<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-26649
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
MCCAW INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)
WASHINGTON
(State or other jurisdiction of
incorporation or organization)
4812
(Primary Standard Industrial
Classification Code Number)
91-167-1412
(I.R.S. Employer
Identification No.)
------------------
1191 SECOND AVENUE
SUITE 1600
SEATTLE, WASHINGTON 98101
(TELEPHONE: 206-749-8000)
(Address, including zip code,
and telephone number, including
area code, of registrant's
principal executive offices)
------------------
HENG-PIN KIANG, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MCCAW INTERNATIONAL, LTD.
1191 SECOND AVENUE, SUITE 1600
SEATTLE, WASHINGTON 98101
(TELEPHONE: 206-749-8000)
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
------------------
Copies of Communications to:
DENNIS J. FRIEDMAN, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(TELEPHONE: 212-408-5100)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH Section 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID Section 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 18, 1997
PROSPECTUS
MCCAW INTERNATIONAL, LTD. LOGO
OFFER TO EXCHANGE
13% Senior Discount Notes due
April 15, 2007 for any and all outstanding
13% Senior Discount Notes due April 15, 2007
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1997 UNLESS EXTENDED.
McCAW INTERNATIONAL, LTD., a Washington corporation (the "Company"), is
hereby offering (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange its 13% Senior Discount
Notes due April 15, 2007 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a registration statement of which this Prospectus is a part (together with all
amendments and exhibits thereto, the "Registration Statement"), for an equal
principal amount at maturity of its outstanding 13% Senior Discount Notes due
April 15, 2007 (the "Private Notes"), of which approximately $951.5 million
aggregate principal amount at maturity was issued on March 6, 1997 and is
outstanding on the date hereof.
The Private Notes were sold by the Company in an offering by the Company
(the "Initial Offering") of 951,463 Units (the "Units") exempt from the
registration requirements of the Securities Act, which was consummated on March
6, 1997 (the "Closing Date"). Each Unit issued in the Initial Offering consisted
of one Private Note and one warrant (collectively, the "Warrants") to purchase
.10616 shares of common stock, without par value, of the Company. The Private
Notes and Warrants will be separately tradeable upon the effectiveness of this
Registration Statement. The Private Notes and Warrants are sometimes
collectively referred to herein as the "Private Securities."
The form and terms of the Exchange Notes are identical in all material
respects to those of the Private Notes, except for certain transfer restrictions
and registration rights relating to the Private Notes and except for certain
interest provisions related to such registration rights. The Exchange Notes will
evidence the same indebtedness as the Private Notes (which they replace) and
will be entitled to the benefits of an Indenture dated as of March 6, 1997,
governing the Private Notes and the Exchange Notes (the "Indenture"). The
Exchange Notes will mature on April 15, 2007. No cash interest will be payable
on the Exchange Notes prior to October 15, 2002. Interest on the Exchange Notes
will accrue from April 15, 2002 and will be payable in cash on each April 15 and
October 15, commencing October 15, 2002. The Exchange Notes and payments due in
respect thereof are solely the obligation of the Company and will not be
guaranteed by the Operating Companies (as defined herein). The Private Notes and
the Exchange Notes are sometimes collectively referred to herein as the "Notes."
See "The Exchange Offer" and "Description of the Notes."
The Exchange Notes may be redeemed, at the option of the Company, in whole
or in part, at any time on or after April 15, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, prior to April 15, 2000, the Company may redeem up to
35% of the aggregate principal amount at maturity of the Notes with the proceeds
of one or more sales of Capital Stock (other than Redeemable Stock) (each as
defined herein) at the redemption price set forth herein; provided, however,
that after any such redemption at least $618.5 million aggregate principal
amount at maturity of the Notes remains outstanding. [continued on next page]
------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
EXCHANGE NOTES.
------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
[continued from front cover]
The Exchange Notes will be senior unsecured indebtedness of the Company,
will rank pari passu in right of payment with all unsubordinated unsecured
indebtedness of the Company and will be senior in right of payment to all
subordinated indebtedness of the Company. After giving pro forma effect to the
Transactions (as defined herein) and the Initial Offering, as of December 31,
1996, the Company would have had no indebtedness outstanding other than the
Exchange Notes. All existing and future liabilities (including trade payables)
of the Company's Restricted Group Members (as defined herein) will be
effectively senior to the Exchange Notes. As of December 31, 1996, after giving
effect to the Transactions, the Company's Restricted Group Members would have
had approximately $79.7 million of liabilities, including $25.0 million of
indebtedness.
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. Private Notes may be tendered only in
integral multiples of $1,000 at maturity. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Rights Agreement, dated as of
March 3, 1997 (the "Registration Rights Agreement"), between the Company and the
Placement Agents (as defined herein). The Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Private Notes
may be offered for resale, resold and otherwise transferred by a holder thereof
(other than (i) a broker-dealer who purchased such Private Notes directly from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery requirements of the Securities
Act; provided, that the holder is acquiring Exchange Notes in the ordinary
course of its business and is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Private Notes wishing to accept
the Exchange Offer must represent to the Company that such conditions have been
met. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes, which contains a plan of distribution with respect to such
resale transactions. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with any resale of the Exchange Notes received
for Private Notes where such Private Notes were acquired by a broker-dealer as a
result of market-making or other trading activities (other than Private Notes
acquired directly from the Company). The Company has agreed that, for a period
of 180 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resales. See "Plan of
Distribution." The Company believes that none of the registered holders of the
Private Notes is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company.
The Private Securities have been designated eligible for trading in the
Private Initial Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market of the National Association of Securities Dealers, Inc. (the
"NASD"). The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or to seek approval through any automated quotation
system nor do the Placement Agents intend to make a market in the Exchange
Notes. There can be no assurance regarding the future development of a market
for the Exchange Notes, or the ability of holders of the Exchange Notes to sell
their Exchange Notes or the price at which such holders may be able to sell
their Exchange Notes. If such a market were to develop, the Exchange Notes could
trade at prices that may be higher or lower than the initial public offering
price depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. See "Risk
Factors -- Lack of Public Market."
Holders of Private Notes whose Private Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Private Notes and will be
entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Private Notes will continue to be subject to
the existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Private Notes held by them.
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer. See "The Exchange Offer -- Resale of the
Exchange Notes."
THIS PROSPECTUS IS DATED JULY , 1997
<PAGE> 4
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY SUCH PROSPECTUS SUPPLEMENT NOR ANY RESALE MADE THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS
PROSPECTUS AND ANY SUCH RELATED PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION.
------------------------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES LAWS. ALL STATEMENTS REGARDING THE COMPANY'S AND THE OPERATING
COMPANIES' (AS DEFINED HEREIN) EXPECTED FINANCIAL POSITION, BUSINESS AND
FINANCING PLANS ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND THE
OPERATING COMPANIES BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
THE INFORMATION UNDER "RISK FACTORS," "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL SUCH FORWARD-
LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
------------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
------------------------------
Unless otherwise indicated, industry and demographic data used throughout
this Prospectus have been obtained from the following industry publications and
have not been independently verified by the Company or the Placement Agents:
MTA-EMCI World Cellular Markets: 1996; MTA-EMCI Latin American Cellular Markets:
1996; MTA-EMCI Asia Pacific Cellular Markets: 1995; Pyramid Research Telecom
Markets in South America (1996); Pyramid Research Cellular and PCS Markets in
Latin America and the Caribbean (1996); Pyramid Research Telecom Markets in
Southeast Asia (1996); Pyramid Research Cellular and PCS Markets in Latin
America and the Caribbean (1996); Pyramid Research Cellular and PCS Markets in
Asia and the Pacific (1996); International Mobile Telecommunications Association
(IMTA) The Global Digest for Commercial Trunked Radio Systems (SMR, PAMR, TRS)
(1996); and CIT Research Mobile Communications in Asia and the Pacific: 1995.
The population data are estimates. Average monthly SMR revenue per
subscriber is estimated by the Company based on industry data from the
above-referenced sources and other factors considered relevant by the Company.
Population data does not represent the current number of the Company's
subscribers and is not necessarily indicative of potential subscribers of the
Company in the future.
"PowerFone," "iDEN" and "FLEX," "Infopage," "MiKE" and "Tricom" are
trademarks of Nextel Communications, Inc., Motorola, Inc., Infocom
Communications Network, Inc. and Clearnet Communications Inc. and Corporacion
Mobilcom S.A. de C.V., respectively.
2
<PAGE> 5
AVAILABLE INFORMATION
This Prospectus constitutes a part of an exchange offer Registration
Statement on Form S-4 filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act with respect to the
Exchange Notes. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Exchange Notes. Any statement
contained herein concerning the provisions of certain documents are not
necessarily complete, and in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
As a result of the filing of the Registration Statement with the
Commission, the Company will become subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith will be required to file with or furnish to the Commission
certain reports and other information. The Registration Statement, the exhibits
and schedules thereto, reports and other information filed with or furnished to
the Commission by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained by mail from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Additionally, the Commission maintains a Web
site on the Internet (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that submit
electronic filings to the Commission, including the Company.
Pursuant to the Indenture, the Company has agreed, whether or not required
by the rules and regulations of the Commission, to file with the Commission and
to furnish to the Trustee (as defined herein) and to registered holders of the
Notes, without cost to the Trustee or such registered holders, reports and other
information as it would be required to file with the Commission if the Company
were subject to the reporting requirements of the Exchange Act. The financial
statements contained in such reports will be audited and reported upon by
certified public accountants.
3
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Unless the context otherwise
requires, the terms "Company" and "McCaw International" refer to McCaw
International, Ltd. and the Operating Companies (as defined below). The Company
is an indirect wholly owned subsidiary of Nextel Communications, Inc.
("Nextel"). Except as otherwise indicated, all dollar amounts are expressed in
U.S. dollars and references to "dollars" and "$" are to U.S. dollars. All
consolidated historical financial statements, other than the pro forma and pro
forma proportionate financial information, contained in this Prospectus are
prepared in accordance with U.S. generally accepted accounting principles ("U.S.
GAAP") and are presented in U.S. dollars. In addition, the Company's historical
financial statements give effect to the 100,000 to 1 stock split effective on
February 26, 1997.
Unless otherwise indicated, the information contained in this Prospectus
gives effect to the following transactions: (i) the acquisition of an 81% equity
interest in McCaw International (Brazil), Ltd. ("McCaw Brazil"), a Virginia
corporation, formerly known as Wireless Ventures of Brazil, Inc. ("WVB"), on
January 30, 1997; (ii) the contribution by Nextel Investment Company ("NIC"), a
wholly owned subsidiary of Nextel, to the Company of an approximately 38% equity
interest in Corporacion Mobilcom S.A. de C.V., a Mexican company ("Mobilcom") on
February 28, 1997 and the subsequent increase in the Company's interest in
Mobilcom from 38% to 46.3%; and (iii) the contribution by NIC to the Company of
a 3.7% equity interest in Clearnet Communications Inc., a Canadian company
("Clearnet") on February 28, 1997. In addition, the information contained herein
gives effect to the joint venture (the "Argentina Transaction") between Wireless
Ventures of Argentina, L.L.C., a Delaware limited liability company ("WVA"), and
the Company, which was consummated on May 6, 1997. Under U.S. GAAP in effect on
the date hereof, the Company's interest in the joint venture, named McCaw
International (Argentina), Ltd. ("McCaw Argentina") will be accounted for under
the equity method. See "Summary -- Recent Events."
THE COMPANY
McCaw International is a leading international wireless communications
services company based on the number of people and the number of specialized
mobile radio ("SMR") channels in its licensed service areas. The Company
provides wireless communications services in the four largest cities in Latin
America and two of the largest cities in Asia. The Company's markets cover
approximately 230 million people ("POPs"), approximately 120 million of which
are in Latin America. McCaw International is the largest SMR service provider in
Brazil and Mexico, and holds the largest SMR channel position in Argentina.
McCaw International's strategy is focused on leveraging its leading analog
dispatch or SMR channel positions in its principal markets and using Nextel's
experience and supplier relationships to upgrade its services from analog
dispatch to digital enhanced specialized mobile radio ("ESMR") services. The
upgrade to digital networks will allow the Company to increase capacity
significantly and to offer additional services and features such as enhanced
dispatch (group calling and instant conferencing), high-quality telephone
interconnect and text messaging.
McCaw International believes that wireless communications opportunities in
emerging markets, particularly in Latin America and Asia, are very attractive
compared to the market in the United States due to the poor telecommunications
infrastructure, low teledensity, favorable competitive environments and greater
expected economic growth rates in those markets. The Company believes that the
low cost of its wireless spectrum relative to cellular and personal
communications services ("PCS"), as well as the large and growing demand for
wireless communications services in its markets, provides it with a significant
opportunity to expand its subscriber base in an efficient and cost-effective
manner.
The Company owns interests in and actively participates in the management
of wireless communications services companies in Brazil, Argentina, Mexico and
the Philippines. In addition, the Company currently has a contractual right
through its Chinese joint venture to receive 25.2% of the profits generated by a
Global System for Mobile communications ("GSM") network in Shanghai, China (the
"Shanghai GSM System")
4
<PAGE> 7
and has a 3.7% interest in Clearnet, a Canadian wireless communications services
company. The foregoing companies and right are referred to in this Prospectus as
the "Operating Companies." The Operating Companies have networks in some of the
largest cities in their respective countries, including Sao Paulo, Mexico City,
Buenos Aires and Rio de Janeiro, which are the four largest cities in Latin
America, and Shanghai and Manila, which are two of the largest cities in Asia.
The subscriber base of the Operating Companies has grown 59% from approximately
111,000 subscribers at December 31, 1995 to approximately 177,000 subscribers at
December 31, 1996.
The Company believes it has established the leading position in terms of
the number of SMR channels in its principal markets. The Company's asset base
includes (i) 5,190 SMR channels in the 800 MHz band (which is adjacent to and
functionally equivalent to cellular frequencies) and the related licenses to
provide wireless communications services over such channels and (ii) deployed
networks in the markets where it operates. The Company's licenses and assets at
January 31, 1997 were acquired for approximately $365 million as of January 31,
1997, or approximately $3.72 per POP, which is significantly less than the
prices paid for cellular and PCS licenses in comparable markets around the
world.
McCaw International currently markets its wireless communications services
primarily to business customers with mobile work forces, such as service
companies, security firms, contractors and delivery services. Companies with
mobile work forces represent growing sectors of the economies in the Company's
markets. These types of businesses often have the need to provide their
personnel with the ability to communicate directly with one another, either on a
one-to-one or a one-to-many basis. By upgrading its operations to provide ESMR
services, the Company will increase capacity significantly and be in a position
to target a broader customer base. The Company currently plans to launch ESMR
commercial service in the Philippines by the end of 1997, in Brazil during the
first quarter of 1998 and in Argentina and Mexico later in 1998. McCaw
International differentiates itself from its competitors by (i) providing
superior quality telecommunications services, (ii) focusing on customer service
and (iii) targeting primarily business customers.
The following table provides a brief overview of each of the Company's
wireless communications systems.
<TABLE>
<CAPTION>
MCCAW INVESTED
INTERNATIONAL PROPORTIONATE SUBSCRIBERS CAPITAL AS
OWNERSHIP POPULATION EXISTING SYSTEM AS OF OF
MARKET AS OF 4/30/97 POPULATION AS OF 4/30/97 TYPE 12/31/96 1/31/97(1)
- ------------------- ------------- ---------- ------------- ---------------- ----------- ----------
(MILLIONS) (MILLIONS) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Brazil............. 81.0% 59.9 48.5 SMR 16,000 $186.3
Argentina.......... 50.0%(2) 17.6 8.8 Paging/SMR 4,000 20.7
Mexico............. 46.3% 42.5 19.7 SMR 24,000 103.8
Philippines........ 30.0% 67.0 20.1 Paging/ESMR(3) 46,000 20.0
China (Shanghai)... 25.2%(4) 14.0 3.5 GSM 28,000 20.5
Canada............. 3.7%(5) 29.5 1.1 SMR/ESMR/PCS(6) 59,000 13.2(7)
----- ----- --------- --------
Total.......... 230.5 101.7 177,000 $364.5
======== ========= ========= ========
<CAPTION>
START DATE
OF
COMMERCIAL
MARKET SERVICES
- ------------------- ----------------
<S> <C>
Brazil............. October 1994
Argentina.......... April 1996/
February 1997
Mexico............. September 1993
Philippines........ February 1995
China (Shanghai)... June 1995
Canada............. April 1994/
October 1996
Total..........
</TABLE>
- ---------------
(1) Invested capital consists of the total amounts invested in the Operating
Companies by McCaw International or Nextel. Amounts include amounts paid for
licenses and capital contributions made to the Operating Companies and in
the case of China also includes a loan made to fund the Shanghai GSM System.
(2) After giving effect to the Argentina Transaction. Under U.S. GAAP in effect
on the date hereof, McCaw Argentina will be accounted for under the equity
method. Prior to the Argentina Transaction, the Company owned 100% of McCaw
Argentina.
(3) The Company currently expects to launch commercial ESMR services in the
Philippines by the end of 1997.
(4) Represents the Company's share of profits from the Shanghai GSM System which
is accounted for under the cost method.
(5) Nextel also owns an approximately 15.3% equity interest in Clearnet which is
accounted for at fair market value.
(6) Clearnet currently expects to launch commercial PCS services in Canada's
largest urban centers in mid-1997.
(7) Reflects the market value of Nextel's initial investment in Clearnet on
October 20, 1994, the date the investment was made. On April 30, 1997, the
Company's Clearnet common stock had a market value of approximately $11.8
million.
5
<PAGE> 8
McCaw International has a senior management team comprised of experienced
executives, most of whom have had substantial experience in the
telecommunications industry and many of whom have been involved in the
development of other telecommunications businesses both in the United States and
in emerging markets. In addition, senior management teams at the Operating
Companies are comprised of both nationals of the countries in which the
Operating Companies are located, most of whom have experience in the
telecommunications industry, as well as U.S. nationals, most of whom have
experience in emerging markets.
McCaw International is an indirect wholly owned subsidiary of Nextel, which
is the largest provider of SMR and ESMR services in the United States with
revenues of approximately $333 million for the year ended December 31, 1996. As
of December 31, 1996, Nextel provided service to approximately 300,000 ESMR
subscriber units. As of February 1, 1997, Nextel had invested approximately $365
million in the Company. A company controlled by Craig O. McCaw, the founder of
McCaw Cellular Communications, Inc. (now AT&T Wireless Services, Inc.), and his
family (collectively, the "McCaw Investor") and Motorola, Inc. ("Motorola") are
significant investors in Nextel.
THE MARKETS
The Company has and will continue to target emerging markets characterized
by large unsatisfied demand for telecommunications services, strong long-term
economic growth prospects, highly-concentrated population centers and favorable
competitive environments.
Large, Unsatisfied Demand for Telecommunications Services. The emerging
markets in which the Company operates are characterized by large, unsatisfied
demand for telecommunications services, resulting in long wait lists for phone
lines that range from nine months in Mexico to approximately 3.5 years in Brazil
and as long as nearly nine years in the Philippines. In these markets, wireless
communications are often a substitute for landline telephone service. The
following comparative market estimates illustrate the differences between
telecommunications services in the emerging markets in which the Company
operates and the United States:
- Average of 6.9 access lines per 100 people, compared to 59.4.
- Cellular penetration rate of .7% and SMR penetration rate of .03%,
compared to 12.8% and 7.0%, respectively.
- Average annual estimated growth rates of cellular subscribers from 1996
through 2001 of 37% in Latin America and 34% in the Asia Pacific region,
compared to 17%.
- Average monthly revenue per cellular subscriber and per SMR user of
approximately $90 and $45, respectively, compared to approximately $51
and $16, respectively.
Strong Economic Growth Prospects. The Company operates primarily in
emerging markets that it believes offer more favorable long-term economic growth
prospects than developed markets such as the United States. The average real GDP
growth for 1996 in the countries in which McCaw International operates is
projected to be between 5% and 6%, compared to approximately 2% in the United
States.
Highly-Concentrated Population Centers. The Company focuses its operations
in major population centers of emerging markets, including Sao Paulo, Rio de
Janeiro, Buenos Aires, Mexico City, Manila and Shanghai. These cities are
characterized by extremely high population densities and a relatively high
concentration of the country's wealth. In addition, vehicle traffic congestion,
low landline penetration and unreliability of the telecommunications
infrastructure encourage the use of wireless communications services in these
cities.
Favorable Competitive Environments. Although there is large unsatisfied
demand for telecommunications services in the emerging markets in which the
Company operates, there are fewer licensed wireless communications service
providers in most of its markets compared to the United States.
STRATEGY
The Company's strategy is to grow by upgrading and expanding its existing
networks to incorporate digital wireless communications services, which will
enable the Company to increase its subscriber base and
6
<PAGE> 9
revenues, and to pursue new investment opportunities in markets which satisfy
the characteristics described above. The key elements of the Company's strategy
are:
Capitalize on Leading Position. In most of its markets, the Company has a
larger SMR channel position than any other SMR service provider, which allows it
to compete effectively with other wireless communications service providers. Its
large channel positions also reduce the capital expenditures required to upgrade
to digital networks and create operating synergies.
Expand by Providing Digital Enhanced Services. The Company intends to
upgrade its analog SMR networks to digital ESMR networks using Motorola's
integrated digital enhanced network ("iDEN") technology. The upgrade to digital
networks will allow the Company to increase capacity significantly and also
offer additional services and features, which the Company believes will lead to
increases in its subscriber base and average monthly revenue per subscriber.
Develop Cost-Efficient Networks. The Company's strategy of investing in SMR
channels has enabled it to acquire spectrum in its markets at a much lower cost
than cellular and PCS providers have paid in comparable markets around the
world. As a result, the Company believes it has an important competitive
advantage relative to cellular and PCS providers.
Leverage Nextel and Motorola Relationships. Nextel is the largest SMR and
ESMR provider in the United States. The Company intends to access Nextel's
technology, operations, supplier relationships, network development and
marketing expertise in upgrading its SMR networks to ESMR in its existing
markets and to leverage its relationship with Nextel in entering new markets. In
addition, the Company believes that it will benefit from Nextel's relationship
with Motorola, which is expected to supply the Company with iDEN equipment and
services. The Company will have access to financing for iDEN equipment on
substantially similar terms as Nextel under a vendor financing commitment among
Nextel, the Company and Motorola. By utilizing Nextel's expertise and
relationships with suppliers, in particular with Motorola, the Company believes
that it will be able to deploy networks that are competitive with cellular and
PCS networks.
Partner with Strong Local Groups. McCaw International seeks financially
strong local groups to invest as equity holders at the operating level. The
Company's local partners often own or have access to an existing strategic asset
base (such as real estate for cell sites or distribution outlets) that the
Operating Companies can use to reduce capital expenditures, operating costs and
network deployment time. Local partners also frequently play an active role in
securing licenses, obtaining necessary regulatory approvals and managing
governmental relations for the Operating Companies.
Maintain Active Management Role. The Company seeks to acquire controlling
ownership and management positions in its principal markets to the extent local
law does not restrict foreign ownership or management. Where the Company holds
less than a majority interest in an Operating Company, it manages its investment
through contractual arrangements that, other than in China and Canada, ensure
board representation and enable it to veto certain corporate actions. The
Company actively participates in the management of the Operating Companies,
other than in China and in Canada, by (i) selecting the key members of the local
management team, (ii) developing the system's technology and infrastructure,
(iii) developing business plans and marketing plans together with local
management, and (iv) maintaining close working relationships with local
partners.
Pursue New Investments in Attractive Markets. The Company is continuing to
pursue new investment opportunities in geographic areas that offer attractive
market fundamentals. At present, the Company plans to focus on emerging markets
in Asia and Latin America. The Company believes that such markets offer
favorable long-term economic growth prospects and that geographic concentration
may provide significant business synergies.
SIGNIFICANT OPERATING LOSSES AND CAPITAL REQUIREMENTS
For the year ended December 31, 1996, on a pro forma basis after giving
effect to the Transactions (as hereinafter defined) and the Initial Offering,
the Company had negative cash flow from operating activities of $6.0 million,
negative EBITDA of $25.5 million and net losses of $114.2 million. During the
next several years, the Company expects to continue to incur significant and
increasing operating and net losses, negative
7
<PAGE> 10
EBITDA and negative cash flow from operations due to the expansion of its
operations and continued build-out and upgrade of its wireless communications
systems. Expansion and upgrade of the Company's existing wireless communications
systems, development of the Company's new systems and the continued funding of
operating losses will require substantial additional cash. See "Risk
Factors -- Short Operating History; Historical and Future Net Operating Losses;
Negative EBITDA" and "-- Significant Capital Requirements for Operations."
RECENT EVENTS
Initial Offering. On March 6, 1997, the Company completed the sale of its
Private Notes and Warrants for aggregate net proceeds to the Company of
approximately $482 million. Through April 30, 1997, approximately $36.1 million
of the $482 million in net proceeds to the Company from the Initial Offering of
Private Securities have been used to fund capital expenditures, operating losses
and to make additional investments in the Operating Companies. The remaining net
proceeds are expected to be used for working capital and general corporate
purposes, to fund Partner Contingencies (as defined herein) and to fund
potential acquisitions and investments in existing and new markets.
Brazil. On January 30, 1997, Nextel acquired an 81% equity interest in
McCaw Brazil for a purchase price of $186.3 million, which was paid with shares
of Nextel Class A Common Stock ("Nextel Class A Common Stock"), and
simultaneously contributed its interest in McCaw Brazil to the Company. McCaw
Brazil is currently the largest SMR operator in Brazil both in terms of the
number of channels and the number of subscribers in its licensed service areas.
The Company is currently in discussions with several large Brazilian corporate
groups regarding the possible sale of up to a 15% equity interest in a holding
company (the "Brazil Holding Company") to be formed by McCaw Brazil (the "Brazil
Equity Sale"). The proceeds from any such sale will be applied to the build-out
of McCaw Brazil's ESMR network. There can be no assurance that the Company will
be able to consummate any such transaction.
On April 26, 1997 and in the beginning of June 1997, news reports appeared
in Brazilian newspapers and international wire services that an anonymous source
had forwarded to the Brazilian Ministry of Communications (the "Ministry of
Communications") a copy of the Company's offering memorandum prepared in
connection with the Initial Offering and a letter alleging that the Company was
operating in Brazil without authorization from the Ministry of Communications.
Based upon these allegations, the Ministry of Communications sent the Company a
letter requesting its comments to the allegations and the Company sent the
Ministry of Communications a letter responding to such allegations. Further,
certain members of the Brazilian Congress introduced legislation that would
eliminate the guaranteed right of SMR providers to interconnect to the public
telecommunications network. Such legislation was enacted on July 16, 1997.
Additionally, on May 15, 1997 and June 25, 1997, the Ministry of Communications
issued proposed regulations for public comment that, if approved as drafted,
would impose limitations on the Company's ability to (i) obtain direct telephone
numbers for all of its subscriber units in Brazil and (ii) interconnect with the
public telecommunications network. Although the Company believes that the
current regulatory framework permits the operation of its existing business in
Brazil, the proposed regulations, if enacted as drafted, may limit the Company's
current and future operations in Brazil. Furthermore, there can be no assurance
that the Brazilian Congress or the Ministry of Communications will not modify
the existing regulatory framework, or that the Ministry of Communications will
not initiate administrative proceedings to impede the Company from providing the
existing SMR services or launch ESMR services.
Argentina. The Company consummated the Argentina Transaction on May 6,
1997. As a result of the Argentina Transaction, the Company doubled its spectrum
position in Argentina, became the largest SMR channel holder in Argentina and
became the holder of a nationwide paging business that currently has
approximately 4,000 subscribers. The Company currently owns a 50% interest in
McCaw Argentina.
Indonesia. The Company has entered into an agreement in principle with one
of the twenty largest companies in Indonesia (the "Indonesian Partner") to form
a joint venture to pursue construction and operation of a nationwide SMR system
(the "Indonesian Joint Venture"). Indonesia has a population of approximately
197 million persons. The Company expects to finalize a definitive agreement by
the end of the
8
<PAGE> 11
third quarter of 1997. The Company is also in discussions with the Indonesian
Partner to bid for regional PCS licenses in Indonesia in the near term. No
assurance can be given that the Company will be able to consummate the
Indonesian Joint Venture or any other transaction with the Indonesian Partner.
Mexico. On February 26, 1997, Mobilcom shareholders approved a $27 million
capital call (the "Mobilcom Capital Call"). Nextel funded the Company's pro rata
share of the Mobilcom Capital Call (approximately $10 million) with a cash
contribution. Additionally, because not all of the Mobilcom shareholders funded
their pro rata share of the Mobilcom Capital Call, the Company had the
opportunity to purchase additional shares of Mobilcom by funding the
unsubscribed portion of the Mobilcom Capital Call (approximately $10 million).
The Company thereby increased its equity interest in Mobilcom from approximately
38% to approximately 46.3%. The Company funded its purchase of the unsubscribed
shares from the net proceeds of the Initial Offering. The funds from the
Mobilcom Capital Call were used by Mobilcom to satisfy certain overdue
obligations (approximately $11 million), to purchase the remaining 51% of
Nacional de Telecomunicaciones S.A. de C.V. ("Natel") that Mobilcom did not own
and to fund operations. The Natel acquisition was consummated on April 16, 1997.
On June 30, 1997, the Company purchased shares representing approximately
1.8% of Mobilcom's issued and outstanding capital from a then-current
shareholder of Mobilcom for approximately $3.2 million. As a result of such
transaction, the Company's equity interest in Mobilcom increased to 48.1%.
Canada. On June 26, 1997, Nextel announced that it completed its
solicitation process whereby Nextel received the consent of the holders of its
public notes to certain amendments to the indentures governing such notes. The
Nextel noteholders agreed, among other things, to permit Nextel to transfer its
equity interest in Clearnet to McCaw International. If Nextel effects such
transfer, McCaw International will hold an aggregate of 8,373,845 shares of
Clearnet, representing approximately 19% of the outstanding common stock of
Clearnet, which represents a 1.7% voting interest. As of June 30, 1997, based on
the closing price of Clearnet stock on the Nasdaq Stock Market, Nextel's equity
interest in Clearnet had a market value of approximately $82 million. Although
Nextel is permitted to transfer its interest in Clearnet to the Company, there
can be no assurance that Nextel will effect such transfer or, should such
transfer occur, that the market value of Nextel's equity interest in Clearnet on
the date of any such transfer will not be less than the market value of such
equity interest as of June 30, 1997.
Stock Option Plan. On June 23, 1997, the board of the directors of the
Company adopted, subject to the approval of Nextel, the Company's sole
shareholder, the McCaw International, Ltd. 1997 Stock Option Plan (the "1997
Stock Option Plan") and approved a plan to terminate the McCaw International,
Ltd. Stock Appreciation Rights Plan (the "SAR Plan"). Each holder of stock
appreciation rights ("SARs") granted previously under the SAR Plan has been
given the right to exchange his or her SARs for options to be granted under the
1997 Stock Option Plan. The Company has agreed to grant additional stock options
to SAR holders who exchange their SARs for stock options as an inducement to
such SAR holders. The Company expects holders representing a substantial
majority of the outstanding SARs, including all of the members of the Company's
senior management team, to exchange their SARs for options granted under the
1997 Stock Option Plan. See "Management -- Benefit Plans."
PRINCIPAL EXECUTIVE OFFICES
The Company's principal executive offices are located at 1191 Second
Avenue, Suite 1600, Seattle, Washington 98101, and the telephone number at that
location is (206) 749-8000.
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<PAGE> 12
THE EXCHANGE OFFER
The Exchange Offer
The Exchange Offer......... The Company is hereby offering to exchange Exchange
Notes for an equal principal amount at maturity of
Private Notes that are properly tendered and
accepted. The Company will issue Exchange Notes on
or as promptly as practicable after the Expiration
Date. As of the date hereof, there is approximately
$951.5 million aggregate principal amount at
maturity of Private Notes outstanding. See "The
Exchange Offer."
Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Private Notes may be offered
for resale, resold and otherwise transferred by a
holder thereof without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that the holder is
acquiring Exchange Notes in the ordinary course of
its business, is not participating, does not intend
to participate and has no arrangement or
understanding with any person to participate in the
distribution of the Exchange Notes and is not an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act. Each
broker-dealer who holds Private Notes acquired for
its own account as a result of market-making or
other trading activities and who receives Exchange
Notes pursuant to the Exchange Offer for its own
account in exchange therefor must acknowledge that
it will deliver a prospectus in connection with any
resale of such Exchange Notes.
This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of
Exchange Notes received in exchange for Private
Notes acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Letter of Transmittal that
accompanies this Prospectus states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. Any holder of Private Notes who
tenders in the Exchange Offer with the intention to
participate in a distribution of the Exchange Notes
could not rely on the above-referenced position of
the staff of the Commission and, in the absence of
an exemption under the Securities Act, would have
to comply with the registration and prospectus
delivery requirements therein in connection with
any resale transaction. Failure to comply with such
requirements in such instance could result in such
holder incurring liability under the Securities Act
for which the holder is not indemnified by the
Company. See "The Exchange Offer -- Resale of the
Exchange Notes."
Registration Rights........ The Private Notes were sold by the Company on March
6, 1997 to Morgan Stanley & Co., Inc., Chase
Securities, Inc., Lehman Brothers, Inc. and NatWest
Capital Markets Limited (together, the "Placement
Agents") pursuant to a Placement Agreement, dated
as of March 3, 1997 (the "Placement Agreement"),
between the Company and the Placement Agents.
Pursuant to the Placement Agreement, the Company
entered into the Registration Rights Agreement with
the Placement Agents, which agreement grants the
holders of Private Notes certain exchange and
registration rights. The Exchange Offer is intended
to
10
<PAGE> 13
satisfy, as to all Notes, such rights, which will
terminate upon the consummation of the Exchange
Offer. The holders of the Exchange Notes will not
be entitled to any exchange or registration rights
with respect to the Exchange Notes. Holders of
Private Notes who do not participate in the
Exchange Offer may thereafter hold a less liquid
security. See "The Exchange Offer -- Termination of
Certain Rights." The Company will not receive any
proceeds from and has agreed to bear the expenses
of the Exchange Offer.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term "Expiration
Date" shall mean the latest date and time to which
the Exchange Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Procedures for Tendering
Private Notes............ Each holder of Private Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Private Notes and any other required
documentation to The Bank of New York, as Exchange
Agent (the "Exchange Agent"), at the address set
forth herein. By executing the Letter of
Transmittal, the holder will represent to and agree
with the Company that, among other things, (i) the
Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer
are being acquired by such holder in the ordinary
course of its business, (ii) such holder is not
participating, does not intend to participate and
has no arrangement or understanding with any person
to participate in a distribution of the Exchange
Notes, and (iii) such holder is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of
the Company. If the holder is a broker-dealer that
will receive Exchange Notes for its own account in
exchange for Private Notes that were acquired as a
result of market-making or other trading
activities, such holder will be required to
acknowledge in the Letter of Transmittal that such
holder will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. See "The Exchange Offer -- Procedures for
Tendering."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Private Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering such owner's Private Notes, either
make appropriate arrangements to register ownership
of the Private Notes in such owner's name or obtain
a properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time and may not be able
11
<PAGE> 14
to be completed prior to the Expiration Date. See
"The Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures set
forth under "The Exchange Offer -- Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of
the Exchange Notes....... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Private Notes that
are properly tendered in the Exchange Offer prior
to the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered on
the earliest practicable date following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Withdrawal Rights.......... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Certain Tax
Considerations............. For a discussion of certain tax considerations
relating to the Exchange Notes, see "Certain U.S.
Federal Income Tax Considerations."
Exchange Agent............. The Bank of New York is serving as the Exchange
Agent in connection with the Exchange Offer. The
Bank of New York also serves as trustee (the
"Trustee") under the Indenture.
Separability............... The Notes and the Warrants will be separately
tradable upon the commencement of the Exchange
Offer.
The Notes
The Exchange Offer applies to the approximately $951.5 million aggregate
principal amount at maturity of the Private Notes. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Private Notes except that the Exchange Notes will not bear legends
restricting the transfer thereof and holders of the Exchange Notes will not be
entitled to any of the registration rights of holders of the Private Notes under
the Registration Rights Agreement, which rights will terminate upon consummation
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Private Notes (which they replace) and will be issued under, and be entitled
to the benefits of, the Indenture. For further information and for definitions
of certain capitalized terms, see "Description of the Notes."
Issuer..................... McCaw International, Ltd.
Notes...................... Approximately $951.5 million aggregate principal
amount at maturity of 13% Senior Discount Notes due
April 15, 2007.
Maturity Date.............. April 15, 2007.
Yield and Interest......... The Private Notes were sold at a substantial
discount from their principal amount at maturity,
and there will not be any payment of interest on
the Notes prior to October 15, 2002. See "Certain
U.S. Federal Income Tax Considerations." The Notes
will fully accrete to face value on April 15, 2002.
From and after April 15, 2002, the Notes will bear
interest, which
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<PAGE> 15
will be payable in cash, at a rate of 13% per annum
on each April 15 and October 15, commencing October
15, 2002.
Optional Redemption........ The Notes will be redeemable, at the option of the
Company, in whole or in part, at any time on or
after April 15, 2002, at 106.5% of their principal
amount at maturity, plus accrued and unpaid
interest, declining ratably to 100% of their
principal amount at maturity, plus accrued and
unpaid interest, on or after April 15, 2004. In
addition, at any time prior to April 15, 2000, the
Company may redeem up to 35% of the aggregate
principal amount at maturity of the Notes with the
proceeds of one or more sales of Capital Stock
(other than Redeemable Stock) (each as defined
under "Description of the Notes") at 113% of their
Accreted Value on the redemption date; provided,
however, that after any such redemption at least
$618.5 million aggregate principal amount at
maturity of the Notes remains outstanding. See
"Description of the Notes -- Optional Redemption."
Ranking.................... The Notes will be senior unsecured indebtedness of
the Company, will rank pari passu in right of
payment with all unsubordinated unsecured
indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness
of the Company. After giving pro forma effect to
the Transactions and the Initial Offering as of
December 31, 1996, the Company would have had no
indebtedness outstanding other than the Notes. All
existing and future liabilities (including trade
payables) of the Company's Restricted Group Members
(as defined under "Description of the Notes") will
be effectively senior to the Notes. As of December
31, 1996 after giving effect to the Transactions,
the Company's Restricted Group Members would have
had $79.7 million of liabilities, including $25.0
million of indebtedness. See "Risk
Factors -- Substantial Indebtedness; Ability to
Service Debt; Refinancing Risks" and "-- Holding
Company Structure; Effective Subordination; Secured
Indebtedness."
Change of Control.......... Upon a Change of Control (as defined under
"Description of the Notes -- Certain Definitions"),
the Company will be required to make an offer to
purchase the Notes at a purchase price equal to
101% of their Accreted Value on the date of
purchase, plus accrued interest. There can be no
assurance that the Company will have sufficient
funds available at the time of any Change of
Control to make any required debt repayment
(including repurchases of the Notes). See
"Description of the Notes -- Repurchase of Notes
Upon a Change of Control."
Certain Covenants.......... The Indenture contains certain covenants for the
benefit of the holders of the Notes (the "Holders")
which, among other things, restrict the ability of
the Company and each Restricted Group Member to
incur additional indebtedness, create liens, engage
in sale-leaseback transactions, pay dividends or
make distributions in respect of their capital
stock, make investments or certain other restricted
payments, sell assets, issue or sell stock of
Restricted Group Members, enter into transactions
with stockholders or affiliates or effect a
consolidation or merger. These limitations will,
however, be subject to important qualifications and
exceptions. See "Description of the
Notes -- Covenants."
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<PAGE> 16
Book-Entry, Delivery
and Form................. It is expected that delivery of the Exchange Notes
will be made in book-entry or certificated form.
The Company expects that Exchange Notes exchanged
for Private Notes currently represented by Global
Notes (as defined under "Description of Exchange
Notes") deposited with, or on behalf of The
Depository Trust Company (the "Depository" or
"DTC") and registered in the name of Cede & Co.,
its nominee, will be represented by Global Notes
and deposited upon issuance with the Depository and
registered in its name or the name of its nominee.
Beneficial interests in Global Note(s) representing
the Notes will be shown on, and transfers thereof
will be effected through, records maintained by the
Depository and its participants.
For additional information regarding the Notes, see "Description of the
Notes" and "Certain U.S. Federal Income Tax Considerations."
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby and has
agreed to pay the expenses of the Exchange Offer. In consideration for issuing
the Exchange Notes as contemplated in this Prospectus, the Company will receive,
in exchange, the Private Notes representing an equal aggregate principal amount
at maturity. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes, except as
otherwise described herein under "The Exchange Offer Terms of the Exchange
Offer." The Private Notes surrendered in exchange for Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding indebtedness
of the Company.
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors to be considered in evaluating the Company, its business and an
investment in the Notes.
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<PAGE> 17
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial and operating
data of the Company for the year ended December 31, 1996, the three months ended
March 31, 1996, and as of and for the three months ended March 31, 1997. The
summary consolidated financial data of the Company for the year ended December
31, 1996, with the exception of data presented under Other Financial Data, were
derived from the consolidated financial statements of the Company and the notes
thereto, which have been audited by Deloitte & Touche LLP, independent auditors,
whose report has been included herein. The summary consolidated historical
financial data of the Company for the three months ended March 31, 1996, and as
of and for the three months ended March 31, 1997 and the pro forma data are
unaudited and are derived from the Company's unaudited consolidated financial
statements. The pro forma consolidated statements of operations give effect to
the Transactions (as defined herein) and the Offering as if they occurred on
January 1, 1996, and the pro forma consolidated balance sheet data give effect
to the Argentina Transaction and the capital contribution that increased the
Company's interest in Mobilcom from 38% to 46.3% as if they occurred on March
31, 1997. The pro forma data are not necessarily indicative of the results that
would have been achieved by the Company, nor are they indicative of the
Company's future results.
The summary consolidated financial and operating data should be read in
conjunction with "Selected Consolidated Historical Financial Data," "Pro Forma
Consolidated Financial Statements," including the notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of the Company, WVB and Mobilcom including
the notes thereto, and the other financial and operating information appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997
----------------------------- ------------------ ----------------------------
ACTUAL PRO FORMA(1) ACTUAL ACTUAL PRO FORMA(1)
------------ ------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $ -- $ 14,212,379 $ -- $ 1,460,388 $ 2,542,777
Costs and expenses related to
revenues............................ -- 9,589,401 -- 956,585 1,526,242
Selling, general and administrative... 9,317,784 19,613,972 821,027 3,852,548 4,019,052
Depreciation and amortization......... 168,401 16,213,796 7,860 2,580,572 3,755,970
------------ ------------- --------------- ------------ ------------
Operating loss........................ (9,486,185) (31,204,790) (828,887) (5,929,317) (6,758,487)
Interest income (expense), net........ 3,977,557 (73,252,848) 1,144,927 (2,793,354) (17,773,981)
Loss from equity method investments... (5,991,304) (13,952,159) (1,269,300) (1,866,894) (3,107,795)
Other, net............................ 378,580 509,172 (4,987) (157,616) (107,200)
Minority interest..................... -- 2,919,168 -- 437,594 546,607
------------ ------------- --------------- ------------ ------------
Loss before income tax benefit
(provision)......................... (11,121,352) (114,981,457) (958,247) (10,309,587) (27,200,856)
Income tax benefit (provision)........ (1,354,862) 777,373 (389,275) 499,304 838,560
------------ ------------- --------------- ------------ ------------
Net loss.............................. (12,476,214) (114,204,084) (1,347,522) (9,810,283) (26,362,296)
=========== ============ =============== =========== ===========
Net loss per share.................... $ (1.25) $ (11.42) $ (0.13) $ (0.98) $ (2.64)
=========== ============ =============== =========== ===========
Weighted average shares outstanding... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
=========== ============ =============== =========== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
DATA:
Cash flows from operating
activities.......................... $ (2,983,257) $ (5,950,838) $ (226,340) $ (471,182) $ (1,119,923)
Cash flows from investing
activities.......................... (72,285,642) (74,170,991) (4,701,413) (37,751,486) (37,901,477)
Cash flows from financing
activities.......................... 42,995,751 48,176,050 5,086,025 465,188,376 465,795,078
Ratio of earnings to fixed
charges(4)..........................
OTHER FINANCIAL DATA:
EBITDA(3)............................. $(14,930,508) $ (25,514,813) $ (2,095,314) $ (4,935,661) $ (5,670,905)
</TABLE>
(footnotes on next page)
15
<PAGE> 18
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
------------------------------
ACTUAL PRO FORMA(5)
------------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................................... $479,994,983 $ 469,377,428
Investment in unconsolidated subsidiaries............................... 124,025,593 153,628,862
Total assets............................................................ 942,591,012 938,018,377
Long-term debt(2)....................................................... 489,909,208 489,909,208
Minority interest....................................................... 5,251,125 5,251,125
Stockholder's equity(2)................................................. 358,091,489 358,091,489
</TABLE>
- ---------------
(1) The pro forma data give effect to the following transactions (collectively,
the "Transactions") in each case as if they had occurred on January 1, 1996:
(i) Nextel's acquisition of an 81.0% interest in WVB for $186.3 million in
market value of Nextel Class A Common Stock and the simultaneous
contribution of such interest to the Company; (ii) the Company's acquisition
of an approximately 38% interest in Mobilcom for $76.9 million, and the
subsequent capital contribution that increased the Company's interest in
Mobilcom from 38% to 46.3%, which are accounted for using the equity method;
(iii) the Company's acquisition of a 30.0% interest in Infocom
Communications Network, Inc. ("Infocom"), accounted for using the equity
method; (iv) The Argentina Transaction; and (v) the pre-merger transfer to
Nextel of NIC's assets and liabilities not associated with the Company's
investments in Mobilcom and Clearnet. The pro forma data also give effect to
the Initial Offering as if it had occurred on January 1, 1996. See "The
Company."
(2) Under U.S. GAAP, approximately $14.8 million of the proceeds of the Initial
Offering has been allocated to the Warrants and $485.2 million of the
proceeds has been allocated to the Notes.
(3) "EBITDA" consists of loss before interest expense, income tax benefit
(provision) and depreciation and amortization. EBITDA is provided because it
is a measure commonly used in the telecommunications industry. It is
presented to enhance an understanding of the Company's operating results and
is not intended to represent cash flow or results of operations for the
periods presented. EBITDA is not a measurement under U.S. GAAP and may not
be similar to EBITDA measures of other companies. See the Company's
consolidated financial statements and the notes thereto appearing elsewhere
in this Prospectus.
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes, plus fixed charges, less
income (loss) from equity method investments. Fixed charges consist of
interest on all indebtedness, amortization of debt expense, and that portion
of rental expense which the Company believes to be representative of
interest. The deficiency for purposes of calculating the ratio of earnings
to fixed charges for the year ended December 31, 1996 for actual and pro
forma was $11,121,352 and $114,981,457, respectively, for the three months
ended March 31, 1996 was $958,247 and for the three months ended March 31,
1997 for actual and pro forma was $10,309,587 and $27,200,856, respectively.
(5) Gives pro forma effect to the Argentina Transaction and the capital
contribution that increased the Company's interest in Mobilcom from 38% to
46.3% as if they occurred on March 31, 1997.
16
<PAGE> 19
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before deciding whether or not to tender Private Notes in
exchange for Exchange Notes pursuant to the Exchange Offer. A number of the
matters and subject areas discussed in this Prospectus are not historical or
current facts but rather address potential future circumstances and
developments. The discussion of such matters and subject areas is qualified by
the inherent risks and uncertainties surrounding future expectations generally,
and also may materially differ from the Company's actual future experience
involving any one or more of such matters and subject areas. The Company has
attempted to identify certain of the factors that it currently believes may
cause actual future experience and results to differ from the Company's current
expectations regarding the relevant matter or subject area. The operation and
results of the Company's wireless communications operations also may be subject
to the effect of other risks and uncertainties in addition to the relevant
qualifying factors identified elsewhere herein, including, but not limited to,
general economic conditions in the countries and markets in which the Operating
Companies offer their wireless communications services, the availability of
adequate quantities of system infrastructure and subscriber equipment and
components to meet the Company's service deployment and marketing plans and
customer demand, the successful deployment of the technologies chosen by the
Operating Companies, the ability to achieve market penetration and average
subscriber revenue levels sufficient to provide financial viability to the
Operating Companies, access to sufficient debt or equity capital to meet the
Company's operating and financing needs, the quality and price of similar or
comparable wireless communications services offered or to be offered by the
Company's competitors, future legislative or regulatory actions relating to
wireless communications services in the countries in which the Operating
Companies are offering their services and other risks and uncertainties
described throughout this Prospectus.
SHORT OPERATING HISTORY; HISTORICAL AND FUTURE NET OPERATING LOSSES;
NEGATIVE EBITDA. Each of the Operating Companies has a short operating history.
Additionally, the Company plans to acquire or commence additional operations in
markets in which it currently does not operate and any such additional
operations will likely have either a limited or no operating history. The
Company's prospects must therefore be considered in light of the risks,
expenses, uncertainties and obstacles inherent in establishing a new business in
an evolving industry. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." For the year ended December 31, 1996, on a
pro forma basis after giving effect to the Transactions and the Initial
Offering, the Company had negative cash flow from operating activities of $6.0
million, negative EBITDA of $25.5 million and net losses of $114.2 million. In
particular, Mobilcom has incurred significant operating and net losses. The
Company has recently taken steps that are intended to improve the operating
performance of Mobilcom and expects to take additional steps in the future,
although no assurance can be given that such efforts will be successful. In some
of the Operating Companies, the Company has experienced relatively high rates of
churn and bad debt expenses. However, the Company has taken a number of steps to
reduce these levels including tightening the credit screening process,
instituting the requirement of longer term contracts and formulating more
aggressive collection processes. During the next several years, the Company
expects to continue to incur significant and increasing operating and net
losses, negative EBITDA and negative cash flow from operations due to the
expansion of its operations and continued build-out and upgrade of its wireless
communications systems. There can be no assurance that the Company will achieve
or sustain profitability or positive cash flow from operations in the future. If
the Company cannot achieve operating profitability or positive cash flow from
operations, it may not be able to meet its debt service or working capital
requirements (including its obligations with respect to the Notes).
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT; REFINANCING RISKS. At
December 31, 1996, on a pro forma basis after giving effect to the Transactions
and the Initial Offering, the Company would have had no indebtedness outstanding
other than the Notes. The accretion of original issue discount on the Notes will
cause an increase in liabilities from the Closing Date of approximately $466.3
million by April 15, 2002. Additionally, on the same pro forma basis, for the
year ended December 31, 1996, the Company's deficiency of earnings before fixed
charges to cover fixed charges would have been $115.0 million and EBITDA would
have been negative $25.5 million. The Indenture limits, but does not prohibit,
the incurrence of additional indebtedness by the Company and certain of its
affiliates and subsidiaries. The Company anticipates that it
17
<PAGE> 20
and the Operating Companies will incur substantial additional indebtedness in
the future. Indebtedness incurred by the Operating Companies includes and is
expected to continue to include financing provided by Motorola to fund the
purchase of equipment from Motorola (the "Motorola Financing") as well as other
vendor financing. The Indenture does not limit the amount of vendor financing
indebtedness that may be incurred. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Indenture restricts, among other things, the Company's, and certain of
its subsidiaries' and affiliates', ability to incur indebtedness, create liens,
pay dividends or make certain other restricted payments, sell assets, enter into
certain transactions with affiliates or merge or consolidate with any other
person. In addition, the Motorola Financing includes and any other vendor
financing (including additional Motorola Financing) is expected to include
restrictive covenants, including prohibitions on the Operating Companies'
ability to pay dividends. It is expected that all of an Operating Company's
assets and capital stock will be pledged to secure such Operating Company's
obligations under the Motorola Financing. Because the Motorola Financing may
mature after the time that cash interest payments on the Notes are required, as
long as any Motorola Financing at an Operating Company remains outstanding, such
Operating Company will be unable to pay dividends to the Company as a source of
cash to make interest payments on the Notes and the Company would therefore need
to obtain funds from other sources.
The level of the Company's indebtedness could have important consequences
to Holders, including the following: (i) the debt service requirements of any
additional indebtedness could make it more difficult for the Company to make
payments of interest on the Notes; (ii) the ability of the Company to obtain any
necessary financing in the future for working capital expenditures, debt service
requirements or other purposes may be limited or at terms which are not
favorable to the Company; (iii) a substantial portion of the Company's cash flow
from operations, if any, must be dedicated to the payment of principal and
interest on its indebtedness and other obligations, and will not be available
for use in its business; (iv) the Company's level of indebtedness could limit
its flexibility in planning for, or reacting to, changes in its business; (v)
the Company is more highly leveraged than some of its competitors, which may
place it at a competitive disadvantage; and (vi) the Company's high degree of
indebtedness will make it more vulnerable in the event of a downturn in its
business.
The Company believes that cash flows from the planned expansion of its
existing operations will be sufficient to meet its debt service obligations;
however, there can be no assurance in this regard. The Company must
substantially increase its net cash flow in order to meet its debt service
obligations, including its obligation under the Notes. If the Company is unable
to generate sufficient cash flow or otherwise obtain funds necessary to make
required payments, or if it otherwise fails to comply with the various covenants
in its indebtedness, it would be in default under the terms thereof, which would
permit the holders of such indebtedness to accelerate the maturity of the
indebtedness and could cause defaults under other indebtedness of the Company.
Such defaults could result in a default on the Notes and could delay or preclude
payment of interest or principal thereon. The Company's ability to meet its
obligations will depend on its future performance, which will be subject to
prevailing economic conditions and to financial, business and other factors,
including factors beyond the Company's control.
The Motorola Financing matures and other financing (including additional
Motorola Financing) may mature prior to the maturity of the Notes. The Company
also expects that existing and future Motorola Financing and other financing may
need to be refinanced at their respective maturities and that the Notes also may
need to be refinanced when cash interest becomes payable. The Company's ability
to refinance its indebtedness will depend, among other factors, on its financial
condition at the time, the restrictions contained in the instruments governing
its other indebtedness and other factors beyond the Company's control, including
market conditions. There can be no assurance that the Company will be able to
refinance any existing or future Motorola Financing, any other financing or the
Notes. If the Motorola Financing or such other financing cannot be refinanced,
it may cause a default under the Notes and the Company may be unable to meet its
obligations under the Notes.
SIGNIFICANT CAPITAL REQUIREMENTS FOR OPERATIONS. Expansion and upgrade of
the Company's existing wireless communications systems, development of the
Company's new systems and the continued funding of
18
<PAGE> 21
operating losses will require substantial additional cash. The Company believes
that the net proceeds from the Initial Offering, together with borrowings
expected to be available under vendor financing, including the Motorola
Financing and the estimated proceeds from the Brazil Equity Sale, if
consummated, will be sufficient to fund the Company's current operations,
including the planned expansion of its existing operations, for approximately 36
to 48 months from the Closing Date; however, there can be no assurance in this
regard. Thereafter, the Company will need substantial additional cash. If the
Company's plans or assumptions change, if its assumptions prove to be
inaccurate, if it consummates investments or acquisitions in addition to those
currently contemplated, if it experiences unanticipated costs or competitive
pressures, if the Brazil Equity Sale is not consummated, or if the net proceeds
from the Initial Offering, together with the proceeds of any such borrowings
otherwise prove to be insufficient, the Company may be required to seek
additional capital sooner than currently anticipated. The Company may seek to
raise such additional capital from public or private equity or debt sources.
There can be no assurance that the Company will be able to raise such capital on
satisfactory terms, if at all. If the Company decides to raise additional funds
through the incurrence of debt, it may become subject to additional or more
restrictive financial covenants and its interest obligations will increase. In
the event that the Company is unable to obtain such additional capital or to
obtain it on acceptable terms, it may be required to reduce the scope of its
presently anticipated expansion, which could have a material adverse effect on
its ability to compete, and its ability to meet its obligations on the Notes.
The terms of any borrowings under the Motorola Financing are subject to
negotiation and execution of definitive agreements. The Company does not have a
revolving credit facility or any other credit facility providing funding for the
Company. Nextel is not obligated to provide any additional funds to the Company.
CONTINGENT CAPITAL REQUIREMENTS. The need for significant additional
capital may also be affected by arrangements the Company has with other
investors in the Operating Companies. In order to retain the contractual right
to designate a majority of the board of directors of Mobilcom, a member of the
Technology Committee of such board of directors and to block certain significant
actions of Mobilcom, the Company must have invested approximately $76.8 million
(the "Minimum Amount") in Mobilcom through certain qualified capital
transactions by March 1998. See "Business -- Operations and
Investments -- Corporate Governance -- Mexico." As of April 30, 1997 the Company
had invested approximately $63.7 million in such qualified capital transactions.
In addition, beginning on October 24, 1997, holders of approximately 37% of the
outstanding capital stock of Mobilcom have the right for two years to put (the
"Mobilcom Put") the entire amount of their holdings to the Company at its
appraised fair market value for cash. The Mobilcom Put is exercisable if
Mobilcom takes any of the following corporate actions and the directors
designated to Mobilcom's board of directors by the holders of the Mobilcom Put
voted against such action: (i) a material amendment of the charter or bylaws;
(ii) issuance of voting securities with disproportionately larger voting rights
or a class vote; (iii) certain issuance of shares in excess of 15% of the
outstanding shares during a 36-month period; (iv) making any investment, loaning
any amount, or selling assets in excess of $20 million; (v) the adoption of, or
material deviation from, any business plan, operating budget or capital
expenditure plan; and (vi) making capital expenditures that would exceed 125% of
the capital expenditure budget approved by the shareholders (collectively, the
"Mobilcom Put Events"). In addition, the Mobilcom Put is exercisable in the
event that the holders of the Mobilcom Put are no longer entitled to designate
in the aggregate at least two directors. The Mobilcom Put is also automatically
exercisable on October 24, 1999 whether or not a Mobilcom Put Event occurs.
Valuation of Mobilcom for purposes of the Mobilcom Put will be based on an
appraisal by an investment bank, with the minimum appraisal for 100% of Mobilcom
equal to $150 million. To the extent such appraisal exceeds $250 million, 50% of
such excess will be included in the valuation. In connection with a capital call
on June 7, 1996, Mobilcom shareholders purchased additional shares of Mobilcom
based on a $200 million valuation of Mobilcom (which values the Mobilcom Put at
approximately $66 million). If the Company does not pay the Minimum Amount and
to the extent the Company does not otherwise acquire a majority of the
outstanding capital stock of Mobilcom, the Company will lose its right to
designate a majority of the board of directors of Mobilcom and a member of the
Technology Committee and its ability to block certain significant actions of
Mobilcom. The Company has the option to purchase, before March 3, 1998, up to an
additional 29.5% of Mobilcom's common stock. To the extent the Company owns a
majority of the voting stock in Mobilcom after giving effect to the exercise of
the Mobilcom Put, the Company will not be affected by the failure to have
invested the Minimum Amount by
19
<PAGE> 22
March 1998 because its equity ownership will entitle it to elect a majority of
the board of directors of Mobilcom. As of April 30, 1997, the Company owned
approximately 46.3% of the voting stock of Mobilcom. See "Business
-- Operations and Investments -- Corporate Governance -- Mexico."
The other shareholder in McCaw Brazil has the right between October 31,
2001 and November 1, 2003, to require McCaw Brazil to redeem such shareholder's
19% interest in McCaw Brazil at fair market value as determined pursuant to an
appraisal procedure (the "McCaw Brazil Put"). The Minimum Amount and any amounts
required to satisfy the Company's obligations with respect to the Mobilcom Put
and the McCaw Brazil Put are collectively referred to as the "Partner
Contingencies."
The Company anticipates funding the Partner Contingencies with the net
proceeds of the Initial Offering, issuances of additional debt and equity
securities at the Company and Operating Company levels, future equity
investments in the Operating Companies by new local partners and capital
contributions from Nextel in the form of cash or Nextel common stock. Nextel has
no obligation to provide any such financing and there can be no assurance that
the Company will be able to fund the Partner Contingencies. The failure to fund
a Partner Contingency may have a material adverse effect on the Company.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION; SECURED INDEBTEDNESS.
The Company intends to invest or loan substantially all of the net proceeds from
the Initial Offering in or to the Operating Companies. As of April 30, 1997, the
Company had invested approximately $36.1 million of the net proceeds from the
Initial Offering in the Operating Companies. The Company is a holding company
and therefore must rely on dividends and other payments from the Operating
Companies to generate the funds necessary to meet its obligations, including the
payment of principal and interest on the Notes. The Operating Companies are
legally distinct from the Company and have no obligation, contingent or
otherwise, to pay amounts due with respect to the Notes, or to make funds
available for such payments. The Operating Companies will not guarantee the
Notes. Additionally, the Operating Companies and subsidiaries through which the
Company holds its interests in certain of the Operating Companies are organized
in jurisdictions outside the United States. The ability of the Operating
Companies to make distributions to the Company will be subject to, among other
things, the availability of funds, contractual restrictions and applicable local
laws. Certain of the Operating Companies have entered into financing facilities
that prohibit or restrict the payment of dividends. It is expected that each
Operating Company that is party to the Motorola Financing will be prohibited
from paying dividends until such Motorola Financing is repaid, which may occur
after the time cash interest is required to be paid on the Notes. In addition,
the payment of dividends by each of the Operating Companies other than McCaw
Brazil requires the approval of certain of the other equity holders in such
companies.
Claims of creditors of the Operating Companies, including trade creditors,
will generally have priority as to the assets of such Operating Companies over
the claims of the Company and the holders of the Company's indebtedness.
Accordingly, the Notes will be effectively subordinated to the liabilities of
the Operating Companies. Any right of the Company to receive assets of any
Operating Company upon the liquidation or reorganization of such Operating
Company (and the consequent right of the Holders to participate in those assets)
will be effectively subordinated to the claims of such Operating Company's
creditors, except to the extent that the Company is itself recognized as a
creditor, in which case the claims of the Company would still be subordinate to
any security in the assets of such Operating Company (including the assets of
such Operating Company securing its Motorola Financing) and any indebtedness of
such Operating Company senior to that held by the Company. In addition, holders
of secured indebtedness of the Company would have a claim on the assets securing
such indebtedness that is prior to the Holders of the Notes and would have a
claim that is pari passu with the Holders of the Notes to the extent such
security did not satisfy such indebtedness. As of April 30, 1997, the Company
has no significant assets other than the stock of the Operating Companies and
approximately $445.9 of the net cash proceeds from the Initial Offering which
has been invested in short term investments. It is expected that the stock of
the Operating Companies owned by the Company will be pledged to secure the
Motorola Financing or other indebtedness and that substantially all of the net
cash proceeds from the Initial Offering will be invested in or loaned to the
Operating Companies. A substantial portion of the assets of the Operating
Companies consists of goodwill, licenses and other intangibles. As of December
31, 1996, after giving effect to the Transactions, the Company's Restricted
Group Members would have had approximately $79.7 million of liabilities,
including $25.0 million of indebtedness.
20
<PAGE> 23
MINORITY INTERESTS; SHAREHOLDER CONSENT REQUIREMENTS. The Company intends
to invest or loan substantially all of the net proceeds from the Initial
Offering in or to the Operating Companies. As of April 30, 1997, the Company had
invested approximately $36.1 of the net proceeds from the Initial Offering in
the Operating Companies. The Company currently has, and anticipates that it will
make in the future, minority investments in international wireless
communications operations, partly because of limitations on foreign ownership in
telecommunications companies in some countries. The Company's ability to
withdraw funds from the Operating Companies other than from McCaw Brazil,
including through the payment of dividends, depends in all cases on receiving
the consent of certain other stockholders of those companies, over which the
Company has no control. In addition, although the Company owns a majority of
McCaw Brazil, the other shareholders have the ability to veto certain other
corporate actions. While the terms of the arrangements vary, the Company's
investments in the Operating Companies may be adversely affected in the event
that the Company's partners have economic or business interests or goals that
are inconsistent with those of the Company or take actions that are contrary to
the Company's policies or objectives. If certain Operating Companies that are
Restricted Group Members take actions that violate the covenants contained in
the Indenture, it may result in an event of default under the Indenture. See
"Description of the Notes." In addition, disagreements may arise between the
Company and any of its partners, which, in some cases, could lead to the Company
being required to purchase its partners' interest in the Operating Company.
The Company may owe a fiduciary duty to the holders of various minority
interests in its subsidiaries. Accordingly, the Company may not have the right
to exercise unfettered control over such subsidiaries and may be required to
deal with such subsidiaries on terms no less favorable to such subsidiaries than
could be obtained from unaffiliated third parties. In addition, dividends or
other distributions paid or made by such subsidiaries must be paid or made on a
pro rata basis to all stockholders.
GOVERNMENT REGULATION. The licensing, construction, ownership and operation
of wireless communications systems, and the grant, maintenance and renewal of
applicable licenses and radio frequency allocations, are regulated by
governmental entities in the markets in which the Company operates. In addition,
such matters and certain other aspects of wireless communications system
operations, including rates charged to customers and the resale of wireless
communications services, may be subject to public utility regulation in the
jurisdiction in which service is provided. Further, statutes and regulations in
certain of the markets in which the Company operates impose limitations on the
ownership of telecommunications companies by foreign entities. Changes in the
current regulatory environments in the countries in which the Company operates
or future judicial intervention, including with respect to interconnection
arrangements, requirements for increased capital investments, regulations
affecting prices the Company is able to charge for its services or foreign
ownership limitations, could have a material adverse effect on the Company. For
a more detailed description of the regulatory environment in each of the
countries in which the Operating Companies operate, see the "Regulatory and
Legal Overview" discussion for each Operating Company under "Business."
Wireless communications licenses and spectrum allocations are subject to
ongoing review and, in some cases, to modification or early termination for
failure to comply with applicable regulations. Most of the Company's wireless
communications licenses have fixed terms and are not automatically renewable. In
cases where license terms are fixed, there can be no assurance that license
renewal will be effected, or if effected that renewal will be on acceptable
economic terms.
Because of the uncertainty as to the interpretation of regulations in
certain jurisdictions, there can be no assurance the Company can provide planned
services in each jurisdiction and it may be possible that the Company may be
prohibited from providing services it intends to provide in the future in
certain jurisdictions, including ESMR services. See also "-- Possible Delay in
Offering ESMR Services in Brazil."
Before McCaw Brazil can launch commercial iDEN-based ESMR services in
Brazil, it will need to obtain the following approvals from the Ministry of
Communications: (i) project installation approval; and (ii) post-installation
operating approval. In addition, before McCaw Brazil can commence ESMR service,
"type certifications" must be obtained from the Ministry of Communications with
respect to the equipment to be deployed in Brazil. Motorola has received type
certification for most of its iDEN equipment, however, the Nortel switch and the
subscriber units that are used with iDEN networks have not yet been type
certified. The
21
<PAGE> 24
Company believes that it will receive these approvals on a timely basis. No
assurance can be given that the Ministry of Communications will grant the
approvals or that the Company's planned roll-out of ESMR will not be delayed.
On April 26, 1997 and in the beginning of June 1997, news reports appeared
in the Brazilian newspapers and international wire services that an anonymous
source had forwarded to the Ministry of Communications a copy of the Company's
offering memorandum prepared in connection with the Initial Offering and a
letter alleging that the Company was operating in Brazil without authorization
from the Ministry of Communications. Based upon these allegations, the Ministry
of Communications sent the Company a letter requesting its comments to the
allegations and the Company sent the Ministry of Communications a letter
responding to such allegations. Further, certain members of the Brazilian
Congress introduced legislation that would eliminate the guaranteed right of SMR
providers to interconnect to the public telecommunications network. Such
legislation was enacted on July 16, 1997. Additionally, on May 15, 1997 and June
25, 1997, the Ministry of Communications issued proposed regulations for public
comment that, if approved as drafted, would impose limitations on the Company's
ability to (i) obtain direct telephone numbers for all of its subscriber units
in Brazil and (ii) interconnect with the public telecommunications network.
Although the Company believes that the current regulatory framework permits the
operation of its existing business in Brazil, the proposed regulations, if
enacted as drafted, may limit the Company's current and future operations in
Brazil. Furthermore, there can be no assurance that the Brazilian Congress or
the Ministry of Communications will not modify the existing regulatory
framework, or that the Ministry of Communications will not initiate
administrative proceedings, to impede the Company from providing the existing
SMR services or launch ESMR services.
Compliance with the terms of the Operating Companies' licenses and certain
regulatory requirements, such as installation deadlines and minimum loading
requirements, can be difficult. There can be no assurance that such requirements
will be met or that the Company will not lose any applicable wireless
communications licenses as a result of its failure to meet such requirements.
The Company currently is not in compliance with applicable installation
deadlines and minimum loading requirements with respect to certain channels
located in various parts of Brazil outside Sao Paulo. Failure to comply with
such requirements may subject the licenses relating to such channels to
forfeiture by the Ministry of Communications. Requests for extensions of the
relevant deadlines in most of the major cities have been filed with the Ministry
of Communications; however, no responses have been received. There can be no
assurance that the Ministry of Communications will not take action in response
to such failure to comply that would have an adverse effect on McCaw Brazil.
Additionally, in June 1997, the Ministry of Communications ordered the Company
to discontinue the operation of two cell sites in the state of Sao Paulo based
on the Ministry's assertion that such sites were operating outside of the
geographical area covered by the Sao Paulo City license. Although the Company
believes that these cell sites are consistent with the applicable license, there
can be no assurance that the Ministry of Communications will agree with the
Company's interpretation of the area covered by the applicable license.
Additionally, because many of the regulatory frameworks are relatively new and
still developing in the countries in which the Company operates and the
enforcement of such regulations is often uncertain, it is difficult to determine
how regulators will interpret the rules or judge compliance, and what degree of
flexibility will be available.
In Brazil, the transfer of control of an SMR licensee is subject to the
prior approval of the Ministry of Communications. Because of these license
transfer restrictions, McCaw Brazil's interest in 1,180 of its 1,700 channels is
structured pursuant to a number of option agreements entered into with the
shareholders of the respective corporate licensees of such channels (the "Option
Agreements"). Pursuant to the Option Agreements, McCaw Brazil has acquired a
minority interest in each such licensee not exceeding 49% and holds the option
to acquire the balance of the ownership interest in each such licensee upon the
payment of an option exercise price. The closing of each such option would be
conditioned upon securing the approval of the Ministry of Communications for the
transfer of control of the relevant licensees. The aggregate amount of the
exercise price if all the options are exercised is not material. A licensee is
not eligible to request approval for change of control until system installation
has been completed and approved by the Ministry of Communications, and many of
the channels subject to the Option Agreements have not been installed. While the
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Company believes it will receive Ministry of Communications approval when it has
met the installation requirements, no assurance can be given that such approval
will be obtained. To the extent the Company is not able to exercise its option
to acquire the balance of the ownership interest in a particular licensee, the
Company believes that AirLink Service e Comercio Ltda. ("Airlink"), an indirect
wholly owned subsidiary of McCaw Brazil, would be able to continue to maintain
its existing contractual right to manage the operations subject to the license
held by such licensee pursuant to a service agreement and receive fees under
such service agreement. However, the Company would not own such licensee and the
Company's rights with respect to such license could be limited. There can be no
assurance that the Ministry of Communications would not challenge the validity
of such service agreements. All of McCaw Brazil's channels in Sao Paulo are
indirectly owned entirely by it and are not held pursuant to the Option
Agreements.
The Company owns or has options to acquire licensees with multiple channels
in each of its service areas in Brazil, which have been acquired from private
parties rather than the Ministry of Communications. Under an administrative
ruling of the Ministry of Communications ("Administrative Ruling No. 478"), one
entity may not "receive" more than one SMR license in a given service area. Such
ruling also provides that an entity may not receive an SMR license if such
entity is a member of a commonly controlled or commonly managed group where
another member of such group already holds a license in the same service area.
The Company believes that Administrative Ruling No. 478 does not restrict an
entity from acquiring prior to July 13, 1994 more than one licensee in the same
service area from private parties and holding such licensee directly or
indirectly.
Administrative Ruling No. 478 also is unclear as to whether, in the event
of a transfer of multiple licensees, it would be permissible to consolidate such
licensees under the ownership of one entity. In any event, the Company believes
that any limitation on acquiring or holding multiple SMR licensees in the same
service area or consolidation of multiple licensees would not affect those
licensees who held SMR licensees prior to July 13, 1994, the effective date of
Administrative Ruling No. 478. All of McCaw Brazil's licenses in Sao Paulo were
issued prior to July 13, 1994. There can be no assurance that the Ministry of
Communications will approve transfers of majority control of licensees in the
same service area. Furthermore, Decree No. 2197, effective April 4, 1997,
provides that any transfer of control can only occur after the period of time
established in the rules to be issued by the Ministry of Communications. Any
failure to approve such a transfer could have a material adverse effect on the
Company.
In the Philippines, cellular mobile operators are required to install at
least 400,000 local exchange lines. The Company does not believe that Infocom is
subject to this requirement however no assurance can be given that this will be
the case. If this requirement were found to be applicable to Infocom, it would
require a significant capital investment.
Each of the jurisdictions in which the Operating Companies operate permit
wireless communications companies to interconnect to the landline telephone
service provider in each market. Although interconnection services are currently
being provided in Brazil and Argentina, the Operating Companies in those
countries have not entered into definitive interconnection agreements with the
landline telephone service providers. The Company is currently negotiating
interconnection agreements to increase interconnect capacity in connection with
the upgrade to ESMR services in Brazil, Argentina and the Philippines. There can
be no assurance that interconnection agreements will be entered into or if
entered into or, whether such agreements will be on terms favorable to such
Operating Companies. The failure to enter into interconnection agreements on
favorable terms could have a material adverse effect on the Company's results of
operations. In many of the countries in which the Company operates,
telecommunications services are subject to value-added taxes.
POSSIBLE DELAY IN OFFERING ESMR SERVICES IN BRAZIL. In June 1997 and July
1997, the Government of Brazil awarded Band B cellular licenses covering two of
the ten areas throughout Brazil, including the City of Sao Paulo, pursuant to
the rules governing the bidding process (the "Band B Rules"), which rules were
released by the Ministry of Communications on January 13, 1997. The Band B Rules
contain a provision which prohibits the initiation of operations by certain
other mobile telecommunications service providers in the areas covered by the
Band B licenses until December 31, 1999. It is unclear whether this provision of
the Band B Rules will prevent the Company from providing iDEN-based ESMR
services in Brazil before December 31, 1999. The Company does not believe that
the Band B Rules are applicable to its current SMR
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operations in Brazil. There can be no assurance, however, that either the
Ministry of Communications or companies bidding for the Band B licenses will not
attempt to prevent the Company from offering ESMR services before December 31,
1999. In addition, companies bidding for the Band B licenses may request that
the December 31, 1999 date be extended or seek clarification as to the
applicability of the Band B Rules to iDEN-based ESMR services. Any significant
delay in offering ESMR services would have a material adverse effect on the
Company's competitive position in Brazil and on its business and results of
operations.
TECHNOLOGY RISKS. In most of its markets, the Company plans to implement
ESMR networks using iDEN technology developed by Motorola. Prior to the second
quarter of 1996, Nextel, the principal user of iDEN technology, implemented its
ESMR networks using Motorola's "first generation" iDEN technology. Nextel
encountered certain system performance issues that resulted in a significant
postponement of its aggressive marketing efforts in the United States with
respect to its ESMR network utilizing iDEN technology, and particularly its
mobile telephone services. Nextel, together with Motorola, has pursued a
significant program directed toward the development and deployment of
modifications to the "first generation" iDEN technology platform designed
principally to produce improvements in audio quality for telephone interconnect
service. Although Nextel has deployed the modified iDEN technology successfully
in several of its markets to date, including Chicago, Detroit, Boston, Denver,
Atlanta, New York, Washington/Baltimore, Los Angeles, Northern California and
the Pacific Northwest, and has announced its intention to pursue an aggressive
roll-out of its ESMR networks in additional markets, its new systems have only
been in commercial use for a limited period and there can be no assurance that
the modified iDEN technology will satisfactorily continue to address the system
performance issues encountered in the deployment of the first generation
technology.
COMPETITION. The Company's success will depend on the Operating Companies'
ability to compete effectively with other communications services providers,
including landline telephone companies and other wireless communications
companies, in the markets in which the Operating Companies offer services. Many
of the Company's competitors are well-established companies with substantially
greater financial and marketing resources, larger customer bases, and better
name recognition than the Company, and in certain markets may be able to provide
coverage to a larger number of subscribers. Because of their financial
resources, these competitors may be able to reduce prices in order to gain
market share. In Brazil, some of the largest telecommunications companies in the
world have been granted licenses in the on-going auctions to provide cellular
service, which will result in significant competition when those services are
launched. In addition, the Argentine and Mexican governments have announced
their intention to auction a number of licenses to provide wireless
communications service, and, as a result, the Company expects competition in
these countries to increase. The Company expects that the prices it charges for
its products and services will decline over the next few years as competition
intensifies in its markets. Because iDEN technology is not compatible with
cellular or PCS technology, the Company's customers will not be able to roam on
cellular or PCS systems. There can be no assurance that the Company will be able
to compete effectively in the future. For a more detailed description of the
competitive factors affecting each Operating Company, see the "Competition"
discussion for each Operating Company under "Business -- Operations and
Investments."
On February 20, 1997, the Ministry of Communications released new SMR rules
(the "New SMR Rules") (i) permitting the combination of adjacent channels in
certain frequencies in the 400 MHz, 800 MHz and 900 MHz band and (ii) requiring
the use of digital technology for SMR systems operating in channels 401 to 600
of the 806-821 MHz and 851-866 MHz bands. The New SMR Rules also provide that
channels which have already been assigned to licensees, including the Company,
will be the object of a study addressing the prospective regrouping of such
channels for application in systems using digital technology. Because the New
SMR Rules allow SMR operators to combine adjacent channels to create contiguous
blocks and may provide for a regrouping of SMR channels to create more
contiguous blocks in the future, SMR operators may have additional technology
choices available to them. Although the Company does not believe that the New
SMR Rules will materially affect its technology decisions or the attractiveness
of McCaw Brazil's product or service offerings, the New SMR Rules and technology
decisions by other SMR operators, including existing and future competitors, may
increase competition in Brazil. The proposed regulations issued on May 15, 1997
and June 25, 1997, if enacted by the Ministry of Communications as
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drafted, would impose limitations on the Company's ability to (i) obtain direct
telephone numbers for all of its subscriber units in Brazil and (ii)
interconnect with the public telecommunications network, and therefore, may
limit the Company's ability to compete effectively with other wireless
communications service providers in Brazil, including the operators of the Band
B cellular licenses.
In addition, many existing telecommunications enterprises in the markets in
which the Company operates have successfully attracted significant investments
from multinational communications companies. These multinational communications
companies, which have invested in local landline, wireless communications and
paging entities, have substantially greater financial resources than the Company
and are attempting to accelerate the modernization of the telecommunications
sector in the regions in which they operate by bringing their operating and
financial resources to bear.
The Company continuously reviews opportunities to acquire additional
licenses in new markets, primarily in emerging countries. In each new market,
the Company expects to face competition for such licenses from major
international telecommunications entities, as well as from local competitors.
RAPID TECHNOLOGICAL CHANGES. The telecommunications industry is subject to
rapid and significant changes in technology, which could lead to new products
and services that compete with those offered by the Company or lower the cost of
current competing products and services to the point where the Company's
products and services could become noncompetitive, thereby requiring the Company
to reduce the prices of its services. While the Company is not aware of any
proposed changes that will materially affect the attractiveness of its product
and service offerings, the effect of technological changes on the Company's
businesses cannot be predicted. In the future, the Company expects to experience
competition from new technologies such as PCS and possibly satellite technology,
as well as from advances with respect to existing technologies such as ESMR,
cellular, paging and mobile data transmission. There can be no assurance that
the Company will be able to adopt new technologies or to keep pace with ongoing
advances in existing technology.
RELIANCE ON LIMITED NUMBER OF EQUIPMENT SUPPLIERS. Motorola is expected to
provide most of the infrastructure and subscriber handset equipment to the
Company for its ESMR systems for the foreseeable future. It is expected that for
the first few years of the Company's ESMR operations, Motorola and competing
manufacturers who are licensed by Motorola (including Matsushita Communication
Industrial Co., Ltd., which has executed a definitive license agreement with
Motorola to employ Motorola's proprietary technology) will be the only
manufacturers of subscriber equipment that is compatible with the Company's ESMR
networks. In addition, the Company sources all of its switching equipment from
Nortel. Although the Company believes that it has or will be able to secure
contractual rights to procure sufficient equipment for its anticipated
requirements, there can be no assurance that such equipment will continue to be
available to the Company. Compania de Radiocomunicaciones Moviles S.A.,
operating under the name Movicom ("Movicom"), one of the two cellular service
providers in Argentina, has an agreement with Motorola pursuant to which
Motorola has agreed not to sell iDEN to any other operator in Argentina until
September 15, 1997. See "Business -- Operations and Investments -- Argentina."
EXPANSION; MANAGEMENT OF GROWTH. The Company has experienced rapid growth
through acquisitions and intends to continue to grow through further expansion
and upgrade of its existing operations, through acquisitions and joint ventures
and through the establishment of new operations. The Company continually seeks
additional opportunities in its existing and new markets. The Company's future
success and its ability to meet its debt service obligations depends on the
expansion of its operations and development of a large subscriber base on a
timely basis.
The Company's planned expansion projects will be subject to numerous risks,
any of which could require substantial changes to proposed plans or otherwise
alter the time frames or budgets currently contemplated. Such risks include (i)
securing the necessary channel grants and adhering to regulatory requirements
relating thereto; (ii) locating suitable sites for the Company's towers,
obtaining any required zoning variances or other governmental or local
regulatory approvals, and negotiating acceptable purchase, lease, joint venture
or other agreements; (iii) negotiating favorable interconnection agreements;
(iv) delays that may be caused by frequency cross-interference with other radio
spectrum users, such as television stations; and (v) risks
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typically associated with any construction project, including possible shortages
of equipment or skilled labor, engineering or environmental problems, work
stoppages, weather interference and unanticipated cost increases. There can be
no assurance that the Company's currently planned expansion will be successful.
Moreover, numerous factors could cause the Company not to proceed with all or a
portion of its expansion plans or otherwise delay or alter its current expansion
plans.
Once the Company's operations are in place in a particular market, the
Company's development of a significant subscriber base depends on the success of
its sales and marketing efforts and the receptiveness of the marketplace. In
most of its markets, the Company has limited experience in marketing its
wireless communications services and in tailoring its sales and marketing to
local conditions, and there can be no assurance that the Company's sales and
marketing teams will be able to successfully establish a large subscriber base
in its markets. In most of its markets, the Company will need to rely in part on
the efforts of independent dealers and distributors to market its services.
As a result of the Company's aggressive expansion plans, the Company faces
significant challenges in managing its expanded operations. The Company must
hire and train a number of key personnel to manage its growth, and its expansion
plans will place substantial burdens on the Company's current management
resources, information systems and financial controls. The Company intends to
adopt a decentralized management strategy in each country in which it operates.
While the Company believes this decentralized approach will result in efficient
and effective operations, the management, information, internal control,
reporting and accounting issues involved in any decentralized organization can
be significant. In addition, the Company expects to face significant challenges
in integrating newly acquired businesses with its existing operations. There can
be no assurance that the Company will be able to manage its growth effectively.
Failure to do so would have a material adverse effect on the Company's results
of operations.
CONTROL BY NEXTEL AND ITS SIGNIFICANT STOCKHOLDERS; CONFLICTS OF INTEREST;
DEPENDENCE ON NEXTEL. The Company is a wholly owned subsidiary of Nextel and
Nextel therefore has the power to elect all the directors of the Company. Of the
six directors that comprise the board of directors of the Company, four are also
directors and/or officers of Nextel. Nextel and directors and officers of Nextel
who are also directors of the Company are in positions that may result in
conflicts of interests with respect to transactions involving the Company. The
Company currently engages in and expects, in the future, to continue to engage
in transactions with Nextel and its affiliates. See "Certain Relationships and
Related Transactions."
Based on securities ownership information relating to Nextel, and after
giving effect to the conversion of the outstanding shares of Nextel's preferred
stock and the exercise in full of outstanding options and warrants held by the
McCaw Investor and Motorola, the McCaw Investor and Motorola would beneficially
own approximately 26.3% and approximately 14.2% of the Nextel Class A Common
Stock, respectively, outstanding as of March 21, 1997. Pursuant to the
Securities Purchase Agreement dated as of April 4, 1995, as amended, among
Nextel, the McCaw Investor and Craig O. McCaw (the "McCaw Securities Purchase
Agreement"), the McCaw Investor has the right to designate not less than 25% of
the board of directors of Nextel (the "Nextel Board"). Additionally, the McCaw
Investor is effectively entitled to designate a majority of the members of the
Operations Committee (the "Operations Committee") of the Nextel Board and has
the authority to formulate key aspects of Nextel's business strategy. As a
result, the McCaw Investor is in a position to exert significant influence over
Nextel's, and thereby McCaw International's, affairs.
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between Nextel as the owner of the
Company's capital stock and the Holders of the Notes. Nextel may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions which, in its judgment, could enhance the value of its equity, even
though such transactions might involve risk to the Holders of the Notes.
The Company and Nextel have entered into a right-of-first-opportunity
agreement (the "Non-Compete Agreement") effective as of the Closing Date of the
Initial Offering pursuant to which Nextel has agreed that neither Nextel nor any
Affiliate (as defined in the agreement) controlled by Nextel will in the future
participate in the ownership or operation of two-way terrestrial-based mobile
wireless communications systems ("Wireless Entities") anywhere other than in the
United States and Canada (for so long as Nextel owns an
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equity interest in Clearnet) unless such opportunities ("Future Wireless
Opportunity") have first been presented to the Company. Such restriction will
not apply to, among other things, any commercial relationship with any Wireless
Entity (including channel or frequency sharing, roaming, purchase or sale of
goods or services, licensing of intellectual property or other intangible rights
or similar business related arrangement) that does not involve the directing or
participating in the management of such Wireless Entity. The Company has agreed
that, without the consent of Nextel, neither it, its Restricted Affiliates nor
any of its Unrestricted Affiliates (each as defined in the "Description of the
Notes") will participate in the ownership or management of any wireless
communications service business in the United States or Canada other than with
respect to its interest in Clearnet. Such restrictions terminate upon the
earliest to occur of (i) April 15, 2007 and (ii) the date on which a Change of
Control occurs (as defined in the "Description of the Notes").
If Nextel gives the Company notice (the "Initial Notice") of a Future
Wireless Opportunity, the Company will have 60 days to notify Nextel that it
intends to pursue such opportunity and how it intends to finance its
participation. The Company must have secured a financing commitment within 90
days of the date of the Initial Notice and the Future Wireless Opportunity must
be consummated within nine months of the date of the Initial Notice. In the
event the Company fails to respond to Nextel within the 60 and 90 day time-
frames or fails to consummate the transaction within the nine-month period,
Nextel will be free to pursue the Future Wireless Opportunity.
The Company has agreed not to amend the Non-Compete Agreement if such
amendment is material and adverse to the holders of the Notes or the Warrants
and to provide such holders with written notice 30 days prior to any amendment.
Each of the McCaw Investor and Motorola has and (subject to the terms of
applicable agreements between such parties and Nextel) may have an investment or
interest in entities that provide wireless communications services that could
potentially compete with Nextel and the Company. Under the McCaw Securities
Purchase Agreement, the McCaw Investor, Craig O. McCaw and their Controlled
Affiliates (as defined in the McCaw Securities Purchase Agreement) may not, for
a period of time, participate in other two-way terrestrial-based mobile wireless
communications systems in the region that includes any part of North America or
South America unless such opportunities have first been presented to and
rejected by Nextel. Such restrictions terminate on the later to occur of July
28, 2000 and one year after the termination of the Operations Committee.
The Company also depends on Nextel to provide it with various services
including technology assistance, as well as certain administrative services.
Such services are provided on a cost-basis pursuant to an overhead services
agreement. See "Certain Relationships and Related Transactions."
In November 1996, Nextel, McCaw International and Motorola entered into a
binding memorandum of understanding regarding the Motorola Financing (the
"Motorola MOU"). Under the Motorola MOU, Motorola agreed to provide an aggregate
of $400 million in vendor financing to Nextel and McCaw International for the
worldwide purchase of iDEN equipment and services and ancillary products (such
as switches). In March 1997, Motorola and Nextel entered into a term sheet
increasing the maximum worldwide vendor financing available to Nextel and McCaw
International to $650 million, with a maximum non-U.S. amount outstanding of
$400 million, subject to certain per country limits as agreed in the Motorola
MOU. The Motorola MOU sets a limit of $125 million per country (other than the
United States and Canada) on the amount that may be borrowed under the Motorola
Financing. Nextel, McCaw International and Motorola agreed to an initial
commitment to McCaw Brazil, McCaw Argentina and Infocom under the Motorola
Financing of $125 million, $81 million and $15 million, respectively.
Commitments provided by Motorola to provide financing to any Operating Company
count 100% against Motorola's $650 million aggregate commitment. Currently,
Motorola has not committed any financing for Mexico. The Motorola MOU
contemplates that the loans under the Motorola Financing will bear interest at a
rate of 2% to 4% over prime rate, depending on the Operating Company placing the
order and the country in which such company is installing the iDEN equipment and
is likely to have a maturity of up to six years. Borrowings by an Operating
Company will be secured by all the assets and stock of such Operating Company
and it is expected that the Company will guarantee such borrowings on a pro rata
basis based on the equity interest of such Operating
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Company owned by the Company (with the exception of Brazil where the Company
will be required to guarantee 100% of such borrowings).
Any amounts available to be borrowed by the Operating Companies under the
Motorola Financing will be reduced by any amounts borrowed by Nextel and its
subsidiaries other than the Company and the Operating Companies. Nextel has
committed to the Company that at least $95 million of the Motorola Financing
will be available to the Company. As of March 31, 1997, Nextel had borrowed $110
million pursuant to the Motorola Financing. Accordingly, there can be no
assurance that more than $95 million of the Motorola Financing will be available
to fund the Operating Companies' equipment purchases. In addition, to the extent
total amounts outstanding under the Motorola Financing to Nextel and its
subsidiaries, including the Company and the Operating Companies (other than
Clearnet), plus requests for additional financing under the Motorola Financing
by Nextel and its subsidiaries other than the Company and the Operating
Companies would exceed $400 million, McCaw International is required to repay or
cause to be repaid sufficient borrowings such that after giving effect to such
repayment, the total amount of loans outstanding from Motorola to Nextel and its
subsidiaries, including the Company and the Operating Companies (other than
Clearnet), will not exceed $400 million (any such repayment is referred to as a
"Forced Repayment"). Nextel has agreed with the Company not to cause a Forced
Repayment.
Nextel has provided a substantial amount of financing to the Company, but
it is under no obligation to do so in the future.
DEPENDENCE ON KEY PERSONNEL. The success of the Company and its growth
strategy depends in large part on the Company's ability to attract and retain
key management, marketing, finance and operating personnel, both at the Company
and the Operating Companies. In many of the countries in which the Company
operates, experienced management and other highly skilled personnel are in great
demand. There can be no assurance that the Company will continue to attract and
retain the qualified personnel necessary for its business. In addition, the loss
of the services of one or more members of its senior management team, in
particular Keith D. Grinstein, the Company's President and Chief Executive
Officer, could have a material adverse effect on the Company. The Company does
not maintain key person life insurance.
RISKS ASSOCIATED WITH EMERGING MARKETS; UNCERTAINTIES ASSOCIATED WITH A NEW
INDUSTRY. Most of the Company's markets are considered to be "emerging markets."
Although political, economic and social conditions differ in each country in
which the Company currently operates, developments in one country may affect the
market value and liquidity of the Notes, Warrants and Warrant Shares and the
Company's access to international capital markets. The Company currently does
not have political risk insurance in the countries in which it conducts
business.
The success of the Company's operating strategies is subject to factors
that are beyond the Company's control and impossible to predict due, in part, to
the limited history of wireless communications services in the Company's
existing and targeted markets. Consequently, the size of these markets for
wireless communications services, the rates of penetration of these markets, the
sensitivity and ability of potential subscribers to pay subscription and other
fees, the extent and nature of the competitive environment and the immediate and
long-term viability of wireless communications services in these markets are
uncertain.
CURRENCY RISKS AND EXCHANGE CONTROLS. All of the Company's revenues will be
denominated in non-U.S. currencies, although a significant portion of its
capital and operating expenditures, including imported infrastructure equipment,
and the interest expense on the Notes and under the Motorola Financing, will be
denominated in U.S. dollars. Fluctuations in exchange rates relative to the U.S.
dollar may have a material adverse effect on the Company's earnings or assets.
To the extent the Operating Companies distribute dividends in local currencies
in the future, the amount of cash to be received by the Company will be affected
by fluctuations in exchange rates. In addition, certain of the countries in
which the Company has operations restrict the expatriation or conversion of
currency.
LOCAL ECONOMIES; POTENTIAL INFLATION. The Company's operations depend on
the economies of the markets in which it has interests. These markets are in
countries with economies in various stages of development or structural reform,
some of which are subject to rapid fluctuations in terms of consumer prices,
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employment levels, gross domestic product and interest and foreign exchange
rates. The Company may be subject to such fluctuation in the local economies. To
the extent such fluctuations have an effect on the ability of customers to pay
for the Operating Companies' services, the growth of the Company's wireless
services could be impacted negatively. Many of the countries in which the
Company operates do not have established credit bureaus, thereby making it more
difficult for the Company to ascertain the creditworthiness of potential
customers. Accordingly, the Company may experience a higher level of bad debt
expense than otherwise would be the case. In particular, the Company's bad debt
expense as a percentage of revenues in Brazil and Mexico has been significantly
higher than in the Company's other markets.
Certain of the Operating Companies operate in countries in which the rate
of inflation is significantly higher than that of the United States. There can
be no assurance that any significant increase in the rate of inflation in such
countries could be offset, in whole or in part, by corresponding price increases
by the Operating Companies, even over the long term.
IMPORT DUTIES ON NETWORK EQUIPMENT AND HANDSETS. The Company's operations
are highly dependent upon the successful and cost-efficient importation of
infrastructure equipment and handsets from North America and, to a lesser
extent, Europe and Japan. In the countries in which the Company operates,
network equipment and handsets are subject to significant import duties and
other taxes that can be as high as 50%. Although the Company believes there is a
trend away from increased import duties, any significant increase in the future
could have a material adverse effect on the Company's results of operations.
INTERNATIONAL TAX RISKS. Distributions of earnings and other payments
(including interest) received from the Company's operating subsidiaries and
affiliates may be subject to withholding taxes imposed by the jurisdictions in
which such entities are formed or operating, which will reduce the amount of
after-tax cash the Company can receive from the Operating Companies. In general,
a U.S. corporation may claim a foreign tax credit against its federal income tax
expense for such foreign withholding taxes and for foreign income taxes paid
directly by foreign corporate entities in which the Company owns 10% or more of
the voting stock. The ability to claim such foreign tax credits and to utilize
net foreign losses is, however, subject to numerous limitations, and the Company
may incur incremental tax costs as a result of these limitations or because the
Company is not in a tax-paying position in the United States.
The Company may also be required to include in its income for U.S. federal
income tax purposes its proportionate share of certain earnings of those foreign
corporate subsidiaries that are classified as "controlled foreign corporations"
without regard to whether distributions have been actually received from such
subsidiaries.
LEGAL ENFORCEMENT. A number of the agreements the Company enters into with
the Operating Companies are governed by the laws of, and are subject to dispute
resolution in the courts of, or through arbitration proceedings in, the country
or region in which the operation is located. The Company cannot accurately
predict whether such forum will provide it with an effective and efficient means
of resolving disputes that may arise in the future. Even if the Company is able
to obtain a satisfactory decision through arbitration or a court proceeding, it
could have difficulty enforcing any award or judgment on a timely basis. The
Company's ability to obtain or enforce relief in the United States is uncertain.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES. The Private Notes were issued with
original issue discount for U.S. federal income tax purposes. The Exchange Notes
should be treated as a continuation of the Private Notes. Consequently, Holders
of the Exchange Notes generally will be required to include amounts in gross
income for U.S. federal income tax purposes in advance of receipt of the cash
payments to which the income is attributable. The Exchange Notes may be subject
to the high-yield discount obligation rules, which will defer and may, in part,
eliminate the Company's ability to deduct for U.S. federal income tax purposes
the original issue discount attributable to the Exchange Notes. Accordingly, the
Company's after-tax cash flow might be less than if the original issue discount
on the Exchange Notes was deductible when it accrued. See "Certain U.S. Federal
Income Tax Considerations" for a more detailed discussion of the U.S. federal
income tax consequences resulting from the Exchange Offer.
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If a bankruptcy case is commenced by or against the Company under the U.S.
Bankruptcy Code after the issuance of the Notes, the claim of a Holder with
respect to the principal amount thereof may be limited to an amount equal to the
sum of (i) the initial offering price and (ii) that portion of the original
issue discount that is not deemed to constitute "unmatured interest" for
purposes of the U.S. Bankruptcy Code. Any original issue discount that was not
amortized as of any such bankruptcy filing would constitute "unmatured
interest."
FOREIGN CORRUPT PRACTICES ACT. As a domestic corporation and a wholly owned
subsidiary of Nextel, the Company is subject to the Foreign Corrupt Practices
Act (the "FCPA"), which generally prohibits U.S. companies and their
intermediaries from bribing foreign officials for the purpose of obtaining or
keeping business. Although the Company has taken precautions to comply with the
FCPA, there can be no assurance that such precautions will protect the Company
against liability under the FCPA, particularly as a result of actions which may
in the past have been taken or which may be taken in the future by agents and
other intermediaries for whom the Company may have exposure under the FCPA. In
particular, the Company may be held responsible for actions taken by its local
partners even though the Company has no ability to control them. Any
determination that the Company had violated the FCPA could have a material
adverse effect on the Company.
RADIO FREQUENCY EMISSION CONCERNS. Allegations have been made, but not
proven, that the use of portable mobile communications devices may pose health
risks due to radio frequency emissions from such devices. Studies performed by
wireless telephone equipment manufacturers have rebutted these allegations, and
a major industry trade association and certain governmental agencies have stated
publicly that the use of such phones poses no undue health risk. Certain
consumers have alleged that serious health risks have resulted from the use of
certain mobile communications devices. The actual or perceived health risks of
mobile communications devices could adversely affect mobile communications
services providers, including the Company, through reduced subscriber growth,
reduced network usage, the threat of product liability suits or limitations on
financing available to the mobile communications industry.
LACK OF PUBLIC MARKET. The NASD has designated the Private Notes as
securities eligible for trading in the PORTAL market of the NASD. However, the
Exchange Notes are new securities for which there is currently no active trading
market. The Company does not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
National Market System and there can be no assurance as to the development of
any market or liquidity of any market that may develop for the Exchange Notes.
If a market for the Exchange Notes does develop, the price of such Exchange
Notes may fluctuate and liquidity may be limited. If a market for the Exchange
Notes does not develop, purchasers may be unable to resell such Exchange Notes
for an extended period of time, if at all. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the Exchange
Notes. There can be no assurance that, if a market for the Exchange Notes were
to develop, such market would not be subject to similar disruptions.
FAILURE TO EXCHANGE PRIVATE NOTES. The Exchange Notes will be issued in
exchange for Private Notes only after timely receipt by the Exchange Agent of
such Private Notes, a properly completed and duly executed Letter of Transmittal
and all other required documentation. Therefore, holders of Private Notes
desiring to tender such Private Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor
the Company are under any duty to give notification of defects or irregularities
with respect to tenders of Private Notes for exchange. Private Notes that are
not tendered or are tendered but not accepted will, following consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof. In addition, any holder of Private Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer who holds Private Notes acquired for its own
account as a result of market making or other trading activities and who
receives Exchange Notes for its own account in exchange for such Private Notes
pursuant to the Exchange Offer, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
that Private Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Private Notes could be
adversely affected due to the limited amount, or "float," of the Private Notes
that are expected
30
<PAGE> 33
to remain outstanding following the Exchange Offer. Generally, a lower "float"
of a security could result in less demand to purchase such security and could,
therefore, result in lower prices for such security. For the same reason, to the
extent that a large amount of Private Notes are not tendered or are tendered and
not accepted in the Exchange Offer, the trading market for the Exchange Notes
could be adversely affected. See "Plan of Distribution" and "The Exchange
Offer."
31
<PAGE> 34
THE COMPANY
McCaw International was founded in February 1995 by Craig O. McCaw to
invest in and manage international wireless communications operations. In August
1995, a wholly owned subsidiary of Nextel purchased all the outstanding shares
of the Company from Craig O. McCaw, who was at the time and remains, a
significant shareholder of Nextel.
The chart below sets forth the summary of the corporate ownership structure
of the Company and the Operating Companies as of April 30, 1997.
[CHART]
- ---------------
(1) After giving effect to the Argentina Transaction. Under U.S. GAAP in effect
on the date hereof, McCaw Argentina will be accounted for under the equity
method. Prior to the consummation of the Argentina Transaction, the Company
owned 100% of McCaw Argentina S.A., an Argentine corporation ("McCaw
Argentina S.A."), which became a subsidiary of McCaw Argentina upon
consummation of the Argentina Transaction.
(2) On June 30, 1997, the Company increased its interest to 48.1% by purchasing
all of the shares of Mobilcom held by a then-current shareholder.
(3) Represents the right to receive 25.2% of the profits generated by the
Shanghai GSM System.
Brazil. On January 30, 1997, Nextel acquired an 81% equity interest in
McCaw Brazil for a purchase price of $186.3 million, which was paid with Nextel
Class A Common Stock, and simultaneously contributed its equity interest in
McCaw Brazil to the Company. McCaw Brazil commenced commercial operations in
October 1994 and grew quickly through a series of acquisitions of Brazilian SMR
license-holding companies. McCaw Brazil is currently the largest SMR operator in
Brazil both in terms of the number of channels and the number of subscribers in
its licensed service areas. McCaw Brazil owns or has options to purchase
licenses for 1,700 SMR channels in Brazil, including 195 in Sao Paulo
(representing 9.75 MHz) and 160 in Rio de Janeiro (representing 8.0 MHz). These
licenses cover more than 59 million POPs, including the 10 largest cities in
Brazil. McCaw Brazil currently offers SMR services in 27 cities, including Sao
Paulo, Rio de Janeiro, Belo Horizonte, Brasilia, Porto Alegre and Curitiba.
Telcom Ventures, LLC ("Telcom Ventures") and certain other entities
(together the "Telcom Group") own the remaining 19% equity interest in McCaw
Brazil. Telcom Ventures is the indirect majority shareholder of LCC
International, Inc., a leading wireless engineering consulting services firm,
and is owned by the family of Dr. Rajendra Singh and affiliates of the Carlyle
Group, a United States based principal investment firm.
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<PAGE> 35
The Company is currently in discussions with several large Brazilian
corporate groups regarding the possible sale of up to a 15% equity interest in
the Brazil Holding Company. The proceeds from the Brazil Equity Sale will be
applied to the build-out of McCaw Brazil's ESMR network. There can be no
assurance that the Company will be able to consummate any such transaction.
Argentina. In 1995, McCaw Argentina S.A. (formerly known as Com Control
Comunicacion Controlada, S.A.) purchased and obtained a license to operate 100
SMR channels in each of Buenos Aires, Cordoba, Rosario and Mendoza, the four
largest cities in Argentina. McCaw Argentina S.A. commenced commercial SMR
operations in February 1997. Following the Argentina Transaction, McCaw
Argentina became the largest SMR channel holder in Argentina, with twice as many
SMR channels as the second largest SMR operator. McCaw Argentina has 180 SMR
channels (9 MHz) in Buenos Aires, 200 SMR channels (10 MHz) in each of the three
other major cities and 20 additional SMR channels in each of Mar del Plata and
Tucuman. The Company's licenses cover over 17.6 million POPs. As part of the
Argentina Transaction, McCaw Argentina became the holder of a nationwide paging
business with approximately 4,000 subscribers. The Company and WVA each own 50%
of McCaw Argentina.
Mexico. Mobilcom was formed in 1993 by an affiliate of Grupo Comunicaciones
San Luis S.A. de C.V. ("Grupo San Luis") to pursue SMR opportunities in Mexico
and began commercial operations in September 1993. In March 1995, Nextel made
its first investment in Mobilcom by purchasing a 16.5% equity interest. During
the last two years, through a series of transactions, Nextel increased its
ownership interest in Mobilcom, as well as its involvement in the management of
Mobilcom and currently has the right to nominate a majority of the board of
directors of Mobilcom. The Company must invest substantial additional amounts in
Mobilcom to maintain such right. The Company currently owns a 48.1% equity
interest in Mobilcom. See "Risk Factors -- Contingent Capital Requirements."
Mobilcom is the leading SMR provider in Mexico and offers, through its
subsidiaries and management agreements, SMR services throughout Mexico,
including in its three largest cities, and along a number of important highways.
The cities in which Mobilcom holds SMR licenses include Mexico City (with a
total of 204 channels representing approximately 10 MHz), Guadalajara (with a
total of 60 channels representing approximately 3 MHz) and Monterrey (with a
total of 25 channels representing approximately 1.25 MHz). The Company's
licenses cover over 42 million POPs.
The Company's strategic partners in Mobilcom include Grupo San Luis, which
currently owns 21% of Mobilcom, Wireless Ventures of Mexico, Inc. ("WVM"), a
wholly owned subsidiary of Telcom Ventures, which owns approximately 11.6% and
Associated SMR, Inc. ("Associated SMR"), an international operator of wireless
communications systems, which owns approximately 11.3%. The Company has options
to acquire up to an additional 29.5% of Mobilcom, which expire on March 3, 1998.
Philippines. In August 1996, McCaw International acquired a 30% equity
interest in Infocom. Infocom owns nationwide licenses (with a total of 100
channels representing approximately 5 MHz), covering more than 67 million POPs,
to provide SMR, ESMR and paging services. Infocom began commercial service of
its paging network in February 1995 under the brand name "Infopage" and plans to
launch commercial iDEN-based ESMR services by the end of 1997.
The Company's partners in Infocom include the Gotesco Group, a leading
diversified conglomerate engaged in retail, real estate, banking, manufacturing
and trading in the Philippines headed by Jose C. Go, which owns a 20% interest
in Infocom. Affiliates of American International Group Inc. (collectively "AIG")
recently purchased a 10% interest in Infocom from an existing Infocom
shareholder at a significantly higher implied valuation than that paid by the
Company for its interest in Infocom. Other shareholders include a 32% holder and
an 8% holder.
Shanghai. The Company has a contractual right to receive 25.2% of the
profits generated by the Shanghai GSM System operated by China United
Telecommunications, Ltd. ("Unicom") through its Shanghai branch ("Shanghai
Unicom"). The Company's interest in the Shanghai GSM System is held through its
60% equity interest in a Chinese joint venture, Shanghai McCaw
Telecommunications Co. Ltd. ("Shanghai McCaw"). Shanghai McCaw participates in
the Shanghai GSM System through a profit-sharing arrangement (the
33
<PAGE> 36
"Unicom Agreement") between Unicom and Shanghai Science & Technology Investment
Corp. Ltd. ("SSTIC"), the Company's 40% partner in Shanghai McCaw. SSTIC is also
a shareholder of Unicom. The Shanghai GSM System covers the greater Shanghai
area, which is comprised of more than 14 million POPs. The Company's interest in
the Shanghai GSM System has been structured as a profit-sharing arrangement
because current Chinese laws prohibit a foreign party from direct participation
in the ownership and operation of telecommunications systems. The Company made
its investment in Shanghai McCaw in 1995. In addition to its equity investment,
the Company loaned Shanghai McCaw a portion of the funds necessary to fund the
Shanghai GSM System. At December 31, 1996, the outstanding balance of this loan
was $10.5 million. On March 29, 1997, the arrangements under the Unicom
Agreement were modified pursuant to the China Unicom Shanghai GSM Phase III
Cooperation Agreement (the "Phase III Agreement") between Unicom and Shanghai
McCaw. The Phase III Agreement requires Shanghai McCaw to provide 60% of the
funds required to expand the Shanghai GSM System. The profit sharing
arrangements under the Unicom Agreement were retained for a period until the
date the 50,001st subscriber is activated and are, thereafter, subject to change
as provided in the Phase III Agreement. See "Business -- Operations and
Investments -- Corporate Governance -- China."
Unicom was established in 1994 by the Ministry of Electronics Industry, the
Ministry of Railways, the Ministry of Power and 13 other shareholders including
SSTIC. SSTIC is an investment holding company established by the Municipal
Government of Shanghai, six major Shanghai banks as well as two major
diversified Shanghai conglomerates for the purpose of developing the Shanghai
high-technology industry.
Canada. The Company owns 1,596,067 shares of common stock of Clearnet, a
Nasdaq-listed company, representing approximately 3.7% of the outstanding common
stock of Clearnet. On June 30, 1997 the Company's Clearnet common stock had a
market value of approximately $19 million. Clearnet is the largest SMR operator
in Canada as measured by the number of current subscribers, the number of 800
MHz channels and the number of POPs it covers. Additionally, Clearnet holds one
of the two national 30 MHz licenses to provide PCS in Canada. Clearnet currently
offers SMR services in more than 40 cities throughout Canada and ESMR services
in Ontario and Quebec. Clearnet plans to launch its PCS network in Canada's
largest urban centers in mid-1997. The Company has one representative on
Clearnet's board of directors.
Nextel made its initial investment in Clearnet in October 1994. The shares
of Clearnet contributed to the Company by NIC were the maximum number of shares
Nextel was permitted to transfer under certain agreements relating to its
indebtedness. Nextel continues to hold approximately 15.6% of Clearnet and also
has one representative on the board of directors of Clearnet.
On June 26, 1997, Nextel announced that it received the consent of the
holders of its public notes regarding certain amendments to the indentures
governing such notes. The Nextel noteholders agreed, among other things, to
permit Nextel to transfer its equity interest in Clearnet to McCaw
International. If Nextel effects such transfer, McCaw International will hold an
aggregate of 8,373,845 shares of Clearnet, representing approximately 19% of the
outstanding common stock of Clearnet, which represents a 1.7% voting interest.
As of June 30, 1997, based on the closing price of Clearnet stock on the Nasdaq
Stock Market, Nextel's equity interest in Clearnet had a market value of
approximately $82 million. Although Nextel is permitted to transfer its interest
in Clearnet to the Company, there can be no assurance that Nextel will effect
such transfer or, should such transfer occur, that the market value of Nextel's
equity interest in Clearnet on the date of any such transfer will not be less
than the market value of such equity interest as of June 30, 1997.
Nextel Investment Company. On February 28, 1997, NIC was merged with an
indirect wholly owned subsidiary of the Company, with NIC as the surviving
corporation. Prior to the consummation of the merger, NIC held approximately 38%
of Mobilcom, 3.7% of Clearnet, a note receivable related to Mobilcom and cash
and short-term investments at December 31, 1996 of $52.9 million. Prior to
consummation of the merger, the cash and short-term investments were distributed
to Nextel.
The Company's principal executive and administrative offices are located at
1191 Second Avenue, Suite 1600, Seattle, Washington 98101 and its telephone
number at that location is (206) 749-8000.
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<PAGE> 37
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby and has
agreed to pay the expenses of the Exchange Offer. In consideration for issuing
the Exchange Notes as contemplated in this Prospectus, the Company will receive,
in exchange, Private Notes representing an equal aggregate principal amount at
maturity. The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Private Notes, except as otherwise
described herein under "The Exchange Offer -- Terms of the Exchange Offer." The
Private Notes surrendered in the exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the outstanding debt of the Company.
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<PAGE> 38
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 on a (i) historical basis and (ii) pro forma basis to give effect
to the Argentina Transaction and the capital contribution that increased the
Company's interest in Mobilcom from 38% to 46.3%. This table should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto, and the pro forma consolidated financial statements appearing elsewhere
in this Prospectus. See "Pro Forma Consolidated Financial Statements" and the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------
ACTUAL(1) PRO FORMA
------------ ------------
(UNAUDITED)
<S> <C> <C>
Long-term debt:
Notes, net of original issue discount of $461,653,792........ $489,909,208 $489,909,208
------------ ------------
Total long-term debt................................. 489,909,208 489,909,208
Stockholder's equity:
Common stock, without par value; 20,000,000 shares
authorized, 10,000,000 shares issued and outstanding
actual and 10,000,000 shares issued and outstanding pro
forma..................................................... 395,427,766 395,427,766
Accumulated deficit.......................................... (38,551,777) (38,551,777)
Unrealized gain on investments classified as
available-for-sale, net of tax............................ 1,215,500 1,215,500
------------ ------------
Total stockholder's equity........................... 358,091,489 358,091,489
------------ ------------
Total capitalization................................. $848,000,697 $848,000,697
=========== ===========
</TABLE>
- ---------------
(1) Under U.S. GAAP, approximately $14.8 million of the proceeds of the Initial
Offering has been allocated to the Warrants and approximately $485.2 million
of the proceeds has been allocated to the Notes.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on the Closing Date to the
Placement Agents pursuant to the Placement Agreement. The Placement Agents
subsequently sold the Private Notes to (i) "qualified institutional buyers"
("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in
reliance on Rule 144A, (ii) other investors in offshore transactions in reliance
on Regulation S under the Securities Act and (iii) a limited number of
institutional "accredited investors", as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act. As a condition to the sale of the Private Notes,
the Company and the Placement Agents entered into the Registration Rights
Agreement on March 3, 1997. Pursuant to the Registration Rights Agreement, the
Company agreed that (i) it would use its bests efforts to cause to be filed with
the Commission within 60 days after the Closing Date an exchange offer
registration statement under the Securities Act with respect to the Exchange
Notes, (ii) to cause such Registration Statement to remain effective under the
Securities Act until the closing of the Exchange Offer and (iii) it would use
its best efforts to have the Exchange Offer consummated not later than 60 days
after the effective date of the Registration Statement. The Company agreed to
issue and exchange Exchange Notes for all Private Notes validly tendered and not
withdrawn before the Expiration Date of the Exchange Offer. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement is
intended to satisfy the Company's obligations under the Registration Rights
Agreement.
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<PAGE> 39
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date.
The Company will issue Exchange Notes in exchange for an equal aggregate
principal amount at maturity of outstanding Private Notes validly tendered
pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date.
Private Notes may be tendered only in integral multiples of $1,000 principal
amount at maturity.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the registration rights of holders of Private Notes under
the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture, which also authorized the
issuance of the Private Notes, such that both series of Notes will be treated as
a single class of debt securities under the Indenture.
As of the date of this Prospectus, approximately $951.5 million in
aggregate principal amount at maturity of the Private Notes was outstanding.
Only a registered holder of the Private Notes (or such holder's legal
representative or attorney-in-fact), as reflected on the records of the Trustee
under the Indenture may participate in the Exchange Offer. Solely for reasons of
administration, the Company has fixed the close of business on , 1997
as the record date for the Exchange Offer for purposes of determining the
persons to whom this Prospectus and the Letter of Transmittal will be mailed
initially. There will be no fixed record date for determining registered holders
of the Private Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters'
rights under the Washington Business Corporation Act Law or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the provisions of the Registration Rights Agreement and
the applicable requirements of the Securities Act and the rules and regulations
of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if, in
the opinion of counsel for the Company, the consummation of the Exchange Offer
would violate any applicable law, rule or regulation or any applicable
interpretation of the staff of the Commission, to terminate or amend the
Exchange Offer by giving oral or written notice of such delay,
37
<PAGE> 40
extension, termination or amendment to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will not bear interest prior to April 15, 2002. From and
after April 15, 2002, the Private Notes bear interest and the Exchange Notes
will bear interest, which will be payable in cash, at a rate of 13% per annum,
on each April 15 and October 15, commencing October 15, 2002 to holders of
record on the immediately preceding April 1 and October 1, respectively.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Private Notes for
Exchange Notes in the ordinary course of business, who is not participating,
does not intend to participate, and has no arrangement with any person to
participate in a distribution of the Exchange Notes, and who is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act,
will be allowed to resell Exchange Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Notes a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, if any holder acquires Exchange Notes in the
Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes, such holder cannot rely on the position of
the staff of the Commission enumerated in certain no-action letters issued to
third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Private Notes
acquired by such broker-dealer as a result of market-making or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to any such
broker-dealer that requests copies of such Prospectus in the Letter of
Transmittal for use in connection with any such resale for a period not to
exceed 180 days after the closing of the Exchange Offer. See "Plan of
Distribution."
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of
38
<PAGE> 41
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Private Notes, if such procedure is available, into the
Exchange Agent's account at the Depository pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date or (iii) the holder must comply with the guaranteed
delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement among such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY PRIVATE
NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wish(es)(s) to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
(within the meaning of Rule 17Ad-15 under the Exchange Act) that is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Private Notes listed therein, such Private Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder exactly as such registered holder's name appears on such
Private Notes.
If the Letter of Transmittal or any Private Notes are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Private
Notes not properly tendered or any Private Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Private Notes. The Company's interpretation of the terms
and conditions of the
39
<PAGE> 42
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Private Notes must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Private Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) the Exchange Notes to be acquired by such holder
of Private Notes in connection with the Exchange Offer are being acquired by
such holder in the ordinary course of business of such holder, (ii) such holder
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is participating in the Exchange Offer for the purposes of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such holder in exchange for Private Notes acquired by such holder directly from
the Company should be covered by an effective registration statement containing
the selling security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and (v) such holder is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company. If
the holder is a broker-dealer that will receive Exchange Notes for such holder's
own account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities, such holder will be
required to acknowledge in the Letter of Transmittal that such holder will
deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, such holder will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depository pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depository) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes with the Depository for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depository's systems may make
book-entry delivery of Private Notes by causing the Depository to transfer such
Private Notes into the Exchange Agent's account at the Depository in accordance
with the Depository's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depository, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"-- Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
40
<PAGE> 43
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company
(by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder and the certificate number(s) of such
Private Notes, stating that the tender is being made thereby and
guaranteeing that, within three business days after the Expiration
Date, the Letter of Transmittal (or a facsimile thereof), together with
the certificate(s) representing the Private Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof) as
well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within three business
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date. To withdraw a tender of
Private Notes in the Exchange Offer, a written or facsimile transmission notice
of withdrawal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn, (ii) identify the Private Notes to be withdrawn (including the
certificate number or numbers) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Private Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer, and no Exchange Notes will be issued with respect thereto unless
the Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer -- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION OF CERTAIN RIGHTS
All registration rights under the Registration Rights Agreement accorded to
holders of the Private Notes (and all rights to receive additional interest on
the Notes to the extent and in the circumstances specified therein) will
terminate upon consummation of the Exchange Offer except with respect to the
Company's duty to keep the Registration Statement effective until the closing of
the Exchange Offer and, for a period of 180 days after the closing of the
Exchange Offer, to provide copies of the latest version of the Prospectus to any
broker-dealer that requests copies of such Prospectus in the Letter of
Transmittal for use in connection with any resale by such broker-dealer of
Exchange Notes received for its own account pursuant to the Exchange Offer in
exchange for Private Notes acquired for its own account as a result of
market-making or other trading activities.
41
<PAGE> 44
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street (212) 815-5915 101 Barclay Street
Floor 21 W Floor 21 W
New York, New York 10286 Confirm by Telephone: (212) New York, New York 10286
Attention: Corporate Trust Office 815-5919 Attention: Corporate Trust Office
</TABLE>
By Overnight Delivery:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
The Bank of New York also serves as Trustee under the Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and their affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable, out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$500,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (ii) in an offshore transaction complying with Rule
903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) pursuant to an effective registration statement
under the Securities Act or (v) to institutional accredited investors in a
transaction exempt from the registration requirements of the Securities Act,
and, in each case, in accordance with all other applicable securities laws and
the transfer restrictions set forth in the Indenture.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.
42
<PAGE> 45
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected financial and operating data
on a consolidated historical basis for the Company as of December 31, 1994, 1995
and 1996 and March 31, 1997, and for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997. The selected
consolidated historical financial data of the Company as of and for the years
ended December 31, 1994, 1995 and 1996, with the exception of data presented
under Other Financial Data, were derived from the consolidated financial
statements and the notes thereto of the Company, which have been audited by
Deloitte & Touche LLP, independent auditors, whose report has been included
herein. The selected consolidated historical financial data of the Company for
the three months ended March 31, 1996 and as of and for the three months ended
March 31, 1997 are derived from the unaudited consolidated financial statements
of the Company. In the opinion of management, the unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, that are necessary for a fair presentation of the financial position
and results of operations for these periods.
On January 1, 1997 and March 3, 1997, respectively, McCaw International
(Services), Ltd. (formerly Special Purpose Company No. 1) and McCaw
International (CANMEX), Ltd. (formerly Nextel Investment Company), both wholly
owned subsidiaries of Nextel, were merged into the Company. As these mergers
represent transfers between companies under common control, they have been
accounted for similar to poolings of interests; accordingly, the historical
financial statements for the periods presented prior to the mergers are restated
as though the companies had been combined from inception.
The selected consolidated historical financial data should be read in
conjunction with "Pro Forma Consolidated Financial Statements" and the notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ -- $ -- $ -- $ -- $ 1,460,388
Costs and expenses related to revenues........... -- -- -- -- 956,585
Selling, general and administrative.............. -- 276,962 9,317,784 821,027 3,852,548
Depreciation and amortization.................... 2,033 18,647 168,401 7,860 2,580,572
------------ ------------ ------------
Operating loss................................... (2,033) (295,609) (9,486,185) (828,887) (5,929,317)
Interest income (expense), net................... 2,687,882 6,232,502 3,977,557 1,144,927 (2,793,354)
Loss from equity method investments.............. -- (6,853,064) (5,991,304) (1,269,300) (1,866,894)
Other, net....................................... -- (15,002,062) 378,580 (4,987) (157,616)
Minority interest................................ -- 437,594
------------ ------------ ------------ ----------- ------------
Income (loss) before income tax benefit
(provision).................................... 2,685,849 (15,918,233) (11,121,352) (958,247) (10,309,587)
Income tax benefit (provision)................... (913,846) (2,119,050) (1,354,862) (389,275) 499,304
------------ ------------ ------------ ----------- ------------
Net income (loss)................................ $ 1,772,003 $(18,037,283) $(12,476,214) $(1,347,522) $ (9,810,283)
============ ============ ============ =========== ============
Net income (loss) per share...................... $ 0.18 $ (1.80) $ (1.25) $ (0.13) $ (0.98)
Weighted average shares outstanding.............. 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
CONSOLIDATED STATEMENT OF CASH FLOWS DATA:
Cash flows from operating activities............. $ 2,687,882 $ (6,063,660) $ (2,983,257) $ (226,340) $ (471,182)
Cash flows from investing activities............. (45,996,038) (47,895,909) (72,285,642) (4,701,413) (37,751,486)
Cash flows from financing activities............. 168,850,077 1,592,751 42,995,751 5,086,025 465,188,376
Capital expenditures............................. -- 36,056 8,817,644 167,950 6,192,982
Ratio of earnings to fixed charges(2)............ -- -- -- -- --
OTHER FINANCIAL DATA:
EBITDA(1)........................................ -- (22,132,088) (14,930,508) (2,095,314) (4,935,661)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------- AS OF MARCH 31,
1994 1995 1996 1997
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $125,541,921 $ 85,302,423 $ 53,029,275 $ 479,994,983
Investment in unconsolidated subsidiaries..................... -- 47,951,335 98,981,700 124,025,593
Total assets.................................................. 171,535,926 169,675,457 199,367,315 942,591,012
Long-term debt................................................ -- -- -- 489,909,208
Minority interest............................................. -- -- -- 5,251,125
Stockholder's equity.......................................... 1,772,003 11,939,690 39,202,634 358,091,489
</TABLE>
- ---------------
(1) EBITDA consists of loss before interest expense, income tax benefit and
depreciation and amortization. EBITDA is provided because it is a measure
commonly used in the telecommunications industry. It is presented to enhance
an understanding of the Company's operating results and is not intended to
represent cash flow or results of operations for the periods presented.
EBITDA is not a measurement under U.S. GAAP and may not be similar to EBITDA
measures of other companies. See the Company's consolidated financial
statements and the notes thereto appearing elsewhere in this Prospectus.
(2) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes, plus fixed charges, less
income (loss) from equity method investments. Fixed charges consist of
interest on all indebtedness, amortization of debt expense, and that portion
of rental expense which the Company believes to be representative of
interest. The deficiency (excess) for purposes of calculating the ratio of
earnings to fixed charges for the years ended December 31, 1996, 1995 and
1994, and the three months ended March 31, 1997 and 1996 was $11,121,352,
$15,918,233, $(2,685,849), $10,309,587 and $958,247, respectively.
43
<PAGE> 46
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements present
the historical consolidated balance sheets and statements of operations after
giving effect to the Transactions and the Initial Offering. The unaudited pro
forma consolidated balance sheet as of March 31, 1997 gives effect to the
Argentina Transaction and the capital contribution that increased the Company's
interest in Mobilcom from 38% to 46.3% as if they had occurred at March 31,
1997. The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1996 and for the three months ended March 31, 1997 give
effect to the Transactions and the Initial Offering as if they had occurred on
January 1, 1996. The following pro forma consolidated financial statements have
been derived from, and should be read in conjunction with, the consolidated
historical financial statements of the Company, Mobilcom and WVB including the
notes thereto, and the other financial and operating information appearing
elsewhere in this Prospectus. The pro forma adjustments are described in the
notes to the pro forma consolidated financial statements and investors are
encouraged to read such information carefully. The pro forma consolidated
financial statements are not necessarily indicative of the operating results or
financial position that would have been achieved by the Company, nor are they
indicative of the Company's future operating results or financial position.
The Transactions which the pro forma consolidated financial statements give
effect to include: (i) Nextel's acquisition on January 30, 1997 of an 81.0%
interest in WVB for $186.3 million in market value of Nextel Class A Common
Stock and the simultaneous contribution of such interest to the Company; (ii)
the Company's acquisition of an approximately 38% interest in Mobilcom for $76.9
million and the capital contribution that increased the Company's ownership
interest in Mobilcom from 38% to 46.3%, which are accounted for using the equity
method; (iii) the Company's acquisition of a 30.0% interest in Infocom which is
accounted for using the equity method; (iv) the Argentina Transaction; and (v)
the pre-merger transfer to Nextel of NIC's assets and liabilities not associated
with the Company's investments in Mobilcom and Clearnet.
PRO FORMA CONSOLIDATED BALANCE SHEET(1)
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
COMPANY
(HISTORICAL) ARGENTINA(2) ADJUSTMENTS(3) PRO FORMA
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Total current assets............................................ $487,065,277 $ (1,466,084) $(10,078,563)(5) $475,520,630
Investment in unconsolidated subsidiaries....................... 124,025,593 18,524,706 11,078,563(5) 153,628,862
Intangible assets -- net........................................ 271,776,869 (10,239,613) 261,537,256
Property, plant and equipment -- net............................ 22,538,503 (9,057,182) 13,481,321
Other noncurrent assets......................................... 37,184,770 (2,334,462) (1,000,000)(5) 33,850,308
------------ ------------ -------------- ------------
Total noncurrent assets......................................... 455,525,735 (3,106,551) 10,078,563 462,497,747
Total assets.................................................... $942,591,012 $ (4,572,635) $ $938,018,377
=========== =========== ============ ===========
Total current liabilities....................................... $ 20,570,350 $ (4,572,635) $ $ 15,997,715
------------ ------------ -------------- ------------
Deferred income taxes and other................................. 68,768,840 68,768,840
Long-term debt.................................................. 489,909,208 489,909,208
------------ ------------ -------------- ------------
Total noncurrent liabilities.................................... 558,678,048 558,678,048
------------ ------------ -------------- ------------
Total liabilities............................................... 579,248,398 (4,572,635) 574,675,763
Minority interest............................................... 5,251,125 5,251,125
Total stockholder's equity...................................... 358,091,489 358,091,489
------------ ------------ -------------- ------------
Total liabilities and stockholder's equity...................... $942,591,012 $ (4,572,635) $ $938,018,377
=========== =========== ============ ===========
</TABLE>
44
<PAGE> 47
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(1)
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMPANY WVB INITIAL
(HISTORICAL) (HISTORICAL)(9) ARGENTINA(2) NIC OFFERING(4) ADJUSTMENTS(3) PRO FORMA
------------ --------------- ------------ --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...... $ 1,460,388 $ 1,136,959 $ (54,570) $ $ $ $ 2,542,777
Costs and
expenses
related to
revenues.... 956,585 592,513 (22,856) 1,526,242
Selling,
general and
administrative... 3,852,548 736,427 (569,923) 4,019,052
Depreciation
and
amortization... 2,580,572 453,172 (176,442) 219,770(10)
678,898(11) 3,755,970
------------ --------------- ------------ --------- ------------ -------------- ------------
Operating
loss........ (5,929,317) (645,153) 714,651 (898,668) (6,758,487)
Interest
expense,
net......... (2,793,354) (211,223) (183,176)(18) (14,705,089)(14) 118,861(7) (17,773,981)
Income (loss)
from equity
method
investments... (1,866,894) (810,468) (171,017)(13)
(259,416)(15) (3,107,795)
Other, net.... (157,616) 48,542 1,874 (107,200)
Minority
interest.... 437,594 109,013(8) 546,607
------------ --------------- ------------ --------- ------------ -------------- ------------
Loss before
income tax
benefit..... (10,309,587) (807,834) (93,943) (183,176) (14,705,089) (1,101,227) (27,200,856)
Income tax
benefit..... 499,304 115,220 224,036(17) 838,560
------------ --------------- ------------ --------- ------------ -------------- ------------
Net loss...... $ (9,810,283) $ (692,614) $ (93,943) $(183,176) $(14,705,089) $ (877,191) $(26,362,296)
=========== ============ ========== ========= =========== ============ ===========
Net loss per
share....... $ (0.98) $ (2.64)
Weighted
average
shares
outstanding... 10,000,000 10,000,000
</TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(1)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMPANY WVB INITIAL
(HISTORICAL) (HISTORICAL)(9) ARGENTINA(2) NIC OFFERING(4) ADJUSTMENTS(3) PRO FORMA
------------ --------------- ------------ ----------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues... $ $ 14,212,379 $ $ $ $ $ 14,212,379
Costs and
expenses
related
to
revenues... 9,589,401 9,589,401
Selling,
general
and
administrative... 9,317,784 13,019,232 (2,723,044) 19,613,972
Depreciation
and
amortization.. 168,401 5,277,024 (15,653) 2,637,246(10)
8,146,778(11) 16,213,796
------------ -------------- ------------ ----------- ------------ -------------- -------------
Operating
loss..... (9,486,185) (13,673,278) 2,738,697 (10,784,024) (31,204,790)
Interest
expense,
net...... 3,977,557 (2,636,127) 70,109 (4,018,717)(18) (72,024,327)(14) 1,378,657(7) (73,252,848)
Income
(loss)
from
equity
method
investments... (5,991,304) (3,200,795) (337,885)(12)
(1,420,998)(13)
(3,085,067)(15)
83,890(16) (13,952,159)
Other,
net...... 378,580 122,909 7,683 509,172
Minority
interest... 2,919,168(8) 2,919,168
------------ --------------- ------------ ----------- ------------ -------------- -------------
Loss before
income
tax
benefit.. (11,121,352) (16,186,496) (384,306) (4,018,717) (72,024,327) (11,246,259) (114,981,457)
Income tax
benefit
(expense).. (1,354,862) (556,202) 2,688,437(17) 773,373
------------ --------------- ------------ ----------- ------------ -------------- -------------
Net loss... $(12,476,214) $ (16,742,698) $ (384,306) $(4,018,717) $(72,024,327) $ (8,557,822) $(114,204,084)
=========== ============ ============ ========== =========== ============ ============
Net loss
per
share.... $ (1.25) $ (11.42)
Weighted
average
shares
outstanding... 10,000,000 10,000,000
</TABLE>
(footnotes on next page)
45
<PAGE> 48
- ---------------
The following table summarizes the purchase price for each business
acquired, the percentage ownership acquired and the preliminary allocation of
the purchase price to the significant net assets acquired (in $ millions):
<TABLE>
<CAPTION>
MCCAW
INTERNATIONAL NET OPERATING
ENTITY ACQUIRED OWNERSHIP % PURCHASE PRICE ASSETS (LIABILITIES) LICENSES GOODWILL
- ----------------- ----------- -------------- -------------------- -------- --------
<S> <C> <C> <C> <C> <C>
WVB.............. 81.0% $187.2(a) $(76.5) $210.9 $ 52.8
</TABLE>
- ---------------
(a) Includes 11,964,000 shares of Nextel common stock valued at
$186.3 million.
(1) For purposes of conforming the presentation of the pro forma consolidated
financial statements, certain historical amounts have been summarized.
(2) Gives effect to the Argentina Transaction and the subsequent change in
accounting to the equity method.
(3) Adjustments to give effect to the Transactions as described.
(4) Adjustments to give effect to the Initial Offering.
(5) Reflects capital contribution that increased the Company's interest in
Mobilcom from 38% to 46.3%. Consists of a $10.1 million cash contribution
funded from current assets and a $1.0 million conversion of a note
receivable.
(6) Not used.
(7) As a result of the forgiveness of a note and interest payable to a
stockholder of $19.0 million concurrent with the WVB acquisition, interest
expense of $1.4 million and $0.1 million for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively, have been
eliminated.
(8) Gives effect to the recognition of the 19% minority interest attributable
to the Company's consolidation of WVB.
(9) Represents historical results of WVB prior to the acquisition on January
30, 1997.
(10) Gives effect to the amortization of goodwill of $52.8 million recognized,
on a preliminary basis pending determination of the effects on the
Company's Brazilian deferred tax assets of planned changes in the Company's
legal structure, in the WVB acquisition over 20 years. Such changes are
dependent on obtaining approval from Brazilian regulatory agencies.
(11) Gives effect to the amortization of licenses of $210.9 million acquired, on
a preliminary basis pending determination of the effects on the Company's
Brazilian deferred tax assets of planned changes in the Company's legal
structure, in the WVB acquisition over 20 years. Such changes are dependent
on obtaining approval from Brazilian regulatory agencies.
(12) Gives effect to the amortization of excess purchase price over net assets
acquired of $16.2 million in the Infocom investment over 20 years.
(13) Gives effect to the amortization of excess purchase price over net assets
acquired of $106.7 million in the Mobilcom investments over 20 years.
(14) Interest expense has been adjusted for the year ended December 31, 1996 and
the three months ended March 31, 1997 to include approximately $72.0
million and $14.7 million, respectively, consisting of (i) interest on the
Notes and (ii) amortization of the offering costs and other related fees of
$16.8 million attributable to the Notes using an amortization period of ten
years. No adjustment has been made to include interest income earned on the
net proceeds from the Initial Offering pending their application in the
Company's capital expenditure program.
(15) Gives effect to the equity earnings associated with the Company's
approximately 46.3% investment in Mobilcom.
(16) Gives effect to the equity earnings associated with the Company's 30%
investment in Infocom.
(17) Gives effect to the tax benefit derived from the amortization of licenses
obtained in the WVB acquisition.
(18) Represents elimination of net interest income attributable to assets
transferred to Nextel prior to NIC's merger with the Company.
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SELECTED PROPORTIONATE DATA
The following table is not required by generally accepted accounting
principles ("GAAP") and is not intended to replace the Consolidated Financial
Statements prepared in accordance with GAAP. It is presented to provide
supplemental data. Because significant assets of the Company are not
consolidated and because of the substantial effect the formation of certain
joint ventures will have on the year-to-year comparability of the Company's
consolidated financial results, the Company believes that proportionate
financial and operating data facilitates the understanding and assessment of its
Consolidated Financial Statements.
Under GAAP, the Company consolidates the entities in which it has a
controlling interest and uses the equity method to account for entities over
which the Company has significant influence but does not have a controlling
interest. In contrast, proportionate accounting reflects the Company's relative
ownership interests in operating revenues and expenses for both its consolidated
and equity method entities. Investments that are accounted for under the cost
method or are classified as available-for-sale are not subject to proportionate
accounting. Accordingly, total proportionate results show the Company's share of
significant operations over which it has the ability to exert significant
influence.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------- -------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997
----------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
PROPORTIONATE STATEMENT OF OPERATIONS DATA:
Revenues...................................... $ 643,464 $ 2,210,148 $ 201,131 $ 2,623,074
Costs and expenses related to revenues........ 384,158 734,205 96,859 1,267,550
Selling, general and administrative........... 1,668,387 11,220,402 1,146,362 4,581,830
Depreciation and amortization................. 2,755,919 4,424,814 844,588 3,972,353
----------------- ----------------- -------------- --------------
Operating loss................................ $ (4,165,000) $ (14,169,273) $ (1,886,678) $ (7,198,659)
OTHER PROPORTIONATE FINANCIAL DATA:
EBITDA(1)..................................... $ (18,172,822) $ (9,457,198) $ (1,047,077) $ (3,361,358)
Total POPs (in millions)(2):
Specialized Mobile Radio.................. 23.8 29.3 23.9 81.3
Paging.................................... -- 20.0 -- 20.1
Total units in service(3):
Specialized Mobile Radio.................. 2,700 7,000 3,100 20,000
Paging.................................... -- 12,900 -- 13,100
</TABLE>
- ---------------
(1) EBITDA consists of loss before interest expense, income tax benefit and
depreciation and amortization. EBITDA is provided because it is a measure
commonly used in the telecommunications industry. It is presented to enhance
an understanding of the Company's operating results and is not intended to
represent cash flow or results of operations for the periods presented.
EBITDA is not a measurement under U.S. GAAP and may not be similar to EBITDA
measures of other companies. See the Company's consolidated financial
statements and the notes thereto appearing elsewhere in this Prospectus.
(2) "POPs" represents the population of a licensed market (based on population
estimates for such market) multiplied by the Company's ownership interest in
a licensee operating in such market as of the date specified.
(3) Units in service represents the number of handsets or pagers in service at
the licensees multiplied by the Company's ownership interest in the
licensees as of the date specified.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto and the
pro forma financial information appearing elsewhere in this Prospectus.
OVERVIEW
GENERAL
McCaw International is a leading wireless communications services company
based on the number of people and the number of SMR channels in its licensed
service areas. The Company provides wireless communications services in the four
largest cities in Latin America and two of the largest cities in Asia. The
Company's markets cover approximately 230 million POPs, approximately 120
million of which are in Latin America. McCaw International is the largest SMR
service provider in Brazil and Mexico, and holds the largest SMR channel
position in Argentina. McCaw International's strategy is focused on leveraging
its leading analog dispatch or SMR channel positions in its principal markets
and using Nextel's experience and supplier relationships to upgrade its services
from analog dispatch to ESMR services. The upgrade to digital networks will
allow the Company to increase capacity significantly and to offer additional
services and features such as enhanced dispatch (group calling and instant
conferencing), high-quality telephone interconnect and text messaging.
On January 1, 1997 and March 3, 1997, respectively, McCaw International
(Services), Ltd. (formerly Special Purpose Company No. 1 ("SPC#1")) and McCaw
International (CANMEX), Ltd. (formerly Nextel Investment Company ("NIC")), both
wholly owned subsidiaries of Nextel, were merged into the Company. As these
mergers represent transfers between companies under common control, they have
been accounted for in a manner similar to poolings of interests; accordingly,
the historical financial statements reflect the combined financial position and
results of operations of the Company, SPC#1 and NIC (collectively referred to as
the "Company") for all periods presented.
As of December 31, 1996, the Company owned 100% of McCaw Argentina, 30.1%
of Mobilcom, 3.7% of Clearnet, 30% of Infocom and the right to receive 25.2% of
the profits of the Shanghai GSM System. Accordingly, at December 31, 1996, the
Company's consolidated financial statements consolidate the accounts of the
Company and McCaw Argentina. The Company's 30.1% interest in Mobilcom and 30%
interest in Infocom are accounted for using the equity method. The Company's
3.7% investment in Clearnet is considered an investment in marketable securities
and is reflected at fair market value, and the Company's right to receive 25.2%
of the profits of the Shanghai GSM System is accounted for using the cost
method. Upon consummation of the Argentina Transaction on May 6, 1997, the
Company's ownership interest in McCaw Argentina was reduced to 50%. Under U.S.
GAAP in effect on the date thereof, McCaw Argentina will be accounted for under
the equity method.
On January 30, 1997, Nextel acquired 81% of WVB, a Brazilian SMR provider,
and concurrently contributed the interest to the Company. Accordingly, the
Company's pro forma financial statements consolidate and the Company's
historical financial statements for 1997 and thereafter will consolidate, McCaw
Brazil.
As of April 30, 1997, the Company owned approximately 46.3% of the
outstanding equity of Mobilcom. On June 30, 1997, the Company increased its
ownership interest in Mobilcom to 48.1%. Beginning on October 24, 1997 and for a
two-year period thereafter, pursuant to the Mobilcom Put, holders of
approximately 37% of the outstanding capital stock of Mobilcom have the right to
put such stock to the Company at its fair market value upon the occurrence of
certain events. In addition, the Company has options to acquire up to an
additional 29.5% of Mobilcom, which expire on March 3, 1998 (collectively, the
"Mobilcom Options"). To the extent the Mobilcom Put or the Mobilcom Options are
exercised and the Company thereafter owns more than 50% of the equity of
Mobilcom, Mobilcom would be consolidated for accounting purposes. There
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<PAGE> 51
can be no assurance that either of the foregoing transactions will occur. See
"Risk Factors -- Contingent Capital Requirements."
REVENUES
The Company derives its revenues primarily from (i) activation fees, which
are the initial charges paid by a new subscriber for service, (ii) monthly fixed
access charges, which vary depending on the plan chosen by the subscriber, (iii)
airtime charges, which are billed based on usage, (iv) monthly rental charges,
which are derived from the leasing of wireless equipment, (v) the sale of
handsets to subscribers and (vi) in certain markets, various local taxes and
fees which are passed on to customers. The Company sets the pricing of the
different components of its services in accordance with its marketing plan in
each of the countries in which it operates, taking into account, among other
things, competitive factors. Usage revenues are accrued for during the month
incurred and billed at the end of the monthly billing cycle. Rental fee revenues
and monthly fixed access charges are billed in advance and recognized in the
period service was delivered. Equipment sales are recognized at the time of
sale.
In general, revenue per subscriber is higher in the Company's markets than
in the United States. In 1995 the average monthly SMR revenue per subscriber in
the United States was approximately $16 compared to $45 in the Company's Latin
American markets. In 1995 the average monthly cellular revenue per subscriber in
the United States was approximately $51 compared to $90 in the Company's markets
($90 represents the combined average monthly cellular bill for Argentina,
Brazil, China, Mexico and the Philippines). In part, this is due to the poor
quality of landline service and unsatisfied demand for telephony services
generally found in emerging markets. In many emerging markets, including most of
those in which the Company has operations, wireless service is often used as a
substitute for landline service, which increases the relative usage per
subscriber and the revenue per subscriber. As the Company upgrades its existing
networks to ESMR networks and begins to offer enhanced services and features, it
expects increased revenue per subscriber. Over time, the Company expects such
increases will be partially offset by a decline in rates resulting from
increased competition and lower average usage per subscriber.
By principally targeting business customers, the Company believes it
experiences lower customer turnover, acquisition costs per subscriber and bad
debt expense and a generally more stable customer base than if it targeted
customers in the general population. In addition, customers using the Company's
iDEN-based ESMR systems will be required to have ESMR handsets which will not be
compatible with a cellular system. The Company believes that the cost of
switching to a competing cellular service may also result in lower turnover.
In some of the Operating Companies, however, the Company has experienced
relatively high rates of churn and bad debt expenses. However, the Company has
taken a number of steps to reduce these levels including tightening the credit
screening process, instituting the requirement of longer term contracts and
formulating more aggressive collection processes.
The Company expects the revenues of the Operating Companies to increase
significantly over the next few years due to the following factors: (i) the
launch of commercial SMR service in Argentina in February 1997, (ii) the
continued expansion of the nationwide paging service acquired as part of the
Argentina Transaction and (iii) the planned launch of commercial ESMR services
in the Philippines by the end of 1997, in Brazil in the first quarter of 1998,
and in Argentina and Mexico later in 1998. In addition, as the Company upgrades
its existing networks to ESMR networks, it anticipates its revenues will
increase substantially due to the large increase in subscriber capacity that
results from ESMR and the expected increase in average revenue per subscriber
that results from the Company's ability to offer enhanced services and features.
The Company is subject to the laws and regulations governing
telecommunication services in effect in each of the countries in which it
operates. These laws and regulations cover, among other things, the number of
licenses that can be used in any one service area by affiliated companies, the
construction and loading requirements necessary to retain a license, the number
of telephone numbers that can be assigned to an individual licensee and the
rights of a licensee to interconnect with a public telecommunications network.
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<PAGE> 52
Each of these factors can have a significant influence on the Company's ability
to generate revenues and are subject to change by the governmental agency
responsible for determining the laws and regulations in the respective
countries. The Company cannot predict what future laws and regulations might be
passed that could have a material effect on the Company's results of operations.
The Company assesses the impact of significant changes in laws and regulations
on a regular basis.
COSTS AND EXPENSES RELATED TO REVENUES
Costs and expenses related to revenues include both the cost of service and
the cost of sales. Cost of service represents the cost of maintaining networks,
interconnection charges, site lease costs, technical expenses and utilities. The
Company anticipates the cost of service will increase with the expansion of its
wireless networks. However, as a percentage of revenue, the Company anticipates
that cost of service will decrease over time as a result of economies of scale
in operations and efficiencies achieved through digital technology. Cost of
sales represents the cost of equipment sold or leased. As the Company expands,
its business will experience an overall increase in cost of sales offset in part
by a decrease in the cost of handsets and other wireless communications
equipment. Cost of sales as a percentage of revenue are expected to decrease
over time as a result of the expected decrease in the cost of handsets and other
wireless communications equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
At the corporate level, selling, general and administrative expenses
consist primarily of compensation expenses and to a lesser extent include
expenses such as rent, professional fees and other general corporate expenses.
At the Operating Company level, selling, general and administrative expenses
consist primarily of customer acquisition costs, advertising and to a lesser
degree, salaries and office expenses. On a historical basis, substantially all
of selling, general and administrative expenses have been incurred at the
corporate level. As the consolidated Operating Companies expand their wireless
communications networks and add subscribers, the Company expects a larger
portion of selling, general and administrative expenses to be incurred at the
Operating Company level. The Company expects selling, general and administrative
expenses to increase over time as it continues to expand its operations. As a
percentage of revenues, however, the Company expects these expenses will
decrease as a result of anticipated revenue growth as the number of subscribers
increases.
The Company is billed directly on a monthly basis by landline telephone
companies for interconnect services and by various governments for taxes. The
Company bills its subscribers for these charges and is responsible for
collecting the charges from them. Many of the countries in which the Company
operates do not have established credit bureaus, thereby making it more
difficult for the Company to ascertain the creditworthiness of potential
customers. Accordingly, the Company experiences a relatively high level of bad
debt expense in most of its markets. In particular, the Company's bad debt
expense as a percentage of revenue and customer turnover in Brazil and Mexico
have been significantly higher than that in the Company's other markets.
DEPRECIATION AND AMORTIZATION
Historically, the Company's depreciation and amortization expense has been
primarily attributable to the depreciation of property, plant and equipment at
its corporate headquarters. As a result of the acquisition of WVB, the Company
expects depreciation and amortization to increase significantly. In particular,
licenses and goodwill totaling $263.7 million has been recognized in this
transaction and will be amortized over 20 years using the straight-line method.
INTEREST INCOME (EXPENSE), NET
Interest income represents income earned on notes receivable and cash and
cash equivalents. Interest income is expected to increase in future periods as
the approximately $482 million of Initial Offering proceeds are invested.
Historically, interest expense has consisted of amounts payable on notes payable
to Nextel. Interest expense is expected to increase significantly in future
periods as a result of the Initial Offering.
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LOSS FROM EQUITY METHOD INVESTMENTS
Loss from equity method investments represents the Company's proportionate
share of net income or loss from its investments in companies of which it owns
between 20% and 50%. As of December 31, 1996, loss from equity method
investments consisted of the Company's proportionate share of net income or loss
from its 30.1% interest in Mobilcom and 30% interest in Infocom. After the
Argentina Transaction, income from equity method investments will include the
Company's 50% interest in McCaw Argentina. Loss from equity method investments
also includes amortization of the excess purchase price over net assets acquired
in its investments in entities accounted for under the equity method.
OTHER, NET
Other, net is comprised of both other income and other expenses. Other
income consists of fees received by the Company for management services provided
to Shanghai McCaw and Infocom and salary and expense reimbursement for the
Company's employees who are working at Infocom. In 1995, other expenses included
a $15.0 million charge to operations representing an other than temporary
decline in its Mobilcom investment as a result of the decline in the Mexican
Peso.
MINORITY INTEREST
Minority interest represents the 19% interest in McCaw Brazil not owned by
the Company.
INCOME TAX BENEFIT (PROVISION)
The Company is subject to income taxes in the United States and in each of
the jurisdictions in which it operates. In the United States, the Company is
included in the consolidated tax return of Nextel; however, the tax accounts are
stated as if the Company filed a separate return.
In the periods prior to the Company's merger with NIC, the Company was
precluded from recognizing income tax benefits associated with its U.S. net
operating losses because it was not reasonably certain that the Company would
generate taxable income. Historically on a stand-alone basis, NIC generated
taxable income from the interest earned on its investments of cash and cash
equivalents. As accounting rules related to the pooling-of-interest method of
accounting preclude the offsetting of the Company's historical net operating
losses against NIC's historical taxable income, the Company has recognized only
the NIC income tax expense in the combined financial statements presented prior
to the merger date. Subsequent to the merger occurring in the first quarter of
1997, the Company is allowed to combine the tax attributes of the merged
companies. As the combined enterprise expects to continue recognizing U.S. net
operating losses in the foreseeable future, no U.S. income tax benefits are
expected to be realized until the Company generates taxable income.
Subsequent to the acquisition of WVB, the Company recognized income tax
benefit related to its operations in Brazil. Certain of the Brazilian
subsidiaries have taxable temporary differences allowing for the recognition of
the tax benefits derived from net operating losses. The Company expects that the
tax benefits from net operating losses in these Brazilian subsidiaries will
continue to be recognized in its financial statements throughout 1997.
HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The Company acquired WVB on January 30, 1997 and commenced commercial SMR
operations in Argentina in February 1997. Accordingly, there were no revenues or
costs and expenses related to revenues in the three months ended March 31, 1996.
For the first quarter of 1997, substantially all of the revenues and costs and
expenses related to revenues result from the two months of Brazilian SMR
operations included in the Company's consolidated financial statements.
Selling, general and administrative expenses increased $3.0 million to $3.9
million for the three months ended March 31, 1997 from $0.8 million for the
three months ended March 31, 1996. Approximately
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$2.0 million of the increase is attributable to the WVB operations which have
been included in the Company's consolidated results of operations commencing
January 30, 1997. The remaining increase can be attributed to a $0.5 million
increase in Argentina start-up costs and a $0.4 million increase in staffing and
expenses associated with the corporate oversight function.
Depreciation and amortization increased to $2.6 million for the three
months ended March 31, 1997 from $0.0 million for the three months ended March
31, 1996. Approximately $2.4 million of the increase is attributable to the
amortization of licenses and goodwill recognized in the acquisition of WVB. The
remaining increase is due to $0.2 million of amortization of licenses in
Argentina which commenced commercial operations in February, 1997.
Interest income increased $1.7 million to $2.8 million for the three months
ended March 31, 1997 from $1.1 million for the three months ended March 31,
1996. The increase was primarily attributable to income recognized on the
investment of the proceeds from the Initial Offering.
Interest expense of $5.6 million was recognized during the three months
ended March 31, 1997 of which $4.9 million represented accretion on the Initial
Offering and amortization of associated debt issue costs. Additionally, NIC
recognized $0.4 million of interest on a note payable to Nextel, and WVB
incurred approximately $0.3 million of interest on short term borrowings. No
interest expense was recognized during the three months ended March 31, 1996.
Loss from equity method investments increased $0.6 million to $1.9 million
for the three months ended March 31, 1997 from $1.3 million for the three months
ended March 31, 1996. The increase was primarily attributable to an increase in
amortization expense of $0.5 million of the excess purchase price over net
assets acquired in its Infocom and additional Mobilcom investments. The amount
of loss recognized in connection with the Company's investment in Mobilcom
increased $0.3 million to $0.8 million during the three months ended March 31,
1997 due to the increase in the Company's ownership percentage. Additionally,
during the three months ended March 31, 1997, the Company recognized $0.2
million in income from its 30% equity interest in Infocom that was acquired in
June, 1996.
Minority interest in the net loss of WVB totaled $0.4 million during the
three months ended March 31, 1997. The amount is attributable to the minority
shareholder's interest in WVB subsequent to the acquisition of an 81% interest
in WVB by the Company on January 30, 1997.
The Company recognized an income tax benefit of $0.5 million during the
three months ended March 31, 1997 compared to an income tax provision of $0.4
million during the three months ended March 31, 1996. The income tax benefit
recognized during the three months ended March 31, 1997 was primarily
attributable to net operating losses of Brazil allowed to be recognized due to
the existence of Brazilian taxable temporary differences. The income tax expense
recognized for the three months ended March 31, 1996 was primarily attributable
to the taxes associated with NIC's interest income.
YEAR ENDED DECEMBER 31, 1996 AND 1995
WVB was acquired in January, 1997 and commercial operations in Argentina
began in February, 1997. Accordingly, there were no revenues or costs and
expenses related to revenues for the years ended December 31, 1996 and 1995.
Selling, general and administrative expenses increased $9.0 million to $9.3
million for the year ended December 31, 1996 from $0.3 million for the year
ended December 31, 1995. The increase is attributable to $6.3 million of
additional expenses related to the increase in staffing and expenses associated
with the corporate oversight function, $1.3 million related to McCaw Argentina
start-up costs, and $1.4 million of inventory write-offs at McCaw Argentina.
Depreciation and amortization expense increased to $0.2 million for the
year ended December 31, 1996 from $0.0 million for the year ended December 31,
1995. The increase is primarily attributable to depreciation from property,
plant and equipment associated with the corporate oversight function.
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Interest income decreased $1.9 million to $4.3 million for the year ended
December 31, 1996 from $6.2 million for the year ended December 31, 1995. The
decrease is primarily due to lower amounts of cash and cash equivalents on hand
during 1996.
Interest expense of $0.3 million represents interest accrued on an
intercompany note payable to Nextel outstanding during the fourth quarter of
1996. No interest-bearing intercompany notes existed during 1995.
Loss from equity method investments decreased $0.9 million to $6.0 million
for the year ended December 31, 1996 from $6.9 million for the year ended
December 31, 1995. The decrease is primarily attributable to the net loss of
Mobilcom decreasing from $31.3 million for the year ended December 31, 1995 to
$11.8 million for the year ended December 31, 1996. The decrease in the net loss
of Mobilcom was partially offset by the Company's increase in ownership
percentage during 1996 and $1.3 million at additional amortization of the excess
purchase price over net assets acquired in its Infocom and additional Mobilcom
investments. The decrease in the net loss of Mobilcom was primarily due to
foreign currency exchange losses incurred in 1995 and interest expense
reductions during 1996.
Other, net consisted of income of $0.4 million for the year ended December
31, 1996 compared to expense of $15.0 million for the year ended December 31,
1995. Income recognized during 1996 primarily relates to amounts recognized
under technical services agreements with Infocom and Shanghai McCaw. Other
expenses recognized during 1995 consists primarily of a $15.0 million write down
of the Company's investment in Mobilcom, which represented an other than
temporary decline in value resulting from the decline in the Mexican Peso.
Income tax expense decreased $0.7 million to $1.4 million for the year
ended December 31, 1996 from $2.1 million for the year ended December 31, 1995.
The decrease in income tax expense is attributable to NIC's interest income
decreasing during 1996 as a result of lower amounts of cash and cash equivalents
on hand throughout the year.
YEAR ENDED DECEMBER 31, 1995 AND 1994
Selling, general and administrative expenses of $0.3 million for the year
ended December 31, 1995 represents the initial formation the Company's corporate
oversight function during the fourth quarter of 1995. No selling, general and
administrative expenses occurred in 1994 as the Company was an investment
holding entity prior to the establishment of the corporate oversight function.
Depreciation and amortization was insignificant during the years ended
December 31, 1995 and 1994.
Interest income increased $3.5 million to $6.2 million for the year ended
December 31, 1995 from $2.7 million for the year ended December 31, 1994. The
increase is primarily due to higher amounts of cash and cash equivalents on hand
during 1995.
Loss from equity method investments of $6.9 million for the year ended
December 31, 1995 is comprised of $2.4 million of amortization of the excess
purchase price over net assets acquired in its Mobilcom investment and $4.5
million of the Company's proportionate share of the net loss of Mobilcom, which
was acquired during 1995. No equity method investments existed during 1994.
Other expense recognized during 1995 consists primarily of a $15.0 million
write down of the Company's investment in Mobilcom which represented an other
than temporary decline in value resulting from the decline in the Mexican Peso.
Income tax expense increased $1.2 million to $2.1 million for the year
ended December 31, 1995 from $0.9 million for the year ended December 31, 1994.
The increase in income tax expense is attributable to NIC's interest income
increasing during 1995 as a result of lower amounts of cash and cash equivalents
on hand throughout the year.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred historical net losses of approximately $38.6
million since inception through March 31, 1997. These losses result from
expenditures required for the development of the Company's wireless
communications networks, other start-up costs and the fact that as of December
31, 1996 no consolidated revenues had been recorded. On a pro forma basis giving
effect to the Transactions and the Initial Offering, for the year ended December
31, 1996 and the three months ended March 31, 1997, the Company's EBITDA would
have been negative $25.5 million and negative $5.7 million, respectively. The
Company expects to continue to incur increasing losses and negative operating
cash flows as it continues to build-out and upgrade its existing wireless
communications networks. Through December 31, 1996, funds necessary to finance
the Company's activities have been provided to the Company primarily by its
parent, Nextel, in the form of equity contributions. Nextel is not obligated to
provide any additional funding to the Company.
Net cash used by operating activities for 1996 equaled $3.0 million. Net
cash used by investing activities equaled $72.3 million for 1996. Net cash
provided by financing activities equaled $43.0 million for 1996.
The Company currently estimates its proportionate share of funding
requirements at the Operating Companies for 1997 and 1998 to be approximately
$319 million and $187 million, respectively. These amounts consist primarily of
the purchase of switches and other equipment, the acquisition of cell sites, the
cost of constructing the network and operating losses. The Company currently
estimates that approximately $319 million of such requirements will be related
to expenditures in Brazil, $74 million in Argentina, $68 million in Mexico and
$18 million in the Philippines. The Company expects approximately $195 million
of the capital expenditures for equipment will be funded at the Operating
Company level through the Motorola Financing, however, the amount of borrowings
under the Motorola Financing that Nextel has agreed to make available to the
Company is limited to $95 million. Based on discussions with Nextel and
Motorola, the Company believes that it will be able to obtain sufficient funding
under the Motorola Financing to meet its business plan. The Company expects to
fund the balance of its requirements with the net proceeds from the Initial
Offering.
The Company's capital requirements may also be affected by arrangements the
Company has with other investors in the Operating Companies. In order to retain
the contractual right to designate a majority of the board of directors of
Mobilcom and a member of the Technology Committee of such board of directors,
the Company must have invested approximately $76.8 million in Mobilcom through
certain qualified capital transactions by March 1998. As of April 30, 1997, the
Company had invested approximately $64.9 million in such qualified capital
transactions. In addition, beginning on October 24, 1997, pursuant to the
Mobilcom Put, holders of approximately 37% of the outstanding capital stock of
Mobilcom have the right for two years to put the entire amount of their holdings
to the Company at its appraised fair market value for cash in the event of a
Mobilcom Put Event. The Mobilcom Put is automatically exercisable on October 24,
1999 whether or not a Mobilcom Put Event occurs. Valuation of Mobilcom for
purposes of the Mobilcom Put will be based on an appraisal by an investment
bank, with the minimum appraisal for 100% of Mobilcom equal to $150 million. To
the extent such appraisal exceeds $250 million, 50% of such excess will be
included in the valuation. In connection with a capital call on June 7, 1996
Mobilcom shareholders purchased additional shares of Mobilcom based on a $200
million valuation of Mobilcom (which values the Mobilcom Put at approximately
$66 million). If the Company does not pay the Minimum Amount and to the extent
the Company does not otherwise acquire a majority of the outstanding capital
stock of Mobilcom, the Company will lose its right to designate a majority of
the board of directors of Mobilcom and a member of the Technology Committee and
its ability to block certain significant actions of Mobilcom. The Company has
the option to purchase, before March 3, 1998, up to an additional 29.5% of
Mobilcom's common stock. To the extent the Company owns a majority of the voting
stock in Mobilcom after giving effect to the exercise of the Mobilcom Put, the
Company will not be affected by the failure to have invested the Minimum Amount
by March 1998 since its equity ownership will entitle it to elect a majority of
the board of directors of Mobilcom. As of April 30, 1997, the Company owned
approximately 46.3% of the voting stock of Mobilcom.
On February 26, 1997, Mobilcom shareholders approved the $27 million
Mobilcom Capital Call. Nextel funded the Company's pro rata share of the
Mobilcom Capital Call (approximately $10 million) with a cash
54
<PAGE> 57
contribution. Additionally, because not all of the Mobilcom shareholders funded
their pro rata share of the Mobilcom Capital Call, the Company had the
opportunity to purchase additional shares of Mobilcom by funding the
unsubscribed portion of the Mobilcom Capital Call (approximately $10 million).
The Company thereby increased its equity interest in Mobilcom from approximately
38% to approximately 46.3%. The Company funded its purchase of the unsubscribed
shares from the proceeds of the Initial Offering. The funds from the Mobilcom
Capital Call were used by Mobilcom to satisfy certain overdue obligations
(approximately $11 million), to purchase the remaining 51% of Natel that
Mobilcom does not own and to fund operations. The Natel acquisition was
consummated on April 16, 1997.
The other shareholder in McCaw Brazil has the right between October 31,
2001 and November 1, 2003, to require McCaw Brazil to redeem such shareholder's
interest in McCaw Brazil at fair market value as determined pursuant to an
appraisal procedure.
The Company anticipates funding the Partner Contingencies with the net
proceeds of the Initial Offering, issuances of additional debt and equity
securities at the Company and Operating Company levels, future equity
investments in the Operating Companies by new local partners and capital
contributions from Nextel in the form of cash or Nextel common stock. Nextel has
no obligation to provide any such financing and there can be no assurance that
the Company will be able to fund Partner Contingencies. The failure to fund a
Partner Contingency may have a material adverse effect on the Company. See "Risk
Factors -- Contingent Capital Requirements."
The Company believes that the net proceeds from the Initial Offering,
together with borrowings expected to be available under vendor financing,
including the Motorola Financing, and the estimated proceeds from the Brazil
Equity Sale will be sufficient to fund the Company's current operations,
including the planned expansion of its existing operations for approximately 36
to 48 months from the Closing Date; however, there can be no assurance in this
regard. Thereafter, the Company will need substantial additional capital. If the
Company's plans or assumptions change, if its assumptions prove to be
inaccurate, if it consummates investments or acquisitions in addition to those
currently contemplated, if it experiences unanticipated costs or competitive
pressures, if the Brazil Equity Sale is not consummated or if the net proceeds
from the Initial Offering, together with the proceeds of any such borrowings,
otherwise prove to be insufficient, the Company may be required to seek
additional capital sooner than currently anticipated. The terms of any
borrowings under the Motorola Financing are subject to negotiation and execution
of definitive agreements. The Company may seek to raise such additional capital
from public or private equity or debt sources. There can be no assurance that
the Company will be able to raise such capital on satisfactory terms, if at all.
See "Risk Factors -- Significant Capital Requirements."
In the future, the Company may consider obtaining financing from various
sources, including vendor financing provided by equipment suppliers, project
financing from commercial banks and international agencies such as International
Finance Corporation and Overseas Private Investment Corporation, bank lines of
credit and sales of equity and debt issued by the Operating Companies and/or the
Company. To the extent the Company issues debt, its leverage and debt service
obligations will increase. There can be no assurance that the Company will be
able to raise such capital on satisfactory terms, if at all.
In November 1996, Nextel, McCaw International and Motorola entered into the
Motorola MOU. Under the Motorola MOU, Motorola agreed to provide an aggregate of
$400 million in vendor financing to Nextel and McCaw International for the
worldwide purchase of iDEN equipment and services and ancillary products (such
as switches). In March 1997, Motorola and Nextel entered into a term sheet
increasing the maximum worldwide vendor financing available to Nextel and McCaw
International to $650 million, with a maximum non-U.S. amount outstanding of
$400 million, subject to certain per country limits as agreed in the Motorola
MOU. The Motorola MOU sets a limit of $125 million per country (other than the
United States and Canada) on the amount that may be borrowed under the Motorola
Financing. Nextel, McCaw International and Motorola agreed to an initial
commitment to McCaw Brazil, McCaw Argentina and Infocom under the Motorola
Financing of $125 million, $81 million and $15 million, respectively.
Commitments provided by Motorola to provide financing to any Operating Company
count 100% against Motorola's $650 million aggregate commitment. Currently
Motorola has not committed any financing for Mexico. The Motorola
55
<PAGE> 58
MOU contemplates that the loans under the Motorola Financing will bear interest
at a rate of 2% to 4% over prime rate, depending on the Operating Company
placing the order and the country in which such company is installing the iDEN
equipment and is likely to have a maturity of up to six years. Borrowings by an
Operating Company will be secured by all the assets and stock of such Operating
Company and it is expected that the Company will guarantee such borrowings on a
pro rata basis based on the equity interest of such Operating Company owned by
the Company (with the exception of Brazil where the Company will be required to
guarantee 100% of such borrowings).
Any amounts available to be borrowed by the Operating Companies under the
Motorola Financing will be reduced by any amounts borrowed by Nextel and its
subsidiaries other than the Company and the Operating Companies. Nextel has
committed to the Company that at least $95 million of the Motorola Financing
will be available to the Company. As of March 31, 1997, Nextel had borrowed $110
million pursuant to the Motorola Financing. Accordingly, there can be no
assurance that more than $95 million under the Motorola Financing will be
available to fund the Operating Companies' equipment purchases. In addition, to
the extent total amounts outstanding under the Motorola Financing to Nextel and
its subsidiaries, including the Company and the Operating Companies (other than
Clearnet), plus requests for additional financing under the Motorola Financing
by Nextel and its subsidiaries other than the Company and the Operating
Companies would exceed $400 million, McCaw International is required to repay or
cause to be repaid sufficient borrowings such that after giving effect to such
repayment, the total amount of loans outstanding from Motorola to Nextel and its
subsidiaries, including the Company and the Operating Companies (other than
Clearnet), will not exceed $400 million. Nextel has agreed with the Company not
to cause a Forced Repayment.
In May 1997, Infocom and Motorola entered into a term sheet (the
"Philippines Motorola Financing"), pursuant to which Motorola will provide up to
$15 million of vendor financing to Infocom. The Philippines Motorola Financing
provides for a maturity of two years and an annual interest rate of prime plus
250 basis points or, at Infocom's option, LIBOR plus 463 basis points. Pursuant
to the Philippines Motorola Financing the loans are secured by a first-priority
lien on substantially all of Infocom's assets and a pro rata guarantee of such
financing by each of Infocom's shareholders.
McCaw International intends to structure its future capital contributions
to the Operating Companies as equity contributions and/or loans and thereafter
to rely on the payment of dividends and/or interest and principal payments as a
means of obtaining cash from the Operating Companies. The Company will evaluate
on an on-going basis which means of contributing cash to the Operating Companies
is most effective.
The Company holds a majority interest in McCaw Brazil and a 50% interest in
McCaw Argentina. The Company's other assets consist of minority ownership
interests in the Operating Companies and approximately $482 million of the net
cash proceeds from the Initial Offering which have been invested in short-term
investments. Even though the Company participates in the management of the
Operating Companies, except in China and Canada, it cannot control the outcome
of matters submitted to the shareholders of the Operating Companies in which it
has less than a majority interest. In addition, the Company may be unable to
access the cash flow of its affiliated companies because (i) it does not have
the requisite control to cause such entities to pay dividends, and (ii)
substantially all of such entities are parties to or expected to become parties
to vendor financing or other borrowing agreements that severely restrict or
prohibit the payment of dividends, and such entities are likely to continue to
be subject to such restrictions and prohibitions for the foreseeable future. The
Motorola Financing will prohibit the payment of dividends to the Company by the
Operating Companies that have debt outstanding under the Motorola Financing. To
the extent any Motorola Financing is outstanding in 2002, when cash interest
payments on the Notes are required to be made, the Company would need to obtain
funds for such interest payments from other sources. The Company does not have a
revolving credit or other facility providing for funding of the Company. In
addition, to the extent the Company contributes capital to the Operating
Companies in the form of loans, interest payments to the Company may be subject
to withholding taxes. See "Risk Factors -- Substantial Indebtedness; Ability to
Service Debt; Refinancing Risks."
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<PAGE> 59
INFLATION AND FOREIGN CURRENCY EXCHANGE
The net monetary assets of the Company's subsidiaries are subject to
foreign currency exchange risks since they are maintained in local currency.
Certain of the Company's subsidiaries operate in countries in which the rate of
inflation is significantly higher than that of the United States. The Company
will attempt to protect its earnings from inflation and possible currency
devaluation by trying to periodically adjust its prices in local currencies and
in some cases setting its prices in direct relation to the U.S. dollar. However,
there can be no assurance that any significant devaluation against the U.S.
dollar could be offset, in whole or in part, by a corresponding price increase.
The countries in which the Company's subsidiaries now conduct business
generally do not restrict the repatriation or conversion of local or foreign
currency. There can be no assurance, however, that this will be the case in each
market that the Company may enter in the future or that this situation will
continue in the Company's existing markets. See "Risk Factors -- Currency Risks
and Exchange Controls." The Company's subsidiaries are all directly affected by
their respective countries' governmental, economic, fiscal and monetary policies
and other political factors.
NET OPERATING LOSS CARRYFORWARDS
As of December 31, 1996, the Company had approximately $6.0 million of net
operating loss carryforwards ("NOLs") available in the United States, which
expire commencing in 2010. See "Certain Relationships and Related
Transactions -- Tax Sharing Agreement." The Company may be limited in its
ability to use NOLs in any one year depending on its ability to generate
sufficient taxable income. A number of other factors may also have an effect on
the Company's ability to fully utilize these NOLs, such as U.S. tax law
provisions limiting the use of the NOLs if certain changes in the Company's
ownership occur. In addition, as of December 31, 1996 there were the following
NOLs at the Operating Company level: (i) $15.7 million in Brazil; (ii) $1.9
million in Argentina and (iii) $57.5 million in Mexico. Such NOLs are only
available to be utilized as a potential future reduction of taxes at the
Operating Company level.
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<PAGE> 60
INDUSTRY OVERVIEW
DEMAND FOR COMMUNICATIONS SERVICES IN EMERGING MARKETS
The rapid expansion and modernization of economies in many emerging markets
have resulted in a significant increase in demand for telecommunications
services. Telecommunications services are viewed as essential to sustaining
rapid economic growth and to improving productivity and competitiveness in
emerging markets. Telephone service and system quality in most of these markets,
however, remains poor due to under investment in landline infrastructure. In
addition, telecommunications providers have been unable to meet the rising
demand for telecommunications service which has resulted in long waiting lists
for the installation of telephone lines and service. Countries in which the
Company operates currently have an average of 6.9 access lines per 100 people
compared to 59.4 access lines per 100 people in the United States. Waiting time
for the installation of a landline telephone is estimated to range from nine
months in Mexico to approximately 3.5 years in Brazil and as long as nearly nine
years in the Philippines.
While wireless communications in the United States provides an attractive
supplemental service to a well developed and reliable landline telephone system,
in many emerging markets wireless communications have become an important
alternative to the relatively antiquated, overburdened and unreliable landline
telephone systems. Furthermore, in most of the emerging markets where the
Company operates, wireless communications services tend to be more readily
available and in many cases provide higher quality service than landline
systems. In addition, wireless networks can be constructed relatively quickly
and are less expensive to install than landline networks. In 1995, the average
cellular penetration rate in the emerging markets in which the Company operates
was .7% (compared to a cellular penetration rate of 12.8% in the United States).
By 2000, the average cellular penetration rate in those countries is expected to
increase to 3.9% representing an average annual growth rate of 39.1%, compared
to 17% in the United States. In terms of regional cellular growth from 1996
through the year 2001, the number of cellular subscribers is estimated to grow
an average of 37% per year in Latin America and 34% per year in the Asia Pacific
region.
The following table sets forth certain information with respect to the
emerging markets in which the Company operates, together with comparative
information for the United States.
<TABLE>
<CAPTION>
WAITING TIME CELLULAR
FOR MONTHLY
INSTALLATION AVERAGE
GDP REAL GDP TELEPHONE OF LAND-LINE CELLULAR REVENUE
POPULATION PER GROWTH LINES PER TELEPHONE PENETRATION PER
POPULATION GROWTH CAPITA 1996 100 POPS (YEARS) (% OF POPS) SUBSCRIBER
1996 1995(1) 1995(1) PROJECTED(1) 1994(2) 1993(3) 1995(2) 1995(4)
------------- ---------- ------- ----------- --------- ------------ ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Argentina............ 34 1.2% $8,167 4.4% 14.3 1.3 1.26% $130
Brazil............... 160 2.0 4,601 2.8 7.4 3.5 0.81 119
China................ 1,215 1.2 517 9.5 2.3 4.7 0.30 58
Mexico............... 92 1.9 3,137 4.4 9.2 0.9 0.77 78
Philippines.......... 67 2.2 1,055 5.9 1.5 8.9 0.52 66
United States........ 264 1.0 27,490 2.0 59.4 -- 12.79 51
</TABLE>
- ---------------
(1) Source: Telecom Markets in South America, 1996 and Telecom Markets in
Southeast Asia, 1996; Blue Chip Economic Indicators, WEFA Group,
International Financial Statistics, 1996.
(2) Source: MTA-EMCI World Cellular Markets, 1996. "Cellular Penetration" is
defined as the number of cellular subscribers as a percentage of the total
population.
(3) Source: International Telecommunications Union (ITU) and Pyramid Research.
(4) Source: Pyramid Research, EMCI and CIT Research.
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<PAGE> 61
WIRELESS TECHNOLOGY
Currently, three systems dominate the market for wireless communications
services: SMR/ESMR, cellular/PCS and paging. The Operating Companies utilize one
or more of each of these forms of wireless communications. The following is a
brief description of each type of wireless communications system.
SMR/ESMR
SMR, also referred to as "trunked radio" or wireless dispatch
communications, is primarily a business communications tool which provides cost
effective point-to-multipoint or "one-to-many" voice communications. This
service allows reliable, flexible and convenient communications among a defined
group of users typically within a business or "work group."
Historically, SMR operators have generally been unable to provide mobile
telephone service competitive with that provided by cellular operators because
of various factors affecting SMR system capacity and voice quality. The primary
factors affecting capacity and voice quality have included: the smaller portion
of the radio spectrum allocated to SMR; regulations and procedures that
initially served to spread ownership of SMR licenses among a large number of
operators in each market, thereby limiting the amount of SMR spectrum available
to any particular operator; and the limitations of traditional SMR technology
which employs analog transmission and a single site, high power transmitter
configuration which precludes the use of any given SMR frequency by more than
one caller at a time within a given service area.
Partially as a result of the constraints on capacity, SMR operators,
including the Operating Companies that offer SMR services, have traditionally
emphasized radio dispatch service, which involves shorter duration
communications than mobile telephone service and places less demand on system
capacity. The traditional SMR market, therefore, has been oriented primarily to
business customers such as contractors, service companies, security firms and
delivery services that have significant field operations and need to provide
their personnel with the ability to communicate directly with one another,
either on a one-to-one or on a one-to-many basis. The broader market of
businesses and individuals that are primarily interested in mobile telephone
service has been largely beyond the reach of traditional SMR operators.
The 800 MHz SMR spectrum in the United States and in other countries is
generally adjacent and functionally equivalent to cellular frequencies. As a
result, ESMR technology has been developed specifically to provide digital
service using the SMR frequency band.
Similar to cellular telephone technology, ESMR technology is based upon the
division of a given geographical area into a number of cells and the
simultaneous re-use of radio channels in non-contiguous cells within the system.
Each cell contains a low power transmitter-receiver at a base station that
communicates by central switching point or mobile switching center that controls
the routing of calls and that, in turn, is connected to the public switched
telephone network. The switch enables ESMR mobile telephone users to move freely
from cell to cell while continuing their calls. In general, an ESMR network
requires fewer sites than are needed for a PCS network.
ESMR technology provides the capability to offer integrated wireless
communications services over one network utilizing common cell and digital
switching infrastructures as well as multi-functional handsets. Historically,
the mobile telephone, paging, dispatch and mobile data market segments were
served by discrete networks utilizing separate technologies, handsets and phone
numbers despite the fact that a number of users subscribed to one or more of
these services. In contrast to this historical segmentation of the wireless
industry, the Company believes that ESMR technology will make it possible to
integrate all such segments of wireless mobile communications.
Motorola has developed a proprietary digital technology for use in SMR
networks, known as iDEN, that allows analog SMR networks to be upgraded to
digital ESMR networks offering enhanced services such as instant conferencing
(enhanced dispatch), mobile telephone (interconnect), short-text messaging with
acknowledgment (alphanumeric paging) and data transmission. The iDEN technology
uses a version of the Time Division Multiple Access ("TDMA") digital
transmission technology used by certain providers of digital cellular services.
The iDEN technology carries up to three voice and/or control paths per channel
for
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<PAGE> 62
the ESMR network's mobile telephone function and up to six voice and/or control
paths per channel for the instant conferencing function.
During the third and fourth quarters of 1996, Nextel launched commercial
service of its iDEN-based ESMR networks in several markets in the United States,
including Chicago, Detroit, Boston, Denver, Atlanta, New York,
Washington/Baltimore, Los Angeles, Northern California and the Pacific
Northwest, under the "PowerFone" brand name. Additionally, during the fourth
quarter of 1996, Clearnet launched commercial services of its iDEN-based ESMR
network in the Ontario-Quebec market under the "MiKE" brand name. Both Nextel
and Clearnet have announced their plans to launch their iDEN-based ESMR networks
in additional markets during 1997 and 1998. As of December 31, 1996, Nextel
provided services to approximately 300,000 ESMR subscriber units and Clearnet
provided services to approximately 5,000 ESMR subscriber units. See "Risk
Factors -- Technology Risks."
The implementation of an ESMR network utilizing iDEN involves upgrading
existing 800 MHz SMR systems via two fundamental changes in system architecture.
First, the analog transmission format of traditional SMR systems is replaced by
a digital TDMA transmission format. Second, the single high-powered transmitter
typical of traditional SMR systems is replaced or augmented by a number of low
powered transmitters, dispersed across the coverage area, enabling frequency
reuse. Additionally, the ESMR frequency reuse system uses a mobile switching
office to enable the hand-off of transmissions from one transmitter to another
as subscribers move across the coverage area.
Cellular/PCS
Cellular telephone systems are capable of providing high quality, high
capacity voice and data communications to and from vehicle-mounted and hand-held
radio telephones. Cellular telephone systems are capable of handling thousands
of calls at any one time and providing service to hundreds of thousands of
subscribers in any particular area.
Cellular telephone technology is based upon the division of a given
geographical area into a number of cells and the simultaneous re-use of radio
channels in non-contiguous cells within the system. Each cell contains a low
power transmitter-receiver at a base station that communicates by a switch that
controls the routing of calls and that, in turn, is connected to the public
switched telephone network. The switch enables cellular telephone users to move
freely from cell to cell while continuing their calls.
Cellular telephone systems generally offer subscribers the features offered
by the most up-to-date landline telephone services. Cellular telephone systems
are interconnected with the landline telephone network which allows subscribers
to receive and originate local, long-distance and international calls from their
cellular telephones. As a result, cellular telephone system operators require an
interconnection arrangement with the local landline telephone companies and the
terms of such arrangements are material to the economic viability of the system.
A cellular telephone system's capacity can be increased in various ways.
Initially, increasing demand may be satisfied by adding available channel
capacity to cells. When all available channels are used, further growth can be
accomplished through a process known as cell splitting. Cell splitting entails
dividing a single cell into a number of smaller cells allowing for greater
channel re-use, thereby increasing the number of calls that can be handled in a
given area.
Currently, the three most widely deployed analog air-interface cellular
standards include Advanced Mobile Phone System ("AMPS"), Nordic Mobile Telephone
("NMT"), and Total Access Communications System ("TACS"). The AMPS and TACS
systems currently operate in the 800 and 900 MHz frequency band and the NMT
systems can operate in either the 450 or 900 MHz ranges. The most prevailing
air-interface standards utilizing digital technology include GSM and Digital
Advanced Mobile Phone System ("DAMPS"). DAMPS systems are currently deployed in
the 800 MHz frequency range and soon will be constructed on the 1.8-1.9 GHz
frequency ranges. DAMPS utilizes either TDMA or Code Division Multiple Access
transmission techniques. Both AMPS and DAMPS are the most widely deployed
systems in the
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<PAGE> 63
Americas. GSM, which is widely deployed in Europe and Asia, can operate at
either the 900 MHz or 1.8-2.0 GHz frequency ranges.
Paging
Paging is a well-established wireless technology, and is widely available
in many countries. A paging system typically consists of a number of transmitter
sites connected to a central messaging center. The messaging center receives
incoming messages from the public telephone network and prepares batches of
messages for transmission to subscribers. There are two basic types of paging
services: numeric (digital display) and alphanumeric, which allows subscribers
to receive and store messages of up to 5,000 characters consisting of both
letters and numbers. Historically, paging was a one-way communication service;
however, technological advances in wireless messaging have made two-way
communications possible. Two-way paging systems allow message acknowledgment
responses and the transmission of short data messages by the paging subscriber.
In emerging markets where telephone penetration is low, paging often provides an
affordable alternative to public telephone service.
The table below illustrates some of the main differences between SMR/ESMR,
cellular/PCS and paging.
COMPARISON OF SMR/ESMR, CELLULAR/PCS AND PAGING (1995)
<TABLE>
<CAPTION>
SMR/ESMR(1) CELLULAR/PCS(2) PAGING(3)
---------------------- ---------------- ----------------
<S> <C> <C> <C>
Services Offered..................... Voice, data, instant Voice and data Data only
conferencing (one-to- (one-to-one) (one-to-one and
many and one-to-one) one-to-many)
Typical Frequency Range.............. 800 MHz 800 MHz Lowband and
(cellular) 931 MHz
1.8 and 1.9 GHz
(PCS)
U.S. Subscribers..................... 18,000,000 33,700,000 34,500,000
Latin American Subscribers........... 138,000 3,608,000 1,122,000
Southeast Asia Subscribers........... 64,200 3,330,000 2,720,000
China................................ 260,000 3,700,000 26,160,000
</TABLE>
- ---------------
(1) Source: EMCI, International Mobile Telecommunications Association (IMTA) and
Pyramid Research, 1996.
(2) Source: EMCI and Pyramid Research, 1996.
(3) Source: EMCI and Pyramid Research, 1996.
61
<PAGE> 64
BUSINESS
McCaw International is a leading international wireless communications
services company based on the number of people and the number of SMR channels in
its licensed service areas. The Company provides wireless communications
services in the four largest cities in Latin America and two of the largest
cities in Asia. The Company's markets cover approximately 230 million POPs,
approximately 120 million of which are in Latin America. McCaw International,
through the Operating Companies, is the largest SMR service provider in Brazil
and Mexico, and holds the largest SMR channel position in Argentina. McCaw
International's strategy is focused on leveraging its leading analog dispatch or
SMR channel positions in its principal markets and using Nextel's experience and
supplier relationships to upgrade its services from analog dispatch to digital
ESMR services. The upgrade to digital networks will allow the Company to
increase capacity significantly and to offer additional services and features
such as enhanced dispatch (group calling and instant conferencing), high-quality
telephone interconnect and text messaging.
McCaw International believes that wireless communications opportunities in
emerging markets, particularly in Latin America and Asia, are very attractive
compared to the market in the United States due to the poor telecommunications
infrastructure, low teledensity, favorable competitive environments and greater
expected economic growth rates in those markets. The Company believes that the
low cost of its wireless spectrum relative to cellular and PCS, as well as the
large and growing demand for wireless communications services in its markets,
provides it with a significant opportunity to expand its subscriber base in an
efficient and cost-effective manner.
The Company owns interests in and actively participates in the management
of wireless communications services companies in Brazil, Argentina, Mexico and
the Philippines. In addition, the Company has a contractual right through its
Chinese joint venture to receive 25.2% of the profits generated by the Shanghai
GSM System and has a 3.7% interest in Clearnet, a Canadian wireless
communications services company. The Operating Companies have networks in some
of the largest cities in their respective countries, including Sao Paulo, Mexico
City, Buenos Aires and Rio de Janeiro, which are the four largest cities in
Latin America, and Shanghai and Manila, which are two of the largest cities in
Asia. The subscriber base of the Operating Companies has grown 59% from
approximately 111,000 subscribers at December 31, 1995 to approximately 177,000
subscribers at December 31, 1996.
The following table provides certain financial information relating to
foreign and domestic operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Operating Loss:
United States......................... $ 6,747,488 $ 271,720 $ (2,033)
Argentina............................. (2,738,697) (23,889) --
------------ ------------ ------------
Total............................ $ 9,486,185 $ 295,609 $ (2,033)
============ ============ ============
Identifiable Assets:
United States......................... $177,004,841 $159,521,952 $171,535,926
Argentina............................. 22,362,474 10,153,502 --
------------ ------------ ------------
Total............................ $199,367,315 $169,675,454 $171,535,926
============ ============ ============
</TABLE>
The Company believes it has established the leading position in terms of
the number of SMR channels in its principal markets. The Company's asset base
includes (i) 5,190 SMR channels in the 800 MHz band (which is adjacent to and
functionally equivalent to cellular frequencies) and the related licenses to
provide wireless communications services over such channels and (ii) deployed
networks in the markets where it operates. At January 31, 1997, the Company's
licenses and assets were acquired for approximately $365 million, or
approximately $3.72 per POP, which is significantly less than the prices paid
for cellular and PCS licenses in comparable markets around the world.
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<PAGE> 65
McCaw International currently markets its wireless communications services
primarily to business customers with mobile work forces, such as service
companies, security firms, contractors and delivery services. In general, the
Company markets its services through a direct sales force, dealers and
independent agents. Companies with mobile work forces represent growing sectors
of the economy in the Company's markets. These types of businesses often have
the need to provide their personnel with the ability to communicate directly
with one another, either on a one-to-one or a one-to-many basis. By upgrading
its operations to provide ESMR services, the Company will increase capacity
significantly and be in a position to target a broader customer base. The
Company currently plans to launch ESMR commercial service in the Philippines by
the end of 1997, in Brazil during the first quarter of 1998 and in Argentina and
Mexico later in 1998. McCaw International differentiates itself from its
competitors by (i) providing superior quality telecommunications services, (ii)
focusing on customer service and (iii) targeting primarily business customers.
The following table provides a brief overview of each of the Company's
wireless communications systems.
<TABLE>
<CAPTION>
MCCAW INVESTED
INTERNATIONAL PROPORTIONATE CAPITAL AS
OWNERSHIP POPULATION AS SUBSCRIBERS OF
AS OF POPULATION OF 4/30/97 EXISTING SYSTEM AS OF 1/31/97(1)
MARKET 4/30/97 (MILLIONS) (MILLIONS) TYPE 12/31/96 ----------
- ------------------- ------------- ---------- ------------- ---------------- ----------- (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Brazil............. 81.0% 59.9 48.5 SMR 16,000 $186.3
Argentina.......... 50.0%(2) 17.6 8.8 Paging/SMR 4,000 20.7
Mexico............. 46.3% 42.5 19.7 SMR 24,000 103.8
Philippines........ 30.0% 67.0 20.1 Paging/ESMR(3) 46,000 20.0
China (Shanghai)... 25.2%(4) 14.0 3.5 GSM 28,000 20.5
Canada............. 3.7%(5) 29.5 1.1 SMR/ESMR/PCS(6) 59,000 13.2(7)
----- ----- ------- ------
Total.............. 230.5 101.7 177,000 $364.5
===== ===== ======= ======
<CAPTION>
START DATE
OF
COMMERCIAL
MARKET SERVICES
- ------------------- ----------------
<S> <C>
Brazil............. October 1994
Argentina.......... April 1996/
February 1997
Mexico............. September 1993
Philippines........ February 1995
China (Shanghai)... June 1995
Canada............. April 1994/
October 1996
Total..............
</TABLE>
- ---------------
(1) Invested capital consists of the total amounts invested in the Operating
Companies by McCaw International or Nextel. Amounts include amounts paid for
licenses and capital contributions made to the Operating Companies and in
the case of China also includes a loan made to fund the Shanghai GSM System.
(2) After giving effect to the Argentina Transaction. Under U.S. GAAP in effect
on the date hereof, McCaw Argentina will be accounted for under the equity
method. Prior to the Argentina Transaction, the Company owned 100% of McCaw
Argentina.
(3) The Company currently expects to launch commercial ESMR services in the
Philippines by the end of 1997.
(4) Represents the Company's share of profits from the Shanghai GSM System which
is accounted for under the cost method.
(5) Nextel also owns an approximately 15.3% equity interest in Clearnet
accounted for at fair market value.
(6) Clearnet currently expects to launch commercial PCS services in Canada's
largest urban centers in mid-1997.
(7) Reflects the market value of Nextel's initial investment in Clearnet on
October 20, 1994, the date the investment was made. On April 30, 1997, the
Company's Clearnet common stock had a market value of approximately $11.8
million.
McCaw International has a senior management team comprised of experienced
executives, most of whom have had substantial experience in the
telecommunications industry and many of whom have been involved in the
development of other telecommunications businesses both in the United States and
in emerging markets. In addition, senior management teams at the Operating
Companies are comprised of both nationals of the countries in which the
Operating Companies are located, most of whom have experience in the
telecommunications industry, as well as U.S. nationals, most of whom have
experience in emerging markets.
McCaw International is an indirect wholly owned subsidiary of Nextel, which
is the largest provider of SMR and ESMR services in the United States with
revenues of approximately $333 million for the year ended December 31, 1996. As
of December 31, 1996, Nextel provided service to approximately 300,000 ESMR
subscriber units. As of February 1, 1997, Nextel had invested approximately $365
million in the Company. A company controlled by Craig O. McCaw, the founder of
McCaw Cellular Communications, Inc. (now AT&T Wireless Services, Inc.), and his
family and Motorola are significant investors in Nextel.
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STRATEGY
The Company's strategy is to grow by upgrading and expanding its existing
networks to incorporate digital wireless communications services, which will
enable the Company to increase its subscriber base and revenues, and to pursue
new investment opportunities in markets which satisfy the characteristics
described above. The key elements of the Company's strategy are:
Capitalize on Leading Position. In most of its markets, the Company has a
larger SMR channel position than any other SMR service provider, which allows it
to compete effectively with other wireless communications service providers. Its
large channel positions also reduce the capital expenditures required to upgrade
to digital networks and create operating synergies.
Expand by Providing Digital Enhanced Services. The Company intends to
upgrade its analog SMR networks to digital ESMR networks using Motorola's iDEN
technology. The upgrade to digital networks will allow the Company to increase
capacity significantly and also offer additional services and features, which
the Company believes will lead to increases in its subscriber base and average
monthly revenue per subscriber.
Develop Cost-Efficient Networks. The Company's strategy of investing in SMR
channels has enabled it to acquire spectrum in its markets at a much lower cost
than cellular and PCS providers have paid in comparable markets around the
world. As a result, the Company believes it has an important competitive
advantage relative to cellular and PCS providers.
Leverage Nextel and Motorola Relationships. Nextel is the largest SMR and
ESMR provider in the United States. The Company intends to access Nextel's
technology, operations, supplier relationships, network development and
marketing expertise in upgrading its SMR networks to ESMR in its existing
markets and to leverage its relationship with Nextel in entering new markets. In
addition, the Company believes that it will benefit from Nextel's relationship
with Motorola, which is expected to supply the Company with iDEN equipment and
services. The Company will have access to financing for iDEN equipment on
substantially similar terms as Nextel under a vendor financing commitment among
Nextel, the Company and Motorola. By utilizing Nextel's expertise and
relationships with suppliers, in particular with Motorola, the Company believes
that it will be able to deploy networks that are competitive with cellular and
PCS networks.
Partner with Strong Local Groups. McCaw International seeks financially
strong local groups to invest as equity holders at the operating level. The
Company's local partners often own or have access to an existing strategic asset
base (such as real estate for cell sites or distribution outlets) that the
Operating Companies can use to reduce capital expenditures, operating costs and
network deployment time. Local partners also frequently play an active role in
securing licenses, obtaining necessary regulatory approvals and managing
governmental relations for the Operating Companies.
Maintain Active Management Role. The Company seeks to acquire controlling
ownership and management positions in its principal markets to the extent local
law does not restrict foreign ownership or management. Where the Company holds
less than a majority interest in an Operating Company, it manages its investment
through contractual arrangements that, other than in China and Canada, ensure
board representation and enable it to veto certain corporate actions. The
Company actively participates in the management of the Operating Companies,
other than in China and in Canada, by (i) selecting the key members of the local
management team, (ii) developing the system's technology and infrastructure,
(iii) developing business plans and marketing plans together with local
management, and (iv) maintaining close working relationships with local
partners.
Pursue New Investments in Attractive Markets. The Company is continuing to
pursue new investment opportunities in geographic areas that offer attractive
market fundamentals. At present, the Company plans to focus on emerging markets
in Asia and Latin America. The Company believes that such markets offer
favorable long-term economic growth prospects and that geographic concentration
may provide significant business synergies.
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SPECTRUM POSITION
The Operating Companies' current license holdings represent one of the
largest international wireless footprints, covering a total of 230 million POPs.
Based on its proportionate equity ownership, the Company's investments cover
approximately 98 million proportionate POPs.
The Company's spectrum strategy in the short-term is to strengthen its
channel position in its existing markets. For example, the Argentina Transaction
doubled the Company's spectrum position in Argentina. The Company will also seek
to acquire SMR channels or other wireless communications spectrum in other
selected urban centers in emerging markets on an opportunistic basis. See
"Summary -- Recent Developments."
In order to construct a digital network utilizing iDEN technology, the
Company believes that at least 100 SMR channels are necessary in any given
market. Generally, the Company estimates that each SMR channel has the capacity
to provide service to approximately 100 subscribers using analog SMR technology.
Deploying digital technology on these SMR channels will increase subscriber
capacity significantly. Moreover, the Company believes its large channel
position reduces capital expenditures required to upgrade to digital networks.
McCaw International owns or has options to acquire at least 100 channels in each
of the markets in which it intends to construct digital networks. In smaller
markets, McCaw International will continue to focus its efforts on growing its
SMR subscriber base. The Company's licenses and assets were acquired for
approximately $365 million as of January 31, 1997, or approximately $3.72 per
POP, which is significantly less than the prices paid for cellular or PCS
licenses in comparable markets around the world.
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The Company believes it has established the leading market position in
terms of number of SMR channels in each of its principal markets. The following
chart summarizes the Company's spectrum position as of March 6, 1997.
<TABLE>
<CAPTION>
POPULATION OF TOTAL SMR TOTAL
LICENSED AREA(1) CHANNELS SPECTRUM
---------------- --------- --------------
(MILLIONS) (MHZ)
<S> <C> <C> <C> <C>
I. SMR PROPERTIES
BRAZIL(2)
Greater Sao Paulo Area
Sao Paulo..................................... 18.4 195 9.75
Campinas...................................... 1.0 120 6.00
Santos........................................ 0.5 100 5.00
Sao Jose dos Campos........................... 0.5 100 5.00
----- -----
Total Greater Sao Paulo Area............. 20.4 515
Rio de Janeiro.................................. 12.0 160 8.00
Belo Horizonte.................................. 3.9 140 7.00
Porto Alegre.................................... 3.1 100 5.00
Recife.......................................... 3.0 60 3.00
Salvador........................................ 2.6 60 3.00
Fortaleza....................................... 2.3 40 2.00
Curitiba........................................ 2.1 120 6.00
Brasilia........................................ 1.9 60 3.00
Belem........................................... 1.5 20 1.00
Other Cities.................................... 7.1 425 --
----- -----
Total Brazil............................. 59.9 1,700
ARGENTINA(3)
Buenos Aires.................................... 11.3 180 9.00
Cordoba......................................... 2.4 200 10.00
Rosario......................................... 2.0 200 10.00
Mendoza......................................... 0.9 200 10.00
Other Cities.................................... 1.0 40 --
----- -----
Total Argentina.......................... 17.6 820
MEXICO(4)
Mexico City..................................... 17.9 204 10.20
Monterrey....................................... 3.1 25 1.25
Guadalajara..................................... 3.4 60 3.00
Tijuana......................................... 0.9 60 3.00
Other Cities.................................... 17.2 2,221 --
----- -----
Total Mexico............................. 42.5 2,570
PHILIPPINES(5)
Nationwide...................................... 67.0 100 5.00
CANADA
Nationwide...................................... 29.5 NA 30.00
----- -----
TOTAL SMR......................................... 216.5 5,190
===== =====
II. CELLULAR PROPERTIES
CANADA
Nationwide PCS.................................. 29.5 -- 30.00
CHINA
Shanghai GSM.................................... 14.0 -- 12.00
-----
TOTAL CELLULAR.................................... 43.5 --
=====
III. PAGING PROPERTIES
PHILIPPINES
Nationwide...................................... 67.0 -- --
ARGENTINA......................................... 34.0 -- --
-----
TOTAL PAGING...................................... 101.0
=====
</TABLE>
(footnotes on next page)
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- ---------------
(1) Represents the estimated POPs in the markets in which the Operating
Companies have channels.
(2) Interest in 1,180 channels in Brazil is structured pursuant to a number of
option agreements entered into with the respective corporate licensees of
such channels. None of such channels are located in Sao Paulo. See
"-- Brazil -- Regulatory and Legal Overview."
(3) Includes additional channels that McCaw Argentina owns as a result of the
consummation of the Argentina Transaction. Additional channels acquired in
the Argentina Transaction include 80 channels in Buenos Aires and 100
channels in each of Cordoba, Rosario and Mendoza.
(4) Excludes 1,040 channels in the 400 MHz frequency range that the Company
intends to divest.
(5) Infocom is negotiating a joint operating agreement which would allow it to
operate an additional 100 channels for a total of 200 nationwide channels in
the Philippines. See "Company -- Philippines."
NETWORK IMPLEMENTATION, DESIGN AND CONSTRUCTION
The Company's networks are in various stages of development. In 1996, the
Company began to build-out its ESMR network in the Philippines and its SMR
network in Argentina, and continued to build-out its SMR network in Brazil. In
1997, the Company intends to begin the design and development of its ESMR
network in Argentina, Brazil and Mexico and to continue to build-out its ESMR
network in the Philippines. The Company plans to launch commercial ESMR services
in the Philippines by the end of 1997, in Brazil during the first quarter of
1998 and in Argentina and Mexico later in 1998.
As the Company builds out its ESMR networks primarily using iDEN, it
intends to leverage Nextel's expertise and relationships in converting its
United States SMR networks to ESMR networks. Nextel is the largest operator of
SMR and ESMR services in the United States.
The Company's critical design criteria for its upgrade to ESMR include:
- Contiguous wide area coverage of substantially all of the major
population areas and traffic corridors in its licensed areas;
- Signal quality comparable to that currently provided by existing cellular
carriers;
- Call "hand-off" for mobile telephone service throughout the ESMR
networks;
- Minimization of blocked and dropped calls;
- The ability to offer advanced features such as data transmission and
message services; and
- Cost-efficient routing of calls to minimize local interconnection costs
and toll charges and to provide maximum utilization of the Company's ESMR
network facilities.
The Company believes careful frequency planning is necessary prior to
commencing network construction in order to ensure seamless coverage over the
entire network. Frequency planning involves the selection of specific areas in
the Company's markets for the placement of transmitter sites and the
identification of specific frequencies that will be employed at each site in the
initial configuration. Sites will be selected on the basis of their coverage and
on frequency propagation characteristics.
In addition to frequency planning and system design, the implementation of
the proposed digital wireless networks requires site acquisition, equipment
procurement, construction and equipment installation, testing and optimization.
Sites are selected on the basis of their proximity to targeted customers, the
ability to acquire and build the site and frequency propagation characteristics.
Site procurement efforts include obtaining leases and permits and, in many
cases, zoning approvals. Once the requisite governmental approvals are obtained,
the preparation of each site, including grounding, ventilation, air conditioning
and construction, typically takes three months, while equipment installation,
testing and optimization generally takes an additional four weeks. Following
commencement of system operations in a selected market, the Company expects to
add new sites to its networks continually in order to improve coverage and
capacity.
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One of the Company's objectives is to reduce the risk of delays during the
initial build-out of its ESMR networks while maintaining the integrity of the
system design. During the initial implementation, the Company intends, where
feasible, to use its existing sites, sites already occupied by other
communications service providers and other sites where zoning approvals and
other necessary permits are likely to be obtained easily. The Company also plans
to pursue concurrently access to multiple sites to mitigate delays resulting
from any permit denials and to use prefabricated buildings and pre-installed
equipment where possible in order to accelerate the installation process.
In certain instances, the Company's ability to proceed with the build-out
of its ESMR networks in its coverage areas or elsewhere may be subject to
successful negotiation of site acquisitions or leases, the availability of
equipment and receiving necessary governmental approvals. In addition, the
timing of the scheduled build-out will be subject to obtaining additional
financing on a timely basis, and typical construction and other delays. See
"Risk Factors -- Significant Capital Requirements for Operations" and "--
Expansion; Management of Growth."
BUSINESS DEVELOPMENT
The Company's business development objective is to pursue undervalued
license opportunities in major population centers in emerging markets throughout
the world. Consistent with this objective, the Company intends to expand its
subscriber base by building high-quality digital wireless networks in select
countries. The Company will pursue such opportunities by acquiring or investing
in projects in emerging markets that meet the Company's investment criteria. The
Company's criteria for investment include: (i) large, unsatisfied demand for
telecommunications; (ii) favorable economic growth, business and regulatory
climate; (iii) the availability of strong local equity partners; (iv) the
ability to have an active management role; (v) emerging market economies and
high-density population areas; and (vi) favorable SMR/ESMR investment
opportunities.
Although the Company plans to direct its business development efforts
primarily toward SMR/ESMR opportunities, it intends to make technology and
spectrum decisions based on (i) the relative cost and availability of spectrum
in each market, (ii) the nature of its existing operations in nearby
geographical areas, (iii) appropriateness of a given technology in a specific
market, and (iv) return on investment.
OPERATIONS AND INVESTMENTS
The Operating Companies offer wireless communications services in Latin
America (Brazil, Argentina and Mexico), Asia (Philippines and Shanghai, China)
and Canada.
BRAZIL
The Company has an 81% equity interest in McCaw Brazil, the largest SMR
service provider in Brazil with over a 50% market share by subscribers and owns
or has options to purchase licenses for 1,700 SMR channels in Brazil, the
largest SMR channel position of any SMR provider in the country. McCaw Brazil
provides service under the tradename "AirLink."
Country Overview. With a population of approximately 160 million, Brazil is
the largest country in Latin America and the fifth largest in the world. Over
77% of Brazil's inhabitants reside in urban areas. The two largest cities in
Brazil are Sao Paulo, with a population of approximately 18.4 million and Rio de
Janeiro, with a population of approximately 12 million. Brazil has the highest
GDP in Latin America, accounting for approximately 40% of Latin America's
aggregate GDP. Sao Paulo and Rio de Janeiro, urban areas in which McCaw Brazil
has the largest SMR channel positions, account for over 50% of the economic
activity in Brazil.
Beginning in December 1993, the Brazilian government launched an economic
stabilization plan called the Real Plan (the "Real Plan"), which was intended to
reduce inflation by decreasing certain public expenditures, collecting
liabilities owed to the Brazilian government, increasing tax revenues,
continuing a privatization program and introducing a new currency, the Real.
Following the implementation of the Real Plan, inflation dropped significantly
from previous levels, which at times had exceeded 40% per month, to
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monthly rates of between 1% and 3%, and the value of the Brazilian Real has been
relatively stable since its introduction.
Although Brazil is the fifth most populated country in the world, it ranks
only thirty-ninth in terms of telephone density. Less than 2% of the rural
population and only 19% percent of all residences have telephone service,
compared to 94% in the United States. In addition, 45% of Brazilian businesses
do not own a telephone. The waiting list for landline telephone service in
Brazil can be as long as approximately 3.5 years.
Although Brazil was the last major country in Latin America to grant
cellular licenses, it is now Latin America's largest cellular market, with more
than 1.5 million subscribers as of December 31, 1995, which represented 33% of
the total Latin American cellular subscriber base. Despite the large number of
cellular subscribers in Brazil, the country's cellular penetration rate is only
.8%, which is well below the United States 1995 cellular penetration rate of
12.8%. Driven by the backlogged demand for telecommunications, Brazil's cellular
market has experienced substantial growth over the past few years, making it one
of the fastest growing wireless markets in Latin America. The number of cellular
subscribers in Brazil increased from 22,500 in 1992 to 1.5 million in 1995, a
compound annual growth rate of over 300%. Over 40% of all subscribers were in
Sao Paulo. Brazil's subscriber growth is expected to continue, with the number
of subscribers projected to increase to over nine million in 2000, an average
annual growth rate of 46%. By the year 2000, Brazil's penetration rate is
expected to be 5.5% and the country's share of Latin America subscribers is
expected to reach 42%. At an average revenue per subscriber of $119 per month,
Brazil's revenue per cellular subscriber is more than two times the average in
the United States.
The SMR business in Brazil is underdeveloped compared to the U.S. market.
In 1995, Brazil had approximately 34,000 SMR subscribers or a .02% SMR
penetration rate compared to 7.0% in the U.S. The average revenue per SMR
subscriber per month of $67 is four times the comparable U.S. average.
Operating Company Overview. McCaw Brazil provides SMR services in 10 of
Brazil's largest cities including Sao Paulo, Rio de Janeiro, Belo Horizonte and
Brasilia.
McCaw Brazil has over 460 SMR channels installed and operational in Brazil.
It has 30 radio sites, five of which are in Sao Paulo and six in Rio de Janeiro.
McCaw Brazil has a centralized customer service and installation center located
in Sao Paulo.
The Company acquired McCaw Brazil's operations in January 1997 and has
performed a review of McCaw Brazil's business operations, billing and reporting
practices. Based on its review to date, the Company has determined that McCaw
Brazil's past reporting practices may have resulted in an overstatement in the
number of revenue-generating subscriber units for the relevant periods.
Specifically, the number of subscriber units reported may have included (i)
units used by customers who were intermittent or seasonal users of McCaw
Brazil's SMR services, but were not active during the periods reported, (ii)
units issued to persons who had canceled or otherwise terminated their active
use of McCaw Brazil's SMR services, but had not returned their subscriber units,
and (iii) units issued as demonstration units, but not activated as revenue-
generating units.
The Company has determined that the previously reported number of SMR units
for McCaw Brazil as of December 31, 1996, which was reported to be more than
16,000, including more than 12,000 in Sao Paulo, may be overstated by
approximately 15%. The overstatement in the number of SMR subscriber units for
McCaw Brazil does not have any impact on the accuracy of the revenue, expense or
other financial data reported by the Company with respect to McCaw Brazil's
operations (other than in the context of any information expressed as a "per
subscriber unit" amount).
McCaw Brazil intends to upgrade to ESMR in Sao Paulo, Rio de Janeiro and
Belo Horizonte, the three largest metropolitan cities in Brazil. This will
increase system capacity and allow McCaw Brazil to offer a broader range of
services to a broader set of business customers. Preliminary system design for
the greater Sao Paulo area and Rio de Janeiro are currently underway and the
Company has entered into iDEN equipment purchase contracts with Motorola with
respect to iDEN equipment for each city. McCaw Brazil plans to launch ESMR
commercial service in Sao Paulo in the first quarter of 1998. The Company
intends to evaluate the timing of any steps in connection with an upgrade to
ESMR in Belo Horizonte and any other cities in
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Brazil based on the then-current competitive and regulatory environment. See
"Risk Factors -- Wireless Communications Operations -- Government Regulation"
and "-- Possible Delay in Offering ESMR Services in Brazil."
McCaw Brazil offers its customers a broad range of services and pricing
plans designed to meet the specific needs of its customers. It offers dispatch
and integrated service plans (dispatch and interconnect). As of March 6, 1997,
approximately 22% of McCaw Brazil's subscribers were primarily interconnect
users, 34% were dispatch users and 44% were users of both dispatch and
interconnect. These plans include the sale or rental of various models of
handsets. The basic price package consists of a monthly fee of approximately
$40, interconnect rates per minute ranging from $.24 to $.31 and dispatch rates
per minute ranging from $.15 to $.23.
McCaw Brazil's sales and marketing efforts currently focus primarily on
providing cost-effective local and regional integrated services (dispatch and
interconnect). Its target markets are businesses engaged in transportation,
construction, security, services and also include utilities and government
agencies. McCaw Brazil utilizes both a direct sales force as well as dealers and
independent agents. It currently has over 13 direct sales representatives and 57
dealers and independent agents.
McCaw Brazil is headquartered in Sao Paulo and has branch offices in seven
other major cities. As of December 31, 1996, McCaw Brazil had 137 employees. Of
these, 115 were based in Sao Paulo.
Operating Company Subsidiaries. The following are subsidiaries or
affiliates of McCaw Brazil:
- AirLink. In September 1994, McCaw Brazil formed an indirect wholly
owned subsidiary, AirLink Service e Comercio Ltda. ("AirLink"). AirLink
owns equipment and, pursuant to service contracts, provides certain
technical support, billing, marketing and other administrative functions to
the licensee companies in Brazil.
- Telemobile and Promobile. In November 1994, McCaw Brazil entered
into an agreement to purchase 49 percent of the capital stock of Telemobile
and Promobile with an option to acquire the remaining 51 percent.
- LMP Consultoria e Representacoes Ltda. In May 1996, McCaw Brazil
entered into an agreement to purchase 49 percent of the capital stock of
LMP Consultoria e Representacoes Ltda. ("LMP") with an option to acquire
the remaining 51 percent.
- Telecomunicacoes Brastel S/C Ltda. In May 1996, McCaw Brazil entered
into an agreement to purchase 49 percent of the capital stock of
Telecomunicacoes Brastel S/C Ltda. ("Brastel") with an option to acquire
the remaining 51 percent.
- Via Radio Administracao e Participacoes Ltda. In October 1993, McCaw
Brazil, through a holding company, acquired all the outstanding capital
stock of Via Radio Administracao e Participacoes Ltda. ("VRA") and the four
Brazilian subsidiaries that were substantially wholly owned by VRA: (i)
Comercial Telecar Ltda., (ii) Telemovel Servicos Ltda., (iii) Car-Tel
Telefonia Movel s/c Ltda. and (iv) Comercial Teleservice Ltda.
- Via Radio-1 Telecomunicacoes Ltda. In August 1993, McCaw Brazil
acquired 94 percent, and in July 1994, the remaining 6 percent, of the
capital stock of Via Radio-1 Telecomunicacoes, S.A., ("VR-1"). In November
1994, the ownership of VR-1 was transferred from McCaw Brazil to VRA.
- ATG-Telecomunicacoes a Comercio Ltda. and Radio Telecomunicacoes do
Brasil Ltda. In November 1993, VRA acquired all of the outstanding capital
stock of ATG Telecomunicacoes e Comercio, Ltda. ("ATG"), and its 70 percent
owned subsidiary, Radio Telecomunicacoes do Brazil, Ltda.
("Radio-Telecom"). In July 1994, VRA acquired the remaining 30 percent of
capital stock of Radio-Telecom.
- Air-fone Participacoes e Empreendimentos S/C Ltda. In July 1994,
McCaw Brazil indirectly acquired all the outstanding capital stock of
Air-fone Participacoes e Empreendimentos S/C Ltda.
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("Airfone") which, in turn, held all of the outstanding capital stock of
Airfone Comercio e Servicos de Radiofonia, Ltda. and SOW Comercio e
Servicos de Radiofonia, Ltda.
- Master-Tec Industria e Comercio de Produtos. In September 1994,
McCaw Brazil indirectly acquired 49 percent of the capital stock of
Master-Tec with an option to acquire the remaining 51 percent interest.
Competition. McCaw Brazil is the largest SMR service provider in Brazil. In
addition, it has the largest SMR channel position of any service provider in
Brazil. There are a number of SMR competitors in Brazil, including MComCast (a
joint venture between Comcast Corporation and Banco Garantia), MCS and Radio
Movil Digital Americas, Inc.
On February 20, 1997, the Ministry of Communications released the new SMR
Rules (the "New SMR Rules") (i) permitting the combination of adjacent channels
in certain frequencies in the 400 MHz, 800 MHz and 900 MHz band and (ii)
requiring the use of digital technology for SMR systems operating in channels
401 to 600 of the 806-821 MHz and 851-866 MHz bands. The New SMR Rules also
provide that channels which have already been assigned to licensees, including
the Company, will be the object of a study addressing the prospective regrouping
of such channels for application in systems using digital technology. Because
the New SMR Rules allow SMR operators to combine adjacent channels to create
contiguous blocks and may provide for a regrouping of SMR channels to create
more contiguous blocks in the future, SMR operators may have additional
technology choices available to them. Although the Company does not believe that
the New SMR Rules will materially affect its technology decisions or the
attractiveness of McCaw Brazil's product or service offerings, the New SMR Rules
and technology decisions by other SMR operators, including existing and future
competitors, may increase competition in Brazil. The proposed regulations issued
on May 15, 1997 and June 25, 1997, if enacted by the Ministry of Communications
as drafted, would impose limitations on the Company's ability to (i) obtain
direct telephone numbers for all of its subscriber units in Brazil and (ii)
interconnect with the public telecommunications network, and therefore, may
limit the Company's ability to compete effectively with other wireless
communications service providers in Brazil, including the operators of the Band
B cellular licenses.
Brazil is one of the last major emerging countries to have only one
cellular provider per market. Telebras, the government-owned holding company
that controls the local telephone operators, is currently the only provider of
cellular service in Brazil. The current waiting list for a cellular telephone is
estimated to be three million people, with more than one million in Sao Paulo
where the average waiting time for a cellular telephone is two years. Due to the
demand for cellular telephony, the average price of a new cellular telephone on
the secondary market is estimated to be $3,000. In addition, there is reported
to be a 3.5 year waiting list for a landline phone. The average price on the
secondary market for a landline in Sao Paulo is estimated to be between $3,000
and $6,000.
In June 1997 and July 1997, the Government of Brazil awarded Band B
cellular licenses covering two of the ten areas throughout Brazil, including Sao
Paulo, pursuant to the Band B Rules. The Band B Rules divide the country into
ten regions for the auction of Band B cellular licenses. The total of the
minimum bids required by the Brazilian government for each of Brazil's ten
regions is $3.7 billion. This equates to a value of approximately $23 per POP in
Brazil. The minimum bid for the city of Sao Paulo is $600 million or
approximately $33 per POP in Sao Paulo. However, under the Band B Rules, a
cellular license winner can provide service in only one major Brazilian market
and one secondary market (e.g., the winner of the Sao Paulo license will be
precluded from owning the Rio de Janeiro license). In addition, future licensing
and commencement of cellular services will not be permitted until December 31,
1999. Some of the largest telecommunications companies in the world are expected
to be granted cellular licenses in the Band B auction, which will result in
significant competition in the Company's Brazilian markets. See "Risk
Factors -- Possible Delay in Offering ESMR Services in Brazil."
Partner Description. On January 30, 1997, Nextel acquired an 81% equity
interest in McCaw Brazil for a purchase price of $186.3 million, which was paid
with shares of Nextel Class A Common Stock, and simultaneously contributed its
interest in McCaw Brazil to the Company. The Telcom Group owns the remaining 19%
equity interest in McCaw Brazil.
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The Company is currently in discussions with several large Brazilian
corporate groups regarding the possible sale of up to a 15% equity interest in
the Brazil Holding Company. The proceeds from any such sale will be applied to
the upgrade of McCaw Brazil's network to ESMR. There can be no assurance that
the Company will be able to consummate any such transaction.
Regulatory and Legal Overview. The Ministry of Communications is the
Brazilian telecommunications authority responsible for administering and
regulating the SMR industry. In particular, the Ministry of Communications
regulates SMR licensing procedures and enforces both industry-wide and
contract-specific operating requirements. Notwithstanding the above, the
President of Brazil has announced that, as a result of the upcoming
privatization of the entire public telecommunications system, the Government of
Brazil may eliminate the Ministry of Communications and transfer its functions
to a new regulatory agency.
Before McCaw Brazil can launch commercial iDEN-based ESMR services in
Brazil, it will need to obtain the following approvals from the Ministry of
Communications: (i) project installation approval; and (ii) post-installation
operating approval. In addition, before McCaw Brazil can commence ESMR service,
"type certifications" must be obtained from the Ministry of Communications with
respect to the equipment to be deployed in Brazil. Motorola has received type
certification for most of its iDEN equipment, however, the Nortel switch and the
subscriber units that are used with iDEN networks have not yet been type
certified. The Company believes that these approvals will be obtained on a
timely basis. No assurance can be given that the Ministry of Communications will
grant the approvals or that the Company's planned roll-out of ESMR will not be
delayed.
Since July 13, 1994, it had been the Ministry of Communication's practice
to grant SMR licenses for a 15-year period and to renew such licenses for an
equal period upon submission of an application to the Ministry of
Communications. Certain of the Company's licenses granted prior to July 13, 1994
were granted for a term of five years and the Company believes that such
licenses have been automatically extended for a term of 15 years from their
original issuance date in accordance with Administrative Ruling No. 478.
Effective July 20, 1996, however, Law No. 9295 (the "Minimum Law"), modified
existing law so that SMR licenses granted after such effective date are issued
for a period of ten years and renewable for an additional ten-year period upon
submission of an application to the Ministry of Communications. The reduction to
ten years of the term and renewal periods for the licenses was confirmed by
Decree No. 2197, effective April 19, 1997. In either case, a license will be
renewed absent existing violations of applicable rules and regulations and upon
application 18 months prior to the expiration of the license. The Company
believes the legal doctrine of vested right ("direito adquirido") under
Brazilian law should insulate the existing terms of SMR licenses issued prior to
July 20, 1996, from the changes effected by the Minimum Law. All of the
Company's licenses were granted prior to July 20, 1996. Notwithstanding the
Minimum Law, a bill was signed into law on July 16, 1997 (the "General Law"),
which, among other things, revokes several provisions of the Minimum Law,
including the ten-year license term. Pursuant to the General Law, absent any new
regulations, existing SMR licenses will remain valid for the term for which they
were issued, however, to be renewed or extended, the term of the licenses must
be adapted to comply with the General Law. The General Law does not specify the
term of renewal or extension of SMR licenses. There can be no assurance that the
Ministry of Communications or a Brazilian court would invoke the doctrine of
vested right to insulate the existing terms of SMR licenses issued prior to July
20, 1996, from the reduced duration periods of SMR licenses as provided in the
Minimum Law.
The Ministry of Communications has established comprehensive operating
standards and requirements applicable to SMR licensees. A license holder of SMR
channels is required to meet certain installation and minimum loading
requirements. Failure to comply with such requirements may subject the licenses
relating to such channels to revocation by the Ministry of Communications.
Certain SMR equipment must be installed within 12 months after receiving an SMR
license from the Ministry of Communications. Additional installation time may be
permitted if more than four repeater stations are being installed. The
installation time also may be extended in the discretion of the Ministry of
Communications if circumstances beyond the control of the licensee contribute to
the delay. Under proposed regulations released for public comment on May 16,
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1997 ("Regulation No. 16"), the period for installation of the equipment would
be fixed in the proposal submitted to the Ministry of Communications by the
licensee, but no longer than 24 months from the date of issuance of the license.
Further, installation cannot be extended for longer than 6 months after the
agreed upon installation date. The Ministry of Communications requires each
channel to be loaded with 30 SMR radios within six months of the completion of
the installation, and with 70 SMR radios within four years of such date. McCaw
Brazil currently is not in compliance with applicable installation deadlines and
minimum loading requirements with respect to licenses covering 545 channels, all
of which are outside of Sao Paulo. Requests for extensions of the relevant
deadlines have been filed with the Ministry of Communications, except for
channels where McCaw Brazil failed to comply with applicable installations
requirements due to television frequency interference, for which extensions were
granted automatically by statute. No responses, however, have been received to
date with respect to such requests. There can be no assurance that the Ministry
of Communications will not take action in response to such failure to comply
which would have an adverse effect on McCaw Brazil.
Under the regulations of the Ministry of Communications, an SMR license is
not transferable before the installation of the SMR system infrastructure is
completed and the transfer of a majority interest in a licensee is also
restricted until installation is completed. Under the proposed regulations
issued on June 25, 1997, the transfer may only be effected after the actual
commencement of commercial operation of service, except for transfers between
entities under common control. The transfer of the license or the controlling
interest of a licensee also requires prior authorization from the Ministry of
Communications. Under Decree No. 2197, however, a transfer of the controlling
interest in the licenseholder to a controlled or controlling company does not
require prior approval from the Ministry of Communications if such transfer is
by succession or as a result of a stock split. Sales of shares comprising less
than a majority interest may be made at any time, provided notification is
submitted to the Ministry of Communications within 30 days after the
effectuation of the transfer. The Ministry of Communications has not established
clear procedures governing the transfer of SMR licenses or the time frame within
which it may approve such requests for transfer.
In Brazil, the transfer of control of an SMR licensee is subject to the
prior approval of the Ministry of Communications, except as noted above with
regard to stock splits. Because of these license transfer restrictions, McCaw
Brazil's interest in 1,180 of its 1,700 channels in Brazil is structured
pursuant to a number of option agreements entered into with the shareholders of
the respective corporate licensees of such channels. Pursuant to the Option
Agreements, McCaw Brazil has acquired a minority interest in each such licensee
not exceeding 49% and holds the option to acquire the balance of the ownership
interest in each such licensee upon the payment of an option exercise price. The
closing of each such option would be conditioned upon securing the approval of
the Ministry of Communications for the transfer of control of the relevant
licensees. The aggregate amount of the exercise price if all the options are
exercised is not material. A licensee is not eligible to request approval for
change of control until system installation has been completed, and many of the
channels that are the subject of the Option Agreements have not been installed.
The Company is currently conducting analog SMR system installation with regard
to a significant portion of the channels that are the subject of the Option
Agreements. While the Company believes it will receive Ministry of
Communications approval when it has met the installation requirements, no
assurance can be given that such approval will be obtained. Under the proposed
regulations issued on June 25, 1997, the transfer may only be effected after the
actual commencement of commercial operation of service. To the extent the
Company is not able to exercise its option to acquire the balance of the
ownership interest in a particular licensee, the Company believes that AirLink
would be able to continue to maintain its contractual right to manage the
operations subject to the license held by such licensee pursuant to a service
agreement and receive fees under such service agreement. However, the Company
would not own such license and the Company's rights with respect to such license
could be limited. There can be no assurance that the Ministry of Communications
would not challenge the validity of such service agreements. All of McCaw
Brazil's channels in Sao Paulo are indirectly owned entirely by the Company and
are not held pursuant to Option Agreements.
The Company owns or has options to acquire multiple channels in each of its
service areas in Brazil, which have been acquired from private parties rather
than the Ministry of Communications. Under Administrative Ruling No. 478, one
entity may not "receive" more than one SMR license in a given service area. Such
ruling also provides that an entity may not receive an SMR license if such
entity is a member of a
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commonly controlled or commonly managed group where another member of such group
already holds a license in the same service area. The Company believes that
Administrative Ruling No. 478 does not restrict an entity from acquiring prior
to July 13, 1994 more than one license in the same service area from private
parties and holding such licenses directly or indirectly.
Administrative Ruling No. 478 also is unclear as to whether, in the event
of a transfer of multiple licenses, it would be permissible to consolidate such
licenses under the ownership of one entity. In any event the Company believes
that any limitation on acquiring or holding multiple SMR licenses in the same
service area or consolidation of multiple licenses would not affect those
licensees who held SMR licenses prior to July 13, 1994, the effective date of
Administrative Ruling No. 478. All of McCaw Brazil's licenses in Sao Paulo were
issued prior to July 13, 1994. There can be no assurance that the Ministry of
Communications will approve transfers of majority control of licensees in the
same service area. Furthermore, Decree No. 2197 effective April 9, 1997 provides
that any transfers of control can only occur after the period of time
established in rules to be issued by the Ministry of Communications.
Notwithstanding Ruling No. 478, proposed Regulation No. 16 would prohibit the
performance of SMR services in the same service area by an affiliate, a
controlled or controlling entity of an existing licensee or by a licensee that
is already the holder of an SMR license in the same service area. Any failure to
approve such transfers could have a material adverse effect on the Company.
Any Brazilian company headquartered in Brazil is eligible to obtain
licenses to operate SMR services and there are no limitations on foreign
ownership of such companies. However, under Decree No. 2197, licenses can only
be obtained pursuant to a public bid.
Brazil has recently made efforts to restructure its telecommunications
laws. The adoption of the Minimum Law, which is designed to rationalize
telecommunications services, including SMR, is an example of such efforts. The
Minimum Law provides that telecommunications services should be provided in such
a manner as to ensure interconnectivity, interoperability, fair competition
among service providers and equitable use of telephone numbers. In addition, the
Minimum Law requires public telecommunications service providers to allow for
interconnection of their networks with mobile cellular service networks. McCaw
Brazil is in the process of negotiating interconnection agreements with relevant
parties. Under Decree No. 2197, an SMR licensee may interconnect with the public
telecommunications network system at any convenient point of interconnection in
its service area. The General Law, however, revokes Article 12 of the Minimum
Law, which guaranteed SMR licensees the right to interconnect with the public
telecommunications network, and provide that interconnection for SMR services
will be subject to regulation by the Ministry of Communications or the newly
created regulatory agency.
The Government of Brazil received on April 7, 1997, bids for the auction of
Band B cellular licenses covering ten areas throughout Brazil, including Sao
Paulo and Rio de Janeiro. On January 13, 1997, the Ministry of Communications
released the Band B Rules, which contain a provision prohibiting the initiation
of operations by certain other mobile telecommunications service providers in
the areas covered by the Band B licenses until December 31, 1999. It is unclear
whether this provision of the Band B Rules will prevent the Company from
providing iDEN-based ESMR services in Brazil before December 31, 1999. The
Company does not believe that the Band B Rules are applicable to its current SMR
operations in Brazil. There can be no assurance, however, that either the
Ministry of Communications or companies bidding for the Band B licenses will not
attempt to prevent the Company from offering ESMR services before December 31,
1999. In addition, companies bidding for the Band B licenses may request that
the December 31, 1999 date be extended or seek clarification as to the
applicability of the Band B Rules to iDEN-based ESMR services. Any significant
delay in offering ESMR services would have a material adverse effect on the
Company's competitive position in Brazil and on its business and results of
operations.
On April 26, 1997 and in the beginning of June 1997, news reports appeared
in Brazilian newspapers and international wire services that an anonymous source
had forwarded to the Ministry of Communications a copy of the Company's offering
memorandum prepared in connection with the Initial Offering and a letter
alleging that the Company was operating in Brazil without authorization from the
Ministry of Communications. Based upon these allegations, the Ministry of
Communications sent to the Company a letter requesting its comments regarding
the allegations. On June 6, 1997, the Company sent to the Minister of Communica-
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tions a letter in response to the allegations. Although the Company believes
that the current regulatory framework permits the operation of its existing
business in Brazil, there can be no assurance that the Ministry of
Communications will not modify the existing regulatory framework, or initiate
administrative proceedings, to impede the Company from providing the existing
SMR services or launching ESMR services. Further, certain members of the
Brazilian Congress introduced an amendment, which was enacted as part of the
General Law, to revoke Article 12 of the Minimum Law, which provided for
interconnectivity on a nondiscriminatory basis and guarantees the right of SMR
service providers, such as the Company, to interconnect with the public
telecommunications network. Any actions by the Ministry of Communications or the
Brazilian Congress impeding or placing substantial restrictions on the Company's
ability to deploy ESMR services could have a material adverse effect on the
Company's competitive position in Brazil and on its business and results of
operations.
On June 25, 1997, the Ministry of Communications issued proposed
regulations for public comment. Regulation No. 20 of June 25, 1997 ("Regulation
20"), if approved as drafted, would impose limitations on the Company's ability
to obtain direct telephone numbers for all of its subscriber units and
interconnect with the public telecommunications network. Under Regulation 20,
the public service company must apply to the Ministry of Communications to
obtain blocks of telephone numbers to be used for the SMR services and the
telephone numbers granted by the Ministry of Communications cannot exceed 50
percent of the total number of SMR stations projected to be in operation, as
provided in the schedule for the deployment of the services. Within the SMR
network, the volume of traffic interconnected with the public telecommunications
network cannot exceed 33 percent of the total of the intra-network traffic
volume plus calls interconnected to the public telecommunications network. The
evaluation of the traffic volumes for the purposes of the above restrictions is
to take place on a quarterly basis. In connection with the transfer of licenses,
or of the controlling interest in SMR licensees, such transfers still must be
approved by the Ministry of Communications and may take place only after the
effective commencement of commercial operations of the service of the
transferee. Notwithstanding the proposed limitations, Regulation 20 may allow
for the licensee to hold more than one SMR license in the same geographic area
and to aggregate the channels corresponding to each such licenses under one SMR
license, subject to the prior approval of the Ministry of Communications.
The purchase and sale of foreign currency in Brazil are subject to
governmental control. There are two foreign exchange markets in Brazil that are
subject to Central Bank regulations. The first is the commercial/ financial
floating exchange rate market which is reserved generally for: (i) trade related
transactions, such as import and export transactions; (ii) registered foreign
currency investments in Brazil; and (iii) certain other transactions involving
remittances abroad. The second is the tourism floating exchange rate market.
While both of these markets operate at floating rates freely negotiated between
the parties, the commercial/financial exchange market is restricted to
transactions which require prior approval of the Brazilian monetary authorities.
The purchase of currency for repatriation of capital invested in the country and
for payment of dividends to foreign shareholders of Brazilian companies is made
in the commercial/financial floating market.
Provided that the original investment of foreign capital and capital
increases were registered with the Brazilian monetary authorities, there are no
significant restrictions on the repatriation of share capital and dividends.
Application has been made to register a substantial portion of the foreign
capital invested by McCaw Brazil and its subsidiaries with the Brazilian
monetary authorities. The majority of the capital of AirLink, the Brazilian
subsidiary through which any dividends are expected to flow, has been registered
with the Brazilian monetary authorities, and McCaw Brazil intends to structure
future capital contributions to Brazilian subsidiaries to maximize the amount of
share capital and dividends that can be repatriated through the Brazilian
monetary authority. There can be no assurance that McCaw Brazil can repatriate
share capital and dividends on foreign investments that have not been registered
with Brazilian monetary authorities. Dividends paid out of profits generated
after 1996 are currently not subject to withholding tax.
Under current law, there is a 15% withholding tax on interest payment and
no withholding tax on dividends.
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ARGENTINA
The Company currently owns a 50% interest in McCaw Argentina. As a result
of the Argentina Transaction, the Company doubled its spectrum position, became
the largest SMR channel holder in Argentina, owning 820 SMR channels, which is
twice as many SMR channels as the second largest SMR operator and became the
holder of a nationwide paging business.
Country Overview. With a population of approximately 34 million, Argentina
is the fourth most populous country in Latin America. In 1995, over 86% of the
country's inhabitants resided in urban areas and over 50% of the total
population resided in the three largest metropolitan areas: Buenos Aires
metropolitan area (11.3 million POPs), Cordoba (2.4 million POPs) and Rosario
(2.0 million POPs). Argentina is characterized by above-average income levels
relative to other Latin American countries and had a GDP per capita of
approximately $8,167 in 1995, the highest in Latin America. The high penetration
of passenger vehicles in Argentina, approximately 18 per 100 population, is
another indication of the relative wealth of Argentines and the demand for
mobile communications services.
In 1991, the Argentine government implemented a stabilization and
structural reform program. Such efforts resulted in a sharp turnaround in
economic conditions. Real GDP growth accelerated to an average of approximately
5.0% a year from 1991 to 1996, up from .2% in the previous six years. The annual
rate of inflation declined to 1.6% in 1995 from 2,300% in 1990. The government
also carried out a substantial privatization program which included politically
sensitive sectors such as telecommunications, public utilities, oil, railroads,
provincial banks and the pension system.
The Argentine government was the first Latin American government to issue a
cellular license to a private entity. In July 1988, the Secretary of
Communications granted the first cellular license to Movicom.
Despite the relative maturity of the Argentine cellular market, it is one
of the fastest growing cellular markets in Latin America. From 1994 to 1995,
cellular subscribers grew 79%, reaching approximately 418,000 at the end of
1995, at which time, cellular penetration levels reached 2.6% in Buenos Aires,
.5% in the northern and southern interiors, and 1.3% for the entire country, as
compared to 12.8% cellular penetration in the United States. Strong cellular
growth is expected to continue, with 2.3 million projected subscribers
nationwide by 2000, reflecting a penetration rate of 6.2% for the entire
country. On a regional basis, Buenos Aires is projected to reach 10.6% market
penetration by the year 2000 and account for 65% of Argentina's total subscriber
base. At a monthly average of $130, Argentina's revenue per cellular subscriber
is one of the highest in Latin America. By comparison, average monthly revenue
per cellular subscriber is $51 in the United States.
The SMR business in Argentina is underdeveloped compared to the U.S.
market. In 1995, there were approximately 12,200 SMR subscribers in Argentina (a
penetration rate of less than .04%), compared to over 18 million SMR subscribers
in the United States (a penetration rate of 7.0%). Argentina's monthly average
revenue per SMR subscriber is approximately $50 compared to $16 in the United
States.
Operating Company Overview. McCaw Argentina has 180 SMR channels (9 MHz) in
Buenos Aires, 200 SMR channels (10 MHz) in each of Cordoba, Rosario and Mendoza
and an additional 20 SMR channels in each of Mar del Plata and Tucuman. The
Company believes its channel position will allow McCaw Argentina to compete more
effectively with other wireless communications providers. McCaw Argentina also
operates a nationwide paging business with approximately 4,000 subscribers under
a nationwide paging license.
In February 1997, McCaw Argentina launched commercial SMR service in Buenos
Aires. The company intends to begin offering commercial SMR service in Cordoba,
Mendoza and Rosario during the second quarter of 1997.
McCaw Argentina plans to construct a digital ESMR network in Buenos Aires,
Cordoba, Rosario and Mendoza utilizing Motorola's iDEN technology. The company
expects to launch commercial ESMR service later in 1998. While migrating its
analog customers to the digital network, the company intends to operate parallel
digital and analog networks. As part of the migration process, the company will
encourage its higher usage customers to convert to the digital network so they
can benefit from the broader range of service
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offerings. Digital service offerings will include interconnect services,
dispatch radio and paging using one multi-functional handset. Initially, the
company will target the mobile workforce, which it believes will be the most
likely users of iDEN's integrated service offerings.
McCaw Argentina currently offers analog dispatch and interconnect service
utilizing both Motorola and Ericsson equipment. Service offerings include
private call, call alert and scanning. The company plans to differentiate itself
from other SMR providers by offering superior voice quality, providing extensive
service coverage and maintaining a high level of customer service. The company
has a centralized customer service and installation center located in Buenos
Aires.
The company's SMR service is designed to be a business tool for the mobile
workforce. The company intends to focus its marketing efforts on businesses that
have a need for mobile communications such as trucking and transportation
companies, real estate firms, construction companies, suppliers and distributors
and security companies. McCaw Argentina is in the process of developing a
distribution network and believes a strong direct sales force is essential to
reaching potential business customers. The company is currently building a
direct sales force and expects to have 26 direct sales representatives by the
end of 1997. In addition, the company has contracted with independent dealers to
market McCaw Argentina's products and is providing extensive training to each of
its distribution channels in order to ensure a high level of customer
satisfaction. The company expects 25% of new customers will be added through
independent dealers.
McCaw Argentina will offer multiple pricing plans tailored for the business
user and will maintain broad flexibility on its pricing decisions. Unlike many
of its competitors, McCaw Argentina sells its SMR handsets instead of leasing
them. The sale of handsets provides a more stable revenue stream and tends to
reduce customer churn. Currently, the average retail price for an analog handset
is $429.
To establish brand identity, the company has begun a promotional
advertising campaign which targets the business segment of the market. In
addition to advertising, the company initially will rely heavily on its direct
sales force to educate potential customers on the benefits of using McCaw
Argentina's service.
McCaw Argentina is headquartered in Buenos Aires. As of December 31, 1996,
McCaw Argentina had 23 employees.
Operating Company Subsidiaries. The following are subsidiaries of McCaw
Argentina:
- McCaw Argentina S.A. Incorporated in Buenos Aires on June 28, 1994,
McCaw Argentina S.A. holds trunking licenses for Buenos Aires, Cordoba,
Mendoza and Rosario and shares management and operations, including billing
and selling of handsets, with Airlink S.A. The Company plans to transfer
the management and operations functions currently performed by Airlink S.A.
to McCaw Argentina S.A.
- Buenos Aires Trunking S.A. Incorporated in Buenos Aires on September
15, 1994, Buenos Aires Trunking S.A. holds trunking licenses for Buenos
Aires, Cordoba, Mendoza and Rosario.
- Communications Services of Argentina S.A. Incorporated in Buenos
Aires on March 16, 1993, Communications Services of Argentina S.A.
("Communications Services") holds trunking and paging licenses in Mar del
Plata and Tucuman. Communications Services also holds a paging frequency
and two bidirectional paging frequencies in Buenos Aires, Cordoba, Mar del
Plata, Mendoza, Rosario and Tucuman.
- Airlink S.A. Incorporated in Buenos Aires on August 4, 1995, Airlink
S.A. currently shares management and operations with McCaw Argentina S.A.
The Company plans to transfer the management and operations functions
currently performed by Airlink S.A. to McCaw Argentina S.A.
Competition. The two largest SMR providers in Argentina, as measured by
subscribers, are owned by Movicom and Miniphone S.A. ("Miniphone") (the two
cellular providers in Buenos Aires) and operate under the tradenames "Movilink"
and "Starcom," respectively. Movicom owns 100 channels in Buenos Aires and 40
SMR channels in each of the three other major cities. In addition to operating
various SMR networks, Movicom also operates an iDEN-based system in Buenos
Aires. Movicom's iDEN system utilizes the higher capacity "first-generation"
voice algorithm system. Movicom has an arrangement with Motorola that gives it
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exclusive use of iDEN in Argentina until September 15, 1997. Based on
discussions between the Company and Motorola, the Company does not believe that
this exclusivity period will be extended. Starcom owns and operates 60 channels
in Buenos Aires and additional SMR channels in two other major cities. There are
two cellular service providers in each of the major markets in Argentina. In
Buenos Aires, the two service providers are Movicom (a joint venture among
BellSouth Corporation, Motorola and others) and Miniphone (a joint venture among
the two Argentine telephone companies, Telefonica de Argentina S.A. and Telecom
Argentina STET-France Telecom S.A.). Over 300,000, or 70%, of Argentina's
cellular subscribers are located in Buenos Aires. In the northern region of
Argentina, the two service providers are Compania de Telefonos del Interior S.A.
("CTI") (a joint venture that includes GTE and Lucent Technologies) and Telecom
Personal S.A. (a wholly owned subsidiary of Telecom Argentina STET-France
Telecom S.A.). In the southern region of Argentina, the two service providers
are CTI and Telefonica Comunicaciones Personales S.A., a wholly owned subsidiary
of Telefonica de Argentina S.A., which operates under the name UNIFON.
The Company expects additional competition following the auction of PCS
licenses and the auction of an additional 220 SMR channels in Buenos Aires and
other major cities, which are expected to occur during 1997.
Partner Description. The Company and WVA each own 50% of McCaw Argentina.
Regulatory and Legal Overview. The Comision Nacional de Comunicaciones
("CNC") and the Secretary are the Argentine telecommunications authorities
responsible for administration and regulation of the SMR industry.
CNC regulations require SMR operators to build-out their channels within 12
months of the channel authorization issuance if the system is multi-site and to
guarantee their performance by posting a bond equivalent to the price paid in
the spectrum auction. The bond is released once the installation and activation
of the SMR site or sites have been verified by the CNC. McCaw Argentina S.A. has
built out its channels in a timely fashion and the bonds posted by McCaw
Argentina S.A. and WVA in connection with its build-out obligation have expired
and are not required to be replaced.
SMR licenses have an indefinite term, but are subject to revocation for
violation of applicable regulatory rules as discussed below. SMR service must
commence within six months to one year after receipt of the channel assignment
(depending on the type of network configuration). Failure to meet service or
loading requirements can result in revocation of the channel authorizations. The
CNC will revoke the licensee's license upon the finding of a third breach by a
licensee of service requirements. Licenses and channel authorizations may be
revoked for violation of other regulatory authority rules and regulations. All
SMR channel holders, including McCaw Argentina S.A. and WVA's Argentine
subsidiaries, that received their channel authorizations pursuant to the
November 1995 SMR auction were granted an extension to December 1997 from the
original December 1996 deadline to meet initial loading requirements. The
Company has been loading subscribers to its analog SMR network since the
commencement of service in February 1997 and expects to meet the initial loading
requirements by the deadline. Argentina imposes no limitation on foreign
ownership of SMR licenses.
SMR providers are assured unlimited interconnect pursuant to the terms of
the tender rules under which the channels were awarded, as well as pursuant to
applicable laws. Furthermore, interconnection with the public switched telephone
network must be on a nondiscriminatory basis. McCaw Argentina S.A. is in the
process of negotiating interconnect agreements with the applicable parties.
Under current law, Argentine currency is convertible into U.S. dollars
without restrictions, and Argentina has a free exchange market for all foreign
currency transactions.
Under applicable Argentine corporate law, dividends may be paid only from
liquid and realized profits as shown on the company's financial statements
prepared in accordance with Argentine generally accepted accounting principles.
Five percent of such profits must be set aside until a reserve equal to twenty
percent of the company's capital stock has been established. Subject to these
requirements, the balance of profits may be declared as dividends and paid in
cash pursuant to a majority vote of the shareholders. Under current law, there
is a 13.2% withholding tax on interest payments and no withholding taxes on
dividends.
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MEXICO
The Company owns an approximately 48.1% equity interest in Mobilcom.
Mobilcom is the largest SMR service provider in Mexico.
Country Overview. Mexico is the second most populated country in Latin
America, with a population of 92 million. Mexico's population is 75% urban, and
approximately 18 million people, or more than one-fifth of the country's total
population, reside in the Mexico City metropolitan area. Other major
metropolitan population centers include Guadalajara (3.4 million POPs) and
Monterrey (3.1 million POPs). In addition, Mexico's income level is above
average relative to other countries in Latin America.
The Mexican government's fiscal and monetary policies since the 1994 peso
devaluation have been credited with preventing a deeper economic crisis and have
stabilized the country's economic recovery. After contracting 6.2% in 1995, the
economy is expected to grow 4.4% in 1996 and nearly 5.9% in 1997. Inflation is
estimated to have fallen to 27.0% in 1996 from 52.0% in 1995, and is projected
to decline to 17.0% in 1997.
Mexico has a relatively low teledensity, with approximately 9.2 lines per
100 inhabitants. Mexico's cellular market is the second largest in Latin America
based on the number of subscribers, but with a penetration rate of 0.8% in 1995,
cellular penetration in the Mexican market is still significantly below the U.S.
cellular penetration rate of 12.8% and the Latin American cellular penetration
rate of 1.3%. In a country where fewer than 10 out of every 100 inhabitants have
a telephone line, cellular telephony can serve as a landline substitute.
Mexico has experienced very rapid growth in the number of wireless
subscribers. Over the last five years, annual growth has averaged 62%. Cellular
subscribers are projected to grow from 686,000 at the end of 1995 to
approximately 2.9 million at the end of 2000, an annual growth rate of 33%. The
principal factor driving demand over the next five years will be the expected
accelerated growth of the Mexican economy. By 2000, cellular penetration in
Mexico is expected to reach 3.5%. Currently, over 48% of cellular subscribers in
Mexico are located in Mexico City.
Mexico has an SMR penetration rate of approximately .05%. Unlike many SMR
providers, the company sells the majority of its handsets instead of leasing
handsets. The average revenue per subscriber per month for cellular and SMR in
Mexico is $78 and $19, respectively, which is higher than the average monthly
U.S. revenue for cellular $51 and for SMR $16.
Operating Company Overview. Mobilcom began commercial SMR operations in
September 1993 under the brand name "Tricom." Mobilcom, through its subsidiaries
and management agreements, provides SMR services in 15 cities and along a number
of major highways. As of December 31, 1996, the company had approximately 24,000
subscribers. The cities in which Mobilcom, through its subsidiaries and
management agreements, holds SMR licenses include: Mexico City (with a total of
204 channels representing approximately 10 MHz), Guadalajara (with a total of 60
channels) and Monterrey (with a total of 25 channels). As of December 31, 1996,
Mobilcom had 43 transmitter sites. Mobilcom has deployed Motorola, Uniden, Nokia
and General Electric technology in its analog SMR networks.
Mobilcom initially intends to construct a digital ESMR network in Mexico
City utilizing Motorola's iDEN technology. The company expects to launch
commercial service on its digital ESMR network later in 1998. While migrating
its analog customers to the digital network, the company intends to operate
parallel digital and analog networks, but within two years of commercial
implementation of ESMR services the company anticipates all of its customers
will be migrated to digital. As part of the migration process, the company will
encourage its higher usage customers to convert to the digital network so they
can benefit from the broader range of service offerings. Digital service
offerings will include interconnect services, dispatch radio and paging using
one multi-functional handset. Initially, the company will target the mobile
workforce which it believes will be the most likely users of iDEN's integrated
services.
Mobilcom's assets also include 1,040 channels in the 400 MHz frequency band
covering central and northern Mexico. Mobilcom currently is considering a sale
of its 400 MHz channels because this frequency is not central to Mobilcom's
business plan. In addition, Mobilcom is building a digital microwave network
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throughout central and northern Mexico to provide regional dispatch radio
services. The Company is also contemplating leasing excess capacity on its
digital microwave network to one or more of the recently licensed long distance
providers in Mexico, including Telecomunicaciones Globales, S.A. de C.V., a
company in which the Company holds a 13% equity interest ("Globales"). Mobilcom
and Globales have entered into certain arrangements pursuant to which Globales
leases access to Mobilcom's microwave network.
In 1995 and 1996, Mobilcom experienced high rates of churn (reaching an
average of 3.7% per month over the two-year period) which the Company believes
was caused primarily by the economic downturn in Mexico. Further, the company
suffered from a high level of bad debt expense. To address these problems,
Mobilcom's board of directors appointed a new chief operating officer in the
fourth quarter of 1996. The primary short-term objectives of the company are to:
(i) implement a plan to reduce overall operating expenses; (ii) build a high
quality customer base and focus on maximizing profitability rather than building
market share; and (iii) establish a high level of customer service, comparable
in quality to the customer service provided by wireless communications companies
in the United States.
Mobilcom offers its customers a broad range of services and pricing plans
designed to meet the specific needs of its customers. Mobilcom offers dispatch
only and integrated service plans (dispatch and interconnect). These plans
include sale or rental of various models of handsets. The basic price package
consists of a monthly fee and interconnect and dispatch charges depending on
minutes of use.
Mobilcom's sales and marketing efforts focus primarily on providing
cost-effective local and regional dispatch radio services to its target
customers, which are businesses engaged in manufacturing and distribution.
Mobilcom markets its services through a multichannel distribution network
including direct sales representatives and independent dealers. Direct sales
representatives account for 40% of new customers and distributors account for
60%. In the future, the company expects to increase sales through the
distributor channel because it believes this channel will be the most effective
in targeting small businesses.
Mobilcom is headquartered in Mexico City and has branch offices in
Guadalajara, Monterrey and Tijuana. As of December 1996, Mobilcom had
approximately 150 employees in Mexico.
Operating Company Subsidiaries. The following are active subsidiaries of
Mobilcom:
Tricom Network S.A. de C.V. Incorporated in Mexico on August 18, 1994,
Tricom Network S.A. de C.V. ("Tricom") is responsible for billing Mobilcom
customers. Mobilcom owns 99.9% of the equity of Tricom.
Servicios de Radiocomunicacion Movil de Mexico S.A. de C.V. Incorporated in
Mexico on November 9, 1990, Servicios de Radiocomunicacion Movil de Mexico S.A.
de C.V. ("Servicios") holds 800 MHz SMR licenses. Mobilcom owns 97.11% of the
equity of Servicios.
Sistemas de Comunicaciones Troncales S.A. de C.V. Incorporated in Mexico on
March 16, 1989, Sistemas de Comunicaciones Troncales S.A. de C.V. ("Sistemas")
holds 800 MHz and 400 MHz SMR licenses. Mobilcom indirectly owns 99.99% of the
equity of Sistemas.
Teletransportes Integrales S.A. de C.V. Incorporated in Mexico on June 29,
1991, Teletransportes Integrales S.A. de C.V. ("Teletransportes") owns fixed
assets including antennae, amplifiers and channels. Teletransportes lease these
fixed assets to Tricom. Mobilcom indirectly owns 99.99% of the equity of
Teletransportes.
Fonotransportes Nacionales S.A. de C.V. Incorporated in Mexico on March 9,
1993, Fonotransportes Nacionales S.A. de C.V. ("Fonotransportes Nacionales")
holds 400 MHz SMR licenses. Mobilcom indirectly owns 99.8% of the equity of
Fonotransportes Nacionales.
Fonotransportes A.C. Organized as a not-for-profit civil association in
Mexico on June 12, 1989, Fonotransportes A.C. holds permits for 2 GHz microwave
links.
Radiophone S.A. de C.V. Incorporated in Mexico on June 29, 1991, Radiophone
S.A. de C.V. ("Radiophone") is a holding company for the following subsidiaries:
(i) Sistemas, (ii) Teletransportes, (iii) Fonotransportes Nacionales and (iv)
Fonotransportes A.C. Mobilcom owns 99.99% of the equity of Radiophone.
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Comunicacion Integral San Luis S.A. de C.V. Prop. Incorporated in Mexico on
January 12, 1993, Comunicacion Integral San Luis S.A. de C.V. ("Comunicacion
Integral") owns fixed assets including antennae, amplifiers and towers.
Comunicacion Integral leases these assets to Tricom. Mobilcom owns 99.98% of the
equity of Comunicacion Integral.
Multifon S.A. de C.V. Incorporated in Mexico on June 17, 1987, Multifon
S.A. de C.V. ("Multifon") imports equipment for sale to Tricom. Mobilcom owns
99.99% of the equity of Multifon.
Equipos de Radiocomunicacion Movil S.A. Incorporated in Mexico on June 12,
1989, Equipos de Radiocomunicacion Movil S.A. ("Equipos") holds 800 MHz SMR
licenses. Mobilcom owns 99.99% of the equity of Equipos.
Autofon de Mexico S.A. de C.V. Incorporated in Mexico on December 9, 1977,
Autofon de Mexico S.A. de C.V. ("Autofon") holds 800 MHz SMR licenses. Mobilcom
owns 99% of the equity of Autofon.
Telecomunicacion Radial S.A. de C.V. Incorporated in Mexico on July 19,
1993, Telecomunicacion Radial S.A. de C.V. ("Radial") holds 800 MHz SMR
licenses. Mobilcom owns 99.99% of the equity of Radial.
Comunicaciones 2000 S.A. de C.V. Incorporated in Mexico on June 30, 1989,
Comunicaciones 2000 S.A. de C.V. ("Comunicaciones 2000") holds 800 MHz SMR
licenses. Mobilcom owns 99.98% of the equity of Comunicaciones 2000.
Promocion de Servicios de Telecomunicacion S.A. de C.V. Incorporated in
Mexico on September 12, 1990, Promocion de Servicios de Telecomunicacion S.A. de
C.V. ("Promocion") holds 800 MHz SMR licenses. Mobilcom owns 99.99% of the
equity of Promocion.
Nacional de Telecomunicaciones S.A. de C.V. Incorporated in Mexico on May
2, 1985, Nacional de Telecomunicaciones S.A. de C.V. ("Natel") holds 800 MHz SMR
licenses. Mobilcom owns 99.99% of the equity of Natel.
Competition. Mexico currently has only 85,000 commercial SMR subscribers,
compared to more than 18 million in the United States. Mobilcom is the largest
SMR provider in Mexico, both in terms of channels and subscribers. The Mexican
cellular market is divided into nine regions and there are two cellular licenses
per region. Telefonos de Mexico, S.A. de C.V. ("Telmex"), Mexico's national
telephone company, has a nationwide cellular license. In the Mexico City region
and throughout most of the southern portion of Mexico, the second cellular
carrier is Iusacell, S.A. de C.V. (a joint venture between Bell Atlantic and
Grupo Iusacell). In the northern part of Mexico, cellular carriers include
Movitel, Cedetel and Baja Cellular Mexicana. Poctatel del Sureste is also active
in Southern Mexico.
As part of its drive to improve and increase Mexican telecommunications
services, the Mexican government has announced its intention to auction a number
of licenses to provide wireless communications services, including licenses for
dispatch services in the 900 MHz frequency band, for narrowband dispatch
services in the 220 MHz frequency band and PCS. Such auctions, which are
anticipated to occur during 1997, will increase the number of actual and
potential competitors that Mobilcom will face.
Partner Description. The Company's strategic partners in Mobilcom include
Grupo San Luis, WVM and Associated SMR, which hold approximately 21%, 11.6% and
11.3% interests, respectively. The remaining interests in Mobilcom are held by
the Carlyle Group, one smaller shareholder and a number of individuals.
Regulatory and Legal Overview. The Secretary of Communications and
Transportation regulates the telecommunications industry in Mexico. Since early
1994, the Mexican government has been deregulating the telecommunications
industry in order to improve the quality and expand the coverage of
telecommunications services. The Mexican government has stated its intention to
increase competition within the telecommunication industries and its desire to
attract foreign investment for the purpose of improving Mexico's
telecommunications infrastructure. Mexico's Federal Telecommunications Law (the
"Mexican Federal Telecommunications Law"), which became effective in June 1995,
outlines the broad rules for opening the local and long distance service markets
to competition.
The Mexican Federal Telecommunications Law requires that all
telecommunications licenses (referred to as "concesiones" in Mexico) must be
owned by entities that do not have more than 49% of their voting
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equity interest owned by non-Mexican entities. Although such 49% limitation
existed prior to the enactment of the Mexican Federal Telecommunications Law for
certain types of telecommunications licenses, SMR licenses issued prior to the
effectiveness of the legislation could be owned by entities wholly owned by
non-Mexicans. Mobilcom believes that in accordance with the terms of the Mexican
Federal Telecommunications Law and Mexican constitutional law principles, the
49% limitation on non-Mexican participation does not apply to the SMR licenses
in which it had an interest at the time of the effectiveness of the Mexican
Federal Telecommunications Law. Consistent with this view, in May 1996, the
Mexican Secretary of Communications and Transportation amended all of the 800
MHz SMR licenses issued prior to the effective date of the Mexican Federal
Telecommunications Law in which Mobilcom had an interest to delete a provision
limiting non-Mexican participation to 49%. Accordingly, all of Mobilcom's 800
MHz SMR licenses, except for one license covering 10 channels along a major
highway from Mexico City to Guadalajara, were amended to remove the 49%
foreign-ownership limitation. The provisions of the Mexican Federal
Telecommunications Law restricting foreign ownership of telecommunications
licenses may, however, have an impact on future acquisitions of licenses by
Mobilcom, including licenses for channels needed to build-out digital mobile
networks in Mexico, and renewal of existing licenses. Although licenses to
provide cellular services are also subject to the 49% limitation on foreign
ownership, the Mexican Federal Telecommunications Law explicitly provides for a
waiver procedure of such limitations for cellular providers upon receipt of a
favorable opinion from the Mexican National Foreign Investments Commission.
The Mexican Federal Telecommunications Law provides all wireless services
providers with the right to interconnect to the public switched network operated
by Telmex. Mobilcom has entered into an interconnection agreement with Telmex
and currently provides interconnection services through Telmex to a limited
number of its subscribers. Mobilcom plans to increase subscriber interconnection
significantly as it upgrades its SMR network.
Mexican companies may remit dividends and profits outside of Mexico if the
Mexican company meets certain distribution and legal reserve requirements. A
Mexican company must distribute 10% of its pretax profits to employees and
allocate 5% of net profits to the legal reserve until 20% of the stated capital
is set aside. Although the Company's investment in Mobilcom is registered with
the Mexican National Registry of Foreign Investments, registration is no longer
a prerequisite for the remittance of dividends and profits outside of Mexico.
Under Mexican corporate law, approval of a majority of shareholders of a
corporation is required to pay dividends. Dividends paid by Mobilcom to its U.S.
shareholders are subject to a 10% withholding tax unless Mobilcom chooses to pay
the Mexican corporate income tax on the net earnings from which the dividends
are being paid. Interest paid by Mobilcom to U.S. residents is subject to a 10%
withholding tax.
PHILIPPINES
In August, 1996, McCaw International acquired a 30% equity interest in
Infocom, a company organized under the laws of the Republic of the Philippines.
Infocom owns nationwide licenses (with a total of 100 channels representing
approximately 5 MHz), to provide SMR, ESMR and paging services. Infocom began
commercial service of its paging network in February 1995 under the brandname
"Infopage" and plans to begin commercial service of an iDEN-based ESMR network
by the end of 1997.
Country Overview. The Philippines has a population of approximately 67
million people and population density of 228 people per square kilometer,
compared to a population density of 29 people per square kilometer in the United
States. The principal cities include Manila, Quezon City, Davao City, Caloocan
City and Cebu City. The country has experienced strong economic growth. In 1995,
GDP increased by 4.8% and by 4.3% in 1994.
The Philippines has one of the lowest teledensities in Southeast Asia, with
approximately one line per 100 inhabitants. It is estimated that only 45% of
total demand has been satisfied. Further, metropolitan Manila, the country's
most urban area, has 80% of all telephone lines with approximately two per 100
inhabitants. The waiting list for landline telephone service contains
approximately 800,000 names and it can take nearly nine years to get a landline
telephone. Current efforts to increase landline installation are expected to
bring teledensity to ten lines per 100 inhabitants by the year 2000.
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The demand for wireless telephone services has grown significantly,
principally due to low teledensity, competition and rising income levels
resulting from strong economic growth in the country. In 1994 and 1995 the
market for wireless services grew by nearly 110% and 150%, respectively. Despite
this growth, the Philippines has one of the lowest cellular penetration rates in
Southeast Asia at .5%. Comparatively, Singapore and Malaysia have penetration
rates of 10.0% and 5.0%, respectively. Currently, there are more than 500,000
cellular subscribers nationwide, with most of this base concentrated in
metropolitan Manila. The continuing economic prosperity in the Philippines is
expected to drive the demand for wireless services over the next decade.
According to industry estimates, the number of cellular subscribers should grow
at a compounded annual rate of 47% to reach 3.3 million subscribers, or a 4.4%
penetration rate, by the end of the decade.
The Philippine paging market has experienced substantial growth over the
past few years. From 1993 to 1995, paging subscribers grew 202%, reaching
325,000 subscribers at the end of 1995. Despite the rapid growth of the
Philippine paging market, it remains largely underdeveloped with a penetration
rate of only .5%. Strong paging growth is expected to continue, with 1.4 million
paging subscribers projected in the year 2000, reflecting a five year compound
annual growth rate of 35% and a penetration rate of 1.8%. The Philippine SMR
market is underdeveloped as well, with only 18,000 SMR subscribers at the end of
1995, or a penetration rate of .03%.
Operating Company Overview. Infocom commercially launched paging services
in February 1995 under the brand name "Infopage." The company has approximately
42,000 subscribers at December 31, 1996 and the Company believes that it was the
fourth largest paging company in the country. Infocom currently offers coverage
across metropolitan Manila and Subic Bay and expects to offer nationwide
coverage by the end of 1997.
Infocom offers both alphanumeric and numeric paging services utilizing
Motorola's FLEX technology and differentiates itself from its competitors by
offering a variety of value-added services including secretarial services, voice
mail, call forwarding, fax mail and group call. Moreover, the company places
considerable emphasis on providing a high level of customer service through its
customer service center located at the company's headquarters in Manila. Unlike
many of its competitors, Infocom does not lease or rent its pagers and currently
its average retail sale price for alphanumeric units exceeds $250. The company's
monthly subscription rate for alphanumeric paging services is currently
approximately $12.
Paging services in the Philippines are targeted at both the business and
consumer segments. Infocom has developed a comprehensive and diverse
distribution network and believes that such a diverse distribution mix will
contribute to an increased growth in its subscriber base. In order to capture
the consumer segment and create brand awareness, Infocom has ten owned and
operated retail outlets, primarily located within large shopping malls, that
exclusively carry the company's products. The company intends to expand this
channel to twenty retail locations by the end of 1997. To target the business
segment, the company has a direct sales force of 130 people, which it intends to
increase to 200 by the end of 1997. Finally, the company has contracted with ten
major dealers and 70 independent dealers to market Infopage's products. The
company expects this independent channel to grow to over 100 dealers by the end
of 1997.
Infocom has a nationwide SMR license and is currently constructing a
digital ESMR network utilizing Motorola's iDEN technology. Infocom currently
does not have any ESMR subscribers, but expects to launch commercial ESMR
service in metropolitan Manila during 1997. In December 1996, Infocom signed an
equipment purchase contract with Motorola. At present, the company has acquired
12 of the 44 proposed radio cell sites and has begun construction of its switch
facility.
Infocom's ESMR business will initially target the larger business customers
in its markets. The company intends to focus on building profitability rather
than building market share in a similar fashion to its efforts in its paging
business. Within the business segment, the company believes the mobile workforce
including construction, service, real estate and sales companies will be the
most likely users of iDEN's integrated service offerings.
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Although the company intends to fully utilize its established paging
distribution network and leverage Infopage's brand recognition, the company also
intends to substantially augment its direct sales force in order to effectively
target other business customers. The company has begun to formulate a strategy
for its pricing plans and aims to charge a premium to low usage subscribers and
a slight discount to high usage subscribers while offering a significantly
greater number of services.
Infocom is headquartered in Manila. As of December 31, 1996, Infocom had
456 employees of which 320 were operators serving its paging customers. In
addition to designating three of the 11 members of Infocom's board of directors
as well as having one of its directors serve as an advisor to Infocom's
executive committee (which is a management committee that under Philippine law
may only have Philippine nationals as members), the Company has seconded two of
its managers as full time employees of Infocom with responsibility for leading
Infocom's marketing and technical efforts.
Competition. There are two major SMR license holders in the Philippines,
each owning 100 channels nationwide, and 10 licensed paging operators. Infocom
believes that it is uniquely positioned to compete effectively in the
Philippines as a result of its nationwide SMR license and its fast-growing
paging business. In addition, the Joint Operating Agreement would enable Infocom
to jointly operate the largest SMR system in the Philippines. There are
currently five cellular providers with nationwide licenses in the Philippines,
two of which are AMPS operators, one of which is a TACS operator and two of
which are GSM operators. Pilipino Telephon Corporation ("Piltel"), the operator
of the public switched telephone network, is the largest cellular provider, with
over 50% market share. As part of its effort to improve teledensity, the
government requires cellular providers to meet certain landline buildout
requirements, which require the installation of 400,000 telephone lines. This
represents a significant investment for each of these providers. See
"-- Regulatory and Legal Overview."
Partner Description. The Company's partners in Infocom include the Gotesco
Group, a leading diversified conglomerate engaged in retail, real estate,
banking, manufacturing and trading in the Philippines headed by Jose C. Go,
which owns a 20% interest in Infocom. Affiliates of AIG recently purchased a 10%
interest in Infocom from an existing Infocom shareholder at a significantly
higher implied valuation than that paid by the Company for its interest in
Infocom. Other shareholders include a 32% holder and an 8% holder.
Regulatory and Legal Overview. In the Philippines, the telecommunications
industry is principally governed by Republic Act No. 7925 (the "Telecoms Act")
enacted on March 1, 1995. Under the Telecoms Act, the National
Telecommunications Commission (the "National Commission"), an agency under the
Department of Transportation and Communications, is mandated to regulate the
telecommunications industry.
Engaging in telecommunications operations requires a franchise from the
Philippine Congress, which is the country's legislative body. After securing a
Congressional franchise, a franchise holder must apply to the National
Commission for an operating license called a Certificate of Public Convenience
and Necessity ("CPCN"). The grant of a CPCN goes through a process of public
notice and hearing. After receipt of an application for a CPCN for a particular
telecommunications service, and pending its legal, technical and financial
evaluation through a public hearing, the National Commission will initially
issue a Provisional Authority ("PA"), which serves as a temporary operating
permit for the particular telecommunications services applied for. Pursuant to
the PA an applicant can commence construction and commercial operations.
Infocom's PA authorizes it to operate a nationwide digital trunked radio
dispatch communications system. It is subject to revocation for failure to (i)
operate continuously for two years or (ii) commence operations within two years
of the issuance of the PA. Pursuant to Infocom's PA, as amended, it is required
to commence operations by January 20, 1998.
The Telecoms Act provides that a telecommunications entity with regulated
types of services must make a public offering of at least 30% of its aggregate
common stock within a period of five years from the effective date of the
Telecoms Act or the entity's first start of commercial operations, whichever
occurs later. Accordingly, Infocom is mandated to make a public offering of 30%
of its common stock by March 1, 2000.
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Under Philippine law, foreign entities' direct ownership of a public
utility telecommunications company is limited to 40% of the company's capital
stock. Philippine law also limits the participation of foreign investors in the
governing body of any public utility enterprise to their proportionate share in
its capital; therefore, a foreign investor's participation in the management of
a telecommunications company is limited solely to membership on its board of
directors. Accordingly, all the executive and managing officers (e.g.,
president, chief executive officer, treasurer) are required to be citizens of
the Philippines.
Presidential Executive Order No. 59 (1993) prescribes, as a matter of
national policy, for the compulsory and nondiscriminatory interconnection of
authorized public telecommunications carriers. Interconnection is negotiated and
effected through bilateral negotiations between the parties involved subject to
certain technical/operational and traffic settlement rules of the National
Commission. Infocom is discussing an interconnection agreement with Piltel.
Presidential Executive Order No. 109 Series of 1993, and, subsequently, the
Telecoms Act (as implemented by the National Commission's Memorandum Circular
No. 8-9-25) require cellular mobile operators to install at least 400,000 local
exchange lines. The Company does not believe that Infocom is subject to such
requirement, however, there can be no assurance that this will be the case. If
this requirement were found to be applicable to Infocom, it would require a
significant capital investment.
Under current regulations of the Central Bank of the Philippines (the
"Central Bank"), foreign exchange may be freely sold and purchased outside the
Philippine banking system. Restrictions exist on the sale and purchase of
foreign exchange in the banking system. The Philippine monetary authority, with
the approval of the President of the Philippines, has the statutory authority,
during a foreign exchange crisis or in times of national emergency, to
temporarily suspend or restrict sales of foreign exchange, require licensing of
foreign exchange transactions or require delivery of foreign exchange in the
Central Bank or its designee.
Foreign investments need not be registered with the Central Bank. The
registration of a foreign investment with the Central Bank is only required if
the foreign exchange needed to service the repatriation and the remittance of
capital and dividends are to be sourced from the Philippine banking system.
Nevertheless, even without Central Bank registration, foreign exchange needed
for capital repatriation and remittance of dividends of unregistered investments
can be sourced lawfully outside of the Philippine banking system. The Company's
investment in Infocom has been registered with the Central Bank.
Under current law there is a 15% withholding tax on dividends and a 20%
withholding tax on interest payments.
SHANGHAI, PEOPLE'S REPUBLIC OF CHINA
The Company currently has a contractual right to receive 25.2% of the
profits generated by the Shanghai GSM System, which is operated by Unicom. The
Shanghai GSM System covers the greater Shanghai area comprising over 14 million
POPs. Unicom is one of only two licensed cellular operators in Shanghai. See
"-- Corporate Governance -- China."
Country Overview. With a population of approximately 1.2 billion, the
People's Republic of China is the most populous country in the world and the
third largest behind Russia and Canada in terms of geographic size. Shanghai is
one of China's leading cities. It is one of four cities in China which has been
accorded provincial level status and also has the largest port in China. The
city covers an area of over 6,000 square kilometers and has a population of
approximately 14 million. Shanghai's GDP experienced a growth rate approaching
15% per year in both 1993 and 1994, and its GDP per capita was $1,303 in 1995,
over two times the national average of $517.
In 1990, the State Council approved the establishment of a new economic
trade zone in the "Pudong New Area" section of Shanghai. The Pudong New Area is
similar to China's Special Economic Zones, which have been established to
attract foreign investment, and is expected to be the region's primary
international business conduit.
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The demand for telecommunications services continues to grow and
teledensity remains at one of the lowest levels in the world at less than one
line per 100 inhabitants. China was the fifth largest cellular market in the
world in 1995, with over 3.7 million subscribers, and was the second largest
paging market in the world with over 26.1 million subscribers. The cellular
market has grown at a compounded annual growth rate of 175% over the last 5
years. Although China has one of the lowest cellular penetration rates in the
world at .3%, its cellular penetration rate is expected to reach 2% by the end
of the decade.
Operating Company Overview. The Shanghai GSM System is a cooperative
project established by Unicom and SSTIC to construct and operate a GSM cellular
network in Shanghai. The Shanghai GSM System has grown quickly since the
commencement of commercial operations in July 1995 and as of December 31, 1996
had approximately 28,000 subscribers. The current network has 55 cell sites
covering the greater Shanghai region (including the Pudong New Area). Under the
current laws of the People's Republic of China, foreign investors are not
permitted to be involved directly in the ownership or operation of
telecommunications services. In the event that such laws change, the Company may
seek to convert its contractual right to share profits generated by the Shanghai
GSM System to a direct ownership interest, although there can be no assurance
that this would be possible.
In August 1995, the Company formed a joint venture with SSTIC called
Shanghai McCaw pursuant to which the Company provided financial support to the
Shanghai GSM System for construction of the initial phases of the system in
exchange for a contractual right to share profits from the system with SSTIC.
Through its joint venture arrangements, the Company provides advice and
direction to the Shanghai GSM System in the key areas of engineering, customer
care, billing practices, quality assurance and system performance.
Shanghai McCaw currently employs seven people. Of these seven employees,
the General Manager is an employee of McCaw International who has been seconded
to the joint venture. The remainder of the joint venture's personnel are native
Chinese.
Shanghai McCaw initially provided technical advice to the Shanghai GSM
System during the construction phase of the network. Shanghai McCaw has
continued to provide technical support in the ongoing process of upgrading the
quality and coverage of the GSM network and has become increasingly involved in
supporting the development of a diversified sales and marketing plan to compete
with the systems operated by the Ministry of Post and Telecommunications (the
"MPT").
Competition. There are only two authorized cellular providers in Shanghai,
Unicom and the Shanghai PTA (the local branch of the MPT). The Shanghai PTA has
been in operation since 1989 and operates three cellular networks (two TACS
systems and one GSM system).
Partner Description. SSTIC, the Company's partner in Shanghai McCaw, is an
investment holding company which was established for the purpose of developing
the Shanghai high-technology industry. SSTIC was formed by the Municipal
Government of Shanghai, six major Shanghai banks as well as two major
diversified Shanghai conglomerates. SSTIC was one of the original shareholders
of Unicom.
Regulatory and Legal Overview. Until 1994, the MPT was the sole entity
authorized to provide public telecommunications services in China. In July 1994,
the State Council established Unicom with the authority to provide public
telecommunications services. In addition, pursuant to a 1995 agreement the MPT
and the Peoples Liberation Army (the "PLA") agreed to jointly develop 800 MHz
cellular communications networks to provide wireless communications services to
the public using spectrum originally allocated to the PLA for military
communications use. Accordingly, there are three entities in China authorized to
provide cellular telecommunications services to the public. The MPT continues in
its role as the central government's regulatory authority over the
telecommunications sector.
Under current Chinese law, foreign investors are not permitted to be
involved directly in the ownership or operation of telecommunications services.
Renminbi, the currency of China, is not freely convertible. The stated goal
of the government is to achieve full convertibility by the year 2000. Under
current laws, a foreign invested enterprise is permitted to convert its Renminbi
earnings to foreign currencies for the purpose of enabling its foreign investors
to receive
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dividends and interest payments. Conversion of Renminbi to foreign currencies
for the purpose of repatriating foreign investors' capital contributions to, and
principal payments from, a foreign invested enterprise is subject to approval by
relevant government authorities, which approval will be granted upon showing
that the foreign invested enterprise has been lawfully terminated and dissolved
or the loan has been properly registered, as the case may be. The Company's loan
to Shanghai McCaw has been properly registered with the relevant governmental
authority. Under current law there is a 10% withholding tax on interest payments
and no withholding tax on dividends.
CANADA
Operating Company Overview. The Company owns 1,596,067 shares of common
stock of Clearnet, a Nasdaq-listed company, representing approximately 3.7%
interest. On June 30, 1997, the Company's Clearnet common stock had a market
value of approximately $19 million. Clearnet is the largest SMR operator in
Canada as measured by the number of current subscribers, the number of 800 MHz
channels and the population of its service territory. As of December 31, 1996,
Clearnet provided analog SMR services in over 40 cities across Canada to
approximately 54,000 subscriber units and ESMR services in Ontario and Quebec to
approximately 5,000 subscriber units. In addition, Clearnet holds one of the two
national 30 MHz licenses to provide PCS in Canada. Clearnet plans to launch its
PCS network in Canada's largest urban centers in mid-1997.
The Company has one representative on the Clearnet board of directors.
Nextel owns additional shares of common stock of Clearnet representing an
approximate 15.3% interest and also has one representative on the Clearnet board
of directors.
On June 26, 1997, Nextel announced that it received the consent of the
holders of its public notes regarding certain amendments to the indentures
governing such notes. The Nextel noteholders agreed, among other things, to
permit Nextel to transfer its equity interest in Clearnet to McCaw
International. If Nextel effects such transfer, McCaw International will hold an
aggregate of 8,373,845 shares of Clearnet, representing approximately 19% of the
outstanding common stock of Clearnet, which represents a 1.7% voting interest.
Additionally, McCaw International will have the right to nominate an additional
director to Clearnet's board of directors. As of June 30, 1997, based on the
closing price of Clearnet stock on the Nasdaq Stock Market, Nextel's equity
interest in Clearnet had a market value of approximately $82 million. Although
Nextel is permitted to transfer its interest in Clearnet to the Company, there
can be no assurance that Nextel will effect such transfer or, should such
transfer occur, that the market value of Nextel's equity interest in Clearnet on
the date of any such transfer will not be less than the market value of such
equity interest as of June 30, 1997.
CORPORATE GOVERNANCE
The following is a description of the Company's contractual relationships
with its partners in the Operating Companies.
Brazil. The Company owns 81% of the Class A voting stock of McCaw Brazil,
which entitles it to 90% of the voting rights. The Company, therefore, has the
right to make management and operating decisions of McCaw Brazil. The Telcom
Group owns 19% of the Class B voting stock, which entitles it to 10% of the
voting rights. The Telcom Group has the right to designate candidates
representing at least 10% of the directors of McCaw Brazil, but at least one
candidate so long as the Telcom Group owns at least 10% of McCaw Brazil. The
Telcom Group holds veto rights with respect to the following actions: (i)
amending the articles of incorporation or bylaws of McCaw Brazil; (ii) creating
any equity senior to the existing shares of McCaw Brazil or changing or
adversely affecting any provisions or rights of the existing shares of McCaw
Brazil; (iii) permitting or causing McCaw Brazil or any of its material
subsidiaries to issue voting securities with voting rights different from those
to which then-issued securities are entitled; (iv) entering into a merger, a
sale of substantially all of the assets, a dissolution, a liquidation or a
spinoff of McCaw Brazil or any of its material subsidiaries; (v) permitting
McCaw Brazil or any of its subsidiaries to enter into a material contract with
the Company or its affiliates other than on an arm's-length, fair-market-value
basis; or (vi) permitting McCaw Brazil or any of its affiliates to issue or
dispose of securities of the Company other than for cash at fair
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market value. If the Telcom Group exercises its veto rights, McCaw Brazil has
the right to purchase (upon vote of a simple majority of its board of directors)
all of the Telcom Group's shares of McCaw Brazil then owned by them at their
appraised fair market value. The repurchase price can be paid in cash or in
shares of Nextel common stock or a combination thereof. McCaw Brazil has the
right to declare dividends without the approval of the Telcom Group.
The Telcom Group has the right to forego making its pro rata share of any
capital calls that may arise until April 1999 without suffering any dilution of
its right to receive dividends and other cash or noncash distributions;
provided, however, the failure by the Telcom Group to ultimately make such
capital contributions (and interest thereon) by April 1999 will result in the
proportionate dilution of its economic interest in McCaw Brazil. The Telcom
Group has the right at any time between October 31, 2001 and November 1, 2003,
or at any time after a change of control of McCaw Brazil, to require McCaw
Brazil to redeem the Telcom Group's entire interest at its appraised fair market
value. The redemption price is payable in cash, or, at McCaw Brazil's election,
publicly-traded common stock of any entity owning 50% or more of McCaw Brazil or
a combination thereof. In the event that McCaw Brazil issues additional shares
of its common stock to such a third party and, as a result, the Telcom Group's
interest in McCaw Brazil is reduced to less than 17%, the Telcom Group has the
right to purchase additional shares in McCaw Brazil such that after the issuance
to a third party, the Telcom Group would own no more than 17% of the outstanding
common stock.
The Company has a right of first refusal with respect to proposed transfers
by members of the Telcom Group of their respective interests in McCaw Brazil and
has the right to compel the Telcom Group to join in any proposed transfer by the
Company of its entire interest in McCaw Brazil. The Telcom Group has the right
to join in any proposed transfer by the Company of its entire interest in McCaw
Brazil.
Argentina. As long as the Company holds at least a 30% interest in McCaw
Argentina and WVA holds at least a 40% interest in McCaw Argentina, the
six-member board of McCaw Argentina will be equally divided. If one party fails
to maintain such level of ownership (while the other maintains it), the party
failing to maintain its ownership will lose the right to designate one of its
three members of the board of directors. Failure to maintain at least a 10%
ownership interest will result in loss of all board seats held by such party.
As long as WVA maintains at least a 40% ownership interest, McCaw Argentina
will be operated in accordance with a three-year business plan adopted by its
board of directors. As long as the Company owns at least 30% of McCaw Argentina,
the following actions will require the approval of two-thirds of the board of
directors: (i) appoint McCaw Argentina's chief executive officer, president and
senior executives in charge of technology, finance and marketing; (ii) amend or
adopt any three-year business plan; or (iii) issue equity securities
representing 5% or more of the shares of McCaw Argentina. The declaration of
dividends also requires the approval of WVA.
As long as each of the Company and WVA own at least 10% of the outstanding
shares of McCaw Argentina the following actions will require the approval of
two-thirds of the directors: (i) creating any equity senior to the existing
shares of McCaw Argentina or changing or adversely affecting any provisions or
rights of the existing shares of McCaw Argentina; (ii) permitting or causing
McCaw Argentina or any of its material subsidiaries to issue voting securities
with voting rights different from those to which then-issued securities are
entitled; (iii) permitting McCaw Argentina or any of its subsidiaries to enter
into a material contract with the Company or its affiliates other than on an
arm's-length, fair-market-value basis; or (iv) permitting McCaw Argentina or any
of its affiliates to issue or dispose of securities of the company other than
for cash at fair market value. In addition, for as long as the Company and WVA
each own at least 10% of the outstanding shares of McCaw Argentina, the
following actions require approval of the holders of two-thirds of McCaw
Argentina's shares: (i) amending the organizational documents of McCaw
Argentina; and (ii) entering into a merger, a sale of substantially all of the
assets, a dissolution, a liquidation or a spinoff of McCaw Argentina or any of
its material subsidiaries.
If (i) WVA exercises its veto power or (ii) at a time when the Company owns
less than 30% and WVA owns at least 40% of the outstanding shares of McCaw
Argentina, respectively, the Company exercises its veto power, McCaw Argentina
shall have the right, upon approval of a majority of the directors of McCaw
Argentina (excluding the directors nominated by the party that exercised its
veto), to repurchase the shares of
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the party exercising its veto right at their appraised fair market value. The
repurchase price is payable, at McCaw Argentina's option, in cash, Nextel common
stock or in any combination thereof.
The Company has a right of first refusal with respect to transactions by
WVA of its shares of McCaw Argentina and has the right to compel WVA to join in
any proposed transfer by the Company of its entire interest in McCaw Argentina.
WVA has the right to join in any proposed transfer by the Company of its entire
interest in McCaw Argentina.
Mexico. In accordance with agreements with other principal shareholders of
Mobilcom, so long as the Company owns 27.5% of the outstanding voting stock of
Mobilcom, the Company has the right to designate a majority of Mobilcom's board
of directors. The Company, therefore, subject to the business plan adopted by
the Mobilcom shareholders, has control over Mobilcom's day-to-day operational
decisions, such as the selection of senior management, sales and marketing
decisions and acquisitions or disposition of assets (up to $20 million). Under
these same agreements, Grupo San Luis, so long as it owns at least 5% of
Mobilcom (15% of Mobilcom in the event that it has disposed of any of its
current shareholdings) has the right to designate two members of the Mobilcom
board of directors. The other board members are elected by a cumulative voting
process and currently are representatives of each of WVM and Associated SMR. The
Company also has the right to designate one of the two members of the Technology
Committee of the Mobilcom board of directors. The Technology Committee has sole
and exclusive authority to make all technology decisions relating to the
Company's digital mobile systems including technology decisions related to
vendor selection and build-out and system design. The other member of the
Technology Committee is a designee of WVM.
Under the agreements relating to the governance of Mobilcom, so long as
Grupo San Luis owns at least 5% and the Company owns at least 20% of Mobilcom,
the following matters require a supermajority vote of the shareholders: (i)
amendments to Mobilcom's and its subsidiaries' charter; (ii) issuance of shares
with disproportionate voting rights; (iii) adoption of any stockholders rights
plan to disadvantage any shareholder on the basis of this size of its holding;
(iv) issuances of shares aggregating to more than 15% of the outstanding shares
at the commencement of any 36-month period, subject to certain exceptions; (v)
the establishment of an executive or special committee of the board of directors
other than the Technology Committee; (vi) acquisition, disposition, loan and
certain other transactions having a value in excess of $20 million; (vii)
adoption of and approval of any material deviation of business plans, marketing
plans, capital expenditure plan or operating budget; (viii) incurrence of
capital expenditures in excess of 125% of the capital expenditure budget
approved by shareholders; (ix) a decision to change the core business; and (x)
approval of any offer for subscription of treasury shares in respect of which
shareholders preemptive rights have been waived.
In order to maintain its right to designate a majority of the board of
directors, to designate one of the two members of the Technology Committee and
to block certain significant actions of Mobilcom, the Company must invest a
minimum of approximately $76.8 million in Mobilcom by March 3, 1998. As of April
30, 1997, the Company had invested approximately $64.9 million in Mobilcom. The
Company may satisfy its remaining commitment by (i) making capital contributions
to Mobilcom, provided that such capital contributions are not part of the pro
rata capital contributions to Mobilcom in which the other principal shareholders
of Mobilcom participate; (ii) making a capital contribution to Mobilcom to be
used for the purchase of Radiocel; or (iii) exercising the Mobilcom Options.
Pursuant to one of the Mobilcom Options, the Company has an option to
purchase up to 19.5% of the common stock of Mobilcom outstanding as of June 6,
1996, for an aggregate exercise price of $76.8 million. The other Mobilcom
option gives the Company the right to purchase up to an additional 9.98% of the
outstanding common stock of Mobilcom for an aggregate exercise price of $67.5
million.
Beginning on October 24, 1997, pursuant to the Mobilcom Put the holders of
approximately 37% of the outstanding common stock of Mobilcom have the right for
two years to put the entire amount of their holdings to the Company at its
appraised fair market value for cash. The Mobilcom Put is exercisable if
Mobilcom takes any of the following corporate actions and the directors
designated to Mobilcom's board of directors by the holders of the Mobilcom Put
vote against such action: (i) a material amendment of the charter or bylaws;
(ii) issuance of voting securities with disproportionately larger voting rights
or a class vote; (iii) certain
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issuance of shares in excess of 15% of the outstanding shares during a 36-month
period; (iv) making any investment, loaning any amount, or selling assets in
excess of $20 million; (v) the adoption of material deviations from any business
plan, operating budget or capital expenditure plan; and (vi) making capital
expenditures that would exceed 125% of the capital expenditure budget approved
by the shareholders. In addition, the Mobilcom Put is exercisable in the event
that the holders of the Mobilcom Put are no longer entitled to designate in the
aggregate at least two directors. The Mobilcom Put is automatically exercisable
on October 24, 1999 whether or not a Mobilcom Put Event occurs. Valuation of
Mobilcom for purposes of the Mobilcom Put will be based on an appraisal by an
investment bank, with the minimum appraisal for 100% of Mobilcom equal to $150
million. To the extent that such appraisal exceeds $250 million, 50% of such
excess will be included in the valuation. In connection with a June 7, 1996
capital call, Mobilcom shareholders purchased additional shares of Mobilcom
based on a $200 million valuation (which values the Mobilcom Put at
approximately $66 million). If the Mobilcom Put is not exercised by October 24,
1999, the Company has right to buy the shares subject to the Mobilcom Put on the
same terms as described above.
In order to effectuate their agreement relating to the governance of
Mobilcom, the principal shareholders of Mobilcom, including the Company and
Grupo San Luis, have agreed to hold all of their shares under a trust
arrangement, and all such shares are registered in the name of a Mexican bank
that serves as the trustee.
The Company has agreed under certain circumstances to attempt to provide
Grupo San Luis with liquidity with respect to its equity interest in Mobilcom.
At any time after January 1, 1999, the Company, if requested by Grupo San Luis,
will cause Mobilcom to undertake a U.S. registered public offering or sale for
cash to a third party of Grupo San Luis' shares at their appraised fair market
value within one year of such request. If Mobilcom fails to provide Grupo San
Luis with liquidity through either of these methods, Grupo San Luis has the
right to cause Mobilcom to file a registration statement in the United States
covering Grupo San Luis' Mobilcom shares.
Philippines. The Company owns 30% of the outstanding shares of Infocom and
has the right to designate three of 11 members of the board of directors and one
of four advisers of the executive committee of the board. The Company holds veto
rights with respect to decisions involving a number of significant corporate
actions including the following: (i) the acquisition of any entity; (ii) the
merger; consolidation or sale of the company or any subsidiary or any
disposition of a material amount of assets; (iii) the amendment of the articles
of incorporation or by-laws; (iv) any amendment affecting the preemptive rights
of stockholders; (v) entering into an agreement relating to marketing or
distribution; (vi) decisions to pursue a CPCN license; (vii) entering other
lines of business; (viii) issuances of stock; (ix) the approval of annual
operating and capital budgets; (x) any borrowings in excess of $200,000; (xi)
any transactions with affiliates in excess of $200,000; and (xii) any
dispositions of assets or making loans other than in the ordinary course of
business.
Infocom and the Company have entered into a technical services agreement
pursuant to which the Company agreed to provide Infocom with engineering and
other technical services, marketing assistance and system operation assistance
for $432,000 per year. The agreement has an initial term of three years.
China. Under current Chinese law, foreign entities or individuals are
prohibited from participating directly in the ownership and operation of
telecommunications services. Because of this limitation, the Company's interest
in the Shanghai GSM System is held through its 60% equity interest in a Chinese
equity joint venture, Shanghai McCaw. Shanghai McCaw participates in the
Shanghai GSM System through a profit-sharing arrangement entered into originally
between SSTIC, its Chinese partner, and Unicom (the "Unicom Agreement"). SSTIC,
holds a 40% equity interest in Shanghai McCaw.
Pursuant to the Unicom Agreement, Shanghai McCaw receives 42% of the net
revenues of the Shanghai GSM System. The Unicom Agreement is structured to
provide the financing for the construction of a system that can service 50,000
subscribers. As of December 31, 1996, the Shanghai GSM System had 28,000
subscribers. The Unicom Agreement expires on February 25, 2007.
Pursuant to a joint venture agreement and other agreements entered into
between the Company and SSTIC (the "Shanghai McCaw Agreements"), the Company and
SSTIC have equal representation on the board of directors of Shanghai McCaw. In
addition, the Company has the right to appoint Shanghai McCaw's
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general manager and chief engineer, subject to SSTIC's approval. Certain
significant corporate actions require unanimous approval of the board of
directors, including: (i) an amendment to the articles of association; (ii)
changes in the ratio of the partners' capital contribution; and (iii) the merger
or dissolution of Shanghai McCaw. Certain other matters require the approval of
at least six of eight members of the board of directors. Those matters include
the following: (i) allowing a third party to participate in the ownership of
McCaw Shanghai; (ii) changes in capitalization; (iii) borrowing money; (iv)
paying dividends; (v) approving operating and capital budgets; (vi) changing the
management structure; (vii) entering into transactions with affiliates; (viii)
the purchase and sale of capital equipment; and (ix) any action not in the
ordinary course of business of Shanghai McCaw. Neither party is permitted to
sell its interest in Shanghai McCaw without the consent of the other party.
In addition to its capital contribution, the Company was responsible for
providing a $13.2 million loan facility to Shanghai McCaw to fund the Shanghai
GSM System. At December 31, 1996, the outstanding balance of this loan was $10.5
million. In the event of an overrun in the budget for the Shanghai GSM System,
the Company agreed to lend an additional $2.2 million to Shanghai McCaw.
On March 29, 1997, Unicom and Shanghai McCaw entered into the Phase III
Unicom Agreement, which modifies certain arrangements under the Unicom
Agreement. Pursuant to the Phase III Unicom Agreement (i) Shanghai McCaw has
agreed to provide 60% of the funds required to expand the capacity of the
Shanghai GSM System to provide service for an additional 100,000 subscribers.
Shanghai McCaw's share of the funds is estimated to be equal to approximately
RMB 386.4 million (approximately US$46.4 million). Pursuant to the Phase III
Unicom Agreement (i) the 42% profit sharing arrangements under the Unicom
Agreement were retained for the period up to the date on which the 50,001st
subscriber (currently, there are approximately 30,000 subscribers) of the
Shanghai GSM System is activated (the "Phase III Commencement Date"); (ii)
following the Phase III Commencement Date the allocation of profit sharing
arrangement between the parties is revised to provide Unicom with a greater
percentage resulting in Shanghai McCaw receiving 40.2% of the profits of the
Shanghai GSM System; (iii) the Phase III Unicom Agreement expires 14 1/3 years
after the Phase III Commencement Date.
EMPLOYEES
As of December 31, 1996, the Company, at the corporate level, employed
approximately 25 employees, of which 19 were located at the Company's principal
executive and administrative offices in Seattle, Washington and 6 were located
outside of the U.S. in countries where the Company operates. As of December 31,
1996, the Operating Companies had an aggregate of 1,646 employees. The Company
is not a party to any collective bargaining agreements and the Company believes
its relationship with its employees is good.
PROPERTIES
The Company currently leases 6,559 square feet for its principal executive
and administrative offices in Seattle, Washington, and payments under such lease
equals approximately $110,000 per year. In addition, the Company's subsidiaries
have leases for office space and transmission sites in each of the countries
where the Company operates.
LITIGATION
The Company is not a party to any material litigation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Daniel F. Akerson 48 Chairman of the Board
Keith D. Grinstein 36 President, Chief Executive Officer and Director
Heng-Pin Kiang 48 Senior Vice President and General Counsel
William S. Roberts 42 Senior Vice President and Chief Operating Officer
David E. Rostov 31 Senior Vice President and Chief Financial Officer
Brian A. Vincent 38 Senior Vice President of Business Development
C. James Judson 52 Vice Chairman of the Board
Craig O. McCaw 47 Director
Steven M. Shindler 34 Director
Dennis M. Weibling 46 Director
</TABLE>
Daniel F. Akerson has served as Chairman of the Board of the Company since
March 1996. Mr. Akerson is also Chairman of the Board and Chief Executive
Officer of Nextel, positions he has held since March 1996. From June 1993 to
March 1996, Mr. Akerson served as a general partner of Forstmann Little & Co., a
private investment firm ("Forstmann Little"), and also held the positions of
Chairman of the Board and Chief Executive Officer of General Instrument
Corporation, a technology company acquired by Forstmann Little. From 1983 to
1993, Mr. Akerson held various senior management positions with MCI
Communications Corporation, including President and Chief Operating Officer. Mr.
Akerson currently serves as a director of American Express Company. Mr. Akerson
received a B.S. from the United States Naval Academy and a M.S. from the London
School of Economics.
Keith D. Grinstein has served as President, Chief Executive Officer and as
a director of the Company since January 1996. From January 1991 to December
1995, Mr. Grinstein was President and Chief Executive Officer of the aviation
communications division of AT&T Wireless Services, Inc. (formerly known as McCaw
Cellular Communications, Inc. ("McCaw Cellular")). Mr. Grinstein held a number
of positions at McCaw Cellular and its subsidiaries, including Vice President,
General Counsel and Secretary of LIN Broadcasting Company, a subsidiary of McCaw
Cellular, and Vice President and Assistant General Counsel of McCaw Cellular.
Mr. Grinstein received a B.A. from Yale University and a J.D. from Georgetown
University.
Heng-Pin Kiang has served as Senior Vice President and General Counsel of
the Company since January 1996. From September 1984 to December 1995, Mr. Kiang
was a partner in the Perkins Coie law firm. Mr. Kiang received a B.S.E. in
Chemical Engineering from Princeton University and a J.D. from Columbia
University.
William S. Roberts has served as Senior Vice President and Chief Operating
Officer of the Company since November 1996. From 1983 to November 1996, Mr.
Roberts held various management positions with BellSouth Corporation
("BellSouth"), an international telecommunications services company, most
recently as the Chief Financial Officer and the Chief Operating Officer of
BellSouth Investment S.A. (Chile), a Chilean investment and services company
owned by BellSouth. Prior to joining BellSouth, Mr. Roberts was a senior
internal auditor for a satellite communications company. Mr. Roberts is a
certified public accountant and received a B.A. in accounting from the
University of West Florida.
David E. Rostov has served as Senior Vice President and Chief Financial
Officer since joining the Company in January 1996. From 1992 to 1996, Mr. Rostov
held various positions at McCaw Cellular, most recently as Assistant Vice
President in the Development Group. Mr. Rostov was a financial analyst with
Goldman, Sachs & Co. from 1987 to 1989. Mr. Rostov received a B.A. from Oberlin
College and an M.B.A. and M.A. in Public Policy from The University of Chicago.
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Brian A. Vincent has served as Senior Vice President of Business
Development. Mr. Vincent joined the Company in January 1996. From 1986 to 1995,
Mr. Vincent served as Vice President of Worldwide Marketing Operations at
Intermec Corporation, a leading manufacturer of handheld data collection
computers and on-premise wireless communication networks. Mr. Vincent received a
B.A. from the University of California at Berkeley and an M.B.A from the
University of Washington. Mr. Vincent currently is a director of Clearnet.
C. James Judson has served as a director of the Company since February
1995. Mr. Judson is Vice President, Secretary and General Counsel of Eagle
River, Inc., a company formed to make strategic investments in
telecommunications ventures ("Eagle River"), a position he has held since
January 1995. From 1969 to January 1995, Mr. Judson was a partner in the Davis
Wright Tremaine law firm. Mr. Judson received a B.A. and a L.L.B. from Stanford
University. Mr. Judson is a director of Real Time Data Corporation.
Craig O. McCaw served as a director of the Company from February 1995 until
the acquisition of the Company by Nextel in August 1995. Mr. McCaw was reelected
to the Company's board of directors in February 1997. From February 1995 to
August 1995, Mr. McCaw served as Chairman of the Board and Chief Executive
Officer of Eagle River, the indirect majority owner of Digital Radio, L.L.C., a
company formed for the purpose of making an equity investment in Nextel. From
March 1990 to November 1994, Mr. McCaw served as Chairman of the Board and Chief
Executive Officer of LIN Broadcasting Company. From 1974 to September 1994, Mr.
McCaw served as Chairman of the Board and Chief Executive Officer of McCaw
Cellular, which was sold to AT&T Corporation in September 1994. Mr. McCaw serves
as a director of Nextel and as Chairman of the Operations Committee of the
Nextel Board. Mr. McCaw is an appointee to the President's National Security
Telecommunications Advisory Committee.
Steven M. Shindler has served as a director of the Company since May 1997.
Mr. Shindler is Vice President and Chief Financial Officer of Nextel, a position
he has held since May 1996. Between 1987 and 1996, Mr. Shindler was an officer
with The Toronto Dominion Bank where most recently he was a Managing Director in
its Communications Finance Group.
Dennis M. Weibling has served as a director of the Company since February
1995. From October 1995 to March 1996, Mr. Weibling served as Nextel's acting
Chief Executive Officer. Mr. Weibling is President of Eagle River, a position he
has held since 1993. From 1981 to 1993, Mr. Weibling was a shareholder of Clark,
Nuber and Co., P.S., a public accounting firm in Bellevue, Washington. Mr.
Weibling received a B.A. from Wittenberg University and a J.D. from the
University of Nebraska. Mr. Weibling is a director of Nextel and is a member of
the Operations Committee, Audit Committee and Compensation Committee of the
Nextel Board. He is also a director of NextLink Communications, L.L.C., a
facilities-based local exchange carrier and majority-owned subsidiary of Eagle
River.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors currently has no standing committees.
COMPENSATION OF DIRECTORS
Currently, the Company's directors do not receive any compensation or
reimbursements for out-of-pocket expenses for their service on the Company's
board of directors.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table and discussion summarize the compensation earned by the
Company's President and Chief Executive Officer and the other most highly
compensated executive officers of the Company, who earned more than $100,000 in
salary and bonuses (collectively, the "Named Executive Officers") for services
rendered in all capacities to the Company during the fiscal year ended December
31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM(1)
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER(2)
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ---------------------------- ---- ------- ------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Keith D. Grinstein.......... 1996 150,000 -- -- 50,000/400,000 2,500
President and Chief
Executive Officer
Heng-Pin Kiang.............. 1996 150,000 -- -- 25,000/250,000 3,625
Senior Vice President
and General Counsel
Brian A. Vincent............ 1996 140,000 -- -- 10,000/100,000 2,450
Senior Vice President
of Business Development
</TABLE>
- ---------------
(1) Options were granted pursuant to the Nextel Incentive Equity Plan. Options
vest over a four-year period and become exercisable, subject to the
provisions of the plan, for shares of Nextel Class A Common Stock. SARs were
granted pursuant to the SAR Plan.
(2) Comprised of the Company's contributions to the Nextel Section 401(k) Plan
on behalf of the Named Executive Officers.
OPTION AND SAR GRANTS IN FISCAL YEAR 1996
The following table sets forth certain information with respect to options
exercisable for shares of Nextel Class A Common Stock and SARs granted to the
Named Executive Officers during fiscal year 1996.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/ POTENTIAL REALIZABLE
UNDERLYING SARS GRANT VALUE OF SARS AT
OPTIONS/ GRANTED TO EXERCISE DATE ASSUMED ANNUAL
SARS EMPLOYEES OR BASE PRESENT RATES ($)(3)
GRANTED IN FISCAL PRICE EXPIRATION VALUE ----------------------
NAME (#)(1) YEAR(%) ($/SHARE) DATE ($)(2) 5% 10%
- ---------------------------------- ---------- ---------- --------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Keith D. Grinstein
Options......................... 50,000 .95 15.63 11/07/05 519,000
SARs............................ 400,000 32.92 10.00 11/01/10 2,516,000 6,376,000
Heng-Pin Kiang
Options......................... 25,000 .47 15.63 11/07/05 259,500
SARs............................ 250,000 20.58 10.00 11/25/10 1,572,500 3,985,000
Brian A. Vincent
Options......................... 10,000 .19 15.13 03/04/06 102,300
SARs............................ 100,000 8.23 10.00 11/01/11 629,000 1,594,000
</TABLE>
- ---------------
(1) Options were granted pursuant to the Nextel Incentive Equity Plan. Options
granted vest over a four-year period, becoming exercisable with respect to
25% of the shares at the beginning of each year following the date of grant.
(2) Black-Scholes pricing model used to estimate the present value of the
options at date of grant.
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(3) The Company's common stock is not registered or publicly traded and
therefore a public market price for the common stock is not available. Net
realizable value of the SARs is based on a fair market value of $10 per
share as of the date of grant. The base price per share is based on the
Board of Directors' estimate of fair market value at the time of grant. The
actual value, if any, an employee may realize will depend on the excess of
fair market value of McCaw International common stock over the base price on
the date the SAR is exercised. The dollar amounts under these columns are
the result of calculations at the 5% and 10% rates set by the Commission
and, therefore, are not intended to forecast future appreciation, if any, of
the SARs.
OPTION AND SAR EXERCISES IN FISCAL 1996 AND YEAR-END OPTION AND SAR VALUES
The following table sets forth information concerning the exercise of
options and SARs during the year ended December 31, 1996 and year-end
unexercised options and SAR values as of the end of the fiscal year ended
December 31, 1996 with respect to each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996 AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED ON VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Keith D. Grinstein
Options................... -- -- 12,500 37,500 -- --
SARs...................... -- -- -- 400,000 -- --
Heng-Pin Kiang
Options................... -- -- 6,250 18,750 -- --
SARs...................... -- -- -- 250,000 -- --
Brian A. Vincent
Options................... -- -- -- 10,000 -- --
SARs...................... -- -- -- 100,000 -- --
</TABLE>
EMPLOYMENT AGREEMENTS
In November 1995, the Company entered into an employment agreement with Mr.
Grinstein providing for his employment as President and Chief Executive Officer.
The agreement with Mr. Grinstein terminates on June 30, 1997 and is
automatically renewable for a subsequent one-year term. The agreement provides
for a base salary of $150,000 per year, subject to an annual performance
evaluation (plus performance bonuses based on the achievement of mutually
determined objectives).
The Company also entered into an employment agreement with Mr. Kiang in
November 1995 providing for his employment as Senior Vice President and General
Counsel. The agreement with Mr. Kiang terminates on June 30, 1997 and is
automatically renewable for a subsequent one-year term. The agreement provides
for a base salary of $150,000 per year, subject to an annual performance review
(plus performance bonuses based on the achievement of mutually determined
objectives).
In January 1996, the Company entered into an employment agreement with Mr.
Vincent providing for his employment as Senior Vice President of Business
Development. The agreement is renewable for subsequent one-year terms, provided
that either party may terminate the agreement upon 60 days' written notice. The
agreement provides for a base salary of $140,000 per year, subject to an annual
performance evaluation (plus performance bonuses based on the achievement of
certain objectives).
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors does not currently have a compensation
committee. The Company's Board of Directors is responsible for executive
compensation matters. During 1996, Mr. Grinstein served on the Company's Board
of Directors and as Chief Executive Officer and President of the Company.
BENEFIT PLANS
Nextel Incentive Equity Plan. All officers, key employees of and
consultants to Nextel and its subsidiaries, including McCaw International, are
eligible to participate in the Nextel Incentive Equity Plan (the "Incentive
Equity Plan"). The Compensation Committee of the Nextel Board (the "Nextel
Compensation Committee") may grant each eligible participant options entitling
the optionee to purchase shares of Nextel Class A Common Stock at a price equal
to or greater than market value on the date of grant, except that the option
price of an option that is granted in exchange for the surrender and
cancellation of an option to purchase shares of another corporation that has
been acquired by the Nextel or one of its subsidiaries ("Replacement Options")
or options granted to a consultant may be less than the market value on the date
of grant. Replacement Options and options granted to consultants are otherwise
subject to the same terms, conditions and discretion as other options granted
under the Incentive Equity Plan.
The option price is payable at the time of exercise (i) in cash, (ii) by
the transfer to Nextel of nonforfeitable, nonrestricted shares of Nextel Class A
Common Stock that are already owned by the optionee and have a value at the time
of exercise equal to the option price, (iii) with any other legal consideration
the Nextel Compensation Committee may deem appropriate or (iv) by any
combination of the foregoing methods of payment. Any grant of options may
provide for deferred payment of the option price from the proceeds of sale
through a bank or broker on the date of exercise of some or all of the shares of
Nextel Class A Common Stock to which the exercise relates.
No option may be exercised more than 10 years from the date of grant. Each
option must specify the vesting period and other terms for the exercise of such
option and may provide for the earlier exercise of the options in the event of a
change in control of Nextel or other similar transaction or event. Options
granted under the Incentive Equity Plan may be designated as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or may be designated as options that are not intended
to so qualify.
The Nextel Compensation Committee may also grant eligible participants in
the Incentive Equity Plan Appreciation Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units (each as defined in the
Incentive Equity Plan). The Nextel Compensation Committee must specify at the
time of grant the vesting period and other terms of any such award.
No option, appreciation right or other "derivative security" within the
meaning of Rule 16b-3 under the Exchange Act is transferable by a recipient
except by will or the laws of descent and distribution. Options and Appreciation
Rights may not be exercised during a recipient's lifetime except by the
recipient or, in the event of his or her incapacity, by his or her guardian or
legal representative acting in a fiduciary capacity on behalf of the recipient
under state law and court supervision. The Nextel Compensation Committee may
specify at the date of grant that all or any part of the shares of Nextel Class
A Common Stock that are to be issued or transferred by Nextel pursuant to the
Incentive Equity Plan shall be subject to further restrictions on transfer.
The Incentive Equity Plan is administered by the Nextel Compensation
Committee, which consists of not less than three nonemployee directors who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act.
The Nextel Compensation Committee may make grants to participants under any or a
combination of all of the various categories of awards that are authorized under
the Incentive Equity Plan and may provide for special terms for awards to
participants who either are foreign nationals or are employed by or provide
consulting services to Nextel or any of its subsidiaries outside of the United
States, as the Nextel Compensation Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.
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The Incentive Equity Plan may be amended from time to time by the Nextel
Compensation Committee, but without further approval by the stockholders of
Nextel no such amendment may (i) increase the aggregate number of shares of
Nextel Class A Common Stock that may be issued or transferred and covered by
outstanding awards, or increase the aggregate number of Performance Units that
may be granted, thereunder or (ii) otherwise cause Rule 16b-3 under the Exchange
Act to cease to be applicable to the Incentive Equity Plan.
Nextel Stock Purchase Plan. All employees of Nextel and its subsidiaries,
including McCaw International, who are customarily employed for more than 20
hours per week are eligible to elect to be granted options under the Nextel
Stock Purchase Plan (the "Stock Purchase Plan"). Section 423 of the Code,
however, prohibits the granting of an option to any employee who would own stock
possessing five percent or more of the total combined voting power or value of
all classes of stock of Nextel or any of its subsidiaries following the granting
of the option. For purposes of the foregoing, shares of stock that are subject
to outstanding options or other vested or contingent rights to acquire the same
are deemed to be owned by the optionee.
The option price per share upon exercise of an option granted under the
Stock Purchase Plan is an amount equal to 85 percent of the lesser of (i) the
fair market value of a share of Nextel Class A Common Stock on the date of grant
or (ii) the fair market value of a share of Nextel Class A Common Stock on the
date of exercise. For purposes of the Stock Purchase Plan, "fair market value"
means the closing price of the Nextel Class A Common Stock on the Nasdaq
National Market on the last trading date preceding the date of the grant or the
date of exercise, as the case may be.
The option price is payable by the optionee on the date of exercise with
funds accumulated through payroll withholding over the term of the option or, at
the discretion of the Nextel Compensation Committee, with funds paid to Nextel
by the optionee in a lump sum on or before the date of exercise. An optionee may
elect to have not less than one percent and not more than ten percent of his or
her "basic compensation," which includes base salary and any commissions paid
pursuant to an ongoing sales incentive compensation program but does not include
cash bonuses or any form of noncash compensation, withheld from payroll and
applied to the purchase of Nextel Class A Common Stock upon the exercise of
options granted under the Stock Purchase Plan.
The maximum number of shares of Nextel Common Stock that an optionee may
purchase upon exercise of an option granted under the Stock Purchase Plan is
equal to ten percent of his or her basic compensation divided by an amount equal
to 85 percent of the lesser of (i) the fair market value of a share of Nextel
Class A Common Stock on the date of grant or (ii) the fair market value of a
share of Nextel Class A Common Stock on the date of exercise, subject to further
limitations imposed by Section 423 of the Code. Section 423 of the Code provides
that, among other things, the right of an optionee to purchase stock under all
"employee stock purchase plans" (as defined in Section 423 of the Code) of a
corporation and its subsidiaries may not accrue at a rate that exceeds $25,000
of fair market value (determined at the time of grant) for each calendar year in
which the option is outstanding at any time.
Options granted under the Stock Purchase Plan may have terms of not less
than three months and not more than one year, as determined by the Nextel
Compensation Committee in its sole discretion, provided that all options granted
pursuant to any particular offering under the Stock Purchase Plan must have the
same term for all optionees. The first day of the relevant term of an option
granted under the Stock Purchase Plan is the grant date with respect to such
option, and the date of exercise of an option granted under the Stock Purchase
Plan is the last day of its term. No option granted under the Stock Purchase
Plan may be transferred by the optionee.
The Stock Purchase Plan is administered by the Nextel Compensation
Committee, which may establish such policies or procedures and adopt such rules
for the operation and administration of the Stock Purchase Plan as it deems
appropriate. Nextel may engage the services of a professional plan administrator
on such terms and conditions as the Nextel Compensation Committee deems
appropriate for the purposes of establishing and maintaining custodial accounts
and holding shares of Nextel Common Stock acquired by employees upon the
exercise of options granted under the Stock Purchase Plan and otherwise
operating the
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Stock Purchase Plan. The Nextel Compensation Committee also has the authority to
promulgate terms and conditions (to the extent not inconsistent with the terms
and conditions prescribed in the Stock Purchase Plan) applicable to grants made
under the Stock Purchase Plan, including, without limitation, holding periods
for shares of Nextel Class A Common Stock purchased upon the exercise of an
option granted under the Stock Purchase Plan beyond those required to obtain
favorable tax treatment under Section 423 of the Code and sanctions for failing
to comply with the terms and conditions applicable to particular grants (in
addition to those otherwise imposed by law or the terms of the Stock Purchase
Plan).
The Stock Purchase Plan will terminate the tenth anniversary of its
adoption by the Nextel Board, unless sooner terminated by the Nextel Board, and
no options will thereafter be granted thereunder. The Stock Purchase Plan may be
amended from time to time by the Board of Directors, but without further
approval by the stockholders of Nextel, no such amendment may (i) increase the
aggregate number of shares of Nextel Class A Common Stock covered by the Stock
Purchase Plan, except for adjustments to reflect the effects of stock dividends,
stock splits, combinations of shares or other changes in the capital structure
of Nextel, (ii) permit the granting of options under the Stock Purchase Plan to
persons other than employees of Nextel and its subsidiaries who are customarily
employed for more than 20 hours per week, (iii) cause options granted under the
Stock Purchase Plan to fail to satisfy any of the conditions of Section 423 of
the Code or (iv) cause Rule 16b-3 under Section 16(b) of the Exchange Act (or
any successor rule to the same effect) to cease to be applicable to the Stock
Purchase Plan.
McCaw International Stock Appreciation Rights Plan. The Company has
granted to selected employees and agents SARs in accordance with the Company's
SAR Plan. The surrender of a SAR, in accordance with the terms of the SAR Plan,
entitles the holder thereof to receive the increase in fair market value of one
share of the Company's Common Stock between the date of its grant and the date
of surrender. The SAR Plan contains provisions establishing how the fair market
value of the Company's Common Stock will be determined. As of December 31, 1996,
1,235,000 SARs had been granted pursuant to the SAR Plan. SARs vest on a monthly
basis over a four-year period and once vested may be surrendered by a holder in
installments of 20% per year; provided, however, that no more than a maximum of
$5 million in the aggregate will be paid out in any one year to all SAR holders.
Certain of the senior officers of the Company have been granted rights whereby
their SARs will automatically vest upon a change of control of the Company (as
defined in the SAR Plan).
On June 23, 1997, the board of the directors of the Company adopted,
subject to the approval of Nextel, the Company's sole shareholder, the Company's
1997 Stock Option Plan and approved a plan to terminate the SAR Plan. Each
holder of SARs granted previously under the SAR Plan has been given the right to
exchange his or her SARs for options to be granted under the 1997 Stock Option
Plan. The Company has agreed to grant additional stock options to SAR holders
who exchange their SARs for stock options as an inducement to such SAR holders.
The Company expects holders representing a substantial majority of the
outstanding SARs, including all of the members of the Company's senior
management team, to exchange their SARs for options granted under the 1997 Stock
Option Plan.
McCaw International Stock Option Plan. All employees, officers, directors,
agents, independent contractors of and advisors and consultants to McCaw
International, its subsidiaries and affiliates are eligible to participate in
the 1997 Stock Option Plan. The McCaw International Board of Directors or a
committee designated thereby (the "Plan Administrator") may grant each eligible
participant options entitling the optionee to purchase shares of McCaw
International common stock at a price equal to at least 100% of the market value
on the date of grant.
The option price is payable at the time of exercise (i) in cash, (ii) by
the transfer to the Company of shares of McCaw International common stock
already owned by the optionee for at least six months and having a value at the
time of exercise equal to the aggregate option exercise price, (iii) with any
other legal consideration the Plan Administrator may deem appropriate or (iv) at
the discretion of the Plan Administrator, by any combination of the foregoing
methods of payment.
No option may be exercised more than 10 years from the date of grant. Each
option must specify the vesting period and other terms for the exercise of such
option. Options granted under the 1997 Stock Option
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Plan vest over four years but may not be exercised prior to two years following
the date of grant. Options granted under the 1997 Stock Option Plan may be
designated as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or may be designated as
options that are not intended to so qualify.
Each optionee has the right to sell any shares acquired pursuant to the
exercise of an option to the Company or an affiliate of the Company after such
shares have been held for at least six months. The sale price for such shares is
the fair market value as of the date of sale. Additionally, the Company has a
right of first refusal on any proposed sale of shares acquired pursuant to the
exercise of an option. Options are not transferable by a recipient except by
will or the laws of descent and distribution. Options may not be exercised
during a recipient's lifetime except by the recipient or, in the event of his or
her incapacity, by his or her guardian or legal representative acting in a
fiduciary capacity on behalf of the recipient under state law and court
supervision. The Plan Administrator may specify at the date of grant that all or
any part of the shares of the McCaw International common stock are to be issued
pursuant to the 1997 Stock Option Plan shall be subject to further restrictions
on transfer.
The Plan Administrator may provide for special terms for awards to
participants who either are foreign nationals or are employed by or provide
consulting services to the Company or any of its subsidiaries outside of the
United States, as the Plan Administrator may consider necessary or appropriate
to accommodate differences in local law, tax policy or custom.
The 1997 Stock Option Plan may be amended from time to time by the Board of
Directors of McCaw International; provided, however, to the extent required for
compliance with any applicable law or regulation, shareholder approval will be
required for any amendment that will (i) increase the aggregate number of shares
of McCaw International common stock as to which options may be granted under the
plan; (ii) modify the class of persons eligible to receive options; or (iii)
otherwise require shareholder approval under any applicable law or regulations.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TAX SHARING AGREEMENT
The Tax Sharing Agreement effective as of January 1, 1997, between Nextel
and the Company (the "Tax Sharing Agreement") provides that the Company must pay
Nextel its federal income tax liability computed as if the Company had filed a
separate federal income tax return. Such computation would take into account any
carryovers and carrybacks of losses and credits that would be allowed if the
Company had filed a separate federal income tax return except that, in making
such computation for any taxable year, such liability will be determined at the
highest corporate tax rate, and without an exemption for purposes of calculating
the alternative minimum tax and the environmental tax. The Tax Sharing Agreement
further provides that the Company may be included in any consolidated, combined,
or unitary state or local income or franchise tax return or report, and the
Company's liability with respect to such taxes will be computed in a manner
similar to and consistent with the calculation of the Company's federal income
tax liability.
Furthermore, the Tax Sharing Agreement provides that Nextel is entitled to
utilize on behalf of the consolidated group all of the tax attributes and other
items of income, gain, loss, deduction, expense, credit and similar treatments
of the Company arising in the current taxable year or another taxable year or
years and which properly may be carried back or carried forward to such taxable
year. The Company is not entitled to receive any compensation by reason of
Nextel's utilization of such attributes or items on behalf of the group in
determining for any taxable year or years the consolidated taxable income and
consolidated tax liability for such taxable year or years.
Nextel will not be required to compensate the Company for the benefit of
loss or credit carryback from the Company's separate filing to the consolidated
group should the Company leave the Nextel consolidated group.
Under the U.S. consolidated income tax rules, the Company and each other
member of the U.S. consolidated tax group of which it is a member will be
jointly and severally liable for the U.S. tax liabilities of each other member
of such group.
OVERHEAD SERVICES AGREEMENT
Pursuant to an Overhead Services Agreement effective as of the Closing Date
between the Company and Nextel (the "Services Agreement"), Nextel has agreed to
provide to the Company certain services, including those relating to accounts
payable, cash management, payroll, human resources, finance reporting and audit
and legal, engineering and technical and marketing and sales assistance. The fee
for services provided pursuant to the Services Agreement is the actual cost
incurred by Nextel, which is billed monthly and payable in 45 days. Pursuant to
the Services Agreement, Nextel has agreed to apportion the aggregate cost
incurred by it to provide such services to the Company and Nextel's other
subsidiaries on the basis that Nextel determines in good faith, from time to
time, represents the relative portion of such services provided by Nextel and
used by each such subsidiary, including the Company, for the relevant period.
The Company has the right to review Nextel's determination and to discuss with
Nextel adjustments that the Company considers appropriate in light of the
services provided to the Company. Nextel's good faith determination after such
consultation is final and binding. The Services Agreement has a ten-year term
and, with the consent of Nextel, the Company may elect to discontinue a
particular service or services provided by Nextel and/or obtain any service from
an independent third party.
Pursuant to the Services Agreement the Company has agreed that the legal
counsel employed by Nextel as parttime or full-time employees will provide legal
services to Nextel as well as to other subsidiaries of Nextel and potentially to
other entities in which Nextel holds an ownership interest. The Company has
agreed that such legal counsel may represent the Company as well as Nextel or
any such other subsidiary or any other entity.
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NONCOMPETE AGREEMENT
The Company and Nextel entered into the Non-Compete Agreement effective as
of the Closing Date pursuant to which Nextel has agreed that neither Nextel nor
any Affiliate (as defined in the agreement) controlled by Nextel will in the
future participate in the ownership or operation of two-way terrestrial-based
mobile wireless communications systems anywhere other than in the United States
and Canada (for so long as Nextel owns an equity interest in Clearnet) unless
such opportunities have first been presented to the Company. Such restriction
does not apply to, among other things, any commercial relationship with any
Wireless Entity (including channel or frequency sharing, roaming, purchase or
sale of goods or services, licensing of intellectual property or other
intangible rights or similar business related arrangement) that does not involve
the directing or participating in the management of such Wireless Entity. The
Company has agreed that, without the consent of Nextel, neither it, its
Restricted Affiliates nor any of its Unrestricted Affiliates (each as defined in
the "Description of the Notes") will participate in the ownership or management
of any wireless communications service business in the United States or Canada
other than with respect to its interest in Clearnet. Such restrictions terminate
upon the earliest to occur of (i) April 15, 2007 and (ii) the date on which a
Change of Control (as defined in the "Description of the Notes") occurs.
If Nextel gives the Company an Initial Notice of a Future Wireless
Opportunity, the Company will have 60 days to notify Nextel that it intends to
pursue such opportunity, and how it intends to finance its participation. The
Company must have secured a financing commitment within 90 days of the date of
the Initial Notice and the Future Wireless Opportunity must be consummated
within nine months of the date of the Initial Notice. In the event the Company
fails to respond to Nextel within the 60 and 90 day time frames or fails to
consummate the transaction within the nine-month period, Nextel will be free to
pursue the Future Wireless Opportunity.
Nextel and the Company have agreed not to amend the Non-Compete Agreement
if such amendment is material and adverse to the holders of the Notes or the
Warrants and to provide such holders with written notice 30 days prior to any
amendment.
MOTOROLA RELATIONSHIPS
Motorola, a significant shareholder of Nextel, provides equipment and
vendor financing to the Operating Companies. For a description of the Motorola
Financing, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Nextel and the Company have entered into an agreement relating to the
Motorola Financing pursuant to which Nextel has agreed to make at least $95
million of the $400 million of vendor financing available to the Company. Nextel
is not obligated to make any additional amounts available to the Company under
the Motorola Financing. However, based on discussions with Nextel the Company
believes that it will be able to obtain sufficient funding under the Motorola
Financing to meet its business plan.
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DESCRIPTION OF THE EXCHANGE NOTES
The Private Notes were, and the Exchange Notes will be, issued under the
Indenture, dated as of March 6, 1997, between the Company, as issuer, and The
Bank of New York, as Trustee. A copy of the Indenture has been filed as an
Exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by reference to the Trust Indenture
Act of 1939, as amended. Whenever particular defined terms of the Indenture not
otherwise defined herein are referred to, such defined terms are incorporated
herein by reference. For definitions of certain capitalized terms used in the
following summary, see "-- Certain Definitions."
GENERAL
The Exchange Notes will be unsecured unsubordinated obligations of the
Company and will mature on April 15, 2007. Although for federal income tax
purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a Holder as such discount accrues from the issue
date of the Exchange Notes, no interest will be payable on the Exchange Notes
prior to October 15, 2002. From and after April 15, 2002, interest on the
Exchange Notes will accrue at the rate shown on the front cover of this
Prospectus from April 15, 2002 or from the most recent interest payment date to
which interest has been paid or provided for, payable semiannually (to Holders
of record at the close of business on the April 1 or October 1 immediately
preceding the interest payment date) on April 15 and October 15 of each year,
commencing October 15, 2002. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes may be exchanged or transferred, at the office
or agency of the Company in the Borough of Manhattan, the City of New York
(which initially will be the corporate trust office of the Trustee at 101
Barclay Street, 21 West, New York, New York 10286); provided, that, at the
option of the Company, payment of interest may be made by check mailed to the
address of the Holders as such address appears in the Security Register.
The Company may, subject to the covenants described below under "Covenants"
and applicable law, issue additional Notes under the Indenture. The Exchange
Notes offered hereby and any additional Notes subsequently issued would be
treated as a single class for purposes of the Indenture.
BOOK-ENTRY; DELIVERY AND FORM
Exchange Notes issued in exchange for the Private Notes currently
represented by one or more fully registered global notes will be represented by
one or more fully registered global notes (collectively, the "Global Note"), and
will be deposited upon issuance with The Depository Trust Company (the
"Depository") or an agent of the Depository and registered in the name of the
Depository or a nominee of the Depository (the "Global Note Registered Owner").
Except as set forth below, the Global Note may be transferred, in whole and not
in part, only to another nominee of the Depository or to a successor of the
Depository or its nominee.
Exchange Notes issued in exchange for other Private Notes will be issued in
registered, certificated form without interest coupons.
The Depository has advised the Company that the Depository is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in the accounts of its Participants. The
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants or Indirect
Participants may beneficially own securities held by or
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on behalf of the Depository only through the Participants or the Indirect
Participants. The ownership interests and transfer of ownership interests of
such persons held by or on behalf of the Depository are recorded on the records
of the Participants and Indirect Participants.
The Depositary has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Note, the Depository will
credit the accounts of its Participants with portions of the principal amount of
the Global Note representing the Exchange Notes issued in exchange for the
Private Notes that each such Participant has instructed the Depository to
surrender for exchange and (ii) ownership of such interests in the Global Note
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depository (with respect to the Participants)
or by the Participants and the Indirect Participants (with respect to other
owners of beneficial interests in the Global Note).
Under the terms of the Indenture, the Company and the Trustee will treat
the persons in whose names the Exchange Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving payments in
respect of the principal of and premium, if any, and interest on any Exchange
Notes and for any and all other purposes whatsoever. Payments on any Exchange
Notes registered in the name of the Global Note Registered Owner will be payable
by the Trustee to the Global Note Registered Owner in its capacity as the
registered holder under the Indenture. Consequently, neither the Company, the
Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect of the Depository's records or
the records of any Participant or Indirect Participant relating to or payments
made on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of the Depository's records or records
of any Participant or Indirect Participant relating to the beneficial ownership
interests in the Global Note or (ii) any other matter relating to the actions
and practices of the Depository or any of its Participants or Indirect
Participants. The Depository has advised the Company that its current practice,
upon receipt of any payment in respect of securities such as the Exchange Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
relevant security as shown on the records of the Depository unless the
Depository has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Exchange Notes will be governed by standing instructions
and customary practices and will be the responsibility of the Participants or
the Indirect Participants and will not be the responsibility of the Depository,
the Trustee or the Company. Neither the Company nor the Trustee will be liable
for any delay by the Depository or any of its Participants or Indirect
Participants in identifying the beneficial owners of the Exchange Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from the Global Note Registered Owner for all purposes.
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable, at the Company's option, in whole or
in part, at any time or from time to time, on or after April 15, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount at maturity), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date), if redeemed during the 12-month
period commencing April 15, of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
------------------------------------- ----------------
<S> <C>
2002 106.50%
2003 103.25
2004 and thereafter 100.00
</TABLE>
In addition, at any time prior to April 15, 2000, the Company may redeem up
to 35% of the principal amount at maturity of the Exchange Notes with the Net
Cash Proceeds of one or more sales by the Company of its Capital Stock (other
than Redeemable Stock), at any time as a whole or from time to time in part, at
a
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Redemption Price (expressed as a percentage of Accreted Value on the Redemption
Date) of 113%, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date); provided that at least $618.5 million aggregate
principal amount at maturity of Exchange Notes remains outstanding after each
such redemption.
In the case of any partial redemption, selection of the Exchange Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Exchange Notes
are listed or, if the Exchange Notes are not listed on a national securities
exchange by lot or by such other method as the Trustee in its sole discretion
shall deem to be fair and appropriate; provided that no Note of $1,000 in
principal amount at maturity or less shall be redeemed in part. If any Note is
to be redeemed in part only, the notice of redemption relating to such Note
shall state the portion of the principal amount at maturity thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Note.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company agreed, for the
benefit of the Holders, that it would use its best efforts, at its cost, to
consummate this Exchange Offer. In satisfaction of this obligation, the Company
is hereby offering the Exchange Notes in return for surrender of the Private
Notes. It is intended by the Company that the Exchange Offer will satisfy these
registration rights, which will terminate upon the consummation of the Exchange
Offer. For each Private Note surrendered to the Company pursuant to the Exchange
Offer, the Holder will receive an Exchange Note of equal principal amount at
maturity. The Accreted Value of each Exchange Note shall be identical to, and
shall be determined in the same manner as, the Accreted Value of the Private
Notes so surrendered and exchanged therefor. Interest on each Exchange Note
shall be calculated and paid in the same manner as interest on the Private Notes
so surrendered and exchanged therefor.
RANKING
The indebtedness evidenced by the Exchange Notes will rank pari passu in
right of payment with all existing and future unsubordinated unsecured
indebtedness of the Company and senior in right of payment to all existing and
future indebtedness of the Company that by its terms is subordinated to the
Exchange Notes. After giving pro forma effect to the Transactions and the
Initial Offering, as of December 31, 1996, the Company would have had no
indebtedness outstanding other than the Exchange Notes. All existing and future
liabilities (including trade payables) of the Company's Restricted Group Members
will be effectively senior to the Exchange Notes. As of December 31, 1996, after
giving effect to the Transactions, the Company's Restricted Group Members would
have had approximately $79.7 million of liabilities, including $25 million of
indebtedness.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Accreted Value" is defined to mean, for any "Specified Date", the amount
calculated pursuant to (i), (ii), (iii) or (iv) for each $1,000 principal amount
at maturity of Exchange Notes:
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(i) if the Specified Date occurs on one or more of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal the
amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
----------------------------------------------------------------- ---------
<S> <C>
October 15, 1997................................................. $ 567.35
April 15, 1998................................................... $ 604.23
October 15, 1998................................................. $ 643.51
April 15, 1999................................................... $ 685.33
October 15, 1999................................................. $ 729.88
April 15, 2000................................................... $ 777.32
October 15, 2000................................................. $ 827.85
April 15, 2001................................................... $ 881.66
October 15, 2001................................................. $ 938.97
April 15, 2002................................................... $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) $525.51 and (b) an
amount equal to the product of (1) the Accreted Value for the first
Semi-Annual Accrual Date less $525.51 multiplied by (2) a fraction, the
numerator of which is the number of days from the issue date of the
Exchange Notes to the Specified Date, using a 360-day year of twelve 30-day
months, and the denominator of which is the number of days elapsed from the
issue date of the Exchange Notes to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-Annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for
the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Group Member or assumed in connection with an
Asset Acquisition by a Restricted Group Member and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Group Member or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Group Member or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Group Members for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income (or loss) of any Unrestricted Subsidiary or Unrestricted
Affiliate, except (x) with respect to net income, to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Group Member by such Unrestricted Subsidiary or Unrestricted Affiliate during
such period, and (y) with respect to net losses, to the extent of the amount of
cash contributed by the Company or any Restricted Group Member to such
Unrestricted Subsidiary or Unrestricted Affiliate during such Period; (ii)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of the "Limitation on
Restricted Payments" covenant described below (and in such case, except to the
extent includable pursuant to clause (i) above), the net income (or
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<PAGE> 108
loss) of any Person accrued prior to the date it becomes a Restricted Group
Member or is merged into or consolidated with the Company or any Restricted
Group Member or all or substantially all of the property and assets of such
Person are acquired by the Company or any Restricted Group Member; (iii) the net
income of any Restricted Group Member to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Group Member of
such net income is not at the time permitted by the operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Restricted Group Member; provided,
in the case of restrictions imposed in connection with outstanding Indebtedness,
that the amount of net income excluded during any period shall not exceed the
aggregate amount of such Indebtedness that would need to be repaid to enable
such Restricted Group Member to declare and pay dividends or similar
distributions of such net income; (iv) any gains or losses (on an after-tax
basis) attributable to Asset Sales; (v) except for purposes of calculating the
amount of Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of the "Limitation on Restricted Payments" covenant described
below, any amount paid or accrued as dividends on Preferred Stock of the Company
or any Restricted Group Member owned by Persons other than the Company and any
Restricted Group Member; (vi) all extraordinary gains and extraordinary losses;
and (vii) to the extent not otherwise excluded in accordance with GAAP, the net
income (or loss) of any Restricted Group Member in an amount that corresponds to
the percentage ownership interest in the income of such Restricted Group Member
not owned on the last day of such period, directly or indirectly, by the
Company.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Group Members (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted Group
Members (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles other than radio frequency licenses, all as set forth on the most
recent quarterly or annual consolidated balance sheet of the Company and its
Restricted Group Members, prepared in conformity with GAAP and filed with the
Commission pursuant to the "Commission Reports and Reports to Holders" covenant;
provided that Adjusted Consolidated Net Tangible Assets shall be reduced (to the
extent not otherwise reduced in accordance with GAAP) by an amount that
corresponds to the percentage ownership interest in the assets of each
Restricted Group Member not owned on the date of determination, directly or
indirectly, by the Company.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any
Restricted Group Member in any other Person pursuant to which such Person shall
become a Restricted Group Member or shall be merged into or consolidated with
the Company or any Restricted Group Member; provided that such Person's primary
business is related, ancillary or complementary to the businesses of the Company
and its Restricted Group Members on the date of such investment or (ii) an
acquisition by the Company or any Restricted Group Member of the property and
assets of any Person other than the Company or any Restricted Group Member that
constitute substantially all of a division or line of business of such Person;
provided that the property and assets acquired are related, ancillary or
complementary to the businesses of the Company and its Restricted Group Members
on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any Restricted Group Member (other than to the Company or another Restricted
Group Member) of (i) all or substantially all of the Capital Stock of any
Restricted Group Member or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any Restricted Group
Member.
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<PAGE> 109
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any Restricted Group
Member to any Person other than the Company or any Restricted Group Member of
(i) all or any of the Capital Stock of any Restricted Group Member, (ii) all or
substantially all of the property and assets of an operating unit or business of
the Company or any Restricted Group Member or (iii) any other property and
assets of the Company or any Restricted Group Member outside the ordinary course
of business of the Company or such Restricted Group Member and, in the case of
any of the foregoing clauses (i) through (iii), that is not governed by the
provisions of the Indenture applicable to mergers, consolidations and sales of
assets of the Company; provided that "Asset Sale" shall not include (a) sales or
other dispositions of inventory, receivables and other current assets, (b) sales
or other dispositions of assets for consideration at least equal to the fair
market value of the assets sold or disposed of, provided that the consideration
received would satisfy clause (B) of the "Limitation on Asset Sales" covenant,
(c) sales or other dispositions of obsolete equipment, (d) sales or other
dispositions of the Capital Stock of an Unrestricted Subsidiary or an
Unrestricted Affiliate or (e) sales or other distributions of assets with a fair
market value (as certified in an officers' certificate) not in excess of $1
million.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the rental obligations
under such lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Section 13(d) or
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (b) after the occurrence of a Public Market, a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 35% of the total voting power of the Voting
Stock of the Company on a fully diluted basis and such ownership is greater than
the amount of voting power of the Voting Stock, on a fully diluted basis, held
by the Existing Stockholders and their Affiliates on such date; or (ii)
individuals who on the Closing Date constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the members of the Board of Directors then in office who
either were members of the Board of Directors on the Closing Date or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of Directors then in
office.
"Closing Date" means March 6, 1997, the date on which the Notes were
originally issued under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts for
such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest
Expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (iv) depreciation expense as
determined in conformity with GAAP, to the extent such amount was deducted in
calculating Adjusted
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<PAGE> 110
Consolidated Net Income, (v) amortization expense as determined in conformity
with GAAP, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, and (vi) all other non-cash items to the extent
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all non-cash items to the extent increasing Adjusted
Consolidated Net Income, as determined in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
in respect of any Indebtedness that is Guaranteed or secured by the Company or
any Restricted Group Member) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Group Members during such
period; excluding, however, (i) any amount of such interest of any Restricted
Group Member if the net income of such Restricted Group Member is excluded in
the calculation of Adjusted Consolidated Net Income pursuant to clause (iii) or
(vii) of the definition thereof (but only in the same proportion as the net
income of such Restricted Group Member is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) or (vii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Exchange
Notes, all as determined (without taking into account Unrestricted Subsidiaries
or Unrestricted Affiliates) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount (determined as set forth in the definition of
"Indebtedness") of Indebtedness of the Company and its Restricted Group Members
as at such Transaction Date to (ii) the aggregate amount of Consolidated EBITDA
for the latest fiscal quarter for which financial statements of the Company have
been filed with the Commission pursuant to the "Commission Reports and Reports
to Holders" covenant described below (such fiscal quarter being the "One Quarter
Period"), multiplied by four; provided that (A) pro forma effect shall be given
to (x) any Indebtedness Incurred from the beginning of the One Quarter Period
through the Transaction Date (the "Reference Period"), to the extent such
Indebtedness is outstanding on the Transaction Date and (y) any Indebtedness
that was outstanding during such Reference Period but that is not outstanding or
is to be repaid on the Transaction Date; (B) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any Asset Disposition) that occur during such
Reference Period, as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (C) pro forma effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Group Member or has been merged with or
into the Company or any Restricted Group Member during such Reference Period and
that would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Group Member as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the full fiscal quarter immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed of for which financial information is
available, multiplied by four.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Group Members
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries or
Unrestricted Affiliates), less any amounts attributable to Redeemable Stock or
any equity security convertible into or exchangeable for Indebtedness, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of the
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Capital Stock of the Company or any Restricted Group Member, each item to be
determined in conformity with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Existing Stockholders" means Craig O. McCaw and Nextel Communications,
Inc.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; provided that for purposes of clause (viii) of
the second paragraph of the "Limitation on Indebtedness" covenant (x) the fair
market value of any security registered under the Exchange Act shall be the
average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the capital contribution or sale
of Capital Stock and (y) in the event the aggregate fair market value of any
other property received by the Company exceeds $10 million, the fair market
value of such property shall be determined by a nationally recognized investment
banking firm and set forth in their written opinion which shall be delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. Except as specifically provided, all ratios and
computations contained or referred to in the Indenture shall be computed in
conformity with GAAP applied on a consistent basis, except that calculations
made for purposes of determining compliance with the terms of the covenants and
with other provisions of the Indenture shall be made without giving effect to
the amortization of any expenses incurred in connection with the offering of the
Exchange Notes.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of such Person's business), to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
purposes of assuring in any other manner the obligee of such Indebtedness of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Group Member; provided that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations
(including reimbursement obligations) with respect to (x) letters of credit
(including trade letters of credit) securing obligations (other than obligations
described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the
ordinary course of business of such Person to the extent such letters of credit
are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed
no later than the third Business Day following receipt by such Person of a
demand for reimbursement and (y) letters of credit secured by cash
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collateral, to the extent secured thereby), (iv) all obligations of such Person
to pay the deferred and unpaid purchase price of property or services, which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (A)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the unamortized
portion of the original issue discount of such Indebtedness at the time of its
issuance as determined in conformity with GAAP, (B) that the amount of
Indebtedness at any time of any Restricted Group Member shall be reduced by an
amount that corresponds to the percentage ownership interest in the assets of
such Restricted Group Member not owned on the date of determination, directly or
indirectly, by the Company, (C) money borrowed at the time of the Incurrence of
any Indebtedness in order to pre-fund the payment of interest on such
Indebtedness shall be deemed not to be "Indebtedness" and (D) that Indebtedness
shall not include any liability for federal, state, local or other taxes.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Group Members) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary, (ii)
the designation of a Restricted Affiliate as an Unrestricted Affiliate and (iii)
the fair market value of the Capital Stock (or any other Investment), held by
the Company or any Restricted Group Member, of (or in) any Person that has
ceased to be a Restricted Group Member, including without limitation, by reason
of any transaction permitted by clause (iii) of the "Limitation on the Issuance
and Sale of Capital Stock of Restricted Group Members" covenant or an Investment
ceasing to be a Permitted Investment pursuant to clause (ii)(y) of the
definition of "Permitted Investment"; provided that the fair market value of the
Investment remaining in any Person that has ceased to be a Restricted Group
Member shall not exceed (x) the value of the aggregate amount of Investments
previously made in such Person valued at the time such Investments were made
less (y) the net reduction of such Investments. For purposes of the definition
of "Unrestricted Affiliate" and "Unrestricted Subsidiary" and the "Limitation on
Restricted Payments" covenant described below, (i) "Investment" shall include
the fair market value of the assets (net of liabilities (other than liabilities
to the Company or any of its Subsidiaries)) of any Restricted Group Member at
the time that such Restricted Group Member is designated an Unrestricted
Subsidiary or Unrestricted Affiliate, (ii) the fair market value of the assets
(net of liabilities (other than liabilities to the Company or any of its
Subsidiaries)) of any Unrestricted Subsidiary or Unrestricted Affiliate at the
time that such Unrestricted Subsidiary or Unrestricted Affiliate is designated a
Restricted Subsidiary or Restricted Affiliate shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary or Unrestricted Affiliate shall be valued at its fair
market value at the time of such transfer; provided that the amount of any
Investment made by a Restricted Group Member shall be reduced by an amount that
corresponds to the percentage ownership interest in the assets of such
Restricted Group Member not owned on the date of determination, directly or
indirectly, by the Company.
"Involuntary Event" has the meaning specified in the definition of
"Permitted Investments."
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature
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thereof or any agreement to give any security interest); provided that the
amount of assets of a Restricted Group Member subject to a Lien shall be reduced
by an amount that corresponds to the percentage ownership interest in the assets
of such Restricted Group Member not owned on the date of determination, directly
or indirectly, by the Company.
"Minority Owned Affiliate," of any specified Person, means any other Person
in which an Investment in the Capital Stock of such Person has been made by such
specified Person other than a direct or indirect Subsidiary of such specified
Person.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Motorola Credit Agreement" means any credit agreement, loan or other
similar agreement entered into pursuant to the Motorola Vendor Financing
Template Memorandum of Understanding, together with all other agreements,
instruments and documents executed or delivered pursuant thereto or in
connection therewith, as such agreements, instruments or documents may be
amended, supplemented, extended, renewed, replaced or otherwise modified from
time to time.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Group Member) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Group Members, taken as a whole, (iii) payments made to repay Indebtedness or
any other obligation outstanding at the time of such Asset Sale that either (A)
is secured by a Lien on the property or assets sold or (B) is required to be
paid as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Group Member as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP; provided that with
respect to any Asset Sale by a Restricted Group Member, Net Cash Proceeds shall
be reduced by an amount that corresponds to the percentage ownership interest in
the assets of such Restricted Group Member not owned on the date of such Asset
Sale, directly or indirectly, by the Company; and (b) with respect to any
capital contribution or issuance or sale of Capital Stock, the proceeds of such
capital contribution or issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Group Member) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such capital
contribution or issuance or sale and net of taxes paid or payable as a result
thereof.
"Offer to Purchase" means an offer to purchase Exchange Notes by the
Company from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made and
that all Exchange Notes validly tendered will be accepted for payment on a pro
rata basis; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will
continue to accrue interest (or amortize original issue discount, as the case
may be) pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest (or amortize original issue
discount, as the case may be) on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form
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entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Exchange Notes delivered for purchase and a statement that such Holder
is withdrawing his election to have such Exchange Notes purchased; and (vii)
that Holders whose Exchange Notes are being purchased only in part will be
issued new Exchange Notes equal in principal amount to the unpurchased portion
of the Exchange Notes surrendered; provided that each Note purchased and each
new Note issued shall be in a principal amount at maturity of $1,000 or integral
multiples thereof. On the Payment Date, the Company shall (i) accept for payment
on a pro rata basis Exchange Notes or portions thereof tendered pursuant to an
Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay
the purchase price of all Exchange Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Exchange Notes or
portions thereof so accepted together with an Officers' Certificate specifying
the Exchange Notes or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail to the Holders of Exchange Notes so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount at maturity of
$1,000 or integral multiples thereof. The Company will publicly announce the
results of an Offer to Purchase as soon as practicable after the Payment Date.
The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
will comply with Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Exchange
Notes pursuant to an Offer to Purchase.
"Overhead Services Agreement" means the Overhead Services Agreement, dated
as of the Closing Date, between the Company and Nextel.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary of the Company or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary of the Company or be merged or
consolidated with or into or transfer or convey all or substantially all its
assets to, the Company or a Restricted Subsidiary of the Company; provided that
such Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
Investment; (ii) an Investment by the Company or a Restricted Group Member in a
Restricted Affiliate or a Person which will, upon the making of such Investment,
become a Restricted Affiliate or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, a Restricted
Affiliate; provided that (x) such Person's primary business is related,
ancillary or complementary to the businesses of the Company and its Restricted
Group Members on the date of such Investment and (y) any such Investment shall
cease to be a Permitted Investment in the event such Restricted Affiliate shall
cease to be a Restricted Affiliate or shall cease to observe any of the
provisions of the covenants that are applicable to such Restricted Affiliate,
provided that in the event such Restricted Affiliate ceases to be a Restricted
Affiliate or such Restricted Affiliate ceases to observe any of the provisions
of the covenants applicable to it solely as a result of circumstances,
developments or conditions beyond the control of the Company (such failure to be
a Restricted Affiliate or failure to observe a covenant as a result of any such
circumstance, development or condition, being an "Involuntary Event") any such
Investment previously made in such Restricted Affiliate will not cease to be a
Permitted Investment unless such Involuntary Event continues for 90 days; (iii)
an Investment by a Restricted Affiliate in a Restricted Subsidiary of such
Restricted Affiliate or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary of such Restricted Affiliate or be merged or
consolidated with or into or transfer or convey all or substantially all its
assets to, such Restricted Affiliate or a Restricted Subsidiary of such
Restricted Affiliate; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Company and its Restricted
Group Members on the date of such Investment; (iv) Temporary Cash Investments;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in accordance
with GAAP; and (vi) stock, obligations or securities received in satisfaction of
judgments or as part of or in connection with the bankruptcy, winding up or
liquidation of a Person, except if such stock,
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obligations or securities are received in consideration for an Investment made
in such Person in connection with or anticipation of such bankruptcy, winding up
or liquidation.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any Restricted Group Member; (vi) Liens
(including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with the
"Limitation on Indebtedness" covenant described below, (1) to finance the cost
(including the cost of design, development, construction, improvement,
installation or integration) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (2) to refinance any Indebtedness previously
so secured, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Group Members, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial payments
by a customer of the Company or its Restricted Group Members relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements (or substantially equivalent
filings outside the United States) regarding leases; (xi) Liens on property of,
or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Group Member;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Group Member other than the property or assets
acquired; (xii) Liens in favor of the Company or any Restricted Group Member;
(xiii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Group Member that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and incurred in the
ordinary course of business, in each case, securing Indebtedness under Interest
Rate Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Company or any of its Restricted Group Members from fluctuations
in interest rates, currencies or the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any Restricted Group Member
in the ordinary course of business in accordance with the past practices of the
Company and its Restricted Group Members prior to the Closing Date; (xviii)
Liens on or sales of receivables; (xix) Liens on the Capital Stock of
Unrestricted Subsidiaries and Unrestricted Affiliates; and
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(xx) Liens securing Indebtedness in an amount not to exceed at any one time
outstanding 10% of Adjusted Consolidated Net Tangible Assets.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (i) required to be redeemed prior to the
Stated Maturity of the Exchange Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Exchange Notes or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the Stated Maturity of the Exchange Notes; provided
that any Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Exchange
Notes shall not constitute Redeemable Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in "Limitation
on Asset Sales" and "Repurchase of Exchange Notes Upon a Change of Control"
covenants described below and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such provision
prior to the Company's repurchase of such Exchange Notes as are required to be
repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of
Exchange Notes Upon a Change of Control" covenants described below.
"Restricted Affiliate" means any direct or indirect Minority Owned
Affiliate of the Company or a Restricted Subsidiary of the Company that has been
designated by the Board of Directors as a Restricted Affiliate based on a
determination by the Board of Directors that the Company has, directly or
indirectly, the requisite control over such Minority Owned Affiliate to prevent
it from Incurring Indebtedness, or taking any other action at any time, in
contravention of any of the provisions of the Indenture that are applicable to
Restricted Affiliates; provided that immediately after giving effect to such
designation (x) the Liens and Indebtedness of such Minority Owned Affiliate
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred for all purposes of the Indenture and (y) no
Default or Event of Default shall have occurred and be continuing. The Company
will be required to deliver an Officers' Certificate to the Trustee upon
designating any Minority Owned Affiliate as a Restricted Affiliate.
"Restricted Group Members" means collectively, each Restricted Subsidiary
of the Company, each Restricted Affiliate and each Restricted Subsidiary of a
Restricted Affiliate.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Significant Group Member" means, at any date of determination, any
Restricted Group Member that, together with its Restricted Subsidiaries and
Restricted Affiliates, (i) for the most recent fiscal year of the Company,
accounted for more than 10% of the consolidated revenues of the Company and its
Restricted Group Members or (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Group Members, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
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"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America with a rating
at the time as of which any investment therein is made of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P, and (v) securities
with maturities of six months or less from the date of acquisition issued or
fully and unconditionally guaranteed by any state, commonwealth or territory of
the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or Moody's.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any Restricted Group Member, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Affiliate" means any Minority Owned Affiliate of the Company
other than a Restricted Affiliate. The Board of Directors may designate any
Restricted Affiliate to be an Unrestricted Affiliate unless such Minority Owned
Affiliate owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Group Member; provided that (A) any Guarantee
by the Company or any Restricted Group Member of any Indebtedness of the
Minority Owned Affiliate being so designated shall be deemed an "Incurrence" of
such Indebtedness and an "Investment" by the Company or such Restricted Group
Member (or both, if applicable) at the time of such designation; (B) either (I)
the Minority Owned Affiliate to be so designated has total assets of $1,000 or
less or (II) if such Minority Owned Affiliate has assets greater than $1,000,
such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an
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"Incurrence" of such Indebtedness and an "Investment" by the Company or such
Restricted Subsidiary (or both, if applicable) at the time of such designation;
(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under the "Limitation on Restricted Payments" covenant
described below and (C) if applicable, the Incurrence of Indebtedness and the
Investment referred to in clause (A) of this proviso would be permitted under
the "Limitation on Indebtedness" and "Limitation on Restricted Payments"
covenants described below. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that immediately after giving
effect to such designation (x) the Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately after such designation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the Indenture
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Indebtedness
(a) The Company will not, and will not permit any Restricted Group Member
to, Incur any Indebtedness (other than the Exchange Notes and Indebtedness
existing on the Closing Date); provided that the Company may Incur Indebtedness,
and any Restricted Group Member may Incur Acquired Indebtedness, if, after
giving effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, the Consolidated Leverage Ratio would be
less than 9 to 1, for Indebtedness Incurred on or prior to December 31, 1999, or
7 to 1, for Indebtedness Incurred thereafter.
Notwithstanding the foregoing, the Company and any Restricted Group Member
(except as specified below) may Incur each and all of the following: (i)
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $100 million, less any amount of such Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described below; (ii)
Indebtedness (A) to the Company evidenced by an unsubordinated promissory note
or (B) to any Restricted Group Member; provided that any event which results in
any such Restricted Group Member ceasing to be a Restricted Group Member or any
subsequent transfer of such Indebtedness (other than to the Company or another
Restricted Group Member) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness of the Company or any Restricted Group Member issued in exchange
for, or the net proceeds of which are used to refinance or refund, then
outstanding Indebtedness of the same Person (other than Indebtedness Incurred
under clause (i), (ii), (iv) or (vi) of this paragraph) or any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the Exchange Notes or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Exchange Notes shall only be permitted under this clause (iii) if (A) in
case the Exchange Notes are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Exchange Notes, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the
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remaining Exchange Notes, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Exchange Notes, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such new Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Exchange Notes at least to the extent
that the Indebtedness to be refinanced is subordinated to the Exchange Notes and
(C) such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; (iv) Indebtedness (A) in respect of performance, surety
or appeal bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that such agreements (a) are
designed solely to protect the Company or its Restricted Group Members against
fluctuations in foreign currency exchange rates or interest rates and (b) do not
increase the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates or
by reason of fees, indemnities and compensation payable thereunder; and (C)
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Company or any
Restricted Group Member pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Group
Member (other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Group Member for the
purpose of financing such acquisition), in a principal amount not to exceed the
gross proceeds actually received by the Company or any Restricted Group Member
in connection with such disposition; (v) Indebtedness of the Company, to the
extent the net proceeds thereof are promptly (A) used to purchase Exchange Notes
tendered in an Offer to Purchase made as a result of a Change in Control or (B)
deposited to defease the Exchange Notes as described below under "Defeasance";
(vi) Guarantees of the Exchange Notes and Guarantees of Indebtedness of the
Company by any Restricted Group Member provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuance of Guarantees by Restricted Group Members" covenant described below;
(vii) Indebtedness Incurred to finance the cost (including the cost of design,
development, construction, improvement, installation or integration and all
import duties) of telecommunications network assets, equipment or inventory
acquired by the Company or a Restricted Group Member after the Closing Date; and
(viii) Indebtedness of the Company not to exceed, at any one time outstanding,
two times, or Indebtedness of a Restricted Group Member not to exceed at any one
time outstanding, one times (x) the Net Cash Proceeds received by the Company
after the Closing Date from contributions of capital or the issuance and sale of
its Capital Stock (other than Redeemable Stock) to a Person that is not a
Subsidiary of the Company or a Restricted Affiliate, to the extent such Net Cash
Proceeds have not been used pursuant to clause (C)(2) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below to make a
Restricted Payment and (y) 80% of the fair market value of property other than
cash received by the Company after the Closing Date from contributions of
capital or the issuance and sale of its Capital Stock (other than Redeemable
Stock) to a Person that is not a Subsidiary of the Company or a Restricted
Affiliate.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Group Member may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Indebtedness Incurred under the
Motorola Credit Agreement on or prior to the Closing Date shall be treated as
Incurred pursuant to clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant, (2) Guarantees of, Liens securing or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (3) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses (other than Indebtedness referred to in clause (1) of the preceding
sentence), the Company, in its sole discretion, shall
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classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Group Member to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Capital Stock
of Restricted Group Members held by Persons other than the Company or other
Restricted Group Members, provided that the Company or any other Restricted
Group Members holding shares of Capital Stock of such dividend or distribution
paying Restricted Group Member shall receive such pro rata dividends or
distributions as may be due to such other Restricted Group Members or the
Company at or prior to the payment of such pro rata dividends or distributions
to such other Persons) held by Persons other than the Company or any Restricted
Group Member, (ii) purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of (A) the Company or an Unrestricted Subsidiary
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Person or (B) a Restricted Group Member (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a Restricted Group Member) or any holder
(or any Affiliate of such holder) of 5% or more of the Capital Stock of the
Company, (iii) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or retirement
for value, of Indebtedness of the Company that is subordinated in right of
payment to the Exchange Notes (other than the purchase, repurchase or the
acquisition of Indebtedness in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in any case due within one
year of the date of acquisition) or (iv) make any Investment, other than a
Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) being collectively "Restricted Payments")
if, at the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing, (B)
except with respect to Investments, the Company could not Incur at least $1.00
of Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant or (C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
made after the Closing Date shall exceed the sum of (1) 50% of the aggregate
amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated
Net Income is a loss, minus 100% of the amount of such loss) (determined by
excluding income resulting from transfers of assets by the Company or a
Restricted Group Member to an Unrestricted Subsidiary or Unrestricted Affiliate)
accrued on a cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following the
Closing Date and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed pursuant to the "Commission
Reports and Reports to Holders" covenant plus (2) the aggregate Net Cash
Proceeds received by the Company after the Closing Date from the issuance and
sale permitted by the Indenture of its Capital Stock (other than Redeemable
Stock) to a Person who is not a Subsidiary or Restricted Affiliate of the
Company (except to the extent such Net Cash Proceeds are used to Incur
Indebtedness outstanding pursuant to clause (viii) of the second paragraph of
the "Limitation on Indebtedness" covenant) or from the issuance to a Person who
is not a Subsidiary or Restricted Affiliate of the Company of any options,
warrants or other rights to acquire Capital Stock of the Company (in each case,
exclusive of any Redeemable Stock or any options, warrants or other rights that
are redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Exchange Notes) plus (3) an amount equal to
the net reduction in Investments (other than reductions in Permitted
Investments, reductions in Investments made pursuant to clause (ix) of the
following paragraph) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Group Member or from the
Net Cash Proceeds from the sale of any such Investment (except, in each case, to
the extent any such payment or proceeds are included in Adjusted Consolidated
Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries of the Company or a Restricted Affiliate or from
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redesignations of Unrestricted Affiliates as Restricted Affiliates (valued in
each case as provided in the definition of "Investments"), not to exceed, in
each case, the amount of Investments previously made by the Company or any
Restricted Group Member in such Person, Unrestricted Subsidiary or Unrestricted
Affiliate.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the
Exchange Notes including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of
the second paragraph of part (a) of the "Limitation on Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of Capital Stock of the
Company (or options, warrants or other rights to acquire such Capital Stock) in
exchange for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock (other than Redeemable Stock) of the Company; (iv) the
making of any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the Company which
is subordinated in right of payment to the Exchange Notes in exchange for, or
out of the proceeds of, a substantially concurrent offering of, shares of the
Capital Stock of the Company (other than Redeemable Stock); (v) the declaration
or payment of dividends on the Common Stock of the Company following a Public
Equity Offering of such Common Stock, of up to 6% per annum of the Net Cash
Proceeds received by the Company in such Public Equity Offering; (vi) payments
or distributions, to dissenting stockholders pursuant to applicable law,
pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Company; (vii) Investments acquired as a capital contribution to
the Company or in exchange for Capital Stock (other than Redeemable Stock) of
the Company or Capital Stock of Nextel or any of its subsidiaries (other than
the Company and its Subsidiaries); (vii) the repurchase, redemption or other
acquisition for value of Capital Stock of the Company to the extent necessary to
prevent the loss or secure the renewal or reinstatement of any license or
franchise held by the Company or any of its Subsidiaries from any governmental
agency; (ix) Investments in an aggregate amount not to exceed $30 million, plus
reductions in such Investments (except to the extent any such reduction is
included in Adjusted Consolidated Net Income) not to exceed the amount of the
Investments previously made; (x) Investments in a Person which has ceased to be
a Restricted Affiliate or ceases to observe any of the provisions of the
covenants applicable to it as a result of an Involuntary Event; provided (I)
such Investment is made with the proceeds of a substantially concurrent capital
contribution to, or sale of Capital Stock (other than Redeemable Stock) of, the
Company and (II) after such Investment such Involuntary Event shall no longer
continue and such person shall be a Restricted Affiliate; or (xi) repurchases of
Warrants pursuant to a Repurchase Offer; provided that, except in the case of
clauses (i) and (iii), no Default or Event of Default shall have occurred and be
continuing or occur as a consequence of the actions or payments set forth
therein, other than with respect to clause (x), a Default or Event of Default
that will cease to exist substantially contemporaneously with such Investment.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii) and (iv), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Group Members
The Company will not, and will not permit any Restricted Group Member to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted Group
Member to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Group Member owned by the
Company or any other Restricted Group Member, (ii) pay any Indebtedness owed to
the Company or any other Restricted Group Member, (iii) make
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loans or advances to the Company or any other Restricted Group Member or (iv)
transfer any of its property or assets to the Company or any other Restricted
Group Member.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Group Member, existing at the time of
such acquisition and not incurred in contemplation thereof, which encumbrances
or restrictions are not applicable to any Person or the property or assets of
any Person other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Group Members" covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) existing by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Group Member not
otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or assets
of the Company or any Restricted Group Member in any manner material to the
Company or any Restricted Group Member; (v) with respect to a Restricted Group
Member and imposed pursuant to an agreement that has been entered into for the
sale or disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Group Member; (vi) contained in the
terms of any Indebtedness or any agreement pursuant to which such Indebtedness
was issued if the encumbrance or restriction applies only in the event of a
default with respect to a financial covenant contained in such Indebtedness or
agreement is not materially more disadvantageous to the Holders of the Exchange
Notes than is customary in comparable financings (as determined by the Company)
and the Company determines that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest payments
on the Exchange Notes; (vii) contained in any stockholders or similar agreement,
so long as such encumbrance or restriction is not materially more
disadvantageous to the Holders of the Exchange Notes than the encumbrances and
restrictions contained in comparable agreements entered into in the past by the
Company or a Restricted Group Member; or (viii) contained in any agreement
entered into after the Closing Date, so long as such encumbrance or restriction
is not materially more disadvantageous to the Holders of the Exchange Notes than
the encumbrances and restrictions contained in the Motorola Credit Agreement.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Group Members" covenant shall prevent the Company or any
Restricted Group Member from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any Restricted Group Member that secure Indebtedness of the Company or any
Restricted Group Member.
Limitation on the Issuance and Sale of Capital Stock of Restricted Group
Members
The Company will not sell, and will not permit any Restricted Group Member,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Group Member (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of a foreign
Restricted Group Member, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted Group
Member would no longer constitute a Restricted Group Member, provided any
Investment in such Person remaining after giving effect to such issuance or sale
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant, if made on the date of such issuance or sale; and (iv)
issuances or sales of Common Stock (including options, warrants or other rights
to purchase Common Stock) of a Restricted Group Member, provided the Net Cash
Proceeds, if any, of such sale are applied in accordance with clause (A) or (B)
of the "Limitation on Asset Sales" covenant described below.
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Limitation on Issuances of Guarantees by Restricted Group Members
The Company will not permit any Restricted Group Member, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Exchange Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Group Member simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Exchange Notes by such Restricted
Group Member and (ii) such Restricted Group Member waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Group Member as a result of any payment by such
Restricted Group Member under its Subsidiary Guarantee; provided that this
paragraph shall not be applicable to (x) any Guarantee of any Restricted Group
Member that existed at the time such Person became a Restricted Group Member and
was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Group Member or (y) any Guarantee of any Restricted Group
Member of Indebtedness Incurred (I) under a revolving credit, vendor financing
or working capital facility pursuant to clause (i) of the second paragraph of
the "Limitation on Indebtedness" covenant or (II) pursuant to clause (vii) of
the second paragraph of the "Limitation on Indebtedness" covenant. If the
Guaranteed Indebtedness is (A) pari passu with the Exchange Notes, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Exchange
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Exchange Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Group Member may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Group Member's Capital Stock in, or all or substantially all the
assets of, such Restricted Group Member (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Group Member to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Person known by the
Company to be an Affiliate of such holder) of 5% or more of any class of Capital
Stock of the Company or with any Affiliate of the Company or any Restricted
Group Member, except upon fair and reasonable terms no less favorable to the
Company or such Restricted Group Member than could be obtained, at the time of
such transaction or, if such transaction is pursuant to a written agreement, at
the time of the execution of the agreement providing therefor, in a comparable
arm's-length transaction with a Person that is not such a holder or an
Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors of the Company or (B) for which the Company or a Restricted
Group Member delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair to the
Company or such Restricted Group Member from a financial point of view; (ii) any
transaction solely between the Company and any of its Wholly Owned Restricted
Subsidiaries or solely between Wholly Owned Restricted Subsidiaries of the
Company; (iii) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company; (iv) any payments or other
transactions pursuant to any tax-sharing agreement between the Company and any
other Person with which the Company files a consolidated tax return or with
which the Company is part of a consolidated group for tax purposes; (v) any
Restricted Payments not prohibited by the "Limitation on Restricted Payments"
covenant; (vi) any payments or other transactions pursuant to the Overhead
Services Agreement as in effect on the Closing Date; or (vii) any transaction or
series of related transactions involving consideration or payments of less than
$5 million. Notwithstanding the foregoing, any
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transaction covered by the first paragraph of this "Limitation on Transactions
with Shareholders and Affiliates" covenant and not covered by clauses (ii)
through (v) of this paragraph, the aggregate amount of which exceeds $10 million
in value, must be approved or determined to be fair in the manner provided for
in clause (i)(A) or (B) above.
Limitation on Liens
The Company will not, and will not permit any Restricted Group Member to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Group Member, without making effective provision for all of the
Exchange Notes and all other amounts due under the Indenture to be directly
secured equally and ratably with (or, if the obligation or liability to be
secured by such Lien is subordinated in right of payment to the Exchange Notes,
prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Group Members created in favor or for the
benefit of the Holders; (iii) Liens with respect to the assets of a Restricted
Group Member granted by such Restricted Group Member to the Company or another
Restricted Group Member to secure Indebtedness owing to the Company or such
other Restricted Group Member; (iv) Liens securing Indebtedness which is
Incurred to refinance secured Indebtedness which is permitted to be Incurred
under clause (iii) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any property or
assets of the Company or any Restricted Group Member other than the property or
assets securing the Indebtedness being refinanced; (v) Liens securing
Indebtedness Incurred under clause (i) or clause (vii) of the second paragraph
of the "Limitation on Indebtedness" covenant; or (vi) Permitted Liens.
Limitation on Sale-Leaseback Transactions
The Company will not, and will not permit any Restricted Group Member to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Group Member sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Group Member, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary of the Company or solely between Wholly
Owned Restricted Subsidiaries of the Company; or (iv) the Company or such
Restricted Group Member, within twelve months after the sale or transfer of any
assets or properties is completed, applies an amount not less than the net
proceeds received from such sale in accordance with clause (A) or (B) of the
first paragraph of the "Limitation on Asset Sales" covenant described below.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Group Member to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Group Member is at least equal to the fair market value of
the assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments or the assumption of
Indebtedness of the Company or any Restricted Group Member relating to such
assets, provided that the Company or such Restricted Group Member is irrevocably
released and discharged from such Indebtedness. In the event and to the extent
that the Net Cash Proceeds received by the Company or any Restricted Group
Member from one or more Asset Sales occurring on or after the Closing Date in
any period of 12 consecutive months exceed $5 million, then the Company shall or
shall cause the relevant Restricted Group Member to (i) within twelve months
after the
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date Net Cash Proceeds so received exceed $5 million (A) apply an amount equal
to such excess Net Cash Proceeds to permanently repay unsubordinated
Indebtedness of the Company or any Restricted Group Member providing a
Subsidiary Guarantee pursuant to the "Limitation on Issuances of Guarantees by
Restricted Group Members" covenant described above or Indebtedness of any other
Restricted Group Member, in each case owing to a Person other than the Company
or any Restricted Group Member, provided that in the event Indebtedness of a
Restricted Group Member is repaid, only the Company's pro rata portion
(determined as provided in the definition of "Indebtedness") of such repaid
Indebtedness shall be deemed to have been repaid in accordance with this clause
(A), or (B) invest an equal amount, or the amount not so applied pursuant to
clause (A) (or enter into a definitive agreement committing to so invest within
twelve months after the date of such agreement), in property or assets (other
than current assets) of a nature or type or that are used in a business (or in a
company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or the business of, the Company and its Restricted Group Members existing on
the date of such investment and (ii) apply (no later than the end of the
twelve-month period referred to in clause (i)) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the last paragraph
of this "Limitation on Asset Sales" covenant. The amount of such excess Net Cash
Proceeds required to be applied (or to be committed to be applied) during such
twelve-month period as set forth in clause (i) of the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."
Notwithstanding the foregoing, to the extent that any or all of the Net
Cash Proceeds of any Asset Sale of assets based outside the United States are
prohibited or delayed by applicable local law from being repatriated to the
United States and such Net Cash Proceeds are not actually applied in accordance
with the foregoing paragraphs, the Company shall not be required to apply the
portion of such Net Cash Proceeds so affected but may permit the applicable
Restricted Group Members to retain such portion of the Net Cash Proceeds so
long, but only so long, as the applicable local law will not permit repatriation
to the United States (the Company hereby agreeing to cause the applicable
Restricted Group Member to promptly take all actions required by the applicable
local law to permit such repatriation) and once such repatriation of any such
affected Net Cash Proceeds is permitted under the applicable local law, such
repatriation will be immediately effected and such repatriated Net Cash Proceeds
will be applied in the manner set forth in this covenant as if the Asset Sale
had occurred on such date; provided that to the extent that the Company has
determined in good faith that repatriation of any or all of the Net Cash
Proceeds of such Asset Sale would have a material adverse tax cost consequence,
the Net Cash Proceeds so affected may be retained by the applicable Restricted
Group Member for so long as such material adverse tax cost event would continue.
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate Accreted Value of Exchange Notes on the relevant Payment Date equal to
the Excess Proceeds on such date, at a purchase price equal to 101% of the
Accreted Value of the Exchange Notes on the relevant Payment Date, plus, in each
case, accrued interest (if any) to the Payment Date.
REPURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Exchange Notes then
outstanding, at a purchase price equal to 101% of the Accreted Value thereof on
the relevant Payment Date, plus accrued interest (if any) to the Payment Date.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Exchange Notes) required by the foregoing covenant (as
well as may be contained in other securities of the Company which might be
outstanding at the time). The above covenant requiring the Company to repurchase
the Exchange Notes will, unless consents are obtained, require the Company to
repay all indebtedness then outstanding which by its terms would prohibit such
Note repurchase, either prior to or concurrently with such Note repurchase.
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COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times from and after the date of the commencement of this Exchange
Offer, the Company shall file with the Commission all such reports and other
information as it would be required to file with the Commission by Sections
13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company
shall supply the Trustee and each Holder or shall supply to the Trustee for
forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to make or
consummate an Offer to Purchase in accordance with the "Limitation on Asset
Sales" or "Repurchase of Exchange Notes upon a Change of Control" covenant;
provided that a default or breach of the "Limitation on Asset Sales" covenant
arising from an Involuntary Event shall not constitute an Event of Default
unless such Involuntary Event continues for 90 days; (d) the Company defaults in
the performance of or breaches any other covenant or agreement of the Company in
the Indenture or under the Exchange Notes (other than a default specified in
clause (a), (b) or (c) above) and such default or breach continues for a period
of 60 consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount at maturity of the Exchange Notes,
provided that a default or breach of a covenant or agreement arising from a
Restricted Affiliate ceasing to observe any covenant applicable to it resulting
from an Involuntary Event shall not constitute an Event of Default unless such
Involuntary Event continues for 90 days; (e) there occurs with respect to any
issue or issues of Indebtedness of the Company or any Significant Group Member
having an outstanding principal amount of $5 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; provided
that an acceleration or payment default arising from an Involuntary Event shall
not constitute an Event of Default unless such Involuntary Event continues for
90 days; (f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Group Member and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
provided that a final judgment or order arising from an Involuntary Event shall
not constitute an Event of Default unless such Involuntary Event continues for
90 days; (g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant Group Member
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Group Member or for all or substantially all of
the property and assets of the Company or any Significant Group Member or (C)
the winding up or liquidation of the affairs of the Company or any Significant
Group Member and, in each case, such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or (h) the Company or any
Significant Group Member (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the
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Company or any Significant Group Member or for all or substantially all of the
property and assets of the Company or any Significant Group Member or (C)
effects any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the Exchange Notes, then outstanding,
by written notice to the Company (and to the Trustee if such notice is given by
the Holders), may, and the Trustee at the request of such Holders shall, declare
the Accreted Value of, premium, if any, and accrued interest on the Exchange
Notes to be immediately due and payable. Upon a declaration of acceleration,
such Accreted Value of, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) above has occurred and is
continuing, such declaration of acceleration shall be automatically rescinded
and annulled if the event of default triggering such Event of Default pursuant
to clause (e) shall be remedied or cured by the Company or the relevant
Significant Group Member or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) above occurs with respect to the
Company, the principal of, premium, if any, and accrued interest on the Exchange
Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of at least a majority in principal amount at maturity of
the outstanding Exchange Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Exchange Notes that have become due solely by such declaration of acceleration,
have been cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. For information as to
the waiver of defaults, see "-- Modification and Waiver."
The Holders of at least a majority in aggregate principal amount at
maturity of the outstanding Exchange Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or the Indenture, that
may involve the Trustee in personal liability, or that the Trustee determines in
good faith may be unduly prejudicial to the rights of Holders of Exchange Notes
not joining in the giving of such direction and may take any other action it
deems proper that is not inconsistent with any such direction received from
Holders of Exchange Notes. A Holder may not pursue any remedy with respect to
the Indenture or the Exchange Notes unless: (i) the Holder gives the Trustee
written notice of a continuing Event of Default; (ii) the Holders of at least
25% in aggregate principal amount at maturity of outstanding Exchange Notes make
a written request to the Trustee to pursue the remedy; (iii) such Holder or
Holders offer the Trustee indemnity satisfactory to the Trustee against any
costs, liability or expense; (iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of indemnity; and (v)
during such 60-day period, the Holders of a majority in aggregate principal
amount at maturity of the outstanding Exchange Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Exchange Notes, which right shall not be impaired or affected without the
consent of the Holder.
The Indenture will require certain officers of the Company to certify, on
or before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Group Members and the Company's and its Restricted Group Members' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company on all of the
Exchange Notes and under the Indenture; (ii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of the
Exchange Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro forma basis
the Company, or any Person becoming the successor obligor of the Exchange Notes,
as the case may be, shall have a Consolidated Leverage Ratio not greater than
110% of the Consolidated Leverage Ratio of the Company immediately prior to the
transaction; and (v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture complies
with this provision, that all conditions precedent provided for herein relating
to such transaction have been complied with and, in the event that the
continuing Person is organized under the laws of any jurisdiction other than the
United States of America or any jurisdiction thereof, that the indenture and the
Exchange Notes constitute legal, valid and binding obligations of the continuing
Person, enforceable in accordance with their terms; provided, however, that
clauses (iii) and (iv) above do not apply if, in the good faith determination of
the Board of Directors of the Company, whose determination shall be evidenced by
a Board Resolution, the principal purpose of such transaction is to change the
state of incorporation of the Company; and provided further that any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture will provide that the Company will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Exchange Notes on the 123rd day after the deposit referred to
below, and the provisions of the Indenture will no longer be in effect with
respect to the Exchange Notes (except for, among other matters, certain
obligations to register the transfer or exchange of the Exchange Notes, to
replace stolen, lost or mutilated Exchange Notes, to maintain paying agencies
and to hold monies for payment in trust) if, among other things, (A) the Company
has deposited with the Trustee, in trust, money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Exchange Notes on the Stated Maturity of such payments in accordance with the
terms of the Indenture and the Exchange Notes, (B) the Company has delivered to
the Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will
not recognize income, gain or loss for federal income tax purposes as a result
of the Company's exercise of its option under this "Defeasance" provision and
will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law after
the Closing Date such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service (the "IRS")
to the same effect as the aforementioned Opinion of Counsel and (ii) an Opinion
of Counsel to the effect that the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and after the passage of 123 days
following the deposit, the trust fund will not be subject to the effect of
Section 547 of the United States Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law, (C) immediately after giving effect to such deposit on
a pro forma basis, no Event of Default, or event that after the giving of notice
or lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending on the
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<PAGE> 129
123rd day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, and (D) if at such time
the Exchange Notes are listed on a national securities exchange, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the Exchange
Notes will not be delisted as a result of such deposit, defeasance and
discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and all the covenants described herein under
"Covenants," clauses (c) and (d) under "Events of Default" with respect to such
clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets" and such
covenants and clauses (e) and (f) under "Events of Default" shall be deemed not
to be Events of Default, upon, among other things, the deposit with the Trustee,
in trust, of money and/or U.S. Government Obligations that through the payment
of interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Exchange Notes on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Exchange Notes,
the satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of
the preceding paragraph and the delivery by the Company to the Trustee of an
Opinion of Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Exchange Notes as described in the immediately
preceding paragraph and the Exchange Notes are declared due and payable because
of the occurrence of an Event of Default that remains applicable, the amount of
money and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Exchange Notes at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Exchange Notes at
the time of the acceleration resulting from such Event of Default. However, the
Company will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the outstanding Exchange Notes;
provided, however, that no such modification or amendment may, without the
consent of each Holder affected thereby, (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (ii) reduce the
Accreted Value of, or premium, if any, or interest on, any Note, (iii) change
the place or currency of payment of principal of, or premium, if any, or
interest on, any Note, (iv) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Note, (v) reduce the
above-stated percentage of outstanding Exchange Notes the consent of whose
Holders is necessary to modify or amend the Indenture, (vi) waive a default in
the payment of principal of, premium, if any, or interest on the Exchange Notes
or (vii) reduce the percentage or aggregate principal amount at maturity of
outstanding Exchange Notes the consent of whose Holders is necessary for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Exchange Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Exchange Notes or because of the creation of any Indebtedness represented
thereby, shall be had against any
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incorporator, stockholder, officer, director, employee or controlling person of
the Company or of any successor Person thereof. Each Holder, by accepting the
Exchange Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
CERTAIN TAX CONSIDERATIONS
Perkins Coie, special tax counsel to the Company, has advised the Company
that because the Exchange Notes should not be considered to differ materially
from the Private Notes, the exchange of the Private Notes for the Exchange Notes
pursuant to the Exchange Offer should not result in any material federal income
tax consequences to Holders. For a full description of the basis of, and
limitations on, this opinion, see "Certain U.S. Federal Income Tax
Considerations."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, which was prepared by Perkins Coie, special tax
counsel to the Company, summarizes the material U.S. federal income tax
consequences of the exchange of the Private Notes for the Exchange Notes
pursuant to the Exchange Offer. This discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
judicial authority, current administrative rulings and practice, and existing
and proposed Treasury Regulations, all as in effect and existing on the date
hereof. Legislative, judicial or administrative changes or interpretations after
the date hereof could alter or modify the validity of this discussion and the
conclusions set forth below. Any such changes or interpretations may be
retroactive and could adversely affect a Holder of the Private Notes or the
Exchange Notes.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular Holders in light of their
personal investment or tax circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of Holders subject to special
treatment under the U.S. federal income tax laws, such as certain financial
institutions, insurance companies, dealers in securities or foreign currency,
tax-exempt organizations, foreign corporations or non-resident alien
individuals, or persons holding Private Notes or Exchange Notes that are a hedge
against, or that are hedged against, currency risk or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. Moreover, the affect of any state, local or foreign tax laws is
not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER OF A
PRIVATE NOTE THAT IS PARTICIPATING IN THE EXCHANGE OFFER IS STRONGLY URGED TO
CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF SUCH HOLDER'S
PARTICULAR TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS OF THE EXCHANGE OF
THE PRIVATE NOTES FOR THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
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EXCHANGE OFFER
The exchange of the Private Notes by any Holder for the Exchange Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes should not be considered
to differ materially in kind or extent from the Private Notes. Rather, the
Exchange Notes received by any Holder should be treated as a continuation of the
Private Notes in the hands of such Holder. As a result, there should be no
federal income tax consequences to Holders exchanging the Private Notes for the
Exchange Notes pursuant to the Exchange Offer, and the federal income tax
consequences of holding and disposing of the Exchange Notes should be the same
as the federal income tax consequences of holding and disposing of the Private
Notes. Accordingly, a Holder's adjusted tax basis in the Exchange Notes will be
the same as its adjusted tax basis in the Private Notes exchanged therefor and
its holding period for the Private Notes will be included in its holding period
for the Exchange Notes. Thus, the determination of gain on a sale or other
disposition of the Exchange Notes will be the same as for the Private Notes. In
addition, the Holders must, among other things, continue to include original
issue discount in income as if the exchange had not occurred.
PLAN OF DISTRIBUTION
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each broker-dealer that
receives Exchange Notes for its own account in exchange for such Private Notes
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company has
agreed that for a period of up to 180 days after the closing of the Exchange
Offer, it will make this Prospectus, as amended or supplemented, available to
any such brokerdealer that requests copies of this Prospectus in the Letter of
Transmittal for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions or through the writing of options on the Exchange Notes,
or a combination of such methods of resale, at market prices prevailing at the
time of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired by such broker-dealer as a result
of market-making or other trading activities and any broker-dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Chadbourne & Parke LLP, New York, New York, special counsel to the Company.
Certain U.S. federal income tax consequences relating to the Exchange Notes will
be passed upon by Perkins Coie, Seattle, Washington. With respect to matters of
Washington law, Chadbourne & Parke LLP will rely on Perkins Coie.
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EXPERTS
The financial statements of the Company and its consolidated subsidiaries,
as of December 31, 1996 and 1995, and for the years ended December 31, 1996,
1995 and 1994, the financial statements of Wireless Ventures of Brazil, Inc. and
subsidiaries as of and for the year ended December 31, 1996 and the financial
statements of Corporacion Mobilcom, S.A. de C.V. as of and for the years ended
December 31, 1996 and 1995 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Wireless Ventures of Brazil, Inc.
and subsidiaries as of December 31, 1995 and 1994 and for the year ended
December 31, 1995 and the six month period ended December 31, 1994 have been
included herein and in the registration statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
Independent Auditors' Report............................................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995............... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and
1994.................................................................................. F-4
Consolidated Statements of Stockholder's Equity for the Years Ended December 31, 1996,
1995 and 1994......................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and
1994.................................................................................. F-6
Notes to Consolidated Financial Statements.............................................. F-7
Condensed Consolidated Balance Sheet as of March 31, 1997 (Unaudited)................... F-18
Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
1997 and 1996 (Unaudited)............................................................. F-19
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1997 and 1996 (Unaudited)............................................................. F-20
Notes to Condensed Consolidated Financial Statements (Unaudited)........................ F-21
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................ F-22
Consolidated Balance Sheet as of December 31, 1996...................................... F-23
Consolidated Statement of Operations for the Year Ended December 31, 1996............... F-24
Consolidated Statement of Stockholders' Equity for the Year Ended December 31, 1996..... F-25
Consolidated Statement of Cash Flows for the Year Ended December 31, 1996............... F-26
Notes to Consolidated Financial Statements.............................................. F-27
Independent Auditors' Report............................................................ F-38
Consolidated Balance Sheets as of December 31, 1995 and 1994............................ F-39
Consolidated Statements of Operations for the Year Ended December 31, 1995
and the six months ended December 31, 1994............................................ F-40
Consolidated Statements of Stockholders' Equity for the Year Ended
December 31, 1995 and the six months ended December 31, 1994.......................... F-41
Consolidated Statements of Cash Flows for the Year Ended December 31, 1995
and the six months ended December 31, 1994............................................ F-42
Notes to Consolidated Financial Statements.............................................. F-44
MCCAW INTERNATIONAL (BRAZIL), LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet as of March 31, 1997 (Unaudited)................... F-55
Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
1997 and 1996 (Unaudited)............................................................. F-56
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1997 and 1996 (Unaudited)............................................................. F-57
Notes to Condensed Consolidated Financial Statements (Unaudited)........................ F-58
CORPORACION MOBILCOM, S.A. DE C.V. AND SUBSIDIARIES
Independent Auditors' Report............................................................ F-59
Consolidated Balance Sheets as of December 31, 1996 and 1995............................ F-60
Consolidated Statements of Operations for the Years Ended December 31, 1996 and 1995.... F-61
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996
and 1995.............................................................................. F-62
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996 and 1995.... F-63
Notes to Consolidated Financial Statements.............................................. F-64
Condensed Consolidated Balance Sheet as of March 31, 1997............................... F-75
Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
1997 and 1996......................................................................... F-76
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1997 and 1996......................................................................... F-77
Notes to Condensed Consolidated Financial Statements.................................... F-78
</TABLE>
F-1
<PAGE> 134
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder of
McCaw International, Ltd.
Seattle, Washington
We have audited the accompanying balance sheets of McCaw International,
Ltd. and subsidiaries (the Company) as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the years ended December 31, 1996, 1995 and 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and 1995,
and the results of its operations and its cash flows for the years ended
December 31, 1996, 1995 and 1994 in conformity with generally accepted
accounting principles.
The financial statements give retroactive effect to the mergers of McCaw
International (Services), Ltd. (formerly Special Purpose Company No. 1) and
McCaw International (CANMEX), Ltd. (formerly Nextel Investment Company), with
the Company on January 1, 1997 and March 3, 1997, respectively, which have been
accounted for in a manner similar to poolings of interests as described in Note
1 to the financial statements.
DELOITTE & TOUCHE LLP
Seattle, Washington
July 2, 1997
F-2
<PAGE> 135
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 53,029,275 $ 85,302,423
Accounts receivable....................................... 540,292 --
Radios and accessories.................................... 830,158 --
Prepaid and other......................................... 183,353 10,642
Notes receivable.......................................... 5,703,494
------------ ------------
Total current assets................................. 60,286,572 85,313,065
Property, plant, and equipment, net of accumulated depreciation
of $73,972 and $0............................................ 8,703,076 36,056
Investment in unconsolidated subsidiaries, at cost less equity
in net loss of $5,991,304 and $6,853,064..................... 98,981,700 47,951,335
Intangible assets.............................................. 10,878,235 10,135,400
Investments and other assets................................... 20,517,732 26,239,601
------------ ------------
$199,367,315 $169,675,457
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable............................................... $ 5,818,914 $ 120,824
Due to Nextel.................................................. 148,395,746 150,261,581
Income taxes payable to Nextel................................. 4,387,758 3,032,896
------------ ------------
Total current liabilities............................ 158,602,418 153,415,301
Deferred income taxes.......................................... 1,562,263 4,320,466
Commitments and contingencies (Notes 2, 5, 7 and 10)
Stockholder's equity:
Common stock (20,000,000 shares authorized, no par value,
10,000,000 shares issued and outstanding)............... 65,042,833 20,181,247
Accumulated deficit....................................... (28,741,494) (16,265,280)
Unrealized gain on investments net of tax................. 2,901,295 8,023,723
------------ ------------
Total stockholder's equity........................... 39,202,634 11,939,690
------------ ------------
$199,367,315 $169,675,457
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 136
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Revenues......................................... $ -- $ -- $ --
Costs and expenses related to revenues........... -- -- --
Selling, general and administrative.............. 9,317,784 276,962 --
Depreciation and amortization.................... 168,401 18,647 2,033
------------ ------------ -----------
Operating loss................................... (9,486,185) (295,609) (2,033)
------------ ------------ -----------
Other income (expense):
Interest income............................. 4,300,089 6,232,502 2,687,882
Interest expense............................ (322,532) -- --
Loss from equity method investments......... (5,991,304) (6,853,064) --
Investment impairment and other, net........ 378,580 (15,002,062) --
------------ ------------ -----------
Total other income (expense)................ (1,635,167) (15,622,624) 2,687,882
------------ ------------ -----------
Net income (loss) before taxes................... (11,121,352) (15,918,233) 2,685,849
Income tax provision............................. (1,354,862) (2,119,050) (913,846)
------------ ------------ -----------
Net income (loss)................................ $(12,476,214) $(18,037,283) $ 1,772,003
------------ ------------ -----------
Net income (loss) per common share............... $ (1.25) $ (1.80) $ 0.18
============ ============ ===========
Weighted average number of common shares
outstanding.................................... 10,000,000 10,000,000 10,000,000
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 137
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED UNREALIZED
------------------------- EARNINGS GAIN (LOSS)
SHARES AMOUNT (DEFICIT) ON INVESTMENTS TOTAL
---------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994.... -- $ -- $ -- $ -- $ --
Net income............. -- -- 1,772,003 -- 1,772,003
---------- ----------- ------------ -------------- ------------
Balance, December 31,
1994...................... -- -- 1,772,003 -- 1,772,003
Common stock issued.... 10,000,000 -- -- -- --
Capital
contributions........ -- 20,181,247 -- -- 20,181,247
Net loss............... -- -- (18,037,283) -- (18,037,283)
Unrealized gain on
investments.......... -- -- -- 8,023,723 8,023,723
---------- ----------- ------------ -------------- ------------
Balance, December 31,
1995...................... 10,000,000 20,181,247 (16,265,280) 8,023,723 11,939,690
Capital
contributions........ 44,861,586 44,861,586
Net loss............... (12,476,214) (12,476,214)
Unrealized loss on
investments.......... (5,122,428) (5,122,428)
---------- ----------- ------------ -------------- ------------
Balance, December 31,
1996...................... 10,000,000 $65,042,833 $(28,741,494) $ 2,901,295 $ 39,202,634
========== =========== ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 138
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $(12,476,214) $(18,037,283) $ 1,772,003
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.............. 168,401 18,647 2,033
Loss from equity method investments........ 5,991,304 6,853,064 --
Investment impairment...................... -- 15,000,000 --
Change in current assets and liabilities:
Accounts receivable................... (540,292) -- --
Radios and accessories................ (830,158) -- --
Prepaid and other..................... (172,711) (10,642) --
Investments and other assets.......... (2,176,539) -- --
Accounts payable...................... 5,698,090 120,824 --
Income taxes payable to Nextel........ 1,354,862 2,119,050 913,846
------------ ------------ ------------
Net cash provided by (used in) operating
activities............................... (2,983,257) 6,063,660 2,687,882
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant and
equipment................................ (8,817,644) (36,056) --
Purchase of licenses....................... (742,835) (10,135,400) --
Issuance of notes receivable............... (5,703,494) -- --
Investments in unconsolidated
subsidiaries............................. (57,021,669) (36,962,481) (32,841,918)
Other...................................... -- (761,972) (13,154,120)
------------ ------------ ------------
Net cash used in investing activities...... (72,285,642) (47,895,909) (45,996,038)
------------ ------------ ------------
Cash flows from financing activities:
Borrowings from (repayments to) Nextel,
net...................................... (1,865,835) (18,588,496) 168,850,077
Capital contribution from parent........... 44,861,586 20,181,247 --
------------ ------------ ------------
Net cash provided by financing
activities............................... 42,995,751 1,592,751 168,850,077
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents................................... (32,273,148) (40,239,498) 125,541,921
Cash and cash equivalents, beginning of
period........................................ 85,302,423 125,541,921 --
------------ ------------ ------------
Cash and cash equivalents, end of period........ $ 53,029,275 $ 85,302,423 $125,541,921
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 139
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS: McCaw International, Ltd.
is an indirect, wholly owned subsidiary of Nextel Communications Inc. (Nextel
and its wholly owned subsidiaries are referred to herein as "Nextel"). McCaw
International, Ltd. and subsidiaries (the "Company" or "McCaw") is an
international wireless telecommunications service company. As of December 31,
1996 the Company owns a 100% interest in McCaw Argentina S.A. (McCaw Argentina),
a 30% interest in Infocom Communications Network, Inc. (Infocom), a Philippine
company, accounted for using the equity method, and a contractual right to
receive 25.2% of the profits of the Shanghai GSM System accounted for as a cost
method investment (see note 2).
As described in Note 2, on January 1, 1997 and March 3, 1997, respectively,
McCaw International (Services), Ltd. (formerly Special Purpose Company No. 1
("SPC#1")) and McCaw International (CAN/MEX), Ltd. (formerly Nextel Investment
Company ("NIC")) became wholly owned subsidiaries of the Company. As these
transactions represent transfers between companies under common control, these
consolidated financial statements have been prepared under a method similar to
the pooling-of-interests method of accounting and reflect the combined financial
position and operating results of the Company, SPC#1 and NIC (collectively
referred to as the "Company") for all periods presented. Accordingly, subsequent
to their issuance, these consolidated financial statements will become the
historical financial statements of the Company.
The Company's efforts are primarily directed towards acquiring, developing
and operating wireless communications systems. The Company's ability to generate
positive cash flow and operating profits will depend on a number of factors,
including the ability to attract and retain subscribers, and the successful
deployment and upgrade of its wireless systems in its existing and new markets.
Future results may also be effected by regulatory policies in the various
countries in which the Company operates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Company is subject to the laws and regulations governing
telecommunication services in effect in each of the countries in which it
operates. These laws and regulations cover, among other things, the number of
licenses that can be used in any one service area by affiliated companies, the
construction and loading requirements necessary to retain a license, the number
of telephone numbers that can be assigned to an individual licensee and the
rights of a licensee to interconnect with the public telecommunications network.
Each of these factors can have a significant influence on the Company's results
of operations and are subject to change by the governmental agency responsible
for determining the laws and regulations in the respective countries. The
financial statements as presented reflect certain assumptions based on laws and
regulations currently in effect in each of the various countries. The Company
cannot predict what future laws and regulations might be passed that could have
a material effect on the Company's results of operations. The Company assesses
the impact of significant changes in laws and regulations on a regular basis and
updates the assumptions used to prepare its financial statements accordingly.
F-7
<PAGE> 140
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CASH AND EQUIVALENTS: The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. There
was no cash paid for interest or taxes for the years ended December 31, 1996,
1995 or 1994.
RADIOS AND ACCESSORIES: Radios and accessories are held for sale to
customers. Radios and accessories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out method.
INTANGIBLE ASSETS: Intangible assets consist primarily of wireless
licenses which are recorded at cost. Licenses in the countries in which the
Company operates are issued conditionally for various periods of time. The
licenses are generally renewable providing the licensee has complied with
applicable rules and policies. In most instances, the Company believes it has
complied and intends to comply with these standards and is amortizing the
related costs using the straight line method over 20 years. In some cases, the
Company currently is not in compliance with applicable requirements and has
filed requests for extensions with the appropriate government agency. The
Company expects that such extension requests will be granted and the risk of
having these or any other licenses revoked is remote. The Company begins
amortizing the cost of wireless licenses upon commencement of commercial
operations in each market.
The carrying value of intangible assets is reviewed for impairment on a
regular basis.
INVESTMENTS: The Company's investment in Clearnet is included in
investments and other assets and classified as available-for-sale as of the
balance sheet date. Accordingly, it is reported at fair value, with unrealized
gains and losses, net of tax, recorded in stockholder's equity. Investments
where the Company does not have the ability to exercise significant influence
over operating and financial policies and that are not considered marketable
instruments are recorded at the lower of cost or market. Realized gains or
losses and declines in value, if any, judged to be other than temporary are
reported in other income or expense.
Investments where the Company has the ability to exercise significant
influence over operating and financial policies and possesses a voting interest
of less than 50% are accounted for using the equity method. The excess of the
cost of the Company's investments over the net assets acquired is being
amortized over 20 years. Amortization of this excess of $3,677,415, $2,361,428
and $0 for the years ended December 31, 1996, 1995 and 1994, respectively, is
reflected in the accompanying statements of operations in loss from equity
method investments.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is provided using the straight line method over estimated
useful lives as follows:
<TABLE>
<S> <C>
Equipment.............................................................. 3-10 years
Computer equipment and software........................................ 3-5 years
Furniture and fixtures................................................. 3 years
Leasehold improvements................................................. Life of lease
</TABLE>
Construction in progress includes labor, material, transmission and related
equipment, engineering, site development, capitalized interest, and other costs
relating to the construction and development of wireless networks. The Company
will begin depreciating the cost of the wireless networks over a 10-year period
upon commencement of commercial operations in each market.
Expenditures which increase value or extend useful lives are capitalized,
while maintenance and repairs are charged to operations as incurred.
The carrying value of property, plant and equipment is reviewed for
impairment on a regular basis.
FOREIGN EXCHANGE: Financial statement amounts of the Company are expressed
in U.S. dollars. Assets and liabilities are translated at the rate in effect at
the balance sheet date. Revenues and expenses are
F-8
<PAGE> 141
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
translated at the weighted average rate during the period. There were no
translation gains or losses for the years ended December 31, 1996, 1995 and
1994.
REVENUE RECOGNITION: Service revenue will be recorded as revenue when
earned. Sales of equipment and related services will be recorded when goods and
services are delivered. Monthly access charges will be billed in advance and
will be recognized as revenue when the services are provided. Rental fee revenue
and monthly fixed access charges will be recognized in the period service was
provided.
INCOME TAXES: The Company accounts for U.S. federal income taxes under the
asset and liability method. Under this method, deferred income taxes are
recorded for the temporary differences between the financial reporting basis and
tax basis of the Company's assets and liabilities. These deferred taxes are
measured by the provisions of currently enacted tax laws. The Company is
included in the consolidated tax return of Nextel. However, the income tax
accounts of McCaw International are stated as if the Company filed a separate
return.
NET LOSS PER SHARE: Net loss per share is computed based on the weighted
average number of common shares outstanding during the period.
NEW ACCOUNTING STANDARDS: The Financial Accounting Standards Board (FASB)
issued FAS No. 128, entitled "Earnings per Share" and FAS No. 129, entitled
"Disclosure of Information about Capital Structure," which are both effective
for the fiscal year ending December 31, 1997. The Company does not expect any
significant impact on the Company's financial position or results of operations
as a result of adopting these standards.
2. BUSINESS COMBINATIONS AND INVESTMENTS
SPECIAL PURPOSE COMPANY NO. 1 AND NEXTEL INVESTMENT COMPANY: On January 1,
1997, Special Purpose Company No. 1, a wholly owned subsidiary of Nextel, was
merged into the Company and renamed McCaw International (Services), Ltd. ("McCaw
Services"). McCaw Services includes all amounts associated with the Company's
expatriate employees. Subsequent to the merger, all intercompany liabilities
were converted to contributed capital.
On March 3, 1997, Nextel Investment Company, a wholly owned subsidiary of
Nextel, was merged into the Company and renamed McCaw International (CANMEX),
Ltd. ("Canmex"). Canmex is primarily an investment and asset holding company.
Immediately prior to the merger, all of Canmex's assets were transferred to
Nextel with the exception of an investment in 38% of the outstanding common
stock of Corporacion Mobilcom, S.A. de C.V. ("Mobilcom") and related assets and
3.7% of the outstanding common stock of Clearnet Communications ("Clearnet").
The remaining intercompany liability was converted to contributed capital
subsequent to the merger.
As the mergers described above represent transfers of companies under
common control, they have been accounted for in a manner similar to poolings of
interests. The poolings-of-interests method of accounting is intended to present
as a single interest two or more common shareholders' interests which were
previously independent; accordingly, the historical financial statements for the
periods presented prior to the mergers are restated as though the companies had
been combined.
F-9
<PAGE> 142
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS AND INVESTMENTS -- (CONTINUED)
The following summarizes amounts previously reported by the Company prior
to the mergers for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
Revenues:
McCaw................................ $ -- $ -- $ --
McCaw Services and Canmex............ -- -- --
------------ ------------ ----------
Combined............................. $ -- $ -- $ --
=========== =========== =========
Net income (loss):
McCaw................................ $ (8,594,017) $ (122,035) $ --
McCaw Services and Canmex............ (3,882,197) (17,915,248) 1,772,003
------------ ------------ ----------
Combined............................. $(12,476,214) $(18,037,283) $1,772,003
============ ============ ==========
Net income (loss) per share:
McCaw................................ $ (0.86) $ (0.01) $ --
McCaw Services and Canmex............ (0.39) (1.79) 0.18
------------ ------------ ----------
Combined............................. $ (1.25) $ (1.80) $ 0.18
============ ============ ==========
</TABLE>
MCCAW ARGENTINA S.A.: On August 6, 1996, Nextel contributed its investment
in McCaw Argentina formerly Com Control Comunicacion Controlada S.A., to the
Company, including licenses with a cost of $10.4 million.
As the contribution of McCaw Argentina to the Company is deemed a
reorganization of an entity under common control, the Company's financial
statements reflect the contribution as of November 21, 1995, the date McCaw
Argentina was acquired by Nextel. Accordingly, the financial statements include
the financial position and results of operations of McCaw Argentina beginning
November 21, 1995.
McCaw Argentina has licenses to provide specialized mobile radio (SMR)
services in the Argentine cities of Buenos Aires, Cordoba, Rosario, and Mendoza.
On May 6, 1997, the Company contributed its interest in McCaw Argentina
into a joint venture between the Company and Wireless Ventures of Argentina LLC
("WVA"). WVA's contribution included all of the outstanding common stock of a
paging company in Argentina and two companies that own SMR licenses in
Argentina. The Company will have a 50% voting interest and will share equally in
the profits and losses of the joint venture. Capital contributions are to be
made equally by the two parties unless otherwise agreed to by both the Company
and Wireless Ventures of Argentina LLC. The Company will account for its
investment in the joint venture using the equity method.
INFOCOM COMMUNICATIONS NETWORK, INC.: On June 14, 1996, the Company
acquired a 30% interest in a Philippine wireless telecommunications company,
Infocom, for $16 million in cash. Infocom provides paging services to
subscribers in the Philippines through a nationwide license granted by the
Philippine government. In addition, Infocom has a nationwide license to provide
ESMR services. The Company's investment in Infocom is accounted for using the
equity method. The excess purchase price over the net assets acquired totaled
$16.2 million and is being amortized over 20 years.
F-10
<PAGE> 143
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS AND INVESTMENTS -- (CONTINUED)
Summarized financial information for Infocom as of December 31, 1996 and
the period from June 14, 1996 (date of acquisition) through December 31, 1996 is
as follows:
<TABLE>
<S> <C>
Assets.................................................................. $5,661,447
Liabilities............................................................. 5,597,526
Operating income........................................................ 340,549
</TABLE>
SHANGHAI GSM SYSTEM: On October 26, 1995, the Company and Shanghai Science
& Technology Investment Company (SSTIC) formed Shanghai McCaw Telecommunications
Co. Ltd. (Shanghai McCaw), a Chinese equity joint venture in which the Company
maintains a 60% ownership interest. The joint venture's sole purpose is to
facilitate the Company's investment in the Shanghai GSM System. The Company
contributed $9.7 million to Shanghai McCaw to fund the joint venture's
investment in the Shanghai GSM System.
Under current Chinese law, foreign entities or individuals are prohibited
from participating directly in the ownership and operations of
telecommunications services. Because of this limitation, Shanghai McCaw
participates in the Shanghai GSM System through a profit-sharing arrangement
(the "Unicom Agreement") entered into originally between SSTIC and China United
Telecommunications, Ltd. (Unicom). Accordingly, the Company does not have the
ability to significantly influence the operations of the Shanghai GSM System and
therefore accounts for its investment in Shanghai McCaw under the cost method
(See Note 9).
Pursuant to the Unicom Agreement, Shanghai McCaw is to receive 42% of the
Shanghai GSM System's net earnings, of which the Company is entitled to 60%.
Accordingly, the Company currently has a contractual right to receive 25.2% of
the earnings of the Shanghai GSM System, representing the consideration for its
cash investments. All assets of the Shanghai GSM System are owned by Unicom. The
Company is not obligated to participate in future capital calls, although
failure to contribute its pro rata share could dilute the Company's right to the
Shanghai GSM System's earnings. Cash payments are made to the Company from
Shanghai McCaw in the form of distributions which are made at the discretion of
the joint venture's Board of Directors. As of March 31, 1997, the Company has
received distributions totaling $1,218,047 which have been remitted to Shanghai
McCaw in the form of a loan (See Note 9).
On March 29, 1997, Unicom and Shanghai McCaw entered into the Phase III
Unicom Agreement, which modified certain arrangements under the Unicom
Agreement. Pursuant to the Phase III Unicom Agreement (i) Shanghai McCaw has
agreed to provide 60% of the funds required to expand the capacity of the
Shanghai GSM System to provide service for an additional 100,000 subscribers,
which is estimated to be equal to approximately RMB 386.4 million (approximately
US$46.4 million). Pursuant to the Phase III Unicom Agreement (i) the 42% profit
sharing arrangements under the Unicom Agreement were retained for the period up
to the date on which the 50,001st subscriber (currently, there are approximately
25,000 subscribers) of the Shanghai GSM System is activated (the "Phase III
Commencement Date"); (ii) following the Phase III Commencement Date the
allocation of profit sharing arrangement between the parties is revised to
provide Unicom with a greater percentage resulting in Shanghai McCaw receiving
40.2% of the profits of the Shanghai GSM System; (iii) the Phase III Unicom
Agreement expires 14 1/4 years after the Phase III Commencement Date.
MOBILCOM: Through a series of investments, from March, 1995 to December,
1996, NIC acquired approximately 30.1% of the outstanding shares of Mobilcom. On
October 24, 1996, as a result of NIC's ownership percentage increasing from
18.5% to 30.1%, the accounting method used to account for this investment was
changed from the cost method to the equity method. The excess purchase price
over net assets acquired recognized as a result of the investments will be
amortized over a period of 20 years.
F-11
<PAGE> 144
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS AND INVESTMENTS -- (CONTINUED)
During the year ended December 31, 1995, the Company recorded a $15.0
million charge to operations representing an other than temporary decline in
this investment as a result of the decline in the Mexican peso.
Mobilcom has licenses to provide SMR services in various cities in Mexico,
including Mexico City, Guadalajara, Monterey, and Tijuana.
In January 1997, NIC purchased additional common shares of Mobilcom at a
cost of $16.5 million, in exchange for shares of Nextel Class A Common Stock.
Such purchase increased NIC's ownership interest to approximately 38%.
NIC has the right to appoint a majority of Mobilcom board members. In order
to retain the contractual right to designate a majority of the board of
directors of Mobilcom, NIC must invest approximately $76.8 million in Mobilcom
through certain qualified capital transactions by March 1998. As of April 16,
1997, NIC had invested $63.7 million in such qualified capital transactions. NIC
has the option to purchase before March 1998, up to an additional 29.5% of
Mobilcom's common stock. Certain shareholders of Mobilcom retain the right to
approve certain significant transactions such as acquisitions and dispositions,
and the approval of business plans of Mobilcom. In addition, beginning on
October 24, 1997, holders of approximately 33% of the outstanding capital stock
of Mobilcom have the right for two years to put (the Mobilcom Put) the entire
amount of their holding to the company at its appraised fair market value for
cash upon occurrence of certain events. The Mobilcom Put is automatically
exercisable on October 24, 1999.
On February 6, 1997, Mobilcom notified each of its shareholders of a $27
million capital call to be funded by March 11, 1997. The Company's pro rata
share of the capital call was approximately $10 million, which was funded by
Nextel. The Company funded an additional $10 million, which increased its equity
interest to approximately 46.3%.
Summarized financial information for Mobilcom as of and for the year ended
December 31, 1996 is as follows:
<TABLE>
<S> <C>
Assets................................................................. $51,944,000
Liabilities............................................................ 32,856,000
Operating loss......................................................... 5,783,000
</TABLE>
Effective January 1, 1997, Mobilcom's operations will be considered to be
in a "highly inflationary" economy, as defined in Statement of Financial
Accounting Standards No. 52, Foreign Currency Translations. Accordingly,
Mobilcom will use the U.S. dollar as its functional currency. Mobilcom's income
and expenses will be remeasured at monthly average exchange rates, except for
those related to balance sheet accounts, which will be remeasured at historical
rates. The net gain or loss on remeasurement will be recognized in the results
of operations currently.
CLEARNET: NIC owns 1,596,067 shares of common stock representing 3.7% of
Clearnet. Clearnet provides analog SMR and ESMR services in Canada and holds a
nationwide license to provide PCS services in Canada. The Company's 3.7%
interest in Clearnet is accounted for at fair market value. The market value of
Clearnet common stock at December 31, 1996 was $11 per share.
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES (WVB): On January 30,
1997, Nextel purchased 81% of WVB for $186.3 million in Nextel Class A Common
Stock. Nextel's investment in WVB was simultaneously contributed to the Company.
WVB provides SMR services throughout Brazil. WVB holds licenses for channels in
23 cities in Brazil including Sao Paulo, Rio de Janeiro, Belo Horizonte,
Curitiba, and Brasilia. The acquisition of WVB has been accounted for as a
purchase and is included in McCaw International's fiscal year 1997 consolidated
financial statements.
F-12
<PAGE> 145
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS COMBINATIONS AND INVESTMENTS -- (CONTINUED)
Summarized financial information for WVB as of and for the year ended
December 31, 1996 is as follows:
<TABLE>
<S> <C>
Assets................................................................. $63,044,510
Liabilities............................................................ 50,561,399
Operating loss......................................................... 13,673,278
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Equipment................................................... $ 151,194 $ --
Computer equipment and software............................. 93,869 6,801
Furniture and fixtures...................................... 124,401 29,255
Leasehold improvements...................................... 15,930 --
Construction in progress.................................... 8,391,654 --
---------- ----------
8,777,048 36,056
Accumulated depreciation.................................... (73,972) --
---------- ----------
$8,703,076 $ 36,056
========== ==========
</TABLE>
4. NOTES RECEIVABLE
As of December 31, 1996, notes receivable consisted of the following (in
thousands):
<TABLE>
<S> <C>
Due from affiliated companies............................................... $5,378
Due from officer of Nextel.................................................. 250
Interest receivable......................................................... 75
------
$5,703
======
</TABLE>
On August 23, 1996, the Company advanced Grupo Comunicaciones San Luis,
S.A. de C.V., an investor in Mobilcom, $12.0 million. The principal and interest
outstanding as of December 31, 1996 was $3.4 million. The note bears interest at
a rate of 14.5% and is payable in full on January 13, 1998.
On September 17, 1996 the Company entered into an agreement with SRI, Inc.
("SRI") and Spectrum Resources of the Northeast ("SRNE") to loan up to $5.0
million to purchase certain specialized mobile radio ("SMR") equipment and
finance other costs related to constructing SMR channels. The note bears
interest at a rate equal to 10.0% per annum and is collateralized with the SMR
equipment and other assets used in construction of the SMR channels. The note
and accrued interest are due in full on the date SRI and SRNE merge with Nextel.
The merger closing date is anticipated to be during the second half of 1997. SRI
and SRNE have borrowed $1.9 million under this loan as of December 31, 1996.
Notes due from officers of the Company and Nextel earn interest at a rate
of 6% compounded annually. Principal and interest are due at various dates
through January 2000.
All of the balances outstanding as of December 31, 1996 plus accrued
interest were transferred to Nextel prior to the merger of NIC and the Company.
Accordingly, they have been classified as current.
5. DUE TO NEXTEL
The intercompany balance due to Nextel represents costs paid by Nextel on
behalf of the Company since the Company's inception, primarily to fund operating
activities. Included in the balance at December 31, 1996 is a $23.1 million note
payable to Nextel that bears interest at a rate of 7% compounded semi-annually
and is payable in full in October 2006. The remainder of the advance is
non-interest bearing.
F-13
<PAGE> 146
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DUE TO NEXTEL -- (CONTINUED)
In October 1996, the Company received from Nextel 1.3 million shares of
Nextel Class A Common Stock valued at $23.1 million in exchange for a promissory
note. The stock was subsequently used as consideration to obtain an additional
11.6% interest in Mobilcom. (See Note 2.)
In February 1997, the Company transferred all of NIC's assets with the
exception of its Clearnet and Mobilcom investment and related assets to Nextel
as repayment for the note payable and intercompany advances received from
Nextel. The remaining outstanding liability due to Nextel was converted to an
additional equity contribution to the Company in connection with the merger of
NIC into the Company. (See Note 2.) Accordingly, they have been classified as
current.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1996 and 1995 are as follows:
CURRENT ASSETS AND CURRENT LIABILITIES: The carrying amounts approximate
fair value due to the short-term maturity of these instruments.
NOTES RECEIVABLE: The fair value of these noncurrent receivables
approximate book value and are estimated by discounting future cash flows using
current rates at which similar notes would be issued to similar borrowers and
quoted market prices, as applicable.
INVESTMENTS AND OTHER ASSETS: Included in investments and others assets is
the Company's investment in Clearnet, which approximates its fair value of
$17,607,000 and $25,505,000 as of December 31, 1996 and 1995, respectively. The
balance also includes the Company's 1.3% interest in non-marketable equity
securities of foreign entities. There is no market for the foreign entities'
common shares, and it was impracticable to estimate the fair market value of the
Company's investment. The investments are carried on the balance sheet at
original cost.
DUE TO NEXTEL: The fair value of the $23.1 million note included in due to
Nextel approximates book value and is based on current rates at which the
Company could borrow funds with a similar maturity.
7. LEASES
The Company leases office facilities under operating leases with terms
ranging from 1 to 5 years.
Future minimum lease payments for years ending after December 31, 1996
under operating leases that have initial noncancelable lease terms exceeding one
year are as follows:
<TABLE>
<S> <C>
1997...................................................................... 210,828
1998...................................................................... 152,132
1999...................................................................... 126,820
2000...................................................................... 124,620
2001...................................................................... --
--------
$614,400
========
</TABLE>
F-14
<PAGE> 147
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The reconciliation of income taxes computed at the statutory rate to the
income tax benefit is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
----------- ----------- --------
<S> <C> <C> <C>
Income tax provision (benefit) at statutory
rate........................................... $(3,781,260) $(5,412,199) $913,189
Nonconsolidated subsidiary adjustments........... 2,209,480 7,430,042 --
Other............................................ 329,611 6,560 657
Increase in valuation allowance.................. 2,597,031 94,647 --
----------- ----------- --------
Tax provision (benefit).......................... $ 1,354,862 $ 2,119,050 $913,846
=========== =========== ========
</TABLE>
Deferred taxes consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Deferred tax asset:
Operating loss carryforward.......................... $ 2,691,678 $ 94,647
Valuation allowance.................................. (2,691,678) (94,647)
----------- -----------
Deferred tax asset................................... $ -- $ --
=========== ===========
Deferred tax liability:
Unrealized gain on investments....................... $ 1,562,263 $ 4,320,466
=========== ===========
</TABLE>
At December 31, 1996, the Company had approximately $6.0 million of
consolidated net operating loss carryforwards for federal income tax purposes
which expire during 2010 and 2011. In addition at December 31, 1996, the Company
had approximately $1.9 million of consolidated net operating loss carryforwards
for Argentinean income tax purposes which expire in 2000 and 2001. The Company
may be limited in its ability to use tax net operating losses in any one year
depending on its ability to generate sufficient taxable income.
9. RELATED PARTIES
In 1996, the Company loaned Shanghai McCaw $10.5 million to fund the
buildout of the Shanghai GSM System. The note receivable is part of a total
commitment of $13.2 million, bears interest at 7% per annum and requires
payments of principal and interest in four annual installments, commencing
December 31, 1997. Due to the lack of significant control over the Company's
investment in Shanghai McCaw, the note is recorded as an addition to the
Company's investment in Shanghai McCaw. In addition to the $13.2 million
commitments the Company has committed to lend Shanghai McCaw $2.2 million in the
event of a budget overrun.
During the year ended December 31, 1996, Nextel has performed certain
administrative functions for the Company, consisting of accounting, legal and
other services, for approximately $504,084, which has been treated as a capital
contribution by the parties. No amounts were incurred for the years ended
December 31, 1995 or 1994 due to the limited operations of the Company.
Infocom and the Company have entered into a technical services agreement
pursuant to which the Company has agreed to provide Infocom with engineering and
other technical services, market assistance and system operation assistance. The
agreement was effective beginning, September, 1996 and provides for monthly
payments of $36,000 and has a three year renewal period.
In 1996, the Company entered into a loan agreement (the Argentina SMR
Equipment Financing) with Motorola, Inc., (Motorola) a significant shareholder
of Nextel common stock, to purchase analog SMR equipment in Argentina for $4.1
million. The agreement is collateralized by 100% of McCaw Argentina S.A.
outstanding stock and all of the assets of McCaw Argentina. The loan was due on
March 30, 1997 with interest accruing at 12% per annum unless McCaw Argentina
places an order for iDEN equipment. In such
F-15
<PAGE> 148
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED PARTIES -- (CONTINUED)
case, principal is due in October 1999 and interest will be forgiven. As McCaw
Argentina has ordered iDEN equipment from Motorola, the loan has been classified
as long-term.
On March 27, 1997, Nextel and Motorola reached agreement on terms and
conditions pursuant to which the Company could access up to $400.0 million of
equipment financing through Motorola, subject to certain per country limits. No
amounts have been borrowed under this agreement by Nextel or the Company to
date.
10. STOCKHOLDER'S EQUITY
In connection with the Offering of High-Yield Debt Securities (see Note
13), the board of directors approved a 100,000 for 1 stock split effective prior
to the Initial Offering which resulted in 10 million shares issued and
outstanding. To complete the transaction, the Company increased its authorized
shares from 10,000 to 20 million. Earnings per share for all periods presented
reflect this stock split.
11. EMPLOYEE BENEFIT PLANS
Employee Stock Option Plan
Certain of the Company's employees participate in Nextel's Incentive Equity
Plan (the "Nextel Plan"). Generally, options outstanding under the Nextel Plan
(i) are granted at prices equal to or exceeding the market value of Nextel's
stock on the grant date; (ii) vest ratably over either a four or five year
service period; and (iii) expire ten years subsequent to award.
A summary of the Nextel Plan activity related to the Company's employees is
as follows:
<TABLE>
<CAPTION>
OPTION WEIGHTED AVERAGE
SHARES PRICE RANGE EXERCISE PRICE
------- ----------------- ----------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1994........................ -- $ -- $
Granted.......................................... 81,500 14.87 18.37 15.63
------- ------ ------ ------
Outstanding, December 31, 1995........................ 81,500 14.87 18.37 15.63
Granted.......................................... 59,700 15.12 15.12
Canceled......................................... (5,100) 14.87 15.12 14.88
------- ------ ------ ------
Outstanding, December 31, 1996........................ 136,100 $15.12 $18.37 $15.44
======= ====== ====== ======
Exercisable, December 31, 1996........................ 18,750 $15.62 $15.62
======= ====== ======
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). This Statement encourages but does not require
companies to account for employee stock compensation awards based on their
estimated fair value at the grant date with the resulting cost charged to
operations. The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. The effect of applying the fair value method to the
Company's stock-based awards results in net income and earnings per share that
are not materially different from amounts reported.
Stock Appreciation Rights
On November 1, 1996, the Company adopted a Stock Appreciation Rights Plan
(the "SAR Plan"), which was effective as of November 1, 1995, whereby selected
employees and agents of the Company may be granted rights to share in the future
appreciation in the value of the Company. Such rights do not represent an equity
interest in the Company, only a right to compensation under the terms of the
plan.
F-16
<PAGE> 149
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The Company retroactively granted 1,140,000 rights under the plan, at an
exercise price of $10.00 per right, on dates ranging from October 1, 1995 to
December 31, 1996, with vesting periods of 4 years. Under the provisions of the
plan, the number of shares used in calculating the fair value per share is
adjusted periodically to reflect capital contributed to the Company by its
parent. This adjustment is generally only for purposes of valuing the SAR's. It
does not necessarily reflect the actual issuance of additional shares of common
stock. Rights under the plan may not be exercised until the employee has vested
50% of the grants. As of December 31, 1996 and 1995, there were 1,240,000 and
755,000 rights outstanding, respectively. None of those rights were exercisable
under the terms of the plan. No compensation expense had been recognized and the
Company had no commitment to make payments under the plan at December 31, 1996
and 1995 because there had not been any appreciation in the value of the rights
from the time of issuance to December 31, 1996.
On June 23, 1997, the board of directors adopted, subject to the approval
of Nextel, the Company's sole shareholder, the 1997 Stock Option Plan and
approved a plan to terminate the SAR Plan. Each holder of SARs granted
previously has been given the right to exchange the SARs for options to be
granted at approximately fair value under the 1997 Stock Option Plan. The
Company expects holders representing a substantial majority of the outstanding
SARs, including all of the members of the Company's senior management team, to
exchange their SARs for options granted under the 1997 Stock Option Plan.
12. GEOGRAPHIC SEGMENT INFORMATION
McCaw Argentina represents $22,362,474 and $10,153,502 of total assets as
of December 31, 1996 and 1995, respectively, and operating losses of $2,738,697,
$23,889 and $0 for the years ended December 31, 1996, 1995 and 1994,
respectively.
13. OFFERING OF HIGH-YIELD DEBT SECURITIES
In March, 1997, the Company issued through a private placement 951,463
units, each unit representing one senior discount note due 2007 (the Notes) and
one warrant to purchase .10616 shares of common stock (the Warrant). The Notes
are unsecured obligations of the Company and will carry a market interest rate
of 13%. The indenture governing the Notes contains substantial covenants and
restrictions of which the Company currently is in compliance. Proceeds of the
offering, net of issue costs of $16.8 million, were $482 million, with $14.8
million allocated to the Warrants.
The Warrants may be exercised for $36.45 per share. Interest on the Notes
is payable in cash on each April 15 and October 15, commencing October 15, 2002.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after April 15, 2002.
On May 7, 1997, the Company filed a registration statement with the
Securities and Exchange Commission in connection with an exchange offer whereby
the holders of the Notes issued in the private placement will be offered the
opportunity to exchange their Notes for publicly tradeable notes.
F-17
<PAGE> 150
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $479,994,983
Accounts receivable...................................................... 3,246,379
Radios and accessories................................................... 2,299,863
Prepaid and other........................................................ 1,524,052
------------
Total current assets................................................ 487,065,277
Property, plant, and equipment, net........................................... 22,538,503
Notes receivable.............................................................. 2,170,286
Investment in unconsolidated subsidiaries..................................... 124,025,593
Intangible assets............................................................. 271,776,869
Investments and other assets.................................................. 35,014,484
------------
$942,591,012
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable.............................................................. $ 19,260,563
Payable to Nextel............................................................. 1,309,787
------------
Total current liabilities........................................... 20,570,350
Deferred income taxes......................................................... 68,768,840
Long-term debt................................................................ 489,909,208
------------
Total liabilities................................................... 579,248,398
Minority interest............................................................. 5,251,125
Stockholder's equity:
Common stock (20,000,000 shares authorized, no par value, 10,000,000
shares issued and outstanding).......................................... 395,427,766
Accumulated deficit...................................................... (38,551,777)
Unrealized gain on investments, net of tax............................... 1,215,500
------------
Total stockholder's equity.......................................... 358,091,489
------------
$942,591,012
============
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE> 151
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
------------ -----------
<S> <C> <C>
Revenues........................................................ $ 1,460,388 $ --
Costs and expenses related to revenues.......................... 956,585 --
Selling, general and administrative............................. 3,852,548 821,027
Depreciation and amortization................................... 2,580,572 7,860
------------ -----------
Operating loss.................................................. (5,929,317) (828,887)
------------ -----------
Other income (expense):
Interest income............................................ 2,797,541 1,144,927
Interest expense........................................... (5,590,895) --
Loss from equity method investments........................ (1,866,894) (1,269,300)
Other, net................................................. (157,616) (4,987)
------------ -----------
Total other income (expense).......................... (4,817,864) (129,360)
Minority interest............................................... 437,594 --
------------ -----------
Net loss before taxes........................................... (10,309,587) (958,247)
------------ -----------
Income tax benefit (provision).................................. 499,304 (389,275)
------------ -----------
Net loss........................................................ $ (9,810,283) $(1,347,522)
------------ -----------
Net loss per common share....................................... $ (0.98) $ (0.13)
=========== ==========
Weighted average number of common shares outstanding............ 10,000,000 10,000,000
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE> 152
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $ (9,810,283) $(1,347,522)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................ 2,580,572 7,860
Interest accretion on long term debt......................... 4,849,132 --
Loss from equity method investments.......................... 1,866,894 1,269,300
Minority interest............................................ (437,594) --
Change in current assets and liabilities:
Accounts receivable..................................... 236,272 (27,726)
Radios and accessories.................................. 243,111 --
Prepaid and other....................................... (2,149,078) (55,528)
Investments and other assets............................ -- (393,354)
Accounts payable........................................ 398,574 (68,645)
Other................................................... 1,751,218 389,275
------------ -----------
Net cash used in operating activities........................ (471,182) (226,340)
------------ -----------
Cash flows from investing activities:
Purchase of property, plant and equipment.................... (6,192,982) (167,950)
Purchase of licenses......................................... -- (233,463)
Issuance of note receivable.................................. (2,143,619) --
Investments in unconsolidated subsidiaries................... (26,916,245) (4,300,000)
Other........................................................ (2,498,640)
------------ -----------
Net cash used in investing activities........................ (37,751,486) (4,701,413)
------------ -----------
Cash flows from financing activities:
Borrowings from (repayments to) Nextel, net.................. (23,556,134) (261,553)
Capital contribution from parent............................. 6,366,087 5,347,578
Proceeds from issuance of warrants........................... 14,800,098 --
Proceeds from issuance of long term debt, net................ 467,578,325 --
------------ -----------
Net cash provided by financing activities.................... 465,188,376 5,086,025
------------ -----------
Increase in cash and cash equivalents............................. 426,965,708 158,272
Cash and cash equivalents, beginning of period.................... 53,029,275 85,302,423
------------ -----------
Cash and cash equivalents, end of period.......................... $479,994,983 $85,460,695
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE> 153
MCCAW INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the consolidated
financial position of McCaw International, Ltd. and Subsidiaries (the "Company")
as of March 31, 1997, and the results of its operations and cash flows for the
three months ended March 31, 1997 and 1996. The results of operations for the
three months ended March 31, 1997 and 1996 are not necessarily indicative of the
results that may be expected for the full year. These condensed financial
statements are unaudited, and do not include all related footnote disclosures.
The interim unaudited condensed financial statements should be read in
conjunction with the audited financial statements of the Company.
(2) BUSINESS ACQUISITIONS
McCaw Brazil
On January 30, 1997, Nextel purchased 81% of the issued and outstanding
capital stock of Wireless Ventures of Brazil, Inc. ("WVB") from Telcom Ventures,
Inc. and affiliates (Telcom Ventures) in exchange for $186.3 million in Nextel
Class A Common Stock. Nextel's investment in WVB was simultaneously contributed
to the Company, and the Company changed its name to McCaw International
(Brazil), Ltd. ("McCaw Brazil"). McCaw Brazil and its subsidiaries hold licenses
for 1700 channels and provide SMR services in 23 cities in Brazil including Sao
Paulo, Rio de Janiero, Belo Horzonte, Curitiba, and Brazilia. Telcom Ventures
has the right between October 31, 2001 and November 1, 2003, to require the
Company to redeem their 19% interest in McCaw Brazil at fair market value as
determined pursuant to an appraisal procedure. The Company is currently required
to fund 100% of McCaw Brazil's capital requirements until April 30, 1999 when
Telcom Ventures must either i) contribute its pro rata share plus accrued
interest or ii) dilute its ownership interest. Dividends are declared at the
discretion of McCaw Brazil's board of directors and are allocated based on the
ownership percentages in effect at the date of declaration. No dividends have
been declared to date.
The total cost of the acquisition, which was accounted for as a purchase,
was $187.2 million and exceeded the net liabilities of the Company by $215.7.
The excess was allocated to licenses and goodwill based on their preliminary
estimated fair values and is being amortized over their estimated useful lives
of 20 years. The following summarized pro forma (unaudited) information assumes
the acquisition had occurred on January 1, 1996.
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
Revenues............................................... $ 2,597,347 $ 3,568,641
============= ============
Net Loss............................................... (10,949,655) (5,418,503)
============= ============
Net Loss per share..................................... (1.09) (0.54)
============= ============
</TABLE>
The above amounts combine the historical results of operations prior to the
merger and reflect adjustments for interest on notes payable forgiven in
connection with the purchase agreement, the recognition of the minority interest
and the amortization of licenses and goodwill.
F-21
<PAGE> 154
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Wireless Ventures of Brazil, Inc.
Washington, D.C.:
We have audited the accompanying consolidated balance sheet of Wireless
Ventures of Brazil, Inc. and subsidiaries (the Company) as of December 31, 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wireless Ventures of Brazil,
Inc. and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Seattle, Washington
March 27, 1997
F-22
<PAGE> 155
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 389,816
Trade accounts receivable, net of allowance for doubtful accounts of
$3,005,653............................................................ 2,647,314
Inventory, net......................................................... 1,839,116
Prepaid expenses and other current assets.............................. 784,576
Due from officers and employees........................................ 147,137
-------------
Total current assets.............................................. 5,807,959
Property and equipment, net of accumulated depreciation of $3,117,813....... 8,842,875
License rights, net of accumulated amortization of $10,299,391.............. 48,291,499
Intangible assets, net of accumulated amortization of $154,167.............. 95,833
Other assets................................................................ 6,344
-------------
Total assets................................................................ $ 63,044,510
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................................. $ 10,473,831
Due to affiliates...................................................... 863,572
Interest payable....................................................... 2,060,377
Income taxes payable................................................... 200,000
Bank loans payable..................................................... 1,257,677
Deferred income taxes.................................................. 204,421
Short-term note payable to majority stockholder........................ 16,973,004
-------------
Total current liabilities......................................... 32,032,882
Other liabilities:
Other taxes payable.................................................... 2,789,949
Deferred income taxes.................................................. 15,738,568
-------------
Total liabilities................................................. 50,561,399
-------------
Commitments and contingencies
Stockholders' equity:
Common stock; $.01 par value; 1,000,000 shares authorized; 90,341
shares issued and outstanding......................................... 903
Additional paid-in capital............................................. 39,528,659
Accumulated deficit.................................................... (27,046,451)
-------------
Total stockholders' equity........................................ 12,483,111
-------------
Total liabilities and stockholders' equity.................................. $ 63,044,510
=============
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE> 156
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenue....................................................................... $ 14,212,379
Cost of operations............................................................ 9,589,401
Selling, general and administrative expenses.................................. 13,019,232
Depreciation and amortization expense......................................... 5,277,024
------------
Operating loss................................................................ (13,673,278)
Other income (expense):
Interest income.......................................................... 449,303
Gain on foreign currency translation..................................... 172,909
Interest expense......................................................... (3,085,430)
Other.................................................................... (50,000)
------------
Loss before provision for income tax.......................................... (16,186,496)
Provision for income tax...................................................... (556,202)
------------
Net loss...................................................................... $(16,742,698)
============
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE> 157
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.................... $903 $39,212,452 $(10,303,753) $ 28,909,602
Capital distribution................... -- (458,000) -- (458,000)
Contributed capital -- expenses paid by
majority stockholder................. -- 774,207 -- 774,207
Net loss............................... -- -- (16,742,698) (16,742,698)
---- ----------- ------------ -------------
BALANCE, DECEMBER 31, 1996.................. $903 $39,528,659 $(27,046,451) $ 12,483,111
==== =========== ============ =============
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE> 158
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss................................................................. $(16,742,698)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization expense............................... 5,277,024
Provision for doubtful accounts..................................... 1,470,598
Provision for income tax............................................ 556,202
Change in assets and liabilities, net of effects from business
acquisitions:
Increase in trade accounts receivable.......................... (988,555)
Decrease in inventory.......................................... 808,221
Increase in prepaid expenses and other current assets.......... (261,847)
Increase in due from officers and employees.................... (111,328)
Decrease in other assets....................................... 78,446
Increase in accounts payable and accrued expenses.............. 2,318,781
Increase in due to affiliates.................................. 458,969
Increase in interest payable................................... 1,378,657
Increase in other taxes payable................................ 2,789,949
------------
Net cash used in operating activities..................... (2,967,581)
------------
Cash flows from investing activities:
Purchase of property and equipment....................................... (755,349)
Payments on acquisitions of licensee companies........................... (1,130,000)
------------
Net cash used in investing activities..................... (1,885,349)
------------
Cash flows from financing activities:
Capital contributions.................................................... 774,207
Stockholder distributions................................................ (458,000)
Proceeds from short-term note payable to majority stockholder............ 4,413,334
Payments on bank loans payable........................................... (806,919)
Proceeds from bank loans payable......................................... 1,257,677
------------
Net cash provided by financing activities................. 5,180,299
------------
Net increase in cash and cash equivalents..................................... 327,369
Cash and cash equivalents, beginning of year.................................. 62,447
------------
Cash and cash equivalents, end of year........................................ $ 389,816
============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest................................... $ 1,291,432
============
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE> 159
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
1. DESCRIPTION OF OPERATIONS AND LIQUIDITY
Wireless Ventures of Brazil, Inc. (WVB), a Virginia corporation whose
majority stockholder on December 31, 1996 is Telcom Ventures, L.L.C. (Telcom
Ventures), which is a Delaware limited liability company, was organized in
August 1993 for the purpose of pursuing wireless communications investment
opportunities in Brazil. As of December 31, 1996, WVB, through Brazilian
licensee companies, holds licenses to provide a class of mobile
telecommunications services known as specialized mobile radio (SMR) or trunking
services in the 800 MHz frequency band in Brazil. SMR services use radio
frequencies to allow multiple subscribers to communicate between remote portable
or mobile radios.
As of December 31, 1996, WVB's subsidiaries held licenses for a total of
1,400 SMR channels in 23 cities in Brazil, including 195 channels in Sao Paulo
and channels in Rio de Janeiro, Belo Horizonte, Curitiba, and Brasilia. The
initial term for such licenses is 15 years, although such licenses are issued at
the sole discretion of the Brazilian Ministry of Communications (the Ministry),
which can seek to cancel the Company's licenses if certain license requirements
are not met. In addition, licensees are required by the Ministry to complete
build-out of the channels and loading of subscribers by a certain date. Failure
to comply with the requirements could result in the revocation of the licenses
by the Ministry. At December 31, 1996, WVB had several channels that had not
been constructed and loaded with subscribers within the specified time frame.
Although there can be no assurance that the Ministry will not revoke these or
any other licenses, the management of WVB has either filed for extensions from
the Ministry or has taken other corrective action and believes the risk of loss
of the licenses due to noncompliance is remote.
In September 1994, WVB formed an indirect wholly owned subsidiary, a
Brazilian service company, AirLink Service e Comercio. Ltda (AirLink). AirLink
holds no licenses but owns equipment and, pursuant to service contracts,
provides technical support, billing, and other administrative functions to the
licensee companies in Brazil.
WVB and its subsidiaries (collectively, "the Company") expect to expand
their operations through continued capital investment in current analog and
future digital technologies to create a national mobile telecommunications
system in Brazil. The Company currently is not generating sufficient cash flows
from operations to support its current operating and capital requirements. The
Company has and will continue to be dependent upon its stockholders to fund
these requirements. The Company's future profitability is dependent upon its
ability to further develop its existing system and successfully market its
mobile radio services in its primary Brazilian markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of WVB and its direct and indirect wholly owned subsidiaries, Via
Radio Administracao e Participacoes Ltda. (VRA), Air-fone Participacoes e
Empreendimentos Ltda. (Airfone), and AirLink, and its indirect 49 percent
interest in Master-Tec Industria e Comercio de Produtos Eletronicos Ltda.
(Master-Tec), Telemobile Telecomunicacoes Ltda. (Telemobile), Promobile
Telecomunicacoes Ltda. (Promobile), LMP Consultoria e Representacoes Ltda. (LMP)
and Telecomunicacoes Brastel S/C Ltd. (Brastel). VRA wholly owns seven Brazilian
subsidiaries, the accounts of which are consolidated with the accounts of the
Company. In addition, Airfone wholly owns two Brazilian subsidiaries, the
accounts of which are consolidated with the accounts of the Company. WVB
acquired indirect 49 percent interests in MasterTec, Telemobile, Promobile, LMP
and Brastel and has the right to obtain the remaining 51 percent for nominal
consideration when it receives approval from the Ministry. As WVB has effective
control of these five companies, the accounts of Master-Tec, Telemobile,
Promobile, LMP and Brastel are consolidated with the accounts of the Company and
no minority interest is recorded. All significant intercompany balances and
transactions have been eliminated in consolidation.
F-27
<PAGE> 160
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The following companies are included in the consolidated financial
statements:
<TABLE>
<CAPTION>
DIRECT AND
INDIRECT INTEREST
BRAZILIAN SUBSIDIARIES HELD BY WVB
---------------------------------------------------------------------- -----------------
<S> <C>
AirLink Servicos e Comercio Ltda. .................................... 100%
Air-fone Participacoes e Empreendimentos S/C Ltda. ................... 100%
SOW Comercio e Servicos de Radiofonia Movel Ltda. .................... 100%
Air-fone Comercio e Servicos de Radiofonia Movel Ltda. ............... 100%
Via Radio Administracao e Partcipacoes Ltda. ......................... 100%
Via Radio 1 Telecomunicacoes Ltda. ................................... 100%
Comercial Telecar Ltda. .............................................. 100%
Telemovel Servicos Ltda. ............................................. 100%
Radio Telecomunicacoes do Brasil Ltda. ............................... 100%
ATG -- Telecomunicacoes e Comercio Ltda. ............................. 100%
Car-Tel Telefonia Movel S/C Ltda. .................................... 100%
Comercial Teleservice Ltda. .......................................... 100%
Promobile Telecomunicacoes Ltda. ..................................... 49%(a)
Telemobile Telecomunicacoes Ltda. .................................... 49%(a)
Master-Tec Industria e Comercio de Produtos Eletronicos Ltda.......... 49%(a)
Telecomunicacoes Brastel S/C Ltda. ................................... 49%(a)
LMP Consultoria e Representacoes Ltda. ............................... 49%(a)
</TABLE>
- ---------------
(a) Under the respective purchase agreements, the Company has the
right to obtain the remaining 51 percent for nominal consideration
when the Ministry approves the transfer of the license rights. As
of December 31, 1996, these companies had no significant
operations and their principal assets recorded were represented by
license rights.
CASH EQUIVALENTS: For purposes of the statement of cash flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents. Cash equivalents consisted of approximately
$218,111 in overnight investments and short-term deposits as of December 31,
1996.
INVENTORY, NET: Inventory, which consists primarily of telecommunications
equipment (radios), is stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. The inventory of the Company is subject to
rapid technological changes that could have an adverse financial impact on its
full realization in future periods.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from 3 to 10 years. Depreciation on
constructed assets, which includes radio towers and analog mobile radio systems,
begins when the assets are substantially completed and ready for their intended
use.
For constructed assets, all costs necessary to bring such assets to the
condition and location necessary for their intended use are initially
capitalized as construction-in-progress and are subsequently transferred to
telecommunications equipment.
LICENSE RIGHTS: License rights consist of licenses to operate channels for
the provision of SMR services in Brazil. Amortization is calculated on the
straight-line method over 15 years, the initial term of the licenses. The
amortization is also calculated for the licenses of those companies that have
not yet started their operations.
F-28
<PAGE> 161
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The license rights are held by the Brazilian subsidiaries that WVB has
acquired directly and indirectly, through its holding companies both inside and
outside Brazil from 1993 to 1996. The acquisitions have been accounted for using
the purchase method of accounting. At the time of such acquisitions, a
substantial portion of the purchase cost was allocated to the license rights.
These costs have no basis for income tax reporting purposes. Therefore, the
Company has established a deferred tax liability. This deferred tax liability
was offset by an increase in the acquisition costs of the license rights and is
being amortized over 15 years.
INTANGIBLE ASSETS: Intangible assets consist of the cost allocated to a
covenant not to compete associated with an acquisition. Amortization is
calculated on the straight-line method over 5 years, the term of the noncompete
arrangement.
REVENUE RECOGNITION: The Company's principal sources of revenue are the
provision of mobile telecommunications services to businesses and individuals
and the sale and rental of telecommunications equipment (radios) to its service
subscribers. Service revenue consists of a usage fee based on the number of
minutes the subscriber uses each month (airtime revenues) plus a fixed monthly
service fee. Revenue for equipment sales is recognized at the time the
merchandise is shipped. Service and rental revenue are recognized ratably over
the term of the agreements.
FOREIGN CURRENCY TRANSLATION: The Company accounts for translation of
foreign currency in accordance with Statement of Financial Accounting Standards
No. 52 (SFAS No. 52), Foreign Currency Translations. During the year ended
December 31, 1996, the Company's Brazilian operations were considered to be in a
"highly inflationary" economy, as defined in SFAS No. 52. Accordingly, the
Company uses the U.S. dollar as the functional currency. Therefore, certain
assets and liabilities are remeasured at historical exchange rates while other
assets and liabilities are remeasured at current exchange rates, as follows:
- Inventories, property and equipment, license rights, and stockholders'
equity are remeasured at their appropriate current exchange rates.
- Accounts receivable, other assets, accounts payable and other
liabilities denominated in U.S. dollars are stated at their actual U.S.
dollar amounts.
- Accounts receivable, certain other assets, accounts payable, and other
liabilities denominated in Brazilian reais are remeasured at the
commercial transaction foreign exchange rate published by the Brazilian
Central Bank at the balance sheet date.
- Income and expenses are remeasured at monthly average exchange rates,
except for those related to balance sheet accounts remeasured at
historical rates.
- The net gain or loss on remeasurement is recognized in the results of
operations currently.
The remeasurement into U.S. dollar equivalent should not be construed as
representation that the Brazilian real amounts actually represent or have been
or could be converted into U.S. dollars at these or any other rates.
INCOME TAXES: In accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, the Company uses the asset and
liability method to recognize deferred tax assets and liabilities. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-29
<PAGE> 162
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
VAT (ICMS AND ISS TAXES): The provision of telecommunication services by
the Company's Brazilian subsidiaries is subject to ICMS taxes, a state-level
value-added tax (VAT) levied at a rate of 25 percent. Non-telecommunication
services provided by the Brazilian subsidiaries are subject to ISS taxes, a
municipal service tax levied at rates of five percent or less depending on the
Brazilian city in which the services are provided. The Brazilian subsidiaries
generate revenues that encompass both aspects of telecommunication services and
non-telecommunication services. The management of the Company has adopted an
allocation method for segregating the revenue for tax reporting purposes. The
allocation method utilized by the Company could be subjected to review by the
Brazilian tax authorities and could be altered as a result of such examination.
Accordingly, the Company could be assessed additional taxes by the Brazilian tax
authorities. The management of the Company periodically reviews its allocation
method and accrues additional reserves for taxes to cover such exposure.
Management believes that such assessments, if any, by the Brazilian taxing
authorities would not have a material impact on the financial statements.
CONCENTRATIONS OF RISKS: Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
trade accounts receivable. The Company sells its products to commercial and
individual customers in Brazil, and extends credit, generally without requiring
collateral. The Company monitors its exposure for credit losses and maintains
allowances for anticipated losses. Since its inception the Company has suffered
significant credit losses, and these losses could continue in the future. Also,
the Company's core business is in Brazil and its operations may be adversely
affected by economic fluctuations.
USE OF ESTIMATES: The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
LONG-LIVED ASSETS: Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Long-lived assets and identifiable intangibles held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. Impairment is measured by comparing the
carrying value of the long-lived asset to the estimated undiscounted future cash
flows expected to result from use of the assets and their eventual disposition.
The Company determined that as of December 31, 1996, there had been no
impairment in the carrying value of long-lived assets.
F-30
<PAGE> 163
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Telecommunications equipment........................................... $ 8,940,967
Furniture and equipment................................................ 582,700
Computer equipment..................................................... 1,180,886
Telephone lines........................................................ 255,992
Construction-in-progress (see Notes 2 and 5)........................... 910,445
Leasehold improvements................................................. 78,743
Vehicles............................................................... 10,955
-----------
11,960,688
Less accumulated depreciation.......................................... (3,117,813)
-----------
$ 8,842,875
===========
</TABLE>
Property and equipment at December 31, 1996, includes approximately
$453,554 in rental radios that have been shipped to customers under short-term
rental agreements. Rental radios are depreciated using the straight-line method
over the estimated useful life of the radios, which is three years.
4. BUSINESS ACQUISITIONS
ACQUISITION OF INTEREST IN TELEMOBILE AND PROMOBILE: In November 1994, the
Company entered into an agreement to purchase 49 percent of the capital stock of
Telemobile and Promobile for a total of approximately $6,782,000 with an option
to acquire the remaining 51 percent for no additional purchase price. Prior to
December 31, 1994, $3,000,000 of such purchase price was paid. Telemobile and
Promobile collectively hold licenses to operate 540 channels for the provision
of trunking services in Brazil. Of the remaining balance of the purchase price,
$3,282,000 was paid during 1995 and 1996. The remaining amount of $500,000 is
included in current liabilities within the accompanying consolidated financial
statements, and is expected to be paid prior to December 31, 1997.
The acquisition of Telemobile and Promobile has been accounted for using
the purchase method of accounting. Accordingly, the purchase price was allocated
to the licenses for the 540 channels held by Telemobile and Promobile.
Additionally, the Company established a deferred tax liability in connection
with the acquisition since the license rights acquired have no basis for tax
reporting purposes in Brazil. Such amount has been allocated as an increase in
the license rights acquired.
ACQUISITION OF INTEREST IN LMP: In May 1996, the Company entered into an
agreement to purchase all of the capital stock of LMP for a total of $900,000.
As of December 31, 1996, $450,000 of such purchase price is included in current
liabilities. Under the terms of the purchase agreement, the remaining purchase
price will be due and payable upon approval from the Ministry for transfer of
control of the licenses. LMP holds licenses to operate 220 SMR channels in
Brazil.
The acquisition of LMP has been accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the licenses for
the 220 channels held by LMP. Additionally, the Company established a deferred
tax liability in connection with the acquisition since the license rights
acquired have no basis for tax reporting purposes in Brazil. Such amount has
been allocated as an increase in the license rights acquired.
ACQUISITION OF INTEREST IN BRASTEL: In May 1996, the Company entered into
an agreement to purchase all of the capital stock of Brastel for a total of
$240,000. As of December 31, 1996, $60,000 of such purchase price is included in
current liabilities. Under the terms of the purchase agreement, the remaining
purchase
F-31
<PAGE> 164
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. BUSINESS ACQUISITIONS -- (CONTINUED)
price will be due and payable upon approval from the Ministry for transfer of
control of the licenses. Brastel holds licenses to operate 40 SMR channels in
Brazil.
The acquisition of Brastel has been accounted for using the purchase method
of accounting. Accordingly, the purchase price was allocated to the licenses for
the 40 channels held by Brastel. Additionally, the Company established a
deferred tax liability in connection with the acquisition since the license
rights acquired have no basis for tax reporting purposes in Brazil. Such amount
has been allocated as an increase in the license rights acquired.
PURCHASE OF AUGUSTUS AND MULTIPONTO: In September 1995, the Company
entered into a purchase agreement with Augustus Administracao e Participacoes
S.A. (Augustus) to purchase its 100 SMR channels in Brazil. The total purchase
price is approximately $408,000. Once the Ministry has approved transfer of
control of the SMR licenses from Augustus to the Company, the purchase price
will become due and payable.
In September 1995, the Company entered into a purchase agreement with
Multiponto Telecomunicacoes, Ltda. (Multiponto) to purchase its 200 SMR channels
in Brazil. The total purchase price is approximately $856,800. Once the Ministry
has approved transfer of control of the SMR licenses from Multiponto to the
Company, the purchase price will become due and payable.
These transactions will be reflected in the financial statements on
approval from the Ministry. The Company expects to receive approval for both
transfers from the Ministry by December 31, 1997.
5. RELATED PARTY TRANSACTIONS
In 1994, LCC International, Inc. (LCC), formerly LCC, L.L.C., an affiliate
of Telcom Ventures, performed design engineering services to develop the
Company's mobile radio communications system in Brazil. Systems development
activities included development of terrain databases, channel loading,
preliminary site design, initial frequency planning, and candidate site
evaluation. The cost of such services, which amounted to $910,455, were paid
during the year ended December 31, 1994, by the Company's majority stockholder,
Telcom Ventures, on behalf of the Company, and remain in
construction-in-progress with a corresponding increase in additional paid-in
capital within the accompanying consolidated financial statements as of December
31, 1996.
In October 1994, LCC licensed its software to the Company for $200,000 per
year over the next five years. The Company's management intends to use such
software to aid in the development of a digital mobile radio communications
system. In March 1996, the software license agreement was amended to make the
software license fee a total of $200,000 for the period commencing October 21,
1994, until December 31, 1996. As of December 31, 1996, such amount was
outstanding and recorded as a due to affiliate. Amortization expense associated
with this software was $50,000 for the year ended December 31, 1996.
During 1996, Telcom Ventures paid certain expenses including salaries,
travel, consulting fees, and overhead expenses totaling $774,207 on behalf of
the Company. This amount has been reported as selling, general and
administrative expenses with a corresponding increase in additional paid-in
capital within the accompanying consolidated financial statements.
During 1996, AirLink contracted with LCC for certain engineering services
totaling $467,434. This amount is included in due to affiliates within the
accompanying consolidated financial statements.
Prior to the Company's acquisition of Air-fone, the former owners of
Air-fone made certain payments on behalf of the Company totaling $319,730. In
December 1994, $133,193 of such debt was forgiven, and reported as additional
paid-in capital within the accompanying consolidated financial statements. At
December 31, 1996, the Company has a remaining payable balance to such
individuals in the amount of
F-32
<PAGE> 165
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTY TRANSACTIONS -- (CONTINUED)
$183,072. This amount is included in due to affiliates within the accompanying
consolidated financial statements.
In December 1994, the Company acquired certain telecommunications equipment
from K-Tel prior to its sale to a third party. The purchase price for the
equipment of $10,000 is included in due to affiliates within the accompanying
consolidated financial statements as of December 31, 1996.
6. INCOME TAXES
WVB is subject to corporate tax in the United States of America (U.S.)
based on its net annual earnings generated in the U.S. and distributions from
its Brazilian subsidiaries. WVB's direct and indirect Brazilian subsidiaries are
separately obligated for Brazilian taxes on their annual earnings.
The income tax provision consists of the following at December 1996:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
U.S. federal.......................................... $ -- $ -- $ --
Brazilian............................................. -- 556,202 556,202
-------- -------- --------
$ -- $556,202 $556,202
======== ======== ========
</TABLE>
The income tax provision was $556,202 for the year ended December 31, 1996,
and differed from the amount computed by applying the U.S. federal income tax
rate of 34 percent as a result of the following:
<TABLE>
<S> <C>
Computed expected tax benefit.......................................... $(5,503,409)
Increase in income taxes resulting from:
Change in the valuation allowance for deferred tax assets......... 3,314,727
Permanent differences............................................. 1,007,822
Effect of differential between U.S. federal and Brazilian income
taxes and changes in enacted tax rates of Brazil................. 1,737,062
-----------
$ 556,202
===========
</TABLE>
The significant components of the U.S. and Brazilian deferred tax benefits
are as follows for the year ended December 31, 1996:
<TABLE>
<CAPTION>
U.S. BRAZILIAN TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
Deferred tax benefit (exclusive of the effects of
other components listed below)................. $(12,667) $(3,520,597) $(3,533,264)
Increase in the valuation allowance for
deferred tax assets....................... 12,667 3,302,060 3,314,727
Effects of enacted changes in tax rates of
Brazil.................................... -- 774,739 774,739
-------- ----------- -----------
$ -- $ 556,202 $ 556,202
======== =========== ===========
</TABLE>
F-33
<PAGE> 166
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996, are
presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.................................. $ 5,191,781
Due from affiliates............................................... 545,347
Fixed assets depreciation......................................... 296,170
Noncompete agreement.............................................. 39,056
-----------
Total gross deferred tax assets.............................. 6,072,354
Less valuation allowance.......................................... (5,329,383)
-----------
742,971
-----------
Deferred tax liabilities:
Intangible license rights......................................... 15,936,192
Accounts receivable............................................... 120,905
Inventory......................................................... 83,516
Due to affiliates................................................. 545,347
-----------
Total gross deferred tax liabilites.......................... 16,685,960
-----------
Net deferred tax liabilities........................................... $15,942,989
===========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996, was
$2,014,656. The net change in the total valuation allowance for the year ended
December 31, 1996, was an increase of $3,314,727.
The change in net deferred tax liablities from the prior year includes
$560,540 of deferred tax liabilities resulting from the acquisition of LMP and
Brastel. Such amount has been recorded as an increase in intangible license
rights.
Under the Brazilian tax legislation, each subsidiary is required to file
its tax return as a separate entity; consolidated returns are not allowed.
7. OFFICE FACILITIES AND OTHER LEASES
The Company has operating leases for office space in Sao Paulo as well as
tower sites throughout Brazil. Rental expense for the office and other operating
leases was approximately $1,190,383 during the year ended December 31, 1996.
Future minimum lease payments under operating leases as of December 31,
1996, calculated using the exchange rate in effect at December 31, 1996, are
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-----------------------
<S> <C>
1997.......................................................... $1,196,115
1998.......................................................... 978,542
1999.......................................................... 978,542
2000.......................................................... 978,542
2001.......................................................... 982,729
----------
Total minimum lease payments.................................. $5,114,470
==========
</TABLE>
F-34
<PAGE> 167
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. BANK LOANS PAYABLE
The Company utilizes various short-term borrowing arrangements with
financial institutions in Brazil as a method of financing current operations.
The Company had bank loans payable as of December 31, 1996, as follows:
<TABLE>
<S> <C>
Short-term notes payable................................................ $ 736,363
Discounted accounts receivable.......................................... 521,314
----------
$1,257,677
==========
</TABLE>
At December 31, 1996, short-term notes payable consisted of four unsecured
loans from financial institutions in Brazil. These notes are due on various
dates up to June 1997, and carry interest at rates of 4.8 percent and 4.96
percent per month.
At December 31, 1996, the Company had an outstanding bank loan in the
amount of $521,314 from a financial institution in Brazil. This note was
collateralized by discounting with recourse an equal amount of the Company's
trade accounts receivable. The Company must pay a discount rate of 4.5 percent
per month on the outstanding balance.
9. OTHER TAXES PAYABLE
Certain taxes have not been paid at their initial due date. The Company's
management has negotiated with the tax authorities payment extensions in monthly
installments. For the taxes due in 1995, agreements were reached with the tax
authorities for payments in 24 to 68 monthly installments (see detail below).
Such balances are subject to monetary adjustments based on the Brazilian
inflation rates, plus interest at a rate of 1% per month. The taxes due in 1996
are under negotiation and management believes that agreements for payment
extension will be reached with the tax authorities in the near future. Fines and
interest have been calculated and recorded for these past-due taxes based on the
rates negotiated with the tax authorities. A total of $2,838,455 has been
included in current liabilities as of December 31, 1996. Other taxes payable
included in other liabilities is payable, as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-----------------------
<S> <C>
1998.......................................................... $ 806,023
1999.......................................................... 530,622
2000.......................................................... 515,565
2001.......................................................... 937,739
----------
$2,789,949
==========
</TABLE>
10. SHORT-TERM NOTE PAYABLE TO MAJORITY STOCKHOLDER
At December 31, 1996, the Company has a revolving unsecured promissory note
payable to its majority stockholder, Telcom Ventures, in the amount of
$16,973,004. The note bears interest at the rate of 9 percent per annum, and
principal and interest are due on demand. During 1996, the Company recognized
interest expense of $1,378,657 related to this note payable. The note can be
converted to shares of capital stock of WVB at the option of the noteholder.
11. DISTRIBUTION TO SHAREHOLDER
During 1996, the Company distributed to a shareholder $458,000 that
represented contributions made in the prior years in excess of amounts required
under certain capitalization arrangements.
F-35
<PAGE> 168
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. CONTINGENCIES
GENERAL: There are contingent liabilities of a general nature with respect
to taxes. The Company's tax returns filed in previous years are subject to final
approval by tax authorities. The application of U.S. and Brazilian tax laws to
the Company can be subjective and is dependent upon administrative
interpretations which are subject to change.
RISK OF LICENSE CANCELLATIONS: As discussed in Note 1, licenses are issued
at the sole discretion of the Brazilian Ministry of Communications, which can
seek to cancel the Company's licenses if certain license requirements are not
met. The Company's strategy is to install the required minimum number of
channels and load them as dictated by the applicable rules and edicts,
particularly when dealing with major cities like the capitals of the various
states. In certain instances, the Company has filed for extensions to the
pre-established installation dates. Management has received no reply to its
extension requests and believes that the Ministry has tacitly approved the
extensions.
Revocation of licenses must be performed by the Ministry in accordance with
applicable rules, which require that the following two conditions be met prior
to revocation:
- The licensee company has not installed and loaded the channels as
required; and
- Third parties have applied for channels in the same area and the Ministry
does not have other available radio spectrum to fulfill the application
requirements.
In certain cases, spectrum has not been available as a result of conflicts
with TV link service providers, who were provided frequencies that have been
subsequently granted to trunking operators. This conflict is regulated by edict
number 1267 dated August 31, 1993, which requires the TV link service providers
to clear these frequencies by established deadlines to permit their use by the
granted trunking operators. The edict established a deadline for the clearing of
channels 70, 77, 78, and 80 by December 1996 and a clearing deadline for
channels 71, 72, and 79 by August 1998. For channels where this conflict exists,
the time period for determining compliance with the channel installation and
loading requirements begins from the date the corresponding channels are cleared
out, rather than the date of grant. Management believes the risk of having these
or any other licenses revoked is remote.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996. Statement of
Financial Accounting Standards No. 107, Disclosure about Fair Value of Financial
Instruments, defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction between willing
parties:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNTS VALUE
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents............................. $ 389,816 $ 389,816
Trade accounts receivable............................. 2,647,314 2,647,314
Due from officers and employees....................... 147,137 147,137
Prepaid expenses and other current assets............. 784,576 --
Financial liabilities:
Accounts payable and accrued expenses................. 10,473,831 10,473,831
Bank loans payable.................................... 1,257,677 1,257,677
Due to affiliates..................................... 1,347,307 1,347,307
Short-term note payable to majority stockholder....... 16,973,004 16,973,004
</TABLE>
F-36
<PAGE> 169
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
- Cash and cash equivalents, trade accounts receivables, due from officers
and employees, other accounts receivable, accounts payable and accrued
expenses, bank loans payable, amounts payable for business acquisitions,
due to affiliates and short-term note payable to majority stockholder:
the carrying amounts approximate fair values because of the short
maturity of those instruments.
- Prepaid expenses and other current assets: It is not practicable to
estimate the fair value since this balance includes amounts related to
recoverable VAT, which are not transferable, and other prepaid expenses
that do not have market values.
14. SUBSEQUENT EVENTS
AGREEMENT AND PLAN OF MERGER: On October 29, 1996, the Company entered
into an Agreement and Plan of Merger (the Merger Agreement) with Nextel
Communications, Inc. (Nextel) and Dial Call Indimich, Inc., a direct wholly
owned subsidiary of Nextel. Pursuant to this Merger Agreement which was
consummated on January 30, 1997, Nextel acquired 81% of the issued and
outstanding capital stock of the Company in exchange for $186,300,000 worth of
Nextel Class A Common Stock in a tax-free reorganization. Under this Merger
Agreement, the existing Company stockholders retained the remaining 19% interest
in the Company. In addition, the Company's common stock was reclassified into
two classes with different voting rights: 1) Nextel acquired 100% of the Class A
common stock, which have 90% of the voting rights, and 2) the existing
stockholders received the Class B common stock, which have 10% of the voting
rights. On the closing date, Nextel contributed its equity interest in the
Company to McCaw International, Ltd. and the Company was renamed McCaw
International (Brazil), Ltd.
STOCK OPTIONS: The Company had entered into individual stock option
agreements with certain employees of the Company and an affiliate company. These
agreements allowed for such individuals to purchase Company common stock at an
exercise price equal to a pro rata share of the total capital contribution per
share on the option exercise date. The agreements had a five year vesting
period, as well as provisions for immediate vesting in the event of a change of
control. The Merger Agreement, as described above, qualified as a change of
control. Accordingly, these employees would have been entitled to receive a
total of 163,733 shares of Nextel Communications, Inc. common stock, based on an
assumed value of the Company at the time of the merger (i.e., the difference
between the assumed exercise price and the assumed value of the Nextel shares
purchasable as of the merger date), and would not receive any shares of the
Company's common stock. On January 23, 1997, such options were canceled and,
therefore, no compensation expense amounts were recorded for the year ended
December 31, 1996.
REPAYMENT OF NOTE PAYABLE AND RELATED INTEREST PAYABLE: Pursuant to the
Merger Agreement, the short-term note payable to majority stockholder and the
related interest payable in the amounts of $16,973,004 and $2,060,377,
respectively as of December 31, 1996, were forgiven at the time of the closing
on January 30, 1997.
INFUSION OF CAPITAL: On February 28, 1997, McCaw International, Ltd.,
infused $5,000,000 of additional paid-in capital to AirLink Servicos e Comercio
Ltda. to repay bank loans and trade payables of the Brazilian subsidiaries.
F-37
<PAGE> 170
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wireless Ventures of Brazil, Inc.:
We have audited the accompanying consolidated balance sheets of Wireless
Ventures of Brazil, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended December 31, 1995 and the six month period ended
December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated balance sheets of Wireless Ventures of
Brazil, Inc. and subsidiaries as of December 31, 1995 and 1994 and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1995 and the six month period ended December 31, 1994 present
fairly, in all material respects, the financial position of Wireless Ventures of
Brazil, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for the year ended December 31, 1995
and the six month period ended December 31, 1994 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Washington, D.C.
May 31, 1996, except as to footnote 15
which is as of June 14, 1996
F-38
<PAGE> 171
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 62,447 $ 572,005
Trade accounts receivable, net of allowance for doubtful
accounts of $1,535,055 and $54,641 (note 8)................. 3,129,357 228,767
Prepaid expenses and other current assets.................... 522,729 478,704
Inventory, net (note 2)...................................... 3,433,337 1,050,346
Due from officers and employees.............................. 35,809 59,271
------------ -----------
Total current assets.................................... 7,183,679 2,389,093
Property and equipment, net of accumulated depreciation of
$1,756,323 and 293,395 (notes 3 and 5).......................... 8,663,016 6,446,546
License rights, net of accumulated amortization of $6,433,857 and
$2,639,348 (notes 2 and 4)...................................... 50,466,493 54,261,002
Intangible assets, net of accumulated amortization of $104,167 and
$54,167 (notes 2 and 4)......................................... 145,833 195,833
Other assets...................................................... 84,790 17,435
------------ -----------
$ 66,543,811 $63,309,909
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................ $ 6,547,627 $ 3,595,382
Due to affiliates (note 5)................................... 404,603 396,538
Bank loans payable (note 8).................................. 806,919 397,447
Interest payable (notes 8 and 9)............................. 681,720 10,700
Income taxes payable (note 6)................................ 200,000 200,000
Amounts payable for business acquisitions (note 4)........... 1,000,000 4,074,648
Deferred income taxes (note 6)............................... 292,893 --
Short-term note payable to majority stockholder (note 9)..... 12,559,670 --
------------ -----------
Total current liabilities............................... 22,493,432 8,674,715
Other............................................................. 607,423 --
Deferred income taxes (note 6).................................... 14,533,354 23,519,752
------------ -----------
Total liabilities....................................... 37,634,209 32,194,467
------------ -----------
Commitments and contingencies (notes 1, 2, 4, 7, 10, 14, and 15)
Stockholders' equity:
Common stock; $.01 par value; 1,000,000 shares authorized;
90,341 and 90,300 shares issued and outstanding (notes 9,
12, and 13)................................................. 903 903
Additional paid-in capital (notes 4, 5, and 13).............. 39,212,452 36,386,585
Accumulated deficit.......................................... (10,303,753) (5,272,046)
------------ -----------
Total stockholders' equity.............................. 28,909,602 31,115,442
------------ -----------
$ 66,543,811 $63,309,909
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-39
<PAGE> 172
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER DECEMBER
31, 31,
1995 1994
----------- -----------
<S> <C> <C>
Revenues........................................................... $10,099,117 $ 829,608
Cost of operations................................................. 7,621,663 744,025
Selling, general and administrative expenses (note 5).............. 10,100,903 3,338,318
Depreciation and amortization expense.............................. 5,305,773 1,835,607
----------- -----------
Operating loss..................................................... (12,929,222) (5,088,342)
Other income (expense):
Interest income (note 4)...................................... 125,050 39,428
Gain (loss) on foreign currency translation................... 13,301 (210,990)
Interest expense (note 9)..................................... (964,437) (23,829)
Other, net.................................................... 30,096 33,742
----------- -----------
Loss before income tax benefit..................................... (13,725,212) (5,249,991)
Income tax benefit (note 6)........................................ 8,693,505 1,621,634
----------- -----------
Net loss........................................................... $(5,031,707) $(3,628,357)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-40
<PAGE> 173
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at July 1, 1994...................... $ 8 $21,151,352 $ (1,643,689) $ 19,507,671
Capital contributions................... -- 11,268,939 -- 11,268,939
Contributed capital -- expenses paid by
majority stockholder (note 5)......... -- 1,578,878 -- 1,578,878
Debt forgiven by K-Tel (note 5)......... -- 170,675 -- 170,675
Debt forgiven by Airfone stockholders
(note 5).............................. -- 133,193 -- 133,193
Stock split (note 12)................... 792 (792) -- --
Issuance of 10,300 shares of common
stock (note 4)........................ 103 2,084,340 -- 2,084,443
Net loss................................ -- -- (3,628,357) (3,628,357)
---- ----------- ------------ ------------
Balance at December 31, 1994................. $903 $36,386,585 $ (5,272,046) $ 31,115,442
Capital contributions................... -- 2,060,917 -- 2,060,917
Contributed capital -- expenses paid by
majority stockholder (note 5)......... -- 747,450 -- 747,450
Net loss................................ -- -- (5,031,707) (5,031,707)
Issuance of 31 shares of common stock
(note 13)............................. -- 12,500 -- 12,500
Issuance of 10 shares of common stock... -- 5,000 -- 5,000
---- ----------- ------------ ------------
Balance at December 31, 1995................. $903 $39,212,452 $(10,303,753) $ 28,909,602
==== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-41
<PAGE> 174
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $(5,031,707) $ (3,628,357)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization expense................... 5,305,773 1,835,607
Provision for doubtful accounts......................... 1,480,416 54,641
Deferred tax benefit.................................... (8,693,505) (1,821,634)
Stock grant............................................. 12,500 --
Change in assets and liabilities, net of effects from
business acquisitions:
Increase in accounts receivable.................... (4,381,004) (267,502)
Increase in prepaid expenses and other current
assets.......................................... (111,380) (103,702)
Increase in inventory.............................. (2,382,991) (1,050,346)
(Increase) decrease in due from officers and
employees....................................... 23,462 (23,479)
Increase in accounts payable and accrued
expenses........................................ 3,559,668 3,755,876
Increase in due to affiliates...................... 8,065 114,579
Increase in interest payable....................... 671,020 10,700
Increase in income taxes payable................... -- 200,000
----------- ------------
Net cash used in operating activities............................. (9,539,683) (923,617)
----------- ------------
Cash flows from investing activities:
Purchase of property and equipment........................... (3,677,736) (4,700,685)
Acquisition of licensee companies, net of cash acquired...... (3,074,648) (6,734,157)
----------- ------------
Net cash used in investing activities............................. (6,752,384) (11,434,842)
----------- ------------
Cash flows from financing activities:
Capital contributions and stock issuances.................... 2,813,367 12,847,817
Proceeds from note payable to majority stockholder........... 12,559,670 --
Payments on bank loans payable............................... (397,447) --
Proceeds from bank loans payable............................. 806,919 41,189
----------- ------------
Net cash provided by financing activities......................... 15,782,509 12,889,006
----------- ------------
Net increase (decrease) in cash and cash equivalents.............. (509,558) 530,547
Cash and cash equivalents at beginning of period.................. 572,005 41,458
----------- ------------
Cash and cash equivalents at end of period........................ $ 62,447 $ 572,005
=========== ============
Supplemental disclosure of cash flow information
Cash paid during the period for interest..................... $ 282,717 $ 35,185
</TABLE>
See notes to consolidated financial statements.
F-42
<PAGE> 175
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
In November 1994, the Company acquired stock of
Telemobile-Telecommunicacoes, Ltda. (Telemobile) and
Promobile-Telecommunicacoes, Ltda. (Promobile) for a total purchase price of
$6,782,000, $1,000,000 and $3,782,000 of which was payable as of December 31,
1995 and 1994, respectively. These amounts have been reported in amounts payable
for business acquisitions within the accompanying consolidated financial
statements. Further, in conjunction with the acquisition of Telemobile and
Promobile, the Company established a deferred tax liability of approximately
$5,549,000 which amount has been recorded as an increase in the value of the
intangible license rights acquired.
In September 1994, the Company acquired stock of Master-Tec
Telecommunicacoes Industria e Comercio Productos Electronicos, Ltda.
(Master-Tec). In conjunction with this acquisition, the Company established a
deferred tax liability of approximately $2,455,000. Such amount has been
recorded as an increase in the value of the intangible license rights acquired.
In July 1994, the Company acquired the stock of Airfone Comercio e Servicos
de Radifonia Ltda. (Airfone) for a total purchase price of approximately
$7,555,000. Of this amount, the Company converted a current note receivable from
the former owners of Airfone in the amount of $5,000,000 plus approximately
$177,000 in accrued interest. The Company also issued stock, the value of which
was determined to be approximately $2,084,000 (see note 4). In conjunction with
the acquisition, the Company assumed liabilities of approximately $1,172,000 and
established a deferred tax liability of approximately $6,400,000 which amount
has been recorded as an increase in the value of the intangible license rights
acquired.
In July 1994, the Company acquired the remaining 6 percent of the capital
stock of Via Radio Telecommunicacoes, S.A. (VR-1). In conjunction with this
acquisition, the Company established a deferred tax liability of approximately
$64,000. Such amount has been recorded as an increase in the value of the
intangible license rights acquired.
In July 1994, the Company acquired the remaining 30 percent of the stock of
Radio Telecommunicacoes do Brazil, Ltda. (Radio-Telecom). In conjunction with
this acquisition, the Company established a deferred tax liability of
approximately $81,000. Such amount has been recorded as an increase in the value
of the intangible license rights acquired.
See notes to consolidated financial statements.
F-43
<PAGE> 176
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED DECEMBER 31, 1994
(1) DESCRIPTION OF OPERATIONS AND LIQUIDITY
Wireless Ventures of Brazil, Inc. (WVB), a Virginia corporation whose
majority stockholder on December 31, 1995 is Telcom Ventures, L.L.C. (Telcom
Ventures), a Delaware limited liability company, was organized in August 1993
for the purpose of pursuing wireless communications investment opportunities in
Brazil. As of December 31, 1995, WVB, through Brazilian licensee companies,
holds licenses to provide a class of mobile telecommunications services known as
specialized mobile radio (SMR) or trunking services in the 800 MHz frequency
band in Brazil. SMR services use radio frequencies to allow multiple subscribers
to communicate between remote portable or mobile radios.
As of December 31, 1995, WVB's subsidiaries held licenses for a total of
1,140 SMR channels in 23 cities in Brazil, including 195 channels in Sao Paulo,
and channels in Rio de Janeiro, Belo Horizonte, Curitiba, and Brasilia. The
initial term for such licenses is 15 years, although such licenses are issued at
the sole discretion of the Brazilian Ministry of Communications (the Ministry),
which can seek to cancel the Company's licenses at any time. In addition,
licensees are required by the Ministry to complete build-out of the channels and
loading of subscribers by a certain date. Failure to comply with the
requirements could result in the revocation of the licenses by the Ministry. At
December 31, 1995, WVB had several channels which had not been constructed and
loaded with subscribers within the specified timeframe. Although there can be no
assurance that the Ministry will not revoke these or any other licenses, the
management of WVB has either filed for extensions from the Ministry or has taken
other corrective action and believes the risk of loss of the licenses due to
noncompliance is remote.
In September 1994, WVB formed an indirect wholly owned subsidiary, a
Brazilian service company, AirLink Servicos e Comercio, Ltda. (AirLink). AirLink
holds no licenses, but owns equipment and, pursuant to service contracts,
provides technical support, billing, and other administrative functions to the
licensee companies in Brazil.
WVB and its subsidiaries (collectively, the Company) expect to expand their
operations through continued capital investment in current analog and future
digital technologies to create a national mobile telecommunications system in
Brazil. The Company currently is not generating sufficient cash flows from
operations to support its current operating and capital requirements. The
Company has and will continue to be dependent upon its stockholders to fund
these requirements. During 1995 and the six months ended December 31, 1994,
WVB's majority stockholder contributed approximately $800,000 and $13,000,000 to
the Company. Additionally, in 1995 WVB's majority stockholder provided
approximately $12,600,000 to the Company under a short-term unsecured note
payable. Subsequent to year-end, WVB borrowed an additional $3,000,000 under the
note payable agreement (see note 9). The Company's future profitability is
dependent upon its ability to further develop its existing system and
successfully market its mobile radio services in its primary Brazilian markets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of WVB and its
direct and indirect wholly owned subsidiaries, Via Radio Administradora e
Participacoes Ltda. (VRA), Airfone Participacoes e Empreendimentos Ltda.
(Airfone), and AirLink, and its indirect 49 percent interest in Master-Tec
Telecomunicacoes Ltda. (Master-Tec), Telemobile-Telecomunicacoes Ltda.
(Telemobile) and Promobile-Telecomunicacoes Ltda. (Promobile). VRA wholly owns
seven Brazilian subsidiaries, the accounts of which are consolidated with the
accounts of the Company. In addition, Airfone wholly owns two Brazilian
subsidiaries, the accounts of which are consolidated with the accounts of the
Company. WVB acquired
F-44
<PAGE> 177
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
indirect 49 percent interests in Master-Tec, Telemobile, and Promobile, and has
the right to obtain the remaining 51 percent when it receives approval from the
Ministry at no additional cost to WVB. As WVB has effective control of these
three companies, the accounts of Master-Tec, Telemobile, and Promobile are
consolidated with the accounts of the Company. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of 3 months or less to be
cash equivalents. Cash equivalents consisted of approximately $3,686 and $2,460
in overnight investments and short-term deposits as of December 31, 1995 and
1994.
Inventory, Net
Inventory, which consists primarily of telecommunications equipment
(radios), is stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method. The inventory of the Company is subject to
rapid technological changes which could have an adverse financial impact on its
full realization in future periods.
Inventory at December 31, 1995 and 1994, includes approximately $786,000
and $328,000, respectively, in rental radios, that have been shipped to
customers under short-term rental agreements. Rental radios are depreciated
using the straight-line method over the estimated useful life of the radios,
which is 5 years.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets which
range from 3 to 10 years. Depreciation on constructed assets, which include
radio towers and analog mobile radio systems, begins when the assets are
substantially completed and ready for their intended use.
For constructed assets, all costs necessary to bring such assets to the
condition and location necessary for their intended use are initially
capitalized as construction-in-progress and are subsequently transferred to
telecommunications equipment.
License Rights
License rights consist of licenses to operate channels for the provision of
SMR services in Brazil, which had been issued to the licensee companies acquired
(see notes 1 and 4). Amortization is calculated on the straight-line method over
15 years, the initial term of the licenses.
Intangible Assets
Intangible assets consist of the cost allocated to a covenant not to
compete associated with an acquisition. Amortization is calculated on the
straight-line method over 5 years, the term of the non-compete arrangement.
Revenue Recognition
The Company's principal sources of revenue are the provision of mobile
telecommunications services to businesses and individuals and the sale and
rental of telecommunications equipment (radios) to its service subscribers.
Service revenues consist of a usage fee based on the number of minutes the
subscriber uses the system each month (airtime revenues) plus a fixed monthly
service fee, which are recognized when the
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
services are provided. Revenue for equipment sales is recognized at the time the
merchandise is shipped. Rental revenue is recorded monthly over the term of each
rental agreement.
Foreign Currency Translation
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52, Foreign Currency
Translations (Statement No. 52). During the year ending December 31, 1995 and
the six months ended December 31, 1994, the Company's Brazilian operations were
considered to be in a "highly inflationary" economy, as such term is defined in
Statement No. 52. Accordingly, the Company uses the U.S. dollar as the
functional currency. Therefore, certain assets and liabilities are translated at
historical exchange rates while other assets and liabilities are translated at
current exchange rates.
Income Taxes
The Company uses the asset and liability method to recognize deferred tax
assets and liabilities. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
ICMS and ISS Taxes
The provision of telecommunication services by the Company's Brazilian
subsidiaries is subject to ICMS taxes, a state level value-added tax (VAT)
levied at a rate of 25 percent. Non-telecommunication services provided by the
Brazilian subsidiaries are subject to ISS taxes, a municipal service tax levied
at rates of 5 percent or less depending on the Brazilian city in which the
services are provided. The Brazilian subsidiaries generate revenues that
encompass both aspects of telecommunication services and non-telecommunication
services. The management of the Company has adopted an allocation method for
segregating the revenue for tax reporting purposes. The allocation method
utilized by the Company could be subjected to review by the Brazilian tax
authorities and could be altered as result of such examination. Accordingly, the
Company could be assessed additional taxes by the Brazilian tax authorities. The
management of the Company periodically reviews its allocation method and accrues
additional reserves for taxes to account for such exposure. Management believes
that such assessments, if any, by the Brazilian taxing authorities would not
have a material impact on the financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
The Company sells its products to commercial and individual customers in Brazil,
and extends credit, generally without requiring collateral. The Company monitors
its exposure for credit losses and maintains allowances for anticipated losses.
Since inception the Company has suffered significant credit losses, and these
losses could continue in the future.
Pervasiveness of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Telecommunications equipment........................ $ 8,502,834 $4,891,717
Furniture and equipment............................. 357,299 427,240
Computer equipment.................................. 402,622 321,136
Telephone lines..................................... 173,666 173,666
Construction-in-progress (see note 5)............... 910,445 910,445
Leasehold improvements.............................. 65,627 8,891
Vehicles............................................ 6,846 6,846
----------- ----------
10,419,339 6,739,941
Less accumulated depreciation and amortization...... (1,756,323) (293,395)
----------- ----------
$ 8,663,016 $6,446,546
=========== ==========
</TABLE>
(4) BUSINESS ACQUISITIONS
Acquisition of VR-1
In August 1993, the Company acquired 94 percent, and in July 1994, the
remaining 6 percent, of the capital stock of Via Radio-1 Telecommunicacoes,
S.A., (VR-1), which holds licenses to operate 20 SMR channels in the city of Sao
Paulo, Brazil. The acquisition has been accounted for using the purchase method
of accounting. Accordingly, the purchase price of approximately $743,000,
including acquisition costs, was allocated to assets and liabilities acquired
based on estimates of the fair values of the assets and liabilities as of the
acquisition date, with approximately $555,000 of the purchase price allocated to
the license rights acquired. Such intangible license rights have no basis for
income tax reporting purposes in Brazil thus giving rise to a deferred tax
liability of approximately $454,000, which amount was allocated as an increase
in the value of the license rights acquired (see note 6).
In conjunction with the initial acquisition, in consideration for a
covenant not to compete with the Company for a 5 year period, the Company paid
the former shareholders $250,000. This amount has been included in intangible
assets within the accompanying consolidated financial statements. In November
1994, the ownership of VR-1 was transferred from WVB to VRA.
Acquisition of VRA
In October 1993, WVB, through a holding company, acquired all the
outstanding capital stock of VRA and the four Brazilian subsidiaries that it
then substantially wholly owned. The acquisition has been accounted for using
the purchase method of accounting. The purchase price of approximately
$3,477,000, including acquisition costs, was allocated to the licenses for 80
SMR channels held by VRA's four Brazilian subsidiaries, which have no basis for
income tax reporting purposes in Brazil. Accordingly, the Company established a
deferred tax liability in connection with this acquisition totaling
approximately $2,845,000 (see note 6). Such amount was allocated as an increase
in the value of the license rights acquired.
In November 1993, VRA acquired all of the outstanding capital stock of two
commonly controlled Brazilian companies, K-Tel and ATG Telecommunicacoes e
Comercio, Ltda. (ATG), and its 70 percent
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) BUSINESS ACQUISITIONS -- (CONTINUED)
owned subsidiary, Radio Telecommunicacoes do Brazil, Ltda. (Radio-Telecom). ATG
holds licenses to operate 140 SMR channels for the provision of SMR services in
Sao Paulo and several nearby cities. K-Tel held no licenses, but provided
equipment, technical support, and other administrative functions to
approximately 2,300 subscribers as of the acquisition date. The acquisition has
been accounted for using the purchase method of accounting and, accordingly, the
purchase price of approximately $10,300,000 for both companies was allocated to
assets and liabilities acquired based on estimates of fair values as of the date
of acquisition, with approximately $9,021,000 and $1,080,000 of the purchase
price allocated to the ATG license rights and certain telecommunications
equipment maintained by ATG, respectively, with the remaining $199,000 allocated
to the net assets of K-Tel. The intangible license rights acquired have no basis
for income tax reporting purposes in Brazil thus giving rise to deferred tax
liabilities of $8,021,000 (see note 6). Such amounts were allocated as an
increase in the value of the license rights acquired.
In July 1994, VRA acquired the remaining 30 percent of capital stock of
Radio-Telecom for approximately $99,000. The purchase price and the value of
deferred tax liabilities assumed of approximately $81,000 were allocated to the
intangible license rights acquired.
On June 30, 1994, the Company sold all the outstanding shares of capital
stock of K-Tel to Telcom Ventures, the Company's majority shareholder, for its
book value of approximately $199,000.
In connection with the acquisition, the Company became aware of certain tax
contingencies which arose prior to the acquisition. Based on discussion with
legal counsel, management of the Company believes that the probability of a
material impact on the financial statements is remote.
Acquisition of Airfone
In July 1994, the Company indirectly acquired all the outstanding capital
stock of Airfone, which, in turn, held all of the outstanding capital stock of
Airfone Comercio e Servicos de Radiofonia, Ltda. and SOW Comercio e Servicos de
Radiofonia, Ltda. (collectively, the Airfone Affiliates), in exchange for 11.43
percent of the issued and outstanding shares of WVB, the value of which was
determined to be approximately $2,084,000, and the sum of approximately
$5,470,000 in additional purchase price. At the date of acquisition, the Company
had a note receivable of $5,000,000 plus accrued interest of $177,000 due from
the principal stockholders of Airfone. This amount was offset against the
purchase price. The remaining balance of the purchase price of approximately
$293,000 was paid in 1995. The Airfone Affiliates are Brazilian corporations,
which, directly or indirectly, hold licenses to operate a total of 280 SMR
channels in several Brazilian cities.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, the purchase price totaling approximately $7,555,000,
was allocated to assets and liabilities acquired based on estimates of the fair
values of the assets and liabilities as of the acquisition date, with
approximately $8,161,000 of the purchase price allocated to the license rights
acquired, approximately $566,000 allocated to telecommunications equipment,
accounts receivable and other current assets acquired, and approximately
$1,172,000 allocated to the liabilities assumed. The intangible license rights
acquired have no basis for income tax reporting purposes in Brazil thus giving
rise to deferred tax liabilities of approximately $6,400,000 (see note 6). Such
amount has been allocated as an increase in the license rights acquired.
Acquisition of Interest in Master-Tec
In September 1994, the Company indirectly acquired 49 percent of the
capital stock of Master-Tec for $3,000,000 with an option to acquire the
remaining 51 percent interest for no additional purchase price. Master-Tec is a
Brazilian corporation which holds licenses to operate 100 SMR channels in
several major cities in Brazil. The acquisition has been accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the licenses for the 100 SMR channels held by Master-Tec. Additionally,
F-48
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) BUSINESS ACQUISITIONS -- (CONTINUED)
the Company established a deferred tax liability in connection with the
acquisition in the amount of approximately $2,455,000 (see note 6), since the
license rights acquired have no basis for tax reporting purposes in Brazil. Such
amount has been allocated as an increase in the license rights acquired.
Acquisition of Interest in Telemobile and Promobile
In November 1994, the Company entered into an agreement to purchase 49
percent of the capital stock of Telemobile and Promobile for a total of
approximately $6,782,000 with an option to acquire the remaining 51 percent for
no additional purchase price. Prior to December 31, 1994, $3,000,000 of such
purchase price was paid. Telemobile and Promobile collectively hold licenses to
operate 540 channels for the provision of trunking services in Brazil. The
remaining balance of the purchase price of $3,782,000 is included in current
liabilities within the accompanying 1994 consolidated financial statements. Of
the remaining balance, $2,782,000 was paid in 1995, and the Company expects the
remaining amount of $1,000,000 to be paid prior to December 31, 1996.
The acquisition of Telemobile and Promobile has been accounted for using
the purchase method of accounting. Accordingly, the purchase price was allocated
to the licenses for the 540 channels held by Telemobile and Promobile.
Additionally, the Company established a deferred tax liability in connection
with the acquisition in the amount of approximately $5,549,000 (see note 6)
since the license rights acquired have no basis for tax reporting purposes in
Brazil. Such amount has been allocated as an increase in the license rights
acquired.
(5) RELATED PARTY TRANSACTIONS
In 1994, LCC, L.L.C. (LCC), an affiliate of Telcom Ventures, performed
design engineering services to develop the Company's mobile radio communications
system in Brazil. Systems development activities included development of terrain
databases, channel loading, preliminary site design, initial frequency planning,
and candidate site evaluation. The cost of such services for the six months
ended December 31, 1994, which was paid by the Company's majority shareholder,
Telcom Ventures, on behalf of the Company, amounted to $524,618 and has been
included in construction-in-progress with a corresponding increase in additional
paid-in capital within the accompanying consolidated financial statements.
During 1995 and the six months ended December 31, 1994, Telcom Ventures
paid certain expenses including salaries, travel, consulting fees, and overhead
expenses totaling $747,450 and $581,809 on behalf of the Company. These amounts
have been reported as selling, general and administrative expenses with a
corresponding increase in additional paid-in capital within the accompanying
consolidated financial statements. During the six months ended 1994, Telcom
Ventures also purchased certain telecommunication equipment and inventory
totaling $472,451 on behalf of the Company. This amount has been reported as an
increase in additional paid-in capital within the accompanying consolidated
financial statements.
In October 1994, LCC licensed its software to the Company for $200,000 per
year over the next five years. The Company's management intends to use such
software to aid in the development of a digital mobile radio communications
system. In March 1996, the software license agreement was amended to make the
software license fee a total of $200,000 for the period commencing October 21,
1994 until December 31, 1997. Accordingly, the license fee of $200,000, which is
due in four installments from June 1996 to December 1996, has been included in
telecommunications equipment and due to affiliates within the accompanying
consolidated financial statements, and is being amortized using the straight
line method over the three year license period. Amortization expense associated
with this software was $24,000 for the year ended December 31, 1995.
F-49
<PAGE> 182
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) RELATED PARTY TRANSACTIONS -- (CONTINUED)
During the six months ended December 31, 1994, K-Tel made certain payments
on behalf of the Company totaling $170,675. Upon the sale of K-Tel by Telcom
Ventures to a related third party in December 1994, K-Tel forgave this debt.
This amount has been reported as additional paid-in capital in the accompanying
consolidated financial statements.
Prior to the Company's acquisition of Airfone, the former owners of Airfone
made certain payments on behalf of the Company totaling $319,730. In December
1994, $133,193 of such debt was forgiven. Accordingly, this amount has been
reported as additional paid-in capital within the accompanying consolidated
financial statements. At December 31, 1995 and 1994, the Company had recorded a
payable to such individuals in the amount of $194,603 and $186,538,
respectively. These amounts are included in due to affiliates within the
accompanying consolidated financial statements.
In December 1994, the Company acquired certain telecommunications equipment
from K-Tel prior to its sale to a third party. The purchase price for the
equipment of $10,000 is included in due to affiliates within the accompanying
consolidated financial statements.
(6) INCOME TAXES
WVB is subject to corporate tax in the United States of America (U.S.) on
its net annual earnings generated in the U.S. and distributions from its
Brazilian subsidiaries. WVB's direct and indirect Brazilian subsidiaries are
separately obligated for Brazilian taxes on their annual earnings.
Income tax benefit consists of the following for the year ended December
31, 1995 and the six months ended December 31, 1994:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
1995:
U.S. federal........................ $ -- $ -- $ --
Brazilian federal................... -- (8,693,505) (8,693,505)
-------- ----------- -----------
$ -- $(8,693,505) $(8,693,505)
======== =========== ===========
1994:
U.S. federal........................ $200,000 $ -- $ 200,000
Brazilian federal................... -- (1,821,634) (1,821,634)
-------- ----------- -----------
$200,000 $(1,821,634) $(1,621,634)
======== =========== ===========
</TABLE>
Income tax benefit was $8,693,505 and $1,621,634 for the year ended
December 31, 1995 and the six months ended December 31, 1994, respectively, and
differed from the amount computed by applying the U.S. federal income tax rate
of 34 percent as a result of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Computed expected tax benefit.............................. $(4,666,572) $(1,784,997)
Increase (reduction) in income taxes resulting from:
Change in beginning of the period balance of the
valuation allowance for deferred tax assets......... 1,537,129 237,677
Taxation of earnings of Brazilian subsidiaries deemed
remitted to WVB..................................... -- 462,000
Effect of differential between U.S. federal and
Brazilian income taxes and changes in enacted tax
rates of Brazil..................................... (5,564,062) (536,314)
----------- -----------
$(8,693,505) $(1,621,634)
=========== ===========
</TABLE>
F-50
<PAGE> 183
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES -- (CONTINUED)
The significant components of the U.S. and Brazilian deferred tax benefit
are as follows for the year ended December 31, 1995 and the six months ended
December 31, 1994:
<TABLE>
<CAPTION>
U.S. BRAZILIAN TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
1995:
Deferred tax benefit (exclusive of the
effects of other components listed
below)............................... $(12,682) $(2,639,365) $(2,652,047)
Increase in beginning of the year
balance of the valuation allowance
for deferred tax assets.............. 12,682 1,524,447 1,537,129
Effects of enacted changes in tax rates
of Brazil............................ -- (7,578,587) (7,578,587)
-------- ----------- -----------
$ -- $(8,693,505) $(8,693,505)
======== =========== ===========
1994:
Deferred tax benefit (exclusive of the
effects of other components listed
below)............................... $(13,707) $(2,045,604) $(2,059,311)
Increase in beginning of the period
balance of the valuation allowance
for deferred tax assets.............. 13,707 223,970 237,677
-------- ----------- -----------
$ -- $(1,821,634) $(1,821,634)
======== =========== ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 2,198,357 $ 1,789,739
Deferred assets....................................... 48,116 217,197
Due from affiliate.................................... 414,872 86,138
Fixed assets depreciation and amortization............ 73,046 3,896
Accounts receivable................................... 468,552 45,000
Accounts payable...................................... 169,014 --
Noncompete agreement.................................. 26,389 13,707
----------- -----------
Total gross deferred tax assets....................... 3,398,346 2,155,677
Less valuation allowance.............................. 2,014,656 477,527
----------- -----------
Net deferred tax assets.................................... 1,383,690 1,678,150
----------- -----------
Deferred tax liabilities:
Intangible license rights............................. 15,725,100 25,111,629
Accounts receivable................................... 48,928 --
Inventory............................................. 21,037 26,519
Due to affiliate...................................... 414,872 59,754
----------- -----------
Total gross deferred tax liabilities....................... 16,209,937 25,197,902
----------- -----------
Net deferred tax liabilities............................... $14,826,247 $23,519,752
========== ==========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1995 and
July 1, 1994, was $477,527 and $239,850, respectively. The net change in the
total valuation allowance for the year ended December 31, 1995 and the six
months ended December 31, 1994, was an increase of $1,537,129 and $237,677,
respectively.
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<PAGE> 184
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) OFFICE FACILITIES AND OTHER LEASES
The Company has operating leases for office space in Sao Paulo, as well as
tower sites throughout Brazil. Rental expense for the office and other operating
leases was approximately $850,000 and $151,000 during the year ended December
31, 1995 and the six months ended December 31, 1994, respectively.
Future minimum lease payments under operating leases as of December 31,
1995, calculated using the exchange rate at December 31, 1995, of R$.972 to US
$1, are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-----------------------
<S> <C>
1996.................................................................... $ 655,000
1997.................................................................... 222,000
1998.................................................................... 171,000
1999.................................................................... 162,000
2000.................................................................... 94,000
----------
Total minimum lease payments............................................ $1,304,000
==========
</TABLE>
(8) BANK LOANS PAYABLE
The Company utilizes various short-term borrowing arrangements with
financial institutions in Brazil as a method of financing current operations.
The Company had bank loan payables as of December 31, 1995 and 1994,
respectively, as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Short-term notes payable........................................ $337,253 $355,167
Discounted accounts receivable.................................. 314,302 --
Bank overdrafts................................................. 155,364 42,280
-------- --------
$806,919 $397,447
======== ========
</TABLE>
At December 31, 1995, short-term notes payable consisted of three unsecured
loans from financial institutions in Brazil, due on various dates in January
1996 and carrying interest at rates varying from 4.8 percent to 5.1 percent per
month. All principal and interest was repaid in full on the due dates. At
December 31, 1994, short-term notes payable consisted of two unsecured loans
from financial institutions in Brazil carrying interest at rates varying from
9.8 percent to 12.0 percent per month. These loans were repaid during 1995.
At December 31, 1995, the Company had an outstanding bank loan in the
amount of $314,302 from a financial institution in Brazil. This note was
collateralized by discounting with recourse an equal amount of the Company's
trade accounts receivable. The Company must pay a discount rate of 4.5 percent
per month on the outstanding balance. During 1996, the Company has continued to
discount portions of its trade accounts receivable to obtain short-term
financing.
At December 31, 1995, the Company had bank overdrafts of $155,364. At
December 31, 1994, the Company had obtained a bank overdraft facility from a
financial institution in Brazil in the amount of $42,280. This note was
unsecured and carried interest at the rate of 8 percent per month and was repaid
during 1995.
(9) SHORT-TERM NOTE PAYABLE TO MAJORITY STOCKHOLDER
At December 31, 1995, the Company has a revolving unsecured promissory note
payable to its majority stockholder, Telcom Ventures, in the amount of
$12,559,670. The note bears interest at the rate of 9 percent per annum and
principal and interest are due on demand. During 1995, the Company recognized
interest
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) SHORT-TERM NOTE PAYABLE TO MAJORITY STOCKHOLDER -- (CONTINUED)
expense of $671,020 related to this note payable. The note can be converted to
shares of capital stock of WVB at the option of the noteholder. As of May 31,
1996, the Company had borrowed an additional $3,051,538 against the promissory
note.
(10) PURCHASE OF AUGUSTUS AND MULTIPONTO
In September 1995, the Company entered into a purchase agreement with
Augustus Administracao e Participacoes S.A. (Augustus) to purchase its 100 SMR
channels in Brazil. The total purchase price is approximately $408,000. Once the
Ministry has approved transfer of control of the SMR licenses from Augustus to
the Company, the purchase price will become due and payable.
In September 1995, the Company entered into a purchase agreement with
Multiponto Telecomunicacoes, Ltda. (Multiponto) to purchase its 200 SMR channels
in Brazil. The total purchase price is approximately $856,800. Once the Ministry
has approved transfer of control of the SMR licenses from Multiponto to the
Company, the purchase price will become due and payable.
These transactions will be reflected in the financial statements on
approval from the Ministry. The Company expects to receive approval for both
transfers from the Ministry by December 31, 1996.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1995 and 1994. FASB
Statement No. 107, Disclosure about Fair Value of Financial Instruments, defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties:
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNTS VALUE AMOUNTS VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents....... $ 62,447 $ 62,447 $ 572,005 $ 572,005
Trade accounts receivable....... 3,129,357 3,129,357 228,767 228,767
Due from officers and
employees..................... 35,809 35,809 59,271 59,271
Other accounts receivable....... 464,432 464,432 120,409 120,409
Financial liabilities:
Trade accounts payable and
accrued....................... 7,155,050 7,155,050 3,595,382 3,595,382
Bank loans payable.............. 806,919 806,919 397,447 397,447
Other short-term payables....... 1,000,000 1,000,000 4,074,648 4,074,648
Due to affiliates............... 404,603 404,603 396,538 396,538
Short-term note payable to
majority stockholder.......... 12,559,670 -- -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, trade accounts receivables, due from
officers and employees, other accounts receivable, trade accounts payable,
bank loans payable, due to affiliates, and other short-term payables: the
carrying amounts approximate fair values because of the short maturity of
those instruments.
F-53
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WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
Short-term note payable to majority stockholder: It is not practicable
to estimate the fair value since the note payable is due to the majority
stockholder, and although the repayment term is due on demand, the actual
timing of repayment is uncertain.
(12) COMMON STOCK
Stock Split
On August 16, 1994, the Articles of Incorporation of WVB were amended to
increase the authorized capital from 10,000 to 1,000,000 shares of common stock
with the stated par value remaining at $.01 per share. At the same time, WVB
effected a one hundred for one stock split whereby each outstanding share of
common stock was subdivided and reclassified into 100 shares of common stock.
Stock Options
The Company has entered into individual stock option agreements with
certain employees of the Company and an affiliated company. These agreements
allow for such individuals to purchase a total of 1,303 shares, or approximately
2 percent, of the common stock of the Company at an exercise price equal to a
pro rata share of the total capital contribution per share on the option
exercise date, which management believes approximates market value. At December
31, 1995, the per share capital contribution was approximately $428. The
agreements expire in November 1996 and April 1997. As of December 31, 1995, both
options were exercisable and neither had been exercised.
(13) STOCK GRANT
In January 1995, the Company entered into an agreement with an employee of
Telcom Ventures, whereby the Company granted such employee 31 shares of common
stock of WVB. The Company recognized compensation expense in the amount of
$12,500, which management believes approximates fair value of the shares
granted. This amount has been reported as selling, general, and administrative
expenses with a corresponding increase in additional paid-in capital within the
accompanying consolidated financial statements.
(14) SUBSEQUENT EVENTS
In May 1996, WVB entered into a purchase agreement to acquire the
outstanding capital stock of LMP Consultoria Representcoes Ltd. (LMP) for
$900,000. LMP holds licenses to operate 220 SMR channels in Brazil. By
agreement, payment of one-half of the purchase price is due upon WVB building
out the channels and the balance is due upon obtaining approval from the
Ministry for the transfer of control of the SMR licenses.
In May 1996, WVB entered into a purchase agreement to acquire the
outstanding capital stock of Telecomunicacoes Brastel S/C Ltd. (Brastel) for
$240,000. Brastel holds licenses to operate 40 SMR channels in Brazil. WVB paid
$50,000 of the purchase price upon signing the agreement. The remainder of the
purchase price is due upon WVB building out the channels and obtaining approval
from the Ministry for the transfer of control of the SMR licenses.
(15) PENDING SALE OF THE COMPANY
In June 1996, the stockholders of WVB entered into a preliminary agreement
to sell all of the outstanding capital stock of the Company to a U.S. publicly
traded company. Pursuant to the agreement, the shareholders of WVB would receive
common stock of the purchaser as consideration for the sale. The negotiations
are in the preliminary stages, and therefore, are subject to the completion of
due diligence procedures by the purchaser.
F-54
<PAGE> 187
MCCAW INTERNATIONAL (BRAZIL), LTD. AND SUBSIDIARIES
(FORMERLY WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 1,437,389
Trade accounts receivable, net.......................................... 2,678,899
Other accounts receivable............................................... 259,087
Prepaid expenses and other current assets............................... 1,410,808
Inventory............................................................... 1,560,745
------------
Total current assets............................................... 7,346,928
------------
Property and equipment, net.................................................. 13,299,260
License rights, net.......................................................... 209,140,980
Intangible assets, net....................................................... 52,396,276
Other assets................................................................. 708
------------
Total assets....................................................... $282,184,152
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................... $ 12,660,989
Other payables.......................................................... 1,659,524
Deferred income taxes................................................... 333,067
------------
Total current liabilities............................................... 14,653,580
Deferred income taxes........................................................ 67,781,273
------------
Total liabilities.................................................. 82,434,853
------------
Stockholders' equity......................................................... 199,749,299
------------
Total liabilities and stockholders' equity.............................. $282,184,152
============
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-55
<PAGE> 188
MCCAW INTERNATIONAL (BRAZIL), LTD. AND SUBSIDIARIES
(FORMERLY WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
Revenues.......................................................... $ 2,542,777 $ 3,568,641
Cost of operations................................................ 1,526,242 3,023,378
Selling, general, and administrative expenses..................... 2,825,721 2,669,879
Depreciation and amortization expense............................. 2,826,372 899,470
------------ -----------
Operating loss.................................................... (4,635,558) (3,024,086)
Other expenses, net............................................... (245,489) (450,507)
------------ -----------
Loss before income tax benefit.................................... (4,881,047) (3,474,593)
Income tax benefit................................................ 674,807 644,437
------------ -----------
Net loss.......................................................... $(4,206,240) $(2,830,156)
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-56
<PAGE> 189
MCCAW INTERNATIONAL (BRAZIL), LTD. AND SUBSIDIARIES
(FORMERLY WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $(4,206,240) $(2,830,156)
Depreciation and amortization expense....................... 2,826,372 899,470
Deferred tax benefit........................................ (248,300) --
Changes in operating accounts, net.......................... (1,204,812) 616,103
----------- -----------
Net cash used by operating activities.................. (2,832,980) (1,314,583)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment.......................... (5,738,595) (1,982,929)
Net cash used by investing activities.................. (5,738,595) (1,982,929)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of stock and net capital contributions... 10,375,607 1,642,103
Proceeds from note payable to majority stockholder..........
Proceeds from bank loans payable............................
Payments on bank loans payable.............................. (756,459) 1,794,620
----------- -----------
Net cash provided by financing activities.............. 9,619,148 3,436,723
----------- -----------
Net increase in cash and cash equivalents........................ 1,047,573 139,211
Cash and cash equivalents at beginning of year................... 389,816 62,447
----------- -----------
Cash and cash equivalents at end of year......................... $ 1,437,389 $ 201,658
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-57
<PAGE> 190
MCCAW INTERNATIONAL (BRAZIL), LTD. AND SUBSIDIARIES
(FORMERLY WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997 AND 1996
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of McCaw International (Brazil), Ltd. and Subsidiaries (the
"Company" or "McCaw Brazil") as of March 31, 1997, and the results of its
operations and cash flows for the three months ended March 31, 1997 and 1996.
The results of operations for the three months ended March 31, 1997 and 1996 are
not necessarily indicative of the results that may be expected for the full
year. These condensed financial statements are unaudited, and do not include all
related footnote disclosures.
The interim unaudited condensed financial statements should be read in
conjunction with the audited consolidated financial statements of the Company.
(2) MERGER OF COMPANY.
On October 29, 1996, the Company entered into an Agreement and Plan of
Merger (the Merger Agreement) with Nextel Communications, Inc. (Nextel) and Dial
Call Indimich, Inc., a direct wholly owned subsidiary of Nextel. Pursuant to
this Merger Agreement which was consummated on January 30, 1997, Nextel acquired
81% of the issued and outstanding capital stock of the Company in exchange for
$186.3 million worth of Nextel Class A Common Stock in a tax-free
reorganization. Under this Merger Agreement, the existing Company stockholders
retained the remaining 19% interest in the Company. In addition, the Company's
common stock was reclassified into two classes with different voting rights: 1)
Nextel acquired 100% of the Class A common stock, which have 90% of the voting
rights and 2) the existing stockholders received the Class B common stock, which
have 10% of the voting rights. On the closing date, Nextel contributed its
equity interest in the Company to McCaw International Ltd. and the Company was
renamed McCaw International (Brazil), Ltd.
The total cost of acquisition, which was accounted for as a purchase, was
$187.2 million and exceeded the net liabilities of the Company by $215.7
million. The excess was allocated to licenses and goodwill based on their
preliminary estimated fair values and is being amortized over their estimated
useful lives of 20 years. The following summarized pro forma (unaudited)
information assumes the acquisition had occurred on January 1, 1996.
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
Revenues.......................................... $ 2,542,777 $ 3,568,641
=========== ===========
Net loss.......................................... $(4,676,167) $(4,261,061)
=========== ===========
</TABLE>
The above amounts reflect adjustment for interest on notes payable forgiven
in connection with the purchase agreement and amortization of licenses and
goodwill.
F-58
<PAGE> 191
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Corporacion Mobilcom, S. A. de C. V. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Corporacion
Mobilcom, S. A. de C. V. and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended (all expressed in thousands of U.S. dollars).
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying financial statements have been translated in accordance
with the standards set forth in Statements of Financial Accounting Standards No.
52 from Mexican pesos (the functional currency of the Company) into U.S. dollars
(the reporting currency of the Company) for purposes of incorporation into the
consolidated financial statements of McCaw International, Ltd. by the equity
method.
In our opinion, for the purpose of incorporation into the consolidated
financial statements of McCaw International, Ltd. by the equity method, the
translated consolidated financial statement referred to above present fairly, in
all material respects, the financial position of Corporacion Mobilcom, S. A. de
C. V. and Subsidiaries as of December 31, 1996 and 1995, and the results of
their operations, the changes in their stockholders' equity and the changes in
their financial position for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche
Mexico City, Mexico
March 10, 1997
F-59
<PAGE> 192
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 468 $ 5,058
Accounts receivable (note 5)................................ 2,250 2,179
Due from related parties (note 4)........................... 427 544
Inventories (note 6)........................................ 385 709
Advances to suppliers....................................... 75 590
-------- --------
Total current assets................................... 3,605 9,080
Investment in affiliate (note 7)............................ 7,553 7,989
Property, furniture and equipment, net of accumulated
depreciation of $2,947 and $1,974 (note 8)................ 13,978 14,875
Cost of licenses, net of accumulated amortization of $2,896
and $1,971 ............................................... 19,960 21,130
Goodwill, net of accumulated amortization of $908 and
$619...................................................... 6,848 7,138
-------- --------
Total.................................................. $ 51,944 $ 60,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (note 9)...................................... $ 3,501 $ 23,908
Current portion and long-term debt (note 10)................ 17,706 394
Accounts payable............................................ 923 2,962
Payable to stockholders..................................... 1,049
Accrued expenses............................................ 6,031 3,164
Income tax and tax on assets................................ 13
Due to related parties...................................... 629 1,537
-------- --------
Total current liabilities.............................. 28,790 33,027
Long-term debt, excluding current portion (note 10)......... 1,403
Deferred income taxes (note 12)............................. 3,867 3,917
Other long-term obligations................................. 199 135
-------- --------
Total liabilities...................................... 32,856 38,482
-------- --------
Commitments and contingencies
Stockholders' equity (note 11):
Common stock, 1,304 and 972 shares authorized, 505 and 469
shares issued and outstanding, in thousands............... 103,378 50,745
Additional paid-in capital.................................. 6,843 48,520
Accumulated deficit......................................... (84,229) (72,387)
Cumulative effect of translation............................ (6,904) (5,148)
-------- --------
Total stockholders' equity............................. 19,088 21,730
-------- --------
Total............................................. $ 51,944 $ 60,212
======== ========
</TABLE>
See notes to consolidated financial statements.
F-60
<PAGE> 193
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenue:
Service revenue............................................. $ 4,326 $ 3,297
Equipment sales and maintenance............................. 1,059 1,192
-------- --------
5,385 4,489
-------- --------
Cost and expenses related to revenue:
Cost of service............................................. 1,007 1,274
Cost of equipment sales and maintenance..................... 897 1,406
-------- --------
1,904 2,680
Operating expenses:
Selling general and administrative.......................... 7,026 9,707
Depreciation................................................ 1,024 1,104
Amortization of cost of licenses............................ 925 1,152
Amortization of goodwill.................................... 289 366
-------- --------
Operating loss......................................... (5,783) (10,520)
-------- --------
Other expenses:
Interest expenses, net...................................... (5,608) (9,041)
Foreign exchange loss, net.................................. (227) (11,013)
Equity in the results of affiliate (note 7)................. (176) (721)
Other, net.................................................. (48) (556)
-------- --------
Loss before income taxes............................... (11,842) (31,851)
-------- --------
Income taxes (note 12)...................................... 516
-------- --------
Net loss......................................................... $(11,842) $(31,335)
======== ========
</TABLE>
See notes to consolidated financial statements.
F-61
<PAGE> 194
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------- PAID-IN ACCUMULATED EFFECT OF
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION TOTAL
------- -------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995........... 380,962 $ 45,407 $ $ (41,052) $ (1,438) $ 2,917
Capital contributions............. 87,924 5,338 48,520 53,858
Translation adjustment............ (3,710) (3,710)
Net loss for the year............. (31,335) (31,335)
------- -------- -------- --------- -------- --------
BALANCES AT DECEMBER 31, 1995......... 468,886 50,745 48,520 (72,387) (5,148) 21,730
Capital contributions............. 41,022 52,633 (41,677) 10,956
Translation adjustment............ (1,756) (1,756)
Net loss for the year............. (11,842) (11,842)
------- -------- -------- --------- -------- --------
BALANCES AT DECEMBER 31, 1996......... 509,908 $103,378 $ 6,843 $ (84,229) $ (6,904) $ 19,088
======= ======== ======== ========= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-62
<PAGE> 195
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $(11,842) $(31,335)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation.............................................. 1,024 1,104
Amortization of licenses and goodwill..................... 1,214 1,518
Unrealized exchange losses................................ 219 3,658
Equity in the results of affiliate........................ 176 721
Deferred taxes............................................ (516)
Allowance for obsolescence................................ 403
Changes in operating assets and liabilities:
Accounts receivable....................................... (326) (2,034)
Inventories............................................... (127)
Accounts payable and accrued expenses..................... (452) 1,536
-------- --------
Cash used by operating activities.................... (9,711) (25,348)
-------- --------
Cash flows from financing activities:
Capital contributions.......................................... 9,926 12,278
Proceeds from loans............................................ 26,762
Repayment of loans............................................. (4,498) (1,251)
-------- --------
Cash provided by financing activities.......................... 5,428 37,789
-------- --------
Cash flows from financing activities:
Acquisition of furniture and equipment......................... (307) (6,291)
Investment in affiliate, net................................... (1,564)
-------- --------
Cash used in investing activities......................... (307) (7,855)
-------- --------
Increase (decrease) in cash and cash equivalents.................... (4,590) 4,586
Cash and cash equivalents:
At beginning of year........................................... 5,058 472
-------- --------
At end of year................................................. $ 468 $ 5,058
======== ========
Supplemental cash flow disclosures:
Cash paid for interest......................................... $ 1,730 $ 7,350
======== ========
</TABLE>
See notes to consolidated financial statements.
F-63
<PAGE> 196
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF U. S. DOLLARS)
1. OPERATIONS
Corporacion Mobilcom, S. A. de C. V. (Mobilcom), is a holding company,
established in 1993. The principal operations of the subsidiary companies of
Mobilcom (the companies) consist of providing specialized mobile radio (SMR)
services to users (subscribers) through licenses granted by the Mexican
Department of Communications and Transportation (SCT) under the terms of the Ley
Federal de Telecomunicaciones (Federal Telecomunications Law) and Ley de Vias
Generales de Comunicacion (General Communications Law and Regulations),
establishing, constructing and exploting, public communication networks for the
transmission of signals between the subscribers' terminal SMR equipment and
interfacing with telecommunication networks authorized by the SCT.
The Companies have licenses that were granted for periods primarily of 15
years and that may be extended under the terms of the licenses granted covering
the principal cities and routes (roads) of Mexico. The terms of the contracts
stipulate that the grantee register the rates of services rendered with the STC.
There is also an obligation to pay the Mexican Federal Government 5% of gross
revenues from the services licensed, as well as an obligation to comply with the
terms established in the licenses granted.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies and practices followed by Mobilcom and
subsidiaries (the Company) in the preparation of consolidated financial
statements are described below:
a. PRINCIPLES OF CONSOLIDATION -- The consolidated financial
statements include the assets, liabilities and results of operations of
subsidiaries in which Mobilcom owns more than 50% of the voting stock. For
all periods presented, Mobilcom owns over 99% of the voting stock of its
consolidated subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
The investment in affiliate of which Mobilcom owns less than 50% of
the stock, is accounted for using the equity method.
b. FOREIGN CURRENCY TRANSLATION -- The Company's accounting records
are maintained in its functional currency, the Mexican peso. The financial
statements have been translated into U. S. dollars using the exchange rate
at each balance sheet date for assets and liabilities and a weighted
average exchange rate for each period for revenues, expenses, gains, and
losses. The resulting translation adjustments are recorded as a separate
component of stockholders' equity.
c. FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are initially recorded at the prevailing exchange rate
on the transaction date. Assets and liabilities denominated in foreign
currencies at year end are recorded at the prevailing exchange rate on the
balance sheet date. Fluctuations in exchange rates from the transaction
date to the settlement date or year end are charged to operations.
d. CASH AND CASH EQUIVALENTS -- The Company considers all highly
liquid, temporary cash investments with original maturities of three months
or less to be cash equivalents.
e. INVENTORIES -- Inventories are stated at the lower of cost or
market, as determined using the average cost method.
F-64
<PAGE> 197
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
f. PROPERTY, FURNITURE AND EQUIPMENT -- Property, furniture and
equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, as
follows:
<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C>
Building................................................. 40 years
Transmission equipment................................... 13 years
Office furniture......................................... 9 years
Computer equipment....................................... 3 years
Transportation equipment................................. 7 years
</TABLE>
g. REVENUE RECOGNITION -- Service revenue is recognized at the time
service is rendered. Revenue from the sale of terminal equipment is
recognized when the goods are delivered and rental from leasing of terminal
equipment is recognized as rental income is earned.
h. INCOME TAXES -- Income taxes are provided for in accordance with
Statements of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and
liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured by
applying enacted tax rates.
i. SENIORITY PREMIUMS AND SEVERANCE COMPENSATION -- Seniority premiums
and severance compensation which employees are entitled, upon retirement
after fifteen years or more of service, in accordance with the Mexican
Federal Labor Law, are recognized as costs during the years in which the
related services are rendered, based on actuarial calculations. Net
periodic expense recognized in 1996 and 1995 was $77, and $115
respectively.
j. CONCENTRATION OF CREDIT RISKS -- The companies provide SMR services
to subscribers in geographic areas throughout Mexico. The companies do not
have any single customer which accounts for a significant amount of
revenues or significant accounts receivables at December 31, 1996 and 1995.
The companies perform evaluations of their customers' credit histories and
establish an allowance for doubtful accounts based upon the credit risk of
specific customers and historical trends.
k. USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements
and related notes to financial statements. Actual results in such estimated
may affect amounts reported in future periods.
l. GOODWILL AND COSTS OF LICENSES -- The excess of cost over fair
value of net assets acquired of subsidiaries and the costs of licenses are
amortized on a straight-line basis over the estimated economic useful life
of 25 years.
m. RECLASSIFICATIONS -- Certain 1995 amounts have been reclassified to
conform with 1996 presentation.
3. FAIR VALUE OF FINANCIAL INSTRUMENT DISCLOSURE
U. S. Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
"Disclosures Fair Value of Financial Instruments", requires disclosure of the
estimated fair value of certain financial instruments. The estimated fair value
amounts have been determined using available market information or other
appropriate valuation methodologies that require considerable judgment in
interpreting market data and
F-65
<PAGE> 198
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. FAIR VALUE OF FINANCIAL INSTRUMENT DISCLOSURE -- (CONTINUED)
developing estimates. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The carrying amounts of the Company's cash equivalents, accounts receivable
and short-term notes payable approximate their fair values. Cash equivalents and
accounts receivable are short-term, in nature and notes payable have relatively
short maturities and bear interest at variable rates tied to market indicators.
The Company's long-term debt consists of debt instruments which bear interest at
fixed rates and variable rates tied to market indicators. Except for long-term
debt due to related parties, the fair value of long-term debt is estimated by
discounting future cash flow amounts using current interest rates at which
similar notes would be issued to similar borrowers. The fair value of these
amounts approximated the carrying value at December 31, 1996 and 1995.
The fair value information presented herein is based on information
available to management as of the above presented dates. Although management is
not aware of any factors that would significantly affect the estimated fair
value, amounts have not been comprehensively revalued for purposes of these
financial statements since those dates and, therefore, the current estimates of
fair value may difference significantly from the amounts presented herein.
4. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Transactions with related parties carried out during the years ended
December 31, 1996 and 1995, in addition to those described in notes 14 and 15,
were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Expenses:
Interest....................................................... $409 $500
Cost of service................................................ 145
Administrative services........................................ 341
Income:
Interest....................................................... 204 87
Administrative services........................................ 26 469
</TABLE>
F-66
<PAGE> 199
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. BALANCES AND TRANSACTIONS WITH RELATED PARTIES -- (CONTINUED)
The balances due from and to related parties at December 31, 1996 and 1995
are summarized as follows:
<TABLE>
<CAPTION>
INTEREST RATE
OR AVERAGE
INTEREST RATE
-------------
1996 1995 1996 1995
---- ---- ---- ------
<S> <C> <C> <C> <C>
Due from related parties:
Investcom, S. A. de C. V...................... 42% $ 15 $
Com-L.D., S. A. de C. V....................... 42% 301
Nextel Communications, Inc.................... 42% 54
Nacional de Telecomunicaciones, S. A. de C.
V........................................... 42% 55% 50 544
Other......................................... 42% 7
---- ------
$427 $ 544
==== ======
Due to related parties:
Grupo Comunicaciones San Luis, S. A. de C.
V........................................... 6% 6% $ 91 $ 933
Comunicaciones Troncales, S. A. de C. V....... 42% 55% 538 604
---- ------
$629 $1,537
==== ======
</TABLE>
Nacional de Telecomunicaciones, S. A. de C. V. is a 49% owned affiliate of
Mobilcom that is accounted for using the equity method (Note 7). December 31,
1996, Grupo Communicaciones San Luis, S. A. de C. V. owned approximately 50%, of
the outstanding shares of the common stock of Mobilcom, Intercom, S. A. de C. V.
and Communicaciones Troncales, S. A. de C. V. are subsidiaries of Grupo
Communicaciones San Luis, S. A. de C. V.
5. ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Trade........................................................... $1,230 $ 1,457
Officer and employees........................................... 867 95
Recoverable value added tax..................................... 575 1,611
Other........................................................... 164 157
------ -------
2,836 3,320
Less allowance for doubtful accounts............................ (586) (1,141)
------ -------
$2,250 $ 2,179
====== =======
</TABLE>
6. INVENTORIES
Inventories, which consist entirely of finished goods, include the
following:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Communication equipment............................................ $ 829 $702
Communication equipment at bonded warehouse........................ 48
Less allowance for obsolete inventories............................ (444) (41)
----- ----
$ 385 $709
===== ====
</TABLE>
F-67
<PAGE> 200
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INVESTMENT IN AFFILIATE
During 1995, the Company acquired a 49 percent interest in Nacional de
Telecomunicaciones, S. A. de C. V. (Natel), a Mexican company with operations
similar to Mobilcom's. (See Note 14) Relating to letter of interest to acquire
the remaining 51% of Natel. Natel's operations and the Company's equity in net
loss of Natel included:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
NATEL:
Net sales.................................................... $ 850 $ 526
Operating loss............................................... 635 839
Net gain (loss).............................................. 215 (904)
MOBILCOM 49% EQUITY IN (LOSS):
Mobilcom equity in (gain) loss............................... 105 (443)
Amortization of excess of cost over the fair value of equity
interest in net assets acquired............................. (281) (278)
----- -----
Equity in loss of Natel........................................... $(176) $(721)
===== =====
</TABLE>
The Company's investment in Natel included the unamortized excess cost over
the fair value of equity interest in Natel's net assets. This excess was $6,303
and $6,663 at December 31, 1996 and 1995 and is being amortized on a
straight-line basis over the estimated economic useful life of 25 years.
Condensed balance sheet information for Natel at December 31, 1996 and 1995
was as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Current assets................................................... $1,641 $ 636
Noncurrent assets................................................ 1,447 1,654
Current liabilities.............................................. 1,681 728
</TABLE>
The Company's investment in affiliate was comprised of the following at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Stockholders' equity -- Natel.................................... $1,407 $1,562
Contribution not recognized...................................... 1,144 1,144
------ ------
$2,551 $2,706
====== ======
Equity participation at 49%...................................... $1,250 $1,326
Excess of cost over the fair value of equity interest in net
assets acquired net of accumulated amortization................ 6,303 6,663
------ ------
Total............................................................ $7,553 $7,989
====== ======
</TABLE>
Under the purchase agreement with Natel, the Company owes Natel $1,144 and
its shareholders $40 or a total of $1,184 at December 31, 1996 and 1995 for the
shares acquired during 1995, which is recorded as a liability and is being
offset against receivables from Natel for services provided.
F-68
<PAGE> 201
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment include the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Land........................................................... $ 44 45
Building....................................................... 131 133
Transmission equipment......................................... 15,188 12,624
Office furniture and fixtures.................................. 196 181
Computer equipment............................................. 296 209
Transportation equipment....................................... 117 90
Equipment at bonded warehouse.................................. 801 2,633
Construction in progress....................................... 152 934
------- -------
16,925 16,849
Less accumulated depreciation.................................. (2,947) (1,974)
------- -------
$13,978 $14,875
======= =======
</TABLE>
9. NOTES PAYABLE
Short-term debt is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST RATE
FOR THE YEAR
---------------
1996 1995 1996 1995
------ ----- -------------- --------------
<S> <C> <C> <C> <C>
Arrendadora Financiera Invermexico, S. A.
de C. V. (Arrendadora)(1)............... 14% $ $ 14,306
Unsecured financing loan:
In Mexican pesos..................... 37.25% 59.5% 683 1,245
In U.S. dollars...................... 15.% 15.2% 2,194 2,532
Union de Credito Regional, S. A. de C. V.:
Unsecured............................ 38.5% 61% 624 646
Banco Mercantil del Norte, S. A., credit
letters
Fimexpo, S. A. de C. V. secure loans in
U.S. dollars............................ 25% 589
Financing loans in U. S. dollars.......... 12.2% 4,590
------ --------
$3,501 $ 23,908
====== ========
</TABLE>
- ------------------
(1) During 1994 a Mexican bank made a loan in the amount of U. S. $8,365 to the
Company collateralized by fixed assets. Additionally in 1994, Arrendadora,
which is a leasing company, advanced U. S. $14,428 to the Company which was
used to pay off the loan from the Mexican bank plus accrued interest. The
advance was made by Arrendadora in anticipation of a sale leaseback
transaction involving the collateralized equipment. At December 31, 1995,
the Company was in arrears on accrued interest related to the notes payable
to Arrendadora in the amount of $1,331 and accordingly the amount was
classified as current liabilities. The anticipated sale leaseback
transaction occurred as of June 10, 1996. (See Note 10).
F-69
<PAGE> 202
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. CURRENT PORTION AND LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Loans in Mexican pesos, bearing Nafin interest plus 6 points and
CPP interest, plus 6 to 10 points, average 40.5% 1996, and 62% in
1995, payable in monthly installments through 2000, collaterized by
fixed assets and goods purchased with the proceeds from the loans
and with the guarantee from subsidiary of the company and one of
the shareholders................................................... $ 2,104 $ 701
Arrendadora Financiera Invermexico, S. A. de C. V. (Arrendadora),
payable in semi-annual payments in U.S. dollars up to $2,007.
Interest rate libor plus 3.6 to 8.6 and one note at 22% (average
16%)(2)............................................................ 14,493
Loan in U.S. dollars, bearing annual interest of 15%, payable in
September 1997..................................................... 690 605
Capital leases in Mexican pesos, bearing the highest interest rate,
plus 9 points or CPP interest, plus 8 to 10 points, average 41.80%
in 1996 and 57.85% in 1995 payable in monthly installments through
1999, collateralized by fixed assets purchased..................... 290 339
Capital lease in U.S. dollars, bearing LIBOR interest plus 7
points, average 12.50% and 12.45% in 1996 and 1995, respectively,
payable in monthly installments through March 1998, collateralized
by fixed assets purchased.......................................... 73 109
Others:
In Mexican pesos.............................................. 56
In U.S. dollars............................................... 43
------- ------
Current portion and long-term debt(1)......................... 17,706 1,797
------- ------
Less current installments:
Capital lease agreements...................................... 105
Notes payable................................................. 289
------- ------
Current installments of long-term debt........................ 394
------- ------
Long-term debt, excluding current installments..................... $ -- $1,403
======= ======
</TABLE>
-----------------------
(1) As of January 31, 1997 all of the above long term debt agreements were
in technical default as the Company has not made all of the scheduled
installments required pursuant to the respective agreement in addition
to non-compliance with other covenants (See Note 14), and accordingly
all
F-70
<PAGE> 203
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. CURRENT PORTION AND LONG-TERM DEBT -- (CONTINUED)
long-term debt was classified as current liabilities. Contractual
maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
PAYABLE IN
MEXICAN U.S.
PESOS DOLLARS TOTAL
---------- ------- -------
<S> <C> <C> <C>
1998............................................. $325 $ 1,045 $ 1,370
1999............................................. 194 1,031 1,225
2000............................................. 137 1,031 1,168
2001............................................. 110 1,031 1,141
2002............................................. 84 1,031 1,115
Thereafter....................................... 38 4,535 4,573
---- ------- -------
$888 $ 9,704 $10,592
==== ======= =======
</TABLE>
-----------------------
(2) On February 1997 the capital lease was signed with an effective date of
June 1996. It establishes some covenants which are not fully complied
with. See also footnote 9.
At December 31, 1996 and 1995, substantially all of the Company's
property, furniture and equipment was pledged as collateral under the
Company's notes payable and long-term debt agreements. Additionally, at
December 31, 1996 and 1995, the shares of one of the Company's
subsidiaries were pledged as collateral for loans in Mexican pesos. The
liabilities of such subsidiary exceeded the book value of its assets at
December 31, 1996 and 1995.
11. STOCKHOLDERS' EQUITY
In June 1996, the Company's board of directors agreed to increase the
variable portion of common stock through a 2.65 to 1 stock split, resulting in
the issuance of 292,117 series "B" shares, with a par value of 1,000 Mexican
pesos each. Share data for all periods presented reflect this stock split.
At December 31, 1996 and 1995 1,304,481 and 971,637 shares of series "B"
shares with a par value of 1,000 Mexican pesos were authorized of which 509,908
and 468,886 shares were issued and outstanding respectively. Prior to March
1995, the company also had series "A" and "C" shares outstanding, all of which
conferred the same rights and privileges to stockholders as series "B" shares.
During 1995 the company exchanged all outstanding series "A" and "C" shares for
series "B" shares.
During 1996, the following transactions occurred:
-- The variable portion of common stock was increased through issuance
of 19,995 series "B" shares, with a par value of 1,000 Mexican pesos
each. The total subscription value was $8,240, including a premium of
$5,562, paid in cash and by capitalizing liabilities for $1,030.
-- The Company's board of directors also agreed to increase the variable
portion, through issuance of 16,427 series "B" shares, with a par
value of 1,000 Mexican pesos each; 811 shares were subscribed and
paid-in by employees, under certain conditions.
-- Common stock, was increased through payment for 4,600 series "B"
shares, with a par value of 1,000 Mexican pesos each, in the amount
of $1,896, including a premium of $1,281.
During 1995, 87,924 additional shares of common stock were acquired by
Nextel. In conjunction with this purchase, the Company received $12,519 in cash
and contributed $43,625 of debt to capital.
F-71
<PAGE> 204
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary
differences between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss carryforwards. The net deferred tax liability represents deferred
tax on the nondeductible cost of licenses less amounts included in the net
operating loss carryforwards for a ten year period. Significant components of
the Company's deferred tax liability are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 19,560 $ 14,606
Site development costs.................................... 90
Property, furniture and equipment......................... 1,035 (2,387)
-------- --------
Deferred tax asset........................................ 20,595 12,309
Valuation reserve......................................... (17,679) (9,169)
-------- --------
Net deferred tax asset.................................... 2,916 3,140
Non deductible cost of licenses........................... (6,783) (7,057)
-------- --------
Net liability............................................. $ (3,867) $ (3,917)
======== ========
</TABLE>
The Company had net operating loss carryforwards of approximately $57,536
at December 31, 1996. These net operating loss carryforwards, which are indexed
to reflect the impact of inflation in accordance with Mexican tax law, expire as
follows:
<TABLE>
<S> <C>
2001..................................................................... $ 24
2002..................................................................... 475
2003..................................................................... 1,854
2004..................................................................... 33,043
2005..................................................................... 16,606
2006..................................................................... 5,534
</TABLE>
The Company and its subsidiaries file their tax returns individually and a
consolidated tax return is not prepared.
Even though the Company has incurred tax losses for the past 5 years,
management believes that it is more likely than not that it will generate
taxable income sufficient to realize the portion of the tax benefit associated
with the net deferred tax asset of $2,916 and $3,140 respectively. The belief is
based upon, among other factors, the expected reversal of existing deferred tax
liabilities. If the company is unable to generate sufficient taxable income in
the future through operating results, increases in valuation allowance will be
required through a charge to expense. However, if the Company achieves
sufficient profitability to utilize a greater portion of the deferred tax asset,
the valuation allowance will be reduced through a credit to income.
The actual income tax expense attributable to earnings for the years ended
December 31, 1996 and 1995 differ from the amounts computed by applying the
Mexican income tax rate of 34 percent to losses before income taxes and equity
in the results of affiliate as a result of the following:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Income tax benefit at statutory rate.............................. $(4,026) $(10,579)
Limitation on net operating loss carryforwards -- net............. 966 9,193
Differences between tax and financial accounting for effects of
inflation....................................................... 3,060 (1,371)
Other............................................................. 2,241
------- --------
Benefit for income tax............................................ $ -- $ (516)
======= ========
</TABLE>
F-72
<PAGE> 205
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES -- (CONTINUED)
The significant components of the deferred income tax benefit for the years
ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Deferred income tax benefit (exclusive of the effects of other
components listed below)........................................ $(4,026) $ (4,256)
Net operating losses generated and other.......................... (4,601) (5,453)
Increase in valuation allowance................................... 8,627 9,193
------- --------
Deferred income tax benefit....................................... $ -- $ (516)
======= ========
</TABLE>
13. ASSOCIATION WITH NEXTEL COMMUNICATIONS, INC. (NEXTEL)
On March 3, 1995 Mobilcom had closed a share purchase and subscription
agreement with Nextel, pursuant to which Nextel Investment Company a subsidiary
of Nextel, acquired 16.5% minority interest in Mobilcom. This transaction
reflects the renegotiation of the terms associated with a previously
contemplated transaction involving Nextel, Nextel Investment Company, Mobilcom
and certain stockholders of Mobilcom which was initially announced in October
1994. Pursuant to this transaction, Nextel Investment Company purchased newly
issued shares comprising 16.5% of the shares of capital stock of Mobilcom
(calculated after issuance of such shares) for a cash payment of $12,519 and
$43,625 of notes representing funds advanced to Mobilcom in 1994.
In addition, Nextel made additional investments in January 1996 for an
additional 1.5% of the shares of capital stock of Mobilcom. (See Note 11). As
part of this transaction, Nextel also received two options to increase its
ownership of Mobilcom equity. The first option was an 18 month option to acquire
an additional 19.5% of Mobilcom for $76,800 and a second option is a three-year
option to acquire an additional 10% of Mobilcom for $67,500.
The agreement grants the following privileges to Nextel: (1) certain
preferred rights to acquire additional shares of Mobilcom, in order to maintain
its equity percentage; (2) certain rights to subscribe the shares proposed to be
issued in the transaction; (3) the right to designate members of the Board of
Mobilcom; and (4) veto rights with regard to various matters presented to the
Board of Directors of Mobilcom, including acquisitions, disposals, business
plans and technology rights. This agreement also set the rules for Nextel and
Mobilcom's other stockholders to acquire or dispose of their equity interests in
Mobilcom. Also executed at closing of the Mobilcom transaction were agreement
related to an interpretability relationship between Nextel and Mobilcom and the
sharing between Nextel and Mobilcom of channels along the United States-Mexican
border.
At January 31, 1997 Nextel owns 38% of the outstanding shares, of Mobilcom
and still has the option to purchase before March 1998, up to an additional
29.5% of Mobilcom's common stock. Furthermore, certain shareholders of Mobilcom,
holders of approximately 37% of Mobilcom's common stock retain the right for a
period of two years commencing October 24, 1997 to put (the "Mobilcom Put") the
entire amount of their holdings to Nextel at its appraised fair market value for
cash upon the occurrence of certain events (the "Put Events"). The Mobilcom Put
is automatically exercisable on October 24, 1999 whether or not a Put Event
occurs.
F-73
<PAGE> 206
CORPORACION MOBILCOM, S. A. DE C. V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENTS
(a) On March 10, 1997 the Company has signed a purchase agreement to
acquire the remaining 51% interest in its equity investee, Natel for $6,500,
subject to the approval of the SCT. The company is exploring the possibility of
acquiring additional channels in other markets.
On February 6, 1997 the Company requested from its shareholders a capital
call of $27,000 by April 14, 1997. The funds obtained through the capital call
will be used to assist the Company to meet its cash obligations and make certain
strategic investments as follows:
<TABLE>
<CAPTION>
CAPITAL CALL
------------
<S> <C>
Pay-off of certain obligations and funds for current operating
expenses....................................................... $ 16,000
Purchase of 51% of Natel......................................... 7,000
Completion of microwave network build-out........................ 4,000
--------
$ 27,000
========
</TABLE>
Nextel's pro rata share of the capital call is approximately $10,000 which
Nextel has committed to fund. Nextel also expects to fund an additional $12,000
which would increase its equity interest in Mobilcom by approximately 10%.
(b) At the March 10, 1997 Board meeting, the Company decided to explore the
possibility of disposing of its 400 mhz business which has a net book value of
licenses and equipment of approximately $6,500 as of December 31, 1996. As the
negotiations with potential buyers are in the early stages, there can be no
assurance that a sale will be consummated. Management believes that the disposal
will not result in losses and expects to utilize the proceeds to reduce debt.
Disposition of the 400 mhz business will allow the Company to more effectively
focus on its core business.
F-74
<PAGE> 207
CORPORACION MOBILCOM S.A. DE C.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(THOUSANDS OF U.S. DOLLARS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents...................................................... $12,881
Trade accounts receivable, net................................................. 787
Other accounts receivable...................................................... 2,418
Inventory...................................................................... 768
Due from related parties....................................................... 238
Prepaid expenses and other..................................................... 168
-------
Total current assets........................................................ 17,260
Investment in affiliate.......................................................... 7,471
Property and equipment, net...................................................... 13,738
Cost of licenses................................................................. 19,735
Goodwill, net.................................................................... 6,770
-------
Total assets................................................................ $64,974
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses............................................................... $ 6,703
Notes payable and current portion long term debt............................... 7,760
Accounts payable............................................................... 1,273
Payable to shareholder......................................................... 1,000
Due to related parties......................................................... --
-------
Total current liabilities................................................... 16,736
Long-term debt................................................................... 12,783
Deferred income taxes............................................................ 3,804
-------
Total liabilities........................................................... 33,323
Stockholders' equity............................................................. 31,651
-------
Total liabilities and stockholders' equity.................................. $64,974
=======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-75
<PAGE> 208
CORPORACION MOBILCOM S.A. DE C.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Revenue................................................................ $ 1,656 $ 1,221
Cost of operations..................................................... 698 588
Selling, general and administrative expenses........................... 2,200 1,975
Depreciation and amortization.......................................... 712 609
------- -------
Operating loss.................................................... (1,954) (1,951)
Other expenses, net.................................................... 390 1,284
------- -------
Net loss............................................................... $(2,344) $(3,235)
======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-76
<PAGE> 209
CORPORACION MOBILCOM S.A. DE C.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $(2,344) $(3,235)
Depreciation and amortization expense................................ 712 609
Equity in subsidiary................................................. 17 (7)
Foreign currency translation and exchange (gain) loss, net........... (201) 152
Changes in operating accounts, net................................... 712 905
------- -------
Net cash used by operating activities............................. (1,104) (1,576)
Cash flows from investing activities:
Purchase of property and equipment................................... (102) (107)
------- -------
Net cash used by investing activities............................. (102) (107)
Cash flows from financing activities:
Proceeds from sale of stock and net capital contributions............ 13,619 --
------- -------
Net cash provided by financing activities......................... 13,619 --
------- -------
Net decrease in cash and cash equivalents.............................. 12,413 (1,683)
Cash and cash equivalents at beginning of year......................... 468 5,058
------- -------
Cash and cash equivalents at end of period............................. $12,881 $ 3,375
======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-77
<PAGE> 210
CORPORACION MOBILCOM S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997 AND 1996
(THOUSANDS OF U.S. DOLLARS)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the consolidated
financial position of Corporacion Mobilcom. S.A. de C.V. and Subsidiaries (the
"Company") as of March 31, 1997, and the statements of operations and statements
of cash flows for the three months ended March 31, 1997 and 1996. The results of
operations for the three months ended March 31, 1997 and 1996 are not
necessarily indicative of the results that may be expected for the full year.
These condensed consolidated financial statements are unaudited, and do not
include all related footnote disclosures.
The interim unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of the
Company.
(2) FOREIGN CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52
Foreign Currency Translation the Mexican economy, in which the Company primarily
conducts operations, is considered to be highly inflationary as of January 1,
1997. Accordingly the financial statements have been remeasured to reflect the
U.S. dollar as the functional currency of the Company. Pursuant to SFAS No. 52
the translated December 31, 1996 balance sheet has become the accounting basis
for subsequent periods. Transactions subsequent to January 1, 1997 will be
recorded at current exchange rates with translation gains and losses recorded as
a component of net income before taxes.
For the three months ended March 31, 1997 net foreign currency gains of
$447 have been recognized as a component of net income.
(3) NOTES PAYABLE AND LONG-TERM DEBT
The Company was in arrears with respect to principal and interest payments
on certain notes payable and long-term debt agreements as of March 31, 1997.
Consequently certain long-term debt agreements were in technical default as the
Company had not made payment of all of the required installments pursuant to
debt agreements, in addition to non-compliance with other debt covenants.
During February 1997 the Company placed a capital call to shareholders
requesting $27,000 in additional capital of which $13,619 was contributed during
March 1997. The remaining $13,381 was contributed during April 1997. Portions of
the funds obtained as a result of the capital call were used to make payments on
the portions of debt in arrears and to make advanced payments in anticipation of
certain debt service requirements. As a result of the payments, the Company is
in compliance with its debt covenants.
Long-term debt has been classified as a non-current liability with the
applicable current portions classified as current liabilities as of March 31,
1997.
(4) SUBSEQUENT EVENTS
In April 1997 the Company acquired the remaining 51% interest in its equity
investee, Natel. In order to accomplish this transaction the Company contributed
cash to Natel in the amount of $5,356. Concurrently, the other shareholders
holding a 51% interest in Natel received $6,500 from Natel for their interest in
Natel. As a result of the transaction the Company became a 100% owner of Natel.
The excess of the cost to acquire 100% of Natel over the fair value of net
assets acquired of $11,098 is expected to be attributed to the cost of licenses
to be amortized over a period of 25 years. The Company will consolidate Natel
using purchase accounting in subsequent periods.
F-78
<PAGE> 211
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE MAKING OF THE
EXCHANGE OFFER PURSUANT TO THIS PROSPECTUS NOR THE ACCEPTANCE OF PRIVATE NOTES
FOR SURRENDER FOR EXCHANGE PURSUANT THERETO SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Summary............................... 4
Risk Factors.......................... 17
The Company........................... 32
No Cash Proceeds to the Company....... 35
Capitalization........................ 36
The Exchange Offer.................... 36
Selected Consolidated Historical
Financial Data...................... 43
Pro Forma Consolidated Financial
Statements.......................... 44
Selected Proportionate Data........... 47
Management's Discussion and Analysis
of Financial Condition and Results
of Operation........................ 48
Industry Overview..................... 58
Business.............................. 62
Management............................ 92
Certain Relationships and Related
Transactions........................ 100
Description of the Exchange Notes..... 102
Certain U.S. Federal Income Tax
Considerations...................... 128
Plan of Distribution.................. 129
Legal Matters......................... 129
Experts............................... 130
Index to Financial Statements......... F-1
</TABLE>
MCCAW INTERNATIONAL, LTD. LOGO
------------------------
OFFER TO EXCHANGE
------------------------
13% SENIOR DISCOUNT NOTES DUE
APRIL 15, 2007 FOR ALL OUTSTANDING
13% SENIOR NOTES DUE APRIL 15, 2007
, 1997
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
<PAGE> 212
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Registrant's Articles of Incorporation, as amended
(the "Articles of Incorporation"), provides that no director of the Registrant
shall be personally liable for any monetary damages for any breach of fiduciary
duty as a director, except to the extent that the Washington Business
Corporation Act prohibits the elimination or limitation of liability of
directors for breach of fiduciary duty.
Article ELEVENTH of the Registrant's Articles of Incorporation provides
that a director or officer of the Registrant shall be indemnified by the
Registrant to the fullest extent of the law against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) actually and reasonably incurred
in connection with any litigation or other legal proceeding brought against him
or her or otherwise involving him or her (including as a witness) by virtue of
his or her position as a director or officer of the Registrant. Notwithstanding
the foregoing, the Registrant shall indemnify an officer or director in
connection with a proceeding initiated by such director or officer only if such
proceeding was authorized by the board of directors of the Registrant. The right
to indemnification includes the right to be paid expenses incurred in defending
any proceeding in advance of its final disposition, provided that such director
or officer undertakes to repay all amounts advanced if it is ultimately
determined that he or she is not entitled to indemnification under Article
ELEVENTH.
If the Registrant fails to make an indemnification payment within 60 days
(20 days in the case of a claim for expenses incurred in defending any
proceeding in advance of its final disposition) after receipt of a written claim
for such payment, the director or officer may bring suit against the Registrant
to recover the unpaid amount of the claim, and to the extent successful, may
also recover the expense of prosecuting such claim. A director or officer will
be presumed to be entitled to indemnification upon submission of a written
claim, and the Registrant will have the burden of proof to overcome such
presumption. Neither failure of the Registrant to make a prior determination
that indemnification is proper nor an actual determination that such director or
officer is not so entitled shall be a defense to such an action or create a
presumption that the director or officer is not so entitled.
Article ELEVENTH of the Registrant's Articles of Incorporation further
provides that the indemnification therein is not exclusive, and provides that in
the event that the Washington Business Corporation Act is amended to expand the
indemnification permitted to directors and officers, the Registrant must
indemnify those persons to the fullest extent permitted by such law as so
amended.
Chapter 23B.08.510 of the Washington Business Corporation Act provides that
a corporation has the power to indemnify a director of the corporation against
amounts paid and expenses incurred in connection with a proceeding to which he
or she is made a party by reason of such position, if such person shall have
acted in good faith and reasonably believed, in the case of conduct in the
director's official capacity, that such conduct was in the best interests of the
corporation, and in all other cases, that such person's conduct was not opposed
to the best interests of the corporation, and, in any criminal proceeding, that
such person had no reasonable cause to believe his conduct was unlawful;
provided that, in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the corporation or in
connection with any proceeding charging improper personal benefit to the
director, whether or not involving action in the director's official capacity,
in which the director was adjudged liable on the basis of an improper personal
benefit.
Chapter 23B.08.570 of the Washington Business Corporation Act provides that
the corporation may indemnify an officer, employee or agent of the corporation
for expenses to the same extent as a director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See Index to Exhibits.
II-1
<PAGE> 213
ITEM 22. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
2. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim of indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
4. The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 214
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN SEATTLE,
WASHINGTON ON JULY 18, 1997.
McCAW INTERNATIONAL, LTD.
By: /s/ HENG-PIN KIANG
-------------------------------------
Name: Heng-Pin Kiang
Title: Senior Vice President and
General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JULY 18, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------- -----------------------------------------------------
<S> <C>
* Chairman of the Board of Directors
- -------------------------------------
DANIEL F. AKERSON
* President, Chief Executive Officer
- ------------------------------------- and Director
KEITH D. GRINSTEIN (Principal Executive Officer)
* Senior Vice President
- ------------------------------------- and Chief Financial Officer
DAVID E. ROSTOV (Principal Financial and Accounting Officer)
* Director
- -------------------------------------
C. JAMES JUDSON
* Director
- -------------------------------------
CRAIG O. MCCAW
Director
- -------------------------------------
STEVEN M. SHINDLER
* Director
- -------------------------------------
DENNIS M. WEIBLING
/s/ HENG-PIN KIANG Attorney-in-fact
- -------------------------------------
HENG-PIN KIANG
</TABLE>
II-3
<PAGE> 215
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
*1.1 Placement Agreement, dated as of March 3, 1997, between McCaw International, Ltd.
and Morgan Stanley & Co., for itself and for Chase Securities, Inc., Lehman
Brothers, Inc. and NatWest Capital Markets Limited.
*3.1 Articles of Incorporation of the Company.
*3.2 By-laws of the Company.
*4.1 Indenture, dated as of March 3, 1997 between McCaw International, Ltd. and The Bank
of New York.
*4.2 Form of Exchange Note (included in Exhibit 4.1).
*4.3 Registration Rights Agreement, dated as of March 3, 1997, between McCaw
International, Ltd. and Morgan Stanley & Co. Incorporated, Chase Securities Inc.,
Lehman Brothers Inc. and NatWest Capital Markets Limited.
4.4 Warrant Agreement, dated March 6, 1997, between the Company and the Bank of New
York.
**5.1 Opinion and Consent of Chadbourne & Parke LLP regarding validity of the Exchange
Notes.
**5.2 Opinion and Consent of Perkins Coie.
**8.1 Tax Opinion of Perkins Coie (included in Exhibit 5.2).
10.1 Motorola Vendor Financing Template Memorandum of Understanding, dated November
1996, between Motorola, Inc., Nextel Communications, Inc. and the Company.
10.2 Shareholders Agreement, dated January 29, 1997, between the Company, McCaw
International (Brazil), Ltd. ("McCaw Brazil") and the minority shareholders of
McCaw Brazil.
10.3 Amendment No. 1, dated April 27, 1997, to Shareholders Agreement between the
Company, McCaw Brazil and the minority shareholders of McCaw Brazil.
10.4 Members Agreement, dated May 6, 1997, between the Company, McCaw International
(Argentina), Ltd. ("McCaw Argentina"), McCaw International (Holdings), Ltd. and
Wireless Ventures of Argentina, LLC ("WVA").
10.5 Joint Venture Agreement, dated October 28, 1996, among the Company, McCaw
International (Holdings), Ltd., McCaw International (Delaware), Ltd., McCaw
International (Argentina), LLC, Telcom Ventures, LLC and WVA.
10.6 Amendment, dated April 25, 1997, to the Joint Venture Agreement among the Company,
McCaw International (Holdings), Ltd., McCaw International (Delaware), Ltd., McCaw
International (Argentina), LLC, Telcom Ventures, LLC and WVA.
10.7 Amended and Restated Shareholders Agreement, dated August 23, 1996, between
Corporacion Mobilcom S.A. de C.V. ("Mobilcom"), Nextel Communications, Inc., Nextel
Investment Company and the certain other shareholders of Mobilcom.
10.8 Put Call Agreement, dated June 13, 1996, between Nextel Communications, Inc.,
Nextel Investment Company and certain other shareholders of Mobilcom.
10.9 Amendment, dated August 23, 1996, to Put Call Agreement between Nextel
Communications, Inc., Nextel Investment Company and certain other shareholders of
Mobilcom.
10.10 Exit Rights Agreement, dated August 23, 1996, between Nextel Investment Company and
Grupo Communicaciones San Luis S.A. de C.V.
10.11 Stockholders Agreement, dated June 21, 1996, between Infocom Communications
Network, Inc. ("Infocom") and the shareholders of Infocom.
10.12 Employment Letter, dated November 3, 1995, between the Company and Keith D.
Grinstein.
</TABLE>
<PAGE> 216
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
10.13 Employment Letter, dated November 3, 1995, between the Company and Heng-Pin Kiang.
10.14 Employment Letter, dated January 11, 1996, between the Company and Brian A.
Vincent.
10.15 Employment Letter, dated October 9, 1996, between the Company and William S.
Roberts.
10.16 Employment Agreement, dated January 11, 1996, between the Company and David E.
Rostov.
10.17 McCaw International, Ltd. 1997 Stock Option Plan.
10.18 Tax Sharing Agreement, dated January 1, 1997, between Nextel Communications, Inc.
and its subsidiaries.
10.19 Overhead Services Agreement, dated March 3, 1997, between Nextel Communications,
Inc. and the Company.
10.20 Right of First Opportunity Agreement, dated March 6, 1997, between Nextel
Communications, Inc. and the Company.
10.21 Indemnification Agreement, dated March 6, 1997, between Nextel Communications, Inc.
and the Company.
**21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
23.2 Not Used.
23.3 Consent of Deloitte & Touche LLP for Corporacion Mobilcom S.A. de C.V.
23.4 Consent of Deloitte & Touche LLP for Wireless Ventures of Brazil, Inc.
23.5 Consent of KPMG Peat Marwick LLP.
**23.6 Consent of Chadbourne & Parke LLP (included in Ex. 5.1).
**23.7 Consent of Perkins Coie (included in Exhibit 5.2).
*24.1 Power of Attorney.
25.1 Statement of Eligibility of The Bank of New York, as Trustee.
27.1 Financial Data Schedule.
**99.1 Form of Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Exchange Agent Agreement.
</TABLE>
- ---------------
* Exhibits filed previously.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 4.4
________________________________________________________________________________
WARRANT AGREEMENT
between
MCCAW INTERNATIONAL, LTD.
and
THE BANK OF NEW YORK
Dated as of March 6, 1997
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.3. Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.4. Certificated Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2. Exercise; Restrictions on Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3. Method of Exercise; Payment of Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4. Repurchase Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2. Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.3. Statement on Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4. Notice of Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5. Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.6. When Issuance or Payment May Be Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.7. Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.2. Book-Entry Provisions for the Global Warrants . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.3. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.4. Surrender of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 9.2. Right of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE X
REMEDIES
Section 10.1. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.2. Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.3. Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.2. Right to Consult Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.3. Compensation; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.4. No Restrictions on Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.5. Discharge or Removal; Replacement Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.6. Successor Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C> <C>
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.3. No Merger, Consolidation or Sale of Assets of the Company . . . . . . . . . . . . . . . . . . 39
Section 12.4. Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.5. Notices; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.6. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.8. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.10. Common Shares Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.11. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 12.12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.13. Right of First Opportunity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
</TABLE>
<PAGE> 5
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of March 6, 1997 (this
"Agreement"), between MCCAW INTERNATIONAL, LTD., a Washington corporation (the
"Company"), and THE BANK OF NEW YORK (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated
March 3, 1997 (the "Placement Agreement"), among the Company and Morgan Stanley
& Co. Incorporated ("Morgan Stanley"), as manager (the "Manager"), for itself
and the other placement agents named therein (collectively with the Manager,
the "Placement Agents"), the Company has agreed to issue and sell to the
Placement Agents an aggregate of 951,463 warrants (each, a "Warrant" and
collectively, the "Warrants"), each Warrant initially entitling the holder
thereof to purchase 0.10616 shares of Common Stock (as defined below) of the
Company at an exercise price of $36.45 per Common Share (as defined below) as
part of 951,463 units (the "Units"), each Unit consisting of one 13% Senior
Discount Note due 2007 of the Company (each a "Note" and collectively, the
"Notes") to be issued pursuant to the provisions of an Indenture, dated as of
the date hereof, among the Company and The Bank of New York (the "Indenture"),
and one Warrant;
WHEREAS, the Notes and the Warrants included in each Unit will
become separately transferable at the close of business upon the earliest to
occur of (i) the date that is six months after the Closing Date (as defined
below), (ii) the commencement of an exchange offer with respect to the Notes
undertaken pursuant to the Notes Registration Rights Agreement (as defined
below), (iii) the effectiveness of a shelf registration statement with respect
to resales of the Notes or (iv) the commencement of an offer to purchase the
Notes undertaken pursuant to the Indenture (the "Separation Date"); and
WHEREAS, the Company desires to engage the Warrant Agent to
act on the Company's behalf, and the Warrant Agent desires to act on behalf of
the Company, in connection with the issuance of the Warrant Certificates (as
defined below) and the other matters as provided herein, including, without
limitation, for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company
and the record holders thereof (together with the holders of shares of Common
Stock (or other securities) received upon exercise thereof, the "Holders").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements contained herein and in the Placement Agreement, the Company
and the Warrant Agent hereby agree as follows:
<PAGE> 6
2
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2
hereof.
"Auditors" means, at any time, the independent auditors of the
Company at such time.
"Board" means the board of directors of the Company from time
to time.
"Business Day" means a day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of the
corporate trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Certificate for Surrender" means the form on the reverse side
of the Warrant Certificate substantially in the form of Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the
Company.
"Common Stock" means the common stock, without par value, of
the Company.
"Company" has the meaning specified in the preamble to this
Agreement.
"Current Market Value" has the meaning specified in Section
4.1(f) hereof.
<PAGE> 7
3
"Default" has the meaning specified in Section 10 hereof.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1
hereof.
"Expiration Date" means April 15, 2007.
"Final Surrender Time" has the meaning specified in Section
3.4 hereof.
"Financial Expert" means one of the Persons listed in Appendix
A hereto.
"Global Warrants" has the meaning specified in Section 2.1
hereof.
"Holders" has the meaning specified in the recitals to this
Agreement.
"IAI Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that
does not (or whose directors, executive officers or 5% stockholders do not)
have a direct or indirect financial interest in the Company or any of its
subsidiaries or affiliates, which has not been for at least five years and, at
the time it is called upon to give independent financial advice to the Company
is not (and none of its directors, executive officers or 5% stockholders is) a
promoter, director, or officer of the Company or any of its subsidiaries or
affiliates. The Independent Financial Expert may be compensated and
indemnified by the Company for opinions or services it provides as an
Independent Financial Expert.
"Institutional Accredited Investor" shall mean an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act.
"Legended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
<PAGE> 8
4
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this
Agreement.
"Notes Registration Rights Agreement" means the Registration
Rights Agreement with respect to the Notes dated March 3, 1997 among the
Company and Morgan Stanley, as Manager, and the other Placement Agents named in
the Placement Agreement.
"Notice Date" has the meaning specified in Section 3.4 hereof.
"Officer" means, with respect to the Company, (i) the Chairman
of the Board, the Chief Executive Officer or any other Director of the Company
or (ii) the Treasurer or any Assistant Treasurer, the Company's Secretary or
any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed
in clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of
the definition thereof in lieu of being signed by one Officer listed in clause
(i) of the definition thereof and one Officer listed in clause (ii) of the
definition thereof.
"Offshore Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Placement Agreement" has the meaning specified in the recitals
to this Agreement.
"Private Placement Legend" means the legend set forth on the
Warrant Certificates in the form set forth in Section 2.2(a) hereof.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
<PAGE> 9
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"Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Relevant Value" means the value of the Warrants as set forth
in the Value Report in accordance with Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any
date when the Company consolidates with or merges into or with (but only where
holders of the Common Stock receive consideration in exchange for all or part
of such Common Stock), or sells all or substantially all of its assets to,
another Person which does not have a class of equity securities registered
under the Exchange Act or a wholly owned subsidiary of such Person, if the
consideration for such transaction does not consist solely of cash or such
merger or consolidation is not effected solely for the purpose of changing the
Company's state of incorporation.
"Repurchase Notice" has the meaning specified in Section
3.4(a) hereof.
"Repurchase Obligation" has the meaning specified in Section
10.2 hereof.
"Repurchase Offer" means the Company's offer to repurchase
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" means the amount of cash payable in respect
of Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified
in Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Right of First Opportunity Agreement" means the Right of
First Opportunity Agreement dated March 6, 1997 between the Company and Nextel.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Separation Date" has the meaning specified in the recitals to
this Agreement.
<PAGE> 10
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"Spread" means, with respect to any Warrant, the Current
Market Value of the Common Shares subject to such Warrant, less the Exercise
Price of such Warrant, in each case as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this
Agreement.
"U.S. Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Unlegended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
"Valuation Date" means the date five Business Days prior to
the Notice Date.
"Value Certificate" has the meaning specified in Section 3.4
hereof.
"Value Report" has the meaning specified in Section 4.1(k)
hereof.
"Warrant" has the meaning specified in the recitals to this
Agreement.
"Warrant Agent" has the meaning specified in the preamble to
this Agreement.
"Warrant Certificates" has the meaning specified in Section
2.1 hereof.
"Warrant Registration Rights Agreement" means the Warrant
Registration Rights Agreement, dated March 3, 1997, between the Company and the
Warrant Agent.
"Warrant Registration Statement" has the meaning specified in
Section 3 of the Warrant Registration Rights Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates
representing the Warrants (the "Warrant Certificates") shall be substantially
in the form attached hereto as
<PAGE> 11
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Exhibit A, shall be dated the date on which such Warrant Certificates are
countersigned by the Warrant Agent and shall have such insertions as are
appropriate or required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more global Warrant Certificate in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "Restricted Global Warrant"), deposited with the Warrant Agent,
as custodian for, and registered in the name of the nominee for, the
Depositary, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more global
Warrant Certificate in definitive, fully registered form, substantially in the
form set forth in Exhibit A (the "Legended Regulation S Global Warrant"),
deposited with the Warrant Agent, as custodian for, and registered in the name
of, the Depositary or its nominee for the accounts of Euroclear and Cedel Bank,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. Prior to March 6, 1998, beneficial interests in the
Legended Regulation S Global Warrant may be only held through Euroclear and
Cedel Bank. At any time following March 6, 1998, upon receipt by the Warrant
Agent and the Company of a certificate substantially in the form of Exhibit D
hereto, one or more global Warrants in registered form substantially in the
form set forth in Exhibit A (the "Unlegended Regulation S Global Warrant"; and
together with the Legended Regulation S Global Warrant, the "Regulation S
Global Warrants") shall be deposited with the Warrant Agent, as custodian for,
and registered in the name of the nominee for, the Depositary, duly executed by
the Company and countersigned by the Warrant Agent as hereinafter provided, and
the Warrant Agent shall reflect on its books and records the date and a
decrease in the Legended Regulation S Global Warrant in an amount equal to the
beneficial interest in number of Warrants evidenced by the Legended Regulation
S Global Warrant transferred. The aggregate number of Warrants represented by
the Regulation S Global Warrant may from time to time be increased or decreased
by adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
<PAGE> 12
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Warrants offered and sold to Institutional Accredited
Investors who are not QIBs shall be issued initially in registered form
substantially in the form set forth in Exhibit A ("IAI Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in
exchange for interests in the Restricted Global Warrant shall be issued in the
form of permanent Warrant Certificates in registered form, substantially in the
form set forth in Exhibit A (the "Restricted Certificated Warrants" and,
together with IAI Certificated Warrants, the "U.S. Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange for
interests in the Regulation S Global Warrants shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form
set forth in Exhibit A (the "Offshore Certificated Warrants"). The Offshore
Certificated Warrants and the U.S. Certificated Warrants are sometimes
collectively herein referred to as the "Certificated Warrants". The Restricted
Global Warrant and the Regulation S Global Warrant are sometimes herein
collectively referred to as the "Global Warrants."
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant
Certificates, other than the Unlegended Regulation S Global Warrants, shall
bear the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS WARRANT IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
<PAGE> 13
9
TIME PERIOD REFERRED TO UNDER RULE 144(k) TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d), IF APPLICABLE UNDER THE SECURITIES ACT AS
IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER
THE WARRANTS REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO MCCAW
INTERNATIONAL, LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE WARRANT AGENT), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE WARRANTS
REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE WARRANT AGENT AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE
<PAGE> 14
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WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Warrant shall also bear the following
legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO MCCAW INTERNATIONAL,
LTD. OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE
WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the
Separation Date shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13% SENIOR
DISCOUNT NOTE DUE 2007 OF MCCAW INTERNATIONAL, LTD. (THE "NOTES") AND
ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.10616
COMMON SHARES, WITHOUT PAR VALUE, OF MCCAW INTERNATIONAL, LTD. PRIOR
TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) SEPTEMBER
6, 1997, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH
<PAGE> 15
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RESPECT TO THE NOTES, (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES OR (iv) THE COMMENCEMENT OF AN
OFFER TO PURCHASE THE NOTES, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing 951,463 Warrants, each Warrant to purchase
initially 0.10616 Common Shares, may be executed, on or after the date of this
Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the written direction of the
Company signed by its Chief Executive Officer or other duly authorized
executive officer to the purchasers thereof on the date of issuance. The
Warrant Agent is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2.3 or by Section 3.3, Article VI or
Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, any Vice
President or other duly authorized executive officer of the Company either
manually or by facsimile signature printed thereon. The Warrant Certificates
shall be countersigned by manual signature of the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any officer or
director of the Company whose signature shall have been placed upon any of the
Warrant Certificates shall cease to be such officer or director of the Company
before countersignature by the Warrant Agent and the issuance and delivery
thereof, such Warrant Certificates may nevertheless be countersigned by the
Warrant Agent and issued and delivered with the same force and effect as though
such person had not ceased to be such officer or director of the Company.
Section 2.4. Certificated Warrants. Beneficial owners of
interests in a Global Warrant may receive Certificated Warrants (which, except
as set forth in Section 8.3(d), shall bear the Private Placement Legend) in
accordance with the procedures of the Warrant Agent and the Depositary
provided, however, that beneficial owners of interests in the Regulation S
Global Warrant may not receive Offshore Certificated Warrants in exchange for
such interest prior to the date one year from the Closing Date. In connection
with the execution and delivery of such Certificated Warrants, the Warrant
Agent shall reflect on its books and records the date and a decrease in the
number of Warrants represented by the relevant Global Warrant equal to the
number of such Certificated Warrants and the Company shall execute and the
Warrant Agent shall countersign and deliver to said beneficial owners one or
more Certificated Warrants in an equal aggregate number.
<PAGE> 16
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ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall,
when countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "Exercise Price") of $36.45
per Common Share, subject to adjustment as provided in Section 4.1 and Article
V hereof.
Section 3.2. Exercise; Restrictions on Exercise. At any time
after one year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of the Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act. Any Warrants
not exercised by 5:00 p.m., New York City time, on the Expiration Date shall
expire and all rights of the Holders of such Warrants shall terminate.
Additionally, pursuant to Section 4.1(j)(ii) hereof, the Warrants shall expire
and all rights of the Holders of such Warrants shall terminate in the event the
Company merges or consolidates with or sells all or substantially all of its
property and assets to a Person (other than an Affiliate of the Company) if the
consideration payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale consists solely of
cash or in the event of the dissolution, liquidation or winding up of the
Company.
Section 3.3. Method of Exercise; Payment of Exercise Price.
In order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set
forth in Section 12.5 hereof, with the Subscription Form set forth on the
reverse of the Warrant Certificate duly executed, together with payment in full
of the Exercise Price then in effect for each Common Share (or other
securities) issuable upon exercise of the Warrants as to which a Warrant is
exercised; such payment may be made in cash or by certified or official bank or
bank cashier's check payable to the order of the Company and shall be made to
the Warrant Agent at its corporate trust office address set forth in Section
12.5 hereof prior to the close of business on the date the Warrant Certificate
is surrendered to the Warrant Agent for exercise. Notwithstanding the
foregoing, if the Common Shares (or other securities) issuable upon exercise of
the Warrants are registered under the Exchange Act, the Exercise Price may be
paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. All payments received upon exercise of Warrants shall be delivered
to the Company by the Warrant Agent as instructed in writing by the Company.
If less than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant
<PAGE> 17
13
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not exercised shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same. Upon the
exercise of any Warrants following the surrender of a Warrant Certificate in
conformity with the foregoing provisions, the Warrant Agent shall instruct the
Company to transfer promptly to the Holder or, upon the written order of the
Holder of such Warrant Certificate, appropriate evidence of ownership of any
Common Shares or other security or property to which it is entitled, registered
or otherwise placed in such name or names as may be directed in writing by the
Holder, and to deliver such evidence of ownership to the Person or Persons
entitled to receive the same and fractional shares, if any, or an amount in
cash, in lieu of any fractional shares, as provided in Section 4.5 hereof;
provided that the Holder of such Warrant shall be responsible for the payment
of any transfer taxes required as the result of any change in ownership of such
Warrants or the issuance of such Common Shares other than to the Holder of such
Warrants. Upon the exercise of a Warrant or Warrants, the Warrant Agent is
hereby authorized and directed to requisition from any transfer agent of the
Common Shares (and all such transfer agents are hereby irrevocably authorized
to comply with all such requests) certificates (bearing the legend set forth in
Section 12.10 hereof, if applicable, unless a Registration Statement relating
to such Common Shares shall then be in effect or the Company and the Holder
exercising such Warrant or Warrants otherwise agree) for the necessary number
of Common Shares to which said Holder may be entitled. The Company shall
enter, or shall cause any transfer agent of the Common Shares to enter, the
name of the Person entitled to receive the Common Shares upon exercise of the
Warrants into the Company's register of shareholders within 14 days of such
exercise. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of the surrender for exercise, as provided
above, of the Warrant Certificate representing such Warrant and, for all
purposes under this Agreement, the Person entitled to receive any Common Shares
deliverable upon such exercise shall, as between such Person and the Company,
be deemed to be the Holder of such Common Shares of record as of the close of
business on such date and shall be entitled to receive, and the Warrant Agent
shall deliver to such Person, any Common Shares to which such Person would
have been entitled had such Person been the registered holder on such date.
Section 3.4. Repurchase Offers. (a) Notice of Repurchase
Event. Within five Business Days following the occurrence of a Repurchase
Event, the Company shall give notice (a "Repurchase Notice") to the Holders of
the Warrants and the Warrant Agent that such event has occurred.
(b) Repurchase Offers Generally. Following the
occurrence of a Repurchase Event, the Company shall offer to repurchase for
cash all outstanding Warrants pursuant to the provisions of this Section 3.4 (a
"Repurchase Offer"). The Company shall
<PAGE> 18
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give notice of a Repurchase Offer in accordance with Section 3.4(f) hereof.
Each date on which the Company gives any such notice is referred to as the
"Notice Date." The Repurchase Offer shall commence on the Notice Date for such
Repurchase Offer and shall expire at 5:00 p.m., New York City time, on a date
determined by the Company (the "Final Surrender Time") that is at least 30 but
not more than 60 days after the Notice Date. Once a Repurchase Event has
occurred, there is no limit on the number of Repurchase Offers that the Company
may make.
(c) Repurchase Offers. (i) In any Repurchase Offer, the
Company shall offer to purchase for cash at the Repurchase Price all Warrants
outstanding on the Notice Date for such Repurchase Offer that are properly
tendered to the Warrant Agent on or prior to the Final Surrender Time for such
Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to,
accept such Repurchase Offer by tendering to the Warrant Agent, on or prior to
the Final Surrender Time for such Repurchase Offer, the Warrant Certificates
evidencing the Warrants such Holder desires to have repurchased in such offer,
together with a completed Certificate for Surrender in substantially the form
attached to the Warrant Certificate. A Holder may withdraw all or a portion of
the Warrants tendered to the Warrant Agent at any time prior to the Final
Surrender Time for such Repurchase Offer. If less than all the Warrants
represented by a Warrant Certificate shall be tendered, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not tendered shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same; provided
that the Holder of such Warrants shall be responsible for the payment of any
transfer taxes required as the result of any change in ownership of such
Warrants.
(d) Repurchase Price. (i) The purchase price (the
"Repurchase Price") for each Warrant properly tendered to the Warrant Agent
pursuant to a Repurchase Offer shall be equal to the value (the "Relevant
Value") on the Valuation Date of the Common Shares issuable, and other
securities or property of the Company which would have been delivered, upon
exercise of Warrants had the Warrants been exercised (regardless of whether the
Warrants are then exercisable), less the Exercise Price in effect on the Notice
Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other
securities or property issuable upon exercise of all the Warrants, on any
Valuation Date shall be:
(1) (A) If the Common Shares (or other securities) are
registered under the Exchange Act, deemed to be the average of the
daily market prices (on the stock
<PAGE> 19
15
exchange that is the primary trading market for the Common Shares (or
other securities)) of the Common Shares (or other securities) for the
20 consecutive trading days immediately preceding such Valuation Date
or, (B) if the Common Shares (or other securities) have been
registered under the Exchange Act for less than 20 consecutive trading
days before such date, then the average of the daily market prices for
all of the trading days before such date for which daily market prices
are available, in the case of each of (A) and (B), as certified to the
Warrant Agent by the President, any Vice President or the Chief
Financial Officer of the Company (the "Value Certificate"). The
market price for each such trading day shall be: (A) in the case of a
security listed or admitted to trading on any national securities
exchange, the closing sales price on such day, or if no sale takes
place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to
trading on any national securities exchange, the last reported sale
price on such day, or if no sale takes place on such day, the average
of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case
of a security not then listed or admitted to trading on any national
securities exchange and as to which no such reported sale price or bid
and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation
service, or a newspaper of general circulation in the Borough of
Manhattan, City and State of New York customarily published on each
Business Day, designated by the Company, or, if there shall be no bid
and asked prices on such day, the average of the high bid and low
asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so
reported and (D) if there are no bid and asked prices reported during
the 30 days prior to the date in question, the Relevant Value shall be
determined as if the Common Shares (or other securities) were not
registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not
registered under the Exchange Act or if the value cannot be computed
under clause (1) above, deemed to be equal to the value set forth in
the Value Report (as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board of Directors in
accordance with Section 3.4(e) hereof, and retained on customary terms
and conditions, using one or more valuation methods that the
Independent Financial Expert, in its best professional judgment,
determines to be most appropriate but without giving effect to any
discount for lack of liquidity, the fact that the Company has no class
of equity securities registered under the Exchange Act or the fact
that the Common Shares and other securities or property issuable upon
exercise of the Warrants represent a minority interest in the Company.
The Company shall cause the Independent Financial Expert to deliver to
the Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert in accordance with
Section 3.4(e) hereof, a value report (the "Value Report") stating the
<PAGE> 20
16
Relevant Value of the Common Shares and other securities or property
of the Company, if any, being valued as of the Valuation Date and
containing a brief statement as to the nature and scope of the
methodologies upon which the determination of Relevant Value was made.
The Warrant Agent shall have no duty with respect to the Value Report
of any Independent Financial Expert, except to keep it on file and
available for inspection by the Holders. The determination as to
Relevant Value in accordance with the provisions of this Section
3.4(d) shall be conclusive on all Persons. The Independent Financial
Expert shall consult with management of the Company in order to allow
management to comment on the proposed Relevant Value prior to delivery
to the Company of any Value Report of the Independent Financial
Expert.
(e) Selection of Independent Financial Expert. If clause
(d)(ii)(2) is applicable, the Board of Directors of the Company shall select an
Independent Financial Expert not more than five Business Days following a
Repurchase Event. Within two days after such selection of the Independent
Financial Expert, the Company shall deliver to the Warrant Agent a notice
setting forth the name of such Independent Financial Expert.
(f) Notice of Repurchase Offer. Each notice of a
Repurchase Offer (an "Offer Notice") given by the Company pursuant to Section
3.4(b)(i) shall be given by the Company directly to all Holders of the
Warrants, with a copy to the Warrant Agent, shall be given simultaneously with
the Repurchase Notice (or, in the event that the Relevant Value of the Common
Shares or other securities or property issuable upon exercise of all the
Warrants cannot be determined pursuant to Section 3.4(d)(ii)(1), then such
Offer Notice shall be given within five Business Days after the Company
receives the Value Report with respect to such offer) and shall specify (A) the
Final Surrender Time for such Repurchase Offer, (B) the manner in which
Warrants may be surrendered to the Warrant Agent for repurchase by the Company,
(C) the Repurchase Price at which the Warrants will be repurchased by the
Company, (D) if applicable, the name of the Independent Financial Expert whose
valuation of the Common Shares and other securities or property was utilized in
connection with determining such Repurchase Price and (E) that payment of the
Repurchase Price will be made by the Warrant Agent. Each such notice shall be
accompanied by a Certificate for Surrender for Repurchase Offer in
substantially the form attached to the Warrant Certificate and a copy of the
Value Report, if any.
(g) Payment for Warrants. Upon surrender for repurchase
of any Warrants in conformity with the provisions of this Section 3.4, the
Warrant Agent shall thereupon promptly notify the Company of such surrender.
On or before the Final Surrender Time for any Repurchase Offer, the Company
shall deposit with the Warrant Agent funds sufficient to make payment for the
Warrants tendered to the Warrant Agent and not withdrawn. After receipt of
such deposit from the Company, the Warrant Agent shall make payment, by
delivering a check in such amount as is appropriate, to such Person or
<PAGE> 21
17
Persons as it may be directed in writing by the Holder surrendering such
Warrants, net of any transfer taxes required to be paid in the event that the
check is to be delivered to a Person other than the Holder.
(h) Compliance with Laws. Notwithstanding anything
contained in this Section 3.4, if the Company is required to comply with laws
or regulations in connection with making any Repurchase Offer, such laws or
regulations shall govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number
of Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) Divisions; Consolidations; Reclassifications. In
case the Company shall, on or before the Expiration Date, (i) issue any Common
Shares in payment of a dividend or other distribution with respect to its
Common Shares, (ii) subdivide its issued and outstanding Common Shares, (iii)
consolidate its issued and outstanding Common Shares into a smaller number of
shares, or (iv) reclassify or convert the Common Shares (other than a
reclassification in connection with a merger, consolidation or other business
combination which will be governed by Section 4.1(j)), then the number of
Common Shares purchasable upon exercise of each Warrant immediately prior to
the record date for such issue or distribution or the effective date of such
subdivision, consolidation, reclassification or conversion shall be adjusted so
that the Holder of each Warrant shall thereafter be entitled to receive the
kind and number of Common Shares which such Holder would have been entitled to
receive after the happening of any of the events described above had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this Section
4.1(a) shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) Rights; Options; Warrants. In case the Company shall
issue rights, options, warrants or convertible or exchangeable securities
(other than an issuance of convertible or exchangeable securities subject to
Section 4.1(a)) to all holders of its Common Shares, entitling them to
subscribe for or purchase Common Shares at a price per share which is lower (at
the record date for such issuance) than the then Current Market Value per
Common Share, then the Company shall ensure that at the time of such issuance,
the same or a like offer or invitation is made to the Holders of the Warrants
as if their Warrants had been exercised on the day immediately preceding the
record date of such offer or invitation
<PAGE> 22
18
on the terms (subject to any adjustment pursuant to Section 4.1(a) for a prior
event) on which such Warrants could have been exercised on such date; provided
that if the Board so resolves, the Company shall not be required to ensure that
the same offer or invitation is made to the Holders of the Warrants, but the
number of Common Shares thereafter purchasable upon the exercise of each
Warrant shall instead be adjusted and shall be determined by multiplying the
number of Common Shares theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the sum of (i) the number of
Common Shares outstanding immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable securities plus (ii) the
number of additional Common Shares which may be purchased or subscribed for
upon exercise, exchange or conversion of such rights, options, warrants or
convertible or exchangeable securities and the denominator of which shall be
the sum of (x) the number of Common Shares outstanding immediately prior to the
issuance of such rights, options, warrants or convertible or exchangeable
securities plus (y) the number of shares which the total consideration received
by the Company for such rights, options, warrants or convertible or
exchangeable securities so offered would purchase at the then Current Market
Value per Common Share. Except as otherwise provided above, such adjustment
shall be made whenever such rights, options, warrants or convertible or
exchangeable securities are issued, and shall become effective retroactively
immediately after the record date for the determination of shareholders
entitled to receive such rights, options, warrants or convertible or
exchangeable securities.
(c) Issuance of Common Shares at Lower Values. In case
the Company shall sell and issue any Common Share or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in Section
4.1(a) or (b) above, (ii) Common Shares issued pursuant to (x) any Rights
outstanding on the date of this Agreement or any Right issued in any
transaction described in Section 4.1(a) or (b) above and (y) a Right, if on the
date such Right was issued, the exercise, conversion or exchange price per
Common Share with respect thereto was at least equal to the then Current Market
Value per Common Share and (iii) any Common Shares or Right issued as
consideration when any corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the Company in an arm's-length
transaction between the Company and a Person other than an Affiliate of the
Company) at a price per Common Share (determined in the case of any such Right,
by dividing (x) the total consideration receivable by the Company in
consideration of the sale and issuance of such Right, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Common Shares covered by such Right) that
is lower than the Current Market Value per Common Share in effect immediately
prior to such sale or issuance, then the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Common Shares theretofore purchasable upon exercise
of such Warrant by a fraction, the numerator of which shall be the number of
Common Shares outstanding immediately after such sale or issuance and the
denominator of which shall be the number of Common Shares outstanding
immediately prior to such sale or issuance plus the number of
<PAGE> 23
19
Common Shares which the aggregate consideration received (determined as
provided below) for such sale or issuance would purchase at such Current Market
Value per Common Share. For purposes of this Section 4.1(c), the Common Shares
which the holder of any such Right shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such Right, plus
the consideration or premiums stated in such Right to be paid for the Common
Shares covered thereby. In case the Company shall sell and issue any Right
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per Common Share" and the "consideration
received by the Company" for purposes of the first sentence of this Section
4.1(c), the Board shall determine, in good faith, the fair value of the Right
then being sold as part of such unit. For purposes of this paragraph, a
"Right" shall mean any right, option, warrant or convertible or exchangeable
security containing the Right to subscribe for or acquire one or more Common
Shares, excluding the Warrants. This Section 4.1(c) shall not apply to: (i)
the exercise of Warrants, or the conversion or exchange of other securities
convertible or exchangeable for Common Shares; or (ii) Common Shares issued
upon the exercise of Rights or warrants issued to all holders of Common Shares.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Common Shares referred to in
Section 4.1(a) above and excluding distributions in connection with the
dissolution, liquidation or winding-up of the Company which shall be governed
by Section 4.1(j) and distributions of securities referred to in Section
4.1(a), Section 4.1(b) or Section 4.1(c)), then, in each case, the number of
Common Shares purchasable after such record date upon the exercise of each
Warrant shall be determined by multiplying the number of Common Shares
purchasable upon the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Value
per Common Share immediately prior to the record date for such distribution and
the denominator of which shall be the Current Market Value per Common Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the evidences of its
indebtedness, or assets or other distributions so distributed attributable to
one Common Share. Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(e) Expiration of Rights, Options and Conversion
Privileges. Upon the expiration of any rights, options, warrants or conversion
or exchange privileges (including without limitation any Rights) that have
previously resulted in an adjustment hereunder, if any thereof shall not have
been exercised, exchanged or converted, the Exercise Price and the number of
Common Shares issuable upon the exercise of each Warrant shall, upon such
<PAGE> 24
20
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
Common Shares so issued were the Common Shares, if any, actually issued or sold
upon the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including without limitation any Rights) and
(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion
plus the consideration, if any, actually received by the Company for issuance,
sale or grant of all such rights, options, warrants or conversion or exchange
rights (including without limitation any Rights) whether or not exercised.
(f) Current Market Value. For the purposes of any
computation under this Article IV, the "Current Market Value" per Common Share
or of any other security (herein collectively referred to as a "security") at
any date herein specified shall be:
(i) if the security is not registered under the Exchange
Act, the value of the security (1) most recently determined as of a
date within the six months preceding such date by an Independent
Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or (2) if no
such determination shall have been made within such six-month period
or if the Company so chooses, determined as of such a date by an
Independent Financial Expert selected by the Company in accordance
with the criteria for such valuation set out in Section 4.1(k), or
(ii) if the security is registered under the Exchange Act,
the average of the daily market prices of the security for the 20
consecutive trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the
daily market prices for all of the trading days before such date for
which daily market prices are available. The market price for each
such trading day shall be: (A) in the case of a security listed or
admitted to trading on any national securities exchange, the closing
sales price, regular way, on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day
on the principal national securities exchange on which such security
is listed or admitted, as determined by the Board, in good faith, (B)
in the case of a security not then listed or admitted to trading on
any national securities exchange, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not
then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices
are available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a
newspaper of
<PAGE> 25
21
general circulation in the Borough of Manhattan, City and State of New
York customarily published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are
no bid and asked prices reported during the 30 days prior to the date
in question, the Current Market Value of the security shall be
determined as if the security were not registered under the Exchange
Act.
(g) Consideration Received. For purposes of any
computation respecting consideration received pursuant to this Section 4.1, the
following shall apply:
(i) in the case of the issuance of Common Shares for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board (irrespective of the accounting
treatment thereof), whose determination shall be conclusive and
described in reasonable detail in a board resolution which shall be
provided as soon as practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options,
warrants or securities convertible into or exchangeable for Common
Shares (including any Rights), the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Company for the issuance of such rights, options, warrants or
securities convertible into or exchangeable for Common Shares, plus
the additional minimum consideration, if any, to be received by the
Company upon the exercise, conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this Section 4.1(g)).
(h) De Minimis Adjustments. No adjustment in the number
of Common Shares purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
number of Common Shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this Section 4.1(h)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
<PAGE> 26
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(i) Adjustment of Exercise Price. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per Common Share payable upon exercise of
such Warrant shall be adjusted (calculated to the nearest $.01) so that it
shall equal the price determined by multiplying such Exercise Price immediately
prior to such adjustment by a fraction the numerator of which shall be the
number of Common Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the denominator of which shall be the
number of Common Shares so purchasable immediately thereafter. Following any
adjustment to the Exercise Price pursuant to this Article IV, the amount
payable, when adjusted, shall never be less than the par value per Common Share
at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes in the capital of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege and the Exercise
Price of each class of shares shall thereafter be subject to adjustment on
terms comparable to those applicable to Common Shares in this Article IV.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(j) Consolidation, Merger, Etc. (i) Subject to the
provisions of Subsection (ii) below of this Section 4.1(j), in case of the
consolidation of the Company with, or merger of the Company with or into, or of
the sale of all or substantially all of the properties and assets of the
Company to, any Person, and in connection therewith consideration is payable to
holders of Common Shares (or other securities or property purchasable upon
exercise of Warrants) in exchange therefor, the Warrants shall remain subject
to the terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive upon
exercise the number of shares in the capital or other securities or property
(including cash) of or from the Person resulting from such consolidation or
surviving such merger or to which such sale shall be made or of the parent of
such Person, as the case may be, that would have been distributable or payable
on account of the Common Shares if such Holder's Warrants had been exercised
immediately prior to such merger, consolidation or sale (or, if applicable, the
record date therefor); and in any such case the provisions of this Agreement
with respect to the rights and interests thereafter of the Holders of Warrants
shall be appropriately adjusted by the Board in good faith so as to be
applicable, as nearly as may reasonably be, to any shares, other securities or
any property thereafter deliverable on the exercise of the Warrants.
<PAGE> 27
23
(ii) Notwithstanding the foregoing, (x) if the Company
merges or consolidates with, or sells all or substantially all of its
property and assets to, another Person (other than an Affiliate of the
Company) and consideration is payable to holders of Common Shares in
exchange for their Common Shares in connection with such merger,
consolidation or sale which consists solely of cash, or (y) in the
event of the dissolution, liquidation or winding up of the Company,
then the Holders of Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders
of Common Shares (or other securities issuable upon exercise of the
Warrants) as if the Warrants had been exercised immediately prior to
such event, less the Exercise Price. Upon receipt of such payment, if
any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the
holders of the Warrants will be entitled to receive the higher of (i)
the amount payable to the holders of the Warrants described above and
(ii) the Repurchase Price payable to the holders of the Warrants
pursuant to such Repurchase Offer. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person
and, in the event of any dissolution, liquidation or winding up of the
Company, the Company shall deposit promptly with the Warrant Agent the
funds, if any, necessary to pay the Holders of the Warrants. After
receipt of such deposit from such Person or the Company and after
receipt of surrendered Warrant Certificates, the Warrant Agent shall
make payment by delivering a check in such amount as is appropriate
(or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may
be directed in writing by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the
Current Market Value shall be deemed to be equal to the value set forth in the
Value Report (as defined below) as determined by an Independent Financial
Expert, which shall be selected by the Board in its sole discretion, and
retained on customary terms and conditions, using one or more valuation methods
that the Independent Financial Expert, in its best professional judgment,
determines to be most appropriate. The Company shall cause the Independent
Financial Expert to deliver to the Company, with a copy to the Warrant Agent,
within 45 days of the appointment of the Independent Financial Expert, a value
report (the "Value Report") stating the value of the Common Shares and other
securities or property of the Company, if any, being valued as of the Valuation
Date and containing a brief statement as to the nature and scope of the
examination or investigation upon which the determination of value was made.
The Warrant Agent shall have no duty with respect to the Value Report of any
Independent Financial Expert, except to keep it on file and available for
inspection by the Holders. The determination as to Current Market Value in
accordance with the provisions of this Section 4.1(k) shall be conclusive on
all Persons. The Independent Financial Expert shall consult with management of
the Company in order to allow management to comment on the proposed value prior
to delivery to the Company of any Value Report.
<PAGE> 28
24
(l) When No Adjustment Required. No adjustment need be
made for:
(i) grants or exercises of Rights granted to employees of
the Company or any of its subsidiaries or Common
Shares issued or granted to such employees, whether
or not upon the exercise, exchange or conversion of
any such Rights (to the extent that all such
securities do not have an aggregate value in excess
of 15% of the equity value of the Company on a fully
diluted basis, as determined in good faith by the
Board);
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company entered into
prior to the date of the issuance of the Warrants;
(iii) rights to purchase Common Shares pursuant to a
Company plan for reinvestment of dividends or
interest; and
(iv) a change in the par value of the Common Shares
(including a change from par value to no par value
or vice versa).
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
Section 4.2. Notice of Adjustment. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall cause, so far as it is
able, the Warrant Agent promptly to mail, at the expense of the Company, to
each Holder notice of such adjustment or adjustments and shall deliver to the
Warrant Agent a certificate of the Auditors setting forth the number of Common
Shares purchasable upon the exercise of each Warrant and the Exercise Price
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the
same, from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Common Shares purchasable on exercise of the Warrants or any
of the other adjustments set forth in Section 4.1, or with respect to the
nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment, or the validity or value (or the
kind or amount) of any Common Shares which may be purchasable on exercise of
the Warrants. The Warrant Agent shall not be responsible for any failure of
the Company to
<PAGE> 29
25
make any cash payment or to issue, transfer or deliver any Common Shares or
share certificates upon the exercise of any Warrant.
Section 4.3. Statement on Warrants. Irrespective of any
adjustment in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger, Etc. In case
at any time after the date hereof and prior to 5:00 p.m. (New York City time)
on the Expiration Date, there shall be any (i) consolidation or merger
involving the Company or sale, transfer or other disposition of all or
substantially all of the Company's property, assets or business (except a
merger or other reorganization in which the Company shall be the surviving
corporation and holders of Common Shares receive no consideration in respect of
their shares) or (ii) any other transaction contemplated by Section 4.1(j)(ii)
above then, in any one or more of such cases, the Company shall cause to be
mailed to the Warrant Agent and shall cause the Warrant Agent to mail, at
Company's expense, to each Holder of a Warrant, at the earliest practicable
time (and, in any event, not less than 20 days before any date set for
definitive action), notice of the date on which such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the kind and amount of the
Common Shares and other securities, money and other property deliverable upon
exercise of the Warrants. Such notice shall also specify the date as of which
the holders of record of the Common Shares or other securities or property
issuable upon exercise of the Warrants shall be entitled to exchange their
shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Common Shares which shall be issuable upon such exercise
thereof shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If
any fraction of a Common Share would, except for the provisions of this Section
4.5, be issuable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
<PAGE> 30
26
Section 4.6. When Issuance or Payment May Be Deferred. In
any case in which this Article IV shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Common Shares
and other shares in the capital of the Company, if any, issuable upon such
exercise over and above the Common Shares and other shares in the capital of
the Company, if any, issuable upon such exercise and (ii) paying such holder
any amount in cash in lieu of a fractional share; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional Common Shares, other
shares and cash upon the occurrence of the event requiring such adjustment.
Section 4.7. Initial Public Offering. Notwithstanding
anything to the contrary herein contained, if the Company conducts an initial
public offering of equity securities (other than nonconvertible preferred
shares), the Company will give the Holders the opportunity to convert such
Warrants into warrants to purchase such equity securities (other than
nonconvertible preferred shares) and such Common Shares or such other
securities that have been received by the Holders upon the exercise of Warrants
into such equity securities (other than nonconvertible preferred shares). Such
conversion opportunity will be on terms and conditions determined to be fair
and reasonable by the Company's Board of Directors.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any
time, or from time to time, to decrease the Exercise Price of the Warrants
and/or increase the number of shares issuable upon the exercise of the
Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to
the registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in
<PAGE> 31
27
exchange for or in lieu thereof, a new Warrant Certificate of the same tenor
and for a like aggregate number of Warrants. Upon the issuance of any new
Warrant Certificate under this Article VI, the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and other expenses (including the fees and expenses
of the Warrant Agent) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Article VI in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable by anyone and shall be entitled
to the benefits of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such
number of its authorized but unissued Common Shares deliverable upon exercise
of Warrants as will be sufficient to permit the exercise in full of all
outstanding Warrants and will cause appropriate evidence of ownership of such
Common Shares to be delivered to the Warrant Agent upon its request for
delivery thereof upon the exercise of Warrants. The Company covenants that all
Common Shares of the Company that may be issued upon the exercise of the
Warrants will, upon issuance, be duly authorized, validly issued, fully paid
and not subject to any calls for funds and free from pre-emptive rights and all
taxes, liens, charges and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only. The Warrant Agent shall keep at its
office a register for the registration of Warrant Certificates and transfers or
exchanges of Warrant Certificates as herein provided and other appropriate data
as determined by the Warrant Agent. The Company shall, upon reasonable notice
to the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon
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any registration of transfer or exchange of Warrant Certificates shall be the
valid obligations of the Company, evidencing the same obligations, and entitled
to the same benefits under this Agreement, as the Warrant Certificates
surrendered for such registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance
of the Units. Prior to the Separation Date, the Warrants may not be
transferred or exchanged separately from, but may be transferred or exchanged
only together with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application
to the Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book-entry system maintained by the holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with
a request to register the transfer or to exchange them for an equal amount of
Warrants of other authorized denominations, the Warrant Agent shall register
such transfer or make such exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrants.
Section 8.2. Book-Entry Provisions for the Global Warrants.
(a) The Global Warrants initially shall (i) be registered in the name of the
Depositary for such Global Warrant or the nominee of such Depositary, (ii) be
delivered to the Warrant Agent as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Agreement with respect to the Global
Warrants held on their behalf by the Depositary or the Warrant Agent as its
custodian, and the Depositary may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the
<PAGE> 33
29
absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to
transfers of such Global Warrant in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in
the Global Warrants may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 8.3 hereof. U.S.
Certificated Warrants and Offshore Certificated Warrants shall be transferred
to beneficial owners in exchange for their beneficial interests in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, (i) if the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for any such Global Warrant and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)
if there is a Default or (iii) upon the request of the beneficial owner in
accordance with the rules and procedures of the Depositary and the provisions
of Section 8.3 hereof; provided that Offshore Certificated Warrants shall not
be transferred in exchange for the Legended Regulation S Global Note prior to
one year after the Closing Date.
(c) Any beneficial interest in one of the Global Warrants
that is transferred to a person who takes delivery in the form of an interest
in any other Global Warrant will, upon transfer, cease to be an interest in
such Global Warrant and become an interest in such other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire
Restricted Global Warrant or Regulation S Global Warrant to beneficial owners
pursuant to paragraph (b) of this Section 8.2, the Restricted Global Warrant or
the Regulation S Global Warrant, as the case may be, shall be surrendered to
the Warrant Agent for cancellation, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, U.S. Certificated Warrants or Offshore Certificated Warrants, as the case
may be, of authorized denominations representing, in the aggregate, the number
of Warrants theretofore represented by the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be.
(e) In connection with the transfer of a portion of the
beneficial interests in the Restricted Global Warrant or the Unlegended
Regulation S Global Warrant to beneficial owners pursuant to paragraph (b) of
this Section 8.2, the Warrant Agent shall reflect on its
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books and records the date and a decrease in the amount of Warrants represented
by the Restricted Global Warrant or Unlegended Regulation S Global Warrant in
an amount equal to the amount of Warrants represented by the beneficial
interest in the Restricted Global Warrant or Unlegended Regulation S Global
Warrant to be transferred, and the Company shall execute, and the Warrant Agent
shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Unlegended Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be, of
like tenor and amount.
(f) Any Certificated Warrant delivered in exchange for an
interest in a Global Warrant pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (d) of Section 8.3
hereof, bear the legend regarding transfer restrictions set forth in Section
2.2 hereof.
(g) The registered holder of a Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following
provisions shall apply:
(a) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
a QIB (excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by
Certificated Warrants or by an interest in the Regulation S Global
Warrant, the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Warrant Certificate stating, or has
otherwise advised the Company and the Warrant Agent in writing, that
the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the
form of Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is purchasing the
Warrants for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing
<PAGE> 35
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representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and
the Warrants to be transferred are represented by Certificated
Warrants or an interest in the Regulation S Global Warrant, upon
receipt by the Warrant Agent of the documents referred to in clause
(i) above and instructions given in accordance with the Depositary's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and an increase in the amount of
Warrants represented by the Restricted Global Warrant in an amount
equal to the amount of Warrants represented by the Certificated
Warrants or the interest in the Regulation S Global Warrant, as the
case may be, to be transferred, and the Warrant Agent shall cancel the
Certificated Warrants or decrease the amount of the Regulation S
Global Warrant so transferred.
(b) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to the registration of any
proposed transfer of Warrants to a Non-U.S. Person:
(i) The Warrant Agent shall register any proposed
transfer of Warrants to a Non-U.S. Person only upon receipt of a
certificate substantially in the form of Exhibit B from the proposed
transferor.
(ii) If the proposed transferee is an Agent Member and the
Warrants to be transferred are represented by Certificated Warrants or
an interest in the Restricted Global Warrant, upon receipt by the
Warrant Agent of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented
by the Regulation S Global Warrant in an amount equal to the number of
Warrants represented by the Certificated Warrants or the Restricted
Global Warrant, as the case may be, to be transferred, and the Warrant
Agent shall cancel the Certificated Warrant or decrease the amount of
Warrants represented by the Restricted Global Warrant so transferred.
(c) Transfers to Any Other Person. The following
provisions shall apply with respect to the registration of any proposed
transfer of Warrants to any Person not specified in paragraphs (a) and (b)
above (including any Institutional Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed
transfer of Warrants to any such Person if (x) the transferor has
delivered to the Warrant Agent and the Company a certificate
substantially in the form of Exhibit C-1 hereto and, if required by
paragraph (d) thereof, an Opinion of Counsel to the effect set forth
therein and
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(y) the proposed transferee has delivered to the Warrant Agent and the
Company a certificate substantially in the form of Exhibit C-2 hereto
if such transferee is an Institutional Accredited Investor that is not
a QIB.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the Restricted Global Warrant or the
Regulation S Global Warrant, upon receipt by the Warrant Agent and the
Company of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Company shall execute and the Warrant Agent
shall countersign Certificated Warrants in an amount equal to the
number of Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant, if any, as the case may be, to be
transferred and the Warrant Agent shall decrease the number of
Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant so transferred.
(d) Private Placement Legend. Upon the transfer,
exchange or replacement of Warrant Certificates not bearing the Private
Placement Legend, the Warrant Agent shall deliver Warrant Certificates that do
not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates bearing the Private Placement Legend, the
Warrant Agent shall deliver only Warrant Certificates that bear the Private
Placement Legend unless either (i) the circumstances contemplated by the third
sentence of the third paragraph of Section 2.1 exist or (ii) there is delivered
to the Warrant Agent an opinion of counsel reasonably satisfactory to the
Company and its Counsel and the Warrant Agent to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) Transfers of Interests in the Legended Regulation S
Global Warrant. The following provisions shall apply with respect to
registration of any proposed transfer of interests in the Legended Regulation S
Global Warrant:
(i) The Registrar shall register the transfer of any
Warrant (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit B hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Warrant stating, or has otherwise advised
the Company and the Warrant Agent in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that it is purchasing the Warrant for its own account or an
account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has
<PAGE> 37
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received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Warrant Agent of the documents referred to in clause
(i)(y) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and an increase in the
number of Warrants represented by the Restricted Global Warrant, in an
amount equal to the number of Warrants represented by the Legended
Regulation S Global Warrant to be transferred, and the Warrant Agent
shall decrease the number of Warrants represented by the Legended
Regulation S Global Warrant.
(f) Transfers of Interests in the Unlegended Regulation S
Global Note or Unlegended Offshore Certificated Warrants. The following
provisions shall apply with respect to any transfer of interests in the
Unlegended Regulation S Global Warrant or unlegended Offshore Certificated
Warrants: The Warrant Agent shall register the transfer of any such Warrant
without requiring any additional certification.
(g) General. (i) By its acceptance of any Warrants
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of such Warrants acknowledges the restrictions on transfer of such
Warrants set forth in this Agreement and in the Private Placement Legend and
agrees that it will transfer such Warrants only as provided in this Agreement.
The Warrant Agent shall not register a transfer of any Warrants unless such
transfer complies with the restrictions on transfer of such Warrants set forth
in this Agreement. In connection with any transfer of Warrants, each Holder
agrees by its acceptance of Warrants to furnish the Warrant Agent or the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the Warrant
Agent shall not be required to determine (but may rely on a determination made
by the Company with respect to) the sufficiency of any such certifications,
legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section
8.2 hereof or this Section 8.3. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable
written notice to the Warrant Agent.
Section 8.4. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented
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34
thereby shall, if surrendered to the Company, be delivered to the Warrant
Agent, and all Warrant Certificates surrendered or so delivered to the Warrant
Agent shall be promptly cancelled by the Warrant Agent and shall not be
reissued by the Company and, except as provided in this Article VIII in case of
an exchange, Article III hereof in case of the exercise of less than all the
Warrants represented thereby or Article VI in case of a mutilated Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time or otherwise
dispose of such cancelled Warrant Certificates as the Company may direct in
writing.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder. The
Company and the Warrant Agent may deem and treat the registered Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
Accordingly, the Company and/or the Warrant Agent shall not, except as ordered
by a court of competent jurisdiction as required by law, be bound to recognize
any equitable or other claim to or interest in the Warrants on the part of any
person other than such registered Holder, whether or not it shall have express
or other notice thereof. Prior to the exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote or to consent
to any action of the shareholders, to receive dividends or other distributions,
to exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with
respect to this Agreement are vested in the Holders of the Warrants, and any
Holder of any Warrant, without the consent of the Warrant Agent or the Holders
of any other Warrant, may, on such Holder's own behalf and for such Holder's
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise in respect of,
such Holder's right to exercise such Warrants in the manner provided in the
Warrant Certificate representing such Warrants and in this Agreement.
ARTICLE X
<PAGE> 39
35
REMEDIES
Section 10.1. Defaults. It shall be deemed to be a "Default"
with respect to the Company's (or its successor's) obligations under this
Agreement if:
(a) a Repurchase Event occurs and the Company (or its
successor) shall fail to make a Repurchase Offer pursuant to Section
3.4 hereof; or
(b) the Company (or its successor) shall fail to purchase
the Warrants pursuant to the Repurchase Offer in accordance with the
provisions of Section 3.4 hereof.
Section 10.2. Payment Obligations. Upon the happening of a
Default under this Agreement, the Company shall be obligated to increase the
amount otherwise payable pursuant to Section 3.4(d) hereof in respect of the
Repurchase Offer to which such Default relates by an amount equal to interest
thereon at a rate per annum equal to 13% from the date of the Default to the
date of payment, which interest shall compound quarterly (all such payment
obligations in respect of such Repurchase Offer, together with all such
increased amounts, being the "Repurchase Obligation").
Section 10.3. Remedies; No Waiver. Notwithstanding any other
provision of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the
Repurchase Obligation or to enforce the performance of any provision of this
Warrant Agreement. A delay or omission by any Holder of a Warrant in
exercising, or a failure to exercise, any right or remedy arising out of a
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Default. All remedies are cumulative to the extent
permitted by law.
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The Warrant Agent
hereby accepts the agency established by this Agreement and agrees to perform
the same upon the terms and conditions herein set forth, by all of which the
Company and the Holders of Warrants, by their acceptance thereof, shall be
bound. The Warrant Agent shall not, by countersigning Warrant Certificates or
by any other act hereunder, be deemed to make any representations as to the
validity or authorization of the Warrants or the Warrant Certificates (except
as to its countersignature thereon) or of any Common Shares issued upon
exercise of any Warrant, or as to the accuracy of the computation of the
Exercise Price or the number or kind or amount of Common Shares deliverable
upon exercise of any Warrant or the correctness of
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36
the representations of the Company made in the certificates that the Warrant
Agent receives. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant. The
Warrant Agent shall not have any duty to calculate or determine any adjustments
with respect to either the Exercise Price or the kind and amount of Common
Shares receivable by Holders upon the exercise of Warrants required from time
to time and the Warrant Agent shall have no duty or responsibility in
determining the accuracy or correctness of such calculation. The Warrant Agent
shall not be (a) liable for any recital or statement of fact contained herein
or in the Warrant Certificates or for any action taken, suffered or omitted by
it in good faith in the belief that any Warrant Certificate or any other
documents or any signatures are genuine or properly authorized, (b) responsible
for any failure on the part of the Company to comply with any of its covenants
and obligations contained in this Agreement or in the Warrant Certificates or
(c) liable for any act or omission in connection with this Agreement except for
its own gross negligence, bad faith or willful misconduct. The Warrant Agent
is hereby authorized to accept instructions with respect to the performance of
its duties hereunder from the Chairman of the Board, Chief Executive Officer,
any Vice President or other executive officer of the Company and to apply to
any such officer for instructions (which instructions will be promptly given in
writing when requested) and the Warrant Agent shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with the
instructions of any such officer; however, in its discretion, the Warrant Agent
may, in lieu thereof, accept other evidence of such or may require such further
or additional evidence as it may deem reasonable. The Warrant Agent shall not
be liable for any action taken with respect to any matter in the event it
requests instructions from the Company as to that matter and does not receive
such instructions within a reasonable period of time after the request
therefor.
The Warrant Agent may execute and exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect or misconduct of
any such attorneys, agents or employees; provided reasonable care has been
exercised with respect to the retention of any such attorney, agent or
employee. The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in respect
hereof, unless first indemnified to its reasonable satisfaction. The Warrant
Agent shall promptly notify the Company in writing of any claim made or action,
suit or proceeding instituted against it arising out of or in connection with
this Agreement.
The Company will perform, execute, acknowledge and deliver or
cause to be delivered all such further acts, instruments and assurances as are
consistent with this Agreement and as may reasonably be required by the Warrant
Agent in order to enable it to carry out or perform its duties under this
Agreement.
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The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement against the Warrant
Agent, whose duties and obligations shall be determined solely by the express
provisions hereof.
Section 11.2. Right to Consult Counsel. The Warrant Agent
may at any time consult with legal counsel (who may be legal counsel for the
Company), and the opinion or advice of such counsel shall be full and complete
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
Section 11.3. Compensation; Indemnification. The Company
agrees promptly to pay the Warrant Agent from time to time and in any case
within 30 days of receipt of an invoice, compensation for its services
hereunder as the Company and the Warrant Agent may agree from time to time, and
to reimburse it upon its request for reasonable fees or expenses and reasonable
counsel fees and expenses incurred in connection with the execution and
administration of this Agreement, and further agrees to indemnify the Warrant
Agent and save it harmless against any losses, liabilities or expenses arising
out of or in connection with the acceptance and administration of this
Agreement, including, without limitation, the reasonable costs and expenses of
investigating or defending any claim of such liability, except that the Company
shall have no liability hereunder to the extent that any such loss, liability
or expense results from the Warrant Agent's own gross negligence, bad faith or
willful misconduct. The obligations of the Company under this Section 11.3
shall survive the exercise and the expiration of the Warrants, the termination
of this Agreement and the resignation or removal of the Warrant Agent in
respect of services or expenses incurred in connection with the Warrants or
this Agreement.
Section 11.4. No Restrictions on Actions. Nothing in this
Agreement shall be deemed to prevent the Warrant Agent and any shareholder,
director, officer or employee of the Warrant Agent from buying, selling or
dealing in any of the Warrants or other securities of the Company or becoming
pecuniarily interested in transactions in which the Company may be interested,
or contracting with or lending money to the Company or otherwise acting as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
Section 11.5. Discharge or Removal; Replacement Warrant
Agent. The Warrant Agent may resign from its position as such and be
discharged from all further duties and liabilities hereunder (except liability
arising as a result of the Warrant Agent's own gross negligence, bad faith or
willful misconduct), after giving one month's prior written notice to
<PAGE> 42
38
the Company. The Company may at any time remove the Warrant Agent upon one
month's written notice specifying the date when such discharge shall take
effect, and the Warrant Agent shall thereupon in like manner be discharged from
all further duties and liabilities hereunder, except as aforesaid. The Warrant
Agent shall mail to each Holder of a Warrant, at the Company's expense, a copy
of said notice of resignation or notice of removal, as the case may be. Upon
such resignation or removal the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of
30 days after it has been notified in writing of such resignation by the
resigning Warrant Agent or after such removal, then the resigning or removed
Warrant Agent or the Holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. After 30 days from
receipt of, or giving, notice, as the case may be, and pending appointment of a
successor to the original Warrant Agent, either by the Company or by such a
court, the duties of the Warrant Agent shall be carried out by the Company.
Any new warrant agent, whether appointed by the Company or by such a court,
shall be a bank or trust company doing business under the laws of the United
States or any state thereof, in good standing and having a combined capital and
surplus of not less than $25,000,000. The combined capital and surplus of any
such new warrant agent shall be deemed to be the combined capital and surplus
as set forth in the most recent annual report of its condition published by
such warrant agent prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the requirements of a federal
or state supervising or examining authority. After acceptance in writing of
such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; however, the original Warrant Agent shall in all events deliver and
transfer to the successor Warrant Agent all property (including, without
limitation, documents and recorded information), if any, at the time held
hereunder by the original Warrant Agent and if for any reason it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning or
removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file notice thereof with the resigning or
removed Warrant Agent and shall forthwith cause a copy of such notice to be
mailed by the successor Warrant Agent to each Holder of a Warrant. Failure to
give any notice provided for in this Section 11.5, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be.
No Warrant Agent hereunder shall be liable for any acts or omissions of any
successor Warrant Agent.
Section 11.6. Successor Warrant Agent. Any corporation into
which the Warrant Agent or any new warrant agent may be merged or converted, or
any corporation resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency
<PAGE> 43
39
business of the Warrant Agent, shall be a successor Warrant Agent under this
Agreement without any further act, provided that such corporation would be
eligible for appointment as successor to the Warrant Agent under the provisions
of Section 11.5 hereof. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to each Holder of a
Warrant.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent. The
Warrant Agent shall not be required to pay interest on any monies deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any monies, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the
purpose for which such monies, securities or other property shall have been
deposited; but such monies, securities or other property need not be segregated
from other funds, securities or other property except to the extent required by
law. Any monies, securities or other property deposited with the Warrant Agent
for payment or distribution to the Holders that remains unclaimed for one year
after the date the monies, securities or other property was deposited with the
Warrant Agent shall be delivered to the Company upon its request therefor.
Section 12.2. Payment of Taxes. Subject to Article VI
hereof, all Common Shares issuable upon the exercise of Warrants shall be
validly issued, fully paid and not subject to any calls for funds, and the
Company shall pay any taxes and other governmental charges that may be imposed
under the laws of the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery thereof
upon exercise of Warrants (other than income taxes imposed on the Holders).
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company
shall not be required to issue any share certificate or pay any cash until such
tax or charge has been paid or it has been established to the Warrant Agent's
and the Company's satisfaction that no such tax or charge is due.
Section 12.3. No Merger, Consolidation or Sale of Assets of
the Company. Except as otherwise provided herein, the Company will not merge
into or consolidate with
<PAGE> 44
40
any other Person, or sell or otherwise transfer its property, assets and
business substantially as an entirety to a successor of the Company, unless the
Person resulting from such merger or consolidation, or such successor of the
Company, shall expressly assume, by supplemental agreement satisfactory in form
to the Warrant Agent and executed and delivered to the Warrant Agent, the due
and punctual performance and observance of each and every covenant and
condition of this Agreement or contained in the Warrants to be performed and
observed by the Company.
Section 12.4. Reports to Holders. At all times from and
after the earlier of (i) the Separation Date and (ii) September 6, 1997, in
either case, whether or not the Company is then required to file reports with
the Commission, the Company shall file with the Commission all such reports and
other information it would be required to file with the Commission by Section
13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company
shall supply the Warrant Agent and each Holder or shall supply to the Warrant
Agent for forwarding to each such Holder, without cost to such Holder, copies
of such reports and other information. The Warrant Agent's receipt of such
reports and other information shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Warrant Agent is entitled to rely exclusively on Officers'
Certificates). In addition, at all times prior to the earlier of the
Separation Date and September 6, 1997, the Company shall, at its cost, deliver
to each Holder quarterly and annual reports substantially equivalent to those
which would be required by the Exchange Act. In addition, at all times, upon
the request of any Holder or any prospective purchaser of the Warrants
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
Section 12.5. Notices; Payment. (a) Except as otherwise
provided in Section 12.5(b) hereof, any notice, demand or delivery authorized
by this Agreement shall be sufficiently given or made when mailed, if sent by
first class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Attention: Heng-Pin Kiang
<PAGE> 45
41
To the Warrant Agent:
The Bank of New York
101 Barclay Street,
21 West
New York, NY 10286
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or
making such notice, demand or delivery. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given
when mailed, whether or not the Holder receives the notice.
(b) Payment of the Exercise Price should be made in
accordance with the provisions of this Agreement at the office of the Warrant
Agent set forth above.
(c) Any notice required to be given by the Company to the
Holders shall be made by mailing by registered mail, return receipt requested,
to the Holders at their last known addresses appearing on the register
maintained by the Warrant Agent. The Company hereby irrevocably authorizes the
Warrant Agent, in the name and at the expense of the Company, to mail any such
notice upon receipt thereof from the Company. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given
when mailed, whether or not the Holder receives the notice.
Section 12.6. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the Warrant Agent and
their respective successors and assigns, and the Holders from time to time of
the Warrants. Nothing in this Agreement is intended or shall be construed to
confer upon any Person, other than the Company, the Warrant Agent and the
Holders of the Warrants, any right, remedy or claim under or by reason of this
Agreement or any part hereof.
Section 12.7. Counterparts. This Agreement may be executed
manually or by facsimile in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument.
Section 12.8. Amendments. The Warrant Agent may, without the
consent or concurrence of the Holders of the Warrants, by supplemental
agreement or otherwise, join with the Company in making any changes or
corrections in this Agreement that (a) are required to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained or (b) add to the covenants and agreements
of the Company in this Agreement further covenants and agreements of the
Company thereafter to be observed, or surrender any rights or power reserved to
or
<PAGE> 46
42
conferred upon the Company in this Agreement; provided that in either case such
changes or corrections do not and will not adversely affect, alter or change
the rights, privileges or immunities of the Holders of Warrants. Upon the
Warrant Agent's request, the Company shall promptly provide an Officer's
Certificate and Opinion of Counsel which provide all conditions precedent to
adoption of an amendment that have been satisfied.
Section 12.9. Headings. The descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
Section 12.10. Common Shares Legend. Unless and until the
Common Shares issuable upon the exercise of the Warrants are registered under
the Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(d), IF APPLICABLE, UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO MCCAW
INTERNATIONAL, LTD. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
<PAGE> 47
43
FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRANSFER AGENT AND
REGISTRAR AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS
A PROVISION REQUIRING THE TRANSFER AGENT AND REGISTRAR TO REFUSE TO
REGISTER ANY TRANSFER OF THE SHARES OF COMMON STOCK REPRESENTED BY
THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Section 12.11. Third Party Beneficiaries. The Holders shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and
<PAGE> 48
44
the Warrant Agent, on the other hand, and each Holder shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders
hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations
may be applicable to such Holder.
Section 12.12. Termination. Except as otherwise specified
herein, this Agreement shall terminate at 5:00 p.m. (New York City time) on the
tenth anniversary of the Closing Date. Notwithstanding the foregoing, this
Agreement shall terminate on any earlier date as of which all Warrants have
been exercised.
Section 12.13. Right of First Opportunity Agreement. The
Company agrees not to amend the Right of First Opportunity Agreement in any
respect material and adverse to the Holders of the Warrants. If the Company
proposes to amend the Right of First Opportunity Agreement, it shall notify the
Warrant Agent in writing 30 days prior to the effectiveness of such amendment
of such proposal to amend and such notice shall include a written copy of the
contents of such proposed amendment (the "Right of First Opportunity Notice").
Within five days of receipt of a Right of First Opportunity Notice,
the Warrant Agent shall give written notice to the Holders of the Right of
First Opportunity Notice. Such notice by the Warrant Agent shall include a
copy of the Right of First Opportunity Notice.
Section 12.14. Governing Law. This Agreement shall be
governed by the laws of the State of New York.
<PAGE> 49
45
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed, as of the day and year first above written.
MCCAW INTERNATIONAL, LTD.
By: /s/ KEITH GRINSTEIN
-------------------------------
Name: Keith Grinstein
Title: President
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
-------------------------------
Name: Mary Jane Morrissey
Title: Vice President
<PAGE> 50
EXHIBIT A
FORM OF WARRANT CERTIFICATE
MCCAW INTERNATIONAL, LTD.
[CUSIP] [CINS] [ISIN] No. _____
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns,
is the owner of ___________ Warrants, each of which represents the right to
purchase, after March 6, 1998, from MCCAW INTERNATIONAL, LTD., a Washington
corporation (the "Company"), 0.10616 common shares, without par value, of the
Company (the "Common Shares") at an exercise price (the "Exercise Price") of
$36.45 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office
of The Bank of New York, or to its successor, as the warrant agent under the
Warrant Agreement (any such warrant agent being herein called the "Warrant
Agent"), with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full by
wire transfer or by certified or official bank or bank cashier's check payable
to the order of the Company. Notwithstanding the foregoing, if the Common
Shares (or other securities) issuable upon exercise of the Warrants are
registered under the Exchange Act, the Exercise Price may be paid by
surrendering additional Warrants to the Warrant Agent having an aggregate
Spread equal to the aggregate Exercise Price of the Warrants being exercised.
At any time after one year after the Closing Date and on or before the
Expiration Date, any outstanding Warrants may be exercised on any Business Day;
provided that the Warrant Registration Statement is, at the time of exercise,
effective and available for the exercise of Warrants or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of March 6, 1997 (the "Warrant Agreement"),
between the Company and The Bank of New York and a Registration Rights
Agreement dated as of March 3, 1997 (the "Warrant Registration Rights
Agreement"), between the Company and The Bank of New York, as Warrant Agent,
and is subject to the Articles of Incorporation and Bylaws of the Company and
to the terms and provisions contained therein, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The terms of the Warrant Agreement and the Warrant Registration
Rights Agreement are hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement and the Warrant
Registration Rights Agreement for a full description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Company and the
Holders of the Warrants. The summary of the terms of the Warrant
<PAGE> 51
A-2
Agreement and the Warrant Registration Rights Agreement contained in this
Warrant Certificate is qualified in its entirety by express reference to the
Warrant Agreement and the Warrant Registration Rights Agreement. All terms
used in this Warrant Certificate that are defined in the Warrant Agreement and
the Warrant Registration Rights Agreement shall have the meanings assigned to
them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration
Rights Agreement are on file at the office of the Warrant Agent and may be
obtained by writing to the Warrant Agent at the following address:
The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
Attention: Corporate Trust Administration
A "Repurchase Event", as defined in the Warrant Agreement,
shall be deemed to occur on any date when the Company consolidates with or
merges into or with (but only where holders of the Common Stock receive
consideration in exchange for all or part of such Common Stock), or sells all
or substantially all of its assets to, another Person which does not have a
class of equity securities registered under the Exchange Act or a wholly owned
subsidiary of such Person, if the consideration for such transaction does not
consist solely of cash or such merger or consolidation is not effected solely
for the purpose of changing the Company's state of incorporation.
Following a Repurchase Event, the Company must make an offer to
repurchase for cash all outstanding Warrants (a "Repurchase Offer"). If the
Company makes a Repurchase Offer, Holders may, until the expiration date of
such offer, surrender all or part of their Warrants for repurchase by the
Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement,
be repurchased by the Company at a price in cash (the "Repurchase Price") equal
to the value on the Valuation Date relating thereto of the Common Shares and
other securities or property of the Company which would have been delivered
upon exercise of the Warrants had the Warrants been exercised, less the
Exercise Price (whether or not the Warrants are then exercisable). The value
of such Common Shares and other securities will be (i) if the Common Shares (or
other securities) are registered under the Exchange Act, determined based upon
the average of the daily market prices (as determined pursuant to Section
3.4(d)(ii)(1) of the Warrant Agreement) of the Common Shares (or other
securities) for the 20 consecutive trading days immediately preceding such
Valuation Date or (ii) if the Common Shares (or other securities)
<PAGE> 52
A-3
are not registered under the Exchange Act or if the value cannot be computed
under clause (i) above, determined by the Independent Financial Expert (as
defined in the Warrant Agreement), in each case as set forth in the Warrant
Agreement.
The "Valuation Date" as defined in the Warrant Agreement shall
be deemed to occur on the date five Business Days prior to the date notice of
the Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a
rate per annum of 13% from the date of the Default to the date of payment,
which interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells
all or substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of
each Warrant and the price per share are subject to adjustment as provided in
the Warrant Agreement. Except as stated in the immediately preceding
paragraph, in the event the Company merges or consolidates with, or sells all
or substantially all of its assets to, another Person, each Warrant will, upon
exercise, entitle the Holder thereof to receive the number of shares of capital
stock or other securities or the amount of money and other property which the
holder of an Common Share (or other securities or property issuable upon
exercise of a Warrant) is entitled to receive upon completion of such merger,
consolidation or sale.
As to any final fraction of a share which the same Holder of
one or more Warrant Certificates would otherwise be entitled to purchase upon
exercise thereof in the same transaction, the Company may pay the cash value
thereof determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all Common
Shares issuable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company
shall pay any taxes and other governmental charges that may be imposed under
the laws of the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery thereof
<PAGE> 53
A-4
upon exercise of Warrants (other than income taxes imposed on the Holders).
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company
shall not be required to issue any share certificate or pay any cash until such
tax or charge has been paid or it has been established to the Warrant Agent's
and the Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set
forth in Article VIII of the Warrant Agreement, this Warrant Certificate and
all rights hereunder are transferable by the registered Holder hereof, in whole
or in part, on the register of the Company maintained by the Warrant Agent for
such purpose at the Warrant Agent's office in New York, New York, upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Warrant Agent duly executed, with signatures guaranteed as specified in the
attached Form of Assignment, by the registered Holder hereof or his attorney
duly authorized in writing and by such other documentation required pursuant to
the Warrant Agreement and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will sign and issue and the Warrant Agent will countersign and deliver
to such Holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred. Each taker and Holder of this Warrant Certificate,
by taking and holding the same, consents and agrees that prior to the
registration of transfer as provided in the Warrant Agreement, the Company and
the Warrant Agent may treat the person in whose name the Warrants are
registered as the absolute owner hereof for any purpose and as the Person
entitled to exercise the rights represented hereby, any notice to the contrary
notwithstanding. Accordingly, the Company and/or the Warrant Agent shall not,
except as ordered by a court of competent jurisdiction as required by law, be
bound to recognize any equitable or other claim to or interest in the Warrants
on the part of any person other than such Registered Holder, whether or not it
shall have express or other notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any
rights of a shareholder of the Company, including, without limitation, the
right to vote or to consent to any action of the shareholders, to receive any
distributions, to exercise any pre-emptive right or to receive any
<PAGE> 54
A-5
notice of meetings of shareholders, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided in the Warrant
Agreement.
This Warrant Certificate shall be void and all rights
evidenced hereby shall cease on March 6, 2007, unless sooner terminated by the
liquidation, dissolution or winding-up of the Company or as otherwise provided
in the Warrant Agreement upon the consolidation or merger of the Company with,
or sale of the Company to, another Person or unless such date is extended as
provided in the Warrant Agreement.
<PAGE> 55
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
MCCAW INTERNATIONAL, LTD.
By: _________________________
Name:
Title:
Dated:
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By: ________________________
Authorized Signatory
<PAGE> 56
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Bank of New York,
as Warrant Agent
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being by wire transfer or by certified or official bank or bank
cashier's check payable to the order or at the direction of McCaw
International, Ltd. or, if the Common Shares (or other securities) issuable
upon exercise of the Warrants are registered under the Exchange Act, the
exercise price may be paid by surrendering additional Warrants to the Warrant
Agent having an aggregate Spread equal to the aggregate exercise price of the
Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the Common shares, without par value, of McCaw International, Ltd.
(the "Common Shares") deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
Check One
[ ] (a) (i) it is not a U.S. person (as defined in Rule 902
of Regulation S under the Securities Act) and the
Warrants are not being exercised on behalf of a U.S.
person.
or
[ ] (ii) it is furnishing to the Warrant Agent a written
opinion of counsel to the effect that the Warrants and
the Common Shares issuable upon exercise of the Warrants
have been registered under the Securities Act or are
exempt from registration thereunder.
<PAGE> 57
A-8
and (b) if an opinion is not being furnished, the undersigned is located
outside the United States at the time of the exercise hereof.
Dated: _______________________________
(Signature of Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 58
A-9
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by McCaw International, Ltd.)
To:
The undersigned, having received prior notice of the
consideration for which MCCAW INTERNATIONAL, LTD. will repurchase the Warrants
represented by the within Warrant Certificate, hereby surrenders this Warrant
Certificate for repurchase by MCCAW INTERNATIONAL, LTD. of the number of
Warrants specified below for the consideration set forth in such notice.
Dated: _________________________
(Number of Warrants)
_________________________
(Signature of Owner)
_________________________
(Street Address)
_________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_________________________
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 59
A-10
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration
received from the Assignee(s) named below, the undersigned registered Holder of
this Warrant Certificate hereby sells, assigns, and transfers unto the
Assignee(s) named below (including the undersigned with respect to any Warrants
constituting a part of the Warrants evidenced by this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s): ___________________________________
Address: __________________________________________________
No. of Warrants: ___________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT UNLEGENDED
REGULATION S GLOBAL WARRANTS AND UNLEGENDED OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the
exemption from registration under the U.S. Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and
the Warrant Agreement.
or
<PAGE> 60
A-11
[ ] (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement
shall have been satisfied.
Dated: _________________________
(Signature of Owner)
_________________________
(Street Address)
_________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
the Warrant(s) for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the U.S.
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding McCaw International, Ltd. as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:________________
_____________________________________________
[NOTE: To be executed by an executive officer]
<PAGE> 61
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: McCaw International, Ltd.
(the "Company") Warrants to Purchase
Common Shares (the "Warrants")
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants,
we hereby certify that such sale has been effected pursuant to and in
accordance with Regulation S under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the
United States and not to a U.S. Person (as defined in Regulation S
under the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United
States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulations S under the Securities Act) have been made by
us, any of our affiliates or any persons acting on our behalf in
the United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, as
applicable; and
<PAGE> 62
B-2
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _________________________
Authorized Signature
<PAGE> 63
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of McCaw International, Ltd. (the "Company")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in
compliance with the transfer restrictions applicable to the Warrants or
interests therein transferred pursuant to and in accordance with the Securities
Act, and accordingly we hereby further certifies that (check one):
(a) [ ] such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act; or
(b) [ ] such transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such transfer is being effected pursuant to an
effective registration statement under the Securities Act;
or
<PAGE> 64
C1-2
(d) [ ] such transfer is being effected pursuant to an
exemption from the registration requirements of the Securities Act other than
Rule 144A, Rule 144 or Rule 904, and we hereby further certify that such
transfer complies with the transfer restrictions applicable to the Warrants or
interests therein transferred to Institutional Accredited Investors and in
accordance with the requirements of the exemption claimed, which certification
is supported by an Opinion of Counsel provided by us or the transferee (a copy
of which we have attached to this certification), to the effect that such
transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred Warrants or interests therein will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI
Certificated Warrant and in the Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By: ______________________________
Authorized Signatory
<PAGE> 65
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
[Date]
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of
McCaw International, Ltd. (the "Company")
Dear Sirs:
In connection with our proposed purchase of ___________
aggregate number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the
Warrants, any interest therein or the Common Shares issuable upon
exercise of any Warrant (the "Warrant Shares") is subject to certain
restrictions and conditions set forth in the Warrant Agreement dated as
of March 6, 1997 relating to the Warrants (the "Warrant Agreement") and
the Warrant Registration Rights Agreement dated March 3, 1997 relating
to the Warrants (the "Warrant Registration Rights Agreement") and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Warrants or Warrant Shares except in compliance
with, such restrictions and conditions and the U.S. Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the Warrants represented by this
Warrant Certificate and, as of the date this Warrant Certificate was
originally issued, the Warrant Shares have not been registered under the
Securities Act, and accordingly may not be offered, sold, pledged or
otherwise transferred within the United States or to, or for the account
or benefit of, U.S. Persons except as set forth in the following
sentence. We agree
<PAGE> 66
C2-2
that we will not, within the time period referred to under Rule 144(k)
of the Securities Act (taking into account the provisions of Rule 144(d)
under the Securities Act, if applicable) under the Securities Act as in
effect on the date of the transfer of this Warrant, resell or otherwise
transfer the Warrants represented by this Warrant Certificate except (a)
to McCaw International, Ltd. or any subsidiary thereof, (b) to a
qualified institutional buyer in compliance with Rule 144A under the
Securities Act, (c) outside the United States in an offshore transaction
in compliance with Rule 904 under the Securities Act, (d) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act (if available), (e) to an institutional accredited
investor that, prior to such transfer, furnishes to you, to the Company
and, in the case of the Warrant Shares, to the transfer agent and
registrar therefor, a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Warrants
represented by this Warrant Certificate (the form of which letter can be
obtained from the Warrant Agent) and an opinion of counsel acceptable to
McCaw International, Ltd. and its counsel that such transfer is in
compliance with the Securities Act or (f) pursuant to an effective
registration statement under the Securities Act and, in each case, in
accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any
Warrants, any interest therein or Warrant Shares, we will be required to
furnish to you and the Company such certifications, legal opinions and
other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Warrants purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
our investment in the Warrants, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment
for an indefinite period of time.
5. We are acquiring the Warrants purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You, the Company and, if applicable, the transfer agent and
registrar for the Warrant Shares are entitled to rely upon this letter and are
irrevocably authorized to produce
<PAGE> 67
C2-3
this letter or a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters covered
hereby.
Very truly yours,
[Name of Transferee]
By: ______________________________
Authorized Signature
<PAGE> 68
EXHIBIT D
Form of Certificate
_______________, ____
The Bank of New York
101 Barclay Street
New York, NY 10286
Attention: Corporate Trust Administration
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Attention: President
Re: Warrants to Purchase Common Shares of
McCaw International, Ltd. (the "Company")
Dear Sirs:
This letter relates to _______________ Warrants represented by a Warrant
Certificate (the "Legended Warrants") which bears a legend outlining
restrictions upon transfer of such Legended Warrants. Pursuant to Section 2.1
of the Warrant Agreement dated as of March 6, 1997 (the "Warrant Agreement")
relating to the Warrants, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Warrants could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933. Accordingly, you are
hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical number of Warrants, all in the manner
provided for in the Warrant Agreement.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ______________________________
Authorized Signature
<PAGE> 69
APPENDIX A
LIST OF FINANCIAL EXPERTS
Alex. Brown & Sons
Bear, Stearns & Co., Inc.
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
Lehman Brothers
<PAGE> 1
EXHIBIT 10.1
MOTOROLA VENDOR FINANCING TEMPLATE
MEMORANDUM OF UNDERSTANDING
- - Motorola agrees that nothing in this Memorandum of Understanding ("MOU") is
intended or shall operate to amend any provision of, or to restrict, limit,
increase or otherwise affect any rights or obligations of the parties under
or pursuant to, that certain Amended, Restated and Consolidated Credit
Agreement dates as of September 27, 1996 among Nextel Communications, Inc.,
Nextel Finance Company, the other Restricted Companies named therein,
Motorola, Inc. and NTFC Capital Corporation, as he same may be amended from
time to time (the "U.S. Vendor Agreement"). McCaw International Limited
agrees that certain actions taken under such U.S. Vendor Agreement may
limit the amount of financing available outside the U.S. to entities
affiliated with Nextel, or may require McCaw International to make
repayments of non-U.S. borrowings outstanding, all as more fully provided
in this MOU. It is expressly understood and acknowledged by Motorola that
Nextel and the Restricted Companies shall have no obligation or liability
of any type or description, contingent or otherwise, on or in respect of
any amount outstanding pursuant to financing made available, committed or
extended by Motorola to any Nextel affiliate for use outside the U.S.
(pursuant to or as contemplated by this MOU).
- - Motorola desires and intends to provide vendor financing to
carriers/customers for the roll out-expansion of iDEN systems in the U.S.
and in certain non-U.S. countries.
- - Motorola's policy will be to establish a Worldwide limit on the amount of
vendor financing that can be OUTSTANDING with respect to certain non-U.S.
countries, for iDEN products, with any particular customer and its
affiliates or in any particular non-U.S. country at any point in time,
that will be based on a ceiling amount of OUTSTANDING vendor financing to
such customer and its affiliates under both U.S. and non-U.S. facilities.
- - The issuance of a financing commitment for any specific country shall be in
Motorola's sole discretion.
- - Due to this timing of roll outs, drawdowns or loan repayments it is
possible that the total amount of Motorola vendor financing COMMITMENTS may
- at times - exceed the worldwide OUTSTANDINGS limit to a customer and its
affiliates. In no case, however, can the drawdowns on such commitments
cause the amounts outstanding to exceed the worldwide OUTSTANDINGS limit.
Accordingly, drawdowns under the U.S. portion of such commitments may
result in required repayments of amounts OUTSTANDING under the non-U.S.
portion of such commitment so that the applicable worldwide OUTSTANDINGS
limit for the relevant customer and its affiliates is not exceeded.
- - The worldwide combined OUTSTANDINGS limit for Motorola provide vendor
financing for Nextel/(i) Nextel and the Restricted Companies under the U.S.
Vendor Agreement and (ii) McCaw International and its designated affiliates
has been established, by Motorola, at $400 million, with no more than $125
million outstanding in any specific country (other than the United States.)
(See attachment 1 for a description of amounts currently
outstanding/committed with each of Nextel and McCaw International).
- - Each worldwide customer financing limit will be reviewed every 2 years and
adjusted, if desired, prospectively.
- - Given these objectives/targets, the general terms of all Motorola provide
vendor financing commitments (other than under the U.S. Vendor Agreement)
for iDEN products will be as follows:
<PAGE> 2
- - Vendor Financing will be provided only for the purchase of Motorola iDEN
good and services and ancillary products and services (such as, without
limitations, switches which have been ordered from and provided by
Motorola) to the extent indicated in the relevant definitive financing
documents.
- - Working capital loans will not be provided by Motorola - except where
Motorola is an equity partner and guarantees its % ownership of joint
venture borrowing.
- - Appropriate collateral will be required for all vendor financing (i.e.
channels, licenses, asset pledges, proportionate shareholders guarantees,
etc.)
- - Vendor Financing must be Senior Secured Debt.
- - Vendor Financing will be denominated in and payable in U.S. dollars (and
will be extended to the relevant borrowing entity in U.S. dollars).
- - Interest rate for loans will be 2% to 4% over prime depending on the
country/business plan risk.
- - There shall be no restriction whatsoever (other than any imposed pursuant
to relevant law) on Motorola's right to sell, syndicate or assign any
borrowings made under these non-U.S. vendor financing arrangements.
- - Political risk insurance will be required on all non-U.S. vendor finance
unless waived by Motorola. Fees to be paid by borrower.
- - There will be no commitment fees on unused commitment amounts.
- - Arrangement fees on non-U.S. borrowing facilities will be priced at
approximate market price (generally 1%).
- - Additional debt will be allowed under the non-U.S. borrowing facilities to
cover working capital needs within agreed financial covenants. In certain
specific, mutually agreed situations Motorola may agree to allow debt that
is paripassu with Motorola.
- - All non-U.S. vendor financing provided will be subject to Motorola's
receipt/approval of acceptable Business Plan(s) and normal due diligence.
/s/ DAVID E. ROSTOV /s/ RICHARD D. SEVERNS
- ------------------- ----------------------
David E. Rostov Richard D. Severns
Senior Vice President - Finance, Senior Vice President
Chief Financial Officer and Treasurer Land Mobile Products Sector
McCaw International Limited Motorola, Inc.
By signing below, Nextel Communications, Inc. acknowledges its
awareness of and agreement with the financing arrangements described above.
NEXTEL COMMUNICATIONS, INC.
By /s/ STEVEN M. SHINDLER
----------------------
Steven M. Shindler
Senior Vice President and Chief
Financial Officer
<PAGE> 3
ATTACHMENT I
- - Motorola currently has a debt commitment to the Restricted Companies (as
defined in the U.S. Vendor Agreement) in the U.S. - as a result of the U.S.
Vendor Agreement of $305 million.
- - The amount currently outstanding on this U.S. commitment is $110 million.
- - Once the other banks party to the Credit Agreement dated as of September
27, 1996 - entered into in connection with the U.S. Vendor Agreement -
have loaned Nextel $827.5 million, Motorola is committed to provide
additional vendor financing in the U.S. on a prorate basis with the other
banks, until the Motorola total amount of outstanding reached a maximum of
$305 million.
- - McCaw International has requested that Motorola provide vendor financing,
for the purchase of Motorola iDEN equipment in the following amounts with
respect to the following countries during the year 1997, 1998 and 1999.
- Brazil $173.5 million
- Argentina $ 81.0 million
- Mexico $107.5 million
- Philippines $ 30.0 million
- - Motorola has agreed to provide initial financing commitments, contingent on
the execution of this MOU, for the purchase of Motorola iDEN in the
following amounts and countries:
- Brazil $125 million
- Philippines $ 30 million
- Argentina $ 81 million
- - Motorola will continue to review McCaw International's request for
financing in Mexico to determine the amount of financing, if any, Motorola
will commit to provide.
- - Subject to the $400 million limit on Worldwide OUTSTANDINGS to a particular
customer and its affiliates noted in the Memorandum of Understanding (or
the $125 million limit to a particular country outside the U.S.), Motorola
commits to provide vendor financing for the purchase of Motorola iDEN
equipment, in these 3 countries, PROVIDED THAT
If the Amount OUTSTANDING in the U.S. under the U.S. Vendor Agreement
PLUS
The amount OUTSTANDING on non-U.S. vendor financing in these countries
PLUS
A request for more vendor financing in the U.S. under the Vendor
Financing Agreement dated September 7, 1996 WHICH CAN NOT BE REFUSED
PER OUR AGREEMENT WITH THE BANKS
Would cause the total OUTSTANDINGS amount to exceed $400 million.
Then McCaw International will repay or cause to repay sufficient
OUTSTANDING non-U.S. loans/borrowings such that after and giving effect to such
repayment, the total amount of loans outstanding from Motorola to Nextel/under
the U.S. Vendor Facility plus the loans outstanding from Motorola to McCaw
International under the non-U.S. facilities will no exceed $400 million.
<PAGE> 4
/s/ DAVID E. ROSTOV /s/ RICHARD D. SEVERNS
- ------------------- ----------------------
David E. Rostov Richard D. Severns
Senior Vice President - Finance, Senior Vice President
Chief Financial Officer and Treasurer Land Mobile Products Sector
McCaw International Limited Motorola, Inc.
By signing below, Nextel Communications, Inc. acknowledges its
awareness of and agreement with the financing arrangements described above.
NEXTEL COMMUNICATIONS, INC.
By /s/ STEVEN M. SHINDLER
----------------------
Steven M. Shindler
Senior Vice President and Chief
Financial Officer
<PAGE> 1
EXHIBIT 10.2
MCCAW INTERNATIONAL (BRAZIL), LTD.
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made as of January
29, 1997, by and among McCaw International (Brazil), Ltd., a Virginia
corporation, formerly named Wireless Ventures of Brazil, Inc. (the "Company"),
and the Persons listed as Shareholders on Exhibit I attached hereto, as amended
from time to time, including McCaw International, Ltd., a Washington
corporation ("MIL"), Telcom Ventures, LLC, a Delaware limited liability company
("Telcom") and the other Shareholders listed as the Founders on the signature
pages to this Agreement (the "Founders") (collectively, the "Shareholders" and,
individually, a "Shareholder").
RECITALS
The Founders are the owners of all of the Company's Class B Common
Stock and MIL is the owner of all of the Company's Class A Common Stock
(together with the Class B Common Stock, the "Common Stock"), and the
Shareholders desire to enter into certain agreements relating to transfers of
Common Stock and other issues relating to the Company.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are acknowledged and to further the interests of the
Company and its present and future Shareholders, the parties agree as follows:
1. TRANSFERABILITY
1.1 TRANSFERS
Except as otherwise provided in this Agreement, no Shareholder may
sell, assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise
transfer to any Person (as defined in the Agreement and Plan of Merger between
Nextel Communications, Inc., Dial Call Indimich, Inc. and the Company dated
October 28, 1996 (the "Merger Agreement")) other than to one of its Affiliates
(as defined in the Merger Agreement) or other than in connection with the grant
of a security interest to secure a bona fide third-party financing
(collectively, "Transfer," including, with correlative meanings, the terms
"Transferring" and "Transferred") all or any part of any shares of Common Stock
or other securities of the Company convertible into or exercisable for Common
Stock (collectively, the "Shares") unless the Shareholder proposing such a
Transfer (the "Selling Shareholder") has complied with the provisions of this
Section 1. For purposes of this Section 1, all shares of the Company's Class A
Common Stock and Class B Common Stock shall be treated as shares of the same
class.
<PAGE> 2
1.2 RESTRICTIVE LEGEND
Each certificate representing (a) Shares or (b) any other securities
issued in respect of the Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event shall be stamped or
otherwise imprinted with a legend setting forth the transfer restrictions
imposed by this Agreement and applicable law as required by Section 10.2. The
Shareholders consent to the Company' making a notation on its records and
giving instructions to any transfer agent of the Shares in order to implement
the restrictions on Transfer established in this Section 1.
1.3 RIGHT OF FIRST REFUSAL
1.3.1 TRANSFERS BY SHAREHOLDERS
Except as otherwise provided in this Agreement, no
Founder may Transfer any interest, direct or indirect, in all or any part of
the Shares owned by such Shareholder (a) during the period beginning on the
date hereof and ending on the date two years and 90 days after the date hereof
(the "Grace Period") and (b) after the expiration of the Grace Period, unless,
in the case of this clause (b) only, (i) the Selling Shareholder shall have
made an offer to sell such Shares to the other Shareholders and the Company as
provided in this Section 1.3 and (ii) such offer shall not have been accepted
in the manner described in this Section 1.3. No Shareholder (including the
Founders collectively) having beneficial ownership of less than 10% of the
Common Stock at the time of any proposed Transfer by any other Shareholder
shall have rights of first refusal as provided in this Section 1.3.
1.3.2 OFFER BY SELLING SHAREHOLDER
The offer referred to in Section 1.3.1 shall consist
of a written offer (the "Offer") to the other Shareholders entitled to rights
of first refusal (the "Offerees") to sell the Shares proposed to be Transferred
(the "Offered Shares"). The Offer shall set forth (a) a statement of intention
to effect a Transfer, (b) the number and class of Offered Shares, (c) the terms
and conditions of the proposed Transfer, including (i) the purchase price for
the Offered Shares and (ii) the identity and beneficial ownership of the third
party or parties having made a bona fide offer to purchase the Offered Shares
on such terms and conditions, and (d) the desired closing date of the
transaction.
1.3.3 ACCEPTANCE OF OFFER
Within 30 days after its receipt of the Offer, the
Offerees may, at their option, accept the Offer as to all or less than all of
the Offered Shares by giving irrevocable written notice to the Selling
Shareholder, the Company and the other Shareholders prior to the expiration of
such 30-day period.
1.3.4 PRO RATA PORTION
The Offered Shares shall first be allocated to the
Offerees. If the Offerees shall not have offered to purchase all the Offered
Shares, the Company may elect to
-2-
<PAGE> 3
purchase any remaining Offered Shares. To the extent that more than one
Offeree shall have elected to purchase Offered Shares pursuant to Section
1.3.3, each such Offeree may purchase up to its pro rata portion of such
Offered Shares as determined in accordance with this Section 1.3.4. Each
Offeree's pro rata portion of the Offered Shares is that proportion of the
Offered Shares as the number of shares of voting capital stock of the Company
held by such Offeree bears to the aggregate number of shares of voting capital
stock of the Company held by such Offeree and all other Offerees who have
exercised their rights of first refusal under this Section 1.3.
1.3.5 CLOSING
If the Offer is accepted as to all the Offered Shares, the
parties shall use their best efforts to complete the closing of such purchase
within 30 days after acceptance of the Offer. If, after expiration of such
30-day period, the closing of such purchase of all Offered Shares shall not
have occurred (unless closing is subject only to receipt of required
governmental or regulatory approvals) through no fault of the Selling
Shareholder, then the Selling Shareholder may treat the Offer as having been
rejected in its entirety. If the Offer is not accepted as to all the Offered
Shares as provided in this Section 1.3, or is deemed to be rejected as set
forth in the previous sentence, the Selling Shareholder may for a period of 60
days after such nonacceptance or deemed rejection Transfer the Offered Shares
to the third party or parties designated in the Offer and on the terms and
conditions specified in the Offer. A proposed Transfer after the expiration of
such 60-day period or on any other terms shall again be subject to the rights
of first refusal and other provisions of this Section 1.
1.4 TAG-ALONG RIGHTS
1.4.1 TRANSFERS BY MIL
Except as otherwise provided in this Agreement, neither MIL
nor any Affiliate of MIL may Transfer all or any part of the Shares owned by
MIL or such Affiliate unless (a) MIL or such Affiliate shall have sent to each
other Shareholder (each a "Tag-Along Offeree") a written offer (the "Tag-Along
Offer") to include in such Transfer all or any portion of such Tag-Along
Offeree's Tag-Along Shares (as defined below) at the same price and on the same
terms as MIL or such Affiliate shall Transfer its Shares and (b) such offer
shall not have been accepted in the manner described in this Section 1.4. Each
Tag-Along Offeree's "Tag-Along Shares," which shall be calculated separately
for each class of Shares included in the Offered Shares, shall mean that number
of Shares of such class as is equal to the number of Shares of such class then
owned by such Tag-Along Offeree multiplied by a fraction, the numerator of
which is the number of Shares of such class being sold by MIL and its
Affiliates and the denominator of which is the number of Shares of such class
then owned by MIL and its Affiliates.
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1.4.2 TAG-ALONG OFFER
The Tag-Along Offer shall consist of a written offer to the
Tag-Along Offerees to include Tag-Along Shares in the Shares proposed to be
Transferred (the "Proposed Shares"). The Tag-Along Offer shall set forth (a) a
statement of intention to effect such a Transfer, (b) the number and class of
Proposed Shares, (c) the terms and conditions of the proposed Transfer,
including the purchase price for the Proposed Shares, and (d) the desired
closing date of the transaction.
1.4.3 ACCEPTANCE OF TAG-ALONG OFFER
Within 30 days after its receipt of the Tag-Along Offer, each
Tag-Along Offeree may, at its option, accept the Tag-Along Offer as to all or
less than all of such Tag-Along Offeree's Tag-Along Shares by giving
irrevocable written notice to MIL, the Company and the other Shareholders prior
to the expiration of such 30-day period. Any Tag-Along Shares to be
Transferred by Tag-Along Offerees shall be substituted for an equal number of
Proposed Shares.
1.4.4 CLOSING
MIL and those Tag-Along Offerees having accepted the Tag-Along
Offer shall use their best efforts to complete the closing of any such Transfer
within 30 days after the end of the 30-day offering period. If MIL and the
Tag-Along Offerees shall fail to complete such Transfer within such 30-day
closing period (unless closing is delayed due to the need for required
governmental or regulatory approvals), or if MIL and the Tag-Along Offerees
propose to effect a Transfer on different terms than those permitted by the
Tag-Along Offer pursuant to Section 1.4.2, then any proposed Transfer shall
again be subject to all the Transfer restrictions set forth in this Section 1.
1.5 DRAG-ALONG RIGHTS OF MIL
1.5.1 RIGHT TO REQUIRE SALE OF THE COMPANY
Notwithstanding the other provisions of this Section 1, if MIL
and its Affiliates seek to effect a transaction involving a bona fide sale of
their entire interest in the Company to an unrelated third party or parties (a
"Buyer"), whether by sale of shares, sale of all or substantially all assets,
merger or otherwise (a "Sale"), the other Shareholders will, upon notice from
MIL after compliance with the provisions of this Section 1.5, take all
commercially reasonable actions required to assist in effecting such Sale,
including, without limitation, Transferring or agreeing to Transfer the Shares
owned by them at a price equal to that at which MIL is Transferring Shares and
otherwise on identical terms and voting in favor of a transaction that results
in such a Transfer.
1.5.2 PROCEDURE
MIL shall give written notice to the Company's Board of
Directors (the "Board") and the other Shareholders of MIL's intent to effect a
Sale of the Company.
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MIL may for a period of 180 days after such notice seek to effect a Sale of the
Company to a Buyer. If such Sale shall not have closed within such 180-day
period (unless closing is delayed due to the need for required governmental or
regulatory approval), any proposed Transfer shall again be subject to all the
Transfer restrictions set forth in this Section 1.
1.6 NO OTHER TRANSFER EFFECTIVE
Except as provided in this Section 1, no Transfer of any right, title
or interest in the Shares shall be effective, and the Company shall not record
or recognize any such Transfer, until there has been compliance with the
provisions of this Agreement. If no Offer is made as herein required, the
Shareholders may nevertheless exercise their rights hereunder as to the Shares
subject to any proposed Transfer, and they may do so at any time, including
after the Transfer of the Shares.
2. VOTING
2.1 VOTING OF SHARES
Each Shareholder shall vote all Shares owned by such Shareholder, or
as to which such Shareholder has voting power, pursuant to the provisions of
this Agreement.
2.2 ELECTION OF DIRECTORS
In elections of directors of the Company, the Shareholders shall vote
in favor of (a) one or more candidates designated by the Founders, which
candidates would represent no more than 10% of the directors of the Company;
provided that so long as the Founders shall collectively own 10% or more of the
Common Stock, the Founders shall have the right to designate at least one
candidate for election to the Board and (b) all other candidates, all of whom
shall have been designated by MIL. If at any time the Founders shall
collectively own less than 10% of the Common Stock, the director or directors
designated for election to the Board by the Founders (the "Founder Director")
shall resign as a director. The Founders shall not have the right to designate
any candidates for election to the board of directors or comparable governing
body of any subsidiary of the Company.
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2.3 VOTING TRUST
If MIL and its Affiliates shall at any time have beneficial ownership
of less than 50% but more than 25% of the Common Stock, the Founders and the
Founder Director shall, subject to their fiduciary duties to the Company and
all Shareholders, execute any legal document required by appropriate law, and
thereafter cast all votes in favor of or against matters to be approved by the
shareholders of the Company or the Board, as the case may be, in the same
manner as MIL and its Affiliates and the directors nominated thereby,
respectively; provided that this Section 2.3 shall not diminish any rights
which the Founders otherwise have under Article Seven of the Company's Articles
of Incorporation.
3. REPURCHASE AT OPTION OF COMPANY OF COMMON STOCK OWNED BY FOUNDERS
(a) If the Founder Director fails to approve any action proposed
to the Board pursuant to Article Seven of the Company's Articles of
Incorporation, or if the holders of Class B Common Stock fail to approve any
such action proposed to the shareholders of the Company, the Company shall have
the right, by written notice to the Founders given within 30 days of the vote
of the Board, and upon approval of a simple majority of the directors of the
Company (excluding the Founder Director), to repurchase all, but not less than
all, of the Common Stock then owned by the Founders. Such repurchase shall
close within 30 days of the final determination of Fair Market Value, subject
only to completion of the appraisal process and receipt of required
governmental or regulatory approvals. The repurchase price (the "Repurchase
Price") shall equal the Appraised Fair Market Value (as defined below) of the
Company as of the exercise date multiplied by a fraction, the numerator of
which is the number of shares of Common Stock then owned by the Founders and
the denominator of which is the total number of Shares (calculated on a fully
diluted basis at the stated exercise price of all options). The Repurchase
Price shall, at the Company's election, be payable in cash, common stock of
Nextel Communications, Inc. ("Nextel Common Stock") or any combination thereof.
Any Nextel Common Stock used as part of the Repurchase Price shall be either
registered with the U.S. Securities and Exchange Commission (the "SEC") or
registrable at the election of the Founders, exercisable by Telcom on behalf of
the Founders, within 30 days after closing of the repurchase right. The Nextel
Common Stock shall be valued at the average of the closing price of the Nextel
Common Stock on the principal trading market on which such shares are traded
over the 20 trading days prior to closing of the repurchase transaction. If
paid in cash, the Repurchase Price shall be payable in four equal quarterly
installments, beginning on the date of closing of the repurchase right and on
each three-month anniversary thereof, with interest accruing on the unpaid
principal at an annual rate equal to the annual rate of interest publicly
announced by The Chase Manhattan Bank, N.A., or any successor thereto, in New
York City as its prime rate from time to time (the "Prime Rate") plus 1%.
(b) For purposes of this Agreement, "Fair Market Value" means the
price that an unrelated third party would pay if it were to acquire all
outstanding Shares (including all outstanding vested options at the stated
exercise price thereof) in an arm's-length
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transaction, assuming that the Shares were being sold in a manner designed to
attract all possible participants and without taking into consideration a
control premium or minority discount. The "Appraised Fair Market Value" shall
be determined in accordance with the following procedures: MIL shall select an
investment banking firm of recognized national standing (the "First
Appraiser"), which shall appraise the Fair Market Value and deliver its
appraisal to the Company, Telcom and MIL, within 60 days of its engagement. If
Telcom shall disagree with the Fair Market Value determined by such appraiser,
then Telcom shall have the right to appoint an additional investment banking
firm of recognized national standing (the "Second Appraiser"). If Telcom does
not engage a Second Appraiser within 30 days of the First Appraiser's delivery
of its appraisal, the First Appraiser's appraisal shall be the Appraised Fair
Market Value. If Telcom engages a Second Appraiser, the Second Appraiser will
appraise the Fair Market Value, and deliver its appraisal to the Company,
Telcom and MIL, within 60 days of its engagement. If such difference between
the two appraisals is less than 20% of the lower appraised value, then the
Appraised Fair Market Value shall be the average of the two appraisals. If the
difference is greater than or equal to 20% of the lower appraised value, the
two appraisers shall engage a third independent investment banking firm of
recognized national standing (the "Third Appraiser"), which shall appraise the
Fair Market Value within 60 days of its engagement. The Appraised Fair Market
Value shall be the average of the two appraised values which are closest in
absolute U.S. dollars. All appraisals of Fair Market Value shall be as of the
date of notice of exercise of the right. The expenses of the First Appraiser
shall be borne by the Company; the expenses of the Second Appraiser, if any,
shall be borne by the Founders; and the expenses of the Third Appraiser, if
any, shall be borne equally by the Company and the Founders.
4. FOREIGN OWNERSHIP RULES
If at any time Brazilian law requires a reduction in the ownership of
the Company by any parties then owning Shares, then
(a) Shares shall be sold on the same date pro
rata by all Shareholders required to sell Shares on the same terms;
(b) such sales shall be at Appraised Fair Market
Value, or as close thereto as achievable under the then-current regulatory
conditions;
(c) such sales shall be made only to purchasers
acceptable to MIL, which acceptance shall not be unreasonably withheld; and
(d) the parties shall use their reasonable best efforts
to sell such Shares for cash.
5. CAPITAL CALLS, PREEMPTIVE RIGHTS AND PLEDGES OF COMPANY STOCK
5.1 GRACE PERIOD FOR FOUNDERS
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Notwithstanding any capital contributions by any Shareholder to the
Company during the Grace Period, the Founders shall have no obligation to make
any pro rata capital contribution to the Company, and the Shares held by the
Founders as of the date hereof shall retain an aggregate interest in dividends
and other cash or noncash distributions by the Company equal to their aggregate
percentage ownership of the Common Stock (19% as of the date hereof, as such
percentage may be reduced by the issuance of additional shares of Common Stock
to any third party in accordance with Section 5.2) (the "Founders'
Percentage"). The issuance of Common Stock to MIL or its Affiliates in
connection with any such capital contributions shall not reduce the Founders'
Percentage.
5.2 PREEMPTIVE RIGHTS
The Company may at any time issue additional shares of Common Stock to
any third party at fair market value, as determined in good faith by a majority
of the directors of the Company, so long as, after such issuance, the Founders'
Percentage is not reduced to less than 17%. If the Company intends to issue
additional shares of Common Stock to a third party such that the Founders would
own in the aggregate less than 17% of the Common Stock, the Company shall
deliver to the Founders a written notice at least 30 days prior to such
proposed issuance. The Founders shall have the right, exercisable upon
irrevocable written notice delivered to the Company at least 10 days prior to
the date of proposed issuance, to purchase additional shares of Common Stock
such that after such issuance, the Founders would own in the aggregate no more
than 17% of the Common Stock; provided that the Founders may exercise their
preemptive rights only if the Founders in the aggregate exercise such rights
with respect to the maximum number of shares of Common Stock permitted
hereunder. If some but not all of the Founders exercise such right, the number
of shares issuable to each exercising Founder shall bear the same proportion to
the aggregate number of shares issuable to all exercising Founders as the
number of shares held by such exercising Founder prior to such issuance bears
to the aggregate of shares held by all exercising Founders.
5.3 FOUNDERS' "TRUE-UP" OPTION
On or prior to the last day of the Grace Period, the Founders shall
have the option, exercisable by Telcom on behalf of the Founders, to pay to the
Company an amount (the "Antidilution Payment") equal to:
FP x CC
---------
1 - FP
where
"FP" is the Founders' Percentage; and
"CC" is the sum of (a) the aggregate amount of all capital contributions made
to the Company by shareholders other than the Founders during the Grace Period
and (b) the amount of each such capital contribution, multiplied by the Prime
Rate plus 1%, per
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annum, for each capital contribution from the date such contribution was made
to the date of payment of the Antidilution Payment.
The Company shall deliver to Telcom a notice setting forth the
calculation of the Antidilution Payment at least 30 days prior to the last day
of the Grace Period; provided that the failure of the Company to deliver such
calculation in a timely manner shall not affect the parties' rights and
obligations hereunder; provided, further, that if such notice is not delivered
in a timely manner, Telcom shall pay the Antidilution Payment upon the later of
the last day of the Grace Period and 15 days after delivery of such notice.
Any Antidilution Payment shall be free of all withholding with respect to taxes
of any nature, and if the Founders are required by applicable law to make any
such withholding with respect to any such payment, such Antidilution Payment
shall be increased so that after making all required withholdings, the Company
shall receive an amount equal to the amount it would have received had such
withholdings not been made. Upon receipt in full of the Antidilution Payment,
the Company shall issue to the Founders on a pro rata basis, based on the
number of shares then owned by each Founder, shares of Common Stock such that
the percentage of the Common Stock owned by the Founders after such transfer
equals the Founders' Percentage. If Telcom does not make the Antidilution
Payment on the last day of the Grace Period, the Founders' interests in
dividends and other cash or noncash distributions by the Company shall
thereafter be proportionate to their respective shareholdings in the Company.
If, within the 30-day period prior to the last day of the Grace
Period, (a) MIL shall have offered to sell shares of Common Stock owned by MIL
to Telcom for a price that is the economic equivalent of the transaction
contemplated by the first paragraph of this Section 5.3, (b) Telcom shall have
declined such offer and shall have made the Antidilution Payment to the
Company, resulting in the Company being, in the judgment of a majority of the
Board of Directors, over-capitalized, and (c) the Company immediately makes a
dividend payment to the Shareholders in an aggregate amount less than or equal
to the Antidilution Payment, then Telcom shall immediately make an additional
payment to each Shareholder so that such Shareholder shall have received an
amount equal to the dividend to which such Shareholder would be entitled if no
taxes of any nature were payable with respect to such dividend payment.
5.4 PLEDGES OF COMMON STOCK
If the Company or any of the WVB Affiliates shall enter into a
financing arrangement pursuant to which the lender requires the pledge of all
of the Common Stock as security for such financing, and MIL and its Affiliates
agree to pledge the Common Stock owned by them, then the Founders shall
simultaneously pledge the Common Stock owned by them on the same terms and
conditions as MIL and its Affiliates; provided that such lender shall have no
recourse against the Founders in connection with such financing other than to
the Common Stock so pledged and such pledge shall expressly permit the exercise
and consummation of any repurchase right held by a holder of Class B Common
Stock pursuant to the Company's Articles of Incorporation.
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6. INTEREST OF SPOUSE
6.1 INTEREST OF SPOUSE SUBJECT TO AGREEMENT
Any property interest in the Shares now owned or hereafter acquired by
the spouse of a Shareholder shall be subject to the terms of this Agreement and
shall be subject to the same restrictions on Transfer described in Section 1 as
if such interests were owned by a Shareholder and as if such spouse were a
Shareholder.
6.2 SIGNATURE OF SPOUSES
Each Shareholder's spouse signing this Agreement acknowledges that he
or she has read this Agreement and understands its contents, specifically this
Section 6. Notwithstanding the foregoing, absence of a spouse's signature
hereto shall not alter the effectiveness hereof or the enforceability of the
provisions contained herein as against such spouse or any Shareholder.
Each spouse acknowledges that he or she has had the opportunity to
obtain separate and independent counsel of his or her own choosing prior to
signing this Agreement and has waived such right. Each spouse agrees that the
Shares and any interest, community or otherwise, he or she has in them are
subject to the provisions of this Agreement. Each spouse also agrees that his
or her Shareholder-spouse may join in any future amendments or modifications of
this Agreement without any further signature, acknowledgment, agreement or
consent on his or her part and he or she designates his or her
Shareholder-spouse attorney-in-fact for this purpose. Furthermore, each spouse
agrees to take no action at any time to hinder the operation of this Agreement
as to the Shares in which he or she has an interest.
7. TERMINATION
This Agreement shall lapse and be of no further force or effect upon
the first of the following to occur:
(a) Merger, Sale or Liquidation. The approval by
the Board and the Shareholders, as required by law and by the Company's
Articles of Incorporation and Bylaws, of the merger of the Company with any
other company as a result of which securities representing all or substantially
all of the voting power of the Company are held by Persons that had less than a
majority interest, directly or indirectly, in such securities prior to such
merger, or of the sale of all or substantially all of the assets of the
Company, or of its liquidation.
(b) Agreement of Shareholders. The written
agreement of holders of not less than 97% of the Common Stock to the
termination of this Agreement.
(c) Public Offering. The closing of an offering
by the Company of its equity securities to the public pursuant to a
registration statement filed pursuant to the
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U.S. Securities Act of 1933, as amended (the "Act"), or the equivalent
legislation of another country.
(d) Lapse of Time. The expiration of 21 years
after the death of the last to die of the individual Shareholders named herein.
8. REGISTRATION RIGHTS
8.1 DEFINITIONS
For purposes of these registration rights:
(a) The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means any
Common Stock held by the Holders, including Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which
is issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, such Common Stock, excluding in all cases, however,
any Registrable Securities sold by a Person in a transaction in which its
rights under this Agreement are not assigned;
(c) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities;
(d) The term "Holder" means MIL, the Founders or any of
their Affiliates or permitted transferees; and
(e) The term "Initiating Holders" means the
Holders who initiate the request for registration under Section 8.2(a).
8.2 REQUEST FOR REGISTRATION
(a) If at any time following six months after the closing of the
Company's initial public offering, the Company shall receive a written request
from MIL or any of its Affiliates or from Holders of at least 50% of the
Registrable Securities then held by the Founders that the Company file a
registration statement under the Act covering the registration for an
underwritten public offering of Registrable Securities with estimated aggregate
gross proceeds of at least $10,000,000, based on a good-faith estimate of the
market price of the Common Stock, then the Company shall, within 10 days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations contained in this Section 8, effect the registration
under the Act of all Registrable Securities which the Holders request to be
registered by their giving written
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<PAGE> 12
notice to the Company within 20 days of the mailing by the Company of its
previous notice to the Holders.
(b) The right of any Holder to include its Registrable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 8.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders, which
underwriter must also be reasonably acceptable to the Company. Notwithstanding
any other provision of this Section 8.2, if the underwriter advises the Company
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only one registration
pursuant to this Section 8.2 on behalf of MIL and its Affiliates and one
registration pursuant to this Section 8.2 on behalf of the Founders, their
Affiliates and permitted transferees; provided that, if the number of
Registrable Securities to be registered by either such group is reduced
pursuant to Section 8.2(b) to less than 75% of the Registrable Securities
requested to be registered by such group, such registration shall not be deemed
to be such group's demand registration pursuant to this Section 8.2(c).
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 8.2 a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board, it would be seriously detrimental to the Company
and its shareholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a period of not more than
90 days after receipt of the request of the Initiating Holders.
8.3 COMPANY REGISTRATION
If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, or a registration on any form that does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the
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Company shall, at each such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within 20
days after mailing of such notice by the Company, the Company shall, subject to
the provisions of Section 8.7, cause to be registered under the Act all of the
Registrable Securities that each such Holder has so requested.
8.4 OBLIGATIONS OF THE COMPANY
Whenever required under this Agreement to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective;
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement;
(c) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of all securities covered by
such registration statement;
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions;
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement; and
(f) Notify each Holder of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto covered by such registration statement is required to be delivered
under the Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
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8.5 FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that the selling Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be reasonably required to effect the registration of their
Registrable Securities and to execute such documents in connection with such
registration as the Company may reasonably request.
8.6 EXPENSES OF REGISTRATION
In connection with any registration pursuant to this Agreement, the
Company shall be responsible for the payment of all expenses of the
registration, with the exception of underwriting commissions and discounts
which shall be paid by the Company, the Holders and any other selling security
holders in proportion to the aggregate value of the securities offered for sale
by each of them. Notwithstanding the preceding sentence, Holders participating
in a registration pursuant to Section 8.2 shall be responsible for the payment
of all expenses directly related to such registration.
8.7 UNDERWRITING REQUIREMENTS
The Company shall not be required under Section 8.3 to include any of
the Holders' securities in an underwritten offering of the Company's securities
unless such Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it. If the total amount of
securities, including Registrable Securities, requested by Holders to be
included in such offering exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, that the underwriters
believe will not jeopardize the success of the offering. The securities to be
included in the registration in the event of such a reduction shall be
apportioned first to the Company, then pro rata among the selling Holders
according to the total amount of securities requested to be sold in such
registration by such Holders, or in such other proportions as shall mutually be
agreed to by such selling Holders.
8.8 DELAY OF REGISTRATION
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
8.9 INDEMNIFICATION
In the event any Registrable Securities are included in a registration
statement under this Agreement:
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(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners, officers, agents,
employees and directors of each Holder, any underwriter (as defined in the Act)
for such Holder and each Person, if any, who Controls (as defined in the Merger
Agreement) such Holder or underwriter within the meaning of the Act or the U.S.
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein, in light of the circumstances under which they
were made, or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, the
1934 Act or any state securities law; and the Company will reimburse each such
Holder, partner, officer, agent, employee or director, underwriter or
Controlling Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 8.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation occurring in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by, or on behalf of, any such Holder, underwriter or Controlling
Person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its officers,
directors, agents or employees, each Person, if any, who Controls the Company
within the meaning of the Act, any underwriter and any other Holder selling
securities in such registration statement or any of its partners, officers,
directors, agents or employees or any Person who Controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such officer, director, agent, employee, Controlling Person, or
underwriter, or other such Holder or its partner, officer, director, agent,
employee or Controlling Person may become subject, under the Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by, or on behalf of, such Holder expressly for use in connection with
such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such partner, officer,
director, agent, employee, Controlling Person, underwriter or other such
Holder, partner, officer, director, agent, employee or
-15-
<PAGE> 16
Controlling Person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 8.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
(c) Promptly after receipt by an indemnified
party under this Section 8.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
8.9, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the opinion of
counsel for the indemnifying party, representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable period of
time of the commencement of any such action shall relieve such indemnifying
party of any liability to the indemnified party under this Section 8.9 to the
extent prejudicial to its ability to defend such action, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 8.9.
8.10 "MARKET STAND-OFF" AGREEMENT
The Holders hereby agree that they shall not, to the extent reasonably
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Registrable Securities for
180 days following the effective date of a registration statement of the
Company filed under the Act; provided, however, that all officers and directors
of the Company and all other Persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements. In order to enforce
the foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of the Holders (and the shares or
securities of every other Person subject to the foregoing restriction) until
the end of such period.
8.11 RIGHT TO TERMINATE REGISTRATION
The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 8 prior to the effectiveness of
such registration whether or not any Holder has elected to include securities
in such registration.
-16-
<PAGE> 17
9. NONCOMPETITION
Each Shareholder agrees that, until one year following termination of
this Agreement with respect to such Shareholder, neither such Shareholder nor
any Affiliate Controlled by such Shareholder shall in any way, by action or
inaction, directly or indirectly, for itself or for the benefit of any other
Person, own, manage, operate, join, Control or participate in the ownership,
management, operation or Control of any Person that competes with the Company
or any Affiliate thereof, or agrees to do any of the foregoing, in the business
of Specialized Mobile Radio or paging in Brazil, other than wireless radio
engineering, design or program management services and the manufacture and sale
of related software and hardware products; provided that neither any
Shareholder nor any Affiliate Controlled by such Shareholder may maintain an
equity interest in any Person in which it owns an equity interest as of the
date hereof, which equity interest entitles any Shareholder or any Affiliate
Controlled by such Shareholder to control of policymaking or day-to-day
operations of such Person or in connection with which any Shareholder or any
Affiliate Controlled by such Shareholder has a representative on the board of
directors, if such Person elects to engage in the business of cellular
communications or Personal Communications Systems in Brazil.
10. MISCELLANEOUS
10.1 SPECIFIC ENFORCEMENT
Each Shareholder expressly agrees that the Company and the other
Shareholders will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Shareholder, each of the Company and the
other Shareholders shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without showing any actual damage, and/or a
decree for specific performance, in accordance with the provisions of this
Agreement.
10.2 LEGEND
Each certificate evidencing any Shares shall bear a legend
substantially as follows:
The securities represented by this certificate are subject to
the terms and conditions of the Shareholders Agreement among
the Company and its Shareholders dated as of January 29, 1997,
as at any time amended, and may not be sold, transferred or
encumbered except in accordance with the terms and provisions
of such Agreement, a copy of which is on file at the principal
executive office of the Company and will be furnished to the
holder of this certificate upon request and without charge.
10.3 DELIVERY OF INFORMATION
-17-
<PAGE> 18
The Company shall deliver to each Shareholder and upon written request
to any other Shareholder of the Common Stock:
(a) as soon as practicable, but in any event
within 120 days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company as of the end of
such year and a statement of cash flows for such year, such financial
statements to be prepared in accordance with U.S. generally accepted accounting
principles and audited by independent certified public accountants of
nationally recognized standing selected by the Company, and
(b) as soon as practicable, but in any event
within 60 days after the end of each of the first three fiscal quarters, an
income statement for such fiscal quarter, a balance sheet of the Company as of
the end of such quarter and a statement of cash flows for such quarter, such
financial statements to be prepared in accordance with U.S. generally accepted
accounting principles and any other operating information provided to the
Board.
10.4 INSPECTION
The Company shall permit each Shareholder owning more than 5% of the
Common Stock at such Shareholder's expense to visit and inspect the Company's
properties, to examine its books of accounts and records and to make copies and
extracts therefrom, and to discuss the Company's business prospects, affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by such Shareholder and for purposes reasonably related to the
business of the Company.
10.5 COMPLIANCE WITH LAWS
Each Shareholder represents, warrants and covenants that it and any
director, officer, agent, employee or other Person acting on its behalf or on
behalf of any Affiliate of it (a) have not been and will not be involved in the
offering, paying or giving of anything of value, either directly or indirectly,
to a government official, political party or candidate for political office to
influence such Person or entity in the discharge of his, her or its official
duties, (b) have not engaged and will not engage in any such unlawful conduct
during the time of carrying out their duties and (c) have maintained and will
maintain accounting books and records in reasonable detail and institute
internal controls to ensure that such books and records accurately reflect
corporate transactions and the disposition of assets.
10.6 NOTICES
Notices given hereunder shall be deemed to have been duly given on the
date of personal delivery, on the date of facsimile transmittal (provided the
addressor confirms receipt of any facsimile by the addressee), on the day after
delivery by overnight courier or three days after mailing if mailed by
certified or registered mail, return receipt requested, postage prepaid, to the
party being notified at his, her or its address specified on the
-18-
<PAGE> 19
applicable signature page or such other address of which the addressee may
subsequently notify the other parties in writing.
10.7 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof, and neither this Agreement nor any
provision hereof may be waived, modified, amended or terminated except by a
written agreement signed by the Company and holders of 97% of the Common Stock;
provided, however, that any new shareholder of the Company may execute this
Agreement without the consent of the Founders. No waiver of any breach or
default hereunder shall be considered valid unless in writing, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature.
10.8 GOVERNING LAW; SUCCESSORS AND ASSIGNS
This Agreement shall for all purposes be governed by and construed in
accordance with the laws of the state of Virginia and shall be binding upon the
heirs, personal representatives, executors, administrators, successors and
permitted assigns of the parties. Each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
state of Virginia or any Virginia state court if any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the state of Virginia or a Virginia state court.
10.9 HEADINGS
The headings of the sections of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
10.10 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument.
10.11 SEVERABILITY
If any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.
-19-
<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
THE COMPANY:
McCAW INTERNATIONAL (BRAZIL), LTD.
By /s/ KEITH D. GRINSTEIN
--------------------------------------
Its President
----------------------------------
Address:
Facsimile number:
THE SHAREHOLDERS:
McCAW INTERNATIONAL, LTD.
By /s/ KEITH D. GRINSTEIN
--------------------------------------
Its President
----------------------------------
Address: 1191 Second Avenue, Suite 1600
Seattle, WA 98101
Facsimile number: (206) 749-8384
THE FOUNDERS:
TELCOM VENTURES, LLC
By /s/ RAJENDRA SINGH
--------------------------------------
Its President
----------------------------------
Address: Arlington Courthouse Plaza II
2300 Clarendon Boulevard, Suite 800
Arlington, VA 22201
Facsimile number: (703) 243-4960
-20-
<PAGE> 21
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below approves this Agreement and constitutes and appoints Rajendra
Singh and Neera Singh, duly authorized officers of Telcom Ventures, LLC, and
each of them, his, her or its true and lawful attorney-in-fact, agent and
proxy, with full power of substitution and resubstitution, for him, her or it
and in his, her or its name, place and stead, in any and all capacities, to
take all actions hereunder, including the signing of any and all amendments
hereto, and to vote all common stock of the Company held by the undersigned, at
a meeting of shareholders or by written consent, with the powers that the
undersigned would possess if personally present at a meeting of shareholders,
granting unto said attorneys-in-fact, agents and proxies and each of them full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he, she or it might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, agents and proxies or any of them,
or their or his, her or its substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
SOUTH BEACH VENTURES INC.
By /s/ SERGIO CARDOSO
--------------------------------------
Its Director
----------------------------------
Address:
Facsimile number:
/s/ RAJENDRA SINGH
------------------------------------------
RAJENDRA SINGH
Address:
Facsimile number:
/s/ NEERA SINGH
------------------------------------------
NEERA SINGH
Address:
Facsimile number:
THE HERSH RAJ SINGH EDUCATION
TRUST
By /s/ NEERA SINGH
--------------------------------------
Its Trustee
----------------------------------
Address:
Facsimile number:
<PAGE> 22
THE SAMIR RAJ SINGH EDUCATION
TRUST
By /s/ NEERA SINGH
--------------------------------------
Its Trustee
----------------------------------
Address:
Facsimile number:
/s/ RAMESH MEHTA by [sig]
------------------------------------------
RAMESH MEHTA
Address:
Facsimile number:
/s/ VANDANA TANDON by [sig]
------------------------------------------
VANDANA TANDON
Address:
Facsimile number:
<PAGE> 23
Annex to
Shareholders
Agreement
RESTATED ARTICLES OF INCORPORATION
OF
MCCAW INTERNATIONAL (BRAZIL), LTD.
FIRST. The name of the corporation is MCCAW INTERNATIONAL (BRAZIL),
LTD. (the "Corporation").
SECOND. The Corporation shall have two classes of common stock, Class
A Common Stock, par value one cent ($0.01) per share ("Class A Common Stock"),
and Class B Common Stock, par value one cent ($0.01) per share ("Class B Common
Stock"). The total number of shares which the Corporation shall have the
authority to issue is 45,000,000 shares of Class A Common Stock and 5,000,000
shares of Class B Common Stock.
A. Voting Rights. On all matters other than the
election of Directors, and except as required by law, the shares of
Class A Common Stock and Class B Common Stock shall vote together as a
single class, with each share of Class A Common Stock having 90/81
votes per share and each share of Class B Common Stock having 10/19
votes per share.
B. Board of Directors. The holders of the
outstanding shares of Class A Common Stock ("Class A Holders") shall
have the right, as a class, to elect nine Directors. The holders of
the outstanding shares of Class B Common Stock ("Class B Holders")
shall have the right, as a class, to elect one Director.
C. Redemption Right of Class B Common Stock.
Class B Holders shall be entitled to cause the Corporation to redeem
all outstanding shares of Class B Common Stock on the terms set forth
below.
(i) At any time after October 31, 2001
and prior to November 1, 2003, or at any time after a Change of
Control shall have occurred, the holder or holders of a majority of
the then outstanding shares of Class B Common Stock may deliver a
request for redemption to the Corporation, and upon receipt of such a
request the Corporation shall be required to redeem all outstanding
shares of Class B Common Stock on the terms specified below.
(ii) The Corporation shall schedule a
closing (the "Closing") for such redemption on a date selected by the
Corporation within six months of delivery of such notice, subject only
to receipt of all required governmental or regulatory approvals, and
shall promptly notify all Class B Holders of the time, date and place
of the Closing.
(iii) At the Closing, the Corporation
shall redeem all outstanding shares of Class B Common Stock for a
price (the "Redemption Price") equal to the Appraised Fair Market
Value of the Corporation as of the exercise date, multiplied by a
fraction, the numerator of which is the number of shares of Class B
Common
<PAGE> 24
Stock outstanding and the denominator of which is the number of shares
of Common Stock (calculated on a fully-diluted basis at the stated
exercise price of all options) then outstanding. The Redemption Price
shall, at the Corporation's election, be payable in cash,
publicly-traded common stock of any entity owning not less than 50% of
the outstanding shares of Class A Common Stock ("Public Company Common
Stock") or any combination thereof. Any Public Company Common Stock
transferred as part of the Redemption Price shall be shares that are
registered with the Securities and Exchange Commission or that are
required to be so registered within 30 days after the Closing. The
Public Company Common Stock shall be valued at the average of the
closing prices on the principal market on which such stock is traded
during the 20 trading days prior to the Closing. If paid in cash, the
Redemption Price shall be payable in four equal quarterly
installments, beginning on the date of closing of the repurchase right
and on each three-month anniversary thereof, with interest accruing on
the unpaid principal at the Prime Rate plus 1%.
For purposes of these Articles of Incorporation, a
"Change of Control" means the acquisition by any person, entity or
group after January 31, 1997 of the power, directly or indirectly, to
elect a majority of the Corporation's Directors.
For purposes of these Articles of Incorporation,
"Fair Market Value" means the price that an unrelated third party
would pay if it were to acquire all outstanding equity interests of
the Corporation (including all outstanding vested options) in an
arm's-length transaction, assuming that such interests were being sold
in a manner designed to attract all possible participants and without
taking into consideration a control premium or minority discount. The
"Appraised Fair Market Value" shall be determined in accordance with
the following procedures: the Corporation shall select an investment
banking firm of recognized national standing which has not provided
services to the Corporation or any affiliate of the Corporation (an
"Independent Appraiser") within the preceding 24 months (the "First
Appraiser") which shall appraise the Fair Market Value and deliver its
appraisal to the Corporation and the Class B Holders within 60 days of
its engagement. If the majority of the Class B Holders shall disagree
with the Fair Market Value determined by such Independent Appraiser
then the majority of Class B Holders shall have the right to appoint
an additional Independent appraiser (the "Second Appraiser"). If the
Class B Holders do not engage a Second Appraiser within 30 days of the
First Appraiser's delivery of its appraisal, the First Appraiser's
appraisal shall be the Appraised Fair Market Value. If the Class B
Holders engage a Second Appraiser, the Second Appraiser will appraise
the Fair Market Value, and deliver its appraisal to the Corporation
and the Class B Holders within 60 days of its engagement. If such
difference between the two appraisals is 20% or less of the lower
appraised value, the Appraised Fair Market Value will be the average
of the two appraisals. If such difference between the two appraisals
is more than 20% of the lower appraised value, the two appraisers
shall engage a third Independent Appraiser (the "Third Appraiser"),
which shall appraise the Fair Market Value within 60 days of its
engagement. The Appraised Fair Market Value
<PAGE> 25
shall be the average of the two appraised values which are closest in
absolute dollars. All appraisals of Fair Market Value shall be as of
the date of receipt by the Corporation of the request for redemption
right. The expenses of the First Appraiser shall be borne by the
Corporation; the expenses of the Second Appraiser, if any, shall be
borne by the Class B Holders, and the expenses of a Third Appraiser,
if any, shall be borne equally by the Corporation on the one hand and
the Class B Holders on the other hand.
For purposes of these Articles of Incorporation,
"Prime Rate" means the rate announced by The Chase Manhattan Bank,
N.A., or any successor thereto, in New York City from time to time as
its "base" or "prime" rate.
D. No Preemptive Rights. The Class A Holders
and the Class B Holders shall have no preemptive right to purchase or
subscribe for any shares of capital stock of the Corporation of any
class whether now or hereafter authorized or any securities
convertible into or exchangeable for shares of Common Stock.
E. Other Rights. Except as otherwise stated
herein, the rights of shares of Class A Common Stock and Class B
Common Stock shall be equal in all respects.
THIRD: The purpose of the corporation is to engage in any lawful
activity for which corporations may be organized under the Virginia Stock
Corporation Act.
FOURTH: No officer or Director shall be personally liable to the
Corporation or its shareholders in any proceedings brought by a shareholder in
the right of the Corporation or brought by or on behalf of shareholders of the
Corporation, for monetary damages assessed against an officer or Director
arising out of a single transaction, occurrence or course of conduct.
Notwithstanding the foregoing sentence, an officer or Director shall be liable
to the extent provided by applicable law for (i) willful misconduct, (ii) a
knowing violation of criminal law, (iii) a knowing violation of federal or
state securities law, including, without limitation, insider trading or
manipulation of the market for any security, or (iv) any transaction from which
the officer or Director derived an improper personal benefit. Neither the
subsequent amendment or repeal of this Article FOURTH shall apply to or have
any effect on the liability of any officer or Director of the Corporation for
or with respect to any acts or omissions of such officer or Director occurring
prior to the date of any amendment or repeal of this Article FOURTH.
FIFTH: The following actions shall require the affirmative vote of
two-thirds of the number of Directors in office, including the Director elected
by the Class B holders:
(a) The amendment of the Articles of
Incorporation or Bylaws of the Corporation other than in the ordinary course of
business.
(b) The creation of any equity security senior to
the existing Common Stock or the amendment of any provision or rights of the
existing classes of capital stock.
<PAGE> 26
(c) Permitting or causing the Corporation or any
of its material subsidiaries to issue voting securities that have voting rights
different from those to which then-issued voting securities are entitled.
(d) The dissolution, liquidation or spin-off of
the Corporation or any material WVB Affiliates (as defined in the Agreement and
Plan of Merger relating to the Corporation dated as of October 28, 1996 (the
"Merger Agreement")) or any portion thereof, or merging or effecting any
acquisition involving the Corporation or any material WVB Affiliates, or
selling all or substantially all of the Corporation's (or any material WVB
Affiliate's) assets, except (i) as provided in the Merger Agreement or (ii) in
transactions involving only the Corporation and Affiliates of the Corporation.
(e) Permitting or causing the Corporation or any
of its subsidiaries (or any other Person to the extent the Corporation
directly or indirectly controls such Person) to enter into any material
contract, agreement or undertaking with McCaw International, Ltd. or any of its
Affiliates (other than the Corporation or its subsidiaries) other than on an
arm's-length, fair-market-value basis.
(f) Permitting or causing the Corporation or any
of its Affiliates to issue, allot or dispose of securities or rights to receive
securities of the Company, including options (but excluding employee options),
other than for cash at fair market value.
For purposes of these Articles of Incorporation, "Affiliate" of any
Person (the "Subject") shall mean any other Person that, directly or
indirectly, Controls or is Controlled by or is under common Control with the
Subject.
For purposes of these Articles of Incorporation, "Control" (including,
with correlative meanings, the terms "Controlled by" and "under common Control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
For purposes of these Articles of Incorporation, "Person" shall mean
any individual, partnership, joint-stock company, limited liability company,
firm, corporation, association, unincorporated organization, joint venture,
trust or other entity.
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 1 TO
MCCAW INTERNATIONAL (BRAZIL), LTD.
SHAREHOLDERS AGREEMENT
This Amendment No. 1 (this "Amendment") dated as of April 27, 1997 to
the Shareholders Agreement (the "Agreement") dated as of January 29, 1997 by
and among McCaw International (Brazil), Ltd., a Virginia corporation, formerly
named Wireless Ventures of Brazil, Inc. (the "Company"), and the Persons listed
as Shareholders on Exhibit I attached thereto, as amended from time to time,
including McCaw International, Ltd., a Washington corporation ("MIL"), Telcom
Ventures, LLC, a Delaware limited liability company ("Telcom"), and the other
shareholders listed on the signature pages to this Amendment (collectively, the
"Shareholders" and, individually, a "Shareholder").
RECITALS
The Shareholders desire to amend Section 1.4.1 of the Agreement in
accordance with Section 10.7 of the Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are acknowledged and to further the interests of the
Company and its present and future Shareholders, the parties agree as follows:
ARTICLE I. AMENDMENTS
1.1 DEFINED TERMS
Except where otherwise provided, terms defined in the Agreement are
used herein as therein defined.
1.2 AMENDMENTS
The last sentence of Section 1.4.1 of the Agreement is hereby amended
and restated to read in its entirety as follows:
Each Tag-Along Offeree's "Tag-Along Shares" shall mean that number of
Shares as is equal to the number of Proposed Shares (as defined in
Section 1.4.2) multiplied by a fraction, the numerator of which is the
number of Shares owned by such Tag-Along Offeree and its Affiliates
and the denominator of which is the number of Shares then owned by all
Shareholders.
<PAGE> 2
ARTICLE II. GENERAL
2.1 HEADINGS
The headings preceding the text of sections of this Amendment are for
convenience only and shall not be deemed parts thereof.
2.2 BINDING EFFECT; APPLICABLE LAW
This Amendment shall become effective when it shall have been executed
by the Company and Shareholders representing at least 97% of the Common Stock.
This Amendment shall be governed by and construed and enforced in accordance
with the laws of the Commonwealth of Virginia, as applied to contracts executed
and to be fully performed in such state.
2.3 COUNTERPARTS
This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature page follows]
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been executed as of the date
and year first above written.
THE COMPANY:
McCAW INTERNATIONAL (BRAZIL), LTD.
By /s/ KEITH D. GRINSTEIN
---------------------------------------
Its President
-------------------------------
Address:
Facsimile number:
THE SHAREHOLDERS:
McCAW INTERNATIONAL, LTD.
By /s/ KEITH D. GRINSTEIN
---------------------------------------
Its President
-------------------------------
Address: 1191 Second Avenue, Suite 1600
Seattle, WA 98101
Facsimile number: (206) 749-8384
TELCOM VENTURES, LLC
By /s/ RAHUL PRAKASH
---------------------------------------
Its
-------------------------------
Address: 211 North Union Street
Suite 300
Arlington, VA 22201
Facsimile number: (703) 706-3801
SOUTH BEACH VENTURES INC.
By /s/ RAHUL PRAKASH
---------------------------------------
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
SIGNATURE PAGE TO AMENDMENT NO. 1 TO
MCCAW INTERNATIONAL (BRAZIL), LTD.
SHAREHOLDERS AGREEMENT
<PAGE> 4
/s/ RAHUL PRAKASH
-------------------------------------------
RAJENDRA SINGH
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
/s/ RAHUL PRAKASH
-------------------------------------------
NEERA SINGH
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
THE HERSH RAJ SINGH EDUCATION
TRUST
By /s/ RAHUL PRAKASH
---------------------------------------
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
THE SAMIR RAJ SINGH EDUCATION
TRUST
By
---------------------------------------
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
-------------------------------------------
RAMESH MEHTA
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
-------------------------------------------
VANDANA TANDON
Name: RAHUL PRAKASH
----------------------------------
By Telcom Ventures, LLC as
attorney-in-fact
SIGNATURE PAGE TO AMENDMENT NO. 1 TO
MCCAW INTERNATIONAL (BRAZIL), LTD.
SHAREHOLDERS AGREEMENT
<PAGE> 1
EXHIBIT 10.4
MCCAW INTERNATIONAL (ARGENTINA), LTD.
MEMBERS AGREEMENT
THIS MEMBERS AGREEMENT (this "Agreement") is made as of May 6, 1997,
by and among McCaw International (Argentina), Ltd., a Cayman Islands company
(the "Company"), and the persons listed as Members on Exhibit I attached
hereto, as amended from time to time, including McCaw International (Holdings),
Ltd., a Cayman Islands company ("MIL"), and Wireless Ventures of Argentina,
L.L.C., a Delaware limited liability company ("WVA") (collectively, the
"Members" and, individually, a "Member").
RECITALS
A. The Members are the owners of all the Company's issued share
capital (the "Ordinary Shares"). The Members desire to enter into certain
agreements relating to transfers of Ordinary Shares and the corporate
governance of the Company.
B. It is the intent of the parties that MIL and its Affiliates
(as defined in the Company's Articles of Association) shall have operational
control of the Company in accordance with and subject to the provisions of this
Agreement and the Memorandum and Articles of Association of the Company, so
long as MIL and its Affiliates own at least 30% of the then issued Ordinary
Shares, including any other securities issued with respect to the Ordinary
Shares by way of a dividend or split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization and any
other securities convertible into or exercisable for any such securities
(collectively, the "Shares").
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are acknowledged and to further the interests of the
Company and its present and future Members, the parties agree as follows:
1. DEFINED TERMS
All capitalized terms used but not defined herein have the meanings
set forth in the Company's Memorandum and Articles of Association, as they may
be amended from time to time (the "Articles").
For purposes of this Agreement, "Affiliate" of any Person (the
"Subject") shall mean any other Person that, directly or indirectly, Controls
or is Controlled by or is under common Control with the Subject.
For purposes of this Agreement, "Control" (including, with correlative
meanings, the terms "Controlled by" and "under common Control with"), as used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
<PAGE> 2
For purposes of this Agreement, "Person" shall mean any individual,
partnership, joint-stock company, limited liability company, firm, corporation,
association, unincorporated organization, joint venture, trust or other entity.
2. VOTING
2.1 VOTING TRUST
If MIL and its Affiliates shall at any time have beneficial
ownership of less than 50% but more than 25% of the Shares, WVA and its
Affiliates shall and shall cause the WVA Directors to, subject to their
fiduciary duties to the Company and all Members, execute any legal document
required by appropriate law, and thereafter cast all votes in favor of or
against matters to be approved by the Members or the Board, as the case may be,
in the same manner as MIL and its Affiliates and the directors nominated
thereby, respectively; provided, however, that this Section 2 shall be subject
to and shall not diminish any rights which WVA and its Affiliates otherwise
have under this Agreement and the Articles; provided, further, that the
provisions of this Section 2 shall not apply to any vote of the directors of
the Company with respect to the redemption by the Company of all the Shares
held by MIL and its Affiliates pursuant to Article 11(c) of the Articles.
2.2 DRAG-ALONG RIGHTS
MIL and WVA agree to take all commercially reasonable actions required
to assist in effecting a Sale pursuant to Article 9(d)(i) of the Company's
Articles of Association including but not limited to voting in favor of such
Sale and causing the Directors appointed by MIL and WVA, subject to their
fiduciary duties to the Company and to all of the Members, to vote in favor of
such Sale.
3. BUSINESS PLANS; CAPITAL CALLS; DEBT
The Company shall adopt the Initial Plan substantially in the form
presented by MIL to WVA on October 25, 1996 and a new Business Plan upon the
expiration of each prior Business Plan, and shall operate the business in
compliance with each Business Plan. Each Member shall be deemed to have
consented to any capital calls reasonably required by each Business Plan, so
long as (i) the earnings before interest, tax, depreciation and amortization of
the Company ("EDITDA") for the period beginning at the commencement of such
Business Plan and ending as of the last day of such fiscal year are greater
than 70% of the EDITDA projected for such period in such Business Plan and (ii)
the consolidated capital expenditures of the Company for the period beginning
at the commencement of such Business Plan at any time are less than the amount
of capital expenditures projected in such Business Plan for the three years of
such Business Plan. Each Member may contribute its pro rata share of any such
capital call by the Company in exchange for the issuance by the Company to such
Member of fully paid and non-assessable shares in the share capital of the
Company, with the price of such shares being equal to their fair value as
determined by the Board. To the extent any Member fails to contribute its pro
rata share of any such capital call, such failure shall not create any debt,
liability or engagement to or with the Company by such Member; however, such
Member's percentage ownership in the Company shall be diluted as a result of
the issuance of new share capital of the Company pursuant to the
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<PAGE> 3
third sentence of this Section 3, based on the valuation of the Invested
Capital contributed or deemed to have been contributed by the parties pursuant
to Section 2.1 of the Joint Venture Agreement dated as of October 28, 1996, as
amended as of April 25, 1997, among McCaw International, Ltd., McCaw
International (Delaware), Ltd., McCaw International (Holdings), Ltd., MIL,
Telcom Ventures, LLC and WVA and, without double-counting, the full face value
of subsequent capital contributions made by the Members. In furtherance of the
foregoing, the Members agree to exercise their voting rights to increase the
authorized share capital of the Company from time to time as may be necessary
to ensure that the Company has an adequate number of authorized but unissued
shares available for issuance pursuant to the Business Plan. The Company shall
seek to maintain a debt-to-equity ratio of at least 1.5 to 1, subject to the
availability of debt financing on commercially reasonable terms.
4. TERMINATION
This Agreement shall lapse and be of no further force or effect upon
the first of the following to occur:
(a) Merger, Sale or Liquidation. The approval by
the Board and the Members, as required by law and by the Articles, of the
merger of the Company with any other company as a result of which Shares
representing all or substantially all of the voting power of the Company are
held by Persons that had less than a majority interest, directly or indirectly,
in such securities prior to such merger, or of the sale of all or substantially
all of the assets of the Company, or of its liquidation.
(b) Agreement of Members. The written agreement
of holders of not less than 90% of the Shares to the termination of this
Agreement.
(c) Public Offering. The closing of an offering
by the Company of its equity securities to the public pursuant to a
registration statement filed pursuant to the U.S. Securities Act of 1933, as
amended, or the equivalent legislation of another country.
(d) Lapse of Time. The final expiration or
termination of all paging and trunking licenses owned by the direct and
indirect subsidiaries of the Company.
(e) Share Ownership. At such time as (i) MIL and
its Affiliates collectively own less than 10% of the Shares and (ii) WVA and
its Affiliates collectively own less than 10% of the Shares.
5. NONCOMPETITION
Each Member agrees that, until one year following termination of this
Agreement with respect to such Member, neither such Member nor any Affiliate
Controlled by such Member shall in any way, by action or inaction, directly or
indirectly, for itself or for the benefit of any other Person, own, manage,
operate, join, Control or participate in the ownership, management, operation
or Control of any Person that competes with the Company or any Affiliate
thereof, or agrees to do any of the foregoing, in the business of paging or
specialized mobile radio in Argentina, other than wireless radio engineering,
design or program management services and the
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<PAGE> 4
manufacture and sale of related software and hardware products. In addition,
neither any Member nor any Affiliate Controlled by such Member may maintain an
equity interest in any Person (other than the Company) in which it owns an
equity interest as of the date hereof, which equity interest entitles any
Member or any Affiliate Controlled by such Member to control of policymaking or
day-to-day operations of such Person or in connection with which any Member or
any Affiliate Controlled by such Member has a representative on the board of
directors, if such Person elects to engage in the business of cellular
communications or personal communications systems in Argentina.
6. OPTION
The Company hereby grants each of MIL and WVA an option to require the
Company to repurchase at a price of US$1.00 per share the number of shares of
its share capital equal to the amount of any Shortfall (as defined in the Joint
Venture Agreement dated as of October 28, 1996 and amended as of April 25, 1997
by and among McCaw International, Ltd., McCaw International (Delaware), Ltd.,
MIL, McCaw International (Argentina) LLC, Telcom Ventures, LLC and WVA, (the
"Joint Venture Agreement")) owed to the JVC by MIL or WVA, as the case may be,
divided by $1.00, in exchange for the termination of the obligation of MIL or
WVA, as the case may be, to pay the Shortfall. Such option may be exercised by
MIL or WVA, as the case may be, giving the Company at least ten days' prior
written notice specifying the date (which shall be a Business Day not more than
20 days after the date of such notice) on which the repurchase shall be made
and the number of shares to be repurchased. Such options shall terminate upon
the satisfaction of the obligations of MIL and WVA under Section 2.3 of the
Joint Venture Agreement.
7. MISCELLANEOUS
7.1 SPECIFIC ENFORCEMENT
Each Member expressly agrees that the Company and the
other Members will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Member, each of the Company and the other
Members shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions of this Agreement.
7.2 DELIVERY OF INFORMATION
The Company shall deliver to each Member owning more
than 5% of the Shares and upon written request to any other Member:
(a) as soon as practicable, but in any event
within 120 days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company as of the end of
such year and a statement of cash flows for such year, such financial
statements to be prepared in accordance with U.S. generally accepted accounting
principles and
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<PAGE> 5
audited by independent certified public accountants of nationally recognized
standing selected by the Company, and
(b) as soon as practicable, but in any event
within 60 days after the end of each of the first three fiscal quarters, an
income statement for such fiscal quarter, a balance sheet of the Company as of
the end of such quarter and a statement of cash flows for such quarter, such
financial statements to be prepared in accordance with U.S. generally accepted
accounting principles, and any other operating information provided to the
Board.
7.3 INSPECTION
The Company shall permit each Member at such Member's
expense to visit and inspect the Company's properties, to examine its books of
accounts and records and to make copies and extracts therefrom, and to discuss
the Company's business prospects, affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by such Member and
for purposes reasonably related to the business of the Company.
7.4 COMPLIANCE WITH LAWS
Each Member represents, warrants and covenants that
it and any director, officer, agent, employee or other Person acting on its
behalf or on behalf of any Affiliate of it (a) have not been and will not be
involved in the offering, paying or giving of anything of value, either
directly or indirectly, to a government official, political party or candidate
for political office to influence such Person in the discharge of his, her or
its official duties, (b) have not engaged and will not engage in any such
unlawful conduct during the time of carrying out their duties, and (c) have
maintained and will maintain accounting books and records in reasonable detail
and institute internal controls to ensure that such books and records
accurately reflect corporate transactions and the disposition of assets.
7.5 NOTICES
Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery, on the date of facsimile
transmittal (provided the addressor confirms receipt of any facsimile by the
addressee), on the day after delivery by overnight courier or three days after
mailing if mailed by certified or registered mail, return receipt requested,
postage prepaid, to the party being notified at its address specified on the
applicable signature page or such other address of which the addressee may
subsequently notify the other parties in writing.
7.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement, together with the Articles, constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
neither this Agreement nor any provision hereof may be waived, modified,
amended or terminated except by a written agreement signed by the parties
hereto; provided, however, that any new member of the Company may execute this
Agreement without the consent of WVA if such new member's investment was
approved in accordance with the Articles and applicable law; provided, further,
that this Agreement may be amended by Members holding at least 90% of the
Shares then owned by all Members so long as
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<PAGE> 6
such amendment imposes no additional liabilities or obligations on any Member
without its consent. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature. In the
event of any conflict between the provisions of this Agreement and the
Articles, the provisions of the Articles shall govern.
7.7 GOVERNING LAW; SUCCESSORS AND ASSIGNS
This Agreement shall for all purposes be governed by
and construed in accordance with the laws of the Cayman Islands and shall be
binding on the heirs, personal representatives, executors, administrators,
successors and permitted assigns of the parties. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any federal court
located in the state of Virginia or any Virginia state court if any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the state of Virginia or a Virginia state court.
7.8 HEADINGS
The headings of the sections of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
7.9 COUNTERPARTS
This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which together shall
constitute one and the same instrument.
7.10 SEVERABILITY
If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
[Signature page follows]
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<PAGE> 7
IN WITNESS WHEREOF, THIS AGREEMENT HAS BEEN EXECUTED AS OF THE DATE
AND YEAR FIRST ABOVE WRITTEN.
THE COMPANY:
MCCAW INTERNATIONAL (ARGENTINA), LTD.
By /s/ KEITH D. GRINSTEIN
---------------------------------
Name: Keith D. Grinstein
Title: President
Address: c/o McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Facsimile Number: : (206) 749-8384
THE SHAREHOLDERS:
MCCAW INTERNATIONAL (HOLDINGS), LTD.
By /s/ KEITH D. GRINSTEIN
---------------------------------
Its President
-----------------------------
Address: c/o McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Facsimile Number: (206) 749-8384
WIRELESS VENTURES OF ARGENTINA, L.L.C.
By /s/ RAHUL PRAKASH
---------------------------------
Its
-----------------------------
Address: c/o Telcom Ventures, LLC
211 North Union Street
Suite 300
Alexandria, VA 22314
Facsimile Number: (703) 706-3801
SIGNATURE PAGE TO MEMBERS AGREEMENT
<PAGE> 1
EXHIBIT 10.5
JOINT VENTURE AGREEMENT
BY AND AMONG
MCCAW INTERNATIONAL, LTD.,
MCCAW INTERNATIONAL (DELAWARE), LTD.,
MCCAW INTERNATIONAL (HOLDINGS), LTD.,
MCCAW INTERNATIONAL (ARGENTINA) LLC,
TELCOM VENTURES, LLC
AND
WIRELESS VENTURES OF ARGENTINA, L.L.C.
dated as of October 28, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS.......................................................................................2
1.1 Defined Terms...................................................................................2
1.2 Other Definitional Matters......................................................................5
ARTICLE II THE JOINT VENTURE................................................................................5
2.1 Establishment of the Joint Venture..............................................................5
2.1.1 Corporate Structure...........................................................................5
2.1.2 Transfers.....................................................................................6
2.1.3 Memorandum of Association.....................................................................7
2.1.4 Articles of Association.......................................................................7
2.2 Closing.........................................................................................7
2.3 Post-Closing Adjustments........................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE MIL PARTIES..............................................10
3.1 Organization, Good Standing, Etc...............................................................10
3.2 Authorization, Due Execution and Binding Effect................................................10
3.3 No Approvals or Notices Required; No Conflicts With Instruments................................10
3.4 Licenses, Permissions, Permits, Authorizations, Etc............................................11
3.5 Capitalization of the MIL Parties..............................................................11
3.6 Ownership of Capital Stock of MIL Parties......................................................12
3.7 Financial Statements...........................................................................12
3.8 Absence of Certain Changes.....................................................................12
3.9 Liabilities....................................................................................14
3.10 Intercompany Transactions.....................................................................14
3.11 Taxes.........................................................................................14
3.12 Assets........................................................................................14
3.13 Channels......................................................................................15
3.14 Compliance With Environmental Laws............................................................15
3.15 Contracts.....................................................................................16
3.16 Claims and Legal Proceedings..................................................................16
3.17 Labor Matters.................................................................................16
3.18 Patents, Trademarks, Etc......................................................................17
3.19 Customers.....................................................................................18
3.20 Applicable Laws...............................................................................19
3.21 Insurance.....................................................................................19
3.22 Brokerage.....................................................................................19
3.23 Full Disclosure...............................................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TELCOM AND WVA................................................20
4.1 Organization, Good Standing, Etc...............................................................20
4.2 Authorization, Due Execution and Binding Effect................................................20
</TABLE>
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<TABLE>
<S> <C>
4.3 No Approvals or Notices Required; No Conflicts With Instruments................................20
4.4 Licenses, Permissions, Permits, Authorizations, Etc............................................21
4.5 Capitalization of WVA and WVA Subsidiaries.....................................................21
4.6 Ownership of WVA Common Stock and Capital Stock of WVA Subsidiaries............................22
4.7 Financial Statements...........................................................................22
4.8 Absence of Certain Changes.....................................................................22
4.9 Liabilities....................................................................................23
4.10 Intercompany Transactions.....................................................................24
4.11 Taxes.........................................................................................24
4.12 Assets........................................................................................24
4.13 Channels......................................................................................25
4.14 Compliance With Environmental Laws............................................................26
4.15 Contracts.....................................................................................26
4.16 Claims and Legal Proceedings..................................................................26
4.17 Labor Matters.................................................................................26
4.18 Patents, Trademarks, Etc......................................................................28
4.19 Customers.....................................................................................28
4.20 Applicable Laws...............................................................................29
4.21 Insurance.....................................................................................29
4.22 Brokerage.....................................................................................29
4.23 Full Disclosure...............................................................................29
ARTICLE V FURTHER AGREEMENTS...............................................................................30
5.1 Schedules......................................................................................30
5.2 Access.........................................................................................30
5.3 Advice of Claims...............................................................................31
5.4 Conduct of Business............................................................................31
5.4.1 Conduct of WVA Business......................................................................31
5.4.2 Conduct of McCaw S.A. Business...............................................................31
5.5 Compliance With Laws...........................................................................32
5.6 Insurance and Loss of or Damage to Assets......................................................32
5.7 Confidentiality................................................................................32
5.8 Other Cooperation..............................................................................33
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF THE MIL PARTIES..........................................33
6.1 Accuracy of Representations and Warranties.....................................................33
6.2 Performance of Agreement.......................................................................33
6.3 Approvals and Consents.........................................................................33
6.4 Shareholders Agreement.........................................................................34
6.5 Opinions of Telcom's Counsel...................................................................34
6.6 Confidentiality, Noncompetition and Proprietary Information Agreements.........................34
6.7 Legal Proceedings..............................................................................34
6.8 Title..........................................................................................34
6.9 Telcom and WVA Officers' Certificates..........................................................34
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
6.10 Documentation Relating to WVA Licenses........................................................34
6.11 Intercompany Transactions.....................................................................35
6.12 Employees and Directors.......................................................................35
6.13 Brazil........................................................................................35
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE WVA SECURITYHOLDERS AND WVA.........................35
7.1 Accuracy of Representations and Warranties.....................................................35
7.2 Performance of Agreement.......................................................................35
7.3 Approvals and Consents.........................................................................36
7.4 Shareholders Agreement.........................................................................36
7.5 MIL Officers' Certificate......................................................................36
7.6 Legal Proceedings..............................................................................36
7.7 Opinions of MIL Counsel........................................................................36
7.8 Title..........................................................................................36
7.9 Documentation Relating to McCaw S.A. Licenses..................................................36
7.10 Intercompany Transactions.....................................................................36
7.11 Brazil........................................................................................37
7.12 Confidentiality, Noncompetition and Proprietary Information Agreements........................37
ARTICLE VIII INDEMNIFICATION AND SURVIVAL OF WARRANTIES....................................................37
8.1 Indemnification by WVA Securityholders.........................................................37
8.2 Indemnification by MIL.........................................................................38
8.3 Procedure......................................................................................38
8.4 Form of Payment................................................................................39
8.5 Survival.......................................................................................39
ARTICLE IX TERMINATION.....................................................................................39
9.1 Termination....................................................................................39
9.2 Effect of Termination..........................................................................41
ARTICLE X GENERAL..........................................................................................41
10.1 Expenses......................................................................................41
10.2 Amendment.....................................................................................42
10.3 Headings......................................................................................42
10.4 Applicable Law................................................................................42
10.5 Parties in Interest...........................................................................42
10.6 Waivers.......................................................................................43
10.7 Notices.......................................................................................43
10.8 Counterparts..................................................................................44
10.9 Entire Understanding..........................................................................44
</TABLE>
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<PAGE> 5
SCHEDULES
3.1 Organization of the MIL Parties
3.3 Approvals and Conflicts
3.4 Additional Payments and Fees
3.5 Capitalization of the MIL Parties
3.8 Certain Changes or Events
3.9 Undisclosed Material Liabilities
3.10 Intercompany Balances
3.11 Taxes
3.12(a) Leases
3.12(b) Real Property
3.12(d) Liens
3.13 Channels
3.15 Contracts
3.16 Claims and Legal Proceedings
3.17 Labor Matters
3.18 Patents, Trademarks, Etc.
3.19 Customers
4.1 Organization of WVA and WVA Subsidiaries
4.3 Approvals and Conflicts
4.4 Additional Payments and Fees
4.5 Capitalization of WVA and WVA Subsidiaries
4.8 Certain Changes or Events
4.9 Undisclosed Material Liabilities
4.10 Intercompany Balances
4.11 Taxes
4.12(a) Leases
4.12(b) Real Property
4.12(d) Liens
4.13 Channels
4.15 Contracts
4.16 Claims and Legal Proceedings
4.17 Labor Matters
4.18 Patents, Trademarks, Etc.
4.19 Customers
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<PAGE> 6
EXHIBITS
6.4 Form of Shareholders Agreement
6.5 Form of Opinion of Telcom's Counsel
6.6 Form of Confidentiality, Noncompetition and Proprietary
Information Agreement
6.9 Form of Telcom and WVA Officers' Certificates
7.5 Form of MIL Officers' Certificates
7.7 Form of Opinions of MIL's Counsel
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<PAGE> 7
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (this "Agreement") is made and entered
into as of this 28th day of October, 1996 by and among McCaw International,
Ltd., a Washington corporation ("MIL"), McCaw International (Delaware), Ltd., a
Delaware corporation and wholly owned subsidiary of MIL ("MIL Delaware"), McCaw
International (Holdings), Ltd., a Cayman Islands company and wholly owned
subsidiary of MIL Delaware ("MIL Holdings"), McCaw International (Argentina)
LLC, a Cayman Islands limited liability company owned 99% by MIL Holdings and
1% by MIL Delaware ("MIL Argentina") (MIL, MIL Delaware, MIL Holdings and MIL
Argentina being referred to individually as a "MIL Party" and collectively as
the "MIL Parties"), Telcom Ventures, LLC, a Delaware limited liability company
("Telcom"), and Wireless Ventures of Argentina, L.L.C., a Delaware limited
liability company and 70%-owned subsidiary of Telcom ("WVA").
RECITALS
A. MIL Argentina and MIL Holdings together own 100% of the capital
stock of McCaw Argentina S.A., an Argentina corporation ("McCaw S.A."). McCaw
S.A. has a license to be engaged in the business of Specialized Mobile Radio
("SMR") in certain cities in Argentina and is authorized to use 100 SMR
channels in each of Buenos Aires, Rosario, Cordoba and Mendoza (collectively,
the "McCaw S.A. Channels") in the conduct of its business (the "McCaw S.A.
Business").
B. Telcom and the other members of WVA (together with Telcom, the "WVA
Securityholders") collectively own 100% of the membership interests of WVA. WVA
owns 100% of the capital stock of (i) AirLink S.A., an Argentina corporation
("AirLink"), which owns certain paging and SMR assets in Argentina and has
employed certain individuals having expertise in the administration and billing
of telecommunication services, (ii) Communication Services S.A., an Argentina
corporation ("CSSA"), which has a paging license valid throughout Argentina and
an SMR license and is authorized to use 20 SMR channels in each of Mar del
Plata and Tucuman, Argentina (the "CSSA Channels") and owns certain paging
assets, and (iii) Buenos Aires Trunking S.A., an Argentina corporation
("BATSA"), which is authorized to use 80 SMR channels in Buenos Aires and 100
SMR channels in each of Cordoba, Rosario and Mendoza (the "BATSA Channels").
AirLink, CSSA and BATSA are referred to collectively herein as the "WVA
Subsidiaries." MIL, MIL Holdings, Telcom and WVA are simultaneously herewith
entering into a purchase agreement relating to a proposed joint venture of MIL,
Telcom and their respective Affiliates in the business of paging in Argentina
(the "Paging Agreement").
C. Telcom and MIL believe it is advisable and in their
respective best interest to effect a merger of Telcom's interests in the WVA
Subsidiaries and MIL's interest in McCaw S.A. (the "Merger") on the terms and
conditions provided in this Agreement.
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<PAGE> 8
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, the following terms shall have the
following meanings:
"Accountants" has the meaning set forth in Section 2.3(e).
"Affiliate" of a Person means any Person which directly or
indirectly Controls, is under common Control with, or is Controlled by, such
Person.
"Agreement" has the meaning set forth in the introductory
paragraph.
"AirLink" has the meaning set forth in the Recitals.
"Authorization" has the meaning set forth in Section 2.1.2.
"BATSA" has the meaning set forth in the Recitals.
"BATSA Channels" has the meaning set forth in the Recitals.
"Claims" has the meaning set forth in Section 3.16.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.1.2.
"CNT" means the Comision Nacional de Telecomunicaciones of
Argentina.
"Confidentiality Agreement" has the meaning set forth in
Section 5.7.
"Contract" has the meaning set forth in Section 9.1.
"Contracting Party" has the meaning set forth in Section 9.1.
"Control" (including, with correlative meanings, the terms
"Controlled by" and "under common Control with"), when used with respect to any
Person or Affiliate, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
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<PAGE> 9
"CSSA" has the meaning set forth in the Recitals.
"CSSA Channels" has the meaning set forth in the Recitals.
"Damages" has the meaning set forth in Section 8.1.
"Government Approval" of any action to be taken by either
party means such approval of or confirmation or consent to such action,
together with such licenses, permits or other permissions reasonably required
for such action, all as the statutes, decrees, regulations and rulings of
governmental authority (collectively, "Legal Authority") within Argentina or
the United States, as the case may be, may require to be obtained in connection
with said action from such governmental authority or from political
subdivisions thereof. Whenever any form of "Government Approval" is used
herein, it shall be interpreted and construed to include the requirement that
such approval be in form and substance acceptable to the parties.
"Indemnifying Party" has the meaning set forth in Section
8.3.
"Indemnitee" has the meaning set forth in Section 8.3.
"Invested Capital" has the meaning set forth in Section
2.1.2(b).
"knowledge of MIL" means, with respect to the existence or
absence of a fact, matter, event or circumstance, the actual knowledge of any
director or officer of any of the MIL Parties.
"knowledge of Telcom" means, with respect to the existence or
absence of a fact, matter, event or circumstance, the actual knowledge of any
director or officer of any of the WVA Securityholders, WVA or the WVA
Subsidiaries.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, deed of trust, charge, security interest, encumbrance
or other adverse claim of any kind with respect to such property or asset.
"McCaw S.A." has the meaning set forth in the Recitals.
"McCaw S.A. Assets" means the McCaw S.A. Channels, McCaw S.A.
Licenses and all other assets owned by McCaw S.A.
"McCaw S.A. Business" has the meaning set forth in the
Recitals.
"McCaw S.A. Channels" has the meaning set forth in the
Recitals.
"McCaw S.A. Licenses" has the meaning set forth in Section
3.4.
"McCaw S.A. Personal Property" has the meaning set forth in
Section 3.12(a).
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"Merger" has the meaning set forth in the Recitals.
"MIL" has the meaning set forth in the introductory
paragraph.
"MIL Argentina" has the meaning set forth in the introductory
paragraph.
"MIL Argentina Financial Statements" has the meaning set
forth in Section 3.7.
"MIL Argentina Securities" has the meaning set forth in
Section 3.5.
"MIL Closing Balance Sheet" has the meaning set forth in
Section 2.3(a).
"MIL Delaware" has the meaning set forth in the introductory
paragraph.
"MIL Holdings" has the meaning set forth in the introductory
paragraph.
"MIL Invested Capital" has the meaning set forth in Section
2.1.2(b).
"MIL Party" has the meaning set forth in the introductory
paragraph.
"MIL Working Capital Excess" has the meaning set forth in
Section 2.3(b).
"Permitted Liens" has the meaning set forth in Section
3.12(d).
"Person" means any individual, corporation, partnership,
firm, joint venture, association, limited liability company, trust,
unincorporated organization or other entity.
"Shareholders Agreement" has the meaning set forth in Section
6.4.
"Shortfall" has the meaning set forth in Section 2.3(h).
"SMR" has the meaning set forth in the Recitals.
"Tax Authorities" has the meaning set forth in Section 3.11.
"Taxes" has the meaning set forth in Section 3.11.
"Telcom" has the meaning set forth in the introductory
paragraph.
"Telcom Invested Capital" has the meaning set forth in
Section 2.1.2(b).
"True-Up" has the meaning set forth in Section 2.1.2(b).
"WVA" has the meaning set forth in the introductory
paragraph.
"WVA Assets" has the meaning set forth in Section 4.3.
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"WVA Business" means the businesses of AirLink, CSSA and
BATSA.
"WVA Channels" means the CSSA Channels, the BATSA Channels,
and any paging channels which WVA, BATSA, CSSA or AirLink are authorized to
use.
"WVA Closing Balance Sheet" has the meaning set forth in
Section 2.3(a).
"WVA Financial Statements" has the meaning set forth in
Section 4.7.
"WVA Licenses" has the meaning set forth in Section 4.4.
"WVA Personal Property" has the meaning set forth in Section
4.12(a).
"WVA Securityholders" has the meaning set forth in the
Recitals.
"WVA Subsidiaries" has the meaning set forth in the Recitals.
"WVA Working Capital Excess" has the meaning set forth in
Section 2.3(b).
1.2 OTHER DEFINITIONAL MATTERS
(a) The words "this Agreement," "hereby," "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular provisions of this Agreement, and the words "Article,"
"Section," "Schedule," "Exhibit" and like references are to this Agreement
unless otherwise specified.
(b) Singular and plural forms, as the case may be, of terms
defined herein have correlative meanings.
(c) Any defined term which relates to a document includes within its
definition any amendments, modifications, renewals, restatements, extensions,
supplements or substitutions which may heretofore have been or which may
hereafter be executed in accordance with the terms thereof and as may be
permitted by this Agreement.
ARTICLE II
THE JOINT VENTURE
2.1 ESTABLISHMENT OF THE JOINT VENTURE
2.1.1 CORPORATE STRUCTURE
The parties acknowledge that the apparent preferred structure for the
transactions contemplated hereby is (in descending order of preference): (i) a
business combination of the parties' respective Argentina operating companies
pursuant to a joint venture, merger or partnership; (ii) the creation of a
non-U.S. entity to which the parties would contribute their
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respective Argentina holdings; (iii) the acquisition by each party of a 50%
interest in the other party's operating companies in Argentina; or (iv) a
business combination of the parties' respective Argentina holding companies
outside of the United States and outside of Argentina. In the event that a party
(the "First Party") to this Agreement shall determine prior to Closing that the
structure of the transaction contemplated hereby can be accomplished by means of
an alternate structure that is more tax-efficient for such party, or that does
not require governmental or other approvals, and if such alternate structure is
advantageous or neutral to the other party, then the First Party shall propose
to restructure the alternate structure. If the parties are unable to agree on an
alternate structure after negotiating in good faith, then the transaction shall
be consummated using the structure described in clause (i) of this Section
2.1.1.
2.1.2 TRANSFERS
On a date (the "Closing Date") as soon as reasonably practicable after
the date of effectiveness of an Argentine regulation or authorization issued by
the competent Argentine authority allowing one Person or group of Persons under
common Control to own at least 200 SMR channels in a single Argentine city (the
"Authorization"), the following shall occur simultaneously, upon the terms and
subject to the conditions of this Agreement:
(a) MIL and Telcom shall implement the structure
mutually agreed upon pursuant to Section 2.1.1.
(b) MIL Holdings or Telcom, as the case may be, shall
contribute cash (the "True-Up") to MIL Argentina, such that after such cash
capital contribution, (i) the sum of (x) $10,000,000 (the value of the McCaw
S.A. Assets as of the date hereof), (y) all cash equity investments by MIL and
its Affiliates in McCaw S.A. and the Paging Joint Venture, less any cash
dividends or other cash or noncash distributions to MIL Holdings and its
Affiliates by McCaw S.A. and the Paging Joint Venture, in each case between the
date hereof and the Closing Date, and (z) the True-Up paid by MIL Holdings, if
any (the "MIL Invested Capital"), is equal to (ii) the sum of (x) $10,000,000
(the value of the WVA Assets as of the date hereof), (y) all cash equity
investments by the WVA Securityholders and their Affiliates in the WVA
Subsidiaries and the Paging Joint Venture, less any cash dividends or other
cash or noncash distributions to the WVA Securityholders and their Affiliates
by WVA and the Paging Joint Venture, in each case between the date hereof and
the Closing Date, and (z) the True-Up paid by Telcom, if any (the "Telcom
Invested Capital"; together with the MIL Invested Capital, the "Invested
Capital"); provided that "Invested Capital" shall exclude contributed services
or intangible rights in excess of the cash would have been paid to the party
contributing such services or rights in an arm's-length transaction with a
non-affiliate.
(c) The note payable by MIL Argentina to WVA in
connection with the joint venture in the Paging Agreement shall have been
cancelled.
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On the Closing Date, neither MIL Argentina nor WVA shall have any
consolidated long-term liabilities; the consolidated current liabilities of MIL
Argentina shall not exceed the consolidated current assets of MIL Argentina by
more than $1,000,000, and the consolidated current liabilities of WVA shall not
exceed the consolidated current assets of WVA by more than $1,000,000.
2.1.3 MEMORANDUM OF ASSOCIATION
On the Closing Date, the Shareholders of MIL Argentina shall cause the
Memorandum of Association of MIL Argentina to be amended as necessary to effect
the transactions contemplated by this Agreement and the Shareholders Agreement,
and shall be the Memorandum of Association of MIL Argentina after the Closing
Date until duly amended.
2.1.4 ARTICLES OF ASSOCIATION
On the Closing Date, the members of MIL Argentina shall cause the
Articles of Association of MIL Argentina to be amended as necessary to effect
the transactions contemplated by this Agreement and the Shareholders Agreement,
and shall be the Articles of Association of MIL Argentina after the Closing
Date until duly amended.
2.2 CLOSING
The closing (the "Closing") of the transactions contemplated hereby
shall take place at the offices of MIL, 1191 Second Avenue, Suite 1600,
Seattle, Washington, on the Closing Date, a date within five business days
following satisfaction or waiver of the conditions set forth in Article VII or
at such other place or time as MIL and Telcom may agree.
2.3 POST-CLOSING ADJUSTMENTS
(a) As promptly as practicable, but no later than 30 days after the
Closing Date, MIL shall provide to Telcom (i) a statement certifying its
calculation of MIL Invested Capital and (ii) a consolidated balance sheet of
MIL Argentina and McCaw S.A. as of the Closing Date (the "MIL Closing Balance
Sheet), both of which shall have been reviewed by MIL Argentina's regular
independent accountants, together with detailed support for such calculation,
and Telcom shall provide to MIL (i) a statement certifying its calculation of
Telcom Invested Capital and (ii) a consolidated balance sheet of WVA and the
WVA Subsidiaries as of the Closing Date (the "WVA Closing Balance Sheet"), both
of which shall have been reviewed by KPMG Peat Marwick, together with detailed
support for such calculation. All calculations shall be derived from the
consolidated financial statements of MIL Argentina and WVA, which shall have
been prepared in accordance with U.S. generally accepted accounting principles
and with accounting policies and practices consistent with those used in
preparation of the MIL Argentina Financial Statements and the WVA Financial
Statements, respectively. MIL Argentina's regular independent accountants shall
verify that MIL had no liabilities and KPMG Peat Marwick shall verify that WVA
had no liabilities, in each case as of the Closing Date.
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(b) To the extent that the MIL Closing Balance Sheet indicates that
the consolidated current liabilities of MIL Argentina and McCaw S.A. exceeded
the consolidated current assets of MIL Argentina and McCaw S.A. as of the
Closing Date by more than US$1,000,000 (any such excess being referred to
herein as the "MIL Working Capital Excess"), MIL shall pay MIL Argentina the
MIL Working Capital Excess in cash within 15 days of MIL's delivery of the MIL
Closing Balance Sheet. To the extent that the WVA Closing Balance Sheet
indicates that the consolidated current liabilities of WVA and the WVA
Subsidiaries exceeded the consolidated current assets of WVA and the WVA
Subsidiaries as of the Closing Date by more than US$1,000,000 (any such excess
being referred to herein as the "WVA Working Capital Excess"), Telcom shall pay
MIL Argentina the WVA Working Capital Excess in cash within 15 days of Telcom's
delivery of the WVA Closing Balance Sheet.
(c) If MIL disagrees with Telcom's calculation of the WVA Working
Capital Excess, MIL may, within 15 days of the delivery of the WVA Closing
Balance Sheet, deliver a notice to Telcom disagreeing with such calculation and
setting forth its calculation. Any such notice of disagreement shall specify
those items or amounts as to which MIL disagrees, and MIL shall be deemed to
have agreed with all other items and amounts contained in the WVA Closing
Balance Sheet and the calculation of the WVA Working Capital Excess delivered
pursuant to Section 2.3(b).
(d) If Telcom disagrees with MIL's calculation of the MIL Working
Capital Excess, Telcom may, within 15 days of the delivery of the MIL Closing
Balance Sheet, deliver a notice to MIL disagreeing with such calculation and
setting forth its calculation. Any such notice of disagreement shall specify
those items or amounts as to which Telcom disagrees, and Telcom shall be deemed
to have agreed with all other items and amounts contained in the MIL Closing
Balance Sheet and the calculation of the MIL Working Capital Excess delivered
pursuant to Section 2.3(b).
(e) If a notice of disagreement shall be delivered by MIL pursuant to
Section 2.3(c), MIL and Telcom shall, during the 15 days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of the WVA
Working Capital Excess, which amount shall not be less than the amount thereof
shown in Telcom's calculations delivered pursuant to Section 2.3(b) or more
than the amount thereof shown in MIL's calculation delivered pursuant to
Section 2.3(c). If, during such period, MIL and Telcom are unable to reach such
agreement, they shall promptly thereafter cause an independent accounting firm
of nationally recognized standing reasonably satisfactory to MIL and Telcom
(which shall not have any material relationship with MIL or Telcom or any of
their Affiliates (the "Accountants")), promptly to review this Agreement and
the disputed items or amounts for the purpose of calculating the WVA Working
Capital Excess. Telcom, WVA and the WVA Subsidiaries shall provide all detailed
documentation necessary to support the computation underlying Telcom's
calculation of the WVA Working Capital Excess. In making such calculation, the
Accountants shall consider only those items or amounts in the WVA Closing
Balance Sheet or
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Telcom's calculation of the WVA Working Capital Excess as to which MIL has
disagreed. The Accountants shall deliver to MIL and Telcom, as promptly as
practicable, a report setting forth such calculation. Such report shall be final
and binding upon MIL and Telcom. The cost of such review and report shall be
borne (i) by MIL if the difference between the WVA Working Capital Excess and
MIL's calculation of the WVA Working Capital Excess delivered pursuant to
Section 2.3(c) is greater than the difference between the WVA Working Capital
Excess and Telcom's calculation of the WVA Working Capital Excess delivered
pursuant to Section 2.3(b), (ii) by Telcom if the first such difference is less
than the second such difference, and (iii) otherwise equally by MIL and Telcom.
(f) If a notice of disagreement shall be delivered by Telcom pursuant
to Section 2.3(d), MIL and Telcom shall, during the 15 days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of the MIL
Working Capital Excess, which amount shall not be less than the amount thereof
shown in MIL's calculations delivered pursuant to Section 2.3(b) or more than
the amount thereof shown in Telcom's calculation delivered pursuant to Section
2.3(d). If, during such period, MIL and Telcom are unable to reach such
agreement, they shall promptly thereafter cause the Accountants promptly to
review this Agreement and the disputed items or amounts for the purpose of
calculating the MIL Working Capital Excess. MIL, MIL Argentina and McCaw S.A.
shall provide all detailed documentation necessary to support the computation
underlying MIL's calculation of the MIL Working Capital Excess. In making such
calculation, the Accountants shall consider only those items or amounts in the
MIL Closing Balance Sheet or MIL's calculation of the MIL Working Capital
Excess as to which Telcom has disagreed. The Accountants shall deliver to MIL
and Telcom, as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon MIL and Telcom. The
cost of such review and report shall be borne (i) by Telcom if the difference
between the MIL Working Capital Excess and Telcom's calculation of the MIL
Working Capital Excess delivered pursuant to Section 2.3(d) is greater than the
difference between the MIL Working Capital Excess and Telcom's calculation of
the MIL Working Capital Excess delivered pursuant to Section 2.3(d), (ii) by
MIL if the first such difference is less than the second such difference, and
(iii) otherwise equally by MIL and Telcom.
(g) MIL Argentina shall engage, at its expense, the Accountants
to review the information provided by MIL and Telcom pursuant to Section 2.3(a)
with respect to the calculations of Invested Capital. Within 30 days after the
Closing Date, the Accountants shall provide to MIL Argentina a verification of
the calculations of the Invested Capital.
(h) To the extent the Accountants' calculations differ from those used
in Section 2.1.2(b) such that one party would have been required to make an
additional cash contribution pursuant to Section 2.1.2(b) (the "Shortfall"),
the party owing the Shortfall shall make such additional cash contribution to
MIL Argentina within 10 days of the Accountants' delivery of their
calculations. If the party owing the Shortfall shall fail to make such
additional cash contribution, MIL Argentina shall issue additional equity
interests to the other party
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hereto such that each party's interest is proportionate to its capital
contributions pursuant to Section 2.1.2(b), taking into account the Accountants'
calculation of the Invested Capital, MIL Working Capital Excess and WVA Working
Capital Excess.
(i) MIL and Telcom agree that they will, and agree to cause their
respective independent accountants, McCaw S.A., WVA and the WVA Subsidiaries
to, cooperate and assist in the Accountants' review of the Invested Capital,
the MIL Closing Balance Sheet, the WVA Closing Balance Sheet, the MIL Working
Capital Excess and the WVA Working Capital Excess, including, without
limitation, the making available to the extent necessary of books, records,
work papers and personnel.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MIL PARTIES
To induce Telcom and WVA to enter into and perform this Agreement, the
MIL Parties represent and warrant to Telcom and WVA (which representations and
warranties shall survive the Closing as provided in Section 8.5) all as follows
in this Article III. The contents of any particular Schedule to this Article
III shall not be deemed included in any other Schedule unless specifically
cross-referenced to that Schedule.
3.1 ORGANIZATION, GOOD STANDING, ETC.
The MIL Parties are duly organized and validly existing under the
laws of their respective jurisdictions of incorporation, as set forth on
Schedule 3.1. MIL Argentina and McCaw S.A. have all corporate power and
authority required to own, operate and lease their respective properties and
assets and to carry on their respective businesses (including the SMR business,
when applicable) as now conducted except where such failure to have corporate
power and authority would not have a material adverse effect on MIL Argentina
and McCaw S.A, taken as a whole. Except as listed on Schedule 3.1, neither MIL
Argentina nor McCaw S.A. is required to be qualified to do business as a
foreign corporation in any state or country. Except as listed on Schedule 3.1,
neither MIL Argentina nor McCaw S.A. has any subsidiaries or any direct or
indirect investments in any other Person.
3.2 AUTHORIZATION, DUE EXECUTION AND BINDING EFFECT
All corporate or member action of the MIL Parties required to
authorize and perform this Agreement and the transactions contemplated hereby
has been taken. This Agreement has been duly executed and delivered by each of
the MIL Parties and is a legal, valid and binding obligation of each of the MIL
Parties.
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
Other than the Authorization and except as listed on Schedule 3.3 and
except where a violation would not have a material adverse effect on MIL
Argentina and McCaw S.A., taken
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as a whole, the execution, delivery and performance of this Agreement by the MIL
Parties and the consummation of the transactions contemplated hereby, including,
but not limited to, the transfer of Persons having all SMR rights (which
include, but are not limited to, telephony and interconnect rights, if any, as
of the date hereof and the Closing Date) in Argentina of McCaw S.A. do not and
will not (a) violate the corporate charter or other organizational documents of
any of the MIL Parties, (b) constitute a violation (with or without the giving
of notice or lapse of time, or both) of any law, rule, regulation, judgment,
injunction, order or decree applicable to any of the MIL Parties, (c) require
any consent, approval or authorization of any Person, governmental authority or
other organization or entity, (d) result in a default under, an acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, or in any other way materially affect the rights of
any of the MIL Parties under, any material agreement, lease, note or other
restriction, encumbrance, obligation or liability to which any of the MIL
Parties is a party or by which any of the MIL Parties is bound or to which the
McCaw S.A. Assets (whether real or personal, tangible or intangible) are
subject, or (e) result in the creation or imposition of any Lien on any of the
McCaw S.A. Assets. MIL has provided, or will provide to Telcom prior to the
Closing Date, true and complete copies of all corporate and organizational
documents of MIL Argentina and McCaw S.A., and there has been no change to any
such documents since the date of such certification except as described on
Schedule 3.3. MIL has provided or will provide to Telcom prior to the Closing
Date copies of the minute books and other customary corporate documents of MIL
Argentina and McCaw S.A., and such minute books and other customary corporate
documents are true, complete and correct.
3.4 LICENSES, PERMISSIONS, PERMITS, AUTHORIZATIONS, ETC.
McCaw S.A. has received all currently required Government Approvals
of all agencies, whether local or national, including, but not limited to, the
right to be engaged in the SMR business and authorizations to use the McCaw
S.A. Channels in the cities identified on Schedule 3.13 (the "McCaw S.A.
Licenses"), and all McCaw S.A. Licenses are valid and in force, except where
the failure to have any valid McCaw S.A. License in force would not,
individually or in the aggregate, have a material adverse effect on McCaw S.A.
Except as listed on Schedule 3.4 and except for tax obligations generally
applicable to SMR licenses in Argentina, no additional payments or fees of any
kind are required to be paid to governmental authorities to conduct the McCaw
S.A. Business. Except as listed on Schedule 3.4, all tax obligations generally
applicable to SMR licenses in Argentina and other payments or fees required to
be paid to governmental authorities to conduct the McCaw S.A. Business have
been paid.
3.5 CAPITALIZATION OF THE MIL PARTIES
As of the date hereof, the capitalization of the MIL Parties is as set
forth on Schedule 3.5. All outstanding shares in the share capital of MIL
Argentina (the "MIL Argentina Securities") have been duly
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authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of capital stock of McCaw S.A. have been duly authorized and
validly issued and are fully paid and nonassessable. Except as described in this
Section 3.5 and on Schedule 3.5, there are no outstanding (a) shares of capital
stock or voting securities or shares of MIL Argentina or McCaw S.A., (b)
securities of MIL Argentina or McCaw S.A. convertible into or exchangeable for
shares of capital stock or voting securities or shares of MIL Argentina or McCaw
S.A., or (c) options or other rights to acquire from MIL Argentina or McCaw
S.A., or other obligations of MIL Argentina or McCaw S.A. to issue, any shares,
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities or shares of MIL Argentina or McCaw S.A.
There are no outstanding obligations of any of the MIL Parties or any Affiliate
of MIL to acquire any securities of the type described in the preceding
sentence.
3.6 OWNERSHIP OF CAPITAL STOCK OF MIL PARTIES
The record and legal ownership of the securities of the MIL Parties is
as set forth on Schedule 3.5, and, except as set forth in Schedule 3.5, such
ownership is free and clear of any Lien and any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
any such capital stock).
3.7 FINANCIAL STATEMENTS
MIL has previously delivered to Telcom consolidated financial
statements of MIL Argentina and McCaw S.A. as of and for the year ended
December 31, 1995 and as of and for the nine months ended September 30, 1996
(the "MIL Argentina Financial Statements"). The MIL Argentina Financial
Statements present fairly the consolidated financial position and results of
operations of MIL Argentina and McCaw S.A. as of the dates and for the periods
indicated therein in accordance with U.S. generally accepted accounting
principles consistently applied, except that the MIL Argentina Financial
Statements for the nine months ended September 30, 1996 may be subject to
normal year-end adjustments of a type consistent with prior years and do not
contain footnotes.
3.8 ABSENCE OF CERTAIN CHANGES
Since September 30, 1996, except as contemplated by this Agreement,
and except as listed on Schedule 3.8, the McCaw S.A. Business has been
conducted in the ordinary course consistent with past practices and there has
not been:
(a) to the knowledge of MIL, any event, occurrence,
development or state of circumstances or facts relating to MIL Argentina or
McCaw S.A. that has had or could reasonably be expected to have a material
adverse effect on the McCaw S.A. Business (other than published laws or
regulations or changes in the Argentine economy generally);
(b) any amendment of any material term of any
outstanding security of MIL Argentina or McCaw S.A.;
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(c) any incurrence, assumption or guarantee by MIL
Argentina or McCaw S.A. of any indebtedness for borrowed money;
(d) any creation or assumption by MIL Argentina or McCaw
S.A. of any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(e) any dividend or other distribution to MIL or any
other Person;
(f) any making of any loan, advance or capital
contributions to or investment in any Person by MIL Argentina or McCaw S.A.;
(g) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the McCaw S.A. Business or the
McCaw S.A. Assets that, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on the McCaw S.A.
Business;
(h) any transaction or commitment made, or any contract
or agreement entered into, by MIL Argentina or McCaw S.A. relating to the
assets of MIL Argentina or McCaw S.A., respectively, or the McCaw S.A. Business
(including the acquisition or disposition of any assets) or any relinquishment
by McCaw S.A. of any contract or other right material to McCaw S.A., other than
transactions and commitments in the ordinary course of business consistent with
past practices or contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by MIL Argentina or McCaw S.A.;
(j) any (i) employment, deferred compensation,
severance, retirement or other similar agreement entered into by MIL Argentina
or McCaw S.A. with any director, officer or employee thereof or consultant
thereto (or any amendment to any such existing agreement), (ii) grant of any
severance or termination pay to any director, officer or employee of or
consultant to MIL Argentina or McCaw S.A., or (iii) change in compensation or
other benefits payable to any director, officer or employee of or consultant to
MIL Argentina or McCaw S.A. pursuant to any severance or retirement plans or
policies thereof; or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of MIL Argentina or McCaw S.A., which
employees were not subject to a collective bargaining agreement as of the date
of the most recent MIL Argentina Financial Statements, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to any
employees of MIL Argentina or McCaw S.A.
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3.9 LIABILITIES
There are no long-term liabilities of MIL Argentina or McCaw S.A. of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are required by U.S. generally accepted
accounting principles to be reflected in a balance sheet or in the notes
thereto, and there is no existing condition, situation or set of circumstances
that is reasonably likely to result in such a liability, other than liabilities
provided for in the MIL Argentina Financial Statements or disclosed on Schedule
3.9. Except as disclosed on Schedule 3.9, none of the liabilities of MIL
Argentina or McCaw S.A. are past due, and all such liabilities were incurred in
the ordinary course of business on terms consistent with past practices.
3.10 INTERCOMPANY TRANSACTIONS
Except as disclosed on Schedule 3.10, there are no intercompany
balances, and there are no and have not been any intercompany transactions,
between MIL and its Affiliates on the one hand and MIL Argentina and McCaw S.A.
on the other hand.
3.11 TAXES
MIL Argentina and McCaw S.A. have accurately prepared in all material
respects and duly filed with the appropriate federal, state, local and foreign
taxing authorities (the "Tax Authorities") all tax returns, information returns
and reports that are, individually and in the aggregate, material and are
required to be filed on or before the date hereof with respect to MIL Argentina
or McCaw S.A., as the case may be, and, except as shown on Schedule 3.11, have
paid in full or made adequate provision for the payment of all material Taxes
(as defined below). Neither MIL Argentina nor McCaw S.A. is delinquent in the
payment of any material Taxes. Neither MIL Argentina nor McCaw S.A. has
requested or received from any Tax Authority any extensions or tolling
arrangements with respect to any Taxes or is subject to any open or threatened
audits by any Tax Authority. As used herein, the term "Taxes" means all
federal, state, local and foreign taxes, including, without limitation, income,
profits, franchise, employment, transfer, withholding, property, excise, sales
and use taxes (including interest and other penalties thereon and additions
thereto).
3.12 ASSETS
(a) MIL has delivered or will deliver to Telcom prior to the Closing
Date true and complete copies of all material leases, subleases, rental
agreements, contracts of sale or licenses of any portion of the personal
property (the "McCaw S.A. Personal Property") owned, leased or rented by McCaw
S.A. as of the date hereof. McCaw S.A. has legal ownership or other legal
rights to use all property used in the conduct of the McCaw S.A. Business as
presently conducted. Schedule 3.12(a) lists all leased McCaw S.A. Personal
Property with a monthly lease payment (or annual lease payment prorated on a
monthly basis) in excess of US$1,000.
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(b) Except as listed on Schedule 3.12(b), McCaw S.A. does not
own, lease or use any material real property.
(c) No McCaw S.A. Assets are subject to any lease, license,
contract of sale or other agreement that is reasonably likely to have a
material adverse effect upon the business, properties or financial condition of
McCaw S.A.
(d) Except as listed on Schedule 3.12(d), the McCaw S.A. Assets
are free and clear of all Liens (other than landlord's Liens, Liens for taxes
not yet due or for overdue taxes disclosed on Schedule 3.9, workmen's Liens,
vendor's Liens or other immaterial Liens arising in the ordinary course of
business ("Permitted Liens")) and, other than leased McCaw S.A. Assets, McCaw
S.A. has good and marketable title thereto. McCaw S.A. has valid leasehold
interests in all leased assets.
(e) No Person has any right of first refusal or option to acquire
any interest in the McCaw S.A. Assets or any part thereof, and none of the MIL
Parties has sold or contracted to sell the McCaw S.A. Assets or any part thereof
or interest therein other than as set forth herein.
(f) MIL Argentina has no assets or liabilities other than the
stock of McCaw S.A. and has not conducted and currently does not conduct any
business other than the ownership of such stock.
(g) No assets used by McCaw S.A. are owned by any Affiliate of
McCaw S.A.
3.13 CHANNELS
Schedule 3.13 sets forth the location of each McCaw S.A. Channel, the
number of such McCaw S.A. Channel, the dates of grant and expiration of the
McCaw S.A. License with respect to such McCaw S.A. Channel, any extension or
renewal periods or requests therefor, and the status thereof, any required
build-out and loading dates, and the status thereof, with respect to such McCaw
S.A. Channel, the number of subscribers using McCaw S.A. Channels in such
location as of September 30, 1996 and the nature of any frequency interference
with the use of such McCaw S.A. Channel. Except as listed on Schedule 3.13, MIL
and its Affiliates, including McCaw S.A., have no other interests, direct or
indirect, contingent or pending, in frequencies capable of being used for SMR
service in Argentina. To the knowledge of MIL, all lawful action that is
necessary to preserve the rights to any McCaw S.A. Licenses or McCaw S.A.
Channels has been taken or is being taken, and, to the knowledge of MIL, McCaw
S.A. is in full compliance with all requirements of all McCaw S.A. Licenses
with respect to McCaw S.A. Channels.
3.14 COMPLIANCE WITH ENVIRONMENTAL LAWS
None of the MIL Parties or any other Person (including, without
limitation, any previous owner, lessee, sublessor or sublessee) has generated,
handled, used, manufactured,
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processed, distributed in commerce, transported, treated, stored, disposed of or
released (or arranged for the transportation, treatment or disposal of)
petroleum, petroleum products, hazardous waste, hazardous chemicals or
substances, toxic chemicals, chemical substances or mixtures, pollutants or
contaminants on, at or from any assets or properties owned, leased, subleased or
used by McCaw S.A. in the operation of the McCaw S.A. Business or on, at or from
any real property to which any of the above-listed substances from the
above-listed assets or properties were transported, or at or on which they were
treated or disposed, in a manner that could subject the MIL Parties, the WVA
Securityholders, WVA, the WVA Subsidiaries or their respective Affiliates to any
material liability under any provision of law in existence on or prior to the
Closing Date.
3.15 CONTRACTS
MIL has provided or will provide to Telcom prior to the Closing Date a
copy of, and has made available or will make available for review by Telcom
prior to the Closing Date originals of, all material contracts, oral or
written, to which McCaw S.A. is a party, including, without limitation,
security agreements, conditional sale agreements and instruments relating to
the borrowing of money. Schedule 3.15 lists all such contracts. All such
contracts are valid and in full force and effect, McCaw S.A. has performed all
material obligations imposed upon it thereunder, and there are, under any of
such contracts, no defaults or events of default by McCaw S.A. or, to the
knowledge of MIL, any other party thereto, that would materially adversely
affect the business, assets or financial condition of McCaw S.A. or could
reasonably be expected to materially adversely affect the business prospects of
McCaw S.A. Neither MIL nor McCaw S.A. has received notice, nor is MIL or McCaw
S.A. otherwise aware, that any party to any such contract intends to cancel,
terminate or refuse to renew such contract or to exercise or decline to
exercise any option or right thereunder.
3.16 CLAIMS AND LEGAL PROCEEDINGS
Except as described on Schedule 3.16, there are no claims, actions,
suits, arbitrations, proceedings or investigations ("Claims") pending or, to
the knowledge of MIL, threatened against any of the MIL Parties with respect to
the McCaw S.A. Business, before or by any governmental or nongovernmental
department, commission, board, bureau, agency, instrumentality or any other
Person, which Claims are reasonably likely to be resolved adversely to any of
the MIL Parties, and which if so resolved would have a material adverse effect
on McCaw S.A. There are no outstanding or unsatisfied judgments, orders,
decrees or stipulations to which any of the MIL Parties is a party that involve
the transactions contemplated hereby or that could individually or in the
aggregate have a material adverse effect upon the business, assets, financial
condition or business prospects of McCaw S.A.
3.17 LABOR MATTERS
There are no material disputes, employee grievances, disciplinary
actions or legal actions pending or threatened between McCaw S.A. and any of
its employees or independent
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contractors and no claims under U.S. or Argentine law. McCaw S.A. has complied
in all material respects with all provisions of all laws in the United States
and Argentina relating to the employment of labor and has no liability for any
arrears of wages, social security payments or taxes or penalties for failure to
comply with any such laws. To the knowledge of MIL, there are no organizational
efforts presently being made or threatened by or on behalf of any labor union
with respect to any of the employees of McCaw S.A.
Except as specifically set forth on Schedule 3.17, McCaw S.A. is not a
party to any:
(a) management, employment or other contract providing
for the employment or rendition of executive services;
(b) employment contract that is not terminable without
penalty by McCaw S.A. on 30 days' notice;
(c) bonus, incentive, deferred compensation, severance
pay, pension, profit-sharing, retirement, stock purchase, stock option,
employee benefit or similar plan, agreement or arrangement;
(d) collective bargaining agreement or other agreement
with any labor union or other employee organization (and no such agreement is
currently being requested by, or is under discussion by management with, any
group of employees or others); or
(e) other employment contract or other compensation
agreement or arrangement, oral or written, affecting or relating to current or
former employees of McCaw S.A.
All such contracts and other agreements and arrangements set forth on
Schedule 3.17 are valid and in full force and effect, McCaw S.A. has performed
all material obligations imposed upon it thereunder, and there are, under any
of such contracts, agreements or arrangements, no defaults or events of default
by McCaw S.A. or, to the knowledge of MIL, any other party thereto that would
materially adversely affect the business, assets or financial condition of
McCaw S.A., that would materially adversely affect the relationship of McCaw
S.A. or MIL Argentina with any employee of McCaw S.A. or that could reasonably
be expected to materially adversely affect the business prospects of McCaw S.A.
From September 30, 1996 to and including the Closing Date, McCaw S.A.
has not made any loans to any of its officers or employees or any of the
officers or employees of MIL or its Affiliates.
3.18 PATENTS, TRADEMARKS, ETC.
McCaw S.A. owns, or has full and unrestricted rights within Argentina
(to the extent available under Argentine law) to:
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(a) all material trademarks, trade names and copyrights
now used by McCaw S.A. and
(b) all material formulae, franchises, processes,
techniques and manufacturing know-how and all trademarks, trade names and
copyrights used in connection with services now being or intended to be offered
and sold by McCaw S.A., except in each case where the failure to own or have
full and unrestricted rights within Argentina to such items would not have a
material adverse effect on McCaw S.A.
Where registration of the intellectual property listed in clauses (a)
and (b) above is necessary in order to have full and unrestricted rights to
such intellectual property, such intellectual property has been duly registered
with the proper authorities in Argentina. McCaw S.A. as a result of the
execution of this Agreement or the performance of its obligations hereunder
will not be deprived of any rights which it would otherwise possess in any of
the intellectual property listed in clauses (a) and (b) above.
A true and complete list of (i) all patents, patent applications,
patent agreements, license agreements, proprietary information agreements,
confidentiality agreements, invention agreements, consulting agreements,
trademark registrations and applications therefor, trade names, service marks
and copyright registrations and applications therefor to which McCaw S.A. is a
party or that are used in the operation of the McCaw S.A. Business and (ii) any
interference actions or adverse claims made or threatened in respect thereof
and any claims made or threatened for alleged infringement thereof are
specifically set forth on Schedule 3.18. To the best knowledge of MIL, McCaw
S.A., in its operations, does not infringe any valid patent, trademark, trade
name, service mark or copyright of any other Person. Except as set forth on
Schedule 3.18, all agreements listed on Schedule 3.18 are valid and
enforceable, McCaw S.A. has performed all material obligations imposed upon it
thereunder, and neither McCaw S.A. nor, to the knowledge of MIL, any other
party thereto is in default thereunder in any material respect, nor is there
any event that with the giving of notice or lapse of time, or both, would
constitute a material default thereunder by McCaw S.A. or, to the knowledge of
MIL, any other party thereto. Neither MIL nor McCaw S.A. has received notice
that any party to any such agreement intends to cancel, terminate or refuse to
renew the same or to exercise or decline to exercise any option or other right
thereunder. McCaw S.A. has not entered into any agreement to indemnify any
Person against any claim or charge of infringement of any patents, trademarks,
trade names, copyrights, technology, know-how, processes or other intangible
rights.
3.19 CUSTOMERS
Except as described on Schedule 3.19, McCaw S.A. has not received any
customer complaints or expressions of customer dissatisfaction, in writing or
orally, of a material nature concerning the service provided by McCaw S.A.
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3.20 APPLICABLE LAWS
The MIL Parties have complied, and are in compliance, with the U.S.
Foreign Corrupt Practices Act with respect to the McCaw S.A. Business. Except
where noncompliance would not individually or in the aggregate have a material
adverse effect on McCaw S.A., the MIL Parties have complied, and are in
compliance with, all presently existing local and national Argentine laws,
rules, ordinances, decrees and orders applicable to the operation of the McCaw
S.A. Business or to their owned or leased properties. None of the MIL Parties
have reasonably been put on notice of any action or omission which could be
deemed an unasserted present or past unremedied failure by MIL or McCaw S.A.,
as the case may be, to comply with any such laws, rules, ordinances, decrees
and orders, other than actions or omissions which such MIL Party reasonably
believes are not failures to comply. No director, officer, agent, employee or
other Person acting on behalf of any of the MIL Parties has used any funds or
given anything of value, directly or indirectly, for contributions, payments,
gifts or entertainment or made any expenditures, directly or indirectly, to any
government official, political party or candidate for political office to
influence such Person in the discharge of his, her or its official duties. Each
of the MIL Parties has financial controls and accounting books and records
reasonably designed to ensure that such books and records accurately reflect
corporate transactions and the disposition of assets to the extent relating to
any of the MIL Parties. No director, officer, agent, employee or other Person
acting on behalf of the MIL Parties or McCaw S.A. has accepted or received any
unlawful contributions, payments, gifts or expenditures in connection with the
operation of the McCaw S.A. Business.
3.21 INSURANCE
MIL has provided, or will provide prior to the Closing Date, to Telcom
true and complete copies of all insurance policies relating to McCaw S.A. and
the McCaw S.A. Assets.
3.22 BROKERAGE
None of the MIL Parties have not retained any broker or finder in
connection with the transactions contemplated by this Agreement. Any brokerage
or finder's fee due to any broker or finder in violation of the foregoing
representation shall be paid by MIL.
3.23 FULL DISCLOSURE
No information furnished by the MIL Parties to Telcom and WVA in this
Agreement (including, but not limited to, the MIL Argentina Financial
Statements and all information in the Schedules and Exhibits) is false or
misleading in any material respect. There has been no omission on the part of
the MIL Parties to state a material fact necessary to make the information
provided to Telcom and WVA not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELCOM AND WVA
To induce the MIL Parties to enter into and perform this Agreement,
Telcom and WVA represent and warrant to the MIL Parties (which representations
and warranties shall survive the Closing as provided in Section 8.5) all as
follows in this Article IV. The contents of any particular Schedule to this
Article IV shall not be deemed included in any other Schedule unless
specifically cross-referenced to such Schedule.
4.1 ORGANIZATION, GOOD STANDING, ETC.
Telcom, WVA and the WVA Subsidiaries are duly organized and validly
existing under the laws of their respective jurisdictions of organization, as
set forth on Schedule 4.1. Each of WVA and each of the WVA Subsidiaries has all
corporate power and authority required to own, operate and lease its properties
and assets and to carry on its business (including the SMR business and paging
business, when applicable) as now conducted except where such failure to have
corporate power and authority would not have a material adverse effect on WVA
and the WVA Subsidiaries, taken as a whole. Except as listed on Schedule 4.1,
neither WVA nor any WVA Subsidiary is required to be qualified to do business
as a foreign corporation in any state or country. Except as listed on Schedule
4.1, neither WVA nor the WVA Subsidiaries have any subsidiaries or any direct
or indirect investments in any other Person.
4.2 AUTHORIZATION, DUE EXECUTION AND BINDING EFFECT
All corporate or member action of the WVA Securityholders, WVA and the
WVA Subsidiaries required to authorize and perform this Agreement and the
transactions contemplated hereby has been taken. This Agreement has been duly
executed and delivered by WVA and Telcom and is a legal, valid and binding
obligation of WVA and Telcom.
4.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
Other than the Authorization and except as listed on Schedule 4.3 and
except where a violation would not have a material adverse effect on WVA and
the WVA Subsidiaries, taken as a whole, the execution, delivery and performance
of this Agreement by WVA and Telcom and the consummation of the transactions
contemplated hereby, including, but not limited to, the transfer of Persons
having all SMR and paging rights (which include, but are not limited to,
telephony and interconnect rights, if any, as of the date hereof and the
Closing Date) in Argentina of the WVA Subsidiaries, do not and will not (a)
violate the corporate charter or other organizational documents of any of the
WVA Securityholders, WVA or the WVA Subsidiaries, (b) constitute a violation
(with or without the giving of notice or lapse of time, or both) of any law,
rule, regulation, judgment, injunction, order or decree applicable to any of
the WVA Securityholders, WVA or the WVA Subsidiaries, (c) require any consent,
approval or authorization of any Person, governmental authority or other
organization or entity,
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(d) result in a default under, an acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
or in any other way materially affect the rights of any of the WVA
Securityholders, WVA or the WVA Subsidiaries under, any material agreement,
lease, note or other restriction, encumbrance, obligation or liability to which
any of the WVA Securityholders, WVA or the WVA Subsidiaries are a party or by
which any of the WVA Securityholders, WVA or the WVA Subsidiaries are bound or
to which the assets (whether real or personal, tangible or intangible) of WVA
and the WVA Subsidiaries (the "WVA Assets") are subject, or (e) result in the
creation or imposition of any Lien on any of the WVA Assets. Telcom has provided
or will provide to MIL prior to the Closing Date true and complete copies of all
corporate and organizational documents of WVA and the WVA Subsidiaries, and
there has been no change to any such documents since the date of such
certification except as described on Schedule 4.3. Telcom has provided or will
provide to MIL prior to the Closing Date copies of the minute books and other
customary corporate documents of WVA and the WVA Subsidiaries, and such minute
books and other customary corporate documents are true, complete and correct.
4.4 LICENSES, PERMISSIONS, PERMITS, AUTHORIZATIONS, ETC.
WVA and the WVA Subsidiaries have received all currently required
Government Approvals of all agencies, whether local or national, including, but
not limited to, municipal and national licenses to be engaged in the SMR
business in the cities identified on Schedule 4.13 and the paging business
throughout Argentina and authorizations to use the WVA Channels (the "WVA
Licenses"), and all the WVA Licenses are valid and in force, except where the
failure to have any valid WVA License in force would not, individually or in
the aggregate, have a material adverse effect on WVA and the WVA Subsidiaries,
taken as a whole. Except as listed on Schedule 4.4 and except for tax
obligations generally applicable to SMR and paging licenses in Argentina, no
additional payments or fees of any kind are required to be paid to governmental
authorities to conduct the WVA Business. Except as listed on Schedule 4.4, all
tax obligations generally applicable to SMR and paging licenses in Argentina
and other payments or fees required to be paid to governmental authorities to
conduct the WVA Business have been paid.
4.5 CAPITALIZATION OF WVA AND WVA SUBSIDIARIES
As of the date hereof, the capitalization of WVA and the WVA
Subsidiaries is as set forth on Schedule 4.5. All outstanding membership
interests of WVA and the shares of capital stock of the WVA Subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as described in this Section 4.5 and on Schedule 4.5, there are no
outstanding (a) shares of capital stock or voting securities of WVA or any WVA
Subsidiary, (b) securities of WVA or any WVA Subsidiary convertible into or
exchangeable for shares of capital stock or voting securities of WVA or any WVA
Subsidiary, or (c) options or other rights to acquire from WVA or any WVA
Subsidiary, or other obligation of WVA or any WVA Subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of WVA or any WVA Subsidiary. There
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are no outstanding obligations of Telcom, WVA or any WVA Subsidiary or any
Affiliate of the foregoing to acquire any securities of the type described in
the preceding sentence.
4.6 OWNERSHIP OF WVA COMMON STOCK AND CAPITAL STOCK OF WVA SUBSIDIARIES
The record and legal ownership of the securities of WVA and the WVA
Subsidiaries is as set forth on Schedule 4.5, and, except as set forth in
Schedule 4.5, such ownership is free and clear of any Lien and any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of any such capital stock).
4.7 FINANCIAL STATEMENTS
Telcom has previously delivered to MIL consolidated financial
statements of WVA and the WVA Subsidiaries as of and for the year ended
December 31, 1995 and as of and for the nine months ended September 30, 1996
(the "WVA Financial Statements"). The WVA Financial Statements present fairly
the consolidated financial position and results of operations of WVA and the
WVA Subsidiaries as of the dates and for the periods indicated therein in
accordance with U.S. generally accepted accounting principles consistently
applied; except that the WVA Financial Statements for the nine months ended
September 30, 1996 may be subject to normal year-end adjustments of a type
consistent with prior years and do not contain footnotes.
4.8 ABSENCE OF CERTAIN CHANGES
Since September 30, 1996, except as contemplated by this Agreement,
and except as listed on Schedule 4.8, the WVA Business has been conducted in
the ordinary course consistent with past practices and there has not been:
(a) to the knowledge of the WVA Securityholders, any
event, occurrence, development or state of circumstances or facts relating to
WVA or any WVA Subsidiary that has had or could reasonably be expected to have
a material adverse effect on the WVA Business (other than published laws or
regulations or changes in the Argentine economy generally);
(b) any amendment of any material term of any
outstanding security of WVA or any WVA Subsidiary;
(c) any incurrence, assumption or guarantee by WVA or
any WVA Subsidiary of any indebtedness for borrowed money;
(d) any creation or assumption by WVA or any WVA
Subsidiary of any Lien on any material asset other than in the ordinary course
of business consistent with past practices;
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(e) any dividend or other distribution to Telcom or any
other Person;
(f) any making of any loan, advance or capital
contributions to or investment in any Person by WVA or any WVA Subsidiary;
(g) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the WVA Business or the WVA
Assets that, individually or in the aggregate, has had or would reasonably be
expected to have a material adverse effect on the WVA Business;
(h) any transaction or commitment made, or any contract
or agreement entered into, by WVA or any WVA Subsidiary relating to the assets
of WVA or such WVA Subsidiary, respectively, or the WVA Business (including the
acquisition or disposition of any assets) or any relinquishment by WVA or such
WVA Subsidiary of any contract or other right, in either case, material to WVA
or any WVA Subsidiary, other than transactions and commitments in the ordinary
course of business consistent with past practices or contemplated by this
Agreement;
(i) any change in any method of accounting or accounting
practice by WVA or any WVA Subsidiary;
(j) any (i) employment, deferred compensation,
severance, retirement or other similar agreement entered into by WVA or any WVA
Subsidiary with any director, officer or employee thereof or consultant thereto
(or any amendment to any such existing agreement), (ii) grant of any severance
or termination pay to any director, officer or employee of or consultant to WVA
or any WVA Subsidiary, or (iii) change in compensation or other benefits
payable to any director, officer or employee of or consultant to WVA or any WVA
Subsidiary pursuant to any severance or retirement plans or policies thereof;
or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of WVA or any WVA Subsidiary, which employees
were not subject to a collective bargaining agreement as of the date of the
most recent WVA Financial Statements, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any employees of WVA or any
WVA Subsidiary.
4.9 LIABILITIES
There are no long-term liabilities of WVA or any WVA Subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are required by generally accepted accounting
principles to be reflected in a balance sheet or in the notes thereto, and
there is no existing condition, situation or set of circumstances that is
reasonably likely to result in such a liability, other than liabilities
provided for in the WVA Financial Statements or disclosed on Schedule 4.9.
Except as disclosed on Schedule 4.9, none of the liabilities of WVA or the WVA
Subsidiaries are past due, and all
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such liabilities were incurred in the ordinary course of business on terms
consistent with past practices.
4.10 INTERCOMPANY TRANSACTIONS
Except as disclosed on Schedule 4.10, there are no intercompany
balances, and there are no and have not been any intercompany transactions,
between Telcom and its Affiliates on the one hand and WVA or the WVA
Subsidiaries on the other hand.
4.11 TAXES
WVA and the WVA Subsidiaries have accurately prepared in all material
respects and duly filed with the appropriate Tax Authorities all tax returns,
information returns and reports that are, individually and in the aggregate,
material and are required to be filed on or before the date hereof with respect
to WVA and the WVA Subsidiaries and, except as shown on Schedule 4.11, have
paid in full or made adequate provision for the payment of all material Taxes.
Neither WVA nor any WVA Subsidiary is delinquent in the payment of any material
Taxes. Neither WVA nor any WVA Subsidiary has requested or received from any
Tax Authority any extensions or tolling arrangements with respect to any Taxes
or is subject to any open or threatened audits by any Tax Authority.
4.12 ASSETS
(a) Telcom has delivered or will deliver to MIL prior to the Closing
Date true and complete copies of all material leases, subleases, rental
agreements, contracts of sale or licenses of any portion of the personal
property (the "WVA Personal Property") owned, leased or rented by WVA and the
WVA Subsidiaries as of the date hereof. WVA or the WVA Subsidiaries have legal
ownership or other legal rights to use all property used in the conduct of the
WVA Business as presently conducted. Schedule 4.12(a) lists all leased WVA
Personal Property with a monthly lease payment (or annual lease payment
prorated on a monthly basis) in excess of US$1,000.
(b) Except as listed on Schedule 4.12(b), WVA and the WVA
Subsidiaries do not own, lease or use any material real property.
(c) No WVA Assets are subject to any lease, license, contract of
sale or other agreement that is reasonably likely to have a material adverse
effect upon the business, properties or financial condition of WVA or any WVA
Subsidiaries.
(d) Except as listed on Schedule 4.12(d), the WVA Assets are free
and clear of all Liens (other than Permitted Liens), and, other than leased WVA
Assets, each of WVA and the WVA Subsidiaries has good and marketable title
thereto. WVA and the WVA Subsidiaries have valid leasehold interests in all
leased assets.
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(e) No Person has any right of first refusal or option to acquire
any interest in the WVA Assets or any part thereof, and none of the WVA
Securityholders, WVA or the WVA Subsidiaries have sold or contracted to sell
the WVA Assets or any part thereof or interest therein other than as set forth
herein.
(f) WVA has no assets or liabilities other than the stock of the
WVA Subsidiaries and has not conducted and currently does not conduct any
business other than the ownership of such stock.
(g) No assets used by WVA are owned by any Affiliate of WVA.
4.13 CHANNELS
Schedule 4.13 sets forth the location of each WVA Channel, the number
of such WVA Channel, the WVA Subsidiary having rights to such WVA Channel, the
dates of grant and expiration of the WVA License with respect to such WVA
Channel, any extension or renewal periods or requests therefor, and the status
thereof, any required build-out and loading dates, and the status thereof, with
respect to such WVA Channel, the number of subscribers using WVA Channels in
such location as of September 30, 1996 and the nature of any frequency
interference with the use of such WVA Channel. Except as listed on Schedule
4.13, Telcom and its Affiliates, including WVA and the WVA Subsidiaries, have
no other interests, direct or indirect, contingent or pending, in frequencies
capable of being used for SMR service or paging services in Argentina. To the
knowledge of Telcom, all lawful action that is necessary to preserve the rights
to any WVA Licenses, WVA Channels or frequencies used for any of paging
operations of WVA or the WVA Subsidiaries has been taken or is being taken,
and, to the knowledge of Telcom, WVA and the WVA Subsidiaries are in full
compliance with all requirements of all WVA Licenses with respect to WVA
Channels and paging frequencies.
4.14 COMPLIANCE WITH ENVIRONMENTAL LAWS
None of the WVA Securityholders, WVA, the WVA Subsidiaries or any
other Person (including, without limitation, any previous owner, lessee,
sublessor or sublessee) has generated, handled, used, manufactured, processed,
distributed in commerce, transported, treated, stored, disposed of or released
(or arranged for the transportation, treatment or disposal of) petroleum,
petroleum products, hazardous waste, hazardous chemicals or substances, toxic
chemicals, chemical substances or mixtures, pollutants or contaminants on, at
or from any assets or properties owned, leased, subleased or used by WVA or the
WVA Subsidiaries in the operation of the WVA Business or on, at or from any
real property to which any of the above-listed substances from the above-listed
assets or properties were transported, or at or on which they were treated or
disposed, in a manner that could subject the MIL Parties, the WVA
Securityholders, WVA, the WVA Subsidiaries or their respective Affiliates to
any material liability under any provision of law in existence on or prior to
the Closing Date.
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4.15 CONTRACTS
Telcom has provided or will provide MIL prior to the Closing Date a
copy of, and has made available or will make available for review by MIL prior
to the Closing Date originals of, all material contracts, oral or written, to
which WVA or the WVA Subsidiaries are a party, including, without limitation,
security agreements, conditional sale agreements and instruments relating to
the borrowing of money. Schedule 4.15 lists all such contracts. All such
contracts are valid and in full force and effect, each of WVA and the WVA
Subsidiaries, as the case may be, has performed all material obligations
imposed upon it thereunder, and there are, under any of such contracts, no
defaults or events of default by WVA or any WVA Subsidiary, as the case may be,
or, to the knowledge of Telcom, or any other party thereto, that would
materially adversely affect the business, assets or financial condition of WVA
and the WVA Subsidiaries, taken as a whole, or which could reasonably be
expected to materially adversely affect the business prospects of WVA and the
WVA Subsidiaries, taken as a whole. None of the WVA Securityholders, WVA or any
WVA Subsidiary has received notice, nor is any WVA Securityholder, WVA or any
WVA Subsidiary otherwise aware, that any party to any such contract intends to
cancel, terminate or refuse to renew such contract or to exercise or decline to
exercise any option or right thereunder.
4.16 CLAIMS AND LEGAL PROCEEDINGS
Except as described on Schedule 4.16, there are no claims pending or,
to the knowledge of the WVA Securityholders, WVA or any WVA Subsidiary,
threatened against any WVA Securityholder, WVA or any WVA Subsidiary with
respect to the WVA Business, before or by any governmental or nongovernmental
department, commission, board, bureau, agency, instrumentality or any other
Person, which Claims are reasonably likely to be resolved adversely to any of
the WVA Securityholders, WVA or any of the WVA Subsidiaries, and which if so
resolved would have a material adverse effect on WVA and the WVA Subsidiaries,
taken as a whole. There are no outstanding or unsatisfied judgments, orders,
decrees or stipulations to which any WVA Securityholder, WVA or any WVA
Subsidiary is a party that involve the transactions contemplated hereby or that
could individually or in the aggregate have a material adverse effect upon the
business, assets, financial condition or business prospects of WVA and the WVA
Subsidiaries, taken as a whole.
4.17 LABOR MATTERS
There are no material disputes, employee grievances, disciplinary
actions or legal actions pending or threatened between WVA or any WVA
Subsidiary and any of their respective employees or independent contractors and
no claims under U.S. or Argentine law. Each of WVA and the WVA Subsidiaries has
complied in all material respects with all provisions of all laws in the United
States and Argentina relating to the employment of labor and has no liability
for any arrears of wages, social security payments or taxes or penalties for
failure to comply with any such laws. To the knowledge of Telcom, there are no
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organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to any of the employees of WVA or the WVA Subsidiaries.
Except as specifically set forth on Schedule 4.17, neither WVA nor any
WVA Subsidiary is a party to any:
(a) management, employment or other contract providing
for the employment or rendition of executive services;
(b) employment contract that is not terminable without
penalty by WVA or any WVA Subsidiary on 30 days' notice;
(c) bonus, incentive, deferred compensation, severance
pay, pension, profit-sharing, retirement, stock purchase, stock option,
employee benefit or similar plan, agreement or arrangement;
(d) collective bargaining agreement or other agreement
with any labor union or other employee organization (and no such agreement is
currently being requested by, or is under discussion by management with, any
group of employees or others); or
(e) other employment contract or other compensation
agreement or arrangement, oral or written, affecting or relating to current or
former employees of WVA or any WVA Subsidiary.
All such contracts and other agreements and arrangements set forth on
Schedule 4.17 are valid and in full force and effect, each of WVA and each WVA
Subsidiary has performed all material obligations imposed upon it thereunder,
and there are, under any of such contracts, agreements or arrangements, no
defaults or events of default by WVA or any WVA Subsidiary or, to the knowledge
of Telcom, any other party thereto that would materially adversely affect the
business, assets or financial condition of WVA or any WVA Subsidiary, that
would materially adversely affect the relationship of WVA, any WVA Subsidiary
or MIL Argentina with any employee of WVA or any WVA Subsidiary or that could
reasonably be expected to materially adversely affect the business prospects of
WVA or any WVA Subsidiary.
From September 30, 1996 to and including the Closing Date, neither WVA
nor any WVA Subsidiary has made any loans to any of its officers or employees
or any of the officers or employees of Telcom and its Affiliates.
4.18 PATENTS, TRADEMARKS, ETC.
WVA and the WVA Subsidiaries own, or have full and unrestricted rights
within Argentina (to the extent available under Argentine law) to:
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(a) all material trademarks, trade names and copyrights,
including, but not limited to, "AirLink," now used by WVA or the WVA
Subsidiaries, as the case may be, and
(b) all material formulae, franchises, processes,
techniques and manufacturing know-how and all trademarks, trade names and
copyrights used in connection with services now being or intended to be offered
and sold by WVA or the WVA Subsidiaries, as the case may be, except in each
case where the failure to own or have full and unrestricted rights within
Argentina to such items would not have a material adverse effect on WVA and the
WVA Subsidiaries, taken as a whole.
Where registration of the intellectual property listed in clauses (a)
and (b) above is necessary in order to have full and unrestricted rights to
such intellectual property, such intellectual property has been duly registered
with the proper authorities in Argentina. WVA and the WVA Subsidiaries as a
result of the execution of this Agreement or the performance of their
obligations hereunder will not be deprived of any rights which they would
otherwise possess in any of the intellectual property listed in clauses (a) and
(b) above.
A true and complete list of (i) all patents, patent applications,
patent agreements, license agreements, proprietary information agreements,
confidentiality agreements, invention agreements, consulting agreements,
trademark registrations and applications therefor, trade names, service marks
and copyright registrations and applications therefor to which WVA or any WVA
Subsidiary is a party or that are used in the operation of the WVA Business and
(ii) any interference actions or adverse claims made or threatened in respect
thereof and any claims made or threatened for alleged infringement thereof are
specifically set forth on Schedule 4.18. To the best knowledge of Telcom or
WVA, neither WVA nor any WVA Subsidiary, in its operations, infringes any valid
patent, trademark, trade name, service mark or copyright of any other Person.
Except as set forth on Schedule 4.18, all agreements listed on Schedule 4.18
are valid and enforceable, WVA and the WVA Subsidiaries have performed all
material obligations imposed upon them thereunder, and neither WVA nor any WVA
Subsidiary nor, to the knowledge of Telcom, any other party thereto is in
default thereunder in any material respect, nor is there any event that with
the giving of notice or lapse of time, or both, would constitute a material
default thereunder by WVA, any WVA Subsidiary or, to the knowledge of Telcom,
any other party thereto. Neither Telcom, WVA nor any WVA Subsidiary has
received notice that any party to any such agreement intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder. Neither WVA nor any WVA Subsidiary has
entered into any agreement to indemnify any Person against any claim or charge
of infringement of any patents, trademarks, trade names, copyrights,
technology, know-how, processes or other intangible rights.
4.19 CUSTOMERS
Except as described on Schedule 4.19, neither WVA nor any WVA
Subsidiary has received any customer complaints or expressions of customer
dissatisfaction, in writing or orally, of a material nature concerning the
service provided by any WVA Subsidiary.
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4.20 APPLICABLE LAWS
The WVA Securityholders, WVA and the WVA Subsidiaries have complied,
and are in compliance, with the U.S. Foreign Corrupt Practices Act with respect
to the WVA Business. Except where noncompliance would not individually or in
the aggregate have a material adverse effect on WVA and the WVA Subsidiaries,
taken as a whole, the WVA Securityholders, WVA and the WVA Subsidiaries have
complied, and are in compliance with, all presently existing local and national
Argentine laws, rules, ordinances, decrees and orders applicable to the
operation of the WVA Business or to their owned or leased properties. None of
the WVA Securityholders, WVA or any WVA Subsidiary has reasonably been put on
notice of any actions or omissions which could be deemed an unasserted present
or past unremedied failure by any WVA Securityholder, WVA or any WVA
Subsidiary, as the case may be, to comply with any such laws, rules,
ordinances, decrees and orders, other than actions or omissions which such WVA
Securityholder, WVA or WVA Subsidiary reasonably believes are not failures to
comply. No director, officer, agent, employee or other Person acting on behalf
of any WVA Securityholder, WVA or any WVA Subsidiary has used any funds or
given anything of value, directly or indirectly, for contributions, payments,
gifts or entertainment or made any expenditures, directly or indirectly, to any
government official, political party or candidate for political office to
influence such Person in the discharge of his, her or its official duties. Each
of the WVA Securityholders, WVA and the WVA Subsidiaries has financial controls
and accounting books and records reasonably designed to ensure that such books
and records accurately reflect corporate transactions and the disposition of
assets to the extent relating to the WVA Securityholders, WVA or the WVA
Subsidiaries. No director, officer, agent, employee or other Person acting on
behalf of any WVA Securityholder, WVA or any WVA Subsidiary has accepted or
received any unlawful contributions, payments, gifts or expenditures in
connection with the operation of the WVA Business.
4.21 INSURANCE
Telcom will provide to MIL prior to the Closing Date true and complete
copies of all insurance policies relating to WVA, the WVA Subsidiaries and the
WVA Assets.
4.22 BROKERAGE
None of the WVA Securityholders have retained any broker or finder in
connection with the transactions contemplated by this Agreement. Any brokerage
or finder's fee due to any broker or finder in violation of the foregoing
representation shall be paid by Telcom.
4.23 FULL DISCLOSURE
No information furnished by the WVA Securityholders, WVA or the WVA
Subsidiaries to the MIL Parties in this Agreement (including, but not limited
to, the WVA Financial Statements and all information in the Schedules and
Exhibits) is false or misleading in any material respect. There has been no
omission on the part of the WVA Securityholders,
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WVA or the WVA Subsidiaries to state a material fact necessary to make the
information provided to the MIL Parties not misleading.
ARTICLE V
FURTHER AGREEMENTS
Each of the parties hereto agrees to perform and observe the following
agreements applicable to it:
5.1 SCHEDULES
(a) All representations and warranties herein shall apply to any
exhibits, schedules and certificates delivered by Telcom or any officer thereof
to any MIL Party, and each such certificate shall be deemed to be a
representation by the WVA Securityholders as to the matters set forth therein.
All representations and warranties herein shall apply to any exhibits,
schedules and certificates delivered by any MIL Party or any officer thereof to
Telcom, and each such certificate shall be deemed to be a representation by the
MIL Party as to the matters set forth therein.
(b) On or prior to the Closing Date, Telcom may deliver to MIL one or
more Schedules to this Agreement that have been revised and updated to reflect
changes to the operations or condition of Telcom, WVA or the WVA Subsidiaries
between the date hereof and the Closing. The delivery of any such revised
Schedule shall not affect the rights of any party under Articles VI and VII,
but, if the Closing shall occur, the revised Schedules shall be deemed to
supersede the Schedules delivered herewith, but only with respect to the
representations and warranties given as of the Closing Date.
(c) On or prior to the Closing Date, MIL may deliver to Telcom one or
more Schedules to this Agreement that have been revised and updated to reflect
changes to the operations or condition of the MIL Parties or McCaw S.A. between
the date hereof and the Closing. The delivery of any such revised Schedule
shall not affect the rights of any party under Articles VI and VII, but, if the
Closing shall occur, the revised Schedules shall be deemed to supersede the
Schedules delivered herewith, but only with respect to the representations and
warranties given as of the Closing Date.
5.2 ACCESS
From the date of this Agreement to and including the Closing Date,
each party shall (and WVA shall cause the WVA Subsidiaries to) grant the other
parties hereto and their respective agents, employees, accountants and
attorneys reasonable access during normal business hours to, and the
opportunity to examine and make copies of, all their books, records, documents,
instruments and papers, and the right to inspect all of their operations,
properties and assets at any reasonable time and provide any authorizations
necessary to examine the status of the WVA Licenses or the McCaw S.A. Licenses,
as the case may be,
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with the CNT, other than any information which counsel advises should not be
provided prior to the Authorization.
5.3 ADVICE OF CLAIMS
From the date of this Agreement to and including the Closing Date,
each of Telcom and WVA shall (and shall cause the WVA Subsidiaries to) promptly
advise MIL in writing if it has notice or knowledge of the commencement or
threat of any Claims against or affecting WVA or the WVA Subsidiaries or any
rulings, decrees or other material developments in any Claim described on
Schedule 4.16 or arising after the date hereof.
From the date of this Agreement to and including the Closing Date, the
MIL Parties shall promptly advise Telcom in writing if they have notice or
knowledge of the commencement or threat of any Claims against or affecting
McCaw S.A. or any rulings, decrees or other material developments in any Claim
described on Schedule 3.16 or arising after the date hereof.
5.4 CONDUCT OF BUSINESS
5.4.1 CONDUCT OF WVA BUSINESS
Telcom and WVA shall, and shall cause the WVA Subsidiaries to, to the
best of their respective abilities, (a) preserve and protect the right of the
WVA Subsidiaries to use all the WVA Channels and paging frequencies used by any
WVA Subsidiary as currently intended and (b) take action to satisfy all
applicable build-out and loading requirements. Telcom and WVA shall immediately
notify MIL if any WVA Channels will not be preserved or protected or if
applicable build-out or loading requirements may not be satisfied.
Telcom and WVA shall not (a) take or agree or commit to take any
action that would make any representation or warranty of Telcom and WVA
hereunder inaccurate in any respect at the Closing Date or (b) omit or agree or
commit to omit to take any commercially reasonable action necessary to prevent
any such representation or warranty from being inaccurate in any respect at
such time.
5.4.2 CONDUCT OF MCCAW S.A. BUSINESS
MIL and McCaw S.A. shall, to the best of their respective abilities,
(a) preserve and protect the right of McCaw S.A. to use all the McCaw S.A.
Channels as currently intended and (b) take action to satisfy all applicable
build-out and loading requirements. MIL shall immediately notify Telcom if any
McCaw S.A. Channels will not be preserved or protected or if applicable
build-out or loading requirements may not be satisfied.
The MIL Parties shall not (a) take or agree or commit to take any
action that would make any representation or warranty of the MIL Parties
hereunder inaccurate in any respect at the Closing Date or (b) omit or agree or
commit to omit to take any commercially reasonable
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action necessary to prevent any such representation or warranty from being
inaccurate in any respect at such time.
5.5 COMPLIANCE WITH LAWS
Each of Telcom and WVA on the one hand and each of the MIL Parties on
the other hand agree that it and any director, officer, agent, employee or
other Person acting on its behalf or on behalf of any Affiliate of it or any of
the WVA Securityholders (a) will not be involved in the offering, paying or
giving of anything of value, either directly or indirectly, to a government
official, political party or candidate for political office to influence such
Person in the discharge of his, her or its official duties, (b) will not engage
in any such unlawful conduct during the time of carrying out their duties, (c)
will maintain accounting books and records in reasonable detail and institute
internal controls to ensure that such books and records accurately reflect
corporate transactions and the disposition of assets, and (d) will not,
directly or indirectly, take any action or fail to take any commercially
reasonable action in each case that could result in the loss of the benefits of
either the McCaw S.A. Licenses, in the case of MIL, or the WVA Licenses, in the
case of WVA. Telcom and WVA further agree that they will cause the WVA
Subsidiaries to comply with the preceding sentence.
5.6 INSURANCE AND LOSS OF OR DAMAGE TO ASSETS
(a) Telcom and WVA shall not, and shall not permit any WVA Subsidiary
to, decrease the insurance coverage maintained prior to the date hereof in
respect of the WVA Business from the period commencing on the date hereof and
ending on the Closing Date. Telcom and WVA shall give MIL prompt written notice
of (i) any loss, damage or destruction to any material tangible WVA Assets
occurring on or after September 30, 1996 and on or prior to the Closing Date,
(ii) the estimated value of the portion of such assets so lost, damaged or
destroyed, and (iii) the estimated cost of repair, replacement or
reconstruction thereof.
(b) The MIL Parties shall not, and shall not permit McCaw S.A. to,
decrease the insurance coverage maintained prior to the date hereof in respect
of the McCaw S.A. Business from the period commencing on the date hereof and
ending on the Closing Date. MIL shall give Telcom and WVA prompt written notice
of (i) any loss, damage or destruction to any material tangible McCaw S.A.
Assets occurring on or after September 30, 1996 and on or prior to the Closing
Date, (ii) the estimated value of the portion of such assets so lost, damaged
or destroyed, and (iii) the estimated cost of repair, replacement or
reconstruction thereof.
5.7 CONFIDENTIALITY
The Confidentiality Agreement among Telcom, Wireless Ventures of
Brazil, Inc, WVA and MIL dated as of October 28, 1996 (the "Confidentiality
Agreement") shall remain in full force and effect in accordance with its terms
and shall apply to all documents and information supplied in connection
herewith.
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5.8 OTHER COOPERATION
All parties will promptly take, and fully cooperate with the other
parties and their legal counsel and accountants in connection with, any steps
reasonably required to be taken as part of the obligations of the parties under
this Agreement or to promptly satisfy the conditions precedent hereunder,
including, without limitation, obtaining any required Argentine Government
Approval and any filings required by the Hart-Scott-Rodino Antitrust
Improvements Act, as amended.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE MIL PARTIES
The obligations of each of the MIL Parties to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by it
at or before the Closing Date shall be subject to the satisfaction of the
following conditions, any of which may be expressly waived by MIL.
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Telcom and WVA contained in
Article IV (including applicable Schedules hereto) shall have been true in all
material respects when made and shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of such date, except as affected by the transactions contemplated hereby and
except to the extent that such representations and warranties shall have been
made as of a specified date, in which case such representations and warranties
shall have been true as of the specified date.
6.2 PERFORMANCE OF AGREEMENT
Telcom and WVA shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed and
complied with by them at or prior to the Closing Date.
6.3 APPROVALS AND CONSENTS
All material approvals and consents from third parties listed on
Schedule 4.3 shall have been obtained.
6.4 SHAREHOLDERS AGREEMENT
MIL Argentina, WVA and McCaw Holdings shall have entered into a
Shareholders Agreement (the "Shareholders Agreement") in substantially the form
attached hereto as Exhibit 6.4.
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6.5 OPINIONS OF TELCOM'S COUNSEL
MIL shall have received opinions of U.S. and Argentine counsel to the
WVA Securityholders reasonably acceptable to MIL in substantially the form
attached hereto as Exhibit 6.5.
6.6 CONFIDENTIALITY, NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENTS
On or before the Closing, Telcom, WVA, the WVA Subsidiaries and all
Affiliates Controlled by Telcom, and the officers and directors thereof, shall
have entered into confidentiality agreements, noncompetition agreements and
proprietary information agreements relating to paging and SMR services and
operations in Argentina in substantially the form attached hereto as Exhibit
6.6.
6.7 LEGAL PROCEEDINGS
No law, regulation, administrative ruling or order of any court or
administrative agency of competent jurisdiction shall be in effect that
enjoins, restrains or prohibits consummation of this Agreement, and no
litigation, investigation or administrative proceeding shall be reasonably
likely to enjoin, restrain or prohibit consummation of this Agreement.
6.8 TITLE
To the extent any such Liens exist, Telcom and WVA shall have caused
WVA and the WVA Subsidiaries to have obtained the release of all material Liens
from the WVA Assets, other than Permitted Liens. Telcom and WVA shall have
supplied to MIL evidence satisfactory to MIL establishing WVA's and the WVA
Subsidiaries' good and marketable title to the WVA Assets, free and clear of
all Liens, other than Permitted Liens.
6.9 TELCOM AND WVA OFFICERS' CERTIFICATES
MIL shall have received certificates from the President and Secretary
of Telcom and of WVA, dated the Closing Date, in substantially the form
attached hereto as Exhibit 6.9, certifying that (a) the conditions set forth in
this Article VI have been fulfilled, (b) the representations and warranties of
Telcom and WVA herein are true and correct in all material respects as of the
Closing Date, and (c) such officers reasonably believe that all loading
requirements with respect to WVA Licenses required to be met within 90 days
following the Closing Date will be met.
6.10 DOCUMENTATION RELATING TO WVA LICENSES
MIL shall have received a true and complete copy of each document
granting the WVA Licenses and authorizing the use of each WVA Channel.
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6.11 INTERCOMPANY TRANSACTIONS
All intercompany agreements and transactions between the WVA
Subsidiaries on the one hand and Telcom or its Affiliates (other than the WVA
Subsidiaries) on the other hand shall have been amended or terminated if MIL
shall have reasonably requested such amendment or termination.
6.12 EMPLOYEES AND DIRECTORS
All employees and directors of the WVA Subsidiaries designated by MIL
shall have resigned from their respective positions, effective as of the
Closing Date.
6.13 BRAZIL
The merger contemplated by the Agreement and Plan of Merger among
Nextel Communications, Inc., Dial Call Indimich, Inc. and Wireless Ventures of
Brazil, Inc. dated as of the date hereof shall have been consummated, or if not
yet consummated, such agreement shall remain in full force and effect.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE WVA
SECURITYHOLDERS AND WVA
The obligations of each of Telcom and WVA to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by
Telcom and WVA at or before the Closing Date shall be subject to the
satisfaction of the following conditions, any of which may be expressly waived
in writing by Telcom and WVA.
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the MIL Parties contained in
Article III (including applicable Schedules thereto) shall have been true in
all material respects when made and shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of such date, except as affected by transactions contemplated hereby and
except to the extent that such representations and warranties are made as of a
specified date, in which case such representations and warranties shall be true
as of the specified date.
7.2 PERFORMANCE OF AGREEMENT
The MIL Parties shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed and
complied with by them at or prior to the Closing Date.
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7.3 APPROVALS AND CONSENTS
All material approvals and consents from third parties listed on
Schedule 3.3 shall have been obtained.
7.4 SHAREHOLDERS AGREEMENT
MIL Argentina, WVA and McCaw Holdings shall have entered into a
Shareholders Agreement in substantially the form attached hereto as Exhibit
6.4.
7.5 MIL OFFICERS' CERTIFICATE
Telcom shall have received certificates of the President and the
Secretary of MIL, dated the Closing Date, in substantially the form attached
hereto as Exhibit 7.5, certifying that (a) all the conditions set forth in this
Article VII have been fulfilled, (b) the representations and warranties of the
MIL Parties herein are true and correct as of the Closing Date, and (c) such
officers reasonably believe that all loading requirements with respect to McCaw
S.A. Licenses required to be met within 90 days following the Closing Date will
be met.
7.6 LEGAL PROCEEDINGS
No law, regulation, administrative ruling or order of any court or
administrative agency of competent jurisdiction shall be in effect that
enjoins, restrains or prohibits consummation of this Agreement, and no
litigation, investigation or administrative proceeding shall be reasonably
likely to enjoin, restrain or prohibit consummation of this Agreement.
7.7 OPINIONS OF MIL COUNSEL
Telcom shall have received opinions of U.S., Argentine and Cayman
counsel to MIL reasonably acceptable to Telcom in substantially the form
attached hereto as Exhibit 7.7.
7.8 TITLE
To the extent any such Liens exist, MIL shall have caused McCaw S.A.
to have obtained the release of all material Liens from the McCaw S.A. Assets,
other than Permitted Liens. MIL shall have supplied to Telcom evidence
satisfactory to Telcom establishing McCaw S.A.'s good and marketable title to
the McCaw S.A. Assets, free and clear of all Liens, other than Permitted Liens.
7.9 DOCUMENTATION RELATING TO MCCAW S.A. LICENSES
Telcom shall have received a true and complete copy of each document
granting the McCaw S.A. Licenses and authorizing the use of each McCaw S.A.
Channel.
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7.10 INTERCOMPANY TRANSACTIONS
All intercompany agreements and transactions between any of the MIL
Parties and their Affiliates on the one hand and McCaw S.A. on the other hand
shall have been amended or terminated if Telcom shall have reasonably requested
such amendment or termination.
7.11 BRAZIL
The merger contemplated by the Agreement and Plan of Merger among
Nextel Communications, Inc., Dial Call Indimich, Inc. and Wireless Ventures of
Brazil, Inc. dated as of the date hereof shall have been consummated, or if not
yet consummated, such agreement shall remain in full force and effect.
7.12 CONFIDENTIALITY, NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENTS
On or before the Closing, each of the MIL Parties and all Affiliates
Controlled by the MIL Parties, and the officers and directors thereof, shall
have entered into confidentiality agreements, noncompetition agreements and
proprietary information agreements relating to paging and SMR services and
operations in Argentina in substantially the form attached hereto as Exhibit
6.6.
ARTICLE VIII
INDEMNIFICATION AND SURVIVAL OF WARRANTIES
8.1 INDEMNIFICATION BY WVA SECURITYHOLDERS
Telcom agrees to indemnify and hold harmless, on an after-tax basis,
the MIL Parties, their respective successors and permitted assigns, and the
officers, directors, affiliates, employees, Controlling Persons and agents of
the foregoing and to hold each such party harmless against and in respect of
any and all losses, damages, costs and expenses, including attorneys' fees
("Damages"), incurred by any such party by reason of (a) a breach of any of the
representations or warranties made in this Agreement by the WVA Securityholders
or WVA, (b) the breach of any covenant contained herein by the WVA
Securityholders or WVA prior to the Closing, or (c) the breach of undertakings
of the WVA Securityholders or WVA in this Agreement or any other document,
supplement, instrument, agreement, letter, amendment or assignment executed in
connection herewith, or in any officers' certificate or other certificate
delivered to MIL or its Affiliates at or in connection with the Closing;
provided that Telcom shall not be obligated to make any payments under this
Section 8.1 unless and until the amount of Damages exceeds US$100,000 after
which Telcom shall be obligated to pay the entire amount of such Damages,
including the first US$100,000.
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8.2 INDEMNIFICATION BY MIL
The MIL Parties agree to indemnify and hold harmless, on an after-tax
basis, WVA, the WVA Securityholders, their successors and permitted assigns,
and the officers, directors, affiliates, employees, Controlling Persons and
agents of the foregoing and to hold each such party harmless against and in
respect of any and all Damages incurred by such party by reason of (a) breach
of any of the representations or warranties made in this Agreement by the MIL
Parties, (b) the breach of any covenant contained herein by the MIL Parties
prior to the Closing, or (c) the breach of undertakings of the MIL Parties in
any other document, supplement, instrument, agreement, letter, amendment or
assignment executed in connection herewith, or in any officers' certificate or
other certificate delivered to Telcom at or in connection with the Closing;
provided that the MIL Parties shall not be obligated to make any payments under
this Section 8.2 unless and until the amount of Damages exceeds $100,000, after
which the MIL Parties shall be obligated to pay the entire amount of such
Damages, including the first $100,000.
8.3 PROCEDURE
With respect to the claims made by third parties, if any of the MIL
Parties or the WVA Securityholders are threatened with any claim, or any claim
is presented to or any action or proceeding is commenced against any of the MIL
Parties or the WVA Securityholders, that may give rise to the right of
indemnification hereunder, the MIL Parties or the WVA Securityholders, as the
case may be (the "Indemnitee"), will give written notice thereof promptly (and
in no event later than the last survival date of the representation and
warranty for the breach of which indemnification is sought) to the party or
parties bearing the indemnification obligation (the "Indemnifying Party");
provided that the failure to give notice in accordance with this Section 8.3
shall not prevent enforcement hereunder if such failure is not prejudicial to
the Indemnifying Party. The Indemnifying Party shall have the right to
participate in the defense of such claim, action or proceeding, and, to the
extent the Indemnifying Party so desires, jointly with any other Indemnifying
Party similarly notified, to assume the defense thereof with counsel mutually
satisfactory to such parties and the Indemnitee, in which case every Indemnitee
shall have the right to participate through counsel of its own choosing (and
whose fees shall be paid by such Indemnitee). If the Indemnifying Party and the
Indemnitee agree upon mutually satisfactory counsel to assume the defense, the
Indemnifying Party shall assume the expense of such counsel's fees and shall no
longer assume the expense of the Indemnitee's attorneys' fees. In the event the
Indemnifying Party undertakes to compromise or defend any such liability, the
Indemnifying Party shall so notify the Indemnitee in writing promptly of its
intention to do so, and the Indemnitee shall cooperate with the Indemnifying
Party and its counsel in the compromising of or the defending against any such
liabilities or claims, at the expense of the Indemnifying Party. Such
cooperation shall include, but shall not be limited to, the provision to the
Indemnifying Party of reasonable access to the Indemnitee's business records,
research, documents and employees as they relate to the defense of any
indemnified claim. In response to a bona fide settlement offer, the
Indemnifying Party may settle the monetary portion of an indemnifiable
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matter that it has duly elected to contest without the consent of the Indemnitee
unless such settlement has an adverse effect upon the Indemnitee, in which case
such matters shall be settled only with the consent of the Indemnitee; provided,
however, that the Indemnifying Party shall not have the right to agree to a
settlement involving injunctive or other equitable relief without obtaining the
prior written consent of the Indemnitee. In the event the Indemnitee declines to
consent to the monetary settlement described in the preceding sentence, then the
Indemnitee shall have no right to indemnification beyond, and the Indemnifying
Party shall have no obligation to pay damages and attorneys' fees hereunder in
excess of, the amount of the proposed settlement.
8.4 FORM OF PAYMENT
The Indemnifying Party may satisfy its obligations under this Article
VIII in cash or at its option in MIL Argentina Securities, based on the value
of the sum of Invested Capital divided by the number of MIL Argentina
Securities then outstanding.
8.5 SURVIVAL
The covenants, agreements, representations and warranties made by the
parties in or pursuant to this Agreement shall survive the Closing for two
years, except as otherwise set forth herein, and except that (a) the
representations and warranties contained in Sections 3.11 and 4.11 shall
survive until expiration of the statute of limitations applicable to the
matters covered thereby (giving effect to any waiver, mitigation or extension
thereof), if later, and (b) the agreements contained in this Article VIII shall
survive indefinitely.
ARTICLE IX
TERMINATION
9.1 TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date:
(a) by mutual written consent;
(b) by either MIL or Telcom if the transactions
contemplated hereby shall not have been consummated by the first anniversary of
the date hereof; provided that if the transactions contemplated hereby shall
not have been consummated by such first anniversary, either MIL or Telcom (the
"Contracting Party") may after such first anniversary and on or prior to the
second anniversary of the date hereof enter into an agreement with a third
party which directly or indirectly is authorized to use SMR channels in
Argentina under which agreement the Contracting Party and such third party
would each have an ownership interest in a Person providing SMR services in
Argentina (a "Contract") only on the following conditions:
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(i) the Contracting Party shall have provided
to the other party (the "Tag-Along Party") written notice at least 30
days prior to entering into such Contract;
(ii) the Tag-Along Party shall have the right,
exerciseable upon written notice to the Contracting Party describing
in reasonable detail all material terms of the proposed transaction
delivered within 15 days after its receipt of notice pursuant to
clause (i), to become a party to such Contract with an economic
interest equal to the Contracting Party's economic interest under such
Contract and voting rights, as between the Contracting Party and the
Tag-Along Party, comparable to those set forth in the form of
Shareholders Agreement; and
(iii) if either or both of MIL and Telcom would be
required by applicable law or regulation to divest all or any portion
of their respective Licenses or Channels as a result of the
consummation of the transactions contemplated by the Contract, MIL and
Telcom shall share equally in the net proceeds of such sale;
provided, further, that nothing in this Agreement shall prevent either MIL or
the WVA Securityholders from transferring their entire interests in McCaw S.A.
or the WVA Subsidiaries, respectively, to a third party at any time after the
first anniversary of the date hereof;
(c) by either MIL or Telcom if a court of competent
jurisdiction or governmental authority shall have issued a nonappealable final
order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby;
(d) by MIL following a breach of any representation,
warranty, covenant or agreement on the part of the WVA Securityholders or WVA
set forth in this Agreement such that the conditions set forth in Section 6.1
or 6.2 would not be satisfied; or by Telcom following a breach of any
representation, warranty, covenant or agreement on the part of the MIL Parties
set forth in this Agreement such that the conditions set forth in Section 7.1
or 7.2 would not be satisfied, which breach shall not have been cured within 20
business days following receipt by any of the MIL Parties of notice of such
breach; or
(e) by MIL if any representation or warranty of the WVA
Securityholders and WVA shall have become untrue such that the conditions set
forth in Article VI cannot reasonably be expected to be satisfied by the date
set forth in Section 9.1(b); or by Telcom if any representation or warranty of
the MIL Parties shall have become untrue such that the conditions set forth in
Article VII cannot reasonably be expected to be satisfied by the date set forth
in Section 9.1(b).
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9.2 EFFECT OF TERMINATION
(a) In the event of any termination pursuant to this Article IX (other
than pursuant to Section 9.1(a)), written notice setting forth the reasons
therefor shall forthwith be given by the terminating party to the other party
hereto and neither party shall have any liability to the other party of any
nature whatsoever due to such termination, except for damages resulting from a
willful breach by the other party, other than pursuant to Section 9.2(b).
(b) Notwithstanding any termination pursuant to this Article IX (other
than any termination by MIL pursuant to Section 9.1(d)), for the period
beginning on the date hereof and ending on the second anniversary of the date
hereof, MIL shall provide written notice to Telcom as far in advance as
reasonably practicable, but at least 90 days prior to the date of anticipated
deployment of digital infrastructure with respect to any block of McCaw S.A.
Channels (the "Deployment Date"). Telcom shall have the right, exerciseable by
Telcom upon written notice to MIL within 30 days following MIL's notice, to
cause the WVA Subsidiaries to exchange an equal number of WVA Channels with
McCaw S.A. such that each of McCaw S.A and the WVA Subsidiaries would have
authorization to use their respective Channels, to the extent feasible, located
contiguously; provided that at least 30 days prior to the Deployment Date, (i)
Telcom shall have provided to MIL evidence reasonably satisfactory to MIL that
such Channels are cleared and are not subject to any interference and (ii) all
necessary regulatory approvals relating to such exchange, if any, shall have
been obtained. If the conditions set forth in clauses (i) and (ii) of the
previous sentence shall not have been satisfied at least 30 days prior to the
Deployment Date, MIL shall have the right to deploy digital technology with
respect to such block of McCaw S.A. Channels, and Telcom shall have no further
right to require the exchange of WVA Channels with respect to such block of
McCaw S.A. Channels. The parties hereto will take all commercially reasonable
steps required to effect such exchange of channels, including, but not limited
to, making any required filings with the CNT.
ARTICLE X
GENERAL
10.1 EXPENSES
If the transactions contemplated by this Agreement are consummated,
the MIL Parties shall pay their own fees, costs and expenses, and Telcom and
WVA shall pay their own fees, costs and expenses, incident to the negotiation,
preparation and carrying out of this Agreement; provided that MIL Argentina
shall not bear any fees, costs or expenses relating to the Merger for the
benefit of any of the MIL Parties, WVA or any of the WVA Securityholders.
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10.2 AMENDMENT
The parties may amend, modify or supplement this Agreement at any
time, but only in a written amendment duly executed on behalf of each of the
parties.
10.3 HEADINGS
The headings preceding the text of Sections of this Agreement are for
convenience only and shall not be deemed parts thereof.
10.4 APPLICABLE LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, as applied to contracts
executed and to be fully performed in such state. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any federal court
located in the state of Virginia or any Virginia state court if any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the state of Virginia or a Virginia state court.
10.5 PARTIES IN INTEREST
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, whether herein so expressed or not.
This Agreement shall not be assigned by any party hereto in whole or in part
without the prior written consent of the other parties hereto; provided,
however, that MIL may at any time assign all or part of its right, title and
interest in, to and under this Agreement and the documents, agreements and
supporting papers delivered in connection herewith to any Affiliate of MIL;
provided, further, that nothing contained in this Agreement shall prevent MIL
and its Affiliates, on the one hand, or Telcom and its Affiliates that it
Controls, on the other hand, from transferring direct or indirect interests in
McCaw S.A. or the WVA Subsidiaries, as the case may be, prior to the Closing
Date so long as on the Closing Date (i) MIL and its Affiliates own directly or
indirectly at least 50% of the capital stock of McCaw S.A. and (ii) Telcom and
its Affiliates that it Controls own directly or indirectly at least 50% of the
capital stock of each of the WVA Subsidiaries; provided, further that nothing
contained in this Agreement shall prevent Telcom and the other members of WVA
from transferring their interests in WVA prior to Closing to an intermediate
holding company Controlled by one or more members of WVA.
10.6 WAIVERS
Any terms, covenants, representations, warranties or agreements of any
party hereto may be waived at any time by an instrument in writing executed by
the party for whose benefit
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such terms exist. The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect its right at a
later time to enforce the same. No waiver by any party of any condition or
breach of any terms, covenants, representations, warranties or agreements
contained in this Agreement shall be effective unless in writing, and no waiver
in any one or more instances shall be deemed to be a further or continuing
waiver of any other condition or any breach of any other terms, covenants,
representations, warranties or agreements.
10.7 NOTICES
Any notice or demand desired or required to be given hereunder shall
be in writing and deemed given when personally delivered or deposited in the
mail, postage prepaid, sent certified or registered, or when delivered by
facsimile, and addressed as respectively set forth below, or to such other
address as any party shall have previously designated by such a notice. Any
notice so delivered personally or by facsimile, transmission confirmed, shall
be deemed to be received on the date of delivery and any notice so mailed shall
be deemed to be received three days after the date on which it was mailed.
Notices to the parties shall be sent as follows:
(a) To MIL and the MIL Parties:
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Attention: General Counsel
Fax: (206) 749-8384
with a copy to:
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Attention: Craig E. Sherman, Esq.
Fax: (206) 583-8500
File #: 24570-10
(b) To Telcom:
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Telcom Ventures, LLC
Arlington Courthouse Plaza II
2300 Clarendon Boulevard, Suite 800
Arlington, VA 22201
Attention: Dr. Rajendra Singh
Fax: (703) 243-4960
(with a copy to General Counsel)
and with a copy to:
Dewey Ballantine
1301 Avenue of The Americas
New York, NY 10019
Attention: William J. Phillips, Esq.
Fax: (212) 259-6333
10.8 COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 ENTIRE UNDERSTANDING
The terms set forth in this Agreement and the Confidentiality
Agreement are intended by the parties as a final, complete and exclusive
expression of the terms of their agreement and may not be contradicted,
explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms.
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IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
McCAW INTERNATIONAL, LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------
Its President
------------------------------------
McCAW INTERNATIONAL (DELAWARE), LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------
Its President
------------------------------------
McCAW INTERNATIONAL (HOLDINGS), LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------
Its President
------------------------------------
McCAW INTERNATIONAL (ARGENTINA) LLC
By /s/ KEITH D. GRINSTEIN
-----------------------------------------
Its President
------------------------------------
TELCOM VENTURES, LLC
By /s/ RAJENDRA SINGH
-----------------------------------------
Its President
------------------------------------
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WIRELESS VENTURES OF ARGENTINA, L.L.C.
By /s/ RAJENDRA SINGH
-----------------------------------------
Its President
------------------------------------
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<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 1 TO
JOINT VENTURE AGREEMENT
This Amendment No. 1 (this "Amendment") dated as of April 25, 1997 to
the Joint Venture Agreement dated as of October 28, 1996 (the "Agreement") by
and among McCaw International, Ltd. a Washington corporation ("MIL"), McCaw
International (Delaware), Ltd., a Delaware corporation and wholly owned
subsidiary of MIL ("MIL Delaware"), McCaw International (Holdings), Ltd., a
Cayman Islands company and 99%-owned subsidiary of MIL Delaware ("MIL
Holdings"), McCaw International (Argentina) LLC, a Cayman Islands limited life
company ("MIL Argentina") (MIL, MIL Delaware, MIL Holdings and MIL Argentina
being referred to individually as a "MIL Party" and collectively as the "MIL
Parties"), Telcom Ventures, LLC, a Delaware limited liability company
("Telcom"), and Wireless Ventures of Argentina, L.L.C., a Delaware limited
liability company which is 99%-owned by Telcom ("WVA").
RECITALS
A. MIL, MIL Argentina, Telcom and WVA entered into a Purchase Agreement
dated as of October 28, 1996 (the "Paging Agreement") relating to a proposed
joint venture in the paging business in Argentina, and the parties hereto
entered into the Agreement to provide for a subsequent combination of the
paging joint venture with a joint venture in the business of Specialized Mobile
Radio in Argentina ("SMR"), subject to obtaining the Authorization (as defined
in the Agreement).
B. The Authorization has been obtained, and the transactions contemplated
by the Paging Agreement have not yet been consummated.
C. Simultaneously herewith, MIL, MIL Argentina, Telcom and WVA are
entering into an agreement terminating, rescinding and canceling the Paging
Agreement.
D. MIL Argentina intends to transfer the capital stock of McCaw S.A. (as
defined in the Agreement) held by it to MIL Holdings.
E. The parties hereto desire to amend certain provisions of the Agreement
pursuant to Section 10.2 thereof in order to provide for the creation of a
holding company, McCaw International (Argentina), Ltd., a company organized
under the laws of the Cayman Islands (the "JVC"), to which MIL Holdings will
contribute the capital stock of McCaw S.A. and WVA will contribute the capital
stock of the WVA Subsidiaries (as defined in the Agreement), in each case in
exchange for 50% of the share capital of the JVC .
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
<PAGE> 2
ARTICLE I
AMENDMENTS
1.1 DEFINED TERMS
Unless otherwise defined herein, terms defined in the Agreement are
used herein as therein defined.
1.2. AMENDMENTS
(a) The definitions of "Telcom Invested Capital" and "Shareholders
Agreement" set forth in Section 1.1 of the Agreement are hereby deleted, the
following definitions of "Appraised Fair Market Value," "Claim Notice," "JVC,"
"Members Agreement," "MIL Interim Financial Statements," "WVA Interim Financial
Statements" and "WVA Invested Capital" are hereby inserted in Section 1.1 in
alphabetical order, and the definitions of "Accountants" and "Closing Date" set
forth in Section 1.1 of the Agreement are hereby amended and restated to read
in their entirety as follows:
"Accountants" has the meaning set forth in Section 2.3(d).
"Appraised Fair Market Value" has the meaning set forth in
Section 8.4.
"Claim Notice" has the meaning set forth in Section 8.3.
"Closing Date" has the meaning set forth in Section 2.2.
"JVC" means McCaw International (Argentina), Ltd., a company
organized under the laws of the Cayman Islands.
"Members Agreement" has the meaning set forth in Section 6.4.
"MIL Interim Financial Statements" has the meaning set forth
in Section 3.7.2.
"WVA Interim Financial Statements" has the meaning set forth
in Section 4.7.2.
"WVA Invested Capital" has the meaning set forth in Section
2.1.2(b)(iii).
(b) Article II of the Agreement is hereby amended and restated to
read in its entirety as follows (and Exhibit 2.1.1 in the form attached hereto
is hereby added to the Agreement):
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2.1 ESTABLISHMENT OF THE JOINT VENTURE
2.1.1 ESTABLISHMENT OF THE JVC
As soon as practicable after the date hereof, the
parties hereto shall cooperate to form the JVC as a company
organized under the laws of the Cayman Islands. The
Memorandum and Articles of Association of the JVC shall be
substantially in the form attached as Exhibit 2.1.1 hereto.
2.1.2 CAPITAL CONTRIBUTIONS
(a) At least three business days prior to the
Closing Date, MIL Holdings shall provide to WVA a good faith
estimate of the amounts described in Section
2.1.2(b)(iii)(x)(2), and WVA shall provide MIL Holdings a good
faith estimate of the amount described in Section
2.1.2(b)(iii)(y)(2).
(b) On or prior to the Closing Date:
(i) MIL Argentina shall transfer all of
the issued and outstanding capital stock of McCaw S.A. held by
it which is registered at such time before the Public Registry
of Commerce of the City of Buenos Aires to the JVC, and MIL
Holdings shall simultaneously transfer the one share of the
issued and outstanding capital stock of McCaw S.A. held by it
to the joint ownership of MIL Holdings and WVA;
(ii) WVA shall transfer all of the issued
and outstanding capital stock of the WVA Subsidiaries held by
it which is registered at such time before the Public Registry
of Commerce of the City of Buenos Aires to the JVC, and WVA
shall cause Carlos Zabalza to transfer the one share of the
capital stock of each of the WVA Subsidiaries held by him to
the joint ownership of MIL Holdings and WVA;
(iii) MIL Holdings or WVA, as the case may
be, shall contribute cash (the "True-Up") to the JVC, such
that after such cash capital contribution, (x) the sum of (1)
$10,000,000 (the value of the capital stock of McCaw S.A. as
of October 28, 1996), (2) all cash equity investments by MIL
Holdings and its Affiliates in McCaw S.A., less any cash
dividends or other cash or noncash distributions to MIL
Holdings and its Affiliates by McCaw S.A., in each case
between October 28, 1996 and the Closing Date, and (3) the
True-Up paid by MIL Holdings, if any ((x) (1), (2) and (3)
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together being referred to herein as the "MIL Holdings
Invested Capital"), is equal to (y) the sum of (1) $10,000,000
(the value of the capital stock of the WVA Subsidiaries as of
October 28, 1996), (2) all cash equity investments by the WVA
Securityholders and their Affiliates in the WVA Subsidiaries,
less any cash dividends or other cash or noncash distributions
to the WVA Securityholders and their Affiliates by the WVA
Subsidiaries, in each case between October 28, 1996 and the
Closing Date, and (3) the True-Up paid by WVA, if any ((y)
(1), (2) and (3) together being referred to herein as the "WVA
Invested Capital"; the WVA Invested Capital or the MIL
Holdings Invested Capital being referred to together or
separately as the "Invested Capital"); provided that "Invested
Capital" shall exclude contributed services or intangible
rights in excess of the cash that would have been paid to the
party contributing such services or rights in an arm's-length
transaction with a non-affiliate;
(iv) to the extent that WVA shall have,
prior to the Closing Date, made capital contributions to the
WVA Subsidiaries or MIL Holdings shall have made capital
contributions to McCaw S.A., in each case which shall not have
been formally registered as capital increases of the relevant
company, the parties hereto shall treat such capital
contributions for purposes of clause (iii) above as if the
corresponding capital increases had been made prior to the
Closing Date, and WVA and MIL Holdings each hereby assign all
rights to such capital contributions to the JVC and agree to
take all actions necessary to cause the registration of such
capital contributions as capital increases in the name of the
JVC;
(v) the JVC shall repurchase one share
of its share capital from each of Paul Lumsden and Henry
Smith, in each case for US$0.001; and
(vi) the JVC shall issue 20,898,600 fully
paid shares of its share capital to each of MIL Holdings and
WVA in exchange for their respective Invested Capital
contributed to the JVC pursuant to Sections 2.1.2(b)(i)
through (iii), equal in each case to 50% of the issued and
outstanding share capital of the JVC.
2.1.3 INSTRUMENTS OF SALE AND TRANSFER; FURTHER
ASSURANCES
On or prior to the Closing Date:
(a) MIL Holdings shall deliver to the JVC
evidence that all necessary action has been taken to vest in
the JVC, MIL
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Holdings and WVA, on the Closing Date, all MIL Holdings'
right, title and interest to all of the capital stock of McCaw
S.A., all as described in Section 2.1.2(b)(i), including but
not limited to (i) a copy of the letters delivered by MIL
Holdings and MIL Argentina to McCaw S.A. notifying McCaw S.A.
of the transfers of the capital stock of McCaw S.A. described
in Section 2.1.2(b)(i) and requiring the registration of such
transfers in the registry book of McCaw S.A., with signatures
duly certified by a notary public and legalized by the
"Apostille" procedure, (ii) stock certificates of McCaw S.A.
properly endorsed to and registered in the name of the JVC,
MIL Holdings and WVA and (iii) evidence of registration of
such transfers in the registry book of McCaw S.A.
(b) WVA shall deliver to the JVC evidence that
all necessary action has been taken to vest in the JVC, MIL
Holdings and WVA, on the Closing Date, all WVA's right, title
and interest in and to all of the capital stock of the WVA
Subsidiaries, all as described in Section 2.1.2(b)(ii),
including but not limited to (i) a copy of the letters
delivered by WVA to each of the WVA Subsidiaries notifying
each of them of the transfers of their respective capital
stock described in Section 2.1.2(b)(ii) and requiring the
registration of such transfers in their respective registry
books with signature duly certified by a notary public and
legalized by the "Apostille" procedure, (ii) stock
certificates of the WVA Subsidiaries properly endorsed to and
registered in the name of the JVC, MIL Holdings and WVA and
(iii) evidence of registration of such transfers in the
registry books of the WVA Subsidiaries.
2.2 CLOSING
The closing (the "Closing") of the transactions
contemplated hereby shall take place on May 6, 1997 (the
"Closing Date") at the offices of MIL, 1191 Second Avenue,
Suite 1600, Seattle, Washington, with effect as of the close
of business on April 30, 1997, or at such other place and time
as MIL and Telcom may agree.
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2.3 POST-CLOSING ADJUSTMENTS
(a) As promptly as practicable, but no later than
30 days after the Closing Date, MIL shall provide to Telcom
(i) a statement certifying its calculation of the MIL Holdings
Invested Capital and (ii) a balance sheet of McCaw S.A. as of
the Closing Date (the "MIL Closing Balance Sheet"), both of
which shall have been reviewed by McCaw S.A.'s regular
independent accountants, together with detailed support for
such calculation, and Telcom shall provide to MIL (i) a
statement certifying its calculation of the WVA Invested
Capital and (ii) a consolidated balance sheet of the WVA
Subsidiaries as of the Closing Date (the "WVA Closing Balance
Sheet," and together with the MIL Closing Balance Sheet, the
"Closing Balance Sheets"), both of which shall have been
reviewed by KPMG Peat Marwick, together with detailed support
for such calculation. All calculations shall be derived from
the respective financial statements of McCaw S.A. and the WVA
Subsidiaries, which shall have been prepared in accordance
with U.S. generally accepted accounting principles and with
accounting policies and practices consistent with those used
in preparation of the MIL Argentina Financial Statements and
the WVA Financial Statements, respectively. MIL Holdings'
regular independent accountants shall verify that McCaw S.A.
had no long-term liabilities and KPMG Peat Marwick shall
verify that the WVA Subsidiaries had no long-term liabilities,
in each case as of the Closing Date.
(b) To the extent that the either party's (i)
Closing Balance Sheet indicates that the sum of the current
liabilities and long-term liabilities of such party exceeded
the current assets of such party as of the Closing Date by
more than US$1,000,000 and/or (ii) certified statement of
Invested Capital indicates that the amount of such party's
Invested Capital used for purposes of the calculations set
forth in Section 2.1.2(b)(iii) exceeded the amount of such
party's Invested Capital as of the Closing Date as shown on
such certified statement of Invested Capital (the aggregate
amount of such party's excesses being referred to herein as
such party's "Shortfall," and such party being referred to
herein as the "Deficient Party"), the Deficient Party shall,
subject to paragraphs (c) through (f) below, pay the JVC an
amount equal to the Deficient Party's Shortfall in cash within
15 days of the Deficient Party's delivery of its Closing
Balance Sheet.
(c) If one party (the "Disagreeing Party")
disagrees with the other party's calculations described in
Section 2.3(b), the
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Disagreeing Party may, within 30 days of the delivery of the
other party's Closing Balance Sheet, deliver a notice to the
other party disagreeing with such calculation and setting
forth its calculation. Any such notice of disagreement shall
specify those items or amounts as to which the Disagreeing
Party disagrees, and the Disagreeing Party shall be deemed to
have agreed with all other items and amounts contained in the
other party's Closing Balance Sheet.
(d) If a notice of disagreement shall be
delivered by a Disagreeing Party pursuant to Section 2.3(c),
MIL and Telcom shall, during the 15 days following such
delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be
required, the amount of the other party's Shortfall, which
amount shall not be less than the amount thereof shown in the
other party's calculations delivered pursuant to Section
2.3(b) or more than the amount thereof shown in the
Disagreeing Party's calculation delivered pursuant to Section
2.3(c). If, during such period, MIL and Telcom are unable to
reach such agreement, the MIL Parties, on the one hand, and
Telcom and WVA, on the other hand, shall promptly thereafter
cause the JVC to engage an independent accounting firm of
nationally recognized standing reasonably satisfactory to MIL
and Telcom (which shall not have any material relationship
with MIL or Telcom or any of their Affiliates (the
"Accountants")) promptly to review this Agreement and the
disputed items or amounts for the purpose of calculating the
other party's Shortfall. The other party and its Affiliates
shall provide all detailed documentation necessary to support
the computation underlying the other party's calculation of
the other party's Shortfall. In making such calculation, the
Accountants shall consider for change only those items or
amounts in the other party's Closing Balance Sheet or
statement of Invested Capital or the other party's calculation
of its own Shortfall as to which the Disagreeing Party has
disagreed. The Accountants shall deliver to MIL and Telcom,
as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon MIL
and Telcom. The cost of such review and report shall be borne
(i) by the Disagreeing Party if the difference between the
Accountants' calculation of the other party's Shortfall and
the Disagreeing Party's calculation of the other party's
Shortfall delivered pursuant to Section 2.3(c) is greater than
the difference between the Accountants' calculation of the
other party's Shortfall and the other party's calculation of
the other party's Shortfall delivered pursuant to Section
2.3(b), (ii) by the other party if the
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<PAGE> 8
first such difference is less than the second such difference,
and (iii) otherwise equally by MIL and Telcom.
(e) If the Accountants shall have calculated
MIL's or Telcom's Shortfall, MIL or Telcom, as the case may
be, agrees to pay the JVC the amount of any Shortfall, as
calculated by the Accountants pursuant to Section 2.3(d), in
cash within ten days of receipt of the Accountants'
calculation, to the extent such payment has not already been
made pursuant to Section 2.3(b). Any Shortfall may be
satisfied, at the option of the party having an obligation to
pay a Shortfall, by payment of cash to the JVC or by the
exercise of the option to require the Company to repurchase
shares of the Company's share capital pursuant to Section 6 of
the Members Agreement.
(f) MIL and Telcom agree that they will, and
agree to cause their respective independent accountants, MIL
Holdings, MIL Argentina, McCaw S.A., WVA and the WVA
Subsidiaries to, cooperate and assist in the Accountants'
review of the Closing Balance Sheets, including, without
limitation, the making available to the extent necessary of
books, records, work papers and personnel.
(c) Section 3.7 of the Agreement is hereby amended and restated to
read in its entirety as follows:
3.7 FINANCIAL STATEMENTS
3.7.1 GENERAL
MIL has previously delivered to Telcom consolidated financial
statements of MIL Argentina and McCaw S.A. as of and for the
year ended December 31, 1995 and as of and for the nine months
ended September 30, 1996 (the "MIL Argentina Financial
Statements"). The MIL Argentina Financial Statements present
fairly the consolidated financial position and results of
operations of MIL Argentina and McCaw S.A. as of the dates and
for the periods indicated therein in accordance with U.S.
generally accepted accounting principles consistently applied,
except that the MIL Argentina Financial Statements for the
nine months ended September 30, 1996 may be subject to normal
year-end adjustments of a type consistent with prior years and
do not contain footnotes.
3.7.2 INTERIM FINANCIAL STATEMENTS
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<PAGE> 9
MIL has delivered or will deliver to Telcom prior to the
Closing monthly financial statements of McCaw S.A. for periods
subsequent to September 30, 1996 (the "MIL Interim Financial
Statements"). The financial statements of McCaw S.A. as of
and for the three months ended March 31, 1997 are attached in
Schedule 3.7. The MIL Interim Financial Statements present
fairly the financial position and results of operations of
McCaw S.A. as of the dates and for the periods indicated
therein in accordance with U.S. generally accepted accounting
principles consistently applied, subject to normal year-end
adjustments of a type consistent with prior years and without
footnotes.
(d) The first sentence of Section 3.12(a) of the Agreement is
hereby amended and restated to read in its entirety as follows:
MIL has delivered or will deliver to Telcom prior to the
Closing Date true and complete copies of all material leases,
subleases, rental agreements, contracts of sale or licenses of
any portion of the personal property (the "McCaw S.A. Personal
Property") owned, leased or rented by McCaw S.A.
(e) The first sentence of Section 3.22 of the Agreement is hereby
amended and restated to read in its entirety as follows:
None of the MIL Parties has retained any broker or finder in
connection with the transactions contemplated by this
Agreement.
(f) The following new Section 3.24 is hereby inserted at the end
of Article III of the Agreement:
3.24 NO PLAN OR INTENTION TO TRANSFER
None of the MIL Parties has any plan or intention to
sell, transfer or otherwise dispose of any of the share
capital of the JVC received by MIL Holdings at the Closing.
(g) The second sentence of Section 4.1 of the Agreement is hereby
amended and restated to read in its entirety as follows:
WVA and each of the WVA Subsidiaries has all corporate power
and authority or limited liability company power and authority
required to own, operate and lease its properties and assets
and to carry on its business (including the SMR business and
paging business, when applicable) as now conducted except
where such failure to have corporate power and authority or
limited liability
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<PAGE> 10
company power and authority would not have a material adverse
effect on WVA and the WVA Subsidiaries, taken as a whole.
(h) Section 4.7 of the Agreement is hereby amended and restated to
read in its entirety as follows:
4.7 FINANCIAL STATEMENTS
4.7.1 GENERAL
Telcom has previously delivered to MIL consolidated financial
statements of WVA and the WVA Subsidiaries as of and for the
year ended December 31, 1995 and as of and for the nine months
ended September 30, 1996 (the "WVA Financial Statements").
The WVA Financial Statements present fairly the consolidated
financial position and results of operations of WVA and the
WVA Subsidiaries as of the dates and for the periods indicated
therein in accordance with U.S. generally accepted accounting
principles consistently applied; except that the WVA Financial
Statements for the nine months ended September 30, 1996 may be
subject to normal year-end adjustments of a type consistent
with prior years and do not contain footnotes.
4.7.2 INTERIM FINANCIAL STATEMENTS
Telcom has delivered or will deliver to MIL prior to the
Closing monthly consolidated financial statements of the WVA
Subsidiaries for periods subsequent to September 30, 1996 (the
"WVA Interim Financial Statements"). The consolidated
financial statements of the WVA Subsidiaries as of and for the
three months ended March 31, 1997 are attached in Schedule
4.7. The WVA Interim Financial Statements present fairly the
consolidated financial position and results of operations of
the WVA Subsidiaries as of the dates and for the periods
indicated therein in accordance with U.S. generally accepted
accounting principles consistently applied; subject to normal
year-end adjustments of a type consistent with prior years and
without footnotes.
(i) Section 4.9 of the Agreement is hereby amended and restated to
read in its entirety as follows:
There are no long-term liabilities of any WVA Subsidiary of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that are required by
generally accepted accounting principles to be reflected in a
balance sheet or in the notes thereto, and there is no
existing condition,
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<PAGE> 11
situation or set of circumstances that is reasonably likely to
result in such a liability, other than liabilities provided
for in the WVA Financial Statements or disclosed on Schedule
4.9. Except as disclosed on Schedule 4.9, none of the
liabilities of the WVA Subsidiaries are past due, and all such
liabilities were incurred in the ordinary course of business
on terms consistent with past practices.
(j) Section 4.10 of the Agreement is hereby amended and restated
to read in its entirety as follows:
Except as disclosed on Schedule 4.10, there are no
intercompany balances, and there are no and have not been any
intercompany transactions, between Telcom and its Affiliates
on the one hand and the WVA Subsidiaries on the other hand.
(k) Paragraphs (a), (d) and (g) of Section 4.12 of the Agreement
are hereby amended and restated to read in their entirety as follows:
(a) Telcom has delivered or will deliver to MIL prior to
the Closing Date true and complete copies of all material
leases, subleases, rental agreements, contracts of sale or
licenses of any portion of the personal property (the "WVA
Personal Property") owned, leased or rented by the WVA
Subsidiaries. The WVA Subsidiaries have legal ownership or
other legal rights to use all property used in the conduct of
the WVA Business as presently conducted. Schedule 4.12(a)
lists all leased WVA Personal Property with a monthly lease
payment (or annual lease payment prorated on a monthly basis)
in excess of US$1,000.
(d) Except as listed on Schedule 4.12(d), the WVA Assets
are free and clear of all Liens (other than Permitted Liens),
and, other than leased WVA Assets, each of the WVA
Subsidiaries has good and marketable title thereto. The WVA
Subsidiaries have valid leasehold interests in all leased
assets.
(g) No assets used by the WVA Subsidiaries are owned by
any Affiliate of the WVA Subsidiaries (excluding the WVA
Subsidiaries).
(l) Section 4.15 of the Agreement is hereby amended and restated
to read in its entirety as follows:
Telcom has provided or will provide MIL prior to the Closing
Date a copy of, and has made available or will make available
for review by MIL prior to the Closing Date originals of, all
material contracts, oral or written, to which the WVA
Subsidiaries are a party,
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<PAGE> 12
including, without limitation, security agreements,
conditional sale agreements and instruments relating to the
borrowing of money and all material contracts to which WVA is
a party that directly relate to the WVA Business or the WVA
Assets. Schedule 4.15 lists all such contracts. All such
contracts are valid and in full force and effect, each of WVA
and the WVA Subsidiaries, as the case may be, has performed
all material obligations imposed upon it thereunder, and there
are, under any of such contracts, no defaults or events of
default by WVA or any WVA Subsidiary, as the case may be, or,
to the knowledge of Telcom, or any other party thereto, that
would materially adversely affect the business, assets or
financial condition of the WVA Subsidiaries, taken as a whole,
or which could reasonably be expected to materially adversely
affect the business prospects of the WVA Subsidiaries, taken
as a whole. None of the WVA Securityholders, WVA or any WVA
Subsidiary has received notice, nor is any WVA Securityholder,
WVA or any WVA Subsidiary otherwise aware, that any party to
any such contract intends to cancel, terminate or refuse to
renew such contract or to exercise or decline to exercise any
option or right thereunder.
(m) Section 4.16 of the Agreement is hereby amended and restated
to read in its entirety as follows:
Except as described on Schedule 4.16, there are no claims
pending or, to the knowledge of the WVA Securityholders, WVA
or any WVA Subsidiary, threatened against any WVA
Securityholder, WVA or any WVA Subsidiary with respect to the
WVA Business, before or by any governmental or nongovernmental
department, commission, board, bureau, agency, instrumentality
or any other Person, which Claims are reasonably likely to be
resolved adversely to any of the WVA Securityholders, WVA or
any of the WVA Subsidiaries, and which if so resolved would
have a material adverse effect on the WVA Subsidiaries, taken
as a whole. There are no outstanding or unsatisfied
judgments, orders, decrees or stipulations to which any WVA
Securityholder, WVA or any WVA Subsidiary is a party that
involve the transactions contemplated hereby or that could
individually or in the aggregate have a material adverse
effect upon the business, assets, financial condition or
business prospects of the WVA Subsidiaries, taken as a whole.
(n) The first two paragraphs and the first sentence of the third
paragraph of Section 4.18 of the Agreement are hereby amended and restated to
read in their entirety as follows:
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<PAGE> 13
The WVA Subsidiaries own, or have full and unrestricted rights
within Argentina (to the extent available under Argentine law)
to:
(a) all material trademarks, trade names and
copyrights, including, but not limited to, "AirLink," now used
by the WVA Subsidiaries, and
(b) all material formulae, franchises, processes,
techniques and manufacturing know-how and all trademarks,
trade names and copyrights used in connection with services
now being or intended to be offered and sold by the WVA
Subsidiaries, as the case may be, except in each case where
the failure to own or have full and unrestricted rights within
Argentina to such items would not have a material adverse
effect on the WVA Subsidiaries, taken as a whole.
Where registration of the intellectual property listed in
clauses (a) and (b) above is necessary in order to have full
and unrestricted rights to such intellectual property, such
intellectual property has been duly registered with the proper
authorities in Argentina. The WVA Subsidiaries as a result of
the execution of this Agreement or the performance of their
obligations hereunder will not be deprived of any rights which
the WVA Subsidiaries would otherwise possess in any of the
intellectual property listed in clauses (a) and (b) above.
A true and complete list of (i) all patents, patent
applications, patent agreements, license agreements,
proprietary information agreements, confidentiality
agreements, invention agreements, consulting agreements,
trademark registrations and applications therefor, trade
names, service marks and copyright registrations and
applications therefor to which any WVA Subsidiary is a party
or that are used in the operation of the WVA Business and (ii)
any interference actions or adverse claims made or threatened
in respect thereof and any claims made or threatened for
alleged infringement thereof are specifically set forth on
Schedule 4.18.
(o) The second sentence of Section 4.20 of the Agreement is hereby
amended and restated to read in its entirety as follows:
Except where noncompliance would not individually or in the
aggregate have a material adverse effect on the WVA
Subsidiaries, taken as a whole, the WVA Securityholders, WVA
and the WVA Subsidiaries have complied, and are in compliance
with, all presently existing local and national Argentine
laws, rules,
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<PAGE> 14
ordinances, decrees and orders applicable to the operation of
the WVA Business or to their owned or leased properties.
(p) The following new Section 4.24 is hereby inserted at the end
of Article IV of the Agreement:
4.24 NO PLAN OR INTENTION TO TRANSFER
WVA has no plan or intention to sell, transfer or
otherwise dispose of any of the share capital of the JVC
received by WVA at the Closing.
(q) Section 5.1(a) of the Agreement is hereby amended and restated
to read in its entirety as follows:
(a) All representations and warranties herein
shall apply to any exhibits, schedules and certificates
delivered by Telcom or any officer thereof to any MIL Party,
and each such certificate shall be deemed to be a
representation by the WVA Securityholders as to the matters
set forth therein. All representations and warranties herein
shall apply to any exhibits, schedules and certificates
delivered by any MIL Party or any officer thereof to Telcom or
WVA, and each such certificate shall be deemed to be a
representation by the MIL Party as to the matters set forth
therein.
(r) The parenthetical phrase in Section 5.2 of the Agreement is
hereby amended and restated to read in its entirety as follows:
(and WVA shall cause the WVA Subsidiaries to and the MIL
Parties shall cause McCaw S.A. to)
(s) Section 5.3 of the Agreement is hereby amended and restated to
read in its entirety as follows:
5.3 ADVICE OF CLAIMS
From October 28, 1996 to and including the Closing
Date, each of Telcom and WVA shall (and shall cause the WVA
Subsidiaries to) promptly advise MIL in writing if it has
notice or knowledge of the commencement or threat of any
Claims against or affecting WVA or the WVA Subsidiaries or any
rulings, decrees or other material developments in any Claim
described on Schedule 4.16 or arising after October 28, 1996.
From October 28, 1996 to and including the Closing
Date, the MIL Parties shall (and shall cause McCaw S.A. to)
promptly advise Telcom in writing if they have notice or
knowledge of the
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<PAGE> 15
commencement or threat of any Claims against or affecting
McCaw S.A. or any rulings, decrees or other material
developments in any Claim described on Schedule 3.16 or
arising after October 28, 1996.
(t) The first sentence of Section 5.4.2 of the Agreement is hereby
amended and restated to read in its entirety as follows:
The MIL Parties shall, and shall cause McCaw S.A. to,
to the best of their respective abilities, (a) preserve and
protect the right of McCaw S.A. to use all the McCaw S.A.
Channels as currently intended and (b) take action to satisfy
all applicable build-out and loading requirements.
(u) The last sentence of Section 5.5 of the Agreement is hereby
amended and restated to read in its entirety as follows:
The MIL Parties further agree that they will cause McCaw S.A.
to comply with the preceding sentence, and Telcom and WVA
further agree that they will cause the WVA Subsidiaries to
comply with the preceding sentence.
(v) The reference to "MIL" in the second sentence of Section
5.6(b) is hereby amended to read "The MIL Parties."
(w) The following new sentences are hereby inserted at the end of
Section 5.8 of the Agreement:
In addition, all parties intend that each of the transfers by
MIL Holdings and WVA of the stock of McCaw S.A. and the WVA
Subsidiaries to the JVC, respectively, will qualify as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The
parties agree to cooperate fully with the other parties and
their legal counsel and accountants in connection with any
filings or notifications required to be made with respect to
Taxes, including, but not limited to, filings and
notifications required to be made pursuant to Sections 351,
358, 367, 368 and 6038B of the Code. In addition, the parties
further agree that they and the JVC will treat the JVC as a
corporation for U.S. federal income tax purposes and unless
the parties agree otherwise (i) all filings or notifications
required to be made with respect to U.S. federal taxes shall
be made consistent with such treatment and (ii) no action,
including any liquidation or merger, shall be taken by the JVC
which would result in it (or any successor) being treated as
other than a corporation for U.S. federal income tax purposes.
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<PAGE> 16
(x) The following new Section 5.9 is hereby inserted in the
Agreement immediately after Section 5.8:
5.9 MANAGEMENT INFORMATION
From the date of this Agreement to and including the
Closing Date, (a) WVA shall (and shall cause the WVA
Subsidiaries to) provide to MIL all material information
specifically requested by the MIL Parties regarding the
operation of the WVA Business during such period and (b) the
MIL Parties shall (and shall cause McCaw S.A. to) provide to
Telcom all material information specifically requested by
Telcom regarding the operation of the McCaw S.A. Business
during such period. Any information provided pursuant to this
Section 5.9 shall be subject to the Confidentiality Agreement.
(y) Section 6.4 of the Agreement is hereby amended and restated to
read in its entirety as follows (and Exhibit 6.4 to the Agreement is hereby
amended and restated as attached hereto):
6.4 MEMBERS AGREEMENT
MIL Holdings, WVA and the JVC shall have entered into
a Members Agreement (the "Members Agreement") in substantially
the form attached hereto as Exhibit 6.4.
(z) Section 6.13 of the Agreement is hereby deleted in its
entirety.
(aa) Section 7.4 of the Agreement is hereby amended and restated to
read in its entirety as follows:
7.4 MEMBERS AGREEMENT
MIL Holdings, WVA and the JVC shall have entered into
the Members Agreement in substantially the form attached
hereto as Exhibit 6.4.
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<PAGE> 17
(bb) Section 7.5 of the Agreement is hereby amended and restated to
read in its entirety as follows:
7.5 MIL PARTIES OFFICERS' CERTIFICATE
Telcom shall have received certificates of the
President and Secretary of MIL, MIL Argentina and MIL
Holdings, dated the Closing Date, in substantially the form
attached hereto as Exhibit 7.5, certifying that (a) all the
conditions set forth in this Article VII have been fulfilled,
(b) the representations and warranties of the MIL Parties
herein are true and correct as of the Closing Date, and (c)
such officers reasonably believe that all loading requirements
with respect to McCaw S.A. Licenses required to be met within
90 days following the Closing Date will be met.
(cc) Section 7.11 of the Agreement is hereby deleted in its
entirety and Section 7.12 is hereby renumbered as Section 7.11.
(dd) Sections 8.1 and 8.2 of the Agreement are hereby amended and
restated to read in their entirety as follows:
8.1 INDEMNIFICATION BY WVA SECURITYHOLDERS
Subject to and in accordance with Section 8.4, Telcom
and WVA jointly and severally agree to indemnify and hold
harmless, on an after-tax basis, the JVC, its successors and
permitted assigns, and the officers, directors, affiliates,
employees, Controlling Persons and agents of the foregoing and
to hold each such party harmless against and in respect of any
and all losses, damages, costs and expenses, including
attorneys' fees ("Damages"), incurred by any such party by
reason of (a) a breach of any of the representations or
warranties made in this Agreement by the WVA Securityholders
or WVA, (b) the breach of any covenant contained herein by the
WVA Securityholders or WVA prior to the Closing or (c) the
breach of undertakings of the WVA Securityholders or WVA in
this Agreement or any other document, supplement, instrument,
agreement, letter, amendment or assignment executed in
connection herewith, or in any officers' certificate or other
certificate delivered to the JVC, MIL or its Affiliates at or
in connection with the Closing; provided that neither Telcom
nor WVA shall be obligated to make any payments under this
Section 8.1 unless and until the amount of Damages exceeds
US$100,000 after which Telcom and WVA, jointly and severally,
shall be obligated to pay the entire amount of such Damages,
including the first US$100,000; provided, further, that
(subject to
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<PAGE> 18
such US$100,000 threshold) Telcom and WVA, jointly and
severally, shall indemnify and hold harmless, on an after-tax
basis, MIL and MIL Holdings, their respective successors and
permitted assigns, and the officers, directors, affiliates,
employees, Controlling Persons and agents of the foregoing
(the "MIL Indemnified Parties") against and in respect of any
and all Damages incurred by any of the MIL Indemnified Parties
which were incurred by reason of the matters described in
clauses (a), (b) or (c) of this sentence and which are not
remedied by the indemnification of the JVC pursuant to this
Section 8.1.
8.2 INDEMNIFICATION BY MIL
Subject to and in accordance with Section 8.4, the
MIL Parties jointly and severally agree to indemnify and hold
harmless, on an after-tax basis, the JVC, its successors and
permitted assigns, and the officers, directors, affiliates,
employees, Controlling Persons and agents of the foregoing and
to hold each such party harmless against and in respect of any
and all Damages incurred by such party by reason of (a) breach
of any of the representations or warranties made in this
Agreement by any of the MIL Parties, (b) the breach of any
covenant contained herein by any of the MIL Parties prior to
the Closing or (c) the breach of undertakings of any of the
MIL Parties in any other document, supplement, instrument,
agreement, letter, amendment or assignment executed in
connection herewith, or in any officers' certificate or other
certificate delivered to the JVC, Telcom or its Affiliates at
or in connection with the Closing; provided that no MIL Party
shall be obligated to make any payments under this Section 8.2
unless and until the amount of Damages exceeds US$100,000,
after which the MIL Parties, jointly and severally, shall be
obligated to pay the entire amount of such Damages, including
the first US$100,000; provided, further, that (subject to such
US$100,000 threshold) the MIL Parties, jointly and severally,
shall indemnify and hold harmless, on an after-tax basis,
Telcom and WVA, their respective successors and permitted
assigns, and the officers, directors, affiliates, employees,
Controlling Persons and agents of the foregoing (together, the
"WVA Indemnified Parties") against and in respect of any and
all Damages incurred by any of the WVA Indemnified Parties
which were incurred by reason of the matters described in
clauses (a), (b) or (c) of this sentence and which are not
remedied by the indemnification of the JVC pursuant to this
Section 8.2.
(ee) Section 8.3 of the Agreement is hereby amended and restated to
read in its entirety as follows:
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<PAGE> 19
8.3 PROCEDURE
Promptly after receipt by any indemnified party of
notice of any claim, action or proceeding which may give rise
to a right of indemnification hereunder, such indemnified
party (the "Indemnitee") will give written notice thereof (the
"Claim Notice") promptly (and, if the matter for which the
Indemnitee is seeking indemnification hereunder arises from a
breach of a representation and warranty, in no event later
than the last survival date of the representation and warranty
for the breach of which indemnification is sought) to the
party or parties bearing the indemnification obligation (the
"Indemnifying Party"); provided that the failure to give
notice in accordance with this Section 8.3 shall not prevent
enforcement hereunder if such failure is not prejudicial to
the Indemnifying Party. If any of the MIL Parties believes
that the JVC has a right of indemnification hereunder from
Telcom or WVA, or if Telcom or WVA believes that the JVC has a
right of indemnification hereunder from any of the MIL
Parties, then the MIL Parties, Telcom and WVA shall cause the
JVC to take all action necessary to enforce such right. The
Indemnifying Party shall have the right to participate in the
defense of any claim, action or proceeding which may give rise
to a right of indemnification hereunder, and, to the extent
the Indemnifying Party so desires, jointly with any other
Indemnifying Party similarly notified, to assume the defense
thereof with counsel mutually satisfactory to such parties and
the Indemnitee, in which case every Indemnitee shall have the
right to participate through counsel of its own choosing (and
whose fees shall be paid by such Indemnitee). If the
Indemnifying Party and the Indemnitee agree upon mutually
satisfactory counsel to assume the defense, the Indemnifying
Party shall assume the reasonable fees and expenses of such
counsel and shall no longer assume the fees and expenses of
any other attorney representing the Indemnitee. If the
Indemnifying Party undertakes to compromise or defend any such
liability, the Indemnifying Party shall so notify the
Indemnitee in writing promptly of its intention to do so, and
the Indemnitee shall cooperate with the Indemnifying Party and
its counsel in the compromising of or the defending against
any such liabilities or claims, at the expense of the
Indemnifying Party. Such cooperation shall include, but shall
not be limited to, the provision to the Indemnifying Party of
reasonable access to the Indemnitee's business records,
research, documents and employees as they relate to the
defense of any indemnified claim. In response to a bona fide
settlement offer, the Indemnifying Party may settle the
monetary portion of an indemnifiable matter without the
consent of the Indemnitee provided that such settlement
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<PAGE> 20
(i) includes as an unconditional term thereof the giving by
the plaintiff or claimant to the Indemnitee of a release from
all liability in respect of such claim or litigation, (ii)
provides that the Indemnitee does not admit any guilt or fault
with respect to the subject matter of such claim or
litigation, and (iii) does not involve injunctive or other
equitable relief.
(ff) Section 8.4 of the Agreement is hereby amended and restated to
read in its entirety as follows:
8.4 METHOD OF PAYMENT
The Indemnifying Party may satisfy its obligations
under this Article VIII in cash or at its option in shares in
the share capital of the JVC at their Appraised Fair Market
Value (as defined below). The Indemnifying Party and the
Indemnitees agree that in any case of indemnification
hereunder where the JVC is damaged, payment will be made to
the JVC; provided, however, that to the extent any Indemnitee
is not made whole by such payment, such Indemnitee shall still
retain a right to indemnification under this Section 8.
For purposes of this Agreement, "Fair Market Value"
of any of the share capital of the JVC means the price that an
unrelated third party would pay if it were to acquire all
outstanding equity interests of the JVC on the date the Claim
Notice is deemed to be received by the Indemnifying Party in
an arm's-length transaction, assuming that such equity
interests were being sold in a manner designed to attract all
possible participants and without taking into consideration a
control premium or minority discount, multiplied by the
percentage of the aggregate share capital represented by the
amount of share capital in question on a fully-diluted basis.
The "Appraised Fair Market Value" shall be determined in
accordance with the following procedures: the Indemnifying
Party shall select an investment banking firm of recognized
national standing (the "First Appraiser"), which shall
appraise the Fair Market Value and deliver its appraisal to
the JVC, every Indemnitee and the Indemnifying Party, within
60 days of its engagement. If the Indemnitees (represented by
one Person designated by the mutual consent of the Indemnitees
(the "Representative")) shall disagree with the Fair Market
Value determined by such appraiser, then the Representative
shall have the right to appoint an additional investment
banking firm of recognized national standing (the "Second
Appraiser"). If the Representative does not engage a Second
Appraiser within 30 days of the First
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<PAGE> 21
Appraiser's delivery of its appraisal, the First Appraiser's
appraisal shall be the Appraised Fair Market Value. If the
Representative engages a Second Appraiser, the Second
Appraiser will appraise the Fair Market Value, and deliver its
appraisal to the JVC, the Indemnitees and the Indemnifying
Party, within 60 days of its engagement. If the difference
between the two appraisals is less than 20% of the lower
appraised value, then the Appraised Fair Market Value shall be
the average of the two appraisals. If such difference is
greater than or equal to 20% of the lower appraised value, the
two appraisers shall engage a third independent investment
banking firm of recognized national standing (the "Third
Appraiser"), which shall appraise the Fair Market Value within
60 days of its engagement. The Appraised Fair Market Value
shall be the average of the two appraised values that are
closest in absolute U.S. dollars. All appraisals of Fair
Market Value shall be as of the date of notice of exercise of
the right. The expenses of the First Appraiser shall be borne
by the Indemnifying Party; the expenses of the Second
Appraiser, if any, shall be borne by the Indemnitees, jointly
and severally; and the expenses of the Third Appraiser, if
any, shall be borne equally by the Indemnifying Party on the
one hand and the Indemnitees, jointly and severally among
themselves, on the other hand.
(gg) The following Section 8.5 is hereby inserted at the end of
Article VIII of the Agreement:
8.5 THIRD PARTY BENEFICIARY
The JVC is intended to be a third party beneficiary
of (i) the representations, warranties and covenants in this
Agreement of each of Telcom, WVA and the MIL Parties and (ii)
the undertakings of each of Telcom, WVA and the MIL Parties in
any other document, supplement, instrument, agreement, letter,
amendment or assignment executed in connection herewith or in
any officers' certificate delivered to the JVC, Telcom or its
Affiliates or MIL or its Affiliates at or in connection with
the Closing. As such, the JVC shall be entitled to enforce
any such representation, warranty, covenant or undertaking as
if it were a party to this Agreement, and the JVC shall be
entitled to seek indemnification for, and to recover any
damages suffered by it, in respect of any breach of any such
representation, warranty, covenant or undertaking, including
without limitation, recovery for any breach that results in
the value of the JVC as of the Closing Date being less than
the sum of the MIL Holdings Invested Capital and the WVA
Invested Capital.
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<PAGE> 22
(hh) The following new Article X is inserted after Article IX and
the former Article X is renumbered to be Article XI and Sections 10.1 to 10.9
are renumbered to be Sections 11.1 to 11.9.
ARTICLE X
NONCOMPETITION
10.1 NONCOMPETITION
Each of MIL and Telcom agree that, until one year
following termination of the Members Agreement with respect to
all Affiliates Controlled by such party, neither such party
nor any Affiliate Controlled by such party shall in any way,
by action or inaction, directly or indirectly, for itself or
for the benefit of any other Person, own, manage, operate,
join, Control or participate in the ownership, management,
operation or Control of any Person that competes with the JVC
or any Affiliate thereof, or agrees to do any of the
foregoing, in the business of paging or SMR in Argentina,
other than wireless radio engineering, design or program
management services and the manufacture and sale of related
software and hardware products. In addition, neither any
party nor any Affiliate Controlled by such party may maintain
an equity interest in any Person (other than the JVC) in which
it owns an equity interest as of the date hereof, which equity
interest entitles any such party or any Affiliate Controlled
by such party to control of policymaking or day-to-day
operations of such Person or in connection with which any such
party or any Affiliate Controlled by such party has a
representative on the board of directors, if such Person
elects to engage in the business of cellular communications or
Personal Communications Systems in Argentina.
10.2 SPECIFIC PERFORMANCE
The parties hereto acknowledge that it may be impossible to
measure in money the damages that any party may incur as a
result of another party's violation of any provision of this
Article X. Consequently, in any action specifically to
enforce any provision of this Agreement, each party hereby
waives any claim or defense therein that an adequate remedy at
law or in damages exists. Each party further agrees that the
other parties shall be entitled to injunctive relief, specific
performance or other equitable relief to prevent violation of
any provision of this Agreement.
(ii) Renumbered Section 11.1 of the Agreement is hereby amended and
restated to read in its entirety as follows:
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<PAGE> 23
11.1 EXPENSES
If the transactions contemplated by this Agreement
are consummated, the MIL Parties shall pay their own fees,
costs and expenses, and Telcom and WVA shall pay their own
fees, costs and expenses, incident to the negotiation,
preparation and carrying out of this Agreement; provided that,
except as expressly provided herein and except for the legal
fees and expenses of Maples and Calder relating to the legal
opinion to be delivered at Closing, the JVC shall not bear any
fees, costs or expenses relating to the transactions
contemplated hereby for the benefit of any of the MIL Parties,
WVA or any of the WVA Securityholders.
(jj) The first sentence of renumbered Section 11.4 of the Agreement
is hereby amended and restated to read in its entirety as follows:
This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York,
as applied to contracts executed and to be fully performed in
such state.
(kk) Section 11.7 of the Agreement is hereby amended and restated
to read in its entirety as follows:
(a) To MIL and the MIL Parties:
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Attention: General Counsel
Fax: (206) 749-8384
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<PAGE> 24
with a copy to:
Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Attention: Craig E. Sherman
Fax: (206) 739-8750
(b) To Telcom:
Telcom Ventures, LLC
211 N. Union Street, Suite 300
Alexandria, VA 22314
Attention: Dr. Rajendra Singh
Fax: (703) 706-3801
(with a copy to General Counsel)
and with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: William J. Phillips, Esq.
Fax: (212) 259-6333
(ll) The following Section 11.10 is hereby inserted at the end of
Article XI of the Agreement:
11.10 SEVERABILITY
If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity
or unenforceability shall attach only to such provision and
shall not in any manner affect or render illegal, invalid or
unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid
or unenforceable provision were not contained herein.
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<PAGE> 25
ARTICLE II.
GENERAL
2.1 HEADINGS
The headings preceding the text of sections of this Amendment are for
convenience only and shall not be deemed parts thereof.
2.2 BINDING EFFECT; APPLICABLE LAW
This Amendment shall become effective when it shall have been executed
by the MIL Parties, Telcom and WVA. This Amendment and the Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of New York, as applied to contracts executed and to be fully performed in such
state.
2.3 COUNTERPARTS
This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature page follows]
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
McCAW INTERNATIONAL, LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------------
Its President
-----------------------------------------
McCAW INTERNATIONAL (DELAWARE), LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------------
Its President
-----------------------------------------
McCAW INTERNATIONAL (HOLDINGS), LTD.
By /s/ KEITH D. GRINSTEIN
-----------------------------------------------
Its President
-----------------------------------------
McCAW INTERNATIONAL (ARGENTINA) LLC
By /s/ KEITH D. GRINSTEIN
-----------------------------------------------
Its President
-----------------------------------------
TELCOM VENTURES, LLC
By /s/ RAHUL PRAKASH
-----------------------------------------------
Its
-----------------------------------------
SIGNATURE PAGE TO AMENDMENT NO. 1 TO
JOINT VENTURE AGREEMENT
<PAGE> 27
WIRELESS VENTURES OF ARGENTINA, L.L.C.
By /s/ RAHUL PRAKASH
-----------------------------------------------
Its
-----------------------------------------
SIGNATURE PAGE TO AMENDMENT NO. 1 TO
JOINT VENTURE AGREEMENT
<PAGE> 1
EXHIBIT 10.7
===============================================================================
AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
DATED AS OF AUGUST 23, 1996
AMONG
NEXTEL INVESTMENT COMPANY,
NEXTEL COMMUNICATIONS, INC.,
GRUPO COMUNICACIONES SAN LUIS, S.A. DE C.V.,
ASSOCIATED SMR, INC.,
WIRELESS VENTURES OF MEXICO, INC.,
CARLYLE-TRICOM INVESTORS, L.L.C.,
AND
CORPORACION MOBILCOM, S.A. DE C.V.
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.3 Determination of Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2. ACQUISITIONS BY THE NEXTEL GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Nextel's First Merger Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3. TREASURY SHARES; PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Agreement to Issue Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Certain Antidilution Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Notice of Estatutos Pre-Emptive Rights . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5. CERTAIN COVENANTS OF THE PRINCIPAL SHAREHOLDERS AND THE COMPANY . . . . . . . . . . 16
5.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 IPO and Alternate Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Foreign Corrupt Practices Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Books, Records and Reports; Listing . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Obligation to Transfer Voting Securities to Control Trust . . . . . . . . . . . . . . 21
5.8 Nextel's Technology Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 WVM's Technology Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6. CONFIDENTIALITY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Benefits; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Entire Agreement; Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.7 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.8 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.11 English Version Governs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.13 Relationship to Estatutos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.14 Nextel to Act as Agent and Primary Obligor . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
7.15 Termination of Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . 29
7.16 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.17 Subordinated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.18 Company Covenant Regarding Certain Actions . . . . . . . . . . . . . . . . . . . . . 30
7.19 [Intentionally Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.20 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.21 Inconsistency with Put-Call Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ANNEXES
ANNEX A: Registration Rights
ANNEX B: Estatutos
ANNEX C: Amendment
ANNEX D: List of Investment Banks
ANNEX E: Representations and Warranties
ANNEX F: Nextel Purchase Agreement
ANNEX G: Shareholders Resolutions
ANNEX H: [Intentionally Deleted]
ANNEX I: Bridge Note Documentation
ANNEX J: Put-Call Agreement and Amendment
ii
<PAGE> 4
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (including the annexes
hereto, and as such agreement and annexes may be amended or supplemented from
time to time, the "Agreement") dated as of August 23, 1996 among NEXTEL
COMMUNICATIONS, INC., a Delaware corporation formerly known as Fleet Call, Inc.
(together with its successors, "Nextel"), NEXTEL INVESTMENT COMPANY, a
wholly-owned subsidiary of Nextel Communications, Inc., (together with its
successors, "Nextel Investment"), GRUPO COMUNICACIONES SAN LUIS, S.A. DE C.V.,
a corporation organized under the laws of Mexico (together with its successors,
"Grupo"), ASSOCIATED SMR, INC., a Delaware corporation (together with its
successors, "ACC"), WIRELESS VENTURES OF MEXICO, INC., a Virginia corporation
(together with its successors, "WVM"), CARLYLE-TRICOM INVESTORS, L.L.C., a
Delaware limited liability company (together with its successors, "Carlyle"),
and CORPORACION MOBILCOM, S.A. DE C.V., a corporation organized under the laws
of Mexico (together with its successors, the "Company"). As of the Closing
Date (as defined below), this Agreement shall supersede and replace in its
entirety the original Shareholders Agreement (the "Original Shareholders
Agreement"), dated as of March 3, 1995, among the parties hereto and the
Amendment thereto, dated as of the date hereof and attached hereto as Annex C,
except for the Surviving Sections (as defined in such Amendment) of such
Amendment which are incorporated herein; provided that this Agreement shall not
be effective prior to the Closing Date (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Subscription Agreement, dated as
of March 3, 1995, among the Company, Nextel and Nextel Investment (as amended
or supplemented from time to time, the "Nextel Purchase Agreement") annexed
hereto as Annex F, the Company issued and sold, and Nextel purchased,
newly-issued shares of the Company's capital stock;
WHEREAS, in satisfaction of a condition to the obligations of each of
the Company, Nextel and Nextel Investment to consummate the transactions
contemplated by the Nextel Purchase Agreement, the Original Shareholders
Agreement was executed and delivered by Nextel and the Company and the other
parties hereto;
WHEREAS, pursuant to the terms of a Subscription Agreement, dated as
of the date hereof, among the Company and Nextel Investment (the "Subscription
Agreement"), the Company has agreed to issue and sell, and Nextel Investment
has agreed to purchase, newly issued shares of the Company's capital stock;
WHEREAS, pursuant to the terms of the Share Purchase and Call Option
Agreement (the "Share Purchase and Call Option Agreement"), dated as of the
date hereof, among certain shareholders of Grupo (the "Mexican Individuals")
and Nextel Investment, (i) the Mexican Individuals have agreed to sell, and
<PAGE> 5
Nextel Investment has agreed to purchase from the Mexican Individuals, Voting
Securities and (ii) Nextel Investment has agreed to grant to each of the
Mexican Individuals the right to require Nextel Investment to sell to each of
the Mexican Individuals Voting Securities under certain circumstances;
WHEREAS, pursuant to the terms of the Put-Call Agreement (the
"Put-Call Agreement"), dated as of June 13, 1996, as amended as of the date
hereof, among ACC, WVM, Carlyle, Nextel, Nextel Investment and certain other
shareholders of the Company, Nextel Investment has agreed to grant certain
shareholders of the Company the right to sell their Beneficially Owned Voting
Securities under certain circumstances, and certain shareholders of the Company
have agreed to grant Nextel Investment the right to buy their Beneficially
Owned Voting Securities under certain circumstances, and the parties hereto
acknowledge that the Put-Call Agreement shall become effective on the Closing
Date (as defined below).
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, the receipt of which is acknowledged, the parties
hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1. Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ACC" has the meaning set forth in the first paragraph hereof.
"Accredited Investor" has the meaning set forth in Regulation D of the
Securities Act, as amended.
"Affiliate" means, as to any Person, any other Person (other than the
Company) (i) that is a Subsidiary of such Person or (ii) that directly or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person. For the purposes of this
definition, "control" when used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" has the meaning set forth in Section 7.14 hereof.
"Agreement" has the meaning set forth in the first paragraph hereof.
"Alternate Offering" means (a) a private placement of Shares (including
a private placement of Shares to be resold
2
<PAGE> 6
under Rule 144A under the Securities Act) and/or (b) an offering of Shares
pursuant to Regulation S under the Securities Act; provided, that a private
placement of Shares or an offering of Shares pursuant to Regulation S under the
Securities Act shall constitute an "Alternate Offering" only if either (i) it
shall be a firm commitment equity placement under Rule 144A or a firm
commitment Regulation S offering that is managed by an underwriter or
underwriters of national standing in the United States or Mexico and is
conducted in a manner that is customary for Rule 144A placements or Regulation
S offerings, as the case may be, using customary preliminary and final offering
memoranda, customary contractual documentation and roadshows in which potential
investors have an opportunity to hear from and question management of the
Company or (ii) the number of Institutional Accredited Investors purchasing
Shares in such private placement or offering under Regulation S is at least
equal to twenty. For purposes of the foregoing proviso, two or more Affiliates
purchasing Shares in a private placement shall constitute a single
institutional Accredited Investor.
"Antidilution Exercise Date" has the meaning set forth in Section
3.2(b) hereof.
"Antidilution Purchaser" has the meaning set forth in Section 3.2(a)
hereof.
"Antidilution Securities" has the meaning set forth in Section 3.2(a)
hereof.
"Beneficially Own" or "Beneficial Ownership" with respect to any
shares of capital stock means having beneficial ownership of such shares of
capital stock, including, without limitation, having ownership of the
Beneficiary Rights relating to Shares. For purposes of this definition and any
other agreement referring to this definition, (i) possession of the right to
acquire shares of capital stock shall not constitute "Beneficial Ownership" of
such shares unless such acquisition has closed, (ii) the grant of the right to
acquire shares of capital stock shall not constitute a transfer of "Beneficial
Ownership" of such shares unless such acquisition has closed, (iii) any Shares
subject to a pledge shall be deemed to be Beneficially Owned by the pledgor
unless both (a) the pledgor has breached any of its obligations under any such
pledge or any other agreement or instrument related thereto and (b) the pledgee
has exercised its rights to obtain or otherwise execute the foreclosure of such
Shares in accordance with the terms of the pledge. Notwithstanding the above,
Nextel Investment shall also be deemed to Beneficially Own the Voting
Securities subject to the Bridge Note Documentation in accordance with Section
4.06(b) of the Pledge Agreement, for so long as Grupo is in default of any of
its payment obligations (whether such payment obligations are for dollars or
otherwise) under the Bridge Note Documentation and notice is given to Grupo of
such default.
3
<PAGE> 7
"Beneficiary Rights" has the meaning set forth in the Control Trust
Agreement.
"Board", "Board of Directors" and "Directors" refer, unless otherwise
specified, to the Company's Board of Directors.
"Bridge Note" means the promissory note issued by Grupo in favor of
Nextel Investment dated as of the date hereof and annexed hereto in Annex I.
"Bridge Note Documentation" means the Bridge Note, the Share Transfer
Agreement and the Pledge Agreement.
"Business Combination" of any corporation means a merger or
consolidation in which such corporation is a constituent corporation and
pursuant to which capital stock of such corporation is exchanged for cash,
securities or other property or a sale of all or substantially all of the
assets of such corporation and its Subsidiaries taken as a whole; provided,
however, that (i) a merger, consolidation or sale of assets of any corporation
shall not be a "Business Combination" if the ultimate Beneficial Ownership of
the capital stock of such corporation immediately after the consummation of
such transaction is substantially the same as the Beneficial Ownership of such
corporation's capital stock immediately prior to such transaction and (ii) a
"Business Combination" shall not include the merger or consolidation between
any corporation and any Subsidiary of such corporation.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in either New York, New
York or Mexico D.F., Mexico are authorized or obligated to close by law or
executive order.
"Carlyle" has the meaning set forth in the first paragraph hereof.
"Change of Control Date" means the date upon which any Person that is
(or has a Majority Affiliate that is) a manufacturer of mobile communications
equipment or mobile communications software (i) becomes a Control Owner of more
than 50% of the outstanding Voting Shares (as defined below) of Nextel, (ii)
elects or designates more than 50% of the board of directors, or comparable
governing body, of Nextel, (iii) has a legal right or power to control actions
in respect of, or a legal consent right or other legal power to veto (through
share ownership, board of director's representation, or any agreement) the
selection of, or actions or decisions taken by, any representative of Nextel or
any Qualified Affiliate thereof on the Technology Committee established
pursuant to the Estatutos or (iv) consummates a Business Combination with
Nextel in which the shareholders of such Person are the Control Owners of more
than 50% of the outstanding Voting Shares of the surviving entity. As used
herein, "Voting Shares" means shares of capital stock, or
4
<PAGE> 8
other rights, of a Person (of whatever class) that entitle the holders thereof
to vote generally (whether at all times or only so long as no senior class of
securities has such voting power by reason of any contingency) in the election
of members of the board of directors, or comparable governing body, of such
Person.
"Closing Date" means the first date by which a closing has occurred
under each of the Share Purchase and Call Option Agreement and the Subscription
Agreement.
"Commission" means the United States Securities and Exchange
Commission or its successor.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Securities" means (i) Voting Securities or other Shares and
(ii) any other agreement or security convertible into, exercisable for or
representing any other right to acquire from the Company (whether or not
currently convertible or exercisable) Voting Securities or other Shares of the
Company.
"Confidential Information" means mailing lists, customer lists,
subscription lists, processes, trade secrets, software, research, techniques,
designs or other technical data, know-how or other proprietary or confidential
information furnished by the Company and contained in or concerning the
operation or affairs of the Company whether or not such information is
described as confidential; provided that "Confidential Information" shall not
include information in the public domain other than as a result of a breach of
this Agreement or other duty of confidentiality to any party hereto.
"Control Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire within 60 days; provided
that, for purposes of this definition, a Person will not be deemed a beneficial
owner of, or to own beneficially, any securities if such beneficial ownership
(1) arises solely as a result of a revocable proxy delivered in response to a
proxy or consent solicitation made pursuant to, and in accordance with, the
Exchange Act and the applicable rules and regulations thereunder and (2) is not
also then reportable on Schedule 13D (or any successor schedule) under the
Exchange Act.
"Control Trust" means the trust established under the Control Trust
Agreement.
"Control Trust Agreement" means the Amended and Restated Irrevocable
Trust Agreement, dated as of the date hereof, among the parties hereto (other
than the Company) and the Control Trustee.
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<PAGE> 9
"Control Trust Modification Date" means March 3, 1998, in the event
the Payment Amount is greater than zero on March 3, 1998.
"Control Trustee" means the trustee of the Control Trust.
"Disinterested Director" means a member of the Board of Directors who
was not a Nominee, whether under the Control Trust or otherwise, of the Nextel
Group (or any representative thereof) and, for purposes of Section 2.3, a
member of the Board of Directors who was not a Nominee, whether under the
Control Trust or otherwise, of (a) any Principal Shareholder (or representative
thereof) that has made the Third Party Merger Proposal at issue under Section
2.3 or (b) the Nextel Group.
"Effective Date" has the meaning set forth in Section A.1 of Annex A.
"Estatutos" means the corporate organizational and governance
documents of the Company substantially in the form of Annex B hereto.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exit Rights Agreement" has the meaning set forth in the Control Trust
Agreement.
"Fair Cash Value" has the meaning set forth in Section 2.3(a) hereof .
"FCPA" has the meaning set forth in Section 5.4 hereof.
"Fiscal Year" means the 12-month period beginning on January 1 and
ending on December 31, unless otherwise changed by the Company.
"Fully Diluted Ownership" means, as of any time of determination
thereof and in respect of any Person or group of Persons, the number of Voting
Securities that are Beneficially Owned by such Person or group of Persons and
all other Voting Securities of which such Person or group of Persons have the
right to acquire Beneficial Ownership directly or indirectly from the Company,
whether or not any such right is currently exercisable. For purposes of this
Agreement, when used with respect to Nextel and its Qualified Affiliates, Fully
Diluted Ownership shall include, without limitation, the Revised Option Shares
and Three Year Option Shares to the extent Nextel or its Qualified Affiliates
Beneficially Own or have a right to acquire Beneficial Ownership of such
Shares.
"Fully Diluted Ownership Percentage" means, as of any time of
determination thereof and in respect of any Person or
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<PAGE> 10
group of Persons, the percentage equivalent of a fraction determined by
dividing (i) such Person's or group's Fully Diluted Ownership by (ii) the
number of Fully Diluted Shares.
"Fully Diluted Shares" means, at any time of determination thereof,
the number of Voting Securities outstanding, assuming the full and
contemporaneous issuance of Shares that the Company is obligated to issue and
exercise of all options, warrants and rights then outstanding to acquire Voting
Securities from the Company, whether or not vested and whether or not treated
as outstanding by the Company. Notwithstanding the foregoing, treasury shares
as to which no Person has a right of acquisition or the Company has no
obligation to transfer shall not be deemed to be Fully Diluted Shares.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity or official properly
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Grantor" has the meaning set forth in the Control Trust Agreement.
"Grupo" has the meaning set forth in the first paragraph hereof.
"ICC" has the meaning set forth in Section 7.7(a) hereof.
"ICC Rules" has the meaning set forth in Section 7.7(a) hereof.
"IPO" means an initial public offering of Shares in the United States
and any other jurisdiction (if any) in which a concurrent offering is made.
"Joint Venture Agreement" has the meaning set forth in Section 7.15
hereof.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement and any capital lease).
"Majority Affiliate" means, as to any Person, another Person which
controls, is controlled by or is under common control with such Person. For
purposes of this definition, a Person shall be deemed to "control" another
Person only if such Person is a Control Owner of more than 50% of the
outstanding Voting Shares of such other Person or has elected or designated
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<PAGE> 11
more than 50% of the board of directors (or other governing body) of such other
Person.
"Majority Vote of the Disinterested Directors" means, with respect to
any matter, (i) the vote of a majority of the Disinterested Directors or (ii)
the written consent of a majority of the Disinterested Directors acting without
a meeting.
"Market Issuance" has the meaning specified in Section 3.2(a) hereof.
"Mexican GAAP" means GAAP as applied in Mexico.
"Mexican Individual" has the meaning set forth in the recitals hereof.
"Mexico" means the United Mexican States.
"Natel" means Nacional de Telecomunicaciones, S.A. de C.V.
"New Person" has the meaning set forth in Section 7.3(b) hereof.
"Nextel" has the meaning set forth in the first paragraph hereof.
"Nextel Group" means Nextel, its Affiliates, each Offeree Designate of
Nextel and its Affiliates.
"Nextel Investment" has the meaning set forth in the first paragraph
hereof.
"Nextel Purchase Agreement" has the meaning set forth in the recitals
hereof.
"Nominee" of any Person means each member of the Board of Directors of
the Company nominated by such Person. For purposes of this definition, a
Director shall be deemed to have been nominated by a Person through the Control
Trust if such Person (A) has by itself (or with its Qualified Affiliates) cast
the minimum number of votes in favor of such Director in the Cumulative Voting
Process under Section 6.3(a)(iii) of the Control Trust Agreement that are
necessary for such Director to be selected in such Cumulative Voting Process
under Section 6.3(a)(iii) for nomination by the Control Trustee and election to
the Board, (B) individually nominates such Director under Section 6.3(a)(i) or
6.3(a)(ii) of the Control Trust Agreement or (C) if the Control Trust is not in
effect, if such Person has by itself (or with its Qualified Affiliates) cast a
sufficient number of votes in favor of such Director to cause the election of
such Director at the shareholders meeting at which such Director was elected to
the Board.
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<PAGE> 12
"Offeree Designate" has the meaning set forth in the Control Trust
Agreement.
"Original Shareholder Party" means each of ACC, Carlyle, Grupo, Nextel
and WVM.
"Party" means each of the Company and each Principal Shareholder.
"Payment Amount" means $76,818,182 less (i) the amount of indebtedness
outstanding under the Bridge Note Documentation on March 3, 1998 less (ii) the
amount paid by Nextel and its Qualified Affiliates for Voting Securities in
purchases from each of the Mexican Individuals and/or the Company, under the
Share Purchase and Call Option Agreement (excluding any amounts set off as the
result of the exercise of the Call Option (as defined in the Share Purchase and
Call Option Agreement)), the Subscription Agreement, the Revised Option
Agreement, the Three Year Option Agreement and the Bridge Note Documentation,
less (iii) the U.S. dollar value (attributed to consideration under the terms
of the RadioCel Acquisition Agreement or in the Company's shareholders
resolutions in connection therewith) contributed (whether in securities,
through the incurrence of transaction costs or otherwise) by Nextel and its
Qualified Affiliates to the Company in a capital increase, to the extent that
the shareholders resolution authorizing such capital increase requires the
Company or its designee to transfer such consideration to RadioCel, S.A. de
C.V. or its designee under the terms of the RadioCel Acquisition Agreement or
otherwise recognizes the value of such consideration in connection with the
RadioCel Acquisition Agreement, including, without limitation, as transaction
costs in connection with the RadioCel Acquisition Agreement (it being
understood, that the aggregate dollar value under this clause (iii) may not
exceed US$45 million) less (iv) the amount paid by Nextel and its Qualified
Affiliates for Voting Securities in purchases from the Company, in connection
with any capital increase to the extent such amount is not covered by clause
(ii) or (iii) above, if both (a) any Original Shareholder Party together with
its Qualified Affiliates fails to contribute, in the aggregate, a percentage of
such capital increase which is calculated by means of a fraction, the numerator
of which is the number of Voting Securities Beneficially Owned by such Original
Shareholder Party immediately prior to such capital increase and the
denominator of which is the number of outstanding Voting Securities
Beneficially Owned by all shareholders who participate in the capital increase
immediately prior to such capital increase and (b) Nextel and its Qualified
Affiliates contribute, in the aggregate, at least a percentage of such capital
increase which is calculated by means of a fraction, the numerator of which is
the number of Voting Securities Beneficially Owned by Nextel and its Qualified
Affiliates immediately prior to such capital increase and the denominator of
which is the number of outstanding Voting Securities Beneficially Owned by all
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<PAGE> 13
shareholders who participate in the capital increase immediately prior to such
capital increase.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof and annexed hereto in Annex I, which secures obligations of Grupo under
the Bridge Note.
"Principal Shareholder" means (a) each Original Shareholder Party, (b)
each Qualified Affiliate thereof and (c) each Offeree Designate that has
acquired Beneficiary Rights pursuant to Section 5 of the Control Trust
Agreement, in the case of each such Person under clauses (a), (b) and (c)
above, in its capacity as a Person Beneficially Owning Shares.
"Principal Shareholder Group" means each Original Shareholder Party
and its Qualified Affiliates.
"Put-Call Agreement" has the meaning set forth in the recitals hereof.
"Qualified Affiliate" means an Affiliate of an Original Shareholder
Party: (a) that has agreed (i) to be bound by the terms of this Agreement and,
if in effect, the Control Trust Agreement with respect to its Beneficial
Ownership of any of the Company Securities and (ii) prior to ceasing to be an
Affiliate of such Original Shareholder Party, to Transfer Beneficial Ownership
in all Company Securities and rights and obligations under this Agreement and,
if in effect, the Control Trust Agreement to such Original Shareholder Party or
another Qualified Affiliate thereof; and (b) as to which such Original
Shareholder Party has agreed to be liable as a primary obligor, and not merely
as a surety, for the obligations of such Qualified Affiliate under this
Agreement and, if in effect, the Control Trust Agreement and any other
agreement or instrument executed and delivered by such Qualified Affiliate
pursuant hereto or thereto. Nextel Investment shall be deemed to be a
Qualified Affiliate of Nextel.
"Qualified IPO" has the meaning set forth in the Control Trust
Agreement.
"RadioCel Acquisition Agreement" means an agreement, to which the
Company or its designee and RadioCel, S.A. de C.V. or its designee are among
the parties, for the Company or its designee to acquire the SMR business or
assets of RadioCel, S.A. de C.V.
"Register", "registered" and "registration" has the meaning set forth
in Section A.1 of Annex A.
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<PAGE> 14
"Registration Right Transferee" has the meaning set forth in Section
A.1 of Annex A.
"Registrable Securities" has the meaning set forth in Section A.1 of
Annex A.
"Representative" has the meaning set forth in Section A.1 of Annex A.
"Requirements of Law" means, as to any Person, any law, rule,
regulation, order, judgment, decree or determination of any arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its properties or to which such Person or any of its
property is subject.
"Revised Option Agreement" means the option, issued as of March 3,
1995, originally titled the "Eighteen Month Option Agreement", and amended and
restated as of the date hereof, by the Company to Nextel, which grants Nextel
or its Qualified Affiliate the right to acquire, and to obligate the Company to
issue and sell, newly issued Voting Securities.
"Revised Option Shares" mean the Voting Securities that would be
acquired by Nextel or its Qualified Affiliate, and issued and sold by the
Company, under the Revised Option Agreement.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Share Purchase and Call Option Agreement" has the meaning set forth
in the recitals hereto.
"Share Transfer Agreement" means the Share Transfer Agreement, dated
as of the date hereof and annexed hereto in Annex I.
"Shares" means the shares of capital stock of the Company, in any
class or series.
"Shareholder" means any Person that has Beneficial Ownership of
Shares.
"Subscription Agreement" has the meaning set forth in the recitals
hereto.
"Subsidiary" of any Person, means any other Person (except that
neither the Company nor any of its Subsidiaries shall be deemed a "Subsidiary"
of any Shareholder) as to which such Person possesses, directly or indirectly,
either (i) more than 50% of the voting securities of such other Person or (ii)
the power to direct or cause the direction of the management
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<PAGE> 15
and policies of such other Person whether through the ownership of voting
securities, by contract or otherwise.
"Technical Committee" has the meaning set forth in the Control Trust
Agreement.
"Technology Committee" has the meaning set forth in the Control Trust
Agreement.
"Third Party Merger Proposal" has the meaning set forth in Section
2.3(a) hereof.
"Three Year Option Agreement" has the meaning set forth in the Nextel
Purchase Agreement.
"Three Year Option Shares" has the meaning set forth in the Nextel
Purchase Agreement.
"Threshold Percentage" means 15%; provided, however, that the
"Threshold Percentage" shall be 5% so long as Grupo and its Qualified
Affiliates have not disposed after January 31, 1996 of Beneficial Ownership of
any Voting Securities to any Person other than (a) to the Mexican Individuals
who have subsequently transferred such Voting Securities to members of Nextel's
Principal Shareholder Group, (b) to the Company pursuant to the resolutions
attached hereto as Annex G or (c) to any member of Grupo's Principal
Shareholder Group.
"Transfer" means any registration of transfer, transfer, assignment,
sale, pledge, hypothecation or other change of ownership of any kind.
"Treasury Securities" has the meaning set forth in Section 3.2(a)
hereof.
"Treasury Stock" has the meaning set forth in Section 3.1 hereof.
"United States" or "U.S." means the United States of America.
"U.S. GAAP" means GAAP as applied in the United States.
"Voting Securities" means all shares of capital stock of the Company
(of whatever class) that entitle the holders thereof to vote generally in the
election of Directors.
"WVM" has the meaning set forth in the first paragraph hereof.
"WVM Group" means WVM, its Affiliates, each Offeree Designate of WVM
and its Affiliates.
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1.2 Other Definitional Provisions. (a) All terms defined in this
Agreement shall have the defined meanings when used in any certificate, report
or other document prepared or delivered pursuant hereto, unless the context
otherwise requires.
(b) Any term defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(d) The words "hereof", "herein" and "hereunder", and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. References to
Sections and Annexes shall refer to Sections of and Annexes to this Agreement,
unless otherwise expressly provided.
(e) All references to "$" or "dollars" refer to United States
dollars.
(f) An amount to be paid in "$" or "dollars" shall be paid in U.S.
dollars, but any amount to be measured for purposes of determining compliance
with a standard set forth in this Agreement in "$" or "dollars" may be so
measured in a foreign currency and shall be translated into U.S. dollars at the
average of the then prevailing free market buy and sell rates published, as of
the date of determination, in The Wall Street Journal or another newspaper in
wide circulation in the United States.
(g) For purposes of this Agreement, a Subsidiary shall be deemed
to be wholly-owned by the Company notwithstanding the fact that a nominee of
the Company owns certain Shares of such Subsidiary to comply with the
requirements of Mexican law that a sociedad anonima or sociedad anonima de
capital variable have more than one shareholder, provided that the Company
directly or indirectly owns at least 98% of the equity of such Subsidiary.
(h) As used herein, "preemptive rights" includes any antidilution
rights under Section 3.2 hereof.
(i) For purposes of this Agreement, in calculating the Beneficiary
Rights of Grupo and/or its Qualified Affiliates or otherwise in connection with
the Voting Securities relating to Beneficiary Rights of Grupo and/or its
Qualified Affiliates, shares held by employees of the Company, whether through
the Control Trust or otherwise, shall not be deemed to be Beneficially Owned by
the Principal Shareholder Group of Grupo until Grupo or any of its Qualified
Affiliates Beneficially Owns such shares.
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1.3 Determination of Outstanding Securities. (a) For purposes of
this Agreement, when calculating the number of the Company Securities
outstanding at any time, such number shall be adjusted to take into account any
dividend in the form of Company Securities or other distribution in the form of
Company Securities, any issuance of Company Securities for the purpose of
capitalizing premiums, stock-split, spin-off, combination, recapitalization,
reclassification, exchange, merger, consolidation or any other change or
adjustment in respect of the total Company Securities outstanding.
(b) Company Securities held in the treasury of the Company shall
not be included when calculating the number of the Company Securities
outstanding.
SECTION 2. ACQUISITIONS BY THE NEXTEL GROUP
2.1 [Intentionally Omitted]
2.2 [Intentionally Omitted].
2.3 Nextel's First Merger Right. (a) In the event (i) a proposal
for a tender or exchange offer to acquire a majority of the outstanding Voting
Securities or to effect a Business Combination of the Company has been
presented to the Company by a Person other than Nextel or any of its Affiliates
(a "Third Party Merger Proposal"), (ii) the Board of Directors is considering,
and has not rejected, such proposal and (iii) the Fully Diluted Ownership
Percentage of Nextel and its Qualified Affiliates is at least 20%, then the
Company shall give Nextel prompt written notice of such Third Party Merger
Proposal. If such Third Party Merger Proposal provides for non-cash
consideration that can reasonably be given a fair cash value by an investment
banking firm of national standing in the United States or Mexico (a "Fair Cash
Value"), then the Company shall promptly engage an investment banking firm to
determine the Fair Cash Value of the Third Party Merger Proposal. Such
investment banking firm shall be selected by a Majority Vote of the
Disinterested Directors from a list of four nominees proposed by Nextel from
the list of investment banks set forth on Annex D; provided that if Nextel does
not submit to the Company a list of four nominees from Annex D within five days
of notice to Nextel of the Third Party Merger Proposal, then the Disinterested
Directors shall be free to select any investment bank listed on Annex D. If,
on or prior to the later of the fifth day after notice from the Company of the
Fair Cash Value of the Third Party Merger Proposal (as determined by the
investment banking firm engaged by the Company) and the twentieth day following
notice to Nextel of the Third Party Merger Proposal, Nextel shall have
submitted to the Board of Directors an alternative proposal providing for (x) a
Fair Cash Value equal to or greater than the Third Party Merger Proposal
(provided that this condition shall not be satisfied if the investment banking
firm engaged by the Company has advised the Board that, in its opinion, the
Fair Cash
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Value of the Third Party Merger proposal is greater than the Fair Cash Value of
the Nextel proposal) and (y) all other terms and conditions are substantially
comparable to those of the Third Party Merger Proposal (it being understood
that Nextel shall not be required, in order to satisfy this condition, to
submit an alternative proposal providing for a closing of the proposed
transaction prior to the ninetieth day after the submission of the Third Party
Merger Proposal), then (unless the alternative offer made by Nextel expires or
is otherwise terminated or the transactions contemplated thereby fail to be
consummated in accordance with the terms thereof as a result of any action or
omission by a member of the Nextel Group) each Principal Shareholder (i) shall
not permit any of its Nominees to vote to accept or recommend approval of such
Third Party Merger Proposal and (ii) may (but shall not be required to) cause
each of its Nominees to vote to accept or recommend approval of Nextel's
proposal. Each Principal Shareholder shall vote against, shall take whatever
action is reasonably necessary in respect of the Control Trust to cause the
Voting Securities related to its Beneficiary Rights therein to be voted against
and shall not permit any of its Nominees to vote to accept or recommend,
approval of any resolution, process, procedure, requirement or other action
considered by the Board of Directors or any committee thereof with respect to
any Third Party Merger Proposal that provides the Person that has made a Third
Party Merger Proposal with any information regarding, or access to, or any
direct or indirect payment of any expense or conferral of any break-up fee or
lock-up option in any auction or bidding process from, the Company in
connection with such Third Party Merger Proposal that is not also available to
Nextel; provided, however, that any Principal Shareholder may vote for, may
take whatever action is necessary in respect of the Control Trust to cause the
Voting Securities underlying its Beneficiary Rights therein to be voted for and
may permit any of its Nominees to vote to accept or recommend any such
resolution, process, procedure or requirement in the event that (A) Nextel has
not satisfied the conditions set forth in clauses (x) and (y) above on or prior
to the later of the fifth day after notice from the Company of the Fair Cash
Value of the Third Party Merger Proposal (as determined by the investment
banking firm engaged by the Company) and the twentieth day following notice to
Nextel of the Third Party Merger Proposal or (B) the alternative offer made by
Nextel expires or is otherwise terminated or the transactions contemplated
thereby fail to be consummated in accordance with the terms thereof as a result
of any action or omission by a member of the Nextel Group.
(b) In the event that the Board accepts or recommends a Third Party
Merger Proposal in accordance with this Section 2.3 and such Third Party Merger
Proposal does not close within one year of the date of such acceptance or
recommendation, then such Third Party Merger Proposal shall be subject to
compliance again with the provisions of this Section 2.3.
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(c) In the event that Nextel submits an alternative proposal pursuant
to Section 2.3(a), each Principal Shareholder shall cause its Nominees to
extend reasonable cooperation to Nextel in connection with the review and
evaluation of such proposal.
(d) Nothing in this Section 2.3 shall be construed to preclude the
Board of Directors from soliciting or considering proposals from Persons other
than Nextel or any of its Affiliates (including new or modified proposals from
any Person that has made a Third Party Merger Proposal) in addition or as
alternatives to a Third Party Merger Proposal or any proposal made by Nextel or
any of its Affiliates pursuant to this Section 2.3 or otherwise (provided that
the Company shall comply with the provisions of this Section 2.3 with respect
to any such new or modified proposal that is a Third Party Merger Proposal).
Notwithstanding any other provisions of subsections (a), (b) and (c) of this
Section 2.3, any member of the Board of Directors may take any actions that
such member determines in good faith, based on the advice of legal counsel, to
be legally required, and no Principal Shareholder shall be in breach of this
Section as a result of any such actions.
SECTION 3. TREASURY SHARES; PREEMPTIVE RIGHTS
3.1 Agreement to Issue Treasury Shares. Each of the Original
Shareholder Parties and Nextel Investment hereby consents to the issuance of
508,492 Shares of N$1,000 par value (made pursuant to a shareholders'
resolution attached hereto in Annex G) to be held in the treasury of the
Company for the purpose of subsequent resale in one or more public offerings or
private placements (the "Treasury Stock") (it being understood that such
consent to the issuance into treasury does not extend to subsequent transfers
of such shares by the Company except as provided herein). Each of the Original
Shareholder Parties and Nextel Investment hereby waives (and shall cause each
of its Affiliates to waive) any pre-emptive rights it has with respect to the
issuance of the Treasury Stock, whether arising under the Estatutos, Mexican
law or otherwise. Each of the Original Shareholder Parties and Nextel
Investment agrees to take (and to cause its Affiliates to take) such actions,
including, without limitation, any actions in respect of the Control Trust, as
are necessary or reasonably requested by the Company to effect such issuance of
Treasury Stock into the treasury of the Company and waiver of pre-emptive
rights.
3.2 Certain Antidilution Rights. (a) Notwithstanding Section
3.1, in the event that the Company transfers any Shares of the Treasury Stock
or any rights, warrants or options to acquire, Shares of Treasury Stock (any
such Shares, rights, warrants or options being "Treasury Securities" and any
such transfer being a "Market Issuance"), the Company shall provide each
Principal Shareholder Group with a Fully Diluted Ownership Percentage of at
least 10% (an "Antidilution Purchaser") the
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<PAGE> 20
right to acquire a number of Shares, rights, warrants or options to acquire
Shares (corresponding to the form of the Treasury Securities) of Treasury Stock
(the "Antidilution Securities"), equal to the sum of (x) the product of (i) the
number of Treasury Securities being transferred in the Market Issuance
multiplied by (ii) the percentage of outstanding Shares of the Company owned by
such Antidilution Purchaser as of a date (the "Calculation Date") occurring 10
Business Days prior to the earlier of (A) the date of the notice by the Company
of the Antidilution Exercise Date referred to below and (B) the closing date of
the Market Issuance plus (y) such additional amount of Shares as will result in
such Antidilution Purchaser owning, after giving effect to the Market Issuance
and the delivery of Shares to all Antidilution Purchasers in connection with
the exercise of antidilution rights under this Section, a percentage of such
Treasury Securities and all such additional Shares delivered pursuant to this
Section equal to the percentage of outstanding shares owned by such
Antidilution Purchaser on the Calculation Date. Notwithstanding the foregoing,
the term "Treasury Securities" shall not include the Revised Option Shares, the
Three Year Option Shares, Shares issued under the employee stock option plan in
effect as of the date hereof or Shares issued under the Subscription Agreement.
(b) In order to exercise its right under this Section 3.2 to acquire
a number of Antidilution Securities as specified in Section 3.2(a) hereof each
Antidilution Purchaser must: (i) on or prior to the Antidilution Exercise Date
(as defined below) provide a written undertaking to the Company, accompanied by
such guaranties and/or collateral as the Company may reasonably require, to
purchase all or any portion (expressed as a percentage) of the Antidilution
Securities to which such Antidilution Purchaser will have the right to purchase
under Section 3.2(a) hereof at the same purchase price, at which, and on the
other terms and conditions (except for the timing of closing or otherwise as
provided in this Section 3.2) pursuant to which, such Treasury Securities are
initially sold to the underwriter(s) or, in the case of a private placement, to
the initial purchaser(s); and (ii) comply with any restrictions on resale or
other transfer of such Antidilution Securities and such other terms and
conditions in respect of the purchase of such Antidilution Securities, as shall
be reasonably requested by the Company and/or, in the case of a public
offering, the managing underwriter(s) or, in the case of a private placement,
the manager(s) for the initial purchaser(s). As used herein, "Antidilution
Exercise Date" means a date selected by the Company and notified to each
Antidilution Purchaser on at least five Business Days' written notice, which
notice shall be given not earlier than the date of the pricing of the Market
Issuance and not later than the closing of the Market Issuance. Any such
notice of the Antidilution Exercise Date shall also include the type and number
of Treasury Securities included in the Market Issuance, the terms and
conditions of the Market Issuance and the number of Antidilution Securities the
Antidilution Purchaser would be entitled to purchase under this Section 3.2.
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(c) The closing for the purchase of Antidilution Securities by any
Antidilution Purchaser exercising its rights under this Section 3.2 shall occur
on the closing date of such Market Issuance or on such later date selected by
the Company on at least five Business Days' notice to the Antidilution
Purchasers provided that such date is not earlier than the closing date of the
Market Issuance and not more than five Business Days following the closing date
of the Market Issuance; it being understood that the closing of the purchase of
the Antidilution Securities may occur on the Antidilution Exercise Date. Such
closing shall occur in the Company's principal offices in Mexico City or at
such other place or on such other date as to which the Company and such
Antidilution Purchaser may mutually agree. In connection with such closing,
the Company and such Antidilution Purchaser shall deliver to each other such
customary closing certificates and legal opinions as may be reasonably
requested by such other party.
3.3 Notice of Estatutos Pre-Emptive Rights. At least fifteen days
prior to each deadline for the exercise of pre-emptive rights under Article
Seven of the Company's Estatutos, the Company shall provide each Original
Shareholder Party with notice of such Principal Shareholder's opportunity to
exercise its pre-emptive right under Article Seven of the Company's Estatutos
and any other information relevant to such opportunity to exercise pre-emptive
rights that, pursuant to such Article Seven, the Company has either published
in the Diario Oficial de la Federacion and in a newspaper of general
circulation in the Company's domicile or announced at a shareholders meeting at
which all of the Shares representing the capital stock of the Company were
represented; provided, however, that in the event the Company receives a
written opinion from counsel experienced in such matters that provision of such
notice would violate applicable Requirements of Law, the Company shall be
released from its obligations to provide such notice hereunder.
SECTION 4. REGISTRATION RIGHTS
The Principal Shareholders shall have the registration rights set
forth in Annex A, subject to the requirement that all transfers be made in
accordance with Section 5.2 of the Control Trust while the Control Trust is in
effect.
SECTION 5. CERTAIN COVENANTS OF THE PRINCIPAL SHAREHOLDERS AND THE
COMPANY
5.1 Board of Directors. (a) The number of members of the Board of
Directors of the Company will be set at nine, and will be changed only in
accordance with the Estatutos and, while in effect, the Control Trust
Agreement. Except as otherwise required by law, the Board of Directors of the
Company shall follow the procedures set forth below.
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(i) Meetings. The Board of Directors shall hold at least four
regularly scheduled meetings per year at such times as may from time to time be
fixed by resolution of the Board of Directors, and no notice (other than the
resolution, a copy of which shall be delivered to each Principal Shareholder
and Director at least 30 days prior to the first meeting) need be given as to a
regularly scheduled meeting. One of the four regularly scheduled meetings of
the Board of Directors shall be held without notice immediately following the
annual meeting of the Shareholders.
(ii) Agenda. A reasonably detailed agenda shall be supplied to
each Director a reasonable time in advance of each meeting of the Board of
Directors, together with other appropriate documentation with respect to agenda
items calling for Board of Directors action, to inform adequately Directors
regarding matters to come before the Board.
(iii) Powers of the Board. Except as otherwise set forth in the
Estatutos, the Board of Directors shall reserve to itself the power to approve
transactions that are of a type customarily subject to board approval as a
matter of good corporate practice, and shall not delegate to any committee of
the Board of Directors or to any officers of the Company the authority to
deprive the Principal Shareholders of their rights under this Agreement. All
committees of the Board will report to and be accountable to the Board. The
Board of Directors shall establish, in cooperation with the Director General of
the Company, a schedule for Board review or action, as appropriate, with
respect to matters which shall typically come before the Board of Directors,
including, but not limited to:
(x) annual business plans (including capital expenditures and
operating budgets);
(y) major collaborative arrangements with third parties not in the
ordinary and normal course of business as theretofore
conducted; and
(z) appointments of officers.
(iv) Committees. Each Principal Shareholder Group having the right
to nominate, without the participation of any member of another Principal
Shareholder Group, at least two Directors (under Section 6.3(a) of the Control
Trust Agreement) shall have the right to include at least one of such Directors
on any executive committee, audit committee, compensation committee or any
other committee of the Board performing similar functions (other than the
Technology Committee).
(b) [Intentionally omitted]
(c) Majority Vote of Board of Directors. Except as provided in
the Estatutos, Section 2.3 hereof, as otherwise
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<PAGE> 23
agreed to among all of the Principal Shareholders or as required by applicable
law, all actions of the Board of Directors shall be taken upon or pursuant to a
majority vote of the Board of Directors entitled to vote thereupon.
(d) [Intentionally omitted]
(e) Influence Over Natel. The Company shall, to the extent
permitted by applicable law, require each member it has nominated to the board
of directors (or similar governing body) or committee thereof of Natel (or any
other Person which is not a Subsidiary of the Company and in which the Company
or any of its Subsidiaries has nominated a member of the board of directors or
similar governing body) (i) to consult with the Company's Board of Directors
with respect to any vote or other action taken by such board of directors (or
similar governing body) or committee thereof on any matter specified in clauses
I through VI of Article 29 of the Estatutos or Section 6.3(d) of the Control
Trust Agreement and (ii) to act only on any matter specified in clauses I
through VI of Article 29 of the Estatutos or Section 6.3(d) of the Control
Trust Agreement upon the receipt of the prior consent of (A) if Grupo and its
Qualified Affiliates Beneficially Own at least the Threshold Percentage of the
outstanding Voting Securities, Grupo and (B) if Nextel and its Qualified
Affiliates Beneficially Own at least 20% of the outstanding Voting Securities
and the Control Trust Modification Date has not occurred, Nextel.
5.2 IPO and Alternate Offering. Subject to the provisions of this
Agreement, the Control Trust and the Estatutos, each Principal Shareholder
agrees that it will take such actions as may be reasonably requested by the
Company to support an IPO or Alternate Offering. The Company hereby agrees and
each Principal Shareholder hereby agrees to (i) vote its Voting Securities,
(ii) cause its Nominees to vote, (iii) cause its representatives on the
Technical Committee to vote and (iv) instruct the Control Trustee to vote such
Principal Shareholder's Voting Securities, in the case of each of (i), (ii),
(iii) and (iv), in favor of the Company's compliance with its agreement under
this Section 5.2 that the Company Securities issued in the IPO, if any, shall
be of the same class and series as all of the Voting Securities Beneficially
Owned by each of the Principal Shareholders and their Qualified Affiliates as
of the closing of the IPO, if any (or into which all of such Voting Securities
Beneficially Owned by each of the Principal Shareholders and their Qualified
Affiliates are convertible without any restriction which would materially
prevent, impair or delay such conversion).
5.3 Contracts with Affiliates. The Company will not, and will not
permit any Subsidiary (and prior to the time Natel is a Subsidiary, to the
extent the Company has the power to control such actions by Natel, Natel) to,
enter into any contract or transaction with or for the benefit of any of its
Affiliates
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<PAGE> 24
(other than wholly-owned Subsidiaries of the Company) which is not at prices
and on other terms at least as favorable to the Company or such Subsidiary
(and, if applicable, Natel) as those which could be obtained on an arms-length
basis from an unaffiliated third party.
5.4 Foreign Corrupt Practices Act. The Company shall, and shall
cause each of its Subsidiaries (and, prior to the time Natel is a Subsidiary,
to the extent the Company has the power to control such compliance by Natel,
Natel) to, comply with all laws applicable to any of them or to their
businesses relating to improper or illegal payments, gifts or gratuities, and
the Company shall not, and shall cause each of its Subsidiaries (and, prior to
the time Natel is a Subsidiary, to the extent the Company has the power to
control such payment by Natel, Natel) not to, pay anything of value, directly
or indirectly, to any government official in order to obtain business in
violation of any applicable laws. The Parties acknowledge that the Foreign
Corrupt Practices Act of the United States (the "FCPA") is a criminal statute
which imposes upon United States companies mandatory affirmative duties to make
good faith efforts to influence any less-than-majority-owned foreign entity to
devise and maintain a system of internal accounting controls consistent with
the FCPA to the extent reasonable under the circumstances.
5.5 Books, Records and Reports; Listing. (a) The books and
records of the Company and its Subsidiaries (and, prior to the time Natel is a
Subsidiary, to the extent the Company has the power to control Natel's book and
record keeping, Natel) shall, subject to applicable law, be kept in the English
or Spanish language, except that books and records maintained in a country
other than Mexico, in connection with the Company's or any of its Subsidiaries'
(or, prior to the time Natel is a Subsidiary, to the extent the Company has the
power to control Natel's book and record keeping, Natel's) conduct of business
in such country may be maintained in the official language of such country.
Each Director and Principal Shareholder Group shall be permitted to bring an
interpreter to any meeting attended by such director or any member of such
Principal Shareholder Group. Annually upon the close of the Fiscal Year (and
at such other times as shall be approved by the Board of Directors), all such
books and accounts shall be audited by the Company's independent accountants.
(b) No later than the date upon which the Company becomes subject
to the reporting requirements of the Exchange Act, the Company shall maintain
and make available to each Principal Shareholder all books, records, accounts
and reports required by (and compiled in accordance with) applicable Exchange
Act reporting requirements.
(c) The Company shall furnish each Principal Shareholder with the
following:
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(i) as soon as available and in any event within 180 days after
the end of each financial year of the Company, copies of the
consolidated and consolidating balance sheets of the Company and its
Subsidiaries (and, prior to the time Natel is a Subsidiary, to the
extent the Company has the power to control Natel's preparation and
distribution of audited year-end financial statements, Natel) as of
the end of such financial year and of the related consolidated and
consolidating profit and loss account, cash flow statements and
statements of total recognized gains and losses of the Company and
such Subsidiaries for such financial year, all prepared in accordance
with Mexican GAAP (and reconciled to United States GAAP to the extent
such reconciliation had previously been done by the Company) and
stating in comparative form the respective consolidated and
consolidating figures as of the end of and for the previous financial
year and accompanied by a report thereon of independent chartered
accountants of recognized international standing;
(ii) as soon as available and in any event within 90 days after the
end of each consecutive three-month period in each financial year of
the Company (with the first such period beginning on the first day of
such financial year) other than the last such three-month period of
such financial year, copies of the consolidated and consolidating
financial statements of the Company and its Subsidiaries (and, prior
to the time Natel is a Subsidiary, to the extent the Company has the
power to control Natel's preparation and distribution of quarterly
financial statements, Natel) for such period, all prepared in
accordance with Mexican GAAP with normal recurring accruals (subject
to year-end adjustments and except for the absence of detailed notes)
and stating in comparative form the respective consolidated and
consolidating figures as of the end of and for the corresponding
period in the previous financial year;
(iii) such other financial and operating information as may be
reasonably requested by any Principal Shareholder from time to time.
(d) The Company, at its sole expense, will timely supply Nextel
and The Associated Group, Inc. with any financial or other information
regarding the Company that Nextel or The Associated Group, Inc., respectively,
is required to include in any report or statement Nextel or The Associated
Group, Inc. is required to file with any regulatory body, agency, stock market
or stock exchange, in a manner that complies with the requirements of the
entity with which it is to be filed, but only to the extent such information
can be made available without
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<PAGE> 26
unreasonable effort or expense by the Company (it being understood that after
the Company has completed an IPO or any other transaction pursuant to which the
Company becomes subject to the reporting requirements of the Exchange Act, such
information would include, without limitation, financial information concerning
the Company conformed to U.S. GAAP standards), and shall certify to Nextel and
The Associated Group, Inc. in writing as to the accuracy and completeness of
the information so furnished.
(e) After completing an IPO, the Company will (at its sole
expense) maintain the eligibility of Shares for quoting or listing on at least
one major stock exchange, over-the-counter or other securities market located
in the United States.
5.6 Right of Inspection. For so long as any Principal Shareholder
shall have a Nominee, such Principal Shareholder or its duly authorized
Representatives shall have reasonable access, at any time during normal
business hours and upon reasonable notice, to books, records and employees of
the Company and its Subsidiaries (and, prior to the time Natel is a Subsidiary,
to the extent the Company has the power to control such access to Natel,
Natel), subject to Requirements of Law and confidentiality obligations that at
the time may be owed by the Company to third parties, provided that such
Principal Shareholder and its Representatives shall have entered into such
confidentiality agreements as may be reasonably required by the Company. The
Company shall, to the extent practicable, cause each Subsidiary (and, prior to
the time Natel is a Subsidiary, to the extent the Company has the power to
control the capacity of Natel to extend such cooperation, Natel) and its and
such Subsidiary's directors, officers and employees (and, prior to the time
Natel is a Subsidiary, the directors, officers and employees of Natel to the
extent the Company has the power to control their capacity to extend such
cooperation), and the Company's independent accountants, to extend reasonable
cooperation for such purposes.
5.7 Obligation to Transfer Voting Securities to Control Trust.
While the Control Trust is in effect, upon obtaining the Beneficial Ownership
of any Voting Securities, each Principal Shareholder shall (and, upon any of
such Principal Shareholder's Affiliates which are not Qualified Affiliates
becoming a transferee of Voting Securities, shall cause such Affiliate to
become a Qualified Affiliate and to) immediately Transfer such Voting
Securities into the Control Trust.
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5.8 Nextel's Technology Consent.
(a) If, at any time following the occurrence of a Change of Control
Date and prior to the termination of the Control Trust, Nextel would, but for
the occurrence of such Change of Control Date, be entitled to designate at least
one representative on the Technology Committee pursuant to Section 12 of the
Control Trust, the Company shall not make any technology decision relating to
the Company's digital mobile systems including, without limitation, technology
decisions related to vendor selection, build-out and system design, without the
consent of Nextel, such consent not to be unreasonably withheld. Notwithstanding
the foregoing, no such consent shall be required if the decision involves (i)
the selection of any mobile communications technology when one of the
alternatives under consideration is a Proprietary Technology (as defined below)
of Nextel or a Majority Affiliate (each being a "Nextel Supplier") or (ii) the
selection of a manufacturer of any mobile communications equipment when one of
the manufacturers under consideration is a Nextel Supplier; provided that the
foregoing consent right shall be reinstated at any time that all Nextel
Suppliers have been eliminated from consideration. As used herein, "Proprietary
Technology" means any technology (or component or embodiment thereof) that is
not made generally available by license or otherwise to manufacturers of
telecommunications equipment.
(b) After the termination of the Control Trust and so long as (i)
the Control Trust Modification Date has not occurred, (ii) Nextel and its
Qualified Affiliates Beneficially Own at least 10% of the Outstanding Voting
Securities and (iii) WVM has not waived its rights under Section 5.9 hereof, no
Principal Shareholder shall vote at a shareholders meeting or permit any of its
Nominees to vote at a Board of Directors meeting to approve any technology
decisions relating to the Company's digital mobile systems, including, without
limitation, technology decisions related to vendor selection, build-out and
system design, without the consent of Nextel, such consent not to be
unreasonably withheld. Notwithstanding the foregoing, no consent shall be
required if the decision involves (A) the selection of any mobile communications
technology when one of the alternatives under consideration is a Proprietary
Technology of a Nextel Supplier or (B) the selection of a manufacturer of any
mobile communications equipment when one of the manufacturers under
consideration is a Nextel Supplier (provided that the foregoing consent right
shall be reinstated at any time that all Nextel Suppliers have been eliminated
from consideration).
(c) Notwithstanding the provisions of Sections 5.8(a) and 5.8(b)
hereof, any Principal Shareholder or member of the Board of Directors may take
any action that it determines in good faith, based on the advice of legal
counsel, to be legally required, and no Principal Shareholder shall be in
breach of Section 5.8(a) or 5.8(b) hereof as a result of such action.
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5.9 WVM's Technology Consent. After the termination of the
Control Trust and so long as WVM and its Qualified Affiliates Beneficially Own
at least 5% of the outstanding Voting Securities, no Principal Shareholder
shall vote at a shareholders meeting or permit any of its Nominees to vote at a
Board of Directors meeting to approve any technology decisions relating to the
Company's digital mobile systems, including, without limitation, technology
decisions related to vendor selection, build-out and system design, without the
consent of WVM, such consent not to be unreasonably withheld. Notwithstanding
the foregoing, (i) no consent shall be required if the decision involves (a)
the selection of any mobile communications technology when one of the
alternatives under consideration is a Proprietary Technology of a member of the
WVM Group (a "WVM Supplier") or (b) the selection of a manufacturer of any
mobile communications equipment when one of the manufacturers under
consideration is a WVM Supplier (provided that the foregoing consent right
shall be reinstated at any time that all WVM Suppliers have been eliminated
from consideration) and (ii) any Principal Shareholder or member of the Board
of Directors may take any action that it determines in good faith, based on the
advice of legal counsel, to be legally required, and no Principal Shareholder
shall be in breach of this Section 5.9 as a result of such action.
5.10 Business Plans. A Shareholders meeting or a Board meeting of
the Company shall be held annually at which a vote will be taken on the
adoption of a new business plan for the Company.
5.11 Transfer of Beneficial Ownership of Voting Securities.
(a) Notwithstanding anything to the contrary in this Agreement or
the Control Trust Agreement, the parties hereto hereby agree that the transfer
of Beneficial Ownership of Voting Securities by Grupo to the Mexican
Individuals shall not be subject to any provision of this Agreement or the
Control Trust Agreement, provided, that such transfer to the Mexican
Individuals consists solely of Voting Securities that are in turn transferred
immediately by the Mexican Individuals to Nextel Investment under the terms and
conditions of the Share Purchase and Call Option Agreement.
(b) Notwithstanding anything to the contrary in this Agreement or
the Control Trust Agreement, the parties hereto hereby agree that the
redemption by the Company of Voting Securities Beneficially Owned by Grupo
pursuant to the resolutions attached hereto as Annex G shall not be subject to
any provision of this Agreement or the Control Trust Agreement.
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SECTION 6. CONFIDENTIALITY COVENANTS.
From and after the date hereof, each Original Shareholder Party shall,
and shall cause each of its Affiliates to, keep confidential any Confidential
Information and shall not, and shall cause each of its Affiliates not to, use
any Confidential Information for any purpose, provided that this Section 6
shall not restrict any Person (i) from acting either as required by applicable
law or in connection with furthering the business of the Company or (ii) with
respect to information or data that (a) was already in the possession of such
Person prior to the initial receipt thereof, directly or indirectly, from the
Company, (b) is independently developed by such Person without reference of any
kind to Confidential Information or (c) is furnished lawfully to such Person by
a third party (other than the Company or an Affiliate of such Person or the
Company) not known to such Person to be subject to restrictions on disclosure
or use of such information or data.
SECTION 7. MISCELLANEOUS
7.1 Notices. All notices, demands, requests, certificates or
other communications under this Agreement shall be in writing and shall be
telegraphed, mailed by certified or registered mail (return receipt requested)
with charges prepaid, hand delivered or sent by facsimile transmission, by
tested or otherwise authenticated telex or cable or by commercial courier to
the address set forth below for each of the Parties (or at such other address
as shall be specified by a Party by like notice to all of the other Parties):
(i) if to the Company:
Tricom Network
Monte Elbruz No. 132
Col. Lomas De Chapultepec
C.P. 11000
Mexico, D.F.
Attention: Benigno Perez Lizaur
Telecopier: 011-525-280-4788
(ii) if to Nextel or Nextel Investment:
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, VA 22101
Attention: Thomas J. Sidman, Esq.
Telecopier: (703) 394-3001
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
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Attention: Steven D. Guynn, Esq.
Telecopier: (212) 755-7306
(iii) if to Grupo:
Grupo Comunicaciones San Luis, S.A. de C.V.
Monte Elbruz no. 132
Primer Piso, Col. Chapultepec Polanco
C.P. 11000, Mexico, D.F.
Attention: Miguel Valladares Garcia
Telecopier: 011-525-280-4788
(iv) if to ACC:
Associated SMR, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
Attention: William H. Berkman and
Keith C. Hartman
Telecopier: (412) 281-1914
with a copy to:
The Associated Group, Inc.
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: Scott G. Bruce, Esq.
Telecopier: (215) 660-4920
(v) if to WVM:
Wireless Ventures of Mexico, Inc.
2300 Clarendon Boulevard
Suite 800
Arlington, VA 22201
Attention: Rajendra Singh and Hal Perkins
Telecopier: (703) 243-4960
(vi) if to Carlyle:
Carlyle-Tricom Investors L.L.C.
1001 Pennsylvania Avenue, N.W.
220 South
Washington, D.C. 20004
Attention: Mark Ein
Telecopier: (202) 347-1818
Notices shall be deemed delivered when received; provided that any notice
delivered after business hours or on a Saturday, Sunday or legal holiday at the
place of such delivery shall be deemed for purposes of computing any time
period hereunder to have been delivered on the next business day in such place
of delivery.
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7.2 Expenses. Except as is otherwise expressly provided in this
Agreement (including the Annexes), each Principal Shareholder shall bear its
own expenses, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by it, incurred in connection with this Agreement or the other
agreements contemplated hereby.
7.3 Benefits; Assignment. (a) The provisions of this Agreement
shall be binding upon, and inure to the benefit of the Parties. Nothing in
this Agreement, express or implied, is intended to confer upon any Person
(other than the Parties) any rights, remedies or obligations under or by reason
of this Agreement.
(b) None of the Principal Shareholders or the Company shall assign
or delegate any of its rights or obligations hereunder or any interest herein
without obtaining the written consent of each of the Principal Shareholders and
the Company and any purported assignment or delegation made without obtaining
such written consent shall be null and void; provided, that the foregoing shall
not be deemed to prevent assignments to other members of a Principal
Shareholder's Principal Shareholder Group and assignments pursuant to Section
A.15 of Annex A hereto, each of which are expressly permitted hereunder.
Notwithstanding the foregoing Nextel may assign and transfer its rights and
obligations hereunder, without the consent of the other Parties, in connection
with a merger with or into, or other combination or consolidation with another
Person, or transfer of substantially all of its assets to another Person (such
other Person being herein referred to as the "New Person"), provided that the
New Person becomes liable for the performance of all obligations of Nextel
prior to or at the time of such merger, combination, consolidation or transfer
of assets; each reference to Nextel herein shall, if the context requires, be
deemed to refer to the New Person.
7.4 Entire Agreement; Amendment and Waiver. This Agreement (which
includes the Annexes hereto), the Amendment, dated as of the date hereof, among
each of the Parties hereto and Banco del Atlantico, S.A. and the Control Trust
Agreement constitute the entire agreement among the Parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter hereof and thereof. This Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
each of the Parties. No waiver by any Party of any of the provisions hereof
shall be effective unless explicitly set forth in writing and executed by such
Person. Any waiver of a breach of this Agreement by any Party shall not
operate or be construed as a waiver by such Party of any subsequent breach.
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7.5 Headings. The headings in this Agreement are for convenience
only and shall not affect the construction hereof.
7.6 Governing Law. THE VALIDITY, CONSTRUCTION, ENFORCEABILITY AND
INTERPRETATION OF THIS AGREEMENT (OTHER THAN THE PROVISIONS OF ANNEX A) SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF MEXICO, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF MEXICO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION
OF THE LAWS OF ANY JURISDICTION OTHER THAN THE LAWS OF MEXICO. THE VALIDITY,
CONSTRUCTION, ENFORCEABILITY AND INTERPRETATION OF THE PROVISIONS OF ANNEX A
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE LAWS OF NEW YORK.
7.7 Arbitration. (a) Except for obtaining a temporary
restraining order or preliminary injunction to prevent immediate irreparable
harm, any controversy, conflict or dispute of any nature that arises in
relation to this Agreement shall be settled exclusively and finally by
arbitration, which will be carried out in conformity with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce (the
"ICC") in effect on the date of this Agreement (the "ICC Rules"). The
arbitration will be carried out by three arbitrators. In the event that there
are two sides to any such arbitration, one arbitrator shall be appointed by
each side in accordance with Article 4.4 of the ICC Rules as if each side were
a "party" (as such term is used in Article 4.4 of the ICC Rules) and the third
arbitrator shall be selected by the two party-appointed arbitrators or, failing
agreement within 45 days after the notice of intention to arbitrate is filed
with the ICC (or such other period as may be agreed by the two sides to such
arbitration), by the ICC in accordance with the ICC Rules; provided that any
such third arbitrator selected by the ICC shall not be a national of either the
United States or Mexico. If there are more than two sides to any such
arbitration, then the parties to such arbitration shall appoint the three
arbitrators directly by delivering a written notice of appointment, signed by
all parties to the arbitration, to the ICC within 45 days after the notice of
intention to arbitrate is filed with the ICC (or such other period as may be
agreed by all the parties to such arbitration). In the event the parties to
the arbitration shall fail so to appoint three mutually acceptable arbitrators,
the arbitrators (or those that have not been appointed) shall be appointed by
the ICC. Unless all of the parties to such arbitration otherwise agree, all
arbitrators appointed in any such arbitration shall be bilingual in English and
Spanish; provided that in the event that the ICC appoints all three
arbitrators, unless all the parties to such arbitration otherwise agree, one
such arbitrator shall be a national of Mexico, one such arbitrator shall be a
national of
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<PAGE> 33
the United States and the chairman of such arbitration panel shall be a
national of a country other than the United States or Mexico.
(b) The arbitration will be carried out in Mexico D.F., Mexico, in
the English language in conformity with the substantive law set forth in
Section 7.6 and the procedural rules set forth in this Section 7.7 and in
Section 7.8 hereof; provided, however, that any party to the arbitration
proceeding with reasonable prior notice to the other parties to such
arbitration may submit testimony or documentary evidence in Spanish, and shall,
upon request of any other party to the arbitration proceeding, furnish a
translation into English of any such testimony or documentary evidence. Any
translation of documentary evidence shall be provided a reasonable period of
time before its submission in the proceeding.
(c) In order to facilitate the comprehensive resolution of related
disputes between or among any of the parties hereto, and upon request by any
party to the arbitration proceeding, the arbitration panel may at any time
before the first oral hearing of evidence, consolidate the arbitration
proceeding with any other arbitration proceedings between or among all or any
of the parties to this Agreement arising under the Control Trust Agreement.
(d) At any oral hearing of evidence, each party to the arbitration
proceeding or its legal counsel shall have the right to examine its witnesses
and to cross-examine the witnesses of an opposing party. No evidence of any
witness shall be presented in written form unless the opposing party or parties
shall have the opportunity to cross-examine such witness, except as the parties
to the arbitration proceeding otherwise agree in writing or except under
extraordinary circumstances where the interests of justice require a different
procedure.
(e) Any decision or award of the arbitrators shall be final and
binding upon the parties to such arbitration, and judgment upon any such
arbitral award may be entered in any court of competent jurisdiction. The
Parties hereby waive, to the fullest extent permitted by applicable law, any
rights to appeal or to review of such decision or award by any court or
tribunal.
(f) To the extent that any Party has or hereafter may acquire any
immunity (sovereign or otherwise) from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, each such Party hereby, to the fullest extent permitted by
applicable law, irrevocably waives such immunity in respect of its obligations
under this Agreement, in connection with any application for judicial
acceptance and an order of enforcement of any such decision or award.
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7.8 Remedies. It is agreed that irreparable damage could occur in
the event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached and that in
addition to a party's right to seek a temporary restraining order or
preliminary injunction to prevent immediate irreparable harm, an arbitration
panel convened under Section 7.7 shall have the power to grant an injunction or
injunctions to prevent breaches of this Agreement, to the extent that such an
injunction may be granted by a court of competent jurisdiction of the United
States, and the parties shall be entitled to enforce specifically the terms and
provisions of an award of such arbitration panel providing for such an
injunction or injunctions in any such court having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof or at law or in equity shall be cumulative and not
alternative, and the exercise of any thereof by any Party shall not preclude
the simultaneous or later exercise of any other such right, power or remedy by
such Party.
7.9 Severability. In the event that any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby as long as the remaining provisions do not fundamentally
alter the relations among the Parties.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered, shall constitute an
original and all together shall constitute one instrument.
7.11 English Version Governs. This Agreement, following its
execution and delivery, may be translated into Spanish for the convenience of
the Parties; provided that in the event of any issue of interpretation, the
English version shall always govern and prevail.
7.12 Further Assurances. Each Principal Shareholder agrees to
exercise its Beneficiary Rights, if any, and to take such other actions
(including, without limitation, under the Control Trust Agreement) as are
reasonably necessary to implement the provisions of this Agreement.
7.13 Relationship to Estatutos. In the event of any conflict or
inconsistency between the provisions of the Estatutos and the provisions of
this Agreement, then as among the parties hereto, the provisions of this
Agreement shall govern.
7.14 Nextel to Act as Agent and Primary Obligor.
(a) Whenever it is provided in this Agreement or the Control Trust
Agreement that any communication is to be made to
31
<PAGE> 35
Nextel, Nextel Investment or any Qualified Affiliate of Nextel Investment, it
shall be sufficient if such communication is made only to Nextel, which shall
act as agent (the "Agent") for Nextel Investment and all Qualified Affiliates
thereof, and, notwithstanding anything to the contrary contained in this
Agreement or the Control Trust Agreement, no such communication need be
delivered to Nextel Investment or any Qualified Affiliate thereof. Any
instrument signed by the Agent, on behalf of Nextel, Nextel Investment or any
Qualified Affiliate of Nextel Investment, shall be binding on Nextel, Nextel
Investment and such Qualified Affiliate, respectively, and neither any party
hereto nor any other Person shall be required to inquire into the authority of
the Agent in so acting.
(b) Nextel shall be and remain obligated under this Agreement and
the Control Trust Agreement as a primary obligor (and not merely as a surety)
in respect of the obligations of Nextel Investment. Nextel hereby agrees that
for so long as Nextel Investment or any Qualified Affiliate thereof
Beneficially Owns Shares, Nextel shall own all of the shares of Nextel
Investment.
7.15 Termination of Joint Venture Agreement. Each of the Company,
Grupo, WVM, and ACC hereby consents to (i) the termination of the Agreement of
Association and Joint Venture in Corporation Mobilcom (the "Joint Venture
Agreement") of April 20, 1993 among Comunicaciones Troncales, S.A. de C.V.,
WVM, ACC, International Wireless Communications ("IWC") and Far East
Agrobusiness Consultants, Limited ("FEAC") as of March 3, 1995 which was the
date upon which each of the other parties thereto consented to termination of
the Joint Venture Agreement and (ii) to the substitution of this Agreement in
its entirety for the Joint Venture Agreement with respect to its relations with
each of the other Parties that is a party to the Joint Venture Agreement.
7.16 Representations and Warranties. Each party hereto makes the
representations and warranties set forth in Annex E to the other parties hereto
as of the date it becomes a party to this Agreement and, in the case of the
parties hereto on the Closing Date, as of the Closing Date.
7.17 Subordinated Amount. Each of the parties hereto agrees that,
notwithstanding the terms of indebtedness in respect of the Subordinated Amount
(as defined in the Nextel Purchase Agreement), payments shall be made by the
Company in respect of such indebtedness only to the extent that they are
permitted by Section 4.2(b) of the Nextel Purchase Agreement; it being
understood and agreed that the Company shall, upon receipt of the entire $11.4
million capital increase approved by the Company's shareholders meeting
resolution dated June 7, 1996, use the second installment of payments to the
Company from the shareholders participating in the capital increase approved at
such shareholders meeting to repay in its entirety such
32
<PAGE> 36
indebtedness, and such repayment shall be considered to be permitted by Section
4.2(b) of the Nextel Purchase Agreement.
7.18 Company Covenant Regarding Certain Actions. The Company
covenants and agrees with the other parties hereto that so long as the Control
Trust Agreement is in effect, it will not take any of the actions referred to
in Section 6.3(d) of the Control Trust Agreement unless such action has been
previously approved by a vote of the Company's shareholders at a duly convened
meeting or unless both (a) Nextel and Grupo, to the extent their consent is
required pursuant to Section 6.3(d) of the Control Trust Agreement, have
expressly consented in writing to the taking of such actions without a
shareholders meeting and (b) each Principal Shareholder Group has received
prior notice of such action. The Company shall be entitled to assume that the
Control Trust Agreement is in effect unless otherwise notified in writing by
the Control Trustee or a Qualified IPO has occurred.
7.19 [Intentionally Deleted.]
7.20 Termination of Rights. From and after the Transfer by any
Principal Shareholder Group of all of its interests in Voting Securities
(including, without limitation, all Liens on and rights to acquire Voting
Securities), the rights and obligations of such Principal Shareholder Group
hereunder shall terminate, provided, however, that this provision shall not be
deemed to affect any rights of any party hereto arising from any breach of this
Agreement by any party occurring prior to such Transfer.
7.21 Inconsistency with Put-Call Agreement.
(a) In the event of any inconsistency or conflict between the
provisions of the Put-Call Agreement and the provisions of this Agreement or
the Control Trust Agreement which would (a) prevent, impair or delay under the
Put-Call Agreement the Selling Shareholders' (as defined therein) exercise of
the Put Right (as defined therein) and receipt of the Put Price (as defined
therein) (b) prevent, impair, or delay Nextel Investment's exercise of the Call
Right (as defined therein) (and upon such exercise, the Selling Shareholders'
receipt of the Call Price (as defined therein)) or (c) limit Nextel
Investment's ability to purchase Shares under the Put-Call Agreement without
having to purchase Shares of other persons or waive any rights under the
provisions of this Agreement or the Control Trust Agreement, such provisions in
this Agreement or the Control Trust Agreement shall be deemed to be superseded
by the Put-Call Agreement to the extent necessary to eliminate such
inconsistency or conflict.
(b) Section 7.21(a) hereof shall not apply to any modification or
amendment of the Put-Call Agreement as attached hereto as Annex J, other than
the addition of any Shareholder as a party to the Put-Call Agreement, except to
the extent that
33
<PAGE> 37
Grupo has consented in writing to such modification or amendment (which consent
shall not be unreasonably withheld).
34
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ Brian D. McAuley
--------------------------------------
Name: Brian D McAuley
Title: Vice Chairman
NEXTEL INVESTMENT COMPANY
By: /s/ Thomas J. Sidman
--------------------------------------
Name: Thomas J. Sidman
Title: Vice President
GRUPO COMUNICACIONES SAN LUIS,
S.A. DE C.V.
By: /s/ Miguel Fernando Valladares Garcia
--------------------------------------
Name: Miguel Fernando Valladares Garcia
Title: President
ASSOCIATED SMR, INC.
By: /s/ William Berkman
-------------------------------------
Name: William Berkman
Title: Vice President
WIRELESS VENTURES OF MEXICO, INC.
By: /s/ Rajendra Singh
-------------------------------------
Name: Rajendra Singh
Title: President
CARLYLE-TRICOM INVESTORS L.L.C.
By: /s/ Michael Ein
-------------------------------------
Name: Michael Ein
Title: Vice President
<PAGE> 39
CORPORACION MOBILCOM, S.A. DE C.V.
By: /s/ Miguel Fernando Valladares Garcia
-------------------------------------
Name: Miguel Fernando Valladares Garcia
Title: President
<PAGE> 1
EXHIBIT 10.8
- -------------------------------------------------------------------------------
PUT-CALL AGREEMENT
DATED AS OF JUNE 13, 1996
AMONG
ASSOCIATED SMR, INC.
WIRELESS VENTURES OF MEXICO, INC.
CARLYLE-TRICOM INVESTORS, L.L.C.
THE PERSONS AND ENTITY SET FORTH ON SCHEDULE I HERETO,
NEXTEL COMMUNICATIONS, INC. AND
NEXTEL INVESTMENT COMPANY,
- -------------------------------------------------------------------------------
NEITHER THIS PUT-CALL AGREEMENT NOR THE SHARES DESCRIBED IN
THIS PUT-CALL AGREEMENT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THIS AGREEMENT
AND UNLESS EITHER (A) THEY ARE REGISTERED UNDER THE ACT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (B) NEXTEL
INVESTMENT COMPANY HAS RECEIVED EVIDENCE SATISFACTORY TO IT
(WHICH MAY INCLUDE AN OPINION OF COUNSEL) THAT SUCH PROPOSED
DISPOSITION IS EXEMPT FROM SUCH REGISTRATION.
<PAGE> 2
TABLE OF CONTENTS Page
<TABLE>
<S> <C> <C>
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Put Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Call Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Put Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Put Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Determination of Fair Value of the Company . . . . . . . . . . . . 12
7. Payment of Put Price and Call Price . . . . . . . . . . . . . . . 15
8. Representations and Warranties . . . . . . . . . . . . . . . . . . 19
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
- i -
<PAGE> 3
PUT-CALL AGREEMENT
PUT-CALL AGREEMENT dated as of June 13, 1996, by and among
NEXTEL COMMUNICATIONS, INC., a Delaware corporation (together with its
successors, "Nextel"), NEXTEL INVESTMENT COMPANY, a Delaware corporation and a
wholly owned subsidiary of Nextel (together with its successors, "Nextel
Investment"), ASSOCIATED SMR, INC., a Delaware corporation (together with its
successors, "Associated"), WIRELESS VENTURES OF MEXICO, INC., a Virginia
corporation (together with its successors, "WVM"), and CARLYLE-TRICOM
INVESTORS, L.L.C., a Delaware limited liability company (together with its
successors, "Carlyle", and collectively with Associated and WVM, the "Selling
Shareholders"), and the other persons and entities that become parties hereto
in accordance with the terms of Section 10(p) hereof (together with their
respective successors, the "Other Shareholders").
The parties hereto (other than the Other Shareholders), Grupo
Communicaciones San Luis, S.A. de C.V., a corporation organized under the laws
of Mexico (together with its successors "Grupo") and Corporacion Mobilcom, S.A.
de C.V., a corporation organized under the laws of Mexico (together with its
successors, the "Company") are parties to a Shareholders Agreement dated as of
March 3, 1995, as previously or hereafter amended (the "Shareholders
Agreement"), and the parties hereto (other than the Other Shareholders) and
Grupo and Banco del Atlantico, S.A., as Trustee, are parties to an Irrevocable
Trust Agreement dated as of March 3, 1995, as previously or hereafter amended
(the "Control Trust Agreement").
Nextel Investment, Grupo and the Company desire to consummate
certain transactions with respect to which they are executing certain
amendments to the Shareholders Agreement and the Control Trust Agreement.
The Selling Shareholders have required, as a condition to
agreeing to execute the amendments to the Shareholders Agreement and the Control
Trust Agreement and to consent to certain other transactions, that Nextel and
Nextel Investment enter into this Agreement, the provisions of which will become
effective upon the effectiveness of (i) the amendments to the Shareholders
Agreement and Control Trust Agreement, whereby Nextel Investment or its
Affiliates becomes entitled to designate a majority of the members of the Board
of Directors of the Company, and (ii) the amendments to the Control Trust
Agreement, the Shareholders Agreement and the Estatutos of the Company whereby
the Selling Shareholders are no longer entitled to take actions, as either
shareholders or through their designees on the Board of Directors, that would
enable them to prevent any of the actions listed on Exhibit A (the date and time
the amendments referred to in clauses (i) and (ii) become effective is herein
referred to as the "Effective Date").
<PAGE> 4
In consideration of the foregoing, and the representations,
covenants and agreements contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Defined Terms.
(a) As used in this Agreement, the following terms shall
have the following meanings:
"AAA" means the American Arbitration Association.
"Affiliate" means, as to any Person, any other Person (other
than the Company and its Subsidiaries) (i) that is a Subsidiary of such Person
or (ii) that directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person. For
the purposes of this definition, "control" when used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Associate" has the meaning set forth in Rule 12b-2 of the
Exchange Act.
"Associated" has the meaning set forth in the first paragraph
hereof.
"Beneficially Own" or "Beneficial Ownership" with respect to
any shares of capital stock means having beneficial ownership of such shares of
capital stock, including, without limitation, having ownership of the
Beneficiary Rights relating to Shares.
"Beneficiary Rights" has the meaning set forth in the Control
Trust Agreement.
"Board" and "Board of Directors" refer, unless otherwise
specified, to the Company's Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York, New
York are authorized or obligated to close by law or executive order.
"Call Closing" has the meaning set forth in Section 2(b)
hereof.
"Call Price" shall be equal to the Put Price determined in
accordance with Section 5, except that for purposes of paragraph (i) and clause
(x) of paragraph (ii) of Section 5(a), the
- 2 -
<PAGE> 5
Ownership Number of the Selling Shareholder shall be determined as of the Call
Closing Date.
"Carlyle" has the meaning set forth in the first paragraph
hereof.
"Commission" means the United States Securities and Exchange
Commission or its successor.
"Company" has the meaning set forth in the second paragraph
hereof.
"Control Trust" means the trust established under the Control
Trust Agreement.
"Control Trust Agreement" has the meaning set forth in the
second paragraph hereof.
"Current Market Price" per share of common stock of an issuer
as of the applicable Determination Date shall be deemed to be the average of
the daily closing prices per share of such common stock for the 30 consecutive
Trading Days immediately prior to such date; provided, however, that in the
event that the Current Market Price per share of such common stock is
determined during a period following the announcement by the issuer of such
common stock of (A) a dividend or distribution on such common stock payable in
shares of such common stock or securities convertible into shares of such
common stock or (B) any subdivision, combination, consolidation, reverse stock
split or reclassification of such common stock, and prior to the expiration of
the requisite 30-Trading Day as set forth above, after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination, consolidation, reverse stock split or reclassification, then, and
in each such case, "Current Market Price" shall be properly adjusted to take
into account ex-dividend trading. The closing price for each such Trading Day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, on
the Trading Market, as reported in the principal consolidated transaction
reporting system or by the NNM with respect to securities listed or admitted to
trading on such Trading Market, respectively.
"Determination Date" means the date as of which a particular
determination, calculation or valuation is made in accordance with the provision
hereof providing for such determination, calculation or valuation as of such
date.
"Director" or "Directors" refers to a member or members of the
Board.
"Effective Date" has the meaning set forth in the fourth
paragraph hereof.
- 3 -
<PAGE> 6
"Equity Interest" means, as of the applicable Determination
Date and in respect of any Selling Shareholder or Other Shareholder, all of the
Shares that are Beneficially Owned by such Selling Shareholder or Other
Shareholder and its respective Affiliates that are either (x) owned as of the
date hereof or (y) acquired after the date hereof directly from the Company.
"Estatutos" means the corporate organizational and governance
documents of the Company bearing such name under Mexican legal principles.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated therein.
"Fair Value of the Company" has the meaning set forth in, and
shall be determined as provided in, Section 6 hereof.
"Fair Market Value of a Share" has the meaning set forth in,
and shall be determined as provided in, Section 5(b) hereof.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity or official
properly exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"IPO" means (x) an initial public offering of Shares in the
United States registered with the Commission pursuant to the Securities Act, as
a result of which Shares of the class(es) and series held by the Selling
Shareholders (or into which such Shares are then convertible) are listed and
traded on a United States national securities exchange (including for this
purpose the NNM) or (y) an initial public offering of Shares in Mexico, as a
result of which shares of the class(es) and series held by the Selling
Shareholders (or into which such Shares are then convertible) are listed and
traded on a Mexican national securities exchange.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, option to purchase or sell, right of first refusal or charge
of any kind (including, without limitation, any conditional sale or other title
retention agreement and any capital lease).
"Nextel" has the meaning set forth in the first paragraph
hereof.
"Nextel Investment" has the meaning set forth in the first
paragraph hereof.
- 4 -
<PAGE> 7
"Nextel Stock Consideration" has the meaning set forth in
Section 7(a).
"NNM" means the Nasdaq National Market.
"Other Shareholders" has the meaning set forth in the first
paragraph hereof.
"Outstanding Shares" means, as of the applicable Determination
Date, the total number of Shares then outstanding.
"Ownership Number" means, as of the applicable Determination
Date and in respect of each Selling Shareholder or Other Shareholder, as the
case may be, the number of Outstanding Shares comprising such Selling
Shareholder's or Other Shareholder's, as the case may be, Equity Interest.
"Ownership Percentage" means, as of the applicable
Determination Date and in respect of each Selling Shareholder or Other
Shareholder, as the case may be, the percentage equivalent to a fraction
determined by dividing such Selling Shareholder's or Other Shareholder's, as
the case may be, Ownership Number by the number of Outstanding Shares.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.
"Put Closing" has the meaning set forth in Section 2(b)
hereof.
"Put Event" has the meaning set forth in Section 4 hereof.
"Put Exercise Termination Date" has the meaning set forth in
Section 2(b) hereof.
"Put Notice" has the meaning set forth in Section 2(b) hereof.
"Put Price" has the meaning set forth in, and shall be
determined as provided in, Section 5 hereof.
"Put Right" has the meaning set forth in Section 2 hereof.
"Representatives" has the meaning set forth in Section 10(l)
hereof.
"Requirement of Law" means, as to any Person, any law, rule,
regulation, order, judgment, decree or determination of any arbitrator, a court
or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its
- 5 -
<PAGE> 8
properties or to which such Person or any of its properties is subject.
"Securities Act" means the United States Securities Act of
1933, as amended and the rules and regulations promulgated therein.
"Shares" means the shares of capital stock of the Company, in
any class or series, and any shares of capital stock of the Company issued by
way of dividend or other distribution, combination, recapitalization,
reclassification, exchange, merger, consolidation or any other change or
adjustment in respect of such capital stock, including, without limitation, any
American Depositary Receipts or Global Depositary Receipts that represent
interests in such shares of capital stock of the Company.
"Shareholder" means any Person that has Beneficial Ownership
of Shares.
"Shareholders Agreement" has the meaning set forth in the
second paragraph hereof.
"Subsidiary" of any Person, means any other Person (except, in
the case of the "Subsidiary" of any Shareholder, the Company or any of its
Subsidiaries) as to which such Person possesses, directly or indirectly, either
(i) the voting securities having more than 50% of the voting power of all then
outstanding voting securities of such other Person or (ii) the power to direct
or cause the direction of the management and policies of such other Person
whether through the ownership of voting securities, by contract or otherwise.
"Trading Day" shall mean, for purposes of calculating the
Current Market Price of an issuer's common stock, a day on which the Trading
Market with respect to such common stock is open for the transaction of
business.
"Trading Market" with respect to an issuer's common stock
means (x) the United States national securities exchange (including for this
purpose the NNM) which is the principal United States trading market for such
common stock, if such common stock is traded solely on a United States trading
market or is traded both on a United States trading market and a Mexican
national securities exchange and/or other trading markets, or (y) a Mexican
national securities exchange, if such common stock is traded on a Mexican
national securities exchange and not on a United States national securities
exchange (including for this purpose the NNM).
"Transaction Agreements" has the meaning set forth in the
Shareholders Agreement, as amended through the date hereof.
- 6 -
<PAGE> 9
"United States" or "U.S." means the United States of America.
"WVM" has the meaning set forth in the first paragraph hereof.
(b) Other Definitional Provisions.
(i) Any term defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(ii) As used herein, the neuter gender shall also denote
the masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
(iii) The words "hereof", "herein" and "hereunder", and
words of a similar import, when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to Sections shall refer to Sections of this Agreement, unless
otherwise expressly provided.
(iv) All references to "$" or "dollars" refer to United
States dollars.
(v) An amount to be paid in "$" or "dollars" shall be
paid in U.S. dollars.
2. Put Rights.
(a) Selling Shareholders Right to Put Shares. Upon the
terms and subject to the conditions of this Agreement, if and at each time that
a Put Event occurs, the Selling Shareholders shall have the collective right
(the "Put Right") to require that Nextel Investment purchase from the Selling
Shareholders, and upon exercise by the Selling Shareholders of the Put Right in
accordance with the terms hereof, Nextel Investment agrees to purchase, all,
but not less than all of, each of the Selling Shareholders' Equity Interest for
consideration equal to the Put Price.
(b) Exercise of Put Rights; Put Closings. If the Selling
Shareholders desire to exercise the Put Right, the Selling Shareholders shall,
within sixty (60) days after the occurrence of the Put Event giving rise to
such Put Right (such sixtieth day being referred to as a "Put Exercise
Termination Date"), cause the Representatives to deliver a written notice (a
"Put Notice") to Nextel Investment, identifying such Put Event and requesting
that Nextel Investment purchase each of the Selling Shareholders' Equity
Interest. Notwithstanding anything contained herein to the contrary, the
Selling Shareholders shall under no circumstances be permitted to cause the
Representatives to deliver a Put Notice after 1155 days after the Effective
Date. Each Put Notice shall specify a place and date not earlier than
- 7 -
<PAGE> 10
thirty (30) nor later than ninety (90) days from the date such Put Notice is
given for the closing of such purchase (a "Put Closing"), provided that such
date shall be deferred to the later of (i) ten days after the date of obtaining
any consents or approvals of any Governmental Authority which are required by
any Requirement of Law to effect the transfer to Nextel Investment of such
Selling Shareholder's Equity Interest in accordance with this Section 2(b),
(ii) if Nextel Investment elects to make payment using Nextel Common Stock, the
date a registration statement is declared effective permitting resales of such
Nextel Common Stock for a thirty (30) day period thereafter (provided that if
the Representatives deliver a notice to Nextel Investment that the Selling
Shareholders are willing to receive Nextel Common Stock without there being an
effective registration statement under which to make resales, the date for the
Put Closing shall not be deferred pursuant to this clause (ii) for a period
greater than ten (10) days after the date Nextel Investment receives such
notice), and (iii) if applicable, to the extent necessary to complete the
appraisal procedure described in Section 6 hereof. The date on which a Put
Closing occurs is referred to herein as a "Put Closing Date". Each Put Closing
shall be held at such location within New York, New York as shall be designated
in the Put Notice. At any Put Closing, Nextel Investment shall deliver to each
Selling Shareholder, subject to the continuing accuracy of such Selling
Shareholder's representations and warranties in Section 8, the applicable Put
Price as contemplated by Section 7 hereof, and each Selling Shareholder shall
deliver to Nextel Investment a certificate or certificates representing the
Shares constituting such Selling Shareholder's Equity Interest, free and clear
of all Liens (other than arising solely as a result of the existence of the
Shareholders Agreement and the Control Trust Agreement), duly endorsed or
accompanied by appropriate stock powers to effect the transfer to Nextel
Investment of such Selling Shareholder's Equity Interest. It is understood and
agreed that (i) with respect to any Shares included in a Selling Shareholder's
Equity Interest which are held in the Control Trust, such Selling Shareholder
shall be deemed to have satisfied its obligations to deliver certificates under
the immediately preceding sentence if it delivers to Nextel Investment the
instructions and certification referred to in clauses (a) and (b) of Section
5.2 of the Control Trust Agreement with respect to such Selling Shareholder's
Beneficiary Rights relating to such Shares, and (ii) failure of any Selling
Shareholder to perform any of its obligations or the inaccuracy of any
representations and warranties of any Selling Shareholder in Section 8, and any
action taken by Nextel Investment to exercise any of its rights in respect
thereof, shall not affect the rights of any other Selling Shareholder or the
rights of Nextel Investment under this Agreement, including without limitation
the right of other Selling Shareholders to sell their Shares to Nextel
Investment or the right of Nextel Investment to purchase the Shares of other
Selling Shareholders. It is similarly understood and agreed that Nextel
Investment's failure to perform any of its obligations
- 8 -
<PAGE> 11
with respect to any Selling Shareholder will not affect its right to purchase
the Shares of any other Selling Shareholder.
(c) Lapse of Put Right. If, with respect to a particular
occurrence of any particular Put Event, the Selling Shareholders fail to
exercise the Put Right in accordance with Section 2(b) hereof, the Selling
Shareholders' Put Right shall, with respect to such particular occurrence of
such Put Event, automatically lapse and shall be of no further force or effect
with respect to such Put Event. However, the Selling Shareholders' failure to
exercise the Put Right in accordance with Section 2(b) hereof with respect to a
particular occurrence of a particular Put Event shall not be deemed to be or
construed as a further or continuing waiver of any other occurrence of such Put
Event or any other Put Event, and the Put Right shall continue to be
exercisable in accordance with the terms hereof with respect to any other
occurrence of such Put Event or any other Put Event.
(d) Other Shareholders. Upon the exercise of the Put
Right, each Other Shareholder shall have the right, and the obligation, to sell
such Other Shareholder's Equity Interest to Nextel Investment at the Put
Closing with respect thereto, at the same Put Price and on the other terms and
conditions provided herein with respect to such exercise, and for such purpose
each Other Shareholder shall be treated as the Selling Shareholders.
3. Call Rights.
(a) Nextel Investment's Right to Call Shares. Upon the
terms and subject to the conditions of this Agreement, 1095 days after the
Effective Date, Nextel Investment shall have the right to require Selling
Shareholders to sell to Nextel Investment, and upon exercise by Nextel
Investment of its Call Right in accordance with the terms hereof, the Selling
Shareholders agree to sell to Nextel Investment, all, but not less than all of
the Selling Shareholders' Equity Interest (the "Call Right") at a purchase
price equal to the Call Price.
(b) Exercise of Call Right; Call Closings. If Nextel
Investment is entitled to exercise its Call Right and desires to do so, Nextel
Investment shall, within 1155 days after the Effective Date, deliver a written
notice (a "Call Notice") to the Representatives specifying a place and date not
earlier than thirty (30) nor later than ninety (90) days from the date such
Call Notice is given for the closing of the purchase by Nextel Investment of
the Selling Shareholders' Equity Interest (a "Call Closing"), provided that
such date shall be deferred to the later of (i) ten (10) days after the date of
obtaining any consents or approvals of any Governmental Authority which are
required by any Requirement of Law to effect the transfer to Nextel Investment
of such Selling Shareholder's Equity Interest in accordance with this Section
3(b), (ii) if Nextel Investment elects to make payment using Nextel Common
Stock, the date a registration
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<PAGE> 12
statement is declared effective permitting resales of such Nextel Common Stock
for a thirty (30) day period thereafter (provided that if the Representatives
deliver a notice to Nextel Investment that the Selling Shareholders are willing
to receive Nextel Common Stock without there being an effective registration
statement under which to make resales, the date for the Call Closing shall not
be deferred pursuant to this clause (ii) for a period greater than ten (10)
days after the date Nextel Investment receives such notice) and (iii) if
applicable, to the extent necessary to complete the appraisal procedure
described in Section 6 hereof. The date on which a Call Closing occurs is
referred to herein as a "Call Closing Date." Any Call Closing shall be held at
such location within New York, New York as shall be designated in the Call
Notice. At any Call Closing, Nextel Investment shall deliver to each Selling
Shareholder, subject to the continuing accuracy of such Selling Shareholder's
representations and warranties in Section 8, the applicable Call Price as
contemplated by Section 7 hereof, and each Selling Shareholder shall deliver to
Nextel Investment a certificate or certificates representing the Shares
constituting such Selling Shareholder's Equity Interest, free and clear of all
Liens (other than arising solely as a result of the existence of the
Shareholders Agreement and the Control Trust Agreement), duly endorsed or
accompanied by appropriate stock powers to effect the transfer to Nextel
Investment of such Selling Shareholder's Equity Interest. It is understood and
agreed that (i) with respect to any Shares included in a Selling Shareholder's
Equity Interest which are held in the Control Trust, such Selling Shareholder
shall be deemed to have satisfied its obligations to deliver certificates under
the immediately preceding sentence if it delivers to Nextel Investment the
instructions and certification referred to in clauses (a) and (b) of Section
5.2 of the Control Trust Agreement with respect to such Selling Shareholder's
Beneficiary Rights relating to such Shares, and (ii) the failure of any Selling
Shareholder to perform its obligations or the inaccuracy of any representations
and warranties in Section 8, and any action taken by Nextel Investment to
exercise any of its rights in respect thereof, shall not affect the rights of
any other Selling Shareholders or the rights of Nextel Investment under this
Agreement, including without limitation the right of other Selling Shareholders
to sell their Shares to Nextel Investment or the right of Nextel Investment to
purchase the Shares of other Selling Shareholders. It is similarly understood
and agreed that Nextel Investment's failure to perform any of its obligations
with respect to any Selling Shareholder will not affect its right to purchase
the Shares of any other Selling Shareholder.
(c) Other Shareholders. Upon the exercise of the Call
Right, each Other Shareholder shall have the right, and the obligation, to sell
such Other Shareholder's Equity Interest to Nextel Investment at the Call
Closing with respect thereto, at the same Call Price and on the other terms and
conditions provided herein with respect to such exercise, and for such
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<PAGE> 13
purpose each Other Shareholder shall be treated as the Selling Shareholders as
to which Nextel Investment has exercised its Call Right.
4. Put Events.
(a) Events Constituting Put Events. A "Put Event" shall be
deemed to have occurred (i) automatically on the date which is 1095 days after
the Effective Date or (ii) if after 365 days after the Effective Date, and
prior to, 1095 days after the Effective Date, any of the events set forth in
clause (1) or (2) below shall have occurred:
(1) The Board or the Company's shareholders shall have taken
action with respect to any of the items listed on Exhibit A hereto and any
Director directly or indirectly designated by one or more of the Selling
Shareholders or all the Shares held by any Selling Shareholder shall not have
voted in favor of such action; or
(2) Solely as a result of the Selling Shareholders' failure
to participate in a capital call approved by the Board in a vote in which any
Director directly or indirectly designated by one or more of the Selling
Shareholders shall not have voted in favor, the Selling Shareholders shall
cease to be entitled to directly or indirectly designate (or shall cease to
have the voting power to elect) at least two Directors on the Board.
5. Put Price.
(a) Calculation of Put Price. The Put Price for a Selling
Shareholder's or Other Shareholder's Equity Interest shall be the greater of
the amounts determined in accordance with paragraphs (i) and (ii) below:
(i) The product of (A) the Fair Market Value of a Share
as of the date of the Put Event (the "Put Price Determination Date") and (B)
such Selling Shareholder's Ownership Number as of the Put Closing Date; and
(ii) The product of (A) $150 million and (B) the product
of (1) the Ownership Percentage of such Selling Shareholder as of the date of
this Agreement and (2) a fraction, (x) the numerator of which is the Ownership
Number of such Selling Shareholder as of the Put Closing Date and (y) the
denominator of which is the Ownership Number of such Selling Shareholder as of
the date of this Agreement.
(b) Fair Market Value of a Share. For purposes of this
Section 5, the "Fair Market Value of a Share" means, as of the applicable
Determination Date:
(i) if thirty percent (30%) or more of the Outstanding
Shares are then held by Persons who are not Affili-
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<PAGE> 14
ates or Associates of the Company and if such Shares are of the same or an
equivalent class and series as those that comprise the Selling Shareholders'
Equity Interest (or into which the Selling Shareholders' Equity Interest is
then convertible) and such class(es) or series of Shares is(are) then listed
and traded on a Trading Market, the Current Market Price per share of such
Shares as of such date, provided that if the product of the Fair Market Value
of a Share as of the applicable Determination Date multiplied by the
Outstanding Shares as of such date is a number which exceeds $250 million, then
the "Fair Market Value a Share" (determined as provided in this clause (i))
shall mean such number, reduced by an amount equal to the quotient of (x)
one-half of the amount by which such number exceeds $250 million, divided by
(y) the Outstanding Shares as of such date; or
(ii) if the class(es) and series of Shares which comprise
the Selling Shareholder's or Other Shareholder's, as the case may be, Equity
Interest (or into which the Selling Shareholders' Equity Interest is then
convertible) is (are) not then listed and traded on a Trading Market or if
fewer than thirty percent (30%) of such Shares are then held by Persons who are
not Affiliates or Associates of the Company, the quotient obtained by dividing
the Fair Value of the Company, determined as provided in Section 6, as of the
Put Price Determination Date, by the Outstanding Shares as of the Put Price
Determination Date.
(c) If the Shares, as a result of a dividend or other
distribution, combination, recapitalization, reclassification, exchange,
merger, consolidation or any other change or adjustment in respect of such
capital stock, consist of more than one class or series of capital stock and
each such Share of a different class or series does not have the same value or
is not then convertible into the same class and series, Nextel Investment and
the Representatives shall adjust the foregoing provisions in order to achieve
the same economic result contemplated by this Agreement.
6. Determination of Fair Value of the Company.
The "Fair Value of the Company" as of the applicable
Determination Date shall be (A) the fair value of the Company as of such date
determined by mutual agreement of Nextel Investment and the Representatives or
(B) if no such agreement is reached within ten (10) days after the date a Put
Notice or a Call Notice, as applicable, is delivered (such date of delivery
being referred to as a "Notice Date"), the fair value of the Company as of such
date determined as follows:
(a) Selection of Appraisers. The Selling Shareholders
collectively through the Representatives, and Nextel Investment, shall each
designate by written notice to the other a firm of recognized national standing
familiar with appraisal techniques applicable to an evaluation of the Company
to serve as an Appraiser pursuant to this Section 6 (the firms designated by
the
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<PAGE> 15
Selling Shareholders and Nextel Investment being referred to herein as the
"Selling Shareholders Appraiser" and the "Nextel Appraiser," respectively)
within fifteen (15) days after the applicable Notice Date (or such later date
as to which Nextel Investment and the Representatives agree in writing). In
the event that either the Selling Shareholders or Nextel Investment fails to
designate its Appraiser within the foregoing fifteen (15)-day time period, the
Appraiser designated shall deliver an Appraiser Certificate as described in
Section 6(b) and the Fair Value of the Company shall be determined on the basis
of such Appraiser Certificate.
(b) Evaluation Procedures. Each Appraiser shall be
directed to determine the fair value of the Company (which for purposes of such
determination shall be what a willing buyer would pay a willing seller in an
arm's length transaction without application of any minority, liquidity or
other discounts or any control or other premiums) as of the applicable
Determination Date. Each Appraiser will be directed to deliver an appraiser's
certificate to the Selling Shareholders and Nextel Investment on or before the
forty-fifth (45th) day after the last date by which Nextel Investment and the
Representatives must designate an Appraiser pursuant to Section 6(a) (the
"Certificate Date"), upon the conclusion of its evaluation, which appraiser's
certificate shall set forth such Appraiser's determination of such fair value
of the Company as of such Determination Date (an "Appraiser Certificate").
Each Appraiser will keep confidential all information disclosed by the Company
in the course of conducting its evaluation and, to that end, will execute such
customary documentation as any party or the Company may reasonably request with
respect to such confidentiality obligation. The Company will provide each
Appraiser with such information concerning the Company as may be reasonably
requested in writing by each Appraiser for purposes of its evaluation
hereunder. The same information shall be provided to each Appraiser. The
Appraisers may, but shall be under no obligation to, consult with each other in
the course of conducting their respective evaluations. Each Appraiser will be
directed to comply with the provisions of this Section 6, and to that end, the
Selling Shareholders and Nextel Investment will provide to their respective
Appraisers a complete and correct copy of this Section 6 (and the definitions
of capitalized terms used in this Section 6 that are defined elsewhere in this
Agreement).
(c) Fair Value Determination. On the first Business Day
after the Certificate Date, the Fair Value of the Company shall be determined
on the basis of the respective Appraisers' Certificates in accordance with the
provisions of this Section 6(c). The higher of the values set forth on the
Appraisers' Certificates is hereinafter referred to as the "Higher Value" and
the lower of such values is hereinafter referred to as the "Lower Value". If
the Higher Value is not more than one hundred ten percent (110%) of the Lower
Value, the Fair Value of the Company will be the arithmetic average of such two
values. If the Higher
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<PAGE> 16
Value is more than one hundred ten percent (110%) of the Lower Value, a third
appraiser shall be selected in accordance with the provisions of Section 6(d)
below, and the Fair Value of the Company will be determined in accordance with
the provisions of Section 6(e) below.
(d) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than one hundred ten percent (110%) of the Lower Value,
within seven (7) days of the Certificate Date the Selling Shareholders
Appraiser and the Nextel Appraiser shall agree and jointly designate by written
notice to each party a third firm of recognized national standing familiar with
appraisal techniques applicable to an evaluation of the Company, and which has
not been engaged by any of the Selling Shareholders or Nextel Investment or
their respective Affiliates within the immediately preceding 18 months to
perform material services, to serve as an appraiser pursuant to this Section
6(d) (the "Third Appraiser"). If for any reason a Third Appraiser is not so
designated within such seven (7) day period, either Appraiser, or any party
hereto, shall have the right to request that the AAA promptly designate a Third
Appraiser which satisfies the criteria set forth above. The parties shall
direct the Third Appraiser to determine the fair value of the Company as of the
Determination Date (the "Third Value") in accordance with the provisions of
Section 6(b) above, and to deliver to the parties an Appraiser's Certificate on
or before the 30th day after the designation of such Third Appraiser. The
Third Appraiser will be directed to comply with the provisions of this Section
6(d), and to that end the parties will provide to the Third Appraiser a
complete and correct copy of this Section 6(d) (and the definitions of
capitalized terms used in this Section 6(d) that are defined elsewhere in this
Agreement).
(e) Alternative Determination of Fair Value. On the first
Business Day after the date of delivery of the Appraiser's Certificate of the
Third Appraiser, the Fair Value of the Company will be determined as provided
in this Section 6(e). The Fair Value of the Company will be (w) the Lower
Value, if the Third Value is less than the Lower Value, (x) the Higher Value,
if the Third Value is greater than the Higher Value, (y) the arithmetic average
of the Third Value and the other Value (Lower or Higher) that is closer to the
Third Value if the Third Value falls within the range between (and including)
the Lower Value and the Higher Value and (z) the Third Value, if the Lower
Value and the Higher Value are equally close to the Third Value.
(f) Fair Value if Appraiser Valuation Exceeds $250 Million.
Notwithstanding the foregoing provisions of this Section 6, if the Fair Value
of the Company determined in accordance with such provisions is a number which
exceeds $250 million, then the Fair Value of the Company will be such number,
reduced by one-half of the amount by which such number exceeds $250 million.
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<PAGE> 17
(g) Costs. The Selling Shareholders and Nextel Investment,
respectively, will bear the cost of the respective Appraisers designated. If
the Higher Value is not more than one hundred fifteen percent (115%) of the
Lower Value, or if the Higher Value and the Lower Value are equally close to
the Third Value, the Selling Shareholders collectively, and Nextel Investment,
shall each bear fifty percent (50%) of the cost of the Third Appraiser, if any;
otherwise, the party (which for this purpose shall mean the Selling
Shareholders collectively or Nextel Investment) whose Appraiser's determination
of the fair value of the Company is further away from the Third Value shall
bear the entire cost of the Third Appraiser. The parties agree to pay when due
the fees and expenses of the Appraisers in accordance with the foregoing
provisions.
(h) Conclusive Determination. To the fullest extent
permitted by law, the determination of the Fair Value of the Company made
pursuant to this Section 6 shall be final and binding on the parties hereto,
and such determination shall not be appealable to any court; provided that the
foregoing shall not limit a party's rights to seek judicial enforcement of the
obligations of the other parties hereunder, including enforcement of a party's
right to receive the Put Price or Call Price as determined pursuant to this
Agreement.
7. Payment of Put Price and Call Price.
(a) Form of Payment. Subject to the further provisions of
this Section 7, Nextel Investment shall pay the Put Price or Call Price to each
Selling Shareholder or Other Shareholder at any Put Closing or Call Closing in
any combination that Nextel Investment may elect (such combination to be the
same combination with respect to each such Selling Shareholder, but which
combination may differ with respect to each such Other Shareholder) of (i) cash
in United States dollars delivered, with respect to amounts of or in excess of
one million dollars ($1,000,000), by wire transfer of immediately available
funds to the account or accounts designated at least five (5) Business Days
prior to such Put Closing or Call Closing by such Selling Shareholder to Nextel
Investment, or with respect to amounts of less than one million dollars
($1,000,000) by bank check and (ii) a certificate or certificates representing
duly authorized, validly issued, fully paid and nonassessable shares of Nextel
Common Stock, which upon delivery at the Put Closing or the Call Closing, as
applicable, shall be free and clear of any Liens and (unless the
Representatives have delivered a notice to Nextel Investment that the Selling
Shareholders are willing to receive Nextel Common Stock without there being an
effective registration statement under which to make resales) shall be freely
transferable for a thirty (30) day period after the Put Closing or the Call
Closing (subject to the terms of Section 7(d)) by such Selling Shareholder or
Other Shareholder pursuant to an effective registration statement under the
Securities Act covering the resale by such Selling Shareholder or Other
Shareholder of such
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<PAGE> 18
shares and which shares shall have been approved for listing and trading on a
United States national securities exchange or the NNM (the "Nextel Stock
Consideration"), having a total value equal to the applicable Put Price.
Notwithstanding the foregoing, if Nextel Investment does not make payment in
whole in cash at the Put Closing or Call Closing, Nextel Investment will be
deemed to have elected (as of the date of the Put Notice or Call Notice, as
applicable) to pay the Put Price or Call Price in Nextel Common Stock to the
extent payment is not made in cash. Each of the Selling Shareholders and Other
Shareholder will pay all stamp and other similar taxes, if any, which may be
payable in respect of the sale and delivery by such Selling Shareholder or
Other Shareholder to Nextel Investment of any of its Shares and will save
Nextel Investment harmless against any loss or liability resulting from
nonpayment or delay in payment of any such tax. All payments to be made by
Nextel Investment may be reduced by any taxes or other fees that Nextel
Investment is required to withhold, under any applicable Requirement of Law.
(b) Valuation of Nextel Common Stock. For purposes of this
Section 7, the value of the Nextel Stock Consideration shall be the product of
the Current Market Price per share of the shares of Nextel Common Stock
comprising the Nextel Stock Consideration as of the Put Closing Date or the
Call Closing Date, as applicable, times the number of such shares.
(c) Definition of "Nextel Common Stock". For purposes of
this Agreement, "Nextel Common Stock" means and includes (i) the class of stock
designated on the date hereof as the Class A common stock, par value $0.001 per
share, of Nextel and (ii) any other class of stock of Nextel or equity
securities of another corporation or other business entity resulting from any
changes of or to such common stock as a result of any dividend or other
distribution, split-up, combination, recapitalization, reclassification,
exchange, merger, consolidation or any other change or adjustment in respect of
such common stock.
(d) Registration Mechanics. If Nextel Investment elects
(or is deemed to have elected) to make payment of the Put Price or Call Price
using Nextel Common Stock, Nextel shall as soon as practicable after delivery
of the Put Notice or Call Notice use all reasonable efforts to cause a
registration statement to be filed and declared effective permitting the
Selling Shareholders and the Other Shareholders to transfer for a thirty (30)
day period after the Put Closing or Call Closing, as the case may be, the
Nextel Stock Consideration to be received by such Selling Shareholder or Other
Shareholder hereunder, provided that, Nextel may postpone filing a registration
statement at any time when: (i) financial statements meeting the requirements
of the Commission cannot with reasonable efforts be obtained; (ii) Nextel is in
possession of material non-public information, the disclosure of which at that
time Nextel's Board of Directors determines in good faith would not be in the
best interests of Nextel or (iii) such registration would adversely affect in a
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<PAGE> 19
significant manner (including, without limitation, through the premature
disclosure thereof) a proposed financing, reorganization, recapitalization,
merger, consolidation or similar transaction involving Nextel or its
Affiliates; provided, however, that Nextel may postpone filing a registration
statement pursuant to clauses (i), (ii) or (iii) for such reasons only for up
to one hundred twenty (120) days from the date of receipt of the Put Notice or
Call Notice. If during the 30-day period after the Put Closing or Call Closing
there occurs any development or event which requires the making of any change
in such registration statement or the related prospectus (in each case as
amended or supplemented) so that they will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading: (i) Nextel shall
immediately notify each Selling Shareholder or Other Shareholder; (ii) upon
receipt of such notice, such persons shall discontinue dispositions of the
Nextel Stock Consideration until such persons shall have received copies of the
amended or supplemented prospectus contemplated above or have been advised by
Nextel in writing that use of the prospectus may be resumed; (iii) as promptly
as practicable, but not later than one hundred twenty (120) days after such
notice, Nextel shall take such action as is necessary to amend or supplement
the registration statement to permit sales of the Nextel Stock Consideration to
be made thereunder and shall furnish such amended or supplemented prospectus in
reasonable quantities (as thereafter deliverable to the purchasers of shares of
Nextel Common Stock comprising the Nextel Stock Consideration) to each such
Selling Shareholder or Other Shareholder so that such prospectus will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading; and (iv) the 30-day period shall be extended by the number of
days during which the Selling Shareholder and Other Shareholders are required
to discontinue dispositions of the Nextel Stock Consideration. Each Selling
Shareholder or Other Shareholder agrees that in undertaking the registration of
Nextel Common Stock contemplated hereby Nextel shall comply with the applicable
requirements of the agreements relating to the registration of Nextel Common
Stock listed on Exhibit B hereto, as in effect on the date hereof, as well as
other registration rights agreements entered into the future, provided such
future agreements do not prohibit, or restrict in a manner which deprives the
Selling Shareholders or the Other Shareholders of the overall material benefits
of their rights with respect to, the registration of Nextel Common Stock under
this Agreement, (such agreements on Exhibit B and future agreements being
herein referred to as the "Registration Rights Agreements"), including without
limitation, rights of parties to the Registration Rights Agreements to include
Shares under the registration statement contemplated by this Agreement; it
being further agreed that, subject to the immediately preceding
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<PAGE> 20
proviso, the Registration Rights Agreements, shall, to the extent any
inconsistency exists between this Agreement and the Registration Rights
Agreements, govern the registration process. Nextel represents and warrants to
each of the Selling Shareholders that as of the date hereof the Registration
Rights Agreements listed on Exhibit B hereto are the only agreements to which
Nextel is a party or by which it is bound relating to the registration of
Nextel Common Stock. Each Selling Shareholder or Other Shareholder shall be
solely responsible for and shall pay or cause to be paid, as appropriate, all
underwriting discounts and commissions and brokerage fees attributable to the
sale of such Selling Shareholder's Nextel Common Stock and the fees and
disbursements of any counsel or other advisors or experts retained by such
Selling Shareholder, it being understood and agreed that Nextel shall be solely
responsible for and shall pay or cause to be paid all other expenses and fees
incurred by Nextel in connection with the registration of Nextel Common Stock
pursuant to this Section 7(d).
(e) Securities Law Restrictions.
(i) Unless it sells Nextel Common Stock to be acquired under
this Agreement, pursuant to an effective registration statement that is
declared effective at the Put Closing or Call Closing, each Selling Shareholder
and Other Shareholder agrees that it shall not sell, transfer, assign, pledge
or otherwise dispose of Nextel Common Stock unless such sale, transfer,
assignment, pledge or other disposition has been registered (with respect to
which Nextel has no obligation to undertake any such registration except as
expressly provided in Section 7) or is exempt under the Securities Act and has
been registered or qualified or is exempt from registration or qualification
under applicable state securities laws and each such Selling Shareholder and
Other Shareholder provides to Nextel an opinion of counsel reasonably
satisfactory to Nextel that a sale, transfer, assignment, pledge or other
disposition of such Nextel Common Stock may be made without registration.
(ii) Each Selling Shareholder and Other Shareholder
acknowledges that until such time as the Nextel Common Stock to be acquired by
such Selling Shareholder or Other Shareholder hereunder has been sold in a
public offering pursuant to an effective registration statement under the
Securities Act, or Rules 144 or 145 thereunder (or any successor rules), each
certificate representing such Nextel Common Stock shall be endorsed with the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS AN
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<PAGE> 21
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND NEXTEL
COMMUNICATIONS, INC. SHALL HAVE RECEIVED, AT THE EXPENSE OF
THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG
OTHER THINGS, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
NEXTEL COMMUNICATIONS, INC.).
(iii) Each Selling Shareholder and Other Shareholder
acknowledges that Nextel may place stop transfer orders against the
registration or transfer of any Nextel Common Stock until such time as the
requirements of the foregoing legend are satisfied.
(iv) At the request of a Selling Shareholder or Other
Shareholder, Nextel will promptly cause the foregoing legend to be removed and
any stop transfer orders rescinded with respect to any shares of Nextel Common
Stock acquired by such Selling Shareholder or Other Shareholder hereunder, upon
presentation to Nextel of evidence reasonably satisfactory to it (which may
include, among other things, an opinion of counsel reasonably satisfactory to
it) that such legend is no longer applicable to such shares.
8. Representations and Warranties.
(a) Selling Shareholders. Each Selling Shareholder and
Other Shareholder hereby represents and warrants (severally and not jointly,
solely with respect to such Selling Shareholder or Other Shareholder) to Nextel
Investment as follows as of the date hereof and as of the Put Closing or Call
Closing (and Nextel Investment's obligation to acquire such Selling
Shareholder's or Other Shareholder's Shares at the Put Closing or Call Closing
shall be subject to such representations and warranties being true and accurate
as of such date):
(i) Corporate Organization. Such Selling Shareholder or
any Other Shareholder that is a corporation is a corporation (or, in the case
of Carlyle, limited liability company and in the case of Other Shareholders
that are partnerships or limited partnerships, partnership or limited
partnership) duly organized and validly existing under the laws of its
jurisdiction of organization.
(ii) Corporate Power and Authority. Such Selling
Shareholder or any Other Shareholder that is a corporation has the requisite
corporate (or, in the case of Carlyle, limited liability company and in the
case of Other Shareholders that are partnerships or limited partnerships,
partnership or limited partnership) power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
such Selling Shareholder or any Other Shareholder that is not a natural person
of this Agreement and the consummation by
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<PAGE> 22
such Selling Shareholder or Other Shareholder of the transactions contemplated
hereby have been duly authorized by all requisite corporate (or, in the case of
Carlyle, limited liability company and in the case of Other Shareholders that
are partnerships or limited partnerships, partnership or limited partnership)
action on the part of such Selling Shareholder or Other Shareholder, and no
other corporate (or, in the case of Carlyle, limited liability company and in
the case of Other Shareholders that are partnerships or limited partnerships,
partnership or limited partnership) proceedings on the part of such Selling
Shareholder or Other Shareholder or its stockholders (or, in the case of
Carlyle, members and in the case of Other Shareholders that are partnerships or
limited partnerships, partners) are necessary to authorize this Agreement and
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes the valid and binding obligation of, such Selling
Shareholder or Other Shareholder, enforceable against such Selling Shareholder
or Other Shareholder in accordance with its terms.
(iii) Shares Free of Liens. As of the Put Closing or Call
Closing, as the case may be, the transfer of such Selling Shareholder's or
Other Shareholder's Shares pursuant to this Agreement (A) (1) does not and
will not result in the creation or imposition of any Lien (other than any Lien
solely created by action of Nextel Investment or any of its Affiliates) upon
any of such Selling Shareholder's or Other Shareholder's Shares, (2) does not
and will not violate any Requirement of Law applicable to it and (3) does not
and will not conflict with or result in any breach of any term, condition or
provision of, or constitute (with due notice or lapse of time or both) a
default under, or pursuant to the terms of, any mortgage, deed of trust or
other agreement or instrument to which it is a party or by which it or any of
its properties is bound, other than the Control Trust Agreement and
Shareholders Agreement, and (B) if applicable, does not and will not conflict
with its charter documents. As of the Put Closing or Call Closing, as the case
may be, each of such Selling Shareholder's or Other Shareholder's Shares to be
sold to Nextel Investment hereunder will be (i) duly authorized, validly
issued, fully paid and non-assessable Shares, (ii) delivered free and clear of
all Liens (other than any Lien solely created by action of Nextel Investment or
any of its Affiliates), and not be subject to any voting or trust agreement,
proxy, buy-sell agreement, right of first refusal, preemptive-right or similar
restriction, except in the case of a Selling Shareholder, as expressly
contemplated by the Control Trust Agreement and the Shareholders Agreement.
(iv) No Conflict. The execution, delivery and performance
by it of this Agreement, and the consummation by it of the transactions
contemplated hereby (A)(1) does not and will not violate any Requirement of Law
applicable to it and (2) does not and will not conflict with or result in any
breach of any term, condition or provision of, or constitute (with due notice
- 20 -
<PAGE> 23
or lapse of time or both) a default under, or pursuant to the terms of, any
mortgage, deed of trust or other agreement or instrument to which it is a party
or by which it or its properties is bound, other than the Control Trust
Agreement and Shareholders Agreement and (B) does not and will not conflict
with its organizational documents.
(v) Consents/Approvals. As of the Put Closing or Call
Closing, as the case may be, (A) no consents of, filings with, authorizations
or other actions of, any Governmental Authority will be required to be
received, made or filed by, or taken on behalf of, such Selling Shareholder's
or Other Shareholder's transfer of the Shares pursuant to this Agreement, other
than those that have or will have been received, made, filed or taken, and (B)
no consent, approval, waiver or other action by any Person under any contract,
agreement, indenture, lease or other similar document to which such Selling
Shareholder or Other Shareholder or any of its properties is bound is required
for the transfer of the Shares pursuant to the Agreement, except for any such
consents, approvals, waivers or other actions (x) required under the Control
Trust Agreement or Shareholders Agreement, if any, and (y) that have been or
will have been previously obtained or completed.
(vi) Share Ownership. As of the date hereof, such Selling
Shareholder or Other Shareholder Beneficially Owns the Shares set forth next to
its name on Schedule II hereto. As of the date hereof, such Selling
Shareholder or Other Shareholder has entered into no agreements or arrangements
to dispose of or grant any interest in such Shares or to otherwise acquire any
Shares or any interest in any Shares, except for this Agreement and, with
respect to each Selling Shareholder, the Stockholders Agreement and the Control
Trust Agreement.
(vii) Compliance With Securities Act. Any right or Nextel
Common Stock to be acquired by such Selling Shareholder or Other Shareholder
pursuant to this Agreement will be acquired for such Selling Shareholder's or
Other Shareholder's own account and not with a view to, or present intention
of, distribution thereof in violation of the Securities Act, or any applicable
state securities laws and will not be disposed of in contravention of the
Securities Act or any applicable state securities laws. Each Selling
Shareholder or Other Shareholder is an "Accredited Investor" as such term is
defined in Rule 501 promulgated under the Securities Act. Each Selling
Shareholder or Other Shareholder understands that as a result of executing this
Agreement, it may be forced to sell its Shares in exchange for Nextel Common
Stock under this Agreement, based on decisions made by the Representatives and
Nextel Investment and is knowledgeable about Nextel and its operations, is
capable of evaluating the risks and merits of entering into this Agreement and
its possible investment in Nextel Common Stock and has had an opportunity to
ask questions and receive answers concerning Nextel and the Nextel Common
Stock. Each Selling Shareholder or Other
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<PAGE> 24
Shareholder is able to bear the economic risk of any investment in the Nextel
Common Stock for an indefinite period of time.
(b) Nextel and Nextel Investment. Each of Nextel and
Nextel Investment hereby represents and warrants to each of the Selling
Shareholders as follows as of the date hereof and as of the Put Closing or Call
Closing:
(i) Corporate Organization. They are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(ii) Corporate Power and Authority. They have the
requisite corporate power and authority to enter into this Agreement, to
perform their obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by them of this
Agreement and the consummation by them of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of each
of them, and no other corporate proceedings on the part of either of them or
their respective stockholders are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of them and constitutes the valid and binding obligation of
each of them, enforceable against each of them in accordance with its terms.
(iii) No Conflict. The execution, delivery and performance
by them of this Agreement, and the consummation by them of the transactions
contemplated hereby (A)(1) does not and will not violate any Requirement of Law
applicable to either of them and (2) does not and will not conflict with or
result in any breach of any term, condition or provision of, or constitute
(with due notice or lapse of time or both) a default under, or pursuant to the
terms of, any mortgage, deed of trust or other agreement or instrument to which
either of them is a party or by which either of them or any of their properties
is bound and (B) does not and will not conflict with their organizational
documents.
(iv) Consents/Approvals. As of the Put Closing or Call
Closing, as the case may be, (A) no consents of, filings with, authorizations
or other actions of, any Governmental Authority will be required to be
received, made or filed by, or taken on behalf of them for Nextel Investment's
purchase of the Shares pursuant to this Agreement, other than those that have
or will have been received, made, filed or taken, and (B) no consent, approval,
waiver or other action by any Person under any contract, agreement, indenture,
lease or other similar document to which any of them or any of their properties
is bound will be required for Nextel Investment's purchase of the Shares
pursuant to this Agreement, except for any such consents, approvals, waivers or
other actions that have or will have been previously obtained or completed.
- 22 -
<PAGE> 25
9. Termination.
This Agreement shall terminate and be of no further force or effect
upon the consummation of an IPO in one or more of a series of public offerings
in which Shares are sold to parties other than Nextel and its Affiliates at a
price to the public resulting in gross proceeds to the Company in the aggregate
of not less than $100 million and as a result of which the class(es) and series
or equivalent class(es) and series of Shares owned by the Selling Shareholders
(including without limitation classes and series into which such Shares are
then convertible) are listed and traded on any Trading Market. This Agreement
shall also terminate if the Effective Date has not occurred on or before 1095
days after the date of this Agreement.
10. Miscellaneous.
(a) Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to perform its obligations hereunder and to consummate and
make effective the transactions contemplated to be consummated by such party
under this Agreement. Without limitation of the generality of the foregoing,
each party hereto agrees to cooperate with the other parties in obtaining as
promptly as practicable after the exercise of a Put Right or Call Right,
respectively, any and all consents or approvals of any Governmental Authority
referred to in Sections 2(b) or 3(b), respectively, with respect to such
exercise and the related Put Closing or Call Closing, respectively.
(b) Binding Effect; Obligations Several and Not Joint.
This Agreement shall be binding upon and inure to the benefit of the respective
successors, heirs, personal representatives and permitted assigns of the
parties hereto, provided that neither this Agreement nor any rights or
obligations hereunder may be assigned or delegated by Nextel Investment, the
Selling Shareholders or the Other Shareholders without the prior written
consent of Nextel Investment and the Representatives except that (i) Nextel
Investment may assign in whole or in part its rights and obligations to any
Affiliate of Nextel, provided that Nextel Investment continues to be bound by
its obligations hereunder (ii) Nextel Investment may assign its rights and
obligations to any Affiliate of Nextel into which Nextel Investment is merged,
consolidated or otherwise combined and (iii) subject to the terms of the
immediately following sentence, any Selling Shareholder may assign in whole
its rights and obligations hereunder to any Person in connection with a
transfer of Shares held by such Selling Shareholder to such Person, provided
such Person agrees with Nextel Investment in writing reasonably acceptable to
Nextel Investment to be bound by all of the terms of this Agreement applicable
to such Selling Shareholder and provided such transfer
- 23 -
<PAGE> 26
or disposition complies with the requirements of the Control Trust Agreement,
Shareholders Agreement and Estatutos and all applicable laws, including without
limitation the Securities Act. Notwithstanding the foregoing, (i) each of the
Selling Shareholders and Other Shareholders shall not transfer or otherwise
dispose of any interest in the Shares without obtaining a written commitment,
reasonably acceptable to Nextel Investment, from the acquiror of such interest
in the Shares that it and any other future subsequent acquirors of any interest
in such Shares shall be obligated to sell any Shares upon the exercise of the
Call Right by Nextel Investment in accordance with the terms of this Agreement
applicable to the Selling Shareholders or Other Shareholders, as the case may
be, and prior to any such transfer or disposition, a legend will be placed on
the Shares in both English and Spanish indicating that the Shares are subject
to the obligations of the Call Right under this Agreement; and (ii) the rights
of any Selling Shareholder under this Agreement shall be assignable only in
connection with a transfer of all of such Selling Shareholder's Shares to a
single Person who or which agrees with Nextel Investment in writing reasonably
acceptable to Nextel Investment to be bound by all of the terms of this
Agreement applicable to such Selling Shareholder. The obligations of the
parties hereunder shall be several and not joint, and the failure of any party
to perform its obligations hereunder shall not limit or impair the obligations
of any other party or the right of any other party to enforce such obligations.
In the event of any inconsistency or conflict between the provisions of this
Agreement and the provisions of the Shareholders Agreement or the Control Trust
Agreement which would (x) prevent, impair or delay the Selling Shareholders'
exercise of the Put Right and receipt of the Put Price (y) prevent, impair or
delay Nextel Investment's exercise of the Call Right (and upon such exercise,
the Selling Shareholders receipt of the Call Price) or (z) limit Nextel
Investment's ability to purchase Shares under this Agreement without having to
purchase Shares of other persons or waive any rights under the provisions of
the Shareholders Agreement or the Control Trust Agreement, such provisions in
the Shareholders Agreement or the Control Trust Agreement shall be deemed to be
superseded by this Agreement to the extent necessary to eliminate such
inconsistency or conflict.
(c) Entire Agreement. This Agreement and the other
agreements and instruments entered into in connection herewith constitute the
entire agreement of the parties hereto with respect to the subject matter
hereof and thereof (other than certain representations with respect to matters
related to compliance with the Securities Act obtained from the Other
Shareholders) and shall supersede any prior expressions of intent or
understanding with respect to the transactions provided for herein and therein,
provided that, except as set forth in this Section 10(c), this Section 10(c) is
not intended to and shall not alter or affect in any manner the rights and
obligations of
- 24 -
<PAGE> 27
the parties pursuant to the Transaction Agreements, as the same have been or
may be amended.
(d) Costs and Expenses. Except as otherwise set forth
herein, each party agrees to bear its own expenses, fees and costs incurred in
connection with the transactions contemplated by this Agreement.
(e) Brokerage. There are no valid claims for brokerage
commissions, finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of any party hereto and each party will
indemnify and hold the other party harmless against any liability or expense to
it arising out of such a claim.
(f) Amendment. Any amendment hereto shall be effective
only if in writing and signed by each of Nextel Investment and the
Representatives.
(g) Waiver; Cumulative Rights. No provision of this
Agreement shall be deemed to have been waived by any act or knowledge of any
party or of such party's agents, officers or employees, but only by an
instrument in writing specifying such waiver signed by Nextel Investment and
delivered to the Representatives, if Nextel or Nextel Investment is the waiving
party, or in writing signed by such party or the Representatives and delivered
to Nextel Investment, if any of the Selling Shareholders or Other Shareholders
is the waiving party. The failure or delay of any party to require performance
by another party of any provision hereof shall not affect its right to require
performance of such provision unless and until such performance has been waived
in writing. Each and every right hereunder is cumulative and may be exercised
in whole or in part from time to time.
(h) Notices. All notices, demands, requests, certificates
or other communications under this Agreement shall be in writing and shall be
mailed by certified or registered mail (return receipt requested) with charges
prepaid, hand delivered or sent by facsimile transmission or by commercial
courier to the address set forth below for each of the parties (or at such
other address as shall be specified by a party by like notice to all of the
other parties):
(i) if to Nextel or Nextel Investment:
Nextel Communications, Inc.
201 Route 17 North
Rutherford, New Jersey 07070
Attention: Thomas J. Sidman, Esq.
Telecopier: (201) 438-5540
with a copy to:
- 25 -
<PAGE> 28
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Steven D. Guynn, Esq.
Telecopier: (212) 755-7306
(ii) if to Associated:
Associated SMR, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
Attention: Keith C. Hartman
Telecopier: (412) 281-1914
with a copy to:
The Associated Group, Inc.
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: Scott G. Bruce, Esq.
Telecopier: (215) 660-4920
(iii) if to WVM:
Wireless Ventures of Mexico, Inc.
2300 Clarendon Boulevard
Suite 800
Arlington, VA 22201
Attention: Rajendra Singh and Hal Perkins
Telecopier: (703) 243-4960
(iv) if to Carlyle:
Carlyle-Tricom Investors L.L.C.
1001 Pennsylvania Avenue, N.W.
220 South
Washington, D.C. 20004
Attention: Mark Ein
Telecopier: (202) 347-1818
(v) if to any Other Shareholder, to such
Other Shareholder at the address (or facsi-
mile number) set forth under the name of such
other Shareholder on Schedule I hereto.
Notwithstanding the foregoing, Nextel or Nextel Investment may provide or make
notice, demand, requests, certificates or other communications to any of the
Selling Shareholders or the Other Shareholders by mailing by certified or
registered mail (return receipt requested) with charges prepaid, hand delivered
or sent by facsimile transmission or by commercial courier to the address set
forth above for Associated and WVM who are acting as the Representatives under
this Agreement. Notices shall be deemed
- 26 -
<PAGE> 29
delivered when received; provided that any notice delivered after business
hours or on a Saturday, Sunday or legal holiday at the place of such delivery
shall be deemed for purposes of computing any time period hereunder to have
been delivered on the next business day in such place of delivery.
(i) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York,
without reference to its conflicts of law principles.
(j) Counterparts. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
(k) Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
(l) Representatives. Each of the Selling Shareholders and
the Other Shareholders has hereby appointed Associated and WVM to act jointly
as the "Representatives" and to take certain actions and to receive notices as
specified herein. Nextel and Nextel Investment shall be entitled to rely and
act on the basis of any notice or instruction that is received from the
Representatives or provided to the Representatives and the Representatives, the
Selling Shareholders and the Other Shareholders shall indemnify and hold each
of Nextel and Nextel Investment harmless from any claim that Nextel or Nextel
Investment should not have acted or otherwise relied on notice or instruction
received from, or provided to, the Representatives.
(m) Nextel Not Obligated Except If Nextel Investment Uses
Nextel Common Stock. Except to the extent expressly set forth herein as an
obligation of Nextel (by naming Nextel or by including Nextel by reference to
"a party", "each of the parties", "any party", "all parties" or similar
reference), and except for the representations of Nextel set forth in Section
8(b), the provisions of this Agreement shall create no obligations on the part
of, or owed by, Nextel; provided that if Nextel Investment pursuant to Section
7(a) hereof, elects, or is deemed to have elected, to make payment in Nextel
Common Stock, Nextel agrees to cause such Nextel Common Stock to be issued to
Nextel Investment, and to effectuate the filing of the registration statement
referred to in and to otherwise comply with all of the applicable provisions
of, Section 7 hereof.
(n) Remedies. Each party shall be entitled to obtain
specific performance of the obligations of another party hereunder and
immediate injunctive relief, and in the event any action or proceeding is
brought in equity to enforce this Agreement, no party will present as a defense
that there is an adequate remedy at law. Such remedies shall be in addition to
- 27 -
<PAGE> 30
any other remedies which any party may have under this Agreement or otherwise.
(o) Approval of RadioCel Transactions and Capital Call. Upon
Nextel Investment's request, each of the Selling Shareholders and Other
Shareholders shall take all actions necessary as a shareholder of the Company
and under the Shareholders Agreement and the Control Trust Agreement to permit
(including without limitation voting its Shares, and causing its designees on
the Board of Directors of the Company to vote to permit) (i) the Company or its
designee to acquire an interest in certain assets of RadioCel, S.A. de C.V. and
(ii) an $11.8 million capital call from the Company's shareholders. Failure of
WVM or ACC to take such action to comply with its obligations under this
Section 10(o) shall be deemed to be a breach of the obligations of all Selling
Shareholders hereunder.
(p) Other Shareholders or Additional Parties. Each person or
entity listed on Schedule I hereto may (without any action or consent by any
other party) become a party to this Agreement as an "Other Shareholder" upon
(i) affirming in writing to Nextel Investment certain representations requested
by Nextel Investment, including without limitation, the representations set
forth in Section 8(a)(vii) hereof with respect to an Other Shareholder, and
Nextel Investment being reasonably satisfied that on the basis thereof that
such person or entity is an "Accredited Investor" as such term is defined under
the Securities Act and execution of this Agreement by such person or entity
complies with applicable law, including without limitation the Securities Act
and state securities laws, (ii) providing a supplement to Schedule I with such
Shareholder's address and facsimile number and a supplement to Schedule II with
the information required by Section 8(a)(vi) and (iii) executing and delivering
to Nextel Investment a counterpart signature page to this Agreement.
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<PAGE> 31
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereof on the date first above written.
NEXTEL COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
NEXTEL INVESTMENT COMPANY
By:
--------------------------------
Name:
Title:
ASSOCIATED SMR, INC.
By:
--------------------------------
Name:
Title:
WIRELESS VENTURES OF MEXICO, INC.
By:
--------------------------------
Name:
Title:
CARLYLE-TRICOM INVESTORS, L.L.C.
By:
--------------------------------
Name:
Title:
- 29 -
<PAGE> 32
Exhibit A
Put Events
This is Exhibit A to the Put-Call Agreement dated as of June 13, 1996
among Associated SMR, Inc., Wireless Ventures of Mexico, Inc., Carlyle-Tricom
Investors, L.L.C., the persons and entities set forth on Schedule I thereto
that become parties thereto in accordance with the terms of Section 10(p)
thereof, Nextel Communications, Inc. and Nextel Investment Company (the
"Put-Call Agreement"). Notwithstanding the definitions set forth in the
Put-Call Agreement, references in this Exhibit A to (i) the "Control Trust
Agreement" refer to the Irrevocable Trust Agreement dated as of March 3, 1995
as in effect on the date hereof, (ii) the Company's "Estatutos" refer to the
corporate organizational and governance documents of the Company bearing such
name under Mexican legal principles as in effect on the date hereof. As
provided for in the Control Trust Agreement, references in the Control Trust
Agreement to the "Shareholders Agreement" refer to the Shareholders Agreement
dated as of March 3, 1995 as in effect on the date hereof. Capitalized terms
used but not defined in this Exhibit A or the Put-Call Agreement have the
respective meanings ascribed thereto in the Control Trust Agreement.
1. Any material amendment to the Company's or any of its Subsidiaries'
(or, prior to the time Natel is a Subsidiary to the extent the Company
has the power to control such action by Natel, Natel's) Estatutos
(except that termination of the supermajority voting requirements
governing votes of the Board of Directors set forth in Article 17 of
the Estatutos shall not be deemed a Put Event).
2. Any issuance by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel, Natel's) of any Shares having, or any
security or instrument which if converted into or exchanged therefor
would have (other than the issuance of Securities having the same
rights as the Voting Securities held by the Grantors as of the date of
the Control Trust Agreement, the issuance of Class L Shares, or any
security or instrument which may be converted or exchanged for such
Voting Securities or Class L Shares) either (A) voting rights
disproportionately large to the ownership interests of the Company
represented thereby or (B) a class vote on any matter, except to the
extent required by applicable corporate law.
3. Any adoption by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel, Natel) of any stockholder rights plan
or any other plan or arrangement that is designed to disadvantage any
Selling
<PAGE> 33
Shareholder on the basis of the size of its shareholding or Beneficial
Ownership of Shares.
4. Any issuance by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel, Natel) of Shares (other than pursuant
to the Eighteen Month Option or the Three Year Option and it being
understood that for purposes hereof any transfer by the Company of
Treasury Securities to any person shall be deemed an issuance of
Shares unless previously deemed to be an issuance under the first
proviso hereto) that (i) when added to all other issuances of Shares
by the Company during the preceding 36-month period would exceed 15%
of the total Shares outstanding at the commencement of such 36-month
period (it being understood that Shares issuable pursuant to employee
stock options and similar stock-based management incentive plans shall
not be included) or (ii) when added to all other issuances of Shares
by the Company during the preceding 36-month period, would be equal to
or less than 15% of the total Shares outstanding at the commencement
of such 36-month period; provided that the issuance of options,
warrants or other securities exercisable for or convertible into
Shares shall be deemed to be the issuance of the Shares for or into
which such options, warrants and other securities are exercisable or
convertible but the Shares into which such options, warrants and other
securities are exercisable or convertible shall not be included and,
for the purposes of calculating the number of Shares issued in any
36-month period, Shares shall be deemed to be issued on the date that
the Company becomes obligated to issue such options, warrants or other
securities; provided further, that if the issuance of all or a portion
of such options, warrants or other securities is terminated or
otherwise abandoned, then Shares shall no longer be deemed to have
been issued on the date that the Company becomes obligated to issue
such options, warrants or other securities.
5. The establishment of any Executive Committee or Special Committee of
the Board of Directors other than the Technology Committee referred to
in Section 12 of the Control Trust Agreement.
6. Any amendment to the last paragraph of either Article 13 or Article 17
of the Estatutos.
7. The replacement of the current Trustee under the Control Trust
Agreement.
8. A transaction or a series of related transactions by the Company or
its direct or indirect, majority or minority owned (only to the extent
the Company has the power to control such decisions) subsidiaries for
the purchase of, establishment of a joint-venture in, investment in,
loans
- 2 -
<PAGE> 34
to, or guarantees of loans to third parties, having an aggregate
purchase price or principal amount in excess of U.S. $10,000,000 (or
its equivalent in other currencies).
9. A single or a related series of dispositions or encumbrances of assets
by the Company or of its direct or indirect, majority or minority
owned (only to the extent the Company has the power to control such
decisions) subsidiaries having fair market value in excess of U.S.
$10,000,000 (or its equivalent in other currencies).
10. The adoption of, or approval of any material deviation from, any
business plan, marketing plan (other than deviations in sales volume),
capital expenditure plan or operating budget of the Company or of its
direct or indirect, majority or minority owned (only to the extent the
Company has the power to control such decisions) subsidiaries.
11. The incurrence of capital expenditures in any fiscal year (other than
capital expenditures to comply with applicable law or a final judicial
or arbitration determination) by the Company or its direct or
indirect, majority or minority owned (only to the extent the Company
has the power to control such decisions) subsidiaries which in the
aggregate exceed 125% of the capital expenditures budget approved by
the Board of Directors.
12. Any approval by the Company or its direct or indirect, majority or
minority owned (only to the extent the Company has the power to
control such decisions) subsidiaries of any tender or exchange of
voting shares of the Company, any merger or other business combination
or the voluntary liquidation of the Company or of its direct or
indirect, majority or minority owned (only to the extent the Company
has the power to control such decisions) subsidiaries.
13. Any decision by the Company or its direct or indirect, majority or
minority owned (only to the extent the Company has the power to
control such decisions) subsidiaries to change its or their, as the
case may be, core business. For purposes of this paragraph, the term
"core business" means the provision (including, without limitation,
the supply installation and operation) of telecommunication products
and services (and the activities related thereto and supply thereof,
which are conducted in accordance with the business plan) in Mexico.
14. The approval of the terms and conditions of any offer for subscription
of treasury shares in respect of which the shareholders' preemptive
rights have been waived.
- 3 -
<PAGE> 1
EXHIBIT 10.9
AMENDMENT TO PUT-CALL AGREEMENT
THIS AMENDMENT AGREEMENT (this "Agreement") is entered into as
of August 23, 1996 to the Put-Call Agreement, dated as of June 13, 1996 (the
"Put-Call Agreement") by and among NEXTEL COMMUNICATIONS, INC., a Delaware
corporation (together with its successors, "Nextel"), NEXTEL INVESTMENT
COMPANY, a Delaware corporation and a wholly owned subsidiary of Nextel
(together with its successors, "Nextel Investment"), ASSOCIATED SMR, INC., a
Delaware corporation (together with its successors, "Associated"), WIRELESS
VENTURES OF MEXICO, INC., a Virginia corporation (together with its successors,
"WVM"), and CARLYLE-TRICOM INVESTORS, L.L.C., a Delaware limited liability
company (together with its successors, "Carlyle", and collectively with
Associated and WVM, the "Selling Shareholders").
For good and valuable consideration, the receipt of which is
hereby acknowledged by the parties, the parties agree as follows:
1. Definitions. Capitalized terms not defined herein
shall have the meanings given to such terms in the Put-Call Agreement.
2. Effective Date. The parties hereby acknowledge that
the Effective Date shall occur upon a closing under each of the Share Purchase
and Call Option Agreement, dated as of the date hereof, among certain
shareholders of Grupo and Nextel Investment and the Subscription Agreement,
dated as of the date hereof, among the Company and Nextel Investment.
3. Amendment to "Current Market Price" Definition. The
definition of "Current Market Price" in the Put-Call Agreement is hereby
amended and restated as follows:
"Current Market Price" per share of common stock of an issuer
as of the applicable Determination Date shall be deemed to be
the average of the daily closing price per share of such
common stock for the 30 consecutive Trading Days immediately
prior to such date; provided, however, that in the event that
during such 30-Trading Day period (and for purposes of Section
7(b), in the event that during such 30-Trading Day period and
after such 30-Trading Day period and prior to the Put Closing
or the Call Closing, as the case may be) there occurs a record
date or effective date in respect of any changes of or to such
common stock as a result of any dividend or other distribution,
split-up, combination, recapitalization, reclassification,
exchange, merger, consolidation or any other change or
adjustment in respect of such common stock (including without
limitation an extraordinary cash dividend) then the "Current
Market Price" shall be adjusted appropriately. The closing
price for each such Trading Day shall be the last sale price,
regular way, or, in case no such sale takes place on such day,
the average of the
<PAGE> 2
closing bid and asked prices, regular way, on the Trading
Market, as reported in the principal consolidated transaction
reporting system or by the NNM with respect to securities
listed or admitted to trading on such Trading Market,
respectively.
4. Put Events. Section 4(a) of the Put-Call Agreement
is hereby amended and restated in its entirety to read as follows:
"(a) Events Constituting Put Events. A "Put Event"
shall be deemed to have occurred (i) automatically on the date
which is 1095 days after the Effective Date or (ii) if after
365 days after the Effective Date, and prior to 1095 days after
the Effective Date, any of the events set forth in clauses (1),
(2), (3) or (4) below shall have occurred:
(1) The Company has taken action with respect to any of
the items listed on Exhibit A hereto and any Director
directly or indirectly designated by one or more of
the Selling Shareholders shall have voted against
such action or any Selling Shareholder shall have
voted all the Shares held by such Selling Shareholder
against such action; provided that if the Company
takes any of the actions listed on Exhibit A without
a vote of the Board or the Company's shareholders,
such action shall constitute a "Put Event" unless the
Company prior to taking such action has provided
written notice to the Selling Shareholders of its
intention to take such action, in which case a "Put
Event" shall only be deemed to occur, if within
fifteen days after provision of such written notice,
Associated and WVM indicate in writing their
disagreement with such proposed action; or
(2) The Selling Shareholders shall cease to be entitled
to directly or indirectly designate (or shall cease
to have the voting power to elect) at least two
Directors on the Board for any reason other than as a
result of the sale or other transfer of the Shares
Beneficially Owned by one or more of the Selling
Shareholders; provided that to the extent the event
resulting in the Selling Shareholders ceasing to be
entitled to directly or indirectly designate (or
ceasing to have the voting power to elect) at least
two Directors, resulted in a "Put Event" occurring
under clause (1) of Section 4(a), no "Put Event"
shall deem to occur under this clause (2);
(3) Section 5.10 of the Shareholders Agreement shall have
been breached; or
2
<PAGE> 3
(4) Neither the Board nor the Company's shareholders
shall have voted on the adoption of, or approval of
any material deviation from, a business plan,
marketing plan, capital expenditure plan or operating
budget of the Company or of its direct or indirect,
majority or minority owned subsidiaries within 90
days after the date which is 365 days after the
Effective Date, unless during such 90 day period one
of the events listed in clauses (1), (2) or (3) of
this Section 4(a) has occurred."
5. Valuation of Nextel Common Stock. Section 7(b) of
the Put-Call Agreement shall be amended and restated in its entirety to read as
follows:
"(b) Valuation of Nextel Common Stock. For purposes
of this Section 7, the value of the Nextel Stock Consideration
shall be the product of the Current Market Price per share of
the shares of Nextel Common Stock comprising the Nextel Stock
Consideration as of three Business Days prior to the Put
Closing Date or the Call Closing Date, as applicable, times
the number of such shares."
6. Nextel Stock Consideration. Sections 7(f), 7(g) and
7(h) shall be added to Section 7 of the Put-Call Agreement and shall read as
follows:
"(f) Nextel Stock Consideration. If any or all of
the Put Price or Call Price to be paid by Nextel Investment to
each Selling Shareholder and Other Shareholder pursuant to
Section 7 consists of Nextel Stock Consideration and a
registration statement is filed and declared effective by the
Securities Exchange Commission to effectuate the resale of the
Nextel Common Stock delivered to the Selling Shareholders and
Other Shareholders (the "Registration Statement") and the
Selling Shareholders and Other Shareholders have complied
promptly with any reasonable requests from Nextel's
accountants for opinions or letters required under the
Statement of Auditing Standards with respect to Letters to
Underwriters as promulgated by the American Institute of
Certified Public Accountants, then Nextel shall provide each
Selling Shareholder and Other Shareholder holding Nextel
Common Stock included in the Registration Statement with (i) a
customary "negative assurances" letter from counsel to Nextel
in form and substance reasonably satisfactory to the Selling
Shareholders and (ii) a customary comfort letter from Nextel's
certified independent public accountants, in form and
substance reasonably satisfactory to the Selling Shareholders.
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<PAGE> 4
(g) Indemnification by Nextel for Securities Law
Violations. (i) With respect to the Registration Statement,
Nextel shall indemnify each Selling Shareholder and Other
Shareholder whose securities are included therein, from and
against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on: (1)
any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement; (2) any
omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading; or (3) any violation by
Nextel of the Securities Act or the Exchange Act or any rule
or regulation promulgated thereunder applicable to Nextel, or
any blue sky or state securities laws or any rule or
regulation promulgated thereunder applicable to Nextel, in
each case, relating to action or inaction required of or on
behalf of Nextel in connection with such Registration
Statement, and will reimburse each Selling Shareholder and
Other Shareholder entitled to indemnity hereunder for any
legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
liability or action; provided that, the foregoing indemnity
and reimbursement obligation shall not be applicable to the
extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in reliance
upon and in conformity with written information furnished to
Nextel by or on behalf of such a holder or by or on behalf of
an underwriter specifically for use in such prospectus,
offering circular or other document; and further provided
that, with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this Section
7(g) shall not inure to the benefit of any Selling Shareholder
or Other Shareholder to the extent that any such losses,
claims, damages or liabilities result from the fact that there
was not sent or given to any person who purchased securities
in connection with such registration, at or prior to the
written confirmation of the sale of securities to such person,
a copy of the prospectus relating to such registration, as
then amended or supplemented (exclusive of material
incorporated by reference), if Nextel had previously furnished
to the Selling Shareholder or Other Shareholder copies
thereof.
(h) Indemnification by Selling Shareholders and
Other Shareholders for Securities Law Violations. Each
Selling Shareholder and Other Shareholder that includes
securities in the Registration Statement shall indemnify
Nextel from and against all claims, losses,
4
<PAGE> 5
damages and liabilities (or actions in respect thereof)
arising out of or based on: (1) any untrue statement (or
alleged untrue statement) of a material fact contained in the
Registration Statement; (2) any omission (or alleged omission)
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; or
(3) any violation by such holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to such
holder, or of any blue sky or other state securities law or
any rule or regulation promulgated thereunder applicable to
such holder, in each case, relating to action or inaction
required of or on behalf of such holder in connection with
such Registration Statement, and will reimburse each such
Person entitled to indemnity hereunder for any legal and other
expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, expense, liability
or action, but in each case only to the extent that such
untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such prospectus, offering
circular or other document in reliance upon and in conformity
with written information furnished to Nextel by or on behalf
of such holder specifically for use therein."
7. Notices. The second paragraph of Section 10(h)(i) of
the Put-Call Agreement is hereby amended and restated to read in its entirety
as follows:
"Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22101
Attention: Thomas J. Sidman, Esq.
Telecopier: 703-394-3001"
8. Release. The Put-Call Agreement is amended by adding
the following Section 11:
"11. Release. Without prejudice to the rights of
the Selling Shareholders and Other Shareholders under this
Agreement, the Selling Shareholders and Other Shareholders
(each, together with its successors, a "Releasor") agree that
upon the occurrence of a Put Closing or Call Closing, the
Company, Nextel Investment and Nextel and their respective
Affiliates shall be released and discharged from all actions,
causes of action, accounts, agreements, bills, covenants,
contracts, controversies, claims, damages, demands, dues,
extents, executions, judgments, liabilities, obligations,
promises, predicate acts, reckonings, specialties, suits,
trespasses and variances whatsoever, under any applicable law,
including, without limitation, Mexican law, United States
federal,
5
<PAGE> 6
state, and local law, at common law, in admiralty or in equity
(collectively, "Claims"), which any of them, ever had or now
has for, upon, or by reason of any matter, cause or thing
whatsoever in connection with any Releasor's capacity as a
shareholder or investor in the Company or any of its
subsidiaries from the beginning of the world to the date of
the Put Closing or Call Closing, including without limitation
whether arising as a result of the Company's, Nextel
Investment's or Nextel's violation of any contractual or other
duty owed to such Releasor as a shareholder of, or investor
in, the Company. Each Releasor agrees that at any Put Closing
or Call Closing it shall deliver any written acknowledgement
of the foregoing release that Nextel Investment may reasonably
request."
9. Exhibit A. Exhibit A of the Put-Call Agreement is
amended and replaced in its entirety by Exhibit A to this Agreement.
10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by and interpreted in accordance with the internal laws of the State of New
York, without reference to its conflicts of law principles.
(b) Counterparts. This Agreement may be signed in
two or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
(c) Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ Brian D. McAuley
-----------------------
Name: Brian D. McAuley
Title: Vice Chairman
NEXTEL INVESTMENT COMPANY
By: /s/ Thomas J. Sidman
-----------------------
Name: Thomas J. Sidman
Title: Vice President
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<PAGE> 7
ASSOCIATED SMR, INC.
By: /s/ William Berkman
---------------------
Name: William Berkman
Title: Vice President
WIRELESS VENTURES OF MEXICO, INC.
By: /s/ Rajendra Singh
---------------------
Name: Rajendra Singh
Title: President
CARLYLE-TRICOM INVESTORS, L.L.C.
By: /s/ Mark Ein
----------------------
Name: /s/ Mark Ein
Title: Vice President
7
<PAGE> 8
EXHIBIT A
Put Events
This is Exhibit A to the Put-Call Agreement dated as of June
13, 1996 as amended as of August __, 1996 among Associated SMR, Inc., Wireless
Ventures of Mexico, Inc., Carlyle-Tricom Investors, L.L.C., the persons and
entities set forth on Schedule I thereto that become parties thereto in
accordance with the terms of Section 10(p) thereof, Nextel Communications, Inc.
and Nextel Investment Company (the "Put-Call Agreement"). Notwithstanding the
definitions set forth in the Put-Call Agreement, references in this Exhibit A
to (i) the "Control Trust Agreement" refer to the Irrevocable Trust Agreement
dated as of March 3, 1995, as amended and as in effect on the Effective Date,
(ii) the Company's "Estatutos" refer to the corporate organizational and
governance documents of the Company bearing such name under Mexican legal
principles as in effect on the Effective Date and attached as Exhibit B to the
Shareholders Agreement. As provided for in the Control Trust Agreement,
references in the Control Trust Agreement to the "Shareholders Agreement" refer
to the Shareholders Agreement dated as of March 3, 1995, as amended and as in
effect on the Effective Date. Capitalized terms used but not defined in this
Exhibit A or the Put-Call Agreement have the respective meanings ascribed
thereto in the Control Trust Agreement.
1. Any material amendment to the Company's or any of its Subsidiaries'
(or, prior to the time Natel is a Subsidiary to the extent the Company
has the power to control such action by Natel, Natel's) Estatutos
(except that elimination of the requirement that matters listed in
items I through VI in Article 29 be considered by a shareholder
meeting shall not be deemed a Put Event).
2. Any issuance by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel, Natel's) of any Shares having, or any
security or instrument which if converted into or exchanged therefor
would have (other than the issuance of Securities having the same
rights as the Voting Securities held by the Grantors as of the date of
the Control Trust Agreement, the issuance of Class N Shares, or any
security or instrument which may be converted or exchanged for such
Voting Securities or Class N Shares) either (A) voting rights
disproportionately large to the ownership interests of the Company
represented thereby or (B) a class vote on any matter, except to the
extent required by applicable corporate law.
3. Any adoption by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel,
<PAGE> 9
Natel) of any stockholder rights plan or any other plan or arrangement
that is designed to disadvantage any Selling Shareholder on the basis
of the size of its shareholding or Beneficial Ownership of Shares.
4. Any issuance by the Company or any of its Subsidiaries (or, prior to
the time Natel is a Subsidiary to the extent the Company has the power
to control such action by Natel, Natel) of Shares (other than pursuant
to the Nextel Purchase Agreement, the Subscription Agreement, the
Revised Option Agreement or the Three Year Option or in connection
with employee stock options and similar stock-based management
incentive plans in place as of the date hereof ("ESOP Shares") or the
agreement to which the Company or its designee and RadioCel S.A. de
C.V. or its designee are among the parties for the company or its
designee to acquire the SMR business or assets of RadioCel S.A. de
C.V. ("RadioCel Acquisition Agreement") (the "Excluded Issuances"))
(it being understood that any transfer by the Company of Shares held
in Treasury to any person shall be deemed an issuance of Shares unless
previously deemed to be an Excluded Issuance) that when added to all
other issuances of Shares by the company during the preceding 36-month
period (other than Excluded Issuances), would exceed 15% of the total
Shares outstanding at the commencement of such 36-month period, the
number of Shares outstanding being calculated to take into account any
dividend in the form of Shares or other distribution in the form of
Shares, stock-split, spin-off, combination, recapitalization,
reclassification, exchange, merger, consolidation, issuance of capital
stock for the capitalization of premiums or any other similar change
in respect of the total Shares outstanding and issuances pursuant to
the Nextel Purchase Agreement, the Subscription Agreement and in
connection with the ESOP Shares and the RadioCel Acquisition
Agreement, in each case as if such event or issuance had occurred at
the commencement of such 36-month period; provided that the issuance
of options, warrants or other securities exercisable for or
convertible into Shares shall be deemed to be the issuance of the
Shares for or into which such options, warrants and other securities
are exercisable or convertible but the Shares into which such options,
warrants and other securities are exercisable or convertible shall not
be included and, for the purposes of calculating the number of Shares
issued in any 36-month period, Shares shall be deemed to be issued on
the date that the Company becomes obligated to issue such options,
warrants or other securities; provided further, that if the issuance
of all or a portion of such options, warrants or other securities is
terminated or otherwise abandoned, then Shares shall no longer be
deemed to have been issued on the date that the Company becomes
obligated to issue such options, warrants or other securities.
2
<PAGE> 10
5. The establishment of any Executive Committee or Special Committee of
the Board of Directors other than the Technology Committee referred to
in Section 12 of the Control Trust Agreement.
6. Any amendment to the last paragraph of either Article 13 or Article 17
of the Estatutos.
7. The replacement of the current Trustee under the Control Trust
Agreement.
8. A transaction or a series of related transactions by the Company or
its direct or indirect, majority or minority owned (only to the extent
the Company has the power to control such decisions) subsidiaries for
the purchase of, establishment of a joint-venture in, investment in,
loans to, or guarantees of loans to third parties, having an aggregate
purchase price or principal amount in excess of U.S. $20,000,000 (or
its equivalent in other currencies).
9. A single or a related series of dispositions or encumbrances of assets
by the Company or of its direct or indirect, majority or minority
owned (only to the extent the Company has the power to control such
decisions) subsidiaries having fair market value in excess of U.S.
$20,000,000 (or its equivalent in other currencies).
10. The adoption of, or approval of any material deviation from, any
business plan, marketing plan (other than deviations in sales volume),
capital expenditure plan or operating budget of the Company or of its
direct or indirect, majority or minority owned (only to the extent the
Company has the power to control such decisions) subsidiaries.
11. The incurrence of capital expenditures in any fiscal year (other than
capital expenditures to comply with applicable law or a final judicial
or arbitration determination) by the Company or its direct or
indirect, majority or minority owned (only to the extent the Company
has the power to control such decisions) subsidiaries which in the
aggregate exceed 125% of the capital expenditures budget approved by
the Shareholders.
12. Any decision by the Company or its direct or indirect, majority or
minority owned (only to the extent the Company has the power to
control such decisions) subsidiaries to change its or their, as the
case may be, core business. For purposes of this paragraph, the term
"core business" means the provision (including, without limitation,
the supply installation and operation) of telecommunication products
and services (and the activities related thereto and supply thereof,
which are conducted in accordance with the business plan) in Mexico.
3
<PAGE> 11
13. The approval of the terms and conditions of any offer for subscription
of treasury shares in respect of which the shareholders' preemptive
rights have been waived.
4
<PAGE> 1
EXHIBIT 10.10
EXIT RIGHTS AGREEMENT (the "Agreement"), dated as of August
23, 1996, between Grupo Comunicaciones San Luis, S.A. de C.V. (together with
its successors and permitted assigns, "Grupo") and Nextel Investment Company
(together with its successors and permitted assigns, "Nextel Investment" and
together with Grupo, the "Parties").
WHEREAS, Nextel Investment and certain other parties have
entered into a Share Purchase and Call Option Agreement (the "Share Purchase
and Call Option Agreement"), dated as of the date hereof and Nextel Investment
and Corporacion Mobilcom, S.A. de C.V. (the "Issuer") have entered into a
Subscription Agreement (the "Subscription Agreement"), dated as of the date
hereof.
NOW THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used herein the following terms
have the following meanings:
"Accredited Investor" has the meaning set forth in Regulation
D under the Securities Act, as amended.
"Affiliate" of any Person means a Person that controls, is
controlled by or is under common control with such Person (it being understood,
that a Person shall be deemed to "control" another Person, for purposes of this
definition, if such Person directly or indirectly has the power to direct or
cause the direction of the management and policies of such other Person,
whether through holding ownership interests in such other Person, through
agreements or otherwise).
"Alternate Offering" means (a) a private placement of Shares
(including a private placement of Shares to be resold under Rule 144A under the
Securities Act) and/or (b) an offering of Shares pursuant to Regulation S under
the Securities Act; provided, that a private placement of Shares or an offering
of Shares pursuant to Regulation S under the Securities Act shall constitute an
"Alternate Offering" only if (i) either (A) it shall be a firm commitment
equity placement under Rule 144A or a firm commitment Regulation S offering
that is managed by an underwriter or underwriters of national standing in the
United States and is conducted in a manner that is customary for Rule 144A
placements or Regulation S offerings, as the case may be, using customary
preliminary and final offering memoranda, customary contractual documentation
and roadshows in which potential investors have an opportunity to hear from and
question management of the Issuer or (B) the number of institutional Accredited
Investors purchasing Shares in such private placement or offering under
Regulation S is at least equal to twenty, (ii) the aggregate gross U.S. Dollar
cash proceeds to the Issuer exceed U.S.$100 million and (iii) all of the Shares
being offered
<PAGE> 2
are of the same class and series as all of the Shares beneficially owned by
Grupo and its Qualified Affiliates as of the closing of the placement or
offering (or into which all of the Shares beneficially owned by Grupo and its
Qualified Affiliates are convertible without any restriction which would
materially prevent, impair or delay such conversion). For purposes of the
foregoing proviso, (X) two or more Affiliates purchasing Shares in a private
placement shall constitute a single institutional Accredited Investor and (Y) a
vendor of the Issuer or its Affiliates acquiring Shares as part of a vendor
financing arrangement shall not be deemed an institutional Accredited Investor
for purposes of clause (i)(B) and the gross proceeds from a sale of Shares
under such a vendor financing arrangement shall not count toward the U.S. $100
million amount for purposes of clause (ii).
"Appraiser" means an investment bank listed in Annex D to the
Shareholders Agreement, which Appraiser shall not have provided any services to
the Party that designates such Appraiser under Section 3 hereof within the
previous 24 months, or acted as an underwriter pursuant to Section 2.1(c) of
the Registration Agreement.
"Appraiser's Certificate" has the meaning set forth in Section
3 hereof.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in either or both
of New York City, New York and Mexico City, Mexico are authorized or obligated
to close by law or executive order.
"Call Option" has the meaning set forth in the Share Purchase
and Call Option Agreement.
"Cash Amount" means the amount of consideration wire
transferred to Grupo at the closing of the Liquidity Event in immediately
available U.S. Dollar funds in exchange for Shares specified in the Liquidity
Request.
"Certificate Date" has the meaning set forth in Section 3
hereof.
"Closing Notice" has the meaning set forth in Section 2
hereof.
"Control Trust Agreement" means the Irrevocable Trust
Agreement, dated as of March 3, 1995, among Nextel, Nextel Investment, Grupo,
Associated SMR, Inc., Wireless Ventures of Mexico, Inc., Carlyle-Tricom
Investors L.L.C. and Banco del Atlantico, S.A., as amended and restated from
time to time.
"ESOP Number" means the number of Shares, up to a maximum of
16,100 Shares, issued pursuant to employee stock option plans of the Issuer and
which either are (a) acquired
2
<PAGE> 3
after the date hereof by Grupo or its Qualified Affiliates from present or
former employees to whom such shares were issued or (b) up to 167 Shares
acquired by Grupo or its Qualified Affiliates after the date hereof from Javier
Salcido Gonzalez de Castilla.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Fair Cash Value" for the number of Shares specified in the
Liquidity Request means the U.S. dollar cash amount determined pursuant to
Section 3 hereof.
"Grupo" has the meaning set forth in the first paragraph
hereof.
"Grupo Appraiser" means an Appraiser which Grupo selects.
"Higher Value" has the meaning set forth in Section 3 hereof.
"ICC" has the meaning set forth in Section 6 hereof.
"ICC Rules" has the meaning set forth in Section 6 hereof.
"Issuer" has the meaning set forth in the recitals hereof.
"Liquidity Event" means the closing within one year after the
Liquidity Request Date of either (i) an Offering or (ii) a sale of the Shares
specified in the Liquidity Request in exchange for the Fair Cash Value in the
form of the Cash Amount and/or the Qualified Securities.
"Liquidity Request" has the meaning set forth in Section 2
hereof.
"Liquidity Request Date" has the meaning set forth in Section
3 hereof.
"Lower Value" has the value set forth in Section 3 hereof.
"Market Shares" mean shares of the same class and series as
all Qualified Securities or into which all Qualified Securities are convertible
without any restriction which would materially prevent, impair or delay such
conversion.
"Market Share Price" means the average of the daily closing
price per share of Market Shares on the Nasdaq Market or a major securities
exchange in the United States for the seven Trading Days immediately preceding
the fourth Trading Day before
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<PAGE> 4
the closing of the Liquidity Event; provided, however, that in the event that
during such seven Trading Day period, or after such seven Trading Day period
and prior to the closing of such Liquidity Event, there occurs a record date or
effective date in respect of any changes of or to such Market Shares as a
result of any dividend or other distribution, split-up, combination,
recapitalization, reclassification, exchange, merger, consolidation or any
other change or adjustment in respect of such Market Shares (including without
limitation an extraordinary cash dividend), then the "Market Share Price" shall
be adjusted appropriately. Such adjustment shall become effective immediately
after such record date or effective date. The closing price for each such
Trading Day shall be the last sale price or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, on the Nasdaq
Market or such major securities exchange in the United States, as reported in
the principal consolidated transaction reporting system or by the Nasdaq Market
or such major securities exchange in the United States.
"Nasdaq Market" means the Nasdaq Stock Market Inc.'s National
Market.
"Nextel" means Nextel Communications, Inc.
"Nextel Appraiser" means an Appraiser which Nextel Investment
selects.
"Nextel Investment" has the meaning set forth in the first
paragraph hereof.
"Offering" means a public offering of Shares of the same class
and series as all of the Shares beneficially owned by Grupo and its Qualified
Affiliates as of the closing of the public offering (or into which all of the
Shares beneficially owned by Grupo and its Qualified Affiliates are convertible
without any restriction which would materially prevent, impair or delay such
conversion) which is registered in the United States, in which all of the
Shares specified in the Liquidity Request are included.
"Parties" has the meaning set forth in the first paragraph
hereof.
"Person" means any individual, limited liability company,
partnership, corporation, business trust, joint stock company, trust,
unincorporated association, governmental authority or other entity.
"Post-Transfer Number" means the number of Shares beneficially
owned by (a) Grupo and its Qualified Affiliates on the date hereof, which is
203,144, plus (b) the ESOP Number plus (c) the number of Shares acquired by the
Sellers under the Share Purchase and Call Option Agreement pursuant to the Call
Option
4
<PAGE> 5
and Section 8.4 plus (d) the aggregate number of Shares issued to each of Grupo
and its Qualified Affiliates by the Issuer on and after the date hereof less
(e) the number of Shares acquired by Nextel Investment under the Share Purchase
and Call Option Agreement less (f) the number of Shares redeemed or purchased
by the Issuer from Grupo or its Qualified Affiliates on and after the date
hereof less (g) the number of Shares sold by Grupo or its Qualified Affiliates,
other than to Grupo, its Qualified Affiliates or, to the extent covered by
clause (f), the Issuer, on and after the date hereof. Notwithstanding the
foregoing, any Shares acquired by Grupo or its Qualified Affiliates from
parties other than the Issuer and present or former employees who acquired any
such Shares pursuant to the Issuer's employee stock option plan and up to 167
Shares acquired from Javier Salcido Gonzalez de Castilla, shall not be deemed
to be part of the Post-Transfer Number.
"Qualified Affiliate" has the meaning set forth in the
Shareholders Agreement, provided, that if the Shareholders Agreement and the
Control Trust Agreement have been terminated, "Qualified Affiliate" shall mean
an Affiliate.
"Qualified Securities" means, in respect of a Liquidity Event,
securities or other consideration reasonably acceptable to Grupo including,
without limitation, securities that (A) are accompanied by agreements with
representations, warranties, indemnities (including, without limitation,
indemnities for liabilities arising under the securities laws of the United
States) and closing conditions customary for similar transactions and
reasonably acceptable to Grupo and that involve parties that have sufficient
assets to comply with their obligations in such a transaction, (B) are duly
authorized, fully paid, validly issued, nonassessable and free and clear of any
liens whatsoever, (C) have an aggregate value, based on the Market Share Price,
equal to the Fair Cash Value less the Cash Amount and (D) are subject to an
arrangement under which they may be resold during the Registration Period by
Grupo in accordance with all applicable laws and regulations on a major
securities exchange in the United States or the Nasdaq Market without being
subject to any requirements that would materially prevent, impair or delay such
resale by Grupo.
"Registration Agreement" means the Registration Agreement
dated as of the date hereof among Nextel, the Issuer and certain other Persons.
"Registration Period" means a period of at least 30 calendar
days (plus the number of days that Grupo is unable to use a prospectus relating
to the resale of the Qualified Securities except if such inability arises from
a change in the proposed plan of distribution by Grupo) following the closing
of the Liquidity Event during which Grupo may resell the Qualified Securities
in accordance with all applicable laws and regulations on a major securities
exchange in the United States or the Nasdaq
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Market without being subject to any requirements that would materially prevent,
impair or delay such resale by Grupo.
"Registration Rights Agreement" means Annex A to the
Shareholders Agreement.
"Resale Costs" means, in respect of any resale of Qualified
Securities by Grupo and its Qualified Affiliates during the Registration
Period, all out-of-pocket fees, commissions and other (customary and reasonably
acceptable to Nextel Investment or the purchaser designated by Nextel
Investment) expenses (including expenses of underwriter's, broker's or dealer's
counsel that are customarily reimbursed to underwriters, brokers and dealers
and that are reasonably acceptable to Nextel Investment or the purchaser
designated by Nextel Investment) incurred and paid by Grupo and its Qualified
Affiliates that are (i) customary and usual for similar types of arrangements
for the resale of publicly traded securities (including, without limitation,
discounts indicated on the cover of any prospectus included in a registration
statement relating to such resale as underwriting compensation payable to or
deductible from payments by any underwriter, broker or dealer acquiring
Qualified Securities from Grupo or selling such Qualified Securities on behalf
of Grupo), (ii) directly related to such arrangement for the resale of
Qualified Securities and (iii) are evidenced by documentation reasonably
satisfactory to Nextel Investment.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Share Purchase and Call Option Agreement" has the meaning set
forth in the recitals hereof.
"Shares" means shares of Issuer capital stock of any class or
series.
"Shareholders Agreement" means the Shareholders Agreement,
dated as of March 3, 1995, among Nextel, Nextel Investment, Grupo, Associated
SMR, Inc., Wireless Ventures of Mexico, Inc., Carlyle-Tricom Investors L.L.C.
and the Issuer, as amended and restated from time to time.
"Subscription Agreement" has the meaning set forth in the
recitals hereof.
"Termination Offering" means a public offering of Shares of
the same class and series as all of the Shares beneficially owned by Grupo and
its Qualified Affiliates as of the closing of the public offering (or into
which all of such Shares beneficially owned by Grupo and its Qualified
Affiliates are convertible without any restriction which would materially
prevent, impair or delay such conversion) which is registered with the United
States Securities and Exchange Commission and in
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which the aggregate gross U.S. Dollar cash proceeds to the Issuer is at least
U.S.$100 million.
"Trading Day" means a day on which (i) Market Shares are
listed and traded on the Nasdaq Market or a major securities exchange in the
United States and (ii) the Nasdaq Market or such major securities exchange in
the United States (as the case may be under clause (i)) is open for the
transaction of business.
"Underwriter" means the underwriter for the Offering which
shall be an investment banking firm of international standing reasonably
acceptable to Grupo.
Section 2. Liquidity Request. (a) Nextel Investment hereby
agrees that upon the receipt of a request (a "Liquidity Request") from Grupo at
any time after January 1, 1999, requesting a Liquidity Event, referencing this
Agreement and designating a number of Shares Beneficially Owned (as defined in
the Shareholders Agreement) by Grupo and its Qualified Affiliates to be
included in such Liquidity Event (which number may not exceed the Post-Transfer
Number), Nextel Investment shall cause a Liquidity Event in respect of such
number of Shares specified in the Liquidity Request to close within one year
after the delivery of the Liquidity Request; provided, that Grupo shall (i)
have used its, and caused its Qualified Affiliates to have used their,
reasonable best efforts to further the occurrence of the Liquidity Event,
including, without limitation, by negotiating in good faith with third parties
with respect to the terms and Fair Cash Value for such Liquidity Event and (ii)
not be in breach under the Control Trust Agreement, if in effect, and the
Shareholders Agreement (other than such breaches which would not be considered
material). In the case of a Liquidity Event other than one in which Grupo has
negotiated the terms thereof with a third party, Nextel Investment shall
provide Grupo with reasonable advance notice (the "Closing Notice") of the
closing and the other material details of the Liquidity Event.
(b) If such Liquidity Event is other than an Offering and
Qualified Securities constitute all or part of the consideration used in such
Liquidity Event, then Nextel Investment or any purchaser of the Shares
designated by Nextel Investment shall reimburse Grupo for one-half of any
Resale Costs; provided, that such reimbursement amount shall not exceed one
percent of the proceeds from the resale of Qualified Securities during the
Registration Period.
(c) If such Liquidity Event is an Offering, then the expenses
in connection with such Offering shall be borne in accordance with the
provisions of the Registration Rights Agreement and Grupo shall otherwise take
such actions as are customary for secondary sellers in a registered public
offering and are reasonably requested by the Underwriter.
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<PAGE> 8
(d) It is understood and agreed that (i) Nextel Investment
shall be obligated to cause only one Liquidity Event hereunder and (ii) in the
event that Nextel Investment fails to cause a Liquidity Event to close within
one year after the delivery of the Liquidity Request, Grupo shall have a right
to demand registration under Section A.5 of the Registration Rights Agreement.
Section 3. Fair Cash Value. Fair Cash Value for the number
of Shares specified in the Liquidity Request shall be the U.S. dollar cash
amount equal to (i) an amount determined by mutual agreement of Grupo and
Nextel Investment or a buyer designated by Nextel Investment; and (ii) if such
an agreement under clause (i) cannot be reached within 60 days after the date
of delivery of the Liquidity Request (such date of delivery being, the
"Liquidity Request Date"), an amount determined upon the request of either
Nextel Investment or Grupo (the date of the first such request being, the
"Appraisal Request Date") as follows:
(a) Selection of Appraisers. Grupo shall designate by
written notice to Nextel the Grupo Appraiser and Nextel Investment shall
designate by written notice to Grupo the Nextel Appraiser. In the event that
only one Appraiser is designated within 15 days after the Appraisal Request
Date (either as the result of both Party's designating the same Appraiser or
one Party failing to designate an Appraiser within such 15-day period), the
Appraiser designated shall deliver an Appraiser Certificate as described in
Section 3(b), the Fair Cash Value shall be determined on the basis of such
Appraiser Certificate and the Parties shall each pay one-half of such
Appraiser's fees and expenses. If the Grupo Appraiser and the Nextel Appraiser
are not the same, then Grupo shall pay all of the Grupo Appraiser's fees and
expenses and Nextel Investment shall pay all of the Nextel Appraiser's fees and
expenses.
(b) Evaluation Procedures. Each Appraiser shall be directed
to determine the value (which for purposes of such determination shall be what
a willing buyer would have paid a willing seller on the Liquidity Request Date
in an arm's length transaction) of all outstanding Shares and then designate
the Fair Cash Value by multiplying such valuation by the percentage of the
outstanding Shares represented by the number of Shares specified in the
Liquidity Request. Each Appraiser will be directed to deliver an appraiser's
certificate (an "Appraiser's Certificate") to Grupo and Nextel Investment on or
before the 45th day (the "Certificate Date") after the last date by which Grupo
and Nextel Investment must designate an Appraiser pursuant to Section 3(a),
upon the conclusion of its evaluation, which appraiser's certificate shall set
forth such appraiser's determination hereunder of the Fair Cash Value.
(c) Fair Cash Value Determination. On the first Business Day
after the Certificate Date, the Fair Cash Value
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<PAGE> 9
shall be determined on the basis of the respective Appraisers' Certificates in
accordance with the provisions of this Section 3(c). The higher of the values
set forth in the Appraisers' Certificates is hereinafter referred to as the
"Higher Value" and the lower of such values is hereinafter referred to as the
"Lower Value". If the Higher Value is not more than 110% of the Lower Value,
the Fair Cash Value will be the arithmetic average of such two values. If the
Higher Value is more than 110% of the Lower Value, a third Appraiser shall be
selected from Annex D to the Shareholders Agreement in accordance with the
provisions of Section 3(d) below, and the Fair Cash Value will be determined in
accordance with the provisions of Section 3(d) below.
(d) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, the Grupo Appraiser and the
Nextel Appraiser shall be directed by the Parties to jointly designate, within
seven days of the Certificate Date, by written notice to each Party a third
Appraiser from Annex D to the Shareholders Agreement (other than the Grupo
Appraiser and the Nextel Appraiser) to serve as an Appraiser pursuant to this
Section 3(d) (the "Third Appraiser"). The Parties shall direct the Third
Appraiser to determine in writing within 30 days after the selection of the
Third Appraiser, which Appraiser's Certificate more accurately states the Fair
Cash Value pursuant to Section 3(b) and the Fair Cash Value will be as set
forth in such Appraiser's Certificate. Each of the Parties shall pay one-half
of the Third Appraiser's fees and expenses.
(e) Conclusive Determination. To the fullest extent
permitted by law, the determination of the Fair Cash Value made pursuant to
this Section 3 shall be final and binding on the Parties for purposes of this
Agreement.
(f) Appraiser Procedures. The Parties shall take all
reasonable action to cause the Issuer to provide each Appraiser with such
information concerning the Issuer as may be reasonably requested in writing by
each Appraiser for purposes of its evaluation hereunder. Each Appraiser will
be obligated to keep confidential all information disclosed by the Issuer in
the course of conducting its evaluation and, to that end, to execute such
customary documentation as any Party or the Issuer may reasonably request with
respect to such confidentiality obligation. The same information shall be
provided to the Grupo Appraiser and the Nextel Appraiser and all such
information shall be provided to the Third Appraiser. The Appraisers may, but
shall be under no obligation to, consult with each other in the course of
conducting their respective evaluations. Each Appraiser will be directed to
comply with the provisions of this Section 3, and to that end, the Parties will
provide the respective Appraisers with a complete and correct copy of this
Section 3 (and the definitions of capitalized terms used in this Section 3 that
are defined elsewhere in this Agreement).
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<PAGE> 10
Section 4. Effective Date. This Agreement shall be effective
from the first date by which a closing has occurred under both the Share
Purchase and Call Option Agreement and the Subscription Agreement.
Notwithstanding the foregoing, in the event that a Termination Offering or an
Alternate Offering has closed prior to January 1, 1999, or the Post-Transfer
Number with respect to Grupo and its Qualified Affiliates is less than 1% of
the outstanding Shares on the date of the Liquidity Request, then the Parties
shall have no obligations hereunder.
Section 5. Governing Law. This Agreement shall be construed
and enforced in accordance with and shall be governed by the laws of the State
of New York, United States of America (including, without limitation, New York
General Obligations Law Section 5-1401) without giving effect to any choice of
law or conflict of law provision or rule (whether of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the laws of the State of New York, except that Section 6 shall be
governed by and construed in accordance with the United States Federal
Arbitration Act and the 1958 United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards to the exclusion of any state or
municipal law of arbitration. This Agreement may be translated into the
Spanish language, but if there is any inconsistency between the English and
Spanish versions hereof, the English version hereof shall be controlling.
Section 6. Arbitration. (a) Except for obtaining a
temporary restraining order or preliminary injunction to prevent immediate
irreparable harm, any controversy, conflict or dispute of any nature that
arises in relation to this Agreement shall be settled exclusively and finally
by arbitration, which will be carried out in conformity with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce (the
"ICC") in effect on the date of this Agreement (the "ICC Rules"). The
arbitration will be carried out by three arbitrators. One arbitrator shall be
appointed by each side in accordance with Article 4.4 of the ICC Rules as if
each side were a "party" (as such term is used in Article 4.4 of the ICC Rules)
and the third arbitrator shall be selected by the two party-appointed
arbitrators or, failing agreement within 45 days after the notice of intention
to arbitrate is filed with the ICC (or such other period as may be agreed by
the two sides to such arbitration), by the ICC in accordance with the ICC
Rules; provided that any such third arbitrator selected by the ICC shall not be
a national of either the United States or Mexico. Unless all of the parties to
such arbitration otherwise agree, all arbitrators appointed in any such
arbitration shall be bilingual in English and Spanish.
(b) The arbitration will be carried out in Mexico D.F.,
Mexico, in the English language in conformity with the substantive law set
forth in Section 5 and the procedural rules set forth in this Section 6 and
Section 7 hereof; provided, however, that any party to the arbitration
proceeding with
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reasonable prior notice to the other parties to such arbitration may submit
testimony or documentary evidence in Spanish, and shall, upon request of any
other party to the arbitration proceeding, furnish a translation into English
of any such testimony or documentary evidence. Any translation of documentary
evidence shall be provided a reasonable period of time before its submission in
the proceeding.
(c) At any oral hearing of evidence, each party to the
arbitration proceeding or its legal counsel shall have the right to examine its
witnesses and to cross-examine the witnesses of an opposing party. No evidence
of any witness shall be presented in written form unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties to the arbitration proceeding otherwise agree in writing or except
under extraordinary circumstances where the interests of justice require a
different procedure.
(d) Any decision or award of the arbitrators shall be
final and binding upon the parties to such arbitration, and judgment upon any
such arbitral award may be entered in any court of competent jurisdiction. The
Parties hereby waive, to the fullest extent permitted by applicable law, any
rights to appeal or to review of such decision or award by any court or
tribunal.
(e) To the extent that any Party has or hereafter may
acquire any immunity (sovereign or otherwise) from jurisdiction of any court or
from any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, each such Party hereby, to the fullest extent
permitted by applicable law, irrevocably waives such immunity in respect of its
obligations under this Agreement, in connection with any application for
judicial acceptance and an order of enforcement of any such decision or award.
Section 7. Remedies. It is agreed that irreparable damage
could occur in the event that Section 2(d) of this Agreement were not performed
in accordance with its specific terms or were otherwise breached and that in
addition to a party's right to seek a temporary restraining order or
preliminary injunction to prevent immediate irreparable harm, an arbitration
panel convened under Section 6 shall have the power to grant an injunction or
injunctions to prevent breaches of Section 2(d) and the parties shall be
entitled to enforce specifically the terms and provisions of an award of such
arbitration panel providing for such an injunction or injunctions in any such
court having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof or at
law or in equity shall be cumulative and not alternative, and the exercise of
any thereof by any Party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such Party.
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Section 8. Notices. All notices and other communications
hereunder shall be in writing and shall be sent by registered or certified mail
(return receipt requested), facsimile or express courier or delivered in person
to the address set forth below.
(a) in the case of Grupo:
Grupo Comunicaciones San Luis, S.A. de C.V.
Monte Elbruz No. 132
Primer Piso
Lomas de Chapultepec, C.P. 11000
Mexico D.F., Mexico
Attention: Miguel Valladares Garcia and Benigno
Perez Lizaur
Telecopier: 525-280-4788
(b) in the case of Nextel Investment at:
c/o Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, VA 22101
Attention: Thomas J. Sidman, General Counsel
Telecopier: 703-394-3001
with a copy to Jones, Day, Reavis & Pogue:
599 Lexington Avenue
New York, New York 10022
Attention: Steven D. Guynn, Esq.
Telecopier: 212-755-7306
Section 9. Headings. The headings in this Agreement are for
purposes of reference only and shall not be considered in construing this
Agreement.
Section 10. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered, shall
constitute an original and all together shall constitute one instrument.
Section 11. Assignment. This Agreement shall bind and inure
to the benefit of each Party's respective successors and permitted assigns and
nothing in this Agreement confers any rights or remedies upon any other Person;
provided, that each of the Parties shall not assign or transfer any of its
rights or obligations hereunder or any interest herein without obtaining the
written consent of the other Party to this Agreement to such assignment or
transfer; provided, further, that each Party may assign or transfer any of its
rights or obligations hereunder to a Qualified Affiliate of such Party provided
that such Party agrees to
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remain a primary obligor in respect of its assignee's obligations hereunder.
Any assignment or transfer in violation of this Section 11 shall be null and
void.
Section 12. Enforceability. In the event that any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby as long as the remaining provisions do not
fundamentally alter the relations among the Parties.
Section 13. Entire Agreement. This Agreement contains the
entire agreement between the Parties with respect to the subject matter hereof
and supersedes all prior understandings with respect to the subject matter
hereof.
Section 14. Amendment. This Agreement may not be amended,
except pursuant to an instrument in writing signed by each of the Parties.
Section 15. Adjustment. If the Issuer (i) subdivides its
outstanding Shares, (ii) combines its outstanding Shares into a smaller number
of Shares, (iii) issues any securities by reclassification of its Shares or a
dividend or a distribution to holders of Shares, (iv) consolidates or merges
into or with any other corporation or (v) issues Shares for the purpose of
capitalizing premiums, then all references herein to Shares, including, without
limitation, the ESOP Number and the Post-Transfer Number, shall be adjusted to
refer to the securities that would be held after the happening of such event.
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IN WITNESS WHEREOF, the Parties have executed this Agreement
this 23rd day of August, 1996.
NEXTEL INVESTMENT COMPANY
By: /s/ Thomas J. Sidman
----------------------------
Name: Thomas J. Sidman
Title: Vice President
GRUPO COMUNICACIONES SAN LUIS,
S.A. de C.V.
By: /s/ Benigno Perez Lizaur
------------------------------
Name: Benigno Perez Lizaur
Title: Attorney-in-Fact
<PAGE> 1
EXHIBIT 10.11
INFOCOM COMMUNICATIONS NETWORK, INC.
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") dated as of June 21,
1996, by and among INFOCOM COMMUNICATIONS NETWORK, INC., a corporation
organized under the laws of the Republic of the Philippines (the "Company"),
and the persons listed as Stockholders on the signature pages to this Agreement
or in Exhibit I attached hereto as at any time amended (collectively, the
"Stockholders" and individually, a "Stockholder").
RECITALS
The Stockholders are the owners of all of the Company's Common Stock
(the "Common Stock") and desire to enter into certain agreements relating to
transfers of Common Stock and the corporate governance of the Company.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are acknowledged and the parties' desire to provide for
continuity of ownership of the Company to further the interests of the Company
and its present and future Stockholders, the parties agree as follows:
1. BOARD OF DIRECTORS
1.1 ELECTION OF DIRECTORS
In elections of directors of the Company, the Stockholders shall vote
for the following candidates, whom the Company's Board of Directors (the
"Board") and the Stockholders shall take all necessary steps to nominate:
(a) Three candidates shall be designated by MIL and
(b) Eight candidates shall be designated by the Board.
1.2 QUORUM
A quorum for any meeting of the Directors shall consist of SIX (6)
Directors, at least one of whom shall be a Director who shall have been
nominated by McCaw International, Ltd. ("MIL").
1.3 EXECUTIVE COMMITTEE
The Board of Directors shall appoint an Executive Committee consisting
of FOUR (4) Directors, ONE (1) of whom shall be appointed by MIL.
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2. NONCOMPETITION
Except for Gotesco Properties, Inc. or any Affiliate thereof
("Gotesco"), so long as any Stockholder owns any capital stock of the Company
or an Affiliate of the Company, such Stockholder or any Affiliate thereof shall
not in any way, by action or inaction, directly or indirectly, for itself or
for the benefit of any other Person, own, manage, operate, join or Control, or
participate in the ownership, management, operation or Control of, any Person
that competes with the Company or any Affiliate thereof, or agree to do any of
the foregoing in mobile telecommunications services in the Republic of the
Philippines for a period ending two years after the closing of the Company's
initial public offering; provided that any of the parties and its Affiliates
may invest in any such competitor whose securities are publicly traded to the
extent such investment by such party and its Affiliates in the aggregate does
not exceed 1% of the voting securities of any class of securities of such
party. Without limiting the generality of the foregoing, any party shall be
deemed to be related to or connected with a Person that competes with the
Company or any Affiliate thereof if, among other things, such Person is (a) a
partnership in which such party is a general or limited partner, (b) a
corporation or association of which such party is a stockholder or for which a
director or officer of such party is an officer, employee or director, or (c) a
partnership, corporation or association for which such party is a consultant or
agent. "Affiliate" of any Person (the "Subject") means any other Person that,
directly or indirectly, Controls or is Controlled by or is under common Control
with the Subject. "Control" (including, with correlative meanings, the terms
"Controlled by" and "under common Control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Person" means any individual, partnership, joint-stock company, firm,
corporation, association, unincorporated organization, joint venture, trust or
other entity.
3. LOANS
The Company shall use its best efforts to only enter into loan
agreements or other obligations on a nonrecourse basis. However, to the extent
a Stockholder is required to provide a guaranty or other form of security to
support any loan or other obligation of the Company (a "Guaranty"), the
obligation of such Stockholder shall be several and not joint, and shall not
exceed such Stockholder's pro rata portion (as defined in Section 6.2)) of such
loan or other obligation. For the purposes of this Section 3, in the event
such a Guaranty is necessary, William Ngai Wai Lun ("Ngai") hereby agrees to
provide such Guaranty on Gotesco's and its Affiliates' behalf to the full
extent of Gotesco's and its Affiliates' pro rata portion, such Guaranty to be
in addition to the Guaranty given by Ngai in relation to the pro rata portion
of Ngai and his Affiliates.
4. REGISTRATION RIGHTS
4.1 DEFINITIONS
For purposes of these registration rights:
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(a) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the U.S. Securities Act of
1933, as amended (the "Act"), and the declaration or ordering of effectiveness
of such registration statement or document;
(b) The term "Registrable Securities" means any Common
Stock of the Company (the "Common Stock") issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which its rights
under this Agreement are not assigned;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities who is a holder of Common Stock as
of the close of business on June 21, 1996; and
(e) The term "Initiating Holders" means the Holders who
initiate the request for registration under section 4.2(a);
4.2 REQUEST FOR REGISTRATION
(a) If at any time after six months after the closing of
the Company's initial public offering, the Company shall receive a written
request from Holders of at least 30% of the Registrable Securities that the
Company file a registration statement under the Securities Act covering the
registration for an underwritten public offering of Registrable Securities with
estimated aggregate gross proceeds of at least $10,000,000, based on a
good-faith estimate of the market price of the Common Stock, then the Company
shall, within 10 days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations contained in this
Section 4, effect the registration under the Securities Act of all Registrable
Securities which the Holders request to be registered by their giving written
notice to the Company within 20 days of the mailing by the Company of its
previous notice to the Holders.
(b) The Initiating Holders must distribute the
Registrable Securities covered by their request by means of an underwritten
public offering. The right of any Holder to include its Registrable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 4.4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders, which
underwriter must also be reasonably acceptable to the Company. Notwithstanding
any other provision of this Section 4.2,
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<PAGE> 4
if the underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder.
(c) The Company is obligated to effect only one such
registration pursuant to this Section 4.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
4.2, a certificate signed by the President of the Company stating that, in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders.
4.3 COMPANY REGISTRATION
If (but without any obligation to do so) the Company proposes
to register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its stock or other securities
under the Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, or a registration on any form that
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at each such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within 20 days after mailing of such notice by the Company, the Company
shall, subject to the provisions of Section 4.7, cause to be registered under
the Act all of the Registrable Securities that each such Holder has so
requested.
4.4 OBLIGATIONS OF THE COMPANY
Whenever required under this Agreement to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the U.S. Securities and
Exchange Commission (the "U.S. SEC") a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 90 days.
(b) Prepare and file with the U.S. SEC such amendments
and supplements to such registration statement
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and the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of all securities covered by
such registration statement.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
4.5 FURNISH INFORMATION
It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
their Registrable Securities and to execute such documents in connection with
such registration as the Company may reasonably request.
4.6 EXPENSES OF REGISTRATION
In connection with any registration pursuant to this
Agreement, the Company shall be responsible for the payment of all expenses of
the registration, with the exception of underwriting commissions and discounts
which shall be paid by the Company, the Holders and any other selling security
holders in proportion to the aggregate value of the securities offered for sale
by each of them. Notwithstanding the preceding sentence, Holders participating
in a registration pursuant to Section 4.2 shall be responsible for the payment
of all expenses directly related to such registration.
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<PAGE> 6
4.7 UNDERWRITING REQUIREMENTS
The Company shall not be required under Section 4.3 to include
any of the Holders' securities in an underwritten offering of the Company's
securities unless such Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it. If the total
amount of securities, including Registrable Securities, requested by Holders to
be included in such offering exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, that the underwriters
believe will not jeopardize the success of the offering. The securities to be
included in the registration in the event of such a reduction shall be
apportioned first to the Company, then pro rata among the selling Holders
according to the total amount of securities requested to be sold in such
registration by such Holders and then pro rata among any other selling Holders
according to the total amount of securities otherwise entitled to be included
therein owned by each such other selling Holder, or in such other proportions
as shall mutually be agreed to by such selling Holders.
4.8 DELAY OF REGISTRATION
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
4.9 INDEMNIFICATION
In the event any Registrable Securities are included in a
registration statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, agents,
employees and directors of each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the U.S. Securities Exchange Act
of 1934, as amended (the "1934 Act"), against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein, in
light of the circumstances under which they were made, or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law; and the
Company will reimburse each such Holder, partner, officer, agent, employee or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or
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<PAGE> 7
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 4.9(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation occurring in reliance
upon and in conformity with written information furnished expressly for use in
connection with such registration by, or on behalf of, any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its officers, directors,
agents or employees, each person, if any, who controls the Company within the
meaning of the Act, any underwriter and any other Holder selling securities in
such registration statement or any of its partners, officers, directors, agents
or employees or any person who controls such Holder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such officer, director, agent, employee, controlling person, or underwriter, or
other such Holder or its partner, officer, director, agent, employee or
controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by, or on
behalf of, such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such partner, officer, director, agent,
employee, controlling person, underwriter or other such Holder, partner,
officer, director, agent, employee or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
4.9(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under
this Section 4.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4.9,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if, in the opinion of counsel for the indemnifying
party, representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable period of time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 4.9 to the extent prejudicial to its
ability to defend such action, but the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 4.9.
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<PAGE> 8
4.10 "MARKET STAND-OFF" AGREEMENT
The Holders hereby agree that they shall not, to the extent requested
by the Company and an underwriter of Common Stock (or other securities) of the
Company, sell or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any Registrable Securities for 180 days following
the effective date of a registration statement of the Company filed under the
Act; provided, however, that all officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
4.11 RIGHT TO TERMINATE REGISTRATION
The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 4 prior to the effectiveness of
such registration whether or not any Stockholder has elected to include
securities in such registration.
4.12 PHILIPPINE REGISTRATION RIGHTS
To the extent necessary for the public sale of shares of Common Stock
under or permitted by Philippine law (or the law of any other jurisdiction the
Company elects), the Company shall provide the Stockholders substantially
similar rights to those provided by this Section 4 with respect to the
Company's public offering of Common Stock in the Philippines (or such other
jurisdiction), if the Company elects to make such offerings.
5. RESTRICTIONS ON TRANSFER
5.1 TRANSFERS
Except as otherwise provided in the Articles of Incorporation or
By-laws, Stockholders may not sell, assign, transfer, pledge, hypothecate,
mortgage, encumber or dispose of (collectively, "Transfer") all or any part of
any shares of Common Stock or other securities of the Company convertible into
Common Stock (collectively, the "Shares") unless such Stockholder has complied
with the provisions of this Section 5.
5.2 OFFER BY A STOCKHOLDER
If a Stockholder of the Company desires to sell, assign, transfer,
pledge, hypothecate, mortgage, encumber or dispose of (collectively,
"Transfer") any or all of its Shares (the "Offered Shares") pursuant to a bona
fide offer received by such Stockholder (the "Selling Stockholder") from a
third party, it shall make a written offer to sell the Offered Shares (the
"Offer") to all other Stockholders. A statement attached to the Offer shall
set forth a full disclosure of the Offer, including (a) a statement of
intention to Transfer, (b) the name and address of the prospective transferee,
(c) the number of Offered Shares and (d) the terms and conditions of the
Transfer, including the purchase price for the Offered Shares.
-8-
<PAGE> 9
5.3 ACCEPTANCE OF OFFER
Within 30 days after its receipt of the Offer, each Stockholder (a
"Purchasing Stockholder") may elect to purchase, at the price and on the terms
specified in the Offer, such number of Offered Shares equal to its pro rata
portion (as defined below) of the Common Stock by giving written notice to the
Selling Stockholder and to the other Stockholders of the number of shares that
such Purchasing Stockholder is electing to purchase. If any Stockholder or
Stockholders elect not to purchase all or any part of its or their pro rata
portion of the Offered Shares, each Purchasing Stockholder may elect to
purchase within five days after such 30th day such portion of the Offered
Shares that such Stockholder or Stockholders elected not to purchase equal to
such Purchasing Stockholder's pro rata portion.
The closing of such purchase shall occur on a date mutually acceptable
to the parties thereto within 30 days after such acceptance. At such closing,
the Purchasing Stockholders shall pay the Selling Stockholder the purchase
price in accordance with Section 5.2(d), and the Selling Stockholder shall
simultaneously deliver the certificates representing the shares being
transferred and all other evidence of transfer as may reasonably be requested
by the transferee.
5.4 OFFER NOT ACCEPTED
If any of the Offered Shares remain unpurchased following the time
periods specified above, the Selling Stockholder may Transfer such remaining
Offered Shares to the prospective transferee named in the statement attached to
the Offer as provided in Section 5.2, such transfer to be made only in strict
accordance with the terms set forth in such statement and to be completed
within 90 days following the expiration of the time provided for the purchase
of the Offered Shares by the Purchasing Stockholders, after which time any such
transfer shall again become subject to all the restrictions of this Agreement,
the By-laws and the Articles of Incorporation. The transferee shall agree in
writing to be bound by the terms of this Agreement.
5.5 NO OTHER TRANSFER EFFECTIVE
No Transfer of any right, title or interest in the Shares shall be
effective, and the Company shall not record or recognize any such Transfer,
until there has been compliance with the provisions of this Agreement, the
By-laws and the Articles of Incorporation. If no Offer is made as herein
required, the Company and the Stockholders may nevertheless exercise their
rights hereunder as to the transferred Shares, and they may do so at any time,
even after the purported Transfer of the Shares.
5.6 FURTHER RESTRICTIONS ON TRANSFER
Prior to the initial public offering of Common Stock, no Stockholder
which is a partnership, joint-stock company, corporation, association,
unincorporated organization, joint venture, trust or other entity (other than
Gotesco Corporation) may Transfer, in one or more transactions, more than 40%
of its own capital stock to any person other than one of its Affiliates;
provided, however, this Section 5 shall not apply in the case of any Transfer
by MIL pursuant to which (a) Craig McCaw shall no longer Control Nextel
Communications, Inc., a Delaware
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<PAGE> 10
corporation and an Affiliate of McCaw International, Ltd., a Washington
corporation ("MIL"), or (b) the management of MIL retains substantially the
same operational and management control over MIL.
6. COSALE PROVISIONS
6.1 RIGHT OF PARTICIPATION
In addition to the rights under Section 5, if Stockholders holding
more than 51% of the outstanding Common Stock (the "Transferring Stockholders")
propose to transfer 51% or more of the outstanding Common Stock to any third
party, such Transferring Stockholders shall provide written notice to all other
Stockholders (the "Remaining Stockholders") setting forth (a) a statement of
intent to transfer, (b) the name and address of the prospective transferee, (c)
the number of shares of Common Stock proposed to be transferred, and (d) the
terms and conditions of the transfer, including the proposed purchase price.
The Remaining Stockholders shall have the right, as a condition to any transfer
by the Transferring Stockholders, to transfer to any purchaser of the offered
Common Stock a pro rata portion (as defined below) of its Common Stock at the
same price per share and on the same terms and conditions as stated in the
notice of the Transferring Stockholder. If and to the extent that any
Remaining Stockholder exercises its rights under this Section 6.1, the offered
Common Stock of the Transferring Stockholders shall be reduced and the Common
Stock being sold by the Remaining Stockholders shall be substituted therefor.
6.2 PRO RATA PORTION
For purposes of this Agreement, a Stockholder's pro rata portion shall
be the proportion that the number of shares of Common Stock such Stockholder
owns or Controls immediately prior to the time of calculation bears to the
total number of Shares of Common Stock outstanding (including in each case
shares of Common Stock and Common Stock issuable upon the conversion of
convertible securities (other than options) of the Company).
6.3 STOCKHOLDER'S NOTICE
If any Remaining Stockholder wishes to exercise its rights under this
Section 6 to participate in a Transfer, it shall notify the Transferring
Stockholders in writing of such intention as soon as practicable after its
receipt of the notice pursuant to Section 6.1, and in any event within 30 days
after the date of such notice. Such notification of exercise shall be
delivered in person or mailed to the Transferring Stockholders at the address
set forth on the signature pages hereto.
7. CREATION OF SEPARATE CLASS OF STOCK
The Stockholders shall vote in favor of amendments to the Company's
Articles of Incorporation and Bylaws to create a separate class of stock (the
"Gotesco Stock") which shall be offered to Gotesco and its Affiliates in
exchange for shares of Common Stock owned by them. The Gotesco Stock shall not
be subject to the restrictions on transfer set forth in Sections 5 and 6 (the
"Restrictions") of this Agreement, but shall otherwise have the same rights,
privileges,
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<PAGE> 11
preferences and restrictions as the Common Stock. The Stockholders shall also
vote in favor of amendments to the Company's Articles of Incorporation and
By-laws which shall make the Restrictions applicable to all shares of Common
Stock other than the Gotesco Stock.
8. MISCELLANEOUS
8.1 TERM
This Agreement shall terminate on the fifth anniversary hereof and
shall be automatically renewed on each one-year anniversary hereof thereafter
for an additional one-year term thereafter unless otherwise terminated pursuant
to Section 8.5.
8.2 SPECIFIC ENFORCEMENT
Each Stockholder expressly agrees that the Company and the other
Stockholders will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Stockholder, each of the Company and the
other Stockholders shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without showing any actual damage, and/or a
decree for specific performance, in accordance with the provisions of this
Agreement.
8.3 LEGEND
Each certificate evidencing any Shares shall bear a legend
substantially as follows:
The securities represented by this certificate are subject to
the terms and conditions of a Stockholders Agreement dated as
of June 21, 1996, as at any time amended, and may not be sold,
transferred or encumbered except in accordance with the terms
and provisions of said Agreement, a copy of which is on file
at the principal executive office of the Company and will be
furnished to the holder of this certificate upon request and
without charge.
Notwithstanding anything to the contrary in this Agreement, the
certificates evidencing shares held by Gotesco and its Affiliates shall not
bear such a legend, and the parties hereto shall not enforce the terms of this
Agreement against Gotesco, its Affiliates and any successors thereto.
8.4 NOTICES
Notices given hereunder shall be deemed to have been duly given on the
date of personal delivery, on the date of facsimile transmittal (provided the
address or confirms receipt of any facsimile by addressee), on the day after
delivery by overnight courier or three days after mailing if mailed by
certified or registered mail, return receipt requested, postage prepaid, to the
party being notified at his or her address specified on the applicable
signature page or such other address of which the addressee may subsequently
notify the other parties in writing.
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<PAGE> 12
8.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and neither this Agreement nor any
provision hereof may be waived, modified, amended or terminated except by a
written agreement approved by holders of seventy-five percent (75%) of the
Common Stock held by the parties hereto; provided, that any new Stockholder of
the Company may execute this Agreement. No waiver of any breach or default
hereunder shall be considered valid unless in writing, and no such waiver shall
be deemed a waiver of any subsequent breach or default of the same or similar
nature.
8.6 GOVERNING LAW; SUCCESSORS AND ASSIGNS
This Agreement shall for all purposes be governed by and construed in
accordance with the laws of the jurisdiction of incorporation of the Company
and shall be binding upon the heirs, personal representatives, executors,
administrators, successors and assigns of the parties.
8.7 REPRESENTATIONS AND WARRANTIES
Each Stockholder represents and warrants and covenants that it and any
director, officer, agent, employee or other person acting on its behalf, and,
in addition to his own representations and warranties under this Section 8.7,
Ngai individually represents and warrants that Gotesco, its Affiliates and any
director, officer, agent, employee or other person acting on Gotesco's or its
Affiliates behalf, (a) have not been and will not be involved in the offering,
paying or giving of anything of value, either directly or indirectly, to a
government official, political party or candidate for political office to
influence such person or entity in the discharge of his, her or its official
duties, (b) have not engaged and will not engage in any such unlawful conduct
during the time of carrying out their duties, (c) have maintained and will
maintain accounting books and records in reasonable detail and institute
internal controls to ensure that such books and records accurately reflect
corporate transactions and the disposition of assets and (d) have not, directly
or indirectly, taken any action or failed to take any action, and will not,
directly or indirectly, take any action of fail to take any action in each case
which could result in the loss of the benefits of any required governmental
approval, authorization, consent, license, order, registration or permit of any
agency, whether local or national. Each Stockholder further represents and
warrants that the list of Stockholders contained in Exhibit I hereto is true
and correct as of the date hereof. Each Stockholder agrees to indemnify and
hold harmless, jointly and severally, each other Stockholder, its Affiliates
and their respective directors, officers, employees, agents and Controlling
persons against and in respect of any and all losses, damages, costs and
expenses, including attorneys' fees incurred by any such party, by reason of
such party's breach of any of the representations or warranties or covenants
made by it.
8.8 HEADINGS
The headings of the sections of this Agreement are for convenience of
reference only and shall not by themselves determine the interpretation of this
Agreement.
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<PAGE> 13
8.9 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument.
8.10 SEVERABILITY
If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
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<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
THE COMPANY:
INFOCOM COMMUNICATIONS NETWORK, INC.
By /s/ BERNARD M. ASPERIN
------------------------------------------------
Name: Bernard M. Asperin
---------------------------------------------
Title: General Manager
--------------------------------------------
Address:
------------------------------------------
THE STOCKHOLDERS:
/s/ GENERAL JUANITO AQUIAS
--------------------------------------------------
General Juanito Aquias
Address:
------------------------------------------
/s/ BERNARD M. ASPERIN
--------------------------------------------------
Bernard M. Asperin
Address:
------------------------------------------
/s/ GODOFREDO ESPERAME
--------------------------------------------------
Godofredo Esperame
Address:
------------------------------------------
Foodcamp Industries, Inc.
By /s/ EMMA T. ASPERIN
------------------------------------------------
Name: Emma T. Asperin
---------------------------------------------
Title:
--------------------------------------------
Address:
------------------------------------------
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<PAGE> 15
/s/ LEONARDO S. GAYAO
--------------------------------------------------
Leonardo S. Gayao
Address:
------------------------------------------
Jetcom Inc.
By /s/ MINERVA C. TOMAYO
------------------------------------------------
Name: Minerva C. Tomayo
---------------------------------------------
Title:
--------------------------------------------
Address:
------------------------------------------
Joyce Link Holdings Ltd.
By /s/ WILLIAM NGAI WAI LUN
------------------------------------------------
Name: William Ngai Wai Lun
---------------------------------------------
Title:
--------------------------------------------
Address:
------------------------------------------
/s/ WILLIAM NGAI WAI LUN
--------------------------------------------------
William Ngai Wai Lun
Address:
------------------------------------------
/s/ CHAN CHON SIONG
--------------------------------------------------
Chan Chon Siong
Address:
------------------------------------------
Top Mega Enterprises Ltd..
By /s/ BRIAN A. VINCENT
------------------------------------------------
Name: Brian A. Vincent
---------------------------------------------
Title:
--------------------------------------------
Address:
------------------------------------------
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<PAGE> 1
EXHIBIT 10.12
MCCAW INTERNATIONAL, LTD
November 3, 1995
Mr. Keith Grinstein
2345 43rd Avenue East
Seattle, WA 98112
Dear Keith:
We are very pleased to offer you a position with McCaw International,
Ltd. ("McCaw International") as its President and Chief Executive Officer to be
based in Kirkland, Washington.
Outlined below are the terms and conditions regarding the offered
position:
- Your employment with McCaw International will start on or about
January 1, 1996.
- Your beginning compensation will be a salary of $150,000 per year
and will be subject to review through an annual performance
evaluation. You will be paid bi-monthly, with paychecks delivered
to you one week following the end of the pay period. Your next
performance review for salary adjustment will be in January of
1997.
- You will be eligible to receive an annual bonus, determined at
year-end based upon your performance against objectives. We will
work together to mutually determine those objectives within 30
days of your start date. McCaw International recognizes that in
the first two years it will be difficult to measure performance
objectively and we will gauge our criteria for those year's
performance objectives accordingly. This bonus is paid in the
month of January for the prior year's performance. You will have
no bonus for any portion of calendar year 1995.
- You will be President and Chief Executive Officer of McCaw
International, reporting as specified from time to time by the
Board of Directors of McCaw International; although you will
remain subject to the direction and control of the Board of
Directors of
<PAGE> 2
Mr. Keith Grinstein
Page 2
November 3, 1995
McCaw International and will report directly to such Board on a
periodic basis for such purposes, initially you also will have a
reporting relationship to the Operations Committee of the Board of
Directors of Nextel Communications, Inc. ("Nextel"), the ultimate
parent of McCaw International, in connection with such Operations
Committee's role in developing and assessing the overall
international business strategy and plan for the Nextel
consolidated group.
- You will be awarded options to acquire shares of the Class A
Common Stock ("Shares") of Nextel in accordance with the Option
Plan of Nextel. These options constitute qualified options under
the Internal Revenue Code. The number of options which you will
be granted will be at the market price as of close on the later of
the date on which your employment was agreed and the date your
option grant is approved by the Nextel Compensation Committee, and
the number of the options you will receive is 50,000. These
options will vest over 4 years in accordance with the Nextel
Option Plan.
- You will receive a Stock Appreciation Right in McCaw International
in accordance with a Stock Appreciation Right Plan for McCaw
International which has yet to be documented but which shall be in
accordance with mutually acceptable terms. The number of SARs
which you will receive is 400,000 at par. They will vest over 4
years on a prorated monthly basis commencing upon employment. The
SAR Plan will contemplate a grant to you of all appreciation in
the units that you receive, over and above a prime plus two
interest rate. While the number of units that you have will not
be diluted, you realize that as additional equity is injected into
McCaw International, your percentage SAR interest will decline.
- The initial term of your employment with McCaw International shall
terminate June 30, 1997, and shall automatically be renewed for a
subsequent one year term commencing July 1, 1997 unless during
December 1996 either party elects by written notice not to renew.
If you are terminated (or not renewed) other than for cause by
McCaw International, you will receive (upon and assuming your
execution of a suitable claims release in favor of McCaw
International) a termination payment equal to (a) salary for the
remaining initial term of your
<PAGE> 3
Mr. Keith Grinstein
Page 2
November 3, 1995
employment but (b) no less than 6 months salary and in either case
excluding bonus but including Cobra rights.
- So long as your employment with McCaw International continues and
McCaw International continues to be a subsidiary of Nextel, you
will be eligible to participate in the on going Nextel Option
Program. The current Nextel Option Plan is as described in a
brochure which I have not yet had a chance to obtain, but which I
will give you as soon as I do obtain it. It will change in an
undetermined fashion soon, however, and may not reflect the
current terms of the plans; additionally, it may be amended from
time to time or terminated by Nextel.
- You will be eligible to receive the benefits package offered by
McCaw International, a summary of which is attached. McCaw
International reserves the right to alter this benefit package at
any time.
- You will accrue vacation with pay at a rate of 20 days per year.
Keith, we believe that you will make a valuable addition to our team
and look forward to working with you. Please don't hesitate to contact me if
you have questions or need additional information.
Please sign below where indicated and return this letter to me no
later than ____, 1995.
Sincerely,
MCCAW INTERNATIONAL, LTD.
C. James Judson
President
I accept the offer of employment contained in this letter and hereby agree that
I have read and understand the terms contained herein.
/s/ KEITH GRINSTEIN November 6, 1995
- ------------------------ -----------------------------
Keith Grinstein Dated
2320 Carillon Point, Kirkland, Washington 98033-7353
<PAGE> 1
EXHIBIT 10.13
[MCCAW INTERNATIONAL, LTD LETTERHEAD]
November 3, 1995
Mr. Heng-Pin Kiang
4525 NE 41st
Seattle, WA 98105
Dear Ping:
We are very pleased to offer you a position with McCaw International,
Ltd. ("McCaw International") as its Senior Vice President and General Counsel,
to be based in Kirkland, Washington.
Outlined below are the terms and conditions regarding the offered
position:
- Your employment with McCaw International will start on or about
January 1, 1996.
- Your beginning compensation will be a salary of $12,500 per month
and will be subject to review through an annual performance
evaluation. You will be paid bi-monthly, with paychecks delivered
to you one week following the end of the pay period. Your next
performance review for salary adjustment will be in December of
1996.
- You will be eligible to receive a targeted annual bonus of up to 35%
of base compensation This bonus will be paid out at year-end based
upon your performance against objectives. We will work together to
mutually determine those objectives within 30 days of your start
date. McCaw International recognizes that in the first two years it
will be difficult to measure performance objectively and we will
gauge our criteria for those year's performance objectives
accordingly. This bonus is paid in the month of January for the
prior year's performance. You will have no bonus for any portion of
calendar year 1995.
- You will be Senior Vice President and General Counsel for McCaw
International, reporting as specified from time to time by the Board
of Directors of McCaw International; initially, you will report
directly to Keith Grinstein as President and Chief Executive Officer
of McCaw
<PAGE> 2
Mr. Heng-Pin Kiang
Page 2
November 3, 1995
International, as well as indirectly to Tom Sidman, General Counsel
of Nextel Communications, Inc.
- You will be awarded options to acquire shares of the Class A Common
Stock ("Shares") of Nextel in accordance with the Option Plan of
Nextel. These options constitute qualified options under the
Internal Revenue Code. The number of options which you will be
granted will be at the market price as of close on the later of the
date on which your employment was agreed and the date your option
grant is approved by the Nextel Compensation Committee, and the
number of the options you will receive is 25,000. These options
will vest over 4 years in accordance with the Nextel Option Plan.
- You will receive a Stock Appreciation Right in McCaw International
in accordance with a Stock Appreciation Right Plan for McCaw
International which has yet to be documented but which shall be in
accordance with mutually acceptable terms. The number of SARs which
you will receive is 250,000 at par. They will vest over 4 years on
a prorated monthly basis commencing upon employment. The SAR Plan
will contemplate a grant to you of all appreciation in the units
that you receive, over and above a prime plus two interest rate.
While the number of units that you have will not be diluted, you
realize that as additional equity is injected into McCaw
International, your percentage SAR interest will decline.
- The initial term of your employment with McCaw International shall
terminate June 30, 1997, and shall automatically be renewed for a
subsequent one year term commencing July 1, 1997 unless during
December 1996 either party elects by written notice not to renew.
If you are terminated (or not renewed) other than for cause by
McCaw International, you will receive (upon and assuming your
execution of a suitable claims release in favor of McCaw
International) a termination payment equal to (a) salary for the
remaining initial term of your employment but (b) no less than 6
months salary and in either case excluding bonus but including Cobra
rights.
- So long as your employment with McCaw International continues and
McCaw International continues to be a subsidiary of Nextel you will
be eligible to participate in the on going Nextel Option Program
which has been described to you by Tom Sidman in oral terms. The
current Nextel
<PAGE> 3
Mr. Heng-Pin Kiang
Page 2
November 3, 1995
Option Plan is as described in a brochure which I have not yet had a
chance to obtain, but which I will give you as soon as I do obtain
it. It will change in an undetermined fashion soon, however, and
may not reflect the current terms of the plans; additionally, it may
be amended from time to time or terminated by Nextel.
- You will be eligible to receive the benefits package offered by
McCaw International, a summary of which I have already given you.
McCaw International reserves the right to alter this benefit package
at any time.
- McCaw International will pay reasonable Bar Association, CLE and
other professional maintenance expenses for you.
- You will accrue vacation with pay at a rate of 20 days per year.
Ping, we believe that you will make a valuable addition to our team
and look forward to working with you. Please don't hesitate to contact me if
you have questions or need additional information.
Please sign below where indicated and return this letter to me no later
than _____, 1995.
Sincerely,
MCCAW INTERNATIONAL, LTD.
C. James Judson
President
I accept the offer of employment contained in this letter and hereby agree
that I have read and understand the terms contained herein.
/s/ HENG-PIN KIANG November 6, 1995
- ---------------------------------- ------------------------
Heng-Pin Kiang Dated
<PAGE> 1
MCCAW INTERNATIONAL, LTD.
EXHIBIT 10.14
January 11, 1996
Mr. Brian A. Vincent
3410 Cascadia Avenue South
Seattle, Washington 98144
Dear Brian:
This letter confirms our mutual understanding of the terms and
conditions applying to your employment with McCaw International, Ltd. ("McCaw
International"). We look forward to your contribution as a key member of the
team responsible for developing international wireless opportunities.
I outline below the specific terms and conditions regarding the
offered position:
Position: Vice President of Business Development (officer
level)
Reporting to: President and CEO
Start Date: January 1, 1996
Location: Seattle
Compensation: $140,000 per year, paid bi-weekly
Bonus: You are eligible to receive up to 40% of your
base compensation based on your achievement of
specific objectives. Payout is expected to
occur during the first quarter of each year.
Equity: Subject to Board of Director approval, you will
be awarded options to acquire 10,000 shares of
Class A Common Stock ("Shares") of Nextel
Communications, Inc. ("Nextel") in accordance
with the Nextel Option Plan. These options
constitute incentive stock options on the
Internal Revenue Code. The options will be
granted at the market price as of the close on
the later of the date on which you agreed to
your employment and the date your option grant
was approved by the Nextel Compensation
Committee. These options will vest over four
years in accordance with the Nextel Option
Plan.
You will receive a Stock Appreciation Right
("SAR") in McCaw International in accordance
with the McCaw International, Ltd. Stock
Appreciation Rights Plan (the "SAR Plan"). The
number of SARs
<PAGE> 2
Mr. Brian A. Vincent
January 11, 1996
Page 2
which you will receive is 40,000 at par value.
They will vest over four years on a pro-rated
monthly basis commencing on your employment.
While the number of units that you have will
not be diluted, you must realize that as
additional equity is injected into McCaw
International, your percentage SAR interest may
decline in accordance with the terms of the SAR
Plan.
Agreements for the Stock Options and the SARs
will be forwarded to you once the Nextel
Compensation Committee has acted and specific
terms and provisions of the SAR Plan have been
approved.
Employment Term: The initial term of your employment with McCaw
International will be 12 months, and shall be
automatically renewed for subsequent 12-month
periods, provided that either party may give
written notice to the other party to the
contrary 60 days in advance; provided, that if
McCaw International elects not to renew this
agreement for an additional term you will be
entitled to an additional four (4) months
compensation from the date of the expiration of
this agreement; and provided, further, that if
McCaw terminates you without cause, you will be
entitled to receive the greater of (x) the
compensation for the balance of the term of
this agreement as if you had not been
terminated or (y) six (6) months compensation.
Expenses: Any expenses that you incur on behalf of McCaw
International which are directly related to
your work will be reimbursed based on properly
completed documentation and approvals in
accordance with applicable procedures.
Benefits: You are eligible for the standard Nextel
Communications, Inc. (the parent of McCaw
International) Benefit Plan commensurate with
your title and salary. If McCaw International
elects not to renew this agreement for an
additional term, you will continue to
participate in health benefits under the Nextel
Benefit Plan for the balance of the term of
this agreement plus an additional four (4)
months. If McCaw International terminates you
without cause, you will continue to participate
in health benefits under the Nextel Benefit
Plan for the greater of the balance of the term
of this agreement as if you had not been
terminated or six (6) months. During this
extended participation in health benefits,
McCaw International shall pay the same portion
of the cost of such health benefits as it paid
during your employment.
<PAGE> 3
Mr. Brian A. Vincent
January 11, 1996
Page 3
Performance Review: Your performance will be reviewed on an annual
basis at which time you will be eligible for a
merit increase in your compensation and
additional equity in McCaw International and
Nextel.
Your responsibilities will be in accordance with those discussed in
your interview. We believe that you will make a valuable addition to our team
and look forward to working with you. Please do not hesitate to contact me if
you have any questions or require additional information.
I am sorry that this process has dragged out as long as it has, but I
hope you understand that we have been faced with a number of pressing
opportunities in South America and Asia, and we have been forced to deal with
them before any of us have come on board officially.
Finally, you represent to us that, to the best of your knowledge, you
have never been discharged or asked to leave an employer for reasons of
personal integrity or performance.
Please sign below where indicated and return this letter to me.
Sincerely,
/s/ KEITH D. GRINSTEIN
Keith D. Grinstein
President and CEO
I accept the offer of employment contained in this letter and hereby
agree that I have read and understand the terms contained herein.
/s/ BRIAN A. VINCENT
--------------------------------------
Brian A. Vincent
Dated: January 12, 1996
---------------------
<PAGE> 1
EXHIBIT 10.15
McCAW INTERNATIONAL, LTD.
October 9, 1996
Mr. William S. Roberts
Santiago, Chile
Dear Bill:
This letter, when executed by both of us, will confirm our mutual understanding
of the terms and conditions applying to your employment with McCaw
International, Ltd. ("McCaw International" or the "Company"). We look forward
to your contribution to the Company as a key member of the team.
I outline below the specific terms and conditions regarding the offered
position:
Position: Senior Vice President - Operations.
Reporting to: Chief Executive Officer of the Company.
Start Date: November 18, 1996.
Location: Seattle, Washington.
Base Salary: $170,000 per year, paid semi-monthly.
Bonus: You will be eligible to receive in cash a
yearly bonus of up to 40% (to be determined
by the Board of Directors of the Company
upon the recommendation of the Chief
Executive Officer of the Company) of your
annual base salary, based on your
achievement of specific objectives. The
specific objectives to be achieved in order
to be eligible for a bonus shall be mutually
determined by you and the Chief Executive
Officer of the Company. Payment of the
bonus is expected to occur during the first
quarter of each year and will be prorated
based on the length of time you are employed
by the Company.
<PAGE> 2
Mr. William S. Roberts
October 9, 1996
Page 2
Performance Review: Your performance in your position with the
Company will be reviewed on an annual basis
by the Chief Executive Officer of the
Company, who shall report the results of
such review to the Board of Directors of the
Company, at which time you will be eligible
for a merit increase in your base annual
compensation. Any such increase shall be
based on a positive review of your
performance and commensurate with your
duties and responsibilities. Your base
annual compensation will first be eligible
for a merit increase as of January 1998.
Equity: Subject to approval by the Board of
Directors or the Compensation Committee of
Nextel Communications, Inc. ("Nextel"), the
Company's parent corporation, you will be
awarded options to acquire 15,000 shares of
Class A Common Stock of Nextel at the end of
fiscal year 1996 in accordance with the
Nextel Amended and Restated Incentive Equity
Plan (the "Incentive Equity Plan"). These
options constitute incentive options as
defined by the Internal Revenue Code. The
options will be granted at the market price
as of the close on the later of the date on
which you agree to your employment and the
date your option grant is approved by the
Nextel Compensation Committee. The options
will vest over four years in accordance with
the terms of the Incentive Equity Plan.
Subject to approval by the Board of
Directors of the Company, you will be
awarded Stock Appreciation Rights ("SARs")
in McCaw International in accordance with
the McCaw International Stock Appreciation
Rights Plan, which is being finalized, but a
draft of which has been provided to you.
The number of SARs you will receive is
75,000. The SARs will vest over four years
on a pro-rated monthly basis commencing on
the date of your employment. The SARs plan
will contemplate a grant to you of all
appreciation in the years that you receive
over and above a prime plus two percent
interest rate. While the number of
<PAGE> 3
Mr. William S. Roberts
October 9, 1996
Page 3
units that you have will not be diluted, you
must realize that, as additional equity is
injected into McCaw International, your
percentage SAR interest will decline.
Agreements for the stock options and the
SARs will be forwarded to you once the
Nextel Board of Directors or Compensation
Committee and the Board of Directors of the
Company have acted and specific terms and
provisions of the plans have been approved.
Termination: The initial term of your employment with the
Company shall be one year from the date you
start. Thereafter, your employment with
McCaw International will be of indefinite
duration, terminable at will by either
party, without cause. This means that you
may elect to terminate your employment with
McCaw International at any time, and McCaw
International retains the same rights. This
"employment at-will" paragraph operates
notwithstanding any other provision of this
letter, and no officer or employee of McCaw
International is authorized to offer any
employment relationship other than the
"at-will" relationship provided for in this
paragraph. If either party terminates this
Agreement, except for COBRA benefits and
repatriation, all rights and liabilities
hereunder will cease. You and McCaw
International agree that the terms of your
employment will be governed by the laws of
the State of Washington, not by the laws of
any foreign country.
If prior to the first anniversary of your
commencing employment with the Company you
elect to terminate your employment without
cause, you agree to reimburse the Company
for that portion of the out-of-pocket
expenses the Company has incurred in
connection with relocating you, your family
and your personal goods and effects to
Seattle, as well as any storage costs which
is derived by dividing the number of days
remaining until the first anniversary of
your commencement of employment by 365.
Relocation Expenses: McCaw International will pay for the cost of
transporting you and your family from
Santiago, Chile
<PAGE> 4
Mr. William S. Roberts
October 9, 1996
Page 4
to Seattle, in compliance with current
Company travel policy. McCaw International
will pay for costs of packing, transporting,
insuring and unpacking those personal
effects and household goods you have
designated for movement, provided such goods
can be contained in one (1) twenty foot
(20') sea going cargo container.
Employee will obtain competitive quotes from
two (2) local moving companies and the most
appropriate one will be selected by the
Company. McCaw International will pay the
costs directly to the mover.
McCaw International will pay for the costs
of (i) appropriate temporary housing for you
and your family and (ii) storing your
personal effects and household goods in
Seattle, for a period of up to ninety (90)
days if your primary residence is not ready
for occupancy when you and/or the goods
arrive in Seattle. Please clear such
housing and storage expenses in advance.
Foreign Visits: You are entitled to one visit to Mexico (and
one extra week of vacation after your first
full year of employment). The Company will
pay for one (1) round-trip airfare in
business class for you and each member of
your family. Round-trip is defined as
passage between Seattle and Guadalajara,
Mexico. The time taken for this visit
beyond the extra week described above, if
applicable, will be considered part of your
annual vacation time.
Business Expenses: Any business expenses that you incur on
behalf of McCaw International that are
directly related to your work will be
reimbursed based on properly completed
documentation, including receipts, and
approvals in accordance with applicable
Company procedures.
Benefits: You will be eligible for the standard Nextel
insurance and benefit plan package,
commensurate with your position and
<PAGE> 5
Mr. William S. Roberts
October 9, 1996
Page 5
salary, a summary of which has been provided
to you herewith; provided that you will
receive 15 days of vacation per calendar
year prorated for any partial years of
employment. In addition to the above bonus,
the Company will pay you an additional bonus
of $20,000 on commencement of your
employment and an additional sum of $20,000
as an advance against a bonus that you are
entitled to receive for your performance
with respect to 1997.
Confidentiality: You will agree that at all times during your
employment and after termination of your
employment you will not, without written
permission of the Company's then current
Chief Executive Officer, disclose to any
party or use or permit to be used in a
manner adverse to the Company any
confidential or other proprietary
information of the Company, including,
without limitation, trade secrets.
Your duties and responsibilities will be as discussed with the Chief Executive
Officer of the Company.
Finally, you represent to us that, to the best of your knowledge, you have
never been discharged or asked to leave an employer for reasons of personal
integrity or performance.
We believe that you will make a valuable addition to our team and look forward
to working with you. Please do not hesitate to contact me if you have any
questions or require additional information.
Please sign below where indicated and return this letter to me at your earliest
convenience.
Sincerely,
/s/ KEITH D. GRINSTEIN
Keith D. Grinstein
President and CEO
<PAGE> 6
Mr. William S. Roberts
October 9, 1996
Page 6
I accept the offer of employment contained in this letter and hereby agree that
I have read and understand the terms contained herein.
/s/ WILLIAM S. ROBERTS Dated: October 11, 1996
- ------------------------------ ----------
William S. Roberts
<PAGE> 1
EXHIBIT 10.16
MCCAW INTERNATIONAL, LTD
January 11, 1996
Mr. David E. Rostov
5736 - 58th N.E.
Seattle, WA 98105
Dear David:
This letter confirms our mutual understanding of the terms and
conditions applying to your employment with McCaw International, Ltd. ("McCaw
International"). We look forward to your contribution as a key member of the
team responsible for developing international wireless opportunities.
I outline below the specific terms and conditions regarding the
offered position:
Position: Vice President and CFO
Reporting to: President and CEO
Start Date: January 12, 1996 or a mutually agreed upon
date
Location: Seattle
Compensation: $100,000 per year, paid bi-weekly
Bonus: You are eligible to receive in cash a target
bonus of 50% of your base compensation based
on your achievement of specific objectives.
Please recognize, however, that this 50%
figure is neither a ceiling nor minimum
bonus amount. Payout is expected to occur
during the first quarter of each year.
Equity: Subject to Board of Director approval, you
will be awarded options to acquire 15,000
shares of Class A Common Stock ("Shares") of
Nextel Communications, Inc. ("Nextel") in
accordance with the Nextel Option Plan.
These options constitute incentive options
as defined by the Internal Revenue Code.
The options will be granted at the market
price as of the close on the later of the
date on which you agreed to your employment
and the date your option grant is approved
by the Nextel Compensation Committee. These
<PAGE> 2
Mr. David E. Rostov
January 11, 1996
Page 2
options will vest over four years in
accordance with the Nextel Option Plan.
You will receive a Stock Appreciation Rights
("SAR") in McCaw International in accordance
with a Stock Appreciation Rights Plan from
McCaw International. The number of SARs
which you will receive is 50,000 at par.
They will vest over four years on a
pro-rated monthly basis commencing on your
employment. The SAR plan will contemplate a
grant to you of all appreciation in the
years that you receive over and above a
prime plus two percent interest rate. While
the number of units that you have will not
be diluted, you must realize that as
additional equity is injected into McCaw
International, your percentage SAR interest
will decline.
Agreements for the Stock Options and the
SARs will be forwarded to you once the
Nextel Compensation Committee has acted and
specific terms and provisions of the plans
have been approved.
Employment Term: The initial term of your employment with
McCaw International will be 12 months, and
shall be automatically renewed for
subsequent 12-month periods, provided that
either party may give written notice to the
other party to the contrary 60 days in
advance of the end of the then current 12
month period.
Expenses: Any expenses that you incur on behalf of
McCaw International which are directly
related to your work will be reimbursed
based on properly completed documentation
and approvals in accordance with applicable
procedures.
Benefits: You are eligible for the standard Nextel
Communications, Inc. (the parent of McCaw
International) Benefit Plan commensurate
with your title and salary.
Performance Review: Your performance will be reviewed on an
annual basis at which time you will be
eligible for a merit increase in your
compensation.
Your responsibilities will be in accordance with those discussed in
your interview. We believe that you will make a valuable addition to our team
and look forward to
<PAGE> 3
Mr. David E. Rostov
January 11, 1996
Page 3
working with you. Please do not hesitate to contact me if you have any
questions or require additional information.
Please sign below where indicated and return this letter to me.
Sincerely,
/s/ KEITH D. GRINSTEIN
Keith D. Grinstein
President and CEO
I accept the offer of employment contained in this letter and hereby
agree that I have read and understand the terms contained herein.
/s/ DAVID E. ROSTOV
---------------------------------------
David E. Rostov
Dated: January 15, 1996
---------------------
<PAGE> 1
EXHIBIT 10.17
MCCAW INTERNATIONAL, LTD.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of this McCaw International, Ltd. 1997 Stock Option Plan
(this "Plan") is to provide a means whereby selected employees, directors,
officers, consultants, agents, advisors and independent contractors of McCaw
International, Ltd., a Washington corporation (the "Company"), and its
Subsidiaries (as defined in Section 4) may be granted options to purchase
shares of the common stock of the Company (the "Common Stock") and thereby
share in any future appreciation in the value of the Common Stock.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the
Company (the "Board") or a committee designated by the Board in its discretion,
which must include two or more members of the Board. If and so long as the
Common Stock is registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Board shall consider
in selecting the Plan Administrator and the membership of any committee acting
as Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a)
"outside directors" as contemplated by Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and (b) "nonemployee directors" as
contemplated by Rule 16b-3 under the Exchange Act. The Board may delegate the
responsibility for administering this Plan with respect to designated classes
of eligible persons to different committees consisting of two or more members
of the Board, subject to such limitations as the Board deems appropriate.
Committee members shall serve for such term as the Board may determine, subject
to removal by the Board at any time. The Board (or the designated committee,
if applicable) shall hereinafter be referred to as the "Plan Administrator."
The Board may also authorize a senior executive officer of the Company to
administer this Plan within limits specifically prescribed by the Board.
Except for the terms and conditions explicitly set forth in this Plan, the Plan
Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of options to be
granted, and all other terms and conditions of the options. The options
granted under this Plan need not be identical in any respect, even when made
simultaneously.
PAGE 1
<PAGE> 2
The Plan Administrator shall be responsible for interpreting and
construing the terms and provisions of this Plan, any options issued hereunder,
or any rule or regulation promulgated in connection with this Plan and
associated options. All actions of the Plan Administrator shall, to the
maximum extent permitted under law, be determined in its good faith discretion,
and subject to appeal or dispute only as to its failure to adhere to such good
faith discretion standard. Any party disagreeing with the Plan Administrator's
interpretation or decision may request the Plan Administrator to reexamine its
action. A request for a reexamination must be made in writing within 60 days
of the Plan Administrator's decision or action, and must specify the reasons
why the Plan Administrator's decision or action was wrong or inappropriate.
Within 90 days of its receipt of a request to reexamine a decision or action,
the Plan Administrator will respond in writing to the disputing party. The
Plan Administrator's response shall either reverse or reconfirm its initial
decision or action. If the response reconfirms the initial decision or action,
the Plan Administrator shall state why it disagrees with the points raised by
the disputing party.
A continuing dispute between the Plan Administrator and a recipient of
options about the proper interpretation of this Plan or the Stock Purchase
Agreement to be entered into between the Company and the holder of an option
upon exercise of an option (the "Stock Purchase Agreement"), or the correct
amount of benefits available under this Plan or the Stock Purchase Agreement
shall be settled in Seattle, Washington, or such other location reasonably
selected by the Company, by arbitration in accordance with the procedures
utilized by Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules"). The arbitrator shall be either selected by the
mutual agreement of the parties or chosen in accordance with the AAA Rules.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding anything in the AAA Rules to the
contrary, the prevailing parties shall not be entitled to costs, expenses or
attorneys' fees.
SECTION 3. STOCK SUBJECT TO THIS PLAN
3.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 7, a
maximum of $1,825,000 shares of Common Stock shall be available for
issuance under this Plan. Shares issued under this Plan shall be drawn from
authorized and unissued shares or shares now held or subsequently acquired by
the Company.
3.2 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an option
that cease to be subject to the option (other than by reason of exercise of the
option to the extent it is exercised for shares) shall again be available for
issuance in connection with future grants of options under this Plan.
PAGE 2
<PAGE> 3
SECTION 4. ELIGIBILITY
An option may be granted to any employee, director, officer,
consultant, agent, advisor or independent contractor of the Company or its
Subsidiaries that the Plan Administrator from time to time selects. For
purposes of this Plan, except as provided below, the term "Subsidiary" means
any entity that is directly or indirectly controlled by the Company or in which
the Company has a significant ownership interest, as determined by the Plan
Administrator. In addition, an option may be granted to any person who was
granted a stock appreciation right under the Company's Stock Appreciation
Rights Plan and who is an employee of Nextel Communications, Inc. ("Nextel") on
the date of grant. Anyone to whom an option is granted under this Plan shall
be referred to hereinafter as an "Optionee."
Notwithstanding anything in this Plan to the contrary, the Plan
Administrator may grant options under this Plan in substitution for awards
issued under other plans, or assume under this Plan awards issued under other
plans, if the other plans are or were plans of other acquired entities
("Acquired Entities") (or the parent of the Acquired Entity) and the new option
is substituted, or the old award is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization or
liquidation (the "Acquisition Transaction"). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is
approved by the Board and said agreement sets forth the terms and conditions of
the substitution for or assumption of outstanding awards of the Acquired
Entity, said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such awards shall be deemed to be Optionees.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
The Plan Administrator shall have the authority, in its sole
discretion, to determine the awards to be made under this Plan. Such awards
shall consist of incentive stock options that are intended to qualify under
Section 422 of the Code or nonqualified stock options.
Options granted under this Plan shall be evidenced by individual
written agreements ("option letter agreements"), which shall contain such
terms, conditions, limitations and restrictions as the Plan Administrator shall
deem advisable and consistent with this Plan. Notwithstanding the foregoing,
all options shall include or incorporate by reference the following terms and
conditions, except as provided otherwise in the applicable option letter
agreement:
PAGE 3
<PAGE> 4
5.1 NUMBER OF OPTIONS AND EXERCISE PRICE
At the time a grant of an option is made, the Plan Administrator shall
establish the maximum number of shares of Common Stock subject to the option
contained in the grant. Also at the time an option is granted, the
corresponding option letter agreement shall designate the exercise price for
shares purchased under the option, which shall be as determined by the Plan
Administrator, but shall not be less than 100% of the fair market value (as
determined below) of a single share of Common Stock on the date of grant with
respect to incentive stock options.
5.2 DETERMINATION OF FAIR MARKET VALUE
The per share fair market value shall be established by the Plan
Administrator as follows:
5.2.1
Within 90 days following the close of the Company's fiscal year, the
Plan Administrator shall establish the fair market value of a share of the
Common Stock for purposes of this Plan, based on financial data dated as of the
end of the most recently closed fiscal year, and shall deliver written notice
of such value to each Optionee within a reasonable period of time of
determining such value (the "Year-End Valuation Notice"). Within 90 days
following the close of the second fiscal quarter of the Company's fiscal year,
the Plan Administrator shall establish the per share fair market value of a
share of the Common Stock for purposes of this Plan, based on financial data
dated as of the end of the second quarter of the fiscal year, and shall deliver
written notice of such value to each Optionee within a reasonable period of
time of determining such value (the "Six-Month Valuation Notice") (the Year-End
Valuation Notice and the Six-Month Valuation Notice are each a "Valuation
Notice"). For purposes of determining the per share fair market value of the
Common Stock on a date other than during a Semi-Annual Exercise Period (as
defined in Section 5.4 below) each year, the Plan Administrator shall determine
the per share fair market value of a share of the Common Stock in good faith,
consistently using formulas and other valuation techniques generally used in
purchasing and selling business similar to the Company. The determination of
fair market value by the Plan Administrator shall be conclusive and binding on
all parties; provided, in the event of a dispute over the valuation, the
arbitration process discussed in Section 2 shall not affect or alter the Plan
Administrator's determination if the arbitrator concludes the Plan
Administrator (i) acted in good faith and (ii) based its determination on
formulas and other valuation techniques generally used in the purchase and sale
of businesses similar to the Company.
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<PAGE> 5
5.2.2
Notwithstanding the preceding paragraph of this Section 5.2, in the
event the grant and/or exercise of options or the exercise of certain put
rights to sell to the Company shares acquired upon exercise of an option (a
"Put Right") as described in Section 12.2 occurs in connection with the sale of
the Company, an initial public offering, merger, or other similar event that
utilizes or produces a purchase value for the Company or for individual shares
of the Common Stock, then that value shall be used for computing the per share
fair market value under this Plan.
5.2.3
Notwithstanding the foregoing, if the Common Stock is listed on the
Nasdaq National Market, the per share fair market value shall be the average of
the high and low per share sales prices for the Common Stock as reported by the
Nasdaq National Market for a single trading day or, if the Common Stock is
listed on the New York Stock Exchange or the American Stock Exchange, the per
share fair market value shall be the average of the high and low per share
sales prices for the Common Stock as such price is officially quoted in the
composite tape of transactions on such exchange for a single trading day. If
there is no such reported price for the Common Stock for the date in question,
then such price on the last preceding date for which such price exists shall be
determinative of the per share fair market value.
5.3 TERM AND VESTING
The term of each option shall be ten years from the date of grant,
unless a different term is established by the Plan Administrator and set forth
in the option letter agreement issued to the individual Optionee. The Plan
Administrator may, in its discretion, extend the term period of an option. In
addition, the term of an option shall expire, if earlier than ten years or the
different term specified in the option letter agreement, earlier in accordance
with the provisions of Section 5.8 if the Optionee's employment or service
relationship with the Company terminates before the end of ten years from the
date of grant or the different term specified in the option letter agreement.
To the extent not exercised within the applicable time period provided herein,
options shall become null and void.
To ensure that the Company achieves the purpose and receives the
benefits contemplated in this Plan, any option granted to any person hereunder
shall, unless the condition of this sentence is waived or modified by the Plan
Administrator in the individual option letter agreement or at any later time,
vest on a monthly basis over a four-year period, with the Optionee becoming
vested in 1/48th of the option grant after the completion of each full calendar
month of employment or service relationship with the Company following the date
as of which the option was granted.
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5.4 EXERCISE
After an Optionee becomes at least 50% vested with respect to any
single option grant, the Optionee may exercise vested options included in that
grant; provided that, an Optionee may not exercise more than 20% of the options
conveyed in a specific grant in a single fiscal year of the Company. This 50%
threshold shall apply separately to each separate grant of options. The Plan
Administrator may in its discretion increase the percentage of options which
may be exercised. To the extent options are exercised upon a termination of
employment or service relationship with the Company (as described in Section
5.8), the preceding 50% and 20% limits shall not apply. During an Optionee's
lifetime, any options granted under this Plan are personal to him or her and
may be exercised solely by such Optionee except as permitted under Section 5.7.
To the extent that the right to purchase shares has accrued
thereunder, an option may be exercised only during a Semi-Annual Exercise
Period by delivering during such Semi-Annual Exercise Period written notice to
the Company, in accordance with procedures established by the Plan
Administrator, setting forth the number of shares with respect to which the
option is being exercised and accompanied by payment in full as described
below. "Semi-Annual Exercise Periods" means the 30-day periods commencing each
year on each of the dates the Plan Administrator delivers to the Optionee the
Year-End Valuation Notice and the Six-Month Valuation Notice pursuant to
Section 5.2.1, during which periods an Optionee is entitled to exercise his or
her options pursuant to the terms hereof.
The limitations on exercisability contained in this Section 5.4 shall
not apply at any time during which the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act. The Plan Administrator may determine at
any time that an option may not be exercised as to less than 100 shares at any
one time (or the lesser number of remaining shares covered by the option).
5.5 PAYMENT OF THE EXERCISE PRICE
The exercise price for shares purchased under an option shall be paid
in full to the Company by delivery of consideration equal to the product of the
option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the option is granted or at
any time before it is exercised, a combination of cash and/or check (if any)
and any of the following alternative forms: (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, by attestation) Common Stock already owned by the Optionee
for at least six months (or any shorter period necessary to avoid a charge to
the Company's earnings for financial reporting purposes) having a fair market
value on the day prior to the exercise date equal to the aggregate option
exercise price; or (b) if and so
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long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, delivery of a properly executed exercise notice, together with
irrevocable instructions, to (i) a brokerage firm designated by the Company to
deliver promptly to the Company the aggregate amount of sale or loan proceeds
to pay the option exercise price and any withholding tax obligations that may
arise in connection with the exercise and (ii) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm, all in
accordance with the regulations of the Federal Reserve Board. In addition, the
price for shares purchased under an option may be paid, either singly or in
combination with one or more of the alternative forms of payment authorized by
this Section 5.5, by such other consideration as the Plan Administrator may
permit.
5.6 STOCK PURCHASE AGREEMENT
Prior to and as a condition to the exercise of an option, the Optionee
shall become a party to and agree to the terms of a Stock Purchase Agreement,
which agreement provides terms and conditions regarding the ownership and
disposition of the Common Stock issued upon the exercise of an option. A copy
of the Stock Purchase Agreement, in its substantial form, shall be provided to
the Optionee upon the grant of an option to the Optionee.
5.7 NON-TRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges
conferred thereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of any option under this Plan
or of any right or privilege conferred thereby, contrary to the provisions
hereof, or upon the sale or levy or any attachment or similar process upon the
options or rights and privileges conferred thereby, such option shall terminate
and become null and void. Notwithstanding the foregoing, and to the extent
permitted by Section 422 of the Code, the Plan Administrator, in its sole
discretion, may permit the assignment or transfer of an option and may permit
an Optionee to designate a beneficiary who may exercise the option after the
Optionee's death; provided, however, that any option so assigned or transferred
shall be subject to all the same terms and conditions contained in the option
letter agreement.
5.8 TERMINATION OF EMPLOYMENT OR SERVICE RELATIONSHIP WITH THE COMPANY
If the Optionee terminates his or her employment or service
relationship with the Company for any reason (including retirement, death,
disability or otherwise), the Optionee may exercise the vested portion of his
or her options, as governed by the vesting schedule defined in Section 5.3.
The unvested portion of his or her options shall be forfeited. In addition, an
Optionee whose employment or service relationship with the
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<PAGE> 8
Company is terminated for cause shall forfeit all outstanding options,
including vested and unvested portions. A termination shall be considered for
"cause" if the Plan Administrator determines that the Optionee's termination of
employment or service relationship with the Company was for one of the
following reasons: (a) proven embezzlement by the Optionee of the Company's
assets, or other crimes by the Optionee against or directly involving the
Company's property; (b) material violation by the Optionee, whether or not an
employee, of the policies applicable to employees of the Company; (c) the
Optionee acting in any fashion as an independent consultant or employee, for
himself or herself or any other business or employer other than the Company, in
any endeavor that in any way competes with the Company; or (d) the Optionee's
willful engaging in conduct that is materially injurious to Nextel, the Company
or their subsidiaries, financially or otherwise. For purposes of this Section
5.8, no act, or failure to act, on the Optionee's part shall be considered
"willful" unless done, or omitted to be done, by the Optionee not in good faith
and without reasonable belief that such action or omission was in the best
interest of Nextel, the Company or their subsidiaries.
The portion of the Optionee's options that are vested and
nonforfeitable on the date of the Optionee's termination of employment or
service relationship with the Company for any reason other than total
disability or death may be immediately exercised for a period of 90 days
following the Optionee's termination of employment or service relationship with
the Company. If termination of employment or service relationship with the
Company is due to an Optionee's total disability (as defined in Section
5.12.4), then the right to exercise the Optionee's vested and nonforfeitable
options under this Section 5.8 shall extend to one year from the date of
termination of employment or service relationship. If termination of
employment or service relationship with the Company is due to an Optionee's
death (or the Optionee dies within 90 days following a termination of
employment or service relationship with the Company, but prior to exercising
his or her options), then the right to exercise the Optionee's vested and
nonforfeitable options under this Section 5.8 shall pass to the Optionee's
personal representative or estate, and the period for exercise shall extend to
one year from the date of death. The Plan Administrator, may, in its
discretion, waive or extend these exercise periods. Following these exercise
periods, any remaining unexercised options shall automatically terminate and be
forfeited.
For purposes of this Section 5.8, employment or service relationship
with the Company shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (as determined by the
Plan Administrator). The foregoing notwithstanding, employment or service
relationship with the Company shall not be deemed to continue beyond the first
90 days of such leave, unless the Optionee's reemployment rights are guaranteed
by statute or contract.
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5.9 CONTINUATION OF EMPLOYMENT OR SERVICE RELATIONSHIP WITH THE COMPANY
Nothing in this Plan or in any options granted pursuant to this Plan
shall confer upon any Optionee any right to continue in the employment or
service relationship of the Company or of any Subsidiary, or to interfere in
any way with the right of the Company or of any Subsidiary to terminate the
Optionee's employment or other relationship with the Company or the Subsidiary
at any time.
5.10 MODIFICATION AND AMENDMENT OF OPTIONS
Subject to the terms and conditions and within the limitations of this
Plan, the Plan Administrator may modify or amend outstanding options granted
under this Plan. Except as expressly provided under the terms of this Plan as
in effect at the time of granting the relevant option, the modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her options that have been granted,
or any of the obligations of the Company under such options.
5.11 BUYOUT PROVISIONS
The Plan Administrator may at any time offer to buy out for a payment
in cash an option previously granted and held by an Optionee whose employment
or service relationship with the Company has been terminated, based on such
terms and conditions as the Plan Administrator shall establish and communicate
to the Optionee at the time such offer is made.
5.12 INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, incentive stock
options shall be subject to the following additional terms and conditions:
5.12.1 DOLLAR LIMITATION
To the extent the aggregate fair market value (determined as of the
grant date) of Common Stock with respect to which incentive stock options held
by an individual Optionee are exercisable for the first time during any
calendar year (under this Plan and all other stock option plans of the Company)
exceeds $100,000, such portion in excess of $100,000 shall be treated as a
nonqualified stock option. In the event an Optionee holds two or more such
options that become exercisable for the first time in the same calendar year,
such limitation shall be applied on the basis of the order in which such
options are granted.
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5.12.2 10% SHAREHOLDERS
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
incentive stock option shall not be less than 110% of the fair market value of
the Common Stock on the grant date and the option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
5.12.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its
subsidiary corporations or parent corporations may not be granted incentive
stock options. For purposes of this Section 5.12.3, "parent corporation" and
"subsidiary corporation" shall have the meanings attributed to those terms for
the purposes of Section 422 of the Code.
5.12.4 TERM
The term of an incentive stock option shall not exceed ten years.
5.12.5 EXERCISABILITY
To qualify for incentive stock option tax treatment, an option
designated as an incentive stock option must be exercised within three months
after termination of employment for reasons other than death, except that, in
the case of termination of employment due to total disability, such option must
be exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Optionee's reemployment rights are guaranteed by statute or contract. For
purposes of this Section 5.12, "total disability" shall mean a mental or
physical impairment of the Optionee that is expected to result in death or that
has lasted or is expected to last for a continuous period of 12 months or more
and that causes the Optionee to be unable, in the opinion of the Company and
two independent physicians, to perform his or her duties for the Company and to
be engaged in any substantial gainful activity. Total disability shall be
deemed to have occurred on the first day after the Company and the two
independent physicians have furnished their opinion of total disability to the
Plan Administrator.
5.12.5 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, the Optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the grant
date of the incentive stock option and one year from the date of exercise. An
Optionee may be subject to the alternative minimum tax at the time of exercise
of an incentive stock option. The Plan Administrator may require an Optionee
to give the Company prompt notice of any disposition of shares
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acquired by the exercise of an incentive stock option prior to the expiration
of such holding periods.
SECTION 6. STATUS AS SHAREHOLDERS
Neither the Optionee nor any person or persons to whom the Optionee's
options and related privileges under this Plan may pass shall be or have any of
the rights and privileges of a shareholder of the Company except to the extent
that shares are acquired upon exercise of an option, and provided that nothing
in this Plan prohibits or prevents an Optionee from otherwise becoming a
shareholder of the Company.
SECTION 7. CAPITALIZATION CHANGES
The aggregate number and kind of securities subject to this Plan as
set forth in Section 3, the number and kind of securities subject to any
outstanding options granted under this Plan and the per share option exercise
price (without any change in the aggregate exercise price to be paid therefor)
shall all be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock of the Company resulting from a
split-up or consolidation of shares or other similar capital adjustment, or the
payment of any stock dividend, or any other increase or decrease in the number
of shares of Common Stock of the Company without the Company's receipt (or
release) of consideration, proportionately equivalent to the added or
eliminated shares. In the event of any adjustment in the number of such
securities, any fractional shares of Common Stock resulting from the adjustment
shall be disregarded.
SECTION 8. AMENDMENT AND TERMINATION
The Board may at any time suspend, amend or terminate this Plan;
provided, however, to the extent required for compliance with any applicable
law or regulation, shareholder approval will be required for any amendment that
will (a) increase the total number of shares as to which options may be granted
under this Plan, (b) modify the class of persons eligible to receive options,
or (c) otherwise require shareholder approval under any applicable law or
regulation. No option may be granted after such termination, or during any
suspension of this Plan. No incentive stock option may be granted more than
ten years after this Plan's adoption by the Board. The amendment or
termination of this Plan shall not, without the consent of the Optionee, alter
or impair any options or obligations under any option previously granted under
this Plan.
SECTION 9. GOVERNING LAW
The provisions of this Plan shall be construed and interpreted
according to the laws of the State of Washington, without regard to its
conflicts of laws principles.
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SECTION 10. VALIDITY
In case any provision of this Plan is deemed illegal or invalid for
any reason, the illegal or invalid portion shall not affect the remaining parts
of this Plan, and this Plan shall be construed and enforced as if the illegal
or invalid provision had never been inserted.
SECTION 11. TAXES AND WITHHOLDING
The Company may withhold from any payment under this Plan or require
the Optionee to pay in cash any and all employment and income taxes that are
required to be withheld under applicable law. Subject to this Plan and
applicable law, the Plan Administrator may, in its sole discretion, permit the
Optionee to satisfy withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the fair market value of the withholding obligation. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to an option or from any cash amounts otherwise due or to become due
from the Company to the Optionee an amount equal to such taxes. The Company
may also deduct from any option any other amounts due from the Optionee to the
Company or a Subsidiary.
SECTION 12. FIRST REFUSAL AND PUT RIGHTS; MARKET STAND-OFF
12.1 FIRST REFUSAL RIGHTS
Until the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the
Company shall have the right of first refusal with respect to any proposed sale
or other disposition by the holder of any shares of Common Stock issued
pursuant to an option granted under this Plan. Such right of first refusal
shall be exercisable in accordance with the terms and conditions established by
the Plan Administrator and set forth in the Stock Purchase Agreement evidencing
such right.
12.2 PUT RIGHTS
Until the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the
shares of Common Stock issued pursuant to the exercise of an option shall be
entitled to certain "Put Rights" by the Optionee to compel the purchase of such
shares (the "Purchased Shares") by the Company or an affiliate pursuant to the
terms and conditions established by the Plan Administrator and set forth in the
Stock Purchase Agreement. Such Put Rights may be exercised, except as provided
in the Stock Purchase Agreement with respect to the sale of a portion of the
Purchased Shares to the Company or an affiliate to
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satisfy the tax withholding obligations relating to the exercise of the Put
Right, only after the Purchased Shares have been held for at least six months
and only during a Semi-Annual Exercise Period.
12.3 MARKET STAND-OFF
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "Securities Act"), including
the Company's initial public offering, a person shall not sell, or make any
short sale of, loan, hypothecate, pledge, grant any option for the purchase of,
or otherwise dispose or transfer for value or otherwise agree to engage in any
of the foregoing transactions with respect to, any shares issued pursuant to an
option granted under this Plan without the prior written consent of the Company
or its underwriters. Such limitations shall be subject to the terms and
conditions established by the Plan Administrator and set forth in the Stock
Purchase Agreement.
SECTION 13. REGISTRATION
The Company shall be under no obligation to any Optionee to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, this
Plan, or to continue in effect any such registrations or qualifications if
made. The Company may issue certificates for shares with such legends and
subject to such restrictions on transfer and stop-transfer instructions as
counsel for the Company deems necessary or desirable for compliance by the
Company with federal and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of
an exemption from registration for the issuance and sale of any shares
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such shares as to which such requisite authority shall
not have been obtained.
As a condition to the exercise of an option, the Company may require
the Optionee to represent and warrant at the time of any such exercise or
receipt that such shares are being purchased or received only for the
Optionee's own account and without any present intention to sell or distribute
such shares if, in the opinion of counsel for the Company, such a
representation is required by any relevant provision of the aforementioned
laws. At the option of the Company, a stop-transfer order against any such
shares may be placed on the official stock books and records of the Company,
and a legend indicating that such shares may not be pledged, sold or otherwise
transferred, unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock
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certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Optionee as may from time to
time be necessary to comply with the federal and state securities laws.
SECTION 14. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board, so long
as it is approved by the Company's shareholders at any time within 12 months of
such adoption.
Approved by the Board on June 23, 1997.
Approved by the shareholders on , 1997.
--------------
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
<TABLE>
<CAPTION>
Date of
Adoption/
Amendment/ Date of Shareholder
Adjustment Section Effect of Amendment Approval
---------- ------- ------------------- --------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.18
TAX SHARING AGREEMENT
dated as of January 1, 1997
by and among
Nextel Communications, Inc.
and
Affiliated Corporations
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. Definitions ....................................................................... 1
2. Payments by Members of Separate Return Tax Liability .............................. 3
3. Payments to Members and Crediting of Members' Accounts ............................ 5
4. Additional Obligations of Members ................................................. 7
5. Remittances by and to Members ..................................................... 10
6. Subsequent Adjustments ............................................................ 11
7. Carrybacks from Separate Return Years ............................................. 11
8. Determinations and Computations ................................................... 12
9. Procedural Matters ................................................................ 12
10. Utilization of Member Tax Attributes, Etc. in Determining
Consolidated Tax Liability ........................................................ 14
11. Additions to Group ................................................................ 14
12. State Taxes ....................................................................... 15
13. Effective Date .................................................................... 15
14. Amendment and Waiver .............................................................. 15
15. Successors and Assigns ............................................................ 15
16. Rights of the Parties ............................................................. 15
17. Expenses .......................................................................... 16
18. Titles and Headings ............................................................... 16
19. Entire Agreement .................................................................. 16
20. Severability ...................................................................... 16
21. Governing Law ..................................................................... 16
22. Counterparts ...................................................................... 16
</TABLE>
<PAGE> 3
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT, dated as of January 1, 1997 (this
"Agreement"), is made and entered into by and among Nextel Communications, Inc.
("Nextel") as Common Parent and those Members whose names appear on Schedule A
hereto.
RECITALS
A. Nextel is the Common Parent of an Affiliated Group, of which each
company identified on Schedule A is a Member, that files a Consolidated Return;
B. Certain state and local combined or unitary income or franchise
tax returns will be filed for various Members or for the Group; and
C. The parties hereto wish to provide for the sharing of the federal
income tax liability and the state and local income and franchise tax
liabilities relating to such consolidated, combined, or unitary returns.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto hereby agree as
follows:
1. DEFINITIONS
In addition to the terms defined elsewhere herein, the following terms
have the following meanings when used herein with initial capital letters:
(a) "Affiliated Group" has the meaning attributed to that term in
Section 1504(a) of the Code.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(c) "Common Parent" has the meaning of that term as it is used in the
Consolidated Return Regulations and initially means Nextel and thereafter any
other corporation that replaces Nextel (or any such other corporation) as
successor Common Parent of the Affiliated Group.
(d) "Completion," for any Taxable Year of the Group, means the date
on which the Consolidated Return of the Group for such Taxable Year is
completed.
<PAGE> 4
(e) "Consolidated Return," for any Taxable Year of the Group, means
a consolidated U.S. corporation income tax return filed pursuant to Section
1501 of the Code by the Common Parent for such Taxable Year.
(f) "Consolidated Return Regulations" means Income Tax Regulations
Sections 1.1502-1 through 1.1502-100 (26 C.F.R.), as amended from time to time.
(g) "Consolidated Tax Liability" means the consolidated U.S.
corporation income tax liability of the Group for any Taxable Year for which
the Group files a Consolidated Return.
(h) "Consolidated Taxable Income," for any Taxable Year of the
Group, means the consolidated U.S. corporation taxable income of the Group for
such Taxable Year, determined in the manner provided in the Code and in the
Consolidated Return Regulations.
(i) "Effective Date" means January 1, 1997.
(j) "Former Member," as of any given date, means any corporation
(including any successor in interest to such corporation) which as of such date
is not a Member of the Group, but which at any time during one or more Taxable
Years of the Group was a Member; provided, however, that no Member that ceases
to exist as a Member hereunder solely as a result of a transaction to which
Section 381 of the Code applies will for purposes of this Agreement be
considered to be a Former Member if the surviving or resulting corporation to
such transaction is a Member of the Group.
(k) "Group," as of any particular date, means the Common Parent and
each Member of the Affiliated Group which is an Includible Corporation as of
such date.
(l) "Includible Corporation" has the meaning attributed to that term
in Section 1504(b) of the Code.
(m) "Income Tax Regulations" means the Regulations (26 C.F.R.), as
amended from time to time, promulgated pursuant to the Code.
(n) "I.R.S." means the Internal Revenue Service.
(o) Loss Item," in the case of any Member, for any Taxable Year of
the Group means such Member's excess credits against federal income tax, net
operating loss, or net capital loss for such Taxable Year which result from the
determination of such Member's Separate Return Tax Liability for such Taxable
Year.
-2-
<PAGE> 5
(p) "Member," for any Taxable Year of the Group, means any
corporation (or any predecessor or successor in interest to such corporation
under Section 381 of the Code which was or is an Includible Corporation) which
at any time during such Taxable Year is an Includible Corporation that is
included in the Affiliated Group and includes any such corporation which at any
time during such Taxable Year is the Common Parent.
(q) "Separate Return Tax Liability," in the case of any Member, for
any Taxable Year of the Group means the liability of such Member hereunder for
federal income tax for such Taxable Year computed as if such Member had filed a
separate federal income tax return for such Taxable Year and for all prior
taxable years or periods and subsequent taxable years, after taking into
account all carryovers and carrybacks of losses and credits, as if such Member
had filed a separate federal income tax return for all such taxable years or
periods, except that, in making such computation for any such taxable year,
such liability will be determined:
(i) on the basis of the highest rate of corporate tax in
effect for such taxable year under Section 11 of the
Code (and, if applicable, Section 15 of the Code),
as though such rate were the only income tax rate in
effect for such taxable year,
(ii) on the assumption that the "exemption amount"
specified in Section 55 of the code which is
applicable to such Member for such taxable year is
zero,
(iii) on the further assumption that the amount specified
in Section 59A(a)(2) of the Code which is applicable
to such Member for such taxable year is zero.
(r) "Taxable Year" means any (i) period of 12 consecutive months or
(ii) period of less than 12 consecutive months, for which a Consolidated Return
is or will be filed by the Group.
2. PAYMENTS BY MEMBERS OF SEPARATE RETURN TAX LIABILITY
(a) For each Taxable Year of the Group, each Member will make the
payments specified in this Section 2(a) at the time or times and in the manner
herein provided.
(i) In the case of any such Member whose estimated
Separate Return Tax Liability for such Taxable Year
is greater than zero, such Member will make
quarterly payments of its estimated Separate
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Return Tax Liability for such Taxable Year. The
amount of each such quarterly payment will be
determined by such Member, and such determination
will be made no later than ten days prior to the
date on which payment of the respective quarterly
estimate of the Group's Consolidated Tax Liability
for such Taxable Year must be made to the I.R.S. The
amount of each such quarterly payment determined by
such Member will equal the amount which such Member
would be required under Section 6655(d) of the Code
(or under any successor Section of the Code) to pay
to the I.R.S. for such quarter were such Member to
make installment payments of its estimated Separate
Return Tax Liability for such Taxable Year in
accordance with the provisions of such Section.
(ii) If the actual Separate Return Tax Liability of any
such Member for such Taxable Year exceeds the total
estimated payments, if any, which such Member made
pursuant to Section 2(a)(i) for such Taxable Year,
such Member will pay an amount equal to the
difference between its actual Separate Return Tax
Liability for such Taxable Year and the sum of the
estimated payments, if any, that such Member made
pursuant to Section 2(a)(i) for such Taxable Year.
(iii) In the case of any Member, each of the quarterly
payments required to be made by such Member pursuant
to Section 2(a)(i) will be made in the manner
provided in Section 5(a) on or before the due date
for the payment of the respective quarterly estimate
of the Group's Consolidated Tax Liability for such
Taxable Year. Any amount required to be paid by such
Member for such Taxable Year pursuant to Section
2(a)(ii) will be paid by such Member in the manner
provided in Section 5(a), as follows: (A) on the
fourteenth day of the third month after the end of
such Taxable Year such Member will pay an amount
equal to such Member's best estimate, as determined
by such Member, of the amount, if any, that such
Member owes pursuant to Section 2(a)(ii) for such
Taxable Year, and (B) on the thirtieth day after
Completion for such Taxable Year an amount equal to
the difference, if any, between (x) the amount
determined for such Taxable Year as the amount
payable by such Member pursuant to Section 2(a)(ii)
for such Taxable Year and (y) the amount, if any,
paid by such Member for such Taxable Year pursuant
to clause
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<PAGE> 7
(A) above, together with interest thereon on such
amount at the rate specified in Section 5(b) from
the date on which the payment referred to in clause
(A) above was made to such thirtieth day following
Completion.
(b) If for any Taxable Year of the Group, any Member of the Group
has a Loss Item which the Common Parent for such Taxable Year is unable, due to
limitations prescribed by the Code, to utilize in computing the Group's
Consolidated Tax Liability for such Taxable Year or any prior Taxable Year, and
if such Member in such circumstance is able to carry back such Loss Item to a
prior taxable year or taxable years of such Member and to obtain a refund in
federal income tax as a result of such carryback, such Member will have no
obligation to remit the amount of such refund to the Common Parent.
3. PAYMENTS TO MEMBERS AND CREDITING OF MEMBERS' ACCOUNTS
(a) For each Taxable Year of the Group, the payments and crediting
of accounts specified in this Section 3 will, if applicable, be made at the
time or times and in the manner herein provided:
(i) If the payments made by any such Member pursuant to
Section 2 for such Taxable Year exceed its actual
Separate Return Tax Liability for such Taxable Year,
such Member will be paid an amount equal to the
difference between (A) the payments that such Member
made pursuant to Section 2 for such Taxable Year and
(B) the amount of its actual Separate Return Tax
Liability for such Taxable Year, together with
interest thereon on such amount at the rate
specified in Section 5(b) from the date on which
payment was made under Section 2 to the date of
repayment under this Section 3.
(ii) If any Member for a Taxable Year has a Loss Item
that such Member on a separate return tax basis
would be entitled under the applicable provisions of
the Code to carry back to a prior taxable year or
taxable years, an account established for such
Member will be credited with an amount equal to the
refund in federal income tax that such Member would
have been entitled to claim and receive had such
Member filed a separate federal income tax return
for such prior taxable year or taxable years. A
Member will not be entitled to receive any credit
pursuant to this Section 3(a)(ii) with respect to a
Loss Item to the extent such Loss Item is eligible
to be carried back by such Member to a
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<PAGE> 8
prior taxable year or taxable years for which such
Member either (A) actually filed a separate federal
income tax return or (B) was included in the
consolidated return of another Affiliated Group, and
as to which such Member accordingly is entitled to
file, or have filed on its behalf, a claim for a
refund of federal income tax previously paid.
(b) In the case of any Member, any payment that such Member may be
entitled to receive for such Taxable Year pursuant to Section 3(a)(i) will be
paid to such Member in the manner provided in Section 5(a) on or before the
later of (i) the fifteenth day of the third month after the end of such Taxable
Year and (ii) 30 calendar days after Completion.
(c) Any amounts credited to a Member's account pursuant to Section
3(a)(ii) will bear interest at the rate specified from time to time pursuant to
Section 6621(a)(2). Any amount credited to a Member's account will be paid to
the Member as follows:
(i) If, with respect to any Taxable Year for which a
Member has a positive balance in its account (taking
into account any credits to such account with
respect to such Taxable Year), the Common Parent
receives a refund from the I.R.S., the Common Parent
shall pay to such Member an amount (not in excess of
the positive balance in such Member's account) equal
to the product of (x) the refund received by the
Common Parent and (y) a fraction, whose numerator is
the positive balance in such Member's account and
the denominator of which is the aggregate positive
balance in the accounts of all Members that have
positive balances in their accounts. Any amount so
paid by the Common Parent to a Member shall reduce
the Member's account.
(ii) Any remaining amount in a Member's account shall be
used only to reduce the amount of any payment due
from such Member pursuant to Section 2. Any amount
so used shall reduce the Member's account.
(d) Any Member that receives a payment or other benefit pursuant to
Section 3(c)(i) or Section 3(c)(ii) will repay such benefit in the event such
Member ceases (other than as a result of a transaction to which Section 381 of
the Code applies and in which the surviving or resulting corporation is also a
Member) to be a Member before the Common Parent has utilized in full the Loss
Item that generated the reduction in determining the Group's Consolidated
Taxable Income or Consolidated
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<PAGE> 9
Tax Liability for any Taxable Year or Taxable Years of the Group. If, as of the
end of the last Taxable Year of the Group in which such Member is a Member, the
Common Parent will have partially utilized such Loss Item in determining the
Group's Consolidated Taxable Income or Consolidated Tax Liability for any
Taxable Year or Taxable Years of the Group, such Former Member will repay a
proportionate part of such benefit, determined by multiplying the amount of
such benefit by a fraction, the numerator of which will be equal to the amount
of such Loss Item which the Common Parent has not so utilized and the
denominator of which will be equal to the aggregate amount of such Loss Item.
For purposes of the two preceding sentences, the extent, if any, to which any
such Loss Item has been utilized by the Common Parent in determining the
Group's Consolidated Taxable Income or Consolidated Tax Liability for the
Taxable Year or Taxable Years of the Group referred to in such sentences will
be determined in accordance with the provisions of Section 1.1502-79 of the
Consolidated Return Regulations. Any payment due from a Former Member pursuant
to this Section 3(d) will be made in the manner provided in Section 5(a) by
such Former Member within 15 days of the date on which such Former Member
receives written notice of the amount payable by such Former Member pursuant to
this Section 3(d).
(e) If a Member receives a payment pursuant to Section 3(c)(i) and
the Common Parent subsequently is required to remit part or all of the refund,
plus interest, to the I.R.S., the Member shall pay to the Common Parent an
amount (not in excess of the payment previously received by the Member pursuant
to Section 3(c)(i), plus interest at the rate specified in Section 5(b)) equal
to the product of (x) the remittance by the Common Parent to the I.R.S. and (y)
a fraction, whose numerator is the payment the Member received under Section
3(c)(i) for such Taxable Year and the denominator is the aggregate payment
received by all Members pursuant to Section 3(c)(i) for such Taxable Year. Any
amount so remitted by the Member to the Common Parent shall increase the
Member's account.
4. ADDITIONAL OBLIGATIONS OF MEMBERS
(a) If:
(i) a Member generates for any Taxable Year a Loss Item
which such Member is unable in whole or in part to
carry back pursuant to Section 2(b) or Section
3(a)(ii);
(ii) is able subsequently to utilize (to the extent not
so carried back) all or any part of such Loss Item
in determining for any subsequent Taxable Year or
Taxable Years its Separate Return Tax Liability for
such Taxable Year or Taxable Years; and
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<PAGE> 10
(iii) ceases for any reason (other than as a result of a
transaction to which Section 381 of the Code applies
and in which the surviving or resulting corporation
is also a Member) to be a Member before the Common
Parent has been able to utilize in full the amount
of such Loss Item (to the extent not so carried
back), so utilized by such Member, in determining
the Group's Consolidated Taxable Income or
Consolidated Tax Liability for any Taxable Year or
Taxable Years of the Group,
then, in such event, such Member or Former Member will with respect to such
Loss Item pay as herein provided an amount equal to the amount determined
pursuant to Section 4(d).
(b) If:
(i) a Member generates for any Taxable Year any credits
or deductions which such Member is able for such
Taxable Year to utilize in determining its Separate
Return Tax Liability for such Taxable Year;
(ii) such credits or deductions cannot be utilized by the
Common Parent for such Taxable Year in determining
the Group's Consolidated Tax Liability for such
Taxable Year and cannot be carried back either by
the Common Parent to any prior Taxable Year or
Taxable Years or by such Member, pursuant to Section
2(b) or Section 3(a)(ii), to any prior taxable year
or taxable years; and
(iii) such Member ceases, for any reason (other than as a
result of a transaction to which Section 381 of the
Code applies and in which the surviving or resulting
corporation is also a Member) to be a Member before
the Common Parent has been able to utilize such
credit in full in determining the Group's
Consolidated Tax Liability for any Taxable Year or
Taxable Years,
then, in such event, such Member or Former Member will with respect to such
credits or deductions pay as herein provided an amount equal to the amount
determined pursuant to Section 4(d).
(c) If:
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<PAGE> 11
(i) in the case of any Member, such Member in
determining its Separate Return Tax Liability for a
Taxable Year utilizes (A) any loss or credit
carryover which did not arise in a Taxable Year or
(B) any deduction the utilization of which by the
Common Parent for any Taxable Year is subject to
Section 1.1502-15T of the Consolidated Return
Regulations; and
(ii) before the Common Parent has been able to utilize in
full the amount of such loss or credit carryover or
deduction, so utilized by such Member, in
determining for any Taxable Year or Taxable Years
the Consolidated Taxable Income or Consolidated Tax
Liability of the Group either (A) such Member ceases
for any reason (other than as a result of a
transaction to which Section 381 of the Code applies
and in which the surviving or resulting corporation
is also a Member) to be a Member of the Group or (B)
all or any part of such loss or credit carryover or
deduction expires under the provisions of the Code,
then, in such event, such Member or Former Member will with respect to such
loss or credit carryover or deduction pay as herein provided an amount equal to
the amount determined pursuant to Section 4(e).
(d) If either Section 4(a), Section 4(b) or Section 4(c) is
applicable to a Member or a Former Member, such Member or Former Member will
pay in the manner provided in Section 4(f) an amount equal to the difference
between (i) the Separate Return Tax Liability of such Member for the Taxable
Year or Taxable Years involved computed without regard to the Loss Item,
credit, or deduction referred to in Section 4(a), Section 4(b) or Section 4(c),
respectively, minus the Separate Return Tax Liability of such Member for such
Taxable Year or Taxable Years and (ii) the amount, if any, of the total
reduction in Consolidated Tax Liability for the then current and all prior
Taxable Years of the Group attributable to the Common Parent's utilization on
behalf of the Group of such Loss Item, credit, or deduction in determining the
Group's Consolidated Taxable Income and Consolidated Tax Liability for such
Taxable Year or Taxable Years.
(e) Any payment due pursuant to Section 4(d) from a Member or Former
Member will, in any case in which a Member ceases to be a Member of the Group,
be made within 15 days of the date on which the Member or Former Member
receives written notice of the amount payable by it pursuant to Section 4(d),
or, in any case in which a loss or credit carryover or deduction expires unused
be made on or before the fifteenth day of the third month following the close
of the Taxable Year in which the loss or credit carryover or deduction referred
to in Section 4(d), expires unused. Any
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<PAGE> 12
payment due pursuant to this Section 4(e) from a Member or Former Member will
be made by such Member or Former Member in the manner provided in Section 5(a).
(f) If a Member at any time acquires the assets and properties of
another Member pursuant to a transaction to which Section 381 of the Code
applies, the acquiring Member will, from and after the date of such
acquisition, be responsible for all of the undertakings and obligations of such
other Member hereunder and will, from and after such date, be entitled to
receive any and all payments that such other Member would be entitled to
receive hereunder. Provided such other Member ceases to exist solely as a
result of such transaction, such event will not, except as expressly provided
herein, in any way result in any acceleration of the time at which any payments
hereunder are due to or from such other Member, and, except as expressly
provided herein to the contrary, all such payments will be made to or by the
acquiring Member at the same time or times that such payments would be payable
to or by such other Member had such other Member continued to exist as a Member
hereunder.
(g) Any repayment obligation of a Member triggered by a Member's
ceasing to be a Member under Section 3(d) or this Section 4 shall not apply in
the event that a Member ceases to be a Member by reason of a foreclosure or
other exercise of remedies by a lender (or collateral agent or trustee for any
such lender) with respect to a pledge of the stock of such Member.
(h) For purposes of this Section 4, the term "utilize" for any
taxable year includes to the extent that the Common Parent makes an election
for such taxable year under Section 1.1502-20(g) of the Consolidated Return
Regulations to reattribtue to itself any portion of a Loss Item, credit or
deduction attributable to the Member (whether or not such item actually reduces
the tax liability of the Group for that year (or any other year)).
5. REMITTANCES BY AND TO MEMBERS
(a) Until such time, if ever, as the Common Parent notifies each
other Member of the Group in writing to the contrary, any and all payments that
each such other Member agrees to make hereunder will be made and remitted by
each such Member directly to Common Parent. The Common Parent will be
responsible for making all payments required to be made hereunder to Members.
(b) Any payment required to be made pursuant to Section 5(a) by a
Member or the Common Parent which is not made on or before the date on which
such payment is due under the terms of this Agreement will bear interest at the
rate specified from time to time pursuant to Section 6621(a)(2) of the Code,
and any Member to whom such payment is due will be entitled to receive interest
computed at
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<PAGE> 13
such rate upon the late payment of any such amount which is required at any
time to be paid hereunder.
6. SUBSEQUENT ADJUSTMENTS
If any adjustment is made to any item of income, gain, loss,
deduction, expense or credit of any Member of the Group for a Taxable Year
ending after the Effective Date during which such Member is a Member of the
Group by reason of the filing of an amended Consolidated Return, a claim for
refund with respect to such Taxable Year or an audit with respect to such
Taxable Year by the I.R.S., the amounts, if any, due to or from such Member
under this Agreement will be redetermined by taking into account any such
adjustment. If, as a result of such redetermination, any amounts due to or from
a Member under this Agreement differ from the amounts previously paid, then
except as herein provided, payment of such difference will be made to such
Member or by such Member in the manner provided in Section 5(a) as follows: (a)
in the case of an adjustment resulting in a credit or refund of tax, within ten
calendar days of the date on which such refund or notice of such credit is
received by the Common Parent or such Member with respect to such adjustment,
or (b) in the case of an adjustment resulting in the assessment of a deficiency
in tax, within ten calendar days of the date on which such deficiency is paid.
Any amounts due under this Section 6 will include any interest attributable
thereto under Sections 6601 or 6611 of the Code and any penalties or additional
amounts which may be imposed. Any amount due pursuant to this Section 6 from a
Former Member will nevertheless be paid by such Former Member at the time
indicated above and in the manner provided in Section 5(a) unless the Common
Parent has agreed in writing prior to the date on which any such payment would
be due to release such Former Member from such obligation. In the event the
redetermination referred to in this Section results in a Former Member being
entitled to receive a payment pursuant to this Section, such Former Member will
not be entitled to receive any amount pursuant to this Section 6 unless the
Common Parent has agreed in writing prior to the date on which any such payment
would be due to permit such Former Member to receive such payment.
7. CARRYBACKS FROM SEPARATE RETURN YEARS
If, for any Taxable Year in the future of a Former Member, such Former
Member has a net operating loss, a net capital loss, or is entitled to credits
against tax which such Former Member, under applicable provisions of the Code
or the Consolidated Return Regulations, may carry back to a Taxable Year or
Taxable Years of the Group during which such Former Member was a Member of the
Group, the Common Parent will have no obligation to pay to such Former Member
the amount of any refund or credit of federal income tax that the Common Parent
may receive as a
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<PAGE> 14
result of the carryback by such Former Member of any such losses or credits;
provided, that the foregoing shall not apply in the event that a Member ceases
to be a Member of the Group by reason of a foreclosure or other exercise of
remedies by a lender (or collateral agent or trustee for any such lender) with
respect to a pledge of the stock of such Member.
8. DETERMINATIONS AND COMPUTATIONS
(a) All determinations and computations required to be made
hereunder, including without limitation all computations of (i) Consolidated
Taxable Income and Consolidated Tax Liability for each Taxable Year of the
Group and (ii) the Separate Return Tax Liability for each such Taxable Year of
each Member will be made by the independent public accountants regularly
employed by the Common Parent at the time that any such determination or
computation is required to be made. The results of any such determination or
computation so made by such independent public accountants will be binding and
conclusive upon the parties hereto for all purposes hereof.
(b) The purpose of this Agreement is to ascertain in a reasonable
and equitable manner the income tax liability of each Member. If a fact pattern
arises in the administration of this Agreement which requires a calculation or
determination that is not dealt with in the specific provisions hereof, the
independent public accountants regularly employed by the Common Parent will be
responsible for performing such calculations or making such determinations. In
making any such calculation or determination, such independent public
accountants will attempt to follow as closely as possible the general concepts
set forth in this Agreement by analogizing to the specific provisions hereof.
The results of any such determination or computation so made by such
independent public accountants will be binding and conclusive upon each of the
parties hereto for all purposes hereof.
(c) For each Taxable Year of the Group, each Member of the Group
will compute its Separate Return Tax Liability consistent with any elections
made by the Common Parent.
9. PROCEDURAL MATTERS
(a) The Common Parent will be solely responsible for making any
estimated or final payments to the I.R.S. in satisfaction of the federal income
tax liability (including additions to tax, penalties, and interest) of the
Group and each of its Members for each Taxable Year of the Group.
(b) The Common Parent will prepare and file, or will cause the
independent public accountants that it regularly employs on behalf of the Group
to prepare and on
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<PAGE> 15
its behalf file, the Consolidated Return and any other returns, documents or
statements required to be filed with the I.R.S. which pertain to the
determination of the Consolidated Tax Liability of the Group for each Taxable
Year of the Group. In its sole and absolute discretion, the Common Parent will
have the right with respect to any Consolidated Return that it or such
independent public accountants has filed or will file: (i) to determine (A) the
manner in which such Consolidated Return, as well as any other documents or
statements incidental or related thereto, will be prepared and filed, including
without limitation the manner in which any item of income, gain, loss,
deduction, expense, or credit of any Member will be reported therein or
thereon, (B) whether any extensions with respect to any such Consolidated
Return will be requested, and (C) the elections that will be made in any such
Consolidated Return by any Member; (ii) to contest, compromise, or settle any
adjustment or deficiency proposed, asserted, or assessed as a result of any
audit of such Consolidated Return by the I.R.S.; (iii) to file an amended
Consolidated Return and to prosecute, compromise or settle any claim for refund
set forth therein; and (iv) to determine whether any refunds to which the Group
may be entitled will be paid by way of cash refund or credited against the
Consolidated Tax Liability of the Group for any Taxable Year or Taxable Years
of the Group. Each Member hereby irrevocably appoints the Common Parent as its
agent and attorney-in-fact to take any action (including the execution of
documents) as the Common Parent may deem appropriate to effect the foregoing.
(c) The Common Parent will prepare, or will cause the independent
public accountants that it regularly employs on behalf of the Group to prepare,
on behalf of each Member any and all Corporation Applications for Tentative
Refund (Form 1139), Amended U.S. Corporation Income Tax Returns (Form 112OX),
or Claims for Refund (Form 843) that such Member is eligible to file with the
I.R.S. with respect to any prior taxable year or taxable years of such Member.
The Common Parent will deliver, or will cause such public accountants to
deliver, to such Member any such completed Form as soon as practicable after
such Form has been completed, and such Member will, within ten days of
receiving such Form, sign such Form and file the same with the appropriate
office of the I.R.S. If any such Member fails to file any such Form with the
I.R.S. within such 10-day period, such Member will, as hereinafter provided,
pay an amount equal to the amount of interest that such Member would have
received from the I.R.S. had such Member filed such Form with the I.R.S. within
such 10-day period but which such Member fails to receive as a consequence of
its delinquency in the filing of such Form; provided, however, that if any such
delay in the filing of such Form causes the claim for refund of tax made by
such Form to be disallowed by the I.R.S. on the ground that the period of
limitations prescribed in Section 6511 of the Code for claiming such refund has
expired as of the date such Form actually was filed with the I.R.S., such
Member will, in lieu of making the above-described payment, pay as hereinafter
provided an amount equal to the sum of
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<PAGE> 16
(i) the amount of the refund of tax claimed on such Form, plus (ii) an amount
equal to the amount of interest that such Member would have received from the
I.R.S. had the claim for refund of tax evidenced by such Form been allowed by
the I.R.S. on the day before the date on which the period of limitations for
claiming such refund expired. Any payment due pursuant to this Section 9(c)
from a Member will be made in the manner provided in Section 5(a) within ten
days of the date on which such Member receives written notice from the Common
Parent that such Member is required to make a payment pursuant to this Section
9(c). Any amount payable pursuant to this Section 9(c) by a Former Member
which, on the date on which any Form referred to in this Section 9(c) was
delivered to such Former Member was a Member of the Group, will be paid by such
Former Member at the time and in the manner indicated above unless the Common
Parent has agreed in writing prior to the date on which such payment would be
due to release such Former Member from the obligations imposed on it under this
Section 9(c).
(d) Each Member which at any time makes a determination pursuant to
Section 2(a)(i) of its estimated Separate Return Tax Liability for any Taxable
Year will, immediately after making any such determination, send a copy of such
determination to the independent public accountants that the Common Parent
regularly employs on behalf of the Group.
10. UTILIZATION OF MEMBER TAX ATTRIBUTES, ETC. IN DETERMINING CONSOLIDATED
TAX LIABILITY
In determining the Consolidated Taxable Income and Consolidated Tax
Liability and in preparing the Consolidated Return of the Group for any Taxable
Year of the Group, the Common Parent will be entitled, and hereby is
authorized, to utilize on behalf of the Group all of the tax attributes and
other items of income, gain, loss, deduction, expense, credit, etc. of each
such Member arising in such Taxable Year or which arose in another Taxable Year
or Taxable Years (or other period or periods) and which properly may be carried
back or carried forward to such Taxable Year. Except as expressly provided for
herein, no Member of the Group will in any manner be entitled to receive any
form of compensation by reason of the Common Parent's utilization of such
Member's tax attributes and items of income, gain, loss, deduction, expense,
credit, etc. on behalf of the Group in determining for any Taxable Year or
Taxable Years the Group's Consolidated Taxable Income and Consolidated Tax
Liability for such Taxable Year or Taxable Years.
11. ADDITIONS TO GROUP
If any Member of the Group will at any time organize or acquire any
other corporation, provided that such corporation becomes a Member of the
Group, the
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<PAGE> 17
Member of the Group that organizes such corporation or consummates such
acquisition will obtain the agreement of such newly organized or acquired
corporation to join in this Agreement and to be bound by all of the terms
hereof and will cause such corporation to execute a written consent,
substantially in the form of the consent attached hereto as Attachment A,
evidencing its agreement to join in this Agreement and to be bound by the terms
hereof. Each of the parties hereto, and each corporation that subsequently
becomes a party to this Agreement, consents to such corporation joining in this
Agreement.
12. STATE TAXES
(a) Each Member agrees that upon the request of the Common Parent it
will join with such other Members as are designated by the Common Parent in any
consolidated, combined, or unitary state or local income or franchise tax
return or report for any taxable year.
(b) For any taxable year for which such a return is filed that
includes a Member, this Agreement will be applied to all matters relating to
the taxes relating to such return in a manner similar to and consistent with
its application to federal income tax matters.
13. EFFECTIVE DATE
This Agreement will be effective for all Taxable Years of the Group
ending after the Effective Date.
14. AMENDMENT AND WAIVER
This Agreement may be amended, modified, waived, discharged, or
terminated only by an instrument in writing signed by each of the parties
hereto.
15. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but will
not be assignable or delegable by any party without the prior written consent
of each other party. In the absence of such prior written consent, any
purported assignment or delegation of any right or obligation hereunder will be
null and void.
16. RIGHTS OF THE PARTIES
Except as provided in Section 15, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any person or
entity
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<PAGE> 18
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
17. EXPENSES
Except as otherwise provided in this Agreement, each of the parties to
this Agreement will bear their own expenses incurred in connection with this
Agreement and the transactions contemplated hereby.
18. TITLES AND HEADINGS
Titles and headings to Sections herein are inserted for convenience of
reference only, and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
19. ENTIRE AGREEMENT
This Agreement, together with its Attachment, constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and there are no agreements among the parties hereto with respect thereto
except as expressly set forth herein.
20. SEVERABILITY
In case any provision contained in this Agreement is invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
21. GOVERNING LAW
This Agreement will be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof.
22. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which so executed will be deemed to be an original; such counterparts will
together constitute but one agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
-16-
<PAGE> 19
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
----------------------------
Name: Thomas J. Sidman
-----------------------
Title: Vice President
----------------------
NEXTEL FINANCE COMPANY
By: /s/ THOMAS J. SIDMAN
----------------------------
Name: Thomas J. Sidman
-----------------------
Title: Vice President
----------------------
-17-
<PAGE> 20
ADVANCED MOBILECOMM OF
NORTH CAROLINA, INC.
AIR LINK COMMUNICATIONS CORP.
(SEATTLE)
AMERICAN MOBILE SYSTEMS
INCORPORATED
C-CALL CORP.
COMQOR, INC.
CUSTOM RADIO/JOHNSON
COMMUNICATIONS, INC.
DIAL CALL, INC.
DIAL CALL ARKANSAS, INC.
DIAL CALL FLORIDA, INC.
DIAL CALL KENTUCKY, INC.
DIAL CALL LOUISSSIANA, INC.
DIAL CALL TEXAS, INC.
DIAL CALL VIRGINIA, INC.
DIAL CALL WEST VIRGINIA, INC.
DIAL DISTANCE, INC.
DISPATCH COMMUNICATIONS
OF ARIZONA, INC.
DISPATCH COMMUNICATIONS
OF MINNESOTA, INC.
DISPATCH COMMUNICATIONS
OF NEW ENGLAND, INC.
DISPATCH COMMUNICATIONS
OF MARYLAND, INC.
DISPATCH COMMUNICATIONS
OF PENNSYLVANIA, INC.
ESMR SUB, INC.
FC NEW YORK, INC.
FCI 900, INC.
FLEET CALL CORPORATION
FLEET CALL OF TEXAS, INC.
FLEET CALL OF UTAH, INC.
FLEET CALL WEST, INC.
F-M TOWER COMPANY
FORT WORTH COMMUNICATIONS,
INC.
METRACOM TRUNKED RADIO
COMMUNICATION SYSTEMS, INC.
-18-
<PAGE> 21
METROLINK COMMUNICATIONS
CORPORATION
MIJAC ENTERPRISES, INC.
MOBILE RADIO OF ILLINOIS, INC.
MOTOROLA SF, INC.
NATIONAL TOWER TRUNKING
SYSTEMS, INC.
NEXTEL COMMUNICATIONS
OF THE MID-ATLANTIC, INC.
NEXTEL HAWAII ACQUISITION CORP.
NEXTEL OF TEXAS, INC.
NEXTEL UTAH ACQUISITION CORP.
NEXTEL WESTERN ACQUISITION
CORP.
ONECOMM CORPORATION, N.A.
POWERFONE HOLDINGS, INC.
POWERFONE, INC.
SABER COMMUNICATIONS, INC.
SAFETY NET, INC.
SHORELAND COMMUNICATIONS, INC.
SMART SMR, INC.
SMART SMR OF CALIFORNIA, INC.
SMART SMR OF ILLINOIS, INC.
SMART SMR OF NEW YORK, INC.
SPECTRUM RESOURCES
OF THE MIDWEST, INC.
TRS, INC.
U.S. DIGITAL, INC.
By: /s/ THOMAS J. SIDMAN
----------------------------
Name: Thomas J. Sidman
-----------------------
Title: Vice President
----------------------
-19-
<PAGE> 22
MCCAW INTERNATIONAL
(DELAWARE), LTD.
MCCAW INTERNATIONAL
(SERVICES), LTD.
By: /s/ DAVID ROSTOV
----------------------------
Name: David Rostov
-----------------------
Title: Senior Vice President
----------------------
-20-
<PAGE> 23
ATTACHMENT A
CONSENT
The undersigned,__________________________ , a ____________
corporation, hereby consents effective as of , 19 , to join in and become a
party to that certain Tax Sharing Agreement, dated effective as of [the
Effective Date], and agrees effective as of ______, 19__, to be bound by all of
the terms and provisions of such Agreement, with the same force and effect as
if _____________had been named in such Agreement and were an original signatory
party to that Agreement.
EXECUTED as of this ____ day of __________, 19 at __________,
________.
---------------------------------
By:
----------------------------
-21-
<PAGE> 1
EXHIBIT 10.19
OVERHEAD
SERVICES AGREEMENT
This is the Overhead Services Agreement (the "Agreement") dated March
3, 1997, between Nextel Communications, Inc., a Delaware corporation (the
"Parent"), and McCaw International, Ltd., a Washington corporation (the
"Subsidiary").
In consideration of the mutual covenants and agreements of the
parties, the parties agree as follows:
1. SERVICES TO BE PROVIDED.
1.1 Parent shall provide the services set forth on Exhibit A to
Subsidiary. With the written consent of Parent, Subsidiary may elect to
discontinue a service or services provided by Parent and/or obtain any service
listed on Exhibit A from an independent third party.
1.2 The fee for any service provided by Parent hereunder for any
fiscal year shall be the actual cost incurred by Parent for the service
provided to Subsidiary.
1.3 Parent undertakes to provide the services required hereunder
with the same degree of care and diligence, and using the same procedures and
policies, that it uses in providing services for its own operation and for its
other subsidiaries.
2. PAYMENT OF COMPENSATION.
2.1 Parent shall apportion the aggregate cost incurred by Parent
to provide each service listed on Exhibit A among its subsidiaries (including
the Subsidiary) on the basis that Parent determines in good faith, from time to
time, represents the relative portion of the services provided by Parent and
used by each such subsidiary (including the Subsidiary) for the relevant
period. Subsidiary shall have the right to review Parent's determination and
to discuss with Parent adjustments that Subsidiary considers appropriate in
light of the services provided to Subsidiary. Parent's good faith and
determination after such consultation shall be final and binding on such
Subsidiary.
2.2 Nextel will charge such Subsidiary monthly and amounts due
shall be paid in not less than 45 days.
3. TERM OF AGREEMENT AND TERMINATION.
3.1 TERM. This Agreement shall be effective as of its date and
shall remain effective until March 3, 2007.
1
<PAGE> 2
3.2 FORCE MAJEURE. No party shall be liable in any manner for
failure or delay in performance of all or any part of this Agreement, directly
or indirectly, owing to acts or God, governmental orders or restrictions,
strikes or other labor disturbances, riots, embargoes, revolutions, wars,
sabotage, fire, floods, or any other cause or circumstance or a combination
thereof beyond the control of the parties. The party suffering any such delay
or failure shall give prompt notice to the other party responsible to perform
and shall exert best efforts to remove the causes or circumstances of
non-performance as promptly as practicable.
3.3 ACCRUED PAYMENT. Termination of this Agreement shall not
affect the right of Parent to any sums accrued prior to the date of
termination.
4. GENERAL PROVISIONS.
4.1 OTHER SERVICES. Nothing in this Agreement shall restrict the
Parent from undertaking to provide additional services to Subsidiary not
described in this Agreement on terms and conditions satisfactory to the Parent
and Subsidiary.
4.2 CONFLICTS OF INTEREST. Subsidiary acknowledges that the legal
counsel employed by Parent as part-time or full-time employees will provide
legal services to Parent as well as to a variety of subsidiaries of Parent and
potentially to other entities in which Parent holds an ownership interest.
Subsidiary agrees that such legal counsel may represent Subsidiary as well as
Parent or any other such subsidiary or other entity. In situations in which
the interests of Subsidiary and Parent are adverse to each other, Subsidiary
agrees that it shall make no attempt to disqualify or prohibit such legal
counsel from representing Subsidiary solely because of such legal counsel's
prior or present representation of Parent.
4.3 COUNTERPARTS. This Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all counterparts shall together constitute but one and the
same document.
4.4 GOVERNING LAW. This Agreement shall in all respects be
governed by, and construed in accordance with, the internal laws of the State
of Delaware, applicable to Agreements made and to be performed within that
state, without regard to the conflicts of laws and principals of that state.
4.5 ASSIGNMENT. Subsidiary may not assign its rights or
obligations under this Agreement without the prior written consent of Parent.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
2
<PAGE> 3
NEXTEL COMMUNICATIONS
By: /s/ THOMAS J. SIDMAN
----------------------------------
Thomas J. Sidman
Vice President
McCAW INTERNATIONAL, LTD.
By: /s/ DAVID ROSTOV
----------------------------------
Name:
Title:
3
<PAGE> 4
EXHIBIT A
SERVICES
1. Accounts Payable Services
2. Investing, Cash Management, and Banking Services
3. Information Technology Services
4. Personnel, Payroll, Human Resources and Employee Benefits Services
5. Taxes, General Accounting, Finance Reporting and Audit Services
6. Legal Services
7. Procurement Services
8. Real Estate Services
9. Financial and Strategic Planning Services
10. Insurance and Risk Management Services
11. Marketing and Sales Services
12. Billing and Customer Support Services
13. Engineering and Technical Services
14. Executive Support Services
1
<PAGE> 5
March 6, 1997
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Re: Motorola International Financing
Dear Sirs:
We refer to that certain Memorandum of Understanding entered
into on or about November 12, 1996 (the "Memorandum of Understanding")
captioned "MOTOROLA VENDOR FINANCING TEMPLATE", by and between McCaw
International, Ltd. ("MIL") and Motorola, Inc. ("Motorola"), acknowledged and
agreed to by Nextel Communications, Inc. ("Nextel"). Such Memorandum of
Understanding, together with all attachments thereto and any and all term
sheets or definitive agreements entered into to establish or reflect the terms
and conditions of any credit available or indebtedness outstanding thereunder
(being referred to collectively as the "Motorola International Financing
Documents"). On the date hereof, the existing Motorola International Financing
Documents contemplate that the worldwide amount of vendor equipment financing
provided by Motorola (i) to Nextel and certain of its subsidiaries that are
"Restricted Companies" (Nextel and such subsidiaries collectively, the "U.S.
Borrowers") under the U.S. Vendor Agreement (as defined in the Memorandum of
Understanding) and (ii) to MIL and certain of its designated affiliates (MIL
and such affiliates collectively, the "MIL Group") under the Motorola
International Financing Documents will be subject to a maximum aggregate limit
of $400 million.
We hereby state our mutual understanding and agreement as
follows:
(1) Nextel commits that none of the U.S. Borrowers will borrow
amounts under the U.S. Vendor Facility if, at the time of and
giving effect to such borrowing and all other amounts then
outstanding under the U.S. Vendor Facility, either (a)
amounts borrowed from Motorola thereunder would exceed $400
million or (b) as a result of such borrowing, the total of
all amounts outstanding or then
<PAGE> 6
remaining available to the MIL Group under the Motorola
International Financing Documents would be less than $95
million; and
(2) MIL commits that no member of the MIL Group will, without the
prior written consent of the Chief Financial Officer of
Nextel, (a) borrow amounts under the Motorola International
Financing Documents if, at the time of and giving effect to
such borrowing and all other amounts then outstanding
thereunder and all other amounts borrowed from Motorola and
then outstanding under the U.S. Vendor Facility, the total of
all amounts so borrowed from Motorola by members of the MIL
Group and by the U.S. Borrowers, as appropriate, would exceed
$400 million or (b) change, or consent to any change, in the
$400 million aggregate worldwide outstandings limit set forth
in the Memorandum of Understanding.
MIL and Nextel each understand and acknowledge that
borrowings and access to funds under the U.S. Vendor Facility and under the
Motorola International Financing Documents will be subject to the applicable
terms and conditions set forth in those documents, and MIL specifically
understands and agrees that, except as expressly set forth above, Nextel has no
obligation, express or implied, to act or refrain from acting to assure
satisfaction of any of the conditions to borrowing under any of the Motorola
International Financing Documents or otherwise to assure that any member of the
MIL Group will have or retain access any amount of financing thereunder.
2
<PAGE> 7
If the above accurately states our mutual understandings and
agreements on these topics, please so indicate by signing and returning the
enclosed duplicate copy of this letter to the undersigned.
Very truly yours,
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
-----------------------------------
Thomas J. Sidman
Vice President
McCAW INTERNATIONAL, LTD.
By: /s/ HENG-PIN KIANG
-----------------------------------
Name: Heng-Pin Kiang
Title: Sr Vice President
<PAGE> 1
EXHIBIT 10.20
RIGHT OF FIRST OPPORTUNITY AGREEMENT
RIGHT OF FIRST OPPORTUNITY AGREEMENT, dated as of March 6,
1997 (the "Agreement"), between NEXTEL COMMUNICATIONS, INC., a Delaware
corporation ("Nextel") and MCCAW INTERNATIONAL, LTD., a Washington corporation
and wholly owned subsidiary of Nextel ("MIL").
W I T N E S S E T H :
WHEREAS, MIL is offering 951,463 Units, each Unit consisting
of one 13% Senior Discount Note due 2007 of MIL (the "Notes") and one warrant
(the "Warrants") to purchase .10616 shares of common stock, no par value, of
MIL at an exercise price of $36.45 per share, subject to adjustment (the
"Offering"); and
WHEREAS, to facilitate the Offering, the parties hereto
desire to provide for certain matters concerning Nextel's and MIL's respective
involvement in the international wireless telecommunications industry.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, receipt of which is acknowledged, the parties,
intending to be legally bound hereby, hereto agree as follows:
SECTION 1. First Opportunity Procedures. Nextel hereby agrees
that until the earliest to occur of (i) April 15, 2007 and (ii) the date on
which a Change of Control (as such term is defined in the Indenture pursuant to
which the Notes were issued; the "Indenture") occurs, neither Nextel nor any
Affiliate that is controlled by Nextel (other than MIL or any Restricted Group
Member (as such term is defined in the Indenture; collectively, the "MIL
Group")) shall be a party to any Future Wireless Opportunity (as such term is
defined below) except in compliance with the procedures set forth in this
Section. A "Future Wireless Opportunity" shall mean any transaction in which
Nextel or any Affiliate that is controlled by Nextel would hold any equity
securities or similar instrument representing an ownership interest ("Equity
Interest") in another Wireless Entity (as such term is defined below), or would
direct or otherwise participate in the management of another Wireless Entity;
provided that the term "Future
<PAGE> 2
Wireless Opportunity" shall not mean or include any of the following: (i)
holding any Equity Interest in any member of the MIL Group or directing or
participating in the management of any member of the MIL Group, (ii) holding
any securities in or issued by any Wireless Entity which are not convertible
into or exercisable or exchangeable for any Equity Interest in a Wireless
Entity, (iii) holding any Equity Interest (or securities that are convertible
into or exercisable or exchangeable for any Equity Interest) in a Wireless
Entity that represents, on a fully-diluted basis, five percent (5%) or less of
the total fully-diluted Equity Interests in such Wireless Entity, (iv)
continuing to hold any investment in a wireless communications service business
with operations outside the United States of America (including its
territories, possessions and protectorates) that was made by Nextel prior to
the date hereof and was not contributed to MIL prior to the date on which the
Offering is consummated, or continuing to exercise rights to direct or
participate in the management of any such business or (v) any commercial
relationship with any Wireless Entity (including, without limitation, channel
or frequency sharing, roaming, the purchase, sale or exchange of goods and/or
services, licensing of intellectual property or other intangible rights or
similar business related arrangement) that does not involve directing or
participating in the management of such Wireless Entity. A "Wireless Entity"
shall mean any corporation, partnership, trust, association or other form of
business organization ("Entity") whose principal business activity involves the
direct or indirect ownership or operation of two-way terrestrial-based mobile
wireless communications systems anywhere in the world other than (A) the United
States of America (including its territories, possessions and protectorates)
and (B) so long as Nextel has any direct or indirect Equity Interest (other
than those held by or through a member of the MIL Group) in Clearnet
Communications, Inc. (including any successor to such entity or to all of the
specialized mobile radio communications business activities conducted by such
entity or its subsidiaries; "Clearnet"), in any of the provinces and
territories that, on the date of this Agreement, collectively constitute Canada
(the areas described in the foregoing clauses (A) and (B), the "Excluded
Areas"), but shall not mean or include any such Entity in which Nextel or its
controlled Affiliates (other than any member of the MIL Group) first acquired
an Equity Interest or first became entitled to direct or participate in the
management of following compliance with the procedures set forth in the next
paragraph of this Section. Except at Nextel's specific
2
<PAGE> 3
request or with Nextel's prior written consent, no member of the MIL Group
shall hold, acquire or direct or otherwise participate in the management of any
wireless communications service business (other than Clearnet) having any
operations in the Excluded Areas.
If Nextel or any of its controlled Affiliates becomes aware
of any Future Wireless Opportunity, it shall promptly notify the Chief
Executive Officer and the Board of Directors of MIL of such Future Wireless
Opportunity and, to the extent known, of the terms, conditions and
circumstances applicable to such Future Wireless Opportunity (such notice the
"Initial Notice"). If either (i) the Board of Directors of MIL (or of the
appropriate member of the MIL Group) thereafter notify Nextel that such member
of the MIL Group is not able or elects not to pursue such Future Wireless
Opportunity or (ii) the appropriate member of the MIL Group has not notified
Nextel, within sixty (60) days after the date of the Initial Notice, that such
member intends to pursue the Future Wireless Opportunity (provided that if such
Future Wireless Opportunity involves any financial commitment to be made by an
MIL Group member, Nextel will not be deemed to have been notified that an MIL
Group member intends to pursue the Future Wireless Opportunity unless the
notification of such intent ("Notice of Intent") is either preceded or
accompanied by (A) a statement, in reasonable detail, of the sources of
financing reasonably available to such MIL Group member that will be used to
satisfy such financial commitment and that such financing is permitted under
the Indenture and the other loan documents, if any, to which the applicable MIL
Group members are parties or by which they are bound (a "Financing Statement")
or (B) a good faith written undertaking to identify the source and nature of
such financing in a writing to be delivered to Nextel within 30 days after the
date on which the Notice of Intent is delivered ("Proposed Financing Notice"),
and to deliver a Financing Statement consistent with the Proposed Financing
Notice within 60 days after the Notice of Intent is delivered; provided that a
failure to timely deliver a Proposed Financing Notice or the related Financing
Statement will be treated as an election by the MIL Group not to pursue such
Future Wireless Opportunity) or (iii) thereafter ceases to pursue such Future
Wireless Opportunity diligently and in good faith or fails to consummate such
Future Wireless Opportunity within nine months of the date of the Initial
Notice (extended as may be reasonably required to obtain any necessary
governmental approval or clearances) then, and in any such event, Nextel or any
of its controlled
3
<PAGE> 4
Affiliates may pursue for itself and consummate, without further obligation,
condition or restriction under this Section, such Future Wireless Opportunity
on substantially the same terms and conditions as were set forth in the Initial
Notice (or, if applicable and at Nextel's election, on terms and conditions in
the aggregate no more favorable to Nextel or its appropriate controlled
Affiliate than those (if any) advanced by any member of the MIL Group that
previously elected to pursue such Future Wireless Opportunity as acceptable to
such member). Nothing in this Section shall obligate Nextel or any of its
controlled Affiliates to provide any financing or any other assistance to any
member of the MIL Group in connection with such member's consideration and/or
pursuit of any such Future Wireless Opportunity.
For purposes of this Section 1:
"Affiliate" as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
SECTION 2. Third Party Beneficiaries. The holders of Notes
and the Warrants shall be third party beneficiaries of the agreements made
hereby between Nextel, on the one hand, and MIL on the other hand, and each
holder of Notes and Warrants shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights or the rights of holders of the Notes and the Warrants
thereunder, provided, that such rights may only be exercised through the
Trustee under the Indenture or the Warrant Agent under the Warrant Agreement,
or another reasonably acceptable representative authorized to act by holders of
a majority of the outstanding Notes or Warrants, as the case may be, with the
power to bind all holders of Notes and Warrants.
SECTION 3. Severability. In the event that any one or more of
the provisions contained herein, or the
4
<PAGE> 5
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
SECTION 4. Specific Performance. Without limiting the rights
of each party hereto to pursue any and all other legal and equitable rights
available to such party for the other parties' failure to perform their
obligations under this Agreement, the parties hereto acknowledge and agree that
the remedy at law for any failure to perform their obligations hereunder would
be inadequate and that each of them, respectively, shall be entitled to
specific performance, injunctive relief or other equitable remedies in the
event of any such failure.
SECTION 5. Amendments. Subject to the next succeeding
sentence this Agreement may be amended at any time by MIL and Nextel. MIL and
Nextel agree, for the benefit of the holders of Notes and Warrants, not to
amend this Agreement in any respect material and adverse to the holders of
Notes or Warrants and to give written notice of any proposed amendment to the
Trustee and the Warrant Agent at least 30 days prior to the effectiveness
thereof.
SECTION 6. Assignment. Neither this Agreement nor any of the
rights, interests or obligations of any party hereto may be assigned by such
party without the prior written consent of the other party.
SECTION 7. Counterparts. This Agreement may be executed in
one or more counterparts, all of which together shall constitute a single
agreement, and all of which shall constitute an original for all purposes.
5
<PAGE> 6
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
----------------------------
Name: Thomas J. Sidman
Title: Vice President
MCCAW INTERNATIONAL, LTD.
By: /s/ HENG-PIN KIANG
----------------------------
Name: Heng-Pin Kiang
Title: Senior Vice President
6
<PAGE> 1
EXHIBIT 10.21
March 6, 1997
McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, Washington 98101
Re: Motorola International Financing
Dear Sirs:
We refer to that certain Memorandum of Understanding entered
into on or about November 12, 1996 (the "Memorandum of Understanding")
captioned "MOTOROLA VENDOR FINANCING TEMPLATE", by and between McCaw
International, Ltd. ("MIL") and Motorola, Inc. ("Motorola"), acknowledged and
agreed to by Nextel Communications, Inc. ("Nextel"). Such Memorandum of
Understanding, together with all attachments thereto and any and all term
sheets or definitive agreements entered into to establish or reflect the terms
and conditions of any credit available or indebtedness outstanding thereunder
(being referred to collectively as the "Motorola International Financing
Documents"). On the date hereof, the existing Motorola International Financing
Documents contemplate that the worldwide amount of vendor equipment financing
provided by Motorola (i) to Nextel and certain of its subsidiaries that are
"Restricted Companies" (Nextel and such subsidiaries collectively, the "U.S.
Borrowers") under the U.S. Vendor Agreement (as defined in the Memorandum of
Understanding) and (ii) to MIL and certain of its designated affiliates (MIL
and such affiliates collectively, the "MIL Group") under the Motorola
International Financing Documents will be subject to a maximum aggregate limit
of $400 million.
We hereby state our mutual understanding and agreement as
follows:
<PAGE> 2
(1) Nextel commits that none of the U.S. Borrowers will borrow
amounts under the U.S. Vendor Facility if, at the time of and
giving effect to such borrowing and all other amounts then
outstanding under the U.S. Vendor Facility, either (a) amounts
borrowed from Motorola thereunder would exceed $400 million or
(b) as a result of such borrowing, the total of all amounts
outstanding or then remaining available to the MIL Group under
the Motorola International Financing Documents would be less
than $95 million; and
(2) MIL commits that no member of the MIL Group will, without the
prior written consent of the Chief Financial Officer of
Nextel, (a) borrow amounts under the Motorola International
Financing Documents if, at the time of and giving effect to
such borrowing and all other amounts then outstanding
thereunder and all other amounts borrowed from Motorola and
then outstanding under the U.S. Vendor Facility, the total of
all amounts so borrowed from Motorola by members of the MIL
Group and by the U.S. Borrowers, as appropriate, would exceed
$400 million or (b) change, or consent to any change, in the
$400 million aggregate worldwide outstandings limit set forth
in the Memorandum of Understanding.
MIL and Nextel each understand and acknowledge that borrowings
and access to funds under the U.S. Vendor Facility and under the Motorola
International Financing Documents will be subject to the applicable terms and
conditions set forth in those documents, and MIL specifically understands and
agrees that, except as expressly set forth above, Nextel has no obligation,
express or implied, to act or refrain from acting to assure satisfaction of any
of the conditions to borrowing under any of the Motorola International
Financing Documents or otherwise to assure that any member of the MIL Group
will have or retain access any amount of financing thereunder.
2
<PAGE> 3
If the above accurately states our mutual
understandings and agreements on these topics, please so indicate by signing
and returning the enclosed duplicate copy of this letter to the undersigned.
Very truly yours,
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
------------------------
Name: Thomas J. Sidman
Title: Vice President
MCCAW INTERNATIONAL, LTD.
By: /s/ DAVID E. ROSTOV
------------------------
Name: David E. Rostov
Title: Senior Vice President
3
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of McCaw International,
Ltd. on Form S-4 of our report dated July 2, 1997 appearing in the Registration
Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Registration Statement.
Deloitte & Touche LLP
Seattle, Washington
July 18, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of McCaw International,
Ltd. on Form S-4 of our report on the financial statements of Corporacion
Mobilcom S.A. de C.V., dated March 10, 1997, appearing in the Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Deloitte & Touche LLP
Seattle, Washington
July 18, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of McCaw International,
Ltd., Inc. on Form S-4 of our report on the financial statements of Wireless
Venture of Brazil, Inc. for the year ended December 31, 1996, dated March 27,
1997, appearing in the Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Deloitte & Touche LLP
Seattle, Washington
July 18, 1997
<PAGE> 1
EXHIBIT 23.5
Accountants' Consent
To Board of Directors
Wireless Ventures of Brazil, Inc.
We consent to the use of our report dated May 31, 1996, except for note 15
which is as of June 14, 1996, with respect to the consolidated balance sheets
of Wireless Ventures of Brazil, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1995 and the six month
period ended December 31, 1994, included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Washington, DC
July 18, 1997
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) | |
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THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
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McCaw International, LTD.
(Exact name of obligor as specified in its charter)
Washington 91-167-1412
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1191 Second Avenue
Suite 1600
Seattle, Washington 98101
(Address of principal executive offices) (Zip code)
----------------------
13% Senior Discount Notes due April 15, 2007
(Title of the indenture securities)
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<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
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Name Address
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<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT
OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of
New York (formerly Irving Trust Company) as now in
effect, which contains the authority to commence
business and a grant of powers to exercise corporate
trust powers. (Exhibit 1 to Amendment No. 1 to Form
T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No.
33-29637.)
4. A copy of the existing By-laws of the Trustee.
(Exhibit 4 to Form T-1 filed with Registration
Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b)
of the Act. (Exhibit 6 to Form T-1 filed with
Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the
Trustee published pursuant to law or to the
requirements of its supervising or examining
authority.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank
of New York, a corporation organized and existing under the laws of the State
of New York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of New
York, and State of New York, on the 16th day of July, 1997.
THE BANK OF NEW YORK
By: /s/ VIVIAN GEORGES
-------------------------------------
Name: VIVIAN GEORGES
Title: ASSISTANT VICE PRESIDENT
<PAGE> 4
Exhibit 7
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Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
Interest-bearing .........14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
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EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 19,449)
Cumulative foreign currency transla-
tion adjustments .................. ( 13,034)
------------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith
J. Carter Bacot
Thomas A. Renyi Directors
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 MAR-31-1996 MAR-31-1997
<CASH> 125,541,921 85,302,423 53,029,275 85,460,695 479,994,983
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 0 540,292 27,726 3,246,379
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 830,158 0 2,299,863
<CURRENT-ASSETS> 125,541,921 85,313,065 60,286,572 85,554,591 487,065,277
<PP&E> 0 36,056 8,777,048 203,534 22,948,495
<DEPRECIATION> 0 0 73,972 3,006 409,992
<TOTAL-ASSETS> 171,535,926 169,675,457 199,367,315 173,235,770 942,591,012
<CURRENT-LIABILITIES> 169,763,923 153,415,301 158,602,418 153,474,378 20,570,350
<BONDS> 0 0 0 0 489,909,208
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 20,181,247 65,042,833 25,528,825 395,427,766
<OTHER-SE> 1,772,003 (8,241,557) (25,840,199) (9,913,280) (37,336,277)
<TOTAL-LIABILITY-AND-EQUITY> 171,535,926 169,675,457 199,367,315 173,235,770 942,591,012
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 0 0 0 0 1,460,388
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 0 956,585
<OTHER-EXPENSES> 2,033 18,647 168,401 7,860 2,580,572
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 0 322,532 0 5,590,895
<INCOME-PRETAX> 2,685,849 (15,918,233) (11,121,352) (958,247) (10,309,587)
<INCOME-TAX> 913,846 2,119,050 1,354,862 389,275 (499,304)
<INCOME-CONTINUING> 1,772,003 (18,037,283) (12,476,214) (1,347,522) (9,810,283)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 1,772,003 (18,037,283) (12,476,214) (1,347,522) (9,810,283)
<EPS-PRIMARY> 0.18 (1.80) (1.25) (0.13) (0.98)
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
