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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices)
(913) 624-3000
(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
SHARES OF COMMON STOCK OUTSTANDING AT March 31, 1995 -- 348,498,192
SPRINT CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995
INDEX
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Common Stock and Other
Shareholders' Equity
Condensed Notes to Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibits
PART 1.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions)
As of As of
March 31, December 31,
1995 1994
(Unaudited)
Assets
Current assets
Cash and equivalents $ 132.2 $ 123.3
Accounts receivable, net of allowance
for doubtful accounts of $154.7
million ($128.9 million in 1994) 1,487.5 1,469.8
Inventories 213.2 215.8
Deferred income taxes 45.4 54.2
Prepaid expenses 156.1 144.5
Other 179.9 180.9
Total current assets 2,214.3 2,188.5
Investments in equity securities 198.4 177.6
Property, plant and equipment
Long distance communications services 6,199.7 6,056.3
Local communications services 12,020.2 11,827.4
Cellular and wireless communications
services 867.9 818.5
Other 511.9 498.6
19,599.7 19,200.8
Less accumulated depreciation 8,648.6 8,322.2
10,951.1 10,878.6
Cellular minority partnership interests 303.8 301.7
Excess of cost over net assets acquired 700.1 706.7
Other assets 850.8 690.6
$ 15,218.5 $ 14,943.7
See accompanying condensed Notes to Consolidated Financial
Statements.
PART 1.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
(In Millions)
As of As of
March 31, December 31,
1995 1994
(Unaudited)
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt $ 271.4 $ 332.4
Accounts payable 934.2 1,072.2
Accrued interconnection costs 539.9 527.6
Accrued taxes 442.8 268.5
Advance billings 169.9 167.6
Other 639.5 686.3
Total current liabilities 2,997.7 3,054.6
Long-term debt 4,784.4 4,604.8
Deferred credits and other liabilities
Deferred income taxes and investment tax
credits 1,219.1 1,266.4
Postretirement and other benefit
obligations 864.0 850.3
Other 641.9 605.7
2,725.0 2,722.4
Redeemable preferred stock 34.7 37.1
Common stock and other shareholders'
equity
Common stock, par value $2.50 per share,
authorized 500.0 million shares, issued
348.6 million (348.6 million in 1994)
and outstanding 348.5 million (348.3
million in 1994) 871.4 871.4
Capital in excess of par or stated value 941.1 942.9
Retained earnings 2,865.7 2,730.9
Other (1.5) (20.4)
4,676.7 4,524.8
$ 15,218.5 $ 14,943.7
See accompanying condensed Notes to Consolidated Financial
Statements.
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Millions, Except Per Share Data)
Three Months
Ended
March 31,
1995 1994
Net operating revenues $ 3,271.5 $ 3,033.2
Operating expenses
Costs of services and products 1,639.9 1,528.4
Selling, general and administrative 768.7 724.2
Depreciation and amortization 386.8 352.3
Total operating expenses 2,795.4 2,604.9
Operating income 476.1 428.3
Interest expense (99.2) (101.1)
Other income (expense), net (20.5) 29.2
Income before income taxes 356.4 356.4
Income tax provision (132.1) (129.0)
Net income 224.3 227.4
Preferred stock dividends (0.7) (0.7)
Earnings applicable to common stock $ 223.6 $ 226.7
Earnings per common share $ 0.64 $ 0.65
Weighted average number of common shares 349.5 346.7
Dividends per common share $ 0.25 $ 0.25
See accompanying condensed Notes to Consolidated Financial Statements.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended
March 31,
1995 1994
Operating activities
Net income $ 224.3 $ 227.4
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 386.8 352.3
Deferred income taxes and investment tax
credits (50.4) (10.4)
Gain on sale of investment -- (34.7)
Changes in operating assets and liabilities
Accounts receivable, net (17.7) (68.5)
Inventories and other current assets (8.0) (20.9)
Accounts payable, accrued expenses and other
current liabilities 9.9 (34.2)
Noncurrent assets and liabilities, net 60.3 51.9
Other, net (2.7) 23.8
Net cash provided by operating activities 602.5 486.7
Investing activities
Capital expenditures (455.8) (326.9)
Proceeds from sale of investment in equity
securities -- 117.7
Investments in affiliates accounted for
using equity method (156.1) (0.9)
Other, net (3.2) (8.3)
Net cash used by investing activities (615.1) (218.4)
Financing activities
Proceeds from long-term debt 209.8 69.7
Retirements of long-term debt (201.1) (238.8)
Net increase (decrease) in notes payable and
commercial paper 109.9 (0.1)
Proceeds from common stock issued 0.7 16.2
Proceeds from employees stock purchase
installments -- 3.4
Dividends paid (87.9) (86.8)
Other, net (9.9) (3.0)
Net cash provided (used) by financing
activities 21.5 (239.4)
Increase in cash and equivalents 8.9 28.9
Cash and equivalents at beginning of period 123.3 76.8
Cash and equivalents at end of period $ 132.2 $ 105.7
Supplemental cash flows information
Cash paid for interest $ 91.8 $ 102.2
Cash paid for income taxes $ 4.3 $ 15.9
Noncash financing activities
Common stock contributed to employee
savings plans, at market $ -- $ 12.0
See accompanying condensed Notes to Consolidated Financial Statements.
PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY (UNAUDITED)
(In Millions)
Three Months Ended March 31, 1995
Capital
in Excess
of Par
Common or Stated Retained
Stock Value Earnings Other Total
Balance as of January
1, 1995 (348.6
million shares issued
and 348.3 million
shares outstanding) $871.4 $942.9 $2,730.9 $(20.4) $4,524.8
Net income -- -- 224.3 -- 224.3
Common stock dividends -- -- (87.2) -- (87.2)
Preferred stock
dividends -- -- (0.7) -- (0.7)
Employee stock purchase
and other installments
received, net -- -- -- 0.7 0.7
Common stock issued -- 0.3 -- -- 0.3
Change in unrealized
holding gains on
investments in equity
securities, net -- -- -- 13.3 13.3
Other, net -- (2.1) (1.6) 4.9 1.2
Balance as of March
31, 1995 (348.6
million shares issued
and 348.5 million
shares outstanding) $871.4 $941.1 $2,865.7 $(1.5) $4,676.7
See accompanying condensed Notes to Consolidated Financial Statements.
PART I.
Item 1.
SPRINT CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995 and 1994
The information contained in this Form 10-Q for the three-month
interim periods ended March 31, 1995 and 1994 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, 1995 are not necessarily indicative of the operating
results that may be expected for the year ended December 31, 1995.
1. Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the
accounts of Sprint Corporation and its wholly-owned and majority-
owned subsidiaries (Sprint). Investments in less than 50 percent-
owned partnerships or joint ventures are accounted for using the
equity method.
In accordance with industry practice, revenues and related net
income of non-regulated operations attributable to transactions
with Sprint's rate-regulated telephone companies have not been
eliminated in the accompanying consolidated financial statements.
Intercompany revenues of such entities amounted to $71 million and
$65 million for the three months ended March 31, 1995 and 1994,
respectively.
All other significant intercompany transactions have been
eliminated.
Classification of Operations
The long distance communications services division provides
domestic voice, video, and data communications services across
certain specified geographical boundaries, as well as international
long distance communications services. The terms under which the
division offers its services to the public are subject to different
levels of state and federal regulation, but rates are generally not
subject to rate-base regulation.
The local communications services division consists principally of
the operations of Sprint's rate-regulated telephone companies.
These operations provide local exchange services, access by
telephone customers and other carriers to local exchange facilities
and long distance services within specified geographical areas.
The cellular and wireless communications services division consists
of wholly-owned and majority-owned interests in partnerships and
corporations operating cellular and wireless communications
properties in various metropolitan and rural service area markets.
The product distribution and directory publishing businesses
include the wholesale distribution of telecommunications products
and the publishing and marketing of white and yellow page telephone
directories.
Reclassifications
Certain amounts previously reported for prior periods have been
reclassified to conform to the current period presentation in the
accompanying consolidated financial statements. Such
reclassifications had no effect on the results of operations or
shareholders' equity as previously reported.
2. Investments in Equity Securities
Investments in equity securities are classified as available for
sale and reported at fair value (estimated based on quoted market
prices). As of March 31, 1995 and December 31, 1994, the cost of
such investments was $109 million, with gross unrealized holding
gains of $90 million and $69 million, respectively, reflected as
additions to other shareholders' equity, net of related income
taxes.
During the three months ended March 31, 1994, Sprint sold an
investment in equity securities, realizing a gain of $35 million,
which increased net income $22 million ($0.06 per share).
3. Income Taxes
The differences which cause the effective income tax rate to vary
from the statutory federal income tax rate of 35 percent for the
three months ended March 31, 1995 and 1994, respectively, are as
follows (in millions):
Three Months Ended
March 31,
1995 1994
Income tax provision at the statutory rate $ 124.7 $ 124.7
Effect of:
Investment tax credits included in income (4.0) (5.1)
State income taxes, net of federal income
tax effect 13.2 12.8
Other, net (1.8) (3.4)
Income tax provision $ 132.1 $ 129.0
Effective income tax rate 37.1% 36.2%
4. Contingencies
Litigation, Claims and Assessments
Following announcement in 1992 of Sprint's merger agreement with
Centel Corporation (Centel), class action suits were filed against
Centel and certain of its officers and directors in federal and
state courts. The state suits have been dismissed, while the
federal suits have been consolidated into a single action which
seeks damages for alleged violations of securities laws. In
January 1995, a purported class action suit was filed against
Centel's financial advisors in state court in New York in
connection with the Sprint/Centel merger. Sprint may have
indemnification obligations to the financial advisors in connection
with this suit. Various other suits arising in the ordinary course
of business are pending against Sprint. Management cannot predict
the ultimate outcome of these actions but believes they will not
result in a material effect on Sprint's consolidated financial
statements.
Accounts Receivable Sold with Recourse
Under an agreement available through December 1995, Sprint may sell
on a continuous basis, with recourse, up to $600 million of
undivided interests in a designated pool of its accounts
receivable. Subsequent collections of receivables sold to
investors are typically reinvested in the pool. Sprint is required
to repurchase the designated pool of accounts receivable only upon
the occurrence of specified events involving non-collectibility of
accounts. As of March 31, 1995, Sprint had not been required to
repurchase receivables under this recourse provision. Because
Sprint retains credit losses associated with its accounts
receivable, any exposure related to this retention is estimated in
conjunction with Sprint's calculation of its reserve for
uncollectible accounts. On an annual basis, subject to the
approval of the investors, Sprint may extend the agreement for an
additional year. Receivables sold that remained uncollected as of
March 31, 1995 aggregated $600 million.
5. Subsequent Event
In April 1995, Sprint's Board of Directors declared a common stock
dividend of $0.25 per share payable on June 30, 1995.
PART I.
Item 2.
SPRINT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Corporation (Sprint), incorporated in 1938 under the laws of
Kansas, is a holding company. Sprint's principal subsidiaries
provide domestic and international long distance, local exchange
and cellular and wireless telecommunications services. Other
subsidiaries are engaged in the wholesale distribution of
telecommunications products and the publishing and marketing of
white and yellow page telephone directories.
Long Distance Communications Services. The long distance division
is the nation's third largest long distance telephone company,
operating a nationwide all-digital long distance communications
network utilizing state-of-the-art fiber-optic and electronic
technology. The division provides domestic and international
voice, video and data communications services. The terms under
which the division offers its services to the public are subject to
different levels of state and federal regulation, but rates are
generally not subject to rate-base regulation.
Local Communications Services. The local division is comprised of
rate-regulated local exchange carriers (LECs) which serve
approximately 6.5 million access lines in 19 states. The companies
in the division operate in geographical areas called Local Access
Transport Areas (LATAs) in which they provide basic local exchange
and intra-LATA toll service. The division also is a reseller of
interexchange long distance services and provides other carriers
access to Sprint's local exchange facilities.
Cellular and Wireless Communications Services. The cellular and
wireless division, which serves over 1.1 million cellular
subscribers, primarily consists of Sprint Cellular Company and its
subsidiaries. The division has operating control of 87 markets in
14 states and minority interests in 53 markets.
Product Distribution and Directory Publishing. North Supply
Company (North Supply), a wholesale distributor of
telecommunications, security and alarm, and electrical products,
distributes products of more than 1,200 manufacturers to
approximately 9,500 customers. Products range from basics, such as
wire and cable, telephones and repair parts, to complete private
branch exchange (PBX) systems, transmission systems and security
and alarm equipment.
Sprint Publishing & Advertising along with Centel Directory Company
publish and market white and yellow page telephone directories in
certain of Sprint's local exchange territories, as well as in the
greater metropolitan areas of Milwaukee, Wisconsin and Chicago,
Illinois. The companies publish approximately 335 directories in
20 states with a circulation of 16.1 million copies.
Strategic Developments
On March 28, 1995, Sprint, along with Tele-Communications Inc.
(TCI), Comcast Corporation (Comcast) and Cox Communications, Inc.
(Cox), signed a definitive agreement to provide local
telecommunications services on a national basis. This partnership
complements and will be jointly managed with the partners' existing
wireless venture. The Sprint Telecommunications Venture is
owned 40 percent by Sprint, 30 percent by TCI and 15 percent each
by Comcast and Cox. Over the next several months, the venture will
finalize a definitive business plan, which will require unanimous
approval by the partners. Included in the plan will be the
venture's wireline and wireless buildout and rollout initiatives.
The four partners have committed to make cash capital contributions
to the venture over the next three years of approximately $4.4
billion of which Sprint's portion is estimated to be approximately $2.0
billion. Approximately $500 million of this commitment has already
been contributed to the venture, primarily to fund amounts paid to
the Federal Communications Commission (FCC) in connection with the
Personal Communications Services (PCS) license auction. In
addition, the cable partners' interests in Teleport Communications
Group, Inc. (TCG) will be contributed to the venture, subject to
governmental and other third-party approvals. TCG is majority-
owned by the cable partners and is an alternative access provider
which operates fiber-optic networks in major U.S. markets.
In March 1995, the Sprint Telecommunications Venture achieved
a national wireless presence in the first round of broadband PCS
auctions. The venture and its affiliates won the rights to PCS
licenses in 30 major trading areas (MTAs) at a cost of $2.2
billion. The venture's wireless presence, including the wireless
presence held by venture wireless affiliates, will cover a
population of 182.4 million in the United States.
Results Of Operations
Consolidated
Each of Sprint's primary divisions -- long distance, local
exchange, and cellular and wireless -- generated improved net
operating revenues and operating income in the first quarter of
1995 as compared to the first quarter of 1994. The long distance
division generated a 6 percent growth in traffic volumes over the
first quarter of 1994, the number of access lines served by the
local division grew 4.5 percent during the past 12 months, and the
cellular and wireless division benefited from a 54.8 percent growth
in cellular subscribers over the past 12 months.
Consolidated net operating revenues for the quarter ended March 31,
1995 were $3.27 billion, a 7.9 percent increase over net operating
revenues of $3.03 billion for the first quarter of 1994. For the
quarter ended March 31, 1995, net income was $224 million, or $0.64
per share, compared with $227 million, or $0.65 per share, for the
first quarter of 1994. Net income for the quarter ended March 31,
1994 included a $22 million gain ($0.06 per share) related to the
sale of an investment in equity securities.
Long Distance Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1995 1994 Dollar Percent
Net operating revenues $ 1,752.5 $ 1,660.4 $ 92.1 5.6%
Operating expenses
Interconnection 762.2 748.5 13.7 1.8%
Operations 244.7 214.8 29.9 13.9%
Selling, general and
administrative 449.2 420.3 28.9 6.9%
Depreciation and
amortization 141.0 133.7 7.3 5.5%
Total operating
expenses 1,597.1 1,517.3 79.8 5.3%
Operating income $ 155.4 $ 143.1 $ 12.3 8.6%
Operating margin 8.9% 8.6%
Net operating revenues for the first quarter of 1995 increased 5.6
percent over the comparable 1994 period and traffic volume growth
increased slightly more than 6 percent. Average revenue per minute
received from customers was relatively constant as a result of
changes in product mix. The increases in net operating revenues
and traffic volumes reflect continuing growth in the large business
and international business markets. Growth in the international
market reflects the division's continuing efforts to target new
geographic markets. The business market continued to experience
growth in the "800" services market. Revenue growth for the three
months ended March 31, 1995 was enhanced by strong performance in
the data services market, which includes sales to consumer on-line
services. Intense competition in the residential market and small
business markets contributed to declines in these markets as
compared to the prior year.
Interconnection costs consist of amounts paid to local exchange
carriers, other domestic service providers, and foreign telephone
companies for the completion of calls made by the division's
customers. Interconnection costs increased during the first
quarter of 1995 relative to the comparable 1994 period due to an
increase in access costs associated with the growth in data
products and increased traffic volumes and changes in the mix of
traffic volumes to various countries. These increases were
partially offset by reductions in rates paid to foreign telephone
companies to complete international calls made by the division's
domestic customers and reduced costs of connecting to networks
domestically as a result of lower intrastate access rates in California
and decreased interstate access rates. As a percentage of net operating
revenues, interconnection costs decreased from 45.1 percent in the
first quarter of 1994 to 43.5 percent in the first quarter of 1995.
Operations expense consists of costs related to operating and
maintaining the long distance network; costs of providing various
services such as operator services, public payphones,
telecommunications services for the hearing impaired, and video
teleconferencing; and costs of data system sales. Operations
expense for the first quarter of 1995 increased $30 million from
the comparable 1994 period, primarily due to increased costs
associated with growth within the "800" services market of the
large business segment and increased international network
operations costs reflecting growth in overseas products and foreign
operations. The increase in operations expense also included
approximately $3 million of expenses associated with a reduction in
the division's work force which was substantially completed during
the quarter.
Selling, general and administrative (SG&A) expense for the first
quarter of 1995 increased $29 million, generally reflecting the
overall growth in the division's operating activities. As a
percentage of net operating revenues, these expenses have remained
at relatively stable levels, increasing slightly from 25.3 percent
for the first quarter of 1994 to 25.6 percent for the first quarter
of 1995. The increase in SG&A expense was generally due to
increased sales and marketing efforts which are important in the
intensely competitive long distance marketplace. The increase also
included approximately $6 million of expenses associated with a
reduction in the division's work force which was substantially
completed during the quarter.
Depreciation and amortization in the first quarter of 1995
increased $7 million compared to 1994, generally due to an increase
in the asset base.
The division made progress toward restoring growth of profitability
during the first quarter of 1995. This follows the fourth quarter
of 1994 in which the division broke its string of nine consecutive
quarters of increased operating income. Operating income for the
fourth quarter of 1994 decreased $27 million from the third
quarter. Fourth quarter net operating revenues reflected
intensified competition in the residential marketplace. The
division implemented various actions to address this decline,
including selective pricing actions, product introductions,
marketing initiatives, and process and productivity improvements.
As a result of such actions, operating income for the first quarter
of 1995 increased $17 million from the fourth quarter of 1994.
Additionally, as discussed above, the division substantially
completed a reduction in its work force of about 400 employees
during the three months ended March 31, 1995 and recorded expenses
of $9 million related to this action. The division's continued
improvement in operating results will depend upon the continued
success of marketing efforts; the continued ability to maintain
pricing strategies and gain market share in the intensely
competitive long distance marketplace; and continued focus on cost
containment and technology improvements.
Local Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1995 1994 Dollar Percent
Net operating revenues
Local service $ 453.6 $ 425.6 $ 28.0 6.6%
Network access 411.3 391.0 20.3 5.2%
Toll service 122.6 134.2 (11.6) (8.6)%
Other 153.4 117.7 35.7 30.3%
Total net operating 1,140.9 1,068.5 72.4 6.8%
revenues
Operating expenses
Plant operations 333.7 317.7 16.0 5.0%
Depreciation and
amortization 207.2 187.3 19.9 10.6%
Customer operations 141.2 131.1 10.1 7.7%
Other 187.3 176.0 11.3 6.4%
Total operating
expenses 869.4 812.1 57.3 7.1%
Operating income $ 271.5 $ 256.4 $ 15.1 5.9%
Operating margin 23.8% 24.0%
The division's net operating revenues for the first quarter of 1995
increased 6.8 percent over the comparable 1994 period. Growth in
local service revenues reflects continued increases in the number
of access lines served and growth in add-on services, such as
custom calling features. The number of access lines served grew
4.5 percent during the past twelve months.
Network access revenues, derived from interexchange long distance
carriers' use of the local network to complete calls, increased as
a result of increased traffic volumes, partially offset by periodic
reductions in network access rates charged. During the first
quarter of 1995, the FCC announced a new interim interstate price
caps plan which is effective August 1, 1995. Under the new plan,
the local division will have the option of choosing a rate formula
based on productivity that will effectively remove the earnings cap
on the division's interstate access revenues. Interstate access
revenues currently comprise approximately 60 percent of the
division's network access revenues.
Toll service revenues, related to the provision of long distance
services within specified geographical areas and the reselling of
interexchange long distance services, decreased 8.6 percent. This
decrease primarily reflects increased competition in the intrastate
long distance market. While toll service revenues have declined as
a result of this increased competition, this reduction is partially
recovered through the resulting increased use of the local network
by interexchange long distance carriers.
Other revenues, including revenues from directory publishing fees,
billing and collection services and sales of telecommunications
equipment, increased 30.3 percent. The increase was generally due
to growth in equipment sales, an increase in billing and collection
services and an increase in miscellaneous non-regulated revenues.
Plant operations expense includes network operations; repair and
maintenance costs of property, plant and equipment; and other costs
associated with the provision of local exchange services. Plant
operations expense increased $16 million in the first quarter of
1995 over the comparable 1994 period primarily due to increases in
the costs of providing services resulting from access line growth.
The increase in depreciation and amortization expense for the first
quarter of 1995 relative to the comparable 1994 period was
generally due to plant additions and the implementation of
depreciation rate changes within the division's Florida operations.
These depreciation rate changes resulted in an increase in
depreciation expense for the first quarter of 1995 of $8 million.
Customer operations expense includes costs associated with business
office operations and billing services, marketing costs, and
expenses related to providing operator and directory assistance and
other customer services. Customer operations expense increased $10
million in the first quarter of 1995 compared to the first quarter
of 1994 primarily due to increased marketing costs to promote new
products and services and increased business office operations
costs.
Other operating expenses increased $11 million in the first quarter
of 1995 over the comparable 1994 period primarily due to the growth
in equipment sales.
Consistent with most LECs, the division accounts for the economic
effects of regulation pursuant to Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain
Types of Regulation." The application of SFAS No. 71 requires the
accounting recognition of the rate actions of regulators where
appropriate, including the recognition of depreciation and
amortization based on estimated useful lives prescribed by
regulatory commissions rather than those that might be utilized by
non-regulated enterprises. Sprint currently believes the
division's rate-regulated operations meet the criteria for the
continued application of the provisions of SFAS No. 71. However,
the division operates in an evolving environment in which the
regulatory framework is changing and the level and types of
competition are increasing. Accordingly, Sprint constantly
monitors and evaluates the ongoing applicability of SFAS No. 71 by
assessing the likelihood that prices which provide for the recovery
of specific costs can continue to be charged to customers. In the
event Sprint determines that the division's rate-regulated
operations no longer qualify for the application of the provisions
of SFAS No. 71, Sprint would eliminate from its financial
statements the effects of any actions of regulators that had been
recognized as assets and liabilities. The resulting material
noncash charge would be recorded as an extraordinary item.
Cellular and Wireless Communications Services
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1995 1994 Dollar Percent
Net operating revenues $ 203.3 $ 143.3 $ 60.0 41.9%
Operating expenses
Costs of services and
products 69.2 46.2 23.0 49.8%
Selling, general and
administrative 77.0 62.0 15.0 24.2%
Depreciation and
amortization 26.8 22.7 4.1 18.1%
Total operating 173.0 130.9 42.1 32.2%
expenses
Operating income $ 30.3 $ 12.4 $ 17.9 --
Operating margin 14.9% 8.7%
In addition to activities comprising the above operating results,
Sprint's cellular and wireless division also owns minority
interests in certain markets. Equity in the earnings and losses of
these minority investments is included in "Other income (expense),
net" in the Consolidated Statements of Income.
Net operating revenues for the first quarter of 1995 increased 41.9
percent over the comparable 1994 period, primarily due to a 54.8
percent growth in customer lines served. The effects of growth in
customer lines served was partially offset by a decline in service
revenue per customer line from $64 for the first quarter of 1994 to
$59 for the first quarter of 1995, reflecting an industry-wide
trend that has occurred as a result of increased general consumer
market penetration. Future growth rates for net operating revenues
and the number of cellular subscribers will be dependent on price
levels and the quality of service in the competitive cellular
marketplace as well as the impact of emerging competition such as
PCS.
Excluding the costs and revenues related to equipment sales, costs
of services and products increased to 25.0 percent of net operating
revenues in the first quarter of 1995 from 24.8 percent for the
same period in 1994. This increase is primarily attributable to a
higher level of roaming expense as a result of an increase in
fraudulent usage.
The increase in selling, general and administrative expense for the
first quarter of 1995 resulted principally from increased
commissions and customer service expenses, as well as increased
advertising costs related to the growth in the number of cellular
subscribers. Despite the increases in the amount of SG&A expense,
such costs as a percentage of net operating revenues (excluding
revenues from equipment sales) declined to 40.1 percent in the
first quarter of 1995 from 46.9 percent in the first quarter of
1994. This improvement resulted primarily from additional
economies realized from providing service and support to a larger
customer base. However, the division's total per unit cost to
acquire customers, including equipment sales discounts, increased
10 percent from the first quarter of 1994 as compared to the same
period in 1995, reflecting the intensely competitive marketplace
for acquiring new customers as well as increased costs associated
with the retention of a larger existing customer base.
Depreciation and amortization increased primarily due to the
additional investment in property, plant and equipment required to
accommodate the growth in customer lines.
Product Distribution and Directory Publishing Businesses
Selected Operating Results
(In Millions)
Three Months Ended
March 31, Variance
1995 1994 Dollar Percent
Net operating revenues $ 277.3 $ 250.8 $ 26.5 10.6%
Operating expenses
Costs of services and
products 235.0 212.3 22.7 10.7%
Selling, general and
administrative 21.6 20.5 1.1 5.4%
Depreciation and
amortization 1.8 1.6 0.2 12.5%
Total operating
expenses 258.4 234.4 24.0 10.2%
Operating income $ 18.9 $ 16.4 $ 2.5 15.2%
Operating margin 6.8% 6.5%
North Supply, Sprint's product distribution subsidiary, had net
operating revenues of $206 million for the first quarter of 1995,
increasing $23 million from the comparable 1994 period due to
growth in sales to non-affiliates as well as increased sales to
Sprint's local communications services division. This growth
in sales contributed to a $19 million increase in costs of services
and products.
Sprint Publishing & Advertising, Sprint's directory publishing
subsidiary, had net operating revenues of $71 million and $68
million for the three months ended March 31, 1995 and 1994,
respectively. Sprint Publishing and Advertising experienced an
increase in costs of services and products from $54 million in the
first quarter of 1994 to $58 million in the first quarter of 1995.
Non-Operating Items
Interest Expense
Interest expense for the first quarter of 1995 decreased $2 million
from the comparable 1994 period. This decrease generally reflects
a reduction in the average levels of debt outstanding as well as
lower interest rates. Sprint's average debt outstanding decreased
by $37 million from the first quarter of 1994 to the first quarter
of 1995 and the effective interest rate decreased 9 basis points
over the same period.
Other Income (Expense), Net
The components of other income (expense), net are as follows (in
millions):
Three Months Ended
March 31,
1995 1994
Gain on sale of investment in equity
securities $ -- $ 34.7
Equity in earnings of minority interests 3.6 2.1
Loss on sales of accounts receivable (9.8) (5.7)
Minority interests (8.0) (3.5)
Other (6.3) 1.6
Total other income (expense), net $ (20.5) $ 29.2
Income Tax Provision
See Note 3 of condensed Notes to Consolidated Financial Statements
for information regarding the differences which cause the effective
income tax rate to vary from the statutory federal income tax rate.
Financial Condition
Sprint's consolidated assets totaled $15.22 billion at March 31,
1995 compared to $14.94 billion at December 31, 1994. Property,
plant and equipment, net of accumulated depreciation, increased $73
million over the same period. This increase was primarily a result
of increased capital expenditures to upgrade Sprint's networks, to
expand service capabilities and increase productivity. Accounts
payable decreased $138 million as of March 31, 1995 compared to
December 31, 1994 generally due to an increase in construction
expenditures which generally occurs in the fourth quarter. Current
maturities of long-term debt as of March 31, 1995 decreased $61
million compared to December 31, 1994 due to scheduled debt
payments. As of March 31, 1995, Sprint's total capitalization
aggregated $9.77 billion, consisting of long-term debt (including
current maturities), redeemable preferred stock, and common stock
and other shareholders' equity. Long-term debt (including current
maturities) comprised 51.8 percent and 52.0 percent of total
capitalization as of March 31, 1995 and December 31, 1994,
respectively.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Cash flows from operating activities, which are Sprint's primary
source of liquidity, were $603 million during the first three
months of 1995, compared to $487 million during the first three
months of 1994. The increase in operating cash flows generally
reflects improved operating results in all divisions and reduced
working capital requirements.
Cash Flows - Investing Activities
Sprint's investing activities used cash of $615 million and $218
million during the first three months of 1995 and 1994,
respectively. Capital expenditures, which represent Sprint's most
significant investing activity, were $456 million and $327 million
during the first three months of 1995 and 1994, respectively. Long
distance capital expenditures totaled $149 million for the first
three months of 1995 compared to $80 million for the same period in
1994. The 1995 expenditures were incurred primarily to enhance
network reliability, to upgrade capabilities for providing new
products and services and to meet increased customer demand.
Capital expenditures for the local division totaled $250 million
for the first three months of 1995 compared to $210 million for the
same period in 1994. The 1995 expenditures were made to
accommodate access line growth, to continue the conversion to
digital technologies, and to expand the division's capabilities for
providing enhanced telecommunications services. Capital
expenditures for the cellular and wireless division totaled $50
million for the first three months of 1995 compared to $30 million
for the same period in 1994. The 1995 expenditures were made to
support the increase in the number of customer lines served.
During the first quarter of 1995, Sprint contributed $162 million
to the Sprint Telecommunications Venture, of which $133
million was used to fund Sprint's portion of the initial payment to
the FCC for licenses acquired in the PCS auction. The remaining
amount of this contribution was primarily used to fund Sprint's
portion of the venture's acquisition of a limited partnership
interest in American Personal Communications (APC), which has a
pioneer preference license in the Washington D.C. MTA.
Investing activities in the first three months of 1994 included
$118 million received in connection with the sale of an investment
in equity securities.
Cash Flows - Financing Activities
Financing activities provided cash of $22 million in the first
three months of 1995 compared to cash used of $239 million in the
comparable 1994 period. During January 1995, $70 million of long-
term debt securities were issued under a shelf registration
statement in order to reduce commercial paper outstanding. During
March 1995, Sprint issued $138 million of 8 1/4% Exchangeable Notes
due March 31, 2000 in the form of 4.3 million DECS(sm) (Debt
Exchangeable for Common Stock) exchangeable into shares of Common
Stock, par value $1.00 per share, of Southern New England
Telecommunications Corporation. The proceeds received from the
DECS(sm) issuance were used to fund commitments associated with the
Sprint Telecommunications Venture. Long-term debt retirements
during the first three months of 1994 included the redemption of
$102 million of debt called, prior to scheduled maturity, in 1993.
Capital Requirements - Exclusive of Sprint Telecommunications Venture
Sprint anticipates funding capital expenditures and dividends with
cash flows from operating activities during 1995. Sprint currently
expects annual capital expenditures for 1995 to be approximately
$2.1 billion. Sprint expects its external cash requirements for
the remainder of 1995 to be approximately $550 million to $650
million, which is generally required to repay scheduled long-term
debt maturities and to refinance notes payable and commercial
paper. Long-term debt outstanding as of March 31, 1995 includes
$1.2 billion of notes payable and commercial paper. Amounts which
are not refinanced through the issuance of long-term debt will
continue to be financed under existing credit facilities or may be
reduced through free cash flows. External cash requirements will
be financed primarily with debt, the source of which will depend
upon prevailing market conditions during the year.
Capital Requirements - Associated with Sprint Telecommunications Venture
As discussed in "Strategic Developments," Sprint has entered into a
joint venture with certain cable companies to provide both wireless
and wireline communications services to consumers and businesses on
a broad geographic basis within the United States. The Sprint
Telecommunications Venture and its affiliates were successful
in bidding on PCS licenses in 30 MTAs at a cost of $2.2 billion.
Sprint's cash commitment associated with the PCS licenses is
approximately $890 million. The remaining portion of this
commitment, approximately $710 million, is expected to be paid
during the second quarter of 1995. Additionally in 1995, Sprint
anticipates funding cash commitments of approximately $500 million
associated with the joint venture. Sprint estimates that its total
cash contributions to the venture will be approximately $2 billion over
the first three years of operation. Sprint has negotiated an
interim credit facility of $1.3 billion to support anticipated cash
commitments associated with the Sprint Telecommunications
Venture activities. A portion of the cash proceeds from the
anticipated investment in Sprint by Deutsche Telekom and France
Telecom would be used to ultimately fund commitments associated
with the venture's activities.
Liquidity
As of March 31, 1995, Sprint had the ability to borrow $1.6 billion
under revolving credit agreements with syndicates of domestic and
international banks and other bank commitments. Other available
financing sources include a Medium-Term Note program, under which
Sprint may offer for sale up to $175 million of unsecured senior
debt securities. In addition, Sprint may offer for sale
approximately $1.0 billion of debt securities pursuant to shelf
registration statements filed with the Securities and Exchange
Commission.
The aggregate amount of additional borrowings which can be incurred
is ultimately limited by certain covenants contained in existing
debt agreements. As of March 31, 1995, Sprint had borrowing
capacity of approximately $4.3 billion under the most restrictive
of its debt covenants.
The most restrictive covenant applicable to dividends results from
Sprint's revolving credit agreements. Among other restrictions,
the agreements require Sprint to maintain specified levels of
consolidated net worth, as defined. As a result of these
requirements, $1.7 billion of Sprint's $2.87 billion consolidated
retained earnings were effectively restricted from the payment of
dividends as of March 31, 1995.
General Hedging Policies
Sprint utilizes certain derivative instruments in an effort to
manage exposure to interest rate risk and foreign exchange risk.
Sprint's utilization of such derivative instruments related to
hedging activities is limited to interest rate swap agreements,
interest rate caps and forward contracts and options in foreign
currencies. As is customary for these types of derivative
instruments, Sprint does not require collateral or other security
from the counterparties to such agreements. However, because
Sprint controls its exposure to credit risk through credit
approvals, credit limits, and internal monitoring procedures,
Sprint believes that its credit risk exposure is limited.
Sprint will in no circumstance take speculative positions and
create an exposure to benefit from market fluctuations. All
hedging activity is in accordance with board-approved policies.
Any potential loss or exposure related to Sprint's use of
derivative instruments is immaterial to its overall operations,
financial condition and liquidity.
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March
31, 1995.
Item 2. Changes in Securities
There were no reportable events during the quarter ended March
31, 1995.
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended March
31, 1995.
Item 4. Submission of Matters to a Vote of Security Holders
On April 18, 1995, Sprint held its Annual Meeting of
Shareholders. In addition to the election of four Class III
Directors to serve for a term of three years, the shareholders
approved the appointment of Ernst & Young LLP as independent
auditors for Sprint, approved the Management Incentive Stock
Option Plan and did not approve two shareholder proposals.
The following votes were cast for each of the following
nominees for Director or were withheld with respect to such
nominees:
For Withheld
William T. Esrey 281,273,406 5,010,909
Linda Koch Lorimer 282,703,107 3,581,208
Charles H. Price II 282,787,845 3,496,470
Stewart Turley 282,962,234 3,322,081
The following votes were cast with respect to the proposal to
approve the appointment of Ernst & Young LLP as independent
auditors of Sprint for 1995:
For 282,892,944
Against 2,212,050
Abstain 1,179,321
The following votes were cast with respect to the proposal to
approve the Management Incentive Stock Option Plan:
For 240,156,409
Against 18,439,203
Abstain 2,381,515
Broker non-votes 25,307,188
The following votes were cast with respect to a shareholder
proposal requesting that the Board of Directors of Sprint
refrain from providing retirement benefits to non-employee
directors unless such benefits are submitted to the
shareholders for approval:
For 71,443,702
Against 178,147,082
Abstain 8,640,716
Broker non-votes 28,052,815
The following votes were cast with respect to a shareholder
proposal regarding the adoption of a bylaw establishing a
Stockholder Advisory Committee to review the management of the
business and affairs of the corporation by the Board of
Directors:
For 26,170,174
Against 220,533,595
Abstain 11,527,731
Broker non-votes 28,052,815
Item 5. Other Information
Sprint's ratios of earnings to fixed charges were 3.62 and
3.73 for the three months ended March 31, 1995 and 1994,
respectively. These ratios have been computed by dividing
fixed charges into the sum of (a) net income less capitalized
interest included in income, (b) income taxes, and (c) fixed
charges. Fixed charges consist of interest on all
indebtedness (including amortization of debt issuance
expenses), the interest factor of operating rents and the pre-
tax cost of preferred stock dividends of subsidiaries. In the
absence of the gain on the sale of an investment in equity
securities of $22 million for the three months ended March 31,
1994, the ratio of earnings to fixed charges would have been
3.56 for that period.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(10) Material Agreements - Joint Venture:
(a) Agreement of Limited Partnership of MajorCo,
L.P., a Delaware limited partnership, dated as of
March 28, 1995, among Sprint Spectrum, L.P., TCI
Network Services, Comcast Telephony Services and Cox
Telephony Partnership.
(10) Executive Compensation Plans and Arrangements:
(b) Form of Contingency Employment Agreements
between Sprint Corporation and certain of its
executive officers.
(c) 1978 Stock Option Plan, as amended.
(d) 1981 Stock Option Plan, as amended.
(e) 1985 Stock Option Plan, as amended.
(f) 1990 Stock Option Plan, as amended.
(g) 1990 Restricted Stock Plan, as amended.
(h) Management Incentive Stock Option Plan, as amended.
(i) Long-Term Stock Incentive Program, as amended.
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
Sprint filed a Current Report on Form 8-K dated March 27, 1995
in which it reported the closing of the sale of $138 million
of 8 1/4% Exchangeable Notes due March 31, 2000 in the form of
4.3 million DECS(sm) (Debt Exchangeable for Common Stock)
exchangeable into shares of Common Stock, par value $1.00 per
share, of Southern New England Telecommunications Corporation.
The Underwriting Agreement between the underwriters and Sprint
and the First Supplemental Indenture between Sprint and the
trustee were filed as exhibits to the report.
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 CORPORATION
(Registrant)
By /s/ John P. Meyer
John P. Meyer
Senior Vice President -- Controller
Principal Accounting Officer
Dated: May 8, 1995
EXHIBIT INDEX
EXHIBIT
NUMBER
(10) Material Agreements - Joint Venture:
(a) Agreement of Limited Partnership of MajorCo,
L.P., a Delaware limited partnership, dated as of
March 28, 1995, among Sprint Spectrum, L.P., TCI
Network Services, Comcast Telephony Services and Cox
Telephony Partnership.
(10) Executive Compensation Plans and Arrangements:
(b) Form of Contingency Employment Agreements
between Sprint Corporation and certain of its
executive officers.
(c) 1978 Stock Option Plan, as amended.
(d) 1981 Stock Option Plan, as amended.
(e) 1985 Stock Option Plan, as amended.
(f) 1990 Stock Plan, as amended.
(g) 1990 Restricted Stock Plan, as amended.
(h) Management Incentive Stock Option Plan, as amended.
(i) Long-Term Stock Incentive Program, as amended.
(11) Computation of Earnings Per Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
<PAGE>
Exhibit (10)(a)
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.,
A DELAWARE LIMITED PARTNERSHIP
dated as of March 28, 1995
among
SPRINT SPECTRUM, L.P.
TCI NETWORK SERVICES
COMCAST TELEPHONY SERVICES
and
COX TELEPHONY PARTNERSHIP
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. THE PARTNERSHIP 1
1.1 Formation......................................................... 1
1.2 Name.............................................................. 1
1.3 Purpose........................................................... 1
1.4 Principal Executive Office........................................ 2
1.5 Term.............................................................. 2
1.6 Filings; Agent for Service of Process............................. 2
1.7 Title to Property. ............................................... 3
1.8 Payments of Individual Obligations................................ 3
1.9 Independent Activities............................................ 3
1.10 Definitions...................................................... 3
1.11 Additional Definitions........................................... 32
1.12 Terms Generally.................................................. 35
SECTION 2. PARTNERS' CAPITAL CONTRIBUTIONS................................ 35
2.1 Percentage Interests; Preservation of
Percentages of Interests Held as General
Partners and as Limited Partners................................ 35
2.2 Partners' Original Capital Contributions.......................... 36
2.3 Additional Capital Contributions.................................. 36
2.4 Failure to Contribute Capital..................................... 47
2.5 Other Additional Capital Contributions............................ 53
2.6 Partnership Funds................................................. 53
2.7 Partner Loans; Other Borrowings................................... 53
2.8 Obligations Under Contribution Agreement.......................... 56
2.9 Other Matters..................................................... 56
SECTION 3. ALLOCATIONS.................................................... 57
3.1 Profits........................................................... 57
3.2 Losses............................................................ 58
3.3 Special Allocations............................................... 58
3.4 Curative Allocations.............................................. 61
3.5 Loss Limitation................................................... 61
3.6 Other Allocation Rules............................................ 62
3.7 Tax Allocations: Code Section 704(c)............................. 62
SECTION 4. DISTRIBUTIONS.................................................. 63
4.1 Available Cash.................................................... 63
4.2 Tax Distributions................................................. 64
4.3 Amounts Withheld.................................................. 64
<PAGE> ii
<S> <C>
SECTION 5. MANAGEMENT..................................................... 64
5.1 Authority of the Management Committee............................. 64
5.2 Business Plan and Annual Budget................................... 70
5.3 Employees......................................................... 74
5.4 Limitation of Agency.............................................. 74
5.5 Liability of Partners, Representatives and
Partnership Employees............................................. 75
5.6 Indemnification................................................... 76
5.7 Temporary Investments............................................. 77
5.8 Deadlocks......................................................... 77
5.9 Conversion to Corporate Form...................................... 79
SECTION 6. PARTNERSHIP OPPORTUNITIES;
CONFIDENTIALITY........................................ 81
6.1 Competitive Activities............................................ 81
6.2 Enforceability and Enforcement.................................... 84
6.3 General Exceptions to Section 6.1................................. 84
6.4 Comcast Exceptions................................................ 89
6.5 Overlaps.......................................................... 93
6.6 Freedom of Action................................................. 98
6.7 Confidentiality................................................... 98
SECTION 7. LOCAL OPERATOR AGREEMENT....................................... 101
SECTION 8. ROLE OF EXCLUSIVE LIMITED PARTNERS............................. 101
8.1 Rights or Powers.................................................. 101
8.2 Voting Rights..................................................... 102
SECTION 9. TRANSACTIONS WITH PARTNERS;
OTHER AGREEMENTS....................................... 102
9.1 Sprint Cellular................................................... 102
9.2 Sprint Brand Licensing Agreement.................................. 103
9.3 Joint Marketing Agreement......................................... 103
9.4 Services Agreement................................................ 103
9.5 Preferred Provider................................................ 104
9.6 MFJ............................................................... 104
9.7 Interested Party Transactions..................................... 105
9.8 Access to Technical Information................................... 105
9.9 Parent Undertaking................................................ 106
9.10 Certain Additional Covenants..................................... 106
9.11 PioneerCo Preemptive Rights...................................... 107
9.12 Foreign Ownership................................................ 107
9.13 Advertising Fund................................................. 109
9.14 Provision of Services............................................ 111
9.15 Comcast Representative........................................... 111
9.16 Purchasing....................................................... 112
<PAGE> iii
<S> <C>
SECTION 10. REPRESENTATIONS AND WARRANTIES................................ 112
10.1 Representations and Warranties by Partners....................... 112
10.2 Representation and Warranty of Sprint............................ 114
SECTION 11. ACCOUNTING, BOOKS AND RECORDS................................. 114
11.1 Accounting, Books and Records.................................... 114
11.2 Reports.......................................................... 115
11.3 Tax Returns and Information...................................... 117
11.4 Proprietary Information.......................................... 118
SECTION 12. ADVERSE ACT................................................... 119
12.1 Remedies......................................................... 119
12.2 Adverse Act Purchase............................................. 121
12.3 Net Equity....................................................... 124
12.4 Gross Appraised Value............................................ 125
12.5 Extension of Time................................................ 126
SECTION 13. DISPOSITIONS OF INTERESTS..................................... 126
13.1 Restriction on Dispositions...................................... 126
13.2 Permitted Transfers.............................................. 127
13.3 Conditions to Permitted Transfers................................ 127
13.4 Right of First Refusal........................................... 130
13.5 Tagalong Rights.................................................. 134
13.6 Partner Put Rights............................................... 136
13.7 Put/Call of Preferred Interests.................................. 139
13.8 Prohibited Dispositions.......................................... 140
13.9 Representations Regarding Transfers.............................. 140
13.10 Distributions and Allocations in Respect of..................... 140
SECTION 14. CONVERSION OF INTERESTS....................................... 141
14.1 Termination of Status as General Partner......................... 141
14.2 Restoration of Status as General Partner......................... 142
SECTION 15. DISSOLUTION AND WINDING UP.................................... 142
15.1 Liquidating Events............................................... 142
15.2 Winding Up....................................................... 143
15.3 Compliance With Certain Requirements of
Regulations; Deficit Capital Accounts.......................... 144
15.4 Deemed Distribution and Recontribution........................... 145
15.5 Rights of Partners............................................... 145
15.6 Notice of Dissolution............................................ 146
15.7 Buy/Sell Arrangements............................................ 146
<PAGE> iv
<S> <C>
SECTION 16. MISCELLANEOUS................................................. 148
16.1 Notices.......................................................... 148
16.2 Binding Effect................................................... 149
16.3 Construction..................................................... 149
16.4 Time............................................................. 149
16.5 Table of Contents; Headings...................................... 149
16.6 Severability..................................................... 150
16.7 Incorporation by Reference....................................... 150
16.8 Further Action................................................... 150
16.9 Governing Law.................................................... 150
16.10 Waiver of Action for Partition; No Bill For
Partnership Accounting.......................................... 150
16.11 Counterpart Execution........................................... 151
16.12 Sole and Absolute Discretion.................................... 151
16.13 Specific Performance............................................ 151
16.14 Entire Agreement................................................ 151
16.15 Limitation on Rights of Others.................................. 151
16.16 Waivers; Remedies............................................... 151
16.17 Jurisdiction; Consent to Service of Process..................... 152
16.18 Waiver of Jury Trial............................................ 152
16.19 No Right of Set-Off............................................. 152
</TABLE>
<PAGE> v
<TABLE>
<CAPTION>
SCHEDULES
SCHEDULES NUMBER
<S> <C>
Current Sprint LEC Territories........................................ 1.10(a)
Excluded Businesses; Exclusive and Non-Exclusive
Services; 75 Mile Plus Calls ......................................... 1.10(b)
Other CAP Businesses.................................................. 1.10(c)
Sprint Cellular Service Area.......................................... 1.10(d)
Initial Percentage Interests.......................................... 2.1
Original Capital Contributions; Notice Addresses...................... 2.2
Special Sprint Contributions.......................................... 2.3(c)
Simple Majority Vote.................................................. 5.1(i)
Required Majority Vote................................................ 5.1(j)
Unanimous Vote........................................................ 5.1(k)
Unanimous Partner Vote................................................ 5.1(l)
Temporary Investments Guidelines...................................... 5.7
Existing Overlap Territories.......................................... 6.5(a)
Permitted Additional Sprint LEC MSAs................................... 6.5(f)
</TABLE>
<PAGE> vi
<TABLE>
<CAPTION>
EXHIBITS
EXHIBIT NUMBER
<S> <C>
Form of Parent Undertaking......................................... 1.10(a)
Form of Default Loan Promissory Note............................... 2.4(c)(ii)
Form of Partner Loan Promissory Note............................... 2.7
Form of Assignment and Acceptance Agreement........................ 9.2(a)(i)
Form of Sprint Trademark License Agreement......................... 9.2(a)(ii)
Form of Sprint Teleport Trademark License Agreement................ 9.2(b)
Key Principles of Joint Marketing Agreement........................ 9.3
Key Principles of Services Agreement............................... 9.4
</TABLE>
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
MAJORCO, L.P.,
A DELAWARE LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP is entered into as of the
28th day of March, 1995, by and among Sprint Spectrum, L.P., a
Delaware limited partnership ("Sprint"), TCI Network Services, a
Delaware general partnership ("TCI"), Comcast Telephony Services, a
Delaware general partnership ("Comcast"), and Cox Telephony
Partnership, a Delaware general partnership ("Cox"), each as a General
Partner and a Limited Partner, pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act, on the following
terms and conditions:
1 . THE PARTNERSHIP
1.1 Formation.
The Partners hereby form the Partnership as a limited
partnership pursuant to the provisions of the Act for the purposes and
upon the terms and conditions set forth in this Agreement.
1.2 Name.
The name of the Partnership shall be MajorCo, L.P, and all
business of the Partnership shall be conducted in such name or, in the
discretion of the Management Committee, under any other names (but
excluding a name that includes the name of a Partner unless such
Partner has consented thereto).
1.3 Purpose.
(a) Subject to, and upon the terms and conditions of this
Agreement, the purposes of the Partnership shall be to engage in the
Wireless Business and the Wireline Business and in the provision of
Non-Exclusive Services, either directly or through one or more
Subsidiaries, and to perform such activities in the furtherance of
such Wireless Business and Wireline Business and provision of Non-
Exclusive Services as may be approved from time to time by the
Management Committee. Without a Unanimous Partner Vote, the
Partnership shall not engage in any other business, including any of
the Excluded Businesses.
(b) The Partnership shall have all the powers now or
hereafter conferred by the laws of the State of Delaware on limited
partnerships formed under the Act and, subject to the limitations of
this Agreement, may do any and all lawful acts or things that are
necessary, appropriate, incidental or convenient for the furtherance
and accomplishment of the purposes of the Partnership. Without
limiting the generality of the foregoing, and subject to the terms of
this Agreement, the Partnership may
<PAGE> 2
enter into, deliver and perform all contracts, agreements and other
undertakings and engage in all activities and transactions as may
be necessary or appropriate to carry out its purposes and conduct
its business.
1.4 Principal Executive Office.
The principal executive office of the Partnership shall be
located in such place as determined by the Management Committee, and
the Management Committee may change the location of the principal
executive office of the Partnership to any other place within or
without the State of Delaware upon ten (10) Business Days prior notice
to each of the Partners, provided that such principal executive office
shall be located in the United States. The Management Committee may
establish and maintain such additional offices and places of business
of the Partnership, within or without the State of Delaware, as it
deems appropriate.
1.5 Term.
The term of the Partnership shall commence on the date the
certificate of limited partnership described in Section 17-201 of the
Act (the "Certificate") is filed in the office of the Secretary of
State of Delaware in accordance with the Act and shall continue until
the winding up and liquidation of the Partnership and its business is
completed following a Liquidating Event, as provided in Section 15.
1.6 Filings; Agent for Service of Process.
(a) Promptly following the execution of this Agreement, the
General Partners shall cause the Certificate to be filed in the office of the
Secretary of State of Delaware in accordance with the Act. The
Management Committee shall take any and all other actions reasonably
necessary to perfect and maintain the status of the Partnership as a
limited partnership under the laws of Delaware. The General Partners
shall cause amendments to the Certificate to be filed whenever
required by the Act. The Partners shall be provided with copies of
each document filed or recorded as contemplated by this Section 1.6
promptly following the filing or recording thereof.
(b) The General Partners shall execute and cause to be filed
original or amended Certificates and shall take any and all other
actions as may be reasonably necessary to perfect and maintain the
status of the Partnership as a limited partnership or similar type of
entity under the laws of any other states or jurisdictions in which
the Partnership engages in business.
(c) The registered agent for service of process on the
Partnership shall be The Corporation Trust Company or any successor as
appointed by the Management Committee in accordance
<PAGE> 3
with the Act. The registered office of the Partnership in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
1.7 Title to Property.
No Partner shall have any ownership interest in its individual
name or right in any real or personal property owned, directly or
indirectly, by the Partnership, and each Partner's Interest and
Preferred Interest (if any) shall be personal property for all
purposes. The Partnership shall hold all of its real and personal
property in the name of the Partnership or its nominee and not in the
name of any Partner.
1.8 Payments of Individual Obligations.
The Partnership's credit and assets shall be used solely for the
benefit of the Partnership, and no asset of the Partnership shall be
Transferred or encumbered for, or in payment of, any individual
obligation of any Partner.
1.9 Independent Activities.
Each Partner and any of its Affiliates shall be required
to devote only such time to the affairs of the Partnership as such
Partner determines in its sole discretion may be necessary to manage
and operate the Partnership to the extent contemplated by this
Agreement, and each such Person, except as expressly provided herein,
shall be free to serve any other Person or enterprise in any capacity
that it may deem appropriate in its discretion.
1.10 Definitions.
Capitalized words and phrases used in this Agreement have the
following meanings:
"Accountants" means, as of any time, such firm of
nationally recognized independent certified public accountants that,
as of such time, has been appointed by the Management Committee as the
accountants for the Partnership.
"Act" means the Delaware Revised Uniform Limited
Partnership Act, as set forth in Del. Code Ann. tit. 6, 17-101 to
17-1109.
"Additional Capital Contributions" means, with respect to
each Partner, the Capital Contributions made by such Partner pursuant
to Sections 2.3 (except as otherwise provided in Section 2.3(a)(i)),
2.4, 2.5 and 9.11, but excluding Special Contributions, Special Sprint
Contributions, and that portion of the Cox Teleport Assets contributed
by Cox having an Agreed Value equal to the Excess Value, reduced in
each case by the amount of any liabilities of such Partner assumed by
the Partnership in connection with such Capital Contribution or any
Nonrecourse Liabilities of such Partner that are secured by any property
<PAGE> 4
contributed by such Partner as a part of such Capital Contribution;
provided, however, that no such reduction shall be made
in the case of the contribution of Property pursuant to Section
2.3(a)(ii) or (iii) or the contribution of any other Property having
an Agreed Value if (in the case of such other Property only) such
liabilities already have been taken into account in arriving at such
Agreed Value. In the event all or a portion of an Interest or
Preferred Interest is Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Additional Capital
Contributions of the transferor to the extent they relate to the
Transferred Interest or Preferred Interest.
"Additional Contribution Agreement" means a contribution
agreement the terms of which have been approved by the Unanimous Vote
of the Management Committee pursuant to which a Partner makes an
Additional Capital Contribution to the Partnership pursuant to
Section 2.5.
"Additional Contribution Notice" means a written notice
given to all Partners, which shall (i) state the Additional
Contribution Amount being requested of all Partners and each Partner's
proportionate share thereof determined as provided in Section
2.3(b)(i) (or, in the case of a required Additional Capital
Contribution in respect of a Declined Accelerated Contribution, as
provided in Section 2.3(b)(iii)(B)), (ii) if applicable, state that
the Additional Capital Contribution being requested is a Second
Tranche Call, (iii) specify in reasonable detail the purposes for
which the Additional Contribution Amount is required, (iv) identify a
date (the "Contribution Date"), not more than forty-five (45) days nor
less than thirty (30) days after the date of such notice, upon which
the Additional Capital Contributions are to be made and (v) specify
the account of the Partnership to which the contribution is to be
made; provided that any Additional Contribution Notice with respect to
any portion of the Auction Commitment of the Partners may require the
Additional Capital Contribution to be made on a date that is less than
thirty (30) days, but not less than two (2) days, after the date of
such notice.
"Additional Markets" means, as of any relevant date, those
geographic areas that are reserved for eventual roll-out by NewTelco
but that are not scheduled for roll-out during the period covered by
the Master Roll-Out Schedule then in effect. The initial list of
geographic areas to be reserved as Additional Markets shall be adopted
by Unanimous Partner Vote in connection with the adoption of the
Initial Business Plan. Such list may be amended from time to time by
the vote of the Management Committee required at such time pursuant to
Schedules 5.1(j) and 5.1(k) for the adoption of the Annual Budget and
Approved Business Plan.
<PAGE> 5
"Adjusted Capital Account Deficit" means, with respect to
any Exclusive Limited Partner, the deficit balance, if any, in such
Exclusive Limited Partner's Capital Account as of the end of the
relevant Allocation Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such
Exclusive Limited Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-
2(i)(5); and
(ii) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
"Adverse Act" means, with respect to any Partner, any of
the following:
(i) Such Partner becomes a Defaulting Partner;
(ii) Such Partner Disposes of all or any part of its
Interest or Preferred Interest except as required or permitted by this
Agreement; provided, however, that no Adverse Act shall be considered
to have occurred until thirty (30) days following the involuntary
encumbrance of all or any part of such Interest or Preferred Interest
if during such thirty (30) day period the affected Partner acts
diligently to, and prior to the end of such thirty (30) day period
does, remove any such encumbrance, including effecting the posting of
a bond to prevent foreclosure where necessary;
(iii) Such Partner has committed a material breach of
any material covenant contained in this Agreement (other than as
otherwise expressly enumerated in this definition) or a material default
on any material obligation provided for in this Agreement (other than as
otherwise expressly enumerated in this definition) and such breach or
default continues for thirty (30) days after the date written notice thereof
has been given to such Partner by any General Partner (with a copy to
the Management Committee and each other Partner); provided that if such
breach or default is not a failure to pay money and is of such a nature that
it cannot reasonably be cured within such thirty (30) day period, but is
curable and such Partner in good faith begins efforts to cure it within such
thirty (30) day period and continues diligently to do so, such Partner shall
have a reasonable additional period thereafter to effect the cure (which shall
not exceed an additional ninety (90) days unless otherwise approved by the
Management Committee by Required Majority Vote); and provided further that
if, within thirty (30) days after the date written
<PAGE> 6
notice of such breach or default has been given to such Partner, such Partner
delivers written notice (the "Contest Notice") to the Management Committee
and all other Partners that it contests such notice of breach or default, such
breach or default shall not constitute an Adverse Act unless and until (and
assuming that such breach or default has not theretofore been cured in full
and that any applicable cure period has expired) (A) the disinterested
Representatives determine in good faith by Required Majority Vote that such
Partner has committed such a breach or default or (B) there is a Final
Determination that such Partner's actions or failures to act constituted such
a breach or default; and provided further that this clause (iii) shall not
apply in the event of a breach of Section 9.6 hereof, which breach shall
constitute an Adverse Act (if at all) pursuant to clause (vii) below;
(iv) The Bankruptcy of such Partner or the occurrence
of any other event which would permit a trustee or receiver to acquire
control of the affairs or assets of such Partner;
(v) The occurrence of a Change in Control of such
Partner without the unanimous written consent of the other General
Partners;
(vi) An IXC Transaction has occurred with respect to
such Partner;
(vii) The occurrence of any event with respect to such
Partner (A) that causes such Partner or the Partnership or any of its
Subsidiaries to become a BOC or (B) that causes the Partnership or any
of its Subsidiaries to become a BOC Affiliated Enterprise or an entity
subject to any restriction or limitation under Section II of the MFJ,
provided, however, that 1(d) in the case of an event specified in
clause (B) above, such event must have a material adverse effect on
the business, assets, liabilities, results of operations, financial
condition or prospects of the Partnership and its Subsidiaries and (b)
no Adverse Act shall be considered to have occurred if such Partner
has taken actions which have cured the event that would otherwise have
constituted an Adverse Act under clause (A) or (B), as applicable, of
this clause (vii) within ninety (90) days following the date written
notice of the occurrence of such event has been given to such Partner
by any General Partner (with a copy to the Management Committee and
each other Partner); and provided further that if, within ninety (90)
days after the date written notice of such occurrence has been given
to such Partner, such Partner delivers a Contest Notice to the
Management Committee and all other Partners that it contests such
occurrence (or contests whether such occurrence constitutes an Adverse
Act under this clause (vii)), such occurrence shall not constitute an
Adverse Act unless and until (and assuming that such event has not
theretofore been cured in full and that the applicable cure period has
expired) (A) the disinterested Representatives determine in good faith
by Required Majority Vote that such occurrence constitutes
<PAGE> 7
an Adverse Act under this clause (vii) or (B) there is a Final Determination
that such occurrence constitutes an Adverse Act under this clause (vii);
(viii) Such Partner otherwise causes a dissolution of
the Partnership in contravention of the terms of this Agreement (other
than solely by reason of the Bankruptcy of such Partner); or
(ix) In the case of any Cable Partner, such Cable
Partner fails to make any payment to the Partnership required to be
made by such Cable Partner pursuant to Section 11.4 of the Teleport
Contribution Agreement within ten (10) days following its receipt of
written notice from any other General Partner that it has failed to
satisfy its obligations under such Section.
An "Adverse Partner" is any Partner with respect to which
an Adverse Act has occurred.
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with such
Person. For purposes of this definition, the term "controls"
(including its correlative meanings "controlled by" and "under common
control with") shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, (i) neither the
Partnership nor MinorCo, nor any Person controlled by the Partnership
or MinorCo (including WirelessCo and NewTelco), shall be deemed to be
an Affiliate of any Partner or of any Affiliate of any Partner and
(ii) no Partner or any Affiliate thereof shall be deemed to be an
Affiliate of any other Partner or any Affiliate thereof solely by
virtue of the ownership by such Partner or any of its Affiliates of
any equity interest in the Partnership, MinorCo, PhillieCo or
OverlapCo.
"Agreed Value" means the agreed upon value of a Capital
Contribution by a Partner of the Property identified below, determined
as provided below:
(i) with respect to the Original Capital
Contributions, the amount set forth next to such Partner's name on
Schedule 2.2;
(ii) with respect to the Additional Capital
Contributions by Sprint referred to in Sections 2.3(a)(iv)(A) and (B),
$0 and $14,000,000, respectively;
(iii) with respect to the Additional Capital
Contribution by a Cable Partner of any Comcast Teleport Assets, Cox
Teleport Assets or TCI Teleport Assets, as the case may be, the amount
determined in accordance with Section 2.5(b) of the
<PAGE> 8
Teleport Contribution Agreement, provided that the Agreed Value of any such
Property shall be subject to adjustment as provided in Section 2.8;
(iv) with respect to the Additional Capital
Contribution by a Cable Partner of any of its Other CAP Businesses,
the amount determined in accordance with the applicable Other CAP
Business Contribution Agreement; and
(v) with respect to the License Contribution by Cox,
$17,647,059.
"Agreement" or "Partnership Agreement" means this
Agreement of Limited Partnership, including all Schedules hereto, as
amended from time to time.
"Allocation Year" means (i) the period commencing on the
date of this Agreement and ending on December 31, 1995, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending
on December 31, or (iii) any portion of the period described in
clauses (i) or (ii) for which the Partnership is required to allocate
Profits, Losses, and other items of Partnership income, gain, loss or
deduction pursuant to Section 3.
"Auction Commitment" of any Partner means an amount equal
to the product of (i) such Partner's initial Percentage Interest as of
the date of this Agreement and (ii) the aggregate maximum amount of
the Additional Capital Contributions specified in the WirelessCo
Management Committee Resolution (whether or not specified in the
WirelessCo Management Committee Resolution as required to be
immediately available or to be secured by the Letters of Credit) to be
used for (a) WirelessCo's maximum budgeted expenditure in the PCS
Auction for the payment of the purchase price for PCS Licenses awarded
to it, (b) capital contributions to be paid in cash by WirelessCo to
PioneerCo under the partnership agreement of PioneerCo during the
Auction Period in connection with the formation of PioneerCo and the
contribution of the Cox Pioneer Preference License to PioneerCo and
capital contributions to be paid in cash during the Auction Period to
other partnerships formed to hold pioneer preference licenses in
connection with the formation of such partnerships and the payment of
the purchase price for such licenses, (c) capital contributions to be
paid in cash by WirelessCo during the Auction Period for investments
in or with entities that are eligible to bid for PCS licenses in frequency
blocks "C" and "F" in connection with the formation of such entities and
the payment of the purchase price for such licenses and (d) incidental
expenses relating to the foregoing; provided, that the amount specified in
this clause (ii) shall be increased if and to the extent that the Management
Committee by Unanimous Vote approves an increase in the aggregate
amount of such Additional Capital Contributions, and shall be reduced
following the PCS Auction as and to the extent contemplated by the
Wireless Strategic Plan to reflect the results of the PCS Auction. In the
event all or a portion of an Interest is Transferred in accordance with
the terms of this Agreement, the
<PAGE> 9
transferee shall succeed to the Auction Commitment of
the transferor to the extent it relates to the Transferred Interest
and has not been called in full.
"Auction Period" means the period from October 24, 1994 to
the effective date of the Initial Business Plan.
"Available Cash" means as of any date the cash of the
Partnership as of such date less such portion thereof as the
Management Committee determines to reserve for Partnership expenses,
debt payments, capital improvements, replacements, and contingencies.
"Bankruptcy" means, with respect to any Person, a
"Voluntary Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary
Bankruptcy" means, with respect to any Person, the inability of such
Person generally to pay its debts as such debts become due (other than
any obligation of such Person to make capital contributions under this
Agreement), or an admission in writing by such Person of its inability
to pay its debts generally or a general assignment by such Person for
the benefit of creditors; the filing of any petition or answer by such
Person seeking to adjudicate it bankrupt or insolvent, or seeking for
itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking, consenting to, or
acquiescing in the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for such
Person or for any substantial part of its property; or corporate
action taken by such Person to authorize any of the actions set forth
above. An "Involuntary Bankruptcy" means, with respect to any Person,
without the consent or acquiescence of such Person, the entering of an
order for relief or approving a petition for relief or reorganization
or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar
relief under any present or future bankruptcy, insolvency or similar
statute, law or regulation, or the filing of any such petition against
such Person which petition shall not be dismissed within ninety (90)
days, or, without the consent or acquiescence of such Person, the
entering of an order appointing a trustee, custodian, receiver or
liquidator of such Person or of all or any substantial part of the
property of such Person which order shall not be dismissed within
sixty (60) days.
"BOC" means a "BOC" or one of the "Bell Operating
Companies" as defined in Section IV.C of the MFJ.
"BOC Affiliated Enterprise" has the same meaning as the
term "affiliated enterprise" as used with respect to "BOC" or "Bell
Operating Companies" in Section II.D of the MFJ.
<PAGE> 10
"BTA" means a Basic Trading Area, as defined in the FCC
rules to be codified at 47 C.F.R. 24.13.
"Business Day" means a day of the year on which banks are
not required or authorized to close in the State of New York.
"Cable Affiliate" means, with respect to any Partner, any
Affiliate of such Partner (other than a Cable Subsidiary) that owns a
cable television system.
"Cable Partners" means Comcast, Cox and/or TCI, as the
context may require.
"Cable Subsidiary" means, with respect to any Partner, (i)
any Controlled Affiliate of such Partner that owns a cable television
system and (ii) any Person that such Partner or its Controlled
Affiliates has a unilateral right to cause to enter into a Local
Operator Agreement with respect to cable television systems owned by
such Person.
"Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the
following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 3.3 or Section
3.4, and the amount of any Partnership liabilities which are assumed
by such Partner or secured by any Property distributed to such Partner
as permitted by this Agreement.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any Property
distributed or deemed to be distributed to such Partner pursuant to
any provision of this Agreement, such Partner's distributive share of
Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 3.3 or Section 3.4, and the
amount of any liabilities of such Partner assumed by the Partnership
or any Nonrecourse Liabilities of such Partner that are secured by any
Property contributed by such Partner to the Partnership (including
Property contributed pursuant to Sections 2.3(a)(ii) and (iii));
provided that the debit for liabilities in connection with the
contribution of Property pursuant to such Sections shall not exceed
the amount added to the Agreed Value of such Property to derive the
Gross Asset Value thereof pursuant to clause (i)(A) of the definition
of such term.
(iii) In the event all or a portion of an Interest or
a Preferred Interest is Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the Transferred Interest or
Preferred Interest.
<PAGE> 11
(iv) In determining the amount of any liability for
purposes of the definitions of "Additional Capital Contributions" and
"Original Capital Contribution" and subparagraphs (i) and (ii) of this
definition of "Capital Account," there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code
and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event
the Management Committee determines that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including debits or credits relating to liabilities which are secured
by contributed or distributed property or which are assumed by the
Partnership or any Partner), are computed in order to comply with such
Regulations, the Management Committee may make such modification,
provided that it is not likely to have a material effect on the
amounts distributable to any Partner pursuant to Section 15 upon the
dissolution and winding up of the Partnership. The Management
Committee also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the
Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations
Section 1.704-1(b). Any such decision or action permitted to be taken
by the Management Committee under this paragraph shall require the
Unanimous Vote of the Management Committee.
"Capital Commitment" of any Partner means with respect to
any Fiscal Year included in the Initial Three-Year Period, an amount
equal to the excess, if any, of (i) the product of (A) such Partner's
initial Percentage Interest and (B) the sum of (1) the excess of (x)
the Planned Capital Amount for such Fiscal Year (including, with
respect to the first Fiscal Year in the Initial Three-Year Period, the
Post-Auction Requirements) over (y) the aggregate amount of Equalizing
Contributions requested pursuant to Section 2.3(a)(v) to be made by
the Partners in such Fiscal Year (and/or in a prior Fiscal Year
included in the Initial Three-Year Period to the extent not previously
applied pursuant to this clause (y) to reduce the Capital Commitments
of the Partners for any prior Fiscal Year) plus (2) the Prior Years'
Carryforward, over (ii) that portion of the cumulative Accelerated
Contribution Amounts requested of and made by such Partner in all
prior Fiscal Years that the Management Committee has determined
pursuant to Section 2.3(b) shall be applied to reduce the Planned
Capital Amount for such Fiscal Year. In the event all or a portion of
an Interest is Transferred in accordance with this Agreement, the
<PAGE> 12
transferee shall succeed to the Capital Commitment of the transferor
to the extent it relates to the Transferred Interest and has not been
called in full.
"Capital Contribution" means, with respect to any Partner,
the amount of money and the Gross Asset Value at the time of
contribution of any Property (other than money) contributed to the
Partnership with respect to the Interest and Preferred Interest (if
any) held by such Partner (including any contribution expressly
excluded from the definition of Additional Capital Contribution). The
principal amount of a promissory note which is not readily traded on
an established securities market and which is contributed to the
Partnership by the maker of the note (or a Partner related to the
maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of
any Partner until the Partnership makes a taxable disposition of the
note or until (and to the extent) principal payments are made on the
note, all in accordance with Regulations Section
1.704-1(b)(2)(iv)(d)(2).
"Carrier" has the meaning set forth in the definition of
"IXC" below.
"Certified Facilities" has the meaning ascribed to such
term in Exhibit 2 to the Joint Venture Formation Agreement.
"Certified Households Passed" means Households Passed by
Certified Facilities.
"Change in Control" means, with respect to any Partner
that has a Parent other than itself, such Partner's ceasing to be a
Subsidiary of its Parent other than in connection with a Permitted
Transaction.
"Chief Executive Officer" means the chief executive
officer of the Partnership, including any interim chief executive
officer.
"Code" means the Internal Revenue Code of 1986.
"Comcast Parent" means Comcast Corporation, a Pennsylvania
corporation and any successor (by merger, consolidation, Transfer or
otherwise) to all or substantially all of its business and assets.
"Comcast Teleport Assets" has the meaning ascribed to such
term in the Teleport Contribution Agreement.
"Committed Serving Areas" means, with respect to any
Partner, those of the Scheduled Serving Areas of such Partner that are
scheduled in the Initial Master Roll-out Schedule to be certified for
service prior to December 31, 1997. The Committed Serving Areas of
all Partners in the aggregate shall include at least ten million
(10,000,000) Households Passed.
<PAGE> 13
"Consumer Price Index" means the Consumer Price Index "All
Urban Consumers: U.S. city average, all items" (1982-1984 = 100)
published by the Bureau of Labor Statistics of the United States
Department of Labor, or any equivalent successor or substitute index
selected by the Management Committee and published by the Bureau of
Labor Statistics or a successor or substitute governmental agency
selected by the Management Committee.
"Contest Notice" has the meaning set forth in clause
(iii) of the definition of "Adverse Act."
"Contribution Date" has the meaning set forth in the
definition of "Additional Contribution Notice."
"Controlled Affiliate" of any Person means the Parent of
such Person and each Subsidiary of such Parent. As used in Sections
6, 9.6, 9.10 and 9.12 the term "Controlled Affiliate" shall also
include any Affiliate of a Person that such Person or its Parent can
directly or indirectly unilaterally cause to take or refrain from
taking any of the actions required, prohibited or otherwise restricted
by such Section, whether through ownership of voting securities,
contractually or otherwise. As used in Sections 2.4, 5.1(c), 12.2,
13.4, 13.5 and 13.6, the term "Controlled Affiliate" shall also
include any Affiliate of a Person that such Person or its Parent can
directly or indirectly unilaterally cause to take or refrain from
taking any action regarding the Partnership, whether through ownership
of voting securities, contractually or otherwise.
"Cox Parent" means Cox Communications, Inc., a Delaware
corporation, and any successor (by merger, consolidation, Transfer or
otherwise) to all or substantially all of its business and assets.
"Cox Pioneer Preference License" means the 30 MHz "A"
block PCS license granted to Cox Parent on December 14, 1994, for the
MTA encompassing Los Angeles and San Diego, California, which MTA is
identified in the FCC Public Notice regarding the PCS Auction as
Market No. M-2 (Report No. AUC-94-04, Auction No. 4).
"Cox Teleport Assets" has the meaning ascribed to such
term in the Teleport Contribution Agreement.
"Current Sprint LEC Territories" means the service areas
of the Incumbent Sprint LECs as of October 24, 1994, as set forth in
Schedule 1.10(a) hereto.
"Cut-Off Time" means the earlier to occur of (i) the end
of the last Fiscal Year covered by the Initial Business Plan and (ii)
such time as the aggregate amount of Original Capital Contributions
and Additional Capital Contributions made or
<PAGE> 14
requested to be made plus the remaining balance (if any) in the Excess
Value Account first equals or exceeds the Total Mandatory Contributions.
"Debt" means (i) any indebtedness for borrowed money or
deferred purchase price of property whether or not evidenced by a
note, bond, or other debt instrument, (ii) obligations to pay money as
lessee under capital leases, (iii) obligations to pay money secured by
any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind existing on any asset owned or held by the Partnership
whether or not the Partnership has assumed or become liable for the
obligations secured thereby, (iv) any obligation under any interest
rate swap agreement (the principal amount of such obligation shall be
deemed to be the notional principal amount on which such swap is
based), and (v) obligations under direct or indirect guarantees of
(including obligations (contingent or otherwise) to assure a creditor
against loss in respect of) indebtedness or obligations of the kinds
referred to in clauses (i), (ii), (iii) and (iv) above, provided that
Debt shall not include obligations in respect of any accounts payable
that are incurred in the ordinary course of the Partnership's business
and are not delinquent or are being contested in good faith by
appropriate proceedings.
"Depreciation" means, for each Allocation Year, an amount
equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such Allocation Year,
except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of
such Allocation Year, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for
such Allocation Year bears to such beginning adjusted tax basis;
provided, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Allocation Year is zero,
Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the
Management Committee; and provided, further, that, consistent with
Section 3.7, Depreciation with respect to Subsidiary Partnership
Property shall not be determined with regard to the distributive share
of depreciation expense directly or indirectly allocated to the
Partnership by the Subsidiary Partnership, but shall be computed with
respect to the initial Gross Asset Value of the Subsidiary Partnership
interest contributed to the Partnership as if such Subsidiary
Partnership Property (or the equivalent percentage thereof) were owned
directly by the Partnership and were contributed by the Partners who
contributed the Subsidiary Partnership interests.
"Dispose" (including its correlative meanings, "Disposed
of", "Disposition" and "Disposed"), with respect to any Interest or
Preferred Interest means to Transfer, pledge, hypothecate or otherwise
dispose of such Interest or Preferred Interest, in whole or in part,
voluntarily or involuntarily, except by operation of law in connection
with a merger, consolidation or other business combination
<PAGE> 15
of the Partnership and except that such term shall not include any pledge
or hypothecation of, or granting of a security interest in, an Interest
or Preferred Interest that is approved by the Management Committee in
connection with any financing obtained on behalf of the Partnership.
"Excess Value" means the excess, if any, of (i) the sum of
(A) the Agreed Value of the Cox Teleport Assets contributed pursuant
to Section 2.3(a)(ii) on the First Closing Date, plus (B) the
aggregate amount of the Original Capital Contribution and all other
Additional Capital Contributions made by Cox prior to and on the First
Closing Date, over (ii) the product of (A) 15/85ths times (B) the
aggregate amount of the Original Capital Contributions and Additional
Capital Contributions made by the Partners other than Cox prior to and
on the First Closing Date
(including all Additional Capital Contributions made, or deemed made o
n the First Closing Date after giving effect to Section 2.3(a)(v)(F),
by the Partners other than Cox pursuant to Section 2.3(a)(v)).
"Excess Value Account" means, with respect to any
Preferred Interest as of any date of determination, an amount equal to
the excess, if any, of (i) the portion of the Excess Value relating to
such Preferred Interest over (ii) the sum of (A) the cumulative amount
of such Excess Value that has been satisfied by the contribution of a
portion of such Preferred Interest pursuant to Section 2.3(b)(iv), (B)
the cumulative amount of distributions with respect to such Preferred
Interest pursuant to Section 4.1(b) through such date and (C) the
cumulative amount of consideration paid by the Partnership in exchange
for a portion of such Preferred Interest pursuant to Section 13.7 that
is considered to be attributable to the Excess Value Account. In the
event all or a portion of a Preferred Interest is Transferred in
accordance with this Agreement, the transferee shall succeed to the
Excess Value Account of the transferor to the extent it relates to the
Transferred Preferred Interest.
"Excluded Businesses" has the meaning set forth in
Schedule 1.10(b) hereto.
"Exclusive Limited Partner" means any Limited Partner that
is not also a General Partner.
"Exclusive Services" means the Wireline Exclusive Services
and the Wireless Exclusive Services.
"FCC" means the Federal Communications Commission.
"Final Determination" means (i) a determination set forth
in a binding settlement agreement between the Partnership and the
Partner alleged to have committed the Adverse Act, which has been
approved by a Required Majority Vote of the Management
<PAGE> 16
Committee pursuant to Section 9.7 or (ii) a final judicial determination, not
subject to further appeal, by a court of competent jurisdiction.
"First Closing Date" has the meaning ascribed to such term
in the Teleport Contribution Agreement.
"Fiscal Year" means (i) the period commencing on the date
of this Agreement and ending on December 31, 1995, (ii) any subsequent
twelve (12) month period commencing on January 1, and ending on
December 31, or (iii) the period commencing on the immediately
preceding January 1 and ending on the date on which all Property is
distributed to the Partners pursuant to Section 15.2. When used in
connection with the Initial Business Plan or the Initial Three-Year
Period, "Fiscal Year" also means the period commencing on the
effective date of the Initial Business Plan and ending on December 31,
1995.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"General Partner" means any Person who (i) is referred to
as such in the first paragraph of this Agreement or has become a
General Partner pursuant to the terms of this Agreement, and (ii) has
not, at any given time, ceased to be a General Partner pursuant to the
terms of this Agreement. "General Partners" means all such Persons.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair
market value of such asset, as determined by the contributing Partner
and the Management Committee in accordance with Section 9.7, provided
that the initial Gross Asset Value of:
(A) the Property contributed by the Partners
pursuant to Section 2.2 or any of clauses (i) through (iv) of Section
2.3(a) shall be the sum of (1) the Agreed Value of such Property plus
(2) the amount of any liabilities of the contributing Partner assumed
by the Partnership in connection with such contribution or any
Nonrecourse Liabilities of such Partner that are secured by the
contributed Property;
(B) a Sprint/TCI Loan contributed by Sprint or
TCI shall be determined as provided in Section 2.3(b)(v); and
(C) a Preferred Interest contributed pursuant
to Section 2.3(b)(iv) shall be determined as provided in Section
2.3(b)(iv).
<PAGE> 17
(ii) The Gross Asset Value of all Partnership assets
shall be adjusted to equal their gross fair market value, as
determined by the Management Committee, as of the following times:
(A) the acquisition of an Interest by any new Partner in exchange for
more than a de minimis Capital Contribution; (B) the distribution by
the Partnership to a Partner of more than a de minimis amount of
Property as consideration for an Interest; (C) the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); and (D) the conversion of a General Partner to
an Exclusive Limited Partner if, and only if, in the judgment of the
Management Committee, such adjustment would either cause the Person
who is being converted to an Exclusive Limited Partner to have a
deficit balance in its Capital Account or increase the amount of such
a deficit balance;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross fair
market value of such asset on the date of distribution as determined
by the distributee and the Management Committee in accordance with
Section 9.7.
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b), but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Regulation
Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition
of "Profits" and "Losses" and Section 3.3(g); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph
(iv) to the extent that an adjustment pursuant to subparagraph (ii)
hereof is made in connection with a transaction that would otherwise
result in an adjustment pursuant to this subparagraph (iv); and
(v) If Gross Asset Value is required to be
determined for the purpose of Section 12.2 or 15.7, Gross Asset Value
shall be determined in the manner set forth in such Sections.
If the Gross Asset Value of an asset has been determined
or adjusted pursuant to subparagraph (i), (ii) or (iv) hereof, such
Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Profits and Losses.
"Households" means, with respect to any area, the
aggregate number of residential dwelling units (whether or not
occupied) in such area, it being understood that each residential unit
(whether or not occupied) in a multiple dwelling unit shall be counted
as one Household.
"Households Passed" means, with respect to any geographic
area, the aggregate number of Households in such area that either (i)
are capable, as of the time of such determination,
<PAGE> 18
of receiving CATV Service by means of an existing Customer Drop or
other similar connection or (ii) could legally (assuming the owner consented to
receipt of CATV Service) receive CATV Service subject only to the
installation of a Customer Drop no more than two hundred (200) feet in
length. For purposes of this definition, the terms "Customer Drop"
and "CATV Services" will have the respective meanings ascribed to such
terms in the form of Local Operator Agreement adopted prior to or in
connection with the adoption of the Initial Business Plan.
"Hypothetical Federal Income Tax Amount" means for any
Fiscal Year the product of (A) the daily weighted average highest
marginal federal income tax rate applicable to domestic corporations
in effect for such Fiscal Year expressed as a percentage and (B) the
excess, if any, of (i) the cumulative amount of taxable income and
gain reported by the Partnership on its Internal Revenue Service
Forms 1065 over its life determined as of the end of such Fiscal Year,
over (ii) the larger of zero (0) or the cumulative amount of taxable
income and gain reported by the Partnership on its Internal Revenue
Service Forms 1065 over its life determined as of the beginning of
such Fiscal Year.
"Incumbent Cable Partner Cable Systems" means those cable
television systems owned by a Cable Partner or an Affiliate of a Cable
Partner as of October 24, 1994 or that have been or will be acquired
by a Cable Partner or an Affiliate of a Cable Partner subsequent to
October 24, 1994 in a transaction that was disclosed in a press
release or similar public announcement prior to October 24, 1994.
"Incumbent Sprint LECs" means those LECs owned by an
Affiliate of Sprint as of October 24, 1994.
"Initial Markets" means, as of any relevant date, those
geographic areas (as identified in the Master Roll-Out Schedule) (i)
in which roll-out has occurred or (ii) that are scheduled for roll-out
by NewTelco during the period covered by the Master Roll-Out Schedule
then in effect.
"Initial Master Roll-Out Schedule" means the Master
Roll-Out Schedule that is adopted by a Unanimous Partner Vote as part
of the Initial Business Plan and covers the period from the effective
date of the Initial Business Plan through December 31, 1999.
"Initial Three-Year Period" means the period from the
effective date of the Initial Business Plan through December 31, 1997.
"Intermediate Subsidiary" means, with respect to any
Parent of a Partner, a Subsidiary of such Parent that holds a direct
or indirect equity interest in such Partner.
<PAGE> 19
"Interest" means, as to any Partner, all of the interests
(other than any Preferred Interest) of such Partner in the
Partnership, including any and all benefits to which the holder of an
interest in the Partnership may be entitled as provided in this
Agreement and under the Act, together with all obligations of such
Partner to comply with the terms and provisions of this Agreement.
"IXC" means each of AT&T Corp., MCI Communications
Corporation and British Telecommunications plc (each, a "Carrier") and
each of their respective Affiliates.
"IXC Transaction" means, with respect to any Partner, that
(i) an IXC has become the beneficial owner of an equity interest in
such Partner or an equity interest in any Intermediate Subsidiary
(other than a Publicly Held Intermediate Subsidiary) of the Parent of
such Partner, (ii) an IXC has become the beneficial owner of
securities representing fifteen percent (15%) or more of the voting
power of the outstanding voting securities of the Parent of such
Partner or any Publicly Held Intermediate Subsidiary of such Parent,
and, if such Parent or Publicly Held Intermediate Subsidiary is
subject to a State Statute or has a shareholder rights plan, such
Parent or Publicly Held Intermediate Subsidiary or the board of
directors or other governing body of such Parent or Publicly Held
Intermediate Subsidiary has approved such beneficial ownership or
otherwise has taken action to waive any applicable restrictions with
respect to such ownership or the exercise by the IXC of its rights
arising from such ownership under such State Statute or shareholder
rights plan, (iii) an IXC has become the beneficial owner of
securities representing twenty-five percent (25%) or more of the
voting power of the outstanding voting securities of any such Parent
or Publicly Held Intermediate Subsidiary, provided that, if such IXC
is an Affiliate of a Carrier, such Affiliate has identified a Carrier
as a Person controlling such Affiliate either (a) pursuant to General
Instruction C to Schedule 13D, in a Schedule 13D (filed with the
Securities and Exchange Commission in accordance with Section 13(d) of
the Securities Exchange Act of 1934) or (b) pursuant to General
Instruction C to Schedule 14D-1, in a Schedule 14D-1 (filed with the
Securities and Exchange Commission in accordance with Section 14(d) of
the Securities Exchange Act of 1934), (iv) any such Parent or Publicly
Held Intermediate Subsidiary has sold or issued beneficial ownership
in any equity interest in such Parent or Publicly Held Intermediate
Subsidiary to an IXC or granted to an IXC any rights with respect to
the governance of such Parent or Publicly Held Intermediate Subsidiary
that are not possessed generally by the owners of outstanding equity
interests in such Parent or Publicly Held Intermediate Subsidiary; or
(v) such Partner has otherwise become an Affiliate of an IXC. Solely
for the purposes of this definition the terms "beneficial owner" and
"beneficial ownership" shall have the same meaning as in Rule 13d-3
under the Securities Exchange Act of 1934, as amended.
<PAGE> 20
"Joint Venture Formation Agreement" means the Amended and
Restated Joint Venture Formation Agreement of even date herewith among
each of the Parents providing for the formation of PioneerCo and
certain other actions.
"LEC" means a local exchange carrier.
"Limited Partner" means any Person (i) who is referred to
as such in the first paragraph of this Agreement or who has become a
Limited Partner pursuant to the terms of this Agreement, and (ii) who,
at any given time, holds an Interest or Preferred Interest. "Limited
Partners" means all such Persons.
"Local Operator" means, with respect to any relevant
geographic area, a Person (including any Cable Subsidiary or Cable
Affiliate) that owns a cable television system in such geographic
area.
"Local Operator Agreement" means, with respect to Cable
Subsidiaries, the form of agreement to be entered into by NewTelco and
Cable Subsidiaries that is adopted by a Unanimous Partner Vote prior
to or in connection with the adoption of the Initial Business Plan as
provided in Section 5.2(a), and with respect to all other Local
Operators, an agreement between NewTelco and a Local Operator in the
form approved by a Required Majority Vote of the Management Committee
(together with any changes to such form that are approved by the Chief
Executive Officer pursuant to authority delegated by the Management
Committee), in each case setting forth the terms of the relationship
between NewTelco and such Local Operator (including a Cable
Subsidiary) with respect to NewTelco's use of the Local Operator
Facilities of such Local Operator.
"Local Operator Facilities" has the meaning ascribed to
such term in Exhibit 2 to the Joint Venture Formation Agreement.
"Management Committee" means the committee that will have
the authority and powers set forth in Section 5.1.
"Mandatory Contribution" of any Partner means an amount
equal to the product of (i) such Partner's initial Percentage Interest
times (ii) the Total Mandatory Contributions.
"Master Roll-Out Schedule" means, as of any relevant date,
the schedule included in the Approved Business Plan then in effect for
the roll-out of Wireline Exclusive Services by NewTelco in the
geographic areas identified in such schedule during the five-year
period covered by such schedule, as such schedule may be amended from
time to time by the vote of the Management Committee required at such
time pursuant to Schedules 5.1(j) and 5.1(k) for the adoption of the
Annual Budget and Approved Business Plan; provided that no such
amendment shall affect the rights or obligations of a Local Operator
under a Local Operator Agreement
<PAGE> 21
in effect at the time of such amendment without the consent of such Local
Operator, unless otherwise provided in such Local Operator Agreement.
"MFJ" means the Modification of Final Judgment agreed to
by the American Telephone and Telegraph Company and the U.S.
Department of Justice and approved by the U.S. District Court for the
District of Columbia on August 24, 1982, as reported in United States
v. Western Electric Company, Inc., et al., 552 F. Supp. 131 (D.D.C.
1982), aff'd sub nom Maryland v. United States, 460 U.S. 1001 (1983)
and any subsequent orders or amendments issued in connection
therewith. Any reference in this Agreement to Section II of the MFJ
shall also include any subsequent statute, rule, regulation, order or
decree which modifies or supersedes Section II of the MFJ (or any
material portion thereof) and imposes any restriction(s) substantially
similar to any of the material restrictions imposed by Section II of
the MFJ.
"Minimum Ownership Requirement" means, with respect to (i)
any Original Partner, as of any date, that the ratio (expressed as a
percentage) of such Original Partner's Percentage Interest to the
aggregate Percentage Interests of all Original Partners is at least
eight percent (8%) or (ii) any Partner not an Original Partner, as of
any date, that such Partner's Percentage Interest is at least eight
percent (8%).
"MinorCo" means MinorCo, L.P., the Delaware limited
partnership formed simultaneously herewith by the Partners for the
purpose of holding a limited partnership interest in NewTelco,
WirelessCo and one or more other Subsidiaries of the Partnership.
"MinorCo Interest" means, as to any Partner, all of the
interests of such Partner in MinorCo, including any and all benefits
to which the holder of an interest in MinorCo may be entitled as
provided in the partnership agreement of MinorCo and under the Act,
together with all obligations of such Partner to comply with the terms
and provisions of the partnership agreement of MinorCo.
"MSA" means a Metropolitan Statistical Area, as determined
by the U.S. Department of Commerce.
"MTA" means a Major Trading Area as defined in FCC rules
to be codified at 47 C.F.R. 24.13.
"NewTelco" means NewTelco, L.P., a Delaware limited
partnership formed by the Partnership and MinorCo simultaneously with
the execution hereof to conduct the Wireline Business of the
Partnership.
"Non-Exclusive Services" has the meaning set forth in
Schedule 1.10(b) hereto.
<PAGE> 22
"Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Original Capital Contribution" means, with respect to
each Partner, the Capital Contribution to be made by such Partner
pursuant to Section 2.2. In the event all or a portion of an Interest
is Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Original Capital Contribution of the
transferor to the extent it relates to the Transferred Interest.
"Original Partners" means collectively Cox, Comcast, TCI
and Sprint and any successors or transferees thereof to the extent
such successors or transferees acquired their Interest in accordance
with this Agreement.
"Other CAP Businesses" means the alternative access
businesses in which any of the Cable Partners or their respective
Controlled Affiliates owns an interest (other than through TCG Inc.,
TCG Partners and their respective Affiliates), as specifically
identified with respect to each Cable Partner on Schedule 1.10(c)
hereto.
"Other CAP Business Contribution Agreements" means the
agreements to be negotiated in good faith and entered into among each
Cable Partner, the Partnership and NewTelco, pursuant to which each
such Cable Partner will contribute to the Partnership the Other CAP
Businesses owned by such Cable Partner and its Controlled Affiliates.
"Parent" menas, except as otherwise provided below with
respect to a Permitted Transaction, (i) with respect to Cox (and its
Controlled Affiliates), Cox Parent, (ii) with respect to Comcast (and its
Controlled Affiliates), Comcast Parent, (iii) with respect to TCI (and its
Controlled Affiliates), TCI Parent and (iv) with respect to Sprint (and its
Controlled Affiliates), Sprint Parent. With respect to any other
Person hereafter admitted to the Partnership as a Partner, the Parent
with respect to such Partner shall be the Person identified as such in
a Schedule to be attached to this Agreement in connection with the
admission of such Partner. In the event of a Permitted Transaction,
the new Parent of the applicable Partner immediately following such
Permitted Transaction will be the ultimate parent entity (as
determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated
thereunder (the "HSR Act")) of such Partner (or such Partner if it is
its own ultimate parent entity); provided that if such ultimate parent
entity is not a Publicly Held Person then the next highest corporate
entity in the ownership chain from such ultimate parent entity to and
including such Partner which is a Publicly Held Person shall be deemed
to be the new Parent. If there is no intermediate Publicly Held
Person, the Parent shall be
<PAGE> 23
the highest entity in the ownership chain from the ultimate parent entity
to and including such Partner which is not an individual. For purposes
of the definition of Controlled Affiliate, the Parent of a Person that is
neither a Partner nor a Controlled Affiliate of a Partner is the ultimate
parent entity (as determined in accordance with the HSR Act) of such Person.
"Parents' Undertaking" means a written instrument in
substantially the form of Exhibit 1.10(a) executed simultaneously with
the execution of this Agreement by each Parent of a Partner.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance
with Section 1.704-2(i)(3) of the Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth
in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partners" means all General Partners and all Limited
Partners. "Partner" means any one of the Partners.
"Partnership" means the partnership formed pursuant to
this Agreement and the partnership continuing the business of this
Partnership in the event of dissolution as herein provided.
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"PCS" means a radio communications system authorized under
the rules for broadband personal communications services designated as
Subpart E of Part 24 of the FCC's rules, including the network,
marketing, distribution, sales, customer interface and operations
functions relating thereto.
"PCS Auction" means the series of simultaneous multiple
round auctions for broadband PCS licenses to be conducted by the FCC
under the authority of Section 309(j) of the Communications Act of
1934, 47 U.S.C. 309(j) (1993), in accordance with the rules
promulgated thereunder by the FCC.
"Percentage Interest" means, with respect to any Partner
as of any relevant date, the ratio (expressed as a percentage) of the
sum of such Partner's Original Capital Contribution and aggregate
Additional Capital Contributions as of such date to the sum of the
aggregate Original Capital Contributions and Additional Capital
Contributions of all Partners as of such date. Additional Capital
Contributions of Premium Dollars pursuant to Section
<PAGE> 24
2.4(a)(v) shall be valued at their Premium Dollar value for purposes of
calculating Percentage Interests. Such Capital Contributions will be
determined after giving effect to all Capital Contributions made prior to
and on the date as of which the determination of Percentage Interests is
made, subject to the provisions regarding the adjustment of Percentage
Interests set forth in Section 2.4(d). In the event all or any
portion of an Interest is Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Percentage
Interest of the transferor to the extent it relates to the Transferred
Interest.
"Permitted Transaction" with respect to a Partner means a
transaction or series of related transactions in which (i) such
Partner ceases to be a Subsidiary of its Parent or such Partner
Transfers its Interest to a Person that is not a Controlled Affiliate
of such Partner and (ii) the new Parent of such Partner (or such
Partner if it is its own Parent) or the Parent of the transferee of
the Interest after giving effect to such transaction, or the last
transaction in a series of related transactions, owns, directly and
indirectly through its Controlled Affiliates, all or a Substantial
Portion of the cable television system assets (in the case of a Cable
Partner) or long distance telecommunications business assets (in the
case of Sprint) owned by the Parent of such Partner, directly and
indirectly through its Controlled Affiliates, immediately prior to the
commencement of such transaction or series of transactions. As used
herein, "Substantial Portion" means (x) in the case of a Cable
Partner, cable television systems serving 75% or more of the aggregate
number of basic subscribers served by cable television systems in the
United States of America (including its territories and possessions
other than Puerto Rico) owned by the Parent of such Cable Partner,
directly and indirectly through its Controlled Affiliates, and (y) in
the case of Sprint, long distance telecommunications business assets
serving 75% or more of the aggregate number of customers served by the
long distance telecommunications business in the United States of
America (including its territories and possessions other than Puerto
Rico) owned by the Parent of Sprint, directly and indirectly through
its Controlled Affiliates.
"Person" means any individual, partnership, corporation,
trust, or other entity.
"PioneerCo" means the Delaware limited partnership to be
formed between WirelessCo and an Affiliate of Cox to own the Cox
Pioneer Preference License and to operate a Wireless Business in
connection therewith.
"PioneerCo Partnership Agreement" means the Agreement of
Limited Partnership of PioneerCo to be entered into between WirelessCo
and an Affiliate of Cox.
<PAGE> 25
"Planned Capital Amount" means for any Fiscal Year during
the Initial Three-Year Period the aggregate amount of Additional
Capital Contributions (other than Capital Contributions of Property
pursuant to Section 2.3(a)(i), (ii), (iii) or (iv)) contemplated to be
required of the Partners during such Fiscal Year as set forth in the
Initial Business Plan, as such amount may be revised by the Unanimous
Vote of the Management Committee or reduced pursuant to Section
2.3(b)(i)(B).
"Preferred Interest" means the interest (and any portion
thereof) as a Limited Partner to be received by Cox pursuant to
Section 2.3(a)(ii) in exchange for its Capital Contribution of that
portion of the Cox Teleport Assets contributed on the First Closing
Date having an Agreed Value equal to the Excess Value, and with
respect to which each holder thereof is entitled to the preferential
and other rights specified in this Agreement until such time as the
Preferred Return Account and Excess Value Account relating to the
Preferred Interest held by such holder are reduced to zero, at which
time such Preferred Interest will, without further action by the
parties, be extinguished.
"Preferred Return" means, with respect to each Preferred
Interest as of any date of determination, a sum equal to six percent
(6%) per annum, determined on the basis of a year of 365 or 366 days,
as the case may be, for the actual number of days elapsed in the
period for which such Preferred Return is being determined, cumulative
and compounded quarterly as of the end of each calendar quarter to the
extent not (i) distributed with respect to such Preferred Interest
pursuant to Section 4.1(a), (ii) treated as satisfied by the
contribution of all or a portion of such Preferred Interest pursuant
to Section 2.3(b)(iv), or (iii) considered as received in exchange for
all or a portion of such Preferred Interest pursuant to Section 13.7,
of the average daily balance of the Excess Value Account relating to
such Preferred Interest from time to time during the period to which
such Preferred Return relates, commencing on the First Closing Date.
"Preferred Return Account" means, with respect to each
Preferred Interest as of any date of determination, an amount equal to
the excess, if any, of (i) the cumulative amount of Preferred Return
accrued with respect to such Preferred Interest through such date
minus (ii) the sum of (A) the cumulative amount of distributions made
with respect to such Preferred Interest pursuant to Section 4.1(a)
through such date, (B) the cumulative amount of the Preferred Return
with respect to such Preferred Interest that has been satisfied
through such date by the contribution of all or a portion of such
Preferred Interest pursuant to Section 2.3(b)(iv) and (C) the
cumulative amount of consideration paid by the Partnership through
such date in exchange for all or a portion of such Preferred Interest
pursuant to Section 13.7 that is considered to be attributable to such
Preferred Return. In the event all or a portion of a Preferred
Interest is Transferred in accordance with this Agreement, the
<PAGE> 26
transferee will succeed to the Preferred Return Account of the
transferor to the extent it relates to the Transferred Preferred
Interest.
"Premium Call" means a Second Tranche Call that has been
converted by a Simple Majority Vote of the Management Committee to a
Premium Call pursuant to Section 2.4(a)(v).
"Premium Call Contribution Date" has the meaning set forth
in the definition of "Premium Call Notice."
"Premium Call Notice" means a written notice given to all
Partners, which shall state (i) the amount of the Second Tranche Call
originally requested in the corresponding Additional Contribution
Notice, (ii) that such Second Tranche Call has been converted to a
Premium Call, (iii) the Premium Dollar amount for each dollar to be
contributed in response to the Premium Call Notice, (iv) the date upon
which the Premium Call contributions are to be made (the "Premium Call
Contribution Date"), which date shall not be more than forty-five (45)
days nor less than thirty (30) days after the date of such notice and
(v) the account of the Partnership to which such contribution is to be
made.
"Premium Dollar" means, except as otherwise provided in
Section 2.4(a)(v), each dollar contributed (whether in cash or by
contribution of a Preferred Interest or the Sprint/TCI Loans) by a
Partner in response to a Premium Call Notice or a Premium Call
Shortfall Notice, each of which dollars will be valued for the
purposes of calculating Percentage Interests at an amount equal to
(i) one dollar ($1.00) divided by (ii) the quotient of (x) the fair
market value of the Partnership (which fair market value shall be
reduced by the sum of the balances of the Excess Value Account and the
Preferred Return Account at that time) as determined by a Simple
Majority Vote of the Management Committee in connection with the
giving of a Premium Call Notice divided by (y) the aggregate amount of
the Original Capital Contributions, Additional Capital Contributions
and Special Sprint Contributions made to the Partnership prior to the
date of the Premium Call Notice.
"Prime Rate" means the rate announced from time to time by
Citibank, N.A. as its prime rate.
"Prior Years' Carryforward", with respect to any Fiscal
Year, means the amount by which the aggregate amount of Additional
Capital Contributions actually requested of the Partners pursuant to
Section 2.3(b) with Contribution Dates during the Fiscal Year(s) in
the Initial Three-Year Period prior to such Fiscal Year (disregarding
for such purposes any Additional Capital Contribution representing an
Excess Contribution Amount during such prior Fiscal Year(s) (other
than an Accelerated Contribution Amount from one such prior Fiscal
Year to another such prior Fiscal Year)) was less than the Planned
Capital Amount during such prior Fiscal Year(s).
<PAGE> 27
"Profits" and "Losses" means, for each Allocation Year, an
amount equal to the Partnership's taxable income or loss for such
Allocation Year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments (without duplication):
(i) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of "Profits"
and "Losses" shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Profits or Losses
pursuant to this definition of "Profits" and "Losses," shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to subparagraph (ii) or
(iii) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the Property disposed of, notwithstanding that the adjusted
tax basis of such Property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation
for such Allocation Year, computed in accordance with the definition
of Depreciation;
(vi) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's Interest, the
amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of computing
Profits or Losses; and
<PAGE> 28
(vii) Notwithstanding any other provision of this
definition of "Profits" or "Losses," any items which are specially
allocated pursuant to Section 3.3 or Section 3.4 shall not be taken
into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Sections 3.3
and 3.4 shall be determined by applying rules analogous to those set
forth in this definition of "Profits" and "Losses."
"Property" means all real and personal property acquired
by the Partnership and any improvements thereto, and shall include
both tangible and intangible property.
"Publicly Held" means, with respect to any Person, that
such Person has a class of equity securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934.
"Publicly Held Intermediate Subsidiary" means, with
respect to any Parent of a Partner, an Intermediate Subsidiary of such
Parent that is Publicly Held.
"Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code.
"Representative" means an individual designated by a
General Partner as a member of the Management Committee.
"Roll-out" or "roll-out" means, with respect to any
particular geographic area, the commencement of the offering by
NewTelco of Wireline Exclusive Services in such area following the
performance by NewTelco and the applicable Local Operator of their
respective obligations under the applicable Local Operator Agreement
(including the purchase and installation of switches and certain other
network transmission equipment and the upgrading of Local Operator
Facilities) as are necessary to permit NewTelco to commence the
provision of Wireline Exclusive Services in such area.
"Scheduled Serving Areas" means, with respect to any
Partner, those geographic areas served by cable television systems
owned by Cable Subsidiaries of such Partner, which areas are located
in the Initial Markets and scheduled in the Initial Master Roll-Out
Schedule to be certified for service prior to December 31, 1999.
"Second Tranche Call" means the first Two Billion Dollars
($2,000,000,000) of Additional Capital Contributions requested in
accordance with Section 2.3(a) or 2.3(b) after the Cut-Off Time;
provided that in no event may a Second Tranche Call be made after
December 31, 2002.
"Serving Area" has the meaning ascribed to such term in
Exhibit 2 to the Joint Venture Formation Agreement.
<PAGE> 29
"75 Mile Plus Calls" has the meaning set forth in Schedule
1.10(b) hereto.
"Specifications and Standards" means the technical
specifications, service quality standards, capacity requirements and
other technical standards for the Wireline Business of the Partnership
and its Subsidiaries as are adopted by a Unanimous Partner Vote prior
to or in connection with the adoption of the Initial Business Plan as
provided in Section 5.2(a), as such may be amended from time-to-time
by the vote of the Management Committee required at such time pursuant
to Schedules 5.1(j) and 5.1(k) for the adoption of the Annual Budget
and Approved Business Plan; provided that no such amendment shall
affect the rights or obligations of a Local Operator under a Local
Operator Agreement in effect at the time of such amendment without the
consent of such Local Operator, unless otherwise provided in such
Local Operator Agreement.
"Sprint Brand" means the trademark "Sprint" together with
the related "Diamond" logo.
"Sprint Cellular Service Area" means the areas serviced as
of October 24, 1994 by the cellular operations of Controlled
Affiliates of Sprint, as listed in Schedule 1.10(d).
"Sprint Communications" means Sprint Communications
Company, L.P., a Delaware limited partnership.
"Sprint Parent" means Sprint Corporation, a Kansas
corporation, and any successor (by merger, consolidation, Transfer or
otherwise) to all or substantially all of its business and assets.
"State Statutes" means any business combination statute,
anti-takeover statute, fair price statute, control share acquisition
statute or any other state statute or regulation that contains any
similar prohibition, limitation, obligation, restriction or other
provision adopted and in effect in the jurisdiction of organization of
a Person that affects the rights of any other Person that acquires a
specified percentage ownership interest in such Person without the
consent or approval of the board of directors or other governing body
of such other Person, and, includes (i) with respect to Cox Parent and
TCI Parent, Section 203 of the Delaware General Corporation Law; (ii)
with respect to Comcast Parent, Subchapters E, F and G of Chapter 25
of the Pennsylvania Business Corporation Law of 1988; and (iii) with
respect to Sprint Parent, Sections 17-12,100 and 17-1286 through 1298,
et seq. of the Kansas Corporations Statute.
"Subsidiary" of any Person as of any relevant date means a
corporation, company or other entity (i) more than fifty percent (50%)
of whose outstanding shares or equity securities are, as of such date,
owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person, and the shares or securities so owned
entitle such Person and/or its Subsidiaries to elect at
<PAGE> 30
least a majority of the members of the board of directors or other managing
authority of such corporation, company or other entity notwithstanding
the vote of the holders of the remaining shares or equity securities
so entitled to vote or (ii) which does not have outstanding shares or
securities, as may be the case in a partnership, joint venture or
unincorporated association, but more than fifty percent (50%) of whose
ownership interest is, as of such date, owned or controlled, directly
or indirectly through one or more Subsidiaries, by such Person, and in
which the ownership interest so owned entitles such Person and/or
Subsidiaries to make the decisions for such corporation, company or
other entity.
"Subsidiary Partnership Property" means all property,
other than interests in other Subsidiary Partnerships, held by any
Subsidiary Partnership on the date on which the interests in such
Subsidiary Partnership are contributed to the Partnership.
"TCG Inc." means Teleport Communications Group Inc., a
Delaware corporation.
"TCG Partners" means TCG Partners, a New York general
partnership.
"TCI Parent" means Tele-Communications, Inc., a Delaware
corporation, and any successor (by merger, consolidation, Transfer or
otherwise) to all or substantially all of its business and assets.
"TCI Teleport Assets" has the meaning ascribed to such
term in the Teleport Contribution Agreement.
"Technical Information" means all technical information,
regardless of form and however transmitted and shall include, among
other forms, computer software, including computer program code, and
system and user documentation, drawings, illustrations, diagrams,
reports, designs, specifications, formulae, know-how, procedural
protocols and methods and manuals.
"Technical Information Rights" means all intellectual
property rights which protect or cover Technical Information.
"Teleport Contribution Agreement" means that certain
Contribution Agreement among Comcast, Cox, TCI, the Partnership and
NewTelco entered into as of the date hereof with respect to the
contribution of the Comcast Teleport Assets, Cox Teleport Assets and
TCI Teleport Assets to the Partnership.
"Total Mandatory Contributions" of the Partners means an
amount equal to the sum of $4.39 billion, plus the Agreed Value of the
Additional Capital Contributions of Property required to be made
pursuant to clauses (i), (ii), (iii) and (iv) of Section 2.3(a), plus
the Excess Value; provided that unless and
<PAGE> 31
until the First Closing Date occurs, the Total Mandatory Contributions
of the Partners shall be $3.99 billion plus the Agreed Value of the License
Contribution.
"Transfer" means, as a noun, any sale, exchange assignment
or transfer and, as a verb, to sell, exchange, assign or transfer.
"Voluntary Bankruptcy" has the meaning set forth in the
definition of "Bankruptcy".
"Voting Percentage Interest" means, as of any date and
with respect to any Partner that as of such date is entitled to
designate one or more members of the Management Committee, the ratio
(expressed as a percentage) of such Partner's Percentage Interest to
the aggregate Percentage Interests of all Partners that are entitled
to designate one or more members of the Management Committee.
"Wireless Business" means the business of providing
Wireless Exclusive Services.
"WirelessCo" means WirelessCo, L.P., the Delaware limited
partnership formed by the Partners pursuant to that certain Agreement
of Limited Partnership dated as of October 24, 1994, as amended and
restated as of the date hereof to cause WirelessCo to become a
Subsidiary of the Partnership.
"WirelessCo Management Committee Resolution" means the
resolution of the management committee of WirelessCo adopted by
written consent on October 24, 1994 that approved (among other things)
the aggregate Auction Commitment.
"Wireless Exclusive Services" has the meaning set forth in
Schedule 1.10(b) hereto.
"Wireless Strategic Plan" means the strategic plan adopted
by the Partners prior to the date hereof for the development and
operation of the Wireless Business of the Partnership, including the
bidding strategy of WirelessCo in the PCS Auction.
"Wireline Business" means the business of providing
Wireline Exclusive Services.
"Wireline Exclusive Services" has the meaning set forth in
Schedule 1.10(b) hereto.
<PAGE> 32
<TABLE>
<CAPTION>
1.11 Additional Definitions.
Defined Term Defined in
<S> <C>
"1933 Act" Section 5.9(a)
"Accelerated Contribution Amount" Section 2.3(b)(i)
"Accepting Offerees" Section 13.4(d)
"Additional Benchmarks" Section 5.2(d)
"Additional Contribution Amount" Section 2.3(b)(i)
"Additional Purchase Commitment" Section 13.6(c)(i)
"Adjusted Percentage Interest" Section 2.4(a)(iv)
"Affiliate Territories" Section 6.5(g)
"Affiliation Agreement" Section 6.1(d)
"Agents" Section 6.7(a)
"Annual Budget" Section 5.2(e)
"Applicable Federal Rate" Section 4.1(a)
"Approved Business Plan" Section 5.2(e)
"Attribution Cap" Section 9.12(a)(v)
"Benchmarks" Section 5.2(a)
"Bidding Partner" Section 15.7(e)
"Blocking Limited Partner" Section 5.1(l)(ii)
"Brief" Section 5.8(a)(ii)
"Business Plan" Section 5.2(a)
"Buying Partner" Section 13.6(c)(i)
"Buy-Sell Price" Section 12.2(a)
"Cable Buying Partner" Section 13.6(c)(ii)
"Certificate" Section 1.5
"Comcast Area" Section 6.4(g)
"Competitive Activity" Section 6.1(a)
"Confidential Information" Section 6.7(a)
"Contributing Partner" Section 2.4(a)(ii)
"Control Notice" Section 13.5(b)
"Control Offer" Section 13.5(b)
"Control Offer Period" Section 13.5(b)
"Controlling Partner" Section 13.5(b)
"Covered Licensee" Section 9.12(a)(ii)
"Cure Date" Section 2.4(c)(iii)
"Damages" Section 12.1(a)
"Deadlock Event" Section 5.8(b)
"Declining Partner" Section 2.4(a)(i)
"Declined Accelerated Contribution" Section 2.3(b)(iii)(B)
"Default Budget" Section 5.2(f)
"Default Loan" Section 2.4(c)(ii)
"Default Loan Notice" Section 2.4(c)(ii)
"Defaulting Partner" Section 2.4(c)(i)
"Delinquent Partner" Section 2.4(b)
"Designated Matters" Section 9.15
"Determination Date" Section 5.2(a)
"Election Notice" Section 12.2(a)
"Election Period" Section 12.2(b)
"Equalizing Contribution" Section 2.3(a)(v)
"Equalizing Contribution Adjustment
Date" Section 2.3(a)(v)(F)
<PAGE> 33
<S> <C>
"Equalizing Contribution Adjustment
Notice" Section 2.3(a)(v)(F)
"Equalizing Contribution Date" Section 2.3(a)(v)
"Equalizing Contribution Notice" Section 2.3(a)(v)
"Estimated Equalizing Contribution" Section 2.3(a)(v)(F)
"Estimated Gross Contribution Amount" Section 2.3(a)(v)(D)
"Excess Contribution Amount" Section 2.3(b)(i)
"Existing Overlap Territory" Section 6.5(a)
"Firm Offer" Section 13.4(b)
"First Appraiser" Section 12.4
"Floating Rate" Section 2.4(f)
"Foreign Ownership Restriction" Section 9.12(a)(i)
"Foreign Ownership Safe Harbor" Section 9.12(a)(iv)
"Foreign Ownership Threshold" Section 9.12(a)(iii)
"Free to Sell Period" Section 13.4(f)
"Funding Commitment" Section 2.4(a)(ii)
"General Partner Percentage Interests" Section 2.1
"Grace Period" Section 2.4(b)
"Gross Appraised Value" Section 12.4
"Gross Contribution Amount" Section 2.3(a)(v)
"Grossed-Up Contribution" Section 2.3(a)(v)
"In-Territory Customers" Section 6.4(e)
"In-Territory Distributors" Section 6.4(e)
"Incidental Acquisition Section 6.5(g)
"Initial Business Plan" Section 5.2(a)
"Initial Offer" Section 15.7(e)
"Interested Person" Section 9.7
"Issuance Items" Section 3.3(h)
"Lending Commitment" Section 2.4(c)(ii)
"Lending Partner" Section 2.4(c)(ii)
"Letter of Credit" Section 2.3(b)(ii)(B)
"License Contribution" Section 2.3(a)(i)
"Liquidating Events" Section 15.1(a)
"Limited Partner Percentage Interests" Section 2.1
"Loan Date" Section 2.4(c)(ii)
"Local Joint Ventures" Section 6.3(o)
"Lock-out Period" Section 6.1(c)
"Make-up Amount" Section 2.4(c)(iii)
"Mediator" Section 5.8(a)(ii)
"MFS" Section 6.4(j)
"MFS Lease" Section 6.4(j)
"MHL" Section 6.3(o)
"Net Equity" Section 12.3
"Net Equity Notice" Section 12.3
"Nextel" Section 6.4(f)
"Nextel Purchase Agreement" Section 6.4(f)
"Non-Adverse Partners" Section 12.1(a)
"Offer" Section 6.1(c)
"Offered Interest" Section 13.4
"Offerees" Section 13.4(b)
"Offer Notice" Section 13.4(b)
"Offer Period" Section 13.4(c)
"Offer Price" Section 13.4(a)
"Offer Statement" Section 15.7(b)
"Other Pennsylvania Company" Section 6.4(g)
<PAGE> 34
<S> <C>
"Ownership Restrictions" Section 9.12
"Overlap Cellular Area" Section 9.1(b)
"OverlapCo" Section 6.5(d)
"Partner Loan" Section 2.7
"Partnership's Businesses" Section 6.4(b)
"Paying Partner" Section 2.4(a)(ii)
"Payment Default" Section 2.4(c)(i)
"Penalty Amount" Section 2.4(b)
"Permitted Transfer" Section 13.2
"PhillieCo" Section 6.3(e)
"Post-Auction Requirements" Section 2.3(b)(i)
"Preferred Buyout Notice" Section 13.7
"Premium Call Shortfall Notice" Section 2.4(a)(v)
"Premium Call Paying Partner" Section 2.4(a)(v)
"Proposed Budget" Section 5.2(e)
"Proposed Business Plan" Section 5.2(e)
"purchase commitment" Section 12.2(b)
and 13.4(d)
"Public Offering" Section 5.9(c)
"Purchase Notice" Section 12.2(b)
"Purchase Offer" Section 13.4(a)
"Purchaser" Section 13.4(a)
"Purchasing Partner" Section 12.2(b)
"Put Notice" Section 13.6(b)(i)
"Receiving Party" Section 6.7(a)
"Regulatory Allocations" Section 3.4
"Related Group" Section 5.1(c)
"Representative" Section 5.1(c)
"Requested Contribution" Section 2.3(b)(i)
"Requested Premium Call Contribution" Section 2.4(a)(v)
"Required Majority Vote" Section 5.1(j)
"Restricted Area" Section 9.15
"Restricted Time" Section 9.15
"Restricted Party" Section 6.7(a)
"Sale Notice" Section 13.4(e)
"Second Appraiser" Section 12.4
"Section 5.1 Election Period" Section 5.1(l)(ii)
"Seller" Section 13.4
"Selling Partners" Section 13.6(c)(i)
"Senior Credit Agreement" Section 2.7
"Shortfall" Section 2.4(a)(ii)
"Shortfall Notice" Section 2.4(a)(ii)
"Simple Majority Vote Section 5.1(i)
"Special Contribution" Section 2.4(b)
"Special Sprint Contribution" Section 2.3(c)
"Sprint Cellular Business" Section 9.1(b)
"Sprint Obligation" Section 13.6(c)(ii)
"Sprint/TCI Loans" Section 2.7(d)
"Subsidiary Partnership" Section 3.7
"Substantial Portion" Section 1.10
"Tagalong Notice" Section 13.5(a)
"Tagalong Offer" Section 13.5(a)
"Tagalong Period" Section 13.5(a)
"Tagalong Purchaser" Section 13.5(a)
<PAGE> 35
<S> <C>
"Tagalong Transaction" Section 13.5(a)
"Tax Matters Partner" Section 11.3(a)
"Teleport Trademark License" Section 9.2(b)
"Third Appraiser" Section 13.4
"Third Party Provider" Section 9.15
"Timely Partner" Section 2.4(b)
"Trademark License" Section 9.2(a)
"Transferring Partner" Section 13.5(a)
"Unanimous Partner Vote" Section 5.1(l)(i)
"Unanimous Vote" Section 5.1(k)
"Unfunded Shortfall" Section 2.3(b)(iii)(B)
"Unpaid Amount" Section 2.4(b)
"Unreturned Capital" Section 12.2(a)
"UTLD" Section 9.4
1.12 Terms Generally.
The definitions in Section 1.10 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". The words "herein",
"hereof" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules) in its entirety and not to any
part hereof unless the context shall otherwise require. All
references herein to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise
require. Unless the context shall otherwise require, any references
to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of
a statute or regulation, to any corresponding provisions of successor
statutes or regulations). Any reference in this Agreement to a "day"
or number of "days" (without the explicit qualification of
"Business") shall be interpreted as a reference to a calendar day or
number of calendar days. If any action or notice is to be taken or
given on or by a particular calendar day, and such calendar day is
not a Business Day, then such action or notice shall be deferred
until, or may be taken or given on, the next Business Day.
2 . PARTNERS' CAPITAL CONTRIBUTIONS
2.1 Percentage Interests; Preservation of Percentages of Interests
Held as General Partners and as Limited Partners.
The initial Percentage Interest (which relates solely to
Interests and not to the Preferred Interests) of each Partner as of
the date of this Agreement is set forth on Schedule 2.1 and
represents the sum of the "General Partner Percentage Interest" and
"Limited Partner Percentage Interest" of such Partner as set
<PAGE> 36
forth in such Schedule 2.1. Except as expressly provided in this Agreement,
or as may result from a Transfer of Interests required or permitted
by this Agreement, the Percentage Interest of a Partner shall not be
subject to increase or decrease without such Partner's prior consent.
For purposes of this Agreement, each Partner is treated as though it
holds a single Interest, even though such Partner (unless and until
it becomes an Exclusive Limited Partner) holds ninety-nine percent
(99.0%) of its Interest as a General Partner and one percent (1.0%)
of its Interest as a Limited Partner. Each Partner, unless and until
it becomes an Exclusive Limited Partner, will hold ninety-nine
percent (99.0%) of its Interest as a General Partner and one percent
(1.0%) of its Interest as a Limited Partner and the amount of any
Capital Contributions made by a Partner pursuant to Section 2 and any
allocations and distributions to a Partner pursuant to Section 3 or
Section 4 shall, except as otherwise provided therein, be allocated
ninety-nine percent (99.0%) to the Interest held by the Partner as a
General Partner and one percent (1.0%) to the Interest held by the
Partner as a Limited Partner. In the event that a Partner Transfers
all or any portion of its Interest pursuant to this Agreement,
ninety-nine percent (99.0%) of the aggregate Interest so acquired by
any Person shall be treated as attributable to the Interest held by
the transferring Partner as a General Partner and one percent (1.0%)
of the aggregate Interest so acquired shall be treated as
attributable to the Interest held by the transferring Partner as a
Limited Partner. In the event that the Interest of a Partner is
otherwise increased or decreased pursuant to this Agreement, the
amount of the increase or decrease, as the case may be, shall be
allocated ninety-nine percent (99.0%) to the Interest held by such
Partner as a General Partner and one percent (1.0%) to the Interest
held by such Partner as a Limited Partner.
2.2 Partners' Original Capital Contributions.
Simultaneously with the execution and delivery of this
Agreement, the Partners shall make their respective Original Capital
Contributions by each contributing to the Partnership that portion of
their respective interests in WirelessCo equal to a fraction
(expressed as a percentage), the numerator of which is the remainder
of (A) the total contributions made by such Partner to WirelessCo
minus (B) such Partner's initial Percentage Interest times $5
million, and the denominator of which is the total contributions made
by such Partner to WirelessCo. The name, address and Agreed Value of
the Original Capital Contribution of each of the Partners are set
forth on Schedule 2.2.
2.3 Additional Capital Contributions.
(a) Additional Capital Contributions of Property; Equalizing
Contributions. The Partners shall make the Additional Capital
Contributions of Property set forth in clauses (i) through (iv) of
this Section 2.3(a) and the Equalizing Contributions required by
clause (v) of this Section 2.3(a).
<PAGE> 37
(i) Contribution of Certain Property by Cox. Cox shall
contribute to the Partnership an undivided fractional interest in the Cox
Pioneer Preference License and certain associated assets (the "License
Contribution"), which the Partnership in turn shall contribute through
its Subsidiaries to the capital of PioneerCo. Such contribution shall
be made concurrently with the contribution by Cox Communications
Pioneer, Inc. to PioneerCo of the remaining undivided fractional
interest in the Cox Pioneer Preference License and such associated
assets, which shall be made at the date and time provided in, and in
accordance with, the PioneerCo Partnership Agreement. For purposes
hereof, such contributions to the Partnership and then to PioneerCo
may be effected through the direct conveyance by Cox Parent of the Cox
Pioneer Preference License to PioneerCo. The Agreed Value of the
License Contribution shall be credited against the next Additional
Capital Contribution to be made in cash by Cox under this Agreement to
the same extent as if Cox had contributed cash in the amount of such
Agreed Value, and until so credited the License Contribution shall not
constitute an Additional Capital Contribution for purposes of this
Agreement.
(ii) Contribution of Teleport Assets. Subject to the
terms and conditions of the Teleport Contribution Agreement, Comcast, Cox and
TCI shall contribute the Comcast Teleport Assets, Cox Teleport Assets
and TCI Teleport Assets, respectively, to the Partnership, which
Assets the Partnership in turn shall contribute to the capital of
NewTelco. For purposes hereof, such contributions to the Partnership
and then to NewTelco may be effected through the direct conveyance by
Comcast, Cox and TCI of the Comcast Teleport Assets, Cox Teleport
Assets and TCI Teleport Assets, respectively, to NewTelco. If the
contribution of the Cox Teleport Assets on the First Closing Date (or
such portion thereof that is contributed on such date) gives rise to
any Excess Value, Cox will receive a Preferred Interest in exchange
for such Excess Value. Excess Value, if any, shall be finally
determined as of the First Closing Date in accordance with
Section 2.3(a)(v)(F) without regard to any Additional Capital
Contributions pursuant to this Section 2.3(a)(ii) that are made
subsequent to the First Closing Date and any adjustments to Agreed
Value or any amounts that subsequently are contributed pursuant to
Section 2.8(a). For purposes of this Agreement, that portion of the
Cox Teleport Assets contributed by Cox on the First Closing Date
having an Agreed Value equal to the Excess Value shall not be treated
as an Additional Capital Contribution by Cox.
(iii) Contribution of Other CAP Businesses. Each
Cable Partner holding an interest in an Other CAP Business (directly or
through a Controlled Affiliate) and the Partnership shall negotiate in good
faith the price (which the Partners intend to be fair market value) and other
terms pursuant to which such Other CAP Business shall be contributed to
NewTelco. If such Cable Partner and the Partnership are unable to agree
upon the price at which such Other CAP Business shall be contributed to
NewTelco, such price shall be equal to the product of (A) such
<PAGE> 38
Cable Partner's ownership interest (expressed as a percentage) in such Other
CAP Business times (b) the "Gross Appraised Value" of such Other CAP
Business determined as provided in Section 12.4 as if all references therein to
the Partnership were deemed references to such Other CAP Business. In such
event, the Cable Partner holding an interest in such Other CAP Business shall
appoint the First Appraiser and the Representatives of the other
Partners shall appoint the Second Appraiser by Required Majority Vote
pursuant to Section 9.7. The Other CAP Business Contribution
Agreements relating to the Other CAP Businesses owned by Cox and its
Controlled Affiliates shall provide that, until such time as NewTelco
has commenced providing Wireline Exclusive Services in the geographic
area serviced by any such Other CAP Business, Cox and its Controlled
Affiliates will continue to manage the business of such Other CAP
Business in exchange for a management fee and other payments to be
mutually agreed upon by Cox and the Partnership. Subject to the
execution of an Other CAP Business Contribution Agreement and upon the
terms and conditions set forth therein, each Cable Partner shall
contribute to NewTelco the Other CAP Businesses owned by such Cable
Partner and its Controlled Affiliates.
(iv) Contribution of Certain Property by Sprint.
(A) Trademark License. Simultaneously with
the execution and delivery of this Agreement, Sprint shall contribute
to the Partnership certain property associated with the Trademark
License.
(B) Teleport Trademark License. On the First
Closing Date, Sprint shall contribute to the Partnership certain
additional property associated with the Teleport Trademark License.
(v) Equalizing Contributions.
(A) Equalizing Contribution Notice. At least five (5)
Business Days prior to the closing date for a contribution of Property pursuant
to Section 2.3(a)(ii) or (iii) (the "Equalizing Contribution Date"),
the Chief Executive Officer shall give written notice (an "Equalizing
Contribution Notice") to each Partner, which notice shall (I) set
forth the Equalizing Contribution Date, (II) set forth the Estimated
Gross Contribution Amount of the Additional Capital Contributions to
be made on the Equalizing Contribution Date determined as provided
below and each Partner's proportionate share thereof determined as
provided in this Section 2.3(a)(v), (III) state with respect to each
Partner, as applicable, the portion of the Additional Capital
Contribution to be made by such Partner with respect to such
Equalizing Contribution Date in Property pursuant to clause (ii),
(iii) or (iv) of this Section 2.3(a) and the portion to be made in
cash or other Property determined as provided in this clause (v) of
Section 2.3(a), and (IV) specify the account of the Partnership to
which any Equalizing Contributions in cash are to be made.
<PAGE> 39
(B) Form of Equalizing Contributions. With respect to
each Equalizing Contribution Date, each Partner shall be obligated to make
an Additional Capital Contribution in an amount equal to the product
of the initial Percentage Interest of such Partner as set forth in
Schedule 2.1 times the Gross Contribution Amount for such Equalizing
Contribution Date, which contribution shall be made (I) if such
Partner was scheduled to contribute Property pursuant to clauses (ii)
or (iii) of this Section 2.3(a) on such Equalizing Contribution Date,
through the contribution of such Property to the extent of the Agreed
Value thereof (which, in the case of Cox, shall not include the Excess
Value), (II) in the case of Sprint, if such Equalizing Contribution
Date is the First Closing Date, through the contribution of the
Property referred to in Section 2.3(a)(iv)(B) to the extent of the
Agreed Value thereof, and (III) otherwise through the contribution of
cash, the crediting of the License Contribution as contemplated by the
last sentence of Section 2.3(a)(i) or the contribution of the
Preferred Interest or Sprint/TCI Loans, as permitted or required by
Sections 2.3(b)(iv) and (v), respectively (the amounts contributed
pursuant to this clause (III), as adjusted in the manner provided in
Section 2.3(a)(v)(F), being referred to as the "Equalizing
Contributions"). Any Partner that fails to make all or any part of
the Equalizing Contribution so requested of it in accordance with
Section 2.3(a)(v)(F) shall be deemed a Delinquent Partner and, if
applicable, a Defaulting Partner under Section 2.4(b) and 2.4(c) and
otherwise under this Agreement.
(C) Gross Contribution Amount. The "Gross
Contribution Amount" shall be:
(I) with respect to the Equalizing
Contribution Date that is the First Closing Date, the greater of the
Grossed-Up Contribution of TCI for such Equalizing Contribution Date
or the Grossed-Up Contribution of Comcast for such Equalizing
Contribution Date; and
(II) with respect to any other Equalizing
Contribution Date, the greatest of the Grossed-Up Contribution of TCI
for such Equalizing Contribution Date, the Grossed-Up Contribution of
Comcast for such Equalizing Contribution Date, or the Grossed-Up
Contribution of Cox for such Equalizing Contribution Date.
(D) Estimated Gross Contribution Amount. The
"Estimated Gross Contribution Amount" with respect to any Equalizing
Contribution Date shall be equal to an estimate of the Gross Contribution
Amount for such Equalizing Contribution Date determined by substituting for
the Agreed Value of any Property to be contributed by any Partner on such
Equalizing Contribution Date pursuant to Section 2.3(a)(ii) or (iii) the
estimate of the Agreed Value of such Property set forth in the notice
delivered to the
<PAGE> 40
Partnership pursuant to Section 2.6 of the Teleport Contribution Agreement
or any comparable provision of an Other CAP Business Contribution Agreement.
(E) Grossed-Up Contribution. The "Grossed-Up
Contribution" of any Partner for any Equalizing Contribution Date shall equal
the Agreed Value of all Property scheduled to be contributed by such Partner on
such Equalizing Contribution Date pursuant to clauses (ii) and (iii)
of this Section 2.3(a) divided by the initial Percentage Interest of
such Partner as set forth in Schedule 2.1.
(F) Contribution of Equalizing Contribution Amount.
On the Equalizing Contribution Date, each Partner shall contribute cash or
other Property to the Partnership equal to the amount of the
Equalizing Contribution that such Partner would be required to make in
accordance with clause (III) of Section 2.3(a)(v)(B) if the Gross
Contribution Amount for such Equalizing Contribution Date were equal
to the Estimated Gross Contribution Amount (the "Estimated Equalizing
Contribution"). As soon as the Agreed Values of all Property
contributed on an Equalizing Contribution Date pursuant to clauses
(ii) and (iii) of this Section 2.3(a) are fully determined pursuant to
Section 2.6 of the Teleport Contribution Agreement or any comparable
provision of an Other CAP Business Contribution Agreement, the Chief
Executive Officer promptly shall cause the Gross Contribution Amount
to be calculated using such Agreed Values and shall determine the
amount of Additional Capital Contributions to be made by the Partners
with respect to such Equalizing Contribution Date pursuant to clause
(III) of Section 2.3(a)(v)(B). Within ten (10) Business Days
following the date that such Agreed Values are finally determined, the
Chief Executive Officer shall give written notice (an "Equalizing
Contribution Adjustment Notice") to each Partner, which notice shall
(I) set forth the date on which the Additional Capital Contributions,
cash reimbursements to the Partners or adjustment to Excess Value
necessary to give effect to the Gross Contribution Amount shall be
made pursuant to this Section 2.3(a)(v)(F) (the "Equalizing
Contribution Adjustment Date") and (II) set forth the Gross
Contribution Amount and each Partner's proportionate share thereof
determined as provided in this Section 2.3(a)(v). On the Equalizing
Contribution Adjustment Date, (x) with respect to any Partner whose
Estimated Equalizing Contribution exceeds its Equalizing Contribution,
the Partnership shall make a cash reimbursement to such Partner
in an amount equal to such excess, (y) with respect to any Partner
whose Equalizing Contribution exceeds its Estimated Equalizing
Contribution, such Partner shall make an Additional Capital Contribution
(in cash or other Property as permitted with respect to an Equalizing
Contribution Date pursuant to Section 2.3(a)(v)(B)) in an amount
equal to such excess, and (z) with respect to Cox, the Excess Value
shall be finally determined taking into account any difference between
the Gross Contribution Amount and the Estimated Gross Contribution
Amount. Any Additional Capital Contributions,
<PAGE> 41
cash reimbursements to Partners, or adjustments to the Excess Value
made pursuant to this Section 2.3(a)(v)(F) shall be deemed to have
occurred as of the Equalizing Contribution Date.
(b) Additional Capital Contributions of Cash and Preferred
Interests.
(i) Additional Cash Contributions Generally. In addition
to the authority to request Equalizing Contributions pursuant to Section
2.3(a)(v), but subject to the limitations of this Agreement, the
Management Committee (or the Chief Executive Officer pursuant to (x)
the express provisions of Section 2.3(b)(ii)(C), (y) the authority to
be granted in each Annual Budget to make requests for Additional
Capital Contributions in the amounts, during the periods and subject
to the limitations set forth therein, and (z) such authority as may be
delegated to the Chief Executive Officer from time to time by the
Management Committee (which delegation may occur only by a vote of the
members of the Management Committee required to take the action so
delegated)) may in accordance with the following procedures request
the Partners to make Additional Capital Contributions to the
Partnership in cash from time to time to fund (i) in the case of
Additional Capital Contributions requested during the Auction Period,
the expenditures described in the definition of Auction Commitment in
Section 1.10 and the cash needs of the Partnership for operating
expenses as determined by the Required Majority Vote of the Management
Committee (subject to the limitation set forth in clause (A) of this
Section 2.3(b)(i)) and (ii) in the case of Additional Capital
Contributions requested following the Auction Period, the cash needs
of the Partnership in conformity with the Annual Budget then in
effect, as it may be modified from time to time in accordance with
this Agreement; provided that the Planned Capital Amount reflected in
the Annual Budget for the first Fiscal Year of the Initial Three-Year
Period shall include that portion of the Auction Commitment that has
not been contributed to the Partnership as of the end of the Auction
Period and that the Management Committee determines will be required
during such first Fiscal Year for the purposes specified in the
definition of Auction Commitment (the "Post-Auction Requirements").
The aggregate amount of the Additional Capital Contributions requested
pursuant to this Section 2.3(b) to be made as of any Contribution Date
(the "Additional Contribution Amount") shall be set forth in an
Additional Contribution Notice given to each Partner, shall not exceed
the amount reasonably anticipated by the Management Committee to be
required to fund the cash needs of the Partnership for the ensuing six
(6) months or such shorter period as may be determined by the
Management Committee, and
(A) during the Auction Period, the Additional
Contribution Amount, when added to the aggregate amount of the
Original Capital Contributions of the Partners and the Additional
Contribution Amounts stated in all prior Additional Contribution
Notices, shall not exceed the cumulative amount of Additional
Capital Contributions contemplated to be required of the Partners
<PAGE> 42
pursuant to the WirelessCo Management Committee Resolution, unless
otherwise approved by the Unanimous Vote of the Management Committee,
and
(B) during each Fiscal Year commencing with the first
Fiscal Year in the Initial Three-Year Period, the Additional Contribution
Amount, when added to the Additional Contribution Amounts stated in all
prior Additional Contribution Notices with Contribution Dates in the
then-current Fiscal Year, (x) shall not exceed the cumulative amount
of Additional Capital Contributions contemplated to be required of the
Partners during such Fiscal Year as set forth in the Annual Budget for
such Fiscal Year (including, with respect to the first Fiscal Year in
the Initial Three-Year Period, any Post-Auction Requirements) unless
otherwise approved by the Required Majority Vote of the Management
Committee and (y) if such Fiscal Year falls within the Initial
Three-Year Period, also shall not exceed, unless otherwise approved by
the Unanimous Vote of the Management Committee, the sum of (A) the
product of (1) 150% times (2) the Planned Capital Amount for such
Fiscal Year minus (for the first Fiscal Year of the Initial Three-Year
Period) any Post-Auction Requirements; provided, that the amount
determined in accordance with this clause (2) will be decreased by any
portion thereof the payment of which the Management Committee has
previously determined as provided below to accelerate into any prior
Fiscal Year, (B) 100% of the Prior Years' Carryforward and (C) for the
first Fiscal Year of the Initial Three-Year Period, any Post-Auction
Requirements; provided, that for the last Fiscal Year of the Initial
Three-Year Period Additional Contribution Notices for Additional
Capital Contributions in excess of the maximum amount established by
clause (y) above may be approved by a Required Majority Vote of the
Management Committee to the extent that the aggregate amount of the
Original Capital Contributions and Additional Capital Contributions
made or requested to be made by the Partners prior to the Contribution
Date set forth in any such Additional Contribution Notice do not
exceed the Total Mandatory Contributions.
To the extent that the cumulative Additional Contribution
Amounts stated in Additional Contribution Notices pursuant to this
Section 2.3(b) with Contribution Dates in any given Fiscal Year
within the Initial Three-Year Period exceed the sum of the Planned
Capital Amount for such Fiscal Year plus the Prior Years'
Carryforward (minus any portion of such Planned Capital Amount
that was accelerated to a prior Fiscal Year), such excess shall
constitute an "Excess Contribution Amount" and, if determined by
a Required Majority Vote of the Management Committee, an
"Accelerated Contribution Amount". The amount of any Excess
Contribution Amount that the Management Committee may designate
as an Accelerated Contribution Amount pursuant to the preceding
sentence shall not exceed the sum of the Planned Capital Amounts
for each Fiscal Year in the Initial Three-Year Period after the Fiscal
Year in which the Contribution Date stated in the Additional Contribution
Notice for such Excess Contribution Amount
<PAGE> 43
occurs (after giving effect to any reduction to such Planned Capital
Amounts pursuant to the following sentence with respect to any prior
Excess Contribution Amount). The Accelerated Contribution Amount in
any Fiscal Year will be applied to reduce the Planned Capital Amount set
forth in the Initial Business Plan for subsequent Fiscal Years in the Initial
Three-Year Period in such order of priority as the Management Committee
may determine in connection with its determination that an Excess
Contribution Amount shall constitute an Accelerated Contribution Amount.
The amount of the Additional Capital Contribution
requested of any Partner pursuant to this Section 2.3(b) in an
Additional Contribution Notice (the "Requested Contribution") shall
be equal to (i) with respect to Requested Contributions with
Contribution Dates during the Auction Period or during any Fiscal
Year in the Initial Three-Year Period, that amount which represents
the same percentage of the Additional Contribution Amount specified
in such Additional Contribution Notice as such Partner's initial
Percentage Interest and (ii) with respect to Requested Contributions
with Contribution Dates during any Fiscal Year after the end of the
Initial Three-Year Period, that amount which represents the same
percentage of the Additional Contribution Amount specified in such
Additional Contribution Notice as such Partner's Percentage Interest
as of the date of such Additional Contribution Notice; provided that
if the aggregate amount of the Original Capital Contributions and
Additional Capital Contributions made or requested to be made
(including pursuant to Section 2.3(a)) prior to the end of the
Initial Three-Year Period is less than the Total Mandatory
Contributions, then the Requested Contributions of each Partner shall
continue to be the same percentage of the Additional Contribution
Amounts as such Partner's initial Percentage Interest until the
Cut-Off Time.
(ii) Mandatory Additional Capital Contributions During the
Auction Period.
(A) A Partner may not decline to make any of its
Requested Contributions with Contribution Dates in the Auction Period.
(B) Prior to the date hereof, each Partner or a
Controlled Affiliate thereof provided WirelessCo with irrevocable letters of
credit (collectively, "Letter of Credit") in the amount of a specified portion
of the Auction Commitment, which may be drawn by the Chief Executive Officer
on behalf of the Partnership to fund such Partner's Auction Commitment
solely in accordance with Section 2.3(b)(ii)(C). Within two (2) Business Days
after a Partner makes a Requested Contribution in accordance with Section
2.3(b)(ii)(C), the Chief Executive Officer shall notify the issuing bank or
banks of such Partner's Letter of Credit of the payment of the Requested
Contribution and shall instruct such bank or banks to reduce the amount of the
Letter of Credit by an amount equal to the Requested Contribution made by such
Partner. In addition, the Chief Executive Officer shall, as
<PAGE> 44
directed by the Management Committee, instruct the issuing bank or banks
of each Partner's Letter of Credit to reduce the amount thereof as may be
appropriate to reflect the results of the PCS Auction. If the Auction
Commitment has not been fully contributed prior to August 31, 1995
(the Original Capital Contributions constituting contributions of the Auction
Commitment for purposes of this Agreement), each Partner shall by September
15, 1995, extend the term of its Letter of Credit in the amount of such
Partner's Auction Commitment (as reduced pursuant to the second and third
sentences of this paragraph) until December 31, 1995, unless otherwise
determined by a Required Majority Vote of the Management Committee.
(C) To the extent necessary to satisfy on a timely
basis in accordance with the FCC's rules all (1) obligations of WirelessCo with
respect to the payment of the purchase price for PCS licenses for
frequency blocks "A" and "B" awarded to it in the PCS Auction or
(2) obligations of WirelessCo to make capital contributions under the
PioneerCo Partnership Agreement during the Auction Period in
connection with the formation of PioneerCo and the contribution of the
Cox Pioneer Preference License to PioneerCo and obligations of
WirelessCo pursuant to partnership agreements or related agreements to
make capital contributions to other entities that are awarded pioneer
preference licenses in connection with the formation of such entities
and the payment of the purchase price for such licenses, in either
case as contemplated by and in accordance with the Wireless Strategic
Plan, the Chief Executive Officer is expressly authorized, without any
requirement of action by the Management Committee, to give an
Additional Contribution Notice to the Partners with respect to the
Additional Capital Contributions required to be made by the
Partnership to WirelessCo to enable WirelessCo to fund such payment
obligations and commitments subject, however, to the limitations of
Section 2.3(b)(i). If any Partner (i) fails to make its Requested
Contribution as set forth in such Additional Contribution Notice or
(ii) gives written authorization to the Chief Executive Officer to
draw on its Letter of Credit in connection with such Additional
Contribution Notice and the applicable Letter of Credit permits a draw
to be made in such circumstances, in either case on or before the
Contribution Date, the Chief Executive Officer is expressly authorized
to draw on such Partner's Letter of Credit to the extent of such
failure or written authorization.
(iii) Mandatory Additional Capital Contributions After
the Auction Period.
(A) No Partner may decline to make any of its Requested
Contributions with Contribution Dates after the Auction Period unless,
and then only to the extent that, (1) with respect to Requested Contributions
with Contribution Dates during any Fiscal Year in the Initial Three-Year
Period, the amount of the Requested Contribution of such Partner, when added
to the cumulative amount of all Requested Contributions theretofore
<PAGE> 45
requested of and made by such Partner during the same Fiscal Year, would
exceed the sum of (x) such Partner's Capital Commitment with respect to such
Fiscal Year and (y) the product of such Partner's initial Percentage Interest
times any Excess Contribution Amount for such Fiscal Year if and to the extent
that such Partner's Representative(s) voted for approval of the Annual
Budget pursuant to which the Excess Contribution Amount is being
requested or voted in favor of requesting (or delegating to the Chief
Executive Officer the authority to request) such Excess Contribution
Amount, and (2) with respect to Requested Contributions with
Contribution Dates during any Fiscal Year after the Initial Three-Year
Period, none of such Partner's Representative(s) voted for approval of
the Annual Budget that provides for the Additional Contribution Amount
being requested and none of such Partner's Representatives voted in
favor of requesting (or delegating to the Chief Executive Officer the
authority to request) such Additional Contribution Amount or such
Partner was an Exclusive Limited Partner at the time of such vote.
Notwithstanding the preceding sentence, a Partner will not be entitled
to decline to make any Requested Contribution with a Contribution Date
during the last Fiscal Year of the Initial Three-Year Period or in any
Fiscal Year thereafter covered by the Initial Business Plan except to
the extent such Requested Contribution, when added to the aggregate
amount of Original Capital Contributions and Additional Capital
Contributions made or requested to be made by such Partner prior to
the Contribution Date of such Requested Contribution, exceeds such
Partner's Mandatory Contribution.
(B) Subject to Section 2.3(b)(iii)(A), if a Partner was
a Declining Partner with respect to an Accelerated Contribution Amount with
a Contribution Date during a Fiscal Year in the Initial Three-Year
Period (with respect to any such Partner, its "Declined Accelerated
Contribution"), then, to the extent that there is a Shortfall in
connection with a Requested Contribution with a Contribution Date
during a subsequent Fiscal Year in the Initial Three-Year Period that
is not fully allocated to one or more Contributing Partners pursuant
to Section 2.4(a) (an "Unfunded Shortfall"), such Partner shall be
required to make an Additional Capital Contribution to the Partnership
up to an amount equal to such Partner's initial Percentage Interest of
the portion of the Planned Capital Amount set forth in the Initial
Business Plan for such subsequent Fiscal Year that was accelerated to
a prior Fiscal Year (but only to the extent of such Declined
Accelerated Contribution and, if there is more than one such Partner,
pro rata in proportion to the aggregate amounts of the previously
unfunded Declined Accelerated Contributions of each such Partner).
Any such required Additional Capital Contribution shall be contributed
by such Partner within ten (10) days of notice to such Partner by the
Chief Executive Officer that there exists an Unfunded Shortfall with
respect to which such Partner is required to make an Additional
Capital Contribution pursuant to the preceding sentence,
which notice shall set forth the amount of
<PAGE> 46
the Additional Capital Contribution required of such Partner and the
applicable Contribution Date and shall otherwise constitute an Additional
Contribution Notice for purposes of this Agreement.
(iv) Contribution of Preferred Interest. Cox may elect to
satisfy any request for Additional Capital Contributions pursuant to an
Additional Contribution Notice or Equalizing Contribution Notice by
contributing all or a portion of the Preferred Interest to the
Partnership. The Management Committee also may require Cox to make
the election provided for in the preceding sentence by stating in the
Additional Contribution Notice or Equalizing Contribution Notice given
to Cox that its Requested Contribution or Equalizing Contribution
shall be satisfied, in whole or in part, as the case may be, by the
contribution of all or a portion of the Preferred Interest to the
Partnership; provided that the Management Committee may not require
Cox to make such election until the License Contribution has been
credited in its entirety pursuant to the last sentence of Section
2.3(a)(i) against Additional Capital Contributions to be made by Cox.
Any contribution of all or any portion of the Preferred Interest made
pursuant to this Section 2.3(b)(iv) shall constitute an Additional
Capital Contribution. The value of the Preferred Interest as of any
relevant date for purposes of this Agreement shall be equal to the sum
of the then outstanding balance of (A) the Preferred Return Account
and (B) the Excess Value Account; provided that the value of any
portion of a Preferred Interest shall be increased as provided in
Section 2.4(a)(v) for purposes of calculating Percentage Interests to
the extent such portion of the Preferred Interest is treated as a
contribution of Premium Dollars. If less than the full value of the
Preferred Interest is being contributed as of any date, then the
amount contributed shall be applied, first, to reduce the then
outstanding balance of the Preferred Return Account until such Account
equals zero and, next, to reduce the then outstanding balance of the
Excess Value Account.
(v) Contribution of Sprint/TCI Loans. On the First
Closing Date, and on each Contribution Date and Equalizing Contribution Date
after (i) the First Closing Date or (ii) the termination of the Teleport
Contribution Agreement, Sprint and TCI each shall be required to
contribute to the Partnership Sprint/TCI Loans having a value equal to
the lesser of (A) the amount of the Equalizing Contribution or
Requested Contribution required to be made by Sprint or TCI,
respectively, on such date and (B) the total value of the Sprint/TCI
Loans then held by Sprint or TCI, respectively. Any contribution of
all or a portion of the Sprint/TCI Loans made pursuant to this Section
2.3(b)(v) shall constitute an Additional Capital Contribution in an
amount equal to the value of the Sprint/TCI Loans so contributed. The
value of a Sprint/TCI Loan as of any relevant date for purposes of
this Agreement shall be equal to the principal balance thereof and the
accrued and unpaid interest thereon as of such date; provided that the
value of any portion of a Sprint/TCI Loan shall be increased as
provided in Section 2.4(a)(v) for purposes of calculating Percentage
<PAGE> 47
Interests to the extent that such portion of a Sprint/TCI Loan is
treated as a contribution of Premium Dollars. If less than the full
value of a Sprint/TCI Loan is being contributed as of any date, then
the amount contributed shall be applied first to reduce the accrued
and unpaid interest on such Sprint/TCI Loan and then to reduce the
principal balance thereof.
(c) Special Sprint Contribution. Sprint shall make a Capital
Contribution of cash to the Partnership (each a "Special Sprint
Contribution") on the last Business Day of each month (which shall
constitute the Contribution Date for the Special Sprint Contribution)
in an amount and in the manner provided in Schedule 2.3(c) hereto.
Sprint will be deemed a Delinquent Partner and (if applicable) a
Defaulting Partner under Sections 2.4(b) and 2.4(c) and otherwise
under this Agreement if it fails to make any Special Sprint
Contribution within the time period described or in the manner
contemplated in Schedule 2.3(c). The amount of the Special Sprint
Contribution shall be in addition to (and shall not be applied against
or reduce) Sprint's Capital Commitment, Mandatory Contribution or any
of the other obligations of Sprint to make Additional Capital
Contributions pursuant to Sections 2.3(a) and (b).
(d) Additional Contributions Related to PioneerCo Preemptive
Rights. Each of the Partners (other than Cox) may make Additional
Capital Contributions to the Partnership as and to the extent
permitted by Section 9.11.
2.4 Failure to Contribute Capital.
(a) Declining Partners.
(i) Any Partner that is entitled to decline to make a
Requested Contribution as provided in Section 2.3(b)(iii) may do so by
notice given to the Chief Executive Officer (with a copy to the
Management Committee) within fifteen (15) days of the date the
applicable Additional Contribution Notice was given (any such Partner
that timely exercises such right is herein referred to as a "Declining
Partner").
(ii) If any Partner is a Declining Partner with respect to
an Additional Contribution Notice and the Management Committee does not
give a Premium Call Notice pursuant to Section 2.4(a)(v), the Chief
Executive Officer shall, within five (5) days after the date notice
was required to be received under Section 2.4(a)(i), give a notice (a
"Shortfall Notice") to each Partner that made its Requested
Contribution in full (each a "Paying Partner") requesting the Paying
Partners to make Additional Capital Contributions in an aggregate
amount equal to the amount not contributed by the Declining Partner(s)
in response to such Additional Contribution Notice (the "Shortfall").
Each Paying Partner that is willing to commit to fund all or any portion
of the Shortfall (each a "Contributing Partner") shall so notify the
Chief Executive Officer and each other Paying Partner within ten (10)
days after the date the Shortfall Notice was given, setting
<PAGE> 48
forth the maximum amount of the Shortfall, up to one hundred
percent (100%) thereof, that such Contributing Partner is willing to
fund (the "Funding Commitment"). Except as otherwise provided in
Section 2.4(a)(iii), if the aggregate Funding Commitments are less
than or equal to one hundred percent (100%) of the Shortfall, each
Contributing Partner shall be entitled to make an Additional Capital
Contribution to the Partnership in response to a Shortfall Notice in
an amount equal to its Funding Commitment. If the aggregate Funding
Commitments made by the Contributing Partners exceed one hundred
percent (100%) of the Shortfall, then except as otherwise provided in
Section 2.4(a)(iii), each Contributing Partner shall be entitled to
contribute an amount equal to the same percentage of the Shortfall as
such Contributing Partner's Percentage Interest represents of the
total Percentage Interests of the Contributing Partners (in each case
before giving effect to any adjustments to the Percentage Interests to
be made in connection with the Additional Contribution Notice with
respect to which the Shortfall occurred), provided that, if any
Contributing Partner's Funding Commitment was for an amount less than
its proportionate share of the Shortfall as so determined, the portion
of the Shortfall not so committed to be funded shall, except as
otherwise provided in Section 2.4(a)(iii), continue to be allocated
proportionally, in the manner provided above in this sentence, among
the other Contributing Partners until each has been allocated by such
process of apportionment an amount equal to its Funding Commitment or
until the entire Shortfall has been allocated among the Contributing
Partners. The amount of the Additional Capital Contribution to be
made by each Contributing Partner in response to the Shortfall Notice
as determined in accordance with this Section 2.4(a)(ii) shall be
specified in a notice delivered by the Chief Executive Officer to the
Contributing Partners and shall, within ten (10) days after the date
of such notice, be paid to the account of the Partnership designated
in the Shortfall Notice.
(iii) Except as otherwise provided in Section
2.4(a)(iv), if the Declining Partner is a Cable Partner and no Cable
Partner's Percentage Interest, when added to the Percentage Interests
of all Controlled Affiliates of such Partner, is equal to or greater
than Sprint's Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of Sprint (in each case
determined without regard to any Additional Capital Contribution made
by any Partner pursuant to the Additional Contribution Notice with
respect to which the Shortfall occurred), the Shortfall shall be
allocated first among those of the Contributing Partners that are Cable
Partners in the manner provided in Section 2.4(a)(ii) as though Sprint
were not a Contributing Partner, and if and to the extent that the
aggregate Funding Commitments made by such Cable Partners are less than
one hundred percent (100%) of the Shortfall, the balance of the
Shortfall up to Sprint's Funding Commitment shall be allocated to
Sprint.
<PAGE> 49
(iv) The Shortfall shall be allocated among the Cable
Partners in the manner set forth in Section 2.4(a)(iii) until any Cable
Partner would have a Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of such Partner, that is equal
to Sprint's Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of Sprint, calculated in each
case after giving effect to the adjustments to the Percentage
Interests to be made in connection with the Additional Contribution
Notice with respect to which the Shortfall occurred assuming that the
Additional Capital Contributions to be made pursuant to this Section
2.4(a) were made up to the aggregate amount that would yield such
result (as to each Partner, its "Adjusted Percentage Interest"). Any
portion of the Shortfall not yet allocated shall continue to be
allocated proportionately among all of the Contributing Partners
(including Sprint, if applicable) in the manner provided in Section
2.4(a)(ii) without regard to Section 2.4(a)(iii), but substituting the
Adjusted Percentage Interests of the Contributing Partners for the
Percentage Interests that would otherwise be used to determine such
allocation, until each has been allocated by such process an amount
equal to its Funding Commitment or until the entire Shortfall has been
allocated among the Contributing Partners.
(v) Notwithstanding the foregoing, if (A) any Partner is
a Declining Partner with respect to an Additional Contribution Notice
that requests a Second Tranche Call and (B) the Management Committee
determines by Simple Majority Vote that the fair market value (which
fair market value shall be reduced by the sum of the balances of the
Excess Value Account and the Preferred Return Account at such time) of
the Partnership is less than the aggregate amount of Original Capital
Contributions, Additional Capital Contributions and Special Sprint
Contributions made to the Partnership through the date of the
applicable Additional Contribution Notice (but excluding the amount
set forth in the Additional Contribution Notice), the Management
Committee may elect to convert such Second Tranche Call to a Premium
Call by giving a Premium Call Notice (which shall supercede such
Additional Contribution Notice) to each Partner within five (5) days
after the date notice was required to be received from the Declining
Partner under Section 2.4(a)(i). Each Partner, including the
Declining Partner, shall have the right to make an Additional Capital
Contribution in response to a Premium Call in an amount which
represents the same percentage of the amount of the Second Tranche
Call requested in the Premium Call Notice as such Partner's Percentage
Interest as of the date of such Premium Call Notice (the "Requested
Premium Call Contribution"). If each Partner makes its Requested
Premium Call Contribution, the amounts so contributed will not be
treated as Premium Dollars. If any Partner fails to make its
Requested Premium Call Contribution, then all amounts contributed
pursuant to this Section 2.4(a)(v) with respect to such Premium Call
shall be treated as Premium Dollars. In addition, if any Partner
fails to make its Requested Premium Call Contribution, the Chief
Executive Officer shall, within five (5) days after the Premium Call
Contribution Date,
<PAGE> 50
give a notice (a "Premium Call Shortfall Notice")
to each Partner that made its Requested Premium Call Contribution in
full (each a "Premium Call Paying Partner") requesting the Premium
Call Paying Partners to make Additional Capital Contributions in an
aggregate amount equal to the amount not contributed by the Declining
Partner (the "Premium Call Shortfall"). The amount of the Premium
Call Shortfall that each Premium Call Paying Partner shall be entitled
to make to the Partnership in response to a Premium Call Shortfall
Notice shall be determined in the same manner as provided in Sections
2.4(a)(ii), (iii) and (iv) for the determination of the amount of the
Additional Capital Contribution that each Contributing Partner is
entitled to make in response to a Shortfall Notice. The amount of the
Premium Call Shortfall to be made by each Premium Call Paying Partner
in response to the Premium Call Shortfall Notice as so determined
shall be specified in a notice delivered by the Chief Executive
Officer to the Premium Call Paying Partners and shall, within ten (10)
days after the date of such notice, be paid to the account of the
Partnership designated in the Premium Call Shortfall Notice and all
amounts so paid shall be treated as Premium Dollars. Any Partner that
fails to make a contribution in response to a Premium Call Notice
shall not be treated as a Delinquent Partner or a Defaulting Partner.
(b) Delinquent Partners. In the event that any Partner other
than a Declining Partner (a "Delinquent Partner") fails to make all or any
portion of its Requested Contribution, Special Sprint Contribution or
Equalizing Contribution on or before the related Contribution Date or
Equalizing Contribution Date, an additional amount shall accrue as a
penalty with respect to such unpaid amount (the "Unpaid Amount") at
the applicable Floating Rate from and including the Contribution Date
or Equalizing Contribution Date until the Unpaid Amount and the full
amount of the penalty accrued thereon (as of any date of
determination, the "Penalty Amount") are paid as provided in this
Section 2.4 or the failure to pay the same results in such Partner
becoming a Defaulting Partner. If the Delinquent Partner pays the
Unpaid Amount to the Partnership at any time during the period ending
at the close of business on the tenth (10th) day following the related
Contribution Date or Equalizing Contribution Date (the "Grace
Period"), the Delinquent Partner shall, at the time of such payment,
in the case of a Delinquent Partner
<PAGE> 51
with respect to a Requested Contribution, pay to each other Partner,
if any, that made its Requested Contribution in full on or before the related
Contribution Date and has no uncured Payment Defaults (each a "Timely
Partner"), a pro rata portion of the Penalty Amount (based on the percentage
that the amount of each Timely Partners' Requested Contribution represents
of the total amount of the Timely Partner's Requested Contributions),
but in no event more than the amount that such Timely Partner would
have earned as interest on the amount of its Requested Contribution,
from and including the Contribution Date to the date the Delinquent
Partner pays the Unpaid Amount to the Partnership, if the Timely
Partner had made a loan in such amount to the Partnership with
interest at the Floating Rate applicable during the Grace Period. The
balance of the Penalty Amount, if any, in the case of a Delinquent
Partner with respect to a Requested Contribution, and all of the
Penalty Amount in the case of any other Delinquent Partner, shall be
paid by the Delinquent Partner to the Partnership and the amount so
paid shall be deemed to be a "Special Contribution" by the Delinquent
Partner to the capital of the Partnership. The portion of the Penalty
Amount paid to the Timely Partners shall not, for any purpose, be
deemed to be a Capital Contribution.
(c) Defaulting Partners.
(i) If a Delinquent Partner fails to pay the Unpaid
Amount together with the Penalty Amount to the Partnership or the
Timely Partners as provided in Section 2.4(b) on or before the
expiration of the Grace Period, such failure shall constitute a
"Payment Default" and, if such Payment Default is not thereafter cured
in full as provided in Section 2.4(c)(iii), the Delinquent Partner
shall for all purposes hereof be considered a "Defaulting Partner"
with the effect described herein.
(ii) If a Payment Default occurs, the Chief Executive
Officer shall, within five (5) days after the expiration of the related
Grace Period, give a notice (a "Default Loan Notice") to each Partner
that, in the case of a Payment Default with respect to a Requested
Contribution, was a Paying Partner with respect to such Additional
Contribution Notice and, in the case of any other Payment Default, to
all Partners other than the Delinquent Partner and any Exclusive Limited
Partner, requesting such Partners to make loans (each a "Default Loan")
to the Partnership in an aggregate amount equal to the Unpaid Amount.
Each such Partner that is willing to commit to make a Default Loan (each
a "Lending Partner") shall so notify the Chief Executive Officer and
each other such Partner within ten (10) days after the date the
Default Loan Notice was given, setting forth the maximum portion of
the Unpaid Amount, up to one hundred percent (100%) thereof, that such
Lending Partner is willing to lend to the Partnership (the "Lending
Commitment"). The amount of the Default Loan that each Lending
Partner shall be entitled to make to the Partnership in response to a
Default Loan Notice shall be determined in the same manner as provided
in Section 2.4(a) for the determination of the amount of the
Additional Capital Contribution that each Contributing Partner is
entitled to make in response to a Shortfall Notice. The amount of the
Default Loan to be made by each Lending Partner in response to the
Default Loan Notice as so determined shall be specified in a notice
delivered by the Chief Executive Officer to the Lending Partners and
within ten (10) days of the date of such notice shall be paid to the
account of the Partnership designated in the Default Loan Notice.
Each Default Loan shall bear interest from the date made (the "Loan
Date") until paid in full or contributed to the Partnership as
provided in this Section 2.4 at the Floating Rate applicable following
the Grace Period and shall be evidenced by a promissory note of the
Partnership in the form of Exhibit 2.4(c)(ii) hereto
<PAGE> 52
(with any changes thereto requested by any lender under any Senior
Credit Agreement and consented to by the Lending Partner, which
consent shall not be unreasonably withheld).
(iii) A Delinquent Partner may cure its Payment
Default at any time prior to the close of business on the ninetieth
(90th) day following the Loan Date (the "Cure Date") by transferring to
an account of the Partnership designated by the Chief Executive Officer
cash in an amount equal to the sum of the Unpaid Amount and the
Penalty Amount accrued thereon to the date of such transfer (the
"Make-up Amount"). The portion of the Make-up Amount equal to the
Penalty Amount shall be deemed to be a Special Contribution by the
Delinquent Partner to the Partnership and the balance thereof shall
constitute an Additional Capital Contribution or Special Sprint
Contribution, as applicable, by the Delinquent Partner to the
Partnership. The Chief Executive Officer shall cause the Partnership
to apply the funds so received from the Delinquent Partner to the
payment in full of the unpaid principal of and accrued interest on
each Default Loan in accordance with the terms of the note evidencing
the same.
(iv) If a Delinquent Partner has not timely cured its
Payment Default in full in accordance with Section 2.4(c)(iii), then the
Lending Partners shall contribute their respective Default Loans to
the Partnership effective as of the day following the Cure Date and
surrender the notes evidencing the same to the Partnership for
cancellation. The unpaid principal amount of a Lending Partner's
Default Loan through the Cure Date shall constitute an Additional
Capital Contribution (and the accrued interest on such Default Loan
shall constitute a Special Contribution) by the Lending Partner to the
Partnership as of the effective date of such contribution.
(d) Adjustments to Percentage Interests. The Percentage
Interests of the Partners shall be adjusted in accordance with the definition
of "Percentage Interest" to give effect to Additional Capital
Contributions made pursuant to Section 2.3, Section 2.5 (if
applicable) and this Section 2.4, provided that if there are any
Declining Partners or Delinquent Partners with respect to any
Additional Contribution Notice or Equalizing Contribution Notice, the
determination of the amount of the adjustment of the Percentage
Interests for Additional Capital Contributions made in response to
such notice will be deferred until the later of the last day for the
making of Additional Capital Contributions in connection with any
Shortfall and the expiration of the Grace Period, provided, however,
that such adjustment, whenever determined, shall be effective as of
the Contribution Date or Equalizing Contribution Date. The Percentage
Interests of the Partners will be further adjusted as and when
Additional Capital Contributions, if any, are made as contemplated by
clause (iii) or (iv), as applicable, of Section 2.4(c). The
Management Committee shall provide notice of each adjustment to all
Partners and Schedule 2.1 shall be revised to reflect such adjustment.
<PAGE> 53
(e) Paying Partners. A Paying Partner that declines to make a
Funding Commitment or Lending Commitment as contemplated by this
Section 2.4 shall not be deemed to be a Delinquent Partner or
Defaulting Partner as a result thereof, nor shall the failure to make
such a commitment constitute a Payment Default with respect to such
Partner.
(f) Floating Rate. Subject to the last two sentences of Section
2.7(b), the term "Floating Rate" means the rate per annum (computed on
the basis of the actual number of days elapsed in a year of 365 or 366
days, as applicable), compounded monthly, equal to the greater of (i)
the Prime Rate (adjusted as and when changes in the Prime Rate occur)
plus (x) during the Grace Period, two percent (2%) and (y) following
the Grace Period, five percent (5%), and (ii) the rate per annum
applicable to borrowings by the Partnership under its principal credit
facility, if any, or, if a choice of rates is then available to the
Partnership, the highest such rate (in either case adjusted as and
when changes in such applicable rate occur) plus, following the Grace
Period, two percent (2%).
2.5 Other Additional Capital Contributions.
Each Partner may contribute from time to time such additional
cash or other Property as the Management Committee may approve by
Unanimous Vote or as may be expressly contemplated by this Agreement,
provided that any Capital Contribution of Property (other than cash)
made pursuant to this Section 2.5 shall be subject to the terms and
provisions of an Additional Contribution Agreement.
2.6 Partnership Funds.
The funds of the Partnership shall be deposited in such bank
accounts or invested in such investments as shall be designated by
the Management Committee. Partnership funds shall not be commingled
with those of any Person other than any Subsidiary of the Partnership
in which the Partnership and MinorCo own, in the aggregate, directly
or indirectly, one hundred percent (100%) of the outstanding equity
interests, without a Unanimous Vote of the Management Committee. The
Partnership shall not lend or advance funds to, or guarantee any
obligation of, a Partner or any Affiliate thereof without the prior
written consent of all Partners.
2.7 Partner Loans; Other Borrowings.
(a) Partner Loans. In order to satisfy the Partnership's
financial needs, the Partnership may, if so approved by the requisite vote of
the Management Committee, borrow from (i) banks, lending institutions or other
unrelated third parties, and may pledge Partnership properties or the
production of income therefrom to secure and provide for the repayment of such
loans and (ii) any Partner or an Affiliate of a Partner. Loans made by
<PAGE> 54
a Partner or an Affiliate of a Partner (a "Partner Loan") shall be evidenced
by a promissory note of the Partnership in the form attached hereto as Exhibit
2.7 and, subject to the last two sentences of Section 2.7(b), shall bear
interest payable quarterly from the date made until paid in full at a rate per
annum to be determined by the Management Committee that is no less favorable
to the Partnership than if the loan had been made by an independent third
party. Unless a Partner declines to make such loan or is a Defaulting
Partner or a Partner subject to Bankruptcy, Partner Loans shall be
made pro rata in accordance with the respective Percentage Interests
of the Partners (or in such other proportion as the Management
Committee may approve by Unanimous Vote).
(b) Terms of Partner Loans. Unless otherwise determined by the
Management Committee, all Partner Loans and Default Loans shall be
unsecured and the promissory notes evidencing the same shall be
non-negotiable and, except as otherwise provided in this Section 2.7
or Section 13.3(c), nontransferable. Repayment of the principal
amount of and accrued interest on all Partner Loans and Default Loans
shall be subordinated to the repayment of the principal of and accrued
interest on any indebtedness of the Partnership to third party lenders
to the extent required by the applicable provisions of the instruments
creating such indebtedness to third party lenders ("Senior Credit
Agreements"). All amounts required to be paid in accordance with the
terms of such notes and all amounts permitted to be prepaid shall be
applied to the notes held by the Partners in accordance with the order
of payment contemplated by Section 15.2(b)(ii) and (iii). Subject to
the terms of applicable Senior Credit Agreements, Partner Loans shall
be repaid to the Partners at such times as the Partnership has
sufficient funds to permit such repayment without jeopardizing the
Partnership's ability to meet its other obligations on a timely basis.
Nothing contained in this Agreement or in any promissory note issued
by the Partnership hereunder shall require the Partnership or any
Partner to pay interest or any amount as a penalty at a rate exceeding
the maximum amount of interest permitted to be collected from time to
time under applicable usury laws. If the amount of interest or of
such penalty payable by the Partnership or any Partner on any date
would exceed the maximum permissible amount, it shall be automatically
reduced to such amount, and interest or the amount of the penalty for
any subsequent period, to the extent less than that permitted by
applicable usury laws, shall, to that extent, be increased by the
amount of such reduction.
(c) Purchase of Partner Loans. An election by a Partner to
purchase all or any portion of another Partner's Interest pursuant to
Sections 5.1, 6.4(f), 12, 13.4, 13.5, 13.6 or 15.7 shall also constitute
an election to purchase an equivalent portion of any outstanding Partner
Loans held by such selling Partner, and each purchasing Partner shall
be obligated to purchase a percentage of such Partner Loans equal to
the percentage of the selling Partner's Interest such purchasing
<PAGE> 55
Partner is obligated to purchase for a price equal to the same percentage
of the outstanding principal and accrued and unpaid interest on such
Partner Loans through the date of the closing of such purchase (except
in the case of a Transfer pursuant to Section 13.4, in which case the terms
of the Purchase Offer shall apply).
(d) Sprint/TCI Loans. Sprint will make loans to the Partnership
in an aggregate principal amount not exceeding $250 million and TCI will
make loans to the Partnership in an aggregate principal amount not
exceeding $50 million (the "Sprint/TCI Loans"), in each case to be
used by the Partnership and its Subsidiaries to finance the
transactions described in the definition of "Auction Commitment." The
Sprint/TCI Loans shall be in addition to the Auction Commitment of
Sprint and TCI. The Sprint/TCI Loans will be advanced by Sprint and
TCI to the Partnership within ten (10) days following receipt of
notice from the Chief Executive Officer instructing Sprint and TCI to
advance the Sprint/TCI Loans; provided that no such notice may be
delivered by the Chief Executive Officer prior to the date on which
the aggregate amount of the Original Capital Contributions and
Additional Capital Contributions (other than contributions of Property
pursuant to clauses (i), (ii), (iii) or (iv) of Section 2.3(a))
previously requested to be made by the Partners exceeds the aggregate
amount of the Letters of Credit of all Partners. Each such advance
shall be made pro rata by Sprint and TCI based on their respective
aggregate commitments with respect to the Sprint/TCI Loans. Simple
interest shall accrue on the Sprint/TCI Loans at the rate of ten
percent (10%) per annum, and accrued interest shall be payable by the
Partnership to Sprint and TCI on the last Business Day of each
calendar quarter.
Upon any termination of the Teleport Contribution
Agreement, the Sprint/TCI Loans shall be converted to demand loans as
of such date. The Sprint/TCI Loans (and the accrued and unpaid
interest thereon) shall be payable in full by the Partnership on the
thirtieth (30th) day following notice by Sprint or TCI, as the case
may be, to the Partnership and the Management Committee of a demand
for payment. The Partners agree to cause their Representatives on
the Management Committee to vote in favor of requesting Additional
Capital Contributions pursuant to Section 2.3(b) in such amounts and
at such times as are necessary to permit the Partnership to satisfy
its obligations under this paragraph.
Except to the extent that the terms of the Sprint/TCI
Loans described in this Section 2.7(d) expressly vary from the other
provisions of this Section 2.7 with respect to Partner Loans, the
Sprint/TCI Loans shall for all purposes be treated as Partner Loans
under this Agreement, and all references to Sprint or TCI relating to
the Sprint/TCI Loans in this Section 2 shall include any permitted
transferee of their respective Interests under Section 13.2.
<PAGE> 56
2.8 Obligations Under Contribution Agreement.
(a) Any payment required to be made by a Cable Partner to the
Partnership pursuant to Section 11.4 of the Teleport Contribution
Agreement shall be treated for income tax purposes and for all
purposes of this Agreement as an Additional Capital Contribution to
the Partnership by such Cable Partner so long as such Cable Partner or
an Affiliate thereof is a Partner in the Partnership at the time of
payment. The Agreed Value of the Property with respect to which such
payment was made (i.e., the Comcast Teleport Assets, the Cox Teleport
Assets or the TCI Teleport Assets, as the case may be) shall be deemed
to have been simultaneously reduced in the amount of such payment.
(b) In the event that the stock of TCG Inc. owned by Continental
Teleport, Inc. remains outstanding after the First Closing Date,
(i) the Agreed Value of each share of the stock of TCG Inc. that is
included in each of the Comcast Teleport Assets, the Cox Teleport
Assets and the TCI Teleport Assets shall be increased by the quotient
of (A) $4,200,000 divided by (B) the aggregate number of shares of TCG
Inc. stock included in the Comcast Teleport Assets, the Cox Teleport
Assets and the TCI Teleport Assets as of the First Closing Date, and
(ii) the Aggregate Base Value (as defined in the Teleport Contribution
Agreement) shall be increased by $4,200,000.
2.9 Other Matters.
(a) No Partner shall have the right to demand or, except as
otherwise provided in Sections 4.1 and 15.2, receive a return of all
or any part of its Capital Account or its Capital Contributions or
withdraw from the Partnership without the consent of all Partners.
Under circumstances requiring a return of all or any part of its
Capital Account or Capital Contributions, no Partner shall have the
right to receive Property other than cash.
(b) Subject to Sections 5.4 and 15.3, the Exclusive Limited
Partners shall not be liable for the debts, liabilities, contracts or
any other obligations of the Partnership. Except as otherwise
provided by any other agreements among the Partners or mandatory
provisions of applicable state law, an Exclusive Limited Partner shall
be liable only to make Capital Contributions to the extent required by
Sections 2.2, 2.3, 2.5 and 15.3 and shall not be required to lend any
funds to the Partnership or, after such Capital Contributions have
been made, to make any additional Capital Contributions to the
Partnership.
(c) No Partner shall have any personal liability for the
repayment of any Capital Contributions of any other Partner.
(d) No Partner shall be entitled to receive interest on its
Capital Contributions or Capital Account except as otherwise specifically
provided in this Agreement.
<PAGE> 57
3 . ALLOCATIONS
3.1 Profits.
After giving effect to the special allocations set forth in
Sections 3.3 and 3.4, Profits for any Allocation Year shall be
allocated in the following order and priority:
(a) First, to the Partners holding the Preferred Interests
(whether or not such Preferred Interests have been contributed to the
Partnership in whole or in part pursuant to Section 2.3(b)(iv) prior
to the end of such Allocation Year) in proportion to their respective
Preferred Interests, up to an amount equal to the excess, if any, of
(i) the cumulative Losses allocated with respect to such Preferred
Interests pursuant to Section 3.2(d) for all prior Allocation Years,
over (ii) the cumulative Profits allocated with respect to such
Preferred Interests pursuant to this Section 3.1(a) for all prior
Allocation Years;
(b) Second, to the Partners holding the Preferred Interests
(whether or not such Preferred Interests have been contributed to the
Partnership in whole or in part pursuant to Section 2.3(b)(iv) prior
to the end of such Allocation Year) in proportion to their respective
Preferred Interests, up to an amount equal to the excess, if any, of
(i) the cumulative Preferred Return attributable to such Preferred
Interests through the last day of such Allocation Year over (ii) the
cumulative Profits allocated with respect to such Preferred Interests
pursuant to this Section 3.1(b) for all prior Allocation Years;
(c) Third, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, an amount equal to the excess, if
any, of (i) the cumulative Losses allocated to each such Partner
pursuant to Section 3.5 for all prior Allocation Years, over (ii) the
cumulative Profits allocated to such Partner pursuant to this Section
3.1(c) for all prior Allocation Years;
(d) Fourth, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, an amount equal to the excess, if
any, of (i) the cumulative Losses allocated to each such Partner
pursuant to Section 3.2(e) for all prior Allocation Years, over
(ii) the cumulative Profits allocated to such Partner pursuant to this
Section 3.1(d) for all prior Allocation Years;
(e) Fifth, to the extent such Profits arise during or after the
Allocation Year in which all or substantially all of the Partnership's
assets are disposed of, to the Partners in such ratios and amounts as
may be necessary to cause the balances in their Capital Accounts to be
as nearly as practicable in the same ratio as their respective
Percentage Interests; provided, however, that for purposes of this
allocation the balance in the Capital Account of each Partner holding
a Preferred Interest shall be
<PAGE> 58
deemed to be reduced by the sum of the then outstanding balance of
the Excess Value Account and the Preferred Return Account with
respect to such Preferred Interest; and
(f) The balance, if any, among the Partners in proportion to
their Percentage Interests.
3.2 Losses.
After giving effect to the special allocations set forth in
Sections 3.3 and 3.4, and subject to Section 3.5, Losses for any
Allocation Year shall be allocated in the following order and
priority:
(a) First, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, the excess, if any, of (i) the
cumulative Profits allocated to each such Partner pursuant to
Section 3.1(f) for all prior Allocation Years, over (ii) the
cumulative Losses allocated to such Partner pursuant to this Section
3.2(a) for all prior Allocation Years;
(b) Second, to the extent such Losses arise during or after the
Allocation Year in which all or substantially all of the Partnership's
assets are disposed of, to the Partners in such ratio and amounts as
may be necessary to cause the balances in their Capital Accounts to be
as nearly as practicable in the same ratio as their respective
Percentage Interests; provided, however, that for purposes of this
allocation the balance in the Capital Account of each Partner holding
a Preferred Interest shall be deemed to be reduced by the sum of the
then outstanding balance of the Excess Value Account and the Preferred
Return Account with respect to such Preferred Interest;
(c) Third, to the Partners in proportion to and to the extent of
the positive balances in their respective Capital Accounts; provided,
however, that for purposes of this allocation the balance in the
Capital Account of each Partner holding a Preferred Interest shall be
deemed to be reduced by the sum of the then outstanding balances of
the Excess Value Account and the Preferred Return Account with respect
to such Preferred Interest;
(d) Fourth, to the Partners holding the Preferred Interests in
proportion to their respective Preferred Interests, until their
respective Capital Accounts are equal to zero; and
(e) The balance, if any, among the Partners in proportion to
their Percentage Interests.
3.3 Special Allocations.
The following special allocations shall be made in the
following order:
<PAGE> 59
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other
provision of this Section 3, if there is a net decrease in Partnership
Minimum Gain during any Allocation Year, each Partner shall be
specially allocated items of Partnership income and gain for such
Allocation Year (and, if necessary, subsequent Allocation Years) in an
amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Sections 1.704-
2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is
intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other
provision of this Section 3, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse
Debt during any Allocation Year, each Partner who has a share of the
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5)
of the Regulations, shall be specially allocated items of Partnership
income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Partner's
share of the net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Exclusive Limited
Partner unexpectedly receives any adjustments, allocations, or
distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations,
items of Partnership income and gain shall be specially allocated to
each such Exclusive Limited Partner in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Exclusive Limited Partner as quickly
as possible, provided that an allocation pursuant to this Section
3.3(c) shall be made only if and to the extent that such Exclusive
Limited Partner would have an Adjusted Capital Account Deficit
<PAGE> 60
after all other allocations provided for in this Section 3 have been
tentatively made as if this Section 3.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Exclusive Limited
Partner has a deficit Capital Account at the end of any Allocation
Year which is in excess of the sum of (i) the amount such Exclusive
Limited Partner is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Exclusive Limited Partner is
deemed to be obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such Exclusive Limited Partner shall be specially
allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to
this Section 3.3(d) shall be made only if and to the extent that such
Exclusive Limited Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this
Section 3 have been made as if Section 3.3(c) and this Section 3.3(d)
were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Allocation Year shall be specially allocated among the Partners in
proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its Interest, the
amount of such adjustment to Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Partners in accordance with their
interests in the Partnership in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Special Interest Allocation. In the event that the
Partnership makes any payment in respect of interest accrued on any Default
Loan in any Allocation Year, the deduction attributable to such payment
shall be specially allocated to the Delinquent Partner with respect to
which such Default Loan was made.
<PAGE> 61
(i) Special Gross Deduction Allocation. In each Allocation Year
gross deductions shall be specially allocated to Sprint in an amount
equal to the excess, if any, of (i) the cumulative amount of Special
Sprint Contributions made by Sprint to the Partnership during the
current and all prior Allocation Years (other than any such Special
Sprint Contributions that are reimbursed to Sprint), over (ii) the
cumulative amount of gross deductions specially allocated to Sprint
for all prior Allocation Years.
(j) Special Income Allocation. In each Allocation Year, gross
income shall be specially allocated to Sprint in an amount equal to
the excess of (i) the cumulative amount of interest payments
distributed pursuant to Schedule 2.3(c) to Sprint during the current
and all prior Allocation Years over (ii) the cumulative amount of
gross income specially allocated to Sprint pursuant to this
Section 3.3(j) for all prior Allocation Years.
3.4 Curative Allocations.
The allocations set forth in Sections 3.3(a), 3.3(b), 3.3(c),
3.3(d), 3.3(e), 3.3(f), 3.3(g) and 3.5 (the "Regulatory Allocations")
are intended to comply with certain requirements of the Regulations.
It is the intent of the Partners that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Partnership
income, gain, loss or deduction pursuant to this Section 3.4.
Therefore, notwithstanding any other provision of this Section 3
(other than the Regulatory Allocations), the Management Committee
shall make such offsetting special allocations of Partnership income,
gain, loss or deduction in whatever manner it determines appropriate
so that, after such offsetting allocations are made, each Partner's
Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items
were allocated pursuant to Sections 3.1, 3.2, 3.3(h), 3.3(i) and
3.3(j). In exercising its discretion under this Section 3.4, the
Management Committee shall take into account future Regulatory
Allocations under Sections 3.3(a) and 3.3(b) that, although not yet
made, are likely to offset other Regulatory Allocations previously
made under Section 3.3(e) and 3.3(f).
3.5 Loss Limitation.
The Losses allocated pursuant to Section 3.2 shall not exceed
the maximum amount of Losses that can be so allocated without causing
(or increasing the amount of) any Exclusive Limited Partner to have
an Adjusted Capital Account Deficit at the end of any Allocation
Year. All Losses in excess of such limitation shall be allocated to
the Partners who are not Exclusive Limited Partners in proportion to
their Percentage Interests.
<PAGE> 62
3.6 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other
items allocable to any period, Profits, Losses, and any such other
items shall be determined on a daily, monthly, or other basis, as
determined by a Required Majority Vote of the Management Committee
using any permissible method under Code Section 706 and the
Regulations thereunder.
(b) The Partners are aware of the income tax consequences of the
allocations made by this Section 3 and hereby agree to be bound by the
provisions of this Section 3 in reporting their shares of Partnership
income and loss for income tax purposes.
(c) Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership
within the meaning of Section 1.752-3(a)(3) of the Regulations, the
Partners' interests in Partnership profits are in proportion to their
Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Management Committee shall endeavor to treat
distributions of cash as having been made from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt only to the extent
that such distributions would cause or increase an Adjusted Capital
Account Deficit for any Exclusive Limited Partner.
3.7 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial
Gross Asset Value using the traditional method with curative
allocations as described in Section 1.704-3 of the Regulations,
applied as necessary in any reasonable manner not expressly precluded
by Section 1.704-3 of the Regulations. In making such allocations,
Section 704(c) shall be applied as if the Partnership's proportionate
share of the assets owned by any partnership, interests in which
(other than indirect interests owned through TCG Inc.) are
contributed to the Partnership ("Subsidiary Partnership"), were owned
directly by the Partnership and were contributed by the Partners who
contributed the Subsidiary Partnership interests.
In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) of the definition of Gross
Asset Value, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any
<PAGE> 63
variation between the adjusted basis of such asset for federal income
tax purposes and its Gross Asset Value in the same manner as under
Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations
shall be made by the Management Committee in any manner that
reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 3.7 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Partner's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to
any provision of this Agreement.
4 . DISTRIBUTIONS
4.1 Available Cash.
From time to time the Management Committee by a Required
Majority Vote may determine Available Cash. Except as otherwise
provided in Section 15.2, Available Cash, if any, shall be
distributed in such amounts and at such times as the Management
Committee shall determine by Required Majority Vote in the following
order and priority:
(a) First, one hundred percent (100%) to the Partners holding
the Preferred Interests in proportion to, and to the extent of, the
then-current balances of the Preferred Return Accounts attributable to
their respective Preferred Interests, which distribution shall be
applied first to the current quarter's accrual of the Preferred
Return, provided that distributions pursuant to this Section 4.1(a)
during each of the first two (2) years after the First Closing Date
shall not exceed in the aggregate an amount equal to the product of
(i) the Excess Value times (ii) 150% of the highest "Applicable
Federal Rate" (as such term is defined in the Code) in effect on such
date;
(b) Second, one hundred percent (100%) to the Partners holding
the Preferred Interests in proportion to, and to the extent of, the
then-current balances of the Excess Value Accounts attributable to
their respective Preferred Interests, provided that no distributions
shall be made pursuant to this Section 4.1(b) during the first two (2)
years after the First Closing Date; and
(c) Third, among the Partners in proportion to their respective
Percentage Interests. Prior to making any cash distributions to the
Partners pursuant to this Section 4.1(c), (i) the Partnership shall
have paid in full all Partner Loans (in accordance with the order of
payment contemplated by Section 15.2(b)) and (ii) the balances of the
Excess Value Accounts and the Preferred Return Accounts attributable
to the Preferred Interests shall each have been reduced to zero.
<PAGE> 64
4.2 Tax Distributions.
(a) Subject to Section 4.2(b), Available Cash shall be
distributed to the Partners in proportion to their Percentage
Interests within one hundred thirty-five (135) days after the end of
each Fiscal Year of the Partnership in an aggregate amount equal to
the Hypothetical Federal Income Tax Amount for such Fiscal Year.
(b) Prior to making any cash distributions to the
Partners pursuant to Section 4.2(a), (i) the Partnership shall have
paid in full all Partner Loans (in accordance with the order of
payment contemplated by Section 15.2(b)) and (ii) the balances of the
Excess Value Accounts and the Preferred Return Accounts attributable
to the Preferred Interests shall each have been reduced to zero.
4.3 Amounts Withheld.
All amounts withheld pursuant to the Code or any provision of
any state or local tax law from any payment or distribution to a
Partner shall be treated as amounts paid or distributed to such
Partner pursuant to this Section 4 for all purposes under this
Agreement. The Partnership is authorized to withhold from payments
and distributions to any Partner and to pay over to any federal,
state, or local government any amounts required to be so withheld
pursuant to the Code or any provisions of any other federal, state,
or local law.
5 . MANAGEMENT
5.1 Authority of the Management Committee.
(a) General Authority. Subject to the limitations and
restrictions set forth in this Agreement, the General Partners shall conduct
the business and affairs of the Partnership, and all powers of the
Partnership, except those specifically reserved to the Partners by the
Act or this Agreement, are hereby granted to and vested in the General
Partners, which shall conduct such business and exercise such powers
through their Representatives on the Management Committee.
(b) Delegation. The Management Committee shall have the power
to delegate authority to such officers, employees, agents and
representatives of the Partnership as it may from time to time deem
appropriate. Any delegation of authority to take any action must be
approved in the same manner as would be required for the Management
Committee to approve such action directly.
(c) Number and Term of Office. The Management Committee
initially shall have six voting members, one of which shall be designated
by each Cable Partner and three of which shall be designated by Sprint.
Each General Partner shall give written
<PAGE> 65
notice to the other General Partners on or prior to the date hereof of the
Person(s) selected to be its initial Representative(s). The Chief Executive
Officer shall be a non-voting member of the Management Committee. During
the term of this Agreement, except as otherwise provided below, each General
Partner shall be entitled to designate one Representative to the
Management Committee, provided that (i) for so long as Sprint is
entitled to representation on the Management Committee (except as
otherwise provided below), Sprint shall be entitled to designate three
Representatives to the Management Committee; provided, however, that
at any time any other Partner holds a greater Voting Percentage
Interest than Sprint (except as otherwise provided below), Sprint
shall be entitled to designate only two Representatives to the
Management Committee; and provided, further, that at any time any
other Partner holds a greater Voting Percentage Interest than Sprint
and Sprint's Percentage Interest is less than twenty percent (20%),
Sprint shall be entitled to designate only one Representative to the
Management Committee, and (ii) those Partners, if any, that are
Controlled Affiliates of the same Parent (a "Related Group") shall
collectively be entitled to designate only the largest number of
Representatives as is entitled to be designated by any single member
of the Related Group, which Representative(s) shall be designated by
the Partner that has the largest Percentage Interest of the Partners
in the Related Group. Any Partner whose Percentage Interest, together
with the Percentage Interest(s) of each other Partner, if any, that is
a member of the same Related Group, is, in the aggregate, less than
the Minimum Ownership Requirement shall, for so long as its Percentage
Interest or the aggregate Percentage Interest of its Related Group, as
applicable, is less than the Minimum Ownership Requirement, not be
entitled to designate a Representative to the Management Committee,
and the Representative of such Partner or Related Group, as
applicable, shall immediately cease to be a member of the Management
Committee, without any further act by the affected Partner.
Any Partner who becomes an Adverse Partner shall immediately
forfeit the right to designate a member of the Management Committee,
and the Representative(s) of the affected Partner shall immediately
cease to be a member of the Management Committee, without any further
act by the affected Partner; provided that if a Partner becomes an
Adverse Partner as the result of the occurrence of an Adverse Act
described in clause (iii), (iv), (vi) or (vii) of the definition of
such term in Section 1.10, such Partner will regain (or its
transferee will be entitled to, as applicable) the right to designate
a Representative on the Management Committee (if otherwise so
entitled thereto under this Agreement) if (i) in the case of a
Partner that is an Adverse Partner other than as a result of the
occurrence of an Adverse Act described in clause (iii) of the definition
of such term in Section 1.10, such Partner Transfers its Interest in
compliance with Section 13 to a Person that is not an Adverse Partner
and does not become an Adverse Partner as a result of such Transfer,
(ii) in the case of a Partner that is an Adverse Partner as a
<PAGE> 66
consequence of the occurrence of an Adverse Act described in clause
(iii) of the definition of such term in Section 1.10, there is a Final
Determination that such Partner's actions or failure to act did not constitute
such an Adverse Act, (iii) in the case of a Partner that is an Adverse Partner
as a consequence of Bankruptcy, such Partner ceases to be in a state of
Bankruptcy, (iv) in the case of a Partner that is an Adverse Partner
as a consequence of the occurrence of any IXC Transaction, such
Partner ceases to have the relationship with the IXC which caused
such IXC Transaction to occur, or (v) in the case of a Partner that
is an Adverse Partner as a consequence of the occurrence of an event
described in clause (vii) of the definition of the term "Adverse Act"
in Section 1.10, such Partner takes actions that eliminate the
circumstances that constituted such an Adverse Act within the meaning
of such clause (vii). The membership of the Management Committee
shall be increased or decreased from time to time in accordance with
the foregoing provisions of this Section 5.1(c).
Each Representative shall hold office at the pleasure of
the Partner that designated such Representative. Any Partner may at
any time, and from time to time, by written notice to the other
Partners remove any or all of the Representatives designated by such
Partner, with or without cause, and appoint substitute
Representatives to serve in their stead. Each Partner shall be
entitled to name one or more alternate Representatives to serve in
the place of any Representative appointed by such Partner should any
such Representative not be able to attend a meeting or meetings or
any portion thereof, including in the case of a Representative of
Comcast not being able to attend a meeting to the extent required in
order to comply with the provisions of Section 9.15. Each such
alternate shall be deemed to be a Representative hereunder with
respect to any action taken at such meeting or meetings or any
portion thereof. Each Partner shall bear the costs incurred by each
Representative or alternate designated by it to serve on the
Management Committee, and no Representative or alternate shall be
entitled to compensation from the Partnership for serving in such
capacity.
The written notice of a Partner's appointment of a
Representative or alternate shall in each case set forth such
Representative's or alternate's business and residence addresses and
business telephone number. Each Partner shall promptly give written
notice to the other Partners of any change in the business or
residence address or business telephone number of any of its
Representatives. Each Partner shall cause its Representatives on the
Management Committee to comply with the terms of this Agreement. In
the absence of prior written notice to the contrary, any action taken
by a Representative of a Partner shall be deemed to have been duly
authorized by the Partner that appointed such Representative.
<PAGE> 67
(d) Vacancy. In the event any Representative dies or is
unwilling or unable to serve as such or is removed from office by the Partner
that designated him or her, such Partner shall promptly designate a
successor to such Representative.
(e) Place of Meeting/Action by Written Consent. The Management
Committee may hold its meetings at such place or places within or
outside the State of Delaware as the Management Committee may from
time to time determine or as may be designated in the notice calling
the meeting. If a meeting place is not so designated, the meeting
shall be held at the Partnership's principal office. Notwithstanding
anything to the contrary in this Section 5.1, the Management Committee
may take without a meeting any action contemplated to be taken by the
Management Committee under this Agreement if such action is approved
by the unanimous written consent of a Representative of each of the
Partners (which may be executed in counterparts). The initial meeting
of the Management Committee shall take place on such date and at such
time and place as the Partners shall agree. The Management Committee
may meet in person or by means of conference telephone or similar
communications equipment. Each Representative shall have the right to
participate in any meeting by means of conference telephone or similar
communications equipment.
(f) Regular Meetings. The Management Committee shall hold
regular meetings no less frequently than quarterly and shall establish meeting
times, dates and places and requisite notice requirements and adopt
rules or procedures consistent with the terms of this Agreement. At
such meetings the members of the Management Committee shall transact
such business as may properly be brought before the meeting.
(g) Special Meetings. Special meetings of the Management
Committee may be called by any Representative. Notice of each such meeting
shall be given to each member of the Management Committee by
telephone, telecopy, telegram or similar method (in which case notice
shall be given at least twenty-four (24) hours before the time of the
meeting) or sent by first-class mail (in which case notice shall be
given at least five (5) days before the meeting), unless a longer
notice period is established by the Management Committee. Each such
notice shall state (i) the time, date, place (which shall be at the
principal office of the Partnership unless otherwise agreed to by all
Representatives) or other means of conducting such meeting and
(ii) the purpose of the meeting to be so held. Any Representative may
waive notice of any meeting in writing before, at or after such
meeting. The attendance of a Representative at a meeting shall
constitute a waiver of notice of such meeting, except when a
Representative attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting was not
properly called.
<PAGE> 68
(h) Voting. The Representative(s) of each General Partner or of
the General Partners in a Related Group shall together have voting
power equal to the Voting Percentage Interest held by such General
Partner or the aggregate Voting Percentage Interest of the General
Partners in such Related Group, as applicable, as in effect from time
to time. If a General Partner or a Related Group designates only one
Representative, such Representative shall be entitled to vote the
entire voting power held by such General Partner or the General
Partners in such Related Group, as applicable. If a General Partner
or Related Group designates more than one Representative, such
Representatives shall vote the entire voting power of such General
Partner or the General Partners in such Related Group as a single
unit. None of the Partners (other than the Partners in a Related
Group) shall enter into any agreements with any other Partner or such
other Partner's Controlled Affiliates regarding the voting of their
Interests or such other Partner's Representatives on the Management
Committee.
(i) Simple Majority Vote. No action may be taken by the
Partnership in connection with any of the matters listed on
Schedule 5.1(i) without the prior approval of the Management
Committee, at a duly called meeting, of Representatives with voting
power of more than fifty percent (50%) of the Voting Percentage
Interests of all Partners whose Representatives are not required by
Section 9.7 or any other express provision of this Agreement to
abstain from such vote (a "Simple Majority Vote").
(j) Required Majority Vote. Except as provided in Section
5.1(i) or 5.1(k) or as otherwise expressly provided in this Agreement, all
actions required or permitted to be taken by the Management Committee
(including the matters listed on Schedule 5.1(j)) must be approved by
the affirmative vote, at a duly called meeting, of Representatives
with voting power of seventy-five percent (75%) or more of the Voting
Percentage Interests of all Partners whose Representatives are not
required by Section 9.7 or any other express provision of this
Agreement to abstain from such vote (a "Required Majority Vote").
(k) Unanimous Vote (Management Committee). No action may be
taken by the Partnership in connection with any of the matters listed on
Schedule 5.1(k) without the prior approval of the Management Committee
by the unanimous vote of all of the Representatives who are not
required to abstain from the vote with respect to the particular
matter as provided for in Section 9.7 of this Agreement or any other
express provision of this Agreement, whether or not present at a
Management Committee meeting (a "Unanimous Vote").
(l) Unanimous Decisions (Partners).
(i) No action may be taken by the Partnership in
connection with any of the matters listed on Schedule 5.1(l) without
the prior consent of all of the Partners (including
<PAGE> 69
Exclusive Limited Partners) other than any Partner required to abstain
from the vote with respect to a particular matter by Section 9.7 or any
other express provision of this Agreement (a "Unanimous Partner Vote").
(ii) If any matter listed on Schedule 5.1(l) or otherwise
required by this Agreement to be approved by the unanimous consent of
the Partners is not approved solely as a result of the failure of one or
more Exclusive Limited Partners to consent to such action (each, a
"Blocking Limited Partner"), the remaining Partners (other than any
Exclusive Limited Partner) may purchase all but not less than all of
the respective Interests (and Preferred Interests, if applicable) of
the Blocking Limited Partner(s) pursuant to this Section 5.1(l)(ii) if
the Management Committee elects to initiate the procedures in this
Section. For a period ending at 11:59 p.m. (local time at the
Partnership's principal office) on the thirtieth (30th) day following
the date on which such Blocking Limited Partner failed to consent to
such matter, the Management Committee may elect to cause the Net
Equity of the Blocking Limited Partner's Interest (and Preferred
Interest, if applicable) to be determined in accordance with Section
12.3. For purposes of such determination of Net Equity, the
Management Committee shall designate the First Appraiser as required
by Section 12.4 and the Blocking Limited Partner shall designate the
Second Appraiser within ten (10) days of receiving notice of the First
Appraiser. For a period ending at 11:59 p.m. (local time at the
Partnership's principal office) on the thirtieth (30th) day following
the date on which notice of the Net Equity of the Blocking Limited
Partner's Interest (and Preferred Interest, if applicable) is given
pursuant to Section 12.3 (the "Section 5.1 Election Period"), except
as otherwise provided in Section 12.2(b), each of the Partners (other
than any Exclusive Limited Partner) may elect to purchase all or any
portion of the Interest (and Preferred Interest, if applicable) of the
Blocking Limited Partner. Such elections shall be made, and the
purchase of the Blocking Limited Partner's Interest (and Preferred
Interest, if applicable) shall occur, in the manner and pursuant to
the procedures set forth in Section 12.2 as if the Blocking Limited
Partner were an Adverse Partner and the Election Period referred to in
Section 12.2 was the Section 5.1 Election Period; provided that the
Buy-Sell Price of the Blocking Limited Partner's Interest (and
Preferred Interest, if applicable) shall be equal to the Net Equity
thereof. Notwithstanding the foregoing, the Blocking Limited Partner
will not be subject to the buy-out provisions of this Section
5.1(l)(ii) if the matter to which the Blocking Limited Partner refused
to consent would, if approved, have adversely affected the rights and
obligations under this Agreement of such Blocking Limited Partner or
the Exclusive Limited Partners (taken as a group) in a manner
different from the other Partners.
(m) Preferred Interest Class Vote. Any amendment to this
Agreement that will adversely affect the powers, preferences or special
rights of the holder of a Preferred Interest under this Agreement must be
approved by the prior consent of the Partner
<PAGE> 70
holding such Preferred Interest. The holders of Preferred Interests shall
have no other voting or approval rights in their capacity as such with respect
to actions to be taken by the Partnership and its Subsidiaries.
(n) Proxies; Minutes. Each Representative entitled to vote at a
meeting of the Management Committee may authorize another Person to
act for him by proxy; provided that such proxy must be signed by the
Representative and shall be revocable by such Representative any time
prior to such meeting. Minutes of each meeting of the Management
Committee shall be prepared by the Chief Executive Officer or his or
her designee and circulated to the Representatives. Written consents
to any action taken by the Management Committee shall be filed with
the minutes.
5.2 Business Plan and Annual Budget.
(a) As soon as practicable, but in no event later than the
earlier to occur of (i) September 1, 1995, and (ii) forty-five (45) days
following the completion of the PCS Auction relating to frequency
blocks "A" through "F" (the "Determination Date"), the General
Partners shall, and shall cause their respective Representatives to,
use all commercially reasonable efforts and cooperate in good faith to
adopt a business plan ("Business Plan") of the Partnership and its
Subsidiaries covering the balance of the Fiscal Year ending
December 31, 1995 and the succeeding Fiscal Years through the Fiscal
Year ending December 31, 1999 (such initial Business Plan, if
approved, being referred to herein as the "Initial Business Plan").
The Initial Business Plan will include (among other things) (i)
capital expenditure and operating budgets for each Fiscal Year covered
thereby, (ii) a schedule of Additional Capital Contributions (other
than Additional Capital Contributions of Property and Equalizing
Contributions pursuant to Section 2.3(a)) anticipated to be requested
of the Partners during each Fiscal Year covered thereby, including the
Planned Capital Amount for each Fiscal Year during the Initial
Three-Year Period, based on the assumptions (or varying sets of
assumptions) upon which the Initial Business Plan was prepared (which
shall be stated therein) and depending, if applicable, on the
achievement of any milestones specified therein, (iii) the projected
results to be achieved by NewTelco on or prior to each of
September 30, 1996, 1997, 1998 and 1999 with respect to
(A) residential penetration rates and (B) monthly revenue per
residential subscriber (collectively, the "Benchmarks"), (iv) the
Initial Markets, (v) the Initial Master Roll-Out Schedule (including
the Scheduled Serving Areas (which shall be selected on the basis of
the location of cable television systems owned by Cable Subsidiaries
in markets (A) that overlap or otherwise correlate with markets in
which WirelessCo holds a PCS license or is affiliated with a license
holder, (B) that have a favorable regulatory environment for
alternative telephony providers, (C) in which the cable television
systems owned by Cable Subsidiaries serve a majority of the
Households Passed and (D) that can efficiently be clustered with
other markets included within the
<PAGE> 71
Scheduled Serving Areas) and the Committed Serving
Areas; provided that a Cable Partner shall be entitled to substitute
cable television systems in which its Parent directly or indirectly
owns an interest (other than a Cable Subsidiary) for a cable
television system included in the Committed Serving Areas if (x) the
Local Operator of any such substitute cable television system executes
and delivers a Local Operator Agreement in the form of the Local
Operator Agreement then being executed and delivered by Cable
Subsidiaries (for which purposes such Local Operator shall be deemed
to be a "Cable Subsidiary" so long as a Cable Partner's Parent owns
any equity interest in such Local Operator) and (y) such substitute
cable television system is the equivalent of the cable television
system for which it is substituted in terms of priority of roll-out in
the then current Master Roll-Out Schedule of the respective markets in
which such systems are located and in terms of the numbers of
Households Passed by such systems; provided further that no such
substitution shall be permitted if it would result in the Committed
Serving Areas containing fewer than 10,000,000 Households Passed),
(vi) the Specifications and Standards (if not previously adopted by a
Unanimous Partner Vote), and (vii) the final form of Local Operator
Agreement (if not previously adopted by a Unanimous Partner Vote). In
adopting the Initial Business Plan, the Partners shall endeavor to
agree upon procedures pursuant to which a Cable Partner will be
permitted to substitute cable television systems owned by its Cable
Subsidiaries for cable television systems that are included in the
Scheduled Serving Areas identified in the Initial Business Plan. The
Initial Business Plan shall contemplate the Partnership's achieving a
capital structure with approximately equal proportions of debt and
equity (including Partner Loans) and will set forth the means by which
the Partnership proposes to achieve such capital structure.
(b) In connection with the adoption of the Initial Business
Plan, each Cable Partner shall represent and warrant to each other Partner
and to the Partnership that none of the cable television systems in
the Committed Serving Areas are owned by a Cable Subsidiary of such
Cable Partner that, because of applicable legal and fiduciary
obligations, such Cable Partner would not be able to unilaterally
cause to enter into a Local Operator Agreement. In addition, each
Cable Partner agrees that it will not take any action between the date
of the adoption of the Initial Business Plan and the execution of a
Local Operator Agreement by a Cable Subsidiary of such Cable Partner
with respect to any Committed Serving Areas that gives rise to any
fiduciary or legal restriction on the ability of such Cable Partner to
cause such Cable Subsidiary to enter into a Local Operator Agreement.
(c) The adoption of the Initial Business Plan shall require a
Unanimous Partner Vote. Pending the adoption of the Initial Business
Plan, the General Partners will, and shall cause their respective
Representatives to, use all commercially reasonable efforts to adopt
interim operating plans and procedures to permit the Partnership and
its Subsidiaries to commence the
<PAGE> 72
provision of Wireline Exclusive Services and Wireless Exclusive Services
At the earliest possible date, including the identification of certain markets
for the initial roll-out of Wireline Exclusive Services. The adoption of such
interim operating plans and procedures shall require a Unanimous Partner Vote.
(d) The Approved Business Plan covering Fiscal Year 1998 and the
four succeeding Fiscal Years shall also set forth projected results to
be achieved by NewTelco by September 30, 2002 with respect to (i)
residential penetration rates and (ii) monthly revenue per residential
subscriber (collectively, the "Additional Benchmarks"). The
Additional Benchmarks shall be determined on a basis consistent with
that used in determining the Benchmarks and taking into account the
Partnership's results of operations through the date of approval of
such Approved Business Plan. If there is no Approved Business Plan
for such period, the Additional Benchmarks shall be determined by
projecting to September 30, 2002 the Benchmarks for the last Fiscal
Year in which Benchmarks were established, based upon the annual rate
of change in the Benchmarks for the period from September 30 of the
year prior to such last Fiscal Year through September 30 of such last
Fiscal Year.
(e) The Chief Executive Officer shall submit annually to the
Management Committee at least ninety (90) days prior to the start of
each Fiscal Year after the Fiscal Year ending December 31, 1995, (i) a
proposed capital expenditure and operating budget (the "Proposed
Budget") for the forthcoming Fiscal Year including an income statement
prepared on an accrual basis which shall show in reasonable detail the
revenues and expenses projected for the business of the Partnership
and its Subsidiaries for the forthcoming Fiscal Year and a cash flow
statement which shall show in reasonable detail the receipts and
disbursements projected for the business of the Partnership and its
Subsidiaries for the forthcoming Fiscal Year and the amount of any
corresponding cash deficiency or surplus, and the required Additional
Capital Contributions, if any, and any contemplated borrowings of the
Partnership and its Subsidiaries and (ii) a proposed revised Business
Plan ("Proposed Business Plan") for the Fiscal Year covered by the
Proposed Budget and the succeeding four Fiscal Years in substantially
the same or greater detail as the Initial Business Plan and containing
such additional categories of information as may be appropriate to
reflect the progress of the development of the business of the
Partnership and its Subsidiaries. Such Proposed Budget and Proposed
Business Plan shall be prepared on a basis consistent with the
Partnership's audited financial statements. If such Proposed Budget
or such Proposed Business Plan is approved by the Management
Committee, then such Proposed Budget or such Proposed Business Plan,
as the case may be, shall be considered approved and shall constitute
the "Annual Budget" or the "Approved Business Plan," as the case may
be, for all purposes of this Agreement and shall supersede any
previously approved Annual Budget or Approved Business Plan, as
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the case may be. Except as provided on Schedule 5.1(k), the approval of
each Proposed Budget and Proposed Business Plan and action by the
Partnership or any of its Subsidiaries constituting any material
deviation from any Annual Budget or Approved Business Plan shall
require the Required Majority Vote of the Management Committee. No
Approved Business Plan or Annual Budget shall be inconsistent with the
provisions of this Agreement, nor shall this Agreement be deemed
amended by any provision of an Approved Business Plan or Annual
Budget. If a Proposed Budget or Proposed Business Plan is not
approved by the Required Majority Vote of the Management Committee,
then the General Partners shall cause their Representatives to
cooperate in good faith and confer with the Chief Executive Officer
and other senior officers of the Partnership for the purpose of
attempting to arrive at a Proposed Budget or Proposed Business Plan,
as the case may be, that can secure the approval of the Management
Committee.
(f) If, notwithstanding the foregoing procedures, on January 1
of any Fiscal Year no Proposed Budget has been approved by the Management
Committee for such Fiscal Year, then the Annual Budget for the prior
Fiscal Year, adjusted (without duplication) to reflect increases or
decreases resulting from the following events, shall govern until such
time as the Management Committee approves a new Proposed Budget:
(i) the operation of escalation or de-escalation
provisions in contracts in effect at the time of approval of the prior
Fiscal Year's Annual Budget solely as a result of the passage of time
or the occurrence of events beyond the control of the Partnership to the
extent such contracts are still in effect;
(ii) elections made in any prior Fiscal Year under
contracts contemplated by the Annual Budget for the prior Fiscal Year
regardless of which party to such contracts made such elections;
(iii) increases or decreases in expenses attributable
to the annualized effect of employee additions or reductions during the
prior Fiscal Year contemplated by the Annual Budget for the prior Fiscal
Year;
(iv) changes in interest expense attributable to any loans
made to or retired by the Partnership or its Subsidiaries (including
Partner Loans);
(v) increases in overhead expenses in an amount equal to
the total of overhead expenses reflected in the Annual Budget for the
prior Fiscal Year multiplied by the increase in the Consumer Price
Index for the prior year, but in no event more than five percent (5%);
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(vi) the anticipated incurrence of costs during such Fiscal
Year for any legal, accounting and other professional fees or
disbursements in connection with events or changes not contemplated at
the time of preparation of the Proposed Budget for the prior Fiscal
Year;
(vii) the continuation of the effects of a decision
made by the Management Committee or the Partners in the prior Fiscal
Year with respect to any of the matters referred to on Schedules 5.1(j),
5.1(k) or 5.1(l) that are not reflected in the Annual Budget for the
prior Fiscal Year; and
(viii) decreases in expense attributable to
non-recurring items reflected in the prior Fiscal Year's Annual Budget.
Any budget established pursuant to this Section 5.2(f) is
herein referred to as a "Default Budget."
(g) If a Proposed Business Plan is submitted for approval
pursuant to this Section 5.2 and is not approved by the requisite vote of the
Management Committee, the Business Plan most recently approved by the
Management Committee pursuant to Section 5.2(e) shall remain in effect
as the Approved Business Plan; provided, that, if a Proposed Budget is
approved pursuant to Section 5.2(e) (and the corresponding Proposed
Business Plan is not so approved), the Approved Business Plan then in
effect shall be deemed to be amended so that the Fiscal Year therein
corresponding to the Fiscal Year for which such Annual Budget has been
approved shall be consistent with such Annual Budget.
(h) The day-to-day business and operations of the Partnership
and its Subsidiaries shall be conducted in accordance with the Approved
Business Plan and the Annual Budget (or Default Budget) then in effect
and the policies, strategies and standards established by the
Management Committee. The Management Committee and the officers and
employees of the Partnership and its Subsidiaries shall implement the
Annual Budget and Approved Business Plan.
5.3 Employees.
The Management Committee will appoint the senior management of
the Partnership and its Subsidiaries and will establish policies and
guidelines for the hiring of employees by the Partnership and its
Subsidiaries. The Management Committee may adopt appropriate
management incentive plans and employee benefit plans.
5.4 Limitation of Agency.
The Partners agree not to exercise any authority to act for or
to assume any obligation or responsibility on behalf of the
Partnership or any of its Subsidiaries except (i) as approved by
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the Management Committee by Required Majority Vote, (ii) as approved by
written agreement among the General Partners and (iii) as expressly
provided herein. No Partner shall have any authority to act for or
to assume any obligations or responsibility on behalf of another
Partner under this Agreement except (i) as approved by written
agreement among the Partners and (ii) as expressly provided
herein. Subject to Section 5.6, in addition to the other remedies specified
herein, each Partner agrees to indemnify and hold the Partnership and
the other Partners harmless from and against any claim, demand, loss,
damage, liability or expense (including reasonable attorneys' fees
and disbursements and amounts paid in settlement, but excluding any
indirect, special or consequential damages) incurred by or against
such other Partners or the Partnership and arising out of or
resulting from any action taken by the indemnifying Partner in
violation of this Section 5.4.
5.5 Liability of Partners, Representatives and Partnership Employees.
No Partner, former Partner or Representative or former
Representative, no Affiliate of any thereof, no partner, shareholder,
director, officer, employee or agent of any of the foregoing, nor any
officer or employee of the Partnership, shall be liable in damages
for any act or failure to act in such Person's capacity as a Partner
or Representative or otherwise on behalf of the Partnership or any of
its Subsidiaries unless such act or omission constituted bad faith,
gross negligence, fraud or willful misconduct of such Person or a
violation by such Person of this Agreement or an agreement between
such Person and the Partnership or a Subsidiary thereof. Subject to
Section 5.6, each Partner, former Partner, Representative and former
Representative, each Affiliate of any thereof, each partner,
shareholder, director, officer, employee and agent of any of the
foregoing, and each officer and employee of the Partnership, shall be
indemnified and held harmless by the Partnership, its receiver or
trustee from and against any liability for damages and expenses,
including reasonable attorneys' fees and disbursements and amounts
paid in settlement, resulting from any threatened, pending or
completed action, suit or proceeding relating to or arising out of
such Person's acts or omissions in such Person's capacity as a
Partner or Representative or (except as provided in Section 5.4)
otherwise involving such Person's activities on behalf of the
Partnership or any of its Subsidiaries, except to the extent that
such damages or expenses result from the bad faith, gross negligence,
fraud or willful misconduct of such Person or a violation by such
Person of this Agreement or an agreement between such Person and the
Partnership or any of its Subsidiaries. Any indemnity by the
Partnership, its receiver or trustee under this Section 5.5 shall be
provided out of and to the extent of Partnership Property only.
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5.6 Indemnification.
Any Person asserting a right to indemnification under Section
5.4 or 5.5 shall so notify the Partnership or the other Partners, as
the case may be, in writing. If the facts giving rise to such
indemnification shall involve any actual or threatened claim or
demand by or against a third party, the indemnified Person shall give
such notice promptly (but the failure to so notify shall not relieve
the indemnifying Person from any liability which it otherwise may
have to such indemnified Person hereunder except to the extent the
indemnifying Person is actually prejudiced by such failure to
notify). The indemnifying Person shall be entitled to control the
defense or prosecution of such claim or demand in the name of the
indemnified Person, with counsel satisfactory to the indemnified
Person, if it notifies the indemnified Person in writing of its
intention to do so within twenty (20) days of its receipt of such
notice, without prejudice, however, to the right of the indemnified
Person to participate therein through counsel of its own choosing,
which participation shall be at the indemnified Person's expense
unless (i) the indemnified Person shall have been advised by its
counsel that use of the same counsel to represent both the
indemnifying Person and the indemnified Person would present a
conflict of interest (which shall be deemed to include any case where
there may be a legal defense or claim available to the indemnified
Person which is different from or additional to those available to
the indemnifying Person), in which case the indemnifying Person shall
not have the right to direct the defense of such action on behalf of
the indemnified Person, or (ii) the indemnifying Person shall fail
vigorously to defend or prosecute such claim or demand within a
reasonable time. Whether or not the indemnifying Person chooses to
defend or prosecute such claim, the Partners shall cooperate in the
prosecution or defense of such claim and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may reasonably be
requested in connection therewith. The indemnifying Person may not
control the defense of any claim or demand that involves any material
risk of the sale, forfeiture or loss of, or the creation of any lien
(other than a judgment lien) on, any material property of the
indemnified Person or could entail a risk of criminal liability to
the indemnified Person, without the consent of such indemnified
Person.
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The indemnified Person shall not settle or permit the
settlement of any claim or action for which it is entitled to
indemnification without the prior written consent of the indemnifying
Person (which shall not be unreasonably withheld), unless the
indemnifying Person shall have been entitled to assume the defense
thereof pursuant to this Section but failed to do so after the notice
and in the manner provided in the preceding paragraph.
The indemnifying Person may not without the consent of the
indemnified Person agree to any settlement (i) that requires such
indemnified Person to make any payment that is not indemnified
hereunder, (ii) does not grant a general release to such indemnified
Person with respect to the matters underlying such claim or action,
or (iii) that involves the sale, forfeiture or loss of, or the
creation of any lien on, any material property of such indemnified
Person. Nothing contained in this Section 5.6 is intended to
authorize the indemnifying Person, in connection with any defense or
settlement as to which it has assumed control, to take or refrain
from taking, without the consent of the indemnified Person, any
action which would reasonably be expected to materially impair the
indemnification of such indemnified Person hereunder or would require
such indemnified Person to take or refrain from taking any action or
to make any public statement, which such indemnified Person
reasonably considers to materially adversely affect its interests.
Upon the request of any indemnified Person, the indemnifying
Person shall use reasonable efforts to keep such indemnified Person
reasonably apprised of the status of those aspects of such defense
controlled by the indemnifying Person and shall provide such
information with respect thereto as such indemnified Person may
reasonably request. If the defense is controlled by the indemnified
Person, such indemnified Person, upon the request of the indemnifying
Person, shall use reasonable efforts to keep the indemnifying Person
reasonably apprised of the status of those aspects of such defense
controlled by such indemnified Person and shall provide such
information with respect thereto as the indemnifying Person may
reasonably request.
5.7 Temporary Investments.
All Property in the form of cash not otherwise invested shall
be deposited for the benefit of the Partnership in one or more
accounts of the Partnership, NewTelco, WirelessCo or any other
Subsidiary of the Partnership in which the Partnership and MinorCo
own, in the aggregate, directly or indirectly, one hundred percent
(100%) of the outstanding equity interests, maintained in such
financial institutions as the Management Committee shall determine,
or shall be invested in accordance with the guidelines set forth in
Schedule 5.7 hereto (which guidelines may be modified from time to
time by the Management Committee), or shall be left in escrow, and
withdrawals shall be made only for Partnership purposes on such
signature or signatures as the Management Committee may determine
from time to time.
5.8 Deadlocks.
(a) Escalation Procedures. Upon the occurrence of a Deadlock
Event, the General Partners shall first use their good faith efforts
to resolve such matter in a mutually satisfactory manner. If, after
such efforts have continued for twenty (20)
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days, no mutually satisfactory solution has been reached, the General
Partners shall resolve the Deadlock Event as provided herein:
(i) The General Partners shall (at the insistence of any
of them) refer the matter to the chief executive officers of their
respective Parents for resolution.
(ii) Should the chief executive officers of the Parents
fail to resolve the matter within ten (10) days after it is referred to
them, each General Partner (or any group of General Partners electing
to act together) shall prepare a brief (a "Brief"), which includes a
summary of the issue, its proposed resolution of the issue and
considerations in support of such proposed resolution, not later than
ten (10) days following the failure of the chief executive officers to
resolve such dispute, and such Briefs shall be submitted to such
reputable and experienced mediation service as is selected by the
Management Committee by Required Majority Vote or, failing such
selection, by the Chief Executive Officer (the "Mediator"). During a
period of twenty (20) days, the Mediator and the General Partners shall
attempt to reach a resolution of the Deadlock Event.
(iii) In the event that after such twenty (20) day
period (or such longer period as the Management Committee may approve
by Required Majority Vote (or, in the case of a Deadlock Event under
Section 5.8(b)(iv) or 5.8(b)(v), by Unanimous Vote)), the General
Partners are still unable to reach resolution of the Deadlock Event
(such resolution to be evidenced by the requisite vote of the
Management Committee with respect to the underlying matters), the
Deadlock Event shall constitute a Liquidating Event as provided in
Section 15.1(a)(iii) unless the Management Committee determines by
Required Majority Vote (or, in the case of a Deadlock Event under
Section 5.8(b)(iv) or 5.8(b)(v), by Unanimous Vote) not to dissolve.
(b) Deadlock Event. A "Deadlock Event" shall be deemed to have
occurred if (i) after failing to approve a Proposed Budget or Proposed
Business Plan for one Fiscal Year, the Management Committee has failed
to approve a Proposed Budget or Proposed Business Plan for the next
succeeding Fiscal Year prior to the commencement of such succeeding
Fiscal Year, (ii) the position of Chief Executive Officer is vacant
for a period of more than sixty (60) days after at least two Partners
with an aggregate of at least thirty-three percent (33%) of the Voting
Percentage Interests have proposed a candidate to fill such vacancy,
(iii) as of September 30 of any Fiscal Year covered by the Initial
Business Plan (excluding the Fiscal Year ending December 31, 1995) (A)
NewTelco has failed to achieve at least eighty-five percent (85%) of
either of the Benchmarks specified to be achieved as of such date in
the Initial Business Plan (or such amended Benchmarks as may be
approved by the requisite vote of the Management Committee pursuant to
Section 5.1(j) or (k)) and (B) the Proposed Budget and Proposed
Business Plan for the immediately succeeding Fiscal Year have not been
approved by a Required Majority Vote of the
<PAGE> 79
Management Committee by January 1 of such succeeding Fiscal Year,
(iv) as of September 30 of any Fiscal Year covered by the Initial Business
Plan (excluding the Fiscal Year ending December 31, 1995) (A) NewTelco
has failed to achieve at least seventy-five percent (75%) of either of the
Benchmarks specified to be achieved as of such date in the Initial
Business Plan (or such amended Benchmarks as may be approved by the
requisite vote of the Management Committee pursuant to Section 5.1(j)
or (k)) and (B) the Proposed Budget and Proposed Business Plan for the
immediately succeeding Fiscal Year have not been approved by a
Unanimous Vote of the Management Committee by January 1 of such
succeeding Fiscal Year, or (v) as of September 30, 2002, (A) NewTelco
has failed to achieve at least fifty percent (50%) of either of the
Additional Benchmarks adopted pursuant to Section 5.2(d) (or such
amended Additional Benchmarks as may be approved by the Unanimous Vote
of the Management Committee) and (B) the Proposed Budget and Proposed
Business Plan for the Fiscal Year ending December 31, 2003 have not
been approved by a Unanimous Vote of the Management Committee by
January 1, 2003.
(c) Failure to Satisfy Benchmarks. On or prior to October 31,
1996, 1997, 1998, 1999 and 2002, the chief financial officer of the
Partnership shall deliver to each Partner a certificate signed by the
chief financial officer indicating the Partnership's performance
relative to the Benchmarks or the Additional Benchmarks (as
applicable) as of September 30 of such year. The determination of the
chief financial officer as to the Partnership's performance with
respect to the Benchmarks and the Additional Benchmarks shall be final
and binding on the Partners unless a Partner delivers written notice
to the other Partners and the Partnership within fifteen (15) days
following its receipt of the chief financial officer's certificate
indicating that such Partner objects to the determinations of the
chief financial officer. In such event, the Partnership shall request
the Accountants to determine whether the Benchmarks or the Additional
Benchmarks have been achieved. The Accountants shall be instructed to
deliver written notice of their determination to each of the Partners
and the Partnership no later than December 15 of such year, and the
Partnership shall bear the costs and expenses of the Accountants in
making such determination. The determination of the Accountants shall
be final and binding on the Partners and the Partnership.
5.9 Conversion to Corporate Form.
(a) Procedures. In the event that the Management Committee
shall determine by Required Majority Vote (or such other vote as may be
required by Item B. of Schedule 5.1(j)) that it is desirable or helpful for
the business of the Partnership to be conducted in a corporate rather than
in a partnership form (for the purposes of conducting a public offering or
otherwise), the Management Committee shall have the power to incorporate
the Partnership in Delaware. In connection with any such incorporation of
the Partnership, the Partners shall receive, in
<PAGE> 80
exchange for their Interests and any Preferred Interest, shares of capital
stock of such corporation having the same relative economic interests and
other rights as such Partners hold in the Partnership as set forth in this
Agreement, subject in each case to (i) any modifications required solely
as a result of the conversion to corporate form and (ii) modifications to
the provisions of Section 5.1 to conform to the provisions relating to actions
of stockholders and a board of directors set forth in the Delaware
General Corporation Law; provided, that the relative number of
representatives on the board of directors and relative voting power of
the outstanding equity interests of such corporation of each General
Partner shall be as nearly as practicable in proportion to the
relative Voting Percentage Interests of the General Partners
immediately prior to such incorporation. For purposes of the
preceding sentence, each Partner's relative economic interest in the
Partnership shall equal such Partner's Net Equity as compared to the
Net Equity of all of the Partners, as determined in accordance with
Section 12.3 except that the Management Committee shall by Required
Majority Vote select a single Appraiser to determine Gross Appraised
Value. At the time of such conversion, the Partners shall enter into
a stockholders' agreement providing for (i) rights of first refusal
and other restrictions on Transfer equivalent to those set forth in
Sections 13.1 through 13.4; provided that such restrictions shall not
apply, following the initial Public Offering by the corporate
successor to the Partnership, to sales in broadly disseminated Public
Offerings or sales in accordance with Rule 144 under the Securities
Act of 1933 (the "1933 Act"), including the manner of sale required by
Rule 144 (whether or not applicable to such sale) and (ii) an
agreement to vote all shares of capital stock held by them with
respect to the election of directors of the corporation so as to
duplicate as closely as possible the management structure of the
Partnership as set forth in Section 5.1, modified as contemplated by
the second sentence of this Section 5.9(a).
(b) Registration Rights. Upon conversion to corporate form, the
corporate successor to the Partnership shall grant to each of the
Partners certain rights to require such successor to register under
the 1933 Act the shares of capital stock received by the Partners in
exchange for their Interests and Preferred Interest. Such rights
shall be as approved by the Required Majority Vote of the Management
Committee, provided that the registration rights of each Partner shall
be identical on a proportionate basis.
(c) Preemptive Rights. Each Partner shall have preemptive
rights, exercisable in accordance with procedures to be established by the
Management Committee in connection with and following the conversion
of the Partnership to corporate form, to purchase equity securities
proposed to be issued from time to time by a corporate successor to
the Partnership or its successor; provided, however, that no Partner
shall have any such preemptive right with respect to any equity
securities which, by a vote of
<PAGE> 81
the board of directors of such corporate successor that is equivalent to
a Required Majority Vote, have been approved for issuance by such
corporate successor in connection with (i) a Public Offering or (ii)
any acquisition (including by way of merger or consolidation) by the
corporate successor of the equity interests or assets of another entity
that is not a Partner or its Affiliate in a transaction pursuant to which the
purchase price is paid by delivery of such equity securities to the
seller. A "Public Offering" means an offering by the corporate
successor pursuant to a registration statement on a form applicable to
the sale of securities to the general public.
6. PARTNERSHIP OPPORTUNITIES; CONFIDENTIALITY
6.1 Competitive Activities.
(a) In General. For so long as any Person is a Partner, neither
such Person nor any of its Controlled Affiliates shall engage in any
Competitive Activity in the United States of America (including its
territories and possessions other than Puerto Rico) except (i) through
the Partnership and its Subsidiaries, (ii) pursuant to a Local
Operator Agreement or as contemplated or permitted thereby, (iii)
following the expiration of the term of a Local Operator Agreement
with respect to a Serving Area or during any renewal term that is
non-exclusive with respect to a Serving Area, the provision of
Wireline Exclusive Services in such Serving Area or, following the
termination of a Local Operator Agreement, the provision of Wireline
Exclusive Services in all Serving Areas covered by such Local Operator
Agreement, (iv) subject to Section 6.1(d), as provided in Section
6.1(b) or 6.1(c), or (v) as permitted by Section 6.1(f), 6.3, 6.4, 6.5
or 9.1(b), or under Exhibit 2 to the Joint Venture Formation
Agreement. The term "Competitive Activity" means to bid on, acquire
or, directly or indirectly, own, manage, operate, join, control or
finance, or participate in the management, operation, control or
financing of, or be connected as a principal, agent, representative,
consultant, beneficial owner of an interest in any Person, or
otherwise with, or use or permit its name to be used in connection
with, any business or enterprise which (i) engages in the bidding for
or acquisition of any Wireless Business license or engages in any
Wireless Business or Wireline Business, or (ii) provides, offers,
promotes or brands services that are within the Exclusive Services.
(b) Bidding for Wireless Business Licenses. Except as
permitted by Section 6.4, no Partner nor any of its Controlled Affiliates
shall bid in the PCS Auction for any Wireless Business licenses
unless (i) the Management Committee consents to such bid following
consultation by such Partner with the Representatives of the other
Partners; or (ii) (A) WirelessCo has entered a bid or bids for such license,
but a third-party bid has been entered which equals or exceeds the
maximum amount that WirelessCo has determined to bid for such
license, (B) if a vote was taken, such
<PAGE> 82
Partner's Representative(s) voted in favor of WirelessCo's increasing the
amount it would bid for such license, and (C) WirelessCo has determined
not to increase its bid in response to such third party bid. The purchase
price of a license purchased by or on behalf of a Partner pursuant to this
Section 6.1(b) shall be in addition to (and not credited against) such
Partner's Auction Commitment. This Section 6.1(b) will not permit a
Partner or its Affiliate to bid for or acquire a Wireless Business license if
the bidding for or acquisition of such license by a Partner or its
Affiliate would otherwise violate (or cause the Partnership or any of
the other Partners or their respective Affiliates to be in violation
of) the FCC's rules or orders relating to Wireless Business license
cross-ownership, license attribution standards, and/or spectrum
attribution or aggregation requirements, including Sections 20.6,
24.204 and 24.229(c) of the FCC's rules to be codified at 47 C.F.R.
20.6, 24.204 and 24.229(c).
(c) Engaging in Competitive Wireless Activities. If any Partner
or any of its Controlled Affiliates proposes to engage in any Competitive
Activity involving Wireless Exclusive Services other than as permitted
by Section 6.1(b) (or through a Wireless Business license acquired as
permitted by Section 6.1(b)), 6.3, 6.4, 6.5 or 9.1(b), then such
Partner shall first offer to the Partnership the opportunity for the
Partnership or any of its Subsidiaries to engage, in lieu of such
Partner and its Affiliates, in such Competitive Activity (whether by
acquiring such interest itself or itself offering, promoting or
branding such services) (the "Offer"), which Offer shall be made in
writing and shall set forth in reasonable detail the nature and scope
of the activity proposed to be engaged in, including all material
terms of any proposed acquisition. The Partnership, for itself or any
of its Subsidiaries (by Required Majority Vote of the Management
Committee pursuant to Section 9.7), shall have thirty (30) days from
receipt of the Offer to accept or reject it. If the Partnership does
not accept (for itself or any of its Subsidiaries), the Offer within
such thirty (30) day period, it shall be deemed to have rejected the
Offer, and the offering Partner or its Controlled Affiliate shall be
permitted to engage in such Competitive Activity on terms no more
favorable to such Partner or its Affiliate than those described in the
Offer. If the Partnership, for itself or any of its Subsidiaries,
accepts the Offer, the offering Partner and its Controlled Affiliates
shall not pursue such opportunity to engage in such Competitive
Activity; provided, however, that if the Partnership or such
Subsidiary, as applicable, does not within a commercially reasonable
period of time after such acceptance take reasonable steps to pursue
such opportunity, other than as a result of a violation of this Agreement
or wrongful acts or bad faith on the part of the offering Partner or its
Controlled Affiliates, then the offering Partner or its Controlled Affiliate
shall be permitted to pursue such opportunity on terms no more favorable
to the offering Partner than those terms described in the Offer. If the
offering Partner or its Controlled Affiliate does not take reasonable steps
to pursue such opportunity contemplated by the Offer within a reasonable
period of time after acquiring the right
<PAGE> 83
to do so in accordance with the foregoing provisions of this Section 6.1(c)
(including, in the case of an acquisition, by entering into a definitive
agreement (subject solely to obtaining the requisite regulatory approvals
and other customary closing conditions) with respect to such acquisition
within one hundred twenty (120) days thereafter), then it shall lose its right
to pursue such opportunity and thereafter be required to reoffer the
opportunity to do so to the Partnership in accordance with, and shall
otherwise comply with, this Section 6.1(c). Notwithstanding the
foregoing, a Partner shall not be permitted to present an Offer to the
Partnership (or otherwise engage in any Competitive Activity involving
Wireless Exclusive Services in reliance on this Section 6.1(c)) (i)
involving any Wireless Business other than PCS until one year
following the completion of the PCS Auction (the "Lock-out Period"),
or (ii) in any license area in which the Partnership or any of its
Subsidiaries is otherwise engaged in the Wireless Business (including
pursuant to an Affiliation Agreement), in any such case without a
Unanimous Vote of the Management Committee pursuant to Section 9.7.
(d) Wireless Business Affiliation Agreements. (i) Any Partner
or Controlled Affiliate thereof that acquires or owns a Wireless Business
license, or directly engages in a Wireless Business, as permitted by
the exceptions provided by Sections 6.1(b), 6.1(c), 6.3(e), 6.3(h) and
9.1(b) to the prohibitions on Competitive Activities contained in
Section 6.1(a), shall, subject to applicable law, as a condition to
the availability of such exceptions, offer to enter into an
affiliation agreement with respect to such Wireless Business with
WirelessCo on terms and conditions comparable to those which
WirelessCo offers to other affiliated Wireless Businesses in similar
situations (or if no such agreement then exists, such terms and
conditions shall include a provision for competitive pricing), under
which such Wireless Business will provide its services to the public
as an affiliate of WirelessCo's business (as entered into with a
Partner or its Controlled Affiliate or any other Person, an
"Affiliation Agreement"). The Management Committee may waive
compliance with all or any part of this Section 6.1(d) with respect to
any transaction by Required Majority Vote of the Management Committee
pursuant to Section 9.7.
(ii) Each Partner and its Controlled Affiliates shall
also use all commercially reasonable efforts to cause any Affiliate of
such Partner which acquires or owns a Wireless Business license, or
otherwise engages in any Wireless Business, and provides services within
the Exclusive Services, to (if WirelessCo so desires) enter into an
Affiliation Agreement with WirelessCo.
(e) Geographic Restrictions on Wireless Business. Unless
approved by a Unanimous Partner Vote, the Partnership and its
Subsidiaries will not engage in any Competitive Activities involving
the Wireless Business or any Wireless Exclusive Services in the
Philadelphia, Charlotte, Cleveland, El Paso, Jacksonville,
<PAGE> 84
Knoxville, Omaha or Richmond MTAs, including bidding for or acquiring
any PCS licenses therein; provided that, to the extent permitted by law, the
Partnership and its Subsidiaries may (or, as provided in Sections
6.3(e) and 9.1(b), shall) enter into Affiliation Agreements with
Persons engaged in Competitive Activities in such MTAs.
(f) Unrestricted Activities. Nothing in this Section 6 shall
prevent any Person from (i) providing any Non-Exclusive Services or
engaging in any Excluded Business or (ii) complying with any
applicable laws, rules or regulations, including those requiring that
any facilities be made available to any other Person.
6.2 Enforceability and Enforcement.
(a) The Partners acknowledge and agree that the time, scope,
geographic area and other provisions of Section 6.1 have been
specifically negotiated by sophisticated parties and agree that such
time, scope, geographic area, and other provisions are reasonable
under the circumstances. If, despite this express agreement of the
Partners, a court should hold any portion of Section 6.1 to be
unenforceable for any reason, the maximum restrictions of time, scope
and geographic area reasonable under the circumstances, as determined
by the court, will be substituted for the restrictions held to be
unenforceable.
(b) The Partnership shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving actual damages or
posting any bond or other security, to prevent any breach of Section
6.1, which rights shall be cumulative and in addition to any other
rights or remedies to which the Partnership may be entitled.
6.3 General Exceptions to Section 6.1.
The restrictions set forth in Section 6.1 on Competitive
Activities shall not be construed to prohibit any of the following
actions by a Partner and its Controlled Affiliates except to the
extent any such action would (i) cause the Partnership (including the
ownership of its assets and the conduct of its business) to be in
violation of any law or regulation or otherwise result in any
restriction or other limitation on the Partnership's and its
Subsidiaries' ownership of their respective assets or conduct of
their respective businesses or (ii) in any way impair, prevent or
delay the ability of WirelessCo to bid for or acquire or invest in
(or enter into an Affiliation Agreement with) a Person holding a
Wireless Business license during the Lock-out Period in any license
area in which WirelessCo plans to engage in a Competitive Activity
pursuant to or as set forth in the Wireless Strategic Plan:
<PAGE> 85
(a) The acquisition or ownership of any debt or equity
securities of a Publicly Held Person, provided that such securities (i) were
not acquired from the issuer thereof in a private placement or similar
transaction, (ii) do not represent more than five percent (5%) of the
aggregate voting power of the outstanding capital stock of any Person
that engages in a Competitive Activity (assuming the conversion,
exercise or exchange of all such securities held by such Partner or
its Controlled Affiliates that are convertible, exercisable or
exchangeable into or for voting stock) and (iii) in the case of debt
securities, entitle the holder to receive only interest or other
returns that are fixed, or vary by reference to an index or formula
that is not based on the value or results of operations of such
Person;
(b) The acquisition (through merger, consolidation, purchase of
stock or assets, or otherwise) of a Person or an interest in a Person,
which engages (directly or indirectly through an Affiliate that is
controlled by such Person) in any Competitive Activity if either
(i) such acquisition results from a foreclosure or equivalent action
with respect to debt securities permitted to be held under Section
6.3(a) or (ii) the Competitive Activity does not constitute the
principal activity, in terms of revenues or fair market value, of the
businesses acquired in such acquisition or conducted by the Person in
which such interest is acquired, provided, in each case, that such
Partner or Controlled Affiliate divests itself of the Competitive
Activity or interest therein as soon as is practicable, but in no
event later than twenty-four (24) months, after the acquisition unless
the Management Committee approves the entering into of an Affiliation
Agreement with respect to such Competitive Activity pursuant to
Section 9.7;
(c) The continued holding of an equity interest in a Person that
commences a Competitive Activity following the acquisition of such
equity interest if neither the Partner nor its Controlled Affiliate
has any responsibility or control over the conduct of such Competitive
Activity, does not permit its name to be used in connection with such
Competitive Activity and uses all commercially reasonable efforts,
including voting its equity interest, to cause such Person either (i)
to cease such Competitive Activity or (ii) to offer to enter into an
Affiliation Agreement with the Partnership and its Subsidiaries;
(d) The conduct of any Competitive Activity that is a necessary
component of or an incidental part of the conduct of any Excluded
Business by a Partner or its Controlled Affiliates or the entering
into of an arrangement with an independent third party for the
provision of any services included in the Exclusive Services which is
a necessary component of or an incidental part of the conduct of such
Excluded Business, so long as, in each case, such Partner or
Controlled Affiliate shall first use all commercially reasonable
efforts to negotiate agreements with the Partnership or one of its
Subsidiaries, which are reasonable in
<PAGE> 86
the independent judgment of both parties, pursuant to which the
Partnership or such Subsidiary would provide such services included
in the Exclusive Services on terms no less favorable to the Partner or
such Controlled Affiliate than such Partner or Controlled Affiliate could
obtain from an independent third party or could provide itself;
(e) The ownership and operation by (i) a partnership of Sprint,
TCI and Cox and/or their respective Affiliates of a PCS license and an
associated Wireless Business in the Philadelphia MTA ("PhillieCo") and
(ii) any of Cox, Comcast and TCI or their Affiliates (acting singly or
jointly through a partnership or other entity) of a PCS License and an
associated Wireless Business in any of the Charlotte, Cleveland, El
Paso, Jacksonville, Knoxville, Omaha and Richmond MTAs, provided in
each case that, subject to applicable law, such owners or entities
holding the licenses enter into Affiliation Agreements with the
Partnership and its Subsidiaries;
(f) The conduct of any Competitive Activity involving the
Wireless Business or any Wireless Exclusive Services involving the provision of
any product or service that is an ancillary value-added addition to a
Wireless Business and which does not itself require an FCC license
(including operator services, location services and weather, sports
and other information services);
(g) The ownership and operation by Sprint's Controlled
Affiliates of their cellular businesses within the Sprint Cellular Service
Area;
(h) The ownership and operation by Cox or its Affiliate of
PioneerCo, so long as PioneerCo, subject to applicable law, enters
into an Affiliation Agreement with the Partnership;
(i) The continuing ownership by an Affiliate of Sprint
of its current ownership interest in Iridium or the provision of any
services by Iridium so long as Iridium is not an Affiliate of Sprint;
(j) The ownership by a Controlled Affiliate of Comcast
of any ownership interest in Nextel and the provision of any services
by Nextel, subject to Section 6.4(f) of this Agreement;
(k) The continuing ownership by a Controlled Affiliate
of TCI of its current ownership interest in American Mobile Systems
("AMS") or any ownership interest in Nextel into which TCI's AMS
interest may be converted or exchanged or the provision of any
services by AMS or by Nextel so long as Nextel is not an Affiliate of
TCI; provided, however, that if AMS is an Affiliate of TCI at any
time more than one year following the end of any fiscal year of AMS
in which (i) AMS's revenue derived from Exclusive Services exceeds
$15,000,000 or (ii) AMS engages in the business of providing any
Exclusive Service other than SMR or ESMR (as such terms are defined
in Schedule 1.10(b)), then TCI will
<PAGE> 87
automatically (without any action required to be taken by the Partnership
or any Partner) become an Exclusive Limited Partner; provided further if
TCI becomes an Exclusive Limited Partner pursuant to this Section 6.3(k),
TCI will automatically (without any action required by the Partnership or any
Partner) be returned to the status of General Partner if AMS ceases
to be an Affiliate of TCI;
(l) The continuing ownership by a Controlled Affiliate
of TCI of its current ownership interest in MTS Limited Partnership
("MTS") or the provision of any services by MTS so long as MTS is not
an Affiliate of TCI;
(m) The continuing ownership by a Controlled Affiliate
of TCI of its current ownership interest in General Communication
Inc. ("GCI") or the provision of any services by GCI so long as GCI
is not an Affiliate of TCI;
(n) The continuing ownership by a Controlled Affiliate
of TCI of its current ownership interest in Western
Tele-Communications, Inc. ("WTCI") or the conduct by WTCI of its
current business;
(o) Subject to the terms of the Teleport Contribution
Agreement, the continuing ownership by the Cable Partners or their
respective Controlled Affiliates of the Comcast Teleport Assets, Cox
Teleport Assets and TCI Teleport Assets or the provision by any of
TCG Inc., TCG Partners or the "Local Joint Ventures" (as defined in
the Teleport Contribution Agreement) of Wireline Exclusive Services
in the areas where such entities currently operate or commence
operations after the date hereof as permitted by the Teleport
Contribution Agreement, provided that neither TCG Inc. or TCG
Partners, nor their respective Subsidiaries or the Local Joint
Ventures is offering or providing Wireline Exclusive Services to
residential customers while such ownership continues, except in
connection with certain trials of the provision of Wireline Exclusive
Services to residential customers conducted in conjunction with the
Partnership or NewTelco;
(p) The provision and transport of Wireline Exclusive
Services by LEC properties owned by Controlled Affiliates of Sprint
in the Current Sprint LEC Territory or in areas serviced by LEC
properties subsequently acquired by Controlled Affiliates of Sprint
in compliance with Section 6.5(f);
(q) The provision by Sprint's Controlled Affiliates of
"dial around" calling (e.g., dial 10333) calls; provided that in the
case of a "dial around" 0+ or 1+ call originated on a
NewTelco-subscribed line that is not a 75 Mile Plus Call, Sprint or
its Controlled Affiliate shall bill the call and forward to NewTelco
revenue equal to the lesser of (i) the amount that NewTelco would
have charged for such call if it had been carried
<PAGE> 88
over NewTelco's facilities or (ii) the amount charged by Sprint for
such call, in each case reduced by Sprint's costs of providing
and billing such call;
(r) The provision by Sprint's Controlled Affiliates of
any calls that are not 75 Mile Plus Calls and are originated by a
non-NewTelco customer;
(s) The choice by Sprint's Controlled Affiliates of the
method of termination for 75 Mile Plus Calls terminated to a
non-NewTelco customer;
(t) The provision and transport by Sprint's Controlled
Affiliates of intra-LATA calls that are not 75 Mile Plus Calls if
(but only for so long as) the calls cannot be carried over facilities
owned by NewTelco or provided by Local Operators to NewTelco or
leased by NewTelco from others (including Affiliates of Sprint) or if
NewTelco chooses not to provide or transport such calls;
(u) The provision by any Controlled Affiliate of a Cable
Partner of Wireline Exclusive Services through a cable television
system of such Controlled Affiliate so long as the revenues
attributable to the provision of such Wireline Exclusive Services
using the facilities of such cable television system do not
constitute in any Fiscal Year more than one percent (1%) of the total
revenues of such cable television system for such Fiscal Year;
provided that at such time as NewTelco commences providing Wireline
Exclusive Services within the territory served by such cable
television system, the Partner whose Controlled Affiliate is
providing such Wireline Exclusive Services pursuant to this Section
6.3(u) shall cause such Controlled Affiliate, promptly following the
receipt of written notice from NewTelco, to offer to Transfer to
NewTelco such Controlled Affiliate's business of providing Wireline
Exclusive Services in such territory, and to Transfer, lease or
otherwise make available (at the election of such Controlled
Affiliate) to NewTelco the assets of such Controlled Affiliate that
are utilized in the provision of Wireline Exclusive Services in such
territory, such offer in each case to be on commercially reasonable
terms. If NewTelco has not accepted such offer and NewTelco and such
Controlled Affiliate have not agreed on alternative terms within
sixty (60) days following NewTelco's receipt of such offer, such
Controlled Affiliate shall be entitled to continue to conduct its
business of providing Wireline Exclusive Services in such territory,
subject to the limitation on revenues set forth in the first sentence
of this Section 6.3(u); and
(v) Subject to the terms of any applicable Other CAP
Business Contribution Agreement, the continuing ownership by a Cable
Partner or its Controlled Affiliates of an Other CAP Business or the
provision by any of such Other CAP Businesses of Wireline Exclusive
Services in the areas where such entities currently operate or
commence operations after the date hereof as
<PAGE> 89
permitted by the applicable Other CAP Business Contribution Agreement,
which areas, in the case of the Other CAP Businesses owned by Controlled
Affiliates of Comcast, shall consist of the following: (A) in the case of
Comcast CAP of Philadelphia, Inc. and its majority-owned subsidiary
Eastern TeleLogic Corporation, the areas within the scope of
Exhibit B (a copy of which previously has been provided to the
Partners) to the Stockholders' Agreement for Eastern TeleLogic
Corporation dated November 5, 1992, and (B) in the case of M H
Lightnet, Inc. ("MHL"), to the extent of the areas located in Essex,
Hudson, Middlesex, Morris, Somerset and Union Counties, New Jersey,
that are south of US Interstate 80.
Notwithstanding anything to the contrary in this Section 6, any
investment fund in which a Partner or any of its Affiliates has an
investment (including pension funds) that invests funds on behalf of
and has a fiduciary duty to third party investors shall be permitted
to engage in or invest in entities engaged in any activity
whatsoever; provided that, neither such Partner nor any of its
Controlled Affiliates, directly or indirectly, exercises any
management or operational control whatsoever in any such entity
engaging in a Wireless Business or Wireline Business.
6.4 Comcast Exceptions.
The restrictions set forth in Section 6.1 shall not apply
with respect to the following:
(a) Subject to the limitations set forth in this Section 6.4,
Comcast and its Controlled Affiliates may engage in any Competitive
Activities with respect to any Wireless Business in the Comcast Area.
(b) Comcast and its Controlled Affiliates may participate in a
bid for and/or acquire any interest in a 10 MHz PCS license only in any of
the BTAs in the Philadelphia MTA or the Allentown, Pennsylvania BTA.
Comcast and its Controlled Affiliates may acquire any interest in a 10
MHz PCS license in any of the following cellular license areas in New
Jersey: Hunterdon County, Middlesex County, Monmouth County and Ocean
County; provided, that at the time of such acquisition Comcast and its
Controlled Affiliates own a controlling interest in a cellular license
for such area and further provided, that the license area of such 10
MHz license shall not extend beyond such area in other than an
immaterial manner. In the event Comcast and its Controlled Affiliates
own a controlling interest in any such 10 MHz PCS license, then
Comcast and its Controlled Affiliates will, to the extent permitted by
applicable law, provide for their customers receiving services under
any such 10 MHz PCS license to receive roaming services from any of
WirelessCo's or its Affiliate's businesses providing services under any
PCS license (the "Partnership's Businesses"), subject to the conditions
that (i) such roaming is technically feasible, (ii) such roaming is at
competitive rates and on other terms and conditions reasonably
<PAGE> 90
acceptable to Comcast and its Controlled Affiliates, (iii) the Partnership's
Businesses support the features and services provided by Comcast and
its Controlled Affiliates to their customers and (iv) subject to the same
conditions, the Partnership's Businesses will provide for their customers
to receive reciprocal roaming services from Comcast and its Controlled
Affiliates in the areas described above at such times as neither PhillieCo
nor WirelessCo owns or has an affiliation with respect to a Wireless
Business license for such areas. Notwithstanding the foregoing, if the
ownership by Comcast or any of its Controlled Affiliates of any 10 MHz
PCS license outside of the Philadelphia MTA (A) causes WirelessCo
(including the ownership of its assets and the conduct of its business) to be
in violation of any law or regulation or otherwise results in any
restriction or other limitation on WirelessCo's ownership of its
assets or conduct of its business or (B) in any way impairs, prevents
or delays the ability of WirelessCo to bid for or acquire a Wireless
Business license in any license area in which WirelessCo plans to
engage in a Competitive Activity pursuant to or as set forth in the
Wireless Strategic Plan or its then-current Approved Business Plan,
Comcast and its Controlled Affiliates will be prohibited from making
such acquisition or, if such acquisition has already occurred, will
cure the circumstances described above (including, if required, by
divesting its ownership of the 10 MHz PCS license) within a
commercially reasonable period of time after its receipt of notice
from WirelessCo of the existence of such circumstances; provided that,
in the event of such divestiture, Comcast and its Controlled
Affiliates will have the right to resell service in such area provided
such resale shall occur using WirelessCo's facilities if they are
available and it is technically feasible to do so.
(c) Comcast and its Controlled Affiliates may engage in any
Competitive Activities utilizing its currently held SMR assets within
the territory covered by its current SMR licenses.
(d) Comcast and its Controlled Affiliates may engage in any
Competitive Activities with respect to any Wireless Business in the
Kankakee, Illinois RSA cellular license area as well as the cellular
license area served by Indiana Cellular Holdings, Inc., Harrisburg
Cellular Telephone Company, Aurora/Elgin Cellular Telephone Company,
Inc. and Joliet Cellular Telephone Company, Inc.; provided that such
Competitive Activities are confined to the geographic territories of
the cellular licenses currently held by such businesses.
(e) Comcast and its Controlled Affiliates may participate in
regional marketing activities within the Comcast Area for the purpose
of: (i) selling to its "In-Territory Customers" (as defined below) wireless
services within the Washington, D.C., New York and Philadelphia MTAs;
and (ii) obtaining distribution from its "In-Territory Distributors" (as
defined below) of wireless services within the Washington, D.C., New York and
Philadelphia MTAs; provided that (A) Comcast and its
<PAGE> 91
Controlled Affiliates do not maintain or deploy any sales personnel, sales
office or other direct sales presence, or otherwise advertise or promote the
Comcast brand or any other brand, in either the New York MTA or the
Washington, D.C. MTA outside of the Comcast Area, (B) Comcast and its
Controlled Affiliates do not own or lease any wireless transmission facilities
outside of the Comcast Area in connection therewith and (C) in obtaining the
distribution contemplated by Section 6.4(e)(ii), Comcast and its
Controlled Affiliates subcontract the provision of wireless services
outside the Comcast Area to a third party provider only if such
services cannot be subcontracted to WirelessCo without material
adverse consequences for Comcast's and its Controlled Affiliates'
ability to participate in such regional marketing activities. For the
purposes hereof, an "In-Territory Customer" is a customer that has a
business location in the Comcast Area and places the order for the
services described above through Comcast and its Controlled Affiliates
in the Comcast Area. For the purposes hereof, an "In-Territory
Distributor" is a distributor that has a business location in the
Comcast Area and requires a regional contract be entered into by
Comcast and its Controlled Affiliates in the Comcast Area. For
purposes of this Section 6.4(e), the term "Comcast Area" shall include
any area in which Comcast and its Controlled Affiliates at such time
own a controlling interest in a PCS license which was permitted to be
acquired under Section 6.4(b).
(f) Comcast and its Controlled Affiliates may hold an interest
in Nextel Communications, Inc. ("Nextel"), provided that (i) none of
Comcast's or its Controlled Affiliates' Agents participate in or are
present at any discussions, or receive any information, regarding
Nextel's PCS bidding strategies; and (ii) at the election of Comcast,
no later than October 24, 1995, either (A) Comcast and its Controlled
Affiliates shall own securities representing less than 5.4% of the
voting power and equity of all of the outstanding capital stock of
Nextel, (B) no Agent of Comcast or any of its Controlled Affiliates
shall be a director or officer of Nextel, and no director of Nextel
shall be an appointee of Comcast or its Controlled Affiliates pursuant
to any contractual right of Comcast and its Controlled Affiliates to
appoint any director of Nextel, or (C) Comcast shall elect to become
an Exclusive Limited Partner as of such date by giving written notice
of such election to the Partnership; provided, however, that if
Comcast and its Controlled Affiliates (x) fail to satisfy either of
clauses (A) or (B) above at any time after October 24, 1995 or (y)
acquire any additional common stock or other voting securities (or
securities convertible into or exchangeable for common stock or voting
securities) of Nextel (as to (y) only, other than as a result of (I)
the exercise of its existing stock option to acquire 25,000,000 shares
and warrants to acquire 230,000 shares (in each case as in effect as
of October 24, 1994) and (II) the consummation of its required
purchase obligation in the original amount of $50,000,000 under that
certain Stock Purchase Agreement dated as of September 14, 1992, among
Comcast Parent, Comcast FCI, Inc. and Fleet Call, Inc., as
<PAGE> 92
amended by that certain Amendment to Stock Purchase Agreement dated as
of January 31, 1995 among Comcast Parent, Comcast FCI, Inc. and Nextel
(as the successor to Fleet Call, Inc.) (the "Nextel Purchase
Agreement")) then Comcast will automatically (without any action
required to be taken by the Partnership or any Partner) become an
Exclusive Limited Partner. Notwithstanding the preceding sentence, if
(1) such acquisition is the result of the exercise by Comcast and its
Controlled Affiliates of preemptive rights granted under the Nextel
Purchase Agreement, (2) Comcast and its Controlled Affiliates exercise
any available registration rights within ten (10) days following such
exercise of preemptive rights or (if no registration rights are
available) otherwise seek to Transfer such common stock as soon as
practicable, and (3) all of the Nextel common stock so acquired is
Transferred to a non-Affiliate of Comcast and its Controlled
Affiliates within two hundred forty (240) days of the date of
acquisition thereof, then Comcast will automatically (without any
action required by the Partnership or any Partner) be returned to the
status of General Partner if it satisfies either of clauses (A) or (B)
above and is not otherwise required to be an Exclusive Limited Partner
under this Section 6.4(f). If Comcast has become an Exclusive Limited
Partner pursuant to this Section 6.4(f) and has on or before
October 24, 1995, presented the Partnership in writing with a plan
providing for the disposition of an ownership interest in Nextel such
that following such disposition Comcast and its Controlled Affiliates
will satisfy the requirements of clause (A) above, then Comcast will
automatically (without any action required by the Partnership or any
Partner) be returned to the status of General Partner at such time as
such plan (or a substantially similar plan) is consummated if such
consummation occurs prior to October 24, 1996 and if Comcast is not
otherwise required to be an Exclusive Limited Partner under this
Section 6.4(f). If at any time following the date hereof Comcast and
its Controlled Affiliates own more than 31% of the common stock of
Nextel on a fully diluted basis (provided that at such time Nextel has
a total market capitalization of at least $2,000,000,000), or own 50%
or more of the common stock of Nextel on a fully-diluted basis
(regardless of Nextel's total market capitalization), Comcast shall
provide written notice to the Partnership and to each other Partner of
the acquisition of such ownership interest (or the occurrence of any
event causing Comcast and its Controlled Affiliates to exceed such
ownership threshold) within five (5) days of such acquisition (or the
occurrence of such event). The other Partners will have the option,
exercisable within ninety (90) days of the date of such notice, to
purchase the Interest of Comcast at its Net Equity Value for cash at a
closing to be held no later than ninety (90) days from the date such
option is exercised. Such purchase shall occur in accordance with the
procedures set forth in Section 12 as if Comcast is an "Adverse
Partner" and each of the other Partners is a "Purchasing Partner."
(g) The term "Comcast Area" means (i) the following cellular
license areas (or portions thereof) in New Jersey: Hunterdon NJ1 RSA,
New Brunswick MSA, Long Branch MSA, Trenton
<PAGE> 93
MSA, Allentown, PA MSA, Philadelphia MSA, Ocean NJ2 RSA, Atlantic
City MSA, Vineland-Millville MSA, and Wilmington, DE MSA; (ii) Delaware;
(iii) Maryland RSA2; (iv) counties in Pennsylvania in which Comcast and
its Controlled Affiliates engaged in the cellular business as of October 24,
1994, and all counties in Pennsylvania contiguous thereto; (v) the
Philadelphia MTA; and (vi) minor overlaps into any territory adjoining
any of the areas included in (i) - (v) required to efficiently provide
services in such area.
(h) The obligations under Section 6.1(d) shall not apply to
Comcast and its Controlled Affiliates with respect to any Competitive
Activities permitted pursuant to this Section 6.4.
(i) Comcast and its Controlled Affiliates may co-brand or
package any Wireless Exclusive Services permitted to be provided pursuant to
this Section 6.4 together with their cable television offerings;
provided that in such event the only brand name(s) which may be used
for any such Wireless Exclusive Services are any of the following, any
combination thereof or any variants thereof substantially similar
thereto: Comcast, Comcast Cellular, Comcast Metrophone, Metrophone,
Comcast Cellular One and Cellular One, which Comcast represents are
currently utilized by its cellular business in the Comcast Area as of
the date hereof; provided further, however, that Comcast may request
that the Partnership approve the use by Comcast and its Controlled
Affiliates of another brand name (other than that of an inter-exchange
carrier), in which case the Partnership's consent to the use thereof
will not be unreasonably withheld.
(j) Comcast and its Controlled Affiliates may perform
their respective obligations under the Facilities Lease Agreement
between Metropolitan Fiber Systems of New Jersey, Inc. ("MFS") and
MHL dated June 30, 1993 (the "MFS Lease"), and under the terms of any
agreement with MFS pursuant to which Comcast and its Controlled
Affiliates obtain the right to Transfer, lease or otherwise make
available to NewTelco (pursuant to an Other CAP Business Contribution
Agreement) the assets or the use of the assets of the Other CAP
Business of MHL now subject to the MFS Lease; provided that any such
agreement shall not expand the obligations of Comcast and its
Controlled Affiliates as they now exist under the MFS Lease unless
approved by the Management Committee.
6.5 Overlaps.
(a) General. That portion of any Current Sprint LEC
Territory that is overlapped by an Incumbent Cable Partner Cable
System as of October 24, 1994 is referred to herein as an "Existing
Overlap Territory". Schedule 6.5(a) (which is not intended to be
binding or to alter in any way the determination of the actual
Existing Overlap Territory) provides an illustration of the Existing
Overlap Territories. The Partners will attempt to resolve such
overlaps as provided in this Section 6.5.
<PAGE> 94
(b) Key Market. Sprint will use its commercially
reasonable efforts to attempt to resolve the overlap in a key market
that has been agreed upon by the Partners by effecting or causing its
Controlled Affiliates to effect a swap of the LEC properties of
Sprint and its Controlled Affiliates in such market for LEC
properties in markets that are not serviced by Incumbent Cable
Partner Systems or by taking other commercially reasonable actions.
(c) Other Markets. Sprint and the Cable Partners will
discuss in good faith the resolution of conflicts in Existing Overlap
Territories in other markets. Actions to be considered by Sprint and
the affected Cable Partner shall include (i) swapping conflicted LEC
properties for LEC properties in markets that are not serviced by
Incumbent Cable Partner Cable Systems, (ii) swapping conflicted cable
television systems for cable television systems in markets that are
outside the Current Sprint LEC Territories and (iii) taking other
commercially reasonable actions to remove the conflict. In addition,
to the extent permitted by law, Sprint and the affected Cable Partner
will consider jointly providing through their respective Controlled
Affiliates a broadband network for cable television and wireline
telephone systems in conflicted territories.
(d) OverlapCo. Unless and until Sprint and the Cable
Partners are able to resolve by mutual agreement any conflicts in an
Existing Overlap Territory, NewTelco will not be permitted to provide
any Wireline Exclusive Services or Non-Exclusive Services to end
users in such Existing Overlap Territory. If such conflict has not
been resolved to the mutual satisfaction of Sprint and the affected
Cable Partner within one hundred eighty (180) days following the
execution of this Agreement with respect to any Existing Overlap
Territory, one or more of the Cable Partners may (directly or through
one or more partnerships consisting only of Cable Partners and their
Controlled Affiliates), at any time thereafter commence the provision
of Wireline Exclusive Services in such Existing Overlap Territory and
accept the rights and benefits contemplated by this Section 6.5(d)
(each such business providing such services that has notified
NewTelco of its acceptance of such rights and benefits being
hereinafter referred to as "OverlapCo" unless and until it thereafter
notifies NewTelco that it has ceased accepting such rights and
benefits). Any Partner or Partners establishing OverlapCo shall
within five (5) days following the formation of OverlapCo give notice
thereof to the Management Committee and the other Partners. Each
OverlapCo will provide services only within the Existing Overlap
Territory for which it is formed and such adjacent non-overlap
territories as Sprint and the Cable Partners agree are necessary on a
market-by-market basis so that the service area of OverlapCo is of
sufficient size for commercial operation.
OverlapCo will be permitted to contract with the operator
of the Incumbent Cable Partner System in the Existing Overlap
Territory to develop Local Operator Facilities and to
<PAGE> 95
provide the types of services within the Existing Overlap Territory that are
contemplated to be provided by Local Operators under the Local
Operator Agreements. OverlapCo will operate under a brand (other
than the Sprint Brand) that it may develop or acquire. The Incumbent
Sprint LEC will operate under the Sprint Brand in the Existing
Overlap Territory.
At the request of OverlapCo, NewTelco will enter into a
support agreement with OverlapCo pursuant to which OverlapCo will
have the right to acquire from NewTelco any or all of the products
and services offered by NewTelco and otherwise receive support from
NewTelco on the terms provided in such support agreement (which in
any event shall be no less favorable to OverlapCo than the terms on
which the Incumbent Sprint LEC is acquiring products and services, if
any, from NewTelco). If any such support agreement is entered into
with OverlapCo, the Incumbent Sprint LEC in the Existing Overlap
Territory shall have the right, with respect to products and services
that it is acquiring or may in the future acquire from NewTelco, to
acquire such products and services on a contract basis on terms no
less favorable than the terms on which such products and services are
provided to OverlapCo. The Partners will cooperate in good faith to
ensure that, to the maximum extent possible in compliance with
applicable law and regulation, NewTelco may provide products and
services to OverlapCo and the Incumbent Sprint LEC as contemplated
hereby.
OverlapCo and the Incumbent Sprint LEC each will act as a
nonexclusive distribution agent for products and services of
WirelessCo. The terms of each such distribution agency agreement
shall be substantially similar, except that OverlapCo may provide
WirelessCo products and services under the Sprint Brand as well as
under any other brand that OverlapCo may develop or acquire.
WirelessCo may distribute its products and services directly in the
Existing Overlap Territories.
(e) Non-Cable Partner Markets. The Incumbent Sprint
LECs may continue to operate free of the restrictions of this
Agreement in those portions of the Current Sprint LEC Territory that
are not Existing Overlap Territories (the "Non-Overlap Areas").
NewTelco will not provide any Wireline Exclusive Services or
Non-Exclusive Services to end users in the Non-Overlap Areas.
WirelessCo may distribute its services and products in the
Non-Overlap Areas, and the Incumbent Sprint LECs will be nonexclusive
agents for the distribution of WirelessCo products and services in
the Non-Overlap Areas.
If the Incumbent Sprint LEC determines to replace its
existing plant in the Non-Overlap Areas with a broadband network and
to offer cable television programming, the Cable Partners will
provide strategic and technical advice and other consulting services
to Sprint on terms reasonably satisfactory to each party, with the
intent of permitting the Incumbent Sprint LEC to compete as
effectively as possible in the cable television business. The
service fee to be paid for such services will be negotiated in
<PAGE> 96
good faith by Sprint and the Cable Partners taking into account all
relevant costs to the Cable Partners of providing such services.
The Incumbent Sprint LECs operating in the Non-Overlap
Areas will have the right to acquire any or all of the products and
services offered by NewTelco on a contract basis at arms'-length
rates.
(f) Acquisition of Additional LECs. Sprint and its
Controlled Affiliates will not acquire (and, since October 24, 1994,
have not acquired) additional LEC properties (including by way of
expansion of the Current Sprint LEC Territories) other than (i) LEC
properties that service Households located entirely within the MSAs
identified on Schedule 6.5(f) and (ii) LEC properties that service
Households located entirely in any non-MSA area; provided in each
case that such acquisitions will be permitted only if the acquired
LEC properties do not overlap a territory (x) in which NewTelco is
then operating or which is subject to a Local Operator Agreement
between NewTelco and the operator of the cable television system in
such territory (whether or not operations have commenced) or (y) in
which a Cable Partner or its Affiliates owns a cable television
system if such Cable Partner or Affiliate is scheduled, in accordance
with the then-current Master Roll-Out Schedule, to enter into a Local
Operator Agreement with NewTelco, or with respect to which such Cable
Partner or Affiliate has requested an accelerated roll-out in
accordance with Exhibit 2 to the Joint Venture Formation Agreement.
If Sprint or its Controlled Affiliates acquire additional LEC
properties in accordance with this Section 6.5(f), the Cable Partners
and their Controlled Affiliates may provide Wireline Exclusive
Services through OverlapCo or pursuant to Section 6.5(h) in the
territories served by such LEC properties.
(g) Acquisition of Additional Cable Properties. Unless
they comply with the provisions of this Section 6.5(g), neither the
Cable Partners nor any of their Controlled Affiliates will (i) prior
to October 24, 1997, acquire any cable television system that serves
more than five percent (5%) of the Households in any of the
Cincinnati, Ohio, Rochester, New York, or Lincoln, Nebraska MSAs or
(ii) acquire any cable television system (other than an Incumbent
Cable Partner Cable System) the Households Passed by which on the
date of such acquisition would cause (together with the Households
Passed by all other cable television systems then owned by such Cable
Partner and its Controlled Affiliates in such state, other than Households
Passed located in the Existing Overlap Territories and in the Affiliate
Territories) an overlap of more than five percent (5%) of the Households
serviced (as calculated by Sprint as of the end of each calendar year in
accordance with the requirements of Form M (or any successor form)
required to be filed by Tier 1 LECs pursuant to 47 C.F.R. Part 43, which
calculation shall be set forth in a written notice delivered to each Cable
Partner within five (5) Business Days of the date that the Sprint LECs
file Form M with the FCC) in any state by an
<PAGE> 97
Incumbent Sprint LEC (or group of Incumbent Sprint LECs
in states where multiple Sprint LECs provide service) then owned by
Sprint and its Controlled Affiliates or by any LEC (or LECs) then
owned by Sprint and its Controlled Affiliates that was acquired by
Sprint and its Controlled Affiliates prior to such time in compliance
with Section 6.5(f). In the case of any acquisition not otherwise
permitted by this Section 6.5(g), the Cable Partner making or whose
Controlled Affiliate is making such acquisition will use all
commercially reasonable efforts to divest or cause such Controlled
Affiliate to divest as promptly as practicable that portion of the
acquired cable properties that exceeds the "five percent (5%)" limit
in the applicable of clause (i) or (ii) of the first sentence of this
Section 6.5(g). Such divestiture may be delayed to the extent
necessary to comply with applicable laws and regulations or to avoid
materially adverse tax consequences; provided that the Cable Partner
must use all commercially reasonable efforts to obtain promptly any
consents and approvals necessary for such divestiture to comply with
applicable laws and regulations; and provided further, any delay
attributable to the avoidance of materially adverse tax consequences
shall not continue for longer than the earlier to occur of (i) the
expiration of such time period as is necessary to avoid such material
adverse tax consequences and (ii) the first Business Day following
the fifth anniversary of the Cable Partner's acquisition of such
property.
If an overlap is created by the acquisition of cable
properties by a Cable Partner or its Controlled Affiliates in a
territory referred to in the first sentence of this Section 6.5(g),
but the applicable cable properties are not required by the
immediately preceding paragraph to be divested, if a governmental
agency or court requires divestiture by Sprint or its Controlled
Affiliate or by the Cable Partner or its Controlled Affiliate of one
of the properties giving rise to such overlap, the Cable Partner
making the acquisition will be responsible for taking actions
necessary to satisfy the requirements of such governmental agency or
court, including (if necessary) divesting the conflicted cable
television system.
If an overlap is created by the acquisition of cable
properties by a Cable Partner in a territory referred to in the first
sentence of this Section 6.5(g), and the Cable Partner is not
required to divest such cable properties pursuant to the first
paragraph of this Section 6.5(g), (i) the provisions of
Section 6.5(e) (including the rights accorded to the Incumbent Sprint
LEC) shall apply to such conflicted areas to the same extent as if it
were a Non-Overlap Area, and (ii) no Cable Partner nor any of its
Controlled Affiliates will be permitted to provide Exclusive Wireline
Services or Non-Exclusive Services through OverlapCo or NewTelco in
the conflicted area.
The acquisition by a Cable Partner or its Controlled
Affiliates after October 24, 1994 of additional equity interests in a
Local Operator in which it owned an equity interest as of October 24,
1994, shall not be construed for purposes of this
<PAGE> 98
Section 6.5(g) to be an acquisition of a cable television system; provided,
however, that if such an acquisition causes such Local Operator to
become a Controlled Affiliate of such Cable Partner, (i) such acquisition
shall be deemed for purposes of this Section 6.5(g) to be an
acquisition of a cable television system to the extent of any
expansion by acquisition of additional cable television systems of
the geographic area serviced by the cable television system(s) owned
by such Local Operator beyond the geographic area serviced by such
cable television system(s) as of October 24, 1994 (the "Affiliate
Territories"), and (ii) thereafter, any acquisition of a cable
television system by such Local Operator shall be subject to the
limitations set forth in this Section 6.5(g).
(h) Non-OverlapCo Markets. If a conflict with respect
to an Existing Overlap Territory has not been resolved by mutual
agreement of Sprint and the Cable Partners in accordance with Section
6.5(d), and Wireline Exclusive Services are not then being provided
in such Existing Overlap Territory by an OverlapCo, the Cable Partner
or its Affiliate that operates the Incumbent Cable Partner Cable
System in such Existing Overlap Territory may provide Wireline
Exclusive Services in such Existing Overlap Territory free of the
restrictions of this Agreement, but shall not be entitled to any of
the rights or benefits available to OverlapCo under this Agreement.
6.6 Freedom of Action.
Except as set forth in this Section 6, no Partner or Affiliate
shall have any obligation not to (i) engage in the same or similar
activities or lines of business as the Partnership or its
Subsidiaries or develop or market any products or services that
compete, directly or indirectly, with those of the Partnership or its
Subsidiaries, (ii) invest or own any interest publicly or privately
in, or develop a business relationship with, any Person engaged in
the same or similar activities or lines of business as, or otherwise
in competition with, the Partnership or its Subsidiaries, (iii) do
business with any client or customer of the Partnership or its
Subsidiaries, or (iv) employ or otherwise engage a former officer or
employee of the Partnership or its Subsidiaries.
6.7 Confidentiality.
(a) Maintenance of Confidentiality. Each Partner and
its Controlled Affiliates and the Partnership (each a "Restricted
Party"), shall cause their respective officers and directors (in
their capacity as such) to, and shall take all reasonable measures to
cause their respective employees, attorneys, accountants, consultants
and other agents and advisors (collectively, and together with their
respective officers and directors, "Agents") to, keep secret and
maintain in confidence all confidential and proprietary information
and data of the Partnership and the other
<PAGE> 99
Partners or their Affiliates disclosed to it (in each case, a "Receiving
Party") in connection with the formation of the Partnership and the
conduct of the Partnership's business and in connection with the
transactions contemplated by the Joint Venture Formation Agreement
(the "Confidential Information") and shall not, shall cause their
respective officers and directors not to, and shall take all
reasonable measures to cause their respective other Agents not to,
disclose Confidential Information to any Person other than the
Partners, their Controlled Affiliates and their respective Agents
that need to know such Confidential Information, or the Partnership.
Each Partner further agrees that it shall not use the Confidential
Information for any purpose other than monitoring and evaluating its
investment, determining and performing its obligations and exercising
its rights under this Agreement. The Partnership and each Partner
shall take all reasonable measures necessary to prevent any
unauthorized disclosure of the Confidential Information by any of
their respective Controlled Affiliates or any of their respective
Agents. The measures taken by a Restricted Party to protect
Confidential Information shall not be deemed unreasonable if the
measures taken are at least as strong as the measures taken by the
disclosing party to protect such Confidential Information.
(b) Permitted Disclosures. Nothing herein shall prevent
any Restricted Party or its Agents from using, disclosing, or
authorizing the disclosure of Confidential Information it receives in
the course of the business of the Partnership which:
(i) has been published or is in the public domain, or
which subsequently comes into the public domain, through no fault of the
Receiving Party;
(ii) prior to receipt hereunder (or under that certain
Agreement for Use and Non-Disclosure of Proprietary Information, dated
as of May 4, 1994, among Affiliates of the Partners) was properly within
the legitimate possession of the Receiving Party or, subsequent to
receipt hereunder (or under such agreement), is lawfully received from a
third party having rights therein without restriction of the third
party's right to disseminate the Confidential Information and without
notice of any restriction against its further disclosure;
(iii) is independently developed by the Receiving
Party through Persons who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(iv) is disclosed to a third party with the written
approval of the party originally disclosing such information, provided
that such Confidential Information
<PAGE> 100
shall cease to be confidential and proprietary information covered
by this Agreement only to the extent of the disclosure so consented to;
(v) subject to the Receiving Party's compliance with
paragraph (d) below, is required to be produced under order of a court
of competent jurisdiction or other similar requirements of a
governmental agency, provided that such Confidential Information to the
extent covered by a protective order or its equivalent shall otherwise
continue to be Confidential Information required to be held confidential
for purposes of this Agreement; or
(vi) subject to the Receiving Party's compliance with
paragraph (d) below, is required to be disclosed by applicable law or
a stock exchange or association on which such Receiving Party's
securities (or those of its Affiliate) are listed.
(c) Notwithstanding this Section 6.7, any Partner may
provide Confidential Information (i) to other Persons considering the
acquisition (whether directly or indirectly) of all or a portion of
such Partner's Interest in the Partnership pursuant to Section 13 of
this Agreement, (ii) to other Persons considering the consummation of
a Permitted Transaction with respect to such Person or (iii) to any
financial institution in connection with borrowings from such
financial institution by such Partner or any of its Controlled
Affiliates, so long as prior to any such disclosure such other Person
or financial institution executes a confidentiality agreement that
provides protection substantially equivalent to the protection
provided the Partners and the Partnership in this Section 6.7.
(d) In the event that any Receiving Party (i) must
disclose Confidential Information in order to comply with applicable
law or the requirements of a stock exchange or association on which
such Receiving Party's securities or those of its Affiliates are
listed or (ii) becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoenas,
civil investigative demands or otherwise) to disclose any
Confidential Information, the Receiving Party shall provide the
disclosing party with prompt written notice so that in the case of
clause (i), the disclosing party can work with the Receiving Party to
limit the disclosure to the greatest extent possible consistent with
legal obligations, or in the case of clause (ii), the disclosing
party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Agreement. In the
case of clause (ii), (A) if the disclosing party is unable to obtain
a protective order or other appropriate remedy, or if the
disclosing party so directs, the Receiving Party shall, and shall
cause its employees to, exercise all commercially reasonable
efforts to obtain a protective order or other appropriate remedy
at the disclosing party's reasonable
<PAGE>101
expense, and (B) failing the entry of a protective order or other
appropriate remedy or receipt of a waiver hereunder, the Receiving
Party shall furnish only that portion of the Confidential Information
which it is advised by opinion of its counsel is legally required to be
furnished and shall exercise all commercially reasonable efforts to
obtain reliable assurance that confidential treatment shall be accorded
such Confidential Information, it being understood that such reasonable
efforts shall be at the cost and expense of the disclosing party whose
Confidential Information has been sought.
(e) Any press release concerning the formation and
operation of the Partnership shall be approved in advance by a
Required Majority Vote of the Management Committee.
(f) The obligations under this Section 6.7 shall survive
for a period of two (2) years from (i) as to all Partners and their
respective Controlled Affiliates, the termination of the Partnership
and (ii) as to any Partner and its Controlled Affiliates, such
Partner's withdrawal therefrom (or otherwise ceasing to be a
Partner); provided that such obligations shall continue indefinitely
with respect to any trade secret or similar information which is
proprietary to the Partnership and provides the Partnership with an
advantage over its competitors.
(g) All references in this Section 6.7 to the
Partnership shall, unless the context otherwise requires, be deemed
to refer also to each Subsidiary of the Partnership.
7 . LOCAL OPERATOR AGREEMENT
Promptly following the adoption of the form of Local Operator
Agreement to be entered into by Cable Subsidiaries in accordance with
Section 5.2(a), the Partners will amend this Section 7 to set forth
the obligations of the Partners with respect to certain matters
addressed in Exhibit 2 to the Joint Venture Formation Agreement,
including (i) the obligations of Cable Subsidiaries to enter into
Local Operator Agreements, (ii) the right of first opportunity to be
accorded to Local Operators to develop facilities for use by
NewTelco, (iii) the servicing of large business customers and (iv)
the right of the Cable Partners to accelerate the provision of
Wireline Exclusive Services in certain geographic areas.
8 . ROLE OF EXCLUSIVE LIMITED PARTNERS
8.1 Rights or Powers.
The Exclusive Limited Partners shall not have any right or
power to take part in the management or control of the Partnership or
its business and affairs or to act for or bind the Partnership in any
way.
<PAGE> 102
8.2 Voting Rights.
The Exclusive Limited Partners shall have the right to vote
only on the matters specifically reserved for the vote or approval of
Partners (including the Exclusive Limited Partners) set forth in this
Agreement, including those matters listed on Schedule 5.1(l) hereto.
9. TRANSACTIONS WITH PARTNERS; OTHER AGREEMENTS
9.1 Sprint Cellular.
(a) The Partners shall negotiate in good faith terms
pursuant to which Sprint will make available or Transfer to
WirelessCo certain assets, expertise and services relating to its
cellular operations, including certain senior level management and
technical expertise from its cellular headquarters and regional
operations, as well as other core employees and capabilities such as
administrative services and intellectual property.
(b) In the event (i) WirelessCo is the winning bidder in
the PCS Auction for a PCS license with respect to a license area and
Sprint and its Controlled Affiliates have an ownership interest in a
cellular business or businesses (a "Sprint Cellular Business") having
a service area which is included within such license area in whole or
in part (an "Overlap Cellular Area") or (ii) WirelessCo has decided,
within thirty (30) months from the date of this Agreement, to acquire
a PCS license in a license area which includes an Overlap Cellular
Area; and as a result of Sprint's ownership interest in a Sprint
Cellular Business WirelessCo would not be awarded on an unconditional
basis (in the event of clause (i) above) or be permitted to acquire
(in the event of clause (ii) above) such PCS license under FCC rules
and regulations relating to CMRS spectrum cap limitations, then
Sprint agrees that it will divest such portion of such Sprint
Cellular Business, within the time period provided by FCC rules in
the event of clause (i) above, and as soon as commercially reasonable
(e.g., to avoid "fire sale" prices) in the event of clause (ii)
above, or take any other action as is necessary, so that WirelessCo
will not be impaired from holding or acquiring such PCS license.
Nothing herein prevents one or more Partners from acquiring such PCS
license if Sprint is unable to divest the overlap property in a
timely manner, provided that, subject to applicable law, such Partner
or Partners enter into an Affiliation Agreement with the Partnership
and its Subsidiaries. This Section 9.1(b) shall not require Sprint
to divest, or take any other action with respect to, any of the
Sprint Cellular Businesses in the Charlotte, Cleveland, El Paso,
Jacksonville, Knoxville, Omaha or Richmond MTAs.
<PAGE> 103
9.2 Sprint Brand Licensing Agreement.
(a) Simultaneously with the execution of this Agreement,
the Partnership and Sprint have entered into an assignment and
acceptance agreement in the form attached as Exhibit 9.2(a)(i),
pursuant to which the Partnership and its Subsidiaries will assume
the rights and obligations of Sprint under the trademark license
agreement between Sprint Communications and Sprint, a copy of which
is attached hereto as Exhibit 9.2(a)(ii) (the "Trademark License").
Pursuant to such assignment and acceptance agreement, the Partnership
and its Subsidiaries will be provided with a national brand license
to market their respective national Wireline and Wireless Businesses
(excluding Wireline Businesses relating to the Comcast Teleport
Assets, Cox Teleport Assets and TCI Teleport Assets).
(b) On the First Closing Date, the Partnership and
Sprint will enter into an assignment and acceptance agreement in form
attached as Exhibit 9.2(a)(i), pursuant to which the Partnership and
its Subsidiaries will assume the rights and obligations of Sprint
under the trademark license agreement between Sprint Communications
and a Controlled Affiliate of Sprint, the terms of which are set
forth on Exhibit 9.2(b) (the "Teleport Trademark License"). Pursuant
to such assignment and acceptance agreement, the Partnership and its
Subsidiaries will be provided with a national brand license to market
their Wireline Businesses relating to the Comcast Teleport Assets,
Cox Teleport Assets and TCI Teleport Assets.
9.3 Joint Marketing Agreement.
Following the execution of this Agreement, each Partner agrees
to (i) negotiate in good faith regarding the definitive terms of a
joint marketing agreement among the Partnership, WirelessCo,
NewTelco, each of the Partners and certain of their Affiliates
reflecting the principles set forth on Exhibit 9.3, with such
modifications and additions as the Partners shall negotiate in good
faith and (ii) subject to the agreement of the Partners as to such
definitive documentation, use all commercially reasonable efforts to
cause such agreement to be executed and delivered as promptly as
practicable following the execution of this Agreement.
9.4 Services Agreement.
Following the execution of this Agreement, each Partner agrees
to (i) negotiate in good faith regarding the definitive terms of a services
agreement to be entered into between the Partnership and Sprint Parent
and its Controlled Affiliates (which services agreement shall provide for,
among other things, the provision by Sprint Parent and its Controlled
Affiliates of certain network services to the Partnership and its Subsidiaries
and for the purchase by Sprint Parent and its Controlled Affiliates
(excluding United Telephone Long Distance ("UTLD")
<PAGE> 104
travel card calls, UTLD third party billed calls, UTLD collect calls and
UTLD 800 service) of certain local access requirements from NewTelco)
reflecting the principles set forth on Exhibit 9.4, with such modifications
and additions as the Partners shall negotiate in good faith and (ii)
subject to the agreement of the Partners as to such definitive
documentation, use all commercially reasonable efforts to cause
such agreement to be executed and delivered as promptly as practicable
following the execution of this Agreement.
9.5 Preferred Provider.
The Partnership and its Subsidiaries shall contract with each
Partner, its Affiliates and third parties, as appropriate, on a
negotiated arms-length basis, for services they may require, which
may include billing and information systems and marketing and sales
services. The Partnership and its Subsidiaries may in the normal
course of their respective businesses enter into transactions with
the Partners and their respective Affiliates, provided that the
Management Committee by the requisite vote pursuant to Section 9.7
has determined that the price and other terms of such transactions
are fair to the Partnership and its Subsidiaries and that the price
and other terms of such transaction are not less favorable to the
Partnership and its Subsidiaries than those generally prevailing with
respect to comparable transactions involving non-Affiliates of
Partners. Subject to the foregoing, the Management Committee, acting
in accordance with Section 9.7, may in its discretion elect from time
to time to provide rights of first opportunity to various Partners or
their Affiliates to provide services to the Partnership and its
Subsidiaries; provided that the Management Committee shall have
adopted, by Unanimous Vote, procedures (including conflict avoidance
procedures) relating generally to such right of first opportunity
arrangements, and the provision of such rights and all matters
related to the exercise thereof shall be subject to and effected in a
manner consistent with such procedures. The Partnership and its
Subsidiaries are expressly authorized to enter into the agreements
expressly referred to in this Section 9.
9.6 MFJ
Each Partner agrees that neither it nor any of its Controlled
Affiliates shall take any action which (i) causes such Partner or the
Partnership to become a BOC or (ii) which causes the Partnership to
become a BOC Affiliated Enterprise or an entity subject to any
restriction or limitation under Section II of the MFJ if, in the case
of an event specified in clause (ii) above, such event would have a
material adverse effect on the business, assets, liabilities, results
or operations, financial condition or prospects of the Partnership
and its Subsidiaries.
<PAGE> 105
9.7 Interested Party Transactions.
Any contract, agreement, relationship or transaction between
the Partnership or any of its Subsidiaries, on the one hand, and any
Partner or any Person in which a Partner (or any of its Controlled
Affiliates) has a direct or indirect material financial interest
(other than the Partnership, MinorCo, PhillieCo and their respective
Subsidiaries) or which has a direct or indirect material financial
interest in such Partner (provided that a Person shall not be deemed
to have such an interest solely as a result of its ownership of less
than 10% (by value) of the outstanding economic interests in a
Publicly Held Parent of a Partner (or a Publicly Held Intermediate
Subsidiary of such Parent)) (each, an "Interested Person") on the
other hand, shall be approved and all decisions with respect thereto
(including a decision to accept or reject an Offer pursuant to
Section 6.1(c), the determination to amend, terminate or abandon any
such contract or agreement, whether there has been a breach thereof
and whether to exercise, waive or release any rights of the
Partnership with respect thereto) shall be made (after full
disclosure by the interested Partner of all material facts relating
to such matter) by the Management Committee (with the Representatives
of the interested Partner(s) absent from the deliberations and
abstaining from the vote with respect thereto) by the requisite
affirmative vote of the Representatives of the disinterested General
Partners. Each of the Cable Partners shall be deemed to be an
interested Partner with respect to any action to be taken by the
Partnership or NewTelco under the Teleport Contribution Agreement,
including any election, decision or other action by the Partnership
or NewTelco relating to the exercise of its rights under Article XI
thereof. For purposes of the foregoing, a disinterested General
Partner is a General Partner that is not a party to, and does not
have an Interested Person that is a party to, the contract,
agreement, relationship or transaction in question; provided that
Sprint shall for all purposes be deemed a disinterested General
Partner with respect to any election, decision or other action by the
Partnership or NewTelco under the Teleport Contribution Agreement.
9.8 Access to Technical Information
Subject to the provisions of Sections 6 and 11.4 of this
Agreement and to applicable confidentiality restrictions, the
Partnership and its Subsidiaries shall grant to each Partner and its
Controlled Affiliates access to Technical Information. Such access
shall be granted at such reasonable times and locations and on such
other reasonable terms as the Management Committee may approve by
Required Majority Vote pursuant to Section 9.7. Subject to Section
6, the Partnership and its Subsidiaries shall grant to any such Partner
or its Controlled Affiliate a license to use any Technical Information Rights
to which it is granted access pursuant to this Section 9.8, which license
shall provide for royalties and fees and other terms and conditions that are
generally prevailing with respect to comparable transactions
<PAGE> 106
involving unrelated third parties and are at least as favorable to such
Partner or its Controlled Affiliate as those generally prevailing with
respect to comparable licenses (if any) granted to non-Affiliates of Partners.
9.9 Parent Undertaking.
Simultaneously with the execution of this Agreement, each
Parent has executed and delivered to the Partnership and the other
Partners a Parent Undertaking.
9.10 Certain Additional Covenants.
(a) Each Cable Partner agrees that for so long prior to
October 24, 1999, as it is a Partner, neither it nor any of its
Controlled Affiliates will engage in any transaction or series of
related transactions, other than a Permitted Transaction, in which
cable television system assets owned directly or indirectly by the
Parent of such Partner are Transferred if, after giving effect to
such transaction or the last transaction in such series of related
transactions, the number of basic subscribers served by the cable
television systems in the United States of America (including its
territories and possessions other than Puerto Rico) owned by the
Parent of such Partner, directly and indirectly through its
Controlled Affiliates, is equal to twenty-five percent (25%) or less
of the number of basic subscribers served by the cable television
systems in the United States of America (including its territories
and possessions other than Puerto Rico) owned by the Parent of such
Partner, directly and indirectly through its Controlled Affiliates,
before giving effect to such transaction or the first transaction in
such series of related transactions.
(b) Sprint agrees that for so long prior to October 24,
1999, as it is a Partner, neither it nor any of its Controlled
Affiliates will engage in any transaction or series of related
transactions, other than a Permitted Transaction, in which long
distance telecommunications business assets owned directly or
indirectly by Sprint Parent are Transferred if, after giving effect
to such transaction or the last transaction in such series of related
transactions, the number of customers served by the long distance
telecommunications business in the United States of America
(including its territories and possessions other than Puerto Rico)
owned by Sprint Parent, directly and indirectly through its
Controlled Affiliates, is equal to twenty-five percent (25%) or less
of the number of customers served by the long distance
telecommunications business in the United States of America
(including its territories and possessions other than Puerto Rico)
owned by Sprint Parent, directly and indirectly through its
Controlled Affiliates, before giving effect to such transaction or
the first transaction in such series of related transactions.
<PAGE> 107
9.11 PioneerCo Preemptive Rights.
The PioneerCo Partnership Agreement will provide that an
Affiliate of Cox and the Partnership (or a Subsidiary of the
Partnership) will have certain put and call rights that may result in
the acquisition by the Partnership of such Cox Affiliate's interest
in PioneerCo in exchange for an additional Interest in the
Partnership. At the time of such exchange, each of the Partners
(other than Cox) will be permitted to make Additional Capital
Contributions in cash up to the amount necessary to permit such
Partner to avoid any reduction in its Percentage Interest as a
consequence of such exchange (assuming that all such other Partners
were to exercise such right).
9.12 Foreign Ownership.
(a) Certain Definitions and Concepts. For purposes of this
Section 9.12:
(i) "Foreign Ownership Restriction" means any federal
law or regulation restricting the amount of ownership or voting control
that may be held by non-citizens of the United States in holders of
licenses or other authorizations issued by the FCC or in Persons
controlling such holders (including 47 U.S.C. 310(b) and the rules
and regulations promulgated thereunder by the FCC).
(ii) "Covered Licensee" means any of the Partnership or
any Subsidiary thereof that holds any license or other authorization
issued by the FCC or that controls the holder of any license or other
authorization for purposes of any Foreign Ownership Restriction.
(iii) "Foreign Ownership Threshold" means, with
respect to any Covered Licensee, the maximum amount of foreign
ownership or foreign voting control of such Covered Licensee that is
permitted by any Foreign Ownership Restriction applicable to such
Covered Licensee, less the amount of foreign ownership or foreign
voting control of such Covered Licensee that is attributable from any
Person other than a Partner.
(iv) "Foreign Ownership Safe Harbor" means, with respect
to any Covered Licensee, ninety percent (90%) of the Foreign Ownership
Threshold of such Covered Licensee.
(v) Except as provided in clause (vi) of this Section
9.12(a), a Partner's "Attribution Cap" equals, with respect to the
Foreign Ownership Threshold of any Covered Licensee:
(A) in the case of Sprint, the product of
the Percentage Interest of Sprint times twenty-eight
percent (28%), and
<PAGE> 108
(B) in the case of any Cable Partner, the
product of (x) the Foreign Ownership Threshold of such
Covered Licensee minus Sprint's Attribution Cap times (y)
the Percentage Interest of such Cable Partner divided by
the aggregate Percentage Interests of all Cable Partners.
(vi) Notwithstanding clause (v) of this Section 9.12(a), if
(A) the proposed transaction among Deutsche Telekom, France Telecom and
Sprint Parent providing for the purchase by Deutsche Telekom and France
Telecom of certain shares of stock of Sprint Parent is abandoned
without the consummation of all of the stock purchases contemplated
thereby and (B) definitive agreements with respect to a similar
alternative transaction with a non-citizen of the United States have
not been entered into by Sprint Parent prior to the second anniversary
hereof or such transaction has not been consummated prior to the third
anniversary hereof, then, with respect to any Covered Licensee, each
Partner's Attribution Cap shall equal the product of the Percentage
Interest of such Partner times the Foreign Ownership Threshold of such
Covered Licensee.
(b) Covenant Regarding Foreign Ownership. Subject to Section
9.12(c), no Partner shall cause or permit the amount of foreign
ownership or foreign voting control attributable to any Covered
Licensee from such Partner and its Controlled Affiliates (determined
in accordance with the method of attribution prescribed in the
applicable Foreign Ownership Restrictions) to exceed the Attribution
Cap of such Partner applicable to such Covered Licensee, increased by
any portion of any other Partner's applicable Attribution Cap that
such other Partner has authorized such Partner to use for purposes of
determining compliance with this Section 9.12(b), and decreased by any
portion of such Partner's applicable Attribution Cap that such Partner
has authorized any other Partner to use for purposes of determining
compliance with this Section 9.12(b).
(c) Right to Cure Potential Violations. So long as a Partner
and its Controlled Affiliates are using their respective commercially
reasonable efforts to cause the amount of foreign ownership and
foreign voting control attributable to each Covered Licensee from such
Partner and its Controlled Affiliates to be reduced below the maximum
amount permitted by Section 9.12(b) (without regard to this Section
9.12(c)), such Partner shall not be deemed to be in violation of its
covenant in Section 9.12(b) until the earlier of:
(i) such time as the aggregate amount of foreign
ownership or foreign voting control attributable to any Covered Licensee
(including the foreign ownership and foreign voting control attributable
from such Partner and its Controlled Affiliates) exceeds the Foreign
Ownership Safe Harbor, or
<PAGE> 109
(ii) thirty (30) days after such Partner receives written
notice from any other Partner that such other Partner or any of its
Controlled Affiliates desires to engage in any transaction permitted
by section 9.12(b) that, if consummated, would cause the aggregate
amount of foreign ownership or foreign voting control attributable to
any Covered Licensee to exceed the Foreign Ownership Safe Harbor if
the foreign ownership attributable to such Covered Licensee from such
Partner and its Controlled Affiliates continued to exceed the maximum
amount permitted by Section 9.12(b).
(d) Authorization to Use the Attribution Cap of Another Partner.
Any authorization by one Partner to another Partner of the right to
use any portion of the authorizing Partner's applicable Attribution
Cap for purposes of determining compliance with Section 9.12(b) shall
be evidenced by a written instrument delivered by the authorizing
Partner to the Partnership and each other Partner.
9.13 Advertising Fund.
(a) As and when reasonably determined by the Chief Executive
Officer following the adoption of the Initial Business Plan (or as
authorized by a Unanimous Vote of the Management Committee prior to
such time), the Partnership and its Subsidiaries will purchase from
the Cable Partners and their respective Cable Subsidiaries advertising
availability on the cable television systems of such Cable
Subsidiaries having an aggregate value of $12,500,000. To the extent
reasonably practicable, such purchases will be made from each Cable
Partner and its Cable Subsidiaries in the same ratio as the initial
Percentage Interest of such Cable Partner bears to the aggregate
initial Percentage Interests of all of the Cable Partners. Following
the completion of the purchases of advertising availability pursuant
to Section 9.13(a), each of the Cable Partners shall make available to
the Partnership and its Subsidiaries (from time to time as may be
reasonably requested by the Chief Executive Officer and subject to
availability) at no charge advertising availability on the cable
television systems of the Cable Partners and their Cable Subsidiaries
having an aggregate value of $12,500,000, with the aggregate value of
the advertising availability provided by each Cable Partner and its
Cable Subsidiaries to equal the aggregate value of the advertising
availability purchased from the Cable Subsidiaries of such Cable
Partner pursuant to this Section 9.13(a). The advertising
availability obtained by the Partnership and its Subsidiaries under
this Section 9.13(a) shall be utilized for the advertisement of
Sprint-branded products and services offered by the Partnership and
its Subsidiaries.
(b) As and when reasonably determined by Sprint Parent following
the date hereof, the Partnership and its Subsidiaries will purchase
from the Cable Partners and their respective Cable Subsidiaries
advertising availability on the cable television
<PAGE> 110
systems of such Cable Subsidiaries having an aggregate value of
$12,500,000. To the extent reasonably practicable, such purchases
will be made from each Cable Partner and its Cable Subsidiaries in
the same ratio as the initial Percentage Interest of such Cable Partner
bears to the aggregate initial Percentage Interests of all of the Cable
Partners. Following the completion of the purchases of advertising
availability pursuant to this Section 9.13(b), each of the Cable Partners
shall make available to the Partnership and its Subsidiaries (from time to
time as may be reasonably determined by Sprint Parent and subject to
availability) at no charge advertising availability on the cable
television systems of the Cable Partners and their Cable Subsidiaries
having an aggregate value of $12,500,000, with the aggregate value of
the advertising availability provided by each Cable Partner and its
Cable Subsidiaries to equal the aggregate value of the advertising
availability purchased from the Cable Subsidiaries of such Cable
Partner pursuant to this Section 9.13(b). The advertising
availability obtained by the Partnership and its Subsidiaries under
this Section 9.13(b) shall be utilized as and when directed by Sprint
Parent in its reasonable discretion, subject to availability for the
advertisement of long distance telecommunications services offered by
Sprint and its Controlled Affiliates, and Sprint Parent shall
determine the content of such advertising.
(c) The value of the advertising availability purchased by and
contributed to the Partnership under this Section 9.13 shall be
determined based on the rates generally made available by the Cable
Subsidiaries to advertisers purchasing similar advertising volumes in
the time slots and markets made available to the Partnership and
Sprint Parent. The Partners agree that the purchases and
contributions of advertising availability shall be completed prior to
December 31, 1999.
(d) The contribution by the Cable Partners and the Cable
Subsidiaries of advertising availability under this Section 9.13 (i)
shall not be treated as a Capital Contribution and shall not affect
the Capital Accounts of the Cable Partners and (ii) shall be in
addition to (and shall not be applied against or reduce) the Cable
Partners' Capital Commitment, Mandatory Contribution or any other
obligation of the Cable Partners to make Additional Capital
Contributions pursuant to Sections 2.3(a) and (b).
(e) If the Teleport Contribution Agreement is terminated
pursuant to Article X thereof, (i) the obligation of the Partnership and its
Subsidiaries to purchase any additional advertising availability from
the Cable Partners and their respective Cable Subsidiaries and the
obligation of the Cable Partners and the Cable Subsidiaries to make
available any additional advertising availability at no charge, in
each case pursuant to Section 9.13(b), shall terminate and (ii) within
thirty (30) days following such termination, Sprint shall pay to each
of the Cable Partners an amount in cash equal to the sum of (A) the
value of the advertising availability previously made
<PAGE> 111
available by such Cable Partner to the Partnership at no charge pursuant
to Section 9.13(b) and (B) a percentage equal to such Cable Partner's
Percentage Interest of the value of the advertising availability previously
purchased by the Partnership and its Subsidiaries pursuant to Section
9.13(b).
9.14 Provision of Services.
To the extent permitted by applicable law, each Partner agrees
that it and its Controlled Affiliates shall use all commercially
reasonable efforts to cause its local cable television and/or
telephone operations to provide appropriate services to WirelessCo in
all its owned and operated markets as well as markets operating under
an Affiliation Agreement with WirelessCo, including any Affiliation
Agreement with PioneerCo. Such services may include antenna sites
and/or strand mounting of RF and transmission equipment owned by
WirelessCo or any Affiliate thereof and transmission facilities
between cell sites and designated switching locations. Services may
also include provision of primary power, standby power and
maintenance. Pricing of the foregoing services will be negotiated at
a local level and is expected to reflect all relevant costs plus a
reasonable return. Notwithstanding the foregoing, Comcast will not
be required to provide any services to WirelessCo under this Section
9.14 in any territories in which Comcast or its Controlled Affiliates
operate Wireless Businesses in the Comcast Area.
9.15 Comcast Representative.
Notwithstanding any other provision of this Agreement, for
such time (the "Restricted Time") as Comcast or any of its Controlled
Affiliates engages in any Competitive Activity in any portion of the
Comcast Area, Comcast agrees to cause any Representative of Comcast
who participates in Designated Matters (as defined below) not to (i)
be involved in any Competitive Activities engaged in by Comcast or
its Controlled Affiliates in the Restricted Area (as defined below)
and (ii) disclose or discuss the Designated Matters with any Agent of
Comcast that is involved in Competitive Activities in the Restricted
Area. During the Restricted Time, each Partner (other than Comcast)
and its Controlled Affiliates and the Partnership and its
Subsidiaries shall not, shall cause their respective officers and
directors (in their capacity as such) not to, and shall take all
reasonable measures to cause their respective other Agents not to,
disclose any information (including any financial projections,
budgets or other operating or business plans) regarding the
provision, by the Partnership and its Subsidiaries or by any Third
Party Provider (as defined below) of Wireless Exclusive Services in
any portion of the Comcast Area, to Comcast or any of its Controlled
Affiliates or Agents other than such Representative of Comcast. As
used herein, "Designated Matters" means the participation in any
discussions regarding, the obtaining of any information or the
casting of any votes, in each case with respect to any matter
concerning the provision by the Partnership or its Subsidiaries of
<PAGE> 112
Wireless Exclusive Services in a portion (the "Restricted Area") of
the Comcast Area (including the terms of any Affiliation Agreement
with any Person providing such Wireless Exclusive Services (a "Third
Party Provider")).
9.16 Purchasing.
The Partners and their respective Controlled Affiliates will
cooperate with each other in a commercially reasonable manner to
structure arrangements whereby the Partners, their respective
Controlled Affiliates, and the Partnership and its Subsidiaries
would, to the extent permitted by applicable law and regulation,
coordinate their respective buying efforts from third party vendors
in a manner such that the benefits of such coordinated efforts would
be available to the Partnership and its Subsidiaries, each Partner
and each Partner's respective Controlled Affiliates in making such
purchases of equipment and materials as may be required for (i) the
accomplishment of the purposes of the Partnership and its
Subsidiaries, including equipment and materials that a Partner or its
Controlled Affiliates may require in order to upgrade its facilities
for the transport of Wireline Exclusive Services by NewTelco as
contemplated by the Local Operator Agreements, and (ii) the
operations of the permitted businesses of any Partner or its
Controlled Affiliates.
10 . REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties by Partners.
Each Partner hereby represents and warrants that as of the
date hereof:
(a) Due Incorporation or Formation; Authorization of
Agreement. Such Partner is a corporation duly organized or a
partnership duly formed, validly existing and, if applicable, in good
standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or partnership power and authority to
own its property and carry on its business as owned and carried on at
the date hereof and as contemplated hereby. Such Partner is duly
licensed or qualified to do business and, if applicable, in good
standing in each of the jurisdictions in which the failure to be so
licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations
hereunder. Such Partner has the corporate or partnership power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder and the execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate
or partnership action. Assuming the due execution and delivery by
the other parties hereto, this Agreement constitutes the legal, valid
and binding obligation of such Partner enforceable against such
<PAGE> 113
Partner in accordance with its terms, subject as to enforceability to
limits imposed by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and the availability of equitable
remedies.
(b) No Conflict with Restrictions; No Default. Neither
the execution, delivery and performance of this Agreement nor the
consummation by such Partner of the transactions contemplated hereby
(i) will conflict with, violate or result in a breach of any of the
terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any court, any
governmental department, board, agency or instrumentality, domestic
or foreign, or any arbitrator, applicable to such Partner or any of
its Controlled Affiliates, (ii) will conflict with, violate, result
in a breach of or constitute a default under any of the terms,
conditions or provisions of the articles of incorporation, bylaws or
partnership agreement of such Partner or any of its Controlled
Affiliates or of any material agreement or instrument to which such
Partner or any of its Controlled Affiliates is a party or by which
such Partner or any of its Controlled Affiliates is or may be bound
or to which any of its material properties or assets is subject
(other than any such conflict, violation, breach or default that has
been validly and unconditionally waived), (iii) will conflict with,
violate, result in a breach of, constitute a default under (whether
with notice or lapse of time or both), accelerate or permit the
acceleration of the performance required by, give to others any
material interests or rights or require any consent, authorization or
approval under any indenture, mortgage, lease agreement or instrument
to which such Partner or any of its Controlled Affiliates is a party
or by which such Partner or any of its Controlled Affiliates is or
may be bound, or (iv) will result in the creation or imposition of
any lien upon any of the material properties or assets of such
Partner or any of its Controlled Affiliates, which in any such case
could reasonably be expected to have a material adverse effect on the
Partnership or to materially impair such Partner's ability to perform
its obligations under this Agreement or to have a material adverse
effect on the consolidated financial condition of such Partner or its
Parent.
(c) Governmental Authorizations. Any registration,
declaration or filing with, or consent, approval, license, permit or
other authorization or order by, any governmental or regulatory
authority, domestic or foreign, that is required to be obtained by
such Partner in connection with the valid execution, delivery,
acceptance and performance by such Partner under this Agreement or
the consummation by such Partner of any transaction contemplated
hereby has been or will be completed, made or obtained, except for
any FCC or other regulatory approvals, licenses, permits or other
authorizations required to be obtained by the Partnership in
connection with the acquisition and ownership of Wireless Business
licenses relating to PCS, and except for required consents,
<PAGE> 114
approvals, licenses, permits or other authorizations contemplated by
the Teleport Contribution Agreement and Other CAP Business
Contribution Agreements.
(d) Litigation. There are no actions, suits,
proceedings or investigations pending or, to the knowledge of such
Partner or its Parent, threatened against or affecting such Partner
or any of its Controlled Affiliates or any of their properties,
assets or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or foreign, or
any arbitrator which could, if adversely determined (or, in the case
of an investigation could lead to any action, suit or proceeding,
which if adversely determined could), reasonably be expected to
materially impair such Partner's ability to perform its obligations
under this Agreement or to have a material adverse effect on the
consolidated financial condition of such Partner or its Parent; and
such Partner or any of its Controlled Affiliates has not received any
currently effective notice of any default, and such Partner or any of
its Controlled Affiliates is not in default, under any applicable
order, writ, injunction, decree, permit, determination or award of
any court, any governmental department, board, agency or
instrumentality, domestic or foreign, or any arbitrator, which
default could reasonably be expected to materially impair such
Partner's ability to perform its obligations under this Agreement or
to have a material adverse effect on the consolidated financial
condition of such Partner or its Parent.
(e) MFJ. Such Partner is not a BOC, a BOC Affiliated
Enterprise or an entity subject to any restrictions under Section II
of the MFJ.
(f) Subsidiaries. Such Partner is a direct or indirect
wholly owned Subsidiary of its Parent.
10.2 Representation and Warranty of Sprint.
Sprint hereby represents and warrants that as of the date
hereof Sprint Communications is the primary entity through which
Sprint Parent conducts its long distance telecommunications business
in the United States of America (including its territories and
possessions other than Puerto Rico).
11 . ACCOUNTING, BOOKS AND RECORDS
11.1 Accounting, Books and Records.
The Partnership shall maintain at its principal office
separate books of account for the Partnership which (i) shall fully
and accurately reflect all transactions of the Partnership, all costs
and expenses incurred, all charges made, all credits made and
received, and all income derived in connection with the conduct of
the Partnership and the operation of its business in accordance with
GAAP or, to the extent inconsistent therewith, in
<PAGE> 115
accordance with this Agreement and (ii) shall include all documents
and other materials with respect to the Partnership's business as are
usually entered and maintained by persons engaged in similar businesses.
The Partnership and its Subsidiaries shall use the accrual method of
accounting in preparation of their annual reports and for tax
purposes and shall keep their books and records accordingly. Subject
to Section 11.4, any Partner or its designated representative shall
have the right, at any reasonable time and for any lawful purpose
related to the affairs of the Partnership and its Subsidiaries or the
investment in the Partnership and its Subsidiaries by such Partner,
(i) to have access to and to inspect and copy the contents of such
books or records, (ii) to visit the facilities of the Partnership and
its Subsidiaries and (iii) to discuss the affairs of the Partnership
and its Subsidiaries with their respective officers, employees,
attorneys, accountants, customers and suppliers. Neither the
Partnership nor its Subsidiaries shall charge such Partner for such
examination and each Partner shall bear its own expenses in
connection with any examination made for any such Partner's account.
11.2 Reports.
(a) In General. The chief financial officer of the
Partnership shall be responsible for the preparation of financial
reports of the Partnership and the coordination of financial matters
of the Partnership with the Accountants.
(b) Periodic and Other Reports. The Partnership shall
cause to be delivered to each Partner the financial statements listed
in clauses (i) through (iii) below, prepared, in each case, in
accordance with GAAP (and, if required by any Partner for purposes of
reporting under the Securities Exchange Act of 1934, Regulation S-X),
and such other reports as any Partner may reasonably request from
time to time, provided that, if the Management Committee so
determines within thirty (30) days thereof, such other reports shall
be provided at such requesting Partner's sole cost and expense. Such
financial statements shall be accompanied by an analysis, in
reasonable detail, of the variance between the financial condition
and results of operations reported therein and the corresponding
amounts for the applicable period or periods in the Approved Business
Plan. The monthly and quarterly financial statements referred to in
clauses (ii) and (iii) below may be subject to normal year-end audit
adjustments.
(i) As soon as practicable following the end
of each Fiscal Year (and in any event not later than
seventy-five (75) days after the end of such Fiscal
Year) and at such time as distributions are made to the
Partners pursuant to Section 15.2 following the
occurrence of a Liquidating Event, a consolidated
balance sheet of the Partnership and its Subsidiaries
as of the end of such Fiscal Year and the related
statements of operations, Partners' Capital Accounts and
<PAGE> 116
changes therein, and cash flows for such Fiscal
Year, together with appropriate notes to such financial
statements and supporting schedules, all of which shall
be audited and certified by the Accountants, and in
each case, to the extent the Partnership was in
existence, setting forth in comparative form the
corresponding figures for the immediately preceding
Fiscal Year (in the case of the balance sheet) and the
two (2) immediately preceding Fiscal Years (in the case
of the statements).
(ii) As soon as practicable following the end
of each of the first three calendar quarters of each
Fiscal Year (and in any event not later than forty
(40) days after the end of each such calendar quarter),
a consolidated balance sheet of the Partnership as of
the end of such calendar quarter and the related
consolidated statements of operations, Partners'
Capital Accounts and changes therein, and cash flows
for such calendar quarter and for the Fiscal Year to
date, in each case, to the extent the Partnership was
in existence, setting forth in comparative form the
corresponding figures for the prior Fiscal Year's
calendar quarter and interim period corresponding to
the calendar quarter and interim period just completed.
(iii) As soon as practicable following the end
of each of the first two calendar months of each
calendar quarter (and in any event not later than
thirty (30) days after the end of such calendar month),
a consolidated balance sheet as of the end of such
month and consolidated statements of operations for the
interim period through such month and the monthly
period then ended, setting forth in comparative form
the corresponding figures from the Business Plan for
such month and the interim period through such month.
(iv) At such times and in such detail as may
be determined by the Management Committee or if
required by any Partner in order for such Partner and
its Parent to comply with their reporting obligations
under the Securities Exchange Act of 1934 or under any
other applicable law, separate financial statements for
WirelessCo and NewTelco, including information
reflecting NewTelco's performance with respect to the
Benchmarks and the Additional Benchmarks.
The quarterly or monthly statements described in clauses (ii)
and (iii) above shall be accompanied by a written certification of
the chief financial officer of the Partnership that such statements
have been prepared in accordance with GAAP or this Agreement, as the
case may be.
<PAGE> 117
11.3 Tax Returns and Information.
(a) Sprint, acting in its capacity as a General Partner,
shall act as the "Tax Matters Partner" of the Partnership within the
meaning of Section 6231(a)(7) of the Code (and in any similar
capacity under applicable state or local law) (the "Tax Matters
Partner"). If Sprint shall cease to be a General Partner, then the
Partner with the greatest Voting Percentage Interest, acting in its
capacity as a General Partner, shall thereafter act as the Tax
Matters Partner. The Tax Matters Partner shall take reasonable
action to cause each other Partner to be treated as a "notice
partner" within the meaning of Section 6231(a)(9) of the Code. All
reasonable expenses incurred by a Partner while acting in its
capacity as Tax Matters Partner shall be paid or reimbursed by the
Partnership. Each Partner shall be given at least five (5) Business
Days advance notice from the Tax Matters Partner of the time and
place of, and shall have the right to participate (and the
Partnership and the Tax Matters Partner shall take such action as may
be necessary to cause the tax matters partner of any Subsidiary to
extend to the Partners the right to participate) in (i) any material
aspect of any administrative proceeding relating to the determination
of partnership items at the Partnership level (or at the level of any
Subsidiary thereof) and (ii) any material discussions with the
Internal Revenue Service relating to the allocations pursuant to
Section 3 of this Agreement or pursuant to the partnership agreement
of any Subsidiary. The Tax Matters Partner shall not, and the
Partnership shall not permit the tax matters partner of any
Subsidiary to, initiate any action or proceeding in any court, extend
any statute of limitations, or take any other action contemplated by
Sections 6222 through 6232 of the Code that would legally bind any
other Partner, the Partnership or any Subsidiary without approval of
the Management Committee by a Required Majority Vote. The Tax
Matters Partner shall from time to time upon request of any other
Partner confer, and cause the Partnership's and any Subsidiary's tax
attorneys and Accountants to confer, with such other Partner and its
attorneys and accountants on any matters relating to a Partnership or
Subsidiary tax return or any tax election.
(b) The Tax Matters Partner shall cause all federal,
state, local and other tax returns and reports (including amended
returns) required to be filed by the Partnership or any Subsidiary
thereof to be prepared and timely filed with the appropriate
authorities and shall cause all income or franchise tax returns or
reports required to be filed by the Partnership or any Subsidiary
thereof to be sent to each Partner for review at least fifteen
(15) Business Days prior to filing. Unless otherwise determined by
the Management Committee, all such income or franchise tax
returns of the Partnership shall be prepared by the Accountants.
The cost of preparation of any returns by the Accountants or other
outside preparers shall be borne by the Partnership or the
applicable Subsidiary, as the case may be. In the event of a
Transfer of all or part of an Interest, the Tax Matters Partner shall
at the request of the transferee cause the Partnership to
<PAGE> 118
elect, pursuant to Section 754 of the Code, to adjust the basis of the
Partnership's property (and the Partnership shall cause the tax matters
partner of any Subsidiary to make a corresponding Section 754 election
with respect to such Subsidiary's property); provided, however, that
such transferee shall reimburse the Partnership and any Subsidiary
promptly for all costs associated with such basis adjustment,
including bookkeeping, appraisal and other similar costs. Except as
otherwise expressly provided herein, all other elections required or
permitted to be made by the Partnership or any Subsidiary under the
Code (or applicable state or local tax law) shall be made in such
manner as may be determined by the Management Committee to be in the
best interests of the Partners as a group.
(c) The Tax Matters Partner shall cause to be provided
to each Partner as soon as possible after the close of each Fiscal
Year (and, in any event, no later than one hundred thirty-five
(135) days after the end of each Fiscal Year), a schedule setting
forth such Partner's distributive share of the Partnership's income,
gain, loss, deduction and credit as determined for federal income tax
purposes and any other information relating to the Partnership that
is reasonably required by such Partner to prepare its own federal,
state, local and other tax returns. At any time after such schedule
and information have been provided, upon at least two (2) Business
Days' notice from a Partner, the Tax Matters Partner shall also
provide each Partner with a reasonable opportunity during ordinary
business hours to review and make copies of all work papers related
to such schedule and information or to any return prepared under
paragraph (b) above. The Tax Matters Partner shall also cause to be
provided to each Partner, at the time that the quarterly financial
statements are required to be delivered pursuant to
Section 11.2(b)(ii) above, an estimate of each Partner's share of all
items of income, gain, loss, deduction and credit of the Partnership
for the calendar quarter just completed and for the Fiscal Year to
date for federal income tax purposes.
11.4 Proprietary Information.
Notwithstanding anything to the contrary in this Section 11,
an Exclusive Limited Partner shall only have access to such
information regarding the Partnership as is required by applicable
law and shall not have access for such time as the Management
Committee deems reasonable to such information relating to the
Partnership's business which the Management Committee reasonably
believes to be in the nature of trade secrets or other information
the disclosure of which the Management Committee in good faith
believes is not in the best interest of the Partnership or could
damage the Partnership or its business or which the Partnership is
required by law or by agreement with a third party to keep
confidential.
<PAGE> 119
12 . ADVERSE ACT
12.1 Remedies.
(a) If an Adverse Act has occurred with respect to any
Partner, (x) in the case of an Adverse Act specified in clause
(vii) of the definition of such term in Section 1.10, any General
Partner may elect or (y) in the case of any other Adverse Act, the
Management Committee (with the Representatives of the affected
Partner abstaining) may elect:
(i) to cause the Partnership to commence the
procedures specified in Section 12.2 for the purchase
of the Adverse Partner's Interest (and such Adverse
Partner's Preferred Interest, if applicable); or
(ii) to cause the Partnership to seek to
enjoin such Adverse Act or to obtain specific
performance of the Adverse Partner's obligations or
Damages (as defined and subject to the limitations
specified below) in respect of such Adverse Act.
Notwithstanding anything to the contrary contained in this Section
12, (x) none of the remedies specified above (nor any other provision
of this Section 12) shall apply to an Adverse Act specified in clause
(vi) of the definition of such term in Section 1.10, (y) the remedies
specified in clause (ii) shall not be available to the Partners with
respect to an Adverse Act specified in clause (vii) of such
definition unless the circumstances under which such event arose also
constituted a breach by the Adverse Partner of the covenant contained
in Section 9.6 of this Agreement, and (z) the remedy specified in
clause (i) above and the right to seek Damages under clause
(ii) above may not be pursued and Section 12.1(b) will not apply to
an Adverse Act specified in clause (iii) of the definition of such
term until such time as there is a Final Determination that the
Partner's actions or failure to act constituted an Adverse Act, if
the affected Partner timely delivered a Contest Notice.
In the event of an Adverse Act specified in any clause of the
definition of such term in Section 1.10 other than clause (vii),
the vote of the Management Committee required to elect to exercise a
remedy specified in clause (i) or (ii) of the first sentence of this
Section 12.1(a) shall be the Required Majority Vote of
Representatives of the Partners that are not actual or alleged
Adverse Partners (the "Non-Adverse Partners"), provided that in the
event more than one (1) Partner is alleged to be an Adverse Partner,
such vote shall be taken separately with respect to each alleged
Adverse Partner excluding from such vote only the Partner(s) that is
alleged to be an Adverse Partner as a result of the specific facts or
circumstances with respect to which such vote is being taken. The
election to pursue a remedy specified in clause (i) or (ii) of the
first sentence of this Section 12.1(a) with respect to an Adverse
Act for which such remedy is available may be exercised by
notice given to the Adverse Partner (x) in the
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case of an Adverse Act specified in clause (i) or (ix) of the definition
of the term "Adverse Act" in Section 1.10, within ninety (90) days
after the occurrence of such Adverse Act or (y) in the case of any
other Adverse Act, within ninety (90) days after the Management
Committee or the Partner making such election, as the case may be,
obtains actual knowledge of the occurrence of such Adverse Act,
including, if applicable, that any cure period has expired; provided that,
if an election pursuant to clause (ii) of the first sentence of this Section
12.1(a) is made to seek an injunction, specific performance or other
equitable relief, an action seeking such relief is commenced promptly
thereafter and a final judgment in such action is rendered denying such
equitable remedy and no election was made pursuant to clause (i) of the
first sentence of this Section 12.1(a), then, by notice given within ten
(10) days after such final judgment is rendered, the Management
Committee may elect to pursue the remedy specified in clause (i) of
the first sentence of this Section 12.1(a) unless (x) prior to the
giving of such notice, the Adverse Partner has cured in full (or
caused to be cured in full) the Adverse Act in question (other than
an Adverse Act specified in clause (i) or (ix) of the definition of
such term in Section 1.10, which may only be cured with the Unanimous
Vote of, and on the terms prescribed by, the Management Committee)
and no other Adverse Act with respect to such Partner has occurred
and is continuing or (y) the final judgment denying equitable relief
specifically held that there was no Adverse Act.
The foregoing remedies shall not be deemed to be mutually
exclusive, and, subject to the requirements of this Section 12.1(a)
regarding the timing of the election of such remedies, selection or
resort to any thereof shall not preclude selection or resort to the
others. The resort to any remedy pursuant to this Section 12.1(a)
shall not for any purpose be deemed to be a waiver of any other
available remedy. Except as provided in Section 12.1(b), the failure
to elect to pursue a remedy within the time periods provided in the
preceding paragraph shall be conclusively presumed to be a waiver of
the remedies provided in this Section 12 with respect to the subject
Adverse Act.
Unless resort to such remedy has been waived as set forth in
the immediately preceding paragraph, the Partnership shall be
entitled to recover from the Adverse Partner in an appropriate
proceeding any and all damages, losses and expenses (including
reasonable attorneys' fees and disbursements) (collectively,
"Damages") suffered or incurred by the Partnership as a result of
such Adverse Act; provided that the Partnership shall not have or
assert any claim against the Adverse Partner for punitive Damages or
for indirect, special or consequential Damages suffered or incurred
by the Partnership as a result of an Adverse Act; and provided
further, that if an election is made pursuant to clause (i) of the
first sentence of this Section 12.1(a), the amount the Partnership
may recover in any action for Damages shall be reduced by an amount
equal to the difference, if any, between the Net
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Equity of the Adverse Partner's Interest (and its Preferred Interest, if
applicable) determined in accordance with Section 12.2(a) and the
applicable Buy-Sell Price.
(b) If the Partnership is dissolved pursuant to
Section 15.1(a) at any time as a result of a Liquidating Event that
occurs prior to a remedy having been elected pursuant to Section
12.1(a) with respect to any Adverse Partner, the time periods for
such election shall thereupon expire and the Management Committee
shall deduct from any amounts to be paid to such Adverse Partner that
amount which it reasonably estimates to be sufficient to compensate
the Non-Adverse Partners for Damages incurred by them as a result of
the Adverse Act (subject to the limitations of Section 12.1(a)) and
shall pay the same to the Non-Adverse Partners.
12.2 Adverse Act Purchase.
(a) Determination of Net Equity of Adverse Partner's
Interest. If the Management Committee or any General Partner makes an
election pursuant to Section 12.1(a)(i) to commence the purchase
procedures set forth in this Section 12.2, the Net Equity of the
Adverse Partner's Interest (and its Preferred Interest, if
applicable) shall be determined in accordance with this Section 12 as
of the last day of the calendar quarter immediately preceding the
calendar quarter in which notice of such election (the "Election
Notice") was given to the Adverse Partner, and the Adverse Partner
shall be obligated to sell to the Purchasing Partners, if any, all
but not less than all of the Adverse Partner's Interest (and
Preferred Interest, if applicable) in accordance with this Section
12.2 at a purchase price (the "Buy-Sell Price") equal to (A) in the
case of any Adverse Act (other than (1) an Adverse Act identified in
clause (i) of the definition of such term that occurs prior to the
Cut-Off Time, (2) an Adverse Act identified in clause (iv) of the
definition of such term or (3) unless such Adverse Act occurred in
connection with any breach by such Partner of its obligations under
Section 9.6, an Adverse Act identified in clause (vii) of the
definition of such term), ninety percent (90%) of the Net Equity
thereof as so determined, (B) in the case of an Adverse Act specified
in clause (iv) or, unless such Adverse Act occurred in connection
with any breach by such Partner of its obligations under Section 9.6,
clause (vii) of the definition of such term in Section 1.10, the Net
Equity thereof and (C) in the case of an Adverse Act specified in
clause (i) of the definition of such term in Section 1.10 that
occurred prior to the Cut-Off Time, the lesser of (A) ninety percent
(90%) of the Net Equity thereof as so determined or (B) eighty
percent (80%) of the remainder of (1) the sum of such Adverse
Partner's Original Capital Contribution and aggregate Additional
Capital Contributions minus (2) the cumulative distributions made to
such Partner pursuant to Section 4 ("Unreturned Capital"), with the
amount of such Unreturned Capital determined as of the date on which
the Adverse Partner's Interest (and Preferred Interest, if
applicable) is purchased. Such Election Notice shall designate
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the First Appraiser as required by Section 12.4 and the Adverse Partner
shall appoint the Second Appraiser within ten (10) Business Days of
receiving such notice designating the First Appraiser.
(b) Election to Purchase Interest of Adverse Partner.
For a period ending at 11:59 p.m. (local time at the Partnership's
principal office) on the thirtieth (30th) day following the day on
which notice of the Adverse Partner's Net Equity is given pursuant to
Section 12.3 (the "Election Period"), except as otherwise provided in
Section 12.2(b)(i), each of the Partners (other than the Adverse
Partner and any Exclusive Limited Partner) may elect, by notice to
the Adverse Partner and each other Partner (the "Purchase Notice"),
to purchase all or any portion of the Adverse Partner's Interest (and
a proportionate share of such Adverse Partner's Preferred Interest,
if applicable), which notice shall state the maximum Percentage
Interest that such Partner (a "Purchasing Partner") is willing to
purchase (each a "purchase commitment"). If the aggregate purchase
commitments made by the Purchasing Partners are equal to at least one
hundred percent (100%) of the Adverse Partner's Interest, then
subject to the following sentence, each Purchasing Partner shall be
obligated to purchase, and the Adverse Partner shall be obligated to
sell to such Purchasing Partner, that portion of the Adverse
Partner's Interest (and Preferred Interest, if applicable) that
corresponds to the ratio of the Percentage Interest of such
Purchasing Partner to the aggregate Percentage Interests of the
Purchasing Partners, provided that, if any Purchasing Partner's
purchase commitment was for an amount less than its proportionate
share of the Adverse Partner's Interest (and Preferred Interest, if
applicable) as so determined, then the portion of the Adverse
Partner's Interest (and Preferred Interest, if applicable) not so
committed to be purchased shall continue to be allocated
proportionally in the manner provided above in this sentence among
the other Purchasing Partners until each has been allocated, by such
process of apportionment, a percentage of the Adverse Partner's
Interest (and Preferred Interest, if applicable) equal to the maximum
percentage such Purchasing Partner committed to purchase or until the
Adverse Partner's entire Interest (and Preferred Interest, if
applicable) has been allocated among the Purchasing Partners. In the
event that the other Partners do not elect to purchase the entire
Interest of the Adverse Partner, the Adverse Partner shall be under
no obligation to sell any portion of its Interest (or Preferred
Interest, if applicable) to any Partner.
(i) Except as otherwise provided in Section
12.2(b)(ii), if an Adverse Partner is a Cable Partner and no
Cable Partner's Percentage Interest, when added to the
Percentage Interests of all Controlled Affiliates of such
Partner, is equal to or greater than Sprint's Percentage
Interest when added to the Percentage Interests of all
Controlled Affiliates of Sprint, then the Adverse Partner's
Interest (and Preferred Interest, if applicable) shall be
allocated first among those of the Purchasing Partners that
are Cable Partners as though Sprint were not a
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Purchasing Partner and if and to the extent that the aggregate
purchase commitments made by such Cable Partners are less
than one hundred percent (100%) of the Adverse Partner's Interest,
the balance of the Adverse Partner's Interest (and Preferred
Interest, if applicable) up to Sprint's purchase commitment
shall be allocated to Sprint.
(ii) The Adverse Partner's Interest (and Preferred
Interest, if applicable) shall be allocated among the Cable
Partners in the manner set forth in Section 12.2(b)(i) until
any Cable Partner would have a Percentage Interest, when added
to the Percentage Interests of all Controlled Affiliates of
such Partner, equal to Sprint's Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates
of Sprint, calculated in each case after giving effect to the
adjustments to the Percentage Interests to be made in
connection with the purchases of the Adverse Partner's
Interest by the Cable Partners in accordance with Section
12.2(b)(i) assuming that such purchases were made up to the
amount that would yield such result (as to each Partner, its
"Adjusted Percentage Interest"). Any portion of the Adverse
Partner's Interest (and Preferred Interest, if applicable) not
yet allocated shall continue to be allocated proportionately
among all Purchasing Partners (including Sprint, if
applicable) in the manner set forth in this Section 12.2(b)
without regard to Section 12.2(b)(i), but substituting the
Adjusted Percentage Interests of the Purchasing Partners for
the Percentage Interests that would otherwise be used to
determine such allocation until each has been allocated an
amount equal to its purchase commitment or until the Adverse
Partner's entire Interest (and Preferred Interest, if
applicable) has been allocated among the Purchasing Partners.
(c) Terms of Purchase; Closing. Unless the Purchasing
Partners and the Adverse Partner otherwise agree, the closing of the
purchase and sale of the Adverse Partner's Interest (and Preferred
Interest, if applicable), MinorCo Interest (as required by
Section 13.3(d)) and Partner Loans (as required by Section 13.3(c))
shall occur at the principal office of the Partnership at 10:00 a.m.
(local time at the place of the closing) on the first Business Day
occurring on or after the thirtieth (30th) day following the last day
of the Election Period (subject to Section 12.5). At the closing,
each Purchasing Partner shall pay to the Adverse Partner, by cash or
other immediately available funds, that portion of the purchase price
for the Adverse Partner's Interest (and Preferred Interest, if
applicable), MinorCo Interest and Partner Loans for which such
Purchasing Partner is liable (determined in the case of the MinorCo
Interest and Partner Loans in accordance with Section 13.3) and the
Adverse Partner shall deliver to each Purchasing Partner good title,
free and clear of any liens, claims, encumbrances, security interests
or options (other than those created by this Agreement and those
securing financing obtained by the Partnership), to the portion of
the Adverse Partner's Interest (and Preferred Interest, if
applicable), MinorCo Interest and Partner Loans thus purchased. Each
Purchasing Partner shall be liable to the Adverse Partner
<PAGE> 124
only for its individual portion of the purchase price for the Adverse
Partner's Interest (and Preferred Interest, if applicable), MinorCo
Interest and Partner Loans.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to
effectuate the transactions contemplated hereby, including the
Transfer of the Adverse Partner's Interest (and Preferred Interest,
if applicable), MinorCo Interest and Partner Loans to the Purchasing
Partner and the assumption by each Purchasing Partner of the Adverse
Partner's obligations with respect to the portion of the Adverse
Partner's Interest (and Preferred Interest, if applicable)
Transferred to such Purchasing Partner. The Partnership and each
Partner shall bear its own costs of such Transfer and closing,
including attorneys' fees and filing fees. The cost of determining
Net Equity shall be borne one-half by the Adverse Partner and
one-half by the Partnership and the amount borne by the Partnership
shall be treated as an expense of the Partnership for purposes of
such determination.
In the event that any Purchasing Partner shall fail to perform
its obligation to purchase hereunder on the scheduled closing date,
and no other Purchasing Partner elects to purchase the portion of the
Adverse Partner's Interest (and Preferred Interest, if applicable),
MinorCo Interest and Partner Loans thus not purchased (such election
to be made by notice given to the Adverse Partner within five (5)
Business Days thereafter), the Adverse Partner will not be obligated
to sell any portion of its Interest (or Preferred Interest, if
applicable), MinorCo Interest or Partner Loans to any Purchasing
Partner. If one or more of the other Purchasing Partners timely
elects to purchase such portion of the Adverse Partner's Interest
(and Preferred Interest, if applicable), MinorCo Interest and Partner
Loans, such Purchasing Partner(s) shall be provided an additional
fifteen (15) days from the previously scheduled closing date in which
to tender payment therefor.
12.3 Net Equity.
The "Net Equity" of a Partner's Interest (and its Preferred
Interest, if applicable), as of any day, shall be the amount that
would be distributed to such Partner in liquidation of the
Partnership pursuant to Section 15 if (i) all of the Partnership's
business and assets (including its partnership interests in NewTelco
and WirelessCo) were sold substantially as an entirety for Gross
Appraised Value, (ii) the Partnership paid its accrued, but unpaid,
liabilities and established reserves pursuant to Section 15.2 for the
payment of reasonably anticipated contingent or unknown liabilities
and (iii) the Partnership distributed the remaining proceeds to the
Partners in liquidation, all as of such day, provided that in
determining such Net Equity, no reserve for contingent or unknown
liabilities shall be taken into account if such Partner (or its
successor in interest) (other than a Partner that is an Adverse
Partner as a result of Bankruptcy) agrees to
<PAGE> 125
indemnify the Partnership and all other Partners for that portion of any such
reserve as would be treated as having been withheld pursuant to
Section 15.3 from the distribution such Partner would have received
pursuant to Section 15.2 if no such reserve were established.
The Net Equity of a Partner's Interest (and its Preferred
Interest, if applicable) shall be determined, without audit or
certification, from the books and records of the Partnership by the
Accountants. The Net Equity of a Partner's Interest (and its
Preferred Interest, if applicable) shall be determined within thirty
(30) days of the day upon which the Accountants are apprised in
writing of the Gross Appraised Value, and the amount of such Net
Equity shall be disclosed to the Partnership and each of the Partners
by written notice ("Net Equity Notice"). The Net Equity
determination of the Accountants shall be final and binding in the
absence of a showing of manifest error.
12.4 Gross Appraised Value.
"Gross Appraised Value," as of any day, means the price at
which a willing seller would sell, and a willing buyer would buy, the
business and assets of the Partnership (including the Partnership
interests in NewTelco and WirelessCo), free and clear of all liens
and encumbrances, substantially as an entirety and as a going concern
in a single arm's-length transaction for cash, without time
constraints and without being under any compulsion to buy or sell.
Each provision of this Agreement that requires a determination
of Gross Appraised Value also provides the manner and time for the
appointment of two (2) appraisers (the "First Appraiser" and the
"Second Appraiser"). If the Second Appraiser is not timely
designated, the determination of the Gross Appraised Value shall be
made by the First Appraiser. The First Appraiser, or each of the
First Appraiser and the Second Appraiser if the Second Appraiser is
timely designated, shall submit its determination of the Gross
Appraised Value to the Partnership, the Partners and the Accountants
within forty-five (45) days of the date of its selection (or the
selection of the Second Appraiser, as applicable). If there are two
(2) Appraisers and their respective determinations of the Gross
Appraised Value vary by less than ten percent (10%) of the higher
determination, the Gross Appraised Value shall be the average of the
two determinations. If such determinations vary by ten percent (10%)
or more of the higher determination, the two Appraisers shall
promptly designate a third appraiser (the "Third Appraiser").
Neither the Partnership nor any Partner shall provide, and the First
Appraiser and Second Appraiser shall be instructed not to provide,
any information to the Third Appraiser as to the determinations of
the First Appraiser and the Second Appraiser or otherwise influence
such Third Appraiser's determination in any way. The Third Appraiser
shall submit its determination of the Gross Appraised Value to the
Partnership, the Partners and the Accountants within forty-five (45)
days of the date of its selection. The Gross
<PAGE> 126
Appraised Value shall be equal to the average of the two closest of the
three determinations, provided that, if the difference between the highest
and middle determinations is no more than one hundred and five
percent (105%) and no less than ninety-five percent (95%) of the
difference between the middle and lowest determinations, then the
Gross Appraised Value shall be equal to the middle determination.
The determination of the Gross Appraised Value in accordance with the
foregoing procedure shall be final and binding on the Partnership and
each Partner. If any Appraiser is only able to provide a range in
which Gross Appraised Value would exist, the average of the highest
and lowest value in such range shall be deemed to be such Appraiser's
determination of the Gross Appraised Value. Each Appraiser selected
pursuant to the provisions of this Section 12.4 shall be an
investment banking firm or other qualified Person with prior
experience in appraising businesses comparable to the business of the
Partnership and that is not an Interested Person with respect to any
Partner.
12.5 Extension of Time.
If any Transfer of a Partner's Interest or Preferred Interest
in accordance with this Section 12 or Sections 5.1(l)(ii), 13 or 15.7
requires the consent, approval, waiver, or authorization of any
government department, board, bureau, commission, agency or
instrumentality as a condition to the lawful and valid Transfer of
such Partner's Interest or Preferred Interest to the proposed
transferee thereof, then each of the time periods provided in this
Section 12 or Sections 5.1(l)(ii), 13 or 15.7, as applicable, for the
closing of such Transfer shall be suspended for the period of time
during which any such consent, approval, waiver, or authorization is
being diligently pursued; provided, however, that in no event shall
the suspension of any time period pursuant to this Section 12.5
extend for more than three hundred sixty-five (365) days other than
in the case of a purchase of an Adverse Partner's Interest (and
Preferred Interest, if applicable). Each Partner agrees to use its
diligent efforts to obtain, or to assist the affected Partner or the
Management Committee in obtaining, any such consent, approval,
waiver, or authorization and shall cooperate and use its diligent
efforts to respond as promptly as practicable to all inquiries
received by it, by the affected Partner or by the Management
Committee from any government department, board, bureau, commission,
agency or instrumentality for initial or additional information or
documentation in connection therewith.
13 . DISPOSITIONS OF INTERESTS
13.1 Restriction on Dispositions.
Except as otherwise permitted by this Agreement, no Partner
shall Dispose of all or any portion of its Interest or Preferred
Interest.
<PAGE> 127
13.2 Permitted Transfers.
Subject to the conditions and restrictions set forth in
Section 13.3, a Partner may at any time Transfer all or any portion
of its Interest or Preferred Interest (a) to any Controlled Affiliate
of such Partner, (b) in connection with a Permitted Transaction
involving such Partner, (c) to the administrator or trustee of such
Partner to whom such Interest or Preferred Interest is Transferred in
an Involuntary Bankruptcy, (d) pursuant to and in compliance with
Section 5.1(l)(ii), 6.4(f), 12.2, 13.4, 13.5, 13.6 or 15.7 or
(e) with the prior written consent of the other Partners (each a
"Permitted Transfer").
After any Permitted Transfer, the Transferred Interest or
Preferred Interest shall continue to be subject to all the provisions
of this Agreement, including the provisions of this Section 13 with
respect to the Disposition of Interests and Preferred Interests.
Except in the case of a Transfer of a Partner's entire Interest (and
Preferred Interest, if applicable) made in compliance herewith, no
Partner shall withdraw from the Partnership, except upon the
Unanimous Vote of the Management Committee. The withdrawal of a
Partner, whether or not permitted, shall not relieve the withdrawing
Partner of its obligations under Section 5.4 or 6.7 and shall not
relieve such Partner or any of its Affiliates of its obligations
under, or result in a termination of or otherwise affect, any
agreement between the Partnership and such Partner or Affiliate then
in effect, except to the extent provided therein.
13.3 Conditions to Permitted Transfers.
A Transfer shall not be treated as a Permitted Transfer unless
and until the following conditions are satisfied:
(a) Except in the case of a Transfer involuntarily by
operation of law, the transferor and transferee shall execute and
deliver to the Partnership such documents as may be necessary or
appropriate in the opinion of counsel to the Partnership to effect
such Transfer. In the case of a Transfer of an Interest or Preferred
Interest involuntarily by operation of law, the Transfer shall be
confirmed by presentation to the Partnership of legal evidence of
such Transfer, in form and substance satisfactory to counsel to the
Partnership. In all cases, the Partnership shall be reimbursed by
the transferor and/or transferee for all costs and expenses that it
reasonably incurs in connection with such Transfer (including
reasonable attorneys' fees and expenses, but excluding the portion of
the costs of determining Net Equity that are to be borne by the
Partnership as provided in Section 12.2(b));
(b) Except in the case of a Transfer involuntarily by
operation of law, the transferee of an Interest or Preferred Interest
(other than, with respect to clauses (A) and (B) below, a transferee
that was a Partner prior to the Transfer) shall, by
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written instrument in form and substance reasonably satisfactory to the
Management Committee (and, in the case of clause (C) below, the
transferor Partner), (A) make representations and warranties to the
nontransferring Partners equivalent to those set forth in
Section 10.1, (B) accept and adopt the terms and provisions of this
Agreement, including this Section 13, and (C) assume the obligations
of the transferor Partner under this Agreement with respect to the
Transferred Interest or Preferred Interest, as applicable. The
transferor Partner shall be released from all such assumed
obligations except (x) as otherwise provided in Section 6 in the case
of a Transfer to a Controlled Affiliate, (y) those obligations or
liabilities of the transferor Partner arising out of a breach of this
Agreement or pursuant to Section 5.4 or 6.7 and (z) in the case of a
Transfer to any Person other than a Partner or any of its Controlled
Affiliates, those obligations or liabilities of the transferor
Partner based on events occurring, arising or maturing prior to the
date of Transfer;
(c) Except in the case of a Transfer involuntarily by
operation of law, the transferor of any Interest and its Affiliates
will be obligated to sell to the transferee, and the transferee will
be obligated to buy from the transferor and its Affiliates, a
percentage of the Partner Loans (if any) held directly or indirectly
by the transferor or an Affiliate thereof equal to the percentage of
the transferor's Interest being Transferred to the transferee. If
the transferee is a Partner or a Controlled Affiliate thereof, the
terms of such purchase will be as provided in Section 2.7. In
connection with any such purchase of Partner Loans, the transferee
shall surrender to the Partnership the promissory note or notes
evidencing such Partner Loans in exchange for the issuance by the
Partnership of a new promissory note made payable to the order of the
transferee in a principal amount equal to the outstanding balance of
such Partner Loans and otherwise having the same terms as the
promissory note surrendered therefor;
(d) Except in the case of a Transfer involuntarily by
operation of law, the transferor of an Interest will be obligated to
sell to the transferee, and the transferee will be obligated to buy
from the transferor, a portion of the MinorCo Interest owned by the
transferor representing the same percentage of the transferor's
MinorCo Interest as the percentage of the transferor's Interest being
Transferred to the transferee. Election by a Partner to purchase all
or any portion of another Partner's Interest pursuant to Section
5.1(l)(ii), 6.4(f) 12, 13.4, 13.5 or 15.7 shall also constitute an
election to purchase an equivalent portion of the transferor's
MinorCo Interest, and each purchasing Partner shall be obligated to
purchase a portion of such MinorCo Interest equal to the percentage
of the transferor's Interest such purchasing Partner is obligated to
purchase for a price equal to the "Net Equity" of the transferor's
MinorCo Interest (determined as provided in Section 12.3 as if all
references therein and in any defined term used therein to the
Partnership were deemed references to MinorCo and all references
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to Section 15 contained therein were deemed references to the
corresponding provisions of the Agreement of Limited Partnership of
MinorCo dated as of the date hereof) (except in the case of a
Transfer pursuant to Section 13.4, in which case the terms of the
Purchase Offer shall apply);
(e) Except in the case of a Transfer involuntarily by
operation of law, if required by the Management Committee, the
transferee shall deliver to the Partnership an opinion, satisfactory
in form and substance to the Management Committee, of counsel
reasonably satisfactory to the Management Committee to the effect
that the Transfer of the Interest or Preferred Interest is in
compliance with applicable state and Federal securities laws;
(f) Except in the case of a Transfer involuntarily by
operation of law, if required by the Management Committee, the
transferee (other than a transferee that was a Partner prior to the
Transfer) shall deliver to the Partnership evidence of the authority
of such Person to become a Partner and to be bound by all of the
terms and conditions of this Agreement, and the transferee and
transferor shall each execute and deliver such other instruments as
the Management Committee reasonably deems necessary or appropriate to
effect, and as a condition to, such Transfer, including amendments to
the Certificate or any other instrument filed with the State of
Delaware or any other state or governmental agency;
(g) Unless otherwise approved by the Management
Committee (with the Representatives of the transferor General Partner
abstaining), no Transfer of an Interest or Preferred Interest shall
be made except upon terms which would not, in the opinion of counsel
chosen by and mutually acceptable to the Management Committee and the
transferor Partner, result in the termination of the Partnership
within the meaning of Section 708 of the Code or cause the
application of the rules of Sections 168(g)(1)(B) and 168(h) of the
Code or similar rules to apply to the Partnership. If the immediate
Transfer of such Interest or Preferred Interest would, in the opinion
of such counsel, cause a termination within the meaning of Section
708 of the Code, then if, in the opinion of such counsel, the
following action would not precipitate such termination, the
transferor Partner shall be entitled (or required, as the case may
be) (i) immediately to Transfer only that portion of its Interest or
Preferred Interest as may, in the opinion of counsel to the
Partnership, be Transferred without causing such a termination and
(ii) to enter into an agreement to Transfer the remainder of its
Interest or Preferred Interest, in one or more Transfers, at the
earliest date or dates on which such Transfer or Transfers may be
effected without causing such termination. The purchase price for
the Interest or Preferred Interest shall be allocated between the
immediate Transfer and the deferred Transfer or Transfers pro rata on
the basis of the percentage of the aggregate Interest or Preferred
Interest being Transferred, each portion to be payable when the
respective Transfer is consummated, unless otherwise
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agreed by the parties to the Transfer. In the case of a Transfer by one
Partner to another Partner, the deferred purchase price shall be deposited
in an interest-bearing escrow account unless another method of securing
the payment thereof is agreed upon by the transferor Partner and the
transferee Partner(s). In determining whether a particular proposed
Transfer will result in a termination of the Partnership, counsel to
the Partnership shall take into account the existence of prior
written commitments to Transfer made pursuant to this Agreement and
such commitments shall always be given precedence over subsequent
proposed Transfers;
(h) The transferor or transferee shall furnish the
Partnership with the transferee's taxpayer identification number,
sufficient information to determine the transferee's initial tax
basis in the Interest or Preferred Interest Transferred, and any
other information reasonably necessary to permit the Partnership to
file all required federal and state tax returns and other legally
required information statements or returns. Without limiting the
generality of the foregoing, the Partnership shall not be required to
make any distribution otherwise provided for in this Agreement with
respect to any Transferred Interest or Preferred Interest until it
has received such information;
(i) Except in the case of a Transfer of an Interest or
Preferred Interest involuntarily by operation of law, if the
transferor is a General Partner, the transferor and transferee shall
provide the Partnership with an opinion of counsel, which opinion of
counsel shall be reasonably satisfactory to the other Partners, to
the effect that such Transfer will not cause the Partnership to
become taxable as a corporation for federal income tax purposes; and
(j) If the Parent of a transferee is not the same Person
as the Parent of the transferring Partner, then the Parent of the
transferee (other than a transferee Partner) shall execute and
deliver to the Partnership and the other Parents a Parents'
Undertaking. If a Partner ceases to be a Controlled Affiliate of its
former Parent as a result of a Permitted Transaction, then the new
Parent of such Partner shall execute and deliver a Parents'
Undertaking to the Partnership and the other Parents.
Upon completion of any Permitted Transfer and compliance with
the provisions of this Section 13.3, the transferee of the Interest
or Preferred Interest (if not already a Partner) shall be admitted as
a Partner without any further action.
13.4 Right of First Refusal.
After March 1, 2000, a Partner may Transfer all or any portion
of its Interest (the "Offered Interest") if (i) such Partner (the
"Seller") first offers to sell the Offered Interest pursuant to the
terms of this Section 13.4, and (ii) the Transfer
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of the Offered Interest to the Purchaser (as defined below) would not
cause an Adverse Act under clause (vii) of the definition thereof.
(a) Limitation on Transfers. No Transfer may be made
under this Section 13.4 unless the Seller has received a bona fide
written offer (the "Purchase Offer") from a Person (including another
Partner) who is not a Controlled Affiliate of such Partner (the
"Purchaser") to purchase the Offered Interest for a purchase price
(the "Offer Price") denominated and payable in United States dollars
at closing, which offer shall be in writing signed by the Purchaser
and shall be irrevocable for a period ending no sooner than the
Business Day following the end of the Offer Period, as hereinafter
defined.
(b) Offer Notice. Prior to accepting the Purchase
Offer, the Seller shall give to the Partnership and each other
Partner other than any Exclusive Limited Partner written notice (the
"Offer Notice") which shall include a copy of the Purchase Offer and
an offer (the "Firm Offer") to sell the Offered Interest to the other
Partners (the "Offerees") for the Offer Price, payable according to
the same terms as (or on more favorable terms than) those contained
in the Purchase Offer, provided that the Firm Offer shall be made
without regard to the requirement of any earnest money or similar
deposit required of the Purchaser prior to closing. If the Person
making the Purchase Offer is not an entity that is subject to the
periodic reporting requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the Seller shall also provide any
information concerning the ownership of the Person making the
Purchase Offer that may be reasonably requested by any other Partner,
to the extent such information is available to the Seller.
(c) Offer Period. The Firm Offer shall be irrevocable
for a period (the "Offer Period") ending at 11:59 P.M., local time at
the Partnership's principal place of business, on the sixtieth (60th)
day following the day of the Offer Notice.
(d) Acceptance of Firm Offer. At any time during the
Offer Period, any Offeree may accept the Firm Offer as to all or any
portion of the Offered Interest, by giving written notice of such
acceptance to the Seller and each other Offeree, which notice shall
indicate the maximum Percentage Interest that such Offeree is willing
to purchase (the "purchase commitment"). If the aggregate purchase
commitments made by Offerees accepting the Firm Offer ("Accepting
Offerees") are equal to at least one hundred percent (100%) of the
Offered Interest, then, except as otherwise provided in Section
13.4(d)(i), each Accepting Offeree shall be obligated to purchase,
and the Seller shall be obligated to sell to such Accepting Offeree
that portion of the Offered Interest that corresponds to the ratio of
the Percentage Interest of such Accepting Offeree to the aggregate
Percentage Interests of the Accepting Offerees, provided that if any
Accepting Offeree's purchase commitment was for an amount
less than its proportionate share of the Offered Interest as so
determined, then the portion
<PAGE> 132
of the Offered Interest not so committed to be purchased shall continue
to be allocated proportionally in the manner provided above in this
sentence among the other Accepting Offerees until each has been
allocated, by such process of apportionment, a percentage of the
Offered Interest equal to the maximum percentage such Accepting
Offeree committed to purchase or until the entire Offered Interest has
been allocated among the Accepting Offerees. If Offerees do not accept
the Firm Offer as to all of the Offered Interest during the Offer Period, the
Firm Offer shall be deemed to be rejected in its entirety.
(i) Except as otherwise provided in Section 13.4(d)(ii),
if a Seller is a Cable Partner and no Cable Partner's Percentage
Interest, when added to the Percentage Interests of all Controlled
Affiliates of such Partner, is equal to or greater than Sprint's
Percentage Interest, when added to the Percentage Interests of all
Controlled Affiliates of Sprint, then the Offered Interest shall be
allocated first among those of the Accepting Offerees that are Cable
Partners as though Sprint were not an Accepting Offeree and if and to
the extent that the aggregate purchase commitments made by such Cable
Partners are less than one hundred percent (100%) of the Offered
Interest, the balance of the Offered Interest up to Sprint's purchase
commitment shall be allocated to Sprint.
(ii) The Offered Interest shall be allocated among the
Cable Partners in the manner set forth in Section 13.4(d)(i) until any
Cable Partner would have a Percentage Interest, when added to the
Percentage Interests of all Controlled Affiliates of such Partner, that
is equal to Sprint's Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of Sprint, calculated in each
case after giving effect to the adjustments to Percentage Interests to
be made in connection with the purchase of the Offered Interest by the
Cable Partners in accordance with Section 13.4(d)(i) assuming that
such purchase was made up to the amount that would yield such result
(as to each Partner, its "Adjusted Percentage Interest"). Any portion
of the Offered Interest not yet allocated shall continue to be
allocated proportionately among all Accepting Offerees (including
Sprint, if applicable) in the manner set forth in this Section 13.4(d)
without regard to Section 13.4(d)(i), but substituting the Adjusted
Percentage Interests of the Offerees for the Percentage Interests that
would otherwise be used to determine such allocation, until each has
been allocated an amount equal to its purchase commitment or until the
entire Offered Interest has been allocated among the Accepting
Offerees.
(e) Closing of Purchase Pursuant to Firm Offer. If all
of the Offered Interest has been subscribed for in accordance with
the terms of Section 13.4(d), the Seller shall give notice to such
effect (the "Sale Notice") to all Offerees within five days after the
end of the Offer Period. Unless the Accepting Offerees and the
Seller otherwise agree, the closing of any purchase pursuant to this
Section 13.4 shall be held at the principal office of the
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Seller at 10:00 a.m. (local time at the place of closing) on the first Business
Day on or after the thirtieth (30th) day following the date on which
the Sale Notice is given (subject to Section 12.5). At the closing,
each Accepting Offeree shall pay to the Seller, by cash or other
immediately available funds, that portion of the purchase price for
the Offered Interest, MinorCo Interest and Partner Loans of the
Seller for which such Accepting Offeree is liable, and the Seller
shall deliver to each Accepting Offeree good title, free and clear of
any liens, claims, encumbrances, security interests or options (other
than those created by this Agreement and those securing financing
obtained by the Partnership), to the portion of the Offered Interest,
MinorCo Interest and Partner Loans thus purchased. Each Accepting
Offeree shall be liable to the Seller only for its individual portion
of the purchase price for the Offered Interest, MinorCo Interest and
Partner Loans.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to
effectuate the transactions contemplated hereby, including the
Transfer of the Offered Interest, MinorCo Interest and Partner Loans
of the Seller to the Accepting Offerees and the assumption by each
Accepting Offeree of the Seller's obligations with respect to the
portion of the Seller's Interest and MinorCo Interest Transferred to
such Accepting Offerees. Each Partner and the Partnership shall bear
its own costs of such Transfer and closing, including attorneys' fees
and filing fees.
(f) Sale Pursuant to Purchase Offer If Firm Offer
Rejected. If the Firm Offer is not accepted in the manner
hereinabove provided, or the Accepting Offerees fail to close the
purchase on the closing date, then in either such event, but subject
to the last sentence of this Section 13.4(f) and subject to Section
13.3, the Seller shall be free for the period described below (the
"Free to Sell Period") to sell the Offered Interest to the Purchaser
upon terms and conditions that are the same as, or more favorable to
the Seller than, those contained in the Purchase Offer (including at
the same or greater price). The Free to Sell Period shall be the
applicable of (i) if the Firm Offer is not accepted, sixty (60) days
after the last day of the Offer Period (subject to Section 12.5) or
(ii) if the Firm Offer is accepted but the purchase is not closed,
sixty (60) days (subject to Section 12.5) after the scheduled closing
date, provided that if the last sentence of this Section 13.4(f)
becomes applicable, then such sixty (60) day period shall be measured
from the fifth (5th) Business Day after the previously scheduled
closing date or, if applicable, from the subsequently scheduled
closing date contemplated by such sentence (assuming the required
purchase elections are made). If the Offered Interest is not so sold
within the Free to Sell Period, the Seller's right to Transfer its
Interest shall again be subject to the foregoing restrictions.
Notwithstanding the foregoing, if more than one Offeree elected to
purchase the Offered Interest and at least one Accepting Offeree
tendered its proportionate share of the purchase price therefor at
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the closing but any other Accepting Offeree failed to make such
tender, then any tendering Accepting Offeree may elect, by notice
given to the Seller within five (5) Business Days thereafter, to
purchase the portion of the Offered Interest for which payment was
not tendered (provided that, after giving effect to such election,
the entire Offered Interest is being purchased) and shall be provided
an additional fifteen (15) days from the previously scheduled closing
date in which to tender payment therefor.
(g) Restrictions on Notice. No notice initiating the
procedures contemplated by this Section 13.4 may be given by any
Partner while any notice, purchase or Transfer is pending under
Section 12 or this Section 13.4 or after a Liquidating Event has
occurred. No notice initiating the procedures contemplated by this
Section 13.4 may be given by an Adverse Partner nor any Delinquent
Partner prior to the applicable Cure Date unless such Partner has
cured the underlying Payment Default, and no Seller shall be required
to offer any portion of its Interest to an Adverse Partner during the
period that the Partnership is pursuing any remedy specified in
Section 12.1 with respect to such Adverse Partner. No Partner may
accept a Purchase Offer during any period that, as provided above,
such Partner may not give the notice initiating the procedures
contemplated by this Section 13.4 or thereafter until it has given
such notice and otherwise complied with the provisions of this
Section 13.4.
13.5 Tagalong Rights.
(a) Direct Transfers. In the event that (i) a Partner
proposes to Transfer its Interest (as part of a single transaction or
any series of related transactions) to any Person other than a
Controlled Affiliate of such Partner after March 1, 2000, and such
Transfer would cause the proposed transferee (a "Tagalong Purchaser")
and its Controlled Affiliates to own more than fifty-five percent
(55%) of the Percentage Interests (a "Tagalong Transaction") and
(ii) the Firm Offer is not accepted in the manner provided in Section
13.4, the Tagalong Transaction shall not be permitted hereunder
unless the Tagalong Purchaser offers to purchase the entire Interest
of any other Partner that desires to sell its Interest to the
Tagalong Purchaser at the same price per each one percent (1%)
Percentage Interest and on the same terms and conditions as the
Tagalong Purchaser has offered to the Partner proposing to make such
Transfer (the "Transferring Partner"). If such Transfer occurs as
part of a series of related transactions, the price and terms shall
be the price and terms most favorable to the Transferring Partner for
which any portion of the Interest of the Transferring Partner is
Transferred as part of such series of transactions. Prior to
effecting any Tagalong Transaction, the Transferring Partner shall
deliver to each other Partner a binding, irrevocable offer (the
"Tagalong Offer") by the Tagalong Purchaser to purchase the entire
Interest of the other Partners at the same price per each one percent
(1%) Percentage Interest and on the same terms and conditions as the
Tagalong Purchaser has offered to the Transferring Partner
<PAGE> 135
(the "Tagalong Notice"). The "Tagalong Offer" shall be irrevocable for a
period (the "Tagalong Period") ending at 11:59 p.m., local time at
the Partnership's principal place of business, (x) with respect to a
Tagalong Purchaser that is an existing Partner or a Controlled
Affiliate of an existing Partner, on the one hundred eightieth
(180th) day following the date of the Tagalong Notice and (y) with
respect to any other Tagalong Purchaser, on the first anniversary of
the date of the Tagalong Notice. At any time during the Tagalong
Period, any Partner may accept the Tagalong Offer as to the entire
amount of its Interest by giving written notice of such acceptance to
the Tagalong Purchaser.
(b) Indirect Transfers. Within five (5) days of the
Parent of any Partner (such Partner, a "Controlling Partner")
acquiring, indirectly, Interests in the Partnership (other than
through such Controlling Partner's acquisition of additional
Interests), causing such Parent to own, directly and indirectly
through its Controlled Affiliates, more than fifty-five percent (55%)
of the Percentage Interests, such Controlling Partner shall give to
each other Partner written notice of such acquisition (a "Control
Notice"), which shall include an offer (the "Control Offer") by the
Controlling Partner to purchase the entire Interest of each other
Partner at a price equal to the Net Equity thereof (as determined
pursuant to Section 12.3) and shall designate a First Appraiser (as
required by Section 12.4). The Representatives of the other General
Partners shall by Required Majority Vote pursuant to Section 9.7
appoint the Second Appraiser within ten (10) Business Days following
the date the Control Notice was given. The Control Offer shall be
irrevocable for a period (the "Control Offer Period") ending at 11:59
p.m., local time at the Partnership's principal place of business, on
the one hundred eightieth (180th) day following the date of the Net
Equity Notice. At any time during the Control Offer Period, any
Partner may accept the Control Offer as to the entire amount of its
Interest by giving written notice of such acceptance to the
Controlling Partner. The costs of determining the Net Equity shall
be borne one-half by the Controlling Partner and one-half by the
Partners that accept the Control Offer (pro rata based on their
respective Percentage Interests) or, if no Partner accepts the
Control Offer, then such costs shall be borne entirely by the
Partnership.
(c) Limitations on Acceptance of Offers. No Adverse
Partner may accept a Tagalong Offer or a Control Offer during any
period that an election may be made to pursue the remedies specified
in 12.1(a) against such Partner and, if an election pursuant to
clause (i) of the first sentence thereof to purchase the Adverse
Partner's Interest is made, pending the closing of the purchase
thereof, unless, in any such case, such Adverse Partner agrees that
the purchase price for its Interest under this Section 13.5 will not
be greater than the price at which its Interest could then be
purchased under Section 12.
<PAGE> 136
(d) Closing Matters. Unless the Tagalong Purchaser or
the Controlling Partner, as the case may be, on the one hand, and the
Partners accepting the Tagalong Offer or the Control Offer, as the
case may be, on the other hand, otherwise agree, the closing of the
purchase and sale of Interests pursuant to this Section 13.5 shall
occur at the principal office of the Partnership at 10:00 a.m. (local
time at the place of the closing) on the first Business Day occurring
on or after the sixtieth (60th) day following the expiration of the
Tagalong Period or the Control Offer Period, as applicable, subject
to Section 12.5. At the closing, the Tagalong Purchaser or
Controlling Partner shall pay to the Partners who have accepted the
applicable offer, by cash or other immediately available funds, the
purchase price for the Interests, MinorCo Interests and Partner Loans
being Transferred, and the Partners selling their Interests, MinorCo
Interests and Partner Loans shall deliver to the Tagalong Purchaser
or Controlling Partner, as applicable, good title, free and clear of
any liens, claims, encumbrances, security interest or options (other
than those created by this Agreement and those securing financing
obtained by the Partnership), to the Interest, MinorCo Interest and
Partner Loans thus purchased.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to
effectuate the transactions contemplated hereby, including the
Transfer of the Interests, MinorCo Interests and Partner Loans to the
Tagalong Purchaser or Controlling Partner, as applicable, and the
assumption by the Tagalong Purchaser or Controlling Partner, as
applicable, of the obligations with respect to the Interests and
MinorCo Interests so Transferred. Each Partner and the Partnership
shall bear its own costs of such Transfer and closing, including
attorneys' fees and filing fees.
13.6 Partner Put Rights.
(a) Determination of Net Equity of Partners' Interests.
If the Initial Business Plan has not been agreed upon by the Partners
by the Determination Date, any Partner may cause the Net Equity of
each Partner's Interest to be determined as of the Determination Date
in accordance with Section 12.3 by giving notice to the Management
Committee and each other Partner of its desire to have Net Equity so
determined. In such event, the initiating Partner shall appoint the
First Appraiser and the Representatives of the other Partners shall
appoint the Second Appraiser by Required Majority Vote pursuant to
Section 9.7.
(b) Put Procedure.
(i) Within thirty (30) days of delivery of the Net
Equity Notice, any Partner may elect to put its entire
Interest to all other Partners not electing to put their
Interests pursuant to this Section 13.6(b) by giving
written notice of its election
<PAGE> 137
(a "Put Notice") to each other Partner and the Management
Committee; provided that a Put Notice may
not be given after the Initial Business Plan has been adopted
by a Unanimous Partner Vote.
(ii) Within fifteen (15) days of the expiration of
the deadline for delivering a Put Notice pursuant to Section
13.6(b)(i), each Partner who did not deliver a Put Notice
pursuant to Section 13.6(b)(i) may elect to put its entire
Interest to all other Partners who do not elect to put their
Interests pursuant to this Section 13.6(b) by delivering a Put
Notice to each other Partner and the Management Committee.
(iii) The procedure set forth in Section 13.6(b)(ii)
shall be repeated until either (A) all Partners have delivered
a Put Notice, in which case a Liquidating Event will occur
pursuant to Section 15.1(a)(iv), or (B) a period during which
one or more Partners may deliver a Put Notice expires without
any Partner delivering a Put Notice, in which case each
Partner that has not delivered a Put Notice will be obligated
to purchase the Interest of each Partner that has delivered a
Put Notice pursuant to the procedures set forth in Section
13.6(c). An election by a Partner to put its Interest by
delivery of a Put Notice is binding and irrevocable.
(c) Purchase of Put Interests.
(i) Except as otherwise provided in Section
13.6(c)(ii), each General Partner not electing to put its
Interest pursuant to Section 13.6(b) (a "Buying Partner")
shall purchase a pro rata share (based on the relative
Percentage Interests of the Buying Partners) of the aggregate
Interests of the Partners that delivered Put Notices pursuant
to Section 13.6(b) (the "Selling Partners"). The purchase
price of each Selling Partner's Interest purchased pursuant to
this Section 13.6(c) shall be equal to the lesser of (i) the
Net Equity of such Interest or (ii) the sum of the Agreed
Values of the Original Capital Contribution, Additional
Capital Contributions and (if applicable) License Contribution
made by the Selling Partner.
(ii) Except as otherwise provided in Section
13.6(c)(iii), if any Selling Partner is a Cable Partner,
Sprint is a Buying Partner, and no Cable Partner that is a
Buying Partner has a Percentage Interest that, when added to
the Percentage Interests of all Controlled Affiliates of such
Partner, is equal to or greater than Sprint's Percentage
Interest, when added to the Percentage Interests of all
Controlled Affiliates of Sprint, then each Cable Partner that
is a Buying Partner (a "Cable Buying Partner") may elect by
written notice to all other Partners to purchase all or any
portion of the Selling Partners' Interests that would, without
regard to this Section 13.6(c)(ii), have been purchased by
Sprint (the "Sprint Obligation"), which notice shall state the
maximum share of the Sprint Obligation that such Cable Buying
Partner is willing to purchase (each an "Additional Purchase
Commitment"). If the aggregate Additional Purchase
Commitments are equal to at least one hundred percent (100%) of
<PAGE> 138
the Sprint Obligation, each Cable Buying Partner shall,
except as otherwise provided in Section 13.6(c)(iii), be
obligated to purchase that portion of the Sprint Obligation
that corresponds to the ratio of the Percentage Interest of
such Cable Buying Partner to the aggregate Percentage
Interests of the Cable Buying Partners, provided that, if any
Cable Buying Partner's Additional Purchase Commitment was for
an amount less than its proportionate share of the Sprint
Obligation as so determined, then the portion of the Sprint
Obligation not so committed to be purchased shall continue to
be allocated proportionally in the manner provided above in
this sentence among the other Cable Buying Partners until each
has been allocated, by such process of apportionment, a
percentage of the Sprint Obligation equal to the maximum
percentage such Cable Buying Partner committed to purchase or
until the entire Sprint Obligation has been allocated among
the Cable Buying Partners. If and to the extent that the
aggregate amount of the Additional Purchase Commitments are
less than one hundred percent (100%) of the Sprint Obligation,
the balance of the Sprint Obligation shall be allocated to
Sprint.
(iii) The Sprint Obligation shall be allocated among
the Cable Buying Partners in the manner set forth in Section
13.6(c)(ii), if applicable, until any Cable Buying Partner
would have a Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of such Partner, that
is equal to Sprint's Percentage Interest, when added to the
Percentage Interests of all Controlled Affiliates of Sprint,
calculated in each case after giving effect to the adjustments
to the Percentage Interests to be made in connection with the
purchases of the Selling Partners' Interests in accordance
with the foregoing provisions of this Section 13.6(c) assuming
that the purchases to be made pursuant to the Sprint
Obligation by the Cable Buying Partners and Sprint were made
up to the aggregate amount that would yield such result (as to
each Partner, its "Adjusted Percentage Interest"). Any
portion of the Sprint Obligation that would not be allocated
to the Cable Buying Partners in accordance with the preceding
sentence shall be allocated proportionately among all Buying
Partners (including Sprint, if applicable) in the manner set
forth in Section 13.6(c)(i) without regard to Section
13.6(c)(ii), but substituting the Adjusted Percentage
Interests of the Buying Partners for the Percentage Interests
that would otherwise be used to determine such allocation
until the entire amount of the Sprint Obligation has been
allocated among the Buying Partners.
(d) Terms of Purchase; Closing. Unless the Buying
Partners and the Selling Partners otherwise agree, the closing of the
purchase and sale of each Selling Partner's Interest, MinorCo
Interest and Partner Loans shall occur at the principal office of the
Partnership at 10:00 a.m. (local time at the place of the closing) on
the first Business Day occurring on or after the ninetieth (90th) day
following the date of the final Put Notice (subject to Section 12.5)
or such earlier date as the Buying and Selling Partners may agree.
At the closing, each Buying Partner
<PAGE> 139
shall pay to each Selling Partner, by cash or other immediately available
funds, that portion of the purchase price of such Selling Partner's Interest,
MinorCo Interest and Partner Loans for which such Buying Partner is liable,
and each Selling Partner shall deliver to each Buying Partner good
title, free and clear of any liens, claims, encumbrances, security
interests or options (other than those created by this Agreement and
those securing financing obtained by the Partnership), to the portion
of such Selling Partner's Interest, MinorCo Interest and Partner
Loans thus purchased. Each Buying Partner shall be liable to such
Selling Partner only for its individual portion of the purchase price
for such Selling Partner's Interest, MinorCo Interest and Partner
Loans.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to
effectuate the transactions contemplated hereby, including the
Transfer of the Interest, MinorCo Interest and Partner Loans of the
Selling Partners to the Buying Partners and the assumption by such
Buying Partner of each Selling Partner's obligations with respect to
the portion of such Selling Partner's Interest and MinorCo Interest
Transferred to such Buying Partner. Each Partner and the Partnership
shall bear its own costs of such Transfer and closing, including
attorneys' fees and filing fees. The costs of determining Net Equity
shall be borne by the Partnership, if no Partner or all Partners
deliver a Put Notice, and otherwise one-half by the Selling Partners
and one-half by the Buying Partners (in each case pro rata among the
members of each group based on their respective Percentage
Interests).
13.7 Put/Call of Preferred Interests.
The Partnership shall have the right to redeem all or any part
of the Preferred Interests (and in the case of a partial redemption
of Preferred Interests held by more than one Person, such redemption
shall be made pro rata in accordance with the relative interests of
such holders in the aggregate Preferred Interests outstanding at the
time of such redemption, except as otherwise agreed to by the holders
of the Preferred Interests), and each holder of a Preferred Interest
shall have the right to require the Partnership to redeem all or any
part of the Preferred Interest held by such holder, at any time after
March 1, 2000, at a price equal to the sum of the outstanding balance
of (i) the Excess Value Account and (ii) the Preferred Return Account
as of the date of redemption, attributable to the portion of the
Preferred Interests being redeemed. Such right may be exercised by
the Partnership or any holder by giving notice (the "Preferred Buyout
Notice") to the other and to the Management Committee at any time
following such date, which notice shall specify the portion of the
Preferred Interests to be redeemed by the Partnership. The
Partnership's purchase of the Preferred Interests shall occur
at the principal office of the Partnership on a date designated
by the Partnership within thirty (30) days following the giving
of the Preferred Buyout Notice. At the
<PAGE> 140
closing, the Partnership shall pay to each holder, by cash or other
immediately available funds, an amount equal to the sum of the
outstanding balance of (i) the Excess Value Account and (ii) the
Preferred Return Account attributable to the portion of such holder's
Preferred Interest being redeemed, and each holder shall deliver to
the Partnership good title, free and clear of any liens, claims,
encumbrances, security interests or options, to such Preferred Interest.
Any Preferred Interest that has been redeemed by the Partnership
pursuant to this Section 13.7 shall, after such redemption, be cancelled
by the Partnership and shall not be available for reissuance.
13.8 Prohibited Dispositions.
Any purported Disposition of all or any part of an Interest or
Preferred Interest that is not a Permitted Transfer shall be null and
void and of no force or effect whatever; provided that, if the
Partnership is required to recognize a Disposition that is not a
Permitted Transfer (or if the Management Committee, in its sole
discretion, elects to recognize a Disposition that is not a Permitted
Transfer), the Interest or Preferred Interest Disposed of shall be
strictly limited to the transferor's rights to allocations and
distributions as provided by this Agreement with respect to the
Transferred Interest or Preferred Interest, which allocations and
distributions may be applied (without limiting any other legal or
equitable rights of the Partnership) to satisfy any debts,
obligations, or liabilities for damages that the transferor or
transferee of such Interest or Preferred Interest may have to the
Partnership.
13.9 Representations Regarding Transfers.
Each Partner hereby represents and warrants to the Partnership
and the other Partners that such Partner's acquisition of Interests
or Preferred Interests hereunder is made as principal for such
Partner's own account and not for resale or distribution of such
Interests or Preferred Interests.
13.10 Distributions and Allocations in Respect of
Transferred Interests.
If any Interest or Preferred Interest is Transferred during
any Fiscal Year in compliance with the provisions of this Section 13,
Profits, Losses, each item thereof, and all other items attributable
to the Transferred Interest or Preferred Interest for such Fiscal
Year shall be divided and allocated between the transferor and the
transferee by taking into account, with respect to a Transferred
Interest, their varying Percentage Interests and, with respect to a
Transferred Preferred Interest, their varying interests in the
aggregate Preferred Interests, during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and
selected by the Management Committee. All distributions on or before
the date of such Transfer shall be made to the transferor, and all
distributions thereafter shall be made
<PAGE> 141
to the transferee. Solely for purposes of making such allocations and
distributions, the Partnership shall recognize such Transfer not later than
the end of the calendar month during which it is given notice of such
Transfer, provided that, if the Partnership is given notice of a Transfer at
least ten (10) Business Days prior to the Transfer, the Partnership
shall recognize such Transfer as of the date of such Transfer, and
provided further that if the Partnership does not receive a notice
stating the date such Interest or Preferred Interest was Transferred
and such other information as the Management Committee may reasonably
require within thirty (30) days after the end of the Fiscal Year
during which the Transfer occurs, then all such items shall be
allocated, and all distributions shall be made, to the Person who,
according to the books and records of the Partnership, was the owner
of the Interest or Preferred Interest on the last day of such Fiscal
Year. Neither the Partnership nor the Management Committee shall
incur any liability for making allocations and distributions in
accordance with the provisions of this Section 13.9, whether or not
the Management Committee or the Partnership has knowledge of any
Transfer of ownership of any Interest or Preferred Interest.
14 . CONVERSION OF INTERESTS
14.1 Termination of Status as General Partner.
(a) A General Partner shall cease to be a General
Partner upon the first to occur of (i) the Transfer of such Partner's
entire Interest as a Partner in a Permitted Transfer (in which event
the transferee of such Interest shall be admitted as a successor
General Partner and a Limited Partner upon compliance with
Section 13.3), (ii) the Unanimous Vote of the Management Committee to
approve a request by such General Partner to withdraw, (iii) any
Adverse Act with respect to such Partner, (iv) such Partner's failure
to satisfy the Minimum Ownership Requirement or (v) in the case of
Comcast only, the occurrence of any of the events described in
Section 6.4(f) that cause Comcast to become an Exclusive Limited
Partner. In the event a Person ceases to be a General Partner
pursuant to clauses (ii), (iii), (iv) or (v), the Interest of such
Person as a General Partner shall automatically and without any
further action by the Partners be converted into an Interest solely
as a Limited Partner, and such Partner shall thereafter be an
Exclusive Limited Partner.
(b) The Partners intend that the Partnership not
dissolve as a result of the cessation of any Person's status as a
General Partner; provided, however, that if it is determined by a
court of competent jurisdiction that the Partnership has dissolved,
the provisions of Section 15.1 shall govern.
<PAGE> 142
14.2 Restoration of Status as General Partner.
An Exclusive Limited Partner whose rights to representation on
the Management Committee have been restored as provided in Section
5.1(c) shall be restored to the status of a General Partner and its
Interest shall thereafter be deemed held in part as a General Partner
and in part as a Limited Partner as provided in Section 2.1. If
Comcast becomes an Exclusive Limited Partner pursuant to Section
6.4(f), it shall not be entitled to be restored to the status of
General Partner except as expressly provided in such Section.
15 . DISSOLUTION AND WINDING UP
15.1 Liquidating Events.
(a) In General. Subject to Section 15.1(b), the
Partnership shall dissolve and commence winding up and liquidating
upon the first to occur of any of the following ("Liquidating
Events"):
(i) The sale of all or substantially all of the
Property;
(ii) A Unanimous Vote of the Management Committee to
dissolve, wind up, and liquidate the Partnership in accordance
with Section 5.1;
(iii) The failure of the General Partners to resolve
a Deadlock Event as provided in Section 5.8(a)(iii) unless the
Management Committee determines by Required Majority Vote or
Unanimous Vote (as required by Section 5.8(a)(iii)) not to
dissolve; and
(iv) The withdrawal of a General Partner, the
assignment by a General Partner of its entire Interest or any
other event that causes a General Partner to cease to be a
general partner under the Act, provided that any such event
shall not constitute a Liquidating Event if the Partnership is
continued pursuant to this Section 15.1.
The Partners hereby agree that, notwithstanding any provision of the
Act or the Delaware Uniform Partnership Act, the Partnership shall
not dissolve prior to the occurrence of a Liquidating Event. Upon
the occurrence of any event set forth in Section 15.1(a)(iv), the
Partnership shall not be dissolved or required to be wound up if (x)
at the time of such event there is at least one remaining General
Partner and that General Partner carries on the business of the
Partnership (any such remaining General Partner being hereby
authorized to carry on the business of the Partnership), or (y)
within ninety (90) days after such event all remaining
<PAGE> 143
Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of such event, of one
or more additional General Partners.
(b) Special Rules. The events described in
Sections 15.1(a)(ii), 15.1(a)(iii) or 15.1(a)(iv) shall not
constitute Liquidating Events until such time as the Partnership is
otherwise required to dissolve, and commence winding up and
liquidating, in accordance with Section 15.7.
15.2 Winding Up.
(a) Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying
the claims of its creditors and Partners and neither the Management
Committee nor any Partner shall take any action that is inconsistent
with, or not appropriate for, the winding up of the Partnership's
business and affairs. To the extent not inconsistent with the
foregoing, this Agreement shall continue in full force and effect
until such time as the Partnership's Property has been distributed
pursuant to this Section 15.2 and the Certificate has been cancelled
in accordance with the Act. The Management Committee shall be
responsible for overseeing the winding up and dissolution of the
Partnership, shall take full account of the Partnership's liabilities
and Property, shall cause the Partnership's Property to be liquidated
as promptly as is consistent with obtaining the fair value thereof,
and shall cause the proceeds therefrom, to the extent sufficient
therefor, to be applied and distributed in the following order:
(i) First, to the payment of all of the
Partnership's debts and liabilities (other than Partner Loans) to
creditors other than the Partners and to the payment of the expenses
of liquidation;
(ii) Second, to the payment of all Partner Loans
and all of the Partnership's debts and liabilities to the
Partners in the following order and priority:
(A) first, to the payment of all debts and
liabilities owed to any Partner other than in respect of
Partner Loans;
(B) second, to the payment of all accrued and
unpaid interest on Partner Loans, such interest to be
paid to each Partner and its Affiliates (considered as a
group) pro rata in proportion to the interest owed to
each such group; and
(C) third, to the payment of the unpaid
principal amount of all Partner Loans, such principal to
be paid to each Partner and its Affiliates (considered as
a group) pro rata in proportion to the outstanding
principal owed to each such group; and
<PAGE> 144
(iii) The balance, if any, to the Partners in
accordance with their Capital Accounts, after giving effect to
all contributions, distributions, and allocations for all
periods.
(b) In the discretion of the Management Committee, a
portion of the distributions that would otherwise be made to the
Partners pursuant to this Section 15.2 may be:
(i) distributed to a trust established for the
benefit of the Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the
General Partners arising out of or in connection with the
Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the
reasonable discretion of the Management Committee in the same
proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the
Partners pursuant to Section 15.2; or
(ii) withheld to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations
owed to the Partnership, provided that such withheld amounts
shall be distributed to the Partners as soon as practicable.
Each Partner and each of its Affiliates (as to Partner Loans only)
agrees that by accepting the provisions of this Section 15.2 setting
forth the priority of the distribution of the assets of the
Partnership to be made upon its liquidation, such Partner or
Affiliate expressly waives any right which it, as a creditor of the
Partnership, might otherwise have under the Act to receive
distributions of assets pari passu with the other creditors of the
Partnership in connection with a distribution of assets of the
Partnership in satisfaction of any liability of the Partnership, and
hereby subordinates to said creditors any such right.
15.3 Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts.
In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a)
distributions shall be made pursuant to this Section 15 to the
Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (b) if any
Partner's Capital Account has any deficit balance (after giving
effect to all contributions, distributions, and allocations for all
taxable years, including the year during which such liquidation
occurs), such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance
to zero in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(3);
provided, however, that the obligation of an Exclusive Limited Partner
to contribute capital pursuant to this sentence shall be limited to
the amount of the deficit balance, if
<PAGE> 145
any, that existed in such Exclusive Limited Partner's Capital Account
at the time it became an Exclusive Limited Partner (taking into account
for this purpose any revaluation of Partnership assets pursuant to
subparagraph (ii)(D) of the definition of Gross Asset Value made as a
result of such Partner's becoming an Exclusive Limited Partner).
15.4 Deemed Distribution and Recontribution.
Notwithstanding any other provision of this Section 15, in the
event the Partnership is liquidated within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations but no Liquidating Event has
occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's
affairs shall not be wound up. Instead, solely for federal income
tax purposes, the Partnership shall be deemed to have distributed the
Property in kind to the Partners, who shall be deemed to have assumed
and taken subject to all Partnership liabilities, all in accordance
with their respective Capital Accounts and, if any Partner's Capital
Account has a deficit balance that such Partner would be required to
restore pursuant to Section 15.3 (after giving effect to all
contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such
Partner shall contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(3). Immediately thereafter,
the Partners shall be deemed to have recontributed the Property to
the Partnership, which shall be deemed to have assumed and taken
subject to all such liabilities.
15.5 Rights of Partners.
Except as otherwise provided in this Agreement, (a) each
Partner shall look solely to the assets of the Partnership for the
return of its Capital Contributions and shall have no right or power
to demand or receive property other than cash from the Partnership,
and (b) no Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or
allocations. If, after the Partnership ceases to exist as a legal
entity, a Partner is required to make a payment to any Person on
account of any activity carried on by the Partnership, such paying
Partner shall be entitled to reimbursement from each other Partner
consistent with the manner in which the economic detriment of such
payment would have been borne had the amount been paid by the
Partnership immediately prior to its cessation.
<PAGE> 146
15.6 Notice of Dissolution.
In the event a Liquidating Event occurs or an event described
in Section 15.1(a)(iv) occurs that would, but for provisions of
Section 15.1, result in a dissolution of the Partnership, the
Management Committee shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners.
15.7 Buy/Sell Arrangements.
(a) As soon as practicable after the occurrence of an
event described in Section 15.1(a)(ii), 15.1(a)(iii) or, subject to
the proviso contained therein, Section 15.1(a)(iv), the Net Equity of
the Interests (and Preferred Interests, if applicable) shall be
determined in accordance with Section 12.3 and notice of such
determination shall be delivered to each Partner. For purposes of
such determination of Net Equity pursuant to this Section 15.7(a),
the General Partner that (together with its Controlled Affiliates)
holds the largest Voting Percentage Interest shall designate the
First Appraiser as required by Section 12.4 within thirty (30) days
after an occurrence of the applicable Liquidating Event, and the
General Partner that (together with its Controlled Affiliates) holds
the smallest Voting Percentage Interest shall appoint the Second
Appraiser within ten (10) Business Days of receiving notice of the
appointment of the First Appraiser.
(b) Prior to 5:00 p.m. (local time at the principal
office of the Partnership) on the first Business Day on or after the
thirtieth (30th) day following its receipt of notice of the
determination of Net Equity pursuant to Section 15.7(a), each General
Partner (individually or together with one or more other General
Partners) must submit sealed statements (the "Offer Statement") to
the Chief Executive Officer notifying the Chief Executive Officer in
writing either (i) that such General Partner or group of General
Partners offers to sell all of its Interest(s) (and Preferred
Interest(s), if applicable), or (ii) that such General Partner or
group of General Partners offers to buy all of the other Partners'
Interests (and Preferred Interests, if applicable). Except as
provided in Section 15.7(g), each Exclusive Limited Partner shall be
automatically deemed to have offered to sell its Interest (and
Preferred Interest, if applicable) hereunder and shall for all
purposes under this Section 15.7 be treated as a General Partner that
has offered to sell its Interest (and Preferred Interest, if
applicable). The Chief Executive Officer shall provide a copy of
each Offer Statement to each of the Partners within five (5) days
following the last day for submission of the Offer Statements.
(c) If the Offer Statements indicate that one General
Partner or group of General Partners wishes to buy and all of the
other Partners wish to sell, the Net Equity of the Interests (and
<PAGE> 147
Preferred Interests, if applicable) shall thereupon be the price at
which the Interests (and Preferred Interests, if applicable) will be
sold.
(d) If the Offer Statements indicate that all Partners
wish to sell their Interests, the Partnership shall dissolve, and
commence winding up and liquidating in accordance with Section 15.2.
(e) If the Offer Statements indicate that more than one
General Partner or group of General Partners wishes to purchase the
other Partners' Interests (and Preferred Interests, if applicable),
then the General Partners or groups of General Partners wishing to
purchase (each General Partner or group of Partners, a "Bidding
Partner") shall begin the bidding process described below and the
highest bidder (determined as the amount bid per each one percent
(1%) Percentage Interest in the Partnership) shall buy all the other
Partners' Interests (and Preferred Interests, if applicable). Each
of the Bidding Partners may make an initial offer (an "Initial
Offer") to purchase the Interests of the other Partners, which offer
may not be less than the Net Equity of the Interests to be purchased
and shall be made within fifteen (15) days of the last day for
submission of the Offer Statements. If no Bidding Partner makes an
Initial Offer by 5:00 p.m. (local time at the principal office of the
Partnership) on the last day of such fifteen (15) day period, the
Partnership shall dissolve, and commence winding up and liquidating
in accordance with Section 15.2. If only one Bidding Partner timely
makes an Initial Offer, such offer shall thereupon be the price at
which all other Partners' Interests shall be sold to such Bidding
Partner. If more than one Bidding Partner timely makes an Initial
Offer, each such Bidding Partner must respond within fifteen (15)
days of the last day of the 15-day period for submitting such Initial
Offers either by accepting the highest of such Initial Offers or
delivering a counteroffer to purchase the Interests of the other
Partners. A counteroffer must be at least one percent (1%) higher
than the prior offer of which the Bidding Partner has received
notice. The bidding process shall continue until all Bidding
Partners have either responded by accepting the highest immediate
prior offer or failed to make a timely response, in which case the
highest immediate prior offer shall be deemed accepted. An
acceptance of an offer shall, if the bidding process thereafter
continues, be deemed to be an acceptance of the highest
succeeding counteroffer. For purposes of this Section 15.7, all
offers, acceptances and counteroffers must be in writing, in a
form which is firm and binding and delivered to the Chief Executive
Officer at the principal office of the Partnership (who shall promptly
notify each other Partner of the identity of the bidder and the
amount of such bid); all offers must be responded to within fifteen
(15) days of the last day of the immediately preceding 15-day
period for submitting offers. If no response to an offer or counteroffer
is received by 5:00 p.m. (local time at the principal office of the
Partnership) on the last day of such fifteen (15) day period, the
highest immediate prior offer shall
<PAGE> 148
be deemed to be accepted. The purchase price for any Preferred
Interest required to be purchased by the Bidding Partner submitting
the highest offer pursuant to this Section 15.7(e) shall be equal to
the Net Equity of such Preferred Interest.
(f) The closing of the purchase and sale of each selling
Partner's Interest (and Preferred Interest, if applicable), MinorCo
Interest and Partner Loans shall occur at the principal office of the
Partnership at 10:00 a.m. (local time at the place of the closing) on
the first Business Day occurring on or after the thirtieth (30th) day
following the date of the final determination of the purchase price
pursuant to Section 15.7(e) (subject to Section 12.5). At the
closing, the purchasing Partner(s) shall pay to each selling Partner,
by cash or other immediately available funds, the purchase price for
such selling Partners' Interest (and Preferred Interest, if
applicable), MinorCo Interest and Partner Loans, and the selling
Partner shall deliver to the purchasing Partner(s) good title, free
and clear of any liens, claims, encumbrances, security interests or
options (other than those created by this Agreement and those
securing financing obtained by the Partnership), to the selling
Partner's Interest (and Preferred Interest, if applicable), MinorCo
Interest and Partner Loans thus purchased.
At the closing, the Partners shall execute such documents and
instruments of conveyance as may be necessary or appropriate to
effectuate the transactions contemplated hereby, including the
Transfer of the Interests (and Preferred Interests, if applicable),
MinorCo Interests and Partner Loans of the selling Partner(s) to the
purchasing Partner(s) and the assumption by each purchasing Partner
of the selling Partner's obligations with respect to the selling
Partner's Interest (and Preferred Interest, if applicable)
Transferred to the purchasing Partner(s). Each Partner shall bear
its own costs of such Transfer and closing, including attorneys' fees
and filing fees. The costs of determining Net Equity shall be borne
by the Partners (pro rata based on their respective Percentage
Interests as of the occurrence of the Liquidating Event).
(g) Solely for the purposes of this Section 15.7,
Comcast will have the same rights and obligations as a General
Partner hereunder even if it has become an Exclusive Limited Partner
under Section 6.4(f) so long as Comcast would not otherwise then be
an Exclusive Limited Partner under Section 14.1(a).
16 . MISCELLANEOUS
16.1 Notices.
Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in
writing and mailed (certified or registered mail, postage
<PAGE> 149
prepaid, return receipt requested) or sent by hand or overnight courier,
or by facsimile (with acknowledgment received), charges prepaid and
addressed as follows, or to such other address or number as such
Person may from time to time specify by notice to the Partners:
(a) If to the Partnership, to the address or number set
forth on Schedule 2.2;
(b) If to a Partner or its designated Representative(s),
to the address or number set forth in Schedule 2.2; and
(c) If to the Management Committee, to the Partnership
and to each General Partner and its designated Representative(s).
Any Person may from time to time specify a different address by
notice to the Partnership and the Partners. All notices and other
communications given to a Person in accordance with the provisions of
this Agreement shall be deemed to have been given and received (i)
four (4) Business Days after the same are sent by certified or
registered mail, postage prepaid, return receipt requested, (ii) when
delivered by hand or transmitted by facsimile (with acknowledgment
received and, in the case of a facsimile only, a copy of such notice
is sent no later than the next Business Day by a reliable overnight
courier service, with acknowledgment of receipt) or (iii) one (1)
Business Day after the same are sent by a reliable overnight courier
service, with acknowledgment of receipt.
16.2 Binding Effect.
Except as otherwise provided in this Agreement, this Agreement
shall be binding upon and inure to the benefit of the Partners and
their respective successors, transferees, and assigns.
16.3 Construction.
This Agreement shall be construed simply according to its fair
meaning and not strictly for or against any Partner.
16.4 Time.
Time is of the essence with respect to this Agreement.
16.5 Table of Contents; Headings.
The table of contents and section and other headings contained
in this Agreement are for reference purposes only and are not
intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement.
<PAGE> 150
16.6 Severability.
Every provision of this Agreement is intended to be severable.
If any term or provision hereof is illegal, invalid or unenforceable
for any reason whatsoever, that term or provision will be enforced to
the maximum extent permissible so as to effect the intent of the
Partners, and such illegality, invalidity or unenforceability shall
not affect the validity or legality of the remainder of this
Agreement. If necessary to effect the intent of the Partners, the
Partners will negotiate in good faith to amend this Agreement to
replace the unenforceable language with enforceable language which as
closely as possible reflects such intent.
16.7 Incorporation by Reference.
Every exhibit and other appendix (other than schedules)
attached to this Agreement and referred to herein is not incorporated
in this Agreement by reference unless this Agreement expressly
otherwise provides.
16.8 Further Action.
Each Partner, upon the reasonable request of the Management
Committee, agrees to perform all further acts and execute,
acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the intent and
purposes of this Agreement.
16.9 Governing Law.
The internal laws of the State of Delaware (without regard to
principles of conflict of law) shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of
the rights and duties of the Partners.
16.10 Waiver of Action for Partition; No Bill For Partnership
Accounting.
Each Partner irrevocably waives any right that it may have to
maintain any action for partition with respect to any of the
Property; provided that the foregoing shall not be construed to apply
to any action by a Partner for the enforcement of its rights under
this Agreement. Each Partner waives its right to seek a court decree
of dissolution (other than a dissolution in accordance with
Section 15) or to seek appointment of a court receiver for the
Partnership as now or hereafter permitted under applicable law. To
the fullest extent permitted by law, each Partner covenants that it
will not (except with the consent of the Management Committee) file a
bill for Partnership accounting.
<PAGE> 151
16.11 Counterpart Execution.
This Agreement may be executed in any number of counterparts
with the same effect as if all the Partners had signed the same
document. All counterparts shall be construed together and shall
constitute one agreement.
16.12 Sole and Absolute Discretion.
Except as otherwise provided in this Agreement, all actions
which the Management Committee may take and all determinations which
the Management Committee may make pursuant to this Agreement may be
taken and made at the sole and absolute discretion of the Management
Committee.
16.13 Specific Performance.
Each Partner agrees with the other Partners that the other
Partners would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific
terms and that monetary damages would not provide an adequate remedy
in such event. Accordingly, in addition to any other remedy to which
the nonbreaching Partners may be entitled, at law or in equity, the
nonbreaching Partners shall be entitled to injunctive relief to
prevent breaches of this Agreement and specifically to enforce the
terms and provisions hereof.
16.14 Entire Agreement.
The provisions of this Agreement set forth the entire
agreement and understanding between the Partners as to the subject
matter hereof and supersede all prior agreements, oral or written,
and other communications between the Partners relating to the subject
matter hereof.
16.15 Limitation on Rights of Others.
Nothing in this Agreement, whether express or implied, shall
be construed to give any Person other than the Partners any legal or
equitable right, remedy or claim under or in respect of this
Agreement.
16.16 Waivers; Remedies.
The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to
enforce such term, but any such waiver shall be effective only if in
a writing signed by the party or parties against which such waiver is
to be asserted. Except as otherwise provided herein, no failure or
delay of any Partner in exercising any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any
<PAGE> 152
abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any
other right or power.
16.17 Jurisdiction; Consent to Service of Process.
(a) Each Partner hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court sitting in the County of New
York or any Federal court of the United States of America sitting in
the Southern District of New York, and any appellate court from any
such court, in any suit, action or proceeding arising out of or
relating to the Partnership or this Agreement, or for recognition or
enforcement of any judgment, and each Partner hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit,
action or proceeding may be heard and determined in such New York
State court or, to the extent permitted by law, in such Federal
court.
(b) Each Partner hereby irrevocably and unconditionally
waives, to the fullest extent it may legally do so, any objection
which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to the
Partnership or this Agreement in any New York State court sitting in
the County of New York or any Federal court sitting in the Southern
District of New York. Each Partner hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such suit, action or proceeding in any such
court and further waives the right to object, with respect to such
suit, action or proceeding, that such court does not have
jurisdiction over such Partner.
(c) Each Partner irrevocably consents to service of
process in the manner provided for the giving of notices pursuant to
this Agreement, provided that such service shall be deemed to have
been given only when actually received by such Partner. Nothing in
this Agreement shall affect the right of a party to serve process in
any other manner permitted by law.
16.18 Waiver of Jury Trial.
Each Partner waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect
of any action, suit or proceeding arising out of or relating to the
Partnership or this Agreement.
16.19 No Right of Set-Off.
No Partner shall be entitled to offset against any of its
financial obligations to the Partnership under this Agreement, any
obligation owed to it or any of its Affiliates by any other Partner
or any of such other Partner's Affiliates.
<PAGE> 153
IN WITNESS WHEREOF, the parties have entered into this
Agreement of Limited Partnership of MajorCo, L.P. as of the date
first above set forth.
SPRINT SPECTRUM, L.P.
By: US Telecom, Inc.,
Its General Partner
By:__________________
Title:________________
TCI NETWORK SERVICES
By: TCI Network, Inc.,
Its General Partner
By:__________________
Title:________________
COMCAST TELEPHONY SERVICES
By: Comcast Telephony
Services, Inc.,
Its General Partner
By:________________
Title:_______________
THIS IS A SIGNATURE PAGE TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF MAJORCO, L.P.
<PAGE> 154
COX TELEPHONY PARTNERSHIP
By: Cox Communications Wireless, Inc.,
Its Managing General Partner
By:________________________
Title:____________________
THIS IS A SIGNATURE PAGE TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF MAJORCO, L.P.
<PAGE>
Exhibit (10)(b)
CONTINGENCY EMPLOYMENT AGREEMENT
between
SPRINT CORPORATION
and
[ ]
Amended and Restated as of February 18, 1995
<PAGE> 1
1. Term of Agreement. This Agreement shall commence
on the date hereof and shall continue in effect through
March 31, 1998; provided, however, that commencing on April
1, 1997, and each third April 1 thereafter, the term of this
Agreement shall automatically be extended for three
additional years unless, not later than April 1 of that
year, the Company shall have given notice that it does not
wish to extend this Agreement; provided, further, if "a
change in control of the Company" (as defined in Section
15(i)) shall have occurred during the original or extended
term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the
month in which such change in control occurred; provided,
further, this Agreement shall terminate on the earliest of
the date you reach age 65, the date you actually retire, or
the Agreement otherwise lapses as set forth in this
paragraph. The obligations of the Company to make payments
hereunder shall survive the expiration of the term of this
Agreement.
2. Duties during Employment. You agree that while
you are employed by Sprint Corporation (the "Company"), you
shall devote your full time and best efforts exclusively to
the business and affairs of the Company and do your utmost
to promote its interests. All references in this Agreement
to employment with the Company shall be deemed to include
employment with Sprint/United Management Company (the
"Management Company") or any other affiliate of the Company
(the "Employer Company"). Related references to the Company
or Employer Company shall be deemed to include the
Management Company or other employer affiliate of the
Company as the context requires, and such interpretation
shall not be construed to limit the obligations of the
Company under this Agreement. It is understood that you
will receive no benefits under this Agreement unless and
until there is a change in control of the Company and your
employment is terminated thereafter (other than by reason of
your death or retirement at age 65) by you for Good Reason
(as defined in Section 15(iv)) or by the Company without
Cause (as defined in Section 15(iii)).
3. Rights Accrued through Date of Termination. This
Agreement shall not reduce, impede or hinder any rights
which you accrue as a result of your performance of services
as an employee of the Employer Company. If your employment
is terminated following a change in control of the Company,
the Company shall pay you your salary through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts and benefits to
which you are entitled under the Company's disability,
retirement, insurance and all other benefit and compensation
programs then in effect in accordance with the terms of such
programs. "Date of Termination" shall mean the 30th day
after Notice of Termination (as defined in Section 11) is
given.
4. Benefit Package. Within three years following a
change in control of the Company if your employment by the
Employer Company shall be terminated (in circumstances other
than normal retirement or death) (a) by the Company other
than for Cause, or (b) by you for Good Reason, then you
shall be entitled to the following payments and benefits
(all as provided in Section 15(v)):
<PAGE> 2
(A) 35 months' salary payments at highest monthly
base salary;
(B) 3 payments based on annual short-term and long-
term incentive payments;
(C) (1) Deferred Compensation: interest rate of 3%
plus Moody's Index rate
(2) Benefits under Key Management Benefit Plan
(3) Savings Plan, Nonvested Company Contribution
(D) Retirement Benefits:
(1) 3 years' service credit based on the Company
Pension Plan
(2) Post-retirement benefits if you are age 55 or
have 10 years' service
(3) Maximum benefits under any individual Pension
Supplemental Agreements
(4) No Early Retirement Reduction based on the
Company Pension Plan
(E) Continuation of medical, dental, life insurance
and disability coverages for 35 months, or until
you are reemployed
(F) Payment of attorney fees and expenses connected
with enforcing this Agreement
(G) Payment of Outplacement fees
5. [Deleted]
6. (i) Time of Payments. The payments provided for
in Section 15(v), (A) and (B), shall be made commencing not
later than the fifth day following the Date of Termination,
provided, however, that if the amount of payments to be made
on the first payment date cannot be calculated on or before
such day, the Company shall pay to you on such day an
estimate, as calculated in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder
of such payments due on such date (together with interest at
the rate provided in Section 280G(d)(4) of the Code) as soon
as the amount thereof can be calculated but in no event
later than the sixtieth day after the Date of Termination.
(ii) Excess Payments Constitute Loan. In the
event that any estimated payment is determined to be in
excess of the amount due, such excess shall constitute a
<PAGE> 3
loan by the Company to you, payable on the 90th day after
demand by the Company (together with interest at the rate
provided in Section 280G(d)(4) of the Code).
7. Lump Sum Election. You shall have the right to
elect to have all or a portion of the payments to be made
pursuant to paragraph (A) or (B) of Section 15(v) paid in a
lump sum. If you make this election, the amount paid to you
shall equal the present value of the payments or portion
thereof, as calculated by the Company's independent auditors
using the discount rate specified in Section 280G(d)(4) of
the Code.
8. No Mitigation or Offsets. You shall not be
required to mitigate the amount of any payment by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for be reduced by any
compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company, or
otherwise, except as specifically provided in this
Agreement.
9. Successor Assumption of Agreement. The Company
will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to
obtain such assumption and agreement as of the effectiveness
of any such succession shall be a breach of this Agreement
and shall entitle you to compensation from the Company in
the same amount and on the same terms hereunder as if you
had terminated your employment for Good Reason following a
change in control of the Company, provided you give Notice
of Termination within 90 days after the effective date of
such succession. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
10. Benefits to Personal Representatives. This
Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees
and legatees. All benefits hereunder shall be subject to
your beneficiary designations in effect under the
appropriate benefit plan with reference to which you have
elected to receive benefits; such designations are
incorporated by reference as if fully set forth in this
Agreement. If you should die, all amounts payable to you
hereunder shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or, if
there is no such designee, to your estate.
11. Notice. Any purported termination of this
Agreement or of your employment by the Employer Company or
by you shall be communicated by written Notice of
Termination to the other party hereto. "Notice of
Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a
<PAGE> 4
basis for termination under the provision so indicated.
Notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the
first page of this Agreement, provided that all notice to
the Company shall be directed to the Secretary of the Company,
or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon
receipt.
12. [Deleted]
13. Resolution of Controversies. You shall be
entitled to seek specific performance of your right to be
paid to the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with
this Agreement. All other disputes, claims or controversies
arising under or in connection with this Agreement shall be
settled exclusively by binding arbitration in the greater
Kansas City area in accordance with the rules of the
American Arbitration Association then in effect; provided,
however, that three arbitrators shall be appointed, one by
the Company, one by you and the third of whom shall be
appointed by the first two arbitrators.
14. Miscellaneous.
(i) No provisions of this Agreement may be
modified, waived or discharged unless such
waiver, modification or discharge is agreed
to in writing.
(ii) No waiver by either party hereto at any time
of any breach by the other party hereto of,
or in compliance with, any condition or
provision of this Agreement to be performed
by such other party shall be deemed a waiver
of similar or dissimilar provisions or
conditions at the same or at any prior or
subsequent time.
(iii) No agreements or representations, oral
or otherwise, express or implied, with
respect to the subject matter hereof have
been made by either party which are not
expressly set forth in this Agreement.
(iv) The validity, interpretation, construction
and performance of this Agreement shall be
governed by the laws of the State of Kansas.
(v) All references to sections of the Securities
Exchange Act of 1934 ("Exchange Act") or the
Internal Revenue Code ("Code") shall be
deemed also to refer to any successor
provisions to such sections. All references
to provisions of the Company's Pension Plan
and all other Company benefit plans shall be
deemed also to refer to
<PAGE> 5
amended provisions of such plans and to
provisions of successor or substitute plans.
(vi) Any payments provided for hereunder shall be
paid net of any applicable withholding
required under federal, state or local law.
(vii) Captions are intended for reference only
and shall not constitute a part of this
Agreement.
(viii) The invalidity or unenforceability of
any provision of this Agreement shall not
affect the validity or enforceability of any
other provision of this Agreement, which
shall remain in full force and effect.
(ix) This Agreement may be executed in several
counterparts, each of which shall be deemed
to be an original but all of which together
will constitute one and the same instrument.
(x) The Company shall take every reasonable step
necessary to maximize the payments and
benefits received or to be received by you in
connection with a change in control of the
Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement
or agreement with the Company, with any
person whose actions result in a change in
control or with any person affiliated with
the Company or such person) (collectively
"Total Payments").
15. Definitions and Detailed Provisions.
(i)(a) Change in Control of the Company. For
purposes of this Agreement, a "change in control of the
Company" shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company, and other than the
Company or a corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company
representing 20% or more of the combined voting power
of the Company's then outstanding securities; or (B)
during any period of two consecutive years (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of such
period constitute the Board of Directors of the Company
(the "Board") and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction
described in clause (A) of this Subsection) whose
election by the Board or nomination for election by the
<PAGE> 6
Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof.
(i)(b) Potential Change in Control of the
Company. For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to
have occurred if (A) the Company enters into an
agreement, the consummation of which would result in
the occurrence of a change in control of the Company,
(B) any person (including the Company) publicly
announces an intention to take or to consider taking
actions which if consummated would constitute a change
in control of the Company; (C) any person, other than a
trustee or other fiduciary holding securities under an
employee benefit plan of the Company who is or becomes
the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of
the combined voting power of the Company's then
outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the
percentage so owned by such person on the date hereof;
or (D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential
change in control of the Company has occurred.
(ii) Retirement. Termination of your employment
based on "Retirement" shall mean termination in
accordance with the Company's Pension Plan or in
accordance with any retirement arrangement established
with your written consent with respect to you.
(iii) Cause. Termination by the Employer
Company of your employment for "Cause" shall mean
termination upon (A) the willful and continued failure
by you to substantially perform your duties with the
Employer Company (other than any such failure
resulting from your incapacity due to physical or
mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination
by you for Good Reason) after a written demand for
substantial performance is delivered to you, which
demand specifically identifies the manner in which the
Board believes that you have not substantially
performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act,
on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and
without reasonable belief that your action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed
to have been terminated for Cause unless and until
there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good
faith opinion of the Board you were guilty of
conduct set forth above in clauses
<PAGE> 7
(A) or (B) of the first sentence of this subsection and
specifying the particulars thereof in detail. Delivery
of such Resolution shall constitute Notice of Termination
for cause by the Company.
(iv) Good Reason. You shall be entitled to
terminate your employment for Good Reason, except that
you shall not be entitled to give Notice of Termination
during any period in which you are unable to
substantially perform your duties with the Employer
Company due to physical or mental illness. Your
continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. For purposes of
this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence of any of the
following circumstances unless such circumstances are
fully corrected prior to the Date of Termination
specified in the Notice of Termination given in respect
thereof:
(A) Change in Duties, Reporting, Status
the assignment to you of any duties inconsistent
with your status as an officer of the Company or a
substantial adverse alteration in the nature or
status of your responsibilities from those in
effect immediately prior to the change in control
of the Company or any downgrading of your position
from that in effect immediately prior to the
change in control of the Company;
(B) Reduction in Salary Base
a reduction by the Company in your annual base
salary as in effect on the date hereof or as the
same may be increased from time to time except for
across-the-board salary reductions similarly
affecting all officers of the Company and all
officers of any business entity or entities in
control of the Company;
(C) Failure to Pay You Currently
the failure by the Company or Employer Company,
without your consent, to pay to you any portion of
your current compensation within seven (7) days of
the date such compensation is due except pursuant
to an across-the-board compensation deferral
similarly affecting all officers of the Company
and all officers of any business entity or
entities in control of the Company;
(D) Relocation, Substantial Change in Travel
Obligations
<PAGE> 8
(1) the relocation of the Company's
principal executive offices to a location outside
the metropolitan area in which such offices are
located immediately prior to the change in control
of the Company; or
(2) the Company's requiring you to be
based anywhere other than the Company's principal
executive offices except for required travel on
the Company's business to an extent substantially
consistent with your present business travel
obligations; or
(3) the Company's requiring you to
travel to an extent substantially inconsistent
with your present business travel obligations;
(E) Substantial Change in Physical Working
Conditions
a substantial adverse alteration in the physical
conditions under or in which you are expected to
perform your duties other than an alteration
similarly affecting all officers of the Company
and all officers of any person in control of the
Company;
(F) Noncontinuation of Compensation Plans
the failure by the Company to continue in effect
any compensation plan in which you participate
immediately prior to the change in control of the
Company which is material to your total
compensation, including but not limited to the
Company's Short-term and Long-term Incentive Plans
or any substitute plans adopted prior to the
change in control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or
the failure by the Company to continue your
participation therein (or in such substitute or
alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits
provided and the level of your participation
relative to other participants, as existed at the
time of the change in control;
(G) Noncontinuation of Benefit Plans
the failure by the Company to continue to provide
you with benefits substantially similar to those
enjoyed by you under any of the Company's plans,
including but not limited to the Company's Pension
Plan, Stock Option Plan, Savings Plan,
Supplemental Employee Retirement Agreement, Key
Management Benefit Plan, Executive Deferred
Compensation Plan, life insurance, medical, health
and accident, or disability plans in which you
were participating at the time of the change in
control of the Company; the taking of any action
by the Company which would directly or indirectly
materially reduce any of such benefits or deprive
you of any material fringe benefit enjoyed by you
at the time of the change in control of the Company;
<PAGE> 9
or the failure by the Company to provide you with
the number of paid vacation days to which you are
entitled on the basis of years of service with the
Company in accordance with the Company's normal
vacation policy in effect at the time of the change
in control of the Company; unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to
such benefits;
(H) Non-Assumption by Successor
the failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform this Agreement, as
contemplated in Section 9 hereof; or
(I) Attempted Termination
any attempted termination of your employment which
is not effected pursuant to a Notice of
Termination satisfying the requirements of
Sections 11 and 15(iii) above; for purposes of
this Agreement, no such attempted termination
shall be effective.
(v) Benefit Package.
(A) Payments in Lieu of Salary
In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the
Company shall pay to you monthly (for a period of
35 months or until the month in which you reach 65
years of age, whichever first occurs) a monthly
payment equal to your highest monthly base salary
(including any deferred amounts) paid during the
36-month period prior to the Date of Termination.
(B) Payments in Lieu of Incentive
Compensation.
In lieu of any payments under, and notwithstanding
any provisions of the long-term and short-term
incentive plans, the Company shall pay to you in
three equal installments on the first day of the
13th, 25th and 35th months following the Date of
Termination an amount equal to the sum of (i) the
highest short-term incentive payment and (ii) the
highest long-term incentive payment received by
you during the 36-month period prior to the Date
of Termination under the long-term and short-term
incentive plans.
(C)(1) Deferred Compensation Interest Rate
For purposes of the Executive Deferred
Compensation Plan, notwithstanding any provision
to the contrary in such plan, the rate at
<PAGE> 10
which interest will be credited to your Deferred
Compensation Account A (as defined in such plan)
will be equal to the Moody's Index plus 3% (as
defined in such plan) or the maximum interest rate
allowed under such Plan if and as amended.
(C)(2) Key Management Benefit Plan Benefits
For purposes of the Key Management Benefit Plan,
even if you are not 60 years of age on the Date of
Termination, you shall be deemed to have remained
a Key Executive (as defined in such plan) until
age 60.
(C)(3) Savings Plan, Nonvested Company
Contribution
Notwithstanding anything in the Company Savings
Plan, you shall be entitled to receive the
nonvested portion of your Company Contribution
Account as of the Date of Termination.
(D) Retirement Benefits
In addition to the retirement benefits to which
you are entitled under the Company's Pension Plan
or any successor plans thereto:
(1) you will be credited with three
years of additional service at your highest
annual compensation rate during the term of
this Agreement for purposes of determining
the amount of your pension;
(2) if you are at least 55 years of age
or have 10 years of credited pension service
at the Date of Termination, you will, at the
time of your retirement, receive the life and
medical post-retirement benefits that would
be due to a retiree under the Company's
Pension Plan;
(3) for purposes of any Supplemental
Employee Retirement Agreement, if applicable,
you shall be credited as of the Date of
Termination with the maximum number of years
of service at your highest annual
compensation rate during the term of this
Agreement potentially available to you under
such agreement; and
(4) if you take early retirement, the
Company shall supplement your pension so that
you are, notwithstanding the Company's
Pension Plan early retirement provisions, not
subject to any early retirement pension
reduction.
<PAGE> 11
(E) Medical, Dental, Insurance, Disability
Insurance
For a thirty-five (35) month period after Termination,
the Company shall arrange to provide you with or
reimburse you for life, disability, medical and dental
insurance coverages substantially similar and at the
same cost to you as those which active employees at the
same grade level receive during such period, provided,
however, such coverages shall cease immediately if you
obtain subsequent employment.
(F) Attorney Fees and Expenses
The Company also shall pay to you all reasonable legal
fees and expenses incurred by you in seeking to obtain
or enforce any right or benefit provided by this
Agreement. Such payments shall be made within five (5)
days after your request for payment accompanied with
such evidence of fees and expenses incurred as the
Company reasonably may require.
(G) Outplacement Fees
The Company shall also pay to you all fees and expenses
incurred by you for the services of a recognized
outplacement firm of your selection. Such payments
shall be made within five (5) days after your request
for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may
require.
(H) Tax Reimbursement:
If the benefits provided under this Agreement, either
alone or together with other benefits you receive from
the Company, would constitute an "excess parachute
payment", as defined in Section 280G of the Code, the
Company shall pay you an additional amount such that
the net amount retained by you after payment of any
excise tax that would be imposed by Section 4999 of the
Code (Excise Tax) and any federal, state and local
income tax, FICA tax and Excise Tax payable with
respect to the payment provided for in this subsection
15(v)(H), shall be equal to the benefits provided for
under this Agreement. For the purpose of determining
the amount of the payment provided for in this
subsection, you shall be deemed to pay federal, state
and local income taxes at the highest marginal rates in
effect as of the Date of Termination and the
calculation of federal income tax shall take into
account the deduction of any state and local income
taxes.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the
enclosed copy of this letter which will then constitute our
agreement on this subject.
<PAGE> 12
Sincerely,
SPRINT CORPORATION
By____________________________
[Authorized Officer]
Agreed to this _____ day
of _____________, 199__.
______________________________
[Employee]
<PAGE> 13
Exhibit A
LUMP SUM ELECTION
I hereby elect to take the following portion of any
Severance Payments to be made to me pursuant to paragraph
(A) or (B) of Sections 4 and 15(v) of this Agreement in a
lump sum in accordance with Section 7: ______ % of payments
under paragraph (A); ______ % of payments under paragraph
(B). The remainder of such payments shall be paid pro rata
in accordance with Section 15(v)(A) or 15(v)(B),
respectively.
_______________________________
[Employee]
</TABLE>
<TABLE>
<CAPTION>
<PAGE> i
Table of Contents
<S> <C>
1. Term of Agreement p. 1
2. Duties during Employment p. 1
3. Rights Accrued through Date of
Termination; "Date of Termination" Defined p. 1
4. Benefit Package p. 1
5. Limitation of Total Payments p. 2
6. Time of Payments p. 2
7. Lump Sum Election p. 3
8. No Mitigation or Offsets p. 3
9. Successor Assumption of Agreement p. 3
10. Benefits to Personal Representatives p. 3
11. Notice p. 3
12. Valuation and Election of Benefits after
Notice or Resolution; Date of Termination p. 4
13. Resolution of Controversies p. 4
14. Miscellaneous p. 4
15. Definitions and Provisions p. 5
(i)(a) Change in Control of the Company p. 5
(b) Potential Change in Control of the Company p. 6
(ii) Retirement p. 6
(iii) Cause p. 6
(iv) Good Reason p. 7
(v) Benefit Package p. 9
Exhibit A - Lump Sum Election Form
<PAGE>
Exhibit (10)(c)
1978 STOCK OPTION PLAN
(as amended on April 27, 1982, April 23, 1985,
February 7, 1987, August 11, 1987, April 12, 1988,
December 12, 1989, April 16, 1991, August 13, 1991,
February 18, 1995 and April 18, 1995)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1978 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its Subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interest of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
All options granted pursuant to the Plan prior to April
27, 1982, and outstanding as of such date shall be
nonstatutory stock options.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 5A(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
5(A)(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall select one of its
members as its chairman, and shall hold its meetings at such
times and places as it may determine. A majority of the
Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934. The
Committee from time to time may adopt (and thereafter amend
and rescind) such rules and regulations for carrying out the
Plan and take such action in the administration of the Plan,
not inconsistent with the provisions hereof, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 800,000<FN-1> (subject to
adjustment as provided in Section 10 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set
forth. No person shall be eligible to receive an option for
a larger number of shares than is recommended for such
individual by the Committee.
Section 5A. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock; provided,
however, that fair market value in the case of Incentive
Stock Options granted prior to April 23, 1985, shall be
deemed to be the closing price of the common stock of the
Company on the New York Stock Exchange on the date the
Incentive Stock Option was granted.
Section 6. Terms and Conditions of Options.
Each option granted on or after April 27, 1982, under
the Plan shall be evidenced by a Stock Option Agreement in
such form not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option Agreement
clearly and separately identifies nonstatutory stock options
and Incentive Stock Options and that the substance of the
following terms and conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock; provided, however, that fair
market value in the case of options granted prior to April
23, 1985, was deemed to be the closing price of the common
stock of the Company on the New York Stock Exchange on the
date the option was granted.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section
8, and if applicable, Section 9) only if the optionee has
been an employee of the Company or of any subsidiary thereof
at all times during the period beginning with the date of
the granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to five (5) years for options designated
"Nonqualified" or "Nonstatutory" options. (For this
purpose, a retiree is a person who is entitled to receive
pension benefits in accordance with the United System
Employee Retirement Plan immediately upon termination of
employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 6(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 7. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least one (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 7, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 8. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 6(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's then present intention to acquire the
shares being purchased for investment and not for resale, or
(ii) the completion of any registration or other
qualification of such shares under any state or federal laws
or rulings or regulations of any government regulatory body,
which the Company shall determine to be necessary or
advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of such option was determined pursuant to Section
6(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all nonqualified options outstanding on
February 17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized to
issue restricted shares of common stock upon such exercises
of stock options, subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions. Notwithstanding any other
provisions to the contrary in the Plan, no reload option shall be
granted for shares withheld or delivered in payment of taxes
upon the lapse of restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 6(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option that continue to be restricted
shall be forfeited in the event that vesting conditions are
not satisfied, subject to the discretion of the Committee,
except in the case of death, disability, normal retirement,
or involuntary termination for reasons other than cause, in
which case all restrictions lapse; provided, however, that
in no event shall restrictions lapse if the restrictions on
shares used to pay for the exercise would not have lapsed
under the same conditions.
(e) The optionee who receives restricted stock may not
sell, transfer, assign, pledge or otherwise encumber or
dispose of shares of restricted stock until such time as all
restrictions on such stock have lapsed except: (i) to the
Company in payment of the exercise price of a stock option
issued by the Company under any employee stock option plan
adopted by the Company that provides for payment of the
exercise price in the form of restricted stock, provided
that such payment is made in accordance with the terms of
such plan; or (ii) to a trust of which the optionee, the
optionee's spouse, or descendants of the optionee are the
primary beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the Internal
Revenue Code, upon the following terms:
(A) the Company receives, prior to such transfer, an
opinion from optionee's counsel (1) that the trust will
be treated as a grantor trust and will be treated as
being owned by the optionee at all times until the
restrictions on such stock lapse or the stock is
forfeited under the terms of its grant, (2) with
respect to any trust structured as a grantor retained
annuity trust, that the annuity period ends after the
last date on which restrictions on such stock can
lapse, (3) that the terms of the trust provide that
upon the forfeiture of the restricted stock under the
terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the restricted
stock shall revert to the optionee or to the Company,
(4) that the trustee of such trust may not, prior to
the lapsing of restrictions on such stock, sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock except to the
Company or to the optionee, subject to the restrictions
provided for in this Plan, and (5) that the trustee is
not authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust;
and
(B) the optionee and the trustee of the trust shall
execute stock powers in blank to be held in the custody
of the Company; and
(C) the Corporate Secretary of the Company may, in his
discretion, enforce the foregoing transfer restrictions
by maintaining physical custody of the certificate or
certificates representing such shares of restricted
stock, by placing a restrictive legend on such
certificates, by requiring the optionee and the trustee
to execute other documents as a pre-condition to such
transfer, or otherwise.
(f) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(g) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
10 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 9. Exercise of Options - Stock Appreciation Rights.
In addition to providing for the exercise of an option
as set forth in Section 8, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company shall be
exercisable during the six-month period following the date
of grant, except that such limitation shall not apply in the
event of death or physical disability of such optionee
occurring prior to the expiration of such six-month period.
Stock Appreciation Rights may be exercised by an optionee by
surrendering the related option or applicable portion
thereof. Upon such exercise and surrender, the optionee
shall be entitled to receive the value of such Stock
Appreciation Rights determined in the manner prescribed in
this Section 9. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable.
Each agreement evidencing Stock Appreciation Rights
granted on or after April 27, 1982, shall clearly and
separately identify the nonstatutory stock options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan as shall be determined from
time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair market value of
common stock on the date of grant of the related option was
determined pursuant to Section 6(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, (i) payment of the value of
Stock Appreciation Rights related to Incentive Stock Options
may be elected in common stock only insofar as the issuance
of such common stock to the optionee would be subject to the
Internal Revenue Code of 1954, Section 83 Income Inclusion
Rule, as in effect on the date of exercise of the Stock
Appreciation Rights, and (ii) the Committee may at any time
impose any other limitations upon the exercise of Stock
Appreciation Rights which, in the Committee's sole
discretion, are necessary or desirable in order to comply
with Section 16(b) and the rules and regulations thereunder,
or in order to obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 6(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 10. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment and outstanding options
shall be made without change of the total price applicable
to the unexercised portion of the option and with a
corresponding adjustment in the option price per share;
provided, however, that each such adjustment in the number
and kind of shares subject to outstanding options, including
any adjustment in the option price, shall be made in such
manner as not to constitute a modification as defined in
Section 425 of the Internal Revenue Code of 1986, as
amended. Any such adjustment made by the Committee shall be
conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 11. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
10 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after December 31, 1987, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 12. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company at a meeting of the stockholders within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 13. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 14. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 15. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 16. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to
orhave stock withheld to satisfy tax obligations is subject
to the approval of the Committee and to such rules as the
Committee may from time to time adopt.
<FN>
<FN-1>The initial number of shares authorized was doubled due
to the December 1989 two-for-one stock split.
<PAGE>
Exhibit (10)(d)
1981 STOCK OPTION PLAN
(as amended on April 27, 1982, April 23, 1985,
February 7, 1987, August 11, 1987, April 12, 1988,
December 12, 1989, April 16, 1991, August 13, 1991,
February 18, 1995 and April 18, 1995)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1981 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interest of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
All options granted pursuant to the Plan prior to April
27, 1982, and outstanding as of such date shall be
nonstatutory stock options.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 5A(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
5(A)(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall select one of its
members as its chairman, and shall hold its meetings at such
times and places as it may determine. A majority of the
Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934. The
Committee from time to time may adopt (and thereafter amend
and rescind) such rules and regulations for carrying out the
Plan and take such action in the administration of the Plan,
not inconsistent with the provisions hereof, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 1,400,000<FN-1> (subject
to adjustment as provided in Section 10 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 5A. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock; provided,
however, that fair market value in the case of Incentive
Stock Options granted prior to April 23, 1985, shall be
deemed to be the closing price of the common stock of the
Company on the New York Stock Exchange on the date the
Incentive Stock Option was granted.
Section 6. Terms and Conditions of Options.
Each option granted on or after April 27, 1982, under
the Plan shall be evidenced by a Stock Option Agreement in
such form not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option Agreement
clearly and separately identifies nonstatutory stock options
and Incentive Stock Options and that the substance of the
following terms and conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock; provided, however, that fair
market value in the case of options granted prior to April
23, 1985, was deemed to be the closing price of the common
stock of the Company on the New York Stock Exchange on the
date the option was granted.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section 8,
and if applicable, Section 9) only if the optionee has been
an employee of the Company or of any subsidiary thereof at
all times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to five (5) years for options designated
"Nonqualified" or "Nonstatutory" options. (For this
purpose, a retiree is a person who is entitled to receive
pension benefits in accordance with the United System
Employee Retirement Plan immediately upon termination of
employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 6(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 7. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least one (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 7, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 8. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 6(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's then present intention to acquire the
shares being purchased for investment and not for resale, or
(ii) the completion of any registration or other
qualification of such shares under any state or federal laws
or rulings or regulations of any government regulatory body,
which the Company shall determine to be necessary or
advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of such option was determined pursuant to Section
6(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all nonqualified options outstanding on
February 17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized
to issue restricted shares of common stock upon such
exercises of stock options, subject to the following
conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions. Notwithstanding any other
provisions to the contrary in the Plan, no reload option
shall be granted for shares withheld or delivered in payment
of taxes upon the lapse of restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 6(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option shall be forfeited in the event
that vesting conditions are not satisfied, subject to the
discretion of the Committee, except in the case of death,
disability, normal retirement, or involuntary termination
for reasons other than cause, in which case all restrictions
lapse; provided, however, that in no event shall
restrictions lapse if the restrictions on shares used to pay
for the exercise would not have lapsed under the same
conditions.
(e) The optionee who receives restricted stock may not
sell, transfer, assign, pledge or otherwise encumber or
dispose of shares of restricted stock until such time as all
restrictions on such stock have lapsed except: (i) to the
Company in payment of the exercise price of a stock option
issued by the Company under any employee stock option plan
adopted by the Company that provides for payment of the
exercise price in the form of restricted stock, provided
that such payment is made in accordance with the terms of
such plan; or (ii) to a trust of which the optionee, the
optionee's spouse, or descendants of the optionee are the
primary beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the Internal
Revenue Code, upon the following terms:
(A) the Company receives, prior to such transfer, an
opinion from optionee's counsel (1) that the trust will
be treated as a grantor trust and will be treated as
being owned by the optionee at all times until the
restrictions on such stock lapse or the stock is
forfeited under the terms of its grant, (2) with
respect to any trust structured as a grantor retained
annuity trust, that the annuity period ends after the
last date on which restrictions on such stock can
lapse, (3) that the terms of the trust provide that
upon the forfeiture of the restricted stock under the
terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the restricted
stock shall revert to the optionee or to the Company,
(4) that the trustee of such trust may not, prior to
the lapsing of restrictions on such stock, sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock except to the
Company or to the optionee, subject to the restrictions
provided for in this Plan, and (5) that the trustee is
not authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust;
and
(B) the optionee and the trustee of the trust shall
execute stock powers in blank to be held in the custody
of the Company; and
(C) the Corporate Secretary of the Company may, in his
discretion, enforce the foregoing transfer restrictions
by maintaining physical custody of the certificate or
certificates representing such shares of restricted
stock, by placing a restrictive legend on such
certificates, by requiring the optionee and the trustee
to execute other documents as a pre-condition to such
transfer, or otherwise.
(f) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(g) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
10 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 9. Exercise of Options - Stock Appreciation Rights.
In addition to providing for the exercise of an option
as set forth in Section 8, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company shall be
exercisable during the six-month period following the date
of grant, except that such limitation shall not apply in the
event of death or physical disability of such optionee
occurring prior to the expiration of such six-month period.
Stock Appreciation Rights may be exercised by an optionee by
surrendering the related option or applicable portion
thereof. Upon such exercise and surrender, the optionee
shall be entitled to receive the value of such Stock
Appreciation Rights determined in the manner prescribed in
this Section 9. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable.
Each agreement evidencing Stock Appreciation Rights
granted on or after April 27, 1982, shall clearly and
separately identify the nonstatutory stock options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan as shall be determined from
time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair market value of
common stock on the date of grant of the related option was
determined pursuant to Section 6(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, (i) payment of the value of
Stock Appreciation Rights related to Incentive Stock Options
may be elected in common stock only insofar as the issuance
of such common stock to the optionee would be subject to the
Internal Revenue Code of 1954, Section 83 Income Inclusion
Rule, as in effect on the date of exercise of the Stock
Appreciation Rights, and (ii) the Committee may at any time
impose any other limitations upon the exercise of Stock
Appreciation Rights which, in the Committee's sole
discretion, are necessary or desirable in order to comply
with Section 16(b) and the rules and regulations thereunder,
or in order to obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 6(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 10. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment and outstanding options
shall be made without change of the total price applicable
to the unexercised portion of the option and with a
corresponding adjustment in the option price per share;
provided, however, that each such adjustment in the number
and kind of shares subject to outstanding options, including
any adjustment in the option price, shall be made in such
manner as not to constitute a modification as defined in
Section 425 of the Internal Revenue Code of 1986, as
amended. Any such adjustment made by the Committee shall be
conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 11. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
10 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after September 30, 1990, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 12. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company at a meeting of the stockholders within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 13. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 14. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 15. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 16. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to have
stock withheld to satisfy tax obligations is subject to the
approval of the Committee and to such rules as the Committee
may from time to time adopt.
<FN>
<FN-1>The initial number of shares authorized was doubled due
to the December, 1989 two-for-one stock split.
<PAGE>
Exhibit (10)(e)
1985 STOCK OPTION PLAN
(as amended on February 7, 1987, August 11, 1987,
April 12, 1988, December 12, 1989, April 16, 1991,
August 13, 1991 and April 18, 1995)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1985 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interests of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 6(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
6(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall hold its meetings at
such times and places as it may determine. A majority of
the Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934 ("Exchange
Act"). The Committee from time to time may adopt (and
thereafter amend and rescind) such rules and regulations for
carrying out the Plan and take such action in the
administration of the Plan, not inconsistent with the
provisions hereof, as it shall deem proper. The
interpretation and construction of any provisions of the
Plan by the Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final and
conclusive. No member of the Board of Directors or the
Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option
granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 3,000,000<FN-1> (subject
to adjustment as provided in Section 11 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced
by a Stock Option Agreement in such form not inconsistent
with the Plan as the Committee shall determine, provided
that such Stock Option Agreement clearly and separately
identifies nonstatutory stock options and Incentive Stock
Options and that the substance of the following terms and
conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section 9,
and if applicable, Section 10) only if the optionee has been
an employee of the Company or of any subsidiary thereof at
all times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to twelve (12) months for options designated
"Incentive Stock Options" and to five (5) years for options
designated "Nonqualified" or "Nonstatutory" options. (For
this purpose, a retiree is a person who is entitled to
receive pension benefits in accordance with the United
System Employee Retirement Plan immediately upon termination
of employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 7(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 8, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 9. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 7(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's or purchaser's then present intention
to acquire the shares being purchased for investment and not
for resale, or (ii) the completion of any registration or
other qualification of such shares under any state or
federal laws or rulings or regulations of any government
regulatory body, which the Company shall determine to be
necessary or advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all nonqualified options outstanding on
February 17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized to
issue restricted shares of common stock upon such exercises
of stock options, subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions. Notwithstanding any other
provisions to the contrary in the Plan, no reload option
shall be granted for shares withheld or delivered in payment
of taxes upon the lapse of restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 7(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option that continue to be restricted
shall be forfeited in the event that vesting conditions are
not satisfied, subject to the discretion of the Committee,
except in the case of death, disability, normal retirement,
or involuntary termination for reasons other than cause, in
which case all restrictions lapse; provided, however, that
in no event shall restrictions lapse if the restrictions on
shares used to pay for the exercise would not have lapsed
under the same conditions.
(e) The optionee who receives restricted stock may not
sell, transfer, assign, pledge or otherwise encumber or
dispose of shares of restricted stock until such time as all
restrictions on such stock have lapsed except: (i) to the
Company in payment of the exercise price of a stock option
issued by the Company under any employee stock option plan
adopted by the Company that provides for payment of the
exercise price in the form of restricted stock, provided
that such payment is made in accordance with the terms of
such plan; or (ii) to a trust of which the optionee, the
optionee's spouse, or descendants of the optionee are the
primary beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the Internal
Revenue Code, upon the following terms:
(A) the Company receives, prior to such transfer, an
opinion from optionee's counsel (1) that the trust will
be treated as a grantor trust and will be treated as
being owned by the optionee at all times until the
restrictions on such stock lapse or the stock is
forfeited under the terms of its grant, (2) with
respect to any trust structured as a grantor retained
annuity trust, that the annuity period ends after the
last date on which restrictions on such stock can
lapse, (3) that the terms of the trust provide that
upon the forfeiture of the restricted stock under the
terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the restricted
stock shall revert to the optionee or to the Company,
(4) that the trustee of such trust may not, prior to
the lapsing of restrictions on such stock, sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock except to the
Company or to the optionee, subject to the restrictions
provided for in this Plan, and (5) that the trustee is
not authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust;
and
(B) the optionee and the trustee of the trust shall
execute stock powers in blank to be held in the custody
of the Company; and
(C) the Corporate Secretary of the Company may, in his
discretion, enforce the foregoing transfer restrictions
by maintaining physical custody of the certificate or
certificates representing such shares of restricted
stock, by placing a restrictive legend on such
certificates, by requiring the optionee and the trustee
to execute other documents as a pre-condition to such
transfer, or otherwise.
(f) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(g) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
11 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 10. Exercise of Options - Stock Appreciation
Rights.
In addition to providing for the exercise of an option
as set forth in Section 9, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company or who is
otherwise subject to Section 16(b) of the Exchange Act shall
be exercisable during the six-month period following the
date of grant, except that such limitation shall not apply
in the event of death or physical disability of such
optionee occurring prior to the expiration of such six-month
period. Stock Appreciation Rights may be exercised by an
optionee by surrendering the related option or applicable
portion thereof. Upon such exercise and surrender, the
optionee shall be entitled to receive the value of such
Stock Appreciation Rights determined in the manner
prescribed in this Section 10. Options which have been so
surrendered, in whole or in part, shall no longer be
exercisable.
Each agreement evidencing Stock Appreciation Rights
shall clearly and separately identify the nonstatutory stock
options and Incentive Stock Options to which it relates and
shall contain such terms and conditions not inconsistent
with other provisions of the Plan as shall be determined
from time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair
market value of common stock on the date of grant of an
option is determined pursuant to Section 7(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Exchange Act, (i) payment of the value of Stock Appreciation
Rights related to Incentive Stock Options may be elected in
common stock only insofar as the issuance of such common
stock to the optionee would be subject to the Internal
Revenue Code of 1954, Section 83 Income Inclusion Rule, as
in effect on the date of exercise of the Stock Appreciation
Rights, and (ii) the Committee may at any time impose any
other limitations upon the exercise of Stock Appreciation
Rights which, in the Committee's sole discretion, are
necessary or desirable in order to comply with Section 16(b)
and the rules and regulations thereunder, or in order to
obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 7(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment of outstanding options shall
be made without change of the total price applicable to the
unexercised portion of the option and with a corresponding
adjustment in the option price per share; provided, however,
that each such adjustment in the number and kind of shares
subject to outstanding options, including any adjustment in
the option price, shall be made in such manner as not to
constitute a modification as defined in Section 425 of the
Internal Revenue Code of 1986, as amended. Any such
adjustment made by the Committee shall be conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
11 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after November 30, 1994, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 13. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company present and entitled to vote at a meeting of the
stockholders at which a quorum is present within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 14. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 15. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to have
stock withheld to satisfy tax obligations is subject to the
approval of the Committee and to such rules as the Committee
may from time to time adopt.
<FN>
<FN-1>The initial number of shares authorized was doubled due
to the December, 1989 two-for-one stock split.
<PAGE>
Exhibit (10)(f)
1990 STOCK OPTION PLAN
(As Amended February 16, 1991, April 16, 1991,
August 13, 1991, December 8, 1992, February 18, 1995
and April 18, 1995)
Section 1. Establishment.
Pursuant to the Sprint Corporation Long-Term Stock
Incentive Program (the "Program"), Sprint Corporation, a
Kansas corporation (the "Company"), hereby establishes a
stock option plan to be named the 1990 Stock Option Plan
(the "Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interests of the Company and its
affiliates. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
Nonstatutory Stock Options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 6(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be Nonstatutory Stock Options. Options
designated "Nonstatutory Stock Options" shall not be
restricted by the limitations of said Section 6(a) and shall
not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by the Organization and
Compensation Committee (the "Committee") of the Board of
Directors of the Company. Members of the Committee shall be
Disinterested Persons as defined in the Program. The
Committee shall hold its meetings at such times and places
as it may determine. A majority of the Committee shall
constitute a quorum and the acts of a majority of the
members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee,
shall be deemed the acts of the Committee. The Company
shall grant options and related Stock Appreciation Rights
("SARs") under the Plan in accordance with determinations
made by the Committee pursuant to the provisions
of the Plan and the Program. The Committee from time to
time may adopt (and thereafter amend and rescind) such rules
and regulations for carrying out the Plan and take such
action in the administration of the Plan, not inconsistent
with the provisions of the Plan and the Program, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 17,000,000 (subject
to adjustment as provided in Section 11 hereof). The shares
sold under the Plan may be either treasury shares or
authorized but unissued shares, as the Board of Directors
from time to time may determine. The maximum number of
shares of common stock which may be issued upon exercise of
options granted in any calendar year, together with shares
of common stock subject to other awards under the Program,
shall not exceed the limits set forth in Section 4(a) of the
Program.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or Nonstatutory Stock Options, any conditions on the
exercise of the options, and the manner in which options may
be exercised. In making such determination, the Committee
may take into consideration the value of the services
rendered by the respective individuals, their present and
potential contributions to the success of the Company and
its affiliates and such other factors which the Committee
may deem relevant in accomplishing the purpose of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. The aggregate fair market value
(determined at the time the option is granted) of the stock
with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year by
the optionee under all plans of the Company and its
subsidiaries shall not exceed $100,000 or, if different, the
maximum limitation in effect at the time of grant under
Section 422A of the Internal Revenue Code of 1986, as
amended, or any successor provision, and any regulations
promulgated thereunder.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced
by a Stock Option Agreement in such form not inconsistent
with the Plan as the Committee shall determine, provided
that such Stock Option Agreement clearly and separately
identifies Nonstatutory Stock Options and Incentive Stock
Options and that the substance of the following terms and
conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise the option and any related SAR upon
the death of the optionee. During the optionee's lifetime,
the option and any related SAR may be exercised only by the
optionee or, if permissible under applicable law, by the
guardian or representative of the optionee.
(c) Exercise of Option. The option and any related
SAR, if exercised by the optionee, may be exercised
(subject, however, to the provisions of Section 9, and if
applicable, Section 10) only if the optionee has been an
employee of the Company or of any subsidiary thereof at all
times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to twelve (12) months for options designated
"Incentive Stock Options" and to five (5) years for options
designated "Non-statutory" Stock Options" (for this purpose,
a retiree is a person who is entitled to receive pension
benefits in accordance with the Sprint Retirement Pension
Plan immediately upon termination of employment). Options
granted under the Plan shall not be affected by any change
of duties or position so long as the optionee continues to
be an employee of the Company or of a subsidiary. Only
those options exercisable at the date the optionee's
employment is terminated may be exercised during the period
following such termination, whether such termination is by
retirement or otherwise.
(d) Term of Option. The option and any related SAR
shall not be exercisable after the expiration of ten (10)
years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Section 7(c) above), the option
theretofore granted to such person and any related SAR shall
be exercisable only within the twelve (12) months next
succeeding such death, and then only (i) by the executor or
administrator of the optionee's estate, by the person or
persons to whom the optionee's rights under the option shall
pass by the optionee's will or the laws of descent and
distribution, or, if a beneficiary has been designated in
accordance with Section 7(b) above, by the beneficiary, and
(ii) if and to the extent that the optionee was entitled (or
deemed to be entitled by the Committee) to exercise the
option at the date of the optionee's death, provided that in
no event shall the option be exercisable more than ten (10)
years after the date it was granted.
Section 7A. Reload Options.
In connection with non-qualified options (including
newly-granted options or outstanding options granted under
the Plan or any other stock option plan of the Company or of
US Sprint Communications Company Limited Partnership), the
Committee may provide that an optionee has the right to a
reload option, which shall be subject to the following terms
and conditions:
(a) Grant of the Reload Option; Number of Shares,
Price. Subject to subsections (b) and (c) of this Section
7A and to the availability of shares to be optioned under
the Plan, if an optionee has an option (the "original
option") with reload rights and pays for the exercise of the
original option by surrendering common stock of the Company,
the optionee shall receive a new option ("reload option")
for the number of shares so surrendered at an option price
equal to the fair market value of the stock on the date of
the exercise of the original option.
(b) Minimum Purchase Required. A reload option will
be granted only if the exercise of the original option is an
exercise of at least 25% of the total number of shares
granted under the original option (or an exercise of all the
shares remaining under the original option if less than 25%
of the shares remain to be exercised).
(c) Other Requirements. A reload option will not be
granted: (1) if the market value of the common stock of the
Company on the date of exercise of the original option is
less than the exercise price of the original option; (2) if
the optionee is no longer an employee of Sprint or a Sprint
subsidiary; or (3) if the original option is exercised less
than one year prior to the expiration of the original
option.
(d) Term of Option. The reload option shall expire on
the same date as the original option.
(e) Type of Option. The reload option shall be a non-
qualified option.
(f) No Additional Reload Options. The reload options
shall not include any right to a second reload option.
(g) Date of Grant, Vesting. The date of grant of the
reload option shall be the date of the exercise of the
original option. The reload options shall be exercisable in
full beginning one year from date of grant; provided,
however, that all shares purchased upon the exercise of the
original option (except for any shares withheld for tax
withholding obligations) shall not be sold, transferred or
pledged within six months from the date of exercise of the
original option. In no event shall a reload option be
exercised after the original option expires as provided in
subsection (d) of this Section 7A.
(h) Stock Withholding; Grants of Reload Options. If
the other requirements of this Section 7A are satisfied, and
if shares are withheld or shares surrendered for tax
withholding pursuant to Section 17, a reload option will be
granted for the number of shares surrendered as payment for
the exercise of the original option plus the number of
shares surrendered or withheld to satisfy tax withholding.
In connection with reload options for officers who are
subject to Section 16 of the Securities Exchange Act of 1934
("Insiders"), the Committee may at any time impose any
limitations which, in the Committee's sole discretion, are
necessary or desirable in order to comply with Section 16(b)
of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, or in order to obtain any exemption
therefrom.
(i) Other Terms and Conditions. Except as otherwise
provided in this Section 7A, all the provisions of the 1990
Stock Option Plan shall apply to reload options granted
pursuant to this Section 7A.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 8, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 9. Exercise of Options - Purchase of Shares.
Options and related SARs shall be exercisable at such
time or times, and upon the satisfaction of such conditions,
as determined by the Committee; provided, however, that
unless otherwise determined by the Committee, no Incentive
Stock Option shall be exercisable during the year ending on
the day before the first anniversary date of the granting of
the Incentive Stock Option. An optionee's right to purchase
shares with respect to shares which become exercisable shall
be cumulative during the term of the option. An option
shall be exercisable by purchase of shares only upon payment
to the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 7(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's or purchaser's then present intention
to acquire the shares being purchased for investment and not
for resale, or (ii) the completion of any registration or
other qualification of such shares under any state or
federal laws or rulings or regulations of any government
regulatory body, which the Company shall determine to be
necessary or advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all nonqualified options outstanding on
February 17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to deliver restricted
shares of the Company's common stock in payment of the
exercise price notwithstanding restrictions on
transferability to which such shares are subject, and the
Company shall be authorized to issue restricted shares of
common stock upon the exercise of such stock options,
subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions. Notwithstanding any other
provisions to the contrary in the Plan, no reload option
shall be granted for shares withheld or delivered in payment
of taxes upon the lapse of restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 7(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Restricted common stock received in an exercise of
a stock option shall be forfeited in the event that vesting
conditions are not satisfied, subject to the discretion of
the Committee, except in the case of death, disability,
normal retirement, or involuntary termination for reasons
other than cause, in which case all restrictions lapse;
provided, however, that in no event shall restrictions lapse
if the restrictions on shares used to pay for the exercise
would not have lapsed under the same conditions.
(e) The optionee who receives restricted stock may not
sell, transfer, assign, pledge or otherwise encumber or
dispose of shares of restricted stock until such time as all
restrictions on such stock have lapsed except: (i) to the
Company in payment of the exercise price of a stock option
issued by the Company under any employee stock option plan
adopted by the Company that provides for payment of the
exercise price in the form of restricted stock, provided
that such payment is made in accordance with the terms of
such plan; or (ii) to a trust of which the optionee, the
optionee's spouse, or descendants of the optionee are the
primary beneficiaries and which is a grantor trust treated
as owned by the optionee under Subchapter J of the Internal
Revenue Code, upon the following terms:
(A) the Company receives, prior to such transfer, an
opinion from optionee's counsel (1) that the trust will
be treated as a grantor trust and will be treated as
being owned by the optionee at all times until the
restrictions on such stock lapse or the stock is
forfeited under the terms of its grant, (2) with
respect to any trust structured as a grantor retained
annuity trust, that the annuity period ends after the
last date on which restrictions on such stock can
lapse, (3) that the terms of the trust provide that
upon the forfeiture of the restricted stock under the
terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the restricted
stock shall revert to the optionee or to the Company,
(4) that the trustee of such trust may not, prior to
the lapsing of restrictions on such stock, sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock except to the
Company or to the optionee, subject to the restrictions
provided for in this Plan, and (5) that the trustee is
not authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust;
and
(B) the optionee and the trustee of the trust shall
execute stock powers in blank to be held in the custody
of the Company; and
(C) the Corporate Secretary of the Company may, in his
discretion, enforce the foregoing transfer restrictions
by maintaining physical custody of the certificate or
certificates representing such shares of restricted
stock, by placing a restrictive legend on such
certificates, by requiring the optionee and the trustee
to execute other documents as a pre-condition to such
transfer, or otherwise.
(f) In the case of early retirement, the lapse of
restrictions may be accelerated at the discretion of the
Committee, provided, however, that in no event shall
restrictions lapse if the restrictions on shares used to pay
for the exercise would not have lapsed under the same
conditions.
(g) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's beneficiary, executor or
administrator, legatees or distributees, as the case may be,
will be, or will be deemed to be, a holder of any shares
subject to an option unless and until a stock certificate or
certificates for such shares are issued to such person or
them under the terms of the Plan. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or
other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in
Section 11 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
In the event that any optionee, without the consent
of the Committee, while employed by the Company or any
affiliate of the Company or after termination of such
employment, becomes associated with, employed by, renders
services to, or owns any interest in (other than any
nonsubstantial interest, as determined by the Committee),
any business that is in competition with the Company or
with any business in which the Company has a substantial
interest, as determined by the Committee, any option still
held by such person at such time shall automatically
terminate. The decision of the Committee on any such
matters shall be final and binding upon all concerned.
Section 10. Exercise of Options - Stock Appreciation
Rights.
In addition to providing for the exercise of an option
as set forth in Section 9, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option; provided, however, that no
SAR granted to an optionee who is subject to Section 16(b)
of the Exchange Act (an "Insider") shall be exercisable
during the six-month period following the date of grant,
except that such limitation shall not apply in the event of
death or physical disability of such optionee occurring
prior to the expiration of such six-month period. SARs may
be exercised by an optionee by surrendering the related
option or applicable portion thereof. Upon such exercise
and surrender, the optionee shall be entitled to receive
the value of such SARs determined in the manner prescribed
in this Section 10. Options which have been so surrendered,
in whole or in part, shall no longer be exercisable.
Each agreement evidencing SARs shall clearly and
separately identify the Nonstatutory Stock Options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan and the Program as shall be
determined from time to time by the Committee, which shall
include the following:
(a) SARs shall expire no later than the expiration of
the related option.
(b) SARs shall be transferable only when and to the
extent that the related option is transferable.
(c) SARs shall be exercisable at such time or times
and only to the extent that the related option is
exercisable. The SAR shall terminate and no longer be
exercisable upon the termination or exercise of the related
option, except that SARs granted with respect to less than
the full number of shares covered by a related option shall
not be reduced until the exercise or termination of the
related option exceeds the number of shares not covered by
the SARs.
(d) SARs shall be exercisable only when there is a
positive spread, that is, when the market price of the stock
subject to the related option exceeds the exercise price of
such option.
(e) Upon the exercise of SARs, an optionee shall be
entitled to receive the value thereof, which value shall be
equal to the excess of the fair market value on the date of
exercise of one share of common stock over the option price
per share specified in the related option multiplied by the
number of shares in respect of which the SARs shall have
been exercised. The fair market value of common stock on
the date of exercise of SARs shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a).
(f) Upon an exercise of SARs, the optionee shall
notify the Company of the form in which payment of the value
thereof will be made (i.e., cash, common stock, or any
combination thereof); provided, however, in the case of
Insiders, (i) payment of the value of SARs related to
Incentive Stock Options may be elected in common stock only
insofar as the issuance of such common stock to the optionee
would be subject to the Internal Revenue Code of 1986,
Section 83 Income Inclusion Rule, as in effect on the date
of exercise of the SARs, and (ii) the Committee may at any
time impose any other limitations upon the exercise of SARs
which, in the Committee's sole discretion, are necessary or
desirable in order to comply with Section 16(b) of the
Exchange Act and the rules and regulations thereunder, or in
order to obtain any exemption therefrom.
Upon the exercise of SARs, the option or part thereof
to which such SARs are related shall be deemed to have been
exercised for the purpose of the limitation of the number of
shares of common stock to be issued under the Plan as set
forth in Section 4 and the limitation of the number of
shares of common stock to be issued under the Program as set
forth in Section 4(a) of the Program. SARs shall be deemed
exercised on the date written notice of exercise is received
by the Secretary of the Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment of outstanding options shall
be made without change of the total price applicable to the
unexercised portion of the option and with a corresponding
adjustment in the option price per share; provided, however,
that each such adjustment in the number and kind of shares
subject to outstanding options, including any adjustment in
the option price, shall be made in such manner as not to
constitute a modification as defined in Section 425 of the
Internal Revenue Code of 1986, as amended. If any
outstanding options are subject to any conditions, the
Committee shall also make appropriate adjustments to such
conditions. Any such adjustment made by the Committee shall
be conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company; provided, however, that no such termination or
amendment shall, without the consent of the individual to
whom any option shall theretofore have been granted, affect
or impair the rights of such individual under such option;
and provided further, that any such amendment shall be
consistent with the provisions of the Program, as it may be
amended from time to time.
No stock option shall be granted under the Plan after
April 18, 1999, but stock options granted prior to or as of
such date may extend beyond such date in accordance with the
provisions hereof.
Section 13. Effectiveness of Plan.
This Plan shall be effective as of February 17, 1990.
Section 14. Date of Granting of Options.
The date of grant of a reload option shall be
determined in accordance with Section 7A(g). The date of
grant of all other options shall be the date designated by
the Committee as the date of grant, provided that in no
event shall the date of grant be earlier than the date on
which the Committee approved the grant. Within sixty (60)
days of the granting of the option, the Company shall notify
the optionee of the grant of the option, and submit to the
optionee a Stock Option Agreement and, if applicable, an
agreement respecting SARs, duly executed by and on behalf of
the Company, with the request that the optionee execute the
agreement or agreements within sixty (60) days after the
mailing by the Company of the notice to the optionee. The
optionee shall execute the written option agreement and, if
applicable, the agreement respecting SARs, within said 60-
day period.
Section 15. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an SAR for stock, or upon the
lapse of restrictions on restricted stock received upon the
exercise of an option (the date on which such exercise
occurs or such restrictions lapse hereinafter referred to as
the "Tax Date"), the optionee may elect to make payment for
the withholding of federal, state and local taxes, excluding
Social Security and Medicare taxes, up to the optionee's
marginal tax rates, by one or both of the following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to
deliver stock or have stock retained to satisfy tax
obligations is subject to the approval of the Committee and
to such rules as the Committee may from time to time adopt.
<PAGE>
Exhibit (10)(g)
1990 RESTRICTED STOCK PLAN
(as amended June 9, 1992, August 10, 1993, December 13, 1994,
February 18, 1995 and April 18, 1995)
Section 1. Establishment.
Pursuant to the Sprint Long-Term Stock Incentive Program
(the "Program"), Sprint Corporation, a Kansas corporation (the
"Company"), hereby establishes a restricted stock plan to be
named the 1990 Restricted Stock Plan (the "Plan").
Section 2. Purpose.
The purpose of the Plan is to aid the Company and its
subsidiaries in competing with other enterprises for the services
of new key personnel needed to help ensure their continued
development. The Plan will also help the Company and its
subsidiaries retain key personnel.
Section 3. Administration.
The Plan shall be administered by the Organization and
Compensation Committee (the "Compensation Committee") of the
Board of Directors of the Company. Members of the Compensation
Committee shall be Disinterested Persons as defined in the
Program. The Compensation Committee shall hold its meetings at
such times and places as it may determine. A majority of the
Compensation Committee shall constitute a quorum and the acts of
a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of
the Compensation Committee, shall be deemed the acts of the
Compensation Committee. The Compensation Committee may delegate
to the Chief Executive Officer of the Company (the "CEO") the
right to grant awards of restricted stock to employees of the
Company and its subsidiaries who are not officers or directors of
the Company and to cancel or suspend such awards. The CEO may
not make awards of restricted stock to any one individual in
excess of 15,000 shares and may not make awards of restricted
stock aggregating in excess of 50,000 shares between meetings of
the Compensation Committee. The awards made by the CEO shall be
reported to the Compensation Committee at each of its meetings.
The Company shall issue shares of restricted stock under the
Plan in accordance with determinations made by the Compensation
Committee or the CEO pursuant to the provisions of the Plan and
the Program. The Compensation Committee from time to time may
adopt (and thereafter amend and rescind) such rules and
regulations for carrying out the Plan and take such action in the
administration of the Plan, not inconsistent with the provisions
of the Plan and the Program, as it shall deem proper. Except as
set forth in Section 6(a) hereof, the Compensation Committee may
accelerate the time or times at which restrictions lapse and may
waive any forfeiture of restricted stock. The interpretation and
construction of any provisions of the Plan by the Compensation
Committee shall, unless otherwise determined by the Board of
Directors of the Company, be final and conclusive. No member of
the Board of Directors or the Compensation Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any grant under it.
Section 4. Total Number of Shares Subject to Grant.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued under the Plan shall
not exceed 300,000 (subject to adjustment as provided in Section
7 hereof). The shares issued under the Plan may be either
treasury shares or authorized but unissued shares, as the Board
of Directors from time to time may determine. The maximum number
of shares of common stock which may be issued in any calendar
year, together with shares of common stock subject to other
awards under the Program, shall not exceed the limits set forth
in Section 4(a) of the Program.
In the event that any outstanding shares of restricted stock
under the Plan are forfeited for any reason, such shares of
common stock may again be subject to grant under the Plan.
Section 5. Eligibility.
Restricted stock shall be granted only to key employees of
the Company or its subsidiaries, including new hires. No grants
shall be made by the CEO to any individual who is an officer or
director of the Company or who will be proposed to be elected as
an officer or director at the next meeting of the Board of
Directors or Stockholders of the Company. The Compensation
Committee or the CEO will, in its discretion, determine the key
employees to be granted restricted stock, the time or times at
which restricted stock shall be granted, the number of shares to
be granted and the duration of restrictions on the shares
granted. In making such determination, the Compensation
Committee and the CEO may take into consideration the value of
the services rendered or to be rendered by the respective
individuals, their present and potential contributions to the
success of the Company and its affiliates and such other factors
which the Compensation Committee or the CEO may deem relevant in
accomplishing the purposes of the Plan.
No restricted stock may be granted to any individual who
immediately after the grant owns directly or indirectly stock
possessing more than five percent (5%) of the total combined
voting power or value of all classes of stock of the Company or
any subsidiary. No person shall be eligible to receive a larger
number of shares of restricted stock than is recommended for such
individual by the Compensation Committee or the CEO.
Section 6. Terms and Conditions of Grants.
Each grant under the Plan shall be evidenced by an Agreement
in such form not inconsistent with the Plan as the Compensation
Committee or the CEO shall determine; provided that the substance
of the following terms and conditions be included therein:
(a) Duration of Restrictions. The restrictions on
restricted stock shall lapse at such time or times as
determined by the Compensation Committee or the CEO;
provided, however, that no restricted stock shall
become free of restrictions prior to the first
anniversary date of the granting of the restricted
stock.
(b) Nontransferable. The employee who receives
restricted stock (the "Grantee") may not sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock until such
time as all restrictions on such stock have lapsed,
except: (i) to the Company in payment of the exercise
price of a stock option issued by the Company under
any employee stock option plan adopted by the Company
that provides for payment of the exercise price in
the form of restricted stock, provided that such
payment is made in accordance with the terms of such
plan; or (ii) to a trust of which the Grantee, the
Grantee's spouse, or descendants of the Grantee are
the primary beneficiaries and that is a grantor trust
treated as owned by the Grantee under Subchapter J
of the Internal Revenue Code, upon the
following terms:
(A) the Company receives, prior to such
transfer, an opinion from Grantee's counsel (1) that
the trust will be treated as a grantor trust and will
be treated as being owned by the Grantee at all times
until the restrictions on such stock lapse or the
stock is forfeited under the terms of its grant,
(2) with respect to any trust structured as a
grantor retained annuity trust, that the annuity
period ends after the last date on which restrictions
on such stock can lapse (3) that the terms of the trust
provide that upon the forfeiture of the restricted
stock under the terms of its grant or the earlier
termination of the trust for whatever reason,
ownership of the restricted stock shall revert to the
Grantee or to the Company, (4) that the trustee of
such trust may not, prior to the lapsing of
restrictions on such stock, sell, transfer,
assign, pledge, or otherwise encumber or dispose of
shares of restricted stock except to the Grantee,
subject to the restrictions provided for in this
Plan, or the Company, and (5) that the trustee is not
authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust; and
(B) the Grantee and the trustee of the trust shall
be required to execute stock powers in blank to
be held in the custody of the Company; and
(C) the Corporate Secretary of the Company may, in
his discretion, enforce the foregoing transfer
restrictions by maintaining physical custody of the
certificate or certificates representing such shares
of restricted stock, by placing a restrictive legend
on such certificates, by requiring the Grantee and the
trustee to execute other documents as a pre-condition
to such transfer, or otherwise.
(c) Termination of Employment. If, before the restrictions
on shares of restricted stock lapse, the Grantee ceases
to be employed by the Company or a subsidiary of the
Company for any reason (including death or disability),
the shares of restricted stock that continue to be
restricted shall be forfeited and the Grantee or his
representative shall sign any document and take any
other action required to assign said restricted shares
back to the Company.
(d) Consideration. Each Grantee shall, as consideration for
the grant of restricted stock, agree in writing to
remain in the employ of the Company or of one of its
subsidiaries, at the pleasure of the Company or of such
subsidiary, for the period of time until the
restrictions on the restricted stock lapse. Nothing
contained in the Plan or in any Agreement shall confer
upon any Grantee any right with respect to continuance
of employment by the Company or its subsidiaries, nor
interfere in any way with the right of the Company or
its subsidiaries to terminate the Grantee's employment
or change the Grantee's compensation at any time.
(e) Interest in Competitor. In the event that any Grantee,
without the consent of the Compensation Committee,
renders services to, or owns any interest in (other
than any nonsubstantial interest, as determined by the
Compensation Committee) any business that is in
competition with the Company or with any business in
which the Company has a substantial interest, as
determined by the Compensation Committee, any
restricted stock shall automatically be forfeited. The
decision of the Compensation Committee on any such
matters shall be final and binding upon all concerned.
(f) Rights as Stockholder. Except as set forth in the
Plan, a Grantee will have all rights of a stockholder
with respect to shares of restricted stock, including
the right to vote the shares of stock and the right to
dividends on the stock. The shares of restricted stock
will be registered in the name of the Grantee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions
and restrictions applicable to the award and shall be
held in escrow by the Company. The Grantee shall
execute a stock power or powers assigning the shares of
restricted stock back to the Company, which stock
powers shall be held in escrow by the Company and used
only in the event of the forfeiture of any of the
shares of restricted stock. A certificate evidencing
unrestricted shares of common stock shall be issued to
the Grantee promptly after the restrictions lapse on
any restricted shares.
(g) A Grantee subject to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act") who
recognizes income under the federal income tax by
reason of the lapsing of restrictions on shares of
restricted stock without having filed an election under
Section 83(b) of the Internal Revenue Code with respect
to such shares may elect (i) to have withheld from such
shares on the date such income is recognized (the "Tax
Date") in payment of withholding for federal, state,
and local income taxes a number of shares equal to the
greatest whole number of shares having a fair market
value for federal income tax purposes on the Tax Date
less than or equal to the Minimum Withholding Amount,
as defined herein, and (ii) to deliver to the Company
shares of the Company's Common Stock (which, if
acquired from the Company shall have been held for a
period of at least six months on the Tax Date) on or
before the Tax Date in payment of such withholding
taxes a number of shares equal to the greatest whole
number of shares having a fair market value for federal
income tax purposes on the Tax Date less than or equal
to the Withholding Amount, as defined herein, minus the
amount, if any, withheld pursuant to clause (i)
preceding. The Grantee must pay to the Company in cash
the excess, if any, of (1) the amount the Company is
required by law to withhold over (2) the fair market
value on the Tax Date for federal income tax purposes
of the shares withheld or delivered pursuant to this
subsection.
For purposes of this subsection 6(g):
"Minimum Withholding Amount" means the
product of (1) the amount includible in the
Grantee's income for federal income tax
purposes by reason of the lapsing of such
restrictions and (2) the sum of the minimum
required withholding tax rates for federal,
state, and local income taxes.
"Withholding Amount" means the product of (1)
the amount includible in the Grantee's income
for federal income tax purposes by reason of
the lapsing of such restrictions and (2) a
rate, specified by the Grantee, not exceeding
the sum of the Grantee's marginal tax rates
for federal, state, and local income taxes.
An election pursuant to this subsection must be
irrevocable and made in writing (1) at least six months
before the Tax Date or (2) on or before the Tax Date
and within a "window period" as described in Rule 16b-
3(e)(iii) under the Exchange Act.
An election pursuant to this subsection is subject to
the approval of the Compensation Committee in
accordance with such rules as the Compensation
Committee may from time to time adopt. An election
pursuant to this subsection shall not be effective
unless the Tax Date occurs on or after the later of (1)
the date six months after the date the shares were
granted, (2) the date six months after the effective
date of this provision, and (3) the date six months
after the Grantee became subject to section 16 of the
Exchange Act.
Section 7. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common stock of
the Company are hereafter increased or decreased or changed into
or exchanged for a different number of shares or kind of shares
or other securities of the Company or of another corporation, by
reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination
of shares, or a dividend payable in capital stock, outstanding
shares of restricted stock shall be treated the same as other
outstanding shares of common stock and appropriate adjustment
shall be made by the Compensation Committee in the number and
kind of shares that may be granted under the Plan and that may be
granted by the CEO under the Plan.
The grant of restricted stock pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate, or sell or transfer all or any part of its
business or assets.
Section 8. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it shall
deem advisable and in the best interests of the Company;
provided, however, that no such termination or amendment shall,
without the consent of the individual to whom any restricted
stock shall theretofore have been granted, affect or impair the
rights of such individual with respect to such restricted stock;
and provided further, that any such amendment shall be consistent
with the provisions of the Program, as it may be amended from
time to time.
No restricted stock shall be granted under the Plan after
April 18, 1999.
Section 9. Effectiveness of Plan.
This Plan shall be effective as of February 17, 1990.
Section 10. Date of Granting of Restricted Stock.
The granting of restricted stock pursuant to the Plan shall
take place on the date the Compensation Committee or the CEO
decides to grant the restricted stock. As soon as practicable
but no later than twenty (20) days after the granting of the
restricted stock, the Company shall notify the employee of the
grant and, within sixty (60) days of the granting of the
restricted stock, the Company shall submit to the employee an
Agreement duly executed by and on behalf of the Company, and a
stock power or powers with respect to the restricted stock, with
the request that the employee execute the Agreement and stock
powers within sixty (60) days after the mailing by the Company of
the notice to the employee. The employee shall execute the
written Agreement and stock powers within said 60-day period.
<PAGE>
Exhibit (10)(h)
MANAGEMENT INCENTIVE STOCK OPTION PLAN
(as Amended April 18, 1995)
1. Establishment and Purpose. Sprint Corporation, a
Kansas corporation (the "Company"), hereby establishes
a stock option plan to be named the Management
Incentive Stock Option Plan (the "Plan") The purpose of
the Plan is to permit employees of the Company and its
subsidiaries who are eligible to receive annual
incentive compensation to receive nonqualified stock
options in lieu of a portion of the target incentive
under the Company's management incentive plans
("MIPs"), thereby encouraging the employees to focus on
the growth and profitability of the Company and the
performance of its common stock. Subject to approval
of the Company's stockholders, the Plan provides for
options to be granted beginning March 15, 1995, and
ending April 18, 2005. Stock options granted prior to
or as of April 18, 2005, may extend beyond that date.
2. Administration. The Plan shall be administered by the
Organization and Compensation Committee of the Board of
Directors (the "Committee"). The Company shall grant
options under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. The Committee from time to
time may adopt (and thereafter amend and rescind) such
rules and regulations for carrying out the Plan and
take such action in the administration of the Plan, not
inconsistent with the provisions of the Plan, as it
shall deem proper. The Committee may correct any
defect, supply any omission or reconcile any
inconsistency in the Plan, or in any option or
restricted shares of common stock granted or issued
pursuant to the Plan, in the manner and to the extent
it shall deem desirable to effect the terms of the
Plan. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the
Board of Directors or the Committee shall be liable for
any action or determination made in good faith with
respect to the Plan or any option granted under it.
The Corporate Secretary shall act as Plan Administrator
carrying out the day-to-day administration of the Plan
unless the Committee appoints another officer or
employee of the Company as Plan Administrator.
<PAGE> 2
3. Eligibility. Options shall be granted only to
employees of the Company and subsidiaries who
participate in the MIPs. The Committee will determine
each year whether options will be granted in such year,
whether participation will be elective or automatic and
the amount of incentive compensation to be given up for
each stock option. The Committee will, in its
discretion, determine the employees who participate in
the MIPs and, therefore, who will be eligible for
options, the dates on which options shall be granted,
and any conditions on the exercise of the options.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%)
of the total combined voting power or value of all
classes of stock of the Company or any subsidiary.
4. Common Stock Subject to the Plan. The shares of common
stock of the Company, $2.50 par value, to be issued
upon the exercise of a nonqualified option to purchase
common stock granted in lieu of MIP payout may be made
available from the authorized but unissued common stock
of the Company, shares of common stock held in the
treasury, or common stock purchased on the open market
or otherwise.
Approval of the Plan by the Stockholders of the Company
shall constitute authorization to use such shares for
the Plan subject to the discretion of the Board or as
such discretion may be delegated to the Committee.
Subject to the provisions of the following paragraph,
the total number of shares for which options may be
granted under the Plan each year shall be 0.9% of the
total outstanding shares of common stock of the Company
as of the first day of such year; provided, however,
that such numbers shall be increased in any year by the
number of shares available in previous years for which
options have not been granted. If and when an option
granted under the Plan is terminated without having
been exercised in full, the unpurchased or forfeited
shares shall become available for grant to other
employees.
The number of shares subject to the Plan may be
appropriately adjusted by the Committee in the
circumstances outlined in Section 5(k).
5. Stock Options; Terms and Conditions. Each option will
represent the right to purchase a specific number of
shares of common stock of the Company and shall be
subject to the following terms and conditions and to
such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem
desirable:
a. Consideration for and Number of Options. Each
option shall be granted in lieu of a portion of the
optionee's cash payout under the MIPs. The Committee
shall determine the number of shares or the manner of
calculating the number of shares available for each
option each year, subject to the total number of shares
available under the Plan for such year, and the amount
or the method of determining the amount of annual
incentive compensation to be given up by each
participant in return for an option, taking into
consideration appropriate factors in making such
determinations, such as interest rates, volatility of
the market price of common stock of the Company and the
term of the option, provided, however that shares
subject to options granted to any individual employee
during any calendar year shall not exceed a total of
500,000 shares.
<PAGE> 3
b. Participation in the Plan. Participation in the
Plan may be voluntary or automatic, as determined
by the Committee. The rules and procedures for
voluntary participation, when applicable, shall be
established and implemented by the Plan
Administrator.
c. Exercise Price. The price at which each share
covered by an option may be purchased shall be one
hundred percent (100%) of the fair market value of
the Company's common stock on the date the option
is granted. Fair market value shall be deemed to
be the average of the high and low prices of the
Company's common stock for composite transactions
as published by major newspapers for the date the
option is granted or, if no sale of the Company's
common stock shall have been made on that day, the
next preceding day on which there was a sale of
such stock.
d. Vesting. Unless the Committee determines
otherwise, stock option grants shall provide that
the total number of shares subject to an option
shall become exercisable December 31 in the year
of the date of grant.
e. Term of Option. Options shall not be exercisable
after the expiration of ten (10) years from the
date of grant.
f. Payment of Exercise Price. Options shall be
exercisable only upon payment to the Company of
the full purchase price of the shares with respect
to which options are exercised. Payment for the
shares shall be either in United States dollars,
payable in cash or by check, or by surrender of
stock certificates representing like common stock
of the Company having an aggregate fair market
value, determined as of the date of exercise,
equal to the number of shares with respect to
which such options are exercised multiplied by the
exercise price per share. The fair market value
of common stock on the date of exercise of options
shall be determined in the same manner as the fair
market value of common stock on the date of grant
of options is determined. Certain optionees may
use restricted stock as payment for the exercise
price in accordance with Section 6 hereof. In
that event, fair market value of the shares of
restricted stock will be determined as if the
shares were not restricted.
g. Manner of Exercise. A completed exercise form and
the exercise price, whether in the form of cash or
stock, must be delivered to the Plan Administrator
in order to exercise an option. An option shall
be deemed exercised on the date such exercise form
and payment are received by the Plan
Administrator.
h. Time for Exercise. Each option expires if it has
not been exercised within its term. Once an option
has expired for any reason, it can no longer be
<PAGE> 4
exercised. If employment with the Company or a
subsidiary of the Company is terminated, the optionee
may exercise options which are exercisable on the
date of termination of employment until the earlier
of (1) the date on which the option expires and (2)
the end of the applicable time period below:
(i) retirement: five years after retirement
date.
(ii) disability (qualifying for long-term
disability benefits under the Company's Basic
Long-Term Disability Plan): five years after
qualification date.
(iii) death: one year after death for the
estate or designated beneficiary to exercise
the decedent's options.
(iv) involuntary termination other than for cause:
the date on which the option expires.
(v) voluntary termination: three months from the
date of termination of employment.
If an optionee's employment is terminated for a
reason constituting good cause, any outstanding
options granted under the Plan and held by such
optionee at such time will automatically
terminate. For this purpose, "good cause" shall
mean conduct by the optionee which reflects
adversely on his or her honesty, trustworthiness
or fitness as an employee, or the optionee's
willful engagement in conduct which is
demonstrably and materially injurious to the
Company.
If an optionee becomes associated with,
becomes employed by, renders services to, or owns
any interest in (other than a nonsubstantial
interest, as determined by the Committee) any
business in competition with the Company, all
outstanding options whether vested or unvested
shall automatically terminate and shares of
restricted stock received upon the exercise of an
option pursuant to Section 6 hereof which continue
to be restricted shall be forfeited.
i. Restricted Stock. Certain optionees may elect to
deliver restricted shares or receive restricted
shares in connection with an exercise of an
option, as provided in Section 6 hereof.
j. Assignment of Benefits; Beneficiary Designations.
Options may not be executed, levied, garnished,
attached, pledged, assigned or transferred other
than by will or by the laws of descent and
distribution, except that an optionee may designate
a beneficiary or beneficiaries to exercise unexpired
<PAGE> 5
options after the optionee's death. Designations
must be made in writing on a form provided by the
Plan Administrator. Designations shall become
effective on the date that the form -- properly
completed, signed and notarized -- is received by
the Plan Administrator.
k. Change in Stock, Adjustments. In the event that
the outstanding shares of common stock of the
Company are hereafter increased or decreased or
changed into or exchanged for a different number
of shares or kind of shares or other securities of
the Company or of another corporation, by reason
of reorganization, merger, consolidation,
recapitalization, reclassification, stock split
up, combination of shares, or a dividend payable
in capital stock, appropriate adjustment shall be
made by the Committee in the number of shares as
to which outstanding options, or portions thereof
then unexercised, shall be exercisable, to the end
that the optionee's proportionate interest shall
be maintained as before the occurrence of such
event, and such adjustment of outstanding options
shall be made without change of the total price
applicable to unexercised options and with a
corresponding adjustment in the exercise price per
share.
6. Restricted Stock. Certain optionees, as determined by
the Committee, may elect to receive restricted shares
upon payment for the exercise of an option in the form
of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the
number of shares surrendered to pay the exercise price,
while the shares received in excess of the number
surrendered to pay the exercise price may be
restricted. Such optionees may also elect to deliver
restricted shares of the Company's common stock in
payment of the exercise price notwithstanding
restrictions on transferability to which such shares
are subject. The Company shall be authorized to issue
restricted shares of common stock upon such exercises
of stock options, subject to the following conditions:
a. The optionee shall elect a vesting period for the
restricted common stock to be received upon
exercise of the option of between six (6) months
and ten (10) years, subject to rules and
procedures established by the Plan Administrator,
but in no event may an optionee elect a vesting
period shorter than the period provided in
paragraph (d) hereof.
b. The optionee who receives restricted stock may not
sell, transfer, assign, pledge or otherwise encumber
or dispose of shares of restricted stock until such
time as all restrictions on such stock have lapsed
except: (i) to the Company in payment of the exercise
price of a stock option issued by the Company under
any employee stock option plan adopted by the Company
that provides for payment of the exercise price in the
form of restricted stock, provided that such payment
is made in accordance with the terms of such plan; or
(ii) to a trust of which the optionee, the optionee's
spouse, or descendants of the optionee are the
primary beneficiaries and which is a
<PAGE> 6
grantor trust treated as owned by the optionee under
Subchapter J of the Internal Revenue Code, upon the
following terms:
(A) the Company receives, prior to such transfer, an
opinion from optionee's counsel (1) that the trust will
be treated as a grantor trust and will be treated as
being owned by the optionee at all times until the
restrictions on such stock lapse or the stock is
forfeited under the terms of its grant, (2) with
respect to any trust structured as a grantor retained
annuity trust, that the annuity period ends after the
last date on which restrictions on such stock can
lapse, (3) that the terms of the trust provide that
upon the forfeiture of the restricted stock under the
terms of its grant or the earlier termination of the
trust for whatever reason, ownership of the restricted
stock shall revert to the optionee or to the Company,
(4) that the trustee of such trust may not, prior to
the lapsing of restrictions on such stock, sell,
transfer, assign, pledge, or otherwise encumber or
dispose of shares of restricted stock except to the
Company or to the optionee, subject to the restrictions
provided for in this Plan, and (5) that the trustee is
not authorized to incur liabilities on behalf of the
trust, other than to the beneficiaries of the trust;
and
(B) the optionee and the trustee of the trust shall
execute stock powers in blank to be held in the custody
of the Company; and
(C) the Corporate Secretary of the Company may, in his
discretion, enforce the foregoing transfer restrictions
by maintaining physical custody of the certificate or
certificates representing such shares of restricted stock,
by placing a restrictive legend on such certificates,
by requiring the optionee and the trustee to execute
other documents as a pre-condition to such transfer, or
otherwise.
c. An optionee who elects to receive restricted
common stock upon an exercise shall have the right
to satisfy tax withholding obligations in the
manner provided in Section 8 hereof.
d. Restricted common stock received in such an
exercise or from an election to receive a Long-
Term Incentive Plan payout in restricted stock, or
any Restricted Stock Award granted pursuant to the
Long-Term Stock Incentive Program, shall be
eligible for use in payment of the exercise price
of a stock option, so long as all the shares
received as a result of such an exercise are
restricted for a period at least as long as, and
with terms at least as restrictive as the terms
of, the restricted common stock used in payment.
<PAGE> 7
e. The shares of restricted common stock received in
an exercise of a stock option that continue to be
restricted shall be forfeited in the event that
vesting conditions are not satisfied, subject to
the discretion of the Committee, except in the
case of death, disability, normal retirement, or
involuntary termination for reasons other than
cause, in which case all restrictions lapse;
provided, however, that in no event shall
restrictions lapse if the restrictions on shares
used to pay for the exercise have not lapsed under
the same conditions. If restricted shares are
forfeited, the optionee or his representative
shall sign any document and take any other action
required to assign said restricted shares back to
the Company.
f. The optionee will have all the rights of a
stockholder with respect to shares of restricted
stock received upon the exercise of an option,
including the right to vote the shares of stock
and the right to dividends on the stock. Unless
the Plan Administrator establishes alternative
procedures, the shares of restricted stock will be
registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms,
conditions and restrictions applicable to the
award and shall be held in escrow by the Company.
The optionee shall execute a stock power or powers
assigning the shares of restricted stock back to
the Company, which stock powers shall be held in
escrow by the Company and used only in the event
of the forfeiture of any of the shares of
restricted stock. A certificate evidencing
unrestricted shares of common stock shall be
issued to the optionee promptly after the
restrictions lapse on any restricted shares.
g. The Plan Administrator shall have the discretion
and authority to establish any rules in connection
with the use of restricted stock, including but
not limited to regulating the timing of the lapse
of restrictions within the six-month to ten-year
period and prescribing election forms as the Plan
Administrator deems necessary or desirable for the
orderly administration of such exercises.
7. Reload Options. The Committee may provide that
optionees have the right to a reload option, which
shall be subject to the following terms and conditions:
a. Grant of the Reload Option; Number of Shares,
Price. Subject to subsections (b) and (c) of this
Section 7 and to the availability of shares to be
optioned under the Plan, if an optionee has an
option (the "original option") with reload rights
and pays for the exercise of the original option
by surrendering common stock of the Company, the
optionee shall receive a new option ("reload
option") for the number of shares so surrendered
(or, if applicable, the number of shares
provided for in paragraph (h) of this
<PAGE> 8
Section 7) at an exercise price equal to the fair
market value of the stock on the date of the
exercise of the original option.
b. Minimum Purchase Required. A reload option will
be granted only if the exercise of the original
option is an exercise of at least 25% of the total
number of shares granted under the original option
(or an exercise of all the shares remaining under
the original option if less than 25% of the shares
remain to be exercised).
c. Other Requirements. A reload option will not be
granted: (1) if the market value of the common
stock of the Company on the date of exercise of
the original option is less than the exercise
price of the original option; (2) if the optionee
is no longer an employee of the Company or its
subsidiary; or (3) if the original option is
exercised less than one year prior to the
expiration of the original option.
d. Term of Option. The reload option shall expire on
the same date as the original option.
e. Type of Option. The reload option shall be a
nonqualified option.
f. No Additional Reload Options. The reload options
shall not include any right to a second reload
option.
g. Date of Grant, Vesting. The date of grant of the
reload option shall be the date of the exercise of
the original option. The reload options shall be
exercisable in full beginning one year from date
of grant; provided, however, that all shares
purchased upon the exercise of the original option
(except for any shares withheld for tax
withholding obligations) shall not be sold,
transferred or pledged within six months from the
date of exercise of the original option. In no
event shall a reload option be exercised after the
original option expires as provided in subsection
(d) of this Section 7.
h. Stock Withholding; Grants of Reload Options. If
the other requirements of this Section 7 are
satisfied, and if shares are withheld or shares
surrendered for tax withholding, a reload option
will be granted for the number of shares
surrendered as payment for the exercise of the
original option plus the number of shares
surrendered or withheld to satisfy tax
withholding. In connection with reload options
for officers who are subject to Section 16 of the
Securities Exchange Act of 1934, the Committee may
at any time impose any limitations which, in the
Committee's sole discretion, are necessary or
desirable in order to comply with Section 16(b) of
the Securities Exchange Act of 1934 and the rules
and regulations thereunder, or in order to obtain
any exemption therefrom.
<PAGE> 9
i. Other Terms and Conditions. Except as otherwise
provided in this Section 7, all the provisions of
the Plan shall apply to reload options.
8. Stock Withholding Election. When taxes are withheld in
connection with the exercise of a stock option by
delivering shares of stock in payment of the exercise
price, or upon the lapse of restrictions on restricted
stock received upon the exercise of an option (the date
on which income is recognized in connection with any
such exercise or lapse of such restrictions hereinafter
referred to as the "Tax Date"), the optionee may elect
to make payment for the withholding of federal, state
and local taxes, excluding Social Security and Medicare
taxes, up to the optionee's marginal tax rates, by one
or both of the following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, or upon the lapse of
restrictions, a number of shares having a fair
market value (as defined herein) on the Tax Date
equal to the amount to be withheld. The amount of
tax withholding to be satisfied by withholding
shares from the option exercise or from the
restricted stock received through the exercise of
an option upon the lapse of restrictions is
limited to the minimum amount of taxes, excluding
Social Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all
tax withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option; and (b) within a
"window period" as defined in Rule 16b-3(e)(3) under
the Securities Exchange Act of 1934 or at least six
months in advance of the Tax Date. An election by an
Insider to deliver stock or have stock retained to
satisfy tax obligations is subject to the approval of
the Committee and to such rules as the Committee may
from time to time adopt.
9. Miscellaneous.
a. Amendment. The Company reserves the right to
amend the Plan at any time by action of the Board
of Directors provided that no such amendment
<PAGE> 10
may materially and adversely affect any outstanding
stock options without the consent of the
respective participants, and provided that,
without the approval of the stockholders, no such
amendment may increase the total number of shares
reserved for the purposes of the Plan or change
the employees or class of employees eligible to
participate in the Plan.
b. Effectiveness of Plan. This Plan shall be
effective as of February 18, 1995, subject to
approval of Stockholders of the Company prior to
February 18, 1996.
c. Securities. All certificates for shares delivered
under the Plan shall be subject to such stock-
transfer orders and other restrictions as the
Committee may deem advisable under the rules,
regulations, and other requirements of the
Securities and Exchange Commission, any stock
exchange upon which the shares are then listed,
and any applicable federal or state securities
law, and the Committee may cause a legend or
legends to be put on any such certificates to make
appropriate reference to such restrictions.
d. Rights in Securities. No optionee or optionee's
beneficiary, executor or administrator, legatees
or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares
subject to an option unless and until a stock
certificate or certificates for such shares are
issued to such person or persons under the terms
of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in
cash, securities or other property) or
distributions or other rights for which the record
date is prior to the date such stock certificate
is issued, except as provided in Section 5(k)
hereof.
e. Date of Grant. The grant of an option shall be
effective no earlier than the date the Committee
decides to grant the option, except that grants
of reload options shall be effective as provided
in Section 7g hereof. .
f. Application of Funds. The proceeds received by
the Company from the sale of stock subject to
option are to be added to the general funds of the
Company and used for its corporate purposes.
g. No Obligation to Exercise Option. Granting of an
option shall impose no obligation on the optionee
to exercise such option.
<PAGE>
Exhibit (10)(i)
THE SPRINT LONG-TERM STOCK INCENTIVE PROGRAM
(as amended February 18, 1995 and April 18, 1995)
Section 1. Purpose. The purposes of the Sprint Long-
Term Stock Incentive Program (the "Plan") are to encourage
directors of Sprint Corporation (the "Company") and officers
and selected key employees of the Company and its Affiliates
to acquire a proprietary and vested interest in the growth
and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the
benefit of stockholders, and to enhance the ability of the
Company and its Affiliates to attract and retain individuals
of exceptional talent upon whom, in large measure, the
sustained progress, growth and profitability of the Company
depends.
Section 2. Definitions. As used in the Plan, the
following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that
directly, or through one or more intermediaries, controls,
or is controlled by, or is under common control with, the
Company or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation
Right, Restricted Stock Award, Performance Share,
Performance Unit, Dividend Equivalent, Other Stock Unit
Award, or any other right, interest, or option relating to
Shares granted pursuant to the provisions of the Plan.
(c) "Award Agreement" shall mean any written
agreement, contract, or other instrument or document
evidencing any Award granted hereunder and signed by both
the Company and the Participant or by both the Company and
an Outside Director.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) "Committee" shall mean the Organization and
Compensation Committee of the Board, composed of not less
than three directors each of whom is a Disinterested Person.
(g) "Company" shall mean Sprint Corporation.
(h) "Disinterested Person" shall have the meaning set
forth in Rule 16b-3(d)(3) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended, or any successor definition adopted by the
Commission.
(i) "Dividend Equivalent" shall mean any right granted
pursuant to Section 14(h) hereof.
(j) "Employee" shall mean any salaried employee of the
Company or of any Affiliate.
(k) "Fair Market Value" shall mean, with respect to
any property, the market value of such property determined
by such methods or procedures as shall be established from
time to time by the Committee.
(l) "Incentive Stock Option" shall mean an Option
granted under Section 6 hereof that is intended to meet the
requirements of Section 422A of the Code or any successor
provision thereto.
(m) "Nonstatutory Stock Option" shall mean an Option
granted to a Participant under Section 6 hereof, and an
Option granted to an Outside Director pursuant to Section 11
hereof, that is not intended to be an Incentive Stock
Option.
(n) "Option" shall mean any right granted to a
Participant under the Plan allowing such Participant to
purchase Shares at such price or prices and during such
period or periods as the Committee shall determine.
"Option" shall also mean the right granted to an Outside
Director under Section 11 hereof allowing such Outside
Director to purchase shares of the common stock of the
Company on the terms set forth in Section 11.
(o) "Other Stock Unit Award" shall mean any right
granted to a Participant by the Committee pursuant to
Section 10 hereof.
(p) "Outside Director" shall mean a member of the
Board who is not an Employee of the Company or of any
Affiliate.
(q) "Participant" shall mean an Employee who is
selected by the Committee to receive an Award under the
Plan.
(r) "Performance Award" shall mean any Award of
Performance Shares or Performance Units pursuant to Section
9 hereof.
(s) "Performance Period" shall mean that period
established by the Committee at the time any Performance
Award is granted or at any time thereafter during which any
performance goals specified by the Committee with respect to
such Award are to be measured.
(t) "Performance Share" shall mean any grant pursuant
to Section 9 hereof of a unit valued by reference to a
designated number of Shares, which value may be paid to the
Participant by delivery of such property as the Committee
shall determine, including, without limitation, cash,
Shares, or any combination thereof, upon achievement of such
performance goals during the Performance Period as the
Committee shall establish at the time of such grant or
thereafter.
(u) "Performance Unit" shall mean any grant pursuant
to Section 9 hereof of a unit valued by reference to a
designated amount of property other than Shares, which value
may be paid to the Participant by delivery of such property
as the Committee shall determine, including, without
limitation, cash, Shares, or any combination thereof, upon
achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such
grant or thereafter.
(v) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, or government or political
subdivision thereof.
(w) "Restricted Stock" shall mean any Share issued
with restrictions on the holder's right to sell, transfer,
pledge, or assign such Share and with such other
restrictions as the Committee, in its sole discretion, may
impose (including, without limitation, any restriction on
the right to vote such Share, and the right to receive any
cash dividends), which restrictions may lapse separately or
in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
(x) "Restricted Stock Award" shall mean an award of
Restricted Stock under Section 8 hereof.
(y) "Senior Officer" shall mean any employee of the
Company holding the office of Vice President or higher.
(z) "Shares" shall mean shares of the common stock of
the Company, $2.50 par value, and such other securities of
the Company as the Committee may from time to time
determine.
(aa) "Stock Appreciation Right" shall mean any right
granted to a Participant pursuant to Section 7 hereof to
receive, upon exercise by the Participant, the excess of (i)
the Fair Market Value of one Share on the date of exercise
or, if the Committee shall so determine in the case of any
such right other than one related to any Incentive Stock
Option, at any time during a specified period before the
date of exercise over (ii) the grant price of the right as
specified by the Committee, in its sole discretion, on the
date of grant, which shall not be less than the Fair Market
Value of one Share on such date. Any payment by the Company
in respect of such right may be made in cash, Shares, other
property, or any combination thereof, as the Committee, in
its sole discretion, shall determine.
(bb) "Stockholder Meeting" shall mean the annual
meeting of stockholders of the Company in each year.
Section 3. Administration. The Plan shall be
administered by the Committee. The Committee shall have
full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan
as may from time to time be adopted by the Board, to: (i)
select the Employees of the Company and its Affiliates to
whom Awards may from time to time be granted hereunder; (ii)
determine the type or types of Award to be granted to each
Participant hereunder; (iii) determine the number of Shares
to be covered by each Award granted hereunder; provided,
however, that Shares subject to Options and Stock
Appreciation Rights granted to any individual employee
during any calendar year shall not exceed a total of 500,000
Shares; (iv) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award
granted hereunder; (v) determine whether, to what extent and
under what circumstances Awards may be settled in cash,
Shares or other property or canceled or suspended; (vi)
determine whether, to what extent and under what
circumstances cash, Shares and other property and other
amounts payable with respect to an Award under this Plan
shall be deferred either automatically or at the election of
the Participant; (vii) interpret and administer the Plan and
any instrument or agreement entered into under the Plan;
(viii) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other
determination and take any other action that the Committee
deems necessary or desirable for administration of the Plan.
Decisions of the Committee shall be final, conclusive and
binding upon all persons, including the Company, any
Participant, any stockholder, and any employee of the
Company or of any Affiliate. Notwithstanding the above, the
Committee shall not have any discretion with respect to the
Options granted to Outside Directors pursuant to Section 11
hereof. A majority of the members of the Committee may
determine its actions and fix the time and place of its
meetings.
Section 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(b),
the total number of Shares available for grant under the
Plan in each calendar year shall be three-fifths of one
percent (0.6%) of the total outstanding Shares as of the
first day of such year for which the Plan is in effect;
provided that such number shall be increased in any year by
the number of Shares available for grant hereunder in
previous years but not covered by Awards granted hereunder
in such years; and provided further, that no more than four
million (4,000,000)<FN-1> Shares shall be cumulatively available
for the grant of Incentive Stock Options under the Plan. In
addition, any Shares issued by the Company through the
assumption or substitution of outstanding grants from an
acquired company shall not reduce the shares available for
grants under the Plan. Any Shares issued hereunder may
consist, in whole or in part, of authorized and unissued
shares or treasury shares. If any Shares subject to any
Award granted hereunder are forfeited or such Award
otherwise terminates without the issuance of such Shares or
of other consideration in lieu of such Shares, the Shares
subject to such Award, to the extent of any such forfeiture
or termination, shall again be available for grant under the
Plan.
(b) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other
change in corporate structure affecting the Shares, such
adjustment shall be made in the aggregate number and class
of Shares which may be delivered under the Plan, in the
number, class and option price of Shares subject to
outstanding Options granted under the Plan, and in the value
of, or number or class of Shares subject to, Awards granted
under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number
of Shares subject to any Award shall always be a whole
number, and provided further, that the number and price of
shares subject to outstanding Options granted to Outside
Directors pursuant to Section 11 hereof and the number of
shares subject to future Options to be granted pursuant to
Section 11 shall be subject to adjustment only as set forth
in Section 11.
Section 5. Eligibility. Any Employee (excluding any
member of the Committee) shall be eligible to be selected as
a Participant.
Section 6. Stock Options. Options may be granted
hereunder to Participants either alone or in addition to
other Awards granted under the Plan. Any Option granted to
a Participant under the Plan shall be evidenced by an Award
Agreement in such form as the Committee may from time to
time approve. Any such Option shall be subject to the
following terms and conditions and to such additional terms
and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price per Share
purchasable under an Option shall be determined by the
Committee in its sole discretion; provided that such
purchase price shall not be less than the Fair Market Value
of the Share on the date of the grant of the Option.
(b) Option Period. The term of each Option shall be
fixed by the Committee in its sole discretion; provided that
no Incentive Stock Option shall be exercisable after the
expiration of ten years from the date the Option is granted.
(c) Exercisability. Options shall be exercisable at
such time or times as determined by the Committee at or
subsequent to grant. Unless otherwise determined by the
Committee at or subsequent to grant, no Incentive Stock
Option shall be exercisable during the year ending on the
day before the first anniversary date of the granting of the
Incentive Stock Option.
(d) Method of Exercise. Subject to the other
provisions of the Plan and any applicable Award Agreement,
any Option may be exercised by the Participant in whole or
in part at such time or times, and the Participant may make
payment of the option price in such form or forms,
including, without limitation, payment by delivery of cash,
Shares or other consideration (including, where permitted by
law and the Committee, Awards) having a Fair Market Value on
the exercise date equal to the total option price, or by any
combination of cash, Shares and other consideration as the
Committee may specify in the applicable Award Agreement.
(e) Incentive Stock Options. In accordance with rules
and procedures established by the Committee, the aggregate
Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Stock Options
held by any Participant which are exercisable for the first
time by such Participant during any calendar year under the
Plan (and under any other benefit plans of the Company or of
any parent or subsidiary corporation of the Company) shall
not exceed $100,000 or, if different, the maximum limitation
in effect at the time of grant under Section 422A of the
Code, or any successor provision, and any regulations
promulgated thereunder. The terms of any Incentive Stock
Option granted hereunder shall comply in all respects with
the provisions of Section 422A of the Code, or any successor
provision, and any regulations promulgated thereunder.
(f) Form of Settlement. In its sole discretion, the
Committee may provide, at the time of grant, that the shares
to be issued upon an Option's exercise shall be in the form
of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.
Section 7. Stock Appreciation Rights. Stock
Appreciation Rights may be granted hereunder to Participants
either alone or in addition to other Awards granted under
the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock
Appreciation Rights need not be the same with respect to
each recipient. Any Stock Appreciation Right related to a
Nonstatutory Stock Option may be granted at the same time
such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any Stock
Appreciation Right related to an Incentive Stock Option must
be granted at the same time such Option is granted. In the
case of any Stock Appreciation Right related to any Option,
the Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a
Stock Appreciation Right granted with respect to less than
the full number of Shares covered by a related Option shall
not be reduced until the exercise or termination of the
related Option exceeds the number of shares not covered by
the Stock Appreciation Right. Any Option related to any
Stock Appreciation Right shall no longer be exercisable to
the extent the related Stock Appreciation Right has been
exercised. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right
as it shall deem appropriate.
Section 8. Restricted Stock.
(a) Issuance. Restricted Stock Awards may be issued
hereunder to Participants, for no cash consideration or for
such minimum consideration as may be required by applicable
law, either alone or in addition to other Awards granted
under the Plan. The provisions of Restricted Stock Awards
need not be the same with respect to each recipient.
(b) Registration. Any Restricted Stock issued
hereunder may be evidenced in such manner as the Committee
in its sole discretion shall deem appropriate, including,
without limitation, book-entry registration or issuance of a
stock certificate or certificates. In the event any stock
certificate is issued in respect of shares of Restricted
Stock awarded under the Plan, such certificate shall be
registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award.
(c) Forfeiture. Except as otherwise determined by the
Committee at the time of grant, upon termination of
employment for any reason during the restriction period, all
shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the
Company; provided that in the event of a Participant's
retirement, permanent disability, other termination of
employment or death, or in cases of special circumstances,
the Committee may, in its sole discretion, when it finds
that a waiver would be in the best interests of the Company,
waive in whole or in part any or all remaining restrictions
with respect to such Participant's shares of Restricted
Stock. Unrestricted Shares, evidenced in such manner as the
Committee shall deem appropriate, shall be issued to the
grantee promptly after the period of forfeiture, as
determined or modified by the Committee.
Section 9. Performance Awards. Performance Awards may
be issued hereunder to Participants, for no cash
consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to
other Awards granted under the Plan. The performance
criteria to be achieved during any Performance Period and
the length of the Performance Period shall be determined by
the Committee upon the grant of each Performance Award.
Except as provided in Section 12, Performance Awards will be
paid only after the end of the relevant Performance Period.
Performance Awards may be paid in cash, Shares, other
property or any combination thereof, in the sole discretion
of the Committee at the time of payment. The performance
levels to be achieved for each Performance Period and the
amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid
in a lump sum or in installments following the close of the
Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.
Section 10. Other Stock Unit Awards.
(a) Stock and Administration. Other Awards of Shares
and other Awards that are valued in whole or in part by
reference to, or are otherwise based on, Shares or other
property ("Other Stock Unit Awards") may be granted
hereunder to Participants, either alone or in addition to
other Awards granted under the Plan. Other Stock Unit
Awards may be paid in Shares, cash or any other form of
property as the Committee shall determine. Subject to the
provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees of the Company
and its Affiliates to whom and the time or times at which
such Awards shall be made, the number of Shares to be
granted pursuant to such Awards, and all other conditions of
the Awards. The provisions of Other Stock Unit Awards need
not be the same with respect to each recipient.
(b) Terms and Conditions. Subject to the provisions
of this Plan and any applicable Award Agreement, Shares
subject to Awards made under this Section 10 may not be
sold, assigned, transferred, pledged or otherwise encumbered
prior to the date on which the Shares are issued, or, if
later, the date on which any applicable restriction,
performance or deferral period lapses. Shares granted under
this Section 10 may be issued for no cash consideration or
for such minimum consideration as may be required by
applicable law; Shares purchased pursuant to a purchase
right awarded under this Section 10 shall be purchased for
such consideration as the Committee shall in its sole
discretion determine, which shall not be less than the Fair
Market Value of such Shares as of the date such purchase
right is awarded.
Section 11. Outside Directors' Options.
(a) Grant of Options. On the date of the 1989
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 5,000<FN-2> shares
of the common stock of the Company, $2.50 par value; on the
date of the 1990 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1989 Stockholders
Meeting shall automatically be granted an Option to purchase
8,000<FN-3> shares of the common stock of the Company; on the
date of the 1991 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1990 Stockholders
Meeting shall automatically be granted an Option to purchase
6,000<FN-4> shares of the common stock of the Company; on the
date of the 1992 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1991 Stockholders
Meeting shall automatically be granted an Option to purchase
4,000<FN-5> shares of the common stock of the Company; on the
date of the 1993 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1992 Stockholders
Meeting shall automatically be granted an Option to purchase
2,000<FN-6> shares of the common stock of the Company; and on the
date of each Stockholders Meeting after the 1993
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 2,000<FN-7> shares
of the common stock of the Company. All such options shall
be Nonstatutory Stock Options. The price at which each
share of common stock covered by such Options may be
purchased shall be one hundred percent (100%) of the fair
market value of the stock on the date the Option is granted.
Fair market value for purposes of this Section 11 shall be
deemed to be the average of the high and low prices of the
common stock for composite transactions as published by
major newspapers for the date the Option is granted or, if
no sale of the common stock shall have been made on that
day, the next preceding day on which there was a sale of the
common stock.
(b) Exercise of Options. Except as set forth in this
Section 11, 25% of the total number of the shares subject to
an Option granted to an Outside Director shall become
exercisable on December 31 of the year in which the option
is granted and 25% on December 31 of each of the three
succeeding years. The right to purchase shares with respect
to shares which have become exercisable shall be cumulative
during the term of the Option. Any Option that has been
outstanding for more than one (1) year shall immediately
become exercisable in the event of a Change in Control, as
hereinafter defined. The Option may be exercised by the
Outside Director during the period that the Outside Director
remains a member of the Board and for a period of five (5)
years following retirement, provided that only those Options
exercisable at the date of the Outside Director's retirement
may be exercised during the period following retirement and,
provided further, that in no event shall the Option be
exercisable more than ten (10) years after the date of
grant.
In the event of the death of an Outside Director, the
Option shall be exercisable only within the twelve (12)
months next succeeding the date of death, and then only (i)
by the executor or administrator of the Outside Director's
estate or by the person or persons to whom the Outside
Director's rights under the Option shall pass by the Outside
Director's will or the laws of descent and distribution, and
(ii) if and to the extent that the Outside Director was
entitled to exercise the Option at the date of the Outside
Director's death, provided that in no event shall the Option
be exercisable more than ten (10) years after the date of
grant.
(c) Payment. An Option granted to an Outside Director
shall be exercisable only upon payment to the Company of the
full purchase price of the shares with respect to which the
Option is being exercised. Payment for the shares shall be
in United States dollars, payable in cash or by check.
(d) Adjustment of Options. In case there shall be a
merger, reorganization, consolidation, recapitalization,
stock dividend or other change in corporate structure such
that the shares of common stock of the Company are changed
into or become exchangeable for a larger or smaller number
of shares, thereafter the number of shares subject to
outstanding Options and the number of shares subject to
Options to be granted to Outside Directors pursuant to the
provisions of this Section 11 shall be increased or
decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of common stock
of the Company by reason of such change in corporate
structure, provided that the number of shares shall always
be a whole number, and the purchase price per share of any
outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the
case of a decrease in the number of shares, shall be
proportionately increased.
Section 12. Change in Control.
(a) In order to maintain the Participants' rights in
the event of any Change in Control of the Company, as
hereinafter defined, the Committee, as constituted before
such Change in Control, may, in its sole discretion, as to
any Award (except Options granted pursuant to Section 11),
either at the time an Award is made hereunder or any time
thereafter, take any one or more of the following actions:
(i) provide for the acceleration of any time periods
relating to the exercise or realization of any such Award so
that such Award may be exercised or realized in full on or
before a date fixed by the Committee; (ii) provide for the
purchase of any such Award, upon the Participant's request,
for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization
of the Participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any
such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; or (iv) cause
any such Award then outstanding to be assumed, or new rights
substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee
may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards as it
may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall be deemed to have
occurred if (i) any Person other than a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, and other than the Company or a corporation
owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board and any new Director (other than a
Director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in (i) above) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof.
Section 13. Amendments and Termination. The Board may
amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would
impair the rights of an optionee or Participant under an
Award theretofore granted, without the optionee's or
Participant's consent, or that without the approval of the
Stockholders would:
(a) except as is provided in Section 4(b) of the Plan,
increase the total number of shares reserved for the
purposes of the Plan;
(b) change the employees or class of employees
eligible to participate in the Plan; or
(c) change in any way the Options provided for in
Section 11 of the Plan.
The Committee may amend the terms of any Award
theretofore granted (except Options granted pursuant to
Section 11 hereof), prospectively or retroactively, but no
such amendment shall impair the rights of any Participant
without his consent. The Committee may also substitute new
Awards for Awards previously granted to Participants,
including without limitation previously granted Options
having higher option prices.
Section 14. General Provisions.
(a) No Award shall be assignable or transferable by a
Participant or an Outside Director otherwise than by will or
by the laws of descent and distribution, except that
Restricted Stock may be used in payment of the exercise
price of a stock option issued by the Company and may be otherwise
transferred in a manner that protects the interests of the
Company as the Committee may determine; provided
that, if so determined by the Committee, a Participant may,
in the manner established by the Committee, designate a
beneficiary to exercise the rights of the Participant with
respect to any Award upon the death of the Participant.
Each Award shall be exercisable, during the lifetime of the
Participant or the Outside Director, only by the Participant
or the Outside Director or, if permissible under applicable
law, by the guardian or legal representative of the
Participant or Outside Director.
(b) The term of each Award shall be for such period of
months or years from the date of its grant as may be
determined by the Committee; provided that in no event shall
the term of any Incentive Stock Option or any Stock
Appreciation Right related to any Incentive Stock Option
exceed a period of ten (10) years from the date of its
grant.
(c) No Employee or Participant shall have any claim to
be granted any Award under the Plan and there is no
obligation for uniformity of treatment of Employees or
Participants under the Plan.
(d) The prospective recipient of any Award under the
Plan shall not, with respect to such Award, be deemed to
have become a Participant, or to have any rights with
respect to such Award, until and unless such recipient shall
have executed an agreement or other instrument evidencing
the Award and delivered a fully executed copy thereof to the
Company, and otherwise complied with the then applicable
terms and conditions.
(e) The Committee shall be authorized to make
adjustments in performance award criteria or in the terms
and conditions of other Awards in recognition of unusual or
nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or
accounting principles. The Committee may correct any
defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards
or the right or obligation to make future such awards in
connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make
such adjustments in the terms of Awards under the Plan as it
shall deem appropriate. Notwithstanding the above, the
Committee shall not have the right to make any adjustments
in the terms or conditions of Options granted pursuant to
Section 11.
(f) The Committee shall have full power and authority
to determine whether, to what extent and under what
circumstances any Award (other than an Option granted
pursuant to Section 11) shall be canceled or suspended. In
particular, but without limitation, all outstanding Awards
to any Participant shall be canceled if the Participant,
without the consent of the Committee, while employed by the
Company or after termination of such employment, becomes
associated with, employed by, renders services to, or owns
any interest in (other than any nonsubstantial interest, as
determined by the Committee), any business that is in
competition with the Company or with any business in which
the Company has a substantial interest as determined by the
Committee or any one or more Senior Officers or committee of
Senior Officers to whom the authority to make such
determination is delegated by the Committee.
(g) All certificates for Shares delivered under the
Plan pursuant to any Award shall be subject to such stock-
transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any
stock exchange upon which the Shares are then listed, and
any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(h) Subject to the provisions of this Plan and any
Award Agreement, the recipient of an Award (including,
without limitation, any deferred Award, but excluding
Options granted pursuant to Section 11) may, if so
determined by the Committee, be entitled to receive,
currently or on a deferred basis, interest or dividends, or
interest or dividend equivalents, with respect to the number
of shares covered by the Award, as determined by the
Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have
been reinvested in additional Shares or otherwise
reinvested.
(i) Except as otherwise required in any applicable
Award Agreement or by the terms of the Plan, recipients of
Awards under the Plan shall not be required to make any
payment or provide consideration other than the rendering of
services.
(j) The Committee may delegate to one or more Senior
Officers or a committee of Senior Officers the right to
grant Awards to Employees who are not officers or directors
of the Company and to cancel or suspend Awards to Employees
who are not officers or directors of the Company.
(k) The Company shall be authorized to withhold from
any Award granted or payment due under the Plan the amount
of withholding taxes due with respect to an Award or payment
hereunder and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for
the payment of such taxes. The Company shall also be
authorized to accept the delivery of shares by a Participant
in payment for the withholding of federal, state and local
taxes (but not for social security and medicare taxes) up to
the Participant's marginal tax rates.
(l) Nothing contained in this Plan shall prevent the
Board of Directors from adopting other or additional
compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific
cases.
(m) The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of
Kansas and applicable Federal law.
(n) If any provision of this Plan is or becomes or is
deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to
applicable laws or if it cannot be construed or deemed
amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be
stricken and the remainder of the Plan shall remain in full
force and effect.
Section 15. Effective Date of Plan. The Plan shall be
effective as of April 18, 1989.
Section 16. Term of Plan. No Award shall be granted
pursuant to the Plan after 10 years from the date of
stockholder approval, but any Award theretofore granted may
extend beyond that date.
<FN>
<FN-1>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<FN-2>The number of shares under the options was increased to
10,000 due to the December, 1989 two-for-one stock split.
<FN-3>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<FN-4>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<FN-5>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<FN-6>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
<FN-7>The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
</TABLE>
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Millions, Except Per Share Data)
Three Months
Ended
March 31,
1995 1994
(Unaudited)
Primary earnings per share
Net income $ 224.3 $ 227.4
Preferred stock dividends (0.7) (0.7)
Earnings applicable to common stock $ 223.6 $ 226.7
Weighted average number of common shares (1) 349.5 346.7
Primary earnings per share $ 0.64 $ 0.65
Fully diluted earnings per share
Earnings applicable to common stock $ 223.6 $ 226.7
Convertible preferred stock dividends 0.1 0.1
Earnings as adjusted for purposes of computing
fully diluted earnings per share $ 223.7 $ 226.8
Weighted average number of common shares 349.5 346.7
Additional dilution for common stock equivalents 1.5 1.2
and dilutive securities
Total 351.0 347.9
Fully diluted earnings per share $ 0.64 $ 0.65
(1) Weighted average number of common shares have been adjusted
for dilutive common stock equivalents using the treasury stock method.
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Three Months Ended
March 31,
1995 1994
(In Millions)
Earnings
Net income $ 224.3 $ 227.4
Capitalized interest (4.5) (1.0)
Income tax provision 132.1 129.0
Subtotal 351.9 355.4
Fixed charges
Interest charges 103.7 102.1
Interest factor of operating rents 30.2 28.1
Pre-tax cost of preferred stock
dividends of subsidiaries 0.2 0.2
Total fixed charges 134.1 130.4
Earnings, as adjusted $ 486.0 $ 485.8
Ratio of earnings to fixed charges 3.62 3.73(1)
(1) Earnings as computed for the ratio of earnings to fixed
charges includes a gain related to the sale of an investment in
equity securities of $22 million for the three months ended March
31, 1994. In the absence of this gain, the ratio of earnings to
fixed charges would have been 3.56 for the first quarter of 1994.
Note: The above ratios have been computed by dividing fixed
charges into the sum of (a) net income less capitalized
interest included in income, (b) income taxes, and (c) fixed
charges. Fixed charges consist of interest on all
indebtedness (including amortization of debt issuance
expenses), the interest component of operating rents and the
pre-tax cost of preferred stock dividends of subsidiaries.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 132,200
<SECURITIES> 0
<RECEIVABLES> 1,642,200
<ALLOWANCES> 154,700
<INVENTORY> 213,200
<CURRENT-ASSETS> 2,214,300
<PP&E> 19,599,700
<DEPRECIATION> 8,648,600
<TOTAL-ASSETS> 15,218,500
<CURRENT-LIABILITIES> 2,997,700
<BONDS> 4,784,400
<COMMON> 871,400
34,700
0
<OTHER-SE> 3,805,300
<TOTAL-LIABILITY-AND-EQUITY> 15,218,500
<SALES> 0
<TOTAL-REVENUES> 3,271,500
<CGS> 0
<TOTAL-COSTS> 2,026,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,200
<INCOME-PRETAX> 356,400
<INCOME-TAX> 132,100
<INCOME-CONTINUING> 224,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,300
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
