UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1997
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------------- -----------------------
333-06609-01
Commission file number 333-06609-02
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SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 48-1165245
DELAWARE 43-1746537
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
4900 Main Street, Kansas City, Missouri, 64112
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(816) 559-1000
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of May 1, 1997, Sprint Spectrum Finance Corporation had Common Stock
outstanding of 100 shares.
<PAGE>
SPRINT SPECTRUM L.P.
SPRINT SPECTRUM FINANCE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
Page
Number
----------
Part I - Financial Information...................................... 1 - 11
Item 1a. Financial Statements - Sprint Spectrum L.P........... 1 - 3
Consolidated Condensed Balance Sheets...................... 1
Consolidated Condensed Statements of Operations............ 2
Consolidated Condensed Statements of Cash Flows............ 3
Notes to Consolidated Condensed Financial Statements....... 4 - 7
Item 1b. Financial Statements - Sprint Spectrum Finance
Corporation................................................ 8 - 10
Condensed Balance Sheets................................... 8
Condensed Statements of Operations......................... 9
Condensed Statements of Cash Flows......................... 10
Notes to Condensed Financial Statements.................... 11
Item 2a. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Sprint Spectrum L.P.. 12 - 16
Item 2b. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Sprint Spectrum
Finance Corporation........................................ 17
Part II - Other Information
Item 1. Legal Proceedings..................................... 18
Item 2. Changes in Securities................................. 18
Item 3. Defaults On Senior Securities......................... 18
Item 4. Submission of Matters to a Vote of Security Holders... 18
Item 5. Other Information..................................... 18
Item 6. Exhibits and Reports on Form 8-K...................... 18 - 19
Signature............................................ 20 - 21
Exhibits
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<TABLE>
<CAPTION>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
March 31, December 31,
1997 1996
------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents......................................... $ 70,317 $ 49,988
Accounts receivable, net.......................................... 7,183 3,310
Receivable from affiliates........................................ 6,810 14,021
Inventory......................................................... 129,627 72,414
Prepaid expenses and other assets................................. 23,263 14,260
----------------- ---------------
Total current assets............................................ 237,200 153,993
INVESTMENT IN PCS LICENSES, net...................................... 2,122,867 2,122,908
PROPERTY, PLANT AND EQUIPMENT, net................................... 2,062,711 1,408,680
MICROWAVE RELOCATION COSTS, net...................................... 176,715 135,802
OTHER ASSETS, net.................................................... 87,672 77,383
----------------- ---------------
TOTAL ASSETS......................................................... $ 4,687,165 $ 3,898,766
================= ===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.................................................. $ 138,032 $ 196,146
Payable to affiliates............................................. 4,204 5,626
Accrued expenses.................................................. 84,419 59,200
Current maturities of long-term debt.............................. 5,051 5,049
----------------- ---------------
Total current liabilities....................................... 231,706 266,021
LONG-TERM COMPENSATION OBLIGATION.................................... 15,786 11,356
CONSTRUCTION OBLIGATIONS............................................. 1,077,903 714,934
LONG-TERM DEBT....................................................... 1,324,162 686,192
COMMITMENTS AND CONTINGENCIES
LIMITED PARTNER INTEREST IN CONSOLIDATED
SUBSIDIARY........................................................ 5,000 5,000
PARTNERS' CAPITAL AND ACCUMULATED DEFICIT:
Partners' capital................................................. 2,773,793 2,767,564
Deficit accumulated during the development stage.................. (741,185) (552,301)
----------------- ---------------
Total partners' capital......................................... 2,032,608 2,215,263
----------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL.............................. $ 4,687,165 $ 3,898,766
================= ===============
See notes to condensed consolidated financial statements
1
</TABLE>
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<TABLE>
<CAPTION>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands)
Cumulative
Period from
October 24,
1994 (date of
inception) to
Three Months Ended March 31, March 31,
1997 1996 1997
- ---------------------------------------------------------- -------------- -------------- -----------------
OPERATING REVENUES:
<S> <C> <C> <C>
Service.............................................. $ 783 $ - $ 816
Equipment............................................ 8,684 - 12,826
-------------- -------------- -----------------
Total operating revenues......................... 9,467 - 13,642
OPERATING EXPENSES:
Cost of service...................................... 22,405 5 44,333
Cost of equipment.................................... 26,409 - 40,557
Selling.............................................. 12,639 63 51,129
General and administrative........................... 104,446 30,656 446,256
Depreciation and amortization........................ 34,382 254 45,906
-------------- -------------- -----------------
Total operating expenses......................... 200,281 30,978 628,181
LOSS FROM OPERATIONS........................... (190,814) (30,978) (614,539)
OTHER INCOME (EXPENSE):
Interest income.................................... 902 - 9,523
Interest expense................................... (94) (358) (643)
Other income ...................................... 1,122 143 2,964
Equity in loss of unconsolidated partnership - (36,232) (138,490)
-------------- -------------- ----------------
Total other income (expense)..................... 1,930 (36,447) (126,646)
-------------- -------------- -----------------
NET LOSS....................................... $ (188,884) $ (67,425) $ (741,185)
============== ============== =================
See notes to condensed consolidated financial statements
2
</TABLE>
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<TABLE>
<CAPTION>
Part I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Cumulative
Period from
October 24,
Three Months Ended 1994 (date of
March 31, inception) to
----------------------------- March 31,
1997 1996 1997
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (188,884) $ (67,425) $ (741,185)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Equity in loss of unconsolidated partnership......... - 36,232 138,490
Depreciation and amortization....................... 34,382 254 45,906
Amortization of debt discount and issuance costs..... 10,959 - 24,967
Loss on disposal of non-network equipment............ - - 31
Changes in assets and liabilities:
Receivables....................................... 3,338 (1,289) (13,993)
Inventory......................................... (57,213) - (129,627)
Prepaid expenses and other assets................. (1,482) (38) (23,278)
Accounts payable and accrued expenses............. (30,317) 47,453 230,655
Long-term compensation obligation................. 4,430 2,391 15,786
------------ ------------- ---------------
Net cash provided by (used in) operating activities....... (224,787) 17,578 (452,248)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (335,908) (44,486) (1,051,971)
Microwave relocation costs................................ (28,179) - (151,533)
Purchase of PCS licenses.................................. - - (2,124,594)
Investment in unconsolidated partnership.................. - - (131,752)
Loan to unconsolidated partnership........................ - (83,000) (172,655)
------------ ------------- ---------------
Net cash used in investing activities..................... (364,087) (127,486) (3,632,505)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt and vendor financing......... 629,214 - 1,303,415
Payments on long-term debt................................ (11) - (35)
Debt issuance costs....................................... (20,000) - (91,791)
Limited partner interest in consolidated subsidiary....... - - 5,000
Borrowings from affiliates................................ - - 5,000
Partner capital contributions............................. - 111,904 2,966,315
Dividends paid............................................ - - (32,834)
------------ ------------- ---------------
Net cash provided by financing activities................. 609,203 111,904 4,155,070
------------ ------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS..................... 20,329 1,996 70,317
CASH AND CASH EQUIVALENTS, Beginning of period............ 49,988 1,123 -
------------ ------------- ---------------
CASH AND CASH EQUIVALENTS, End of period.................. $ 70,317 $ 3,119 $ 70,317
============ ============= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of amount capitalized.................... $ 25 $ - $ 348
NON-CASH INVESTING ACTIVITIES:
- - A PCS license covering the Omaha MTA and valued at $6,229 was contributed
to the Company by Cox Communications during the three months ended
March 31, 1997
- - Capital expenditures and microwave relocation costs of
$364,087 and $1,203,504 for the three months and cumulative
period ended March 31, 1997 are net of construction obligations
of $362,969 and $1,077,903, respectively, to be financed
See notes to condensed consolidated financial statements
3
</TABLE>
<PAGE>
PART I.
Item 1a.
SPRINT SPECTRUM L.P.
(A Development Stage Enterprise)
Notes to Consolidated Condensed Financial Statements (Unaudited)
The information contained in this Form 10-Q for the three-month interim periods
ended March 31, 1997 and 1996 and the cumulative period from October 24, 1994
(date of inception) to March 31, 1997 has been prepared in accordance with
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of
management, all adjustments considered necessary, consisting only of normal
recurring accruals, to present fairly the consolidated financial position,
results of operations, and cash flows for such interim periods have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The results of operations for the
three months ended March 31, 1997 are not necessarily indicative of the
operating results that may be expected for the year ended December 31, 1997.
1. Organization
Sprint Spectrum L.P. (the "Company") is a limited partnership formed in Delaware
on March 28, 1995, by Sprint Spectrum Holding Company, L.P. ("Holdings") and
MinorCo, L.P. ("MinorCo") both of which were formed by Sprint Enterprises, L.P.,
TCI Spectrum Holdings, Inc. (formerly known as TCI Telephony Services, Inc., as
successor to TCI Network Services), Cox Telephony Partnership and Comcast
Telephony Services (together the "Partners"). The Company was formed pursuant to
a reorganization of the operations of an existing partnership, WirelessCo, L.P.
("WirelessCo") which transferred certain operating functions to Holdings. The
Partners are subsidiaries of Sprint Corporation ("Sprint"), Tele-Communications,
Inc. ("TCI"), Comcast Corporation ("Comcast") and Cox Communications, Inc.
("Cox", and together with Sprint, TCI and Comcast, the "Parents"), respectively.
The Company and certain other affiliated partnerships offer services as Sprint
PCS.
The Partners of the Company have the following ownership interests as of March
31, 1997 and 1996:
Sprint Spectrum Holding Company, L.P. (general partner)....greater than 99%
MinorCo, L.P. (limited partner)................................less than 1%
The Company is consolidated with its subsidiaries, WirelessCo, L.P.
("WirelessCo"), Sprint Spectrum Equipment Company, L.P. ("EquipmentCo"), Sprint
Spectrum Realty Company, L.P. ("RealtyCo") and Sprint Spectrum Finance
Corporation ("FinCo"). WirelessCo was formed on October 24, 1994 to invest in
and hold the PCS licenses. On May 15, 1996, EquipmentCo and RealtyCo were
organized for the purpose of holding PCS network-related real estate interests
and assets. On May 20, 1996, FinCo, was also formed to be a co-obligor of the
senior notes and senior discount notes.
Development Stage Company - The Company and its subsidiaries are development
stage enterprises. The success of the Company's development is dependent on a
number of business factors, including securing financing to complete network
construction and fund initial operations, successfully deploying the PCS network
and attaining profitable levels of market demand for Company products and
services.
4
<PAGE>
2. Summary of Significant Accounting Policies
Basis of Presentation - Prior to July 1, 1996, substantially all wireless
operations of the Company and subsidiaries and Holdings and subsidiaries were
conducted at Holdings and substantially all operating assets and liabilities,
with the exception of the interest in an unconsolidated subsidiary and the
ownership interest in PCS licenses, were held at Holdings. As of July 1, 1996,
Holdings transferred these net assets, and assigned agreements related to the
wireless operations to which it was a party to Sprint Spectrum L.P., EquipmentCo
and RealtyCo (the "Reorganization").
For purposes of these consolidated condensed financial statements, these
transactions have been treated as transactions between entities under common
control and accounted for in a manner similar to a pooling of interest ("As
Reorganized"). The Company, as used in these financial statements, includes the
pooled operations of Holdings through June 30, 1996. Accordingly, for periods
prior to July 1, 1996, Sprint Spectrum L.P.'s historical financial statements
have been restated to reflect those operations of Holdings that were transferred
on July 1, 1996 on a pooled basis. Information as of June 30, 1996 with respect
to the financial position and results of operations of the separate operations
pooled herein is as follows (in thousands):
<TABLE>
<CAPTION>
Sprint
Spectrum L.P. Holdings Combined
<S> <C> <C> <C>
Total Assets................................ $ 2,268,805 $ 2,561,328 $ 2,561,328
Partners' Capital & Accumulated Deficit..... 2,258,426 2,469,529 2,472,384
Net Loss.................................... (81,278) (158,195) (158,195)
</TABLE>
Revenue Recognition - Operating revenues for PCS services are recognized as
service is rendered. Operating revenues for equipment sales are recognized at
the time the equipment is sold to a customer or an unaffiliated agent.
Accounts Receivable - Accounts receivable are net of an allowance for doubtful
accounts of approximately $1.2 million and $202,000 at March 31, 1997 and
December 31, 1996, respectively.
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 Company believes it has and will continue to meet all
requirements necessary to secure renewal of its PCS licenses. The Company 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. Accumulated amortization for PCS licenses and microwave
relocation costs totaled approximately $9.0 million and $1.7 million as of March
31, 1997 and December 31, 1996, respectively. Interest expense capitalized
pertaining to the acquisition of the PCS licenses has been included in Property,
plant and equipment.
5
<PAGE>
Capitalized Interest - Interest costs associated with the construction of
capital assets incurred during the period of construction are capitalized. The
total capitalized as of March 31, 1997 and December 31, 1996 was approximately
$64,709,000 and $30,461,000, respectively.
Major Customer - The Company markets its products through multiple distribution
channels, including Company-owned retail stores and third-party retail outlets.
Sales to one third-party retail customer exceeded 10% of Equipment revenue in
the consolidated condensed statement of operations for the three months ended
March 31, 1997.
Income Taxes - The Company has not provided for federal or state income taxes
since such taxes are the responsibility of the individual Partners.
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.
Paging Services - The Company has commenced paging services pursuant to
agreements with Paging Network Equipment Company ("PageNet") and Sprint
Communications Company, L.P. ("Sprint Communications"). For the three months
ended March 31, 1997 and 1996, Sprint Communications received agency fees of
approximately $3.3 million and $8,000, respectively.
Reclassifications - Certain reclassifications have been made to the 1996
financial statements to conform with the 1997 financial statement presentation.
3. Long-Term Debt and Borrowing Arrangements
The long-term debt of the Company as of March 31, 1997 and December 31, 1996 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------- -----------------
<S> <C> <C>
11% Senior Notes due in 2006 $ 250,000 $ 250,000
12 1/2% Senior Discount Notes due in 2006, net of
unamortized discount of $205,732 and $214,501 at
March 31, 1997 and December 31, 1996, respectively 294,268 285,499
Credit facility - term loans 300,000 150,000
Credit facility - revolving credit 200,000 -
Vendor financing 279,214 -
Note payable to affiliate due in 1997 5,000 5,000
Other 731 742
------------------- -----------------
Total debt 1,329,213 691,241
Less current maturities 5,051 5,049
------------------- -----------------
Long-term debt $ 1,324,162 $ 686,192
=================== =================
</TABLE>
6
<PAGE>
Bank Credit Facility - The Company entered into an agreement with The Chase
Manhattan Bank ("Chase") as agent for a group of lenders for a $2 billion bank
credit facility dated October 2, 1996. The proceeds of this facility are to be
used to finance working capital needs, subscriber acquisition costs, capital
expenditures and other general Company purposes.
The facility consists of a revolving credit commitment of $1.7 billion and a
$300 million term loan commitment. As of March 31, 1997, the term loans bear a
weighted average interest rate of 8.12%. The amount available under the total
revolving credit commitment will be increased upon the achievement of certain
financial and operating conditions as defined in the agreement. As of March 31,
1997, $200 million had been drawn at a weighted average interest rate of 8.22%
and $250 million remained available. Commitment fees for the revolving portion
of the agreement are payable quarterly based on average unused revolving
commitments. Subsequent to March 31, 1997, the Company borrowed an additional
$40 million under the revolving credit facility.
Vendor Financing - As of October 2, 1996, the Company entered into financing
agreements with Northern Telecom, Inc. ("Nortel") and Lucent Technologies, Inc.
("Lucent" and together with Nortel, the "Vendors") for multiple drawdown term
loan facilities totaling $1.3 billion and $1.8 billion, respectively. The
proceeds of such facilities are to be used to finance the purchase of goods and
services provided by the Vendors.
Nortel has committed to provide financing in two phases. During the first phase,
Nortel will finance up to $800 million. Under the second phase, Nortel will
finance up to an additional $500 million upon the achievement of certain
operating and financial conditions. As of March 31, 1997, $5 million had been
borrowed at an interest rate of 8.73% with $755 million remaining available
under the first phase. In addition, the Company paid $20 million in origination
fees upon the initial draw down under the first phase and will be obligated to
pay additional origination fees on the date of the initial draw down loan under
the second phase. Subsequent to March 31, 1997, the Company borrowed an
additional $90.9 million under the Nortel facility.
Lucent has committed to financing up to $1.5 billion through December 31, 1997,
and up to an aggregate of $1.8 billion thereafter. The Company pays a facility
fee on the daily amount of loans outstanding under the agreement, payable
quarterly. The Lucent agreement terminates June 30, 2001. As of March 31, 1997,
the Company had borrowed approximately $274 million under the Lucent facility at
a weighted average interest rate of 8.72%. Subsequent to March 31, 1997, the
Company borrowed an additional $32.7 million under the Lucent facility.
Certain amounts included under Construction Obligations on the consolidated
condensed balance sheets may be financed under the Vendor Financing agreements.
7
<PAGE>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED BALANCE SHEETS
March 31, December 31,
1997 1996
- --------------------------------------------------------------------------------
(Unaudited)
ASSETS
Receivable from parent $ 100 $ 100
----------- --------------
TOTAL ASSETS $ 100 $ 100
=========== ==============
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value;
1,000 shares authorized;
100 shares issued and outstanding $ 100 $ 100
----------- --------------
TOTAL STOCKHOLDER'S EQUITY $ 100 $ 100
=========== ==============
See notes to condensed financial statements
8
<PAGE>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Period from
May 21, 1996
Three Months (date of inception)
Ended to March 31,
March 31, 1997 1997
--------------- --------------------
Operating Revenues................... $ - $ -
Operating Expenses................... - -
-------------- --------------------
Net Loss............................. $ - $ -
============== ====================
See notes to condensed financial statements
9
<PAGE>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
From date
Three Months of inception
Ended to March 31,
March 31, 1997 1997
---------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net
cash used in operating activities:
Net income............................ $ - $ -
Changes in assets and liabilities:
Receivables........................ - (100)
---------------- -------------
Net cash used in operating activities - (100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................... - 100
---------------- -------------
Net cash provided by financing activities - 100
---------------- -------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS......................... - -
CASH AND CASH EQUIVALENTS, Beginning
of Period............................. - -
---------------- -------------
CASH AND CASH EQUIVALENTS, End of Period.... $ - $ -
================ =============
See notes to condensed financial statements
10
<PAGE>
Part I.
Item 1b.
SPRINT SPECTRUM FINANCE CORPORATION
(A wholly-owned subsidiary of Sprint Spectrum L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The information contained in this Form 10-Q for the three-month interim period
ended March 31, 1997 and the cumulative period from May 21, 1996 (date of
inception) to March 31, 1997 has been prepared in accordance with instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments considered necessary, consisting only of normal recurring accruals,
to present fairly the consolidated financial position, results of operations,
and cash flows for such interim periods have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The results of operations for the three months
ended March 31, 1997 are not necessarily indicative of the operating results
that may be expected for the year ended December 31, 1997.
1. ORGANIZATION
Sprint Spectrum Finance Corporation ("FinCo"), a Delaware corporation, was
formed on May 21, 1996 and is a wholly-owned subsidiary of Sprint Spectrum L.P.
(the "Partnership"). FinCo was formed to be a co-obligor of $250 million in
Senior Notes and $500 million in Senior Discount Notes.
The Partnership contributed $100 to FinCo on May 21, 1996 in exchange for 100
shares of common stock.
11
<PAGE>
PART I.
Item 2a.
SPRINT SPECTRUM L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with Sprint
Spectrum L.P.'s consolidated condensed financial statements and notes thereto.
The term "Company" refers to Sprint Spectrum L.P. and its direct and indirect
subsidiaries, including FinCo, WirelessCo, RealtyCo and EquipmentCo. As of July
1, 1996, Holdings transferred substantially all operating assets and liabilities
to the Company. The Sprint Spectrum financial information as presented includes
the pooled operations of Holdings through June 30, 1996.
The Company includes certain estimates, projections and other forward-looking
statements in its reports as well as in presentations to analysts and others and
in other material disseminated to the public. There can be no assurances of
future performance and actual results may differ materially from those in the
forward-looking statements. Factors which could cause actual results to differ
materially from estimates or projections contained in forward-looking statements
include:
- the effects of vigorous competition in the markets in which the
Company will operate;
- the cost of entering new markets necessary to provide services;
- the impact of any unusual items resulting from ongoing
evaluations of the Company's business strategies;
- the effects of unanticipated delays or problems with the development of
technologies and systems used by the Company;
- requirements imposed on the Company and its competitors by the Federal
Communications Commission ("FCC") and state regulatory commissions
under the Telecommunications Act of 1996;
- the possibility of one or more of the markets in which the Company will
compete being impacted by variations in political, economic or other
factors over which the Company has no control; and
- unexpected results in litigation.
General
The Company is a development stage enterprise formed for the purpose of
establishing a nationwide personal communications service ("PCS") wireless
telecommunications network. The Company acquired PCS licenses in the FCC's A
Block and B Block PCS auction, which concluded in March 1995, to provide service
to 29 major trading areas ("MTAs") covering 150.3 million Pops. Additionally,
Cox contributed to the Company, effective February 6, 1997, a PCS license for
the Omaha MTA covering 1.7 million Pops. The Company has also affiliated and
expects to continue to affiliate with other PCS providers. Pursuant to
affiliation agreements, each affiliated PCS service provider will use the
Sprint(R) (a registered trademark of Sprint Communications Company, L.P.) brand
name. Holdings owns a 49% limited partnership interest in American PCS, L.P.
("APC"), which indirectly owns a PCS license for, and operates a broadband GSM
(global system for mobile communications) PCS system in, the Washington
D.C./Baltimore MTA. APC has affiliated with the Company and is marketing its
products and services under the Sprint brand name. Holdings also owns a 49%
limited partnership interest in Cox Communications PCS, L.P. ("Cox PCS"), a
partnership that owns a PCS license for the Los Angeles-San Diego MTA covering
21.5 million Pops. Cox, which previously owned this license, contributed the
12
<PAGE>
license to Cox PCS on March 31, 1997 and will manage and control Cox PCS. The
Company signed an affiliation agreement with Cox PCS on December 31, 1996.
The Company also expects to 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 covering
9.1 million Pops. In addition, SprintCom, Inc. ("SprintCom"), an affiliate of
Sprint, participated in the FCC's D and E Block auction which ended January 14,
1997, and was awarded licenses for 139 of 493 Basic Trading Areas ("BTAs")
covering 70 million Pops, all of which are geographic areas not covered by the
Company's owned PCS licenses or licenses owned by PhillieCo, APC or Cox PCS. The
Company is in the process of negotiating an agreement with SprintCom to build
out the network infrastructure in certain BTA markets where SprintCom was
awarded PCS licenses. In accordance with an agreement among the Partners and the
Amended and Restated Agreement of Limited Partnership of MajorCo, L.P. (renamed
Sprint Spectrum Holding Company , L.P.) dated January 31, 1996 (the "Partnership
Agreement"), SprintCom is required to offer to enter into an affiliation
agreement with Holdings with respect to such BTA licenses pursuant to which
SprintCom's systems in such areas would be included in the Company's national
PCS network, although no assurance can be given that SprintCom and Holdings will
enter into any such affiliation agreement.
To date, the Company has incurred expenditures in conjunction with PCS license
acquisitions, initial design and construction of the PCS network, engineering,
marketing, administrative and other start up related expenses. The Company
commenced initial commercial operations in certain MTAs for its PCS services
late in the fourth quarter of 1996 and, as a result, has generated minimal
operating revenues. The Company intends to initiate service in portions of most
MTAs during the summer of 1997. Pop coverage at the end of the initial launch
period (approximately the end of the summer of 1997) is expected to reach
approximately 57% of the Pops in all of the Company's license areas with
coverage in the individual license areas ranging from 19% to 90%. The timing of
launch in individual markets will be determined by various factors, principally
zoning and microwave relocation factors, equipment delivery schedules and local
market and competitive considerations. The Company intends to continue to expand
its coverage in its PCS markets in its existing license areas based on actual
market experience, customer demand, and reductions in the cost of technology.
The extent to which the Company is able to generate operating revenue and
earnings is dependent on a number of business factors, including maintaining
existing financing to complete network construction and fund initial operations
and operating losses, successfully deploying the PCS network and attaining
profitable levels of market demand for the Company's products and services.
Liquidity and Capital Resources
The buildout of the Company's PCS network and the marketing and distribution of
the Company's PCS products and services will require substantial capital. The
Company currently estimates that its capital requirements (capital expenditures,
the cost of its existing licenses, working capital, debt service requirements
and anticipated operating losses) for the period from inception through the end
of 1998 (based on the Company's current plans for its network buildout in its
current license areas) will total approximately $8.9 billion (of which
approximately $5.1 billion had been expended as of March 31, 1997). After 1998,
the Company will also require additional capital for coverage expansion, volume-
driven network capacity and other capital expenditures for existing and new
license areas (if any), working capital, debt service requirements and
anticipated further operating losses. 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 $3.9
billion through 1997, including $2.3 billion
13
<PAGE>
through March 31, 1997. Estimated capital expenditures have increased due to
changes in the nature of certain network elements, actual construction
experience to date and additional network capacity requirements. 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 minimal sources of revenue to meet its capital
requirements and has relied upon capital contributions, advances from Holdings,
third party debt and public debt. The Holdings partnership agreement provides
for a planned capital amount to be contributed by the Partners ("Total Mandatory
Contributions"), which represents the sum of $4.2 billion, which includes agreed
upon values attributable to the contributions of certain additional PCS licenses
by a Partner. The Total Mandatory Contributions amount is required to be
contributed in accordance with capital contribution schedule to be set forth in
approved annual budgets if requested by the Holdings partnership board (or by
the Chief Executive Officer of Holdings pursuant to authority to be granted in
each annual budget or such other authority as may be delegated to the Chief
Executive Officer by the Holdings partnership board). The partnership board of
Holdings may request capital contributions to be made in the absence of an
approved budget or more quickly than provided for in an approved budget, but
always subject to the Total Mandatory Contributions limit. The proposed budget
for 1997 has not yet been approved by the partnership board. The Amended and
Restated Capital Contribution Agreement (the "Amended Agreement") was executed
effective October 2, 1996. The Amended Agreement recognized that through
December 31, 1995, approximately $2.2 billion of the Total Mandatory
Contributions had been contributed to Sprint Spectrum L.P., and designates that
approximately $1.0 billion of the balance of the Total Mandatory Contributions
shall be contributed to Sprint Spectrum L.P. As of March 31, 1997, $2.7 billion
had been contributed to Sprint Spectrum. The Company's business plan and the
financial covenants and other terms of the Secured Financing (defined below)
will require such additional equity financing prior to the end of 1998, absent a
new financing source. The $1.0 billion portion of the $4.2 billion not required
to be invested in the Company may be used by Holdings to fund its other
affiliate commitments and make other wireless investments. Amounts budgeted by
the Partners in future years will determine the extent to which the commitments
will actually be utilized.
In October 1996, the Company entered into a credit agreement with The Chase
Manhattan Bank, as administrative agent for a group of lenders, for a $2.0
billion senior secured credit facility (the "Bank Facility"). The proceeds of
the Bank Facility are to be used to finance working capital needs, subscriber
acquisition costs, capital expenditures and other general purposes of the
Company. The Bank Facility consists of a $300 million term loan commitment and a
revolving credit commitment of $1.7 billion. Of the $300 million term facility,
$150 million was drawn down subsequent to closing, and the remaining $150
million was drawn down in January, 1997. As of March 31, 1997, $200 million had
been borrowed and $250 million remained available under the revolving credit
facility. Availability under the Bank Facility will increase subject to the
Company meeting certain performance criteria.
Also in October 1996, the Company entered into credit agreements for up to an
aggregate of $3.1 billion of senior secured multiple drawdown term loan
facilities from two of its network infrastructure equipment vendors. Nortel has
agreed to provide up to $1.3 billion in senior secured loans, and Lucent has
agreed to provide up to $1.8 billion in senior secured loans (together the
"Vendor Financing" and together with the Bank Facility, the "Secured
Financing"). The Company will use the proceeds from 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)
14
<PAGE>
required to construct the Company's PCS network. These facilities will serve as
the primary financing mechanism for the buildout of the network.
Borrowings under the Secured Financing are secured by the Company's interest in
WirelessCo, RealtyCo and EquipmentCo and certain other personal and real
property (the "Shared Lien"). The Shared Lien equally and ratably secures the
Bank Facility and the Vendor Financing. The Secured Financing is jointly and
severally guaranteed by WirelessCo, RealtyCo and EquipmentCo and is non-recourse
to the Partners and the Parents.
In August 1996, Sprint Spectrum L.P. and FinCo issued $250 million aggregate
principal amount of the 11% Senior Notes and $500 million aggregate principal
amount at maturity of 12 1/2% Senior Discount Notes (together, the "Notes"). The
Senior Discount Notes were issued at a discount to their aggregate principal
amount at maturity and generated proceeds of approximately $273 million. Cash
interest on the Senior Notes will accrue at a rate of 11% per annum and is
payable semi-annually in arrears on each February 15 and August 15, commencing
February 15, 1997. Cash interest will not accrue or be payable on the Senior
Discount Notes prior to August 15, 2001. Thereafter, cash interest on the Senior
Discount Notes will accrue at a rate of 12 1/2% per annum and will be payable
semi-annually in arrears on each February 15 and August 15, commencing February
15, 2002. FinCo was formed solely to be a co- obligor of the Notes. FinCo has
only nominal assets and no operations or revenues, and Sprint Spectrum L.P. will
be responsible for payment of the Notes. On August 15, 2001, Sprint Spectrum
L.P. will be required to redeem an amount equal to $384.772 per $1,000 principal
amount at maturity of each Senior Discount Note then outstanding ($192 million
in aggregate principal amount at maturity, assuming all of the Senior Discount
Notes remain outstanding at such date). The proceeds of approximately $509
million from the issuance of the Notes (net of approximately $14 million of
underwriting discounts, commissions, and offering expenses) were used to fund
capital expenditures, including the buildout of the nationwide PCS network, to
fund working capital requirements, to fund operating losses and for other
partnership purposes. Sprint purchased, and continues to hold, approximately
$183 million principal amount at maturity of the Senior Discount Notes.
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 any additional
financing can be obtained on a timely basis and on terms acceptable to the
Company and within limitations contained in the Notes, the agreements governing
the Secured 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 and could have a material adverse effect on its
business.
For the year-to-date period ended March 31, 1997, the Company used cash of $225
million in operating activities, which consisted of the operating loss of $189
million, an increase in inventory of $57 million and decreases in payables,
accrued expenses and long-term accruals of $26 million. Cash used in investing
activities totaled $364 million, consisting of capital expenditures and
microwave relocation costs.
15
<PAGE>
Results of Operations
For the Three Months Ended March 31, 1997
The Company commenced initial commercial operations for its PCS services in
certain MTAs late in the fourth quarter of 1996 and, as a result, has generated
minimal operating revenues. The negative gross profit from equipment sales
results from the Company's subsidy of handsets. Cost of service consists
principally of switch and cell site expenses, including site rental, utilities
and access charges. Prior to service launch, such costs are incurred during the
network buildout and testing phases. As markets launch, the costs are incurred
to provide service in the related markets.
Selling expenses increased to $12.6 million for the three months ended March 31,
1997 compared to the three months ended March 31, 1996 due to costs incurred in
preparation of and during the initial commercial service launch in various
markets. Such costs include participation with Sprint in an NFL sponsorship,
development and production expenses associated with advertisements in various
media (i.e., television, radio, print), and the development of printed brochures
to promote the Company's products and services.
General and administrative expenses increased from $30.7 million for the three
months ended March 31, 1996 to $104.4 million for the three months ended March
31, 1997 due principally to increases in salary and related benefits, computer
equipment and related expenses and professional and consulting fees. Salaries
and benefits and computer equipment and related expenses increased due to an
increase in employee headcount. Professional and consulting fees increased due
to the use of consultants and other experts to assist with the continuing
development and enhancement of the Company's sophisticated information systems,
continued rollout and tailoring of training programs for the Company's sales
force, and various other projects.
Depreciation and amortization expense increased from $0.3 million for the three
months ended March 31, 1996 to $34.4 million for the three months ended March
31, 1997 as certain network equipment has been placed in service and
amortization of PCS licenses and microwave relocation costs in the launched
markets commenced.
For the Three Months Ended March 31, 1996
The Company incurred a loss of $67 million for the three months ended March 31,
1996, which includes equity in loss of an unconsolidated subsidiary of $36
million. There was no amortization of licenses during the period as PCS service
had not been launched commercially.
16
<PAGE>
PART I.
Item 2b.
SPRINT SPECTRUM FINANCE CORPORATION
(A Wholly-Owned Subsidiary of Sprint Spectrum L.P.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Spectrum Finance Corporation ("FinCo"), a Delaware corporation, was
formed on May 21, 1996 and is a wholly-owned subsidiary of Sprint Spectrum L.P.
FinCo has nominal assets, does not conduct any operations and was formed to be a
co-obligor of the securities issued by the Company. Certain institutional
investors who might otherwise be limited in their ability to invest in
securities issued by partnerships by reasons of the legal investment laws in
their states of organization or their charter documents, may be able to invest
in the Company's securities because FinCo is a co-obligor. Accordingly, a
discussion of the results of operations, liquidity and capital resources of
FinCo are not presented. See FinCo's notes to financial statements for a
discussion of the securities with respect to which FinCo is serving as
co-obligor.
17
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings.
There were no reportable events during the quarter ended March 31,
1997.
Item 2. Changes in Securities.
There were no reportable events during the quarter ended March 31,
1997.
Item 3. Defaults Upon Senior Securities.
There were no reportable events during the quarter ended March 31,
1997.
Item 4. Submission of Matters to a Vote of Security-Holders.
There were no reportable events during the quarter ended March 31,
1997.
Item 5. Other Information.
There were no reportable events during the quarter ended March 31,
1997.
Item 6. Exhibits and Reports of Form 8-K.
(a) The following exhibits are filed as part of this report:
3.1 Certificate of Limited Partnership of Sprint Spectrum L.P.
(incorporated by reference to Form S-1 Registration Statement,
Registration No. 333-06609, filed on June 21, 1996).
3.2 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 (incorporated
by reference to Form S-1 Registration Statement, Registration
No. 333-06609, filed on June 21, 1996).
3.3 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. (incorporated by reference to
Form S-1 Registration Statement, Registration No. 333-06609,
filed on June 21, 1996).
4.1 Senior Note Indenture, dated August 23, 1996, between Sprint
Spectrum L. P., Sprint Spectrum Finance Corporation, and The
Bank of New York, as Trustee (incorporated by reference to
Form S-1 Registration Statement, Registration No. 333-06609,
the form of which was filed on July 30, 1996).
4.2 Form of Senior Note (included in Exhibit 4.1).
4.3 Senior Discount Note Indenture dated August 23, 1996, between
Sprint Spectrum L.P., Sprint Spectrum Finance Corporation, and
The Bank of New York, as Trustee (incorporated by reference to
Form S-1 Registration Statement, Registration No. 333- 06609,
the form of which was filed on July 30, 1996).
4.4 Form of Senior Discount Note (included in Exhibit 4.3).
18
<PAGE>
10.1 PCS Software License and Purchase Agreement dated October 8,
1996 between Sprint Spectrum Equipment Company, L.P. and
Lucent Technologies Inc. The omitted portions indicated by
brackets have been separately filed with the Securities and
Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities and Exchange Act
of 1934, as amended.
10.2 Amendment No. 1 dated as of February 25,1 997, to the Amended
and Restated Procurement Services Contract dated as of October
9, 1996, between Sprint Spectrum Equipment Company, L.P. and
Lucent Technologies Inc. The omitted portions indicated by
brackets have been separately filed with the Securities and
Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities and Exchange Act
of 1934, as amended.
10.3 Amendment No. 2 dated as of January 29, 1997, to the Procure-
ment and Services Contract dated as of January 31,1996, be-
tween Sprint Spectrum Equipment Company, L.P. and Northern
Telecom Inc. The omitted portions indicated by brackets have
been separately filed with the Securities and Exchange
Commission pursuant to a request for confidential treatment
under Rule 24b-2 of the Securities and Exchange Act of 1934,
as amended.
10.4 Employment Agreement dated January 21, 1997, between Sprint
Spectrum L.P. and Charles E. Levine.
27 Financial data schedule
(b) No reports on Form 8-K were filed during the quarter ended March
31, 1997.
19
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINT SPECTRUM L.P.
(Registrant)
By /s/ John W. Meyer
John W. Meyer
Vice President and Controller
Dated: May 13, 1997
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINT SPECTRUM FINANCE
CORPORATION
(Registrant)
By /s/ John W. Meyer
John W. Meyer
Vice President and Controller
Dated: May 13, 1997
21
Exhibit 10.1
The omitted portions indicated by brackets have been separately filed
with the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended.
PCS SOFTWARE LICENSE AND PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into between Sprint Spectrum
Equipment Company, L.P., a Delaware limited partnership ("Owner") and Lucent
Technologies Inc., a Delaware corporation ("Vendor").
RECITALS
WHEREAS, the Owner and the Vendor entered into a Procurement and
Services Contract dated as of January 31, 1996, as the same may be amended,
restated, supplemented or otherwise modified from time to time (the "Contract"),
and
WHEREAS, the Owner desires to obtain a fully paid-up license for
Vendor's 1996 optional features software (defined below as Licensed Software),
pursuant to the terms and conditions and prices set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein, the
parties agree as follows:
1. SCOPE
1.1. This Agreement including Exhibits A, B and C as attached hereto
and incorporated herein by reference, sets forth the terms and conditions,
prices and payment schedule under which the Vendor agrees to license Licensed
Software, as defined herein, for use on all of the PCS Products purchased from
the Vendor and used in the Owner's Nationwide Network.
1.2. All the terms and conditions of the Contract are hereby
incorporated by reference into this Agreement, except as expressly modified or
supplemented herein. Any such modifications or supplements shall apply to this
Agreement only and shall not apply to any other agreement unless so provided for
therein. In the event of a conflict between the terms and conditions of this
Agreement and the Contract, the Contract shall prevail.
1.3. For purposes of the Vendor financing with the Owner's parent, the
Vendor expressly agrees that all payments made or to be made hereunder will be
covered by such Vendor financing as if such payments were made under the
Contract.
2. DEFINITIONS
2.1. "Licensed Software" means all optional software features for PCS
Products made generally available to Customers in 1996 on an optional, separate
fee, basis. A current list of these features is set forth on Exhibit A hereto.
2.2. "Initial Application" means the initial configuration to be
deployed in Fresno, California consisting of one (1) switch and the number of
base stations within the Initial Application which are available for testing of
the Licensed Software on the date Vendor is ready to commence testing pursuant
to Section 5.1.
2.3. "Initial Application Verification" means the tests set forth on
Exhibit C hereto.
2.4. "Initial Application Verification Test Plan" means the test plan
set forth on Exhibit C hereto.
All other capitalized terms shall have the meanings set forth herein or
as defined in the Contract.
3. SOFTWARE LICENSE
Upon delivery of the Licensed Software, the Vendor grants to the Owner
a perpetual, nontransferable, non-exclusive fully paid-up (i.e., buyout),
multi-site (capability to have deployed Licensed Software in any number of
sites) right to use license for the Licensed Software ("License") for use on the
Products purchased from the Vendor provided in each of the systems and the
System as a whole, subject to payment of license fees set forth on Exhibit B.
The Licensed Software will at all times throughout the term perform in
accordance with the Specifications.
4. ORDER AND DELIVERY OF LICENSED SOFTWARE
4.1. The Owner agrees that the execution of this Agreement shall be
deemed an order for the Licensed Software for its Initial Application.
4.2. The Vendor agrees to deliver and install the Licensed Software
for the Owner's Initial Application as soon as possible, but, in any event, no
later than October 30, 1996.
5. ACCEPTANCE
5.1. The Owner and the Vendor agree that acceptance testing in
accordance with Exhibit C of the Initial Application for Licensed Software will
commence on the date of the installation of the Licensed Software or October 30,
1996, whichever is later. The period for acceptance testing will run for no
longer than the thirty (30) day period after commencement of acceptance testing.
The Owner will accept or reject the Licensed Software within such thirty (30)
day period unless the parties mutually agree that the Licensed Software has met
the acceptance tests prior thereto. If the Owner does not provide a notice of
rejection, then the Licensed Software will be deemed to have been accepted at
the end of the thirty (30) day acceptance period; provided that any such
acceptance will in no way limit the Vendor's warranty or other obligations under
this Agreement and/or the Contract. If prior to Owner acceptance, the Owner
notifies the Vendor of a Defect in the Licensed Software, then the thirty (30)
day acceptance period will be extended day-for-day until the Vendor has
corrected the Defect.
5.2. Minor Defects and shortcomings not affecting the operational use
of the part of the Licensed Software shall not give rise to withholding
acceptance provided that the Vendor undertakes to remedy such defects and
shortcomings as soon as reasonably possible.
5.3. The Owner and the Vendor further agree that the Owner's acceptance
of the Licensed Software for the Owner's Initial Application shall be deemed
acceptance of the Licensed Software by the Owner for deployment of the Licensed
Software in its Nationwide Network; provided that nothing herein will limit or
otherwise modify the Vendor's warranty and other obligations hereunder.
6. INTELLECTUAL PROPERTY
Without limiting the generality of Section 1.2, all of the Software and
Intellectual Property provisions of the Contract shall apply to the Licensed
Software provided herein.
7. WARRANTY
Without limiting the generality of Section 1.2, all of the warranty
provisions of the Contract shall apply to the Licensed Software provided herein.
8. INVOICE PAYMENTS
The Vendor will invoice the Owner for the full amounts shown in Exhibit
B on the dates set forth therein. The Owner will pay such invoiced amounts
within thirty (30) days of the receipt of any such invoices. The Vendor
understands and agrees that amounts owed and invoiced in accordance with the
terms of this Agreement, may be credited, at the Owner's option, against the
Vendor's financing facilities pursuant to and in accordance with the terms of
those facilities.
9. NOTICES
Any notice, request, consent, waiver or other communication required or
permitted under this Agreement will be effective only if it is in writing and
personally delivered by hand or by overnight courier or sent by certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Owner: Sprint Spectrum Equipment Company, L.P.
c/o Sprint Spectrum L.P.
4900 Main Street
Kansas City, Missouri 64112
Attention: Director, Program Management
If to the Vendor: Lucent Technologies Inc.
111 Madison Avenue
Morristown, New Jersey 07962-1970
Attention: William K. Nelson
10. AGREEMENT
10.1. Except as otherwise stated herein, this Agreement, together with
all incorporated documents, constitutes the entire Agreement with regard to the
subject matter herein between the Parties.
10.2. Any amendment, modification or supplemental agreement shall only
be binding after its effective date, provided that such amendment, modification
or supplemental agreement is in writing and signed by an authorized
representative of each Party.
10.3. Any material and continuing breach of the terms of this Agreement
by the Vendor will constitute a material breach of an/or a Vendor Event of
Default under the Contract. The Owner and the Vendor expressly understand and
agree that any slip or delay in the availability of any feature(s) set forth on
Exhibit A in excess of sixty (60) days beyond the dates applicable for such
feature(s) as set forth on Exhibit A will constitute a "material and continuing
beach" by the Vendor under this Agreement.
10.4. This Agreement will be construed in accordance with and governed
by the laws of the State of New York without regard to any laws and principles
thereof which would direct the application of the laws of another jurisdiction.
11. SIGNATURES
This Agreement may be executed in any number of identical counterparts,
each of which will constitute an original but all of which when taken together
will constitute one contract.
IN WITNESS WHEREOF, the Parties have caused this agreement to be
executed by their duly authorized officers or representatives, to be effective
when each party has executed this Agreement.
Lucent Technologies Inc.
Signature: /s/ William K. Nelson
Name: William K. Nelson
Title: Vice President
Date: 10/7/96
Sprint Spectrum Equipment Company, L.P.
Signature: /s/ A.A. Kurtze
Name: A. Kurtze
Title: Chief Technology Officer
Date: October 8, 1996
<PAGE>
EXHIBIT A
1996 OPTIONAL FEATURES SOFTWARE
CDMA Software Feature by Release
- --------------------------------------- -------------------- -------------------
CDMA CDMA
Feature Name Release Availability
- --------------------------------------- -------------------- -------------------
[ ]
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT B
- --------------------------------------------------------------------------------
All Vendor Optional Features Software made generally available for PCS
Products in 1996 (Exhibit A) will be licensed to the Owner for a total price of
________________________ Dollars ($_______.00). This package price does not
include features provided on peripheral equipment, i.e., HLR, SCP, SCN,
Actiview, etc.
Invoice Schedule
_________ (__) Days After Owner Acceptance of Licensed Software $__________
_________ (__) Days following First Invoice of Licensed Software
or _________ (__) Days after Substantial Completion
of the Initial PCS System, whichever is earlier $__________
All new Vendor Optional Software Features made generally available
starting on January 1, 1998 will receive a _______ percent (___%) discount off
the then current List Price. For non-Vendor manufactured equipment, the discount
for new Optional Software Features will be _______ percent (___%) off the then
current List Price.
<PAGE>
EXHIBIT C
Initial Application Verification Test Plan
[ ]
Exhibit 10.2
The omitted portions indicated by brackets have been separately filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
AMENDMENT NO. 1 dated as of February 25, 1997, to the Amended
and Restated Procurement and Services Contract dated as of October 9, 1996,
between Sprint Spectrum Equipment Company, L.P., a Delaware limited partnership
(the "Owner") and Lucent Technologies Inc., a Delaware corporation, the full
successor to the Network Systems Group of AT&T Corp., a New York corporation
(the "Vendor", and together with the Owner, the "Parties").
RECITALS:
WHEREAS, the Parties are parties to a certain Amended and
Restated Procurement and Services Contract dated as of October 9, 1996 as may be
amended, supplemented or modified from time to time (the "Contract") wherein the
Owner agreed to have the Vendor engineer and construct PCS Systems in the System
Areas and the Vendor, itself or through its Subcontractors, agreed to provide
Products and Services to the Owner in connection with the engineering and
construction of PCS Systems in the System Areas pursuant to and in accordance
with the terms of the Contract.
WHEREAS, pursuant to and in accordance with a Consent and
Waiver between the Parties (the "Consent and Waiver") dated as of December 23,
1996, the Parties desire to amend the Contract.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the Owner and the Vendor hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capit- alized terms
used in this Amendment will have the meaning given to such terms in the
Contract.
2. Agreement. The Parties understand and agree that the terms of Paragraph
2 of the Consent and Waiver are hereby incorporated into and are made a part of
the Contract.
3. Amendment to Subsection 2.7. Subsection 2.7 is hereby amended to add the
following subsection 2.7(c) after subsection 2.7(b):
"(c) Notwithstanding anything contained in subsection
2.6, this subsection 2.7 and/or Exhibit A1 to the contrary, the Vendor
will be required to complete the Work in accordance with the
Specifications as required by each of Milestone 6, Milestone 7 and
Milestone 8 within the time periods between the Milestones (denoted by
"M" on the table below) set forth on the table below. The Guaranteed
Substantial Completion Dates for each of the PCS Systems and PCS
Sub-Systems listed in the following table will not be later than the
dates set forth in the column marked "Guaranteed Substantial Completion
Date".
===========================--------------------------------=====================
PCS System/PCS M5 Latest M6 to M7 Latest M7 to M8 M8
Sub-System M6 date Interval M7 date Interval Guaranteed
Substantial
Completion Date
===========================--------------------------------=====================
[ ]
Furthermore and notwithstanding anything contained in this Contract to
the contrary, for any PCS System and/or PCS Sub-System (other than any
PCS Systems and/or PCS Sub-Systems listed on the table above) which did
not achieve the requirements of Milestone 5 pursuant to the terms of
the Contract on or before January 15, 1997 (each a "97 System"), the
target permissible interim period between Milestone 5 and Milestone 8
in which the Vendor must complete the Work required for and as a
condition of achieving Substantial Completion in a timely manner in
accordance with the terms of this Contract shall be ninety (90) days;
provided that in certain larger PCS Systems and PCS Sub-Systems such
period may exceed ninety (90) days, as mutually agreed by the Owner and
the Vendor, but in no event will such period exceed a total of one
hundred thirty (130) days. For all such 97 Systems, the applicable
permissible interim periods (including the periods between applicable
Interim Milestones) will be mutually agreed by the Owner and the Vendor
on or before achieving Milestone 5 for each such 97 System. All such
agreements will be reflected in writing, executed by authorized
representatives of both the Owner and the Vendor. For purposes hereof,
the authorized representative of the Vendor is Pat Pomponio and the
authorized representative of the Owner is Keith Paglusch.
4. Amendment to Subsection 15.2. Subsection 15.2(b) is hereby amended to
add the following sentence after the last sentence of 15.2(b):
"Notwithstanding anything contained herein to the contrary, for any of
the five PCS Systems and/or PCS Sub-Systems listed on the table in
subsection 2.7(c) or any 97 System, any Interim Delay Penalties accrued
pursuant to subsection 15.2(a) will be credited back to the Vendor in
the manner described in the immediately preceding sentence to the
extent that (i) the Vendor successfully achieves Substantial Completion
of such PCS System or PCS Sub-System on or before the Guaranteed
Substantial Completion Date (as such date is determined in accordance
with the terms of subsection 2.7(c)) and (ii) the relevant interim
delay does not otherwise materially adversely affect the Owner, such
PCS System or PCS Sub-System and/or the System as a whole."
5. NO OTHER AMENDMENTS. EXCEPT AS EXPRESSLY AMENDED, MODIFIED AND
SUPPLEMENTED HEREBY, THE PROVISIONS OF THE CONTRACT ARE AND WILL REMAIN IN FULL
FORCE AND EFFECT AND NOTHING IN THIS AMENDMENT WILL BE CONSTRUED AS A WAIVER OF
ANY OF THE RIGHTS OR OBLIGATIONS OF THE PARTIES UNDER THE CONTRACT.
6. GOVERNING LAW. THIS AMENDMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARDS TO THE LAWS AND
PRINCIPLES THEREOF WHICH WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
7. Descriptive Headings. Descriptive headings are for convenience only and
will not control or affect the meaning or construction of any provisions of this
Amendment.
8. Counterparts. This Amendment may be executed in any number of identical
counterparts, each of which will constitute an original but all of which when
taken together will constitute but one contract.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be signed by their duly authorized representatives on the date
first above written.
SPRINT SPECTRUM EQUIPMENT
COMPANY, L.P., as the Owner
By: /s/ KEITH PAGLUSCH
Name: Keith Paglusch
Title: Vice President - Engineering &
Operations
LUCENT TECHNOLOGIES INC.,
as the Vendor
By:/s/ WILLIAM K. NELSON
Name: William K. Nelson
Title: Vice President
Exhibit 10.3
The omitted portions indicated by brackets have been separately filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
AMENDMENT NO. 2
TO
PROCUREMENT AND SERVICES CONTRACT
BETWEEN
SPRINT SPECTRUM EQUIPMENT COMPANY, L.P.
AND
NORTHERN TELECOM INC.
Made as of this 29th day of January, 1997, by and between Sprint
Spectrum Equipment Company, L.P. ("Equipment Co.") (the "Owner"), a Delaware
limited partnership, and Northern Telecom Inc., a Delaware corporation (the
"Vendor").
RECITALS:
WHEREAS, Equipment Co. and the Vendor, are parties to that certain
Procurement and Services Contract dated as of January 31, 1996, as amended the
"Contract", wherein Sprint Spectrum Holding Company L. P. (formerly known as
MajorCo, L.P., "Holdings") agreed to have the Vendor engineer and construct PCS
Systems in the System Areas and the Vendor agreed to provide Products and
Services to Holdings in connection with the engineering and construction of PCS
Systems in the System Areas pursuant to and in accordance with the terms of the
Contract; and
WHEREAS, Equipment Co. is the successor to all of the rights and
obligations of Holdings under the Contract pursuant to that certain
Assignment, Assumption and Amendment No. 1 to the Contract dated as of June
26, 1996; and
WHEREAS, the Parties desire to amend subsections 6.3, 17.3, 27.7, and
Schedules 2 and 12 A/B of the Contract;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the Parties hereby agree as follows:
1. Delete the next to the last paragraph of subsection 6.3 "Payments'
and replace, in lieu thereof, a new next to the last paragraph of subsection 6.3
as set forth below:
"Notwithstanding the foregoing, (i) invoices for RF
Engineering for each PCS System will be payable in accordance with
subsection 6.4(b) below and (ii) invoices for Facilities Preparation
Services being provided to the Vendor by a Subcontractor within any PCS
System will be submitted to the Owner by the Vendor upon the
Subcontractor's full and satisfactory completion of that portion of the
Facilities Preparation Services for which that invoice is written. Each
such invoice will be payable by the Owner within forty-five (45) days
of the date of Vendor's invoice."
2. Delete subsection 17.3 (c) Services Warranty and replace, in
lieu thereof, a new subsection 17.3 (c) as set forth below:
"(c) The Vendor warrants that, for a period of not less than
three (3) years (except in the case of Civil Work specific to site
preparation limited to only, grading, dirtwork, land clearing, pad
construction, compound construction, erection of towers, installation
of fencing, landscaping, road work, site and building improvements,
including retaining walls, roof repair and reinforcements, and building
reinforcements, or such other items as the Parties shall mutually agree
to in writing) as to which the period shall be one (1 ) year) from the
date of completion of Facilities Preparation Services within any PCS
System but in no event later than the achievement of Milestone M8
pursuant to Exhibit A1 in such PCS System (provided that in the event
of a Microwave Delay Period in such PCS System pursuant to subsection
2.37, the commencement of the Facilities Preparation Services Warranty
Period will not be later than three (3) months from the date the Vendor
would have otherwise been able to commence Substantial Completion
testing in such PCS System in accordance with Exhibit B3 and Milestone
M8 as set forth on Exhibit A1 but for the existence of such Microwave
Delay Period) (the `Facilities Preparation Services Warranty Period'
and collectively with the Engineering Warranty Period and the RF
Services Warranty Period, the `Services Warranty Periods') Facilities
Preparation Services will be (i) operational in accordance with the
Specifications, (ii) in compliance with all material Applicable Laws
and material Applicable Permits in effect at the time of the completion
of such Facilities Preparation Services in such PCS System, and (iii)
free from Defects or Deficiencies in design, materials, workmanship or
otherwise. It is expressly understood by the Parties that `Civil Work
specific to site preparation,' for the sole purpose of determining
which Civil Work is subject to a one (1) year warranty and which Civil
Work is subject to a three (3) year warranty pursuant to the terms set
forth above, does not include building construction, tower materials,
fencing materials and/or Non-Essential Equipment (which will be subject
to warranties pursuant to Subsection 17.2) all of which may be part of
Civil Work but will not be deemed `Civil Work specific to site
preparation.'"
3. Delete subsection 27.7 "Governing Law" and replace, in lieu
thereof, a new subsection 27.7 as set forth below:
"GOVERNING LAW AND FORUMS. THIS CONTRACT IS GOVERNED BY THE
LAWS AND STATUTES OF THE STATE OF NEW YORK, EXCLUSIVE OF NEW YORK'S
CONFLICT OF LAWS RULES. THIS CONTRACT AND THE WORK WILL BE DEEMED TO BE
MADE, EXECUTED AND PERFORMED IN THE STATE OF NEW YORK. IF ONE PARTY
COMMENCES A LAWSUIT IN RELATION TO THIS CONTRACT AGAINST THE OTHER
PARTY, SUCH LAWSUIT CAN ONLY BE BROUGHT IN THE STATE OF MISSOURI OR THE
STATE OF DELAWARE. THE PARTIES HEREBY WAIVE A TRIAL BY JURY IN ANY SUCH
LAWSUIT. THE VENDOR AND THE OWNER EACH HEREBY IRREVOCABLY (A) AGREES
THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS CONTRACT WILL BE BROUGHT IN THE FEDERAL DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI, OR IN THE FEDERAL DISTRICT COURT
FOR THE DISTRICT OF DELAWARE, WHICH COURTS WILL HAVE EXCLUSIVE
JURISDICTION OVER ANY CONTROVERSY ARISING OUT OF THIS CONTRACT, (B)
CONSENTS TO THE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDINGS AND (C) WAIVES ANY OBJECTION WHICH IT MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN SUCH COURTS
AND CLAIMS THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS
TO THE OWNER OR THE VENDOR, AS THE CASE MAY BE, AT THE ADDRESSES
INDICATED IN SUBSECTION 27.6 HEREOF AND IN THE MANNER SET FORTH IN SUCH
SUBSECTION 27.6. NOTHING IN THIS SUBSECTION 27.7 WILL AFFECT THE RIGHT
OF THE OWNER OR THE VENDOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW."
4. Schedule 2 of the Contract is hereby amended by adding the following
as an additional line above the chart on the first page of such Schedule 2:
"The BSS discount applies to BSM spares."
5. Schedule 12 A/B of the Contract, is hereby deleted and replaced with
"Schedule 12 A/B (Revised)" as contained in Attachment A of this Amendment.
6. IN ALL OTHER RESPECTS, THE CONTRACT AS HERETOFORE AMENDED, SHALL RE-
MAIN IN FULL FORCE AND EFFECT WITH NO OTHER CHANGES WHATSOEVER.
7. This Amendment No. 2 shall be governed by New York law.
8. Capitalized term not otherwise defined herein have the meanings
set forth in the Contract.
9. This Amendment No. 2 may be executed by one or more of the Parties
to this Amendment No. 2 on any number of separate counterparts, and all of said
counterparts taken together will be deemed to constitute one and the same in-
strument.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
executed by their duly authorized representatives as of the date first set forth
above.
SPRINT SPECTRUM EQUIPMENT
COMPANY, L.P.
By: /s/ Keith D. Paglusch
Name: Keith D. Paglusch
Title: Vice President - Network
Engineering and Operations
Date: 1-18-97
NORTHERN TELECOM INC.
By: /s/ Charles Drayton
Name: Charles Drayton
Title: Vice President - Marketing
and Sales
Date: January 29, 1997
<PAGE>
ATTACHMENT A
DMS_MTX SPARES LIST
[ ]
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made on the 21st day of January, 1997, by and
between Sprint Spectrum L.P. ("Employer") and Charles E. Levine ("Executive").
WITNESSETH:
WHEREAS, Employer and its affiliates are engaged in the telecommunications
business;
WHEREAS, Executive has expertise, experience and capability in the business
of employer and the telecommunications business in general;
WHEREAS, Employer desires to enter into this Agreement to provide severance
and other benefits for Executive and obtain Executive's agreements regarding
confidentiality and post-employment restrictive covenants for Employer; and
WHEREAS, Executive is willing to provide such agreements to Employer.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which consideration are mutually acknowledged by the parties, it
is hereby agreed as follows:
1. RECITALS
The recitals set forth above constitute an integral part of this
Agreement, evidencing the intent of the parties in executing this Agreement, and
describing the circumstances surrounding its execution. Those recitals are made
a part of the covenants of this Agreement, and this Agreement shall be construed
in light thereof.
2. DUTIES AND RESPONSIBILITIES
The position is Chief Marketing Officer and reports to the Chief
Executive Officer, Sprint PCS. The duties and responsibilities of Executive
shall be of an executive nature as shall be required by Employer in the conduct
of its business. Executive's powers and authority shall include such duties and
responsibilities as from time to time may be assigned to him. Executive
recognizes that during his employment under this Agreement, he owes an undivided
duty of loyalty to Employer, and agrees to devote his entire business time and
attention to the performance of his duties and responsibilities and to use his
best efforts to promote and develop the business of Employer.
3. EMPLOYMENT TERM
This Agreement shall become effective as of January 27, 1997, and
continue until Executive's employment is terminated by either party in
accordance with Sections 5, 6, 7 or 8 of this Agreement.
4. COMPENSATION AND BENEFITS
4.1. Executive shall be entitled to receive a base salary in the amount
of Three Hundred Thousand Dollars ($300,000.00) per year ("Base Salary"),
payable in accordance with Employer's normal payroll procedures in effect from
time to time. Employer may increase or decrease Executive's Base Salary from
time to time, subject to the provisions of this Agreement.
4.2. Executive shall be entitled to participate in such long-term and
short-term incentive compensation, life, health, medical, dental, disability,
pension, savings, and retirement plans and other similar executive compensation
and employee benefit plans which may be in effect from time to time and in which
other officers of Employer having comparable responsibilities are entitled to
participate. Executive's participation in such plans shall be in accordance with
the terms of those plans in effect from time to time. Nothing contained in this
subsection shall be construed to require Employer to establish, or shall
preclude Employer, in its absolute discretion, from changing or amending, in
whole or in part, or revoking, any executive compensation or employee benefit
plan.
4.3. Executive shall be reimbursed for reasonable expenses incurred on
behalf of Employer and accounted for in accordance with the policies and
procedures of Employer in effect from time to time.
4.4. Executive shall be entitled to paid hours in an amount equivalent
to that provided to employees with fifteen (15) years of service as recognized
by Employer's Time Pool Policy or similar practice in effect from time to time.
5. TERMINATION BY EMPLOYER; SPECIAL COMPENSATION
At any time, Employer may terminate Executive's employment for any
reason. If Executive's termination by Employer is other than pursuant to Section
6, Executive shall, subject to the other provisions of this Section 5, be
entitled to the following Special Compensation (as that term is defined in this
Section 5 in lieu of any benefits available under any and all Employer
separation plans or policies, except as noted in Section 17. If Executive is
terminated pursuant to this Section 5, Executive's obligations under Section 11,
12, 13 and 14 hereof shall continue.
For purposes of this Agreement, "Special Compensation" shall entitle
Executive:
5.1. to continue to receive for a period of eighteen (18) months from
the date of termination (the "Severance Period"), bi-weekly compensation at the
rate equal to the amount of his bi-weekly base salary in effect at the date of
termination of employment paid according to Employer's payroll practices;
5.2. to receive a bonus, based on actual performance results, up to the
target amount, under any short-term incentive plan maintained by Employer
throughout the Severance Period in which Executive participated prior to the
termination of his employment, provided that the amount, if any, payable under
such plan for the award period including the last day of the Severance Period
shall be prorated based upon the number of months of the Severance Period that
fall within the award period and the total number of months in such award
period;
5.3. to receive any vested award under any long-term incentive plan in
which Executive participated prior to the termination of his employment, based
on the Executive's last day worked, exclusive of any Severance Period,
determined in accordance with the terms of said Plan;
5.4. to continue to receive throughout the Severance Period any life,
health, medical, dental, and qualified or non-qualified retirement benefits
which the Executive was receiving or was entitled to receive at the time of
termination of his employment, except that any long-term disability and
short-term disability benefits cease on the last day worked; and
5.5. to receive outplacement counseling by a firm selected by Employer
to continue for the duration of the Severance Period or until Executive becomes
employed on a full-time basis, whichever is earlier.
Employer shall pay, or cause to be paid, the amounts payable under
paragraph (a) above in equal installments, bi-weekly or otherwise according to
Employer's existing pay practices, and the amount payable under paragraphs 5.2
and 5.3 in accordance with the terms of those plans, if any. All payments
pursuant to this Section shall be subject to applicable income tax, unemployment
insurance and social security withholdings and other deductions required by law.
In addition to the Special Compensation described above, Executive
shall also be entitled to pay for any Time Pool hours accrued by Executive in
the calendar year of termination but not taken at the time of termination.
In the event Executive becomes employed full-time during the Severance
Period, Executive's entitlement to continuation of the benefits described in
paragraph 5.4 shall immediately cease; however, Executive shall retain any
rights to continue medical insurance coverage (including dental) under the COBRA
continuation provisions of the group medical insurance plan by paying the
applicable premium therefore.
The payments and benefits provided for in this Section shall be in
addition to all other sums then payable and owing to Executive hereunder and,
except as expressly provided herein, shall not be subject to reduction for any
amounts received by Executive for employment or services provided after
termination of employment hereunder, and shall be in full settlement and
satisfaction of all of Executive's claims and demands.
In all events, Executive's right to receive severance and/or other
benefits pursuant to this Section shall cease immediately in the event (a)
Executive is re-employed by Employer, (b) Executive is employed by any person,
firm, corporation or other entity that has an ownership interest in Employer, or
any of their affiliates, (c) Executive breaches his Confidential Information
covenant (as defined in Section 11 hereof), or (d) Executive breaches Sections
12, 13 or 14 hereof. In all cases, Employer's rights under Section 15 shall
continue.
6. VOLUNTARY RESIGNATION BY EXECUTIVE; TERMINATION FOR CAUSE;
TOTAL DISABILITY
Upon termination of Executive's employment by Voluntary Resignation,
Termination for Cause (as those terms are defined in this Section 6, or Total
Disability, as that term is defined in Employer's Long-Term Disability Plan,
Executive shall have no right to compensation, severance pay or other benefits
described in this Agreement following the termination of his employment, but
Executive's obligations under Sections 11, 12, 13 and 14 hereof shall continue.
6.1. Voluntary Resignation by Executive
At any time, Executive has the right, by written notice to Employer, to
terminate his services hereunder ("Voluntary Resignation"), effective as of
thirty (30) days after such notice.
6.2. Termination for Cause by Employer
At any time, Employer has the right to terminate Executive's employment
for cause. Termination upon the occurrence of any of the following shall be
deemed termination for cause ("Termination for Cause"):
6.2.1. Conduct by the Executive which reflects adversely on the
Executive's honesty, trustworthiness or fitness as an Executive; or
6.2.2. Executive's willful engagement in conduct which is
demonstrably and materially injurious to the Employer.
Termination for failure to meet performance expectations, unless
willful, continuing and substantial, shall not be deemed a Termination for
Cause. For Termination for Cause, written notice of the termination of
Executive's employment by Employer shall be served upon Executive and shall be
effective as of the date of such service. Such notice given by Employer shall
specify the act or acts of Executive underlying such termination.
6.3. Total Disability
Upon the Total Disability of the Executive, as that term is defined in
Employer's Long-Term Disability Plan, Executive shall have no right to
compensation or severance pay described in this Agreement, but shall be entitled
to long-term disability and other such benefits afforded under Employer's
applicable policies and plans.
7. RESIGNATION FOLLOWING CONSTRUCTIVE DISCHARGE
If at any time, except in connection with a termination pursuant to
Section 5 or 6, Executive is Constructively Discharged (as that term is defined
in this Section 7), then Executive shall have the right, by written notice to
Employer within sixty (60) days of the event causing him to be Constructively
Discharged, to terminate his services hereunder, effective as of thirty (30)
days after such notice. Executive shall in such event be entitled to the
compensation and benefits as if such employment were terminated pursuant to
Section 5 of this Agreement. If Executive terminates his employment pursuant to
this Section 7, Executive's obligations under Sections 11, 12, 13 and 14 shall
continue.
For purposes of this Agreement, the Executive shall be "Constructively
Discharged" upon the occurrence of either of the following events:
7.1. Executive is removed from his position with Employer other than as
a result of Executive's appointment to positions of equal or superior scope and
responsibility; or
7.2. Executive's targeted total compensation is reduced by more than
ten percent (10%) (other than across-the-board reductions similarly affecting
all executives of Employer having comparable responsibilities).
8. EFFECT OF CHANGE IN CONTROL
In the event that within one (1) year of a Change in Control (as that
term is defined in this Section 8, Executive's employment is terminated:
8.1. by Employer other than pursuant to Section 6,
8.2. by Executive pursuant to Section 7 hereof,
8.3. by Executive if Executive is required to be based anywhere other
than his location at the time or the Kansas City metropolitan area, except for
required travel on business to an extent substantially consistent with
Executive's business travel obligations immediately prior to the Change in
Control, then Executive shall be entitled to the Special Compensation described
in Section 5 and shall be bound by Sections 11, 13 and 14, but shall not have
any continuing obligations under Section 12 except as otherwise required by
common law or statute.
For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred if any natural person, corporation, trust, partnership, limited
liability company or other entity (a "Person"), other than (i) a trustee or
other fiduciary holding securities under an employee benefit plan of Employer or
any of its affiliates, or (ii) the current partners of Employer or any Person
that, directly or indirectly, owns or controls, is owned or controlled by, or is
under common ownership of control with, the current partners of Employer, is or
becomes the owner, directly or indirectly, of fifty percent (50%) or more of the
outstanding partnership interests in Employer.
9. DISPUTE RESOLUTION
All disputes arising under this Agreement, other than those disputes
relating to Executive's alleged violations of Sections 11, 12, 13 and 14 herein,
shall be submitted to arbitration by the American Arbitration Association in
Kansas City, Missouri. Costs of arbitration shall be borne equally by the
parties. The decision of the arbitrators shall be final and binding on both
parties, and there shall be no appeal from any award rendered. Any award
rendered may be entered as a judgment in any court of competent jurisdiction. In
any judicial enforcement proceeding, the losing party shall reimburse the
prevailing party for its reasonable costs and attorneys' fees for enforcing its
rights under this Agreement, in addition to any damages or other relief granted.
This Section 9 does not apply to any action by Employer to enforce Sections 11,
12, 13 and 14 of this Agreement and does not in any way restrict Employer's
rights under Section 1 herein.
10. ENFORCEMENT
In the event Employer shall fail to pay any amounts due to Executive
under this Agreement as they come due, Employer agrees to pay interest on such
amounts at a rate of prime plus two percent (2%) per annum. Employer agrees that
Executive shall be entitled to recover all costs of successfully enforcing any
provision of this Agreement, including reasonable attorneys' fees and costs of
litigation.
11. CONFIDENTIAL INFORMATION
Executive acknowledges that during the course of his employment he will
learn or develop Confidential Information (as that term is defined in this
Section 11). Executive further acknowledges that unauthorized disclosure or use
of such Confidential Information, other than in discharge of Executive's duties
on behalf of Employer, will cause Employer irreparable harm.
For purposes of this Section, Confidential Information means trade
secrets (including but not limited to technical and non-technical data, a
formula, pattern, compilation, program, device, method, technique, drawing,
process) and other proprietary information concerning the products, processes or
services of Employer or its partners, and its or their affiliates, including but
not limited to, computer programs; unpatented inventions, discoveries or
improvements; marketing, manufacturing, or organizational research and
development; business plans; methods of operation; sales forecasts; personnel
information, including the identity of other employees of Employer, their
responsibilities, competence, abilities, and compensation; pricing and financial
information; current and prospective customer and supplier lists and information
on customers, suppliers or their employees; information concerning planned or
pending acquisitions or divestitures; and information concerning purchases of
major equipment or property, which information has not been made generally
available to the public.
Except as authorized in the course of his employment and in the pursuit
of the business of Employer, Executive shall not, during the course of his
employment, or at any time following termination of his employment for any
reason, directly or indirectly, disclose, publish, communicate or use on his
behalf or another's behalf, any Confidential Information of Employer.
Executive acknowledges that Employer operates and competes nationally,
and that Employer will be harmed by unauthorized disclosure or use of
Confidential Information regardless of where such disclosure or use occurs, and
that therefore this confidentiality agreement is not limited to any single state
or other jurisdiction.
12. NON-COMPETITION
Executive acknowledges that use or disclosure of Confidential
Information described in Section 11 is likely if Executive were to perform
telecommunications functions relating to wireless services on behalf of a
competitor of Employer. Therefore, Executive shall not, for eighteen (18) months
following termination of employment for any reason (the "Non-Compete Period"),
accept any position where Executive dedicates his time and efforts to managing,
controlling, participating in, investing in, acting as a consultant or advisor
to, rendering services for or otherwise assisting any person, firm, corporation
or other entity in the wireless business in competition with the wireless
business of Employer, anywhere in the United States of America; provided,
however, that the ownership of less than a five percent (5%) interest in the
securities of a corporation which are traded on a national securities exchange
or quoted on NASDAQ shall not be deemed to constitute a violation hereof.
Executive acknowledges that Employer operates and competes nationally,
and that therefore this non-competition agreement appropriately is not limited
to any single state or other jurisdiction.
13. INDUCEMENT OF OTHER EMPLOYEES
For an eighteen (18) month period following termination of employment
for any reason, Executive will not directly or indirectly solicit, induce or
encourage any employee or agent of Employer to terminate his relationship with
Employer.
14. RETURN OF EMPLOYER'S PROPERTY
All books, records, files, notes, reports, sketches, plans, published
memoranda or other documents, and any other tangible forms of information
(whether stored magnetically, electronically, or otherwise, including, but not
limited to, computer diskettes or compact disks), created, developed, generated
or held by Executive during employment, concerning or related to Employer's
business, and whether containing or relating to Confidential Information or not,
are the property of Employer and will be promptly delivered by Executive to
Employer upon termination of Executive's employment for any reason whatsoever.
During the course of employment, Executive shall not remove any of the above
property containing Confidential Information, or reproductions or copies
thereof, or any apparatus from Employer's premises without authorization.
15. REMEDIES
Executive acknowledges that the restraints and agreements herein
provided are fair and reasonable, that enforcement of the provisions of Sections
11, 12, 13 and 14 will not cause him undue hardship and that said provisions are
reasonably necessary and commensurate with the need to protect Employer and its
legitimate and proprietary business interests and property from irreparable
harm.
Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer. Therefore, Executive agrees
that, in addition to any other remedies at law or in equity available to
Employer for Executive's breach or threatened breach of this Agreement, Employer
is entitled to specific performance or injunctive relief, without bond, against
Executive to prevent such damage or breach, and the existence of any claim or
cause of action Executive may have against Employer will not constitute a
defense thereto. Executive further agrees to pay reasonable attorneys' fees and
costs of litigation incurred by Employer in any proceeding relating to the
enforcement of the Agreement or to any alleged breach thereof in which Employer
shall prevail in whole or those reasonable fees and costs attributable to the
extent that Employer prevails in part.
In the event of a breach or a violation of any of the covenants and
provisions of this Agreement, the beginning of the Non-Compete Period (but not
of Executive's obligation thereunder), shall be tolled during the period of the
continuance of any actual breach or violation.
16. CONFIDENTIALITY AGREEMENT
As a specific condition to Executive's right to Special Compensation or
other benefits described herein, Executive agrees that he will not disclose or
discuss the existence of this Agreement, the Special Compensation provided
herein, or any other terms of the Agreement except: (1) to members of his
immediate family; (2) to his financial advisor or attorney but then only to the
extent necessary for them to assist him; (3) to a potential employer on a
strictly confidential basis and then only to the extent necessary for reasonable
disclosure in the course of serious negotiations for potential employment; or
(4) as required by law or to enforce legal rights.
17. ENTIRE UNDERSTANDING
This Agreement constitutes the entire understanding and agreement
between the parties relating to Executive's employment hereunder and supersedes
and cancels all prior written and oral understandings and agreements with
respect to such matters, except for the terms and provisions of the employee
benefit or other compensation plans (or any agreements or awards thereunder)
referred to in or contemplated by this Agreement.
18. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of
Executive's executors, administrators, legal representatives, heirs and legatees
and the successors and assigns of Employer.
19. PARTIAL INVALIDITY
The various provisions of this Agreement are intended to be severable
and to constitute independent and distinct binding obligations. Should any
provision of this Agreement be determined to be void and unenforceable, in whole
or in part, it shall not be deemed to affect or impair the validity of any other
provision or part thereof, and such provision or part thereof shall be deemed
modified to the extent required to permit enforcement. Without limiting the
generality of the foregoing, if the scope of any provision contained in this
Agreement is deemed by a court or arbitrator to be too broad to permit
enforcement to its full extent, but may be made enforceable by limitations
thereon, such provision shall be enforced to the maximum extent permitted by
law, and Executive hereby agrees that such scope may be judicially modified
accordingly.
20. STRICT CONSTRUCTION
The language used in this Agreement will be deemed to be the language
chosen by Employer and Executive to express their mutual intent and no rule of
strict construction shall be applied against any person.
21. WAIVER
The waiver of any party hereto of a breach of any provision of this
Agreement by any other party shall not operate or be construed as a waiver of
any subsequent breach.
22. NOTICES
Any notice or other communication required or permitted to be given
hereunder shall be determined to have been duly given to any party (a) upon
delivery to the address of such party specified below if delivered personally or
by courier; (b) upon dispatch if transmitted by telecopy or other means of
facsimile, provided a copy thereof is also sent by regular mail or courier; or
(c) within forty-eight (48) hours after deposit thereof in the U.S. mail,
postage prepaid, for delivery as certified mail, return receipt requested,
addressed, in any case to the party at the following addresses or telecopy
numbers:
If to Executive: Charles E. Levine
xxxxxx
Kansas City, Missouri 64xxx
If to Employer: Sprint Spectrum L.P.
4900 Main Street, 12th Floor
Kansas City, Missouri 64112
Attention: Chief Executive Officer
or other such addresses or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
23. GOVERNING LAW
This Agreement shall be governed by, and interpreted, construed and
enforced in accordance with, the laws of the State of Kansas.
24. GENDER
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and the
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine or neuter.
25. HEADINGS
The headings of the Sections of this Agreement are for reference
purposes only and do not define or limit and shall not be used to interpret or
construe the contents of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date above set forth.
EMPLOYER:
SPRINT SPECTRUM L.P.
By: __/s/ Andrew J. Sukawaty_______
Authorized Officer
EXECUTIVE:
By: ____/s/ Charles Levine_________
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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