the party non-disclosing, its customers and
other suppliers, that is inadequately compensable in monetary damages.
Accordingly, the disclosing party may seek injunctive relief in any
court of competent jurisdiction for the breach or threatened breach of
this Section, in addition to any other remedies in law or equity.
Customer acknowledges that disclosure of Proprietary Information of
Supplier which would come into Customer's possession embodied in
source code for Supplier Software, under certain conditions outlined
in subsections 8.4 and 8.8, may cause irreparable injury to Supplier
and/or its other customers that is inadequately compensable in
monetary damages. Accordingly, Supplier may seek injunctive relief in
any court of competent jurisdiction for breach or threatened breach of
this Section following Customer's obtaining possession of source code
to Supplier Software.
17.0 SUPPLIER WARRANTIES
Supplier warrants to Customer the following:
17.1 Services Warranty. Supplier guarantees that its Maintenance Release,
training, Data Center Services described in this Agreement will be
available for the then-current and immediately preceding version of
the Supplier Software and its Enhancement Service described in this
Agreement will be available for the then-current version of the
Supplier Software with right to use under this Agreement for a period
co-extensive with the term and any extension of this Agreement.
17.2 Software Warranty. For the term of this Agreement Supplier Software
under this Agreement will materially conform to the description,
definition, specification, and functional requirements set forth in
this Agreement. Supplier will, at its own expense, and in substantial
conformance with any Supplier technical support requirements contained
in this Agreement promptly correct all Non-conformance in the Software
reported by Customer during the term and any extension of the term.
17.3 Media Warranty. All tapes, diskettes, or other media delivered to
Customer by Supplier under this Agreement will be free of defects in
materials and workmanship under normal use for a period of ninety (90)
Days following the Customer's acceptance of same. During the ninety
(90) Day period, Customer may return the defective media to Supplier,
and Supplier will promptly replace the defective media with
functionally equivalent new media without charge to Customer. Supplier
will use reasonable commercial efforts to ensure that all media
delivered to Customer will be free of viruses, disabling programming
codes, instructions, or other such items that may interfere with or
adversely affect Customer's permitted use.
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17.4 Non-Infringement Warranty. Supplier has the full power and authority
to grant the rights granted Customer under this Agreement with respect
to the Software, and neither rights to nor use by Customer of the
Software, as permitted under this Agreement, will in any way
constitute an infringement or other violation of any copyright,
patent, trademark, service mark or exclusive right in any mask works
registered or enforceable by reason of the Berne Convention or any
other international convention for reciprocal recognition and
enforcement of patents, trademarks, copyrights or mask words to which
convention United States adheres by treaty or enactment of Congress;
or of any intellectual property in the nature of trade secret or
legally protected proprietary information, moral right, or right of
publicity.
17.5 Supplier Personnel Warranty. Each Supplier employee, subcontractor, or
agent assigned to render Services under this Agreement has, in
Supplier's reasonable judgment, the proper expertise, skills,
training, and professional education to perform the Services required
under this Agreement in a professional manner and consistent with
applicable industry standards. To the best of Suppliers' knowledge,
after investigation, neither Supplier nor its personnel performing
Services under this Agreement has any existing obligation that would
violate or infringe upon the rights of third parties, including
property, contractual, employment, trademark, trade secrets,
copyright, patent, Proprietary Information and non-disclosure rights,
that might affect Supplier's ability to fulfill its obligations under
this Agreement.
17.6 Performance Warranty. Supplier warrants that the performance of the
System will meet or exceed that which Supplier has agreed to in
Exhibit D and that Supplier's System will be capable of continued
overall performance consistent with the Service Levels in Exhibit F as
Customer expands its Subscribers within the limits of performance
stated in Exhibit D. Supplier warrants that the System modifications
required to provide the stated performance will be anticipated,
planned, implemented and paid for by Supplier and will not cause
degradation to Customer's functionality and/or use of the System.
17.7 Warranty Term. Any warranty term not otherwise limited in duration in
this Agreement will commence upon Customer's final acceptance as
defined in the Implementation Plan and continue for the duration of
the term of this Agreement. Inspection, test, acceptance, payment or
use by Customer of the Services furnished, do not affect Supplier's
warranty obligations unless specifically stated otherwise.
17.8 Express Warranty. EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN,
SUPPLIER DISCLAIMS ALL WARRANTIES REGARDING THE SYSTEM, THE SERVICES
OR THIS AGREEMENT INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
18.0 SUBCONTRACTS
Except for individual contract personnel under the control and supervision
of Supplier, Supplier may not subcontract any portion of the Services of
which requires interaction with the Customer, without prior written consent
of Customer's Director-Negotiations, which will not be unreasonably
withheld. Supplier will remain fully liable for the Services and all other
obligations under this Agreement and for the acts or omissions of any
subcontractor without regard to Customer's consent. Supplier must request
in writing for approval of subcontractors, including but not limited to,
the specific work function, timeframe, name, address, and contract number.
Approved initial subcontractors will be listed in Exhibit E and will be
revised as others are agreed upon.
19.0 FEDERAL REQUIREMENTS
19.1 Federal Acquisition Requirements. If Customer or the federal
government reasonably determines that this Agreement supports specific
requirements included in a Customer contract or subcontract
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Contract Number 96-0032
with the federal government, Supplier will be subject to certain
federal procurement regulations contained in Customer's contract or
subcontract. Supplier will be subject only to those federal
procurement regulations that must be included in all subcontracts as a
matter of law.
19.2 Subcontracting Opportunities. Supplier must make an accounting of
dollars that are subcontracted, per Section 18, to firms that are
Small Businesses under Small Disadvantaged Businesses, or Women-Owned
Businesses under Small Business Administration regulations. These
dollars will be reported in writing to the following address:
Small Business Coordinator
Sprint Spectrum L.P.
4717 Grand
Kansas City, Missouri 64112
20.0 LIABILITY AND INDEMNIFICATION
20.1 Indemnification of Liability. Supplier agrees to release, irrevocably
and forever, Customer, and will defend, pay all judgements, expenses,
and costs (including attorney fees) and generally indemnify, defend
and hold Customer harmless from all liability, suit, claim or
proceeding ("Claim") asserting liability on the part of Customer or
Supplier by reason of action taken or omitted in performance of or
with respect to this Agreement by Supplier, its employees, agents and
contractors to the extent that such Claim is insured against under
Section 21 of this Agreement and to the extent there is coverage
provided thereunder.
20.2 Indemnification of Infringement.
20.2.1 Supplier Responsibility. Supplier, at its sole expense, agrees
to handle, defend, indemnify, and hold harmless Customer and its
customers from and against any Claim, action, demand, suit, or
proceeding in which any Third Party alleges or asserts that any
deliverable, or the use of any deliverable, in accordance with
the provisions of this Agreement, constitutes infringement,
misuse, violation, or misappropriation of any patent, copyright,
trademark, service mark, trade secret, exclusive right in a mask
work registered or enforceable by reason of the Berne Convention
or any other international convention for reciprocal recognition
and enforcement of patents, trademarks, copyrights or mask works
to which convention United States adheres by treaty or enactment
of Congress, or of any intellectual property in the nature of
trade secret or legally protected proprietary information of such
Third Party; and Supplier will pay any and all costs, expenses
(including reasonable attorney fees), penalties, fines, damages,
and judgments incurred in connection therewith, provided that;
20.2.1.1 Customer provides Supplier prompt written notice of such
Claim of which Customer is aware and affords Supplier
complete and sole control of the defense, settlement, or
compromise of such Claim and all settlement or
compromise negotiations related thereto, and
20.2.1.2 Customer provides Supplier, at Supplier's sole expense,
commercially reasonable assistance, information, and
authority as reasonably requested by Supplier's in
connection with the performance of Supplier's obligation
under this Section 20.
20.3 Enjoined Deliverable.
20.3.1 Replacement. If, at any time within the ten (10) year period
immediately subsequent to the Effective Date of this Agreement,
and as a result of any Claim with respect to which
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Supplier has an obligation under subsection 20.2.1 above.
Customer's use of any deliverable is or, in Supplier's reasonable
opinion, may be enjoined, then Supplier will, at its sole option
and expense, undertake reasonable business efforts to:
20.3.1.1 procure for Customer and its customers the right to
continue use of the deliverables as provided hereunder,
20.3.1.2 modify the deliverables such that they are functionally
equivalent but not longer infringing, or
20.3.1.3 replace the deliverables with a product of equal or
superior functional capability.
20.3.2 Refund. If, after reasonable business efforts, Supplier is
unable to effect a satisfactory solution to any such Claim under
subsection 20.3.1, and
20.3.2.1 the infringing deliverable prevents the continued
provision of Services under this Agreement before the
last six (6) months of the term or any extensions
hereof, then Supplier will refund to Customer one
hundred percent (100%) of the Upfront Fees and Annual
Release Fees paid to Supplier less ten percent (10%) for
each full year of Service received beyond the initial
two (2) years.
20.3.2.2 the infringing deliverable does not prevent the
continued provision of Services under this Agreement
then Supplier will refund to Customer one hundred
percent (100%) of the fees paid to Supplier for the
Enhancement less ten percent (10%) for each full year of
use of the Enhancement beyond the initial year.
20.4 Limitation. Except for the indemnity provisions set forth in
subsections 20.1 or 20.2 of this Agreement, neither party will be
liable to the other for special, indirect or consequential loss or
damage whether or not such loss or damage is caused by the fault or
negligence of that party, its employees, agents or subcontractors.
21.0 INSURANCE
Supplier will obtain and maintain during the term of this Agreement with
financially reputable insurers, licensed to do business in all jurisdiction
where works is performed and that are reasonably acceptable to Customer,
not less than the following insurance:
21.1 Worker's Compensation. Workers' Compensation as required under any
Workers' Compensation or similar law in the jurisdiction where work is
performed, with an Employer's Liability limit of not less than five
hundred thousand dollars ($500,000.00) per occurrence. Supplier may
elect, as approved by the respective jurisdictional authority, to
self-insure its workers' compensation obligations.
21.2 General. Commercial General Liability, including coverage for
Contractual Liability and Products/Completed Operations Liability,
with a limit of not less than five million dollars ($5,000,000.00)
combined single limit per occurrence for bodily injury, personal
injury (as defined under Commercial General Liability Coverage) and
property damage liability, listing Customer as an additional insured,
as respects its vicarious liability.
21.3 Auto. Business Auto insurance covering the ownership, maintenance or
use of any owned, non-owned or hired automobile with a limit of not
less than one million dollars ($1,000,000.00)
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combined single limit per accident for bodily injury and property
damage liability, listing Customer as an additional insured, as
respect its vicarious lability.
21.4 Property. "All Risk" Property insurance covering not less than the
full replacement costs of Supplier's, if any, personal property while
on a Customer work location. Supplier may elect, at its option, to
self-insure its personal property. Supplier shall require all
subcontractors to provide comparable "All Risk" coverage.
21.5 Dishonesty. Comprehensive Crime insurance in the amount no less than
seven million five hundred thousand dollars ($7,500,000) to provide
coverage for direct losses of money, securities or other property
owned by Customer for which the Supplier is legally liable, or is held
by the Supplier in any capacity, when such loss is caused by theft or
forgery committed by any employee of the Supplier.
21.6 Certificates of Insurance. Supplier will, as a material condition of
this Agreement, within thirty (30) Days after execution of this
Agreement and prior to any renewal of insurance, deliver to Customer
certificate(s) of insurance, satisfactory in form and content to
Customer, evidencing that the above insurance is in force and will not
be canceled or materially altered without first giving Customer thirty
(30) Days prior written notice. Such certificate(s) of insurance will
be incorporated into this Agreement in Exhibit T.
21.7 Mutual Waiver of Subrogation. Customer and Supplier hereby expressly
waive, and release each other and their respective agents and
employees from, any Claims and all Claims it may have against each
other or anyone claiming through or under them by way of subrogation
for any loss caused by or resulting from risks insured against,
whether such insurance related to property damage, public liability or
other risks, provided that the insurance company issuing such policy
shall have waived its right of subrogation with respect to all such
Claims to such loss.
The Customer and Supplier each shall obtain a waiver from each and
every insurance company with which, in accordance with the insurance
requirements of this Agreement, it carries insurance. Such waiver
shall release the insurance company's subrogation rights against the
other party. However, if at any time their respective insurers shall
refuse to permit waivers of subrogation. Customer or Supplier may in
each instance revoke said waiver of subrogation effective thirty (30)
Days from the date of notice to the other unless, within such thirty
(30) Day period, the other is able to secure and furnish, without
additional expense, insurance in other companies which provide such
waiver of subrogation. If such waiver can only be obtained at
additional expense, the other party may agree to pay such additional
expense to maintain the waiver of subrogation.
22.0 REMEDIES
22.1 Services and Remedies. Supplier hereby acknowledges Customer's
critical need for Supplier's ability to provide the Services as
defined in this Agreement. Supplier is aware that if the Services do
not meet the terms in this Agreement, including Service Levels,
Customer may incur costs and damages in an amount that is difficult to
ascertain at the time of the execution of this Agreement. Except as
otherwise provided in subsections 22.1 through 22.4, the parties agree
that any issue or dispute arising out of or related to Supplier's
performance of Services will be resolved as set forth in Section 25.
22.2 Performance Adjustment. Supplier will incur liability to Customer for
liquidated damages, which will not be construed as a penalty, for each
and every failure to meet Service Levels as set forth in Exhibit F.
Such liquidated damages for monthly, operational Service Levels shall
be limited to a monthly maximum of fifteen percent (15%) of Subscriber
Fees or one-hundred-fifty-thousand dollars ($150,000), whichever is
lower, and a maximum per Service Level of fifteen percent (15%) of
Subscriber Fees or fifty thousand dollars ($50,000), whichever is
lower;
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Contract Number 96-0032
liquidated damages for Software Releases shall be limited to fifteen
percent (15%) of the prorata Annual Release Fee with the reduction of
the Annual Release Fee being no greater than one hundred-fifty-
thousand dollars ($150,000) for the year; liquidated damages for
Software Releases tied to the increment of the Upfront Fee shall be
limited to fifteen percent (15%) of the increment with the reduction
of the Upfront Fee being no greater than one-hundred-fifty-thousand
dollars ($150,000). Furthermore, Supplier will be entitled to
incentive awards for each and every achievement of the designated
performance goal for certain deliverables as set forth in Exhibit F.
Such incentive awards for monthly, operational Service Levels shall be
limited to a monthly maximum of fifteen percent (15%) of Subscriber
Fees or one-hundred-fifty-thousand dollars ($150,000), whichever is
lower, and a maximum per Service Level of fifteen percent (15%) of
Subscriber Fees or fifty thousand dollars ($50,000), whichever is
lower. The performance adjustment will be reflected in the Supplier
invoice for those Services.
22.3 Other Damages and Relief. A breach of certain provisions of this
Agreement may cause a party irreparable injury as set forth in
subsection 16.5 of this Agreement. The parties agree that in such
instances a court may grant injunctive relief or specific performance,
in addition of any other remedies which may be available.
Except as is otherwise provided in Section 20, neither party will be
liable to the other or any Third Party for loss of profits, loss of
business or indirect, consequential or punitive damages. This
limitation is not intended to affect or eliminate Customer's right to
performance adjustments pursuant to subsection 22.2 or Supplier's
ability to enforce Customer's payment obligations through the term of
this Agreement.
In the event that Customer terminates this Agreement pursuant to
subsection 5.1 Supplier's liability shall be limited to providing up
to two million dollars ($2,000,000.00) as a credit to Customer against
Wind-down Transition Period costs under subsection 7.2.
Except as is otherwise provided in this subsection 22.3 or in Section
20, and except for the allowance of performance adjustments under
subsection 22.2 hereof, Supplier's liability to Customer for damages
under this Agreement will be limited to direct damages proven in an
amount not to exceed one-hundred-fifty thousand dollars ($150,000.00)
per occurrence or series of related occurrences. Any Claim by Customer
for damages associated with a billing cycle must be made within ninety
(90) Days of the completion of the billing cycle.
The foregoing states the entire liability of Supplier under or as a
result of this Agreement or a Material Uncured Breach thereof except
for direct damages sustained as a result of the proven intentional
material breach of this Agreement by Supplier.
The exercise of any right or remedy as to damages is not cumulative in
nature and is to the exclusion of any other damage remedy with respect
to the same instance of default, breach or deficiency in performance;
provided, however, that the exercise of any remedy as to damages shall
not preclude the pursuit of any equitable right or remedy otherwise
allowed by law.
22.4 Disputed Invoices. If, within ten (10) Business Days following receipt
of Supplier's valid invoice as set forth in Section 2, Customer
provides Supplier with written notice of disputed amounts and
justification thereof, Customer will deduct such disputed amounts from
the applicable Supplier invoice. Disputed item amounts are not to be
considered a late payment or default under this Agreement. Supplier
agrees that disputed amount payments may be withheld from pending
Customer payments until such time as both parties agree as to the
disposition of this disputed amount, as set forth in Section 25.
23.0 RIGHT OF AUDIT
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Supplier will maintain all invoice records for three (3) years after the
date of invoice. Customer may audit, copy and inspect the records at
reasonable times during the term of this Agreement and for the follow-on
period to verify costs and maintenance of the records.
Customer or its authorized representative will have the right to audit
Supplier's performance under this Agreement at Customer's cost.
24.0 NOTICE
Communications relating to this Agreement except for invoicing
instructions, must be identified by the Contract number, and any applicable
Work Order number and communicated by certified mail, return receipt
requested, telex, facsimile, or overnight mail to the following address or
as my be later designated by written notice or either party:
Customer: Sprint Spectrum
4717 Grand, 15th floor
Kansas City, Missouri 64112
ATTN: Director-Business Development
Phone: 816 559-6026
FAX: 816 559-6040
Supplier: Cincinnati Bell Information Systems Inc.
600 Vine Street
Cincinnati, Ohio 45202
ATTN: General Counsel
Phone: 513 784-6400
Fax: 513 784-5062
25.0 DISPUTE RESOLUTION
25.1 Negotiation. The parties will attempt in good faith to resolve any
issue, dispute, or controversy arising out of or relating to this
Agreement, including but not limited to any Section of this Agreement
that requires mutual agreement of the parties, promptly by negotiation
between the parties' representatives who have authority to settle the
issue, dispute, or controversy. Any party may give the other party
written notice of any dispute not resolved in the normal course of
business. Within ten (10) Days after delivery of such notice,
representatives of both parties will meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem
necessary, to exchange relevant information and to attempt to resolve
the dispute by the respective representatives of Supplier and Customer
within the timeframes here:
Customer Supplier
-------- --------
Within 10 Days Agreement Manager Agreement Manager
Within 20 Days Chief Information Officer President,
Telecommunications
Services Group
Within 30 Days Chief Business Development Chief Operating
Officer Officer
If the matter has not been resolved within thirty (30) Days of the
disputing party's notice, or if the parties fail to meet within ten
(10) Days, either party may initiate mediation of the dispute as
provided below. If a negotiator intends to be accompanied at a meeting
by an attorney, the other negotiator will be given at least two (2)
Business Days notice of such intention and may also be accompanied by
an attorney. All negotiations pursuant to this clause are confidential
and will be
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Contract Number 96-0032
treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and State Rules of Evidence.
25.2 Mediation. If the dispute has not been resolved by negotiation as
provided above, the parties will endeavor to settle the dispute by
mediation. If the parties encounter difficulty in agreeing on a
neutral third party, they will seek the assistance of the Center for
Public Resources in the selection process. The cost of mediation will
be borne equally by the parties.
25.3 Arbitration. Any dispute arising out of or relating to this Agreement
that has not been resolved by non-binding means as provided above
within thirty (30) Days of the initiation of such procedure will be
finally settled by arbitration in accordance with the rules of the
American Arbitration Association applying the substantive law of
Missouri without regard to any conflict of laws provision; provided,
however, that if one party has requested the other to participate in a
non-binding procedures and the other has failed to participate, the
requesting party may initiate arbitration before expiration of the
above period. The arbitration will be held in the Kansas City,
Missouri metropolitan area. The arbitrator(s) are not empowered to
award damages in excess of compensatory damages limited as set forth
in this Agreement and each party waives any damages in excess of such
compensatory damages.
Notwithstanding the foregoing, either party may bring a Claim for
injunctive relief as provided in subsections 16.5 and 22.3 in any
court of competent jurisdiction without first submitting the Claim to
arbitration.
25.4 Continuing Performance. Supplier agrees to continue performance during
the pendency of any dispute, unless performance is terminated by
Customer under Section 5.
25.5 Limitation of Claims. Neither party may bring any Claim against the
other later than two (2) years after the cause of action giving rise
to such Claim accrued.
26.0 STRATEGIC ALLIANCE
Supplier agrees to develop, deliver, and implement the Services within the
framework of a strategic alliance with Customer. The alliance between
Supplier and Customer will be mutually beneficial and share the risks and
the alliance encompasses. Customer and Supplier agree to continually seek
out business process improvements under this Agreement, including;
modifying, adding, or deleting Service Levels, better defining common
goals, and improving methods and procedures to lessen costs to either
party. In addition, Customer and Supplier agree to the following alliance
strategy:
26.1 Customer Participation. In addition to other rights of Customer under
this Agreement, Customer will have the right to participate in the
Supplier's research and development activities and product and testing
activities pursuant to this Agreement provided that such observation
will not interfere with the Supplier's research and development
activities, will not affect the responsibilities and warranties under
this Agreement and not breach Supplier's confidentiality provisions to
other customers.
26.2 Advisory Forum. Supplier will provide and Customer has the right to
participate, or not participate, in strategic or tactical planning and
review sessions that determine, impact, or influence Supplier's
current and future availability and delivery of Services. Nothing in
this subsection 26.2 will limit or modify Customer's ability to
enforce its rights under this Agreement.
26.3 Mutual Value. The alliance will contribute to mutual profit and
growth.
26.4 Improvement. The alliance will promise continuous and measurable
improvement in the people, products, and services of Customer and
Supplier.
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26.5 Commitment. Supplier will share Customer's (i) dedication to customer
satisfaction and quality and (ii) commitment to successful market
Launch.
26.6 Process. The terms of the relationship will minimize the likelihood of
disputes by having documented Service Levels for performance and
quality, clear and specific warranties, escalation paths and
exercisable remedies in the event that one or both parties fail to
meet their obligations.
26.7 Effectiveness. Wherever agreeable to both Customer and Supplier
electronic forms of communication will be employed.
26.8 Efficiency. The parties to the Agreement acknowledge their respective
obligations to take such actions as are appropriate to assure that
cost benefits achieved by the alliance are equitably shared between
the parties.
26.9 Preferred Provider. Customer agrees that, with the exceptions noted
below, Supplier will be Customer's primary provider of PCS call record
collection and processing during the term of the Agreement. This
Agreement is made on the warranty and representation of Supplier that
call record collection and processing is its core competency and
primary business. The exceptions are:
(i) Customer Partners and Customer itself may provide PCS call record
collection and processing to Customer and its Affiliates; and
(ii) Customer may move call record collection and processing to Third
Parties during the Wind-down Transition Period.
Based upon the preceding, Customer and Supplier agree that Customer
shall provide PCS call record collection and processing for no less
than seventy-five percent (75%) of all PCS Subscribers of Customer and
its Embedded Affiliates during the term of the Agreement, excluding
any Wind-down Transition Period.
Notwithstanding the foregoing, the event that Supplier does not have
the capacity or capability to accommodate Customer's Subscribers
Customer may elect any other available solution for PCS call record
collection and processing of such Subscribers.
26.10 Right of First Offer. Customer agrees, with the exceptions noted
below, to provide Supplier the right of first offer to provide
enhanced customer care and billing functionality (e.g., sales
commissions, inventory, hierarchical billing, etc.) although such
right of first offer shall not imply that Supplier is entitled to
provide any minimum percentage of Customer's enhanced customer care
and billing functionality needs. Such offer by Supplier will be made
available to Customer within twenty (20) Days of Customer's request.
After evaluation and negotiation of such offer, as Customer deems
appropriate, Customer will accept or reject Suppliers' offer in
Customer's reasonable business judgment. The exceptions to Supplier's
right of first offer are:
(i) Customer Partners and Customer itself may provide enhanced
customer care functionality to Customer and its Affiliates; and
(ii) Customer has no obligations to provide the right of first offer
to Supplier during the Wind-down Transition Period.
Notwithstanding the preceding, Supplier agrees that until the date of
implementation of the Software Factory, Supplier shall respond within
five (5) Days of Customer's requests for non-Precedent 2000
functionality as to whether or not Supplier will make an offer with
such twenty (20) Day period in response hereto. Supplier's failure to
respond within such five (5) Day period
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Contract Number 96-0032
or to respond that it declines to offer, shall release Customer from
its obligation to Supplier with respect to such requests. Supplier's
right of first offer shall not apply to any request for non-Precedent
2000 functionality made by Customer to Supplier before execution of
the Agreement to which Supplier has chosen not to respond.
26.11 Systems Integration. Supplier and Customer agree to use commercially
reasonable efforts to provide for the integration of Partner provided
Customer Systems with the Precedent 2000 System.
27.0 OWNERSHIP
27.1 Ownership. All equipment, materials, drawings, Software or data of any
description which Supplier receives directly or indirectly from
Customer or from a Third Party on behalf of Customer, is the property
of Customer ("Customer-owned"). Supplier must return all
Customer-owned property to Customer upon Customer's request, or upon
the termination or expiration of this Agreement, or per subsection
7.2.1, as Customer determines. Supplier is responsible and must
account for all Customer-owned property, and bears the risk of loss
while the property is in Supplier's possession. Customer-owned
property may only be used in Supplier's performance of this Agreement.
Customer may inspect any agreements and associated records including
invoices by which Supplier acquires Customer-owned property. Customer
agrees to return or destroy all Supplier Software and Third Party
Software provided hereunder and certify such destruction upon
expiration or termination of this Agreement.
27.2 Assignment of Ownership to Customer Proprietary Supplemental Software.
Supplier must promptly disclose to Customer all intellectual property
generated, conceived or developed by Supplier in connection with
Customer Proprietary Supplemental Software, and will assign and make
physically available to Customer all such intellectual property
generated, conceived or developed under this Agreement, including but
not limited to Proprietary Information, original works of authorship
made for hire hereunder, complete copies of source code and
Documentation of computer programs, inventions conceived or reduced to
practice as a result thereof and any resulting patents. Supplier and
Customer specifically agree that Customer Proprietary Supplemental
Software shall not include (i) Supplier Software described in Exhibit
I; (ii) Supplier provided Third Party Software described in Exhibit O;
(iii) Software items scheduled on Exhibits J or K; or (iv) Software
items produced under Work Order, as to which the Work Order does not
expressly provide that proprietary rights will vest in Customer. Any
works of authorship in any form of expression, including but not
limited to Documentation and Software developed under this Agreement,
belong exclusively to Supplier unless expressly designated as Customer
Proprietary Supplemental Software under this subsection 27.2. If, by
operation of law, the ownership of works for hire specifically
designated as Customer Proprietary Supplemental Software under this
subsection do not automatically vest in Customer, then Supplier will
take necessary steps to assign ownership to Customer. Supplier will
provide reasonable assistance to Customer at Customer's expense to
secure intellectual property protection, including but not limited to
assistance in the preparation and filing of any patent applications,
copyright registrations, and the execution of all applications,
assignments or other instruments for perfection of protection or
title. Supplier will pay its employees any compensation due in
connection with the assignment of any intellectual property or
invention. Supplier warrants to Customer that Supplier's employees are
subject to agreements which will secure Customer's rights under this
Section.
28.0 GENERAL
28.1 Supplier Performances. Time is of the essence in Supplier's
performance. Supplier agrees to use reasonable commercial efforts in
its performance under this Agreement. Customer may inspect Supplier's
performance and Supplier will facilitate inspection. Customer's
inspection (or lack of
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inspection) will not be an acceptance of Services or a waiver of any
right or warranty or preclude Customer from rejecting defective
Services.
28.2 Material/Mechanic's Lien. Supplier will promptly pay for all services,
materials, equipment, labor used under this Agreement, and will hold
Customer harmless from all losses, expenses, and liabilities connected
with Supplier's failure to promptly pay for services, materials
equipment or labor and will keep Customer premises free of claims or
liens. Supplier will furnish Customer with lien waivers from all
approved subcontractors, per Exhibit E.
28.3 Assignment. Customer may assign this Agreement to any Customer
Affiliate or Partner without the consent of Supplier. Otherwise, the
parties agree that this Agreement is personal in nature and neither
party may assign this Agreement or any of its rights or delegate its
obligations without the prior written consent of the other party,
which will not be unreasonably withheld.
28.4 Governing Law. This Agreement is governed by and construed in
accordance with the laws of the State of Missouri without regard to
any conflict of laws provision.
28.5 Laws and Regulations. Supplier will comply with all local, municipal,
state, federal and governmental laws, orders, codes and regulations in
the performance of this Agreement and any Work Orders.
28.6 Permits and Licenses. Supplier will obtain and keep current at
Supplier's expense all governmental permits, certificates and licenses
(including professional licenses, if applicable) necessary for
Supplier to perform the Services.
28.7 Waiver. The waiver of a breach of any term or condition of this
Agreement will not constitute the waiver of any other breach of the
same or any other term.
28.8 Severability. If any provision of this Agreement is held to be
unenforceable, the remaining provisions will remain in effect, to be
construed as if the unenforceable provision were originally deleted.
28.9 Survival. Numbered provisions 5.5, 5.6, 6.3, 7.2, 7.3, 8.4, 8.5, 8.8,
12.3, 13.2, 13.4, 14.12, 15.4, 16.0, 17.4, 20.0, 22.0, 23.0, 27.0,
32.0 and 33.0, will survive the termination of this Agreement, in
addition to any other provisions that by their content are intended to
survive the performance, termination or cancellation of this
Agreement.
28.10 Publicity, Neither party, without prior written consent of the other
party will:
28.10.1 make any news release, public announcement, denial or
confirmation of this Agreement or its subject matter; or
28.10.2 in any manner advertise or publish the fact of this Agreement;
or
28.10.3 disclose the terms or prices of this Agreement.
Withstanding the foregoing, either party may make such announcement
upon advice of counsel that such announcement is reasonably required,
and such consent as stated above in this subsection 28.10 shall not be
unreasonably withheld.
28.11 Force Majeure. Neither party will be liable or deemed to be in
default for any delay or failure in performance under this Agreement
or interruption of Service over which it has no control resulting
directly or indirectly by reason of fire, flood, earthquake, explosion
or other casualty, war or other violence, or any requirement of a
Government agency provided the party so affected takes all
7/8/96 keo. Sprint Spectrum LP Proprietary Information Page 37
<PAGE>
Contract Number 96-0032
reasonable steps to avoid or remove such cause of non-performance and
resumes performance hereunder promptly whenever such causes are
removed.
29.0 SAFETY
29.1 OSHA. Supplier will comply with all Occupational Safety & Health Act
(OSHA) regulations and all other applicable federal, state, and local
rules and regulations that may apply to performance of the Services
required under this Agreement. Supplier must immediately notify
Customer by telephone (followed by written confirmation within
twenty-four (24) hours) of any product or material used in providing
Services that fails to comply with any applicable safety rules or
standards of any government agencies (including the Environmental
Protection Agency) or that contains a defect which could present a
substantial risk to the public health or of injury to the public or
the environment.
29.2 Injury Prevention. If Supplier's work under this Agreement involves
performance on Customer's or Customer Affiliates' premises, Supplier
must take all reasonably necessary precautions to prevent injury to
persons or property during the work and strictly adhere to all
applicable security procedures of Customer or its Customer Affiliate
while on Customer's or Customer Affiliate's premises.
29.3 Weapons Prohibition. Supplier is prohibited from carrying weapons or
ammunition onto Customer's premises or using or carrying weapons while
performing work on Customer's behalf or attending Customer-sponsored
activities. Supplier further agrees to comply with any postings or
notices located at Customer's premises regarding safety, security, or
weapons.
30.0 SECURITY
Supplier agrees to perform background checks on each Supplier employee and
approved subcontractor assigned to Customer in accordance with Supplier's
approved security guidelines. Security access to Customer premises will be
designated on an as needed basis. Supplier will abide by all procedures and
policies applicable to Customer premises.
31.0 AGREEMENT MANAGEMENT
31.1 Agreement Managers. Each party agrees to appoint an Agreement Manager
to act as liaison with the other party in regard to any issues,
concern, question, dispute, concerning this Agreement, as may arise.
In the event the dispute is not resolved in the normal course of
business, the escalation path in subsection 25.1 will apply.
31.2 Service Level Reporting. Supplier will provide capture, calculation,
and reporting of all Service Levels per subsection 7.1.2. Supplier
will report performance on Service Levels monthly to Customer per
mutually agreed upon format and medium, as initially defined during
Implementation planning. Additional Service Levels may be mutually
agreed to and incorporated into this Agreement.
31.3 General Notification. Supplier agrees to make available to Customer
any significant information that is publicly made available to
Supplier by Supplier's equipment manufacturers, Software providers,
and service providers concerning defects, Upgrades, Interoperability,
discontinuation, constraints, and performance.
31.4 Determination of Launch. Customer has the sole responsibility to
determine Customer's date of Launch. If Customer's Launch should
become any date other than November 1, 1996, then Customer will notify
Supplier promptly of such change and the parties will mutually agree
to the action, if any, to be taken by either party in regard to this
Agreement. Customer will be allowed to declare an excusable delay of
Launch up to one-hundred-twenty (120) Days in its schedule, in
7/8/96 keo. Sprint Spectrum LP Proprietary Information Page 38
<PAGE>
Contract Number 96-0032
which case Supplier and Customer agree to simply shift the commitments
based on annual periods month for month until the delay ends. The
Annual Minimum Amount, Initial Term, and the annum for Early
Termination Fees will begin at the end of the delay period. Any
Monthly per Subscriber Fees paid to Supplier during the delay period
will not apply toward the Annual Minimum Amount.
32.0 ACCEPTANCE
Customer will accept Services from Supplier if in substantial conformance
to specification. Customer will have the right in good faith to deny
acceptance of any Service in whole or in part without Penalty which is not
in substantial conformance with specifications. Acceptance of Service will
occur as follows:
32.1 Test Acceptance. Customer's confirmation of successful conclusion of
Acceptance Test per subsection 11.5.
32.2 Implementation Acceptance. Customer's confirmation of successful
conclusion of the Implementation Plan.
32.3 Work Order Acceptance. Customer approval as being in substantial
conformance with specification or use of any work and deliverables
requested per an authorized Work Order.
32.4 Final Acceptance. The Supplier's System will be accepted by Customer
if production operations is in substantial conformance with business
requirements, the functional specifications, feature and function
definition, and any other mutually agreed upon specification. Customer
will have the right to accept each deliverable separately, and to
accept all deliverables fully installed and operating in the Customer
production environment. The final acceptance period will be no greater
than ninety (90) Days.
33.0 SUPPLIER DOCUMENTATION
Supplier Documentation of Services, either directly or indirectly, will be
made available to Customer, its consultants and agents, in at least
electronic media. Such Documentation will be considered Proprietary
Information per Section 16 and will be returned to Supplier, or certified
destroyed, and upon the termination effective date in subsection 7.2 only
if the Documentation is not Customer-owned per Section 27. No markings to
the contrary will limit Customer's right to copy.
34.0 SUPPLIER RELEASE SCHEDULE
Customer has the right to participate with Supplier in the planning of
scheduled dates and content prioritization for Software Releases and
interim dates for Maintenance Releases to Supplier's Software and
Supplier's provided Third Party Software ("Release Schedule"). Supplier
agrees that Customer has a right to participate in the development of the
Release Schedule. Supplier shall commit to a date when Supplier shall
conclude System Testing and provide a Software Release to Customer as
documented in a formal commitment letter issued pursuant to subsection
10.2.6 ("Software Release Date"). Any Supplier provided Enhancement which
was not requested by Customer but is disclosed to Costumer within thirty
(30) Days of the formal commitment letter. Furthermore, Customer has the
right to request to be a beta test Customer. Supplier will apply
commercially reasonable efforts to ensure the timeliness of Maintenance
Releases and Software Releases, including but not limited to the rating,
invoicing, and invoice presentation, driven by any applicable legislative
or federal, state, or local agency.
7/8/96 keo. Sprint Spectrum LP Proprietary Information Page 39
<PAGE>
Contract Number 96-0032
35.0 ENTIRE AGREEMENT
This Agreement, together with the Work Orders, constitutes the entire
Agreement between Customer and Supplier with respect to the subject matter
contained, and may not be amended or modified except by written
document signed by both parties. In the event of an inconsistency between
the terms of this Agreement and those of a Work Order, the provisions of
this Agreement control.
SIGNED:
Sprint Spectrum L.P. Cincinnati Bell Information Systems Inc.
/s/ BERNHARD BLANCHINO /s/ JAMES F. ORR
- - --------------------------- ------------------------
(signature) (signature)
BERNHARD BLANCHINO JAMES F. ORR
- - --------------------------- ------------------------
CHIEF BUSINESS DEVELOPMENT (print name)
OFFICER
PRESIDENT & CEO
- - --------------------------- ------------------------
(title) (title)
July 8, 1996 July 8, 1996
- - -------------------------- ---------------------
(date) (date)
7/8/96 keo. Sprint Spectrum LP Proprietary Information Page 40
<PAGE>
[EXECUTION COPY]
EXHIBIT 10.19
CAPITAL CONTRIBUTION AGREEMENT
CAPITAL CONTRIBUTION AGREEMENT, dated as of July 15, 1996, among SPRINT
CORPORATION, a Kansas corporation ("Sprint"), TELE-COMMUNICATIONS, INC., a
------
Delaware corporation ("TCI"), COMCAST CORPORATION, a Pennsylvania corporation
---
("Comcast"), COX COMMUNICATIONS, INC., a Delaware corporation ("Cox", and
- - --------- ---
collectively with Sprint, TCI and Comcast, the "Parents"), and SPRINT SPECTRUM
-------
L.P., a Delaware limited partnership (the "Borrower").
--------
W I T N E S S E T H:
-------------------
WHEREAS, the Parents, through subsidiaries, indirectly are the sole limited
and general partners of Holding (as defined below); and
WHEREAS, Holding is the sole general partner of the Borrower;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. (a) As used in this Capital Contribution Agreement,
-------------
the following terms shall have the following meanings:
"APC": American PCS, L.P., a Delaware limited partnership.
---
"Business Day": a day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City or Kansas City, Missouri
are authorized or required by law to close.
"Capital Contribution Agreement": this Capital Contribution
------------------------------
Agreement, as amended, supplemented or otherwise modified from time to
time.
"Contractual Obligations": as to any Person, any provision of
-----------------------
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"Contribution Amount": with respect to any Contribution
-------------------
Certificate, the amount, if any, specified in such Contribution
Certificate as the amount by which the expected cash expenditures of
the Borrower and its Restricted Subsidiaries during the period of
three months following the
<PAGE>
2
date of such Contribution Certificate exceeds the cash, cash
equivalents and borrowing availability of the Borrower and its
Restricted Subsidiaries on the date of such Contribution Certificate
plus their expected cash receipts from sources other than borrowings
during such period.
"Contribution Certificate": a certificate of the Chief Executive
------------------------
Officer, President, Chief Financial Officer or Treasurer of the
Borrower, substantially in the form of Exhibit A to this Capital
Contribution Agreement, delivered to each Parent (with a copy to the
Corporate Trustee) pursuant to Section 3, which specifies in
reasonable detail (a) the cash, cash equivalents and borrowing
availability of the Borrower and its Restricted Subsidiaries on the
date of such certificate plus their expected cash receipts from
sources other than borrowings during the period of three months
following the date of such certificate and (b) the expected cash
expenditures of the Borrower and its Restricted Subsidiaries for such
period.
"Corporate Trustee": as defined in the Trust Agreement.
-----------------
"EquipmentCo": Sprint Spectrum Equipment Company, L.P., a
-----------
Delaware limited partnership.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Holding": Sprint Spectrum Holding Company, L.P., a Delaware
-------
limited partnership, the general partner of the Borrower.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever.
"Partnership Agreement": the Amended and Restated Agreement of
---------------------
Limited Partnership of Holding, dated as of January 31, 1996, among
the Partnership Subsidiaries, as amended, supplemented or otherwise
modified from time to time.
"Partnership Subsidiary": with respect to Sprint, Sprint
----------------------
Enterprises, L.P.; with respect to TCI, TCI Telephony Services, Inc.;
with respect to Comcast, Comcast Telephony Services; and with respect
to Cox; Cox Telephony Partnership.
<PAGE>
3
"Percentage Interest": with respect to Sprint, 40%; with respect
-------------------
to TCI, 30%; with respect to Comcast, 15%; and with respect to Cox,
15%.
"Person": an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Public Debt Rating": with respect to any Person, the actual or
------------------
implied rating of such Person's senior long-term unsecured debt by a
Rating Agency.
"Rating Agency": each of Standard and Poor's Ratings Services
-------------
and Moody's Investors Service, Inc.
"RealtyCo": Sprint Spectrum Realty Company, L.P., a Delaware
--------
limited partnership.
"Restricted Subsidiary": any Subsidiary of the Borrower that is
---------------------
not an Unrestricted Subsidiary.
"Requirement of Law": as to any Person, the partnership
------------------
agreement, the certificate of incorporation and by-laws or other
organizational or governing documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such
Person or any of its property is subject.
"Secured Instruments": as defined in the Trust Agreement.
-------------------
"Specified Affiliate Debt": any indebtedness incurred by an
-------------------------
affiliate of the Borrower (a) the debt service in respect of which the
Borrower is entitled to fund through the making of distributions that
are permitted by all Secured Instruments then in existence and (b)
which has been identified as such by the Borrower in a written notice
delivered by the Borrower to the Trustee.
"Subsidiary": as to any Person, a corporation, partnership or
----------
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interest having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of
<PAGE>
4
which is otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person.
"Triggering Event": any delivery by the Borrower to the Parents
----------------
(with a copy to the Corporate Trustee) pursuant to Section 3 of a
Contribution Certificate showing a Contribution Amount for the three
month period covered by such Contribution Certificate.
"Trust Agreement": the Trust Agreement to be entered into among
---------------
the Borrower, First Union National Bank, as corporate trustee, and
Kenneth D. Benton, as individual trustee, as amended, supplemented or
otherwise modified from time to time.
"Unrestricted Subsidiary": APC and any other Subsidiary of the
-----------------------
Borrower (other than WirelessCo, EquipmentCo and RealtyCo) that the
Borrower designates as an Unrestricted Subsidiary in accordance with
the applicable provisions of the Secured Instruments, provided,
--------
however, that the Borrower may cause any Unrestricted Subsidiary to
-------
become a Restricted Subsidiary to the extent permitted by the
applicable provisions of the Secured Instruments.
"WirelessCo": WirelessCo, L.P., a Delaware limited partnership.
----------
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Capital Contribution Agreement shall refer to this
Capital Contribution Agreement as a whole and not to any particular provision of
this Capital Contribution Agreement, and Section and paragraph references are to
this Capital Contribution Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Capital Contribution. (a) Upon the occurrence of a Triggering Event,
--------------------
each Parent shall contribute, or shall cause to be contributed, to the Borrower
such Parent's Percentage Interest of the Contribution Amount applicable to such
Triggering Event within 5 Business Days of the occurrence of such Triggering
Event; provided, however, that no Parent shall be required to contribute in the
-------- -------
aggregate more than that amount which is equal to (i) its Percentage Interest of
the sum of (A) $1,000,000,000, (B) the Agreed Value of the License Contribution
and (C) the Agreed Value of the Omaha License (calculated as of the earlier of
the date on which the Omaha License is contributed or the date that the
Contribution Certificate to which the Triggering Event relates is delivered)
less (ii) the sum of (A) the amount of any cash equity contributions not
otherwise required to be made pursuant to this paragraph that are made by such
Parent or any of its Subsidiaries (through one or more intermediate partnerships
or
<PAGE>
5
corporations) to the Borrower subsequent to December 31, 1995 (other than cash
equity contributions which are the proceeds of Specified Affiliate Debt or which
are used to fund the acquisition of any entity which does not become a
Restricted Subsidiary upon such acquisition), (B) such Parent's Percentage
Interest of the amount of the aggregate cash proceeds of equity capital (other
than equity capital which is the proceeds of Specified Affiliate Debt) obtained
by the Borrower from sources other than the Parents or any of their respective
Subsidiaries subsequent to December 31, 1995 and (C) in the case of Cox, the
Agreed Value of the License Contribution and the Agreed Value of the Omaha
License (calculated as of the earlier of the date on which the Omaha License is
contributed or the date that the Contribution Certificate to which the
Triggering Event relates is delivered). As used in this Section 2, the terms
"Agreed Value," "License Contribution" and "Omaha License" have the meanings
given to them in the Partnership Agreement.
(b) Each contribution made, or caused to be made, by each Parent pursuant
to paragraph (a) of this Section 2 and Section 5 shall be deemed a contribution
made by such Parent's Partnership Subsidiary to Holding pursuant to Section 2 of
the Partnership Agreement and a contribution by Holding to the Borrower.
3. Delivery of Contribution Certificates. The Borrower may deliver
-------------------------------------
Contribution Certificates hereunder as frequently as it shall deem necessary in
order to prevent the occurrence of any cash shortfall while this Capital
Contribution Agreement is in effect, and in any event the Borrower shall deliver
Contribution Certificates not less frequently than once each fiscal quarter
while this Capital Contribution Agreement is in effect.
4. Payments. The contributions made hereunder by the Parents will be paid
--------
to the Borrower without set-off or counterclaim in U.S. dollars and in
immediately available funds to such account as the Borrower shall from time to
time notify the Parents in writing.
5. Parent(s) Failure to Make Contribution(s). If any Parent fails to make
-----------------------------------------
any contribution required to be made by it under the terms of this Capital
Contribution Agreement, any one or all of the other Parents may, but shall not
be obligated to, make such contribution in addition to its own contribution in
accordance with (i) the same procedures that would be applicable if the capital
call had been made under the Partnership Agreement or (ii) such other procedures
as the Parents may agree upon.
6. Valid Obligations. The obligations of the Parents under this Capital
-----------------
Contribution Agreement are enforceable against the Parents without regard to the
legality, validity or enforceability of any obligations of the Borrower,
including the Secured Obligations, and without regard to any modification of
such obligations that may be effected, with or without the consent of the
Parents.
<PAGE>
6
7. Representations and Warranties. Each Parent hereby represents and
------------------------------
warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Capital
Contribution Agreement, and has taken all necessary corporate action to
authorize its execution, delivery and performance of this Capital Contribution
Agreement;
(c) this Capital Contribution Agreement constitutes a legal, valid and
binding obligation of such Parent, enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing;
(d) the execution, delivery and performance of this Capital Contribution
Agreement will not violate in any material respect any provision of any
Requirement of Law or Contractual Obligation of such Parent and will not result
in or require the creation or imposition of any Lien on any of the properties or
revenues of such Parent pursuant to any such Requirement of Law or Contractual
Obligation of such Parent; and
(e) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority is required in connection
with the execution, delivery, performance, validity or enforceability of this
Capital Contribution Agreement, other than any of the foregoing that have been
obtained and are in full force and effect.
8. Notices. (a) All notices, requests and demands hereunder to or upon
-------
the Borrower or any Parent to be effective shall be in writing (or by fax or
similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (i) when delivered by hand or (ii) if given by mail,
five days after being deposited in the mails by certified mail, return receipt
requested, or (iii) if by fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed to such Parent or the Borrower at its
address or transmission number for notices set forth under its signature below.
(b) The Parents and the Borrower may change their respective addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
<PAGE>
7
9. Severability. Any provision of this Capital Contribution Agreement
------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10. Expenses of Enforcement. Each Parent agrees to pay or reimburse the
-----------------------
Borrower for all out-of-pocket costs and expenses (including reasonable fees and
disbursements of counsel) incurred in enforcing such Parent's obligations
hereunder.
11. Integration. This Capital Contribution Agreement represents the
-----------
agreement of the Parents with respect to the subject matter hereof, and there
are no promises or representations by the Borrower or the Parents relative to
the subject matter hereof not reflected herein (including by reference to the
Partnership Agreement). This Capital Contribution Agreement is in addition to
the Partnership Agreement but (except as provided in Section 2(b)), does not
supersede or otherwise modify any provisions of the Partnership Agreement.
12. Amendments in Writing. None of the terms or provisions of this
---------------------
Capital Contribution Agreement may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by each of the parties hereto.
13. Section Headings. The Section headings used in this Capital
----------------
Contribution Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
14. Successors and Assigns. (a) This Capital Contribution Agreement
----------------------
shall be binding upon and inure to the benefit of each of the parties hereto and
their successors and assigns; provided that no Parent may assign any of its
--------
obligations hereunder unless such Parent ceases to own directly or indirectly
any interest in Holding, in which event such Parent may assign its obligations
hereunder to the parent/parents of the entity/entities which has/have acquired
such Parent's direct or indirect interest in Holding, and such Parent shall be
automatically released from its obligations hereunder as a result of such
assignment if, after giving effect to such assignment and assumption by such
assignee of such assignor Parent's obligations hereunder, such assignee has a
Public Debt Rating by either Rating Agency at least equivalent to the lower of
(i) the Public Debt Rating of such assignor Parent by such Rating Agency on the
date of this Capital Contribution Agreement and (ii) the Public Debt Rating of
such assignor Parent by such Rating Agency immediately prior to such assignment.
(b) The Parents hereby acknowledge that the Borrower has granted the
Corporate Trustee the right to enforce this Capital Contribution Agreement on
the Borrower's behalf, and the Parents hereby consent thereto.
<PAGE>
8
15. Submission to Jurisdiction; Waivers. Each Parent hereby irrevocably
-----------------------------------
and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Capital Contribution Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Parent at its
address set forth under its signature below or at such other address of which
the Borrower shall have been notified pursuant hereto; and
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction.
16. Governing Law. This Capital Contribution Agreement shall be governed
-------------
by, and construed and interpreted in accordance with, the law of the State of
New York.
IN WITNESS WHEREOF, each of the undersigned has caused this Capital
Contribution Agreement to be duly executed and delivered by its duly authorized
officer as of the day and year first above written.
SPRINT CORPORATION
By: /s/ Theodore H. Schell
---------------------------------------
Title: Senior Vice President
Address for Notices:
Sprint Enterprises, L.P.
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attention: Chief Financial Officer
Fax: (913) 624-8426
<PAGE>
9
with a copy to:
Sprint Enterprises, L.P.
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attention: Corporate Secretary
Fax: (913) 624-2256
TELE-COMMUNICATIONS, INC.
By: /s/ Brendan Clouston
---------------------------------------
Title: Executive Vice President
Address for Notices:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: Brendon Clouston, Executive Vice
President
Fax: 303-488-3200
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
Suite 2900
New York, New York 10022-6030
Attention: Elizabeth M. Markowski
Fax: 212-705-5125
<PAGE>
10
COMCAST CORPORATION
By: /s/ Lawrence Smith
---------------------------------------
Title:
Address for Notices:
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Attention: General Counsel
Fax: 215-981-7794
COX COMMUNICATIONS, INC.
By: /s/ James O. Robbins
---------------------------------------
Title: President
Address for Notices:
Cox Communications, Inc.
1400 Lake Hearn Drive
Atlanta, Georgia 30319-1464
Attention: James O. Robbins, President
Fax: 404-843-5804
with a copy to:
Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-6802
Attention: David D. Wild
Fax: 202-776-2222
<PAGE>
11
SPRINT SPECTRUM L.P.
By: /s/ Robert M. Neumeister
---------------------------------------
Title: CFO
Address for Notices:
Sprint Spectrum L.P.
4717 Grand Avenue, 5th Floor
Kansas City, Missouri 64115
Attention: Treasurer
Fax: 816-559-1490
with a copy to:
Sprint Spectrum L.P.
4900 Main Street, 12th Floor
Kansas City, Missouri 64113
Attention: General Counsel
Fax: 816-559-2591
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 3 to Registration Statement No.
333-06609 on Form S-1 of Sprint Spectrum L.P. and subsidiary of our report
dated March 29, 1996 (July 8, 1996 as to Note 4) relating to the financial
statements of Sprint Spectrum L.P. and subsidiary and our report dated March
29, 1996 (July 8, 1996 as to Note 6) relating to the financial statements of
Sprint Spectrum Holding Company, L.P. and subsidiaries (which reports include
an explanatory paragraph referring to the development stage of Sprint Spectrum
L.P. and subsidiary and Sprint Spectrum Holding Company, L.P. and
subsidiaries) appearing in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Kansas City, Missouri
July 29, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 19, 1996 relating
to the financial statements of American PCS, L.P., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Washington, DC
July 29, 1996
<PAGE>
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
SPRINT SPECTRUM L.P.
(Exact name of obligor as specified in its charter)
Delaware 48-1165245
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SPRINT SPECTRUM FINANCE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 43-1746537
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4717 Grand Avenue - Fifth Floor
Kansas City, Missouri 64112
(Address of principal executive offices) (Zip code)
______________________
% Senior Notes Due 2006
-
(Title of the indenture securities)
================================================================================
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- - --------------------------------------------------------------------------------
Name Address
- - --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 29th day of July, 1996.
THE BANK OF NEW YORK
By: /S/ NANCY B. GILL
--------------------------
Name: NANCY B. GILL
Title: ASSISTANT TREASURER
<PAGE>
EXHIBIT 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
SPRINT SPECTRUM L.P.
(Exact name of obligor as specified in its charter)
Delaware 48-1165245
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SPRINT SPECTRUM FINANCE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 43-1746537
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4717 Grand Avenue - Fifth Floor
Kansas City, Missouri 64112
(Address of principal executive offices) (Zip code)
______________________
% Senior Discount Notes Due 2006
-
(Title of the indenture securities)
================================================================================
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- - --------------------------------------------------------------------------------
Name Address
- - --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 29th day of July, 1996.
THE BANK OF NEW YORK
By: /S/ NANCY B. GILL
--------------------------
Name: NANCY B. GILL
Title: ASSISTANT TREASURER
