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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED AUGUST 31, 1999
COMMISSION FILE NUMBER 0-29752
LEAP WIRELESS INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 33-0811062
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10307 PACIFIC CENTER COURT, SAN DIEGO, CA 92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(858) 882-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.0001 PAR VALUE
(TITLE OF CLASS)
PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of October 1, 1999, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$421,641,000, based on the closing price of the Company's Common Stock on the
Nasdaq National Market on October 1, 1999 of $23.50 per share.
As of October 1, 1999, 18,428,411 shares of registrant's Common Stock,
$.0001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated into this report by
reference:
1. Part II Registrant's Annual Report to Shareholders for the fiscal
year ended August 31, 1999.
2. Part III Registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission within 120 days after the close of
the fiscal year.
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PART I
FORWARD LOOKING STATEMENTS
This document, including the information incorporated by reference,
contains certain forward-looking statements that are not related to historical
results. The forward looking statements include statements regarding the network
deployment plans of Leap Wireless International, Inc. and its operating
companies and their plans for financing these deployments. Leap has based these
forward-looking statements largely on its current expectations and projections
about future events and financial trends affecting the financial condition of
its business. Forward-looking statements can be identified in this document
through their use of words such as "believe," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect," and similar expressions. Actual
results may differ materially from those stated or implied in the
forward-looking statements. The forward-looking statements contained in this
document are subject to a number of risks, uncertainties and assumptions about
Leap Wireless International, Inc., including the risks described under the
heading "Risk Factors" in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of Leap's Annual Report to
Shareholders for the fiscal year ended August 31, 1999.
ITEM 1. BUSINESS
INTRODUCTION
Leap Wireless International, Inc., is a wireless communications carrier
that deploys, owns, operates and participates in wireless networks in domestic
and international markets with strong growth potential. Through its operating
companies, Leap has launched all-digital wireless service in the United States,
Mexico and Chile. Leap is dedicated to bringing the benefits of reliable,
cost-effective and high-quality wireless communications services to domestic and
growth markets.
Upon completion of its pending asset acquisitions, Leap and its operating
companies will own wireless communications licenses covering approximately 138
million potential customers or "POPs" in the United States, Mexico and Chile.
Leap's equity share of this pool of potential customers will be approximately 67
million potential customers, although this share may decrease in the future as
Leap's operating companies sell additional equity.
Leap's domestic strategy is to offer consumers a simple and affordable
wireless service plan that allows them to make all of the local calls they want
for a low, flat monthly rate. The service, marketed under the name
"Cricket(SM)," is targeted at the mass consumer market. Leap's Cricket(SM)
concept was introduced in Chattanooga, Tennessee in March 1999 using the
existing infrastructure of Chase Telecommunications, Inc., a company that Leap
has agreed to acquire. The service was launched under an agreement that requires
the management of Chase Telecommunications to control the business until Leap's
pending acquisition of Chase Telecommunications receives all necessary
governmental approvals and is completed. Leap expects that Chase
Telecommunications will introduce the Cricket(SM) service concept in Nashville,
Tennessee in early 2000. Since September 1998, Leap has acquired or agreed to
acquire wireless communications licenses covering approximately 24 million
potential customers in the United States (based on 1998 data). Leap is also
considering additional domestic license acquisitions. Over the next several
years, Leap expects to launch Cricket(SM) service in numerous markets in which
it has acquired licenses or has agreed to acquire licenses.
In the international arena, Leap plans to focus its efforts in growth
markets where Leap's ability to provide value added services will increase the
likelihood of launching successful wireless ventures. When making new
investments in growth markets, Leap generally expects to seek investment
partners that provide familiarity with local markets, financial and technical
resources, an ability to facilitate development in a particular market, or other
attributes that can contribute to a successful network-building enterprise. Leap
expects to be actively involved in each joint venture operation in which it
holds a significant position.
In Mexico, Leap's operating company, PEGASO Telecomunicaciones, S.A. de C.
V., is deploying the first 100% digital wireless communications network in
Mexico. PEGASO holds licenses to provide nationwide wireless service in Mexico
and plans to build one of the largest wireless communications networks in Latin
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America. PEGASO has already launched operations in three of Mexico's four
largest cities: Tijuana, Guadalajara and Monterrey. The company expects to
launch service in Mexico City, the country's largest city, near the end of 1999.
After that launch, PEGASO plans to roll-out its network in additional
metropolitan areas as well as tourist destinations and major border cities.
Leap's operating company in Chile, which is being renamed SMARTCOM PCS and
is referred to as SMARTCOM in the remainder of this report, operates a
nationwide wireless system in Chile. SMARTCOM launched its system in Chile in
September 1998. Leap purchased the 50% of SMARTCOM that it did not already own
from its former joint venture partner in April 1999. Over the last several
months, Leap has strengthened SMARTCOM's management team and expanded SMARTCOM's
marketing and customer acquisition efforts.
At the end of Leap's first fiscal year, its operating companies had almost
60,000 domestic and international subscribers -- 42,000 in Chile, 12,400 in the
United States and 5,500 in Mexico, primarily from its first market in Tijuana.
Leap's proportionate share of the total subscriber base was approximately
44,500, based on Leap's 100% ownership of SMARTCOM, 28.6% ownership of PEGASO,
and its 7.2% stake in Chase Telecommunications, Inc.
Leap, a Delaware corporation, was formed in June 1998 as a subsidiary of
QUALCOMM Incorporated, a provider of digital wireless communications products,
technologies and services. In September 1998, QUALCOMM contributed several of
its wireless communications businesses and ventures to Leap and distributed all
of Leap's outstanding shares of common stock to QUALCOMM's stockholders as a
taxable dividend.
INDUSTRY BACKGROUND
Domestic and international telecommunications markets are expanding
rapidly. Developing countries are seeking to increase their number of telephone
lines as a percentage of their population (known as teledensity) and to increase
competition among carriers. In addition, increased demand, decreased government
regulation, and new spectrum auctions have created domestic and international
opportunities for new providers to capture market share. Leap believes that
wireless is the cheapest and fastest way to increase teledensity and that it
possesses the expertise to oversee and manage the entry of new wireless
operating companies into today's competitive markets.
Wireless communications service is currently available using either analog
or digital technology. Although analog technology is more widely deployed than
digital technology, its use is growing more slowly and analog technology has
significant limitations. Digital wireless communications systems overcome the
capacity constraints of analog systems by converting voice or data signals into
a stream of digits that is compressed before transmission, enabling a single
radio channel to carry multiple simultaneous signal transmissions. This
increased capacity, along with enhancements in digital protocols, allow
digitally based systems to offer new and advanced services including greater
call privacy and security, fraud protection, consistently higher voice quality,
and integrated voice and paging. Digital systems also provide enhanced wireless
data transmission allowing for higher speed and more reliable wireless e-mail
and internet use.
The primary digital technologies available for wireless fixed and mobile
applications are Code Division Multiple Access, known as CDMA, and Time Division
Multiple Access, known as TDMA. TDMA includes several variants, including
Digital Advanced Mobile Phone System also known as D-AMPS which is deployed
primarily in North and South America, and Global System for Mobile
Communication, known as GSM, which is widely deployed in Europe, where the
technology was developed, and in many other markets around the world.
Leap is currently committed to owning and participating in networks that
utilize CDMA technology. Leap believes that CDMA technology is the best platform
to meet current network requirements as well as the best platform for third
generation or "3G" based services. CDMA technology currently provides from three
to five times the capacity of other digital technologies, enabling service
providers to support more subscribers and greater volumes of wireless traffic
within a given amount of radio frequency spectrum. As a result, CDMA
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networks can provide high capacity using less spectrum and fewer cell site
towers. This reduces both initial capital expenditures as well as ongoing
operational and maintenance costs. CDMA is also the only wireless technology
that effectively supports both fixed voice and data services along with full
mobility services from the same platform, providing companies that utilize CDMA
technology flexibility in structuring their service offerings and in responding
to changing market demands. In addition, "1XRTT," the first phase of third
generation CDMA technology, is expected to provide more than double the voice
capacity of existing CDMA systems and to deliver high speed data to users.
CORPORATE STRATEGY
Leap's strategy is to provide management and project expertise to, and to
selectively invest in and manage, joint ventures and other collaborative efforts
to provide wireless communications services in markets with significant growth
potential. Leap believes its wireless communications experience and the
technical and commercial expertise of Leap and its contractors will benefit Leap
and the entities in which it invests. Leap also expects to expand its expertise
through the experience gained on its current and future ventures to become a
sought after and more valuable participant in future joint ventures.
Leap intends to focus its efforts on its current projects and on a limited
number of additional opportunities that become available in the future, taking
into account its management and capital resources. In the international arena,
Leap plans to focus its efforts in growth markets where Leap's ability to
provide value added services will increase the likelihood of launching
successful wireless ventures.
When making new international investments, Leap generally expects to seek
investment partners that provide familiarity with local markets, financial and
technical resources, an ability to facilitate development in a particular
market, or other attributes that can contribute to a successful network-building
enterprise. Leap seeks to ensure that its strategic alliances will enable Leap
to better prepare and equip its operating companies for successful development.
Although Leap may not hold a majority ownership in many of the joint
ventures in which it elects to participate due to a variety of reasons, Leap
expects to exercise, to varying degrees, significant management influence and
oversight over the businesses in which it invests. Leap believes its experience
and business relationships enable it to add value to its operating companies and
increase their performance and likelihood of success.
LEAP OPERATING COMPANIES
Leap's businesses and operating companies are described below.
CRICKET
General. Leap's domestic strategy is to offer consumers a simple and
affordable wireless service plan that allows them to make all of the local calls
they want for a low, flat monthly rate. The service, targeted at the mass
consumer market, is advertised as the "around-town phone(SM)" and "comfortable
wireless(SM)" and is marketed under the name "Cricket(SM)." This strategy is
different from the existing model used by most current wireless operators in the
United States, who generally offer consumers a "bundle" or maximum amount of
minutes of use for a fixed price with additional charges imposed for minutes of
use above the set maximum.
The Cricket(SM) service concept was introduced in Chattanooga, Tennessee in
March 1999 using the existing infrastructure of Chase Telecommunications, Inc.,
a company that Leap has agreed to acquire. The service was launched under an
agreement that requires the management of Chase Telecommunications to control
the business until Leap's proposed acquisition of Chase Telecommunications
receives all necessary governmental approvals and is completed. Leap currently
owns 7.2% of Chase Telecommunications Holdings, Inc., the parent corporation to
Chase Telecommunications, Inc.
Since September 1998, Leap has acquired or agreed to acquire wireless
communication licenses covering approximately 24 million potential customers in
the United States. Leap is also considering additional domestic spectrum
acquisitions. Over the next several years, Leap expects to launch Cricket(SM)
service in
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numerous markets in which it has acquired licenses or has agreed to acquire
licenses. These markets include cities such as Albuquerque, Boise, Charlotte,
Dayton, Greensboro, Knoxville, Little Rock, Memphis, Nashville, Salt Lake City,
Spokane, Tucson, Tulsa and Wichita.
Market Opportunity. Wireless penetration was approximately 25% in the
United States at the end of 1998. Wireless companies have generally focused
their U.S. marketing on highly mobile customers, including business users, who
are likely to generate the highest revenues. Customers are typically offered
multiple service plans with prices based on the customer's minutes of use during
the billing period. The numerous plans offered by wireless companies have tended
to confuse many potential customers. Market research indicates that many people
are interested in a wireless product but are concerned about the cost and
complexity of wireless pricing plans.
The Cricket service model focuses on the mass consumer market rather than
on highly mobile business customers. The Cricket model does not provide roaming
outside of the local service area and thus is not likely to be selected by
highly mobile customers. Cricket's fixed price, unlimited local service,
however, is designed to appeal to the mass consumer market in which customers
are most likely to use their wireless phone in the areas where they live and
work and have a limited need to use their wireless phones outside of their local
calling area. Cricket's fixed price service plan is also designed to overcome
consumer concerns about pricing.
Capital Requirements and Projected Investments. Leap will require
substantial capital to develop and operate wireless networks in the numerous
markets in which it plans to operate Cricket service in the United States. The
amount of financing that Leap will require for these efforts will vary depending
on the number of these networks that are developed (including any markets
covered by future Leap spectrum acquisitions) and the speed at which Leap
constructs and launches these networks. In fiscal 2000, Leap expects to finance
these development and operation costs largely through vendor financing and
amounts available under its credit agreement with QUALCOMM. Leap expects,
however, that it will also need to raise additional capital to fund its planned
roll-out of domestic networks and acquisitions of spectrum in fiscal 2000. As a
result, Leap is currently exploring debt and equity financing alternatives.
Regulatory Environment. Leap's business plan anticipates and depends on its
acquisition and operation of C-Block and F-Block spectrum in the United States.
Although C-Block and F-Block licenses are generally more available and are less
expensive to obtain than licenses in other spectrum blocks, a licensee may hold
these licenses only if it qualifies as a "designated entity" under FCC rules.
In July 1999, the FCC issued an opinion and order that found that Leap was
qualified to acquire C-Block and F-Block spectrum. The order also approved
Leap's acquisition of the 36 C-Block licenses that Leap won in the FCC's 1999
spectrum reauction, and approved the transfer to Leap of four F-Block licenses
covering portions of North and South Carolina, in each case subject to the
fulfillment of certain conditions. In October 1999, the FCC issued the 36
reauction licenses to Leap.
Each of the conditions imposed by the FCC has been satisfied except for the
condition that Leap reduce its debt to QUALCOMM to 50% or less of its
outstanding debt by January 2001 and except for Leap's continuing obligation,
during the designated entity holding period for its C-Block and F-Block spectrum
licenses, to ensure that persons who are or were previously officers or
directors of QUALCOMM do not comprise a majority of Leap's Board of Directors or
a majority of its officers. Leap anticipates satisfying the debt reduction
condition through additional financing activities, but Leap cannot guarantee
that it will be able to reduce its debt to QUALCOMM to the required level. If
Leap fails in the future to meet any of the conditions imposed by the FCC or
otherwise fails to maintain its qualification to own C-Block and F-Block
licenses, that failure would have a material adverse effect on Leap's financial
condition and business prospects.
Various parties, including the U.S. Small Business Administration,
previously challenged Leap's qualification to hold C-Block and F-Block licenses,
and a wireless operating company has requested that the FCC review its order. In
addition, one or more of such parties may appeal the FCC's order approving
Leap's acquisition of C-Block and F-Block licenses. Leap cannot assure investors
that it will prevail in connection with any such appeal or that it will remain
qualified to hold C-Block or F-Block spectrum licenses.
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Competition. The U.S. telecommunications industry is characterized by
intense competition. Leap's planned service will compete with some or all of the
services offered by the historic landline operators. Leap will compete directly
with other wireless providers in each of its markets, many of whom have greater
resources than Leap and entered the market before Leap. A few of Leap's
competitors operate wireless communications networks covering most of the United
States. Competitors' earlier entry and broader presence in the U.S.
telecommunications market may have a negative effect on Leap's ability to
successfully implement its strategy. In addition, other wireless providers could
attempt to implement Leap's strategy of providing local service at a flat-rate.
Providers who offered such a service in Leap's market areas would directly
compete against Leap in its market niche. Also, some competitors will likely
market other services, including cable television access, landline telephone
service and Internet access, that Leap does not currently intend to market. Leap
also expects to compete with new entrants to the U.S. wireless market as well as
other telecommunications technologies, including paging, enhanced specialized
mobile radio and global satellite networks.
CHASE TELECOMMUNICATIONS
General. Through a subsidiary, Chase Telecommunications Holdings, Inc. owns
spectrum licenses covering approximately 6.6 million POPs in a region that
includes approximately 98% of Tennessee. Leap currently owns 7.2% of Chase
Telecommunications Holdings and, in December 1998, Leap agreed to purchase
substantially all the assets of Chase Telecommunications Holdings, including its
spectrum licenses and all of the stock of its operating company, Chase
Telecommunications, Inc. Because the pending acquisition involves the transfer
of licenses, it is subject to approval by the FCC. Leap filed an application for
approval of the license transfers with the FCC in September 1999.
Chase Telecommunications began offering wireless service in Chattanooga in
October 1998. In March 1999, Chase Telecommunications re-launched its service,
offering the Cricket(SM) concept in Chattanooga, Tennessee under an agreement
that requires the management of Chase Telecommunications to control the business
until Leap's proposed acquisition receives all necessary governmental approvals
and is completed.
Chase Telecommunications has begun efforts to expand the Cricket(SM)
service to other markets in Tennessee and currently expects to launch service in
Nashville early in 2000.
Market Opportunity. Nashville, Memphis, Knoxville and Chattanooga account
for approximately 4.8 million of the 6.6 million POPs covered by the Chase
Telecommunications Holdings' licenses. The state of Tennessee is situated in the
growing Southeast with a diverse economic base including manufacturing,
services, retail and wholesale trade, transportation, finance and agriculture.
Tennessee's personal income per capita grew 16.2% in real terms between 1990 and
1997 compared to 10.0% for the United States as a whole.
Strategic Partners. Chase Telecommunications was founded by Tony Chase, the
chairman and CEO of Faith Broadcasting Corporation which operates radio
communications licenses in several major markets in Texas. Leap expects to
continue to maintain and benefit from its relationship with Mr. Chase after the
licenses are transferred.
Leap's Rights and Interests. Leap does not have a right to representation
on the board of Chase Telecommunications Holdings or the board of Chase
Telecommunications, although it participates in the management and operation of
Chase Telecommunications under the terms of the management agreement described
above. If the FCC does not approve the transfer of the Chase Telecommunications
Holdings' licenses, Leap has the right to continue in its role as manager until
December 2005.
Capital Requirement and Project Investments. Until the completion of Leap's
pending acquisition, Chase Telecommunications plans to finance the construction
and operation of its networks in Tennessee through borrowings from Leap and its
subsidiaries. Leap has entered into a credit facility with Chase
Telecommunications under which Leap has agreed, at its discretion, to provide
working capital to Chase Telecommunications. The parties have agreed in
principle to increase the maximum principal amount that may be drawn under the
facility to $45 million. Borrowings under the facility bear interest at prime
plus 4.5%. The borrowings are collateralized by substantially all of the assets
of Chase Telecommunications and are
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subordinated in right of payment to amounts Chase Telecommunications owes to
QUALCOMM under an equipment financing agreement. At August 31, 1999, borrowings
under the working capital facility totaled $36.1 million, including $3.3 million
of accrued and capitalized interest. In addition, until the completion of Leap's
pending acquisition, a Leap subsidiary plans to purchase equipment and services
required by Chase Telecommunications under the subsidiary's existing equipment
purchase and financing agreements, and to resell the equipment and services to
Chase Telecommunications on substantially similar terms, including financing.
Competition. Chase Telecommunications faces and expects to face competition
in its markets from current and potential market entrants including, among
others, Sprint Spectrum, Power Telecom, AT&T, Bell South and Alltel. Leap
believes that these competitors currently are or will soon begin operating
networks in the territories served or to be served by Chase Telecommunications.
Additionally, FCC rules allow licensees to partition or disaggregate their
spectrum. If other licensees create partitioned or disaggregated licenses, this
could increase the number of competitors and the types of competition in Chase
Telecommunications' markets.
PEGASO
General. Leap currently owns 28.6% of PEGASO, a joint venture formed to
construct and operate a wireless communications network in Mexico. In October
1998, a wholly owned subsidiary of PEGASO acquired nationwide PCS licenses in
Mexico for approximately U.S. $221 million (based on exchange rates in effect on
the dates the license payments were made). PEGASO launched operations in three
of Mexico's four largest cities in 1999: Tijuana in February, Guadalajara in
August and Monterrey in September. PEGASO expects to launch service in Mexico
City, the country's largest city, near the end of 1999. PEGASO plans to
construct and operate wireless communications systems in additional metropolitan
areas as well as tourist destinations and major border cities, subject to the
availability of additional capital.
In bidding for its licenses, PEGASO agreed to provide coverage to
municipalities containing at least 20% of the total population of most of the
licensed regions by October 2001 and to provide coverage to municipalities
containing at least 50% of the total population of most of the licensed regions
by October 2003. Leap cannot assure investors that PEGASO can complete these
construction projects for the amount budgeted or on a timely basis.
PEGASO has signed a roaming agreement with Sprint PCS that will enable
PEGASO customers to use Sprint PCS's nationwide wireless network in the U.S. and
will allow Sprint PCS customers to roam on PEGASO's network in Mexico.
Market Opportunity. In early 1998, the Mexican government auctioned
additional wireless communications licenses in each of the nine regions of
Mexico to allow additional competition in the mobile wireless market. PEGASO
acquired nationwide PCS licenses in these auctions. Mexico's population of
approximately 99 million people is approximately 70% urban with approximately
50% living in Mexico City, Monterrey and Guadalajara. In 1998, Mexico's
teledensity was approximately 10.4% and its cellular penetration was
approximately 3.5%.
Strategic Partners. In addition to Leap, Corporativo del Valle de Mexico,
S.A. de C.V., an affiliate of Grupo Televisa, and Pegaso Comunicaciones y
Servicios, S.A. de C.V. have interests in PEGASO. Grupo Televisa is the largest
media company in the Spanish-speaking world and is a major participant in the
international entertainment business. Pegaso Comunicaciones y Servicios is
96%-owned by Alejandro Burillo Azcarraga, a member of the Leap board of
directors, and is affiliated with Grupo Pegaso, a private investment group with
investments in various industries including cable television, communications,
retail electronics, real estate, sports and entertainment. Leap management
believes that the strong financing resources of Corporativo del Valle de Mexico
and Pegaso Comunicaciones y Servicios, as well as their political access in
Mexico, provide PEGASO critical resources and relationships for assisting the
network build-out and in marketing and distributing PEGASO's wireless services.
Citicorp, the Latin America Infrastructure Fund and Nissho Iwai have also
invested in PEGASO.
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Leap's Rights and Interests. Leap, through a wholly owned subsidiary,
currently owns a 28.6% interest in PEGASO and has invested $100 million of the
$350 million of capital that has been contributed by the members of the joint
venture. Leap expects that its ownership interest in PEGASO will be reduced in
the future. Several existing investors, other than Leap, are committed to
contribute an additional $50 million of financing by August 2000 and PEGASO is
currently seeking additional debt and equity financing.
Leap has agreed to provide operator services to PEGASO and in turn has
subcontracted those services to a subsidiary of GTE. GTE is one of the world's
largest publicly traded international telecommunications operators, with
investments and operations in the United States and many other parts of the
world.
Capital Requirements and Projected Investments. PEGASO has already raised
or obtained commitments for substantial amounts of capital. To date, the members
of the joint venture have contributed $350 million of equity, and members other
than Leap have committed an additional $50 million of equity contributions. In
addition, QUALCOMM and another equipment vendor have agreed to provide
approximately $580 million of secured equipment financing to the venture, a
portion of which has already been advanced to the company. In May 1999, a PEGASO
subsidiary also entered into a $100 million working capital facility with an
equipment vendor and several banks. To complete the build-out, launch and
operation of its planned networks, however, PEGASO will need to obtain
substantial additional capital.
PEGASO expects to fund a large portion of its development and operating
activities in fiscal 2000 with cash from operations, proceeds of the recent $50
million investment, and borrowings under the $100 million working capital
facility. In addition, PEGASO is seeking additional debt and equity financing,
including additional vendor financing.
Regulatory Environment. The Mexican Comision Federal de Telecomunicaciones
auctioned four new PCS licenses in the 1.9GHz band and four new wireless local
loop or WLL licenses in the 3.4GHz band beginning in November 1997. PEGASO
successfully purchased nationwide PCS licenses in the auctions. Mexico's Federal
Telecom Law provides the underlying basis for telecommunications competition in
Mexico. The Federal Telecom Law is designed to provide a pro-competitive
regulatory environment in the Mexican wireless services market.
Telmex, the government telecommunications operator, is required by Mexico's
Federal Telecom Law to interconnect competing cellular operators to the landline
public switch telephone network. Interconnect agreements are supervised and
approved by the Secretaria de Comunicaciones y Transportes, also known as the
SCT, the government ministry responsible for regulating the telecommunications
sector and licensing new competitors. While cellular tariffs are no longer
regulated in Mexico, the rates must still be registered with the SCT. Mexico
currently restricts foreign voting ownership of telecommunications networks and
services to 49%.
Competition. Following the Mexican government's recent wireless auctions,
there is one existing nationwide wireless operator, Telmex, which operates
through its subsidiaries Telcel and Dipsa; one carrier, Iusacell, with a large
mixed band footprint (four 800 MHz licenses and two 1900 MHz licenses); and
PEGASO, which holds a nationwide PCS license. In addition, Unefon has been
granted nationwide licenses, but cannot launch service until December 1999. The
Mexican government's right to issue licenses to Unefon is being challenged
because the government granted Unefon additional time to pay required license
fees after Unefon failed to comply with the payment schedule originally
established in connection with the auction. In addition, there are several
regional wireless carriers who offer wireless service in one or more of Mexico's
nine regions but who do not have a broad national presence.
SMARTCOM
General. In 1997, SMARTCOM, a wholly owned indirect subsidiary of Leap,
acquired a nationwide license to offer PCS services in Chile. SMARTCOM's
nationwide system began operation in September 1998 and had approximately 42,000
subscribers on August 31, 1999. In April 1999, Leap increased its ownership of
SMARTCOM from 50% to 100% when Leap's Chilean subsidiary purchased 50% of
SMARTCOM from
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Telex-Chile, a Chilean telecommunications company, and an affiliate of
Telex-Chile, for $28 million and a $22 million interest-free note payable in
three years.
SMARTCOM has experienced reliability problems with respect to its network
infrastructure equipment. Leap and SMARTCOM are working with equipment vendors
to address these problems, which have not yet been resolved. SMARTCOM is
upgrading existing equipment and purchasing additional equipment which it
expects to resolve the problems, enhance the quality and reliability of its
system and accommodate expected subscriber growth. Based upon its experience
with other operating company infrastructure configurations, Leap believes but
cannot guarantee that the upgrade and expansion will correct the reliability
problems that SMARTCOM has experienced.
Market Opportunity. Chile is considered by many to be a technology leader
in Latin America. It has a stable economy and a regulatory environment that is
friendly to foreign investors. Chile has a population of approximately 15
million people. In excess of 70% of the population is concentrated in the center
of the country in the Santiago and Valparaiso regions. Current teledensity is
approximately 21.1%. Current wireless penetration in Chile is approximately
6.5%.
Capital Requirements and Projected Investments. As discussed above,
SMARTCOM is in the process of upgrading existing equipment and purchasing
additional equipment to enhance the reliability of its system and to accommodate
expected subscriber growth. Leap intends to finance the planned upgrade and
expansion, as well as the operation of SMARTCOM's network in fiscal 2000,
through borrowings under Leap's credit agreement with QUALCOMM, the proceeds of
equipment financing agreements that Leap expects to negotiate in connection with
planned equipment purchases by SMARTCOM, and capital from additional financing
transactions. Leap and QUALCOMM are currently negotiating a new equipment
financing agreement for SMARTCOM, and SMARTCOM has engaged an investment banker
to assist it in selling equity. SMARTCOM is also exploring other capital raising
alternatives. Leap cannot assure investors that SMARTCOM will obtain additional
vendor funding or conclude a sale of equity or other financing transaction in
fiscal 2000. If SMARTCOM does not obtain additional financing in fiscal 2000,
Leap expects to delay or reduce the scope of SMARTCOM's planned expansion.
Regulatory Environment. The Subsecretaria Telecomunicaciones regulates the
basic telecommunications network in Chile. In April 1997, Subsecretaria
Telecomunicaciones awarded three licenses for PCS (1900MHz) mobile operations in
Chile -- one to SMARTCOM and two to affiliates of Entel Cellular. In addition,
three major cellular operators, including Entel Cellular, were previously
licensed by the government and are operating in Chile. The regulatory
environment in Chile is considered to be stable, reliable and friendly to
foreign investment.
Competition. In addition to SMARTCOM, there are three major operators of
wireless services in Chile, each of which effectively provides nationwide
service. CTC/Startel operates a nationwide cellular system. Bell South operates
in central Chile, but has acquired the cellular license for the regions outside
of Santiago from Entel Cellular. Bell South has an existing roaming agreement
with Entel Cellular that will allow it to effectively provide nationwide
coverage while it builds out its own nationwide network. In addition to these
cellular services, Entel launched a commercial PCS service using GSM technology
in March 1998. A second PCS license, also controlled by Entel, has not been
built out or put into operation.
OTHER BUSINESSES
Through a subsidiary, Leap owns a 35% interest in Orrengrove Investments
Limited, which in turn owns a 60% interest in three related companies referred
to as the Transworld Companies. The Transworld Companies have been seeking to
establish a domestic long-distance business in Russia. In December 1998, they
launched limited long-distance service between Moscow and Perm, a region of
three million people west of Moscow. The third party satellite that the
companies used to provide long distance service failed in April 1999. As a
result of the failure, the Transworld Companies began using fiber lines to
provide long distance services on a short-term basis and they began to explore
long-term alternatives to the satellite transmission equipment they previously
used. The directors of the Transworld Companies voted to liquidate the companies
after reviewing a series of alternative business plans that did not meet their
minimum financial performance
8
<PAGE> 10
criteria. As a result, Leap wrote down its investment in Orrengrove to the
proceeds Leap expects to receive in connection with the pending liquidations.
Through another subsidiary, Leap also owns a 35% interest in Metrosvyaz
Limited, a company that is attempting to establish joint ventures in Russia to
construct and operate networks providing wireless local loop service. Metrosvyaz
was funding its activities through vendor financing from an equipment supplier
and a working capital facility from Leap. As described in greater detail in
"Item 3. Legal Proceedings," Leap has ceased funding loans to Metrosvyaz and, as
a result, has written-off its remaining investment in Metrosvyaz.
In August 1999, Leap sold its subsidiary, OzPhone Pty. Limited, for $16.0
million. Leap had invested approximately $6.9 million in OzPhone prior to the
sale. Leap concluded that it could achieve greater shareholder return through
this sale than it could through years of continued investment in and development
of OzPhone. Although OzPhone owned spectrum licenses, it had not yet introduced
service.
RELATIONSHIP BETWEEN QUALCOMM AND LEAP
To transfer the business of Leap from QUALCOMM to Leap, QUALCOMM and Leap
entered into various agreements that are described below. The agreements have
been amended from time to time, including recent changes required by the FCC as
a condition to allowing Leap to acquire specific wireless operating licenses. In
May 1999, QUALCOMM sold its network infrastructure division to Ericsson. In
connection with that sale, QUALCOMM transferred to Ericsson its rights to sell
network infrastructure equipment to Leap and its operating companies.
QUALCOMM's relationship as a lender to Leap and its operating companies
gives QUALCOMM significant influence over Leap. Leap's relationships with
QUALCOMM may also create conflicts of interest between Leap and QUALCOMM.
SEPARATION AND DISTRIBUTION AGREEMENT
Immediately before the distribution of Leap common stock to QUALCOMM's
stockholders, QUALCOMM and Leap entered into the Separation and Distribution
Agreement. The Separation and Distribution Agreement governed the principal
transactions required to effect the separation of the companies and the
distribution, and other agreements governing the relationship between the
parties.
To effect the separation of the companies, QUALCOMM transferred some of its
businesses and ventures to Leap. QUALCOMM also contributed to Leap the
following:
- $10 million in cash;
- QUALCOMM's right to receive payment of approximately $113 million of debt
from the operating companies;
- QUALCOMM's rights under specific agreements relating to the business and
ventures of Leap; and
- other assets.
QUALCOMM's performance as an equipment vendor is not a condition of payment
to Leap under the notes and other debt transferred. Leap did not receive any
intellectual property in connection with the separation of the companies, and
QUALCOMM retained all rights not expressly transferred regarding any and all
agreements with Leap's operating companies.
In connection with the transfer of assets and rights by QUALCOMM, Leap
issued a warrant to QUALCOMM to purchase 5,500,000 shares of Leap common stock
for $6.11 per share. In March 1999, in exchange for consideration valued at $5.4
million, QUALCOMM agreed to amend the warrant to reduce the number of shares
which may be acquired upon exercise of the warrant to 4,500,000. The warrant is
currently exercisable and remains exercisable until 2008. QUALCOMM has agreed
that it will not exercise the warrant in a manner that would cause QUALCOMM and
its officers and directors to collectively hold more than 15% of Leap's
outstanding common stock.
9
<PAGE> 11
In the Separation and Distribution Agreement, Leap also assumed some
liabilities of QUALCOMM, including: (1) funding obligations to Leap's operating
companies totaling approximately $75 million; (2) QUALCOMM's rights and
obligations to manage Leap's operating companies; and (3) $2 million of accrued
liabilities regarding Leap's employees.
The Separation and Distribution Agreement also provides for (1) releases of
claims of each party against the other; (2) the allocation of potential
liabilities; and (3) indemnification rights between the parties.
The Separation and Distribution Agreement also provides that, in
international markets, Leap will deploy, and will cause its affiliates to
deploy, only systems using cdmaOne until January 1, 2004. CdmaOne is the
original standard for fixed or mobile wireless communications systems based on
or derived from QUALCOMM's CDMA technology and successor standards that QUALCOMM
has adopted. The Telecommunications Industry Association and other recognized
international standards bodies have adopted cdmaOne as an industry standard.
Leap also agreed that, in international markets, it would invest only in
companies using cdmaOne systems until January 1, 2004.
Under the Separation and Distribution Agreement, Leap also granted QUALCOMM
a non-exclusive, royalty-free license to any patent rights developed by Leap or
its affiliates. In addition, under the Separation and Distribution Agreement,
Leap Wireless granted QUALCOMM a right of first refusal for a period of three
years with respect to proposed transfers by Leap of its investments and joint
venture interests. Leap further agreed to take an active role in the management
of companies in which it holds stock or joint venture interests. The parties
also generally agreed that, for a period of three years following the spin-off
of Leap, neither party would solicit or hire employees of the other.
Under the Separation and Distribution Agreement, the parties agreed that if
specific events occur by March 2000, QUALCOMM would transfer its ownership
interest in Telesystems of Ukraine to Leap. As a result of continued
difficulties between QUALCOMM and the other partners in Telesystems of Ukraine,
Leap believes that it is unlikely that QUALCOMM's interest in Telesystems of
Ukraine will be transferred to Leap.
CREDIT AGREEMENT
Immediately before the distribution of Leap common stock to QUALCOMM's
stockholders, Leap entered into a credit agreement with QUALCOMM. The credit
agreement consists of two sub-facilities. Leap may use the working capital
sub-facility to borrow up to $35.2 million from QUALCOMM. Leap may only use the
proceeds from the working capital sub-facility to meet its normal working
capital and operating expenses. These normal expenses include salaries and
overhead, but exclude strategic investments, substantial acquisitions of capital
equipment and the acquisition of telecommunications licenses. The investment
capital sub-facility enables Leap to borrow up to $229.8 million from QUALCOMM.
Leap may only use the proceeds from the investment capital sub-facility to make
identified portfolio investments. Amounts available under the investment
sub-facility are allocated to specific Leap projects and may not be reallocated
to other projects without QUALCOMM's written consent. As one of the conditions
to the FCC's recognition of Leap as a designated entity qualified to hold
C-Block and F-Block licenses of PCS spectrum, Leap must take steps so that by
January 2001, QUALCOMM holds no more than 50% of Leap's outstanding debt
obligations.
Amounts borrowed under the credit agreement are due and payable in
September 2006, unless the maturity of the loans is accelerated pursuant to the
provisions of the credit agreement. The credit agreement required a 2%
origination fee. QUALCOMM has a security interest in substantially all of the
assets of Leap for so long as any amounts are outstanding under the credit
agreement. Amounts borrowed under the credit agreement bear interest at a
variable rate equal to LIBOR plus 5.25% per annum. Interest is payable quarterly
beginning September 30, 2001. Before this time, accrued interest is added to the
principal amount outstanding. If QUALCOMM assigns more than 10% of the total
funding commitments to other lenders, Leap must pay a commitment fee to the
lenders on unused balances under the credit agreement.
10
<PAGE> 12
The credit agreement contains operating covenants, including restrictions
on the ability of Leap to incur debt, merge, consolidate or transfer
substantially all of its assets, create, incur or permit the existence of liens
or pay dividends. Under the credit agreement, Leap agreed that it will not
permit the quotient obtained by dividing its total debt by total capitalization
to exceed the following level during the indicated period:
<TABLE>
<CAPTION>
PERIOD LEVEL
------ -----
<S> <C>
Through February 23, 2002............................. 70%
After February 23, 2002............................... 50%
</TABLE>
The terms total debt and total capitalization are each defined in the
credit agreement.
Leap was in compliance with the financial covenant as of August 31, 1999.
In addition, the credit agreement limits Leap's use of borrowed funds, restricts
Leap's joint venture and stock ownership, and imposes other restrictions on the
operation of Leap's business. Further, if Leap sells some of its assets, it must
prepay the credit agreement with a percentage of the proceeds.
MASTER AGREEMENT REGARDING EQUIPMENT ACQUISITION
The Master Agreement Regarding Equipment Acquisition contains the
obligations of Leap regarding the purchase and sale of terrestrial-based cdmaOne
infrastructure and subscriber equipment. As a result of QUALCOMM's sale of its
network infrastructure division to Ericsson, Leap owes some purchase obligations
to Ericsson with respect to network equipment and to QUALCOMM with respect to
subscriber equipment. Under the Master Agreement Regarding Equipment
Acquisition, Leap generally agreed that:
- For five years, it will purchase at least 50% of its requirements for
infrastructure equipment from Ericsson and 50% of its requirements for
subscriber equipment from QUALCOMM.
- For each initial investment by Leap made before October 2002 in a
wireless telecommunication entity operating in the United States, Leap
will require the U.S. operator to enter into an equipment requirements
agreement with QUALCOMM and Ericsson. The equipment requirements
agreement will require the U.S. operator to purchase at least 50% of its
requirements for infrastructure equipment from Ericsson and 50% of its
requirements for subscriber equipment from QUALCOMM, in each case for a
five year period.
- For each investment by Leap in a U.S. operator of wireless communications
made after October 2002, Leap will attempt to require the U.S. operator
to provide Ericsson and QUALCOMM with an opportunity to bid on its
requirements for infrastructure equipment and subscriber equipment,
respectively. Leap also will encourage the U.S. operator to acquire
equipment from Ericsson and QUALCOMM.
Leap and the U.S. operating companies in which it invests must comply with
these requirements only if Ericsson's bid for the infrastructure equipment and
related services or QUALCOMM's bid for subscriber equipment is less than or
equal to the lowest competing bid that Leap or its operating company would
accept; provided, however, until QUALCOMM has received contracts from Leap and
the companies in which it invests for at least $250 million of subscriber
equipment for use in the United States, Leap and the U.S. operating companies in
which it initially invests before 2002 must comply with these requirements if
QUALCOMM's bid is 110% or less than the lowest competing bid Leap or such other
company would accept.
Until the earlier of (1) October 2002 and (2) the date on which Leap
receives an aggregate of $60 million of financing from parties other than
QUALCOMM, Leap must require each wireless telecommunication entity operating
outside the United States in which Leap initially invests to enter into an
equipment requirements agreement with QUALCOMM and Ericsson. The equipment
requirements agreement will provide that the foreign operator of wireless
communications will purchase at least 50% of its requirements for infrastructure
equipment from Ericsson and 50% of its requirements for subscriber equipment
from QUALCOMM, in each case for a five year period. The equipment requirements
agreement will also require the foreign operator to notify QUALCOMM if its bid
is not competitive, to explain how QUALCOMM must modify its bid to make it
competitive, and to give QUALCOMM the opportunity to submit a modified bid. If
11
<PAGE> 13
Leap makes an initial investment in a wireless communications company operating
outside of the United States after the date described above, Leap will seek to
provide QUALCOMM and Ericsson with an opportunity to bid on the foreign
operator's infrastructure and subscriber equipment. Leap will also encourage the
foreign operator to acquire its equipment from QUALCOMM and Ericsson. The
obligations of all the foreign operators will depend on QUALCOMM and Ericsson
providing competitive prices.
All the obligations of Leap and its operating companies regarding equipment
purchases under the Master Agreement Regarding Equipment Acquisition will expire
in September 2007.
If Leap or one of its operating companies attempts to acquire equipment on
a "bundled" basis, then Ericsson and QUALCOMM are entitled, in some cases, to
respond separately to each portion of the proposed bundled acquisition. If Leap
does not attempt to acquire the equipment on a competitive basis from multiple
vendors, but instead decides to negotiate exclusively with Ericsson or QUALCOMM,
then Ericsson or QUALCOMM, as applicable, will offer and sell the equipment to
Leap on a "most favored pricing" basis.
EMPLOYEE BENEFITS AGREEMENT
The Employee Benefits Agreement between QUALCOMM and Leap governs the
employee benefit obligations of Leap for employees assigned to Leap. Under the
Employee Benefits Agreement, Leap assumed and agreed to pay all liabilities
relating to former employees of QUALCOMM employed by Leap. The Employee Benefits
Agreement also required Leap Wireless to adopt a 401(k) plan similar to
QUALCOMM's plan. In addition, Leap granted options to purchase shares of Leap
common stock to holders of options to purchase shares of QUALCOMM common stock.
TAX AGREEMENT
The Tax Agreement between QUALCOMM and Leap generally requires QUALCOMM to
pay all federal, state, local and foreign taxes relating to the businesses
conducted by QUALCOMM or its subsidiaries for any taxable period, excluding: (1)
taxes relating to Leap and its U.S. subsidiaries after the distribution of Leap;
(2) taxes relating to Leap's non-U.S. subsidiaries or any predecessor or
successor for all periods before and after the distribution of Leap (other than
regarding restructuring transactions incident to the distribution of Leap common
stock); and (3) taxes arising out of actions taken by, or in respect of, Leap or
any of its subsidiaries that cause negative tax consequences to QUALCOMM, Leap
or their respective subsidiaries regarding the distribution of Leap common stock
or the related transactions.
The Tax Agreement further provides for cooperation regarding tax matters,
the exchange of information and retention of records that may affect the tax
liability of either party.
CONVERSION AGREEMENT
Under the Conversion Agreement, Leap agreed to issue up to 2,271,060 shares
of Leap common stock to the holders of the Trust Convertible Preferred
Securities of QUALCOMM Financial Trust I, a wholly owned statutory business
Trust of QUALCOMM, upon the conversion of their securities. Leap also agreed to
reserve and keep available Leap common stock for issuance and delivery upon that
conversion. Leap also filed and must keep effective a registration statement
covering the shares of Leap common stock issuable upon conversion of the Trust
Convertible Preferred Securities. If Leap determines that any event requires
changes to the registration statement so that the registration statement and the
prospectus contained therein do not contain a material misstatement or omission,
or if the continued effectiveness of the registration statement would require
Leap to disclose a material financing, acquisition or other material corporate
transaction or development (and the Leap Board of Directors has determined that
such disclosure is not in the best interests of Leap and its stockholders), then
Leap may suspend the issuance of Leap common stock issuable upon conversion of
the Trust Convertible Preferred Securities until Leap has prepared and filed,
and the SEC has declared effective, a post-effective amendment to the
registration statement which contains the required disclosures.
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<PAGE> 14
Leap anticipates that all of the shares reserved for issuance under the
Conversion Agreement will be issued. Upon conversion of the Trust Convertible
Preferred Securities, QUALCOMM will receive benefit in the form of forgiveness
of debt, but Leap will receive no additional benefit or other consideration.
INFRASTRUCTURE PURCHASE AND FINANCE AGREEMENTS
Subsequent to the end of fiscal 1999, a domestic subsidiary of Leap agreed
to purchase $330 million of infrastructure products and services from a major
telecommunications supplier. The supplier agreed to finance these purchases plus
additional working capital at an interest rate equal to LIBOR plus 3.5% to 4.25%
or a bank base rate plus 2.5% to 3.25%, in each case with the specific rate
based on the ratio of total indebtedness to EBITDA (earnings before interest,
taxes, depreciation and amortization). Principal payments are scheduled to begin
after three years with a final maturity after eight years. Repayment is weighted
to the later years of the repayment schedule. The supplier credit agreement is
secured by substantially all of the stock and assets of the companies operating
Leap's domestic wireless business and contains covenants and conditions typical
for a loan of this type.
At the same time, Leap's subsidiary also agreed to purchase $330 million of
next-generation infrastructure products which are currently in development and
related services from a second major telecommunications supplier. Purchases from
the second supplier will be on substantially similar terms, including financing.
This second agreement is subject to approval of the supplier's board of
directors.
COMPETITION
The wireless communications industry is very competitive and competition is
increasing. Many competitors have substantially greater resources than Leap and
its operating companies. Leap cannot assure investors that Leap or its operating
companies will compete successfully.
Although the deployment of advanced telecommunications services is in its
early stages in many developing countries, Leap believes competition is
increasing as businesses and foreign governments realize the market potential of
telecommunications services. Leap's operating companies currently face
competition from existing wireless communications providers. In addition, a
number of large telecommunications companies are implementing programs to deploy
telecommunications services in both developing and developed countries. Leap's
operating companies also compete against landline carriers, including
government-owned telephone companies. In addition, Leap's operating companies
may face competition with technologies and services introduced in the future.
Although Leap's operating companies intend to use relatively new technologies,
newer technologies may make their technologies obsolete. Leap also expects the
price that its operating companies charge for their products and services in
some regions will decline over the next few years as competition increases in
their markets.
In the United States, Leap will compete directly with other wireless
providers in each of its markets, many of whom have greater resources than Leap
and entered the market before Leap. A few of Leap's competitors operate wireless
communications networks covering most of the United States. Competitors' earlier
entry and broader presence in the U.S. telecommunications market may have a
negative effect on Leap's ability to successfully implement its strategy. In
addition, other wireless providers could attempt to implement Leap's strategy of
providing local service at a flat-rate. Providers who offered such a service in
Leap's market areas would directly compete against Leap in its market niche.
Also, it is likely that some competitors will market other services, including
cable television access, landline telephone service and Internet access, that
Leap does not currently intend to market. Leap also expects to compete with new
entrants to the U.S. wireless market as well as other telecommunications
technologies, including paging, enhanced specialized mobile radio and global
satellite networks.
In addition, Leap believes that companies holding equity interests in
multiple operating companies throughout the world will be increasingly
predominant in the wireless communications industry and expects to experience
increasing competition from entities with structures resembling that of Leap.
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<PAGE> 15
GOVERNMENT REGULATION
The construction, operation, sale and interconnection arrangements of
wireless communications systems and the grant, maintenance and renewal of
applicable licenses in each of the countries outside the United States in which
Leap has operations are regulated by governmental authorities in each country.
In some cases, the regulatory authorities also operate or control the operations
of the competitors of the operating companies. Changes in the current regulatory
environment of these markets or future judicial intervention, or regulations
affecting the pricing of the operating companies' services, could have a
material adverse effect on Leap. In addition, the regulatory framework and
authorities in the countries where Leap operates are relatively recent and,
therefore, the enforcement and interpretation of regulations, the assessment of
compliance, and the degree of flexibility of regulatory authorities are
uncertain. Further, changes in the regulatory framework may limit the ability to
add subscribers to developing systems. An operating company's failure to comply
with applicable governmental regulations or operating requirements could result
in the loss of licenses, penalties and fines or otherwise could have a material
adverse effect on Leap.
The construction, operation, sale and interconnection arrangements of
wireless communications systems and the grant, maintenance and renewal of
applicable licenses in the United States are regulated to varying degrees by
state regulatory agencies, the FCC, the United States Congress and the courts.
This regulation is continually evolving and there are a number of issues on
which regulation has been or in the future may be suggested. The
Telecommunications Act of 1996 mandates significant changes in existing
regulations of the telecommunications industry to promote competitive
development of new service offerings to expand the availability of
telecommunications services and to streamline the regulation of the industry.
Leap cannot assure investors that the FCC, Congress, the courts or state
agencies having jurisdiction over the business of any of Leap's United States
operating companies will not adopt or change regulations or take other actions
that would adversely affect Leap's financial condition or results of operations.
Many of the FCC's rules relating to the businesses of Leap's U.S. operating
companies have not been tested by the courts and are subject to being changed by
Congressional action. In addition, FCC licenses are subject to renewal and
revocation. Leap cannot assure investors that the licenses of Leap's U.S.
operating companies will be renewed or not be revoked.
FINANCIAL INFORMATION CONCERNING SEGMENTS AND GEOGRAPHICAL INFORMATION
Financial information concerning Leap's operating segments and the
geographic areas in which it operates is set forth in Note 13 to the
Consolidated Financial Statements in Leap's Annual Report to Shareholders for
the fiscal year ended August 31, 1999, which is incorporated in this report by
reference.
EMPLOYEES
On October 1, 1999, Leap Wireless employed approximately 90 full time
employees, including the employees of its subsidiary Cricket Communications,
Inc. In addition, Leap's subsidiary SMARTCOM employed approximately 545
employees on that date.
ITEM 2. PROPERTIES
The Company has leased approximately 50,000 square feet of office space in
San Diego, California, U.S.A. The Company currently leases this building for
sales, marketing, product development and administrative purposes. The Company
does not own any real property.
SMARTCOM has leased approximately 50,000 square feet of office space in
Santiago, Chile, excluding a lease which is expiring in the near future and will
not be renewed. SMARTCOM uses this space for sales, marketing, customer service,
operations and administrative purposes, as well as for its primary
telecommunications switching equipment. In addition, SMARTCOM owns or leases
space at three sites in Temuco, Antafagasta and Punta Arena, Chile aggregating
approximately 10,000 square feet for additional switching equipment. SMARTCOM
also maintains numerous small sites throughout Chile for radio transmission
equipment that supports its telecommunications network. A large majority of
these radio transmission sites are leased.
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<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
Leap recently announced that it had stopped funding loans to Metrosvyaz and
had written-off its remaining $9.6 million investment in Metrosvyaz. Metrosvyaz
had not satisfied certain conditions required for funding and was in default
under its loan agreement with Leap. In addition, Leap had been prevented from
securing full reporting and documentation of performance, results and
expenditures of Metrosvyaz in spite of repeated efforts to obtain that
information. Preliminary results of a special investigation of Metrosvyaz also
disclosed serious irregularities, including unaccounted for funds and
questionable contracts and payments. On September 29, 1999, Leap issued a demand
for arbitration seeking a full accounting and damages from Metrosvyaz and one of
its directors with respect to these matters. It is too early to evaluate the
likely outcome of the arbitration or any adversarial proceeding that may arise
out of these matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended August 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.0001 par value per share, has traded on The
Nasdaq National Market under the symbol "LWIN" since September 24, 1998. The
following table sets forth the high and low sale prices for the Common Stock as
reported by the Nasdaq National Market in each of the four quarters of fiscal
1999.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
First Quarter.............................. $ 9.00 $ 2.69
Second Quarter............................. $ 7.88 $ 4.75
Third Quarter.............................. $25.50 $ 5.88
Fourth Quarter............................. $21.75 $16.00
</TABLE>
As of October 1, 1999 there were 18,428,411 shares of Common Stock
outstanding held by approximately 1,959 holders of record.
Leap has never paid or declared any cash dividends on its Common Stock and
does not intend to pay dividends on its Common Stock in the foreseeable future.
Leap is currently prohibited from paying dividends by the terms of the Credit
Agreement between Leap and QUALCOMM. Leap intends to retain any earnings for use
in the operation and expansion of its business.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the section headed
"Selected Financial Data" in Leap's Annual Report to Shareholders for the fiscal
year ended August 31, 1999, and is incorporated in this report by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this Item is set forth in the section headed
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Leap's Annual Report to Shareholders for the fiscal year ended
August 31, 1999, and is incorporated in this report by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. Leap's exposure to market risk for changes in interest
rates relates primarily to its variable rate long-term debt obligations. For a
description of Leap's long term debt obligations, see Note 7 to the Consolidated
Financial Statements in Leap's Annual Report to Shareholders for the fiscal year
ended
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<PAGE> 17
August 31, 1999, which is incorporated in this report by reference. The general
level of U.S. interest rates and/or LIBOR affect the interest expense that Leap
recognizes on its variable rate long-term debt obligations. As of August 31,
1999, the principal amounts of Leap's variable rate long-term debt obligations
amounted to $210.3 million. An increase of 10% in interest rates would increase
Leap's interest expense for fiscal year 2000 by approximately $2.3 million. This
hypothetical amount is only suggestive of the effect of changes in interest
rates on Leap's results of operations in fiscal year 2000.
Foreign Exchange Market Risk. The long-term debt obligations of Leap's
wholly owned Chilean subsidiary, SMARTCOM, which are denominated in the U.S.
dollar, are subject to the effects of currency fluctuations and may affect
reported earnings and losses. A significant change in the value of U.S. dollar
against the Chilean peso could result in a significant increase in the
consolidated expenses of Leap. As of August 31, 1999, SMARTCOM's long-term debt
obligations that were denominated in the U.S. dollar amounted to $101.7 million.
Leap's results of operations would be negatively impacted by approximately $11.9
million for fiscal year 2000 if the U.S. dollar were to appreciate against the
Chilean peso by 10%. This hypothetical amount is only suggestive of the effect
of currency fluctuations on Leap's results of operations in fiscal year 2000.
Hedging Policy. Leap does not currently have a policy to systematically
hedge against foreign currency exchange rate or interest rate risks.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in the sections headed
"Consolidated Balance Sheets," "Consolidated Statements of Operations and
Comprehensive Loss," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Stockholders' Equity," "Notes to Consolidated Financial
Statements" and "Report of Independent Accountants" in Leap's Annual Report to
Shareholders for the fiscal year ended August 31, 1999, and is incorporated in
this report by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is set forth in the section headed
"Proposal 1 -- Election of Directors" in Leap's definitive Proxy Statement for
the Annual Meeting of Shareholders of the Company (the "Proxy Statement") which
is expected to be filed not later than 120 days after the end of Leap's fiscal
year ended August 31, 1999, and is incorporated in this report by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the section headed
"Executive Compensation" in Leap's definitive Proxy Statement and is
incorporated in this report by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the section headed
"Security Ownership of Certain Beneficial Owners and Management" in Leap's
definitive Proxy Statement and is incorporated in this report by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the sections headed
"Certain Relationships and Related Transactions" and "Compensation Committee
Interlocks and Insider Participation" in Leap's definitive Proxy Statement and
is incorporated in this report by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS:
The financial statements of Leap listed below are incorporated in this report
by reference to Leap's Annual Report to Shareholders for the fiscal year
ended August 31, 1999:
Consolidated Balance Sheets at August 31, 1999 and 1998
Consolidated Statements of Operations and Comprehensive Loss for each of the
three years in the period ended August 31, 1999
Consolidated Statements of Cash Flows for each of the three years in the
period ended August 31, 1999
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended August 31, 1999
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. FINANCIAL STATEMENT SCHEDULES:
Report of Independent Accountants on Financial Statement Schedule
Schedule I -- Condensed Financial Information at August 31, 1999 and 1998,
and for each of the three years in the period ended August 31, 1999
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
3. EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1(1) Form of Amended and Restated Charter of the Registrant
3.2(1) Form of Amended and Restated Bylaws of the Registrant
3.3(2) Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant
4.1(1) Form of Common Stock Certificate
4.2.1(3) Letter, dated as of May 5, 1999, from QUALCOMM Incorporated
("QUALCOMM") to the Registrant
4.2.2(9) Superceding Warrant, dated as of August 9, 1999, issued to
QUALCOMM
4.2.3(9) Form of Voting Agreement, dated as of April 1, 1999, between
the Registrant and various officers and directors of
QUALCOMM Incorporated
4.2.4(9) Amended and Restated Agreement Concerning Share Ownership,
dated as of August 4, 1999, between Registrant and QUALCOMM
Incorporated
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.3(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California
10.1(8) Separation and Distribution Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.1.1(9) First Amendment to Separation and Distribution Agreement,
dated as of August 6, 1999, between Registrant and QUALCOMM
10.2(8) Credit Agreement, dated as of September 23, 1998, between
QUALCOMM and the Registrant
10.3(8) Tax Matters Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.4(8) Interim Services Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.5(8) Master Agreement Regarding Equipment Acquisition, dated as
of September 23, 1998, between QUALCOMM and the Registrant
10.5.1(9) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between Registrant
and QUALCOMM
10.6(8) Employee Benefits Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.7(8) Conversion Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.8(8) Assignment and Assumption Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999
10.10(1) Form of non-qualified/incentive stock option under the 1998
Stock Option Plan
10.11(1) Form of non-qualified stock option under the 1998 Stock
Option Plan granted to QUALCOMM option holders in connection
with the distribution of Registrant's common stock
10.12(1) Form of Registrant's 1998 Non-Employee Directors' Stock
Option Plan
10.13(1) Form of non-qualified stock option under the 1998
Non-Employee Directors' Stock Option Plan
10.14(1) Form of Registrant's Employee Stock Purchase Plan
10.15(1) Assignment and Assumption of Lease dated August 11, 1998
between QUALCOMM and Vaxa International, Inc.
10.16(1) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers
10.17(4) Loan Agreement, dated as of September 28, 1998, between
Pegaso Comunicaciones y Servicios, S.A. de C.V. and the
Registrant
10.18(4) Promissory Note, executed September 25, 1998, payable to
Registrant by Pegaso Comunicaciones y Servicios, S.A. de
C.V.
10.19(4) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and Registrant
10.20(5) Asset Purchase Agreement, dated December 24, 1998, by and
among Chase Telecommunications Holdings, Inc., Anthony
Chase, Richard McDugald and Registrant
10.21.1(6) Stock Purchase Agreement, dated April 12, 1999, by and among
Inversiones Leap Wireless Chile S.A., Telex -- Chile S.A.,
and Chilesat S.A.
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.21.2(7) Novation and Assumption of Payment Obligation Agreement,
dated May 11, 1999, by and among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A. and Chilesat S.A.
(In Spanish and accompanied by a translation in English)
10.22(9) Cricket Communications, Inc. 1999 Stock Option Plan
10.23(9) Form of non-qualified/incentive stock option under the
Cricket Communications, Inc. 1999 Stock Option Plan
10.24(9) Employment offer letter to Susan G. Swenson from Registrant,
dated July 9, 1999
10.25(10) System Equipment Purchase Agreement, dated September 20,
1999, by and between Cricket Wireless Communications, Inc.
and Lucent Technologies, Inc. Portions of this exhibit
(indicated by asterisks) have been omitted pursuant to a
request for confidential treatment pursuant to Rule 24b-2.
10.26(10) Credit Agreement, dated as of September 29, 1999, among
Cricket Communications, Inc., Cricket Wireless
Communications, Inc., the Lenders party thereto, and Lucent
Technologies, Inc., as Administrative Agent. Portions of
this exhibit (indicated by asterisks) have been omitted
pursuant to a request for confidential treatment pursuant to
Rule 24b-2.
10.26.1(10) Exhibit A -- Form of Borrower Pledge Agreement
10.26.2(10) Exhibit B -- Form of Collateral Agency and Intercreditor
Agreement
10.26.3(10) Exhibit C -- Form of Guarantee Agreement
10.26.4(10) Exhibit D -- Form of Indemnity, Subrogation and Contribution
Agreement
10.26.5(10) Exhibit E -- Form of Parent Agreement
10.26.6(10) Exhibit F -- Form of Parent Pledge Agreement
10.26.7(10) Exhibit G -- Form of Perfection Certificate
10.26.8(10) Exhibit H -- Form of Security Agreement
10.26.9(10) Exhibit I -- Form of Subordination Agreement
10.27(10) Memorandum of Agreement, dated September 20 1999, by and
between Ericsson Wireless Communications Inc., Leap Wireless
International, Inc., and Cricket Wireless Communications,
Inc. Portions of this exhibit (indicated by asterisks) have
been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2.
10.28(10) Second Amended and Restated Deferred Payment Agreement,
dated October 12, 1999, among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A., and QUALCOMM
Incorporated, as Vendor, Administrative Agent and Collateral
Agent
13.1(10) Portions of Registrant's Annual Report to Shareholders for
the Fiscal Year Ended August 31, 1999
21.1(10) Subsidiaries of the Registrant
23.1(10) Consent of PricewaterhouseCoopers LLP, independent
accountants
27.1(10) Financial Data Schedule
</TABLE>
- ---------------
(1) Filed as an exhibit to Leap's Registration Statement on Form 10, as amended
(File No. 0-29752), and incorporated herein by reference.
(2) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
14, 1998, and incorporated herein by reference.
(3) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1999, as filed with the Securities and Exchange
Commission on April 14, 1999, and incorporated herein by reference.
19
<PAGE> 21
(4) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1998, as filed with the Securities and Exchange
Commission on November 30, 1998, as amended, and incorporated herein by
reference.
(5) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended November 30, 1998, as filed with the Securities and Exchange
Commission on January 14, 1999, and incorporated herein by reference.
(6) Filed as an exhibit to Leap's Current Report on Form 8-K dated May 4, 1999,
and incorporated herein by reference.
(7) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1999, as filed with the Securities and Exchange Commission on
July 15, 1999, and incorporated herein by reference.
(8) Filed as an exhibit to Leap's Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-64459) dated October 13, 1998, and incorporated
herein by reference.
(9) Filed as an exhibit to Leap's Post-Effective Amendment No. 2 to
Registration Statement on Form S-1 (File No. 333-64459) dated August 10,
1999, and incorporated herein by reference.
(10) Filed herewith.
(b) REPORTS ON FORM 8-K
On July 6, 1999, Leap filed Amendment No. 1 to its previously filed Form
8-K dated April 19, 1999. Leap's April 19, 1999 Form 8-K reported the
acquisition by a wholly owned subsidiary of Leap of all of the shares of
Chilesat Telefonia Personal, S.A. that the Leap subsidiary did not already own.
Amendment No. 1 to the Form 8-K was filed to add pro forma financial statements
to the Form 8-K and also updated the Chilesat Telefonia Personal S.A. financial
statements contained in the Form 8-K to include unaudited financial information
with respect to the three month period ended March 31, 1999. The following
financial statements were included in the July 6, 1999 Amendment No. 1 to Form
8-K:
(1) Financial Statements of Business Acquired (i.e., Chilesat
Telefonia Personal S.A.)
Report of Independent Accountants
Balance Sheet at March 31, 1999 (unaudited) and December 31, 1998 and
1997
Statement of Income and Comprehensive Income for the three month
period ended March 31, 1999 and 1998 (unaudited), for the year
ended December 31, 1998, and for the periods from inception (March
3, 1997) to December 31, 1997, March 31, 1999 (unaudited), and
December 31, 1998
Statement of Cash Flows for the three month period ended March 31,
1999 and 1998 (unaudited), for the year ended December 31, 1998 and
for the periods from inception (March 3, 1997) to December 31,
1997, March 31, 1999 (unaudited), and December 31, 1998
Statement of Shareholders' Equity for the period from inception
(March 3, 1997) to December 31, 1998, and for the period January 1,
1999 to March 31, 1999 (unaudited)
Notes to the Financial Statements
(2) Pro Forma Financial Information of Leap Wireless International,
Inc.
Unaudited Pro Forma Statement of Operations for the six months ended
February 28, 1999
Unaudited Pro Forma Statement of Operations for year ended August 31,
1998
Unaudited Pro Forma Balance Sheet as of February 28, 1999
Notes to the Pro Forma Financial Statements
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LEAP WIRELESS INTERNATIONAL, INC.
October 18, 1999 By: /s/ HARVEY P. WHITE
------------------------------------
Harvey P. White,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HARVEY P. WHITE Chief Executive Officer and October 18, 1999
- ----------------------------------------------------- Director (Principal Executive
Harvey P. White Officer)
/s/ SUSAN G. SWENSON President, Chief Operating October 18, 1999
- ----------------------------------------------------- Officer and Director
Susan G. Swenson
/s/ THOMAS J. BERNARD Vice Chairman, President -- October 18, 1999
- ----------------------------------------------------- International Business
Thomas J. Bernard Division and Director
/s/ TOM WILLARDSON Senior Vice President, Finance October 18, 1999
- ----------------------------------------------------- and Treasurer (Principal
Tom Willardson Financial Officer)
/s/ STEPHEN DHANENS Controller October 18, 1999
- ----------------------------------------------------- (Principal Accounting Officer)
Stephen Dhanens
/s/ ALEJANDRO BURILLO AZCARRAGA Director October 18, 1999
- -----------------------------------------------------
Alejandro Burillo Azcarraga
/s/ ROBERT C. DYNES Director October 18, 1999
- -----------------------------------------------------
Robert C. Dynes
/s/ SCOT B. JARVIS Director October 18, 1999
- -----------------------------------------------------
Scot B. Jarvis
/s/ JOHN J. MOORES Director October 18, 1999
- -----------------------------------------------------
John J. Moores
/s/ MICHAEL B. TARGOFF Director October 18, 1999
- -----------------------------------------------------
Michael B. Targoff
Director
- -----------------------------------------------------
Jeffrey P. Williams
</TABLE>
21
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
of Leap Wireless International, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated October 18, 1999 appearing in the Leap Wireless International, Inc. 1999
Annual Report to Shareholders (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects the information set forth therein when
read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
San Diego, California
October 18, 1999
22
<PAGE> 24
SCHEDULE I
LEAP WIRELESS INTERNATIONAL, INC.
CONDENSED INFORMATION AS TO THE
FINANCIAL CONDITION OF THE REGISTRANT
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AUGUST 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
Cash and cash equivalents................................... $ 17,502 $ --
Accounts receivable......................................... 825 --
Other current assets........................................ 55 --
--------- --------
Total current assets.............................. 18,382 --
--------- --------
Property and equipment, net................................. 2,630 --
Investments in and loans receivable from subsidiaries....... 180,270 141,805
Intangible assets........................................... -- 6,838
Deposits and other assets................................... 1,449 --
--------- --------
Total assets...................................... $ 202,731 $148,643
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.................... $ 11,620 $ 5,680
--------- --------
Total current liabilities......................... 11,620 5,680
--------- --------
Long-term debt.............................................. 120,161 --
Other long-term liabilities................................. 50 --
--------- --------
Total liabilities................................. 131,831 5,680
--------- --------
Stockholders' equity:
Preferred stock -- authorized 10,000,000 shares
$.0001 par value, no shares issued and outstanding..... -- --
Common stock -- authorized 75,000,000 shares;
$.0001 par value, 18,370,974 shares issued and
outstanding............................................ 2 --
Additional paid-in capital................................ 291,189 --
Former parent company's investment........................ -- 197,598
Accumulated deficit....................................... (216,896) (52,283)
Accumulated other comprehensive loss...................... (3,395) (2,352)
--------- --------
Total stockholders' equity........................ 70,900 142,963
--------- --------
Total liabilities and stockholders' equity........ $ 202,731 $148,643
========= ========
</TABLE>
See accompanying notes to condensed financial statements.
23
<PAGE> 25
SCHEDULE I
LEAP WIRELESS INTERNATIONAL, INC.
CONDENSED INFORMATION AS TO THE
RESULTS OF OPERATIONS AND COMPREHENSIVE LOSS
OF THE REGISTRANT
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------
1999 1998 1997
--------- -------- -------
<S> <C> <C> <C>
General and administrative expenses........................ $ (17,567) $ (9,292) $(1,361)
--------- -------- -------
Operating loss........................................... (17,567) (9,292) (1,361)
Equity in net loss of subsidiaries......................... (123,655) (38,284) (3,793)
Write-down of investments in subsidiaries.................. (27,242) -- --
Interest income............................................ 960 843 --
Interest expense and amortization of discount and facility
fee...................................................... (6,102) -- --
Gain on sale of subsidiary................................. 9,097 -- --
Other income (expense), net................................ (104) -- --
--------- -------- -------
Net loss................................................. (164,613) (46,733) (5,154)
Other comprehensive income (loss):
Foreign currency translation (losses) gains.............. (1,043) (2,412) 60
--------- -------- -------
Comprehensive loss.................................... $(165,656) $(49,145) $(5,094)
========= ======== =======
Basic and diluted net loss per common share................ $ (9.19) $ (2.65) $ (0.29)
========= ======== =======
Shares used to calculate basic and diluted net loss per
common share............................................. 17,910 17,648 17,648
========= ======== =======
</TABLE>
See accompanying notes to condensed financial statements.
24
<PAGE> 26
SCHEDULE I
LEAP WIRELESS INTERNATIONAL, INC.
CONDENSED INFORMATION AS TO THE
CASH FLOWS OF THE REGISTRANT
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Net cash used in operating activities.................... $ (17,286) $ (9,322) $ (1,193)
--------- --------- --------
Investing activities:
Purchase of property and equipment..................... (3,182) -- --
Investments in and loans to subsidiaries............... (186,707) (140,234) (46,000)
Loan receivable to related party....................... (17,500) -- --
Repayment of loan receivable from related party........ 17,500 -- --
Acquisition of subsidiary.............................. -- (564) --
Proceeds from sale of subsidiary....................... 16,024 -- --
--------- --------- --------
Net cash used in investing activities.................... (173,865) (140,798) (46,000)
--------- --------- --------
Financing activities:
Borrowings under credit agreement...................... 128,584 -- --
Repayment of borrowings under credit agreement......... (17,500) -- --
Issuance of common stock............................... 2,301 -- --
Former parent company's investment..................... 95,268 150,120 47,193
--------- --------- --------
Net cash provided by financing activities................ 208,653 150,120 47,193
--------- --------- --------
Net increase in cash and cash equivalents................ 17,502 -- --
Cash and cash equivalents at beginning of year........... -- -- --
--------- --------- --------
Cash and cash equivalents at end of year................. $ 17,502 $ -- $ --
========= ========= ========
Supplemental disclosure of non-cash investing and
financing activities:
Facility fee due on long-term debt..................... $ 5,300 $ -- $ --
Repurchase of warrant.................................. $ 5,355 $ -- $ --
</TABLE>
See accompanying notes to condensed financial statements.
25
<PAGE> 27
SCHEDULE I
LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Leap Wireless International, Inc. ("Leap"), a Delaware corporation, is the
parent company of all Leap subsidiaries. The accompanying condensed financial
statements reflect the financial position, results of operations and
comprehensive loss and cash flows of Leap on a separate basis. All subsidiaries
of Leap are reflected as investments accounted for under the equity method of
accounting.
No cash dividends were paid to Leap by its subsidiaries during the years
ended August 31, 1999, 1998 or 1997.
For accounting policies and other information, see the Notes to
Consolidated Financial Statements included in Leap's Annual Report to
Shareholders for the fiscal year ended August 31, 1999, which is incorporated by
reference in this Annual Report on Form 10-K.
26
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1(1) Form of Amended and Restated Charter of the Registrant
3.2(1) Form of Amended and Restated Bylaws of the Registrant
3.3(2) Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant
4.1(1) Form of Common Stock Certificate
4.2.1(3) Letter, dated as of May 5, 1999, from QUALCOMM Incorporated
("QUALCOMM") to the Registrant
4.2.2(9) Superceding Warrant, dated as of August 9, 1999, issued to
QUALCOMM
4.2.3(9) Form of Voting Agreement, dated as of April 1, 1999, between
the Registrant and various officers and directors of
QUALCOMM Incorporated
4.2.4(9) Amended and Restated Agreement Concerning Share Ownership,
dated as of August 4, 1999, between Registrant and QUALCOMM
Incorporated
4.3(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California
10.1(8) Separation and Distribution Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.1.1(9) First Amendment to Separation and Distribution Agreement,
dated as of August 6, 1999, between Registrant and QUALCOMM
10.2(8) Credit Agreement, dated as of September 23, 1998, between
QUALCOMM and the Registrant
10.3(8) Tax Matters Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.4(8) Interim Services Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.5(8) Master Agreement Regarding Equipment Acquisition, dated as
of September 23, 1998, between QUALCOMM and the Registrant
10.5.1(9) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between Registrant
and QUALCOMM
10.6(8) Employee Benefits Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.7(8) Conversion Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.8(8) Assignment and Assumption Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999
10.10(1) Form of non-qualified/incentive stock option under the 1998
Stock Option Plan
10.11(1) Form of non-qualified stock option under the 1998 Stock
Option Plan granted to QUALCOMM option holders in connection
with the distribution of Registrant's common stock
10.12(1) Form of Registrant's 1998 Non-Employee Directors' Stock
Option Plan
10.13(1) Form of non-qualified stock option under the 1998
Non-Employee Directors' Stock Option Plan
10.14(1) Form of Registrant's Employee Stock Purchase Plan
10.15(1) Assignment and Assumption of Lease dated August 11, 1998
between QUALCOMM and Vaxa International, Inc.
10.16(1) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers
10.17(4) Loan Agreement, dated as of September 28, 1998, between
Pegaso Comunicaciones y Servicios, S.A. de C.V. and the
Registrant
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.18(4) Promissory Note, executed September 25, 1998, payable to
Registrant by Pegaso Comunicaciones y Servicios, S.A. de
C.V.
10.19(4) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and Registrant
10.20(5) Asset Purchase Agreement, dated December 24, 1998, by and
among Chase Telecommunications Holdings, Inc., Anthony
Chase, Richard McDugald and Registrant
10.21.1(6) Stock Purchase Agreement, dated April 12, 1999, by and among
Inversiones Leap Wireless Chile S.A., Telex -- Chile S.A.,
and Chilesat S.A.
10.21.2(7) Novation and Assumption of Payment Obligation Agreement,
dated May 11, 1999, by and among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A. and Chilesat S.A.
(In Spanish and accompanied by a translation in English)
10.22(9) Cricket Communications, Inc. 1999 Stock Option Plan
10.23(9) Form of non-qualified/incentive stock option under the
Cricket Communications, Inc. 1999 Stock Option Plan
10.24(9) Employment offer letter to Susan G. Swenson from Registrant,
dated July 9, 1999
10.25(10) System Equipment Purchase Agreement, dated September 20,
1999, by and between Cricket Wireless Communications, Inc.
and Lucent Technologies, Inc. Portions of this exhibit
(indicated by asterisks) have been omitted pursuant to a
request for confidential treatment pursuant to Rule 24b-2.
10.26(10) Credit Agreement, dated as of September 29, 1999, among
Cricket Communications, Inc., Cricket Wireless
Communications, Inc., the Lenders party thereto, and Lucent
Technologies, Inc., as Administrative Agent. Portions of
this exhibit (indicated by asterisks) have been omitted
pursuant to a request for confidential treatment pursuant to
Rule 24b-2.
10.26.1(10) Exhibit A -- Form of Borrower Pledge Agreement
10.26.2(10) Exhibit B -- Form of Collateral Agency and Intercreditor
Agreement
10.26.3(10) Exhibit C -- Form of Guarantee Agreement
10.26.4(10) Exhibit D -- Form of Indemnity, Subrogation and Contribution
Agreement
10.26.5(10) Exhibit E -- Form of Parent Agreement
10.26.6(10) Exhibit F -- Form of Parent Pledge Agreement
10.26.7(10) Exhibit G -- Form of Perfection Certificate
10.26.8(10) Exhibit H -- Form of Security Agreement
10.26.9(10) Exhibit I -- Form of Subordination Agreement
10.27(10) Memorandum of Agreement, dated September 20 1999, by and
between Ericsson Wireless Communications Inc., Leap Wireless
International, Inc., and Cricket Wireless Communications,
Inc. Portions of this exhibit (indicated by asterisks) have
been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2.
10.28(10) Second Amended and Restated Deferred Payment Agreement,
dated October 12, 1999, among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A., and QUALCOMM
Incorporated, as Vendor, Administrative Agent and Collateral
Agent
13.1(10) Portions of Registrant's Annual Report to Shareholders for
the Fiscal Year Ended August 31, 1999
21.1(10) Subsidiaries of the Registrant
23.1(10) Consent of PricewaterhouseCoopers LLP, independent
accountants
27.1(10) Financial Data Schedule
</TABLE>
- ---------------
(1) Filed as an exhibit to Leap's Registration Statement on Form 10, as amended
(File No. 0-29752), and incorporated herein by reference.
(2) Filed as an exhibit to Leap's Current Report on Form 8-K dated September
14, 1998, and incorporated herein by reference.
(3) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1999, as filed with the Securities and Exchange
Commission on April 14, 1999, and incorporated herein by reference.
<PAGE> 30
(4) Filed as an exhibit to Leap's Annual Report on Form 10-K for the fiscal
year ended August 31, 1998, as filed with the Securities and Exchange
Commission on November 30, 1998, as amended, and incorporated herein by
reference.
(5) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended November 30, 1998, as filed with the Securities and Exchange
Commission on January 14, 1999, and incorporated herein by reference.
(6) Filed as an exhibit to Leap's Current Report on Form 8-K dated May 4, 1999,
and incorporated herein by reference.
(7) Filed as an exhibit to Leap's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1999, as filed with the Securities and Exchange Commission on
July 15, 1999, and incorporated herein by reference.
(8) Filed as an exhibit to Leap's Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-64459) dated October 13, 1998, and incorporated
herein by reference.
(9) Filed as an exhibit to Leap's Post-Effective Amendment No. 2 to
Registration Statement on Form S-1 (File No. 333-64459) dated August 10,
1999, and incorporated herein by reference.
(10) Filed herewith.
<PAGE> 1
EXHIBIT 10.25
SYSTEM EQUIPMENT PURCHASE AGREEMENT
This System Equipment Purchase Agreement is made and is
effective as of September 20, 1999 (the "Effective Date"), by and between
Cricket Wireless Communications, Inc. a Delaware corporation (the "Owner"),
and Lucent Technologies Inc., a Delaware corporation (the "Vendor").
RECITALS:
A. WHEREAS, the Owner desires to purchase PCS systems pursuant
to this Contract; and
B. WHEREAS, the Vendor desires to provide such PCS systems to
the Owner, as described in Exhibit A, including, but not limited to, the
Vendor's obligation to manufacture, engineer, equip, integrate, install, test
and provide technical assistance for said PCS systems in accordance with the
terms and conditions set forth herein; and
C. WHEREAS, the mutual goal of the parties hereto is to build
PCS systems that are capable of integrating new technologies while reducing
costs over time in a highly competitive marketplace;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in this Contract, the Owner and the Vendor hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 Definitions. In addition to the terms listed below, certain
additional terms are defined elsewhere in this System Equipment Purchase
Agreement and in the Exhibits, and all definitions are subject to the provisions
of subsection 1.2 hereof. As used in this Contract, the following terms have the
following meanings:
"Annual Release Maintenance Fee" means, with respect to each
System, those recurring annual fees of the Vendor, calculated in accordance with
Exhibit B-5 and invoiced annually on the anniversary of the earlier to occur of
(i) Substantial Completion or (ii) the date such System is placed in In Revenue
Service, full payment of which entitles Owner to receive all Initial Software
Features, together with all other base generic software features in standard
software releases, Software Maintenance Releases, Software Enhancements,
Software Maintenance Releases and Software Upgrades applicable to CDMA PCS
Products which will be made available to Owner when made generally available by
Vendor during the period for which the fees were paid.
"Applicable Laws" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, all U.S. or foreign laws, treaties, ordinances, judgments, decrees,
injunctions, writs, orders and
<PAGE> 2
stipulations of any court, arbitrator or governmental agency or authority and
statutes, rules, regulations, orders and interpretations thereof of any federal,
state, provincial, county, municipal, regional, environmental or other
Governmental Entity, instrumentality, agency, authority, court or other body (i)
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or (ii) having jurisdiction over
all or any part of a System or the Work to be performed pursuant to the terms of
this Contract.
"Applicable Permits" means any waiver, exemption, zoning,
building, variance, franchise, permit, authorization, approval, license or
similar order of or from any country, federal, state, provincial, county,
municipal, regional, environmental or other Governmental Entity,
instrumentality, agency, authority, court or other body having jurisdiction over
all or any part of a System or the Work to be performed pursuant to the terms of
this Contract.
"B Exhibits" is defined in subsection 2.4.
"Backwards Compatible" or "Backwards Compatibility" means (i)
with respect to new Software Maintenance Releases, Software Upgrades, Software
Combined Releases and Software Enhancements, the ability of each of the two
prior older versions of Software to remain fully functional in accordance with
and up to the performance levels to which each was performing immediately prior
to the integration with the new Software Maintenance Release, Software Upgrade,
Software Combined Releases and/or Software Enhancement, and the ability of such
new Software Maintenance Release, Software Upgrade, Software Combined Release
and/or Software Enhancement to interoperate and be compatible with all such
functionality of such prior Software versions and with all existing in-service
Vendor provided Products already installed in the System; (ii) with respect to
all Equipment Upgrades, and Equipment Combined Releases to the extent of that
portion of the Equipment Combined Release which is the Equipment Upgrade or the
use of which by Owner is not optional without losing the benefit of the
Equipment Upgrade (for purposes of this Contract, a "New Equipment Release"
means collectively the Equipment Upgrade and such non-optional portion of the
Equipment Combined Release), the ability of the existing infrastructure to
remain fully functional in accordance with and up to the performance levels to
which it was performing immediately prior to the integration with the New
Equipment Release, and the ability of the New Equipment Release to interoperate
and be fully compatible with all such functionality of such existing
infrastructure and (iii) with respect to each of Software Maintenance Releases,
Software Upgrades, Software Combined Releases, Software Enhancements and New
Equipment Releases, the ability of such Products to comply with the existing
interfaces to other third party equipment already deployed in the System and
with respect to which Vendor is already in compliance prior to the introduction
of the Software Maintenance Releases, Software Upgrades, Software Combined
Releases, Software Enhancements and New Equipment Releases.
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"Base Station ("BTS")" means the radio Products that handle the
Owner's PCS radio traffic in a designated cell. The Base Station includes all
amplification, modulation, synchronization and other circuitry required to
process a radio signal.
"Base Station Controller ("BSC")" means the radio Products that
control the Owner's PCS radio traffic.
"beta testing" means pre-launch testing conducted by Owner in
respect of which no payment from customers is made to the Owner for the services
provided in connection therewith.
"Business Day" means any day of the year other than a Saturday,
Sunday or a United States Federal holiday.
"Capacity Guarantee" is defined in Section 16.3.
"Certificate of Final Acceptance" is defined in subsection
10.1(f).
"Certificate of Substantial Completion" is defined in subsection
10.1(d).
"Change Orders" is defined in subsection 11.1.
"Chattanooga Replacement" is defined in subsection 2.2.
"Claim" is defined in subsection 15.2.
"Claim Notice" is defined in subsection 15.2.
"Contract" means this System Equipment Purchase Agreement,
together with all Exhibits, Schedules and Specifications hereto, together with
all amendments, modifications and supplements.
"Contract Term" means the period commencing on the Effective
Date and ending five (5) years therefrom, unless terminated earlier in
accordance with the terms and conditions hereof, or unless extended by the
mutual written consent of the parties hereto.
"Core System" means that collection or aggregation of Products
which are designed by Vendor to operate as a functional entity in accordance
with the applicable Specifications or otherwise represented by Vendor in its
published information as being capable of operating as a functional entity. By
way of example and not limitation, a circuit pack or connecting cable which is
an OEM item, and which forms part of the 5 ESS switch would form part of a Core
System, whereas a call center system or voice mail system, though it interfaces
with the System, would not be part of a Core System, since various call center
systems or voice mail systems manufactured by several alternate manufacturers
could be utilized by Owner, and operated functionally independent of the
selection of Vendor's Equipment for the MSC.
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"Covered PoP" means, with respect to a System, the population
contained within the footprint of the System at the time of Substantial
Completion. Such population shall be determined based upon the most recent
census data available at the time of Substantial Completion and shall remain
constant thereafter. For purposes of calculating the Annual Release Maintenance
Fee for a System, "Covered Pop" shall mean the greater of (i) the population
located within the footprint of the System, or (ii) fifty percent (50%) of the
population in the applicable basic trading area. The population located within
the footprint of the System and the population in the applicable basic trading
area shall be determined based upon the most recent census data available at the
time of Substantial Completion and shall remain constant thereafter.
"Customer Price Guide" means the Vendor's published price
notification release or releases furnished for the purpose of communicating to
customers the Vendor's list pricing or pricing related items applicable to
Products.
"Defects and Deficiencies", "Defects or Deficiencies" or
"Defective" means any one or a combination of the following items or other items
of a substantially similar nature:
(a) when used with respect to the performance of Services, that
such Services are not provided in a careful and workmanlike manner and
in accordance with the Specifications, using material which is free from
defects;
(b) when used with respect to structures, materials or Products,
that such items (i) are not new and of good quality and free from
defects in materials and workmanship, or (ii) do not conform to the
Specifications, or (iii) with respect to Software, that such Software
does not process dates correctly; or
(c) with respect to all other Work, that the same (i) are not
free of defects in workmanship and materials, or (ii) do not conform to
the Specifications.
"Discontinued Products" is defined in subsection 12.1.
"Documentation" means the Operating Manuals, the Maintenance and
Instruction Manuals, the Training Manuals, the "as-built" Site parameters and
all other documentation necessary for the operation of the System, the
Chattanooga Replacement, any Expansions and/or any material part thereof.
"Dollars" or "U.S. $" or "$" means the lawful currency of the
United States of America.
"Equipment" means all equipment, hardware and other items of
personal property (including, without limitation, any Documentation furnished
hereunder in respect thereof) which are required to be furnished by the Vendor
in accordance with the terms and conditions of this Contract, including repair
and replacement parts.
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"Equipment Combined Release" is defined in subsection 14.2.1.
"Equipment Enhancements" means modifications or improvements
made to the Equipment which improve the performance or capacity of such
Equipment (sometimes referred to by the Vendor as its "Class B" changes).
"Equipment Upgrade" means a change or modification in any
delivered Equipment which fixes or otherwise corrects faults, design
shortcomings or shortcomings in meeting the Specifications, required to correct
defects of a type that result in inoperative conditions, unsatisfactory
operating conditions, or which is recommended to enhance safety (sometimes
referred to by the Vendor as its "Class A" changes).
"Expansions" means any additional Products ordered by the Owner
from the Vendor, which may include growth to existing Systems and additional
Products, Services and Systems.
"FCC" means the Federal Communications Commission.
"Final Acceptance" means, with respect to any System, date the
Owner signs the Certificate of Final Acceptance.
"Fit" means physical size or mounting arrangement (for example,
electrical or mechanical connections).
"Force Majeure" is defined in Section 17.
"Form" means physical shape.
"Function" means Product features and performance, or with
respect to other items, the features and performance of such items.
"Funds" is defined in subsection 2.10.
"Governmental Entity" means the United States federal government
or any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranteed Substantial Completion Date" means, with respect to
a System, the date by which Substantial Completion must be achieved by the
Vendor. The Guaranteed Substantial Completion Date is determined based on the
Site that is identified by the Owner in writing to be the last Site to be
included in the definition of such System (the "Last Site"). If the Owner has
issued a Purchase Order to the Vendor to proceed with Site Preparation with
respect to the Last Site, the Guaranteed Substantial Completion Date shall be
the date which is sixty (60) calendar days after the later of the date of such
Purchase Order or the date that written notice identifying the Last Site was
issued.
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<PAGE> 6
If the Owner has performed the Site Preparation activities with respect
to the Last Site, the Guaranteed Substantial Completion Date shall be the date
which is thirty (30) calendar days after the date the Owner issues a Site
Preparation Substantial Completion Certificate with respect to the Last Site to
the Vendor; provided that in all of the foregoing circumstances, the Guaranteed
Substantial Completion Date shall be delayed to a date mutually acceptable to
Vendor and Owner, acting reasonably, in the event that:
i. Owner has not satisfied its obligations, if any, for Site
Preparation for the installation of the switch by at least
twelve (12) weeks prior to the Substantial Completion Date (in
this case the parties agree that the period of delay shall be
equal to the number of days that the Owner's Site Preparation
obligations, if any, are delayed beyond such date which is
twelve (12) weeks prior to the Substantial Completion Date); or
ii. extreme weather and other unusual environmental conditions
beyond Vendor's reasonable control delays Vendor's completion of
Substantial Completion activities (in this case the parties
agree that the period of delay shall be equal to the period of
time associated with the duration of such extreme or unusual
condition(s)); or
iii. Vendor is not provided with all necessary and reasonable access
to the System and each Site; or
iv. at the time Owner identifies the Last Site, more than 10% of the
total number of Sites for the System are also identified
contemporaneously therewith.
Owner shall also involve Vendor through all stages of the Site Acquisition
process. In all cases, Owner shall be responsible for the provisioning of
backhaul facilities required at all Sites. Such provisioning must be completed
prior to the start of equipment integration by the Vendor at each site.
"Hazardous Materials" means material designated as a "hazardous
chemical substance or mixture" by the Administrator, pursuant to Section 6 of
the Toxic Substance Control Act, a "hazardous material" as defined in the
Hazardous Materials Transportation Act (49 U.S.C. 1801, et seq.), or a
"hazardous substance as defined in the Occupational Safety and Health Act
Communication Standard (29 CFR 1910.1200).
"In Revenue Service" or "In Revenue" means, with respect to a
System, the commercial operation of such System, exclusive of operation for
purposes of determining compliance with this Contract or beta testing, whether
or not revenue is actually being generated.
"Initial Period" is defined in Section 10.1(f).
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"Initial Software Features" means those software features
contained in Vendor's standard base generic software releases together with
those additional optional software features listed in Exhibit C.
"Installation and Integration" is defined in Exhibit F.
"Intellectual Property Rights" is defined in subsection 15.2.
"Interoperability" means the ability of the Products to operate
with other Products and to operate with and within a System, all in accordance
with the Specifications.
"Liquidated Damages" is defined in subsection 16.1.
"List Price" means Vendor's published "network wireless systems
price reference guide" or other price notification releases furnished by Vendor
for the purpose of communicating Vendor's prices or pricing related information
to Vendor's customers; however this does not include firm price quotation.
"Losses" means any claims, demands, suits, proceedings, causes
of action, damages, costs, expenses, liabilities, reasonable attorneys' fees,
and amounts paid in settlement.
"Major Outage" means the cessation of operation of a System or
System Element caused by a Defect or Deficiency attributable solely to Vendor
which has a material adverse impact on Owner's ability to operate or maintain
such System, render billings to Owner's subscribers, or which causes a material
interruption in Owner's ability to continue to furnish or offer service
functionalities and features to such subscribers. In addition, the following
capacity and/or coverage impairment conditions shall be considered a "Major
Outage":
(i) Any impairment caused by a Defect or Deficiency
attributable solely to Vendor that has the effect of reducing by
greater than [*] the number of traffic channel resources
available in the System for access by Owner's subscribers;
and/or
(ii) Any impairment caused by a Defect or Deficiency
attributable solely to Vendor that has the effect of rendering
greater than [*] of the equipped antenna sectors in the System
unable to process origination, termination or hand-off requests;
or that reduces the forward channel power of more than [*] of
the equipped sectors in the System by greater than [*]; and/or
(iii) The persistent occurrences of an impairment
referenced in paragraphs (i) or (ii) above which, although each
occurrence falls below the [*] threshold, each occurrence
exceeds a threshold of greater than [*]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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<PAGE> 8
of the applicable metric set forth above, and the total number
of such occurrences is greater than [*] events during the
Initial Period;
provided, however, that the foregoing definition shall only be applicable for
purposes of this Contract for the issuance of a Certificate of Final Acceptance
at the end of the Initial Period.
"Maintenance and Instruction Manuals" means the manuals listed
in Exhibit P and prepared by the Vendor and delivered to the Owner pursuant to
Section 9.
"Manufacturing" means the fabrication of the Equipment.
"Material Adverse Effect" is defined in subsection 24.2(b).
"Milestones" means the performance milestones set forth in the
Exhibits.
"Minimum Purchase Commitment" is defined in subsection 5.1(a).
"MSC" means a mobile switching center and usually consists of a
Lucent 5 ESS-2000(R) AnyMedia switch, an operations and management platform and
the Executive Cellular Processor Complex which includes call processing, system
intelligence handling and feature control functionality.
"Network Planning" means Work related to the design and
engineering of a System, including frequency clearance.
"Operating Affiliates" means a subsidiary or affiliate of Owner
which is authorized to operate a PCS System and which places Purchase Orders
pursuant to this Contract.
"Operating Manuals" means the operating and configuration
manuals listed in Exhibit P to be prepared by the Vendor and delivered to the
Owner pursuant to Section 9 containing detailed procedures and specifications
for the operation of any System, the Chattanooga Replacement, any Expansions
and/or any part thereof including, but not limited to, BTS manuals and BSC
manuals.
"Operator" shall mean the Owner, a Related Operator, an
Operating Affiliate or any independent contractor appointed by the Owner, which
operates a System.
"Optimization Services" means the RF optimization services
described on Exhibit G.
"Optional Software Features" means Software features for PCS
Products available to Owner on a optional, separate fee basis.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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"PCS" means personal communication services authorized by the
Federal Communications Commission.
"Person" means an individual, partnership, limited partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity of whatever nature.
"Products" means the collective reference to the Equipment and
the Software provided by the Vendor or any Subcontractor.
"Proprietary Information" is defined in subsection 26.18.
"Punch List" means that list prepared in conjunction with any
certificate which contains one or more immaterial non-service-affecting items
which have not been fully completed as of the date of the accompanying
certificate; provided that such incomplete portion of the Work shall not, during
its completion, materially impair the normal daily operation of a System in
accordance with the Specifications.
"Purchase Order" means a written notice given by the Owner to
the Vendor in compliance with the provisions of this Contract specifying the
Products, Services or other items of Work that the Vendor is authorized to
supply or commence in compliance with the terms of this Contract.
"Purchase Order Date" means the date on which any Purchase Order
is issued by the Owner in accordance with the terms of this Contract.
"Related Operator" means an entity (other than Owner) which
holds a license issued by the FCC permitting the holder to provide wireless PCS
services, which has entered into a contract with Owner to provide management
responsibilities with respect to the operation of such a service, which may
include agreements pursuant to which Owner resells to or shares with such entity
capacity on the Owner's System as, for example, when the Related Operator's cell
site equipment is interconnected with the Owner's MSC.
"RF" means radio frequency.
"RTM License" is defined in subsection 13.6.
"RTU License" is defined in subsection 13.1.
"Services" means the collective reference to all of the services
to be furnished by the Vendor as part of the Work including, but not limited to
all design, engineering, network planning, construction, interoperability,
supply, delivery, installation, testing, training, repair, maintenance,
technical and other support services, and any and all other services to be
furnished by the Vendor as part of the Work in accordance with the terms of this
Contract.
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"Site" means the physical location of a System Element Facility.
"Site Acceptance Certificate" means a document submitted by the
Vendor to the Owner and signed by an authorized representative of the Owner and
an authorized officer of the Vendor stating that, in accordance with the
requirements of this Contract, the Vendor has successfully completed all Site
Acceptance Tests with respect to the Sites specified therein.
"Site Acceptance Tests" means the collective reference to the
performance and reliability demonstrations specified in the Exhibits to
determine whether a site meets the Specifications and other requirements of this
Contract.
"Site Acquisition" means the activities to be performed by the
Owner and/or its subcontractors in connection with identifying and acquiring
sufficient rights to Sites.
"Site Acquisition Substantial Completion" means, with respect to
any System, the point at which the Owner shall have (i) acquired, by purchase,
lease or otherwise, rights to a sufficient number of Sites in the judgment of
the Owner, and (ii) that, with respect to all Sites within such System, all land
use and/or lease requirements necessary to be satisfied prior to the start of
construction activities in accordance with Applicable Laws have been satisfied.
"Site Acquisition Substantial Completion Date" means with
respect to any System, the date on which the Owner shall have achieved Site
Acquisition Substantial Completion.
"Site Preparation" means the demolition, construction and
renovation work (for example, roads, grading, fencing and structural
improvements, including, but not limited to, any buildings, towers and
commercial power) and the preparation of co-location sites necessary for the
installation of Equipment or the operation of the System, Chattanooga
Replacement, Expansions and/or any part thereof.
"Site Preparation Substantial Completion" means the completion
of all Site Preparation with respect to a Site except for Punch List items.
"Site Preparation Substantial Completion Certificate" is defined
in Section 10.1(b).
"Software" means (a) the computer software licensed to the Owner
pursuant to the terms of this Contract, (b) any Software Enhancements, Software
Maintenance Releases, Software Combined Releases and Software Upgrades, and (c)
any Documentation furnished hereunder in respect of clauses (a) and/or (b) of
this definition.
"Software Combined Release" means a Software Upgrade which is at
any time combined with any Software Enhancement.
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"Software Enhancements" means modifications or improvements made
to the Software relating to Products which improve performance, capabilities or
capacity of the Software revision level with which it is associated or which
provide additional functions to the Software. A Software Enhancement may also
correct defects in earlier versions of the Software.
"Software Maintenance Release" means issues of Software which
correct defects in preceding versions of Software.
"Software Upgrades" means periodic updates to the Software
issued by the Vendor to the Owner under Warranty and Software maintenance
obligations which add to, improve or enhance existing Software features and
capabilities involving more extensive changes to the underlying Source Code or
the user interface than is the case with Software Enhancements. A Software
Upgrade may also correct defects in the Software, or otherwise to correct
shortcomings in the Software.
"Source Code" means any version of Software incorporating high
level or assembly language that generally is not directly executable by a
processor.
"Spares" is defined in Exhibit K.
"Specifications" means the collective reference to the
specifications and performance standards (including all of the Services and
Products) as set forth in this Contract, including but not limited to Exhibit I,
Exhibit J, Exhibit M; provided that (i) the Specifications shall be deemed to
include a requirement that all of the Products and Services shall be in
accordance with ANSI standards except when otherwise stated in a specific
Exhibit or otherwise agreed by the parties, and (ii) with respect to Services
and Products for which specifications and performance standards are not provided
and listed in a specific Exhibit, the term "Specifications" shall refer to
Vendor's published specifications in respect thereof.
"Subcontractor" means a contractor, vendor, supplier, licensor
or other Person, having a direct or indirect contract with the Vendor or with
any other Subcontractor of the Vendor who has been hired to assist the Vendor in
the performance of its obligations under this Contract.
"Substantial Completion" means the time at which the Owner signs
the Certificate of Substantial Completion.
"System" means the Sites and Equipment identified by the Owner
to the Vendor in writing as collectively comprising a System.
"System Element" means the Products required to perform radio,
switching and/or system element functions for a System, any Expansions and/or
the Chattanooga Replacement.
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"System Element Facility" means the structures, improvements,
foundations, towers, and other facilities necessary to house or hold any System
Element and any related Products to be located at a particular location.
"Taxes" is defined in subsection 5.2.
"Training" is defined in subsection 9.4.
"Vendor Developments" is defined in subsection 14.3.1.
"Vendor Financing" means a loan to be provided by the Vendor to
the Owner pursuant to documentation acceptable to both parties.
"Warranty" means any one or more of the Equipment and Services
Warranty, Expansions Warranty, Software Warranty, Software Backwards
Compatibility Warranty, Equipment Backwards Compatibility Warranty, Compliance
Warranty and the Year 2000 Warranty.
"Warranty Period" is defined in Section 18.1.
"Work" means the furnishing of Products hereunder, and the
performance of work, engineering services, installation services and all other
related activities and obligations required to be performed by the Vendor
pursuant to this Contract.
1.2 Other Definitional Provisions. (a) When used in this
Contract, unless otherwise specified therein, all terms defined in this Contract
shall have the defined meanings set forth herein. Terms defined in the Exhibits
are deemed to be terms defined herein; provided that in the case of any terms
that are defined both in this Contract and/or an Exhibit, the definitions
contained in this Contract shall supersede such other definitions for all
purposes of this Contract; provided further, that definitions contained in any
Exhibit shall control as to such Exhibit.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Contract refer to this Contract as a whole and
not to any particular provision of this Contract and section, subsection,
schedule and exhibit references are to this Contract unless otherwise specified.
Reference herein to Section shall mean any and all subsections thereof.
(c) The meanings given to terms defined in this Contract are
applicable to both the singular and plural forms of such terms.
SECTION 2. SCOPE OF WORK, RESPONSIBILITIES AND PROJECT
MILESTONES
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2.1 Scope of Work. During the Contract Term and in accordance
with Purchase Orders issued to Vendor from time to time, the Vendor shall
engineer, design, plan, manufacture, construct, install, test and perform all
Work. The terms of this Contract shall also apply to Purchase Orders issued by
Operating Affiliates and by Owner, for and on behalf of its Related Operators,
provided that in each case, the Purchase Orders are made pursuant to and
incorporate by reference the terms of this Contract. The Vendor shall be
responsible for providing in accordance with the terms of this Contract any and
all items and services which are expressly included by the terms of this
Contract or in the Exhibits. The Vendor shall furnish all labor, materials,
tools, transportation and supplies required to complete its obligations in
accordance with this Contract.
In instances where Purchase Orders are placed by Owner for or on behalf
of a Related Operator, Owner shall be considered the purchaser for purposes of
placing all orders, addressing invoices and the obligation of payment. Owner
agrees to be obligated hereunder with respect to all payments which become due
hereunder with respect to Purchase Orders placed by it for or on behalf of a
Related Operator, including but not limited to all payments for Products. In
addition, Owner shall be considered the purchaser for purposes of passage of
title and risk of loss with regard to Products and Software which are delivered
to it, even though such are subsequently re-delivered to another entity.
2.2 Plan for Chattanooga. In addition to its obligations
specified in Section 2.1, upon the terms and conditions set forth herein, the
Vendor shall provide those Products and Services described in Exhibit B-3 to the
Owner in order to provide for the technology swap for the System in Chattanooga,
Tennessee (the "Chattanooga Replacement").
2.3 Site Acquisition. The Owner shall acquire all Sites. The
Vendor, at its request, shall be kept informed of the progress made on ongoing
Site Acquisition activity. As the Site Acquisition progresses, the Vendor agrees
to alter regularly the engineering plan to determine a new search ring or rings
to take into account any changes or modifications requested by the Owner due to
the Owner's inability to acquire sufficient rights to a location which could
constitute a Site in a timely or economic manner; provided that all such
alterations requested by Owner shall be considered by Owner and addressed
pursuant to the Change Order provisions described in Section 11 below. Vendor
shall offer to Owner Site Acquisition services as defined on Exhibit E and
according to the pricing set forth on Exhibit B-7. When making changes to the RF
engineering plan, the Vendor shall take into account the Site Acquisition
already completed by the Owner. Upon Site Acquisition Substantial Completion,
Owner shall notify Vendor of the Site Acquisition Substantial Completion Date.
2.4 Expansions. During the five (5) year period commencing on
the Effective Date, the Owner may, from time to time, order Expansions from the
Vendor, subject to the provisions of Section 12. The price and terms of such
Expansions shall be as set forth in Exhibits B and B-1 through and including B-8
(collectively, the "B Exhibits").
2.5 Review of Contract. Each party has examined in detail and
carefully studied and compared the Contract with all other information furnished
by the other party
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and has promptly reported to the other party any material errors,
inconsistencies or omissions so discovered or discovered by any of its
Subcontractors.
2.6 Eligibility under Applicable Laws and Applicable Permits.
The Vendor shall be responsible for ensuring that the Vendor and its
Subcontractors are and remain eligible under all Applicable Laws and Applicable
Permits to perform the Work under this Contract in the various jurisdictions
involved including, to the extent that Vendor will be responsible for
construction for any particular component of the Work, all such construction
will be done in accordance with all applicable Federal Communications Commission
requirements. Each of the Owner and the Vendor shall be responsible for
obtaining and maintaining in full force and effect the Applicable Permits listed
as its responsibility in the applicable Exhibits. Owner shall use its best
efforts to obtain such approvals, licenses, permits, tariffs, and/or other
authorities from the Federal Communications Commission and state and local
public utilities commissions as may be necessary for construction and operation
of a PCS System.
2.7 Further Assurances. The Vendor shall execute and deliver all
reasonable further instruments and documents, and will, in good faith, consider
all reasonable requests for further action, including, but not limited to,
assisting the Owner in filing notices of completion with the appropriate state
and local Governmental Entity, that may be necessary or that the Owner may
reasonably request in order to enable the Owner or the Vendor to complete
performance of the Work or to effectuate the purposes or intent of this
Contract. All such requests shall be addressed pursuant to the Change Order
procedures described below in Section 11.
2.8 Liens and Other Encumbrances. (a) The Vendor covenants and
agrees, subject to Vendor's receipt from Owner of full payment in respect
thereof, to:
(i) protect and keep free all Systems, Expansion,
Chattanooga Replacement and/or any and all interests and estates therein
acquired from the Vendor, and all improvements and materials now or
hereafter placed thereon under the terms of this Contract, from any and
all claims, liens, charges or encumbrances of the nature of mechanics,
labor or materialmen liens or otherwise arising out of or in connection
with performance by any Subcontractor, including services or furnishing
of any materials hereunder, and to promptly have any such lien released
by bond or otherwise; and
(ii) give notice of this subsection to each
Subcontractor before such Subcontractor furnishes any labor or materials
for any System.
(b) If any laborers', materialmen's, mechanics', or other
similar lien or claim thereof is filed by any Subcontractor, the Vendor shall
cause such lien to be satisfied or otherwise discharged, or shall file a bond in
form and substance satisfactory to the Owner in lieu thereof within ten (10)
Business Days of the Vendor's receipt of notice of such filing. If any such lien
is filed or otherwise imposed, and the Vendor does not cause such lien to be
released and discharged forthwith, or file a bond in lieu thereof, then, without
limiting the
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Owner's other available remedies, the Owner has the right, but not the
obligation, to pay all sums necessary to obtain such release and discharge or
otherwise cause the lien to be removed or bonded to the Owner's satisfaction
from funds retained from any payment then due or thereafter to become due to the
Vendor.
(c) The Owner reserves the right to post or place within any
System notices of non-responsibility or to do any other act required by
Applicable Law, to exempt the Owner from any liability to third parties by
reason of any work or improvements to be performed or furnished hereunder;
provided that failure by the Owner to do so shall not release or discharge the
Vendor from any of its obligations hereunder.
2.9 Duty To Inform Itself Fully; Waiver of Defense. (a) Each
party shall be deemed to have notice of and to have fully examined and approved
the Specifications, the Exhibits and all other documents referred to herein, and
all drawings, specifications, schedules, terms and conditions of this Contract,
regulations and other information in relation to this Contract and/or any
amendments, modifications or supplements thereto at any time on or after the
Effective Date and to have fully examined, understood and satisfied itself as to
all information of which it is aware and which is relevant as to the risks,
contingencies and other circumstances which could affect this Contract and in
particular the installation of any System or any part thereof.
2.10 Special Provisions Regarding Vendor Financing. The
financing made available to Owner pursuant to separate financing agreements will
provide Owner with an available source of funds ("Funds") for purchases of items
other than the Products and Services specified hereunder for the Systems. With
respect to the purchase of any additional items to be used in connection with
the Systems, or any additional market area for which Owner obtains PCS licenses
utilizing the Funds, or any other items utilizing the Funds, Vendor shall be
treated as a preferred vendor and will be provided the first opportunity to
provide such additional items in accordance with the terms of this Contract,
provided such items conform to the Specifications and are priced in accordance
with the B Exhibits. In the event that Vendor does not manufacture such an item
equivalent in Form, Fit and Function to be made available for purchase at a
competitive market price, Owner shall be permitted to purchase such items from
third parties utilizing the Funds.
SECTION 3. PURCHASE ORDERS AND SCHEDULES
3.1 Purchase Orders. The Owner and any Operating Affiliate may
deliver Purchase Orders to the Vendor at any time and from time to time during
the Contract Term. Such Purchase Orders shall be sent to the Vendor either by
certified mail, electronic transmission or another mutually acceptable manner to
the address specified in Exhibit L of this Contract. All Purchase Orders shall
be governed by the terms and conditions of this Contract, unless otherwise
agreed by the parties in writing. Each Purchase Order shall specify, in
reasonable detail, the Products, Services or other items of Work to be provided
by the Vendor.
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3.2 Delivery under the Contract. The Vendor shall complete the
Work specified in each Purchase Order in accordance with the terms and
conditions of this Contract.
3.3 Order Acceptance. All Purchase Orders submitted by Owner
shall be deemed to incorporate and be subject to the terms and conditions of
this Contract unless otherwise agreed in writing. All Purchase Orders, including
electronic orders, shall contain the information necessary for Vendor to fulfill
the order. All schedules and requested dates are subject to Vendor's
concurrence, provided that if orders are made within the agreed to lead times
specified in Exhibit L, Vendor shall not withhold its concurrence to the
requested dates. No provision or data on any Purchase Order or contained in any
documents attached to or referenced in any Purchase Order, or any subordinate
document (such as shipping releases), which is inconsistent with the terms of
this Contract shall be binding, except data necessary for Vendor to fill the
order. All such other data and provisions are hereby rejected. Electronic orders
shall be binding on Owner notwithstanding the absence of a signature, provided
that the parties have implemented a mutually acceptable electronic order process
and such orders deemed to be binding have been issued by Owner and accepted by
Vendor in accordance with the process agreed upon by the parties. Order
acceptance provisions, together with delivery schedules and intervals and
forecast requirements are set forth in Exhibit L.
While it is Vendor's objective to provide Owner with an acknowledgment
of each order received, Owner shall advise Vendor to the extent that Owner
becomes aware of any missing or late notifications to ensure that the order has
not been lost.
Changes made by Owner to an accepted Purchase Order shall be treated as
a separate order unless the parties expressly agree otherwise. If any such
change affects Vendor's ability to meet its obligations under the original
Purchase Order, any price, shipment date, or completion date quoted by Vendor
with respect to such original order is subject to change and shall be addressed
pursuant to the Change Order provisions below in Section 11.
3.4 Forecasts. Owner shall provide to Vendor regular forecasts
of Owner's annual Product and Services needs. If the quantities ordered are more
than 25% greater than forecast quantities, Vendor shall be permitted a
reasonable extension of time to fulfill such orders and achieve the Milestones
required of Vendor hereunder.
3.5 Deployment Plans and Milestones. The deployment plans and
intervals, together with the key milestones, order intervals, in respect of each
System, are set forth in Exhibit L.
3.6 Inventory Control and Bar-coding. Vendor shall, at no
additional charge, pack and mark shipping containers in accordance with its
standard practices for domestic shipments. Where in order to meet Owner's
requests, Vendor packs and/or is required to mark shipping cartons in accordance
with Owner's specifications, Vendor shall invoice Owner additional charges for
such packing and/or marking. Vendor shall (a)
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enclose a packing memorandum with each shipment and, if the shipment contains
more than one package, identify the package containing the memorandum, and (b)
mark Products as applicable for identification in accordance with Vendor's
marking specifications (for example, model/serial number and month, year of
manufacture).
SECTION 4. SUBCONTRACTORS
4.1 Subcontractors. The Vendor may subcontract any portion of
its obligations under this Contract, but no such subcontract shall relieve
Vendor from primary responsibility and liability for the performance of Vendor's
covenants and obligations under this Contract. Regardless of whether or not the
Vendor obtains approval from the Owner or a Subcontractor or whether the Vendor
uses a Subcontractor recommended by the Owner, use by the Vendor of a
Subcontractor shall not, under any circumstances: (i) give rise to any claim by
the Vendor against the Owner if such Subcontractor breaches its subcontract or
contract with the Vendor; (ii) give rise to any claim by such Subcontractor
against the Owner; (iii) create any contractual obligation by the Owner to the
Subcontractor; (iv) give rise to a waiver by the Owner of its rights to reject
any Defects or Deficiencies or Defective Work; or (v) in any way release the
Vendor from being solely responsible to the Owner for the Work to be performed
under this Contract.
4.2 The Vendor's Liability. The Vendor is responsible for all of
its obligations under this Contract, including the Work, regardless of whether a
subcontract or supply agreement is made or whether the Vendor relies upon any
Subcontractor to any extent. The Vendor's use of Subcontractors for any of the
Work shall in no way increase the Vendor's rights or diminish the Vendor's
liabilities to the Owner with respect to this Contract, and in all events,
except as otherwise expressly provided for herein, the Vendor's rights and
liabilities hereunder with respect to the Owner shall be as though the Vendor
had itself performed such Work. The Vendor shall be liable for any delays caused
by any Subcontractor as if such delays were caused by the Vendor.
4.3 No Effect of Inconsistent Terms in Subcontracts. The terms
of this Contract shall in all events be binding upon the Vendor regardless of
and without regard to the existence of any inconsistent terms in any agreement
between the Vendor and any Subcontractor whether or not and without regard to
the fact that the Owner may have directly and/or indirectly had notice of any
such inconsistent term.
4.4 Assignability of Subcontracts to Owner. Vendor shall use
reasonable efforts to have each agreement between the Vendor and a Subcontractor
contain a provision stating that, in the event that the Vendor is terminated for
cause, convenience, abandonment of this Contract or otherwise, (i) each
Subcontractor shall continue its portion of the Work as may be requested by the
Owner and (ii) such agreement permits assignment thereof without penalty to the
Owner and, in order to create security interests, to third parties designated by
Owner, in either case at the option of the Owner and for the same price and
under the same terms and conditions as originally specified in such
Subcontractor's agreement with the Vendor.
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4.5 Removal of Subcontractor or Subcontractor's Personnel. The
Owner has the right at any time to request removal of a Subcontractor and/or any
of a Subcontractor's personnel from Work on the System upon reasonable grounds
and reasonable prior notice to Vendor. Such request (a "Request for Removal")
shall be in writing and shall specify the Owner's reasoning therefor. The Vendor
promptly shall issue a written response to any such Request for Removal,
specifying the reasoning for its disagreement or agreement, as the case may be,
with the reasoning contained in the Request for Removal. If the parties fail to
agree, this matter shall be handled in accordance with the dispute resolution
procedures in Section 23. The exercise of such right by the Owner shall have no
effect on the provisions of subsections 4.1 and 4.2.
4.6 Subcontractor Insurance. The Vendor shall require its
Subcontractors to obtain, maintain and keep in force, during the time they are
engaged in providing Products and Services hereunder, insurance coverage of the
types and levels customary in the industry (provided that the maintenance of any
such Subcontractor insurance shall not relieve the Vendor of its other
obligations pursuant to this Contract). The Vendor shall, upon the Owner's
request, furnish the Owner with evidence of such insurance in form and substance
reasonably satisfactory to the Owner.
4.7 Review and Approval not Relief of Vendor Liability. No
inspection, review or approval by the Owner permitted under this Contract of any
portion of the Work shall relieve the Vendor of any duties, liabilities or
obligations under this Contract, but nothing contained in this subsection shall
be deemed a bar of any waiver given by the Owner to the Vendor pursuant to and
in accordance with the terms of this Contract.
4.8 Vendor Warranties. Except as otherwise expressly provided in
Section 18, the warranties of the Vendor pursuant to Section 18 shall be deemed
to apply to all Work performed by any Subcontractor as though the Vendor had
itself performed such Work and to all Products supplied by any third-party
vendor or other subcontractor as though the Vendor itself had supplied such
Products. Except as otherwise specifically provided in Section 18, the parties
agree that such warranties shall not be enforceable merely on a "pass-through"
basis but that Owner may, but shall not be obligated to, enforce such warranties
of any Subcontractor to the extent that the Owner determines that the Vendor is
not paying and/or performing its warranties; provided that any such election by
the Owner shall not relieve the Vendor from any obligations or liability with
respect to any such warranty.
4.9 Payment of Subcontractors. The Vendor shall make all
payments it is contractually required to make to all Subcontractors (except in
the case of legitimate disputes between the Vendor and any such Subcontractor
arising out of the agreement between the Vendor and such Subcontractor) in
accordance with the respective agreements between the Vendor and its
Subcontractors such that no Subcontractor shall be in a position to enforce any
liens and/or other rights against the Owner, the System, any Products or any
part thereof.
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4.10 Copies. Subject to any confidentiality obligations insisted
upon by third party providers, including Subcontractors, Vendor will use its
good faith, reasonable efforts to provide Owner with any and all relevant
agreements, understandings, subcontracts and other documents pertaining to the
provision of Products or Services by a Subcontractor which Owner may reasonably
require in order for it to be provided with the information necessary to
exercise any of its rights under this Contract.
4.11 Benefit of Subcontracts. In addition to anything else
provided for in this Contract, the Owner shall be entitled to the following
benefits and rights of the Vendor under its contracts with any applicable
third-party vendors or other Subcontractors: all rights to conduct in-house
tests, to receive notice of upgrades and enhancements and to purchase spare
parts; provided however, that the Vendor shall maintain sole responsibility for
all obligations and other duties under all such contracts.
SECTION 5. PRICES AND PAYMENT
5.1 Prices; Minimum Purchases. (a) The prices for the Products,
Services and other items of Work for the Contract Term are set forth in the B
Exhibits. The prices for Expansions and the Chattanooga Replacement, including
all Work to be performed in connection with the Chattanooga Replacement, are
also set forth in the B Exhibits. The Owner agrees that the aggregate amount of
all payments to the Vendor pursuant to Purchase Orders delivered to the Vendor
during the Contract Term shall be not less than Three Hundred Thirty Million
Dollars ($330,000,000) (the "Minimum Purchase Commitment").
(b) Prices for all Products and Services shall be afforded the
following price protection. [***]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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[***]
5.2 Taxes. The Owner shall reimburse Vendor for all present or
future taxes, levies, imposts, deductions, charges, withholdings and liabilities
("Taxes") imposed on the Vendor by any Governmental Entity relating to the
provision of Products and Services by the Vendor to the Owner under this
Contract, provided, however, that the Owner shall not be liable for and shall
not pay or reimburse Vendor for any Taxes on or measured by the income or
receipts of the Vendor. If the Owner shall pay Taxes for which the Vendor
receives a credit, then the Vendor shall reimburse to the Owner an amount equal
to such credit.
5.3 Payment. Payment for the Products and Services to be
supplied pursuant to this Contract shall occur as follows (in each case
following submission of an invoice by the Vendor which shall properly document,
to the reasonable satisfaction of the Owner, all the items included):
(a) Products for Systems: except as set forth in subsections (b)
and (c) below,
(i) [*] of the amount of all Purchase Orders completed
by the Vendor with respect to a Site shall be invoiced upon shipment of
the Products in respect of such Purchase Orders;
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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(ii) [*] of the amount of all Purchase Orders completed
by the Vendor with respect to a Site shall be invoiced upon completion
of Installation and Integration of the Products with respect to each
Site;
(iii) [*] of the amount of all Purchase Orders completed
by the Vendor with respect to a Site shall be invoiced upon the date
Owner signs a Certificate of Substantial Completion in respect of the
Products forming part of such Purchase Orders; provided that in the
event that a Certificate of Substantial Completion is not issued within
five (5) Business Days after the Guaranteed Substantial Completion Date
because of a delay in reaching Substantial Completion solely
attributable to the failure or lack of performance of Owner to satisfy
its obligations and commitments in a timely manner, such amount shall be
invoiced on the fifth (5th) Business Day following Substantial
Completion; and
(iv) the balance of all amounts due Vendor pursuant to
completed Purchase Orders with respect to Products for a System shall be
invoiced upon Final Acceptance of such System.
(b) Services: Services shall be invoiced as performed, or as
soon thereafter as practical but in no event more frequently than monthly,
provided that Installation and Integration Services and Optimization Services
will only be invoiced after the Owner signs a Certificate of Substantial
Completion in respect of the System for which such Services are rendered;
provided that in the event that a Certificate of Substantial Completion is not
issued within five (5) Business Days after the Guaranteed Substantial Completion
Date because of a delay in reaching Substantial Completion solely attributable
to the failure or lack of performance of Owner to satisfy its obligations and
commitments in a timely manner, such amount shall be invoiced on the fifth (5th)
Business Day following Substantial Completion.
(c) Optional Software Features and Spares: The purchase price
for the initial Optional Software Features and Spares shall be invoiced after
the Owner signs a Certificate of Substantial Completion in respect of the System
for which such initial Optional Software Features and Spares are furnished;
provided that in the event that a Certificate of Substantial Completion is not
issued within five (5) Business Bays after the Guaranteed Substantial Completion
Date because of a delay in reaching Substantial Completion attributable solely
to the failure or lack of performance of Owner to satisfy its obligations and
commitments in a timely manner, such amount shall be invoiced on the fifth (5th)
Business Day following Substantial Completion.
(d) Expansions (Growth):
(i) [*] of the amount of all Purchase Orders completed
by the Vendor with respect to Products for which Vendor provides
installation Services pursuant to an Expansion shall be invoiced upon
delivery of such Products; and
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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(ii) [*] of the amount of all Purchase Orders completed
by Vendor with respect to Products for which Vendor provides
installation Services pursuant to an Expansion shall be invoiced upon
completion of installation of such Products; and
(iii) 100% of the amount of all Purchase Orders
completed by the Vendor with respect to Products for which Vendor
provides no installation Services pursuant to an Expansion shall be
invoiced upon delivery of such Products.
(e) Payment of Invoices. Owner shall pay the invoiced amounts,
less any disputed amounts, within ten (10) days from the date of transmission of
Vendor's invoice. Delinquent payments are subject to a late payment charge after
thirty (30) days at the rate of [*] per month, or portion thereof, of the amount
due (but not to exceed the maximum lawful rate). Any disputed items which are
determined to be validly billed are due for payment based upon the original
invoice date.
5.5 No Payment in Event of Material Breach. Subject to
Subsection 24.5, the Owner shall have no obligation to make any payment for any
Work with respect to which the Vendor is in material breach of this Contract
until and unless such breach is cured or waived by the Owner in accordance with
the terms of this Contract.
5.6 In Revenue Payments. At any time during a period of delay
the Owner may, in its sole discretion, decide to place a System which is subject
to such delay into In Revenue Service. Such placement into In Revenue Service
shall constitute Substantial Completion only for purposes of the payment
obligations above, but shall not in any way relieve the Vendor of any of its
obligations under this Contract, including without limitation achieving a
Guaranteed Substantial Completion Date nor shall such In Revenue Service trigger
the commencement of the Initial Period.
5.7 Currency and Place of Payment. Payments under this Contract
shall be made in US dollars and if such method of payment is acceptable to
Owner, Owner shall pay all amounts due Vendor hereunder using Electronic Funds
Transfer ("EFT"). EFT payments by Vendor shall be made to the following account
of Vendor or such other account as is subsequently designated by Vendor in
writing and, concurrent with the EFT payment, Owner shall fax a coy of the
remittal to Vendor's manager of cash operations at 770-750-4288:
Chase Manhattan Bank
New York, New York
Account Name: Lucent Technologies Inc.
Acct.: 910144-9099
ABA 021000021
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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SECTION 6. AVAILABILITY OF IOS
6.1 Availability of IOS. [***]
6.2 Effect of Other Base Stations. [***]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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SECTION 7. MODCELL/MINICELL REPLACEMENT
7.1. Minicell/Modcell. For markets to be located in Chattanooga
and Nashville, Tennessee, for up to a maximum of [*] Sites, [*] shall de-install
and redeploy the minicells in such markets to a market area(s) of Owner's choice
at [*], and replace such minicells with modcells in accordance with this
Section. [*] shall be responsible for temporary warehousing of the de-installed
minicells at a location of Owner's choosing within the United States. [*] shall
be responsible, at [*], for transportation from the original location to such
warehouse, transportation from such warehouse to the new installation Site, and
re-installation at the new Site within the United States. [*] shall be
responsible for the cost of installation of the replacement modcells. In
addition, Vendor shall provide up to [*] refurbished 5 ESS(R) switches
engineered for up to 50 minicells and one carrier each at [*] for use in any of
Owner's markets at Owner's choice. [*] shall be responsible for the cost of
engineering and installation of such switches, at prices consistent with the
prices set out in Exhibit B-2 and B-3.
Vendor shall reimburse Owner [*] incurred by Owner as a result of the
use of minicells in Nashville and Chattanooga, Tennessee, up until the
replacement of the minicells with modcells in such markets. In the event that
Owner delays the installation of modcells after they are made available by
Vendor, Vendor shall not be responsible for [*] incurred by Owner after the date
that the replacement is made available.
During the time commencing on the date the minicells are decommissioned
from operation in the System, until the date that the minicells are installed in
the new reinstallation Site, the applicable Warranty Period remaining on such
Products, if any, will be suspended. Thereafter, upon reinstallation, the
Warranty Period shall continue for a period which is the greater of (i) the
remaining Warranty Period; and (ii) twelve months following reinstallation.
During period from decommissioning to redeployment, Vendor will continue
to supply all Class A Upgrades, new Software loads, and other standard support
which would otherwise be provided pursuant to this Contract. Vendor shall, at
[*]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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[*] provide reasonable quantities of spares and training in light of the new
total network deployment of modcells and minicells.
If the refurbished 5 ESS(R) switches to be delivered to Owner have not
been decommissioned immediately prior to the time that they are to be
refurbished and engineered, Vendor will provide Owner with a reasonable
opportunity to inspect the switches at the site where such switches are located,
to satisfy itself that such switches are in a reasonable state of repair and
will be fit for Owner's purposes; provided that the owner or operator of such
site consents to the site inspection. Owner may refuse to accept such a switch
that is not, in Owner's reasonable opinion, in such a satisfactory condition in
accordance with the foregoing. If the refurbished 5 ESS(R) switches to be
delivered to Owner have been decommissioned and removed from the prior
operator's network, Owner or, at Owner's request, a qualified third party
reasonably acceptable to both parties, shall have the right to conduct a
reasonable inspection on such switch, to determine whether the switches are in
such a satisfactory condition in accordance with the foregoing. If Owner
reasonably objects to the conditions of any of such switches, Vendor will either
obtain the necessary switches in a satisfactory condition, or take such other
actions as are necessary to satisfy Owner's objections.
7.2 Tennessee Swap-out Credit. In connection with the swap-out
of the existing network in Tennessee, Vendor will make available to Owner
general purchase credits in the amount of [*] (the "Tennessee Swap-out
Credits"), to be applied against any invoice issued by Vendor during the initial
twenty four (24) months of the Contract term, provided that Credits shall not be
applied to any particular invoice in an amount greater than 20% of the net
invoiced amount; provided, however that Vendor will agree with reasonable
requests by Owner to either adjust the amount which can be applied to each
invoice in order to ensure that the entire amount of the Tennessee Swap-out
Credits are applied against invoices during such initial twenty four (24) month
period or extend the initial twenty four (24) in order to facilitate the entire
usage of the Tennessee Swap-out Credits.
SECTION 8. SERVICES
8.1 Transportation. The Vendor shall at the Vendor's sole cost
and expense provide for the transportation and delivery to the Sites of all the
Products to be delivered pursuant to, and in accordance with, each Purchase
Order and the terms of this Contract. In the event of any unusual Site
selections or requirements which require transportation arrangements out of the
ordinary course having regard to normal industry standards and practices (such
as non-standard crane requirements, helicopter transportation requirements to a
remote setting, etc.), Vendor shall arrange, subject to Owner's prior approval,
for such exceptional transportation requirements from local staging facilities
or warehouse locations to the unusual Site. Vendor shall notify Owner that it
believes, in good faith, that exceptional transportation arrangements are
necessary in the circumstances, and Vendor will consult with Owner on an
approved course of action to complete delivery. Owner shall be
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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responsible for all costs with respect to such exceptional transportation
requirements in excess of transportation costs applicable to a standard Site.
8.2 Services. The Vendor shall provide the Services ordered by
Owner in accordance with the provisions of the Exhibit hereto in respect of such
Services, including, without limitation, the following Services: RF Design
Services as stated in Exhibit D, construction management and site construction
services as stated in Exhibit E, architectural & engineering services as stated
in Exhibit E, spectrum clearing and microwave relocation services as stated in
Exhibit E, Optimization Services as set forth in Exhibit G, Installation and
Integration services as set forth in Exhibit F and Wireless Support Services as
stated in Exhibit H.
8.3 No Interference. The Vendor shall install all Equipment and
build each of the Systems so as to cause no unauthorized interference with or
obstruction to lands and thoroughfares or rights of way on or near which the
installation work may be performed. The Vendor shall exercise every reasonable
safeguard to avoid damage to existing facilities, and if repairs or new
construction are required in order to replace facilities damaged by the Vendor
due to its carelessness, negligence or willful misconduct, such repairs or new
construction shall be at the Vendor's sole cost and expense. Vendor understands
that many of the Sites may be co-located with other RF transmission facilities
and Vendor shall take all necessary precautions and safety measures to ensure
the safety of all of Vendor's and Subcontractors' personnel at such Sites. The
Owner shall use its reasonable best efforts to ensure that no other third
parties employed or engaged by the Owner hinder or delay the Vendor in the
performance of its installation obligations hereunder.
Vendor represents and warrants that all Products furnished
hereunder shall comply, to the extent required, with the requirements of Part 24
of the Federal Communication Commission's Rules and Regulations (the "FCC
Rules") pertaining to personal communications services in effect upon delivery
of such Product. In addition, Vendor represents and warrants that a Product
furnished hereunder shall comply, to the extent required, with the requirements
of Subpart J of Part 15 of the FCC Rules in effect upon delivery of such
Product, including those sections concerning the labeling of such Product and
the suppression of radio frequency and electromagnetic radiation to specified
levels. Vendor makes no undertaking with respect to harmful interference caused
by (i) unauthorized installation, repair, modification or change or Products not
furnished by Vendor; (ii) Products being subject to misuse, neglect, accident or
abuse by other than Vendor; (iii) Products being used in a manner not in
accordance with operating instructions or in a suitable installation environment
or operations of other equipment in the frequency ranges reserved for Owner
within the applicable licensed area. Vendor assumes no responsibility under this
clause for items not specified or supplied by Vendor. The foregoing warranties
are collectively referred to as the "Compliance Warranty".
Vendor shall, when appropriate, have reasonable access to
Owner's premises during normal business hours and at such other times as may be
agreed upon by the parties in order to enable Vendor to perform its obligations
under this Contract. Vendor shall coordinate such access with Owner's designated
representative prior to visiting such
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premises. Vendor agrees to instruct its employees to comply with all site rules
while on Owner's premises. The employees and agents of Vendor shall, while on
the Owner's premises, comply with all site rules and guidelines including, but
not limited to, where required by government regulations, submission of
satisfactory clearance from U.S. Department of Defense and other governmental
authorities concerned. Neither party shall require waivers or releases of any
personal rights from representatives of the other in connection with visits to
its premises, and no such releases or waivers shall be pleaded by either party
in any action or proceeding.
For purposes of this Section, all references to "Owner's
premises" and other similar references shall be deemed to refer to any location
where a Site is to be located, which may include land or buildings owned or
leased by Owner. To the extent that Owner does not own the premises, Vendor's
obligations to adhere to site rules and guidelines shall include, without
limitation, those rules and guidelines required by the owner, landlord or
property manager having care and control of such premises, which Owner has
provided to Vendor in advance of the commencement of the applicable Work
hereunder.
SECTION 9. MANUALS, ENGINEERING DRAWINGS AND TRAINING
9.1 Documentation. The Vendor shall provide the Documentation in
the amounts and formats listed in Exhibit P. The Documentation shall be prepared
in accordance with the relevant Specifications. Operating Manuals with
up-to-date (but not "as-built") drawings, specifications and design sheets shall
be available for the Training as set forth in subsection 9.4.
9.2 Standards for Manuals. All Operating Manuals and Maintenance
and Instruction Manuals required to be provided by the Vendor pursuant to this
Contract shall be:
(a) detailed and comprehensive and prepared in conformance with
the Specifications and generally accepted national standards of
professional care, skill, diligence and competence applicable to
telecommunications and operation practices for facilities similar to the
Systems;
(b) consistent with good quality industry operating practices
for operating personal communications service systems of similar size,
type and design;
(c) sufficient to enable the Owner to operate and maintain each
System on a continuous basis; and
(d) prepared subject to the foregoing standards with the goal of
achieving operation of each System at the capacity, efficiency,
reliability, safety and maintainability levels contemplated by this
Contract and required by all Applicable Laws and Applicable Permits.
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9.3 Equipment and Data. The Vendor shall furnish all drawings,
specifications, specific design data, preliminary arrangements and outline
drawings of the Equipment and all other information as required in accordance
with this Contract in sufficient detail to indicate that the Equipment and
fabricated materials to be supplied under this Contract comply with the
Specifications.
9.4 Training. As more fully described in Exhibit O, the Vendor
shall provide to the Owner a training program with respect to each System
(collectively, the "Training"). Promptly upon execution of this Contract, the
Vendor shall establish a training coordinator, whose responsibility shall be to
work with the Owner to ensure that the Owner receives the Training. Such
coordinator (or his or her replacement) shall continue in such assignment until
the receipt by the Owner of all of the Training required to be provided.
9.5 Manuals and Training. The Training and the Documentation
provided in connection herewith, including, without limitation, all
Documentation provided in CD-ROM format, and pursuant to subsections 9.2, 9.3
and 9.4 shall be updated in reasonable quantities at no additional cost to Owner
pursuant to and in accordance with all Product upgrades and/or modifications
applicable to any System and/or any part thereof.
SECTION 10. ACCEPTANCE PROCEDURES
10.1 Acceptance Procedures. Depending upon the specific Products
and Services to be furnished by Vendor, and those tasks for which Owner shall
assume responsibility, the parties, directly or through third-party vendors or
other Subcontractors, as the case may be, shall carry out the following
procedures. Certain of the tests below will apply to purchases of Products and
Services which comprise a System, while certain other tests will apply to tests
for Product and Service purchases for Expansions
(a) Factory Tests Owner may, at Owner's option and cost, be
present at any factory testing conducted by Vendor. Vendor shall give the Owner
ten (10) Business Days advance notice of any such factory testing relating to
the Products or Services furnished by Vendor hereunder. Vendor shall cooperate
with Owner to facilitate Owner's observation of such tests. Regardless of
whether or not Owner observes any factory testing, Vendor agrees to, within a
reasonable period of time in view of the nature and urgency of the request, upon
written request by Owner, provide Owner with copies of all documentation
relating to factory testing of the Product specified by Owner, including without
limitation copies of test procedures, test results and FCC compliance
certifications.
(b) Site Preparation Substantial Completion Upon completion of
all Site Preparation with respect to each Site for which the Owner has issued a
Purchase Order directing the Vendor to proceed with Site Preparation activities,
the Vendor shall issue a Site Preparation Substantial Completion Certificate
("Site Preparation Substantial Completion Certificate") certifying that all Site
Preparation specified in the Purchase Order is substantially complete. Such
certificate shall be accompanied by a Punch List of all
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<PAGE> 29
incomplete items which items shall be completed by the Vendor prior to Final
Acceptance. Vendor shall offer Construction Management, Architectural &
Engineering, Site Civil Construction and Antenna Installation and Testing as
provided for in Exhibit E and at pricing consistent with that set forth in
Exhibit B-7. In the event the Owner performs Site Preparation with respect to a
Site, the Owner shall issue the Site Preparation Substantial Completion
Certificate.
(c) Site Installation and Integration Completion Certificate.
Upon completion of the installation of the BTS and other Products and the
completion of integration activities in accordance with Exhibit F the Vendor
shall issue a Site Installation and Integration Substantial Completion
Certificate certifying that all installation and integration activities
specified in the Purchase Order are substantially complete. Such certificate
shall be accompanied by a Punch List of all incomplete items which items shall
be completed by the Vendor prior to Final Acceptance.
(d) Certificate of Substantial Completion. Upon completion of
Optimization Services and all testing with respect to a System in accordance
with Exhibit G, the Vendor shall issue a Certificate of Substantial Completion,
which shall be in the form of a checklist listing all tests performed and the
results thereof, and shall be accompanied by a Punch List of outstanding items
(the "Certificate of Substantial Completion"). Upon its reasonable satisfaction
that the Certificate of Substantial Completion is correct and complete, the
Owner shall promptly sign the Certificate of Substantial Completion.
(e) "Beta" Tests. Upon written notice to the Vendor, the Owner
shall be entitled, in its sole discretion to conduct beta testing, and in
connection therewith the Owner shall be entitled to add appropriate items to the
Punch List prior to Final Acceptance.
(f) Certificate of Final Acceptance. During the [*] day period
following Substantial Completion (as extended as described below, the "Initial
Period"), the Vendor shall complete all outstanding Punch List items and the
Owner and the Vendor shall monitor the System for outages and compliance with
the Specifications. In event that all Punch List items have been completed
during the Initial Period, all testing specified in Exhibit G has been
satisfactorily completed and there have been no Major Outages, then at the end
of the Initial Period the Vendor shall issue a Certificate of Final Acceptance
certifying the same. Upon its reasonable satisfaction that the Certificate of
Final Acceptance is correct and complete, the Owner shall sign the Certificate
of Final Acceptance. In the event that a Major Outage occurs during the Initial
Period, the Initial Period shall be extended (each, an "Extension Period") as
follows: (i) if a Major Outage occurs on or prior to [*] days after the
commencement of the Initial Period, the Initial Period shall be extended for an
additional [*] days, (ii) if a Major Outage occurs after [*] days but on or
prior to [*] days after the commencement of the Initial Period, the Initial
Period shall be extended for an additional [*] days, and (iii) if a Major Outage
occurs after [*] days but on or prior to [*] days after the commencement of the
Initial Period, the Initial Period shall be extended for an additional [*] days.
In the event a Major Outage occurs during any Extension Period, the Initial
Period shall be further extended by an additional period of [*]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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<PAGE> 30
Owner shall issue a Certificate of Final Acceptance not later than the end of
the Initial Period (as extended) after receipt of notice of Vendor that it
corrected the problem giving rise to the Major Outage or Major Outages.
Documentation not already delivered to the Owner pursuant to the terms of this
Contract shall be delivered to the Owner within [*] Business Days of Final
Acceptance. With respect to each System, the Owner shall not be required to sign
the Certificate of Final Acceptance until all such documentation has been so
delivered (and Final Acceptance shall not be deemed to have occurred earlier
than the date that is [*] Business Days prior to the date of delivery of such
documentation). In addition to, and without limiting the requirements set forth
in the preceding sentence, the Operating Manuals and the Maintenance and
Instruction Manuals shall be submitted to the Owner in CD-ROM format (when
available) in addition to hard-copy volume format if so requested by the Owner.
10.2 Costs and Expenses. The costs and expenses of complying
with all acceptance procedures set forth above shall be borne by the Vendor,
provided that Owner remains responsible for completing those items identified as
Owner's responsibility in the Exhibits.
SECTION 11. CHANGE ORDERS AND SCHEDULING
11.1 Change Orders. The Owner has the right to request
expansions, other revisions and/or modifications to any Purchase Order or to the
Work ("Changes"), including but not limited to the Specifications, the manner of
performance of the Work or the timing of the completion of the Work. All Changes
shall be subject to the prior written consent of the Vendor. All Changes shall
be documented in a written order ("Change Order") which shall be executed by the
Owner and the Vendor and shall contain any adjustments to pricing, Milestone or
other aspect of the Work as mutually agreed by the parties. The Vendor shall
promptly notify the Owner of any such requested Changes which may materially
affect the operation and/or maintenance of any System or any part thereof. In
the event that the parties cannot agree on a Change Order within fifteen (15)
days of submission of a Change Order by the Owner to the Vendor, the matter
shall then be referred to dispute resolution pursuant to Section 23. Nothing
contained in this subsection is intended to limit the Vendor's right, from time
to time, to make suggestions for modifications to the Work or the
Specifications, provided that in any such event the Owner, in its sole and
absolute discretion pursuant to the terms of this Contract may refuse to make
any such modification or otherwise agree to issue a Change Order incorporating
any such Vendor suggestion.
11.2 Cancellation. Owner may at any time to cancel, in whole or
in part, any Purchase Order or Change Order upon advance written notice to the
Vendor. In the event of such cancellation, the Owner shall pay to the Vendor
cancellation charges in accordance with the Exhibits.
30
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 31
SECTION 12. DISCONTINUED PRODUCTS AND CONTINUING PRODUCT SUPPORT
12.1 Notice of Discontinuation. For a period of [*] for the 5
ESS(R) switch and [*] for all other Products furnished hereunder after the
Effective Date, but in no event less than [*] after the date of shipment, the
Vendor agrees to provide the Owner, or its affiliates as the case may be, not
less than one (1) year notice before the Vendor discontinues a Product
("Discontinued Products") furnished under this Contract. In respect of Products
manufactured by a third party vendor, the notice period may vary. Where the
Vendor offers a product for sale that is equivalent in Form, Fit and Function in
accordance with and pursuant to the Specifications, the notification period may
vary but in no event shall be less than sixty (60) days. In the event of the
foregoing, the Vendor shall continue to furnish Products fully compatible with
the relevant System Elements within the System at such time during the
appropriate [*] and [*] periods referenced above; provided that nothing
herein shall bar the Vendor from discontinuing individual items of Products as
provided in and pursuant to this subsection. In the event that Vendor
discontinues a Product, Vendor will meet with Owner and use reasonable, good
faith efforts to develop a mutually acceptable transition plan that takes into
account the Owner's existing investment in the item scheduled for
discontinuance.
In addition to repairs provided for under any applicable
Warranty, Vendor shall offer repair Services and repair parts in accordance with
Vendor's repair and repair parts practices and terms and conditions then in
effect, for Vendor-manufactured Equipment furnished pursuant to this Contract.
Such repair Services and repair parts shall be available while Vendor is
manufacturing or stocking such Products or repair parts, but in no event less
than [*] for the 5 ESS switch and [*] for all other Products after such
Product's discontinued availability effective date. Vendor may use either the
same or functionally equivalent products or parts which are new, remanufactured,
reconditioned or refurbished in the furnishing of repairs or replacements under
this Contract.
If during the agreed-to support period following the issuance of
notice of discontinuance, Vendor fails to provide repair parts and or repair
Services and a functionally equivalent replacement has not been designated,
Vendor shall so advise Owner, to allow Owner to plan appropriately, and if
Vendor is unable to identify another source of supply for such repair parts or
services, Vendor shall, in addition to any other right or remedy available to
Owner at law or in equity, provide Owner, at no additional charge to Owner, upon
request, with non-exclusive licenses for Product manufacturing to the extent
Vendor can grant such licenses, so that Owner will have sufficient information,
ability and rights to have such Discontinued Products manufactured, or obtain
such repair Service or repair parts from other sources. Such license shall
include appropriate non-disclosure and confidentiality covenants.
12.2 Discontinuation During Warranty Period. If Vendor
discontinues the availability of a Product during that Product's Warranty Period
and Owner is required to purchase a replacement Product to replace the
Discontinued Product in order to maintain
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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<PAGE> 32
the same functionality of the Discontinued Product in a System, Vendor agrees
to grant Owner an additional [*] discount to be applied against the net price of
all Products required to be purchased by Owner as replacements for such
Discontinued Product, which additional discount shall be applied after the
determination of the lowest price available to Owner pursuant to this Contract,
excluding the application of any Tennessee Swap-Out Credits.
SECTION 13. SOFTWARE; CONFIDENTIAL INFORMATION
13.1 RTU License. Upon delivery of the Software, but subject to
payment of the license fees specified in Exhibit B-5, the Owner is hereby
granted a personal, non-exclusive, fully paid-up, multi-site (capability to move
Software from site to site on prior notice to Vendor) right to use license for
the Software ("RTU License"), to operate the specific Equipment, processor or
product line for which the licenses to use the Software are initially granted,
or temporarily on any comparable replacement if any such Equipment, processor or
product line becomes inoperative. Owner shall use such Software only for its own
internal business operation. The RTU License grants Owner no right to, and Owner
will not, sublicense such Software or modify, decompile, or disassemble Software
furnished as object code to generate corresponding source code provided in each
of the Systems. Except as provided below, no license is granted to Owner to use
the Software outside of the United States.
In the event that Owner wishes to use the Software on associated
equipment outside of the United States or to transfer Software to an affiliate
or third party transferee located outside the United States, Vendor shall not
unreasonably withhold its consent to such use or transfer, provided that Vendor
or the transferee, as the case may be, enters into an appropriate license
agreement with an affiliate of Vendor carrying on business in the territory in
which the Software is to be located, on terms substantially similar to the RTU
License terms set forth herein, provided, however, that Owner acknowledges and
agrees that support and maintenance obligations set forth herein are only
applicable for Software resident on Equipment located within the United States.
Support and maintenance Services offered by Vendor's affiliates differs in
various different territories, and will be subject to the local practices
maintained in such territory.
13.2 Owner's Obligations. The Owner agrees that the Software,
whether or not modified, and all copies thereof made by Owner, shall be treated
as proprietary to the Vendor, its Subcontractors or its suppliers, as
appropriate and the Owner shall:
(a) Utilize the Software solely in conjunction with a System;
provided that the Vendor acknowledges that the Software shall be integrated
across interfaces with systems, equipment and software provided by other
suppliers and customers;
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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(b) Ensure that all copies of the Software shall, upon any
reproduction by the Owner authorized by the Vendor and whether or not in the
same form or format as such Software, contain the same proprietary,
confidentiality and copyright notices or legends which appear on the Software
provided pursuant hereto; and
(c) Hold secret and not disclose the Software to any person,
except to (i) such of its employees, contractors, agents or affiliates that are
involved in the operation or management of a System and need to have access
thereto to fulfill their duties in such capacity, or (ii) other Persons who need
to use such Software to permit integration of a System with systems and software
of other suppliers and customers; provided that such persons agree, or are
otherwise obligated, to hold secret and not disclose the Software to the same
extent as if they were subject to this Contract, and provided further that if
any such Person is a competitor of Vendor involved in the manufacture of
communications equipment, software or related services, Vendor must approve such
use on a case-by-case basis on commercially reasonable terms and such use shall
be subject to an appropriate non-disclosure agreement.
(d) When and if the Owner determines that it no longer needs the
Software or if the Owner's license is canceled or terminated pursuant to the
terms of this Contract, return all copies of such Software to the Vendor or
follow reasonable written disposition instructions provided by the Vendor. If
the Vendor authorizes disposition by erasure or destruction, the Owner shall
remove from the medium on which Software resides all electronic evidence of the
Software, both original and derived, in such manner that prevents subsequent
recovery of such original or derived Software.
(e) Owner shall not copy Software embodied in firmware and
unless otherwise specifically provided in this Contract, Owner is not granted
any right to modify Software furnished by Vendor under this Contract.
13.3 Backwards Compatibility. The Vendor represents and warrants
(the "Software Backwards Compatibility Warranty") that each Software Maintenance
Release, Software Upgrade and Software Enhancement will be Backwards Compatible.
[***] Notwithstanding the foregoing, the Software Backwards Compatibility
Warranty does not apply to Products developed beyond 3G1X which are developed in
accordance with standards not yet finalized as of the date hereof.
13.4 Transfer and Relocation. (a) In the event the Owner or any
successor to the Owner's title in the Products (i) elects to transfer a Product
to a third party, and where such Product shall remain in place and used for
substantially the same purpose as used by the Owner and where such third party
resides in the United States and is not a direct competitor of the Vendor
involved in the manufacture of communications equipment, software or related
services, or (ii) elects to transfer Products to an affiliate, the Owner may
33
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 34
transfer its RTU License for the Software furnished under this Contract for use
with such Product, without the payment of any additional Software right-to-use
fees by the transferee provided that Annual Maintenance Fees shall continue to
be calculated on the same basis. For example, if the RTU License for the
Software contains usage or per subscriber limits, or the processor to be used by
transferee requires additional memory or hard disk space additional payments or
purchases may be required. The following conditions shall apply to transfers and
relocations pursuant to this subsection 13.4:
(A) The right to use such Software may be transferred only
together with the Products with which the Owner has a
right to use such Software, and such right to use the
Software shall continue to be limited to use with such
Products;
(B) Before any such Software is transferred, the Owner shall
notify the Vendor of such transfer and the transferee
shall have agreed in writing (a copy of which shall be
provided to the Vendor) to keep the Software in
confidence and to corresponding conditions respecting
possession and use of Software as those imposed on the
Owner in this Contract; and
(C) The transferee shall have the same right to Software
warranty and Software maintenance for such Software as
the transferor, provided the transferee continues to pay
the fees, including recurring fees, if any, associated
with such Software warranty or maintenance pursuant to
this Contract.
(b) Except as otherwise provided in this Contract, the Owner or
any successor to the Owner's title in the Products shall have no right to
transfer Software furnished by the Vendor under this Contract without the
consent of the Vendor, which consent shall not be unreasonably withheld. If the
Owner or such successor elects to transfer a Product purchased under this
Contract for which it does not under this Contract have the right to transfer
related Software, the Vendor agrees that upon written request of the transferee
of such Product, or of the Owner or such successor, the Vendor shall not without
reasonable cause fail to grant to the transferee a license to use such Software
with the Products, whether to be located within the United States or elsewhere,
upon payment of a relicensing fee to the Vendor on commercially reasonable terms
acceptable to Vendor.
13.5 Termination and Survival. The rights and obligations of the
Owner under the RTU License shall survive the termination of this Contract,
regardless of the cause of termination provided Owner has met its material
obligations hereunder and has rendered all payments in accordance with this
Contract. In the event that Owner persistently and materially breaches its
confidentiality obligations hereunder with respect to the Software
notwithstanding the fact that Vendor will have provided Owner with prior written
notice describing the alleged material breaches and will have given Owner a
reasonable time, and in no event less than thirty (30) days, to cure any such
breaches, Vendor may terminate Owner's RTU License. In the event that Owner
fails to pay the Annual Release
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Maintenance Fees (other than with respect to any periods for which no payment
for Annual Release Maintenance Fees are due pursuant to this Contract), Vendor
may terminate Owner's right to use the Software to which such fees apply. In no
event other than as set forth in this subsection 13.5 may Vendor terminate
Owner's right to use the Software. Notwithstanding any other provision of this
Contract, if there is a dispute, pending final resolution of such dispute, all
of Owner's rights under this Contract shall continue in full force and effect,
and Vendor will not terminate the RTU License, and so long as Owner continues to
pay Vendor applicable Annual Maintenance Release Fees, Vendor will not
terminate, suspend, interrupt or delay maintenance and support of the Software.
13.6 Access to Source Codes. The Vendor represents and warrants
that as of the date hereof, Vendor has not established a Source Code escrow for
any of its existing customers. In the event that Vendor establishes a Source
Code escrow in the future which applies to any of the Software furnished to
Owner hereunder, Vendor shall add Owner as a beneficiary of such Source Code
escrow, and Owner shall be entitled to receive a copy of the escrowed Source
Code in the event of the occurrence of any of the events set out below. In
addition to the foregoing, the Vendor shall immediately deliver and hereby
grants the Owner a right to access the Source Code and to modify the Software
(the "RTM License") for the maintenance, enhancement and support of those
Products purchased from the Vendor and owned or operated by the Owner under the
following circumstances, provided that any such released Source Code shall be
subject to the confidentiality provisions set forth in this Contract:
(i) if the Vendor becomes insolvent, makes a general
assignment for the benefit of creditors, files a voluntary petition in
bankruptcy or an involuntary petition in bankruptcy is filed against the
Vendor which is not dismissed within sixty (60) days, or suffers or
permits the appointment of a receiver for its business, or its assets
become subject to any proceeding under a bankruptcy or insolvency law,
domestic or foreign, or has liquidated its business, or the Vendor, or a
business unit of the Vendor that is responsible for maintenance of the
Software, ceases doing business without providing for a successor, and
the Owner has reasonable cause to believe that any such event shall
cause the Vendor to be unable to meet its Warranty service or support
requirements hereunder; or
(ii) if the Vendor ceases to maintain or support a
previously supported version of the Software and Owner cannot obtain,
with Vendor's assistance (for example, by providing a third party with
Source Code or by any other appropriate method) the same support
services the Vendor is required to provide under this Contract from
another entity (either working with or independently from Vendor) at a
price that is equal to or less than the prices for such support as
provided herein, or there is a persistent and material failure by Vendor
to provide the Warranty service or support it is required to provide
pursuant to the terms of this Contract.
13.7 Ownership of Intellectual Property. The Vendor shall own
all forms of intellectual property rights (including, but not limited to,
patent, trade secret, copyright and
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<PAGE> 36
mask rights) pertaining to the Software, and shall have the right to file for or
otherwise secure and protect such rights. The foregoing notwithstanding, the
parties understand and agree that from time to time the Owner may devise,
develop or otherwise create ideas or other concepts for services or new products
which are patentable or otherwise capable of receiving protection from
duplication. In such event, the Owner shall have the right to apply for a patent
in accordance with applicable law, provided, however, that notwithstanding this
subsection, the Vendor does not hereby relinquish or release any of its
intellectual property rights.
SECTION 14. SOFTWARE AND EQUIPMENT CHANGES
14.1 Software.
14.1.1 Software Upgrades, Software Maintenance Releases,
Software Enhancements and Combined Releases. During the Contract Term, upon
payment of the Annual Release Maintenance Fees, calculated pursuant to Exhibit
B-5, Owner shall receive all base Software releases and all Software Maintenance
Releases, Software Upgrades, Software Enhancements and Software Combined
Releases applicable to Software for Products for which the Owner has obtained a
RTU License at such times as they become generally available to the Vendor's
customers. Owner shall also be entitled to receive Optional Software Features
upon payment of the appropriate fees determined in accordance with Exhibit B-5.
Owner may elect to purchase such features on a per feature basis, or purchase
annual buy-out rights on a per market basis, permitting Owner to select those
features it wishes to deploy in the relevant market.
14.1.2 Notice. The Vendor shall give the Owner, or cause the
Owner to be given not less than ninety (90) days prior written notice of the
introduction of any Software Enhancement release or any Software Combined
Release or any optional Software release. In addition, in each February and
August of each year during the term of this Contract, the Vendor shall provide,
or cause to be provided, to the Owner a forecast of future Software Enhancement
releases, Software Upgrades, or Software Combined Releases or any optional
Software release, as the case may be, then currently being developed by or on
behalf of the Vendor.
14.1.3 Installation, Testing and Maintenance. The installation
and testing of the Software by the Vendor and the acceptance thereof by the
Owner shall be performed in accordance with the criteria set forth in Exhibit G.
14.1.4 Software Fixes. In the event that any Software
Maintenance Release, Software Upgrade, Software Enhancement or Software Combined
Release supplied by the Vendor during the term of this Contract has the effect
of preventing any System or any part thereof from satisfying, or performing in
accordance with the Specifications or the Exhibits or otherwise adversely
affects the functionality or features of any System or any part thereof, then
the Vendor shall promptly retrofit or take such other corrective action as may
be necessary to ensure that any System or any such affected part, as modified to
include each
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<PAGE> 37
such Software Maintenance Release, Software Upgrade, Software Enhancement or
Software Combined Release, shall satisfy, and perform in accordance with, the
Specifications and the Exhibits and restore all pre-existing functionality and
features as well as provide any new features and functionality provided by any
of the foregoing modifications, in each case without any charge to the Owner
(other than payment of the applicable fees pursuant to the terms of this
Contract). Notwithstanding anything contained herein in this subsection to the
contrary, Owner shall be responsible for the cost of any additional Equipment
required to accommodate additional capacity, memory or processing requirements
necessitated by any new Software feature or Optional Software Feature which
Owner elects to use (provided such use by Owner is optional without losing the
benefit of the Software Maintenance Release or Software Upgrade) which are
contained in any such Software Upgrade, Software Enhancement or Software
Combined Release; provided, however, that Owner shall not be required to pay for
any additional Equipment required to accommodate additional capacity, memory or
processing requirements necessitated by implementation of a required Software
Maintenance Release, whether or not such Software Maintenance Release is issued
as a stand-alone release, or is contained within a Software Upgrade, Software
Enhancement or Software Combined Release.
14.2 Equipment.
14.2.1 Equipment Upgrades. (a) Equipment Upgrades will be
provided to the Owner by the Vendor at no charge to the Owner as provided in
subsection 14.2.1(b) below. Equipment Enhancements must be provided to the Owner
by the Vendor, if requested by the Owner, and the Owner is obligated to make
payment therefor in an amount that is specified on the B Exhibits. If the Vendor
at any time issues an Equipment Upgrade which is combined with any Equipment
Enhancement (collectively, the "Equipment Combined Release") to such Equipment,
the Equipment Combined Release will be provided at no charge to the Owner unless
and until the Owner uses any of the Equipment Enhancements included within the
Equipment Combined Release, provided such use by Owner of such Equipment is
optional without losing the benefit of the Equipment Upgrade.
(b) (i) After a Product has been shipped to the Owner, if the
Vendor issues an Equipment Upgrade or Equipment Enhancement, or where a
modification to correct an error in field documentation is to be introduced, the
Vendor will promptly notify the Owner of such change through the Vendor's design
change management system or another Vendor notification procedure. Each change
notification, whether or not it bears a restrictive legend, will be subject to
the confidentiality obligations provided in subsection 26.18, except that such
information may be reproduced by the Owner for the Owner's use as required
within the System. If the Vendor has engineered, furnished, and installed a
Product which is subject to an Equipment Upgrade, the Vendor will implement such
change, at its sole cost and expense, if it is announced within [*] for the 5
ESS switch and [*] for all other Products from the date of shipment of that
Product, and subject to the reasonable review and acceptance of the Owner at
such times as the Owner reasonably determines that it needs to review such
Vendor decision, by either (A) modifying the Product at the Owner's site; (B)
modifying the Product which the Owner has returned to the Vendor in accordance
with the Vendor's reasonable instructions pursuant to and in
37
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 38
accordance with the terms of this Contract; or (C) replacing the Product
requiring the change with a replacement Product for which such change has
already been implemented. If the Vendor has not engineered the original Product
application and accordingly office records are not available to the Vendor, the
Vendor will provide the generic change information and associated parts for the
Owner's use in implementing such change.
(ii) In any of the instances described in clause (i) above, if
the Vendor and the Owner agree that a Product or part thereof subject to such
change is readily returnable, without incurring any significant time or expense,
the Owner, at its expense, will remove and return such Product or part to the
Vendor's designated facility within the United States and the Vendor, at its
sole expense, will implement such change (or replace it with a Product or part
for which such change has already been implemented) at its facility and return
such changed (or replacement) Product or part at its sole cost and expense to
the Owner's designated location within the United States. Any such
reinstallation of Products which were readily returnable will be performed by
the Owner at its sole expense, provided such reinstallation can be done by Owner
without incurring any significant time or expense. In all other circumstances,
Vendor shall provide such removal, repair and reinstallation Services at its
sole cost and expense.
(iii) If the Owner does not make or permit the Vendor to make an
Equipment Upgrade as stated above within the appropriate [*] or [*] period from
the date of change notification or such other period as the Vendor may agree,
subsequent changes, repairs or replacements affected by the failure to make such
change may, at the Vendor's option, be invoiced to the Owner whether or not such
subsequent change, repair or replacement is covered under the warranty provided
in this Contract for such Product. If requested by the Owner, Equipment Upgrades
announced more than the appropriate [*] or [*] period from the date of shipment
will be implemented at the Owner's expense.
(iv) If the Vendor issues an Equipment Enhancement after a
Product has been shipped to the Owner, the Vendor will promptly notify the Owner
of such change if it is being offered to any of the Vendor's customers. Except
as otherwise set forth above in subsection 14.2(b), when an Equipment
Enhancement is requested by the Owner, the pricing set for such Equipment
Enhancements will be at the Vendor's standard charges subject to the applicable
discounts set forth in the B Exhibits.
(v) All change notifications for Equipment Upgrades and
Equipment Enhancements provided by the Vendor to the Owner pursuant to the terms
of this Contract must contain the following information: (A) a detailed
description of the change; (B) the reason for the change; (C) the effective date
of the change; and (D) the implementation schedule for such change, if
appropriate.
14.2.2 Notice. The Vendor shall give, or shall cause to be given
to, the Owner not less than ninety (90) days prior written notice of the
introduction of any Equipment Enhancement or any Equipment Combined Release. In
addition, in each February and August of each year during the Term of this
Contract, the Vendor shall
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[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 39
provide the Owner with a forecast of future Equipment Enhancements to the
Equipment or Equipment Combined Releases then currently being developed by or on
behalf of the Vendor.
14.2.3 Installation, Testing and Acceptance The Installation and
testing of the Equipment by the Vendor and the acceptance thereof by the Owner
shall be performed in accordance with the Exhibits and pursuant to the
Milestones contained in the Exhibits.
14.2.4 Equipment Fixes. In the event that any Equipment Upgrade
or Equipment Enhancement, directly or indirectly, supplied by the Vendor during
the appropriate [*] or [*] period following the Effective Date or during [*]
period following the date of shipment of such Equipment Upgrade or Equipment
Enhancement, has the effect of preventing any System or any part thereof from
satisfying, or performing in accordance with, the Specifications or otherwise
adversely affects the functionality, interoperability or features of any System,
or any part thereof then the Vendor shall without any charge to the Owner
promptly retrofit or take such other corrective action as may be necessary to
assure that any System or any such affected part, as modified to include each
such Equipment Upgrade and Equipment Enhancement, shall satisfy, and perform in
accordance with, the Specifications and restore all pre-existing functionality
and features as well as provide any features and functionality provided by any
of the foregoing modifications.
14.2.5 Equipment Backwards Compatibility Warranty. The Vendor
represents and warrants (the "Equipment Backwards Compatibility Warranty") that
each New Equipment Release will be Backwards Compatible, provided that it is
implemented within the specified time provided with each New Equipment Release.
[***] Notwithstanding the foregoing, the Equipment Backwards
Compatibility Warranty does not apply to Products developed beyond 3G1X which
are developed in accordance with standards not yet finalized as of the date
hereof.
14.2.6 3G1X. [***]
14.2.7 1.1 ASIC Product. The prices set forth in the B Exhibits
for a BTS and channel elements includes a BTS equipped with the hardware
component for Vendor's "1.1 ASIC Product". Each BTS furnished by Vendor
hereunder will, at no additional charge to Owner beyond the BTS prices set forth
in Exhibit B-1, be equipped
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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at the time of shipment, or be retrofitted to include after shipment, at
Vendor's sole expense, such hardware component of Vendor's 1.1 ASIC Product.
14.3 Notice of Developments.
14.3.1 Vendor Developments. The Vendor shall provide the Owner,
or cause to be provided to the Owner, through the Owner's chief executive
officer, with reasonable written notice of any Product developments, innovations
and/or technological advances (collectively "Vendor Developments") relevant to
the System simultaneous to giving such notice to any other customer or otherwise
making any such Vendor Development public; provided that the Vendor shall not be
obligated to provide the Owner such notice before any other customer if doing so
would breach any contractual obligation to any other customer, provided further
that any such notice need not include any information originated by another
customer of Vendor which is proprietary to such other customer of Vendor. For
the purposes of this subsection the term "Vendor" includes the Vendor and its
affiliates and subsidiaries.
14.3.2 Participation in Testing. The Owner has the right, but
not the obligation, to witness and/or participate in any initial testing;
provided that any such initial testing of Vendor Developments shall be subject
to (i) scheduling as reasonably determined by the Vendor, (ii) the qualification
that the Owner's System meets the technical requirements for the testing of such
Vendor Development as reasonably determined by the Vendor (or otherwise that the
Owner is willing to update such System to meet such requirements), (iii) the
Owner's acknowledgment that it shall be able to provide the resources necessary
to implement the initial testing for such Vendor Development, and (iv) the Owner
and the Vendor executing a verification office testing agreement that identifies
the scope, terms, pricing, responsibilities and schedule related to the initial
testing of such Vendor Development. The Vendor shall provide the Owner at least
thirty (30) days' prior written notice of its intent to test any such Vendor
Development and upon the Owner's written request the Vendor shall allow the
Owner to participate in such testing upon terms and in a testing environment
reasonably acceptable to the parties at such time. Such rights shall not apply
to a Vendor Development originated by another customer of Vendor which includes
information which is proprietary to such other customer.
14.3.3 Quarterly Notices. Vendor shall make reasonable efforts
to collect and distribute on a quarterly basis a list of new Software bugs,
problems, fixes, etc., provided that Vendor shall not be required to distribute
confidential information of any other customer.
SECTION 15. INTELLECTUAL PROPERTY
15.1 Intellectual Property. Neither Owner nor Vendor shall
publish or use any advertising, sales promotion, press releases or publicity
matters relating to this Contract without the prior written approval of the
other, in accordance with Section 26.13.
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15.2 Infringement. (a) The Vendor agrees that it shall defend,
indemnify and hold harmless, at its own expense, all suits and claims against
the Owner for infringement or violation of any patent, trademark, copyright,
trade secret or other intellectual property rights of any third party
enforceable in the United States or in any other territory where Vendor has
approved the deployment or use of Products under this Contract (collectively,
"Intellectual Property Rights"), covering, or alleged to cover, the Products or
any component thereof. The Vendor agrees that it shall pay all sums, including
without limitation, reasonable attorneys' fees and other costs incurred at
Vendor's written request or authorization, which, in defense of, by final
judgment or decree, or in settlement of any suit or claim to which the Vendor
agrees, may be assessed against, or incurred by, the Owner on account of such
infringement or violation, provided that the Owner shall cooperate in all
reasonable respects with the Vendor and its attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the Owner may, at its own cost, participate in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers. If a claim for Losses (a "Claim") is to be made by a
party entitled to indemnification hereunder against the Vendor, the party
claiming such indemnification shall give written notice (a "Claim Notice") to
the Vendor as soon as practicable after the party entitled to indemnification
becomes aware of any fact, condition or event which may give rise to Losses for
which indemnification may be sought under this Agreement, provided, however, no
delay on the part of the Owner in notifying the Vendor shall relieve the Vendor
from any obligation hereunder unless (and then solely to the extent) the Vendor
is thereby materially prejudiced. If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to the Vendor as promptly as practicable (and in any
event within fifteen (15) calendar days after the service of the citation or
summons). The Vendor shall be entitled, if it so elects, (i) to defend such
lawsuit or action, (ii) to employ and engage attorneys of its own choice to
handle and defend the same, at the Vendor's cost, risk and expense, and (iii) to
compromise or settle such Claim, which compromise or settlement shall be made
only with the written consent of the Owner (which may not be unreasonably
withheld), unless such compromise or settlement includes an unconditional
release of any claims against the Owner in which event such written consent of
the Owner shall not be required. If the Vendor fails to assume the defense of
such Claim within fifteen (15) calendar days after receipt of the Claim Notice,
the Owner against which such Claim has been asserted will (upon delivering
notice to such effect to the Vendor) have the right to undertake, at the
Vendor's cost and expense, the defense, compromise or settlement of such Claim
on behalf of and for the account and risk of the Vendor. In the event the Owner
assumes the defense of the Claim, the Owner will keep the Vendor reasonably
informed of the progress of any such defense, compromise or settlement. The
Vendor shall be liable for any settlement of any action effected pursuant to and
in accordance with this Agreement and for any final judgment (subject to any
right of appeal), and the Vendor agrees to indemnify and hold harmless the Owner
from and against any Losses by reason of such settlement or judgment.
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(b) The Vendor's obligation under this subsection shall not
extend to alleged infringements or violations that arise because the Products
provided by the Vendor are used in combination with other products furnished by
third parties and where any such combination was not installed, recommended or
approved by the Vendor.
15.3 Vendor's Obligation to Cure. If in any such suit so
defended, all or any part of the Products or any component thereof is held to
constitute an infringement or violation of Intellectual Property Rights of
others and its use is enjoined, or if in respect of any claim of infringement or
violation the Vendor deems it advisable to do so, the Vendor shall at its sole
cost, expense and option take one or more of the following actions: (i) procure
the right to continue the use of the same without interruption for the Owner;
(ii) replace the same with non-infringing Products that meets the Specifications
in accordance with the terms of this Contract; or (iii) modify said Products,
any System or any component thereof so as to be non-infringing, provided that
the Products, any System or any component thereof as modified meets all of the
Specifications. In the event that the Vendor is not able to cure the
infringement pursuant to clause (i), (ii) or (iii) in the immediately preceding
sentence, in addition to the other rights and remedies provided in this Section
15, the Vendor shall refund to the Owner the full purchase price paid by the
Owner for such infringing Product or feature, and the Owner shall be under no
obligation to return to the Vendor such infringing Product or feature regardless
of whether, or by what means, the Owner, on its own or otherwise, subsequently
cures such infringement, unless Owner is directed to do so by court order.
15.4 Vendor's Obligations. The Vendor's obligations under this
Section 15 shall not apply to any infringement or violation of Intellectual
Property Rights caused by unauthorized modification of the Products, any System
or any component thereof by the Owner, or arises from adherence to instructions
to apply Owner's trademark, trade name or other company identification to a
Product, or any infringement caused solely by the Owner's use and maintenance of
the Products other than in accordance with the Specifications, except as
authorized or permitted by the Vendor. The Owner shall indemnify the Vendor
against all liabilities and costs, including reasonable attorneys' fees, for
defense and settlement of any and all claims against the Vendor for
infringements or violations based upon this subsection.
15.5 Liability of Vendor. The Liability of Vendor with respect
to any and all claims, actions, proceedings or suits by third parties alleging
infringement of patents, trademarks, or copyrights or violation of trade secrets
or proprietary rights because of, or in connection with, any items furnished
pursuant to this Contract shall be limited to the specific undertakings
contained in this Section 15.
SECTION 16. DELAY
16.1 Liquidated Damages. The parties agree that damages for
delay are difficult to calculate accurately and not reasonably determinable at
the time of execution of this Contract, and, therefore, agree that liquidated
damages (the "Liquidated Damages")
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shall be paid for non-performance or late performance of the Vendor's
obligations to achieve a Guaranteed Substantial Completion Date for reasons not
otherwise excused by Force Majeure or Owner's failure to satisfy its obligations
set out in this Contact. The parties agree that Liquidated Damages are intended
to compensate Owner for the delayed or late performance by the Vendor and are
not a penalty.
16.2 Delay and Default. In the event the Vendor fails to achieve
(other than as permitted by this Contract) the Substantial Completion of a
System on or before the Guaranteed Substantial Completion Date for such System
or during a ten day cure period following such date, the Vendor shall pay,
weekly in arrears, for the next [*] commencing on the eleventh day after the
Guaranteed Substantial Completion Date, Liquidated Damages to the Owner in an
amount equal to [*] (pro-rated on a daily basis for periods of time less than
one week) of the total amount of all Purchase Orders relating to the System with
respect to which the Vendor has so failed, based on the number of days elapsed
after a ten day cure period following the Guaranteed Substantial Completion Date
and before the achievement of Substantial Completion; provided that in the event
that Substantial Completion is not achieved prior to the expiration of such [*]
period, thereafter Vendor shall pay, weekly in arrears, additional Liquidated
Damages to the Owner in an amount equal to [*] (pro-rated on a daily basis for
periods of time less than one week) of the total amount of all Purchase Orders
relating to the System with respect to which the Vendor has so failed, based on
the number of days elapsed after the [*] plus ten day cure period
following the Guaranteed Substantial Completion Date and before the achievement
of Substantial Completion; provided that in no event shall the amount of
Liquidated Damages so paid in respect of a System exceed [*] of the total amount
of all Purchase Orders relating to the System with respect to which the Vendor
has so failed.
16.3 System Capacity Guarantee. [***]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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[***]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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[***]
16.4 Limitation. The foregoing provisions concerning Liquidated
Damages shall not be deemed to limit the amount payable by the Vendor to the
Owner for breach of contract, except for amounts payable on account of delay as
aforesaid, provided, however that the payment of Liquidated Damages shall be
Owner's sole remedy for the delay giving rise to the Vendor's obligation to pay
the Liquidated Damages.
16.5 Early Completion Bonus. With respect to a System, Vendor
shall be entitled to an early completion bonus from the Owner in the event that
Substantial Completion with respect to such System occurs on or prior to the
date that is [*] prior to the Guaranteed Substantial Completion Date for such
System. Such early completion bonus shall be equal to [*] (pro-rated on a daily
basis for periods of time less than one week) of the total amount of all
Purchase Orders relating to such System, based on the number of days that
Substantial Completion occurs prior the date that is [*} prior to the
Guaranteed Substantial Completion Date for such System.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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SECTION 17. FORCE MAJEURE
17.1 Excusable Delay. (a) If the performance of this Contract,
or of any obligation hereunder except for the obligations set forth in Section 5
is prevented, restricted or interfered with by reason of fires, breakdown of
plant, labor disputes, embargoes, government ordinances or requirements, civil
or military authorities, acts of God or of the public enemy, acts or omissions
of carriers, inability to obtain necessary materials or services from suppliers,
or other causes beyond the reasonable control of the party whose performance is
affected ("Force Majeure"), then the party affected, upon giving prompt notice
to the other party, shall be excused from such performance on a day-for-day
basis to the extent of such prevention, restriction, or interference (and the
other party shall likewise be excused from performance of its obligations on a
day-for-day basis to the extent such party's obligations relate to the
performance so prevented, restricted or interfered with); provided that the
party so affected shall use reasonable efforts to avoid or remove such cause of
non-performance and both parties shall proceed to perform their obligations with
dispatch whenever such causes are removed or cease.
(b) The party claiming the benefit of excusable delay hereunder
shall (i)promptly notify the other party of the circumstances creating the
failure or delay and provide a statement of the impact of such party failure or
delay and (ii) use reasonable efforts to avoid or remove such causes of
nonperformance, excusable failure or delay. If an event of Force Majeure
prevents the Vendor from performing its obligations under this Contract for a
period exceeding sixty (60) days, the Owner may, upon prior written notice to
the other party, terminate this Contract.
(c) In the event of a Force Majeure which the party claiming
relief for such event has used all best efforts to resolve in accordance with
the terms of this Contract, upon the written request of either party, the other
party shall in good faith negotiate modifications, to the extent reasonable and
necessary, in scheduling and performance criteria in order to reasonably address
the impact of such Force Majeure.
SECTION 18. WARRANTIES
18.1 Equipment and Services Warranty. Vendor warrants that, with
respect to each System, for a period of two (2) years from the date of
Substantial Completion, provided, however that if prior to Final Acceptance a
Major Outage occurs, the two (2) year period shall be extended by the number of
days elapsed between Substantial Completion and the date the Owner signs the
Certificate of Final Acceptance (as so determined, the "Warranty Period"), all
Equipment and Services furnished under this Contract with respect to such System
will be free of Defects and Deficiencies and shall conform to the applicable
portions of the Specifications (the "Equipment and Services Warranty"),
provided, however, that with respect to those Services for which a warranty is
set forth in an Exhibit, the warranty contained in the Exhibit shall supersede
the general Services warranty contained in this Section 18.1. With respect to
third-party manufactured Products which are not a part of a Core System, Vendor
shall furnish such Products only on a pass-through warranty basis;
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provided, however, that Vendor shall identify such Products to Owner before
acceptance of any Purchase Order which includes any such Products. The terms of
the warranty applicable to such Products shall be provided in an addendum to the
Purchase Order. Except as noted in the B Exhibits, all Products referenced in
the B Exhibits qualify as Vendor-warranted Products. The Vendor's obligations
with respect to the Equipment and Services Warranty shall be to attempt first to
repair or replace at no additional cost, any defective Equipment or correct any
deficient Services. If, after using its best efforts to repair or replace such
Product and after consultation with and with the consent of Owner, which consent
shall not be unreasonably withheld, Vendor determines that it is unable to
repair, replace or otherwise correct such defect, Vendor shall provide a credit
or refund based on the original purchase price, and installation charges if
installed by Vendor. If, as a result of the Defect and Deficiency, the Product
fails to operate in accordance with the Specifications which causes the System
to fail to materially operate in accordance with its Specifications, a refund
shall be paid to the Owner on account of the purchase price for the total
System, less a pro-rata discount calculated with regard to the period of time
during the Warranty Period that Owner operated the System in In Revenue Service.
For purposes of calculating such pro rata discount, the period of time the Owner
would have been able to operate the System in In Revenue Service shall be ten
(10) years from Substantial Completion for the 5 ESS switch and seven years from
Substantial Completion for all other Products. In the event that Vendor pays a
refund hereunder, Owner shall return such Products to Vendor at Vendor's sole
cost and expense. The Warranty Period for all Equipment or Services repaired,
replaced or corrected under the Equipment and Services Warranty shall be the
longer of one (1) year from the date of delivery of the repaired or replacement
Equipment or from the completion of the corrected Services, as applicable, or
(ii) or the unexpired term of the Warranty Period. The Warranty Period for
Equipment purchased as spares shall be two (2) years from installation of such
Equipment.
For those Products not readily returnable by Owner, or where Owner
cannot remove and reinstall the Products without incurring significant time and
expense, and where Vendor elects to repair or replace the Product, Vendor shall
repair or replace the Product at Owner's Site. In the event Vendor does the
repair work at Owner's site, Vendor shall be responsible for replacement of
cable and wire Products, and for reasonable Site restoration. If Vendor has
elected to repair or replace a defective Product, and the Product is readily
returnable by Owner without incurring significant work or expense, Owner is
responsible for removing and reinstalling the Products. Products returned for
repair or replacement will be accepted by Vendor only in accordance with its
instructions and procedures for such returns. The transportation expense
associated with returning such Product to Vendor shall be borne by Owner. Vendor
shall pay the cost of transportation of the repaired or replacing Product to the
return destination designated by Owner. Defective or nonconforming Products or
parts which are replaced hereunder shall become Vendor's property. Vendor may
use either the same or functionally equivalent new, remanufactured,
reconditioned or refurbished Products or parts in the furnishing of repairs or
replacements under this Contract, provided that such Products satisfy the
Specifications.
18.2 Expansions Warranty. Vendor warrants that, with respect to
Products and Services constituting Expansions (including Expansions to a System,
or Expansions or
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growth not part of a System, and all other purchased Products) furnished under
this Contract will be free of Defects and Deficiencies and shall conform the
applicable portions of the Specifications (the "Expansions Warranty"). The
warranty period with respect to such Products and Services shall be two (2)
years from the date of installation completion or completion of Services, as the
case may be (the "Expansions Warranty Period"). With respect to third-party
manufactured Products which are not a part of a Core System, Vendor shall
furnish such Products only on a pass-through warranty basis; provided, however,
that Vendor shall identify such Products to Owner before acceptance of any
Purchase Order which includes any such Products. The terms of the warranty
applicable to such Products shall be provided in an addendum to the Purchase
Order. Except as noted in the B Exhibits, all Products referenced in the B
Exhibits qualify as Vendor-warranted Products. The Vendor's obligations with
respect to the Expansions Warranty shall be to attempt first to repair or
replace at no additional cost, any defective Equipment or correct any deficient
Services. If, after using its best efforts to repair or replace such Product and
after consultation with and with the consent of Owner, which consent shall not
be unreasonably withheld, Vendor determines that it is unable to repair, replace
or otherwise correct such defect, Vendor shall provide a credit or refund based
on the original purchase price, and installation charges if installed by Vendor.
The warranty period for all Equipment or Services repaired, replaced or
corrected under the Expansions Warranty shall be the longer of one (1) year from
the date of delivery of the repaired or replacement Equipment or from the
completion of the corrected Services, as applicable, or (ii) or the unexpired
term of the Expansions Warranty Period. The Warranty Period for Equipment
purchased as spares shall be two (2) years from installation of such Equipment.
For those Products not readily returnable by Owner, or where Owner
cannot remove and reinstall the Products without incurring significant time and
expense, and where Vendor elects to repair or replace the Product, Vendor shall
repair or replace the Product at Owner's Site. In the event Vendor does the
repair work at Owner's site, Vendor shall be responsible for replacement of
cable and wire Products, and for reasonable Site restoration. If Vendor has
elected to repair or replace a defective Product, and the Product is readily
returnable by Owner without incurring significant work or expense, Owner is
responsible for removing and reinstalling the Products. Products returned for
repair or replacement will be accepted by Vendor only in accordance with its
instructions and procedures for such returns. The transportation expense
associated with returning such Product to Vendor shall be borne by Owner. Vendor
shall pay the cost of transportation of the repaired or replacing Product to the
return destination designated by Owner. Defective or nonconforming Products or
parts which are replaced hereunder shall become Vendor's property. Vendor may
use either the same or functionally equivalent new, remanufactured,
reconditioned or refurbished Products or parts in the furnishing of repairs or
replacements under this Contract, provided that such Products satisfy the
Specifications.
18.3 Software Warranty. Vendor warrants that, with respect to
each System for the Warranty Period, all Software will be free of Defects and
Deficiencies and shall conform to the applicable portions of the Specifications
(the "Software Warranty"). The Vendor's obligations with respect to the Software
Warranty shall be to attempt first to repair or replace at no additional cost,
any defective Software. If, after using its best efforts to
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repair or replace such Software and after consultation with and with the consent
of Owner, which consent shall not be unreasonably withheld, Vendor determines
that it is unable to repair, replace or otherwise correct such defect, Vendor
shall provide a credit or refund based on the original purchase price, and
installation charges if installed by Vendor. If, as a result of the Defect and
Deficiency, the Software fails to operate in accordance with the Specifications
which causes the System to fail to materially operate in accordance with its
Specifications, a refund shall be paid to Owner on account of the purchase price
for the total System, less a pro rata discount calculated with regard to the
period of time during the Warranty Period that Owner operated the System in In
Revenue Service. For purposes of calculating such pro rata discount, the period
of time the Owner would have been able to operate the System in In Revenue
Service shall be ten (10) years from Substantial Completion for the 5 ESS switch
and seven years from Substantial Completion for all other Products. In the event
that Vendor pays a refund hereunder, Owner shall return such Products to Vendor.
The warranty period for all Software so corrected or replaced under the Software
Warranty shall be the longer of one (1) year from the date of delivery of the
repaired or replacement Software, or (ii) or the unexpired term of the Warranty
Period. Vendor shall be solely responsible for all costs and expenses incurred
by Owner or Vendor in connection with the de-installation, removal and
transportation of defective Software under the Software Warranty and for the
transportation and installation of repaired, corrected or replacement Software,
including without limitation any additional or upgraded Equipment or processing
capability necessary to run or operate such repaired, corrected or replacement
Software. The Warranty Period with respect to Software Maintenance Releases,
Software Upgrades, Software Enhancements and Software Combined Releases shall be
two (2) years from the successful installation of such Software Maintenance
Releases, Software Upgrades, Software Combined Releases and Software
Enhancements.
18.4 [intentionally deleted]
18.5 Year 2000 Warranty. Vendor warrants that, notwithstanding
any other warranty provided to Owner pursuant to this Contract, during the
period commencing on the date that the applicable Software Warranty Period
commences and ending on January 1, 2004, the Software will (a) process calendar
dates falling on or after January 1, 2000, with substantially the same
functionality as such Software processes calendar dates falling on or before
December 31, 1999, and (b) provide substantially the same functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000, as it provides with respect to the introduction of records
containing dates falling on or before December 31, 1999 (the "Year 2000
Warranty"). All of the foregoing functionality shall be known as "Year 2000
Capability". In the event Owner has or purchases more than one version of
Software, such versions of Software, if they are intended by Vendor to
interoperate, will be compatible and interoperate in such manner as to process
between them, as applicable, date related data correctly as described herein.
All of the foregoing functionality shall be known as "Year 2000
Interoperability". The foregoing sets forth an additional warranted
specification for Software developed by Vendor that Vendor has identified as
having Year 2000 Capability. The failure of such Software to meet such
specification during the Year 2000 Warranty Period shall, to the extent the
Software remains then subject to warranty protection, entitle Owner to the
remedies set out in this section.
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Nothing in the foregoing shall be deemed to make Vendor responsible for the Year
2000 Capability or Year 2000 Interoperability of any third party software
interoperating or intended to interoperate with Software developed by Vendor.
Owner and or the manufacturer or other supplier of such third party software
shall be responsible for such compliance and assuring the ability of such
software to successfully operate while interoperating with Software developed by
Vendor.
18.6 Warranty Claim Procedures. (a) If the Owner claims a breach
of any warranty, it shall notify the Vendor of the claimed breach within a
reasonable time after its determination that a breach has occurred. The Owner
shall allow the Vendor to inspect the Equipment, Software, Services, or the
System, as the case may be, on-site in order to effect the necessary repairs.
(b) The Vendor shall respond to such warranty claims for
warranty Services in accordance with the procedures outlined in Exhibit N.
18.7 Technical Assistance. The Vendor shall maintain a technical
assistance center and shall have technical support available to the Owner in
accordance with the requirements set forth in Exhibit N.
18.8 Scope of Warranties. Unless otherwise stated herein, the
Warranties shall not apply to:
18.8.1 defective conditions or nonconformities to the extent
resulting from the following, if not consistent with applicable
Specifications: unauthorized Owner modifications, misuse, neglect,
accident, abuse, improper wiring, repairing, splicing, alteration,
installation, storage or maintenance failure of Owner to apply
previously applicable Vendor modifications or corrections;
18.8.2 any Equipment, Services or Software damaged by accident
or disaster, including without limitation, fire, flood, wind, water,
lightning or power failure other than to the extent that any such
Equipment, Services or Software should in accordance with the
Specifications be able to withstand any such events; or
18.8.3 non-integral items normally consumed in operation or
which has a normal life inherently shorter than the Warranty Periods
(e.g., fuses, lamps, magnetic tape); or
18.8.4 damages or defects resulting directly from third party
equipment, provided that this shall in no event limit the Vendor's
obligations as to interoperability pursuant to the terms of this
Contract;
18.8.5 Equipment which have had their serial numbers or months
and year of manufacture removed or obliterated by the Owner; or
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18.8.6 failures or deficiencies in BTS performance or System
optimization resulting solely from changed environmental conditions or
unauthorized changes to the System by Owner, or changes not consented to
by Owner including, but not limited to, the growth of trees and other
foliage, the erection of buildings, and interference from third party
radio transmissions not otherwise engineered for by the Vendor;
except when any such damage or defects are made, done or caused by the Vendor or
any of its Subcontractors, their respective agents and employees.
18.9 Third Party Warranties. If the Vendor purchases or
subcontracts for the manufacture of any part of a System or the performance of
any of the Services to be provided hereunder from a third party, the warranties
given to the Vendor by such third party shall inure, to the extent assigned to
the Owner pursuant to this Section 18 or permitted by law, to the benefit of the
Owner, and the Owner shall have the right, at its sole discretion, to enforce
such warranties directly and/or through the Vendor. The warranties of such third
parties shall be in addition to and shall not, unless otherwise expressly stated
herein, be in lieu of any warranties given by the Vendor under this Contract.
18.10 Additional Sites. In the event that under the remedy
provisions of this Section 18 the Vendor is required to provide additional MSC
and/or BTS's requiring additional Sites, the Owner shall be responsible for all
Site Acquisition.
18.11 EXCLUSIVE REMEDIES. THE FOREGOING EQUIPMENT, SERVICES,
SOFTWARE AND EXPANSIONS WARRANTIES AND REMEDIES ARE EXCLUSIVE FOR THE PURPOSES
OF ANY BREACH BY THE VENDOR OF ANY SUCH WARRANTY AND ARE IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 19. INSURANCE
19.1 Insurance. The Vendor shall maintain insurance in
accordance with the provisions set forth in Exhibit Q.
SECTION 20. INDEMNIFICATION AND LIMITATION OF LIABILITY
20.1 Indemnity. Vendor agrees to indemnify, defend and hold harmless
Owner and its affiliates and their respective directors, officers, employees,
agents, successors and assigns, from Losses and threatened Losses arising from,
in connection with, or based on allegations of, any of the following:
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(a) Vendor's failure to observe or perform any duties or
obligations to Subcontractors or any third parties
within the reasonable contemplation of this Contract;
(b) the death or bodily injury of any agent, employee,
customer, business invitee or any other person caused by
the tortious conduct (including without limitation
negligence, willful misconduct or breach of warranty) or
strict liability of Vendor, any Subcontractor or its or
their respective employees, contractors, agents or
representatives;
(c) the damage, loss or destruction of any real or tangible
personal property caused by the tortious conduct
(including without limitation negligence, willful
misconduct or breach of warranty) or strict liability of
Vendor, any Subcontractor or its or their respective
employees, contractors, agents or representatives; or
(d) any claim, demand, charge, action, cause of action or
other proceeding asserted against Owner but arising out
of or resulting from an act or omission of Vendor, any
Subcontractor or its or their respective employees,
contractors, agents or representatives in its or their
respective capacities as an employer.
20.2 Claim for Losses. If a Claim is to be made by a party
entitled to indemnification hereunder against the Vendor, the party claiming
such indemnification shall give a Claim Notice to the Vendor as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Losses for which indemnification
may be sought under this Agreement, provided, however, no delay on the part of
the Owner in notifying the Vendor shall relieve the Vendor from any obligation
hereunder unless (and then solely to the extent) the Vendor is thereby
materially prejudiced. If any lawsuit or enforcement action is filed against any
party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the Vendor as promptly as practicable (and in any event within
fifteen (15) calendar days after the service of the citation or summons). The
Vendor shall be entitled, if it so elects, (i) to defend such lawsuit or action,
(ii) to employ and engage attorneys of its own choice to handle and defend the
same, at the Vendor's cost, risk and expense, and (iii) to compromise or settle
such Claim, which compromise or settlement shall be made only with the written
consent of the Owner (which may not be unreasonably withheld), unless such
compromise or settlement includes an unconditional release of any claims against
the Owner in which event such written consent of the Owner shall not be
required. If the Vendor fails to assume the defense of such Claim within fifteen
(15) calendar days after receipt of the Claim Notice, the Owner against which
such Claim has been asserted will (upon delivering notice to such effect to the
Vendor) have the right to undertake, at the Vendor's cost and expense, the
defense, compromise or settlement of such Claim on behalf of and for the account
and risk of the Vendor. In the event the Owner assumes the defense of the Claim,
the Owner will keep the Vendor reasonably informed of the
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progress of any such defense, compromise or settlement. The Vendor shall be
liable for any settlement of any action effected pursuant to and in accordance
with this Agreement and for any final judgment (subject to any right of appeal),
and the Vendor agrees to indemnify and hold harmless the Owner from and against
any Losses by reason of such settlement or judgment.
20.3 Limitation On Liability. THE ENTIRE LIABILITY OF VENDOR FOR
ANY CLAIM, LOSS, DAMAGE OR EXPENSE OF OWNER OR ANY OTHER ENTITY ARISING OUT OF
THIS CONTRACT, OR THE USE OR PERFORMANCE OF ANY PRODUCT OR SERVICE, WHETHER IN
AN ACTION FOR OR ARISING OUT OF BREACH OF CONTRACT OR TORT, INCLUDING
NEGLIGENCE, INDEMNITY OR STRICT LIABILITY, SHALL BE EXPRESSLY SET FORTH HEREIN
AND AS FOLLOWS:
1. FOR INFRINGEMENT, THE REMEDIES SET FORTH IN SECTION 15;
2. FOR THE NON-PERFORMANCE OF PRODUCTS OR SERVICES DURING THE
WARRANTY PERIOD, THE REMEDIES SET FORTH IN THE APPLICABLE CLAUSE
OF SECTION 18;
3. FOR DELAYS ATTRIBUTABLE TO FAILURE TO ACHIEVE A GUARANTEED
SUBSTANTIAL COMPLETION DATE OR FAILURE TO SATISFY THE CAPACITY
GUARANTEE, THE AGGREGATE OF THE DAMAGES WITH RESPECT TO THE
FOREGOING SHALL NOT EXCEED AN AMOUNT EQUAL TO [*] OF THE
AGGREGATE AMOUNTS OF ALL PURCHASE ORDERS WITH RESPECT TO ALL
SYSTEMS, PROVIDED THAT FOR PURPOSES OF QUANTIFYING THE DAMAGES
FOR A FAILURE TO SATISFY THE CAPACITY GUARANTEE, THE ADDITIONAL
EQUIPMENT FURNISHED BY THE VENDOR AT NO CHARGE TO THE OWNER
SHALL BE VALUED AT THE PURCHASE PRICES FOR SUCH EQUIPMENT SET
FORTH IN THIS CONTRACT AND, AS SO VALUED, SHALL BE DEEMED TO BE
DAMAGES FOR PURPOSES OF THIS SUBSECTION AND;
4. EXCEPT AS PROVIDED IN PARAGRAPH 5 BELOW, FOR EVERYTHING OTHER
THAN AS SET FORTH ABOVE, VENDOR'S TOTAL LIABILITY TO THE OWNER,
WHETHER IN CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY,
NEGLIGENCE AND STRICT LIABILITY) SHALL BE LIMITED TO AN AMOUNT
EQUAL TO [*] OF THE AGGREGATE AMOUNT OF ALL PURCHASE ORDERS
ISSUED UNDER THIS CONTRACT.
5. THE LIMITATION SET FORTH IN PARAGRAPH 4 ABOVE SHALL NOT APPLY
WITH RESPECT TO (i) CLAIMS OF BREACH OF CONFIDENTIALITY, (ii)
CLAIMS SUBJECT TO INDEMNIFICATION
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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PURSUANT TO SUBSECTION 20.1 ABOVE OR PATENT INFRINGEMENT
PROVISIONS OF THIS CONTRACT, OR (iii) FAILURE TO COMPLY WITH
APPLICABLE LAWS.
6. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CONTRACT, NEITHER
PARTY, NOR THEIR AFFILIATES NOR THEIR EMPLOYEES, DIRECTORS,
OFFICERS AND SUPPLIERS SHALL BE LIABLE FOR THE OTHER PARTY'S
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS,
REVENUES OR SAVINGS ARISING OUT OF THIS CONTRACT OR THE USE OR
PERFORMANCE OF ANY PRODUCTS OR SERVICES OR, EXCEPT AS SET FORTH
ABOVE, FOR DAMAGES IN EXCESS OF THE AGGREGATE AMOUNT OF ALL
PAYMENTS MADE TO THE VENDOR HEREUNDER. THIS CLAUSE SHALL SURVIVE
FAILURE OF AN EXCLUSIVE OR LIMITED REMEDY.
SECTION 21. REPRESENTATIONS AND WARRANTIES
21.1 Representations and Warranties of the Parties. The parties
hereby represent and warrant as follows:
21.1.1 Due Organization. Each party represents and warrants to
the other party that the representing party is a corporation duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to own and operate its business and properties and to carry on
its business as such business is now being conducted and is duly
qualified to do business in all jurisdictions in which the transaction
of its business in connection with the performance of its obligations
under this Contract makes such qualification necessary or required.
21.1.2 Due Authorization; Binding Obligation. Each party
represents and warrants to the other party that the representing party
has full corporate power and authority to execute and deliver this
Contract and to perform its obligations hereunder, and the execution,
delivery and performance of this Contract by the representing party have
been duly authorized by all necessary corporate action on the part of
the party; this Contract has been duly executed and delivered by such
party and is the valid and binding obligation of the party enforceable
in accordance with its terms, except as enforcement thereof may be
limited by or with respect to the following: (i) applicable insolvency,
moratorium, bankruptcy, fraudulent conveyance and other similar laws of
general application relating to or affecting the rights and remedies of
creditors; (ii) application of equitable principles (whether enforcement
is sought in proceedings in equity or at law); and (iii) provided the
remedy of specific enforcement or of injunctive relief is subject to the
discretion of the court before which any proceeding therefore may be
brought.
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21.1.3 Non-Contravention. Each party represents and warrants to
the other party that the execution, delivery and performance of this
Contract by the representing party and the consummation of the
transactions contemplated hereby will not contravene its certificate of
incorporation or by-laws and will not conflict with or result in (i) a
breach of or default under any material indenture, mortgage, lease,
agreement, instrument, judgment, decree, order or ruling applicable to
it or by which it or any of its properties is bound or affected, or (ii)
a breach by the representing party of any Applicable Law.
21.1.4 Regulatory Approvals. Vendor represents and warrants to
Owner that all authorizations by, approvals or orders by, consents of,
notices to, filings with or other acts by or in respect of any
Governmental Entity or any other Person required in connection with the
execution, delivery and performance of this Contract by the Vendor have
been obtained or shall be obtained in due course.
21.1.5 Non-Infringement. Vendor represents and warrants to Owner
that to the best of Vendor's knowledge after reasonable investigation,
as of the Effective Date there are no actual claims or threatened or
actual suits in connection with patents or other Intellectual Property
Rights that could materially adversely affect it's the Vendor's ability
to perform its obligations under this Contract.
21.1.7 Requisite Knowledge. Vendor represents and warrants to
Owner that that Vendor has all requisite knowledge, know-how, skill,
expertise and experience to satisfy its obligations in accordance with
the terms of this Contract.
21.1.8 Financial Capacity. Vendor represents and warrants to
Owner that Vendor has the financial, management and manufacturing
capacity and capabilities to satisfy its obligations in a timely manner
in accordance with the terms of this Contract.
SECTION 22. TITLE AND RISK OF LOSS
22.1 Title. Title to Equipment shall pass to the Owner upon
delivery of such Equipment to the location specified in the Exhibits.
22.2 Risk of Loss. Risk of loss or damage of any Products
furnished to the Owner in connection with this Contract shall pass from the
Vendor to the Owner upon the later of (i) delivery of such Products to the
Sites; or, (ii) if Vendor is responsible for Site Preparation, the date of the
Site Preparation Substantial Completion Certificate; provided that during the
period a party has the risk of loss or damage to an item, nothing in this
section shall relieve the other party of responsibility for loss or damage to
the item resulting from the acts or omissions of the other party, its employees,
or agents.
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SECTION 23. DISPUTE RESOLUTION
23.1 Dispute Resolution. In the event any controversy, claim,
dispute, difference or misunderstanding between the Owner and the Vendor arises
out of or relates to this Contract, any term or condition hereof, any of the
Work to be performed hereunder or in connection herewith, each party shall
designate managers to meet and negotiate in good faith in an attempt to amicably
resolve such controversy, claim, dispute, difference or misunderstanding in
writing. Such managers shall meet for this purpose within ten (10) Business
Days, or such other time period mutually agreed to by the parties, after written
notice from either party. If the parties are unable to resolve the controversy,
claim, dispute, difference or misunderstanding through good faith negotiations
within ten (10) Business Days after such meeting or meetings, each party shall,
within five (5) Business Days after the expiration of such ten (10) Business Day
period, prepare a written position statement which summarizes the unresolved
issues and such party's proposed resolution. Such position statement shall be
delivered by the Vendor to the Owner's Chief Executive Officer and by the Owner
to the Vendor's corresponding officer or representative for resolution within
(5) Business Days, or such other time period mutually agreed to by the parties.
23.2 Tolling. All applicable statutes of limitation shall be
tolled to the extent permitted by Applicable Law while the dispute resolution
procedures specified in this Section are pending, and nothing herein shall be
deemed to bar any party from taking such action as the party may reasonably deem
to be required to effectuate such tolling.
SECTION 24. TERMINATION AND EVENTS OF DEFAULT
24.1 Termination Without Cause. The Owner may, at its sole
option, terminate this Contract, in its entirety, for convenience upon ninety
(90) days' prior written notice at any time. Any Purchase Orders issued prior to
any such termination above shall remain in effect and shall be fulfilled to the
extent that such orders are outstanding as of the date of such termination. In
the event that at the time of such termination the aggregate amount of all
Purchase Orders delivered to Vendor under this Contract (the "Aggregate Purchase
Orders") is less than One Hundred Million Dollars ($100,000,000), Owner shall
pay to the Vendor the lesser of (i) the difference between One Hundred Million
Dollars ($100,000,000) and the Aggregate Purchase Orders; or (ii) the aggregate
amounts of the Products and Services furnished by Vendor pursuant to Exhibits
B-2 and B-3 prior to the date of such termination.
24.2 Termination for Cause. The Owner shall have the right to
terminate this Contract in its entirety (except as otherwise set forth in clause
(g) below) without any penalty or payment obligation, except as provided in
subsection 24.5 below, upon the occurrence of any of the events of default (each
a "Vendor Event of Default") as set forth below:
(a) the Vendor (i) files a voluntary petition in bankruptcy or
has an involuntary petition in bankruptcy filed against it that is not
dismissed within sixty
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(60) days of such involuntary filing, (ii) admits the material
allegations of any petition in bankruptcy filed against it, (iii) is
adjudged bankrupt, (iv) is unable generally to pay its debts as they
mature, (v) makes a general assignment for the benefit of its creditors,
or if a receiver is appointed for all or a substantial portion of its
assets and is not discharged within sixty (60) days after his
appointment, or (vi) the Vendor commences any proceeding for relief from
its creditors in any court under any state insolvency statutes; or
(b) the Vendor disregards or violates any Applicable Laws or
Applicable Permits which has a material adverse effect on the business,
financial condition or operations of Owner or on any of its Systems
("Material Adverse Effect"); or
(c) the Vendor allows material Defects and Deficiencies to
exist; or
(d) the Vendor fails to fulfill its obligations with respect to
the satisfaction, discharge or bonding of liens as set forth herein; or
(e) the Vendor abandons or ceases for a period in excess of
thirty (30) days its performance of the Work (except as a result of
Force Majeure or a casualty which is fully covered by insurance or as to
which other provisions reasonably acceptable to the Owner are being
diligently pursued); or
(f) the Vendor assigns or subcontracts Work other than as
provided for in this Contract which has a Material Adverse Effect; or
(g) the Vendor misses the Guaranteed Substantial Completion Date
for any given System by a period in excess of one hundred-fifty (150)
days; provided that in such case the Owner shall have the right, but not
the obligation, to terminate this Contract with respect to only that
System in which such delay occurred; and provided further that such
failure to achieve such date was not caused by (i) a Force Majeure event
and/or (ii) any act or omission of the Owner; or
(h) if an event of Force Majeure prevents the Vendor from
performing its obligations under this Contract for a period exceeding
sixty (60) days, the Owner may, upon prior written notice to the Vendor,
terminate this Contract in accordance with the Force Majeure provisions
above; or
(i) the Vendor otherwise materially breaches any provision of
this Contract.
24.3 Remedies. (a) If any of the Vendor Events of Default
exists, the Owner may, in addition to and without prejudice to any other rights
or remedies of the Owner in this Contract or at law or in equity, terminate this
Contract upon written notice to the Vendor; provided, however, that the Owner
shall have first provided to the Vendor the following periods of notice and
opportunity to cure:
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(i) in the case of a Vendor Event of Default specified
in the foregoing clauses (a) or (b), no notice or opportunity to cure
shall be required from the Owner; and
(ii) in the case of any other Vendor Event of Default,
the Owner shall have provided thirty (30) days' prior written notice,
and the Vendor shall have failed (i) to commence to cure the default
within five (5) Business Days of delivery of such notice, and (ii) to
diligently pursue such cure and remedy the breach entirely.
(b) If the Owner elects to terminate this Contract, the Owner
may, in addition to and without prejudice to any other rights or remedies of the
Owner in this Contract or of law or in equity, do one or more of the following:
(i) require Vendor, at no additional charge to Owner, to
complete or assist others with the completion of all ordered but
unfinished Work, including the sharing with Owner and others all
relevant engineering and design data, procurement data, manufacturing
data, construction and erection data, start-up and testing data,
materials, and Products that shall become part of such unfinished System
and/or the specified Systems, which Vendor would otherwise have been
required to deliver to Owner pursuant to the terms of this Contract but
for the breach, under reasonably appropriate non-disclosure agreements;
or
(ii) direct that the Vendor assign its Subcontractor
agreements to the Owner without any change of price or conditions
therein or penalty or payment therefor.
(c) In the event of any termination of this Contract by Owner in
connection with a Vendor Event of Default, Owner shall have no liability for any
failure to satisfy the Minimum Purchase Commitment prior to such termination.
24.4 Discontinuance of Work. Upon such notification of
termination, the Vendor shall immediately discontinue all of the Work (unless
such notice of termination directs otherwise), and, as more fully set forth in
subsection 24.3(b), deliver to the Owner copies of all data, drawings,
specifications, reports, estimates, summaries, and such other information, and
materials as may have been accumulated by the Vendor in performing the Work,
whether completed or in process, which Vendor would otherwise have been required
to deliver to Owner pursuant to this Contract but for the breach. Furthermore,
the Vendor shall assign, assemble and deliver to the Owner all purchase orders
and Subcontractor agreements requested by the Owner.
24.5 Payments. If the Owner terminates this Contract pursuant to
subsection 24.2, the Vendor shall not be entitled to receive further payment
other than payments due and payable under this Contract and not subject to
dispute prior to such termination (provided that any such disputed amounts shall
be paid by the Owner when and if such dispute is in fact resolved).
Notwithstanding anything herein to the contrary, the Owner may withhold
payments, if any, to the Vendor for the purposes of offset of amounts
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owed to the Owner pursuant to the terms of this Contract until such time as the
exact amount of damages due the Owner from the Vendor is fully determined by a
court of competent jurisdiction.
24.6 Continuing Obligations. Termination of this Contract for
any reason (i) shall not relieve either party of its obligations with respect to
the confidentiality of the Proprietary Information as set forth in subsection
26.18, (ii) shall not relieve either party of any obligation which applies to it
and which expressly or by implication survives termination, and (iii) except as
otherwise provided in any provision of this Contract expressly limiting the
liability of either party, shall not relieve either party of any obligations or
liabilities for loss or damage to the other party arising out of or caused by
acts or omissions of such party prior to the effectiveness of such termination
or arising out of its obligations as to portions of the Work already performed
or of obligations assumed by the Vendor prior to the date of such termination.
24.7 Vendor's Right to Terminate. The Vendor shall have the
option to terminate this Contract without any penalty or payment obligations,
other than undisputed payment obligations outstanding as of the date of any such
termination pursuant to the terms of this Contract if:
(a) the Owner (i) files a voluntary petition in bankruptcy or
has an involuntary petition in bankruptcy filed against it that is not
dismissed within sixty (60) days of such involuntary filing, (ii) admits
the material allegations of any petition in bankruptcy filed against it,
(iii) is adjudged bankrupt, (iv) makes a general assignment for the
benefit of its creditors, or if a receiver is appointed for all or a
substantial portion of its assets and is not discharged within sixty
(60) days after his appointment, or (v) commences any proceeding for
relief from its creditors in any court under any state insolvency
statutes, and any such filing, proceeding, adjudication or assignment as
described herein above shall otherwise materially impair the Owner's
ability to perform its obligations under this Contract; or
(b) the Owner fails to make payments of undisputed amounts due
to the Vendor pursuant to the terms of this Contract which are more than
sixty (60) days overdue, provided that such failure has continued for at
least thirty (30) days after the Vendor has notified the Owner of its
right and intent to so terminate on account of such overdue amount; and
provided, further, that such failure to make undisputed payments to
Vendor shall not arise out of or relate to a termination of or credit
restrictions under the Vendor Financing, or
(c) the Owner materially breaches any provision of this Contract
other than a breach to which Section 24.7(b) is applicable, and after
the Vendor having provided thirty (30) days' prior written notice, the
Owner shall have failed (i) to commence to cure the default within five
(5) Business Days of delivery of such notice, and (ii) to diligently
pursue such cure and remedy the breach entirely.
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24.8 Special Termination Events. (a) Neither the Vendor nor the
Owner shall be obligated to perform under this Contract, except as specifically
provided, in the event that financing for the purpose of acquiring any System
sufficient to cover Owner's current payment obligations hereunder has not been
finalized with the Vendor on terms and conditions reasonably satisfactory to the
Owner. Unless acceptable financing is available, either party may terminate this
Contract without recourse, except as noted below, by notifying the other party
in writing. Further, the parties agree that the delivery and performance
schedules shall be extended by the period of time required to secure acceptable
financing. In the event of a termination of this Contract pursuant to this
subsection the Owner shall remain liable for amounts due to the Vendor for all
Work performed or Products delivered by the Vendor or any of its Subcontractors
pursuant to the specific terms of this Contract which had been directly
delivered to or performed for the Owner and/or any of its facilities or Sites in
accordance with the terms of this Contract. Any amounts owed by the Owner for
Work done or Products delivered by the Vendor during such interim period not
otherwise invoiced to the Owner by the Vendor prior to the termination of such
interim period, shall be invoiced to the Owner by the Vendor within thirty (30)
days. In no event shall the Owner be liable to the Vendor due to a termination
of this Contract pursuant to this subsection for satisfaction of the Minimum
Purchase Commitment or for any of the Vendor's direct or indirect costs or
expenses incurred in connection with any supplies or equipment ordered by the
Vendor or agreements entered into by the Vendor in order to enable it to fulfill
its obligations hereunder or in connection with the establishment of and/or
upgrade to its manufacturing, personnel, engineering, administrative or other
capacities and/or resources in contemplation of or pursuant to its performance
in accordance with the terms of this Contract and any amounts due to the Vendor
pursuant to this subsection shall be limited in all cases to Work actually done
or Products or Services actually delivered to the Owner, its Sites or its
facilities.
(b) If at any time after the Effective Date any material change
shall have occurred in any Applicable Law or in the interpretation thereof by
any Governmental Entity, or there shall be rendered any decision in any judicial
or administrative case or proceeding, in either case which, in the reasonable
opinion of the Owner would make the Owner's use of any part of any System
illegal or would subject the Owner or any of its Affiliates to any material
penalty, other material liability or onerous condition or to any burdensome
regulation by any Governmental Entity or otherwise render the use of such System
economically nonviable, then, with respect to such System, or affected part
thereof, or with respect to all Systems if so affected, the Owner may terminate
this Contract without charge or penalty of any kind; provided that (i) the Owner
gives the Vendor prior written notice of any such change or decision and (ii)
that the Owner uses its reasonable efforts for a reasonable time to reverse or
ameliorate such change or decision to the extent possible or practical prior to
declaring such termination. In the event of a termination pursuant to this
subsection, payment obligations incurred by the Owner for Work actually done or
Products or Services actually delivered by the Vendor prior to such termination
pursuant to this Contract shall be payable by the Owner to the Vendor on the
same terms and subject to the limitations set forth in subsection 24.8(a) above.
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SECTION 25. SUSPENSION
25.1 Owner's Right to Suspend Work. The Owner may at any time
issue a Change Order to the Vendor to suspend all or any part of the Work for
such period of time as the Owner may reasonably determine to be appropriate. Any
such Change Order shall be handled in accordance with the provisions of Section
11 hereof.
SECTION 26. MISCELLANEOUS
26.1 Amendments. The terms and conditions of this Contract may
only be amended by mutually agreed contract amendments. Each amendment shall be
in writing and shall identify the provisions to be changed and the changes to be
made. Contract amendments shall be signed by duly authorized representatives of
each of the Vendor and the Owner.
26.2 Owner Liabilities. Vendor understands and agrees that no
third party shall guarantee or otherwise be in any way liable with respect to
any obligations or liabilities of the Owner or any of its affiliates pursuant to
this Contract.
26.3 Offset. The Vendor hereby waives any right of offset of
amounts owed by the Owner to the Vendor pursuant to the terms of this Contract.
26.4 Assignment. The Owner may assign this Contract, or any part
hereof, to any affiliate of Owner without the Vendor's approval or consent.
Subject to the foregoing and except as otherwise permitted herein, neither this
Contract nor any portion hereof may be assigned by either party without the
express prior written consent of the other party. The Owner may, without the
consent of the Vendor, collaterally assign its rights hereunder (including, but
not limited to, all licenses with respect to the Software) to any or all parties
providing financing for any part of a System for the benefit of the Vendor and
one or more other entities providing financing for any part of a System or
similar arrangement for the benefit of the Vendor and one or more other entities
providing for the financing for any part of a System, in either case, which
arrangement, as the case may be, is reasonably acceptable to the Vendor in
accordance with the terms of the financing documents. If requested by the Owner,
the Vendor shall within seven (7) calendar days of such request provide a
written consent to any such assignment; provided that such consent shall permit
reassignment if the financing parties exercise their remedies under the
documents for such financing subject to reasonable standards as to (i) the
creditworthiness of the assignee and (ii) the fact that the assignee is not at
such time a direct competitor of the Vendor involved in the manufacture of
communications equipment, software or related services. The foregoing rights and
obligations are in addition to those set forth elsewhere in this Contract. Any
attempted assignment in violation of the terms of this Contract shall be null
and void. Subject to the foregoing, this Contract shall bind and inure to the
benefit of the parties to this Contract, their successors and permitted assigns.
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26.5 Notices. Except as otherwise expressly stated herein, all
notices, requests, demands and other communications which are required or may be
given under this Contract shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service; and three (3 ) days after sending, if
sent by certified or registered mail, postage prepaid, return receipt requested.
All notices shall be addressed as follows:
If to the Owner:
CRICKET WIRELESS COMMUNICATIONS, INC.
10307 Pacific Center Court
San Diego, California 92121
Attention: Chief Executive Officer
With a copy to:
Sr. Vice President, General Counsel
10307 Pacific Center Court
San Diego, California 92121
Telephone: (858) 882-6000
Facsimile: (858) 882-6080
If to the Vendor:
Lucent Technologies Inc.
4851 LBJ Freeway
Suite 900
Dallas, Texas 75244
Attention: Diana-Lee Mary or Contract Manager
Telephone: (972) 858-4956
Facsimile: (972)-858-4798
By written notice provided pursuant to this subsection, either party may change
its designated addressee for purposes of giving notices under this Contract.
26.6 Governing Law. This Contract is governed by the laws of the
State of California, without regard to principles of conflict of laws. This
Contract shall be deemed to be made and executed in the State of California.
26.7 Remedies. Subject only to the limitations on liability
contained in Section 20.3, each party shall be entitled to pursue any and all
rights and remedies that are available at law or in equity.
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26.8 Consent to Jurisdiction. Each party to this Contract, by
its execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court located in the Southern
District of California or the state courts of the State of California located in
San Diego, California for the purpose of any action, claim, cause of action or
suit (in contract, tort or otherwise), inquiry, proceeding or investigation
arising out of or based upon this Contract or relating to the subject matter
hereof, (ii) hereby waives, to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that-any such proceeding brought in one of the above-named courts is
improper, or that this Contract or the subject matter hereof may not be enforced
in or by such court, and (iii) hereby agrees not to commence any action, claim,
cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Contract or relating to the
subject matter hereof other than before one of the above-named courts nor to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by California law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified herein.
26.9 Compliance with Law. The Owner and the Vendor shall (a)
comply with all Applicable Laws in the performance of this Contract, including,
without limitation, the laws and regulations of the United States Department of
Commerce, State Department and the Federal Communications Commission and any
other applicable agency or department.
26.10 Headings. The headings given to the Sections and
subsections herein are inserted only for convenience and are in no way to be
construed as part of this Contract or as a limitation of the scope of the
particular Section or subsection to which the title refers.
26.11 Severability. Whenever possible, each provision of this
Contract shall be interpreted in such a manner as to be effective and valid
under such applicable law, but, if any provision of this Contract shall be held
to be prohibited or invalid in any jurisdiction, the remaining provisions of
this Contract shall remain in full force and effect and such prohibited or
invalid provision shall remain in effect in any jurisdiction in which it is not
prohibited or invalid.
26.12 Waiver. Unless otherwise specifically provided by the
terms of this Contract, no delay or failure to exercise a right resulting from
any breach of this Contract shall impair such right or shall be construed to be
a waiver thereof, but such right may be exercised from time to time as may be
deemed expedient. If any representation, warranty or covenant contained in this
Contract is breached by either party and thereafter waived by the
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other party, such waiver shall be limited to the particular breach so waived and
not be deemed to waive any other breach under this Contract.
26.13 Public Statements and Advertising. (a) Neither party shall
issue any public statement (or any private statement unless required in the
performance of the Work) relating to or in any way disclosing any aspect of the
Work or any System including the scope, the specific terms of this Contract,
extent or value of the Work or any System. Express written consent of the other
party is required prior to the invitation of or permission to any reporter or
journalist to enter upon the System or any part thereof. The Vendor agrees not
to use for publicity purposes any photographs, drawings and/or materials
describing any System without obtaining the prior written consent of the Owner,
which consent shall not be unreasonably withheld. The Owner agrees not to use
for publicity purposes any photographs, drawings and/or materials describing the
Vendor's products and services without obtaining the prior written consent of
the Vendor, which consent shall not be unreasonably withheld. This subsection
shall not prohibit the provision of necessary information to prospective
Subcontractors and the Vendor's or the Owner's personnel, agents or consultants
or other disclosures which are required by Applicable Law, including without
limitation federal and state securities laws and regulations. All other such
public disclosures by a party require the written consent of the other party.
(b) Each party shall submit to the other proposed copies of all
advertising (other than public statements or press releases) wherein the name,
trademark or service mark of the other party or its affiliates is mentioned; and
neither party shall publish or use such advertising without the other party's
prior written approval. Such approval shall be granted as promptly as possible
and shall not be unreasonably withheld. The parties acknowledge that the
obtaining of prior written approval for each such use pursuant to this
subsection may be an administrative burden. At the request of either party, the
Owner and the Vendor shall establish mutually acceptable guidelines for the uses
specified therein. Such guidelines shall be subject to change from time to time
at the reasonable request of either party.
26.14 Records and Communications. Procedures for keeping and
distributing orderly and complete records of the Work and its progress are
stated in the Exhibits. The procedures so established shall be followed
throughout the course of the Work unless the Owner and the Vendor mutually agree
in advance in writing to revise the procedures. Procedures for communications
among the Owner and the Vendor are stated in the Exhibits. The procedures so
established shall be followed throughout the course of the Work unless the Owner
and the Vendor mutually agree in advance and in writing to revise such
procedure.
26.15 Ownership of Specifications. The Specifications shall
constitute the Proprietary Information of each party to the extent of each
party's contribution to the Specifications. Neither party shall use those parts
of the Specifications contributed by the other party or any part of the
Proprietary Information of the other party for any purpose other than fulfilling
or exercising their respective rights or obligations under this Agreement.
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26.16 Financing Requirements. The Vendor acknowledges that the
attainment of financing for construction of the System may be subject to
conditions that are customary and appropriate for the providers of such
financing. Therefore, the Vendor agrees to promptly consider any reasonable
amendment to or modification or assignment of this Contract required by such
providers (including, without limitation, any pertinent industrial development
authority or other similar governmental agency issuing bonds for financing of
the System) which do not materially modify the scope of the Vendor's Work in
order to obtain such financing. In the event that any such amendment or
modification materially increases the Vendor's risk or costs hereunder, the
Owner and the Vendor shall negotiate in good faith to adjust pricing matters,
and to equitably adjust such other provisions of this Contract, if any, which
may be affected thereby, to the extent necessary to reflect such increased risk
or costs. In no event shall the Vendor be required to accept any modification or
amendment pursuant to this subsection provide it has a commercially reasonable
basis for such refusal.
26.17 Owner Review, Comment and Approval. To the extent that
various provisions of this Contract provide for the Owner's review, comment,
inspection, evaluation, recommendation or approval, the Owner may at its option
do so in conjunction and/or consultation with the Vendor. To the extent that
this Contract requires the Owner to submit, furnish, provide or deliver to the
Vendor any report, notice, Change Order, request or other items, the Owner may
at its option and upon written notice to the Vendor designate a representative
to submit, furnish, provide or deliver such items as the Owner's agent therefor.
To the extent that various provisions of this Contract provide that the Owner
may order, direct or make requests with respect to performance of the Work or is
provided access to the System sites or any other site, the Owner may at its
option and upon written notice to the Vendor authorize a representative to act
as the Owner's agent therefor. Upon receipt of such notice, the Vendor shall be
entitled to rely upon such authorization until a superseding written notice from
the Owner is received by the Vendor.
26.18 Confidentiality. (a) All information which is identified
as proprietary or confidential by the disclosing party, including without
limitation all oral and written information (including, but not limited to,
determinations or reports by arbitrators pursuant to the terms of this
Contract), disclosed to the other party is deemed to be confidential, restricted
and proprietary to the disclosing party (hereinafter referred to as "Proprietary
Information"). Each party agrees to use the Proprietary Information received
from the other party only for the purpose of this Contract. Except as specified
in this Contract, no other rights, and particularly licenses, to trademarks,
inventions, copyrights, patents, or any other intellectual property rights are
implied or granted under this Contract or by the conveying of Proprietary
Information between the parties. Proprietary Information supplied is not to be
reproduced in any form except as required to accomplish the intent of, and in
accordance with the terms of, this Contract. The receiving party shall provide
the same care to avoid disclosure or unauthorized use of Proprietary Information
as it provides to protect its own similar proprietary information but in no
event shall the receiving party fail to use reasonable care under the
circumstances to avoid disclosure or unauthorized use of Proprietary
Information. All Proprietary Information shall be retained by the receiving
party in a secure place with access limited to only such of the receiving
party's employees,
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subcontractors or agents who need to know such information for purposes of this
Contract and to such third parties as the disclosing party has consented to by
prior written approval. All Proprietary Information, unless otherwise specified
in writing (i) remains the property of the disclosing party, (ii) shall be used
by the receiving party only for the purpose for which it was intended, and (iii)
such Proprietary Information, including all copies of such information, shall be
returned to the disclosing party or destroyed after the receiving party's need
for it has expired or upon request of the disclosing party, and, in any event,
upon termination of this Contract. At the request of the disclosing party, the
receiving party shall furnish a certificate of an officer of the receiving party
certifying that Proprietary Information not returned to disclosing party has
been destroyed. For the purposes hereof, Proprietary Information does not
include information which:
(i) is published or is otherwise in the public domain
through no fault of the receiving party at the time of
any claimed disclosure or unauthorized use by the
receiving party;
(ii) prior to disclosure pursuant to this Contract is
properly within the legitimate possession of the
receiving party as evidenced by reasonable documentation
to the extent applicable;
(iii) subsequent to disclosure pursuant to this Contract is
lawfully received from a third party having rights in
the information without restriction of the third party's
right to disseminate the information and without notice
of any restriction against its further disclosure;
(iv) is independently developed by the receiving party or is
otherwise received through parties who have not had,
either directly or indirectly, access to or knowledge of
such Proprietary Information;
(v) is transmitted to the receiving party after the
disclosing party has received written notice from the
receiving party after termination or expiration of this
Contract that it does not desire to receive further
Proprietary Information;
(vi) is obligated to be produced under order of a court of
competent jurisdiction or other similar requirement of a
Governmental Entity, so long as the party required to
disclose the information provides the other party with
prior notice of such order or requirement and its
cooperation to the extent reasonable in preserving its
confidentiality; or
(vii) the disclosing party agrees in writing is free of such
restrictions.
(b) Because damages may be difficult to ascertain, the parties
agree, without limiting any other rights and remedies specified herein, an
injunction may be sought against the party who has breached or threatened to
breach this subsection. Each party represents and warrants that it has the right
to disclose all Proprietary Information which it has
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disclosed to the other party pursuant to this Contract, and each party agrees to
indemnify and hold harmless the other from all claims by a third party related
to the wrongful disclosure of such third party's proprietary information.
26.19 Entirety of Contract; No Oral Change. This Contract and
the Exhibits and Schedules referenced herein constitute the entire contract
between the parties with respect to the subject matter hereof, and supersede all
proposals, oral or written, all previous negotiations, and all other
communications between the parties with respect to the subject matter hereof. No
modifications, alterations or waivers of any provisions herein contained shall
be binding on the parties hereto unless evidenced in writing signed by duly
authorized representatives of both parties as set forth in this Contract.
26.20 Relationship of the Parties. Nothing in this Contract
shall be deemed to constitute either party a partner, agent or legal
representative of the other party, or to create any fiduciary relationship
between the parties. The Vendor is and shall remain an independent contractor in
the performance of this Contract, maintaining complete control of its personnel,
workers, Subcontractors and operations required for performance of the Work.
This Contract shall not be construed to create any relationship, contractual or
otherwise, between the Owner and any Subcontractor, except to establish Owner as
a third party beneficiary of the Vendor's contacts with Subcontractors as
provided herein.
26.21 Discretion. Notwithstanding anything contained herein to
the contrary, to the extent that various provisions of this Contract call for an
exercise of discretion in making decisions or granting approvals or consents,
the parties shall be required to exercise such discretion, decision or approvals
and in good faith.
26.22 Non-Recourse. No past, present or future limited or
general partner in or of the Owner, no parent or other affiliate of any company
comprising the Owner, and no officer, employee, servant, executive, director,
agent or authorized representative of any of them (each, an "Operative") shall
be liable by virtue of the direct or indirect ownership interest of such
Operative in the Owner for payments due under this Contract or for the
performance of any obligation, or breach of any representation or warranty made
by the Owner hereunder. The sole recourse of the Vendor for satisfaction of the
obligations of the Owner under this Contract shall be against the Owner and the
Owner's assets and not against any Operative or any assets or property of any
such Operative. In the event that a default occurs in connection with such
obligations, no action shall be brought against any such Operative by virtue of
its direct or indirect ownership interest in the Owner.
26.23 Improvements, Inventions and Innovations. All rights in
any improvements, inventions, and innovations made solely by the Owner shall
vest in the Owner, and the Owner and its affiliates shall have the right to
exploit such improvements, inventions, and innovations. All rights in any
improvements, inventions and innovations made solely by the Vendor shall vest in
the Vendor, and the Vendor and its affiliates shall have the right to exploit
such improvements, inventions and innovations. All rights in any improvements,
inventions and innovations made by the substantial contribution of both parties
("Joint Information") shall vest jointly in both parties. Joint Information does
not
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include any underlying information owned by one of the parties prior to
commencement of such joint activities or developed beyond the scope of such
joint activities, including Products and Product information, technical
information or inventions developed prior to the commencement of any joint
activities, developed outside of the scope of such joint activities or developed
solely by either party. The rights of joint ownership to such Joint Information
shall be rights of full non-exclusive worldwide ownership, including rights to
license and transfer. Each party may exploit its rights to the Joint Information
independent of the other and may retain all economic benefits thereof, neither
party shall have any obligation to account to the other for profits derived from
the Joint Information and each party shall have full rights to enforce the Joint
Information intellectual property rights against non-authorized users.
26.24 Attachments and Incorporations. All Schedules and Exhibits
attached hereto, are hereby incorporated by reference herein and made a part of
this Contract with the same force and effect as though set forth in their
entirety herein.
26.25 Conflicts. In the event of any conflict or inconsistency
among the provisions of this Contract and the documents attached hereto and
incorporated herein, such conflict or inconsistency shall be resolved by giving
precedence to this Contract and thereafter to the Exhibits, Schedules and
Specifications.
26.26 References to Certain Sources. Reference to standard
specifications, manuals or codes of any technical society, organization or
association or to the laws or regulations of any Governmental Entity, whether
such reference is specific or by implication, by this Contract, means the latest
standard specification, manual, code, laws or regulations in effect at the time
of such reference, except as may be otherwise specifically agreed to by the
Owner. However, no provision of any reference, standard, specification, manual
or code (whether or not specifically incorporated by reference in this Contract)
shall be effective to change the duties and responsibilities of the Owner or the
Vendor from those set forth in this Contract; provided that nothing contained in
this Contract shall require the Owner or the Vendor to violate then existing and
enforceable Applicable Laws.
26.27 Counterparts. This Contract may be executed by one or more
of the parties to this Contract on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
26.28 Cooperation. Vendor acknowledges that Owner may have one
or more third party vendors, contractors and other personnel engaged to provide
work, equipment or services to Owner in connection with or related to this
Contract. Vendor agrees to reasonably communicate and cooperate with such third
parties at all times and, at the request of Owner, coordinate Vendor's and
Vendor's Subcontractors' activities hereunder with the activities of such third
parties.
26.29 Survival. Notwithstanding any expiration or termination of
this Contract, the provisions of Sections 2.8, 12, 13, 14, 15, 18, 20 and 26.18
shall continue in full force and effect.
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THE OWNER AND THE VENDOR HAVE READ THIS CONTRACT INCLUDING ALL
SCHEDULES AND EXHIBITS HERETO AND AGREE TO BE BOUND BY ALL THE TERMS AND
CONDITIONS HEREOF AND THEREOF.
IN WITNESS WHEREOF, the parties have executed this Contract as
of the date first above written.
VENDOR:
LUCENT TECHNOLOGIES INC,
a Delaware corporation
By: /s/ CHARLES M. MANY
---------------------------------
Name: Charles M. Many
Title: 8/12/99
V.P. SALES - WIRELESS
OWNER:
CRICKET WIRELESS COMMUNICATIONS,
INC.,
a Delaware corporation
By: /s/ S.G. SWENSON
---------------------------------
Name: S.G. Swenson
Title: CEO
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EXHIBIT A
TO THE
CRICKET COMMUNICATIONS, INC.
SYSTEM EQUIPMENT PURCHASE AGREEMENT
SYSTEM DESCRIPTION
Lucent Technologies, Inc. shall provide PCS 1900 mhz CDMA equipment, including
MSCs, ECPs, AP's, and base stations for deployment in Cricket Communications,
Inc.'s wireless network in the C through F bands.
Page 1 of 1
<PAGE> 71
Exhibit B to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Discount Structure for Cricket Communications
[Twenty-One Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 72
Exhibit B-1 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Flexent BTS Equipment
[Nine Pages of Pricing Lists Deleted Pursuant to Confidential Treatment Request]
<PAGE> 73
Exhibit B-2 to the Cricket Communication, Inc. System Equipment Purchase
Agreement
PCS CDMA System for Nashville Discounted Pricing Summary
[Eleven Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 74
Exhibit B-3 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
PCS CDMA System for Chattanooga Discounted Pricing Summary
[Twelve Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 75
Exhibit B-4 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Voice Processing Proposal
Year One: 46,000 Mailboxes (2000) New System Hardware Kit
[Thirty-Nine Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 76
Exhibit B-5 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Annual Release Maintenance Fee (ARMF)
[Text Deleted Pursuant to Confidential Treatment Request]
<PAGE> 77
Exhibit B-6 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Software Feature Packages
[One Page of Pricing Information Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 78
Exhibit B-7 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Services Prices
[Six Pages of Pricing Information Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 79
Exhibit B-8 to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Lucent Technologies
[One Hundred and Six Pages of Pricing Lists Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 80
Exhibit C to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Lucent Technologies Proprietary
[Eleven Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 81
Exhibit D to the Cricket Communications, Inc. System Equipment Purchase
Agreement
RF Engineering and Design Pricing
[Seven Pages of Pricing Information Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 82
Exhibit E to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Vendor's Agency Plan for Outsourced Material Procurement
[Twenty-Six Pages of Technical Information Text Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 83
EXHIBIT F
BTS & MSC INSTALLATION
I. STATEMENT OF WORK
1. GENERAL
The purpose of this section is to describe Owner's and Vendor's
responsibilities for the ordering, scheduling, transport, warehousing,
testing, delivery, installation and acceptance of BTS and or MSC
equipment at one or more sites secured by Owner as part of its RF
Network design for a market. In no case should this document supersede
the terms and conditions of the base contract. Both parties shall use
best efforts to individually and jointly complete activities identified
in the following narrative and matrices to accomplish the installation
of all BTS' and associated materials to insure the timely and efficient
operation of the Owner's network.
2. RESPONSIBILITIES
b. Owner
(1). Prior to install - Owner shall, using a "just-in-time"
delivery philosophy, issue purchase orders for BTS' and MSC' and
related equipment to the Vendor. Owner shall provide Vendor a
copy of the Network Design for review by Vendor and incorporation
into the production design of equipment for the individual site.
Owner shall insure through separate contracts that all local
permits and approvals have been secured for the installation of
Vendor's equipment at a cell site. All Owner provided antennas,
jumper and coax shall be installed and swept prior to or at the
time of BTS' equipment installation. All Owner installed power,
grounding and air conditioning shall be installed prior to or
contemporaneous with the time of MSC/OEM equipment installation
to meet Vendor's written specifications. Power and telco shall
have been ordered and either installed or scheduled for
installation at the site. A ground ring and bar shall be provided
to meet Vendor's written specifications. Access and staging areas
shall be secured for use by Vendor to carry out their
responsibilities.
(2). During install - Owner shall make available technical staff
to monitor installation, review and conduct such operational
tests as may be agreed upon by Owner and Vendor as part of this
installation activity. Owner shall make available, as required,
subcontractors to carry out such modifications to the
positioning, placement or replacement of antennas, positioning,
placement or replacement of existing equipment, cables, coaxial
cable and power distribution systems as may be required by Seller
<PAGE> 84
to carry out the installation and optimization of their equipment
at the site required by Vendor to carry out the optimization of
the site.
(3). Post install - Owner shall conduct mutually agreed to tests
and inspections deemed necessary in order to accept the
installation and operation of the site including review of any
and all tests and procedures conducted by Vendor as part of the
installation process.
a. Vendor
(1). Prior to install - Vendor shall schedule the production,
transport, delivery to any warehousing facilities required by
Vendor and delivery to and lifting at the cell site pad in
conformance with Owner's site specifications.
(2). During install - Vendor shall provide technical staff and
materials to carry out the provisioning, transport, lifting,
installation, testing, optimization and acceptance of BTS and
related equipment (bottom jumpers, RFFE's/LNA's, GPS antennas and
coax, power and telco cables to the demarc, etc.) or MSC and
related equipment at the site.
(3). Post install - Vendor shall provide to Owner written results
(or in other format as may be mutually agreed upon) of all
installation and testing conducted on the site together with all
operational parameters set on the equipment during installation,
optimization and integration process for the site.
3. EXECUTION PLAN
Vendor shall develop an execution plan for review and acceptance by
Owner that outlines, in detail; the Scope of Work, Project Team,
Schedule, Reporting Provisions, Quality Control functions and the
Process for Change orders to be utilized both for the overall project
and the installation of the all specified equipment at a cell site. The
execution plan shall be provided by Vendor to Owner and approved by
Owner, in writing, prior to the start of installation.
4. PROJECT TEAM
Vendor shall provide a detailed staffing plan by name, job function,
schedule, contact phone numbers together with a reporting hierarchy for
the teams assigned to BTS installation. The project team shall be
reviewed with and approved by Owner to determine adequacy of numbers
and job categories to carry out the complete project BTS installation
schedule within the mutually agreed upon schedule and price.
Owner shall provide a staffing plan outlining points of contact,
decision making authority and staff availability for the duration of
the installation project.
<PAGE> 85
5. SCHEDULE
Vendor shall provide in a mutually agreed to format, both hard copy and
electronic, an installation schedule that includes all agreed upon
project activities, deliverables, timetables, task prerequisites,
interdependencies, staffing, etc.
6. REPORTING PROVISIONS
Vendor shall provide written reports in a mutually agreed to format.
This schedule shall be prepared as a baseline and shall be upgraded
against the baseline not less often than once per week to demonstrate
adherence to the project schedule. In addition, more frequent reports
shall be made by Vendor to keep Owner informed of any problems which
may impact schedule adherence or which may require a change order from
this Scope of Work.
7. CHANGE ORDERS
In the event that site conditions deviate from those represented by
Owner to the Vendor and which may have a significant cost impact,
Vendor shall prepare for review and approval by Owner prior to
implementation of the change, a written change request for Owner's
approval. This request shall outline the assumptions made prior to the
request, the changes found which necessitate the request, the cost or
time deviations resulting from the current conditions and a cost
associated with the request. Owner shall have 24 hours to approve or
deny the request.
II. RESPONSIBILITY MATRIX
See Attached Excel Spreadsheet
III. ACCEPTANCE CRITERIA
Vendor shall provide to Owner its Standard Plan outlining criteria for
acceptance of installation of BTS equipment as complete prior to and
for inclusion in the final contract documents. This Standard Plan
shall, by incorporation, become a part of this agreement and shall
include at a minimum: Verification of Sweep tests, equipment settings,
all serial numbers, end-to-end test results of telephone circuits, all
manuals and documentation for the equipment, serial numbers, etc.
Acceptance of equipment installation by Owner shall not imply
acceptance of equipment performance individually or in the aggregate.
IV. WARRANTIES
Vendor agrees to perform Services in a workmanlike manner and in
accordance with good usage and accepted practices in the community in
which such Services are performed using material free from Defects
except where such material is specified or provided by Owner. If
Services performed by Vendor prove not to be performed in
<PAGE> 86
accordance with this Warranty and if Owner notifies Vendor of this
failure within a thirty (30) days period commencing on the date of
completion of the Service, Vendor, at its option, either will correct
all Defects or Deficiencies or render a full or prorated refund or
credit based on the original charge for the Services.
THE FOREGOING SERVICES WARRANTIES ARE IN ADDITION TO THOSE STATED IN
SECTION 18.2 OF THE CONTRACT AND ARE IN LIEU OF ALL OTHER IMPLIED
WARRANTIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
<PAGE> 87
Exhibit F
Responsibility Matrix
**pages 4 and 5 have been deleted pursuant to a Confidential Treatment Request
<PAGE> 88
Exhibit G to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Network Owner Acceptance
Substantial Completion Reference Documents
[Twenty Pages of Technical Information Text Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 89
Exhibit H to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Network Reliability Center Product Description
[Six Pages of Product Description Information Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 90
LUCENT TECHNOLOGIES
Bell Labs Innovations
AUTOPACE(TM) SYSTEM
PRODUCT DESCRIPTION
INTRODUCTION
The AutoPACE TM System provides performance management and some aspects of
configuration management for Lucent Technologies wireless systems. This software
tool can be used for monitoring and maintaining or improving system performance,
troubleshooting, capacity planning, and, in general, engineering a Lucent
Technologies wireless system to provide peak quality of service. New releases of
the AutoPACE System are issued approximately twice a year to support new ECP and
cell site software releases and to provide new features and capabilities. The
current release is AutoPACE 13.01.
GENERAL BACKGROUND
The AutoPACE System is a second generation tool that has evolved over more than
10 years. Strongly driven by user input, it was developed to enhance and replace
the performance analysis software package introduced in 1987 in response to an
assessment of the needs of AUTOPLEX System operators.
Performance analysis is required to monitor and maintain (or improve) the
quality of service once a system is operational. Performance analysis can
indicate aspects of a system that are not operating at acceptable levels due
either to design deficiencies, hardware/software failures, or the growth of the
system and/or subscriber base.
AUTOPACE SYSTEM BENEFITS
The major benefits of the AutoPACE System are:
- A Graphical User Interface (GUI), implemented under
Microsoft(R)(1) Windows(TM)(2)
- A client-server architecture that supports a common data source
for multiple users
- Single server support for multiple systems and systems with
multiple MSCs
- ----------
(1) Microsoft is a registered trademark of Microsoft Corporation, Inc.
(2) Windows is a trademark of Microsoft Corporation, Inc.
Exhibit I Lucent Technologies Page 1 of 22
January 1999
<PAGE> 91
- Long term data storage in an INFORMIX(R)(3) database on the
AutoPACE server
- Easier analyses through a task-oriented user interface
- Flexible and user-definable busy hour analyses
- Automated report generation via user-defined schedules
- Busy hour or 24 hour data summarization to reduce resource
requirements for long term data storage
- Flexible analysis options, including data trending and
forecasting
- Flexible configuration options
- Integrated interface for data collection from Lucent
Technologies wireless systems.
- 7 day x 24 hour hot line support by Wireless Technical Support
Center
- Professionally produced documentation (hard copy and CD-ROM)
reissued every release and detailed Release Letters
- Dedicated AutoPACE courses included in an integrated wireless
curriculum provided by the Lucent Technologies Customer Training
and Information Products (CTIP) organization
- ----------
(3) INFORMIX is a registered trademark of INFORMIX Software, Inc.
Exhibit I Lucent Technologies Page 2 of 22
January 1999
<PAGE> 92
AUTOPACE SYSTEM FUNCTIONAL CAPABILITIES: AN OVERVIEW
The AutoPACE System provides capabilities in the following functional
categories:
CONFIGURATION MANAGEMENT
AutoPACE System Configuration Management provides reports and analyses of the
translatable parameters that define the configuration of a Lucent Technologies
wireless system. Reports include both pre-defined geographic displays and
pre-defined tabular reports. Also, the AutoPACE System User Definable Report
(UDR) tool allows users to define their own reports of system configuration
parameters. An associated utility can compare configuration parameters at two
different points in time and display the differences. Currently, AutoPACE cannot
be used to modify the configuration of a system.
The AutoPACE database stores the most recent view. of the system configuration
and this is refreshed with a frequency defined by the user (typically once per
day). Configuration Management can report on more than one system as well as
systems with more than one MSC.
TRAFFIC ANALYSIS
AutoPACE System Traffic Analysis can be used for hourly, daily, or longer-term
analyses, including weekly, monthly, or annual reports, limited only by the
amount of data stored by the user. Traffic and performance data for cell sites,
trunks, logical and physical antenna faces, IS-41 inter-system networking and
MSC elements are collected, analyzed, and displayed as user-defined tabular
reports and graphs. Traffic Analysis can report every count provided by the
AUTOPLEX Service Measurement sub-system and the domestic 5ESS Switch DCS.
Virtually all Traffic Analysis reports are user-defined(4). The elements of a
report definition include several aspects, including: the system elements
included in a report, the counts included in a report, the data and time scope
of the report, the details of the presentation of the counts (including busy
hour analysis and data summarization details), and the organization, destination
and appearance of the output.
Traffic data, collected from the OMP as well as the domestic 5ESS Switch DCS on
an hourly basis, can be stored in the AutoPACE database for a period of time
determined by the user-provided storage capacity of the AutoPACE server. Traffic
Analysis can report on more than one system as well as systems with more than
one MSC.
MAINTENANCE MESSAGE ANALYSIS
AutoPACE System Maintenance Message Analysis is used to study Call Processing
Failure (CPF) messages that are generated by the AUTOPLEX System when a call
terminates abnormally. Pre-defined and user-defined reports based on Call
Processing Failure messages can
- ----------
(4) Currently, AutoPACE pre-defines the contents of 3 reports supporting
performance metrics recommended by Lucent Technologies and several
reports that support capacity planning trending recommend by Lucent
Technologies.
Exhibit I Lucent Technologies Page 3 of 22
January 1999
<PAGE> 93
be used to troubleshoot performance problems associated with cell site hardware,
specific mobile units, or terminals associated with a given power class, access
technology, or manufacturer. Maintenance Message Analysis also reports the
frequency with which the various types of Call Processing Failure messages
occur. These counts can be reported directly by the Maintenance Message Analysis
module and can also be included in the Traffic Analysis reports described above.
Call Processing Failure messages are collected in hourly files on the OMP and
transferred to the AutoPACE server where they are loaded into the AutoPACE
database. AutoPACE Maintenance Message Analysis can report on more than one
system as well as systems with more than one MSC.
SPECIAL ENGINEERING STUDIES
AutoPACE System Special Engineering Studies (SES) support four types of
scheduled engineering studies:
- Power Level Measurements (PLM) to analyze RF signal and
impairment measurements
- Voice Channel Selection Activity (VCSA) to report the details of
voice channel selection decisions
- Handoff Matrix (HOM) to report the flow of calls between handoff
neighbors
- RF Call Trace to analyze the signal strengths and digital error
rates received by a test terminal as a function of time
These studies are described in more detail below.
Note that the SES studies themselves are included as standard software in the
MSC and cell generic software and are not part of AutoPACE. However, the
AutoPACE System provides an easy and reliable interface to schedule any of the
SES studies and, after they have executed, AutoPACE can collect the data to
analyze and report it in formats that support troubleshooting.
Exhibit I Lucent Technologies Page 4 of 22
January 1999
<PAGE> 94
AUTOPACE SYSTEM GENERAL FEATURES
The following sections describe several general features that significantly
enhance the functional capabilities of the AutoPACE System
USER INTERFACE
Many of the benefits of the AutoPACE System are realized at the Graphical User
Interface (GUI). The AutoPACE System provides a GUI to improve the efficiency,
effectiveness, and overall user-friendliness of its performance analysis
capabilities. The AutoPACE System is a Microsoft Windows application; as such it
shares the ease of use of other Windows applications. Users already familiar
with Windows applications will quickly relate to the AutoPACE System interface.
The AutoPACE System is designed to allow traffic engineers and technicians to
use any of the available capabilities with a minimum of special training.
AutoPACE System reports can be specified to run according to a user-defined
schedule. Moreover, the output is available as either tabular or graphical
reports that can be selected or redefined with just a few keystrokes or clicks
of the mouse. Map reports, which display configuration data based on geography,
provide added insight into the performance of a wireless system. Finally,
On-Line Help is available for efficient and easy access to reliable, up-to-date
information without interrupting the workflow.
AUTOMATION
The AutoPACE System allows a user to specify schedules for automatically
collecting traffic data from one or more AUTOPLEX Systems. Additionally, the
AutoPACE System provides the ability to automate the generation of user-defined
reports. A user can specify when to run a report (for example, on a daily or
other regular basis or as a one time case), which report(s) are to be run, and
the output destination.
SPREADSHEET COMPATIBILITY
The AutoPACE System uses the Microsoft Excel spreadsheet program internally to
output reports (except for map reports). A User Defined Macro capability
provides all the flexibility and power of the spreadsheet to enhance the
analysis of the data. In addition, the AutoPACE System can load data directly
into Microsoft Excel. Thus the use of Excel allows a high degree of
customization and automation by the user, providing additional flexibility for
AutoPACE System users to display high-resolution color plots of primary traffic
data or secondary values calculated from them. For example, the user is able to
choose the axis variable in a plot to study traffic-related dependencies within
a system. Plots can be bar charts, pie charts, line graphs, or any of the other
standard Excel reporting formats.
AUTOPACE SYSTEM DATABASE
Exhibit I Lucent Technologies Page 5 of 22
January 1999
<PAGE> 95
All data in the AutoPACE System are stored in a relational database, implemented
using INFORMIX(R)(5) database software. The AutoPACE System database supports
three types of data:
- AUTOPLEX System Call Processing Failure Messages.
The database contains Call Processing Failure Messages collected
from AUTOPLEX System for use by AutoPACE System Maintenance
Message Analysis and reporting capabilities. The database also
supports the generation of counts that summarize the contents of
those messages.
- AUTOPLEX System Configuration Parameters.
The AutoPACE System database contains a copy of configuration
parameters for the AUTOPLEX System, taken from the MSC
Application Database(6) as well as user-supplied data such as
geographic information or network element names.
- AUTOPLEX System Service Measurements.
The AutoPACE System database contains service measurements
collected from AUTOPLEX System and 5ESS Switch DCSs for use by
AutoPACE System traffic analysis and reporting capabilities.
Moreover, the database supports the generation of a variety of
summary data.
The AutoPACE System automatically accesses its database for all applications.
However, to meet special needs, users can directly access the AutoPACE databases
using the appropriate INFORMIX database tools.(7)
Note that the Special Engineering Studies data, used exclusively for
troubleshooting, are not archived in the AutoPACE database.
- ----------
(5) INFORMIX is a registered trademark of INFORMIX Software, Inc.
(6) The Application Database for the AUTOPLEX System resides on the NBC and
contains both subscriber and system configuration data.
(7) Note that these tools will not be supplied with the AutoPACE System
product- In general, access other than read-only is not recommended.
Exhibit I Lucent Technologies Page 6 of 22
January 1999
<PAGE> 96
AUTOPACE SYSTEM CONFIGURATION
ARCHITECTURE
The AutoPACE System incorporates a client-server architecture. The clients do
not contain databases and must access data from a server. A single server is
able to access one or more AUTOPLEX Systems via TCP/IP connections and to
support one or more clients, connected to the server by a local area network
(LAN(8)). This configuration allows multiple AutoPACE System clients to share a
common database. As a result, data are available to all users without wasteful
duplication and without the possibility of inconsistent data. The AutoPACE
System server provides additional capabilities that significantly enhance the
effectiveness and utility of the AutoPACE System, including:
- automatic scheduled data collection
- database management for data storage and administration
- high speed data access via the LAN.
Data can be stored for any length of time required by the user, limited only by
the amount of user-provided disk storage capacity.
AUTOPACE SYSTEM HARDWARE/SOFTWARE PLATFORM
The AutoPACE System client, implemented on a PC as a Microsoft Windows product,
is positioned take advantage of technical innovations in the personal
computing/workstation market. The AutoPACE System server is provided on UNIX
System V Release 4 (Solaris(9)) running on a SUN SPARCStation.
AUTOPACE SYSTEM SWITCH INTERFACE
The AutoPACE System is designed to be used only with Lucent Technologies
wireless systems. An AutoPACE System client interfaces with an AutoPACE System
server over a LAN. The AutoPACE System server, in turn, interfaces with one or
more systems, either through a dial-up WAN or dedicated data lines into a port
on the Operations and Management Platform (OMP).(10)
- ----------
(8) While not strictly required, a LAN will provide the best performance.
High bandwidth data connections support remote access of the server by a
client.
(9) The currently supported Solaris release numbers can be obtained from
your Lucent Technologies wireless account representative.
(10) Note that the AutoPACE System is not sold as a turnkey product. The
hard-are required to support the tool as well as third party vendor
software (e.g., INFORNUX) must be provided by the customer. However, the
Lucent Technologies Customer Technical Support Organization will provide
support to help identify the specific hardware, software, configuration,
and capacity required for a particular installation.
Exhibit I Lucent Technologies Page 7 of 22
January 1999
<PAGE> 97
**Pages eight through twenty-two have been deleted pursuant to a Confidential
Treatment Request.**
Exhibit I Lucent Technologies Page 8 of 22
January 1999
<PAGE> 98
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
LUCENT TECHNOLOGIES
AUTOPLEX(R) SYSTEM 1000
OPERATIONS ADMINISTRATION AND MAINTENANCE (OA&M)
FUNCTIONAL OVERVIEW
JULY 27, 1999
APXLIB d13112 -LUCENT TECHNOLOGIES PROPRIETARY- July 27, 1999
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<PAGE> 99
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
1. INTRODUCTION
1.1 OVERVIEW
The AUTOPLEX(R) system 1000 provides a rich set of Operations, Administration
and Maintenance (OA&M) features to monitor, configure, and control an AUTOPLEX
communications network. These features aim to maximize the quality of service
offered to end customers of the system by:
1. Minimizing down time through robust redundancy schemes and fast
automatic recovery from hardware and software faults,
2. Providing a broad set of features to maximize the efficiency of the
operations staff assigned to monitor and control the system, and
3. Supporting a complete set of performance measurements; which enables the
efficient configuration and engineering of the system.
1.2 SCOPE
The features described in this document are currently available, or are under
development for delivery in 1999. This document does not address future product
evolution plans. This document will be updated yearly to reflect new features
that are added to the product.
The focus of this document is OA&M features offered in the Autoplex 1000 System,
including the Access Manager, 5ESS-2000 DCS, Operation Maintenance Platform -
Simplex, Operational Maintenance Platform-FX, and AutoPACE.
1.3 GUIDE TO THE DOCUMENT
This document is written in a layered fashion starting with a high level product
description, leading to OA&M feature descriptions, and finishing with a
discussion of user and system OA&M interfaces.
Section 2 provides an architectural overview of the AUTOPLEX system, identifying
the Network Elements that comprise the system and their associated redundancy
strategies.
Section 3 provides a functional decomposition of the AUTOPLEX OA&M features. The
features are described according the classical Network Management functional
areas:
- Fault Management,
- Performance Management,
- Configuration Management,
- Accounting Management, and
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<PAGE> 100
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
- Security Management.
Section 4 describes the hardware and user interfaces that provide access to the
OA&M features.
Section 5 describes how the OA&M interfaces may be integrated into a network
operations environment.
1.4 GLOSSARY
The official name of this product is the AUTOPLEX System 1000 Cellular
Telecommunications System. Throughout this document the product will be referred
to simply as the "AUTOPLEX system".
<TABLE>
<S> <C>
AMA Automatic Message Accounting
AMATPS Automatic Message Accounting Teleprocessing System
AP Application Processor
APC Application Processor Cluster
APCC Application Processor Cluster Complex
ASCII American Standard Code for Information Interchange
CDMA Code Division Multiple Access
CDN Call Processing/ Data Base Node
CDR Call Detail Record
CSN Cell Site Node
DLN Direct Link Node
DCI Dual-Serial Channel Computer Interface
DCS Digital Cellular Switch
ECP Executive Cellular Processor (Access Manager)
ECPC Executive Cellular Processor Complex (Access Manager)
EIN Ethernet Interface Node
EML Element Management Layer
EMS Element Management System
FTP File Transfer Protocol
GUI Graphical User Interface
HOM Hand Off Matrix
ICN Inter-Cellular Node
IMS/CNI Inter-processor Message Switch/Common Network Interface
ITU International Telecommunications Union
LAN Local Area Network
MSC Mobile Switching Center
Network Element Processing node in the AUTOPLEX system
NML Network Management Layer
NOCC Network Operations Control Center
NVM Non-Volatile Memory
OA&M Operations, Administration and Maintenance
OFD Operational Fault Detection
OMP Operations and Management Platform
</TABLE>
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<PAGE> 101
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
<TABLE>
<S> <C>
OSI Open System Interconnection
OSS Operations Support System
PLM Power Level Measurements
PPP Point to Point Protocol
PSTN Public Switched Telephone Network
RCS Radio Cluster Server
RC/V Recent Change/Verify
RF Radio Frequency
RPCN Ring Peripheral Controller Node
ROP Receive Only Printer
SCCS Switching Control Center System
SNMP Simple Network Management Protocol
SS7 Signaling System 7
System Administrator Person responsible for Unix administration of AUTOPLEX Network
Elements
TCP/IP Transmission Control Protocol/Internet Protocol
TEA Translations Entry Assistant
Technician Person responsible for day to day maintenance of equipment
TMN Telecommunications Management Network
VCDX Very Compact Digital Exchange
VCSA Voice Channel Selection Activity
WAN Wide Area Network
</TABLE>
2. SYSTEM DESCRIPTION
The AUTOPLEX system is comprised of a diverse network of processors required to
support a wireless switching system. Figure 2.0-1 shows the major components
that comprise the AUTOPLEX system architecture. Figure 2.0-1 does not show all
the AUTOPLEX Network Elements and interfaces. More detailed diagrams may be
found later in the document.
[graphic]
FIGURE 2.0-1 AUTOPLEX SYSTEM ARCHITECTURE
The AUTOPLEX system is designed with a high degree of redundancy to provide
reliable services to wireless subscribers. The AUTOPLEX Network Elements are
each designed with a redundancy scheme that is best suited to the service that
they provide. The following subsections defines the role of each of the AUTOPLEX
Network Element and its associated redundancy strategy.
2.1 OPERATIONS AND MANAGEMENT PLATFORM (OMP)
The OMP is an adjunct processor connected to the ECP via a redundant pair of
high speed data links. The OMP is not actively involved in processing wireless
calls. The OMP hosts a wide range of OA&M applications including:
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<PAGE> 102
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
- collecting and storing service measurement data to support
Performance Management,
- collecting special study data to support Performance Management,
- providing a forms based front end for the ECP Recent Change/Verify
(RC/V) application for Configuration Management,
- maintaining log files for AUTOPLEX event reports,
- supporting a near real time billing interface for Accounting
Management,
- storing cell site inventory data for Configuration Management, and
- storing backup software images for the AP and the Flexent cell
products.
The multi-window OMP client terminals (attached to the OMP's Ethernet) provide
access to the OA&M applications for maintaining all Network Elements in the
AUTOPLEX system (ECPC, cell sites and 5ESS-2000 DCS). See section 4.2 for more
details.
The OMP is built on a scalable Sun computing platform. It utilizes UNIX System V
Release 4 (Solaris(R)(1)) and supports open systems networking standards. The
OMP acts as an interface point into the service provider's Wide Area Network
(WAN) for network operations. Operations Support Systems (OSSs) can connect to
the OMP to support network level Fault Management, Performance Management,
Configuration Management, and Accounting Management. See Section 4.3 for more
details on AUTOPLEX interfaces to the OSSs.
[* * *]
2.2 AUTOPACE(R)
The AutoPACE system is an adjunct set of processors (the AutoPACE server, and
multiple AutoPACE client PCs) that monitor and report AUTOPLEX performance data.
The AutoPACE system is designed to be used only with the AUTOPLEX system. Figure
2.6-1 below shows a typical AutoPACE configuration. The AutoPACE server receives
performance data from the OMP and stores it in a data base. The AutoPACE client
PCs execute AutoPACE applications with support from the AutoPACE server.
[graphic]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted material
has been filed separately with the Securities and Exchange Commission.
- ---------------------
(1) Solaris is a registered trademark of Sun Microsystems, Inc
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[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 103
Exhibit J to the Cricket Communications, Inc. System Equipment Purchase
Agreement
FIGURE 2.6-1 TYPICAL AUTOPACE CONFIGURATION
A single AutoPACE server connects to multiple AUTOPLEX systems and supports one
or more AutoPACE client PCs, connected to the server by a Local Area Network
(LAN). The
AutoPACE client applications run Windows(TM) applications on a PC. The AutoPACE
server is based on UNIX System V Release 4 (Solaris(2)) running on a Sun
SPARCStation(R)(3).
** A portion of page six and seven through twenty-four have been deleted
pursuant to a Confidential Treatment Request. **
- -------------------
(2) The currently supported Solaris release numbers can be obtained from
your Lucent Technologies wireless account representative.
(3) SPARCstation is a registered trademark of SPARC International, Inc.
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<PAGE> 104
Exhibit K to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Lucent Technologies Network Wireless Systems
[Seven Pages of Pricing Lists Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 105
Exhibit L to the Cricket Communications Inc. System Equipment Purchase Agreement
Standard Intervals
[Seven Pages of Technical Information Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 106
Exhibit M to the Cricket Communications, Inc. System Equipment Purchase
Agreement
CDMA Enhanced Primary Minicell Overview
[Twelve Pages of Technical Information Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 107
EXHIBIT N
TO THE
CRICKET COMMUNICATIONS, INC.
SYSTEM EQUIPMENT PURCHASE AGREEMENT
1.1 HOT-LINE SERVICE
Vendor will provide an "800 Hot-Line" telephone Service for
direct telephone support to Owner in an emergency situation. The
Hot Line telephone number is 1-800-225-4672. This Service will be
available twenty-four (24) hours a day, seven (7) days a week for
Severity Levels 1 and 2 conditions only. Prior to placing the
call to the Hot-Line, the following steps shall have been
completed by Owner with assistance of Vendor when required:
(a) Identification of the condition and its isolation to a
particular component of the system believed to be Vendor's
responsibility.
(b) Collection of sufficient supporting documentation from the
system for inclusion in the trouble report.
(c) Determination that there are no outstanding fixes which
correct the condition.
When a problem is identified as a fix to Seller's infrastructure,
whereas a fix is not in compliance within Seller's
specifications, the Vendor will supply the solution and make it
available to Owner.
1.2 RESPONSE TIME INTERVALS
The Owner due date, is set by default based on the SEVERITY
Field.
If the Owner negotiates a new date with the Vendor, the mutually
agreed date will apply.
TABLE 1 RESPONSE TIME INTERVALS
<TABLE>
<CAPTION>
Severity Calendar Days to Resolve
<S> <C>
1 7
2 45
3 90
4 180
</TABLE>
Once the solution is found, Vendor will supply it for testing and
use on the failed system.
1.3 NORMAL TROUBLE-REPORTING PROCEDURES
<PAGE> 108
Owner requirements and routines for reporting Severity Levels 2,
3 and 4 conditions are as follows:
(a) Owner shall prepare a trouble report, including the
appropriate supporting documentation and forward it to
Vendor at the address provided by Vendor.
(b) Owner may also telephone the Vendor's Customer Wireless
Technical Support Center for answers to general
operational questions about the Software or Equipment
and/or assistance in correcting Severity Level 3 and 4
conditions. The return call will either provide the
requested information, request additional information, or
report on the status of corrective action on the trouble
report.
(c) The calling Owner's personnel shall provide the following
information:
- Caller's name, location, and company
- Call-back telephone number
- System name, location
- Generic issue
- Equipment location, type and serial number
- Nature of question or situation.
1.4 SEVERITY LEVELS / PRIORITY
SEVERITY 1
- Total system failure
- Loss of a major system component
- Loss of emergency capability
- Significant reduction of revenue generating capability
SEVERITY 2
- Loss of system's redundancy
- Notable functional failure of a specific call type
- Notable functional loss of revenue due to a billing error
- Loss of diagnostic functionality
- Loss of reporting functionality
SEVERITY 3
- Intermittent faults
- Marginal functional failure of a specific call type
<PAGE> 109
- Marginal functional loss of revenue due to a billing error
- Invalid data
SEVERITY 4
- Any questions regarding documentation
- General informational questions
- Other investigations that are not marked 1, 2 or 3
** The remainder of page two through page five has been deleted pursuant to a
Confidential Treatment Request.**
<PAGE> 110
Exhibit O to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Training Description
[Fifteen Pages of Technical Information Deleted Pursuant to Confidential
Treatment Request]
<PAGE> 111
Exhibit P to the Cricket Communications, Inc. System Equipment Purchase
Agreement
Lucent Technologies Documentation
[Three Pages of Technical Information Deleted Pursuant to Confidential Treatment
Request]
<PAGE> 112
EXHIBIT Q
CRICKET COMMUNICATIONS, INC.
SYSTEM EQUIPMENT PURCHASE AGREEMENT
INSURANCE
Each party shall maintain during the term of this Contract, at its own cost and
expense, carry and maintain at a minimum, the insurance coverage listed below.
If either party is not self-insured, that party shall maintain such coverages
having a "Best's" rating of at least B+XIII. Vendor shall not commence any work
hereunder until each party has fulfilled all insurance requirements herein. Each
party shall require its subcontractors and agents to maintain the same insurance
coverage listed below.
- - Workers' Compensation insurance with statutory limits as required in the
state(s) of operation; and providing coverage for either party's employee
entering onto Owner premises, even if not required by statute. Employers'
Liability or "Stop Gap" insurance with limits of not less than $500,000 for
each occurrence.
- - Commercial General Liability Insurance covering claims for bodily injury,
death, personal injury or property damage occurring or arising out of the
performance of this Agreement, including coverage for independent
contractor's protection (required if any work will be subcontracted),
premises-operations, products/completed operations and contractual
liability with respect to the liability assumed by either party hereunder.
- - The limits of insurance shall be:
<TABLE>
<S> <C>
- Each Occurrence (Bodily Injury/Property Damage) $1,000,000.00
- General Aggregate Limit (Annual Aggregate) $2,000,000.00
- Products-Completed Operations Limit (Annual Aggregate) $1,000,000.00
- Personal Advertising Injury Limit (Each Occurrence) $1,000,000.00
</TABLE>
- - Comprehensive Automobile Liability Insurance covering ownership, operation
and maintenance of all owned, non-owned and hired motor vehicles used in
connection with the performance of this Agreement, with limits of at least
$1,000,000 combined single limit for bodily injury and property damage.
The insurance limits required herein may be obtained through any combination of
self-insurance, primary and excess or umbrella liability insurance. Each party
shall furnish the other prior to the start of the work, if requested by the
other party, certificates or adequate proof of the insurance required by this
clause. Each party shall notify the other in writing at least thirty (30) days
prior to cancellation of or any material change in the policy. Notwithstanding
the above, each party shall have the option where permitted by law to
self-insure any or all of the foregoing risks.
Page 1 of 1
<PAGE> 1
EXHIBIT 10.26
================================================================================
CREDIT AGREEMENT
dated as of
September 20, 1999
among
CRICKET COMMUNICATIONS INC.,
CRICKET WIRELESS COMMUNICATIONS INC.,
The Lenders Party Hereto,
and
LUCENT TECHNOLOGIES INC.,
as Administrative Agent
================================================================================
[Reference No. 7725-053]
<PAGE> 2
Contents, p. 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Definitions
SECTION 1.01. Defined Terms..................................................1
SECTION 1.02. Classification of Loans and Borrowings........................33
SECTION 1.03. Terms Generally...............................................33
SECTION 1.04. Accounting Terms; GAAP; Consolidation of License
Subsidiaries............................................34
ARTICLE II The Loans
SECTION 2.01. Commitments...................................................34
SECTION 2.02. Loans and Borrowings..........................................35
SECTION 2.03. Requests for Borrowings.......................................36
SECTION 2.04. Funding of Borrowings.........................................37
SECTION 2.05. Interest Elections............................................38
SECTION 2.06. Termination and Reduction of Commitments......................39
SECTION 2.07. Repayment of Loans; Evidence of Debt..........................40
SECTION 2.08. Amortization of Loans.........................................41
SECTION 2.09. Prepayment of Loans...........................................42
SECTION 2.10. Fees..........................................................45
SECTION 2.11. Interest......................................................46
SECTION 2.12. Alternate Rate of Interest....................................47
SECTION 2.13. Increased Costs...............................................47
SECTION 2.14. Break Funding Payments........................................48
SECTION 2.15. Taxes.........................................................49
SECTION 2.16. Payments Generally;
Pro Rata Treatment;
Sharing of Set-Offs.....................................50
SECTION 2.17. Mitigation Obligations;
Replacement of Lenders..................................53
ARTICLE III Representations and Warranties
SECTION 3.01. Organization; Powers..........................................54
SECTION 3.02. Authorization; Enforceability.................................54
SECTION 3.03. Governmental Approvals;
No Conflicts............................................54
SECTION 3.04. Financial Condition;
</TABLE>
<PAGE> 3
Contents, p. 3
<TABLE>
<S> <C>
No Material Adverse Change..............................55
SECTION 3.05. Properties and Licenses.......................................55
SECTION 3.06. Litigation and Environmental Matters..........................56
SECTION 3.07. Compliance with Laws and Agreements...........................57
SECTION 3.08. Investment and Holding Company Status.........................57
SECTION 3.09. Taxes.........................................................57
SECTION 3.10. ERISA.........................................................57
SECTION 3.11. Disclosure....................................................58
SECTION 3.12. Subsidiaries..................................................58
SECTION 3.13. Insurance.....................................................58
SECTION 3.14. Labor Matters.................................................58
SECTION 3.15. Purchase Agreement............................................59
SECTION 3.16. Year 2000.....................................................59
ARTICLE IV Conditions
SECTION 4.01. Effective Date................................................59
SECTION 4.02. Initial Availability Date.....................................60
SECTION 4.03. Full Availability Date........................................62
SECTION 4.04. Each Borrowing................................................62
ARTICLE V Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information....................63
SECTION 5.02. Notices of Material Events....................................66
SECTION 5.03. Information Regarding Collateral..............................66
SECTION 5.04. Existence; Conduct of Business................................67
SECTION 5.05. Payment of Obligations........................................68
SECTION 5.06. Maintenance of Properties.....................................68
SECTION 5.07. Insurance.....................................................68
SECTION 5.08. Books and Records; Inspection Rights..........................69
SECTION 5.09. Compliance with Laws and Agreements...........................69
SECTION 5.10. Use of Proceeds...............................................70
SECTION 5.11. Additional Subsidiaries.......................................70
SECTION 5.12. Further Assurances............................................70
SECTION 5.13. Casualty and Condemnation.....................................71
SECTION 5.14. Interest Rate Protection......................................71
SECTION 5.15. Intercompany Agreements ......................................72
</TABLE>
<PAGE> 4
Contents, p. 4
<TABLE>
<S> <C>
ARTICLE VI Negative Covenants
SECTION 6.01. Indebtedness; Preferred Stock.................................72
SECTION 6.02. Liens.........................................................74
SECTION 6.03. Fundamental Changes;
Corporate Structure.....................................75
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions;
Asset Sales.............................................77
SECTION 6.05. Hedging Agreements............................................80
SECTION 6.06. Restricted Payments...........................................80
SECTION 6.07. Transactions with Affiliates..................................81
SECTION 6.08. Restrictive Agreements........................................81
SECTION 6.09. Repayment of Indebtedness.....................................82
SECTION 6.10. Intercompany Agreements.......................................82
SECTION 6.11. Limitation on Sale-Leaseback Transactions.....................82
SECTION 6.12. Equipment Site Interests and Real Estate Subsidiaries.........82
SECTION 6.13. FCC Licenses and License Subsidiaries.........................83
SECTION 6.14. Amendment of Material Documents...............................83
SECTION 6.15. Capital Expenditures..........................................83
SECTION 6.16. Covered POPS..................................................84
SECTION 6.17. Subscribers...................................................85
SECTION 6.18. Total Indebtedness to Total Capitalization....................85
SECTION 6.19. Total Indebtedness to Annualized EBITDA.......................86
SECTION 6.20. Consolidated EBITDA to Cash Interest Expense..................86
SECTION 6.21. Minimum Gross Revenue.........................................87
SECTION 6.22. Activities of Holdings........................................87
ARTICLE VII Events of Default
ARTICLE VIII The Agents
ARTICLE IX Miscellaneous
SECTION 9.01. Notices.......................................................95
SECTION 9.02. Waivers; Amendments...........................................95
SECTION 9.03. Expenses; Indemnity;
Damage Waiver...........................................97
SECTION 9.04. Successors and Assigns........................................98
</TABLE>
<PAGE> 5
Contents, p. 5
<TABLE>
<S> <C>
SECTION 9.05. Survival.....................................................101
SECTION 9.06. Counterparts; Integration;
Effectiveness..........................................102
SECTION 9.07. Severability.................................................102
SECTION 9.08. Right of Setoff..............................................102
SECTION 9.09. Governing Law; Jurisdiction;
Consent to Service of Process..........................103
SECTION 9.10. WAIVER OF JURY TRIAL.........................................104
SECTION 9.11. Headings.....................................................104
SECTION 9.12. Confidentiality..............................................104
SECTION 9.13. Interest Rate Limitation.....................................105
</TABLE>
<PAGE> 6
Contents, p. 6
SCHEDULES:
Schedule 2.01 -- Tranche A Commitments
Schedule 3.05A -- Real Property
Schedule 3.05B -- Licenses
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.08 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Borrower Pledge Agreement
Exhibit B -- Form of Collateral Agency Agreement
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and
Contribution Agreement
Exhibit E -- Form of Parent Agreement
Exhibit F -- Form of Parent Pledge Agreement
Exhibit G -- Form of Perfection Certificate
Exhibit H -- Form of Security Agreement
Exhibit I -- Form of Subordination Agreement
Exhibit J -- Form of Opinion of Counsel
<PAGE> 7
CREDIT AGREEMENT dated as of September 20, 1999, among CRICKET
COMMUNICATIONS INC., a Delaware corporation, CRICKET WIRELESS COMMUNICATIONS
INC., a Delaware corporation, the LENDERS party hereto, and LUCENT TECHNOLOGIES
INC., as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Lucent, in its capacity as administrative
agent for the Lenders hereunder.
"Administrative Questionnaire" means an administrative questionnaire in
a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means the Administrative Agent and the Collateral Agent.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate
<PAGE> 8
2
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.
"Annualized EBITDA" means, as of any date, (a) Consolidated EBITDA for
the period of two consecutive calendar quarters ended on such date (or, if such
date is not the last day of a calendar quarter, then for the period of two
consecutive calendar quarters most recently ended prior to such date),
multiplied by (b) two.
"Applicable Margin" means, for any day, the applicable rate per annum
set forth below under the caption "ABR Margin" or "Eurodollar Margin", as the
case may be, based on the Leverage Ratio as of the most recent determination
date:
<TABLE>
<CAPTION>
Leverage Ratio ABR Margin Eurodollar Margin
-------------- ---------- -----------------
<S> <C> <C> <C>
Category 1 <4.0 to 1.0 2.50% 3.50%
-
Category 2 >4.0 to 1.0 but <6.0 2.75% 3.75%
- to 1.0
Category 3 >6.0 to 1.0 but 3.00% 4.00%
<10.0 to 1.0
-
Category 4 >10.0 to 1.0 3.25% 4.25%
</TABLE>
For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of
the end of each fiscal quarter of the Borrower's fiscal year based upon the
Borrower's consolidated financial statements delivered pursuant to Section
5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a
change in the Leverage Ratio shall be effective during the period commencing on
and including the date of delivery to the Administrative Agent of such
consolidated financial statements indicating such change and ending on the date
immediately preceding the effective date of the next such change; provided that
the Leverage Ratio shall be deemed to be in Category 4 (A) at any time that an
Event of Default has occurred and is continuing or (B) if the Borrower fails to
deliver the consolidated financial statements required to be delivered by it
pursuant to Section 5.01(a) or (b) within the period specified therein for
delivery thereof, during the period
<PAGE> 9
3
from the expiration of the period specified therein for delivery thereof until
such consolidated financial statements are delivered.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in a form
approved by the Administrative Agent.
"Availability Period" means the period from and including the Initial
Availability Date to but excluding the earlier of the Availability Termination
Date and the date of termination of the Commitments.
"Availability Termination Date" means the date that is 36 months after
the Effective Date.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower" means Cricket Wireless Communications, Inc., a Delaware
corporation.
"Borrower Pledge Agreement" means the Pledge Agreement among Holdings,
the Borrower, its Subsidiaries and the Collateral Agent, substantially in the
form of Exhibit A.
"Borrowing" means a Loan or group of Loans of the same Type, made,
converted or continued on the same date and, in the case of LIBOR Loans, as to
which a single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a LIBOR Loan, the
term "Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Business Plan" means, for any fiscal year, the business plan of the
Borrower and the Subsidiaries for such fiscal year.
<PAGE> 10
4
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Borrower and
its Subsidiaries that are (or would be) set forth in a consolidated statement of
cash flows of the Borrower for such period prepared in accordance with GAAP and
(b) Capital Lease Obligations incurred by the Borrower and its Subsidiaries
during such period.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Interest Expense" means, for any period, the sum of (a) interest
expense of the Borrower and the Subsidiary Loan Parties for such period,
determined on a consolidated basis in accordance with GAAP, excluding (to the
extent otherwise included therein) (i) amortization of debt discounts and loan
fees, (ii) interest expense in respect of any Indebtedness that constitutes a
Primary Subordinated Obligation and (iii) any other interest that is not
required to be paid during such period or within one year after the end of such
period, plus (b) the aggregate amount of Restricted Payments made during such
period pursuant to clause (d) of Section 6.06.
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person other than Holdings of any
Equity Interest in the Borrower, (b) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person other than the Parent of
any Equity Interest in any License Subsidiary, (c) the sale, transfer or other
disposition by the Parent of any Equity Interest in Holdings, (d) the failure by
the Parent to own, beneficially and of record, Voting Stock of Holdings
representing at least 51% of the combined voting power of all Voting Stock of
Holdings, (e) the failure by the Parent to have the ability (without the consent
or approval of any other Person) to control the election of at least a majority
of the board of directors of Holdings, (f) the acquisition of beneficial
ownership (within the meaning of Rule 13d-3 of
<PAGE> 11
5
the Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, by any Person (or two or more Persons acting in
concert), other than the Parent, of Voting Stock of Holdings (or other
securities convertible into such Voting Stock) representing 15% or more of the
combined voting power of all Voting Stock of Holdings, (g) the acquisition of
beneficial ownership (within the meaning of such Rule 13d-3), directly or
indirectly, by any Person (or two or more Persons acting in concert) of Voting
Stock of the Parent (or other securities convertible into such Voting Stock)
representing 20% or more of the combined voting power of all Voting Stock of the
Parent, (h) the failure on any day of at least a majority of the board of
directors of the Parent to be comprised of (i) individuals who were directors of
the Parent as of the later of the date 18 months prior to such day or September
1, 1999, and (ii) individuals whose nomination as directors was approved by
individuals who were directors of the Parent as of the later of the date 18
months prior to such day or September 1, 1999, or (i) the acquisition, by
contract or otherwise, of the power to exercise, directly or indirectly, Control
of the Parent by any Person (or two or more Persons acting in concert), or the
entering into of any contract or arrangement that, upon consummation, will
result in such acquisition of power. For purposes of the foregoing, "Voting
Stock" means Equity Interests issued by a Person the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such Person, even of
the right so to vote has been suspended by the happening of such contingency.
The grant by the Parent of a Lien on any Equity Interest in Holdings shall not
constitute a Change in Control unless and until any action is taken to exercise
remedies in respect of such Lien.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 2.13(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"ChaseTel" means Chase Telecommunications, Inc., a Delaware
corporation.
<PAGE> 12
6
"ChaseTel Acquisition" means the purchase of ChaseTel, ChaseTel
Licensee and certain related assets pursuant to and as contemplated by the
ChaseTel Purchase Agreement.
"ChaseTel Credit Agreement" means the Credit Agreement dated as of June
26, 1998, as amended, between ChaseTel and QUALCOMM Incorporated.
"ChaseTel Earnout" means (a) the obligation to pay the "Earnout Amount"
(as defined in the ChaseTel Purchase Agreement) or (b) any payment made in
respect of such obligation.
"ChaseTel Indebtedness" means any Indebtedness of ChaseTel existing at
the time of consummation of the ChaseTel Acquisition, including any Indebtedness
outstanding under the ChaseTel Credit Agreement.
"ChaseTel Licensee" means ChaseTel Licensee Corp., a Delaware
corporation.
"ChaseTel Loans" means Loans outstanding hereunder in an aggregate
principal amount equal to [*] of the aggregate Purchase Price of all equipment
purchased pursuant to the Purchase Agreement that has been resold by the
Borrower or a Subsidiary to ChaseTel as contemplated by Section 6.04(c);
provided that (a) the "ChaseTel Loans" shall be reduced by the principal amount
of any Loans prepaid pursuant to clause (iii) of Section 6.04(c) and (b) no
Loans shall constitute "ChaseTel Loans" after the ChaseTel Acquisition is
consummated in accordance with Section 6.04(a) or after the Parent prepays the
ChaseTel Loans in accordance with Section 7 of the Parent Agreement.
"ChaseTel Purchase Agreement" means the Asset Purchase Agreement dated
as of December 24, 1998, as amended, among the Parent, Chase Telecommunications
Holdings, Inc., ChaseTel, Anthony Chase and Richard McDugald.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means any and all "Collateral", as defined in any
applicable Security Document.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
<PAGE> 13
7
"Collateral Agency Agreement" means the Collateral Agency and
Intercreditor Agreement among the Borrower, the Collateral Agent, the
Administrative Agent and other holders of Eligible Secured Debt (or their
representatives) that become parties thereto as provided therein, substantially
in the form of Exhibit B.
"Collateral Agent" means State Street Bank and Trust Company in its
capacity as collateral agent for the Secured Parties (as defined in the
Collateral Agency Agreement) under the Security Documents.
"Collateral and Guarantee Requirement" means the requirement that:
(a) the Collateral Agent shall have received from Holdings and
each Subsidiary Loan Party either (i) a counterpart of the Guarantee
Agreement duly executed and delivered on behalf of such Subsidiary Loan
Party or (ii) in the case of any Person that becomes a Subsidiary Loan
Party after the Effective Date, a supplement to the Guarantee
Agreement, in the form specified therein, duly executed and delivered
on behalf of such Subsidiary Loan Party;
(b) the Collateral Agent shall have received (i) from the
Parent a counterpart of the Parent Pledge Agreement duly executed and
delivered on behalf of the Parent, (ii) from Holdings, the Borrower and
each of its Subsidiaries either (A) a counterpart of the Borrower
Pledge Agreement duly executed and delivered on behalf of the Borrower
or such Subsidiary, as applicable, or (B) in the case of any Person
that becomes a Subsidiary after the Effective Date, a supplement to the
Borrower Pledge Agreement, in the form specified therein, duly executed
and delivered on behalf of such Subsidiary, and (iii) from the Borrower
and each Subsidiary Loan Party either (A) counterparts of each of the
Security Agreement and the Indemnity, Subrogation and Contribution
Agreement duly executed and delivered on behalf of the Borrower or such
Subsidiary Loan Party, as applicable, or (B) in the case of any Person
that becomes a Subsidiary Loan Party after the Effective Date, a
supplement to each such agreement, in the form specified therein, duly
executed and delivered on behalf of such Subsidiary Loan Party;
<PAGE> 14
8
(c) all outstanding Equity Interests of the Borrower and each
Subsidiary Loan Party owned by or on behalf of any Loan Party shall
have been pledged pursuant to the applicable Pledge Agreement and the
Collateral Agent shall have received certificates or other instruments
representing all such Equity Interests, together with stock powers or
other instruments of transfer with respect thereto endorsed in blank;
(d) all Indebtedness of Holdings, the Borrower and each
Subsidiary Loan Party that is owing to any Loan Party (except for
Indebtedness of Holdings that is owing to the Parent) shall be
evidenced by a promissory note and shall have been pledged pursuant to
the applicable Pledge Agreement and the Collateral Agent shall have
received all such promissory notes, together with instruments of
transfer with respect thereto endorsed in blank;
(e) all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably
requested by either Agent to be filed, registered or recorded to create
the Liens intended to be created by the Security Agreement and perfect
such Liens to the extent required by, and with the priority required
by, the Security Agreement, shall have been filed, registered or
recorded or delivered to the Collateral Agent for filing, registration
or recording;
(f) the Collateral Agent shall have received (i) counterparts
of a Mortgage with respect to each Mortgaged Property duly executed and
delivered by the record owner of such Mortgaged Property, (ii) a policy
or policies of title insurance issued by a nationally recognized title
insurance company insuring the Lien of each such Mortgage as a valid
first Lien on the Mortgaged Property described therein, free of any
other Liens except as expressly permitted by Section 6.02, together
with such endorsements, coinsurance and reinsurance as either Agent or
the Required Lenders may reasonably request, and (iii) such surveys,
abstracts, appraisals, legal opinions and other documents as either
Agent or the Required Lenders may reasonably request with respect to
any such Mortgage or Mortgaged Property; and
<PAGE> 15
9
(g) each Loan Party shall have obtained all consents and
approvals required to be obtained by it in connection with the
execution and delivery of the Guarantee Agreement and all Security
Documents to which it is a party, the performance of its obligations
thereunder and the granting by it of the Liens under such Security
Documents.
"Commitment" means, with respect to each Lender, the commitment, if
any, of such Lender to make Loans hereunder during the Availability Period,
expressed as an amount representing the maximum principal amount of the Loans to
be made by such Lender hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.06 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in
the Assignment and Acceptance pursuant to which such Lender shall have assumed
its Commitment, as applicable. The initial aggregate amount of the Commitments
is $641,000,000.
"Commitment Fee Rate" means a rate per annum equal to (a) 1.25% until
the aggregate principal amount of Loans made hereunder (whether or not repaid)
equals $175,000,000, (b) 1.00% thereafter, until the aggregate principal amount
of Loans made hereunder (whether or not repaid) equals $350,000,000 and (c)
0.75% thereafter.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period (adjusted to exclude all extraordinary items), plus, without
duplication and to the extent deducted from revenues in determining such
Consolidated Net Income, the sum of (a) consolidated interest expense for such
period, (b) consolidated income tax expense for such period, and (c) all amounts
attributable to depreciation and amortization for such period all as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income or loss
of the Borrower and the Subsidiary Loan Parties for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income of any Person (other than the Borrower or a Subsidiary
Loan Party) in which any other Person (other than the Borrower or any Subsidiary
or any director holding qualifying shares in compliance with
<PAGE> 16
10
applicable law) owns an Equity Interest, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or any of the
Subsidiaries during such period, and (b) the income or loss of any Person
accrued prior to the date it becomes a Subsidiary Loan Party or is merged into
or consolidated with the Borrower or any Subsidiary Loan Party or the date that
such Person's assets are acquired by the Borrower or any Subsidiary Loan Party.
"Contingent Commitments" means a portion of the Commitments equal to
$116,000,000.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Covered POPS" means, at any time, the aggregate number of POPS within
the service areas of the facilities that are then owned by the Borrower and its
Subsidiaries and that have been placed in commercial operation; provided that
during the period from the Effective Date up to and including the earlier of (a)
the consummation of the ChaseTel Acquisition in accordance with Section 6.04 and
(b) the date that is one year after the Effective Date, "Covered POPS" shall
also include the aggregate number of POPS within the service areas of the
facilities that are then owned by ChaseTel and that have been placed in
commercial operation so long as such commercial operation is being managed by
the Borrower and its Subsidiaries pursuant to a management contract with
ChaseTel.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Disqualified Stock" means any capital stock of Holdings, the Borrower
or any Subsidiary which by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (a) matures or is
<PAGE> 17
11
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b)
is convertible or exchangeable for Indebtedness or Disqualified Stock, (c)
requires the payment of dividends other than dividends payable solely in
additional shares of capital stock of Holdings (other than Disqualified Stock)
or (d) is redeemable or subject to required repurchase at the option of the
holder thereof, in whole or in part.
"dollars" or "$" refers to lawful money of the United States of
America.
"Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Eligible Assignee" means (a) Lucent or any Affiliate of Lucent, (b)
any commercial bank or other financial institution (including any credit
corporation) that either (i) has total assets in excess of $10,000,000,000, (ii)
has a combined capital and surplus and undivided profits in excess of
$700,000,000, (iii) has long-term indebtedness rated BBB- or better by S&P or
Baa3 or better by Moody's, or commercial paper having one of the two highest
credit ratings obtainable from S&P or Moody's, or (iv) has an Affiliate that
satisfies any of the criteria described in the foregoing clauses (i), (ii) and
(iii), or (c) any fund that is regularly engaged in making, purchasing or
investing in loans or securities that is controlled by an institution described
in clause (b) above or by any other nationally recognized investment fund
manager.
"Eligible Secured Debt" means (a) Indebtedness of the Borrower in
respect of the Loans, (b) any other Indebtedness for borrowed money of the
Borrower incurred to finance the purchase price of equipment purchased by the
Borrower and its Subsidiaries (other than pursuant to the Purchase Agreement)
for use in their wireless telecommunications and data networking business, (c)
any other Indebtedness for borrowed money of the Borrower incurred to finance
payments in respect of fees related to or interest in respect of Eligible
Secured Debt (other than the Loans) or the purchase price of any FCC License
that is acquired by a License Subsidiary and is to be used in the business of
the Borrower and its Subsidiaries after the purchase thereof (provided that such
FCC License is acquired by a License Subsidiary free of any Liens and is not
purchased subject to any FCC Debt, Permitted License
<PAGE> 18
12
Acquisition Debt or other Indebtedness), and (d) any Indebtedness for borrowed
money of the Borrower incurred to refinance Indebtedness referred to in clause
(a), (b) or (c) above in compliance with the proviso to clause (f) of Section
6.01 (other than clause (v) of such proviso); provided that:
(i) in the case of any Indebtedness described in clause (b)
above, such Indebtedness is incurred within 90 days of the purchase of
the equipment financed thereby, the principal amount thereof does not
exceed 100% of the purchase price of the equipment financed thereby and
such equipment becomes Collateral under the Security Agreement upon the
purchase thereof (free of any Liens other than the Lien of the Security
Agreement);
(ii) in the case of any Indebtedness described in clause (c)
above, at the time of and after giving effect to the incurrence of any
such Indebtedness the aggregate principal amount of all Indebtedness
described in clause (c) above that has been incurred (on a cumulative
basis, whether or not such Indebtedness remains outstanding) shall not
exceed 50% of the aggregate principal amount of all Indebtedness
described in clause (b) above that has been incurred (on a cumulative
basis, whether or not such Indebtedness remains outstanding) at or
prior to such time;
(iii) in the case of any Indebtedness described in clause (b)
or (c) above, at the time of and after giving effect to the incurrence
of any such Indebtedness the aggregate principal amount of all such
Indebtedness that has been incurred and all Loans that have been
incurred (in each case, on a cumulative basis, whether or not such
Indebtedness or Loans remain outstanding) shall not exceed
$1,200,000,000;
(iv) in the case of any Indebtedness described in clause (b),
(c) or (d) above, the holder or holders of such Indebtedness (or a duly
authorized representative thereof on behalf of such holders) shall have
become a party to the Collateral Agency Agreement as provided therein;
<PAGE> 19
13
(v) in the case of any Indebtedness described in clause (b),
(c) or (d) above, such Indebtedness is not Guaranteed by any Person
(other than pursuant to the Guarantee Agreement) or secured by any Lien
(other than Liens granted to the Collateral Agent to secure all
Eligible Secured Debt pursuant to the Security Documents); and
(vi) in the case of any Indebtedness described in clause (b),
(c) or (d) above, (A) the terms and conditions of such Indebtedness
shall not be less favorable to the Borrower in any material respect
than the terms and conditions of the Loans and shall not be
inconsistent with the terms and conditions of the Loans, (B) at the
time of and after giving effect to the incurrence of any such
Indebtedness, no Default shall have occurred and be continuing and the
Borrower shall be in compliance with Sections 6.18, 6.19 and 6.20
determined on a pro forma basis as of the last day of the most recently
ended calendar quarter of the Borrower for which financial statements
are available as though such Indebtedness had been incurred on such
day, and the Borrower shall have delivered to the Administrative Agent
a reasonably detailed calculation demonstrating such compliance, and
(C) at the time of and after giving effect to the incurrence of any
such Indebtedness, the ratio of Adjusted Total Indebtedness to Total
Contributed Capital shall not exceed 2.0 to 1.0.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of any Loan Party directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling,
<PAGE> 20
14
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.
"Equipment Site Interest" means any ownership interest in, or right,
title or interest under any lease, agreement or other arrangement providing for
the right to use, any site upon or at which any infrastructure equipment owned
by the Borrower or any Subsidiary is or is to be located.
"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal
<PAGE> 21
15
or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to such term in Article
VII.
"Excess Cash Flow" means, for any fiscal year of the Borrower, the sum
(without duplication) of:
(a) the Consolidated Net Income of the Borrower and the
Subsidiary Loan Parties for such fiscal year, adjusted to exclude any
gains or losses attributable to Prepayment Events; plus
(b) depreciation, amortization and other non-cash charges or
losses deducted in determining such Consolidated Net Income for such
fiscal year; plus
(c) the sum of (i) the amount, if any, by which Net Working
Capital decreased during such fiscal year plus (ii) the net amount, if
any, by which the consolidated deferred revenues of the Borrower and the
Subsidiary Loan Parties increased during such fiscal year; minus
(d) the sum of (i) any non-cash gains included in determining
such consolidated net income (or loss) for such fiscal year plus (ii)
the amount, if any, by which Net Working Capital increased during such
fiscal year plus (iii) the net amount, if any, by which the consolidated
deferred revenues of the Borrower and the Subsidiary Loan Parties
decreased during such fiscal year; minus
(e) Capital Expenditures for such fiscal year (except to the
extent attributable to the incurrence of Capital Lease Obligations or
otherwise financed by incurring Long-Term Indebtedness); minus
(f) the aggregate principal amount of Long-Term Indebtedness
repaid or prepaid by the Borrower and the Subsidiary Loan Parties during
such fiscal year,
<PAGE> 22
16
excluding (i) Eligible Secured Debt prepaid pursuant to Section 2.09(c)
or (d), and (ii) repayments or prepayments of Long-Term Indebtedness
financed by incurring other Long-Term Indebtedness.
"Excluded Taxes" means, with respect to either Agent, any Lender or any
other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction described in clause (a)
above and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.17(b)), any withholding tax that
(i) is in effect and would apply to amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or designates a
new lending office), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to any withholding tax pursuant to Section 2.15(a) or (ii) is
attributable to such Foreign Lender's failure to comply with Section 2.15(a).
"FCC" means the Federal Communications Commission.
"FCC Debt" means Indebtedness owing to the FCC in respect of the
deferred purchase price of any FCC License.
"FCC License" means any license granted by the FCC to the Borrower or
any Subsidiary Loan Party or that is used by the Borrower or any Subsidiary in
the conduct of its business.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
<PAGE> 23
17
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Fixed Charges" means, as of any date, the sum of (a) Cash Interest
Expense, (b) Capital Expenditures and (c) scheduled principal payments of
Indebtedness to be made by the Borrower or any Subsidiary Loan Party to any
Person other than the Borrower or any Subsidiary Loan Party, in each case
projected (to the extent necessary) for the period of four consecutive calendar
quarters of the Borrower beginning on such date or, if such date is not the
first day of a calendar quarter of the Borrower, beginning on the last day of
the calendar quarter of the Borrower most recently ended on such date.
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.
"Full Availability Date" means the date on which the conditions set
forth in Section 4.03 are satisfied (or waived in accordance with Section 9.02).
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or
<PAGE> 24
18
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantee Agreement" means the Guarantee Agreement among Holdings, the
Subsidiary Loan Parties and the Collateral Agent, substantially in the form of
Exhibit C.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Holdings" means Cricket Communications Inc., a Delaware corporation.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred
<PAGE> 25
19
purchase price of property or services (excluding current accounts payable
incurred in the ordinary course of business), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h)
all Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty (j) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances and (k) all Disqualified Stock of such
Person. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement among the Borrower, the
Subsidiary Loan Parties and the Collateral Agent, substantially in the form of
Exhibit D.
"Initial Availability Date" means the first date after the Effective
Date on which the conditions set forth in Section 4.02 are satisfied (or waived
in accordance with Section 9.02).
"Intercompany Agreements" has the meaning set forth in Section 5.15.
"Interest Borrowing" means any Borrowing of Loans hereunder for the
sole purpose of paying, and the proceeds of which are applied solely to pay,
accrued interest on any Loans or accrued commitment fees payable under this
Agreement.
<PAGE> 26
20
"Interest Election Request" means a request by the Borrower to convert
or continue a Borrowing in accordance with Section 2.05.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
last day of each March, June, September and December and (b) with respect to any
LIBOR Loan, the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a LIBOR Borrowing with an Interest
Period of more than three months' duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months' duration after
the first day of such Interest Period.
"Interest Period" means, with respect to any LIBOR Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Leverage Ratio" means, on any date, the ratio of (a) Total
Indebtedness as of such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters of the Borrower ended on such date or, if such date
is not the last day of a fiscal quarter, ended on the last day of the fiscal
quarter of the Borrower most recently ended prior to such date.
<PAGE> 27
21
"LIBOR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"LIBO Rate" means, with respect to any LIBOR Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the "LIBO Rate" with respect to such LIBOR Borrowing for
such Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent (or, if the Administrative
Agent at the time is not a commercial bank, any commercial bank based in New
York City selected by the Administrative Agent for the purpose of quoting such
rate, provided that such commercial bank has a combined capital and surplus and
undivided profits of not less than $500,000,000) in immediately available funds
in the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.
"License Subsidiary" has the meaning assigned to such term in Section
6.13.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
<PAGE> 28
22
"Loan Documents" means this Agreement, the Collateral Agency Agreement,
the Guarantee Agreement, the Parent Agreement, the Subordination Agreement, the
Security Documents and the Indemnity, Subrogation and Contribution Agreement.
"Loan Parties" means the Parent, Holdings, the Borrower and the
Subsidiary Loan Parties.
"Loans" means loans made to the Borrower pursuant to this Agreement.
"Long-Term Indebtedness" means any Indebtedness that, in accordance
with GAAP, constitutes (or, when incurred, constituted) a long-term liability.
"Lucent" means Lucent Technologies Inc.
"Lucent Lenders" means, at any time, Lucent and any Affiliates of
Lucent that are Lenders at such time.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition (financial or otherwise) of
the Borrower and the Subsidiary Loan Parties taken as a whole, (b) the ability
of any Loan Party to perform any of its obligations under any Loan Document or
(c) the rights of or benefits available to the Lenders under any Loan Document.
"Material Indebtedness" means (a) Indebtedness (other than the Loans),
or obligations in respect of one or more Hedging Agreements, of any one or more
of the Loan Parties in an aggregate principal amount exceeding $5,000,000, (b)
any FCC Debt or (c) any Permitted License Acquisition Debt. For purposes of
determining Material Indebtedness, the "principal amount" of the obligations of
a Loan Party in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that such
Loan Party would be required to pay if such Hedging Agreement were terminated at
such time.
"Maturity Date" means June 30, 2007.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other
<PAGE> 29
23
security document granting a Lien on any Mortgaged Property to secure the
Obligations. Each Mortgage shall be satisfactory in form and substance to the
Agents.
"Mortgaged Property" means each parcel of real property and
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.12.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event (a) the cash proceeds
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, net of (b) the sum of (i) all
fees and out-of-pocket expenses paid by the Borrower and the Subsidiary Loan
Parties to third parties (other than Affiliates) in connection with such event,
(ii) in the case of a sale or other disposition of an asset (including pursuant
to a sale and leaseback transaction or a casualty or condemnation), the amount
of all payments required to be made by the Borrower and the Subsidiary Loan
Parties as a result of such event to repay Indebtedness (other than Eligible
Secured Debt) secured by such asset or otherwise subject to mandatory prepayment
as a result of such event, and (iii) the amount of all taxes paid (or reasonably
estimated to be payable) by the Borrower and the Subsidiary Loan Parties, and
the amount of any reserves established by the Borrower and the Subsidiary Loan
Parties to fund contingent liabilities reasonably estimated to be payable, in
each case during the year that such event occurred or the next succeeding year
and that are directly attributable to such event (as determined reasonably and
in good faith by the chief financial officer of the Borrower).
"Net Working Capital" means, at any date, (a) the sum of the
consolidated current assets and non-current deferred income tax assets of the
Borrower and the Subsidiary Loan Parties as of such date (excluding cash and
Permitted Investments) minus (b) the sum of the consolidated current liabilities
and non-current deferred income tax liabilities of the Borrower and the
Subsidiary Loan Parties as of such date (excluding current liabilities in
respect of Indebtedness), determined on a consolidated basis in accordance with
GAAP. Net Working Capital at any date may
<PAGE> 30
24
be a positive or negative number. Net Working Capital increases when it becomes
more positive or less negative and decreases when it becomes less positive or
more negative.
"Obligations" has the meaning assigned to such term in the Collateral
Agency Agreement.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Parent" means Leap Wireless International, Inc., a Delaware
corporation.
"Parent Agreement" means the agreement between the Parent and the
Administrative Agent, substantially in the form of Exhibit E.
"Parent Pledge Agreement" means the Parent Pledge Agreement between the
Parent and the Collateral Agent, substantially in the form of Exhibit F.
"Payment Date" means each March 31, June 30, September 30 and December
31, commencing on and including the first such date that is on or after the
Availability Termination Date, and ending on and including the Maturity Date.
"Perfection Certificate" means a certificate in the form of Exhibit G
or any other form approved by the Agents.
"Permitted ChaseTel Financing" means financing extended by the Borrower
or any Subsidiary to ChaseTel prior to consummation of the ChaseTel Acquisition
in the form of (a) loans made by the Borrower (or by the Parent and assigned to
the Borrower) pursuant to the ChaseTel Credit Agreement prior to the Initial
Availability Date, (b) purchase money financing in respect of the purchase price
of equipment sold by Lucent to the Borrower or a Subsidiary and then resold to
ChaseTel on or after the
<PAGE> 31
25
Initial Availability Date and prior to the earlier of the consummation of the
ChaseTel Acquisition and the date one year after the Effective Date in
accordance with Section 6.04(c) or (c) other loans made by the Borrower to
ChaseTel on or after the Initial Availability Date and prior to the earlier of
the consummation of the ChaseTel Acquisition and the date one year after the
Effective Date; provided that:
(i) all such financing shall be made pursuant to the ChaseTel
Credit Agreement and secured (together with the other Indebtedness
outstanding under the ChaseTel Credit Agreement) by perfected,
first-priority Liens on substantially all the assets of ChaseTel and
its subsidiaries;
(ii) in the case of financing referred to in clauses (b) and
(c) above, the ChaseTel Credit Agreement and related documentation
shall have been amended to provide for such financing and the security
therefor, and such amendments and the related security arrangements
shall be reasonably satisfactory to the Administrative Agent;
(iii) in the case of financing referred to in clauses (b) and
(c) above, such financing shall not be subordinated to any other
Indebtedness and shall share pro rata in the benefits of the collateral
security for the Indebtedness outstanding under the ChaseTel Credit
Agreement;
(iv) in the case of financing referred to in clause (b) above,
the aggregate principal amount of such financing shall be limited as
set forth in Section 6.04(c);
(v) in the case of financing referred to in clause (c) above,
the aggregate principal amount of such financing made available to
ChaseTel shall not at any time exceed 50% of the aggregate principal
amount of financing referred to in clause (b) above that has been made
available to ChaseTel at such time;
(vi) all such financing shall be evidenced by promissory notes
of ChaseTel pledged pursuant to the Borrower Pledge Agreement;
<PAGE> 32
26
(vii) if any payment is received by the Borrower or any
Subsidiary from or on behalf of ChaseTel in respect of any such
financing, then such payment shall be applied to prepay an equal
principal amount of the outstanding principal amount of the outstanding
Borrowings hereunder; and
(viii) upon consummation of the ChaseTel Acquisition, all
obligations of ChaseTel in respect of such financing shall be
terminated and all collateral security therefor shall be released.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's and other like Liens imposed by law, arising
in the ordinary course of business and securing obligations that are
not overdue by more than 30 days or are being contested in compliance
with Section 5.05;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Subsidiary;
<PAGE> 33
27
provided that the term "Permitted Encumbrances" shall not include any
Lien securing Indebtedness.
"Permitted Holdings Debt" means Indebtedness of Holdings in
respect of debt securities issued in an underwritten public offering or
private placement pursuant to Rule 144A; provided that (a) such
Indebtedness shall not mature, nor shall any scheduled repayment of any
principal thereof be due, nor shall such Indebtedness be subject to any
mandatory redemption or required repurchase, conversion or exchange
(whether upon the occurrence of any contingency or otherwise, but
excluding contingent redemption offer provisions in the event of a
"change of control" or "asset sale" that are customary for similar debt
securities), in each case prior to the date that is one year after the
Maturity Date, (b) any covenants, events of default and similar
provisions relating thereto shall be reasonably satisfactory to the
Required Lenders, (c) the obligations of Holdings in respect thereof
shall not be Guaranteed by any other Loan Party or secured by any Lien,
(d) by its terms, no interest shall be payable in respect of such
Indebtedness (other than (i) by the issuance of additional Permitted
Holdings Debt or (ii) out of a cash reserve funded by Holdings from the
net proceeds of the issuance of such Indebtedness in an amount
sufficient to pay such cash interest) prior to the later of (A) the
date that is five years after the date of issuance of such Indebtedness
and (B) June 30, 2005, and (e) the net proceeds of such Indebtedness
(other than the portion, if any, of such net proceeds applied to fund
any cash reserve established to fund interest payments as provided
above) are contributed by Holdings to the Borrower as common equity.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
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28
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any
State thereof which has a combined capital and surplus and undivided
profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"Permitted License Acquisition Debt" means Indebtedness (other than FCC
Debt) of any License Subsidiary in respect of the deferred purchase price of any
FCC License purchased by such License Subsidiary; provided that (a) such
Indebtedness shall not be secured by any Lien, other than a Lien on the Equity
Interests of the License Subsidiary that holds such FCC License, (b)
arrangements satisfactory to the Agents shall have been made for the Lien
granted under the Parent Pledge Agreement on the Equity Interests of such
License Subsidiary to be perfected, subject to the prior Lien referred to in
clause (a) above, (c) such Indebtedness shall mature within three years after
the date such Indebtedness is incurred, and (d) the holder of such Indebtedness
shall have entered into an agreement with the Administrative Agent, in form and
substance reasonably satisfactory to the Administrative Agent, pursuant to which
such holder shall have agreed to sell such Indebtedness to one or more of the
Lenders upon demand if an Event of Default has occurred and is continuing, for a
purchase price equal to the outstanding principal amount thereof and accrued and
unpaid interest thereon.
"Permitted Preferred Stock" means Disqualified Stock issued by
Holdings; provided that (a) by its terms, no dividends shall be payable in
respect of such stock (other than by the issuance of additional shares of
Permitted Preferred Stock) prior to the date that is one year after the Maturity
Date, (b) such stock shall not mature or be subject to mandatory redemption or
required repurchase, conversion or exchange (whether upon the occurrence of any
contingency or otherwise) prior to the date that is one year after the Maturity
Date, (c) any obligations of Holdings in
<PAGE> 35
29
respect of such stock shall not be Guaranteed by any other Loan Party or secured
by any Lien, and (d) the net proceeds of such stock are contributed by Holdings
to the Borrower as common equity.
"Permitted Third Party Payments" means (a) payments, not exceeding
$35,000,000, made to repay ChaseTel Indebtedness (other than any such
Indebtedness owed to Leap or any subsidiary of Leap, including the Borrower) in
connection with the ChaseTel Acquisition (or, if repaid by the Parent prior to
the Effective Date, to reimburse the Parent for such repayment), (b) loans made
to ChaseTel prior to consummation of the ChaseTel Acquisition that constitute
Permitted ChaseTel Financing under clause (c) of the definition of such term,
(c) payments in respect of the purchase price of equipment purchased by the
Borrower and its Subsidiaries other than pursuant to the Purchase Agreement,
provided that such equipment becomes Collateral under the Security Agreement
upon the purchase thereof (free of any Liens other than the Lien of the Security
Agreement) and (d) payments in respect of the purchase price of any FCC License
that is acquired by a License Subsidiary and is to be used in the business of
the Borrower and its Subsidiaries after the purchase thereof, provided that such
FCC License is acquired by a License Subsidiary free of any Liens and is not
purchased subject to any FCC Debt, Permitted License Acquisition Debt or other
Indebtedness; provided that, unless otherwise agreed by Lucent, payments
referred to in clauses (c) and (d) above shall be "Permitted Third Party
Payments" only if and to the extent that such payments are permitted to be
financed with the proceeds of Loans hereunder in accordance with the applicable
provisions of the Purchase Agreement.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
<PAGE> 36
30
"Pledge Agreements" means the Borrower Pledge Agreement and the Parent
Pledge Agreement.
"POPS" means, with respect to any geographical area, the most recent
projection of the population of such geographic area as published in a
demographic data source based upon the most recent U.S. Census Bureau data, such
data source to be reasonably agreed upon by the Administrative Agent and the
Borrower.
"Prepayment Event" means:
(a) any sale, transfer or other disposition (including
pursuant to a sale and leaseback transaction) of any property or asset
of the Borrower or any Subsidiary Loan Party, other than pursuant to
clause (i), (ii), (iii) or (iv) of Section 6.04(b); or
(b) any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of the Borrower or any Subsidiary Loan Party,
but only to the extent that the Net Proceeds therefrom have not been
applied to repair, restore or replace such property or asset within 180
days after such event.
"Primary Subordinated Obligation" has the meaning assigned to such term
in the Subordination Agreement.
"Prime Rate" means the rate of interest per annum published from time
to time in the "Money Rates" column (or any successor column) of The Wall Street
Journal as the prime rate or, if such rate shall cease to be so published or is
not available for any reason, the rate of interest publicly announced from time
to time by any commercial bank based in New York City selected by the
Administrative Agent for the purpose of quoting such rate; provided that if at
any time the Person serving as Administrative Agent is a commercial bank based
in New York City then the "Prime Rate" shall be the rate of interest per annum
publicly announced from time to time by such bank as its prime rate in effect at
its principal office in New York City. Each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Purchase Agreement" means the System Equipment Purchase Agreement
dated as of August 12, 1999, between the Borrower and Lucent.
<PAGE> 37
31
"Purchase Price" means amounts paid or payable to Lucent pursuant to
invoices delivered by Lucent pursuant to the Purchase Agreement, excluding any
such amounts attributable to sales taxes.
"Real Estate Subsidiary" has the meaning assigned to such term in
Section 6.12.
"Register" has the meaning set forth in Section 9.04.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Repayment" means, in respect of any Indebtedness, the direct or
indirect repayment, prepayment, redemption, purchase, acquisition, defeasance,
retirement or other satisfaction of the principal of such Indebtedness, in whole
or in part, whether optional or mandatory. "Repay" has a meaning correlative
thereto.
"Required Lenders" means, at any time, Lenders having outstanding Loans
and Commitments representing more than 50% of the sum of the total outstanding
Loans and Commitments at such time; provided that at any time that Lucent
Lenders have outstanding Loans and Commitments representing more than 50% of the
sum of all outstanding Loans and Commitments at such time, "Required Lenders"
means each of (i) the Lucent Lenders at such time and (ii) other Lenders holding
more than 50% of the outstanding Loans and Commitments (excluding those held by
Lucent Lenders) at such time.
"Restricted Payment" means (a) any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in Holdings, the Borrower or any Subsidiary Loan Party, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any Equity Interest in Holdings, the
Borrower or any Subsidiary Loan Party or any option, warrant or other right to
acquire any such Equity Interest in Holdings, the Borrower or any Subsidiary
Loan Party or
<PAGE> 38
32
(b) any Repayment in respect of any Primary Subordinated Obligation or any
payment of interest thereon.
"S&P" means Standard & Poor's.
"Secondary Subordinated Obligation" has the meaning assigned to such
term in the Subordination Agreement.
"Security Agreement" means the Security Agreement among the Borrower,
the Subsidiary Loan Parties and the Collateral Agent, substantially in the form
of Exhibit H.
"Security Documents" means the Collateral Agency Agreement, the Pledge
Agreements, the Security Agreement, the Mortgages and each other security
agreement or other instrument or document executed and delivered pursuant to
Section 5.11 or 5.12 to secure any of the Obligations.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which any commercial banks subject to regulation by
the Board are subject with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. LIBOR Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Subordination Agreement" means the Subordination Agreement among the
Loan Parties and the Collateral Agent, substantially in the form of Exhibit I.
"Subscribers" means customers of the Borrower's operating Subsidiaries
that are receiving wireless telecommunications service pursuant to a service
contract; provided that during the period from the Effective Date up to and
including the earlier of (a) the consummation of the
<PAGE> 39
33
ChaseTel Acquisition in accordance with Section 6.04 and (b) the date that is
one year after the Effective Date, "Subscribers" shall also include customers of
ChaseTel that are receiving wireless telecommunications service pursuant to a
service contract so long as the operation of such wireless telecommunications
service is being managed by the Borrower and its Subsidiaries pursuant to a
management contract with ChaseTel.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Loan Parties" means the Subsidiaries and the License
Subsidiaries.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Capitalization" means, as of any date, the sum (without
duplication) of (a) Total Indebtedness as of such date, plus (b) Total
Contributed Capital as of such date, plus (c) if positive, consolidated retained
earnings of the Borrower and the Subsidiary Loan Parties as of such date.
"Total Contributed Capital" means, as of any date, the sum (without
duplication) of (a) the amount of consolidated paid-in equity capital of the
Borrower and the Subsidiary Loan Parties as of such date, plus (b) the
outstanding principal amount of Indebtedness consisting of Primary Subordinated
Obligations as of such date; provided
<PAGE> 40
34
that "Total Contributed Capital" shall not include any of the foregoing to the
extent that the consideration received by the Borrower and the Subsidiary Loan
Parties therefore did not consist of either (i) cash or (ii) assets useful in
the business of the Borrower and the Subsidiary Loan Parties that the Borrower
and the Subsidiary Loan Parties would have been permitted to acquire hereunder
if cash had been received by the Borrower as consideration therefor. Any assets
referred to in clause (ii) shall be valued at the lesser of the cost or fair
market value of such assets at the time received by the Borrower and the
Subsidiary Loan Parties, it being understood that costs incurred and assets
contributed to capital of the Borrower prior to the Effective Date and treated
as paid-in equity capital in accordance with GAAP shall be valued at the amount
reflected on the Borrower's balance sheet as paid-in equity capital in
accordance with GAAP.
"Total Indebtedness" means, as of any date, the sum of (a) the
aggregate principal amount of Indebtedness of the Borrower and the Subsidiary
Loan Parties outstanding as of such date (excluding Indebtedness that
constitutes a Primary Subordinated Obligation), in the amount that would be
reflected on a balance sheet prepared as of such date on a consolidated basis in
accordance with GAAP, plus (b) the aggregate principal amount of Indebtedness of
the Borrower and the Subsidiary Loan Parties outstanding as of such date
(excluding Indebtedness that constitutes a Primary Subordinated Obligation) that
is not required to be reflected on a balance sheet in accordance with GAAP,
determined on a consolidated basis; provided that, for purposes of clause (b)
above, the term "Indebtedness" shall not include contingent obligations of the
Borrower or any Subsidiary as an account party in respect of any letter of
credit or letter of guaranty unless such letter of credit or letter of guaranty
supports an obligation that constitutes Indebtedness.
"Transactions" means the execution, delivery and performance by the
Loan Parties of the Loan Documents, the borrowing of Loans and the use of the
proceeds thereof.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
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35
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Type (e.g., a "LIBOR
Loan"). Borrowings also may be classified and referred to by Type (e.g., a
"LIBOR Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts, contract rights, licenses and intellectual
property.
SECTION 1.04. Accounting Terms; GAAP; Consolidation of License
Subsidiaries. (a) Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower notifies the
Administrative Agent that the Borrower requests an amendment to any
<PAGE> 42
36
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Administrative Agent notifies the Borrower that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith.
(b) Any determination required to be made under any Loan Document with
respect to the Borrower and the Subsidiary Loan Parties on a consolidated basis
shall be made as though the License Subsidiaries were consolidated subsidiaries
of the Borrower.
ARTICLE II
The Loans
SECTION 2.01. Commitments. (a) Subject to the terms and conditions set
forth herein, each Lender agrees to make Loans to the Borrower at any time and
from time to time during the Availability Period in an aggregate principal
amount not exceeding its remaining Commitment at the time; provided that, prior
to the Full Availability Date, Loans shall not be made in respect of Contingent
Commitments. Amounts repaid in respect of Loans may not be reborrowed.
(b) If the Parent is required to prepay, and prepays, the ChaseTel
Loans pursuant to Section 7 of the Parent Agreement, then Lucent (in its
capacity as a Lender) agrees that, if the ChaseTel Acquisition is consummated in
accordance with this Agreement after the date of such prepayment and before the
date that is 18 months after the Effective Date, Lucent will, subject to the
same terms and conditions set forth herein with respect to other Loans, make a
Loan to the Borrower on the date of consummation of the ChaseTel Acquisition in
an aggregate principal amount equal to the aggregate principal amount of
ChaseTel Loans prepaid by the Parent. Lucent's agreement to make a Loan pursuant
to this paragraph (b) shall constitute a "Commitment" (commencing upon the date
on which the ChaseTel Loans are prepaid) for all purposes of this Agreement,
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37
except that such Commitment (i) shall be disregarded for purposes of funding
other Loans, (ii) may be reduced or terminated by the Borrower without reducing
or terminating other Commitments, (iii) when utilized, shall not require ratable
funding of Loans in respect of other Commitments, (iv) must be utilized with a
Borrowing on a single date on or within 15 Business Days after the date of
consummation of the ChaseTel Acquisition and (v) shall terminate on the earlier
of the date that is five Business Days after the date of consummation of the
ChaseTel Acquisition and the date that is 18 months after the Effective Date, if
not utilized prior to such date.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part
of a Borrowing consisting of Loans of the same Type made by the Lenders ratably
in accordance with their respective Commitments (disregarding Contingent
Commitments prior to the Full Availability Date). The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised entirely
of LIBOR Loans or ABR Loans as the Borrower may request in accordance herewith.
Each Lender at its option may make any LIBOR Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any LIBOR
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $3,000,000. At the time that each ABR
Borrowing (other than an Interest Borrowing) is made, such Borrowing shall be in
an aggregate amount that is not less than $3,000,000; provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire remaining
Commitments. Borrowings of more than one Type may be outstanding at the same
time; provided that there shall not at any time be more than a total of 12 LIBOR
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or
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38
to elect to convert or continue, any Borrowing as a LIBOR Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.
SECTION 2.03. Requests for Borrowings. To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone not
later than 11:00 a.m., New York City time, three Business Days before the date
of the proposed Borrowing; provided that, except for Interest Borrowings, the
Borrower may make only one request for a Borrowing in any single calendar month
(it being understood that all Borrowings made by the Borrower on the same date
shall be treated as a single request for a Borrowing for purposes of this
limitation). Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request in a form approved by the Administrative
Agent and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:
(i) the aggregate amount of such Borrowing and the use of
proceeds therefrom (and each written Borrowing Request shall attach
copies of the invoices to be paid with such proceeds, except to the
extent such Borrowing is to be applied to pay fees and interest payable
hereunder);
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be a LIBOR Borrowing or an
ABR Borrowing;
(iv) in the case of a LIBOR Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period"; and
(v) if any proceeds of such Borrowing are to be applied to pay
the purchase price of Permitted Third Party Payments, the location and
number of the Borrower's account to which funds are to be disbursed,
which shall comply with Section 2.04.
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39
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested LIBOR Borrowing, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. Such account shall be in New York, New York. The
Administrative Agent will make such Loans available to the Borrower (i) in the
case of amounts payable to Lucent, by promptly crediting the amounts so
received, in like funds, to an account of Lucent maintained with the
Administrative Agent and designated by Lucent for such purpose, (ii) in the case
of amounts payable to either Agent or any Lender, by promptly transmitting the
amounts so received to such Agent or Lender by wire transfer (or by crediting
the account of such Agent or Lender maintained with the Administrative Agent, if
applicable), in immediately available funds, or (iii) in the case of any other
amounts, by promptly transmitting the amounts so received to the Borrower by
wire transfer to an account of the Borrower in New York, New York (or crediting
the account of the Borrower maintained with the Administrative Agent in New
York, New York, if applicable), in immediately available funds, as designated by
the Borrower in the applicable Borrowing Request. Notwithstanding the foregoing,
(i) any Lender may make its Loan by crediting the amount thereof against any
amount payable to such Lender from the proceeds of such Borrowing and shall be
deemed to have made a Loan in the amount of such credit and (ii) the
Administrative Agent will make the Loans of the other Lenders available as
provided in the preceding sentence. So long as Lucent is the Administrative
Agent, any amounts to be made available or paid as provided above to an account
maintained with the Administration Agent may be made available or paid to an
account maintained with a commercial bank designated by Lucent for the purpose.
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40
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.05. Interest Elections. (a) Each Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
LIBOR Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a LIBOR
Borrowing, may elect Interest Periods therefor, all as provided in this Section.
The Borrower may elect different options with respect to different portions of
the affected Borrowing, in which case each such portion shall be allocated
ratably among the Lenders holding the Loans comprising such Borrowing, and the
Loans comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery
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41
or telecopy to the Administrative Agent of a written Interest Election Request
in a form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a LIBOR
Borrowing or an ABR Borrowing; and
(iv) if the resulting Borrowing is a LIBOR Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a LIBOR Borrowing but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a LIBOR Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies the Borrower, then, so
<PAGE> 48
42
long as an Event of Default is continuing (i) no outstanding Borrowing may be
converted to or continued as a LIBOR Borrowing and (ii) unless repaid, each
LIBOR Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.
SECTION 2.06. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitments shall terminate on the earlier of (i) the
Availability Termination Date and (ii) the date of termination of the Purchase
Agreement.
(b) On the date of each Loan made by any Lender such Lender's
Commitment shall be reduced by an amount equal to such Loan.
(c) In the event that a prepayment of Loans would be required pursuant
to paragraph (b), (c) or (d) of Section 2.09, all Commitments then in effect
shall be reduced ratably by an aggregate amount equal to the excess, if any, of
the amount of the required prepayment over the aggregate principal amount of
Loans outstanding immediately prior to giving effect to such prepayment.
(d) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that each reduction of the Commitments
pursuant to this paragraph (d) shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000.
(e) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (d) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any such notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments pursuant to
paragraph (d) of this Section shall be made ratably among the Lenders in
accordance with their respective Commitments (including any Contingent
Commitments), except that the Borrower may elect, prior to the Full Availability
Date, to terminate or reduce Contingent Commitments without terminating or
reducing other Commitments.
<PAGE> 49
43
SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Loan of such
Lender as provided in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
<PAGE> 50
44
SECTION 2.08. Amortization of Loans. (a) Subject to adjustment pursuant
to paragraph (c) of this Section, the Borrower shall repay Borrowings on each
Payment Date set forth below in an aggregate amount equal to the percentage set
forth opposite such Payment Date multiplied by an amount equal to the sum of all
Loans made during the Availability Period (whether or not previously repaid):
<TABLE>
<CAPTION>
Payment Date Percentage
------------ ----------
<S> <C>
Each of first, second, third and fourth 1.25%
Each of fifth, sixth, seventh and eighth 3.75%
Each of ninth, tenth, eleventh and twelfth 5.00%
Each of thirteenth, fourteenth, fifteenth and sixteenth 6.25%
Each of seventeenth, eighteenth, nineteenth and twentieth 8.75%
</TABLE>
(b) To the extent not previously paid, all Loans shall be due and
payable on the Maturity Date.
(c) Any prepayment of a Borrowing shall be applied to reduce the
subsequent scheduled repayments of the Borrowings to be made pursuant to this
Section in the inverse order of maturity thereof.
(d) Prior to any repayment of any Borrowings hereunder, the Borrower
shall select the Borrowing or Borrowings to be repaid and shall notify the
Administrative Agent by telephone (confirmed by telecopy) of such selection not
later than 2:00 p.m., New York City time, three Business Days before the
scheduled date of such repayment; provided that the Borrower shall select
Borrowings to be repaid such that each Lender shall receive its pro rata share
of such repayment as provided in Section 2.16. Each repayment of a Borrowing
shall be applied ratably to the Loans included in the repaid Borrowing.
Repayments of Borrowings shall be accompanied by the payment of accrued interest
on the amount thereof.
<PAGE> 51
45
SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) Subject to paragraph (h) of this Section, in the event and on each
occasion that any Net Proceeds are received by or on behalf of the Borrower or
any Subsidiary Loan Party in respect of any Prepayment Event, the Borrower
shall, within three Business Days after such Net Proceeds are received, prepay
Borrowings in an aggregate principal amount equal to such Net Proceeds; provided
that, in the case of any event described in clause (a) of the definition of the
term Prepayment Event, if the Borrower shall deliver to the Administrative Agent
a certificate of a Financial Officer to the effect that the Borrower and the
Subsidiaries intend to apply the Net Proceeds from such event (or a portion
thereof specified in such certificate), within 180 days after receipt of such
Net Proceeds, to acquire real property, equipment or other tangible assets to be
used in the business of the Borrower and the Subsidiaries, and certifying that
no Default has occurred and is continuing, then no prepayment shall be required
pursuant to this paragraph in respect of the Net Proceeds in respect of such
event (or the portion of such Net Proceeds specified in such certificate, if
applicable) except to the extent of any such Net Proceeds therefrom that have
not been so applied by the end of such 180-day period, at which time a
prepayment shall be required in an amount equal to such Net Proceeds that have
not been so applied.
(c) Subject to paragraph (h) of this Section, following the end of each
fiscal year of the Borrower, commencing with the fiscal year during which the
Availability Termination Date occurs, the Borrower shall prepay Borrowings in an
aggregate principal amount equal to 50% of Excess Cash Flow for such fiscal
year. Each prepayment pursuant to this paragraph shall be made on or before the
date on which financial statements are delivered pursuant to Section 5.01 with
respect to the fiscal year for which Excess Cash Flow is being calculated (and
in any event within 90 days after the end of such fiscal year).
(d) In the event and on each occasion that the Borrower or any
Subsidiary Loan Party Repays any Indebtedness of the Borrower or any Subsidiary
Loan Party then the Borrower shall, within three Business Days after the date of
<PAGE> 52
46
such Repayment, prepay Borrowings in an aggregate amount equal to the product of
(x) the sum of the aggregate principal amount of the Loans outstanding at the
time, multiplied by (y) a fraction, the numerator of which is the aggregate
principal amount of such Repayment, and the denominator of which is the amount
of Total Indebtedness immediately prior to such Repayment (excluding
Indebtedness in respect of the Loans and Indebtedness outstanding under
revolving credit facilities); provided that prepayments of Borrowings shall not
be required pursuant to this paragraph in respect of (i) Repayments of Loans,
(ii) any Repayment of Indebtedness to the extent such Repayment is refinanced by
incurring other Indebtedness that (A) has a scheduled maturity date that is on
or after the scheduled maturity date of the Indebtedness being refinanced, (B)
has a weighted average life to maturity that is equal to or longer than the
remaining weighted average life to maturity of the Indebtedness being
refinanced, determined immediately prior to giving effect to such Repayment, (C)
does not include any provisions that may require mandatory Repayment thereof
prior to scheduled maturity, other than scheduled repayments taken into
consideration in determining compliance with clause (B) above and other
provisions that are not materially more burdensome than any such provisions
included in the Indebtedness being refinanced, (D) is issued or incurred by the
same Person that issued or incurred the Indebtedness being refinanced and is not
Guaranteed or secured by any Lien unless the Indebtedness being refinanced was
Guaranteed or secured (in which case such Indebtedness shall not be Guaranteed
by any Person that did not Guarantee the Indebtedness being refinanced and shall
not be secured by a Lien on any asset that did not secure the Indebtedness being
refinanced), and (E) is subordinated to the Obligations on terms no less
favorable than the terms on which the Indebtedness being refinanced was so
subordinated, if such refinanced Indebtedness was so subordinated, (iii) any
Repayment of Indebtedness outstanding under a revolving credit facility to the
extent that (A) the commitments of the lenders to make loans thereunder remain
in effect after giving effect to such Repayment or are replaced by commitments
under a replacement revolving credit facility and (B) such commitments are not
reduced within six months thereafter, (iv) any Repayment of secured Indebtedness
in connection with the sale of the assets securing such Indebtedness, (v) any
Repayment of Indebtedness at the scheduled final maturity thereof or in
accordance with regularly scheduled amortization requirements prior to maturity
or (vi) any Repayment of other Eligible Secured
<PAGE> 53
47
Debt that constitutes a mandatory prepayment thereof in respect of a Prepayment
Event or Excess Cash Flow, to the extent that the Lenders receive a pro rata
prepayment in respect of such event pursuant to paragraph (b) or (c) of this
Section.
(f) Prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (g) of this Section; provided that the Borrower shall select
Borrowings to be prepaid such that each Lender shall receive its pro rata share
of such prepayment as provided in Section 2.16.
(g) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder not later than 11:00 a.m.,
New York City time, three Business Days before the date of prepayment. Each such
notice shall be irrevocable and shall specify the prepayment date, the principal
amount of each Borrowing or portion thereof to be prepaid and, in the case of a
mandatory prepayment, a reasonably detailed calculation of the amount of such
prepayment. Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02, except as
necessary to apply fully the required amount of a mandatory prepayment. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments of Borrowings shall be accompanied by the payment
of accrued interest on the amount prepaid.
(h) If any other Eligible Secured Debt is outstanding at the time that
any mandatory prepayment of Borrowings is required to be made pursuant to
paragraph (b) or (c) of this Section, then, to the extent that the terms of any
such other Eligible Secured Debt require that a mandatory prepayment be made of
such other Eligible Secured Debt pursuant to corresponding provisions applicable
thereto, the aggregate principal amount of such prepayment required to be made
hereunder shall be reduced by the aggregate principal amount of such
corresponding prepayments required to be made in respect of other Eligible
Secured Debt; provided that, in any event, each mandatory prepayment of
Borrowings required to be made pursuant to paragraph (b) or (c) of this Section
shall be in an aggregate principal
<PAGE> 54
48
amount not less than (i) the aggregate principal amount of Borrowings that would
be required to be prepaid if no other Eligible Secured Debt was outstanding at
the time, multiplied by (ii) a fraction, the numerator of which is the
outstanding principal amount of Loans at the time of and before giving effect to
such prepayment and the denominator of which is the aggregate principal amount
of all Eligible Secured Debt (including the Loans) outstanding at such time the
terms of which require such mandatory prepayment.
SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Commitment Fee Rate on the daily amount of the Commitment of
such Lender during the period from and including the Effective Date to but
excluding the date on which the Commitments terminate; provided that commitment
fees shall not commence to accrue with respect to Contingent Commitments until
the Full Availability Date. Accrued commitment fees shall be payable in arrears
on the last day of March, June, September and December of each year and on the
date on which the Commitments terminate, commencing on the first such date to
occur after the Effective Date. All commitment fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay to Lucent, for its own account, fees in
the amounts and at the times separately agreed.
(c) The Borrower agrees to pay to the Administrative Agent and the
Collateral Agent (if other than Lucent), for its own account, fees in the
amounts and at the times separately agreed.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, (i) to the applicable Agent, (ii) to Lucent, in the
case of fees payable to it, or (iii) to the Administrative Agent, in the case of
commitment fees, for distribution to the Lenders entitled thereto. Fees paid
shall not be refundable under any circumstances.
SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing
shall bear interest at the Alternate Base Rate plus the Applicable Margin.
<PAGE> 55
49
(b) The Loans comprising each LIBOR Borrowing shall bear interest at
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to 2% plus the rate applicable to ABR Loans as provided in
paragraph (a) of this Section.
(d) All accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan; provided that (i) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan, accrued interest on the
principal amount of such Loan repaid or prepaid shall be payable on the date of
such repayment or prepayment, and (iii) in the event of any conversion of any
Loan prior to the end of the current Interest Period therefor, accrued interest
on such Loan shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a LIBOR Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate for such
Interest Period; or
<PAGE> 56
50
(b) the Administrative Agent is advised by a majority in
interest of the Lenders participating in such Borrowing that the
Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders of making or maintaining their
Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a LIBOR Borrowing shall be ineffective and
(ii) if any Borrowing Request requests a LIBOR Borrowing, such Borrowing shall
be made as an ABR Borrowing.
SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or LIBOR Loans made by such
Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation
to make any such Loan) or to reduce the amount of any sum received or receivable
by such Lender hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender to a level
below that which such Lender or such Lender's holding company could have
achieved but for
<PAGE> 57
51
such Change in Law (taking into consideration such Lender's policies and the
policies of such Lender's holding company with respect to capital adequacy),
then from time to time the Borrower will pay to such Lender such additional
amount or amounts as will compensate such Lender or such Lender's holding
company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the payment
of any principal of any LIBOR Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any LIBOR Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Loan on the date specified in any notice delivered pursuant hereto,
or (d) the assignment of any LIBOR Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.17, then, in any such event, the Borrower shall compensate
each Lender for the loss, cost and expense attributable to such event. In the
case of a LIBOR Loan, such loss, cost or expense to any Lender shall be deemed
to include an amount determined by such Lender to be the excess, if any, of (i)
the amount of interest which would
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52
have accrued on the principal amount of such Loan had such event not occurred,
at the Adjusted LIBO Rate that would have been applicable to such Loan, for the
period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period for such Loan), over
(ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
SECTION 2.15. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent or Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender
on or with respect to any payment by or on account of any obligation of the
Borrower hereunder or under any other Loan Document (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties,
<PAGE> 59
53
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender,
or by the Administrative Agent on its own behalf or on behalf of a Lender, shall
be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the United States of America, or
any treaty to which the United States of America is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate; provided that such Foreign Lender has
received written notice from the Borrower advising it of the availability of
such exemption or reduction and supplying all applicable documentation.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of
Set-Offs. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest or
fees, or of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise)
prior to 12:00 (noon), New York City time, on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at The Chase Manhattan Bank, New York, New York, ABA no.
021000021, account no. 9101449099, phone no. (212) 552-2222 (or such other
<PAGE> 60
54
account in New York, New York as the Administrative Agent shall from time to
time specify by notice), except that payments pursuant to Sections 2.10(b),
2.10(c), 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.
(b) Each repayment or prepayment of principal of the Loans hereunder,
or selection of Borrowings for repayment or prepayment, shall be made such that
the benefit of such repayment or prepayment is shared by the Lenders ratably in
accordance with the aggregate principal amount of their respective Loans then
outstanding.
(c) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.
(d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are
purchased
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55
and all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrower will not make
such payment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
(f) Without limiting the generality of paragraph (a) above, the
Borrower's obligations to make each payment required to be made by it hereunder
or under any other Loan Document (whether of principal, interest, fees or
otherwise) shall be absolute and unconditional and shall not be subject to any
delay, reduction, set-off, counterclaim, defense or recoupment for any reason,
including any dispute with, breach of representation or warranty by or claim
against any supplier, manufacturer, installer, vendor or distributer, including
Lucent.
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SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.13, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.15, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder,
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrower (in the case of all other amounts) and (iii)
such assignment will result in a material reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
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ARTICLE III
Representations and Warranties
Each of Holdings and the Borrower represents and warrants to the
Lenders that:
SECTION 3.01. Organization; Powers. Each of the Loan Parties is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions entered
into or to be entered into by each Loan Party are within such Loan Party's
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by Holdings and the Borrower and constitutes, and each other Loan
Document to which any Loan Party is or is to be a party constitutes (or, when
executed and delivered by it, will constitute) a legal, valid and binding
obligation of Holdings and the Borrower or such Loan Party (as the case may be),
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect and except filings necessary
to perfect Liens created under the Security Documents, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of any Loan Party or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon any Loan Party or its assets, or give rise to a right
thereunder to require any payment to be made by any
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Loan Party, except for, until the consents and waivers required by Section
4.02(j) are received, the Credit Agreement dated as of September 23, 1998 among
the Parent, QUALCOMM Incorporated and ABN Amro Bank N.V., as Administrative
Agent, and (d) will not result in the creation or imposition of any Lien on any
asset of any Loan Party, except Liens created under the Security Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The
Parent has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows (i) as of and for
the fiscal year ended August 31, 1998, reported on by PricewaterhouseCoopers
LLP, independent public accountants, and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended May 31, 1999, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Parent and its consolidated subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of the statements referred to in clause (ii) above.
(b) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statement of operations, stockholder's equity and
cash flows as of and for the fiscal year ended August 31, 1998, and as of and
for the portion of the fiscal year ended June 21, 1999, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Borrower and its consolidated subsidiaries as of such dates and for such periods
in accordance with GAAP.
(c) Since June 21, 1999, there has been no material adverse change in
the business, assets, operations, prospects or condition (financial or
otherwise) of the Borrower and the Subsidiary Loan Parties, taken as a whole.
SECTION 3.05. Properties and Licenses. (a) Each of the Borrower and the
Subsidiary Loan Parties has good title to, or valid leasehold interests in, all
the real and personal property material to its business (other than licenses,
which are addressed in paragraph (d) of this Section), except for minor defects
in title that do not interfere with its ability to conduct its business as
currently conducted or proposed to be conducted.
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(b) Each of the Borrower and the Subsidiary Loan Parties owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and the Subsidiary Loan Parties does not infringe upon the rights of
any other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05A sets forth the address of each real property that is
owned or leased by the Borrower or any of its Subsidiaries as of the Effective
Date after giving effect to the Transactions. As of the Effective Date, neither
Holdings, the Borrower nor any of its Subsidiaries has received notice of, or
has knowledge of, any pending or contemplated condemnation proceeding affecting
any Mortgaged Property or any sale or disposition thereof in lieu of
condemnation. Neither any Mortgaged Property nor any interest therein is subject
to any right of first refusal, option or other contractual right to purchase
such Mortgaged Property or interest therein.
(d) Schedule 3.05B sets forth all FCC Licenses existing as of the
Effective Date (and the respective holders of such FCC Licenses) and all other
licenses and permits in effect as of the Effective Date that are material to the
business of the Borrower and the Subsidiary Loan Parties. Each of the FCC
Licenses, and each other license or permit that is material to the business of
the Borrower and the Subsidiary Loan Parties, is valid and in full force and
effect, and the Borrower and the Subsidiary Loan Parties are in compliance with
the terms and conditions thereof except where the failure to so comply could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of Holdings or the Borrower,
threatened against or affecting any Loan Party (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the
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Disclosed Matters) or (ii) that involve any of the Loan Documents or the
Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, none of the Loan Parties (i)
has failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the Loan
Parties is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, except for, until the consents
and waivers required by Section 4.02(j) are received, the Credit Agreement dated
as of September 23, 1998 among the Parent, QUALCOMM Incorporated and ABN Amro
Bank N.V., as Administrative Agent. No Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. None of the Loan
Parties is (a) an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (b) a "holding company" as defined
in, or subject to regulation under, the Public Utility Holding Company Act of
1935.
SECTION 3.09. Taxes. Each of the Loan Parties has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the applicable Loan
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Party has set aside on its books adequate reserves or (b) the filing of state or
local Tax returns and reports, or the payment of state or local Taxes, to the
extent that the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $5,000,000 the fair
market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. Holdings and the Borrower have disclosed to
the Lenders all agreements, instruments and corporate or other restrictions to
which any of the Loan Parties is subject, and all other matters known to any of
them, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or thereunder
(as modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, Holdings and the Borrower represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.
SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries
other than the Borrower and the Borrower's Subsidiaries. Schedule 3.12 sets
forth as of the
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Effective Date (a) the name of, and the ownership interest of the Borrower in,
each Subsidiary of the Borrower and (b) the name of, and the ownership interest
of the Parent in, each License Subsidiary.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all
insurance maintained by or on behalf of the Borrower and the Subsidiary Loan
Parties as of the Effective Date. As of the Effective Date, all premiums then
due and payable in respect of such insurance have been paid.
SECTION 3.14. Labor Matters. As of the Effective Date, there are no
strikes, lockouts or slowdowns against any Loan Party pending or, to the
knowledge of Holdings or the Borrower, threatened. The hours worked by and
payments made to employees of the Loan Parties have not been in violation of the
Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law dealing with such matters. All payments due from any Loan Party, or
for which any claim may be made against any Loan Party, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the applicable Loan Party. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which any Loan Party is bound.
SECTION 3.15. Purchase Agreement. The Purchase Agreement is in full
force and effect. The Borrower is in compliance in all material respects with
the terms and conditions of the Purchase Agreement.
SECTION 3.16. Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (a) the computer systems
of the Borrower and its Subsidiaries (including any computer systems of the
Parent that are used in connection with the business of the Borrower and its
Subsidiaries) and (b) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrower's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, have been completed. The cost to the Borrower and its Subsidiaries
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrower and its Subsidiaries (including reprogramming
errors and the failure of others' systems or
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equipment) will not result in a Default or a Material Adverse Effect.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make
Loans hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Lenders shall be satisfied with the corporate and
legal structure and capitalization of Holdings, the Borrower and the
Subsidiary Loan Parties, including the charter and by-laws of Holdings,
the Borrower and each Subsidiary Loan Party and each agreement or
instrument evidencing Indebtedness.
(c) All Equipment Site Interests (if any) shall be owned by
Real Estate Subsidiaries in accordance with Section 6.12. Each FCC
License shall be owned by a License Subsidiary in accordance with
Section 6.13. No event shall have occurred that would subject any FCC
License to revocation by the FCC.
(d) The Purchase Agreement shall have been executed and
delivered by the Borrower and Lucent and shall be in full force and
effect.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02. Initial Availability Date. The obligations of the Lenders
to make Loans hereunder on the occasion of the first Borrowing hereunder shall
be subject to the occurrence of the Effective Date and the satisfaction
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(or waiver in accordance with Section 9.02) of the following additional
conditions:
(a) The Administrative Agent shall have received a favorable
written opinion or opinions (addressed to the Agents and the Lenders
and dated the Effective Date) of one or more counsel for the Loan
Parties reasonably satisfactory to the Administrative Agent,
collectively to the effect set forth in Exhibit J, and covering such
other matters relating to the Loan Parties, the Loan Documents or the
Transactions as the Administrative Agent shall reasonably request.
Holdings and the Borrower hereby request their counsel referred to in
this paragraph to deliver such opinions.
(b) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of the Loan Parties, the authorization of the Transactions and
any other legal matters relating to the Loan Parties, the Loan
Documents or the Transactions, all in form and substance satisfactory
to the Administrative Agent and its counsel.
(c) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.04.
(d) The Agents and Lucent shall have received all fees and
other amounts due and payable to them hereunder on or prior to the
Initial Availability Date, including, to the extent invoiced,
reimbursement or payment of all expenses required to be reimbursed or
paid by the Borrower hereunder or under any other Loan Document.
(e) The Collateral and Guarantee Requirement shall have been
satisfied and the Agents shall have received a completed Perfection
Certificate dated the Effective Date and signed by a Financial Officer
of the Borrower, together with all attachments contemplated thereby,
including (i) the results of a search of the Uniform Commercial Code
(or equivalent) filings made with respect to the Borrower and the
Subsidiary Loan
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Parties in the jurisdictions contemplated by the Perfection Certificate
and (ii) copies of the financing statements (or similar documents)
disclosed by such search and evidence reasonably satisfactory to the
Agents that the Liens indicated by such financing statements (or
similar documents) are permitted by Section 6.02 or have been released.
(f) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in
effect and that the Collateral Agent has been named as an additional
insured and loss payee under all insurance policies to be maintained
with respect to the properties of the Borrower and the Subsidiary Loan
Parties constituting the Collateral.
(g) The Collateral Agent shall have received a counterpart of
the Subordination Agreement duly executed and delivered on behalf of
each Loan Party.
(h) The Administrative Agent shall have received a counterpart
of the Parent Agreement duly executed and delivered on behalf of the
Parent.
(i) The Lenders shall have received a permit issued to the
Borrower by the California Department of Corporations pursuant to
Section 25113 of the California Corporation Code exempting the Loans
from California usury laws, or, if such permit is not issued, the
Lenders shall be reasonably satisfied that California usury laws shall
not be applicable to the Loans.
(j) The Parent shall have obtained all consents and waivers
required under the Credit Agreement dated as of September 23, 1998,
among the Parent, QUALCOMM Incorporated and ABN Amro Bank N.V., as
Administrative Agent, in connection with the Transactions, on terms
reasonably satisfactory to the Lenders.
Notwithstanding the foregoing, the Lenders shall not be required to make Loans
hereunder unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on
November 1, 1999 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
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SECTION 4.03. Full Availability Date. The obligation of each Lender
with a Contingent Commitment to make any Loans in respect of such Contingent
Commitment is subject to the occurrence of the Initial Availability Date and the
execution and delivery by the Borrower and Lucent of an amendment to the
Purchase Agreement (or a separate purchase contract, in which case such separate
purchase contract shall be deemed to constitute a part of the Purchase Agreement
for purposes of the Loan Documents) providing for the purchase of additional
equipment from Lucent with an aggregate purchase price of not less than
$75,000,000.
SECTION 4.04. Each Borrowing. The obligation of each Lender to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) At the time of and immediately after giving effect to such
Borrowing, the representations and warranties of the Loan Parties set
forth in the Loan Documents shall be true and correct on and as of the
date of such Borrowing.
(b) At the time of and immediately after giving effect to such
Borrowing, no Default shall have occurred and be continuing.
(c) At the time of and immediately after giving effect to such
Borrowing, (i) the aggregate principal amount of all Loans (excluding
up to $30,000,000 of Loans made to finance the Permitted Third Party
Payments described in clause (a) of the definition of "Permitted Third
Party Payments") made hereunder (whether or not repaid) shall not
exceed [*] of the sum of the aggregate Purchase Price payments made to
Lucent at or prior to such time, (ii) the ratio of Total Indebtedness
to Total Contributed Capital shall not exceed 2.0 to 1.0 and (iii) the
aggregate principal amount of all Eligible Secured Debt described in
clauses (a), (b) and (c) of the definition of "Eligible Secured Debt"
that has been incurred (on a cumulative basis, whether or not such
Eligible Secured Debt remains outstanding) shall not exceed
$1,200,000,000.
(d) In the case of a Borrowing to finance the Purchase Price
of any assets, a License Subsidiary shall have a valid FCC License for
the geographic
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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market in which such assets are to be installed or operated; provided
that the condition set forth in this paragraph (d) shall not apply with
respect to Borrowings to finance the Purchase Price of assets that are
being resold to ChaseTel prior to consummation of the ChaseTel
Acquisition in accordance with Section 6.04(c).
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a),
(b), (c) and (d) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full, each of Holdings and the Borrower covenants and agrees with the Lenders
that:
SECTION 5.01. Financial Statements and Other Information. The Borrower
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of (i) each fiscal year of
the Borrower (beginning with the fiscal year ending August 31, 2000)
and (ii) each calendar year (beginning with the calendar year ending
December 31, 2000), (A) the audited consolidated balance sheets of each
of the Parent and its subsidiaries and of the Borrower and its
Subsidiaries, respectively, and their respective related statements of
operations, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the
figures for the previous fiscal year or calendar year, as the case may
be, all reported on by PricewaterhouseCoopers LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of
each of the Parent and its
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subsidiaries and of the Borrower and its Subsidiaries, respectively, in
each case on a consolidated basis in accordance with GAAP consistently
applied and (B) a combined consolidated balance sheet of the Borrower
and the Subsidiary Loan Parties and related statements of operations,
stockholders' equity and cash flows, for the same period as (and
prepared based on) the financial statements referred to in clause (A)
above, consolidated as though all the License Subsidiaries were
subsidiaries of the Borrower, and prepared by the same firm of
independent public accountants as reported on such financial
statements;
(b) within 45 days after the end of (i) each of the first
three fiscal quarters of each fiscal year of the Borrower and (ii) each
of the first three calendar quarters of each calendar year, (i) the
consolidated balance sheets of each of the Parent and its subsidiaries
and of the Borrower and its Subsidiaries, respectively, and their
respective related statements of operations, stockholders' equity and
cash flows as of the end of and for such fiscal quarter or calendar
year and the then elapsed portion of the fiscal year or calendar year,
as the case may be, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year or
previous calendar year, as the case may be, all certified by one of its
Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of each of the Parent and
its subsidiaries and of the Borrower and its Subsidiaries,
respectively, in each case on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year-end audit adjustments
and the absence of footnotes and (B) a combined consolidated balance
sheet of the Borrower and the Subsidiary Loan Parties and related
statements of operations, stockholders' equity and cash flows, for the
same period as (and prepared based on) the financial statements
referred to in clause (A) above, consolidated as though all the License
Subsidiaries were subsidiaries of the Borrower, and prepared and
certified by one of the Borrower's Financial Officers;
(c) within 30 days after the end of each fiscal month of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries and related statements of operations, stockholders' equity
and cash
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flows as of the end of and for such fiscal month and the then elapsed
portion of the fiscal year, all certified by one of its Financial
Officers as presenting in all material respects the financial condition
and results of operations of the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of
footnotes;
(d) concurrently with any delivery of the Borrower's financial
statements under clause (a) or (b) above, a certificate of a Financial
Officer of the Borrower (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof
and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance
with Sections 6.15, 6.18, 6.19, 6.20 and 6.21 (for statements relating
to a calendar year or calendar quarter), and (iii) stating whether any
change in GAAP or in the application thereof has occurred since the
date of the Borrower's audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the
effect of such change on the financial statements accompanying such
certificate;
(e) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the
extent required by accounting rules or guidelines);
(f) promptly after the same become available but in any event
within 30 days after the end of each fiscal year of the Borrower, the
Business Plan for the current fiscal year and updated financial
projections through the Maturity Date;
(g) promptly after the end of (i) each fiscal year of the
Borrower and each calendar year and (ii) each calendar quarter ending
March 31, 2000, June 30, 2000, September 30, 2000, December 31, 2000,
March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001
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a certificate signed on behalf of the Borrower by the President, a Vice
President or a Financial Officer of the Borrower, setting forth the
number of Covered POPS and the number of Subscribers as of the end of
such fiscal year;
(h) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by any Loan Party with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or
distributed by the Parent to its shareholders generally or by Holdings
to its securityholders generally, as the case may be;
(i) promptly after execution thereof, copies of any agreement,
instrument or other document evidencing or governing any other Eligible
Secured Debt and of any amendment or modification thereto or waiver
thereunder; and
(j) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of Holdings, the Borrower or any Subsidiary, or compliance
with the terms of any Loan Document, as either Agent or any Lender may
reasonably request.
SECTION 5.02. Notices of Material Events. The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and the Subsidiary Loan
Parties in an aggregate amount exceeding $1,000,000; and
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(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) The Borrower will
furnish to the Agents prompt written notice of any change (i) in the Borrower's
or any Subsidiary Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of the Borrower's or any Subsidiary Loan
Party's chief executive office, its principal place of business, any office in
which it maintains books or records relating to the Collateral or any premises
where any asset constituting Collateral is installed or situated (including the
installation of any asset constituting Collateral at a location where Collateral
has not previously been located), (iii) in the Borrower's or any Subsidiary Loan
Party's identity or corporate structure or (iv) in the Borrower's or any
Subsidiary Loan Party's Federal Taxpayer Identification Number. The Borrower
agrees not to effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. The Borrower also agrees promptly to notify the Agents if
any material portion of the Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial statements
for the Borrower with respect to the preceding fiscal year pursuant to clause
(a) of Section 5.01, the Borrower shall deliver to the Agents a certificate of a
Financial Officer of the Borrower (i) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of the Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section and (ii) certifying that all Uniform
Commercial Code financing statements (including
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fixture filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (i) above to the extent necessary to protect and
perfect the security interests under the Security Agreement for a period of not
less than 18 months after the date of such certificate (except as noted therein
with respect to any continuation statements to be filed within such period).
SECTION 5.04. Existence; Conduct of Business. Each of Holdings and the
Borrower will, and will cause each of the Subsidiary Loan Parties to, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of the business of the Borrower and the
Subsidiary Loan Parties, taken as a whole; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.
SECTION 5.05. Payment of Obligations. Each of Holdings and the Borrower
will, and will cause each of the Subsidiary Loan Parties to, pay its
Indebtedness and other obligations, including Tax liabilities, before the same
shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Borrower or such Subsidiary Loan Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, (c) such contest
effectively suspends collection of the contested obligation and the enforcement
of any Lien securing such obligation and (d) the failure to make payment pending
the resolution of such contest could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. The Borrower will, and will
cause each of the Subsidiary Loan Parties to, keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.07. Insurance. (a) The Borrower will, and will cause each of
the Subsidiary Loan Parties to, maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks
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(including fire and other risks insured by extended coverage) as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations, including public liability insurance against
claims for personal injury, death or property damage occurring upon, about or in
connection with the use of any properties owned, occupied or controlled by it as
well as such other insurance as may be required by law.
(b) All policies of casualty insurance maintained by or for the benefit
of the Borrower or any Subsidiary Loan Party with respect to any of the
Collateral shall be endorsed or otherwise amended to include a "standard" or
"New York" lender's loss payable endorsement, in favor of and satisfactory to
the Collateral Agent, which endorsement shall provide that the insurance carrier
shall pay all proceeds otherwise payable to any Loan Party under such policies
directly to the Collateral Agent. All such policies also shall provide that none
of the Loan Parties, the Administrative Agent, the Collateral Agent nor any
other party shall be a coinsurer thereunder and shall contain a "Replacement
Cost Endorsement", without any deduction for depreciation, "mortgagee's
interest"/"breach of warranty coverage" and such other provisions as the
Administrative Agent or the Collateral Agent may reasonably require from time to
time to protect the interests of the Lenders. Each such policy also shall
provide that it shall not be canceled, modified or not renewed (i) by reason of
nonpayment of premium except upon not less than 10 days' prior written notice
thereof by the insurer to the Administrative Agent and the Collateral Agent
(giving the Administrative Agent and the Collateral Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than 30 days' prior written notice thereof by the insurer to the
Administrative Agent and the Collateral Agent. The Borrower shall deliver to the
Administrative Agent and the Collateral Agent, prior to the cancelation,
modification or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Administrative Agent and the Collateral Agent) together with
evidence satisfactory to the Administrative Agent and the Collateral Agent of
payment of the premium therefor.
(c) The Borrower shall notify the Administrative Agent and the
Collateral Agent immediately whenever any separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this
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Section is taken out by any Loan Party, and shall promptly deliver to the
Administrative Agent and the Collateral Agent a duplicate original copy of such
policy or policies.
SECTION 5.08. Books and Records; Inspection Rights. Each of Holdings
and the Borrower will, and will cause each of the Subsidiary Loan Parties to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. Each of Holdings and the Borrower will, and will cause each of the
Subsidiary Loan Parties to, permit any representatives designated by either
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all during normal business hours but as often as reasonably
requested.
SECTION 5.09. Compliance with Laws and Agreements. Each of Holdings and
the Borrower will, and will cause each of the Subsidiary Loan Parties to, comply
with all laws, rules, regulations and orders of any Governmental Authority
(including ERISA and all Environmental Laws) applicable to it or its property
and all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. Use of Proceeds. The proceeds of the Loans will be used
solely (a) to make payments in respect of the Purchase Price and Permitted Third
Party Payments and (b) to pay fees payable under Sections 2.10(a), 2.10(b) and
2.10(c), interest payable to Lucent, the Agent or the Lenders under this
Agreement and out-of-pocket expenses incurred in connection with the
negotiation, execution and delivery of the Loan Documents.
SECTION 5.11. Additional Subsidiaries. If any additional Subsidiary
Loan Party is formed or acquired after the Effective Date, the Borrower will,
within three Business Days after such Subsidiary Loan Party is formed or
acquired, (a) notify the Agents and the Lenders thereof, (b) cause the
Collateral and Guarantee Requirement to be satisfied with respect to such
Subsidiary Loan Party and with respect to any Equity Interest in or Indebtedness
of such Subsidiary Loan Party owned by or on behalf of any Loan Party and
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(c) cause such Subsidiary Loan Party to become a party to the Subordination
Agreement.
SECTION 5.12. Further Assurances. (a) Each of Holdings and the Borrower
will, and will cause each Subsidiary Loan Party to, execute any and all further
documents, financing statements, agreements and instruments, and take all such
further actions (including the filing and recording of financing statements,
fixture filings, mortgages, deeds of trust and other documents), which may be
required under any applicable law, or which either Agent or the Required Lenders
may reasonably request, to cause the Collateral and Guarantee Requirement to be
and remain satisfied, all at the expense of the Loan Parties. The Borrower also
agrees to provide to the Agents, from time to time upon request, evidence
reasonably satisfactory to the Agents as to the perfection and priority of the
Liens created or intended to be created by the Security Documents.
(b) If any material assets (including any real property or improvements
thereto or any interest therein, but excluding Equipment Site Interests acquired
by Real Estate Subsidiaries) are acquired by the Borrower or any Subsidiary Loan
Party after the Effective Date (other than assets constituting Collateral under
the Security Agreement that become subject to the Lien of the Security Agreement
upon acquisition thereof), the Borrower will notify the Agents and the Lenders
thereof, and, if requested by the Administrative Agent or the Required Lenders,
the Borrower will cause such assets to be subjected to a Lien securing the
Obligations and will take, and cause the Subsidiary Loan Parties to take, such
actions as shall be necessary or reasonably requested by the Administrative
Agent to grant and perfect such Liens, including actions described in paragraph
(a) of this Section, all at the expense of the Loan Parties.
SECTION 5.13. Casualty and Condemnation. (a) The Borrower will furnish
to the Agents and the Lenders prompt written notice of any casualty or other
damage to any portion of any Collateral or the commencement of any action or
proceeding for the taking of any Collateral or any part thereof or interest
therein under power of eminent domain or by condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section results in
Net Proceeds (whether in the form of insurance proceeds, condemnation award or
otherwise), the
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Collateral Agent is authorized to collect such Net Proceeds and, if received by
the Borrower or any Subsidiary Loan Party, such Net Proceeds shall be paid over
to the Collateral Agent. All such Net Proceeds retained by or paid over to the
Collateral Agent shall be held by the Collateral Agent and released from time to
time to pay the costs of repairing, restoring or replacing the affected property
or purchasing additional property constituting Collateral in accordance with the
terms of this Agreement and the applicable provisions of the Security Documents,
subject to the provisions of the Security Documents regarding application of
such Net Proceeds during a Default.
(c) If any Net Proceeds retained by or paid over to the Collateral
Agent as provided above continue to be held by the Collateral Agent on the date
that any prepayment is due pursuant to Section 2.09(b) in respect of the event
resulting in such Net Proceeds, then such Net Proceeds shall be applied to
prepay Borrowings as provided in Section 2.09(b).
SECTION 5.14. Interest Rate Protection. After the consolidated
Long-Term Indebtedness (excluding Primary Subordinated Obligations) of the
Borrower and the Subsidiary Loan Parties exceeds $225,000,000, the Borrower will
from time to time enter into and maintain in effect one or more Hedging
Agreements satisfactory to the Required Lenders, the effect of which shall be to
fix or limit the interest cost to the Borrower and the Subsidiary Loan Parties
with respect to such portion of their Long-Term Indebtedness as shall be
necessary in order that, at all times, at least 50% of consolidated Long-Term
Indebtedness (excluding Primary Subordinated Obligations) of the Borrower and
the Subsidiary Loan Parties shall be comprised of a combination of (a)
Indebtedness bearing interest at a fixed rate and (b) Indebtedness covered by
such Hedging Agreements.
SECTION 5.15. Intercompany Agreements. Each of Holdings and the
Borrower agrees that, within 90 days after the Effective Date, all intercompany
agreements and arrangements between Holdings, the Borrower or any Subsidiary
Loan Party, on the one hand, and the Parent or any other Affiliate of Holdings,
the Borrower or any Subsidiary Loan Party (other than Holdings, the Borrower or
any Subsidiary Loan Party), on the other hand, including with respect to tax
sharing, management fees or sharing of facilities, services or employees, shall
be completed on terms and conditions reasonably satisfactory to the Required
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Lenders and shall be set forth in written agreements (the "Intercompany
Agreements") reasonably satisfactory in form and substance to the Required
Lenders, and true and correct copies of such Intercompany Agreements shall have
been delivered to the Lenders.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full,
each of Holdings and the Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness; Preferred Stock. The Borrower will not, nor
will it permit any Subsidiary Loan Party to, create, incur, assume or permit to
exist any Indebtedness or issue any preferred stock, except:
(a) Indebtedness created under the Loan Documents and other Eligible
Secured Debt;
(b) subject to Section 6.04, Indebtedness of the Borrower to any
Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary;
(c) subject to Section 6.04, Guarantees by the Borrower of Indebtedness
of any Subsidiary;
(d) Indebtedness of the Borrower or any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital assets by
the Borrower or such Subsidiary (other than assets that are an integral part of
any of the telecommunications or data network systems of the Borrower and its
Subsidiaries or other assets that become accessions to such assets or the
removal or loss of which would adversely affect the value of any such assets),
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof; provided that (A) such Indebtedness is
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (B) any such Indebtedness incurred in
connection with any particular acquisition, construction or improvement shall
not exceed 90% of the cost of such
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acquisition, construction or improvement; provided further that the aggregate
principal amount of such Indebtedness (and Indebtedness incurred to refinance
such Indebtedness permitted by clause (f) below) shall not exceed $10,000,000 at
any time outstanding;
(e) Indebtedness outstanding on the Effective Date and set forth on
Schedule 6.01;
(f) Indebtedness of the Borrower incurred to refinance any Indebtedness
referred to in clause (d) or (e) above and Indebtedness of any Subsidiary
incurred to refinance any Indebtedness of such Subsidiary referred to in clause
(d) or (e) above; provided that (i) the principal amount of any such
Indebtedness does not exceed the principal amount of, plus accrued interest and
any prepayment premiums applicable to, the Indebtedness refinanced thereby, (ii)
any such Indebtedness has a scheduled maturity date that is on or after the
scheduled maturity date of the Indebtedness refinanced thereby, (iii) any such
Indebtedness has a weighted average life to maturity that is equal to or longer
than the remaining weighted average life to maturity of the Indebtedness
refinanced thereby (determined immediately prior to giving effect to such
refinancing), (iv) any such Indebtedness does not include any provisions that
may require mandatory Repayment thereof prior to scheduled maturity, other than
scheduled repayments taken into account in determining compliance with clause
(iii) above and other provisions that are not materially more burdensome than
any such provisions included in the Indebtedness refinanced thereby, (v) any
such Indebtedness shall not be secured by any Lien other than Liens on assets
securing the Indebtedness being refinanced thereby, and shall not be Guaranteed
by any Subsidiary other than any Subsidiary that Guaranteed the Indebtedness
being refinanced thereby, and (vi) if the Indebtedness being refinanced is
subordinated to the Obligations, then such refinancing Indebtedness shall be
subordinated to the Obligations on terms no less favorable to the Lenders than
the Indebtedness being refinanced;
(g) Indebtedness of the Borrower that constitutes a Primary
Subordinated Obligation;
(h) other unsecured Indebtedness of the Borrower in an aggregate
principal amount not exceeding $5,000,000 at any time outstanding; and
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(i) FCC Debt and Permitted License Acquisition Debt of any
License Subsidiary incurred to finance the purchase of any FCC License owned by
such License Subsidiary; provided that (i) the aggregate principal amount of FCC
Debt and Permitted License Acquisition Debt of any License Subsidiary shall not
exceed 75% of the sum of such principal amount plus the additional cash
consideration paid to acquire the FCC License or Licenses acquired by such
License Subsidiary, and (ii) the aggregate principal amount of Permitted License
Acquisition Debt incurred on a cumulative basis during the term of this
Agreement shall not exceed [*].
SECTION 6.02. Liens. (a) The Borrower will not, nor will it
permit any Subsidiary Loan Party to, create, incur, assume or permit to exist
any Lien on any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
(i) Liens created under the Security Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
provided that (A) such Lien shall not apply to any other property or
asset of the Borrower or any Subsidiary Loan Party and (B) such Lien
shall secure only those obligations which it secures on the date hereof
and refinancings thereof that satisfy the criteria set forth in clause
(f) of Section 6.01;
(iv) any Lien existing on any property or asset prior to the date
that such property or asset was first acquired by the Borrower or any
Subsidiary or any Affiliate thereof or existing on any property or asset
of any Person that becomes a Subsidiary after the date hereof prior to
the time such Person becomes a Subsidiary; provided that (A) such Lien
is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, (B) such Lien shall
not apply to any other property or assets of the Borrower or any
Subsidiary Loan Party and (C) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be, and refinan-
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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cings thereof that satisfy the criteria set forth in clause (f) of
Section 6.01;
(v) Liens on fixed or capital assets (other than assets that are
an integral part of any of the telecommunications or data network
systems of the Borrower and its Subsidiaries or other assets that become
accessions to such assets or the removal or loss of which would
adversely affect the value of any such assets) acquired, constructed or
improved by the Borrower or a Subsidiary; provided that (A) such Liens
secure only Indebtedness permitted by clause (d) of Section 6.01 or a
refinancing thereof permitted by clause (f) of Section 6.01, (B) such
Liens and the Indebtedness secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such
construction or improvement, (C) the Indebtedness secured thereby does
not exceed 90% of the cost of acquiring, constructing or improving such
fixed or capital assets and (D) such Liens shall not apply to any other
property or assets of the Borrower or any Subsidiary Loan Party; and
(vi) any Lien on any FCC License owned by any License Subsidiary
securing FCC Debt of such Subsidiary incurred to finance the purchase of
such FCC License.
(b) Notwithstanding the foregoing, the Borrower will not, nor
will it permit any Subsidiary Loan Party to, create any Lien (other than any
Permitted Encumbrance, Liens created under the Security Documents and Liens
permitted by clause (vi) of Section 6.01(a) above) on any FCC License.
SECTION 6.03. Fundamental Changes; Corporate Structure. (a)
Neither Holding nor the Borrower will, nor will they permit any Subsidiary Loan
Party to, merge into or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the Equity
Interests of any of any Subsidiary Loan Party (in each case, whether now owned
or hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Subsidiary may merge into any other
Subsidiary, (ii) any Subsidiary may sell, transfer, lease or otherwise dispose
of its assets to
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another Subsidiary, (iii) any Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or dissolution is in its
best interests and is not materially disadvantageous to the Lenders or (iv) a
Subsidiary may merge as contemplated by clause (vi) of Section 6.04(a) in
connection with the ChaseTel Acquisition.
(b) The Borrower will not, nor will it permit any of its
Subsidiaries to, engage to any material extent in any business other than the
wireless telecommunications and data networking business and businesses
reasonably related thereto, in each case in the United States.
(c) The Borrower will conduct business through one or more
operating Subsidiaries, which Subsidiaries shall own all equipment and other
assets (other than FCC Licenses and Equipment Site Interests) used to conduct
such business.
(d) The Borrower will conduct business as a holding company and
will not own any material assets other than investments in the Subsidiaries.
Each Subsidiary will be wholly owned by the Borrower and will be either (i) an
operating Subsidiary formed for the purpose of conducting business in one or
more geographical markets as contemplated by paragraph (c) above or (ii) a Real
Estate Subsidiary.
(e) The Borrower will not issue any Equity Interests (or
warrants, options or other rights in respect thereof) other than shares of
common stock issued to Holdings that are pledged pursuant to the Borrower Pledge
Agreement. The Borrower will not permit any Subsidiary Loan Party to issue any
Equity Interests (or warrants, options or other rights in respect thereof) other
than (i) Equity Interests issued by Subsidiaries to the Borrower that are
pledged pursuant to the Borrower Pledge Agreement and (ii) Equity Interests
issued by License Subsidiaries to the Parent that are pledged pursuant to the
Parent Pledge Agreement.
(f) The Borrower will not (i) have any Subsidiaries organized in
a jurisdiction outside the United States of America or (ii) permit any
Collateral or other assets owned by the Borrower or any Subsidiary to be located
in a jurisdiction outside of the United States.
(g) Holdings will not issue any Equity Interests (or warrants,
options or other rights in respect thereof) other than (i) Equity Interests
issued to the Parent,
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(ii) shares of common stock of Holdings issued to Persons other than the Parent
or any Affiliate of the Parent and that do not result in a Change of Control and
(iii) Permitted Preferred Stock of Holdings issued in compliance with the
applicable provisions of this Agreement. The Net Proceeds of any such Equity
Interests issued by Holdings shall be contributed by Holdings to the Borrower as
common equity (except any such Net Proceeds retained by Holdings to pay interest
on Permitted Holdings Debt or to pay the ChaseTel Earnout).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions; Asset Sales. (a) The Borrower will not, nor will it permit any
Subsidiary Loan Party to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any Equity Interests in, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
(i) Permitted Investments;
(ii) investments by the Borrower in Equity Interests in the
Subsidiaries;
(iii) loans or advances made by the Borrower to any Subsidiary
and made by any Subsidiary to the Borrower; provided that all such loans
and advances shall be evidenced by promissory notes pledged pursuant to
the Borrower Pledge Agreement and shall be subordinated to the
Obligations as provided in the Subordination Agreement;
(iv) Guarantees by the Borrower of obligations of the
Subsidiaries;
(v) investments by the Borrower and the Subsidiaries received in
connection with the bankruptcy or reorganization of, or settlement of
delinquent accounts and disputes with, customers and suppliers, in each
case in the ordinary course of business;
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(vi) the ChaseTel Acquisition may be consummated; provided that
(A) the ChaseTel Acquisition shall be consummated in accordance with the
ChaseTel Purchase Agreement, without giving effect to any amendment or
modification thereto or waiver thereunder that has not been approved by
the Required Lenders (which approval shall not be unreasonably
withheld), (B) ChaseTel shall become a wholly owned Subsidiary, either
as a result of the ChaseTel Acquisition or by merger with a wholly owned
Subsidiary promptly upon consummation of the ChaseTel Acquisition, (C)
ChaseTel Licensee shall become a License Subsidiary as a result of the
ChaseTel Acquisition, (D) neither the Borrower nor any Subsidiary Loan
Party shall be directly or indirectly liable for the ChaseTel Earnout
(except that the Borrower may agree to be liable therefor, subject to
the same conditions that would apply to Restricted Payments pursuant to
clause (c) of Section 6.06, and provided that any such obligation of the
Borrower shall be subordinated to the Obligations on terms satisfactory
to the Administrative Agent), (E) the ChaseTel Indebtedness shall be
fully repaid (or, in the case of any such Indebtedness owing to the
Parent or any of its subsidiaries, including the Borrower, forgiven and
discharged without consideration) and all Liens securing the ChaseTel
Indebtedness shall be released and terminated upon consummation of the
ChaseTel Acquisition and (F) the Collateral and Guarantee Requirement
shall be satisfied promptly upon consummation of the ChaseTel
Acquisition; and
(vii) Permitted ChaseTel Financing.
(b) The Borrower will not, nor will it permit any Subsidiary Loan
Party to, sell, transfer, lease or otherwise dispose of any asset, including any
Equity Interest in any other Person owned by it, except:
(i) sales of inventory, obsolete, uneconomic or surplus
equipment and Permitted Investments, in each case in the ordinary course
of business;
(ii) transfers constituting investments permitted by paragraph
(a) of this Section or Restricted Payments permitted by Section 6.06;
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(iii) sales, transfers and dispositions by the Borrower or a
Subsidiary to the Borrower or a Subsidiary;
(iv) prior to consummation of the ChaseTel Acquisition, the
Borrower or a Subsidiary may resell to ChaseTel equipment purchased by
the Borrower or a Subsidiary pursuant to the Purchase Agreement, in
accordance with paragraph (c) of this Section; and
(v) other sales and dispositions by the Borrower and the
Subsidiaries of assets (other than Equity Interests in any Subsidiary)
with a fair market value not exceeding, in the aggregate, $1,000,000
during any fiscal year of the Borrower;
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than pursuant to clause (iii) above) shall be made for fair value
and solely for cash consideration (except that sales pursuant to clause (iv)
above shall be made as provided in paragraph (c) below).
(c) Prior to consummation of the ChaseTel Acquisition (but not
after the date that is one year after the Effective Date), the Borrower or a
Subsidiary may resell to ChaseTel any equipment purchased by the Borrower or a
Subsidiary pursuant to the Purchase Agreement and may finance any such sale with
Permitted ChaseTel Financing (referred to in clause (b) of the definition of
"Permitted ChaseTel Financing") in a principal amount equal to the Purchase
Price paid or payable in respect of such equipment; provided that:
(i) the price at which any such equipment is sold to ChaseTel
shall be equal to the price at which such equipment was purchased
pursuant to the Purchase Agreement;
(ii) the obligation of ChaseTel to pay the purchase price for
such equipment shall be financed with such Permitted ChaseTel Financing
in a principal amount equal to such purchase price, bearing interest at
a rate that is not less than the rate of interest applicable to the
Loans hereunder;
(iii) if any payment is received by the Borrower or any
Subsidiary from or on behalf of ChaseTel in respect
<PAGE> 91
85
of any such resale of equipment or any such Permitted ChaseTel
Financing, then such payment shall be applied to prepay an equal
principal amount of the outstanding Borrowings hereunder;
(iv) the Borrower shall notify the Administrative Agent of each
resale of equipment to ChaseTel pursuant to this paragraph at or prior
to the date of such resale, which notice shall specify the Purchase
Price of the equipment being resold; and
(v) neither the Borrower nor any Subsidiary shall sell to or
finance any equipment for ChaseTel as contemplated hereby that would
result in the total Purchase Price of all such equipment exceeding
$40,000,000.
SECTION 6.05. Hedging Agreements. The Borrower will not, nor will
it permit any of the Subsidiary Loan Parties to, enter into any Hedging
Agreement, other than Hedging Agreements required by Section 5.14 and other
Hedging Agreements entered into by the Borrower in the ordinary course of
business to hedge or mitigate risks to which the Borrower or any Subsidiary is
exposed in the conduct of its business or the management of its liabilities.
SECTION 6.06. Restricted Payments. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary Loan Party to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
except (a) the Borrower may declare and pay dividends with respect to its
capital stock payable solely in additional shares of its common stock, (b)
Subsidiaries may declare and pay dividends and distributions to the Borrower,
(c) after the Parent pays the ChaseTel Earnout (but in any event not prior to
January 1, 2006), the Borrower may make Restricted Payments in an aggregate
amount not exceeding the lesser of $41,000,000 and the amount of such ChaseTel
Earnout paid by the Parent (and Holdings may make Restricted Payments with the
proceeds of any such Restricted Payments received by Holdings), provided that at
the time of and after giving effect to any such Restricted Payment (i) no
Default shall have occurred and be continuing, (ii) the Borrower shall be in
compliance with Sections 6.18 and 6.19 determined on a pro forma basis as of the
last day of the most recently ended calendar quarter of the Borrower for which
financial statements are available as though such payment had been
<PAGE> 92
86
made on the first day of each relevant period for testing compliance with such
covenant, and (iii) the ratio of Annualized EBIDTA to Fixed Charges shall be
greater than or equal to 1.0 to 1.0 and (d) the Borrower may make Restricted
Payments at the time that any scheduled interest payment is due in respect of
any Permitted Holdings Debt, in an aggregate amount not exceeding the aggregate
amount of such interest payment; provided that (i) at the time of and after
giving effect to any such Restricted Payment, no Default shall have occurred and
be continuing, (ii) such Restricted Payments shall be applied to make such
interest payment, (iii) no such Restricted Payments shall be made prior to the
earlier of (A) June 30, 2005, (B) the date that is five years after the date of
issuance of any Permitted Holdings Debt and (C) the date on which the Borrower
shall have repaid at least 40% of the aggregate principal amount of the Loans
that were outstanding at the end of the Availability Period, and (iv) the
aggregate amount of Restricted Payments made in reliance upon this clause (d)
shall not exceed $65,000,000 during any 12-month period.
SECTION 6.07. Transactions with Affiliates. (a) Neither Holdings
nor the Borrower will, nor will they permit any Subsidiary Loan Party to, sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (i) transactions that do not
involve Holdings and are at prices and on terms and conditions not less
favorable to the Borrower or such Subsidiary Loan Party than could be obtained
on an arm's-length basis from unrelated third parties, (ii) transactions between
or among the Borrower and the Subsidiary Loan Parties not involving any other
Affiliate, (iii) any Restricted Payment permitted by Section 6.06, and (iv)
transactions expressly contemplated by the Intercompany Agreements that are
conducted in accordance with the terms of the Intercompany Agreements.
(b) Neither Holdings nor the Borrower will, nor will they permit
any Subsidiary Loan Party to, create, incur, assume or permit to exist any
Indebtedness (or any other obligation or liability of the type defined as a
"Subordinated Obligation" in the Subordination Agreement) owing to or for the
benefit of the Parent or any other Affiliate of Holdings, the Borrower or any
Subsidiary Loan Party, unless (i) such Affiliate shall have become a party to
the Subordination Agreement and agreed to subordinate
<PAGE> 93
87
such Indebtedness (or such other obligation or liability) as provided therein
and (ii) in the case of any such Indebtedness, such Indebtedness is evidenced by
one or more promissory notes or similar instruments that are pledged pursuant to
the Pledge Agreement.
SECTION 6.08. Restrictive Agreements. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary Loan Party to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon the ability
of any Subsidiary Loan Party to pay dividends or other distributions with
respect to any of its Equity Interests or to make or repay loans or advances to
the Borrower or to Guarantee Indebtedness of the Borrower; provided that (a) the
foregoing shall not apply to restrictions and conditions imposed by law or by
any Loan Document and (b) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition).
SECTION 6.09. Repayment of Indebtedness. The Borrower will not,
nor will it permit any Subsidiary Loan Party to, make any Repayment in respect
of, or make any payment in violation of any subordination terms of, any
Indebtedness of the Borrower or any Subsidiary Loan Party except (a) any
Repayment of Indebtedness resulting in a prepayment of Loans pursuant to Section
2.09(d) and (b) Repayments described in any of the clauses of the proviso to
Section 2.09(d).
SECTION 6.10. Intercompany Agreements. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary Loan Party to, enter into any
agreement or arrangement after the date hereof that would constitute an
Intercompany Agreement without the prior written approval of the Required
Lenders.
SECTION 6.11. Limitation on Sale-Leaseback Transactions. The
Borrower will not, nor will it permit any Subsidiary Loan Party to, enter into
any arrangement, directly or indirectly, whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
<PAGE> 94
88
that it intends to use for substantially the same purpose or purposes as the
property sold or transferred.
SECTION 6.12. Equipment Site Interests and Real Estate
Subsidiaries. The Borrower will not permit any Equipment Site Interests to be
owned or acquired by any Person other than a Subsidiary that (a) is wholly owned
directly by the Borrower, (b) does not engage in any business or activity other
than the ownership of Equipment Site Interests and activities incidental
thereto, (c) does not own or acquire any assets other than Equipment Site
Interests, cash and Permitted Investments and (d) does not have or incur any
Indebtedness or other liabilities other than liabilities under the Loan
Documents, liabilities imposed by law, including tax liabilities, and other
liabilities incidental to its existence and permitted business and activities
(any such Subsidiary satisfying the foregoing requirements, a "Real Estate
Subsidiary"). The Equipment Site Interests relating to all sites in any
particular state shall be owned by a separate Real Estate Subsidiary.
SECTION 6.13. FCC Licenses and License Subsidiaries. The Borrower
will not permit any FCC License to be owned or acquired by any Person other than
a corporation that (a) is wholly owned directly by the Parent, (b) does not
engage in any business or activity other than the ownership of one or more FCC
Licenses and activities incidental thereto, (c) does not own or acquire any
assets other than one or more FCC Licenses, cash and Permitted Investments and
(d) does not have or incur any Indebtedness or other liabilities other than
liabilities under the Loan Documents, liabilities imposed by law, including tax
liabilities, other liabilities incidental to its existence and permitted
business and activities and FCC Debt or Permitted License Acquisition Debt
incurred to finance the purchase by it of its FCC Licenses (any corporation
satisfying the foregoing requirements, a "License Subsidiary"). Each FCC License
that is acquired without being financed with FCC Debt or Permitted License
Acquisition Debt shall be owned by a License Subsidiary that does not have any
liability in respect of any FCC Debt or Permitted License Acquisition Debt. Each
FCC License that is financed with FCC Debt or Permitted License Acquisition Debt
shall be owned by a separate License Subsidiary (which shall be the only Loan
Party liable for such FCC Debt or Permitted License Acquisition Debt), except
that any combination of two or more such FCC Licenses that are
<PAGE> 95
89
acquired contemporaneously pursuant to the same acquisition may be owned by the
same License Subsidiary if required by the terms of such FCC Debt or Permitted
License Acquisition Debt.
SECTION 6.14. Amendment of Material Documents. Neither Holdings
nor the Borrower will, nor will they permit any Subsidiary Loan Party to, amend,
modify or waive any of its rights under (a) any Intercompany Agreement, (b) its
certificate of incorporation, by-laws or other organizational documents, (c) the
ChaseTel Purchase Agreement, (d) the ChaseTel Credit Agreement or any agreement
or instrument securing, guaranteeing or evidencing any Permitted ChaseTel
Financing (other than amendments or modifications that do not adversely effect
any Permitted ChaseTel Financings) or (e) any agreement or instrument governing
or evidencing any Permitted Holdings Debt or FCC Debt.
SECTION 6.15. Capital Expenditures. The Borrower will not permit
the aggregate amount of Capital Expenditures made by the Borrower and its
Subsidiaries in any calendar year to exceed the amount set forth below with
respect to such calendar year:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 74,000,000
2000 $509,000,000
2001 $380,000,000
2002 $300,000,000
2003 $216,000,000
2004 $137,000,000
2005 $120,000,000
2006 $106,000,000
2007 and thereafter $ 90,000,000
</TABLE>
SECTION 6.16. Covered POPS. The Borrower will not permit the
total number of Covered POPS at any time during any period set forth below to be
less than the number set forth below with respect to such period:
<TABLE>
<CAPTION>
Period Number
------ ------
<S> <C>
January 1, 2000 to and
including March 31, 2000 275,000
April 1, 2000 to and
including June 30, 2000 1,000,000
</TABLE>
<PAGE> 96
90
<TABLE>
<CAPTION>
Period Number
------ ------
<S> <C>
July 1, 2000 to and
including September 30, 2000 2,700,000
October 1, 2000 to and
including December 31, 2000 2,800,000
January 1, 2001 to and
including March 31, 2001 7,200,000
April 1, 2001 to and
including June 30, 2001 8,700,000
July 1, 2001 to and
including September 30, 2001 10,300,000
October 1, 2001 to and
including December 31, 2001 12,000,000
January 1, 2002 to and
including December 31, 2002 13,400,000
January 1, 2003 to and
including December 31, 2003 19,700,000
January 1, 2004 to and
including December 31, 2004 21,100,000
January 1, 2005 to and
including December 31, 2005 21,600,000
January 1, 2006 and thereafter 22,000,000
</TABLE>
SECTION 6.17. Subscribers. The Borrower will not permit the total
number of Subscribers at any time during any period set forth below to be less
than the number set forth below opposite such period:
<TABLE>
<CAPTION>
Period Number
------ ------
<S> <C>
January 1, 2000 to and
including March 31, 2000 16,500
April 1, 2000 to and
including June 30, 2000 30,000
July 1, 2000 to and
including September 30, 2000 55,000
</TABLE>
<PAGE> 97
91
<TABLE>
<CAPTION>
Period Number
------ ------
<S> <C>
October 1, 2000 to and
including December 31, 2000 100,000
January 1, 2001 to and
including March 31, 2001 193,000
April 1, 2001 to and
including June 30, 2001 283,000
July 1, 2001 to and
including September 30, 2001 405,000
October 1, 2001 to and
including December 31, 2001 538,000
January 1, 2002 to and
including December 31, 2002 725,000
January 1, 2003 to and
including December 31, 2003 1,370,000
January 1, 2004 to and
including December 31, 2004 1,950,000
January 1, 2005 to and
including December 31, 2005 2,450,000
January 1, 2006 and thereafter 2,700,000
</TABLE>
SECTION 6.18. Total Indebtedness to Total Capitalization. The
Borrower will not permit the ratio of Total Indebtedness to Total Capitalization
at any time during any period set forth below to exceed the ratio set forth
opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Initial Availability Date to and
including December 31, 2002 0.67 to 1.0
January 1, 2003 to and
including December 31, 2003 0.60 to 1.0
January 1, 2004 and thereafter 0.50 to 1.0
</TABLE>
SECTION 6.19. Total Indebtedness to Annualized EBITDA. The
Borrower will not permit the ratio of Total
<PAGE> 98
92
Indebtedness to Annualized EBITDA as of any date during period set forth below
to exceed the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Janaury 1, 2003 to and
including March 31, 2003 40.0 to 1.0
April 1, 2003 to and
including June 30, 2003 15.0 to 1.0
July 1, 2003 to and
including September 30, 2003 10.0 to 1.0
October 1, 2003 to and
including December 31, 2003 7.0 to 1.0
Janaury 1, 2004 and thereafter 5.0 to 1.0
</TABLE>
SECTION 6.20. Consolidated EBITDA to Cash Interest Expense. The
Borrower will not permit the ratio of Consolidated EBITDA to Cash Interest
Expense for any period of four consecutive calendar quarters ending during any
period set forth below to be less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Janaury 1, 2003 to and
including March 31, 2003 0.6 to 1.0
April 1, 2003 to and
including June 30, 2003 1.25 to 1.0
July 1, 2003 to and
including September 30, 2003 1.5 to 1.0
October 1, 2003 to and
including December 31, 2003 1.75 to 1.0
January 1, 2004 and thereafter 2.0 to 1.0
</TABLE>
<PAGE> 99
93
SECTION 6.21. Minimum Gross Revenue. (a) After the earlier to
occur of (i) the last day of the first full calender quarter ending after the
consummation of the ChaseTel Acquisition in accordance with Section 6.04 and
(ii) September 30, 2000, the Borrower will not permit the consolidated revenue
of the Borrower and the Subsidiary Loan Parties during any calendar quarter
ending on a date set forth below to be less than the amount set forth below
opposite such date:
<TABLE>
<CAPTION>
Calendar Quarter Ending Amount
----------------------- ------
<S> <C>
December 31, 1999 $ 1,330,000
March 31, 2000 $ 2,300,000
June 30, 2000 $ 4,200,000
September 30, 2000 $ 8,200,000
December 31, 2000 $ 15,200,000
March 31, 2001 $ 22,000,000
June 30, 2001 $ 32,000,000
September 30, 2001 $ 44,000,000
</TABLE>
(b) The Borrower will not permit the consolidated revenue of the
Borrower and the Subsidiary Loan Parties during any calendar year ending on a
date set forth below to be less than the amount set forth below opposite such
date:
<TABLE>
<CAPTION>
Calendar Year Ending Amount
-------------------- ------
<S> <C>
December 31, 2001 $146,400,000
December 31, 2002 $242,900,000
December 31, 2003 $322,800,000
December 31, 2004 $355,200,000
December 31, 2005
and thereafter $375,000,000
</TABLE>
<PAGE> 100
94
SECTION 6.22. Activities of Holdings. Holdings will not engage in
any business or activity other than the ownership of all the outstanding Equity
Interests of the Borrower and activities incidental thereto. Holdings will not
own or acquire any assets (other than shares of common stock of the Borrower,
cash and Permitted Investments) or incur any liabilities (other than liabilities
under the Loan Documents, liabilities imposed by law, including tax liabilities,
other liabilities incidental to its existence and liabilities in respect of
Permitted Holdings Debt or the ChaseTel Earnout). Holdings will not create,
incur, assume or permit to exist any Lien on any asset now owned or hereafter
acquired by it, except Liens created under the Loan Documents and Permitted
Encumbrances.
<PAGE> 101
95
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause
(a) of this Article) payable under this Agreement or any other Loan
Document, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of any Loan Party in or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, or in any
report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, shall prove to have been
incorrect in any respect when made or deemed made;
(d) Holdings or the Borrower shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.02, 5.04
(with respect to the existence of the Borrower) or 5.10 or in Article
VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other
than those specified in clause (a), (b) or (d) of this Article), and
such failure shall continue unremedied for a period of 30 days after
notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of any Lender);
(f) any Loan Party shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and
payable;
<PAGE> 102
96
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of any Loan Party or its
debts, or of a substantial part of its assets, under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan
Party or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) any Loan Party shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief
under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan
Party or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
<PAGE> 103
97
(j) any Loan Party shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $1,000,000 shall be rendered against any
Loan Party or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by
a judgment creditor to attach or levy upon any assets of any Loan Party
to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in liability
of the Borrower and its Subsidiaries in an aggregate amount exceeding
(i) $1,000,000 in any year or (ii) $5,000,000 for all periods;
(m) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required
by the applicable Security Document, except (i) as a result of the sale
or other disposition of the applicable Collateral in a transaction
permitted under the Loan Documents or (ii) as a result of the Collateral
Agent's failure to maintain possession of any stock certificates,
promissory notes or other instruments delivered to it under the Pledge
Agreements;
(n) a Change in Control shall occur;
(o) the loss, revocation, suspension or material impairment of
any material FCC License shall occur; or
(p) Lucent shall terminate the Purchase Agreement as a result of
any default or breach by the Borrower thereunder, or the Borrower shall
terminate the Purchase Agreement other than by reason of a default or
breach by Lucent thereunder;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of
<PAGE> 104
98
this Article), and at any time thereafter during the continuance of such event,
the Administrative Agent may, and at the request of the Required Lenders shall,
by notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE VIII
The Agents
Each of the Lenders hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
Any Person serving as Administrative Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent, and such
Person and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
<PAGE> 105
99
The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.02), and (c) except as
expressly set forth in the Loan Documents, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to any of the Loan Parties that is communicated to or
obtained by the Person serving as Administrative Agent or any of its Affiliates
in any capacity. The Administrative Agent shall not be liable for any action
taken or not taken by it with the consent or at the request of the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.02) or in the absence of its
own gross negligence or wilful misconduct. The Administrative Agent shall be
deemed not to have knowledge of any Default unless and until written notice
thereof is given to it by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with any Loan
Document, (ii) the contents of any certificate, report or other document
delivered thereunder or in connection therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth in any Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of any Loan Document or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in Article IV or elsewhere in
any Loan Document, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper
<PAGE> 106
100
Person. The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor.
If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its
<PAGE> 107
101
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or related agreement or any document furnished hereunder
or thereunder.
Each Lender acknowledges and agrees to the terms of the
Collateral Agency Agreement and to the appointment of the Collateral Agent to
act as collateral agent under the Collateral Agency Agreement and the other
Security Documents.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to Holdings or the Borrower, to it at 10307 Pacific
Center Court, San Diego, California 92121, Attention of President
(Telecopy No. (619) 882-6010);
(b) if to the Collateral Agent, to it as provided in the
Collateral Agency Agreement;
(c) if to the Administrative Agent, to it at 283 King George
Road, Warren, New Jersey 07059, Attention of Assistant Treasurer-Project
Finance (Telecopy No. (908) 559-1711);
<PAGE> 108
102
(d) if to Lucent, to it at 283 King George Road, Warren, New
Jersey 07059, Attention of Assistant Treasurer-Project Finance (Telecopy
No. (908) 559-1711); and
(e) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by
either Agent or any Lender in exercising any right or power hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Agents and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of any Loan Document or
consent to any departure by any Loan Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan shall not be construed as a waiver of any
Default, regardless of whether an Agent or any Lender may have had notice or
knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by Holdings, the Borrower and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the applicable Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders; provided
that no such agreement shall
<PAGE> 109
103
(i) increase the Commitment of any Lender without the written consent of such
Lender, (ii) reduce the principal amount of any Loan or reduce the rate of
interest on such Loan, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.16(b), (c) or (d)
in a manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) change any of the provisions of
this Section or the definition of "Required Lenders" or any other provision of
any Loan Document specifying the number or percentage of Lenders required to
waive, amend or modify any rights thereunder or make any determination or grant
any consent thereunder, without the written consent of each Lender, (vi) release
all or any substantial part of the Collateral from the Lien of any Security
Document (except as expressly provided in such Security Document), without the
written consent of each Lender, (vii) release Holdings or any Subsidiary Loan
Party from its Guarantee under the Guarantee Agreement (except as expressly
provided in the Guarantee Agreement), or limit its liability in respect of such
Guarantee or (viii) change any provisions of any Security Document in a manner
that adversely affects the pro rata security of the Loans in relation to any
other Eligible Secured Debt, without the written consent of each Lender;
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of either Agent without the prior written consent of such
Agent.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by Lucent
and each Agent, including the reasonable fees, charges and disbursements of
counsel for Lucent or the Agents, in connection with the preparation and
administration of the Loan Documents or any amendments, modifications or waivers
thereof (whether or not the transactions contemplated hereby are consummated)
and (ii) all reasonable out-of-pocket expenses incurred by either Agent or any
Lender, including the reasonable fees, charges and disbursements of any counsel
for either Agent or any Lender, in connection with the enforcement or protection
of its rights in connection with the Loan Documents, including its rights under
this Section, or in connection
<PAGE> 110
104
with the Loans made hereunder, including all such costs and expenses incurred
during any workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower shall indemnify each Agent and each Lender, and
each Related Party of any of the foregoing Persons (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged
presence or release of Hazardous Materials on or from any Mortgaged Property or
any other property at any time owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses have resulted from the gross negligence or wilful misconduct of
such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent under paragraph (a) or (b)
of this Section, each Lender severally agrees to pay to the Administrative Agent
such Lender's pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent in its capacity as such. For purposes hereof, a
Lender's "pro rata share" shall be determined based upon its share of the sum of
the total outstanding Loans and Commitments at the time.
<PAGE> 111
105
(d) To the extent permitted by applicable law, neither Holdings
nor the Borrower shall assert, and each of them hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable not later
than 30 days after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Agents and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to Lucent, a Lender or an Affiliate of
Lucent or a Lender, the Administrative Agent must give its prior written consent
to such assignment (which consent shall not be unreasonably withheld or
delayed), (ii) in the case of an assignment to a competitor of the Borrower or
any of its Subsidiaries (or any Affiliate of any such competitor) or in the case
of an assignment of a Commitment (other than to an Eligible Assignee), the
Borrower must give its prior written consent to such assignment (which consent,
except in the case of an assignment to any such competitor or Affiliate of a
competitor, shall not be unreasonably withheld or delayed), (iii) except in the
case of an assignment to Lucent, a
<PAGE> 112
106
Lender or an Affiliate of Lucent or a Lender or an assignment of the entire
remaining amount of the assigning Lender's Commitment and Loans, the amount of
the Commitment and Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless the Borrower otherwise consents, (iv) each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender's rights and obligations under this Agreement, except that this clause
(iv) shall not be construed to prohibit the assignment of a proportionate part
of all of the assigning Lender's rights and obligations in respect of (A) Loans
separately from (or without assigning) Commitments, (B) Commitments separately
from (or without assigning) Loans or (C) Commitments that are not Contingent
Commitments separately from (or without assigning) Contingent Commitments, (v)
the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500, and (vi) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire; provided further
that any consent of the Borrower otherwise required under this paragraph shall
not be required if an Event of Default under clause (h) or (i) of Article VII
has occurred and is continuing. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
<PAGE> 113
107
(c) The Administrative Agent, acting for this purpose as an agent
of the Borrower, shall maintain at one of its offices a copy of each Assignment
and Acceptance delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Commitments of, and principal amount of
the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the "Register"). The entries in the Register shall be conclusive, and the
Borrower, the Agents and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Commitments and the
Loans owing to it); provided that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Agents and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of
<PAGE> 114
108
the Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 2.16(d) as
though it were a Lender.
(f) A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as
though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
SECTION 9.05. Survival. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that either Agent or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid and so long
as the Commitments have not expired or terminated. The provisions
<PAGE> 115
109
of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive and remain
in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to the
Borrower's agreement to cooperate with Lucent with respect to marketing, selling
or syndicating Loans and Commitments or with respect to fees payable to Lucent
or either Agent constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time
<PAGE> 116
110
held and other obligations at any time owing by such Lender or Affiliate to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that either Agent or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against Holdings or the Borrower or its properties in the courts of any
jurisdiction.
(c) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient
<PAGE> 117
111
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Agents and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions
<PAGE> 118
112
substantially the same as those of this Section, to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to either
Agent or any Lender on a nonconfidential basis from a source other than Holdings
or the Borrower. For the purposes of this Section, "Information" means all
information received from Holdings or the Borrower relating to Holdings or the
Borrower or its business, other than any such information that is publicly
available or available to either Agent or any Lender on a nonconfidential basis
prior to disclosure by Holdings or the Borrower. Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon
<PAGE> 119
113
at the Federal Funds Effective Rate to the date of repayment, shall have been
received by such Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
CRICKET COMMUNICATIONS INC.,
by
-----------------------------------------
Name:
Title:
CRICKET WIRELESS COMMUNICATIONS INC.,
by
-----------------------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC., individually and as
Administrative Agent,
by
-----------------------------------------
Name:
Title:
<PAGE> 120
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
Commitment
Lender Amount
- ------ ----------
<S> <C>
Lucent Technologies Inc. $641,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.26.1
EXHIBIT A
BORROWER PLEDGE AGREEMENT dated as of
September 17, 1999, among CRICKET COMMUNICATIONS,
INC. a Delaware corporation ("Holdings"), CRICKET
WIRELESS COMMUNICATIONS, INC., a Delaware corporation
(the "Borrower"), each subsidiary of the Borrower
listed on Schedule I hereto (each a "Subsidiary",
and, collectively, the "Subsidiaries"), each
subsidiary of Leap Wireless International, Inc., a
Delaware corporation (the "Parent") listed on
Schedule I hereto (each a "License Subsidiary", and,
collectively, the "License Subsidiaries"; and
together with the Subsidiaries, Holdings and the
Borrower, the "Pledgors") and STATE STREET BANK AND
TRUST COMPANY, as collateral agent (in such capacity,
the "Collateral Agent") for the Secured Parties.
Reference is made to the Collateral Agency and Intercreditor Agreement
dated as of September 17, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Collateral Agency and Intercreditor Agreement") among
the Borrower, the Representatives and Unrepresented Holders referred to therein
and the Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. Each Pledgor acknowledges receipt of a true and correct
copy of the Collateral Agency and Intercreditor Agreement and agrees to the
terms thereof.
The Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
The obligations of the Lenders to make Loans are conditioned upon, among other
things, the execution and delivery by the Pledgors of a Pledge Agreement in the
form hereof. The Borrower may from time to time incur Permitted Additional
Obligations that are required to be secured pursuant to the terms hereof.
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as
the case may be, in full of the Obligations, each Pledgor hereby transfers,
grants, bargains, sells,
<PAGE> 2
2
conveys, hypothecates, pledges, sets over and delivers unto the Collateral
Agent, its successors and assigns, and hereby grants to the Collateral Agent,
its successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in all of such Pledgor's right, title and interest in, to and
under (a) all shares of capital stock, membership interests or other equity
interests owned by it, all of which are listed on Schedule II hereto, and any
shares of capital stock, membership interests or other equity interests obtained
in the future by the Pledgor and the certificates representing all such shares,
membership interests or other equity interests (collectively, the "Pledged
Stock"); provided that the pledged interests shall not include to the extent
that applicable law requires that a subsidiary of the Pledgor issue directors'
qualifying shares, such qualifying shares; (b)(i) all debt securities owned by
it, all of which are listed opposite the name of the Pledgor on Schedule II
hereto, (ii) any debt securities in the future issued to the Pledgor and (iii)
the promissory notes and any other instruments evidencing such debt securities
(the "Pledged Debt Securities"); (c) all other property that may be delivered to
and held by the Collateral Agent pursuant to the terms hereof; (d) subject to
Section 5, all payments of principal or interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed, in respect of, in exchange for or upon the conversion of the
securities referred to in clauses (a) and (b) above; (e) subject to Section 5,
all rights and privileges of the Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above; and (f) all
proceeds of any of the foregoing (the items referred to in clauses (a) through
(f) above being collectively referred to as the "Collateral"). Upon delivery to
the Collateral Agent, (a) any stock certificates, notes or other securities now
or hereafter included in the Collateral (the "Pledged Securities") shall be
accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request in order to give effect
to the pledge granted hereby and (b) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Collateral Agent may
<PAGE> 3
3
reasonably request in order to give effect to the pledge granted hereby. Each
delivery of Pledged Securities shall be accompanied by a schedule describing the
securities theretofore and then being pledged hereunder, which schedule shall be
attached hereto as Schedule II and made a part hereof. Each schedule so
delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any Person to be evidenced by a duly executed promissory note,
bond, debenture or similar instrument that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor
hereby represents, warrants and covenants, as to itself and the Collateral
pledged by it hereunder, to and with the Collateral Agent that as of the
Effective Date:
(a) the Pledged Stock represents that percentage as set forth
on Schedule II of the issued and outstanding shares of each class of
the capital stock of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the
Pledgor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule
<PAGE> 4
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II, (ii) holds the same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit
to exist any security interest in or other Lien on, the Collateral,
other than pursuant hereto, and (iv) subject to Section 5, will cause
any and all Collateral, whether for value paid by the Pledgor or
otherwise, to be forthwith deposited with the Collateral Agent and
pledged or assigned hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will
defend its title or interest thereto or therein against any and all
Liens (other than the Lien created by this Agreement), however arising,
of all Persons whomsoever;
(d) except for such consents and approvals as have been
obtained and are in full force and effect, no consent of any other
Person (including stockholders or creditors of any Pledgor) and no
consent or approval of any Governmental Authority or any securities
exchange was or is necessary to the validity of the pledge effected
hereby;
(e) by virtue of the execution and delivery by the Pledgors of
this Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to,
and continue to be in the possession of, the Collateral Agent in
accordance with this Agreement, the Collateral Agent will have a valid
and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the
Obligations;
(f) the pledge effected hereby is effective to vest in the
Collateral Agent, on behalf of the Secured Parties, the rights of the
Collateral Agent in the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and
validly issued and is fully paid and nonassessable;
<PAGE> 5
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(h) all information set forth herein relating to the Pledged
Stock is accurate and complete in all material respects as of the date
hereof; and
(i) the pledge of the Pledged Stock pursuant to this Agreement
does not violate Regulation U or X of the Federal Reserve Board or any
successor thereto as of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of any material
notices or other communications received by it with respect to Pledged
Securities registered in the name of such Pledgor. The Collateral Agent shall at
all times have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless a
Notice of Enforcement is in effect:
(i) Each Pledgor shall be entitled to exercise any and all
voting and/or other consensual rights and powers inuring to an owner of
Pledged Securities or any part thereof for any purpose consistent with
the terms of this Agreement, the other Support Documents and the
Secured Instruments; provided, however, that such Pledgor will not be
entitled to exercise any such right if the result thereof could
materially and adversely affect the rights inuring to a holder of the
Pledged Securities or the rights and remedies of any of the Secured
Parties under this Agreement or any other Support Document or any
Secured Instrument or the ability of the Secured Parties to exercise
the same.
<PAGE> 6
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(ii) The Collateral Agent shall execute and deliver to each
Pledgor, or cause to be executed and delivered to each Pledgor, all
such proxies, powers of attorney and other instruments as such Pledgor
may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and/or consensual rights and powers it is entitled
to exercise pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph (iii)
below.
(iii) Each Pledgor shall be entitled to receive and retain any
and all cash dividends, interest and principal paid on the Pledged
Securities to the extent and only to the extent that such cash
dividends, interest and principal are permitted by, and otherwise paid
in accordance with, the terms and conditions of the Support Documents,
the Secured Instruments and applicable laws. While a Notice of
Enforcement is in effect, all noncash dividends, interest and
principal, and all dividends, interest and principal paid or payable in
cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and
all other distributions (other than distributions referred to in the
preceding sentence) made on or in respect of the Pledged Securities,
whether paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital
stock of the issuer of any Pledged Securities or received in exchange
for Pledged Securities or any part thereof, or in redemption thereof,
or as a result of any merger, consolidation, acquisition or other
exchange of assets to which such issuer may be a party or otherwise,
shall be and become part of the Collateral, and, if received by any
Pledgor, shall not be commingled by such Pledgor with any of its other
funds or property but shall be held separate and apart therefrom, shall
be held in trust for the benefit of the Collateral Agent and shall be
forthwith delivered to the Collateral Agent in the same form as so
received (with any necessary endorsement).
(b) While a Notice of Enforcement is in effect, all rights of any
Pledgor to dividends, interest or principal
<PAGE> 7
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that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to receive
and retain such dividends, interest or principal. All dividends, interest or
principal received by the Pledgor contrary to the provisions of this Section 5
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of such Pledgor and shall be forthwith
delivered to the Collateral Agent upon demand in the same form as so received
(with any necessary endorsement). Any and all money and other property paid over
to or received by the Collateral Agent pursuant to the provisions of this
paragraph (b) shall be retained by the Collateral Agent in the Enforcement
Collateral Account upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 7. After a Notice of
Enforcement has been rescinded in accordance with the terms of the Collateral
Agency and Intercreditor Agreement, the Collateral Agent shall, within five
Business Days after all such Notices of Enforcement have been rescinded, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in the Enforcement Collateral
Account.
(c) While a Notice of Enforcement is in effect, rights of any Pledgor
to exercise the voting and consensual rights and powers it is entitled to
exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of
the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers in a manner not inconsistent with the terms of
this Agreement, provided that, unless otherwise directed by the Required Secured
Parties, the Collateral Agent shall have the right from time to time while a
Notice of Enforcement is in effect to permit the Pledgors to exercise such
rights. After all Notices of Enforcement have been rescinded in accordance with
the terms
<PAGE> 8
8
of the Collateral Agency and Intercreditor Agreement, such Pledgor will have the
right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i)
above.
SECTION 6. Remedies upon Default. While a Notice of Enforcement is in
effect, subject to applicable regulatory and legal requirements, the Collateral
Agent may sell the Collateral, or any part thereof, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate subject to
applicable law and standards of commercial reasonableness. The Collateral Agent
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of any Pledgor, and, to
the extent permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at
<PAGE> 9
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such place or places as the Collateral Agent may fix and state in the notice of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid in full by the purchaser or
purchasers thereof, but the Collateral Agent shall not incur any liability in
case any such pur chaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. Subject to Section 9.05 of the Collateral Agency and
Intercreditor Agreement, at any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, any Secured Party
may bid for or purchase, free from any right of redemption, stay or appraisal on
the part of any Pledgor (all said rights being also hereby waived and released),
the Collateral or any part thereof offered for sale. For purposes hereof, (a) a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry out
such sale pursuant to such agreement and (c) such Pledgor shall not be entitled
to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement the applicable Notice of Enforcement shall have been rescinded
in accordance with the terms of the Collateral Agency and Intercreditor
Agreement and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
<PAGE> 10
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suit or suits at law or in equity to foreclose upon the Collateral and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this Section 6
shall be deemed to conform to the commercially reasonable standards as provided
in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied promptly by the Collateral Agent after receipt thereof as
provided in the Collateral Agency and Intercreditor Agreement.
Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees
to pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or
observe any of the provisions hereof.
<PAGE> 11
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(b) Without limitation of its indemnification obligations under the
other Support Documents, each Pledgor agrees to indemnify the Collateral Agent
and the other Indemnitees against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, other charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Support
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations thereunder or
the consummation of the transactions contemplated hereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement or any other Support Document or any
Secured Instrument, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or unenforceability of
any term or provision of this Agreement or any other Support Document or any
Secured Instrument or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party. All amounts due under this Section 8 shall be
payable on written demand therefor and, if not paid within five Business Days
after written demand for payment is received by a Pledgor from the Collateral
Agent, shall bear interest at the rate specified in Section 2.11(c) of the
Credit Agreement.
(d) To the extent that the Pledgors fail to pay any amount required to
be paid by them to the Collateral Agent under paragraph (a) or (b) of this
Section, each Secured Party severally agrees to pay to the Collateral Agent such
Secured Party's pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity
<PAGE> 12
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payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damaged, liability or related expense, as the case
may be, was incurred by or asserted against the Collateral Agent in its capacity
as such. For purposes hereof, a Secured Party's "pro rata share" shall be
determined based upon its share of the sum of the total outstanding loans and
unused commitments under the Secured Instruments at the time.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent, effective while a Notice of Enforcement is
in effect, the attorney-in-fact of such Pledgor for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument that the Collateral Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, while a Notice of Enforcement is in
effect, with full power of substitution either in the Collateral Agent's name or
in the name of such Pledgor, to ask for, demand, sue for, collect, receive and
give acquittance for any and all moneys due or to become due under and by virtue
of any Collateral, to endorse checks, drafts, orders and other instruments for
the payment of money payable to the Pledgor representing any interest or
dividend or other distribution payable in respect of the Collateral or any part
thereof or on account thereof and to give full discharge for the same, to
settle, compromise, prosecute or defend any action, claim or proceeding with
respect thereto, and to sell, assign, endorse, pledge, transfer and to make any
agreement respecting, or otherwise deal with, the same, in each case in a manner
not inconsistent with the terms of this Agreement; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered
<PAGE> 13
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thereby. The Collateral Agent and the other Secured Parties shall be accountable
only for amounts actually received as a result of the exercise of the powers
granted to them herein, and neither they nor their officers, directors,
employees or agents shall be responsible to any Pledgor for any act or failure
to act hereunder, except for their own gross negligence or wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent and the other Secured Parties under the other
Support Documents and the Secured Instruments are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provisions of this Agreement or consent to any departure by any Pledgor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Pledgor in any case shall entitle such Pledgor to any other or further
notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Collateral Agent and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 11.02 of the Collateral Agency and Intercreditor
Agreement.
SECTION 11. Securities Act, etc. In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the "Federal Securities Laws") with
<PAGE> 14
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respect to any disposition of the Pledged Securities permitted hereunder. Each
Pledgor understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Collateral Agent if the Collateral
Agent were to attempt to dispose of all or any part of the Pledged Securities,
and might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities could dispose of the same. Similarly, there
may be other legal restrictions or limitations affecting the Collateral Agent in
any attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion, (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale. Each Pledgor acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such sale, the
Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached. The provisions of
this Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
<PAGE> 15
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SECTION 12. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of any Support
Document or Secured Instrument, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from any Support Document or Secured
Instrument or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other collateral,
or any release or amendment or waiver of or consent to or departure from any
guaranty, for all or any of the Obligations or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Pledgor in respect of the Obligations or in respect of this Agreement (other
than the indefeasible payment in full of all the Obligations).
SECTION 13. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full and all Secured Instrument Commitments shall have
terminated.
(b) Subject to Section 9.03 of the Collateral Agency and Intercreditor
Agreement, upon any sale or other transfer by any Pledgor of any Collateral that
does not violate any Secured Instrument to any Person that is not a Pledgor, the
security interest in such Collateral shall be automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at
such Pledgor's expense, all documents that such Pledgor shall reasonably request
to evidence such termination or release. Any execution and delivery of documents
pursuant to this Section 13 shall be without recourse to or warranty by the
Collateral Agent.
<PAGE> 16
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SECTION 14. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 11.01 of the Collateral Agency and
Intercreditor Agreement. All communications and notices hereunder to any
Subsidiary Loan Party shall be given to it in care of the Borrower at the
address set forth in the Credit Agreement.
SECTION 15. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder.
SECTION 16. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Support
Documents. Subject to Section 9.03 of the Collateral Agency and Intercreditor
Agreement, if all of the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a Person that is not a Pledgor pursuant to a
transaction that does not violate any Secured Instrument, such Pledgor shall be
released from its obligations under this Agreement without further action. This
Agreement shall be construed as a separate agreement with respect to each
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Pledgor and may be amended, modified, supplemented, waived or released with
respect to any Pledgor without the approval of any other Pledgor and without
affecting the obligations of any other Pledgor hereunder.
SECTION 17. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Support Document shall be considered
to have been relied upon by the Collateral Agent and the other Secured Parties
and shall survive the extension of credit by any Secured Party pursuant to a
Secured Instrument, regardless of any investigation made by the Secured Parties
or on their behalf, and shall continue in full force and effect until this
Agreement shall terminate.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 16. Delivery of an executed counterpart of a signature
page to this Agreement
<PAGE> 18
18
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 20. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Collateral Agency and Intercreditor Agreement
shall be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting
this Agreement.
SECTION 21. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or any
other Support Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Support Document shall affect any right
that the Collateral Agent or any other Secured Party may otherwise have to bring
any action or proceeding relating to this Agreement or any other Loan Document
against any Pledgor or its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Support Document in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
<PAGE> 19
19
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 22. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 23. Additional Pledgors. Upon execution and delivery by the
Collateral Agent and a Subsidiary Loan Party of an instrument in the form of
Annex 1, such Subsidiary Loan Party shall become a Pledgor hereunder with the
same force and effect as if originally named as a Pledgor herein. The execution
and delivery of such instrument shall not require the consent of any Pledgor
hereunder. The rights and obligations of each Pledgor hereunder shall remain in
full force and effect notwithstanding the addition of any new Pledgor as a party
to this Agreement. This Agreement may be waived, amended or modified with
respect to any one or more Pledgors and any one or more Pledgors may be released
from its obligations hereunder without the consent or agreement of any other
Pledgor.
SECTION 24. Execution of Financing Statements. Pursuant to Section
9-402 of the Uniform Commercial Code as in effect in the State of New York, each
Pledgor authorizes the Collateral Agent to file financing statements with
respect to the Collateral owned by it without the signature of such Pledgor in
such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other
<PAGE> 20
20
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CRICKET COMMUNICATIONS, INC.,
By____________________________
Name:
Title:
CRICKET WIRELESS
COMMUNICATIONS, INC.,
By____________________________
Name:
Title:
EACH SUBSIDIARY
LISTED ON SCHEDULE I
By___________________________
Name:
Title:
EACH LICENSE SUBSIDIARY
LISTED ON SCHEDULE I
By___________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent
By___________________________
<PAGE> 21
21
Name:
Title:
<PAGE> 22
22
Schedule I to the
Borrower Pledge Agreement
PLEDGORS
Name Address
- ---- -------
<PAGE> 23
23
Schedule II to the
Borrower Pledge Agreement
CAPITAL STOCK
<TABLE>
<CAPTION>
Number and
Number of Registered Class of Percentage
Issuer Certificates Owner Shares of Shares
- ------ ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
</TABLE>
LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage
Number and of
Number of Registered Class of Membership
Issuer Certificates Owner Interests of Interests
- ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
</TABLE>
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage of Limited
Number of Limited or General Partnership
Issuer Certificates General Interests
- ------ ------------ ---------- ---------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 24
24
DEBT SECURITIES
<TABLE>
<CAPTION>
Principal Date of Maturity
Issuer Amount Notes Date
- ------ --------- ------- --------
<S> <C> <C> <C>
</TABLE>
<PAGE> 25
Annex 1 to the
Borrower Pledge Agreement
SUPPLEMENT NO. dated as of , to the Borrower Pledge
Agreement dated as of September 17, 1999, among, CRICKET
COMMUNICATIONS, INC., a Delaware corporation ("Holdings"),
CRICKET WIRELESS COMMUNICATIONS, INC., a Delaware corporation
(the "Borrower"),each subsidiary of the Borrower listed on
Schedule I thereto (each a "Subsidiary", and, collectively,
the "Subsidiaries"), each subsidiary of the Leap Wireless
International, Inc., a Delaware corporation (the "Parent")
listed on Schedule I thereto (each a "License Subsidiary",
and, collectively, the "License Subsidiaries"; and together
with the Subsidiaries, Holdings and the Borrower, the
"Pledgors") and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, the "Collateral Agent")
for the Secured Parties.
A. Reference is made to (a) the Collateral Agency and Intercreditor
Agreement (as defined in the Pledge Agreement) and (b) the Borrower Pledge
Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to
induce Secured Parties to make loans under the applicable Secured Instruments.
Section 23 of the Pledge Agreement provides that Subsidiary Loan Parties may
become Pledgors under the Pledge Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary Loan Party
(the "New Pledgor") is executing this Supplement to become a Pledgor under the
Pledge Agreement in order to induce the Secured Parties to make additional loans
under the applicable Secured Instruments and as consideration for loans
previously made under the Secured Instruments.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 23 of the Pledge Agreement, the
New Pledgor by its signature below becomes a
<PAGE> 26
26
Pledgor under the Pledge Agreement with the same force and effect as if
originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to
all the terms and provisions of the Pledge Agreement applicable to it as a
Pledgor thereunder and (b) represents and warrants that the representations and
warranties made by it as a Pledgor thereunder are true and correct on and as of
the date hereof except for representations and warranties which by their terms
refer to a specific date. In furtherance of the fore going, the New Pledgor, as
security for the payment and performance in full of the Obligations, does hereby
create and grant to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, their successors and assigns, a security
interest in and lien on all of the New Pledgor's right, title and interest in
and to the Collateral of the New Pledgor. Each reference to a "Pledgor" in the
Pledge Agreement shall be deemed to include the New Pledgor. The Pledge
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally.
SECTION 3. This Supplement may be executed in counter parts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set
forth on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.
SECTION 5. Except as expressly supplemented hereby,
<PAGE> 27
27
the Pledge Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Pledge Agreement. All communications
and notices here under to the New Pledgor shall be given to it in care of the
Borrower as set forth in the Credit Agreement.
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[NAME OF NEW PLEDGOR],
By_________________________________
<PAGE> 28
28
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By_________________________________
Name:
Title:
<PAGE> 29
29
Schedule I to
Supplement No. [ ]
to the Borrower Pledge Agreement
Pledged Securities of the New Pledgor
CAPITAL STOCK
<TABLE>
<CAPTION>
Number and Percentage of
Class of Shares Shares or
Number of Registered and Other Other Equity
Issuer Certificates Owner Equity Interests Interests
- ------ ------------ ---------- ----------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage
Number and of
Number of Registered Class of Membership
Issuer Certificates Owner Interests of Interests
- ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
</TABLE>
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage of Limited
Number of Limited or General Partnership
Issuer Certificates General Interests
- ------ ------------ ---------- ---------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 30
30
DEBT SECURITIES
<TABLE>
<CAPTION>
Principal Date of Maturity
Issuer Amount Notes Date
- ------ --------- ------- --------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.26.2
EXHIBIT B
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
dated as of
September 17, 1999
among
CRICKET WIRELESS COMMUNICATIONS, INC.,
The Representatives and Unrepresented Holders
referred to herein,
and
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
<PAGE> 2
2
<PAGE> 3
3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions
SECTION 1.01. Defined Terms..........................................................1
SECTION 1.02. Terms Generally.......................................................10
SECTION 1.03. Accounting Terms; GAAP................................................11
ARTICLE II
Permitted Additional Obligations; Additional Security Documents
SECTION 2.01. Permitted Additional Obligations......................................11
SECTION 2.02. Additional Security Documents.........................................11
ARTICLE III
Acts of Secured Parties; Amounts of Obligations
SECTION 3.01. Acts of Secured Parties...............................................12
SECTION 3.02. Determination of Amounts of Obligations...............................12
SECTION 3.03. Restrictions on Actions...............................................13
ARTICLE IV
Duties of Collateral Agent
SECTION 4.01. Notice to Secured Parties.............................................14
SECTION 4.02. Actions Under Support Documents.......................................14
SECTION 4.03. Records...............................................................14
ARTICLE V
Collateral Accounts; Distributions
SECTION 5.01. The Collateral Accounts...............................................15
SECTION 5.02. Application of Proceeds...............................................16
SECTION 5.03. Time of Payments......................................................17
</TABLE>
<PAGE> 4
4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.04. Application of Amounts Not Distributable..............................17
SECTION 5.05. Treatment of Contingent Obligations...................................17
SECTION 5.06. Collateral Agent's Calculations.......................................18
ARTICLE VI
Agreements
SECTION 6.01. Delivery of Agreements................................................18
SECTION 6.02. Information...........................................................18
ARTICLE VII
The Collateral Agent
SECTION 7.01. Appointment; Rights and Duties........................................19
SECTION 7.02. Expenses; Indemnity; Damage Waiver....................................21
ARTICLE VIII
Representations and Warranties
SECTION 8.01. Organization; Powers..................................................22
SECTION 8.02. Authorization; Enforceability.........................................23
SECTION 8.03. Governmental Approvals; No Conflicts..................................23
ARTICLE IX
Intercreditor Arrangements
SECTION 9.01. Security Interests....................................................23
SECTION 9.02. Turnover of Collateral and Certain Payments...........................24
SECTION 9.03. Release of Collateral and Guarantees..................................24
SECTION 9.04. Additional Collateral.................................................25
SECTION 9.05. Purchase of Collateral................................................25
SECTION 9.06. Further Assurances, etc...............................................25
</TABLE>
<PAGE> 5
5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE X
Benefit of Agreement
Benefit of Agreement.................................................................26
ARTICLE XI
Miscellaneous
SECTION 11.01. Notices..............................................................26
SECTION 11.02. Waivers; Amendments..................................................27
SECTION 11.03. Counterparts.........................................................28
SECTION 11.04. Severability.........................................................28
SECTION 11.05. Governing Law; Jurisdiction; Consent to Service of Process...........28
SECTION 11.06. WAIVER OF JURY TRIAL.................................................29
SECTION 11.07. Headings.............................................................29
SECTION 11.08. Successors and Assigns...............................................29
SECTION 11.09. Termination..........................................................30
SECTION 11.10. Complete Agreement...................................................30
EXHIBIT:
Exhibit A -- Form of Permitted Additional Obligations Designation
</TABLE>
<PAGE> 6
6
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT dated as
of [ ], 1999, among CRICKET WIRELESS COMMUNICATIONS, INC., a
Delaware corporation, STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent, and the Representatives and Unrepresented
Holders referred to herein.
WHEREAS the Borrower (such term, and other capitalized terms used in
this preliminary statement, having the meanings set forth in this Agreement
below) is entering into the Credit Agreement pursuant to which the Lenders will
make Loans to the Borrower;
WHEREAS the Loan Parties have agreed to enter into certain Security
Documents in order to secure the Credit Facility Obligations and the Subsidiary
Loan Parties have agreed to enter into the Guarantee Agreement in order to
guarantee the Credit Facility Obligations;
WHEREAS the Borrower may from time to time incur Permitted Additional
Obligations that may be secured under the Security Documents and guaranteed
pursuant to the Guarantee Agreement; and
WHEREAS the parties desire to enter into this Agreement in order to set
forth certain agreements with respect to the Obligations to be so secured and
guaranteed, including mechanisms for securing Permitted Additional Obligations
and certain intercreditor arrangements with respect to the enforcement of rights
under the Support Documents and the allocation of proceeds in respect of the
Obligations;
NOW THEREFOR, the parties hereto agree as follows:
ARTICLE I
<PAGE> 7
7
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"Act" has the meaning set forth in Section 3.01.
"Additional Security Document" means any agreement or instrument (other
than the Initial Security Documents) creating or evidencing a security interest
of the Collateral Agent in, or a Lien in favor of the Collateral Agent on, or an
assignment to the Collateral Agent of, any Collateral.
"Administrative Agent" means Lucent Technologies Inc., in its capacity
as administrative agent for the Lenders under the Credit Agreement.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Borrower" means Cricket Wireless Communications, Inc., a Delaware
corporation.
"Borrower Pledge Agreement" means the Borrower Pledge Agreement dated as
of the date hereof among Holdings, the Borrower, the Subsidiary Loan Parties and
the Collateral Agent.
"Business Day" has the meaning assigned to such term in the Credit
Agreement.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
<PAGE> 8
8
with GAAP.
"Collateral" means (a) any and all "Collateral" as defined in any
applicable Security Document and (b) any and all other assets of whatever
nature, tangible or intangible, now owned or existing or hereafter acquired or
arising in which the Collateral Agent has been granted a Lien or security
interest, or that have been assigned to the Collateral Agent, pursuant to any of
the Security Documents.
"Collateral Accounts" has the meaning set forth in Section 5.01(a).
"Collateral Agent" means State Street Bank and Trust Company, in its
capacity as collateral agent for the Secured Parties under the Support
Documents.
"Contingent Obligations" means any Obligations that are contingent
obligations or not yet liquidated, including any obligation for the
reimbursement of any letter of credit that is outstanding but not yet drawn
upon.
"Contingent Obligations Collateral Account" has the meaning set forth in
Section 5.05.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Credit Agreement" means the Credit Agreement dated as of September 17,
1999, among, Holdings, the Borrower, the Lenders and the Administrative Agent.
"Credit Facility Obligations" means (a) the principal of and premium, if
any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such
<PAGE> 9
9
proceeding) on the Loans, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise and (b) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency, receiver
ship or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) of the Borrower under the Credit Agreement.
"Enforcement Collateral Account" has the meaning set forth in Section
5.01(a).
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other
<PAGE> 10
10
equity ownership interests in a Person.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"GAAP" means, subject to Section 1.03, generally accepted accounting
principles in the United States of America.
"General Collateral Account" has the meaning set forth in Section
5.01(a).
"General Funds" means funds required to be deposited in the General
Collateral Account as provided in Section 5.01(b).
"General Funds Release Request" means a written request delivered by the
Borrower to the Collateral Agent requesting the Collateral Agent to release
funds from the General Collateral Account. Each General Funds Release Request
(a) shall specify (i) the amount of funds to be released, (ii) the date of the
requested release, (iii) the purpose for which the Borrower expects to use such
funds, (iv) the applicable provisions of the applicable Secured Instrument or
Secured Instruments pursuant to which such funds are being released and (v) the
wire instructions for the transfer of such funds to or for the account of the
Borrower and (b) shall be accompanied by a certificate of a Financial Officer to
the effect that such requested release of funds is not in contravention of any
Secured Instrument.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of
<PAGE> 11
11
guaranteeing any Indebtedness or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantee Agreement" means the Guarantee Agreement dated as of the date
hereof among Holdings, the Subsidiary Loan Parties and the Collateral Agent.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Holder" means any direct holder of, or creditor party to a Secured
Instrument in respect of, any Obligations.
"Holdings" means Cricket Communications, Inc., a Delaware corporation.
"Indebtedness" of any Person means, without
<PAGE> 12
12
duplication, (a) all obligations of such Person for borrowed money or with
respect to advances of any kind, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnitee" has the meaning assigned to such term in Section 7.02.
"Indemnity, Subrogation and Contribution Agreement" means the Indemnity,
Subrogation and Contribution Agreement dated as of the date hereof among the
Borrower, the Subsidiary Loan Parties and the Collateral Agent.
"Initial Security Documents" means this Agreement, the Security
Agreement, the Borrower Pledge Agreement and the Parent Pledge Agreement.
"Lenders" means the lenders from time to time
<PAGE> 13
13
party to the Credit Agreement.
"License Subsidiary" has the meaning assigned to such term in the Credit
Agreement.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Parties" means the Parent, Holdings, the Borrower and the
Subsidiary Loan Parties.
"Loans" has the meaning assigned to such term in the Credit Agreement.
"Moody's means Moody's Investors Service, Inc.
"Notice of Cancelation of Enforcement" means, with respect to any Notice
of Enforcement, a notice or notices delivered to the Collateral Agent by the
Representatives and/or Unrepresented Holders representing the Required Secured
Parties, canceling such Notice of Enforcement.
"Notice of Enforcement" means a notice or notices delivered to the
Collateral Agent by Representatives and/or Unrepresented Holders representing
the Required Secured Parties stating that (a) all or part of the Obligations are
due and payable and remain unpaid and any applicable grace period for payment
thereof has lapsed or (b) all or part of the Obligations are then permitted by
the Secured Instrument or Secured Instruments under which such Obligations are
outstanding (because of the occurrence of an event of default or similar event
under such Secured Instrument or
<PAGE> 14
14
Secured Instruments) to be declared due and payable prior to the stated maturity
thereof pursuant to the terms of such Secured Instrument or Secured Instruments.
A Notice of Enforcement shall be deemed to have been given when the notice
referred to in the preceding sentence has actually been received by the
Collateral Agent and to have been rescinded when the Collateral Agent has
actually received a Notice of Cancelation of Enforcement. A Notice of
Enforcement shall be deemed to be in effect at all times after such Notice has
been given until such time, if any, as such Notice has been rescinded. The
Representatives and Unrepresented Holders representing the Required Secured
Parties shall rescind a Notice of Enforcement once such Representatives and
Unrepresented Holders are satisfied that the event or events giving rise to such
Notice of Enforcement have been cured or waived in accordance with the
applicable Secured Instrument and no other event has occurred and is continuing
that would permit a Notice of Enforcement to be given.
"Obligations" means, collectively, the Credit Facility Obligations and
all Permitted Additional Obligations.
"Parent" means Leap Wireless International, Inc., a Delaware
corporation.
"Parent Pledge Agreement" means the Parent Pledge Agreement dated the
date hereof among the Parent and the Collateral Agent.
"Permitted Additional Obligations" means (a) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on any
Indebtedness for borrowed money of the Borrower, but only to the extent that
such Indebtedness is designated as "Permitted Additional Obligations" in
accordance with Section 2.01, and (b) all other monetary
<PAGE> 15
15
obligations (other than monetary obligations in respect of Indebtedness that
does not constitute Permitted Additional Obligations), including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) of the Borrower under the
Secured Instrument governing or evidencing such Indebtedness referred to in
clause (a) above; provided that any Indebtedness or obligations owing to
Holdings, any Subsidiary Loan Party or Affiliate of the Borrower shall not
constitute Permitted Additional Obligations.
"Permitted Additional Obligations Designation" means each Permitted
Additional Obligations Designation duly completed and executed by the Collateral
Agent, the Borrower and the holder or holders of the Permitted Additional
Obligations referenced therein (or a Representative of such holders) and
delivered pursuant to Section 2.01, substantially in form of Exhibit A.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of
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16
any commercial bank organized under the laws of the United States of
America or any State thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Principal Obligations" means the principal amount of the outstanding
Obligations.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Representative" means, as to any Secured Party or Secured Parties, any
Person designated in the Secured Instrument evidencing or governing the
Obligations held by such Secured Party or Secured Parties as the trustee, agent
or representative of such Secured Party or Secured Parties (including, in the
case of the Credit Facility Obligations, the Administrative Agent).
"Required Committed Secured Parties" means, at any time, Secured Parties
having outstanding Principal Obligations and Secured Instrument Commitments
representing more than 50% of the sum of the total outstanding Principal
Obligations and Secured Instrument Commitments at such time.
"Required Secured Parties" means, at any time, Secured Parties having
outstanding Principal Obligations
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representing more than 50% of the aggregate principal amount of the total
outstanding Principal Obligations at such time.
"S&P" means Standard & Poor's.
"Secured Instrument" means any instrument or agreement (other than the
Support Documents) that evidences or governs the terms of any of the Obligations
(including, in the case of the Credit Facility Obligations, the Credit
Agreement).
"Secured Instrument Commitments" means, at any time, commitments in
effect at such time to extend credit to the Borrower under any Secured
Instrument that, if extended at such time, would constitute Principal
Obligations.
"Secured Parties" means the Collateral Agent and the Holders of the
Obligations (including, in the case of the Credit Facility Obligations, the
Lenders and the Administrative Agent).
"Security Agreement" means the Security Agreement dated as of the date
hereof among the Borrower, the Subsidiary Loan Parties and the Collateral Agent.
"Security Documents" means the Initial Security Documents and the
Additional Security Documents.
"Subordination Agreement" means the Subordination Agreement dated as of
the date hereof among the Loan Parties and the Collateral Agent.
"Subordination Collateral Account" has the meaning set forth in Section
5.01(a).
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
<PAGE> 18
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entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Loan Parties" means the Subsidiaries and the License
Subsidiaries.
"Support Documents" means the Security Documents, the Indemnity,
Subrogation and Contribution Agreement, the Subordination Agreement and the
Guarantee Agreement.
"Unrepresented Holder" means any Holder for which there is no
Representative.
SECTION 1.02. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections and Exhibits
shall
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be construed to refer to Articles and Sections of, and Exhibits to, this
Agreement and (e) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts, contract rights,
licenses and intellectual property.
SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Collateral Agent that the Borrower requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Collateral Agent notifies the Borrower
that the Required Committed Secured Parties request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
ARTICLE II
Permitted Additional Obligations;
Additional Security Documents
SECTION 2.01. Permitted Additional Obligations. The Borrower may from
time to time designate any Indebtedness for borrowed money of the Borrower as
Permitted Additional Obligations hereunder by (a) delivering to the Collateral
Agent a Permitted Additional Obligations Designation in respect of such
Indebtedness describing such Indebtedness and attaching thereto a true and
complete copy of all instruments and agreements (together with all
<PAGE> 20
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schedules, exhibits, annexes, appendices and other attachments thereto),
including the applicable Secured Instruments, relating to such Indebtedness to
which the Borrower or any Subsidiary Loan Party is a party, and (b) delivering
to the Collateral Agent a certificate of a Financial Officer and, if requested
by a Representative or an Unrepresented Holder, an opinion of counsel, each to
the effect that such designation of such Indebtedness is not in contravention of
any Secured Instrument. Upon completion of the actions described in clauses (a)
and (b) of the preceding sentence, but subject to the following sentence, the
Indebtedness designated by such Permitted Additional Obligations Designation
shall constitute Permitted Additional Obligations and the Holders thereof shall
constitute Secured Parties hereunder and shall be bound by the provisions
hereof. Notwithstanding anything herein to the contrary, any purported
designation of any such Indebtedness of the Borrower as Permitted Additional
Obligations in violation of any Secured Instrument shall be null and void and of
no force or effect.
SECTION 2.02. Additional Security Documents. If the Borrower or any
Subsidiary Loan Party is required by any Secured Instrument, Security Document
or other agreement to grant a security interest in or Lien on, or assignment of,
any assets (other than assets constituting Collateral under the Initial Security
Documents) of the Borrower or any Subsidiary Loan Party to secure any
Obligations, the Borrower shall, or shall cause the applicable Subsidiary Loan
Party or Subsidiary Loan Parties to, grant such security interest in or Lien on,
or assignment of, such assets to the Collateral Agent to secure all the
Obligations pursuant to an Additional Security Document.
ARTICLE III
Acts of Secured Parties;
Amounts of Obligations
SECTION 3.01. Acts of Secured Parties. Any request, demand,
authorization, direction, notice, consent, waiver or other action permitted or
required by this
<PAGE> 21
21
Agreement to be given or taken by any Secured Party or the Required Secured
Parties or Required Committed Secured Parties may be and, at the request of the
Collateral Agent, shall be embodied in and evidenced by one or more instruments
reasonably satisfactory in form to the Collateral Agent and signed by such
Secured Party or its Representative or the Required Secured Parties or Required
Committed Secured Parties or their Representatives (as applicable) and, except
as otherwise expressly provided in any such instrument, any such action shall
become effective when such instrument or instruments shall have been delivered
to the Collateral Agent. The instrument or instruments evidencing any action
(and the action embodied therein and evidenced thereby) are sometimes referred
to herein as an "Act" of the Persons signing such instrument or instruments. The
Collateral Agent shall be entitled to rely absolutely upon (a) an Act of any
Representative if such Act purports to be taken by or on behalf of the Secured
Parties represented by such Representative and (b) an Act of any Holder if such
Act purports to be taken by or on behalf of such Holder, and nothing in this
Section 3.01 or elsewhere in this Agreement shall be construed to require any
Representative or Holder to demonstrate that it has been authorized to take any
action which it purports to be taking, the Collateral Agent being entitled to
rely conclusively, and being fully protected in so relying, on any Act of such
Representative or Holder.
SECTION 3.02. Determination of Amounts of Obligations. Whenever the
Collateral Agent is required to determine the existence or amount of any of the
Obligations or Secured Instrument Commitments or any portion thereof for any
purposes of this Agreement, it shall be entitled to make such determination on
the basis of one or more certificates of any applicable Representative or
Holder; provided that if, notwithstanding the request of the Collateral Agent,
any applicable Representative or Holder shall fail or refuse promptly to certify
as to the existence or amount of any Obligations or Secured Instrument
Commitments or any portion thereof, the Collateral Agent shall be entitled to
determine
<PAGE> 22
22
such existence or amount by such method as the Collateral Agent may, in its sole
discretion exercised in good faith, determine, including by reliance upon a
certificate of the Borrower; provided further that, promptly following deter-
mination of any such amount, the Collateral Agent shall notify such
Representative or Holder of such determination and thereafter shall correct any
error that such Representative or Holder brings to the attention of the
Collateral Agent. The Collateral Agent may rely conclusively, and shall be
fully protected in so relying, on any determination made by it in accordance
with the provisions of the preceding sentence (or as otherwise directed by a
court of competent jurisdiction) and shall have no liability to the Borrower or
any Secured Party or any other Person as a result of any action taken by the
Collateral Agent based upon such determination prior to receipt of notice of any
error in such determination.
SECTION 3.03. Restrictions on Actions. Each Secured Party agrees that,
unless and until this Agreement is terminated as provided herein, the provisions
of this Agreement shall provide the exclusive method by which any Secured Party
may exercise, or direct the exercise of, rights and remedies under the Support
Documents. Therefore, each Secured Party shall, for the mutual benefit of all
Secured Parties, except as permitted under this Agreement:
(a) refrain from taking or filing any action, judicial or
otherwise, to enforce any rights or pursue any remedies under the
Support Documents, except for delivering notices hereunder; and
(b) refrain from exercising any rights or remedies under the
Support Documents which may be exercisable as a result of an event that
could result in a Notice of Enforcement;
provided that the foregoing shall not prevent (i) any Secured Party from
imposing a default rate of interest in accordance with the applicable Secured
Instrument, (ii) the Collateral Agent from exercising any right or remedy or
taking any other action that it is permitted or authorized to exercise or take
or (iii) a Secured Party from exercising
<PAGE> 23
23
its rights and remedies as a general creditor in accordance with the applicable
Secured Instrument and applicable law, including the right to commence legal
proceedings to collect any Obligation due and payable to such Secured Party and
remaining unpaid, to accelerate the maturity of any Obligations or to terminate
any Secured Instrument Commitment in accordance with the applicable Secured
Instrument, to commence legal proceedings to enforce any Secured Instrument and
obtain a judgment and to enforce such judgment, in each case to the same extent
as if such Secured Party were an unsecured creditor.
ARTICLE IV
Duties of Collateral Agent
SECTION 4.01. Notice to Secured Parties. The Collateral Agent shall
promptly notify each Representative and Unrepresented Holder in the event it
shall receive any Notice of Enforcement or any Notice of Cancelation of
Enforcement or any request by any party hereto or by any Loan Party for any
consent, waiver or amendment with respect hereto or any other Support Document.
SECTION 4.02. Actions Under Support Documents. The Collateral Agent
shall not be obligated to take any action under this Agreement or any of the
Support Documents except for the performance of such duties as are specifically
set forth herein or therein. Subject to the provisions of Article VII, the
Collateral Agent shall take any action under or with respect to the Support
Documents which is requested by the Required Committed Secured Parties (or, at
any time when a Notice of Enforcement is in effect, the Required Secured
Parties) and which is not inconsistent with or contrary to the provisions of
this Agreement or any other Support Document. At any time when a Notice of
Enforcement shall be in effect, the Collateral Agent shall, subject in all cases
to the provisions of Article VII, exercise or refrain from exercising all such
rights, powers
<PAGE> 24
24
and remedies as shall be available to it under the Support Documents or any of
them in accordance with any written instructions received from the Required
Secured Parties. Absent written instructions from the Required Secured Parties
at a time when a Notice of Enforcement shall be in effect, the Collateral Agent
may take, but shall have no obligation to take, any and all such actions under
the Support Documents or any of them or otherwise as it shall deem to be in the
best interests of the Secured Parties in order to maintain the Collateral and
protect and preserve the Collateral and the rights of the Secured Parties.
SECTION 4.03. Records. The Collateral Agent shall maintain records
regarding determinations of the amounts of the outstanding Obligations and
Secured Instrument Commitments for any purpose, any distributions from the
Collateral Accounts and any information received by the Collateral Agent
pursuant to Section 6.02. The information contained in such records shall be
made available to any Secured Party upon request.
ARTICLE V
Collateral Accounts; Distributions
SECTION 5.01. The Collateral Accounts. (a) The Collateral Agent shall
establish and maintain at its office located at [ ] three collateral accounts
designated the "Enforcement Collateral Account", the "Subordination Collateral
Account" and the "General Collateral Account", respectively (such collateral
accounts, collectively, the "Collateral Accounts").
(b) All amounts which are received by the Collateral Agent (in its
capacity as Collateral Agent) in respect of the Collateral, whether in
connection with the exercise of any right or remedy provided in this Agreement
or any other Support Document or otherwise (including all amounts received on
account of any sale of or other
<PAGE> 25
25
realization upon any of the Collateral pursuant to any Security Document), or
pursuant to enforcement of the Guarantee Agreement, in each case while a Notice
of Enforcement is in effect shall be deposited in the Enforcement Collateral
Account. While a Notice of Enforcement is in effect, all amounts on deposit in
or required to be deposited in the Subordination Collateral Account or the
General Collateral Account shall be transferred to the Enforcement Collateral
Account. Upon the rescission of each effective Notice of Enforcement in
accordance with the terms hereof, the Collateral Agent shall (subject to the
payment of any Obligations then due in accordance with Section 5.02) release any
funds then remaining on deposit in the Enforcement Collateral Account to any
Loan Party to the extent required by any of the Security Documents; provided
that such funds in an amount equal to the sum of (x) the amount of General Funds
transferred to the Enforcement Collateral Account from the General Collateral
Account pursuant to paragraph (d) of this Section and (y) the amount of funds
that would have been deposited in the General Collateral Account pursuant to
paragraph (d) of this Section if a Notice of Enforcement had not been in effect,
together with all interest and income on such amounts, shall be deposited in the
General Collateral Account for application in accordance with the terms of
paragraph (d) of this Section.
(c) All amounts which are received by the Collateral Agent (in its
capacity as Collateral Agent) pursuant to terms of the Subordination Agreement
shall be deposited in the Subordination Collateral Account. While a Notice of
Enforcement is in effect, all amounts on deposit in or required to be deposited
in the Subordination Collateral Account shall be transferred to the Enforcement
Collateral Account.
(d) All amounts which are received by the Collateral Agent (in its
capacity as Collateral Agent) which by the terms of any Support Document or any
Secured Instrument are required to be held by the Collateral Agent (other than
amounts required to be deposited in the Enforcement Collateral Account or the
Subordination Collateral Account) shall be deposited in the General
<PAGE> 26
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Collateral Account. While a Notice of Enforcement is in effect, all amounts on
deposit in or required to be deposited in the General Collateral Account shall
be transferred to the Enforcement Collateral Account. The Borrower may, by
delivery to the Collateral Agent of a General Funds Release Request, request a
release of General Funds from the General Collateral Account in accordance with
the applicable provisions of the Support Document or Secured Instrument or
Secured Instruments which required such funds to be deposited with the
Collateral Agent (but only to the extent any funds in the General Collateral
Account were deposited in the General Collateral Account pursuant to such
agreements). If no Notice of Enforcement is in effect on the date on which such
General Funds are requested to be released pursuant to the applicable General
Funds Release Request, the Collateral Agent shall release such General Funds in
accordance with such General Funds Release Request. Pending the receipt by the
Collateral Agent of a General Funds Release Request with respect to any General
Funds or a transfer of such General Funds to the Enforcement Collateral Account
as provided above, the Collateral Agent shall invest such funds in Permitted
Investments (and the proceeds thereof and interest thereon shall constitute part
of such General Funds).
(e) All amounts deposited in the Collateral Accounts shall be held by
the Collateral Agent subject to the terms hereof and of the Support Documents
and shall constitute Collateral under the Security Agreement. No Loan Party
shall have any rights with respect to, and the Collateral Agent shall have
exclusive dominion and control over, the Collateral Accounts.
SECTION 5.02. Application of Proceeds. Subject to Section 5.05, all
amounts deposited in the Enforcement Collateral Account shall be applied in the
following order of priority:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent (in its capacity as such
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hereunder or any other Support Document) in connection with any Support Document
or any of the Obligations, including all court costs and the fees and expenses
of its agents and legal counsel, the repayment of all advances made by the
Collateral Agent under any Support Document on behalf of any Loan Party and any
other costs and expenses incurred in connection with the exercise of any right
or remedy hereunder or under any other Support Document;
SECOND, to the Secured Parties pro rata in accordance with the aggregate
amounts of the Obligations outstanding on the date of any such distribution
(whether or not due and payable); and
THIRD, the balance, if any, to the Borrower or its successors and
assigns, or such other Person or Persons as shall be entitled thereto, or as a
court of competent jurisdiction may otherwise direct.
SECTION 5.03. Time of Payments. Subject to any written instructions
received by the Collateral Agent from the Required Secured Parties as to the
times at which any amounts are to be distributed pursuant to Section 5.02, all
distributions under Section 5.02 shall be made at such times as the Collateral
Agent shall, in its sole discretion, determine, subject to Section 5.04.
SECTION 5.04. Application of Amounts Not Distributable. If any
Representative or Unrepresented Holder shall inform the Collateral Agent in
writing that no provision is made under the relevant Secured Instrument for the
application of amounts which are to be distributed in respect of Obligations
under such Secured Instrument pursuant to Section 5.02 (whether by virtue of the
applicable Obligations thereunder not being then due and payable or otherwise)
or for the holding of such amounts by or on behalf of such parties pending
application thereof, then the Collateral Agent shall invest such amounts in
Permitted Investments and shall hold such amounts and all proceeds thereof in
the Enforcement Collateral Account, solely for the Secured Parties represented
by such Representative or such Unrepresented Holder, as the case may be, until
such Representative or Unrepresented Holder shall
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notify the Collateral Agent that such Obligations have been paid (in which case
such amounts and all proceeds thereof shall be applied in accordance with the
provisions of Section 5.02) or shall request the delivery thereof by the
Collateral Agent for application pursuant to such Secured Instrument.
SECTION 5.05. Treatment of Contingent Obligations. Notwithstanding the
foregoing, distributions under clause SECOND of Section 5.02 shall be made
disregarding any Contingent Obligations. If any Contingent Obligations exist at
any time that any amounts are to be distributed to the Borrower under clause
THIRD of Section 5.02, the Collateral Agent shall deposit such amounts up to an
amount equal to such Contingent Obligations in a collateral account established
and maintained at its office located at [ ] (designated the "Contingent
Obligations Collateral Account") for the benefit of the Secured Parties that
have a claim with respect to such Contingent Obligations. The Collateral Agent
shall invest such amounts in Permitted Investments until the Representative of
such Secured Parties or the applicable Unrepresented Holder, as the case may be,
shall notify the Collateral Agent that any or all of the Contingent Obligations
with respect to the Secured Parties represented by such Representative or such
Unrepresented Holder, as the case may be, have become fixed or liquidated (in
which case such amounts up to the amount in the Contingent Obligations
Collateral Account shall be delivered to such Representative or Unrepresented
Holder, as the case may be, to be applied pursuant to the applicable Secured
Instrument) or that such Contingent Obligations have expired or cease to exist
(in which case an amount in the Contingent Obligations Collateral Account in
excess of the Contingent Obligations outstanding at such time shall be applied
in accordance with the provisions of Section 5.02).
SECTION 5.06. Collateral Agent's Calculations. In making the
determinations and allocations required by Section 5.02, the Collateral Agent
may rely upon
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certificates as provided in Section 3.02, as to the amounts payable with respect
to Obligations. If any Secured Party receives any amount pursuant to Section
5.02 in excess of the amount it was entitled to receive pursuant to Section 5.02
as a result of a demonstrable error in the determination of the amount of the
Obligations, then such Secured Party (by becoming a Holder of Obligations and
accepting the benefits of this Agreement) agrees to pay such excess to the
Collateral Agent for application in accordance with Section 5.02 as soon as
practicable after the existence of such error shall have been determined. All
distributions made by the Collateral Agent pursuant to Section 5.02 shall be
(subject to the preceding sentence and to any decree of any court of competent
jurisdiction and to the preceding sentence) final, and the Collateral Agent
shall have no duty to inquire as to the application by any Representative or
Unrepresented Holder of any amounts distributed to them.
ARTICLE VI
Agreements
SECTION 6.01. Delivery of Agreements. The Borrower shall deliver to the
Collateral Agent, promptly upon the execution thereof, true and complete copies
of (a) all amendments, supplements or other modifications to any Secured
Instrument and (b) each Additional Security Document.
SECTION 6.02. Information. On a quarterly basis promptly following the
end of each calendar quarter, and from time to time upon the request of the
Collateral Agent (which request may be made by the Collateral Agent at the
reasonable direction of any Secured Party), the Borrower shall promptly deliver
to the Collateral Agent a list, setting forth as of a specified date not more
than 10 days prior to the date of delivery, of the aggregate outstanding
Obligations and Secured Instrument Commitments and the name and address of each
Secured Party (and the name and address of such Secured Party's Representative,
if any) and the respective amounts of Obligations and Secured Instrument
Commitments attributable to each. The Collateral Agent
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shall provide a copy of the most recent list delivered to it under this Section
to any Secured Party upon request.
ARTICLE VII
The Collateral Agent
SECTION 7.01. Appointment; Rights and Duties. (a) Each of the Secured
Parties hereby irrevocably appoints the Collateral Agent as its agent and
authorizes the Collateral Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Collateral Agent by the terms of
the Support Documents, together with such actions and powers as are reasonably
incidental thereto.
(b) Any Person serving as the Collateral Agent hereunder shall have the
same rights and powers in its capacity as a Secured Party as any other Secured
Party and may exercise the same as though it were not the Collateral Agent, and
such Person and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Collateral Agent hereunder.
(c) The Collateral Agent shall not have any duties or obligations except
those expressly set forth in the Support Documents. Without limiting the
generality of the foregoing, (i) the Collateral Agent shall not be subject to
any fiduciary or other implied duties, regardless of whether a Notice of
Enforcement is in effect, (ii) the Collateral Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Support Documents
that the Collateral Agent is required to exercise in writing by the Required
Secured Parties, and (iii) except as expressly set forth in the Support
Documents, the Collateral Agent shall not have
<PAGE> 31
31
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Parent, the Borrower or the Subsidiary Loan Parties
that is communicated to or obtained by the Person serving as the Collateral
Agent or any of its Affiliates in any capacity. The Collateral Agent shall not
be liable for any action taken or not taken by it with the consent or at the
request of the Secured Parties (or the requisite portion thereof as required by
any applicable provision of this Agreement) or in the absence of its own gross
negligence or wilful mis conduct. The Collateral Agent shall be deemed not to
have knowledge of any event that could result in a Notice of Enforcement unless
and until a Notice of Enforcement is given to the Collateral Agent, and the
Collateral Agent shall not be responsible for or have any duty to ascertain or
inquire into (A) any statement, warranty or representation made in or in
connection with any Support Document or Secured Instrument, (B) the contents of
any certificate, report or other document delivered thereunder or in connection
therewith, (C) the performance or observance of any of the covenants, agreements
or other terms or conditions set forth in any Support Document or Secured
Instrument, (D) the validity, enforceability, effectiveness or genuineness of
any Support Document or Secured Instrument or any other agreement, instrument or
document, or (E) the satisfaction of any condition set forth in any Support
Document or Secured Instrument, other than to confirm receipt of items expressly
required to be delivered to the Collateral Agent.
(d) The Collateral Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Collateral Agent also
may rely upon any statement made to it orally or by telephone and believed by it
to be made by the proper Person, and shall not incur any liability for relying
thereon. The Collateral Agent may consult with legal counsel (who may be counsel
for the
<PAGE> 32
32
Parent or the Borrower), independent accountants and other experts selected by
it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.
(e) The Collateral Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the
Collateral Agent. The Collateral Agent and any such sub-agent may perform any
and all its duties and exercise its rights and powers through their respective
Related Parties. The exculpatory provisions of the preceding paragraphs shall
apply to any such sub-agent and to the Related Parties of the Collateral Agent
and any such sub-agent, and shall apply to their respective activities in
connection with the activities as Collateral Agent.
(f) Subject to the appointment and acceptance of a successor Collateral
Agent as provided in this paragraph, the Collateral Agent may resign at any time
by notifying each Secured Party and the Borrower. Upon any such resignation, the
Required Committed Secured Parties (or, at any time when a Notice of Enforcement
is in effect, the Required Secured Parties) shall have the right to appoint a
successor. If no successor shall have been so appointed by the Required
Committed Secured Parties (or, if applicable, the Required Secured Parties) and
shall have accepted such appointment within 30 days after the retiring
Collateral Agent gives notice of its resignation, then the retiring Collateral
Agent may, on behalf of the Secured Parties, appoint a successor Collateral
Agent which shall be a bank with an office in New York, New York or an Affiliate
of any such bank. Upon the acceptance of its appointment as Collateral Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Collateral Agent,
and the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Collateral Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrower and such successor. After the Collateral
Agent's resignation hereunder, the provisions of this Article shall continue in
effect for the benefit of
<PAGE> 33
33
such retiring Collateral Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Collateral Agent.
(g) Each Secured Party acknowledges that it has, independently and
without reliance upon the Collateral Agent or any other Secured Party and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to extend credit to the Borrower pursuant to the
applicable Secured Instrument and enter into this Agreement. Each Secured Party
also acknowledges that it will, independently and without reliance upon the
Collateral Agent or any other Secured Party and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Support Document or related agreement or any document furnished
hereunder or thereunder.
SECTION 7.02. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall
pay (i) all costs and expenses incurred by the Collateral Agent, including the
fees, charges and disbursements of counsel for the Collateral Agent, in
connection with the negotiation, preparation, execution and delivery of the
Support Documents, and (ii) all costs and expenses incurred by the Collateral
Agent, including the fees, charges and disbursements of any counsel, consultants
or appraisers for the Collateral Agent, in connection with (A) the enforcement
or protection of its rights in connection with the Support Documents, including
its rights under this Section and (B) the administration of, and any amendments,
modifications, waivers or supplements of or to the provisions of, any of the
Support Documents.
(b) The Borrower shall indemnify the Collateral Agent and each of its
Related Parties (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims,
<PAGE> 34
34
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Support Document or Secured Instrument or any other
agreement or instrument contemplated hereby, or the performance by the parties
to the Support Documents or Secured Instruments of their respective obligations
thereunder, (ii) any extension of credit under any Secured Instrument or the use
of the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower or
any of the Subsidiary Loan Parties or at which any Collateral is located, or any
Environmental Liability related in any way to the Borrower or any of the
Subsidiary Loan Parties, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses have resulted from the gross negligence or wilful misconduct of
such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby.
(d) All amounts due under this Section shall be payable not later than
30 days after written demand therefor.
ARTICLE VIII
Representations and Warranties
The Borrower represents and warrants to the
<PAGE> 35
35
Secured Parties that:
SECTION 8.01. Organization; Powers. Each Loan Party is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a material adverse
effect of the Borrower and the Subsidiary Loan Parties taken as a whole, is
qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required.
SECTION 8.02. Authorization; Enforceability. The execution delivery and
performance by each Loan Party of the Support Documents to which it is a party
are within such Loan Party's corporate powers and have been duly authorized by
all necessary company or corporate, as the case may be, and, if required,
stockholder action. This Agreement and each other Support Document has been duly
executed and delivered by each Loan Party that is a party thereto and
constitutes a legal, valid and binding obligation of such Loan Party (as the
case may be), enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
SECTION 8.03. Governmental Approvals; No Conflicts. The execution,
delivery and performance by each Loan Party of the Support Documents to which it
is a party (a) do not require any consent or approval of, registration or filing
with, or any other action by, any Governmental Authority, except such as have
been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Security Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Loan Party
<PAGE> 36
36
or any order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument binding upon any Loan
Party or its assets, or give rise to a right thereunder to require any payment
to be made by any Loan Party, and (d) will not result in the creation or
imposition of any Lien on any asset of any Loan Party, except Liens created
under the Security Documents.
ARTICLE IX
Intercreditor Arrangements
SECTION 9.01. Security Interests. The Collateral Agent and each of the
Secured Parties hereby agree that the Liens and security interests granted to
the Collateral Agent under the Security Documents, and the Guarantees provided
under the Guarantee Agreement, shall be treated, as among the Secured Parties,
as having equal priority and shall at all times be shared by the Secured Parties
as provided herein.
SECTION 9.02. Turnover of Collateral and Certain Payments. If any
Secured Party (i) acquires custody, control or possession of any Collateral or
proceeds therefrom or (ii) receives any payment pursuant to enforcement of the
Guarantee Agreement, in each case other than pursuant to the terms of this
Agreement, then such Secured Party shall promptly cause such Collateral,
proceeds or payments to be delivered to or put in the custody, possession or
control of the Collateral Agent for disposition or distribution in accordance
with the provisions of Article V. Until such time as the provisions of the
immediately preceding sentence have been complied with, such Secured Party shall
be deemed to hold such Collateral, proceeds or payments in trust for the parties
entitled thereto hereunder. Notwithstanding the foregoing, no Secured Party
shall be required to deliver to or put in the custody, possession or control of
the Collateral Agent
<PAGE> 37
37
or to hold in trust as specified in the preceding sentence any amount of any
Obligation paid or prepaid by the Borrower to it (and not obtained by it through
any sale of or other realization upon any Collateral or by enforcement of its
rights under the Guarantee Agreement as provided herein and in the Support
Documents) in accordance with the terms of the applicable Secured Instrument.
SECTION 9.03. Release of Collateral and Guarantees. (a) In connection
with any sale, transfer or disposition of any Collateral to any Person other
than the Borrower or any Subsidiary Loan Party that does not violate any Secured
Instrument, the Secured Parties agree that any Liens on such Collateral created
pursuant to the Security Documents will be released upon the delivery of
evidence satisfactory to the Collateral Agent that such sale, transfer or
disposition (and the release of such Liens and, if applicable, any guarantee of
the Obligations) is in compliance with the requirements of each Secured
Instrument (including a certificate from a Financial Officer to such effect). In
the event any such sale, transfer or disposition to a Person other than the
Parent or any subsidiary thereof (including the Borrower or any Subsidiary Loan
Party) shall be of 100% of the Equity Interests of a Subsidiary Loan Party, the
Secured Parties hereby authorize the Collateral Agent upon the delivery of such
evidence to release such Subsidiary and its assets from its obligations under
and the Liens created by the Support Documents and to execute amendments,
releases and other documents in form and substance satisfactory to the
Collateral Agent confirming such release.
(b) Collateral may be released in connection with the exercise of any
rights, powers or remedies by the Collateral Agent pursuant to and in accordance
with Section 4.02 and such release shall not require any approval under this
Section.
(c) The Secured Parties hereby authorize the Collateral Agent to execute
releases and other documents in form and substance satisfactory to the
Collateral Agent in respect of any release of Collateral permitted under this
Section.
<PAGE> 38
38
SECTION 9.04. Additional Collateral. Each of the Secured Parties hereby
covenants and agrees that it (a) will not accept any Guarantee of any of the
Obligations by any Person unless such Person's Guarantee is provided pursuant to
the Guarantee Agreement or otherwise Guarantees the payment of all the
Obligations on a pari passu basis and (b) will not take any security interest in
or Lien on or assignment of any assets to secure any of the Obligations unless
such security interest or Lien or assignment is granted to the Collateral Agent
to secure the payment of all the Obligations on a pari passu basis pursuant to
an Additional Security Document; provided that the foregoing shall not apply to
any insurance or other credit support acquired by a Secured Party at its own
expense from a Person (other than any Loan Party or an Affiliate thereof) with
respect to the Obligations.
SECTION 9.05. Purchase of Collateral. Any Secured Party may purchase
Collateral at any public sale of such Collateral pursuant to any of the Security
Documents and to the extent, but only to the extent, approved by the Required
Secured Parties (determined for this purpose without giving effect to the
Obligations owed to the Secured Party that is making such purchase, unless it is
the only Holder at the time) may make payment on account thereof by using any
Obligation then due and payable to such Secured Party from the Person which
granted a security interest in such Collateral as a credit against the purchase
price.
SECTION 9.06. Further Assurances, etc. Each party hereto shall execute
and deliver such other documents and instruments, in form and substance
reasonably satisfactory to the other parties hereto, and shall take such other
action, in each case as any other party hereto may reasonably have requested (at
the cost and expense of the Borrower which agrees to pay such costs and
expenses), to effectuate and carry out the provisions of this Agreement and the
other Support Documents, including by recording or filing in such places as the
requesting party may deem
<PAGE> 39
39
desirable, this Agreement or such other documents or instruments.
ARTICLE X
Benefit of Agreement
This Agreement is being executed and delivered by the Persons whose
names appear on the signature pages below and by such other Persons as become
parties hereto by the execution and delivery of a Permitted Additional
Obligations Designation pursuant to Section 2.01, but shall benefit, in addition
to such Persons, each other Secured Party represented by a Representative
(including the Lenders). Notwithstanding the foregoing, it is expressly
understood that the entitlement of each such other Secured Party to the benefits
of this Agreement and of the Support Documents is subject to the terms and
conditions of this Agreement and is expressly conditioned on the observance by
such Secured Party of such terms and conditions. Without limiting the foregoing,
the Collateral Agent may (but shall not be required to), as a condition to
making any distribution hereunder to which any such Secured Party would be
entitled, require that such Secured Party execute and deliver to the Collateral
Agent an acknowledgment of and consent to all the provisions of this Agreement
(specifically including the provisions of Section 5.06); provided that the
failure to request or obtain any such acknowledgment or consent shall not affect
any of the obligations of such Secured Party hereunder.
ARTICLE XI
Miscellaneous
SECTION 11.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as
<PAGE> 40
40
follows:
(a) if to the Borrower, to it at 10307 Pacific Center Court, San
Diego, California 92121, Attention of President (Telecopy No. (619)
882-6010);
(b) if to the Collateral Agent, to it at [ ], Attention of [ ]
(Telecopy No. [ ]);
(c) if to the Administrative Agent, to it at 283 King George
Road, Warren, New Jersey 07059, Attention of Assistant Treasurer-Project
Finance (Telecopy No. (908) 559-1711); and
(d) if to any other Secured Party, to it at its address (or
telecopy number) set forth in the applicable Permitted Additional
Obligation Designation.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 11.02. Waivers; Amendments. (a) No failure or delay by the
Collateral Agent in exercising any right or power hereunder or under any other
Support Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Collateral Agent hereunder and under the other Support
Documents are cumulative and are not exclusive of any rights or remedies that it
would otherwise have. No waiver of any provision of any Support Document or
consent to any departure by any Loan Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or
<PAGE> 41
41
consent shall be effective only in the specific instance and for the purpose for
which given.
(b) Neither this Agreement nor any other Support Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Representatives and/or Unrepresented
Holders representing the Required Committed Secured Parties (or, at any time
when a Notice of Enforcement is in effect, the Required Secured Parties) or, in
the case of any other Support Document, pursuant to an agreement or agreements
in writing entered into by the Collateral Agent and the Loan Party or Loan
Parties that are parties thereto with the consent of the Required Committed
Secured Parties (or, at any time when a Notice of Enforcement is in effect, the
Required Secured Parties); provided that no such agreement shall (i) adversely
affect any of the Collateral Agent's rights, immunities or rights to
indemnification hereunder or under any Support Document or expand its duties
hereunder or under any Support Document, without the prior written consent of
the Collateral Agent, (ii) modify any provision hereof which is intended to
provide for the equal and ratable security of all Obligations without the prior
written consent of all Secured Parties, (iii) release all or any substantial
part of the Collateral from the Liens of the Security Documents (except as
expressly provided in Section 9.03), without the prior written consent of each
Secured Party, (iv) release any Subsidiary Loan Party from its Guarantee under
the Guarantee Agreement (except as expressly provided in Section 9.03) or limit
or condition its obligations thereunder, without the prior written consent of
each Secured Party, or (v) change the definitions of "Credit Facility
Obligations", "Obligations", "Permitted Additional Obligations", "Required
Secured Parties", "Required Committed Secured Parties" or this Section or
Section 9.03 without the prior written consent of each Secured Party.
Notwithstanding the foregoing, the Collateral Agent and the Borrower and, in the
case of the Guarantee Agreement, any
<PAGE> 42
42
guarantor party to the Guarantee Agreement, may enter into one or more
agreements supplemental to the applicable Support Documents, in form and
substance satisfactory to the Collateral Agent, to add any guarantor of the
Obligations or any grantor to any Security Document.
SECTION 11.03. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 11.04. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 11.05. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Support Document, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that
<PAGE> 43
43
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Support Document shall
affect any right that the Collateral Agent or any Secured Party may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Support Document against the Borrower or their properties in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Support Document in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 11.01. Nothing in this
Agreement or any other Support Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
SECTION 11.06. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER SUPPORT DOCUMENT (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
<PAGE> 44
44
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 11.07. Headings. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
SECTION 11.08. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party (including, in the case of any
Secured Party, each transferee or assignee of Obligations held by it).
(b) The Borrower shall not assign or delegate any of its rights or
duties hereunder or any of its interest herein without the prior written consent
of each Secured Party, and any purported assignment or delegation in
contravention of this paragraph shall be void.
SECTION 11.09. Termination. This Agreement shall automatically terminate
when (i) the Liens and security interests granted under the Security Documents
have terminated and (ii) the Collateral has been released and the Obligations
have been indefeasibly paid and performed in full and all Secured Instrument
Commitments shall have terminated; provided that the provisions of Section 7.02
shall not be affected by any such termination.
SECTION 11.10. Complete Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior representations, negotiations, writings, memoranda and
agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
<PAGE> 45
45
CRICKET WIRELESS
COMMUNICATIONS, INC.,
by
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
by
Name:
Title:
LUCENT TECHNOLOGIES INC., as
Administrative Agent,
by
Name:
Title:
EXHIBIT A
FORM OF
PERMITTED ADDITIONAL OBLIGATIONS DESIGNATION
[Date]
To: [_________], as Collateral Agent
Re: Collateral Agency and Intercreditor Agreement, dated as of September 17,
1999, among CRICKET WIRELESS COMMUNICATIONS, INC., STATE STREET BANK AND
TRUST
<PAGE> 46
46
COMPANY, as Collateral Agent, and the Representatives and Unrepresented
Holders referred to therein (the "Collateral Agency and Intercreditor
Agreement").
Reference is hereby made to the Collateral Agency and Intercreditor
Agreement. Capitalized terms which are defined in the Collateral Agency and
Intercreditor Agreement are used herein as therein defined.
In accordance with Section 2.1 of the Collateral Agency and
Intercreditor Agreement, the following Indebtedness for borrowed money of the
Borrower are hereby added as Permitted Additional Obligations thereunder.
[DESCRIBE INDEBTEDNESS]
Attached hereto is a true and complete copy of each agreement (together with all
schedules, exhibits, annexes, appendices and other attachments thereto),
constituting the applicable Secured Instruments relating to such Permitted
Additional Obligations.
The undersigned is [the Secured Party] [the Representative of the
Secured Parties] in respect of such Permitted Additional Obligations and hereby
acknowledges receipt of a copy of the Collateral Agency and Intercreditor
Agreement. [The undersigned agrees that, upon execution and delivery hereof, it
shall be a party to the Collateral Agency and Intercreditor Agent and shall have
all the rights and obligations of a Secured Party under the Collateral Agency
and Intercreditor Agreement in accordance with the terms thereof.] [The
undersigned represents that it has been appointed as the Representative under
the Secured Instruments referred to above on behalf of the Holders thereunder,
with the power to become a party to the Collateral Agency and Intercreditor
Agreement on behalf of such Holders, and by the undersigned's execution and
delivery hereof, each such Holder shall become a party to the Collateral Agency
and Intercreditor Agreement and shall
<PAGE> 47
47
have all the rights and obligations of a Secured Party under the Collateral
Agency and Intercreditor Agreement in accordance with the terms thereof].
All communications and notices under the Collateral Agency and
Intercreditor Agreement to the [Secured Party] [Representative and the Holders
under the Secured Instruments referred to above] shall be given to such Person
at the address set forth on Schedule I hereto.
[_____________]
by
Name:
Title:
[Secured Party] [Representative]
by
Name:
Title:
CRICKET WIRELESS COMMUNICATIONS, INC.,
by
Name:
Title:
<PAGE> 48
48
SCHEDULE I
ADDRESS[ES] OF
[SECURED PARTY] [REPRESENTATIVE
AND SECURED PARTIES]
<PAGE> 1
EXHIBIT 10.26.3
EXHIBIT C
GUARANTEE AGREEMENT dated as of September 17, 1999,
among CRICKET COMMUNICATIONS, INC., a Delaware corporation
("Holdings"), each of the subsidiaries of Cricket Wireless
Communications, Inc., a Delaware corporation (the "Borrower")
listed on Schedule I hereto (each such subsidiary individually,
a "Subsidiary" and, collectively, the "Subsidiaries"), each of
the subsidiaries of Leap Wireless International, Inc., a
Delaware corporation (the "Parent") listed on Schedule I hereto
(each such subsidiary individually, a "License Subsidiary" and,
collectively, the "License Subsidiaries"; and Holdings, each
Subsidiary and License Subsidiary, individually, a "Guarantor"
and, collectively, the "Guarantors") and STATE STREET BANK AND
TRUST COMPANY, as collateral agent (in such capacity, the
"Collateral Agent"), for the Secured Parties.
Reference is made to the Collateral Agency and Intercreditor Agreement
dated as of September 17, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Collateral Agency and Intercreditor Agreement") among
the Borrower, the Representatives and Unrepresented Holders referred to therein
and the Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. Each Guarantor acknowledges receipt of a true and
correct copy of the Collateral Agency and Intercreditor Agreement and agrees to
the terms thereof.
The Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
Each of the Guarantors is a direct or indirect subsidiary of the Borrower or the
Parent and acknowledges that it will derive substantial benefit from the making
of the Loans by the Lenders. The obligations of the Lenders to make Loans are
conditioned on, among other things, the execution and delivery by the Guarantors
of a Guarantee Agreement in the form hereof. As consideration therefor and in
order to induce the Lenders to make Loans, the Guarantors are willing to execute
this Agreement. The Borrower may from time to time incur Permitted Additional
Obligations that are required to be guaranteed pursuant to the terms hereof.
<PAGE> 2
2
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly
with the other Guarantors and severally, as a primary obligor and not merely as
a surety, the due and punctual payment of the Obligations, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise. Each Guarantor further agrees that the Obligations may be extended
or renewed, in whole or in part, without notice to or further assent from it,
and that it will remain bound upon its guarantee notwithstanding any extension
or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding,
the obligations of each Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the greatest amount that would not render such
Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b) under any Guarantee of senior unsecured indebtedness or Indebtedness
subordinated in right of payment to the Obligations which Guarantee contains a
limitation as to maximum amount similar to that set forth in this paragraph,
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
contribution, reimbursement, indemnity or similar rights of such Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an equitable
allocation among such Guarantor and other Affiliates of the Borrower of
obligations arising under Guarantees by such parties (including the Indemnity,
Subrogation and Contribution Agreement).
<PAGE> 3
3
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Collateral Agent or any other
Secured Party to assert any claim or demand or to enforce or exercise any right
or remedy against the Borrower or any other Guarantor under the provisions of
any Support Document or Secured Instrument or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of this Agreement, any other Support Document, any Secured
Instrument, any Guarantee or any other agreement, including with respect to any
other Guarantor under this Agreement or (c) the failure to perfect any security
interest in, or the release of, any of the security held by or on behalf of the
Collateral Agent or any other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent and each of the other Secured Parties, to (a) take and hold security for
the payment of this Guarantee and the Obligations and exchange, enforce, waive
and release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees or other guarantors or other
obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee hereunder constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Collateral Agent or any other Secured Party to any of the security held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Collateral Agent or any other Secured Party in favor of the
Borrower or any other Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible
<PAGE> 4
4
payment in full in cash of all the Obligations), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under any Support Document, any Secured Instrument or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or the failure to perfect any security interest in, or the release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party, or by any other act or omission that may or might in any
manner or to any extent vary the risk of any Guarantor or that would otherwise
operate as a discharge of each Guarantor as a matter of law or equity (other
than the indefeasible payment in full in cash of all the Obligations).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the final and indefeasible payment in full
in cash of all the Obligations. The Collateral Agent and the other Secured
Parties may, at their election, foreclose on any security held by one or more of
them by one or more judicial or nonjudicial sales, accept an assignment of any
such security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with the Borrower or any other
guarantor or exercise any other right or remedy available to them against the
Borrower or any other guarantor, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Obligations have
been fully, finally and
<PAGE> 5
5
indefeasibly paid in cash. To the fullest extent permitted by applicable law,
each of the Guarantors waives any defense arising out of any such election even
though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Guarantor against the Borrower or any other Guarantor or guarantor, as the
case may be, or any security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of the Borrower or any other Loan Party to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Collateral Agent
in cash the amount of such unpaid Obligations to be applied by the Collateral
Agent in the manner required by Article V of the Collateral Agency and
Intercreditor Agreement. Upon payment by any Guarantor of any sums to the
Collateral Agent, all rights of such Guarantor against the Borrower arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations as provided in the Subordination Agreement.
SECTION 8. Information. Each of the Guarantors assumes all
responsibility for being and keeping itself informed of the Borrower's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risks that
such Guarantor assumes and incurs hereunder, and agrees that none of the
Collateral Agent or the other Secured Parties will have any duty to advise any
of the Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of
<PAGE> 6
6
the Guarantors represents and warrants as to itself that all representations and
warranties relating to it contained in the Credit Agreement are true and
correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been indefeasibly paid in full and all
Secured Instrument Commitments shall have been terminated and (b) shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any Obligation is rescinded or must otherwise be restored
by any Secured Party or any Guarantor upon the bankruptcy or reorganization of
the Borrower, any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void). Subject to Section 9.03 of the
Collateral Agency and Intercreditor Agreement, if all of the Equity Interests of
a Guarantor are sold, transferred or otherwise disposed of (other than to the
Parent or an Affiliate thereof including the Borrower or any Subsidiary Loan
Party) pursuant to a transaction that does not violate any Secured Instrument,
such Guarantor shall be released from its obligations under this Agreement
without further action. This Agreement shall be construed as a separate
agreement with respect to each Guarantor and may be amended, modified,
supplemented, waived or released with respect to any Guarantor without the
approval of any
<PAGE> 7
7
other Guarantor and without affecting the obligations of any other Guarantor
hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent and the other Secured Parties under the other
Support Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by any Guarantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on any Guarantor in any case
shall entitle such Guarantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors with respect to which such waiver, amendment or modification
relates and the Collateral Agent, subject to any consents required in accordance
with Section 11.02 of the Collateral Agency and Intercreditor Agreement.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 11.01 of the Collateral Agency and
Intercreditor Agreement. All communications and notices hereunder to each
Guarantor shall be given to it in care of the Borrower at the address set forth
in the Credit Agreement.
<PAGE> 8
8
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Support Document shall be considered
to have been relied upon by the Collateral Agent and the other Secured Parties
and shall survive the extension of credit by any Secured Party pursuant to a
Secured Instrument regardless of any investigation made by any Secured Party or
on their behalf, and shall continue in full force and effect until this
Agreement shall terminate.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Support Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract, and shall become effective as
provided in Section 11. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Collateral Agency and Intercreditor Agreement
shall be applicable to this Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and
<PAGE> 9
9
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or any other Support Document, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement or any other
Support Document shall affect any right that the Collateral Agent or any other
Secured Party may otherwise have to bring any action or proceeding relating to
this Agreement or any other Support Document against any Guarantor or its
properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Support Document in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE
<PAGE> 10
10
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER SUPPORT DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER SUPPORT DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
SECTION 20. Additional Guarantors. Upon execution and delivery after the
date hereof by the Collateral Agent and a Subsidiary Loan Party of an instrument
in the form of Annex 1, such Subsidiary Loan Party shall become a Guarantor
hereunder with the same force and effect as if originally named as a Guarantor
herein. The execution and delivery of any instrument adding an additional
Guarantor as a party to this Agreement shall not require the consent of any
other Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement. This Agreement may be waived,
amended or modified with respect to any one or more Guarantors and any one or
more Guarantors may be released from its obligations hereunder without the
consent or agreement of any other Guarantor.
SECTION 21. Right of Setoff. While a Notice of Enforcement is in effect,
each Secured Party is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other Indebtedness at any time owing by such Secured Party to or for the credit
or the account of any Guarantor against any or all the obligations of such
Guarantor now or hereafter existing under this Agreement and the other Support
Documents held by such Secured Party, irrespective of whether or not such
Secured Party shall have made any demand under this Agreement or any other
Support Document and although such obligations may be unmatured. After any
exercise of such right of setoff, the
<PAGE> 11
11
Secured Party shall give notice of such exercise to the Collateral Agent and the
Borrower; provided, however, that failure to give such notice shall not in any
way affect the rights of any Secured Party. The rights of each Secured Party
under this Section 21 are in addition to other rights and remedies (including
other rights of setoff) which such Secured Party may have.
SECTION 22. Credit Agreement Covenants. Each Guarantor hereby covenants
and agrees to comply with all covenants contained in the Credit Agreement that
are applicable to such Guarantor.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
CRICKET COMMUNICATIONS, INC.,
By
-------------------------------------
Name:
Title:
EACH SUBSIDIARY LISTED ON
SCHEDULE I HERETO,
By
-------------------------------------
Name:
Title:
EACH LICENSE SUBSIDIARY LISTED
ON SCHEDULE I HERETO,
By
-------------------------------------
Name:
<PAGE> 12
12
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
-------------------------------------
Name:
Title:
<PAGE> 13
Schedule I to the
Guarantee Agreement
<TABLE>
<CAPTION>
Guarantor Address
--------- -------
<S> <C>
</TABLE>
<PAGE> 14
Annex 1 to the
Guarantee Agreement
SUPPLEMENT NO. [ ] dated as of , to the Guarantee Agreement dated as of
September 17, 1999, among CRICKET COMMUNICATIONS, INC., a Delaware corporation
("Holdings"), each of the subsidiaries of Cricket Wireless Communications, Inc.,
a Delaware corporation (the "Borrower") listed on Schedule I thereto (each such
subsidiary individually, a "Subsidiary" and, collectively, the "Subsidiaries"),
each of the subsidiaries of Leap Wireless International, Inc., a Delaware
corporation (the "Parent") listed on Schedule I thereto (each such subsidiary
individually, a "License Subsidiary" and, collectively, the "License
Subsidiaries"; and Holdings, each Subsidiary and License Subsidiary,
individually, a "Guarantor" and, collectively, the "Guarantors") and STATE
STREET BANK AND TRUST COMPANY, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties.
A. Reference is made to (a) the Collateral Agency and Intercreditor
Agreement (as defined in the Guarantee Agreement) and (b) the Guarantee
Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Secured Parties to make loans under the Secured Instruments. Section
20 of the Guarantee Agreement provides that additional Subsidiary Loan Parties
may become Guarantors under the Guarantee Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary Loan
Party (the "New Guarantor") is executing this Supplement to become a Guarantor
under the Guarantee Agreement in order to induce the Secured Parties to make
additional loans and as consideration for loans previously made under the
Secured Instruments.
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof
except for representations and warranties which by their terms refer to a
specific date. Each reference to a "Guarantor" in the Guarantee Agreement shall
be deemed to include the New Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
<PAGE> 15
15
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity
regardless of whether considered in a proceeding in equity or at law.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the
<PAGE> 16
16
Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year first
above written.
[NAME OF NEW GUARANTOR],
By
--------------------------------------
Name:
Title:
Address:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.26.4
EXHIBIT D
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated
as of September 17, 1999, among CRICKET WIRELESS COMMUNICATIONS,
INC., a Delaware corporation (the "Borrower"), each subsidiary
of the Borrower listed on Schedule I hereto (each a
"Subsidiary", and, collectively, the "Subsidiaries") each
subsidiary of Leap Wireless International, Inc., a Delaware
corporation (the "Parent") listed on Schedule I hereto (each a
"License Subsidiary", and, collectively, the "License
Subsidiaries"; each such Subsidiary and each such License
Subsidiary individually, a "Guarantor" and, collectively, the
"Guarantors") and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties.
Reference is made to (a) the Collateral Agency and Intercreditor
Agreement dated as of September 17, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Collateral Agency and Intercreditor Agreement")
among the Borrower, the Representatives and Unrepresented Holders referred to
therein and the Collateral Agent and (b) the Guarantee Agreement and the other
Support Documents. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. Each Guarantor acknowledges receipt of a true and
correct copy of the Collateral Agency and Intercreditor Agreement and agrees to
the terms thereof.
The Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
The Guarantors have guaranteed such Loans and the other Obligations pursuant to
the Guarantee Agreement; certain Guarantors have granted Liens on and security
interests in certain of their assets to secure the Obligations pursuant to the
Security Documents. The obligations of the Lenders to make Loans are conditioned
on, among other things, the execution and delivery by the Borrower, the
Guarantors and the Collateral Agent of an agreement in the form hereof.
<PAGE> 2
2
The Borrower may from time to time incur Permitted Additional Obligations that
are required to be guaranteed pursuant to the Guarantee Agreement and secured
under the Security Documents.
Accordingly, the Borrower, each Guarantor and the Collateral Agent agree
as follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), the Borrower agrees that (a) in the event a payment shall
be made by any Guarantor under the Guarantee Agreement, the Borrower shall
indemnify such Guarantor for the full amount of such payment and such Guarantor
shall be subrogated to the rights of the Person to whom such payment shall have
been made to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party, the Borrower shall indemnify such Guarantor in an amount
equal to the greater of the book value or the fair market value of the assets so
sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing
Guarantor") agrees (subject to Section 3) that, in the event a payment shall be
made by any other Guarantor under the Guarantee Agreement or assets of any other
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by the Borrower as provided in Section 1, the
Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal
to the amount of such payment or the greater of the book value or the fair
market value of such assets, as the case may be, in each case multiplied by a
fraction of which the numerator shall be the net worth of the Contributing
Guarantor on the date hereof and the denominator shall be the aggregate net
worth of all the Guarantors on the date hereof (or, in the case of any Guarantor
becoming a party hereto pursuant to Section 12, the date of the Supplement
hereto executed and delivered by such Guarantor). Any Contributing Guarantor
making any payment to a Claiming Guarantor pursuant to this Section 2 shall be
subrogated to the rights of such Claiming Guarantor under Section 1 to the
extent of such payment.
<PAGE> 3
3
SECTION 3. Subordination. Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in full
in cash of all Obligations which are then due and payable whether at maturity,
by acceleration or otherwise. No failure on the part of the Borrower or any
Guarantor to make the payments required by Sections 1 and 2 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Guarantor with respect to its obligations
hereunder, and each Guarantor shall remain liable for the full amount of the
obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, and so long as any of the Secured Instrument
Commitments have not been terminated, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or any Guarantor upon the bankruptcy or reorganization of the Borrower, any
Guarantor or otherwise.
SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Collateral Agent or any Guarantor to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the
Collateral Agent or any Guarantor preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. None of
the Collateral Agent and the Guarantors shall be deemed to have waived any
rights hereunder unless such waiver shall be in writing and signed by such
parties.
<PAGE> 4
4
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Borrower, the Guarantor or Guarantors with respect to which such waiver,
amendment or modification is to apply and the Collateral Agent, subject to any
consents required in accordance with Section 11.02 of the Collateral Agency and
Intercreditor Agreement.
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Guarantee Agreement and addressed as
specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the parties that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns. Neither the Borrower nor any Guarantor may assign or transfer any of
its rights or obligations hereunder (and any such attempted assignment or
transfer shall be void), except as expressly contemplated by this Agreement or
the other Support Documents. Notwithstanding the foregoing, at the time any
Guarantor is released from its obligations under the Guarantee Agreement and any
Security Documents to which it is a party in accordance with the Support
Documents and the Secured Instruments, such Guarantor will cease to have any
rights or obligations under this Agreement.
SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Borrower and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Support Documents shall be considered to have been relied
upon by the Collateral Agent, the other Secured Parties and each Guarantor and
shall survive the extension of credit by any Secured Party pursuant to the
Secured Instruments and shall continue in full force and effect until this
agreement shall terminate.
(b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal
<PAGE> 5
5
or unenforceable in any respect, no party hereto shall be required to comply
with such provision for so long as such provision is held to be invalid, illegal
or unenforceable, but the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 10. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Agreement shall be effective with respect to any Guarantor
when a counterpart bearing the signature of such Guarantor shall have been
delivered to the Collateral Agent. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Collateral Agency and Intercreditor Agreement
shall be applicable to this Agreement.
SECTION 12. Additional Guarantors. Upon execution and delivery, after
the date hereof, by the Collateral Agent and a Subsidiary Loan Party of an
instrument in the form of Annex 1 hereto, such Subsidiary Loan Party shall
become a Guarantor hereunder with the same force and effect as if originally
named as a Guarantor hereunder. The execution and delivery of any instrument
adding an additional Guarantor as a party to this Agreement shall not require
the consent of any Guarantor hereunder. The rights and obligations of each
Guarantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Guarantor as a party to this Agreement. This Agreement may
be waived, amended or modified with respect to any one or more Guarantors and
any one or more Guarantors may be released from its obligations hereunder
without the consent or agreement of any other Guarantor.
<PAGE> 6
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
CRICKET WIRELESS
COMMUNICATIONS, INC.,
By
--------------------------------------
Name:
Title:
EACH SUBSIDIARY LISTED ON
SCHEDULE I,
By
--------------------------------------
Name:
Title:
EACH LICENSE SUBSIDIARY LISTED
ON SCHEDULE I,
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 7
Schedule I to the
Indemnity, Subrogation and
Contribution Agreement
GUARANTORS
<TABLE>
<CAPTION>
Guarantor Address
--------- -------
<S> <C>
</TABLE>
<PAGE> 8
Annex 1 to the
Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. [ ] dated as of [ ], to the Indemnity,
Subrogation and Contribution Agreement dated as of September 17,
1999 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Indemnity, Subrogation and
Contribution Agreement"), among CRICKET WIRELESS COMMUNICATIONS,
INC., a Delaware corporation (the "Borrower"),each subsidiary of
the Borrower listed on Schedule I thereto (each a "Subsidiary",
and, collectively, the "Subsidiaries") each subsidiary of Leap
Wireless International, Inc., a Delaware corporation (the
"Parent") listed on Schedule I thereto (each a "License
Subsidiary", and, collectively, the "License Subsidiaries"; each
such Subsidiary and each such License Subsidiary individually, a
"Guarantor" and, collectively, the "Guarantors") and STATE
STREET BANK AND TRUST COMPANY, as collateral agent (in such
capacity, the "Collateral Agent") for the Secured Parties.
A. Reference is made to (a) the Collateral Agency and Intercreditor
Agreement (as defined in the Indemnity, Subrogation and Contribution Agreement)
and (b) the Indemnity, Subrogation and Contribution Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Secured Parties to
make loans under the applicable Secured Instruments. Section 12 of the
Indemnity, Subrogation and Contribution Agreement provides that additional
Subsidiary Loan Parties may become Guarantors under the Indemnity, Subrogation
and Contribution
<PAGE> 9
10
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary Loan Party of the Borrower (the "New
Guarantor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and
Contribution Agreement in order to induce the Secured Parties to make additional
loans under the applicable Secured Instruments and as consideration for Loans
previously made under the Secured Instruments.
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation
and Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
<PAGE> 10
11
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not in
any way be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE> 11
12
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[NAME OF NEW GUARANTOR],
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 12
Schedule I to Supplement No. [ ]
to the Indemnity, Subrogation and
Contribution Agreement
GUARANTORS
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.26.5
EXHIBIT E
PARENT AGREEMENT dated as of September 17, 1999, among
LEAP WIRELESS INTERNATIONAL, INC., a Delaware corporation (the
"Parent") and LUCENT TECHNOLOGIES INC., as administrative agent
(in such capacity, the "Administrative Agent") for the Lenders
(as defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of September 17, 1999
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Cricket Wireless Communications, Inc. (the "Borrower"),
Cricket Communications, Inc., the lenders from time to time party thereto (the
"Lenders") and the Administrative Agent. Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
The Borrower is a subsidiary of the Parent. The obligations of the Lenders to
make Loans are conditioned upon, among other things, the execution and delivery
by the Parent of an agreement in the form hereof to set forth certain covenants,
agreements and obligations of the Parent.
Accordingly, the Parent and the Administrative Agent, on behalf of
itself and each Lender (and each of their respective successors or assigns),
hereby agree as follows:
SECTION 1. Guarantee. The Parent unconditionally guarantees, as a
primary obligor and not merely as a surety, the due and punctual payment of the
ChaseTel Loans and any accrued interest thereon (the "ChaseTel Obligations"),
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise. The Parent further agrees that the ChaseTel
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any ChaseTel Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Parent waives presentment to, demand of payment from and
protest to the Borrower of any of the ChaseTel Obligations, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment.
<PAGE> 2
2
SECTION 3. No Discharge or Diminishment of Guarantee. The obligations of
the Parent hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of all the ChaseTel Obligations), including any claim of waiver,
release, surrender, alteration or compromise of any of the ChaseTel Obligations,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the ChaseTel Obligations or otherwise.
SECTION 4. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, the Parent waives any defense based on or arising out of any
defense of the Borrower or the unenforceability of the ChaseTel Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the final and indefeasible payment in full
in cash of all the ChaseTel Obligations.
SECTION 5. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Administrative Agent
or any other Lender has at law or in equity against the Parent by virtue hereof,
upon the failure of the Borrower or any other Loan Party to pay any ChaseTel
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, the Parent hereby
promises to and will forthwith pay, or cause to be paid, to the Administrative
Agent in cash the amount of such unpaid ChaseTel Obligations to be applied by
the Administrative Agent as provided in the Credit Agreement. Upon payment by
the Parent of any sums to the Administrative Agent, all rights of the Parent
against the Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations as provided in the Subordination Agreement.
SECTION 6. Termination. The guarantee made hereunder (a) shall terminate
when all the ChaseTel Obligations have been indefeasibly paid in full and (b)
shall continue to be effective or be reinstated, as the case may be, if at any
<PAGE> 3
3
time payment, or any part thereof, of any ChaseTel Obligation is rescinded or
must otherwise be restored by any Lender or the Parent upon the bankruptcy or
reorganization of the Borrower, the Parent or otherwise. Notwithstanding the
foregoing, the guarantee made hereunder shall terminate
upon the consummation of the ChaseTel Acquisition in
accordance with the terms of the Credit Agreement.
SECTION 7. Purchase Agreement. (a) If the ChaseTel Acquisition has not
been consummated in accordance with the terms of the Credit Agreement prior to
the date that is one year after the Effective Date, then on the date that is one
year after the Effective Date, the Parent shall pay to the Administrative Agent
in cash the aggregate principal amount of all ChaseTel Loans together with
accrued interest thereon, without utilizing any funds of the Borrower or any
Subsidiary Loan Party, which funds shall be applied to prepay such Loans and
accrued interest.
(b) Upon payment by the Parent of any sums to the Administrative Agent
pursuant to this Section 7, all rights of the Parent against the Borrower
arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall constitute Primary Subordinated
Obligations and shall in all respects be subordinate and junior in right of
payment to the prior indefeasible payment in full in cash of all the Obligations
as provided in the Subordination Agreement.
SECTION 8. Covenants. Until the Commitments have expired or terminated
and the principal of and interest on each Loan and all fees payable under the
Credit Agreement shall have been paid in full, the Parent hereby covenants and
agrees with the Administrative Agent that:
(a) The Parent will not, nor will it permit any of its direct or
indirect subsidiaries (other than the Borrower and the Subsidiary Loan
Parties) to, engage to any material extent in the wireless
telecommunications and data networking business or any business that
competes with the business conducted by the Borrower and the Subsidiary
Loan Parties, in each case, in the United States.
(b) The Parent and its subsidiaries (other than
<PAGE> 4
4
the Borrower and the Subsidiary Loan Parties) will cause all assets
owned by the Parent and its subsidiaries that are used predominantly in
the business of the Borrower and the Subsidiary Loan Parties to be owned
by the Borrower and the Subsidiary Loan Parties.
SECTION 9. ChaseTel Covenants. Unless and until the ChaseTel Acquisition
has been consummated in accordance with the terms of the Credit Agreement, at
any time any ChaseTel Obligations remain outstanding, the Parent covenants and
agrees with the Administrative Agent that:
(a) The Parent will not enter into any amendment or modification of or
accept any waiver of Section 5.3 of the Credit Agreement dated as of September
23, 1998 among the Parent, as borrower, QUALCOMM Incorporated, the other lenders
named therein and ABN AMRO Bank N.V., as administrative agent (the "QUALCOMM
Credit Agreement");
(b) The Parent shall comply with the covenants set forth in Section 5 of
the QUALCOMM Credit Agreement, as in effect from time to time;
(c) Upon the payment of all amounts outstanding under the QUALCOMM
Credit Agreement and the termination of all commitments to lend under the
QUALCOMM Credit Agreement, the Parent shall comply with the covenants set forth
in Section 5 of the QUALCOMM Credit Agreement as in effect as of the Effective
Date, without giving effect to any subsequent amendment or waiver thereto; and
(d) The Parent will not (i) consolidate or merge with or into any other
Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of its assets to any other Person unless, in either case, such
Person assumes, in writing, the obligations of the Parent under this Agreement.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall
<PAGE> 5
5
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent hereunder and of the other Secured
Parties under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or consent to any departure by the Parent therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
the Parent in any case shall entitle the Parent to any other or further notice
or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Administrative Agent and the Parent, subject to any consent required in
accordance with Section 9.02 of the Credit Agreement.
SECTION 11. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 9.01 of the Credit Agreement;
provided that any communication or notice hereunder to the Parent shall be given
to it at [_________], attention of [_________] (Telecopy No. [_________]).
SECTION 12. Further Assurances. The Parent agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Administrative Agent may at any
time reasonably request in connection with the administration and enforcement of
this Agreement or in order better to assure and confirm unto the Administrative
Agent its rights and remedies hereunder.
SECTION 13. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Parent that are contained in this
Agreement shall bind and
<PAGE> 6
6
inure to the benefit of its successors and assigns. This Agreement shall become
effective as to the Parent when a counterpart hereof executed on behalf of the
Parent shall have been delivered to the Administrative Agent and a counterpart
hereof shall have been executed on behalf of the Administrative Agent, and
thereafter shall be binding upon the Parent and the Administrative Agent and
their respective successors and assigns, and shall inure to the benefit of the
Parent, the Administrative Agent and the other Secured Parties, and their
respective successors and assigns.
SECTION 14. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Parent herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Administrative Agent and the other Secured Parties
and shall survive the making by the Lenders of the Loans, regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect as long as the principal of or any accrued interest on
any Loan or any other fee or amount payable under this Agreement or any other
Loan Document is outstanding and unpaid.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 7
7
SECTION 16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 13. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
SECTION 18. Jurisdiction; Consent to Service of Process. (a) The Parent
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that the Administrative Agent or any other
Secured Party may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against the Parent or its properties
in the courts of any jurisdiction.
(b) The Parent hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to
<PAGE> 8
8
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 11. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
LEAP WIRELESS INTERNATIONAL,
INC.,
By
--------------------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC., as
<PAGE> 9
9
Administrative Agent
By
--------------------------------------
Name:
Title:
<PAGE> 1
1
EXHIBIT 10.26.6
EXHIBIT F
PARENT PLEDGE AGREEMENT dated as of September 17, 1999, among LEAP
WIRELESS INTERNATIONAL, INC., a Delaware corporation (the "Parent") and STATE
STREET BANK AND TRUST COMPANY, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties.
Reference is made to the Collateral Agency and Intercreditor Agreement
dated as of September 17, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Collateral Agency and Intercreditor Agreement") among
Cricket Wireless Communications, Inc., a Delaware corporation (the "Borrower"),
the Representatives and Unrepresented Holders referred to therein and the
Collateral Agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. The Parent acknowledges receipt of a true and correct
copy of the Collateral Agency and Intercreditor Agreement and agrees to the
terms thereof.
The Lenders have agreed to make Loans to the Borrower pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
The Borrower is a subsidiary of the Parent. The obligations of the Lenders to
make Loans are conditioned upon, among other things, the execution and delivery
by the Parent of a Pledge Agreement in the form hereof. The Borrower may from
time to time incur Permitted Additional Obligations that are required to be
secured pursuant to the terms hereof.
Accordingly, the Parent and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, the Parent hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Parent's right, title and
interest in, to and under (a), the shares of capital stock, membership interests
or other, equity interests of the Borrower or any Subsidiary Loan Party owned by
it and listed on Schedule I hereto and any shares of the Borrower or any
Subsidiary Loan Party obtained in the future by the Parent and the certificates
representing all such shares,
<PAGE> 2
2
membership interests or other equity interests (collectively, the "Pledged
Stock"); provided that the pledged interests shall not include to the extent
that applicable law requires that the Borrower or any Subsidiary Loan Party
issue directors' qualifying shares, such qualifying shares; (b)(i) all debt
securities issued by the Borrower or any Subsidiary Loan Party owned by it, all
of which are listed on Schedule I hereto, (ii) any debt securities in the future
issued to the Parent by the Borrower or any Subsidiary Loan Party and (iii) the
promissory notes and any other instruments evidencing such debt securities (the
"Pledged Debt Securities"); (c) all other property that may be delivered to and
held by the Collateral Agent pursuant to the terms hereof; (d) subject to
Section 5, all payments of principal or interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed, in respect of, in exchange for or upon the conversion of the
securities referred to in clauses (a) and (b) above; (e) subject to Section 5,
all rights and privileges of the Parent with respect to the securities and other
property referred to in clauses (a), (b), (c) and (d) above; and (f) all
proceeds of any of the foregoing (the items referred to in clauses (a) through
(f) above being collectively referred to as the "Collateral"). Upon delivery to
the Collateral Agent, (a) any stock certificates, notes or other securities now
or hereafter included in the Collateral (the "Pledged Securities") shall be
accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request in order to give effect
to the pledge granted hereby and (b) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the Parent and such other instruments or documents as the Collateral
Agent may reasonably request in order to give effect to the pledge granted
hereby. Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule I and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent,
<PAGE> 3
3
its successors and assigns, for the ratable benefit of the Secured Parties,
forever; subject, however, to the terms, covenants and conditions hereinafter
set forth.
SECTION 2. Delivery of the Collateral. (a) The Parent agrees promptly to
deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities and any and all certificates or other instruments or documents
representing the Collateral.
(b) The Parent will cause any Indebtedness for borrowed money owed to
the Parent by the Borrower or any Subsidiary Loan Party to be evidenced by a
duly executed promissory note, bond, debenture or similar instrument that is
pledged and delivered to the Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. The Parent hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that as of the Effective Date:
(a) the Pledged Stock represents that percentage as set forth on
Schedule I of the issued and outstanding shares of each class of the capital
stock of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the Parent (i)
is and will at all times continue to be the direct owner, beneficially and of
record, of the Pledged Securities indicated on Schedule I, (ii) holds the same
free and clear of all Liens, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security interest
in or other Lien on, the Collateral, other than pursuant hereto, and (iv)
subject to Section 5, will cause any and all Collateral, whether for value paid
by the Parent or otherwise, to be forthwith deposited with the Collateral Agent
and pledged or assigned hereunder;
(c) the Parent (i) has the power and authority to pledge the Collateral
in the manner hereby done or contemplated and (ii) will defend its title or
interest thereto or therein against any and all Liens (other than the Lien
created by this Agreement), however arising, of all Persons whomsoever;
<PAGE> 4
4
(d) except for such consents and approvals as have been obtained and are
in full force and effect, no consent of any other Person (including stockholders
or creditors of the Parent) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of the
pledge effected hereby;
(e) by virtue of the execution and delivery by the Parent of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Collateral are delivered to, and continue to be
in the possession of, the Collateral Agent in accordance with this Agreement,
the Collateral Agent will have a valid and perfected first lien upon and
security interest in such Pledged Securities as security for the payment and
performance of the Obligations;
(f) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in
the Collateral as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly issued
and is fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this Agreement does not
violate Regulation U or X of the Federal Reserve Board or any successor thereto
as of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the Parent,
endorsed or assigned in blank or in favor of the Collateral Agent. The Parent
will promptly give to the Collateral Agent copies of any material notices or
other communications received by it with respect to Pledged Securities
registered in the name of the Parent. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged
<PAGE> 5
5
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until a Notice of Enforcement is in effect:
(i) The Parent shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms
of this Agreement, the other Support Documents and the Secured
Instruments; provided, however, that the Parent will not be entitled to
exercise any such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged
Securities or the rights and remedies of any of the Secured Parties
under this Agreement or any other Support Document or Secured Instrument
or the ability of the Secured Parties to exercise the same.
(ii) The Collateral Agent shall execute and deliver to the
Parent, or cause to be executed and delivered to the Parent, all such
proxies, powers of attorney and other instruments as the Parent may
reasonably request for the purpose of enabling the Parent to exercise
the voting and/or consensual rights and powers it is entitled to
exercise pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph (iii)
below.
(iii) The Parent shall be entitled to receive and retain any and
all cash dividends, interest and principal paid on the Pledged
Securities to the extent and only to the extent that such cash
dividends, interest and principal are permitted by, and otherwise paid
in accordance with, the terms and conditions of the Support Documents,
the Secured Instruments and applicable laws. While a Notice of
Enforcement is in effect, all noncash dividends, interest and principal,
and all dividends, interest and principal paid or payable in cash or
otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and
all
<PAGE> 6
6
other distributions (other than distributions referred to in the
preceding sentence) made on or in respect of the Pledged Securities,
whether paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital
stock of the issuer of any Pledged Securities or received in exchange
for Pledged Securities or any part thereof, or in redemption thereof, or
as a result of any merger, consolidation, acquisition or other exchange
of assets to which such issuer may be a party or otherwise, shall be and
become part of the Collateral, and, if received by the Parent, shall not
be commingled by the Parent with any of its other funds or property but
shall be held separate and apart therefrom, shall be held in trust for
the benefit of the Collateral Agent and shall be forthwith delivered to
the Collateral Agent in the same form as so received (with any necessary
endorsement).
(b) While a Notice of Enforcement is in effect, all rights of the Parent
to dividends, interest or principal that the Parent is authorized to receive
pursuant to paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends, interest or
principal. All dividends, interest or principal received by the Parent contrary
to the provisions of this Section 5 shall be held in trust for the benefit of
the Collateral Agent, shall be segregated from other property or funds of the
Parent and shall be forthwith delivered to the Collateral Agent upon demand in
the same form as so received (with any necessary endorsement). Any and all money
and other property paid over to or received by the Collateral Agent pursuant to
the provisions of this paragraph (b) shall be retained by the Collateral Agent
in the Enforcement Collateral Account upon receipt of such money or other
property and shall be applied in accordance with the provisions of Section 7.
After a Notice of Enforcement has been rescinded in accordance with the terms of
the Collateral Agency and Intercreditor Agreement, the Collateral Agent shall,
within five Business Days after all such Notices of Enforcement have been
rescinded, repay to the Parent all cash dividends, interest or principal
(without interest), that the Parent would otherwise be permitted to retain
pursuant to the terms of paragraph (a)(iii) above and which remain in the
Enforcement Collateral Account.
<PAGE> 7
7
(c) While a Notice of Enforcement is in effect, all rights of the Parent
to exercise the voting and consensual rights and powers it is entitled to
exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of
the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and
all such rights shall thereupon become vested in the Collateral Agent, which
shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers in a manner not inconsistent with the terms of
this Agreement, provided that, unless otherwise directed by the Required Secured
Parties, the Collateral Agent shall have the right from time to time while a
Notice of Enforcement is in effect to permit the Parent to exercise such rights.
After all Notices of Enforcement have been rescinded in accordance with the
terms of the Collateral Agency and Intercreditor Agreement, the Parent will have
the right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i)
above.
SECTION 6. Remedies upon Default. While a Notice of Enforcement is in
effect, subject to applicable regulatory and legal requirements, the Collateral
Agent may sell the Collateral, or any part thereof, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate subject to
applicable law and standards of commercial reasonableness. The Collateral Agent
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of the Parent, and, to
the extent permitted by applicable law, the Parent hereby waives all rights of
redemption, stay, valuation and appraisal the Parent now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
<PAGE> 8
8
The Collateral Agent shall give the Parent 10 days' prior written notice
(which the Parent agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of the Parent's Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid in full by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. Subject to Section 9.05 of the Collateral Agency
and Intercreditor Agreement, at any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, any Secured Party
may bid for or purchase, free from any right of redemption, stay or appraisal on
the part of the Parent (all said rights being also hereby waived and released),
the Collateral or any part thereof offered for sale. For purposes hereof, (a) a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry out
such sale
<PAGE> 9
9
pursuant to such agreement and (c) the Parent shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement the applicable Notice of Enforcement shall have been rescinded in
accordance with the terms of the Collateral Agency and Intercreditor Agreement
and the Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose upon the Collateral and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver. Any sale pursuant to the provisions of this Section 6
shall be deemed to conform to the commercially reasonable standards as provided
in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied promptly by the Collateral Agent after receipt thereof as
provided in the Collateral Agency and Intercreditor Agreement.
Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) The Parent agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of the
<PAGE> 10
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Collateral Agent hereunder or (iv) the failure by the Parent to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Support Documents, the Parent agrees to indemnify the Collateral Agent and
the other Indemnitees against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, other charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Support
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations thereunder or
the consummation of the transactions contemplated hereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement or any other Support Document or any
Secured Instrument, the consummation of the transactions contemplated hereby,
the repayment of any of the Obligations, the invalidity or unenforceability of
any term or provision of this Agreement or any other Support Document or any
Secured Instrument or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party. All amounts due under this Section 8 shall be
payable on written demand therefor and, if not paid within five Business Days
after written demand for payment is received by the Parent from the Collateral
Agent, shall bear interest at the rate specified in Section 2.11(c) of the
Credit Agreement.
(d) To the extent that the Parent fails to pay any amount required to be
paid by them to the Collateral Agent under paragraph (a) or (b) of this Section,
each Secured Party severally agrees to pay to the Collateral Agent such Secured
Party's pro rata share (determined as of the time
<PAGE> 11
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that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damaged, liability or related expense, as the case may be, was incurred
by or asserted against the Collateral Agent in its capacity as such. For
purposes hereof, a Secured Party's "pro rata share" shall be determined based
upon its share of the sum of the total outstanding loans and unused commitments
under the Secured Instruments at the time.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The Parent
hereby appoints the Collateral Agent, effective while a Notice of Enforcement is
in effect, the attorney-in-fact of the Parent for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument that the Collateral Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, while a Notice of Enforcement is in
effect, with full power of substitution either in the Collateral Agent's name or
in the name of the Parent, to ask for, demand, sue for, collect, receive and
give acquittance for any and all moneys due or to become due under and by virtue
of any Collateral, to endorse checks, drafts, orders and other instruments for
the payment of money payable to the Parent representing any interest or dividend
or other distribution payable in respect of the Collateral or any part thereof
or on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and to make any
agreement respecting, or otherwise deal with, the same, in each case in a manner
not inconsistent with the terms of this Agreement; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby. The Collateral Agent and the other Secured Parties
shall be accountable only for amounts actually received as a result of the
exercise of the powers granted to them herein, and neither they nor their
officers,
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directors, employees or agents shall be responsible to the Parent for any act or
failure to act hereunder, except for their own gross negligence or wilful
misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent and the other Secured Parties under the other
Support Documents and the Secured Instruments are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provisions of this Agreement or consent to any departure by the Parent
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Parent in any case shall entitle the Parent to any other or further
notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Collateral Agent and the Parent, subject to any consent required in
accordance with Section 11.02 of the Collateral Agency and Intercreditor
Agreement.
SECTION 11. Securities Act, etc. In view of the position of the Parent
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. The Parent
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent
<PAGE> 13
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transferee of any Pledged Securities could dispose of the same. Similarly, there
may be other legal restrictions or limitations affecting the Collateral Agent in
any attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. The Parent recognizes that in light of such restrictions and limitations
the Collateral Agent may, with respect to any sale of the Pledged Securities,
limit the purchasers to those who will agree, among other things, to acquire
such Pledged Securities for their own account, for investment, and not with a
view to the distribution or resale thereof. The Parent acknowledges and agrees
that in light of such restrictions and limitations, the Collateral Agent, in its
sole and absolute discretion, (a) may proceed to make such a sale whether or not
a registration statement for the purpose of registering such Pledged Securities
or part thereof shall have been filed under the Federal Securities Laws and (b)
may approach and negotiate with a single potential purchaser to effect such
sale. The Parent acknowledges and agrees that any such sale might result in
prices and other terms less favorable to the seller than if such sale were a
public sale without such restrictions. In the event of any such sale, the
Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached. The provisions of
this Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
SECTION 12. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of the Parent hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability any Support Document
or Secured Instrument, any agreement with respect to any of the Obligations or
any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other
<PAGE> 14
14
amendment or waiver of or any consent to any departure from any Support Document
or Secured Instrument or any other agreement or instrument relating to any of
the foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guaranty, for all or any of the Obligations or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Parent in respect of the Obligations or in respect of this
Agreement (other than the indefeasible payment in full of all the Obligations).
SECTION 13. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full and all Secured Instrument Commitments shall have
terminated.
(b) Subject to Section 9.03 of the Collateral Agency and Intercreditor
Agreement, upon any sale or other transfer by the Parent of any Collateral that
does not violate any Secured Instrument to any Person other than Holdings, the
Borrower or any Subsidiary Loan Party, the security interest in such Collateral
shall be automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to the Parent, at the
Parent's expense, all documents that the Parent shall reasonably request to
evidence such termination or release. Any execution and delivery of documents
pursuant to this Section 13 shall be without recourse to or warranty by the
Collateral Agent.
SECTION 14. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 11.01 of the Collateral Agency and
Intercreditor Agreement; provided that any communication or notice hereunder to
the Parent shall be given to it at [__________], attention of [__________]
(Telecopy No. [__________]).
SECTION 15. Further Assurances. The Parent agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure
<PAGE> 15
15
and confirm unto the Collateral Agent its rights and remedies hereunder.
SECTION 16. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Parent that are contained in this
Agreement shall bind and inure to the benefit of its successors and assigns.
This Agreement shall become effective as to the Parent when a counterpart hereof
executed on behalf of the Parent shall have been delivered to the Collateral
Agent and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon the Parent and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of the Parent, the Collateral Agent and the other Secured Parties,
and their respective successors and assigns, except that the Parent shall not
have the right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void), except as
expressly contemplated by this Agreement or the other Loan Documents. Subject to
Section 9.03 of the Collateral Agency and Intercreditor Agreement, if all of the
capital stock of the Borrower or a Subsidiary Loan Party is sold, transferred or
otherwise disposed of to a Person other than the Borrower or a Subsidiary Loan
Party pursuant to a transaction that does not violate any Secured Instrument,
such capital stock shall be released from any security interest, lien or
encumbrance created under this Agreement without further action.
SECTION 17. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by the Parent herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Support Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the extension of credit by any Secured Party pursuant to a Secured
Instrument, regardless of any investigation made by the Secured Parties or on
their behalf, and shall continue in full force and effect until this Agreement
shall terminate.
(b) In the event any one or more of the provisions
<PAGE> 16
16
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 16. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 20. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Collateral Agency and Intercreditor Agreement
shall be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting
this Agreement.
SECTION 21. Jurisdiction; Consent to Service of Process. (a) The Parent
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any this Agreement or any
other Support Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be
<PAGE> 17
17
heard and determined in such New York State or, to the extent permitted by law,
in such Federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement or any other Support Document shall affect any
right that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against the Parent or its properties in the courts of any jurisdiction.
(b) The Parent hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Support Document in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 22. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 23. Execution of Financing Statements. Pursuant to Section 9-402
of the Uniform Commercial Code as in effect in the State of New York, the Parent
authorizes the Collateral Agent to file financing statements with
<PAGE> 18
18
respect to the Collateral owned by it without the signature of the Parent in
such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
LEAP WIRELESS INTERNATIONAL, INC.,
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 19
Schedule I to the
Pledge Agreement
CAPITAL STOCK
<TABLE>
<CAPTION>
Number and
Number of Registered Class of Percentage
Issuer Certificates Owner Shares of Shares
- ------ ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
</TABLE>
LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage
Number and of
Number of Registered Class of Membership
Issuer Certificates Owner Shares of Interests
- ------ ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
</TABLE>
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Percentage of Limited
Number of Limited or General Partnership
Issuer Certificates General Interests
- ------ ------------ ---------- ---------------------
<S> <C> <C> <C>
</TABLE>
DEBT SECURITIES
<TABLE>
<CAPTION>
Principal Date of Maturity
Issuer Amount Notes Date
- ------ -------- ------- --------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.26.7
EXHIBIT G
[Form of]
PERFECTION CERTIFICATE
Reference is made to (a) the Collateral Agency and Intercreditor
Agreement dated as of September 17, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Collateral Agency and Intercreditor
Agreement"), among Cricket Wireless Communications, Inc. (the "Borrower"), the
Representatives and Unrepresented Holders referred to therein and State Street
Bank and Trust Company, as collateral agent (in such capacity, the "Collateral
Agent") and (b) the Security Agreement dated as of September 17, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Security
Agreement"), among the Grantors (as defined therein) and the Collateral Agent.
Capitalized terms used herein and not defined herein shall have meanings
assigned to such terms in the Collateral Agency and Intercreditor Agreement and
the Security Agreement.
The undersigned, a Financial Officer and the chief legal officer,
respectively, of the Borrower, hereby certify to the Collateral Agent and each
other Secured Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor has had in
the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
<PAGE> 2
2
(d) The following is a list of all other names (including trade names or
similar appellations) used by each Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification Number of
each Grantor:
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
<TABLE>
<CAPTION>
Grantor Mailing Address County State
- ------- --------------- ------ -----
<S> <C> <C> <C>
</TABLE>
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
<TABLE>
<CAPTION>
Grantor Mailing Address County State
- ------- --------------- ------ -----
<S> <C> <C> <C>
</TABLE>
(c) Set forth below opposite the name of each Grantor are all the places
of business of such Grantor not identified in paragraph (a) or (b) above:
<TABLE>
<CAPTION>
Grantor Mailing Address County State
- ------- --------------- ------ -----
<S> <C> <C> <C>
</TABLE>
<PAGE> 3
3
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
<TABLE>
<CAPTION>
Grantor Mailing Address County State
- ------- --------------- ------ -----
<S> <C> <C> <C>
</TABLE>
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all Persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
<TABLE>
<CAPTION>
Grantor Mailing Address County State
- ------- --------------- ------ -----
<S> <C> <C> <C>
</TABLE>
3. Unusual Transactions. All Accounts Receivable have been originated by
the Grantors and all Inventory has been acquired by the Grantors in the ordinary
course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true copies
of file search reports from the Uniform Commercial Code filing offices where
filings described in Schedule 6 are to be made. Attached hereto as Schedule 4(B)
is a true copy of each financing statement or other filing identified in such
file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings
<PAGE> 4
4
described in Section 5 above, each filing and the filing office in which such
filing is to be made.
7. Stock Ownership. Attached hereto as Schedule 7 is a true and correct
list of all the duly authorized, issued and outstanding Equity Interests of the
Borrower and each Subsidiary Loan Party and the record and beneficial owners of
such stock. Also set forth on Schedule 7 is each equity investment of the
Borrower and each Subsidiary Loan Party that represents 50% or less of the
equity of the entity in which such investment was made.
8. Notes. Attached hereto as Schedule 8 is a true and correct list of
all notes held by the Borrower and each Subsidiary Loan Party and all
intercompany notes between the Borrower and each Subsidiary Loan Party and
between each Subsidiary Loan Party and each other Subsidiary Loan Party.
9. Advances. Attached hereto as Schedule 9 is (a) a true and correct
list of all advances made by the Borrower to any Subsidiary Loan Party or made
by any Subsidiary Loan Party to the Borrower or any other Subsidiary Loan Party,
which advances will be on and after the date hereof evidenced by one or more
intercompany notes pledged to the Collateral Agent under the Pledge Agreement,
and (b) a true and correct list of all unpaid intercompany transfers of goods
sold and delivered by or to the Borrower or any Subsidiary Loan Party.
10. Mortgage Filings. Attached hereto as Schedule 10 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the entity that owns such property as such name appears in its
certificate of formation, (ii) if different from the name identified pursuant to
clause (i), the exact name of the current record owner of such property
reflected in the records of the filing office for such property identified
pursuant to the following clause and (iii) the filing office in which a Mortgage
with respect to such property must be filed or recorded in order for the
Collateral Agent to obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this certificate
on this [ ] day of [ ].
<PAGE> 5
5
CRICKET WIRELESS
COMMUNICATIONS, INC.,
By
--------------------------------------
Name:
Title: [Financial Officer]
By
--------------------------------------
Name:
Title: [Legal Officer]
<PAGE> 1
EXHIBIT 10.26.8
EXHIBIT H
SECURITY AGREEMENT dated as of September 17, 1999, among
CRICKET WIRELESS COMMUNICATIONS, INC., a Delaware corporation
(the "Borrower"), each subsidiary of the Borrower listed on
Schedule I hereto (each a "Subsidiary", and, collectively, the
"Subsidiaries"), each subsidiary of Leap Wireless International,
Inc. (the "Parent") listed on Schedule I hereto (each a "License
Subsidiary", and, collectively, the "License Subsidiaries"; each
such Subsidiary and each such License Subsidiary individually, a
"Guarantor" and, collectively the "Guarantors"; the Guarantors
and the Borrower are referred to collectively herein as the
"Grantors") and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties.
Reference is made to the Collateral Agency and Intercreditor Agreement
dated as of September 17, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Collateral Agency and Intercreditor Agreement") among
the Borrower, the Representatives and Unrepresented Holders referred to therein
and the Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. Each Grantor acknowledges receipt of a true and correct
copy of the Collateral Agency and Intercreditor Agreement and agrees to the
terms thereof.
The Lenders have agreed to make Loans to the Borrower for the account of
the Borrower, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. Each of the Guarantors has agreed to
guarantee, among other things, all the obligations of the Borrower under the
Credit Agreement. The obligation of the Lenders to make Loans is conditioned
upon, among other things, the execution and delivery by the Grantors of an
agreement in the form hereof. The Borrower may from time to time incur Permitted
Additional Obligations that are required to be secured pursuant to the terms
hereof.
<PAGE> 2
2
Accordingly, the Grantors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Collateral Agency and Intercreditor Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Investment Property and (h) Proceeds.
<PAGE> 3
3
"Collateral Agency and Intercreditor Agreement" shall have the meaning
assigned to such term in the preliminary statements of this Agreement.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an option
on a commodity futures contract, a commodity option or any other contract that,
in each case, is (a) traded on or subject to the rules of a board of trade that
has been designated as a contract market for such a contract pursuant to the
federal commodities laws or (b) traded on a foreign commodity board of trade,
exchange or market, and is carried on the books of a Commodity Intermediary for
a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or hereafter
in effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations
<PAGE> 4
4
and applications for registration of any such copyright in the United States or
any other country, including registrations, recordings, supplemental
registrations and pending applications for registration in the United States
Copyright Office, including those listed on Schedule II.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary. If a Person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such Person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
Person or a share, participation or other interest in a Person or in property or
an enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
<PAGE> 5
5
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including corporate or other business records,
indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Hedging Agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor to secure payment by an Account Debtor of any
of the Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trade
marks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
<PAGE> 6
6
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party including
those listed on Schedule III (other than those license agreements which by their
terms prohibit assignment or a grant of a security interest by such Grantor as
licensee thereunder).
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
form of Exhibit F to the Credit Agreement, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by a Financial
Officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession of
any Collateral and any payment received from any insurer or other Person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever
<PAGE> 7
7
nature of any asset or property which constitutes Collateral, and shall
include, (a) any claim of any Grantor against any third party for (and the right
to sue and recover for and the rights to damages or profits due or accrued
arising out of or in connection with) (i) past, present or future infringement
of any Patent now or hereafter owned by any Grantor, or licensed under a Patent
License, (ii) past, present or future infringement or dilution of any Trademark
now or hereafter owned by any Grantor or licensed under a Trademark License or
injury to the goodwill associated with or symbolized by any Trademark now or
hereafter owned by any Grantor, (iii) past, present or future breach of any
License and (iv) past, present or future infringement of any Copyright now or
hereafter owned by any Grantor or licensed under a Copyright License and (b) any
and all other amounts from time to time paid or payable under or in connection
with any of the Collateral.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or trade on securities exchanges or securities markets or (ii) are a medium
for investment and by their terms expressly provide that they are a security
governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests of
an Entitlement Holder with respect to
<PAGE> 8
8
a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Trademark License" shall mean any written agreement, now or hereafter
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all domestic trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired in the United States, all registrations and recordings
thereof in the United States, and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office, any State of the
United States or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule IV, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Collateral Agency and Intercreditor Agreement
shall be applicable to this Agreement.
ARTICLE II
<PAGE> 9
9
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements (including fixture filings), continuation statements,
filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good title to, or
valid leasehold interest in, the
<PAGE> 10
10
Collateral material to its business with respect to which it has purported to
grant a Security Interest hereunder, except for minor defects in title that do
not interfere with its ability to conduct its business as currently conducted or
to utilize such properties for their intended purposes and subject to Liens
permitted by the Credit Agreement and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other Person other
than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Each Grantor has or will deliver
to the Collateral Agent fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
for filing in each governmental, municipal or other office in the United States
requested by the Collateral Agent and specified in Schedule 6 to the Perfection
Certificate, which are all the filings, recordings and registrations (other than
filings required to be made in the United States Patent and Trademark Office and
the United States Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and Copyrights) that
are necessary in the United States to publish notice of and protect the validity
of and to establish a legal, valid and perfected security interest in favor of
the Collateral Agent (for the ratable benefit of the Secured Parties) in respect
of all Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and
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11
containing a description of all Collateral consisting of Intellectual Property
shall have been received and recorded within three months after the execution of
this Agreement with respect to United States Patents and United States
registered Trademarks (and Trademarks for which United States registration
applications are pending) and within one month after the execution of this
Agreement with respect to United States registered Copyrights by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section
205 and the regulations thereunder, as applicable, and otherwise as may be
required pursuant to the laws of any other necessary jurisdiction, to protect
the validity of and to establish a legal, valid and perfected security interest
in favor of the Collateral Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral consisting of Patents, Trademarks and
Copyrights in which a security interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and
its territories and possessions, or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copy rights (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions and
(c) a security interest that shall be perfected in all Collateral in which a
security interest may be perfected upon the receipt and
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recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three-month
period (commencing as of the date hereof) pursuant to 35 U.S.C. 261 or 15 U.S.C.
Section 1060 or the one-month period (commencing as of the date hereof) pursuant
to 17 U.S.C. Section 205 and otherwise as may be required pursuant to the laws
of any other necessary jurisdiction. The Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than Liens expressly permitted
to be prior to the Security Interest under each Secured Instrument.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted under
each Secured Instrument and except for restrictions on transfer, assignment, use
and rights of first refusal and similar rights under the terms of any leases,
licenses and other agreements under which the Grantors acquired rights in and to
Collateral. No Grantor has filed or consented to the filing of (a) any financing
statement or analogous document under the Uniform Commercial Code or any other
applicable laws covering any Collateral, (b) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement or
similar instrument is still in effect, except, in each case, for Liens expressly
permitted under each Secured Instrument and except for financing statements
evidencing Liens being terminated on the Effective Date.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees to promptly notify in writing the Collateral
Agent, but in no event later than 30 days after such change, of any change
<PAGE> 13
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(i) in its corporate name or in any trade name used to identify it in the
conduct of its business or in the owner ship of its properties, (ii) in the
location of its chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
or any office or facility at which Collateral owned by it is located (including
the establishment of any such new office or facility), (iii) in its corporate
structure or (iv) in its Federal Taxpayer Identification Number. Each Grantor
agrees to make within 45 days, after the occurrence of any of the foregoing
changes, all filings under the Uniform Commercial Code or otherwise that are
required by the Collateral Agent in order for the Collateral Agent to continue
at all times following such change to have a valid, legal and perfected first
priority security interest in all the Collateral.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral.
SECTION 4.02. Periodic Certification. Within 90 days after the end of
each fiscal year of the Borrower, the Borrower shall deliver to the Collateral
Agent a certificate executed by an executive officer or a Financial Officer of
the Borrower (a) setting forth the information required pursuant to Section 2 of
the Perfection Certificate or confirming that there has been no change in such
information since the date of such certificate or the date of the most recent
certificate delivered pursuant to this Section 4.02 and (b) certifying that all
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registra tions,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral have been filed of record in each governmental,
municipal or
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other appropriate office in each jurisdiction identified pursuant to clause (a)
above to the extent necessary to protect and perfect the Security Interest or
identifying such additional Uniform Commercial Code financing statements or
other appropriate filings, recordings or registrations as may be required to
protect and perfect the security interests hereunder which, upon the request of
the Collateral Agent, shall be filed, recorded or registered, in either case for
a period of not less than 18 months after the date of such certificate (except
as noted therein with respect to any continuation statements to be filed within
such period). Each certificate delivered pursuant to this Section 4.02 shall
identify in the format of Schedule II, III, IV or V, as applicable, all
Intellectual Property of any Grantor in existence on the date thereof and not
then listed on such Schedules or previously so identified to the Collateral
Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own
cost and expense, take any and all reasonable actions necessary to defend title
to the Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted under each Secured Instrument.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own
expense, (x) to execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Collateral Agent may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith and (y)
at the request of the Collateral Agent, to enter into and to cause any
Securities Intermediary through which it holds Investment Property to enter into
(or to reinvest through a Securities Intermediary who will enter into) a control
agreement, in form and substance satisfactory to the Collateral Agent, pursuant
to which such Securities Intermediary grants "control", within the meaning
<PAGE> 15
15
of Section 8-106 of the Uniform Commercial Code of the State of New York, over
such Investment Property to the Collateral Agent. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be forthwith
pledged and delivered to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 45 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its reasonable best
efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Collateral within 30 days after the date it has been notified by the
Collateral Agent of the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantors'
affairs with the officers of the Grantors and their independent accountants and
to verify under reasonable procedures the validity, amount, quality, quantity,
value, condition and status of, or any other matter relating to, the Collateral,
including, in the case of Accounts or Collateral in the possession of any third
Person, by contacting Account
<PAGE> 16
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Debtors while a Notice of Enforcement is in effect or the third Person
possessing such Collateral for the purpose of making such a verification. The
Collateral Agent shall have the absolute right to share any information it gains
from such inspection or verification with any Secured Party (it being understood
that any such information shall be deemed to be "Information" subject to the
provisions of Section 9.12 of the Credit Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent
may, upon reasonable prior notice to Grantors, discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted under any Secured
Instrument, and may pay for the maintenance and preservation of the Collateral
to the extent any Grantor fails to do so as required by any Secured Instrument
or this Agreement, and each Grantor jointly and severally agrees to reimburse
the Collateral Agent on demand for any payment made or any expense incurred by
the Collateral Agent pursuant to the foregoing authorization; provided, however,
that nothing in this Section 4.06 shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Support Documents or any Secured Instrument.
SECTION 4.07. Assignment of Security Interest. If at any time any
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of an Account to the extent
permissible under the document granting a security interest, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other Person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed
<PAGE> 17
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by it under each contract, agreement or instrument relating to the Collateral,
all in accordance with the terms and conditions thereof, and each Grantor
jointly and severally agrees to indemnify and hold harmless the Collateral Agent
and the Secured Parties from and against any and all liability for such
performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted under each Secured Instrument. None of the Grantors shall
make, nor shall they permit to be made, any sale, conveyance, lease, assignment,
transfer or other disposition of any Collateral except as permitted under each
Secured Instrument and each Grantor shall remain at all times in possession of
the Collateral owned by it, except that unless and until the Collateral Agent
shall notify the Grantors that a Notice of Enforcement is in effect and that
while such Notice of Enforcement is in effect, the Grantors may use and dispose
of the Collateral in any lawful manner not inconsistent with the provisions of
this Agreement, or any other Support Document or any Secured Instrument. Without
limiting the generality of the foregoing, each Grantor agrees that it shall not
permit any Inventory to be in the possession or control of any warehouseman,
bailee, agent or processor at any time unless such warehouseman, bailee, agent
or processor shall have been notified of the Security Interest and shall have
agreed in writing to hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien held by
it with respect to such Inventory, whether arising by operation of law or
otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable in the
aggregate, compromise, compound or settle the same for less than the full amount
thereof, release, wholly or partly, any Person liable for the payment thereof or
allow any credit or discount whatsoever thereon, other than extensions, credits,
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discounts, compromises or settlements granted or made in the ordinary course of
business and consistent with its good faith business judgment.
SECTION 4.11. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with the applicable requirements of
each Secured Instrument. Each Grantor irrevocably makes, constitutes and
appoints the Collateral Agent (and all officers, employees or agents designated
by the Collateral Agent) as such Grantor's true and lawful agent (and
attorney-in-fact) for the purpose, while a Notice of Enforcement is in effect,
of making, settling and adjusting claims in respect of Collateral under policies
of insurance, endorsing the name of such Grantor on any check, draft, instrument
or other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any event that could result
in a Notice of Enforcement, in its sole reasonable discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable. All sums
disbursed by the Collateral Agent in connection with this Section 4.11,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, upon demand, by the Grantors to the
Collateral Agent and shall be additional Obligations secured hereby.
SECTION 4.12. Legend. Each Grantor shall upon written request legend, in
form and manner reasonably satisfactory to the Collateral Agent, its Accounts
Receivable and its books, records and, to the extent applicable, documents
evidencing or pertaining thereto with an appropriate reference to the fact that
such Accounts Receivable have been collaterally assigned to the Collateral Agent
for the benefit of the Secured Parties and that the Collateral Agent has a
security interest therein.
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SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, and it will exercise its
best efforts to ensure that its licensees will not, do any act, or omit to do
any act, whereby any Patent which is material to the conduct of such Grantor's
business may become invalidated or dedicated to the public, and agrees that it
shall continue to mark any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work material to the conduct of Grantor's business covered by a material
Copyright, continue to publish, reproduce, display, adopt and distribute the
work with appropriate copyright notice as necessary and sufficient to establish
and preserve its rights under applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent promptly if it knows
that any Patent, Trademark or Copyright material to the conduct of the business
of the Grantors (taken as a whole) may reasonably be expected to become
abandoned, lost or dedicated to the public, or of any material adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's
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ownership of any such Patent, Trademark or Copyright, its right to register the
same, or to keep and maintain the same.
(e) In the event that any Grantor shall, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, such Grantor shall
promptly thereafter inform the Collateral Agent of such action, and, upon
request of the Collateral Agent, execute and deliver any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably request
to evidence the Collateral Agent's security interest in such Patent, Trademark
or Copyright, and such Grantor hereby appoints the Collateral Agent as its
attorney-in-fact to execute and file such writings for the foregoing purposes,
all acts of such attorney being hereby ratified and confirmed; such power, being
coupled with an interest, is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (excluding applications which a
Grantor abandons pursuant to good faith business considerations) (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
the business of the Grantors (taken as a whole), including timely filings of
applications for renewal, affidavits of use, affidavits of incontestability and
payment of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancelation proceedings against third
parties.
(g) In the event that any Grantor has reason to
<PAGE> 21
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believe that any Collateral consisting of a Patent, Trademark or Copyright
material to the conduct of the business of the Grantors (taken as a whole) has
been or is about to be infringed, misappropriated or diluted by a third party in
any material respect, such Grantor promptly shall notify the Collateral Agent
and shall, if consistent with good business judgment, promptly sue for
infringement, misappropriation or dilution and to recover any and all damages
for such infringement, misappropriation or dilution, and take such other actions
as are appropriate under the circumstances to protect such Collateral.
(h) While a Notice of Enforcement is in effect, if requested by the
Collateral Agent, each Grantor shall use reasonable efforts to obtain all
requisite consents or approvals by the licensor of each Copyright License,
Patent License or Trademark License to effect the assignment of all of such
Grantor's right, title and interest thereunder to the Collateral Agent or its
designee.
ARTICLE V
Power of Attorney
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, while a Notice of
Enforcement is in effect (a) to receive, endorse, assign and/or deliver any and
all notes, acceptances, checks, drafts, money orders or other evidences of
payment relating to the Collateral or any part thereof; (b) to demand, collect,
receive payment of, give receipt for and give discharges and releases of all or
any of the Collateral; (c) to sign the name of any Grantor on any invoice or
bill of lading relating to any of the Collateral; (d) to send verifications of
Accounts Receivable to any Account Debtor;
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(e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes, in each case
in a manner not inconsistent with the terms of this Agreement and on terms that
are commercially reasonable and in compliance with any mandatory requirements of
applicable law; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent or any Secured Party
to make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Collateral Agent or any Secured Party, or to present
or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of any Grantor or to any claim or action against the Collateral
Agent or any Secured Party. It is understood and agreed that the appointment of
the Collateral Agent as the agent and attorney-in-fact of the Grantors for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Support Document or any Secured
Instrument with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the
<PAGE> 23
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exercise by the Collateral Agent or any Secured Party of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder, under any other Support Document or any Secured Instrument, by law or
otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. While a Notice of Enforcement is in
effect, each Grantor agrees to deliver each item of Collateral to the Collateral
Agent forthwith on demand to the extent reasonably practicable, and it is agreed
that the Collateral Agent shall have the right to take any of or all the
following actions at the same or different times (subject to any mandatory
requirements of law and standards of commercial reasonableness that cannot be
waived by contract): (a) with respect to any Collateral consisting of
Intellectual Property, on demand, to cause the Security Interest to become an
assignment, transfer and conveyance of any of or all such Collateral by the
applicable Grantors to the Collateral Agent, or to license or sublicense,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any such Collateral throughout the world on such terms and
conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained) and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and to enter any premises owned or leased by the Grantors where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at
<PAGE> 24
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any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate and commercially
reasonable. The Collateral Agent shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to Persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold. Each such purchaser at any such sale shall hold
the property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further
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notice, be made at the time and place to which the same was so adjourned. In
case any sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Collateral Agent
until the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. Subject
to Section 9.05 of the Collateral Agency and Intercreditor Agreement, at any
public (or, to the extent permitted by applicable law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free from
any right of redemption, stay or appraisal on the part of any Grantor (all said
rights being also hereby waived and released), the Collateral or any part
thereof offered for sale and such Secured Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to any Grantor therefor. For purposes hereof, a written agreement
to purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement the applicable Notice
of Enforcement shall have been rescinded in accordance with the terms of the
Collateral Agency and Intercreditor Agreement remedied and the Obligations paid
in full. As an alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply
promptly the proceeds of any collection or sale of the Collateral, as well as
any Collateral consisting of cash, as provided in the Collateral Agency and
Intercreditor Agreement.
<PAGE> 26
26
Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor (to the extent not prohibited by the terms of any
license agreement pursuant to which such Grantor is a licensee), and wherever
the same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof. The
use of such license by the Collateral Agent shall be exercised, at the option of
the Collateral Agent, while a Notice of Enforcement is in effect; provided that
any license, sub-license or other transaction entered into by the Collateral
Agent in accordance herewith shall be binding upon the Grantors notwithstanding
whether such Notice of Enforcement is subsequently rescinded in accordance with
the terms of the Collateral Agency and Intercreditor Agreement.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 11.01
<PAGE> 27
27
of the Collateral Agency and Intercreditor Agreement. All communications and
notices hereunder to any Grantor shall be given to it at its address or telecopy
number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of any Support Document or Secured Instrument, any
other Loan Document, any agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing, (b) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the Obligations, or any other amendment or waiver of or any consent to any
departure from any Support Document or Secured Instrument, any other Loan
Document or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the extension of credit by any Secured Party,
and the execution and delivery to the Secured Parties of any notes evidencing
such extensions of credit, regardless of any investigation made by the Secured
Parties or on their behalf, and shall continue in full force and effect until
this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall
<PAGE> 28
28
have been delivered to the Collateral Agent and a counterpart hereof shall have
been executed on behalf of the Collateral Agent, and thereafter shall be binding
upon such Grantor and the Collateral Agent and their respective successors and
assigns, and shall inure to the benefit of such Grantor, the Collateral Agent
and the other Secured Parties and their respective successors and assigns,
except that no Grantor shall have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement and the other Support Documents. This Agreement shall be construed as
a separate agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from or other realization upon any of the Collateral, (iii)
the exercise, enforcement or protection of any of the rights of the Collateral
Agent hereunder or (iv) the failure of any Grantor to perform or observe any of
the provisions hereof.
(b) Without limitation of its indemnification obligations under the
other Support Documents, each Grantor jointly and severally agrees to indemnify
the Collateral Agent and the other Indemnitees against, and hold each of
<PAGE> 29
29
them harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses have resulted
from the gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Support Document or
any Secured Instrument, the consummation of the transactions contemplated
hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Support
Document, or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party. All amounts due under this Section 7.06 shall be
payable on written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, and the Secured Parties under the other Support
Documents and the Secured
<PAGE> 30
30
Instruments are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Agreement or any
other Support Document or consent to any departure by any Grantor therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
any Grantor in any case shall entitle such Grantor or any other Grantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor or Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any
consents required in accordance with Section 11.02 of the Collateral Agency and
Intercreditor Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER SUPPORT
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER SUPPORT DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected
<PAGE> 31
31
or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or any
other Support Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Support Document shall affect any right
that the Collateral Agent or any Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or
<PAGE> 32
32
any other Support Document against any Grantor or its properties in the courts
of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Support Document in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement or any other Support Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security Interest
shall terminate when all the Obligations have been indefeasibly paid in full and
all Secured Instrument Commitments shall have terminated, at which time the
Collateral Agent shall execute and deliver to the Grantors, at the Grantors'
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent (except to the extent that any losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of the Collateral Agent). Subject to Section
9.03 of the Collateral Agency and Intercreditor Agreement, a Grantor shall
automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Grantor shall be automatically released in
the event that all the capital stock of such Grantor
<PAGE> 33
33
shall be sold, transferred or otherwise disposed of to a Person that is not the
Parent, Holdings or a Grantor in a transaction that does not violate any Secured
Instrument.
SECTION 7.15. Additional Grantors. Upon execution and delivery by the
Collateral Agent and a Subsidiary Loan Party of an instrument in the form of
Annex 1 hereto, such Subsidiary Loan Party shall become a Grantor hereunder with
the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any such instrument shall not require the consent of
any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantors as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
CRICKET WIRELESS
COMMUNICATIONS, INC.,
By
--------------------------------------
Name:
Title:
EACH SUBSIDIARY LISTED ON
SCHEDULE I,
By
--------------------------------------
Name:
Title:
EACH LICENSE SUBSIDIARY LISTED
ON SCHEDULE I,
<PAGE> 34
34
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 35
Schedule I to the
Security Agreement
GUARANTORS
<TABLE>
<CAPTION>
Guarantors Address
---------- -------
<S> <C> <C>
</TABLE>
<PAGE> 36
Schedule II to the
Security Agreement
COPYRIGHTS
[See attached]
<PAGE> 37
Schedule III to the
Security Agreement
LICENSES
[See attached]
<PAGE> 38
Schedule IV to the
Security Agreement
PATENTS
[See attached]
<PAGE> 39
Schedule V to the
Security Agreement
TRADEMARKS
[See Attached]
<PAGE> 40
Annex 1 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security
Agreement dated as of September 17, 1999, among CRICKET WIRELESS
COMMUNICATIONS, INC., a Delaware corporation (the "Borrower"),
each subsidiary of the Borrower listed on Schedule I thereto,
each subsidiary of Leap Wireless International, Inc. (the
"Parent") listed on Schedule I thereto (the "License
Subsidiaries"; each such Subsidiary and each such License
Subsidiary individually, a "Guarantor" and, collectively the
"Guarantors"; the Guarantors and the Borrower are referred to
collectively herein as the "Grantors") and STATE STREET BANK AND
TRUST COMPANY, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties.
A. Reference is made to (a) the Collateral Agency and Intercreditor
Agreement (as defined in the Security Agreement) and (b) the Security Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Secured Parties to make loans under the applicable Secured
Instrument. Section 7.15 of Security Agreement provides that additional
Subsidiary Loan Parties may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary Loan Party (the "New Grantor") is executing this
Supplement to become a Grantor under the Security Agreement in order to induce
the Secured Parties to make additional loans under the applicable Secured
Instruments and as consideration for loans previously made under the Secured
Instruments.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor
<PAGE> 41
41
and the New Grantor hereby (a) agrees to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Grantor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Grantor, as security for the payment and performance in
full of the Obligations (as defined in the Collateral Agency and Intercreditor
Agreement), does hereby create and grant to the Collateral Agent, its successors
and assigns, for the benefit of the Secured Parties, their successors and
assigns, a security interest in and lien on all of the New Grantor's right,
title and interest in and to the Collateral (as defined in the Collateral Agency
and Intercreditor Agreement) of the New Grantor. Each reference to a "Grantor"
in the Security Agreement shall be deemed to include the New Grantor. The
Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor as of the date hereof and
(b) set forth under its signature hereto, is the true and correct location of
the chief executive office of the New Grantor.
<PAGE> 42
42
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE> 43
43
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[NAME OF NEW GRANTOR],
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 44
Schedule I
to Supplement No. [ ]
to the Security Agreement
LOCATION OF COLLATERAL
<TABLE>
<CAPTION>
Description Location
- ----------- --------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.26.9
EXHIBIT I
SUBORDINATION AGREEMENT dated as of September 17, 1999,
among CRICKET COMMUNICATIONS, INC., a Delaware corporation
("Holdings"), CRICKET WIRELESS COMMUNICATIONS, INC., a Delaware
corporation (the "Borrower"), LEAP WIRELESS INTERNATIONAL, INC.,
a Delaware corporation (the "Parent"), each subsidiary of the
Borrower listed on Schedule I hereto (each a "Subsidiary", and,
collectively, the "Subsidiaries"), each subsidiary of the Parent
listed on Schedule I hereto (each a "License Subsidiary", and,
collectively, the "License Subsidiaries"; each Subsidiary, each
License Subsidiary, Holdings, and the Parent individually, a
"Subordinated Creditor" and collectively, the "Subordinated
Creditors"), and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties.
Reference is made to the Collateral Agency and Intercreditor Agreement
dated as of September 17, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Collateral Agency and Intercreditor Agreement") among
the Borrower, the Representatives and Unrepresented Holders referred to therein
and the Collateral Agent. Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Collateral Agency and
Intercreditor Agreement. Each Subordinated Creditor acknowledges receipt of a
true and correct copy of the Collateral Agency and Intercreditor Agreement and
agrees to the terms thereof.
The Lenders have agreed to make Loans to the Borrower pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The obligation of the Lenders to make Loans is conditioned on, among
other things, the execution and delivery by the Subordinated Creditors, the
Borrower and the Collateral Agent of a subordination agreement in the form
hereof. In order to induce the Secured Parties to extend credit under the
applicable Secured Instrument, each of the Subordinated Creditors and the
Borrower are willing to execute and deliver this Agreement. The Borrower may
from time to time incur Permitted Additional Obligations that are required to
become Senior Obligations hereunder. Accordingly, the Subordinated Creditors,
the Borrower and the Collateral Agent hereby agree as follows:
<PAGE> 2
2
ARTICLE I
DEFINITIONS
Terms used herein but not defined herein shall have the meanings
set forth in the Collateral Agency and Intercreditor Agreement. Section 1.02 of
the Collateral Agency and Intercreditor Agreement also shall apply to terms used
in this Agreement. In addition to the terms defined elsewhere in this Agreement
or in the Collateral Agency and Intercreditor Agreement, as used herein the
following terms shall have the following meanings:
"Borrower Companies" means the Borrower, the License
Subsidiaries and the Subsidiaries.
"Primary Subordinated Obligations" means, with respect to any
Borrower Company, the following:
(a) all monetary obligations of such Borrower Company, whether
in respect of principal, premium interest or otherwise, in respect of
any Indebtedness owed by such Borrower Company to any Subordinated
Creditor (including any such obligations owing to any other Person for
the direct or indirect benefit of any Subordinated Creditor); and
(b) any fees or similar charges payable to or directly or
indirectly for the benefit of any Subordinated Creditor;
provided that the Primary Subordinated Obligations of a Borrower Company shall
not include any of the foregoing obligations owed to a Subordinated Creditor
that is a Subsidiary Loan Party.
"Secondary Subordinated Obligations" means, with respect to any
Borrower Company, all monetary obligations and other liabilities of such
Borrower Company at any time owing to any Subordinated Creditor (including any
such obligations or other liabilities owing to any other Person for the direct
or indirect benefit of any Subordinated Creditor); provided that Secondary
Subordinated Obligations of a Borrower Company shall not include its Primary
Subordinated Obligations.
<PAGE> 3
3
"Senior Creditors" means the Secured Parties and their
respective successors and assigns.
"Senior Creditor Documents" means the Loan Documents.
"Senior Obligations" means (a) with respect to the Borrower, the
Obligations, and (b) with respect to any other Borrower Company, all monetary
obligations of such Borrower Company under the Support Documents to which it is
a party, including pursuant to the Guarantee Agreement.
"Subordinated Creditors" means each of the Parent, Holdings, the
Subsidiary Loan Parties and such other Persons as shall become parties hereto as
contemplated by Section 5.9 hereof.
"Subordinated Obligations" means the Primary Subordinated
Obligations and the Secondary Subordinated Obligations.
ARTICLE II
SUBORDINATION
SECTION 2.1. Subordination. Each Subordinated Creditor hereby
agrees that all the Subordinated Obligations of each Borrower Company are hereby
expressly subordinated, to the extent and in the manner set forth in this
Article II, to the prior payment in full in cash of all Senior Obligations of
such Borrower Company in accordance with the terms thereof.
SECTION 2.2. Dissolution or Insolvency. Upon any distribution of
the assets of any Borrower Company or upon any dissolution, winding up,
liquidation or reorganization of any Borrower Company, whether in bankruptcy,
insolvency, reorganization, arrangement or receivership proceedings or
otherwise, or upon any assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of any Borrower Company, or otherwise:
(a) the Senior Creditors of such Borrower Company shall first be
entitled to receive payment in full in cash
<PAGE> 4
4
of the Senior Obligations of such Borrower Company in accordance with the terms
of such Senior Obligations and the Support Documents before any Subordinated
Creditor shall be entitled to receive any payment on account of the Subordinated
Obligations of such Borrower Company, whether as principal, interest or
otherwise; and
(b) any payment by, or distribution of the assets of, such
Borrower Company of any kind or character, whether in cash, property or
securities, to which any Subordinated Creditor would be entitled except for the
provisions of this Agreement shall be paid or delivered by the Person making
such payment or distribution (whether a trustee in bankruptcy, a receiver,
custodian or liquidating trustee or otherwise) directly to the Collateral Agent
to the extent necessary to make payment in full in cash of all Senior
Obligations of such Borrower Company remaining unpaid, after giving effect to
any concurrent payment or distribution to the Senior Creditors in respect of the
Senior Obligations, to be held and applied by the Collateral Agent as provided
in the Collateral Agency and Intercreditor Agreement .
SECTION 2.3. Payment of Primary Subordinated Obligations
Prohibited. (a) No payment (whether directly, by exercise of any right of
set-off or otherwise) in respect of any Primary Subordinated Obligation of any
Borrower Company, whether as principal, interest or otherwise, shall be
permitted at any time until all Senior Obligations have been paid in full.
(b) No payment of any Primary Subordinated Obligation that is
prohibited by paragraph (a) above shall be received or accepted by or on behalf
of any Subordinated Creditor.
(c) The provisions of this Section 2.3 shall not apply to the
payment of any Primary Subordinated Obligation to the extent payment thereof is
permitted at the time by each Secured Instrument and the Collateral Agency and
Intercreditor Agreement.
SECTION 2.4. Payment of Secondary Subordinated Obligations
Prohibited Upon Default. No payment (whether directly, by exercise of any right
of set-off or otherwise) in respect of the Secondary Subordinated Obligations of
any
<PAGE> 5
5
Borrower Company, whether as principal, interest or otherwise, shall be
permitted, and no such payment shall be received or accepted by or on behalf of
any Subordinated Creditor, if immediately prior to or after giving effect to
such payment either (a) a Notice of Enforcement is in effect or (b) an event
that with notice, lapse of time or both would entitle the Required Secured
Parties to deliver a Notice of Enforcement.
SECTION 2.5. Certain Payments Held in Trust. In the event that
any payment by, or distribution of the assets of, any Borrower Company of any
kind or character, whether in cash, property or securities, and whether
directly, by exercise of any right of set-off or otherwise, shall be received by
or on behalf of any Subordinated Creditor at a time when such payment is
prohibited by this Agreement, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over to, (a) the Collateral Agent to
the extent necessary to make payment in full in cash of all Senior Obligations
of such Borrower Company remaining unpaid, after giving effect to any concurrent
payment or distribution to the Senior Creditors in respect of such Senior
Obligations, to be held and applied by the Collateral Agent as provided in the
Collateral Agency and Intercreditor Agreement or (b) in the case of any payment
prohibited under Section 2.3 or 2.4 hereof, the Borrower Company from which such
payment was received or, if directed by the Collateral Agent, to the Collateral
Agent to be held and applied by the Collateral Agent as provided in the
Collateral Agency and Intercreditor Agreement.
SECTION 2.6. Subrogation. Subject to the prior indefeasible
payment in full in cash of the Senior Obligations of a Borrower Company, the
applicable Subordinated Creditors of such Borrower Company shall be subrogated
to the rights of the Senior Creditors of such Borrower Company to receive
payments or distributions in cash, property or securities of such Borrower
Company applicable to such Senior Obligations until all amounts owing on the
Subordinated Obligations of such Borrower Company shall be paid in full, and as
between and among a Borrower Company, its creditors (other than its Senior
<PAGE> 6
6
Creditors) and the applicable Subordinated Creditors of such Borrower Company,
no such payment or distribution made to the Collateral Agent by virtue of this
Agreement that otherwise would have been made to the Subordinated Creditors of
such Borrower Company shall be deemed to be a payment by such Borrower Company
on account of its Subordinated Obligations, it being understood that the
provisions of this Agreement are intended solely for the purpose of defining the
relative rights of the Subordinated Creditors, on the one hand, and the Senior
Creditors, on the other hand.
ARTICLE III
OTHER MATTERS REGARDING THE SUBORDINATED OBLIGATIONS
SECTION 3.1. Other Creditors. Nothing contained in this
Agreement is intended to or shall impair, as between and among the Borrower
Companies, their creditors (other than their Senior Creditors) and the
Subordinated Creditors, the obligations of each Borrower Company to pay to the
applicable Subordinated Creditors of such Borrower Company the Subordinated
Obligations of such Borrower Company as and when the same shall become due and
payable in accordance with the terms thereof, or affect the relative rights of
the Subordinated Creditors and the other creditors of the Borrower Company
(other than their Senior Creditors).
SECTION 3.2. Proofs of Claims. In the event of any dissolution,
winding up, liquidation or reorganization of any Borrower Company, whether in
bankruptcy, insolvency, reorganization, arrangement or receivership proceedings
or otherwise, or any assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of any Borrower Company, each
Subordinated Creditor agrees to file proofs of claim for the Subordinated
Obligations owed to it upon demand of the Collateral Agent, in default of which
the Collateral Agent or other authorized representative of the Senior Creditors
is hereby irrevocably authorized so to file in order to effectuate the
provisions hereof. This Section shall not be construed to permit any
Subordinated Creditor to retain any payment received by it in respect of a
Subordinated Obligation that such Subordinated Creditor is not entitled to
receive and retain under any other provision of this Agreement.
<PAGE> 7
7
SECTION 3.3. No Waiver. No right of any Senior Creditor to
enforce this Agreement shall at any time or in any way be prejudiced or impaired
by any act or failure to act on the part of any of the Collateral Agent, the
other Senior Creditors, or any Borrower Company, or by any noncompliance by any
Borrower Company with the terms, provisions and covenants contained herein, and
the Senior Creditors are hereby expressly authorized to extend, renew, increase,
decrease, modify or amend the terms of the Senior Obligations or any security
therefor, and to release, sell or exchange any such security and otherwise deal
freely with the Borrower Companies, all without notice to or consent of any
Subordinated Creditor and without affecting the liabilities and obligations of
the parties hereto.
SECTION 3.4. Acceleration and Remedies; Bankruptcy Filings. Each
Subordinated Creditor agrees that, except for claims submitted in any proceeding
contemplated by Section 3.2 hereof, it will not exercise any remedies or take
any action or proceeding to enforce any Subordinated Obligation if the payment
of such Subordinated Obligation is then prohibited by Section 2.3 or 2.4, and
each Subordinated Creditor further agrees not to file, or to join with any other
creditors of any Borrower Company in filing, any petition commencing any
bankruptcy, insolvency, reorganization, arrangement or receivership proceeding
or any assignment for the benefit of creditors against or in respect of any
Borrower Company or any other marshaling of the assets and liabilities of any
Borrower Company. Each Subordinated Creditor further agrees, to the fullest
extent permitted under applicable law, that it will not cause any Borrower
Company to file any such petition, commence any such proceeding or make any such
assignment referred to above until all Senior Obligations have been paid in
full.
SECTION 3.5. Transfer of Subordinated Obligations. Each
Subordinated Creditor agrees that it will not sell, assign, transfer or
otherwise dispose of all or any part of the Subordinated Obligations owed to it
unless the Person to whom such sale, assignment, transfer or disposition is made
(i) is a Subordinated Creditor hereunder
<PAGE> 8
8
or (ii) shall acknowledge in writing (delivered to the Collateral Agent) that it
shall be bound by the terms of this Agreement, including the terms of this
Section 3.5, as though named herein as a Subordinated Creditor.
SECTION 3.6. Obligations Hereunder Not Affected. (a) All rights
and interests of the Senior Creditors hereunder, and all agreements and
obligations of the Subordinated Creditors hereunder, shall remain in full force
and effect irrespective of:
(i) any lack of validity or enforceability of any Support
Document or Secured Instrument;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Senior Obligations, or any other
amendment or waiver of or consent to departure from the Credit Agreement
or any other Senior Creditor Document (other than this Agreement);
(iii) any exchange, release or nonperfection of any security
interest in any collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, in respect of all or any of the
Senior Obligations; or
(iv) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Borrower Company in respect
of its Senior Obligations or of any Subordinated Creditor in respect of
this Agreement.
(b) This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of the Senior
Obligations or any part thereof is rescinded or must otherwise be returned by
any Senior Creditor upon the insolvency, bankruptcy or reorganization of any
Borrower Company or otherwise, all as though such payment had not been made.
(c) Each Subordinated Creditor hereby authorizes the Senior
Creditors, without notice or demand and without affecting or impairing any of
the obligations of such Subordinated Creditor hereunder, from time to time to
<PAGE> 9
9
(i) renew, compromise, extend, increase, accelerate or otherwise change the time
for payment of, or otherwise change the terms of, the Senior Obligations or any
part thereof and (ii) exercise or refrain from exercising any rights against any
Subordinated Creditor, any Borrower Company or any other Person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUBORDINATED CREDITORS
Each Subordinated Creditor severally represents and warrants to
the Collateral Agent, for the benefit of the Senior Creditors, that:
(a) It is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized.
(b) The execution, delivery and performance by it of this
Agreement and the consummation of the transactions contemplated hereby are
within its powers, have been duly authorized by all necessary action on its
part, require no action by or in respect of, or filing with, any Governmental
Authority (other than such as have been duly taken or made) and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of its certificate of incorporation or by-laws (or other
organizational documents, as applicable) or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon it or any of its
subsidiaries.
(c) This Agreement constitutes a valid and binding agreement of
such Subordinated Creditor, enforceable against such Subordinated Creditor in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and equitable
principles of general applicability.
<PAGE> 10
10
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Notices. All communications and notices hereunder
shall be in writing and shall be given as provided in Section 11.01 of the
Collateral Agency and Intercreditor Agreement; provided that any communication
or notice hereunder to any Subordinated Creditor shall be given to it at the
address or telecopy number set forth under its signature on the signature page
hereof or of the supplement hereto pursuant to which it becomes a party hereto.
SECTION 5.2. Successors and Assigns. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party. All representations,
warranties, covenants, promises and agreements by or on behalf of any
Subordinated Creditor that are contained in this Agreement shall bind its
successors and assigns and inure to the benefit of the Senior Creditors and the
successors and assigns of the Senior Creditors. Each Subordinated Creditor
agrees that it shall not assign or delegate any of its obligations under this
Agreement without the prior written consent of the Collateral Agent, and any
attempted assignment or delegation without such consent shall be void and of no
effect.
SECTION 5.3. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each Subordinated Creditor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or any other Senior Creditor
Document, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to
<PAGE> 11
11
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent or any other Senior Creditor may otherwise have
to bring any action or proceeding relating to any Support Document against any
Subordinated Creditor or its properties in the courts of any jurisdiction.
(c) Each Subordinated Creditor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to any Support
Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each Subordinated Creditor hereby irrevocably consents to
service of process in the manner provided for notices in Section 5.1. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 5.4. Waivers; Amendment. No failure or delay of any
Senior Creditor in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power by any Senior Creditor preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the Senior
Creditors hereunder and under the other documents and instruments creating or
securing their respective Senior Obligations are cumulative and are not
exclusive of any other rights or remedies provided by law. Neither this
Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Collateral
Agent and each Subordinated Creditor and Borrower
<PAGE> 12
12
Company intended to be bound thereby, subject to the consents required in
accordance with Section 11.02 of the Collateral Agency and Intercreditor
Agreement.
SECTION 5.5. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO ANY SUPPORT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 5.6. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace any invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 5.7. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but all of
which, when taken together, shall constitute but one instrument; provided that
this Agreement shall be construed as a separate agreement with respect to each
Subordinated Creditor and may be amended, modified, supplemented, waived or
released with respect to any Subordinated Creditor without the approval of any
other Subordinated Creditor and without affecting the obligations of any other
Subordinated Creditor hereunder. This Agreement shall be effective with respect
to any Subordinated Creditor when a counterpart hereof (or of an
<PAGE> 13
13
instrument executed as provided in Section 5.9 below) which bears the signature
of such Subordinated Creditor shall have been delivered to the Collateral Agent.
SECTION 5.8. Headings. Article and Section headings used herein
are for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 5.9. Additional Subordinated Creditors. Upon execution
and delivery by the Agent and an Affiliate of Holdings or the Borrower or a
Subsidiary Loan Party of an instrument in the form of Annex 1 attached thereto,
such Affiliate or Subsidiary Loan Party shall become a Subordinated Creditor
hereunder with the same force and effect as if originally named as a
Subordinated Creditor herein. The execution and delivery of any such instrument
shall not require the consent of any other Subordinated Creditor hereunder. The
rights and obligations of each Subordinated Creditor herein shall remain in full
force and effect notwithstanding the addition of any Subordinated Creditor as a
party to this Agreement.
SECTION 5.10. Termination. Subject to Section 3.6(b), this
Agreement shall terminate upon the termination of all Secured Instrument
Commitments and the payment in full of the Obligations.
IN WITNESS WHEREOF, the Parent, Holdings, each Subsidiary, each
License Subsidiary, the Borrower and the Collateral Agent have caused this
Agreement to be duly executed by their respective authorized representatives as
of the day and year first above written.
CRICKET WIRELESS
COMMUNICATIONS, INC.,
By
--------------------------------------
Name:
Title:
<PAGE> 14
14
CRICKET COMMUNICATIONS, INC.,
By
--------------------------------------
Name:
Title:
EACH SUBSIDIARY LISTED ON
SCHEDULE I HERETO,
By
--------------------------------------
Name:
Title:
Address: See Schedule I
LEAP WIRELESS INTERNATIONAL,
INC.,
By
--------------------------------------
Name:
Title:
Address:
EACH LICENSE SUBSIDIARY LISTED
ON SCHEDULE I HERETO,
By
--------------------------------------
Name:
Title:
Address: See Schedule I
STATE STREET BANK AND TRUEST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 15
SCHEDULE I TO THE
SUBORDINATION AGREEMENT
Subordinated Creditors
<PAGE> 16
Annex 1 to the
Subordination Agreement
SUPPLEMENT NO. [ ] dated as of , to the Subordination
Agreement dated as of September 17, 1999, among CRICKET
COMMUNICATIONS, INC., a Delaware corporation ("Holdings"),
CRICKET WIRELESS COMMUNICATIONS, INC., a Delaware corporation
(the "Borrower"), LEAP WIRELESS INTERNATIONAL, INC., a Delaware
corporation (the "Parent"), each subsidiary of the Borrower
listed on Schedule I hereto (each a "Subsidiary", and,
collectively, the "Subsidiaries"), each subsidiary of the Parent
listed on Schedule I hereto (each a "License Subsidiary", and,
collectively, the "License Subsidiaries"; each Subsidiary, each
License Subsidiary, Holdings, and the Parent individually, a
"Subordinated Creditor" and collectively, the "Subordinated
Creditors"), and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties.
A. Reference is made to the (a) Collateral Agency and Intercreditor
Agreement (as defined in the Subordination Agreement) and (b) the Subordination
Agreement).
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Subordination Agreement.
C. The Subordinated Creditors and the Borrower have entered into the
Subordination Agreement in order to induce the Secured Parties to make loans
under the applicable Secured Instrument. Section 5.9 of the Subordination
Agreement provides that Affiliates of Holdings or the Borrower and additional
Subsidiary Loan Parties may become Subordinated Creditors under the
Subordination Agreement by execution and delivery of an instrument in the form
of this Supplement. The undersigned Affiliate of Holdings or the Borrower or
Subsidiary Loan Party, as the case may be, (the "New Subordinated Creditor") is
executing this Supplement to become a Subordinated Creditor under the
Subordination Agreement in order to induce the Secured Parties to make
additional loans under the applicable Secured Instruments
<PAGE> 17
17
and as consideration for loans previously made under the Secured Instruments.
Accordingly, the Collateral Agent and the New Subordinated Creditor
agree as follows:
SECTION 1. In accordance with Section 5.9 of the Subordination
Agreement, the New Subordinated Creditor by its signature below becomes a
Subordinated Creditor under the Subordination Agreement with the same force and
effect as if originally named therein as a Subordinated Creditor and the New
Subordinated Creditor hereby (a) agrees to all the terms and provisions of the
Subordination Agreement applicable to it as a Subordinated Creditor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Subordinated Creditor thereunder are true and correct on and as of the
date hereof except for representations and warranties which by their terms refer
to a specific date. Each reference to a "Subordinated Creditor" in the
Subordination Agreement shall be deemed to include the New Subordinated
Creditor. The Subordination Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Subordinated Creditor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity
regardless of whether considered in a proceeding in equity or at law.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Subordinated Creditor and the
Collateral Agent. Delivery of an executed signature page to
<PAGE> 18
18
this Supplement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Subordination
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Subordination Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 5.1 of the Subordination Agreement. All
communications and notices hereunder to the New Subordinated Creditor shall be
given to it at the address set forth under its signature below, with a copy to
the Borrower.
SECTION 8. The New Subordinated Creditor agrees to reimburse the
Collateral Agent for its reasonable out-of-pocket expenses in connection with
this Supplement, including the reasonable fees, disbursements and other charges
of counsel for the Collateral Agent.
IN WITNESS WHEREOF, the New Subordinated Creditor and
<PAGE> 19
19
the Collateral Agent have duly executed this Supplement to the Subordination
Agreement as of the day and year first above written.
[NAME OF NEW SUBORDINATED
CREDITOR],
By
--------------------------------------
Name:
Title:
Address:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent,
By
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.27
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement (the "Memorandum of Agreement") is entered into as
of September 20, 1999 (the "Effective Date"), by and between Ericsson Wireless
Communications Inc. ("Ericsson"), Leap Wireless International, Inc. ("Leap") and
Cricket Wireless Communications, Inc. (Cricket Communications, Inc., together
with its affiliates developing wireless businesses in the United States are
collectively called "Cricket"), with regard to the following facts:
WHEREAS, Ericsson manufactures digital wireless communications equipment based
on technology known as Code Division Multiple Access ("CDMA") and is developing
products for use in wireless communications systems that are capable of
providing greater capacity and improved quality compared to other wireless
communications technology;
WHEREAS, it is Cricket's desire and intent to develop relationships with two (2)
primary vendors, and Cricket intends to utilize Ericsson as a preferred vendor
and purchase at least $330 Million of equipment and services from Ericsson and
its affiliates upon satisfaction of the conditions set forth herein;
WHEREAS, Cricket and Ericsson desire to negotiate the terms and conditions of
one or more definitive agreements (the "Definitive Agreements"), pursuant to
which (i) Cricket will purchase from Ericsson or its affiliate, Ericsson Inc.,
Products and Services for the deployment of mobile and fixed wireless
communications systems based on CDMA digital wireless communications technology
in markets in the United States; and (ii) Leap and Ericsson will further
document the amendment to the Master Agreement Regarding Equipment Procurement
dated September 23, 1998, which amendment is set forth herein;
1
<PAGE> 2
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. Except as defined elsewhere, capitalized terms used herein shall
have the meanings assigned to them in the System Equipment Purchase Agreement
attached hereto as Exhibit C (the "Form of Agreement"). The terms "Competitive
Factors," "Lowest Competing Infrastructure Bid," and "Infrastructure Prices"
have the meaning given to them in the Master Agreement Regarding Equipment
Procurement dated September 23, 1998, by and between Leap and Ericsson's
predecessor in interest, QUALCOMM Incorporated (the "Master Agreement").
2. NOTICES.
2.1. ERICSSON'S FIRST NOTICE. On or before twelve (12) months after the
Effective Date, Ericsson shall give to Leap and Cricket a notice (the "Ericsson
First Notice") that it will be capable of and intends to deliver to Cricket
within twelve (12) months after the date of the Ericsson First Notice Products
and Systems compliant with Minimum Equipment Specifications set forth on Exhibit
A to this Memorandum of Agreement (and, in the case that the notice is delivered
on or after the date six (6) months after the Effective Date, Equipment which
operates in accordance with all applicable 1XRTT standards). The notice shall
specify a date on which Ericsson will be ready to deliver the compliant Systems
(the "Delivery Date). The Delivery Date specified in the notice may not be less
than twelve (12) months after the date of the First Ericsson Notice or more than
twenty-four (24) months after the Effective Date. To be effective, the Ericsson
First Notice must include the detailed Product Specifications required for
Milestone 1 of Exhibit B. If Ericsson has not delivered the Ericsson First
Notice by the date twelve (12) months after the Effective Date, Cricket shall
give Ericsson notice of its failure to give the Ericsson First Notice and, if
Ericsson has not given the Ericsson First Notice within five (5) business days
after notice that the Ericsson First Notice is late, this Memorandum of
Agreement and the Definitive Agreements shall terminate without further
liability to either party.
2
<PAGE> 3
2.2. CRICKET NOTICE. No sooner than the date seven (7) months before the
scheduled Delivery Date but not later than six (6) months before the scheduled
Delivery Date set forth in the Ericsson First Notice, Cricket shall provide
notice (the "Cricket Notice") to Ericsson which notice shall contain each of the
following: (i) if Cricket contends the financing terms and conditions at the
time of the Cricket Notice offered by its Primary Vendor have materially changed
in Cricket's favor, Cricket shall notify Ericsson that it is requesting
comparable financing terms and conditions; and (ii) the price of Products,
Equipment and Systems as established pursuant to Section 3.5 below; if prices
have been agreed upon in the definitive agreement and Cricket contends the
financing terms and conditions at the time of the Cricket Notice offered by its
Primary Vendor have materially changed in Cricket's favor or, if no prices have
been agreed upon in the Definitive Agreements; and (iii) Cricket shall provide
Ericsson with a copy of its current business plan and financial information, so
as to enable Ericsson to evaluate and make an informed business decision with
regard to whether it wishes to offer the proposed vendor financing. The Cricket
Notice shall provide reasonable specificity as to the requested information.
Cricket further agrees to reasonably cooperate with Ericsson by providing any
non-confidential information reasonably requested by Vendor for purposes of
verifying the information contained in Cricket's Notice, and, if requested by
Ericsson, will allow the audit procedure set forth in the Master Agreement to be
followed to verify the pricing set forth in the Cricket Notice.
2.3. NOTICE OF TERMINATION. Through and including the date thirty (30)
calendar days after receipt of the Cricket Notice, Ericsson shall have the
option to terminate this Memorandum of Agreement and Definitive Agreements if
any of the following occur: (i) Ericsson's Board of Directors does not approve
the financing contemplated by Section 3.4; (ii) if Equipment or System prices
have changed from those set forth in the Definitive Agreements as provided in
Section 3.5, and Ericsson disapproves any such proposed new prices; (iii) if the
financing terms change from those
3
<PAGE> 4
set forth in the Definitive Agreements as provide in Section 3.4, and Ericsson
disapproves any such proposed new terms; or (iv) if Cricket's business plan or
financial information as provided by Cricket do not meet Ericsson's
satisfaction. Ericsson shall use commercial reasonable efforts to: (a) satisfy
the milestones; and (b) have its Board of Directors approve the financing. If
any of the items (i) through (iv) above within this Section occur, Ericsson may
terminate this Memorandum of Agreement and the Definitive Agreements by
providing written notice to Cricket (the "Ericsson Second Notice"). If Ericsson
exercises its termination option, the parties shall be relieved of all further
rights and obligations under this Memorandum of Agreement and the Definitive
Agreements; and Ericsson shall have no liability in connection with such
termination. If Ericsson fails to give the Ericsson Second Notice on or before
the date thirty (30) calendar days after receipt of the Cricket Notice, Cricket
shall give Ericsson notice of its failure to give the Ericsson Second Notice
and, if Ericsson has not given the Ericsson Second Notice within five (5)
business days after notice that the Ericsson Second Notice is late, then
Ericsson shall have been deemed to have terminated its obligations hereunder,
and the Memorandum of Agreement and the Definitive Agreements shall terminate
without further liability to either party.
3. PURCHASE OF EQUIPMENT. Unless the Memorandum of Agreement is terminated
pursuant to Section 2.3 above and subject to satisfaction of the conditions set
forth in this Section 3, Cricket agrees to purchase (or license in the case of
software) from Ericsson Products and Services for mobile and fixed wireless
communications Systems based on CDMA digital wireless communications technology
in markets in the United States, pursuant to the terms and conditions set forth
below. The minimum commitment of Cricket to purchase and Ericsson to sell shall
be $330,000,000 of total value. The purchase obligations of Cricket are subject
to: (i) the existence of Available Markets (as defined below) at any time after
Ericsson is prepared to deliver the first System for commercial operations; (ii)
Ericsson being prepared to deliver the first System for
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<PAGE> 5
commercial operation within twenty-four (24) months from the Effective Date of
this Memorandum of Agreement and (iii) Ericsson complying with each of the other
terms set forth in this Section 3. If Ericsson fails to meet the milestones
and/or other requirements set forth in this Section 3, Cricket shall have the
option, as its sole and exclusive remedy to terminate this Memorandum of
Agreement and the Definitive Agreements without any further liability to either
party. The terms and conditions of such purchases shall be as follows:
3.1. TECHNICAL SPECIFICATIONS. The Systems to be purchased by Cricket
and sold by Ericsson shall comply with any specifications agreed to by the
parties in the Definitive Agreements and those additional specifications as
published by Ericsson from time to time thereafter. In addition, in all cases,
the Systems shall meet the "Minimum Equipment Specifications" as set forth on
Exhibit A to this Memorandum of Agreement.
3.2. DEVELOPMENT PROCESS AND MILESTONES. To demonstrate that the
Systems to be sold by Ericsson will meet the Minimum Equipment Specifications
set forth on Exhibit A, the parties agree that Ericsson shall follow the
"Procedures and Milestones for System Development and Monitoring Program" set
forth on Exhibit B.
3.3. DEFINITIVE AGREEMENTS. Within thirty (30) days after the Effective
Date, Ericsson and Cricket shall diligently and in good faith negotiate and
execute a System Equipment Purchase Agreement that shall be on the terms and
conditions set forth herein and on those additional terms contained in the Form
of Agreement. In the event of any inconsistency or conflict between the
Memorandum of Agreement and the Form of Agreement, the parties shall revise the
Form of Agreement to be consistent with the terms and concepts contained in this
Memorandum of Agreement. If the parties have not reached agreement on the
Definitive Agreements within thirty (30) days, the parties shall continue
efforts to negotiate the Definitive Agreements, and this Memorandum of Agreement
will continue in full force and effect. The parties shall complete negotiation
of those areas noted as open issues on the Form of Agreement (including but not
limited
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to missing or incomplete exhibits) and those other areas which require
modification to reflect unique aspects of the Ericsson System and procedures
provided that such modifications are not inconsistent with non-operational
issues provide that no such modification shall require Cricket to accept changes
which materially and adversely impact the cost of acquiring, installing,
maintaining or operating the System, unless such change was expressly
contemplated with regard to an unopen item. Other provisions of the Form of
Agreement shall not be subject to negotiation and the negotiation of open issues
(including prices) will not be inconsistent with terms established herein or in
the Form of Agreement which are not designated as "open."
3.4. VENDOR FINANCING. Ericsson shall provide to Cricket, vendor
financing in an amount not less than [*] of the purchase price of the System(s)
and Equipment acquired by Cricket from Ericsson on the terms and conditions set
forth in the term sheet attached hereto as Exhibit D, or such more favorable
terms as may be available to Cricket on the date of the Cricket Notice for
shipments on the date that Ericsson intends to first ship Products to Cricket,
if Cricket provides the Cricket Notice as provided above, the terms and
conditions of such financing shall be no less favorable in rates and terms and
conditions to Cricket (and its affiliates) than those terms and conditions
offered by Cricket's other Primary Vendor for comparable financing on the date
Cricket provides Cricket's Notice. "Primary Vendor" means Cricket's or its
affiliates then current primary (i.e., in terms of dollar cost of Equipment then
on order and which has been ordered within the previous three (3) months) vendor
for supplying the Systems. Within sixty (60) days after the Effective Date, the
parties agree to diligently and in good faith negotiate and execute: (i)
definitive form of loan documents, which are substantially similar to those loan
documents of Cricket's other Primary Vendor; and (ii) an intercreditor
agreement. Cricket shall diligently and in good faith attempt to obtain the
Primary Vendor's written approval to the form of an intercreditor agreement to
be used between
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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Ericsson and Primary Vendor. The parties agree to execute documents and
amendments as necessary to accomplish the foregoing.
3.5. PRICING. The price for the Systems to be purchased by Cricket
pursuant to this Memorandum of Agreement shall not be higher than the pricing
for comparable Systems available to Cricket from the Primary Vendor as of the
date of the Cricket Notice for Systems and Products to be delivered on the date
of first shipment of Ericsson Products to Cricket as established by Cricket
pursuant to the Cricket Notice provided as required by Section 2.2
above. The parties agree to use commercially reasonable efforts to cause the
determination of Ericsson's infrastructure prices versus the infrastructure
prices of the Primary Vendor, to be based on an "apples-to-apples" comparison
(taking into consideration not only the pricing of products and services, the
costs to obtain, install, maintain and operate the system, and the terms and
conditions of any other material consideration proposed to be given or received
by any competing bidder, including the financing terms and conditions and each
of the Competitive Factors (as that term is defined in the Master Agreement).
3.6. VENDOR PREFERENCE. Provided that: Ericsson (i) has given a
timely Ericsson First Notice; (ii) has satisfied the conditions of Section 3
above; and (iii) has not given an Ericsson Second Notice, Cricket shall purchase
from Ericsson a System for the next Available Market (the "Test Market")
deployed by Cricket or its affiliates after the earlier of: (a) the date
twenty-four (24) months after the Effective Date; or (b) twelve (12) months
after the gives the Ericsson First Notice. "Available Market" means any market
where Cricket or any of its affiliates have acquired a license to build and
operate a System, which is not yet deployed and whether such market currently
exists as of the Effective Date or is acquired thereafter; provided however, it
excludes any Contiguous Markets. A "Contiguous Market" means a market owned by
Cricket or any of its affiliates that is geographically close or proximate to
an existing market where Cricket or any of its affiliates have deployed a
System, and where operating synergies would be
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<PAGE> 8
gained or capital expenditures would be avoided by deploying additional Systems
identical to those in the existing market (i.e., Salt Lake City, UT would be
considered a Contiguous Market to Provo, UT, since operating efficiencies would
exist). The System deployed in the Test Market will be subject to a "soak"
period, whereby it will be operated for six (6) months after the Substantial
Completion date (the "Test Period") in order to determine whether it is
operating in accordance with the Definitive Agreements and the Specifications.
Provided the System in the Test Market has operated in accordance with the
Specifications and Definitive Agreements during the Test Period, thereafter
Cricket shall purchase from Ericsson any additional Products and Services for
deployment in its remaining Available Markets in accordance with the following:
(i) if as of the expiration of the Test Period the projected cost (as reasonably
set forth in Cricket's business plan) to deploy Products and Services in all of
the remaining Available Markets is equal to or greater than $330,000,000 (less
the price of the Products and Services previously deployed in the Test Market),
then Cricket agrees to purchase a minimum of $330,000,000 (less the price of the
Products and Services previously deployed in the Test Market) of Products and
Services for deployment in such remaining Available Markets; or (ii) if as of
the expiration of the Test Period the projected cost (as reasonably set forth in
Cricket's business plan) to deploy Products and Services in all of the remaining
Available Markets is less than $330,000,000 (less the price of the Products and
Services previously deployed in the Test Market), then Cricket shall purchase
from Ericsson all of its Products and Services requirements for the Remaining
Markets until such time as Cricket has purchased from Ericsson Products and
Services with an aggregate total cost of $330,000,000 (less the price of the
Products and Services previously deployed in the Test Market). Cricket agrees
that it will deploy its Products and Services in good faith in a commercially
reasonable manner and will not arrange the deployment schedule so as to deploy
Products and Services in the Contiguous Markets where the purpose is to delay
the deployment of Ericsson's Products and Services in the Test Market.
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<PAGE> 9
4. EFFECT ON MASTER AGREEMENT REGARDING EQUIPMENT PROCUREMENT. The parties
agree that this Memorandum of Agreement and the purchases described hereunder
satisfies the obligations of the parties under the Master Agreement as it
relates to the Request for Proposal issued by Cricket prior to the Effective
Date. In addition, as further consideration for the purchase commitments of
Cricket as set forth in this Memorandum of Agreement, Ericsson agrees that upon
the earlier of: (i) execution of the Definitive Agreements; or (ii) thirty (30)
days after the Effective Date of this Memorandum of Agreement; (y) the
provisions of Section 2.4.4 of the Master Agreement be and hereby are terminated
and such Section shall be of no further force or effect; and (z) for all future
purchases by Leap and/or Cricket and/or their affiliates under Section 2 of the
Master Agreement, Ericsson's price must be not higher than the Lowest Competing
Infrastructure Bid (defined in the Master Agreement) or there shall be no
obligation to award any procurement to Ericsson (i.e., the parties hereby
eliminate the provisions in Section 2 that require Leap and/or Cricket and/or
their affiliates in certain circumstances to purchase Infrastructure Equipment
(defined in the Master Agreement) from Ericsson if the Ericsson Infrastructure
Prices (defined in the Master Agreement) are within 110% of the Lowest Competing
Infrastructure Bid). Without affecting the immediate enforceability of the
forgoing, the parties agree to negotiate and execute a more formal amendment to
the Master Agreement that will memorialize the foregoing amendments and which
shall be executed concurrently with the Definitive Agreements. Except as set
forth above, the term and provisions of the Master Agreement shall continue in
full force and effect. Notwithstanding the foregoing, pricing and purchase terms
for purchases made under this Memorandum of Agreement and the Definitive
Agreements are not affected by the Master Agreement.
5. SCOPE. It is the intent and understanding of the parties that this
Memorandum of Agreement shall be binding on both parties notwithstanding the
fact that the parties intend to negotiate one (1) or more Definitive Agreements
and the Master Agreement
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Amendment to document the terms of the transaction outlined herein and intend
that the final terms of any business arrangements between the parties with
respect to the subject matter hereof shall be set forth in the Definitive
Agreements and the Master Agreement Amendment.
6. TERM. This Memorandum of Agreement shall become effective as of the
Effective Date and remain in effect for twenty-four (24) months thereafter. Once
the Definitive Agreements and Master Agreement Amendment are executed, this
Memorandum of Agreement shall be superseded and of no further force or effect.
7. PUBLICITY. Except as may otherwise be required by law or except as may
otherwise be permitted by this Memorandum of Agreement, each party shall keep
this Memorandum of Agreement and its provisions confidential, and shall not
disclose or publicize any information contained herein without first obtaining
the written consent of the other party. The parties however intend to make a
public announcement of this Memorandum of Agreement and agree to work together
to promptly agree on the terms and conditions of that announcement and to cause
that announcement to be promptly published concurrently (i.e., the same day) as
the press release made by Cricket regarding its new agreement with its other
vendor. Said public announcement including questions and answers will be
pre-approved and substantially in the form of the attached hereto as Exhibit E.
8. NOTICES. All notices and billings shall be in writing and sent by
registered or certified mail, postage prepaid, or via facsimile with
confirmation to the following addresses:
TO ERICSSON: TO LEAP AND/OR CRICKET:
Ericsson Wireless Cricket Wireless Communications, Inc.
Communications Inc. 10307 Pacific Center Court
6455 Lusk Boulevard San Diego, CA 92121
San Diego, CA 92121 ATTN: President
ATTN: President
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Facsimile No.: 858-332-7188 Facsimile No.: 858-882-6040
WITH A COPY TO: General Counsel WITH A COPY TO: General Counsel
at the same address at the same address
Facsimile No.: 858-332-7189
9. ASSIGNABILITY. Neither of the parties to this Memorandum of Agreement
shall assign any of its rights or delegate any of its obligations under this
Memorandum of Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Ericsson shall have the right to assign this
Memorandum of Agreement to its affiliate, Ericsson Inc.; provided, however, such
assignment shall not relieve Ericsson of its obligations hereunder or cause
Cricket to incur any additional costs or expenses.
10. ENTIRE AGREEMENT; MODIFICATION. This Memorandum of Agreement constitutes
the entire agreement between the parties and supersedes all prior negotiations,
representations and agreements between the parties with respect to the subject
matter hereof. No modification, variation or amendment of this Memorandum of
Agreement shall be effective unless made in writing and signed by both parties
to this Memorandum of Agreement.
11. CAPITALIZED TERMS. Except as defined elsewhere, capitalized terms used
herein shall have the meanings assigned to them in the Form of Agreement.
12. INDEPENDENT CONTRACTOR. The parties expressly intend and agree that each
is acting as an independent contractor and not as an agent or employee of the
other. This Memorandum of Agreement shall not be construed as a partnership
agreement. Neither party shall have responsibility for any of the other party's
debts, liabilities, or other obligations nor for any acts or omissions of the
other party or any of its employees or agents.
13. GOVERNING LAW; VENUE. This Memorandum of Agreement shall be governed by
the laws of the State of California, United States of America (without regard to
its conflict-of-laws provisions), and any legal proceeding arising out of or
relating to this
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Memorandum of Agreement shall be heard only before a court of competent
jurisdiction in San Diego County, California.
14. SEVERABILITY. Any provision of this Agreement which is declared
unenforceable in any jurisdiction by a court or other governmental entity of
competent jurisdiction therein shall be ineffective in such jurisdiction,
without invalidating any other provision hereof and without affecting the
validity or enforceability of such provision in any other jurisdiction.
15. NON-EXCLUSIVE RELATIONSHIP. Without limiting or otherwise affecting the
rights under Section 3.6, nothing in this Memorandum of Agreement shall be
construed to create an exclusive relationship between Ericsson and Cricket or to
prevent Ericsson or Cricket from entering into any discussion, negotiation or
relationship with any other party.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Agreement as of the Effective Date.
ERICSSON WIRELESS COMMUNICATIONS INC. CRICKET WIRELESS COMMUNICATIONS, INC.
By: /s/ AKE PERSSON By: /s/ SUSAN SWENSON
------------------------------- ----------------------------------
Ake Persson, President Susan Swenson,
Chief Executive Officer
LEAP WIRELESS INTERNATIONAL, INC.
By: /s/ SUSAN SWENSON
-------------------------------
Susan Swenson, President
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Exhibit A
Minimum Equipment Specifications
[Four Pages of Text Deleted Pursuant to Confidential Treatment Request]
<PAGE> 14
EXHIBIT B
PROCEDURES AND MILESTONES
FOR SYSTEM DEVELOPMENT AND MONITORING PROGRAM
[Four Pages of Text Deleted Pursuant to Confidential Treatment Request]
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EXHIBIT C
SYSTEM EQUIPMENT PURCHASE AGREEMENT
This System Equipment Purchase Agreement is made and is effective as
of _________ __, 1999 (the "Effective Date"), by and between Cricket Wireless
Communications, Inc. a Delaware corporation (the "Owner"), and Ericsson Wireless
Communications Inc., a Delaware corporation (the "Vendor").
RECITALS:
A. WHEREAS, the Owner desires to purchase CDMA PCS systems
for U.S. based markets pursuant to this Contract; and
B. WHEREAS, the Vendor desires to provide such CDMA PCS systems to
the Owner, as described in Exhibit A, including but not limited to the Vendor's
obligation to develop, manufacture, engineer, equip, integrate, install, test
and provide technical assistance for said PCS systems in accordance with the
terms and conditions set forth herein; and
C. WHEREAS, the mutual goal of the parties hereto is to build CDMA
PCS systems that are capable of integrating new technologies while reducing
costs over time in a highly competitive marketplace;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in this Contract, the Owner and the Vendor hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 Definitions. In addition to the terms listed below, certain
additional terms are defined elsewhere in this System Equipment Purchase
Agreement and in the Exhibits, and all definitions are subject to the provisions
of subsection 1.2 hereof. As used in this Contract, the following terms have the
following meanings:
"Annual Release Maintenance Fee" means, with respect to each System,
those recurring annual fees of the Vendor as described on Exhibit ___. [TO BE
NEGOTIATED]
"Applicable Laws" mean, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, all U.S. or foreign laws, treaties, ordinances, judgments, decrees,
injunctions, writs, orders and stipulations of any court, arbitrator or
governmental agency or authority and statutes, rules, regulations, orders and
interpretations thereof of any federal, state, provincial, county, municipal,
regional, environmental or other Governmental Entity, instrumentality, agency,
authority, court or other body: (i) applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is subject;
or (ii) having jurisdiction
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over all or any part of a System or the Work to be performed pursuant to the
terms of this Contract.
"Applicable Permits" mean any waiver, exemption, zoning, building,
variance, franchise, permit, authorization, approval, license or similar order
of or from any country, federal, state, provincial, county, municipal, regional,
environmental or other Governmental Entity, instrumentality, agency, authority,
court or other body having jurisdiction over all or any part of a System or the
Work to be performed pursuant to the terms of this Contract.
"Available Market" is defined in subsection 2.1
"AXE Switch" means Vendor's CDMA version of its switch.
"Backwards Compatible" or "Backwards Compatibility" means: (i) with
respect to new Software Maintenance Releases, Software Upgrades, Software
Combined Releases and Software Enhancements, the ability of each of the two (2)
prior older versions of Software to remain fully functional in accordance with
and up to the performance levels to which each was performing immediately prior
to the integration with the new Software Maintenance Release, Software Upgrade,
Software Combined Releases and/or Software Enhancement, and the ability of such
new Software Maintenance Release, Software Upgrade, Software Combined Release
and/or Software Enhancement to interoperate and be compatible with all such
functionality of such prior Software versions and with all existing in-service
Vendor provided Products already installed in the System; (ii) with respect to
all Equipment Upgrades, and Equipment Combined Releases to the extent of that
portion of the Equipment Combined Release which is the Equipment Upgrade or the
use of which by Owner is not optional without losing the benefit of the
Equipment Upgrade (for purposes of this Contract, a "New Equipment Release"
means collectively the Equipment Upgrade and such non-optional portion of the
Equipment Combined Release), the ability of the existing infrastructure to
remain fully functional in accordance with and up to the performance levels to
which it was performing immediately prior to the integration with the New
Equipment Release, and the ability of the New Equipment Release to interoperate
and be fully compatible with all such functionality of such existing
infrastructure; and (iii) with respect to each of Software Maintenance Releases,
Software Upgrades, Software Combined Releases, Software Enhancements and New
Equipment Releases, the ability of such Products to comply with the existing
interfaces to other third party equipment already deployed in the System and
with respect to which Vendor is already in compliance prior to the introduction
of the Software Maintenance Releases, Software Upgrades, Software Combined
Releases, Software Enhancements and New Equipment Releases.
"Base Station ("BTS")" means the radio Products that handle the
Owner's PCS radio traffic in a designated cell. The Base Station includes all
amplification, modulation, synchronization and other circuitry required to
process a radio signal.
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"Base Station Controller ("BSC")" means the radio Products that
control the Owner's PCS radio traffic.
"Beta Testing" means pre-launch testing conducted by Owner in
respect of which no payment from customers is made to the Owner for the Services
provided in connection therewith.
"Business Day" means any day of the year other than a Saturday,
Sunday or a United States Federal holiday.
"Capacity Guarantee" is defined in subsection 16.3.
"Certificate of Final Acceptance" is defined in subsection 10.1(f).
"Certificate of Substantial Completion" is defined in subsection
10.1(d).
"Change Orders" are defined in subsection 11.1.
"Claim" is defined in subsection 15.2.
"Claim Notice" is defined in subsection 15.2.
"Contiguous Market" is defined in subsection 2.12.
"Contract" means this System Equipment Purchase Agreement, together
with all Exhibits, Schedules and Specifications hereto, together with all
amendments, modifications and supplements.
"Contract Term" means the period commencing on the Effective Date
and ending seven (7) years therefrom, unless terminated earlier in accordance
with the terms and conditions hereof, or unless extended by the mutual written
consent of the parties hereto.
"Core System" means that collection or aggregation of Products,
which are designed by Vendor to operate as a functional entity in accordance
with the applicable Specifications or otherwise represented by Vendor in its
published information as being capable of operating as a functional entity. By
way of example and not limitation, a circuit pack or connecting cable which is
an OEM item, and which forms part of Vendor's CDMA version of the AXE switch
("AXE Switch") would form part of a Core System, whereas a call center system or
voice mail system, though it interfaces with the System, would not be part of a
Core System, since various call center systems or voice mail systems
manufactured by several alternate manufacturers could be utilized by Owner, and
operated functionally independent of the selection of Vendor's Equipment for the
MSC.
[DELETION OF DEFINITION RELEVANT TO CALCULATION OF THE ANNUAL
RELEASE MAINTENANCE FEE. ARMF FEE STRUCTURE, AS WELL AS OTHER CONCEPTS IN THIS
CONTRACT
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PERTAINING TO SOFTWARE, MAY NEED TO BE MODIFIED TO REFLECT A MUTUAL
UNDERSTANDING AND THE CONSIDERATION OF VENDOR'S SOFTWARE STRUCTURE, RELEASE AND
FEE STRUCTURE. TO BE NEGOTIATED.]
"Cricket Notice" is defined in subsection 1A.2.
"Customer Price Guide" means the Vendor's published price
notification release or releases furnished for the purpose of communicating to
customers the Vendor's list pricing or pricing related items applicable to
Products. [TO BE NEGOTIATED.]
"Defects and Deficiencies", "Defects or Deficiencies" or "Defective"
means any one (1) or a combination of the following items or other items of a
substantially similar nature:
(a) when used with respect to the performance of Services, that such
Services are not provided in a careful and workmanlike manner and in
accordance with the Specifications, using material which is free from
defects;
(b) when used with respect to structures, materials or Products,
that such items: (i) are not new and of good quality and free from defects
in materials and workmanship; or (ii) do not conform to the
Specifications; or (iii) with respect to Software, that such Software does
not process dates correctly; or
(c) with respect to all other Work, that the same: (i) are not free
of defects in workmanship and materials; or (ii) do not conform to the
Specifications.
"Delivery Date" is defined in subsection 1A.1.
"Discontinued Products" are defined in subsection 12.1.
"Documentation" means the Operating Manuals, the Maintenance and
Instruction Manuals, the Training manuals, the "as-built" Site parameters and
all other documentation necessary for the operation of the System, any
Expansions and/or any material part thereof.
"Dollars" or "U.S. $" or "$" means the lawful currency of the United
States of America.
"Equipment" means all equipment, hardware and other items of
personal property (including, without limitation, any Documentation furnished
hereunder in respect thereof) which are required to be furnished by the Vendor
in accordance with the terms and conditions of this Contract, including repair
and replacement parts.
"Equipment Combined Release" is defined in subsection 14.2.1.
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"Equipment Enhancements" mean modifications or improvements made to
the Equipment which improve the performance or capacity of such Equipment
(sometimes referred to by the Vendor as its "Class B" changes).
"Equipment Upgrade" means a change or modification in any delivered
Equipment which fixes or otherwise corrects faults, design shortcomings or
shortcomings in meeting the Specifications, required to correct Defects of a
type that result in inoperative conditions, unsatisfactory operating conditions,
or which is recommended to enhance safety (sometimes referred to by the Vendor
as its "Class A" changes).
"Expansions" mean any additional Products or Services ordered by the
Owner from the Vendor, which may include growth to existing Systems and
additional Products, Services and Systems.
"FCC" means the Federal Communications Commission.
"Final Acceptance" means, with respect to any System, the date that
Owner signs the Certificate of Final Acceptance.
"Fit" means physical size or mounting arrangement (for example,
electrical or mechanical connections).
"Force Majeure" is defined in Section 17.
"Form" means physical shape.
"Function" means Product features and performance, or with respect
to other items, the features and performance of such items.
"Funds" are defined in subsection 2.10.
"Governmental Entity" means the United States federal government or
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranteed Substantial Completion Date" means, with respect to a
System, the date by which Substantial Completion must be achieved by the Vendor.
The Guaranteed Substantial Completion Date is determined based on the Site that
is identified by the Owner in writing to be the last Site to be included in the
definition of such System (i.e., all previous Sites in such system have been
completed) (the "Last Site"). If the Owner has issued a Purchase Order to the
Vendor to proceed with Site Preparation activities with respect to the Last
Site, the Guaranteed Substantial Completion Date shall be the date which is
sixty (60) calendar days after the later of the date of such Purchase Order or
the date that written notice identifying the Last Site was issued.
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<PAGE> 20
If the Owner has performed the Site Preparation activities with respect to
the Last Site, the Guaranteed Substantial Completion Date shall be the date
which is thirty (30) calendar days after the date the Owner issues a Site
Preparation Substantial Completion Certificate with respect to the Last Site to
the Vendor; provided that in all of the foregoing circumstances, the Guaranteed
Substantial Completion Date shall be delayed to a date mutually acceptable to
Vendor and Owner, acting reasonably, in the event that:
i. Owner has not satisfied its obligations, if any, for Site
Preparation for the installation of the switch by at least twelve
(12) weeks prior to the Substantial Completion Date (in this case,
the parties agree that the period of delay shall be equal to the
number of days that the Owner's Site Preparation obligations, if
any, are delayed beyond such date which is twelve (12) weeks prior
to the Substantial Completion Date); or
ii. extreme weather and other unusual environmental conditions beyond
Vendor's reasonable control delays Vendor's completion of
Substantial Completion activities (in this case the parties agree
that the period of delay shall be equal to the period of time
associated with the duration of such extreme or unusual
condition(s)); or
iii. Vendor is not provided with all necessary and reasonable access to
the System and each Site; or
iv. at the time Owner identifies the Last Site, more than 10% of the
total number of Sites for the System are also identified
contemporaneously therewith.
Owner shall also involve Vendor through all stages of the Site Acquisition
process. In all cases, Owner shall be responsible for the provisioning of
backhaul facilities required at all Sites. Such provisioning must be completed
prior to the start of Equipment integration by the Vendor at each site.
"Hazardous Materials" mean material designated as a "hazardous
chemical substance or mixture" by the Administrator, pursuant to Section 6 of
the Toxic Substance Control Act, a "hazardous material" as defined in the
Hazardous Materials Transportation Act (49 U.S.C. 1801, et seq.), or a
"hazardous substance as defined in the Occupational Safety and Health Act
Communication Standard (29 CFR 1910.1200).
"In Revenue Service" or "In Revenue" means, with respect to a
System, the commercial operation of such System, exclusive of operation for
purposes of determining compliance with this Contract or Beta Testing, whether
or not revenue is actually being generated.
"Initial Period" is defined in subsection 10.1(f).
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"Initial Software Features" mean those Software features contained
in Vendor's standard base generic software releases together with those
additional optional software features listed in Exhibit C.
"Installation and Integration" are defined in Exhibit F.
"Intellectual Property Rights" are defined in subsection 15.2.
"Interoperability" means the ability of the Products to operate with
other Products and to operate with and within a System, and are in accordance
with the Specifications.
"Liquidated Damages" is defined in subsection 16.1.
"List Price" means Vendor's published "network wireless systems
price reference guide" or other price notification releases furnished by Vendor
for the purpose of communicating Vendor's prices or pricing related information
to Vendor's customers; however this does not include firm price quotation.
"Losses" mean any claims, demands, suits, proceedings, causes of
action, damages, costs, expenses, liabilities, reasonable attorneys' fees and
amounts paid in settlement.
"Major Outage" means the cessation of operation of a System or
System Element caused by a Defect or Deficiency attributable solely to Vendor,
which has a material adverse impact on Owner's ability to operate or maintain
such System, render billings to Owner's subscribers, or which causes a material
interruption in Owner's ability to continue to furnish or offer service
functionalities and features to such subscribers. In addition, the following
capacity and/or coverage impairment conditions shall be considered a "Major
Outage":
(i) Any impairment caused by a Defect or Deficiency
attributable solely to Vendor that has the effect of reducing by
greater than [*] the number of traffic channel resources available
in the System for access by Owner's subscribers; and/or
(ii) Any impairment caused by a Defect or Deficiency
attributable solely to Vendor that has the effect of rendering
greater than [*] of the equipped antenna sectors in the System
unable to process origination, termination or hand-off requests; or
that reduces the forward channel power of more than [*] of the
equipped sectors in the System by greater than [*]; and/or
(iii) The persistent occurrences of an impairment referenced
in paragraphs (i) or (ii) above which, although each occurrence
falls below the [*] threshold, each occurrence exceeds a threshold
of greater than [*]
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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of the applicable metric set forth above, and the total number of
such occurrences is greater than [*] events during the Initial
Period;
provided, however, that the foregoing definition shall only be applicable for
purposes of this Contract for the issuance of a Certificate of Final Acceptance
at the end of the Initial Period.
"Maintenance and Instruction Manuals" mean the manuals listed in
Exhibit P and prepared by the Vendor and delivered to the Owner pursuant to
Section 9.
"Manufacturing" means the fabrication of the Equipment.
"Master Agreement" means the Master Agreement Regarding Equipment
Procurement dated September 23, 1998, by and between Leap and Vendor's
predecessor in interest, QUALCOMM Incorporated.
"Material Adverse Effect" is defined in subsection 24.2(b).
"Milestones" mean the performance milestones set forth in the
Exhibits.
"Minimum Equipment Specification" means [SEE MOA].
"Minimum Purchase Commitment" is defined in subsection 5.1(i).
"MSC" means a mobile switching center.
"Network Planning" means Work related to the design and engineering
of a System, including frequency clearance.
"Operating Affiliates" mean a subsidiary or affiliate of Owner which
is authorized to operate a PCS System and which places Purchase Orders pursuant
to this Contract.
"Operating Manuals" mean the operating and configuration manuals
listed in Exhibit P to be prepared by the Vendor and delivered to the Owner
pursuant to Section 9 containing detailed procedures and specifications for the
operation of any System, AXE SWITCH any Expansions and/or any part thereof
including but not limited to BTS manuals and BSC manuals.
"Operator" shall mean the Owner, a Related Operator, an Operating
Affiliate or any independent contractor appointed by the Owner, which operates a
System.
"Optimization Services" mean the RF optimization services described
on Exhibit G.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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"Optional Software Features" mean Software features for PCS Products
available to Owner on a optional, separate fee basis.
"PCS" means personal communication services authorized by the
Federal Communications Commission.
"Person" means an individual, partnership, limited partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity of whatever nature.
"Primary Vendor" is defined in subsection 2.10.
"Products" mean the collective reference to the Equipment and the
Software provided by the Vendor or any Subcontractor.
"Proprietary Information" is defined in subsection 26.18.
"Punch List" means that list prepared in conjunction with any
certificate which contains one (1) or more immaterial non-service-affecting
items which have not been fully completed as of the date of the accompanying
certificate; provided that such incomplete portion of the Work shall not, during
its completion, materially impair the normal daily operation of a System in
accordance with the Specifications.
"Purchase Order" means a written notice given by the Owner to the
Vendor in compliance with the provisions of this Contract specifying the
Products, Services or other items of Work that the Vendor is authorized to
supply or commence in compliance with the terms of this Contract.
"Purchase Order Date" means the date on which any Purchase Order is
issued by the Owner in accordance with the terms of this Contract.
"Related Operator" means an entity (other than Owner) which holds a
license issued by the FCC permitting the holder to provide wireless PCS
services, which has entered into a contract with Owner to provide management
responsibilities with respect to the operation of such a service, which may
include agreements pursuant to which Owner resells to or shares with such entity
capacity on the Owner's System as, for example, when the Related Operator's cell
site equipment is interconnected with the Owner's MSC.
"RF" means radio frequency.
"RTM License" is defined in subsection 13.6.
"RTU License" is defined in subsection 13.1.
"Services" mean the collective reference to all of the services to
be furnished by the Vendor as part of the Work including but not limited to all
design, engineering,
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network planning, construction, interoperability, supply, delivery,
installation, testing, training, repair, maintenance, technical and other
support services, and any and all other services to be furnished by the Vendor
as part of the Work in accordance with the terms of this Contract.
"Site" means the physical location of a System Element Facility.
"Site Acceptance Certificate" means a document submitted by the
Vendor to the Owner and signed by an authorized representative of the Owner and
an authorized officer of the Vendor stating that, in accordance with the
requirements of this Contract, the Vendor has successfully completed all Site
Acceptance Tests with respect to the Sites specified therein.
"Site Acceptance Tests" mean the collective reference to the
performance and reliability demonstrations specified in the Exhibits to
determine whether a site meets the Specifications and other requirements of this
Contract.
"Site Acquisition" means the activities to be performed by the Owner
and/or its subcontractors in connection with identifying and acquiring
sufficient rights to Sites.
"Site Acquisition Substantial Completion" means, with respect to any
System, the point at which the Owner shall have: (i) acquired, by purchase,
lease or otherwise, rights to a sufficient number of Sites in the judgment of
the Owner; and (ii) that, with respect to all Sites within such System, all land
use and/or lease requirements necessary to be satisfied prior to the start of
construction activities in accordance with Applicable Laws have been satisfied.
"Site Acquisition Substantial Completion Date" means, with respect
to any System, the date on which the Owner shall have achieved Site Acquisition
Substantial Completion.
"Site Preparation" means the demolition, construction and renovation
work (for example, roads, grading, fencing and structural improvements,
including but not limited to any buildings, towers and commercial power) and the
preparation of co-location sites necessary for the installation of Equipment or
the operation of the System, Expansions and/or any part thereof.
"Site Preparation Substantial Completion" means the completion of
all Site Preparation with respect to a Site except for Punch List items.
"Site Preparation Substantial Completion Certificate" is defined in
subsection 10.1(b).
"Software" means: (i) the computer software licensed to the Owner
pursuant to the terms of this Contract; (i) any Software Enhancements, Software
Maintenance
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Releases, Software Combined Releases and Software Upgrades; and (iii) any
Documentation furnished hereunder in respect of clauses (i) and/or (ii) of this
definition.
"Software Combined Release" means a Software Upgrade, which is at
any time combined with any Software Enhancement.
"Software Enhancements" means modifications or improvements made to
the Software relating to Products which improve performance, capabilities or
capacity of the Software revision level with which it is associated or which
provide additional functions to the Software. [To be negotiated.][.
"Software Maintenance Release" means issues of Software which
correct defects in preceding versions of Software.
"Software Upgrades" mean periodic updates to the Software issued by
the Vendor to the Owner under Warranty and Software maintenance obligations
[correct defects in the Software, or otherwise to correct shortcomings in the
Software. [To be negotiated.]
"Source Code" means any version of Software incorporating high level
or assembly language that generally is not directly executable by a processor.
"Spares" is defined in Exhibit K.
"Specifications" means the collective reference to the
specifications and performance standards (including all of the Services and
Products) as set forth in this Contract, including but not limited to Exhibit I,
Exhibit J, Exhibit M; provided that: (i) the Specifications shall be deemed to
include a requirement that all of the Products and Services shall be in
accordance with ANSI standards except when otherwise stated in a specific
Exhibit or otherwise agreed by the parties; and (ii) with respect to Services
and Products for which specifications and performance standards are not provided
and listed in a specific Exhibit, the term "Specifications" shall refer to
Vendor's published specifications in respect thereof.
"Subcontractor" means a contractor, vendor, supplier, licensor or
other Person, having a direct or indirect contract with the Vendor or with any
other Subcontractor of the Vendor who has been hired to assist the Vendor in the
performance of its obligations under this Contract.
"Substantial Completion" means the time at which the Owner signs the
Certificate of Substantial Completion.
"System" means the Sites identified by the Owner to the Vendor in
writing as collectively comprising a System.
"System Element" means the Products required to perform radio,
switching and/or system element functions for a System and/or any Expansions.
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"System Element Facility" means the structures, improvements,
foundations, towers, and other facilities necessary to house or hold any System
Element and any related Products to be located at a particular location.
"Taxes" is defined in subsection 5.2.
"Test Market" is defined in subsection 2.12.
"Test Period" is defined in subsection 2.12.
"Training" is defined in subsection 9.4.
"Vendor Developments" is defined in subsection 14.3.1.
"Vendor Financing" means a loan to be provided by the Vendor or its
affiliates to the Owner pursuant to documentation acceptable to both parties.
"Vendor First Notice" is defined in subsection 1A.1.
"Vendor Second Notice" is defined in subsection 1A.3.
"Warranty" means any one (1) or more of the Equipment and Services
Warranty, Expansions Warranty, Software Warranty, Software Backwards
Compatibility Warranty, Equipment Backwards Compatibility Warranty, Compliance
Warranty and the Year 2000 Warranty.
"Warranty Period" is defined in subsection 18.1.
"Work" means the furnishing of Products hereunder, and the
performance of work, engineering services, installation services and all other
related activities and obligations required to be performed by the Vendor
pursuant to this Contract.
1.2 Other Definitional Provisions. (a) When used in this Contract,
unless otherwise specified therein, all terms defined in this Contract shall
have the defined meanings set forth herein. Terms defined in the Exhibits are
deemed to be terms defined herein; provided that in the case of any terms that
are defined both in this Contract and/or an Exhibit, the definitions contained
in this Contract shall supersede such other definitions for all purposes of this
Contract; provided further, that definitions contained in any Exhibit shall
control as to such Exhibit.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Contract refer to this Contract as a whole and
not to any particular provision of this Contract and section, subsection,
schedule and exhibit references are to this Contract unless otherwise specified.
Reference herein to Section shall mean any and all subsections thereof.
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(c) The meanings given to terms defined in this Contract are
applicable to both the singular and plural forms of such terms.
1A Notices.
[THIS SECTION IS TO BE REVISED TO INCLUDE THE RELEVANT SECTIONS OF THE
EXECUTED MEMORANDUM OF AGREEMENT]
SECTION 2. SCOPE OF WORK, RESPONSIBILITIES AND PROJECT MILESTONES
2.1 Purchase of Equipment. Cricket agrees to purchase (or license in
the case of Software) from Vendor Products and Services for mobile and fixed
wireless communications Systems based on CDMA digital wireless communications
technology in markets in the United States, pursuant to the terms and conditions
set forth below. The minimum commitment of Cricket to purchase and Vendor to
sell shall be $330,000,000 of total value. The purchase obligations of Cricket
are subject to: (i) the existence of Available Markets at any time after Vendor
is prepared to deliver the first System for commercial operations; (ii) Vendor
being prepared to deliver the first System for commercial operation within
twenty-four (24) months from September 20, 1999; and (iii) Vendor complying with
Specifications, the milestones, Vendor Financing and pricing. If Vendor fails to
meet the Specifications, milestones, Vendor Financing and/or pricing, Cricket
shall have the option, as its sole and exclusive remedy to terminate this
Contract without any further liability to either party. [TO BE REVISED PER MOA]
2.1.A. Scope of Work. During the Contract Term and in accordance
with Purchase Orders issued to Vendor from time to time, the Vendor shall
engineer, design, plan, manufacture, construct, install, test and perform all
Work. The terms of this Contract shall also apply to Purchase Orders issued by
Operating Affiliates and by Owner, for and on behalf of its Related Operators,
provided that in each case, the Purchase Orders are made pursuant to and
incorporate by reference the terms of this Contract. The Vendor shall be
responsible for providing in accordance with the terms of this Contract any and
all items and services which are expressly included by the terms of this
Contract or in the Exhibits. The Vendor shall furnish all labor, materials,
tools, transportation and supplies required to complete its obligations in
accordance with this Contract.
In instances where Purchase Orders are placed by Owner for or on behalf of
a Related Operator, Owner shall be considered the purchaser for purposes of
placing all orders, addressing invoices and the obligation of payment. Owner
agrees to be obligated hereunder with respect to all payments which become due
hereunder with respect to Purchase Orders placed by it for or on behalf of a
Related Operator, including but not limited to all payments for Products. In
addition, Owner shall be considered the purchaser for purposes of passage of
title and risk of loss with regard to Products and Software which are delivered
to it, even though such are subsequently re-delivered to another entity.
2.1.1 Technical Specifications. [TO BE REVISED PER MOA]
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2.1.2 Development Process and Milestones. To demonstrate that the System to be
sold by Vendor will meet the Specifications, the parties agree that Vendor shall
follow the "Procedures and Milestones for System Development and Monitoring
Program" set forth in Exhibit A1.
2.2 [INTENTIONALLY BLANK]
2.3 Site Acquisition. The Owner shall acquire all Sites. The Vendor,
at its request, shall be kept informed of the progress made on ongoing Site
Acquisition activity. As the Site Acquisition progresses, the Vendor agrees to
alter regularly the engineering plan to determine a new search ring or rings to
take into account any changes or modifications requested by the Owner due to the
Owner's inability to acquire sufficient rights to a location which could
constitute a Site in a timely or economic manner; provided that all such
alterations requested by Owner shall be considered by Owner and addressed
pursuant to the Change Order provisions described in Section 11 below. Vendor
shall offer to Owner Site Acquisition services as defined on Exhibit E and
according to the pricing set forth on Exhibit B-7. When making changes to the RF
engineering plan, the Vendor shall take into account the Site Acquisition
already completed by the Owner. Upon Site Acquisition Substantial Completion,
Owner shall notify Vendor of the Site Acquisition Substantial Completion Date.
2.4 Expansions. During the five (5) year period commencing on the
delivery of the first System for commercial operations, the Owner may, from time
to time, order Expansions from the Vendor, subject to the provisions of Section
12. The price and terms of such Expansions shall be as set forth in Exhibits B
and B-1 through and including B-8 (collectively, the "B Exhibits").
2.5 Review of Contract. Each party has examined in detail and
carefully studied and compared the Contract with all other information furnished
by the other party and has promptly reported to the other party any material
errors, inconsistencies or omissions so discovered or discovered by any of its
Subcontractors.
2.6 Eligibility under Applicable Laws and Applicable Permits. The
Vendor shall be responsible for ensuring that the Vendor and its Subcontractors
are and remain eligible under all Applicable Laws and Applicable Permits to
perform the Work under this Contract in the various jurisdictions involved
including, to the extent that Vendor will be responsible for construction for
any particular component of the Work, all such construction will be done in
accordance with all applicable Federal Communications Commission requirements.
Each of the Owner and the Vendor shall be responsible for obtaining and
maintaining in full force and effect the Applicable Permits listed as its
responsibility in the applicable Exhibits. Owner shall use its best efforts to
obtain such approvals, licenses, permits, tariffs, and/or other authorities from
the Federal Communications Commission and state and local public utilities
commissions as may be necessary for construction and operation of a PCS System.
Vendor reserves the right to self-insure its obligations hereunder.
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2.7 Further Assurances. The Vendor shall execute and deliver all
reasonable further instruments and documents, and will, in good faith, consider
all reasonable requests for further action, including but not limited to
assisting the Owner in filing notices of completion with the appropriate state
and local Governmental Entity, that may be necessary or that the Owner may
reasonably request in order to enable the Owner or the Vendor to complete
performance of the Work or to effectuate the purposes or intent of this
Contract. All such requests shall be addressed pursuant to the Change Order
procedures described below in Section 11.
2.8 Liens and Other Encumbrances. (a) The Vendor covenants and
agrees, subject to Vendor's receipt from Owner of full payment in respect
thereof, to:
(i) protect and keep free all Systems, Expansion and/or
any and all interests and estates therein acquired from the Vendor, and
all improvements and materials now or hereafter placed thereon under the
terms of this Contract, from any and all claims, liens, charges or
encumbrances of the nature of mechanics, labor or materialmen liens or
otherwise arising out of or in connection with performance by any
Subcontractor, including services or furnishing of any materials
hereunder, and to promptly have any such lien released by bond or
otherwise; and
(ii) give notice of this subsection to each
Subcontractor before such Subcontractor furnishes any labor or materials
for any System.
(b) If any laborers', materialmen's, mechanics', or other similar
lien or claim thereof is filed by any Subcontractor, the Vendor shall cause such
lien to be satisfied or otherwise discharged, or shall file a bond in form and
substance satisfactory to the Owner in lieu thereof within ten (10) Business
Days of the Vendor's receipt of notice of such filing. If any such lien is filed
or otherwise imposed, and the Vendor does not cause such lien to be released and
discharged forthwith, or file a bond in lieu thereof, then, without limiting the
Owner's other available remedies, the Owner has the right, but not the
obligation, to pay all sums necessary to obtain such release and discharge or
otherwise cause the lien to be removed or bonded to the Owner's satisfaction
from funds retained from any payment then due or thereafter to become due to the
Vendor.
(c) The Owner reserves the right to post or place within any System
notices of non-responsibility or to do any other act required by Applicable Law,
to exempt the Owner from any liability to third parties by reason of any work or
improvements to be performed or furnished hereunder; provided that failure by
the Owner to do so shall not release or discharge the Vendor from any of its
obligations hereunder.
2.9 Duty To Inform Itself Fully; Waiver of Defense. (a) Each party
shall be deemed to have notice of and to have fully examined and approved the
Specifications, the Exhibits and all other documents referred to herein, and all
drawings, specifications, schedules, terms and conditions of this Contract,
regulations and other information in relation to this Contract and/or any
amendments, modifications or supplements thereto at
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any time on or after the Effective Date and to have fully examined, understood
and satisfied itself as to all information of which it is aware and which is
relevant as to the risks, contingencies and other circumstances which could
affect this Contract and in particular the installation of any System or any
part thereof.
2.10 Special Provisions Regarding Vendor Financing.
2.11 Pricing.
2.12. Vendor Preference.
SECTION 3. PURCHASE ORDERS AND SCHEDULES
3.1 Purchase Orders. The Owner and any Operating Affiliate may
deliver Purchase Orders to the Vendor at any time and from time to time during
the Contract Term. Such Purchase Orders shall be sent to the Vendor either by
certified mail, electronic transmission or another mutually acceptable manner to
the address specified in Exhibit L of this Contract. All Purchase Orders shall
be governed by the terms and conditions of this Contract, unless otherwise
agreed by the parties in writing. Each Purchase Order shall specify, in
reasonable detail, the Products, Services or other items of Work to be provided
by the Vendor.
3.2 Delivery under the Contract. The Vendor shall complete the Work
specified in each Purchase Order in accordance with the terms and conditions of
this Contract.
3.3 Order Acceptance. All Purchase Orders submitted by Owner shall
be deemed to incorporate and be subject to the terms and conditions of this
Contract unless otherwise agreed in writing. All Purchase Orders, including
electronic orders, shall contain the information necessary for Vendor to fulfill
the order. All schedules and requested dates are subject to Vendor's
concurrence, provided that if orders are made within the agreed to lead times
specified in Exhibit L, Vendor shall not withhold its concurrence to the
requested dates. No provision or data on any Purchase Order or contained in any
documents attached to or referenced in any Purchase Order, or any subordinate
document (such as shipping releases), which is inconsistent with the terms of
this Contract shall be binding, except data necessary for Vendor to fill the
order. All such other data and provisions are hereby rejected. Electronic orders
shall be binding on Owner notwithstanding the absence of a signature, provided
that the parties have implemented a mutually acceptable electronic order process
and such orders deemed to be binding have been issued by Owner and accepted by
Vendor in accordance with the process agreed upon by the parties. Order
acceptance provisions, together with delivery schedules and intervals and
forecast requirements are set forth in Exhibit L.
While it is Vendor's objective to provide Owner with an acknowledgment of
each Purchase Order received, Owner shall advise Vendor to the extent that Owner
becomes
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aware of any missing or late notifications to ensure that the Purchase Order has
not been lost.
Changes made by Owner to an accepted Purchase Order shall be treated as a
separate order unless the parties expressly agree otherwise. If any such change
affects Vendor's ability to meet its obligations under the original Purchase
Order, any price, shipment date, or completion date quoted by Vendor with
respect to such original order is subject to change and shall be addressed
pursuant to the Change Order provisions below in Section 11.
3.4 Forecasts. Owner shall provide to Vendor regular forecasts of
Owner's annual Product and Services needs. If the quantities ordered are more
than [*] greater than forecast quantities, Vendor shall be permitted a
reasonable extension of time to fulfill such orders and achieve the Milestones
required of Vendor hereunder.
3.5 Deployment Plans and Milestones. The deployment plans and
intervals, together with the key milestones, order lead times, in respect of
each System, are set forth in Exhibit L.
3.6 Inventory Control and Bar-coding. Vendor shall, at no additional
charge, pack and mark shipping containers in accordance with its standard
practices for domestic shipments. Where in order to meet Owner's requests,
Vendor packs and/or is required to mark shipping cartons in accordance with
Owner's specifications, Vendor shall invoice Owner additional charges for such
packing and/or marking. Vendor shall: (i) enclose a packing memorandum with each
shipment and, if the shipment contains more than one package, identify the
package containing the memorandum; and (ii) mark Products as applicable for
identification in accordance with Vendor's marking specifications (for example,
model/serial number and month, year of manufacture).
SECTION 4. SUBCONTRACTORS
4.1 Subcontractors. The Vendor may subcontract any portion of its
obligations under this Contract, but no such subcontract shall relieve Vendor
from primary responsibility and liability for the performance of Vendor's
covenants and obligations under this Contract. Regardless of whether or not the
Vendor obtains approval from the Owner or a Subcontractor or whether the Vendor
uses a Subcontractor recommended by the Owner, use by the Vendor of a
Subcontractor shall not, under any circumstances: (i) give rise to any claim by
the Vendor against the Owner if such Subcontractor breaches its subcontract or
contract with the Vendor; (ii) give rise to any claim by such Subcontractor
against the Owner; (iii) create any contractual obligation by the Owner to the
Subcontractor; (iv) give rise to a waiver by the Owner of its rights to reject
any Defects or Deficiencies or Defective Work; or (v) in any way release the
Vendor from being solely responsible to the Owner for the Work to be performed
under this Contract.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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4.2 Vendor's Liability. The Vendor is responsible for all of its
obligations under this Contract, including the Work, regardless of whether a
subcontract or supply agreement is made or whether the Vendor relies upon any
Subcontractor to any extent. The Vendor's use of Subcontractors for any of the
Work shall in no way increase the Vendor's rights or diminish the Vendor's
liabilities to the Owner with respect to this Contract, and in all events,
except as otherwise expressly provided for herein, the Vendor's rights and
liabilities hereunder with respect to the Owner shall be as though the Vendor
had itself performed such Work. The Vendor shall be liable for any delays caused
by any Subcontractor as if such delays were caused by the Vendor.
4.3 No Effect of Inconsistent Terms in Subcontracts. The terms of
this Contract shall in all events be binding upon the Vendor regardless of and
without regard to the existence of any inconsistent terms in any agreement
between the Vendor and any Subcontractor whether or not and without regard to
the fact that the Owner may have directly and/or indirectly had notice of any
such inconsistent term.
4.4 Assignability of Subcontracts to Owner. Vendor shall use
reasonable efforts to have each agreement between the Vendor and a Subcontractor
contain a provision stating that, in the event that the Vendor is terminated for
cause, convenience, abandonment of this Contract or otherwise then: (i) each
Subcontractor shall continue its portion of the Work as may be requested by the
Owner; and (ii) such agreement permits assignment thereof without penalty to the
Owner and, in order to create security interests, to third parties designated by
Owner, in either case at the option of the Owner and for the same price and
under the same terms and conditions as originally specified in such
Subcontractor's agreement with the Vendor.
4.5 Removal of Subcontractor or Subcontractor's Personnel. The Owner
has the right at any time to request removal of a Subcontractor and/or any of a
Subcontractor's personnel from Work on the System upon reasonable grounds and
reasonable prior notice to Vendor. Such request (a "Request for Removal") shall
be in writing and shall specify the Owner's reasoning therefor. The Vendor
promptly shall issue a written response to any such Request for Removal,
specifying the reasoning for its disagreement or agreement, as the case may be,
with the reasoning contained in the Request for Removal. If the parties fail to
agree, this matter shall be handled in accordance with the dispute resolution
procedures in Section 23. The exercise of such right by the Owner shall have no
effect on the provisions of subsections 4.1 and 4.2.
4.6 Subcontractor Insurance. The Vendor shall require its
Subcontractors to obtain, maintain and keep in force, during the time they are
engaged in providing Products and Services hereunder, insurance coverage of the
types and levels customary in the industry (provided that the maintenance of any
such Subcontractor insurance shall not relieve the Vendor of its other
obligations pursuant to this Contract). The Vendor shall, upon the Owner's
request, furnish the Owner with evidence of such insurance in form and substance
reasonably satisfactory to the Owner.
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4.7 Review and Approval not Relief of Vendor Liability. No
inspection, review or approval by the Owner permitted under this Contract of any
portion of the Work shall relieve the Vendor of any duties, liabilities or
obligations under this Contract, but nothing contained in this subsection shall
be deemed a bar of any waiver given by the Owner to the Vendor pursuant to and
in accordance with the terms of this Contract.
4.8 Vendor Warranties. Except as otherwise expressly provided in
Section 18, the warranties of the Vendor pursuant to Section 18 shall be deemed
to apply to all Work performed by any Subcontractor as though the Vendor had
itself performed such Work and to all Products supplied by any third-party
vendor or other subcontractor as though the Vendor itself had supplied such
Products. Except as otherwise specifically provided in Section 18, the parties
agree that such warranties shall not be enforceable merely on a "pass-through"
basis but that Owner may, but shall not be obligated to, enforce such warranties
of any Subcontractor to the extent that the Owner determines that the Vendor is
not paying and/or performing its warranties; provided that any such election by
the Owner shall not relieve the Vendor from any obligations or liability with
respect to any such warranty.
4.9 Payment of Subcontractors. The Vendor shall make all payments it
is contractually required to make to all Subcontractors (except in the case of
legitimate disputes between the Vendor and any such Subcontractor arising out of
the agreement between the Vendor and such Subcontractor) in accordance with the
respective agreements between the Vendor and its Subcontractors such that no
Subcontractor shall be in a position to enforce any liens and/or other rights
against the Owner, the System, any Products or any part thereof.
4.10 Copies. Subject to any confidentiality obligations insisted
upon by third party providers, including Subcontractors, Vendor will use its
good faith, reasonable efforts to provide Owner with any and all relevant
agreements, understandings, subcontracts and other documents pertaining to the
provision of Products or Services by a Subcontractor which Owner may reasonably
require in order for it to be provided with the information necessary to
exercise any of its rights under this Contract.
4.11 Benefit of Subcontracts. In addition to anything else provided
for in this Contract, the Owner shall be entitled to the following benefits and
rights of the Vendor under its contracts with any applicable third-party vendors
or other Subcontractors: all rights to conduct in-house tests, to receive notice
of upgrades and enhancements and to purchase spare parts; provided however, that
the Vendor shall maintain sole responsibility for all obligations and other
duties under all such contracts.
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SECTION 5. PRICES AND PAYMENT
5.1 Prices; Minimum Purchases. (i) The prices for the Products,
Services and other items of Work for the Contract Term are set forth in the B
Exhibits. The prices for Expansions are also set forth in the B Exhibits. The
Owner agrees that the aggregate amount of all payments to the Vendor pursuant to
Purchase Orders delivered to the Vendor during the Contract Term shall be not
less than Three Hundred Thirty Million Dollars ($330,000,000) (the "Minimum
Purchase Commitment").
(ii) MOST FAVORED CUSTOMER STATUS. [OPEN ISSUE]
5.2 Taxes. The Owner shall reimburse Vendor for all present or
future taxes, levies, imposts, deductions, charges, withholdings and liabilities
("Taxes") imposed on the Vendor by any Governmental Entity relating to the
provision of Products and Services by the Vendor to the Owner under this
Contract, provided, however, that the Owner shall not be liable for and shall
not pay or reimburse Vendor for any Taxes on or measured by the income or
receipts of the Vendor. If the Owner shall pay Taxes for which the Vendor
receives a credit, then the Vendor shall reimburse to the Owner an amount equal
to such credit.
5.3 Payment. Payment for the Products and Services to be supplied
pursuant to this Contract shall occur as follows (in each case following
submission of an invoice by the Vendor which shall properly document, to the
reasonable satisfaction of the Owner, all the items included):
(a) Products for Systems: except as set forth in subsections (b) and
(c) below,
(i) [*] of the amount of all Purchase Orders completed by the
Vendor with respect to a Site shall be invoiced upon shipment of the
Products in respect of such Purchase Orders;
(ii) [*] of the amount of all Purchase Orders completed by the
Vendor with respect to a Site shall be invoiced upon completion of
Installation and Integration of the Products with respect to each Site;
(iii) [*] of the amount of all Purchase Orders completed by
the Vendor with respect to a Site shall be invoiced upon the date Owner
signs a Certificate of Substantial Completion with respect to the Products
forming part of such Purchase Orders; provided that in the event that a
Certificate of Substantial Completion is not issued within five (5)
Business Days after the Guaranteed Substantial Completion Date because of
a delay in reaching Substantial Completion solely attributable to the
failure or lack of performance of Owner to satisfy its obligations and
commitments in a timely manner, such amount shall be invoiced on the fifth
(5th) Business Day following Substantial Completion; and
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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<PAGE> 35
(iv) the balance of all amounts due Vendor pursuant to
completed Purchase Orders with respect to Products for a System shall be
invoiced upon Final Acceptance of such System.
(b) Services: Services shall be invoiced as performed, or as soon
thereafter as practical but in no event more frequently than monthly, provided
that Installation and Integration Services and Optimization Services will only
be invoiced after the Owner signs a Certificate of Substantial Completion in
respect of the System for which such Services are rendered; provided that in the
event that a Certificate of Substantial Completion is not issued within five (5)
Business Days after the Guaranteed Substantial Completion Date because of a
delay in reaching Substantial Completion solely attributable to the failure or
lack of performance of Owner to satisfy its obligations and commitments in a
timely manner, such amount shall be invoiced on the fifth (5th) Business Day
following Substantial Completion.
(c) Optional Software Features and Spares. The purchase price for
the initial Optional Software Features and Spares shall be invoiced after the
Owner signs a Certificate of Substantial Completion in respect of the System for
which such initial Optional Software Features and Spares are furnished; provided
that in the event that a Certificate of Substantial Completion is not issued
within five (5) Business Bays after the Guaranteed Substantial Completion Date
because of a delay in reaching Substantial Completion attributable solely to the
failure or lack of performance of Owner to satisfy its obligations and
commitments in a timely manner, such amount shall be invoiced on the fifth (5th)
Business Day following Substantial Completion.
(d) Expansions. [To be negotiated.]
(i) [*] of the amount of all Purchase Orders completed by the
Vendor with respect to Products for which Vendor provides installation
Services pursuant to an Expansion shall be invoiced upon delivery of such
Products; and
(ii) [*] of the amount of all Purchase Orders completed by
Vendor with respect to Products for which Vendor provides installation
Services pursuant to an Expansion shall be invoiced upon completion of
installation of such Products; and
(iii) [*] of the amount of all Purchase Orders completed by
the Vendor with respect to Products for which Vendor provides no
installation Services pursuant to an Expansion shall be invoiced upon
delivery of such Products.
(e) Payment of Invoices. Owner shall pay the invoiced amounts, less
any disputed amounts, within ten (10) days from the date of transmission of
Vendor's invoice. Delinquent payments are subject to a late payment charge after
thirty (30) days at the rate of [*] per month, or portion thereof, of the amount
due (but not to exceed the maximum lawful rate). Any disputed items which are
determined to be validly billed are due for payment based upon the original
invoice date.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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5.5 No Payment in Event of Material Breach. Subject to subsection
24.5, the Owner shall have no obligation to make any payment for any Work with
respect to which the Vendor is in material breach of this Contract until and
unless such breach is cured or waived by the Owner in accordance with the terms
of this Contract.
5.6 In Revenue Payments. At any time during a period of delay the
Owner may, in its sole discretion, decide to place a System which is subject to
such delay into In Revenue Service. Such placement into In Revenue Service shall
constitute Substantial Completion only for purposes of the payment obligations
above, but shall not in any way relieve the Vendor of any of its obligations
under this Contract, including without limitation achieving a Guaranteed
Substantial Completion Date nor shall such In Revenue Service trigger the
commencement of the Initial Period.
5.7 Currency and Place of Payment. Payments under this Contract
shall be made in U.S. Dollars and if such method of payment is acceptable to
Owner, Owner shall pay all amounts due Vendor hereunder using Electronic Funds
Transfer ("EFT"). EFT payments by Vendor shall be made to the following account
of Vendor or such other account as is subsequently designated by Vendor in
writing and, concurrent with the EFT payment, Owner shall fax a copy of the
remittal to Vendor's manager of cash operations at _________:
Account Name:
Acct.:
ABA
SECTION 6. AVAILABILITY OF IOS
6.1 Availability of IOS. [*]
SECTION 7. [INTENTIONALLY DELETED].
SECTION 8. SERVICES
8.1 Transportation. The Vendor shall at the Vendor's sole cost and
expense provide for the transportation and delivery to the Sites within the
U.S., of all the Products to be delivered pursuant to, and in accordance with,
each Purchase Order and the terms of this Contract. In the event of any unusual
Site selections or requirements which require
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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transportation arrangements out of the ordinary course having regard to normal
industry standards and practices (such as non-standard crane requirements,
helicopter transportation requirements to a remote setting, etc.), Vendor shall
arrange, subject to Owner's prior approval, for such exceptional transportation
requirements from local staging facilities or warehouse locations to the unusual
Site. Vendor shall notify Owner that it believes, in good faith, that
exceptional transportation arrangements are necessary under the circumstances,
and Vendor will consult with Owner on an approved course of action to complete
delivery. Owner shall be responsible for all costs with respect to such
exceptional transportation requirements in excess of transportation costs
applicable to a standard Site.
8.2 Services. The Vendor shall provide the Services ordered by Owner
in accordance with the provisions of the Exhibit hereto in respect of such
Services, including, without limitation, the following Services: (i)RF Design
Services as stated in Exhibit D; (ii) construction management and site
construction services as stated in Exhibit E; (iii) architectural & engineering
services as stated in Exhibit E; (iv) spectrum clearing and microwave relocation
services as stated in Exhibit E; (v) Optimization Services as set forth in
Exhibit G; (vi) Installation and Integration services as set forth in Exhibit F;
and (vi) wireless support Services as stated in Exhibit H.
8.3 No Interference. The Vendor shall install all Equipment and
build each of the Systems so as to cause no unauthorized interference with or
obstruction to lands and thoroughfares or rights of way on or near which the
installation work may be performed. The Vendor shall exercise every reasonable
safeguard to avoid damage to existing facilities, and if repairs or new
construction are required in order to replace facilities damaged by the Vendor
due to its carelessness, negligence or willful misconduct, such repairs or new
construction shall be at the Vendor's sole cost and expense. Vendor understands
that many of the Sites may be co-located with other RF transmission facilities
and Vendor shall take all necessary precautions and safety measures to ensure
the safety of all of Vendor's and Subcontractors' personnel at such Sites. The
Owner shall use its reasonable best efforts to ensure that no other third
parties employed or engaged by the Owner hinder or delay the Vendor in the
performance of its installation obligations hereunder.
Vendor represents and warrants that all Products furnished hereunder
shall comply, to the extent required, with the requirements of Part 24 of the
Federal Communication Commission's Rules and Regulations (the "FCC Rules")
pertaining to personal communications services in effect upon delivery of such
Product. In addition, Vendor represents and warrants that a Product furnished
hereunder shall comply, to the extent required, with the requirements of Subpart
J of Part 15 of the FCC Rules in effect upon delivery of such Product, including
those sections concerning the labeling of such Product and the suppression of
radio frequency and electromagnetic radiation to specified levels. Vendor makes
no undertaking with respect to harmful interference caused by (i) unauthorized
installation, repair, modification or change or Products not furnished by
Vendor; (ii) Products being subject to misuse, neglect, accident or abuse by
other than Vendor; (iii) Products being used in a manner not in accordance with
operating instructions or in a suitable installation environment or operations
of other equipment in the frequency ranges reserved for Owner within the
applicable licensed area. Vendor assumes no
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responsibility under this clause for items not specified or supplied by Vendor.
The foregoing warranties are collectively referred to as the "Compliance
Warranty".
Vendor shall, when appropriate, have reasonable access to Owner's
premises during normal business hours and at such other times as may be agreed
upon by the parties in order to enable Vendor to perform its obligations under
this Contract. Vendor shall coordinate such access with Owner's designated
representative prior to visiting such premises. Vendor agrees to instruct its
employees to comply with all site rules while on Owner's premises. The employees
and agents of Vendor shall, while on the Owner's premises, comply with all site
rules and guidelines including but not limited to where required by government
regulations, submission of satisfactory clearance from U.S. Department of
Defense and other governmental authorities concerned. Neither party shall
require waivers or releases of any personal rights from representatives of the
other in connection with visits to its premises, and no such releases or waivers
shall be pleaded by either party in any action or proceeding.
For purposes of this Section, all references to "Owner's premises"
and other similar references shall be deemed to refer to any location where a
Site is to be located, which may include land or buildings owned or leased by
Owner. To the extent that Owner does not own the premises, Vendor's obligations
to adhere to site rules and guidelines shall include, without limitation, those
rules and guidelines required by the owner, landlord or property manager having
care and control of such premises, which Owner has provided to Vendor in advance
of the commencement of the applicable Work hereunder.
SECTION 9. MANUALS, ENGINEERING DRAWINGS AND TRAINING
9.1 Documentation. The Vendor shall provide the Documentation in the
amounts and formats listed in Exhibit P. The Documentation shall be prepared in
accordance with the relevant Specifications. Operating Manuals with up-to-date
(but not "as-built") drawings, specifications and design sheets shall be
available for the Training as set forth in subsection 9.4.
9.2 Standards for Manuals. All Operating Manuals and Maintenance and
Instruction Manuals required to be provided by the Vendor pursuant to this
Contract shall be:
(a) detailed and comprehensive and prepared in conformance with the
Specifications and generally accepted national standards of professional
care, skill, diligence and competence applicable to telecommunications and
operation practices for facilities similar to the Systems;
(b) consistent with good quality industry operating practices for
operating personal communications service systems of similar size, type
and design;
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(c) sufficient to enable the Owner through reasonably competent
personnel to operate and maintain each System on a continuous basis; and
(d) prepared subject to the foregoing standards with the goal of
achieving operation of each System at the capacity, efficiency,
reliability, safety and maintainability levels contemplated by this
Contract and required by all Applicable Laws and Applicable Permits.
9.3 Equipment and Data. The Vendor shall furnish all drawings,
specifications, specific design data, preliminary arrangements and outline
drawings of the Equipment and all other information as required in accordance
with this Contract in sufficient detail to indicate that the Equipment and
fabricated materials to be supplied under this Contract comply with the
Specifications.
9.4 Training. As more fully described in Exhibit O, the Vendor shall
provide to the Owner a Training program with respect to each System
(collectively, the "Training"). Promptly upon execution of this Contract, the
Vendor shall establish a training coordinator, whose responsibility shall be to
work with the Owner to ensure that the Owner receives the Training. Such
coordinator (or his or her replacement) shall continue in such assignment until
the receipt by the Owner of all of the Training required to be provided.
9.5 Manuals and Training. The Training and the Documentation
provided in connection herewith, including, without limitation, all
Documentation provided in CD-ROM format, and pursuant to subsections 9.2, 9.3
and 9.4 shall be updated in reasonable quantities at no additional cost to Owner
pursuant to and in accordance with all Product upgrades and/or modifications
applicable to any System and/or any part thereof.
SECTION 10. ACCEPTANCE PROCEDURES
10.1 Acceptance Procedures. Depending upon the specific Products and
Services to be furnished by Vendor, and those tasks for which Owner shall assume
responsibility, the parties, directly or through third-party vendors or other
Subcontractors, as the case may be, shall carry out the following procedures.
Certain of the tests below will apply to purchases of Products and Services
which comprise a System, while certain other tests will apply to tests for
Product and Service purchases for Expansions
(a) Factory Tests Owner may, at Owner's option and cost, be present
at any factory testing conducted by Vendor. Vendor shall give the Owner ten (10)
Business Days advance notice of any such factory testing relating to the
Products or Services furnished by Vendor hereunder. Vendor shall cooperate with
Owner to facilitate Owner's observation of such tests. Regardless of whether or
not Owner observes any factory testing, Vendor agrees to, within a reasonable
period of time in view of the nature and urgency of the request, upon written
request by Owner, provide Owner with copies of all documentation relating to
factory testing of the Product specified by Owner, including without limitation
copies of test procedures, test results and FCC compliance certifications.
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(b) Site Preparation Substantial Completion Upon completion of all
Site Preparation with respect to each Site for which the Owner has issued a
Purchase Order directing the Vendor to proceed with Site Preparation activities,
the Vendor shall issue a Site Preparation Substantial Completion Certificate
("Site Preparation Substantial Completion Certificate") certifying that all Site
Preparation specified in the Purchase Order is substantially complete. Such
certificate shall be accompanied by a Punch List of all incomplete items which
items shall be completed by the Vendor prior to Final Acceptance. Vendor shall
offer Construction Management, Architectural & Engineering, Site Civil
Construction and Antenna Installation and Testing as provided for in Exhibit E
and at pricing consistent with that set forth in Exhibit B-7. In the event the
Owner performs Site Preparation with respect to a Site, the Owner shall issue
the Site Preparation Substantial Completion Certificate.
(c) Site Installation and Integration Completion Certificate. Upon
completion of the installation of the BTS and other Products and the completion
of integration activities in accordance with Exhibit F the Vendor shall issue a
Site Installation and Integration Substantial Completion Certificate certifying
that all installation and integration activities specified in the Purchase Order
are substantially complete. Such certificate shall be accompanied by a Punch
List of all incomplete items which items shall be completed by the Vendor prior
to Final Acceptance.
(d) Certificate of Substantial Completion. Upon completion of
Optimization Services and all testing with respect to a System in accordance
with Exhibit G, the Vendor shall issue a Certificate of Substantial Completion,
which shall be in the form of a checklist listing all tests performed and the
results thereof, and shall be accompanied by a Punch List of outstanding items
(the "Certificate of Substantial Completion"). Upon its reasonable satisfaction
that the Certificate of Substantial Completion is correct and complete, the
Owner shall promptly sign the Certificate of Substantial Completion.
(e) Beta Testing. Upon written notice to the Vendor, the Owner shall
be entitled, in its sole discretion to conduct Beta Testing, and in connection
therewith the Owner shall be entitled to add appropriate items to the Punch List
prior to Final Acceptance.
(f) Certificate of Final Acceptance. During the [*] day period
following Substantial Completion (as extended as described below, the "Initial
Period"), the Vendor shall complete all outstanding Punch List items and the
Owner and the Vendor shall monitor the System for outages and compliance with
the Specifications. In event that all Punch List items have been completed
during the Initial Period, all testing specified in Exhibit G has been
satisfactorily completed and there have been no Major Outages, then at the end
of the Initial Period the Vendor shall issue a Certificate of Final Acceptance
certifying the same. Upon its reasonable satisfaction that the Certificate of
Final Acceptance is correct and complete, the Owner shall sign the Certificate
of Final Acceptance. In the event that a Major Outage occurs during the Initial
Period, the Initial Period shall be extended (each, an "Extension Period") as
follows: (i) if a Major Outage occurs on or prior to [*] days after the
commencement of the Initial Period, the
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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Initial Period shall be extended for an additional [*] days; (ii) if a Major
Outage occurs after [*] days but on or prior to [*] days after the commencement
of the Initial Period, the Initial Period shall be extended for an additional
[*] days; and (iii) if a Major Outage occurs after [*] days but on or prior to
[*] days after the commencement of the Initial Period, the Initial Period shall
be extended for an additional [*] days. In the event a Major Outage occurs
during any Extension Period, the Initial Period shall be further extended by an
additional period of [*]. Owner shall issue a Certificate of Final Acceptance
not later than the end of the Initial Period (as extended) after receipt of
notice of Vendor that it corrected the problem giving rise to the Major Outage
or Major Outages. Documentation not already delivered to the Owner pursuant to
the terms of this Contract shall be delivered to the Owner within [*] Business
Days of Final Acceptance. With respect to each System, the Owner shall not be
required to sign the Certificate of Final Acceptance until all such
documentation has been so delivered (and Final Acceptance shall not be deemed to
have occurred earlier than the date that is [*] Business Days prior to the date
of delivery of such documentation). In addition to, and without limiting the
requirements set forth in the preceding sentence, the Operating Manuals and the
Maintenance and Instruction Manuals shall be submitted to the Owner in CD-ROM
format (when available) in addition to hard-copy volume format if so requested
by the Owner.
10.2 Costs and Expenses. The costs and expenses of complying with
all acceptance procedures set forth above shall be borne by the Vendor, provided
that Owner remains responsible for completing those items identified as Owner's
responsibility in the Exhibits.
SECTION 11. CHANGE ORDERS AND SCHEDULING
11.1 Change Orders. The Owner has the right to request expansions,
other revisions and/or modifications to any Purchase Order or to the Work
("Changes"), including but not limited to the Specifications, the manner of
performance of the Work or the timing of the completion of the Work. All Changes
shall be subject to the prior written consent of the Vendor. All Changes shall
be documented in a written order ("Change Order") which shall be executed by the
Owner and the Vendor and shall contain any adjustments to pricing, Milestone or
other aspect of the Work as mutually agreed by the parties. The Vendor shall
promptly notify the Owner of any such requested Changes which may materially
affect the operation and/or maintenance of any System or any part thereof. In
the event that the parties cannot agree on a Change Order within fifteen (15)
days of submission of a Change Order by the Owner to the Vendor, the matter
shall then be referred to dispute resolution pursuant to Section 23. Nothing
contained in this subsection is intended to limit the Vendor's right, from time
to time, to make suggestions for modifications to the Work or the
Specifications, provided that in any such event the Owner, in its sole and
absolute discretion pursuant to the terms of this Contract may refuse to make
any such modification or otherwise agree to issue a Change Order incorporating
any such Vendor suggestion.
11.2 Cancellation. Owner may at any time to cancel, in whole or in
part, any Purchase Order or Change Order upon advance written notice to the
Vendor. In the
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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event of such cancellation, the Owner shall pay to the Vendor cancellation
charges in accordance with the Exhibits.
SECTION 12. DISCONTINUED PRODUCTS AND CONTINUING PRODUCT SUPPORT
12.1 Notice of Discontinuation. For a period of [*] for the
AXE switch and [*] for all other Products furnished hereunder after the
Effective Date, but in no event less than [*] after the date of shipment,
the Vendor agrees to provide the Owner, or its affiliates as the case may be,
not less than one (1) year notice before the Vendor discontinues a Product
("Discontinued Products") furnished under this Contract. With respect to
Products manufactured by a third party vendor, the notice period may vary. Where
the Vendor offers a product for sale that is equivalent in Form, Fit and
Function in accordance with and pursuant to the Specifications, the notification
period may vary but in no event shall be less than sixty (60) days. In the event
of the foregoing, the Vendor shall continue to furnish Products fully compatible
with the relevant System Elements within the System at such time during the
appropriate [*] and [*] periods referenced above; provided that nothing
herein shall bar the Vendor from discontinuing individual items of Products as
provided in and pursuant to this subsection. In the event that Vendor
discontinues a Product, Vendor will meet with Owner and use reasonable, good
faith efforts to develop a mutually acceptable transition plan that takes into
account the Owner's existing investment in the item scheduled for
discontinuance.
In addition to repairs provided for under any applicable Warranty,
Vendor shall offer repair Services and repair parts in accordance with Vendor's
repair and repair parts practices and terms and conditions then in effect, for
Vendor-manufactured Equipment furnished pursuant to this Contract. Such repair
Services and repair parts shall be available while Vendor is manufacturing or
stocking such Products or repair parts, but in no event less than [*] for
the AXE switch and [*] for all other Products after such Product's discontinued
availability effective date. Vendor may use either the same or functionally
equivalent products or parts which are new, remanufactured, reconditioned or
refurbished in the furnishing of repairs or replacements under this Contract.
If during the agreed-to support period following the issuance of
notice of discontinuance, Vendor fails to provide repair parts and or repair
Services and a functionally equivalent replacement has not been designated,
Vendor shall so advise Owner, to allow Owner to plan appropriately, and if
Vendor is unable to identify another source of supply for such repair parts or
services, Vendor shall, in addition to any other right or remedy available to
Owner at law or in equity, provide Owner, at no additional charge to Owner, upon
request, with non-exclusive licenses for Product manufacturing to the extent
Vendor can grant such licenses, so that Owner will have sufficient information,
ability and rights to have such Discontinued Products manufactured, or obtain
such repair Service or repair parts from other sources. Such license shall
include appropriate non-disclosure and confidentiality covenants.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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12.2 Discontinuation During Warranty Period. If Vendor discontinues
the availability of a Product during that Product's Warranty Period and Owner is
required to purchase a replacement Product to replace the Discontinued Product
in order to maintain the same functionality of the Discontinued Product in a
System, Vendor agrees to grant Owner an additional [*] discount to be applied
against the net price of all Products required to be purchased by Owner as
replacements for such Discontinued Product, which additional discount shall be
applied after the determination of the lowest price available to Owner pursuant
to this Contract.
SECTION 13. SOFTWARE; CONFIDENTIAL INFORMATION
13.1 RTU License. Upon delivery of the Software, but subject to
payment of the license fees specified in Exhibit B-5, the Owner is hereby
granted a personal, non-exclusive, fully paid-up, multi-site (capability to move
Software from site to site on prior notice to Vendor) right to use license for
the Software ("RTU License"), to operate the specific Equipment, processor or
product line for which the licenses to use the Software are initially granted,
or temporarily on any comparable replacement if any such Equipment, processor or
product line becomes inoperative. Owner shall use such Software only for its own
internal business operation. The RTU License grants Owner no right to, and Owner
will not, sublicense such Software or modify, decompile, or disassemble Software
furnished as object code to generate corresponding source code provided in each
of the Systems. Except as provided below, no license is granted to Owner to use
the Software outside of the United States.
In the event that Owner wishes to use the Software on associated
equipment outside of the United States or to transfer Software to an affiliate
or third party transferee located outside the United States, Vendor shall not
unreasonably withhold its consent to such use or transfer, provided that Vendor
or the transferee, as the case may be, enters into an appropriate license
agreement with an affiliate of Vendor carrying on business in the territory in
which the Software is to be located, on terms substantially similar to the RTU
License terms set forth herein, provided, however, that Owner acknowledges and
agrees that support and maintenance obligations set forth herein are only
applicable for Software resident on Equipment located within the United States.
Support and maintenance Services offered by Vendor's affiliates differs in
various different territories, and will be subject to the local practices
maintained in such territory.
13.2 Owner's Obligations. The Owner agrees that the Software,
whether or not modified, and all copies thereof made by Owner, shall be treated
as proprietary to the Vendor, its Subcontractors or its suppliers, as
appropriate and the Owner shall:
(a) Utilize the Software solely in conjunction with a System;
provided that the Vendor acknowledges that the Software shall be integrated
across interfaces with systems, equipment and software provided by other
suppliers and customers;
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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(b) Ensure that all copies of the Software shall, upon any
reproduction by the Owner authorized by the Vendor and whether or not in the
same form or format as such Software, contain the same proprietary,
confidentiality and copyright notices or legends which appear on the Software
provided pursuant hereto; and
(c) Hold secret and not disclose the Software to any person, except
to (i) such of its employees, contractors, agents or affiliates that are
involved in the operation or management of a System and need to have access
thereto to fulfill their duties in such capacity, or (ii) other Persons who need
to use such Software to permit integration of a System with systems and software
of other suppliers and customers; provided that such persons agree, or are
otherwise obligated, to hold secret and not disclose the Software to the same
extent as if they were subject to this Contract, and provided further that if
any such Person is a competitor of Vendor involved in the manufacture of
communications equipment, software or related services, Vendor must approve such
use on a case-by-case basis on commercially reasonable terms and such use shall
be subject to an appropriate non-disclosure agreement.
(d) When and if the Owner determines that it no longer needs the
Software or if the Owner's license is canceled or terminated pursuant to the
terms of this Contract, return all copies of such Software to the Vendor or
follow reasonable written disposition instructions provided by the Vendor. If
the Vendor authorizes disposition by erasure or destruction, the Owner shall
remove from the medium on which Software resides all electronic evidence of the
Software, both original and derived, in such manner that prevents subsequent
recovery of such original or derived Software.
(e) Owner shall not copy Software embodied in firmware and unless
otherwise specifically provided in this Contract, Owner is not granted any right
to modify Software furnished by Vendor under this Contract.
13.3 Backwards Compatibility. The Vendor represents and warrants
(the "Software Backwards Compatibility Warranty") that each Software Maintenance
Release, Software Upgrade and Software Enhancement will be Backwards Compatible.
[***] Notwithstanding the foregoing, the Software Backwards Compatibility
Warranty does not apply to Products developed AXE in accordance with standards
not yet finalized as of the date hereof.
13.4 Transfer and Relocation. (a) In the event the Owner or any
successor to the Owner's title in the Products: (i) elects to transfer a Product
to a third party, and where such Product shall remain in place and used for
substantially the same purpose as used by the Owner and where such third party
resides in the United States and is not a direct competitor of the Vendor
involved in the manufacture of communications equipment, software or related
services; or (ii) elects to transfer Products to an affiliate, the Owner may
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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transfer its RTU License for the Software furnished under this Contract for use
with such Product, without the payment of any additional Software right-to-use
fees by the transferee provided that Annual Maintenance Fees shall continue to
be calculated on the same basis. For example, if the RTU License for the
Software contains usage or per subscriber limits, or the processor to be used by
transferee requires additional memory or hard disk space additional payments or
purchases may be required. The following conditions shall apply to transfers and
relocations pursuant to this subsection 13.4:
(A) The right to use such Software may be transferred only
together with the Products with which the Owner has a right to
use such Software, and such right to use the Software shall
continue to be limited to use with such Products;
(B) Before any such Software is transferred, the Owner shall
notify the Vendor of such transfer and the transferee shall
have agreed in writing (a copy of which shall be provided to
the Vendor) to keep the Software in confidence and to
corresponding conditions respecting possession and use of
Software as those imposed on the Owner in this Contract; and
(C) The transferee shall have the same right to Software warranty
and Software maintenance for such Software as the transferor,
provided the transferee continues to pay the fees, including
recurring fees, if any, associated with such Software warranty
or maintenance pursuant to this Contract.
(b) Except as otherwise provided in this Contract, the Owner or any
successor to the Owner's title in the Products shall have no right to transfer
Software furnished by the Vendor under this Contract without the consent of the
Vendor, which consent shall not be unreasonably withheld. If the Owner or such
successor elects to transfer a Product purchased under this Contract for which
it does not under this Contract have the right to transfer related Software, the
Vendor agrees that upon written request of the transferee of such Product, or of
the Owner or such successor, the Vendor shall not without reasonable cause fail
to grant to the transferee a license to use such Software with the Products,
whether to be located within the United States or elsewhere, upon payment of a
relicensing fee to the Vendor on commercially reasonable terms acceptable to
Vendor.
13.5 Termination and Survival. The rights and obligations of the
Owner under the RTU License shall survive the termination of this Contract,
regardless of the cause of termination provided Owner has met its material
obligations hereunder and has rendered all payments in accordance with this
Contract. In the event that Owner persistently and materially breaches its
confidentiality obligations hereunder with respect to the Software
notwithstanding the fact that Vendor will have provided Owner with prior written
notice describing the alleged material breaches and will have given Owner a
reasonable time, and in no event less than thirty (30) days, to cure any such
breaches, Vendor may terminate Owner's RTU License. In the event that Owner
fails to pay the Annual Release
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Maintenance Fees (other than with respect to any periods for which no payment
for Annual Release Maintenance Fees are due pursuant to this Contract), Vendor
may terminate Owner's right to use the Software to which such fees apply. In no
event other than as set forth in this subsection 13.5 may Vendor terminate
Owner's right to use the Software. Notwithstanding any other provision of this
Contract, if there is a dispute, pending final resolution of such dispute, all
of Owner's rights under this Contract shall continue in full force and effect,
and Vendor will not terminate the RTU License, and so long as Owner continues to
pay Vendor applicable Annual Maintenance Release Fees, Vendor will not
terminate, suspend, interrupt or delay maintenance and support of the Software.
13.6 Access to Source Codes. The Vendor represents and warrants that
as of the date hereof, Vendor has not established a Source Code escrow for any
of its existing customers. In the event that Vendor establishes a Source Code
escrow in the future which applies to any of the Software furnished to Owner
hereunder, Vendor shall add Owner as a beneficiary of such Source Code escrow,
and Owner shall be entitled to receive a copy of the escrowed Source Code in the
event of the occurrence of any of the events set out below. In addition to the
foregoing, the Vendor shall immediately deliver and hereby grants the Owner a
right to access the Source Code and to modify the Software (the "RTM License")
for the maintenance, enhancement and support of those Products purchased from
the Vendor and owned or operated by the Owner under the following circumstances,
provided that any such released Source Code shall be subject to the
confidentiality provisions set forth in this Contract:
(i) if the Vendor becomes insolvent, makes a general
assignment for the benefit of creditors, files a voluntary petition in
bankruptcy or an involuntary petition in bankruptcy is filed against the
Vendor which is not dismissed within sixty (60) days, or suffers or
permits the appointment of a receiver for its business, or its assets
become subject to any proceeding under a bankruptcy or insolvency law,
domestic or foreign, or has liquidated its business, or the Vendor, or a
business unit of the Vendor that is responsible for maintenance of the
Software, ceases doing business without providing for a successor, and the
Owner has reasonable cause to believe that any such event shall cause the
Vendor to be unable to meet its Warranty service or support requirements
hereunder; or
(ii) if the Vendor ceases to maintain or support a
previously supported version of the Software and Owner cannot obtain, with
Vendor's assistance (for example, by providing a third party with Source
Code or by any other appropriate method) the same support services the
Vendor is required to provide under this Contract from another entity
(either working with or independently from Vendor) at a price that is
equal to or less than the prices for such support as provided herein, or
there is a persistent and material failure by Vendor to provide the
Warranty service or support it is required to provide pursuant to the
terms of this Contract.
13.7 Ownership of Intellectual Property. The Vendor shall own all
forms of intellectual property rights (including, but not limited to, patent,
trade secret, copyright and
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mask rights) pertaining to the Software, and shall have the right to file for or
otherwise secure and protect such rights. The foregoing notwithstanding, the
parties understand and agree that from time to time the Owner may devise,
develop or otherwise create ideas or other concepts for services or new products
which are patentable or otherwise capable of receiving protection from
duplication. In such event, the Owner shall have the right to apply for a patent
in accordance with applicable law, provided, however, that notwithstanding this
subsection, the Vendor does not hereby relinquish or release any of its
intellectual property rights.
SECTION 14. SOFTWARE AND EQUIPMENT CHANGES
14.1 Software.
14.1.1 Software Upgrades, Software Maintenance Releases, Software
Enhancements and Combined Releases. During the Contract Term, upon payment of
the Annual Release Maintenance Fees, calculated pursuant to Exhibit B-5, Owner
shall receive all base Software releases and all Software Maintenance Releases,
Software Upgrades, Software Enhancements and Software Combined Releases
applicable to Software for Products for which the Owner has obtained a RTU
License at such times as they become generally available to the Vendor's
customers. Owner shall also be entitled to receive Optional Software Features
upon payment of the appropriate fees determined in accordance with Exhibit B-5.
Owner may elect to purchase such features on a per feature basis, or purchase
annual buy-out rights on a per market basis, permitting Owner to select those
features it wishes to deploy in the relevant market.
14.1.2 Notice. The Vendor shall give the Owner, or cause the Owner
to be given not less than ninety (90) days prior written notice of the
introduction of any Software Enhancement release or any Software Combined
Release or any optional Software release. In addition, in each February and
August of each year during the term of this Contract, the Vendor shall provide,
or cause to be provided, to the Owner a forecast of future Software Enhancement
releases, Software Upgrades, or Software Combined Releases or any optional
Software release, as the case may be, then currently being developed by or on
behalf of the Vendor.
14.1.3 Installation, Testing and Maintenance. The installation and
testing of the Software by the Vendor and the acceptance thereof by the Owner
shall be performed in accordance with the criteria set forth in Exhibit G.
14.1.4 Software Fixes. In the event that any Software Maintenance
Release, Software Upgrade, Software Enhancement or Software Combined Release
supplied by the Vendor during the term of this Contract has the effect of
preventing any System or any part thereof from satisfying, or performing in
accordance with the Specifications or the Exhibits or otherwise adversely
affects the functionality or features of any System or any part thereof, then
the Vendor shall promptly retrofit or take such other corrective action as may
be necessary to ensure that any System or any such affected part, as modified to
include each
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such Software Maintenance Release, Software Upgrade, Software Enhancement or
Software Combined Release, shall satisfy, and perform in accordance with, the
Specifications and the Exhibits and restore all pre-existing functionality and
features as well as provide any new features and functionality provided by any
of the foregoing modifications, in each case without any charge to the Owner
(other than payment of the applicable fees pursuant to the terms of this
Contract). Notwithstanding anything contained herein in this subsection to the
contrary, Owner shall be responsible for the cost of any additional Equipment
required to accommodate additional capacity, memory or processing requirements
necessitated by any new Software feature or Optional Software Feature which
Owner elects to use (provided such use by Owner is optional without losing the
benefit of the Software Maintenance Release or Software Upgrade) which are
contained in any such Software Upgrade, Software Enhancement or Software
Combined Release; provided, however, that Owner shall not be required to pay for
any additional Equipment required to accommodate additional capacity, memory or
processing requirements necessitated by implementation of a required Software
Maintenance Release, whether or not such Software Maintenance Release is issued
as a stand-alone release, or is contained within a Software Upgrade, Software
Enhancement or Software Combined Release.
14.2 Equipment.
14.2.1 Equipment Upgrades. (a) Equipment Upgrades will be provided
to the Owner by the Vendor at no charge to the Owner as provided in subsection
14.2.1(b) below. Equipment Enhancements must be provided to the Owner by the
Vendor, if requested by the Owner, and the Owner is obligated to make payment
therefor in an amount that is specified on the B Exhibits. If the Vendor at any
time issues an Equipment Upgrade which is combined with any Equipment
Enhancement (collectively, the "Equipment Combined Release") to such Equipment,
the Equipment Combined Release will be provided at no charge to the Owner unless
and until the Owner uses any of the Equipment Enhancements included within the
Equipment Combined Release, provided such use by Owner of such Equipment is
optional without losing the benefit of the Equipment Upgrade.
(b) (i) After a Product has been shipped to the Owner, if the Vendor
issues an Equipment Upgrade or Equipment Enhancement, or where a modification to
correct an error in field documentation is to be introduced, the Vendor will
promptly notify the Owner of such change through the Vendor's design change
management system or another Vendor notification procedure. Each change
notification, whether or not it bears a restrictive legend, will be subject to
the confidentiality obligations provided in subsection 26.18, except that such
information may be reproduced by the Owner for the Owner's use as required
within the System. If the Vendor has engineered, furnished, and installed a
Product which is subject to an Equipment Upgrade, the Vendor will implement such
change, at its sole cost and expense, if it is announced within [*] for the AXE
switch and [*] for all other Products from the date of shipment of that Product,
and subject to the reasonable review and acceptance of the Owner at such times
as the Owner reasonably determines that it needs to review such Vendor decision,
by either (A) modifying the Product at the Owner's site; (B) modifying the
Product which the Owner has returned to the Vendor in accordance with the
Vendor's reasonable instructions pursuant to and in
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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accordance with the terms of this Contract; or (C) replacing the Product
requiring the change with a replacement Product for which such change has
already been implemented. If the Vendor has not engineered the original Product
application and accordingly office records are not available to the Vendor, the
Vendor will provide the generic change information and associated parts for the
Owner's use in implementing such change.
(ii) In any of the instances described in clause (i) above, if the
Vendor and the Owner agree that a Product or part thereof subject to such change
is readily returnable, without incurring any significant time or expense, the
Owner, at its expense, will remove and return such Product or part to the
Vendor's designated facility within the United States and the Vendor, at its
sole expense, will implement such change (or replace it with a Product or part
for which such change has already been implemented) at its facility and return
such changed (or replacement) Product or part at its sole cost and expense to
the Owner's designated location within the United States. Any such
reinstallation of Products which were readily returnable will be performed by
the Owner at its sole expense, provided such reinstallation can be done by Owner
without incurring any significant time or expense. In all other circumstances,
Vendor shall provide such removal, repair and reinstallation Services at its
sole cost and expense.
(iii) If the Owner does not make or permit the Vendor to make an
Equipment Upgrade as stated above within the appropriate [*] or [*] period from
the date of change notification or such other period as the Vendor may agree,
subsequent changes, repairs or replacements affected by the failure to make such
change may, at the Vendor's option, be invoiced to the Owner whether or not such
subsequent change, repair or replacement is covered under the warranty provided
in this Contract for such Product. If requested by the Owner, Equipment Upgrades
announced more than the appropriate [*] or [*] period from the date of shipment
will be implemented at the Owner's expense.
(iv) If the Vendor issues an Equipment Enhancement after a Product
has been shipped to the Owner, the Vendor will promptly notify the Owner of such
change if it is being offered to any of the Vendor's customers. Except as
otherwise set forth above in subsection 14.2(b), when an Equipment Enhancement
is requested by the Owner, the pricing set for such Equipment Enhancements will
be at the Vendor's standard charges subject to the applicable discounts set
forth in the B Exhibits.
(v) All change notifications for Equipment Upgrades and Equipment
Enhancements provided by the Vendor to the Owner pursuant to the terms of this
Contract must contain the following information: (A) a detailed description of
the change; (B) the reason for the change; (C) the effective date of the change;
and (D) the implementation schedule for such change, if appropriate.
14.2.2 Notice. The Vendor shall give, or shall cause to be given to,
the Owner not less than ninety (90) days prior written notice of the
introduction of any Equipment Enhancement or any Equipment Combined Release. In
addition, in each February and August of each year during the Term of this
Contract, the Vendor shall
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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provide the Owner with a forecast of future Equipment Enhancements to the
Equipment or Equipment Combined Releases then currently being developed by or on
behalf of the Vendor.
14.2.3 Installation, Testing and Acceptance The Installation and
testing of the Equipment by the Vendor and the acceptance thereof by the Owner
shall be performed in accordance with the Exhibits and pursuant to the
Milestones contained in the Exhibits.
14.2.4 Equipment Fixes. In the event that any Equipment Upgrade or
Equipment Enhancement, directly or indirectly, supplied by the Vendor during the
appropriate [*] or [*] period following the Effective Date or during [*] period
following the date of shipment of such Equipment Upgrade or Equipment
Enhancement, has the effect of preventing any System or any part thereof from
satisfying, or performing in accordance with, the Specifications or otherwise
adversely affects the functionality, interoperability or features of any System,
or any part thereof then the Vendor shall without any charge to the Owner
promptly retrofit or take such other corrective action as may be necessary to
assure that any System or any such affected part, as modified to include each
such Equipment Upgrade and Equipment Enhancement, shall satisfy, and perform in
accordance with, the Specifications and restore all pre-existing functionality
and features as well as provide any features and functionality provided by any
of the foregoing modifications.
14.2.5 Equipment Backwards Compatibility Warranty. The Vendor
represents and warrants (the "Equipment Backwards Compatibility Warranty") that
each New Equipment Release will be Backwards Compatible, provided that it is
implemented within the specified time provided with each New Equipment Release.
[***] Notwithstanding the foregoing, the Equipment Backwards Compatibility
Warranty does not apply to Products developed beyond AXE standards not yet
finalized as of the date hereof.
14.3 Notice of Developments.
14.3.1 Vendor Developments. The Vendor shall provide the Owner, or
cause to be provided to the Owner, through the Owner's chief executive officer,
with reasonable written notice of any Product developments, innovations and/or
technological advances (collectively "Vendor Developments") relevant to the
System simultaneous to giving such notice to any other customer or otherwise
making any such Vendor Development public; provided that the Vendor shall not be
obligated to provide the Owner such notice before any other customer if doing so
would breach any contractual obligation to any other customer, provided further
that any such notice need not include any information originated by another
customer of Vendor which is proprietary to such other
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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customer of Vendor. For the purposes of this subsection the term "Vendor"
includes the Vendor and its affiliates and subsidiaries.
14.3.2 Participation in Testing. The Owner has the right, but not
the obligation, to witness and/or participate in any initial testing; provided
that any such initial testing of Vendor Developments shall be subject to: (i)
scheduling as reasonably determined by the Vendor; (ii) the qualification that
the Owner's System meets the technical requirements for the testing of such
Vendor Development as reasonably determined by the Vendor (or otherwise that the
Owner is willing to update such System to meet such requirements); (iii) the
Owner's acknowledgment that it shall be able to provide the resources necessary
to implement the initial testing for such Vendor Development; and (iv) the Owner
and the Vendor executing a verification office testing agreement that identifies
the scope, terms, pricing, responsibilities and schedule related to the initial
testing of such Vendor Development. The Vendor shall provide the Owner at least
thirty (30) days prior written notice of its intent to test any such Vendor
Development and upon the Owner's written request the Vendor shall allow the
Owner to participate in such testing upon terms and in a testing environment
reasonably acceptable to the parties at such time. Such rights shall not apply
to a Vendor Development originated by another customer of Vendor which includes
information which is proprietary to such other customer.
14.3.3 Quarterly Notices. Vendor shall make reasonable efforts to
collect and distribute on a quarterly basis a list of new Software bugs,
problems, fixes, etc., provided that Vendor shall not be required to distribute
confidential information of any other customer.
SECTION 15. INTELLECTUAL PROPERTY
15.1 Intellectual Property. Neither Owner nor Vendor shall publish
or use any advertising, sales promotion, press releases or publicity matters
relating to this Contract without the prior written approval of the other, in
accordance with subsection 26.13.
15.2 Infringement. (a) The Vendor agrees that it shall defend,
indemnify and hold harmless, at its own expense, all suits and claims against
the Owner for infringement or violation of any patent, trademark, copyright,
trade secret or other intellectual property rights of any third party
enforceable in the United States or in any other territory where Vendor has
approved the deployment or use of Products under this Contract (collectively,
"Intellectual Property Rights"), covering, or alleged to cover, the Products or
any component thereof. The Vendor agrees that it shall pay all sums, including
without limitation, reasonable attorneys' fees and other costs incurred at
Vendor's written request or authorization, which, in defense of, by final
judgment or decree, or in settlement of any suit or claim to which the Vendor
agrees, may be assessed against, or incurred by, the Owner on account of such
infringement or violation, provided that the Owner shall cooperate in all
reasonable respects with the Vendor and its attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the Owner may, at its own cost, participate in the
investigation, trial and defense of
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such lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers. If a claim for
Losses (a "Claim") is to be made by a party entitled to indemnification
hereunder against the Vendor, the party claiming such indemnification shall give
written notice (a "Claim Notice") to the Vendor as soon as practicable after the
party entitled to indemnification becomes aware of any fact, condition or event
which may give rise to Losses for which indemnification may be sought under this
Agreement, provided, however, no delay on the part of the Owner in notifying the
Vendor shall relieve the Vendor from any obligation hereunder unless (and then
solely to the extent) the Vendor is thereby materially prejudiced. If any
lawsuit or enforcement action is filed against any party entitled to the benefit
of indemnity hereunder, written notice thereof shall be given to the Vendor as
promptly as practicable (and in any event within twenty (20) calendar days after
the service of the citation or summons). The Vendor shall be entitled, if it so
elects to: (i) defend such lawsuit or action; (ii) employ and engage attorneys
of its own choice to handle and defend the same, at the Vendor's cost, risk and
expense; and (iii) compromise or settle such Claim, which compromise or
settlement shall be made only with the written consent of the Owner (which may
not be unreasonably withheld), unless such compromise or settlement includes an
unconditional release of any claims against the Owner in which event such
written consent of the Owner shall not be required. If the Vendor fails to
assume the defense of such Claim within twenty (20) calendar days after receipt
of the Claim Notice, the Owner against which such Claim has been asserted will
(upon delivering notice to such effect to the Vendor) have the right to
undertake, at the Vendor's cost and expense, the defense, compromise or
settlement of such Claim on behalf of and for the account and risk of the
Vendor. In the event the Owner assumes the defense of the Claim, the Owner will
keep the Vendor reasonably informed of the progress of any such defense,
compromise or settlement. The Vendor shall be liable for any settlement of any
action effected pursuant to and in accordance with this Agreement and for any
final judgment (subject to any right of appeal), and the Vendor agrees to
indemnify and hold harmless the Owner from and against any Losses by reason of
such settlement or judgment.
(b) The Vendor's obligation under this subsection shall not extend
to alleged infringements or violations that arise because the Products provided
by the Vendor are used in combination with other products furnished by third
parties and where any such combination was not installed, recommended or
approved by the Vendor.
15.3 Vendor's Obligation to Cure. If in any such suit so defended,
all or any part of the Products or any component thereof is held to constitute
an infringement or violation of Intellectual Property Rights of others and its
use is enjoined, or if in respect of any claim of infringement or violation the
Vendor deems it advisable to do so, the Vendor shall at its sole cost, expense
and option take one or more of the following actions: (i) procure the right to
continue the use of the same without interruption for the Owner; (ii) replace
the same with non-infringing Products that meets the Specifications in
accordance with the terms of this Contract; or (iii) modify said Products, any
System or any component thereof so as to be non-infringing, provided that the
Products, any System or any component thereof as modified meets all of the
Specifications. In the event that the Vendor is not able to cure the
infringement pursuant to clause (i), (ii) or (iii) in the immediately preceding
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sentence, in addition to the other rights and remedies provided in this Section
15, the Vendor shall refund to the Owner the full purchase price paid by the
Owner for such infringing Product or feature, and the Owner shall be under no
obligation to return to the Vendor such infringing Product or feature regardless
of whether, or by what means, the Owner, on its own or otherwise, subsequently
cures such infringement, unless Owner is directed to do so by court order.
15.4 Vendor's Obligations. The Vendor's obligations under this
Section 15 shall not apply to any infringement or violation of Intellectual
Property Rights caused by unauthorized modification of the Products, any System
or any component thereof by the Owner, or arises from adherence to instructions
to apply Owner's trademark, trade name or other company identification to a
Product, or any infringement caused solely by the Owner's use and maintenance of
the Products other than in accordance with the Specifications, except as
authorized or permitted by the Vendor. The Owner shall indemnify the Vendor
against all liabilities and costs, including reasonable attorneys' fees, for
defense and settlement of any and all claims against the Vendor for
infringements or violations based upon this subsection.
15.5 Liability of Vendor. The Liability of Vendor with respect to
any and all claims, actions, proceedings or suits by third parties alleging
infringement of patents, trademarks, or copyrights or violation of trade secrets
or proprietary rights because of, or in connection with, any items furnished
pursuant to this Contract shall be limited to the specific undertakings
contained in this Section 15.
SECTION 16. DELAY
16.1 Liquidated Damages. The parties agree that damages for delay
are difficult to calculate accurately and not reasonably determinable at the
time of execution of this Contract, and, therefore, agree that liquidated
damages (the "Liquidated Damages") shall be paid for non-performance or late
performance of the Vendor's obligations to achieve a Guaranteed Substantial
Completion Date for reasons not otherwise excused by Force Majeure or Owner's
failure to satisfy its obligations set out in this Contact. The parties agree
that Liquidated Damages are intended to compensate Owner for the delayed or late
performance by the Vendor and are not a penalty.
16.2 Delay and Default. In the event the Vendor fails to achieve
(other than as permitted by this Contract) the Substantial Completion of a
System on or before the Guaranteed Substantial Completion Date for such System
or during a ten day cure period following such date, the Vendor shall pay,
weekly in arrears, for the next [*] commencing on the eleventh day after the
Guaranteed Substantial Completion Date, Liquidated Damages to the Owner in an
amount equal to [*] (pro-rated on a daily basis for periods of time less than
one week) of the total amount of all Purchase Orders relating to the System with
respect to which the Vendor has so failed, based on the number of days elapsed
after a ten day cure period following the Guaranteed Substantial Completion Date
and before the achievement of Substantial Completion;
[*] Certain material (included by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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provided that in the event that Substantial Completion is not achieved prior to
the expiration of such [*] period, thereafter Vendor shall pay, weekly in
arrears, additional Liquidated Damages to the Owner in an amount equal to [*]
(pro-rated on a daily basis for periods of time less than one week) of the total
amount of all Purchase Orders relating to the System with respect to which the
Vendor has so failed, based on the number of days elapsed after the [*]
plus ten day cure period following the Guaranteed Substantial Completion Date
and before the achievement of Substantial Completion; provided that in no event
shall the amount of Liquidated Damages so paid in respect of a System exceed [*]
of the total amount of all Purchase Orders relating to the System with respect
to which the Vendor has so failed.
16.3 System Capacity Guarantee. [***]
16.4 Limitation. The foregoing provisions concerning Liquidated
Damages shall not be deemed to limit the amount payable by the Vendor to the
Owner for breach of contract, except for amounts payable on account of delay as
aforesaid, provided, however
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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that the payment of Liquidated Damages shall be Owner's sole remedy for the
delay giving rise to the Vendor's obligation to pay the Liquidated Damages.
16.5 Early Completion Bonus. With respect to a System, Vendor shall
be entitled to an early completion bonus from the Owner in the event that
Substantial Completion with respect to such System occurs on or prior to the
date that is [*] prior to the Guaranteed Substantial Completion Date for such
System. Such early completion bonus shall be equal to [*] (pro-rated on a daily
basis for periods of time less than one week) of the total amount of all
Purchase Orders relating to such System, based on the number of days that
Substantial Completion occurs prior the date that is [*] prior to the Guaranteed
Substantial Completion Date for such System.
SECTION 17. FORCE MAJEURE
17.1 Excusable Delay. (a) If the performance of this Contract, or of
any obligation hereunder except for the obligations set forth in Section 5 is
prevented, restricted or interfered with by reason of fires, breakdown of plant,
labor disputes, embargoes, government ordinances or requirements, civil or
military authorities, acts of God or of the public enemy, acts or omissions of
carriers, inability to obtain necessary materials or services from suppliers, or
other causes beyond the reasonable control of the party whose performance is
affected ("Force Majeure"), then the party affected, upon giving prompt notice
to the other party, shall be excused from such performance on a day-for-day
basis to the extent of such prevention, restriction, or interference (and the
other party shall likewise be excused from performance of its obligations on a
day-for-day basis to the extent such party's obligations relate to the
performance so prevented, restricted or interfered with); provided that the
party so affected shall use reasonable efforts to avoid or remove such cause of
non-performance and both parties shall proceed to perform their obligations with
dispatch whenever such causes are removed or cease.
(b) The party claiming the benefit of excusable delay hereunder
shall: (i) promptly notify the other party of the circumstances creating the
failure or delay and provide a statement of the impact of such party failure or
delay; and (ii) use reasonable efforts to avoid or remove such causes of
nonperformance, excusable failure or delay. If an event of Force Majeure
prevents the Vendor from performing its obligations under this affected Purchase
Orders for a period exceeding sixty (60) days, the Owner may, upon prior written
notice to the other party, terminate any affected Purchase Orders; however, this
Contract remains in full force and effect. [To be negotiated.]
(c) In the event of a Force Majeure which the party claiming relief
for such event has used all best efforts to resolve in accordance with the terms
of this Contract, upon the written request of either party, the other party
shall in good faith negotiate modifications, to the extent reasonable and
necessary, in scheduling and performance criteria in order to reasonably address
the impact of such Force Majeure.
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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SECTION 18. WARRANTIES
18.1 Equipment and Services Warranty. Vendor warrants that, with
respect to each System, for a period of two (2) years from the date of
Substantial Completion, provided, however that if prior to Final Acceptance a
Major Outage occurs, the two (2) year period shall be extended by the number of
days elapsed between Substantial Completion and the date the Owner signs the
Certificate of Final Acceptance (as so determined, the "Warranty Period"), all
Equipment and Services furnished under this Contract with respect to such System
will be free of Defects and Deficiencies and shall conform to the applicable
portions of the Specifications (the "Equipment and Services Warranty"),
provided, however, that with respect to those Services for which a warranty is
set forth in an Exhibit, the warranty contained in the Exhibit shall supersede
the general Services warranty contained in this Section 18.1. With respect to
third-party manufactured Products which are not a part of a Core System, Vendor
shall furnish such Products only on a pass-through warranty basis; provided,
however, that Vendor shall identify such Products to Owner before acceptance of
any Purchase Order which includes any such Products. The terms of the warranty
applicable to such Products shall be provided in an addendum to the Purchase
Order. Except as noted in the B Exhibits, all Products referenced in the B
Exhibits qualify as Vendor-warranted Products. The Vendor's obligations with
respect to the Equipment and Services Warranty shall be to attempt first to
repair or replace at no additional cost, any defective Equipment or correct any
deficient Services. If, after using its best efforts to repair or replace such
Product and after consultation with and with the consent of Owner, which consent
shall not be unreasonably withheld, Vendor determines that it is unable to
repair, replace or otherwise correct such defect, Vendor shall provide a credit
or refund based on the original purchase price, and installation charges if
installed by Vendor. If, as a result of the Defect and Deficiency, the Product
fails to operate in accordance with the Specifications which causes the System
to fail to materially operate in accordance with its Specifications, a refund
shall be paid to the Owner on account of the purchase price for the total
System, less a pro-rata discount calculated with regard to the period of time
during the Warranty Period that Owner operated the System in In Revenue Service.
For purposes of calculating such pro rata discount, the period of time the Owner
would have been able to operate the System within In Revenue Service shall be:
(i) ten (10) years from Substantial Completion for the AXE switch; and (ii)
seven (7) years from Substantial Completion for all other Products. In the event
that Vendor pays a refund hereunder, Owner shall return such Products to Vendor
at Vendor's sole cost and expense. The Warranty Period for all Equipment or
Services repaired, replaced or corrected under the Equipment and Services
Warranty shall be the longer of: (i) one (1) year from the date of delivery of
the repaired or replacement Equipment or from the completion of the corrected
Services, as applicable; or (ii) or the unexpired term of the Warranty Period.
The Warranty Period for Equipment purchased as spares shall be two (2) years
from installation of such Equipment.
For those Products not readily returnable by Owner, or where Owner cannot
remove and reinstall the Products without incurring significant time and
expense, and where Vendor elects to repair or replace the Product, Vendor shall
repair or replace the Product at Owner's Site. In the event Vendor does the
repair work at Owner's site, Vendor shall be responsible
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for replacement of cable and wire Products, and for reasonable Site restoration.
If Vendor has elected to repair or replace a defective Product, and the Product
is readily returnable by Owner without incurring significant work or expense,
Owner is responsible for removing and reinstalling the Products. Products
returned for repair or replacement will be accepted by Vendor only in accordance
with its instructions and procedures for such returns. The transportation
expense associated with returning such Product to Vendor shall be borne by
Owner. Vendor shall pay the cost of transportation of the repaired or replacing
Product to the return destination designated by Owner. Defective or
nonconforming Products or parts which are replaced hereunder shall become
Vendor's property. Vendor may use either the same or functionally equivalent
new, remanufactured, reconditioned or refurbished Products or parts in the
furnishing of repairs or replacements under this Contract, provided that such
Products satisfy the Specifications.
18.2 Expansions Warranty. Vendor warrants that, with respect to
Products and Services constituting Expansions (including Expansions to a System,
or Expansions or growth not part of a System, and all other purchased Products)
furnished under this Contract will be free of Defects and Deficiencies and shall
conform the applicable portions of the Specifications (the "Expansions
Warranty"). The warranty period with respect to such Products and Services shall
be two (2) years from the date of installation completion or completion of
Services, as the case may be (the "Expansions Warranty Period"). With respect to
third-party manufactured Products which are not a part of a Core System, Vendor
shall furnish such Products only on a pass-through warranty basis; provided,
however, that Vendor shall identify such Products to Owner before acceptance of
any Purchase Order which includes any such Products. The terms of the warranty
applicable to such Products shall be provided in an addendum to the Purchase
Order. Except as noted in the B Exhibits, all Products referenced in the B
Exhibits qualify as Vendor-warranted Products. The Vendor's obligations with
respect to the Expansions Warranty shall be to attempt first to repair or
replace at no additional cost, any defective Equipment or correct any deficient
Services. If, after using its best efforts to repair or replace such Product and
after consultation with and with the consent of Owner, which consent shall not
be unreasonably withheld, Vendor determines that it is unable to repair, replace
or otherwise correct such defect, Vendor shall provide a credit or refund based
on the original purchase price, and installation charges if installed by Vendor.
The warranty period for all Equipment or Services repaired, replaced or
corrected under the Expansions Warranty shall be the longer of: (i) one (1) year
from the date of delivery of the repaired or replacement Equipment or from the
completion of the corrected Services, as applicable; or (ii) or the unexpired
term of the Expansions Warranty Period. The Warranty Period for Equipment
purchased as spares shall be two (2) years from installation of such Equipment.
For those Products not readily returnable by Owner, or where Owner cannot
remove and reinstall the Products without incurring significant time and
expense, and where Vendor elects to repair or replace the Product, Vendor shall
repair or replace the Product at Owner's Site. In the event Vendor does the
repair work at Owner's site, Vendor shall be responsible for replacement of
cable and wire Products, and for reasonable Site restoration. If Vendor has
elected to repair or replace a defective Product, and the Product is readily
returnable by Owner without incurring significant work or expense, Owner is
responsible for removing
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and reinstalling the Products. Products returned for repair or replacement will
be accepted by Vendor only in accordance with its instructions and procedures
for such returns. The transportation expense associated with returning such
Product to Vendor shall be borne by Owner. Vendor shall pay the cost of
transportation of the repaired or replacing Product to the return destination
designated by Owner. Defective or nonconforming Products or parts which are
replaced hereunder shall become Vendor's property. Vendor may use either the
same or functionally equivalent new, remanufactured, reconditioned or
refurbished Products or parts in the furnishing of repairs or replacements under
this Contract, provided that such Products satisfy the Specifications.
18.3 Software Warranty. Vendor warrants that, with respect to each
System for the Warranty Period, all Software will be free of Defects and
Deficiencies and shall conform to the applicable portions of the Specifications
(the "Software Warranty"). The Vendor's obligations with respect to the Software
Warranty shall be to attempt first to repair or replace at no additional cost,
any defective Software. If, after using its best efforts to repair or replace
such Software and after consultation with and with the consent of Owner, which
consent shall not be unreasonably withheld, Vendor determines that it is unable
to repair, replace or otherwise correct such defect, Vendor shall provide a
credit or refund based on the original purchase price, and installation charges
if installed by Vendor. If, as a result of the Defect and Deficiency, the
Software fails to operate in accordance with the Specifications which causes the
System to fail to materially operate in accordance with its Specifications, a
refund shall be paid to Owner on account of the purchase price for the total
System, less a pro rata discount calculated with regard to the period of time
during the Warranty Period that Owner operated the System in In Revenue Service.
For purposes of calculating such pro rata discount, the period of time the Owner
would have been able to operate the System in In Revenue Service shall be: (i)
ten (10) years from Substantial Completion for the AXE switch; and (ii) seven
(7) years from Substantial Completion for all other Products. In the event that
Vendor pays a refund hereunder, Owner shall return such Products to Vendor. The
warranty period for all Software so corrected or replaced under the Software
Warranty shall be the longer of: (i) one (1) year from the date of delivery of
the repaired or replacement Software; or (ii) or the unexpired term of the
Warranty Period. Vendor shall be solely responsible for all costs and expenses
incurred by Owner or Vendor in connection with the de-installation, removal and
transportation of defective Software under the Software Warranty and for the
transportation and installation of repaired, corrected or replacement Software,
including without limitation any additional or upgraded Equipment or processing
capability necessary to run or operate such repaired, corrected or replacement
Software. The Warranty Period with respect to Software Maintenance Releases,
Software Upgrades, Software Enhancements and Software Combined Releases shall be
two (2) years from the successful installation [To be negotiated.] of such
Software Maintenance Releases, Software Upgrades, Software Combined Releases and
Software Enhancements.
18.4 [intentionally deleted]
18.5 Year 2000 Warranty. [YEAR 2000 WARRANTY LANGUAGE MAY NOT BE
RELEVANT AT TIME OF DELIVERY AND DEPLOYMENT UNDER THIS CONTRACT.]
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18.6 Warranty Claim Procedures. (a) If the Owner claims a breach of
any warranty, it shall notify the Vendor of the claimed breach within a
reasonable time after its determination that a breach has occurred. The Owner
shall allow the Vendor to inspect the Equipment, Software, Services, or the
System, as the case may be, on-site in order to effect the necessary repairs.
(b) The Vendor shall respond to such warranty claims for warranty
Services in accordance with the procedures outlined in Exhibit N.
18.7 Technical Assistance. The Vendor shall maintain a technical
assistance center and shall have technical support available to the Owner in
accordance with the requirements set forth in Exhibit N.
18.8 Scope of Warranties. Unless otherwise stated herein, the
Warranties shall not apply to:
18.8.1 defective conditions or nonconformities to the extent
resulting from the following, if not consistent with applicable
Specifications: unauthorized Owner modifications, misuse, neglect,
accident, abuse, improper wiring, repairing, splicing, alteration,
installation, storage or maintenance failure of Owner to apply previously
applicable Vendor modifications or corrections;
18.8.2 any Equipment, Services or Software damaged by accident or
disaster, including without limitation, fire, flood, wind, water,
lightning or power failure other than to the extent that any such
Equipment, Services or Software should in accordance with the
Specifications be able to withstand any such events; or
18.8.3 non-integral items normally consumed in operation or which
has a normal life inherently shorter than the Warranty Periods (e.g.,
fuses, lamps, magnetic tape); or
18.8.4 damages or defects resulting directly from third party
equipment, provided that this shall in no event limit the Vendor's
obligations as to interoperability pursuant to the terms of this Contract;
18.8.5 Equipment which have had their serial numbers or months and
year of manufacture removed or obliterated by the Owner; or
18.8.6 failures or deficiencies in BTS performance or System
optimization resulting solely from changed environmental conditions or
unauthorized changes to the System by Owner, or changes not consented to
by Owner including but not limited to the growth of trees and other
foliage, the erection of buildings, and interference from third party
radio transmissions not otherwise engineered for by the Vendor;
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except when any such damage or defects are made, done or caused by the Vendor or
any of its Subcontractors, their respective agents and employees.
18.9 Third Party Warranties. If the Vendor purchases or subcontracts
for the manufacture of any part of a System or the performance of any of the
Services to be provided hereunder from a third party, the warranties given to
the Vendor by such third party shall inure, to the extent assigned to the Owner
pursuant to this Section 18 or permitted by law, to the benefit of the Owner,
and the Owner shall have the right, at its sole discretion, to enforce such
warranties directly and/or through the Vendor. The warranties of such third
parties shall be in addition to and shall not, unless otherwise expressly stated
herein, be in lieu of any warranties given by the Vendor under this Contract.
18.10 Additional Sites. In the event that under the remedy
provisions of this Section 18 the Vendor is required to provide additional MSC
and/or BTSs requiring additional Sites, the Owner shall be responsible for all
Site Acquisition.
18.11 EXCLUSIVE REMEDIES. THE FOREGOING EQUIPMENT, SERVICES,
SOFTWARE AND EXPANSIONS WARRANTIES AND REMEDIES ARE EXCLUSIVE FOR THE PURPOSES
OF ANY BREACH BY THE VENDOR OF ANY SUCH WARRANTY AND ARE IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 19. INSURANCE
19.1 Insurance. The Vendor shall maintain insurance in accordance
with the provisions set forth in Exhibit Q. [To be negotiated.]
SECTION 20. INDEMNIFICATION AND LIMITATION OF LIABILITY
20.1 Indemnity. Vendor agrees to indemnify, defend and hold harmless Owner
and its affiliates and their respective directors, officers, employees, agents,
successors and assigns, from Losses and threatened Losses arising from, in
connection with, or based on allegations of, any of the following:
(a) Vendor's failure to observe or perform any duties or
obligations to Subcontractors or any third parties within the
reasonable contemplation of this Contract;
(b) the death or bodily injury of any agent, employee, customer,
business invitee or any other person caused by the tortious
conduct (including without limitation negligence, willful
misconduct or breach of warranty) or strict liability of
Vendor, any Subcontractor
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or its or their respective employees, contractors, agents or
representatives;
(c) the damage, loss or destruction of any real or tangible
personal property caused by the tortious conduct (including
without limitation negligence, willful misconduct or breach of
warranty) or strict liability of Vendor, any Subcontractor or
its or their respective employees, contractors, agents or
representatives; or
(d) any claim, demand, charge, action, cause of action or other
proceeding asserted against Owner but arising out of or
resulting from an act or omission of Vendor, any Subcontractor
or its or their respective employees, contractors, agents or
representatives in its or their respective capacities as an
employer.
20.2 Claim for Losses. If a Claim is to be made by a party entitled
to indemnification hereunder against the Vendor, the party claiming such
indemnification shall give a Claim Notice to the Vendor as soon as practicable
after the party entitled to indemnification becomes aware of any fact, condition
or event which may give rise to Losses for which indemnification may be sought
under this Agreement, provided, however, no delay on the part of the Owner in
notifying the Vendor shall relieve the Vendor from any obligation hereunder
unless (and then solely to the extent) the Vendor is thereby materially
prejudiced. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the Vendor as promptly as practicable (and in any event within twenty
(20) calendar days after the service of the citation or summons). The Vendor
shall be entitled, if it so elects to: (i) defend such lawsuit or action; (ii)
employ and engage attorneys of its own choice to handle and defend the same, at
the Vendor's cost, risk and expense; and (iii) compromise or settle such Claim,
which compromise or settlement shall be made only with the written consent of
the Owner (which may not be unreasonably withheld), unless such compromise or
settlement includes an unconditional release of any claims against the Owner in
which event such written consent of the Owner shall not be required. If the
Vendor fails to assume the defense of such Claim within twenty (20) calendar
days after receipt of the Claim Notice, the Owner against which such Claim has
been asserted will (upon delivering notice to such effect to the Vendor) have
the right to undertake, at the Vendor's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the Vendor. In the event the Owner assumes the defense of the Claim, the
Owner will keep the Vendor reasonably informed of the progress of any such
defense, compromise or settlement. The Vendor shall be liable for any settlement
of any action effected pursuant to and in accordance with this Agreement and for
any final judgment (subject to any right of appeal), and the Vendor agrees to
indemnify and hold harmless the Owner from and against any Losses by reason of
such settlement or judgment.
20.3 Limitation Of Liability. THE ENTIRE LIABILITY OF VENDOR FOR ANY
CLAIM, LOSS, DAMAGE OR EXPENSE OF OWNER OR ANY OTHER
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ENTITY ARISING OUT OF THIS CONTRACT, OR THE USE OR PERFORMANCE OF ANY PRODUCT OR
SERVICE, WHETHER IN AN ACTION FOR OR ARISING OUT OF BREACH OF CONTRACT OR TORT,
INCLUDING NEGLIGENCE, INDEMNITY OR STRICT LIABILITY, SHALL BE EXPRESSLY SET
FORTH HEREIN AND AS FOLLOWS:
1. FOR INFRINGEMENT, THE REMEDIES SET FORTH IN SECTION 15;
2. FOR THE NON-PERFORMANCE OF PRODUCTS OR SERVICES DURING THE WARRANTY
PERIOD, THE REMEDIES SET FORTH IN THE APPLICABLE CLAUSE OF SECTION
18;
3. FOR DELAYS ATTRIBUTABLE TO FAILURE TO ACHIEVE A GUARANTEED
SUBSTANTIAL COMPLETION DATE OR FAILURE TO SATISFY THE CAPACITY
GUARANTEE, THE AGGREGATE OF THE DAMAGES WITH RESPECT TO THE
FOREGOING SHALL NOT EXCEED AN AMOUNT EQUAL TO [*] OF THE AGGREGATE
AMOUNTS OF ALL PURCHASE ORDERS WITH RESPECT TO ALL SYSTEMS, PROVIDED
THAT FOR PURPOSES OF QUANTIFYING THE DAMAGES FOR A FAILURE TO
SATISFY THE CAPACITY GUARANTEE, THE ADDITIONAL EQUIPMENT FURNISHED
BY THE VENDOR AT NO CHARGE TO THE OWNER SHALL BE VALUED AT THE
PURCHASE PRICES FOR SUCH EQUIPMENT SET FORTH IN THIS CONTRACT AND,
AS SO VALUED, SHALL BE DEEMED TO BE DAMAGES FOR PURPOSES OF THIS
SUBSECTION AND;
4. EXCEPT AS PROVIDED IN PARAGRAPH 5 BELOW, FOR EVERYTHING OTHER THAN
AS SET FORTH ABOVE, VENDOR'S TOTAL LIABILITY TO THE OWNER, WHETHER
IN CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND
STRICT LIABILITY) SHALL BE LIMITED TO AN AMOUNT EQUAL TO [*] OF THE
AGGREGATE AMOUNT OF ALL PURCHASE ORDERS ISSUED UNDER THIS CONTRACT.
5. THE LIMITATION SET FORTH IN PARAGRAPH 4 ABOVE SHALL NOT APPLY WITH
RESPECT TO: (i) CLAIMS OF BREACH OF CONFIDENTIALITY; (ii) CLAIMS
SUBJECT TO INDEMNIFICATION PURSUANT TO SUBSECTION 20.1 ABOVE OR
PATENT INFRINGEMENT PROVISIONS OF THIS CONTRACT; OR (iii) FAILURE TO
COMPLY WITH APPLICABLE LAWS.
6. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CONTRACT, NEITHER PARTY,
NOR THEIR AFFILIATES NOR THEIR EMPLOYEES, DIRECTORS, OFFICERS AND
SUPPLIERS SHALL BE LIABLE FOR THE OTHER PARTY'S INDIRECT,
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS, REVENUES OR
SAVINGS ARISING OUT OF THIS CONTRACT OR THE USE OR PERFORMANCE OF
ANY PRODUCTS OR SERVICES OR, EXCEPT AS SET FORTH ABOVE, FOR DAMAGES
IN EXCESS OF THE AGGREGATE AMOUNT OF ALL PAYMENTS MADE TO THE VENDOR
HEREUNDER. THIS CLAUSE SHALL SURVIVE FAILURE OF AN EXCLUSIVE OR
LIMITED REMEDY.
SECTION 21. REPRESENTATIONS AND WARRANTIES
21.1 Representations and Warranties of the Parties. The parties
hereby represent and warrant as follows:
21.1.1 Due Organization. Each party represents and warrants to the
other party that the representing party is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own and operate its business and properties and to carry on its business
as such business is now being conducted and is duly qualified to do
business in all jurisdictions in which the transaction of its business in
connection with the performance of its obligations under this Contract
makes such qualification necessary or required.
21.1.2 Due Authorization; Binding Obligation. Each party represents
and warrants to the other party that the representing party has full
corporate power and authority to execute and deliver this Contract and to
perform its obligations hereunder, and the execution, delivery and
performance of this Contract by the representing party have been duly
authorized by all necessary corporate action on the part of the party;
this Contract has been duly executed and delivered by such party and is
the valid and binding obligation of the party enforceable in accordance
with its terms, except as enforcement thereof may be limited by or with
respect to the following: (i) applicable insolvency, moratorium,
bankruptcy, fraudulent conveyance and other similar laws of general
application relating to or affecting the rights and remedies of creditors;
(ii) application of equitable principles (whether enforcement is sought in
proceedings in equity or at law); and (iii) provided the remedy of
specific enforcement or of injunctive relief is subject to the discretion
of the court before which any proceeding therefore may be brought.
21.1.3 Non-Contravention. Each party represents and warrants to the
other party that the execution, delivery and performance of this Contract
by the representing party and the consummation of the transactions
contemplated hereby will not contravene its certificate of incorporation
or by-laws and will not conflict with or result in (i) a breach of or
default under any material indenture, mortgage, lease, agreement,
instrument, judgment, decree, order or ruling applicable to it or by which
it or any of its properties is bound or affected; or (ii) a breach by the
representing party of any Applicable Law.
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21.1.4 Regulatory Approvals. Vendor represents and warrants to Owner
that all authorizations by, approvals or orders by, consents of, notices
to, filings with or other acts by or in respect of any Governmental Entity
or any other Person required in connection with the execution, delivery
and performance of this Contract by the Vendor have been obtained or shall
be obtained in due course.
21.1.5 Non-Infringement. Vendor represents and warrants to Owner
that to the best of Vendor's knowledge after reasonable investigation, as
of the Effective Date there are no actual claims or threatened or actual
suits in connection with patents or other Intellectual Property Rights
that could materially adversely affect it's the Vendor's ability to
perform its obligations under this Contract.
21.1.7 Requisite Knowledge. Vendor represents and warrants to Owner
that that Vendor has all requisite knowledge, know-how, skill, expertise
and experience to satisfy its obligations in accordance with the terms of
this Contract.
21.1.8 Financial Capacity. Vendor represents and warrants to Owner
that Vendor has the financial, management and manufacturing capacity and
capabilities to satisfy its obligations in a timely manner in accordance
with the terms of this Contract.
SECTION 22. TITLE AND RISK OF LOSS
22.1 Title. Title to Equipment shall pass to the Owner upon delivery
of such Equipment to the location specified in the Exhibits.
22.2 Risk of Loss. Risk of loss or damage of any Products furnished
to the Owner in connection with this Contract shall pass from the Vendor to the
Owner upon the later of: (i) delivery of such Products to the Sites; or (ii) if
Vendor is responsible for Site Preparation, the date of the Site Preparation
Substantial Completion Certificate; provided that during the period a party has
the risk of loss or damage to an item, nothing in this section shall relieve the
other party of responsibility for loss or damage to the item resulting from the
acts or omissions of the other party, its employees, or agents.
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SECTION 23. DISPUTE RESOLUTION
23.1 Dispute Resolution. In the event any controversy, claim,
dispute, difference or misunderstanding between the Owner and the Vendor arises
out of or relates to this Contract, any term or condition hereof, any of the
Work to be performed hereunder or in connection herewith, each party shall
designate managers to meet and negotiate in good faith in an attempt to amicably
resolve such controversy, claim, dispute, difference or misunderstanding in
writing. Such managers shall meet for this purpose within ten (10) Business
Days, or such other time period mutually agreed to by the parties, after written
notice from either party. If the parties are unable to resolve the controversy,
claim, dispute, difference or misunderstanding through good faith negotiations
within ten (10) Business Days after such meeting or meetings, each party shall,
within five (5) Business Days after the expiration of such ten (10) Business Day
period, prepare a written position statement which summarizes the unresolved
issues and such party's proposed resolution. Such position statement shall be
delivered by the Vendor to the Owner's Chief Executive Officer and by the Owner
to the Vendor's corresponding officer or representative for resolution within
(5) Business Days, or such other time period mutually agreed to by the parties.
23.2 Tolling. All applicable statutes of limitation shall be tolled
to the extent permitted by Applicable Law while the dispute resolution
procedures specified in this Section are pending, and nothing herein shall be
deemed to bar any party from taking such action as the party may reasonably deem
to be required to effectuate such tolling.
SECTION 24. TERMINATION AND EVENTS OF DEFAULT
24.1 Termination Without Cause. The Owner may, at its sole option,
terminate any Purchase Orders, in their entirety, [To be negotiated.]for
convenience upon ninety (90) days' prior written notice at any time. Any
Purchase Orders issued prior to any such termination above shall remain in
effect and shall be fulfilled to the extent that such orders are outstanding as
of the date of such termination. In the event that at the time of such
termination the aggregate amount of all Purchase Orders delivered to Vendor
under this Contract (the "Aggregate Purchase Orders") is less than One Hundred
Million Dollars ($100,000,000), Owner shall pay to the Vendor the lesser of: (i)
the difference between One Hundred Million Dollars ($100,000,000) and the
Aggregate Purchase Orders; or (ii) the aggregate amounts of the Products and
Services furnished by Vendor pursuant to Exhibits B-2 and B-3 prior to the date
of such termination.
24.2 Termination for Cause. The Owner shall have the right to
terminate this Contract in its entirety (except as otherwise set forth in clause
(g) below) without any penalty or payment obligation, except as provided in
subsection 24.5 below, upon the occurrence of any of the events of default (each
a "Vendor Event of Default") as set forth below:
(a) the Vendor (i) files a voluntary petition in bankruptcy or has
an involuntary petition in bankruptcy filed against it that is not
dismissed within sixty
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(60) days of such involuntary filing; (ii) admits the material allegations
of any petition in bankruptcy filed against it; (iii) is adjudged
bankrupt; (iv) is unable generally to pay its debts as they mature; (v)
makes a general assignment for the benefit of its creditors, or if a
receiver is appointed for all or a substantial portion of its assets and
is not discharged within sixty (60) days after his appointment; or (vi)
the Vendor commences any proceeding for relief from its creditors in any
court under any state insolvency statutes; or
(b) the Vendor disregards or violates any Applicable Laws or
Applicable Permits which has a material adverse effect on the business,
financial condition or operations of Owner or on any of its Systems
("Material Adverse Effect"); or
(c) the Vendor allows material Defects and Deficiencies to exist; or
(d) the Vendor fails to fulfill its obligations with respect to the
satisfaction, discharge or bonding of liens as set forth herein; or
(e) the Vendor abandons or ceases for a period in excess of thirty
(30) days its performance of the Work (except as a result of Force Majeure
or a casualty which is fully covered by insurance or as to which other
provisions reasonably acceptable to the Owner are being diligently
pursued); or
(f) the Vendor assigns or subcontracts Work other than as provided
for in this Contract which has a Material Adverse Effect; or
(g) the Vendor misses the Guaranteed Substantial Completion Date for
any given System by a period in excess of one hundred-fifty (150) days;
provided that in such case the Owner shall have the right, but not the
obligation, to terminate this Contract with respect to only that System in
which such delay occurred; and provided further that such failure to
achieve such date was not caused by: (i) a Force Majeure event; and/or
(ii) any act or omission of the Owner; or
(h) if an event of Force Majeure prevents the Vendor from performing
its obligations under this Contract for a period exceeding sixty (60)
days, the Owner may, upon prior written notice to the Vendor, terminate
this Contract in accordance with the Force Majeure provisions above; or
(i) the Vendor otherwise materially breaches any provision of this
Contract.
24.3 Remedies. (a) If any of the Vendor Events of Default exists,
the Owner may, in addition to and without prejudice to any other rights or
remedies of the Owner in this Contract or at law or in equity, terminate this
Contract upon written notice to the Vendor; provided, however, that the Owner
shall have first provided to the Vendor the following periods of notice and
opportunity to cure:
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(i) in the case of a Vendor Event of Default specified in the
foregoing clauses (a) or (b), no notice or opportunity to cure shall be
required from the Owner; and
(ii) in the case of any other Vendor Event of Default, the
Owner shall have provided thirty (30) days' prior written notice, and the
Vendor shall have failed to: (i) commence to cure the default within five
(5) Business Days of delivery of such notice; and (ii) diligently pursue
such cure and remedy the breach entirely.
(b) If the Owner elects to terminate this Contract, the Owner may,
in addition to and without prejudice to any other rights or remedies of the
Owner in this Contract or of law or in equity, do one or more of the following:
(i) require Vendor, at no additional charge to Owner, to
complete or assist others with the completion of all ordered but
unfinished Work, including the sharing with Owner and others all relevant
engineering and design data, procurement data, manufacturing data,
construction and erection data, start-up and testing data, materials, and
Products that shall become part of such unfinished System and/or the
specified Systems, which Vendor would otherwise have been required to
deliver to Owner pursuant to the terms of this Contract but for the
breach, under reasonably appropriate non-disclosure agreements; or
(ii) direct that the Vendor assign its Subcontractor
agreements to the Owner without any change of price or conditions therein
or penalty or payment therefor.
(c) In the event of any termination of this Contract by Owner in
connection with a Vendor Event of Default, Owner shall have no liability for any
failure to satisfy the Minimum Purchase Commitment prior to such termination.
24.4 Discontinuance of Work. Upon such notification of termination,
the Vendor shall immediately discontinue all of the Work (unless such notice of
termination directs otherwise), and, as more fully set forth in subsection
24.3(b), deliver to the Owner copies of all data, drawings, specifications,
reports, estimates, summaries, and such other information, and materials as may
have been accumulated by the Vendor in performing the Work, whether completed or
in process, which Vendor would otherwise have been required to deliver to Owner
pursuant to this Contract but for the breach. Furthermore, the Vendor shall
assign, assemble and deliver to the Owner all purchase orders and Subcontractor
agreements requested by the Owner.
24.5 Payments. If the Owner terminates this Contract pursuant to
subsection 24.2, the Vendor shall not be entitled to receive further payment
other than payments due and payable under this Contract and not subject to
dispute prior to such termination (provided that any such disputed amounts shall
be paid by the Owner when and if such dispute is in fact resolved).
Notwithstanding anything herein to the contrary, the Owner may withhold
payments, if any, to the Vendor for the purposes of offset of amounts
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owed to the Owner pursuant to the terms of this Contract until such time as the
exact amount of damages due the Owner from the Vendor is fully determined by a
court of competent jurisdiction.
24.6 Continuing Obligations. Termination of this Contract for any
reason (i) shall not relieve either party of its obligations with respect to the
confidentiality of the Proprietary Information as set forth in subsection 26.18;
(ii) shall not relieve either party of any obligation which applies to it and
which expressly or by implication survives termination; and (iii) except as
otherwise provided in any provision of this Contract expressly limiting the
liability of either party, shall not relieve either party of any obligations or
liabilities for loss or damage to the other party arising out of or caused by
acts or omissions of such party prior to the effectiveness of such termination
or arising out of its obligations as to portions of the Work already performed
or of obligations assumed by the Vendor prior to the date of such termination.
24.7 Vendor's Right to Terminate. The Vendor shall have the option
to terminate this Contract without any penalty or payment obligations, other
than undisputed payment obligations outstanding as of the date of any such
termination pursuant to the terms of this Contract if:
(a) the Owner (i) files a voluntary petition in bankruptcy or has an
involuntary petition in bankruptcy filed against it that is not dismissed
within sixty (60) days of such involuntary filing: (ii) admits the
material allegations of any petition in bankruptcy filed against it; (iii)
is adjudged bankrupt; (iv) makes a general assignment for the benefit of
its creditors, or if a receiver is appointed for all or a substantial
portion of its assets and is not discharged within sixty (60) days after
his appointment; or (v) commences any proceeding for relief from its
creditors in any court under any state insolvency statutes, and any such
filing, proceeding, adjudication or assignment as described herein above
shall otherwise materially impair the Owner's ability to perform its
obligations under this Contract; or
(b) the Owner fails to make payments of undisputed amounts due to
the Vendor pursuant to the terms of this Contract which are more than
sixty (60) days overdue, provided that such failure has continued for at
least thirty (30) days after the Vendor has notified the Owner of its
right and intent to so terminate on account of such overdue amount; and
provided, further, that such failure to make undisputed payments to Vendor
shall not arise out of or relate to a termination of or credit
restrictions under the Vendor Financing, or
(c) the Owner materially breaches any provision of this Contract
other than a breach to which subsection 24.7(b) is applicable, and after
the Vendor having provided thirty (30) days' prior written notice, the
Owner shall have failed to: (i) commence to cure the default within five
(5) Business Days of delivery of such notice; and (ii) diligently pursue
such cure and remedy the breach entirely.
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24.8 Special Termination Events. (a) Neither the Vendor nor the
Owner shall be obligated to perform under this Contract, except as specifically
provided, in the event that financing for the purpose of acquiring any System
sufficient to cover Owner's current payment obligations hereunder has not been
finalized with the Vendor on terms and conditions reasonably satisfactory to the
Owner. Unless acceptable financing is available, either party may terminate this
Contract without recourse, except as noted below, by notifying the other party
in writing. Further, the parties agree that the delivery and performance
schedules shall be extended by the period of time required to secure acceptable
financing. In the event of a termination of this Contract pursuant to this
subsection the Owner shall remain liable for amounts due to the Vendor for all
Work performed or Products delivered by the Vendor or any of its Subcontractors
pursuant to the specific terms of this Contract which had been directly
delivered to or performed for the Owner and/or any of its facilities or Sites in
accordance with the terms of this Contract. Any amounts owed by the Owner for
Work done or Products delivered by the Vendor during such interim period not
otherwise invoiced to the Owner by the Vendor prior to the termination of such
interim period, shall be invoiced to the Owner by the Vendor within thirty (30)
days. In no event shall the Owner be liable to the Vendor due to a termination
of this Contract pursuant to this subsection for satisfaction of the Minimum
Purchase Commitment or for any of the Vendor's direct or indirect costs or
expenses incurred in connection with any supplies or equipment ordered by the
Vendor or agreements entered into by the Vendor in order to enable it to fulfill
its obligations hereunder or in connection with the establishment of and/or
upgrade to its manufacturing, personnel, engineering, administrative or other
capacities and/or resources in contemplation of or pursuant to its performance
in accordance with the terms of this Contract. Any amounts due to the Vendor
pursuant to this subsection shall be limited in all cases to Work actually done
or Products or Services actually delivered to the Owner, its Sites or its
facilities.
(b) If at any time after the Effective Date any material change
shall have occurred in any Applicable Law or in the interpretation thereof by
any Governmental Entity, or there shall be rendered any decision in any judicial
or administrative case or proceeding, in either case which, in the reasonable
opinion of the Owner would make the Owner's use of any part of any System
illegal or would subject the Owner or any of its Affiliates to any material
penalty, other material liability or onerous condition or to any burdensome
regulation by any Governmental Entity or otherwise render the use of such System
economically nonviable, then, with respect to such System, or affected part
thereof, or with respect to all Systems if so affected, the Owner may terminate
this Contract without charge or penalty of any kind; provided that (i) the Owner
gives the Vendor prior written notice of any such change or decision and (ii)
that the Owner uses its reasonable efforts for a reasonable time to reverse or
ameliorate such change or decision to the extent possible or practical prior to
declaring such termination. In the event of a termination pursuant to this
subsection, payment obligations incurred by the Owner for Work actually done or
Products or Services actually delivered by the Vendor prior to such termination
pursuant to this Contract shall be payable by the Owner to the Vendor on the
same terms and subject to the limitations set forth in subsection 24.8(a) above.
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SECTION 25. SUSPENSION
25.1 Owner's Right to Suspend Work. The Owner may at any time issue
a Change Order to the Vendor to suspend all or any part of the Work for such
period of time as the Owner may reasonably determine to be appropriate. Any such
Change Order shall be handled in accordance with the provisions of Section 11
hereof.
SECTION 26. MISCELLANEOUS
26.1 Amendments. The terms and conditions of this Contract may only
be amended by mutually agreed contract amendments. Each amendment shall be in
writing and shall identify the provisions to be changed and the changes to be
made. Contract amendments shall be signed by duly authorized representatives of
each of the Vendor and the Owner.
26.2 Owner Liabilities. Vendor understands and agrees that no third
party shall guarantee or otherwise be in any way liable with respect to any
obligations or liabilities of the Owner or any of its affiliates pursuant to
this Contract.
26.3 Offset. The Vendor hereby waives any right of offset of amounts
owed by the Owner to the Vendor pursuant to the terms of this Contract.
26.4 Assignment. The Owner may assign this Contract, or any part
hereof, to any affiliate of Owner without the Vendor's approval or consent.
Subject to the foregoing and except as otherwise permitted herein, neither this
Contract nor any portion hereof may be assigned by either party without the
express prior written consent of the other party. The Owner may, without the
consent of the Vendor, collaterally assign its rights hereunder (including but
not limited to all licenses with respect to the Software) to any or all parties
providing financing for any part of a System for the benefit of the Vendor and
one or more other entities providing financing for any part of a System or
similar arrangement for the benefit of the Vendor and one or more other entities
providing for the financing for any part of a System, in either case, which
arrangement, as the case may be, is reasonably acceptable to the Vendor in
accordance with the terms of the financing documents. If requested by the Owner,
the Vendor shall within seven (7) calendar days of such request provide a
written consent to any such assignment; provided that such consent shall permit
reassignment if the financing parties exercise their remedies under the
documents for such financing subject to reasonable standards as to: (i) the
creditworthiness of the assignee; and (ii) the fact that the assignee is not at
such time a direct competitor of the Vendor involved in the manufacture of
communications equipment, software or related services. The foregoing rights and
obligations are in addition to those set forth elsewhere in this Contract. Any
attempted assignment in violation of the terms of this Contract shall be null
and void. Subject to the foregoing, this Contract shall bind and inure to the
benefit of the parties to this Contract, their successors and permitted assigns.
Notwithstanding the foregoing, Vendor shall have the right to assign this
Contract to its affiliate, Ericsson Inc.; provided however, such
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assignment shall not relieve Vendor of its obligations hereunder or cause Owner
to incur any additional costs or expenses.
26.5 Notices. Except as otherwise expressly stated herein, all
notices, requests, demands and other communications which are required or may be
given under this Contract shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service; and three (3 ) days after sending, if
sent by certified or registered mail, postage prepaid, return receipt requested.
All notices shall be addressed as follows:
If to the Owner:
CRICKET WIRELESS COMMUNICATIONS, INC.
10307 Pacific Center Court
San Diego, California 92121
Attention: Chief Executive Officer
With a copy to:
Sr. Vice President, General Counsel
10307 Pacific Center Court
San Diego, California 92121
Telephone: (858) 882-6000
Facsimile: (858) 882-6080
If to the Vendor:
Ericsson Wireless Communications Inc.
6455 Lusk Boulevard
San Diego, California 92121
Attention: President
Telephone: (858) 332-5000
Facsimile: (858) 332-7188
With a copy to:
Vice President, General Counsel
Telephone: (858) 332-5000
Facsimile: (858) 332-7189
By written notice provided pursuant to this subsection, either party may change
its designated addressee for purposes of giving notices under this Contract.
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26.6 Governing Law. This Contract is governed by the laws of the
State of California, without regard to principles of conflict of laws. This
Contract shall be deemed to be made and executed in the State of California.
26.7 Remedies. Subject only to the limitations on liability
contained in subsection 20.3, each party shall be entitled to pursue any and all
rights and remedies that are available at law or in equity.
26.8 Consent to Jurisdiction. Each party to this Contract, by its
execution hereof, (i) hereby irrevocably submits to the exclusive jurisdiction
of the United States District Court located in the Southern District of
California or the state courts of the State of California located in San Diego,
California for the purpose of any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Contract or relating to the subject matter hereof; (ii)
hereby waives, to the extent not prohibited by applicable law, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such action, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution,
that-any such proceeding brought in one of the above-named courts is improper,
or that this Contract or the subject matter hereof may not be enforced in or by
such court; and (iii) hereby agrees not to commence any action, claim, cause of
action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Contract or relating to the
subject matter hereof other than before one of the above-named courts nor to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by California law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified herein.
26.9 Compliance with Law. The Owner and the Vendor shall comply with
all Applicable Laws in the performance of this Contract, including, without
limitation, the laws and regulations of the United States Department of
Commerce, State Department and the Federal Communications Commission and any
other applicable agency or department.
26.10 Headings. The headings given to the Sections and subsections
herein are inserted only for convenience and are in no way to be construed as
part of this Contract or as a limitation of the scope of the particular Section
or subsection to which the title refers.
26.11 Severability. Whenever possible, each provision of this
Contract shall be interpreted in such a manner as to be effective and valid
under such applicable law, but, if any provision of this Contract shall be held
to be prohibited or invalid in any jurisdiction, the remaining provisions of
this Contract shall remain in full force and effect and such prohibited or
invalid provision shall remain in effect in any jurisdiction in which it is not
prohibited or invalid.
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26.12 Waiver. Unless otherwise specifically provided by the terms of
this Contract, no delay or failure to exercise a right resulting from any breach
of this Contract shall impair such right or shall be construed to be a waiver
thereof, but such right may be exercised from time to time as may be deemed
expedient. If any representation, warranty or covenant contained in this
Contract is breached by either party and thereafter waived by the other party,
such waiver shall be limited to the particular breach so waived and not be
deemed to waive any other breach under this Contract.
26.13 Public Statements and Advertising. (a) Neither party shall
issue any public statement (or any private statement unless required in the
performance of the Work) relating to or in any way disclosing any aspect of the
Work or any System including the scope, the specific terms of this Contract,
extent or value of the Work or any System. Express written consent of the other
party is required prior to the invitation of or permission to any reporter or
journalist to enter upon the System or any part thereof. The Vendor agrees not
to use for publicity purposes any photographs, drawings and/or materials
describing any System without obtaining the prior written consent of the Owner,
which consent shall not be unreasonably withheld. The Owner agrees not to use
for publicity purposes any photographs, drawings and/or materials describing the
Vendor's products and services without obtaining the prior written consent of
the Vendor, which consent shall not be unreasonably withheld. This subsection
shall not prohibit the provision of necessary information to prospective
Subcontractors and the Vendor's or the Owner's personnel, agents or consultants
or other disclosures which are required by Applicable Law, including without
limitation federal and state securities laws and regulations. All other such
public disclosures by a party require the written consent of the other party.
(b) Each party shall submit to the other proposed copies of all
advertising (other than public statements or press releases) wherein the name,
trademark or service mark of the other party or its affiliates is mentioned; and
neither party shall publish or use such advertising without the other party's
prior written approval. Such approval shall be granted as promptly as possible
and shall not be unreasonably withheld. The parties acknowledge that the
obtaining of prior written approval for each such use pursuant to this
subsection may be an administrative burden. At the request of either party, the
Owner and the Vendor shall establish mutually acceptable guidelines for the uses
specified therein. Such guidelines shall be subject to change from time to time
at the reasonable request of either party.
26.14 Records and Communications. Procedures for keeping and
distributing orderly and complete records of the Work and its progress are
stated in the Exhibits. The procedures so established shall be followed
throughout the course of the Work unless the Owner and the Vendor mutually agree
in advance in writing to revise the procedures. Procedures for communications
among the Owner and the Vendor are stated in the Exhibits. The procedures so
established shall be followed throughout the course of the Work unless the Owner
and the Vendor mutually agree in advance and in writing to revise such
procedure.
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26.15 Ownership of Specifications. The Specifications shall
constitute the Proprietary Information of each party to the extent of each
party's contribution to the Specifications. Neither party shall use those parts
of the Specifications contributed by the other party or any part of the
Proprietary Information of the other party for any purpose other than fulfilling
or exercising their respective rights or obligations under this Agreement.
26.16 Financing Requirements. The Vendor acknowledges that the
attainment of financing for construction of the System may be subject to
conditions that are customary and appropriate for the providers of such
financing. Therefore, the Vendor agrees to promptly consider any reasonable
amendment to or modification or assignment of this Contract required by such
providers (including, without limitation, any pertinent industrial development
authority or other similar governmental agency issuing bonds for financing of
the System) which do not materially modify the scope of the Vendor's Work in
order to obtain such financing. In the event that any such amendment or
modification materially increases the Vendor's risk or costs hereunder, the
Owner and the Vendor shall negotiate in good faith to adjust pricing matters,
and to equitably adjust such other provisions of this Contract, if any, which
may be affected thereby, to the extent necessary to reflect such increased risk
or costs. In no event shall the Vendor be required to accept any modification or
amendment pursuant to this subsection provide it has a commercially reasonable
basis for such refusal.
26.17 Owner Review, Comment and Approval. To the extent that various
provisions of this Contract provide for the Owner's review, comment, inspection,
evaluation, recommendation or approval, the Owner may at its option do so in
conjunction and/or consultation with the Vendor. To the extent that this
Contract requires the Owner to submit, furnish, provide or deliver to the Vendor
any report, notice, Change Order, request or other items, the Owner may at its
option and upon written notice to the Vendor designate a representative to
submit, furnish, provide or deliver such items as the Owner's agent therefor. To
the extent that various provisions of this Contract provide that the Owner may
order, direct or make requests with respect to performance of the Work or is
provided access to the System sites or any other site, the Owner may at its
option and upon written notice to the Vendor authorize a representative to act
as the Owner's agent therefor. Upon receipt of such notice, the Vendor shall be
entitled to rely upon such authorization until a superseding written notice from
the Owner is received by the Vendor.
26.18 Confidentiality. (a) All information which is identified as
proprietary or confidential by the disclosing party, including without
limitation all oral and written information (including but not limited to
determinations or reports by arbitrators pursuant to the terms of this
Contract), disclosed to the other party is deemed to be confidential, restricted
and proprietary to the disclosing party (hereinafter referred to as "Proprietary
Information"). Each party agrees to use the Proprietary Information received
from the other party only for the purpose of this Contract. Except as specified
in this Contract, no other rights, and particularly licenses, to trademarks,
inventions, copyrights, patents, or any other intellectual property rights are
implied or granted under this Contract or by the conveying of Proprietary
Information between the parties. Proprietary Information supplied is not to be
reproduced in any form except as required to accomplish the intent of, and in
accordance
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with the terms of, this Contract. The receiving party shall provide the same
care to avoid disclosure or unauthorized use of Proprietary Information as it
provides to protect its own similar proprietary information but in no event
shall the receiving party fail to use reasonable care under the circumstances to
avoid disclosure or unauthorized use of Proprietary Information. All Proprietary
Information shall be retained by the receiving party in a secure place with
access limited to only such of the receiving party's employees, subcontractors
or agents who need to know such information for purposes of this Contract and to
such third parties as the disclosing party has consented to by prior written
approval. All Proprietary Information, unless otherwise specified in writing (i)
remains the property of the disclosing party, (ii) shall be used by the
receiving party only for the purpose for which it was intended, and (iii) such
Proprietary Information, including all copies of such information, shall be
returned to the disclosing party or destroyed after the receiving party's need
for it has expired or upon request of the disclosing party, and, in any event,
upon termination of this Contract. At the request of the disclosing party, the
receiving party shall furnish a certificate of an officer of the receiving party
certifying that Proprietary Information not returned to disclosing party has
been destroyed. For the purposes hereof, Proprietary Information does not
include information which:
(i) is published or is otherwise in the public domain through no
fault of the receiving party at the time of any claimed
disclosure or unauthorized use by the receiving party;
(ii) prior to disclosure pursuant to this Contract is properly
within the legitimate possession of the receiving party as
evidenced by reasonable documentation to the extent
applicable;
(iii) subsequent to disclosure pursuant to this Contract is lawfully
received from a third party having rights in the information
without restriction of the third party's right to disseminate
the information and without notice of any restriction against
its further disclosure;
(iv) is independently developed by the receiving party or is
otherwise received through parties who have not had, either
directly or indirectly, access to or knowledge of such
Proprietary Information;
(v) is transmitted to the receiving party after the disclosing
party has received written notice from the receiving party
after termination or expiration of this Contract that it does
not desire to receive further Proprietary Information;
(vi) is obligated to be produced under order of a court of
competent jurisdiction or other similar requirement of a
Governmental Entity, so long as the party required to disclose
the information provides the other party with prior notice of
such order or requirement and its cooperation to the extent
reasonable in preserving its confidentiality; or
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(vii) the disclosing party agrees in writing is free of such
restrictions.
(b) Because damages may be difficult to ascertain, the parties
agree, without limiting any other rights and remedies specified herein, an
injunction may be sought against the party who has breached or threatened to
breach this subsection. Each party represents and warrants that it has the right
to disclose all Proprietary Information which it has disclosed to the other
party pursuant to this Contract, and each party agrees to indemnify and hold
harmless the other from all claims by a third party related to the wrongful
disclosure of such third party's proprietary information.
26.19 Entirety of Contract; No Oral Change. This Contract and the
Exhibits and Schedules referenced herein constitute the entire contract between
the parties with respect to the subject matter hereof, and supersede all
proposals, oral or written, all previous negotiations, and all other
communications between the parties with respect to the subject matter hereof. No
modifications, alterations or waivers of any provisions herein contained shall
be binding on the parties hereto unless evidenced in writing signed by duly
authorized representatives of both parties as set forth in this Contract.
26.20 Relationship of the Parties. Nothing in this Contract shall be
deemed to constitute either party a partner, agent or legal representative of
the other party, or to create any fiduciary relationship between the parties.
The Vendor is and shall remain an independent contractor in the performance of
this Contract, maintaining complete control of its personnel, workers,
Subcontractors and operations required for performance of the Work. This
Contract shall not be construed to create any relationship, contractual or
otherwise, between the Owner and any Subcontractor, except to establish Owner as
a third party beneficiary of the Vendor's contacts with Subcontractors as
provided herein.
26.21 Discretion. Notwithstanding anything contained herein to the
contrary, to the extent that various provisions of this Contract call for an
exercise of discretion in making decisions or granting approvals or consents,
the parties shall be required to exercise such discretion, decision or approvals
and in good faith.
26.22 Non-Recourse. No past, present or future limited or general
partner in or of the Owner, no parent or other affiliate of any company
comprising the Owner, and no officer, employee, servant, executive, director,
agent or authorized representative of any of them (each, an "Operative") shall
be liable by virtue of the direct or indirect ownership interest of such
Operative in the Owner for payments due under this Contract or for the
performance of any obligation, or breach of any representation or warranty made
by the Owner hereunder. The sole recourse of the Vendor for satisfaction of the
obligations of the Owner under this Contract shall be against the Owner and the
Owner's assets and not against any Operative or any assets or property of any
such Operative. In the event that a default occurs in connection with such
obligations, no action shall be brought against any such Operative by virtue of
its direct or indirect ownership interest in the Owner.
26.23 Improvements, Inventions and Innovations. All rights in any
improvements, inventions, and innovations made solely by the Owner shall vest in
the
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Owner, and the Owner and its affiliates shall have the right to exploit such
improvements, inventions, and innovations. All rights in any improvements,
inventions and innovations made solely by the Vendor shall vest in the Vendor,
and the Vendor and its affiliates shall have the right to exploit such
improvements, inventions and innovations. All rights in any improvements,
inventions and innovations made by the substantial contribution of both parties
("Joint Information") shall vest jointly in both parties. Joint Information does
not include any underlying information owned by one of the parties prior to
commencement of such joint activities or developed beyond the scope of such
joint activities, including Products and Product information, technical
information or inventions developed prior to the commencement of any joint
activities, developed outside of the scope of such joint activities or developed
solely by either party. The rights of joint ownership to such Joint Information
shall be rights of full non-exclusive worldwide ownership, including rights to
license and transfer. Each party may exploit its rights to the Joint Information
independent of the other and may retain all economic benefits thereof, neither
party shall have any obligation to account to the other for profits derived from
the Joint Information and each party shall have full rights to enforce the Joint
Information intellectual property rights against non-authorized users.
26.24 Attachments and Incorporations. All Schedules and Exhibits
attached hereto, are hereby incorporated by reference herein and made a part of
this Contract with the same force and effect as though set forth in their
entirety herein.
26.25 Conflicts. In the event of any conflict or inconsistency among
the provisions of this Contract and the documents attached hereto and
incorporated herein, such conflict or inconsistency shall be resolved by giving
precedence to this Contract and thereafter to the Exhibits, Schedules and
Specifications.
26.26 References to Certain Sources. Reference to standard
specifications, manuals or codes of any technical society, organization or
association or to the laws or regulations of any Governmental Entity, whether
such reference is specific or by implication, by this Contract, means the latest
standard specification, manual, code, laws or regulations in effect at the time
of such reference, except as may be otherwise specifically agreed to by the
Owner. However, no provision of any reference, standard, specification, manual
or code (whether or not specifically incorporated by reference in this Contract)
shall be effective to change the duties and responsibilities of the Owner or the
Vendor from those set forth in this Contract; provided that nothing contained in
this Contract shall require the Owner or the Vendor to violate then existing and
enforceable Applicable Laws.
26.27 Counterparts. This Contract may be executed by one or more of
the parties to this Contract on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
26.28 Cooperation. Vendor acknowledges that Owner may have one or
more third party vendors, contractors and other personnel engaged to provide
work, equipment or services to Owner in connection with or related to this
Contract. Vendor agrees to reasonably communicate and cooperate with such third
parties at all times and, at
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the request of Owner, coordinate Vendor's and Vendor's Subcontractors'
activities hereunder with the activities of such third parties.
26.29 Survival. Notwithstanding any expiration or termination of
this Contract, the provisions of Sections 2.8, 12, 13, 14, 15, 18, 20 and 26.18
shall continue in full force and effect. Any termination hereunder shall not
relieve Owner of any payment obligation accrued prior to such termination.
THE OWNER AND THE VENDOR HAVE READ THIS CONTRACT INCLUDING ALL
SCHEDULES AND EXHIBITS HERETO AND AGREE TO BE BOUND BY ALL THE TERMS AND
CONDITIONS HEREOF AND THEREOF.
IN WITNESS WHEREOF, the parties have executed this Contract as of
the date first above written.
VENDOR:
ERICSSON WIRELESS COMMUNICATIONS INC.,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
OWNER:
CRICKET WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
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EXHIBIT D
CREDIT FACILITY
<TABLE>
<S> <C>
Borrower: Cricket Wireless Communications Inc.
("Borrower").
Lender: Ericsson Inc. or any of its parent
companies ("Lender") (with a right to
assign to one (1) or more eligible
assignees).
Purpose: To finance [*] of the price for equipment
purchased from Ericsson. In the event that
Ericsson does not manufacture such an item
equivalent in form, fit and function to be
made available for purchase at a competitive
market price, Cricket shall be permitted to
purchase such items from third parties
(excluding competitors of Ericsson) utilizing
the borrowings from Lender. Borrower shall
also be able to use the financing for services
provided by Ericsson. Subject to the
foregoing, borrowings in excess of the
purchase price can be used for most working
capital needs of Cricket, including interest
payable to Lender, other loan related fees and
spectrum acquisition.
Amount/Facility: The maximum principal amount of the
Facility may not exceed $495 million.
Effective Date: Date of first advance.
Availability Period: Three (3) years after the Effective Date.
Final Maturity: Eight (8) years from the Effective Date.
Leap Guarantee: None.
Amortization Schedule: No principal for the first three (3) years
after the Effective Date. Thereafter principal
reductions are due over five (5) years, with
annual payments of 5%, 15%, 20%, 25% and 35%
of the amount outstanding at the end of the
Availability Period in years 4 through 8,
respectively.
</TABLE>
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
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<TABLE>
<S> <C>
Mandatory Prepayments: 50% of Borrower's "excess cash flow" (to be
defined in the definitive loan documents) and
pro rata prepayments if Borrower or any of its
direct or indirect subsidiaries prepays any
indebtedness to any other lender.
Interest Rate & Payment: Libor plus a margin based on the ratio of
total indebtedness to EBITDA (margin ranges
from 3.5% to 4.25%). Comparable Base Rates (to
be defined in definitive loan documents)
interest options are available. Interest will
be calculated on a 360-day basis. Interest
will be payable on quarterly in arrears.
Default Interest Rate: At all times while a payment default exists under
the Facility, interest will be charged at the
otherwise applicable rate plus 200 basis points.
Commitment Fees: Borrower pays: (i) 1.25% per annum on borrowings
up to $175M; (ii) 1% per annum on borrowings
from $175M to $350M; and (iii) .75% on
borrowings above $350M.
Facility Fee: Borrower will pay to the Lender's a Facility Fee
equal to 3% of the Facility. The fee is
payable at the earlier of: (i) when the loan
is sold to an unrelated third party; or (ii)
at the earlier of the date on which: (a)
Borrower has drawn down the entire amount of
the Facility; or (b) availability period for
the Facility has expired. The Facility Fee may
be financed under the Facility.
Administrative Fees: The Lenders will agree on a third party
administrative agent with respect to the
credit facility, and Borrower shall pay the
fees, costs and expenses of such third party
administrative agent.
Collateral: All the stock and assets of all Leap US wireless
business subsidiaries. Lender agrees to share
the collateral on a pari passu basis
</TABLE>
2
<PAGE> 81
<TABLE>
<S> <C>
with other comparable vendor financing of up
to a total of $1.2 billion for all vendors. To
obtain collateral, loan terms and covenants
will have to be comparable to those of other
lender. Borrower covenants that no other more
favorable terms will be given to other similar
lenders, and in the event more favorable terms
are given, such terms will be equally extended
to Lender on a retrospective basis back to the
date such terms were given to the other
similar lenders
Financial Covenants: With respect to Borrower, the following:
minimum covered pops, minimum number of
subscribers; total debt to total
capitalization; maximum total debt to
annualized EBITDA; maximum annual capital
expenditures and EBITDA to cash interest
expense. [***]
Maximum total debt to contributed capital is
set at 2 to 1 for the first three (3) years
and declining thereafter.
Permitted Dividends--Maximum of $65 Million
subject to payment not before 6/30/2005
subject to compliance with minimum cash
interest coverage ration and loan having been
amortized as scheduled.
Affirmative and Negative Covenants, Typical and customary for a facility of
Representations, and Warranties: this nature.
Assignments and Participations: Permitted by Lender without prior written
notice to the Borrower. Not permitted by
Borrower
Expenses: Typical expenses of the Lender are reimbursed
by Borrower, including without limitation,
attorneys' fees, costs and expenses.
Governing Law And Jurisdiction: The Borrower and Guarantor (to be defined
in the definitive loan documents) (if
applicable) will: consent to the jurisdiction
of the State and Federal Courts of the City of
New York.
</TABLE>
[*] Certain material (indicated by an asterisk) has been omitted from this
document pursuant to a request for confidential treatment. The omitted
material has been filed separately with the Securities and Exchange
Commission.
3
<PAGE> 82
<TABLE>
<S> <C>
Appoint an agent for service of process in New
York Waive trial by jury.
Intercreditor Agreement: An intercreditor agreement will be required upon
the closing of a senior secured permitted
indebtedness permitted to share pari passu in
the collateral as will be set forth in the
definitive loan documents.
Events of Default & Remedies: The definitive loan documents will contain
those events of default customary for
financing transactions of this type, subject
to customary cure periods, grace periods and
material provisions.
Due Diligence Review; Internal
Approvals: The terms and conditions of the definitive
loan documents are subject to Lender's
completion of its due diligence review with
respect to Borrower and its affiliates, all to
Lender's satisfaction, and Lender's Board of
Directors' approval.
</TABLE>
4
<PAGE> 83
EXHIBIT E
[ERICSSON LOGO]
PRESS RELEASE
SEPTEMBER 20, 1999
FINAL DRAFT - FOR INTERNATIONAL /// DISTRIBUTION
ERICSSON AND LEAP WIRELESS INTERNATIONAL SIGN $330 MILLION MOBILE INFRASTRUCTURE
AGREEMENT
ERICSSON (NASDAQ: ERICY) AND LEAP WIRELESS INTERNATIONAL, INC. (NASDAQ: LWIN), A
GLOBAL PROVIDER OF WIRELESS COMMUNICATIONS, TODAY ANNOUNCED A SIGNED AGREEMENT
TO PROVIDE $330 MILLION IN MOBILE NETWORK EQUIPMENT FOR LEAP'S U.S. SUBSIDIARY,
CRICKET COMMUNICATIONS.
Ericsson will supply and install state-of-the-art digital mobile systems that
will provide next-generation voice and multimedia data services based on the
phase one cdma2000 standard, known as 1XRTT. Ericsson will provide Radio Base
Stations (RBS), CMS 11 Base Station Controllers (BSC), switching equipment, and
a full portfolio of services including network design, deployment and training.
In connection with sales of equipment, Ericsson will provide Leap with vendor
financing that will be used for equipment, services and operations needed to
expand its wireless network in various markets across the United States. The
Ericsson agreement is part of Leap's strategy to work with multiple world-class
infrastructure vendors.
"We're proud to have the opportunity to contribute to the success of Cricket's
innovative service offering," said Ake Persson, president of Ericsson's CDMA
Systems business unit. "As a leading supplier of CDMA solutions, Ericsson is
committed to providing high quality networks to Leap Wireless International and
all of its operations, and we look forward to a strong relationship over the
long term."
"We are pleased to be working closely with Ericsson as it continues to develop
state-of-the-art CDMA infrastructure equipment," said Harvey P. White, chairman
and CEO of Leap. "We believe that our relationship with a world-renowned vendor
like Ericsson will allow us to provide the highest-quality wireless service to
Cricket and Leap customers."
"We believe that Ericsson's expertise in designing and supporting premier
communications solutions will be important to Cricket's success as it rolls out
across the United States," said Susan G. Swenson, president of Leap and CEO of
Cricket.
<PAGE> 84
EXHIBIT E
cdmaOne is one of the fastest growing wireless technologies in the world,
currently serving close to 35 million subscribers. Ericsson's cdmaOne networks
deliver the full advantages of CDMA technology for strong performance in mobile,
fixed and data applications. cdmaOne networks offer a clear migration path to
cdma2000, enabling operators to evolve their networks to provide the full range
of third generation services.
The financing agreement described above is subject to Ericsson obtaining the
approval of its Board of Directors.
This news release contains certain forward-looking statements, which are based
upon certain assumptions and describe future plans, strategies and expectations
of Leap Wireless International, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project" or similar
expressions. The ability of Leap to predict actual results and other future
events is inherently uncertain. Important factors which may cause actual results
to differ materially from the forward-looking statements contained herein or in
other public statements by Leap are described in the section entitled "Risk
Factors" in Leap's Information Statement filed with the Securities and Exchange
Commission on September 14, 1998. Those risk factors include the uncertainties
relating to costs and profitability and the ability to raise sufficient capital
for continued expansion and operation.
Ericsson is the leading provider in the new telecoms world, with communications
solutions that combine telecom and datacom technologies with freedom of mobility
for the user. With more than 100,000 employees in 140 countries, Ericsson
simplifies communications for its customers - network operators, service
providers, enterprises and consumers - the world over.
Please visit Ericsson's Press Room at: http://www.ericsson.se/pressroom
FOR FURTHER INFORMATION, PLEASE CONTACT
Ericsson Contacts:
Michelle French, Media Relations
Phone: 1-858-332-5241; Fax: 1-858-332-7203
Email: [email protected]
Eric Osterberg, Communications Director
Ericsson Corporate Communications
Phone: +46 70 590 05 99
Email: [email protected]
Leap Wireless International Contacts:
Sarah Thailing, Media Relations
Phone: 1-858-882-6018; Fax:1-858-882-6030
Email: [email protected]
Jim Seines, Investor Relations
Phone: 1-858-882-6084 Fax: 1-858-882-6030 Email: [email protected]
<PAGE> 85
EXHIBIT E
COMPANY INFORMATION
ABOUT CRICKET COMMUNICATIONS, INC.
Cricket Communications, Inc., a subsidiary of Leap Wireless International; plans
to change the way people communicate by bringing wireless communications to the
U.S. mass consumer market. Cricket's service, called "Comfortable Wireless" SM
and the "around town phone," SM has been operating in Chattanooga, Tennessee
since early 1999 using Chase Telecommunications' infrastructure and licenses
under an agreement that provides that ChaseTel controls the business until
Leap's proposed acquisition of ChaseTel is complete. Cricket's service lets
customers make and receive unlimited calls within their local service area for
one low, flat rate. Cricket's service also allows customers to make long
distance calls by paying for these calls in advance. While roaming is not
available, the local service area provides coverage where people live, work, and
play. Leap has rights to acquire licenses to offer the Cricket service to
approximately 24 million potential subscribers (1998 POPs) in more than 50
markets across the country, including Albuquerque, N.M., Greensboro, N.C.,
Little Rock, Ark., Nashville, Tenn., Salt Lake City, Utah, Spokane, Wash.,
Tucson, Ariz., Tulsa, Okla., and Wichita, Kans.
ABOUT LEAP WIRELESS INTERNATIONAL, INC.
Leap Wireless International, Inc., headquartered in San Diego, Calif., is a
wireless communications carrier that deploys, owns and operates wireless
networks in domestic and international markets with strong growth potential.
Through its operating companies, Leap has launched all-digital wireless service
in the United States, Mexico, Chile and Russia. Leap is dedicated to bringing
the benefits of reliable, cost-effective and high-quality voice and data
services to domestic and emerging markets. For more information, please visit
www.leapwireless.com.
###
<PAGE> 86
EXHIBIT E
LEAP CONTRACT ANNOUNCEMENT Q&A
SEPTEMBER 20, 1999
PLEASE DIRECT ALL MEDIA INQUIRIES TO AN APPROPRIATE ERICSSON SPOKESPERSON
- MICHELLE FRENCH, SENIOR PUBLIC RELATIONS MANAGER, CDMA Systems
PHONE: +1 858 332 5241, E-MAIL: [email protected]
- ERIC OSTERBERG, COMMUNICATIONS DIRECTOR, ERICSSON CORPORATE COMMUNICATIONS
PHONE: +46 70 590 05 99, E-MAIL: [email protected]
[The remainder of page one and pages two through four have been deleted
pursuant to a Confidential Treatment Request.]
Ericsson Proprietary - For Internal Use Only
<PAGE> 1
EXHIBIT 10.28
SECOND AMENDED AND RESTATED
DEFERRED PAYMENT AGREEMENT
BY AND AMONG
CHILESAT TELEFONIA PERSONAL S.A.,
AS PURCHASER,
QUALCOMM INCORPORATED
AND THE OTHER VENDORS NAMED HEREIN,
INVERSIONES LEAP WIRELESS CHILE S.A.,
AS GUARANTOR,
QUALCOMM INCORPORATED,
AS ADMINISTRATIVE AGENT
AND
QUALCOMM INCORPORATED,
AS COLLATERAL AGENT
<PAGE> 2
SECOND AMENDED AND RESTATED
DEFERRED PAYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED DEFERRED PAYMENT AGREEMENT (this
"Agreement") is entered into as of October 12, 1999, among CHILESAT TELEFONIA
PERSONAL S.A., a company duly organized under the laws of the Republic of Chile
("Purchaser"), INVERSIONES LEAP WIRELESS CHILE S.A., a company duly organized
under the laws of the Republic of Chile ("Guarantor"), QUALCOMM INCORPORATED, a
corporation duly organized under the laws of the State of Delaware ("QUALCOMM"),
as Vendor (as defined below), QUALCOMM INCORPORATED, as Administrative Agent (as
defined below) and QUALCOMM INCORPORATED, as Collateral Agent (as defined
below). This Agreement amends, restates and supersedes in its entirety the
Deferred Payment Agreement dated as of February 27, 1997, as amended by the
First Amendment to Deferred Payment Agreement dated as of April 24, 1997, and by
the Amended and Restated Deferred Payment Agreement dated as of June 24, 1998,
each executed among Purchaser, Telex-Chile S.A. and QUALCOMM ("Deferred Payment
Agreement").
RECITALS
A. Purchaser and Vendor entered into the Equipment Agreements (as
defined below) to purchase substantially all of Purchaser's requirements for
network and infrastructure equipment and related services for deployment in the
Republic of Chile (the "Project").
B. Vendor facilitated Purchaser's acquisitions under the Equipment
Agreements by making forbearances of the purchase price payable by Purchaser
pursuant to the Deferred Payment Agreement.
C. As part of its capital restructuring, Purchaser has requested and
Vendor has agreed, as a financial accommodation to Purchaser, to amend and
restate the Deferred Payment Agreement and capitalize such interest payments,
but only to the extent, in accordance with the terms, subject to the conditions
and in reliance upon the representations and warranties set forth below.
E. To facilitate the transactions described above, Purchaser desires,
and Vendors, Administrative Agent and Collateral Agent have agreed, to provide
certain financial accommodations and perform certain duties in connection
therewith, but only upon the terms and conditions and in reliance upon the
representations and warranties herein set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, and intending to be legally bound, Purchaser,
Guarantors, Vendors, Administrative Agent and Collateral Agent agree as follows:
1.
<PAGE> 3
SECTION 1. DEFINITIONS.
1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the respective meanings set forth below or set forth in the provision referenced
following such term:
"Additional Equipment Deferred Payment Agreement" means that
certain Additional Equipment Deferred Payment Agreement to be entered among
Purchaser, QUALCOMM and such other Persons as shall from time to time become
vendors thereunder, as the same may be amended, modified, supplemented or
restated from time to time.
"Administrative Agent" means QUALCOMM Incorporated or any
successor administrative agent.
"Administrative Agent-Related Persons" has the meaning set forth
in SECTION 7.4 hereof.
"Administrative Agent's Fee Letter" means the side letter, by and
among Purchaser, QUALCOMM, Vendors and Administrative Agent, relating to fees
payable from time to time from Purchaser to Administrative Agent in
consideration for the services to be performed by Administrative Agent pursuant
to the Credit Documents.
"Administrative Agent's Payment Office" means the address for
payments set forth on the signature page hereto in relation to the
Administrative Agent or such other address as Administrative Agent may from time
to time specify in accordance with SECTION 9.2.
"Affected Forbearance" has the meaning set forth in SECTION
2.14(a) hereof.
"Affiliate" means, with respect to any Person, each other Person
which, directly or indirectly, controls, is controlled by or is under common
control with such Person (excluding any trustee under, or any committee with
responsibility for administering, any pension plan or employee benefit plan);
provided, however, that for purposes of this Agreement, neither QUALCOMM nor
Purchaser shall be deemed to be Affiliates of the other. A Person shall be
deemed to be "controlled by" another Person if such other Person possesses,
directly or indirectly, power (a) to vote fifteen percent (15.0%) or more of the
securities (on a fully diluted basis) having ordinary voting power for the
election of directors, managing general partners or managing members or (b) to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Aggregate Capitalized Interest Commitment" means, at any time,
an amount up to Fourteen Million Six Hundred Thousand Dollars ($14,600,000.00).
"Aggregate Commitment" means, as of the date of determination,
the aggregate amount of the Deferred Payment Balance plus the Aggregate
Capitalized Interest Commitment.
"Agreement" means this Second Amended and Restated Deferred
Payment Agreement, as the same may from time to time be amended, modified,
supplemented or restated as hereinafter provided.
2.
<PAGE> 4
"Applicable Margin" means the percentage per annum initially
determined on the Funding Date, and adjusted from time to time as set forth
below, for such Forbearance based upon (a) the applicable EBITDA, (b) the Total
Debt/Total Capitalization Ratio, and (c) the applicable senior unsecured foreign
currency debt rating of Purchaser by Moody's Investors Service ("Moody's") or
the applicable senior unsecured foreign currency debt rating of Purchaser by
Standard & Poor's ("S&P"), whichever would indicate the lower Applicable Margin,
in accordance with the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------- ------------------------------------------------- -------------------- --------------------
LEVEL DESCRIPTION APPLICABLE MARGIN APPLICABLE MARGIN
FOR LIBOR FOR BASE RATE
FORBEARANCES FORBEARANCES
--------- ------------------------------------------------- -------------------- --------------------
I As of the Operative Date and when no other +6.50%pa until the +5.50 %pa until
Level is applicable. second anniversary the second
of the Effective anniversary of the
Date and 7.00%pa Effective Date and
thereafter 6.00%pa thereafter
- ---------- ------------------------------------------------- -------------------- --------------------
II EBITDA greater than 0 for two consecutive +5.75 %pa +4.75 %pa
quarters and Total Debt/Total Capitalization of
less than or equal to 0.5; but Level III is not
applicable.
- ---------- ------------------------------------------------- -------------------- --------------------
III EBITDA greater than 0 for two consecutive +5.00%pa +4.00 %pa quarters
and Total Debt/Total Capitalization of
less than or equal to 0.5 and either
(i) S&P of greater than or equal to BBB or
(ii) Moody's of greater than or equal to Baa2,
provided, however, that in the event of a split
rating differing by more than one grade, the
intermediate grade shall be the applicable
rating.
- ---------- ------------------------------------------------- -------------------- --------------------
</TABLE>
Notwithstanding anything to the contrary contained in this Agreement, after the
delivery from time to time by Purchaser to the Administrative Agent of quarterly
financial statements and compliance certificates required by SECTION 5.1(B), the
Applicable Margin for all LIBOR Forbearances and Base Rate Forbearances shall be
determined in accordance with the above table. If the above table indicates that
an adjustment to the existing Applicable Margin for all LIBOR Forbearances and
Base Rate Forbearances is required, the effective date for such adjustment shall
be the first Business Day following the date on which such financial statements
and compliance certificates were delivered (which adjustment shall remain
effective until the first day following the date on which Purchaser delivers to
the Administrative Agent quarterly financial statements and compliance
certificates evidencing that the Applicable Margins for all LIBOR Forbearances
and Base Rate Forbearances, in accordance with the above table, are to be
further adjusted) (the "Adjustment Date"). Notwithstanding the foregoing: (i) if
Purchaser shall at any time fail to timely deliver the financial statements
pursuant to SECTION 5.1(B) for any quarter preceding an Adjustment Date, the
Applicable Margin from and after such date to the next Adjustment Date shall be
the highest rate specified in the table above; and (ii) in no event shall
Purchaser be entitled to a decrease in the Applicable Margins applicable to
LIBOR Forbearances or Base Rate Forbearances if an Unmatured Event of Default or
Event of Default
3.
<PAGE> 5
has occurred and is continuing. However, any increase pursuant to clause (i) of
the preceding sentence shall be immediately reversed upon delivery of such
financial statements and any decrease in the Applicable Margins which is
disallowed pursuant to clause (ii) of the preceding sentence shall become
effective immediately upon the cure of the Unmatured Event of Default or a
waiver of the Event of Default in question.
"Asset Sale" means the sale, transfer, lease or other disposition
by any Person or any of its Subsidiaries to any other party other than such
Person or its Subsidiaries of any assets or rights of such Person or such
Subsidiary (including, but not limited to, the sale of stock of partner
companies or Subsidiaries or any other Pledged Shares) other than (a) the sale
in the ordinary course of business of personal property or real property held
for resale in the ordinary course of business or (b) the sale, transfer, lease
or other disposition of capital equipment in the ordinary course of business
where the Net Proceeds of such sale, transfer, lease or other disposition are
reinvested in equipment used by such Person or its Subsidiaries in the ordinary
course of business of such Person and its Subsidiaries within one hundred eighty
(180) days after such sale, transfer, lease or other disposition, provided,
however, that the Net Proceeds of the sale and leaseback of the towers and sites
which may be reinvested and excluded from this definition of "Assets Sale,"
shall not exceed in the aggregate Forty Million Dollars ($40,000,000).
"Assignment of Lease" means an assignment of lease (or the
Chilean equivalent) executed by Purchaser in favor of Collateral Agent, on
behalf of Secured Parties, and consented to by the landlord, the form of which
shall be satisfactory to Secured Parties to assign to Collateral Agent, on
behalf of Secured Parties each of the leases of real property entered into by
Purchaser.
"Availability Period" means the period commencing on the
Operative Date and ending on the earliest of (a) September 29, 2001, (b) the
date Parent first pays interest on High Yield Debt, or (c) the date on which the
Capitalized Interest Facility is fully drawn, canceled or terminated under the
provisions of this Agreement.
"Base Rate" means the greater of (a) the rate of interest per
annum publicly announced by Administrative Agent at its headquarters in the
United States of America from time to time as its prime commercial lending rate,
such rate to be adjusted automatically (without notice) on the effective date of
any change in such publicly announced rate and (b) the Federal Funds Effective
Rate plus one-half of one percent (0.50%) (rounded upwards, if necessary, to the
next one-eighth of one percent (1/8 of 1%).
"Base Rate Forbearance" means any Forbearance bearing interest at
the Base Rate.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to close
in New York City or in the Republic of Chile; provided that, when used in
conjunction with any LIBOR Forbearance, the term "Business Day" shall also
exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.
4.
<PAGE> 6
"Business Plan" means that certain initial business plan of
Purchaser to be initially approved by Vendor pursuant to SECTION 3.1(y), as the
same may from time to time be revised, amended, updated or otherwise modified
with written notification to Requisite Vendors.
"Capital Expenditures" means, for any person in respect of any
period, the sum of (a) the aggregate of all expenditures incurred by such person
during such period that, in accordance with GAAP, are or should be included as
additions to property, plant or equipment or other capital expenditures
reflected in the statement of cash flows of such person (including the amount of
assets leased under any Capital Lease obligation) and (b) to the extent not
covered by (a) above, the aggregate of all expenditures by such person to
acquire by purchase or otherwise the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any other person; provided,
however, the Capital Expenditures shall not include expenditures of proceeds of
insurance settlements in respect of lost, destroyed or damaged assets, equipment
or other property to the extent such expenditures are made to replace or repair
such lost, destroyed or damaged assets, equipment or other property within
twelve (12) months of such destruction or damage.
"Capital Lease" means a lease, which has been or should be
capitalized on the books of the subject lessee in accordance with GAAP, plus to
the extent not otherwise included, the net proceeds of any sale and leaseback of
towers and sites.
"Capital Stock" of any Person means any and all shares, interest,
rights to purchase, warrants, options, preemptive rights, participations or
other equivalents of or interest in (however designated) the common or preferred
equity or equity or preference share capital of such Person, including without
limitation, partnership interests.
"Capitalized Interest Commitment" means, with respect to each
Capitalized Interest Vendor, the amount set forth on Schedule 1.1 as such
Vendor's Capitalized Interest Commitment, as such amount may be adjusted from
time to time pursuant to the terms of this Agreement.
"Capitalized Interest Commitment Percentage" means, with respect
to any Capitalized Interest Vendor, the percentage equivalent of such Vendor's
Capitalized Interest Commitment divided by the Aggregate Capitalized Interest
Commitment.
"Capitalized Interest Facility" means the extension of credit to
Purchaser by the Capitalized Interest Vendors as set forth in Section 2.2.
"Capitalized Interest Forbearance Request" has the meaning set
forth in SECTION 2.6(a) hereof.
"Capitalized Interest Forbearances" means Forbearances made to
Purchaser by Capitalized Interest Vendors under the Capitalized Interest
Facility pursuant to this Agreement.
"Capitalized Interest Vendors" means any Vendor having a
Capitalized Interest Commitment.
"Cash Interest Expense" means, for any period, Interest Expense
for such period minus, without duplication, any Interest Expense capitalized
during such period.
5.
<PAGE> 7
"Change of Control" means the occurrence, after the date of this
Agreement, of: (a) any Person, or two (2) or more Persons acting in concert,
acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Purchaser or Parent, as the
case may be, (or other securities convertible into such securities) representing
greater than twenty percent (20.0%); (b) any Person, or two or more Persons
acting in concert, acquiring by contract or otherwise, or entering into a
contract or arrangement which, upon consummation, will result in its or their
acquisition of, or control over, securities of Purchaser or Parent, as the case
may be, (or other securities convertible into such securities) representing
greater than twenty percent (20.0%); or (c) during any twenty four (24)
consecutive calendar months, individuals who were directors of Purchaser or
Parent, as the case may be, on the first day of such period shall, together with
such directors as are approved by directors who were directors at the beginning
of such period, cease to constitute a majority of the board of directors of
Purchaser or Parent, as the case may be; provided, however, that so long as the
shares of Purchaser or Parent, as applicable, are not publicly traded on a
recognized national securities exchange in the Republic of Chile or in the
United States of America, no "Change of Control" shall exist under clause (a),
(b) or (c) above so long as Leap maintains beneficial ownership, directly or
indirectly of securities of Purchaser or Parent, as the case may be, (or other
securities convertible into securities) representing greater than fifty percent
(50%) of the combined voting power of all securities of Purchaser or Parent, as
the case may be, entitled to vote in the election of directors.
"Chattel Mortgage" means any chattel mortgage (or the Chilean
equivalent) executed by Purchaser in favor of Collateral Agent, on behalf of
Secured Parties, the form of which shall be satisfactory to Secured Parties and
adequate to give to Collateral Agent, on behalf of Secured Parties a first
priority perfected security interest (or the Chilean equivalent) in all of the
personal property of Purchaser, including, but not limited to, the License and
Other Licenses to the extent permitted by law.
"Collateral Agent" means QUALCOMM Incorporated in its capacity as
Collateral Agent under this Agreement and the Collateral Documents and, as
applicable, any of its agents, employees or attorneys-in-fact, including,
without limitation, any local agent appointed by Collateral Agent in relation to
registering any Collateral Documents for the benefit of Secured Parties.
"Collateral Agency and Intercreditor Agreement" means a
Collateral Agency and Intercreditor Agreement to be entered into among
Purchaser, Collateral Agent, Administrative Agent and other holders of Eligible
Secured Debt (or their representatives) that become parties thereto as provided
herein.
"Collateral Documents" means the Security Agreements, the Stock
Pledge Agreement, the Project Account Control Agreements and the Landlord's
Waivers.
"Commitment Fee" has the meaning set forth in SECTION 2.8(b)
hereof.
"Contingent Obligation" means as to any Person and its
Subsidiaries, (a) any obligation of such Person guaranteeing or intending to
guarantee any Indebtedness ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or
6.
<PAGE> 8
indirectly, including any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure, indemnify or hold harmless
the owner of such primary obligation against loss in respect thereof (other than
indemnity obligations arising in the ordinary course of business); (b) any
repurchase obligation or liability of such Person or any of its Subsidiaries
with respect to accounts or notes receivable permitted to be sold by such Person
or such Subsidiary pursuant to this Agreement; (c) any repurchase obligation or
other liability of such Person or any of its Subsidiaries with respect to
property leased by such Person pursuant to an Operating Lease; and (d)
obligations arising with respect to any other transaction which is the
functional equivalent of, or takes the place of borrowing but which does not
constitute, a liability on the financial statements of such Person, excluding
therefrom Operating Leases which do not require payment by or due from such
Person at the scheduled termination of such Operating Lease or pursuant to a
required purchase by such Person of the leased property; provided, however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be the lesser of (x) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined in good faith or (y) if
applicable, the maximum amount for which such contingently liable person may be
liable for pursuant to the terms of the instrument embodying such Contingent
Obligation or if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined in good faith.
"Contractual Obligation" means, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contributed Capital" means, as of any date, (a) the amount of
cash proceeds received by Purchaser in connection with the issuance of common or
preferred equity and the principal amount of the Sponsor Subordinated
Indebtedness converted to equity pursuant to SECTION 3.1(dd) measured in Dollars
as determined on the date of such investment or conversion into equity, as the
case may be; and (b) Forty Seven Million Four Hundred Seventeen Thousand Dollars
($47,417,000) in respect of the agreed value of the License and the backbone.
"Credit Document Currency" has the meaning set forth in SECTION
9.23 hereof.
"Credit Documents" means this Agreement, the Notes, the Pagares,
the Collateral Documents, the Guaranty and any other agreements or instruments
that may hereafter be executed and delivered in favor of Secured Parties
pursuant to this Agreement.
"Credit Party" means Purchaser, each Guarantor and each other
party (other than Administrative Agent, Collateral Agent and Vendors) to a
Credit Document.
7.
<PAGE> 9
"Credit Support Agreement" means that certain Credit Support
Agreement for an additional investment in Purchaser to be entered into between
Administrative Agent on behalf of Vendors, QUALCOMM, Parent and Leap, as the
same may be amended, modified, supplemented or restated from time to time. Such
Credit Support Agreement shall require Leap, upon the triggering of certain
financial covenants and/or events to be agreed upon, to invest up to
approximately Thirty Six Million Dollars ($36,000,000) from funds made available
to Leap pursuant to that certain Credit Agreement by and among Leap, QUALCOMM,
the other Lenders named therein and ABN AMRO Bank, N.V. dated as of September
23, 1998; provided, however, that the maximum funding obligation under the
Credit Support Agreement shall be reduced to the extent of additional cash
equity investment in Purchaser (i) from third parties after the date hereof
exceeds Fourteen Million Dollars ($14,000,000) and (ii) from Leap or its
Affiliates after the date hereof.
"Current Line of Business" means the fixed and mobile wireless
telecommunication business in the Republic of Chile.
"Date hereof" or "date hereof" means the date set forth at the
beginning of this Agreement.
"Deemed Capitalized Interest Forbearance Request" has the meaning
set forth in SECTION 2.6(a)(ii) hereof.
"Default Rate" means an interest rate per annum equal to the Base
Rate or LIBOR Rate plus the Applicable Margin plus, with reference to Events of
Default arising under (a) SECTION 6.1(a) and (b) SECTION 6.1(c) by reason of a
violation of the covenant set forth in SECTION 5.3(a) AND SECTION 5.3(b), five
percent (5.00%) per annum, and with reference to other Events of Defaults, two
percent (2.00%) per annum.
"Deferred Payment Balance" means an amount equal to Ninety
Million Six Hundred Eighty Five Thousand Three Hundred Eighty Four Dollars and
9/100 ($90,685,384.09), which amount includes all outstanding unpaid amount of
principal, accrued and capitalized interest and expenses owing to Vendor as of
the date hereof in connection with all forbearances made by Vendor to Purchaser
under the Deferred Payment Agreement (reflecting all amounts owing by Purchaser
to Vendor under the Equipment Agreements).
"Deferred Payment Balance Forbearance" has the meaning set forth
in SECTION 2.1 hereof.
"Dollar," "Dollars" and "$" means dollars in lawful currency of
the United States of America.
"EBITDA" means, for any period, determined on a consolidated
basis, the sum of (a) pre-tax net income (excluding any items of extraordinary
gain and loss and gains and losses on any Asset Sale) plus (b) to the extent
deducted from net income, (i) Interest Expense, (ii) depreciation expense, and
(iii) expense from the amortization of Intangibles. EBITDA will be adjusted to
exclude (a) interest income and other non-operating income or losses; (b) any
extraordinary non-cash items deducted from or included in the calculation of
pre-tax net income (other than items which will require cash payments and for
which an accrual or reserve is, or is required by GAAP to be, made); (c) the
EBITDA of any Subsidiaries or assets disposed of or
8.
<PAGE> 10
discontinued during such period; and (d) the EBITDA of any Subsidiaries or
Affiliates that are not dividended to Purchaser.
"Effective Date" means the date hereof.
"Eligible Assignee" means (a) a commercial bank organized under
the laws of the United States, or any state thereof, (b) a commercial bank
organized under the laws of the Republic of Chile or any other country which is
a member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, which is acting through
a branch or agency located in the United States; which, in each case (under
clauses (a) and (b) above) has a combined capital and surplus of at least Two
Hundred Million Dollars ($200,000,000); (c) an Affiliate of a Vendor; or (d) a
finance company, financial institution, fund or any other Person, which in each
case has a combined capital and surplus of at least Two Hundred Million Dollars
($200,000,000) and is approved in writing by Administrative Agent, Purchaser and
Requisite Vendors (which approvals shall not be unreasonably withheld);
provided, however, that (i) neither Purchaser nor its respective Affiliates
shall qualify as an Eligible Assignee; and (ii) no direct competitor of
Purchaser competing in Purchaser's principal line of business shall qualify as
an Eligible Assignee.
"Eligible Secured Debt" means (a) Other Senior Indebtedness, (b)
Other Vendor Indebtedness, (c) any other Indebtedness for borrowed money of the
Purchaser incurred to finance payments in respect of fees related to or interest
in respect of Other Vendor Indebtedness, and (d) any Indebtedness for borrowed
money of the Purchaser incurred to refinance Indebtedness referred to in clause
(a), (b) or (c) above in compliance with the Refinancing Terms; provided that:
(i) in the case of any Indebtedness described in clause (b) above,
such Indebtedness is incurred within 90 days of the purchase of the
equipment financed thereby, the principal amount thereof does not
exceed 100% of the purchase price of the equipment financed thereby
and such equipment becomes collateral under the Security Agreements
upon the purchase thereof (free of any Liens other than the Lien of
the Security Agreements);
(ii) in the case of any Indebtedness described in clause (c) above,
at the time of and after giving effect to the incurrence of any such
Indebtedness the aggregate principal amount of all Indebtedness
described in clause (c) above that has been incurred (on a cumulative
basis, whether or not such Indebtedness remains outstanding) shall
not exceed fifty percent (50%) of the aggregate principal amount of
all Indebtedness described in clause (b) above that has been incurred
(on a cumulative basis, whether or not such Indebtedness remains
outstanding) at or prior to such time;
(iii) in the case of any Indebtedness described in clause (b) or (c)
above, at the time of and after giving effect to the incurrence of
any such Indebtedness the aggregate principal amount of all such
Indebtedness that has been incurred (in each case, on a cumulative
basis, whether or not such Indebtedness remains outstanding) shall
not at any time exceed the cumulative Capital Expenditures permitted
under SECTION 5.3(h);
9.
<PAGE> 11
(iv) in the case of any Indebtedness described in clause (b), (c) or
(d) above, the holder or holders of such Indebtedness (or a duly
authorized representative thereof on behalf of such holders) shall
have become a party to the Collateral Agency and Intercreditor
Agreement;
(v) in the case of any Indebtedness described in clause (a), (b), (c)
or (d) above, such Indebtedness is not guaranteed by any Person or
secured by any Lien (other than the Guaranties and Liens granted to
the Collateral Agent, on behalf of Vendors, to secure all Eligible
Secured Debt pursuant to the Security Documents); and
(vi) in the case of any Indebtedness described in clause (a) (b), (c)
or (d) above, (A)the terms and conditions of such Indebtedness shall
neither be less favorable to the Purchaser nor more favorable to the
applicable vendor or lender in any material respect than the terms
and conditions of the Forbearances and shall not be inconsistent with
the terms and conditions of the Forbearances, (B) at the time of and
after giving effect to the incurrence of any such Indebtedness, no
Event of Default or Unmatured Event of Default shall have occurred
and be continuing, and (C) at the time of and after giving effect to
the incurrence of any such Indebtedness, the ratio of Net Debt to
Total Capitalization shall not exceed .62:1.00.
In determining whether the requirements of clause (vi)(B) and (C) of this
definition are satisfied, Purchaser shall provide to Administrative Agent and
each Vendor at least ten (10) Business Days prior to entering into definitive
agreements for the incurrence of such Eligible Secured Debt, Purchaser's good
faith pro forma financial projections giving effect to the anticipated
incurrence of such Eligible Secured Debt over the one year period following the
date such Eligible Secured Debt is first incurred together with Purchaser's
calculation of the covenants set forth in Section 5.3 for each month during such
one year period showing no anticipated Event of Default based on a violation of
such covenants and that the Net Debt to Total Capitalization ratio does not
exceed .62:1.00 at any time during such period.
"Equipment Agreements" means the equipment supply and services
agreements between QUALCOMM or its Affiliates and Purchaser related to the
Project, including, without limitation, the System Equipment Purchase Agreement
dated as of February 27, 1997, as amended by that certain First Amendment to
System Equipment Purchase Agreement dated as of April 24, 1997, and that certain
Second Amendment to System Equipment Purchase Agreement dated as of June 24,
1998 as the same may be amended, modified, supplemented or restated hereafter
from time to time, by and among QUALCOMM and Purchaser, and as the same have
been assigned to Ericsson pursuant to the Assignment and Assumption of
Infrastructure Agreement, dated June 2, 1999.
"Ericsson" means Telefonaktiebolaget LM Ericsson and/or its
Affiliates, including Cia Ericsson de Chile S.A.
"Event of Default" means any of the events specified in SECTION
6.1 hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
10.
<PAGE> 12
"Excess Cash Flow" means, for any fiscal year, calculated for
Purchaser and its Subsidiaries on a consolidated basis, the excess, if any, of
(a) EBITDA for such year, minus (b) the sum of, without duplication, (i) the
aggregate amount actually paid by Purchaser and its Subsidiaries in cash during
such fiscal year on account of Capital Expenditures (excluding the principal
amount of Indebtedness incurred in connection with such expenditures and any
such expenditures financed with the proceeds of any sale or other disposition of
property), (ii) the aggregate amount of all optional prepayments and mandatory
prepayments of funded debt during such fiscal year, (iii) the aggregate amount
of all regularly scheduled principal payments of funded debt of Purchaser and
its Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder) and all cash interest in respect of such
payments paid during such period, (iv) corporate taxes actually paid by
Purchaser during such fiscal year, (v) increases in consolidated working capital
for such fiscal year, and (vi) the aggregate amount of payments of principal
hereunder and interest which is not capitalizable hereunder which are scheduled
to fall due within the 180 day period following the end of such fiscal year.
"Federal Funds Effective Rate" means, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
Administrative Agent from three (3) Federal funds brokers of recognized standing
selected by Administrative Agent.
"Final Availability Date" means the last day of the Availability
Period.
"Final Maturity Date" means September 30, 2006.
"Financial Statements" means, with respect to any fiscal quarter
(or full fiscal year) as to any Person, consolidated and consolidating
statements of income and cash flows of such Person and its Subsidiaries for such
fiscal quarter (or full fiscal year) of such Person (and, if the end of such
fiscal quarter of such Person is not also the end of such Person's first fiscal
quarter or full fiscal year, for the elapsed portion of such fiscal year of such
Person), and consolidated and consolidating balance sheets of such Person and
its Subsidiaries as of the end of such fiscal quarter (or full fiscal year) of
such Person, setting forth in each case in comparative form figures for the
corresponding fiscal quarter in the preceding fiscal year of such Person (and,
as applicable, the elapsed portion of the preceding fiscal year of such Person
or, if such period is a full fiscal year, corresponding figures from the
preceding fiscal year), all prepared in reasonable detail and in accordance with
GAAP consistently applied and which shall fairly present in all material
respects the financial condition of such Person and its Subsidiaries.
"Forbearance" means the Deferred Payment Balance Forbearance or a
Capitalized Interest Forbearance, and "Forbearances" means all of such
forbearances, collectively, unless the context otherwise requires.
"Funding Date" means each date on or after the Operative Date on
which Vendors make a Forbearance hereunder.
11.
<PAGE> 13
"GAAP" means generally accepted accounting principles as in
effect from time to time in, as to Purchaser, the Republic of Chile and, as to
any other Person, its country of formation, applied on a consistent basis with
the most recent financial statements delivered to Vendors and for each of Parent
and Purchaser includes U.S. GAAP reconciliations for all period ends as are
required for reporting purposes by the United States Securities and Exchange Act
of 1934 or, at Purchaser's option, U.S. GAAP.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Consents" has the meaning set forth in SECTION
3.1(m) hereof.
"Guarantors" means Parent, Subsidiaries of Purchaser, if any, and
each other Person who shall from time to time execute a Guaranty.
"Guaranty" means the Guaranty and Support Agreement dated as of
the date hereof, entered into by Guarantors, and each other Guaranty and Support
Agreement hereafter entered into by each other Guarantor, each in favor of
Collateral Agent, on behalf of Secured Parties, which shall be acceptable to
Secured Parties, including, but not limited to, a Chilean guaranty in the form
of a public deed securing the obligations of Guarantors.
"Indebtedness" means, as to any Person, without double counting,
(a) all indebtedness of such Person for borrowed money (including, with respect
to Purchaser, the Obligations); (b) all obligations under Capital Leases of such
Person; (c) to the extent of the outstanding Indebtedness thereunder, all
obligations of such Person that are evidenced by a promissory note or other
instrument representing an extension of credit to such Person, whether or not
for borrowed money; (d) all obligations of such Person for the deferred purchase
price of property or services (other than trade or other accounts payable in the
ordinary course of business in accordance with customary industry terms unless
such trade or other account payable becomes more than ninety (90) days past
due); (e) all obligations for deferred customs duties; (f) all obligations of
such Person of the nature described in clauses (a), (b), (c) or (d), above, and
not otherwise included therein which are secured by a Lien on assets of such
Person, whether or not such Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, but only to the
extent of the fair market value of the assets so subject to such Lien; (g) all
obligations of such Person arising under acceptance facilities or under
facilities for the discount of accounts receivable of such Person; (h) all
issued and outstanding letters of credit, performance bonds and similar
instruments; (i) all obligations of such Person to a counterparty under any
interest rate protection agreement or other hedging arrangement; (j) any
security which, by its terms or the happening of any event (excluding a change
in control), matures or is mandatorily redeemable or is otherwise exchangeable
into debt at the option of the holder thereof; and (k) all Contingent
Obligations.
"Indemnitee" has the meaning set forth in SECTION 9.15 hereof.
"Intangibles" means, at a particular date, all assets of any
Person and its Subsidiaries determined on an unconsolidated basis at such date
that would be classified as intangible assets in accordance with GAAP.
12.
<PAGE> 14
"Interest Expense" means, for any period, determined on a
consolidated basis for any Person and its Subsidiaries, the sum (without
duplication) of (a) interest expense on Total Debt, including (i) fees, (ii)
payments under any interest rate protection agreements or other hedging
agreements, (iii) the interest portion of any deferred payment obligations, (iv)
all fees and charges owed with respect to letters of credit or performance or
other bonds, (v) all accrued or capitalized interest, (vi) any amortization of
debt discount and (vii) all but the principal component of Capital Lease
payments plus (b) dividends declared or paid whether or not permitted pursuant
to this Agreement.
"Interest Payment Date" means, with respect to any LIBOR
Forbearance, the last day of each Interest Period applicable to such Forbearance
and, with respect to Base Rate Forbearances, the last Business Day of each
calendar quarter and each date a Base Rate Forbearance is converted into a LIBOR
Forbearance; provided however, that if any Interest Period for a LIBOR
Forbearance exceeds three (3) months, interest shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.
"Interest Period" means, with respect to each LIBOR Forbearance,
the period commencing on the date of the making or continuation of or conversion
to such LIBOR Forbearance and ending one, three or six months thereafter, as
Purchaser may elect in the applicable Forbearance Request or Notice of
Conversion/Continuation; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (c) below) that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless, in
the case of LIBOR Forbearances, such Business Day falls in the next calendar
month, in which case such Interest Period shall end on the next preceding
Business Day;
(b) any Interest Period applicable to a LIBOR Forbearance that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last Business
Day of a calendar month;
(c) any Interest Period with respect to a LIBOR Forbearance that
would otherwise end after the applicable Final Maturity Date shall end on such
Final Maturity Date;
(d) no Interest Period applicable to any LIBOR Forbearance shall
include a principal repayment date for such LIBOR Forbearance unless an
aggregate principal amount of Forbearances at least equal to the principal
amount due on such principal repayment date shall be Base Rate Forbearances or
other LIBOR Forbearances having Interest Periods ending on or before such date;
and
(e) notwithstanding clauses (c) and (d) above, no Interest Period
applicable to a LIBOR Forbearance shall have a duration of less than one (1)
month, and if any Interest Period applicable to such LIBOR Forbearance would be
for a shorter period, such Interest Period shall not be available hereunder.
"Invested Capital" means, as of any date of determination, the
sum of all Capital Stock investments in Purchaser and the amount of all Third
Party Subordinated Indebtedness and Sponsor Subordinated Indebtedness of
Purchaser outstanding as of such date.
13.
<PAGE> 15
"Investment" means, as to any Person, any direct or indirect
ownership or purchase or other acquisition by such Person of any Capital Stock,
obligations or other securities, or a beneficial interest in any Capital Stock,
obligations (excluding trade payables to such Person arising in the ordinary
course) or other securities of any other Person (including a Subsidiary), or all
or substantially all assets used to conduct a business or a line of business, or
any direct or indirect loan, advance or capital contribution by such Person to
any other Person, or any joint venture or other arrangement involving the
sharing of profits or losses from joint business activities, including all
Indebtedness and accounts receivable from that other Person which are not
current assets or did not arise from sales to that other Person in the ordinary
course of business.
"Investment Grade Instruments" means (a) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or the Republic of Chile and maturing within one (1) year from the date of
acquisition thereof by Purchaser, (b) time deposits or certificates of deposit
of a U.S. or Chilean bank, the commercial paper or other short-term unsecured
debt obligations of which (or, in the case of a bank that is the principal
subsidiary of a holding company, the holding company) are rated, (i) in the case
of a U.S. bank, either A1 or better by Standard & Poor's Ratings Group ("S&P")
or P1 or better by Moody's Investors Service, Inc. ("Moody's"), and maturing
within one (1) year from the date of acquisition thereof by Purchaser, or (ii)
in the case of a Chilean bank, the highest rating of any Chilean bank, but in
any event not less than A2 by S&P or P2 by Moody's, and maturing within ninety
(90) days (unless the rating is not less than A1 by S&P or P1 by Moody's, in
which case maturing within one (1) year) from the date of acquisition thereof by
Purchaser, or (c) commercial paper of a U.S. or Chilean issuer, (i) in the case
of a U.S. issuer, rated either A1 or better by S&P or P1 or better by Moody's,
and maturing within one (1) year from the date of acquisition thereof by
Purchaser, or (ii) in the case of a Chilean issuer, the highest rating of a
Chilean issuer, but in any event not less than the equivalent of A2 by S&P or P2
by Moody's, and maturing within ninety (90) days (unless the rating is not less
than A1 by S&P or P1 by Moody's, in which case maturing within one (1) year)
from the date of acquisition thereof by Purchaser.
"Judgement Currency" has the meaning set forth in SECTION 9.24
hereof.
"Landlord's Waiver" means each agreement with any landlord and
any landlord's mortgagee (or the Chilean equivalent), substantially in the form
of EXHIBIT B, as such may from time to time be required to be executed and
delivered by Purchaser pursuant to this Agreement.
"Laws" means, collectively, all national, international, foreign,
federal, state, provincial and local statutes, treaties, codes, ordinances,
rules, orders, regulations and precedents of any court or other governmental
agency from time to time in effect.
"Leap" means Leap Wireless International, Inc., a Delaware
corporation.
"Leap Loans" has the meaning set forth in SECTION 4.1(j) hereof.
"LIBOR Forbearance" means any Forbearance bearing interest at the
LIBOR Rate.
"LIBOR" means the rate at which deposits in U.S. Dollars are
offered to leading banks in the London interbank market.
14.
<PAGE> 16
"LIBOR Rate" shall mean, for any Interest Period for each LIBOR
Forbearance, the rate per annum (rounded upward, if necessary, to the nearest
whole multiple of 1/16 of 1% per annum) appearing on Telerate Page 3750 as of
11:00 A.M. (London time) on the date (as to any Interest Period, the
"Determination Date") that is two Business Days before the first day of such
Interest Period, as LIBOR for a period equal to such Interest Period. In the
event that Telerate Page 3750 shall cease to report such LIBOR or, in the
reasonable judgement of the Requisite Vendors, shall cease to accurately reflect
such LIBOR, then the "LIBOR Rate" with respect to such Interest Period for such
LIBOR Forbearance shall be the rate per annum equal to the average of the rate
per annum at which deposits in Dollars are offered by the principal office of
each of the Reference Banks in London, England to leading banks in the London
interbank market at 11:00 A.M. (London time) on the Determination Date in an
amount substantially equal to such Reference Bank's LIBOR Forbearance comprising
part of the related Forbearance and for a period equal to such Interest Period
or, if no Reference Bank has a LIBOR Forbearance constituting part of the
related Forbearance, the rate per annum at which deposits in Dollars are offered
by the principal office of Citibank, N.A. in London, England to leading banks in
the London interbank market at 11:00 A.M. (London time) on the Determination
Date in an amount substantially equal to the aggregate of all LIBOR Forbearances
constituting part of the related Forbearance and for a period equal to such
Interest Period. The LIBOR Rate for any Interest Period for each LIBOR
Forbearance shall be determined by Administrative Agent on the basis of the
applicable rate appearing on Telerate Page 3750 as aforesaid (or the applicable
rates furnished to and received by Administrative Agent from the Reference
Banks) on the Determination Date for such Interest Period.
"License" has the meaning set forth in SECTION 4.1(s) hereof.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, or any
financing lease having substantially the same economic effect as any of the
foregoing).
"Material Adverse Effect" means a material adverse effect on (a)
the business, properties, assets, results of operations, financial condition or
prospects of Purchaser, any of its Subsidiaries or any Guarantor, individually
or taken as a whole or (b) the ability of Purchaser, any of its Subsidiaries or
any Guarantor to discharge the Obligations in accordance with their terms.
"Material Indebtedness" has the meaning set forth in SECTION
6.1(d) hereof.
"Maturity" or "maturity" means the earlier of (a) the Final
Maturity Date and (b) the date on which (i) the Forbearances have been
accelerated or (ii) the Forbearances have been prepaid in full and the Aggregate
Commitment terminated pursuant to this Agreement.
"Mortgage" means a mortgage (or the Chilean equivalent) executed
by Purchaser in favor of Collateral Agent, on behalf of Secured Parties, the
form of which shall be satisfactory to Secured Parties and which shall be
adequate to give to Collateral Agent, on behalf of Secured Parties a first
priority perfected security interest (or the Chilean equivalent) in all of the
real property of Purchaser.
15.
<PAGE> 17
"Net Debt" means, with respect to any Person, Total Debt minus
the sum of cash and Investment Grade Instruments in excess of Fifteen Million
Dollars ($15,000,000).
"Net Proceeds" means, with respect to any Asset Sale of Parent or
Purchaser, or the issuance and sale of any Capital Stock of Parent or Purchaser,
or the issuance and sale of any debt by Purchaser or Parent, the gross cash
consideration received by such Parent or Purchaser from such sale, issuance or
incurrence, net of commissions, direct sales costs, normal closing adjustments,
taxes attributable to such sale, insurance proceeds, issuance or incurrence and
professional fees and expenses incurred by Parent or Purchaser in connection
therewith, to the extent the foregoing are actually paid (or will be paid,
provided that such amounts have been accrued in accordance with GAAP and will be
paid within one year of the date of the closing of such sale of assets or
issuance and sale of Capital Stock in connection with such sale).
"Note" or "Notes" means those notes referred to in SECTION 2.12
hereof.
"Notice of Conversion/Continuation" has the meaning set forth in
SECTION 2.6(c) hereof.
"Obligation Currency" has the meaning set forth in SECTION 9.24
hereof.
"Obligations" means, collectively, all Indebtedness, principal,
interest, fees, expenses of Administrative Agent, Collateral Agent and Vendors
(including, without limitation, reasonable attorneys' and other fees, costs or
expenses incurred in connection with the preparation, negotiation,
administration and enforcement of the Credit Documents; Administrative Agent's,
Collateral Agent's and any Vendor's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Credit Documents, whether or
not suit is brought); and other amounts owed to Administrative Agent, Collateral
Agent or any Vendor by any Credit Party pursuant to this Agreement, the Credit
Documents or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an insolvency proceeding (including, without
limitation, any proceeding commenced by or against any Credit Party under any
provision of the United States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
any Credit Party's creditors, or proceedings seeking reorganization, arrangement
or other relief) and including any Indebtedness, liability or obligation owing
from any Credit Party to others that Administrative Agent, Collateral Agent or
any Vendor may have obtained by assignment or otherwise.
"Operative Date" means such time as when each and every condition
set forth in SECTION 3.1 and SECTION 3.2 hereof has been satisfied or waived by
all Vendors in their sole and absolute discretion.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease under which that Person is lessor.
"Other Licenses" has the meaning set forth in SECTION 4.1(s)
hereof.
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"Other Project Documents" means the interconnection agreements
and such other agreements as shall be entered into from time to time which are
necessary or advisable to permit the profitable operation of the Project, the
absence of which, if the same were terminated, would be reasonably likely to
have a Material Adverse Effect.
"Other Senior Indebtedness" means any Indebtedness of Purchaser
for borrowed money except as described in clauses (b), (c) and (d) of the
definition of Eligible Secured Debt.
"Other Taxes" has the meaning set forth in SECTION 2.14(c)(i)
hereof.
"Other Vendor Indebtedness" means any Indebtedness of Purchaser
incurred to finance the purchase price of equipment and related services
acquired by Purchaser (other than pursuant to the Equipment Agreements) for use
in its wireless telecommunications and data networking business which
Indebtedness is either provided or guaranteed by the vendor of such equipment or
its affiliates.
"Pagare" or "Pagares" means those notes referred to in SECTION
2.12 hereof.
"Parent" means Inversiones Leap Wireless Chile S.A.
"Permitted Indebtedness" has the meaning set forth in SECTION
5.2(b) hereof.
"Permitted Liens" means: (a) Liens for taxes and assessments or
other governmental charges or levies not at the time delinquent or thereafter
payable without penalty; (b) Liens of carriers, warehousemen, mechanics,
materialmen, landlords, suppliers and lessors incurred in the ordinary course of
business for sums not overdue; (c) Liens created to secure the payment of the
purchase price of assets (including conditional sales agreements and other title
retention agreements, but not including Liens securing Capital Leases) on which
the Lien is created, provided that the aggregate amount at any one time
outstanding and secured thereby does not exceed the value of the equipment
purchased and is permitted under SECTION 5.2(b)(ii), and any such Lien attaches
only to the asset or assets so purchased; (d) Liens resulting from any judgment
or award, the time for the appeal or rehearing of which shall not have expired
and in respect of which Purchaser or any Guarantor shall at any time in good
faith be prosecuting an appeal and there exists a stay of execution; (e) Liens
securing appeal and surety bonds (to the extent such Indebtedness is otherwise
not prohibited hereby); and (f) other ordinary course Liens which do not
materially interfere with the operation of the business of Purchaser, including
easements.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
limited liability company, Governmental Authority or other entity of whatever
nature.
"Pesos" means the lawful currency of the Republic of Chile.
"Pledged Shares" means all of the issued and outstanding shares
of Capital Stock of Purchaser now or hereafter issued which shall, pursuant to
the Stock Pledge Agreement, be delivered to Collateral Agent on behalf of
Secured Parties as collateral for the Obligations under this Agreement,
including all certificates and instruments representing or evidencing such
securities.
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"Process Agent" has the meaning set forth in SECTION 9.11(c)
hereof.
"Pro Forma Required Debt Service" means, for any period, the sum
of (a) Cash Interest Expense for the next succeeding four (4) fiscal quarters
(assuming the interest rates in effect on Total Debt on the date of
determination are in effect throughout the next succeeding four (4) fiscal
quarters) and (b) scheduled principal payments on Total Debt for the next
succeeding four (4) fiscal quarters.
"Project" has the meaning set forth in the Recitals hereto.
"Project Accounts" means Purchaser's disbursement, operating and
investment accounts and any and all sub-accounts thereof.
"Project Account Control Agreements" means the control agreements
as shall be necessary or appropriate to perfect Collateral Agent's security
interest in the Project Accounts.
"Promise of Mortgage" means a promise of mortgage (or the Chilean
equivalent) executed by Purchaser in favor of Collateral Agent, on behalf of
Secured Parties, the form of which shall be satisfactory to Secured Parties and
in which Purchaser promises to execute additional Chattel Mortgages, Mortgages
and Assignment of Leases upon its acquisition of additional personal property or
real property or entering into additional real estate leases.
"Purchaser" has the meaning set forth in the Preamble hereto.
"Reference Banks" shall mean Citibank, N.A., ABN AMRO Bank N.V.
and Societe Generale.
"Refinancing Terms" means the following: (i) the principal amount
of any such Indebtedness does not exceed the amounts outstanding under the
Indebtedness refinanced and any applicable prepayment premiums, (ii) any such
Indebtedness has a scheduled maturity date that is on or after the scheduled
maturity date of the Indebtedness refinanced thereby, (iii) any such
Indebtedness has a weighted average life to maturity that is equal to or longer
than the remaining weighted average life to maturity of the Indebtedness
refinanced thereby (determined immediately prior to the giving effect to such
refinancing), (iv) any such Indebtedness does not include any provisions that
may require mandatory prepayment thereof prior to the scheduled maturity, other
than scheduled repayments taken into account in determining compliance with
clause (iii) above and other such provisions included in the Indebtedness
refinanced thereby, and (vi) if the Indebtedness being refinanced is
subordinated to the Forbearances, then such refinancing Indebtedness shall be
subordinated to the Forbearances on terms no less favorable to Vendors than the
Indebtedness being refinanced;
"Reimbursement Agreement" means that certain Reimbursement
Agreement to be entered into among Purchaser, QUALCOMM and such other Persons as
shall from time to time become Vendors thereunder, as the same may be amended,
modified, supplemented or restated from time to time.
"Requirements of Law" means, as to any Person, the Certificate or
Articles of Incorporation and Bylaws or Estatutos Sociales or other
organizational or governing documents of such Person, and any Law, treaty, rule
or regulation or determination of an arbitrator or a court
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or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which or by which such Person or any of its
property is subject.
"Requisite Vendors" means, at any time, Vendors then holding more
than fifty-one (51.0%) of the then aggregate unpaid principal amount of all
Forbearances then outstanding or, if no such Forbearances are then outstanding,
Vendors then having more than fifty-one percent (51.0%) of the Aggregate
Commitment; provided, however, that (a) in the event there shall be only two (2)
Vendors, both such Vendors and (b) in the event that there shall be any Vendor
which is an Affiliate of Purchaser such Vendor's shares shall not be included in
the above percentage calculation.
"Reserve Percentage" means the reserve percentage applicable to
an Interest Period (expressed as a decimal and rounded upwards, if necessary, to
the next higher 1/100 of 1%) in effect on the date the LIBOR Rate for such
Interest Period is determined under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the maximum
reserve requirement (including, without limitation, any basic, supplemental,
emergency or marginal reserve requirement) with respect to "eurocurrency
liabilities" (as defined under such regulations) having a term comparable to
such Interest Period.
"Responsible Officer" means any of the president, chief financial
officer, treasurer, Gerente General, Gerente de Finanzas, Gerente de Operaciones
or Gerente de Marketing of any Person.
"Secured Parties" means Collateral Agent, Administrative Agent,
Vendors, Indemnitees and any other Person to whom any sums of money shall be due
from Purchaser pursuant to the terms and Obligations hereunder.
"Security Agreements" means the Security Agreement by and between
Purchaser, as grantor, and Collateral Agent, on behalf of Secured Parties, each
Chattel Mortgage, Mortgage, Assignment of Lease and Promise of Mortgage,
assignment of material agreements entered into by Purchaser and/or Parent, and
any and all other security agreements, control agreements or consent agreements
pertaining to the grant to Collateral Agent, on behalf of Secured Parties, of a
first priority, perfected security interest (or the Chilean equivalent) in all
assets of Purchaser, in each case satisfactory in form and substance to Secured
Parties, as the same from time to time may be amended, modified, supplemented or
restated.
"Security Filings" means the filings duly executed by Purchaser
as debtor, in favor of Collateral Agent, for the benefit of Vendors, as secured
party, and caused to be filed prior to the Operative Date in the jurisdictions
required by Secured Parties.
"Senior Debt" means Total Debt minus the sum of Sponsor
Subordinated Indebtedness and Third Party Subordinated Indebtedness.
"Site Lease Agreement" means each Lease Agreement, substantially
in the form of EXHIBIT C, as such may from time to time be required to be
executed and delivered by Purchaser pursuant to this Agreement.
"Sponsor Subordinated Indebtedness" means unsecured Indebtedness,
as to any Person, owing to an Affiliate of such Person, no part of the principal
or interest of which is
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required to be paid (whether directly to the holders thereof or to a sinking
fund) prior to one year after the Final Maturity Date, and the payment of the
principal of and interest on which and any other obligations of such Person in
respect thereof is subordinated to the prior payment in full of the principal of
and interest (including post-petition interest) on the Notes and Pagares and all
other obligations and liabilities of Purchaser or any Guarantor, as the case may
be, to Vendors, Administrative Agent and Collateral Agent hereunder on terms and
conditions first approved in writing by Vendors, which approval shall not be
unreasonably withheld.
"Stock Pledge Agreement" means the Stock Pledge to be executed by
Parent and all shareholders of Purchaser in favor of Collateral Agent, on behalf
of Secured Parties, which shall be acceptable to Secured Parties and adequate to
give to Collateral Agent, on behalf of Secured Parties, a first priority
perfected security interest (or the Chilean equivalent) in all of the Pledged
Shares, as the same from time to time may be amended, modified, supplemented or
restated.
"Subordination Agreement" means that certain Subordination
Agreement to be entered into among Purchaser, Vendors, Leap and Parent, whereby
Leap and Parent subordinate all indebtedness owed by Purchaser or Parent in
their favor to Administrative Agent, Collateral Agent and Vendors hereunder, as
the same may be amended, modified, supplemented or restated from time to time.
"Subsidiary" means, as to any Person, an entity of which
twenty-five percent (25%) of the shares of stock (or similar Capital Stock)
having ordinary voting power (other than stock having such power only by reason
of the happening of a contingency) are at the time owned or controlled, directly
or indirectly, through one or more intermediaries, or both, by such Person.
"Subsidiary Stock Pledge Agreement" means the Subsidiary Stock
Pledge Agreement to be executed by Purchaser in favor of Collateral Agent, on
behalf of Secured Parties, which shall be acceptable to Secured Parties and
adequate to give to Collateral Agent, on behalf of Secured Parties, a first
priority perfected security interest (or the Chilean equivalent) in all of the
issued and outstanding shares of Capital Stock of each Subsidiary of Purchaser,
as the same from time to time may be amended, modified, supplemented or
restated.
"Subsidiary Security Agreements" means the Subsidiary Security
Agreement by and between each Subsidiary of Purchaser, as grantor, and
Collateral Agent, on behalf of Secured Parties, each Chattel Mortgage, Mortgage,
Assignment of Lease and Promise of Mortgage, and any and all other security
agreements, control agreements or consent agreements pertaining to the grant to
Collateral Agent, on behalf of Secured Parties, of a first priority, perfected
security interest (or the Chilean equivalent) in all assets of each Subsidiary
of Purchaser, in each case satisfactory in form and substance to Secured
Parties, as the same from time to time may be amended, modified, supplemented or
restated.
"Syndication" has the meaning set forth in SECTION 2.16 hereof.
"System" shall have the meaning as defined in the Equipment
Agreements.
"Taxes" has the meaning set forth in SECTION 2.14(c) hereof.
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"Telex Chile Debt" means any loans extended to Purchaser pursuant
to that certain Novation and Assumption of Payment Obligation Agreement by and
among Purchaser, Parent and Chilesat S.A. dated as of May 11, 1999.
"Third Party Subordinated Indebtedness" unsecured Indebtedness,
as to any Person; (a) owing to a non-Affiliate of such Person; (b) with a final
maturity date and weighted average life to maturity (computed from the date of
incurrence of such debt) of at least one day longer than the Final Maturity Date
and the weighted average life to maturity of the Notes and Pagares and all other
obligations and liabilities of Purchaser or any Guarantor, as the case may be,
to Vendors, Administrative Agent and Collateral Agent hereunder; (c) where the
Net Proceeds of such issuance are applied in accordance with SECTION 2.10(b);
and (d) where such Indebtedness is subordinated and on terms and conditions
first approved in writing by Requisite Vendors, which approval shall not be
unreasonably withheld.
"Total Capitalization" means, as of any date, determined on a
consolidated basis, the sum of (a) Total Debt, exclusive of Third Party
Subordinated Indebtedness and Sponsor Subordinated Indebtedness for purposes of
this calculation; (b) Third Party Subordinated Indebtedness; (d) Sponsor
Subordinated Indebtedness and (e) Contributed Capital.
"Total Debt" means, as of any date, determined on a consolidated
basis for any Person, the sum (without duplication) of (a) all principal and
Interest Expense owing under this Agreement; (b) any obligation for borrowed
money, including Indebtedness convertible into Capital Stock; (c) any security
issued by such Person for cash consideration which, by its terms or the
happening of any event (excluding a change in control), matures or is
mandatorily redeemable or is otherwise exchangeable into debt at the option of
the holder thereof or is redeemable by the holder thereof prior to one year
after the Final Maturity Date; (d) any obligation evidenced by a bond,
indenture, note or other similar instrument; (e) any obligation to pay the
deferred purchase price of property or services; (f) Capital Leases; (g) any
obligation to purchase securities or other property; (h) any contractual
obligation, contingent or otherwise, including obligations to reimburse any
other Person in respect of amounts paid under a letter of credit or performance
or other bond issued by such other Person; (i) any obligation of others secured
by a Lien on any asset of such Person or any of its Subsidiaries (provided, that
there is no recourse to such Person or any Subsidiary of such Person), but only
to the extent of the fair market value of the assets so subject to such Lien
plus (j) any Indebtedness of others guaranteed by such Person or its
Subsidiaries.
"Total Debt to EBITDA Threshold" means a Total Debt to EBITDA
ratio of less than six (6) as determined as of the end of any fiscal quarter.
"Unmatured Event of Default" means any event or occurrence not
yet constituting an Event of Default but which, with the giving of notice or the
passage of time or both, would constitute an Event of Default.
"U.S. GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Vendor " or "Vendors" means QUALCOMM, any Affiliates of QUALCOMM
party to the Equipment Agreements and any assignee or successor thereof assigned
in accordance with SECTION 9.7 hereof.
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"Vendor Assignee" means Ericsson, and after any assignment of its
rights under the Equipment Agreements, its assignee thereunder.
"Vendor's Commitment" means, with respect to each Vendor, the
amount set forth on SCHEDULE 1.1 as such Vendor's "Total Commitment," as such
amount may be amended from time to time.
"Vendor Equipment" means equipment sold pursuant to the Equipment
Agreements.
"Vendor Office" means, with respect to any Vendor, the office or
offices of such Vendor specified as its "Domestic Lending Office" opposite its
name on the applicable signature page hereto, or such other office or offices of
such Vendor as it may from time to time notify Purchaser and Administrative
Agent.
"Wireless Subscribers" means, as of any date, the aggregate
number of customers then receiving and paying for wireless mobile and/or fixed
telephone services from Purchaser.
1.2 OTHER INTERPRETIVE PROVISIONS.
(a) All terms defined in this Agreement shall have their defined
meanings when used in the other Credit Documents and any certificate or other
document made or delivered pursuant hereto, unless the context clearly indicates
otherwise.
(b) As used in this Agreement and the other Credit Documents and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to any Person not defined in SECTION 1.1 above, and accounting
terms partly defined in SECTION 1.1 above to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) 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. Section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
(d) All terms defined in this Agreement in the singular form
shall have comparable meanings when used in the plural form and vice versa.
(e) Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, and all Financial Statements required to be
delivered hereunder shall be prepared in accordance with GAAP. If any changes in
GAAP from those used in the preparation of the Financial Statements referred to
in SECTION 4.1(e) hereof ("GAAP Changes") hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or the Republic of Chile or international
equivalent thereof (or successors thereto or agencies with similar functions)
result in a change in the method of calculation of any of the financial
covenants, standards or other terms or conditions found in this Agreement, the
parties hereto agree to enter into negotiations to amend such provisions so as
to reflect equitably such GAAP Changes with the desired result that the criteria
for evaluating the financial condition
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and performance of any Guarantor or Purchaser and its Subsidiaries shall be the
same after such GAAP Changes as if such GAAP Changes had not been made.
SECTION 2. DEFERRED PAYMENT BALANCE AND CAPITALIZED INTEREST FACILITY.
2.1 DEFERRED PAYMENT BALANCE. Purchaser acknowledges and agrees that as
of the date hereof the Deferred Payment Balance is the amount of principal,
accrued and capitalized interest and expenses Purchaser owes to Vendor in
connection with forbearances made by Vendor to Purchaser under the Deferred
Payment Agreement. Subject to the terms and conditions, and subject to the
limitations, herein set forth, Vendors agree, in accordance with this SECTION 2,
to make a Forbearance in the full amount of the Deferred Payment Balance
("Deferred Payment Balance Forbearance") as of the date hereof, which amount
shall be repaid in accordance with the terms and conditions set forth herein.
2.2 CAPITALIZED INTEREST FACILITY.
(a) CAPITALIZED INTEREST FORBEARANCE COMMITMENTS. Subject to the
terms and conditions, and subject to the limitations, herein set forth, each
Capitalized Interest Vendor, severally and for itself alone, agrees to make
Capitalized Interest Forbearances to Purchaser in amounts equal to such Vendor's
Capitalized Interest Commitment Percentage from time to time. At no time shall
the aggregate amount of outstanding Capitalized Interest Forbearances exceed the
Capitalized Interest Commitment.
(b) TYPES OF CAPITALIZED INTEREST FORBEARANCES. Capitalized
Interest Forbearances shall be available to Purchaser for (i) interest payments
to Vendors on the Deferred Payment Balance Forbearance, (ii) interest payments
on earlier Capitalized Interest Forbearances and (iii) paying the Commitment Fee
set forth in SECTION 2.8(b).
(c) CAPITALIZED INTEREST FORBEARANCE AVAILABILITY. Capitalized
Interest Forbearances shall be available from the Operative Date through the
Final Availability Date, in an aggregate amount not exceeding the Aggregate
Capitalized Interest Commitment; provided, however, that no Vendor shall be
required to make any Capitalized Interest Forbearance when there exists an Event
of Default or an Unmatured Event of Default. Capitalized Interest Forbearances
drawn and repaid during the Availability Period may not be re-drawn. Any part of
the Capitalized Interest Facility undrawn at the end of the Availability Period
shall be canceled.
2.3 TYPES OF FORBEARANCES. Each Forbearance shall, in accordance with
the terms of this Agreement, be in the form of either a Base Rate Forbearance or
a LIBOR Forbearance; provided, however, that, notwithstanding anything to the
contrary herein, the Deferred Payment Balance Forbearance shall bear interest at
the 30 days LIBOR Rate until such time as another rate is requested pursuant to
a Notice of Conversion/Continuation given in accordance with SECTION 2.6(c). At
no time may Purchaser maintain LIBOR Forbearances in more than six (6) separate
Interest Periods.
2.4 CONVERSION AND CONTINUATION ELECTIONS. Purchaser may, upon
irrevocable written notice to Administrative Agent:
(a) elect to convert on any Business Day, Base Rate Forbearances
in an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000) (or
any integral
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multiple of One Hundred Thousand Dollars ($100,000) in excess thereof) into
LIBOR Forbearances; or
(b) elect to convert on any Interest Payment Date any LIBOR
Forbearances maturing on such Interest Payment Date (or any part thereof) into
Base Rate Forbearances; or
(c) elect to continue on any Interest Payment Date any LIBOR
Forbearances maturing on such Interest Payment Date (or any part thereof in an
amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000) or any
integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof)
as LIBOR Forbearances;
provided, that if the aggregate amount of LIBOR Forbearances shall have been
reduced by payment, prepayment, or conversion of any part thereof, to be less
than Two Million Five Hundred Thousand Dollars ($2,500,000), such LIBOR
Forbearances shall automatically convert into Base Rate Forbearances, and on and
after such date the right of Purchaser to continue such Forbearances as, and
convert such Forbearances into, LIBOR Forbearances shall terminate.
(d) unless all Vendors shall otherwise consent, during the
existence of an Unmatured Event of Default or Event of Default, Purchaser may
not elect to have a Forbearance converted to, or made or continued as, a LIBOR
Forbearance.
2.5 DURATION OF INTEREST PERIODS.
(a) Subject to the provisions of the definition of Interest
Period, the duration of each Interest Period applicable to a LIBOR Forbearance
shall be as specified in the applicable Forbearance Request or Notice of
Conversion/Continuation, as applicable.
(b) If Administrative Agent does not receive a notice of election
of duration of an Interest Period with respect to a borrowing of LIBOR
Forbearances pursuant to SUBSECTION (a) above within the applicable time limits
specified herein, Purchaser shall be deemed to have elected to make or convert
such Forbearances in whole into Base Rate Forbearances on the last day of the
then current Interest Period with respect thereto. Notwithstanding anything to
the contrary herein, any and all LIBOR Forbearances shall be converted in whole
into Base Rate Forbearances on the last day of the then existing Interest Period
with respect thereto if Administrative Agent shall have received notice from
Purchaser or a Vendor that a default, Unmatured Event of Default or an Event of
Default exists.
(c) Notwithstanding the foregoing, Purchaser may not select an
Interest Period that would end, but for the provisions of the definition of
Interest Period, after the applicable Final Maturity Date.
2.6 NOTICE AND MANNER OF MAKING ADDITIONAL FORBEARANCES.
(a) CAPITALIZED INTEREST FORBEARANCE.
(i) Not fewer than three (3) Business Days prior to the date
Purchaser desires to obtain a Capitalized Interest Forbearance, Purchaser shall
deliver by electronic facsimile transmission to each of Administrative Agent and
QUALCOMM, written notice specifying (A) the amount of such Capitalized Interest
Forbearance, (b) the effective date for the
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borrowing of such Capitalized Interest Forbearance, which notice shall be in the
form of EXHIBIT D to this Agreement (a "Capitalized Interest Forbearance
Request").
(ii) If Purchaser has not delivered a Capitalized Interest
Forbearance Request on or before the third Business Day prior to the next
succeeding Interest Payment Date, a Capitalized Interest Forbearance Request for
a Base Rate Forbearance shall be deemed to have been made on such date (a
"Deemed Capitalized Interest Forbearance Request") in the amount of the interest
payment to become due and payable on such Interest Payment Date.
(iii) Administrative Agent shall promptly notify each
Capitalized Interest Vendor as to the content of each Capitalized Interest
Forbearance Request or Deemed Capitalized Interest Forbearance Request.
(b) CAPITALIZED INTEREST FORBEARANCE REQUEST IRREVOCABLE. Once
given, a Capitalized Interest Forbearance Request shall be irrevocable and
Purchaser shall be bound to draw a Capitalized Interest Forbearance in
accordance therewith, except as otherwise provided in this Agreement. If for any
reason a Capitalized Interest Forbearance is not made in accordance with the
Capitalized Interest Forbearance Request, Purchaser shall on demand (which may
be made through the Administrative Agent) pay to Vendor such amount (if any) as
Vendor may certify, in a certificate setting out in reasonable detail the method
and basis of computation of such amount, to be necessary to compensate it for
any loss or expense incurred in liquidating or redeploying funds arranged for
the purpose of a proposed Capitalized Interest Forbearance or in terminating any
such arrangement in respect of this Agreement or otherwise as a direct
consequence of a Capitalized Interest Forbearance not having been made in
accordance with the Capitalized Interest Forbearance Request but, in each case,
only up to and including the last day of the relevant interest period determined
in accordance with this SECTION 2.6.
(c) CONVERSIONS/CONTINUATIONS OF FORBEARANCES. On each date on
which Purchaser desires, with respect to Forbearances to (A) continue any such
Forbearances hereunder or (B) convert any such outstanding Forbearances into
Forbearances of another type provided for in this Agreement, Purchaser shall
notify Administrative Agent (which notice shall be irrevocable) in writing by
electronic facsimile transmission received no later than 1:00 p.m. New York time
on the date one (1) Business Day before the day on which such requested
Forbearances are to be continued as or converted into Base Rate Forbearances,
and received no later than 1:00 p.m. New York time on the date three (3)
Business Days before the date on which such requested Forbearances are to be
continued as or converted into LIBOR Forbearances. Such notice shall specify (i)
the effective date and amount of such Forbearances or portion thereof to be
continued or converted, subject to the limitations set forth in SECTION 2.3
hereof, (ii) the interest rate option to be applicable thereto, and (iii) the
duration of the applicable Interest Period, if any (subject to the provisions of
the definition of Interest Period and SECTION 2.5) hereof. Each such
notification (a "Notice of Conversion/Continuation") shall be in the form of
EXHIBIT E to this Agreement.
(d) NOTIFICATION OF VENDORS. Administrative Agent shall promptly
notify each Vendor as to the content of each Capitalized Interest Forbearance
Request, Deemed Capitalized Interest Forbearance Request and Notice of
Conversion/Continuation.
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2.7 SCHEDULED PAYMENT OF PRINCIPAL OF THE FORBEARANCES.
(a) On each date set forth on SCHEDULE 2.7(a), Purchaser shall
pay that percentage of the principal amount of the Deferred Payment Balance
Forbearance outstanding on September 30, 2001 which is set forth opposite each
such date.
(b) On each date set forth on SCHEDULE 2.7(a), Purchaser shall
pay that percentage of the principal amount of the Capitalized Interest
Forbearances outstanding on September 30, 2001 which is set forth opposite each
such date.
(c) Any remaining unpaid Forbearances, accrued and unpaid
interest thereon and other amounts owing to Administrative Agent and Vendors
pursuant to this Agreement shall be due and payable in full at the Final
Maturity Date.
2.8 INTEREST RATES; PAYMENT OF INTEREST; COMMITMENT FEE; CALCULATION OF
INTEREST AND FEES.
(a) FORBEARANCES.
(i) BASE RATE FORBEARANCES. Each Base Rate Forbearance shall
bear interest on the outstanding principal amount thereof at a rate per annum
equal to the Base Rate plus the Applicable Margin. From the Effective Date such
interest shall be payable on each Interest Payment Date and at Maturity.
(ii) LIBOR FORBEARANCES. Each LIBOR Forbearance shall bear
interest on the outstanding principal amount thereof, for each Interest Period
applicable thereto, at a rate per annum equal to the LIBOR Rate plus the
Applicable Margin. From the Effective Date such interest shall be payable on
each Interest Payment Date and at Maturity.
(iii) DEFAULT RATE. Upon the occurrence of an Event of
Default and so long as such Event of Default shall continue, including after
acceleration (whether before or after entry of judgment), Purchaser shall pay
interest on the principal amount of each Forbearance then outstanding at the
Default Rate.
(b) FEES. Commencing on the Effective Date and through the Final
Availability Date, Purchaser shall pay to Administrative Agent, for the ratable
benefit of Vendors, a commitment fee equal to three-eighths of one percent
(0.375%) per annum on the average daily amount of the unutilized portion of the
Aggregate Capitalized Interest Commitment ("Commitment Fee"). Such Commitment
Fee shall be payable on the last Business Day of that month which is six (6)
months following the Effective Date and continuing on the last Business Day of
each six (6) month period thereafter through the Final Availability Date. So
long as there exists no Unmatured Event of Default or Event of Default, the
Commitment Fee may be financed under the Capitalized Interest Facility.
(c) CALCULATION OF INTEREST AND FEES. Interest on LIBOR
Forbearances and the Commitment Fee shall be computed on the basis of a 360-day
year and on the basis of a 365/366-day year for all Base Rate Forbearances and
fees for the actual number of days elapsed. In computing interest on any
Forbearance, the date of the making of such Forbearance shall be included and
the date of payment shall be excluded; provided, however, that if any
Forbearance
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is repaid on the same day on which it is made, such day shall be included in
computing interest on such Forbearance. Each change in the interest rate of the
Base Rate Forbearances based on changes in the Base Rate shall be effective on
the effective date of such change and to the extent of such change.
Administrative Agent shall give Purchaser prompt written notice of any such
change in the Base Rate; provided, however, that any failure by Administrative
Agent to provide Purchaser with notice hereunder shall not affect Vendors' right
to make changes in the interest rate of the Base Rate Forbearances based on
changes in the Base Rate.
2.9 PAYMENT PROCEDURES.
(a) PAYMENT ON BUSINESS DAYS. Whenever any payment due under this
Agreement shall fall due on a day other than a Business Day, the due date of
such payment shall be extended to the next succeeding Business Day (subject,
however, to CLAUSE (a) of the definition of Interest Period) and such payment
shall be made on such Business Day, and such extension of time shall be included
in the computation of interest.
(b) PLACE OF PAYMENT. Purchaser shall make all payments and
prepayments under this Agreement, the Notes and Pagares, the Commitment Fee, the
prepayment fees referred to in SECTION 2.10(A) hereof, and the principal of and
interest on the Forbearances to the Administrative Agent's Payment Office, in
lawful money of the United States and in immediately available funds no later
than 1:00 p.m., New York time, on the date of payment (which must be a Business
Day). All payments received after 1:00 p.m., New York time, on any Business Day,
shall be deemed to have been received on the next succeeding Business Day. After
the occurrence and during the continuance of an Event of Default, Purchaser
authorizes Vendors to charge from time to time against any or all of Purchaser's
deposits maintained with Vendors any amount payable by Purchaser hereunder not
paid when due. Each Vendor shall promptly notify Administrative Agent of each
such charge and pay over the same to Administrative Agent for application in
accordance with this Agreement.
(c) DISTRIBUTION OF PAYMENTS TO VENDORS BY ADMINISTRATIVE AGENT.
Upon receipt of any payment or prepayment of the Commitment Fee, the prepayment
fees referred to in SECTION 2.10(A) hereof, or the principal of and interest on
the Forbearances by or on behalf of Purchaser, Administrative Agent shall
promptly pay over to each Vendor at its Vendor Office its pro rata share of such
amount in like funds of the sum received.
(d) LATE PAYMENTS. If any amount required to be paid by Purchaser
under this Agreement or the other Credit Documents (including without
limitation, payments and prepayments of the principal amount of Forbearances,
accrued interest and fees) is not paid when due, Purchaser shall pay interest on
the unpaid amount until such amount is paid in full at a per annum rate equal to
the Default Rate, such rate to change from time to time as the Base Rate shall
change.
(e) APPLICATION OF PAYMENTS. Except as specifically set forth
herein, all payments under this Agreement shall be credited first to all fees
and other expenses then due to Administrative Agent and Collateral Agent, next
to all fees and other expenses then due to Vendors, next to all interest then
due, and lastly to all principal then due.
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(f) DESIGNATION OF PAYMENT. When making a payment under this
Agreement, Purchaser shall clearly specify which Forbearance, fee or expense
such payment relates to and the nature of the payment.
(g) ADMINISTRATIVE AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE
BY PURCHASER. Unless Administrative Agent shall have been notified by Purchaser
prior to the date on which any payment to be made by Purchaser hereunder is due
that Purchaser does not intend to remit such payment, Administrative Agent may
(in its sole and absolute discretion) assume that Purchaser has remitted such
payment when so due and Administrative Agent may (in its sole and absolute
discretion) and in reliance upon such assumption, make available to each Vendor
on such payment date an amount equal to such Vendor's Capitalized Interest
Commitment Percentage of such assumed payment. If Purchaser has not in fact
remitted such payment to Administrative Agent, each Vendor shall forthwith on
demand repay to Administrative Agent the amount of such assumed payment made
available to such Vendor, together with interest thereon in respect of each date
from and including the date such amount was made available by Administrative
Agent to such Vendor to the date such amount is repaid to Administrative Agent,
at the Federal Funds Rate.
2.10 PREPAYMENTS OF THE FORBEARANCES; CERTAIN REQUIRED PAYMENTS;
AGGREGATE COMMITMENT REDUCTION.
(a) VOLUNTARY PREPAYMENTS. Subject to the terms of SECTION
2.10(c), Purchaser shall have the right to prepay Forbearances in whole or in
part, without premium or penalty, from time to time on the following terms and
conditions: (i) Purchaser shall give Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay
Forbearances, the amount of such prepayment and the specific Forbearance(s) such
prepayment shall apply, which notice shall be given by Purchaser no later than
1:00 p.m. (New York time) three (3) days prior to the date of such prepayment,
and which notice shall promptly be transmitted by Administrative Agent to each
of the Vendors; (ii) each partial prepayment of any Forbearance shall be in an
aggregate principal amount of at least One Million Dollars ($1,000,000) and
shall be in integral multiples of One Million Dollars ($1,000,000) in excess
thereof; (iii) each prepayment of the Forbearances shall be applied pro rata to
the scheduled principal repayments of the outstanding Forbearances at the time
of prepayment of the Forbearances among all Vendors; and (iv) any interest
accrued on the amounts so prepaid to the date of such payment shall be paid at
the time of any such payment. Any notice of prepayment given by Purchaser under
any provision of this Agreement shall be irrevocable and Purchaser shall be
bound to make a prepayment in accordance therewith. Purchaser may not prepay the
Forbearances or any part thereof except in accordance with the express terms of
this Agreement. Amounts prepaid may not be reborrowed under this Agreement.
(b) MANDATORY PREPAYMENTS.
(i) PROCEEDS OF ASSET SALES. Notwithstanding the prohibition
of Asset Sales in SECTION 5.2(d) below, all Net Proceeds received by Purchaser
or any of its Subsidiaries at any time related to Asset Sales shall be paid by
Purchaser or such Subsidiaries to Administrative Agent no later than five (5)
days after receipt by Purchaser or such Subsidiary of such Net Proceeds to be
applied against the principal amount of the Forbearances then outstanding in an
amount equal to one hundred percent (100.0%) of such Net Proceeds;
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provided, however, that if required by the terms of the Eligible Secured Debt,
then one hundred percent (100.0%) of such Net Proceeds shall be applied pro rata
to such Eligible Secured Debt and the principal amount of the Forbearances then
outstanding. Concurrent with Purchaser's or such Subsidiary's receipt of such
Net Proceeds, the Capitalized Interest Commitment shall be reduced to reflect
the reduction of anticipated interest payments implied by such prepayment.
(ii) ISSUANCE OF DEBT OR EQUITY INSTRUMENTS. Net Proceeds
received by Parent, Purchaser or any of its Subsidiaries in excess of Two
Hundred Forty Five Million Dollars ($245,000,000) (reduced by the amount of
Assets Sales as determined without regard to the application of clause (b) of
the definition of Asset Sale) which are related to the public or private
issuance or sale of any debt or Capital Stock, shall be paid by Purchaser or
such Subsidiaries to Administrative Agent no later than five (5) days after
receipt by Purchaser or such Subsidiary of such Net Proceeds to be applied
against the principal amount of the Forbearances then outstanding as follows:
(A) if by issuance and sale of equity through a public offering, in an amount
equal to fifty percent (50%) of such Net Proceeds and (B) and in all other
cases, one hundred percent (100%) of the Net Proceeds aggregating in excess of
Fifty Million Dollars ($50,000,000); provided, however, that if required by the
terms of the Eligible Secured Debt, then such Net Proceeds shall be applied pro
rata to such Eligible Secured Debt and the principal amount of the Forbearances
then outstanding. Concurrent with Purchaser's or such Subsidiary's receipt of
such Net Proceeds, the Capitalized Interest Commitment shall be reduced to
reflect the reduction of anticipated interest payments implied by such
prepayment.
(iii) EXCESS CASH FLOW. Fifty percent (50%) of Purchaser's
Excess Cash Flow at any time shall be promptly paid by Purchaser to
Administrative Agent to be applied against the principal amount of the
Forbearances then outstanding; provided, however, that if required by the terms
of the Eligible Secured Debt, then such Excess Cash Flow amount shall be applied
pro rata to such Eligible Secured Debt and the principal amount of the
Forbearances then outstanding. As of the end of each fiscal year, the
Capitalized Interest Commitment shall be reduced to reflect the reduction of
anticipated interest payments implied by such prepayment of Excess Cash Flow.
(iv) PREPAYMENT OF OTHER INDEBTEDNESS. Notwithstanding the
limitations on prepayments in SECTION 5.2(g) below, in the event Purchaser or
any of its Subsidiaries prepays any Indebtedness other than the Forbearances and
mandatory payments made pursuant to the Telex Chile Debt, then Purchaser shall
immediately prepay a portion of the Forbearances in proportion to the
outstanding balances of the other Indebtedness paid.
(v) FORBEARANCES IN EXCESS OF COMMITMENT. Purchaser shall
immediately prepay a portion of the Capitalized Interest Forbearances to the
extent the total outstanding balance of all Capitalized Interest Forbearances
exceeds the Aggregate Capitalized Interest Commitment.
(c) BREAKAGE CHARGE. In the event of (i) the payment of any
principal of any LIBOR Forbearance other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (ii)
the conversion of any LIBOR Forbearance other than on the last day of the
Interest Period applicable thereto, or (iii) the failure to borrow, convert,
continue or prepay any Forbearance on the date specified in any notice delivered
pursuant hereto, then, in any such event, Purchaser shall compensate each Vendor
for the loss, cost and expense
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attributable to such event. In the case of a LIBOR Forbearance, such loss, cost
or expense to any Vendor shall be deemed to include an amount determined by such
Vendor to be the excess, if any, of (A) the amount of interest which would have
accrued on the principal amount of such LIBOR Forbearance had such event not
occurred, at the LIBOR Rate that would have been applicable to such LIBOR
Forbearance, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such LIBOR Forbearance), over (B) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Vendor
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Vendor setting forth any amount or amounts that
such Vendor is entitled to receive pursuant to this Section shall be delivered
to Purchaser and shall be conclusive absent manifest error. Purchaser shall pay
such Vendor the amount shown as due on any such certificate within ten (10) days
after receipt thereof.
(d) APPLICATION OF PREPAYMENTS. Mandatory prepayments of
Forbearances pursuant to this SECTION 2.10, other than mandatory prepayments
pursuant to SECTION 2.10(b)(iii) AND (iv), shall be applied in the inverse order
of scheduled principal repayments of the outstanding Forbearances at the time of
prepayment of the Forbearances. Voluntary prepayments and mandatory prepayments
of Forbearances pursuant to SECTION 2.10(b)(iii) or (iv) shall be applied pro
rata to the scheduled principal repayments of the outstanding Forbearances at
the time of prepayment of the Forbearances.
2.11 SURVIVABILITY. All of Purchaser's obligations under this Agreement
shall survive repayment of the Notes and Pagares until all obligations of
Purchaser to make payments to Administrative Agent and Vendors under all Credit
Documents are fully satisfied and Vendors' obligations to make the Forbearances
hereunder expire. Notwithstanding the foregoing, Purchaser's obligations set
forth in SECTIONS 9.4 and 9.15 of this Agreement shall survive Purchaser's
payment of all obligations under the Credit Documents and the expiration of
Vendors' obligations to make Forbearances hereunder.
2.12 EVIDENCE OF DEBT.
(a) Each Vendor shall maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of Purchaser to such
Vendor resulting from each Forbearance owing to such Vendor from time to time,
including the amounts of principal and interest payable and paid to such Vendor
from time to time hereunder in respect of such Forbearances.
(b) Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Forbearance made hereunder and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from Purchaser to each Vendor hereunder and
(iii) the amount of any sum received by Administrative Agent hereunder for the
account of Vendors and each Vendor's share thereof.
(c) The entries made in the accounts maintained pursuant to
paragraph (b) or (d) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Vendor or Administrative Agent to maintain
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such accounts or any error therein shall not in any manner affect the obligation
of Purchaser to repay the Forbearances in accordance with the terms of this
Agreement.
(d) No later than the Funding Date for each Forbearance,
Purchaser shall execute before a Chilean Notary Public and deliver to
Administrative Agent to hold on behalf of the Vendor making such Forbearance a
promissory note of Purchaser payable to such Vendor substantially in the form of
EXHIBIT A, attached hereto or in form and substance reasonably satisfactory to
Purchaser and such Vendor (each a "Pagare"), with appropriate insertions as to
the issue date, principal repayment dates, principal amount, Applicable Margin
and due date (which shall not be later than Maturity), and payable to the order
of such Vendor in a principal amount equal to the Forbearance. Such Pagare shall
be jointly and severally guaranteed by the Guarantors and shall be dated the
date such Forbearance is made. Notwithstanding anything to the contrary
contained herein, upon the reasonable request of Administrative Agent at any
time, Purchaser shall promptly execute and deliver to Administrative Agent to
hold on behalf of such Vendor a replacement Pagare or an endorsement with
respect to any Pagare theretofore issued in order to conform the terms thereof
to the terms of this Agreement, which replacement Pagare or endorsement shall be
jointly and severally guaranteed by the Guarantors and shall be dated the date
on which the replacement or endorsement is to be effective. Concurrently
therewith, Administrative Agent or Vendor, as the case may be, shall return the
replaced Pagare to Purchaser. Purchaser shall bear all costs and taxes arising
from such replacement or endorsement.
(e) Upon the written request of any Vendor, Administrative Agent
shall forward to such Vendor (i) all Pagares payable to such Vendor received by
Administrative Agent on or prior to such date (the "Request Date") within ten
(10) Business Days of receipt by Administrative Agent of such request, and (ii)
all Pagares payable to such Vendor received by Administrative Agent after the
Request Date within ten (10) Business Days of the receipt by Administrative
Agent thereof; provided that any Vendor requesting such delivery of its Pagares
shall reimburse Administrative Agent for all costs and expenses incurred by
Administrative Agent in the distribution thereof.
(f) In the case of any conflict between the terms of this
Agreement and any Pagare, the terms of this Agreement shall control. Without
limiting the generality of the foregoing, all Forbearances made hereunder shall
accrue interest from the date such Forbearance is made and, to the extent not
evidenced by a Pagare, shall otherwise be treated as a Forbearance hereunder
irrespective of Purchaser's execution or nonexecution of any Pagare.
(g) Upon partial repayment of any principal amount evidenced by
any Pagares, Purchaser may execute and deliver to Administrative Agent to hold
on behalf of each Vendor a replacement Pagare taking into account such
prepayment, which replacement Pagare shall be jointly and severally guaranteed
by the Guarantors and shall be dated the date on which the replacement is to be
effective. Concurrently therewith, Administrative Agent or Vendor, as the case
may be, shall return the replaced Pagare to Purchaser. Purchaser shall bear all
costs and taxes arising from such replacement.
(h) Upon request after the payment in full of all Obligations,
Administrative Agent and Vendors, as applicable, shall return all Pagares and
Notes received by them, stamped as paid in full.
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(i) In addition to the Pagares, Purchaser agrees to execute and
deliver to each Vendor, promptly upon request by such Vendor, a promissory note
evidencing Purchaser's Indebtedness to such Vendor under this Agreement in the
amount of such Vendor's Commitment ("Note"), which promissory note shall
acknowledge that the indebtedness outstanding thereunder may also be evidenced
by one or more Pagares and shall be satisfactory in form and substance to such
Vendor and Administrative Agent and shall be consistent with the terms of this
Agreement.
(j) If any Vendor exercises any right in any court in the
Republic of Chile under any Pagare or Note delivered pursuant to this Agreement,
it shall not be required for such purpose to evidence to Purchaser or any other
Person that such Pagare or Note represents Obligations of the Purchaser under
this Agreement nor that any condition herein has been fulfilled. Notwithstanding
discharge in full of any Pagare or Note, if the amount (including, without
limitation, default interest) paid or payable to any of the Vendors under such
Pagare or Note (whether arising from the enforcement thereof in the Republic of
Chile or otherwise) is less than the amount due and payable to such Vendor in
accordance with this Agreement with respect to the Forbearance, or portion
thereof, evidenced by such Pagare or Note, Purchaser agrees to pay to such
Vendor upon demand such difference.
2.13 NET PAYMENTS. Purchaser's obligation to make payments and perform
all other obligations hereunder, and the rights of Administrative Agent,
Collateral Agent and Vendors in and to such payments and performance, shall be
absolute and unconditional and shall not be subject to any abatement, reduction,
set-off, defense, counterclaim or recoupment for any reason whatsoever,
including, without limitation, abatements or reductions due to any present or
future claims of Purchaser against Administrative Agent, Collateral Agent or any
Vendor under this Agreement, the Equipment Agreements or otherwise, against any
vendor of equipment or services used or planned to be used, or against any other
Person for whatever reason. Except as otherwise expressly provided herein, this
Agreement shall not terminate, nor shall the obligations of Purchaser be
affected, by reason of (a) any defect in or damage to, or any loss or
destruction of, any of the equipment or services provided pursuant to the
Equipment Agreements or otherwise from any cause whatsoever; (b) any bankruptcy,
insolvency, reorganization or other proceeding relating to, or any action taken
by any trustee or receiver of, Administrative Agent, Collateral Agent, any
Vendor or any other Person; or (c) for any other cause, whether similar or
dissimilar to the foregoing, any present or future law or regulation to the
contrary notwithstanding, whether or not such cause shall give rise to a claim
by Purchaser against any Vendor or any other Person under the Equipment
Agreements or otherwise, it being the express intention of the parties hereto
that all amounts payable by Purchaser hereunder shall be, and continue to be,
payable in all events unless the obligation to pay shall be terminated pursuant
to the express provisions of this Agreement. All payments made by Purchaser
hereunder as required hereby shall be final, and Purchaser shall not seek to
recover any such payment or any part thereof for any reason whatsoever. Nothing
in this Agreement shall, however, release any claim Purchaser may have against
Administrative Agent, Collateral Agent or any Vendor, whether in connection with
the Equipment Agreements or otherwise. If for any reason whatsoever this
Agreement shall be terminated in whole or in part by operation of law or
otherwise, Purchaser shall nonetheless, to the extent permitted by applicable
law, pay to Administrative Agent, on behalf of Vendors, an amount equal to each
payment payable hereunder at the time and in the manner that such payment would
have become due and payable under the terms of this Agreement if it had not been
terminated in whole or in part.
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2.14 CHANGED CIRCUMSTANCES; TAXES.
(a) In the event that:
(i) on any date on which the LIBOR Rate would otherwise be
set, Administrative Agent shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair means do not
exist for ascertaining the LIBOR Rate, or
(ii) at any time Administrative Agent or any Vendor shall
have determined in good faith (which determination shall be final and
conclusive) that:
(A) the making or continuation of any Forbearance to a
LIBOR Forbearance has been made impracticable or unlawful by (1) the occurrence
of a contingency that materially and adversely affects the interbank eurodollar
market or (2) compliance by any Vendor in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change thereof
by any Governmental Authority charged with the interpretation or administration
thereof or with any request or directive of any such Governmental Authority
(whether or not having the force of law); or
(B) the LIBOR Rate shall no longer represent the
effective cost to any Vendor for U.S. dollar deposits in the interbank market
for deposits in which banks of the United States of America regularly
participate (including, without limitation, due to the imposition of a Reserve
Percentage);
then, and in any such event, such Vendor shall forthwith so notify
Administrative Agent and Purchaser thereof. From the date of delivery of such
notice until such Vendor reasonably determines that the circumstances giving
rise to such notice no longer apply, the obligation of Vendors to allow
selection by Purchaser of the type of Forbearance affected by the contingencies
described in this SECTION 2.14 (herein called "Affected Forbearances") shall be
suspended. If at the time Administrative Agent or a Vendor so notifies
Purchaser, Purchaser has previously given Administrative Agent a Notice of
Conversion/Continuation with respect to one or more Affected Forbearances but
such Forbearances have not yet gone into effect, such notification shall be
deemed to be void and Purchaser may request Forbearances of a non-affected type
by giving a substitute Notice of Conversion/Continuation pursuant to this
Agreement.
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) Purchaser shall, with respect to the
outstanding Affected Forbearances (other than Affected Forbearances described in
SECTION 2.14(a)(ii)(A)(1) above), either prepay or convert the same to Base Rate
Forbearances, together with interest thereon and any amounts required to be paid
pursuant to SECTION 2.10(c) above, and may request a Forbearance of another type
in accordance with this Agreement, by giving an a Notice of
Conversion/Continuation pursuant to this Agreement; provided that any such
prepayment shall not be deemed to constitute a prepayment pursuant to SECTION
2.10 above.
(b) In case any law, regulation, treaty or official directive or
the interpretation or application thereof by any court or by any Governmental
Authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other Governmental Authority
(whether or not having the force of law):
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(i) subjects any Vendor to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Purchaser or
otherwise with respect to the transactions contemplated hereby (except for such
taxes as are imposed on or measured by each Vendor's net income by the
jurisdiction under the laws of which such Vendor is organized or maintains a
place of business or any political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, any Vendor (including,
without limitation, any imposition of a Reserve Percentage), or
(iii) imposes upon any Vendor any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to such Vendor,
reduce the income receivable by such Vendor or impose any expense upon such
Vendor with respect to any LIBOR Forbearances, such Vendor shall promptly notify
Purchaser thereof. Purchaser agrees to pay to such Vendor the amount of such
increase in cost, reduction in income or additional expense as and when such
cost, reduction or expense is incurred or determined, upon presentation by such
Vendor of a statement in the amount and setting forth such Vendor's calculation
thereof, which statement shall be deemed true and correct absent manifest error.
(c) Any and all payments by Purchaser to each Vendor and
Administrative Agent under this Agreement and any Credit Document shall be made
free and clear of, and without deduction or withholding for, any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Vendor, such
taxes (including income taxes, taxes on profits and franchise taxes) as are
imposed on or measured by each Vendor's net income or profits by the
jurisdiction under the laws of which such Vendor is organized or maintains a
place of business or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes").
(i) In addition, Purchaser shall pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, any Pagares or any other Credit Documents (hereinafter referred to as
"Other Taxes").
(ii) Purchaser shall indemnify and hold harmless each Vendor
and Administrative Agent for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this SECTION 2.14) paid by such Vendor and any liability (including penalties,
interest, additions to tax and expenses, except for, in the event such Vendor or
Administrative Agent fails to deliver notice of such assertion of Taxes or Other
Taxes to Purchaser within one hundred eighty (180) days after it has received
notice of such assertion or imposition of Taxes or Other Taxes, any such
penalties, interest or expenses which would not have arisen but for the failure
of such Vendor or Administrative Agent to so notify Purchaser of such assertion
or imposition of Taxes or Other Taxes) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
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legally asserted. Payment under this indemnification shall be made within thirty
(30) days from the date such Vendor or Administrative Agent makes written demand
therefor.
(iii) If Purchaser shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Vendor or Administrative Agent, then:
(A) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 2.14) such Vendor or Administrative
Agent receives an amount equal to the sum it would have received had no such
deductions been made;
(B) Purchaser shall make such deductions; and
(C) Purchaser shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(iv) Within thirty (30) days after the date of payment by
Purchaser of Taxes or Other Taxes, Purchaser shall furnish to Administrative
Agent and each Vendor the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to Administrative
Agent.
(v) If Purchaser fails to pay any Taxes or Other Taxes when
due to the appropriate taxing authority or fails to furnish to each Vendor the
required receipts or other required documentary evidence, Purchaser shall
indemnify Vendors for any incremental Taxes or Other Taxes, interest or
penalties that may become payable by any of Vendors or Administrative Agent as a
result of any such failure.
(vi) If Purchaser is required to pay additional amounts to
any Vendor pursuant to SECTION 2.14(c) hereof, then such Vendor shall use its
reasonable best efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Vendor Office so as to eliminate any such
additional payment by such Vendor which may thereafter accrue if such change in
the judgment of such Vendor is not otherwise materially disadvantageous to such
Vendor.
2.15 CAPITAL REQUIREMENTS. If after the date hereof any Vendor
determines in good faith that (a) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for Vendors, banks or
bank holding companies, or any change in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof;
or (b) compliance by such Vendor or any of its Affiliates with any guideline,
request or directive of any such entity implemented after the date hereof
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on such Vendor's or such Affiliate's capital as a
consequence of such Vendor's commitment to make Forbearances hereunder to a
level below that which such Vendor or such Affiliate could have achieved but for
such adoption, change or compliance (taking into consideration such Vendor's or
such Affiliates' then existing policies with respect to capital adequacy and
assuming the full utilization of such entity's capital) by any amount deemed by
such Vendor to be material, then such Vendor shall notify Purchaser thereof.
Purchaser agrees to pay to such Vendor the amount of such reduction in the
return on capital as and when such reduction is determined, upon presentation by
such
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Vendor of a statement in the amount and setting forth such Vendor's calculation
thereof, which statement shall be deemed true and correct absent manifest error.
In determining such amount, such Vendor may use any reasonable averaging and
attribution methods.
2.16 SYNDICATION. QUALCOMM, Administrative Agent, Collateral Agent and
each Vendor shall have the right from time to time to arrange, or to attempt to
arrange, a syndication of the Forbearances (a "Syndication"); provided that no
more than three (3) full Syndications shall occur per year. Purchaser shall
cooperate with QUALCOMM, Administrative Agent, Collateral Agent and each Vendor
to facilitate any Syndication, and Purchaser agrees, at its expense, to execute
and deliver such documents (including amendments to this Agreement reasonably
requested by QUALCOMM, Administrative Agent or Collateral Agent relating to such
Syndication and which do not impose on Purchaser additional financial
obligations, negative covenants, affirmative covenants, security or credit
support or events of default), furnish such information, attend such meetings,
assist QUALCOMM, Administrative Agent, Collateral Agent and Vendors, and take
any and all other actions as may be reasonably requested by QUALCOMM,
Administrative Agent, Collateral Agent or any Vendor in connection with any
Syndication. QUALCOMM's rights under this SECTION 2.16 shall terminate at such
time as all of the interests of QUALCOMM in any capacity hereunder have been
assigned without recourse.
2.17 REPLACEMENT OF VENDORS. Upon the occurrence of any event giving
rise to the operation of SECTION 2.14(b), SECTION 2.14(c) or SECTION 2.15 with
respect to any Vendor which results in such Vendor charging to the Purchaser
increased costs in excess of those being charged generally by the Vendors
hereunder or results in such Vendor seeking indemnification for Taxes or Other
Taxes, Purchaser shall have the right, if no Event of Default or Unmatured Event
of Default then exists, to replace such Vendor hereunder (the "Replaced Vendor")
with one or more replacement vendors (collectively, the "Replacement Vendor")
reasonably acceptable to Administrative Agent, provided that (i) at the time of
any replacement pursuant to this SECTION 2.17, the Replacement Vendor shall
enter into one or more Assignment and Acceptance pursuant TO SECTION 9.7 (and
with all fees payable pursuant to said SECTION 9.7 to be paid by the Replacement
Vendor) pursuant to which the Replacement Vendor shall acquire all of the
commitments and outstanding Forbearances of the Replaced Vendor and, in
connection therewith, shall pay to the Replaced Vendor in respect thereof an
amount equal to the sum of (A) an amount equal to the principal of, and all
accrued but unpaid interest on, all outstanding Forbearances of the Replaced
Vendor and (B) an amount equal to all accrued, but unpaid, Commitment Fee owing
to the Replaced Vendor pursuant to SECTION 2.8(b), and (ii) all obligations of
the Purchaser owing to the Replaced Vendor (other than those specifically
described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid) shall be paid in full to such Replaced
Vendor concurrently with such replacement. Upon the execution of the respective
Assignment Agreement, the payment of amounts referred to in clauses (i) and (ii)
above and, if so requested by the Replacement Vendor, delivery to the
Replacement Vendor of the appropriate Pagares executed by the Purchaser, the
Replacement Vendor shall become a Vendor hereunder and the Replaced Vendor shall
cease to constitute a Vendor hereunder, except with respect to indemnification
provisions applicable to the Replaced Vendor under this Agreement, which shall
survive as to such Replaced Vendor.
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SECTION 3. CONDITIONS OF EFFECTIVENESS OF THIS AGREEMENT AND FORBEARANCES.
3.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THE FORBEARANCES. The
effectiveness of this Agreement is subject to the satisfaction or waiver by
QUALCOMM of the following conditions.
(a) PAGARES. Purchaser shall have duly executed before a Chilean
Notary Public and delivered to each Vendor its Pagare in respect of the Deferred
Payment Balance Forbearance.
(b) GUARANTY. There shall have been delivered to Collateral Agent
a Guaranty duly executed by Parent.
(c) SECURITY AGREEMENTS AND ASSIGNMENT OF MATERIAL CONTRACTS. (i)
There shall have been delivered to Collateral Agent the Security Agreements in
form and substance reasonably satisfactory to Collateral Agent, duly executed by
the grantors under such Security Agreements; (ii) all security interests
intended to be created pursuant to the Security Agreements shall have been
created and, where appropriate, registered or other action taken to create a
security interest and Lien over the relevant asset or property in favor of
Collateral Agent, for the benefit of Secured Parties; (iii) all fees and duties
shall have been paid in connection with such registration; and (iv) all such
security interests shall be valid and enforceable and constitute first priority
perfected security interests, and be enforceable against Purchaser or Parent, as
the case may be, and any subsequent lien or (including a judgment lien or),
holder of a fixed or floating charge, or transferee for not for value, in bulk,
by operation of law, for the benefit of creditors, or otherwise, subject in any
case only to Permitted Liens. Collateral Agent shall have received such
assignments of Purchaser's material contracts (A) as Secured Parties may
reasonably request and (B) as Purchaser shall obtain with commercially
reasonable efforts.
(d) SECURITY INTEREST FILINGS. All filings, publications,
notifications and the like, necessary or appropriate to obtain a first priority
perfected security interest in favor of Secured Parties in all assets of
Purchaser, and the Pledged Shares shall have been made.
(e) PROJECT ACCOUNT CONTROL AGREEMENTS. There shall have been
delivered to Collateral Agent the separate written collateral control agreements
with respect to the Project Accounts, each executed by Collateral Agent, Parent
or Purchaser, as applicable, and each depository institution at which Parent or
Purchaser, as applicable, maintains any of the Project Accounts, or each
securities intermediary at which Parent or Purchaser, as applicable, maintains
an investment, brokerage or similar account which holds financial assets (as
defined in Section 8102(a)(9) of the UCC) owned beneficially by Parent or
Purchaser, as applicable, each satisfactory to Collateral Agent.
(f) STOCK PLEDGE AGREEMENT. There shall have been delivered to
Collateral Agent the Stock Pledge Agreement, duly executed by Parent and Michael
Grasty Cousino, together with the certificates representing the Pledged Shares
and Administrative Agent shall have received evidence satisfactory to it of the
registration of the security interest in the Pledged Shares in Purchaser's share
register and of the approval of Parent's shareholder of such security interest.
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(g) CREDIT SUPPORT AGREEMENT. There shall have been delivered to
Administrative Agent the Credit Support Agreement duly executed by Guarantor and
QUALCOMM.
(h) OPINIONS OF COUNSEL. The Vendors, Administrative Agent and
Collateral Agent shall have received opinions dated the Effective Date from Gray
Cary Ware & Freidenrich LLP, counsel to Purchaser, Parent and Leap, and opinions
of Grasty, Quintana, Majlis y Cia. ("Grasty"), Chilean counsel to Purchaser,
Parent and Leap, including a consent letter from Grasty accepting the
designation as Process Agent for Purchaser and agreeing not to resign, all in
form and substance satisfactory to Administrative Agent, Collateral Agent and
Vendors.
(i) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
making the initial Forbearance and also after giving effect thereto (i) there
shall exist no Event of Default or Unmatured Event of Default; and (ii) all
representations and warranties contained herein and in the other Credit
Documents in effect at such time shall be true and correct in all material
respects.
(j) OFFICER'S CERTIFICATE. Administrative Agent and Collateral
Agent shall have received certificates dated such date, signed by the president
and chief financial officer (such certificate and all other certificates
delivered under this Agreement to be in such Person's corporate, not individual,
capacity) of Purchaser and each Guarantor, as applicable, stating that all of
the applicable conditions set forth in this SECTION 3.1 have been satisfied as
of such date.
(k) CORPORATE PROCEEDINGS. All corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Credit Documents shall have been
duly approved by Purchaser's Board of Directors and Shareholders and be
reasonably satisfactory in form and substance to Administrative Agent,
Collateral Agent and Vendors, and Vendors shall have received all information
and copies of all certificates, documents and papers, including records of
corporate proceedings and governmental approvals, if any, which Vendors may have
reasonably requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate officers or governmental
authorities.
(l) ADVERSE CHANGE. Nothing shall have occurred, including,
without limitation, the termination of any contract, lease or other agreement,
the incurrence of any damage, destruction or loss (whether or not covered by
insurance), the occurrence of any employee strike, work-stoppage, slow-down or
lock-out or any substantial threat directed to Purchaser or any Guarantor of
Purchaser of any imminent strike, work-stoppage, slow-down or lock-out, which
Vendors shall reasonably determine has, or is reasonably expected to have, a
Material Adverse Effect.
(m) CONSENTS, APPROVALS. Purchaser shall have received the
consents, approvals and releases of all appropriate Governmental Authorities and
all other third parties in connection with the transactions contemplated by the
Equipment Agreements and the Credit Documents and otherwise referred to herein
(the "Governmental Consents"), including, without limitation, (i) all import
licenses for equipment acquired until the date hereof under the Equipment
Agreements and for Deferred Payment Balance Forbearances shall have been amended
to reflect the terms and conditions of this Agreement, (ii) any other exchange
control
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approvals and necessary consents required from the Central Bank of Chile in
order for Purchaser to make payments in Dollars hereunder shall have been
obtained, and (iii) all required consents from contractual counterparties of
Parent or Purchaser or their Subsidiaries to the assignment to Collateral Agent
or Vendors, or their designees, of the Collateral and all applicable waiting
periods shall have expired without any action being taken by any competent
Governmental Authority which restrains, prevents or imposes materially adverse
conditions upon the consummation of this Agreement or the Equipment Agreements
or building any System.
(n) ORGANIZATIONAL DOCUMENTATION; ETC. Administrative Agent and
each Vendor shall have received copies of the Articles or Certificates of
Incorporation and Bylaws or Estatutos Sociales of Purchaser, Parent and each of
Purchaser's Subsidiaries, any agreements entered into by any such entity
governing the terms and relative rights of its capital stock and any agreements
among the shareholders of such entity, certified as true and complete by an
appropriate corporate officer or Governmental Authority, and a Certificate of
Good Standing, and, with respect to each Guarantor, a franchise tax good
standing or similar tax good standing certificate issued by the Secretary of
State or appropriate government officials for each province, state or nation in
which any Guarantor is qualified to do business or in which the failure to so
qualify would be reasonably likely to have a Material Adverse Effect, and the
provisions of the foregoing shall be reasonably satisfactory to Vendors.
(o) BOARD AND SHAREHOLDERS RESOLUTIONS. Administrative Agent,
Collateral Agent and Vendors shall have received resolutions of Purchaser's and
each Guarantor's Board of Directors and Shareholders approving and authorizing
the execution, delivery and performance of the Credit Documents to which it is a
party and the transactions contemplated thereby, in form and substance
reasonably satisfactory to Administrative Agent, Collateral Agent and Vendors
and their respective counsel, such resolutions certified as of the initial
Funding Date (unless a Guarantor other than Parent executes the Guaranty at a
later date) by Purchaser's and each Guarantor's Secretary or an Assistant
Secretary, as applicable, as being in full force and effect without modification
or amendment.
(p) INCUMBENCY CERTIFICATES. Administrative Agent, Collateral
Agent and Vendors shall have received signature and incumbency certificates of
Purchaser's, each Guarantor's and each of Purchaser's Subsidiaries' officers
executing this Agreement or the other Credit Documents to which it is or is to
be a party.
(q) FEES, COSTS AND EXPENSES. Purchaser shall have financed
pursuant to the terms of this Agreement or paid to Administrative Agent and each
Vendor all costs, fees and expenses (including, without limitation, the
reasonable legal fees and expenses of Administrative Agent and each Vendor, but
excluding the fees and expenses of Purchaser's financial advisor).
(r) LITIGATION. There shall be no actions, suits or proceedings
pending or threatened with respect to Purchaser or any of its Subsidiaries that
(i) might be expected to have a Material Adverse Effect; or (ii) have a material
adverse effect on the ability of Purchaser and Parent to perform their
obligations under the Equipment Agreements. There shall not exist any judgment,
order, injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified with respect to the
performance of Equipment Agreements or the Credit Documents, or the making of
any Forbearance hereunder.
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(s) EVIDENCE OF INSURANCE. Collateral Agent and Vendors shall
have received certificates or other evidence of the existence of the insurance
required by this Agreement with loss payee endorsements reasonably satisfactory
to Collateral Agent and Vendors.
(t) NO VIOLATION. The consummation of the transactions
contemplated hereby shall not contravene, violate or conflict with, nor involve
Administrative Agent, Collateral Agent or Vendors in a violation of, any
Requirement of Law, including, without limitation, applicable usury law, and
evidence satisfactory to Administrative Agent and Vendors shall have been
received as to the compliance with applicable usury law including at a minimum
the obtaining of a qualification permit or exemption from the California
Corporations Commissioner.
(u) ADMINISTRATIVE AGENT'S FEE LETTER. Administrative Agent shall
have received the Administrative Agent's Fee Letter, duly executed by Purchaser
and QUALCOMM and accepted by Administrative Agent, together with the payment of
such fees as are set forth in the Administrative Agent's Fee Letter to be paid
on the Effective Date (the payment of which shall be deemed to be a concurrent
condition).
(v) PROJECT ASSETS IN PURCHASER; SITE DOCUMENTS. Collateral Agent
shall have received evidence satisfactory to it that (i) all assets relating to
the Project, including, without limitation, the License and the Equipment
Agreements shall be in full force and effect and fully vested in and owned by
Purchaser (which, with respect to the License shall include appropriate
assurance that the License is in full force and effect notwithstanding any
changes of control of the licensee from and after the date the License was
granted); and (ii) each Site Lease Agreement and, if applicable, Landlord Waiver
in respect thereof, shall have been obtained and delivered to Collateral Agent.
(w) SUBORDINATION AGREEMENT. There shall have been delivered to
Administrative Agent the duly executed Subordination Agreement.
(x) SPANISH TRANSLATION. Administrative Agent shall have received
the translation into Spanish of this Agreement and the other Credit Documents
agreed upon by the parties.
(y) BUSINESS PLAN. Vendors shall have reviewed and approved the
form and substance of the Business Plan.
(z) RELATED PARTY TRANSACTIONS. Vendors shall have reviewed and
approved the form and substance of all transactions by and among Purchaser,
Guarantors and their Affiliates.
(aa) REIMBURSEMENT AGREEMENT. Administrative Agent shall have
received duly executed copies of the Reimbursement Agreement, in form and
substance satisfactory to Administrative Agent and Vendors, and all conditions
precedent to the obligation of the lenders party thereto to make loans to
Purchaser thereunder shall have been satisfied.
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(bb) PROCESS AGENT LETTERS. Administrative Agent shall have
received process agent letters from Purchaser and each Guarantor appointing
Process Agents in accordance with SECTION 9.11 (c).
(cc) SHAREHOLDERS' LETTERS. Administrative Agent shall have
received from each shareholder of Purchaser and Parent an agreement in form and
substance satisfactory to Vendors waiving any rights the shareholder may have
under any law with respect to any required annual distribution of profits as
dividends or otherwise.
(dd) CONVERSION TO EQUITY. Administrative Agent shall have
received evidence satisfactory to Vendors that all Sponsor Subordinated
Indebtedness existing on the Effective Date shall be converted to equity.
(ee) ADDITIONAL MATTERS, DOCUMENTS OR INFORMATION. Vendors shall
have received each additional document, instrument, legal opinion or item of
information reasonably requested by any Vendor, including, without limitation, a
copy of any debt instrument, security agreement or other material contract to
which Purchaser, Guarantors or any of Purchaser's Subsidiaries may be a party,
and all corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated by this
Agreement and the other Credit Documents shall be reasonably satisfactory in
form and substance to Vendors.
All of the agreements, certificates, legal opinions and other documents and
papers referred to in this SECTION 3.1, unless otherwise specified, shall be
delivered to Vendors and shall be reasonably satisfactory in form and substance
to Administrative Agent and Vendors.
3.2 CONDITIONS PRECEDENT TO EFFECTIVENESS OF AND ADDITIONAL
FORBEARANCES. The effectiveness of this Agreement and the obligation of Vendors
to make any Forbearance shall be subject to the further conditions precedent
that:
(a) On the date of such Forbearance the following statements
shall be true:
(i) All representations and warranties contained herein and
in the other Credit Documents in effect at such time shall be true and correct
in all material respects with the same effect (except for any representation and
warranty that speaks only as of a specific date, which shall be true and correct
in all material respects as of such date) as though such representations and
warranties had been made on and as of the date of the making of such
Forbearance; and
(ii) No Event of Default or Unmatured Event of Default has
occurred and is continuing or would result from the making of such Forbearance.
(b) Vendors shall have received such other approvals, opinions or
documents as Vendors may reasonably request in connection with the requested
Forbearance.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Except as set forth on
the Schedules attached hereto and numbered in such manner as to correspond to
the subsections of
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this SECTION 4 (which Schedules shall only constitute an exception to the
specific subsection referenced in such Schedule), Purchaser and Guarantors,
jointly and severally, make the following representations and warranties, which
representation and warranties shall be true, accurate and complete as of the
Effective Date and the Operative Date:
(a) CORPORATE ORGANIZATION; STRUCTURE. Purchaser and each
Guarantor are corporations duly incorporated, validly existing and in good
standing under the laws of their respective places of incorporation, have the
power and authority to own their property and carry on their business as now
being conducted, and are qualified as foreign corporations and in good standing
in each jurisdiction where the nature of their business or assets requires such
qualification except where the failure to so qualify would not be reasonably
likely to result in a Material Adverse Effect. The ownership structure of
Purchaser and each Guarantor as of the date hereof is as set forth in SCHEDULE
4.1(a) hereto.
(b) CORPORATE POWER; AUTHORIZATION. The execution, delivery and
performance by Purchaser and each Guarantor which is or may become a party to
any Credit Document are within their corporate powers, have been duly authorized
by all necessary corporate action, and do not (i) contravene such Person's
Estatutos Sociales, certificate of incorporation or bylaws; (ii) violate any law
or any contractual restriction binding on or affecting such Person, except where
such violation would not be reasonably likely to have a Material Adverse Effect;
or (iii) result in or require the creation of any Lien other than Permitted
Liens, upon or with respect to any of the properties of Purchaser or any
Guarantor.
(c) APPROVALS. Except for (i) the amendment to the existing
import license from the Central Bank of Chile with respect to the equipment
imported under the Equipment Agreements and with respect of which there is a
Deferred Payment Balance Forbearance and (ii) the agreed upon translation into
Spanish of this Agreement and the other Credit Documents in order to be enforced
in Chile if executed in a foreign language, no consent, order, authorization,
approval or release or other action by, and no notice to or filing with, any
Governmental Authority, regulatory body or other third party is required for (A)
the due execution, delivery and performance of any Credit Document by Purchaser
or by any Subsidiary of Purchaser; (B) the legality, validity, binding effect or
enforceability of any such Credit Document; (C) in connection with the
transactions contemplated by the Equipment Agreements and the Credit Documents,
including, without limitation, all Governmental Consents and all required
consents from contractual counterparties of Parent or Purchaser or its
Subsidiaries to the assignment to Secured Parties, or their designees, of the
Collateral, including, without limitation, the Pledged Shares, and all
applicable waiting periods relating to any of the foregoing have expired without
any action being taken by any competent Governmental Authority which restrains,
prevents or imposes materially adverse conditions upon the consummation of this
Agreement or the Equipment Agreements.
(d) ENFORCEABILITY. This Agreement is, and each other Credit
Document to which Purchaser, Parent or any Guarantor is or will be a party when
delivered hereunder will be, legal, valid and binding obligations of such Person
enforceable against it in accordance with their respective terms, provided that
the enforceability of any of such documents may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws relating to or affecting the rights of creditors generally and the
application of equitable principles.
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(e) FINANCIAL STATEMENTS/PROJECTIONS. The consolidated balance
sheet of the Purchaser and each Guarantor as at December 31, 1998, and the
related consolidated statements of income and retained earnings of the Purchaser
and each Guarantor for the fiscal year then ended, copies of which have been
furnished to Vendors, fairly present in all material respects the financial
condition of the Purchaser and each Guarantor on a consolidated basis as at such
date and the results of the operations of the Purchaser and each Guarantor for
the period ended on such date, all in accordance with GAAP consistently applied,
and there has been no material adverse change in such condition or operations or
in the assets, liabilities, properties, business or prospects of Purchaser and
each Guarantor taken as a whole or of any Guarantor or Purchaser individually.
All financial forecasts and projections delivered to Administrative Agent or
Vendors as of the date hereof have been reasonably prepared using the best
currently available estimates and judgments of Purchaser and Guarantors.
(f) LITIGATION. Except as listed on SCHEDULE 4.1(f) there is no
pending or, to the best knowledge of Purchaser and each Guarantor, threatened,
action, suit, investigation or proceeding against Purchaser or any Guarantor or
against any of their respective properties or revenues before any court,
governmental department, commission, board, bureau, instrumentality or agency or
arbitrator which might have a Material Adverse Effect.
(g) COMPLIANCE WITH LAWS, OTHER AGREEMENTS. Except as disclosed
on SCHEDULE 4.1(g), neither Purchaser nor any Guarantor is in violation or
default with respect to their respective certificate of incorporation, bylaws or
any applicable laws, rules or regulations where such violation or default would
be reasonably likely to have a Material Adverse Effect, nor is Purchaser nor any
Guarantor in violation of or in default with respect to any order, writ, decree
or judgment of any court or administrative agency or in violation or default
(nor is there any waiver in effect which, if not in effect, would result in a
violation or default) under any mortgage, indenture, lease, contract or other
agreement or instrument binding upon Purchaser or any such Guarantor, where such
violation or default would be reasonably likely to have a Material Adverse
Effect.
(h) EVENT OF DEFAULT. No Event of Default or Unmatured Event of
Default has occurred and is continuing.
(i) COLLATERAL DOCUMENTS. Except for Permitted Liens and Liens
noted in SCHEDULE 4.1(i), the provisions of the Collateral Documents are and
will continue to be effective to create and maintain in favor of Collateral
Agent for the benefit of Vendors a legal, valid and enforceable first priority
perfected security interest in all assets of Purchaser, including, without
limitation, the Pledged Shares. All necessary and appropriate recordings,
registrations and filings have been made in all appropriate public offices, and
all other necessary and appropriate action has been taken so that each
Collateral Document creates an effective Lien with respect to the property,
assets, contract rights and revenues covered thereby to the extent a security
interest may be created therein under applicable laws, prior and superior to all
other Liens except for Permitted Liens, and consents to the creation,
effectiveness, priority and enforcement of such Liens have been obtained from
each of the parties to the Credit Documents and the relevant Governmental
Authorities.
(j) NO SUBORDINATION. The Obligations of each Guarantor under the
Guaranty and Purchaser under this Agreement or under any other contracts or
instruments
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executed by Guarantors or Purchaser in connection therewith and herewith are not
subordinated in right of payment to any other obligation of Purchaser or such
Guarantors, including all obligations related to loans extended to the Purchaser
by Leap Wireless International, Inc. and Inversiones Leap S.A. or any of their
Affiliates or Subsidiaries ("Leap Loans").
(k) NO LEGAL BAR. The execution, delivery and performance (in
accordance with their respective terms) of the Credit Documents, the Fee Letter,
the Administrative Agent's Fee Letter and the borrowings hereunder and the use
of the proceeds thereof, will not (i) violate any law or regulations; (ii)
contravene, violate or constitute a breach under any corporate document or
contractual obligations of Purchaser or any of its Subsidiaries or any
Guarantor; and (iii) will not result in, or require, the creation or imposition
of any Lien on any of Purchaser's or any Guarantors' properties or revenues or
any properties or revenues of any of Purchaser's Subsidiaries except pursuant to
the express terms of the Credit Documents.
(l) SUBSIDIARIES. Purchaser and Guarantors do not as of the date
hereof have any Subsidiaries other than as disclosed on SCHEDULE 4.1(l) to this
Agreement.
(m) TAXES. Each of Purchaser and Guarantors has filed or has
caused to be filed all material tax returns which it is required to file or has
obtained extensions for the filing thereof, and each of Purchaser and Guarantors
has paid (i) all taxes shown to be due and payable on said returns or on any
assessments made against it or against any of its property (other than those the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Purchaser or Guarantors, as the case may
be) and (ii) all other taxes, fees or other charges imposed on it or imposed on
any of its property by any Governmental Authority (other than those the amount
or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of Purchaser or Guarantors, as the case may be), and no
claims are being asserted with respect to any such taxes, fees or other charges
(other than those the amount or validity of which is currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of Purchaser or Guarantors,
as the case may be). No tax Liens have been filed with respect to any such
taxes, fees or other charges (other than those the amount or validity of which
is currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of Purchaser or Guarantors, as the case may be).
(n) OWNERSHIP AND LIENS. Subject to the sale of equipment and
services under the Equipment Agreements, Purchaser owns and has good and
marketable title in fee simple absolute to, or valid leasehold interests in, all
assets comprising any part of the Project and all property necessary and
appropriate to own and operate the Project, all of its properties and assets,
real and personal, including the properties and assets and leasehold interests
reflected in the Financial Statements (other than any properties or assets
disposed of in the ordinary course of business or otherwise in compliance with
this Agreement) and all assets and properties acquired by Purchaser and its
Subsidiaries since the date of the Financial Statements referred to in SECTION
4.1(E) hereof (other than any properties or assets disposed of in the ordinary
course of business or otherwise in compliance with this Agreement), and, except
as set forth on
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SCHEDULE 4.1(i), none of the properties and assets owned by Purchaser and its
Subsidiaries and none of its leasehold interests are subject to any Lien, except
Permitted Liens.
(o) INDEBTEDNESS. As of the date hereof, SCHEDULE 4.1(o) is a
complete and correct list of all Indebtedness, credit agreements, indentures,
purchase agreements, guaranties, Capital Leases and other investments,
agreements and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing, but not including non-delinquent
trade credit providing for payment within ninety (90) days of invoice) involving
$100,000 or more in respect of which Purchaser or any Guarantor is in any manner
directly or contingently obligated. The maximum principal or face amounts of the
credits in question, which are outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule.
(p) ACCURACY OF INFORMATION FURNISHED; COMPLETE DISCLOSURE.
Neither this Agreement nor any certificate, data, report, statement or other
information furnished to Vendors by or on behalf of Purchaser or any Guarantor
in connection with the transactions contemplated hereby or by the other Credit
Documents contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to Purchaser or any Guarantor which would be
reasonably likely to have a Material Adverse Effect which has not been disclosed
herein or in such other documents, certificates and statements furnished to
Vendors for use in connection with the transaction contemplated hereby.
(q) NO DEFAULT. Neither Purchaser nor any Guarantor is in default
under or with respect to any Contractual Obligation in any respect which would
be reasonably likely to lead to a Material Adverse Effect.
(r) NO BURDENSOME RESTRICTIONS. No contractual obligation of
Purchaser or any Guarantor and no Requirement of Law, insofar as Purchaser or
any Guarantor may reasonably foresee, are reasonably likely to result in a
Material Adverse Effect.
(s) COMPLIANCE WITH PERSONAL COMMUNICATIONS SERVICES REGULATIONS,
LICENSES AND RELATED AGREEMENTS. Purchaser has been awarded a license to provide
broadband fixed and mobile wireless personal communications services
telecommunication services ("License") for Chile and has obtained and currently
maintains (or will maintain) the License and all other required federal, state,
national, provincial and local licenses related to its provision thereof ("Other
Licenses") in such areas, all of which are summarized on SCHEDULE 4.1(s).
Neither Purchaser nor any Guarantor is in violation of any federal, state,
national, provincial or local statute, rule, regulation or order relating to the
licensing of it as a provider of such services including, but not limited to,
any statute in the Republic of Chile relating to its maintenance of the License
and eligibility therefor, including, but not limited to, those statutes, rules,
regulations or orders governing its control, ownership and affiliation by or
with other persons or entities; its ownership by non-citizens; its cross
ownership of cellular services in various geographical service areas; or the
restrictions on the assignment and transfer of control of the License and the
renewal of the License, violation of which might have a Material Adverse Effect.
Neither Purchaser nor any Guarantor is in default of any term of the License or
any Other Licenses, and there exists no agreement with any non-governmental or
third party Person relating to the pledge
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by Purchaser or any Guarantor of the License or Other Licenses as collateral
("Third Party Collateral Agreements"). Neither Purchaser nor any Guarantor has
pledged the License or any Other Licenses as collateral under any license
financing agreement, Third Party Collateral Agreement or any other agreement nor
is the License nor any Other Licenses subject to any claim, Lien, security
interest or other encumbrance.
(t) OTHER REGULATORY COMPLIANCE. Neither Purchaser nor any
Guarantor is an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Purchaser and Guarantor are not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Purchaser and Guarantor have complied
with all the provisions of the Federal Fair Labor Standards Act and the Labor
Code of the Republic of Chile. Purchaser and Guarantor have not violated any
statutes, laws, ordinances or rules applicable to them, violation of which would
be reasonably likely to have a Material Adverse Effect.
(u) ENVIRONMENTAL CONDITION. None of Purchaser's nor any
Guarantor's properties or assets has ever been used by such Person or their
Affiliates or, to the best of such Person's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; none of Purchaser's or any Guarantor's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by
Purchaser or any Guarantor; and Purchaser and Guarantors have never received a
summons, citation, notice or directive from any federal, state, national,
provincial or other Governmental Authority concerning any action or omission by
Purchaser or any Guarantor resulting in the releasing, or otherwise disposing of
hazardous waste or hazardous substances into the environment.
(v) TRANSACTIONS WITH AFFILIATES. As of the date hereof and as of
the Operative Date, SCHEDULE 4.1(v) sets forth each agreement whereby a
transaction with an aggregate value in excess of $200,000 is contemplated
between any Guarantor or Purchaser and an Affiliate of any of them. Each
transaction (regardless of value) of any Guarantor or Purchaser with an
Affiliate of any of them is on fair and reasonable terms no less favorable to
such Guarantor or Purchaser, as applicable, than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate.
(w) YEAR 2000. Purchaser reasonably believes that all computer
applications that are material to its business and operations will on a timely
basis be able to perform properly date-sensitive functions for all dates before,
on and after January 1, 2000 (that is, "Year 2000 Compliant"), except to the
extent that a failure to do so would not have a Material Adverse Effect.
(x) EMPLOYEE BENEFIT PLANS. Neither Purchaser nor any Guarantor
has any employee benefit plans, including retirement plans which have been
established or are
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maintained, or to which contributions have been made by or for Purchaser or any
Guarantor. Purchaser and Guarantors are not now and never have been obligated to
contribute to any employee pension benefit plan that is a multi-employer plan
and each is not liable for and is not expected to incur any withdrawal liability
with respect to any multi-employer plan. There are not now, nor have there been,
any medical health-related life insurance or other retiree benefits provided or
expected to be provided by Purchaser for the benefit of retired employees
(including current employees upon their retirement).
(y) STATUS. Purchaser represents that the Forbearances granted
pursuant to this Agreement will qualify as supplier credits for purposes of
income tax laws of the Republic of Chile and, that therefore, QUALCOMM shall (i)
be entitled to receive all payments of principal hereunder free from withholding
taxes of the Republic of Chile and to receive payments of interest and any other
amounts subject to a four percent (4%) withholding tax imposed by the Republic
of Chile and (ii) not be required to register the financial terms and conditions
of this Agreement with the Central Bank of Chile or take any other action under
the laws of the Republic of Chile in order to have access to the formal foreign
exchange market of the Republic of Chile. Except as set forth above and the
payment of the stamp tax payable pursuant to Article 3 of Decree Law No. 3,475
of 1980, as amended, on the deferred purchase price of equipment purchased under
the Equipment Agreements, all payments made by Purchaser under this Agreement
are exempt from all Taxes and Other Taxes imposed by the Republic of Chile.
SECTION 5. COVENANTS.
5.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations shall
remain unpaid or unsatisfied or Purchaser shall have any other obligation to
Administrative Agent or any Vendor hereunder or any Vendor shall have any
commitment hereunder (whichever is later), Parent and Purchaser shall, and shall
cause each of Purchaser's Subsidiaries, at all times to:
(a) COMPLIANCE WITH LAWS, OTHER AGREEMENTS. Comply with respect
to: (i) their respective Estatutos Sociales, certificates of incorporation,
bylaws or any applicable laws, including, without limitation, telecommunication
laws, rules or regulations where failure to so comply would be reasonably likely
to have a Material Adverse Effect; (ii) orders, writs, decrees or judgments of
any court or administrative agency; and (iii) mortgages, indentures, leases,
contracts or other agreements or instruments binding upon Purchaser or its
Subsidiaries, where failure to so comply would be reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the foregoing,
Purchaser and Guarantors hereby covenant, represent and warrant that they will
comply and will not violate any United States of America or foreign laws,
including but not limited to the FCPA, where failure to so comply would be
reasonably likely to have a Material Adverse Effect.
(b) REPORTING REQUIREMENTS. With respect to Parent and Purchaser,
furnish to Administrative Agent and each Vendor each of the following:
(i) As soon as available and in any event within ten (10)
days of the end of each fiscal month of such Person, internal monthly financial
statements prepared by such Person and in form reasonably acceptable to
Requisite Vendors for the accounting period then ended;
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(ii) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of such Person, unaudited
Financial Statements for the accounting period then ended, accompanied by a
compliance certificate (with calculations in reasonable detail) signed by such
Person's Chief Financial Officer, certifying (A) that the Financial Statements
attached were prepared in accordance with GAAP and fairly present in all
material respects the financial condition of such Person as of such date (except
as to the absence of notes and subject to year-end adjustments); (B) that the
calculation of the financial covenants with respect to such Financial
Statements, is accurate and as required under this Agreement; (C) that such
Person has taken all steps to pledge all collateral required to be pledged under
the Collateral Documents to which it is a party; and (D) that such officer is
familiar with the terms of this Agreement and that no Event of Default or
Unmatured Event of Default has occurred or is continuing under this Agreement,
or if such an Event of Default or Unmatured Event of Default has occurred and is
continuing, containing a statement as to the nature thereof and the steps being
taken with respect thereto;
(iii) As soon as available and in any event within ninety
(90) days after the end of each fiscal year of such Person, audited Financial
Statements for the immediately preceding fiscal year (provided that
consolidating figures for such Financial Statements may be unaudited), certified
in a manner reasonably acceptable to Vendors by one of the "Big Four" Accounting
Firms or such other independent public accountants acceptable to Vendors, and an
opinion of such accountants relating to such Financial Statements, accompanied
by (A) a compliance certificate (with calculations in reasonable detail), in
form satisfactory to Vendors, signed by such Person's Chief Financial Officer,
certifying (1) that the Financial Statements attached were prepared in
accordance with GAAP and fairly present in all material respects the financial
condition of such Person; (2) that the calculation of the financial covenants
with respect to the Financial Statements, is accurate and as required under this
Agreement; and (3) that such officer is familiar with the terms of this
Agreement and that no Event of Default or Unmatured Event of Default has
occurred or is continuing under this Agreement, or if such an Event of Default
or Unmatured Event of Default has occurred and is continuing, containing a
statement as to the nature thereof and the steps being taken with respect
thereto; (B) copies of any and all management letters relating to the audits of
such Financial Statements (which is audited); (C) a certificate of accountants
of such Person stating that in making the examination necessary for their
certification they have obtained no knowledge of any Event of Default or
Unmatured Event of Default with respect to the financial covenants required
under this Agreement which has occurred and is continuing, or if, in the opinion
of such accountants, an Event of Default or Unmatured Event of Default has
occurred and is continuing, a statement as to the nature thereof; and (D) an
annual budget of Purchaser and its Subsidiaries prepared by Purchaser's Chief
Financial Officer in form and detail reasonably satisfactory to Vendors;
(iv) Promptly after the sending or filing thereof, copies of
all reports which such Person sends to any of their public equity or debt
securities holders and, to the extent not included in such reports, any and all
monthly, quarterly and audited annual financial statements of such Person, any
and all press releases that such Person issues or, as reasonably requested by
Administrative Agent or Vendors, other information (whether or not publicly
filed);
(v) Promptly after any Responsible Officer of such Person
has knowledge or should have known of the occurrence thereof, give written
notice to Administrative Agent and Vendors of: (A) the occurrence of any
Unmatured Event of Default or
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Event of Default; (B) any default or event of default under any contractual
obligation of Purchaser or any Guarantor or any force majeure event which would
be reasonably likely to have a Material Adverse Effect; (C) any litigation or
proceeding affecting such Person which might have a Material Adverse Effect; (D)
any change in the ownership of Parent or Purchaser or its Subsidiaries; and (E)
any notice of termination of any of the Equipment Agreements. Each notice
pursuant to this subsection shall be accompanied by a certificate of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Purchaser proposes to take with respect thereto;
(vi) As soon as available and in any event within forty five
(45) days of the end of each fiscal quarter of Purchaser, a list of all material
assets and properties of Purchaser organized by category and specifying the
original book value of such assets in form reasonably acceptable to Requisite
Vendors for the accounting period then ended;
(vii) As soon as available and in any event within seven
(7) days prior to the submission for approval of the board of directors of
Purchaser copies of any proposed revision, amendment, or modification to the
Business Plan; and
(viii) Such other information respecting the condition or
operation (financial or otherwise) of any Guarantor, Purchaser or any of their
Subsidiaries as Administrative Agent and Vendors may from time to time
reasonably request.
(c) INSURANCE. With respect to Purchaser and its Subsidiaries,
maintain insurance with responsible and reputable insurance companies and
associations reasonably satisfactory to Vendors, in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties, including, without limitation, general liability,
hazard and business interruption coverages reasonably satisfactory to Vendors.
All policies of insurance shall name Collateral Agent as an additional insured
and loss payee and be endorsed so that if at any time should they be canceled,
or coverage be reduced in a way which materially affects the interests of
Secured Parties, such cancellation or reduction shall not be effective as to
Secured Parties for thirty (30) days after receipt by Administrative Agent and
Collateral Agent of written notice from such insurer of such cancellation or
reduction.
(d) TAXES AND OTHER INDEBTEDNESS. Promptly pay and discharge when
due, and cause each Subsidiary to promptly pay and discharge when due, any and
all Indebtedness (other than Permitted Indebtedness), Liens (other than
Permitted Liens), charges, taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any of its properties
prior to the date upon which penalties accrue thereon, and lawful claims which,
if unpaid, are or might become a Lien (other than a Permitted Lien) or material
charge upon its property or otherwise would be reasonably likely to have a
Material Adverse Effect, except for items being contested in good faith where
adequate reserves have been provided to satisfy such item if the contest is not
successful. Without limiting the generality of the foregoing, Purchaser shall
pay all custom duties, taxes and charges when due and shall not be entitled to
agree upon a deferred payment of such duties, taxes and charges; provided,
however, that Purchaser may incur and maintain deferred custom duty obligations
so long as (i) such obligations are for the importation of equipment used in the
business of Purchaser, (ii) the aggregate principal amount thereof does not
exceed at any one time Ten Million Dollars
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($10,000,000), and (iii) no such obligation may be rescheduled or refinanced
with the holders of such obligations. Any charge which would affect the
collateral shall be deemed to be material.
(e) MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Except as
otherwise permitted by this Agreement, preserve and maintain, and cause each of
its Subsidiaries to preserve and maintain, its corporate existence, its business
substantially as contemplated in the Business Plan to be conducted, and all of
its rights, licenses, privileges and franchises necessary or desirable in the
normal conduct of said business. Purchaser shall, and shall cause each of its
Subsidiaries to, conduct its business in an orderly, efficient and regular
manner, keep its properties useful or necessary in its business in good working
order and condition, and from time to time make all needed repairs, renewals and
replacements thereto, so that the efficiency of its properties shall be usefully
preserved. Each Purchaser and Guarantor shall, and shall cause each of its
Subsidiaries to, comply with all applicable orders, writs, decrees and
judgments, with its Estatutos Sociales or articles of incorporation and bylaws,
and with the terms of all mortgages, indentures, leases, contracts and other
agreements and instruments binding upon it or its property, except to the extent
that the failure to comply with such mortgages, indentures, leases, contracts,
agreements or instruments would not be reasonably likely to have a Material
Adverse Effect.
(f) FINANCIAL RECORDS, INSPECTION. Keep and maintain, and cause
each of its Subsidiaries to keep and maintain, accurate books of record and
account in accordance with GAAP consistently applied. On reasonable notice,
which shall in no event need to be longer than five (5) Business Days, each
Purchaser and Guarantor shall permit, and cause each Subsidiary to permit,
Secured Parties or representatives thereof, during customary business hours and
as often as Secured Parties may reasonably request, to inspect, audit and
examine its books and records, to take extracts therefrom, to inspect its
properties and assets and to discuss its affairs, finances and accounts with its
principal officers and its independent public accountants.
(g) CONSENTS, APPROVALS. From time to time obtain all appropriate
governmental and third party consents, approvals and licenses in connection with
the transactions contemplated by the Equipment Agreements and the Credit
Documents and such consents, approvals and licenses shall remain in effect,
including, without limitation, (i) any required consent of any Governmental
Authorities to the assignment for security purposes of the License and all Other
Licenses awarded to Purchaser or its Subsidiaries and the potential foreclosure
by Secured Parties of such security interest and (ii) all required consents from
Purchaser's or its Subsidiaries' contractual counterparties to the assignment to
Collateral Agent or Vendors or their designees of revenue producing agreements
or other material contracts.
(h) MAINTENANCE OF LICENSES AND COMPLIANCE WITH PERSONAL
COMMUNICATIONS SERVICES REGULATIONS AND RELATED AGREEMENTS.
(i) Take any and all action necessary to maintain the
License and Other Licenses for those areas set forth in SCHEDULE 4.1(s)
including, without limitation, payment of applicable Taxes;
(ii) Not, without the prior written consent of Secured
Parties, sell, assign, transfer or partition the License or any Other Licenses,
and if Secured Parties consent to such sale, assignment, transfer or partition,
Purchaser and each Guarantor shall cause each
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purchaser, assignee, transferee or partitionee to become a party to or otherwise
specifically assume Purchaser's obligations under the Credit Documents to which
it is a party;
(iii) Not take any action which would violate any Law
relating to the License or any Other Licenses;
(iv) Not, without the prior written consent of Collateral
Agent, Administrative Agent and Requisite Vendors, which consent shall not be
unreasonably withheld, modify or amend the License or modify, amend or enter
into any Other Licenses;
(v) Enter into all interconnection agreements, in form and
substance satisfactory to Collateral Agent, required under or by the License,
the Other Licenses, any Governmental Authority pursuant to its rules,
regulations, orders or other pronouncements;
(vi) Not take any action which would violate any other
agreement relating to the License or any Other Licenses; or
(viiI) Not, without the prior written consent of Secured
Parties, pledge as collateral the License or any Other Licenses, nor subject the
License or any Other Licenses to any claim, Lien, security interest or other
encumbrance.
(i) ENVIRONMENTAL CONDITION. Use its properties and assets in
such a manner as to comply with all environmental protection statutes and shall
not use its properties and assets, or allow its Subsidiaries to use their
properties or assets for the disposal of, or to produce, store, handle, treat,
release or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; each Purchaser, Guarantor and its Subsidiaries
shall use their best efforts to ensure that (i) none of their properties or
assets will be designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute and (ii) no Lien arising under any environmental protection
statute will attach to any revenues or to any real or personal property owned by
any Guarantor, Purchaser or any of its Subsidiaries.
(j) SITE ACQUISITION.
(i) In connection with site acquisition or renewals thereof
for the placement or installation of infrastructure equipment, enter into a Site
Lease Agreement and Landlord's Waiver;
(ii) Concurrent with entering into any lease or renewal of
real property in connection with the placement or installation infrastructure
equipment, whether or not in the form of a Site Lease Agreement, deliver to
Collateral Agent (A) a copy of such lease, (B) a duly executed Landlord's Waiver
in form suitable for recordation, and (C) if the lessor of such real property is
party to a lending arrangement with respect to such real property, a
non-disturbance agreement, duly executed by the lessor's lender and in form
suitable for recordation, and such other documentation satisfactory to
Collateral Agent;
(iii) Notwithstanding anything to the contrary set forth
elsewhere in this Agreement or in any Equipment Agreement, prior to any
equipment being delivered to
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Purchaser for placement or installation on any site acquired by Purchaser
pursuant to the terms of a site lease or the advance of any Forbearances
hereunder in relation to equipment to be delivered to such site, Collateral
Agent shall have delivered to Purchaser written notice of its receipt of the
appropriate Site Lease Agreement and Landlord's Waiver or Collateral Agent shall
have, at the direction of Requisite Vendors, consented to such lease
arrangement.
(k) PROJECT ACCOUNTS. Purchaser and Parent shall ensure that
Collateral Agent at all times enjoys a first priority perfected security
interest in all Project Accounts.
(l) CURRENT LINE OF BUSINESS. Purchaser shall conduct business
only in its Current Line of Business.
(m) SUBSIDIARIES. Notwithstanding SECTION 5.2(l), in the event
that Purchaser acquires any Subsidiary, Purchaser shall (i) execute and deliver
to Administrative Agent, for the benefit of Secured Parties, a Subsidiary Stock
Pledge Agreement, together with the certificates representing the pledged shares
and (ii) cause such Subsidiary to execute and deliver to Administrative Agent,
for the benefit of Secured Parties, a Guaranty and Subsidiary Security
Agreement. Administrative Agent shall have received evidence satisfactory to it
of the registration of the security interest in the shareholders' registry of
such Subsidiary.
(n) NO SUBORDINATION. The Obligations of each Guarantor under the
Guaranty and Purchaser under this Agreement or under any other contracts or
instruments executed by Guarantors or Purchaser in connection therewith and
herewith will at all times rank prior to all present and future unsecured
Indebtedness of any Guarantor or Purchaser, as applicable.
(o) SHAREHOLDERS' LETTERS. Purchaser and Parent shall cause all
and each shareholder of Purchaser or Parent, as applicable, to enter into an
agreement in form and substance satisfactory to Vendors waiving any rights the
shareholder may have under any law with respect to any required annual
distribution of profits as dividends or otherwise; provided, however, that such
agreement shall not abrogate any rights expressly set forth herein.
(p) LIST OF PURCHASER'S ASSETS. Purchaser shall take all
necessary measures requested by Administrative Agent to perfect Vendor's
security interest in all assets and properties reported by Purchaser each
quarter in accordance with SECTION 5.1(b)(vi).
(q) YEAR 2000 COMPLIANCE. Purchaser shall take such actions as
are necessary or prudent to assure that any computer application that is
material to its business will be Year 2000 compliant on a timely basis, except
to the extent that such failure is not reasonably likely to result in a Material
Adverse Effect. Purchaser shall promptly notify Administrative Agent in the
event Purchaser discovers or determines that any computer application (including
those of its material suppliers and vendors) that is material to its or any of
the business will not be Year 2000 compliant on a timely basis, except to the
extent that such failure is not reasonably likely to have a Material Adverse
Effect.
(r) COVENANT TO GIVE SECURITY. Upon the request of the Collateral
Agent following the occurrence and during the continuance of an Event of
Default, Purchaser shall, at Purchaser's expense: (i) within 15 day; after such
request, duly execute and deliver to Collateral Agent mortgages, pledges,
assignments, security agreement supplements, intellectual property
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security agreement supplements and other security agreements, as specified by
and in form and substance satisfactory to Collateral Agent, securing payment of
all Obligations of Purchaser under the Credit Documents on all its properties,
(ii) within 30 days after such request, take whatever action (including, without
limitation, the recording of mortgages, the filing of Uniform Commercial Code
financing statements, the giving of notices and the endorsement of notices on
title documents) may be necessary or advisable in the opinion of the Collateral
Agent to vest in Collateral Agent (or any representative of the Collateral
Agent) valid and subsisting Liens on the properties purported to be subject to
the mortgages, pledges, assignments, security agreement supplements,
intellectual property security agreement supplements and security agreements
delivered pursuant to this Section 5.1 (r), enforceable against all third
parties in accordance with their terms, and (iii) at any time and from time to
time, promptly execute and deliver any and all further instruments and documents
and take all such other action as the Collateral Agent may deem necessary or
desirable in obtaining the full benefits of, or in perfecting and preserving the
Liens of, such guaranties, mortgages, pledges, assignments, security agreement
supplements, intellectual property security agreement supplements and security
agreements.
(s) PERFORMANCE OF CREDIT DOCUMENTS, ADDITIONAL EQUIPMENT
DEFERRED PAYMENT AGREEMENT AND REIMBURSEMENT AGREEMENT. Perform and observe, and
cause each of its Subsidiaries to perform and observe, in all material respects
the terms and provisions of each Credit Document, the Additional Equipment
Deferred Payment Agreement and the Reimbursement Agreement to be performed or
observed by it, maintain each such Credit Document, the Additional Equipment
Deferred Payment Agreement and the Reimbursement Agreement in full force and
effect, and enforce such Related Document in accordance with its terms.
(t) COMPLIANCE WITH TERMS OF LEASEHOLDS. Make all payments and
otherwise perform in all respects its obligations in respect of all leases of
real property to which the Purchaser or any Subsidiary is a party to, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to be forfeited or cancelled,
notify the Administrative Agent of any default by any party with respect to such
lease and cooperate with the Administrative Agent in all respects to cure any
such default, and cause each of its Subsidiaries to do so; provided, however,
that any failure to make payments, perform obligations, keep leases in full
force and effect, permit a lapse or termination, or notify, shall not constitute
a violation of this sentence if, with respect to all such leases, the
termination of any individual lease or all such leases would not have a Material
Adverse Effect.
(u) OWNERSHIP OF PURCHASER. Except for one share owned by Michael
Grasty Cousino, which shall be pledged to Collateral Agent, Parent shall at all
times own one hundred percent (100%) of the Capital Stock, options, warrants and
other similar rights of Purchaser on a fully diluted basis.
(v) COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT. Upon the
request of Purchaser and prior to the incurrence of any Eligible Secured Debt,
the parties hereto agree to negotiate in good faith and enter in the Collateral
Agency and Intercreditor Agreement, after which the collateral agent established
under such agreement shall hold the collateral securing the Obligations as well
as the indebtedness arising under such Eligible Secured Debt.
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(w) FURTHER ASSURANCES. In addition to the obligations and
documents which this Agreement expressly requires Purchaser or any Guarantor to
execute, acknowledge, deliver and perform, Purchaser and each Guarantor shall
execute and acknowledge (or cause to be executed and acknowledged) and deliver
to Administrative Agent or Collateral Agent all documents, and take all actions,
that may be reasonably requested by Secured Parties from time to time to confirm
the rights created or now or hereafter intended to be created under the Credit
Documents, to protect and further the validity, priority and enforceability of
the Liens created under the Collateral Documents, to subject to the Liens
created under the Collateral Documents any property intended by the terms of any
Credit Document to be covered by the Collateral Documents, or otherwise to carry
out the purposes of the Credit Documents and the transactions contemplated
hereunder and thereunder.
5.2 NEGATIVE COVENANTS. So long as any of the Obligations shall remain
unpaid or unsatisfied or Purchaser shall have any other obligations to make
payments to Administrative Agent or Vendors hereunder or Vendors shall have any
commitment hereunder (whichever is later), Purchaser shall not, and shall not
permit any Subsidiary to, and, only as to each Section of this SECTION 5.2
expressly applying to Guarantors, each Guarantor shall not, directly or
indirectly, at any time, without the prior written consent of Requisite Vendors,
which consent may, except where specified to the contrary herein, be withheld in
each Vendor's sole and absolute discretion:
(a) ENCUMBRANCES, LIENS, ETC. Except for Liens in favor of
Secured Parties, Permitted Liens and Liens disclosed on SCHEDULE 4.1(I), neither
any Guarantor, Purchaser nor any of Purchaser's Subsidiaries shall create,
incur, assume or suffer to exist any mortgage, deed of trust, pledge, Lien,
security interest, assignment, deposit arrangement or other preferential
arrangement, charge or encumbrance (including, without limitation, any
conditional sale or other title retention agreement or finance lease) of any
nature, upon or with respect to any of the properties, now owned or hereafter
acquired by Purchaser.
(b) INDEBTEDNESS. Neither any Guarantor, Purchaser nor any of
Purchaser's Subsidiaries shall contract, create, incur, assume or suffer to
exist any Indebtedness, except the following ("Permitted Indebtedness"):
(i) Indebtedness incurred pursuant to the Equipment
Agreements, Additional Equipment Deferred Payment Agreement and Reimbursement
Agreement;
(ii) Capital Leases (exclusive of Capital Leases
arising as a result of the sale and leaseback of towers and sites) of Purchaser
and Indebtedness of Purchaser incurred pursuant to purchase money mortgages or
security interests permitted by SECTION 5.2(A), provided that the aggregate
amount of all such Capitalized Leases entered into after the Effective Date plus
the principal amount of all Indebtedness secured by such purchase money
mortgages or security interests shall not exceed at any time outstanding the
greater of (i) $15,000,000 or (ii) two percent (2%) of the sum of Total Debt and
Contributed Capital at the time of incurrence thereof;
(iii) other Indebtedness outstanding prior to, and to
remain outstanding after, the Effective Date to the extent specified in SCHEDULE
4.1(O);
54.
<PAGE> 56
(iv) Contingent Obligations of Purchaser arising with
respect to customary indemnification obligations incurred in connection with
permitted asset dispositions;
(v) unsecured Indebtedness of Purchaser taking the
form of a working capital revolving credit facility made by an independent third
party, provided that (A) the principal amount of such Indebtedness does not at
any time exceed $5,000,000 and has a maturity of at least one year, and (B)
after the incurrence thereof the financial covenants set forth in SECTION 5.3
shall be satisfied on the last day of the fiscal quarter last ended for which
financial statements have been delivered in accordance with SECTION 5.1(B), on a
pro forma basis as if such unsecured Indebtedness and any other Indebtedness
which was incurred since such last day was incurred and outstanding on such last
day, and any Indebtedness which was paid after such last day was not outstanding
on such last day;
(vi) Indebtedness incurred by Parent ("High Yield
Debt"), provided that (A) no principal installments of such High Yield Debt are
scheduled to be due and payable (or are otherwise required to be paid) prior to
one year after the Final Maturity Date, (B) such High Yield Debt is not subject
to any Lien on any property or assets of Purchaser, (C) following the issuance
of such High Yield Debt, the financial covenants set forth in SECTION 5.3 shall
be satisfied as of the last day of the fiscal quarter last ended for which
financial statements have been delivered in accordance with Section 5.1(B), on a
pro-forma basis, giving effect to any Contributed Capital after the last day of
such fiscal quarter, as if such High Yield Debt and any other Indebtedness which
was incurred since such last day were issued and outstanding on such last day,
and any Indebtedness which was paid after such last day was not outstanding on
such last day, (D) such High Yield Debt is not guaranteed by Purchaser or any
Guarantor, (E) the initial cash interest payments required under such High Yield
Debt do not precede the first Interest Payment Date for Forbearances which are
not capitalized hereunder, and (F) such proceeds of High Yield Debt are
immediately contributed to Purchaser;
(vii) Unsecured Indebtedness incurred in connection
with the financing of wireless telecommunication handsets, subject to the
restrictions contained in SECTION 5.2(A);
(viii) Contingent Obligations not otherwise permitted
under this Section 5.2(B) to the extent not exceeding in the aggregate at any
time outstanding $5,000,000;
(ix) Eligible Secured Debt, provided that (A) Other
Senior Indebtedness shall require prior written consent of Requisite Vendors,
which consent shall not be unreasonably withheld, and (B) after any nonrecourse
assignment of Forbearances by QUALCOMM in an amount not less than the lesser of
Twenty Million Dollars ($20,000,000) or the entire amount of the Forbearances
then outstanding, Other Vendor Indebtedness shall require the prior written
consent of Requisite Vendors (exclusive of QUALCOMM and its Affiliates), which
consent shall not be unreasonably withheld;
(x) Sponsor Subordinated Indebtedness and Third Party
Subordinated Indebtedness; and
(xi) Other unsecured Indebtedness of a type not
described above in the aggregate at any one time not exceeding One Hundred
Thousand Dollars ($100,000.00).
55.
<PAGE> 57
(c) CONSOLIDATION/MERGER/CHANGE OF CONTROL, MANAGEMENT OR
OWNERSHIP. Except with the consent of all Vendors, which consent shall not be
unreasonably withheld, neither any Guarantor, Purchaser nor any of Purchaser's
Subsidiaries shall consolidate with or merge into any other Person or permit any
other Person to merge into it or permit a Change of Control to occur, or enter
into any agreement to do any of the foregoing.
(d) DISPOSITION OF ASSETS. Neither any Guarantor, Purchaser
nor any of Purchaser's Subsidiaries shall (i) cause or allow to occur an Asset
Sale (ii) sell, transfer, lease or otherwise dispose of any assets or rights to
its Subsidiaries, or (iii) permit any assets that are used or useful in the
business of Purchaser or exploitation of the License to be owned or in the
possession of Parent or any other Affiliates of Purchaser.
(e) INVESTMENTS. Neither any Guarantor, Purchaser nor any of
Purchaser's Subsidiaries shall make or permit to remain outstanding any
Investment other than (i) Investment Grade Instruments and (ii) loans and
advances to employees for business expenses, relocation, medical purposes and
other purposes in the ordinary course of business, in the aggregate not to
exceed One Hundred Thousand Dollars ($100,000) at any time outstanding.
(f) CAPITAL EXPENDITURES. Neither any Guarantor, Purchaser nor
any of Purchaser's Subsidiaries shall incur or make Capital Expenditures in any
fiscal year (i) in an aggregate amount in excess of the amount permitted under
SECTION 5.3(H) hereof or (ii) if the incurrence of such Capital Expenditure
would otherwise result in or cause an Event of Default or an Unmatured Event of
Default.
(g) LIMITATION ON PREPAYMENTS. Neither any Guarantor,
Purchaser nor any of Purchaser's Subsidiaries shall make or commit to make any
prepayment, sinking fund payments (or payments in the nature thereof) or
redemptions of any Indebtedness, including the Leap Loans, except (i)
prepayments of any amounts payable hereunder and permitted to be paid hereby;
and (ii) prepayments of trade debt made within forty-five (45) days of the date
such payment is otherwise to be made.
(h) TRANSACTIONS WITH AFFILIATES. Neither any Guarantor,
Purchaser nor any of Purchaser's Subsidiaries shall enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except in the ordinary course, and
pursuant to the reasonable requirements, of its business or upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
(i) DIVIDENDS; DISTRIBUTIONS; INTEREST ON THIRD PARTY
SUBORDINATED INDEBTEDNESS, SPONSOR SUBORDINATED INDEBTEDNESS. Neither any
Guarantor, Purchaser nor any of Purchaser's Subsidiaries shall declare or pay
cash dividends upon any of its stock or distribute any of its property or
redeem, retire, purchase or acquire, directly or indirectly, any of its Capital
Stock, or make any change in its capital structure or make any payments of
interest on the Third Party Subordinated Indebtedness and Sponsor Subordinated
Indebtedness, including the Leap Loans; provided, however, that (i) Purchaser
may receive dividends or other distributions made by a Subsidiary of Purchaser
to Purchaser and (ii) Parent may receive dividends in the amount necessary and
to the extent such amount is actually used to pay interest only under the High
Yield Debt.
56.
<PAGE> 58
(j) LIMITATION ON MODIFICATIONS. Purchaser will not issue any
additional Capital Stock. During any period fiscal quarter following a fiscal
quarter during which Purchaser's EBITDA shall have been negative and, except
with respect to Parent's issuance of new Capital Stock or debt otherwise
permitted hereunder, on terms reasonably acceptable to the Requisite Vendors,
neither any Guarantor, Purchaser nor any of Purchaser's Subsidiaries shall
amend, modify or change any of its (i) organizational documents in a way that
may have the effect of altering its capital structure or increasing its
liabilities; (ii) indentures or agreements pertaining to other Indebtedness or
preferred stock of Purchaser or any Guarantor; (iii) site leases approved by
Collateral Agent; or (iv) other material agreement of Purchaser or any
Guarantor, the absence of which would have a Material Adverse Effect on
Purchaser or any Guarantor, or change its fiscal year or change its name, or
enter into any new lines of business which would materially alter the nature of
the business of Purchaser or Purchaser and Guarantors taken as a whole.
(k) COMPLIANCE. Neither any Guarantor, Purchaser nor any of
Purchaser's Subsidiaries shall become an "investment company" or a Person
controlled by an "investment company", within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Forbearance for
such purpose or violate any law or regulation, in each case which violation
would be reasonably likely to have a Material Adverse Effect.
(l) NO SUBSIDIARIES. Create or permit to exist any
Subsidiaries of Purchaser.
(m) ACCOUNTING CHANGES. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as required by generally accepted accounting
principles, this Agreement or applicable law, or (ii) fiscal year.
(n) PARTNERSHIPS, ETC. Neither any Guarantor, Purchaser nor
any of Purchaser's Subsidiaries shall become a general partner in any general or
limited partnership or joint venture, or permit any of its Subsidiaries to do
so.
5.3 FINANCIAL COVENANTS OF PURCHASER. From and after the Effective Date
and so long as any of the Obligations shall remain unpaid or unsatisfied or
Purchaser shall have any other obligation to make payments to Administrative
Agent or Vendors hereunder or any Vendor shall have any commitment hereunder,
Parent and Purchaser shall not, with respect to Parent, Purchaser and
Purchaser's Subsidiaries on a consolidated basis, without the written consent of
Requisite Vendors, which consent may be withheld in each Vendor's sole and
absolute discretion:
(a) NET DEBT TO TOTAL CAPITALIZATION. Until the Total Debt to
EBITDA Threshold is achieved, as of any day, permit the ratio of Net Debt to
Total Capitalization to exceed 0.65:1.00.
(b) SENIOR DEBT TO TOTAL CAPITALIZATION. Until the Total Debt
to EBITDA Threshold is achieved, as of any day, permit the ratio of Senior Debt
to Total Capitalization of Purchaser and its consolidated Subsidiaries to exceed
0.55:1.00.
57.
<PAGE> 59
(c) MINIMUM REVENUES. As of the last day of each fiscal
quarter set forth below, permit gross revenues for the four (4) fiscal quarters
then ending to be less than the amounts set forth below with respect to the
indicated fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING AMOUNT
--------------------- ------
<S> <C>
March 31, 2000 $21,200,000
June 30, 2000 $27,400,000
September 30, 2000 $34,100,000
December 31, 2000 $42,100,000
March 31, 2001 $51,000,000
June 30, 2001 $60,500,000
September 30, 2001 $70,000,000
December 31, 2001 $79,500,000
</TABLE>
(d) MINIMUM EBITDA. As of the last day of each fiscal quarter
and year as set forth below, permit EBITDA for the most recently completed four
(4) fiscal quarters to be less than the amounts set forth below for the
respective fiscal quarters and years:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING AMOUNT
--------------------- ------
<S> <C>
March 31, 2002 $1,000,000
June 30, 2002 $9,900,000
September 30, 2002 $17,200,000
December 31, 2002 $24,600,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING AMOUNT
--------------------- ------
<S> <C>
December 31, 2002 $24,600,000
December 31, 2003 $51,800,000
December 31, 2004 $75,800,000
December 31, 2005 $95,400,000
After December 31, 2005 $95,400,000
</TABLE>
(e) TOTAL DEBT TO EBITDA. As of the last day of each fiscal
quarter and year set forth below, permit the ratio of Total Debt to EBITDA for
the most recently completed four (4) fiscal quarters to be negative nor to
exceed the ratio set forth opposite such period:
58.
<PAGE> 60
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
--------------------- -----
<S> <C>
September 30, 2002 18.0 to 1.0
December 31, 2002 12.0 to 1.0
March 31, 2003 8.0 to 1.0
June 30, 2003 6.0 to 1.0
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
--------------------- -----
<S> <C>
December 31, 2003 5.5 to 1.0
December 31, 2004 4.0 to 1.0
December 31, 2005 4.0 to 1.0
After December 31, 2005 4.0 to 1.0
</TABLE>
(f) EBITDA TO CASH INTEREST EXPENSE. As of the last day of
each fiscal quarter and year set forth below, permit the ratio of EBITDA to Cash
Interest Expense for the most recently completed four (4) fiscal quarters to be
less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
--------------------- -----
<S> <C>
March 31, 2002 Greater than 0.01
June 30, 2002 0.40 to 1.0
September 30, 2002 0.8 to 1.0
December 31, 2002 1.10 to 1.0
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
--------------------- -----
<S> <C>
December 31, 2003 2.0 to 1.0
December 31, 2004 2.0 to 1.0
After December 31, 2004 2.0 to 1.0
</TABLE>
(g) PRO FORMA REQUIRED DEBT SERVICE. As of the last day of
each fiscal quarter or year, permit the ratio of EBITDA for the most recently
completed four (4) fiscal quarters to Pro Forma Required Debt Service to be less
than the ratio set forth opposite such period:
59.
<PAGE> 61
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
--------------------- -----
<S> <C>
March 31, 2002 0.15 to 1.0
June 30, 2002 0.35 to 1.0
September 30, 2002 0.50 to 1.0
December 31, 2002 0.65 to 1.0
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDING RATIO
------------------ -----
<S> <C>
December 31, 2003 0.65 to 1.0
December 31, 2004 0.8 to 1.0
December 31, 2005 0.9 to 1.0
After December 31, 2005 1.0 to 1.0
</TABLE>
(h) CAPITAL EXPENDITURES. As of the last day of each fiscal
year set forth below, permit the Capital Expenditures for the most recently
completed four (4) fiscal quarters to be more than the amount set forth opposite
such period:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ ------
<S> <C>
December 31, 1999 $85,000,000
December 31, 2000 $52,000,000
December 31, 2001 $37,000,000
December 31, 2002 $31,000,000
December 31, 2003 $28,000,000
December 31, 2004 $26,000,000
December 31, 2005 $23,000,000
December 31, 2006 $21,000,000
</TABLE>
(i) WIRELESS SUBSCRIBERS. As of the following dates maintain
Wireless Subscribers of not less than the number opposite such date:
<TABLE>
<CAPTION>
QUARTER ENDING NUMBER
-------------- ------
<S> <C>
March 30, 2000 71,500
June 30, 2000 92,000
</TABLE>
60.
<PAGE> 62
<TABLE>
<CAPTION>
QUARTER ENDING NUMBER
-------------- ------
<S> <C>
September 30, 2000 112,500
December 30, 2000 133,000
March 31, 2001 152,500
June 30, 2001 172,000
September 30, 2001 191,500
December 31, 2001 211,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDING NUMBER
------------------ ------
<S> <C>
December 31, 2002 285,000
December 31, 2003 357,000
December 31, 2004 420,000
December 31, 2005 474,000
After December 31, 2005 474,000
</TABLE>
SECTION 6. EVENTS OF DEFAULT.
6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) A failure by Purchaser to pay (whether by scheduled
maturity, required prepayment, by acceleration or otherwise) the following
amounts (i) any principal of any Forbearance when due, or (ii) any interest on
any Forbearance, any other amounts owing hereunder or under any other Credit
Document or any other amounts constituting Obligations within five (5) days
after such interest or other amounts first becomes due; or
(b) Any representation or warranty made by Purchaser or any
Guarantor (or any of their officers), under or in connection with this Agreement
or any other Credit Document shall prove to have been incorrect in any material
respect when made or deemed made; or
(c) Purchaser, any Subsidiary of Purchaser or any Guarantor
shall fail to perform or observe any other term, covenant or agreement on its
part to be performed or observed and contained in this Agreement or any other
Credit Document and such failure shall not have been remedied within thirty (30)
days after the date on which written notice thereof shall have been received by
Purchaser from Administrative Agent (provided, however, that the breach of
SECTIONS 5.1(C), (H) (N) (O) and (P), and SECTIONS 5.2, 5.3 and 5.4 hereof
shall, immediately upon any such breach, constitute an Event of Default); or
61.
<PAGE> 63
(d) Purchaser, any of its material Subsidiaries or any
Guarantor shall fail to pay any of their Material Indebtedness (excluding
Indebtedness incurred under this Agreement) or any interest or premium thereon,
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Material Indebtedness; or any other default under any agreement or instrument
relating to any such Material Indebtedness, or any other event, shall occur and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Material
Indebtedness; or any such Material Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment or prepayments required by the terms of such Indebtedness upon a sale
of assets) prior to the stated maturity thereof. As used in this SECTION 6.1,
"Material Indebtedness" shall mean (i) during any fiscal quarter of Purchaser
following a fiscal quarter during which Purchaser's EBITDA was less than zero
(0), any Indebtedness with a principal amount in excess of One Million Dollars
($1,000,000) and (ii) in all other cases, any Indebtedness with a principal
amount in excess of Five Million Dollars ($5,000,000); provided, however, that
if an Event of Default does not exist but would exist under this SECTION 6.1(D)
if the threshold set forth in clause (ii) of this sentence were applicable, then
an Event of Default shall arise on the last day of the first fiscal quarter
during which Purchaser's EBITDA was less than zero (0) and such failure or
condition which would give rise to such Event of Default is continuing;
(e) Purchaser, any Guarantor or any of their Subsidiaries
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of effecting any
of the foregoing; or
(f) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Purchaser, any Guarantor or any of their Subsidiaries
or of all or a substantial part of any of their respective property, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Purchaser, any Guarantor or any of their
Subsidiaries, under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within forty five (45) days of
commencement; or
(g) There occurs, in relation to Purchaser, any Guarantor or
any of their Subsidiaries, in any country or territory in which they carry on
business or to the jurisdiction of whose courts any part of their assets are
subject, any event which in that country or territory corresponds with, or has
an effect equivalent or similar to, any of those mentioned in SECTION 6.1(E) or
SECTION 6.1(F) (subject to the cure period stated therein); or
62.
<PAGE> 64
(h) Purchaser, any of its Subsidiaries or any Guarantor shall
fail to pay and discharge any judgment or order, or levy of any attachment,
execution or other process against its assets and such judgment, order, levy or
other process shall remain undischarged, unvacated, unbonded or unstayed for a
period of forty five (45) days or in any event five (5) days prior to the time
of any proposed sale under any such judgment or levy; or
(i) If any of the Equipment Agreements or the Other Project
Documents, including, without limitation, the Security Agreements, shall for any
reason be unenforceable or cease to be in full force and effect or shall cease
to give Secured Parties the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a first priority perfected
security interest in, and Lien on, all of the collateral subject thereto) in
favor of Secured Parties, superior to and prior to the rights of all third
Persons and subject to no other Liens (except to the extent expressly permitted
herein or therein), or any Guarantor, Purchaser or any of their Subsidiaries
shall fail to perform or observe any term, covenant, condition, agreement or
obligation on its part to be performed or observed pursuant thereto or any
Guarantor, Purchaser or any of their Subsidiaries party to any of such foregoing
documents shall deny or disaffirm such Person's obligations thereunder; or
(j) Purchaser shall abandon the development, ownership or
operation of the Project or shall suspend all or part of its business operations
material to the conduct of Purchaser's business, which abandonment and
suspension shall be material to the operation of the System as a whole; or
(k) There shall have occurred any act or series of acts
attributable to a Governmental Authority which (i) has the effect of depriving
Vendors of any rights (the loss of which would not be de minimis) as creditors
in respect of this Agreement or any other Credit Document, or (ii) attempts to
condemn, confiscate, seize, nationalize or expropriate the ownership or control
of all or any substantial part of the assets of Purchaser or any Governmental
Authority shall require a material modification or revocation of the License or
Other Licenses, and which condemnation, confiscation, seizure, nationalization
or expropriation shall be material to the operation of the System as a whole; or
(l) Any law, order, decree or regulation shall impose any
restriction on (i) the lawful transfer of Dollars by Purchaser from the Republic
of Chile to Administrative Agent (and from Administrative Agent to any other
Person or locale whether within or outside of the Republic of Chile), (ii) the
conversion of (A) Dollars to Pesos or (B) Pesos to Dollars, or (iii) the
purchase of Dollars in the formal foreign exchange market of the Republic of
Chile to pay the Forbearances, which restriction might have an adverse effect on
the ability of Purchaser to pay the Forbearances as scheduled or upon an
acceleration after an Event of Default; or
(m) An event shall have occurred which would be reasonably
likely to result in a Material Adverse Effect.
6.2 REMEDIES. Immediately and without notice upon the occurrence of an
Event of Default specified in SECTION 6.1(E), 6.1(F) or 6.1(G) of this
Agreement, or, at the option of Requisite Vendors, upon the occurrence of any
other Event of Default, (a) all amounts and obligations owed to Administrative
Agent, Collateral Agent and Vendors pursuant to this Agreement, the Notes,
Pagares and the other Credit Documents shall immediately become due
63.
<PAGE> 65
and payable (including without limitation any unpaid Commitment Fee); (b) the
obligation of Vendors to make any Forbearance under this Agreement or the other
Credit Documents and all commitments hereunder shall be terminated, all without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; and (c) without the expiration of any other period of grace,
Administrative Agent, Collateral Agent or any Vendor may immediately enforce
payment of the amounts owed it hereunder and exercise any and all other rights
and remedies granted to it by this Agreement or any of the other Credit
Documents or at law, in equity or otherwise.
6.3 UNMATURED EVENTS OF DEFAULT. Upon the occurrence of any Unmatured
Event of Default, the obligation of Vendors to make any Forbearances under this
Agreement or the other Credit Documents shall be suspended until such event is
either waived by Requisite Vendors or, to the extent allowed hereunder, cured.
SECTION 7. ADMINISTRATIVE AGENT.
7.1 APPOINTMENT of QUALCOMM INCORPORATED as ADMINISTRATIVE AGENT.
Vendors hereby designate and appoint QUALCOMM Incorporated as Administrative
Agent to act in an administrative function as specified under this Agreement and
the other Credit Documents and irrevocably authorizes Administrative Agent to
take such actions on its behalf under and subject to the provisions of this
Agreement and each other Credit Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this Agreement or
any other Credit Document, together with such other powers, in the judgment of
Administrative Agent, as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or any other Credit
Document, Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein or therein, or any fiduciary
relationship with any Vendor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Credit Document or otherwise exist against Administrative
Agent.
7.2 RIGHTS AND POWERS AS VENDOR. The bank serving as Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Vendor as any other Vendor and may exercise the same as though it were not
Administrative Agent, and such bank and its Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, Purchaser or any Subsidiary or other Affiliate of any
such Person and any Person who may do business with or own securities of
Purchaser or any such Subsidiary or Affiliate, all as if such bank were not
Administrative Agent and without any duty to account therefor to the Vendors or
any other Person.
7.3 DELEGATION OF DUTIES BY ADMINISTRATIVE AGENT. Administrative Agent
may execute any of its duties under this Agreement by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Administrative Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
7.4 LIABILITY OF ADMINISTRATIVE AGENT. None of Administrative
Agent-Related Persons (defined below) shall (a) be liable for any action taken
or omitted to be taken by any of them under or in connection with this Agreement
or any other Credit Document (except for its
64.
<PAGE> 66
own gross negligence or willful misconduct), or (b) be responsible in any manner
to any of the Vendors for any recital, statement, representation or warranty
made by Purchaser or any Affiliate of Purchaser, or any officer thereof,
contained in this Agreement or in any other Credit Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Credit Document, or for the value of any Collateral or
the validity, priority, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Credit Document, or for any failure of
Purchaser or any other party to any Credit Document to perform its obligations
hereunder or thereunder. No Administrative Agent-Related Person shall be under
any obligation to any Vendor to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document, or to inspect the Properties, books or
records of Purchaser or any of Purchaser's Affiliates. "Administrative
Agent-Related Persons" shall mean Administrative Agent and any successor
Administrative Agent, together with their respective Affiliates, and the
employees, agents and attorneys-in-fact of such persons.
7.5 RELIANCE BY ADMINISTRATIVE AGENT.
(a) Administrative Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to
Purchaser), independent accountants and other experts selected by Administrative
Agent. Administrative Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Credit Document unless it
shall first receive such advice or concurrence of Requisite Vendors as it deems
appropriate and indemnification for all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action,
provided, however, that Administrative Agent shall be justified in refusing to
take action if such action is in violation of law or the terms of this Agreement
or any other Credit Document, based on the advise of Administrative Agent's
legal counsel. Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Credit
Document in accordance with a request or consent of Requisite Vendors and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of Vendors.
(b) For purposes of determining compliance with the conditions
precedent specified in SECTION 3, each Vendor that has executed this Agreement
or shall hereafter execute and deliver an Assignment and Acceptance in
accordance with SECTION 9.7 shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter either sent by
Administrative Agent to such Vendor for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to such Vendor, unless an officer of Administrative
Agent responsible for the transactions contemplated by the Credit Documents
shall have received notice from such Vendor prior to the initial borrowing
specifying its objection thereto and either such objection shall not have been
withdrawn by notice to Administrative Agent to that effect or such Vendor shall
not have made available to Administrative Agent its ratable portion of such
borrowing
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7.6 NOTICE OF DEFAULT. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to Administrative Agent on behalf and for the benefit of Vendors, unless
Administrative Agent shall have received written notice from a Vendor or
Purchaser referring to this Agreement, describing such Event of Default and
stating that such notice is a "notice of default." In the event that
Administrative Agent receives such a notice, Administrative Agent shall give
notice thereof to each Vendor. Administrative Agent shall take such action with
respect to such Event of Default as shall be requested by Requisite Vendors in
accordance with SECTION 6; provided, however, that unless and until
Administrative Agent shall have received any such request, Administrative Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Event of Default as it shall deem in the best
interest of Vendors.
7.7 NON-RELIANCE BY VENDORS. Each Vendor expressly acknowledges that
none of Administrative Agent-Related Persons has made any representation or
warranty to it and that no act by Administrative Agent hereafter taken,
including any review of the affairs of Purchaser or Guarantors, shall be deemed
to constitute any representation or warranty by Administrative Agent to such
Vendor. Each Vendor confirms to Administrative Agent that it has not relied, and
will not rely hereafter, on Administrative Agent to check or inquire on such
Vendor's behalf into the adequacy, accuracy or completeness of any information
provided by Purchaser or Guarantors or any other Person under or in connection
with the Credit Documents or the transactions herein contemplated (whether or
not the information has been or is hereafter distributed to such Vendor by
Administrative Agent). Each Vendor represents to Administrative Agent that it
has, independently and without reliance upon Administrative Agent and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
Property, financial and other condition and creditworthiness of Purchaser or
Guarantors, and all applicable regulatory laws relating to the transactions
contemplated thereby, and made its own decision to enter into this Agreement and
the other Credit Documents and extend credit to Purchaser under and pursuant to
this Agreement. Each Vendor also represents that it will, independently and
without reliance upon Administrative Agent and based on such documents and
appraisals and decisions in taking or not taking action under this Agreement and
the other Credit Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of Purchaser or Guarantors.
Except for notices, reports and other documents expressly herein required to be
furnished to Vendors by Administrative Agent, Administrative Agent shall not
have any duty or responsibility to provide to any Vendor any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of Purchaser or Guarantors which may
come into the possession of any Administrative Agent-Related Persons.
Administrative Agent shall not be responsible to any Vendor for the execution,
effectiveness, priority, genuineness, validity, enforceability, collectibility
or sufficiency of this Agreement the Credit Documents or for any representations
or warranties, recitals or statements made herein or therein or made in any
written or oral statements, or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made
available by Administrative Agent to Vendors or by or on behalf of Purchaser or
Guarantors to Administrative Agent or any Vendor in connection with the Credit
Documents or the transactions contemplated thereby or for the financial
condition or business affairs of Purchaser or Guarantors or any Person liable
for payment of the Obligations, nor shall Administrative Agent be required to
ascertain or inquire as
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to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Credit Documents or as to the
use of proceeds of the Forbearances or as to the existence or possible existence
of any Event of Default.
7.8 INDEMNIFICATION. Whether or not the transactions contemplated
hereby are consummated, Vendors shall indemnify upon demand Administrative
Agent-Related Persons (to the extent not reimbursed by or on behalf of Purchaser
and without limiting the obligation of Purchaser to do so) ratably from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind
whatsoever which may at any time (including at any time following the repayment
of the Forbearances or the termination or the resignation of the related
Administrative Agent) be imposed on, incurred by or asserted against any such
Person in any way relating to or arising out of this Agreement or any of the
other Credit Documents or the transactions contemplated hereby or thereby or any
action taken or omitted by any such Person under or in connection with any of
the foregoing; provided, however, that no Vendor shall be liable for the payment
to Administrative Agent-Related Persons of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Vendor shall
reimburse Administrative Agent upon demand for its ratable share of any costs or
other out-of-pocket expenses (including reasonable attorneys' expenses and
disbursements) incurred by Administrative Agent in connection with the
preparation, execution, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement or any
other Credit Document to the extent that Administrative Agent has not previously
been reimbursed for such expenses by or on behalf of Purchaser. Without limiting
the generality of the foregoing, if any tax authority or the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Vendor (because the appropriate form was not delivered, was not properly
executed, or because such Vendor failed to notify Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), such Vendor shall
indemnify Administrative Agent fully for all amounts paid, directly or
indirectly, by Administrative Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Administrative Agent under this SECTION 7.8, together with all costs
and expenses (including reasonable attorneys' expenses and disbursements). The
obligations of Vendors in this SECTION 7.8 shall survive the repayment of all
Obligations and the termination of the Credit Documents.
7.9 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may, and at
the request of Requisite Vendors shall, resign as Administrative Agent upon 30
days' notice to Vendors. If Administrative Agent shall resign as Administrative
Agent under this Agreement and the other Credit Documents, then Requisite
Vendors shall appoint a successor Administrative Agent; provided, however, that
such successor shall also be an Eligible Assignee. If no successor
Administrative Agent is appointed prior to the effective date of the resignation
of Administrative Agent, Administrative Agent may appoint, after consulting with
Vendors and Purchaser, a successor Administrative Agent from among Vendors. Upon
the acceptance of its appointment as successor Administrative Agent hereunder
and under the other Credit Documents, such successor Administrative Agent shall
succeed to the rights, powers and duties of Administrative Agent, the term
"Administrative Agent" shall mean such successor Administrative Agent effective
upon its appointment, and the former Administrative Agent's appointment, rights,
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powers and duties as Administrative Agent shall be terminated. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this SECTION 7 and SECTIONS 9.4 and 9.15 shall continue to inure
to its benefit as to actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Credit Documents.
SECTION 8. COLLATERAL AGENT.
8.1 APPOINTMENT OF QUALCOMM INCORPORATED AS COLLATERAL AGENT. Vendors
hereby designate and appoint QUALCOMM Incorporated as Collateral Agent to act as
specified under this Agreement and the other Credit Documents, including,
without limitation, holding all possessory Collateral. Each Vendor hereby
irrevocably authorizes, and each holder of a Note and Pagare by the acceptance
of such Note and Pagare shall be deemed to have authorized, Collateral Agent to
take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated to Collateral Agent by the terms of this Agreement or
any other Credit Document, together with such other powers as are reasonably
incidental hereto and thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or any other Credit Document, Collateral Agent shall
not have any duties or responsibilities, except those expressly set forth herein
or therein, or any fiduciary relationship with any Vendor, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Credit Document or otherwise exist
against Collateral Agent.
8.2 DELEGATION OF DUTIES BY COLLATERAL AGENT. Collateral Agent may
execute any of its duties under this Agreement or any of the Credit Documents by
or through agents, employees or attorneys-in-fact, including, without
limitation, any local agent appointed by Collateral Agent in relation to
registering the security interest of Secured Parties under any of the Collateral
Documents, and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. Collateral Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact, including, without
limitation, any such local agent, that it selects with reasonable care.
8.3 LIABILITY OF COLLATERAL AGENT. None of Collateral Agent-Related
Persons (as defined below) shall (a) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement (except
for its own gross negligence or willful misconduct), or (b) be responsible in
any manner for the value of any Collateral or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any Credit
Document. No Collateral Agent-Related Person shall be under any obligation to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of Purchaser. "Collateral Agent-Related Persons"
shall mean Collateral Agent and any successor Collateral Agent, together with
their respective Affiliates, and the employees, agents and attorneys-in-fact of
such persons.
8.4 RELIANCE BY COLLATERAL AGENT. Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by
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the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel to Purchaser), independent accountants and other experts
selected by Collateral Agent.
8.5 NON-RELIANCE BY VENDORS. Each Vendor expressly acknowledges that
none of Collateral Agent-Related Persons has made any representation or warranty
to it and that no act by Collateral Agent hereafter taken shall be deemed to
constitute any representation or warranty by Collateral Agent to such Vendor.
Collateral Agent shall not have any duty or responsibility to provide to any
Vendor any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Purchaser or Guarantor which may come into the possession of any Collateral
Agent-Related Persons. Collateral Agent shall not be responsible to any Vendor
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or for any representations or
warranties, recitals or statements made herein or made in any written or oral
statements, or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Collateral Agent to
Vendors or by or on behalf of Purchaser or Guarantors to Collateral Agent or any
Vendor in connection with the Credit Documents or the transactions contemplated
thereby or for the financial condition or business affairs of Purchaser or
Guarantors or any Person liable for payment of the Obligations, nor shall
Collateral Agent be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Credit Documents or as to the use of proceeds of the
Forbearances or as to the existence or possible existence of any Event of
Default or Unmatured Event of Default.
8.6 INDEMNIFICATION. Whether or not the transactions contemplated
hereby are consummated, Vendors shall indemnify upon demand Collateral
Agent-Related Persons (to the extent not reimbursed by or on behalf of Purchaser
and without limiting the obligation of Purchaser to do so) ratably from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind
whatsoever which may at any time (including at any time following the repayment
of the Forbearances or the termination or the resignation of the related
Collateral Agent) be imposed on, incurred by or asserted against any such Person
in any way relating to or arising out of this Agreement or any of the other
Credit Documents or the transactions contemplated hereby or thereby or any
action taken or omitted by any such Person under or in connection with any of
the foregoing; provided, however, that no Vendor shall be liable for the payment
to Collateral Agent-Related Persons of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Vendor shall
reimburse Collateral Agent upon demand for its ratable share of any costs or
other out-of-pocket expenses (including reasonable attorneys' expenses and
disbursements) incurred by Collateral Agent in connection with the preparation,
execution, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any other Credit
Document to the extent that Collateral Agent has not previously been reimbursed
for such expenses by or on behalf of Purchaser. The obligations of Vendors in
this SECTION 8.6 shall survive the repayment of all Obligations.
8.7 SUCCESSOR COLLATERAL AGENT. Collateral Agent may resign as
Collateral Agent upon sixty (60) days' notice to Vendors. If Collateral Agent
shall resign as Collateral Agent
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under this Agreement and the other Credit Documents, then Requisite Vendors
shall appoint a successor Collateral Agent; provided, however, that such
successor shall also be an Eligible Assignee. No resignation shall be effective
until acceptance of the appointment of a successor Collateral Agent. Such
successor collateral agent shall succeed to the rights, powers and duties of
Collateral Agent, and the term "Collateral Agent" shall mean such successor
collateral agent effective upon its appointment, and the former Collateral
Agent's rights, powers and duties as Collateral Agent shall be terminated,
without any other or further act or deed on the part of such former Collateral
Agent or any of the parties to this Agreement or any holders of the Notes or
Pagares. After any retiring Collateral Agent's resignation as Collateral Agent,
the provisions of this SECTION 8 shall inure to its benefit as to actions taken
or omitted to be taken by it while it was Collateral Agent under this Agreement
and the other Credit Documents.
SECTION 9. MISCELLANEOUS.
9.1 AMENDMENTS. No amendment or waiver of any provision of this
Agreement or any of the other Credit Documents, nor consent to any departure by
Purchaser therefrom, shall in any event be effective unless the same shall be in
writing and signed by Requisite Vendors and acknowledged by Administrative Agent
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no such
amendment or waiver or consent shall, unless in writing and signed by all
Vendors (other than any Vendor which is in default of its obligations hereunder)
and Purchaser and acknowledged by the Administrative Agent, do any of the
following:
(a) postpone or delay any date fixed by this Agreement or any
other Credit Document for any payment or prepayment of amounts due to Vendors,
or any of them, hereunder or under any other Credit Document;
(b) reduce the amount of any amounts payable to Vendors, or
any of them, hereunder or under any other Credit Document;
(c) change the percentage of the Aggregate Commitment or the
aggregate unpaid principal amount of the Forbearances, which is required for
Vendors to take any action hereunder;
(d) release all or any substantial part of the collateral
granted or pledged under any of the Collateral Documents, except as otherwise
may be provided in the Collateral Documents;
(e) amend, terminate or release the Guaranty; or
(f) amend this SECTION 9.1 or any provision herein expressly
providing for consent or other action by all Vendors;
provided further, that no amendment or waiver shall, unless in writing and
signed by Administrative Agent and Collateral Agent in addition to Requisite
Vendors or all Vendors, affect the rights or duties of Administrative Agent and
Collateral Agent under this Agreement or any other Credit Document.
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9.2 NOTICES, ETC. Except as to those notices and other communications
which are expressly authorized to be sent telephonically, all notices and other
communications provided for hereunder shall be in writing (including facsimile
communication) and sent by overnight courier service, telecopied or delivered,
and addressed to Purchaser, Administrative Agent, Collateral Agent or any Vendor
at the address set forth on the signature page hereto, or at such other address
as it may, by written notice received by the other parties to this Agreement,
have designated as its address for such purposes. Administrative Agent,
Collateral Agent, any Vendor or the holder of the Notes and Pagares giving any
waiver, consent or notice to, or making any request upon, Purchaser hereunder
shall promptly notify the other parties to this Agreement at the addresses set
forth as the address of each Person on the signature pages of this Agreement or
at such other address as shall be designated by any party in a written notice to
the other parties hereto.
The address for notices for Persons which subsequently become Vendors
hereunder shall be as noted in the assignment and acceptance documentation to
which such Person becomes a party. Except as set forth below, all such notices
and communications shall, when mailed by overnight courier service or
telecopied, be effective, if deposited with the overnight courier service, two
(2) Business Days after deposit therewith, or if telecopied, upon being
telecopied, with receipt telephonically confirmed by sender, respectively,
addressed as aforesaid; provided, however, that notices to Vendors or
Administrative Agent pursuant to the provisions of SECTION 2 of this Agreement
shall not be effective, as of a given Business Day, unless actually received by
Vendors or Administrative Agent or both, as applicable, prior to 1:00 p.m. New
York time, on said Business Day. Notices given to Vendors or Administrative
Agent pursuant to the provisions of SECTION 2 of this Agreement which are
received after 1:00 p.m. New York time on a Business Day shall be considered
effective as of the next succeeding Business Day. Each of such notices specified
in SECTION 2 of this Agreement shall be given by telephone, facsimile or
delivery of such notice. Neither Vendors nor Administrative Agent shall incur
any liability to Purchaser in acting upon any telephone or facsimile notice
referred to in SECTION 2 of this Agreement which Vendors or Administrative Agent
believe in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Purchaser. Each such telephonic or
facsimile notice shall be irrevocable and binding on Purchaser.
9.3 NO WAIVER; REMEDIES. No failure on the part of Administrative
Agent, Collateral Agent and Vendors to exercise, and no delay in exercising, any
right under any Credit Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Credit Document preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in the Credit Documents are cumulative and not exclusive of
any remedies provided by law.
9.4 COSTS, EXPENSES AND TAXES. Purchaser agrees to pay Administrative
Agent or Vendors, as the case may be, on demand, whether or not any Forbearance
is made hereunder, (a) all reasonable fees, costs and expenses incurred by
Administrative Agent, Collateral Agent or Vendors in connection with the
negotiation, preparation, execution, delivery and consummation of, and the
making of the initial Forbearances under, this Agreement and the other Credit
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Administrative Agent, Collateral Agent and Vendors with
respect thereto and appraisal fees; provided, however that any out of pocket
expenses exceeding Ten Thousand Dollars ($10,000) shall be pre-approved by
Purchaser; (b) all reasonable fees and expenses,
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including attorneys' fees, incurred by Administrative Agent, Collateral Agent
and Vendors in connection with the negotiation of and/or the preparation of
amendments to and waivers under the Credit Documents; (c) all reasonable costs
and expenses, if any (including reasonable counsel fees and expenses), incurred
by Administrative Agent, Collateral Agent and Vendors in connection with the
enforcement and administration of the Credit Documents and the other documents
to be delivered under the Credit Documents; and (d) any and all recording and
filing fees and any present and future stamp, excise and other similar taxes
with respect to the foregoing matters, and Purchaser agrees to indemnify and
hold Administrative Agent, Collateral Agent and Vendors harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission to pay Vendors any such taxes. As used herein, "attorneys' fees" shall
include, without limitation, allocable costs of Administrative Agent's,
Collateral Agent's and Vendors' in-house legal counsel and staff.
9.5 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default, Administrative Agent, Collateral Agent and Vendors are
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by Vendors to or for the credit or the account of Purchaser or
Guarantors against any and all of the obligations of Purchaser or Guarantors now
or hereafter existing under any Credit Document, irrespective of whether or not
Administrative Agent, Collateral Agent or Vendors shall have made any demand
under such Credit Document and although such obligations may be unmatured.
Vendors agree promptly to notify Purchaser or Guarantors, as the case may be,
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of Vendors under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which Vendors may have.
9.6 RATABLE SHARING. Vendors hereby agree among themselves that if any
of them shall, whether by voluntary payment (other than a voluntary prepayment
of Forbearances made and applied in accordance with the terms of this
Agreement), by realization upon security, through the exercise of any right of
set-off or banker's lien, by counterclaim or cross action or by the enforcement
of any right under the Credit Documents or otherwise, or as adequate protection
of a deposit treated as cash collateral under bankruptcy laws, receive payment
or reduction of a proportion of the aggregate amount of principal, interest,
fees and other amounts then due and owing to that Vendor hereunder or under the
other Credit Documents (collectively, the "Aggregate Amounts Due" to such
Vendor) which is greater than the proportion received by any other Vendor in
respect of the Aggregate Amounts Due to such other Vendor, then the Vendor
receiving such proportionately greater payment shall (i) notify Administrative
Agent and each other Vendor of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from cash seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Vendors so that all such recoveries of Aggregate Amounts Due
shall be shared by all Vendors in proportion to the Aggregate Amounts Due to
them; provided that if all or part of such proportionately greater payment
received by such purchasing Vendor is thereafter recovered from such Vendor upon
the bankruptcy or reorganization of Purchaser or otherwise, those purchases
shall be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Vendor ratably to the extent of such recovery, but
without interest. Purchaser expressly consents to the foregoing arrangement and
agrees that any holder
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of a participation so purchased may exercise any and all rights of banker's
lien, set-off or counterclaim with respect to any and all monies owing by
Purchaser to that holder with respect thereto as fully as if the holder were
owed the amount of the participation held by that holder. Each Vendor hereby
agrees that, solely for purposes of this SECTION 9.6, a participant shall be
considered to be a Vendor.
9.7 BINDING EFFECT; ASSIGNMENTS. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Purchaser, Vendors,
Collateral Agent and Administrative Agent and their respective successors and
assigns. Purchaser and Parent shall not have the right to assign their rights or
delegate their duties hereunder or any interest herein without the prior written
consent of Vendors and Administrative Agent. Vendors may assign or sell
participation interests in all or any part of their interests under this
Agreement or any of the other Credit Documents to any Eligible Assignee.
Purchaser hereby grants its unconditional authorization to Vendors to execute
any such assignment, and agrees that it shall be sufficient that there exist
only an agreement between Vendors and their assignees. Administrative Agent
shall notify Purchaser of the assignment in writing, pursuant to the provisions
of SECTION 9.2. This unconditional acceptance by Purchaser of any such
assignment by Vendors includes Purchaser's and Guarantor's express consent to
the total or partial assignment of the Guaranty or any other guaranties that
have been or may be in the future be extended as surety for the payment and
performance of Purchaser's Obligations under this Agreement and the other Credit
Agreements. Purchaser, Guarantor and Vendors hereby agree that in the event of
any such assignment, the rights and interests in and to the Purchaser's and
Guarantor's payment and performance of its Obligations under this Agreement and
each of the other Credit Agreements, shall be assigned in favor of the one or
several assignees, to be shared jointly with Vendors or such other assignees if
the assignment is in part. Vendors may, subject to SECTION 9.21 below, disclose
the Credit Documents and any financial or other information relating to
Purchaser to any potential assignee or participant. Any Taxes arising from the
assignment shall be borne by Purchaser. The form of Assignment and Acceptance is
attached hereto as EXHIBIT F.
9.8 COLLATERAL. The obligations of Purchaser under this Agreement are
secured by the Collateral Documents.
9.9 NATURE OF VENDORS' OBLIGATIONS. Nothing contained in this
Agreement, any other Credit Document or the Equipment Agreements and no action
taken by Vendors pursuant hereto or thereto may, or may be deemed to, make
Administrative Agent, Collateral Agent or Vendors a partnership, an association,
a joint venture, or other entity, with Purchaser.
9.10 NON-LIABILITY OF VENDORS. The relationship between Purchaser and
Vendors is, and shall at all times remain, solely that of borrower and lender,
and Vendors neither undertake nor assume any responsibility or duty to Purchaser
to review, inspect, supervise, pass judgment upon, or inform Purchaser of any
matter in connection with any phase of Purchaser's business, operations, or
condition, financial or otherwise. Purchaser shall rely entirely upon its own
judgment with respect to such matters, and any review, inspection, supervision,
exercise of judgment, or information supplied to Purchaser by Vendors in
connection with any such matter is for the protection of Vendors, and neither
Purchaser nor any third party is entitled to rely thereon.
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9.11 GOVERNING LAW, JURISDICTION, VENUE, SERVICE OF PROCESS, WAIVER OF
IMMUNITY.
(a) GOVERNING LAW, JURISDICTION. This Agreement shall be
governed by, and construed in accordance with, the law of the State of New York,
United States, without reference to principles of conflicts of law (other than
Section 5-1401 of the General Obligations Laws of the State of New York).
(b) VENUE. Purchaser, each Guarantor, each Vendor,
Administrative Agent and Collateral Agent hereby agree that any suit, action or
proceeding with respect to this Agreement or any of the other Credit Agreements
or any judgment entered by any court in respect thereof may be brought in the
United States of America District Court for the Southern District of New York,
in the Supreme Court of the State of New York sitting in New York County
(including its Appellate Division), or in any other appellate court in the State
of New York or the courts sitting in the Comuna of Santiago, Santiago, Republic
of Chile, as the party commencing such suit, action or proceeding may elect in
its sole discretion; and Purchaser, each Guarantor, each Vendor, Administrative
Agent and Collateral Agent hereby irrevocably submit to the jurisdiction of such
courts for the purpose of any such suit, action, proceeding or judgment.
Purchaser, each Guarantor, each Vendor, Administrative Agent and Collateral
Agent further submits, for the purpose of any such suit, action, proceeding or
judgment brought or rendered against it, to the appropriate courts of the
jurisdiction of its domicile. Purchaser and Guarantor hereby waive any rights to
a specific jurisdiction it may have by virtue of its present or any future
domicile, or otherwise.
(c) SERVICE OF PROCESS. Purchaser and Guarantors hereby agree
that service of all writs, process and summonses in any such suit, action or
proceeding brought (i) in the State of New York may be made upon CT Corporation
System, presently located at 1633 Broadway, New York, New York 10019, U.S.A. and
(ii) in the Republic of Chile may be made upon Mr. Octavio Bofill-Genzsch of
Grasty, Quintana, Majlis y Cia., presently located at Tenderini 153, Santiago,
Chile (the "Process Agents"), and Purchaser and Guarantors hereby confirm and
agree that the Process Agents have been duly and irrevocably appointed as their
respective agent and true and lawful attorney-in-fact in their respective name,
place and stead to accept such service of any and all such writs, process and
summonses, and agree that the failure of the Process Agents to give any notice
of any such service of process to Purchaser or Guarantors, as the case may be,
shall not impair or affect the validity of such service or of any judgment based
thereon. Purchaser and Guarantors hereby further irrevocably consent to the
service of process in any suit, action or proceeding in said courts by the
mailing thereof by Vendor by registered or certified mail, postage prepaid, at
its address set forth beneath its signature hereto. Nothing herein shall in any
way be deemed to limit the ability of Vendors to serve any such writs, process
or summonses in any other manner permitted by applicable law or to obtain
jurisdiction over Purchaser and Guarantors in such other jurisdictions, and in
such manner, as may be permitted by applicable law. Purchaser and Guarantors
hereby irrevocably waive any objection that they may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Credit Document brought in the Supreme
Court of the State of New York, County of New York, or in the United States of
America District Court for the Southern District of New York or the competent
courts of the Republic of Chile, and hereby further irrevocably waive any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Furthermore, Purchaser and Guarantors
74.
<PAGE> 76
hereby agree to cause each Process Agent to execute and deliver to Vendor a
letter from each Process Agent to Vendor confirming Process Agent's acceptance
of the appointment by Purchaser and Guarantor, respectively, prescribed in
SECTION 9.11(C).
(d) WAIVER OF IMMUNITY. Each of Purchaser and Guarantors
irrevocably and unconditionally waives any immunity to which it or its property
may at any time be or become entitled, whether characterized as sovereign
immunity or otherwise, from any set-off or legal action in the Republic of Chile
or elsewhere, including immunity from service of process, immunity from
jurisdiction of any court or tribunal, and immunity of any of its property from
attachment prior to judgment or from execution of a judgment. This Agreement,
the other Credit Documents and the Forbearances are of a commercial rather than
the public or governmental nature and Purchaser and each Guarantor are not
entitled to claim immunity from legal proceedings with respect to itself or any
of its properties or assets on any grounds of sovereignty or otherwise under any
law or in any jurisdiction where an action may be brought for the enforcement of
any of the obligations arising under or relating to this Agreement or the other
Credit Documents.
(e) WAIVER OF JURY TRIAL. PURCHASER, EACH GUARANTOR, EACH
VENDOR, ADMINISTRATIVE AGENT AND COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER CREDIT DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS OR OBLIGATIONS.
9.12 CONFLICT IN CREDIT DOCUMENTS. To the extent there is any actual
irreconcilable conflict between the provisions of this Agreement and any other
Credit Document, the provisions of this Agreement shall prevail.
9.13 MAXIMUM RATE. In no event whatsoever shall the interest rate and
other charges charged hereunder exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that a court determines that Vendors have
received interest and other charges hereunder in excess of the highest rate
applicable hereto, Vendors shall promptly refund such excess amount to Purchaser
and the provisions hereof shall be deemed amended to provide for such
permissible rate.
9.14 BROKER. Purchaser and Vendors represent and warrant to each other
that, with respect to the financing transaction herein contemplated, no Person
is entitled to any brokerage fee or other commission as a result of their
respective conduct and each agrees to indemnify and hold the other harmless
against any and all such claims for which the indemnitor is responsible.
9.15 INDEMNIFICATION. Purchaser agrees to indemnify, save, and hold
harmless Administrative Agent, Collateral Agent, Vendors and their directors,
officers, agents, attorneys and employees (collectively, the "Indemnitees") from
and against: (a) any and all claims, demands, actions, or causes of action that
are asserted against any indemnitee by any Person if the claim, demand, action,
or cause of action arises out of or relates to a claim, demand, action, or cause
of action that the Person asserts or may assert against Purchaser, or any
officer, director or shareholder of Purchaser in their capacity as such; (b) any
and all claims, demands, actions or causes of action that are asserted against
any indemnitee (other than by Purchaser) if the claim,
75.
<PAGE> 77
demand, action or cause of action arises out of or relates to the Forbearances,
the use of proceeds of any Forbearances, or the relationship of Purchaser and
Vendors under this Agreement or any transaction contemplated pursuant to this
Agreement; (c) any administrative or investigative proceeding by any
governmental agency arising out of or related to a claim, demand, action or
cause of action described in clauses (a) or (b) above; and (d) any and all
liabilities, losses, costs, or expenses (including outside attorneys' fees,
in-house counsel fees and disbursements) that any indemnitee suffers or incurs
as a result of any of the foregoing; provided, that Purchaser shall have no
obligation under this SECTION 9.15 to any Vendor, Collateral Agent or
Administrative Agent with respect to any of the foregoing arising out of the
gross negligence or willful misconduct of such Vendor, Collateral Agent or
Administrative Agent.
9.16 SEVERABILITY. Whenever possible, each provision of this Agreement,
the Notes, Pagares and each of the other Credit Documents shall be interpreted
in such a manner as to be valid, legal and enforceable under the applicable law
of any jurisdiction. Without limiting the generality of the foregoing, in case
any provision of this Agreement, the Notes, Pagares or any of the other Credit
Document shall be invalid, illegal or unenforceable under the applicable law of
any jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provision in any other jurisdiction, shall not in any way
be affected or impaired thereby.
9.17 HEADINGS. Headings in this Agreement are for convenience of
reference only and are not part of the substance hereof.
9.18 COUNTERPARTS. This Agreement may be executed in identical original
counterparts, each of which will be deemed to be an original and taken together
shall constitute one and the same instrument.
9.19 SURVIVAL. All indemnities herein shall survive the execution and
delivery of this Agreement, the Notes and Pagares and the making and repayment
of all Forbearances.
9.20 EFFECTIVENESS. This Agreement shall become effective on the date
on which Purchaser, Vendors, Administrative Agent and Collateral Agent shall
have signed a copy hereof and shall have delivered the same to the other
parties.
9.21 CONFIDENTIALITY. Administrative Agent, Collateral Agent, and each
Vendor agrees that it will use its reasonable best efforts to keep confidential
and to cause any representative designated under SECTION 5.1(F) hereof to keep
confidential any material non-public information from time to time supplied to
it under this Agreement; provided, however, that nothing herein shall prohibit
Administrative Agent, Collateral Agent or any Vendor from disclosing such
information (a) to the extent Administrative Agent, Collateral Agent or such
Vendor in good faith believes it is required by statute, rule, regulation or
judicial process to divulge such information to any Person as required by such
authority; (b) to Administrative Agent's, Collateral Agent's or such Vendor's
counsel; (c) to Administrative Agent's, Collateral Agent's or such Vendor's
examiners, regulators, advisors, auditors or comparable Persons; (d) to any of
Administrative Agent's, Collateral Agent's or such Vendor's Affiliates; (e) to
any other Vendor or any assignee, transferee or participant, or any potential
assignee, transferee or participant, of all or any portion of Administrative
Agent's, Collateral Agent's or any Vendor's rights under this Agreement or the
other Credit Documents who is notified of the confidential nature of the
information and agrees to be bound by this provision or provisions reasonably
76.
<PAGE> 78
comparable hereto; or (f) any other Person in connection with any litigation to
which any of Vendors is a party; and provided, further, that no Vendor shall
have any obligation under this SECTION 9.21 to the extent any such information
becomes available on a non-confidential basis from a source other than Purchaser
or its Subsidiaries or that any information becomes publicly available other
than by a breach of this SECTION 9.21. Each Vendor agrees it will use all
confidential information exclusively for the purpose of evaluating, monitoring,
selling, protecting or enforcing its rights under this Agreement and the other
Credit Documents. Without affecting any other rights of Purchaser, each Vendor
agrees that Purchaser shall be entitled to seek the remedies of injunction and
specific performance for any breach of the provisions of this SECTION 9.21.
9.22 ENTIRE AGREEMENT. This Agreement, the Notes, the Pagares, the
other Credit Documents and the documents and agreements executed in connection
herewith and therewith constitute the final agreement of the parties hereto and
supersede any prior agreement or understanding, written or oral, with respect to
the matters contained herein and therein, including but not limited to any Term
Sheet between or among Purchaser, Parent and QUALCOMM through the date of this
Agreement.
9.23 CURRENCY OF PAYMENT. The obligation of Purchaser to pay in Dollars
those amounts of the sums specified to be due in Dollars, under this Agreement
or the respective Credit Documents (the "Credit Document Currency") shall not be
deemed to have been novated, discharged or satisfied by any tender of (or
recovery under judgment expressed in) any currency other than the Credit
Document Currency, except to the extent to which such tender (or recovery) shall
result in the effective payment of such aggregate amount in the applicable
Credit Document Currency at the place where such payment is due and,
accordingly, the amount (if any) by which any such tender (or recovery) shall
fall short of such amount shall be and remain due to Administrative Agent,
Vendors or QUALCOMM, as the case may be, as a separate Obligation, unaffected by
judgment having been obtained (if such is the case) for any other amounts due in
respect of this Agreement or the Credit Documents.
9.24 JUDGMENT CURRENCY. Purchaser agrees to indemnify each Vendor
against any loss incurred by it as a result of any judgment or order being given
or made for the payment of any amount due under any Pagare which is expressed
and paid in a currency (the "Judgment Currency") other than the currency in
which such amount was payable under this Agreement (the "Obligation Currency")
and as a result of any variation between (i) the rate of exchange at which the
Obligation Currency amount is converted into the Judgment Currency for the
purposes of satisfying such judgment or order, and (ii) the rate of exchange at
which such Vendor is able to purchase the Obligation Currency with the amount of
Judgment Currency actually received by such Vendor. The foregoing indemnity
shall constitute a separate and independent obligation of Purchaser and shall
continue in full force and effect notwithstanding any such judgment or order as
aforesaid. The term "rate of exchange" shall include any premiums and costs of
exchange payable in connection with the purchase of, or conversions into, the
relevant currency.
9.25 ENGLISH LANGUAGE. This Agreement is made in the English language.
One Spanish language translation of this Agreement prepared at Purchaser's
expense by Chilean counsel to Purchaser and Chilean counsel to Vendors under
this Agreement shall be the agreed Spanish language translation hereof for all
purposes. Such translation and no other may be filed in one or more public
registries in the Republic of Chile or used in any proceeding in the
77.
<PAGE> 79
Republic of Chile. For all purposes, the English language version hereof shall
be the original instrument and in all cases of conflict between the English and
the Spanish versions, the English version shall control.
9.26 REINSTATEMENT. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
obligations of Purchaser, or any part thereof, is, pursuant to applicable Law,
rescinded or reduced in amount, or must otherwise be restored or returned by
Administrative Agent, any Vendor or QUALCOMM. In the event that any payment or
any part thereof is so rescinded, reduced, restored or returned, such
obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, restored or returned.
78.
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized, as of the date
first above written.
PURCHASER: CHILESAT TELEFONIA PERSONAL S.A., a
company duly organized under the laws of
the Republic of Chile
By: /s/ ALEJANDRO ROJAS
--------------------------------------
Chairman
By: /s/ STEVEN J. CALIGURI
--------------------------------------
Director
Address: Rinconada El Salto 202
Huechuraba Santiago,
Chile
<PAGE> 81
GUARANTOR: INVERSIONES LEAP WIRELESS CHILE S.A., a
company duly organized under the laws of
the Republic of Chile
By: /s/ JAMES E. HOFFMANN
--------------------------------------
Name:
------------------------------------
Title: Agent
-----------------------------------
Address:
ADMINISTRATIVE AGENT: QUALCOMM Incorporated
By: /s/ PAUL FISKNESS
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: QUALCOMM Incorporated
5755 Morehouse Drive
San Diego, California 92121
Attention: Vice President -
Customer Finance
Fax No. (619) 658-4203
With Copy to: General Counsel
Payment Office: QUALCOMM Incorporated
5755 Morehouse Drive
San Diego, California 92121
Attention: Vice President -
Customer Finance
Fax No. (619) 658-4203
With Copy to: General Counsel
[Signature Page]
<PAGE> 82
COLLATERAL AGENT: QUALCOMM Incorporated
By: /s/ PAUL FISKNESS
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Address: QUALCOMM Incorporated
5755 Morehouse Drive
San Diego, California 92121
Attention: Vice President -
Customer Finance
Fax No. (619) 658-4203
With Copy to: General Counsel
VENDORS: QUALCOMM INCORPORATED
By: /s/ PAUL FISKNESS
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Domestic Lending Office
QUALCOMM Incorporated
5755 Morehouse Drive
San Diego, California 92121
Attention: Vice President -
Customer Finance
Fax No. (619) 658-4203
With Copy to: General Counsel
[Signature Page]
<PAGE> 83
SCHEDULE 1.1
COMMITMENTS
<TABLE>
<CAPTION>
DEFERRED CAPITALIZED
PAYMENT INTEREST AGGREGATE
BALANCE COMMITMENT COMMITMENT
------- ---------- ----------
<S> <C> <C> <C>
QUALCOMM Incorporated $90,685,384.09 $14,600,000.00 $105,285,384.09
</TABLE>
<PAGE> 84
SCHEDULE 2.7(A)
PRINCIPAL AND CAPITALIZED INTEREST PAYMENT SCHEDULE
<TABLE>
<CAPTION>
PERIOD PERCENTAGE
------ ----------
<S> <C>
September 30, 2001 29%
March 31, 2002 2%
September 30, 2002 2%
March 31, 2003 2%
September 30, 2003 2%
March 31, 2004 7%
September 30, 2004 7%
March 31, 2005 10%
September 30, 2005 10%
March 31, 2006 14.5%
September 30, 2006 14.5%
</TABLE>
<PAGE> 85
INDEX OF SCHEDULES
Schedule 1.1 -- Commitments
Schedule 2.7(a) -- Principal and Interest Payment Schedule
Schedule 4.1(a) -- Ownership Structure of Purchaser and Parent
Schedule 4.1(f) -- Litigation
Schedule 4.1(h) -- Non-Contravention of Laws/Agreements
Schedule 4.1(i) -- Liens on Collateral
Schedule 4.1(l) -- Subsidiaries of Purchaser and Parent
Schedule 4.1(o) -- Indebtedness
Schedule 4.1(s) -- License and Other Licenses Areas and Agreements
Schedule 4.1(v) -- Transactions with Affiliates
INDEX OF EXHIBITS
Exhibit A -- Form of Pagare
Exhibit B -- Form of Landlord's Waiver
Exhibit C -- Form of Site Lease Agreement
Exhibit D -- Form of Capitalized Interest Forbearance Request
Exhibit E -- Form of Notice of Conversion/Continuation
Exhibit F Form of Assignment and Acceptance
<PAGE> 86
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS.....................................................................................2
1.1 Defined Terms...................................................................................2
1.2 Other Interpretive Provisions..................................................................22
SECTION 2. DEFERRED PAYMENT BALANCE AND CAPITALIZED INTEREST FACILITY.....................................23
2.2 Capitalized Interest Facility..................................................................23
2.3 Types of Forbearances..........................................................................23
2.4 Conversion and Continuation Elections..........................................................23
2.5 Duration of Interest Periods...................................................................24
2.6 Notice and Manner of Making Additional Forbearances............................................24
2.7 Scheduled Payment of Principal of the Forbearances.............................................26
2.8 Interest Rates; Payment of Interest; Commitment Fee; Calculation of Interest and Fees..........26
2.9 Payment Procedures.............................................................................27
2.10 Prepayments of the Forbearances; Certain Required Payments; Aggregate Commitment
Reduction......................................................................................28
2.11 Survivability..................................................................................30
2.12 Evidence of Debt...............................................................................30
2.13 Net Payments...................................................................................32
2.14 Changed Circumstances; Taxes...................................................................33
2.15 Capital Requirements...........................................................................35
2.16 Syndication....................................................................................36
2.17 Replacement of Vendors.........................................................................36
SECTION 3. CONDITIONS OF EFFECTIVENESS OF THIS AGREEMENT AND FORBEARANCES.................................37
3.1 Conditions Precedent to the Effectiveness of the Forbearances..................................37
3.2 Conditions Precedent to Effectiveness of and Additional Forbearances...........................41
SECTION 4. REPRESENTATIONS AND WARRANTIES.................................................................41
4.1 Representations and Warranties of Purchaser....................................................41
(y) Status................................................................................47
SECTION 5. COVENANTS......................................................................................47
5.1 Affirmative Covenants..........................................................................47
5.2 Negative Covenants.............................................................................54
</TABLE>
i
<PAGE> 87
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.3 Financial Covenants of Purchaser...............................................................57
SECTION 6. EVENTS OF DEFAULT..............................................................................61
6.1 Events of Default..............................................................................61
6.2 Remedies.......................................................................................63
6.3 Unmatured Events of Default....................................................................64
SECTION 7. ADMINISTRATIVE AGENT...........................................................................64
7.1 Appointment of QUALCOMM Incorporated as Administrative Agent...................................64
7.2 Rights and Powers as Vendor....................................................................64
7.3 Delegation of Duties by Administrative Agent...................................................64
7.4 Liability of Administrative Agent..............................................................64
7.5 Reliance by Administrative Agent...............................................................65
7.6 Notice of Default..............................................................................66
7.7 Non-reliance by Vendors........................................................................66
7.8 Indemnification................................................................................67
7.9 Successor Administrative Agent.................................................................67
SECTION 8. COLLATERAL AGENT...............................................................................68
8.1 Appointment of QUALCOMM Incorporated as Collateral Agent.......................................68
8.2 Delegation of Duties by Collateral Agent.......................................................68
8.3 Liability of Collateral Agent..................................................................68
8.4 Reliance by Collateral Agent...................................................................68
8.5 Non-Reliance by Vendors........................................................................69
8.6 Indemnification................................................................................69
8.7 Successor Collateral Agent.....................................................................69
SECTION 9. MISCELLANEOUS..................................................................................70
9.1 Amendments.....................................................................................70
9.2 Notices, Etc...................................................................................71
9.3 No Waiver; Remedies............................................................................71
9.4 Costs, Expenses and Taxes......................................................................71
9.5 Right of Set-Off...............................................................................72
9.6 Ratable Sharing................................................................................72
</TABLE>
ii
<PAGE> 88
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.7 Binding Effect; Assignments....................................................................73
9.8 Collateral.....................................................................................73
9.9 Nature of Vendors' Obligations.................................................................73
9.10 Non-liability of Vendors.......................................................................73
9.11 Governing Law, Jurisdiction, Venue, Service of Process, Waiver of Immunity.....................74
9.12 Conflict in Credit Documents...................................................................75
9.13 Maximum Rate...................................................................................75
9.14 Broker.........................................................................................75
9.15 Indemnification................................................................................75
9.16 Severability...................................................................................76
9.17 Headings.......................................................................................76
9.18 Counterparts...................................................................................76
9.19 Survival.......................................................................................76
9.20 Effectiveness..................................................................................76
9.21 Confidentiality................................................................................76
9.22 Entire Agreement...............................................................................77
9.23 Currency of Payment............................................................................77
9.24 Judgment Currency..............................................................................77
9.25 English Language...............................................................................77
9.26 Reinstatement..................................................................................78
</TABLE>
iii
<PAGE> 1
EXHIBIT 13.1
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended August 31, 1999 1998(1) 1997(1) 1996
- ----------------------------------------------------------------------------------------------------------------------
(restated) (restated)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2)
Operating revenues ................................ $ 3,907 $ -- $ -- $ --
--------- --------- --------- ---------
Operating expenses:
Cost of operating revenues ........................ (3,810) -- -- --
Selling, general and administrative expenses ...... (28,745) (23,888) (1,361) (396)
Depreciation and amortization ..................... (5,824) -- -- --
--------- --------- --------- ---------
Total operating expenses ...................... (38,379) (23,888) (1,361) (396)
--------- --------- --------- ---------
Operating loss .................................. (34,472) (23,888) (1,361) (396)
Equity in net loss of unconsolidated wireless
operating companies ............................ (100,300) (23,118) (3,793) --
Write-down of investments in unconsolidated
wireless operating companies ................... (27,242) -- -- --
Interest income ................................... 2,505 273 -- --
Interest expense and amortization of discount
and facility fee ............................... (10,356) -- -- --
Foreign currency transaction losses ............... (7,211) -- -- --
Gain on sale of wholly owned subsidiary ........... 9,097 -- -- --
Gain on issuance of stock by unconsolidated
wireless operating company ..................... 3,609 -- -- --
Other income (expense), net ....................... (243) -- -- --
--------- --------- --------- ---------
Net loss ........................................ $(164,613) $ (46,733) $ (5,154) $ (396)
========= ========= ========= =========
Basic and diluted net loss per common share (3) ... $ (9.19) $ (2.65) $ (0.29) $ (0.02)
========= ========= ========= =========
Shares used to calculate basic and diluted
net loss per common share (3) .................. 17,910 17,648 17,648 17,648
========= ========= ========= =========
BALANCE SHEET DATA (2)
Cash (at end of period) ........................... $ 26,215 $ -- $ -- $ --
Working capital (deficit) ......................... 6,587 (14,789) (279) (111)
Total assets ...................................... 335,331 157,752 42,267 --
Stockholders' equity .............................. 70,900 142,963 41,988 (111)
</TABLE>
- ---------------
(1) These amounts have been restated for the adoption of the equity method
of accounting during fiscal 1999 for Leap's investment in Chase
Telecommunications Holdings, Inc.
(2) For the fourth quarter of fiscal 1999, the financial statements of
SMARTCOM are included in the consolidated financial data as a result of
Leap's acquisition of the remaining 50% interest in SMARTCOM. Prior to
the fourth quarter, Leap's investment in SMARTCOM was accounted for
using the equity method of accounting.
(3) The basic and diluted net loss per common share for the year ended
August 31, 1999 was calculated by dividing the net loss by the weighted
average number of common shares outstanding during the period of
17,910,440. Leap was a wholly owned subsidiary of QUALCOMM prior to
September 23, 1998. The basic and diluted net loss per common share was
calculated by dividing the net loss for the fiscal years ended August
31, 1998, 1997 and 1996 by the 17,647,685 shares of Leap common stock
issued in the distribution to QUALCOMM's stockholders on September 23,
1998.
1
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This annual report, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains certain forward-looking
statements that are not related to historical results, including statements
regarding the network deployment plans of Leap and its operating companies and
their plans for financing these deployments. Leap has based these
forward-looking statements largely on its current expectations and projections
about future events and financial trends affecting the financial condition of
its business. Forward-looking statements can be identified through their use of
words such as "believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "expect," and similar expressions in this annual report. Actual
results may differ materially from those stated or implied in the
forward-looking statements. The forward-looking statements contained in this
annual report are subject to a number of risks, uncertainties and assumptions
about Leap Wireless International, Inc., including the risks described below
under the heading "Risk Factors."
OVERVIEW
Leap Wireless International, Inc. is a wireless communications carrier that
deploys, owns, operates and participates in CDMA telecommunications networks in
domestic and international markets with strong growth potential. Through its
operating companies, Leap has launched all digital wireless networks in Mexico,
Chile and the United States. Upon completion of its pending U.S. asset
acquisitions, Leap will have interests in wireless communications licenses
covering approximately 138 million potential customers in these three countries.
Leap's equity share will be approximately 67 million potential customers,
although this share may decrease as Leap's operating companies sell additional
equity.
Domestic and international telecommunications markets are expanding rapidly.
Developing countries are seeking to increase their number of telephone lines as
a percentage of their population, known as teledensity, and to increase
competition among carriers. In addition, increased demand, decreased government
regulation, and new spectrum auctions have created domestic and international
opportunities for new providers to capture market share. Leap believes that
wireless is the cheapest and fastest way to increase teledensity and that it
possesses the expertise to oversee and manage the entry of new wireless
operating companies into today's competitive markets.
Leap's domestic strategy is to offer consumers a simple and affordable
wireless service plan that allows them to make all of the local calls they want
for a low, flat monthly rate. Targeted at the mass consumer market, the service
is marketed under the name "Cricket(SM)" and is identified as "the around-town
phone(SM)" and "comfortable wireless(SM)." Cricket(SM) service was introduced in
March 1999 in Chattanooga, Tennessee using the existing infrastructure of Chase
Telecommunications, Inc., a company that Leap has agreed to acquire. The service
was launched under an agreement that requires the management of Chase
Telecommunications to control the business until Leap's proposed acquisition of
Chase Telecommunications receives all necessary governmental approvals and is
completed. The expansion of Cricket(SM) service to Nashville, Tennessee is
currently underway.
Leap plans to introduce Cricket(SM) service to additional markets in the
United States in the future. Leap recently acquired 36 licenses in the federal
government's 1999 reauction of broadband PCS spectrum licenses. Leap has also
entered into agreements to purchase several licenses and is considering the
purchase of additional licenses in the United States.
2
<PAGE> 3
In July 1999, the FCC issued a Memorandum Opinion and Order that found that
Leap was qualified to acquire and operate C-Block and F-Block PCS spectrum
licenses, subject to several conditions. The order also granted Leap's
application to acquire the 36 reauction licenses and approved the transfer of
four licenses in North Carolina and South Carolina to Leap, subject to the
specified conditions. In October 1999, the FCC issued the 36 reauction licenses
to Leap. Another wireless company has filed an application for review of the
FCC's order. Leap believes, however, that the FCC's order will be affirmed.
Generally, Leap's international strategy is to invest in growth markets with
partners who provide familiarity with the local market and an ability to
facilitate deployment. For each joint venture in which it holds a significant
position, Leap is actively involved in the management of the venture, combining
its expertise in wireless markets with its technical expertise in CDMA. Leap is
committed to bringing the benefits of reliable, cost-effective and high-quality
voice and data services to its operating companies' customers.
In Mexico, Leap's joint venture operating company, PEGASO, has launched
wireless service in three of Mexico's four largest markets - Monterrey,
Guadalajara and Tijuana - as part of a planned nationwide rollout. PEGASO
expects to launch service in Mexico City near the end of calendar 1999. During
the past year, PEGASO signed a roaming agreement with Sprint PCS that will allow
PEGASO's customers to use Sprint PCS's nationwide wireless network in the United
States. Under the agreement, Sprint PCS customers will also be able to utilize
PEGASO's network in Mexico.
Chilesat Telefonia Personal, a wholly owned subsidiary of Leap, launched a
nationwide wireless network in Chile in September 1998. Chilesat Telefonia
Personal is being renamed SMARTCOM PCS and is referred to in the remainder of
this report as SMARTCOM. SMARTCOM's system is the first nationwide CDMA network
in Latin America. Leap increased its ownership interest in SMARTCOM from 50% to
100% in April 1999.
The directors of the Transworld Companies, partially owned subsidiaries of a
company in which Leap has an indirect interest, recently voted to liquidate the
companies. The decision followed the Transworld Companies' loss of leased
satellite transmission capacity and the companies' failure to develop an
acceptable business plan that did not utilize satellite transmission. As a
result of these developments, Leap wrote down its indirect investment in the
Transworld Companies in the fourth quarter of fiscal 1999. In addition, Leap
stopped funding and wrote off its remaining investment in Metrosvyaz.
Leap and its operating companies are in the early stages of development.
Start-up wireless communications companies typically require substantial capital
expenditures for the construction of their networks and license acquisition
costs. In addition, these companies typically incur significant marketing and
other expenses as they begin commercial operations. Accordingly, as Leap's
operating companies continue to build-out their networks, expand their
operations, and amortize their capitalized costs, their net operating losses and
Leap's proportionate share of the losses is expected to grow.
PRESENTATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations reviews the financial condition of the businesses that QUALCOMM
transferred to Leap in September 1998 as if Leap were a separate entity for all
periods discussed. Leap adopted the equity method of accounting for its
investment in Chase Telecommunications Holdings, Inc. in the third quarter of
fiscal 1999. Prior to that, Leap accounted for its investment in Chase
Telecommunications Holdings under the cost method. Accordingly, all prior
periods presented in the accompanying financial statements have been adjusted
retroactively in accordance with generally accepted accounting principles.
In April 1999, Leap increased its ownership interest in SMARTCOM from 50% to
100%. As a result of the reporting lag it has adopted for its foreign operating
companies, Leap began fully consolidating SMARTCOM's results of operations in
June 1999, the beginning of the fourth quarter of fiscal 1999. Prior to that,
Leap accounted for its investment in SMARTCOM under the equity method of
accounting.
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RESULTS OF OPERATIONS
FISCAL YEAR ENDED AUGUST 31, 1999 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1998
Leap incurred a net loss of $164.6 million in fiscal 1999 compared to a net
loss of $46.7 million in fiscal 1998. The increase resulted primarily from
start-up costs associated with Leap's international operating companies. Leap's
share of these start-up costs, $100.3 million in fiscal 1999, is recorded as
equity in net loss of unconsolidated wireless operating companies. In addition,
in fiscal 1999 Leap recorded a write-down of equity investments of $27.2
million, interest expense and amortization of debt discount and facility fee of
$10.4 million, foreign currency transaction losses of $7.2 million, a gain on
the sale of a wholly owned subsidiary of $9.1 million and a gain on issuance of
stock by an unconsolidated wireless operating company of $3.6 million.
As a direct result of the consolidation of SMARTCOM in the fourth quarter of
fiscal 1999, Leap recorded $3.9 million of operating revenues, $3.8 million of
cost of operating revenues, $4.5 million of additional selling, general and
administrative expenses, $5.3 million of additional depreciation and
amortization, $2.9 million of additional interest expense, and $7.2 million of
foreign currency transaction losses. SMARTCOM's full consolidation increased
Leap's net loss in fiscal 1999 by $9.9 million. During the prior fiscal year,
Leap did not report any operating revenues because all of its operating
companies were accounted for under the equity method of accounting. Leap's
operating companies did not generate material revenues in the prior fiscal year.
Leap incurred $28.7 million of selling, general and administrative expenses
in fiscal 1999 compared to $23.9 million in fiscal 1998. The increase resulted
from the consolidation of SMARTCOM in the fourth quarter of fiscal 1999.
Excluding SMARTCOM, selling, general and administrative expenses remained
relatively flat, despite increased staffing as a result of Leap becoming a
stand-alone entity.
Leap incurred an operating loss of $34.5 million in fiscal 1999 compared to
an operating loss of $23.9 million in fiscal 1998. The $10.6 million increase
primarily reflects the consolidation of SMARTCOM in the fourth quarter of fiscal
1999. Leap expects that fiscal 1999 operating revenues, operating expenses and
operating loss are not representative of future results, and believes operating
revenues and expenses will increase in the future. Leap expects substantial
growth in subscribers, operating revenues and operating expenses as a result of
its pending acquisition and consolidation of Chase Telecommunications, the
planned development and launch of Cricket(SM) service in multiple U.S. markets,
and an increase in marketing efforts in Chile. Leap also expects substantial
growth in PEGASO's subscribers, operating revenues and operating expenses;
however, because PEGASO is accounted for under the equity method, its operating
revenues and expenses are not fully consolidated.
Equity in net loss of unconsolidated wireless operating companies was $100.3
million in fiscal 1999 compared to $23.1 million in fiscal 1998. The significant
increase in Leap's share of the net loss of its unconsolidated wireless
operating companies related primarily to the expenditures they incurred in
launching their network services, including marketing and other expenses, and
the amortization of their capitalized network costs. SMARTCOM, accounted
for under the equity method until the fourth quarter of fiscal 1999, launched
nationwide service in September 1998. PEGASO launched operations in Tijuana,
Guadalajara and Monterrey in February through September 1999. Chase
Telecommunications launched its traditional mobile service in the U.S. in
September 1998 and re-launched service utilizing Leap's Cricket(SM) wireless
concept in March 1999. In addition, Petrosvyaz, a Metrosvyaz joint venture,
launched commercial service in St. Petersburg in April 1999.
Equity in net loss of unconsolidated wireless operating companies included a
$16.9 million asset impairment charge in fiscal 1999. Orrengrove, a company in
which Leap has an indirect ownership interest, recorded the charge when the
satellite that the Transworld Companies relied on to deliver long-distance
service in Russia failed. The Transworld Companies are partially owned
subsidiaries of Orrengrove. As a result of the satellite failure, the Transworld
Companies began using fiber lines to provide long-distance service as a
short-term alternative to the satellite transmission option they previously
used. They also began to explore long-term alternative methods to provide
long-distance services.
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After reviewing a series of alternative business plans that did not meet
their minimum financial performance criteria, the directors of the Transworld
Companies voted to liquidate the companies and to distribute their net assets to
their stockholders. As a result, Leap recorded a $17.6 million write-down in the
fourth quarter of fiscal 1999, reducing its investment in Orrengrove to the
liquidation proceeds Leap expects to receive.
Leap also wrote off its remaining $9.6 million investment in Metrosvyaz in
fiscal 1999 as a result of its decision to stop funding loans to Metrosvyaz.
Metrosvyaz, a joint venture attempting to enter the Russian wireless
communications market, had not satisfied certain funding conditions under its
loan agreement with Leap and was in default of that agreement. In addition, Leap
had been prevented from securing full reporting and documentation of
performance, results and expenditures of Metrosvyaz in spite of repeated efforts
to obtain that information. Preliminary results of a special investigation of
Metrosvyaz also disclosed serious irregularities, including unaccounted for
funds and questionable contracts and payments.
Leap expects its share of the equity losses of its unconsolidated wireless
operating companies to decrease in fiscal 2000 as a result of the consolidation
of SMARTCOM, the expected acquisition of Chase Telecommunications, the
discontinuance of funding to Metrosvyaz and the reduction in its percentage
equity interest in PEGASO from 33.3% to 28.6%. Leap expects the decrease to be
offset in part by increased equity losses from PEGASO's continued build-out in
Mexico.
Interest expense in fiscal 1999 related primarily to borrowings under Leap's
credit agreement with QUALCOMM and the consolidation of $2.9 million of SMARTCOM
interest expense in the fourth quarter of fiscal 1999. SMARTCOM's interest
expense related primarily to the financing of its wireless communications
network. Leap expects interest expense to substantially increase in fiscal 2000
as a result of the consolidation of SMARTCOM and expected borrowings to fund the
construction of domestic telecommunications networks. Leap did not incur any
interest expense during the prior fiscal year.
Foreign currency transaction losses of $7.2 million in fiscal 1999 reflected
unrealized foreign exchange losses recognized by SMARTCOM on U.S. dollar
denominated loans as a result of changes in the exchange rate between the U.S.
dollar and the Chilean peso during the fourth quarter of fiscal 1999.
Gain on sale of wholly owned subsidiary of $9.1 million in fiscal 1999
resulted from Leap's sale of OzPhone Pty. Ltd., its Australian operating
company. OzPhone held wireless licenses but had not initiated service.
Gain on issuance of stock by unconsolidated wireless operating company of
$3.6 million in fiscal 1999 effectively reflects a reduction in Leap's share of
PEGASO's accumulated losses as a result of a decrease in Leap's percentage
ownership of PEGASO. In July 1999, several other investors increased their
ownership interest in PEGASO by contributing $50 million of capital as
previously planned.
FISCAL YEAR ENDED AUGUST 31, 1998 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1997
General and administrative expenses were $23.9 million for fiscal 1998,
compared to $1.4 million for fiscal 1997. The increase was due principally to
increases in business development activities relating to projects to create
Leap' operating companies in Mexico and Russia. These development activities
resulted in significantly higher consulting expenses and an increase in
QUALCOMM's corporate overhead allocated to Leap. Leap expects that general and
administrative expenses will increase in the future as a result of ongoing
development efforts on current and new projects.
Equity in net loss of unconsolidated wireless operating companies for fiscal
1998 was $23.1 million, which represented Leap's wireless share of the net
losses of the wireless operating companies in which it then held an ownership
interest accounted for under the equity method of accounting. These losses
consisted of costs incurred before service launch during the network build-out
and testing phases, such as salary and related benefits, overhead expenses,
professional and consulting fees, and interest on long-term debt. Through August
31, 1998, there was no depreciation of network equipment and no
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amortization of licenses as service had not been launched commercially. Equity
in net loss of unconsolidated wireless operating companies of $3.8 million for
fiscal 1997 primarily reflected Leap's equity share in the net loss of Chase
Telecommunications Holdings, which began network planning and initial build-out
activities earlier in the year.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
Leap expects to require significant capital over the next several years to
fund the development and operation of its operating companies' existing wireless
projects and potential new ventures as well as corporate operations.
Leap's primary sources of liquidity are $26.2 million of cash and cash
equivalents as of August 31, 1999, a $265 million credit agreement with
QUALCOMM, and vendor financing agreements related to the purchase and
installation of new telecommunications equipment. The credit agreement contains
a $35.2 million sub-facility to fund the corporate operating expenses of Leap at
the parent level, and a $229.8 million sub-facility to fund specified
investments of Leap. As of August 31, 1999, Leap had $145.6 million available to
it under the credit agreement, with $24.6 million available under the working
capital sub-facility and $121.0 million available under the investment
sub-facility. Amounts available under the investment sub-facility are allocated
to specific Leap projects and may not be reallocated to other projects without
QUALCOMM's written consent.
As a condition to the FCC's recognition of Leap's qualification to hold
C-Block and F-Block licenses of PCS spectrum, Leap must take steps so that by
January 2001, QUALCOMM holds no more than 50% of Leap's outstanding debt
obligations. Leap cannot assure investors that it will be able to reduce its
debt to QUALCOMM to 50% or less of its outstanding debt obligations by January
2001.
In the United States, Leap plans to construct wireless networks in numerous
markets. Leap expects to incur substantial expenditures in fiscal 2000 and
beyond to plan and construct these wireless networks. As is typical for start-up
telecommunications networks, Leap also expects the networks to incur operating
expenses significantly in excess of revenues in their early years of operations.
Subsequent to the end of fiscal 1999, a domestic subsidiary of Leap agreed to
purchase $330 million of infrastructure products and services from a major
telecommunications supplier. The supplier agreed to finance these purchases plus
additional working capital at an interest rate equal to LIBOR plus 3.5% to 4.25%
or a bank base rate plus 2.5% to 3.25%, in each case with the specific rate
based on the ratio of total indebtedness to EBITDA (earnings before interest,
taxes, depreciation and amortization). Principal payments are scheduled to begin
after three years with a final maturity after eight years. Repayment is weighted
to the later years of the repayment schedule. The supplier credit agreement is
secured and contains covenants and conditions typical for a loan of this type.
At the same time, Leap's subsidiary also agreed to purchase $330 million of
next-generation infrastructure products which are currently in development and
related services from a second major telecommunications supplier. Purchases from
the second supplier will be on substantially similar terms, including financing.
This second agreement is subject to approval of the supplier's board of
directors.
Leap expects to fund the cost of developing and operating domestic networks
in fiscal 2000 largely through vendor financing and amounts available under its
credit agreement with QUALCOMM. In addition, Leap expects that it will need to
raise additional capital to fund its planned roll-out of domestic networks and
acquisitions of licenses in fiscal 2000. As a result, Leap is exploring debt and
equity financing alternatives. Leap cannot assure investors that it will be able
to raise additional capital in fiscal 2000 or that additional capital will be
available to it on acceptable terms. If Leap does not obtain additional
financing, management believes it can reduce its capital needs sufficiently to
meet its liquidity requirements through fiscal 2000 by slowing or reducing the
scope of its planned deployments in the United States and by reducing or
deferring additional license acquisitions.
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Leap and Chase Telecommunications are parties to a credit agreement under
which Leap provides, at its discretion, working capital to Chase
Telecommunications. The parties have agreed in principle to increase the maximum
amount that may be drawn under the facility to $45 million. At August 31, 1999,
principal borrowings under the working capital facility totaled approximately
$32.8 million.
Chase Telecommunications is preparing to launch Cricket (SM) service in
additional markets in Tennessee. Until Leap's pending acquisition of Chase
Telecommunications is completed, a Leap subsidiary plans to purchase the
equipment and services required by Chase Telecommunications under the
subsidiary's existing equipment purchase and financing agreements, and to resell
the equipment and services to Chase Telecommunications on substantially similar
terms, including financing. If Leap does not complete the acquisition of Chase
Telecommunications by approximately October 2000, Leap is required to purchase
from the vendor the note Leap's subsidiary will provide to finance its purchase
of equipment and services for Chase Telecommunications.
Leap's wholly owned subsidiary, SMARTCOM, expects to incur significant
capital expenses over the next several years. SMARTCOM plans to upgrade existing
equipment and purchase additional equipment to accommodate expected subscriber
growth and to enhance the quality and reliability of its system. As a relatively
new wireless operating company, SMARTCOM also expects to incur operating losses
for the next several years.
Leap intends to finance the planned upgrade and expansion as well as the
operation of SMARTCOM's network in fiscal 2000 through borrowings under Leap's
credit agreement with QUALCOMM, the proceeds of equipment financing agreements
that Leap expects to negotiate in connection with planned equipment purchases by
SMARTCOM, and capital from additional financing transactions. Leap and an
equipment supplier are currently negotiating a new financing agreement for
SMARTCOM, and SMARTCOM has engaged an investment banker to assist it in selling
equity. SMARTCOM is also exploring other capital raising alternatives. Leap
cannot assure investors that SMARTCOM will obtain additional vendor funding or
conclude a sale of equity or other financing transaction in fiscal 2000. If
SMARTCOM does not obtain additional financing in fiscal 2000, Leap expects to
delay or reduce the scope of SMARTCOM's planned expansion.
SMARTCOM was in default of certain covenants in an equipment financing
agreement at August 31, 1999. Subsequent to the end of the fiscal year, SMARTCOM
and the equipment vendor amended the agreement, revising the covenants that
were in default and extending the loan repayment schedule.
In May 1999, PEGASO entered into a $100 million loan agreement with an
equipment vendor and several banks. Leap guaranteed 33% of PEGASO's
obligations under that agreement. In July 1999, several existing investors
contributed $50 million to PEGASO as previously planned. PEGASO expects to fund
a large portion of its development and operating activities in fiscal 2000 with
cash from operations, proceeds of the $50 million investment, and borrowings
under the $100 million loan agreement. In addition, PEGASO is seeking additional
debt and equity financing, including additional vendor financing. Leap has no
further commitment to contribute capital to PEGASO, although several other
existing investors are committed to contribute $50 million by August 2000.
OPERATING ACTIVITIES
Leap used $34.1 million in cash for operating activities in fiscal 1999,
compared to $18.4 million in fiscal 1998. Cash used in operating activities in
fiscal 1999 included $8.5 million attributable to the consolidation of SMARTCOM
during the fourth quarter. Leap expects that cash used in operating activities
will increase further as it expands its project development efforts. In
addition, Leap expects that cash used in operating activities will increase
substantially in the future as a result of its acquisition and consolidation of
SMARTCOM, its pending acquisition of Chase Telecommunications, and other Leap
activities related to the launch of its U.S. network.
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INVESTING ACTIVITIES
Cash used in investing activities was $158.3 million in fiscal 1999 compared
to $140.7 million in fiscal 1998. Significant investments in fiscal 1999
consisted of $124.5 million of investments in and loans to Leap's operating
companies ($71.4 million made before Leap began to operate as an independent
company), $28.0 million for Leap's acquisition of the remaining shares of
SMARTCOM, and $18.7 million on U.S. license acquisitions. Cash used in
investing activities was offset by $16.0 million provided from the sale of
Leap's OzPhone subsidiary. In fiscal 2000, Leap and its subsidiaries expect to
make significant investments in capital assets, including network equipment and
wireless communications licenses.
FINANCING ACTIVITIES
Cash provided by financing activities during fiscal 1999 amounted to $216.5
million, representing $95.3 million of funding from QUALCOMM for Leap's
operating and investing activities prior to the distribution of Leap common
stock to QUALCOMM's stockholders in September 1998 and $111.1 million of net
borrowings under the credit agreement with QUALCOMM after the distribution.
CURRENCY FLUCTUATION RISKS
Leap reports its financial statements in U.S. dollars. Leap's international
operating companies report their results in local currencies. Consequently,
fluctuations in currency exchange rates between the U.S. dollar and the
applicable local currency will affect Leap's results of operations as well as
the value of its ownership interests in its operating companies.
Generally, Leap's international operating companies generate revenues which
are paid in their local currency. However, many of these operating companies'
major contracts, including financing agreements and contracts with equipment
suppliers, are denominated in U.S. dollars. As a result, a significant change in
the value of the U.S. dollar against the national currency of an operating
company could result in a significant increase in the operating company's
expenses and could have a material adverse effect on the operating company and
on Leap. In some emerging markets, including Mexico, significant devaluations of
the local currency have occurred and may occur again in the future.
Leap does not currently have a policy to systematically hedge against foreign
currency exchange rate or interest rate risks.
INFLATION
Inflation has had and may continue to have negative effects on the economies
and securities markets of emerging market countries and could have negative
effects on Leap's operating companies and any new start-up project in those
countries, including their ability to obtain financing. Chile and Mexico, for
example, have periodically experienced relatively high rates of inflation. The
operating companies, where permitted and subject to competitive pressures,
intend to increase their tariffs to account for the effects of inflation.
However, in those jurisdictions where tariff rates are regulated or specified in
the license, the operating companies may not successfully mitigate the impact of
inflation on their operations.
YEAR 2000 ISSUE
The Year 2000 issue arises from the fact that many computer software programs
use two digits rather than four to represent a specific year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculation causing disruptions of operations including a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
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Leap and its operating companies have recently begun their respective
businesses and have designed and built their wireless communications networks
and support systems with the Year 2000 issue in mind. The recent acquisition of
network equipment and software does not guarantee, however, that such equipment
and software will be Year 2000 compliant.
Leap and each of its operating companies have conducted an inventory to
identify its systems that may be subject to Year 2000 problems and that are
critical to its business and operations. Each of Leap's operating companies has
been working with its primary telecommunications and business software systems
vendors on Year 2000 readiness issues. They have informed Leap and its operating
companies that their products are Year 2000 ready or, if not ready, have agreed
to a remediation and test program to be implemented prior to the Year 2000.
Although Leap expects that its operating companies' critical network
infrastructure systems will be Year 2000 compliant, Leap's operating companies
may experience difficulties with systems maintained by third parties. For
example, other telecommunications systems that interconnect with the operating
companies' systems (such as landline, long-distance and power systems) could
malfunction and disrupt their ability to provide wireless service. Leap's
operating companies are not currently aware of evidence that a failure is likely
to occur in their service areas. However, Leap's operating companies continue to
evaluate the risks associated with third-party interfaces and Year 2000 issues.
Leap continues to work at the corporate level and with its operating
companies to evaluate Year 2000 risks and the development of any required
remediation and contingency plans. Leap expects that Year 2000 testing and
preparation will continue during the remainder of 1999. To date, Leap has not
incurred any material costs in support of the Year 2000 issue. Leap estimates
that it will spend $500,000 or less in calendar year 1999 to review and correct
any non-compliance as well as to support the Leap operating companies and
support material third party relationships.
Leap cannot assure investors that Leap and its operating companies will be
able to identify all Year 2000 problems in their systems and third-party systems
in advance of the occurrence of those problems. In addition, we may not be able
to remedy any problems that may occur on a timely basis. A material Year 2000
problem could result in an interruption in, or a failure of, certain normal
business activities, including the provision of wireless service by the Leap
operating companies. Such a problem could materially and adversely affect the
business and operations of Leap and its operating companies.
Leap expects that its operating companies in the United States, Mexico and
Chile, and their critical equipment vendors, will have personnel available to
assess and remedy any Year 2000 problem that may occur early in the year 2000.
FUTURE ACCOUNTING REQUIREMENTS
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities,"
which Leap will be required to adopt for fiscal year 2000. This SOP provided
guidance on the financial reporting of start-up and organizational costs. It
requires start-up and organizational costs to be expensed as incurred. Leap does
not expect that the adoption of SOP No. 98-5 will have a material impact on its
consolidated financial position or results of operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities,"
which Leap must adopt for fiscal year 2001. This statement establishes a new
model for accounting for derivatives and hedging activities. Under FAS 133, all
derivatives must be recognized as assets and liabilities and measured at fair
value. Leap does not expect that the adoption of this new accounting standard
will have a material impact on its consolidated financial position or results of
operations.
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RISK FACTORS
LEAP HAS A LIMITED OPERATING HISTORY
Leap has only operated as an independent company since September 1998.
Because Leap and each of its operating companies are at an early stage of
development, Leap faces risks generally associated with establishing a new
business enterprise. When considering Leap's prospects, investors must consider
the risks, expenses and difficulties encountered by companies in their early
stage of development. These risks include possible disruptions and
inefficiencies associated with rapid growth and workplace expansion, the
difficulties associated with raising money to finance new enterprises and the
difficulties of establishing a significant presence in highly competitive
markets. Investors must also consider the risks Leap will face as a company in
new and evolving wireless communications markets experiencing rapid growth.
LEAP HAS A HISTORY OF LOSSES AND ANTICIPATES FUTURE LOSSES
Leap experienced net losses of $164.6 million in fiscal 1999, $46.7 million
in fiscal 1998 and $5.2 million in fiscal 1997. According to generally accepted
accounting principles, Leap must recognize some or all of its operating
companies' losses. These losses are likely to be significant for the next
several years as Leap's operating companies launch service in new markets and
seek to increase their subscriber base in new and existing markets. We cannot
assure investors that Leap or any of its operating companies will generate
profits in the short term or at all. If Leap or any of its operating companies
fails to achieve profitability, that failure could have a negative effect on the
market value of the Leap common stock.
LEAP AND ITS OPERATING COMPANIES MAY FAIL TO RAISE REQUIRED CAPITAL
Leap and its operating companies require significant additional capital to
build-out and operate their planned networks and for general working capital
needs. Leap also requires additional capital to invest in any new wireless
opportunities, including capital for license acquisition costs. Capital markets
have recently been volatile and uncertain. We cannot assure investors that these
markets will improve or that Leap or its operating companies can access these
markets to raise additional capital. Developing companies in emerging markets
such as Latin America have found it particularly difficult to raise capital. An
operating company's failure to raise required capital could adversely affect the
value and prospects of that company and thus, could adversely affect the value
and prospects of Leap. If Leap fails to obtain required new financing, that
failure could also affect the value and prospects of Leap. For example, if Leap
is unable to access capital markets, it may have to restrict its activities or
sell its interests in one or more operating companies earlier than planned or at
a "distressed sale" price.
HIGH LEVELS OF DEBT COULD ADVERSELY AFFECT LEAP'S BUSINESS AND FINANCIAL
CONDITION
Leap expects to obtain much of its required capital through debt financing.
Most of the debt financing bears or is likely to bear a variable interest rate,
exposing Leap to interest rate risk.
The high leverage of Leap could have important consequences, including the
following:
- the ability of Leap to obtain additional financing may be impaired;
- a substantial portion of Leap's future cash flows from operations must be
dedicated to the payment of its debt, thus reducing the funds available
for operations and investments;
- Leap's leverage may reduce its ability to adjust rapidly to changing
market conditions and may make Leap more vulnerable to future downturns in
the general economy; and
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- high levels of debt may reduce the value of stockholders' investment in
Leap because debt holders have priority regarding the assets of Leap in
the event of a bankruptcy or liquidation.
We cannot assure investors that Leap will have sufficient future cash flows
to meet its debt payments or that Leap will successfully refinance any of its
debt at maturity.
Leap's operating companies also expect to be highly leveraged. As a result,
Leap's operating companies face the same types of risks with respect to their
heavy debt level as are described above. Leap's operating companies will face
additional risks with respect to their equipment financing arrangements from
vendors. These equipment financings will depend on meeting planned levels of
performance. If any Leap operating company fails to meet performance
requirements, its equipment financing may be restricted or cancelled.
QUALCOMM has provided significant financing to Leap and its operating
companies and has also agreed to provide them with significant additional
financing. We cannot assure you Leap and its operating companies will not
experience disputes or difficulties with QUALCOMM with respect to these
agreements. The business and prospects of Leap and its operating companies would
be adversely affected if they were not able to draw funds under their financing
agreements with QUALCOMM.
INTERNATIONAL RISKS COULD ADVERSELY AFFECT LEAP'S BUSINESS
Leap faces many risks from its international activities. Leap's operating
companies largely depend on the economies in which they operate and these
economies are in various stages of development. Some of these markets are
subject to rapid fluctuations in currency exchange rates, consumer prices,
inflation, employment levels and gross domestic product. Economic difficulties
in Russia, for example, negatively affected the development of
telecommunications companies in which Leap holds minority interests.
In addition, foreign law and courts govern many of the agreements of Leap's
operating companies. Other parties may breach or may make it difficult to
enforce these agreements. Further, public awareness of the risks associated with
international operations may increase the volatility of the market price of
Leap's common stock.
Leap will also face country-specific risks. The country-specific risks that
Leap faces include:
Risks Associated With Doing Business in Mexico: Mexico's currency and
financial markets continue to experience volatility. The impact on the Mexican
economy of the economic crisis which began in Asia and then spread to Eastern
Europe and Brazil has affected the ability of Mexican companies to access the
capital markets. We cannot assure you that the ability of Mexican companies to
access the capital markets will improve or that it will not deteriorate further
in the future. The economy of Mexico historically also has close ties to
fluctuations in the price of oil and petroleum products. Fluctuations in the
prices of these products and continuing political tensions in Mexico could
negatively impact Leap's prospects in Mexico. A number of international
telecommunications companies, including Bell Atlantic, AT&T, MCI, Motorola,
Nextel and SBC, as well as local competitors such as Telmex and other Mexican
telecommunications companies, continue to actively engage in developing
telecommunications services in Mexico. Most of these competitors have
substantially greater resources than PEGASO. We cannot assure you that PEGASO
will be able to compete successfully.
Risks Associated With Doing Business in Chile: The Leap operating
company in Chile depends largely on the economy of that country. Fluctuations in
the price of natural resources historically affect the economy of Chile. The
economic crisis that began in Asia and spread to Eastern Europe and Brazil has
negatively impacted some commodity prices, which could negatively impact Leap's
prospects in Chile. Although Chilean prices and its currency generally have been
stable, this stability has required continued intervention by the Chilean
government. Also, the Chilean telecommunications market historically has been
very price competitive. The existing competitors in Chile include BellSouth,
Telefonica and Entel, all of whom have greater financial resources and more
established operations than SMARTCOM. We cannot assure you that SMARTCOM will
compete successfully.
11
<PAGE> 12
LEAP'S FAILURE TO MAINTAIN ITS EXISTING LICENSES AND OBTAIN NEW LICENSES COULD
AFFECT ITS COMPETITIVE POSITION
Leap's operating companies must maintain their existing telecommunications
licenses to continue offering wireless telecommunications services. Changes in
regulations or an operating company's failure to comply with the terms of a
license could result in a loss of the license, penalties and fines. For example,
an operating company could lose its license if it failed to construct or operate
a wireless network as required by the license. If a Leap operating company loses
a license, that loss could have a material adverse effect on the operating
company and on Leap.
State regulatory agencies, the FCC, the United States Congress and the courts
regulate the operation of wireless telecommunications systems and the use of
licenses in the United States. We cannot assure you that the FCC, Congress, the
courts or state agencies having jurisdiction over Leap's operating companies
will not take actions that could negatively affect Leap's business and financial
condition.
Foreign governmental authorities regulate the operation of wireless
telecommunications systems and the use of licenses in the foreign countries in
which Leap's operating companies operate. In some cases, the regulatory
authorities also operate the competitors of Leap's operating companies. Changes
in the current regulatory environment of these markets could have a negative
effect on Leap. In addition, the regulatory frameworks in some of these
countries are relatively new and the interpretation of regulations is uncertain.
This uncertainty may create legal risks for Leap's operating companies.
Leap believes that intense competition will surround the acquisition of new
telecommunications licenses. If Leap fails to obtain new licenses, or cannot
otherwise participate in companies that obtain new licenses, Leap's ability to
expand its operations would be limited.
THE FCC'S DECISION THAT LEAP IS QUALIFIED TO HOLD C-BLOCK AND F-BLOCK LICENSES
IS SUBJECT TO REVIEW AND APPEAL
Leap's business plan anticipates and depends on its acquisition and operation
of C-Block and F-Block spectrum licenses in the United States. Although C-Block
and F-Block licenses are generally more available and are less expensive to
obtain than licenses in other spectrum blocks, a licensee may hold these
licenses only if it qualifies as a "designated entity" under FCC rules.
In July 1999, the FCC issued an opinion and order that found that Leap was
entitled to acquire C-Block and F-Block licenses. The order also approved Leap's
acquisition of the 36 C-Block licenses that Leap won in the FCC's 1999 spectrum
reauction, and approved the transfer to Leap of four F-Block licenses covering
portions of North and South Carolina, in each case subject to the fulfillment of
certain conditions. In October 1999, the FCC issued the 36 reauction licenses
to Leap.
Each of the conditions imposed by the FCC has been satisfied except for the
condition that Leap reduce its debt to QUALCOMM to 50% or less of its
outstanding debt by January 2001 and except for Leap's continuing obligation,
during the designated entity holding period for its C-Block and F-Block spectrum
licenses, to ensure that persons who are or were previously officers or
directors of QUALCOMM do not comprise a majority of Leap's Board of Directors or
a majority of its officers. Leap anticipates satisfying the debt reduction
condition through additional financing activities, but Leap cannot guarantee
that it will be able to reduce its debt to QUALCOMM to the required level. If
Leap fails in the future to meet any of the conditions imposed by the FCC or
otherwise fails to maintain its qualification to own C-Block and F-Block
licenses, that failure would have a material adverse effect on Leap's financial
condition and business prospects.
Various parties, including the U.S. Small Business Administration, previously
challenged Leap's qualification to hold C-Block and F-Block licenses, and a
wireless operating company has requested that the FCC review its order. In
addition, one or more of such parties may appeal the FCC's order approving
Leap's acquisition of C-Block and F-Block licenses.
12
<PAGE> 13
Leap cannot assure investors that it will prevail in connection with any such
appeal or that it will remain qualified to hold C-Block or F-Block spectrum
licenses.
CALL VOLUME UNDER CRICKET(SM) FLAT PRICE PLANS COULD EXCEED THE CAPACITY OF
LEAP'S WIRELESS NETWORKS
Leap's strategy in the United States, marketed under the name Cricket(SM), is
to offer consumers a service plan that allows them to make all of the local
calls they want for a flat monthly rate. Leap's business plans for this strategy
assume that Cricket(SM) customers will use their wireless phones for
substantially more minutes per month than customers who purchase service from
other providers under more typical plans. Leap intends to design its U.S.
networks to accommodate the expected high call volume. Leap also believes that
the CDMA technology it plans to utilize is particularly well suited to support
high volume applications. In addition, Leap expects that the capacity of CDMA
products will be enhanced in the future with third generation technologies.
Despite these plans, if wireless use by Cricket(SM) subscribers exceeds the
capacity of Leap's future networks, service quality may suffer and Leap may be
forced to raise the price of its Cricket(SM) service to reduce volume or
otherwise limit the number of new subscribers. If Leap's planned networks cannot
handle the call volumes they experience, Leap's competitive position and
business prospects in the U.S. are likely to suffer materially.
LEAP MAY EXPERIENCE DIFFICULTIES IN CONSTRUCTING AND OPERATING ITS
TELECOMMUNICATIONS NETWORKS
Leap and its operating companies will need to construct new
telecommunications networks and expand existing networks. Leap and its operating
companies will be heavily dependent on its suppliers and contractors to
successfully complete these complex construction projects. Leap and its
operating companies may experience quality deficiencies, cost overruns and
delays on their construction projects, including deficiencies, overruns and
delays not within their control or the control of their contractors. We cannot
assure you that Leap and its operating companies can complete construction
projects for the amount budgeted or on a timely basis. A failure to
satisfactorily complete construction projects could jeopardize spectrum licenses
and subscriber contracts. As a result, a failure of this type could have a
negative effect on Leap and its operating companies.
Even if Leap and its operating companies complete construction in a timely
and cost effective manner, they will also face challenges in managing and
operating their telecommunications systems. These challenges include operating
and maintaining the telecommunications operating equipment and managing the
sales, advertising, customer support, billing, and collection functions of the
business. A failure by Leap or any of its operating companies in any of these
areas could undermine customer satisfaction, increase churn, reduce revenues and
otherwise negatively effect Leap and its operating companies.
Several of Leap's operating companies have experienced reliability problems
with respect to their network infrastructure equipment in their initial year of
operation. Leap and its operating companies are working with vendors to address
these problems. If the network infrastructure equipment that Leap's operating
companies have purchased ultimately fails to perform as expected, that failure
could have a material adverse effect on Leap and its operating companies.
A DETERMINATION THAT LEAP IS AN INVESTMENT COMPANY COULD ADVERSELY AFFECT ITS
BUSINESS
A large portion of Leap's assets consists of investments in entities in which
Leap does not own an interest greater than 50%. In addition, Leap expects that
its ownership interests in its operating companies will vary over time as the
ventures raise additional capital and as Leap considers participating in new
ventures. As a result, Leap could be subject to the registration requirements of
the Investment Company Act of 1940. The Investment Company Act of 1940 requires
registration of companies that engage primarily in the business of investing in
stock. Because Leap intends to actively participate in managing the business
operations of its operating companies, Leap does not believe it is primarily
engaged in the business of investing in stock. Leap intends to monitor and
adjust its interests in its operating companies to the extent practical to avoid
subjecting itself to the Investment Company Act of 1940. In addition, to clarify
Leap's status under the Investment Company Act of 1940, in September 1998 Leap
filed a request for an exemptive order from the SEC
13
<PAGE> 14
declaring Leap to be primarily engaged in a business other than investing in
stock. The SEC has not yet ruled on Leap's application. We cannot assure
investors that the requested exemptive order will be granted. If we must
register as an investment company under the Investment Company Act of 1940,
compliance with these regulations will negatively impact Leap's business.
LEAP FACES SIGNIFICANT COMPETITION
The wireless telecommunications industry is very competitive and competition
is increasing. Many competitors have substantially greater resources than Leap
and its operating companies. We cannot assure you that Leap or its operating
companies will compete successfully.
Although the deployment of advanced telecommunications services is in its
early stages in many developing countries, Leap believes competition is
increasing as businesses and foreign governments realize the market potential of
telecommunications services. Leap's operating companies currently face
competition from existing wireless telecommunications providers. In addition, a
number of large telecommunications companies are implementing programs to deploy
telecommunications services in both developing and developed countries. Leap's
operating companies also compete against landline carriers, including
government-owned telephone companies. In addition, Leap's operating companies
may face competition with technologies and services introduced in the future.
Although Leap's operating companies intend to use relatively new technologies,
newer technologies may make their technologies obsolete. Leap also expects the
price that its operating companies charge for their products and services in
some regions will decline over the next few years as competition increases in
their markets.
In the United States, Leap will compete directly with other wireless
providers in each of its markets, many of whom have greater resources than Leap
and entered the market before Leap. A few of Leap's competitors operate wireless
telecommunications networks covering most of the United States. Competitors'
earlier entry and broader presence in the U.S. telecommunications market may
have a negative effect on Leap's ability to successfully implement its strategy.
In addition, other wireless providers could attempt to implement Leap's strategy
of providing local service at a flat-rate. Providers who offered such a service
in Leap's market areas would directly compete against Leap in its market niche.
Also, it is likely that some competitors will market other services, including
cable television access, landline telephone service and Internet access, that
Leap does not currently intend to market. Leap also expects to compete with new
entrants to the U.S. wireless markets as well as other telecommunications
technologies, including paging, enhanced specialized mobile radio and global
satellite networks.
THE LOSS OF KEY PERSONNEL COULD HARM LEAP'S BUSINESS
Leap believes its success depends on the contributions of a number of its key
personnel. Leap's key personnel include Harvey P. White, Chairman of the Board
and Chief Executive Officer; and Susan G. Swenson, President and Chief Operating
Officer. If Leap lost the services of key personnel, that loss could materially
harm Leap. Leap does not maintain "key person" life insurance on any employee.
ISSUANCE OF SHARES RESERVED FOR FUTURE ISSUANCE WILL REDUCE YOUR PERCENTAGE
OWNERSHIP INTEREST IN LEAP
On September 30, 1999, 18,428,330 shares of Leap common stock were
outstanding. In addition, 14,580,297 additional shares of Leap common stock were
reserved for issuance on September 30, 1999, including:
- 4,500,000 shares reserved for issuance upon exercise of the warrant issued
to QUALCOMM;
- 3,674,430 shares reserved for issuance to employees, officers, directors
and consultants under Leap's equity incentive plans;
14
<PAGE> 15
- 4,136,373 shares reserved for issuance upon exercise of options to
purchase Leap common stock granted in connection with the distribution of
Leap's common stock to the stockholders of QUALCOMM; and
- 2,269,494 shares reserved for issuance upon conversion of outstanding
QUALCOMM Trust Convertible Preferred Securities.
If Leap were to issue all of the shares reserved for issuance, the current
holders of shares of Leap's currently outstanding common stock would hold only
56% of the outstanding common stock.
LEAP HAS IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION
OF LEAP THAT IS BENEFICIAL TO ITS STOCKHOLDERS
Leap's charter and bylaws could make it more difficult for a third party to
acquire Leap, even if doing so would be beneficial to its stockholders. Leap's
charter and bylaw provisions could diminish the opportunities for a stockholder
to participate in tender offers. The charter and bylaws may also restrain
volatility in the market price of the Leap common stock resulting from takeover
attempts. In addition, the Board of Directors may issue preferred stock that
could have the effect of delaying or preventing a change in control of Leap. The
issuance of preferred stock could also negatively affect the voting power of the
holders of Leap common stock. The provisions of the charter and bylaws may have
the effect of discouraging or preventing an acquisition of Leap or a sale of its
businesses.
The preferred stock purchase rights attached to each share of Leap common
stock could discourage, delay or prevent an acquisition of Leap at a premium
price. The purpose of the preferred stock purchase rights is to assure that all
of Leap's stockholders receive fair and equal treatment in the event of any
proposed takeover of Leap. The preferred stock purchase rights also guard
against a party using abusive tactics to gain control of Leap without paying all
stockholders a control premium. The preferred stock purchase rights will cause
substantial dilution to a person or group acquiring 15% or more of Leap's stock
if the acquisition is not approved by the Board of Directors, although the
rights should not interfere with any merger approved by the Board of Directors.
Leap's ownership of U.S. wireless telecommunications licenses that may only
be transferred to licensees who meet restrictive eligibility conditions also
adversely affects the ability of third parties to acquire Leap.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. Leap's exposure to market risk for changes in interest
rates relates primarily to its variable rate long-term debt obligations. The
general level of U.S. interest rates and/or LIBOR affect the interest expense
that Leap recognizes on its variable rate long-term debt obligations. As of
August 31, 1999, the principal amounts of Leap's variable rate long-term debt
obligations amounted to $210.3 million. An increase of 10% in interest rates
would increase Leap's interest expense for fiscal year 2000 by approximately
$2.3 million. This hypothetical amount is only suggestive of the effect of
changes in interest rates on Leap's results of operations in fiscal year 2000.
Foreign Exchange Market Risk. The long-term debt obligations of Leap's
wholly owned Chilean subsidiary, SMARTCOM, which are denominated in the U.S.
dollar, are subject to the effects of currency fluctuations and may affect
reported earnings and losses. A significant change in the value of U.S. dollar
against the Chilean peso could result in a significant increase in the
consolidated expenses of Leap. As of August 31, 1999, SMARTCOM's long-term debt
obligations that were denominated in the U.S. dollar amounted to $101.7 million.
Leap's results of operations would be negatively impacted by approximately $11.9
million for fiscal year 2000 if the U.S. dollar were to appreciate against the
Chilean peso by 10%. This hypothetical amount is only suggestive of the effect
of currency fluctuations on Leap's results of operations in fiscal year 2000.
15
<PAGE> 16
LEAP WIRELESS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------
1999 1998
--------- ---------
ASSETS (RESTATED)
<S> <C> <C>
Cash and cash equivalents ...................................... $ 26,215 $ --
Accounts receivable, net ....................................... 2,726 --
Inventories .................................................... 5,410 --
Recoverable taxes .............................................. 3,907 --
Other current assets ........................................... 1,926 --
--------- ---------
Total current assets ....................................... 40,184 --
--------- ---------
Property and equipment, net .................................... 116,947 --
Investments in and loans receivable from unconsolidated
wireless operating companies .............................. 94,429 150,914
Intangible assets, net ......................................... 73,944 6,838
Deposits and other assets ...................................... 9,827 --
--------- ---------
Total assets ............................................... $ 335,331 $ 157,752
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities ....................... $ 16,372 $ 5,789
Loans payable to banks ......................................... 17,225 9,000
--------- ---------
Total current liabilities .................................. 33,597 14,789
--------- ---------
Long-term debt ................................................. 221,812 --
Other long-term liabilities .................................... 8,504 --
--------- ---------
Total liabilities .......................................... 263,913 14,789
--------- ---------
Commitments and contingencies (Note 12)
Minority interest in consolidated subsidiary ................... 518 --
--------- ---------
Stockholders' equity:
Preferred stock - authorized 10,000,000 shares
$.0001 par value, no shares issued and outstanding ......... -- --
Common stock - authorized 75,000,000 shares;
$.0001 par value, 18,370,974 shares issued and outstanding.. 2 --
Additional paid-in capital ................................... 291,189 --
Former parent company's investment ........................... -- 197,598
Accumulated deficit .......................................... (216,896) (52,283)
Accumulated other comprehensive loss ......................... (3,395) (2,352)
--------- ---------
Total stockholders' equity ................................. 70,900 142,963
--------- ---------
Total liabilities and stockholders' equity ................. $ 335,331 $ 157,752
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 17
LEAP WIRELESS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------
1999 1998 1997
--------- --------- ---------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Operating revenues .................................... $ 3,907 $ -- $ --
--------- --------- ---------
Operating expenses:
Cost of operating revenues ............................ (3,810) -- --
Selling, general and administrative expenses .......... (28,745) (23,888) (1,361)
Depreciation and amortization ......................... (5,824) -- --
--------- --------- ---------
Total operating expenses ....................... (38,379) (23,888) (1,361)
--------- --------- ---------
Operating loss ..................................... (34,472) (23,888) (1,361)
Equity in net loss of unconsolidated wireless
operating companies ................................ (100,300) (23,118) (3,793)
Write-down of investments in unconsolidated wireless
operating companies ................................ (27,242) -- --
Interest income ....................................... 2,505 273 --
Interest expense and amortization of discount and
facility fee ....................................... (10,356) -- --
Foreign currency transaction losses ................... (7,211) -- --
Gain on sale of wholly owned subsidiary ............... 9,097 -- --
Gain on issuance of stock by unconsolidated wireless
operating company .................................. 3,609 -- --
Other income (expense), net ........................... (243) -- --
--------- --------- ---------
Net loss ........................................... (164,613) (46,733) (5,154)
Other comprehensive income (loss):
Foreign currency translation (losses) gains ........ (1,043) (2,412) 60
--------- --------- ---------
Comprehensive loss ................................. $(165,656) $ (49,145) $ (5,094)
========= ========= =========
Basic and diluted net loss per common share (Note 2) .. $ (9.19) $ (2.65) $ (0.29)
========= ========= =========
Shares used to calculate basic and diluted net loss
per common share (Note 2) ......................... 17,910 17,648 17,648
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 18
LEAP WIRELESS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------
1999 1998 1997
--------- --------- ---------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Operating activities:
Net loss ........................................... $(164,613) $ (46,733) $ (5,154)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization .................... 5,824 -- --
Gain on sale of wholly owned subsidiary .......... (9,097) -- --
Gain on issuance of stock by unconsolidated
wireless operating company ..................... (3,609) -- --
Equity in net loss of unconsolidated
wireless operating companies ................... 100,300 23,118 3,793
Write-down of investments in unconsolidated
wireless operating companies ................... 27,242 -- --
Interest accrued to loans receivable
and payable - net .............................. 8,251 (273) --
Other ............................................ (386) -- --
Changes in assets and liabilities, net of
effects from acquisition:
Accounts receivable, net ....................... (1,203) -- --
Inventories .................................... 1,873 -- --
Recoverable taxes .............................. (599) -- --
Deposits and other assets ...................... (5,989) -- --
Accounts payable and accrued liabilities ....... 9,671 5,510 168
Other liabilities .............................. (1,770) -- --
--------- --------- ---------
Net cash used in operating activities ................ (34,105) (18,378) (1,193)
--------- --------- ---------
Investing activities:
Purchase of property and equipment ................. (3,935) -- --
Investments in and loans to unconsolidated wireless
operating companies ............................ (124,471) (133,904) (46,000)
Loan receivable to related party ................... (17,500) -- --
Repayment of loan receivable from related party .... 17,500 -- --
Acquisitions, net of cash acquired ................. (26,942) (564) --
Purchase of wireless communications licenses ....... (19,009) (6,274) --
Proceeds from sale of wholly owned subsidiary ...... 16,024 -- --
--------- --------- ---------
Net cash used in investing activities ................ (158,333) (140,742) (46,000)
--------- --------- ---------
Financing activities:
Proceeds from loans payable to banks ............... 6,720 9,000 --
Borrowings under credit agreement .................. 128,584 -- --
Repayment of borrowings under credit agreement ..... (17,500) -- --
Issuance of common stock ........................... 2,301 -- --
Exercise of subsidiary stock options ............... 1,103 -- --
Former parent company's investment ................. 95,268 150,120 47,193
--------- --------- ---------
Net cash provided by financing activities ............ 216,476 159,120 47,193
--------- --------- ---------
Effect of exchange rate changes on cash and
cash equivalents .............................. 2,177 -- --
--------- --------- ---------
Net increase in cash and cash equivalents ............ 26,215 -- --
Cash and cash equivalents at beginning of year ....... -- -- --
--------- --------- ---------
Cash and cash equivalents at end of year ............. $ 26,215 $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
LEAP WIRELESS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Supplemental disclosure of non-cash investing
and financing activities:
Loans to unconsolidated wireless operating
companies converted to equity investment ....... $ 50,196 $ -- $ --
Long-term financing to purchase assets ............. $ 8,791 $ -- $ --
Facility fee due on long-term debt ................. $ 5,300 $ -- $ --
Repurchase of warrant .............................. $ 5,355 $ -- $ --
Supplemental disclosure of cash used for acquisitions:
Total purchase value ............................... $ 43,699 $ 564 $ --
Note payable issued, net of discount ............... (15,699) -- --
Cash acquired ...................................... (1,058) -- --
-------- -------- --------
Cash used for acquisitions ......................... $ 26,942 $ 564 $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
LEAP WIRELESS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FORMER ACCUMULATED
COMMON STOCK ADDITIONAL PARENT OTHER
----------------------- PAID-IN COMPANY'S ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL INVESTMENT DEFICIT INCOME (LOSS) TOTAL
---------- ---------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1996 ........ -- $ -- $ -- $ 285 $ (396) $ -- $ (111)
Transfers from former parent .... -- -- -- 47,193 -- -- 47,193
Net loss (restated) ............. -- -- -- -- (5,154) -- (5,154)
Foreign currency translation
adjustment .................... -- -- -- -- -- 60 60
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at August 31, 1997 ........ -- -- -- 47,478 (5,550) 60 41,988
Transfers from former parent .... -- -- -- 150,120 -- -- 150,120
Net loss (restated) ............. -- -- -- -- (46,733) -- (46,733)
Foreign currency translation
adjustment .................... -- -- -- -- -- (2,412) (2,412)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at August 31, 1998 ........ -- -- -- 197,598 (52,283) (2,352) 142,963
Transfers from former parent .... -- -- -- 95,268 -- -- 95,268
Distribution by former parent ... 17,647,685 2 292,864 (292,866) -- -- --
Repurchase of warrant ........... -- -- (5,355) -- -- -- (5,355)
Issuance of common stock ........ 723,289 -- 2,356 -- -- -- 2,356
Effect of subsidiary and
unconsolidated wireless
operating company equity
transactions ................... -- -- 1,324 -- -- -- 1,324
Net loss ........................ -- -- -- -- (164,613) -- (164,613)
Foreign currency translation
adjustment ..................... -- -- -- -- -- (1,043) (1,043)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at August 31, 1999 ........ 18,370,974 $ 2 $ 291,189 $ -- $ (216,896) $ (3,395) $ 70,900
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. THE COMPANY
The Company and Nature of Business
Leap Wireless International, Inc., a Delaware corporation, and its wholly
owned and majority-owned subsidiaries (the "Company" or "Leap") is a wireless
communications carrier that deploys, owns and operates networks in domestic and
international markets. Through its operating companies, Leap has launched
all-digital wireless networks in the United States, Chile and Mexico. The
Company was incorporated on June 24, 1998 as a wholly owned subsidiary of
QUALCOMM Incorporated ("QUALCOMM"). On September 23, 1998 (the "Distribution
Date"), QUALCOMM distributed all of the outstanding shares of common stock of
the Company to QUALCOMM's stockholders as a taxable dividend (the
"Distribution"). In connection with the Distribution, one share of Company
common stock was issued for every four shares of QUALCOMM common stock
outstanding on September 11, 1998. Following the Distribution, the Company and
QUALCOMM operate as independent companies.
The Distribution
QUALCOMM transferred to the Company its equity interests in the following
domestic and international wireless communications operating companies: Chilesat
Telefonia Personal, S.A., to be renamed SMARTCOM PCS ("SMARTCOM"), Pegaso
Telecomunicaciones, S.A. de C.V. ("PEGASO"), Chase Telecommunications Holdings,
Inc. ("Chase"), Metrosvyaz Limited ("Metrosvyaz"), Orrengrove Investments
Limited ("Orrengrove"), OzPhone Pty. Ltd. ("OzPhone"), and certain other
development stage businesses which are today operating under the trade name
"Cricket" (collectively, the "Leap Operating Companies"). Metrosvyaz, Orrengrove
and OzPhone have been subsequently written off, written down or sold. See Notes
3 and 4. QUALCOMM also transferred to the Company cash and its right to receive
payment from working capital and other loans QUALCOMM made to the Leap Operating
Companies, as well as certain miscellaneous assets and liabilities. The
aggregate net tangible book value of the assets transferred by QUALCOMM to the
Company in connection with the Distribution was approximately $236 million. The
consolidated financial statements reflect the Company as if it were a separate
entity for all periods presented.
Additional Capital Needs
The Company experienced net losses for the years ended August 31, 1999,
1998 and 1997 of $164.6 million, $46.7 million and $5.2 million, respectively.
Further, the Leap Operating Companies are in the early stages of developing and
deploying their respective telecommunications systems. Such systems require
significant expenditures, a substantial portion of which is incurred before
corresponding revenues are generated. In addition, the Company and its operating
companies are expected to be highly leveraged which will lead to significant
interest expense and principal repayment obligations. The Company therefore
expects to incur significant expenses in advance of generating revenues and, as
a result, to incur substantial additional losses in the near term. There can be
no assurance that the Company or any of the Leap Operating Companies will
achieve or sustain profitability in the future. Furthermore, there can be no
assurance that the Company will generate sufficient cash flows to meet its debt
obligations or successfully refinance any of its debt at maturity.
The Company's ability to generate revenues will be dependent on a number of
factors, including the future operations and profitability of its operating
companies. The Leap Operating Companies are expected to incur substantial losses
for the next several years. These operating companies will require substantial
additional financing to build-out and operate their planned networks. If the
Leap Operating Companies do not obtain additional financing in fiscal 2000, Leap
expects that the scope of the planned network build-outs will be reduced. If the
Company is unable to obtain additional working capital or financing, the Company
may have to restrict its activities or sell its interests in one or more
operating companies.
21
<PAGE> 22
There can be no assurance that any of the Leap Operating Companies or any other
companies in which Leap may acquire an interest will be able to obtain the
additional financing they require, or become profitable. The failure of these
companies to build-out their systems, meet their payment obligations or become
profitable would adversely affect the value of the Company's assets and its
future profitability.
The Company expects to obtain much of its required near-term financing
through borrowings under its secured credit facility with QUALCOMM (the "Credit
Agreement"). The Credit Agreement bears interest at a variable rate, exposing
the Company to interest rate risk. The Company expects that it will have
borrowed substantially all of the funds available to it under the Credit
Agreement by the end of calendar year 2000. As one of the conditions to the
Federal Communications Commission's ("FCC") recognition of the Company's
qualification to hold C-Block and F-Block licenses of PCS spectrum, however, the
Company must take steps so that by January 2001, QUALCOMM holds no more than 50%
of the Company's debt obligations. There can be no assurance that additional
sources of debt financing will be available to the Company to finance its
operations after the Credit Agreement has been fully drawn or to comply with the
condition imposed by the FCC regarding the Company's debt to QUALCOMM. If Leap
fails to meet any of the conditions imposed by the FCC or otherwise fails to
maintain its qualification to own C-Block and F-Block licenses, that failure
would have a material adverse effect on Leap's financial condition and business
prospects.
International Risks
The Company is subject to numerous risks as a result of its international
activities. The Leap Operating Companies are dependent, in large part, on the
economies of the markets in which they have operations. Those markets and other
markets in which the Company may operate are in countries with economies in
various stages of development, some of which are subject to rapid fluctuations
in currency exchange rates, consumer prices, inflation, employment levels and
gross domestic product. As a result, the Company and the Leap Operating
Companies are exposed to market risk from these changes, and are subject to
other economic and political risks, which could impact their results of
operations and financial condition.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Leap and its
wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in the consolidated financial
statements. Investments in entities, which Leap exercises significant influence,
but does not control, are accounted for using the equity method. In fiscal 1999,
to accommodate the different fiscal periods of the Company and its foreign
operating companies, the Company extended the lag for recognition of its share
of net earnings or losses of such foreign companies from one month to two
months. The effect of this change on previously reported amounts was not
significant.
For the fourth quarter of fiscal 1999, the financial statements of SMARTCOM
are included in the consolidated financial statements of the Company as a result
of the Company's acquisition of the remaining 50% of SMARTCOM that it did not
already own. The accounts of SMARTCOM have been consolidated using a two-month
lag.
22
<PAGE> 23
Financial Statement Preparation
The consolidated financial statements are prepared using generally accepted
accounting principles. These principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ from those estimates. Certain
prior period amounts have been reclassified to conform to the current period
presentation.
Restatement
The Company adopted the equity method of accounting for its investment in
Chase in the third quarter of fiscal 1999. Prior to that time, Leap accounted
for its investment in Chase under the cost method. Accordingly, all prior
periods presented in these financial statements have been adjusted retroactively
in accordance with generally accepted accounting principles.
Issuance of Stock by Subsidiaries and Equity Investees
The Company recognizes gains and losses on issuance of stock by
subsidiaries and equity investees in its Consolidated Statement of Operations
and Comprehensive Loss, except for those subsidiaries and equity investees that
are in the development stage. For those entities in the development stage, gains
and losses are reflected in "effect of subsidiary and unconsolidated wireless
operating company equity transactions" in the Consolidated Statements of
Stockholders' Equity.
Foreign Currency Translation and Transactions
The Company uses the local currency as the functional currency for all of its
international consolidated and unconsolidated operating companies, except where
such operating companies operate in highly inflationary economies. Assets and
liabilities are translated into U.S. Dollars at the exchange rate in effect at
the balance sheet date. Revenues and expense items are translated at the average
rate prevailing during the period. Resulting unrealized gains and losses are
accumulated and reported as other comprehensive income or loss.
The functional currency of the Company's foreign investees that operate in
highly inflationary economies is the U.S. Dollar. The monetary assets and
liabilities of these foreign investees are re-measured into U.S. Dollars at the
exchange rate in effect at the balance sheet date. Revenues, expenses, gains and
losses are translated at the average exchange rate for the period, and
non-monetary assets and liabilities are translated at historical rates.
Resulting re-measurement gains or losses of foreign investees are recognized
in the results of operations.
Mexico ceased to be considered a highly inflationary economy as of January 1,
1999 and, as a result, PEGASO changed its functional currency from the U.S.
Dollar to its local currency on that date.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. At August 31, 1999, the
Company's cash and cash equivalents consisted of deposits with banks and
investments in money market accounts and mutual funds. The Company has not
experienced any losses on its deposits of cash and cash equivalents.
23
<PAGE> 24
Fair Value of Financial instruments
The carrying amounts of certain of the Company's financial instruments,
including cash equivalents, accounts receivable, recoverable taxes and accounts
payable approximate fair value due to their short-term maturities. Loans payable
to banks and other long-term debts approximate fair value due to their risk
adjusted market rates of interest.
Accounts Receivable
The Company's trade accounts receivable are derived from revenue earned from
customers located in Chile and are denominated in Chilean pesos. The Company
records an allowance for uncollectable accounts receivable with respect to those
amounts estimated not to be recoverable.
Inventories
Inventories consist of handsets and accessories not yet placed into
service and are stated at the lower of cost or market. The Company uses the
first-in, first-out method of determining inventory cost.
Recoverable Taxes
Recoverable taxes relate to value added taxes (VAT) incurred on the supply
of goods and services which, are eventually borne by the final consumer. VAT
payments made by the Company on the build-out of its wireless communications
networks are recovered in cash from customers as services are provided.
Investments in Unconsolidated Wireless Operating Companies
The Company uses the equity method to account for investments in corporate
entities in which it exercises significant influence, but does not control.
Under the equity method, the investment is originally recorded at cost and
adjusted to recognize the Company's share of net earnings or losses of the
investee, limited to the extent of the Company's investment in, advances to and
financial guarantees for the investee. Such earnings or losses of the Company's
investees are adjusted to reflect the amortization of any differences between
the carrying value of the investment and the Company's equity in the net assets
of the investee. For those unconsolidated subsidiaries where the Company is the
only contributor of assets, equity in net losses of wireless operating companies
includes 100% of the losses of the equity investee.
Property and equipment
Property and equipment are recorded at cost. Constructed assets are recorded
at cost plus capitalized interest and direct costs incurred during the
construction phase. Depreciation is applied using the straight-line method over
the estimated useful lives of the assets, ranging from two to ten years, once
the assets are placed in service. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the remaining term of the related
lease. Repairs and maintenance costs are expensed as incurred.
Intangible Assets
Intangible assets, primarily telecommunications licenses and rights to
telecommunications network systems, are recorded at cost and amortized over
their estimated useful lives upon commencement of commercial service, which
currently range from ten to twenty-eight years.
24
<PAGE> 25
Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
total amount of an asset may not be recoverable. An impairment loss is
recognized when estimated future cash flows expected to result from the use of
the asset and its eventual disposition are less than its carrying amount.
Debt Discount and Facility Fees
Debt discount and facility fees are amortized and recognized as interest
expense under the interest method.
Revenue recognition
Operating revenues are recognized as telecommunications services are
rendered and as handsets and other products are delivered to customers.
Stock-based Compensation
The Company measures compensation expense for its employee and outside
directors stock-based compensation using the intrinsic value method.
Compensation charges related to non-employee stock-based compensation are
measured using the fair value method.
Income Taxes
Current income tax benefit (expense) is the amount expected to be receivable
(payable) for the current year. A deferred tax asset and/or liability is
computed for both the expected future impact of differences between the
financial statement and tax bases of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be "more likely than not" realized in future
tax returns. Tax rate changes are reflected in income in the period such changes
are enacted.
Reporting Comprehensive Income (Loss)
Effective September 1, 1998, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." This statement requires the
Company to report in its financial statements, in addition to net income (loss),
comprehensive income (loss) and its components, including foreign currency
translation gains (losses). Prior period financial statements have been adjusted
to conform to the requirements of SFAS No. 130.
Basic and Diluted Net Loss Per Common Share
Basic and diluted net loss per common share for the years ended August 31,
1999, 1998 and 1997 was calculated by dividing the net loss for each of the
periods by the weighted average number of common shares outstanding for each of
the periods of 17,910,440, 17,647,685 and 17,647,685, respectively. The weighted
average number of common shares outstanding assumes that the 17,647,685 shares
issued at Distribution were outstanding for the periods prior to Distribution.
Stock options for 5,939,715 common shares, the conversion of QUALCOMM's Trust
Convertible Preferred Securities which are convertible into 2,270,573 shares of
the Company's common stock, and the exercise of a warrant issued to QUALCOMM for
4,500,000 shares of the Company's common stock have not been considered in
calculating basic and diluted net loss per common share because their effect
would be anti-dilutive. As a result, the Company's basic and diluted net loss
per common share are the same.
25
<PAGE> 26
Segment Reporting
Effective September 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131 adopts
the management approach which designates internal reporting used by management
for making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires disclosures about
products and services, geographic areas and major customers. The adoption of
SFAS No. 131 did not affect results of operations or the financial position of
the Company but did affect the disclosure of segment information.
Future Accounting Requirements
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities",
which the Company will be required to adopt for fiscal year 2000. This SOP
provided guidance on the financial reporting of start-up and organizational
costs. It requires start-up and organizational costs to be expensed as incurred.
The Company does not expect that the adoption of SOP No. 98-5 will have a
material impact on its consolidated financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which the Company will be required to adopt
for fiscal year 2001. This statement establishes a new model for accounting for
derivatives and hedging activities. Under SFAS No. 133, all derivatives must be
recognized as assets and liabilities and measured at fair value. The Company
does not expect that the adoption of SFAS No. 133 will have a material impact on
its consolidated financial position or results of operations.
NOTE 3. ACQUISITIONS AND DISPOSALS
SMARTCOM
In April 1999, Leap acquired the remaining 50% of SMARTCOM that it did not
already own from Telex-Chile S.A. and its operating affiliate, Chilesat S.A.
(collectively "Telex-Chile"). In exchange, the Company paid $28 million in cash
and issued a $22 million, non-interest-bearing note payable to Telex-Chile due
in May 2002. The present value of the $22 million non-interest-bearing note
payable to Telex-Chile was $15.7 million upon issuance. Therefore, the total
purchase price was $43.7 million. The Company accounted for the transaction as a
purchase and allocated the $40.8 million excess investment over the fair value
of the net assets acquired to intangible assets, which include
telecommunications licenses and rights to telecommunications network systems.
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on September 1,
1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues ................................................. $ 7,577 $ --
========== ==========
Net loss ................................................. $ (184,782) $ (55,435)
========== ==========
Pro forma basic and diluted net loss per common share .... $ (10.32) $ (3.14)
========== ==========
</TABLE>
26
<PAGE> 27
These unaudited pro forma amounts are for comparative purposes only and do
not necessarily represent what actual results of operations would have been had
the acquisition occurred on September 1, 1997, nor do they necessarily indicate
results of future operations.
Licenses
In September 1998, the Company agreed to purchase four wireless
communications licenses from AirGate Wireless, L.L.C. ("AirGate") for $19.5
million, paying a deposit of $0.6 million.
In July 1999, the FCC issued a Memorandum Opinion and Order that found the
Company was qualified to hold C-Block and F-Block PCS licenses in the United
States. The order also approved the Company's $18.7 million cash acquisition of
36 wireless communications licenses in the U.S. government's April 1999
reauction of PCS spectrum and approved the transfer of the four licenses from
AirGate to the Company. The FCC order was subject to several conditions,
including the Company taking steps so that by January 2001, QUALCOMM holds no
more than 50% of Leap's outstanding debt obligations.
OzPhone
In June 1998, the Company purchased all the shares of OzPhone, an Australian
company, for $564,000. The entire purchase price was allocated to goodwill.
OzPhone then acquired several wireless communications licenses to provide mobile
and wireless local loop services in Australia. The total cost of the licenses
was $6.3 million. In August 1999, the Company sold all of the shares of OzPhone
for $16.0 million in cash and recorded a gain of $9.1 million.
NOTE 4. INVESTMENTS AND LOANS TO WIRELESS OPERATING COMPANIES
The Company has equity interests in companies that directly or indirectly
hold wireless communications licenses. Its participation in each company differs
and, except for SMARTCOM for the fourth quarter of fiscal 1999, the Company does
not have majority interests in such companies. The Company accounts for these
equity interests, except for SMARTCOM, under the equity method. For the fourth
quarter of fiscal 1999, the financial statements of SMARTCOM have been
consolidated. The Company's ability to withdraw funds, including dividends, from
its participation in such investments is dependent in many cases on receiving
the consent of lenders and the other participants, over which the Company has no
control. The Company and its consolidated subsidiaries have investments in
wireless operating companies consisting of the following:
<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
AUGUST 31,
-----------------------
1999 1998
-------- ---------
<S> <C> <C>
Chase (United States) ........................... 7.2% 7.2%
SMARTCOM (Chile) ................................ 100% 50%
PEGASO (Mexico) ................................. 28.6% 49%
Metrosvyaz (Russia) ............................. 50% 50%
Orrengrove (Russia) ............................. 50% 50%
</TABLE>
27
<PAGE> 28
Condensed combined financial information for the Leap Operating Companies
accounted for under the equity method is summarized as follows (in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
------------------------
1999 1998
--------- ---------
(RESTATED)
<S> <C> <C>
Current assets ....................................... $ 140,899 $ 82,575
Non-current assets ................................... 576,765 263,543
Current liabilities .................................. (112,539) (99,134)
Non-current liabilities .............................. (347,590) (178,491)
--------- ---------
Total stockholders' capital ....................... 257,535 68,493
Other stockholders' share of capital ................. 146,059 (9,208)
--------- ---------
Company's share of capital ........................... 111,476 77,701
Excess cost of investment ............................ -- 20,018
Lag period loans and advances ........................ 10,195 53,195
Write-down in investments ............................ (27,242) --
--------- ---------
Investments in and loans receivable from
unconsolidated wireless operating companies .... $ 94,429 $ 150,914
========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------
1999 1998 1997
--------- --------- ---------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Operating revenues .................................. $ 8,233 $ 22 $ --
--------- --------- ---------
Operating expenses .................................. (153,062) (20,739) (5,234)
Other income (expense), net ......................... (22,471) (18,403) (18,108)
Foreign currency transaction loss ................... (1,532) (3,970) --
--------- --------- ---------
Net loss ......................................... (168,832) (43,090) (23,342)
Other stockholders' share of net loss ............... (62,491) (19,402) (19,549)
--------- --------- ---------
Company's share of net loss ......................... (106,341) (23,688) (3,793)
Amortization of excess cost of investment ........... (630) -- --
Elimination of intercompany transactions ............ 6,671 570 --
--------- --------- ---------
Equity in net loss of unconsolidated wireless
operating companies ............................ $(100,300) $ (23,118) $ (3,793)
========= ========= =========
</TABLE>
Chase
In December 1996, the Company purchased $4.0 million of Class B Common Stock
of Chase, representing 7.2% of the outstanding capital stock of Chase. The
Company has also provided a working capital facility to Chase and has agreed in
principle to increase the maximum principal that may be drawn to $45.0 million.
Borrowings under the facility are subject to interest at an annual rate of prime
plus 4.5%. Semi-annual principal payments are to be made ratably over a six-year
period commencing June 2000, with accrued interest payable on maturity.
Borrowings are collateralized by substantially all of the assets of Chase and
are subordinated to Chase's equipment vendor loans from QUALCOMM. At August 31,
1999, borrowings under the facility totaled $36.1 million, including $3.3
million of accrued and capitalized interest. However, because the working
capital facility is the only source of working capital for Chase, the carrying
value of its investment and the loans under the facility have been reduced to
zero as Leap has recognized 100% of the net losses of Chase to the extent of its
investment and loans. The Company
28
<PAGE> 29
recorded equity losses from Chase of $20.9 million, $11.8 million and $4.0
million during fiscal 1999, 1998 and 1997, respectively.
In December 1998, the Company agreed to purchase substantially all the
assets of Chase for $6.3 million; a warrant to purchase 1% of the common stock
of Cricket Communications, Inc. ("Cricket Communications"), a majority-owned
subsidiary of the Company, exercisable at $1.0 million; the Company's existing
stock ownership and warrants to purchase stock in Chase; and certain contingent
earn-outs. This acquisition involves the transfer of wireless communications
licenses, which is subject to approval by the FCC. The acquisition will not
occur unless the FCC approves the transfer of the licenses.
SMARTCOM
In April 1999, Leap acquired the remaining 50% of SMARTCOM that it did not
already own. As a result of the reporting lag, the Company began fully
consolidating SMARTCOM's results of operations commencing June 1, 1999. Prior to
this time, the Company accounted for its investment in SMARTCOM under the equity
method of accounting. The Company recorded equity (income) losses from SMARTCOM
of $13.1 million, $3.1 million and $(0.2) million during fiscal 1999, 1998 and
1997, respectively.
PEGASO
The Company has a 28.6% interest in PEGASO, a Mexican corporation. During
fiscal 1998, the Company advanced a portion of PEGASO's working capital
requirements and provided a loan of $27.4 million to PEGASO. The purpose of the
loan was to fund a portion of PEGASO's first PCS license payment. Interest on
the loan accrued at a rate of 10% and was added to the principal amount of the
loan outstanding. In September 1998, the Company provided $60.7 million of
additional funding and converted its advances and loan, with accrued interest,
into capital stock of PEGASO. The Company's total investment in PEGASO after
these transactions was $100.0 million. On the same date, other investors also
subscribed for and purchased capital stock of PEGASO such that, after these
transactions, the total par value of the common equity of PEGASO was $300
million. As a result, the Company's ownership interest in PEGASO was diluted
from 49.0% to 33.3%. In July 1999, several of the other investors subscribed for
and purchased an additional $50.0 million of capital stock of PEGASO. As a
result, the Company's ownership interest was diluted from 33.3% to 28.6%. The
Company recorded equity losses from PEGASO of $23.6 million and $2.1 million
during fiscal 1999 and 1998, respectively. In fiscal 1999, the Company
recognized a gain of $4.4 million on the issuance of stock by PEGASO as
described above. Of this amount, $0.8 million was recognized directly to
additional paid-in capital for the change in interest that occurred during
PEGASO's development stage.
Metrosvyaz
The Company has a 35% interest in Metrosvyaz. The Company agreed to provide
a $72.5 million loan facility to Metrosvyaz to support its business plan and
working capital needs. Metrosvyaz also has a $102.5 million equipment loan
facility from QUALCOMM. The Company has pledged its equity interest in
Metrosvyaz as collateral for amounts owed under QUALCOMM's loan facility to
Metrosvyaz, and has subordinated its $72.5 million loan facility to QUALCOMM's
$102.5 million loan facility. Borrowings under the $72.5 million facility are
subject to interest at 13% and are due in August 2007. Interest is payable
semi-annually beginning August 2000 and, prior to such time, added to the
principal amount outstanding. At August 31, 1999, borrowings under the Company's
loan facility to Metrosvyaz totaled $39.5 million, including $2.7 million of
accrued and capitalized interest and $1.1 million of facility fees.
The Company's investment in Metrosvyaz consists of the outstanding loan
facility, less its share of equity losses. The Company recorded equity losses of
$20.0 million from Metrosvyaz in fiscal 1999. In
29
<PAGE> 30
addition, the Company stopped funding Metrosvyaz and recorded a write-down of
$9.6 million, the Company's remaining investment in Metrosvyaz, in the fourth
quarter. The Company recorded equity losses from Metrosvyaz of $6.1 million
during fiscal 1998.
Orrengrove
The Company has a 35% interest in Orrengrove. In August 1998, Orrengrove
acquired a 60% interest in Transworld Telecommunications, Inc., Transworld
Communications Services, Inc., and Transworld Communications (Bermuda), Ltd.
(collectively, the "Transworld Companies").
The Transworld Companies obtained, through a number of agreements, the
rights to utilize the capacity on certain Russian satellites in order to provide
commercial long-distance voice, video and data services to the Russian
Federation. In April 1999, the Transworld Companies were notified by Mercury
Telesat ("Mercury"), provider of the satellite signal transmission capacity,
that the satellite equipment used to provide their long-distance service had
failed. Mercury's prognosis indicated that the satellite's operational status
will not be restored. The Transworld Companies identified and put into operation
a short-term terrestrial transmission solution by leasing fiber capacity and
began exploring long-term alternatives to the lost satellite transmission
capacity. As a result of these events, Orrengrove recognized an impairment loss
of approximately $16.9 million in the third quarter of fiscal 1999 to write off
certain satellite related assets. This loss is included in the Company's equity
in net loss from unconsolidated wireless operating companies.
After reviewing a series of alternative business plans that did not meet
their minimum financial performance criteria, the directors of the Transworld
Companies voted to liquidate those companies and to distribute the net assets to
their stockholders. As a result, the Company recorded a $17.6 million write-down
in the fourth quarter of fiscal 1999, reducing its investment in Orrengrove to
the liquidation proceeds Leap expects to receive. In addition, the Company
recorded equity losses of $22.6 million from Orrengrove during fiscal 1999,
which included the write-off of the satellite related assets and impairment of
the license.
30
<PAGE> 31
NOTE 5. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------
1999 1998
--------- ---------
(in thousands)
<S> <C> <C>
Accounts receivable, net:
Trade accounts receivable ....................... $ 2,197
Other accounts receivable ....................... 1,112
---------
3,309
Allowance for doubtful accounts ................. (583)
---------
$ 2,726
=========
Property and equipment, net:
Land ............................................ $ 310
Buildings and infrastructure .................... 108,958
Machinery and equipment ......................... 12,897
Other ........................................... 6,819
---------
128,984
Accumulated depreciation and amortization ....... (12,037)
---------
$ 116,947
=========
Intangible assets, net:
Telecommunications licenses ..................... $ 58,488 $ 6,274
Rights to telecommunications network systems .... 16,225 --
Goodwill ........................................ -- 564
--------- ---------
74,713 6,838
Accumulated amortization ........................ (769) --
--------- ---------
$ 73,944 $ 6,838
========= =========
Accounts payable and accrued liabilities:
Trade accounts payable .......................... $ 1,523 $ --
Accrued payroll and related benefits ............ 4,597 --
Accrued loss on handset purchase commitment ..... 7,035 --
Other accrued liabilities ....................... 3,217 5,789
--------- ---------
$ 16,372 $ 5,789
========= =========
</TABLE>
NOTE 6. LOANS PAYABLE TO BANKS
Between July and November 1998, the Company borrowed $15.7 million under
notes payable to banks in Chile. In February 1999, the Company was granted a
one-year extension for the payment of the loans. The renewed loans of $9.0
million and $6.7 million, along with capitalized interest and fees of $1.5
million at August 31, 1999, bear interest at rates of 8.1% and 8.5% per annum,
respectively, and are due to be repaid in February 2000.
31
<PAGE> 32
NOTE 7. LONG-TERM DEBT
As of August 31, 1999, long-term debt is summarized as follows (in
thousands):
<TABLE>
<S> <C>
Credit Agreement, net of facility fee ...................... $120,161
Deferred Payment Agreement ................................. 85,483
Note payable to Telex-Chile, net of discount (See Note 3)... 16,168
--------
$221,812
========
</TABLE>
Credit Agreement
The Company entered into a secured Credit Agreement with QUALCOMM on
September 23, 1998. The Credit Agreement consists of two sub-facilities. The
working capital sub-facility enables the Company to borrow up to $35.2 million
from QUALCOMM. The proceeds from this sub-facility may be used by the Company
solely to meet the normal working capital and operating expenses of the Company,
including salaries and overhead, but excluding, among other things, strategic
capital investments in wireless operators, substantial acquisitions of capital
equipment, and the acquisition of telecommunications licenses. The investment
capital sub-facility enables the Company to borrow up to $229.8 million from
QUALCOMM. The proceeds from this second sub-facility may be used by the Company
solely to make certain identified investments. Under the terms of the Credit
Agreement, if QUALCOMM assigns 10% or more of the total funding commitments to
other lenders, Leap must pay a commitment fee to the lenders on unused balances.
At August 31, 1999, the Company had borrowed $10.6 million under the working
capital sub-facility, including $5.3 million to pay QUALCOMM a 2% facility fee
which is being amortized over the term of the Credit Agreement ($0.6 million of
the facility fee was amortized in 1999). At August 31, 1999, the Company had
borrowed $108.8 million under the investment capital sub-facility to make
further loans to and investments in the Leap Operating Companies.
Amounts borrowed under the Credit Agreement are due September 23, 2006.
QUALCOMM has a collateral interest in substantially all of the assets of the
Company as long as any amounts are outstanding under the Credit Agreement. The
Credit Agreement requires the Company to meet certain financial and operating
covenants. Amounts borrowed under the Credit Agreement bear interest at either a
prime or LIBOR rate, plus an applicable margin. At August 31, 1999, the
weighted average effective rate of interest was 11.35%. Interest will be payable
quarterly beginning after September 2001 and, prior to such time, accrued
interest will be added to the principal amount outstanding. At August 31, 1999,
$5.5 million of capitalized and accrued interest had been added to the Credit
Agreement.
Deferred Payment Agreement
SMARTCOM and QUALCOMM are parties to a Deferred Payment Agreement related to
SMARTCOM's purchase of equipment, software and services from QUALCOMM. The
assets of SMARTCOM collateralize its obligations under the Deferred Payment
Agreement. The Company has also pledged its shares in SMARTCOM as collateral for
the Company's guaranty of SMARTCOM's obligation to QUALCOMM. The Deferred
Payment Agreement requires SMARTCOM to meet certain financial and operating
covenants, including a debt to equity ratio and restrictions on SMARTCOM's
ability to pay dividends and to distribute assets. As a result, substantially
all the net assets are restricted from distribution to Leap. SMARTCOM was in
violation of certain covenants at August 31, 1999, however QUALCOMM and SMARTCOM
amended the Deferred Payment Agreement subsequent to the end of the fiscal year
to revise the covenants that were in default and defer the dates of repayment of
the loan.
32
<PAGE> 33
Under the terms of the amended agreement, QUALCOMM has agreed to defer
collection of amounts up to a maximum of $84.5 million. The deferred payments
bear interest at either a prime or LIBOR rate, plus an applicable margin. At
August 31, 1999, the weighted average effective rate of interest was 8.2%.
Accrued interest may be added to the outstanding principal amount of the
applicable borrowing until October 2001.
Debt Repayment Schedule
The scheduled principal repayments for long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31:
<S> <C>
2000 ................................................. $ --
2001 ................................................. --
2002 ................................................. 44,732
2003 ................................................. 3,218
2004 ................................................. 8,045
Thereafter ........................................... 176,333
---------
$ 232,328
Less unamortized discount and facility fee ........... (10,516)
---------
Total .......................................... $ 221,812
=========
</TABLE>
NOTE 8. OTHER LONG-TERM LIABILITIES
Other long-term liabilities at August 31, 1999 consist primarily of deferred
Chilean customs duties of $8.5 million. Under Chilean law, the payment of
customs duties levied on property and equipment can be deferred over a period of
up to seven years. The balance at August 31, 1999 represents amounts owing
including accrued interest.
NOTE 9. INCOME TAXES
The components of the Company's deferred tax assets (liabilities) are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
August 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
U.S. deferred tax assets:
Net operating loss carryovers ................ $ 32,498 $ 8,754
Equity losses in unconsolidated company ...... 16,320 6,417
Deferred charges ............................. 3,502 --
Reserves and allowances ...................... 3,402 2,984
-------- --------
55,722 18,155
Foreign deferred tax assets:
Net operating loss carryovers ................ 8,000 --
Reserves and allowances ...................... 1,259 --
-------- --------
9,259 --
-------- --------
Gross deferred tax assets .................... 64,981 18,155
Foreign deferred tax liabilities:
Intangible assets ............................ (9,136) --
-------- --------
Net deferred tax asset ....................... 55,845 18,155
Valuation allowance .......................... (55,845) (18,155)
-------- --------
$ -- $ --
======== ========
</TABLE>
33
<PAGE> 34
Management has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
The net operating losses generated prior to the Distribution were retained
by QUALCOMM. At August 31, 1999 the Company had a federal net operating loss
carryover of approximately $86.0 million which will expire in 2019. In addition,
the Company had foreign net operating losses of approximately $52.5 million
which do not expire. Should a substantial change in the Company's ownership
occur as defined under Internal Revenue Code section 382, there will be an
annual limitation on its utilization of net operating loss carryforwards.
A reconciliation of the income tax provision (benefit) to the amount
computed by applying the statutory federal income tax rate to income before
income tax provision is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Amounts computed at statutory federal rate ...... $(57,615) $(16,357) $ (1,804)
Non-deductible losses of investees .......... 16,649 2,150 --
State income tax, net of federal benefit .... (5,740) (1,428) (229)
Other ....................................... 385 (487) --
Increase in valuation allowance ............. 46,321 16,122 2,033
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>
NOTE 10. STOCKHOLDERS' EQUITY
Stockholder Rights Plan
In September 1998, the Company's Board of Directors adopted a Stockholder
Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, the Board of
Directors declared a dividend, payable on September 16, 1998, of one preferred
purchase right (a "Right") for each share of common stock, $.0001 par value, of
the Company outstanding at the close of business on September 11, 1998. Similar
Rights will generally be issued in respect to common stock subsequently issued.
Each Right entitles the registered holder to purchase from the Company a one
one-thousandth share of Series A Junior Participating Preferred Stock, $.0001
par value per share, at a purchase price of $90 (subject to adjustment). The
Rights are exercisable only if a person or group (an "Acquiring Person"), other
than QUALCOMM with respect to its exercise of the warrant granted to it in
connection with the Distribution, acquires beneficial ownership of 15% or more
of the Company's outstanding shares of common stock. Upon exercise, holders
other than an Acquiring Person, will have the right (subject to termination) to
receive the Company's common stock or other securities having a market value (as
defined) equal to twice the purchase price of the Right. The Rights, which
expire on September 10, 2008, are redeemable in whole, but not in part, at the
Company's option at any time for a price of $.01 per Right.
In conjunction with the distribution of the Rights, the Company's Board of
Directors designated 75,000 shares of Preferred Stock as Series A Junior
Participating Preferred Stock and reserved such shares for issuance upon
exercise of the Rights. At August 31, 1999, no shares of Preferred Stock were
outstanding.
Warrant
In connection with the Distribution, the Company issued QUALCOMM a warrant
to purchase 5,500,000 shares of the Company's common stock. In March 1999,
QUALCOMM agreed to reduce the number of shares to 4,500,000 for consideration of
$5.4 million, which is the estimated fair value of the warrant repurchase as
determined by an option pricing model. This warrant is currently
34
<PAGE> 35
exercisable and remains exercisable until September 2008.
Trust Convertible Preferred Securities
Under the conversion agreement between the Company and QUALCOMM, Leap has
agreed to issue up to 2,271,060 shares of its common stock upon the conversion
of the Trust Convertible Preferred Securities of a wholly owned statutory
business trust of QUALCOMM. After conversion of the Trust Convertible Preferred
Securities, QUALCOMM will have some of its debt reduced, but Leap will receive
no additional benefit or other consideration. At August 31, 1999, 487 shares of
the Company's common stock had been issued upon conversion.
NOTE 11. BENEFIT PLANS
Employee Savings and Retirement Plan.
In September 1998, the Company adopted a 401(k) plan that allows eligible
employees to contribute up to 15% of their salary, subject to annual limits. The
Company matches a portion of the employee contributions and may, at its
discretion, make additional contributions based upon earnings. The Company's
contribution expense for fiscal 1999 was $133,000.
Stock Option Plans
In September 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan") that allows the Board of Directors to grant options to selected
employees, directors and consultants to the Company to purchase shares of the
Company's common stock. A total of 8,000,000 shares of common stock were
reserved for issuance under the 1998 Plan. The 1998 Plan provides for the grant
of both incentive and non-qualified stock options. Incentive stock options are
exercisable at a price not less than 100% of the fair market value of the common
stock on the date of grant. Non-qualified stock options are exercisable at a
price not less than 85% of the fair market value of the common stock on the date
of grant. Generally, options vest over a five-year period and are exercisable
for up to ten years from the grant date. The Company also adopted the 1998
Non-Employee Directors Stock Option Plan (the "1998 Non-Employee Directors
Plan"), under which options to purchase common stock are granted to non-employee
directors on an annual basis. A total of 500,000 shares of common stock were
reserved for issuance under the 1998 Non-Employee Directors Plan. The options
are exercisable at a price equal to the fair market value of the common stock on
the date of grant, vest over a five-year period and are exercisable for up to
ten years from the grant date.
35
<PAGE> 36
A summary of stock option transactions for the 1998 Plan and the 1998
Non-Employee Directors Plan follows (number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------
OPTIONS
AVAILABLE NUMBER OF WEIGHTED AVERAGE
FOR GRANT SHARES EXERCISE PRICE
----------- ----------- ----------------
<S> <C> <C> <C>
Options authorized .................... 8,500
Options granted at Distribution ....... (5,542) 5,542 $ 3.73
Options granted after Distribution .... (1,768) 1,768 10.52
Options cancelled ..................... 513 (720) 4.03
Options exercised ..................... -- (650) 3.11
-------- --------
August 31, 1999 .......................... 1,703 5,940 $ 5.78
======== ========
</TABLE>
The following table summarizes information about stock options outstanding
under the 1998 Plan and the 1998 Non-Employee Directors Plan at August 31, 1999
(number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- -------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF NUMBER LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF SHARES (IN YEARS) PRICE OF SHARES PRICE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.78 to $3.63 2,707 6.30 $ 2.75 1,240 $ 2.46
$3.67 to $5.04 1,799 7.87 4.45 573 4.31
$5.06 to $10.38 650 8.38 5.93 112 5.54
$15.63 to $22.00 784 9.83 19.14 -- --
-------- --------
5,940 7.47 $ 5.78 1,925 $ 3.19
======== ========
</TABLE>
In June 1999, Cricket Communications adopted its own 1999 Stock Option Plan
(the "1999 Cricket Plan") that allows the Cricket Communications Board of
Directors to grant options to selected employees, directors and consultants to
purchase shares of Cricket Communication's common stock. A total of 7,600,000
shares of Cricket Communications common stock were reserved for issuance under
the 1999 Cricket Plan. The 1999 Cricket Plan provides for the grant of both
incentive and non-qualified stock options. Incentive stock options are
exercisable at a price not less than 100% of the fair market value of the
Cricket Communications common stock on the date of grant. Non-qualified stock
options are exercisable at a price not less than 85% of the fair market value of
the Cricket Communications common stock on the date of grant. Generally, options
vest over a five-year period and are exercisable for up to ten years from the
grant date. In June 1999, a total of 1,205,000 options to purchase Cricket
Communications common stock were granted to two directors of the Company,
exercisable at $1.00 per share with accelerated vesting provisions. In July
1999, all of these options vested and were fully exercised. In addition, 795,000
other options granted in June 1999 were exercised in July 1999. Cricket
Communications received promissory notes totaling $0.9 million and cash of $1.1
million in consideration for the issuance of the shares. Immediately thereafter,
the Company owned 96.2% of the outstanding common stock of Cricket
Communications. As Cricket Communications is in the development stage, the
effect of the issuance of the shares of $0.6 million has been recorded to
additional paid-in capital. These transactions in fiscal 1999 have been
reflected in minority interest.
36
<PAGE> 37
A summary of stock option transactions for the 1999 Cricket Plan follows
(number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------
OPTIONS
AVAILABLE NUMBER OF WEIGHTED AVERAGE
FOR GRANT SHARES EXERCISE PRICE
----------- ----------- ----------------
<S> <C> <C> <C>
Options authorized .... 7,600
Options granted ....... (3,335) 3,335 $ 1.16
Options cancelled ..... 2 (2) 1.00
Options exercised ..... -- (2,000) 1.00
------ ------
August 31, 1999 .......... 4,267 1,333 $ 1.41
======
</TABLE>
The following table summarizes information about stock options outstanding
under the 1999 Cricket Plan at August 31, 1999 (number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- -------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
NUMBER LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF SHARES (IN YEARS) PRICE OF SHARES PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00 851 9.81 $ 1.00 123 $ 1.00
$2.00 458 9.87 2.00 -- --
$4.00 24 9.93 4.00 -- --
-------- --------
1,333 9.83 $ 1.40 123 $ 1.00
======== ========
</TABLE>
Employee Stock Purchase Plan
In September 1998, the Company adopted the 1998 Employee Stock Purchase Plan
(the "1998 ESP Plan") for all eligible employees to purchase shares of common
stock at 85% of the lower of the fair market value of such stock on the first or
the last day of each offering period. A total of 200,000 shares of common stock
were reserved for issuance under the 1998 ESP Plan. Employees may authorize the
Company to withhold up to 15% of their compensation during any offering period,
subject to certain limitations. During fiscal 1999, a total of 63,779 shares
were issued under the 1998 ESP Plan at $3.83 per share. At August 31, 1999,
136,221 shares were reserved for future issuance.
Executive Retirement Plan
In September 1998, the Company adopted a voluntary retirement plan that
allows eligible executives to defer up to 100% of their income on a pre tax
basis. On a quarterly basis, participants receive up to a 10% match of their
deferral in the form of the Company's common stock based on the then current
market price, to be issued to the participant upon eligible retirement. The
income deferred and the Company match are unsecured and subject to the claims of
general creditors of the Company. The plan authorizes up to 100,000 shares of
common stock to be allocated to participants. During fiscal 1999, 8,718 shares
were allocated under the plan and the Company's matching contribution amounted
to $86,216. At August 31, 1999, 91,282 shares were reserved for future
allocation.
37
<PAGE> 38
Accounting for Stock-Based Compensation
Pro forma information regarding net income (loss) and net earnings (loss)
per common share is required by SFAS No. 123, "Accounting for Stock-Based
Compensation". This information is required to be determined as if the Company
had accounted for its stock-based awards to employees and non-employee directors
(including shares issued under stock options and the 1998 ESP Plan, collectively
called "options") granted subsequent to September 30, 1995 under the fair value
method of SFAS No. 123. The fair value of options granted in fiscal 1999
reported below has been estimated at the date of grant using the Black-Scholes
option-pricing model using the following weighted average assumptions:
<TABLE>
<CAPTION>
1998 1999 1998
STOCK OPTION PLAN CRICKET PLAN ESP PLAN
----------------- ------------ --------
<S> <C> <C> <C>
Risk-free interest rate ....... 5.0% 5.0% 4.5%
Volatility .................... 50.0% 0.0% 55.0%
Dividend yield ................ 0.0% 0.0% 0.0%
Expected life (years) ......... 6.0 6.0 0.5
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's options have characteristics significantly different than those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in the opinion of management, the
existing models do not necessarily provide a reliable single measure of the fair
value of its options. The weighted average estimated grant date fair values of
stock options granted in fiscal 1999 under the 1998 Plan, the 1999 Cricket Plan
and the 1998 ESP Plan were $2.37, $0.12 and $2.37 per share, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is assumed to be amortized to expense over the options' vesting period.
The Company's pro forma information for the year ended August 31, 1999 is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
Net loss ....................................... $ (164,613) $ (171,415)
Basic and diluted net loss per common share .... $ (9.19) $ (9.57)
</TABLE>
The Company did not recognize a tax benefit relating to pro forma
compensation expense under SFAS No. 123 for fiscal 1999 as such benefit did not
meet the "more likely than not" criteria for recognition of deferred tax assets.
NOTE 12. COMMITMENTS AND CONTINGENCIES
In May 1999, PEGASO entered into a $100 million loan agreement. The Company
guaranteed 33% of PEGASO's obligations under this loan agreement in the event
of PEGASO's default.
The Company has entered into non-cancelable operating lease agreements to
lease its facilities, certain equipment and rental of sites for towers and
antennas required for the operation of its mobile PCS telephone system in Chile.
Future minimum rental payments required for all non-cancelable operating leases
at August 31, 1999 are as follows (in thousands):
38
<PAGE> 39
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31:
<S> <C>
2000.................................................. $ 2,060
2001.................................................. 2,050
2002.................................................. 2,049
2003.................................................. 2,056
2004.................................................. 1,860
Thereafter............................................ 5,840
----------
Total...................................... $ 15,915
==========
</TABLE>
Rent expense totaled $1.2 million in fiscal 1999. No rent expense was
incurred by the Company prior to the Distribution.
Various claims arising in the course of business, seeking monetary damages
and other relief, are pending. The amount of the liability, if any, from such
claims cannot be determined with certainty; however, in the opinion of
management, the ultimate liability for such claims will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows.
NOTE 13. SEGMENT DATA
The Company's current reportable segments are countries in which it manages,
supports, operates and otherwise participates in wireless communications
business ventures. These reportable segments are evaluated separately because
each geographic region presents different marketing strategies and operational
issues, as well as distinct economic climates and regulatory constraints. The
Company's reportable segments are comprised of Cricket Communications and Chase
in the United States, and Leap's operating companies in Mexico and Chile.
The accounting policies of the various segments are the same as those
described in Note 2, "Summary of Significant Accounting Policies". The key
operating performance criteria used by Leap includes revenue growth, operating
income (loss), depreciation and amortization, capital expenditures, and
purchases of wireless licenses. Segment assets exclude corporate assets.
Corporate expenses are comprised primarily of general and administrative
expenses, which are separately managed. The segment results of Chile and Mexico
do not include any corporate allocations of general and administrative expenses
from Leap.
39
<PAGE> 40
Summary information by segment is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED AUGUST 31,
---------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
UNITED STATES
Revenues ............................... $ 3,337 $ 22 $ --
Operating loss ......................... (22,414) (20,017) (4,959)
Depreciation and amortization .......... (2,033) (120) (120)
Capital expenditures ................... (6,177) (12,852) (9,971)
Purchase of wireless licenses .......... (18,920) -- --
Total assets ........................... 109,437 88,991
CHILE
Revenues ............................... 7,444 -- --
Operating loss ......................... (27,479) (4,380) (274)
Depreciation and amortization .......... (9,409) (60) --
Capital expenditures ................... (26,666) (85,036) (15,058)
Purchase of wireless licenses .......... -- -- --
Total assets ........................... 186,645 124,614
MEXICO
Revenues ............................... 1,203 -- --
Operating loss ......................... (68,847) (5,350) --
Depreciation and amortization .......... (2,320) -- --
Capital expenditures ................... (8,315) (822) --
Purchase of wireless licenses .......... (175,864) (57,666) --
Total assets ........................... 551,098 71,760
</TABLE>
A reconciliation of the Company's segment revenues, operating expenses,
depreciation and amortization and total assets to the corresponding consolidated
amounts is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED AUGUST 31,
---------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Segment revenues .......................................... $ 11,984 $ 22 $ --
Revenues of unconsolidated wireless operating companies.... (8,190) (22) --
Other unallocable revenues ................................ 113 -- --
--------- --------- ---------
Consolidated revenues ................................... $ 3,907 $ -- $ --
========= ========= =========
Segment operating losses .................................. $(118,740) $ (29,747) $ (5,233)
Operating losses of unconsolidated wireless operating
Companies ............................................... 101,528 15,151 5,233
Corporate and eliminations ................................ (17,260) (9,292) (1,361)
--------- --------- ---------
Consolidated operating loss ............................. $ (34,472) $ (23,888) $ (1,361)
========= ========= =========
Segment depreciation and amortization ..................... $ (13,762) $ (180) $ (120)
Depreciation and amortization of unconsolidated wireless
Operating companies ..................................... 8,501 180 120
Corporate depreciation and amortization ................... (563) -- --
--------- --------- ---------
Consolidated depreciation and amortization .............. $ (5,824) $ -- $ --
========= ========= =========
Segment total assets ...................................... $ 847,180 $ 285,365
Total assets of unconsolidated wireless operating
companies ............................................... (639,738) (285,365)
Investments in and loans to unconsolidated wireless
Operating companies ..................................... 94,429 150,914
Corporate assets .......................................... 33,460 6,838
--------- ---------
Consolidated total assets ............................... $ 335,331 $ 157,752
========= =========
</TABLE>
40
<PAGE> 41
Revenues and long-lived assets related to operations in the United States
and other foreign countries are as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED AUGUST 31,
-------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
United States ............................... $ -- $ -- $ --
Other foreign countries ..................... 3,907 -- --
--------- --------- ---------
Total consolidated revenues .............. $ 3,907 $ -- $ --
========= ========= =========
LONG-LIVED ASSETS:
United States ............................... $ 23,599 $ -- $ --
Other foreign countries ..................... 264,369 104,557 42,267
--------- --------- ---------
Total consolidated long-lived assets ..... $ 287,968 $ 104,557 $ 42,267
========= ========= =========
</TABLE>
NOTE 14. SUBSEQUENT EVENTS
Infrastructure Agreements
In September 1999, a subsidiary of Leap entered into separate infrastructure
equipment purchase agreements with two major telecommunications suppliers. Under
the agreements, each supplier will sell $330 million in infrastructure equipment
to the subsidiary. In connection with the sales of infrastructure equipment, the
suppliers will provide vendor financing that will be used for equipment,
services and operations needed to deploy the subsidiary's wireless networks in
various markets across the United States. One of the purchase agreements is
subject to the approval of the applicable supplier's board of directors.
41
<PAGE> 42
Report of Independent Accountants
To the Board of Directors and Stockholders
of Leap Wireless International, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive loss, of cash flows and
of stockholders' equity present fairly, in all material respects, the financial
position of Leap Wireless International, Inc. and its subsidiaries at August 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended August 31, 1999 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
adopted the equity method of accounting for its investment in Chase
Telecommunications Holdings, Inc. during the year ended August 31, 1999. The
accompanying financial statements have been restated to reflect the adoption of
the equity method retroactive to the initial date of the Company's investment in
Chase Telecommunications Holdings, Inc.
PricewaterhouseCoopers LLP
San Diego, California
October 18, 1999
42
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF LEAP WIRELESS INTERNATIONAL, INC.
<TABLE>
<CAPTION>
DATE OF ACQUISITION
NAME OR ORGANIZATION COUNTRY
- ---------------------------------------------- ------------------- --------------
<S> <C> <C>
QUALCOMM Telecommunications Limited September 23, 1998 Cayman Islands
Metrosvyaz Limited September 23, 1998 Cypress
QUALCOMM Telecommunications Limited September 23, 1998 Isle of Man
Orrengrove Investments Limited September 23, 1998 Cypress
Transworld Telecommunications (Bermuda), Ltd. September 23, 1998 Bermuda
Transworld Telecommunications, Inc. September 23, 1998 Delaware
Transworld Telecommunications Services, Inc. September 23, 1998 Delaware
Inversiones Leap Wireless Chile S.A. September 23, 1998 Chile
Chilesat Telefonia Personal S.A. September 23, 1998 Chile
Leap PCS Mexico, Inc. September 23, 1998 California
Leap Wireless Mexico, S.A. de C.V. October 8, 1998 Mexico
Pegaso Telecomunicaciones, S.A. de C.V. September 23, 1998 Mexico
Pegaso Comunicaciones y Sistemas, S.A. de C.V. September 23, 1998 Mexico
Pegaso PCS, S.A. de C.V. September 23, 1998 Mexico
Pegaso Humanos Recureos, S.A. de C.V. September 23, 1998 Mexico
Chase Telecommunications Holdings, Inc. September 23, 1998 Delaware
Chase Telecommunications, Inc. September 23, 1998 Delaware
Cricket Holdings, Inc. August 26, 1998 Delaware
Cricket Communications, Inc. August 26, 1998 Delaware
Cricket Wireless Communications, Inc. September 16, 1999 Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-63823) of Leap Wireless International, Inc. of
our report dated October 18, 1999 relating to the financial statements, which
appears in the Leap Wireless International, Inc. 1999 Annual Report to
Shareholders, which is incorporated by reference in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our report dated
October 18, 1999 relating to the financial statement schedule, which appears in
this Form 10-K.
PricewaterhouseCoopers LLP
San Diego, California
October 18, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 26,215
<SECURITIES> 0
<RECEIVABLES> 2,726
<ALLOWANCES> 583
<INVENTORY> 5,410
<CURRENT-ASSETS> 40,184
<PP&E> 128,984
<DEPRECIATION> 12,037
<TOTAL-ASSETS> 335,331
<CURRENT-LIABILITIES> 33,597
<BONDS> 221,812
0
0
<COMMON> 2
<OTHER-SE> 70,898
<TOTAL-LIABILITY-AND-EQUITY> 335,331
<SALES> 3,907
<TOTAL-REVENUES> 3,907
<CGS> 3,810
<TOTAL-COSTS> 3,810
<OTHER-EXPENSES> 34,569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,356
<INCOME-PRETAX> 164,613
<INCOME-TAX> 0
<INCOME-CONTINUING> 164,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,613
<EPS-BASIC> (9.19)
<EPS-DILUTED> (9.19)
</TABLE>
