<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 333-
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- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SPRINT SPECTRUM HOLDING COMPANY, L.P.
(EXACT NAME OF CO-REGISTRANT GUARANTOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 48-1165242
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
---------------
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. [_]
CALCULATION OF REGISTRATION FEE
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- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- - --------------------------------------------------------------------------------
<S> <C> <C>
% Senior Notes due 2006..................... $150,000,000 $ 51,724
- - --------------------------------------------------------------------------------
% Senior Discount Notes due 2006............ $500,000,000 $172,414
- - --------------------------------------------------------------------------------
Guarantees(2)................................ $650,000,000 --
- - --------------------------------------------------------------------------------
Total........................................ $650,000,000 $224,138
- - --------------------------------------------------------------------------------
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is payable with respect to the Guarantees.
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
10. Interests of Named Experts and Federal Income Tax Consequences
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 JUNE 21, 1996
PROSPECTUS
$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
UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY
SPRINT SPECTRUM HOLDING COMPANY, L.P.
----------
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"). 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." The Notes will be fully
and unconditionally guaranteed on a senior unsecured basis by Sprint Spectrum
Holding Company, L.P. (the "Guarantor").
(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>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(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 and the Guarantor, 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 and the Guarantor
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 (as defined) of
Sprint Spectrum, the Guarantor 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.
The Notes will be senior unsecured 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--Disposition of Proceeds of Asset Sales." There can be no assurance
that the Issuers or the Guarantor 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."
2
<PAGE>
[MAP TO COME]
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.
3
<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." To date, 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) licenses which are held by WirelessCo,
are held at Holdings. Holdings and the Company will reorganize (the
"Reorganization") operations so that the assets used in the Company's PCS
business will be owned by subsidiaries of Sprint Spectrum and the investment in
APC will be transferred to Holdings. Unless otherwise indicated, all
information in this Prospectus assumes that the Reorganization has 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 commence marketing efforts and launch commercial service
in certain MTAs in the fourth quarter of 1996 and to continue to expand its
coverage in its PCS markets to reach approximately 70% of the Pops in its
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 license areas in the aggregate,
thereby substantially completing its planned network buildout.
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 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"). 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").
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
$1.0 billion is expected to be, but is not presently committed to be, provided
by the Parents), resulting in $3.6 billion in aggregate invested equity capital
in the Company. 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."
4
<PAGE>
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. 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. Subject to certain conditions,
Holdings is entitled to increase its percentage ownership in APC, and
consequently may assume the management of APC. 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 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.
The table below presents the owned and affiliated Pops:
<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)................ 1 1.7 $ 3.06
Affiliated:
APC (Baltimore/Washington)(2).......... 1 8.3 $13.16
Cox-California (Los Angeles/San Die-
go)(3)................................ 1 21.5 $13.16
PhillieCo (Philadelphia)(4)............ 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).
(2) Holdings owns a 49% limited partnership interest in APC, which has signed
an affiliation agreement with the Company.
(3) Holdings intends to acquire a 49% limited partnership interest in, and the
Company expects to sign an affiliation agreement with, Cox-California.
(4) 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-based telephony 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 commence marketing efforts and launch commercial
service in the fourth quarter of 1996 and to continue to expand its coverage in
its PCS markets to reach approximately 70% of the Pops in its 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 license areas in the aggregate, thereby substantially
completing its planned network buildout.
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 1,350 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, license acquisitions, 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 after 1998 for coverage expansion, volume-driven
network capacity and other capital expenditures for existing and new license
areas (if any), new license acquisitions or affiliation arrangements (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 External
Financing (as defined). 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, 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 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. The
Company's business plan and the financial covenants and other terms of the
External Financing will require such additional equity financing prior to the
end of 1998, absent a new financing source. The
7
<PAGE>
$0.8 billion balance (of the $4.2 billion) that may be available to Holdings
from its Partners may be used by Holdings to fund the Company's capital needs,
Holdings' other affiliate commitments and/or to make other wireless
investments. See "Risk Factors--Substantial Capital Requirements and Liquidity"
and "The Partnership Agreements--Holdings Partnership Agreement--Capital
Contributions" for a discussion of the equity capital commitments to Holdings.
The Company has entered into agreements with certain third-parties that have
committed to provide up to $5.1 billion of senior secured loans. The Company
has entered into an agreement with 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. The Company
has also entered into an agreement with 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. The Company has also entered into an agreement with Chase Securities
Inc. and Chemical Bank (together, "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 "External
Financing") to finance working capital, capital expenditures, operating losses
and other partnership purposes. There can be no assurance that the conditions
for borrowing 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 External Financing and as to how the
Company will elect to use available amounts under those facilities. See
"Description of Vendor Contracts and Financing."
<TABLE>
<CAPTION>
SOURCES:
-------- (IN BILLIONS)
<S> <C>
Equity Contributions Received(1)............................... $2.2
Unfunded Equity(2)............................................. 1.0
Vendor Financing(3)............................................ 2.6
Bank Credit Facility(4)........................................ 1.1
Net Proceeds to the Company from the Offering.................. 0.6
Future Capital Required(5)..................................... 0.4
----
Total Sources................................................ $7.9
====
USES:
PCS Licenses................................................... $2.1
PCS Network Buildout........................................... 3.8
Cash Debt Service Requirements(6).............................. 0.2
Operating Losses and Working Capital........................... 1.8
----
Total Uses................................................... $7.9
====
</TABLE>
- - --------
(1) As of March 31, 1996.
(2) While 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," it is
expected that approximately $1.0 billion of additional funding will be
obtained in the form of equity from Holdings through the capital
contribution provisions of the Holdings Partnership Agreement. The
Company's business plan and the financial covenants and other terms of the
External Financing will require such additional equity financing prior to
the end of 1998, absent a new financing source.
(3) The Company has 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.
(4) The Company 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.
(5) The Company's business plan assumes that such additional capital will be
obtained in the form of equity (from the Partners or other sources), but 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.
(6) 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.
Guarantee................... The Notes will be guaranteed on a senior
unsecured basis by the Guarantor (the "Guaran-
tee"). See "Description of the Notes--
Guarantees." None of the Issuers' subsidiaries
will initially guarantee the Notes. The Senior
Notes and the Senior Discount Notes are non-re-
course to the Partners and the Parents.
Maturity Date............... , 2006.
Ranking..................... The Notes will rank pari passu in right of pay-
ment and priority with all other existing and fu-
ture 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 Is-
suers 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 ac-
cordingly, claims of holders of the Notes will be
effectively subordinated to claims of creditors
(including trade creditors) of such subsidiaries.
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
9
<PAGE>
to the difference between the issue price of the
Senior Discount Notes and the sum of all cash
payments (whether denominated as principal or in-
terest) to be made thereon. Each holder of a Se-
nior 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 interest 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) of Common Equity Interests (as defined) of
Sprint Spectrum, the Guarantor or a Special Pur-
pose Corporation (as defined), in either case,
resulting in gross proceeds of at least $100 mil-
lion; provided that at least 65% of the origi-
nally 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.
Change of Control........... 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 Change of Control Payment Date (as defined)
and (ii)(a) 101% of the Accreted 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 ma-
turity of the Senior Discount Notes, plus accrued
and unpaid interest, if any, thereon to the
Change of Control Payment Date, if the Change of
Control Payment Date is after , 2001.
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 Senior Notes, plus accrued and unpaid in-
terest, 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
principal amount
10
<PAGE>
of the Senior Discount Notes, plus accrued and
unpaid interest, if any, thereon to the purchase
date, if such date is after , 2001. See
"Description of the Notes--Certain Covenants--
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), (v) limitations on equity interests
of Restricted Subsidiaries, (vi) limitations on
transactions with equity holders and affiliates,
(vii) limitations on issuances of certain guaran-
tees by Restricted Subsidiaries, (viii) limita-
tions on activities of the Issuers and the Re-
stricted Subsidiaries, (ix) limitations on the
disposition of proceeds of asset sales and (x)
limitations on designations of Unrestricted Sub-
sidiaries (as defined). In addition, the Inden-
tures will limit the ability of the Issuers to
consolidate, merge or sell all or substantially
all of their assets. These covenants are subject
to important exceptions and qualifications. 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
$ , after deducting estimated discounts, com-
missions and offering expenses. The Company in-
tends to use the net proceeds from the Offering
to fund capital expenditures, including the
buildout of a nationwide PCS network, to fund
working capital and debt service requirements, to
fund operating losses and for other partnership
purposes.
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 Holdings 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 Holdings. 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 Holdings. Due to the development stage nature
of Holdings and 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 Holdings or
the Company. The following data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Holdings' consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
As permitted by the rules and regulations of the Securities and Exchange
Commission (the "Commission"), Holdings' consolidated financial information is
presented in this Prospectus. The Company's consolidated financial information
has not been separately included for the periods presented because it would not
reflect the financial condition of the Company following the planned transfer
of all of Holdings' assets used in the Company's PCS business to the Company
(expected to occur on July 1, 1996) and the planned distribution of the
Company's interest in APC to Holdings. To assist prospective investors, the pro
forma and as adjusted data set forth below reflect the historical financial
information of Holdings as adjusted (1) to present pro forma financial
information reflecting how the financial statements of the Company might have
appeared if such Reorganization had occurred as of the beginning of the periods
presented or as of the date presented and (2) to present such pro forma
financial information for the Offering as if it 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 $ 37,460 $ 1,273 $ 19,862 $ 58,693 $ 37,460 $ 19,862
Professional and legal
fees.................. 1,923 28,880 2,335 10,862 41,665 26,849 10,862
Depreciation........... 38 211 47 254 503 211 254
------- --------- ------- -------- --------- -------- --------
Total operating
expenses.............. 3,332 66,551 3,655 30,978 100,861 64,520 30,978
Other income (expense):
Interest income........ 24 460 275 (291) 193 260 (358)
Other income........... -- 38 -- 143 181 38 143
Equity in loss of
unconsolidated
partnership........... -- (46,206) (3,409) (36,232) (82,438) -- --
Limited partner
interest in net
(income) loss of
consolidated
subsidiary............ -- 1,830 -- (67) 1,763 -- --
------- --------- ------- -------- --------- -------- --------
Total other income
(expense)............. 24 (43,878) (3,134) (36,447) (80,301) 298 (215)
------- --------- ------- -------- --------- -------- --------
Net loss................ $(3,308) $(110,429) $(6,789) $(67,425) $(181,162) $(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............ $ 4,974 $ 4,974 $ 654,974(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 76,129
---------- ---------- ----------
Total assets.............. $2,338,666 $2,205,697 $2,855,697
========== ========== ==========
Liabilities and partners'
capital:
Current liabilities....... $ 96,884 $ 96,870 $ 96,870
Deferred compensation..... 4,247 4,247 4,247
Note payable to
affiliate................ -- 5,000 5,000
Long-term debt............ -- -- 650,000(1)
Limited partner interest
in consolidated
subsidiary............... 13,237 10,000 10,000
Partners' capital......... 2,224,298 2,089,580 2,089,580
---------- ---------- ----------
Total liabilities and
partners' capital........ $2,338,666 $2,205,697 $2,855,697
========== ========== ==========
</TABLE>
- - -------
(1) 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. The Company is currently conducting a search for a new Chief
Executive Officer to succeed Ronald LeMay, who has returned to Sprint as
President and Chief Operating Officer. However, Mr. LeMay is continuing with
the Company as Chief Executive Officer and President until such time as a
successor is named. In addition, the Company is actively searching for a
senior marketing executive. See "Business--General" and "Management."
OPERATING LOSSES AND NEGATIVE CASH FLOW FROM OPERATIONS
As of March 31, 1996, Holdings had incurred cumulative net losses of
approximately $181.2 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
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, license acquisitions, 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 after 1998 for coverage expansion,
volume-driven network capacity and other capital expenditures for existing and
new license areas (if any), new license acquisitions or affiliation
arrangements (if any), working capital, debt service requirements and
anticipated further operating losses. 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. The Company will
have certain
13
<PAGE>
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 External Financing. 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, 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 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. 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 customary
conditions which must be satisfied in order for the Company to access funds.
The Company has also 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
Bank Credit Facility will also include certain conditions to borrowing
availability. See "Description of Vendor Contracts and Financing--Bank Credit
Facility." 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.
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 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. The Company's
business plan and the financial covenants and other terms of the External
Financing will require such additional equity financing prior to the end of
1998, absent a new financing source. The $0.8 billion balance (of the $4.2
billion) that may be available to Holdings from its Partners may be used by
Holdings to fund the Company's capital needs and its other affiliate
commitments or to make other wireless investments. Amounts budgeted by the
Company, as approved by the Partners in future years, will determine the
extent to which the commitments will actually be utilized. See "--Substantial
Capital Requirements and Liquidity" 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 External Financing 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 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."
14
<PAGE>
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 June 14, 1996, 746 relocation agreements were under
negotiation, 289 agreements had been reached and 101 paths had been relocated.
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 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. 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.
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 June 14, 1996, the Company had signed leases
or options for 2,705 sites of which 477 were pending zoning and 245 were zoned
and ready for construction. There are currently 133 sites under construction.
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.
15
<PAGE>
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 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. 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
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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. 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.
Currently there are expected to be limited suppliers of CDMA handsets.
Although the Company 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. The Company 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, that terms satisfactory to the
Company 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.
AFFILIATE TRANSACTIONS; CONFLICTS OF INTEREST
The Company currently engages and intends to continue to engage in
transactions with the Parents, including those transactions described below.
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.
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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 the Parents will not develop. See "The Partnership
Agreements--Holdings Partnership Agreement" and "Certain Relationships and
Related Transactions."
DEADLOCK EVENT
The Holdings Partnership Agreement (as defined) provides that Holdings will
be dissolved upon the failure of the General Partners (as defined) to resolve
a "Deadlock Event," which is deemed to occur if the Partnership Board (as
defined) (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). 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 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. 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."
The External 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 External 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 External 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 External Financing notwithstanding the
ability of the Company to meet its debt service obligations. An event of
default under the External 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."
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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 External 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.
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). Therefore, the 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 the Company to incur substantial indebtedness, including
indebtedness expected to be incurred under the External 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 External
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 External Financing is accelerated, the lenders under the
External Financing would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to the terms of the External
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.
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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.
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.
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
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(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. 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), 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) 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."
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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. There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to effect a Change of Control
Offer (as defined). See "Description of the Notes." In addition, 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.
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 securities exchange or quoted on
any automated 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.
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THE COMPANY
Sprint Spectrum was formed in March 1995 as a Delaware limited partnership.
Sprint Spectrum currently has three limited partnership subsidiaries:
WirelessCo which was formed in 1994 in anticipation of the FCC auctions and
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 formed 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 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.
The following is a chart of the ownership structure of Holdings and the
Company:
(MAC ART)
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.
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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 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.
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USE OF PROCEEDS
The net proceeds to Sprint Spectrum from the sale of the Notes offered
hereby are estimated to be approximately $ , after deducting estimated
discounts, commissions and offering expenses. Holdings and 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 and debt service
requirements, to fund operating losses and for other partnership purposes. See
"Prospectus Summary--Network Buildout and Financing Plan."
CAPITALIZATION
The following tables set forth as of March 31, 1996 (i) the actual
capitalization of Holdings and the capitalization of Holdings as adjusted to
reflect the Offering and (ii) 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 Holdings and
notes thereto appearing elsewhere in this Prospectus, including Note 8 thereto
which sets forth summary consolidated financial information for the Company.
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 External Financing.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------
AS ADJUSTED FOR
ACTUAL THE OFFERING
---------- ------------------
(IN THOUSANDS)
<S> <C> <C>
HOLDINGS:
Cash and cash equivalents...................... $ 3,119 $ 653,119 (1)
========== ==========
Long-term debt:
Senior Notes offered hereby.................. $ -- $ 150,000
Senior Discount Notes offered hereby......... -- 500,000 (2)
---------- ----------
Total long-term debt....................... -- 650,000 (1)
Limited partner interest in consolidated sub-
sidiary....................................... 13,237 13,237
Partners' capital and accumulated deficit:
Partners' capital............................ 2,405,460 2,405,460
Deficit accumulated during the development
stage....................................... (181,162) (181,162)
---------- ----------
Total partners' capital.................... 2,224,298 2,224,298
---------- ----------
Total capitalization..................... $2,237,535 $2,887,535
========== ==========
<CAPTION>
MARCH 31, 1996
------------------------------
PRO FORMA FOR THE
REORGANIZATION
AND AS ADJUSTED
ACTUAL FOR THE OFFERING
---------- ------------------
(IN THOUSANDS)
<S> <C> <C>
THE COMPANY:
Cash and cash equivalents...................... $ -- $ 653,119 (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 (1)
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 gross proceeds of $650 million from the Offering before
underwriting discounts and commissions and expenses.
(2) Reflects gross proceeds from the issuance of the Senior Discount Notes.
25
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents selected historical consolidated financial data
for Holdings 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 Holdings. 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 Holdings. Due to the development
stage nature of Holdings and 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 Holdings or the Company. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Holdings' consolidated financial statements and
the notes thereto included elsewhere in this Prospectus. After the Offering,
pursuant to the Indentures, Sprint Spectrum will file reports with the
Commission and the Trustees (as defined) presenting financial information of
Sprint Spectrum.
As permitted by the rules and regulations of the Commission, Holdings'
consolidated financial information is presented in this Prospectus. The
Company's consolidated financial information has not been separately included
for the periods presented because it would not reflect the financial condition
of the Company following the planned transfer of all of Holdings' assets used
in the Company's PCS business to the Company (expected to occur on July 1,
1996) and the planned distribution of the Company's interest in APC to
Holdings. To assist prospective investors, the pro forma and as adjusted data
set forth below reflect the historical financial information of Holdings as
adjusted (1) to present pro forma financial information reflecting how the
financial statements of the Company might have appeared if such Reorganization
had occurred as of the beginning of the periods presented or as of the date
presented and (2) to adjust such pro forma financial information for the
Offering as if it had occurred on March 31, 1996.
<TABLE>
<CAPTION>
FOR THE
FOR THE CUMULATIVE
PERIOD FROM PERIOD FROM PRO FORMA FOR THE
OCTOBER 24, OCTOBER 24, REORGANIZATION
1994 FOR THE THREE 1994 --------------------------
(DATE OF FOR THE MONTHS ENDED (DATE OF FOR THE FOR THE THREE
INCEPTION) TO YEAR ENDED MARCH 31, 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 $ 37,460 $ 1,273 $ 19,862 $ 58,693 $ 37,460 $ 19,862
Professional and legal
fees.................. 1,923 28,880 2,335 10,862 41,665 26,849 10,862
Depreciation........... 38 211 47 254 503 211 254
------- --------- ------- -------- ---------- ---------- ----------
Total operating
expenses.............. 3,332 66,551 3,655 30,978 100,861 64,520 30,978
Other income (expense):
Interest income........ 24 460 275 (291) 193 260 (358)
Other income........... -- 38 -- 143 181 38 143
Equity in loss of
unconsolidated
partnership........... -- (46,206) (3,409) (36,232) (82,438) -- --
Limited partner
interest in net
(income) loss of
consolidated
subsidiary............ -- 1,830 -- (67) 1,763 -- --
------- --------- ------- -------- ---------- ---------- ----------
Total other income
(expense)............. 24 (43,878) (3,134) (36,447) (80,301) 298 (215)
------- --------- ------- -------- ---------- ---------- ----------
Net loss................ $(3,308) $(110,429) $(6,789) $(67,425) $(181,162) $(64,222) $(31,193)
======= ========= ======= ======== ========== ========== ==========
RATIO OF EARNINGS TO
FIXED CHARGES -- (1) -- (1) -- (1) -- (1) -- (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...................................................... $ 4,974 $ 4,974 $ 654,974 (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 76,129
---------- ---------- ----------
Total assets........................................................ $2,338,666 $2,205,697 $2,855,697
========== ========== ==========
Liabilities and partners' capital:
Current liabilities................................................. $ 96,884 $ 96,870 $ 96,870
Deferred compensation............................................... 4,247 4,247 4,247
Note payable to affiliate........................................... -- 5,000 5,000
Long-term debt...................................................... -- -- 650,000 (2)
Limited partner interest in consolidated subsidiary................. 13,237 10,000 10,000
Partners' capital................................................... 2,224,298 2,089,580 2,089,580
---------- ---------- ----------
Total liabilities and partners' capital............................. $2,338,666 $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, $64,223,000 and $67,531,000 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. 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. Holdings had no fixed
charges as defined for any of the periods indicated.
(2) Reflects gross proceeds of $650 million from the Offering before
underwriting discounts and commissions and expenses.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
Holdings' consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. As permitted by the rules and regulations of the
Commission, Holdings' consolidated financial information is presented in this
Prospectus. The Company's consolidated financial information has not been
separately included for the periods presented because it would not reflect the
financial condition of the Company following the planned transfer of all of
Holdings' assets used in the Company's PCS business to the Company (expected
to occur on July 1, 1996) and the planned distribution of the Company's
interest in APC to Holdings. 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."
GENERAL
Holdings and the Company are development stage enterprises 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. Holdings 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.
To date, Holdings 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 commence
marketing efforts and launch commercial service in the fourth quarter of 1996
and to continue to expand its coverage in its PCS markets to reach
approximately 70% of the Pops in its 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 license areas in the aggregate, thereby substantially completing its
planned network buildout. The extent to which Holdings 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.
Holdings is a limited partnership formed by subsidiaries of Sprint, TCI,
Comcast and Cox. Holdings owns or will own partnership interests in Sprint
Spectrum (greater than 99% interest), APC (49% interest) and Cox-California
(49% interest). The Company has four subsidiaries: WirelessCo, RealtyCo,
EquipmentCo and FinCo.
LIQUIDITY AND CAPITAL RESOURCES
The Company
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, license acquisitions, 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 after 1998 for coverage expansion and
volume-driven network capacity and other capital expenditures for existing and
new license areas (if any), new license acquisitions or affiliation
arrangements (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 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
27
<PAGE>
in the event of significant departures from the current business plan,
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. 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. The Company's business plan and the financial covenants and
other terms of the External Financing are expected to require such additional
equity financing prior to the end of 1998, absent a new financing source. The
$0.8 billion balance (of the $4.2 billion) that may be available to Holdings
from its Partners may be used by Holdings to fund the Company's capital needs
and its other affiliate commitments or to make other wireless investments.
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" and "The Partnership
Agreements--Holdings Partnership Agreement--Capital Contributions" for a
discussion of the equity capital commitments to Holdings.
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 Vendor Financing will contain certain
customary conditions which must be satisfied in order for the Company to
access funds. 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" and "Description of Vendor Contracts and Financing--Vendor
Financing." 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 External
Financing and minimum purchase obligations under the Procurement Contracts.
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 External 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 External Financing and any new
financing arrangements. Failure to obtain any such 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.
Holdings
In addition to the capital needs of the Company, Holdings will require
capital for affiliate investments and 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 1999 as
approved by the Partners.
28
<PAGE>
Of that amount, $3.2 billion is expected to be contributed to the Company. The
remaining $1.0 billion, of which $0.2 billion has already been contributed or
advanced to APC, is presently expected to be used to meet financing
obligations for APC and to fund investments in Cox-California and other
wireless opportunities. With respect to APC, during the initial five year
build-out period, which began in December 1994, 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, upon ten days prior notice; (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 will be 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, Holdings is subject to a put option pursuant to which, annually
during the initial five-year period, APC, Inc. may require Holdings to redeem
the greater of (i) one-fifth of APC, Inc.'s initial percentage interest (i.e
51%) in APC, or (ii) the portion of APC, Inc.'s interest in APC, equal to APC
Inc.'s obligation for annual payments to be made by APC to the FCC. APC,
Inc.'s put rights are not cumulative. Notwithstanding the foregoing, at the
end of the initial five-year period, APC, Inc. may require Holdings to redeem
APC, Inc.'s entire remaining interest in APC. Furthermore, to the extent APC,
Inc. has an interest in APC on the seventh anniversary of the initial
buildout, APC, Inc. may, within 180 days after the seventh anniversary,
require Holdings to redeem APC, Inc.'s entire remaining interest in APC. In
connection with APC, Inc.'s put rights, Holdings is entitled to designate the
purchaser of APC, Inc.'s interest. 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.
Holdings may purchase, on each of the fifth through seventh anniversaries of
the initial buildout, that portion of APC, Inc.'s interest that equals the
amount by which the percentage interest then held by APC, Inc. exceeds one-
fifth of APC, Inc.'s initial percentage interest. Six months after the seventh
anniversary of the initial buildout and on each of the eighth through tenth
anniversaries of the initial buildout, Holdings has the option to purchase
APC, Inc.'s entire remaining interest.
Holdings 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. Cox (or an affiliate thereof) will hold the
remaining partnership interest in, and will manage and control, Cox-
California. Holdings expects to contribute to Cox-California capital, in an
amount equal to the sum of (i) its interest in the license, (ii) its
fractional share of expenses prior to operation of the PCS system and (iii)
its fractional share of the hypothetical value of a PCS license for the Los
Angeles/San Diego MTA calculated according to criteria to be specified in the
applicable partnership agreement. Holdings expects that Cox (or such affiliate
thereof) will have the right to require Holdings to purchase its interest in
the partnership. It is anticipated that during the first three years after Cox
(or such affiliate thereof) meets the put requirements, Cox (or such affiliate
thereof) will have the right to require Holdings to purchase up to one-fifth
of its interest in the partnership. It is further expected that from each of
the fourth to eighth anniversaries of the initial put date, Cox (or such
affiliate thereof) may require Holdings to purchase its entire remaining
interest in the partnership.
Holdings 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, Holdings had a net cash
usage of $2.2 billion. Cash used in operations was $17.0 million which
consisted of the operating loss of $110.4 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 $2.2 billion, consisting
of a $2.0 billion purchase of PCS
29
<PAGE>
licenses from the FCC, $31.8 million of capital expenditures related to the
network buildout and a $132.4 million investment in APC. For the quarter ended
March 31, 1996, total cash usage was $111.7 million. Cash used in operations
consisted of operating losses of $67.4 million offset, in part, by changes in
payables and other accruals. Cash used in investing activities totaled $127.5
million and was primarily for the acquisition of network equipment and
furniture and fixtures associated with the growth in the Company's headcount
and an $83.0 million advance to APC. Since Holdings' 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.
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 depreciation expense in 1994. Holdings 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.
Holdings incurred $37.5 million of general and administrative costs
associated with the staffing of marketing, engineering, field operations and
administrative organizations. At year end, Holdings had 739 full- time
employees. Professional and legal costs associated with WirelessCo's
participation in the PCS auction, market research, procurement and financing
contract negotiation, information systems development and certain other costs
incurred in conjunction with the design and buildout of the Company's PCS
network totaled $28.9 million. Holdings incurred a loss of $46.2 million as
its share of APC's losses associated with commencement of operations.
Additionally, Holdings had interest and other income of $2.3 million during
1995. 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. Holdings had a loss of $110.4 million for the year ended December 31,
1995.
For the Quarter Ended March 31, 1996.
General and administrative expenses totaled $19.9 million as Holdings grew
its headcount to approximately 1,200 full time employees with the majority of
the increase occurring in the field engineering and operations areas.
Professional and legal expenses incurred in conjunction with consulting
activities and contract negotiations were $10.9 million. Marketing and
administrative infrastructure establishment costs make up the majority of the
general and administrative expense. Depreciation on non-network infrastructure
capital totaled $0.3 million for the period. Holdings 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. Holdings had a loss of $67.4
million for the quarter ended March 31, 1996.
30
<PAGE>
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 commence marketing efforts and launch commercial service in certain
MTAs in the fourth quarter of 1996 and to continue to expand its coverage in
its PCS markets to reach approximately 70% of the Pops in its 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 license areas in the aggregate, thereby
substantially completing its planned network buildout.
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 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. The Partners are
subsidiaries of, respectively, Sprint, TCI, Comcast and Cox.
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. The
Company's business plan and the financial covenants and other terms of the
External Financing will require such additional equity financing prior to the
end of 1998, absent a new financing source. The $0.8 billion balance (of the
$4.2 billion) that may be available to Holdings from its 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 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.
31
<PAGE>
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. 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. Subject to certain conditions,
Holdings is entitled to increase its percentage ownership in APC and
consequently may assume the management of APC. See "Business--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 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.
Subject to certain conditions Holdings is entitled to increase its
percentage ownership in APC pursuant to the terms of the partnership agreement
of APC. Any increase in ownership which would give Holdings a majority
interest may not occur prior to the receipt of all necessary FCC approvals and
the earlier of December 1997 or the full satisfaction of certain FCC buildout
construction requirements.
The table below presents the owned and affiliated Pops:
<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)................... 1 1.7 $ 3.06
Affiliated:
APC (Baltimore/Washington)(2)............. 1 8.3 $13.16
Cox-California (Los Angeles/San
Diego)(3)................................ 1 21.5 $13.16
PhillieCo (Philadelphia)(4)............... 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) Holdings owns a 49% limited partnership interest in APC, which has signed
an affiliation agreement with the Company.
(3) Holdings intends to acquire a 49% limited partnership interest in, and the
Company expects to sign an affiliation agreement with, Cox-California.
(4) Owned by subsidiaries of Sprint, TCI and Cox. The Company expects to sign
a services and affiliation agreement with PhillieCo.
32
<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 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 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-based telephony 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.
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<PAGE>
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 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
34
<PAGE>
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.
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.
35
<PAGE>
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 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
36
<PAGE>
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 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 end of May 1996, the company had more than 20,000
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. As of February 29, 1996, the company had approximately 640
CDMA subscribers. 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
37
<PAGE>
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 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 1,350 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 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 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,
38
<PAGE>
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 June 14, 1996, the Company had signed leases or options for
2,705 sites, of which 477 were pending zoning and 245 were zoned and ready for
construction. There are currently 133 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 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 June 14,
1996, 746 relocation agreements were under negotiation, 289 agreements had
been reached and 101 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
39
<PAGE>
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.
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 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.
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 by existing means, through
direct mail, direct sales, employee programs, advertising and promotions. The
foregoing agreement will not affect the Company's
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<PAGE>
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, including 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, New Jersey, Delaware and Maryland (the
"Comcast Area") because it owns cellular licenses for such areas and the
provision of such services to the Company would violate FCC regulations. 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
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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.
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 Basic Trading Areas ("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.
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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.
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.
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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
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
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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.
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. The A and B Block auction
raised a total of $7.74 billion representing an average price of $14.81 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.
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 FCC has adopted rules setting out three separate spectrum aggregation
limits that may affect PCS licensees. First, a single PCS licensee may not hold
multiple PCS licenses that are granted for more than 40 MHz of spectrum in a
single geographic area. Second, a cellular licensee may hold an attributable
interest in no more than one 10 MHz PCS license (i.e., ownership of a 30 MHz
PCS license is prohibited) for a PCS service area that significantly overlaps
with the cellular licensee's service area. However, following a court remand,
the FCC initiated a rulemaking to determine whether to retain this cross-
ownership restriction. Third, a single entity cannot have a combined
attributable interest (20% or greater interest in any license) in broadband
PCS, cellular and special mobile radio licenses totalling more than 45 MHz in a
single market.
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
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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 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.
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 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
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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.
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 also is considering whether, and how, it should regulate the
conditions under which customers of one wireless provider can obtain service
while roaming in another wireless provider's service area.
The FCC also has pending proceedings to examine the expansion of permissible
uses for broadband PCS networks 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 Commercial
Mobile Radio Service ("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.
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.
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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.
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
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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 June 14, 1996,
the Company had leased or purchased 39 switch sites and had entered into
leases or options for a total of 2,705 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 May 31, 1996, the Company had no employees; Holdings, however, employed
1,600 personnel, all of whom are working on behalf of the Company. Pursuant to
a services agreement, the Company reimburses Holdings for the payroll expense
and benefits associated with all 1,600 employees. None of Holdings employees
is represented by a labor union. Management believes that Holdings' 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.
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
49
<PAGE>
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. See "Business--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.
50
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND PARTNERSHIP BOARD REPRESENTATIVES OF THE ISSUERS AND
HOLDINGS
The executive officers of the Issuers and Holdings and their respective
positions with Sprint Spectrum, FinCo and Holdings 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; Chief Executive Officer
and Chairman of the Partnership Board of
Holdings; President of FinCo
Arthur A. Kurtze................ 51 Chief Technology Officer of Holdings and
Sprint Spectrum
Bernard A. Bianchino............ 47 Chief Business Development Officer of
Holdings and Sprint Spectrum
Robert M. Neumeister, Jr........ 46 Chief Financial Officer of Holdings and
Sprint Spectrum; Vice President and
Treasurer of FinCo
F. Edward Mattix................ 43 Chief Public Relations Officer of Holdings
and Sprint Spectrum
Joseph M. Gensheimer............ 44 General Counsel and Secretary of Holdings
and 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.
51
<PAGE>
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.
52
<PAGE>
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.
53
<PAGE>
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 and
Partnership Board Representatives of the Issuers and Holdings" for the month
during which each Named Executive commenced employment with Holdings.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------- LONG TERM
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER COMPENSATION
--------------------------- -------- -------- -------- ------------
<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 and $417,375 represents stock options granted with respect to Sprint
Corporation stock.
(3) Of the $40,769 shown as long-term compensation, $18,351 represents a cash
pay-out and $22,418 represents stock options granted with respect to Sprint
Corporation stock.
(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.
54
<PAGE>
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.
55
<PAGE>
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 that 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.
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 Holdings on the first anniversary of employment with Holdings for
foregone stock options and 1995 incentive compensation related to his previous
employer.
Holdings 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, Holdings 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 (as defined) anywhere in the
United States.
Holdings expects to enter into employment agreements, on terms substantially
similar to those contained in Mr. Gensheimer's agreement, with Messrs. Kurtze,
Bianchino and Neumeister.
56
<PAGE>
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 Network Services, 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. 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 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, the Holdings Partnership Agreement contains other
provisions relating to transactions between Holdings and its subsidiaries, on
the one hand, and the Partners and their affiliates, on the other hand.
Holdings reimburses Sprint for certain accounting, data processing, and
other related services, and for certain cash payments made by Sprint on behalf
of Holdings. The costs of such services are allocated based on direct usage.
Allocation expenses of approximately $2,646,000 are included in general and
administrative expenses on the statement of operations 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. Included in prepaid
expenses and other assets are receivables for services provided as of December
31, 1995, of $183,225 and $156,528 due from PhillieCo and Cox's affiliate,
respectively.
57
<PAGE>
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) as a
result of Comcast's ownership of a PCS license for 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 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. 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.
58
<PAGE>
PRINCIPAL SECURITY HOLDERS
The following table sets forth, as of March 31, 1996, the ownership of
Holdings and the Issuers. 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%
(formerly known as Sprint Spectrum, L.P.)
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
TCI Network Services(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
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.
(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.
(4) A wholly-owned subsidiary of Comcast Corporation.
(5) A wholly-owned subsidiary of Cox Communications, Inc.
(6) As of March 31, 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 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 wireless communications services utilizing radio spectrum for
cellular, PCS, ESMR, paging, mobile communications and any other voice or data
wireless services (collectively, 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 Network Services, Comcast Telephony Services and Cox Telephony Partnership
(TCI Network Services, 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 Network Services, 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 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 same percentage of the
shortfall as such Partner's Percentage Interest. 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 constitute an Adverse Act (as defined),
which would permit the Partnership Board to elect (i) to commence procedures
to allow the other Partners to purchase such delinquent Partner's interest in
Holdings at a discount or (ii) to cause Holdings to seek to obtain specific
performance of such delinquent 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,
default, disposition of its Partnership Interest other than in accordance with
the Holdings Partnership Agreement 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. The most significant of these are
summarized below.
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 will be assigned to Sprint
Spectrum in connection with the Reorganization that is expected to occur on
July 1, 1996. 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, Holdings 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 Sprint Spectrum'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 Sprint Spectrum 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
Sprint Spectrum 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. Sprint Spectrum 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 Sprint Spectrum'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 Sprint Spectrum the
costs of completing the project above the contract price, notwithstanding any
liquidated damages owed by Vendor to Sprint Spectrum.
The Vendors may terminate the Procurement Contracts upon Sprint Spectrum's
default. The events of default applicable to Sprint Spectrum are (i) events of
bankruptcy or otherwise seeking relief from creditors, (ii) Sprint Spectrum'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 Sprint
Spectrum'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) Sprint Spectrum'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. Sprint
Spectrum 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. Sprint Spectrum 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 Sprint Spectrum reasonably believes that operating a PCS system would be
illegal or onerous. Before terminating a Procurement Contract subject to this
provision, Sprint Spectrum 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"). 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. In the event Sprint Spectrum fails to make the
minimum purchases, Sprint Spectrum will be liable for liquidated damages.
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.
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.
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
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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 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 customary conditions which must be satisfied in order
for the Company to access funds.
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 will 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, warrants, covenants,
conditions and events of default customary for such senior credit facilities
of similar size and nature, including without limitation, the delivery and
execution of definitive documentation relating thereto. 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.
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
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.
The Bank Credit Facility will consist of three separate tranches of debt in
the amounts of $750 million, $750 million and $500 million.
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.
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The Bank Credit Facility is expected to automatically 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 amounts
outstanding 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 is expected to 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.
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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, Sprint
Spectrum Holding Company, L.P., as guarantor (the "Guarantor"), 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, the
Guarantor 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) the Guarantor or (iii) a special purpose corporation (a
"Special Purpose Corporation") formed to own Common Equity Interests of Sprint
Spectrum or the Guarantor, 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) the Guarantor 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
principal amount at maturity, as the case may be, thereof to be redeemed. A
new Senior Note or Senior Discount
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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.
GUARANTEES
Pursuant to the Indentures, the Guarantor will unconditionally guarantee, on
a senior unsecured basis, to each holder of Senior Notes and Senior Discount
Notes and the Trustees, the full and prompt performance of the Issuers'
obligations under the Indentures and the Notes, including the payment of
principal of, premium, if any, and interest on the Notes.
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 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;
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(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
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.
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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 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 immediately 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 immediately 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 an Investment
constituting a Restricted Payment out 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 immediately 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 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 the preceding
clause (i) shall be included in making the determination of available amounts
under clause (iii) of the preceding paragraph and Restricted Payments made
pursuant to the preceding clauses (ii), (iii), (iv), (v) and (vii) shall not
be included in making the determination of available amounts under clause
(iii) of the 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 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
Sprint Spectrum is a Wholly-Owned Subsidiary of the Guarantor, either (a) if
the current provisions of Section 8.6 ("Interested Party Transactions")
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of the Holdings Partnership Agreement are in effect, members of the Board of
the Guarantor 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 the Guarantor, in each case, as evidenced by a
Resolution of the Board of the Guarantor and (ii) if Sprint Spectrum is not a
Wholly-Owned Subsidiary of the Guarantor, 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 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
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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 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) 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 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 corporate purposes. 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 and 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
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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 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 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.
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") 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
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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 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.
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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)
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
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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) the Guarantee or any Subsidiary Guarantee ceases to be in full
force and effect or is declared null and void or the Guarantor or a
Subsidiary Guarantor denies that it has any further liability under the
Guarantee or its Subsidiary Guarantee, as applicable, 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 and is continuing, 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 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 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
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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, the Guarantor and any Subsidiary Guarantor with respect to the
applicable outstanding Notes, Guarantees 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, the Guarantor and any Subsidiary Guarantors with respect to
certain covenants that are set forth in the applicable Indenture, 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 ("covenant defeasance").
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 Sprint Spectrum or any of its 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,
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reorganization or similar laws affecting creditors' rights generally or to the
rights of any creditor of the Issuers, the Guarantor 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, the Guarantor 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, the Guarantee and any Subsidiary
Guarantees 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, the Guarantee and any Subsidiary
Guarantees may be made by the Issuers, the Guarantor, 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 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, the Guarantees 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 a Guarantee, (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, (viii) adversely affect the ranking of the Notes, the
Guarantees or any Subsidiary Guarantees or (ix) release the Guarantees.
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
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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 or the Guarantor, 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 PARTNERS OR THE PARENTS
The Senior Notes and the Senior Discount Notes are non-recourse to 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>
(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.
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"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 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.
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"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
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 the Guarantor;
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 Equity Interests of Sprint Spectrum or the Guarantor, as the case
may be; (ii) Sprint Spectrum or the Guarantor 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 the
Guarantor, in any such event pursuant to a transaction in which the
outstanding Voting Equity Interests of Sprint Spectrum or the Guarantor 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 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 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 the Guarantor of any plan or proposal for the liquidation or
dissolution of Sprint Spectrum or the Guarantor.
"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."
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"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, 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, 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
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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."
"Disinterested Director" means, with respect to any transaction or series of
transactions, a member of the Board of Sprint Spectrum or the Guarantor, 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
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"--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 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.
"Guarantees" means, collectively, the guarantee of Senior Notes and the
guarantee of the Senior Discount Notes issued by Sprint Spectrum Holdings,
L.P.
"Holdings Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Guarantor 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
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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.
"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.
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"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 Network
Services, 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 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 Agreements 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
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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, the Guarantor 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 the Guarantor and the Special Purpose Corporation 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.
"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
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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.
"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
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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 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."
"Subsidiary Guarantee" has the meaning set forth under "--Certain
Covenants--Limitation on Issuances 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.
"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 second
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
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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.
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
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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 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
The following summary describes certain 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 may be treated as ordinary income. "Market
discount" with respect to a Note is, subject to a de minimis exception, 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. 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 may 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.
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 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
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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 SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS ABOUT THIS ELECTION.
SALE, EXCHANGE, REDEMPTION OR OTHER TAXABLE DISPOSITION
In general, 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. The deductibility of capital losses is subject to limitations.
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
"Underwriting Agreement") among the Issuers, Holdings 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 Underwriting 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 and Holdings 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. Chase
has provided a commitment for the Bank Credit Facility. 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 report appearing herein and elsewhere in the Registration Statement
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to the development stage of Sprint Spectrum Holding
Company, L.P. and subsidiaries), and have been so included in reliance upon
the report 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 for the years then ended 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 and Holdings 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 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.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
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
AMERICAN PCS, L.P.
Report of Independent Accountants......................................... F-15
Balance Sheets at December 31, 1994 and 1995 and at March 31, 1996........ F-16
Statements of Loss for the year ended December 31, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 .......................... F-17
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-18
Statements of Changes in Partners' Capital as of December 31, 1994 and
1995 and as of March 31, 1996............................................ F-19
Notes to Financial Statements............................................. F-20
</TABLE>
F-1
<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
F-2
<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
-------- ---------- -----------
(UNAUDITED)
<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 devel-
opment 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-3
<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 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>
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-4
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(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 $2,291,806 $ --
Contributions of
capital................ 123,438 2,168,368 2,291,806 390,999 113,654 2,405,460
Receivable for capital
contributions.......... -- -- -- (13,462) -- --
-------- ---------- ---------- -------- ---------- ----------
Balance at end of
period................. 123,438 2,291,806 2,291,806 500,975 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 $490,878 $2,224,298 $2,224,298
======== ========== ========== ======== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(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 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>
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:
Prepaid expenses,
receivables from
affiliates 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-6
<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., which transferred certain operating functions
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 an ownership 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.
The Partners' ownership interests in WirelessCo, L.P. were initially held
directly by the Partners as of October 24, 1994, the formation date of
WirelessCo, L.P., but were subsequently contributed to the Partnership and
MinorCo, L.P. when such partnerships were formed as of March 28, 1995.
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 the purpose of the
Partnership is to engage in wireless communications services. The MajorCo
Agreement
F-7
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 Contribution 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 the Partnerships' development 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 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 recurring
adjustments) necessary to present fairly the consolidated financial position,
results of operations and cash flows.
F-8
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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-9
<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
progress........................................... -- 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
Recognized 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 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.
F-10
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 the
$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 a 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 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 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.
F-11
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 AND CONTINGENCIES
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.
Purchase Commitments--On January 31, 1996, the Partnership entered into
procurement and services contracts with AT&T Corp. (subsequently assigned to
Lucent Technologies, Inc.) and with Northern Telecom, Inc. (the "Vendors"),
individually, for the engineering and construction of PCS networks in certain
geographic areas. Each contract provides an initial term of ten years with
annual one-year renewal periods following. The Vendors must achieve
substantial completion of each PCS network within an established time frame
and in accordance with criteria specified in the agreements. Pricing for the
initial equipment, software and engineering services has been established in
the agreements. The terms of the agreements provide for the payment of
invoices based on the invoice date, substantial completion dates, and final
acceptance dates. In the event of delay in the completion of the PCS networks,
the 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 for Lucent Technologies, Inc. and Northern Telecom, Inc.,
respectively, which includes, but is not limited to, all equipment required
for the establishment and installation of the PCS networks. The Partnership is
currently in the process of negotiating definitive financing agreements with
Lucent Technologies, Inc. and Northern Telecom, Inc. for the procurement and
services contracts discussed above.
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.
The Partnership has certain existing and future commitments to provide
funding to affiliated PCS licensees.
F-12
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
8. SUMMARIZED FINANCIAL INFORMATION OF SPRINT SPECTRUM L.P.
Summarized consolidated financial information of Sprint Spectrum L.P. and
its subsidiary (99% general partner of WirelessCo, L.P.) is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
-------- ---------- -----------
(UNAUDITED)
(IN 000'S)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS.............................. $ 5,024 $ 1,123 $ 842
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 $2,258,405
======== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES......................... $ 3,745 $ 214 $ --
NOTE PAYABLE--AFFILIATE..................... -- 5,000 5,000
LIMITED PARTNER INTEREST IN CONSOLIDATED
SUBSIDIARY................................. -- 5,000 5,000
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 $2,258,405
======== ========== ==========
</TABLE>
F-13
<PAGE>
SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
<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)
(IN 000'S)
<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....... 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>
* * * * * *
F-14
<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 the results of its operations and its cash
flows for the years then ended, 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-15
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ------------
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<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-16
<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 -- 7,013,114
Selling, general and
administrative........ 7,413,659 35,767,479 3,784,545 15,922,629
Depreciation and amor-
tization.............. 491,447 2,751,841 137,959 4,536,881
----------- ------------ ----------- ------------
7,905,106 55,933,202 3,922,504 46,153,992
----------- ------------ ----------- ------------
Operating loss......... (7,905,106) (50,779,733) (3,920,804) (34,555,651)
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) $(39,093,850)
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<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) $(39,093,850)
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
Gain 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 (decrease)
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) (65,248,655)
------------ ------------ ----------- ------------
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 --
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 82,743,293
------------ ------------ ----------- ------------
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-18
<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
----------- ----------- ------------ ------------
Allocation of net loss
(unaudited).......... (2,708,873) (36,227,598) (157,379) (39,093,850)
----------- ----------- ------------ ------------
Balance, March 31, 1996
(unaudited)............ $(2,424,920) $29,476,946 $ -- $ 27,052,026
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<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
the General Partner and WirelessCo is the 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
obligations, 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-20
<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 for the year ended December
31, 1995. 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 was $975,194 and
$1,283,151, respectively.
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.
F-21
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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%
of total handset sales revenue for the year ended December 31, 1995. 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 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
(unaudited) consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ ------------
1994 1995 1996
---------- ------------ ------------
(UNAUDITED)
<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 was $183,490 and $2,123,317, respectively.
F-22
<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 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Due to FCC less unamortized discount of $23,978,236
and $19,981,863.................................... $78,365,303 $82,361,676
Note payable, less unamortized discount of
$1,010,360 and $522,146............................ 4,434,153 3,107,528
Capital lease obligations at interest rates ranging
from 8.33% to 10.94%............................... -- 3,328,326
----------- -----------
82,799,456 88,797,530
Less current portion.............................. (1,326,625) (2,532,219)
----------- -----------
Total long-term debt................................ $81,472,831 $86,265,311
=========== ===========
</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 Partnerships' 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 Company's debt approximated its carrying
value at December 31, 1995.
Interest paid was $1,000 and $664,000 for the years ended December 31, 1994
and 1995, 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 and $1,681,276 in 1994 and 1995, respectively.
During 1995, the Partnership incurred capital lease obligations of
$3,609,002. The capital lease obligations are generally repayable in 36-60
monthly installments from the dates of purchase.
F-23
<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 are as follows:
<TABLE>
<CAPTION>
EAR ENDINGY CAPITAL OPERATING
DCEMBER 31,E LEASES LEASES
- - ------------ ---------- -----------
<S> <C> <C>
1996.................................................. $1,350,413 $ 8,084,075
1997.................................................. 1,351,320 8,139,879
1998.................................................. 998,978 8,201,039
1999.................................................. 96,271 8,080,698
2000.................................................. 65,477 6,449,123
Thereafter............................................ -- 15,358,639
---------- -----------
3,862,459 $54,313,453
---------- ===========
Less amounts representing interest.................... (534,133)
----------
Present value of minimum lease payments............... $3,328,326
==========
</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 Company's expenses relating to the employee
savings plan were $38,000 and $109,000 for the years ended December 31, 1994
and 1995, 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 (unaudited) including $2,599,365
(unaudited) 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 for 1995 are $25,500.
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 in 1995 was $882,306.
Amounts outstanding at December 31, 1995 totaled $711,517.
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 year
ended December 31, 1994 and 1995, respectively. At December 31, 1994 and 1995,
the Partnership owed the company approximately $141,435 and $759,325,
respectively.
F-24
<PAGE>
AMERICAN PCS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Partnership leased office space during 1995 from a limited partnership
owned by officers of APC. Lease payments of $65,215 were paid to the limited
partnership during 1995.
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.
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-25
<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....................................................... 4
Risk Factors............................................................. 13
The Company.............................................................. 23
Use of Proceeds.......................................................... 25
Capitalization........................................................... 25
Selected Historical and Pro Forma Financial Data......................... 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 31
Management............................................................... 51
Certain Relationships and Related Transactions........................... 57
Principal Security Holders............................................... 59
The Partnership Agreements............................................... 60
Description of Vendor Contracts and Financing............................ 67
Description of the Notes................................................. 71
Certain Federal Income Tax Consequences.................................. 98
Underwriting............................................................. 101
Legal Matters............................................................ 102
Experts.................................................................. 102
Available Information.................................................... 102
Glossary of Selected Terms............................................... 103
Index to Financial Statements............................................ F-1
</TABLE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
$650,000,000 GROSS PROCEEDS
[LOGO]
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY
SPRINT SPECTRUM HOLDING COMPANY, L.P.
$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 .................................... $ *
Printing expenses.................................................. $ *
Legal fees and expenses............................................ $ *
Blue Sky fees and expenses......................................... $ 35,000
Trustees' fees and expenses........................................ $ *
Miscellaneous fees and expenses.................................... $ *
Other.............................................................. $ *
--------
Total............................................................ $
========
</TABLE>
--------
* To be determined.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subject to any terms, conditions or restrictions set forth in the respective
Partnership Agreements of Sprint Spectrum L.P. ("Sprint Spectrum") and Sprint
Spectrum Holding Company, L.P. ("Holdings"), 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. Each of the Partnership
Agreements of Sprint Spectrum and Holdings 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 or Holdings,
as the case may be, 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 Holdings, as the case may be, 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 Holdings, as the case may be, or
an agreement between such person and Sprint Spectrum or Holdings, as the case
may be, 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 or
Holdings, as the case may be, will be indemnified and held harmless by Sprint
Spectrum or Holdings, as the case may be, 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 Holdings, as the case may be, 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 Holdings, as
the case may be, or an agreement between such person and Sprint Spectrum or
Holdings, as the case may be, 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 any of the Registrants.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement, dated as of [ ], 1996 among the
Underwriters and the Registrants with respect to the Notes
3.1 Certificate of Limited Partnership of Sprint Spectrum Holding Company,
L.P.
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
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
5.1* Opinion of Simpson Thacher & Bartlett regarding the legality 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
NO. DESCRIPTION
------- -----------
<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
10.9* Commitment Letter of Chase Securities Inc. and Chemical Bank to Sprint
Spectrum L.P. dated June 7, 1996
10.10* Commitment Letter of Lucent Technologies, Inc. to Sprint Spectrum L.P.
dated June 21, 1996.
10.11* Employment Agreement, dated as of September 29, 1995, by and among
MajorCo, L.P. and
Joseph M. Gensheimer.
12.1 Not applicable.
21.1 Subsidiaries of the Registrants
23.1* Consent of Simpson Thacher & Bartlett (included in Exhibit 5)
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>
- - --------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules are omitted for the reason that they are not required or are not
applicable.
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
II-3
<PAGE>
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 REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF KANSAS CITY,
MISSOURI, ON JUNE 21, 1996.
Sprint Spectrum L.P.
By: Sprint Spectrum Holding Company,
L.P., its General Partner
/s/ Ronald T. LeMay
By: _________________________________
Chief Executive Officer and
President
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Ronald T. LeMay, Robert M. Neumeister,
Jr. and Joseph M. Gensheimer, and each of them individually, his true and
lawful agent, proxy and attorney-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to (i) act on, sign and file with the Securities and Exchange
Commission any and all amendments (including post-effective amendments) to
this Registration Statement together with all schedules and exhibits thereto,
(ii) act on, sign and file with the Securities and Exchange Commission any
registration statement relating to this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
(iii) act on, sign and file with the Securities and Exchange Commission any
exhibits to this Registration Statement or any such registration statement or
amendments (including post-effective amendments), (iv) act on, sign and file
such certificates, instruments, agreements and other documents as may be
necessary or appropriate in connection therewith, (v) act on and file any
supplement to any prospectus included in this Registration Statement or any
such registration statement or amendment and (vi) take any and all actions
which may be necessary or appropriate in connection therewith, granting unto
such agents, proxies and attorneys-in-fact, and each of them individually,
full power and authority to do and perform each and every act and thing
necessary or appropriate to be done, as fully for all intents and purposes as
he might or could do in person, hereby approving, ratifying and confirming all
that such agents, proxies and attorneys-in-fact, any of them or any of his or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
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
/s/ Ronald T. LeMay Chief Executive June 21, 1996
- - ------------------------------------- Officer and
RONALD T. LEMAY President
/s/ Arthur A. Kurtze Chief Technology June 21, 1996
- - ------------------------------------- Officer
ARTHUR A. KURTZE
/s/ Bernard A. Bianchino Chief Business June 21, 1996
- - ------------------------------------- Development Officer
BERNARD A. BIANCHINO
II-5
<PAGE>
SIGNATURES TITLE DATE
/s/ Robert M. Neumeister, Jr. Chief Financial June 21, 1996
- - ------------------------------------- Officer
ROBERT M. NEUMEISTER, JR.
/s/ Joseph M. Gensheimer General Counsel and June 21, 1996
- - ------------------------------------- Secretary
JOSEPH M. GENSHEIMER
/s/ William T. Esrey Partnership Board June 21, 1996
- - ------------------------------------- Representative
WILLIAM T. ESREY
/s/ Gary D. Forsee Partnership Board June 21, 1996
- - ------------------------------------- Representative
GARY D. FORSEE
/s/ Gerald W. Gaines Partnership Board June 21, 1996
- - ------------------------------------- Representative
GERALD W. GAINES
/s/ Arthur B. Krause Partnership Board June 21, 1996
- - ------------------------------------- Representative
ARTHUR B. KRAUSE
/s/ James O. Robbins Partnership Board June 21, 1996
- - ------------------------------------- Representative
JAMES O. ROBBINS
/s/ Lawrence S. Smith Partnership Board June 21, 1996
- - ------------------------------------- Representative
LAWRENCE S. SMITH
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SPRINT SPECTRUM
HOLDING COMPANY, L.P. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, MISSOURI, ON JUNE 21, 1996.
Sprint Spectrum Holding Company,
L.P.
By: Sprint Enterprises, L.P., its
general partner
/s/ Arthur B. Krause, Vice
President
By: _________________________________
By: TCI Network Services, its
General Partner
By: TCI Telephony Services,
Inc., its General Partner
/s/ Gerald W. Gaines
By: _____________________________
Name: Gerald W. Gaines
Title: President and Chief
Executive Officer
By: Comcast Telephony Services, its
General Partner
/s/ Lawrence S. Smith
By: _________________________________
By: Cox Telephony Partnership, its
General Partner
/s/ James O. Robbins
By: _________________________________
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Ronald T. LeMay, Robert M. Neumeister,
Jr. and Joseph M. Gensheimer, and each of them individually, his true and
lawful agent, proxy and attorney-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to (i) act on, sign and file with the Securities and Exchange
Commission any and all amendments (including post-effective amendments) to
this Registration Statement together with all schedules and exhibits thereto,
(ii) act on, sign and file with the Securities and Exchange Commission any
registration statement relating to this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
(iii) act on, sign and file with the Securities and Exchange Commission any
exhibits to this Registration Statement or any such registration statement or
amendments (including post-effective amendments), (iv) act on, sign and file
such certificates, instruments, agreements and other documents as may be
necessary or appropriate in connection therewith, (v) act on and file any
supplement to any prospectus included in this Registration Statement or any
such registration statement or amendment and (vi) take any and all actions
which may be necessary or appropriate in connection therewith, granting unto
such agents, proxies and attorneys-in-fact, and each of them individually,
full power and authority to do and perform each and every act and thing
necessary or appropriate to be done, as fully for all intents and purposes as
he might or could do in person, hereby approving, ratifying and confirming all
that such agents, proxies and attorneys-in-fact, any of them or any of his or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
II-7
<PAGE>
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
/s/ Ronald T. LeMay Chief Executive June 21, 1996
- - ------------------------------------- Officer and
RONALD T. LEMAY Chairman of the
Partnership Board
/s/ Arthur A. Kurtze Chief Technology June 21, 1996
- - ------------------------------------- Officer
ARTHUR A. KURTZE
/s/ Bernard A. Bianchino Chief Business June 21, 1996
- - ------------------------------------- Development Officer
BERNARD A. BIANCHINO
/s/ Robert M. Neumeister, Jr. Chief Financial June 21, 1996
- - ------------------------------------- Officer
ROBERT M. NEUMEISTER, JR.
/s/ Joseph M. Gensheimer General Counsel June 21, 1996
- - -------------------------------------
JOSEPH M. GENSHEIMER
/s/ William T. Esrey Partnership Board June 21, 1996
- - ------------------------------------- Representative
WILLIAM T. ESREY
/s/ Gary D. Forsee Partnership Board June 21, 1996
- - ------------------------------------- Representative
GARY D. FORSEE
/s/ Gerald W. Gaines Partnership Board June 21, 1996
- - ------------------------------------- Representative
GERALD W. GAINES
/s/ Arthur B. Krause Partnership Board June 21, 1996
- - ------------------------------------- Representative
ARTHUR B. KRAUSE
/s/ James O. Robbins Partnership Board June 21, 1996
- - ------------------------------------- Representative
JAMES O. ROBBINS
/s/ Lawrence S. Smith Partnership Board June 21, 1996
- - ------------------------------------- Representative
LAWRENCE S. SMITH
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SPRINT SPECTRUM
FINANCE CORPORATION HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
KANSAS CITY, MISSOURI, ON JUNE 21, 1996.
Sprint Spectrum Finance Corporation
/s/ Ronald T. LeMay
By: _________________________________
PRESIDENT AND DIRECTOR
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Ronald T. LeMay, Robert M. Neumeister,
Jr. and Joseph M. Gensheimer, and each of them individually, his true and
lawful agent, proxy and attorney-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to (i) act on, sign and file with the Securities and Exchange
Commission any and all amendments (including post-effective amendments) to
this Registration Statement together with all schedules and exhibits thereto,
(ii) act on, sign and file with the Securities and Exchange Commission any
registration statement relating to this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
(iii) act on, sign and file with the Securities and Exchange Commission any
exhibits to this Registration Statement or any such registration statement or
amendments (including post-effective amendments), (iv) act on, sign and file
such certificates, instruments, agreements and other documents as may be
necessary or appropriate in connection therewith, (v) act on and file any
supplement to any prospectus included in this Registration Statement or any
such registration statement or amendment and (vi) take any and all actions
which may be necessary or appropriate in connection therewith, granting unto
such agents, proxies and attorneys-in-fact, and each of them individually,
full power and authority to do and perform each and every act and thing
necessary or appropriate to be done, as fully for all intents and purposes as
he might or could do in person, hereby approving, ratifying and confirming all
that such agents, proxies and attorneys-in-fact, any of them or any of his or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
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
/s/ Ronald T. LeMay President and June 21, 1996
- - ------------------------------------- Director
RONALD T. LEMAY
/s/ Robert M. Neumeister, Jr. Vice President, June 21, 1996
- - ------------------------------------- Treasurer
ROBERT M. NEUMEISTER, JR. (Principal
Financial and
Accounting
Officer), and
Director
/s/ Joseph M. Gensheimer Secretary and June 21, 1996
- - ------------------------------------- Director
JOSEPH M. GENSHEIMER
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement, dated as of [ ],
1996 among the Underwriters and the Registrants with
respect to the Notes
3.1 Certificate of Limited Partnership of Sprint Spectrum
Holding Company, L.P.
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
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
5.1* Opinion of Simpson Thacher & Bartlett regarding the
legality 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.
10.9* Commitment Letter of Chase Securities Inc. and Chemical
Bank to Sprint Spectrum L.P. dated June 7, 1996
10.10* Commitment Letter from Lucent Technologies, Inc. to
Sprint Spectrum L.P. dated June 21, 1996.
10.11* Employment Agreement, dated as of September 29, 1995,
by and among MajorCo, L.P. and Joseph M. Gensheimer.
12.1 Not applicable.
21.1 Subsidiaries of the Registrants
23.1* Consent of Simpson Thacher & Bartlett (included in
Exhibit 5)
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
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>
- - -------
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "MAJORCO, L.P.", CHANGING ITS NAME FROM "MAJORCO, L.P." TO "SPRINT
SPECTRUM HOLDING COMPANY, L.P.", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF
FEBRUARY, A.D. 1996, AT 9 O'CLOCK A.M.
[SEAL]
/s/ Edward J. Freel
[SEAL] ---------------------------------------------
Edward J. Freel, Secretary of State
2473737 8100 AUTHENTICATION: 7847433
960059214 DATE: 02-29-96
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.
#2473737
It is hereby certified that:
FIRST: The name of the limited partnership (hereinafter called the
"partnership") is MajorCo, L.P.
SECOND: Pursuant to provisions of Section 17-202, Title 6, Delaware
Code, the Certificate of Limited Partnership is amended as follows:
The name of the limited partnership is Sprint Spectrum Holding Company,
L.P.
The undersigned, a general partner of the partnership, executed this
Certificate of Amendment on the 28th day of February, 1996.
SPRINT SPECTRUM, L.P.
as General Partner
By: US Telecom, Inc.
as General Partner
By: /s/ Don A. Jensen
----------------------
Title: Vice President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 02/29/1996
960059214 - 2473737
<PAGE>
STATE OF DELAWARE PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
LIMITED PARTNERSHIP OF "MAJORCO, L.P.", FILED IN THIS OFFICE ON THE TWENTY-NINTH
DAY OF MARCH, A.D. 1995, AT 9 O'CLOCK A.M.
[SEAL]
/s/ Edward J. Freel
[SEAL] ---------------------------------------------
Edward J. Freel, Secretary of State
2473737 8100 AUTHENTICATION: 745530
950069878 DATE: 03-29-95
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.
This Certificate of Limited Partnership of MAJORCO, L.P. (the "Partnership"),
dated as of the 28th day of March, 1995, is being duly executed and filed by
SPRINT SPECTRUM, L.P., a limited partnership organized under the laws of the
State of Delaware, TCI NETWORK SERVICES, a general partnership organized under
the laws of the State of Delaware, COMCAST TELEPHONE SERVICES, a general
partnership organized under the laws of the State of Delaware, and COX
TELEPHONE PARTNERSHIP, a general partnership organized under the laws of the
State of Delaware, each of the foregoing as general partner, to form a limited
partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.
C. S 17-101, et seq.
1. Name. The name of the limited partnership formed hereby is MajorCo, L.P.
2. Registered Office. The registered office of the Partnership in the State of
Delaware is located at The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street , Wilmington, New Castle County, Delaware 19801.
3. Registered Agent. The name and address of the registered agent of the
Partnership for service of process in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County Delaware 19801.
4. General Partners. The name and business address of each of the general
partners of the Partnership are as follows:
Sprint Spectrum, L.P.
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
TCI Network Services
5619 DTC Parkway
Englewood, Colorado 80111
Comcast Telephony Services
1500 Market Street
Philadelphia, Pennsylvania 19102-2140
Cox Telephony Partnership
1400 Lake Hoarn Drive
Atlanta, Georgia 30319-1464
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Limited Partnership of MajorCo, L.P. as of the date first above written.
SPRINT SPECTRUM L.P.,
as General Partner
By: US Telecom, Inc.,
Its General Partner
By: /s/ Don A. Jensen
------------------------
Title: Vice President
---------------------
TCI NETWORK SERVICES,
as General Partner
By: TCI Network, Inc.,
Its General Partner
By: /s/ Gerald W. Gaines
------------------------
Title: President
---------------------
COMCAST TELEPHONY SERVICES,
as General Partner
By: Comcast Telephony Services,
Inc.,
Its General Partner
By: /s/ Lawrence S. Smith
------------------------
Title: Senior Vice President
---------------------
COX TELEPHONY PARTNERSHIP,
as General Partner
By: Cox Communications Wireless,
Inc.,
Its Managing General Partner
By: /s/ David M. Woodrow
------------------------
Title: Vice President
---------------------
-2-
<PAGE>
EXHIBIT 3.2
STATE OF DELAWARE PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "MAJORCO SUB, L.P.", CHANGING ITS NAME FROM "MAJORCO SUB, L.P." TO
"SPRINT SPECTRUM L.P.", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF
FEBRUARY, A.D. 1996, AT 9:10 O'CLOCK A.M.
[SEAL]
/s/ Edward J. Freel
[SEAL] ---------------------------------------------
Edward J. Freel, Secretary of State
2494229 8100 AUTHENTICATION: 7847513
960059217 DATE: 02-29-96
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:10 AM 02/29/1996
960052917 - 2494229
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MAJORCO SUB, L.P.
#2494229
It is certified that:
FIRST: The name of the limited partnership (hereinafter called the
"partnership") is MajorCo Sub, L.P.
SECOND: Pursuant to provisions of Section 17-202, Title 6, Delaware
Code, the Certificate of Limited Partnership is amended as follows:
The name of the limited partnership is Sprint Spectrum L.P.
The undersigned, a general partner of the partnership, executed this
Certificate of Amendment on the 28th day of February, 1996.
SPRINT SPECTRUM HOLDING COMPANY, L.P.
as General Partner
By: /s/ Robert M. Neumeister, Jr.
----------------------------------------------
Name & Title: Robert M. Neumeister, Jr., Chief Financial Officer
--------------------------
<PAGE>
STATE OF DELAWARE PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
LIMITED PARTNERSHIP OF "MAJORCO SUB, L.P.", FILED IN THIS OFFICE ON THE
TWENTY-NINTH DAY OF MARCH, A.D. 1995, AT 9:02 O'CLOCK A.M.
[SEAL]
/s/ Edward J. Freel
[SEAL] ---------------------------------------------
Edward J. Freel, Secretary of State
2494229 8100 AUTHENTICATION: 7455525
950069887 DATE: 03-29-95
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MAJORCO SUB, L.P.
This Certificate of Limited Partnership of MAJORCO SUB, L.P. (the
"Partnership"), dated as of the 28th day of March, 1995, is being duly executed
and filed by MAJORCO, L.P., a limited partnership organized under the laws of
the State of Delaware, as general partner, to form a limited partnership under
the Delaware Revised Uniform Limited Partnership Act (6 Del. C. (S)17-101, et
seq.).
1. Name. The name of the limited partnership formed hereby is MajorCo Sub,
L.P.
2. Registered Office. The registered office of the Partnership in the State
of Delaware is located at The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
3. Registered Agent. The name and address of the registered agent of the
Partnership for service of process in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
4. General Partner. The name and business address of the general partner of
the Partnership is as follows:
MajorCo, L.P.
9221 Ward Parkway
Suite 100
Kansas City, Missouri 54114
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership of MajorCo Sub, L.P. as of the date first above written.
MAJORCO, L.P.,
as General Partner
By: Sprint Spectrum, L.P.,
a General Partner
By: /s/ Don A. Jensen
------------------------
Title: Vice President
---------------------
-2-
<PAGE>
EXHIBIT 3.3
STATE OF DELAWARE PAGE 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "SPRINT SPECTRUM FINANCE CORPORATION", FILED IN THIS OFFICE ON
THE TWENTIETH DAY OF MAY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
[SEAL] ---------------------------------------------
Edward J. Freel, Secretary of State
2625137 8100 AUTHENTICATION: 7953219
960144839 DATE: 05-21-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
SPRINT SPECTRUM FINANCE CORPORATION
The undersigned, a natural person, for the purpose of organizing a corporation
for conducting the business and promoting the purposes stated, under the
provisions and subject to the requirements of the laws of the State of Delaware
including the General Corporation Law of the Stale of Delaware", certifies
that:
1. NAME
The name of the corporation (hereinafter called the "corporation") is Sprint
Spectrum Finance Corporation.
2. REGISTERED OFFICE AND AGENT
The address, including street, number, city, and county, of the registered
office of the corporation in the State of Delaware is 1013 Centre Road, City of
Wilmington 19805, County of New Castle; and the name of the registered agent of
the corporation in the State of Delaware at such address is Corporation Service
Company.
3. PURPOSE
The nature of the business and the purpose of the corporation is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
4. STOCK
The total number of shares of stock which the corporation shall have
authority to issue is 1,000. The par value of each of such shares is $1.00
dollar. All such shares are of one class and are shares of Common Stock.
<PAGE>
5. INCORPORATOR
The name and the mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Charles Wunsch 4717 Grand, Fifth Floor
Kansas City, Missouri 64112
6. DURATION
The corporation is to have perpetual existence.
7. CREDIT ARRANGEMENTS
Whenever a compromise or arrangement is proposed between this corporation and
its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under (S) 291 of Title
8 of the Delaware Code or on the application of trustees in dissolution or of
any receiver or receivers appointed for this corporation under (S) 279 of Title
8 of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation. as the case may be.
and also on this corporation.
8. BOARD OF DIRECTORS
The number of directors which shall constitute the whole Board of Directors
shall be fixed by, or in the manner provided in, the Bylaws. The Board of
Directors is authorized to make, alter or repeal the bylaws of the corporation.
Election of directors need not be by written ballot.
<PAGE>
9. LIMITATION OF LIABILITY
No director of the corporation shall be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty by such
director as a director; provided, however, that this Article 9 shall not
eliminate or limit the liability of a director to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware and amendments thereto or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article 9 shall apply to or have
any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
10. INDEMNIFICATION
The corporation shall indemnify its officers, directors, employees and agents
to the fullest extent permitted by the General Corporation Law of Delaware.
11. AMENDMENTS
The corporation reserves the right to amend, alter or repeal any provision
contained in these Articles of Incorporation in the manner now or hereafter
prescribed by statute, and all rights of stockholders herein are subject to this
reservation.
THE UNDERSIGNED, being the incorporator above named, for the purpose of
forming a corporation pursuant to the General Corporation Law of Delaware, has
signed this instrument on the 17th day of May, 1996, and does hereby acknowledge
that it is his act and deed and that the facts stated therein are true.
/s/ Charles Wunsch
----------------------------
Charles Wunsch, Incorporator
<PAGE>
EXHIBIT 3.4
SPRINT SPECTRUM FINANCE CORPORATION
BYLAWS
ARTICLE ONE
STOCKHOLDERS
Section 1.1. Annual Meetings. An annual meeting of stockholders of the
Corporation to elect directors and transact such other business as may properly
be presented to the meeting shall be held at such place, within or without the
State of Delaware, as the Board of Directors may from time to time fix, at 10:00
a.m., or such other time as may be designated by the Board of Directors, on the
second Tuesday in May in each year or, if that day shall be a legal holiday in
the jurisdiction in which the meeting is to be held, then on the next day not a
legal holiday.
Section 1.2. Special Meetings. A special meeting of stockholders may be
called at any time by the Board of Directors, the Executive Committee or the
President and shall be called by any of them or by the Secretary upon receipt of
a written request to do so specifying the matter or matters, appropriate for
action at such a meeting, proposed to be presented at the meeting and signed by
holders of record of a majority of the shares of stock that would be entitled to
be voted on such matter or matters if the meeting were held on the day such
request is received and the record date for such meeting were the close of
business on the preceding day. Any such meeting shall be held at such time and
at such place, within or without the State of Delaware, as shall be determined
by the body or person calling such meeting and as shall be stated in the notice
of such meeting.
Section 1.3. Notice of Meeting. For each meeting of stockholders, written
notice shall be given stating the place, date and hour, and in the case of a
special meeting, the purpose or purposes for which the meeting is called and, if
the location of the list of stockholders required by Section 1.10. Except as
otherwise provided by Delaware law, the written notice of any meeting shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. If mailed,
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
1
<PAGE>
Section 1.4. Nominations. Nominations of persons for election to the
Board of Directors of the Corporation at a meeting of the stockholders may be
made by or at the direction of the Board of Directors or may be made at a
meeting of the Stockholders by any stockholder of the Corporation entitled to
vote for the election of Directors at the meeting.
Section 1.5. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, the holders of record of a majority of the shares
of stock entitled to be voted present in person or represented by proxy at a
meeting shall constitute a quorum for the transaction of business at the
meeting, but in the absence of a quorum the holders of record present or
represented by proxy at such meeting may vote to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is obtained. At any such adjourned session of the meeting at which there shall
be present or represented the holders of record of the requisite number of
shares, any business may be transacted that might have been transacted at the
meeting as originally called.
Section 1.6. Chairman and Secretary at Meeting. At each meeting of
stockholders the President of the Corporation, or in his absence or inability to
act, the person designated by the Board of Directors, shall preside as chairman
of the meeting; if no person is so designated, then the stockholders present at
the meeting shall choose a chairman by plurality vote. The Secretary, or in his
absence a person designated by the chairman of the meeting, shall act as
secretary of the meeting.
Section 1.7. Voting; Proxies. Except as otherwise provided by law or the
Certificate of Incorporation and subject to the provisions of Section 1.10:
(a) At every meeting of the stockholders each stockholder shall be entitled
to one vote for each share of capital stock held by him.
(b) Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy.
(c) Each matter, other than election of directors, properly presented to
any meeting shall be decided by a majority of the votes cast on the matter.
2
<PAGE>
(d) Election of directors and the vote on any other matter presented to a
meeting shall be by written ballot.
Section 1.8. Adjourned Meetings. A meeting of stockholders may be
adjourned to another time or place as provided in Section 1.5. Unless the Board
of Directors fixes a new record date, stockholders of record for an adjourned
meeting shall be as originally determined for the meeting from which the
adjournment was taken. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote. At the adjourned meeting any business may be transacted that
might have been transacted at the meeting as originally called.
Section 1.9. Consent of Stockholders in Lieu of Meeting. Any action that
may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all holders having a right
to vote thereon were present and noted.
Section 1.10. List of Stockholders Entitled to Vote. Before every meeting
of stockholders a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder,
shall be prepared and shall be open to the examination of any stockholder for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. Such list shall be produced and kept at the time and place of
the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 1.11. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
3
<PAGE>
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed; and
the record date for any other purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE TWO
DIRECTORS
Section 2.1. Number; Term of Office; Qualifications; Vacancies. The
business and affairs of the Corporation shall be managed by or under the
direction of a Board of Directors. The number of directors that shall
constitute the whole Board shall be determined by action of the Board of
Directors taken by the affirmative vote of a majority of the whole Board.
Directors shall be elected at the annual meeting of stockholders to hold office,
subject to Sections 2.2 and 2.3, until the election and qualification of their
respective successors or such respective director's earlier resignation or
removal. Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director, and the directors so chosen shall hold office, subject to Sections 2.2
and 2.3, until the next annual meeting of stockholders and until their
respective successors are elected and qualified.
Section 2.2. Resignation. Any director of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the President or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or, if no time be specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from
the Board of Directors effective at a future date, a
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majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in these Bylaws in the filling
of other vacancies.
Section 2.3. Removal. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors; provided, however, if less
than the entire Board is to be removed, no director may be removed without cause
if the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors.
Section 2.4. Regular and Annual Meetings; Notice. Regular meetings of the
Board of Directors shall be held at such time and at such place, within or
without the State of Delaware, as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting, and a notice, if
given, need not specify the purposes thereof. A meeting of the Board of
Directors may be held without notice immediately after an annual meeting of
stockholders at the same place as that at which such meeting was held.
Section 2.5. Special Meetings; Notice. A special meeting of the Board of
Directors may be called at any time by the Board of Directors, the Executive
Committee, the President or any person acting in the place of the President and
shall be called by any one of them or by the Secretary upon receipt of a written
request to do so specifying the matter or matters, appropriate for action at
such a meeting, proposed to be presented at the meeting and signed by at least
two directors. Any such meeting shall be held at such time and at such place,
within or without the State of Delaware, as shall be determined by the body or
person calling such meeting. Notice of such meeting stating the time and place
thereof shall be given (a) by deposit of the notice in the United States mail,
first class, postage prepaid, at least two days before the day fixed for the
meeting addressed to each director at his address as it appears on the
Corporation's records or at such other address as the director may have
furnished the Corporation for that purpose, or (b) by delivery of the notice
similarly addressed for dispatch by facsimile, telegraph, cable, or radio or by
delivery of the notice by telephone or in person, in each case at least 24 hours
before the time fixed for the meeting.
Section 2.6. Presiding Officer and Secretary at Meetings. Each meeting of
the Board of Directors shall be presided over by the President or
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in his absence by such member of the Board of Directors as shall be chosen by
the meeting. The Secretary, or in his absence an Assistant Secretary, shall act
as secretary of the meeting, or if no such officer is present, a secretary of
the meeting shall be designated by the person presiding over the meeting.
Section 2.7. Quorum. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, but in the absence of a
quorum, a majority of those present (or if only one be present, then that one)
may adjourn the meeting, without notice other than announcement at the meeting,
until such time as a quorum is present. Except as may otherwise be required by
the Certificate of Incorporation or the Bylaws, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 2.8. Meeting by Telephone. Members of the Board of Directors or
of any committee thereof may participate in meetings of the Board of Directors
or of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 2.9. Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing and the writing
or writings are filed with the minutes of proceedings of the Board of Directors
or of such committee.
Section 2.10. Executive and Other Committees. The Board of Directors may,
by resolution passed by a majority of the whole Board of Directors, designate an
Executive Committee and one or more other committees, each such committee to
consist of one or more directors as the Board of Directors may from time to time
determine. Any such committee, to the extent provided in such resolution or
resolutions, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation between meetings of the Board of Directors, including the power to
authorize the seal of the Corporation to be affixed to all papers that may
require it; but no such committee shall have such power or authority to amend
the Articles of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a
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dissolution of the Corporation or a revocation of a dissolution, amend the
Bylaws or otherwise to act (other than to make recommendations) where it is
provided by law or by the Certificate of Incorporation that any vote or action,
in order to bind the Corporation, shall be taken by the Directors, and unless
the resolution creating such committee or the Certificate of Incorporation shall
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or adopt a certificate
of ownership and merger pursuant to Section 253 of the General Corporation Law
of the State of Delaware.
In the absence or disqualification of a member of a committee, the number
of members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Each such committee other than the Executive
Committee shall have such name as may be determined from time to time by the
Board of Directors.
A majority of the committee shall constitute a quorum for the transaction
of business at any meeting for which written notice has been given to all
members or for which notice has been waived by all members. Each such committee
shall keep a record of its proceedings and may hold meetings upon one (1) day's
written notice or upon waiver of notice signed by all of the members of the
committee either before or after said committee meeting.
Section 2.11. Compensation. Directors shall receive compensation for
their services as directors or as members of committees as may from time to time
be fixed by the Board of Directors. They may also be reimbursed for their
expenses in attending any meeting and in the transaction of business for the
Corporation.
ARTICLE THREE
OFFICERS
Section 3.1. Election; Qualification. The officers of the Corporation
shall be a President, one or more Vice Presidents, one or more of whom may be
designated Executive Vice President or Senior Vice President, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board
of Directors may elect a Controller, one or more Assistant Secretaries, one or
more Assistant Treasurers, one or more
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Assistant Controllers and such other officers as it may from time to time
determine. Two or more offices may be held by the same person.
Section 3.2. Term of Office. Each officer shall hold office from the time
of his election and qualification to the time at which his successor is elected
and qualified, unless sooner he shall die or resign or shall be removed pursuant
to Section 3.4.
Section 3.3. Resignation. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the President or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or, if no time be specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified in the resignation, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.4. Removal. Any Officer may be removed at any time, with or
without cause, by the vote of a majority of the whole Board of Directors.
Section 3.5. Vacancies. Any vacancy, however caused, in any office of the
Corporation may be filled by the Board of Directors.
Section 3.6. Compensation. The compensation of each officer shall be such
as the Board of Directors may from time to time determine.
Section 3.7. President. Unless the Board of Directors otherwise provides,
the President shall be the Chief Executive Officer of the Corporation with such
general executive powers and duties of supervision and management as are usually
vested in such office and shall perform such other duties as are authorized by
the Board of Directors. The President shall sign all contracts, certificates
and other instruments of the Corporation as authorized by the Board of
Directors.
Section 3.8. Vice President. Each Vice President shall have such powers
and duties as generally pertain to the office of Vice President and as the Board
of Directors or the President may from time to time prescribe. During the
absence of the President or his inability to act, the Vice President, or if
there shall be more than one Vice President, then that one designated by the
Board of Directors, shall exercise the powers and shall perform the duties of
the President, subject to the direction of the Board of Directors.
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Section 3.9. Secretary. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors and issue notices of such
meetings as necessary. He shall be custodian of the corporate seal and shall
affix it or cause it to be affixed to such instruments as require such seal and
attest the same and shall exercise the powers and shall perform the duties
incident to the office of Secretary, subject to the direction of the Board of
Directors. Any Assistant Secretary, in the absence or inability of the
Secretary, shall perform all duties of the Secretary and such other duties as
may be required.
Section 3.10. Treasurer. The Treasurer shall have care and custody of all
money and securities of the Corporation and shall give bond in such sum and with
such sureties as the Board of Directors may specify, conditioned upon the
faithful performance of the duties of his office. He shall keep regular books
of account and shall submit them, together with all his vouchers, receipts,
records and other papers, to the Board of Directors for their examination and
approval annually; and semi-annually, or when directed by the Board of
Directors, he shall submit to each director a statement of the condition of the
business and accounts of the Corporation; and shall perform all such other
duties as are incident to his office. An Assistant Treasurer, in the absence or
inability of the Treasurer, shall perform all the duties of the Treasurer and
such other duties as may be required.
Section 3.11. Other Officers. Each other officer of the Corporation shall
exercise the powers and shall perform the duties incident to his office, subject
to the direction of the Board of Directors.
ARTICLE FOUR
CAPITAL STOCK
Section 4.1. Stock Certificates. The interest of each holder of stock of
the Corporation shall be evidenced by a certificate or certificates in such form
as the Board of Directors may from time to time prescribe. Each certificate
shall be signed by or in the name of the Corporation by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. If such certificate is countersigned (1) by a transfer
agent other than the Corporation or its employee or (2) by a registrar other
than the Corporation or its employee, any other signature on the certificate may
be facsimile. If any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a
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certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 4.2. Transfer of Stock. Shares of stock shall be transferable on
the books of the Corporation pursuant to applicable law and such rules and
regulations as the Board of Directors may from time to time prescribe.
Section 4.3. Holders of Record. Prior to due presentment for registration
of transfer the Corporation may treat the holder of record of a share of its
stock as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.
Section 4.4. Lost, Stolen, Destroyed or Mutilated Certificate. The
Corporation shall issue a new certificate of stock to replace a certificate
theretofore issued by it alleged to have been lost, destroyed or wrongfully
taken, if the owner or his legal representative (i) requests replacement before
the Corporation has notice that the stock certificate has been acquired by a
bona fide purchaser; (ii) files with the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such stock certificate or the
issuance of any such new stock certificate; and (iii) satisfies such other terms
and conditions as the Board of Directors may from time to time prescribe.
Section 4.5. No Preemptive Rights. No holder of shares of any class of
this Corporation, or holder of any securities or obligations convertible into
shares of any class of this Corporation, shall have any preemptive right
whatsoever to subscribe for, purchase or otherwise acquire shares of this
Corporation of any class, whether now or hereafter authorized.
ARTICLE FIVE
INDEMNIFICATION
Section 5.1. General Indemnity. The Corporation shall indemnify, subject
to the requirements of Section 5.4, any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by
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reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person 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, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 5.2. Derivative Suit Indemnity. The Corporation shall indemnify,
subject to the requirements of Section 5.4, any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
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 except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 5.3. Expense Indemnity. To the extent that a director, officer,
employee or agent of the Corporation, or a person serving in any other
enterprise at the request of the Corporation, has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
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Section 5.1 and 5.2 or in defense of any claim, issue or matter therein, such
director, officer, employee or agent shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
Section 5.4. Procedure. Any indemnification under Sections 5.1 and 5.2
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, or employee is proper in the circumstances because such director,
officer, employee or agent has met the applicable standard of conduct set forth
in Sections 5.1 and 5.2. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5.5. Advancement of Expenses. Expenses (including attorneys'
fees) incurred by a director or officer in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it is ultimately
determined that the director or officer is not entitled to be indemnified by the
Corporation as authorized in this Section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
Section 5.6. Non-Exclusive Rights. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other subsections of this
Section shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in a person's official capacity and as to action in another capacity
while holding such office.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the
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power to indemnify such person against such liability under the provisions of
this Article.
Section 5.8. Continuation of Indemnities. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Section
with respect to the resulting or surviving corporation as such person would have
with respect to such constituent corporation if its separate existence had
continued.
Section 5.9. Definition. For purposes of this Article, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Section.
Section 5.10. Benefits. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
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ARTICLE SIX
GENERAL PROVISIONS
Section 6.1. Waiver of Notice. Whenever notice is required by the
Certificate of Incorporation, the Bylaws or any provision of the General
Corporation Law of the State of Delaware, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time required for
such notice, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice.
Section 6.2. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year unless the Board of Directors shall from time to time otherwise
prescribe.
Section 6.3. Corporate Seal. The corporate seal shall be in such form as
the Board of Directors may from time to time prescribe, and the same may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE SEVEN
AMENDMENT OF BYLAWS
Section 7.1. Amendment. The Bylaws may be made, altered or repealed at
any meeting of stockholders or at any meeting of the Board of Directors by a
majority vote of the whole Board.
CERTIFICATION
These Bylaws have been adopted and approved this 21st day of May, 1996.
/s/ Charles Wunsch
__________________________________
Charles Wunsch, Incorporator
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EXHIBIT 3.5
EXECUTION COPY
--------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.
A DELAWARE LIMITED PARTNERSHIP
dated as of January 31, 1996
among
SPRINT SPECTRUM, L.P.
TCI NETWORK SERVICES
COMCAST TELEPHONY SERVICES
and
COX TELEPHONY PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. THE PARTNERSHIP................................................ 1
1.1 Continuation of the Partnership................................ 1
1.2 Name........................................................... 2
1.3 Purpose........................................................ 2
1.4 Principal Executive Office..................................... 2
1.5 Term........................................................... 3
1.6 Filings; Agent for Service of Process.......................... 3
1.7 Title to Property.............................................. 3
1.8 Payments of Individual Obligations............................. 4
1.9 Independent Activities......................................... 4
1.10 Definitions.................................................... 4
1.11 Additional Definitions......................................... 26
1.12 Terms Generally................................................ 30
SECTION 2. PARTNERS' CAPITAL CONTRIBUTIONS................................ 30
2.1 Percentage Interests; Preservation of Percentages of
Interests Held as General Partners and as
Limited Partners............................................... 30
2.2 Partners' Original Capital Contributions....................... 31
2.3 Addtional Capital Contributions................................ 31
2.4 Failure to Contribute Capital.................................. 35
2.5 Other Additional Capital Contributions......................... 43
2.6 Partnership Funds.............................................. 43
2.7 Partner Loans; Other Borrowings................................ 43
2.8 Other Matters.................................................. 45
SECTION 3. ALLOCATIONS.................................................... 45
3.1 Profits........................................................ 45
3.2 Losses......................................................... 46
3.3 Special Allocations............................................ 46
3.4 Curative Allocations........................................... 48
3.5 Loss Limitation................................................ 49
3.6 Other Allocation Rules......................................... 49
3.7 Tax Allocations: Code Section 704(c)........................... 49
SECTION 4. DISTRIBUTIONS.................................................. 50
4.1 Available Cash................................................. 50
4.2 Tax Distributions.............................................. 50
4.3 Amounts Withheld............................................... 51
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SECTION 5. MANAGEMENT....................................................... 51
5.1 Authority of the Partnership Board............................... 51
5.2 Business Plan and Annual Budget.................................. 56
5.3 Employees........................................................ 59
5.4 Limitation of Agency............................................. 59
5.5 Liability of Partners, Representatives and
Partnership Employees............................................ 60
5.6 Indemnification.................................................. 60
5.7 Temporary Investments............................................ 62
5.8 Deadlocks........................................................ 62
5.9 Conversion to Corporate Form..................................... 63
SECTION 6. PARTNERSHIP OPPORTUNITIES; CONFIDENTIALITY....................... 65
6.1 Competitive Activities........................................... 65
6.2 Enforceability and Enforcement................................... 68
6.3 General Exceptions to Section 6.1................................ 68
6.4 Comcast Exceptions............................................... 72
6.5 Freedom of Action................................................ 77
6.6 Confidentiality.................................................. 77
SECTION 7. ROLE EXCLUSIVE LIMITED PARTNERS.................................. 80
7.1 Rights or Powers................................................. 80
7.2 Voting Rights.................................................... 80
SECTION 8. TRANSACTIONS WITH PARTNERS; OTHER AGREEMENTS..................... 80
8.1 Sprint Cellular.................................................. 80
8.2 Sprint Brand Licensing Agreement................................. 81
8.3 Marketing; Branding of Partnership Services...................... 81
8.4 Preferred Provider............................................... 83
8.5 MFJ.............................................................. 84
8.6 Interested Party Transactions.................................... 84
8.7 Access to Technical Information.................................. 84
8.8 Parent Undertaking............................................... 85
8.9 Certain Additional Covenants..................................... 85
8.10 PioneerCo Preemptive Rights...................................... 86
8.11 Foreign Ownership................................................ 86
8.12 Product Integration.............................................. 88
8.13 Provision of Services............................................ 91
8.14 Comcast Representative........................................... 91
8.15 Purchasing....................................................... 92
8.16 Advertising Reimbursement........................................ 92
SECTION 9. REPRESENTATIONS AND WARRANTIES................................... 93
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9.1 Representations and Warranties by Partners....................... 93
9.2 Representation and Warranty of Sprint............................ 95
SECTION 10. ACCOUNTING, BOOKS AND RECORDS................................... 95
10.1 Accounting, Books and Records.................................... 95
10.2 Reports.......................................................... 95
10.3 Tax Returns and Information...................................... 97
10.4 Proprietary Information.......................................... 98
SECTION 11. ADVERSE ACT..................................................... 99
11.1 Remedies......................................................... 99
11.2 Adverse Act Purchase............................................ 101
11.3 Net Equity...................................................... 104
11.4 Gross Appraised Value........................................... 105
11.5 Extension of Time............................................... 106
SECTION 12. DISPOSITIONS OF INTERESTS...................................... 106
12.1 Restriction on Dispositions..................................... 106
12.2 Permitted Transfers............................................. 106
12.3 Conditions to Permitted Transfers............................... 107
12.4 Right of First Refusal.......................................... 110
12.5 Tagalong Rights................................................. 114
12.6 Offer and Registration Rights................................... 116
12.7 Right of First Offer............................................ 123
12.8 Prohibited Dispositions......................................... 128
12.9 Representations Regarding Transfers............................. 128
12.10 Distributions and Allocations in Respect of..................... 128
SECTION 13. CONVERSION OF INTERESTS........................................ 129
13.1 Termination of Status as General Partner........................ 129
13.2 Restoration of Status as General Partner........................ 129
SECTION 14. DISSOLUTION AND WINDING UP..................................... 130
14.1 Liquidating Events.............................................. 130
14.2 Winding Up...................................................... 131
14.3 Compliance With Certain Requirements of
Regulations;.................................................... 132
14.4 Deemed Distribution and Recontribution.......................... 133
14.5 Rights of Partners.............................................. 133
14.6 Notice of Dissolution........................................... 133
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14.7 Buy/Sell Arrangements........................................... 133
SECTION 15. MISCELLANEOUS.................................................. 136
15.1 Notices......................................................... 136
15.2 Binding Effect.................................................. 137
15.3 Construction.................................................... 137
15.4 Time............................................................ 137
15.5 Table of Contents; Headings..................................... 137
15.6 Severability.................................................... 137
15.7 Incorporation by Reference...................................... 137
15.8 Further Action.................................................. 137
15.9 Governing Law................................................... 138
15.10 Waiver of Action for Partition: No Bill For..................... 138
15.11 Counterpart Execution........................................... 138
15.12 Sole and Absolute Discretion.................................... 138
15.13 Specific Performance............................................ 138
15.14 Entire Agreement................................................ 139
15.15 Limitation on Rights of Others.................................. 139
15.16 Waivers; Remedies............................................... 139
15.17 Jurisdiction; Consent to Service of Process..................... 139
15.18 Waiver of Jury Trial............................................ 140
15.19 No Right of Set-Off............................................. 140
</TABLE>
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<PAGE>
SCHEDULES
---------
<TABLE>
<CAPTION>
Schedule Number
- - -------- ------
<S> <C>
Excluded Businesses; Non-Exclusive Services
and Wireless Exclusive Services....................................... 1.10(a)
Sprint Cellular Service Area........................................... 1.10(b)
Initial Percentage Interests........................................... 2.1
Notice Addresses....................................................... 2.2
Simple Majority Vote................................................... 5.1(i)
Required Majority Vote................................................. 5.1(j)
Unanimous Vote......................................................... 5.1(k)
Unanimous Partner Vote................................................. 5.1(l)
Temporary Investments Guidelines....................................... 5.7
</TABLE>
-v-
<PAGE>
EXHIBITS
--------
<TABLE>
<CAPTION>
Exhibit Number
- - ------- ------
<S> <C>
Form of Amended and Restated Parent
Undertaking.......................................................... 1.10(a)
Form of Parents Agreement............................................. 1.10(b)
Form of Default Loan Promissory Note.................................. 2.4(c)(ii)
Form of Partner Loan Promissory Note.................................. 2.7
Form of Amended and Restate Sprint
Trademark License Agreement.......................................... 8.2
</TABLE>
-vi-
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.,
A DELAWARE LIMITED PARTNERSHIP
------------------------------
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is entered into
as of the 31st day of January, 1996, by and among Sprint Spectrum, L.P., a
Delaware limited partnership ("Sprint"), TCI Network Services, a Delaware
general partnership ("TCI"), Comcast Telephony Services, a Delaware general
partnership ("Comcast"), and Cox Telephony Partnership, a Delaware general
partnership ("Cox"), each as a General Partner and a Limited Partner, pursuant
to the provisions of the Delaware Revised Uniform Limited Partnership Act, on
the following terms and conditions:
WHEREAS, Sprint, TCI, Comcast and Cox entered into that certain Agreement
of Limited Partnership of MajorCo, L.P., dated as of March 28, 1995 (as amended
by that certain First Amendment to Agreement of Limited Partnership dated as of
August 31, 1995, the "Prior Partnership Agreement"), providing for the formation
of the Partnership by the filing of a Certificate of Limited Partnership with
the Secretary of State of Delaware;
WHEREAS, Sprint, TCI, Comcast and Cox wish to further amend the Prior
Partnership Agreement and to restate the Prior Partnership Agreement, as so
amended, in its entirety; and
WHEREAS, Sprint, TCI, Comcast and Cox wish to continue the Partnership upon
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, and in order to set 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 of the Partnership.
-------------------------------
The Partnership was formed on March 28, 1995. The Partners hereby agree to
continue the Partnership as a limited partnership pursuant to the provisions of
the Act and upon the terms and conditions set forth in this Agreement. This
Agreement completely amends, restates and supersedes the Prior Partnership
Agreement.
1.2 Name.
----
The name of the Partnership shall be MajorCo, L.P., and all business of the
Partnership shall
-1-
<PAGE>
be conducted in such name or, in the discretion of the Partnership Board, 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 of the Partnership shall be to engage in the Wireless Business and
in the provision of Non-Exclusive Services, either directly or through one or
more Subsidiaries, and to perform such activities in the furtherance of such
Wireless Business and provision of Non-Exclusive Services as may be approved
from time to time by the Partnership Board. Without a Unanimous Partner Vote,
the Partnership shall not engage in any other business, including any of the
Excluded Businesses. Notwithstanding the preceding sentence, the Partners
acknowledge that (i) pursuant to the Prior Partnership Agreement, the
Partnership conducted certain activities relating to the provision of wireline
telecommunications services, (ii) such activities will be terminated in an
orderly manner as soon as practicable following the date of this Agreement, but
in no event earlier than the end of such period as the Partnership Board may
determine is needed to ensure an orderly disposition by the Partnership of any
assets or rights relating exclusively to such activities and (iii) any assets or
other rights relating exclusively to such activities that are owned by the
Partnership shall be disposed of in such a manner as determined by a Unanimous
Vote of the Partnership Board.
(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 as 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 determined by the Partnership Board, and the Partnership Board 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 Partnership Board may
establish 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 commenced on the date the certificate of
limited partnership described in Section 17-201 of the Act (the "Certificate")
was filed in the office of the Secretary of State of Delaware in accordance with
the Act and shall continue until the winding up and liquidation of the
Partnership and its business is completed following a Liquidating Event, as
provided in Section 14.
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<PAGE>
1.6 Filings; Agent for Service of Process.
-------------------------------------
(a) The General Partners caused the Certificate to be filed in the
office of the Secretary of State of Delaware in accordance with the Act. The
Partnership Board 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 Partners shall cause amendments to the
Certificate to be filed whenever required by the Act. The Partners shall be
provided with copies of each document filed or recorded as contemplated by this
Section 1.6 promptly following the filing or recording thereof.
(b) The General Partners shall execute and cause to be filed
original or amended Certificates and shall take any and all other actions as 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
Partnership Board 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 in its individual name or
right 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.
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:
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<PAGE>
"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 Partnership Board as the accountants for the Partnership.
"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.
"Additional Capital Contributions" means, with respect to each
Partner, the Capital Contributions made by such Partner pursuant to Section 2.3
of the Prior Partnership Agreement on or after January 1, 1996 and prior to the
date of this Agreement, and the Capital Contributions made by such Partner
pursuant to Sections 2.3 (except as otherwise provided in Sections 2.3(a)(i) and
(ii)), 2.4, 2.5 and 8.10, but excluding Special Contributions, reduced in each
case by the amount of any liabilities of such Partner assumed by the Partnership
in connection with such Capital Contribution or any Nonrecourse Liabilities of
such Partner that are secured by any property contributed by such Partner as a
part of such Capital Contribution. 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
the terms of which have been approved by the Unanimous Vote of the Partnership
Board pursuant to which a Partner makes an Additional Capital Contribution to
the Partnership pursuant to Section 2.5.
"Additional Contribution Notice" means a written notice given to all
Partners, which shall (i) state the Additional Contribution Amount being
requested of all Partners and each Partner's proportionate share thereof
determined as provided in Section 2.3(b)(i) (or, in the case of a required
Additional Capital Contribution in respect of a Declined Accelerated
Contribution, as provided in Section 2.3(b)(ii)(B)), (ii) if applicable, state
that the Additional Capital Contribution being requested is a Second Tranche
Call, (iii) specify in reasonable detail the purposes for which the Additional
Contribution Amount is required, (iv) identify a date (the "Contribution Date"),
not more than forty-five (45) days nor less than thirty (30) days after the date
of such notice, upon which the Additional Capital Contributions are to be made,
(v) specify the account of the Partnership to which the contribution is to be
made and (vi) if the Additional Capital Contribution is being requested at such
time as the aggregate amount of Original Capital Contributions and Additional
Capital Contributions (including the Additional Capital Contribution being
requested) made or requested to be made in accordance with this Agreement
(excluding any PioneerCo Contribution) exceeds Five Billion Dollars
($5,000,000,000), state the Base Value, the estimated Gross Appraised Value and
the estimated aggregate Adjusted Net Equity of all Partners as of the applicable
Contribution Date.
"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
-4-
<PAGE>
(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.
- -
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 any Partner, any of the
following:
(i) Such Partner becomes a Defaulting Partner;
(ii) Such Partner Disposes of all or any part of its Interest
except as required or permitted by this Agreement; provided, however, that no
-------- -------
Adverse Actshall be considered 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 has committed a material breach of any
material covenant contained in this Agreement (other than as otherwise expressly
enumerated in this definition) or a material default on any material 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 General
Partner (with a copy to the Partnership Board and each 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
Partnership Board by Required Majority Vote); 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 the Partnership Board and all other Partners 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) (A) the disinterested Representatives determine in good
faith by Required Majority Vote that such Partner has committed such a breach or
default or (B) there is a Final Determination that such Partner's actions or
failures to act constituted such a breach or default; and provided further that
-------- -------
this clause (iii) shall not apply in the event of a breach of Section 8.5
hereof, which breach shall constitute an Adverse Act (if at all) pursuant to
clause (vii) below;
(iv) The Bankruptcy of such 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;
(v) The occurrence of a Change in Control of such Partner
without the
-5-
<PAGE>
unanimous written consent of the other General Partners;
(vi) An IXC Transaction has occurred with respect to such
Partner;
(vii) The occurrence of any event with respect to such Partner
(A) that causes such Partner or the Partnership or any of its Subsidiaries to
become a BOC or (B) that causes the Partnership or any of its Subsidiaries to
become a BOC Affiliated Enterprise or an entity subject to any restriction or
limitation under Section II of the MFJ, provided, however, that (a) the
-------- -------
circumstances that constitute an Adverse Act under clause (B) above must have a
material adverse effect on the business, assets, liabilities, results of
operations, financial condition or prospects of the Partnership and its
Subsidiaries and (b) no Adverse Act shall be considered to have occurred if such
Partner has taken actions which have cured the circumstances that would
otherwise have constituted an Adverse Act under clause (A) or (B), as
applicable, of this clause (vii) within ninety (90) days following the date
written notice of the occurrence of such event has been given to such Partner by
any General Partner (with a copy to the Partnership Board and each other
Partner); 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 the Partnership Board and all other Partners that
it contests such occurrence (or contests whether such occurrence constitutes an
Adverse Act under this clause (vii)), such occurrence shall not constitute an
Adverse Act unless and until (and assuming that such circumstances have not
theretofore been cured in full and that the applicable cure period has expired)
(a) the disinterested Representatives determine in good faith by Required
Majority Vote that such occurrence constitutes an Adverse Act under this clause
(vii) or (b) there is a Final Determination that such occurrence constitutes an
Adverse Act under this clause (vii); or
(viii) 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, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, (i) neither the
Partnership nor MinorCo, nor any Person controlled by the Partnership or MinorCo
(including WirelessCo), shall be deemed to be an Affiliate of any Partner or of
any Affiliate of any Partner and (ii) no Partner or any Affiliate thereof shall
be deemed to be an Affiliate of any other Partner or any Affiliate thereof
solely by virtue of the ownership by such Partner or any of its Affiliates of
any equity interest in the Partnership, MinorCo or PhillieCo.
"Agreed Value" means the agreed upon value of a Capital Contribution
by a Partner of the Property identified below, determined as provided below:
(i) with respect to the Property included in the Original
Capital
-6-
<PAGE>
Contribution of such Partner, the amount set forth next to such Partner's name
in Schedule 2.2 to the Prior Partnership Agreement;
(ii) with respect to the License Contribution by Cox,
$17,647,059; and
(iii) with respect to the Omaha License, an amount equal to the
sum of (A) $995,564.00, together with interest at the rate of 13.4% per annum
computed from November 17, 1994 through the date that the Omaha License is
contributed to the Partnership pursuant to Section 2.3(a)(ii) plus (B)
----
$4,062,400.00, together with interest at the rate of 13.4% per annum computed
from June 30, 1995 through the date that the Omaha License is contributed to the
Partnership pursuant to Section 2.3(a)(ii).
"Agreement" or "Partnership Agreement" means this Amended and
Restated Agreement of Limited Partnership, including all Schedules hereto, as
amended from time to time.
"Allocation Year" means (i) the period commencing on the date of the
Prior Partnership 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.
"Available Cash" means as of any date the cash of the Partnership as
of such date less such portion thereof as the Partnership Board 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 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.
-7-
<PAGE>
"BOC" means a "BOC" or one of the "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.
"BTA" means a Basic Trading Area, as defined in the FCC rules to be
codified at 47 C.F.R. (S) 24.13.
"Business Day" means a day of the year on which banks are not
required or authorized to close in the State of New York.
"Cable Partners" means Comcast, Cox and/or TCI, as the context may
require.
"Cable Subsidiary" has the meaning set forth in the form of Parents
Agreement attached as Exhibit 1.10(b).
"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.
(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 any Nonrecourse Liabilities of such Partner that 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 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 Partnership Board determines that it is
prudent to modify the manner in which the Capital Accounts, or any debits
-8-
<PAGE>
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 Partnership Board 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 and winding up of the
Partnership. The Partnership Board 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 such decision
or action permitted to be taken by the Partnership Board under this paragraph
shall require the Unanimous Vote of the Partnership Board.
"Capital Commitment" of any Partner means (i) with respect to the
first Fiscal Year in the Initial Two-Year Period, an amount equal to the product
of (A) such Partner's initial Percentage Interest and (B) the Planned Capital
Amount for such Fiscal Year, and (ii) with respect to the last Fiscal Year in
the Initial Two-Year Period, an amount equal to the excess, if any, of (A) the
product of (1) such Partner's initial Percentage Interest and (2) the sum of (a)
the Planned Capital Amount for such Fiscal Year plus (b) any Prior Year's
----
Carryforward, over (B) that portion of the cumulative Accelerated Contribution
Amounts requested of and made by such Partner in the first Fiscal Year in the
Initial Two-Year Period that the Partnership Board has determined pursuant to
Section 2.3(b)(i) shall be applied to reduce the Planned Capital Amount for such
last Fiscal Year. In the event all or a portion of an Interest is Transferred
in accordance with this Agreement, the transferee shall succeed to the Capital
Commitment of the transferor to the extent it relates to the Transferred
Interest and has not been called in full.
"Capital Contribution" means, with respect to any Partner, the amount
of money and the Gross Asset Value at the time of contribution of any Property
(other than money) contributed to the Partnership with respect to the Interest
held by such Partner (including any contribution expressly excluded from the
definition of Additional Capital Contribution). 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).
- -
"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 its
Parent other than in connection with a Permitted Transaction.
"Chief Executive Officer" means the chief executive officer of the
Partnership, including any interim chief executive officer.
-9-
<PAGE>
"Code" means the Internal Revenue Code of 1986.
"Comcast Parent" means Comcast Corporation, a Pennsylvania
corporation and any successor (by merger, consolidation, Transfer or otherwise)
to all or substantially all of its business and assets.
"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 Partnership Board and
published by the Bureau of Labor Statistics or a successor or substitute
governmental agency selected by the Partnership Board.
"Contest Notice" has the meaning set forth in clause (iii) of the
definition of "Adverse Act."
"Contribution Date" has the meaning set forth in the definition of
"Additional Contribution Notice."
"Controlled Affiliate" of any Person means the Parent of such Person
and each Subsidiary of such Parent. As used in Sections 6, 8.5, 8.9 and 8.11 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. As used in Sections 2.4, 5.1(c), 11.2, 12.4 and 12.5
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 action regarding the Partnership, whether
through ownership of voting securities, contractually or otherwise.
"Cox Parent" means Cox Communications, Inc., a Delaware corporation,
and any successor (by merger, consolidation, Transfer or otherwise) to all or
substantially all of its business and assets.
"Cox Pioneer Partnership" means a general partnership to be formed by
a Subsidiary of Cox Parent and a Subsidiary of Cox Enterprises, Inc., a Delaware
corporation.
"Cox Pioneer Preference License" means the 30 MHz "A" block PCS
license granted to Cox Parent on December 14, 1994, for the MTA encompassing Los
Angeles and San Diego, California, which MTA is identified in the FCC Public
Notice regarding the PCS Auction as Market No. M-2 (Report No. AUC-94-04,
Auction No. 4).
"Cut-Off Time" means the earlier to occur of (i) the end of the last
Fiscal Year covered by the Initial Business Plan and (ii) such time as the
aggregate amount of Original Capital Contributions and Additional Capital
Contributions made or requested to be made (excluding any PioneerCo
Contribution) first equals or exceeds the Total Mandatory Contributions.
"Debt" means (i) any indebtedness for borrowed money or deferred
purchase price of property whether or not evidenced by a note, bond, or other
debt instrument, (ii) obligations to pay
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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
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of any accounts obligations in respect 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 adjusted tax basis; provided,
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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 Partnership Board; and provided, further, that, consistent with
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Section 3.7, Depreciation with respect to Subsidiary Partnership Property shall
not be determined with regard to the distributive share of depreciation expense
directly or indirectly allocated to the Partnership by the Subsidiary
Partnership, but shall be computed with respect to the initial Gross Asset Value
of the Subsidiary Partnership interest contributed to the Partnership as if such
Subsidiary Partnership Property (or the equivalent percentage thereof) were
owned directly by the Partnership and were contributed by the Partners who
contributed the Subsidiary Partnership interests.
"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
Partnership Board in connection with any financing obtained on behalf of the
Partnership.
"Excluded Businesses" has the meaning set forth in Schedule 1.10(a).
"Exclusive Limited Partner" means any Limited Partner that is not
also a General Partner.
"FCC" means the Federal Communications Commission.
"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,
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which has been approved by a Required Majority Vote of the Partnership Board
pursuant to Section 8.6 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 the
Prior Partnership 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. "General Partners"
means all such Persons.
"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 contributing Partner and the Partnership Board in
accordance with Section 8.6, provided that the initial Gross Asset Value of the
Property contributed by the Partners pursuant to Section 2.2 or either of
clauses (i) or (ii) of Section 2.3(a) shall be the sum of (1) the Agreed Value
of such Property plus (2) the amount of any liabilities of the contributing
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Partner assumed by the Partnership in connection with such contribution or any
Nonrecourse Liabilities of such Partner that are secured by the contributed
Property;
(ii) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their gross fair market value, as determined by the
Partnership Board, 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;
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(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 conversion of a General Partner to an Exclusive Limited Partner if, and only
if, in the judgment of the Partnership Board, 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 increase the amount of such a deficit
balance; and (E) the adjustment of the Percentage Interests of the Partners
pursuant to Section 2.4(d)(ii);
(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
Partnership Board in accordance with Section 8.6;
(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
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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
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Values shall not be adjusted pursuant to this subparagraph (iv) to the extent
that an adjustment pursuant to subparagraph (ii) hereof is made in connection
with a transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv); and
(v) If Gross Asset Value is required to be determined for the
purpose of Section 11.2 or 14.7, Gross Asset Value shall be determined in the
manner set forth in such Sections.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to clause (i), (ii) or (iv) of this definition, 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.
"Hypothetical Federal Income Tax Amount" means for any Fiscal Year
the product of (A) the daily weighted average highest marginal federal income
tax rate applicable to domestic corporations in effect for such Fiscal Year
expressed as a percentage and (B) the excess, if any, of (i) the cumulative
amount of taxable income and gain reported by the Partnership on its Internal
Revenue Service Forms 1065 over its life determined as of the end of such Fiscal
Year, over (ii) the larger of zero (0) or the cumulative amount of taxable
income and gain reported by the Partnership on its Internal Revenue Service
Forms 1065 over its life determined as of the beginning of such Fiscal Year.
"Initial Two-Year Period" means the period from January 1, 1996
through December 31, 1997.
"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"), each successor to the long
distance telecommunications business of any of the foregoing entities and each
respective Affiliate of each such Carrier or successor.
"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 the 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 the Parent of such
Partner or any Publicly Held
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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
or the exercise by the IXC of its rights arising from such ownership under such
State Statute or 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
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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 and 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 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, as amended.
"Joint Venture Formation Agreement" means the Second Amended and
Restated Joint Venture Formation Agreement of even date herewith among each of
the Parents providing for the formation of PioneerCo and certain other matters.
"LEC" means a local exchange carrier.
"Limited Partner" means any Person (i) who is referred to as such in
the first paragraph of this Agreement or who has become a 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.
"Local Joint Venture" means any joint venture or other entity formed
by, or any agreement or arrangement entered into between or among, as
applicable, Sprint or its Controlled Affiliates and one or more Cable Partners
or their respective Controlled Affiliates for purposes of providing or offering
local wireline telecommunications services under the Sprint Brand as
contemplated under a Parents Agreement.
"Mandatory Contribution" of any Partner means an amount equal to the
product of (i) such Partner's initial Percentage Interest times (ii) the Total
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Mandatory Contributions.
"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.,
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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
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<PAGE>
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.
"Minimum Ownership Requirement" means, with respect to (i) any
Original Partner, as of any date, that the ratio (expressed as a percentage) of
such Original Partner's Percentage Interest to the aggregate Percentage
Interests of all Original Partners is at least eight percent (8%) or (ii) any
Partner not an Original Partner, as of any date, that such Partner's Percentage
Interest is at least eight percent (8%).
"MinorCo" means MinorCo, L.P., the Delaware limited partnership
formed by the Partners for the purpose of holding a limited partnership interest
in WirelessCo and one or more other Subsidiaries of the Partnership.
"MinorCo Interest" means, as to any Partner, all of the interests of
such Partner in MinorCo, including any and all benefits to which the holder of
an interest in MinorCo may be entitled as provided in the partnership agreement
of MinorCo and under the Act, together with all obligations of such Partner to
comply with the terms and provisions of the partnership agreement of MinorCo.
"MSA" means a Metropolitan Statistical Area, as determined by the
U.S. Department of Commerce.
"MTA" means a Major Trading Area as defined in FCC rules to be
codified at 47 C.F.R. (S) 24.13.
"Non-Exclusive Services" has the meaning set forth in Schedule
1.10(a) hereto.
"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.
"Omaha License" means the 30 MHz PCS license acquired by Cox Parent
in the PCS Auction for the MTA encompassing Omaha, Nebraska, which MTA is
identified in the FCC Public Notice regarding the PCS Auction as Market No. M-45
(Report No. AUC-94-04, Auction No. 4).
"Original Capital Contribution" means, with respect to each Partner,
the Capital Contributions made by such Partner prior to January 1, 1996. 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.
"Original Partners" means collectively Comcast, Cox, TCI and Sprint
and any
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<PAGE>
successors or transferees thereof to the extent such successors or transferees
acquired their Interest in accordance with this Agreement.
"Parent" means, except as otherwise provided below with respect to a
Permitted Transaction, (i) with respect to Cox (and its Controlled Affiliates),
Cox Parent, with respect to Comcast (and its Controlled Affiliates), Comcast
Parent, with respect to TCI (and its Controlled Affiliates), TCI Parent and with
respect to Sprint (and its Controlled Affiliates), Sprint Parent. 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 Transaction, the new Parent of the
applicable Partner immediately following such Permitted Transaction 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
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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, 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.
"Parent Undertaking" means a written instrument in substantially the
form of Exhibit 1.10(a) executed simultaneously with the execution of this
Agreement by each Parent of a Partner.
"Parents Agreement" means, individually and collectively, the
separate agreements between Sprint Parent and each of TCI Parent, Comcast Parent
and Cox Parent, substantially in the form of Exhibit 1.10(b), executed
simultaneously with the execution and delivery of this Agreement.
"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.
"Partners" means all General Partners and all Limited Partners.
"Partner" means any one of the Partners.
"Partnership" means the partnership formed pursuant to that certain
Agreement of Limited Partnership of MajorCo, L.P. dated as of March 28, 1995,
and continued pursuant to this Agreement, and the partnership continuing the
business of this Partnership in the event of dissolution as herein provided.
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<PAGE>
"Partnership Board" means the committee of Representatives that will
have the authority and powers set forth in Section 5.1.
"Partnership Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"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 any Partner as of any
relevant date, the ratio (expressed as a percentage) of the sum of such
Partner's Original Capital Contribution and aggregate Additional Capital
Contributions as of such date to the sum of the aggregate Original Capital
Contributions and Additional Capital Contributions of all Partners as of such
date; provided, however, that if any Partner fails for any reason to make its
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Requested Contribution or any Preemptive Contribution after such time as the
aggregate amount of Original Capital Contributions and Additional Capital
Contributions made or requested to be made in accordance with this Agreement
(including any Additional Capital Contribution then being made or requested, but
excluding any PioneerCo Contribution) first equals Five Billion Dollars
($5,000,000,000), then effective as of the Contribution Date for such Requested
Contribution or, with respect to any Preemptive Contribution, the applicable
PioneerCo Contribution Date, and at all times thereafter, the Percentage
Interest of each Partner shall be determined in accordance with Section
2.4(d)(ii). Additional Capital Contributions of Premium Dollars pursuant to
Section 2.4(a)(v) shall be valued at their Premium Dollar value for purposes of
calculating Percentage Interests. Such Capital Contributions will be determined
after giving effect to all Capital Contributions made prior to and on the date
as of which the determination of Percentage Interests is made, subject to the
provisions regarding the adjustment of Percentage Interests set forth in Section
2.4(d). In the event all or any portion of an Interest is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Percentage Interest of the transferor to the extent it relates to the
Transferred Interest. In the case of an adjustment of Gross Asset Value pursuant
to clause (ii) of the definition of such term or an adjustment of Percentage
Interests pursuant to Section 2.4(d)(ii), any references in Section 3 to
"Percentage Interest" shall be deemed to refer to the Percentage Interests of
the Partners as of the day immediately preceding the date of any such
adjustment.
"Permitted Brand" means a trademark, trade name, service mark and/or
logo of a Cable Partner, Teleport or their respective Controlled Affiliates,
other than any trademark, trade name, service mark or logo of any RBOC or IXC
(as each such term is defined in the form of Parents Agreement attached as
Exhibit 1.10(b)).
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"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.
"Person" means any individual, partnership, corporation, trust, or
other entity.
"PioneerCo" means the Delaware limited partnership to be formed by
Cox Pioneer Partnership and WirelessCo to own the Cox Pioneer Preference License
and to operate a Wireless Business in connection therewith.
"PioneerCo Contribution" means a Capital Contribution of all or any
portion of Cox Pioneer Partnership's interest in PioneerCo as contemplated under
Section 8.10.
"PioneerCo Contribution Date" means a date on which a PioneerCo
Contribution is made.
"PioneerCo Partnership Agreement" means the Agreement of Limited
Partnership of PioneerCo to be entered into between WirelessCo and Cox Pioneer
Partnership .
"Planned Capital Amount" means, with respect to the first Fiscal Year
in the Initial Two-Year Period, $1,131,000,000, and with respect to the last
Fiscal Year in the Initial Two-Year Period, $767,000,000, as such amount may be
revised by the Unanimous Vote of the Partnership Board or reduced pursuant to
Section 2.3(b)(i).
"Premium Call" means a Second Tranche Call that has been converted by
a Simple Majority Vote of the Partnership Board to a Premium Call pursuant to
Section 2.4(a)(v).
"Premium Call Contribution Date" has the meaning set forth in the
definition of "Premium Call Notice."
"Premium Call Notice" means a written notice given to all Partners,
which shall state (i) the amount of the Second Tranche Call originally requested
in the corresponding Additional
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Contribution Notice, (ii) that such Second Tranche Call has been converted to a
Premium Call, (iii) the Premium Dollar amount for each dollar to be contributed
in response to the Premium Call Notice, (iv) the date upon which the Premium
Call contributions are to be made (the "Premium Call Contribution Date"), which
date shall not be more than forty-five (45) days nor less than thirty (30) days
after the date of such notice and (v) the account of the Partnership to which
such contribution is to be made.
"Premium Dollar" means, except as otherwise provided in Section
2.4(a)(v), each dollar contributed by a Partner in response to a Premium Call
Notice or a Premium Call Shortfall Notice, each of which dollars will be valued
for the purposes of calculating Percentage Interests at an amount equal to (i)
one dollar ($1.00) divided by (ii) the quotient of (x) the aggregate Adjusted
Net Equity of all Partners (provided that for purposes of determining Adjusted
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Net Equity pursuant to this definition, Gross Appraised Value shall be
determined by a Simple Majority Vote of the Partnership Board in connection with
the giving of a Premium Call Notice) divided by (y) the aggregate amount of the
Original Capital Contributions and Additional Capital Contributions made to the
Partnership prior to the date of the Premium Call Notice.
"Prime Rate" means the rate announced from time to time by Citibank,
N.A. as its prime rate.
"Prior Year's Carryforward" means the amount by which the aggregate
amount of Additional Capital Contributions actually requested of the Partners
pursuant to Section 2.3(b)(i) with Contribution Dates during the first Fiscal
Year in the Initial Two-Year Period was less than the Planned Capital Amount
during such Fiscal Year.
"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;
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(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 1.704-1(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.
"Representative" means an individual designated by a General Partner
as a member of the Partnership Board.
"Second Tranche Call" means the first Eight Hundred Million Dollars
($800,000,000) of Additional Capital Contributions requested in accordance with
Section 2.3(b) after the Cut-Off Time; provided that in no event may a Second
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Tranche Call be made after December 31, 2002.
"Sprint Brand" means the trademark "Sprint" together with the related
"Diamond" logo.
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"Sprint Cellular Service Area" means the areas serviced as of October
24, 1994 by the cellular operations of Controlled Affiliates of Sprint, as
listed in Schedule 1.10(b).
"Sprint Communications" means Sprint Communications Company, L.P., a
Delaware limited partnership.
"Sprint Parent" means Sprint Corporation, a Kansas corporation, and
any successor (by merger, consolidation, Transfer or otherwise) to all or
substantially all of its business and assets.
"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 other Person, and, includes (i) with respect to Cox Parent and TCI
Parent, Section 203 of the Delaware General Corporation Law; (ii) with respect
to Comcast Parent, Subchapters E, F and G of Chapter 25 of the Pennsylvania
Business Corporation Law of 1988; and (iii) with respect to Sprint Parent,
Sections 17-12,100 and 17-1286 through 1298, et seq. of the Kansas Corporations
Statute.
"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.
"Subsidiary Partnership Property" means all property, other than
interests in other Subsidiary Partnerships, held by any Subsidiary Partnership
on the date on which the interests in such Subsidiary Partnership are
contributed to the Partnership.
"Substantial Portion" has the meaning set forth in the definition of
"Permitted Transaction."
"TCI Parent" means Tele-Communications, Inc., a Delaware corporation,
and any successor (by merger, consolidation, Transfer or otherwise) to all or
substantially all of its business and assets.
"Technical Information" means all technical information, regardless of
form and
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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.
"Teleport" means Teleport Communications Group Inc., a Delaware
corporation, TCG Partners, a New York general partnership, and their respective
Controlled Affiliates, as well as each local joint venture that is managed by
any of the foregoing entities and in which the foregoing entities collectively
own an equity interest of at least thirty percent (30%), and any successor (by
merger, consolidation, Transfer or otherwise) to all or substantially all of the
business and assets of any of the foregoing.
"Total Mandatory Contributions" of the Partners means an amount equal
to the sum of $4.2 billion plus the Agreed Values of the License Contribution
----
and the Omaha License.
"Trading Day" means, with respect to any security, a day on which the
principal national securities exchange on which such security is listed or
admitted to trading, or the Nasdaq Stock Market, such security is listed or
admitted to trading thereon, is open for the transaction of business (unless
such trading shall have been suspended for the entire day) or, if such security
is not listed or admitted to trading on any national securities exchange or the
Nasdaq Stock Market, any day other than a Business Day.
"Transfer" means, as a noun, any sale, exchange assignment or transfer
and, as a verb, to sell, exchange, assign or transfer.
"Voluntary Bankruptcy" has the meaning set forth in the definition of
"Bankruptcy."
"Voting Percentage Interest" means, as of any date and with respect to
any Partner that as of such date is entitled to designate one or more members of
the Partnership Board, the ratio (expressed as a percentage) of such Partner's
Percentage Interest to the aggregate Percentage Interests of all Partners that
are entitled to designate one or more members of the Partnership Board.
"Wireless Affiliate" means any Person that is an affiliate of the
Partnership's Wireless Business by entering into an Affiliation Agreement with
WirelessCo.
"Wireless Business" means the business of providing Wireless Exclusive
Services.
"WirelessCo" means WirelessCo, L.P., the Delaware limited partnership
formed by the Partners 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 the Partnership.
"Wireless Exclusive Services" has the meaning set forth in Schedule
1.10(a).
1.11 Additional Definitions.
----------------------
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<TABLE>
<CAPTION>
Defined Term Defined in
------------ ----------
<S> <C>
"1933 Act" Section 5.9(a)
"Accelerated Contribution Amount" Section 2.3(b)(i)
"Accepting Offerees" Section 12.4(d)
"Accepting Partner Note" Section 12.7(e)
"Accepting Partners" Section 12.7(e)
"Additional Contribution Amount" Section 2.3(b)(i)
"Adjusted Net Equity" Section 2.4(d)(ii)
"Adjusted Percentage Interest" Section 2.4(a)(iv)
"Affiliation Agreement" Section 6.1(d)
"Agents" Section 6.6(a)
"Aggregate Contributions" Section 2.4(d)(iv)
"Annual Budget" Section 5.2(c)
"Approved Business Plan" Section 5.2(c)
"Attribution Cap" Section 8.11(a)(v)
"Base Value" Section 2.4(d)(iii)(A)
"Bidding Partner" Section 14.7(e)
"Blocking Limited Partner" Section 5.1(l)(ii)
"Brief" Section 5.8(a)(ii)
"Business Plan" Section 5.2(a)
"Business-Related Information" Section 8.12(b)
"Buy-Sell Price" Section 11.2(a)
"Cable Services" Section 8.3(b)
"Certificate" Section 1.5
"Comcast Area" Section 6.4(g)
"Competitive Activity" Section 6.1(a)
"Confidential Information" Section 6.6(a)
"Contributing Partner" Section 2.4(a)(ii)
"Control Notice" Section 12.5(b)
"Control Offer" Section 12.5(b)
"Control Offer Period" Section 12.5(b)
"Controlling Partner" Section 12.5(b)
"Covered Licensee" Section 8.11(a)(ii)
"Cure Date" Section 2.4(c)(iii)
"Damages" Section 11.1(a)
"Deadlock Event" Section 5.8(b)
"Declining Partner" Section 2.4(a)(i)
"Declined Accelerated Contribution" Section 2.3(b)(ii)(B)
"Default Budget" Section 5.2(d)
"Default Loan" Section 2.4(c)(ii)
"Default Loan Notice" Section 2.4(c)(ii)
"Defaulting Partner" Section 2.4(c)(i)
"Delinquent Partner" Section 2.4(b)
</TABLE>
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<TABLE>
<S> <C>
"Designated Matters" Section 8.14
"Election Notice" Section 11.2(a)
"Election Period" Section 11.2(b)
"Excess Contribution Amount" Section 2.3(b)(i)
"extension period" Section 12.6(f)
and 12.7(e)
"Firm Offer" Section 12.4(b)
"Firm Offer Commencement Notice" Section 12.6(c)
"First Appraiser" Section 11.4
"First Offer Period" Section 12.7(c)
"First Offer Sale Notice" Section 12.7(e)
"First Public Appraiser" Section 12.6(a)
"Floating Rate" Section 2.4(f)
"Foreign Ownership Restriction" Section 8.11(a)(i)
"Foreign Ownership Safe Harbor" Section 8.11(a)(iv)
"Foreign Ownership Threshold" Section 8.11(a)(iii)
"Free to Sell Period" Section 12.4(f)
"Funding Commitment" Section 2.4(a)(ii)
"General Partner Percentage Interests" Section 2.1
"Grace Period" Section 2.4(b)
"Gross Appraised Value" Section 11.4
"In-Territory Customers" Section 6.4(e)
"In-Territory Distributors" Section 6.4(e)
"Initial Business Plan" Section 5.2(a)
"Initial Offer" Section 14.7(e)
"Initial Participating Partner" Section 8.12(c)
"Initiating Partner" Section 8.12(b)
"Interested Person" Section 8.6
"Issuance Items" Section 3.3(h)
"Lending Commitment" Section 2.4(c)(ii)
"Lending Partner" Section 2.4(c)(ii)
"License Contribution" Section 2.3(a)(i)
"Liquidating Events" Section 14.1(a)
"Limited Partner Percentage Interests" Section 2.1
"Loan Date" Section 2.4(c)(ii)
"Make-up Amount" Section 2.4(c)(iii)
"MajorCorp" Section 12.6(a)
"MajorCorp Stock" Section 12.6(a)
"Market Value" Section 12.7(g)
"Mediator" Section 5.8(a)(ii)
"Minimum Offering Amount" Section 12.6(a)
"Minimum Secondary Offering Amount" Section 12.7(b)
"Net Equity" Section 11.3
"Net Equity Notice" Section 11.3
"Nextel" Section 6.4(f)
"Non-Adverse Partners" Section 11.1(a)
"Non-Selling Partners" Section 12.7(a)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
"Notice Partner" Section 12.6(a)
"Offer" Section 6.1(c)
"Offered Interest" Section 12.4
"Offerees" Section 12.4(b)
"Offer Notice" Section 12.4(b)
"Offer Period" Section 12.4(c)
"Offer Price" Section 12.4(a)
"Offer Statement" Section 14.7(b)
"Ownership Restrictions" Section 8.11
"Overlap Cellular Area" Section 8.1
"Partner Loan" Section 2.7
"Partnership's Businesses" Section 6.4(b)
"Partnership Services" Section 8.3(b)
"Partnership Technical Information" Section 8.7
"Paying Partner" Section 2.4(a)(ii)
"Payment Default" Section 2.4(c)(i)
"Penalty Amount" Section 2.4(b)
"Permitted Period" Section 12.7(f)
"Permitted Transfer" Section 12.2
"PhillieCo" Section 6.3(e)
"PMCI Shares" Section 6.4(f)
"PMV Notice" Section 12.6(b)
"Preemptive Contribution" Section 2.3(c)
"Premium Call Shortfall Notice" Section 2.4(a)(v)
"Premium Call Paying Partner" Section 2.4(a)(v)
"Prior Partnership Agreement" Recitals
"Proposed Budget" Section 5.2(c)
"Proposed Business Plan" Section 5.2(c)
"Proprietary Technical Information" Section 8.12(b)
"Public Appraiser" Section 12.6(a)
"Public Market Value" Section 12.6(b)
"Public Offering" Section 5.9(c)
"purchase commitment" Section 11.2(b), 12.4(d),
12.6(e) and 12.7(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 6.6(a)
"Registered Offering" Section 12.7
"Registering Partner" Section 12.6(c)
"Registration Accepting Offerees" Section 12.6(e)
"Registration Firm Offer" Section 12.6(c)
"Registration Interest" Section 12.6(a)
"Registration Note" Section 12.6(f)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
"Registration Notice" Section 12.6(a)
"Registration Offer" Section 12.7(b)
"Registration Offer Period" Section 12.6(d)
"Registration Offerees" Section 12.6(c)
"Registration Sale Notice" Section 12.6(f)
"Regulatory Allocations" Section 3.4
"Related Group" Section 5.1(c)
"Representative" Section 5.1(c)
"Requested Contribution" Section 2.3(b)(i)
"Requested Premium Call Contribution" Section 2.4(a)(v)
"Required Majority Vote" Section 5.1(j)
"Restricted Area" Section 8.14
"Restricted Time" Section 8.14
"Restricted Party" Section 6.6(a)
"Sale Notice" Section 12.4(e)
"Rule 144 Notice" Section 12.7(a)
"Rule 144 Offer" Section 12.7(a)
"Rule 144 Sale" Section 12.7
"Second Appraiser" Section 11.4
"Secondary Registration Notice" Section 12.7(b)
"Second Public Appraiser" Section 12.6(a)
"Section 5.1 Election Period" Section 5.1(l)(ii)
"Seller" Section 12.4
"Selling Partner" Section 12.7
"Senior Credit Agreement" Section 2.7
"Shortfall" Section 2.4(a)(ii)
"Shortfall Notice" Section 2.4(a)(ii)
"Simple Majority Vote Section 5.1(i)
"Special Contribution" Section 2.4(b)
"Sprint Cellular Business" Section 8.1
"Sprint LD" Section 8.3(b)
"Sprint LD Services" Section 8.3(b)
"Subsidiary Partnership" Section 3.7
"Tagalong Notice" 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)
"Tendering Offeree" Section 12.6(f)
"Tendering Partner" Section 12.7(e)
"Third Appraiser" Section 12.4
"Third Party Provider" Section 8.14
"Timely Partner" Section 2.4(b)
"Trademark License" Section 8.2
"Transferring Partner" Section 12.5(a)
"Unanimous Partner Vote" Section 5.1(l)(i)
</TABLE>
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<TABLE>
<S> <C>
"Unanimous Vote" Section 5.1(k)
"Unfunded Shortfall" Section 2.3(b)(ii)(B)
"Unpaid Amount" Section 2.4(b)
"Unreturned Capital" Section 11.2(a)
</TABLE>
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) 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.
SECTION 2. PARTNERS' CAPITAL CONTRIBUTIONS
2.1 Percentage Interests; Preservation of Percentages of Interests Held
-------------------------------------------------------------------
as General Partners and as Limited Partners.
-------------------------------------------
The initial Percentage Interest of each Partner as of the date of this
Agreement is set forth on Schedule 2.1 and represents the sum of the "General
Partner Percentage Interest" and "Limited Partner Percentage Interest" of such
Partner as set forth in such Schedule 2.1. Except as expressly provided in this
Agreement, 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 and until it 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 and
until it 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 and the amount of any Capital Contributions made
by a Partner pursuant to Section 2 and any allocations and distributions to a
Partner pursuant to Section 3 or Section 4 shall, except as otherwise provided
therein, be allocated ninety-nine percent (99.0%) to the Interest held by the
Partner as a General Partner and one percent (1.0%) to the Interest held by the
Partner as a Limited Partner. In the event that a Partner Transfers
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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 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.
2.2 Partners' Original Capital Contributions.
----------------------------------------
The Original Capital Contribution of each Partner consists of the
contributions of cash and Property made by such Partner pursuant to the terms of
the Prior Partnership Agreement prior to January 1, 1996.
2.3 Additional Capital Contributions.
--------------------------------
(a) Contributions of Certain Property by Cox.
----------------------------------------
(i) License Contribution by Cox. Cox shall contribute to the
---------------------------
Partnership an undivided fractional interest in the Cox Pioneer Preference
License and certain associated assets (the "License Contribution"), which the
Partnership in turn shall contribute through its Subsidiaries to the capital of
PioneerCo. Such contribution shall be made concurrently with the contribution by
Cox Pioneer Partnership to PioneerCo of the remaining undivided fractional
interest in the Cox Pioneer Preference License and such associated assets, which
shall be made at the date and time provided in, and in accordance with, the
PioneerCo Partnership Agreement. For purposes hereof, such contributions to the
Partnership and then to PioneerCo may be effected through the direct conveyance
by Cox Parent of the Cox Pioneer Preference License to PioneerCo. The Agreed
Value of the License Contribution shall be credited against the next Additional
Capital Contribution to be made in cash by Cox under this Agreement to the same
extent as if Cox had contributed cash in the amount of such Agreed Value, and
until so credited the License Contribution shall not constitute an Additional
Capital Contribution for purposes of this Agreement.
(ii) Omaha License Contribution by Cox. As soon as
---------------------------------
practicable (taking into account any FCC approval that may be required in
connection with such contribution) following the divestiture by Sprint and its
Controlled Affiliates of their ownership interests in the Sprint Cellular
Businesses, Cox shall contribute the Omaha License to the Partnership. The
Agreed Value of the Omaha License shall be credited against the next Additional
Capital Contribution to be made in cash by Cox under this Agreement to the same
extent as if Cox had contributed cash in the amount of such Agreed Value, and
until so credited the contribution of the Omaha License shall not constitute an
Additional Capital Contribution for purposes of this Agreement.
(b) Additional Capital Contributions of Cash.
----------------------------------------
(i) Additional Cash Contributions Generally. Subject to the
---------------------------------------
limitations of this Agreement, the Partnership Board (or the Chief Executive
Officer pursuant to (x) the authority to be granted in each Annual Budget to
make requests for Additional Capital Contributions in the
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amounts, during the periods and subject to the limitations set forth therein,
and (y) such authority as may be delegated to the Chief Executive Officer from
time to time by the Partnership Board (which delegation may occur only by a vote
of the members of the Partnership Board required to take the action so
delegated)) may in accordance with the following procedures request the Partners
to make Additional Capital Contributions to the Partnership in cash from time to
time to fund the cash needs of the Partnership in conformity with the Annual
Budget then in effect, as it may be modified from time to time in accordance
with this Agreement. The aggregate amount of the Additional Capital
Contributions requested pursuant to this Section 2.3(b)(i) to be made as of any
Contribution Date (the "Additional Contribution Amount") (A) shall be set forth
in an Additional Contribution Notice given to each Partner, (B) shall not exceed
the amount reasonably anticipated by the Partnership Board to be required to
fund the cash needs of the Partnership for the ensuing six (6) months or such
shorter period as may be determined by the Partnership Board, and (C) when added
to the Additional Contribution Amounts stated in all prior Additional
Contribution Notices with Contribution Dates in the then-current Fiscal Year,
(I) shall not exceed the cumulative amount of Additional Capital Contributions
contemplated to be required of the Partners during such Fiscal Year as set forth
in the Annual Budget for such Fiscal Year unless otherwise approved by a
Required Majority Vote of the Partnership Board, and (II) if such Fiscal Year
falls within the Initial Two-Year Period, also shall not exceed, unless
otherwise approved by a Unanimous Vote of the Partnership Board, (a) with
respect to the first Fiscal Year in the Initial Two-Year Period, the product of
(1) 150% times (2) the Planned Capital Amount for such Fiscal Year, and (b) with
-----
respect to the last Fiscal Year in the Initial Two-Year Period, the sum of (1)
the product of (x) 150% times (y) the Planned Capital Amount for such Fiscal
-----
Year (provided that the amount determined in accordance with this clause (y)
--------
will be decreased by any portion thereof the payment of which the Partnership
Board has previously determined as provided below to accelerate into the first
Fiscal Year in the Initial Two-Year Period), plus (2) 100% of any Prior Year's
----
Carryforward. For purposes of this Agreement, amounts contributed on or after
January 1, 1996 pursuant to Section 2.3 of the Prior Partnership Agreement shall
be deemed to be Additional Capital Contributions made pursuant to an Additional
Contribution Notice under this Section 2.3(b)(i).
To the extent that the cumulative Additional Contribution Amounts stated in
Additional Contribution Notices pursuant to this Section 2.3(b)(i) with
Contribution Dates in any given Fiscal Year in the Initial Two-Year Period
exceed (i) with respect to the first Fiscal Year in the Initial Two-Year Period,
the Planned Capital Amount for such Fiscal Year and (ii) with respect to the
last Fiscal Year in the Initial Two-Year Period, the sum of (A) the Planned
Capital Amount for such Fiscal Year plus (B) any Prior Year's Carryforward minus
---- -----
(C) any portion of such Planned Capital Amount that was accelerated to the prior
Fiscal Year, such excess shall constitute an "Excess Contribution Amount." The
Partnership Board may by Required Majority Vote designate any Excess
Contribution Amount with a Contribution Date in the first Fiscal Year of the
Initial Two-Year Period as an "Accelerated Contribution Amount." The amount of
any Excess Contribution Amount that the Partnership Board may designate as an
Accelerated Contribution Amount pursuant to the preceding sentence shall not
exceed the Planned Capital Amount for the last Fiscal Year in the Initial Two-
Year Period (after giving effect to any reduction to such Planned Capital Amount
pursuant to the following sentence with respect to any prior Excess Contribution
Amount). Any Accelerated Contribution Amount will be applied to reduce the
Planned Capital Amount for the last Fiscal Year in the Initial Two-Year Period.
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The amount of the Additional Capital Contribution requested of any Partner
pursuant to this Section 2.3(b)(i) in an Additional Contribution Notice (the
"Requested Contribution") shall be equal to (i) with respect to Requested
Contributions with Contribution Dates during any Fiscal Year in the Initial Two-
Year Period, that amount which represents the same percentage of the Additional
Contribution Amount specified in such Additional Contribution Notice as such
Partner's initial Percentage Interest and (ii) with respect to Requested
Contributions with Contribution Dates during any Fiscal Year after the end of
the Initial Two-Year Period, that amount which represents the same percentage of
the Additional Contribution Amount specified in such Additional Contribution
Notice as such Partner's Percentage Interest as of the date of such Additional
Contribution Notice; provided that if the aggregate amount of the Original
--------
Capital Contributions and Additional Capital Contributions made or requested to
be made (excluding any PioneerCo Contribution) prior to the end of the Initial
Two-Year Period is less than the Total Mandatory Contributions, then the
Requested Contributions of each Partner shall continue to be the same percentage
of the Additional Contribution Amounts as such Partner's initial Percentage
Interest until the Cut-Off Time.
(ii) Mandatory Additional Capital Contributions.
------------------------------------------
(A) No Partner may decline to make any of its Requested
Contributions unless, and then only to the extent that, (I) with respect to
Requested Contributions with Contribution Dates during any Fiscal Year in the
Initial Two-Year Period, the amount of the Requested Contribution of such
Partner, when added to the sum of (a) the cumulative amount of all Requested
Contributions theretofore requested of and made by such Partner during the same
Fiscal Year plus (b) the amount of any Preemptive Contribution made by such
----
Partner during the same Fiscal Year, would exceed the sum of (x) such Partner's
Capital Commitment with respect to such Fiscal Year and (y) the product of such
Partner's initial Percentage Interest times any Excess Contribution Amount for
such Fiscal Year if and to the extent that such Partner's Representative(s)
voted for approval of the Annual Budget pursuant to which the Excess
Contribution Amount is being requested or voted in favor of requesting (or
delegating to the Chief Executive Officer the authority to request) such Excess
Contribution Amount, and (II) with respect to Requested Contributions with
Contribution Dates during any Fiscal Year after the Initial Two-Year Period,
none of such Partner's Representative(s) voted for approval of the Annual Budget
that provides for the Additional Contribution Amount being requested and none of
such Partner's Representatives voted in favor of requesting (or delegating to
the Chief Executive Officer the authority to request) such Additional
Contribution Amount or such Partner was an Exclusive Limited Partner at the time
of such vote. Notwithstanding the preceding sentence, a Partner will not be
entitled to decline to make any Requested Contribution with a Contribution Date
during the last Fiscal Year in the Initial Two-Year Period or in any Fiscal Year
thereafter covered by the Initial Business Plan except to the extent such
Requested Contribution, when added to the aggregate amount of Original Capital
Contributions and Additional Capital Contributions made or requested to be made
by such Partner (excluding any PioneerCo Contribution) prior to the Contribution
Date of such Requested Contribution, exceeds such Partner's Mandatory
Contribution.
(B) Subject to Section 2.3(b)(ii)(A), if a Partner was a
Declining Partner with respect to an Accelerated Contribution Amount (with
respect to any such Partner, its "Declined Accelerated Contribution"), then, to
the extent that there is a Shortfall in connection with a Requested Contribution
with a Contribution Date during the last Fiscal Year in the Initial Two-Year
Period that is not fully allocated to one or more Contributing Partners pursuant
to Section 2.4(a) (an
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"Unfunded Shortfall"), such Partner shall be required to make an Additional
Capital Contribution to the Partnership up to an amount equal to such Partner's
initial Percentage Interest of the portion of the Planned Capital Amount set
forth in the Initial Business Plan for such last Fiscal Year that was
accelerated to the prior Fiscal Year (but only to the extent of such Declined
Accelerated Contribution and, if there is more than one such Partner, pro rata
in proportion to the aggregate amounts of the previously unfunded Declined
Accelerated Contributions of each such Partner). Any such required Additional
Capital Contribution shall be contributed by such Partner within ten (10) days
of notice to such Partner by the Chief Executive Officer that there exists an
Unfunded Shortfall with respect to which such Partner is required to make an
Additional Capital Contribution pursuant to the preceding sentence, which notice
shall set forth the amount of the Additional Capital Contribution required of
such Partner and the applicable Contribution Date and shall otherwise constitute
an Additional Contribution Notice for purposes of this Agreement.
(c) Additional Contributions Related to PioneerCo Preemptive Rights.
---------------------------------------------------------------
Each of the Partners (other than Cox) may make Additional Capital Contributions
to the Partnership as and to the extent permitted by Section 8.10 (each a
"Preemptive Contribution").
2.4 Failure to Contribute Capital.
-----------------------------
(a) Declining Partners.
------------------
(i) Any Partner that is entitled to decline to make a
Requested Contribution as provided in Section 2.3(b)(ii) may do so by notice
given to the Chief Executive Officer (with a copy to the Partnership Board)
within fifteen (15) days of the date the applicable Additional Contribution
Notice was given (any such Partner that timely exercises such right is herein
referred to as a "Declining Partner").
(ii) If any Partner is a Declining Partner with respect to an
Additional Contribution Notice and the Partnership Board does not give a Premium
Call Notice pursuant to Section 2.4(a)(v), the Chief Executive Officer shall,
within five (5) days after the date notice was required to be received under
Section 2.4(a)(i), give a notice (a "Shortfall Notice") to each Partner that
made its Requested Contribution in full (each a "Paying Partner") requesting the
Paying Partners to make Additional Capital Contributions in an aggregate amount
equal to the amount not contributed by the Declining Partner(s) in response to
such Additional Contribution Notice (the "Shortfall"). Each Paying Partner that
is willing to commit to fund all or any portion of the Shortfall (each a
"Contributing Partner") shall so notify the Chief Executive Officer and each
other Paying Partner within ten (10) days after the date the Shortfall Notice
was given, setting forth the maximum amount of the Shortfall, up to one hundred
percent (100%) thereof, that such Contributing Partner is willing to fund (the
"Funding Commitment"). Except as otherwise provided in Section 2.4(a)(iii), if
the aggregate Funding Commitments are less than or equal to one hundred percent
(100%) of the Shortfall, each Contributing Partner shall be entitled to make an
Additional Capital Contribution to the Partnership in response to a Shortfall
Notice in an amount equal to its Funding Commitment. If the aggregate Funding
Commitments made by the Contributing Partners exceed one hundred percent (100%)
of the Shortfall, then except as otherwise provided in Section 2.4(a)(iii), each
Contributing Partner shall be entitled to contribute an amount equal to the same
percentage of the Shortfall as such
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Contributing Partner's Percentage Interest represents of the total Percentage
Interests of the Contributing Partners (in each case before giving effect to any
adjustments to the Percentage Interests to be made in connection with the
Additional Contribution Notice with respect to which the Shortfall occurred),
provided that, if any Contributing Partner's Funding Commitment was for an
- - --------
amount less than its proportionate share of the Shortfall as so determined, the
portion of the Shortfall not so committed to be funded shall, except as
otherwise provided in Section 2.4(a)(iii), continue to be allocated
proportionally, in the manner provided above in this sentence, among the other
Contributing Partners until each has been allocated by such process of
apportionment an amount equal to its Funding Commitment or until the entire
Shortfall has been allocated among the Contributing Partners. The amount of the
Additional Capital Contribution to be made by each Contributing Partner in
response to the Shortfall Notice as determined in accordance with this Section
2.4(a)(ii) shall be specified in a notice delivered by the Chief Executive
Officer to the Contributing Partners and shall, within ten (10) days after the
date of such notice, be paid to the account of the Partnership designated in the
Shortfall Notice.
(iii) Except as otherwise provided in Section 2.4(a)(iv), if
the Declining Partner is a Cable Partner and no Cable Partner's Percentage
Interest, when added to the Percentage Interests of all Controlled Affiliates of
such Partner, is equal to or greater than Sprint's Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates of Sprint (in
each case determined without regard to any Additional Capital Contribution made
by any Partner pursuant to the Additional Contribution Notice with respect to
which the Shortfall occurred), the Shortfall shall be allocated first among
those of the Contributing Partners that are Cable Partners in the manner
provided in Section 2.4(a)(ii) as though Sprint were not a Contributing Partner,
and if and to the extent that the aggregate Funding Commitments made by such
Cable Partners are less than one hundred percent (100%) of the Shortfall, the
balance of the Shortfall up to Sprint's Funding Commitment shall be allocated to
Sprint.
(iv) The Shortfall shall be allocated among the Cable Partners
in the manner set forth in Section 2.4(a)(iii) until any Cable Partner would
have a Percentage Interest, when added to the Percentage Interests of all
Controlled Affiliates of such Partner, that is equal to Sprint's Percentage
Interest, when added to the Percentage Interests of all Controlled Affiliates of
Sprint, calculated in each case after giving effect to the adjustments to the
Percentage Interests to be made in connection with the Additional Contribution
Notice with respect to which the Shortfall occurred assuming that the Additional
Capital Contributions to be made pursuant to this Section 2.4(a) were made up to
the aggregate amount that would yield such result (as to each Partner, its
"Adjusted Percentage Interest"). Any portion of the Shortfall not yet allocated
shall continue to be allocated proportionately among all of the Contributing
Partners (including Sprint, if applicable) in the manner provided in Section
2.4(a)(ii) without regard to Section 2.4(a)(iii), but substituting the Adjusted
Percentage Interests of the Contributing Partners for the Percentage Interests
that would otherwise be used to determine such allocation, until each has been
allocated by such process an amount equal to its Funding Commitment or until the
entire Shortfall has been allocated among the Contributing Partners.
(v) Notwithstanding the foregoing, if (A) any Partner is a
Declining Partner with respect to an Additional Contribution Notice that
requests a Second Tranche Call and (B) the Partnership Board determines by
Simple Majority Vote that the aggregate Adjusted Net Equity of all Partners
(provided that for purposes of determining Adjusted Net Equity pursuant to this
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Section
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2.4(a)(v), Gross Appraised Value shall be determined by a Simple Majority Vote
of the Partnership Board) is less than the aggregate amount of Original Capital
Contributions and Additional Capital Contributions made to the Partnership
through the date of the applicable Additional Contribution Notice (but excluding
the amount set forth in the Additional Contribution Notice), the Partnership
Board may elect to convert such Second Tranche Call to a Premium Call by giving
a Premium Call Notice (which shall supercede such Additional Contribution
Notice) to each Partner within five (5) days after the date notice was required
to be received from the Declining Partner under Section 2.4(a)(i). Each Partner,
including the Declining Partner, shall have the right to make an Additional
Capital Contribution in response to a Premium Call in an amount which represents
the same percentage of the amount of the Second Tranche Call requested in the
Premium Call Notice as such Partner's Percentage Interest as of the date of such
Premium Call Notice (the "Requested Premium Call Contribution"). If each Partner
makes its Requested Premium Call Contribution, the amounts so contributed will
not be treated as Premium Dollars. If any Partner fails to make its Requested
Premium Call Contribution, then all amounts contributed pursuant to this Section
2.4(a)(v) with respect to such Premium Call shall be treated as Premium Dollars.
In addition, if any Partner fails to make its Requested Premium Call
Contribution, the Chief Executive Officer shall, within five (5) days after the
Premium Call Contribution Date, give a notice (a "Premium Call Shortfall
Notice") to each Partner that made its Requested Premium Call Contribution in
full (each a "Premium Call Paying Partner") requesting the Premium Call Paying
Partners to make Additional Capital Contributions in an aggregate amount equal
to the amount not contributed by the Declining Partner (the "Premium Call
Shortfall"). The amount of the Premium Call Shortfall that each Premium Call
Paying Partner shall be entitled to make to the Partnership in response to a
Premium Call Shortfall Notice shall be determined in the same manner as provided
in Sections 2.4(a)(ii), (iii) and (iv) for the determination of the amount of
the Additional Capital Contribution that each Contributing Partner is entitled
to make in response to a Shortfall Notice. The amount of the Premium Call
Shortfall to be made by each Premium Call Paying Partner in response to the
Premium Call Shortfall Notice as so determined shall be specified in a notice
delivered by the Chief Executive Officer to the Premium Call Paying Partners and
shall, within ten (10) days after the date of such notice, be paid to the
account of the Partnership designated in the Premium Call Shortfall Notice and
all amounts so paid shall be treated as Premium Dollars. Any Partner that fails
to make a contribution in response to a Premium Call Notice shall not be treated
as a Delinquent Partner or a Defaulting Partner.
(b) Delinquent Partners. In the event that any Partner other than
-------------------
a Declining Partner (a "Delinquent Partner") fails to make all or any portion of
its Requested Contribution on or before the related Contribution Date, an
additional amount shall accrue as a penalty with respect to such unpaid amount
(the "Unpaid Amount") at the applicable Floating Rate from and including the
Contribution Date until the Unpaid Amount and the full amount of the penalty
accrued thereon (as of any date of determination, the "Penalty Amount") are paid
as provided in this Section 2.4 or the failure to pay the same results in such
Partner becoming a Defaulting Partner. If the Delinquent Partner pays the Unpaid
Amount to the Partnership at any time during the period ending at the close of
business on the tenth (10th) day following the related Contribution Date (the
"Grace Period"), the Delinquent Partner shall, at the time of such payment, pay
to each other Partner, if any, that made its Requested Contribution in full on
or before the related Contribution Date and has no uncured Payment Defaults
(each a "Timely Partner"), a pro rata portion of the Penalty Amount (based on
the percentage that the amount of each Timely Partners' Requested Contribution
represents of the total
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amount of the Timely Partner's Requested Contributions), but in no event more
than the amount that such Timely Partner would have earned as interest on the
amount of its Requested Contribution, from and including the Contribution Date
to the date the Delinquent Partner pays the Unpaid Amount to the Partnership, if
the Timely Partner had made a loan in such amount to the Partnership with
interest at the Floating Rate applicable during the Grace Period. The balance of
the Penalty Amount, if any, shall be paid by the Delinquent Partner to the
Partnership and the amount so paid shall be deemed to be a "Special
Contribution" by the Delinquent Partner to the capital of the Partnership. The
portion of the Penalty Amount paid to the Timely Partners shall not, for any
purpose, be deemed to be a Capital Contribution.
(c) Defaulting Partners.
-------------------
(i) If a Delinquent Partner fails to pay the Unpaid Amount
together with the Penalty Amount to the Partnership or the Timely Partners as
provided in Section 2.4(b) on or before the expiration of the Grace Period, such
failure shall constitute a "Payment Default" and, if such Payment Default is not
thereafter cured in full as provided in Section 2.4(c)(iii), the Delinquent
Partner shall for all purposes hereof be considered a "Defaulting Partner" with
the effect described herein.
(ii) If a Payment Default occurs, the Chief Executive Officer
shall, within five (5) days after the expiration of the related Grace Period,
give a notice (a "Default Loan Notice") to each Partner that was a Paying
Partner with respect to such Additional Contribution Notice requesting the
Paying Partners to make loans (each a "Default Loan") to the Partnership in an
aggregate amount equal to the Unpaid Amount. Each Paying Partner that is willing
to commit to make a Default Loan (each a "Lending Partner") shall so notify the
Chief Executive Officer and each other Paying Partner within ten (10) days after
the date the Default Loan Notice was given, setting forth the maximum portion of
the Unpaid Amount, up to one hundred percent (100%) thereof, that such Lending
Partner is willing to lend to the Partnership (the "Lending Commitment"). The
amount of the Default Loan that each Lending Partner shall be entitled to make
to the Partnership in response to a Default Loan Notice shall be determined in
the same manner as provided in Section 2.4(a) for the determination of the
amount of the Additional Capital Contribution that each Contributing Partner is
entitled to make in response to a Shortfall Notice. The amount of the Default
Loan to be made by each Lending Partner in response to the Default Loan Notice
as so determined shall be specified in a notice delivered by the Chief Executive
Officer to the Lending Partners and within ten (10) days of the date of such
notice shall be paid to the account of the Partnership designated in the Default
Loan Notice. Each Default Loan shall bear interest from the date made (the "Loan
Date") until paid in full or contributed to the Partnership as provided in this
Section 2.4 at the Floating Rate applicable following the Grace Period and shall
be evidenced by a promissory note of the Partnership in the form of Exhibit
2.4(c)(ii) (with any changes thereto requested by any lender under any Senior
Credit Agreement and consented to by the Lending Partner, which consent shall
not be unreasonably withheld).
(iii) A Delinquent Partner may cure its Payment Default at any
time prior to the close of business on the ninetieth (90th) day following the
Loan Date (the "Cure Date") by transferring to an account of the Partnership
designated by the Chief Executive Officer cash in an amount equal to the sum of
the Unpaid Amount and the Penalty Amount accrued thereon to the date of such
transfer (the "Make-up Amount"). The portion of the Make-up Amount equal to the
Penalty
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Amount shall be deemed to be a Special Contribution by the Delinquent Partner to
the Partnership and the balance thereof shall constitute an Additional Capital
Contribution by the Delinquent Partner to the Partnership. The Chief Executive
Officer shall cause the Partnership to apply the funds so received from the
Delinquent Partner to the payment in full of the unpaid principal of and accrued
interest on each Default Loan in accordance with the terms of the note
evidencing the same.
(iv) If a Delinquent Partner has not timely cured its Payment
Default in full in accordance with Section 2.4(c)(iii), then the Lending
Partners shall contribute their respective Default Loans to the Partnership
effective as of the day following the Cure Date and surrender the notes
evidencing the same to the Partnership for cancellation. The unpaid principal
amount of a Lending Partner's Default Loan through the Cure Date shall
constitute an Additional Capital Contribution (and the accrued interest on such
Default Loan shall constitute a Special Contribution) by the Lending Partner to
the Partnership as of the effective date of such contribution.
(d) Adjustments to Percentage Interests. The Percentage Interests
-----------------------------------
of the Partners shall be adjusted in accordance with this Section 2.4(d). The
Partnership Board shall provide notice of each adjustment to all Partners and
Schedule 2.1 shall be revised to reflect such adjustment.
(i) Except as otherwise provided in clause (ii) of this
Section 2.4(d), the Percentage Interests of the Partners shall be adjusted in
accordance with the definition of "Percentage Interest" to give effect to
Additional Capital Contributions made (or deemed to be made) pursuant to Section
2.3, Section 2.5 (if applicable) and this Section 2.4, provided that if there
--------
are any Declining Partners or Delinquent Partners with respect to any Additional
Contribution Notice, the determination of the amount of the adjustment of the
Percentage Interests for Additional Capital Contributions made in response to
such notice will be deferred until the later of the last day for the making of
Additional Capital Contributions in connection with any Shortfall and the
expiration of the Grace Period, provided, however, that such adjustment,
-------- -------
whenever determined, shall be effective as of the Contribution Date. The
Percentage Interests of the Partners will be further adjusted as and when
Additional Capital Contributions, if any, are made as contemplated by clause
(iii) or (iv), as applicable, of Section 2.4(c).
(ii) If any Partner fails for any reason (x) to make its
requested contribution with respect to an Additional Contribution Notice that
requests Additional Capital Contributions in an amount that, when added to the
aggregate amount of Original Capital Contributions and Additional Capital
Contributions made or requested to be made in accordance with this Agreement
(excluding any Pioneerco Contribution), would exceed Five Billion Dollars
($5,000,000,000), or (y) to make a Preemptive Contribution at such time as the
aggregate amount of Original Capital Contributions and Additional Capital
Contributions made or requested to be made in accordance with this Agreement
(excluding any Pioneerco Contribution but including all Preemptive Contributions
made or to be made in connection with the Pioneerco Contribution with respect to
which such Partner failed to make its Preemptive Contribution) exceed Five
Billion Dollars ($5,000,000,000), the Percentage Interests of the Partners shall
be adjusted and thereafter determined in accordance with this section
2.4(d)(ii). Such determination shall be made on the later of the last day for
the making of Additional Capital Contributions in connection with any Shortfall
and the tenth (10th) day following the applicable contribution date (or, with
respect to a Preemptive Contribution,
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<PAGE>
such other date as may be determined by the Partnership Board in connection with
the related Pioneerco Contribution) and shall be effective as of the
Contribution Date (or, with respect to a Preemptive Contribution, the Applicable
Pioneerco Contribution Date). The adjusted Percentage Interest of a Partner
shall be equal to a fraction (expressed as a percentage) the numerator of which
shall be the sum of (A) the Adjusted Net Equity of such Partner plus (B) either
----
(1) with respect to a Requested Contribution, the Additional Capital
Contribution made by such Partner with respect to such Additional Contribution
Notice (including any Additional Capital Contributions made by such Partner in
connection with any Shortfall) or (2) with respect to a Preemptive Contribution,
the Preemptive Contribution or PioneerCo Contribution made by such Partner, as
applicable, and the denominator of which shall be the sum of (C) the aggregate
Adjusted Net Equity of all Partners plus (D) either (i) with respect to a
Requested Contribution, the aggregate Additional Capital Contributions made by
all Partners with respect to such Additional Contribution Notice (including any
Additional Capital Contributions made in connection with any Shortfall) or (2)
with respect to a Preemptive Contribution, the aggregate Preemptive
Contributions made by all Partners and the PioneerCo Contribution to which such
Preemptive Contributions relate. The "Adjusted Net Equity" of a Partner shall be
the amount that would be distributed as of the applicable Contribution Date or
PioneerCo Contribution Date to such Partner in liquidation of the Partnership
pursuant to Section 14.2(a)(iii) if (I) all of the Partnership's business and
assets (including its partnership interests in WirelessCo, but excluding the
amounts of any Additional Capital Contributions made pursuant to such Additional
Contribution Notice or, with respect to a Preemptive Contribution, the
Preemptive Contributions and PioneerCo Contribution to which such Preemptive
Contribution relates) were sold substantially as an entirety for Gross Appraised
Value (determined in accordance with Section 2.4(d)(iii)), (II) Profits and
Losses and items specially allocated in accordance with Sections 3.3 and 3.4 for
the Allocation Year ending on the date of such determination, including any gain
or loss resulting from the deemed sale described in clause (I), were allocated
in accordance with Section 3, (III) the Partnership paid its accrued, but
unpaid, liabilities and established reserves pursuant to Section 14.2 for the
payment of reasonably anticipated contingent or unknown liabilities and (IV) the
Partnership distributed the remaining proceeds to the Partners in liquidation,
all as of such Contribution Date or applicable PioneerCo Contribution Date.
(iii) (A) Except as otherwise will be provided in the
PioneerCo Partnership Agreement to reflect the principles set forth in Item 8(c)
of Exhibit 1.1(b) to the Joint Venture Formation Agreement, whenever Adjusted
Net Equity is required to be determined pursuant to Section 2.4(d)(ii), Gross
Appraised Value shall be determined by the Partnership Board by a Simple
Majority Vote based upon the most recent determination of Gross Appraised Value
(the "Base Value") pursuant to Section 2.4(d)(iii)(B). In making its
determination of Gross Appraised Value pursuant to this Section 2.4(d)(iii)(A),
the Partnership Board shall adjust the Base Value for any Capital Contributions
by and distributions to the Partners and for the operating results and other
transactions of the Partnership from the date as of which the Base Value was
determined to the applicable Contribution Date.
(B) Gross Appraised Value shall be determined as of
December 31 of the Fiscal Year immediately preceding the Fiscal Year in which
the amount of Additional Capital Contributions contemplated under the Annual
Budget (or Default Budget, if applicable) for the forthcoming Fiscal Year, when
added to the aggregate amount of Original Capital Contributions and Additional
Capital Contributions theretofore made or requested to be made in accordance
with this Agreement (excluding any PioneerCo Contribution), would exceed Five
Billion Dollars
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<PAGE>
($5,000,000,000), and thereafter shall be determined as of December 31 of each
Fiscal Year. Gross Appraised Value shall be determined as provided in Section
11.4, and the General Partner that (together with its Controlled Affiliates)
holds the largest Voting Percentage Interest shall designate the First Appraiser
not less than twenty (20) days prior to the date as of which Gross Appraised
Value is to be determined, and the General Partner that (together with its
Controlled Affiliates) holds the smallest Voting Percentage Interest shall
appoint the Second Appraiser within ten (10) Business Days of receiving notice
of the appointment of the First Appraiser. The Partnership Board shall, by
Simple Majority Vote, estimate Gross Appraised Value and the Adjusted Net Equity
of the Partners from time to time as necessary to comply with the notice
requirement set forth in clause (vi) of the definition of Additional
Contribution Notice.
(iv) If any Requested Contributions are requested to be made
or any PioneerCo Contribution is made at such time as the aggregate amount of
Original Capital Contributions and Additional Capital Contributions previously
made in accordance with this Agreement (excluding all PioneerCo Contributions)
(collectively, the "Aggregate Contributions") is less than Five Billion Dollars
($5,000,000,000), but the aggregate amount of such Requested Contributions or
the aggregate amount of Preemptive Contributions permitted to be made pursuant
to Section 2.3(c) in response to such PioneerCo Contribution, as applicable,
when added to the Aggregate Contributions, exceeds Five Billion Dollars
($5,000,000,000), then any adjustment of the Percentage Interests of the
Partners pursuant to this Section 2.4(d) shall be determined (A) with respect to
that portion of the amount of such Requested Contributions or Preemptive
Contributions, as applicable, that, when added to the Aggregate Contributions
equals Five Billion Dollars ($5,000,000,000), in accordance with Section
2.4(d)(i), and (B) with respect to that portion of the amount of such Requested
Contributions or Preemptive Contributions, as applicable, that, when added to
the Aggregate Contributions exceeds Five Billion Dollars ($5,000,000,000), in
accordance with Section 2.4(d)(ii).
(e) Paying Partners. A Paying Partner that declines to make a
---------------
Funding Commitment or Lending Commitment as contemplated by this Section 2.4
shall not be deemed to be a Delinquent Partner or Defaulting Partner as a result
thereof, nor shall the failure to make such a commitment constitute a Payment
Default with respect to such Partner.
(f) Floating Rate. Subject to the last two sentences of Section
-------------
2.7(b), the term "Floating Rate" means the rate per annum (computed on the basis
of the actual number of days elapsed in a year of 365 or 366 days, as
applicable), compounded monthly, equal to the greater of (i) the Prime Rate
(adjusted as and when changes in the Prime Rate occur) plus (x) during the Grace
Period, two percent (2%) and (y) following the Grace Period, five percent (5%),
and (ii) the rate per annum applicable to borrowings by the Partnership under
its principal credit facility, if any, or, if a choice of rates is then
available to the Partnership, the highest such rate (in either case adjusted as
and when changes in such applicable rate occur) plus, following the Grace
Period, two percent (2%).
2.5 Other Additional Capital Contributions.
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Each Partner may contribute from time to time such additional cash or other
Property as the Partnership Board may approve by Unanimous Vote or as may be
expressly contemplated by this
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Agreement, provided that any Capital Contribution or Property (other than cash
--------
or any PioneerCo Contribution) made pursuant to this Section 2.5 shall be
subject to the terms and provisions of an Additional Contribution Agreement.
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 Partnership Board.
Partnership funds shall not be commingled with those of any Person other than
any Subsidiary of the Partnership in which the Partnership and MinorCo own, in
the aggregate, directly or indirectly, one hundred percent (100%) of the
outstanding equity interests, without a Unanimous Vote of the Partnership Board.
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.
-------------------------------
(a) Partner Loans. In order to satisfy the Partnership's financial
-------------
needs, the Partnership may, if so approved by the requisite vote of the
Partnership Board, 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. Loans made by a Partner or an
Affiliate of a Partner (a "Partner Loan") shall be evidenced by a promissory
note of the Partnership in the form attached as Exhibit 2.7 and, subject to the
last two sentences of Section 2.7(b), shall bear interest payable quarterly from
the date made until paid in full at a rate per annum to be determined by the
Partnership Board that is no less favorable to the Partnership than if the loan
had been made by an independent third party. Unless a Partner declines to make
such loan or is a Defaulting Partner or a Partner subject to Bankruptcy, Partner
Loans shall be made pro rata in accordance with the respective Percentage
Interests of the Partners (or in such other proportion as the Partnership Board
may approve by Unanimous Vote).
(b) Terms of Partner Loans. Unless otherwise determined by the
----------------------
Partnership Board, all Partner Loans and Default Loans shall be unsecured and
the promissory notes evidencing the same shall be non-negotiable 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
and Default 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(b)(ii) and (iii). Subject to the terms of applicable Senior Credit
Agreements, 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
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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.
(c) Purchase of Partner Loans. An election by a Partner to
-------------------------
purchase all or any portion of another Partner's Interest pursuant to Sections
5.1, 6.4(f), 11, 12.4, 12.5, 12.6 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 same percentage of 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) Subject to Sections 5.4 and 14.3, the Exclusive Limited
Partners shall not be liable for the debts, liabilities, contracts or any other
obligations of the Partnership. Except as otherwise provided by any other
agreements among the Partners or mandatory provisions of applicable state law,
an Exclusive Limited Partner shall be liable only to make Capital Contributions
to the extent required by Sections 2.3, 2.5 and 14.3 and shall not be required
to lend any funds to the Partnership or, after such Capital Contributions have
been made, to make any additional Capital Contributions to the Partnership.
(c) No Partner shall have any personal liability for the repayment
of any Capital Contributions of any other Partner.
(d) No Partner shall be entitled to receive interest on its Capital
Contributions or Capital Account except as otherwise specifically provided in
this Agreement.
SECTION 3. ALLOCATIONS
3.1 Profits.
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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, one hundred percent (100%) to the Partners, in
proportion to, and to the
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extent of, an amount equal to the excess, if any, of (i) the cumulative Losses
allocated to each such Partner pursuant to Section 3.5 for all prior Allocation
Years, over (ii) the cumulative Profits allocated to such Partner pursuant to
this Section 3.1(a) for all prior Allocation Years;
(b) Second, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, an amount equal to the excess, if any, of
(i) the cumulative Losses allocated to each such Partner pursuant to Section
3.2(c) for all prior Allocation Years, over (ii) the cumulative Profits
allocated to such Partner pursuant to this Section 3.1(b) for all prior
Allocation Years;
(c) Third, to the extent such Profits arise during or after the
Allocation Year in which all or substantially all of the Partnership's assets
are disposed of (or revalued pursuant to clause (ii) of the definition of Gross
Asset Value), to the Partners in such ratios and amounts as may be necessary to
cause the balances in their Capital Accounts to be as nearly as practicable in
the same ratio as their respective Percentage Interests; and
(d) The balance, if any, among the Partners in proportion to their
Percentage Interests.
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, one hundred percent (100%) 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(d) 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 extent such Losses arise during or after the
Allocation Year in which all or substantially all of the Partnership's assets
are disposed of, to the Partners in such ratio and amounts as may be necessary
to cause the balances in their Capital Accounts to be as nearly as practicable
in the same ratio as their respective Percentage Interests; and
(c) The balance, if any, among the Partners in proportion to their
Percentage Interests.
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
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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 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.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for
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<PAGE>
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 Interest Allocation. In the event that the Partnership
---------------------------
makes any payment in respect of interest accrued on any Default Loan in any
Allocation Year, the deduction attributable to such payment shall be specially
allocated to the Delinquent Partner with respect to which such Default Loan was
made.
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), 3.3(g) and 3.5 (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 Partnership Board 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 Partnership Board shall take into account
future Regulatory Allocations 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 to the Partners who are not Exclusive Limited
Partners in proportion to their Percentage Interests.
3.6 Other Allocation Rules.
----------------------
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<PAGE>
(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 a Required
Majority Vote of the Partnership Board 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 Partnership Board 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 using the traditional method with curative
allocations as described in Section 1.704-3 of the Regulations, applied as
necessary in any reasonable manner not expressly precluded by Section 1.704-3 of
the Regulations. In making such allocations, Section 704(c) shall be applied as
if the Partnership's proportionate share of the assets owned by any partnership,
interests in which are contributed to the Partnership ("Subsidiary
Partnership"), were owned directly by the Partnership and were contributed by
the Partners who contributed the Subsidiary Partnership interests.
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 Partnership Board 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.
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<PAGE>
SECTION 4. DISTRIBUTIONS
4.1 Available Cash.
--------------
From time to time the Partnership Board by a Required Majority Vote may
determine to distribute Available Cash to the Partners. Except as otherwise
provided in Section 14.2, Available Cash, if any, shall be distributed to the
Partners in proportion to their respective Percentage Interests in such amounts
and at such times as the Partnership Board shall determine by Required Majority
Vote. Prior to making any cash distributions to the Partners pursuant to this
Section 4.1, the Partnership shall have paid in full all Partner Loans (in
accordance with the order of payment contemplated by Section 14.2(b)).
4.2 Tax Distributions.
-----------------
(a) Subject to Section 4.2(b), Available Cash shall be distributed to
the Partners in proportion to their Percentage Interests within one hundred
thirty-five (135) days after the end of each Fiscal Year of the Partnership in
an aggregate amount equal to the Hypothetical Federal Income Tax Amount for such
Fiscal Year.
(b) Prior to making any cash distributions to the Partners pursuant
to Section 4.2(a), the Partnership shall have paid in full all Partner Loans (in
accordance with the order of payment contemplated by Section 14.2(b)).
4.3 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 Partnership Board.
----------------------------------
(a) General Authority. Subject to the limitations and restrictions
-----------------
set forth in this Agreement, the General Partners 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, are hereby
granted to and vested in the General Partners, which shall conduct such business
and exercise such powers through their Representatives on the Partnership Board.
(b) Delegation. The Partnership Board 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 Partnership Board to approve such action directly.
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<PAGE>
(c) Number and Term of Office. The Partnership Board initially
-------------------------
shall have six voting members, one of which shall be designated by each Cable
Partner and three of which shall be designated by Sprint. The Chief Executive
Officer shall be a non-voting member of the Partnership Board. During the term
of this Agreement, except as otherwise provided below, each General Partner
shall be entitled to designate one Representative to the Partnership Board,
provided that (i) for so long as Sprint is entitled to representation on the
- - --------
Partnership Board (except as otherwise provided below), Sprint shall be entitled
to designate three Representatives to the Partnership Board; provided, however,
-------- -------
that at any time any other Partner holds a greater Voting Percentage Interest
than Sprint (except as otherwise provided below), Sprint shall be entitled to
designate only two Representatives to the Partnership Board; and provided,
further, that at any time any other Partner holds a greater Voting Percentage
Interest than Sprint and Sprint's Percentage Interest is less than twenty
percent (20%), Sprint shall be entitled to designate only one Representative to
the Partnership Board, and (ii) those Partners, if any, that are Controlled
Affiliates of the same Parent (a "Related Group") shall collectively be entitled
to designate only the largest number of Representatives as is entitled to be
designated by any single member of the Related Group, which Representative(s)
shall be designated by the Partner that has the largest Percentage Interest of
the Partners in the Related Group. Any Partner whose Percentage Interest,
together with the Percentage Interest(s) of each other Partner, if any, that is
a member of the same Related Group, is, in the aggregate, less than the Minimum
Ownership Requirement shall, for so long as its Percentage Interest or the
aggregate Percentage Interest of its Related Group, as applicable, is less than
the Minimum Ownership Requirement, not be entitled to designate a Representative
to the Partnership Board, and the Representative of such Partner or Related
Group, as applicable, shall immediately cease to be a member of the Partnership
Board, without any further act by the affected Partner.
Any Partner who becomes an Adverse Partner shall immediately forfeit the
right to designate a member of the Partnership Board, and the Representative(s)
of the affected Partner shall immediately cease to be a member of the
Partnership Board, without any further act by the affected Partner; provided
--------
that if a Partner becomes an Adverse Partner as the result of the occurrence of
an Adverse Act described in clause (iii), (iv), (vi) or (vii) of the definition
of such term in Section 1.10, such Partner will regain (or its transferee will
be entitled to, as applicable) the right to designate a Representative on the
Partnership Board (if otherwise so entitled thereto under this Agreement) if (i)
in the case of a Partner that is an Adverse Partner other than as a result of
the occurrence of an Adverse Act described in clause (iii) of the definition of
such term in Section 1.10, such 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) in the case of a Partner
that is an Adverse Partner as a consequence of the occurrence of an Adverse Act
described in clause (iii) of the definition of such term in Section 1.10, there
is a Final Determination that such Partner's actions or failure to act did not
constitute such an Adverse Act, (iii) in the case of a Partner that is an
Adverse Partner as a consequence of Bankruptcy, such Partner ceases to be in a
state of Bankruptcy, (iv) in the case of a Partner that is an Adverse Partner as
a consequence of the occurrence of any IXC Transaction, such Partner ceases to
have the relationship with the IXC which caused such IXC Transaction to occur,
or (v) in the case of a Partner that is an Adverse Partner as a consequence of
the occurrence of an event described in clause (vii) of the definition of the
term "Adverse Act" in Section 1.10, such Partner takes actions that eliminate
the circumstances that constituted such an Adverse Act within the meaning of
such clause (vii). The membership of the
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<PAGE>
Partnership Board shall be increased or decreased from time to time in
accordance with the foregoing provisions of this Section 5.1(c).
Each Representative shall hold office at the pleasure of the Partner that
designated such Representative. Any Partner may at any time, and from time to
time, by written notice to the other Partners remove any or all of the
Representatives designated by such Partner, with or without cause, and appoint
substitute Representatives to serve in their stead. Each Partner shall be
entitled to name one or more alternate Representatives to serve in the place of
any Representative appointed by such Partner should any such Representative not
be able to attend a meeting or meetings or any portion thereof, including in the
case of a Representative of Comcast not being able to attend a meeting to the
extent required in order to comply with the provisions of Section 8.14. Each
such alternate shall be deemed to be a Representative hereunder with respect to
any action taken at such meeting or meetings or any portion thereof. Each
Partner shall bear the costs incurred by each Representative or alternate
designated by it to serve on the Partnership Board, and no Representative or
alternate shall be entitled to compensation from the Partnership for serving in
such capacity.
The written notice of a Partner's appointment of a Representative or
alternate shall in each case set forth such Representative's or alternate's
business and residence addresses and business telephone number. Each Partner
shall promptly give written notice to the other Partners of any change in the
business or residence address or business telephone number of any of its
Representatives. Each Partner shall cause its Representatives on the
Partnership Board to comply with the terms of this Agreement. In the absence of
prior written notice to the contrary, any action taken by a Representative of a
Partner shall be deemed to have been duly authorized by the Partner that
appointed such Representative.
(d) Vacancy. In the event any Representative dies or is unwilling
-------
or unable to serve as such or is removed from office by the Partner that
designated him or her, such Partner shall promptly designate a successor to such
Representative.
(e) Place of Meeting/Action by Written Consent. The Partnership
------------------------------------------
Board may hold its meetings at such place or places within or outside the State
of Delaware as the Partnership Board may from time to time determine or as may
be designated in the notice calling the meeting. If a meeting place is not so
designated, the meeting shall be held at the Partnership's principal office.
Notwithstanding anything to the contrary in this Section 5.1, the Partnership
Board may take without a meeting any action contemplated to be taken by the
Partnership Board under this Agreement if such action is approved by the
unanimous written consent of a Representative of each of the Partners then
entitled to designate a Representative to the Partnership Board (which may be
executed in counterparts). The Partnership Board may meet in person or by means
of conference telephone or similar communications equipment. Each Representative
shall have the right to participate in any meeting by means of conference
telephone or similar communications equipment.
(f) Regular Meetings. The Partnership Board shall hold regular
----------------
meetings 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 members of
the Partnership Board shall transact such business as may properly be brought
before the meeting.
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<PAGE>
(g) Special Meetings. Special meetings of the Partnership Board
----------------
may be called by any Representative. Notice of each such meeting shall be given
to each member of the Partnership Board by telephone, telecopy, telegram or
similar method (in which case notice shall be given at least twenty-four (24)
hours before the time of the meeting) or sent by first-class mail (in which case
notice shall be given at least five (5) days before the meeting), unless a
longer notice period is established by the Partnership Board. Each such notice
shall state (i) the time, date, place (which shall be at the principal office of
the Partnership unless otherwise agreed to by all Representatives) or other
means of conducting such meeting and (ii) the purpose of the meeting to be so
held. Any Representative may waive notice of any meeting in writing before, at
or after such meeting. The attendance of a Representative at a meeting shall
constitute a waiver of notice of such meeting, except when a Representative
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not properly called.
(h) Voting. The Representative(s) of each General Partner or of
------
the General Partners in a Related Group shall together have voting power equal
to the Voting Percentage Interest held by such General Partner or the aggregate
Voting Percentage Interest of the General Partners in such Related Group, as
applicable, as in effect from time to time. If a General Partner or a Related
Group designates only one Representative, such Representative shall be entitled
to vote the entire voting power held by such General Partner or the General
Partners in such Related Group, as applicable. If a General Partner or Related
Group designates more than one Representative, such Representatives shall vote
the entire voting power of such General Partner or the General Partners in such
Related Group as a single unit. None of the Partners (other than the Partners in
a Related Group) shall enter into any agreements with any other Partner or such
other Partner's Controlled Affiliates regarding the voting of their Interests or
such other Partner's Representatives on the Partnership Board.
(i) Simple Majority Vote. No action may be taken by the Partnership
--------------------
in connection with any of the matters listed on Schedule 5.1(i) without the
prior approval of the Partnership Board, at a duly called meeting, of
Representatives with voting power of more than fifty percent (50%) of the Voting
Percentage Interests of all Partners whose Representatives are not required by
Section 8.6 or any other express provision of this Agreement to abstain from
such vote (a "Simple Majority Vote").
(j) Required Majority Vote. Except as provided in Section 5.1(i)
----------------------
or 5.1(k) or as otherwise expressly provided in this Agreement, all actions
required or permitted to be taken by the Partnership Board (including the
matters listed on Schedule 5.1(j)) must be approved by the affirmative vote, at
a duly called meeting, of Representatives with voting power of seventy-five
percent (75%) or more of the Voting Percentage Interests of all Partners whose
Representatives are not required by Section 8.6 or any other express provision
of this Agreement to abstain from such vote (a "Required Majority Vote").
(k) Unanimous Vote (Partnership Board). No action may be taken by
----------------------------------
the Partnership in connection with any of the matters listed on Schedule 5.1(k)
without the prior approval of the Partnership Board by the unanimous vote of all
of the Representatives who are not required to abstain from the vote with
respect to the particular matter as provided for in Section 8.6 of this
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<PAGE>
Agreement or any other express provision of this Agreement, whether or not
present at a Partnership Board meeting (a "Unanimous Vote").
(l) Unanimous Decisions (Partners).
------------------------------
(i) No action may be taken by the Partnership in connection
with any of the matters listed on Schedule 5.1(l) without the prior consent of
all of the Partners (including Exclusive Limited Partners) other than any
Partner required to abstain from the vote with respect to a particular matter by
Section 8.6 or any other express provision of this Agreement (a "Unanimous
Partner Vote").
(ii) If any matter listed on Schedule 5.1(l) or otherwise
required by this Agreement to be approved by the unanimous consent of the
Partners is not approved solely as a result of the failure of one or more
Exclusive Limited Partners to consent to such action (each, a "Blocking Limited
Partner"), the remaining Partners (other than any Exclusive Limited Partner) may
purchase all but not less than all of the respective Interests of the Blocking
Limited Partner(s) pursuant to this Section 5.1(l)(ii) if the Partnership Board
elects to initiate the procedures in this Section. For a period ending at 11:59
p.m. (local time at the Partnership's principal office) on the thirtieth (30th)
day following the date on which such Blocking Limited Partner failed to consent
to such matter, the Partnership Board may elect to cause the Net Equity of the
Blocking Limited Partner's Interest to be determined in accordance with Section
11.3. For purposes of such determination of Net Equity, the Partnership Board
shall designate the First Appraiser as required by Section 11.4 and the Blocking
Limited Partner shall designate the Second Appraiser within ten (10) days of
receiving notice of the First Appraiser. For a period ending at 11:59 p.m.
(local time at the Partnership's principal office) on the thirtieth (30th) day
following the date on which notice of the Net Equity of the Blocking Limited
Partner's Interest is given pursuant to Section 11.3 (the "Section 5.1 Election
Period"), except as otherwise provided in Section 11.2(b), each of the Partners
(other than any Exclusive Limited Partner) may elect to purchase all or any
portion of the Interest of the Blocking Limited Partner. Such elections shall be
made, and the purchase of the Blocking Limited Partner's Interest shall occur,
in the manner and pursuant to the procedures set forth in Section 11.2 as if the
Blocking Limited Partner were an Adverse Partner and the Election Period
referred to in Section 11.2 was the Section 5.1 Election Period; provided that
---------
the Buy-Sell Price of the Blocking Limited Partner's Interest shall be equal to
the Net Equity thereof. Notwithstanding the foregoing, the Blocking Limited
Partner will not be subject to the buy-out provisions of this Section 5.1(l)(ii)
if the matter to which the Blocking Limited Partner refused to consent would, if
approved, have adversely affected the rights and obligations under this
Agreement of such Blocking Limited Partner or the Exclusive Limited Partners
(taken as a group) in a manner different from the other Partners.
(m) Proxies; Minutes. Each Representative entitled to vote at a
----------------
meeting of the Partnership Board may authorize another Person to act for him by
proxy; provided that such proxy must be signed by the Representative and shall
--------
be revocable by such Representative any time prior to such meeting. Minutes of
each meeting of the Partnership Board shall be prepared by the Chief Executive
Officer or his or her designee and circulated to the Representatives. Written
consents to any action taken by the Partnership Board shall be filed with the
minutes.
5.2 Business Plan and Annual Budget.
-------------------------------
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<PAGE>
(a) At the January 11, 1996 meeting of the Partnership Board, the
Partners adopted by Unanimous Partner Vote (i) a business plan ("Business Plan")
of the Partnership and its Subsidiaries covering the Fiscal Year ending December
31, 1996 and the succeeding Fiscal Years through the Fiscal Year ending December
31, 1999, which the Partners hereby agree is the "Initial Business Plan" for all
purposes under this Agreement, and (ii) the Annual Budget for the Fiscal Year
ending December 31, 1996. The Partners contemplate the Partnership's achieving a
capital structure in which debt (including Partner Loans) represents an equal or
greater proportion of the Partnership's total capitalization than the aggregate
Original Capital Contributions and Additional Capital Contributions and, unless
otherwise approved by Required Majority Vote, the first Proposed Business Plan
presented to the Partnership Board for approval subsequent to the Initial
Business Plan will set forth the means by which the Partnership proposes to
achieve such capital structure.
(b) Nothing contained in the Initial Business Plan (or any subsequent
Business Plan) shall be binding upon the Partners or the Partnership, except to
the extent specifically set forth in the applicable provisions of this
Agreement. Notwithstanding anything to the contrary set forth in the Initial
Business Plan (or any subsequent Business Plan) or this Agreement, in the event
of any conflict or inconsistency between the Initial Business Plan (or any
subsequent Business Plan) and this Agreement, such conflict or inconsistency
shall be resolved in favor of the applicable terms and provisions of this
Agreement to the extent required to give full effect to such applicable terms
and provisions. For example, by voting to approve the Initial Business Plan (or
any subsequent Business Plan), a Partner will not have thereby agreed that any
assumption or set of assumptions contained in the Initial Business Plan (or any
subsequent Business Plan) (i) is the basis for any agreement by or among the
Partners and/or the Partnership (or any of their respective Affiliates), (ii)
cannot be changed (to the extent any such change would not thereby become
inconsistent with the applicable terms and provisions of this Agreement), or
(iii) is binding with respect to any transaction or other course of dealing or
otherwise between the Partnership and such Partner or between or among any of
the Partners other than as specifically set forth in this Agreement.
(c) The Chief Executive Officer shall submit annually to the
Partnership Board at least ninety (90) days prior to the start of each Fiscal
Year after the Fiscal Year ending December 31, 1996, (i) a proposed capital
expenditure and operating 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
business of the Partnership and its Subsidiaries for the forthcoming Fiscal Year
and a cash flow statement which shall show in reasonable detail the receipts and
disbursements projected for the business of the Partnership and its Subsidiaries
for the forthcoming Fiscal Year and the amount of any corresponding cash
deficiency or surplus, and the projected Additional Capital Contributions, if
any, and any contemplated borrowings of the Partnership and its Subsidiaries 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. 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 Partnership
Board, 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. Except as
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provided in Schedule 5.1(k), the approval of each Proposed Budget and Proposed
Business Plan and action by the Partnership or any of its Subsidiaries
constituting any material deviation from any Annual Budget or Approved Business
Plan shall require the Required Majority Vote of the Partnership Board. 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
Proposed Business Plan is not approved by the Required Majority Vote of the
Partnership Board, then the General Partners shall cause their Representatives
to 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 Partnership Board.
(d) If, notwithstanding the foregoing procedures, on January 1 of any
Fiscal Year no Proposed Budget has been approved by the Partnership Board 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 Partnership Board 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 made such elections;
(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 or its Subsidiaries (including Partner Loans);
(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 Proposed Budget for the prior Fiscal Year;
(vii) the continuation of the effects of a decision made by the
Partnership Board or the Partners in the prior Fiscal Year with respect to any
of the matters referred to on Schedules 5.1(j), 5.1(k) or 5.1(l) that are not
reflected in the Annual Budget for the prior Fiscal Year; and
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(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(d) is herein referred
to as a "Default Budget."
(e) If a Proposed Business Plan is submitted for approval pursuant to
this Section 5.2 and is not approved by the requisite vote of the Partnership
Board, the Business Plan most recently approved by the Partnership Board
pursuant to Section 5.2(c) shall remain in effect as the Approved Business Plan;
provided, that, if a Proposed Budget is approved pursuant to Section 5.2(c) (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.
(f) The day-to-day business and operations of the Partnership and its
Subsidiaries 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 Partnership Board. The Partnership
Board and the officers and employees of the Partnership and its Subsidiaries
shall implement the Annual Budget and Approved Business Plan.
5.3 Employees.
---------
The Partnership Board will appoint the senior management of the Partnership
and its Subsidiaries and will establish policies and guidelines for the hiring
of employees by the Partnership and its Subsidiaries. The Partnership Board may
adopt appropriate management incentive plans and employee benefit plans.
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 or any of its
Subsidiaries except (i) as approved by the Partnership Board by Required
Majority Vote, (ii) as approved by written agreement among the General Partners
and (iii) as expressly provided herein. No Partner shall have any authority to
act for or to assume any obligations or responsibility on behalf of another
Partner 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 Partners 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, Representatives and Partnership Employees.
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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 the
Partnership, shall 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 the
Partnership 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 this Agreement or an agreement between such Person
and the Partnership or a Subsidiary thereof. Subject to Section 5.6, 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 the
Partnership, 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 Representative or (except as provided in
Section 5.4) 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 this Agreement or an
agreement between such Person and the Partnership or any of its Subsidiaries.
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 or 5.5
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 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 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 Person
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or could entail a risk of criminal liability to the indemnified Person, without
the consent of 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 (which shall not be unreasonably
withheld), unless the indemnifying Person shall have been entitled to assume the
defense thereof pursuant to this Section 5.6 but failed to do so after the
notice and in the manner provided in the preceding paragraph.
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) 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.
Nothing contained in this Section 5.6 is intended to authorize the indemnifying
Person, 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
Person, any action which 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 to
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 defense controlled by the indemnifying
Person and shall provide such information with respect thereto as such
indemnified Person may reasonably request. If the defense is controlled by the
indemnified Person, such indemnified Person, upon the request of the
indemnifying Person, shall use reasonable efforts to keep the indemnifying
Person reasonably apprised of the status of those aspects of such defense
controlled by such indemnified Person and shall provide such information with
respect thereto as the indemnifying Person may reasonably request.
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,
WirelessCo or any other Subsidiary of the Partnership in which the Partnership
and MinorCo own, in the aggregate, directly or indirectly, one hundred percent
(100%) of the outstanding equity interests, maintained in such financial
institutions as the Partnership Board shall determine, or shall be invested in
accordance with the guidelines set forth in Schedule 5.7 hereto (which
guidelines may be modified from time to time by the Partnership Board), or shall
be left in escrow, and withdrawals shall be made only for Partnership purposes
on such signature or signatures as the Partnership Board may determine from time
to time.
5.8 Deadlocks.
---------
(a) Escalation Procedures. Upon the occurrence of a Deadlock Event,
---------------------
the General Partners shall first use their good faith efforts to resolve such
matter in a mutually satisfactory
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manner. If, after such efforts have continued for twenty (20) days, no mutually
satisfactory solution has been reached, the General Partners shall resolve the
Deadlock Event as provided herein:
(i) The General Partners shall (at the insistence of any of
them) refer the matter to the chief executive officers of their respective
Parents for resolution.
(ii) Should the chief executive officers of the Parents fail to
resolve the matter within ten (10) days after it is referred to them, each
General Partner (or any group of General Partners electing to act together)
shall prepare a brief (a "Brief"), which includes a summary of the issue, its
proposed resolution of the issue and considerations in support of such proposed
resolution, not later than ten (10) days following the failure of the chief
executive officers to resolve such dispute, and such Briefs shall be submitted
to such reputable and experienced mediation service as is selected by the
Partnership Board by Required Majority Vote or, failing such selection, by the
Chief Executive Officer (the "Mediator"). During a period of twenty (20) days,
the Mediator and the General Partners shall attempt to reach a resolution of the
Deadlock Event.
(iii) In the event that after such twenty (20) day period (or
such longer period as the Partnership Board may approve by Required Majority
Vote), the General Partners are still unable to reach resolution of the Deadlock
Event (such resolution to be evidenced by the requisite vote of the Partnership
Board with respect to the underlying matters), the Deadlock Event shall
constitute a Liquidating Event as provided in Section 14.1(a)(iii) unless the
Partnership Board determines by Required Majority Vote not to dissolve.
(b) Deadlock Event. A "Deadlock Event" shall be deemed to have
--------------
occurred if (i) after failing to approve a Proposed Budget or Proposed Business
Plan for one Fiscal Year, the Partnership Board has failed to approve a Proposed
Budget or Proposed Business Plan for the next succeeding Fiscal Year prior to
the commencement of such succeeding Fiscal Year, or (ii) the position of Chief
Executive Officer is vacant for a period of more than sixty (60) days after at
least two Partners with an aggregate of at least thirty-three percent (33%) of
the Voting Percentage Interests have proposed a candidate to fill such vacancy.
5.9 Conversion to Corporate Form.
----------------------------
(a) Procedures. In the event that (i) the Partnership Board shall
----------
determine by Required Majority Vote (or such other vote as may be required by
Item B. of Schedule 5.1(j)) that it is desirable or helpful for the business of
the Partnership to be conducted in a corporate rather than in a partnership form
(for the purposes of conducting a public offering or otherwise) or (ii)
conversion to corporate form is required pursuant to an election made by a
Registering Partner under Section 12.6(c), the Partnership Board shall
incorporate the Partnership in Delaware. In connection with any incorporation of
the Partnership pursuant to the preceding sentence, the Partnership and MinorCo
shall be consolidated and the Partners shall receive, in exchange for their
Interests and MinorCo Interests, shares of capital stock of such corporation
having the same relative economic interests and other rights as such Partners
hold in the Partnership as set forth in this Agreement, subject in each case to
(i) any modifications required solely as a result of the conversion to corporate
form and (ii) modifications to the provisions of Section 5.1 to conform to the
provisions relating to actions of stockholders and a board of directors set
forth in the Delaware General Corporation Law; provided, that the relative
--------
number of representatives on the board of directors and relative voting power of
the
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outstanding equity interests of such corporation of each General Partner shall
be as nearly as practicable in proportion to the relative Voting Percentage
Interests of the General Partners immediately prior to such incorporation. For
purposes of the preceding sentence, each Partner's relative economic interest in
the Partnership shall equal such Partner's Net Equity as compared to the Net
Equity of all of the Partners, as determined in accordance with Section 11.3
except that the Partnership Board shall by Required Majority Vote select a
single Appraiser to determine Gross Appraised Value. At the time of such
conversion, the Partners shall enter into a stockholders' agreement providing
for (i) rights of first refusal and other restrictions on Transfer equivalent to
those set forth in Sections 12.1 through 12.5 and Section 12.7, provided that
--------
(x) the restrictions on Transfer set forth in Sections 12.1 through 12.4 shall
not apply, following the initial Public Offering by the corporate successor to
the Partnership, to sales in broadly disseminated Public Offerings or sales in
accordance with Rule 144 under the Securities Act of 1933 (the "1933 Act") or
Rule 145 under the 1933 Act (in accordance with the applicable provisions of
Rule 144) (or any successor to either of such Rules), in a transaction that
satisfies the manner of sale requirements of Rule 144 or Rule 145 (whether or
not applicable to such sale) and (y) the restrictions on Transfer set forth in
Section 12.5 shall not apply following the initial Public Offering by the
corporate successor to the Partnership; and (ii) an agreement to vote all shares
of capital stock held by them with respect to the election of directors of the
corporation so as to duplicate as closely as possible the management structure
of the Partnership as set forth in Section 5.1, modified as contemplated by the
second sentence of this Section 5.9(a).
(b) Registration Rights. Upon conversion to corporate form, the
-------------------
corporate successor to the Partnership shall grant to each of the Partners
certain rights to require such successor to register under the 1933 Act the
shares of capital stock received by the Partners in exchange for their
Interests. Such rights shall be as approved by the Required Majority Vote of the
Partnership Board, provided that the registration rights of each Partner shall
--------
be identical on a proportionate basis and, if the conversion to corporate form
was required by Section 12.6(g), shall consist of not less than two demand
registrations on customary terms and subject to customary conditions.
(c) Preemptive Rights. Each Partner shall have preemptive rights,
-----------------
exercisable in accordance with procedures to be established by the Partnership
Board in connection with and following the conversion of the Partnership to
corporate form, to purchase equity securities proposed to be issued from time to
time by a corporate successor to the Partnership or its successor; provided,
--------
however, that no Partner shall have any such preemptive right with respect to
- - -------
any equity securities which, by a vote of the board of directors of such
corporate successor that is equivalent to a Required Majority Vote, have been
approved for issuance by such corporate successor in connection with (i) a
Public Offering or (ii) any acquisition (including by way of merger or
consolidation) by the corporate successor of the equity interests or assets of
another entity that is not a Partner or its Affiliate in a transaction pursuant
to which the purchase price is paid by delivery of such equity securities to the
seller. A "Public Offering" means an offering of the securities of the
corporate successor to the Partnership pursuant to a registration statement on a
form applicable to the sale of securities to the general public (including an
offering by a Registering Partner pursuant to a registration statement as
contemplated under Section 12.6(g)).
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SECTION 6. PARTNERSHIP OPPORTUNITIES; CONFIDENTIALITY
6.1 Competitive Activities.
----------------------
(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 United States of America (including its territories and
possessions other than Puerto Rico) except (i) through the Partnership and its
Subsidiaries, (ii) subject to Section 6.1(d), as provided in Section 6.1(b) or
6.1(c), (iii) as permitted or contemplated under Section 8.3, or (iv) as
permitted by Section 6.1(f), 6.3, 6.4 or 8.1. The term "Competitive Activity"
means to bid on, acquire or, directly or indirectly, own, manage, operate, join,
control or finance, or participate in the management, operation, control or
financing of, or be connected as a principal, agent, representative, consultant,
beneficial owner of an interest in any Person, or otherwise with, or use or
permit its name to be used in connection with, any business or enterprise which
(i) engages in the bidding for or acquisition of any Wireless Business license
or engages in any Wireless Business, or (ii) provides, offers, promotes or
brands services that are within the Wireless Exclusive Services.
(b) Bidding for Wireless Business Licenses. Except as permitted by
--------------------------------------
Section 6.4, no Partner nor any of its Controlled Affiliates shall bid in the
PCS Auction for any Wireless Business licenses unless (i) the Partnership Board
consents to such bid following consultation by such Partner with the
Representatives of the other Partners; or (ii) (A) WirelessCo has entered a bid
or bids for such license, but a third-party bid has been entered which equals or
exceeds the maximum amount that WirelessCo has determined to bid for such
license, (B) if a vote was taken, such Partner's Representative(s) voted in
favor of WirelessCo's increasing the amount it would bid for such license, and
(C) WirelessCo has determined not to increase its bid in response to such third
party bid. This Section 6.1(b) will not permit a Partner or its Affiliate to bid
for or acquire a Wireless Business license if the bidding for or acquisition of
such license by a Partner or its Affiliate would otherwise violate (or cause the
Partnership or any of the other Partners or their respective Affiliates to be in
violation of) the FCC's rules or orders relating to Wireless Business license
cross-ownership, license attribution standards, and/or spectrum attribution or
aggregation requirements, including Sections 20.6, 24.204 and 24.229(c) of the
FCC's rules to be codified at 47 C.F.R. (S)(S)20.6, 24.204 and 24.229(c).
(c) Engaging in Wireless Businesses. If any Partner or any of its
-------------------------------
Controlled Affiliates proposes to engage in any Competitive Activity other than
as permitted by Section 6.1(b) (or through a Wireless Business license acquired
as permitted by Section 6.1(b)), 6.3, 6.4 or 8.1, then such Partner shall first
offer to the Partnership the opportunity for the Partnership or any of its
Subsidiaries to engage, in lieu of such Partner and its Affiliates, in such
Competitive Activity (whether by acquiring such interest itself or itself
providing, offering, promoting or branding such services) (the "Offer"), which
Offer shall be made in writing and shall set forth in reasonable detail the
nature and scope of the activity proposed to be engaged in, including all
material terms of any proposed acquisition. The Partnership, for itself or any
of its Subsidiaries (by Required Majority Vote of the Partnership Board pursuant
to Section 8.6), shall have thirty (30) days from receipt of the Offer to accept
or reject it. If the Partnership does not accept (for itself or any of its
Subsidiaries), the Offer within such thirty (30) day period, it shall be deemed
to have rejected the Offer, and the offering Partner or its Controlled Affiliate
shall be permitted to engage in such Competitive Activity on terms no more
favorable to such Partner or its Controlled Affiliate than those described in
the Offer. If the
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Partnership, for itself or any of its Subsidiaries, accepts the Offer, the
offering Partner and its Controlled Affiliates shall not pursue such opportunity
to engage in such Competitive Activity; provided, however, that if the
-------- -------
Partnership or such Subsidiary, as applicable, does not within a commercially
reasonable period of time after such acceptance take reasonable steps to pursue
such opportunity, other than as a result of a violation of this Agreement or
wrongful acts or bad faith on the part of the offering Partner or its Controlled
Affiliates, then the offering Partner or its Controlled Affiliate shall be
permitted to pursue such opportunity on terms no more favorable to the offering
Partner or its Controlled Affiliate than the terms of the Offer. If the offering
Partner or its Controlled Affiliate does not take reasonable steps to pursue
such opportunity contemplated by the Offer within a reasonable period of time
after acquiring the right to do so in accordance with the foregoing provisions
of this Section 6.1(c) (including, in the case of an acquisition, by entering
into a definitive agreement (subject solely to obtaining the requisite
regulatory approvals and other customary closing conditions) with respect to
such acquisition within one hundred twenty (120) days thereafter), then it shall
lose its right to pursue such opportunity and thereafter be required to reoffer
the opportunity to the Partnership in accordance with, and shall otherwise
comply with, this Section 6.1(c). Notwithstanding the foregoing, a Partner shall
not be permitted to present an Offer to the Partnership (or, except for
Competitive Activities relating to an Offer previously rejected by the
Partnership, otherwise engage in any Competitive Activity in reliance on this
Section 6.1(c)) in any license area (or portion thereof) in which the
Partnership or any of its Subsidiaries is otherwise offering, promoting or
branding Wireless Exclusive Services (or in which the Partnership or any of its
Subsidiaries plans to offer, promote or brand Wireless Exclusive Services
pursuant to or as set forth in the Initial Business Plan or Approved Business
Plan then in effect, as applicable, or pursuant to any Wireless Business license
acquired by the Partnership or an Affiliation Agreement entered into with the
holder of a Wireless Business license subsequent to the approval of such Initial
Business Plan or Approved Business Plan, as applicable), including pursuant to
an Affiliation Agreement, without a Unanimous Vote of the Partnership Board
pursuant to Section 8.6.
(d) Wireless Business Affiliation Agreements. Any Partner or
----------------------------------------
Controlled Affiliate thereof that acquires or owns a Wireless Business license,
or directly engages in a Wireless Business, as permitted by the exceptions
provided by Sections 6.1(b), 6.1(c), 6.3(e), 6.3(h) and 8.1 to the prohibitions
on Competitive Activities contained in Section 6.1(a), shall, subject to
applicable law, as a condition to the availability of such exceptions, offer to
enter into an affiliation agreement with respect to such Wireless Business with
WirelessCo on terms and conditions comparable to those which WirelessCo offers
to other affiliated Wireless Businesses in similar situations (or if no such
agreement then exists, such terms and conditions shall include a provision for
competitive pricing), under which such Wireless Business will provide its
services to the public as an affiliate of WirelessCo's business (as entered into
with a Partner or its Controlled Affiliate or any other Person, an "Affiliation
Agreement"). The Partnership Board may waive compliance with all or any part of
this Section 6.1(d) with respect to any transaction by Required Majority Vote of
the Partnership Board pursuant to Section 8.6.
(ii) Each Partner and its Controlled Affiliates shall also use
all commercially reasonable efforts to cause any Affiliate of such Partner which
acquires or owns a Wireless Business license, or otherwise engages in any
Wireless Business, and provides services within the Wireless Exclusive Services,
to (if WirelessCo so desires) enter into an Affiliation Agreement with
WirelessCo.
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(e) Geographic Restrictions on Wireless Business. Unless approved
--------------------------------------------
by a Unanimous Partner Vote, the Partnership and its Subsidiaries will not
engage in any Competitive Activities in the Philadelphia, Charlotte, Cleveland,
El Paso, Jacksonville, Knoxville, Omaha or Richmond MTAs, including bidding for
or acquiring any PCS licenses therein; provided that, to the extent permitted by
--------
law, the Partnership and its Subsidiaries may (or, as provided in Sections
6.3(e) and 8.1, shall) enter into Affiliation Agreements with Persons engaged in
Competitive Activities in such MTAs; and provided further, that the Partnership
-------- -------
and its Subsidiaries may engage in Competitive Activities in any MTA (other than
Philadelphia) listed in this Section 6.1(e) from and after the time that Sprint
and its Controlled Affiliates have divested of their ownership interests in any
of the Sprint Cellular Businesses in such MTA.
(f) Unrestricted Activities. Nothing in this Section 6 shall
-----------------------
prevent any Person from (i) providing any Non-Exclusive Services or engaging in
any Excluded Business or (ii) complying with any applicable laws, rules or
regulations, including those requiring that any facilities be made available to
any other Person.
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 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 and its Subsidiaries'
ownership of their respective assets or conduct of their respective businesses:
(a) The acquisition or ownership of any debt or equity securities of
a Publicly Held Person, provided that such securities (i) were not acquired from
the issuer thereof in a private placement or similar transaction, (ii) do not
represent more than five percent (5%) of the aggregate voting power of the
outstanding capital stock of any Person 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) and (iii) in the case of debt securities,
entitle the holder to receive only interest or other returns that are
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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 either (i) such acquisition results from a
foreclosure or equivalent action with respect to debt securities permitted to be
held under Section 6.3(a) or (ii) the Competitive Activity does not constitute
the principal activity, 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 unless the Partnership Board approves the entering into of an
Affiliation Agreement with respect to such Competitive Activity pursuant to
Section 8.6;
(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 either (i) to cease such Competitive Activity or (ii) to
offer to enter into an Affiliation Agreement with the Partnership and its
Subsidiaries;
(d) The conduct of any Competitive Activity that is a necessary
component of or an incidental part of the conduct of any Excluded Business by a
Partner or its Controlled Affiliates or the entering into of an arrangement with
an independent third party for the provision of any services included in the
Wireless Exclusive Services which is a necessary component of or an incidental
part of the conduct of such Excluded Business, so long as, in each case, such
Partner or Controlled Affiliate shall first use all commercially reasonable
efforts to negotiate agreements with the Partnership or one of its Subsidiaries,
which are reasonable in the independent judgment of both parties, pursuant to
which the Partnership or such Subsidiary would provide such services included in
the Wireless Exclusive Services on terms no less favorable to the Partner or
such Controlled Affiliate than such Partner or Controlled Affiliate could obtain
from an independent third party or could provide itself;
(e) The ownership and operation by (i) a partnership of Sprint, TCI
and Cox and/or their respective Affiliates of a PCS license and an associated
Wireless Business in the Philadelphia MTA ("PhillieCo"), (ii) Cox or its
Affiliate of a PCS License and an associated Wireless Business in the Omaha MTA
and (iii) any of Cox, Comcast and TCI or their Affiliates (acting singly or
jointly through a partnership or other entity) of a PCS license and an
associated Wireless Business in any of the Charlotte, Cleveland, El Paso,
Jacksonville, Knoxville and Richmond MTAs, provided in each case that, subject
--------
to applicable law, such owners or entities holding the licenses enter into
Affiliation Agreements with the Partnership and its Subsidiaries; and provided
--------
further, that (x) the exception provided in clause (ii) of this Section 6.3(e)
- - -------
shall terminate at such time as Cox is obligated to contribute the Omaha License
to the Partnership pursuant to Section 2.3(a)(ii) and (y) except for
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any Competitive Activities conducted in the MTAs listed in clause (iii) of this
Section 6.3(e) pursuant to an agreement entered into or PCS license acquired
during the period beginning on July 1, 1996 and ending on the date that Sprint
and its Controlled Affiliates have divested of their ownership interests in the
Sprint Cellular Businesses, the exception provided in such clause (iii) shall
terminate at such time as Sprint and its Controlled Affiliates have divested of
their ownership interests in the Sprint Cellular Businesses;
(f) The conduct 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);
(g) The ownership and operation by Sprint's Controlled Affiliates of
their cellular businesses within the Sprint Cellular Service Area until such
time as Sprint and its Controlled Affiliates have divested of their ownership
interests in the Sprint Cellular Businesses; provided that the entities
--------
succeeding to the Sprint Cellular Businesses shall be entitled to use the Sprint
Brand for a period not to exceed one (1) year following the closing of such
divestiture;
(h) The ownership and operation by Cox or its Affiliate of PioneerCo,
so long as PioneerCo, subject to applicable law, enters into an Affiliation
Agreement with the Partnership prior to offering or providing any Wireless
Exclusive Services;
(i) The continuing ownership by an Affiliate of Sprint of its current
ownership interest in Iridium and the provision of any services by Iridium so
long as Iridium is not an Affiliate of Sprint;
(j) The ownership by a Controlled Affiliate of Comcast of any
ownership interest in Nextel and the provision of any services by Nextel,
subject to Section 6.4(f) of this Agreement;
(k) The continuing ownership by a Controlled Affiliate of TCI of its
current ownership interest in Nextel and the provision of any services by Nextel
so long as Nextel is not an Affiliate of TCI;
(l) The continuing ownership by a Controlled Affiliate of TCI of its
current ownership interest in MTS Limited Partnership ("MTS") and the provision
of any services by MTS so long as MTS is not an Affiliate of TCI;
(m) The continuing ownership by a Controlled Affiliate of TCI of its
current ownership interest in General Communication Inc. ("GCI") and the
provision of any services by GCI so long as GCI is not an Affiliate of TCI;
(n) The continuing ownership by a Controlled Affiliate of TCI of its
current ownership interest in Western Tele-Communications, Inc. ("WTCI") and the
conduct by WTCI of its current business;
(o) The continuing ownership and operation by Sprint's Controlled
Affiliates of their IMTS (mobile radio telephony service) and paging businesses
as such businesses currently are
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being conducted, so long as the aggregate annual revenue derived from the
operation of such businesses does not exceed $15,000,000;
(p) The provision by a Partner and its Controlled Affiliates of
Wireless Exclusive Services on a resale basis in geographic areas where neither
the Partnership nor any of its Subsidiaries or Wireless Affiliates is then
providing, offering, promoting or branding Wireless Exclusive Services and
either (i) with respect to Sprint, a Controlled Affiliate of Sprint owns a LEC
property as of the date of this Agreement in such geographic area or (ii) in the
reasonable judgment of such Partner, such Partner or its Controlled Affiliate
must offer in such geographic area Wireless Exclusive Services in a package with
other products and services of such Partner or its Controlled Affiliates in
order to compete with an actual or anticipated initiative by a service provider
that is not a Controlled Affiliate of such Partner; provided in each case that
--------
such Partner or its Controlled Affiliate must (x) first offer, or cause to be
offered, to the Partnership the opportunity to be the provider of such Wireless
Exclusive Services on terms no less favorable to the Partnership than those made
available to such Partner or its Controlled Affiliate and (y) use its
commercially reasonable efforts to insure that any provision of such Wireless
Exclusive Services is in accordance with the Partnership's technical
requirements in a manner that would facilitate the transition of such business
to the Partnership. At such time as the Partnership commences providing,
offering, promoting or branding Wireless Exclusive Services within such
geographic area, such Partner shall, promptly following its receipt of written
notice from the Partnership, offer, or cause its Controlled Affiliate to offer,
to Transfer to the Partnership such Partner's or its Controlled Affiliate's
business of providing Wireless Exclusive Services in such geographic area, and
(at the Partnership's option) to Transfer, lease or otherwise make available (at
the election of such Partner or its Controlled Affiliate) to the Partnership the
assets that are utilized in the provision of such Wireless Exclusive Services,
such offer in each case to be at a price equal to the costs that the Partnership
would incur to achieve a like business, including the costs associated with the
creation or acquisition of the customer base of such business and the
replacement cost of any assets so Transferred, leased or otherwise made
available;
(q) Prior to the termination of a Parents Agreement, the offering,
promotion and branding by the Cable Partner whose Parent is a party to such
Parents Agreement and its Controlled Affiliates of the Partnership's Wireless
Exclusive Services under a Permitted Brand at such times and in such geographic
areas as to which Section 2(a)(i) of such Parents Agreement has ceased to be
applicable to the Parent of such Cable Partner pursuant to Section 4(b) or 4(c)
of such Parents Agreement;
(r) Following the termination of a Parents Agreement, the offering,
promotion and branding by the Cable Partner whose Parent is a party to such
Parents Agreement and its Controlled Affiliates of the Partnership's Wireless
Exclusive Services under a Permitted Brand in any geographic area where (i)
neither such Cable Partner, its Controlled Affiliates nor any Local Joint
Venture between such Cable Partner or its Controlled Affiliate and Sprint or its
Controlled Affiliate is providing Local Telephony Services (as defined in the
Parents Agreement) under the Sprint Brand and (ii) Sprint Parent has not
provided or caused to be provided to such Cable Partner or its applicable
Controlled Affiliate on competitive economic terms Long Distance Telephony
Services (as defined in the Parents Agreement) under the Sprint Brand to offer
and promote, and package with other products and services to offer and promote,
to its customers, and for which it is authorized to
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act as a non-exclusive sales agent in that geographic area; and
(s) The offering or promotion on a sales agency basis of any product
or service offered by any Wireless Affiliate pursuant to or in accordance with
an Affiliation Agreement.
Notwithstanding anything to the contrary in this Section 6, any investment fund
in which a Partner or any of its Affiliates has an investment (including pension
funds) that invests funds on 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.
6.4 Comcast Exceptions.
------------------
The restrictions set forth in Section 6.1 shall not apply with respect
to the following:
(a) Subject to the limitations set forth in this Section 6.4, Comcast
and its Controlled Affiliates may engage in any Competitive Activities with
respect to any Wireless Business in the Comcast Area.
(b) Comcast and its Controlled Affiliates may participate in a bid
for and/or acquire any interest in a 10 MHz PCS license only in any of the BTAs
in the Philadelphia MTA or the Allentown, Pennsylvania BTA. Comcast and its
Controlled Affiliates may acquire any interest in a 10 MHz PCS license in any of
the following cellular license areas in New Jersey: Hunterdon County, Middlesex
County, Monmouth County and Ocean County; provided, that at the time of such
--------
acquisition Comcast and its Controlled Affiliates own a controlling interest in
a cellular license for such area and further provided, that the license area of
------- --------
such 10 MHz license shall not extend beyond such area in other than an
immaterial manner. In the event Comcast and its Controlled Affiliates own a
controlling interest in any such 10 MHz PCS license, then Comcast and its
Controlled Affiliates will, to the extent permitted by applicable law, provide
for their customers receiving services under any such 10 MHz PCS license to
receive roaming services from any of WirelessCo's or its Affiliate's businesses
providing services under any PCS license (the "Partnership's Businesses"),
subject to the conditions that (i) such roaming is technically feasible, (ii)
such roaming is at competitive rates and on other terms and conditions
reasonably acceptable to Comcast and its Controlled Affiliates, (iii) the
Partnership's Businesses support the features and services provided by Comcast
and its Controlled Affiliates to their customers and (iv) subject to the same
conditions, the Partnership's Businesses will provide for their customers to
receive reciprocal roaming services from Comcast and its Controlled Affiliates
in the areas described above at such times as neither PhillieCo nor WirelessCo
owns or has an affiliation with respect to a Wireless Business license for such
areas. Notwithstanding the foregoing, if the ownership by Comcast or any of its
Controlled Affiliates of any 10 MHz PCS license outside of the Philadelphia MTA
(A) causes WirelessCo (including the ownership of its assets and the conduct of
its business) to be in violation of any law or regulation or otherwise results
in any restriction or other limitation on WirelessCo's ownership of its assets
or conduct of its business or (B) in any way impairs, prevents or delays the
ability of WirelessCo to bid for or acquire a Wireless Business license in any
license area in which WirelessCo plans to engage in a Competitive Activity
pursuant to or as set forth in the Initial Business Plan or its then-current
Approved Business Plan, Comcast and its Controlled Affiliates will be prohibited
from making such acquisition or, if such
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acquisition has already occurred, will cure the circumstances described above
(including, if required, by divesting its ownership of the 10 MHz PCS license)
within a commercially reasonable period of time after its receipt of notice from
WirelessCo of the existence of such circumstances; provided that, in the event
of such divestiture, Comcast and its Controlled Affiliates will have the right
to resell service in such area provided such resale shall occur using
WirelessCo's facilities if they are available and it is technically feasible to
do so.
(c) The Partnership will, at the request of Comcast and Affiliates
and to the extent permitted by applicable law, (i) provide for customers
receiving Wireless Business services from Comcast and its Controlled Affiliates
in the Comcast Area, to receive roaming services in areas outside of the Comcast
Area at competitive rates and on commercially reasonable terms and conditions
where the Partnership Businesses own or have an affiliation with respect to a
Wireless Business license, subject to the condition that such roaming is
technically feasible; (ii) provide Comcast and its Controlled Affiliates'
Wireless Businesses in the Comcast Area with SS7 interconnection to the
Partnership's facilities on commercially reasonable terms and conditions and
(iii) in the event the Partnership or its Subsidiaries allow or are required by
law to allow resale of their Wireless Exclusive Services in any part of the
Comcast Area, allow Comcast and its Controlled Affiliates to resell such
services in such part of the Comcast Area on commercially reasonable terms and
conditions.
(d) Comcast and its Controlled Affiliates may engage in any
Competitive Activities with respect to any Wireless Business in the Kankakee,
Illinois RSA cellular license area as well as the cellular license area served
by Indiana Cellular Holdings, Inc., Harrisburg Cellular Telephone Company,
Aurora/Elgin Cellular Telephone Company, Inc. and Joliet Cellular Telephone
Company, Inc.; provided that such Competitive Activities are confined to the
geographic territories of the cellular licenses currently held by such
businesses.
(e) 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, D.C., New York and Philadelphia MTAs; and (ii) obtaining
distribution from its "In-Territory Distributors" (as defined below) of wireless
services within the Washington, D.C., New York and Philadelphia MTAs; 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 either the New
York MTA or the Washington, D.C. 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 by Section 6.4(e)(ii), 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 WirelessCo without material adverse consequences for Comcast's
and its Controlled Affiliates' ability to participate in such regional marketing
activities. For the purposes hereof, 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 hereof, an "In-Territory Distributor" is a
distributor that has a business location in the Comcast Area and requires a
regional contract be entered into by Comcast and its Controlled
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Affiliates in the Comcast Area. For purposes of this Section 6.4(e), the term
"Comcast Area" 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).
(f) Comcast and its Controlled Affiliates may hold an interest in
Nextel Communications, Inc. ("Nextel"), provided that (i) none of Comcast's or
-------- ----
its Controlled Affiliates' Agents participate in or are present at any
discussions, or receive any information, regarding Nextel's PCS bidding
strategies; and (ii) at the election of Comcast, no later than October 24, 1995,
either (A) Comcast and its Controlled Affiliates shall own securities
representing less than 5.4% of the voting power and equity of all of the
outstanding capital stock of Nextel, (B) no Agent of Comcast or any of its
Controlled Affiliates shall be a director or officer of Nextel, and no director
of Nextel shall be an appointee of Comcast or its Controlled Affiliates pursuant
to any contractual right of Comcast and its Controlled Affiliates to appoint any
director of Nextel, or (C) Comcast shall elect to become an Exclusive Limited
Partner as of such date by giving written notice of such election to the
Partnership; provided, however, that if Comcast and its Controlled Affiliates
-------- -------
(x) fail to satisfy either of clauses (A) or (B) above at any time after October
24, 1995 or (y) acquire any additional common stock or other voting securities
(or securities convertible into or exchangeable for common stock or other voting
securities) of Nextel (as to (y) only, other than common stock acquired as a
result of (I) the exercise of its stock option to acquire 25,000,000 shares and
warrant to acquire 230,000 shares, (II) the consummation of its sale of the
assets of Philadelphia Mobile Communications, Inc. to Nextel (the "PMCI Shares")
or (III) the exercise by Comcast and its Controlled Affiliates of purchase
rights to maintain, in the event of certain future share issuances by Nextel,
the then current percentage ownership of Comcast and its Controlled Affiliates
in Nextel assuming the exercise of such stock option and warrant in full and the
receipt of the PMCI Shares (which percentage shall in no event exceed 15%),
granted under that certain Stock Purchase Agreement dated as of September 14,
1992, among Comcast Parent, Comcast FCI, Inc. and Fleet Call, Inc., as amended;
provided, that as a result of any such purchases pursuant to clauses (I), (II)
- - --------
and (III), Comcast and its Controlled Affiliates do not own 10% or more of the
common stock of Nextel (determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934)), then Comcast will automatically (without any
action required to be taken by the Partnership or any Partner) become an
Exclusive Limited Partner. Notwithstanding the second proviso in the preceding
sentence, if (1) such acquisition is the result of the exercise by Comcast and
its Controlled Affiliates of such purchase rights and as a result thereof
Comcast and its Controlled Affiliates own 10% or more of the common stock of
Nextel as so determined, (2) Comcast and its Controlled Affiliates exercise any
available registration rights within thirty (30) days following the acquisition
of common stock pursuant to the exercise of such purchase rights and otherwise
seek to Transfer such common stock as soon as practicable, and (3) an amount of
Nextel common stock is Transferred within two hundred forty (240) days following
the date of such acquisition such that thereafter Comcast and its Controlled
Affiliates do not own 10% or more thereof as so determined, then Comcast will
automatically (without any action required by the Partnership or any Partner) be
returned to the status of General Partner if it satisfies either of clauses (A)
or (B) above and is not otherwise required to be an Exclusive Limited Partner
under this Section 6.4(f). If at any time following the date hereof Comcast and
its Controlled Affiliates own more than 31% of the common stock of Nextel on a
fully diluted basis (provided that at such time Nextel has a total market
capitalization of at least $2,000,000,000), or own 50% or more of the common
stock of Nextel on a fully-diluted basis (regardless of Nextel's total market
capitalization), Comcast shall provide written notice to the Partnership and to
each other Partner of the acquisition of such ownership interest (or the
occurrence of any event causing Comcast and its Controlled Affiliates to
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exceed such ownership threshold) within five (5) days of such acquisition (or
the occurrence of such event). The other Partners will have the option,
exercisable within ninety (90) days of the date of such notice, to purchase the
Interest of Comcast for a purchase price equal to the Net Equity thereof for
cash at a closing to be held no later than ninety (90) days from the date such
option is exercised. Such purchase shall occur in accordance with the procedures
set forth in Section 11 as if Comcast were an "Adverse Partner" and each of the
other Partners were a "Purchasing Partner.
(g) 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 engaged in the cellular business as of October 24,
1994, 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 (i) - (v) required to efficiently provide services in such area.
(h) The obligations under Section 6.1(d) shall not apply to Comcast
and its Controlled Affiliates with respect to any Competitive Activities
permitted pursuant to this Section 6.4.
(i) Comcast and its Controlled Affiliates may co-brand or package any
Wireless Exclusive Services permitted to be provided pursuant to this Section
6.4 together with their cable television offerings; provided that in such event
the only brand name(s) which may be used for any such Wireless Exclusive
Services are any of the following, any combination thereof or any variants
thereof substantially similar thereto: Comcast, Comcast Cellular, Comcast
Metrophone, Metrophone, Comcast Cellular One and Cellular One, which Comcast
represents are currently utilized by its cellular business in the Comcast Area
as of the date hereof; provided further, however, that Comcast may request that
the Partnership approve the use by Comcast and its Controlled Affiliates of
another brand name (other than that of an inter-exchange carrier), in which case
the Partnership's consent to the use thereof will not be unreasonably withheld.
6.5 Freedom of Action.
-----------------
Except as set forth in this Section 6, no Partner or Affiliate shall have
any obligation not to (i) engage in the same or similar activities or lines of
business as the Partnership or its Subsidiaries or develop or market any
products or services that compete, directly or indirectly, with those of the
Partnership or its Subsidiaries, (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 or its Subsidiaries, (iii) do business with any client or
customer of the Partnership or its Subsidiaries, or (iv) employ or otherwise
engage a former officer or employee of the Partnership or its Subsidiaries.
6.6 Confidentiality.
---------------
(a) Maintenance of Confidentiality. Each Partner and its Controlled
------------------------------
Affiliates and
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the Partnership (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 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 and in connection with the
transactions contemplated by the Joint Venture Formation 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 Partners, their Controlled Affiliates and 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. 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. The
measures taken by a Restricted Party to protect Confidential Information shall
not be deemed unreasonable if the measures taken are at least as strong as the
measures taken by the disclosing party to protect such Confidential Information.
(b) Permitted Disclosures. Nothing herein shall prevent 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,
or which subsequently comes into the public domain, through no
fault of the Receiving Party;
(ii) prior to receipt hereunder (or under that
certain Agreement for Use and Non-Disclosure of Proprietary
Information, dated as of May 4, 1994, among Affiliates of the
Partners) 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 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
paragraph (d) 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
--------
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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
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 6.6, 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
in the Partnership pursuant to Section 12 of this Agreement, (ii) to other
Persons considering the consummation of a Permitted Transaction with respect to
such Person or (iii) to any financial institution in connection with borrowings
from such financial institution by such Partner or any of its Controlled
Affiliates, 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 6.6.
(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), 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.
(e) Any press release concerning the business, affairs and operation
of the Partnership shall be approved in advance by a Required Majority Vote of
the Partnership Board.
(f) The obligations under this Section 6.6 shall survive for a period
of two (2) years from (i) as to all Partners and their respective Controlled
Affiliates, the termination of the Partnership and (ii) as to any Partner and
its Controlled Affiliates, such Partner's withdrawal therefrom (or otherwise
ceasing to be a Partner); provided that such obligations shall continue
--------
indefinitely with respect to any trade secret or similar information which is
proprietary to the
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Partnership and provides the Partnership with an advantage over its competitors.
(g) All references in this Section 6.6 to the Partnership shall,
unless the context otherwise requires, be deemed to refer also to each
Subsidiary of the Partnership.
SECTION 7. ROLE OF EXCLUSIVE LIMITED PARTNERS
7.1 Rights or Powers.
----------------
The Exclusive Limited Partners 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.
7.2 Voting Rights.
-------------
The Exclusive Limited Partners shall have the right to vote only on the
matters specifically reserved for the vote or approval of Partners (including
the Exclusive Limited Partners) set forth in this Agreement, including those
matters listed on Schedule 5.1(l).
SECTION 8. TRANSACTIONS WITH PARTNERS; OTHER AGREEMENTS
8.1 Sprint Cellular.
---------------
In the event (i) WirelessCo is the winning bidder in the PCS Auction for a
PCS license with respect to a license area and at such time Sprint and its
Controlled Affiliates have an ownership interest in a cellular business or
businesses (a "Sprint Cellular Business") having a service area which is
included within such license area in whole or in part (an "Overlap Cellular
Area") or (ii) WirelessCo has decided, at any time prior to September 28, 1997,
to acquire a PCS license in a license area which includes an Overlap Cellular
Area; and as a result of Sprint's ownership interest in a Sprint Cellular
Business WirelessCo would not be awarded on an unconditional basis (in the event
of clause (i) above) or be permitted to acquire (in the event of clause (ii)
above) such PCS license under FCC rules and regulations relating to CMRS
spectrum cap limitations, then Sprint agrees that it will divest such portion of
such Sprint Cellular Business, within the time period provided by FCC rules in
the event of clause (i) above, and as soon as commercially reasonable (e.g., to
----
avoid "fire sale" prices) in the event of clause (ii) above, or take any other
action as is necessary, so that WirelessCo will not be impaired from holding or
acquiring such PCS license. Nothing herein prevents one or more Partners from
acquiring such PCS license if Sprint is unable to divest the overlap property in
a timely manner, provided that, subject to applicable law, such Partner or
--------
Partners enter into an Affiliation Agreement with the Partnership and its
Subsidiaries. This Section 8.1 shall not require Sprint to divest, or take any
other action with respect to, any of the Sprint Cellular Businesses in the
Charlotte, Cleveland, El Paso, Jacksonville, Knoxville, Omaha or Richmond MTAs.
8.2 Sprint Brand Licensing Agreement.
--------------------------------
Simultaneously with the execution and delivery of this Agreement, the
Partnership and Sprint
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Communications have entered into an Amended and Restated Trademark License
Agreement, a copy of which is attached hereto as Exhibit 8.2 (the "Trademark
License").
8.3 Marketing; Branding of Partnership Services.
-------------------------------------------
(a) Marketing Channels. The Partnership Services will be marketed
------------------
directly by the Partnership and through its marketing channels, which will
include Sprint LD, the Cable Subsidiaries and other Controlled Affiliates of the
Cable Partners, and Wireless Affiliates. The Partnership may enter into sales
agency agreements with others, including (if and to the extent permitted by the
original agency agreement) sub-agency agreements for Sprint LD Services and
Cable Services; provided, however, that such appointment shall be subject to all
-------- -------
of the terms and conditions of the original agency agreement (including
performance and quality standards), and the appointing agent shall be
responsible for ensuring compliance by its distributors and sub-agents with such
terms and conditions.
(b) Sales Agency. Sprint LD, the Cable Subsidiaries and other
------------
Controlled Affiliates of the Cable Partners (except for Cable Subsidiaries and
other Controlled Affiliates of Comcast with respect to the Comcast Area) will be
non-exclusive commission sales agents for the Partnership's Wireless Exclusive
Services and Non-Exclusive Services ("Partnership Services") pursuant to agency
agreements that conform to the provisions of this Section 8.3 and are otherwise
in form and substance reasonably satisfactory to the parties thereto. The agency
agreements will provide that all Partnership Services will be made available to
each of Sprint LD and the Cable Subsidiaries and other Controlled Affiliates of
the Cable Partners to offer, promote and package.
The Partnership will be a non-exclusive commission sales agent for such
long distance services of Sprint and its Affiliates (other than Sprint Cellular
and any LEC properties owned by Controlled Affiliates of Sprint) (collectively,
"Sprint LD") as Sprint LD may agree to make available to the Partnership
("Sprint LD Services") and for such services offered by a Cable Subsidiary or
other Controlled Affiliate of a Cable Partner in the areas served by its local
cable system as such Cable Subsidiary (or Controlled Affiliate) may agree to
make available to the Partnership ("Cable Services"), in each case pursuant to
agency agreements that conform to the provisions of this Section 8.3 and are
otherwise in form and substance reasonably satisfactory to the parties thereto.
Subject to Section 8.3(a), Sprint LD will be a sub-agent of the Partnership
for Cable Services, and the Cable Subsidiaries and other Controlled Affiliates
of the Cable Partners will be sub-agents of the Partnership for Sprint LD
Services, in each case only if and to the extent that such sub-agency is
permitted by the original agency agreement relating to such services. The
Partnership will establish the commission structure and level for its sub-
agents, provided that sub-agents that are Partners or their Controlled
Affiliates will be paid commissions on a pass-through basis without deduction by
the Partnership.
No Partner or Controlled Affiliate thereof shall be required (i) to make
any of its product or service offerings available to the Partnership to offer or
promote pursuant to the first sentence of the second paragraph of this Section
8.3(b), (ii) to authorize the Partnership to include any product or service
offerings that are made available by such Partner or Controlled Affiliate in a
bilateral package
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with any Partnership Services or in a multilateral package with Partnership
Services and product or service offerings of any other Partner or its Controlled
Affiliates, or (iii) to authorize the Partnership to appoint any distributors or
sub-agents for any product or service offerings that such Partner or its
Controlled Affiliates make available to the Partnership, whether as a condition
of its appointment as an agent for Partnership Services or otherwise.
The sales agency agreements referenced to in this Section 8.3(b) will
include appropriate customer and territorial restrictions. Sprint LD and the
Cable Subsidiaries and other Controlled Affiliates of the Cable Partners will
retain the "retail margins" on the sales of their respective services by the
Partnership, and will pay a sales commission to the Partnership.
(c) Commissions. Commissions payable to the Partnership under sales
-----------
agency agreements for Sprint LD Services and for Cable Services and commissions
payable to Sprint LD and the Cable Subsidiaries and other Controlled Affiliates
of the Cable Partners under sales agency agreements for Partnership Services
will be not less favorable to the agent than those for comparable agency
arrangements (considering churn, marketing support provided by agent, etc.) of
the relevant principal with third parties, irrespective of volume. The Partners
acknowledge that commission arrangements between Cable Subsidiaries and other
Controlled Affiliates of the Cable Partners and owners of multiple dwelling
units, shared tenant services companies and the like are not comparable agency
arrangements for this purpose. Commissions will be paid on the basis of net
customer growth (i.e., after taking into account churn) and in the case of a
----
sale to an existing customer will only be paid on the basis of incremental sales
revenue from such customer resulting from such sale, if any.
(d) Exclusivity. The Partnership will require as a condition to its
-----------
appointment of Sprint LD, each Cable Subsidiary or other Controlled Affiliate of
the Cable Partners and each Wireless Affiliate as sales agents for the
Partnership Services, that Sprint LD, such Cable Subsidiary or other Controlled
Affiliate of the Cable Partners and such Wireless Affiliate agree that, except
as permitted under Section 6, it will not offer, promote or package any Wireless
Exclusive Services other than the Partnership Services and, in the case of a
Wireless Affiliate, the products and services of such Wireless Affiliate, during
the term of such agency.
(e) Brand. The Partnership Services will be offered, promoted and
-----
packaged solely under the Licensed Mark (as defined in the Sprint Trademark
License Agreement attached as Exhibit 8.2), except that the foregoing shall not
preclude (i) the inclusion of Partnership Services bearing the Licensed Mark
(or, if permitted under clause (ii), a Permitted Brand) in a package with any
products or services offered, promoted or packaged by a Cable Subsidiary or
other Controlled Affiliate of a Cable Partner (whether such package is offered
by any of the foregoing or by any of their respective sub-agents or
distributors) that bear a mark or brand other than the Licensed Mark or (ii) to
the extent expressly permitted by Sections 6.3(q) and 6.3(r), the offering,
promoting and packaging of Partnership Services under a Permitted Brand.
(f) Right to Market Own Products. Nothing in this Section 8.3 shall
----------------------------
govern or restrict the right of Sprint LD or any Cable Subsidiary or other
Controlled Affiliate of a Cable Partner to market, sell or distribute its own
products or services.
8.4 Preferred Provider.
------------------
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The Partnership and its Subsidiaries shall contract with each Partner, its
Affiliates and third parties, as appropriate, on a negotiated arms-length basis,
for services they may require, which may include billing and information systems
and marketing and sales services. The Partnership and its Subsidiaries may in
the normal course of their respective businesses enter into transactions with
the Partners and their respective Affiliates, provided that the Partnership
--------
Board by the requisite vote pursuant to Section 8.6 has determined that the
price and other terms of such transactions are fair to the Partnership and its
Subsidiaries and that the price and other terms of such transaction are not less
favorable to the Partnership and its Subsidiaries than those generally
prevailing with respect to comparable transactions involving non-Affiliates of
Partners. Subject to the foregoing, the Partnership Board, acting in accordance
with Section 8.6, may in its discretion elect from time to time to provide
rights of first opportunity to various Partners or their Affiliates to provide
services to the Partnership and its Subsidiaries; provided that the Partnership
--------
Board shall have adopted, by Unanimous Vote, 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 and its Subsidiaries are expressly authorized
to enter into the agreements expressly referred to in this Section 8.
8.5 MFJ.
---
Each Partner agrees that neither it nor any of its Controlled Affiliates
shall take any action that (i) causes such Partner or the Partnership to become
a BOC or (ii) 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 clause (ii) above, the results referred to in such clause (ii)
would have a material adverse effect on the business, assets, liabilities,
results of operations, financial condition or prospects of the Partnership and
its Subsidiaries.
8.6 Interested Party Transactions.
-----------------------------
Any contract, agreement, relationship or transaction between the
Partnership or any of its Subsidiaries, on the one hand, and any Partner or any
Person in which a Partner (or any of its Controlled Affiliates) has a direct or
indirect material financial interest (other than the Partnership, MinorCo,
PhillieCo and their respective Subsidiaries) 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 a decision to accept or reject an Offer pursuant
to Section 6.1(c), 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 relating to such matter) by the Partnership Board (with the
Representatives of the interested Partner(s) absent from the deliberations and
abstaining from the vote with respect thereto) by the requisite affirmative vote
of the Representatives of the disinterested General Partners. For purposes of
the foregoing, a disinterested General Partner is a General Partner that is not
a party to, and does not have an
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Interested Person that is a party to, the contract, agreement, relationship or
transaction in question.
8.7 Access to Technical Information.
-------------------------------
Subject to the provisions of Sections 6 and 10.4 of this Agreement and to
applicable confidentiality restrictions, the Partnership and its Subsidiaries
shall grant to each Partner and its Controlled Affiliates access to Technical
Information of the Partnership and its Subsidiaries ("Partnership Technical
Information"). Such access shall be granted at such reasonable times and
locations and on such other reasonable terms as the Partnership Board may
approve by Required Majority Vote pursuant to Section 8.6. Subject to Section 6,
the Partnership and its Subsidiaries shall grant to any such Partner or its
Controlled Affiliate a license to use any Partnership Technical Information to
which it is granted access pursuant to this Section 8.7 (and to make copies
thereof at such Partner's expense), 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; provided that, except as expressly provided in
--------
Section 8.12, the Partnership shall not grant any Partner or its Controlled
Affiliates access to any Proprietary Technical Information. The rights of access
granted pursuant to this Section 8.7 shall be subject to the pre-existing rights
of any third party to such Partnership Technical Information.
8.8 Parent Undertaking.
------------------
Simultaneously with the execution and delivery of this Agreement, each
Parent has executed and delivered to the Partnership and the other Partners a
Parent Undertaking.
8.9 Certain Additional Covenants.
----------------------------
(a) Each Cable Partner agrees that for so long as such Cable Partner
is a Partner during the Term (as defined in the Parents Agreement) of the
Parents Agreement to which the Parent of such Cable Partner is a party, neither
it nor any of its Controlled Affiliates will engage in any transaction or series
of related transactions, other than a Permitted Transaction, in which cable
television system assets owned directly or indirectly by the Parent of such
Partner are Transferred if, after giving effect to such transaction or the last
transaction in such series of related transactions, the number of basic
subscribers served by the cable television systems in the United States of
America (including its territories and possessions other than Puerto Rico) owned
by the Parent of such Partner, directly and indirectly through its Controlled
Affiliates, is equal to twenty-five percent (25%) or less of the number of basic
subscribers served by the cable television systems in the United States of
America (including its territories and possessions other than Puerto Rico) owned
by the Parent of such Partner, directly and indirectly through its Controlled
Affiliates, before giving effect to such transaction or the first transaction in
such series of related transactions.
(b) Sprint agrees that for so long as Sprint is a Partner during the
Term (as defined in the Parents Agreement) of any Parents Agreement, neither it
nor any of its Controlled Affiliates will engage in any transaction or series of
related transactions, other than a Permitted Transaction, in which long distance
telecommunications business assets owned directly or indirectly by Sprint Parent
are Transferred if, after giving effect to such transaction or the last
transaction in such series
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of related transactions, the 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 Sprint Parent,
directly and indirectly through its Controlled Affiliates, is equal to twenty-
five percent (25%) or less of the 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 Sprint Parent,
directly and indirectly through its Controlled Affiliates, before giving effect
to such transaction or the first transaction in such series of related
transactions.
8.10 PioneerCo Preemptive Rights.
----------------------------
The PioneerCo Partnership Agreement will provide that Cox Pioneer
Partnership and the Partnership (or a Subsidiary of the Partnership) will have
certain put and call rights that may result in the acquisition by the
Partnership of Cox Pioneer Partnership's interest in PioneerCo in exchange for
an additional Interest in the Partnership. At the time of such exchange, each of
the Partners (other than Cox) will be permitted to make Additional Capital
Contributions in cash up to the amount necessary to permit such Partner to avoid
any reduction in its Percentage Interest as a consequence of such exchange
(assuming that all such other Partners were to exercise such right).
8.10 Foreign Ownership.
-----------------
(a) Certain Definitions and Concepts. For purposes of this Section
--------------------------------
8.11:
(i) "Foreign Ownership Restriction" means any federal law or
regulation restricting the amount of ownership or voting control that may be
held by non-citizens of the United States in holders of licenses or other
authorizations issued by the FCC or in Persons controlling such holders
(including 47 U.S.C. (S)310(b) and the rules and regulations promulgated
thereunder by the FCC).
(ii) "Covered Licensee" means any of the Partnership or any
Subsidiary thereof that holds any license or other authorization issued by the
FCC or that controls the holder of any license or other authorization for
purposes of any Foreign Ownership Restriction.
(iii) "Foreign Ownership Threshold" means, with respect to any
Covered Licensee, the maximum amount of foreign ownership or foreign voting
control of such Covered Licensee that is permitted by any Foreign Ownership
Restriction applicable to such Covered Licensee, less the amount of foreign
ownership or foreign voting control of such Covered Licensee that is
attributable from any Person other than a Partner.
(iv) "Foreign Ownership Safe Harbor" means, with respect to any
Covered Licensee, ninety percent (90%) of the Foreign Ownership Threshold of
such Covered Licensee.
(v) Except as provided in clause (vi) of this Section 8.11(a),
a Partner's "Attribution Cap" equals, with respect to the Foreign Ownership
Threshold of any Covered Licensee:
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(A) in the case of Sprint, the product of the Percentage
Interest of Sprint times twenty-eight percent (28%), and
-----
(B) in the case of any Cable Partner, the product of (x)
the Foreign Ownership Threshold of such Covered Licensee minus Sprint's
-----
Attribution Cap times (y) the Percentage Interest of such Cable Partner divided
----- -------
by the aggregate Percentage Interests of all Cable Partners.
- - --
(vi) Notwithstanding clause (v) of this Section 8.11(a), if (A)
the proposed transaction among Deutsche Telekom, France Telecom and Sprint
Parent providing for the purchase by Deutsche Telekom and France Telecom of
certain shares of stock of Sprint Parent is abandoned without the consummation
of all of the stock purchases contemplated thereby and (B) definitive agreements
with respect to a similar alternative transaction with a non-citizen of the
United States have not been entered into by Sprint Parent prior to March 28,
1997 or such transaction has not been consummated prior to March 28, 1998, then,
with respect to any Covered Licensee, each Partner's Attribution Cap shall equal
the product of the Percentage Interest of such Partner times the Foreign
Ownership Threshold of such Covered Licensee.
(vii) Notwithstanding clause (v) of this Section 8.11(a), if the
Foreign Ownership Threshold with respect to any Covered Licensee exceeds 28%,
each Partner's Attribution Cap shall equal the product of the such Partner's
Percentage Interest times the Foreign Ownership Threshold of such Covered
-----
Licensee.
(b) Covenant Regarding Foreign Ownership. Subject to Section 8.11
------------------------------------
(c), no Partner shall cause or permit the amount of foreign ownership or foreign
voting control attributable to any Covered Licensee from such Partner and its
Controlled Affiliates (determined in accordance with the method of attribution
prescribed in the applicable Foreign Ownership Restrictions) to exceed the
Attribution Cap of such Partner applicable to such Covered Licensee, increased
by any portion of any other Partner's applicable Attribution Cap that such other
Partner has authorized such Partner to use for purposes of determining
compliance with this Section 8.11(b), and decreased by any portion of such
Partner's applicable Attribution Cap that such Partner has authorized any other
Partner to use for purposes of determining compliance with this Section 8.11(b).
(c) Right to Cure Potential Violations. So long as a Partner and its
----------------------------------
Controlled Affiliates are using their respective commercially reasonable efforts
to cause the amount of foreign ownership and foreign voting control attributable
to each Covered Licensee from such Partner and its Controlled Affiliates to be
reduced below the maximum amount permitted by Section 8.11(b) (without regard to
this Section 8.11(c)), such Partner shall not be deemed to be in violation of
its covenant in Section 8.11(b) until the earlier of:
(i) such time as the aggregate amount of foreign ownership or
foreign voting control attributable to any Covered Licensee (including the
foreign ownership and foreign voting control attributable from such Partner and
its Controlled Affiliates) exceeds the Foreign Ownership Safe Harbor, or
(ii) thirty (30) days after such Partner receives written notice
from any other Partner that such other Partner or any of its Controlled
Affiliates desires to engage in any
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transaction permitted by section 8.11(b) that, if consummated, would cause the
aggregate amount of foreign ownership or foreign voting control attributable to
any Covered Licensee to exceed the Foreign Ownership Safe Harbor if the foreign
ownership attributable to such Covered Licensee from such Partner and its
Controlled Affiliates continued to exceed the maximum amount permitted by
Section 8.11(b).
(d) Authorization to Use the Attribution Cap of Another Partner. Any
-----------------------------------------------------------
authorization by one Partner to another Partner of the right to use any portion
of the authorizing Partner's applicable Attribution Cap for purposes of
determining compliance with Section 8.11(b) shall be evidenced by a written
instrument delivered by the authorizing Partner to the Partnership and each
other Partner.
8.12 Product Integration.
-------------------
(a) The Partnership shall undertake to architect and design its
systems, platforms, networks and products in a manner that facilitates seamless
integration of the Partnership's Wireless Exclusive Services with the
telecommunications products and services offered by the Partnership and its
Subsidiaries, each Partner and its Controlled Affiliates, Teleport and any Local
Joint Venture. The adoption of all budgets, plans and procedures by the
Partnership regarding the planning, design and development activities of the
Partnership with respect to the architecture and design of all systems,
platforms, networks and products shall require a Required Majority Vote of the
Partnership Board, and each Partner shall have the right to participate fully in
such planning, design and development activities and shall have access to and
rights to use all Partnership Technical Information relating to such activities
in accordance with Section 8.7 (except to the extent otherwise provided in
Sections 8.12(b), (c) and (d) below with respect to any Proprietary Technical
Information).
(b) Following July 31, 1996, each Partner shall have the right to
cause the Partnership to undertake, in cooperation with such Partner and at such
Partner's cost and expense, the development of Technical Information that such
Partner reasonably believes is necessary to integrate the Partnership's Wireless
Exclusive Services with the wireline telecommunications products and services of
(x) Sprint and its Controlled Affiliates, if such Partner is Sprint, (y) such
Partner and its Controlled Affiliates and/or Teleport, if such Partner is a
Cable Partner, or (z) any Local Joint Venture in which such Partner or its
Controlled Affiliate has an interest (or to which such Partner or its Controlled
Affiliate is a party) ("Proprietary Technical Information"); provided, that such
--------
undertaking by the Partnership shall not materially interfere with the
Partnership's ongoing planning, design and development activities and any such
integration shall not adversely impact in any material respect the operating
characteristics of the Partnership's existing systems, platforms, networks or
products. The Partner causing the Partnership to develop any such Proprietary
Technical Information (the "Initiating Partner") shall have the irrevocable,
royalty-free exclusive right and license to make (or have made), use, sell,
copy, modify and sublicense such Proprietary Technical Information; provided,
--------
that (i) the Initiating Partner shall have no such exclusive right as to any
pre-existing Partnership Technical Information used in the development of any
such Proprietary Technical Information, (ii) if (A) the Initiating Partner is
Sprint, each other Partner that has, or has a Controlled Affiliate that has,
entered a Local Joint Venture with Sprint or a Controlled Affiliate of Sprint,
or (B) the Initiating Partner is a Cable Partner, each other Cable Partner and,
if Sprint or a Controlled
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Affiliate of Sprint has entered a Local Joint Venture with such Initiating
Partner or a Controlled Affiliate of such Initiating Partner, Sprint, shall be
entitled to participate in the development of Proprietary Technical Information
in cooperation with the Initiating Partner (except that neither Sprint (if a
Cable Partner is the Initiating Partner) nor any of the Cable Partners (if
Sprint is the Initiating Partner) shall be entitled to participate in the
development of any Proprietary Technical Information integrating the
Partnership's Wireless Exclusive Services with telecommunications products and
services designed primarily for non-residential customers ("Business-Related
Information")), and (iii) if one or more other Partners participates in the
development of any Proprietary Technical Information pursuant to clause (ii)
above, the Initiating Partner and each such other Partner shall have the
exclusive (other than as among the Initiating Partner and each such other
Partner) irrevocable, royalty-free right and license to make (or have made),
use, sell, copy, modify and sublicense such Proprietary Technical Information;
however, in such case, no Initiating Partner or such other Partner having the
foregoing rights as to any such Proprietary Technical Information developed
pursuant to this Section 8.12(b) shall sublicense or otherwise grant rights with
respect to such Proprietary Technical Information to any Person other than such
Partner and its Controlled Affiliates, the Partnership and its Subsidiaries, any
Local Joint Venture in which the Initiating Partner (or its Controlled
Affiliate) or such other Partner (or its Controlled Affiliate) that participated
in the development of such Proprietary Technical Information has an interest (or
to which any of the foregoing is otherwise a party), and Teleport (if a Cable
Partner is the Initiating Partner) (provided that the restrictions set forth in
--------
this clause (iii) shall apply only to the use of such Proprietary Technical
Information in connection with the provision of telecommunications products and
services to customers located in the United States and its territories, other
than Puerto Rico). Subject to Section 8.12(c), the costs and expenses incurred
in the development of Proprietary Technical Information shall be borne by the
Initiating Partner and each such other Partner that elects to participate in the
development of such Proprietary Technical Information ratably in proportion to
their respective Percentage Interests.
(c) To the extent that following the development of any Business-
Related Information, the Initiating Partner or any of its Controlled Affiliates
uses or licenses or permits a sub-license (or otherwise grants any right) for
the use of all or any portion of such Business-Related Information for an
application thereof to a telecommunications product or service for residential
customers to any material extent (other than the provision by a non-residential
customer of access to any such product or service solely for business purposes,
provided that such product or service is not offered, promoted or packaged to
- - --------
residential customers), the Initiating Partner shall promptly notify each other
Partner that would have been entitled to participate in such development but for
the restriction on its right to participate in the development of Business-
Related Information contained in the second sentence of Section 8.12(b), and
each such other Partner shall be entitled to an irrevocable right and license to
make (or have made), use, sell, copy, modify or sub-license any such portion of
such Business-Related Information (but subject to the restriction in clause
(iii) of the proviso in the second sentence of Section 8.12(b) above), subject
to the payment by such Partner of a pro rata portion of the development costs
and expenses attributable to the development of such portion of such Business-
Related Information used for such application for residential customers (which
shall be borne by the Initiating Partner, any other Partner initially
participating in the development of such Business-Related Information (an
"Initial Participating Partner"), and any Partner(s) exercising rights under
this paragraph ratably in proportion to their respective Percentage Interests).
Such payment shall be made as a direct reimbursement to the Initiating Partner
and each Initial Participating Partner of the applicable portion of the
development costs and expenses
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previously paid to the Partnership by the Initiating Partner and the Initial
Participating Partner.
(d) In connection with the proposed development of any Proprietary
Technical Information, the applicable Partners and the Partnership shall agree
in writing to processes and procedures related to such development and the
actual scope of use, ownership, license and sub-license rights with respect to
such Proprietary Technical Information (including the nature and extent of any
pre-existing Partnership Technical Information to be used in the development of
such Proprietary Technical Information), which in any such case shall be
consistent with this Section 8.12, unless otherwise agreed by the applicable
Partners and the Partnership. If, in connection with any development pursuant to
Section 8.12, any Partner or the Partnership develops or invents any technology
or other intellectual property giving rise to any patent rights, subject to the
other provisions of this Section 8.12, common law principles relating to the
ownership of and rights to use patentable inventions shall govern the ownership
of and rights to use such technology or other intellectual property, unless
otherwise agreed by the parties participating in the development of such
technology or other intellectual property. Notwithstanding anything in this
Agreement to the contrary, without such Partner's prior written consent, no
licenses, either express or implied, are granted to the Partnership, any other
Partner or any other entity for any Proprietary Technical Information or other
Technical Information Rights owned or solely developed by a Partner.
8.13 Provision of Services.
---------------------
To the extent permitted by applicable law, each Partner agrees that it and
its Controlled Affiliates shall use all commercially reasonable efforts to cause
its local cable television and/or telephone operations to provide appropriate
services to WirelessCo in all its owned and operated markets as well as markets
operating under an Affiliation Agreement with WirelessCo, including any
Affiliation Agreement with PioneerCo. Such services may include antenna sites
and/or strand mounting of RF and transmission equipment owned by WirelessCo or
any Affiliate thereof and transmission facilities between cell sites and
designated switching locations. Services may also include provision of primary
power, standby power 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. Notwithstanding the foregoing, Comcast will not be required
to provide any services to WirelessCo under this Section 8.13 in any territories
in which Comcast or its Controlled Affiliates operate Wireless Businesses in the
Comcast Area.
8.14 Comcast Representative.
----------------------
Notwithstanding any other provision of this Agreement, for such time
(the "Restricted Time") as Comcast or any of its Controlled Affiliates engages
in any Competitive Activity in any portion of the Comcast Area, Comcast agrees
to cause any Representative of Comcast who participates in Designated Matters
(as defined below) not to (i) be involved in any Competitive Activities engaged
in by Comcast or its Controlled Affiliates in the Restricted Area (as defined
below) and (ii) disclose or discuss the Designated Matters with any Agent of
Comcast that is involved in Competitive Activities in the Restricted Area.
During the Restricted Time, each Partner (other than Comcast) and its Controlled
Affiliates and the Partnership and its Subsidiaries shall not, shall cause their
respective officers and directors (in their capacity as such) not to, and shall
take all reasonable measures to cause
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their respective other Agents not to, disclose any information (including any
financial projections, budgets or other operating or business plans) regarding
the provision, by the Partnership and its Subsidiaries or by any Third Party
Provider (as defined below) of Wireless Exclusive Services in any portion of the
Comcast Area, to Comcast or any of its Controlled Affiliates or Agents other
than such Representative of Comcast. As used herein, "Designated Matters" means
the participation in any discussions regarding, the obtaining of any information
or the casting of any votes, in each case with respect to any matter concerning
the provision by the Partnership or its Subsidiaries of Wireless Exclusive
Services in a portion (the "Restricted Area") of the Comcast Area (including the
terms of any Affiliation Agreement with any Person providing such Wireless
Exclusive Services (a "Third Party Provider")).
8.15 Purchasing.
----------
The Partners and their respective Controlled Affiliates will cooperate with
each other in a commercially reasonable manner to structure arrangements whereby
the Partners, their respective Controlled Affiliates, and the Partnership and
its Subsidiaries would, to the extent permitted by applicable law and
regulation, coordinate their respective buying efforts from third party vendors
in a manner such that the benefits of such coordinated efforts would be
available to the Partnership and its Subsidiaries, each Partner and each
Partner's respective Controlled Affiliates in making such purchases of equipment
and materials as may be required for (i) the accomplishment of the purposes of
the Partnership and its Subsidiaries and (ii) the operations of the permitted
businesses of any Partner or its Controlled Affiliates.
8.16 Advertising Reimbursement.
-------------------------
On December 31, 1996, if by such date Sprint and the Cable Partners have
not entered into an agreement regarding Teleport as contemplated under Section
3(b) of the Parents Agreements between Sprint and each Parent of the Cable
Partners in the form executed and delivered as of the date hereof, Sprint will
pay to each of the Cable Partners an amount, together with interest thereon at
the rate of six percent (6%) per annum from and including February 1, 1996 until
the date on which such amount is paid, in cash equal to the sum of (A) the value
of the advertising availability previously made available to the Partnership by
such Partner and its Controlled Affiliates at no charge pursuant to Section
9.13(b) of the Prior Partnership Agreement and (B) an amount equal to such Cable
Partner's Percentage Interest times the value of the advertising availability
-----
previously purchased by the Partnership and its Subsidiaries pursuant to Section
9.13(b) of the Prior Partnership Agreement.
SECTION 9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties by Partners.
------------------------------------------
Each Partner hereby represents and warrants that as of the date hereof:
(a) Due Incorporation or Formation; Authorization of Agreement. Such
----------------------------------------------------------
Partner 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
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and carried on at the date hereof and as contemplated hereby. Such Partner 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 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 have 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 governmental department, board, agency or instrumentality, domestic
or foreign, 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, which in any such
case 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 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 Partner 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, except for any FCC or other regulatory
approvals, licenses, permits or other authorizations required to be obtained by
the Partnership in connection with the acquisition and ownership of Wireless
Business licenses relating to PCS.
(d) Litigation. There are no actions, suits, proceedings or
----------
investigations pending
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or, to the knowledge of such Partner or its Parent, 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 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 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 or its
Parent; 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
governmental department, board, agency or instrumentality, domestic or foreign,
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 or its Parent.
(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) Subsidiaries. Such Partner is a direct or indirect wholly owned
------------
Subsidiary of its Parent.
9.2 Representation and Warranty of Sprint.
-------------------------------------
Sprint hereby represents and warrants that as of the date hereof Sprint
Communications is the primary entity through which Sprint Parent conducts its
long distance telecommunications business in the United States of America
(including its territories and possessions other than Puerto Rico).
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 and its Subsidiaries shall use
the accrual method of accounting in preparation of their annual reports and for
tax purposes and shall keep their 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 and its Subsidiaries or the investment in the Partnership and its
Subsidiaries 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 its Subsidiaries and (iii) to discuss the affairs of the
Partnership and its Subsidiaries with their respective officers, employees,
attorneys, accountants, customers and suppliers. Neither the Partnership nor its
Subsidiaries shall charge such
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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 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 Partnership Board 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.
(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 consolidated balance sheet of the Partnership and its Subsidiaries
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 calendar quarters of each Fiscal Year (and in any event not
later than forty (40) days after the end of each such calendar quarter), a
consolidated balance sheet of the Partnership as of the end of such
calendar quarter and the related consolidated statements of operations,
Partners' Capital Accounts and changes therein, and cash flows for such
calendar 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 calendar quarter and
interim period corresponding to the calendar quarter and interim period
just completed.
(iii) As soon as practicable following the end of each of the
first
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two calendar months of each calendar quarter (and in any event not later
than thirty (30) days after the end of such calendar month), a consolidated
balance sheet as of the end of such month and consolidated 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.
10.3 Tax Returns and Information.
---------------------------
(a) Sprint, acting in its capacity as a General Partner, 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"). If Sprint shall cease to be a General
Partner, then the Partner with the greatest Voting Percentage Interest, acting
in its capacity as a General Partner, shall thereafter act as the Tax Matters
Partner. 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 Partner shall be given at least five (5) Business Days
advance notice from the Tax Matters Partner of the time and place of, and shall
have the right to participate (and the Partnership and the Tax Matters Partner
shall take such action as may be necessary to cause the tax matters partner of
any Subsidiary to extend to the Partners the right to participate) in (i) any
material aspect of any administrative proceeding relating to the determination
of partnership items at the Partnership level (or at the level of any Subsidiary
thereof) and (ii) any material discussions with the Internal Revenue Service
relating to the allocations pursuant to Section 3 of this Agreement or pursuant
to the partnership agreement of any Subsidiary. The Tax Matters Partner shall
not, and the Partnership shall not permit the tax matters partner of any
Subsidiary to, 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, the
Partnership or any Subsidiary without approval of the Partnership Board by a
Required Majority Vote. The Tax Matters Partner shall from time to time upon
request of any other Partner confer, and cause the Partnership's and any
Subsidiary's tax attorneys and Accountants to confer, with such other Partner
and its attorneys and accountants on any matters relating to a Partnership or
Subsidiary 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 or any Subsidiary thereof 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 or any Subsidiary
thereof to be sent to each Partner for review at least fifteen (15) Business
Days prior to filing. Unless otherwise determined by the Partnership Board, 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 or the applicable
Subsidiary, as the case may be. 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
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Code, to adjust the basis of the Partnership's property (and the Partnership
shall cause the tax matters partner of any Subsidiary to make a corresponding
Section 754 election with respect to such Subsidiary's property); provided,
--------
however, that such transferee shall reimburse the Partnership and any Subsidiary
- - -------
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 or any Subsidiary under the Code (or applicable state or local tax
law) shall be made in such manner as may be determined by the Partnership Board
to be in the best interests of the Partners as a group.
(c) The Tax Matters Partner shall cause to be provided to each
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 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 a 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 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 calendar 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 Exclusive
Limited 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 Partnership Board deems reasonable to such information relating to
the Partnership's business which the Partnership Board reasonably believes to be
in the nature of trade secrets or other information the disclosure of which the
Partnership Board 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 with respect to any Partner, (x)
in the case of an Adverse Act specified in clause (vii) of the definition of
such term in Section 1.10, any General Partner may elect or (y) in the case of
any other Adverse Act, the Partnership Board (with the Representatives of the
affected Partner abstaining) may elect:
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(i) 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 cause the Partnership 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.
Notwithstanding anything to the contrary contained in this Section 11, (x) none
of the remedies specified above (nor any other provision of this Section 11)
shall apply to an Adverse Act specified in clause (vi) of the definition of such
term in Section 1.10, (y) the remedies specified in clause (ii) shall not be
available to the Partners with respect to an Adverse Act specified in clause
(vii) 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 8.5 of this Agreement, and (z) 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
the definition of such term 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.
In the event of an Adverse Act specified in any clause of the definition of
such term in Section 1.10 other than clause (vii), the vote of the Partnership
Board required to elect to exercise a remedy specified in clause (i) or (ii) of
the first sentence of this Section 11.1(a) shall be the Required Majority Vote
of Representatives of the Partners that are not actual or alleged Adverse
Partners (the "Non-Adverse Partners"), provided that in the event more than one
--------
(1) Partner is alleged to be an Adverse Partner, such vote shall be taken
separately with respect to each alleged Adverse Partner excluding from such vote
only the Partner(s) that is alleged to be an Adverse Partner as a result of the
specific facts or circumstances with respect to which such vote is being taken.
The election to pursue a remedy specified in clause (i) or (ii) of the first
sentence of this Section 11.1(a) with respect to an Adverse Act for which such
remedy is available may be exercised by notice given to the Adverse Partner (x)
in the 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 (y) in the case of any other Adverse Act, within ninety
(90) days after the Partnership Board or the Partner making such election, as
the case may be, 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) of the first sentence of this Section 11.1(a)
is made to seek an injunction, specific performance or other equitable relief,
an action seeking such relief is commenced promptly thereafter and a final
judgment in such action is rendered denying such equitable remedy and no
election was made pursuant to clause (i) of the first sentence of this Section
11.1(a), then, by notice given within ten (10) days after such final judgment is
rendered, the Partnership Board may elect to pursue the remedy specified in
clause (i) of the first sentence of this Section 11.1(a) 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 (other than an Adverse Act specified
in clause (i) of the definition of such term in Section 1.10, which may only be
cured with the Unanimous Vote of, and on the terms prescribed by, the
Partnership Board) and no other Adverse Act with respect to such 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, subject to the
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requirements of this Section 11.1(a) regarding the timing of the election of
such remedies, 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
available remedy. Except as provided in Section 11.1(b), the failure to elect to
pursue 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.
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; and provided further, that if an election is made pursuant to
-------- -------
clause (i) of the first sentence of this Section 11.1(a), the amount the
Partnership may recover in any action for Damages shall be reduced by an amount
equal to the difference, if any, between the Net Equity of the Adverse Partner's
Interest determined in accordance with Section 11.2(a) and the applicable Buy-
Sell Price.
(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 Partnership
Board 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 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 Partners.
11.2 Adverse Act Purchase.
--------------------
(a) Determination of Net Equity of Adverse Partner's Interest. If the
---------------------------------------------------------
Partnership Board or any General 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 calendar quarter
immediately preceding the calendar 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 Partners, if any, 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 (1) an Adverse Act identified in clause (i) of the
definition of such term that occurs prior to the Cut-Off Time, (2) an Adverse
Act identified in clause (iv) of the definition of such term or (3) unless such
Adverse Act occurred in connection with any breach by such Partner of its
obligations under Section 8.5, an Adverse Act identified in clause (vii) of the
definition of such term), ninety percent (90%) of the Net Equity thereof as so
determined, (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 8.5, clause (vii) of the definition of such
term in Section 1.10, the Net Equity thereof, and (C) in the case of an Adverse
Act specified in clause (i) of the definition of such
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term in Section 1.10 that occurred prior to the Cut-Off Time, the lesser of (A)
ninety percent (90%) of the Net Equity thereof as so determined or (B) eighty
percent (80%) of the remainder of (1) the sum of such Adverse Partner's Original
Capital Contribution and aggregate Additional Capital Contributions minus (2)
-----
the cumulative distributions made to such Partner pursuant to Section 4
("Unreturned Capital"), with the amount of such Unreturned Capital determined as
of the date on which the Adverse Partner's Interest is purchased. 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"), except as
otherwise provided in Section 11.2(b)(i), each of the Partners (other than the
Adverse Partner and any Exclusive Limited Partner) may elect, by notice to the
Adverse Partner and each other Partner (the "Purchase Notice"), to purchase all
or any portion of the Adverse Partner's Interest, which notice shall state the
maximum Percentage Interest that such Partner (a "Purchasing Partner") 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 the Purchasing Partners, provided that, 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 continue to be
allocated proportionally in the manner provided above in this sentence among the
other Purchasing Partners until each has been allocated, by such process of
apportionment, a percentage of the Adverse Partner's Interest equal to the
maximum percentage such Purchasing Partner committed to purchase or until the
Adverse Partner's entire Interest has been allocated among the Purchasing
Partners. In the event that the other 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.
(i) Except as otherwise provided in Section 11.2(b)(ii), if an
Adverse Partner is a Cable Partner and no Cable Partner's Percentage Interest,
when added to the Percentage Interests of all Controlled Affiliates of such
Partner, is equal to or greater than Sprint's Percentage Interest when added to
the Percentage Interests of all Controlled Affiliates of Sprint, then the
Adverse Partner's Interest shall be allocated first among those of the
Purchasing Partners that are Cable Partners as though Sprint were not a
Purchasing Partner and if and to the extent that the aggregate purchase
commitments made by such Cable Partners are less than one hundred percent (100%)
of the Adverse Partner's Interest, the balance of the Adverse Partner's Interest
up to Sprint's purchase commitment shall be allocated to Sprint.
(ii) The Adverse Partner's Interest shall be allocated among
the Cable Partners in the manner set forth in Section 11.2(b)(i) until any Cable
Partner would have a Percentage Interest, when added to the Percentage Interests
of all Controlled Affiliates of such Partner, equal to Sprint's Percentage
Interest, when added to the Percentage Interests of all Controlled Affiliates of
Sprint, calculated in each case after giving effect to the adjustments to the
Percentage Interests to be
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made in connection with the purchases of the Adverse Partner's Interest by the
Cable Partners in accordance with Section 11.2(b)(i) assuming that such
purchases were made up to the amount that would yield such result (as to each
Partner, its "Adjusted Percentage Interest"). Any portion of the Adverse
Partner's Interest not yet allocated shall continue to be allocated
proportionately among all Purchasing Partners (including Sprint, if applicable)
in the manner set forth in this Section 11.2(b) without regard to Section
11.2(b)(i), but substituting the Adjusted Percentage Interests of the Purchasing
Partners for the Percentage Interests that would otherwise be used to determine
such allocation until each has been allocated an amount equal to its purchase
commitment or until the Adverse Partner's entire Interest has been allocated
among the Purchasing Partners.
(c) Terms of Purchase; Closing. Unless the Purchasing Partners and
--------------------------
the Adverse Partner otherwise agree, the closing of the purchase and sale of the
Adverse Partner's Interest, MinorCo Interest (as required by Section 12.3(d))
and Partner Loans (as required by Section 12.3(c)) 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, each Purchasing Partner shall pay to the Adverse Partner, by cash or
other immediately available funds, that portion of the purchase price for the
Adverse Partner's Interest, MinorCo Interest and Partner Loans for which such
Purchasing Partner is liable (determined in the case of the MinorCo Interest and
Partner Loans in accordance with Section 12.3) and the Adverse Partner shall
deliver to each Purchasing Partner good title, free and clear of any liens,
claims, encumbrances, security interests or options (other than those created by
this Agreement and those securing financing obtained by the Partnership), to the
portion of the Adverse Partner's Interest, MinorCo Interest and Partner Loans
thus purchased. Each Purchasing Partner shall be liable to the Adverse Partner
only for its allocable portion of the purchase price for the Adverse Partner's
Interest, MinorCo Interest and Partner Loans.
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,
MinorCo Interest and Partner Loans to the Purchasing Partner and the assumption
by each Purchasing Partner of the Adverse Partner's obligations with respect to
the portion of 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 Partnership and the amount borne by the Partnership shall be treated
as an expense of the Partnership for purposes of such determination.
In the event that any Purchasing Partner shall fail to perform its
obligation to purchase hereunder on the scheduled closing date, and no other
Purchasing Partner elects to purchase the portion of the Adverse Partner's
Interest, MinorCo Interest and Partner Loans thus not purchased (such election
to be made by notice given to the Adverse Partner within five (5) Business Days
thereafter), the Adverse Partner will not be obligated to sell any portion of
its Interest, MinorCo Interest or Partner Loans to any Purchasing Partner. If
one or more of the other Purchasing Partners timely elects to purchase such
portion of the Adverse Partner's Interest, MinorCo Interest and Partner Loans,
such Purchasing Partner(s) shall be provided an additional fifteen (15) days
from the previously scheduled closing date in which to tender payment therefor.
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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(a)(iii) if (i) all of the Partnership's
busin ess and assets (including its partnership interests in WirelessCo) were
sold substantially as an entirety for Gross Appraised Value, (ii) Profits and
Losses and items specially allocated in accordance with Sections 3.3 and 3.4 for
the Allocation Year ending on the date that Net Equity is determined, including
any gain or loss resulting from the deemed sale described in clause (i), were
allocated in accordance with Section 3, (iii) the Partnership paid its accrued,
but unpaid, liabilities and established reserves pursuant to Section 14.2 for
the payment of reasonably anticipated contingent or unknown liabilities, and
(iv) 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 account if
such Partner (or its successor in interest) (other than a Partner that is an
Adverse Partner as a result of Bankruptcy) 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, 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 (including the Partnership interests in WirelessCo), free and clear
of all liens and encumbrances, 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 (other than
Sections 2.4(a)(v) and 2.4(d)(iii) and the definition of "Premium Dollar" in
Section 1.10) 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 forty-five (45) 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
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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 forty-five (45) 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. The determination of the Gross Appraised Value in accordance with
this Section 11.4 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. Each Appraiser selected pursuant to the provisions of this
Section 11.4 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 Interest in accordance with this Section 11
or Sections 5.1(l)(ii), 12 or 14.7 requires the consent, approval, waiver, or
authorization of any government department, board, bureau, commission, agency or
instrumentality 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 Sections 5.1(l)(ii), 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 agrees to use its diligent efforts to
obtain, or to assist the affected Partner or the Partnership Board 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 Partnership Board from any
government department, board, bureau, commission, agency or instrumentality 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, a
Partner may at any time
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Transfer all or any portion of its Interest (a) to any Controlled Affiliate of
such Partner, (b) in connection with a Permitted Transaction involving such
Partner, (c) to the administrator or trustee of such Partner to whom such
Interest is Transferred in an Involuntary Bankruptcy, (d) pursuant to and in
compliance with Section 5.1(l)(ii), 6.4(f), 11.2, 12.4, 12.5, 12.6, 12.7 or 14.7
or (e) with the prior written consent of the other 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 upon the Unanimous Vote of
the Partnership Board. The withdrawal of a Partner, whether or not permitted,
shall not relieve the withdrawing Partner of its obligations under Section 5.4
or 6.6 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 an
Interest 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, but excluding the portion of
the costs of determining Net Equity that are to be borne by the Partnership as
provided in Section 11.2(b));
(b) Except in the case of a Transfer involuntarily by operation of
law, the transferee of an Interest (other than, with respect to clauses (A) and
(B) below, a transferee that was a Partner prior to the Transfer) shall, by
written instrument in form and substance reasonably satisfactory to the
Partnership Board (and, in the case of clause (C) below, the transferor
Partner), (A) make representations and warranties to the nontransferring
Partners equivalent to those set forth in Section 9.1, (B) accept and adopt the
terms and provisions of this Agreement, including this Section 12, and (C)
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 obligations except (x) as otherwise provided in Section 6
in the case of a Transfer to a Controlled Affiliate, (y) those obligations or
liabilities of the transferor Partner arising out of a breach of this Agreement
or pursuant to Section 5.4 or 6.6 and (z) 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;
(c) Except in the case of a Transfer involuntarily by operation of
law, the transferor of any Interest and its Affiliates will be obligated to sell
to the transferee, and the transferee
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will be obligated to buy from the transferor and its Affiliates, a percentage of
the Partner Loans (if any) held directly or indirectly by the transferor or an
Affiliate thereof equal to the percentage of the transferor's Interest being
Transferred to the transferee. If the transferee is a Partner or a Controlled
Affiliate thereof, the terms of such purchase will be as provided in Section
2.7. In connection with any such purchase of Partner Loans, the transferee shall
surrender to the Partnership the promissory note or notes evidencing such
Partner Loans in exchange for the issuance by the Partnership of a new
promissory note made payable to the order of the transferee in a principal
amount equal to the outstanding balance of such Partner Loans and otherwise
having the same terms as the promissory note surrendered therefor;
(d) Except in the case of a Transfer involuntarily by operation of
law, the transferor of an Interest will be obligated to sell to the transferee,
and the transferee will be obligated to buy from the transferor, a portion of
the MinorCo Interest owned by the transferor representing the same percentage of
the transferor's MinorCo Interest as the percentage of the transferor's Interest
being Transferred to the transferee. Election by a Partner to purchase all or
any portion of another Partner's Interest pursuant to Section 5.1(l)(ii),
6.4(f), 11, 12.4, 12.5, 12.6 or 14.7 shall also constitute an election to
purchase an equivalent portion of the transferor's MinorCo Interest, and each
purchasing Partner shall be obligated to purchase a portion of such MinorCo
Interest equal to the percentage of the transferor's Interest such purchasing
Partner is obligated to purchase for a price equal to the "Net Equity" of the
transferor's MinorCo Interest (determined as provided in Section 11.3 as if all
references therein and in any defined term used therein to the Partnership were
deemed references to MinorCo and all references to Section 14 contained therein
were deemed references to the corresponding provisions of the Agreement of
Limited Partnership of MinorCo dated as of March 28, 1995) (except in the case
of a Transfer pursuant to Section 12.4, in which case the terms of the Purchase
Offer shall apply, and except in the case of a Transfer pursuant to Section
12.6, in which case the Public Market Value shall apply);
(e) Except in the case of a Transfer involuntarily by operation of
law, if required by the Partnership Board, the transferee shall deliver to the
Partnership an opinion, satisfactory in form and substance to the Partnership
Board, of counsel reasonably satisfactory to the Partnership Board to the effect
that the Transfer of the Interest is in compliance with applicable state and
Federal securities laws;
(f) Except in the case of a Transfer involuntarily by operation of
law, if required by the Partnership Board, 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 Partnership Board 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 agency;
(g) Unless otherwise approved by the Partnership Board (with the
Representatives of the transferor General Partner abstaining), 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
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Partnership Board 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
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. Each
Partner agrees that, solely for purposes of this Section 12.3(g), any Transfer
of an ownership interest in a Partner that has the same effect as a Transfer of
such Partner's Interest for purposes of determining whether the Partnership has
been terminated within the meaning of Section 708 of the Code shall be treated
as a Transfer of such Partner's Interest. Each Partner shall notify the
Partnership and each other Partner in writing not less than five (5) days prior
to any Transfer of an ownership interest in such Partner to which this Section
12.3(g) applies. No Partner shall be deemed to have breached this Section
12.3(g) to the extent that such Partner's failure to comply with the foregoing
provisions in connection with a Transfer of an ownership interest in such
Partner resulted solely from the failure of any other Partner to comply with the
notice obligation set forth in the preceding sentence;
(h) 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;
(i) Except in the case of a Transfer of an Interest 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; and
(j) If the Parent of a transferee is not the same Person as the
Parent of the transferring Partner, then the Parent of the transferee (other
than a transferee Partner) shall execute and deliver to the Partnership and the
other Parents a Parent Undertaking. If a Partner ceases to be
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a Controlled Affiliate of its former Parent as a result of a Permitted
Transaction, then the new Parent of such Partner shall execute and deliver a
Parent Undertaking to the Partnership and the other Parents.
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.
----------------------
After March 1, 2000, 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 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 (vii) 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 (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 each other Partner other than any Exclusive
Limited 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 Partners (the "Offerees") for the Offer Price, payable
according to the same terms 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 13 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 other Partner, 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 (the "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, except as otherwise
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provided in Section 12.4(d)(i), 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 the Accepting Offerees, provided that 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 continue to be allocated proportionally in
the manner provided above in this sentence among the other Accepting Offerees
until each has been allocated, by such process of apportionment, a percentage of
the Offered Interest equal to the maximum percentage such Accepting Offeree
committed to purchase or until the entire Offered Interest has been allocated
among the Accepting Offerees. 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.
(i) Except as otherwise provided in Section 12.4(d)(ii), if a
Seller is a Cable Partner and no Cable Partner's Percentage Interest, when added
to the Percentage Interests of all Controlled Affiliates of such Partner, is
equal to or greater than Sprint's Percentage Interest, when added to the
Percentage Interests of all Controlled Affiliates of Sprint, then the Offered
Interest shall be allocated first among those of the Accepting Offerees that are
Cable Partners as though Sprint were not an Accepting Offeree and if and to the
extent that the aggregate purchase commitments made by such Cable Partners are
less than one hundred percent (100%) of the Offered Interest, the balance of the
Offered Interest up to Sprint's purchase commitment shall be allocated to
Sprint.
(ii) The Offered Interest shall be allocated among the Cable
Partners in the manner set forth in Section 12.4(d)(i) until any Cable Partner
would have a Percentage Interest, when added to the Percentage Interests of all
Controlled Affiliates of such Partner, that is equal to Sprint's Percentage
Interest, when added to the Percentage Interests of all Controlled Affiliates of
Sprint, calculated in each case after giving effect to the adjustments to
Percentage Interests to be made in connection with the purchase of the Offered
Interest by the Cable Partners in accordance with Section 12.4(d)(i) assuming
that such purchase was made up to the amount that would yield such result (as to
each Partner, its "Adjusted Percentage Interest"). Any portion of the Offered
Interest not yet allocated shall continue to be allocated proportionately among
all Accepting Offerees (including Sprint, if applicable) in the manner set forth
in this Section 12.4(d) without regard to Section 12.4(d)(i), but substituting
the Adjusted Percentage Interests of the Offerees for the Percentage Interests
that would otherwise be used to determine such allocation, until each has been
allocated an amount equal to its purchase commitment or until the entire Offered
Interest has been allocated among the Accepting Offerees.
(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 such effect (the "Sale Notice") to all
Offerees within five 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 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, MinorCo Interest
and Partner Loans of the Seller for which such Accepting Offeree is liable, and
the Seller shall deliver to each Accepting Offeree good title, free and clear of
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any liens, claims, encumbrances, security interests or options (other than those
created by this Agreement and those securing financing obtained by the
Partnership), to the portion of the Offered Interest, MinorCo Interest and
Partner Loans thus purchased. Each Accepting Offeree shall be liable to the
Seller only for its allocable portion of the purchase price for the Offered
Interest, MinorCo Interest and Partner Loans.
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, MinorCo
Interest and Partner Loans of the Seller 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 and MinorCo Interest Transferred to such
Accepting Offerees. 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 subject 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 (subject to
Section 11.5) or (ii) if the Firm Offer is accepted but the purchase is not
closed, sixty (60) days (subject to 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
(5th) 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 foregoing restrictions.
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.
(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 has occurred. No notice initiating the procedures
contemplated by this Section 12.4 may be given by an Adverse Partner nor any
Delinquent Partner prior to the applicable Cure Date unless such Partner has
cured the underlying Payment Default, and no Seller shall be required to offer
any portion of its Interest to an Adverse Partner during the period that the
Partnership is pursuing any remedy specified in Section 11.1 with respect to
such Adverse Partner. No Partner may accept a Purchase Offer during any period
that, as
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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 Rights.
---------------
(a) Direct Transfers. In the event that (i) a Partner proposes to
----------------
Transfer its Interest (as part of a single transaction or any series of related
transactions) to any Person other than a Controlled Affiliate of such Partner
after March 1, 2000, and such Transfer would cause the proposed transferee (a
"Tagalong Purchaser") and its Controlled Affiliates to own more than fifty-five
percent (55%) of the Percentage Interests (a "Tagalong Transaction") and (ii)
the Firm Offer is not accepted in the manner provided in Section 12.4, the
Tagalong Transaction shall not be permitted hereunder unless the Tagalong
Purchaser offers to purchase the entire Interest of any other Partner that
desires to sell its Interest to the Tagalong Purchaser at the same price per
each one percent (1%) Percentage Interest and on the same terms and conditions
as the Tagalong Purchaser has offered to the Partner proposing to make such
Transfer (the "Transferring Partner"). If such Transfer occurs as part of a
series of related transactions, the price and terms shall be the price and terms
most favorable to the Transferring Partner for which any portion of the Interest
of the Transferring Partner is Transferred as part of such series of
transactions. Prior to effecting any Tagalong Transaction, the Transferring
Partner shall deliver to each other Partner a binding, irrevocable offer (the
"Tagalong Offer") by the Tagalong Purchaser to purchase the entire Interest of
the other Partners at the same price per each one percent (1%) Percentage
Interest and on the same terms and conditions as the Tagalong Purchaser has
offered to the Transferring Partner (the "Tagalong Notice"). 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, (x) with
respect to a Tagalong Purchaser that is an existing Partner or a Controlled
Affiliate of an existing Partner, on the one hundred eightieth (180th) day
following the date of the Tagalong Notice and (y) with respect to any other
Tagalong Purchaser, on the first anniversary of the date of the Tagalong Notice.
At any time during the Tagalong Period, any Partner may accept the Tagalong
Offer as to the entire amount of its Interest by giving written notice of such
acceptance to the Tagalong Purchaser.
(b) Indirect Transfers. Within five (5) days of the Parent of any
------------------
Partner (such Partner, a "Controlling Partner") acquiring, indirectly, Interests
in the Partnership (other than through such Controlling Partner's acquisition of
additional Interests), causing such Parent to own, directly and indirectly
through its Controlled Affiliates, more than fifty-five percent (55%) of the
Percentage Interests, such Controlling Partner shall give to each other Partner
written notice of such acquisition (a "Control Notice"), which shall include an
offer (the "Control Offer") by the Controlling Partner to purchase the entire
Interest of each other Partner at a price equal to the Net Equity thereof (as
determined pursuant to Section 11.3) and shall designate a First Appraiser (as
required by Section 11.4). The Representatives of the other General Partners
shall by Required Majority Vote pursuant to Section 8.6 appoint the Second
Appraiser within ten (10) Business Days following the date the Control Notice
was given. The Control Offer shall be irrevocable for a period (the "Control
Offer Period") ending at 11:59 p.m., local time at the Partnership's principal
place of business, on the one hundred eightieth (180th) day following the date
of the Net Equity Notice. At any time during the Control Offer Period, any
Partner may accept the Control Offer as to the entire amount of its Interest by
giving written notice of such acceptance to the Controlling Partner. The costs
of determining the Net Equity shall be borne one-half by the Controlling Partner
and one-half by the Partners that accept
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the Control Offer (pro rata based on their respective Percentage Interests) or,
if no Partner accepts the Control Offer, then such costs shall be borne entirely
by the Partnership.
(c) Limitations on Acceptance of Offers. No Adverse Partner may
-----------------------------------
accept a Tagalong Offer or a Control Offer during any period that an election
may be made to pursue the remedies specified in Section 11.1(a) against such
Partner and, if an election pursuant to clause (i) of the first sentence 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 its Interest could then be purchased under Section 11.
(d) Closing Matters. Unless the Tagalong Purchaser or the Controlling
---------------
Partner, as the case may be, on the one hand, and the Partners accepting the
Tagalong Offer or the Control Offer, as the case may be, on the other hand,
otherwise agree, the closing of the purchase and sale of Interests pursuant to
this Section 12.5 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 sixtieth (60th) day following the expiration of the
Tagalong Period or the Control Offer Period, as applicable, subject to Section
11.5. At the closing, the Tagalong Purchaser or Controlling Partner shall pay to
the Partners who have accepted the applicable offer, by cash or other
immediately available funds, the purchase price for the Interests, MinorCo
Interests and Partner Loans being Transferred, and the Partners selling their
Interests, MinorCo Interests and Partner Loans shall deliver to the Tagalong
Purchaser or Controlling Partner, as applicable, good title, free and clear of
any liens, claims, encumbrances, security interest or options (other than those
created by this Agreement and those securing financing obtained by the
Partnership), to the Interest, MinorCo Interest and Partner 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 Interests, MinorCo Interests
and Partner Loans to the Tagalong Purchaser or Controlling Partner, as
applicable, and the assumption by the Tagalong Purchaser or Controlling Partner,
as applicable, of the obligations with respect to the Interests and MinorCo
Interests so Transferred. Each Partner and the Partnership shall bear its own
costs of such Transfer and closing, including attorneys' fees and filing fees.
12.6 Offer and Registration Rights.
-----------------------------
(a) Registration Notice. At any time on or after August 1, 2003 and
on or before September 30, 2003 and during the corresponding two-month periods
of each calendar year thereafter, any Partner or group of Partners
(individually, a "Notice Partner" and collectively the "Notice Partners"), by
notice (a "Registration Notice") given to the Partnership Board and each other
Partner, may request that the Partnership convert to corporate form pursuant to
Section 5.9 and that the corporate successor to the Partnership ("MajorCorp")
register under the 1933 Act for resale by the Notice Partner(s) all or a portion
of the shares of common stock ("MajorCorp Stock") that would be issued in
exchange for such Notice Partner's Interest and MinorCo Interest upon such
conversion to corporate form. Each Registration Notice shall (i) identify the
Notice Partner(s) giving the
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Registration Notice, (ii) specify the percentage (or respective percentages) of
the MajorCorp Stock to be issued in exchange for the Interest(s) (and MinorCo
Interest(s)) of the Notice Partner(s) upon such conversion of the Partnership
that such Notice Partner(s) desire to have registered for resale (as to each
Notice Partner, subject to increase as provided in Section 12.6(c), its
"Registration Interest"), (iii) identify the Public Appraiser selected by the
Notice Partner(s) to make the determination of Public Market Value and the
Minimum Offering Amount (the "First Public Appraiser") and (iv) set forth the
First Public Appraiser's estimate of the Minimum Offering Amount. If, during the
period specified above of any calendar year, one or more Registration Notices
are timely given as provided above, then each Partner that did not timely give a
Registration Notice will have until October 15th of the same calendar year to
give a Registration Notice, which Registration Notice shall contain only the
information required to be set forth in a Registration Notice by clauses (i) and
(ii) of the second sentence of this Section 12.6(a), and a Partner giving such a
Registration Notice shall be deemed to concur in the selection of the First
Public Appraiser made in the initial Registration Notice given during the
applicable calendar year. All Registration Notices shall be deemed void if the
aggregate Registration Interests specified in such Registration Notices are less
than the Minimum Offering Amount. If a Registration Notice has been timely given
in any calendar year and is not deemed void pursuant to the previous sentence,
then by October 31st of such year, the Partnership Board shall inform the
Partners of its selection of a Public Appraiser (the "Second Public Appraiser");
provided that if the Partnership Board has not timely designated the Second
- - --------
Public Appraiser, then the Second Public Appraiser shall be the Public Appraiser
proposed to the Partnership Board by the General Partner (other than any Notice
Partner) that (together with its Controlled Affiliates) holds the largest Voting
Percentage Interest. For purposes of this Section 12.6 and Section 12.7, a
"Public Appraiser" must be an investment banking firm of national reputation,
must not be an Interested Person with respect to any Partner, and must be one of
the ten leading investment banking firms based on aggregate proceeds of public
offerings of common stock in the United States for which it acted as a managing
underwriter during the preceding two full calendar years. "Minimum Offering
Amount" means the percentage (which shall not be less than one percent (1%)) of
the total equity of MajorCorp that the First Public Appraiser and Second Public
Appraiser jointly determine would be necessary to effect a viable initial public
offering and to result in a sufficient public float for MajorCorp Stock to be
actively traded and to satisfy the applicable listing requirements for the
Nasdaq National Market or The New York Stock Exchange and any applicable market
capitalization requirements for use of the shortest form of registration
statement (excluding Form S-4 and Form S-8) then available for the registration
of a primary offering by an issuer of common stock under the 1933 Act (which
form currently is Form S-3) assuming the satisfaction of all other requirements,
including any duration of public reporting requirements.
(b) Determination of Public Market Value. The "Public Market Value"
------------------------------------
of the Registration Interests of the Notice Partners shall equal the aggregate
cash proceeds, net of underwriters' fees, discounts and commissions and other
selling expenses customarily borne by selling stockholders, that would be
received by the Notice Partners from the sale in an underwritten public offering
registered under the 1933 Act of the MajorCorp Stock issued in exchange for such
Registration Interests if such offering were carried out in an orderly manner
over a period not exceeding eighteen (18) months (excluding any changes in value
of MajorCorp over such time, but otherwise considering all factors that the
Public Appraisers may deem relevant). In determining the Public Market Value of
the Registration Interests, the Public Appraisers shall assume the conversion of
the Partnership to a corporation in accordance with Section 5.9 and the
consolidation of the assets of MinorCo with the Partnership in connection
therewith. The Public Market Value of the
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Registration Interests will be determined in accordance with the procedures set
forth in the second paragraph of Section 11.4, substituting the term "Public
Market Value" for the term "Gross Appraised Value", the term "First Public
Appraiser" for the term "First Appraiser" and the term "Second Public Appraiser"
for the term "Second Appraiser." The Public Appraisers shall agree on the
Minimum Offering Amount. The fees and expenses of the Public Appraisers in
making such determination will be paid by the Partnership. Within five (5) days
after the final determination of Public Market Value, the Public Appraisers
shall provide written notice (the "PMV Notice") of such Public Market Value and
the Minimum Offering Amount to each Notice Partner and each other Partner. The
Public Market Value of each Notice Partner's Registration Interest shall be its
allocable share of the Public Market Value of the Registration Interests.
(c) Offer. By notice given to the Partnership and each other Partner
-----
(other than any Exclusive Limited Partner) within thirty (30) days after the
date of the PMV Notice, any Notice Partner (any such Notice Partner to then be
referred to as a "Registering Partner") may make an offer (the "Registration
Firm Offer") to sell to the other Partners (including any Notice Partner who has
not given a Registration Firm Offer within the thirty (30) day period for the
delivery of such Registration Firm Offer but excluding any other Registering
Partner and any Exclusive Limited Partner) (the "Registration Offerees") its
Registration Interest for the Public Market Value of such Registration Interest.
If the Partnership receives (i) Registration Firm Offers from all of the Notice
Partners prior to the expiration of such thirty (30) day period or (ii)
Registration Firm Offers from at least one Notice Partner on or before the
thirtieth (30th) day after the date of the PMV Notice, the Partnership shall
promptly give notice (the "Firm Offer Commencement Notice") to each Partner
stating that such Registration Firm Offers have been delivered as of the date of
such Firm Offer Commencement Notice. If the aggregate amount of Registration
Interest(s) for which Registration Firm Offers are given is less than the
Minimum Offering Amount, then each Registering Partner shall have the right to
increase the Registration Interest so offered by it by the amount by which the
aggregate Registration Interest(s) for which Registration Firm Offer(s) have
previously been given is less than the Minimum Offering Amount (which right as
among the Registering Partners shall be apportioned pro rata based upon the
relative Registration Interests of the Registering Partners unless otherwise
agreed), by giving notice to the Partnership Board and each other Partner
amending its Registration Firm Offer to effect such increase by the tenth (10th)
day following the date of the Firm Offer Commencement Notice; provided, that in
--------
such event the Firm Offer Commencement Notice shall be deemed to have been given
as of the end of such ten (10) day period. If, as of the end of such ten (10)
day period, the aggregate Registration Interest(s) so offered pursuant to the
Registration Firm Offer(s), as so amended, are less than the Minimum Offering
Amount, then all of such Registration Firm Offers shall be deemed to have been
rejected and withdrawn.
(d) Registration Offer Period. Subject to the last sentence of
-------------------------
Section 12.6(c), each Registration Firm Offer shall be irrevocable for a period
(the "Registration Offer Period") ending at 11:59 p.m., local time at the
Partnership's principal place of business, on the thirtieth (30th) day following
the date of the Firm Offer Commencement Notice; provided that if, as of the end
of such period, at least one but fewer than all of the Registration Offerees
have accepted the Registration Firm Offer pursuant to Section 12.6(e), the
Registration Offer Period shall be extended for an additional fifteen (15) days
and any remaining Registration Offeree(s) shall have the right to accept the
Registration Firm Offer during such fifteen (15) day period.
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(e) Acceptance of Registration Firm Offer. At any time during the
-------------------------------------
Registration Offer Period (as extended by Section 12.6(d), if applicable), any
Registration Offeree may accept the Registration Firm Offer as to all or any
portion of the Registration Interest(s) covered thereby, by giving notice of
such acceptance to each Partner (other than any Exclusive Limited Partner) which
notice shall indicate the maximum percentage of the Registration Interest of
each Registering Partner that such Registration Offeree is willing to purchase
(the "purchase commitment"); provided that if more than one Registration
--------
Interest is being offered, such Registration Offeree must accept the
Registration Firm Offer as to the same percentage of the Registration Interest
of each such Registering Partner. If the aggregate purchase commitments made by
Registration Offerees accepting the Registration Firm Offer(s) ("Registration
Accepting Offerees") exceed one hundred percent (100%) of each Registration
Interest, then, each Registration Accepting Offeree shall purchase, and each
Registering Partner shall sell to such Registration Accepting Offeree, that
portion of such Registering Partner's Registration Interest that corresponds to
the ratio of the Percentage Interest of such Registration Accepting Offeree to
the aggregate Percentage Interests of all Registration Accepting Offerees;
provided that if any Registration Accepting Offeree's purchase commitment was
- - --------
for an amount less than its proportionate share of the applicable Registration
Interest as so determined, then the portion of the Registration Interest not so
committed to be purchased by such Registration Accepting Offeree shall continue
to be allocated proportionally in the manner provided above in this sentence
among the other Registration Accepting Offerees until each has been allocated,
by such process of apportionment, a percentage of the Registration Interest
equal to the maximum percentage such Registration Accepting Offeree committed to
purchase or until the entire amount of each Registration Interest has been
allocated among the Registration Accepting Offerees. Notwithstanding any
purported acceptance of a Registration Firm Offer, all Registration Firm Offers
shall be deemed to be rejected by all such Registration Accepting Offerees in
their entirety if the portion not accepted is in the aggregate greater than zero
but less than the Minimum Offering Amount; provided that all Registration Firm
--------
Offers will not be deemed rejected in their entirety if, within ten (10) days
after the expiration of the Registration Offer Period, the Registration
Accepting Offerees increase or decrease their purchase commitments, by giving
notice to the Partnership Board and each other Partner amending their respective
purchase commitments to the extent required to effect any such increase or
decrease, as applicable, such that the amount accepted for purchase by the
Registration Accepting Offerees constitutes all of the Registration Interest(s)
or the amount not accepted equals or exceeds the Minimum Offering Amount.
(f) Closing of Purchase Pursuant to Registration Firm Offer. If the
-------------------------------------------------------
Registration Firm Offer(s) have been accepted in whole or in part in accordance
with the terms of Section 12.6(e), the Registering Partner(s) shall give notice
to such effect (the "Registration Sale Notice") to all Registration Offerees
within five (5) days after the end of the Registration Offer Period. Unless the
Registration Accepting Offerees and the Registering Partner(s) otherwise agree,
the closing of any purchase pursuant to this Section 12.6 shall be held at the
principal office of the Partnership 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 such Registration Sale Notice is given (subject to
Section 11.5). At the closing, each Registration Accepting Offeree shall (i)
pay to each Registering Partner an amount in cash or other immediately available
funds equal to at least one-third of that portion of the purchase price for the
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applicable portion of the Registration Interest and Partner Loans of the
Registering Partner for which such Registration Accepting Offeree is liable, and
the Registering Partner shall deliver to each Registration Accepting Offeree
good title, free and clear of any liens, claims, encumbrances, security
interests or options (other than those created by this Agreement and those
securing financing obtained by the Partnership), to the applicable portion of
the Registration Interest and Partner Loans thus purchased. The principal
amount of the Registration Note shall be payable in two equal annual
installments beginning on the first anniversary of the closing date under this
Section 12.6(f), and shall bear interest, payable quarterly, in arrears at the
rate specified below from the closing date until the principal amount thereof
and all accrued interest thereon is paid in full. The Registration Note will
contain customary terms, conditions and remedies, including an increased rate of
interest payable after a default in the payment of principal and/or interest.
The interest rate on the Registration Note shall be determined in connection
with the closing and shall be the average of the interest rates determined
independently by the First Public Appraiser and the Second Public Appraiser as
the rate that would be necessary to cause publicly traded securities with terms,
conditions and remedies comparable to the Registration Note to trade at face
value on a fully distributed basis. Each Registration Accepting Offeree shall
be liable to each Registering Partner only for its allocable portion of the
purchase price for the Registration Interest and corresponding portion of such
Registering Partner's Partner Loans.
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 an allocable portion of the
Registration Interest and Partner Loans of each Registering Partner to each of
the Registration Accepting Offerees and the assumption by each Registration
Accepting Offeree of each Registering Partner's obligations with respect to such
portion of the Registering Partner's Registration Interest Transferred to such
Registration Accepting Offeree. Each Partner and the Partnership shall bear its
own costs of such Transfer and closing, including attorneys' fees and filing
fees.
In the event that any Registration Accepting Offeree shall fail to perform
its obligation to purchase hereunder on the scheduled closing date and any other
Registration Accepting Offeree(s) were prepared to perform their respective
obligations at the closing on such date (each a "Tendering Offeree"), then the
Tendering Offerees shall be entitled to elect by notice given to the Partnership
Board, the Registering Partner(s) and each other Tendering Offeree within ten
(10) days after the originally scheduled closing date (the "extension period")
to increase or decrease their purchase commitments such that the amount accepted
for purchase by the Tendering Offerees constitutes all of the Registration
Interest(s) or the amount not accepted equals or exceeds the applicable Minimum
Offering Amount, and the closing of the purchase of the Registration Interest(s)
shall be delayed until the date determined in accordance with the following
sentence; provided, however, that the Registering Partner(s) will not be
-------- -------
obligated to sell any portion of their Registration Interest(s) or Partner Loans
if the amount of the Registration Interest(s) not accepted for purchase after
giving effect to such elections is greater than zero but less than the
applicable Minimum Offering Amount. If, after giving effect to all elections
timely made in accordance with the preceding sentence, the Registering
Partner(s) would be required to sell all or any portion of their Registration
Interest(s), then the closing of the purchase of such Registration Interest(s)
and Partner Loans shall be held (i) on the first Business Day following the
expiration of the extension period if no Tendering Offeree has timely elected to
increase its purchase commitment or (ii) on the fifth (5th) Business Day
following
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the expiration of the extension period if any Tendering Offeree has timely
elected to increase its purchase commitment. If, pursuant to this paragraph, (x)
any Tendering Offeree decreases its purchase commitment or (y) the Registering
Partner(s) are not obligated to sell any portion of their Registration
Interest(s) to any Tendering Offeree, the eighteen (18) month period described
in the last two sentences of Section 12.6(g) shall be extended to account for
the number of days elapsed between the last day of the applicable Registration
Offer Period and the end of the extension period.
(g) Registration. If the Registration Firm Offer(s) in the
------------
aggregate are for Registration Interest(s) that in the aggregate are equal to or
greater than the Minimum Offering Amount and are not accepted with respect to
all of the Registration Interest(s) in the manner provided in Section 12.6(e),
(i) the Partners will cause the Partnership to be converted to corporate form in
accordance with Section 5.9 no later than the effective date of the registration
contemplated hereunder and will cause the Partnership and MajorCorp to register
the shares of MajorCorp Stock to be received by such Registering Partner in
exchange for its Registration Interest (other than any portion of such
Registration Interest purchased by the Registration Accepting Offerees pursuant
to Sections 12.6(e) and (f)) for sale under the 1933 Act (and any applicable
state securities laws) in accordance with the offering contemplated hereunder
and (ii) subject to such registration, the Registering Partner will sell such
shares to the public in a broadly disseminated firm commitment underwritten
offering subject to customary cutbacks on a pro rata basis. MajorCorp shall
select the managing underwriter for such offering subject to the approval of the
Registering Partner(s) which approval shall not be unreasonably withheld. To
effectuate such offers, MajorCorp and the Registering Partner(s) will enter into
an underwriting agreement with such managing underwriter on terms and conditions
customary for underwriting agreements in a firm commitment underwritten
secondary offering. If the first sentence of this Section 12.6(g) applies to any
Registration Firm Offer and for any reason the Partnership has not converted to
corporate form in accordance with Section 5.9 within eighteen (18) months from
the expiration of the Registration Offer Period, such Registering Partner's
right to Transfer its Registration Interest shall again be subject to the
restrictions set forth in this Section 12.6. If any shares of MajorCorp Stock
registered and offered pursuant to this Section 12.6(g) are not sold within
eighteen (18) months from the expiration of the Registration Offer Period, any
Transfer of such shares will be subject to the provisions of the stockholders'
agreement contemplated under Section 5.9(a).
(h) Restrictions on Notice. Subject to the provisions of Section
----------------------
12.6(a), no notice initiating the procedures contemplated by this Section 12.6
may be given by any Partner while the Partnership is undertaking to effect the
registration of MajorCorp Stock pursuant to the exercise by any Partner of its
rights under this Section 12.6 in a prior year or after a Liquidating Event has
occurred. No notice initiating the procedures contemplated by this Section 12.6
may be given by an Adverse Partner, and no Registering Partner shall be required
to offer any portion of its Interest to an Adverse Partner during the period
that the Partnership is pursuing any remedy specified in Section 11.1 with
respect to such Adverse Partner.
(i) Right of First Refusal/Tagalong Rights. The provisions of
--------------------------------------
Sections 12.4 and 12.5 shall not apply to the purchase and sale of a
Registration Interest pursuant to this Section 12.6.
12.7 Right of First Offer.
--------------------
If the Partnership is converted to corporate form pursuant to Section
12.6(g), the
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stockholders' agreement contemplated under Section 5.9(a) shall incorporate the
provisions of this Section 12.7, mutatis mutandis. Any Partner (a "Selling
------- --------
Partner") that proposes to sell its shares of MajorCorp Stock (i) in accordance
with Rule 144 under the 1933 Act or Rule 145 under the 1933 Act (in accordance
with the applicable provisions of Rule 144) (or any successor to either of such
Rules), in a transaction that satisfies the manner of sale requirements of Rule
144 or Rule 145 (whether or not applicable to such sale) (a "Rule 144 Sale"), or
(ii) in a broadly disseminated Public Offering pursuant to a registration
statement filed under the 1933 Act (a "Registered Offering"), must first comply
with the requirements of this Section 12.7.
(a) Open Market Sales. Prior to any sale or disposition by a Selling
-----------------
Partner of any of its shares of MajorCorp Stock in a Rule 144 Sale, such Selling
Partner shall give notice (a "Rule 144 Notice") to the Board of Directors of
MajorCorp and each other Partner (excluding any Partner that was an Exclusive
Limited Partner at the time the Partnership converted to corporate form, the
"Non-Selling Partners") of the number of shares of MajorCorp Stock proposed to
be sold and the intended manner of disposition. The Rule 144 Notice shall
constitute an irrevocable offer (a "Rule 144 Offer") by such Selling Partner to
the Non-Selling Partners to sell the number of shares of MajorCorp Stock so
proposed to be sold at a price equal to the Market Value of such shares
determined as provided in Section 12.7(g).
(b) Registered Offerings. If, pursuant to the registration rights
--------------------
agreement contemplated under Section 5.9(b) or otherwise, a Selling Partner
intends to sell any of its shares of MajorCorp Stock in a Registered Offering,
such Selling Partner shall first give notice to each Non-Selling Partner (the
"Secondary Registration Notice"). The Secondary Registration Notice shall (i)
specify the number of shares of MajorCorp Stock proposed to be so registered,
(ii) identify the Public Appraiser selected by such Selling Partner to make the
determination of the Minimum Secondary Offering Amount, which Public Appraiser
shall be reasonably acceptable to MajorCorp, (iii) set forth the Public
Appraiser's determination of the Minimum Secondary Offering Amount (or state
that such Selling Partner has elected to waive the Minimum Secondary Offering
Amount limitations set forth in the following sentence and in Sections 12.7(d)
and 12.7(e)), and (iv) set forth the intended method of distribution. The
shares of MajorCorp Stock so specified in the Secondary Registration Notice
shall not be less than the Minimum Secondary Offering Amount (if any) specified
in such Secondary Registration Notice. The Secondary Registration Notice shall
constitute an irrevocable offer (a "Registration Offer") by such Selling Partner
to each Non-Selling Partner to sell such number of shares of MajorCorp Stock so
proposed to be registered at a price equal to the Market Value of such shares
determined in accordance with Section 12.7(g). "Minimum Secondary Offering
Amount" means the number of shares of MajorCorp Stock that the Public Appraiser
selected by the Selling Partner determines would be necessary to effect a viable
secondary public offering of the MajorCorp Stock considering all relevant
factors, including the intended method of distribution set forth in the
Secondary Registration Notice. Two or more Selling Partner(s) may jointly give a
Secondary Registration Notice.
(c) First Offer Period. A Rule 144 Offer or a Registration Offer, as
------------------
applicable, shall be irrevocable for a period (the "First Offer Period")
commencing on the date of delivery by the Selling Partner of the applicable
notice to the Non-Selling Partners and ending at 11:59 p.m., local time at
MajorCorp's principal place of business, (i) with respect to a Rule 144 Offer,
on the fifth (5th)
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full Trading Day following the date of the Rule 144 Notice, and (ii) with
respect to a Registration Offer, on the twentieth (20th) full Trading Day
following the date of the Secondary Registration Notice.
(d) Acceptance of Offers. At any time during the applicable First
--------------------
Offer Period, any Non-Selling Partner may accept a Rule 144 Offer or
Registration Offer, as applicable, as to all or any portion of the shares of
MajorCorp Stock covered by such Rule 144 Offer or Registration Offer, as
applicable, by giving notice of such acceptance to the applicable Selling
Partner and each other Non-Selling Partner, which notice shall indicate the
maximum number of shares of MajorCorp Stock that such Non-Selling Partner is
willing to purchase (the "purchase commitment") and, with respect to a
Registration Offer in which the aggregate Market Value of the shares of
MajorCorp Stock proposed to be registered exceeds $150,000,000, if applicable,
identify the Public Appraiser selected by such Non-Selling Partner to determine
the interest rate of the Accepting Partner Note. If the aggregate purchase
commitments made by Non-Selling Partners accepting a Rule 144 Offer or
Registration Offer, as applicable ("Accepting Partners"), exceed the number of
shares of MajorCorp Stock covered by such Rule 144 Offer or Registration Offer,
as applicable, then each Accepting Partner shall purchase, and the Selling
Partner shall sell to such Accepting Partner, that portion of the number of
shares of MajorCorp Stock covered by such Rule 144 Offer or Registration Offer,
as applicable, that corresponds to the ratio of the Percentage Interest of such
Accepting Partner to the aggregate Percentage Interests of all Accepting
Partners; provided that if any Accepting Partner's purchase commitment was
--------
for an amount less than its proportionate share of the number of shares of
MajorCorp Stock as so determined, then the number of shares of MajorCorp Stock
not so committed to be purchased shall continue to be allocated proportionally
in the manner provided above in this sentence among the other Accepting Partners
until each has been allocated, by such process of apportionment, a number of
shares of MajorCorp Stock equal to the maximum number of shares such Accepting
Partner committed to purchase or until all of the shares of MajorCorp Stock
covered by such Rule 144 Offer or Registration Offer, as applicable, have been
allocated among the Accepting Partners. Notwithstanding any purported acceptance
of a Registration Offer, the Registration Offer shall be deemed to be rejected
by all such Accepting Partners in their entirety if the portion not accepted is
in the aggregate greater than zero but less than the Minimum Secondary Offering
Amount; provided that such Registration Offer will be deemed accepted if, within
--------
ten (10) days after the expiration of the First Offer Period, the Accepting
Partners increase or decrease their purchase commitments, by giving notice to
the Board of Directors of MajorCorp and each other Partner amending their
respective purchase commitments to the extent required to effect any such
increase or decrease, as applicable, such that the amount accepted for purchase
by the Accepting Partners constitutes all of the shares of MajorCorp Stock
covered by such Registration Offer or the amount not accepted equals or exceeds
the Minimum Secondary Offering Amount.
(e) Closing of Purchase Pursuant to First Offer. If the Rule 144
-------------------------------------------
Offer or Registration Offer, as applicable has been accepted in whole or in part
in accordance with the terms of Section 12.7(d), the Selling Partner shall give
notice to such effect (the "First Offer Sale Notice") to all Non-Selling
Partners within five (5) days after the end of the applicable First Offer
Period. Unless the Accepting Partners and the Selling Partner otherwise agree,
the closing of any purchase pursuant to this Section 12.7 shall be held at the
principal office of MajorCorp at 10:00 a.m. (local time at the place of closing)
on the first Business Day on or after (x) with respect to a Rule 144 Offer, the
fifth (5th) Business Day following the date on which the First Offer Sale Notice
is given, and (y) with respect to a Registration Offer, the thirtieth (30th) day
following the date on which the First
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Offer Sale Notice is given. At the closing, each Accepting Partner shall (i)
with respect to a Rule 144 Offer, pay to the Selling Partner an amount in cash
or other immediately available funds equal to that portion of the purchase price
for the shares of MajorCorp Stock of the Selling Partner for which such
Accepting Partner is liable, and (ii) with respect to a Registration Offer, (A)
if the aggregate Market Value of the shares of MajorCorp Stock covered by the
applicable Registration Offer exceeds $150,000,000, (1) pay to the Selling
Partner an amount in cash or other immediately available funds equal to at least
one-third of that portion of the purchase price for the shares of MajorCorp
Stock of the Selling Partner for which such Accepting Partner is liable and (2)
issue to the Selling Partner a promissory note (an "Accepting Partner Note") of
such Non-Selling Partner or its Controlled Affiliate in a principal amount equal
to the remaining portion of the purchase price for the shares of MajorCorp Stock
of the Selling Partner for which such Accepting Partner is liable, or (B) if the
aggregate Market Value of the shares of MajorCorp Stock covered by the
applicable Registration Offer is equal to or less than $150,000,000, pay to the
Selling Partner an amount in cash or other immediately available funds equal to
that portion of the purchase price for the shares of MajorCorp Stock of the
Selling Partner for which such Accepting Partner is liable, and the Selling
Partner shall deliver to each Accepting Partner good title, free and clear of
any liens, claims, encumbrances, security interests or options (other than
those created by any stockholders' agreement contemplated under Section 5.9(a))
to the shares of MajorCorp Stock thus purchased. The principal amount of each
Accepting Partner Note shall be payable in two equal annual installments
beginning on the first anniversary of the closing date under this Section
12.7(e), and shall bear interest, payable quarterly, in arrears at the rate
specified below from the closing date until the principal amount thereof and all
accrued interest thereon is paid in full. The Accepting Partner Note will
contain customary terms, conditions and remedies, including an increased rate of
interest payable after a default in the payment of principal and/or interest.
The interest rate on the Accepting Partner Note shall be determined in
connection with the closing and shall be the average of the interest rates
determined independently by the Public Appraiser selected by the Selling Partner
and the Public Appraiser selected by the applicable Accepting Partner as the
rate that would be necessary to cause publicly traded securities with terms,
conditions and remedies comparable to the Accepting Partner Note to trade at
face value on a fully distributed basis. Each Accepting Partner shall be liable
to the Selling Partner only for its allocable portion of the purchase price for
the shares of MajorCorp Stock purchased hereunder. The provisions of the
stockholders' agreement contemplated under Section 5.9(a) will incorporate
provisions comparable to this Section 12.7 and additional appropriate provisions
that will address the Partners' relative rights and obligations in the event the
circumstances described in Section 11.5 prevent the Accepting Partners from
purchasing any shares of MajorCorp Stock offered by a Selling Partner hereunder
within the time periods specified in this Section 12.7(e).
At the closing, the Partners and MajorCorp 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 shares of
MajorCorp Stock of the Selling Partner to the Accepting Partners. Each Partner
and MajorCorp shall bear its own costs of such Transfer and closing, including
attorneys' fees and filing fees.
In the event that any Accepting Partner shall fail to perform its
obligation to purchase hereunder on the scheduled closing date and any other
Accepting Partner(s) were prepared to perform their respective obligations at
the closing on such date (each a "Tendering Partner"), then
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the Tendering Partners shall be entitled to elect by notice given to the Board
of Directors of MajorCorp, the Selling Partner(s) and each other Tendering
Partner within ten (10) days after the originally scheduled closing date (the
"extension period") to increase or decrease their purchase commitments such that
the amount accepted for purchase by the Tendering Partners constitutes all of
the shares of MajorCorp Stock offered or the amount not accepted equals or
exceeds the applicable Minimum Secondary Offering Amount, and the closing of the
purchase of the shares of MajorCorp Stock shall be delayed until the date
determined in accordance with the following sentence; provided, however, that
-------- -------
the Selling Partner(s) will not be obligated to sell any portion of their shares
of MajorCorp Stock if the amount of the shares of MajorCorp Stock not accepted
for purchase after giving effect to such elections is greater than zero but less
than the applicable Minimum Secondary Offering Amount. If, after giving effect
to all elections timely made in accordance with the preceding sentence, the
Selling Partner(s) would be required to sell all or any portion of their shares
of MajorCorp Stock, then the closing of the purchase of such shares of MajorCorp
Stock shall be held (i) on the first Business Day following the expiration of
the extension period if no Tendering Partner has timely elected to increase its
purchase commitment or (ii) on the fifth (5th) Business Day following the
expiration of the extension period if any Tendering Partner has timely elected
to increase its purchase commitment.
(f) Sale if First Offer Rejected. Any shares of MajorCorp Stock not
----------------------------
purchased in the manner provided in this Section 12.7 (including any shares that
are not purchased because of the failure of the Accepting Partners to close any
purchase in accordance with Section 12.7(e)), but subject to the last sentence
of this Section 12.7(f), may be sold during the period described below (the
"Permitted Period") in the manner described in the Rule 144 Notice or pursuant
to the intended method of distribution set forth in the Secondary Registration
Notice, as applicable. Except as otherwise provided in the following sentence,
the Permitted Period shall be the applicable of (i) with respect to shares of
MajorCorp Stock covered by a Rule 144 Notice, twenty (20) full Trading Days
after the last day of the applicable First Offer Period, or (ii) with respect to
shares of MajorCorp Stock covered by a Secondary Registration Notice, one
hundred eighty (180) days after the last day of the applicable First Offer
Period (in each case commencing on the first day following the applicable First
Offer Period), provided that such 180-day period may be extended for an
--------
additional period of up to ninety (90) days if at the end of such 180-day period
the Selling Partner has caused a registration statement to be filed by MajorCorp
with the Securities and Exchange Commission relating to such Registered Offering
and is actively pursuing the consummation of such Registered Offering in good
faith. Notwithstanding the foregoing, if, pursuant to the third paragraph of
Section 12.7(e), (x) any Tendering Partner decreases its purchase commitment or
(y) the Selling Partner is not obligated to sell any portion of its shares of
MajorCorp Stock to any Tendering Partner, the Permitted Period shall be extended
to account for the number of days elapsed between the last day of the applicable
First Offer Period and the end of the extension period under Section 12.7(e).
Any such shares of MajorCorp Stock not sold within the applicable Permitted
Period shall again be subject to the restrictions set forth in this Section
12.7.
(g) Market Value. The "Market Value" of any shares of MajorCorp
------------
Stock purchased pursuant to this Section 12.7 shall be (i) with respect to
shares of MajorCorp Stock offered pursuant to a Rule 144 Offer, an amount equal
to the product of (A) the number of shares of MajorCorp Stock offered times (B)
-----
the average of the last reported sales prices, regular way, for the five (5)
full Trading Days preceding the date of the Rule 144 Notice as reported on the
principal national securities exchange on which MajorCorp Stock is listed or
admitted for trading or, if
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MajorCorp Stock is not listed or admitted for trading on any national securities
exchange, on the Nasdaq National Market or (ii) with respect to shares of
MajorCorp Stock offered pursuant to a Registration Offer, the product of (A) the
number of shares of MajorCorp Stock offered times (B) the average of the last
-----
reported sales prices, regular way, for the twenty (20) full Trading Days
preceding the date of the Secondary Registration Notice as reported on the
principal national securities exchange on which MajorCorp Stock is listed or
admitted for trading or, if MajorCorp Stock is not listed or admitted for
trading on any national securities exchange, on the Nasdaq National Market.
12.8 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 Partnership Board, in its sole
discretion, 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.
12.9 Representations Regarding Transfers.
-----------------------------------
Each Partner hereby represents and warrants to the Partnership and the
other Partners 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.
12.10 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 Partnership Board. 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 Partnership Board 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 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 Partnership Board
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shall incur any liability for making allocations and distributions in accordance
with the provisions of this Section 12.10, whether or not the Partnership Board
or the Partnership has knowledge of any Transfer of ownership of any Interest.
SECTION 13. CONVERSION OF INTERESTS
13.1 Termination of Status as General Partner.
----------------------------------------
(a) 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 Unanimous Vote of the Partnership Board
to approve a request by such General Partner to withdraw, (iii) any Adverse Act
with respect to such Partner, (iv) such Partner's failure to satisfy the Minimum
Ownership Requirement or (v) in the case of Comcast only, the occurrence of any
of the events described in Section 6.4(f) that cause Comcast to become an
Exclusive Limited Partner. In the event a Person ceases to be a General Partner
pursuant to clauses (ii), (iii), (iv) or (v), 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.
(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.
13.2 Restoration of Status as General Partner.
----------------------------------------
An Exclusive Limited Partner whose rights to representation on the
Partnership Board have been restored as provided in Section 5.1(c) shall 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. If Comcast becomes an Exclusive Limited Partner
pursuant to Section 6.4(f), it shall not be entitled to be restored to the
status of General Partner except as expressly provided in such Section.
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) A Unanimous Vote of the Partnership Board to dissolve,
wind up, and liquidate the Partnership in accordance with Section 5.1;
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(iii) The failure of the General Partners to resolve a Deadlock
Event as provided in Section 5.8(a)(iii) unless the Partnership Board determines
by Required Majority Vote not to dissolve; 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 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)(iv), 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, or (y) if there is not at least one remaining General Partner,
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),
-------------
14.1(a)(iii) or 14.1(a)(iv) 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.
14.2 Winding Up.
----------
(a) 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 Partnership Board 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 Partnership
Board 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:
(i) First, to the payment of all of the Partnership's debts
and liabilities (other than Partner Loans) to creditors other than the Partners
and to the payment of the expenses of liquidation;
(ii) Second, 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:
(A) first, to the payment of all debts and liabilities
owed to any Partner other than in respect of Partner Loans;
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(B) 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
(C) 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
(iii) 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.
(b) In the discretion of the Partnership Board, a 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 Partners 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 Partnership Board 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 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 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 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
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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 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 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)(iv) occurs that would, but for provisions of Section 14.1, result in a
dissolution of the Partnership, the Partnership Board 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), 14.1(a)(iii) or, subject to the proviso contained
therein, Section 14.1(a)(iv), the Net Equity
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of the Interests shall be determined in accordance with Section 11.3 and notice
of such determination shall be delivered to each Partner. For purposes of such
determination of Net Equity pursuant to this Section 14.7(a), the General
Partner that (together with its Controlled Affiliates) holds the largest Voting
Percentage Interest shall designate the First Appraiser as required by Section
11.4 within thirty (30) days after an occurrence of the applicable Liquidating
Event, and the General Partner that (together with its Controlled Affiliates)
holds the smallest Voting Percentage Interest shall appoint the Second Appraiser
within ten (10) Business Days of receiving notice of the appointment of the
First Appraiser.
(b) Prior to 5:00 p.m. (local time at the principal office of the
Partnership) on the first Business Day on or after the thirtieth (30th) day
following its receipt of notice of the determination of Net Equity pursuant to
Section 14.7(a), each General Partner (individually or together with one or more
other General Partners) must submit sealed statements (the "Offer Statement") to
the Chief Executive Officer notifying the Chief Executive Officer in writing
either (i) that such General Partner or group of General Partners offers to sell
all of its Interest(s), or (ii) that such General Partner or group of General
Partners offers to buy all of the other Partners' Interests. Except as provided
in Section 14.7(g), each Exclusive Limited Partner shall be automatically deemed
to have offered to sell its Interest hereunder and shall for all purposes under
this Section 14.7 be treated as a General Partner that has offered to sell its
Interest. The Chief Executive Officer shall provide a copy of each Offer
Statement to each of the Partners within five (5) days following the last day
for submission of the Offer Statements.
(c) If the Offer Statements indicate that one General Partner or
group of General Partners wishes to buy and all of 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 Offer Statements 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.
(e) If the Offer Statements indicate that more than one General
Partner or group of General Partners wishes to purchase the other Partners'
Interests, then the General Partners or groups of General Partners wishing to
purchase (each General Partner or group of Partners, a "Bidding Partner") shall
begin the bidding process described below and the highest bidder (determined as
the amount bid per each one percent (1%) Percentage Interest in the Partnership)
shall buy all the other Partners' Interests. Each of the Bidding Partners may
make an initial offer (an "Initial Offer") to purchase the Interests of the
other Partners, which offer may not be less than the Net Equity of the Interests
to be purchased and shall be made within fifteen (15) days of the last day for
submission of the Offer Statements. If no Bidding Partner makes an Initial
Offer by 5:00 p.m. (local time at the principal office of the Partnership) on
the last day of 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 timely makes an Initial Offer, such offer shall
thereupon be the price at which all other Partners' Interests shall be sold to
such Bidding Partner. If more than one Bidding Partner timely makes an Initial
Offer, each such Bidding Partner must respond within fifteen (15) days of the
last day of the 15-day period for submitting such Initial Offers 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
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responded by accepting the highest immediate prior offer or failed to make a
timely response, in which case the highest im mediate prior offer shall be
deemed accepted. An acceptance of an offer shall, if the bidding process
thereafter continues, be deemed to be an acceptance of the highest succeeding
counteroffer. 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 at the principal office of the
Partnership (who shall promptly notify each other Partner of the identity of the
bidder and the amount of such bid); all offers must be responded to within
fifteen (15) days of the last day of the immediately preceding 15-day period for
submitting offers. If no response to an offer or counteroffer is received by
5:00 p.m. (local time at the principal office of the Partnership) on the last
day of such fifteen (15) day period, the highest immediate prior offer shall be
deemed to be accepted.
(f) The closing of the purchase and sale of each selling Partner's
Interest, MinorCo Interest and Partner 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
date of the final determination of the purchase price pursuant to Section
14.7(e) (subject to Section 11.5). At the closing, the purchasing Partner(s)
shall pay to each selling Partner, by cash or other immediately available funds,
the purchase price for such selling Partners' Interest, MinorCo Interest and
Partner Loans, and the selling Partner shall deliver to the purchasing
Partner(s) good title, free and clear of any liens, claims, encumbrances,
security interests or options (other than those created by this Agreement and
those securing financing obtained by the Partnership), to the selling Partner's
Interest, MinorCo Interest and Partner 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 Interests,
MinorCo Interests and Partner Loans of the selling Partner(s) to the purchasing
Partner(s) 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(s). 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).
(g) Solely for the purposes of this Section 14.7, Comcast will have
the same rights and obligations as a General Partner hereunder even if it has
become an Exclusive Limited Partner under Section 6.4(f) so long as Comcast
would not otherwise then be an Exclusive Limited Partner under Section 13.1(a).
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
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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 2.2;
(b) If to a Partner or its designated Representative(s), to the
address or number set forth in Schedule 2.2; and
(c) If to the Partnership Board, to the Partnership and to each
General Partner and its designated Representative(s).
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.
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
-114-
<PAGE>
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.
--------------------------
Every exhibit and other appendix (other than schedules) attached to this
Agreement and referred to herein is not incorporated in this Agreement by
reference unless this Agreement expressly otherwise provides.
15.8 Further Action.
--------------
Each Partner, upon the reasonable request of the Partnership Board,
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. Each Partner waives its right
to seek a court decree of dissolution (other than a dissolution in accordance
with Section 14) or to seek appointment of a court receiver for the Partnership
as now or hereafter permitted under applicable law. To the fullest extent
permitted by law, each Partner covenants that it will not (except with the
consent of the Partnership Board) file a bill for Partnership accounting.
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
Partnership Board may take and all determinations which the Partnership Board
may make pursuant to this Agreement may be taken and made at the sole and
absolute discretion of the Partnership Board.
15.13 Specific Performance.
--------------------
-115-
<PAGE>
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, 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 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
-116-
<PAGE>
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.
15.19 No Right of Set-Off.
-------------------
No Partner shall be entitled to offset against any of its financial
obligations to the Partnership under this Agreement, any obligation owed to it
or any of its Affiliates by any other Partner or any of such other Partner's
Affiliates.
-117-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Amended and
Restated Agreement of Limited Partnership of MajorCo, L.P. as of the date first
above set forth.
SPRINT SPECTRUM, L.P.
By: US Telecom, Inc.,
Its General Partner
By: /s/ Don A. Jensen
--------------------------------------
Title: Vice President
-----------------------------------
TCI NETWORK SERVICES
By: TCI Network, Inc.,
Its General Partner
By: /s/ Gerald W. Gaines
--------------------------------------
Title:
-----------------------------------
COMCAST TELEPHONY SERVICES
By: Comcast Telephony Services, Inc.,
Its General Partner
By: /s/ Arthur R. Block
--------------------------------------
Title: Vice President
-----------------------------------
THIS IS A SIGNATURE PAGE TO THE AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF MAJORCO, L.P.
-118-
<PAGE>
COX TELEPHONY PARTNERSHIP
By: Cox Communications Wireless, Inc.,
Its Managing General Partner
By: /s/ David M. Woodrow
-----------------------------------
Title: Vice President
--------------------------------
THIS IS A SIGNATURE PAGE TO THE AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF MAJORCO, L.P.
-119-
<PAGE>
Schedule 1.10(a)
- - ----------------
WIRELESS EXCLUSIVE SERVICES; NON-EXCLUSIVE
SERVICES; EXCLUDED BUSINESSES
----------------------------------
The scope of the Partnership will be Wireless Exclusive Services, which,
except as contemplated or permitted by Section 6 of the Partnership Agreement,
the Partners and their respective Controlled Affiliates will engage in solely
through the Partnership and its Subsidiaries, and Non-Exclusive Services, in
which both the Partnership and its Subsidiaries and the Partners and their
respective Controlled Affiliates may engage. All references to the Partnership
in this Schedule 1.10(a) shall include the Partnership and its Subsidiaries.
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, to the extent such services relate to or are provided
in connection with Wireless Exclusive Services, are also within the scope of the
Partnership's business but are not subject to the provisions of Section 6.1 of
the Partnership Agreement. Consequently the Partners and their respective
Controlled Affiliates are permitted to provide such services outside of the
Partnership:
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
<PAGE>
only and TDD relay. The Partners may (by Unanimous Vote of the
Management Committee) revise such list of server-based content
services from time to time to 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 Management
Committee, 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
-------------------
Notwithstanding anything contained in Section I or II above, each of the
following (each an "Excluded Business") shall be excluded from the scope of the
Partnership's business and the Partnership shall not engage in any of the
Excluded Businesses without a Unanimous Partner Vote:
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 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
-2-
<PAGE>
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 ar 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.
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
-3-
<PAGE>
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.
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.
-4-
<PAGE>
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>
Schedule 1.10 (b)
- - -----------------
Sprint Cellular Service Area
----------------------------
See attached.
<PAGE>
[PAGE TO COME]
<PAGE>
[PAGE TO COME]
<PAGE>
[PAGE TO COME]
<PAGE>
SCHEDULE 2.1
INITIAL PERCENTAGE INTERESTS
----------------------------
INITIAL
PARTNER PERCENTAGE INTEREST
------- -------------------
Sprint 40%
TCI 30%
Comcast 15%
Cox 15%
<PAGE>
SCHEDULE 2.2
NOTICE ADDRESSES
----------------
SPRINT:
------
Sprint Spectrum, L.P.
2330 Shawnee Mission Parkway
Westwood, KS 66205
Telecopy No.: (913) 624-8426
Attn: Chief Financial Officer
with copies to:
Sprint Spectrum, L.P.
2330 Shawnee Mission Parkway
Westwood, KS 66205
Telecopy No.: (913) 624-2256
Attn: Corporate Secretary
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Telecopy No.: (404) 572-5100
Attn: Bruce N. Hawthorne
TCI:
---
TCI Network Services
5619 DTC Parkway
Englewood, CO 80111
Telecopy No.: (303) 488-3200
Attn: President
with copies to:
Baker & Botts, L.L.P.
885 Third Avenue
New York, NY 10022-4834
Telecopy No.: (212) 705-5125
Attn: Elizabeth Markowski, Esq.
<PAGE>
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111
Telecopy No.: (303) 488-3200
Attn: General Counsel
COMCAST:
-------
Comcast Telephony Services
1500 Market Street
Philadelphia, PA 19102-2148
Telecopy No.: (215) 981-7794
Attn: General Counsel
with copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopy No.: (212) 450-4800
Attn: Mr. Dennis S. Hersch
COX:
---
Cox Telephony Partnership
1400 Lake Hearn Drive
Atlanta, Georgia 30319-1464
Telecopy No.: (404) 843-5142
Attn: John R. Dillon
with copy to:
Dow, Lohnes & Albertson
Attn: Leonard J. Baxt
Prior to February 16, 1996:
--------------------------
1255 23rd Street, N.W.
Washington, DC 20037
Telecopy No.: (202) 857-2900
-2-
<PAGE>
After February 16, 1996:
-----------------------
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036
Telecopy No.: (202) 776-2222
PARTNERSHIP:
-----------
MajorCo, L.P.
4717 Grand
Kansas City, Missouri 64112
Telecopy No.: (816) 559-1290
Attn: Chief Executive Officer
with a copy to:
MajorCo, L.P.
4717 Grand
Kansas City, Missouri 64112
Telecopy No.: (816) 559-2281
Attn: General Counsel
-3-
<PAGE>
Schedule 5.1(i)
- - ---------------
Simple Majority Vote
--------------------
The following matters with respect to the Partnership require a Simple
Majority Vote:
A. the making of any Second Tranche Call that requests Additional Capital
Contributions that, when added to the amount of Additional Capital
Contributions previously requested of the Partners in such Fiscal
Year, does not exceed the budgeted Additional Capital Contributions
set forth in the Annual Budget for such Fiscal Year;
B. the conversion of a Second Tranche Call to a Premium Call, including
the determination of the Gross Appraised Value required to be made in
connection with the making of a Premium Call; and
C. the determination of Gross Appraised Value required to be made in
connection with an adjustment of Percentage Interests pursuant to
Section 2.4(d)(ii).
<PAGE>
Schedule 5.1(j)
- - ---------------
Required Majority Vote
----------------------
The following matters, and all other matters required by the Partnership Board
to be submitted to it, except as provided for in Schedule 5.1(i), Schedule
5.1(k) and Schedule 5.1(l) or as otherwise expressly provided in this Agreement,
require a Required Majority Vote:
A. The incurrence of any Debt by the Partnership or any Subsidiary of the
Partnership for loans (other than Default Loans) made by any Partner
or an Affiliate of a Partner, provided, that in any event all Partners
--------
(other than a Defaulting Partner or a Partner subject to Bankruptcy)
shall be given the opportunity to participate pro rata in accordance
with the respective Percentage Interests of the Partners in making
such loans;
B. the conversion by the Partnership or any Subsidiary of the Partnership
to non-partnership form, provided, that such Required Majority Vote
--------
must include the affirmative vote of any Partner that (or which is a
member of a consolidated group for federal income tax reporting
purposes that) is reasonably likely to suffer a material adverse
effect for federal income tax purposes in connection with the
conversion to non-partnership form (other than any material adverse
effect which is also reasonably likely to affect all Partners or their
respective consolidated groups on a similar pro rata basis);
C. the election or removal of the Chief Executive Officer and the other
senior management of the Partnership or any Subsidiary of the
Partnership, except as provided in Item H. of Schedule 5.1(k); the
compensation of the Chief Executive Officer and the other senior
management of the Partnership or any Subsidiary of the Partnership;
and the adoption or amendment of incentive compensation and benefit
plans for executive officers and employees;
D. subject to Item F. of Schedule 5.1(l), the declaration or payment of
any distribution by the Partnership on any Interest or by any non-
wholly owned Subsidiary on any partnership interest or other equity
interest of such Subsidiary;
E. the adoption of a Proposed Business Plan or Proposed Budget or of a
business plan or budget of any Subsidiary (or, in either case, of any
amendment thereto or material deviation therefrom) other than as
expressly provided in Item A. of Schedule 5.1(k);
F. the acquisition by the Partnership or any Subsidiary of the
Partnership of any assets (including stock or other equity interests)
in a transaction or series of transactions that have an aggregate
purchase price in excess of one percent (1%) of the book value of
<PAGE>
the consolidated assets of the Partnership or such Subsidiary, as the
case may be, as determined in accordance with GAAP (or such greater or
lesser amount (subject to Item O. of Schedule 5.1(k)) as may be
approved from time to time by the Partnership Board);
G. the disposition by the Partnership or any Subsidiary of the
Partnership of any assets (including stock or other equity interests)
in a transaction or series of transactions that have an aggregate
value in excess of one percent (1%) of the book value of the
consolidated assets of the Partnership or such Subsidiary, as the case
may be, as determined in accordance with GAAP (or such greater or
lesser amount (subject to Item P. of Schedule 5.1(k) as may be
approved from time to time by the Partnership Board);
H. 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 (other than Debt to the
Partners incurred with the approval of the Partnership Board pursuant
to Item E. of Schedule 5.1(l)), is in excess of $25,000,000 (or such
greater or lesser amount as may be approved from time to time by the
Partnership Board) by Required Majority Vote);
I. the selection of, and changes in, the Accountants or the selection of
any accountants for a Subsidiary of the Partnership (other than the
Accountants);
J. the institution or settlement by the Partnership or any Subsidiary of
the Partnership of any legal action or other proceeding before any
court or other governmental or administrative authority which is
reasonably likely to have a material adverse effect on a Partner or
any Affiliate of such Partner (other than as a result of the
diminution of the value of the Interest of such Partner where such
diminution affects all Partners and their respective Affiliates
proportionately), provided, that such Required Majority Vote shall
--------
include the affirmative vote of any Partner so affected; and
K. the adoption of all budgets, plans and procedures by the Partnership
regarding the planning, design and development activities of the
Partnership with respect to the architecture and design of all
systems, platforms, networks and products pursuant to Section 8.12.
-2-
<PAGE>
Schedule 5.1(k)
- - ---------------
Unanimous Vote of the Partnership Board
---------------------------------------
The following matters, in addition to any other matters expressly required by
the Agreement, require a Unanimous Vote of the Partnership Board:
A. any amendment or revision to the Planned Capital Amount;
B. the approval or modification of any amendments, modifications or
supplements to this Schedule 5.1(k);
C. the admission of new Partners or other equity holders in the
Partnership or any Subsidiary of the Partnership, other than pursuant
to Transfers expressly permitted by Section 12 of this Agreement;
D. the taking of any action that would result in a Voluntary Bankruptcy
of the Partnership or any Subsidiary of the Partnership;
E. the removal of the initial Chief Executive Officer within one year of
his appointment;
F. the approval of any transaction involving the Partnership or any
Subsidiary of the Partnership which would have the effect of the
Partnership's becoming a BOC or the Partnership's or any Partner's
becoming a BOC Affiliated Enterprise or an entity subject to any
restrictions under Section II of the MFJ;
G. the approval or implementation of any material changes in the
operations, scope or direction of the business of the Partnership or
any Subsidiary of the Partnership (including any disposition of
material assets) that is implemented for the primary purpose of
avoiding the Partnership's becoming a BOC, a BOC Affiliated Enterprise
or an entity subject to any restrictions under Section II of the MFJ
in connection with any proposed, pending or completed transaction
involving the Partnership or any Subsidiary of the Partnership, a
Partner or any entity that is related to a Partner;
H. except as permitted under Section 2.6, the commingling of funds of the
Partnership with those of any other Person;
I. subject to Schedule 5.1(l), the taking of any action that would make
it impossible for the Partnership or any Subsidiary of the Partnership
to carry on its ordinary business or that is in contravention of this
Agreement or that would constitute a breach of or default under any
senior credit agreement of the Partnership or any Subsidiary of the
Partnership;
<PAGE>
J. the incurrence of any indebtedness for borrowed money that is recourse
to any or all of the Partners and their Affiliates;
K. except as specifically provided for by this Agreement, the
satisfaction by any Partner of its obligations to make Capital
Contributions with property other than cash;
L. any direct or indirect purchase or other acquisition, or any direct or
indirect sale, by the Partnership or any Subsidiary of the Partnership
of any Interest or of any partnership interest or other equity
interest of a Subsidiary of the Partnership;
M. 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 (i) one or more wholly owned
Subsidiaries of the Partnership or (ii) any other Subsidiary of the
Partnership in which the Partnership and MinorCo own, in the
aggregate, directly or indirectly, one hundred percent (100%) of the
outstanding equity interests;
N. the approval of a nonjudicial dissolution by the Partnership or any
Subsidiary of the Partnership and, subject to the provisions of this
Agreement, decisions with respect to the winding up by the Partnership
or any Subsidiary of the Partnership including the making of
liquidating distributions on any Interest;
O. the acquisition of any assets by the Partnership or any Subsidiary of
the Partnership (including stock or other equity interests) in a
transaction or series of transactions that have an aggregate purchase
price in excess of twenty percent (20%) of the book value of the
consolidated assets of the Partnership or such Subsidiary, as the case
may be, as determined in accordance with GAAP;
P. the disposition of any assets by the Partnership or any Subsidiary of
the Partnership (including stock or other equity interests) in a
transaction or series of transactions that have an aggregate value in
excess of twenty percent (20%) of the book value of the consolidated
assets of the Partnership or such Subsidiary, as the case may be, as
determined in accordance with GAAP;
Q. any decision or action permitted to be taken by the Partnership Board
pursuant to the last paragraph of the definition of Capital Account in
Section 1.10;
R. the contribution by any Partner of additional cash or other Property
to the Partnership other than as expressly contemplated under the
Agreement and the approval of the terms of any contribution agreement
pursuant to which a Partner makes such an Additional Capital
Contribution;
-2-
<PAGE>
S. the making of Partner Loans other than pro rata in accordance with the
respective Percentage Interests of the Partners, unless a Partner
declines to make such a loan or is a Defaulting Partner or a Partner
subject to Bankruptcy;
T. the granting of permission to a Partner to present an Offer to the
Partnership (or, except for Competitive Activities relating to an
Offer previously rejected by the Partnership, otherwise engage in any
Competitive Activity in reliance upon Section 6.1(c)) in any license
area (or portion thereof) in which the Partnership or any of its
Subsidiaries is offering, promoting or branding Wireless Exclusive
Services (or in which the Partnership or any of its Subsidiaries plans
to offer, promote or brand Wireless Exclusive Services pursuant to or
as set forth in the Initial Business Plan or Approved Business Plan
then in effect, as applicable, or pursuant to any Wireless Business
license acquired by the Partnership or an Affiliation Agreement
entered into with the holder of a Wireless Business license subsequent
to the approval of such Initial Business Plan or Approved Business
Plan, as applicable), including pursuant to an Affiliation Agreement;
U. the adoption of procedures (including conflict avoidance procedures)
relating to the provision by the Partnership of rights of first
opportunity to Partners or their Affiliates to provide services to the
Partnership and its Subsidiaries pursuant to Section 8.4;
V. any decision to treat an Adverse Act specified in clause (i) of the
definition of such term in Section 1.10 as having been cured in full
by the applicable Adverse Partner;
W. except in the case of a Transfer of a Partner's entire Interest made
in compliance with the Agreement, the withdrawal from the Partnership
of any Partner; and
X. the approval of a request by a General Partner to withdraw as a
General Partner.
-3-
<PAGE>
Schedule 5.1(l)
- - ---------------
Unanimous Partner Vote
----------------------
The following matters, in addition to any other matters expressly required by
the Agreement, require a Unanimous Partner Vote:
A. any amendment to or material deviation from the Initial Business Plan
during the Fiscal Year ending December 31, 1996;
B. the engagement by the Partnership or any Subsidiary of the Partnership
in any Excluded Business or any other business outside the scope of
the Partnership's business as set forth in Section 1.3 of this
Agreement;
C. except with respect to the items listed on Schedules 5.1(j) and
5.1(k), the approval of any amendments, modifications or supplements
to this Agreement, including this Schedule 5.1(l);
D. the loan or advancement by the Partnership or any Subsidiary of the
Partnership of funds to, or the guarantee of any obligations of, a
Partner or any Affiliate thereof;
E. the incurrence of any Debt for loans (other than Default Loans) made
by any Partner or Affiliate of a Partner other than in accordance with
Section 2.7 of this Agreement;
F. the making of any non-pro rata cash or any in-kind distributions to a
Partner in respect of its Interest, other than in accordance with this
Agreement;
G. the approval of any amendment, modification or supplement of, or
deviation from, the procedures to be followed for the winding up of
the Partnership's affairs, it being understood that the determination
to dissolve the Partnership only requires a Unanimous Vote of the
Partnership Board; and
H. the engagement by the Partnership and its Subsidiaries in any
Competitive Activities in the Philadelphia, Charlotte, Cleveland, El
Paso, Jacksonville, Knoxville, Omaha or Richmond MTAs, including
bidding for or acquiring any PCS licenses therein, provided that the
--------
Partnership and its Subsidiaries may engage in Competitive Activities
in any MTA (other than Philadelphia) listed in this Item H. from and
after the time that Sprint and its Controlled Affiliates have divested
of their ownership interests in any of the Sprint Cellular Businesses
in such MTA.
<PAGE>
Schedule 5.7
- - ------------
TEMPORARY INVESTMENTS GUIDELINES
--------------------------------
A. CREDIT QUALITY
Investments may be made in the following sectors with the following
credit rating restrictions:
1. OBLIGATIONS OF THE UNITED STATES GOVERNMENT, ITS AGENCIES, OR
SPONSORED ENTERPRISES, AND/OR OBLIGATIONS GUARANTEED BY THE SAME.
No Limitations.
2. CORPORATIONS
Debt Obligations issued by United States Corporations or United
States domiciled Foreign Owned Corporations must have a long term rating
of A or better by two of the four following rating agencies: Standard &
Poor's, Moody's Investors Services, Fitch Investor Services or Duff &
Phelps ("Rating Agencies").
Commercial Paper investments are restricted to issues rated one
(1) by at least two of the four Rating Agencies. Commercial paper
investments in issues rated two (2) by at least two of these Rating
Agencies cannot exceed 10% of the investment portfolio.
3. UNITED STATES AND FOREIGN BANKS
Domestic Banking Institutions must have a rating of at least A as
rated by two of the four Rating Agencies.
Foreign Bank securities are restricted to issuers that have a
Thompson Bankwatch rating of B/C or higher and a country rating of I/II
or higher.
In order to promote minority-owned institutions, investments in
minority-owned banks that do not meet the preceding criteria are
permitted to the extent that such investments are fully insured by the
FDIC.
B. PORTFOLIO AVERAGE MATURITY AND SECURITIES MATURITY
Investments will have an average maturity of 90 days or less with
a maximum of one year or less for any single issue.
<PAGE>
For purposes of these Investment Guidelines, maturity shall be defined
as either the stated maturity, pre-refunded call date, auction date, or put
date. The calculated average maturity will be determined by prepayment
speeds at time of purchase for asset-backed securities. The maximum average
maturity for asset-backed and mortgage-backed securities must be less than
three years at the time of purchase. The legal final maturity will not
exceed four years at time of purchase.
C. ISSUER
Except as noted below, all investments must be in securities
denominated in U.S. dollars or Eurodollars. Eurodollar deposits are defined
as non-negotiable, full liability U.S. dollar-denominated deposits in an
offshore branch of a U.S. or foreign bank. To offset foreign currency
liability exposure, up to the equivalent of $10 million may be invested in
a foreign currency or currencies where the Partnership has existing
exposures.
Investments in obligations of offshore branches of United States or
Foreign Banks shall be limited to said Banks' London, Cayman Islands, and
Nassau branches.
D. SECURITIES
As noted above, the Partnership's investment portfolios are subject to
the restrictions set forth in the following table:
-2-
<PAGE>
INVESTMENT PORTFOLIO RESTRICTIONS
---------------------------------
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
SECURITY RESTRICTIONS ALLOCATION MATURITY
- - -------- ------------ ---------- --------
<S> <C> <C> <C>
United States
Treasury
Obligations No Limitations No Limitation 1 Year
United States
Federal Agency
and Sponsored
Enterprises $50 Million
Issues No Limitations per Agency 1 Year
Commercial Maximum 10% of the $25 Million 270 days
Paper Portfolio (Measured on per issue;
the Date of Investment) $50 Million
shall be Invested in the per issuer
Securities of One or More
Issuers Conducting their
Principal Business Activity
in the Same Industry. Bank,
Finance, and Securities
Firms are Excluded from
this Restriction
Certificates of
Deposit Same 365 days
Bankers
Acceptances Same 270 days
Repurchase 101% Collateralized 10% per Issuer 30 Days
Agreements (Including Accrued
Interest) with United States
Treasury or Agency Issues
which Meet the Standards
Listed Above and have a
3-year or less maturity;
Only executed with Primary
Dealers Listed by the New
York Federal Reserve Bank,
Rated Al/P1 or Better, and
Qualified Under Current
Approved Dealer List for
Repurchase Agreements;
Master Repurchase Agreement
must be on File Prior to
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
SECURITY RESTRICTIONS ALLOCATION MATURITY
- - -------- ------------ ---------- --------
<S> <C> <C> <C>
Executing any Transaction;
Collateral must be Book Entry
Wireable and Deliverable to
Custodian
Pooled At Least 80% of the Net 10% per Fund Daily
Instruments Asset Value of the Fund is Family
(Such as Money Invested in Securities that
Market Mutual by their Terms would be
Funds) Permitted Investments Under
these Investments Guidelines
</TABLE>
-4-
<PAGE>
EXHIBIT 3.6
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO SUB, L.P.,
A DELAWARE LIMITED PARTNERSHIP
dated as of March 28, 1995
among
MAJORCO, L.P.
and
MINORCO, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. THE PARTNERSHIP....................................................... 1
1.1 Formation............................................................. 1
1.2 Name.................................................................. 1
1.3 Purpose............................................................... 1
1.4 Principal Executive Office............................................ 1
1.5 Term.................................................................. 2
1.6 Filings; Agent for Service of Process................................. 2
1.7 Title to Property..................................................... 2
1.8 Payments of Individual Obligations.................................... 2
1.9 Independent Activities................................................ 2
1.10 Definitions........................................................... 3
1.11 Terms Generally....................................................... 9
SECTION 2. PARTNERS' CAPITAL CONTRIBUTIONS....................................... 9
2.1 Partners' Original Capital Contributions.............................. 9
2.2 Additional Capital Contributions...................................... 9
2.3 Partnership Funds.................................................... 10
2.4 Partnership Borrowings............................................... 10
2.5 Other Matters........................................................ 10
SECTION 3. ALLOCATIONS.......................................................... 10
3.1 Profits.............................................................. 10
3.2 Losses............................................................... 11
3.3 Special Allocations.................................................. 11
3.4 Curative Allocations................................................. 13
3.5 Loss Limitation...................................................... 13
3.6 Other Allocation Rules............................................... 13
3.7 Tax Allocations: Code Section 704(c)................................ 13
SECTION 4. DISTRIBUTIONS........................................................ 14
4.1 Available Cash....................................................... 14
4.2 Amounts Withheld..................................................... 14
SECTION 5. MANAGEMENT........................................................... 14
5.1 Authority of the General Partner..................................... 14
5.2 Delegation........................................................... 14
5.3 Employees............................................................ 15
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C>
5.4 Liability of Partners and Partnership Employees...................... 15
5.5 Indemnification...................................................... 15
5.6 Temporary Investments................................................ 16
SECTION 6. ACCOUNTING, BOOKS AND RECORDS........................................ 16
6.1 Accounting, Books and Records........................................ 16
6.2 Reports.............................................................. 17
6.3 Tax Returns and Information.......................................... 17
SECTION 7. TRANSFERS OF INTERESTS............................................... 17
7.1 Restriction on Transfers............................................. 17
7.2 Prohibited Dispositions.............................................. 17
SECTION 8. DISSOLUTION AND WINDING UP........................................... 17
8.1 Liquidating Events................................................... 17
8.2 Winding Up........................................................... 18
8.3 Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts.......................................... 19
8.4 Deemed Distribution and Recontribution............................... 19
8.5 Rights of Partners................................................... 19
SECTION 9. MISCELLANEOUS........................................................ 20
9.1 Notices.............................................................. 20
9.2 Binding Effect....................................................... 20
9.3 Construction......................................................... 20
9.4 Time................................................................. 20
9.5 Table of Contents; Headings.......................................... 20
9.6 Severability......................................................... 21
9.7 Incorporation by Reference........................................... 21
9.8 Further Action....................................................... 21
9.9 Governing Law........................................................ 21
9.10 Waiver of Action for Partition; No Bill For Partnership Accounting... 21
9.11 Counterpart Execution................................................ 21
9.12 Sole and Absolute Discretion......................................... 21
9.13 Specific Performance................................................. 22
9.14 Entire Agreement..................................................... 22
9.15 Limitation on Rights of Others....................................... 22
9.16 Waivers; Remedies.................................................... 22
9.17 Jurisdiction; Consent to Service of Process.......................... 22
9.18 Waiver of Jury Trial................................................. 23
9.19 No Right of Set-Off.................................................. 23
9.20 Amendment............................................................ 23
</TABLE>
- ii -
<PAGE>
SCHEDULES
Schedule 2.1 Original Capital Contributions; Notice Addresses
- iii -
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO SUB, L.P.,
A DELAWARE LIMITED PARTNERSHIP
------------------------------
This AGREEMENT OF LIMITED PARTNERSHIP is entered into as of the 28th day of
March, 1995, by and among MajorCo, L.P., a Delaware limited partnership
("MajorCo"), as the General Partner, and MinorCo, L.P., a Delaware limited
partnership ("MinorCo"), as the Limited Partner, pursuant to the provisions of
the Delaware Revised Uniform Limited Partnership Act, on the following terms and
conditions:
SECTION 1. THE PARTNERSHIP
1.1 Formation.
---------
The Partners hereby form 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 be MajorCo Sub, L.P., and all business of
the Partnership shall be conducted in such name or, in the discretion of the
General Partner, under any other names (but excluding a name that includes the
name of a partner of MajorCo unless such partner has consented thereto).
1.3 Purpose.
-------
(a) Subject to, and upon the terms and conditions of this Agreement,
the purposes of the Partnership shall be (i) to engage, through one or more
Subsidiaries, in the provision of Wireless Exclusive Services and Non-Exclusive
Services, (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 Partnership shall not
engage in any other business without the prior written consent of all of the
Partners.
(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 as may be necessary or appropriate to carry out its purposes
and conduct its business.
1.4 Principal Executive Office.
--------------------------
1
<PAGE>
The principal executive office of the Partnership shall be located in such
place as determined by the General Partner, and the General 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 General Partner may establish 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 commence on the date the certificate of
limited partnership described in Section 17-201 of the Act (the "Certificate")
is filed in the office of the Secretary of State of Delaware in accordance with
the Act and shall continue until the winding up and liquidation of the
Partnership and its business is completed following a Liquidating Event, as
provided in Section 8.
1.6 Filings; Agent for Service of Process.
-------------------------------------
(a) Promptly following the execution of this Agreement, the General
Partner shall cause the Certificate to be filed in the office of the Secretary
of State of Delaware in accordance with the Act. 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 amendments to the Certificate to be filed
whenever required by the Act. The Partners shall be provided with copies 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 as 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
General 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 in its individual name or
right 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.
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
2
<PAGE>
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:
"Accountants" shall have the meaning given such term in the MajorCo
Agreement.
"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.
"Adjusted Capital Account Deficit" means, with respect to the Limited
Partner, the deficit balance, if any, in the 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 the
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.
- -
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.
"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" or "Partnership Agreement" means this Agreement of Limited
Partnership, including all Schedules hereto, as amended from time to time.
"Allocation 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) 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.
"Available Cash" means as of any date the cash of the Partnership as
of such date less such portion thereof as the General Partner determines to
reserve for Partnership expenses, capital contributions to WirelessCo, debt
payments, capital improvements, replacements, and contingencies.
3
<PAGE>
"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.
(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 any Nonrecourse Liabilities of such Partner that 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
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 General 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 General 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 8 upon the dissolution and winding up of the Partnership.
The General 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).
"Capital Contribution" means, with respect to any Partner, the amount
of money and the Gross Asset Value at the time of contribution of any Property
(other than money) contributed or deemed to be contributed to the Partnership
with respect to the Interest held by such Partner. 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).
- -
4
<PAGE>
"Certificate" has the meaning set forth in Section 1.5.
"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 adjusted tax basis; provided
--------
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 General 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 General
Partner in connection with any financing obtained on behalf of the Partnership.
"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 8.2.
"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 preamble to 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. "General Partners"
means all such Persons.
"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 agreement of the Partners; provided that the Gross Asset
--------
Value of the Property contributed by the Partners as their Original Capital
Contributions pursuant to Section 2.1 shall be the value of such Property as set
forth in Schedule 2.1;
(ii) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their gross fair market value, as determined by the General
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; and (C) the liquidation of the
Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
5
<PAGE>
(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 other
Partner; and
(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 that an adjustment pursuant to subparagraph (ii)
hereof is made 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 (i), (ii) or (iv) hereof, 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.
"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.
"Limited Partner" means any Person (i) who is referred to as such in
the preamble to this Agreement or who has become a 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.
"Liquidating Event" has the meaning set forth in Section 8.1.
"MajorCo Agreement" means the Agreement of Limited Partnership of
MajorCo, L.P., of even date herewith.
"Non-Exclusive Services" has the meaning set forth in Schedule 1.10(b)
to the MajorCo Agreement.
"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 to be made by such Partner pursuant to Section 2.1. 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.
"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.
6
<PAGE>
"Partner Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partners" means all General Partners and all Limited Partners.
"Partner" means any one of the Partners.
"Partnership" means the partnership formed pursuant to this Agreement
and the partnership continuing the business of this Partnership in the event of
dissolution as herein provided.
"Partnership Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interest" means, with respect to any Partner as of any
relevant date, the ratio (expressed as a percentage) of the sum of such
Partner's Capital Contributions as of such date to the sum of the aggregate
Capital Contributions of all Partners as of such date. Such Capital
Contributions will be determined after giving effect to all Capital
Contributions made prior to and on the date as of which the determination of
Percentage Interests is made. In the event all or any portion of an Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Percentage Interest of the transferor to the extent it relates to
the Transferred Interest.
"Permitted Transfer" has the meaning set forth in Section 7.1.
"Person" means any individual, partnership, corporation, trust, or
other entity.
"Preferred Return" means, with respect to the Limited Partner as of
any date of determination, an amount equal to nine percent (9%) per annum,
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, cumulative to the extent not distributed for any given calendar
quarter pursuant to Section 4.1 hereof, of the Limited Partner's Original
Capital Contribution.
"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;
7
<PAGE>
(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 1.704-1(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.
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code.
"Regulatory Allocations" has the meaning set forth in Section 3.4.
"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.
"Tax Matters Partner" has the meaning set forth in Section 6.3.
"Transfer" means, as a noun, any sale, exchange assignment or transfer
and, as a verb, to sell, exchange, assign or transfer.
8
<PAGE>
"WirelessCo" means WirelessCo, L.P., the Delaware limited partnership
formed pursuant to that certain Agreement of Limited Partnership dated as of
October 24, 1994, as amended and restated as of the date hereof to cause
WirelessCo to become a Subsidiary of the Partnership.
"Wireless Exclusive Services" has the meaning set forth in Schedule
1.10(b) to the MajorCo Agreement.
1.11 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) in its entirety and not to any part hereof unless the
context shall otherwise require. All references herein to Articles, Sections and
Schedules shall be deemed references to Articles and Sections of, 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.
SECTION 2. PARTNERS' CAPITAL CONTRIBUTIONS
2.1 Partners' Original Capital Contributions.
----------------------------------------
The Partners shall make their respective Original Capital Contributions as
follows: (i) Simultaneously with the execution and delivery of this Agreement,
MajorCo shall contribute its entire interest in WirelessCo to the Partnership as
its Original Capital Contribution, which interest has a value equal to the
Agreed Value (as such term is defined in the MajorCo Agreement) of the aggregate
original capital contributions made to MajorCo as described in Section 2.2 of
the MajorCo Agreement and (ii) not later than ten (10) Business Days following
the execution and delivery of this Agreement, MinorCo shall make its Original
Capital Contribution in cash by wire transfer of immediately available funds to
the Partnership's bank account. The name, address and the Gross Asset Value of
the Original Capital Contribution of each of the Partners is as set forth in
Schedule 2.1.
2.2 Additional Capital Contributions.
--------------------------------
The General Partner shall make such additional Capital Contributions of
cash and Property to the Partnership as it deems necessary; provided that the
--------
General Partner shall not be entitled to make additional Capital Contributions
of Property (other than cash) to the Partnership without the prior written
consent of the Limited Partner. The Limited Partner may not make any additional
Capital Contributions without the prior written consent of the General Partner.
9
<PAGE>
2.3 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 General Partner.
Without the prior written consent of all of the Partners, Partnership funds
shall not be commingled with those of any Person other than MajorCo, any
Subsidiary of MajorCo in which MajorCo and MinorCo own, in the aggregate,
directly or indirectly, one hundred percent (100%) of the outstanding equity
interests and any wholly owned Subsidiary of the Partnership. 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 of the Partners.
2.4 Partnership Borrowings.
----------------------
In order to satisfy the Partnership's financial needs, the Partnership may,
if so approved by the General Partner, borrow from 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. The Partnership may borrow from its Partners on commercially reasonable
terms.
2.5 Other Matters.
-------------
(a) No Partner shall have the right to demand or, except as otherwise
provided in Sections 4.1 and 8.2, 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) The Limited Partner shall not be liable for the debts,
liabilities, contracts or any other obligations of the Partnership. Except as
otherwise provided by any other agreements among the Partners or mandatory
provisions of applicable state law, the Limited Partner shall not be required to
lend any funds to the Partnership or to make any Capital Contributions other
than its Original Capital Contribution to the Partnership.
(c) No Partner shall have any personal liability for the repayment of
any Capital Contributions of any other Partner.
(d) No Partner shall be entitled to receive interest on its Capital
Contributions or Capital Account except as otherwise specifically provided in
this Agreement.
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 General Partner in an amount equal to the excess, if
any, of (i) the cumulative Losses allocated to the General Partner pursuant to
Section 3.5 for all prior Allocation Years, over (ii) the cumulative Profits
allocated to the General Partner pursuant to this Section 3.1(a) for all prior
Allocation Years;
(b) Second, to the General Partner in an amount equal to the excess,
if any, of (i) the cumulative Losses allocated to the General Partner pursuant
to Section 3.2(c) for all prior
10
<PAGE>
Allocation Years, over (ii) the cumulative Profits allocated to the General
Partner pursuant to this Section 3.1(b) for all prior Allocation Years;
(c) Third, to the Limited Partner in an amount equal to the excess, if
any, of (i) the cumulative Losses allocated to the Limited Partner pursuant to
Section 3.2(b) for all prior Allocation Years, over (ii) the cumulative Profits
allocated to the Limited Partner pursuant to this Section 3.1(c) for all prior
Allocation Years;
(d) Fourth, to the General Partner in an amount equal to the excess,
if any, of (i) the cumulative Losses allocated to the General Partner pursuant
to Section 3.2(a) for all prior Allocation Years, over (ii) the cumulative
Profits allocated to the General Partner pursuant to this Section 3.1(d) for all
prior Allocation Years;
(e) Fifth, to the Limited Partner in an amount equal to the excess, if
any, of (i) the cumulative Preferred Return through the last day of such
Allocation Year over (ii) the cumulative Profits allocated to the Limited
Partner pursuant to this Section 3.1(e) for all prior Allocation Years; and
(f) The balance, if any, to the General Partner.
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, one hundred percent (100%) to the General Partner until its
Capital Account is equal to zero;
(b) Second, one hundred percent (100%) to the Limited Partner until
its Capital Account is equal to zero; and
(c) The balance, if any, one hundred percent (100%) to the General
Partner.
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 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.
11
<PAGE>
(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 the 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 the Limited Partner in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of the 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 the 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 the Limited Partner has a
-----------------------
deficit Capital Account at the end of any Allocation Year which is in excess of
the amount the 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, the 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 the Limited Partner would have a deficit Capital
Account in excess of such amount 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.
(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.
- -
12
<PAGE>
3.4 Curative Allocations.
--------------------
The allocations set forth in Sections 3.3 and 3.5 (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 General
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 and
3.2. In exercising its discretion under this Section 3.4, the General Partner
shall take into account future Regulatory Allocations 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) the 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 to the General Partner.
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 a Required
Majority Vote of the General 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 General 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 the 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
13
<PAGE>
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).
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 General 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.
--------------
Except as otherwise provided in Section 8.2, on the last Business Day of
every calendar quarter (or more frequently as determined by the General
Partner), the General Partner shall cause Available Cash, if any, to be
distributed in the following amounts, order and priority:
(a) First, one hundred percent (100%) to the Limited Partner in an
amount equal to the excess, if any, of (i) the cumulative Preferred Return
through the Business Day immediately preceding the date on which such
distribution is made, over (ii) all prior distributions to the Limited Partner
pursuant to this Section 4.1(a); and
(b) Second, one hundred percent (100%) to the General Partner.
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 General Partner 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 General Partner.
--------------------------------
The General Partner shall conduct the business and affairs of the
Partnership, and all powers of the Partnership, except those specifically
reserved to the Limited Partner by the Act or this Agreement, are hereby granted
to and vested in the General Partner.
5.2 Delegation.
----------
14
<PAGE>
The General 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.
5.3 Employees.
---------
The General Partner will appoint the senior management of the Partnership
and will establish policies and guidelines for the hiring of employees. The
General Partner may adopt appropriate management incentive plans and employee
benefit plans.
5.4 Liability of Partners and Partnership Employees.
-----------------------------------------------
No Partner or former Partner, no Affiliate of any thereof, no partner,
shareholder, director, officer, employee or agent of any of the foregoing, nor
any officer or employee of the Partnership, 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 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 this Agreement or an agreement between
such Person and the Partnership or a Subsidiary thereof. Subject to Section 5.5,
each Partner and former Partner, each Affiliate of any thereof, each partner,
shareholder, director, officer, employee and agent of any of the foregoing, and
each officer and employee of the Partnership, 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
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 this Agreement or an agreement between such
Person and the Partnership or any of its Subsidiaries. Any indemnity by the
Partnership, its receiver or trustee under this Section 5.4 shall be provided
out of and to the extent of Partnership Property only.
5.5 Indemnification.
---------------
Any Person asserting a right to indemnification under Section 5.4 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
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
15
<PAGE>
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 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 Person or could
entail a risk of criminal liability to the indemnified Person, without the
consent of 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 (which shall not be unreasonably
withheld), unless the indemnifying Person 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 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) 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.
Nothing contained in this Section 5.4 is intended to authorize the indemnifying
Person, 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
Person, any action which 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 to
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 defense controlled by the indemnifying
Person and shall provide such information with respect thereto as such
indemnified Person may reasonably request. If the defense is controlled by the
indemnified Person, such indemnified Person, upon the request of the
indemnifying Person, shall use reasonable efforts to keep the indemnifying
Person reasonably apprised of the status of those aspects of such defense
controlled by such indemnified Person and shall provide such information with
respect thereto as the indemnifying Person may reasonably request.
5.6 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 wholly owned Subsidiary of the Partnership, maintained in such financial
institutions as the General Partner shall determine, or shall be invested in
accordance with the guidelines set forth in Schedule 5.7 to the MajorCo
Agreement, or shall be left in escrow, and withdrawals shall be made only for
Partnership purposes on such signature or signatures as the General Partner may
determine from time to time.
SECTION 6. ACCOUNTING, BOOKS AND RECORDS
6.1 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
16
<PAGE>
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.
6.2 Reports.
-------
The General Partner shall arrange for the preparation of financial reports
of the Partnership and the coordination of financial matters of the Partnership
with the Accountants. Without limiting the generality of the foregoing, the
General Partner shall cause to be prepared and distributed to the Partners such
financial reports of the Partnership as are necessary to allow the chief
financial officer of the General Partner to comply with the provisions of
Section 11 of the MajorCo Agreement.
6.3 Tax Returns and Information.
---------------------------
MajorCo 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) for any taxable year of the Partnership during
which MajorCo was a General Partner for any portion thereof. The General Partner
shall comply with the provisions of Section 11.3 of the MajorCo Agreement as
such provisions relate to the tax matters partner of Subsidiaries of MajorCo.
SECTION 7. TRANSFERS OF INTERESTS
7.1 Restriction on Transfers.
------------------------
No Partner shall Dispose of all or any portion of its Interest without the
prior written consent of all of the Partners (a "Permitted Transfer").
7.2 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 General Partner, in its sole discretion,
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.
SECTION 8. DISSOLUTION AND WINDING UP
8.1 Liquidating Events.
------------------
17
<PAGE>
The Partnership shall dissolve and commence winding up and liquidating upon
the first to occur of any of the following ("Liquidating Events"):
(a) The sale of all or substantially all of the Property;
(b) The sale by WirelessCo of all or substantially all of its property
and the distribution to the Partnership of the proceeds of such sale to which
the Partnership is entitled;
(c) The written consent of all of the Partners to dissolve, wind up,
and liquidate the Partnership;
(d) 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 8.1.
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 8.1(d), 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) at the time of such event there are
at least two (2) Partners and, 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.
8.2 Winding Up.
----------
(a) 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 no 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 8.2 and the Certificate has been cancelled
in accordance with the Act. The General 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:
(i) First, to the payment of all of the Partnership's debts
and liabilities to creditors other than the Partners and to the payment of the
expenses of liquidation;
(ii) Second, to the payment of all of the Partnership's debts
and liabilities to the Partners; and
(iii) 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.
(b) In the discretion of the General Partner, a pro rata portion of
the distributions that would otherwise be made to the Partners pursuant to this
Section 8.2 may be:
18
<PAGE>
(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 Partners 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 General 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 this Section 8.2; 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 agrees that by accepting the provisions of this Section 8.2 setting
forth the priority of the distribution of the assets of the Partnership to be
made upon its liquidation, such Partner expressly waives any right which it, as
a creditor of the Partnership, might otherwise have under the Act to receive
distributions of 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.
8.3 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 8 to the Partners who have positive Capital Accounts in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (b) if a
- -
General 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 General 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).
- -
8.4 Deemed Distribution and Recontribution.
--------------------------------------
Notwithstanding any other provision of this Section 8, 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 the General Partner's Capital Account has a deficit
balance that it would be required to restore pursuant to Section 8.3 (after
giving effect to all contributions, distributions, and allocations for all
Fiscal Years, including the Fiscal Year during which such liquidation occurs),
the General 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 to the Partnership,
which shall be deemed to have assumed and taken subject to all such liabilities.
8.5 Rights of Partners.
------------------
19
<PAGE>
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 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.
SECTION 9. MISCELLANEOUS
9.1 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 General Partner at the address or
number set forth in Schedule 2.1; and
(b) If to a Partner, to the address or number set forth in Schedule
2.1.
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.
9.2 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.
9.3 Construction.
------------
This Agreement shall be construed simply according to its fair meaning and
not strictly for or against any Partner.
9.4 Time.
----
Time is of the essence with respect to this Agreement.
9.5 Table of Contents; Headings.
---------------------------
20
<PAGE>
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.
9.6 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.
9.7 Incorporation by Reference.
--------------------------
Every exhibit and other appendix (other than schedules) attached to this
Agreement and referred to herein is not incorporated in this Agreement by
reference unless this Agreement expressly otherwise provides.
9.8 Further Action.
--------------
Each Partner, upon the reasonable request of the General 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.
9.9 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.
9.10 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. Each Partner waives its right to
seek a court decree of dissolution (other than a dissolution in accordance with
Section 8) or to seek appointment of a court receiver for the Partnership as now
or hereafter permitted under applicable law. To the fullest extent permitted by
law, each Partner covenants that it will not file a bill for Partnership
accounting.
9.11 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.
9.12 Sole and Absolute Discretion.
----------------------------
21
<PAGE>
Except as otherwise provided in this Agreement, all actions which the
General Partner may take and all determinations which the General Partner may
make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of the General Partner.
9.13 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.
9.14 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, oral or written, and other communications between the
Partners relating to the subject matter hereof.
9.15 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.
9.16 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 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.
9.17 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
22
<PAGE>
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.
9.18 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.
9.19 No Right of Set-Off.
-------------------
No Partner shall be entitled to offset against any of its financial
obligations to the Partnership under this Agreement, any obligation owed to it
or any of its Affiliates by any other Partner or any of such other Partner's
Affiliates.
9.20 Amendment.
---------
This Agreement may be modified or amended only by a written amendment
signed by all of the Partners.
[SIGNATURES FOLLOW ON A SEPARATE PAGE]
23
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement of
Limited Partnership of MajorCo Sub, L.P. as of the date first above set forth.
MAJORCO, L.P.,
General Partner
By: Sprint Spectrum, L.P., a General Partner
By: /s/ Don A. Jensen
_________________________________________
Title: Vice President
_______________________________________
MINORCO, L.P.,
Limited Partner
By: Sprint Spectrum, L.P.,
a General Partner
By: /s/ Don A. Jensen
_________________________________________
Title: Vice President
_________________________________________
24
<PAGE>
SCHEDULE 2.1
------------
ORIGINAL CAPITAL CONTRIBUTIONS; NOTICE ADDRESSES
------------------------------------------------
Original
Partner Capital Contribution
- - ------- --------------------
MajorCo, L.P. A 98.9824095% partnership
9221 Ward Parkway interest in WirelessCo,
Suite 100 with an initial Gross Asset
Kansas City, Missouri 64114 Value of $486,356,764.00
Telecopy: 913-624-6897
MinorCo, L.P. $5,000,000.00
9221 Ward Parkway
Suite 100
Kansas City, Missouri 64114
Telecopy: 913-624-6897
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Registrant
Sprint Spectrum Holding Company, L.P.
1. Sprint Spectrum L.P.
2. NewTelCo, L.P.
Sprint Spectrum L.P.
1. Wireless Co, L.P.
2. Sprint Spectrum Equipment Company, L.P.
3. Sprint Spectrum Realty Company, L.P.
4. Sprint Spectrum Finance Corporation
Sprint Spectrum Finance Corporation
None
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Sprint Spectrum Holding
Company, L.P. on Form S-1 of our report dated March 29, 1996, (which report
expresses a unqualified opinion and includes an explanatory paragraph referring
to the development stage of 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.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
June 20, 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.
PRICE WATERHOUSE LLP
Washington, DC
June 20, 1996
