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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10/A
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GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
VOICESTREAM WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1956185
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
3650 131ST AVENUE S.E.
BELLEVUE, WA 98006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
</TABLE>
COPIES TO:
ALAN R. BENDER
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
3650 131ST AVENUE S.E.
BELLEVUE, WA 98006
G. SCOTT GREENBURG
MARK S. BRITTON
PRESTON GATES & ELLIS LLP
5000 COLUMBIA SEAFIRST CENTER
701 5TH AVE.
SEATTLE, WA 98104
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (425) 653-4600
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
NONE NONE
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
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ITEM 1. BUSINESS
GENERAL
VoiceStream Wireless Corporation ("VoiceStream") is presently the 80.1%
subsidiary of Western Wireless Corporation ("Western Wireless"); however,
Western Wireless is in the process of "spinning-off" VoiceStream (the
"Spin-off"). See "-- Present Relationship with Western Wireless." VoiceStream is
a Washington corporation.
VoiceStream provides personal communications services ("PCS") under the
VoiceStream(R) brand name in 11 urban markets -- Denver, Seattle/Tacoma,
Phoenix/Tucson, Portland, Salt Lake City, Des Moines, Oklahoma City, Honolulu,
El Paso, Albuquerque and Boise -- and is currently constructing systems in San
Antonio and Austin. VoiceStream holds 107 broadband PCS licenses covering
approximately 62.6 million persons. VoiceStream served 322,400 PCS subscribers
at December 31, 1998.
VoiceStream was formed in 1994 as "Western PCS Corporation" to participate
on behalf of Western Wireless and its shareholders in auctions held by the
Federal Communications Commission ("FCC") of various PCS licenses. It was a
wholly owned subsidiary of Western Wireless until February 1998, when Hutchison
Holdingsmunications PCS (USA) Limited ("Hutchison USA"), a subsidiary of
Hutchison Whampoa Limited ("Hutchison"), invested $248.4 million (the "Hutchison
Investment") to purchase newly issued shares of common stock representing a
19.9% interest in VoiceStream. VoiceStream operated as a Delaware corporation
until April 8, 1999, when it became a Washington corporation. The results of
VoiceStream are both consolidated and reported with the results for Western
Wireless and separately maintained, audited, and reported as the results of
VoiceStream. As a result, all financial data relating to VoiceStream herein
reflect the combined operations of the PCS operating subsidiaries of Western
Wireless, but do not contain any of the results of the cellular, paging and
international operations of Western Wireless.
BACKGROUND
THE WIRELESS COMMUNICATIONS INDUSTRY
Overview
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the wireless communications industry
includes one-way radio applications, such as paging or beeper services, and
two-way radio applications, such as cellular, PCS and ESMR networks. Each such
application is licensed in a distinct radio frequency block.
Since its introduction in 1983, wireless service has grown dramatically. As
of June 30, 1998, according to the Cellular Telecommunications Industry
Association ("CTIA") there were over 60.8 million wireless subscribers in the
United States, representing a penetration rate of 22.4%.
In the wireless communications industry, there are two principal frequency
bands licensed by the FCC for transmitting two way voice and data signals,
"cellular" and "PCS." Cellular systems are generated at 824 to 899 MHz and can
be either analog or digital. Although all cellular systems provide analog
capabilities, digital technology has been introduced by most carriers in urban
markets. Analog technology has several limitations, including lack of privacy
and limited capacity. Digital systems convert voice or data signals into a
stream of digits that is compressed before transmission, enabling a single radio
channel to carry multiple simultaneous signal transmissions. This enhanced
capacity, along with improvements in digital signaling, allows digital-based
wireless technologies to offer new and enhanced services, such as greater call
privacy, and robust data transmission features, such as "mobile office"
applications (including facsimile, electronic mail and wireless connections to
computer/data networks, including the Internet). See "-- Operation of Wireless
Communications Systems."
PCS is a term commonly used in the United States to describe a portion of
radio spectrum from 1850 to 1990 MHz. PCS spectrum was auctioned by the FCC in
six frequency blocks (A-F) beginning with the A and B Blocks in late 1994 and
1995. In late 1995 and in 1996 the C Block was auctioned and
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the FCC concluded simultaneous auctions of the D, E and F Blocks in 1997. In
1999, the FCC intends to reauction portions of the C, D, E and F Blocks that
were returned or not purchased in previous auctions. This portion of radio
spectrum is to be used by PCS licensees to provide wireless communications
services. PCS competes directly with existing cellular telephone, paging and
specialized mobile radio services. PCS also includes features that are not
generally offered by analog cellular providers, such as data transmissions to
and from portable computers, advanced paging services and facsimile services. In
addition, wireless providers may eventually offer mass market wireless local
loop applications in competition with wired local communications services. See
"-- Governmental Regulation" for a discussion of the FCC auction process and
allocation of wireless licenses.
Operation of Wireless Communications Systems
Wireless communications system service areas, whether cellular or PCS, are
divided into multiple cells. Due to the frequencies in which they operate, a
single cell in a cellular system generally transmits over a wider radius than a
comparable PCS cell. In both cellular and PCS systems, each cell contains a
transmitter, a receiver and signaling equipment (the "Cell Site"). The Cell Site
is connected by microwave or landline telephone lines to a switch that uses
computers to control the operation of the wireless communications system for the
entire service area. The system controls the transfer of calls from cell to cell
as a subscriber's handset travels, coordinates calls to and from handsets,
allocates calls among the cells within the system and connects calls to the
local landline telephone system or to a long distance telephone carrier.
Wireless communications providers establish interconnection agreements with
local exchange carriers and interexchange carriers, thereby integrating their
system with the existing landline communications system.
Because the signal strength of a transmission between a handset and a Cell
Site declines as the handset moves away from the Cell Site, the switching office
and the Cell Site monitor the signal strength of calls in progress. When the
signal strength of a call declines to a predetermined level, the switching
office may "hand off" the call to another Cell Site where the signal strength is
stronger. If a handset leaves the service area of a cellular or PCS system, the
call is disconnected unless there is a technical connection with the adjacent
system.
Wireless system operators normally agree to provide service to subscribers
from other compatible wireless systems who are temporarily located in or
traveling through their service areas in a practice called "roaming." Agreements
among system operators provide that the carrier that normally provides services
to the roaming subscriber pays the serving carrier at rates prescribed by the
serving carrier. Analog cellular handsets are functionally compatible with
cellular systems in all markets within the United States. As a result, analog
cellular handsets may be used wherever a subscriber is located, as long as a
cellular system is operational in the area and necessary roaming arrangements
exist. Although PCS and cellular systems utilize similar technologies and
hardware, they operate on different frequencies and use different technical and
network standards. Dual mode phones, however, make it possible for users of one
type of system to "roam" on a different type of system outside of their service
area.
PCS systems operate under one of three principal digital signal
transmission technologies, or standards, that have been deployed by various
operators and vendors for use in PCS systems: Global System for Mobile
Communications ("GSM"), Time Division Multiple Access ("TDMA") or Code Division
Multiple Access ("CDMA"). GSM is the most widely used digital wireless standard
in the world serving over 120 million subscribers in approximately 130
countries. A benefit associated with GSM technology is its use of an open system
architecture that allows operators to purchase network equipment from a variety
of vendors that share standard interfaces for operation.
GSM and TDMA are both based upon time-division of spectrum and are
currently incompatible with each other and with CDMA. Accordingly, a subscriber
of a system that utilizes GSM technology is currently unable to use a GSM
handset when traveling in an area not served by GSM-based PCS operators, unless
the subscriber carries a dual-mode handset that permits the subscriber to use
the analog cellular system in that area. Under a memorandum of understanding
between GSM operators in the
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United States and Canada and the association of TDMA operators in the United
States and Canada, there are plans to promote the interoperability of GSM and
TDMA standards.
The TDMA-based PCS standard offers the same features and services offered
by the time division-based digital cellular standard currently in use by certain
cellular operators in the United States, including AT&T Wireless and
Southwestern Bell. Both the CDMA- and TDMA-based PCS standards use a closed
system architecture that will limit PCS operators' choices of equipment vendors.
The CDMA standard is the most widely adopted digital standard in the United
States. CDMA-based PCS systems offer the same features and services offered by
CDMA-based cellular systems.
THE BUSINESS OF VOICESTREAM
VoiceStream provides PCS services under the VoiceStream brand name in 11
urban markets -- Denver, Seattle/Tacoma, Phoenix/Tucson, Portland, Salt Lake
City, Des Moines, Oklahoma City, Honolulu, El Paso, Albuquerque and Boise -- and
is currently constructing systems in San Antonio and Austin. VoiceStream holds
107 broadband PCS licenses covering approximately 62.6 million persons.
VoiceStream has experienced rapid growth of its operations since commencement in
February 1996. VoiceStream's subscribers have grown to 322,400 at December 31,
1998, and revenues have grown to $168.0 million for the year ended December 31,
1998. VoiceStream believes these results reflect the strong demand for wireless
services in its markets, the success of its marketing strategy and its
management capabilities.
VoiceStream believes its PCS service offerings are more extensive than
those generally offered by cellular systems in VoiceStream's markets. Service
offerings include all of the services typically provided by cellular systems, as
well as paging, caller identification, text messaging, smart cards, voice mail,
over-the-air activation and over-the-air subscriber profile management.
VoiceStream's goal is to achieve significant market penetration by
aggressively marketing competitively priced services under its proprietary
VoiceStream brand name, offering enhanced services not generally provided by
cellular operators and providing superior customer service. In addition,
VoiceStream is well-positioned to be a low-cost provider of PCS services by
utilizing centralized management, marketing, billing and customer service
functions, and by focusing on efficient customer acquisition and retention.
VoiceStream selected GSM as the digital standard for its PCS systems
because it believes GSM has significant advantages over the other competing
digital standards. These advantages include the widest array of features and an
open system architecture that provides cost advantages in choosing from a
variety of equipment options and providers, which result from the experience of
years of proven operability in Europe and Asia. GSM is the leading digital
wireless standard in the world, with over 120 million customers in 130
countries.
VoiceStream has entered into roaming agreements with substantially all of
the licensees that have deployed the GSM standard in North America. Such
agreements will allow VoiceStream's subscribers to roam in these carriers' PCS
markets, and vice versa, when such systems are operational. VoiceStream also has
approximately 90 reciprocal roaming agreements with a variety of international
carriers who have chosen to deploy the GSM standard. In addition, VoiceStream
has entered into roaming agreements with several cellular carriers, including
Western Wireless.
STRATEGY
VoiceStream's principal focus is on the operation of PCS systems in urban
markets in the United States. VoiceStream believes that PCS is the optimum
technology for more densely populated urban areas where cellular systems are
generally more expensive to deploy and face potential capacity constraints.
VoiceStream's operating strategy is to: (i) construct and operate high
quality systems with extensive coverage in urban areas; (ii) expand operations
through increased subscriber growth and usage; (iii) utilize
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centralized management, back office functions and its own salesforce to improve
operating efficiencies and generate greater economies of scale; and (iv) acquire
additional PCS licenses in urban markets.
VoiceStream is implementing its strategy by: (i) expanding its present
systems and building new systems; (ii) offering a targeted range of products to
complement today's business and personal lifestyles at competitive prices; (iii)
continually upgrading the quality of its network; (iv) establishing brand
recognition through a strong sales and marketing program; and (v) providing a
superior level of customer service.
VOICESTREAM EMPLOYEES AND LABOR RELATIONS
VoiceStream considers its labor relations to be good and, to VoiceStream's
knowledge, none of its employees is covered by a collective bargaining
agreement. As of December 31, 1998, VoiceStream employed a total of
approximately 1,834 people in the following areas:
<TABLE>
<CAPTION>
NUMBER OF
CATEGORY EMPLOYEES
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<S> <C>
Sales and marketing......................................... 771
Engineering................................................. 269
General and administration, including customer service...... 794
</TABLE>
MARKETS AND SYSTEMS
VoiceStream owns 107 broadband PCS licenses, seven of which are for Major
Trading Area ("MTA") license areas and 100 of which are for Basic Trading Area
("BTA") license areas, covering a total of approximately 62.6 million persons.
See "-- Governmental Regulation, Licensing of PCS Systems." MTA and BTA are
terms used by the FCC to define licensed market areas and are based on the Rand
McNally 1992 Commercial Atlas & Marketing Guide, 123rd Edition, at pages 38 - 39
("BTA/MTA Map"). Rand McNally organizes the 50 states and the District of
Columbia into 47 MTAs and 487 BTAs. The BTA/MTA Map is available for public
inspection at the Office of Engineering and Technology's Technical Information
Center, 2000 M Street, NW, Washington, DC 20554.
VoiceStream obtained its licenses as follows: (i) six MTA licenses in the
FCC's A Block auction in 1995; (ii) one MTA license from another carrier in
1996; (iii) 92 BTA licenses in the FCC's D and E Block auctions in 1997; and
(iv) eight BTA licenses from another carrier in October 1997. Cook Inlet Western
Wireless PV/SS, LP ("Cook Inlet PCS"), in which VoiceStream owns a 49.9% limited
partnership interest, owns 18 PCS BTA licenses that were acquired in the FCC's C
and F Block auctions. Cook Inlet PCS provides service in the Spokane, Tulsa,
Phoenix/Tucson and Seattle/Tacoma markets. VoiceStream has also formed another
joint venture with some of the same Cook Inlet PCS partners to participate in
the FCC's reauction of C and F Block licenses. Through other joint ventures in
which VoiceStream has an interest, PCS service is available in the Wichita
market and certain markets in Iowa, and is anticipated to be available in
certain markets in southern Texas in 1999. All of these operational markets use
the internationally-proven GSM technology.
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Unless the context otherwise requires, when used herein, with respect to a
licensed area, "persons" and "population" are interchangeable and refer to the
aggregate number of persons located in such licensed area. Persons and
population data are estimated for 1999 based upon 1998 estimates by Equifax
Marketing Decision Systems, Inc. ("Equifax") adjusted by VoiceStream by applying
Equifax's growth factors from 1997 to 1998.
<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ---------
<S> <C> <C> <C>
DENVER
Casper-Gillette........................................... 140,000 B 30 MHz
Cheyenne.................................................. 109,000 B 30 MHz
Colorado Springs.......................................... 513,000 B 30 MHz
Denver.................................................... 2,478,000 B 30 MHz
Fort Collins.............................................. 231,000 B 30 MHz
Grand Junction............................................ 233,000 B 30 MHz
Greeley................................................... 160,000 B 30 MHz
Pueblo.................................................... 299,000 B 30 MHz
Rapid City................................................ 194,000 B 30 MHz
Riverton.................................................. 49,000 B 30 MHz
Rock Springs.............................................. 59,000 B 30 MHz
Scottsbluff............................................... 101,000 B 30 MHz
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4,566,000
SEATTLE
Olympia-Centralia......................................... 327,000 E 10 MHz
Seattle-Tacoma............................................ 3,090,000 E 10 MHz
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3,417,000
PHOENIX
Flagstaff................................................. 119,000 D 10 MHz
Nogales................................................... 40,000 D 10 MHz
Phoenix................................................... 3,191,000 D 10 MHz
Prescott.................................................. 153,000 D 10 MHz
Sierra Vista-Douglas...................................... 114,000 D 10 MHz
Tucson.................................................... 807,000 D 10 MHz
Yuma...................................................... 126,000 D 10 MHz
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4,550,000
PORTLAND
Bend...................................................... 141,000 A 30 MHz
Coos Bay-North Bend....................................... 84,000 A 30 MHz
Eugene-Springfield........................................ 312,000 A 30 MHz
Klamath Falls............................................. 81,000 A 30 MHz
Longview.................................................. 96,000 A 30 MHz
Medford-Grants Pass....................................... 249,000 A 30 MHz
Portland.................................................. 2,041,000 A 30 MHz
Roseburg.................................................. 103,000 A 30 MHz
Salem-Albany.............................................. 514,000 A 30 MHz
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3,621,000
SALT LAKE CITY
Logan..................................................... 101,000 A 30 MHz
Provo-Orem................................................ 358,000 A 30 MHz
Salt Lake City............................................ 1,554,000 A 30 MHz
St. George................................................ 129,000 A, E 40 MHz
Boise-Nampa............................................... 538,000 A 30 MHz
Idaho Falls............................................... 211,000 A 30 MHz
Pocatello................................................. 102,000 A 30 MHz
Twin Falls................................................ 158,000 A 30 MHz
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3,151,000
</TABLE>
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<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ---------
<S> <C> <C> <C>
EL PASO-ALBUQUERQUE
Albuquerque............................................... 792,000 A 30 MHz
Carlsbad.................................................. 54,000 A 30 MHz
Farmington-Durango........................................ 194,000 A 30 MHz
Gallup.................................................... 141,000 A 30 MHz
Las Cruces................................................ 240,000 A 30 MHz
Roswell................................................... 79,000 A 30 MHz
Santa Fe.................................................. 204,000 A 30 MHz
El Paso................................................... 772,000 A 30 MHz
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2,476,000
OKLAHOMA CITY
Ada....................................................... 54,000 A 30 MHz
Ardmore................................................... 88,000 A 30 MHz
Enid...................................................... 85,000 A, E 40 MHz
Lawton-Duncan............................................. 173,000 A 30 MHz
McAlester................................................. 53,000 A 30 MHz
Oklahoma City............................................. 1,391,000 A, E 40 MHz
Ponca City................................................ 46,000 A, E 40 MHz
Stillwater................................................ 76,000 A, E 40 MHz
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1,966,000
DES MOINES-QUAD CITIES
Burlington................................................ 137,000 A 10 MHz
Cedar Rapids.............................................. 280,000 A 10 MHz
Clinton-Sterling.......................................... 146,000 A 10 MHz
Davenport-Moline.......................................... 427,000 A 10 MHz
Des Moines(1)............................................. 776,000 A 10/30 MHz
Dubuque................................................... 177,000 A 10 MHz
Fort Dodge................................................ 126,000 A 10 MHz
Iowa City................................................. 122,000 A 10 MHz
Marshalltown.............................................. 56,000 A 10 MHz
Mason City................................................ 116,000 A 10 MHz
Ottumwa................................................... 123,000 A 10 MHz
Sioux City................................................ 341,000 A 10 MHz
Waterloo-Cedar Falls...................................... 259,000 A 10 MHz
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3,086,000
HONOLULU
Hilo...................................................... 142,000 A 30 MHz
Honolulu.................................................. 866,000 A 30 MHz
Kahului-Wailuku-Lahaina................................... 123,000 A 30 MHz
Lihue..................................................... 57,000 A 30 MHz
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1,188,000
SAN ANTONIO
San Antonio............................................... 1,805,000 D 10 MHz
DALLAS-FORT WORTH
Abilene................................................... 256,000 D 10 MHz
Amarillo.................................................. 407,000 D 10 MHz
Austin.................................................... 1,188,000 D 10 MHz
Big Spring................................................ 35,000 D 10 MHz
Brownwood................................................. 62,000 D 10 MHz
Clovis.................................................... 80,000 E 10 MHz
Hobbs..................................................... 56,000 D 10 MHz
Lubbock................................................... 404,000 E 10 MHz
Midland................................................... 122,000 D, E 20 MHz
Odessa.................................................... 217,000 D, E 20 MHz
</TABLE>
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<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ---------
<S> <C> <C> <C>
Paris..................................................... 91,000 D 10 MHz
San Angelo................................................ 165,000 D 10 MHz
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3,083,000
ST. LOUIS
Cape Girardeau............................................ 188,000 E 10 MHz
Carbondale-Marion......................................... 218,000 E 10 MHz
Columbia.................................................. 208,000 E 10 MHz
Jefferson City............................................ 156,000 D 10 MHz
Kirksville................................................ 56,000 E 10 MHz
Mount Vernon.............................................. 122,000 D 10 MHz
Poplar Bluff.............................................. 155,000 D 10 MHz
Quincy-Hannibal........................................... 180,000 D 10 MHz
Rolla..................................................... 93,000 D 10 MHz
St. Louis................................................. 2,822,000 E 10 MHz
West Plains............................................... 75,000 D 10 MHz
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4,273,000
TULSA
Coffeyville............................................... 61,000 D 10 MHz
WICHITA
Hutchinson................................................ 124,000 D 10 MHz
Salina.................................................... 143,000 D 10 MHz
Wichita................................................... 652,000 D 10 MHz
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919,000
CHICAGO
Jacksonville.............................................. 71,000 E 10 MHz
CINCINNATI-DAYTON
Dayton-Springfield........................................ 1,209,000 E 10 MHz
CLEVELAND
Ashtabula................................................. 102,000 E 10 MHz
Canton-New Philadelphia................................... 526,000 E 10 MHz
Cleveland-Akron........................................... 2,964,000 E 10 MHz
East Liverpool-Salem...................................... 111,000 E 10 MHz
Erie...................................................... 278,000 E 10 MHz
Mansfield................................................. 226,000 E 10 MHz
Meadville................................................. 89,000 E 10 MHz
Sandusky.................................................. 140,000 E 10 MHz
Sharon.................................................... 122,000 E 10 MHz
Youngstown-Warren......................................... 480,000 E 10 MHz
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5,038,000
KANSAS CITY
Manhattan-Junction City................................... 110,000 D 10 MHz
LITTLE ROCK
Fayetteville-Springdale................................... 292,000 E 10 MHz
Fort Smith................................................ 311,000 D 10 MHz
Harrison.................................................. 87,000 D 10 MHz
Hot Springs............................................... 132,000 D 10 MHz
Jonesboro-Paragould....................................... 174,000 E 10 MHz
Little Rock............................................... 920,000 D 10 MHz
Pine Bluff................................................ 148,000 D 10 MHz
Russellville.............................................. 93,000 E 10 MHz
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2,157,000
MILWAUKEE
Milwaukee................................................. 1,789,000 D 10 MHz
</TABLE>
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<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ---------
<S> <C> <C> <C>
MINNEAPOLIS-ST. PAUL
Aberdeen.................................................. 87,000 D 10 MHz
Bemidji................................................... 64,000 D 10 MHz
Bismarck.................................................. 127,000 E 10 MHz
Fargo..................................................... 307,000 E 10 MHz
Grand Forks............................................... 208,000 D 10 MHz
Huron..................................................... 54,000 D 10 MHz
Mitchell.................................................. 84,000 D 10 MHz
Sioux Falls............................................... 232,000 D 10 MHz
Watertown................................................. 76,000 D 10 MHz
Willmar-Marshall.......................................... 84,000 E 10 MHz
Worthington............................................... 96,000 D 10 MHz
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1,419,000
OMAHA
Grand Island.............................................. 148,000 E 10 MHz
Hastings.................................................. 72,000 E 10 MHz
Lincoln................................................... 332,000 E 10 MHz
McCook.................................................... 34,000 E 10 MHz
Norfolk................................................... 112,000 E 10 MHz
North Platte.............................................. 85,000 E 10 MHz
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783,000
RICHMOND-NORFOLK
Danville.................................................. 168,000 E 10 MHz
Lynchburg................................................. 161,000 E 10 MHz
Martinsville.............................................. 90,000 E 10 MHz
Norfolk-VA Beach.......................................... 1,763,000 E 10 MHz
Richmond-Petersburg....................................... 1,202,000 E 10 MHz
Staunton-Waynesburo....................................... 107,000 E 10 MHz
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3,491,000
SAN FRANCISCO-SAN JOSE
San Francisco............................................. 6,965,000 E 10 MHz
SPOKANE-BILLINGS
Billings.................................................. 307,000 E 10 MHz
Bozeman................................................... 77,000 E 10 MHz
Butte..................................................... 67,000 D 10 MHz
Great Falls............................................... 164,000 E 10 MHz
Helena.................................................... 67,000 D 10 MHz
Kalispell................................................. 72,000 D 10 MHz
Kennewick-Pasco........................................... 189,000 D 10 MHz
Lewiston-Moscow........................................... 123,000 E 10 MHz
Missoula.................................................. 164,000 D 10 MHz
Walla Walla-Pendleton..................................... 169,000 D 10 MHz
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1,399,000
----------
VOICESTREAM TOTAL........................................... 62,593,000
==========
</TABLE>
- ---------------
(1) VoiceStream contributed portions of the Des Moines MTA license to Iowa
Wireless (defined below). As a result, VoiceStream owns 30 MHz of the
license for certain counties within the Des Moines BTA but only 10 MHz for
the remainder of the Des Moines BTA.
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Cook Inlet PCS
Cook Inlet PCS is a Delaware limited partnership ultimately controlled by
Cook Inlet Region, Inc., an Alaska Native Regional Corporation, which qualifies
Cook Inlet PCS for additional benefits available to a small business under FCC
rules. VoiceStream holds a 49.9% partnership interest in Cook Inlet PCS. Cook
Inlet PCS began operations in the Tulsa market in June 1997, in the
Phoenix/Tucson market in November 1998 and in the Seattle/Tacoma and Spokane
markets in February 1999. Cook Inlet PCS has not yet finalized its construction
plans for the other licenses it owns. For the Phoenix/Tucson and Seattle/ Tacoma
markets, Cook Inlet PCS and VoiceStream have entered into agreements allowing
system leasing, resale and roaming, enabling each of them to operate on the
systems constructed for the markets.
Cook Inlet PCS owns FCC licenses to provide wireless communications
services in the following 18 BTA license areas. See "-- Governmental Regulation,
Licensing of PCS Systems."
<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ------
<S> <C> <C> <C>
CINCINNATI-DAYTON
Cincinnati................................................ 2,139,000 F 10 MHz
DALLAS-FORT WORTH
Temple-Killeen............................................ 354,000 F 10 MHz
KANSAS CITY
Pittsburg-Parsons......................................... 90,000 F 10 MHz
PHOENIX
Phoenix(1)................................................ 3,191,000 F 10 MHz
Tucson(1)................................................. 807,000 F 10 MHz
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3,998,000
SEATTLE
Aberdeen.................................................. 91,000 C 15 MHz
Bellingham................................................ 161,000 F 10 MHz
Bremerton................................................. 242,000 C 15 MHz
Port Angeles.............................................. 93,000 C 15 MHz
Seattle-Tacoma(1)......................................... 3,090,000 F 10 MHz
Wenatchee................................................. 211,000 C 15 MHz
Yakima.................................................... 259,000 C 15 MHz
----------
4,147,000
SPOKANE-BILLINGS
Spokane................................................... 733,000 C 15 MHz
Walla Walla-Pendleton(1).................................. 169,000 C 15 MHz
----------
902,000
TULSA
Bartlesville.............................................. 47,000 C 15 MHz
Coffeyville(1)............................................ 61,000 C 15 MHz
Muskogee.................................................. 159,000 C 15 MHz
Tulsa..................................................... 910,000 C 15 MHz
----------
1,177,000
----------
COOK INLET PCS TOTAL........................................ 12,807,000
==========
</TABLE>
- ---------------
(1) VoiceStream also owns 10 MHz E Block licenses for these BTAs.
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Iowa Wireless
Iowa Wireless Services, L.P. ("Iowa Wireless") is a Delaware limited
partnership ultimately controlled by Iowa Network Services, Inc., an Iowa
corporation. VoiceStream has a 38% limited partnership interest in Iowa
Wireless. Iowa Wireless began operations in certain markets in 1998.
Iowa Wireless owns FCC licenses to provide wireless communications services
in the following 13 BTA license areas. See "-- Governmental Regulation,
Licensing of PCS Systems."
<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ------
<S> <C> <C> <C>
DES MOINES-QUAD CITIES
Burlington................................................ 137,000 A, D 30 MHz
Cedar Rapids.............................................. 280,000 A 20 MHz
Clinton-Sterling.......................................... 146,000 A, D 30 MHz
Davenport-Moline.......................................... 427,000 A 20 MHz
Des Moines................................................ 207,000 A 20 MHz
Dubuque................................................... 177,000 A 20 MHz
Fort Dodge................................................ 126,000 A 20 MHz
Iowa City................................................. 122,000 A 20 MHz
Marshalltown.............................................. 56,000 A, D 30 MHz
Mason City................................................ 116,000 A, D 30 MHz
Ottumwa................................................... 123,000 A 20 MHz
Sioux City................................................ 341,000 A 20 MHz
Waterloo-Cedar Falls...................................... 259,000 A 20 MHz
---------
IOWA WIRELESS TOTAL......................................... 2,517,000
=========
</TABLE>
Wichita PCS
VoiceStream manages the Wichita market under the VoiceStream brand name for
Omnipoint Corp. VoiceStream is reimbursed for the costs of managing this market.
Omnipoint purchases VoiceStream's D Block service at wholesale in the Wichita,
Hutchinson and Salina BTAs and resells VoiceStream service to its own customers.
These operations are referred to as Wichita PCS. Wichita PCS provides wireless
communications services using the following three FCC licenses.
<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ------
<S> <C> <C> <C>
WICHITA
Hutchinson................................................ 124,000 D 10 MHz
Salina.................................................... 143,000 D 10 MHz
Wichita................................................... 652,000 D 10 MHz
-------
WICHITA PCS TOTAL........................................... 919,000
=======
</TABLE>
11
<PAGE> 12
STPCS
STPCS Joint Venture, LLC ("STPCS") is a Delaware limited liability company
ultimately controlled by STPCS Investment, LLC. VoiceStream has an 18%
membership interest in STPCS. STPCS, through its wholly owned subsidiaries, owns
seven FCC licenses to provide wireless communications services in the following
six BTA markets. See "-- Governmental Regulation, Licensing of PCS Systems."
<TABLE>
<CAPTION>
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ
-------------------- ---------- ----- ------
<S> <C> <C> <C>
SAN ANTONIO
Brownsville-Harlingen..................................... 353,000 D, F 20 MHz
Corpus Christi............................................ 556,000 D 10 MHz
Eagle Pass-Del Rio........................................ 120,000 F 10 MHz
Laredo.................................................... 215,000 D 10 MHz
McAllen................................................... 594,000 D 10 MHz
---------
1,838,000
HOUSTON
Victoria.................................................. 164,000 F 10 MHz
---------
STPCS TOTAL................................................. 2,002,000
=========
</TABLE>
Cook Inlet/VoiceStream PCS LLC
On February 12, 1999, VoiceStream formed a Delaware limited liability
company, Cook Inlet/ VoiceStream PCS LLC. This LLC, like Cook Inlet PCS, is
ultimately controlled by Cook Inlet Region, Inc., and is participating in FCC
reauctions of C Block and F Block licenses. As part of that transaction, a
subsidiary of Cook Inlet Region, Inc. has certain rights to exchange for shares
of VoiceStream Common Stock. See Item 10 -- Description of Registrant's
Securities to be Registered."
PRODUCTS AND SERVICES
VoiceStream provides a variety of wireless products and services designed
to match a range of needs for business and personal use. VoiceStream currently
offers several distinct services and features in its PCS systems, including:
- Enhanced Features -- VoiceStream's systems offer caller identification,
call hold, voice mail and numeric paging, as well as custom calling
features such as call waiting, conference calling and call forwarding.
- Messaging and Wireless Data Transmission -- Digital networks offer voice
and data communications, including text messaging, through a single
handset. VoiceStream believes that, as data transmission services
develop, a number of uses for such services will emerge.
- Call Security and Privacy -- Sophisticated encryption algorithms provide
increased call security, encouraging users to make private, business and
personal calls with significantly lower risk of eavesdropping than on
analog-based systems.
- Smart Card -- "Smart" cards, programmed with the user's billing
information and a specified service package, allow subscribers to obtain
PCS connectivity automatically, simply by inserting their smart cards
into compatible PCS handsets.
- Over-the-Air Activation and Over-the Air Subscriber Profile
Management -- VoiceStream is able to transmit changes in the subscriber's
feature package, including mobile number assignment and personal
directory numbers, directly to the subscriber's handset.
- Roaming -- Subscribers are able to roam throughout the United States,
either on other GSM-based PCS systems operated by current licensees or by
using dual-mode handsets that can be used on existing cellular systems.
VoiceStream has entered into roaming agreements which allow its
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<PAGE> 13
customers to roam on cellular systems. Dual-mode handsets allow roaming
onto analog cellular systems.
MARKETING, SALES AND CUSTOMER SERVICE
VoiceStream's sales and marketing strategy is to generate continued
subscriber growth and increased subscriber revenues. In addition, VoiceStream
targets a customer base which it believes is likely to generate higher monthly
service revenues, while attempting to achieve a low cost of adding new
subscribers. VoiceStream markets its services under a proprietary brand name,
and sells its products and services through a combination of direct and indirect
distribution channels.
- Marketing -- VoiceStream markets its PCS products and services under the
proprietary VoiceStream brand name. VoiceStream's objective is to develop
brand recognition of VoiceStream through substantial advertising and
direct marketing in each of its PCS markets. In marketing its PCS
services, VoiceStream emphasizes the enhanced features, privacy and
competitive pricing of such services. VoiceStream concentrates its
marketing efforts primarily on businesses and individuals "on-the-go,"
who benefit from integrated mobile voice, messaging and wireless data
transmission capabilities, and enhanced features and services.
- Sales -- VoiceStream sells its products and services through a
combination of direct and indirect channels. VoiceStream operates 90
company-owned retail sales locations and utilizes a direct sales force of
over 680 persons. VoiceStream's training programs provide its sales
employees with an in-depth understanding of VoiceStream's system,
products and services so that they, in turn, can provide extensive
information to prospective customers. Sales commissions generally are
linked both to subscriber revenue and subscriber retention, as well as to
activation levels.
VoiceStream believes that its local sales offices provide the physical
presence in local markets necessary to position VoiceStream as a quality
local service provider, and give VoiceStream greater control over both
its costs and the sales process. VoiceStream also utilizes indirect sales
through an extensive network of national and local merchant and specialty
retailers. VoiceStream intends to continue to use a combination of direct
and indirect sales channels, with the mix depending on the retail needs
of each particular market.
In addition, VoiceStream acts as a retail distributor of handsets and
maintains inventories of handsets. Although subscribers generally are
responsible for purchasing or otherwise obtaining their own handsets,
VoiceStream has historically sold handsets below cost to respond to
competition and general industry practice and expects to continue to do
so in the future.
- Customer Service -- Customer service is a significant element of
VoiceStream's operating philosophy. VoiceStream is committed to
attracting and retaining subscribers by providing consistently superior
customer service. In Albuquerque, New Mexico, VoiceStream maintains a
highly sophisticated monitoring and control system, a staff of customer
service personnel and a well-trained technical staff to handle both
routine and complex questions as they arise, 24 hours a day, 365 days a
year.
VoiceStream implements credit check procedures at the time of sale and
continuously monitors customer churn (the rate of subscriber attrition).
VoiceStream believes that it helps manage its churn rate through an outreach
program implemented through its sales force and customer service personnel. This
program not only enhances subscriber loyalty, but also increases add-on sales
and customer referrals. The outreach program allows the sales staff to check
customer satisfaction, as well as to offer additional calling features, such as
voice mail, call waiting and call forwarding.
SUPPLIERS AND EQUIPMENT VENDORS
VoiceStream does not manufacture any of the handsets or network equipment
used in its operations. The high degree of compatibility among different
manufacturers' models of handsets and network equipment allows VoiceStream to
design, construct and operate its systems without being dependent upon
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<PAGE> 14
any single source of such equipment. The handsets and network equipment used in
VoiceStream's operations are available for purchase from multiple sources, and
VoiceStream anticipates that such equipment will continue to be available in the
foreseeable future. VoiceStream currently purchases handsets primarily from
Motorola Inc., Ericsson Inc., Mitsubishi Wireless Communications, Inc. and Nokia
Mobile Phones, Inc. (together with its affiliate, Nokia Telecommunications Inc.,
"Nokia"). VoiceStream currently purchases network equipment primarily from
Northern Telecom Inc. and Nokia.
COMPETITION
Competition for subscribers among wireless licensees is based principally
upon the services and features offered, the technical quality of the wireless
systems, customer service, system coverage, capacity and price. Under current
FCC rules, there may be up to seven PCS licensees in each geographic area in
addition to the two cellular licensees. Also, SMR dispatch system operators have
constructed digital mobile communications systems on existing SMR frequencies,
referred to as ESMR, in many cities throughout the United States, including some
of the markets in which VoiceStream operates.
VoiceStream is a relatively new entrant in a highly competitive market.
VoiceStream's principal competitors are the cellular service providers in its
markets, many of which have been operational for a number of years, and national
PCS providers, many of which offer no or low cost roaming and toll calls. Many
of VoiceStream's competitors have significantly greater financial and technical
resources than those available to VoiceStream and provide comparable services in
competition with VoiceStream's PCS systems. These competitors include AirTouch
Cellular Communications, Inc. ("AirTouch"), AT&T Wireless Services, Inc. ("AT&T
Wireless") Bell Atlantic Mobile ("Bell Atlantic"), GTE Mobilnet, Inc. ("GTE
Mobilnet"), Sprint PCS L.P. ("Sprint PCS") and U.S. West Wireless LLC ("US
West"). VoiceStream also competes with paging, dispatch and conventional mobile
telephone companies, resellers and landline telephone service providers in its
PCS markets. Potential users of wireless systems may, however, find their
communications needs satisfied by other current and developing technologies. One
or two-way paging or beeper services that feature voice messaging and data
display as well as tone only service may be adequate for potential subscribers
who do not need to speak to the caller. In the future, wireless service may also
compete more directly with traditional landline telephone service providers.
VoiceStream's principal PCS competitors use standards other than GSM. As a
result, VoiceStream's subscribers may not be able to conveniently use PCS
services while roaming in areas outside its markets. US West and Sprint PCS use
the CDMA standard. AT&T Wireless and Southwestern Bell use the TDMA standard.
The FCC requires all cellular and PCS licensees to provide service to
"resellers." A reseller provides wireless service to customers but does not hold
an FCC license or own facilities. The reseller buys blocks of wireless telephone
numbers and capacity from a licensed carrier and resells service through its own
distribution network to the public. Thus, a reseller is both a customer of a
wireless licensee's services and also a competitor of that licensee. Several
small resellers currently operate in competition with VoiceStream's systems.
With respect to PCS licensees, the resale obligations terminate five years after
the last group of initial licenses of currently allotted PCS spectrum is
awarded.
In the future, VoiceStream expects to face increased competition from
entities providing similar services using other communications technologies.
While some of these technologies and services are currently operational, others
are being developed or may be developed in the future.
VoiceStream recognizes that technological advances and changing regulations
have led to rapid evolution of the wireless telecommunications industry. At the
end of 1996, the FCC transferred 200 MHz of spectrum previously allocated to
federal government use to the private sector. In April of 1997, the FCC
auctioned 30 MHz of spectrum for Wireless Communications Services, which can
provide fixed or mobile telecommunications service. In late 1997, the FCC also
auctioned 10 MHz of spectrum for Specialized Mobile Radio service, another
potential competitor with PCS and cellular service. Moreover, in 1998, the FCC
auctioned more than 1000 MHz of spectrum for Local Multipoint Distribution
Service ("LMDS"). VoiceStream acquired 16 licenses as a result of such auction.
During 1998, the FCC
14
<PAGE> 15
auctioned 25 MHz of spectrum for the General Wireless Communications Service,
plus additional spectrum in the 220 MHz and 39 MHz bands. VoiceStream cannot
foresee how technological progress or economic incentive will affect competition
from these new services. In all instances, the FCC reserves the right to amend
or repeal its service regulations and auction schedule.
INTELLECTUAL PROPERTY
VoiceStream holds federal trademark registration of the marks "VoiceStream"
and "VoiceStream and Design," and has registered or applied for various other
trade and service marks with the United States Patent and Trademark Office.
ORGANIZATION
VoiceStream holds its FCC licenses and conducts all operations through a
number of direct and indirect wholly-owned subsidiaries and through certain
affiliates. Indirect wholly-owned subsidiaries of VoiceStream are the 49.9%
limited partner of Cook Inlet PCS, the 38.0% limited partner of Iowa Wireless,
the 18.0% member of STPCS, and the non-controlling member of Cook
Inlet/VoiceStream LLC. In three BTAs, VoiceStream and Cook Inlet PCS each own a
license for 10 MHz of PCS spectrum that are the subject of agreements allowing
each of VoiceStream and Cook Inlet PCS to operate on the PCS systems built by
VoiceStream in those BTAs.
GOVERNMENTAL REGULATION
The FCC regulates the licensing, construction, operation, acquisition and
sale of cellular and PCS systems in the United States pursuant to the
Communications Act of 1934, as amended from time to time, and the rules,
regulations and policies promulgated by the FCC thereunder (the "Communications
Act").
LICENSING OF PCS SYSTEMS
In order to increase competition in wireless communications, promote
improved quality and service and make available the widest possible range of
wireless services, federal legislation was enacted directing the FCC to allocate
radio frequency spectrum for PCS by competitive bidding. A PCS system operates
under a protected geographic service area license granted by the FCC for a
particular market on one of six frequency blocks allocated for broadband PCS
service. The FCC has divided the United States and its possessions and
territories into PCS markets made up of 493 BTAs and 51 MTAs. Each MTA consists
of at least two BTAs. As many as seven licensees will compete in each PCS
service area. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz band
for licensed PCS services. The FCC divided the 120 MHz of spectrum into six
individual blocks, each of which is allocated to serve either MTAs or BTAs. The
spectrum allocation includes two 30 MHz blocks (A and B Blocks) licensed for
each of the 51 MTAs, one 30 MHz block (C Block) (which has been split in some
BTAs into two 15 MHz blocks) licensed for each of the 493 BTAs, and three 10 MHz
blocks (D, E and F Blocks) licensed for each of the 493 BTAs. A PCS license will
be awarded for each MTA or BTA in every block, for a total of more than 2,000
licenses. During 1997, the last of these auctions was completed; however, a
reauction of certain C, D, E and F Block licenses is currently scheduled for
1999.
Under the FCC's current rules specifying spectrum ownership limits
affecting broadband PCS licensees, no entity may hold licenses for more than 45
MHz of PCS, cellular and SMR services regulated as Commercial Mobile Radio
Service ("CMRS") where there is significant overlap in any geographic area
(significant overlap will occur when at least ten percent of the population of
the PCS licensed service area is within the Cellular Geographic Service Area
("CGSA") and/or SMR service area, as defined by the FCC). The FCC is currently
reexamining these ownership limits.
Western Wireless owns cellular licenses serving markets that are wholly or
partially within the Denver MTA and the Oklahoma City MTA, resulting in Western
Wireless exceeding the FCC's current 45 MHz CMRS cross ownership restriction
described above. Western Wireless has filed waiver requests with the
15
<PAGE> 16
FCC with respect to both MTAs, both of which are pending, and has been allowed
to delay compliance with the ownership restriction until the FCC rules on the
waiver requests. In the event that this restriction is not waived or the rule
itself revised, either VoiceStream or Western Wireless will be obligated to
divest sufficient portions of their markets in the Denver and Oklahoma City MTA
to come into compliance with the rules. VoiceStream does not believe such
restriction or any actions Western Wireless or VoiceStream is required to take
to comply therewith will have a material adverse effect on VoiceStream due to
the relatively minor geographic overlap.
All PCS licenses are granted for a ten year term, at the end of which they
must be renewed. The FCC has adopted specific standards to apply to PCS
renewals, under which the FCC will award a renewal expectancy to a PCS licensee
that (i) has provided substantial service during its past license term and (ii)
has substantially complied with applicable FCC rules and policies and the
Communications Act. All 30 MHz PCS licensees, including VoiceStream, must
construct facilities that offer coverage to one-third of the population of their
service area within five years of their initial license grants and to two-thirds
of the population within ten years. Licensees that fail to meet the coverage
requirements may be subject to forfeiture of the license.
FCC rules restrict the voluntary assignments or transfers of control of C
and F Block licenses. During the first five years of the license term,
assignments or transfers affecting control are permitted only to assignees or
transferees that meet the eligibility criteria for participation in the
entrepreneur block auction at the time the application for assignment or
transfer of control is filed, or if the proposed assignee or transferee holds
other licenses for C and F Blocks and, at the time of receipt of such licenses,
met the same eligibility criteria. Any transfers or assignments during the
entire ten year initial license term are subject to an unjust enrichment penalty
of acceleration of any installment payment plans should the assignee or
transferee not qualify for the same benefits. Any transfers or assignments
during the first five years of the initial license term are subject to an unjust
enrichment penalty of forfeiture of bidding credits. In the case of the C and F
Blocks, the FCC will conduct random audits to ensure that licensees are in
compliance with the FCC's eligibility rules. Violations of the Communications
Act or the FCC's rules could result in license revocations, forfeitures or
fines.
For a period of up to ten years after the grant of a PCS license (subject
to extension), a PCS licensee will share spectrum with existing licensees that
operate certain fixed microwave systems within its license area. To secure a
sufficient amount of unencumbered spectrum to operate its PCS systems
efficiently and with adequate population coverage, VoiceStream will need to
relocate many of these incumbent licensees. In an effort to balance the
competing interests of existing microwave users and newly authorized PCS
licensees, the FCC adopted (i) a transition plan to relocate such microwave
operators to other spectrum blocks and (ii) a cost sharing plan so that if the
relocation of an incumbent benefits more than one PCS licensee, the benefiting
PCS licensees will share the cost of the relocation. Initially, this transition
plan allowed most microwave users to operate in the PCS spectrum for a two-year
voluntary negotiation period and an additional one-year mandatory negotiation
period. The FCC has shortened the voluntary negotiation period by one year
(without lengthening the mandatory negotiation period) for PCS licensees in the
C, D, E and F Blocks. For public safety entities dedicating a majority of their
system communications for police, fire or emergency medical services operations,
the voluntary negotiation period is three years, with an additional two year
mandatory negotiation period. Parties unable to reach agreement within these
time periods may refer the matter to the FCC for resolution, but the incumbent
microwave user is permitted to continue its operations until final FCC
resolution of the matter. The transition and cost sharing plans expire on April
4, 2005, at which time remaining incumbents in the PCS spectrum will be
responsible for their costs to relocate to alternate spectrum locations.
Cellular and PCS systems are subject to certain Federal Aviation
Administration regulations respecting the location, lighting and construction of
transmitter towers and antennae and may be subject to regulation under the
National Environmental Policy Act and the environmental regulations of the FCC.
State or local zoning and land use regulations also apply to VoiceStream's
activities. VoiceStream uses, among other facilities, common carrier point to
point microwave facilities to connect cell sites and to link
16
<PAGE> 17
them to the main switching office. These facilities are separately licensed by
the FCC and are subject to regulation as to technical parameters and service.
VoiceStream has purchased its PCS licenses from private parties and the
federal government. VoiceStream has used a combination of debt and equity
financing to acquire such licenses. Some joint ventures in which VoiceStream
holds an interest have utilized financing from the federal government to the
extent available.
TRANSFERS AND ASSIGNMENTS OF PCS LICENSES
The Communications Act and FCC rules require the FCC's prior approval of
the assignment or transfer of control of a license for a PCS system (proforma
transfer of control does not require prior FCC approval). In addition, the FCC
has established transfer disclosure requirements that require licensees who
transfer control of or assign a PCS license within the first three years of
their license term to file associated contracts for sale, option agreements,
management agreements or other documents disclosing the total consideration that
the licensee would receive in return for the transfer or assignment of its
license. Non-controlling interests in an entity that holds a PCS license or PCS
system generally may be bought or sold without FCC approval. Any acquisition or
sale by VoiceStream of PCS interests may also require the prior approval of the
Federal Trade Commission and the Department of Justice, if over a certain size,
as well as state or local regulatory authorities having competent jurisdiction.
FOREIGN OWNERSHIP
Under the Communications Act, no more than 25% of an FCC licensee's capital
stock may be indirectly owned or voted by non-U.S. citizens or their
representatives, by a foreign government, or by a foreign corporation, absent an
FCC finding that a higher level of alien ownership is not inconsistent with the
public interest. In November 1997, the FCC adopted new rules, effective in
February 1998, in anticipation of implementation of the World Trade Organization
Basic Telecom Agreement ("WTO Agreement"). Formerly, potential licensees had to
demonstrate that their markets offered effective competitive opportunities in
order to obtain authorization to exceed the 25% indirect foreign ownership
threshold. Under the new rules, this showing now only applies to non-WTO
members. Applicants from WTO Agreement signatories have an "open entry"
standard: they are presumed to offer effective competitive opportunities.
However, the FCC reserves the right to attach additional conditions to a grant
of authority, and, in the exceptional case in which an application poses a very
high risk to competition, to deny the application. The limitation on direct
foreign ownership in an FCC licensee remains fixed at 20%, with no opportunity
to increase the percentage, and is unaffected by the FCC's new rules.
VoiceStream has applied for and received FCC approval for foreign ownership of
up to 39.9%. As of the effective date of the Spin-off, foreign ownership of
VoiceStream is less than 30%.
The WTO Agreement also obligates signatories to open their domestic
telecommunications markets to foreign investment and foreign corporations. The
WTO Agreement will increase investment and competition in the United States,
potentially leading to lower prices, enhanced innovation and better service. At
the same time, market access commitments from WTO Agreement signatories will
provide U.S. service suppliers opportunities to expand abroad.
TELECOMMUNICATIONS ACT OF 1996 AND OTHER RECENT INDUSTRY DEVELOPMENTS
On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") was signed into law, substantially revising the
regulation of communications. The goal of the Telecommunications Act is to
enhance competition and remove barriers to market entry, while deregulating the
communications industry to the greatest extent possible. To this end, local and
long-distance communications providers will, for the first time, be able to
compete in the other's market, and telephone and cable companies will likewise
be able to compete in each other's markets. To facilitate the entry of new
carriers into existing markets, the Telecommunications Act imposes certain
interconnection requirements on incumbent carriers. Additionally, all
telecommunications providers are required to make
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<PAGE> 18
an equitable and nondiscriminatory contribution to the preservation and
advancement of universal service. VoiceStream cannot predict the outcome of the
FCC's rulemaking proceedings to promulgate regulations to implement the new law
or the effect of the new regulations on cellular service or PCS, and there can
be no assurance that such regulations will not adversely affect VoiceStream's
business or financial condition.
The Telecommunications Act codifies the policy that non-regional Bell
operating company CMRS providers will not be required to provide equal access to
long distance carriers, and relieved such CMRS providers of their existing equal
access obligations. The FCC, however, may require CMRS carriers to offer
unblocked access (i.e., implemented by the subscriber's use of a carrier
identification code or other mechanisms at the time of placing a call) to the
long distance provider of a subscriber's choice. The FCC has terminated its
inquiry into the imposition of equal access requirements on CMRS providers.
On July 26, 1996, the FCC released a Report and Order establishing
timetables for making emergency 911 services available by cellular, PCS and
other mobile service providers, including "enhanced 911" services that provide
the caller's telephone number, location and other useful information. Cellular
and PCS providers must be able to process and transmit 911 calls (without call
validation), including those from callers with speech or hearing disabilities.
If a cost recovery mechanism is in place and a Public Service Answering Point
("PSAP") requests and is capable of processing the caller's telephone number and
location information, cellular, PCS, and other mobile service provider must
relay a caller's automatic number identification and Cell Site location, and by
2001 they must be able to identify the location of a 911 caller within 125
meters in 67% of all cases. State actions incompatible with the FCC rules are
subject to preemption. On December 1, 1997, the FCC required wireless carriers
to transmit all 911 calls without regard to validation procedures intended to
identify and intercept calls from non-subscribers.
On August 1, 1996, the FCC released a Report and Order expanding the
flexibility of cellular, PCS and other CMRS providers to provide fixed as well
as mobile services. Such fixed services include, but need not be limited to,
"wireless local loop" services, e.g., to apartment and office buildings, and
wireless backup to PBXs and local area networks, to be used in the event of
interruptions due to weather or other emergencies. The FCC has not yet decided
how such fixed services should be regulated, but it has proposed a presumption
that they be regulated as CMRS services.
On August 8, 1996, the FCC released its order implementing the
interconnection provisions of the Telecommunications Act. The FCC's decision is
lengthy and complex and is subject to petitions for reconsideration and judicial
review (as described below), and its precise impact is difficult to predict with
certainty. However, the FCC's order concludes that CMRS providers are entitled
to reciprocal compensation arrangements with local exchange carriers ("LECs")
and prohibits LECs from charging CMRS providers for terminating LEC-originated
traffic. Under the rules adopted by the FCC, states must set arbitrated rates
for interconnection and access to unbundled elements based upon the LECs'
long-run incremental costs, plus a reasonable share of forward-looking joint and
common costs. In lieu of such cost-based rates, the FCC has established proxy
rates to be used by states to set interim interconnection rates pending the
establishment of cost-based rates. The FCC has also permitted states to impose
"bill and keep" arrangements, under which CMRS providers would make no payments
for LEC termination of calls where LECs and CMRS providers have symmetrical
termination costs and roughly balanced traffic flows. However, the FCC has found
no evidence that these conditions presently exist. The relationship of these
charges to the payment of access charges and universal service contributions has
not yet been resolved by the FCC. LECs and state regulators filed appeals of the
interconnection order, which have been consolidated in the US Court of Appeals
for the Eighth Circuit. The Court has vacated many of the rules adopted by the
FCC, including those rules governing the pricing of interconnection services,
but specifically affirmed the FCC rules governing interconnection with CMRS
providers. In January 1998, the U.S. Supreme Court agreed to review the Eighth
Circuit decision. In January 1999, the U.S. Supreme Court reversed many aspects
of the Eighth Circuit's judgment holding that: (i) the FCC has general
jurisdiction to implement the Telecommunications Act's local-competition
provisions; (ii) the FCC's rules governing unbundled access are consistent with
the Telecommunications Act, except for Rule 319, which gives requesting carriers
blanket access to network elements; and (iii) the "pick and choose" rule is a
18
<PAGE> 19
reasonable interpretation of the Telecommunications Act. The FCC will now have
to reexamine the list of unbundled network elements that incumbent local
exchange carriers must offer to competitors. Furthermore, as a result of the
Supreme Court's vacating and remanding the Eighth Circuit's ruling that the FCC
lacked authority to set local pricing standards, the Eighth Circuit will have to
decide whether the FCC's total-element long-run incremental cost methodology for
setting interconnection and unbundled network element rates violates the
Telecommunications Act.
In its implementation of the Telecommunications Act, the FCC recently
established new federal universal service rules, under which wireless service
providers for the first time are eligible to receive universal service
subsidies, but also are required to contribute to both federal and state
universal service funds. For the first quarter of 1998, the FCC's universal
service assessments amount to 0.72% of interstate and intrastate
telecommunications revenues for schools, libraries and rural healthcare support
mechanisms and an additional 3.19% of interstate telecommunications revenues for
high cost and low income support mechanisms. Various parties have challenged the
FCC's universal service rules, and the cases have been consolidated in the U.S.
Court of Appeals for the Fifth Circuit. VoiceStream cannot predict the outcome
of this proceeding.
The FCC has adopted rules on telephone number portability which will enable
subscribers to migrate their landline and cellular telephone numbers to a PCS
carrier and from a PCS carrier to another service provider. Various parties have
challenged the number portability requirements as they apply to CMRS providers.
These challenges are still pending at the FCC and in the courts. VoiceStream can
not predict the outcome of such challenges. In February 1999, the FCC extended
the deadline for CMRS carriers to implement service provider local number
portability until November 24, 2002.
RELATIONSHIP BETWEEN VOICESTREAM AND WESTERN WIRELESS PRIOR TO THE SPIN-OFF
Although VoiceStream is presently an 80.1% subsidiary of Western Wireless,
Western Wireless is the process of "spinning-off" VoiceStream pursuant to an
Agreement and Plan of Distribution ("Distribution Agreement"). In the Spin-off,
Western Wireless will distribute to its shareholders one share of common stock,
no par value, of VoiceStream ("VoiceStream Common Stock") for each share of
Class A common stock, no par value, of Western Wireless (the "Class A Common
Stock") and Class B common stock, no par value, of Western Wireless (the "Class
B Common Stock") owned by each shareholder (Class A Common Stock and Class B
Common Stock are referred to collectively as the "Western Wireless Common
Stock"). After the Spin-off, VoiceStream will be a separate company, no longer
owned in any way by Western Wireless, although there will be some overlapping
management. See "Item 5. Directors and Executive Officers."
As a wholly-owned subsidiary, VoiceStream in the past had secured favorable
intercompany loans from Western Wireless, which loans bore interest on the
long-term advances ranging between 8% and 11.1%. VoiceStream also relied upon
the assets and cash flow of Western Wireless in securing loans from third
parties, and VoiceStream and Western Wireless shared services of officers,
employees and others. The salaries and benefits of such persons and other
centralized general and administrative costs and assets were allocated between
Western Wireless and VoiceStream in a manner which reflected the relative time
devoted to each of the operational units.
In connection with the Hutchison Investment, Western Wireless converted to
equity a portion of the loans Western Wireless had made to VoiceStream, which
together with its other capital investments in VoiceStream equalled $750 million
at the closing of the Hutchison Investment. VoiceStream also repaid to Western
Wireless $105.4 million of indebtedness owed by VoiceStream to Western Wireless.
In addition, VoiceStream and Western Wireless agreed that neither of them would
have any liability regarding indebtedness of the other and VoiceStream and
Western Wireless entered into their own credit arrangements with a separate
syndicate of banks. Finally, VoiceStream entered into agreements with Western
Wireless which, among other things, formalized the allocation of overhead costs
and expenses, cash management and the tax sharing arrangements between Western
Wireless and VoiceStream, as well as roaming arrangements on each other's
systems. All of these agreements, except the tax sharing agreement, terminate on
the effective date of the Spin-off (the "Effective Date").
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<PAGE> 20
At the time of the Hutchison Investment, Western Wireless and Hutchison USA
entered into a shareholders agreement, which provides, among other things, for
the following:
(i) Hutchison USA has the right to designate two directors to a ten
person VoiceStream Board of Directors with such number of directors being
subject to increase or decrease depending upon increases or decreases in
Hutchison USA's percentage ownership of VoiceStream;
(ii) each of Western Wireless and Hutchison USA have certain rights of
first offer or first refusal in the event the other proposes to sell its
stock in VoiceStream under specified circumstances;
(iii) Hutchison USA has certain tag along rights to sell its shares,
and is subject to certain drag along obligations to sell its shares, if
Western Wireless proposes to sell its stock in VoiceStream;
(iv) each of Western Wireless and Hutchison USA have certain
preemptive rights in connection with issuances by VoiceStream of equity
securities;
(v) Hutchison USA's consent would be required with respect to an
initial public offering of VoiceStream stock during the 18 month period
immediately following the purchase by Hutchison USA of the VoiceStream
shares;
(vi) Hutchison USA will have certain approval rights with respect to
VoiceStream entering into employment contracts with certain members of
senior management of Western Wireless and certain other transactions with
affiliates; and
(vii) Hutchison USA has certain demand and piggyback registration
rights for its shares of VoiceStream Common Stock.
In addition, Hutchison USA has the right to require a public sale of
Hutchison USA's equity interest in VoiceStream or, in certain cases, to sell
Hutchison USA's equity interest in VoiceStream to Western Wireless, if
VoiceStream takes any of the following actions without Hutchison USA's consent:
(a) any incurrence of indebtedness in excess of $10 million in a single instance
or $25 million in the aggregate in a fiscal year, other than pursuant to
financing arrangements in effect at the date of the closing of the Hutchison
Investment or as previously approved by Hutchison USA; (b) adoption of any
annual capital expenditures budget, annual operating plan and budget or any
material amendment to either thereof; (c) any acquisition of a PCS system or
wireless telecommunications business (or interest therein) in a transaction or
auction involving an aggregate acquisition cost in excess of $100 million; and
(d) any disposition of a PCS system or wireless telecommunications business (or
interest therein) in a transaction involving an aggregate sales price in excess
of $50 million.
The shareholders agreement also sets forth the events which will trigger a
termination of some or all of the foregoing rights and obligations, which events
include a public sale of VoiceStream Common Stock or a spin-off resulting in a
public float of at least 15% of the outstanding VoiceStream Common Stock,
certain transfers by Hutchison USA of the VoiceStream Common Stock, dilution of
Hutchison USA's ownership interest in VoiceStream below certain specified levels
and certain mergers and other transactions.
The only rights of Hutchison USA under such shareholder's agreement which
survive the Spin-off are its preemptive rights, its demand and piggyback
registration rights, and Hutchison USA's rights to transfer its right to
designate directors and demand and piggy back registration rights to persons who
acquire from Hutchison USA 50% or more of the shares of VoiceStream Common Stock
purchased by Hutchison USA in the Hutchison Investment.
In November 1997, an affiliate of Hutchison USA acquired 3,888,888 shares
of Western Wireless Class A Common Stock for a purchase price of approximately
$19 per share (approximately $74 million).
Effective upon the Spin-off, Hutchison USA and certain other principal
shareholders of VoiceStream will enter into an agreement whereby such
shareholders agree to vote for each other's designees to the board of directors
of VoiceStream. See "Item 4. Security Ownership of Certain Beneficial Owners and
Management -- VoiceStream Voting Agreement."
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<PAGE> 21
AGREEMENT AND PLAN OF DISTRIBUTION; RELATIONSHIP BETWEEN WESTERN WIRELESS AND
VOICESTREAM AFTER THE SPIN-OFF
VoiceStream and Western Wireless have entered into an Agreement and Plan of
Distribution (the "Distribution Agreement") which, in general, outlines the
anticipated relationship between the two companies after the Spin-off. The
following sets forth a summary of the material terms and provisions of the
Distribution Agreement.
ESTABLISHMENT OF VOICESTREAM BENEFIT AND COMPENSATION PLANS
VoiceStream 401(k) Plan
The Distribution Agreement contemplates that VoiceStream will establish a
defined contribution 401(k) plan (the "VoiceStream 401(k) Plan") substantially
similar to Western Wireless' 401(k) plan presently in effect. The VoiceStream
401(k) Plan will give participants credit for service as Western Wireless
employees. After the Spin-off and the establishment of the VoiceStream 401(k)
Plan, the account balances of participants in the VoiceStream 401(k) Plan will
be transferred from Western Wireless' 401(k) plan to the VoiceStream 401(k)
Plan.
VoiceStream Stock Option Plan
VoiceStream will establish a stock option plan (the "VoiceStream Stock
Option Plan") substantially similar to Western Wireless' stock option plan
presently in effect. As part of the Spin-off and pursuant to the Distribution
Agreement, VoiceStream will issue new options and Western Wireless will amend
its existing options in order to maintain for Western Wireless option holders
the value of their existing stock options.
Vested Western Wireless Options
Individuals who hold vested options to purchase Western Wireless Common
Stock ("Vested Western Wireless Options") will receive an equal number of vested
options to purchase VoiceStream Common Stock ("Vested VoiceStream Options")
which will be governed by the VoiceStream Stock Option Plan. The original
exercise price of the Vested Western Wireless Options will then be allocated
between the Vested Western Wireless Options and the Vested VoiceStream Options.
This allocation will be pro rata, based upon the respective average daily last
trade price of each of the Western Wireless Common Stock and the VoiceStream
Common Stock during a period of ten trading days beginning the fifth trading day
(the "Averaging Period") after the Effective Date. For example, if the original
exercise price of an individual's Vested Western Wireless Options was $20.00,
and during the Averaging Period the average daily last trade price of the
Western Wireless Common Stock was $15.00 and the average daily last trade price
of the VoiceStream Common Stock was $10.00 (a total for both of $25.00), then
for Western Wireless the respective percentage of the total price for both would
be 60% (15/25) and for VoiceStream the respective percentage of the total price
for both would be 40% (10/25) and the exercise price for the Vested Western
Wireless Options would be $20.00 x 60%, or $12.00, and the exercise price for
the Vested VoiceStream Options would be $20.00 x 40%, or $8.00.
Unvested Western Wireless Options
Western Wireless Employees. Each individual who continues as a Western
Wireless employee after the Spin-off and who holds options to purchase Western
Wireless Common Stock that are not vested ("Unvested Western Wireless Options"),
will surrender their Unvested Western Wireless Options and in replacement
thereof will be granted by Western Wireless new unvested options to purchase a
number of shares of Western Wireless Common Stock ("New Unvested Western
Wireless Options"). The number of shares subject to the New Unvested Western
Wireless Options shall be determined by multiplying the number of shares
represented by the Unvested Western Wireless Options by a fraction, the
numerator of which is the sum of the average daily last trade prices of both
Western Wireless Common Stock and
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<PAGE> 22
VoiceStream Common Stock during the Averaging Period, and the denominator of
which is the average of the daily last trade prices of Western Wireless Common
Stock during the Averaging Period. The new exercise price shall be determined by
multiplying the exercise price for the Unvested Western Wireless Options by a
fraction, the numerator of which is the average of the daily last trade prices
of Western Wireless Common Stock during the Averaging Period, and the
denominator of which is the sum of the average daily last trade prices of both
Western Wireless Common Stock and VoiceStream Common Stock during the Averaging
Period. For example, if the number of shares subject to the Unvested Western
Wireless Options was 100 at an exercise price of $20.00, and during the
Averaging Period the average daily last trade price of the Western Wireless
Common Stock was $16.00 and the average daily last trade price of the
VoiceStream Common Stock was $12.00, the number of shares subject to the New
Unvested Western Wireless Options would be 175 (100 shares x $28.00/$16.00), and
the exercise price for the New Unvested Western Wireless Options would be $11.43
($20.00 x $16.00/$28.00). In addition, the vesting period and expiration date of
the New Unvested Western Wireless Options will be the same as the Unvested
Western Wireless Options.
VoiceStream Employees. Each individual who becomes a VoiceStream employee
at the time of the Spin-off who holds Unvested Western Wireless Options, will
surrender their Unvested Western Wireless Options and in replacement thereof
will be granted by VoiceStream unvested options to purchase a number of shares
of VoiceStream Common Stock ("Unvested VoiceStream Options"). The number of
shares subject to the Unvested VoiceStream Options shall be determined by
multiplying the number of shares represented by the Unvested Western Wireless
Options by a fraction, the numerator of which is the sum of the average daily
last trade prices of both Western Wireless Common Stock and VoiceStream Common
Stock during the Averaging Period, and the denominator of which is the average
of the daily last trade prices of VoiceStream Common Stock during the Averaging
Period. The new exercise price shall be determined by multiplying the exercise
price for the Unvested Western Wireless Options by a fraction, the numerator of
which is the average of the daily last trade prices of VoiceStream Common Stock
during the Averaging Period, and the denominator of which is the sum of the
average daily last trade prices of both Western Wireless Common Stock and
VoiceStream Common Stock during the Averaging Period. For example, if the number
of shares subject to the Unvested Western Wireless Options was 100 at an
exercise price of $20, and during the Averaging Period the average daily last
trade price of the Western Wireless Common Stock was $16.00 and the average
daily last trade price of the VoiceStream Common Stock was $12.00, the number of
shares subject to the Unvested VoiceStream Options would be 233 (100 shares x
$28.00/$12.00), and the exercise price for the Unvested VoiceStream Options
would be $8.57 ($20.00 x $12.00/$28.00). In addition, the vesting period and
expiration date of the Unvested VoiceStream Options will be the same as the
Unvested Western Wireless Options.
Three executive officers (Messrs. Stanton, Guthrie and Bender) will be
executive officers of Western Wireless and VoiceStream after the Spin-off. Their
Unvested Western Wireless Options will be divided ratably between New Unvested
Western Wireless Options and Unvested VoiceStream Options consistent with the
above.
VoiceStream Restricted Stock Plan
VoiceStream will establish a restricted stock plan (the "VoiceStream
Restricted Stock Plan") substantially similar to Western Wireless' restricted
stock option plan presently in effect. All individuals who hold restricted
Western Wireless Common Stock on the Effective Date, will receive an equal
number of restricted shares of VoiceStream Common Stock in the Spin-off, which
shall be governed by the VoiceStream Restricted Stock Plan.
VoiceStream Stock Purchase Plan
VoiceStream will establish an employee stock purchase plan substantially
similar to Western Wireless's employee stock purchase plan presently in effect.
VoiceStream will fund this plan with VoiceStream Common Stock.
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<PAGE> 23
ADMINISTRATIVE SERVICES
Western Wireless and VoiceStream expect to provide their own administrative
services after the Spin-off. However, for a period of up to twelve months after
the Spin-off, Western Wireless and VoiceStream will generally make their
employees available to each other as necessary to support the activities of each
party in areas including, without limitation, accounting, tax and legal advice
and services and human resources.
The party rendering these services will be entitled to receive from the
other, upon the presentation of invoices therefor, payment for its reasonable
costs and expenses incurred in providing such services.
PAYMENT OF INSURANCE CLAIMS
Western Wireless currently maintains insurance policies that provide
coverage for each of Western Wireless' business and VoiceStream's business.
Certain of these policies are "claims made" policies and these must be in place
both at the time of occurrence of the insured loss and at the time a resulting
claim is made. In order to ensure continuity of coverage of these "claims made"
policies, Western Wireless will purchase so-called "run-off" coverage for a
minimum time of 3 years following the Spin-off. The responsibility for the
premiums associated with the "run-off" policies shall be shared equally by
Western Wireless and VoiceStream.
Western Wireless and VoiceStream are aware there are and may be a number of
occurrences before the Effective Date involving the activities of VoiceStream's
business for which claims have been or may be made ("Incurred Claims"), and are
aware that additional Incurred Claims involving the activities of VoiceStream's
business may come to light which will result in insurance claims under either
"claims made" or "claims accrued" policies covering the combined businesses.
Western Wireless will promptly notify VoiceStream of any such Incurred Claims
asserted against Western Wireless relating in whole or in part to VoiceStream's
business. VoiceStream will promptly notify Western Wireless of any Incurred
Claims asserted against VoiceStream or the VoiceStream Subsidiaries which
VoiceStream reasonably believes are covered by such policies covering the
combined businesses. VoiceStream will have the responsibility of administering,
defending and settling all such Incurred Claims which relate solely to
VoiceStream's business. VoiceStream and Western Wireless will jointly and
cooperatively administer, defend and settle all such Incurred Claims that relate
to both of VoiceStream's and Western Wireless' businesses. Any self-insured
portion of Incurred Claims and the costs of defending such Incurred Claims shall
be borne by VoiceStream in proportion to the extent to which the Incurred Claim
relates to VoiceStream's business. In connection with Incurred Claims covered by
insurance, Western Wireless will promptly transfer to VoiceStream any funds
proportionally due to VoiceStream that are received by Western Wireless in
connection with the settlement of Incurred Claims.
Except for the "run-off" policies described above, Western Wireless and
VoiceStream will each obtain insurance policies relating to its respective
business.
INDEMNIFICATION
Pursuant to the Distribution Agreement, VoiceStream will continue to remain
liable for all liabilities and obligations of VoiceStream and will also assume
any Western Wireless' liabilities, obligations, lawsuits and administrative
investigations relating to or arising from VoiceStream's domestic PCS business
and urban LMDS business (collectively, the "VoiceStream Liabilities"). Western
Wireless will continue to be liable for all the liabilities, obligations,
lawsuits and administrative investigations relating to or arising from all
business of Western Wireless other than VoiceStream's domestic PCS business and
urban LMDS business (collectively, the "Western Wireless Liabilities").
VoiceStream and Western Wireless will each be responsible for its own
"Distribution Liabilities" (defined as expenses, costs, liabilities or
investment tax credit recapture, directly related to the Spin-off) which are
incurred or accrued prior to the Spin-off. Western Wireless and VoiceStream will
share in the same percentage as their respective market capitalizations
determined during the Averaging Period (i) any Distribution Liabilities incurred
or accrued
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<PAGE> 24
after the Spin-off, and (ii) any liabilities which are not specifically assumed
by either party and are neither VoiceStream Liabilities nor Western Wireless
Liabilities.
VoiceStream will indemnify Western Wireless and its officers, directors,
employees, agents and affiliates from and against any and all losses,
liabilities, claims, damages, costs and expenses arising out of or related in
any manner to the VoiceStream Liabilities and any and all liabilities of Western
Wireless pursuant to any obligations of Western Wireless to the extent the same
have been specifically assumed by VoiceStream in writing. Western Wireless will
indemnify VoiceStream similarly.
USE OF THE "VOICESTREAM" AND "WESTERN WIRELESS" NAMES
Western Wireless will discontinue and cause each of its remaining
subsidiaries to discontinue all use of the name "VoiceStream." VoiceStream will
discontinue and will cause each of its subsidiaries to discontinue all use of
the names "Western Wireless" and "Cellular One." Additionally, each company will
remove the other's name from its name and business as well as from the name and
business of each such subsidiary as promptly as is reasonably practicable.
SPECTRUM ALLOCATION, NON-COMPETITION AND ROAMING
Prior to the Effective Date, Western Wireless and VoiceStream will enter
into a Spectrum Allocation and Non-Competition Agreement whereby for a period of
three years after the Effective Date (i) Western Wireless agrees not to pursue
any PCS opportunity unless it first presents such opportunity to VoiceStream and
VoiceStream determines not to pursue, or discontinues the pursuit of, such
opportunity; (ii) Western Wireless agrees that if it acquires businesses or
assets which include both cellular and PCS assets, it will offer VoiceStream the
opportunity to buy the PCS assets so acquired at the allocable portion of the
purchase price paid for such assets; (iii) VoiceStream agrees not to pursue any
cellular opportunity unless it first presents such opportunity to Western
Wireless and Western Wireless determines not to pursue, or discontinues the
pursuit of, such opportunity; (iv) VoiceStream agrees that if it acquires
businesses or assets which include both cellular and PCS assets, it will offer
Western Wireless the opportunity to buy the cellular assets so acquired at the
allocable portion of the purchase price paid for such assets; (v) Western
Wireless and VoiceStream agree that with respect to any wireless telephone
opportunity that is neither cellular nor PCS, they will share such opportunity
on an equal basis, unless they agree to another arrangement; (vi) Western
Wireless agrees that it will not provide or resell wireless telephony services
in any portion of the geographic area in which VoiceStream provides wireless
telephony services, except in any geographic area in which Western Wireless
provides those services on the Effective Date or as otherwise mutually agreed
to; (vii) VoiceStream agrees that it will not provide or resell wireless
telephony services in any portion of the geographic area in which Western
Wireless provides wireless telephony services, except any geographic area in
which VoiceStream provides those services on the Effective Date or as otherwise
mutually agreed to; and (viii) Western Wireless and VoiceStream agree not to
solicit each other's employees. Pursuant to an agreement, each of VoiceStream
and Western Wireless will continue to permit the other's customers to roam on
its systems.
OTHER PROVISIONS
The Distribution Agreement also includes provisions relating to: (i)
sharing of occupancy expenses; (ii) allocating liability with respect to pending
litigation and other potentially significant obligations; and (iii)
responsibilities with respect to tax audits and computation of tax adjustments.
TAX SHARING AGREEMENT
Western Wireless and VoiceStream are parties to a Tax Sharing Agreement
which, among other things, provides for payments between Western Wireless and
VoiceStream in respect of the net tax operating losses generated by one company
and its affiliates which are used to offset taxable income generated by the
other company and its affiliates. Pursuant to this agreement, it is anticipated
that VoiceStream will make a payment not to exceed $20,000,000 to Western
Wireless in respect of
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<PAGE> 25
VoiceStream's net operating losses generated prior to 1997. The actual amount of
such payment will be determined in part by Western Wireless' operating results
through the Effective Date.
In addition, pursuant to the Tax Sharing Agreement, Western Wireless has
agreed to be solely responsible for any taxes imposed on it under Section 355(e)
of the Code as a result of (i) any violation of the representations made by it
to the IRS related to the Spin-off, (ii) certain actions taken by it following
the Spin-off, or (iii) changes in its stock ownership. Similarly, VoiceStream
has agreed to be solely responsible for any taxes imposed on Western Wireless
under Section 355(e) of the Code as a result of (i) any violation following the
Spin-off of the representations made concerning it to the IRS related to the
Spin-off, (ii) certain actions taken by it following the Spin-off, or (iii)
changes in its stock ownership. Western Wireless and VoiceStream have agreed to
be equally responsible for any taxes imposed on Western Wireless under Section
355(e) of the Code where each of them has taken an action, or there has been a
change in the stock ownership of each, giving rise to such tax. In addition,
Western Wireless and VoiceStream each has agreed that if it claims a deduction
under the Code with respect to the issuance of stock by the other party pursuant
to the exercise of an employee stock option, it will compensate the other party
for such deduction. Section 355(e) of the Code is discussed under the heading
"Material Federal Income Tax Consequences of the Spin-off."
RISKS RELATING TO THE BUSINESS OF VOICESTREAM
There are various risks associated with VoiceStream's business. For a
discussion of such risks, please see Western Wireless' Information Statement on
Schedule 14C as filed with the Securities and Exchange Commission and dated
, 1999. Such document is incorporated herein by reference.
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ITEM 2. FINANCIAL INFORMATION
SELECTED VOICESTREAM CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial and
operating data for VoiceStream as of and for each of the five years in the
period ended December 31, 1998. Financial data as of and for each of the three
years in the period ended December 31, 1998, were derived from VoiceStream's
consolidated financial statements and notes thereto that have been audited by
Arthur Andersen LLP, independent public accountants. All the data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of VoiceStream" and VoiceStream's consolidated
financial statements and notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Subscriber revenues....................... $ 123,966 $ 52,360 $ 7,794
Roamer revenues........................... 3,506 227
Equipment revenues........................ 40,490 25,143 9,745
----------- ----------- -----------
Total revenues..................... 167,962 77,730 17,539
----------- ----------- -----------
Operating expenses:
Cost of service........................... 50,978 43,183 12,470
Cost of equipment sales................... 77,071 53,469 20,789
General and Administrative................ 75,343 51,678 20,209 $ 3,069
Sales and marketing....................... 85,447 59,466 31,505 339
Depreciation and amortization............. 83,767 66,875 14,395 269
----------- ----------- ----------- -----------
Total operating expenses........... 372,606 274,671 99,368 3,677
----------- ----------- ----------- -----------
Operating loss.............................. (204,644) (196,941) (81,829) (3,677)
Other income (expense):
Interest and financing expense............ (34,118) (57,558) (3,607) (40)
Equity in net loss of unconsolidated
affiliate............................... (24,120) (9,327) (954) (11)
Interest income and other................. 8,616 11 40 --
----------- ----------- ----------- -----------
Net loss........................... $ (254,266) $ (263,815) $ (86,350) $ (3,728)
=========== =========== =========== ===========
CONSOLIDATED BALANCE SHEET DATA:
Current assets.............................. $ 59,398 $ 49,945 $ 59,515 $ 1,684 $ 10,000
Property and equipment, net................. 619,280 420,638 318,473 34,914 220
Licensing cost and other intangible assets,
net....................................... 312,040 315,653 227,997 145,728
Other assets................................ 60,938 36,055 8,142 8,484
----------- ----------- ----------- ----------- -----------
Total assets....................... $ 1,051,656 $ 822,291 $ 614,127 $ 193,810 $ 10,220
=========== =========== =========== =========== ===========
Current liabilities......................... $ 125,026 $ 126,184 $ 155,769 $ 25,444 $ 10,158
Long-term debt.............................. 540,000 300,000 143,000 13,000
Other long-term liabilities................. 173,705 7,613
Shareholders' equity........................ 386,630 396,107 141,653 147,753 62
----------- ----------- ----------- ----------- -----------
Total liabilities and shareholders'
equity........................... $ 1,051,656 $ 822,291 $ 614,127 $ 193,810 $ 10,220
=========== =========== =========== =========== ===========
OTHER DATA:
Licensed population......................... 62,498,000 62,808,000 19,488,000 14,853,000
Covered population(1)....................... 16,121,000 11,412,000 6,133,000
Subscribers................................. 322,400 128,600 35,500
EBITDA(2)................................... $ (120,877) $ (130,066) $ (67,434) $ (3,408)
CASH FLOWS PROVIDED BY (USED IN):
Operating activities........................ $ (112,931) $ (198,129) $ (81,272) $ (4,115) $ (10,220)
Investing activities........................ $ (253,633) $ (370,202) $ (342,587) $ (145,632) $ (220)
Financing activities........................ $ 374,284 $ 563,254 $ 429,250 $ 149,770 $ 10,020
</TABLE>
- ---------------
(1) Represents population that is covered by our consolidated systems.
(2) EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA should not be construed as an alternative to operating
income (loss) as determined in accordance with United States generally
accepted accounting principles ("GAAP"), as an alternate to cash flows from
operating activities (as determined in accordance with GAAP), or as a
measure of liquidity. EBITDA is presented because it is a commonly used
financial indicator in the wireless industry and indicates a company's
ability to service and/or incur debt. Because EBITDA is not calculated in
the same manner by all companies, VoiceStream's presentation may not be
comparable to other similarly titled measures of other companies.
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<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion and analysis of the consolidated financial
condition and results of operations of VoiceStream and should be read in
conjunction with VoiceStream's consolidated financial statements and notes
thereto and other financial information included herein.
OVERVIEW
VoiceStream is an 80.1% owned subsidiary of Western Wireless. The remaining
19.9% is indirectly owned by Hutchison. VoiceStream provides wireless
communications services in urban markets in the United States through the
ownership and operation of PCS licenses. VoiceStream had commenced commercial
operations in ten markets under the VoiceStream(R) brand name as of December 31,
1998 (an eleventh market commenced commercial operations in February 1999).
Additionally, VoiceStream PCS services are offered in three markets in
conjunction with joint ventures (a fourth market commenced commercial operations
in February 1999).
On February 8, 1999, Western Wireless announced its intention to separate
VoiceStream from Western Wireless' other operations. Western Wireless has
received a favorable ruling from the Internal Revenue Service for a tax free
spin-off, and the approval by its board of directors to take the necessary steps
to complete the Spin-off. Western Wireless will distribute all of its interest
in VoiceStream to its shareholders upon the Spin-off. Although certain aspects
of VoiceStream's operations have always been separate from Western Wireless'
other operations and VoiceStream has been a separate legal entity since its
inception, the Spin-off will establish VoiceStream as a stand-alone entity with
objectives separate from those of Western Wireless. The Spin-off is subject to
numerous conditions including, among others, the receipt of certain third party
approvals. There is no assurance that such conditions will be met to complete
the Spin-off.
In connection with the Spin-off, VoiceStream will issue a substantial
number of stock options. See "Item 6 -- Grants of Stock Options." Issuance of
such options may result in a non-cash charge to earnings during the second
quarter of 1999, depending on the public trading price of the shares of
VoiceStream and Western Wireless following the Spin-off.
It is imperative for VoiceStream to expand its operations in order to
remain competitive. Because of the nature and character of the holders of PCS
licenses, there are few licenses available for purchase in urban areas. However,
one significant opportunity for VoiceStream to expand its PCs operations is to
acquire interests in PCs licenses that are reserved for use by a Designated
Entity. In order to do this, VoiceStream must enter into joint ventures with
Designated Entities to make such acquisitions (since VoiceStream is not itself a
Designated Entity).
VoiceStream's revenues consist primarily of subscriber revenues (including
access charges and usage charges), and equipment sales. The majority of
VoiceStream's revenues are derived from subscriber revenues. VoiceStream had no
revenues prior to February 1996. VoiceStream expects to continue to sell
handsets below cost and regards these losses as a cost of building its
subscriber base. As used herein, "service revenues" include subscriber and
roamer revenues.
Cost of service consists of the cost of providing wireless service to
subscribers, primarily costs to access local exchange and long distance carrier
facilities and to maintain the wireless network. General and administrative
expenses include the costs associated with billing a subscriber and the
administrative costs associated with maintaining subscribers, including customer
service, accounting and other centralized functions. General and administrative
expenses also include provisions for unbillable fraudulent roaming charges and
subscriber bad debt. Sales and marketing costs include costs associated with
acquiring a subscriber, including direct and indirect sales commissions,
salaries, all costs of retail locations, advertising and promotional expenses.
Sales and marketing costs do not include the revenue or costs of handset sales.
However, when sales and marketing costs per net subscriber addition are
discussed, the revenue and costs from handset sales are included because such
measure is commonly used in the wireless industry.
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<PAGE> 28
Depreciation and amortization primarily includes depreciation expense associated
with the property and equipment in service and amortization associated with its
wireless licenses for operational markets.
VoiceStream's financial statements include an allocation of certain
centralized costs and assets that were incurred by Western Wireless and benefit
all of its operations, including those of VoiceStream. These costs are allocated
to the respective operational units in a manner which reflects management's
judgement as to the nature of the activity causing those items to be incurred.
VoiceStream was allocated costs of $33.3 million in 1998 and $29.1 million in
1997 and assets of $14.5 million in 1998 and $19.1 million in 1997. Management
believes that the financial information presented fairly reflects the results of
operations had VoiceStream been a stand alone entity. Therefore, no proforma
presentation is provided. Management believes that allocations reflected in the
financial statements are reasonable, however, the financial information included
herein is not necessarily indicative of the financial position, results of
operations or cash flows of VoiceStream in the future.
As used herein, "EBITDA" represents operating loss before depreciation and
amortization. EBITDA should not be construed as an alternative to operating loss
(as determined in accordance with GAAP), as an alternative to cash flows from
operating activities (as determined in accordance with GAAP), or as a measure of
liquidity. EBITDA is presented because it is a commonly used financial indicator
in the wireless industry and indicates a company's ability to service and/or
incur debt. Because EBITDA is not calculated in the same manner by all
companies, VoiceStream's presentation may not be comparable to other similarly
titled measures of other companies.
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<PAGE> 29
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
VoiceStream did not commence operations in any of its markets until
February 1996. From that date through the end of 1996 VoiceStream launched
service in six markets: Honolulu, Portland, Salt Lake City, Albuquerque,
Oklahoma City and Des Moines. In 1997, VoiceStream launched service in El Paso,
Boise and Denver. In 1998, VoiceStream launched service in Phoenix/Tucson. Due
to the varying dates at which each of the markets became operational, the
expenses and revenues incurred during any period may not be comparable to
another period and may not be representative of future operations. Additionally,
during each period being discussed a portion of the operating expenses was
related to start-up costs incurred before the commencement of operations in each
of the markets. Exclusive of depreciation and amortization expense, which was
not material, approximately $7.7 million, $5.4 million and $17.0 million of
start-up costs were incurred in 1998, 1997 and 1996 respectively.
VoiceStream had 322,400 subscribers at December 31, 1998, a 150.7% increase
during 1998. VoiceStream had 128,600 subscribers at December 31, 1997, a 262.3%
increase during 1997. At December 31, 1996, VoiceStream had 35,500 subscribers.
The following table sets forth certain financial data as it relates to
VoiceStream's operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
% %
1998 CHANGE 1997 CHANGE 1996
--------- ------- --------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber revenues........................... $ 123,966 136.8% $ 52,360 571.8% $ 7,794
Roamer revenues............................... 3,506 1,444.4% 227 N.M.
Equipment revenues............................ 40,490 61.0% 25,143 158.0% 9,745
--------- --------- --------
Total revenues......................... $ 167,962 $ 77,730 $ 17,539
========= ========= ========
Operating expenses:
Cost of service............................... $ 50,978 18.0% $ 43,183 246.3% $ 12,470
Cost of equipment sales....................... 77,071 44.1% 53,469 157.2% 20,789
General and administrative.................... 75,343 45.8% 51,678 155.7% 20,209
Sales and marketing........................... 85,447 43.7% 59,466 88.8% 31,505
Depreciation and amortization................. 83,767 25.3% 66,875 364.6% 14,395
--------- --------- --------
Total operating expenses............... $ 372,606 $ 274,671 $ 99,368
========= ========= ========
Other income (expense).......................... (49,622) (25.8)% (66,874) 1379.2% (4,521)
--------- --------- --------
Net loss........................................ $(254,266) (3.6)% $(263,815) 205.5% $(86,350)
--------- --------- --------
EBITDA.......................................... $(120,877) (7.1)% $(130,066) 92.9% $(67,434)
========= ========= ========
</TABLE>
Revenues
The increase in subscriber revenues is due to the increase in the number of
subscribers. The increase in subscribers is due to the higher number of
operational markets during each period and the relative maturity of
VoiceStream's operations in these markets. Offsetting this increase is a
decrease in the average monthly subscriber revenue per average subscriber
("ARPU"). ARPU was $45.81 for 1998 compared to $57.48 for 1997 and $62.85 for
1996. The decrease in ARPU is primarily due to the change in strategy in 1998,
signified by the "Get More" advertising campaign. In this campaign, subscribers
get more value from their wireless service through lower priced rated plans that
include high minutes of use. Revenues from prepaid customers of $2.1 million are
included in subscriber revenues for 1998. VoiceStream does not expect that ARPU
will decline at the same rate in 1999 as it did in 998.
Roamer revenues are a result of VoiceStream's continuing effort to procure
domestic and international roaming agreements with other carriers. VoiceStream
expects roamer revenues to increase in 1999 due to increased wireless
subscribers and VoiceStream's expanded coverage.
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<PAGE> 30
Equipment sales increased as a result of more handsets sold. The increase
in handsets sold is due to the number of operational markets during each period
and the relative maturity of VoiceStream's operations in these markets.
Offsetting this increase is a decrease in the average handset selling price,
which is the result of lower handset costs and the competitive environment.
VoiceStream anticipates continued growth in equipment sales as a result of
increases in subscriber additions and the commencement of commercial operations
in other markets.
Operating Expenses
Cost of service expenses represent expenses incurred only by operational
markets. The increase in cost of service is primarily attributable to the
increased costs of maintaining the expanding wireless network as a result of new
markets becoming operational. Cost of service as a percentage of service
revenues declined to 40.0% in 1998 from 82.7% in 1997 and 160.0% in 1996 due to
efficiencies gained from the growing subscriber base. While cost of service
expenses are expected to grow in 1999 due to the growth in subscribers and
operating markets, VoiceStream expects the cost of service as a percentage of
service revenue to decline as greater economies of scale are realized.
Cost of equipment sales increased each year primarily due to the increase
in handsets sold, offset by a decrease in the average cost of handsets.
VoiceStream expects this trend to continue in 1999. Although subscribers
generally are responsible for purchasing or otherwise obtaining their own
handsets, VoiceStream has historically sold handsets below cost to respond to
competition and general industry practice and expects to continue to do so in
the future.
The increase in general and administrative expenses is primarily
attributable to the increased costs associated with supporting a larger
subscriber base. General and administrative costs per average subscriber were
$27.84 for 1998 compared to $56.74 for 1997 and $135.81 for 1996. This decrease
is largely the result of efficiencies gained from a larger subscriber base.
While general and administrative expenses are expected to grow in 1999 due to
the growth in subscribers and operating markets, VoiceStream expects the costs
per average subscriber to decline as greater economies of scale are realized.
The increase in sales and marketing costs each year is primarily due to the
increase in subscribers added. Sales and marketing costs per net subscriber
added, including the loss on equipment sales, was $630 for 1998 compared to $943
for 1997 and $1,200 for 1996. This decrease is largely the result of
efficiencies gained from larger subscriber additions. Sales and marketing costs
are expected to increase in 1999 due to the anticipated growth in subscriber
additions.
The increase in depreciation and amortization expenses is attributable to
the continued expansion of the wireless systems. FCC licenses are not amortized
until the related market is operational. These expenses will increase as new
markets become operational.
Other Income (Expense); Net Operating Loss Carryforwards
Interest and financing expense, net of capitalized interest, decreased in
1998 from 1997 due to the equity contributions from Western Wireless in December
1997 and Hutchison USA in February 1998 (see "Liquidity and Capital Resources").
The equity contribution from Western Wireless was a conversion of debt that had
previously incurred interest. The Hutchison Investment allowed VoiceStream to
repay the remaining debt to Western Wireless and to forego additional borrowings
until July 1998. The increase in interest and financing expense in 1997 from
1996 was due to the increase in long-term debt. Long-term debt was incurred
primarily to fund the capital expenditures associated with the build-out of the
wireless systems. Interest expense will increase in 1999 as a result of
increased borrowings to fund the expansion of the wireless network. The weighted
average interest rate, before the effect of capitalized interest, was 8.76% in
1998, 8.23% in 1997 and 8.12% in 1996. Interest income and other increased in
1998 from 1997 due to interest earned on the funds received in the Hutchison
Investment.
VoiceStream had $707 million of net operating loss ("NOL") carryforwards at
December 31, 1998, which will expire between 2010 and 2018. After the Spin-off,
these NOLs will remain with VoiceStream.
30
<PAGE> 31
EBITDA
From 1997 to 1998, decrease in negative EBITDA is attributable to the
increase in revenues and operating efficiencies gained from the growing
subscriber base. VoiceStream expects a similar trend in EBITDA from 1998 to 1999
for its operational markets, however the commencement of operations in new
markets will slow and could reverse this trend. Negative EBITDA increased in
1997 from 1996 due to the commencement of operations in three new markets.
Net Loss
From 1997 to 1998, decrease in net loss is attributable to the increase in
revenues, operating efficiencies gained from growing the subscriber base and a
decrease in other expense. VoiceStream expects a similar trend in net loss from
1998 to 1999 for its operational markets, however the commencement of operations
in new markets will slow and could reverse this trend. Net loss increased in
1997 from 1996 due to the commencement of operations in new markets.
LIQUIDITY AND CAPITAL RESOURCES
VoiceStream, through a wholly-owned subsidiary, has a credit facility with
a consortium of lenders (the "Credit Facility") consisting of $500 million in
revolving credit and $500 million in term loans. As of December 31, 1998, $540
million was outstanding under the Credit Facility. The amount which VoiceStream
can borrow under the Credit Facility is reduced beginning in 2001, the same year
in which repayment of the Credit Facility begins. Debt under the Credit Facility
matures on December 31, 2006, for the revolver and the delayed draw term loan,
and June 30, 2007, for the other $250 million term loan. The borrowings under
the Credit Facility bear interest at variable rates. Substantially all the
assets of VoiceStream, other than certain PCS licenses acquired in the FCC's D
and E Block auctions and certain other assets, are pledged as security for such
debt. The terms of the Credit Facility restrict, among other things, the sale of
assets, distribution of dividends or other distributions and loans. As of
January 1, 1999, the amount available to borrow under the Credit Facility, which
is restricted by certain financial covenants, was $277 million.
The Hutchinson Investment closed in February 1998. Approximately $135
million of the proceeds of the Hutchison Investment was used by VoiceStream for
the build-out of its systems during 1998. The remainder of the proceeds was paid
to Western Wireless as a repayment of loans made to VoiceStream.
In 1999, VoiceStream anticipates spending approximately $150 million for
the continued expansion of its operating markets and $150 million for the
development and expansion of new markets (both amounts include VoiceStream's
anticipated spending by Cook Inlet PCS (described below)). VoiceStream will use
cash on hand and amounts available for borrowing under the Credit Facility for
such purposes. In addition, further funds (which may be significant) will be
required to finance the continued growth of its operations, including the
build-out of its markets, provide for working capital and service debt. The
build-out of additional systems by VoiceStream will require substantial
additional funds. The capital cost of completing a project in any particular
market, and overall, could vary materially from current estimates. If adequate
funds are not available from its existing capital resources, VoiceStream may be
required to curtail its service operations or to obtain additional funds. The
terms of any additional funds may be less favorable than those contained in
current arrangements. In addition to the aforementioned capital expenditures
VoiceStream expects to make in 1999, VoiceStream has noncancellable lease
agreements for various facilities, including cell-site locations, of
approximately $25 million in 1999. The sources of funding for such expenditures
will come from the same sources as discussed above. VoiceStream has reached an
agreement in principle with one of its infrastructure equipment vendors whereby
such vendor would purchase $400,000,000 of VoiceStream's newly designated and
issued 12% cumulative senior exchangeable preferred stock. During the first five
years following issuance, dividends would be paid in cash or, at VoiceStream's
option, in additional shares of exchangeable preferred stock having an aggregate
liquidation preference equal to the amount of such dividends. After the fifth
anniversary, all dividends would be payable only in cash. In addition,
VoiceStream would modify its existing PCS supply agreement with such
31
<PAGE> 32
vendor. The agreement in principle contemplates that the net proceeds of the
sale of the exchangeable preferred stock would be used to finance capital
expenditures, for working capital purposes and to finance permitted investments
and acquisitions. Although VoiceStream is working diligently with the vendor to
prepare formal contracts, there can be no assurance that formal contracts will
be executed and that such funds will be available to VoiceStream.
A wholly owned subsidiary of VoiceStream holds a 49.9% interest in Cook
Inlet PCS. Cook Inlet PCS is subject to the FCC's build-out requirements and
will require significant additional amounts to complete the build-out of its PCS
systems and to meet the government debt service requirements on the C and F
Block licenses. No principal payments on these licenses are due in 1999. The
potential sources of such additional funding include vendor loans, loans or
capital contributions by the partners of Cook Inlet PCS or other third party
financing. To date, VoiceStream has funded the operations of Cook Inlet PCS
through loans evidenced by promissory notes. VoiceStream does not have any
further commitments to fund Cook Inlet PCS. At December 31, 1998, the wholly
owned subsidiary of VoiceStream had advanced funds totaling $65.3 million to
Cook Inlet PCS under such promissory notes. During the second quarter of 1998,
Cook Inlet PCS participated in the C Block restructuring options provided by the
FCC. The options chosen by Cook Inlet PCS had the effect of reducing its debt by
$29.1 million.
In January 1999, certain partners of Cook Inlet PCS, including VoiceStream,
formed another joint venture, Cook Inlet/VoiceStream PCS LLC ("CIVS") (of which
49.9% is owned by VoiceStream and 50.1% is owned by Cook Inlet Region, Inc.) to
participate in the FCC's reauction of C and F Block licenses in 1999.
VoiceStream contributed $25 million in March 1999, to the deposit required by
the FCC to participate in the reauction. CIVS has reached an agreement in
principle with one of its infrastructure equipment vendors whereby such vendor
would provide to CIVS a $725,000,000 senior credit facility and a $100,000,000
subordinated facility, and CIVS would agree to acquire certain equipment,
software and services from such vendor. The agreement in principle contemplates
that the net proceeds of the senior secured facility and the subordinated
facility would be used to finance capital expenditures, for working capital and
to finance permitted investments and acquisitions. The effectiveness of the
senior secured facility and the subordinated facility will be conditioned upon
CIVS acquiring licenses for BTA's covering at least 2 million persons. The
amount available for borrowing pursuant to the senior credit facility and the
subordinated facility will be based upon the aggregate number of persons covered
by licenses for BTA's acquired by CIVS, with $825 million in the aggregate being
available if CIVS acquires licenses for BTA's covering at least 15 million
persons and such availability being ratably reduced if CIVS acquired licenses
for BTA's covering fewer than 15 million persons. Although CIVS is working
diligently with the vendor to prepare formal contracts, there can be no
assurance that formal contracts will be executed or that such funds will be
available to CIVS.
After the Spin-off, the NOL carryforwards resulting from VoiceStream's
cumulative tax losses will remain with VoiceStream. Pursuant to a tax sharing
agreement entered into at the time of the Hutchison Investment, VoiceStream will
pay Western Wireless in 1999 an amount representative of the tax benefit of NOLs
generated while VoiceStream was a wholly-owned subsidiary of Western Wireless.
This payment will not exceed $20 million, net of taxes.
Net cash used in operating activities was $112.9 million in 1998.
Adjustments to the $254.3 million net loss to reconcile to net cash used in
operating activities included $83.8 million of depreciation and amortization,
and $24.1 million of equity in the net loss of unconsolidated subsidiaries.
Other adjustments included changes in operating assets and liabilities,
including: (i) an increase of $20.9 million in accrued liabilities, the largest
component of which is attributable to an increase in property taxes; and (ii) an
increase of $13.7 million in accounts payable, due to the growth of the
business. Net cash used in operating activities was $198.1 million in 1997 and
$81.3 million in 1996.
Net cash used in investing activities was $253.6 million in 1998. Investing
activities consisted primarily of: (i) purchases of property and equipment of
$206.5 million, largely related to the build-out of the wireless network; (ii)
investments in and advances to unconsolidated affiliates of $34.3 million,
primarily attributable to advances to Cook Inlet PCS for working capital and
purchases of property and
32
<PAGE> 33
equipment; and (iii) $12.9 million of additions to licensing costs and other
intangible assets, primarily attributable to 16 Local Multipoint Distribution
Service (LMDS) licenses acquired in an FCC auction. Net cash used in investing
activities was $370.2 million in 1997 and $342.6 million in 1996.
Net cash provided by financing activities was $374.3 million in 1998.
Financing activities consisted of: (i) net proceeds from the Hutchison
Investment of $244.8, offset by the repayment of advances from Western Wireless
of $105.4 million; and (ii) net borrowings on long-term debt of $240.0 million,
offset by $5.1 million of financing fees. Net cash provided by financing
activities was $563.3 million in 1997 and $429.3 million in 1996.
In the ordinary course of business, VoiceStream continues to evaluate
acquisitions, joint ventures and other potential business transactions. Any such
transactions would be financed with the borrowings under the Credit Facility or
through the issuance of additional debt or the sale of additional equity. There
can be no assurance that such funds will be available to VoiceStream on
acceptable or favorable terms.
YEAR 2000 ISSUES
VoiceStream, like most owners of computer software, will be required to
modify significant portions of its software so that it will function properly in
the year 2000. Any of VoiceStream's, or its vendors, computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. VoiceStream is currently remediating its critical systems to
address the year 2000 issue. Critical systems are those whose failure poses a
risk of disruption to VoiceStream's ability to provide wireless services, to
collect revenues, to meet safety standards, or to comply with legal
requirements. VoiceStream expects to incur internal staff costs as well as
consulting and other expenses related to infrastructure and facilities
enhancements necessary to prepare the systems for the year 2000. VoiceStream
cannot assure that the remediation of its critical systems will be complete by
the year 2000.
Much of VoiceStream's technology, including technology associated with its
critical systems, is purchased from third parties. VoiceStream is dependent on
those third parties to assess the impact of the year 2000 issue on the
technology and services they supply and to take any necessary corrective action.
VoiceStream's plan includes obtaining information from all third parties to
determine whether they have accurately assessed the problem and taken corrective
action. VoiceStream cannot assure that these third parties will have taken the
necessary corrective action prior to the year 2000.
While costs incurred to date to address the year 2000 issue have not been
significant, VoiceStream expects to incur incremental consolidated expenses of
not more than $5 million through the end of 1999 to implement its plan for its
consolidated critical systems. In addition, VoiceStream has redeployed internal
resources to address the problem. The majority of these expenses will be
incurred in the first half of 1999. Additionally, VoiceStream will incur
capitalized costs that represent ongoing investment in new systems and system
upgrades, the timing of which is being accelerated to facilitate year 2000
compliance and which is not expected to have a material impact on VoiceStream's
financial position or results of operations. This estimate assumes that third
party suppliers have accurately assessed the compliance of their products and
that they will successfully correct the issue in non-compliant products. Because
of the complexity of correcting the year 2000 issue, actual costs may vary from
this estimate.
Based on its current assessments and its remediation plan, which are based
in part upon certain representations of third parties, VoiceStream expects that
it will not experience a disruption of its operations as a result of the change
to the year 2000. However, there can be no assurance that either VoiceStream or
the third parties who have supplied technology used in VoiceStream's critical
systems will be successful in taking corrective action in a timely manner.
Although VoiceStream has developed contingency plans with respect to its
critical systems which VoiceStream believes will successfully avoid service
disruption, there can be no assurance that all such disruptions can be
eliminated. VoiceStream will continuously test and update these plans and
systems as long as necessary.
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<PAGE> 34
ITEM 3. PROPERTIES
In addition to the direct and attributable interests in PCS licenses and
other similar assets discussed in this Information Statement, VoiceStream leases
its principal executive offices located in Bellevue, Washington, and leases its
customer service center located in Albuquerque, New Mexico. VoiceStream and its
subsidiaries and affiliates lease and own locations for inventory storage,
microwave, cell site and switching equipment, sales and administrative offices,
and retail stores.
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<PAGE> 35
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of VoiceStream Common Stock as of March 26, 1999, by (i) each person
who is known by VoiceStream to own beneficially 5% or more of the VoiceStream
Common Stock; (ii) each director of VoiceStream; (iii) each Named Executive
Officer of VoiceStream; and (iv) all directors and officers of each company as a
group. The table further sets forth certain information regarding the
anticipated beneficial ownership of VoiceStream Common Stock as a result of the
Spin-off.
Unless otherwise indicated, all persons listed have sole voting power and
investment power with respect to such shares, subject to community property
laws, where applicable, and the information contained in the notes to the table.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF VOICESTREAM PERCENT
VOICESTREAM COMMON STOCK BENEFICIALLY
COMMON STOCK PERCENT BENEFICIALLY OWNED
BENEFICIALLY BENEFICIALLY OWNED AFTER AFTER THE
NAME AND ADDRESS OWNED(1) OWNED SPIN-OFF(1) SPIN-OFF
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Western Wireless Corporation
3650 131st Ave. SE
Bellevue, WA 98006(2)...................................... 76,499,775 80.10% 0.0 *
Hutchison Whampoa Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong(2)(6)(19)........................................ 19,005,562 19.90% 22,894,450 23.97%
Hellman & Friedman(3)(6)(12)
One Maritime Plaza, 12th Floor
San Francisco, CA 94111.................................... 0 * 12,299,497 12.88%
The Goldman Sachs Group, L.P. and related
investors(4)(6)(12)
85 Broad Street, 19th Floor
New York, NY 10004......................................... 0 * 9,799,279 10.26%
Providence Media Partners L.P.(6)(12)
c/o Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, RI 02903....................................... 0 * 3,339,018 3.50%
Franklin Resources, Inc.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777................................... 0 * 2,207,910 2.31%
John W. Stanton(5)(6)(7)(14)(16)
3650 131st Ave. SE
Bellevue, WA 98006......................................... 0 * 6,555,411 6.85%
Theresa E. Gillespie(5)(6)(7)
3650 131st Ave SE
Bellevue, WA 98006......................................... 0 * 6,555,411 6.85%
Robert R. Stapleton(7)(15)(12).............................. 0 * 578,762 *
Donald Guthrie(7)(15)(16)................................... 0 * 348,392 *
Mikal J. Thomsen(7)(8)(17).................................. 0 * 573,942 *
Alan R. Bender(7)(16)....................................... 0 * 253,242 *
Cregg B. Baumbaugh(7)(12)................................... 0 * 224,915 *
John L. Bunce, Jr.(9)(12)(14)............................... 0 * 12,299,497 12.88%
Mitchell R. Cohen(9)(12)(14)................................ 0 * 12,299,497 12.88%
Daniel J. Evans(7)(14)...................................... 0 * 2,750 *
Jonathan M. Nelson(10)(12)(14).............................. 0 * 3,345,018 3.50%
Terence M. O'Toole(11)(12)(14).............................. 0 * 9,799,279 10.26%
Canning Fok(13)(15)......................................... 19,005,562 19.90% 22,894,450 23.97%
Hans R. Snook(13)(15)....................................... 19,005,562 19.90% 22,894,450 23.97%
All Western Wireless directors and executive officers as a
group (11 persons)(7)(12)(18).............................. 0 * 33,025,957 34.22%
All VoiceStream directors and executive officers as a group
(15 persons)(7)(12)(18).................................... 19,005,562 19.90% 56,441,616 58.27%
</TABLE>
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<PAGE> 36
NOTES TO BENEFICIAL OWNERSHIP TABLE
- ---------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Computed in accordance with Rule 13d-3(d)(1) of the Exchange Act. In order
to allow a distribution of one share of VoiceStream Common Stock for each
share of Western Wireless Common Stock outstanding at the time of the
Spin-off, VoiceStream will effectuate a stock split of its shares
immediately prior to the Spin-off. All VoiceStream Common Stock set forth
in the table reflects the results of such stock split.
(2) Parties or affiliates of parties to a shareholders agreement, which
provides that the parties thereto will vote their shares of VoiceStream
Common Stock in favor of the election of certain directors designated by
each of Western Wireless and Hutchison, will have certain rights of first
offer or first refusal, preemptive rights and registration rights and
Hutchison will have certain approval rights with respect to Western
Wireless employment contracts. The parties to this agreement anticipate
that its provisions relevant to Hutchison's right to designate certain
directors shall be incorporated into the voting agreement with respect to
the VoiceStream Common Stock. With the exception of preemptive rights and
registration rights in favor of Hutchison, this will be terminated
effective with the Spin-off. See "-- VoiceStream Voting Agreement" below.
(3) Consists of shares held by Hellman & Friedman Capital Partners II, L.P.
("HFCP"), H&F Orchard Partners, L.P. ("HFOP") and H&F International
Partners, L.P. ("HFIP"), which are in turn beneficially owned by their
respective general partners and Warren Hellman, individually and as a
trustee of The Hellman Family Revocable Trust dated December 17, 1984 (the
"Hellman Trust," and, with HFCP, HFOP and HFIP, the "Hellman Entities").
HFCP will own of record 11,108,169 shares of VoiceStream Common Stock, HFOP
will own of record 993,648 shares of VoiceStream Common Stock and HFIP will
own of record 197,180 shares of VoiceStream Common Stock. HFCP, HFOP and
HFIP are California limited partnerships, the sole general partners of
which are entities indirectly controlled by the Hellman Trust. The
principal business of each of such partnerships is to make strategic
investments in a variety of special situations, including restructurings,
recapitalizations and buyouts. Warren Hellman is a trustee of the Hellman
Trust and is a citizen of the United States. Warren Hellman, individually
and as a trustee of the trust, shares voting and investment power with
respect to the shares of VoiceStream Common Stock held by the Hellman
Entities.
(4) Consists of (i) 8,986,738 shares of VoiceStream Common Stock held of record
by GS Capital Partners, L.P. ("GS Capital"), (ii) 470,401 shares of
VoiceStream Common Stock held of record by Stone Street Fund 1992, L.P.
("Stone Street"), (iii) 273,069 shares of VoiceStream Common Stock held of
record by Bridge Street Fund 1992, L.P. ("Bridge Street") and (iv) 68,821
shares of VoiceStream Common Stock held of record by The Goldman Sachs
Group, L.P. ("GS Group," and, with GS Capital, Stone Street and Bridge
Street, the "Goldman Sachs Entities"). Each of GS Capital, Stone Street and
Bridge Street is an investment limited partnership, the general partner,
the managing general partner or the managing partner of which is an
affiliate of GS Group. GS Group disclaims beneficial ownership of shares
held by such investment partnerships to the extent partnership interests in
such partnerships are held by persons other than GS Group and its
affiliates.
(5) Mr. Stanton is a director and Named Executive Officer of VoiceStream. Ms.
Gillespie is an executive officer of Western Wireless. Mr. Stanton and Ms.
Gillespie are married. Includes (i) 1,686,069 shares of VoiceStream Common
Stock held of record by PN Cellular, Inc. ("PN Cellular"), which is
substantially owned and controlled by Mr. Stanton and Ms. Gillespie, (ii)
1,274,520 shares of VoiceStream Common Stock held of record by Stanton
Communications Corporation ("SCC"), which is substantially owned and
controlled by Mr. Stanton and Ms. Gillespie, (iii) 105,000 shares of
VoiceStream Common Stock and 3,087,774 shares of VoiceStream Common Stock
held by Mr. Stanton and Ms. Gillespie, as tenants in common, (iv) 5,000
shares of VoiceStream Common stock and 159,437 shares of VoiceStream Common
Stock held of record by The Stanton Family Trust; and (v) 90,000 shares and
15,000 shares of VoiceStream Common Stock held of record by each of Mr.
Stanton and Ms. Gillespie, respectively,
36
<PAGE> 37
pursuant to Western Wireless' 1997 Executive Restricted Stock Plan. Mr.
Stanton and Ms. Gillespie share voting and investment power with respect to
the shares jointly owned by them, as well as the shares held of record of
PN Cellular, SCC and The Stanton Family Trust. Mr. Stanton, Ms. Gillespie,
PN Cellular, SCC and The Stanton Family Trust are referred to collectively
as the "Stanton Entities."
(6) The parties expect to enter into an agreement with respect to their shares
of VoiceStream Common Stock. See "-- VoiceStream Voting Agreement" below.
(7) Includes aggregate exercisable options, within 60 days of March 26, 1999,
to purchase VoiceStream Common Stock; does not include unexercisable
options. May include stock jointly or separately owned with or by spouse.
(8) Mr. Thomsen jointly holds voting and investment power with respect to all
of such shares with Lynn C. Thomsen, his wife, except for shares issued or
issuable upon the exercise of stock options. Includes 172,484 shares of
VoiceStream Common Stock beneficially owned by Mr. Thomsen through his
ownership of approximately 10.2% of PN Cellular. Mr. Thomsen does not have
voting control over such shares.
(9) Mr. Bunce and Mr. Cohen may each be deemed to be the owner of the
12,299,497 shares of VoiceStream Common Stock owned by the Hellman Entities
as they are officers of the corporate general partners of the Hellman
Entities. Each of Mr. Bunce and Mr. Cohen disclaim beneficial ownership of
shares held by the Hellman Entities to the extent interests in such
entities are held by persons other than such individual.
(10) Mr. Nelson may be deemed to be the owner of the 3,338,768 shares of
VoiceStream Common Stock owned by Providence, as he is a managing general
partner of Providence Ventures, L.P., the general partner of the general
partner of Providence. Mr. Nelson disclaims beneficial ownership of shares
held by Providence to the extent interests in Providence are held by
persons other than Mr. Nelson.
(11) Mr. O'Toole, who is a managing director of Goldman Sachs, disclaims
beneficial ownership of shares which may be deemed to be beneficially owned
by GS Group, except to the extent of his pecuniary interest therein.
(12) Includes aggregate exercisable options, within 60 days of April 1, 1999, to
purchase VoiceStream Common Stock; does not include unexercisable options.
Options granted to Messrs. Bunce and Cohen are held for the benefit of
HFCP; options granted to Mr. Nelson are held for the benefit of Providence;
and options granted to Mr. O'Toole are held for the benefit of GS Group.
(13) Messrs. Fok and Snook may each be deemed to be the owner of the 22,894,450
shares of VoiceStream Common Stock owned by Hutchison, as Mr. Fok is the
Group Managing Director of Hutchison and Mr. Snook is the Group Managing
Director of an affiliate of Hutchison and a Director of a separate
affiliate of Hutchison. Each of Mr. Fok and Mr. Snook disclaim beneficial
ownership of VoiceStream shares held by Hutchison to the extent interests
in Hutchison are held by persons other than such individual.
(14) Director of both Western Wireless and VoiceStream.
(15) Director of VoiceStream only.
(16) Named Executive Officer of both Western Wireless and VoiceStream.
(17) Named Executive Officer of VoiceStream only.
(18) In determining the aggregate number of shares owned by Western Wireless and
VoiceStream directors and executive officers, only the maximum number of
shares which such individuals collectively control at any given time have
been included.
(19) Consists of shares held by Hutchison Holdingsmunications Holdings (USA)
Limited ("Hutchison Holdings") and Hutchison USA, subsidiaries of Hutchison
(collectively, the "Hutchison Entities"). Hutchison Holdings will own of
record 3,888,888 shares of VoiceStream Common Stock and Hutchison USA
currently owns of record 19,005,562 shares of VoiceStream Common Stock. The
Hutchison Entities' principal business is property development and
holdings; ports and related
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<PAGE> 38
services; retail; manufacturing and other services; telecommunications; and
energy, infrastructure, finance and investment.
VOICESTREAM VOTING AGREEMENT
In connection with the Spin-off, the Hellman Entities, the Goldman Sachs
Entities, the Stanton Entities, Providence and the Hutchison Entities, will
enter into a voting agreement (the "VoiceStream Voting Agreement"), similar to
the voting agreement with respect to Western Wireless.
The VoiceStream Voting Agreement provides that the parties thereto shall
vote their shares of VoiceStream Common Stock for the election of ten members
designated as follows:
(i) Mr. Stanton, so long as he is the Chief Executive Officer of
VoiceStream or he beneficially owns 4,500,000 shares of Common Stock;
(ii) so long as the Hellman Entities beneficially own at least (A)
9,800,000 shares of VoiceStream Common Stock, two persons designated by the
Hellman Entities or (B) 4,500,000 shares of VoiceStream Common Stock, one
person designated by the Hellman Entities;
(iii) so long as the Hutchison Entities beneficially own at least (A)
9,800,000 shares of VoiceStream Common Stock, two persons designated by the
Hutchison Entities or (B) 4,500,000 shares of VoiceStream Common Stock, one
person designated by the Hutchison Entities;
(iv) so long as the Goldman Sachs Entities beneficially own at least
4,500,000 shares of VoiceStream Common Stock, one person designated by
Goldman Sachs;
(v) so long as the Stanton Entities and Providence collectively
beneficially own at least 4,500,000 shares of VoiceStream Common Stock, one
person designated by majority vote of the Stanton Entities and Providence
(such designee being in addition to Mr. Stanton if he is then serving on
the VoiceStream Board of Directors by reason of being the Chief Executive
Officer of VoiceStream); the Stanton Entities will agree that (x) so long
as Mr. Stanton is serving as Chief Executive Officer or he beneficially
owns at least 4,500,000 shares of VoiceStream Common Stock, (y) the Stanton
Entities and Providence collectively beneficially own at least 4,500,000
shares of VoiceStream Common Stock, and (z) Providence beneficially owns at
least 2,500,000 shares of VoiceStream Common Stock, the Stanton Entities
shall vote their shares of VoiceStream Common Stock for one member of the
VoiceStream Board of Directors designated by Providence; and
(vi) three members of the VoiceStream Board of Directors selected by a
majority of the persons selected as described above.
In addition, the Hutchison Entities shall have the right to designate an
additional director (and the Board shall in each case be expanded by one member
to accommodate such new designee) when the Hutchison Entities' aggregate
ownership of the VoiceStream Common Stock exceeds each of the following
thresholds: 27.25%, 33.33%, 38.5%, 42.9%, 44.67% and 50%. The Goldman Sachs
Entities are limited in their voting power pursuant to provisions of
VoiceStream's Articles of Incorporation.
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<PAGE> 39
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and positions of the executive officers and directors of
VoiceStream on the effective date of the Spin-off are listed below along with
their business experience during the past five years. The business address of
all officers of VoiceStream is 3650 131st Avenue SE, Bellevue, Washington 98006.
The VoiceStream Board of Directors will consist of ten directors. Directors will
be elected to serve until they resign or are removed, or are otherwise
disqualified to serve, or until their successors are elected and qualified.
Executive officers of VoiceStream are appointed by the Board of Directors. No
family relationships exist among any of the directors or executive officers of
VoiceStream.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John W. Stanton............................ 43 Chairman, Director and Chief Executive
Officer
Robert R. Stapleton........................ 41 President and Director
Donald Guthrie............................. 43 Vice Chairman and Director
Cregg B. Baumbaugh......................... 42 Executive Vice President -- Finance,
Strategy and Development
Alan R. Bender............................. 44 Executive Vice President, General Counsel
and Secretary
Robert P. Dotson........................... 38 Senior Vice President -- Marketing
Timothy R. Wong............................ 43 Senior Vice President -- Engineering
Patricia L. Miller......................... 36 Vice President, Controller and Principal
Accounting Officer
John L. Bunce, Jr. ........................ 40 Director
Mitchell R. Cohen.......................... 35 Director
Daniel J. Evans............................ 73 Director
Canning Fok................................ 47 Director
Jonathan M. Nelson......................... 42 Director
Terence M. O'Toole......................... 40 Director
Hans R. Snook.............................. 50 Director
</TABLE>
John W. Stanton has been a director of VoiceStream since February 1998, and
has been Chief Executive Officer and Chairman since it was formed in 1994. Mr.
Stanton has also been a director, Chief Executive Officer and Chairman of
Western Wireless Corporation and its predecessors since 1992. Mr. Stanton served
as a director of McCaw Cellular Communications, Inc. ("McCaw") from 1986 to
1994, and as a director of LIN Broadcasting Corporation ("LIN Broadcasting")
from 1990 to 1994, during which time it was a publicly traded company. From 1983
to 1991, Mr. Stanton served in various capacities with McCaw, serving as
Vice-Chairman of the Board of McCaw from 1988 to September 1991 and as Chief
Operating Officer of McCaw from 1985 to 1988. Mr. Stanton is also a member of
the Board of Directors of Advanced Digital Information Corporation, Columbia
Sportswear, Inc. and SmarTone (Hong Kong). In addition, Mr. Stanton is a trustee
of Whitman College, a private college. Mr. Stanton is currently Chairman of the
Cellular Telecommunications Industry Association.
Robert R. Stapleton has been a director of VoiceStream since April 1999 and
President of VoiceStream since it was founded in 1994. Effective April 1998, Mr.
Stapleton became responsible for all operations of VoiceStream. Mr. Stapleton
was President of Western Wireless Corporation and one of its predecessors from
1992 to 1999. From 1989 to 1992, he served in various positions with General
Cellular Corporation ("GCC"), including Chief Operating Officer and Vice
President of Operations. From 1984 to 1989, Mr. Stapleton was employed by mobile
communications subsidiaries of Pacific Telesis, Inc., which now are affiliated
with AirTouch.
Donald Guthrie has been a director of VoiceStream since April 1999 and has
been Vice Chairman since February 1998. He served as the Chief Financial Officer
of Western Wireless from February 1997 to April 1999. Mr. Guthrie has been Vice
Chairman of Western Wireless since November 1995. From 1986 to October 1995, he
served as Senior Vice President and Treasurer of McCaw and, from 1990 to October
1995, he served as Senior Vice President -- Finance of LIN Broadcasting.
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<PAGE> 40
Cregg B. Baumbaugh will serve as Executive Vice President -- Finance
Strategy and Development of VoiceStream as of the effective date of the
Spin-off. He served as Senior Vice President -- Corporate Development of
VoiceStream and Western Wireless from 1994 to 1999. Mr. Baumbaugh was a director
of VoiceStream from its inception in 1994 until February 1998. From November
1989 through the present, he has served in various positions with Western
Wireless and its predecessor, including Vice President -- Business Development.
From 1986 to 1989, Mr. Baumbaugh was employed by The First Boston Corporation.
Alan R. Bender will serve as Executive Vice President, General Counsel and
Secretary of VoiceStream as of the effective date of the Spin-off. He also will
hold such positions with Western Wireless. From 1990 to 1999, he held various
positions with Western Wireless, VoiceStream and their respective predecessors,
including Senior Vice President and General Counsel from 1994 to 1999. From 1988
to 1990, Mr. Bender was Vice President and Senior Counsel of Equitec Financial
Group, Inc., a subsidiary of PacifiCorp Inc.
Robert P. Dotson will serve as Senior Vice President -- Marketing of
VoiceStream as of the effective date of the Spin-off. From 1996 to 1999, he
served as Vice President -- Marketing of VoiceStream and Western Wireless
Previously, Mr. Dotson held various marketing positions with PepsiCo's KFC
restaurant group, serving as Senior Director of Concept Development from 1994 to
1996, Director of International Marketing from 1993 to 1994, Divisional
Marketing Director from 1991 to 1993 and Manager of New Product Development and
Base Business Marketing from 1989 through 1991.
Timothy R. Wong will serve as Senior Vice President -- Engineering of
VoiceStream as of the effective date of the Spin-off. From 1996 to 1999, he
served as Vice President -- Engineering of VoiceStream and Western Wireless.
From 1990 to 1995, Mr. Wong held various positions at U S WEST Cellular, serving
as Executive Director -- Engineering and Operations from 1994 to 1995, Director
of Wireless Systems Engineering in 1993, Manager of International Wireless
Engineering in 1992, and Manager -- Systems Design from 1990 to 1991.
Patricia L. Miller will serve as Vice President, Controller and Principal
Accounting Officer of VoiceStream as of the effective date of the Spin-off. From
1998 to 1999, she served as Controller and Principal Accounting Officer of
VoiceStream and Western Wireless. From 1993 to 1997, Ms. Miller held various
accounting positions with Western Wireless. Prior to 1993, Ms. Miller held
various accounting positions with a subsidiary of Weyerhaeuser Company.
John L. Bunce, Jr. has been a director of VoiceStream since February 1998
and of Western Wireless since it was formed in 1994. Mr. Bunce was a director of
GCC from March 1992 to December 1995. Mr. Bunce is a general partner of Hellman
& Friedman, a private investment firm, having joined Hellman & Friedman as an
associate in 1988. Mr. Bunce currently is a director of MobileMedia.
Mitchell R. Cohen has been a director of VoiceStream since February 1998
and of Western Wireless since it was formed in 1994. Mr. Cohen was a director of
GCC from March 1992 to December 1995. Mr. Cohen is a general partner of Hellman
& Friedman, having joined Hellman & Friedman as an associate in July 1989. From
1986 to 1989, Mr. Cohen was employed by Shearson Lehman Hutton, Inc. Mr. Cohen
currently is a director of MobileMedia and Matrix Telecommunications Limited.
Daniel J. Evans has been a director of VoiceStream since February 1998 and
of Western Wireless since 1997. Mr. Evans is the Chairman of Daniel J. Evans
Associates, a consulting firm. From 1965 through 1977, Mr. Evans was Governor of
the State of Washington. In 1983 he was appointed and then elected to the United
States Senate to fill the seat of the late Senator Henry M. Jackson. He serves
as a director of Flow International Corporation, Puget Sound Energy, Tera
Computer Company, and is President of the Board of Regents of the University of
Washington.
Canning Fok has been a director of VoiceStream since February 1998. For
more than five years, Mr. Fok has been Group Managing Director of Hutchison
Whampoa Limited, a diversified Hong Kong-based corporation that includes
interests in telecommunications businesses, and Chairman of Orange plc. Other
appointments include, Chairman of Port of Felixstowe Ltd., Co-Chairman of Husky
Oil Ltd.,
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<PAGE> 41
Deputy Chairman of Hongkong Electric Holdings Ltd. and Cheung Kong
Infrastructure Holdings Ltd., and Director of Cheung Kong (Holdings) Ltd. Mr.
Fok is a chartered accountant.
Jonathan M. Nelson has been a director of VoiceStream since February 1998
and of Western Wireless since it was formed in 1994. Mr. Nelson is a managing
general partner of Providence Ventures, L.P., the general partner of the general
partner of Providence Media Partners L.P. ("Providence"), a private equity fund.
Since 1986, Mr. Nelson has been a managing director of Narragansett Capital,
Inc., a private management company for three separate equity investment funds.
Mr. Nelson is currently a director of MetroNet Communications.
Terence M. O'Toole has been a director of VoiceStream since February 1998
and of Western Wireless since it was formed in 1994. Mr. O'Toole joined Goldman,
Sachs & Co. ("Goldman Sachs") in 1983 and became a Vice President in April 1988,
a general partner in November 1992 and a Managing Director in 1996. He is
currently a director of AMF Bowling, Inc. and Amscan Holdings, Inc.
Hans R. Snook has been a director of VoiceStream since February 1998. For
more than five years, Mr. Snook has been Group Managing Director of Orange plc,
a telecommunications service provider in the United Kingdom, and a director of
Hutchison Holdingsmunications Limited.
Each of the foregoing individuals who serve on the VoiceStream Board of
Directors shall be elected pursuant to the VoiceStream Voting Agreement. See
"Item 4. Security Ownership of Certain Beneficial Owners and
Management -- VoiceStream Voting Agreement."
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for services rendered
during 1998 for VoiceStream's Chief Executive Officer and its next four most
highly compensated executive officers (collectively referred to herein as the
"Named Executive Officers"). All such compensation was paid by Western Wireless
for services performed for Western Wireless and VoiceStream during 1998, prior
to the Spin-off.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-------------------------------------
ANNUAL COMPENSATION RESTRICTED ALL OTHER
NAME AND ---------------------------------- STOCK COMPEN-
PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) AWARDS($)(1) OPTIONS SATION($)(2)
------------------ ----------- --------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
John W. Stanton(3)................ 1998 193,542 400,000 521,250 1,000 367,974
Chairman and Chief
Executive Officer
Robert R. Stapleton............... 1998 165,667 200,000 260,625 75,000 186,487
President and Director
Donald Guthrie(3)................. 1998 165,667 150,000 260,625 60,000 186,487
Vice Chairman and Director
Cregg B. Baumbaugh................ 1998 145,321 110,000 173,750 40,000 125,992
Executive Vice
President -- Finance, Strategy and
Development
Alan R. Bender(3)................. 1998 145,321 110,000 173,750 40,000 125,992
Executive Vice President, General
Counsel, and Secretary
</TABLE>
- ---------------
(1) Western Wireless granted 30,000 shares to Mr. Stanton, 15,000 shares to each
of Messrs. Stapleton and Guthrie, and 10,000 shares to each of Messrs.
Baumbaugh and Bender of Class A Common Stock on January 1, 1998, pursuant to
the Executive Restricted Stock Plan. Pursuant to the Services Agreement
between Western Wireless and VoiceStream, VoiceStream recorded an allocated
portion of deferred compensation based upon the market value of the Western
Wireless Common Stock at January 1, 1998, and the price at which the
Executive Restricted Stock Plan shares were granted. The shares are
restricted until predetermined performance goals are met, including
achieving predetermined levels of subscribers, and achieving predetermined
levels of cash flow.
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<PAGE> 42
(2) Western Wireless and VoiceStream made payments to cover the taxes related to
the grant of restricted shares and paid matching contributions to
VoiceStream's 401(k) Profit Sharing Plan and Trust.
(3) As of the effective date of the Spin-off, these Executive Officers shall
split their time and responsibilities between VoiceStream and Western
Wireless, and their compensation will be shared appropriately.
GRANTS OF STOCK OPTIONS
For discussion of the stock options that the officers and directors of
VoiceStream shall receive in conjunction with the Spin-off, see "Item 1.
Agreement and Plan of Distribution; Relationship between Western Wireless and
VoiceStream after the Spin-off."
The following table summarizes the options to purchase Western Wireless
Class A Common Stock ("Options") granted during 1998 to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
% OF TOTAL RATES
OPTIONS OF STOCK APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------- ------------ ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Stanton................. 1,000(1) 0.10% $17.3750 Jan. 1, 2008 $ 10,927 $ 27,691
Robert R. Stapleton............. 75,000(1) 7.56% $17.3750 Jan. 1, 2008 819,528 2,076,846
Donald Guthrie.................. 60,000(1) 6.05% $17.3750 Jan. 1, 2008 655,623 1,661,477
Cregg B. Baumbaugh.............. 40,000(1) 4.03% $17.3750 Jan. 1, 2008 437,082 1,107,651
Alan R. Bender.................. 40,000(1) 4.03% $17.3750 Jan. 1, 2008 437,082 1,107,651
</TABLE>
- ---------------
(1) These options have terms of ten years from the date of grant, January 1,
1998, and become exercisable as to 25% of the shares on the first
anniversary and an additional 25% every year thereafter until such options
are fully exercisable, provided that such officer remains continuously
employed by Western Wireless. With respect to the treatment of such options
as a result of the Spin-off, see above.
(2) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements of the Securities and Exchange
Commission and do not reflect VoiceStream's estimate of future stock price
performance.
EXERCISES OF STOCK OPTIONS
The following table provides information on Option exercises in 1998 by the
Named Executive Officers and the value of such officers' unexercised options on
December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON REALIZED --------------------------- ----------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Stanton................. 0 0 0 1,000 0 4,625
Robert R. Stapleton............. 79,800 1,409,997 504,825 147,375 7,360,340.25 1,030,698.75
Donald Guthrie.................. 0 0 185,775 113,250 2,790,637.50 774,757.50
Cregg B. Baumbaugh.............. 34,500 533,590 186,625 79,375 2,387,463.75 558,006.25
Alan R. Bender.................. 1,900 30,343 234,325 79,375 3,227,117.75 558,006.25
</TABLE>
COMPENSATION OF DIRECTORS
Historically, directors of VoiceStream have not received any compensation
for serving on the VoiceStream Board of Directors, nor have they been reimbursed
for their out-of-pocket expenses incurred
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<PAGE> 43
in connection with attendance at meetings of, and other activities relating to
serving on, the VoiceStream Board of Directors and any committees thereof.
Subsequent to the Spin-off, the Board of Directors will consider alternative
compensation arrangements for the directors.
EMPLOYMENT AGREEMENTS
In conjunction with the Spin-off, VoiceStream will assume the existing
employment agreements between Western Wireless and Messrs. Stapleton and
Baumbaugh. Mr. Stanton and, for a transition period, Messrs. Guthrie and Bender,
will serve both VoiceStream and Western Wireless pursuant to their existing
employment agreements with Western Wireless. The existing employment agreements
with Messrs. Stanton, Guthrie, Stapleton, Bender and Baumbaugh ("Employment
Agreements") provide for annual base salaries (as adjusted by the Western
Wireless Board of Directors) of $195,000, $168,000, $168,000, $147,500 and
$147,500, respectively, and provide each executive officer an opportunity to
earn an annual bonus, as determined by the Board of Directors of VoiceStream,
targeted at 100%, 70%, 70%, 60% and 60%, respectively, of annual base
compensation. The compensation arrangements for Messrs. Stanton, Guthrie and
Bender will be funded by both Western Wireless and VoiceStream on mutually
agreeable terms. The Employment Agreements also provide that the contracting
employee may be terminated by VoiceStream at any time, with or without cause (as
such term is defined in the Employment Agreements); however, in the event of an
involuntary termination (as defined therein) for other than cause (1) such
executive officer will be entitled to receive a severance payment in an amount
equal to any accrued but unpaid existing annual targeted incentive bonus through
the date of termination, 12 months of such executive's then base compensation,
and an amount equal to 12 months of such executive's existing annual targeted
incentive bonus, (2) the employer will, at its expense, make all specified
insurance payment benefits on behalf of such executive officer and his or her
dependents for 12 months following such involuntary termination and (3) with
respect to any stock options previously granted to each executive officer which
remain unvested at the time of involuntary termination, there shall be immediate
vesting of that portion of each such grant of any unvested stock options equal
to the product of the total number of such unvested options under such grant
multiplied by a fraction, the numerator of which is the sum of the number of
days from the date on which the last vesting of options under such grant
occurred to and including the date of termination plus 365, and the denominator
of which is the number of days remaining from the date on which the last vesting
of options under such grant occurred to and including the date on which the
final vesting under such grant would have occurred absent the termination. Mr.
Stapleton's agreement provides for an immediate vesting of all options upon his
involuntary termination. Among other things, an executive officer's death or
permanent disability will be deemed an involuntary termination for other than
cause. In addition, each Employment Agreement provides for full vesting of all
stock options granted upon a change of control (as such term is in the stock
option agreements with the executive officer).
Pursuant to the terms of each Employment Agreement, each executive officer
agrees that during such executive officer's employment and for one year
following the termination of such executive officer's employment for any reason,
such executive officer will not engage in a business which is substantially the
same as or similar to the business of his employer and which competes within the
applicable commercial mobile radio services markets serviced by his employer.
Mr. Stanton's agreement provides that such prohibition shall not preclude Mr.
Stanton's investment in other companies engaged in the wireless communications
business or his ability to serve as a director of other companies engaged in the
wireless communications business, in each case subject to his fiduciary duties
as a director.
INDEMNIFICATION AGREEMENTS
VoiceStream will enter into an indemnification agreement with each of its
executive officers and directors, which shall be separate from such executive
officers employment agreement with VoiceStream or Western Wireless, as the case
may be. Pursuant to this indemnification agreement, VoiceStream will agree to
indemnify the executive officer or director against certain liabilities arising
by reason of the executive officer's or the director's affiliation with
VoiceStream.
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<PAGE> 44
COMPENSATION COMMITTEE
VoiceStream intends to establish a compensation committee shortly after the
Spin-off. To date, all compensation matters for VoiceStream have been addressed
by Western Wireless' Compensation Committee. Western Wireless's Compensation
Committee was formed in July 1994. None of the members at any time served as an
officer or employee of VoiceStream. No member of Western Wireless's Compensation
Committee serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of
Western Wireless's Board of Directors or Compensation Committee
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information relating to the relationship between VoiceStream and
Western Wireless and the relationship between Western Wireless and the Hutchison
Entities, see "Item 1. Business -- Relationship between VoiceStream and Western
Wireless prior to the Spin-off, -- Agreement and Plan of Distribution;
Relationship between Western Wireless and VoiceStream After the Spin-Off."
An affiliate of the Goldman Sachs Entities, which entities are shareholders
of VoiceStream, is a member of the syndicate of lenders pursuant to
VoiceStream's $1 billion senior credit facility (the "Credit Facility") and has
committed to lend to VoiceStream up to an aggregate principal amount of $8.5
million.
Goldman Sachs served as a consultant in connection with the Hutchison
Investment, for which VoiceStream paid it customary fees.
VoiceStream intends to enter into indemnification agreements with its
officers and directors. See "Item 6. Executive Compensation -- Indemnification
Agreements."
VoiceStream believes that the foregoing transactions were on terms as fair
to VoiceStream as those which would have been available in arm's-length
negotiations. The Credit Facility and the Washington Business Corporation Act
contain provisions which limit the terms on which the Company may enter into
transactions with its affiliates.
ITEM 8. LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which VoiceStream or
any of its subsidiaries or affiliates is a party or of which any of their
property is subject which, if adversely decided, would have a material adverse
effect on VoiceStream.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no public market for the VoiceStream Common Stock; however, as
part of the Spin-off, VoiceStream will trade on the Nasdaq Stock Market.
VoiceStream has never declared a cash dividend with respect to its capital
stock, and does not anticipate doing so. Whether VoiceStream pays dividends in
the future will be subject to the discretion of the VoiceStream Board of
Directors and will depend on VoiceStream's and its subsidiaries' operating
results, financial requirements, restrictive covenants in lending agreements and
other factors as they develop over time.
Immediately subsequent to the Spin-off: (i) an indeterminate number of
shares of VoiceStream Common Stock will be subject to options. The actual number
of shares of VoiceStream Common Stock subject to options shall be determined in
accordance with the formula set forth under "Item 6. Executive
Compensation -- Grants of Stock Options"; (ii) 535,515 shares of VoiceStream
Common Stock will be subject to warrants (See, "Item 11. Description of
Registrant's Securities to be Registered"); (iii) all shares of VoiceStream
Common Stock will be saleable pursuant to Rule 144 of the Securities Act; and
(iv) no VoiceStream Common Stock will be or proposed to be for sale in a public
offering which could have a material effect on the market price of the
VoiceStream Common Stock.
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<PAGE> 45
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
VoiceStream was a wholly owned subsidiary of Western Wireless until the
Hutchinson Investment. VoiceStream did not use an underwriter in connection with
the Hutchison Investment. VoiceStream effectuated this transaction in accordance
with Section 4(2) of the Securities Act of 1933.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
As of the Effective Date, the authorized capital stock of VoiceStream will
consist of 300,000,000 shares of Common Stock, no par value (the "VoiceStream
Common Stock") and 50,000,000 shares of preferred stock, no par value (the
"VoiceStream Preferred Stock"). There is no VoiceStream Preferred Stock
outstanding. As a result of a 7650.21924063-for-1 stock split to be effected
prior to the Effective Date in the form of a stock dividend, there will be
95,505,337 shares of VoiceStream Common Stock outstanding, with 2 holders of
record, Western Wireless (80.1%) and Hutchison (19.9%). On the Effective Date,
the 76,499,775 shares held by Western Wireless will be distributed to its
shareholders.
As of the Effective Date, VoiceStream will have outstanding options to
acquire a number of shares of its Common Stock, which options will have been
granted under VoiceStream's management incentive stock option plan. The number
of shares subject to options will not be known until after the Effective Date of
the spin-off, and will be determined pursuant to the terms of the Distribution
Agreement. See "Item 6. Executive Compensation -- Grants of Stock Options." In
addition, as of the Effective Date, participants in Cook Inlet PCS are parties
to certain Exchange Rights Agreements and have the right to convert or exchange
their joint venture interests into 535,515 shares of VoiceStream Common Stock
and participants in CIVS have rights to exchange membership interests into an
indeterminate number of shares of VoiceStream Common Stock. There are no other
rights outstanding to acquire VoiceStream stock.
VoiceStream has never declared a cash dividend with respect to its capital
stock.
VOICESTREAM COMMON STOCK
The VoiceStream Common Stock has one vote per share. Holders of VoiceStream
Common Stock have no cumulative voting rights and no preemptive, subscription or
sinking fund rights, except that Hutchison USA has certain preemptive rights
that will survive the Spin-off, entitling it to acquire a portion of any newly
issued equity securities of VoiceStream on the same terms and conditions as such
equity securities are being issued to other holders such that Hutchison USA
shall be able to retain the same percentage ownership of VoiceStream as existed
immediately prior to such issuance. The preemptive right does not apply to any
issuances of equity securities in connection with a public sale of equity
securities by VoiceStream; a conversion or exchange of outstanding securities;
stock dividends; mergers, acquisitions or other reorganizations in which the
then current shareholders of VoiceStream would continue to be the only
shareholders of VoiceStream or which is effected to carry out an acquisition
transaction; or issuances of equity to employees. Subject to preferences that
may be applicable to any then outstanding Preferred Stock, holders of Common
Stock will be entitled to receive ratably such dividends as may be declared by
the VoiceStream Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of VoiceStream, holders of
Common Stock will be entitled to share ratably in all remaining assets after
payment of liabilities and the liquidation preference of any then-outstanding
VoiceStream Preferred Stock.
VoiceStream's Articles of Incorporation permit the redemption of
VoiceStream Common Stock from shareholders where necessary to protect
VoiceStream's regulatory licenses.
The Washington Business Act, Section 23B.19 of the Revised Code of
Washington, prohibits a "target corporation," with certain exceptions, from
engaging in certain "significant business transactions" (such as a merger or
sale of assets) with an "acquiring person" who acquires more than 10% of the
voting securities of the target corporation for a period of five years after
such acquisition, unless the transaction is approved by a majority of the
members of the target corporation's board of directors prior to the date of the
transaction or unless the aggregate amount of the cash and the market value of
non-cash consideration
45
<PAGE> 46
received by holders of outstanding shares of any class or series of stock of the
target corporation is equal to certain minimum amounts. VoiceStream's Articles
of Incorporation provide that it will be subject to such prohibitions and shall
remain subject to such prohibitions even if they are repealed. Such prohibitions
do not apply to any shareholders who beneficially own ten percent or more of
VoiceStream's outstanding voting securities prior to the Spin-off.
VOICESTREAM PREFERRED STOCK
Pursuant to its Articles of Incorporation, VoiceStream will be authorized
to issue 50,000,000 shares of VoiceStream Preferred Stock, which may be issued
from time to time in one or more classes or series or both upon authorization by
VoiceStream's Board of Directors. VoiceStream's Board of Directors, without
further approval of the shareholders, is authorized to fix the dividend rights
and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences and any other rights, preferences, privileges and
restrictions applicable to each class or series of VoiceStream Preferred Stock.
The issuance of VoiceStream Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of VoiceStream
Common Stock and, under certain circumstances, make it more difficult for a
third party to gain control of VoiceStream, discourage bids for VoiceStream
Common Stock at a premium or otherwise adversely affect the market price of the
VoiceStream Common Stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.510 of the Revised Code of Washington authorizes Washington
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. VoiceStream's Articles of Incorporation and Bylaws require
indemnification of VoiceStream's officers and directors to the fullest extent
permitted by Washington law. VoiceStream also maintains directors' and officers'
liability insurance.
VoiceStream's By-laws and Articles of Incorporation provide that
VoiceStream shall, to the full extent permitted by the Washington Business
Corporation Act of the State of Washington, as amended from time to time,
indemnify all directors and officers of VoiceStream. In addition, VoiceStream's
Articles of Incorporation contains a provision eliminating the personal
liability of directors to VoiceStream or its shareholders for monetary damages
arising out of a breach of fiduciary duty. Under Washington law, this provision
eliminates the liability of a director for breach of fiduciary duty but does not
eliminate the personal liability of any director for (i) acts or omissions of a
director that involve intentional misconduct or a knowing violation of law, (ii)
conduct in violation of Section 23B.08.310 of the Revised Code of Washington
(which section relates to unlawful distributions) or (iii) any transaction from
which a director personally received a benefit in money, property or services to
which the director was not legally entitled.
VoiceStream has entered into separate indemnification agreements with each
of its directors and executive officers. See "Item 6. Executive
Compensation -- Employment Agreements."
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required as part of this Registration Statement
are included beginning on the index page F-1 of this Registration Statement.
ITEM 14.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During VoiceStream's last two fiscal years there were no changes in or
disagreements with accountants on accounting and financial disclosure of the
type required to be disclosed in this Item.
46
<PAGE> 47
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
The financial statements required as part of this Registration Statement
are included beginning on the index page F-1 of this Registration Statement.
EXHIBITS
The following exhibits required by Item 601 of Regulation S-K are attached
hereto or incorporated herein by reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Distribution between Western Wireless
Corporation and VoiceStream Wireless Corporation
dated
3.1 Amended and Restated Articles of Incorporation of
VoiceStream Wireless Corporation
3.2 Bylaws of VoiceStream Wireless Corporation
4.1(8) Loan Agreement by and among Western PCS Holding Corporation
TD Securities (USA) Inc., NationsBanc Montgomery Securities
LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase
Securities Inc., J.P. Morgan Securities Inc., NationsBanc
Montgomery Securities LLC, Chase Securities Inc. and Toronto
Dominion (Texas), Inc. dated June 30, 1995
4.2(1) First Amendment To Loan Agreement by and among Western PCS
Holding Corporation TD Securities (USA) Inc., NationsBanc
Montgomery Securities LLC, Barclays Capital, J.P. Morgan
Securities Inc., Chase Securities Inc., J. P. Morgan
Securities Inc., NationsBanc Montgomery Securities LLC,
Chase Securities Inc. and Toronto Dominion (Texas), Inc.
dated November 25, 1998
10.1(2) Loan Agreement between Western PCS II Corporation and
Northern Telecom, Inc., dated June 30, 1995
10.2(2) PCS 1900 Project and Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated June 30, 1995
10.3(2) First Amendment to Stockholders Agreement by and among
Western Wireless Corporation and certain of its
shareholders, Adding as a Party Western PCS Corporation,
dated November 30, 1994
10.4(2) Waiver Agreement by and among Western Wireless Corporation,
Western PCS Corporation and certain of Western Wireless
Corporation's shareholders, dated November 30, 1994
10.5(2) Waiver Agreement by and among Western Wireless Corporation,
Western PCS Corporation and certain of Western Wireless
Corporation's shareholders, dated February 15, 1996
10.6(2) Asset Purchase Agreement between Western PCS III License
Corporation as Buyer and GTE Mobilnet Incorporated as
Seller, dated January 16, 1996
10.7(2) Western PCS Corporation Series A Preferred Stock Purchase
Agreement among Western Wireless Corporation, Western PCS
Corporation and the Purchasers listed therein, dated April
10, 1995
10.8(2) PCS Block "C" Organization and Financing Agreement by and
among Western PCS BTA I Corporation, Western Wireless
Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet
Telecommunications, Inc., SSPCS Corporation and Providence
Media Partners L.P. dated as of November 5, 1995
10.9(2) Limited Partnership Agreement by and between Cook Inlet
PV/SS PCS Partners, L.P. and Western PCS BTA I Corporation
dated as of November 5, 1995
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.10(2) First Amendment to Block "C" Organization and Financing
Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P.
Limited Partnership Agreement by and among Western PCS BTA I
Corporation, Western Wireless Corporation, Cook Inlet PV/SS
PCS Partners, L.P., Cook Inlet Telecommunications, Inc.,
SSPCS Corporation and Providence Media Partners L.P. dated
as of April 8, 1996
10.11(3) Second Amendment to Block "C" Organization and Financing
Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P.
Limited Partnership Agreement by and among Western PCS BTA I
Corporation, Western Wireless Corporation, Cook Inlet PV/SS
PCS Partners, L.P., Cook Inlet Telecommunications, Inc.,
SSPCS Corporation and Providence Media Partners L.P. dated
as of June 27, 1996
10.12(3) Third Amendment to Block "C" Organization and Financing
Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P.
Limited Partnership Agreement and First Amendment to
Technical Services Agreement by and among Western PCS BTA I
Corporation, Western Wireless Corporation, Cook Inlet PV/SS
PCS Partners, L.P., Cook Inlet Telecommunications, Inc.,
SSPCS Corporation, Providence Media Partners L.P. and Cook
Inlet Western Wireless PV/SS PCS, L.P., dated July 30, 1996
10.13(3) Amendment No. 1 to PCS 1900 Supply Agreement between Western
PCS Corporation and Northern Telecom Inc., dated July 25,
1996
10.14(3) Amendment No. 2 to PCS 1900 Supply Agreement between Western
PCS Corporation and Northern Telecom Inc., dated July 25,
1996
10.15(4) Amendment No. 3 to PCS Supply Agreement between Western PCS
Corporation and Northern Telecom Inc., dated October 14,
1996
10.16(5) First Amendment to Loan Agreement, dated as of March 6,
1997, among Western PCS II Corporation, Northern Telecom
Inc., NTFC Capital Corporation and Export Development
Corporation
10.17(5) Second Amendment to Loan Agreement, dated as of April 15,
1997, among Western PCS II Corporation, Northern Telecom
Inc., NTFC Capital Corporation and Export Development
Corporation
10.18(6) Purchase Agreement by and among Western PCS Corporation,
Western Wireless Corporation, Hutchison Holdingsmunications
Limited and Hutchison Holdingsmunications PCS (USA) Limited
dated October 14, 1997
10.19(6) Form of Cash Management Agreement by and between Western
Wireless Corporation and Western PCS Corporation. Form of
Roaming Agreement by and between Western Wireless
Corporation and Western PCS Corporation
10.20(6) Form of Services Agreement by and between Western Wireless
Corporation and Western PCS Corporation. Form of
Shareholders Agreement by and among Western Wireless
Corporation, Hutchison Holdingsmunications PCS (USA) Limited
and Western PCS Corporation
10.21(6) Form of Tax Sharing Agreement by and between Western
Wireless Corporation and Western PCS Corporation.
10.22(6) Agreement to Form Limited Partnership dated September 30,
1997, by and among Western PCS I Iowa Corporation, a
Delaware corporation, INS Wireless, Inc., an Iowa
corporation, Western PCS I Corporation, a Delaware
corporation, and Iowa Network Services, Inc., an Iowa
corporation
10.23(6) Iowa Wireless Services, L.P. Limited Partnership Agreement
dated as of September 30, 1997, by and between INS Wireless,
Inc., as General Partner, and Western PCS I Iowa
Corporation, as Limited Partner
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.24(7) Software License Maintenance and Subscriber Billing Services
Agreement dated June 1997
10.25(7) First Amendment to Software License, Maintenance and
Subscriber Billing Services Agreement dated December 1997,
between CSC Intelicom, Inc., and Western Wireless
Corporation
10.26(7) Letter agreement dated December 16, 1997 between Western
Wireless Corporation and Intelicom Services Inc. to provide
products and services pursuant to the Software License
Maintenance and Subscriber Billing Services Agreements and
First Amendment thereto
10.27(8)(9) Amendment Number 4 to PCS 1900 Project and Supply Agreement
by and between Western PCS Corporation and Northern Telecom
Inc. dated March 26, 1998
10.28(8)(9) Supply Contract by and between Western PCS Corporation and
Nokia Telecommunications Inc. dated March 9, 1998
10.29(8)(9) Purchase and Sale Agreement by and between Nokia Mobile
Phones, Inc. and Western PCS Corporation dated March 9, 1998
10.30(1) Amendment Number 5 to PCS 1900 Project and Supply Agreement
between VoiceStream Wireless Corporation and Northern
Telecom Inc. dated September 17, 1998
10.31(1) Exchange Rights and Grant Agreement by and among Western PCS
BTA I Corporation, Western Wireless Corporation, Cook Inlet
Telecommunications, Inc. and VoiceStream Wireless
Corporation dated December 17, 1998
10.32(1) Exchange Rights and Grant Agreement by and among Western PCS
BTA I Corporation, Western Wireless Corporation, SSPCS
Corporation and VoiceStream Wireless Corporation dated
January 19, 1999
10.33(2) Employment Agreement by and between Robert R. Stapleton and
Western Wireless Corporation, dated March 12, 1996
10.34(2) Employment Agreement by and between Cregg B. Baumbaugh and
Western Wireless Corporation, dated March 12, 1996
10.35(10) Employment Agreement by and between Timothy Wong and Western
Wireless Corporation, dated February 10, 1998
10.36(10) Employment Agreement by and between Robert Dotson and
Western Wireless Corporation, dated February 10, 1998
10.37 Form of Assignment and Assumption Agreement by and between
Western Wireless Corporation and VoiceStream Wireless
Corporation with respect to the Employment Agreement of
Robert R. Stapleton
10.38 Form of Assignment and Assumption Agreement by and between
Western Wireless Corporation and VoiceStream Wireless
Corporation with respect to the Employment Agreement of
Cregg B. Baumbaugh
10.39 Form of Assignment and Assumption Agreement by and between
Western Wireless Corporation and VoiceStream Wireless
Corporation with respect to the Employment Agreement of
Timothy Wong
10.40 Form of Assignment and Assumption Agreement by and between
Western Wireless Corporation and VoiceStream Wireless
Corporation with respect to the Employment Agreement of
Robert Dotson
10.41 Form of First Amendment to Shareholders Agreement by and
among VoiceStream Wireless Corporation, Western Wireless
Corporation, Hutchison Holdingsmunications Holdings (USA)
Limited and Hutchison Holdingsmunications PCS (USA) Limited
</TABLE>
49
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.42 Form of Voting Agreement by and among VoiceStream Wireless
Corporation, Hellman & Friedman Capital Partners II, L.P., H
& F Orchard Partners, L.P., H & F International Partners,
L.P., John W. Stanton, Theresa E. Gillespie, PN Cellular,
Inc., Stanton Family Trust, Stanton Communications
Corporation, GS Capital Partners, L.P., The Goldman Sachs
Group, L.P., Bridge Street Fund 1992, L.P., Stone Street
Fund 1992, L.P., Providence Media Partners L.P., Hutchison
Holdingsmunications PCS (USA) Limited, and Hutchison
Holdingsmunications Holdings (USA) Limited
10.43 Form of Registration Rights Agreement by and among
VoiceStream Wireless Corporation, Hellman & Friedman Capital
Partners II, L.P., H & F Orchard Partners, L.P., H & F
International Partners, L.P., John W. Stanton, Theresa E.
Gillespie, PN Cellular, Inc., Stanton Family Trust, Stanton
Communications Corporation, GS Capital Partners, L.P., The
Goldman Sachs Group, L.P., Bridge Street Fund 1992, L.P.,
Stone Street Fund 1992, L.P., and Providence Media Partners
L.P.
10.44 Cook Inlet/VoiceStream PCS LLC Limited Liability Company
Agreement by and between Cook Inlet GSM Company and Western
PCS BTA I Corporation dated February 11, 1999
21.1(1) Subsidiaries of the Registrant
27.1(1) Financial Data Schedule
</TABLE>
- ---------------
(1) Previously filed as an Exhibit to the Form 10 filed with the SEC on
February 26, 1999.
(2) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Registration Statement on Form S-1 (Commission File No.
333-2432).
(3) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Registration Statement on Form S-4 (Commission File No.
333-14859).
(4) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Form 10-K for the year ended 12/31/96.
(5) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Form 10-Q for the quarter ended 3/31/97.
(6) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Form 10-Q for the quarter ended 9/30/97.
(7) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Form 10-K for the year ended 12/31/97.
(8) Incorporated by reference to the exhibit filed with the Western Wireless
Corporation Form 10-Q for the quarter ended 6/30/98.
(9) Portions of this exhibit have been omitted and filed separately with the
Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 246-2 of the Securities
Exchange Act of 1934.
(10) Incorporated by reference to the exhibit filed with Western Wireless' Form
10-Q for the quarter ended 3/31/98.
50
<PAGE> 51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
VOICESTREAM WIRELESS CORPORATION CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Schedule I -- Valuation and Qualifying Accounts............. F-18
</TABLE>
F-1
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
VoiceStream Wireless Corporation:
We have audited the accompanying consolidated balance sheets of VoiceStream
Wireless Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements and schedule referred to below are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VoiceStream Wireless
Corporation and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
consolidated financial statements is presented for purpose of complying with the
Securities and Exchange Commission rules and is not a required part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Seattle, Washington
February 18, 1999
F-2
<PAGE> 53
VOICESTREAM WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1998 1997
---------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 8,057 $ 337
Accounts receivable, net of allowance for doubtful
accounts of $5,715 and $2,040, respectively............ 24,766 18,375
Inventory................................................. 20,182 22,716
Prepaid expenses and other current assets................. 6,393 8,517
---------- --------
Total current assets.............................. 59,398 49,945
Property and equipment, net of accumulated depreciation of
$151,408 and $73,878, respectively........................ 619,280 420,638
Licensing costs and other intangible assets, net of
accumulated amortization of $13,799 and $7,454,
respectively.............................................. 312,040 315,653
Investments in and advances to unconsolidated affiliates.... 60,938 36,055
---------- --------
$1,051,656 $822,291
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 16,172 $ 2,503
Accrued liabilities....................................... 45,566 24,625
Construction accounts payable............................. 58,217 6,310
Payable to Western Wireless............................... 5,071 92,746
---------- --------
Total current liabilities......................... 125,026 126,184
---------- --------
Long-term debt.............................................. 540,000 300,000
Commitments (Note 8)
Shareholders' equity:
Preferred stock, par value of $0.001; 10,00 shares
authorized; no shares issued and outstanding
Common stock, par value of $0.001, and paid-in capital;
50,000 shares authorized; 12,484 and 10,000 Class A
shares issued and outstanding, respectively............ 994,789 750,000
Deficit................................................... (608,159) (353,893)
---------- --------
Total shareholders' equity........................ 386,630 396,107
---------- --------
$1,051,656 $822,291
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 54
VOICESTREAM WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
----------- --------- --------
<S> <C> <C> <C>
Revenues:
Subscriber revenues................................... $ 123,966 $ 52,360 $ 7,794
Roamer revenues....................................... 3,506 227
Equipment sales....................................... 40,490 25,143 9,745
----------- --------- --------
Total revenues................................ 167,962 77,730 17,539
----------- --------- --------
Operating expenses:
Cost of service....................................... 50,978 43,183 12,470
Cost of equipment sales............................... 77,071 53,469 20,789
General and administrative............................ 75,343 51,678 20,209
Sales and marketing................................... 85,447 59,466 31,505
Depreciation and amortization......................... 83,767 66,875 14,395
----------- --------- --------
Total operating expenses...................... 372,606 274,671 99,368
----------- --------- --------
Operating loss.......................................... (204,644) (196,941) (81,829)
----------- --------- --------
Other income (expense):
Interest and financing expense, net................... (34,118) (57,558) (3,607)
Equity in net loss of unconsolidated affiliates....... (24,120) (9,327) (954)
Interest income and other............................. 8,616 11 40
----------- --------- --------
Total other income (expense).................. (49,622) (66,874) (4,521)
----------- --------- --------
Net loss...................................... $ (254,266) $(263,815) $(86,350)
=========== ========= ========
Pro forma basic and diluted loss per common share....... $ (2.75)
===========
Weighted average common shares used in computing pro
forma basic and diluted loss per common share......... 92,387,000
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 55
VOICESTREAM WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------- TOTAL
PAR VALUE SHAREHOLDERS'
CLASS A SHARES AND PAID-IN CAPITAL DEFICIT EQUITY
-------------- ------------------- --------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996............. 10,000 $151,481 $ (3,728) $ 147,753
Additional capital contributions... 80,250 80,250
Net loss........................... (86,350) (86,350)
------ -------- --------- ---------
Balance, December 31, 1996........... 10,000 231,731 (90,078) 141,653
Additional capital contributions... 518,269 518,269
Net loss........................... (263,815) (263,815)
------ -------- --------- ---------
Balance, December 31, 1997........... 10,000 750,000 (353,893) 396,107
Issuance of common stock, net...... 2,484 244,789 244,789
Net loss........................... (254,266) (254,266)
------ -------- --------- ---------
Balance, December 31, 1998........... 12,484 $994,789 $(608,159) $ 386,630
====== ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 56
VOICESTREAM WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities:
Net loss.............................................. $(254,266) $(263,815) $ (86,350)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization...................... 83,767 66,875 14,395
Equity in net loss of unconsolidated affiliates.... 24,120 9,327 954
Other, net......................................... 571 1,122 62
Changes in operating assets and liabilities, net of
effects from consolidating acquired interests:
Accounts receivable, net......................... (6,391) (12,969) (5,406)
Inventory........................................ 2,534 (2,581) (20,135)
Prepaid expenses and other current assets........ 2,124 (4,957) (1,899)
Accounts payable................................. 13,669 (8,068) 9,419
Accrued liabilities.............................. 20,941 16,937 7,688
--------- --------- ---------
Net cash used in operating activities.............. (112,931) (198,129) (81,272)
--------- --------- ---------
Investing activities:
Purchase of property and equipment.................... (206,503) (264,432) (234,362)
Additions to licensing costs and other intangible
assets............................................. (12,871) (71,634) (84,113)
Acquisition of wireless properties, net of cash
acquired........................................... (4,645)
Investments in and advances to unconsolidated
affiliates, net.................................... (34,259) (37,240) (1,492)
Deposit held by FCC................................... (23,500)
Refund of deposit held by FCC......................... 7,749
Other.............................................. 880
--------- --------- ---------
Net cash used in investing activities............ (253,633) (370,202) (342,587)
--------- --------- ---------
Financing activities:
Proceeds from issuance of common stock, net........... 244,789
Additions to long-term debt........................... 540,000 157,000 130,000
Repayment of long term-debt........................... (300,000)
Advances from (repayment to) Western Wireless, net.... (105,446) 406,254 219,000
Deferred financing fees............................... (5,059)
Equity contributions from Western Wireless............ 80,250
--------- --------- ---------
Net cash provided by financing activities.......... 374,284 563,254 429,250
--------- --------- ---------
Change in cash and cash equivalents..................... 7,720 (5,077) 5,391
Cash and cash equivalents, beginning of year............ 337 5,414 23
--------- --------- ---------
Cash and cash equivalents, end of year.................. $ 8,057 $ 337 $ 5,414
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 57
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
VoiceStream Wireless Corporation ("VoiceStream") was formed in 1994 as
"Western PCS Corporation". VoiceStream is an 80.1% owned subsidiary of Western
Wireless Corporation ("Western Wireless"). The remaining 19.9% is indirectly
owned by Hutchison Whampoa Limited, a Hong Kong company. VoiceStream provides
wireless communications services in urban markets in the United States through
the ownership and operation of personal communications services ("PCS")
licenses. VoiceStream has commenced commercial operations in ten markets under
the VoiceStream(R) brand name using the GSM technology. Additionally,
VoiceStream PCS services are offered in three additional markets in conjunction
with joint ventures.
VoiceStream expects to incur significant operating losses and to generate
negative cash flows from operating activities during the next several years
while it expands its PCS systems and customer base. These losses are expected to
be financed through borrowings or the issuance of new debt or additional equity.
There can be no assurance that such funds will be available to VoiceStream on
acceptable or favorable terms.
On February 8, 1999, Western Wireless announced its intention to separate
VoiceStream from Western Wireless' other operations (the "Spin-off"). Western
Wireless has received a favorable ruling by the Internal Revenue Service for a
tax free spin-off, and the approval by its board of directors to take the
necessary steps to complete the Spin-off. Western Wireless will distribute all
of its interest in VoiceStream to its shareholders upon the Spin-off. Although
VoiceStream has been operated separately from Western Wireless' other operations
and has been a separate legal entity since its inception, the Spin-off will
establish VoiceStream as a stand-alone entity with objectives separate from
those of Western Wireless. The Spin-off is subject to numerous conditions
including, among others, the receipt of certain government and third party
approvals. There is no assurance that such conditions will be met to complete
the Spin-off. See further information on the relationship between VoiceStream
and Western Wireless in footnote 15.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of VoiceStream,
its wholly owned subsidiaries and its affiliate investments in which VoiceStream
has a greater than 50% interest. All affiliate investments in which VoiceStream
has between a 20% and 50% interest are accounted for using the equity method.
All significant intercompany accounts and transactions have been eliminated.
Cash and cash equivalents
Cash and cash equivalents generally consist of cash and marketable
securities that have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value.
Revenue recognition
Service revenues based on customer usage are recognized at the time the
service is provided. Access and special feature service revenues are recognized
when earned. Sales of equipment, primarily handsets, are recognized when the
goods are delivered to the customer.
Inventory
Inventory consists primarily of handsets and accessories. Inventory is
stated at the lower of cost or market, determined on a first-in, first-out
basis.
F-7
<PAGE> 58
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation commences once the
assets have been placed in service and is computed using the straight-line
method over the estimated useful lives of the assets which primarily range from
three to twenty years.
Licensing costs and other intangible assets and amortization
Licensing costs primarily represent costs incurred to acquire PCS licenses
issued by the FCC. Amortization begins with the commencement of service to
customers and is computed using the straight-line method over 40 years. Other
intangible assets consist primarily of deferred financing costs. Deferred
financing costs are amortized using the effective interest method over the term
of the loan.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of," VoiceStream periodically evaluates whether there has
been any indication of impairment of its long-lived assets, including its
licensing costs and other intangibles. As of December 31, 1998, there has been
no indication of such impairment.
Capitalized interest
VoiceStream's PCS licenses and wireless communications systems represent
qualified assets pursuant to SFAS No. 34, "Capitalization of Interest Cost."
VoiceStream capitalized interest of $1.8 million in 1998 and $4.0 million in
1997.
Income taxes
Deferred tax assets and liabilities are recognized based on temporary
differences between the financial statements and the tax bases of assets and
liabilities using enacted tax rates expected to be in effect when they are
realized. A valuation allowance against deferred tax assets is recorded, if,
based upon weighted available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized. For income tax purposes,
VoiceStream's results have been included in the consolidated federal income tax
return of Western Wireless. The provision/benefit for income taxes has been
computed as if VoiceStream filed a separate federal income tax return using the
tax rate applicable to Western Wireless on a consolidated basis. After the
Spin-off, VoiceStream's results of operations will no longer be included in
Western Wireless' consolidated tax return.
Loss per common share
Basic and diluted loss per common share is calculated using the weighted
average number of common shares outstanding during the period. The number of
shares outstanding is calculated based on the requirements of SFAS No. 128,
"Earnings Per Share." Proforma net loss per share for 1998 is calculated based
on shares of VoiceStream common stock which are expected to be outstanding at
the date of the Spin-off. Given the historical capital structure of VoiceStream
as a subsidiary of Western Wireless and the changes therein to be effected by
the Spin-off, historical loss per share amounts are not presented in the
financial statements of VoiceStream as they are not considered to be meaningful.
Fair value of financial instruments
As required under the Credit Facility (as defined in Note 7), VoiceStream
enters into interest rate swap and cap agreements to manage interest rate
exposure pertaining to long-term debt. VoiceStream has only limited involvement
with these financial instruments, and does not use them for trading purposes. In
addition, VoiceStream has historically held derivative financial instruments to
maturity and has never
F-8
<PAGE> 59
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recognized a material gain or loss on disposal. It is VoiceStream's intent to
hold existing financial instruments to maturity. Interest rate swaps are
accounted for on an accrual basis, the income or expense of which is included in
interest expense. Premiums paid to purchase interest rate cap agreements are
classified as an asset and amortized to interest expense over the terms of the
agreements. These transactions do not subject VoiceStream to risk of loss
because gains and losses on these contracts are offset against losses and gains
on the underlying liabilities. No collateral is held in relation to
VoiceStream's financial instruments.
The carrying value of VoiceStream's short-term financial instruments
approximates fair value due to the short maturity of these instruments. The fair
value of long-term debt is based on incremental borrowing rates currently
available on loans with similar terms and maturities.
Supplemental cash flow disclosure
Cash paid for interest (net of amounts capitalized) was $26.8 million in
1998 and $17.8 million in 1997. Cash paid for interest in 1996 was offset
entirely by amounts capitalized.
Non-cash investing and financing activities were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996(1)
------- -------- --------
<S> <C> <C> <C>
Contribution of wireless licenses to joint ventures......... $14,744
Conversion of FCC deposit to wireless license............... $ 17,251
Conversion of payable to Western Wireless to equity (See
Note 14).................................................. $518,269
</TABLE>
- ---------------
(1) There were no non-cash investing or financing activities in 1996.
Estimates used in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Reclassifications
Certain amounts in prior year's financial statements have been reclassified
to conform with the 1998 presentation.
Recently issued accounting standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." It requires the
recognition of all derivatives as either assets or liabilities and the
measurement of those instruments at fair value. The required adoption period is
effective for the issuance of VoiceStream's March 31, 2000, quarterly financial
statements. The implementation of SFAS No. 133 is not expected to have a
material impact on VoiceStream's financial position or results of operations.
The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organizational activities. It requires costs of start-up activities
and organizational costs to be expensed as incurred. SOP 98-5 is not expected to
materially affect the financial
F-9
<PAGE> 60
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
position or results of operations of the Company. The required adoption period
is effective for the issuance of VoiceStream's December 31, 1999, financial
statements.
Stock-based compensation plans:
VoiceStream has not historically had stock-based compensation plans
separate from Western Wireless. However, VoiceStream intends to adopt its own
stock plans upon the Spin-off. VoiceStream will apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in measuring compensation costs for its stock options after the
Spin-off. VoiceStream will disclose pro forma net income (loss) and net income
(loss) per share as if compensation costs had been determined consistent with
the SFAS No. 123, "Accounting for Stock-based Compensation". VoiceStream has no
stock options outstanding as of December 31, 1998.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land, buildings, and improvements........................... $ 15,549 $ 11,168
Wireless communications systems............................. 459,710 391,269
Furniture and equipment..................................... 57,840 39,419
--------- --------
533,099 441,856
Less accumulated depreciation............................... (151,408) (73,878)
--------- --------
381,691 367,978
Construction in progress.................................... 237,589 52,660
--------- --------
$ 619,280 $420,638
========= ========
</TABLE>
Depreciation expense was $77.6 million in 1998, $61.2 million in 1997 and
$12.6 million in 1996.
4. LICENSING COSTS AND OTHER INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Licensing costs............................................. $320,834 $322,606
Other intangible assets..................................... 5,005 501
-------- --------
325,839 323,107
Accumulated amortization.................................... (13,799) (7,454)
-------- --------
$312,040 $315,653
======== ========
</TABLE>
Amortization expense was $6.2 million in 1998, $5.7 million in 1997 and
$1.8 million in 1996.
5. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
A subsidiary of VoiceStream holds a 49.9% interest in Cook Inlet Western
Wireless PV/SS PCS, LP ("Cook Inlet PCS"). Cook Inlet PCS is subject to the
FCC's build-out requirements and will require significant additional amounts to
complete the build-out of its PCS systems and to meet the government debt
service requirements on the C and F Block licenses. The potential sources of
such additional funding include vendor loans, loans or capital contributions by
the partners of Cook Inlet PCS or other third party financing. VoiceStream
funded the operations of Cook Inlet PCS during 1998 and 1997 through loans
evidenced by promissory notes which are due 180 days after the date of issuance.
The weighted average
F-10
<PAGE> 61
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest rate was 15% for 1998 and 1997. All promissory notes that have come due
were replaced with new promissory notes. The total investment in Cook Inlet PCS,
including advances under such promissory notes, was $47.9 million at December
31, 1998, and $36.1 million at December 31, 1997.
During the second quarter of 1998, Cook Inlet PCS, participated in the C
Block restructuring options provided by the FCC. The FCC provided for various
options, including: (1) to return to the FCC entire licenses purchased in the C
Block auction and be relieved of 100% of the related debt ("Amnesty"); and (2)
to return 15 MHz, from a total of 30 MHz, of the licenses purchased in the
auction and be relieved of one half of the related debt ("Disaggregation"). Of
the licenses purchased in the C Block auction, Cook Inlet PCS chose Amnesty for
two BTA licenses and Disaggregation for 11 BTA licenses. This resulted in a
reduction of Cook Inlet PCS's debt of $29.1 million and a gain of $3.9 million,
due to the retroactive adjustment of interest due on the related debt, the
effect of which reduced the equity losses picked up by VoiceStream for the
second quarter.
In September 1997, a wholly owned subsidiary of VoiceStream and a
subsidiary of Iowa Network Services, Inc., formed a limited partnership to build
and operate a PCS network under the VoiceStream brand name covering certain
metropolitan areas in Iowa and the major interstate and state highways linking
such areas. In 1998 VoiceStream contributed certain licenses that it purchased
in the FCC's A and D Block auctions for approximately $12.3 million to the
venture for an approximate 38% ownership interest.
In July 1998, VoiceStream entered into an agreement to form a joint venture
with STPCS Investment, LLC and Americall International, LLC that will operate
certain PCS markets in south Texas under the VoiceStream brand name. VoiceStream
contributed certain licenses that it purchased in the FCC's D Block auction for
approximately $2.5 million to the venture for an approximate 18% ownership
interest.
6. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits................................ $ 6,558 $ 1,504
Accrued advertising and marketing........................... 2,252 2,654
Accrued interest expense.................................... 2,823 797
Accrued property taxes...................................... 21,482 10,066
Accrued interconnect charges................................ 3,986 1,865
Other....................................................... 8,465 7,739
------- -------
$45,566 $24,625
======= =======
</TABLE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Credit Facility:
Revolver.................................................... $290,000
Term Loan................................................... 250,000
Vendor Facility............................................. $300,000
-------- --------
$540,000 $300,000
======== ========
</TABLE>
F-11
<PAGE> 62
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In June 1998, a wholly owned subsidiary of VoiceStream (the "Borrower")
entered into a $1 billion credit facility with a consortium of lenders (the
"Credit Facility"). The Credit Facility consists of $500 million in revolving
credit and $250 million in a delayed draw term loan (collectively the
"Revolver"), and a term loan (the "Term Loan") for $250 million. Beginning
September 2001, the amount available to borrow under the Revolver and the
principal balance of the Term Loan are to be reduced by various percentages each
year. The Revolver and the Term Loan are due in their entirety on December 31,
2006, and June 30, 2007, respectively. The Credit Facility also contains certain
financial covenants, which, among other things, impose limitations on the amount
of indebtedness, limit the amount of capital spending and impose limitations on
acquisitions and investments. The repayment of the Credit Facility is secured
by, among other things, the grant of a security interest in substantially all of
the assets of the Borrower and its subsidiaries.
Under the Credit Facility, interest is payable at an applicable margin in
excess of a prevailing rate. The prevailing rate is based on the prime rate or
LIBOR at the Borrower's option. The applicable margin on the Credit Facility is
determined quarterly based on certain events and the leverage ratio of the
Borrower. The weighted average interest rate on all of VoiceStream's debt,
including the appropriate margin, was 8.76% in 1998 and 8.20% in 1997. As of
December 31, 1998, all loans under the Credit Facility had been borrowed using
the LIBOR option. The Credit Facility also provides for an annual fee ranging
from 0.375% to 0.5% on the unused commitment, payable quarterly.
The Credit Facility requires VoiceStream to enter into interest rate swap
and cap agreements to manage the interest rate exposure pertaining to borrowings
under the Credit Facility. VoiceStream had entered into interest rate caps and
swaps with a total notional amount of $295 million at December 31, 1998.
Generally these instruments have initial terms ranging from 1 to 4 years and
effectively convert variable rate debt to fixed rate. The weighted average
interest rate under these agreements was approximately 6.11% in 1998. The amount
of unrealized gain or loss attributable to changing interest rates at December
31, 1998, was not material.
Interest only payments are required through June 30, 2001. Commencing
September 30, 2001, and at the end of each calendar quarter thereafter,
VoiceStream is required to make payments on the principal amount outstanding
under the Credit Facility in increasing quarterly installments.
Immediately after entering into the Credit Facility, the Borrower paid off,
in its entirety, the balance owed under the $300 million Vendor Facility.
The aggregate amounts of principal maturities of VoiceStream's long-term
debt at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Year ending December 31,
1999............................................ $ 0
2000............................................ 0
2001............................................ 17,000
2002............................................ 31,500
2003............................................ 46,000
Thereafter...................................... 445,500
--------
$540,000
========
</TABLE>
8. COMMITMENTS
VoiceStream leases various facilities, cell site locations, rights-of-way
and equipment under operating lease agreements. The leases expire at various
dates through the year 2027. Some leases have options to
F-12
<PAGE> 63
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
renew for additional periods up to 25 years. Certain leases require VoiceStream
to pay property taxes, insurance and normal maintenance costs. Significantly all
of VoiceStream's leases have fixed minimum lease payments. VoiceStream has no
significant capital lease liabilities.
Future minimum payments required under operating leases and agreements that
have initial or remaining noncancellable terms in excess of one year at December
31, 1998, are summarized below:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Year ending December 31,
1999............................................ $ 24,495
2000............................................ 23,489
2001............................................ 19,271
2002............................................ 11,878
2003............................................ 7,935
Thereafter...................................... 14,466
--------
$101,534
========
</TABLE>
Aggregate rental expense for all operating leases was approximately $21.3
million in 1998, $18.0 million in 1997 and $7.7 million in 1996.
In order to ensure adequate supply and availability of certain inventory
requirements and service needs, VoiceStream has committed to purchase PCS
equipment from various suppliers. The aggregate amount of these commitments
total approximately $450 million. At December 31, 1998, VoiceStream has ordered
approximately $338 million under all of these agreements, of which approximately
$12 million is outstanding.
VoiceStream and its affiliates have various other purchase commitments for
materials, supplies and other items incident to the ordinary course of business
which are neither significant individually nor in the aggregate. Such
commitments are not at prices in excess of current market value.
9. INCOME TAXES
Significant components of deferred income tax assets and liabilities, net
of tax, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
----------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 282,002 $ 165,850
Other temporary differences................................. 13,459 6,142
--------- ---------
Total deferred tax assets................................... 295,461 171,992
Valuation allowance......................................... (243,049) (142,775)
--------- ---------
Deferred tax liabilities:
Property and wireless licenses basis differences............ (52,412) (29,217)
--------- ---------
$ 0 $ 0
========= =========
</TABLE>
VoiceStream had approximately $707 million of net operating loss ("NOL")
carryforwards at December 31, 1998. The NOLs will expire between 2010 and 2018.
The valuation allowance increased approximately $100 million in 1998, $105
million in 1997 and $37 million in 1996.
Management believes that available objective evidence creates sufficient
uncertainty regarding the realization of the net deferred tax assets. Such
factors include recurring operating losses resulting primarily
F-13
<PAGE> 64
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
from the development of VoiceStream's PCS business. Accordingly, a valuation
allowance has been provided for the net deferred tax assets of VoiceStream.
The difference between the statutory tax rate of approximately 40% (35%
federal and 5% state, net of federal benefits) and the tax benefit of zero
recorded by VoiceStream is primarily due to VoiceStream's full valuation
allowance against its net deferred tax assets. VoiceStream's ability to utilize
the NOLs in any given year may be limited by certain events, including a
significant change in ownership interest.
After the Spin-off, the NOL carryforwards resulting from VoiceStream's
cumulative tax losses will remain with VoiceStream. Pursuant to a tax sharing
agreement entered into at the time of the Hutchison Transaction (as defined in
Note 14), VoiceStream will pay Western Wireless an amount representative of the
tax benefit of NOLs generated while VoiceStream was a wholly-owned subsidiary of
Western Wireless. This payment will not exceed $20 million, net of taxes.
10. STOCK-BASED COMPENSATION PLANS
VoiceStream has no stock options outstanding, nor does it have an option
plan in place as of December 31, 1998. After the Spin-off, VoiceStream intends
to have its own stock option plans that are substantially similar to the plans
that are currently administered by Western Wireless. In connection with the
Spin-off, (1) Western Wireless option holders will receive one vested
VoiceStream option and one vested Western Wireless option for each existing
vested Western Wireless option at the Spin-off; and (2) Western Wireless option
holders who become VoiceStream employees will receive for each unvested Western
Wireless option at the Spin-off a number of unvested VoiceStream options. It is
anticipated the unvested options will have materially the same vesting schedule
and expiration dates as the original options issued by Western Wireless.
Proforma disclosures required under SFAS 123 are not presented as the number of
VoiceStream options as of the Spin-off is not yet ascertainable.
11. EMPLOYEE BENEFIT PLANS
VoiceStream does not have any employee benefit plans of its own as of
December 31, 1998, because all of the individuals performing services for
VoiceStream are employees of Western Wireless. Accordingly these employees were
covered under Western Wireless' benefit plans, including defined contribution
(401K) plan. Upon the Spin-off, all individuals that perform services for
VoiceStream will become employees of VoiceStream. VoiceStream will establish its
own employee benefit plans, including a 401K plan. The 401K plan will be
substantially similar to Western Wireless' plan presently in effect and will
give participants credit for service as Western Wireless employees.
12. ACQUISITIONS AND CERTAIN TRANSACTIONS
In March 1998, VoiceStream was granted 16 Local Multipoint Distribution
Service (LMDS) licenses that it was the high bidder on in an FCC auction.
VoiceStream paid approximately $8.7 million for these licenses.
In October 1997, VoiceStream acquired from Triad Corporation, Triad
Cellular L.P. and certain of their affiliates various D and E Block PCS licenses
for an aggregate purchase price of approximately $4.6 million. This transaction
was accounted for using the purchase method.
F-14
<PAGE> 65
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SELECTED QUARTERLY INFORMATION
Selected quarterly consolidated financial information for the years ended
December 31, 1998 and 1997 is as follows (unaudited):
<TABLE>
<CAPTION>
TOTAL OPERATING
QUARTER ENDED REVENUES LOSS NET LOSS
------------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
March 31, 1998...................................... $29,883 $(48,233) $(64,301)
June 30, 1998....................................... $36,508 $(50,412) $(56,794)
September 30, 1998.................................. $46,186 $(48,845) $(61,463)
December 31, 1998................................... $55,385 $(57,154) $(71,708)
March 31, 1997...................................... $11,302 $(39,074) $(46,907)
June 30, 1997....................................... $18,870 $(53,621) $(67,884)
September 30, 1997.................................. $23,292 $(52,172) $(73,761)
December 31, 1997................................... $24,266 $(52,074) $(75,263)
</TABLE>
14. HUTCHISON TRANSACTION
In February 1998 Hutchison Holdingsmunications Limited ("HTL") through a
subsidiary of HTL (the "HTL Sub") purchased 19.9% of VoiceStream for an
aggregate purchase price of $248.4 million ("the Hutchison Transaction").
Western Wireless amended certain outstanding financing agreements to which it is
subject, and unless otherwise agreed to by HTL Sub and Western Wireless, neither
Western Wireless nor VoiceStream shall have any liability regarding any
indebtedness of the other. The HTL Sub designated two directors to a ten person
Board of Directors who have approval rights over certain transactions of
VoiceStream.
In connection with this transaction, Western Wireless was required to
invest $750 million of equity in VoiceStream. In the fourth quarter of 1997,
approximately $518.3 million of the advances made by Western Wireless to
VoiceStream were converted to equity to comply with this requirement. In
addition, this agreement required that any additional investment made by Western
Wireless over $750 million was to be reimbursed from the proceeds of HTL's
investment in VoiceStream. This reimbursement occurred in February 1998 when the
$248.4 million investment by HTL was received by VoiceStream.
15. RELATED PARTY TRANSACTIONS
Prior to the first quarter of 1998, VoiceStream relied on advances from
Western Wireless and borrowings under the Vendor Facility to fund its operations
and capital expansion. VoiceStream received $406.3 million in advances from
Western Wireless in 1997. As a result of the Hutchison Transaction and the
Credit Facility, VoiceStream was able to repay $105.4 million to Western
Wireless in 1998. Interest charges were incurred on the long-term portion of
advances made to VoiceStream by Western Wireless prior to the Hutchinson
Transaction. The interest rates charged on these advances ranged between 8.0%
and 11.1%, and were based on the average interest rates incurred by Western
Wireless on all of its outstanding debt during the period.
VoiceStream's financial statements include an allocation of certain
centralized general and administrative costs and assets that were incurred by
Western Wireless and benefit all of its operations, including those of
VoiceStream. Such centralized items include the costs of customer service and
accounting as well as the assets to support these functions. These items are
allocated to the respective operational units in a manner that reflects the
relative time devoted to each of the operational units. VoiceStream was
allocated costs of $33.3 million in 1998 and $29.1 million in 1997 and assets of
$14.5 million in 1998 and $19.1 million in 1997. Management believes that the
financial information
F-15
<PAGE> 66
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
presented fairly reflects the results of operations had VoiceStream been a stand
alone entity. Therefore, no proforma presentation is provided. Management
believes that allocations reflected in the financial statements are reasonable,
however, the financial information included herein is not necessarily indicative
of the financial position, results of operations or cash flows of VoiceStream in
the future.
Subsequent to the Hutchison Transaction, as a subsidiary of Western
Wireless, VoiceStream continued to utilized certain centralized functions of
Western Wireless. This activity was reimbursed on a regular basis (less than 30
days). The payable to Western Wireless at December 31, 1998, represents those
activities that had not yet been reimbursed as of that date.
16. CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
The condensed financial information presented below represents the balance
sheet, statement of operations and cash flows of VoiceStream as if the
subsidiary that is restricted under the Credit Facility (footnote 7) was an
unconsolidated entity. VoiceStream less this subsidiary is referred to as
"Parent Company Only". VoiceStream's ownership in such subsidiary has been
reflected in this condensed financial information as if the investment was
accounted for using the equity method.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
CONDENSED BALANCE SHEETS: 1998 1997
------------------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets.............................................. $ 16 $ 290
Property and equipment, net of accumulated depreciation of
$57....................................................... 2,398
Licensing costs and other intangible assets................. 74,200 66,033
Investments in and advances to affiliates................... 311,226 329,901
--------- ---------
Total assets...................................... $ 387,840 $ 396,224
========= =========
Current liabilities......................................... 1,210 117
Common stock, par value of $0.001, and paid-in capital;
50,000 shares authorized; 12,484 and 10,000 Class A shares
issued and outstanding, respectively...................... 994,789 750,000
Deficit..................................................... (608,159) (353,893)
========= =========
Total debt and shareholders' equity............... $ 387,840 $ 396,224
========= =========
</TABLE>
F-16
<PAGE> 67
VOICESTREAM WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CONDENSED STATEMENTS OF OPERATIONS:
Operating expenses...................................... $ 354
---------
Operating loss.......................................... (354)
Other income (expense)
Interest and financing expense, net..................... (540) $ (2,443)
Equity in net loss of affiliates........................ (259,755) (261,372) $ (86,350)
Other, net.............................................. 6,383
--------- --------- ---------
Other income (expense................................... (253,912) (263,815) (86,350)
--------- --------- ---------
Net loss................................................ $(254,266) $(263,815) $ (86,350)
========= ========= =========
CONDENSED STATEMENTS OF CASH FLOWS:
Operating activities:
Net loss.............................................. $(254,266) $(263,815) $ (86,350)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Equity in net loss of affiliates...................... 259,755 261,372 86,350
Other................................................. 294 (173)
--------- --------- ---------
Net cash provided by (used in) operating activities... 5,783 (2,616) 0
--------- --------- ---------
Investing activities:
Purchase of property and equipment.................... (1,422)
Additions to licensing costs and other intangible
assets............................................. (8,744) (43,851) (585)
Investments in and advances to affiliates............. (134,960) (362,891) (275,165)
Acquisition of wireless properties.................... (4,645)
(Payment) refund of FCC deposit....................... 7,749 (23,500)
--------- --------- ---------
Net cash used in investing activities................. (145,126) (403,638) (299,250)
--------- --------- ---------
Financing activities:
Equity contributions.................................. 244,789 80,250
Advances from (repayment to) affiliate, net........... (105,446) 406,254 219,000
--------- --------- ---------
Net cash provided by financing activities............. 139,343 406,254 299,250
--------- --------- ---------
Change in cash and cash equivalents..................... 0 0 0
Cash and cash equivalents, beginning of year............ 0 0 0
--------- --------- ---------
Cash and cash equivalents, end of year.................. $ 0 $ 0 $ 0
========= ========= =========
</TABLE>
F-17
<PAGE> 68
VOICESTREAM WIRELESS CORPORATION
SCHEDULE I VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO COSTS DEDUCTIONS BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AND EXPENSES (1) END OF PERIOD
----------- ------------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998.............. $2,040 $12,780 $(9,105) $5,715
====== ======= ======= ======
Year ended December 31, 1997.............. $ 747 $ 6,628 $(5,335) $2,040
====== ======= ======= ======
Year ended December 31, 1996.............. $ 0 $ 747 $ 0 $ 747
====== ======= ======= ======
</TABLE>
- ---------------
(1) Write-offs, net of bad debt recovery.
F-18
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
VOICESTREAM WIRELESS CORPORATION
By: /s/ JOHN W. STANTON
------------------------------------
John W. Stanton
Chairman and Chief Executive
Officer
Date February 24, 1999
<PAGE> 1
EXHIBIT 2.1
===============================================================================
AGREEMENT
AND
PLAN OF DISTRIBUTION
BETWEEN
WESTERN WIRELESS CORPORATION
AND
VOICESTREAM WIRELESS CORPORATION
===============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
1 THE PLAN OF DISTRIBUTION.................................................................................2
<S> <C>
1.1 Transactions Prior to Distribution..............................................................2
1.1.1 Assets of VoiceStream and the VoiceStream Subsidiaries; Other
Transactions...........................................................................2
1.1.2 The Information Statement..............................................................2
1.1.3 Record Date............................................................................2
1.1.4 Stock Split............................................................................3
1.1.5 No Issuance of Additional Shares.......................................................3
1.1.6 Effective Date.........................................................................3
1.2 The Distribution................................................................................3
1.2.1 Distribution of VoiceStream Common Stock...............................................3
1.2.2 Conditions.............................................................................3
1.3 Termination and Amendment.......................................................................4
1.4. 401(k) Plan.....................................................................................4
1.4.1 VoiceStream Plans......................................................................4
1.4.2 Transfer of 401(k) Plan Assets.........................................................4
1.5 Stock Options and Restricted Stock..............................................................4
1.5.1 VoiceStream Stock Option Plan..........................................................4
1.5.2 Vested Options.........................................................................4
1.5.3 Stock Option Agreements with Respect toVested Options..................................4
1.5.4 Unvested Options.......................................................................6
1.5.5 Stock Option Agreements with Respect to Unvested Options...............................6
1.5.6 VoiceStream Restricted Stock Plan......................................................8
2 PROVISION OF MANAGEMENT SERVICES AND SPECIFICATION OF ON-GOING RELATIONSHIPS.............................8
2.1 Services........................................................................................8
2.1.1 Existing Services Agreement............................................................8
2.1.2 General Assistance.....................................................................8
2.1.3 Exceptions to Requirement to Provide Services..........................................9
2.1.4 Payment for Services...................................................................9
2.1.5 Office of the Chairman.................................................................9
2.1.6 Termination of Obligation to Provide Services..........................................9
2.2 Estimation and Payment of Insurance Claims......................................................9
2.2.1 Background.............................................................................9
2.2.2 Term..................................................................................10
2.2.3 Notice and Administration of Claims...................................................10
2.2.4 Personnel Costs.......................................................................10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
2.3 Access to Information and Witnesses............................................................10
2.4 Mail and Other Items...........................................................................11
2.5 Indemnification................................................................................11
2.6 Pending Litigation and Significant Obligations.................................................13
2.7 Use of the Company Name........................................................................14
2.8 Premises and Occupancy Expenses................................................................14
3 SPECIFIC AGREEMENTS BETWEEN THE PARTIES.................................................................15
3.1 Tax Sharing Agreement..........................................................................15
3.2 Roaming Agreement..............................................................................15
3.3 Spectrum Allocation and Conflicts of Interest..................................................15
4 MISCELLANEOUS PROVISIONS OF GENERAL APPLICABILITY.......................................................15
4.1 Entire Agreement...............................................................................15
4.2 Benefit of Agreement...........................................................................15
4.3 Further Documents; Compliance; Governmental Approvals..........................................16
4.4 Notices........................................................................................16
4.5 Arbitration....................................................................................16
4.6 Attorneys'Fees.................................................................................16
4.7 Governing Law..................................................................................16
4.8 Meaning of Terms...............................................................................16
4.9 Headings.......................................................................................17
</TABLE>
LIST OF EXHIBITS
Exhibit (ii) VoiceStream Subsidiaries
Exhibit (v) IRS Ruling
Exhibit 1.1.2 Information Statement
Exhibit 3.1 Tax Sharing Agreement, as amended
Exhibit 3.2 Roaming Agreement
Exhibit 3.3 Spectrum Allocation and Non-Competition Agreement
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
TERM PAGE DEFINED
- ---- ------------
<S> <C>
1934 ACT.......................................2
AGREEMENT......................................1
AVERAGING PERIOD...............................5
CELLULAR ONE..................................13
CLASS A COMMON STOCK...........................1
CLASS B COMMON STOCK...........................1
COMMITTEE......................................2
COMPANY........................................1
COMPANY LIABILITIES...........................11
DISTRIBUTION...................................1
DISTRIBUTION LIABILITIES......................11
DOMESTIC PCS BUSINESS..........................1
EFFECTIVE DATE.................................2
FCC............................................1
INCURRED CLAIMS................................9
INDEMNIFIED PARTY.............................11
INDEMNIFYING PARTY............................11
INFORMATION...................................10
INFORMATION STATEMENT..........................2
IRS............................................1
IRS RULING.....................................1
NEW UNVESTED WWC OPTIONS.......................5
NEW WWC OPTION EXERCISE PRICE..................5
OLD EXERCISE PRICE.............................5
PREMISES......................................13
PROCEEDINGS...................................13
RECORD DATE....................................2
SERVICES.......................................8
SERVICES AGREEMENT.............................8
SHARED SENIOR MANAGEMENT.......................8
SUBSTITUTE WWC OPTION AGREEMENT................4
UNVESTED VOICESTREAM OPTIONS...................6
UNVESTED WWC OPTIONS...........................5
VESTED VOICESTREAM OPTIONS.....................4
VESTED WWC OPTIONS.............................4
VOICESTREAM....................................1
VOICESTREAM 401(k) PLAN........................4
VOICESTREAM BOARD..............................2
VOICESTREAM COMMON STOCK.......................1
TERM PAGE DEFINED
- ---- ------------
VOICESTREAM EMPLOYEE...........................4
VOICESTREAM LIABILITIES.......................11
VOICESTREAM OPTION AGREEMENT...................4
VOICESTREAM OPTION EXERCISE PRICE..............5
VOICESTREAM PRICE PERCENTAGE...................5
VOICESTREAM RESTRICTED STOCK PLAN..............7
VOICESTREAM STOCK OPTION PLAN..................4
VOICESTREAM SUBSIDIARIES.......................1
WWC BOARD......................................2
WWC COMMON STOCK...............................1
WWC EMPLOYEE...................................4
WWC OPTION PLAN................................4
WWC PRICE PERCENTAGE...........................5
WWC RESTRICTED STOCK PLAN......................7
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF DISTRIBUTION
THIS AGREEMENT AND PLAN OF DISTRIBUTION ("Agreement") is made by and
between WESTERN WIRELESS CORPORATION, a Washington corporation (the "Company"),
and VoiceStream Wireless CORPORATION, a Washington corporation ("VoiceStream").
RECITALS
(i) The Company, directly and through its direct and indirect
subsidiaries, including VoiceStream, operates various wireless communications
services, including cellular service, personal communications service ("PCS"
service), and paging service in the United States and in selected international
markets;
(ii) VoiceStream, as an 80.1% owned subsidiary of the Company, and
VoiceStream's numerous direct and indirect subsidiaries identified on Exhibit
(ii) hereto (the "VoiceStream Subsidiaries"), collectively are responsible for
performing and providing for the Company's PCS service in the United States
under the VoiceStream(R) brand name (the "Domestic PCS Business");
(iii) The Company has determined that it is in its own and its
shareholders' long-term best interests that the Company be restructured into two
publicly held companies:
(1) the Company, which will continue to provide cellular
telephone services in rural areas in the western United States using
the Cellular One(R) brand name, to provide paging and competitive local
exchange carrier service in selected United States markets, and to hold
all Company interests in subsidiaries (including investments in joint
ventures) operating outside the United States; and
(2) VoiceStream, which will own and operate the Domestic PCS
Business and which, collectively with the VoiceStream Subsidiaries,
will hold all assets and liabilities related to, and all of the
Company's Federal Communications Commission ("FCC") licenses
authorizing, the Domestic PCS Business.
(iv) To accomplish the restructuring, the Company desires to distribute
(the "Distribution") to each shareholder of the Company one share of the common
stock, no par value, of VoiceStream (the "VoiceStream Common Stock") for each
one share of the Class A Common Stock, no par value, of the Company (the "Class
A Common Stock") or the Class B Common Stock, no par value, of the Company (the
"Class B Common Stock") owned by such shareholder (Class A Common Stock and
Class B Common Stock is referred to collectively herein as the "WWC Common
Stock").
(v) Pursuant to a ruling received by the Company from the United States
Internal Revenue Service ("IRS"), on January 28, 1999, a copy of which is
attached as Exhibit (v) hereto (the "IRS Ruling"), the Distribution may be
accomplished without the recognition of gain or loss to the Company or to the
Company's shareholders, as further described therein.
<PAGE> 6
(vi) The Company and VoiceStream desire to provide in this Agreement
for the Distribution of VoiceStream Common Stock in accordance with the IRS
Ruling.
(vii) The Company and VoiceStream also desire to allow for certain
other transactions, and to make provision for certain on-going relationships
between them concerning delivery of services, handling of insured and uninsured
claims, and other matters.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1 THE PLAN OF DISTRIBUTION.
1.1 Transactions Prior to Distribution.
1.1.1 Assets of VoiceStream and the VoiceStream Subsidiaries; Other
Transactions. Prior to date hereof, the Company has transferred to VoiceStream
or to the VoiceStream Subsidiaries, as the case may be, all assets and
liabilities of the Company related to the Domestic PCS Business. Prior to the
Effective Date of the Distribution (the "Effective Date," as determined pursuant
to Section 1.1.6), Western Wireless and VoiceStream shall undertake the
transactions contemplated in paragraphs (1) through (6) on pages 5 through 6 of
the IRS Ruling.
1.1.2 The Information Statement. The Company has prepared for
distribution to its shareholders, in accordance with Section 14C of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), an Information
Statement in the form attached as Exhibit 1.1.2 hereto (the "Information
Statement"), identifying and describing the Distribution and the reasons
therefor. The Information Statement will be sent to all Company shareholders on
the date established by the Company's Board of Directors (the "WWC Board"),
pursuant to Section 1.1.3 (the "Record Date"), and will provide that the
Distribution will be effective as of the Effective Date.
1.1.3 Record Date. The WWC Board, or, if so directed by resolution
of the WWC Board, a Committee appointed for such purposes (the "Committee")
shall set the Record Date on which a record of the Company shareholders shall be
taken so as to determine which shareholders shall be provided the Information
Statement.
1.1.4 Stock Split. The Board of Directors of VoiceStream (the
"VoiceStream Board") shall take all actions necessary to cause a stock split, in
the form of a stock dividend, the effect of which will be that as of the Record
Date the number of shares of VoiceStream Common Stock held by the Company will
equal exactly the number of shares of WWC Common Stock held by all shareholders
of the Company.
1.1.5 No Issuance of Additional Shares. The WWC Board shall take
all actions necessary to prevent the issuance of shares of WWC Common Stock,
pursuant to exercise of stock options or otherwise, from the Record Date to the
Effective Date, so as to fix the number of
-2-
<PAGE> 7
issued and outstanding shares of WWC Common Stock as of the Record Date until
the Effective Date.
1.1.6 Effective Date. The WWC Board shall establish the Effective
Date upon which the Distribution shall take place and the spin off shall be
effective, provided that such date shall be identified in the Information
Statement and shall be no fewer than 20 days following the Record Date. In the
event for any reason that the WWC Board determines to postpone the spin-off, the
Effective Date shall be the date rescheduled by the Board to be the date upon
which the Distribution shall take place.
1.2 The Distribution.
1.2.1 .Distribution of VoiceStream Common Stock. The Company shall
as soon as practical after the Effective Date distribute to the Company
shareholders who held WWC Common Stock on the Effective Date certificates
representing the shares of VoiceStream Common Stock held by the Company in
accordance with Section 1.1.4 above on the basis of one share of VoiceStream
Common Stock for each one share of the WWC Common Stock held by such
shareholder.
1.2.2 Conditions. The consummation of this Agreement is subject to
the following conditions:
(a) The IRS Ruling shall not have been withdrawn.
(b) The Company and VoiceStream shall have obtained all
orders, rulings, consents or approvals, governmental or otherwise, necessary to
permit them to perform this Agreement in accordance with its terms.
(c) On the Effective Date, each party shall furnish to the
other all such documents and certificates, including assignments and
conveyances, as shall, in the opinion of counsel, be required to consummate this
Agreement.
(d) The VoiceStream Common Stock shall have been listed for
trading on the Nasdaq Stock Market.
1.3 Termination and Amendment. Notwithstanding the approval of this
Agreement by the WWC Board and the VoiceStream Board, at any time prior to the
Effective Date, this Agreement may be terminated, or the Effective Date may be
delayed, by the WWC Board acting in its sole discretion, and the terms hereof
may be amended by the mutual consent of the WWC Board and the VoiceStream Board.
1.4 401(k) Plan.
1.4.1 VoiceStream Plans. VoiceStream shall establish a defined
contribution 401(k) plan ("VoiceStream 401(k) Plan") substantially similar to
the Company's 401(k) plan
-3-
<PAGE> 8
presently in effect. The VoiceStream 401(k) Plan shall give participants credit
for service as Company employees.
1.4.2 Transfer of 401(k) Plan Assets. After the Distribution,
the account balances of participants in the VoiceStream 401(k) Plan shall be
transferred from the Company 401(k) plan to the VoiceStream 401(k) Plan.
1.5 Stock Options and Restricted Stock.
1.5.1 VoiceStream Stock Option Plan. VoiceStream has
established a stock option plan ("VoiceStream Stock Option Plan") substantially
similar to the Company's stock option plan presently in effect ("WWC Option
Plan").
1.5.2 Vested Options. It is the intent of the Company and
VoiceStream that each individual that as of the Effective Date is the holder of
fully vested options to purchase an identified number of shares of WWC Common
Stock ("Vested WWC Options"), as listed on the Vested Options Schedule adopted
by the Company and VoiceStream, will, at and after the Effective Date retain the
right to purchase such identified number of shares of WWC Common Stock and will,
in addition, receive a vested option to purchase an equal number of shares of
VoiceStream Common Stock ("Vested VoiceStream Options"), all in accordance with
this Section 1.5. The terms of this Section 1.5 will apply to each individual
who on and after the Effective Date remains an employee of the Company ("WWC
Employee") and to each individual who on and after the Effective Date becomes an
employee of VoiceStream ("VoiceStream Employee"). The Vested Options Schedule
adopted by the Company and VoiceStream shall identify each individual who holds
Vested WWC Options, and for each set forth, among other information, the
original date of grant, the number of shares purchasable as of the Effective
Date, the exercise price per share of shares purchasable as of the Effective
Date, and the outside termination date of the original grant.
1.5.3 Stock Option Agreements with Respect to Vested Options.
The individual's right to retain the Vested WWC Options and to receive the
Vested VoiceStream Options will be contingent on, and fully subject to, (a) the
recipients' execution of a substitute stock option agreement replacing the
agreement covering the Vested WWC Options (" Substitute WWC Option Agreement"),
(b) surrender of the recipient's original agreement with respect to the Vested
WWC Options, and (c) the recipient's execution of a new VoiceStream Stock Option
Agreement ("VoiceStream Option Agreement"). The terms of the Substitute WWC
Option Agreement and the VoiceStream Option Agreement will provide, as the case
may be, as follows.
1.5.3.1 WWC Employees--For a WWC Employee, the number of
Vested WWC Options and the terms of the option as originally granted will remain
unchanged, except the Substitute WWC Option Agreement will provide that the
exercise price to purchase WWC Common Stock will be reduced pursuant to 1.5.3.3
below. The terms of the VoiceStream Option Agreement to be issued to WWC
Employees will be materially identical to the terms of the Substitute WWC Option
Agreement, with appropriate revisions to reflect VoiceStream as the grantor, and
will be governed by the VoiceStream Stock Option Plan.
-4-
<PAGE> 9
1.5.3.2 VoiceStream Employees--For a VoiceStream Employee, the
number of Vested WWC Options and the terms of the options as originally granted
to the VoiceStream Employee when such employee was employed by the Company will
remain unchanged, except the Substitute WWC Option Agreement will provide that
(i) the exercise price to purchase WWC Common Stock will be reduced pursuant to
1.5.3.3 below, and, (ii) the terms with respect to termination of the option and
all rights thereunder on termination of employment by the Company will be
amended to relate to termination of employment by VoiceStream, rather than the
Company. The Substitute WWC Option Agreement will remain subject to the WWC
Option Plan. The terms of the VoiceStream Option Agreement to be issued to
VoiceStream Employees will be materially identical to the terms of the
Substitute WWC Option Agreement, with appropriate revisions to reflect
VoiceStream as the grantor, and will be governed by the VoiceStream Stock Option
Plan.
1.5.3.3 Exercise Price--The exercise price of the Vested WWC
Options as set forth in the Substitute WWC Option Agreement ("New WWC Option
Exercise Price") and the exercise price of the Vested VoiceStream Options
("VoiceStream Option Exercise Price") will each be established as a percentage
of the exercise price of the Vested WWC Options (the "Old Exercise Price") prior
to replacement by the Substitute WWC Option Agreement, and will collectively
total 100% of the Old Exercise Price. The relative percentage of the Old
Exercise Price to be applied to determine the WWC Option Exercise Price (the
"WWC Price Percentage") and to be applied to determine the New VoiceStream
Option Exercise Price (the "VoiceStream Price Percentage") will be determined
based upon the relative averages of the daily last trade prices of each of the
WWC Common Stock and the VoiceStream Common Stock during a period of 10 trading
days ("Averaging Period") beginning the 5th trading day after the Effective
Date. For example, assume the Old Exercise Price was $20.00. If the average of
the daily last trade prices of WWC Common Stock during the Averaging Period was
$15.00 and the average of the daily last trade prices of VoiceStream Common
Stock during the Averaging Period was $10.00 (a total for both of $25.00), then
for WWC Common Stock the relative average, and the WWC Price Percentage, would
be 60% (15/25) and for VoiceStream Common Stock the relative average, and the
VoiceStream Price Percentage, would be 40% (10/25). As a result, the New WWC
Option Exercise Price would be $12.00 ($20.00 x 60%), while the VoiceStream
Option Exercise Price would be $8.00 ($20.00 x 40%).
1.5.4 Unvested Options. It is the intent of the Company and
VoiceStream that each individual that as of the Effective Date is the holder of
unvested options to purchase an identified number of shares of WWC Common Stock
("Unvested WWC Options"), as listed on the Unvested Options Schedule adopted by
the Company and VoiceStream, will, at and after the Effective Date, (a) if they
are a WWC Employee, surrender the original option to purchase such identified
number of shares of WWC Common Stock and will, in replacement thereof, receive
an unvested option ("New Unvested WWC Options") to purchase a new, increased
number at a new exercise price, determined pursuant to Section 1.5.5.3 below, of
shares of WWC Common Stock, on terms, except as to number of shares and exercise
price, materially identical to the terms of the agreement by which they were
granted their existing Unvested WWC Options, and (b) if they are a VoiceStream
Employee, will lose the right to purchase WWC Common Stock and will be granted
by VoiceStream unvested options ("Unvested VoiceStream Options") to purchase a
number of shares of VoiceStream Common Stock at a new exercise price, determined
pursuant
-5-
<PAGE> 10
to Section 1.5.5.4 below, on terms, except as to number of shares and exercise
price, materially identical to the terms of the agreement by which they were
granted their existing Unvested WWC Options, with appropriate revisions as to
grantor, all in accordance with this Section 1.5. The Unvested Options Schedule
adopted by the Company and VoiceStream shall identify each individual who holds
Unvested WWC Options, and for each shall set forth, among other information, the
original date of grant, the number of shares purchasable as of the Effective
Date, the exercise price per share of shares purchasable as of the Effective
Date, and the outside termination date of the original grant.
1.5.5 Stock Option Agreements with Respect to Unvested Options.
The terms of the agreements with respect to the New Unvested WWC Options and
the Unvested VoiceStream Options will provide, as the case may be, as follows.
1.5.5.1 WWC Employees--For a WWC Employee, the individual's
right to receive the New Unvested WWC Options will be contingent on, and fully
subject to, (a) surrender of the recipient's original agreement with respect to
the Unvested WWC Options and (b) the recipients' execution of a Substitute WWC
Option Agreement replacing the agreement covering the Unvested WWC Options.
Except with respect to exercise price and the number of shares, the Substitute
WWC Option Agreement will contain terms materially identical to the terms of the
agreement by which the recipient was granted their existing Unvested WWC
Options. The number of shares to be purchased and the exercise price to purchase
WWC Common Stock will be established with respect to the New Unvested WWC
Options pursuant to Section 1.5.5.3 below.
1.5.5.2 VoiceStream Employees--For a VoiceStream Employee, the
individual's right to receive the Unvested VoiceStream Options will be
contingent on, and fully subject to, (a) surrender of the recipient's original
agreement with respect to the Unvested WWC Options, and (b) the recipient's
execution of a new VoiceStream Stock Option Agreement. Except with respect to
exercise price and the number of shares, the terms of the VoiceStream Option
Agreement to be issued to VoiceStream Employees will be materially identical to
the terms of the surrendered original agreement granting the Unvested WWC
Options, with appropriate revisions to reflect VoiceStream as the grantor, and
will be governed by the VoiceStream Stock Option Plan, provided that the number
of shares and the exercise price will be established pursuant to Section 1.5.5.4
below.
1.5.5.3 Number of Shares and Exercise Price for WWC
Employees--The number of shares subject to the New Unvested WWC Options shall be
determined by multiplying the number of shares represented by the Unvested WWC
Options by a fraction, the numerator of which is the sum of the average daily
last trade prices of both WWC Common Stock and VoiceStream Common Stock during
the Averaging Period, and the denominator of which is the average of the daily
last trade prices of WWC Common Stock during the Averaging Period. The new
exercise price shall be determined by multiplying the exercise price for the
Unvested WWC Options by a fraction, the numerator of which is the average of the
daily last trade prices of WWC Common Stock during the Averaging Period, and the
denominator of which is the sum of the average daily last trade prices of both
WWC Common Stock and VoiceStream Common Stock during the Averaging Period. For
example, if the number of shares
-6-
<PAGE> 11
subject to the Unvested WWC Options was 100 at an exercise price of $20.00, and
during the Averaging Period the average daily last trade price of the WWC Common
Stock was $16.00 and the average daily last trade price of the VoiceStream
Common Stock was $12.00, the number of shares subject to the New Unvested WWC
Options would be 175 (100 shares x $28.00/$16.00), and the exercise price for
the New Unvested WWC Options would be $11.43 ($20.00 x $16.00/$28.00).
1.5.5.4 Number of Shares and Exercise Price for VoiceStream
Employees--The number of shares subject to the Unvested VoiceStream Options
shall be determined by multiplying the number of shares represented by the
Unvested WWC Options by a fraction, the numerator of which is the sum of the
average daily last trade prices of both WWC Common Stock and VoiceStream Common
Stock during the Averaging Period, and the denominator of which is the average
of the daily last trade prices of VoiceStream Common Stock during the Averaging
Period. The new exercise price shall be determined by multiplying the exercise
price for the Unvested WWC Options by a fraction, the numerator of which is the
average of the daily last trade prices of VoiceStream Common Stock during the
Averaging Period, and the denominator of which is the sum of the average daily
last trade prices of both WWC Common Stock and VoiceStream Common Stock during
the Averaging Period. For example, if the number of shares subject to the
Unvested WWC Options was 100 at an exercise price of $20, and during the
Averaging Period the average daily last trade price of the WWC Common Stock was
$16.00 and the average daily last trade price of the VoiceStream Common Stock
was $12.00, the number of shares subject to the Unvested VoiceStream Options
would be 233 (100 shares x $28.00/$12.00), and the exercise price for the
Unvested VoiceStream Options would be $8.57 ($20.00 x $12.00/$28.00).
1.5.6 VoiceStream Restricted Stock Plan. VoiceStream shall establish a
restricted stock plan ("VoiceStream Restricted Stock Plan") substantially
similar to the Company's restricted stock option plan presently in effect ("WWC
Restricted Stock Plan"). All individuals who prior to the Effective Date were
employees of the Company and who have previously been awarded restricted stock
by the Company, as identified on the Restricted Stock Schedule adopted by the
Company and VoiceStream, will receive shares of VoiceStream Common Stock
pursuant to Section 1.2, and such shares shall be subject to the terms and
restrictions of the WWC Restricted Stock Plan and the grant thereunder covering
the shares with respect to which the VoiceStream Common Stock is issued. All
individuals who prior to the Effective Date were employees of the Company and
who on and after the Effective Date will be employees of VoiceStream, and who
have previously been awarded restricted stock by the Company, as identified on
the Restricted Stock Schedule adopted by the Company and VoiceStream, will be
issued an amendment to their restricted stock grant as necessary to avoid
forfeiture thereunder as a result of the new employment arrangements, and
containing such other terms, including adjustments as to existing restrictions
and delegation of authority to VoiceStream as to additional adjustments, as the
WWC Board shall determine.
-7-
<PAGE> 12
2. PROVISION OF SERVICES AND SPECIFICATION OF ON-GOING RELATIONSHIPS.
2.1 Services. The following terms hereof shall apply with respect to
the services to be provided between and among the parties (collectively,
"Services").
2.1.1 Existing Services Agreement. The Services Agreement
between the Company and VoiceStream executed as of February 17, 1998 in
connection with the investment in VoiceStream by a subsidiary of Hutchison
Whampoa Ltd. (the "Services Agreement") shall be terminated as of the Effective
Date.
2.1.2 General Assistance. From and after the Effective Date
for a period, subject to Section 2.1.6, not to exceed one (1) year, the Company
and VoiceStream shall generally make their respective employees available to
each other as necessary to support the respective activities of each party in
areas including, without limitation, (a) advice and services relating to legal
matters, (b) accounting, (c) taxation and financial services, and (d) human
resources.
2.1.3 Exceptions to Requirement to Provide Services. Neither
the Company nor VoiceStream shall be obliged to provide Services to the other
if:
2.1.3.1 doing so would unreasonably interfere with
the performance by any employee of services for his employer or otherwise cause
unreasonable burden on the party otherwise obliged to provide Services;
2.1.3.2 it is not in a position to provide such
Services by reason of an absence of past participation, involvement or
familiarity with such matters or the absence of personnel competent to perform
such services; or
2.1.3.3 the performance of such Service presents an
unavoidable conflict of interest between the Company and VoiceStream.
2.1.4 Payment for Services. Each party shall be entitled to
receive payment from the other party for the reasonable costs and expenses of
providing such services.
2.1.5 Shared Senior Management. The Company and VoiceStream
will jointly provide for and fund the salaries and expenses of John W. Stanton,
Donald Guthrie, and Alan R. Bender (the "Shared Senior Management"), who will
support the Company and VoiceStream on an on-going basis on terms established
from time to time by the mutual agreement of the WWC Board and the VoiceStream
Board. The services of Mr. Guthrie and Mr. Bender for both the Company and
VoiceStream shall continue for up to three (3) years.
2.1.6 Termination of Obligation to Provide Services. At any
time, either party may undertake to perform any or all of the Services being
provided hereunder by the other by providing the other with ninety (90) days'
prior written notice of its intent to commence to perform such Services and to
terminate this Agreement with respect to such Services. At any time after a date
thirty (30) days following the Effective Date, a party rendering Services may
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<PAGE> 13
terminate its obligations under this Section 2 by providing the other with
ninety (90) days' prior written notice of its intent to so terminate its
delivery of Services; provided that the other party shall have the right to
extend such ninety (90) day period for a reasonable period of time to permit an
orderly transition so long as such period does not extend beyond one (1) year
from the Effective Date.
2.2 Estimation and Payment of Insurance Claims.
2.2.1 Background. The Company currently maintains insurance
policies which provide coverage for each of the Company's business and
VoiceStream's business. Certain of these policies are "claims made" policies and
these must be in place both at the time of occurrence of the insured loss and at
the time a resulting claim is made. In order to ensure continuity of coverage of
these "claims made" policies, the Company will purchase so-called "run-off"
coverage for a minimum time of 3 years following the Spin-off. The
responsibility for the premiums associated with the "run-off" policies shall be
shared equally by the Company and VoiceStream. The Company and VoiceStream are
aware there are and may be a number of occurrences before the Distribution Date
involving the activities of VoiceStream's business for which claims have been or
may be made ("Incurred Claims"), and are aware that additional Incurred Claims
involving the activities of VoiceStream's business may come to light which will
result in insurance claims under either "claims made" or "claims accrued"
policies covering the combined business.
2.2.2 Term. The parties' obligations under this Section 2
shall continue for as long as there are any Incurred Claims which have not been
finally settled.
2.2.3 Notice and Administration of Claims. The Company will
promptly notify VoiceStream of any Incurred Claims asserted against the Company
relating in whole or in part to VoiceStream's business. VoiceStream will
promptly notify the Company of any Incurred Claims asserted against VoiceStream
or the VoiceStream Subsidiaries which VoiceStream reasonably believes are
covered by insurance policies covering the combined businesses. VoiceStream will
have the responsibility of administering, defending and settling all such
Incurred Claims which relate solely to VoiceStream's business. VoiceStream and
Western Wireless will jointly and cooperatively administer, defend and settle
all such Incurred Claims that relate to both VoiceStream's and Western Wireless'
businesses. Any self-insured portion of Incurred Claims and the costs of
defending such Incurred Claims shall be borne by VoiceStream in proportion to
the extent to which the Incurred Claim relates to VoiceStream's business. In
connection with Incurred Claims covered by insurance, the Company will promptly
transfer to VoiceStream any funds proportionally due to VoiceStream that are
received by the Company in connection with the settlement of Incurred Claims.
2.2.4 Personnel Costs. Time expended by Company personnel in
dealing with Incurred Claims under this Section 2.2 shall be paid for by
VoiceStream in accordance with and in the same manner as Services are paid for
under Section 2.1
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<PAGE> 14
2.3 Access to Information and Witnesses.
Subsequent to the Distribution, each of the Company and VoiceStream may
have in its possession or under its control (or the control of persons or firms
which have rendered services to or otherwise done business with it) books,
records, contracts, instruments, data and other information (collectively,
"Information") which may prove necessary to the other in connection with the
other's business. Accordingly, at all times subsequent to the Record Date, (i)
the Company agrees to provide to VoiceStream, and VoiceStream agrees to provide
to the Company, upon the other's request, at all reasonable times, full and
complete access to (including access to persons or firms possessing
Information), and duplication rights with respect to, any and all such
Information as the other may reasonably request and require in the conduct of
its business; and (ii) the Company agrees to use its best efforts to make
available to VoiceStream, and VoiceStream agrees to use its best efforts to make
available to the Company, upon the other's request, their respective officers,
directors, employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal, administrative or other
proceedings in which VoiceStream or the Company, as the case may be, may from
time to time be involved. "Information" shall include without limitation
information sought for audit, accounting, FCC filing, claims, litigation and tax
purposes as well as for purposes of fulfilling disclosure and reporting
obligations under federal and state securities laws. The party providing
Information or making witnesses available shall be entitled to receive from the
other party, upon the presentation of invoices therefor, payment as calculated
in Section 2.1.4 above. This provision is intended for the convenience of the
parties in administrative matters, and all information that is by its nature
privileged or confidential will be subject to release only in the event a
confidentiality agreement reasonably acceptable to the releasing party is
executed at the time of the release.
2.4 Mail and Other Items.
Subsequent to the Distribution, each of the Company and VoiceStream may
receive mail, deliveries, faxes, email, packages and other communications
properly belonging to the other. Accordingly, at all times subsequent to the
Record Date, each of the Company and VoiceStream authorizes the other to receive
and open mail, deliveries, faxes, email, packages and other communications
received by it and not unambiguously intended for the other party or any of the
other party's officers and/or directors specifically in their capacities as
such, and to retain the same to the extent that they relate to the business of
the receiving party. To the extent that they do not relate to the business of
the receiving party and do relate to the business of the other party, or to the
extent that they relate to both businesses, the receiving party shall promptly
contact the other party for delivery instructions and such mail, telegrams,
packages or other communications (or, in case the same relate to both
businesses, copies thereof) shall promptly be forwarded to the other party in
accordance with its delivery instructions. The provisions of this Section 2.4
are not intended to and shall not be deemed to constitute an authorization by
either the Company or VoiceStream to permit the other to accept service of
process on its behalf and neither party is nor shall be deemed to be the agent
of the other for service of process purposes.
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<PAGE> 15
2.5 Indemnification.
2.5.1 Pursuant to this Agreement, VoiceStream shall continue
to remain primarily liable for all liabilities and obligations of VoiceStream
and shall also assume the Company's liabilities, obligations, lawsuits and
administrative investigations relating to or arising from the Domestic PCS
Business (collectively, the "VoiceStream Liabilities"); provided that
liabilities and obligations in respect of taxes shall be governed by the terms
of the Tax Sharing Agreement. The Company shall continue to be liable for all
liabilities, obligations, lawsuits and administrative investigations relating to
or arising from all business of the Company other than the Domestic PCS Business
(the "Company Liabilities"); provided that liabilities and obligations in
respect of taxes shall be governed by the terms of the Tax Sharing Agreement.
VoiceStream and the Company shall each be responsible for its own "Distribution
Liabilities" (defined as expenses, costs, or liabilities directly related to the
Distribution) which are incurred or accrued prior to the Effective Date;
provided that liabilities and obligations in respect of taxes shall be governed
by the Tax Sharing Agreement. The Company and VoiceStream shall share (i) any
Distribution Liabilities incurred or accrued after the Effective Date; and (ii)
any liabilities which are not specifically assumed by either party and are
neither VoiceStream liabilities nor Company Liabilities, and the relative shares
of the Company and VoiceStream will be allocated in the same percentage as their
respective market capitalizations determined based upon the relative averages of
the daily last trade prices of the WWC Common Stock and the VoiceStream Common
Stock during Averaging Period.
2.5.2 VoiceStream agrees to indemnify, defend and hold
harmless the Company and its officers, directors, employees, agents and
affiliates from and against any and all losses, liabilities, claims, damages,
costs and expenses (including without limitation reasonable attorneys' fees)
arising out of or related in any manner to the VoiceStream Liabilities and any
and all liabilities of the Company pursuant to any obligations of the Company to
the extent the same have been specifically assumed by VoiceStream in writing.
2.5.3 The Company agrees to indemnify, defend and hold
harmless VoiceStream and its officers, directors, employees, agents and
affiliates from and against any and all losses, liabilities, claims, damages,
costs and expenses (including without limitation reasonable attorneys' fees)
arising out of or related in any manner to the Company Liabilities.
2.5.4 If any action is brought or any claim is made against a
party or controlling person with respect to which indemnity may be sought (the
"Indemnified Party"), the Indemnified Party shall, with reasonable promptness
after the receipt of information indicating that an action has been or is likely
to be instituted or a claim has been or is likely to be made, notify the party
from whom indemnification is to be sought (the "Indemnifying Party") in writing
of such action or claim and the Indemnifying Party shall have the obligation to
assume the defense of such action or claim, including the employment of counsel;
provided, however, that the Indemnifying Party shall not-be entitled to settle
such action or claim on behalf of the Indemnified Party without the prior
written consent of the Indemnified Party, (which consent shall not unreasonably
be withheld, if, but only if, such settlement would not, in addition to the
payment of money, impose an unreasonable and material burden on the Indemnified
Party, such as a consent judgment or injunction). Such Indemnified Party shall
have the right to employ its
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<PAGE> 16
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action or claim or the Indemnifying Party shall not
have employed counsel to take charge of the defense of such action or claim or
such Indemnified Party shall have reasonably concluded that there may be
defenses available to it which are different from or in addition to those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to direct any different or additional defense of such action
or claim on behalf of the Indemnified Party), in any of which events such fees
and expenses shall be borne by the Indemnifying Party. Except as expressly
provided above, the Indemnifying Party shall not be liable to any Indemnified
Party for legal or other expenses incurred by such Indemnified Party in
investigating, preparing or defending against such action or claim subsequent to
such time as the Indemnifying Party assumes the defense of such action or claim.
Anything in this Section 2.5 to the contrary notwithstanding, no Indemnifying
Party shall be liable for any settlement of any such claim or action effected
without its written consent. In the event that any actions or claims could
result in both parties being liable to the other under these indemnification
provisions, the parties shall endeavor, acting reasonably and in good faith, to
agree upon a manner of conducting the defense and/or settlement of such action
or claim with a view to minimizing the legal expenses and associated costs that
might otherwise be incurred by the parties under the provisions of this Section
2.5.4.
2.5.5 For purposes of this Section 2.5, losses, liabilities,
claims, damages, costs and expenses of past, present or future officers,
directors, employees, agents or subsidiaries of the Company or VoiceStream shall
be deemed to have been suffered by the Company or VoiceStream, as the case may
be.
2.5.6 The indemnification provided for in this Section 2.5
shall be subject to the following provisions:
2.5.6.1 Any amounts payable from the Company to
VoiceStream and from VoiceStream to the Company shall first be offset against
each other with any net balance then payable upon demand;
2.5.6.2 The indemnification provisions hereof shall
survive the Effective Date and any investigation made at any time by either of
the parties. In addition, actual prior knowledge by the Indemnified Party with
respect to any matter as to which indemnification may be sought shall not
constitute a defense to the Indemnifying Party or otherwise affect the
Indemnified Party's rights to indemnification pursuant to the provisions hereof;
and
2.5.6.3 Subject to the provisions of Section 2.5.6.1
and 2.5.6.2 above, the indemnification provisions of this Section 2.5 are made
for the sole benefit of the Company and VoiceStream and shall not, except to the
extent expressly stated otherwise herein, inure to the benefit of any third
party.
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<PAGE> 17
2.6 Pending Litigation and Significant Obligations.
2.6.1 With respect to all pending litigation and proceedings
(the "Proceedings") relating to the Domestic PCS Business to which the Company
has heretofore been a party and the liability for which will be assumed by
VoiceStream pursuant to this Agreement, the parties will endeavor to have
VoiceStream substituted in the place of and for the Company (and to have the
Company removed) as a party as promptly as is reasonably practicable. Pending
such substitution, and in cases where such substitution cannot be effected,
VoiceStream shall, subsequent to the Effective Date, in the name of the Company
but on behalf of VoiceStream, assume and have the sole and exclusive right to
direct the defense, prosecution and/or settlement of the claims involved,
including the employment of counsel (which counsel may be the counsel heretofore
used by the Company for such purpose), and VoiceStream shall pay all expenses
related thereto. To the extent that any such expenses are paid by the Company,
VoiceStream shall promptly reimburse the Company therefor.
2.6.2 With respect to all significant outstanding contracts,
licenses, guarantees and other obligations relating to the Domestic PCS Business
to which the Company has heretofore been a party and the liability for which
will be assumed by VoiceStream pursuant to this Agreement, the parties will
endeavor, to the extent not already provided for, to have VoiceStream
substituted in the place of and for the Company (and to have the Company
removed) as a party as promptly as is reasonably practicable.
2.7 Use of the Company Name.
VoiceStream agrees that it will discontinue and will cause each of its
subsidiaries to discontinue all use of the name "Western Wireless," "Western"
and "Cellular One," and to remove each of said names from its name and business
as well as from the name and business of each such subsidiary as promptly as is
reasonably practicable.
2.8 Premises and Occupancy Expenses.
2.8.1 The Company and VoiceStream (subject to requisite
approvals), shall enter into mutually agreeable arrangements with respect to
VoiceStream's use of office space and equipment at 3650 131st Avenue SE,
Bellevue, Washington, 98006, and such other locations as are mutually determined
by the Company and VoiceStream (the "Premises"), subject and subordinate to the
terms, provisions, covenants and conditions of the leases under which the
Company has leased the Premises and of this Section 2.8.
2.8.2 The term of this Section 2.8 shall commence on the
Effective Date and terminate upon ninety (90) days notice by the Company;
provided that VoiceStream shall have the right to extend such ninety (90) day
period for a reasonable period of time to permit an orderly transition.
2.8.3 VoiceStream acknowledges that it has inspected the
Premises and accepts the same in an "as is" condition and that the Company shall
have no obligation whatsoever to make any alterations, improvements or repairs.
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<PAGE> 18
2.8.4 Notwithstanding the provisions of Section 2.1, (i) lease
payments and all other shared costs of occupancy of the Premises, (ii) all
expenses, including depreciation and maintenance expenses, related to shared
furnishings and equipment at the Premises, and (iii) all out-of-pocket expenses
related to shared fax, telephone, duplicating and miscellaneous office equipment
at the Premises shall be shared in proportion to use by the Company and
VoiceStream. The foregoing expenses shall be reimbursed monthly. The Company and
VoiceStream may from time to time review the allocation of expenses between the
Company and VoiceStream and either shall have the right to propose a change in
the allocation (for either the most recent fiscal year or on a prospective basis
from the beginning of the current fiscal year) of such expenses between the
Company and VoiceStream. If the two parties do not concur as to a proposed
change then either party may request that the question of a fair allocation be
submitted to a mutually acceptable independent nationally recognized certified
public accounting firm (which may include an auditing firm previously retained
by either the Company or VoiceStream) and the determination of such firm shall
be final and binding on each party. Any reimbursement required by either an
agreed change or a determination by the accounting firm shall be paid within
five business days. The monthly rate of future reimbursements shall also be
adjusted accordingly.
3 SPECIFIC AGREEMENTS BETWEEN THE PARTIES.
3.1 Tax Sharing Agreement. Exhibit 3.1, the Tax Sharing Agreement,
dated February 17, 1997, and the Amendment to Tax Sharing Agreement
(collectively the "Tax Sharing Agreement") contain terms that establish the
parties respective rights and obligations concerning tax aspects of the
Distribution.
3.2 Roaming Agreement. Exhibit 3.2, the "Roaming Agreement," contains
terms that establish the parties, respective rights and obligations concerning
roaming on their respective wireless systems.
3.3 Spectrum Allocation and Non-Competition. Exhibit 3.3, the
"Spectrum Allocation and Non-Competition Agreement," contains terms that
shall govern the parties respective obligations in the event of business
opportunities and in the event of conflicts of interest.
4 MISCELLANEOUS PROVISIONS OF GENERAL APPLICABILITY.
4.1 Entire Agreement.
All prior or contemporaneous oral agreements, contracts, promises,
representations and statements, if any, among the parties hereto, or their
representatives, are merged into this Agreement and this Agreement shall
constitute the entire agreement and understanding among them with respect to the
subject matter hereof. No modification or waiver of the terms hereof shall be
valid unless in writing signed by the party to be charged and only to the extent
therein set forth.
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<PAGE> 19
4.2 Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors; provided, however, that this
Agreement is not assignable, in whole or in part, directly or indirectly, by
either party hereto without the written consent of the other which consent shall
not be unreasonably withheld.
4.3 Further Documents; Compliance; Governmental Approvals.
Both the Company and VoiceStream shall make, execute, acknowledge and
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby. Both the
Company and VoiceStream shall, in connection with entering into this Agreement,
performing its obligations hereunder and taking any and all actions relating
hereto, (i) comply with all applicable laws, regulations, orders and decrees,
(ii) obtain all required consents and approvals and make all required filings
with any governmental agency, other regulatory or administrative agency,
commission or similar authority, and (iii) promptly provide the other with all
such information as the other may reasonably request in order to be able to
comply with the provisions of this section.
4.4 Notices.
All communications hereunder shall be in writing and shall be either
personally delivered or sent by first class mail.
4.5 Arbitration.
If any controversy or claim arising out of this Agreement cannot be
settled by the parties, the controversy or claim shall be settled by arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association then in effect, and judgment on the award may be entered in any
court having jurisdiction. The arbitration shall be conducted at Seattle,
Washington.
4.6 Attorneys' Fees.
In the event that any party maintains or defends any cause of action
against another party to this Agreement, the prevailing party shall be entitled
to recover all reasonable attorneys' fees and costs of litigation and
arbitration.
4.7 Governing Law.
The provisions of this Agreement shall be governed by and construed in
accordance with the laws of the state of Washington.
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<PAGE> 20
4.8 Meaning of Terms.
As used in this Agreement, the terms "the Company" and "VoiceStream"
shall, unless the context otherwise requires, include the respective
subsidiaries of the Company and VoiceStream.
4.9 Headings.
The captions appearing in this Agreement are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope and intent of this Agreement or any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year set forth below.
WESTERN WIRELESS CORPORATION
By
-------------------------------
Its
------------------------------
Dated:
----------------------------
VOICESTREAM WIRELESS CORPORATION
By
-------------------------------
Its
------------------------------
Dated:
----------------------------
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<PAGE> 21
EXHIBIT (ii)
VOICESTREAM SUBSIDIARIES
<TABLE>
<CAPTION>
NAME STATE % OWNED
---- ----- -------
<S> <C> <C>
VoiceStream PCS Holding LLC Delaware 100%
VoiceStream PCS I LLC Delaware 100%
VoiceStream PCS I License LLC Delaware 100%
VoiceStream PCS II Corporation Delaware 100%
VoiceStream PCS II License Corporation Delaware 100%
VoiceStream PCS III Corporation Delaware 100%
VoiceStream PCS III License Corporation Delaware 100%
PCS Wireless Systems Purchasing Corporation Delaware 100%
VoiceStream PCS BTA Corporation Delaware 100%
VoiceStream PCS I Iowa Corporation Delaware 100%
VoiceStream PCS BTA License Corporation Delaware 100%
VoiceStream PCS BTA I Corporation Delaware 100%
VoiceStream PCS BTA Development Corporation Delaware 100%
VoiceStream PCS SMR Corporation Delaware 100%
VoiceStream PCS LMDS Corporation Delaware 100%
Cook Inlet Western Wireless PV/SS PCS, L.P. Delaware 49.9%
Cook Inlet/VoiceStream PCS LLC Delaware 49.9%
STPCS Joint Venture, L.L.C. Delaware 17.81%
Iowa Wireless Services, L.P. Delaware 38%
</TABLE>
<PAGE> 22
EXHIBIT 1.1.2
INFORMATION STATEMENT
<PAGE> 23
Exhibit 3.1(a)
TAX SHARING AGREEMENT
Agreement dated this 14th day of October, 1997, by and among
Western Wireless Corporation, a Washington corporation ("WWC"), Western PCS
Corporation, a Delaware corporation ("Western PCS") and Hutchison
Telecommunications PCS (USA) Limited, a British Virgin Islands corporation (the
"Investor") (the "Agreement").
WHEREAS, WWC is the common parent of an affiliated group of
corporations that files a consolidated federal income tax return (the "WWC
Affiliated Group");
WHEREAS, prior to the date hereof, WWC owned all of the
outstanding stock of Western PCS;
WHEREAS, as of the date hereof, Investor will acquire from
Western PCS 19.9 percent of the outstanding common stock of Western PCS (the
"Purchase"); and
WHEREAS, WWC, Western PCS and Investor desire to establish an
arrangement whereby the income tax liabilities of Western PCS and its direct and
indirect subsidiaries (the "Western PCS Group") will be determined and paid by
WWC and rebilled to Western PCS for settlement, and the Western PCS Group will
be compensated by WWC for the use of certain Western PCS Group net operating
losses and other tax attributes;
NOW, THEREFORE, WWC, Western PCS and Investor agree as follows:
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<PAGE> 24
ARTICLE I
1.01 Preparation and Filing of Tax Returns by WWC. WWC shall
prepare and timely file, or shall cause the preparation and timely filing of,
all federal, state, and other income tax returns ("Tax Returns") of the Western
PCS Group. With respect to the tax treatment of items affecting the Western PCS
Group, such Tax Returns shall be prepared (in the absence of a material change
in law or circumstance) in a manner that is consistent with past practices,
elections, accounting methods, conventions, and principles of taxation used for
the most recent taxable periods for which Tax Returns involving similar items
have been filed prior to the Purchase.
1.02 Payment of Taxes by WWC. Subject to Sections 1.05 and 1.08
and any rights of offset that WWC may have under this Agreement, WWC shall pay,
or cause to be paid, all income taxes, interest, and penalties due with respect
to income earned or recognized by the Western PCS Group.
1.03 Determination of Income Taxes of the Western PCS Group. WWC
shall determine and allocate to each member of the Western PCS Group its income
taxes and related penalties and interest as if it were a separate and
independent taxpayer. For purposes of this determination, WWC shall not give
effect to any federal net operating loss carryover or carryback that would be
available to any member of the Western PCS Group. The computations shall be
prepared from year to year (in the absence of a material change in law or
circumstance) in a manner consistent with past practices, elections, accounting
methods, conventions, and principles of taxation used for the most recent
taxable periods for which Tax Returns involving similar items have been filed
prior to the Purchase. In the event that the WWC Affiliated Group files its
consolidated
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<PAGE> 25
federal income Tax Return on the basis of the alternative minimum tax, each
member of the Western PCS Group will be allocated tax by WWC based on its tax
calculated on a stand-alone basis. Items relating to intercompany transactions
shall be treated as provided under Treasury Reg. Section 1.1502-13.
WWC shall consult with Western PCS and Investor in the
determination of the Western PCS Group members' allocated income tax liabilities
and shall afford Western PCS and Investor reasonable opportunity to review such
determinations by making such determinations available to Western PCS and
Investor. Not later than the later of (i) 15 days after receipt of such
determinations by Western PCS and Investor and (ii) 15 days before the filing
due date of the relevant Tax Return, Investor or Western PCS shall notify WWC of
any determinations or allocations with which Investor or Western PCS disagrees,
including a reasonably detailed explanation of such disagreement. The parties
shall act in good faith to resolve such disagreement and if they cannot reach a
resolution, the matter shall be referred to an independent accounting firm
acceptable to all parties, whose resolution of the matter shall be binding on
the parties.
In addition to the other principles and policies set forth in
this Agreement, the parties have agreed that the determination and allocation of
taxes under this Section shall be computed on the basis that (i) the merger of
Western PCS III Corporation into Western PCS II Corporation during 1997 was a
qualifying tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) any tax liability arising as a
result of any future spin-off by Western PCS of any direct or indirect
subsidiary of Western PCS shall not be allocated to any member of the Western
PCS Group.
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<PAGE> 26
WWC and Western PCS shall cooperate to effectively monitor any
"excess loss accounts" (as defined in Treasury Reg. Section 1.1502-19) anywhere
within the Western PCS Group. Prior to any event (including, but not limited to,
debt cancellations and deconsolidation events) which may trigger recapture of
income due to any excess loss account, WWC and Western PCS shall cooperate and
use all commercially reasonably efforts to eliminate such excess loss account
recapture or otherwise avoid or minimize the impact thereof.
1.04 Determinations by WWC in Accordance with Allocation Policy
Objectives. In the event that it may be unclear as to the result of the
application of Section 1.03 to specific situations which may arise and which are
not expressly addressed in Section 1.03, the allocation of taxes by WWC to the
members of the Western PCS Group shall be made using the following tax
allocation policy objective as a guide: the tax allocation policy is meant to
fairly allocate federal, state, and local tax liabilities (without regard to
federal net operating loss carryovers or carrybacks, except as provided in
Sections 1.06 and 1.07) to the members of the Western PCS Group as if each such
corporation filed its Tax Return and paid its tax on a separate company basis.
1.05 Payment of Allocated Taxes. Subject to Sections 1.06 and
1.08, Western PCS shall pay to WWC on behalf of each of the members of the
Western PCS Group, within 30 days after the later of (i) the receipt of the
determinations referred to in Section 1.03 and (ii) the filing of the relevant
Tax Return, the tax liability allocated to such member pursuant to Section 1.03,
except for payments relating to disputed items under Section 1.03, which
payments shall be made within 30 days after the resolution thereof. The tax
liability of the WWC Affiliated Group, less the amount of tax liability
4
<PAGE> 27
allocated to the members of the Western PCS Group, shall be the sole
responsibility of WWC and the other members of the WWC Affiliated Group,
excluding the members of the Western PCS Group. The foregoing sentence shall not
affect any right to indemnification that WWC or other members of its Affiliated
Group may have from any person who is not a member of the WWC Affiliated Group
for any taxes (including penalties and interest thereon and expenses related
thereto) that are the responsibility of WWC. Western PCS may offset its
obligation to make payments to WWC under this Section against WWC's obligations
to make payments to Western PCS under the provisions of this Agreement.
1.06 Treatment of Post-1997 Net Operating Losses and Other Tax
Attributes. (a) If for any taxable year beginning on or after January 1, 1998,
any member of the Western PCS Group has a net operating loss (computed without
regard to any net operating loss carryover or carryback from any period) or
generates any other tax attribute (e.g., a credit) that reduces the federal
consolidated tax liability of the WWC Affiliated Group (excluding the Western
PCS Group) for the year in which such loss is incurred or such attribute is
generated, the amount of the net operating loss or tax attribute producing such
reduction in tax liability shall be treated as follows: (i) first, to the extent
of losses or attributes referred to in Section 1.12 (generally, Western PCS
Group Pre-1997 Losses), as reducing the amount of such losses or attributes;
(ii) then, to the extent of losses referred to in Section 1.07 (Western PCS
Group 1997 Losses), as reducing the amount of such losses; and (iii) thereafter,
as a utilization of a current year loss or attribute; all as further described
below in this Section.
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<PAGE> 28
(b) With respect to the losses referred to in Section
1.06(a)(ii), WWC shall make such payment as provided in Section 1.07 by treating
such amount as a "1997 Reimbursable Loss."
(c) With respect to the losses and attributes referred to in
Section 1.06(a)(iii) above, the aggregate total of such losses and attributes
shall be maintained in a deferred account (the "Western PCS Deferred Account")
until the date upon which the Western PCS Group members (i) cease to file a
consolidated federal income Tax Return with WWC, or (ii) cease to have any net
operating loss carryovers computed on a stand-alone basis (taking into account
the provisions of this Section 1.06 and computed as of the end of a taxable
year). If the Western PCS Group members cease to file a consolidated federal
income Tax Return with WWC, WWC shall pay to Western PCS within 30 days
following the date of such deconsolidation an amount equal to the present value
of the aggregate balance of such Western PCS Deferred Account determined by
mutual agreement among WWC, Western PCS and Investor based on (i) the maximum
federal income tax rate for corporations applicable for the year during which
the deconsolidation becomes effective, (ii) reasonable projections for the
Western PCS Group with regard to the anticipated timing of the utilization by it
of such losses and attributes and (iii) commercially reasonable discount rate.
If there is a dispute between WWC, Western PCS and Investor with regard to the
preceding calculation, the matter shall be referred to an independent accounting
firm acceptable to all parties, whose resolution of the matter shall be binding
on the parties. In no event shall payment of any disputed amount be required to
be made prior to 30 days following resolution of such dispute. If, prior to any
time that the Western PCS Group members cease to file
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a consolidated federal income tax return with WWC, the Western PCS Group members
cease to have any net operating loss carryovers computed on a stand-alone basis
(taking into account the provisions of this Section 1.06 and computed as of the
end of a taxable year), WWC shall pay to Western PCS an amount equal to the
difference between (A) the sum of the Western PCS Group members' federal income
tax liabilities determined as if each such member were a separate and
independent taxpayer, and (B) the sum of the Western PCS Group members' federal
income tax liabilities determined as if each such member were a separate and
independent taxpayer and had available to it a part of the net operating losses
and other attributes in the Western PCS Deferred Account proportionate to its
taxable income. Thereafter, such calculation shall be performed annually (or
until the Western PCS Group members cease to file a consolidated federal income
tax return with WWC), and the amount in the Western PCS Deferred Account shall
be reduced by the amount of the net operating losses and other attributes
utilized in determining the federal income tax liabilities of the Western PCS
Group members in (B).
(d) The principles of Section 1.06(c) shall apply equally to
years in which the WWC Affiliated Group (excluding the members of the Western
PCS Group) has a net operating loss (computed without regard to any net
operating loss carryover or carryback from any period) or other tax attribute
which reduces the tax liability of the Western PCS Group. The deferred account
of the WWC Affiliated Group (excluding members of the Western PCS Group) (the
"WWC Deferred Account") shall be increased for all such current year losses and
other attributes referred to in this Section 1.06(d). No member of the Western
PCS Group shall be required to make any payment pursuant to Section 1.05 for any
taxable year to the extent that such payment which otherwise would
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<PAGE> 30
be required under Section 1.05 is attributable to any amount added for that
taxable year to such WWC Deferred Account.
(e) WWC and Western PCS may each offset their obligations to make
payments pursuant to Section 1.06(c) and (d) against the other party's
obligations to make such payments.
(f) If for any taxable year beginning on or after January 1,
1998, any member of the Western PCS Group has a net operating loss (computed
without regard to any net operating loss carryover or carryback from any period)
or generates any other tax attribute (e.g., a credit) that reduces the federal
consolidated tax liability of the WWC Affiliated Group, for any year other than
the year in which such loss is incurred or such attribute is generated, below
the amount that would have been payable if such Western PCS Group member had not
incurred such loss or generated such attribute, WWC shall pay the amount of the
tax reduction so computed to Western PCS within 30 days after the filing of the
consolidated federal income Tax Return that reflects such tax reduction or, if
such tax reduction is due to the carryback of an item and refund of earlier
payment, within 30 days after the receipt by WWC of such refund payment. WWC may
offset its obligation to make payments to Western PCS under this Section 1.06(f)
against Western PCS's obligations to make payments to WWC under the provisions
of this Agreement.
(g) The principles of Section 1.06 shall be applied on the basis
that, if any member of the WWC Affiliated Group has a net operating loss
(computed without regard to any net operating loss carryover or carryback) or
generates any other tax attribute for any taxable year beginning on or after
January 1, 1998, such net operating loss or tax attribute shall be used first to
reduce the federal tax liability for such year of
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the other members of the Western PCS Group or WWC Affiliated Group (excluding
the Western PCS Group members) of which such member having such net operating
loss or tax attribute is a member.
1.07 Reimbursement for the Use of Western PCS Group 1997 Net
Operating Losses. If for the 1997 taxable year any member of the Western PCS
Group has a net operating loss (computed without regard to any net operating
loss carryover or carryback from any period) that reduces the federal
consolidated tax liability of the WWC Affiliated Group for any year below the
amount that would have been payable if such Western PCS Group member had not
incurred such loss (such net operating loss a "1997 Reimbursable Loss"), WWC
shall pay to Western PCS the amount of such tax reduction, computed as specified
in the next sentence. The amount of the tax reduction shall be an amount equal
to $20 million times a fraction, the numerator of which shall be the amount of
the Western PCS Group members' 1997 Reimbursable Losses utilized for the year of
tax reduction, and the denominator of which shall be the total amount of the
Western PCS Group members' 1997 net operating losses (computed without regard to
any net operating loss carryover or carryback from any period). In no event
shall (i) the total payments made by WWC to Western PCS under this Section
exceed $20 million or (ii) the payment for any particular year exceed the amount
of the tax reduction referred to in the first sentence of this Section 1.07. Any
payment by WWC required under this Section 1.07 shall be paid to Western PCS
within 30 days of WWC's filing of the consolidated federal income Tax Return
that reflects such tax reduction as determined under this Section. WWC may
offset its obligation to make payments to Western PCS under this Section
9
<PAGE> 32
against Western PCS's obligations to make payments to WWC under the provisions
of this Agreement.
The amount of losses and payments referred to in this Section
1.07 shall be reduced by the losses and payments determined in Section 1.06(b).
In any case where WWC would be required to make a payment under
Section 1.06(f) but for the existence of a Western PCS Group member 1997 net
operating loss (computed without regard to any net operating loss carryover or
carryback from any period), the WWC Affiliated Group's federal consolidated tax
liability shall be deemed to be reduced first by the 1997 loss and WWC shall
make a payment to Western PCS under this Section 1.07 accordingly.
1.08 Interim Estimated Payments. Within 30 days after each
request by WWC, Western PCS shall advance to WWC amounts computed consistently
with Sections 1.03, 1.04 and 1.06 necessary to reimburse WWC for the portion of
any estimated federal income tax payments attributable to the inclusion of the
members of the Western PCS Group in the WWC consolidated federal income Tax
Return. Any amounts so paid in any year shall operate to reduce the amount
payable to WWC following the end of such year pursuant to Section 1.05 above,
and any excess of payments made by Western PCS pursuant to this Section 1.08
shall promptly be refunded by WWC to Western PCS. Conversely, within 30 days
after the due date of any estimated federal income tax payments, WWC shall
advance to Western PCS amounts computed consistently with Sections 1.06 and 1.07
(and only if a current payment would be required pursuant to Sections 1.06 and
1.07) necessary to reimburse Western PCS for the reduction in estimated federal
income tax payments attributable to the inclusion of the
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<PAGE> 33
Western PCS Group in the WWC consolidated federal income Tax Return. Any amounts
so paid in any year shall operate to reduce the amount payable to Western PCS
following the end of such year pursuant to Sections 1.06 and 1.07, and any
excess of payments made by WWC pursuant to this Section 1.08 shall promptly be
refunded to WWC by Western PCS.
1.09 State and Local Combined Reporting. In the event that any
Western PCS Group member, on the one hand, and WWC or any other member of the
WWC Affiliated Group (other than a member of the Western PCS Group), on the
other hand, compute their state or local income, franchise, net worth or similar
tax liabilities in any jurisdiction on a combined, consolidated or unitary
basis, this Agreement shall apply to such corporations with respect to such
taxes to the fullest extent possible, taking into account any differences
between the federal consolidated return system and the state or local combined,
consolidated or unitary return system.
1.10 Conduct of Tax Audits and Disputes; Tax Adjustments. Except
as otherwise provided in this Section 1.10, WWC and its duly appointed
representatives shall have the right on behalf of all members of the Western PCS
Group to supervise or otherwise coordinate any tax examination process and to
negotiate, resolve, settle, and contest any asserted tax deficiencies or assert
and prosecute any claim for tax refund. WWC shall consult with Western PCS and
Investor in connection with such matters as relate to the Western PCS Group,
shall give Investor a reasonable opportunity to participate therein (provided
that WWC shall retain ultimate control of such matters), and shall promptly
provide to Western PCS and Investor all information relating to such matters
received by WWC or its representatives, including providing copies of all
notices,
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assessments, or similar documents within 15 days of receipt. WWC shall not agree
to any audit adjustment or deficiency, settle any issue or amount, resolve any
issue, contest any claim, or take any other action in any legal proceeding that
pertains to the Western PCS Group except in good faith and based on the merits
thereof and without regard to any other audit adjustment, deficiency, issue,
amount, claim or proceeding relating to the WWC Affiliated Group (excluding the
Western PCS Group).
In the event of any adjustment to the Tax Returns of any member
of the Western PCS Group as filed (by reason of an amended return, claim for
refund, or an audit by the Internal Revenue Service or other tax authority), the
liability of each member of the Western PCS Group hereunder shall be
redetermined to give effect to any such adjustment as if it had been made as
part of the original determination and allocation of tax liability. Appropriate
payments between WWC and Western PCS shall be made in respect of any such
adjustment in accordance with the foregoing provisions of this Agreement within
30 days after any payments are made or refunds are received as a result of the
adjustment or, in the case of contested proceedings, within 30 days after a
final determination of the contest. Similar principles shall apply to the other
members of the WWC Affiliated Group.
1.11 Payment for Western PCS Group Post-1996 Losses and Other Tax
Attributes Retained by WWC. In the event the Western PCS Group members cease to
file a consolidated federal income Tax Return with WWC, WWC shall make a lump
sum payment to Western PCS, according to the provisions of the following
paragraph, within 30 days of the date that the Western PCS Group members leave
the WWC Affiliated Group, in compensation for any unused net operating losses
and other tax attributes
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<PAGE> 35
arising after 1996 that are attributable to the Western PCS Group and that are
retained by WWC.
To the extent that Western PCS Group 1997 net operating losses
are retained by WWC at such time, WWC shall pay to Western PCS the remaining
unpaid balance of the $20 million due to Western PCS from WWC as provided in
Section 1.07, determined as if the amount of such retained losses were treated
as o1997 Reimbursable Losses." In no event shall any payment to Western PCS
under this Section in respect of net operating losses attributable to the
Western PCS Group arising in 1997 exceed $20 million. To the extent that Western
PCS Group post-1997 net operating losses or other attributes are retained by WWC
at such time, WWC shall pay to Western PCS an amount equal to the present value
of such retained net operating losses and other attributes determined by mutual
agreement among WWC, Western PCS and Investor based on (i) the maximum federal
income tax rate for corporations applicable for the year during which the
deconsolidation becomes effective, (ii) reasonable projections for the Western
PCS Group with regard to the anticipated timing of the utilization by it of such
losses and other attributes and (iii) a commercially reasonable discount rate.
If there is a dispute among WWC, Western PCS and Investor with regard to the
preceding calculation, the matter shall be referred to an independent accounting
firm acceptable to all parties, whose resolution of the matter shall be binding
on the parties. In no event shall payment of any disputed amount be required to
be made prior to 30 days following resolution of such dispute.
1.12 Payment for Western PCS Group Pre-1997 Losses and WWC Group
(Excluding Western PCS Group) Post-1997 Losses and Other Attributes Retained
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by Western PCS. In the event the Western PCS Group members cease to file a
consolidated federal income Tax Return with WWC, Western PCS shall make a lump
sum payment to WWC, at the time the Western PCS Group members leave the WWC
Affiliated Group, in consideration for (i) any unused net operating losses
arising before 1997 that are attributable to the Western PCS Group and that are
retained by the Western PCS Group members and (ii) any unused net operating
losses or other tax attributes arising after 1996 that are attributable to
members of the WWC Affiliated Group, other than members of the Western PCS
Group, and that are retained by Western PCS Group members. The amount of the
payment in respect of losses referred to in clause (i) of the preceding sentence
shall be equal to $20 million times a fraction, the numerator of which shall be
the retained losses in clause (i), and the denominator of which shall be the
total amount of the net operating losses arising before 1997 that are
attributable to the Western PCS Group as of the date of this Agreement. To the
extent that such losses and attributes referred to in clause (ii) above are
retained by Western PCS at such time, Western PCS shall pay to WWC an amount
equal to the present value of such retained net operating losses and attributes
determined by mutual agreement among WWC, Western PCS and Investor based on (i)
the maximum federal income tax rate for corporations applicable for the year
during which the deconsolidation becomes effective, (ii) reasonable projections
for the WWC Affiliated Group (excluding the Western PCS Group) with regard to
the anticipated timing of the utilization by it of such losses and attributes
and (iii) a commercially reasonable discount rate. If there is a dispute among
WWC, Western PCS and Investor with regard to the preceding calculation, the
matter shall be referred to an independent accounting firm acceptable to all
parties, whose resolution of the matter shall
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<PAGE> 37
be binding on the parties. In no event shall payment of any disputed amount be
required to be made prior to 30 days following resolution of such dispute.
For purposes of determining the amount of any payment to be made
pursuant to this Section 1.12, the amount of pre-1997 losses and WWC Affiliated
Group (excluding Western PCS Group) post-1997 losses and other attributes
retained by the Western PCS Group members shall be reduced by losses and
attributes as provided in clause (i) of Section 1.06(a).
1.13 Ownership Change Loss Limitations. If a change of ownership
(as determined under Section 382 of the Code) occurs with respect to WWC which
causes the limitations of Section 382 to be applicable to any net operating loss
(including carryforward losses) of any member of the Western PCS Group, WWC
shall, at any time that the Western PCS Group (or any member thereof) ceases to
file a consolidated federal income Tax Return with WWC, allocate to the Western
PCS Group (or relevant member thereof) an equitable portion of any allowance for
limited use of NOLs that remains available. Such allocation shall be determined
based upon the proportion that the net operating losses (including carryforward
net operating losses) of each member of the WWC Affiliated Group represents of
the total of such losses (inclusive of such carryforward losses) of the entire
WWC Affiliated Group as of the date of the deconsolidation.
1.14 Indemnification of the Western PCS Group. WWC shall
indemnify and hold the Western PCS Group members harmless from and against all
federal, state, local, foreign and other taxes and penalties and interest
related thereto due or payable by WWC or any member of the WWC Affiliated Group
(other than taxes,
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penalties and interest allocable to members of the Western PCS Group pursuant to
Sections 1.01 through 1.10 of this Agreement and taxes, penalties and interest
of the members of the Western PCS Group where such items are not otherwise
subject to the provisions of the Agreement). If, upon receipt by WWC of a notice
of indemnification claim by Western PCS from Western PCS or Investor hereunder,
WWC disputes such claim, WWC shall notify Western PCS and Investor of its
disagreement and the basis therefor within 30 days of receipt of the notice of
claim. The parties shall act in good faith to resolve such disagreement and if
they cannot reach a resolution, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of the matter shall
be binding on the parties. Any indemnification payment required hereunder shall
be paid within 30 days after the indemnifying party receives notice of such
required payment from the indemnified party or, if disputed, within 30 days
after the resolution of such dispute as provided in the preceding sentence. The
indemnifying party shall also pay the reasonable attorney's fees and other costs
incurred by the indemnified party with respect to the payment of such taxes and
other amounts and the pursuit of the indemnification claim.
1.15 Indemnification of WWC. Western PCS shall indemnify and hold
WWC and all members of its Affiliated Group (other than the members of the
Western PCS Group) harmless from and against all federal, state, local, foreign
and other taxes and penalties and interest related thereto allocable to any
member of the Western PCS Group pursuant to Sections 1.01 through 1.10 of this
Agreement and taxes, penalties and interest of the members of the Western PCS
Group where such items are not otherwise subject to the provisions of the
Agreement. Any indemnification claim by WWC shall be
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delivered to both Western PCS and Investor. If, upon receipt by Western PCS and
Investor of a notice of indemnification claim by WWC hereunder, Western PCS or
Investor disputes such claim, Western PCS or Investor shall notify WWC of its
disagreement and the basis therefor within 30 days of receipt of the notice of
claim. The parties shall act in good faith to resolve such disagreement and if
they cannot reach a resolution, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of the matter shall
be binding on the parties. Any indemnification payment required hereunder shall
be paid within 30 days after the indemnifying party receives notice of such
required payment from the indemnified party or, if disputed, within 30 days of
the resolution of such dispute as provided in the preceding sentence. The
indemnifying party shall also pay the reasonable attorney's fees and other costs
incurred by the indemnified party with respect to the payment of such taxes and
other amounts and the pursuit of the indemnification claim.
1.16 Portion of Taxable Year. Whenever it is necessary under this
Agreement to determine liability for taxes for a portion of a taxable year or
period that begins before and ends after the Western PCS Group members cease to
file a consolidated federal income Tax Return with WWC, the determination shall
be made by assuming that each of the relevant corporations had a taxable year
which ended at the close of the date on which such corporations cease to file a
consolidated federal income Tax Return with WWC, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis.
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1.17 Payment Gross-up. Any payment required to be made under this
Agreement after the Western PCS Group members cease to file a consolidated
federal income Tax Return with WWC shall be increased so that the net amount
retained by the corporation to which payment is due, after deduction of any tax
due thereon, shall be equal to the amount otherwise due. All parties agree to
report payments to each other hereunder as non-includable and non-deductible to
the extent permitted under applicable law.
ARTICLE II
2.01 Limitation to Consolidated Return Years. The obligations of
the parties hereunder shall relate solely to taxes, net operating losses and tax
attributes arising during taxable years for which the Western PCS Group members
file a consolidated federal income Tax Return with WWC, except that if, in a
taxable year in which the Western PCS Group no longer files a consolidated
federal income Tax Return with WWC, the Western PCS Group generates a net
operating loss or other tax attribute which it carries back to a year in which
the Western PCS Group did file a consolidated federal income Tax Return with
WWC, WWC shall promptly apply for a refund upon notice of such carryback to WWC
and, upon receipt of such refund, shall promptly pay to Western PCS the amount
of the refund. Western PCS shall pay and indemnify WWC for all out-of-pocket
expenses including outside accountant's fees, attorney's fees and reasonable
overhead allocation incurred by WWC in making such refund claim and WWC shall be
entitled to offset any such expenses against the amount of any refund received.
2.02 Expenses. Except as otherwise stated herein, all costs and
expenses incurred in connection with this Agreement and transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
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2.03 Entire Agreement. This Agreement contains the entire
agreement among the parties and supersedes all prior agreements, arrangements,
and understandings relating to the subject matter hereof. There are no written
or oral agreements, understandings, representations or warranties between or
among the parties other than those set forth or referred to in this Agreement.
2.04 Section Headings. The Section and paragraph headings
contained in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
2.05 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given when made, or served if in writing when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by returned telecopy, addressed as follows, or, in each
case, to such other address as may be specified by a party in writing to another
party:
(a) if to WWC, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Donald Guthrie
Facsimile No.: 425-313-7731
with copies (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
and
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<PAGE> 42
Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Attention: Lester W. Droller, Esq.
Facsimile No.: 202-737-2832
(b) if to Western PCS, to it at:
Western PCS Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Donald Guthrie
Facsimile No.: 425-313-7731
with copies (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
and
Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Attention: Lester W. Droller, Esq.
Facsimile No.: 202-737-2832
(c) if to Investor, to it at:
Hutchison Telecommunications PCS (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
with a copy (which shall not constitute notice) to:
Dewey Ballantine LLP
Suite 3907
Asia Pacific Finance Tower
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<PAGE> 43
Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi
Facsimile No.: 852-2509-7088
2.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law principles thereof.
2.07 Illegality. In case any provision in this Agreement shall be
invalid, illegal or unenforceable the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
unless such remaining provisions are inconsistent with the policy objectives set
forth in Section 1.04.
2.08 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns (and, in the case of the second sentence of Section 2.09 below, to
the benefit of the Investor as an express third party beneficiary thereof);
provided, however, that no member of the Western PCS Group may assign any of its
rights or obligations under this Agreement without the prior written consent of
WWC.
2.09 Arbitration. In the event of any dispute between WWC and
Western PCS arising out of this Agreement, such dispute shall be submitted to
arbitration in accordance (mutatis mutandis) with the terms and procedures set
forth in Section 13(k) of the Shareholders Agreement of Western PCS, of even
date herewith (the "Shareholders Agreement"), between WWC, Investor and Western
PCS. The Investor shall have the right to participate in any pending
arbitration and to consolidate any such arbitration with any arbitration which
may be pending under the Shareholders Agreement and which relates to a dispute
which involves in a material way substantially similar issues.
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<PAGE> 44
IN WITNESS WHEREOF, this Agreement has been signed on behalf of
each of the parties on the day set forth above.
WESTERN WIRELESS CORPORATION
By: ________________________________
Title:
WESTERN PCS CORPORATION
By: ________________________________
Title:
HUTCHISON TELECOMMUNICATIONS PCS
(USA) LIMITED
By: ________________________________
Title:
<PAGE> 45
EXHIBIT 3.1(b)
FIRST AMENDMENT TO TAX SHARING AGREEMENT
First Amendment dated __________, 1999, to the Tax Sharing Agreement
(the "Tax Sharing Agreement"), dated February 17, 1998, by and among Western
Wireless Corporation, a Washington Corporation, Western PCS Corporation
(presently named VoiceStream Wireless Corporation), a Washington Corporation,
and Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands
corporation.
WHEREAS, the parties to the Tax Sharing Agreement desire to make
certain amendments thereto in light of the proposed spin-off by Western Wireless
Corporation of all of its stock in VoiceStream Wireless Corporation; and
WHEREAS, VoiceStream Wireless Corporation was reincorporated in
Washington prior to the date hereof.
NOW, THEREFORE, the parties agree that the Tax Sharing Agreement is
amended as follows:
1. All references in the Tax Sharing Agreement to Western PCS
Corporation or Western PCS shall be deemed to be references to VoiceStream
Wireless Corporation ("VoiceStream"), a Washington Corporation, and all
references in the Tax Sharing Agreement to the Western PCS Group shall be deemed
to be references to the VoiceStream Group, which shall consist of VoiceStream
and its direct and indirect subsidiaries.
2. Section 1.02 of the Tax Sharing Agreement shall be amended so that
the obligations of WWC thereunder shall be subject to Sections 1.05, 1.08, 1.14,
1.19, and 1.20. Accordingly, Section 1.02 of the Tax Sharing Agreement shall be
amended to read as follows:
1.02 Payment of taxes by WWC. Subject to Sections 1.05, 1.08,
1.14, 1.19, and 1.20 and any rights of offset that WWC may
have under this Agreement, WWC shall pay, or cause to be paid,
all income taxes, interest, and penalties due
<PAGE> 46
with respect to income earned or recognized by the VoiceStream
Group.
3. Section 1.14 of the Tax Sharing Agreement is deleted in its entirety
and the following is inserted in lieu thereof:
1.14 Indemnification of the VoiceStream Group. Except as
otherwise provided in Section 1.20, WWC and each member of the
WWC Affiliated Group (other than members of the VoiceStream
Group) shall indemnify and hold each of the VoiceStream Group
members harmless from and against all federal, state, local,
foreign and other taxes and penalties and interest related
thereto due from or payable by WWC or any member of the WWC
Affiliated Group, other than taxes, penalties and interest (a)
allocable to members of the VoiceStream Group pursuant to
Sections 1.01 through 1.10 of the Agreement, (b) of members of
the VoiceStream Group that are not otherwise subject to the
provisions of this Agreement, (c) arising as a result of the
failure of any member of the VoiceStream Group to comply in
all material respects with each written representation and
written statement made concerning it in the ruling request
filed with the Internal Revenue Service by Western Wireless
Corporation on September 28, 1998, including all accompanying
exhibits and materials and the letters filed with the Internal
Revenue Service by Western Wireless Corporation in connection
therewith on November 24, 1998, January 14, 1999, and March 3,
1999 (collectively, the "Ruling Request"), (d) arising as a
result of VoiceStream voluntarily ceasing within two years
after the Spin-off, as defined in the Ruling Request, to
actively conduct the VoiceStream Active Business, as defined
in the Ruling Request, or (e) that are provided for in Section
1.19(b). For purposes of clause (c) of the prior sentence, the
inaccuracy as of the time of the Spin-off of any written
representation or written statement in the Ruling Request
shall not constitute a failure of any member of the
VoiceStream Group to comply with such representation or
statement.
<PAGE> 47
If, upon receipt by WWC of a notice of
indemnification claim by VoiceStream from VoiceStream or
Investor hereunder (other than a claim related to the
taxability of the Spin-off under Section 355 of the Code or
Section 311(b) of the Code or otherwise), WWC disputes such
claim, WWC shall notify VoiceStream and Investor of its
disagreement and the basis therefor within 30 days of receipt
of the notice of claim. The parties shall act in good faith to
resolve such disagreement and if they cannot reach a
resolution, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of
the matter shall be binding on the parties. Any
indemnification payment required under this Section 1.14
(other than a payment related to the taxability of the
Spin-off under Section 355 of the Code or Section 311(b) of
the Code or otherwise) shall be paid within 30 days after the
indemnifying party receives notice of such required payment
from the indemnified party or, if disputed, within 30 days
after the resolution of such dispute as provided in the
preceding sentence. The indemnifying party shall also pay the
reasonable attorney's fees and other costs incurred by the
indemnified party with respect to the payment of such taxes
and other amounts and the pursuit of the indemnification
claim.
4. Section 1.15 of the Tax Sharing Agreement is deleted in its entirety
and the following is inserted in lieu thereof:
1.15 Indemnification of WWC Affiliated Group. Except as
otherwise provided in Section 1.20, VoiceStream and each
member of the VoiceStream Group shall indemnify and hold each
of the WWC Affiliated Group members (other than the members of
the VoiceStream Group) harmless from and against all federal,
state, local, foreign and other taxes and penalties and
interest related thereto due from or
<PAGE> 48
payable by any member of the VoiceStream Group and, in the
case of taxes specified in Section 1.14(c), (d), or (e) of
this Agreement, due from or payable by any member of the WWC
Affiliated Group (other than members of the VoiceStream
Group), other than taxes, penalties and interest (a) allocable
to members of the WWC Affiliated Group (other than the members
of the VoiceStream Group) pursuant to Sections 1.01 through
1.10 of the Agreement, (b) of members of the WWC Affiliated
Group (other than members of the VoiceStream Group) that are
not otherwise subject to the provisions of this Agreement, (c)
arising as a result of the failure of any member of the WWC
Affiliated Group (other than the members of the VoiceStream
Group) to comply in all material respects with each written
representation and written statement made concerning it in the
Ruling Request, (d) arising as a result of WWC voluntarily
ceasing within two years after the Spin-off to actively
conduct the WWC Active Business, as defined in the Ruling
Request, or (e) that are provided for in Section 1.19(a).
If, upon receipt by VoiceStream and Investor of a
notice of indemnification claim by WWC hereunder (other than a
claim relating to the taxability of the Spin-off under Section
355 of the Code or Section 311(b) of the Code or otherwise),
VoiceStream or Investor disputes such claim, VoiceStream or
Investor shall notify WWC of its disagreement and the basis
therefor within 30 days of receipt of the notice of claim. The
parties shall act in good faith to resolve such disagreement
and if they cannot reach a resolution, the matter shall be
referred to an independent accounting firm acceptable to all
parties, whose resolution of the matter shall be binding on
the parties. Any indemnification payment required under this
Section 1.15 (other than a payment related to the taxability
of the Spin- off under Section 355 of the Code or Section
311(b) of the Code or otherwise) shall be paid within 30 days
after the indemnifying party
<PAGE> 49
receives notice of such required payment from the indemnified
party or, if disputed, within 30 days of the resolution of
such dispute as provided in the preceding sentence. The
indemnifying party shall also pay reasonable attorney's fees
and other costs incurred by the indemnified party with respect
to the payment of such taxes and other amounts and the pursuit
of the indemnification claim.
5. A new Section 1.19 is added to the Tax Sharing Agreement as
follows:
1.19 Code Section 355(e) Taxes. (a) Except as otherwise
provided in Section 1.20, WWC and each member of the WWC
Affiliated Group (other than members of the VoiceStream Group)
shall indemnify and hold harmless each of the VoiceStream
Group members from and against all taxes, and penalties and
interest related thereto, arising in connection with the
Spin-off pursuant to the application of Section 355(e) of the
Code (and any similar provision of state or local law) as a
result of any acquisition of a 50-percent or greater interest,
within the meaning of Section 355(e) of the Code, of WWC or
any of its successors.
(b) Except as otherwise provided in Section 1.20, VoiceStream
and each member of the VoiceStream Group shall indemnify and
hold harmless each of the WWC Affiliated Group members (other
than the members of the VoiceStream Group) from and against
all taxes, and penalties and interest related thereto, arising
in connection with the Spin-off pursuant to the application of
Section 355(e) of the Code (and any similar provision of state
or local law) as a result of any acquisition of a 50-percent
or greater interest, within the meaning of Section 355(e) of
the Code, of VoiceStream or any of its successors.
(c) For purposes of Section 1.19 (b), the amount of any tax
arising in connection with the Spin-off pursuant to the
application of Section 355(e) of the Code (and
<PAGE> 50
any similar provision of state or local law) shall be deemed
to include the present value of any net operating losses of
WWC utilized by WWC to offset gain arising in connection with
the Spin-off pursuant to the application of Section 355(e) of
the Code (and any similar provision of state or local law).
The present value of such WWC net operating losses shall be
determined by mutual agreement among WWC and VoiceStream based
on (i) the maximum federal income tax rate for corporations
applicable for the year during which the Spin-off becomes
effective, (ii) reasonable projections for the WWC Affiliated
Group with regard to the anticipated timing of the utilization
by it of such losses, and (iii) a commercially reasonable
discount rate. If there is a dispute among WWC and VoiceStream
with regard to the preceding calculation, the matter shall be
referred to an independent accounting firm acceptable to all
parties, whose resolution of the matter shall be binding on
the parties.
6. A new Section 1.20 is added to the Agreement as follows:
1.20 Shared Responsibility for Certain Taxes Arising in
Connection with the Spin-off. (a) VoiceStream and each member
of the VoiceStream Group shall indemnify and hold harmless
each of the WWC Affiliated Group members (other than members
of the VoiceStream Group) from and against 50 percent of all
taxes, and 50 percent of all penalties and interest related
thereto, arising in connection with the Spin-off if (1) there
have been acquisitions of a 50-percent or greater interest,
within the meaning of Section 355(e) of the Code, of both WWC
or any of its successors and VoiceStream or any of its
successors, and each such acquisition, standing alone, would
give rise to a tax in connection with the Spin-off pursuant to
the application of Section 355(e) of the Code, or (2) both (x)
a member of the WWC Affiliated Group (other than the members
of the VoiceStream Group) has failed to comply in all material
respects with each written representation made concerning it
in the Ruling Request or WWC has
<PAGE> 51
voluntarily ceased within two years after the Spin-off to
actively conduct the WWC Active Business, as defined in the
Ruling Request, and as a result a tax would arise in
connection with the Spin-off pursuant to the application of
Section 355 of the Code, and (y) a member of the VoiceStream
Group has failed to comply in all material respects with each
written representation made concerning it in the Ruling
Request or VoiceStream has voluntarily ceased within two years
after the Spin-off to actively conduct the VoiceStream Active
Business, as defined in the Ruling Request, and as a result a
tax would arise in connection with the Spin-off pursuant to
the application of Section 355 of the Code. WWC and each
member of the WWC Affiliated Group shall indemnify and hold
harmless each member of the VoiceStream Group from the
remaining taxes, and penalties and interest related thereto,
arising in connection with the Spin- off in the circumstances
set forth in clauses (1) and (2) of the prior sentence.
(b) For purposes of Section 1.20(a), the amount of any tax
arising in connection with the Spin-off pursuant to the
application of Section 355 (including Section 355(e)) of the
Code (and any similar provision of state or local law) shall
be deemed to include the present value of any net operating
losses of WWC utilized by WWC to offset gain arising in
connection with Spin-off pursuant to the application of
Section 355(e) of the Code (and any similar provision of state
or local law). The present value of such WWC net operating
losses shall be determined by mutual agreement among WWC and
VoiceStream based on (i) the maximum federal income tax rate
for corporations applicable for the year during which the
Spin-off becomes effective, (ii) reasonable projections for
the WWC Affiliated Group with regard to the anticipated timing
of the utilization by it of such losses, and (iii) a
commercially reasonable discount rate. If there is a dispute
<PAGE> 52
among WWC and VoiceStream with regard to the preceding
calculation, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of
the matter shall be binding on the parties.
7. A new Section 1.21 is added to the Agreement as follows: 1.21
Proceedings and Payment Related to Code Section 355 Taxes. (a)
Notwithstanding Section 1.10 of this Agreement, WWC and its
duly appointed representatives shall have the right on behalf
of all members of the VoiceStream Group to supervise or
otherwise coordinate any tax examination process and to
negotiate, resolve, settle, and contest any asserted tax
deficiencies or assert and prosecute any claim for tax refund
related to any tax arising as a result of the Spin-off and for
which WWC has sole indemnification responsibility under this
Agreement. WWC shall consult with VoiceStream in connection
with such matters as relate to the VoiceStream Group, shall
give VoiceStream a reasonable opportunity to participate
therein (provided that WWC shall retain ultimate control of
such matters), and shall promptly provide to VoiceStream all
information relating to such matters received by WWC or its
representatives, including providing copies of all notices,
assessments, or similar documents within 10 business days of
receipt.
(b) Notwithstanding Section 1.10 of this Agreement,
VoiceStream and its duly appointed representatives shall have
the right on behalf of all members of the WWC Affiliated Group
to supervise or otherwise coordinate that portion of any tax
examination process and to negotiate, resolve, settle, and
contest that portion of any asserted tax deficiencies or
assert and prosecute that portion of any claim for tax refund
related to any tax arising as a result of the Spin-off and for
which
<PAGE> 53
VoiceStream has sole indemnification responsibility under this
Agreement. VoiceStream shall consult with WWC in connection
with such matters, shall give WWC a reasonable opportunity to
participate therein (provided that VoiceStream shall retain
ultimate control of such matters), and shall promptly provide
to WWC all information relating to such matters received by
VoiceStream or its representatives, including providing copies
of all notices, assessments, or similar documents within 5
business days of receipt. WWC shall promptly notify
VoiceStream in writing upon receipt by WWC of notice of any
pending or threatened federal, state, or local tax audits or
assessments for which VoiceStream has sole indemnification
responsibility under this Agreement, provided that failure to
comply with this provision shall not affect WWC's right to
indemnification hereunder.
(c) Notwithstanding Section 1.10 of this Agreement, WWC and
VoiceStream shall mutually agree how to supervise or otherwise
coordinate that portion of any tax examination process, and
how to negotiate, resolve, settle, and contest that portion of
any asserted tax deficiency, or how to prosecute that portion
of any claim for tax refund, related to any tax for which
there is shared responsibility under Section 1.20.
(d) Any indemnification payment under this Agreement related
to the taxability of the Spin-off under Section 355 of the
Code or Section 311(b) of the Code shall be made at least 3
business days before the relevant tax becomes due (taking into
account any extensions of the due date for payment). Notice of
any payment to be made pursuant to the preceding sentence
shall be given by the indemnified party to the indemnifying
party at least 10 business days before the relevant tax
becomes due.
8. A new section 1.22 is added to the Tax Sharing Agreement as
follows:
<PAGE> 54
1.22 Employee Stock Options. WWC and VoiceStream agree that
following the Spin-off, (a) WWC shall claim a deduction under
section 162 of the Code with respect to the exercise of all
employee stock options to acquire the stock of WWC, and (b)
VoiceStream shall claim a deduction under section 162 of the
Code with respect to the exercise of all employee stock
options to acquire the stock of VoiceStream. The party
claiming the deduction as set forth in the prior sentence is
referred to as the "Employer" and the other party is referred
to as the "non-Employer." In the event that the non-Employer
claims a deduction under the Code (for whatever reason) with
respect to the exercise of an employee stock option to acquire
stock of the Employer, such non-Employer shall compensate the
Employer in an amount equal to the present value of the
Employer's deduction claimed pursuant to this section 1.22.
The present value of the Employer's deduction shall be
determined by mutual agreement among WWC and VoiceStream based
on (i) the maximum federal income tax rate for corporations
applicable for the year during which the deduction was claimed
by the Employer, (ii) reasonable projections for the
Employer's affiliated group with regard to the anticipated
timing of the utilization by it of such deduction, and (iii) a
commercially reasonable discount rate. If there is a dispute
among WWC and VoiceStream with regard to the preceding
calculation, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of
the matter shall be binding on the parties.
9. Section 2.01 of the Tax Sharing Agreement is amended to read
as follows:
2.01 Limitation to Consolidated Return Years. Except as
provided in Section 1.22, the obligations of the parties
hereunder shall relate solely to taxes, net operating losses
and tax attributes arising during taxable years for which the
<PAGE> 55
VoiceStream Group members file a consolidated federal income
Tax Return with WWC, except that if, in a taxable year in
which the VoiceStream Group no longer files a consolidated
federal income Tax Return with WWC, the VoiceStream Group
generates a net operating loss or other tax attribute which it
carries back to a year in which the VoiceStream Group did file
a consolidated federal income Tax Return with WWC, WWC shall
promptly apply for a refund upon notice of such carryback to
WWC and, upon receipt of such refund, shall promptly pay to
VoiceStream the amount of the refund. VoiceStream shall pay
and indemnify WWC for all out-of-pocket expenses including
outside accountant's fees, attorney's fees and reasonable
overhead allocation incurred by WWC in making such refund
claim and WWC shall be entitled to offset any such expenses
against the amount of any refund received.
10. Except as expressly stated herein, the Tax Sharing Agreement
is ratified and confirmed in all respects.
IN WITNESS WHEREOF, this First Amendment has been signed on behalf of
each of the parties on the day set forth.
WESTERN WIRELESS CORPORATION
By: ________________________________
Title:
VOICESTREAM WIRELESS CORPORATION
By: ________________________________
Title:
<PAGE> 56
HUTCHISON TELECOMMUNICATIONS
PCS (USA) LIMITED
By: ________________________________
Title:
<PAGE> 57
EXHIBIT 3.2
ROAMING AGREEMENT
This Agreement is entered into as of __________, 1999 by and between
Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream
Wireless Corporation, a Washington corporation ("VoiceStream").
WHEREAS, WWC and VoiceStream are parties to that certain Roaming
Agreement, dated as of February 17, 1998 (the "February Roaming Agreement"),
setting forth, among other things, certain agreements regarding the rates upon
which each of WWC and VoiceStream provide roaming services to the other;
WHEREAS, in connection with the February Roaming Agreement, WWC and
VoiceStream have entered into that certain Intercarrier Roamer Service Agreement
dated as of _______, 1998 (the "February Roamer Service Agreement"), setting
forth, among other things, the terms upon which each of WWC and VoiceStream
provide roaming services to the other;
WHEREAS, WWC and VoiceStream are parties to that certain Agreement and
Plan of Distribution, dated as of ________, 1999, pursuant to which, among other
things, WWC has agreed, upon the terms and conditions set forth therein, to
distribute the shares of VoiceStream's Common Stock, no par value (the "Common
Stock"), owned by it, which shares represent 80.1% of the Common Stock, to WWC's
shareholders, on the basis of one share of Common Stock for each one share of
WWC's outstanding common stock (the "Spin-Off");
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), VoiceStream and WWC desire to (i) terminate the February
Roaming Agreement and the February Roamer Service Agreement; and (ii) enter into
a new arrangement to provide roaming services to one another at the rates and
upon the terms hereinafter provided; and
WHEREAS, WWC and VoiceStream anticipate entering into a new
Intercarrier Roamer Service Agreement (the "Standard Agreement"), in connection
with this Agreement, a copy of which is attached hereto as Schedule A.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. This Agreement shall become effective on the Spin-Off Effective
Date. If the Spin- Off Effective Date does not occur on or before December 31,
1999, (a) this Agreement shall terminate and be of no further force and effect
whatsoever, and (b) each of the February Roaming Agreement and the February
Roamer Service Agreement shall remain in full force and effect.
<PAGE> 58
2. WWC and VoiceStream hereby agree that each of the February Roaming
Agreement and the February Roamer Service Agreement shall be terminated as of
the Spin-Off Effective Date and thereafter shall be of no further force and
effect.
3. Each of WWC and VoiceStream agrees, on behalf of itself and its
Subsidiaries, that each will provide roaming on its system to the other at a
rate per minute for local service and an additional rate per minute for
long-distance service as the Board of Directors of each of WWC and VoiceStream
have mutually agreed prior to the date hereof.
4. WWC further agrees, on behalf of itself and its Subsidiaries, if
within the control of WWC, to use its reasonable best efforts to provide roaming
technology for the benefit of VoiceStream customers where necessary.
5. Each of WWC and VoiceStream agrees, on behalf of itself and its
Subsidiaries, that all roaming agreements between them shall be modified by
mutual consent to reflect industry technological changes applicable to PCS to
AMPS roaming and vice versa.
6. Any and all disputes, controversies or claims (each a "Dispute")
between the parties relating to the interpretation or enforcement or performance
of this Agreement shall be resolved by binding arbitration by American
Arbitration Association ("AAA") in accordance with its rules, subject to the
following provisions:
(a) There shall be three arbitrators (the "Arbitrators"). Each party
shall appoint one arbitrator within 30 days after giving or receiving notice of
the submission of a Dispute to arbitration. The two arbitrators appointed by the
parties shall appoint the third arbitrator. If a party does not appoint an
arbitrator within such designated period, or if the two appointed arbitrators
fail to appoint a third arbitrator within 30 days after their appointment, the
relevant appointment shall be made by the president of the AAA.
(b) The expenses of the arbitration shall be borne equally by WWC and
VoiceStream, and each party shall bear its own legal fees and expenses;
provided, however, that the Arbitrators shall have discretion to require that
one party pay all or a portion of the expenses of arbitration or the other
party's legal fees and expenses in connection with any particular arbitration.
(c) The Arbitrators shall determine whether and to what extent any
party shall be entitled to damages or equitable relief. No party shall be
entitled to punitive damages or consequential damages or shall be required to
post a bond in connection with equitable relief.
(d) The Arbitrators shall not have the power to add to nor modify any
of the terms or conditions of this Agreement. The Arbitrators' decision shall
not go beyond what is necessary for the interpretation and application of the
provisions of this Agreement in respect of the issue before the Arbitrators. The
Arbitrators' decision and award or permitted remedy, if any, shall be based upon
the
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<PAGE> 59
issue as drafted and submitted by the respective parties and the relevant
and competent evidence adduced at the hearing(s).
(e) The Arbitrators shall have the authority to award any remedy or
relief provided for in this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant (but subject to the remedial limitations
elsewhere set forth in this Agreement, including, but without limitation, the
aforesaid prohibition against punitive and consequential damages). The
Arbitrators written decision shall be rendered within sixty (60) days of the
hearing. The decision reached by the Arbitrators shall be final and binding upon
the parties as to the matter in dispute. To the extent that the relief or remedy
granted by the Arbitrators is relief or remedy on which a court could enter
judgement, a judgement upon the award rendered by the Arbitrators may be entered
in any court having jurisdiction thereof (unless in the case of an award of
damages, the full amount of the award is paid within ten (10) days of its
determination by the Arbitrators). Otherwise, the award shall be binding on the
parties in connection with their continuing performance of this Agreement and in
any subsequent arbitral or judicial proceeding between the parties.
(f) The arbitration shall take place in New York, New York unless
otherwise agreed by the parties.
(g) The arbitration proceeding and all filing, testimony, documents and
information relating to or presented during the arbitration proceeding shall be
disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose.
(h) The parties shall continue performing their respective obligations
under this Agreement notwithstanding the existence of a Dispute while the
Dispute is being resolved unless and until such obligations are terminated,
expire or are suspended in accordance with the provisions hereof.
(i) The Arbitrators may, in their sole discretion, order a pre-hearing
exchange of information including production of documents, exchange of summaries
of testimony or exchange of statements of position, and shall schedule promptly
all discovery and other procedural steps and otherwise assume case management
initiative and control to effect an efficient and expeditious resolution of the
Dispute. At any oral hearing of evidence in connection with an arbitration
proceeding, each party and its counsel shall have the right to examine its
witnesses and to cross- examine the witnesses of the other party. No testimony
of any witness shall be presented in written form unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures contained in this
Section 6 either party may apply to any court having jurisdiction (a) to enforce
this Agreement to arbitrate, (b) to seek provisional injunctive relief so as to
maintain the status quo until the arbitration award is rendered
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<PAGE> 60
or the Dispute is otherwise resolved, or (c) to challenge or vacate any final
judgment, award or decision of the Arbitrators that does not comport with the
express provisions of this Section 6.
7. Notices. All notices, claims or other communications hereunder shall
be in writing and shall be given by delivery in person, by facsimile
transmission, by registered or certified mail (return receipt requested),
postage prepaid or overnight carrier guaranteeing next day delivery:
(a) to VoiceStream:
3650 131 Avenue SE
Bellevue, Washington 98006
U.S.A.
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
U.S.A.
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
U.S.A.
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
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<PAGE> 61
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
U.S.A.
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 7. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; when receipt confirmed, if sent by
facsimile; and the next business day after timely delivery to the courier, if
sent by an overnight air courier service guaranteeing next day delivery.
8. Termination. WWC and VoiceStream agree that notwithstanding any
terms to the contrary in the Standard Agreement or any other related agreement,
this Agreement shall terminate upon the earliest to occur of any of the
following events:
(a) the mutual written agreement of the parties;
(b) upon notice by WWC to VoiceStream, in the event that
VoiceStream or any of its Subsidiaries provides or resells, or acts as the agent
for any other entity offering or reselling, wireless telephony services in any
portion of the geographic area in which WWC or any of its Subsidiaries provides
wireless telephony services other than (i) any such geographic area in which
VoiceStream or any of its Subsidiaries provides such services on the Spin-Off
Effective Date, or (ii) any such geographic area which is mutually agreed to by
the parties after the Spin-Off Effective Date;
(c) upon notice by VoiceStream to WWC, in the event that WWC
or any of its Subsidiaries provides or resells, or acts as the agent for any
other entity offering or reselling, wireless telephony services in any portion
of the geographic area in which VoiceStream or any of its Subsidiaries provides
wireless telephony services other than (i) any such geographic area in which WWC
or any of its Subsidiaries provides such services on the Spin-Off Effective
Date, or (ii) any
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<PAGE> 62
such geographic area which is mutually agreed to by the parties after the
Spin-Off Effective Date; or
(d) upon six (6) months notice by either of WWC or VoiceStream
to the other, in the event of a Change of Control (as defined below).
For purposes of this Section 8, (a) a "Change of Control" means (i)
directly or indirectly a sale, transfer, or other conveyance of all or
substantially all of the assets of VoiceStream or WWC, as the case may be, on a
consolidated basis, to any "person" (as such term is used for purposes of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not applicable), excluding transfers or conveyances
to or among VoiceStream's Subsidiaries or WWC's Subsidiaries, respectively, as
an entirety or substantially as an entirety in one transaction or series of
related transactions, in each case with the effect that a Person owns more than
50% of the aggregate number of votes of all classes of capital stock of
VoiceStream or WWC, respectively, which ordinarily have voting power for the
election of directors VoiceStream or WWC, respectively, immediately after such
transaction; (ii) any "person" (as such term is used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), is or becomes
the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a Person shall be deemed to
have "beneficial ownership" of all shares that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the aggregate number of
votes of all classes of capital stock of VoiceStream or WWC, as the case may be,
which ordinarily have voting power for the election of directors of VoiceStream
or WWC, respectively; (iii) any "person" (as such term is used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) shall
have the right or ability (whether by agreement, proxies, ownership of shares or
otherwise) to elect a majority of the Board of Directors of VoiceStream or WWC,
as the case may be; or (iv) there ceasing to be any Person who serves on the
Board of Directors of both WWC and VoiceStream; and (b) a "Person" means an
individual, partnership, joint-stock company, corporation, trust or
unincorporated organization, limited liability, company, or a government or
agency or political subdivision thereof or any other entity.
9. For purposes of this Agreement, a "Subsidiary" of any party hereto
shall mean any other entity as to which such party, directly or indirectly, owns
more than 50% of the outstanding voting power.
10. Applicable Law. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by and construed in accordance with the internal
laws of the State of Washington.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their behalf by their officers thereunto duly authorized as of the
day and year first above written.
WESTERN WIRELESS CORPORATION VOICESTREAM WIRELESS CORPORATION
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<PAGE> 63
By:______________________________ By:______________________________________
Name:____________________________ Name:____________________________________
Its:_____________________________ Its:_____________________________________
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<PAGE> 64
EXHIBIT 3.3
SPECTRUM ALLOCATION AND NON-COMPETITION AGREEMENT
This SPECTRUM ALLOCATION AND NON-COMPETITION AGREEMENT (the
"Agreement"), dated as of __________, 1999, by and between Western Wireless
Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless
Corporation, a Delaware corporation ("VoiceStream").
W I T N E S S E T H:
WHEREAS, VoiceStream holds, directly or through its Subsidiaries (as
hereinafter defined), personal communications services licenses operating in the
1850-1910 MHz and 1930- 1990 MHz bands issued by the Federal Communications
Commission ("FCC") and is engaged in the business of acquiring, owning,
constructing and operating wireless telecommunications systems utilizing such
licenses and businesses ancillary thereto (the "PCS Business");
WHEREAS, WWC holds, directly or through its Subsidiaries, cellular
telephone licenses operating in the 824-849 MHz and 869-894 MHz bands issued by
the FCC and is engaged in the business of acquiring, owning, constructing and
operating wireless telecommunications systems utilizing such licenses and
businesses ancillary thereto (the "Cellular Business");
WHEREAS, WWC and VoiceStream operate in distinct segments of the
wireless telecommunications industry under different brand names, with WWC
operating a rural-focused cellular business and VoiceStream operating an
urban-focused digital PCS business;
WHEREAS, VoiceStream and WWC are parties to that certain Agreement and
Plan of Distribution, dated of as of ________________, 1999 (the "Distribution
Agreement"), pursuant to which, among other things, WWC has agreed upon the
terms and conditions set forth therein, to distribute the shares of
VoiceStream's Common Stock, no par value per share ("Common Stock"), owned by
it, which shares represent 80.1% of the issued and outstanding shares of Common
Stock, to its shareholders on the basis of one share of Common Stock for each
one share of WWC's outstanding common stock (the "Spin-Off");
WHEREAS, the Board of Directors of WWC has determined that it is in the
best interests of WWC's stockholders to continue to expand and conduct its
Cellular Business;
WHEREAS, the Board of Directors of VoiceStream has determined it is in
the best interests of VoiceStream's stockholders to continue to expand and
conduct its PCS Business;
WHEREAS, the Board of Directors of WWC and the Board of Directors of
VoiceStream believe that during a transition period of three (3) years, or until
there has been a VoiceStream Change of Control (as hereinafter defined) or a WWC
Change of Control (as hereinafter defined), that it is in the best interests of
each of the companies to expand its respective business and services, thereby
becoming more competitive with other providers of its services;
<PAGE> 65
WHEREAS, the Spin-Off will allow each of WWC and VoiceStream to more
readily expand their respective businesses, as well as pursue strategies and
focus on objectives appropriate to its business; and
WHEREAS, simultaneously with the consummation of the Spin-Off (the date
of such consummation being hereinafter referred to as the "Spin-Off Effective
Date"), WWC and VoiceStream desire to enter into certain agreements (i)
concerning the allocation between them of certain assets and business
opportunities hereafter acquired by either of them relating to the wireless
telecommunications business, and (ii) not to solicit the other's employees, all
on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, VoiceStream and WWC hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms have the
respective meanings set forth below:
"AAA" has the meaning set forth in Section 10.
"Agreement" has the meaning set forth in the preamble.
"Arbitrators" has the meaning set forth in Section 10.
"Cellular Business" has the meaning set forth in the recitals.
"Change of Control" shall mean with respect to any Person (i) directly
or indirectly a sale, transfer, or other conveyance of all or substantially all
of the assets of such Person, on a consolidated basis, to any "person" (as such
term is used for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable), excluding transfers or conveyances to or among such
Person's Subsidiaries, as an entirety or substantially as an entirety in one
transaction or series of related transactions, in each case with the effect that
a Person owns more than 50% of the aggregate number of votes of all classes of
capital stock of such Person which ordinarily have voting power for the election
of directors, managers or trustees of the transferee entity immediately after
such transaction; (ii) any "person" (as such term is used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), is or
becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a Person shall be
deemed to have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the aggregate
number of votes of all classes of capital stock of such Person which ordinarily
have voting power for the election of directors of such Person; or (iii) any
"person" (as such term is
<PAGE> 66
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) shall have the right or ability (whether by agreement, proxies,
ownership of shares or otherwise) to elect a majority of the Board of Directors
of such Person.
"CIRI" means Cook Inlet Western Wireless PV/SS PCS L.P. or Cook
Inlet/VoiceStream PCS LLC.
"Common Stock" has the meaning set forth in the recitals.
"Dispute" has the meaning set forth in Section 10.
"Distribution Agreement" has the meaning set forth in the recitals.
"Exchange Act" means the Securities Exchange Act, as amended, and any
successor act thereto.
"FCC" has the meaning set forth in the recitals.
"PCS Business" has the meaning set forth in the recitals.
"Person" means an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, limited liability company, or
a government or agency or political subdivision thereof or any other entity.
"Subsidiary" means, as to any Person, another Person of which more than
50% of the voting power is owned, directly or indirectly, by such Person.
"Term" has the meaning set forth in Section 6.
"VoiceStream" has the meaning set forth in the preamble.
"VoiceStream Change of Control" means (a) a Change of Control of
VoiceStream, or (b) (i) John W. Stanton ceasing to be Chairman of the Board of
Directors of VoiceStream, and (ii) there ceasing to be any Person who serves on
the Board of Directors of both WWC and VoiceStream.
"VoiceStream Group" means VoiceStream, its Subsidiaries and CIRI.
"VoiceStream Voting Agreement" means that certain Voting Agreement,
dated as of __________, 1999, among VoiceStream and the shareholders of
VoiceStream party thereto.
"WWC" has the meaning set forth in the preamble.
<PAGE> 67
"WWC Change of Control" means (a) a Change of Control of WWC, or (b)
(i) John W. Stanton ceasing to be Chairman of the Board of Directors of WWC, and
(ii) there ceasing to be any Person who serves on the Board of Directors of both
WWC and VoiceStream.
"WWC Group" means WWC and its Subsidiaries.
"WWC Voting Agreement" means that certain Voting Agreement, dated as of
May 13, 1996, among WWC and the shareholders of WWC party thereto.
When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The use of a
gender herein shall be deemed to include the neuter, masculine and feminine
genders whenever necessary or appropriate. Whenever the word "herein,"
"hereunder" or "hereof" is used in this Agreement, it shall be deemed to refer
to this Agreement and not to a particular Section of this Agreement unless
expressly stated otherwise.
2. Allocation of Certain Opportunities.
(a) Agreements Regarding Opportunities in the PCS Business. During the
Term, WWC agrees that:
(i) it will not, and it will not permit any member of the WWC
Group to, pursue any opportunity which constitutes primarily a PCS Business
(which shall include for this purpose the opportunity to acquire any expansion
spectrum allocated by the FCC to broadband personal communications services) in
the United States, unless, (a) prior to pursuing such opportunity, WWC notifies
VoiceStream, in writing, of said opportunity and (b) within seven (7) business
days of delivery of such notice, VoiceStream has either (x) not notified WWC, in
writing, that a member of the VoiceStream Group is pursuing, or has determined
to pursue, such opportunity or, (y) has notified WWC, in writing, that no member
of the VoiceStream Group is pursuing, and each member of the VoiceStream Group
has determined not to pursue, such opportunity. In the event that within such
seven (7) business day period, VoiceStream has not notified WWC, in writing,
that a member of the VoiceStream Group is pursuing, or has determined to pursue,
such opportunity, or has notified WWC, in writing, that no member of the
VoiceStream Group is pursuing, and each member of the VoiceStream Group has
determined not to pursue, such opportunity, any member of the WWC Group may, in
its discretion, pursue such opportunity free of any rights of any member of the
VoiceStream Group under this Agreement. In the event that within such seven (7)
business day period, VoiceStream has notified WWC, in writing, that a member of
the VoiceStream Group is pursuing, or has determined to pursue, such
opportunity, and thereafter determines to discontinue pursuing such opportunity,
VoiceStream shall immediately notify WWC, in writing, of such determination and
upon receipt of said notification, any member of the WWC Group may, in its
discretion, pursue such opportunity for
<PAGE> 68
its own purpose free of any rights of any member of the VoiceStream Group under
this Agreement; and
(ii) in the event any member of the WWC Group acquires any
businesses or assets which include businesses or assets which constitute a PCS
Business, such member will offer VoiceStream the opportunity to acquire any such
businesses or assets constituting the PCS Business at a purchase price equal to
that portion of the purchase price paid by the WWC Group which is allocable to
the PCS Business. The boards of directors of WWC and VoiceStream shall endeavor
to determine in good faith the portion of the purchase price allocable to the
PCS Business. If WWC and VoiceStream are unable to agree upon the portion of the
purchase price allocable to the PCS Business, the determination of the portion
thereof allocable to the PCS Business shall be determined by arbitration
pursuant to Section 10 hereof.
(b) Agreements Regarding Opportunities in the Cellular Business. During
the Term, VoiceStream agrees that:
(i) it will not, and it will not permit any member of the
VoiceStream Group to, pursue any opportunity which constitutes primarily a
Cellular Business (which shall include for this purpose the opportunity to
acquire any expansion spectrum allocated by the FCC to cellular services) in the
United States, unless, (a) prior to pursuing such opportunity, VoiceStream
notifies WWC, in writing, of said opportunity and (b) within seven (7) business
days of delivery of such notice, WWC has either (x) not notified VoiceStream, in
writing, that a member of the WWC Group is pursuing, or has determined to
pursue, such opportunity, or (y) has notified VoiceStream, in writing, that no
member of the WWC Group is pursuing, and each member of the WWC Group has
determined not to pursue, such opportunity. In the event that within such seven
(7) business day period, WWC has not notified VoiceStream, in writing, that a
member of the WWC Group is pursuing, or has determined to pursue, such
opportunity, or has notified VoiceStream, in writing, that no member of the WWC
Group is pursuing, and each member of the WWC Group has determined not to
pursue, such opportunity, any member of the VoiceStream Group may, in its
discretion, pursue such opportunity free of any rights of any member of the WWC
Group under this Agreement. In the event that within such seven (7) business day
period, WWC has notified VoiceStream, in writing, that a member of the WWC Group
is pursuing, or has determined to pursue, such opportunity, and thereafter
determines to discontinue pursuing such opportunity, WWC shall immediately
notify VoiceStream, in writing, of such determination and upon receipt of said
notification, any member of the VoiceStream Group may, in its discretion, pursue
such opportunity for its own purpose free of any rights of any member of the WWC
Group under this Agreement; and
(ii) in the event any member of the VoiceStream Group acquires
any business or assets which include businesses or assets which constitute a
Cellular Business, such member will offer WWC the opportunity to acquire any
such businesses or assets constituting the Cellular Business at a purchase price
equal to that portion of the purchase price paid by the VoiceStream Group which
is allocable to the Cellular Business. The boards of directors of WWC and
VoiceStream shall endeavor to determine in good faith the portion of the
purchase price allocable
<PAGE> 69
to the Cellular Business. If WWC and VoiceStream are unable to agree upon the
portion of the purchase price allocable to the Cellular Business, the
determination of the portion thereof allocable to the Cellular Business shall be
determined by arbitration pursuant to Section 10 hereof.
(c) Overlapping Area. During the Term:
(i) VoiceStream agrees it will not, and it will not permit any
member of the VoiceStream Group to, provide or resell, or act as the agent for
any other entity offering or reselling, wireless telephony services in any
portion of the geographic area in which any member of the WWC Group provides
wireless telephony services other than (x) any such geographic area in which any
member of the VoiceStream Group provides such services on the Spin-Off Effective
Date, or (y) any such geographic area which is mutually agreed to by the parties
after the Spin-Off Effective Date; and
(ii) WWC agrees it will not, and it will not permit any member
of the WWC Group to, provide or resell, or act as the agent for any other entity
offering or reselling, wireless telephony services in any portion of the
geographic area in which any member of the VoiceStream Group provides wireless
telephony services other than (x) any such geographic area in which any member
of the WWC Group provides such services on the Spin-Off Effective Date, or (y)
any such geographic area which is mutually agreed to by the parties after the
Spin- Off Effective Date.
(d) Agreement Regarding Other Opportunities. During the Term, WWC and
VoiceStream agree that, with respect to any opportunity in the wireless
telecommunications business in the United States which is related to neither a
PCS Business nor a Cellular Business, WWC and VoiceStream shall divide such
opportunity equally between them, unless WWC and VoiceStream agree to another
arrangement with respect to such opportunity.
3. Employees.
(a) WWC Employees. During the Term, WWC shall not, and shall not permit
any member of the WWC Group to, without VoiceStream's prior written consent,
directly or indirectly, (i) solicit or encourage any employee of any member of
the VoiceStream Group to leave the employ of such member, or (ii) hire or offer
to hire any employee who has left the employ of a member of the VoiceStream
Group, within three hundred and sixty-five (365) days after the termination of
such employee's employment with such member of the VoiceStream Group.
(b) VoiceStream Employees. During the Term, VoiceStream shall not, and
shall not permit any member of the VoiceStream Group to, without WWC's prior
written consent, directly or indirectly, (i) solicit or encourage any employee
of any member of the WWC Group to leave the employ of such member, or (ii) hire
or offer to hire any employee who has left the employ of
<PAGE> 70
a member of the WWC Group, within three hundred and sixty-five (365) days after
the termination of such employee's employment with such member of the WWC Group.
(c) Transition Employees. Notwithstanding anything contained in this
Section 3 to the contrary, with respect to any employee of any member of (i) the
WWC Group who is made available to any member of the VoiceStream Group, or (ii)
the VoiceStream Group who is made available to any member of the WWC Group, in
each case, in accordance with Section 2.1.2 of the Distribution Agreement, WWC
and VoiceStream hereby agree to enter into mutually satisfactory agreements as
to whether a member of the WWC Group or a member of the VoiceStream Group will
employ each such employee after the termination of the provisions of Section
2.1.2 of the Distribution Agreement in accordance with its terms.
4. Agreements Regarding CIRI.
WWC and VoiceStream hereby agree that any of the covenants and
agreements of VoiceStream contained herein which require VoiceStream to cause or
permit CIRI to act or refrain from acting, shall be satisfied by VoiceStream if
VoiceStream votes its respective interests in CIRI, and requests the other
equity holders of CIRI to vote their respective interests in CIRI, in favor of
or against, as the case may be, the action proposed to be taken by CIRI. It is
understood that VoiceStream does not control CIRI and, accordingly, the other
equity holders of CIRI might be able to cause CIRI to take an action or refrain
from taking an action contrary to VoiceStream's expressed request.
5. Representations and Warranties.
Each of WWC and VoiceStream hereby represents and warrants to the other
as follows:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation with full power and
authority to execute, deliver and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on its part and this Agreement constitutes its
legal, valid and binding obligation enforceable against it in accordance with
its terms; and
(c) Neither the execution, delivery or performance of this Agreement by
it, nor the consummation of the transactions contemplated hereby will, with or
without the giving of notice of passage of time, or both conflict with, result
in a default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, (i) any provision of its (or any of its
Subsidiaries') certificate of incorporation or by-laws, (ii) any material note,
bond, indenture, mortgage, deed of trust, contract, agreement, lease or other
instrument or obligation to which it, or any of its Subsidiaries, is a party or
by which it, or any of its Subsidiaries, or its, or any of its
<PAGE> 71
Subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
Subsidiaries, is a party or by which it, or any of its Subsidiaries, or any of
its, or any of its Subsidiaries', properties are bound or affected.
6. Effectiveness; Term.
This Agreement shall be effective for a period after the Spin-Off
Effective Date through and including the earliest to occur of any of the
following events (the "Term"):
(a) the third anniversary of the Spin-Off Effective Date;
(b) mutual written agreement of WWC and VoiceStream;
(c) a WWC Change of Control; or
(d) a VoiceStream Change of Control;
provided, however, that if the Spin-Off Effective Date does not occur on or
before December 31, 1999, this Agreement shall terminate and be of no further
force and effect whatsoever.
7. Waiver; Amendments.
This Agreement may be amended, modified or supplemental only by written
agreement of the parties. No provision in this Agreement shall be deemed waived
except by an instrument in writing signed by the party waiving such provision.
Any waiver by any party of any of its rights under this Agreement or of any
breach of this Agreement shall not constitute a waiver of any other rights or of
any other or future breach.
8. Specific Performance.
Each of the WWC and VoiceStream hereby acknowledges and agrees that, in
the event of any breach of this Agreement, the non-breaching party would be
irreparably harmed and could not be made whole by monetary damages. Accordingly,
each of the WWC and VoiceStream agrees that the other party, in addition to any
other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of this Agreement.
9. Notices.
All notices, claims or other communications hereunder shall be in
writing and shall be given by delivery in person, by facsimile transmission, by
registered or certified mail (return receipt requested), postage prepaid or
overnight carrier guaranteeing next day delivery:
(a) to VoiceStream:
<PAGE> 72
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
<PAGE> 73
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 9. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; when receipt confirmed, if sent by
facsimile; and the next business day after timely delivery to the courier, if
sent by an overnight air courier service guaranteeing next day delivery.
10. Arbitration.
Any and all disputes, controversies or claims (each a "Dispute")
between the parties relating to the interpretation or enforcement or performance
of this Agreement shall be resolved by binding arbitration by American
Arbitration Association ("AAA") in accordance with its rules, subject to the
following provisions:
(a) There shall be three arbitrators (the "Arbitrators"). Each party
shall appoint one arbitrator within 30 days after giving or receiving notice of
the submission of a Dispute to arbitration. The two arbitrators appointed by the
parties shall appoint the third arbitrator. If a party does not appoint an
arbitrator within such designated period, or if the two appointed arbitrators
fail to appoint a third arbitrator within 30 days after their appointment, the
relevant appointment shall be made by the President of the AAA.
(b) The expenses of the arbitration shall be borne equally by WWC and
VoiceStream, and each party shall bear its own legal fees and expenses;
provided, however, that the Arbitrators shall have discretion to require that
one party pay all or a portion of the expenses of arbitration or the other
party's legal fees and expenses in connection with any particular arbitration.
(c) The Arbitrators shall determine whether and to what extent any
party shall be entitled to damages or equitable relief. No party shall be
entitled to punitive damages or consequential damages or shall be required to
post a bond in connection with equitable relief.
(d) The Arbitrators shall not have the power to add to nor modify any
of the terms or conditions of this Agreement. The Arbitrators' decision shall
not go beyond what is necessary for the interpretation and application of the
provisions of this Agreement in respect of the issue before the Arbitrators. The
Arbitrators' decision and award or permitted remedy, if any, shall be based upon
the issue as drafted and submitted by the respective parties and the relevant
and competent evidence adduced at the hearing(s).
<PAGE> 74
(e) The Arbitrators shall have the authority to award any remedy or
relief provided for in this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant (but subject to the remedial limitations
elsewhere set forth in this Agreement, including, but without limitation, the
aforesaid prohibition against punitive and consequential damages). The
Arbitrators written decision shall be rendered within sixty (60) days of the
hearing. The decision reached by the Arbitrators shall be final and binding upon
the parties as to the matter in dispute. To the extent that the relief or remedy
granted by the Arbitrators is relief or remedy on which a court could enter
judgement, a judgement upon the award rendered by the Arbitrators may be entered
in any court having jurisdiction thereof (unless in the case of an award of
damages, the full amount of the award is paid within ten (10) days of its
determination by the Arbitrators). Otherwise, the award shall be binding on the
parties in connection with their continuing performance of this Agreement and in
any subsequent arbitral or judicial proceeding between the parties.
(f) The arbitration shall take place in New York, New York unless
otherwise agreed by the parties.
(g) The arbitration proceeding and all filing, testimony, documents and
information relating to or presented during the arbitration proceeding shall be
disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose.
(h) The parties shall continue performing their respective obligations
under this Agreement notwithstanding the existence of a Dispute while the
Dispute is being resolved unless and until such obligations are terminated,
expire or are suspended in accordance with the provisions hereof.
(i) The Arbitrators may, in their sole discretion, order a pre-hearing
exchange of information including production of documents, exchange of summaries
of testimony or exchange of statements of position, and shall schedule promptly
all discovery and other procedural steps and otherwise assume case management
initiative and control to effect an efficient and expeditious resolution of the
Dispute. At any oral hearing of evidence in connection with an arbitration
proceeding, each party and its counsel shall have the right to examine its
witnesses and to cross-examine the witnesses of the other party. No testimony of
any witness shall be presented in written form unless the opposing party or
parties shall have the opportunity to cross-examine such witness, except as the
parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures contained in this
Section 10 either party may apply to any court having jurisdiction (a) to
enforce this Agreement to arbitrate, (b) to seek provisional injunctive relief
so as to maintain the status quo until the arbitration award is rendered or the
Dispute is otherwise resolved, or (c) to challenge or vacate any final judgment,
award or decision of the Arbitrators that does not comport with the express
provisions of this Section 10.
<PAGE> 75
11. Entire Agreement.
This Agreement constitutes the entire understanding of the parties
hereto with respect to the subject matter hereof and supersedes all prior
understandings among the parties hereto with respect to such subject matter.
12. Section Headings.
The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.
13. Applicable Law.
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder, shall be determined under,
governed by and construed in accordance with the internal laws of the State of
New York.
14. Failure to Pursue Remedies.
The failure of any party hereto to seek redress for violation of, or to
insist upon the strict performance of, any provision of this Agreement shall not
prevent a subsequent act, which would have originally constituted a violation,
from having the effect of an original violation.
15. Cumulative Remedies.
The rights and remedies provided by this Agreement are cumulative and
the use of any one right or remedy by any party shall not preclude or waive its
right to use any or all other remedies except as otherwise expressly provided in
this Agreement. Such rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
16. Severability.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
17. Successors and Assigns.
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each party hereto.
18. Further Assurances.
<PAGE> 76
Each party hereto at the request of the other party shall, from time to
time, execute and deliver such other assignments, transfers, conveyances and
other instruments and documents and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting complete consummation of
this Agreement and the transactions herein contemplated.
19. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which together shall be
considered the same agreement.
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
VOICESTREAM WIRELESS CORPORATION
By:______________________________________
Name:
Title:
WESTERN WIRELESS CORPORATION
By:______________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VOICESTREAM WIRELESS CORPORATION II
ARTICLE I
Pursuant to RCW 23B.10.070, the following Amended and Restated Articles
of Incorporation are hereby submitted for filing:
The name of the corporation is VOICESTREAM WIRELESS CORPORATION II.
ARTICLE II
2.1 Authorized Shares. The total number of shares of stock that the
corporation shall have authority to issue is three hundred fifty million
(350,000,000), which shall consist of three hundred million (300,000,000) shares
of Common Stock, no par value per share ("Common Stock"), and fifty million
(50,000,000) shares of Preferred Stock, no par value per share ("Preferred
Stock").
2.2 Rights and Preferences of Common Stock. The holders of Common Stock
shall have the following rights and preferences, subject to the rights and
preferences of holders of Preferred Stock, as determined by the Board of
Directors pursuant to Section 2.3 of this Article II.
(a) Dividends. Holders of Common Stock shall be entitled to
receive such dividends, payable in cash or otherwise, as may be declared thereon
by the Board of Directors from time to time out of assets or funds of the
corporation that are legally available therefor.
(b) Voting.
(i) On all matters upon which shareholders are entitled
to vote, every holder of Common Stock shall be entitled to one (1) vote in
person or by proxy for each share of Common Stock standing in its name on the
transfer books of the corporation.
(ii) (A) Notwithstanding anything to the contrary
contained in these Articles of Incorporation, if a Regulated Shareholder and its
Affiliates own and have the right to vote shares of Common Stock having
aggregate Voting Power in excess of 24.9% (the "Maximum Voting Percentage") of
the Total Voting Power, then, for so long as such Regulated Shareholder and its
Affiliates shall own and have the right to vote shares of Common Stock having
aggregate Voting Power in excess of the Maximum Voting Percentage, that number
of shares of Common Stock which results in such Regulated Shareholder and its
Affiliates having aggregate Voting Power in excess of the Maximum Voting
Percentage shall not be entitled to
<PAGE> 2
vote on any matter on which the shareholders of the corporation shall be
entitled to vote, and such number of shares shall not be included in determining
the number of shares voting or entitled to vote on any such matters.
(B) As used in this Section 2.2(b)(ii) and Section 10.1,
the following terms shall have the following meanings:
(1) "Affiliate" shall mean with respect to any
Person, any other Person, directly or indirectly controlling, controlled by or
under common control with such Person. For the purpose of the above definition,
the term "control" (including with correlative meaning, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
(2) "Person" shall mean an individual, a
partnership, a corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
(3) "Regulated Shareholder" shall mean any
holder of shares of capital stock of the Company that is, or an Affiliate of
which is, subject to the provisions of Rule 312(g) of the General Rules of the
New York Stock Exchange (or any successor to such Rule) and was, or its
Affiliate was, a holder of shares of capital stock of the Company on the date
that capital stock is held by shareholders other than the shareholders on April
1, 1999.
(4) "Total Voting Power" shall mean the total
number of votes attributable to all shares of capital stock of the corporation
outstanding and entitled to vote on any particular matter, other than the number
of shares, if any, held by the Regulated Shareholders or their Affiliates which,
pursuant to this Section 2.2(b)(ii), are non-voting.
(5) "Voting Power" shall mean the number of
votes attributable to the total number of shares of capital stock of the
corporation owned by a Regulated Shareholder and its Affiliates and with respect
to which they shall have the right to vote on any particular matter before
giving effect to this Section 2.2(b)(ii).
(c) Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation, holders
of Common Stock shall receive a per share distribution of any assets remaining
after payment or provision for liabilities and the liquidation preference on
Preferred Stock, if any.
2.3 Rights and Preferences of Preferred Stock. The Board of Directors
shall have the full authority permitted by law to divide the authorized and
unissued shares of Preferred Stock into series, and to provide for the issuance
of such shares in an aggregate amount not exceeding in the aggregate the number
of shares of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time, and to determine with respect to each such series the
voting powers, if any (which voting powers, if granted, may be full or limited),
designations,
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preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions relating thereto, including
without limiting the generality of the foregoing, the voting rights relating to
shares of Preferred Stock of any series (which may not exceed one vote per share
or a fraction of a vote per share, which may vary over time and which may be
applicable generally or only upon the happening and continuance of stated events
or conditions), the rate of dividend to which holders of Preferred Stock of any
series may be entitled (which may be cumulative or noncumulative), the rights of
holders of Preferred Stock of any series in the event of liquidation,
dissolution or winding up of the affairs of the corporation, the rights, if any,
of holders of Preferred Stock of any series to convert or exchange such shares
of Preferred Stock of such series for shares of any other series of capital
stock or for any other securities, property or assets of the corporation
(including the determination of the price or prices or the rate or rates
applicable to such rights to convert or exchange and the adjustment thereof, the
time or times during which the right to convert or exchange shall be applicable
and the time or times during which a particular price or rate shall be
applicable), whether or not the shares of that series shall be redeemable, and
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates, and whether any shares of that series shall be
redeemed pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.
Before the corporation shall issue any shares of Preferred Stock of any
series, articles of amendment in a form meeting the requirements of the
Washington Business Corporation Act (the "Act") setting forth the terms of the
series and fixing the voting powers, designations, preferences, the relative,
participating, optional or other special rights, if any, and the qualifications,
limitations and restrictions, if any, relating to the shares of Preferred Stock
of such series, and the number of shares of Preferred Stock of such series
authorized by the Board of Directors to be issued shall be filed with the
Secretary of State of the State of Washington in the manner prescribed by the
Act, and shall become effective without any shareholder action. The Board of
Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any series subsequent to the issuance of shares of that series.
2.4 Issuance of Stock. The shares of capital stock of the corporation
may be issued by the corporation from time to time for such consideration as
from time to time may be fixed by the Board of Directors of the corporation; and
all issued shares of the capital stock of the corporation shall be deemed fully
paid and non-assessable.
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ARTICLE III
The street address of the registered office of the corporation in the
State of Washington is 1010 Union Ave S.E., Olympia, Washington 98501 and the
name of the registered agent of the corporation at such address is Corporation
Service Company.
ARTICLE IV
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for:
a. Acts or omissions involving intentional misconduct by the director or
a knowing violation of law by the director;
b. Conduct violating Section 23B.08.310 of the Act (which involves
liability for unlawful distributions by the corporation);
c. Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not legally
entitled.
If the Act is amended to authorize corporate action further eliminating
or limiting the personal liability of directors or officers, then the liability
of a director or officer of the corporation shall be eliminated or limited to
the fullest extent permitted by the Act, as so amended. The provisions of this
Article IV shall be deemed to be a contract with each director and officer of
the corporation who serves as such at any time while such provisions are in
effect, and each director and officer entitled to the benefits hereof shall be
deemed to be serving as such in reliance on the provisions of this Article IV.
Any repeal or modification of this Article IV by the shareholders of the
corporation shall not adversely affect any right or protection of a director or
officer of the corporation with respect to any acts or omissions of such
director or officer occurring prior to such repeal or modification.
ARTICLE V
5.1 Indemnification. The corporation shall indemnify its directors and
officers to the full extent permitted by applicable law. The corporation shall
advance expenses for such persons pursuant to the terms set forth in the Bylaws,
or in a separate directors' resolution or contract.
5.2 Authorization. The Board of Directors may take such action as is
necessary to carry out these indemnification and expense advancement provisions.
It is expressly empowered to adopt, approve, and amend from time to time such
Bylaws, resolutions, contracts, or further indemnification and expense
advancement arrangements implementing these provisions as may be permitted by
law, including the purchase and maintenance of insurance. Such Bylaws,
resolutions, contracts, or further arrangements shall include but not be limited
to implementing the manner in which determinations as to any indemnity or
advancement of expenses shall be made.
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5.3 Amendment. No amendment or repeal of this Article V shall apply to
or have any effect on any right to indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or repeal.
ARTICLE VI
Shareholders of the corporation shall not have preemptive rights to
acquire additional shares issued by the corporation.
ARTICLE VII
Shareholders of the corporation shall not have cumulative voting rights.
ARTICLE VIII
8.1 Number of Directors. The number of directors of this corporation
shall be fixed in the manner specified by the bylaws of this corporation. The
name and address of the first director of the corporation shall be:
Alan R. Bender
3650 131st Ave. S.E.
Bellevue, WA 98006
The first directors shall serve until the first annual meeting of the
shareholders and until their successors are elected and qualified.
8.2 Removal. Any director or the entire Board of Directors may be
removed from office at any time, at a duly called special meeting of
shareholders, by the affirmative vote of shareholders which satisfies the
requirements of Article X applicable to amendment, modification, or repeal of
these Articles.
8.3 Vacancies. Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority of the directors then in office, though less than a quorum, by the sole
remaining director or by action of the shareholders. All directors elected to
fill vacancies shall hold office for a term expiring at the next annual meeting
of shareholders, but shall continue to serve despite the expiration of the
director's term until his or her successor shall have been elected and qualified
or until there is a decrease in the number of directors. No decrease in the
number of directors constituting the Board of Directors shall shorten or
eliminate the term of any incumbent director.
ARTICLE IX
9.1 Redemption. Notwithstanding any other provision of these Articles of
Incorporation to the contrary, outstanding shares of capital stock of the
corporation held by Disqualified Holders shall always be subject to redemption
by the corporation, by action of the Board of Directors, if, in the judgment of
the Board of Directors, such action should be taken, pursuant to RCW 23B.06.010
or any other applicable provision of law, to the extent necessary to prevent the
loss or secure the reinstatement of any license or franchise from any
governmental
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agency held by the corporation or any of its subsidiaries to conduct any portion
of the business of the corporation or any of its subsidiaries, which license or
franchise is conditioned upon some or all of the holders of the corporation's
stock possessing prescribed qualifications; provided, however, that prior to
exercising any redemption right hereunder, the corporation shall use reasonable
efforts to obtain all necessary waivers or approvals from the appropriate
governmental agencies in order to prevent such loss or secure such reinstatement
without the necessity of redemption. The terms and conditions of such redemption
shall be as follows:
(a) the redemption price of the shares to be redeemed pursuant
to this Article IX shall be equal to the lesser of (i) the Fair Market Value or
(ii) if such stock was purchased by such Disqualified Holder within one year of
the Redemption Date, such Disqualified Holder's purchase price for such shares;
(b) the redemption price of such shares may be paid in cash,
Redemption Securities or any combination thereof;
(c) if less than all the shares held by Disqualified Holders are
to be redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection first
of the most recently purchased shares thereof, selection by lot or selection in
any other manner determined by the Board of Directors;
(d) at least 30 days' written notice of the Redemption Date
shall be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder); provided, however, that only 10
days' written notice of the Redemption Date shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed; provided, further, that the record holders of the shares
selected to be redeemed may transfer such shares prior to the Redemption Date to
any holder that is not a Disqualified Holder and thereafter, for so long as such
shares are note held by a Disqualified Holder, such shares shall not be subject
to redemption by the corporation;
(e) from and after the Redemption Date, any and all rights of
whatever nature (including without limitation any rights to vote or participate
in dividends declared on stock of the same class or series as such shares) with
respect to the shares selected from redemption held by Disqualified Holders on
the Redemption Date shall cease and terminate and such Disqualified Holders
thenceforth shall be entitled only to receive the cash or Redemption Securities
payable upon redemption; and
(f) such other terms and conditions as the Board of Directors
shall determine.
9.2 Definitions. For purposes of this Article IX:
(a) "Disqualified Holder" shall mean any holder of capital
shares of stock of the corporation whose holding of such stock, either
individually or when taken together with the holding of shares of capital stock
of the corporation by any other holders, may result, in the
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judgment of the Board of Directors, in the loss of, or the failure to secure the
reinstatement of, any license or franchise from any governmental agency held by
the corporation or any of its subsidiaries or affiliates to conduct any portion
of the business of the corporation or any of its subsidiaries or affiliates.
(b) "Fair Market Value" of a share of the corporation's stock of
any class or series shall mean the average Closing Price for such a share for
each of the forty-five (45) most recent days on which shares of stock of such
class or series shall have been traded preceding the day on which notice of
redemption shall be given pursuant to Section 9.1(d) of this Article IX;
provided, however, that if shares of stock of such class or series are not
traded on any United States securities exchange registered under the Securities
Exchange Act of 1934 (a "Securities Exchange") or in the National Association of
Securities Dealers, Inc. Automated Quotations Systems or any other system then
in use (a "Quotation System"), "Fair Market Value" shall be determined by the
Board of Directors in good faith. For purposes of this definition "Closing
Price" on any day means the reported closing sales price or, in case no such
sale takes place, the average of the reported closing bid and asked prices on
the principal Securities Exchange on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing sales price or bid
quotation for such stock on the applicable Quotation System.
(c) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the corporation pursuant
to this Article IX.
(d) "Redemption Securities" shall mean any debt or equity
securities of the corporation, any of its subsidiaries or affiliates or any
other corporation, or any combination thereof, having such terms and conditions
as shall be approved by the Board of Directors and which, together with any cash
to be paid as part of the redemption price, in the opinion of any nationally
recognized investment banking firm selected by the Board of Directors (which may
be a firm which provides other investment banking, brokerage or other services
to the corporation), has a value, at the time notice of redemption is given
pursuant to Section 9.1(d) of this Article IX, at least equal to the price
required to be paid pursuant to Section 9.1(a) of this Article IX (assuming, in
the case of Redemption Securities to be publicly traded, such Redemption
Securities were fully distributed and subject only to normal trading activity).
ARTICLE X
10.1 Repeal of and Amendment to Articles of Incorporation. Unless
otherwise provided herein, the provisions of these Articles of Incorporation may
be repealed or amended upon the affirmative vote of the holders of not less than
a majority of the Total Voting Power of the corporation. The provisions set
forth in Article VI, Article VII, Article IX and this sentence of Section 10.1
of Article X herein may not be repealed or amended in any respect, unless such
action is approved by the affirmative vote of the holders of not less than
66-2/3% of the Total Voting Power.
10.2 Repeal of and Amendment to Bylaws. In furtherance and not in
limitation of the powers conferred by the Act, the Board of Directors is
expressly authorized to make, adopt, repeal, alter, amend, and rescind the
Bylaws of the corporation by a
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resolution adopted by a majority of the directors. The shareholders shall also
have the power to adopt, amend or repeal the Bylaws of the corporation as set
forth therein.
10.3 Special Meetings of Shareholders. Special meetings of the
shareholders of the corporation for any purpose may be called at any time by the
Board of Directors or an authorized committee of the Board of Directors, but
such special meetings may not be called by any other person or persons.
10.4 Conflicting Interests. The corporation may enter into contracts and
otherwise transact business as vendor, purchaser, or otherwise, with its
directors, officers, and shareholders and with corporations, associations, firms
and entities in which they are or may be or become interested as directors,
officers, shareholders, members, or otherwise, as freely as though such diverse
interests did not exist, even though the vote, action, or presence of such
director, officer, or shareholder may be necessary to obligate the corporation
upon such contracts or transactions. In accordance with the Bylaws and in
absence of fraud, and provided such contract or transaction is approved in
accordance with RCW 23B.08 et seq, no such contract or transaction shall be
avoided and no such director, officer, or shareholder shall be held liable to
account to the corporation, by reason of such conflicting interests or by reason
of any fiduciary relationship to the corporation arising out of such office or
stock ownership, for any profit or benefit realized by him through any such
contract or transaction, provided that in the case of directors, officers, and
shareholders of the corporation, (a) the existence and nature of the interest of
such director, officer, or shareholder, and (b) all facts known to such
director, officer, or shareholder respecting the subject matter of the
transaction that an ordinarily prudent person would reasonably believe to be
material to judgment about whether or not to proceed with the transaction, be
disclosed or known to the Board of Directors of this corporation, at the meeting
thereof at which such contract or transaction is authorized or confirmed.
10.5 Significant Transactions. The corporation shall be subject to the
provisions of RCW 23B.19 et seq, as amended from time to time, provided,
however, that if such statute ever is amended to take away the substantive
rights conferred thereby or is repealed, the corporation shall remain subject to
the Chapter, and the Chapter, as it exists on the date hereof, shall be
incorporated into these Articles of Incorporation by this reference.
The undersigned has signed these Amended and Restated Articles of
Incorporation as of March 30, 1999.
/s/ ALAN R. BENDER
---------------------------------
Alan R. Bender, Vice President
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RESTATEMENT CERTIFICATE
The undersigned Vice President of VOICESTREAM WIRELESS CORPORATION II
(the "Corporation") hereby certifies that the Amended and Restated Articles of
Incorporation of the Corporation supersede in their entirety the original
Articles of Incorporation.
The name of the corporation is VOICESTREAM WIRELESS CORPORATION II.
Article II, 2.2 (b)(ii)(B)(3) has been amended in its entirety to read
as follows:
"Regulated Shareholder" shall mean any holder of shares of
capital stock of the Company that is, or an Affiliate of which is, subject to
the provisions of Rule 312(g) of the General Rules of the New York Stock
Exchange (or any successor to such Rule) and was, or its Affiliate was, a holder
of shares of capital stock of the Company on the date that capital stock is held
by shareholders other than the shareholders on April 1, 1999.
Article II, 2.3 has been amended in its entirety to read as follows:
2.3 Rights and Preferences of Preferred Stock. The Board of Directors
shall have the full authority permitted by law to divide the authorized and
unissued shares of Preferred Stock into series, and to provide for the issuance
of such shares in an aggregate amount not exceeding in the aggregate the number
of shares of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time, and to determine with respect to each such series the
voting powers, if any (which voting powers, if granted, may be full or limited),
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions relating thereto,
including without limiting the generality of the foregoing, the voting rights
relating to shares of Preferred Stock of any series (which may not exceed one
vote per share or a fraction of a vote per share, which may vary over time and
which may be applicable generally or only upon the happening and continuance of
stated events or conditions), the rate of dividend to which holders of Preferred
Stock of any series may be entitled (which may be cumulative or noncumulative),
the rights of holders of Preferred Stock of any series in the event of
liquidation, dissolution or winding up of the affairs of the corporation, the
rights, if any, of holders of Preferred Stock of any series to convert or
exchange such shares of Preferred Stock of such series for shares of any other
series of capital stock or for any other securities, property or assets of the
corporation (including the determination of the price or prices or the rate or
rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange shall
be applicable and the time or times during which a particular price or rate
shall be applicable), whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different
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redemption dates, and whether any shares of that series shall be redeemed
pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.
Before the corporation shall issue any shares of Preferred Stock of any
series, articles of amendment in a form meeting the requirements of the
Washington Business Corporation Act (the "Act") setting forth the terms of the
series and fixing the voting powers, designations, preferences, the relative,
participating, optional or other special rights, if any, and the qualifications,
limitations and restrictions, if any, relating to the shares of Preferred Stock
of such series, and the number of shares of Preferred Stock of such series
authorized by the Board of Directors to be issued shall be filed with the
Secretary of State of the State of Washington in the manner prescribed by the
Act, and shall become effective without any shareholder action. The Board of
Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any series subsequent to the issuance of shares of that series.
Article IX, 9.1 has been amended in its entirety to read as follows:
9.1 Redemption. Notwithstanding any other provision of these Articles of
Incorporation to the contrary, outstanding shares of capital stock of the
corporation held by Disqualified Holders shall always be subject to redemption
by the corporation, by action of the Board of Directors, if, in the judgment of
the Board of Directors, such action should be taken, pursuant to RCW 23B.06.010
or any other applicable provision of law, to the extent necessary to prevent the
loss or secure the reinstatement of any license or franchise from any
governmental agency held by the corporation or any of its subsidiaries to
conduct any portion of the business of the corporation or any of its
subsidiaries, which license or franchise is conditioned upon some or all of the
holders of the corporation's stock possessing prescribed qualifications;
provided, however, that prior to exercising any redemption right hereunder, the
corporation shall use reasonable efforts to obtain all necessary waivers or
approvals from the appropriate governmental agencies in order to prevent such
loss or secure such reinstatement without the necessity of redemption. The terms
and conditions of such redemption shall be as follows:
These Amended and Restated Articles of Incorporation contain amendments
to the Articles of Incorporation which required shareholder approval. The
amendments were approved by the Board of Directors on March 30, 1999 in
accordance with the provisions of RCW 23B.10.060 and 23B.10.070. The
shareholders duly approved the amendments on March 30, 1999 in accordance with
the provisions of RCW 23B.10.030 and 23B.10.040.
The amendments do not provide for an exchange, reclassification, or
cancellation of issued shares.
VOICESTREAM WIRELESS CORPORATION II
By: /s/ ALAN R. BENDER
---------------------------------
Alan R. Bender, Vice President
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EXHIBIT 3.2
BYLAWS
OF
VOICESTREAM WIRELESS CORPORATION II
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the date and at the
time determined by the Board of Directors. The failure to hold an annual meeting
at the time fixed in accordance with these Bylaws does not affect the validity
of any corporate action.
Section 2. Special Meetings. Except as otherwise provided by law,
special meetings of shareholders of this Corporation shall be held whenever
called by the Board of Directors or an authorized committee of the Board of
Directors in accordance with the provisions of these Bylaws.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place within or without the State of Washington as determined by the Board
of Directors, pursuant to proper notice.
Section 4. Notice. Written notice of each shareholders' meeting stating
the date, time, and place and, in case of a special meeting, the purpose(s) for
which such meeting is called, shall be given by the Corporation not less than
TEN (10) (unless a greater period of notice is required by law in a particular
case) nor more than SIXTY (60) days prior to the date of the meeting, to each
shareholder of record entitled to vote at such meeting unless required by law to
send notice to all shareholders regardless of whether or not such shareholders
are entitled to vote, to the shareholder's address as it appears on the current
record of shareholders of this Corporation.
Section 5. Waiver of Notice. A shareholder may waive any notice required
to be given by these Bylaws, the Articles of Incorporation of this Corporation,
as amended and restated from time to time (the "Articles of Incorporation"), or
the Washington Business Corporation Act, as amended from time to time (the
"Act"), before or after the meeting that is the subject of such notice. A valid
waiver is created by any of the following three methods: (a) in writing, signed
by the shareholder entitled to the notice and delivered to the Corporation for
inclusion in its corporate records; (b) attendance at the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; or (c) as to the consideration of a
particular matter that is not within the purpose or purposes described in the
meeting notice, the shareholders' failure to object at the time of presentation
of such matter for consideration.
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Section 6. Quorum of Shareholders. At any meeting of the shareholders,
holders of a majority of the votes of all the shares entitled to vote on a
matter, represented by shareholders of record in person or by proxy, shall
constitute a quorum.
Once a share is represented at a meeting, other than to object to
holding the meeting or transacting business, it is deemed to be present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting. At
such reconvened meeting, any business may be transacted that might have been
transacted at the meeting as originally noticed.
If a quorum exists, action on a matter is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
question is one upon which by express provision of law or of the Articles of
Incorporation a different vote is required.
Section 7. Proxies. Shareholders of record may vote at any meeting
either in person or by proxy executed in writing. A proxy is effective when
received by the Secretary of the Corporation or another officer or agent of the
Corporation authorized to tabulate votes for the Corporation. A proxy is valid
for ELEVEN (11) months unless a longer period is expressly provided in the
proxy.
Section 8. Voting. Unless otherwise provided in the Articles of
Incorporation, each outstanding share of Common Stock is entitled to ONE (1)
vote on each matter voted on at a shareholders' meeting, with all shares voting
together as a single class.
Section 9. Adjournment. A majority of the shares represented at the
meeting, even if less than a quorum, may adjourn any meeting of the shareholders
from time to time. At a reconvened meeting at which a quorum is present, any
business may be transacted at the meeting as originally noticed. If a meeting is
adjourned to a different date, time, or place, notice need not be given of the
new date, time, or place if a new date, time, or place is announced at the
meeting before adjournment; however, if a new record date for the adjourned
meeting is or must be fixed in accordance with the Act, notice of the adjourned
meeting must be given to persons who are shareholders as of the new record date.
Section 10. Advance Notice Requirements for Shareholder Proposals and
Director Nominations. Any shareholder seeking to bring business before or to
nominate a director or directors at any meeting of shareholders, must provide
written notice thereof in accordance with this Section 10. The notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than (i) with respect to an annual meeting of shareholders,
120 calendar days in advance of the one-year anniversary of the date that the
Corporations proxy statement was released to shareholders in connection with the
previous year's annual meeting, except that if no annual meeting of shareholders
was held in the previous year or if the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, such notice must be received by the
Corporation a reasonable time before the Corporation's proxy statement is to be
released, and (ii) with respect to a special meeting of shareholders, a
reasonable time before the Corporation's proxy statement is to be released.
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ARTICLE II
BOARD OF DIRECTORS
Section 1. Powers of Directors. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of Directors, except as
otherwise provided by the Articles of Incorporation.
Section 2. Number and Qualifications. The number of directors which
shall constitute the whole Board shall be not less than ONE (1) director nor
more than sixteen (16) directors. The number of directors may at any time be
increased or decreased within such range by the shareholders or by the Board of
Directors at any regular or special meeting. Directors must have reached the age
of majority. The Board of Directors shall initially consist of ten (10)
directors.
Section 3. Election - Term of Office. The directors shall be elected by
the shareholders at each annual shareholders' meeting to hold office until the
next annual meeting of the shareholders, but shall continue to serve despite the
expiration of the director's term until their respective successors are elected
and qualified or until there is a decrease in the number of directors. If, for
any reason, the directors shall not have been elected at any annual meeting,
they may be elected at a special meeting of shareholders called for that purpose
in the manner provided by these Bylaws.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held immediately following each annual meeting of shareholders and at
such other times and at such places as the Board may determine.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be held at any time, whenever called by the Chairman of the Board,
President, Chief Executive Officer, or any director, notice thereof being given
to each director by the officer calling or directed to call the meeting.
Section 6. Notice. No notice is required for regular meetings of the
Board of Directors. Notice of special meetings of the Board of Directors,
stating the date, time, and place thereof, shall be given at least SEVEN (7)
days prior to the date of the meeting. The purpose of the meeting need not be
given in the notice. Such notice shall be given in the manner provided by
Section 3 of Article III of these Bylaws.
Section 7. Waiver of Notice. A director may waive notice of a special
meeting of the Board either before or after the meeting, and such waiver shall
be deemed to be the equivalent of giving such notice. Attendance of a director
at or participation in a meeting shall constitute waiver of notice of that
meeting unless said director, at the beginning of the meeting, or promptly upon
such director's arrival, objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting. Any waiver by a non-
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attending director must be in writing, signed by the director entitled to the
notice and delivered to the Corporation for inclusion in its corporate records.
Section 8. Quorum of Directors. A majority of the members of the Board
of Directors shall constitute a quorum for the transaction of business. When a
quorum is present at any meeting, a majority of the members present thereat
shall decide any question brought before such meeting, except as otherwise
provided by the Articles of Incorporation or by these Bylaws.
Section 9. Adjournment. A majority of the directors present, even if
less than a quorum, may adjourn a meeting and continue it to a later time.
Notice of the adjourned meeting or of the business to be transacted thereat,
other than by announcement, shall not be necessary. At any adjourned meeting at
which a quorum is present, any business may be transacted which could have been
transacted at the meeting as originally called.
Section 10. Resignation and Removal. Any director of this Corporation
may resign at any time by giving written notice to the Board of Directors, its
Chairman, or the President or Secretary of this Corporation. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later effective date. A director or the entire Board of Directors
may be removed as prescribed in the Articles of Incorporation.
Section 11. Vacancies. Unless otherwise provided by law, vacancies in
the Board of Directors shall be filled by a majority of the directors then in
office, though less than a quorum, by. the sole remaining director or by action
of the shareholders.
Section 12. Compensation. By resolution of the Board of Directors, each
director may be paid expenses, if any, of attendance at each meeting of the
Board of Directors (and each meeting of any committees thereof), and may be paid
a stated salary as director, or a fixed sum for attendance at each meeting of
the Board of Directors (and each meetings of any committee thereof), or both. No
such payment shall preclude any director from serving this Corporation in any
other capacity and receiving compensation therefor.
Section 13. Presumption of Assent. A director of this Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless:
a. The director objects at the beginning of the meeting, or
promptly upon the director's arrival, to holding it or transacting business at
the meeting;
b. The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
c. The director delivers written notice of dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
Corporation within a reasonable time after adjournment.
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The right of dissent or abstention is not available to a director who
votes in favor of the action taken.
Section 14. Committees of the Board of Directors. The Board of Directors
is expressly authorized to create one or more committees of directors in
accordance with the provisions of Section 23B.08.250 of the Act. Each committee
must have two or more members, who serve at the pleasure of the Board of
Directors. The creation of a committee and appointment of members to it must be
approved by a majority of all the directors in office when such action is taken
or such other number of directors as may be required by Section 23B.08.250(2) of
the Act. To the extent specified by the Board of Directors or in the Articles of
Incorporation or these Bylaws, each committee may exercise the authority of the
Board of Directors under Section 23B.08.010 of the Act; provided, however, a
committee may not: (a) authorize or approve a distribution except according to a
general formula or method prescribed by the Board of Directors, (b) approve or
propose to shareholders action that is required by the Act to be approved by
shareholders; (c) fill vacancies on the Board of Directors or on any of its
committees, (d) amend the Articles of Incorporation pursuant to Section 23B.
10.020 of the Act, (e) adopt, amend or repeal these Bylaws, (f) approve a plan
of merger not requiring shareholder approval or (g) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences, and limitations of a class or series of
shares, except that, in the case of this clause (g), the Board of Directors may
authorize a committee, or a senior executive officer of the corporation, to do
so within limits specifically prescribed by the Board of Directors.
ARTICLE III
SPECIAL MEASURES APPLYING TO
SHAREHOLDER AND/OR DIRECTOR ACTIONS
Section 1. Action by Written Consent. Any action required or Permitted
to be taken at a meeting of the shareholders or the Board of Directors may be
accomplished without a meeting if the action is taken by all the shareholders
entitled to vote thereon, or all the members of the Board, as the case may be.
The action must be evidenced by one or more written consents describing the
action taken, signed by all the shareholders entitled to vote thereon, or by all
directors, as the case may be, either before or after the action is taken, and
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's records.
Action taken by unanimous written consent of the shareholders is
effective when all consents have been delivered to the Corporation, unless the
consent specifies a later effective date. Action taken by unanimous written
consent of the Board of Directors is effective when the last director signs the
consent, unless the consent specifies a later effective date.
Section 2. Conference Telephone. Meetings of the shareholders and Board
of Directors may be effectuated by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other during the meeting . Participation by such means
shall constitute presence in person at such meeting.
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Section 3. Oral and Written Notice. Oral notice of a meeting of the
Board of Directors may be communicated in person or by telephone, wire or
wireless equipment that does not transmit a facsimile of the notice. Oral notice
is effective when communicated if communicated in a comprehensible manner.
Written notice may be transmitted by mail, reputable overnight or
express delivery service, or personal delivery; telegraph or teletype; or
telephone, wire, or wireless equipment that transmits a facsimile of the notice.
Written notice in a comprehensible form is effective at the earliest of the
following:
(a) when dispatched by telegraph, teletype or facsimile
equipment, if such notice is sent to the person's address, telephone number or
other number appearing on the records of the Corporation;
(b) when received;
(c) when mailed, if mailed with first-class postage prepaid and
correctly addressed to the shareholder's address shown in the Corporation's
current record of shareholders;
(d) the day of delivery as shown on the delivery receipt or
acknowledgment if delivered by reputable overnight or express delivery service;
or
(e) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
ARTICLE IV
OFFICERS
Section 1. Positions. The officers of this Corporation may consist of a
Chairman of the Board of Directors, President, Chief Executive Officer, Chief
Operating Officer, one or more Vice Chairmen, one or more Vice Presidents, a
Chief Financial Officer, a Secretary, one or more Assistant Secretaries, a
Controller and a Treasurer, as appointed by the Board.
In addition, the Board of Directors may choose such other officers and
assistant officers to perform such duties as from time to time may be assigned
to them by the Board of Directors. The Board of Directors may delegate to any
other officer of the Corporation the power to choose such other officers and
assistant officers and to prescribe their respective duties and powers. No
officer need be a shareholder or a director of this Corporation. Any two or more
offices may be held by the same person.
Section 2. Appointment and Term of Office. The officers of this
Corporation shall be appointed annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If officers are not appointed at such meeting, such appointment
shall occur as soon as possible thereafter. Each officer shall hold office until
a successor shall have been appointed and qualified or until said officer's
earlier death, resignation, or removal.
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Section 3. Powers and Duties. If the Board of Directors appoints persons
to fill the following officer positions, such officer shall have the powers and
duties set forth below:
a. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the shareholders and of the Board
of Directors. The Chairman of the Board of Directors shall possess the same
power as the President to sign all bonds, deeds, mortgages and any other
agreements, and such signature shall be sufficient to bind this Corporation.
During the absence or disability of the President, the Chairman of the Board of
Directors shall exercise all the powers and discharge all the duties of the
President. The Chairman of the Board of Directors shall also perform such other
duties as the Board of Directors shall designate.
b. President. The President shall, subject to the direction and
control of the Board of Directors, have general supervision of the business of
this Corporation. Unless the Chairman of the Board of Directors has been
appointed and is present, the President shall preside at meetings of the
shareholders and of the Board of Directors.
The President, or such other persons as are specifically authorized by
resolution of the Board of Directors, shall possess the power to sign all bonds,
deeds, mortgages, and any other agreements, and such signatures shall be
sufficient to bind this Corporation. The President shall perform such other
duties as the Board of Directors shall designate.
c. Chief Executive Officer. The Chief Executive Officer shall,
together with the President, and subject to the direction and control of the
Board of Directors, have general supervision of the business of the Corporation.
The Chief Executive Officer shall, in the absence of the Chairman of the Board
of Directors and the President, preside at all meetings of shareholders and of
the Board of Directors.
The Chief Executive Officer may sign all bonds, deeds, mortgages, and
any other agreements, and such signature shall be sufficient to bind this
Corporation. The Chief Executive Officer shall perform such other duties as the
Board of Directors shall designate.
d. Chief Operating Officer. The Chief Operating Officer shall,
subject to the direction and control of the Board of Directors, have general
supervision of the operations of the Corporation's income-producing assets. The
Chief Operating Officer may sign all bonds, deeds, mortgages, and any other
agreements, and such signature shall be sufficient to bind this Corporation. The
Chief Operating Officer shall perform such other duties as the Board of
Directors shall designate.
e. Vice Chairman. The Vice Chairman shall, together with the
President and Chief Executive Officer, and subject to the direction and control
of the Board of Directors, have general supervision of the business of the
Corporation. The Vice Chairman shall, in the absence of the Chairman of the
Board of Directors, the President and the Chief Executive Officer, preside at
all meetings of shareholders and of the Board of Directors.
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The Vice Chairman may sign all bonds, deeds, mortgages, and any other
agreements, and such signature shall be sufficient to bind this Corporation. The
Vice Chairman shall perform such other duties as the Board of Directors shall
designate.
e. Vice Presidents. Each Vice President shall have such powers
and discharge such duties as may be assigned from time to time to such Vice
President by the Board of Directors, the Chairman of the Board of Directors, the
President or the Chief Executive Officer. The Board of Directors may select a
specific title for a Vice President of this Corporation, which such title shall
include the words "Vice President" together with such other term or terms which
may generally indicate such Vice President's rank and/or duties. During the
absence or disability of the Chairman of the Board of Directors (if one has been
elected), the President, and the Chief Executive Officer, the Vice President (or
in the event that there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors) shall exercise all functions of
the Chairman of the Board of Directors, the President and the Chief Executive
Officer, except as limited by resolution of the Board of Directors.
g. Secretary. The Secretary shall:
(1) Prepare minutes of the directors' and shareholders'
meetings and keep them in one or more books provided for that purpose;
(2) Authenticate records of the Corporation;
(3) See that all notices are duly given in accordance with
the provisions of these Bylaws or as required by law;
(4) Be custodian of the corporate records and of the seal
of the Corporation (if any), and affix the seal of the Corporation to all
documents as may be required;
(5) Keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder;
(6) Sign with the Chairman of the Board of Directors, the
President, the Chief Executive Officer or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(7) Have general charge of the stock transfer books of the
Corporation; and
(8) In general, perform all the duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him or her by the Board of Directors, the Chairman of the Board of Directors,
the President or the Chief Executive Officer. In the Secretary's absence, an
Assistant Secretary shall perform the Secretary's duties.
h. Chief Financial Officer. The Chief Financial Officer shall
have custody of the funds and securities of the Corporation, shall keep full and
accurate accounts of receipts and
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disbursements of the Corporation in books belonging to the Corporation and shall
deposit all moneys and other valuable effects of the Corporation in the name and
to the credit of the Corporation in such depositories as may be designated by
the Board of Directors. The Chief Financial Officer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President, the Chief Executive Officer and the Board of Directors, at its
regular meetings, or when the Chairman of the Board, the President, the Chief
Executive Officer or the Board of Directors so requires, an account of all of
his or her transactions as Chief Financial Officer and of the financial
condition of the Corporation If required by the Board of Directors, the Chief
Financial Officer shall give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his or her office and for the restoration
to the Corporation, in case of his or her death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his or her possession or under his or her control belonging to
the Corporation,
i. Controller. The Controller shall perform such duties and have
such powers as from time to time may be assigned to him or her by the Board of
Directors, the Chairman of the Board, the President, the Chief Executive
Officer, any Vice President, or the Chief Financial Officer, and in the absence
of the Chief Financial Officer or in the event of the Chief Financial Officer's
disability or refusal to act, shall perform the duties of the Chief Financial
Officer, and when so acting, shall have a the powers of and be subject to all
the restrictions upon the Chief Financial Officer. If required by the Board of
Directors, the Controller shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in the case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
j. Treasurer. The Treasurer shall perform such duties and have
such responsibilities as from time to time may be assigned by the Board of
Directors.
Section 4. Salaries and Contract Rights. The salaries, if any, of the
officers shall be fixed from time to time by the Board of Directors. The
appointment of an officer shall not of itself create contract rights.
Section 5. Resignation or Removal. Any officer of this Corporation may
resign at any time by giving written notice to the Board of Directors. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later date, and shall be without prejudice to the contract rights,
if any, of such officer.
The Board of Directors, by majority vote, may remove any officer or
agent appointed by it, with or without cause. The removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 6. Vacancies. If any office becomes vacant by any reason, the
directors may
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appoint a successor or successors who shall hold office for the unexpired term.
ARTICLE V
CERTIFICATES OF SHARES AND THEIR TRANSFER;
UNCERTIFICATED SHARES
Section 1. Issuance of Shares. No shares of this Corporation shall be
issued unless authorized by the Board of Directors. Such authorization shall
include the maximum number of shares to be issued and the consideration to be
received. A good faith determination by the Board that the consideration
received or to be received for the shares to be issued is adequate is conclusive
insofar as the adequacy of consideration relates to whether the shares are
validly issued, fully paid and nonassessable.
Section 2. Issuance of Certificated Shares. Unless the Board of
Directors determines that the Corporation's shares are to be uncertificated,
certificates for shares of the Corporation shall be in such form as is
consistent with the provisions of the Act. The certificate shall be signed by
original or facsimile signature of two officers of the Corporation, and the seal
of the Corporation may be affixed thereto.
Section 3. Transfer of Certificated Stock. Certificated shares of stock
may be transferred by delivery of the certificate accompanied by either an
assignment in writing on the back of the certificate or by a written power of
attorney to assign and transfer the same on the books of the Corporation, signed
by the record holder of the certificate. Shares shall be transferable on the
books of this Corporation upon surrender thereof so assigned or endorsed.
Section 4. Loss or Destruction of Certificates. In case of the loss,
mutilation, or destruction of a certificate of stock, a duplicate certificate
may be issued upon such terms as the Board of Directors shall prescribe.
Section 5. Issuance of Uncertificated Shares. The Board of Directors may
authorize the issue of some or all of the shares of any or all of the
Corporation's classes or series of stock without certificates, provided,
however, that such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. Within a reasonable
time after the issue or transfer of shares without certificates, the Corporation
shall send the shareholders a written statement of the information required on
certificates by the Act. Said statement, shall be informational to the
shareholder, and not incontrovertible evidence of stock ownership.
The statement shall be signed by original or facsimile signature of two
officers of the Corporation, and the seal of the Corporation may be affixed
thereto.
Section 6. Transfer of Uncertificated Stock. Transfer of uncertificated
shares of stock may be accomplished by delivery of an assignment in writing or
by a written power of attorney to assign and transfer the same on the books of
the Corporation, signed by the record holder of the shares. Surrender of the
written statement shall not be a requirement for transfer of the shares so
represented.
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Section 7. Record Date and Transfer Books. For the purpose of
determining shareholders who are entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date in any case to be not more than
SEVENTY (70) days and, in case of a meeting of shareholders, not less than TEN
(10) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
If no record date is fixed for such purposes, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders,
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned more than ONE HUNDRED
TWENTY (120) days after the date fixed for the original meeting.
Section 8. Voting Record. The officer or agent having charge of
the stock transfer books for shares of this Corporation shall make at least TEN
(10) days before each meeting of shareholders a complete record of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
ARTICLE VI
BOOKS AND RECORDS
Section 1. Books of Accounts, Minutes, and Share Register. The
Corporation:
a. Shall keep as permanent records minutes of all meetings of its
shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the authority
of the Board of Directors on behalf of the Corporation;
b. Shall maintain appropriate accounting records;
c. Or its agent shall maintain a record of its shareholders, in a
form that permits preparation of a list of the names and addresses of all
shareholders, in alphabetical order by class of shares showing the number and
class of shares held by each; and
d. Shall keep a copy of the following records at its principal
office:
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(1) The Articles of Incorporation and all amendments to
them currently in effect;
(2) The Bylaws or Restated Bylaws and all amendments to
them currently in effect;
(3) The minutes of all shareholders' meetings, and records
of all actions taken by shareholders without a meeting, for the past THREE (3)
years;
(4) Its financial statements for the past THREE (3) years,
including balance sheets showing in reasonable detail the financial condition of
the Corporation as of the close of each fiscal year, and an income statement
showing the results of its operations during each fiscal year;
(5) All written communications to shareholders generally
within the past THREE (3) years;
(6) A list of the names and business addresses of its
current directors and officers; and
(7) Its most recent annual report delivered to the
Secretary of State of Washington.
Section 2. Copies of Resolutions. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the President or Secretary.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Indemnification Rights of Directors, Officers, Employees and
Agents. The Corporation shall indemnify its directors and officers and may
indemnify its employees and agents (each an "Indemnified Party") to the full
extent permitted by the Act or other applicable law, as then in effect, and the
Articles of Incorporation, against liability arising out of a proceeding to
which each such Indemnified Party was made a party because the Indemnified Party
is or was a director, officer, employee or agent of the Corporation. The
Corporation shall advance expenses incurred by each such Indemnified Party who
is a party to a proceeding in advance of final disposition of the proceeding, as
provided by applicable law, the Articles of Incorporation, or by written
agreement, which written agreement may allow any required determinations to be
made by any appropriate person or body consisting of a member or members of the
Board of Directors, or any other person or body appointed by the Board of
Directors, who is not a party to the particular claim for which an Indemnified
Party is seeking indemnification, or independent legal counsel.
The Corporation is not obligated to indemnify an Indemnified Party for
any amounts paid in settlement of any proceeding without the Corporation's prior
written consent to such
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settlement and payment. The Corporation shall not settle any proceeding in any
manner which would impose any penalty or limitation on an Indemnified Party
without such Indemnified Party's prior written consent. Neither the Corporation
nor an Indemnified Party may unreasonably withhold its consent to a proposed
settlement.
Section 2. Contract and Related Rights.
a. Contract Rights. The right of an Indemnified Party to
indemnification and advancement of expenses is a contract right upon which the
Indemnified Party shall be presumed to have relied in determining to serve or to
continue to serve in his or her capacity with the Corporation. Such right shall
continue as long as the Indemnified Party shall be subject to any possible
proceeding. Any amendment to or repeal of this Article shall not adversely
affect any right or protection of an Indemnified Party with respect to any acts
or omissions of such Indemnified Party occurring prior to such amendment or
repeal.
b. Optional Insurance, Contracts. and Funding. The Corporation
may:
(1) Maintain insurance, at its expense, to protect itself
and any Indemnified Party against any liability, whether or not the Corporation
would have power to indemnify the Indemnified Party against the same liability
under Sections 23B.08.510 or .520 of the Act, or a successor section or statute;
(2) Enter into contracts with any Indemnified Party in
furtherance of this Article and consistent with the Act; and
(3) Create a trust fund, grant a security interest, or use
other means (including without limitation a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in this Article.
Section 3. Exceptions. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Bylaws to indemnify or advance expenses to an Indemnified Party with
respect to any proceeding:
a. initiated or brought voluntarily by an Indemnified Party and
not by way of defense, except with respect to proceedings brought to establish
or enforce a right to indemnification under these Bylaws, the Articles of
Incorporation or any statute or law; but such indemnification or advancement of
expenses may be provided by the Corporation in specific cases if the Board of
Directors finds it to be appropriate,
b. instituted by an Indemnified Party to enforce or interpret the
provisions hereof or the Articles of Incorporation, if a court of competent
jurisdiction determines that each of the material assertions made by such
Indemnified Party in such proceeding was not made in good faith or was
frivolous;
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c. to the extent such Indemnified Party has otherwise actually
received payment (under any insurance policy or otherwise) of the amounts
otherwise indemnifiable hereunder; or
d. if the Corporation is prohibited by the Articles of
incorporation, the Act or other applicable law as then in effect from paying
such indemnification and/or advancement of expenses.
ARTICLE VIII
AMENDMENT OF BYLAWS
Section 1. By the Shareholders. These Bylaws may be amended or repealed
by a resolution duly adopted by not less than a majority of the shares entitled
to vote thereon.
Section 2. By the Board of Directors. These Bylaws may be amended or
repealed by a resolution duly adopted by a majority of the whole Board of
Directors. However, the directors may not modify the Bylaws relating to filling
Board of Directors vacancies resulting from a removal by action of the
shareholders as specified herein or in the Articles of Incorporation.
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CERTIFICATE OF ADOPTION
The undersigned Secretary of VoiceStream Wireless Corporation II does
hereby certify that the above and foregoing Bylaws of said Corporation were
adopted by the directors as the Bylaws of said Corporation and that the same do
now constitute the Bylaws of this Corporation.
DATED this ______ day of __________________, 1999.
------------------------------
Alan R. Bender, Secretary
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EXHIBIT 10.37
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the
"Agreement"), by and between Western Wireless Corporation, a Washington
corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington
corporation ("VoiceStream", WWC and VoiceStream are sometimes individually
referred to herein as a "Party" and collectively as the "Parties").
WHEREAS, WWC and VoiceStream are parties to that certain Agreement and
Plan of Distribution, dated as of ______________, 1999, pursuant to which, among
other things, WWC has agreed, upon the terms and conditions set forth therein,
to distribute the shares of VoiceStream's Common Stock, no par value (the
"Common Stock"), owned by it, which shares represent 80.1% of the issued and
outstanding shares of Common Stock, to WWC's shareholders on the basis of one
share of Common Stock for each one share of WWC's outstanding common stock (the
"Spin Off");
WHEREAS, WWC and Robert Stapleton (the "Employee") have entered into an
Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"),
setting forth, among other things, the terms of the Employee's employment by
WWC; and
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires
to assume, all of WWC's rights and obligations under the Employment Agreement on
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as
follows:
1. Assignment and Assumption of the Employment Agreement. On and as of
the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to
VoiceStream all of WWC's rights and interests in, and VoiceStream hereby
accepts, assumes and agrees to perform and discharge all of the obligations
arising from and after the Spin-Off Effective Date under, the Employment
Agreement.
2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall
indemnify and hold harmless WWC, its subsidiaries and affiliates and its and
their respective shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them (each, a "WWC Indemnified
Party"), from and against any and all demands, claims, losses, liabilities,
actions or causes of action, assessments, damages, fines, fees, penalties, costs
and expenses, including, without limitation, interest, expenses of
investigation, reasonable fees and disbursements of counsel, accountants and
other experts (collectively, "Losses") (whether arising out of or relating to
matters asserted by third parties against a WWC Indemnified Party or incurred or
sustained by such WWC Indemnified Party in the absence of a third party claim)
that
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arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b)
by reason of the Employee's employment by VoiceStream after the Spin-Off
Effective Date, or (c) any default by VoiceStream in the performance of its
obligations under the Employment Agreement.
(b) Indemnification of VoiceStream by WWC. WWC shall indemnify
and hold harmless VoiceStream, its subsidiaries and affiliates and its and their
respective shareholders, members, managers, officers, employees, agents and/or
the legal representatives of any of them (each, a "VoiceStream Indemnified
Party"), from and against any and all Losses (whether arising out of or relating
to matters asserted by third parties against a VoiceStream Indemnified Party or
incurred or sustained by such VoiceStream Indemnified Party in the absence of a
third party claim) that arise out of or result from (a) the assignment to
VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on
or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the
Spin-Off Effective Date in the performance of its obligations under the
Employment Agreement.
(c) Procedures.
(i) In the event that any VoiceStream Indemnified Party
or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur
any Losses in respect of which indemnification may be sought by such Indemnified
Party pursuant to this Section 2, the Indemnified Party shall assert a claim for
indemnification by giving prompt notice to the applicable indemnifying party
(the "Indemnifying Party) under Section 2 and shall thereafter keep the
Indemnifying Party reasonably informed with respect thereto; provided that
failure of the Indemnified Party to give the Indemnifying Party notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder, except to the extent that the Indemnifying Party is
materially prejudiced by such failure. Upon the Indemnifying Party's receipt of
such notice, the Indemnifying Party shall have the right to assume, conduct and
control the defense, compromise or settlement thereof, by written notice to the
Indemnified Party of its intention to do so within thirty (30) days after
receipt of the notice, with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's own expense, and thereupon to prosecute in
the name and on behalf of the Indemnified Party any available cross-claims,
counter-claims or third-party claims arising with respect to the claim. If the
Indemnifying Party shall assume the defense of such claim, it shall not settle
such claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified Party,
reasonably satisfactory to the Indemnified Party, from all liability with
respect to such claim. As long as the Indemnifying Party is contesting any such
claim in good faith and on a timely basis, the Indemnified Party shall not pay
or settle any such claim. Notwithstanding the assumption by the Indemnifying
Party of the defense of any claim as provided in this Section 2(c) and without
limiting the Indemnifying Party's right to assume, conduct and control the
defense, compromise or settlement thereof, the Indemnified Party shall be
permitted to join in the defense of such claim and to employ counsel at its own
expense. Assumption by the Indemnifying Party of the defense of any claim shall
not be deemed a concession by the Indemnifying Party that it is required to
indemnify the Indemnified Party for the subject matter of such claim.
- 2 -
<PAGE> 3
(ii) If the Indemnifying Party shall fail to notify the
Indemnified Party of its desire to assume the defense of such claim within the
prescribed 30-day period set forth in Section 2(c)(i) or shall notify the
Indemnified Party that it will not assume the defense of any such claim, then
the Indemnified Party may defend any such claim, in which event it may do so in
such manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determinations made in any litigation with respect to such claim or
any settlement thereof effected by the Indemnified Party, provided that any such
determinations or settlement shall not affect the right of the Indemnifying
Party to dispute the Indemnified Party's claim for indemnification. Unless and
until the Indemnified Party assumes the defense of any claim, the Indemnifying
Party shall advance to the Indemnified Party any of its reasonable attorneys'
fees and other costs and expenses incurred in connection with the defense of any
such action or proceeding.
3. Representations and Warranties.
Each of WWC and VoiceStream hereby represents and warrants to the other
as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
power and authority to execute, deliver and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms; and
(c) Neither the execution, delivery or performance of this
Agreement by it, nor the consummation of the transactions contemplated hereby
will, with or without the giving of notice of passage of time, or both, conflict
with, result in a default or loss of rights (or give rise to any right of
termination, cancellation or acceleration) under, (i) any provision of its (or
any of its subsidiaries') certificate of incorporation or by-laws, (ii) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which it, or any of its subsidiaries,
is a party or by which it, or any of its subsidiaries, or its, or any of its
subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
subsidiaries, is a party or by which it, or any of its subsidiaries, or any of
its, or any of its subsidiaries', properties are bound or affected.
4. Effectiveness. This Agreement shall become effective only upon the
Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or
before December 31, 1999, this Agreement shall terminate and be of no further
force and effect whatsoever.
5. Notices. All notices, claims or other communications hereunder shall
be in writing and shall be given by delivery in person, by facsimile
transmission, by registered or
- 3 -
<PAGE> 4
certified mail (return receipt requested), postage prepaid, or overnight carrier
guaranteeing next day delivery:
(a) to VoiceStream:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
- 4 -
<PAGE> 5
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any Party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 5. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) business days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next business day
after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
6. Waiver; Amendments. This Agreement may be amended, modified or
supplemental only by written agreement of the Parties. No provision in this
Agreement shall be deemed waived except by an instrument in writing signed by
the Party waiving such provision. Any waiver by any Party of any of its rights
under this Agreement or of any breach of this Agreement shall not constitute a
waiver of any other rights or of any other or future breach.
7. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
8. Successors, Assigns and Transferees. This Agreement shall inure to
the benefit of, and be binding upon, the successors and assigns of each Party.
9. Entire Agreement. This Agreement constitutes the entire understanding
of the Parties with respect to the subject matter hereof and supersedes all
prior understandings among the Parties with respect to such subject matter.
- 5 -
<PAGE> 6
10. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall be considered the same agreement.
11. Applicable Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Washington without
reference to conflicts of laws principles.
12. Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WESTERN WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
VOICESTREAM WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 10.38
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the
"Agreement"), by and between Western Wireless Corporation, a Washington
corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington
corporation ("VoiceStream", WWC and VoiceStream are sometimes individually
referred to herein as a "Party" and collectively as the "Parties").
WHEREAS, WWC and VoiceStream are parties to that certain Agreement and
Plan of Distribution, dated as of ______________, 1999, pursuant to which, among
other things, WWC has agreed, upon the terms and conditions set forth therein,
to distribute the shares of VoiceStream's Common Stock, no par value (the
"Common Stock"), owned by it, which shares represent 80.1% of the issued and
outstanding shares of Common Stock, to WWC's shareholders on the basis of one
share of Common Stock for each one share of WWC's outstanding common stock (the
"Spin Off");
WHEREAS, WWC and Cregg Baumbaugh (the "Employee") have entered into an
Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"),
setting forth, among other things, the terms of the Employee's employment by
WWC; and
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires
to assume, all of WWC's rights and obligations under the Employment Agreement on
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as
follows:
1. Assignment and Assumption of the Employment Agreement. On and as of
the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to
VoiceStream all of WWC's rights and interests in, and VoiceStream hereby
accepts, assumes and agrees to perform and discharge all of the obligations
arising from and after the Spin-Off Effective Date under, the Employment
Agreement.
2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall
indemnify and hold harmless WWC, its subsidiaries and affiliates and its and
their respective shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them (each, a "WWC Indemnified
Party"), from and against any and all demands, claims, losses, liabilities,
actions or causes of action, assessments, damages, fines, fees, penalties, costs
and expenses, including, without limitation, interest, expenses of
investigation, reasonable fees and disbursements of counsel, accountants and
other experts (collectively, "Losses") (whether arising out of or relating to
matters asserted by third parties against a WWC Indemnified Party or incurred or
sustained by such WWC Indemnified Party in the absence of a third party claim)
that
-1-
<PAGE> 2
arise after the Spin-Off Effective Date (a) under the Employment Agreement,
(b) by reason of the Employee's employment by VoiceStream after the Spin-Off
Effective Date, or (c) any default by VoiceStream in the performance of its
obligations under the Employment Agreement.
(b) Indemnification of VoiceStream by WWC. WWC shall indemnify and hold
harmless VoiceStream, its subsidiaries and affiliates and its and their
respective shareholders, members, managers, officers, employees, agents and/or
the legal representatives of any of them (each, a "VoiceStream Indemnified
Party"), from and against any and all Losses (whether arising out of or relating
to matters asserted by third parties against a VoiceStream Indemnified Party or
incurred or sustained by such VoiceStream Indemnified Party in the absence of a
third party claim) that arise out of or result from (a) the assignment to
VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on
or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the
Spin-Off Effective Date in the performance of its obligations under the
Employment Agreement.
(c) Procedures.
(i) In the event that any VoiceStream Indemnified Party or WWC
Indemnified Party (each an "Indemnified Party") shall sustain or incur any
Losses in respect of which indemnification may be sought by such Indemnified
Party pursuant to this Section 2, the Indemnified Party shall assert a claim for
indemnification by giving prompt notice to the applicable indemnifying party
(the "Indemnifying Party) under Section 2 and shall thereafter keep the
Indemnifying Party reasonably informed with respect thereto; provided that
failure of the Indemnified Party to give the Indemnifying Party notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder, except to the extent that the Indemnifying Party is
materially prejudiced by such failure. Upon the Indemnifying Party's receipt of
such notice, the Indemnifying Party shall have the right to assume, conduct and
control the defense, compromise or settlement thereof, by written notice to the
Indemnified Party of its intention to do so within thirty (30) days after
receipt of the notice, with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's own expense, and thereupon to prosecute in
the name and on behalf of the Indemnified Party any available cross-claims,
counter-claims or third-party claims arising with respect to the claim. If the
Indemnifying Party shall assume the defense of such claim, it shall not settle
such claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified Party,
reasonably satisfactory to the Indemnified Party, from all liability with
respect to such claim. As long as the Indemnifying Party is contesting any such
claim in good faith and on a timely basis, the Indemnified Party shall not pay
or settle any such claim. Notwithstanding the assumption by the Indemnifying
Party of the defense of any claim as provided in this Section 2(c) and without
limiting the Indemnifying Party's right to assume, conduct and control the
defense, compromise or settlement thereof, the Indemnified Party shall be
permitted to join in the defense of such claim and to employ counsel at its own
expense. Assumption by the Indemnifying Party of the defense of any claim shall
not be deemed a concession by the Indemnifying Party that it is required to
indemnify the Indemnified Party for the subject matter of such claim.
- 2 -
<PAGE> 3
(ii) If the Indemnifying Party shall fail to notify the
Indemnified Party of its desire to assume the defense of such claim within the
prescribed 30-day period set forth in Section 2(c)(i) or shall notify the
Indemnified Party that it will not assume the defense of any such claim, then
the Indemnified Party may defend any such claim, in which event it may do so in
such manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determinations made in any litigation with respect to such claim or
any settlement thereof effected by the Indemnified Party, provided that any such
determinations or settlement shall not affect the right of the Indemnifying
Party to dispute the Indemnified Party's claim for indemnification. Unless and
until the Indemnified Party assumes the defense of any claim, the Indemnifying
Party shall advance to the Indemnified Party any of its reasonable attorneys'
fees and other costs and expenses incurred in connection with the defense of any
such action or proceeding.
3. Representations and Warranties.
Each of WWC and VoiceStream hereby represents and warrants to the other
as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
power and authority to execute, deliver and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms; and
(c) Neither the execution, delivery or performance of this
Agreement by it, nor the consummation of the transactions contemplated hereby
will, with or without the giving of notice of passage of time, or both, conflict
with, result in a default or loss of rights (or give rise to any right of
termination, cancellation or acceleration) under, (i) any provision of its (or
any of its subsidiaries') certificate of incorporation or by-laws, (ii) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which it, or any of its subsidiaries,
is a party or by which it, or any of its subsidiaries, or its, or any of its
subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
subsidiaries, is a party or by which it, or any of its subsidiaries, or any of
its, or any of its subsidiaries', properties are bound or affected.
4. Effectiveness. This Agreement shall become effective only upon the
Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or
before December 31, 1999, this Agreement shall terminate and be of no further
force and effect whatsoever.
5. Notices. All notices, claims or other communications hereunder shall
be in writing and shall be given by delivery in person, by facsimile
transmission, by registered or
- 3 -
<PAGE> 4
certified mail (return receipt requested), postage prepaid, or overnight carrier
guaranteeing next day delivery:
(a) to VoiceStream:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
- 4 -
<PAGE> 5
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any Party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 5. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) business days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next business day
after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
6. Waiver; Amendments. This Agreement may be amended, modified or
supplemental only by written agreement of the Parties. No provision in this
Agreement shall be deemed waived except by an instrument in writing signed by
the Party waiving such provision. Any waiver by any Party of any of its rights
under this Agreement or of any breach of this Agreement shall not constitute a
waiver of any other rights or of any other or future breach.
7. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
8. Successors, Assigns and Transferees. This Agreement shall inure to
the benefit of, and be binding upon, the successors and assigns of each Party.
9. Entire Agreement. This Agreement constitutes the entire understanding
of the Parties with respect to the subject matter hereof and supersedes all
prior understandings among the Parties with respect to such subject matter.
- 5 -
<PAGE> 6
10. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall be considered the same agreement.
11. Applicable Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Washington without
reference to conflicts of laws principles.
12. Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WESTERN WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
VOICESTREAM WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 10.39
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the
"Agreement"), by and between Western Wireless Corporation, a Washington
corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington
corporation ("VoiceStream", WWC and VoiceStream are sometimes individually
referred to herein as a "Party" and collectively as the "Parties").
WHEREAS, WWC and VoiceStream are parties to that certain Agreement and
Plan of Distribution, dated as of ______________, 1999, pursuant to which, among
other things, WWC has agreed, upon the terms and conditions set forth therein,
to distribute the shares of VoiceStream's Common Stock, no par value (the
"Common Stock"), owned by it, which shares represent 80.1% of the issued and
outstanding shares of Common Stock, to WWC's shareholders on the basis of one
share of Common Stock for each one share of WWC's outstanding common stock (the
"Spin Off");
WHEREAS, WWC and Timothy Wong (the "Employee") have entered into an
Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"),
setting forth, among other things, the terms of the Employee's employment by
WWC; and
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires
to assume, all of WWC's rights and obligations under the Employment Agreement on
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as
follows:
1. Assignment and Assumption of the Employment Agreement. On and as of
the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to
VoiceStream all of WWC's rights and interests in, and VoiceStream hereby
accepts, assumes and agrees to perform and discharge all of the obligations
arising from and after the Spin-Off Effective Date under, the Employment
Agreement.
2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall
indemnify and hold harmless WWC, its subsidiaries and affiliates and its and
their respective shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them (each, a "WWC Indemnified
Party"), from and against any and all demands, claims, losses, liabilities,
actions or causes of action, assessments, damages, fines, fees, penalties, costs
and expenses, including, without limitation, interest, expenses of
investigation, reasonable fees and disbursements of counsel, accountants and
other experts (collectively, "Losses") (whether arising out of or relating to
matters asserted by third parties against a WWC Indemnified Party or incurred or
sustained by such WWC Indemnified Party in the absence of a third party claim)
that
- 1 -
<PAGE> 2
arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b)
by reason of the Employee's employment by VoiceStream after the Spin-Off
Effective Date, or (c) any default by VoiceStream in the performance of its
obligations under the Employment Agreement.
(b) Indemnification of VoiceStream by WWC. WWC shall indemnify
and hold harmless VoiceStream, its subsidiaries and affiliates and its and their
respective shareholders, members, managers, officers, employees, agents and/or
the legal representatives of any of them (each, a "VoiceStream Indemnified
Party"), from and against any and all Losses (whether arising out of or relating
to matters asserted by third parties against a VoiceStream Indemnified Party or
incurred or sustained by such VoiceStream Indemnified Party in the absence of a
third party claim) that arise out of or result from (a) the assignment to
VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on
or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the
Spin-Off Effective Date in the performance of its obligations under the
Employment Agreement.
(c) Procedures.
(i) In the event that any VoiceStream Indemnified Party
or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur
any Losses in respect of which indemnification may be sought by such Indemnified
Party pursuant to this Section 2, the Indemnified Party shall assert a claim for
indemnification by giving prompt notice to the applicable indemnifying party
(the "Indemnifying Party) under Section 2 and shall thereafter keep the
Indemnifying Party reasonably informed with respect thereto; provided that
failure of the Indemnified Party to give the Indemnifying Party notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder, except to the extent that the Indemnifying Party is
materially prejudiced by such failure. Upon the Indemnifying Party's receipt of
such notice, the Indemnifying Party shall have the right to assume, conduct and
control the defense, compromise or settlement thereof, by written notice to the
Indemnified Party of its intention to do so within thirty (30) days after
receipt of the notice, with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's own expense, and thereupon to prosecute in
the name and on behalf of the Indemnified Party any available cross-claims,
counter-claims or third-party claims arising with respect to the claim. If the
Indemnifying Party shall assume the defense of such claim, it shall not settle
such claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified Party,
reasonably satisfactory to the Indemnified Party, from all liability with
respect to such claim. As long as the Indemnifying Party is contesting any such
claim in good faith and on a timely basis, the Indemnified Party shall not pay
or settle any such claim. Notwithstanding the assumption by the Indemnifying
Party of the defense of any claim as provided in this Section 2(c) and without
limiting the Indemnifying Party's right to assume, conduct and control the
defense, compromise or settlement thereof, the Indemnified Party shall be
permitted to join in the defense of such claim and to employ counsel at its own
expense. Assumption by the Indemnifying Party of the defense of any claim shall
not be deemed a concession by the Indemnifying Party that it is required to
indemnify the Indemnified Party for the subject matter of such claim.
- 2 -
<PAGE> 3
(ii) If the Indemnifying Party shall fail to notify the
Indemnified Party of its desire to assume the defense of such claim within the
prescribed 30-day period set forth in Section 2(c)(i) or shall notify the
Indemnified Party that it will not assume the defense of any such claim, then
the Indemnified Party may defend any such claim, in which event it may do so in
such manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determinations made in any litigation with respect to such claim or
any settlement thereof effected by the Indemnified Party, provided that any such
determinations or settlement shall not affect the right of the Indemnifying
Party to dispute the Indemnified Party's claim for indemnification. Unless and
until the Indemnified Party assumes the defense of any claim, the Indemnifying
Party shall advance to the Indemnified Party any of its reasonable attorneys'
fees and other costs and expenses incurred in connection with the defense of any
such action or proceeding.
3. Representations and Warranties.
Each of WWC and VoiceStream hereby represents and warrants to the other
as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
power and authority to execute, deliver and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms; and
(c) Neither the execution, delivery or performance of this
Agreement by it, nor the consummation of the transactions contemplated hereby
will, with or without the giving of notice of passage of time, or both, conflict
with, result in a default or loss of rights (or give rise to any right of
termination, cancellation or acceleration) under, (i) any provision of its (or
any of its subsidiaries') certificate of incorporation or by-laws, (ii) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which it, or any of its subsidiaries,
is a party or by which it, or any of its subsidiaries, or its, or any of its
subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
subsidiaries, is a party or by which it, or any of its subsidiaries, or any of
its, or any of its subsidiaries', properties are bound or affected.
4. Effectiveness. This Agreement shall become effective only upon the
Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or
before December 31, 1999, this Agreement shall terminate and be of no further
force and effect whatsoever.
5. Notices. All notices, claims or other communications hereunder shall
be in writing and shall be given by delivery in person, by facsimile
transmission, by registered or
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<PAGE> 4
certified mail (return receipt requested), postage prepaid, or overnight carrier
guaranteeing next day delivery:
(a) to VoiceStream:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
- 4 -
<PAGE> 5
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any Party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 5. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) business days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next business day
after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
6. Waiver; Amendments. This Agreement may be amended, modified or
supplemental only by written agreement of the Parties. No provision in this
Agreement shall be deemed waived except by an instrument in writing signed by
the Party waiving such provision. Any waiver by any Party of any of its rights
under this Agreement or of any breach of this Agreement shall not constitute a
waiver of any other rights or of any other or future breach.
7. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
8. Successors, Assigns and Transferees. This Agreement shall inure to
the benefit of, and be binding upon, the successors and assigns of each Party.
9. Entire Agreement. This Agreement constitutes the entire understanding
of the Parties with respect to the subject matter hereof and supersedes all
prior understandings among the Parties with respect to such subject matter.
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<PAGE> 6
10. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall be considered the same agreement.
11. Applicable Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Washington without
reference to conflicts of laws principles.
12. Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WESTERN WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
VOICESTREAM WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 10.40
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the
"Agreement"), by and between Western Wireless Corporation, a Washington
corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington
corporation ("VoiceStream", WWC and VoiceStream are sometimes individually
referred to herein as a "Party" and collectively as the "Parties").
WHEREAS, WWC and VoiceStream are parties to that certain Agreement and
Plan of Distribution, dated as of ______________, 1999, pursuant to which, among
other things, WWC has agreed, upon the terms and conditions set forth therein,
to distribute the shares of VoiceStream's Common Stock, no par value (the
"Common Stock"), owned by it, which shares represent 80.1% of the issued and
outstanding shares of Common Stock, to WWC's shareholders on the basis of one
share of Common Stock for each one share of WWC's outstanding common stock (the
"Spin Off");
WHEREAS, WWC and Robert Dotson (the "Employee") have entered into an
Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"),
setting forth, among other things, the terms of the Employee's employment by
WWC; and
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires
to assume, all of WWC's rights and obligations under the Employment Agreement on
the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as
follows:
1. Assignment and Assumption of the Employment Agreement. On and as of
the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to
VoiceStream all of WWC's rights and interests in, and VoiceStream hereby
accepts, assumes and agrees to perform and discharge all of the obligations
arising from and after the Spin-Off Effective Date under, the Employment
Agreement.
2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall
indemnify and hold harmless WWC, its subsidiaries and affiliates and its and
their respective shareholders, members, managers, officers, employees, agents
and/or the legal representatives of any of them (each, a "WWC Indemnified
Party"), from and against any and all demands, claims, losses, liabilities,
actions or causes of action, assessments, damages, fines, fees, penalties, costs
and expenses, including, without limitation, interest, expenses of
investigation, reasonable fees and disbursements of counsel, accountants and
other experts (collectively, "Losses") (whether arising out of or relating to
matters asserted by third parties against a WWC Indemnified Party or incurred or
sustained by such WWC Indemnified Party in the absence of a third party claim)
that
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<PAGE> 2
arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b)
by the reason of the Employee's employment by VoiceStream after the Spin-Off
Effective Date, or (c) any default by VoiceStream in the performance of its
obligations under the Employment Agreement.
(b) Indemnification of VoiceStream by WWC. WWC shall indemnify
and hold harmless VoiceStream, its subsidiaries and affiliates and its and their
respective shareholders, members, managers, officers, employees, agents and/or
the legal representatives of any of them (each, a "VoiceStream Indemnified
Party"), from and against any and all Losses (whether arising out of or relating
to matters asserted by third parties against a VoiceStream Indemnified Party or
incurred or sustained by such VoiceStream Indemnified Party in the absence of a
third party claim) that arise out of or result from (a) the assignment to
VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on
or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the
Spin-Off Effective Date in the performance of its obligations under the
Employment Agreement.
(c) Procedures.
(i) In the event that any VoiceStream Indemnified Party
or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur
any Losses in respect of which indemnification may be sought by such Indemnified
Party pursuant to this Section 2, the Indemnified Party shall assert a claim for
indemnification by giving prompt notice to the applicable indemnifying party
(the "Indemnifying Party) under Section 2 and shall thereafter keep the
Indemnifying Party reasonably informed with respect thereto; provided that
failure of the Indemnified Party to give the Indemnifying Party notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder, except to the extent that the Indemnifying Party is
materially prejudiced by such failure. Upon the Indemnifying Party's receipt of
such notice, the Indemnifying Party shall have the right to assume, conduct and
control the defense, compromise or settlement thereof, by written notice to the
Indemnified Party of its intention to do so within thirty (30) days after
receipt of the notice, with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's own expense, and thereupon to prosecute in
the name and on behalf of the Indemnified Party any available cross-claims,
counter-claims or third-party claims arising with respect to the claim. If the
Indemnifying Party shall assume the defense of such claim, it shall not settle
such claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified Party,
reasonably satisfactory to the Indemnified Party, from all liability with
respect to such claim. As long as the Indemnifying Party is contesting any such
claim in good faith and on a timely basis, the Indemnified Party shall not pay
or settle any such claim. Notwithstanding the assumption by the Indemnifying
Party of the defense of any claim as provided in this Section 2(c) and without
limiting the Indemnifying Party's right to assume, conduct and control the
defense, compromise or settlement thereof, the Indemnified Party shall be
permitted to join in the defense of such claim and to employ counsel at its own
expense. Assumption by the Indemnifying Party of the defense of any claim shall
not be deemed a concession by the Indemnifying Party that it is required to
indemnify the Indemnified Party for the subject matter of such claim.
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<PAGE> 3
(ii) If the Indemnifying Party shall fail to notify the
Indemnified Party of its desire to assume the defense of such claim within the
prescribed 30-day period set forth in Section 2(c)(i) or shall notify the
Indemnified Party that it will not assume the defense of any such claim, then
the Indemnified Party may defend any such claim, in which event it may do so in
such manner as it may deem appropriate, and the Indemnifying Party shall be
bound by any determinations made in any litigation with respect to such claim or
any settlement thereof effected by the Indemnified Party, provided that any such
determinations or settlement shall not affect the right of the Indemnifying
Party to dispute the Indemnified Party's claim for indemnification. Unless and
until the Indemnified Party assumes the defense of any claim, the Indemnifying
Party shall advance to the Indemnified Party any of its reasonable attorneys'
fees and other costs and expenses incurred in connection with the defense of any
such action or proceeding.
3. Representations and Warranties.
Each of WWC and VoiceStream hereby represents and warrants to the other
as follows:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
power and authority to execute, deliver and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms; and
(c) Neither the execution, delivery or performance of this
Agreement by it, nor the consummation of the transactions contemplated hereby
will, with or without the giving of notice of passage of time, or both, conflict
with, result in a default or loss of rights (or give rise to any right of
termination, cancellation or acceleration) under, (i) any provision of its (or
any of its subsidiaries') certificate of incorporation or by-laws, (ii) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which it, or any of its subsidiaries,
is a party or by which it, or any of its subsidiaries, or its, or any of its
subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
subsidiaries, is a party or by which it, or any of its subsidiaries, or any of
its, or any of its subsidiaries', properties are bound or affected.
4. Effectiveness. This Agreement shall become effective only upon the
Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or
before December 31, 1999, this Agreement shall terminate and be of no further
force and effect whatsoever.
5. Notices. All notices, claims or other communications hereunder shall
be in writing and shall be given by delivery in person, by facsimile
transmission, by registered or
- 3 -
<PAGE> 4
certified mail (return receipt requested), postage prepaid, or overnight carrier
guaranteeing next day delivery:
(a) to VoiceStream:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
(b) to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: General Counsel
Tel: (425) 586-8014
Fax: (425) 586-8080
- 4 -
<PAGE> 5
with a copy to:
Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98006
Tel: (425) 586-8014
Fax: (425) 586-8080
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Telephone: (212) 833-1107
Facsimile: (212)-355-6401
or to such other address as any Party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 5. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) business days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next business day
after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
6. Waiver; Amendments. This Agreement may be amended, modified or
supplemental only by written agreement of the Parties. No provision in this
Agreement shall be deemed waived except by an instrument in writing signed by
the Party waiving such provision. Any waiver by any Party of any of its rights
under this Agreement or of any breach of this Agreement shall not constitute a
waiver of any other rights or of any other or future breach.
7. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
8. Successors, Assigns and Transferees. This Agreement shall inure to
the benefit of, and be binding upon, the successors and assigns of each Party.
9. Entire Agreement. This Agreement constitutes the entire understanding
of the Parties with respect to the subject matter hereof and supersedes all
prior understandings among the Parties with respect to such subject matter.
- 5 -
<PAGE> 6
10. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall be considered the same agreement.
11. Applicable Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of Washington without
reference to conflicts of laws principles.
12. Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
13. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WESTERN WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
VOICESTREAM WIRELESS CORPORATION
By:
---------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.41
FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT
FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT, dated as of _________, 1999
(the "Agreement"), by and among VoiceStream Wireless Corporation, a Washington
corporation (the "Company"), Western Wireless Corporation, a Washington
corporation ("WWC"), Hutchison Telecommunications Holdings (USA) Limited, a
British Virgin Islands corporation ("Hutchison Holdings"), and Hutchison
Telecommunications PCS (USA) Limited, a British Virgin Islands corporation
("Hutchison PCS"; each of Hutchison Holdings, Hutchison PCS, WWC and the Company
is sometimes referred to herein as a "Party" and collectively as the "Parties").
WHEREAS, the Company and WWC are parties to that certain Agreement and
Plan of Distribution, dated as of ___________, 1999, pursuant to which, among
other things, WWC has agreed, upon the terms and conditions set forth therein,
to distribute the shares of the Company's Common Stock, no par value (the
"Common Stock"), owned by it, which shares represent 80.1% of the issued and
outstanding shares of Common Stock, to WWC's shareholders on the basis of one
share of Common Stock for each one share of WWC's outstanding common stock (the
"Spin-Off");
WHEREAS, prior to the Spin-Off, Hutchison PCS is the owner of 19.9% of
the issued and outstanding shares of Common Stock, and WWC, the Company and
Hutchison PCS are Parties to that certain Shareholders Agreement, dated February
17, 1998 (the "Shareholders Agreement"), pursuant to which, among other things,
certain agreements concerning the management and control of the Company,
preemptive rights with respect to the Company's equity securities, registration
rights with respect to the Common Stock, and certain other matters were set
forth;
WHEREAS, prior to the Spin-Off, Hutchison Holdings is the owner of
3,888,888 shares of the issued and outstanding Class A common stock of WWC, and
as a result of the Spin-Off, will receive a like number of shares of Common
Stock;
WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off
Effective Date"), the Company and certain stockholders of the Company, including
Hutchison Holdings and Hutchison PCS, intend to enter into a Voting Agreement
(the "Voting Agreement"), setting forth, among other things, certain agreements
concerning the management of the Company; and
WHEREAS, simultaneously with the execution of the Voting Agreement, the
Parties desire to terminate the Shareholders Agreement, except for certain
provisions therein granting Hutchison PCS preemptive rights on equity securities
issued by the Company, rights to designate directors and registration rights on
the Common Stock owned by Hutchison PCS, all on the terms set forth herein.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:
1. Certain Definitions. For purposes of this Agreement, capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Shareholders Agreement as if such definitions were set forth
herein, unless the context otherwise requires.
2. Termination of Certain Provisions of the Shareholders Agreement. (a)
Effective as of the Spin-Off Effective Date, the Shareholders Agreement is
amended to delete WWC as a party thereto and from and after the Spin-Off
Effective Date, (i) WWC shall have no further rights, obligations or
liabilities of any nature whatsoever under the Shareholders Agreement; and (ii)
neither the Company nor Hutchison PCS shall have any further rights against, or
obligations or liabilities of any nature whatsoever to, WWC under the
Shareholders Agreement.
(b) Except as set forth in Section 2(c) below, the Parties hereby
agree that, as of the Spin-Off Effective Date, all rights and obligations of the
Parties under the Shareholders Agreement shall terminate.
(c) Notwithstanding the termination of the rights and obligations
of the Parties pursuant to Section 2(b) hereof, the Parties hereby agree that
(i) Hutchison PCS's preemptive right to purchase equity securities issued by the
Company under Section 9 of the Shareholders Agreement shall survive the Spin-Off
Effective Date until the termination in its entirety of Hutchison PCS's right to
designate directors to the Board of Directors of the Company under Section 3 of
the Voting Agreement, or, if earlier, the completion of an Investor 50%
Transfer; (ii) Hutchison PCS's demand and piggyback registration rights under
Section 11 of the Shareholders Agreement shall survive the Spin-Off Effective
Date until terminated in accordance with Section 11 of the Shareholders
Agreement; (iii) Hutchison Holdings is hereby granted, with respect to the
Common Stock which Hutchison Holdings will receive as a result of the Spin-Off
with respect to its WWC Class A common stock, the same demand and piggyback
registration rights as Hutchison PCS under Section 11 of the Shareholders
Agreement, which rights shall survive the Spin-Off Effective Date until
terminated in accordance with Section 11 of the Shareholders Agreement; and (iv)
Hutchison PCS's right to transfer its right to designate directors and demand
and piggyback registration rights to an Investor 50% Transferee shall continue
until terminated in accordance with the Shareholders Agreement.
3. Representations and Warranties.
Each Party hereby represents and warrants, as to itself, to each other
Party as follows:
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<PAGE> 3
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation with full
power and authority to execute, deliver and perform its obligations under this
Agreement;
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part and this Agreement
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms; and
(c) Neither the execution, delivery or performance of this
Agreement by it, nor the consummation of the transactions contemplated hereby
will, with or without the giving of notice of passage of time, or both conflict
with, result in a default or loss of rights (or give rise to any right of
termination, cancellation or acceleration) under, (i) any provision of its (or
any of its Subsidiaries') certificate of incorporation or by-laws, (ii) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which it, or any of its Subsidiaries,
is a party or by which it, or any of its Subsidiaries, or its, or any of its
Subsidiaries', properties may be bound or affected, or (iii) any law, order,
judgment, ordinance, rule, regulation or decree to which it, or any of its
Subsidiaries, is a party or by which it, or any of its Subsidiaries, or any of
its, or any of its Subsidiaries', properties are bound or affected.
4. Effectiveness. This Agreement shall become effective on the Spin-Off
Effective Date. If the Spin-Off Effective Date does not occur on or before
December 31, 1999, (a) this Agreement shall terminate and be of no further force
and effect whatsoever, and (b) the Shareholders Agreement shall remain in full
force and effect without any amendment thereto whatsoever resulting from this
Agreement and shall hereby be ratified, adopted and confirmed in all respects.
5. Waiver; Amendments. Except as expressly provided otherwise herein,
neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Parties.
6. Recapitalization, Exchanges, Etc. The provisions of this Agreement
shall apply to the full extent set forth herein with respect to shares or other
securities of the Company that may be issued to Hutchison PCS or Hutchison
Holdings in respect of, in exchange for, or in substitution of the Common Stock.
7. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and, except to the extent otherwise expressly
provided in this Agreement, shall be deemed to have been duly given if delivered
by same day or next day courier (guaranteed delivery) or mailed, registered
mail, return receipt requested, or transmitted by telegram, telex or facsimile
at such Party's address appearing below, or such other address as such Party may
have furnished to the other Parties, in writing, in accordance with this Section
7. If a notice hereunder is transmitted by confirmed fax so as to arrive during
normal business hours during a Business
-3-
<PAGE> 4
Day at the place of receipt, then such notice shall be deemed to have been given
on such Business Day at the place of receipt or, if so transmitted to arrive
after normal business hours during a Business Day at the place of receipt, then
such notice shall be deemed to have been given on the following Business Day at
the place of receipt. If such notice is sent by next-day courier it shall be
deemed to have been given on the third Business Day at the place of receipt
following sending and, if by registered air mail, on the tenth Business Day at
the place of receipt following sending, provided, that the date of sending shall
be deemed to be the date at the place of receipt at the time such notice is
posted.
(a) if to Hutchison PCS:
Hutchison Telecommunications PCS (USA)
Limited
c/o Offshore Incorporations Limited
P.O. Box 957
Offshore Incorporations Centre
Road Town, Tortola
British Virgin Islands
Tel: (809) 494-2233
Fax: (809) 494-4885
and
Hutchison Telecommunications PCS (USA)Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Edith Shih
Tel: (852) 2128-1232
Fax: (852) 2128-1778
With a copy (which shall not constitute
notice) to:
Dewey Ballantine LLP
Suite 3907, Asia Pacific Finance Tower
Citibank Plaza
3 Garden Road
Central, Hong Kong
Attention: John A. Otoshi
Tel: (852) 2509-7000
Fax: (852) 2509-7088
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<PAGE> 5
(b) if to Hutchison Holdings:
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Edith Shih
Tel: (852) 2128-1232
Fax: (852) 2128-1778
With a copy (which shall not constitute
notice) to:
Dewey Ballantine LLP
Suite 3907, Asia Pacific Finance Tower
Citibank Plaza
3 Garden Road
Central, Hong Kong
Attention: John A. Otoshi
Tel: (852) 2509-7000
Fax: (852) 2509-7088
(c) if to WWC:
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: Alan R. Bender, Esq.
Tel: (425) 586-8014
Fax: (425) 586-8080
With a copy (which shall not constitute
notice) to:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Tel: (212) 833-1107
Fax: (212) 355-6401
(d) if to the Company:
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<PAGE> 6
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: Alan R. Bender, Esq.
Tel: (425) 586-8014
Fax: (425) 586-8080
With a copy (which shall not constitute
notice) to:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Attention: Barry A. Adelman, Esq.
Tel: (212) 833-1107
Fax: (212) 355-6401
For purposes of this Section 7, a "Business Day" shall mean any day
other than a Saturday, Sunday or legal holiday in New York, New York, Seattle or
Hong Kong or any other day on which commercial banks in those locations are
authorized by law or governmental decree to close.
8. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall inure to the benefit of, and be binding upon, the successors and
assigns of each of the Parties.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10. Entire Agreement. This Agreement constitutes the entire
understanding of the Parties with respect to the subject matter hereof and
supersedes all prior understandings among the Parties with respect to such
subject matter.
11. Applicable Law. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the Parties hereunder, shall
be determined under, governed by and construed in accordance with the internal
laws of the State of New York applicable to contracts formed in such State. Each
Party agrees that, subject to Section 13 hereof, any suit, action or other
proceeding arising out of this Agreement shall be brought and litigated in the
courts of the State of New York or the United States District Court for the
Southern District of New York and each Party hereby irrevocably consents to
personal jurisdiction and venue in any such court and hereby waives any claim it
may have that such court is an inconvenient forum for the purposes of any such
suit, action or other proceeding.
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<PAGE> 7
12. Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
13. Arbitration. Any and all disputes, controversies or claims (each a
"Dispute") between the Parties relating to the interpretation or enforcement or
performance of this Agreement shall be resolved by binding arbitration by the
Arbitration Institute of the Stockholm Chamber of Commerce in accordance with
its rules, subject to the following provisions:
(i) There shall be three arbitrators (the "Arbitrators"). Each
Party shall appoint one arbitrator within 30 days after giving or receiving
notice of the submission of a Dispute to arbitration. The two arbitrators
appointed by the Parties shall appoint the third arbitrator. If a Party does not
appoint an arbitrator within such designated period, or if the two appointed
arbitrators fail to appoint a third arbitrator within 30 days after their
appointment, the relevant appointment shall be made by the Arbitration Institute
of the Stockholm Chamber of Commerce.
(ii) The expenses of the arbitration shall be borne equally by
WWC, on the one hand, and VoiceStream, on the other hand, and each Party shall
bear its own legal fees and expenses; provided, however, that the Arbitrators
shall have discretion to require that one Party pay all or a portion of the
expenses of arbitration or the other Party's legal fees and expenses in
connection with any particular arbitration.
(iii) The Arbitrators shall determine whether and to what extent
any Party shall be entitled to damages or equitable relief. No Party shall be
entitled to punitive damages or consequential damages or shall be required to
post a bond in connection with equitable relief.
(iv) The Arbitrators shall not have the power to add to nor
modify any of the terms or conditions of this Agreement. The Arbitrators'
decision shall not go beyond what is necessary for the interpretation and
application of the provisions of this Agreement in respect of the issue before
the Arbitrators. The Arbitrators' decision and award or permitted remedy, if
any, shall be based upon the issue as drafted and submitted by the respective
Parties and the relevant and competent evidence adduced at the hearing(s).
(v) The Arbitrators shall have the authority to award any remedy
or relief provided for in this Agreement, in addition to any other remedy or
relief (including provisional remedies and relief) that a court of competent
jurisdiction could order or grant (but subject to the remedial limitations
elsewhere set forth in this Agreement, including, but without limitation, the
aforesaid prohibition against punitive and consequential damages). The
Arbitrators written decision shall be rendered within sixty (60) days of the
hearing. The decision reached by the Arbitrators shall be final and binding upon
the Parties as to the matter in dispute. To the extent that the relief or remedy
granted by the Arbitrators is relief or remedy on which a court could enter
judgement, a judgement upon the award rendered by the Arbitrators may be entered
in any court having jurisdiction thereof (unless in the case of an award of
damages, the full amount of
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<PAGE> 8
the award is paid within ten (10) days of its determination by the Arbitrators).
Otherwise, the award shall be binding on the Parties in connection with their
continuing performance of this Agreement and in any subsequent arbitral or
judicial proceeding between the Parties.
(vi) The arbitration shall take place in Stockholm, Sweden,
unless otherwise agreed by the Parties, and shall be conducted in the English
language.
(vii) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the arbitration
proceeding shall be disclosed exclusively for the purpose of facilitating the
arbitration process and for no other purpose.
(viii) The Parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a Dispute
while the Dispute is being resolved unless and until such obligations are
terminated, expire or are suspended in accordance with the provisions hereof.
(ix) The Arbitrators may, in their sole discretion, order a
pre-hearing exchange of information including production of documents, exchange
of summaries of testimony or exchange of statements of position, and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the Dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each Party and its counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of the other Party. No
testimony of any witness shall be presented in written form unless the opposing
Party or Parties shall have the opportunity to cross-examine such witness,
except as the Parties otherwise agree in writing.
(x) Notwithstanding the dispute resolution procedures contained
in this Section 13, either Party may apply to any court having jurisdiction (a)
to enforce this Agreement to arbitrate, (b) to seek provisional injunctive
relief so as to maintain the status quo until the arbitration award is rendered
or the Dispute is otherwise resolved, or (c) to challenge or vacate any final
judgment, award or decision of the Arbitrators that does not comport with the
express provisions of this Section 13.
14. Failure to Pursue Remedies. The failure of any Party to seek redress
for violation of any provision of this Agreement shall not prevent a subsequent
act, which would have originally constituted a violation, from having the effect
of an original violation.
15. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the Parties may have by law, statute,
ordinance or otherwise.
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<PAGE> 9
16. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
17. HTL. In the event Hutchison PCS shall exercise its preemptive rights
under Section 9 of the Shareholders Agreement, Hutchison Telecommunications
Limited, a corporation organized under the laws of Hong Kong, agrees to cause
Hutchison PCS to perform its obligations under such Section 9 in accordance with
its respective terms in connection with any such purchases (including causing or
enabling Hutchison PCS to make payment).
18. Further Assurances. Each party hereto at the request of the other
party shall, from time to time, execute and deliver such other assignments,
transfers, conveyances and other instruments and documents and do and perform
such other acts and things as may be reasonably necessary or desirable for
effecting complete consummation of this Agreement and the transactions herein
contemplated.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
WESTERN WIRELESS CORPORATION
-------------------------------
Name:
Title:
HUTCHISON TELECOMMUNICATIONS PCS
(USA) LIMITED
-------------------------------
Name:
Title:
HUTCHISON TELECOMMUNICATIONS
HOLDINGS (USA) LIMITED
-------------------------------
Name:
Title:
VOICESTREAM WIRELESS CORPORATION
-------------------------------
Name:
Title:
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<PAGE> 11
The undersigned joins as a Party to this Agreement solely for the
purpose of acknowledging and becoming bound by the provisions of Section 17
hereof.
HUTCHISON TELECOMMUNICATIONS
LIMITED
-------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.42
VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement") is made and entered into as of
this ____ day of ____________, 1999 by and among VoiceStream Wireless
Corporation, a Washington corporation (the "Company"), Hellman & Friedman
Capital Partners II, L.P., a California limited partnership ("HFCP II"), H & F
Orchard Partners, L.P., a California limited partnership ("Orchard"), H & F
International Partners, L.P., a California limited partnership ("International";
HFCP II, Orchard and International are hereinafter referred to collectively as
"H&F"), John W. Stanton ("JWS"), Theresa E. Gillespie ("TEG"), PN Cellular,
Inc., a Washington corporation ("PN"), Stanton Family Trust, established
November 1, 1990 by JWS and TEG, as settlors f/b/o the settlors' children
("SFT"), Stanton Communications Corporation, a Washington corporation ("SCC";
JWS, TEG, PN, SFT and SCC are hereinafter referred to collectively as
"Stanton"), GS Capital Partners, L.P., a Delaware limited partnership ("GSCP"),
The Goldman Sachs Group, L.P., a Delaware limited partnership ("GS"), Bridge
Street Fund 1992, L.P., a Delaware limited partnership ("BSF"), Stone Street
Fund 1992, L.P., a Delaware limited partnership ("SSF"; GSCP, GS, BSF and SSF
are hereinafter referred to collectively as "GSC"), Providence Media Partners
L.P., a Delaware limited partnership ("Providence"); Hutchison
Telecommunications PCS (USA) Limited, a British Virgin Islands corporation
("Hutchison PCS"); and Hutchison Telecommunications Holdings (USA) Limited, a
British Virgin Islands corporation ("Hutchison Holdings"; Hutchison PCS and
Hutchison Holdings are hereinafter referred to collectively as "Hutchison")
(each of H&F, Stanton, GSC, Providence and Hutchison are hereinafter referred to
individually as a "Shareholder" and collectively as the "Shareholders").
<PAGE> 2
R E C I T A L S
WHEREAS, the Company and Western Wireless Corporation, a Washington
corporation ("WWC"), are parties to that certain Agreement and Plan of
Distribution, dated as of ___________, 1999, pursuant to which, among other
things, WWC has agreed, upon the terms and conditions set forth therein, to
distribute the shares of Common Stock (as hereinafter defined) owned by it,
which shares represent 80.1% of the issued and outstanding shares of Common
Stock, to WWC's shareholders, including the Shareholders party hereto, on the
basis of one share of Common Stock for each one share of WWC's outstanding
common stock (the "Spin-Off");
WHEREAS, effective with the Spin-Off, the Company will be authorized to
issue ____ shares of Common Stock, of which ____ shares will be issued and
outstanding immediately after the Spin-Off;
WHEREAS, immediately after the Spin-Off, each of the Shareholders will
own the number of shares of Common Stock set forth opposite its respective name
on Schedule 1 annexed hereto; and
WHEREAS, simultaneously with the consummation of the Spin-Off (the date
of such consummation being hereinafter referred to as the "Effective Date"),
this Agreement shall be in full force and effect in accordance with its terms in
order, among other things, to set forth certain matters relating to the
management of the Company.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the Shareholders and the Company
agree as follows:
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1. Certain Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
1.1 "Agreement" has the meaning given in the preamble.
1.2 "Arbitrators" has the meaning given in Section 6.12(i).
1.3 "Beneficially Own" has the meaning set forth in Rule 13d-3 of
the Securities and Exchange Act of 1934, as amended; except that no broker or
dealer or any affiliate thereof shall be deemed to Beneficially Own shares of
Common Stock, the beneficial ownership of which is acquired in the ordinary
course of the activities of a broker or dealer registered under Section 15 of
the Securities Exchange Act of 1934, as amended, including, but not limited to,
the acquisition of beneficial ownership of such securities as a result of any
market-making or underwriting activities (including any shares acquired for the
investment account of a broker or dealer in connection with such underwriting
activities), or the exercise of investment or voting discretion authority over
any of its customer accounts, or the acquisition in good faith of such
securities in connection with the enforcement of payment of a debt previously
contracted.
1.4 "Board" means the Board of Directors of the Company.
1.5 "BSF" has the meaning given in the preamble.
1.6 "Business Day" means any day other than a Saturday, Sunday or
legal holiday in New York, New York, Seattle or Hong Kong or any other day on
which commercial banks in those locations are authorized by law or governmental
decree to close.
1.7 "Common Stock" means the Company's Common Stock, no par
value, and shall include any new, substituted and additional securities issued
at any time in replacement of the Common Stock or issued or delivered with
respect to the Common Stock.
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<PAGE> 4
1.8 "Company" has the meaning given in the preamble.
1.9 "Dispute" has the meaning given in Section 6.12.
1.10 "Effective Date" has the meaning given in the recitals.
1.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.12 "GS" has the meaning given in the preamble.
1.13 "GSC" has the meaning given in the preamble.
1.14 "GSCP" has the meaning given in the preamble.
1.15 "H&F" has the meaning given in the preamble.
1.16 "HFCP II" has the meaning given in the preamble.
1.17 "HTL" means Hutchison Telecommunications Limited, a
corporation organized under the laws of Hong Kong.
1.18 "Hutchison" has the meaning given in the preamble.
1.19 "Immediate Family" means an individual's spouse, children
(including adopted children), grandchildren and parents.
1.20 "International" has the meaning given in the preamble.
1.21 "JWS" has the meaning given in the preamble.
1.22 "Orchard" has the meaning given in the preamble.
1.23 "Percentage Ownership" means, as to any Shareholder, the
aggregate percentage of the outstanding shares of Common Stock Beneficially
Owned by such Shareholder, including for this purpose, shares Beneficially Owned
by such Shareholder's Affiliated Transferees.
1.24 "Permitted Affiliate Transferee" means (i) with respect to
any Shareholder who is a natural Person, any member of such Person's Immediate
Family, or any trust for the benefit
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<PAGE> 5
of, or a partnership all of the partners of which are, such Person and/or any
member of such Person's Immediate Family; (ii) with respect to any Shareholder
which is a limited partnership (a) any Person that, as of May 13, 1996, was the
sole general partner of such Shareholder or is the sole general partner of the
sole general partner of such Shareholder, (b) another limited partnership which
has a sole general partner, the control of which sole general partner is held,
directly or indirectly, by five or fewer natural Persons, provided such natural
Persons had control at May 13, 1996 of the sole general partner of such
Shareholder or (iii) with respect to Hutchison, (x) HTL, (y) any Subsidiary of
HTL, or (z) any other entity acceptable to Shareholders (other than Hutchison
and its Permitted Affiliate Transferees) holding at least a majority of the
Common Stock owned by all Shareholders (other than Hutchison and its Permitted
Affiliate Transferees) in which HTL owns, directly or indirectly, more than 40%
of the outstanding voting power, and (d) in the case of any Person referred to
in clause (x), (y) or (z), Hutchison. For purposes of this definition, "control"
shall mean ownership of at least 51% of the equity interest in, and at least 51%
of the voting power on all matters in, an entity or, if applicable, the sole
general partner of such entity.
1.25 "Person" means an individual, corporation, association,
partnership, trust or estate, an unincorporated organization, a joint venture, a
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
1.26 "PN" has the meaning given in the preamble.
1.27 "Providence" has the meaning given in the preamble.
1.28 "SCC" has the meaning given in the preamble.
1.29 "SFT" has the meaning given in the preamble.
1.30 "Shareholder" has the meaning given in the preamble.
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1.31 "Spin-Off" has the meaning given in the recitals.
1.32 "SSF" has the meaning given in the preamble.
1.33 "Stanton" has the meaning given in the preamble.
1.34 "Subsidiary" means, as to any Person, another Person which
is an entity as to which such Person owns more than 50% of the outstanding
voting power.
1.35 "TEG" has the meaning given in the preamble.
1.36 "Transfer" means any sale, assignment, pledge,
hypothecation, gift or other transfer, disposition or encumbrance of any
interest (and includes an exchange of shares in a merger, consolidation or
similar transaction).
1.37 "WWC" has the meaning given in the recitals.
1.38 "WWC Shareholders Agreement" has the meaning given in the
preamble.
Each definition or pronoun herein shall be deemed to refer to the
singular, plural, masculine, feminine or neuter as the context requires. Words
such as "herein, "hereinafter," "hereof," "hereto" and "hereunder" refer to this
Agreement as a whole, unless the context otherwise requires. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
2. Effectiveness; Legend.
2.1 This Agreement shall become effective on the Effective Date.
If the Effective Date does not occur on or before December 31, 1999, this
Agreement shall terminate and be of no further force or effect whatsoever.
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2.2 All certificates representing shares of Common Stock now or
hereafter issued by the Company to any of the Shareholders or their Permitted
Affiliate Transferees shall be subject to this Agreement and shall bear the
following legend:
"The shares evidenced by this certificate or any certificate
issued in exchange or transfer therefor are and will be subject to, the
terms of a certain Voting Agreement, dated as of ___________, 1999, by
and among certain shareholders of the Company."
The requirement that the above legend be placed upon certificates evidencing any
such Common Stock shall cease and terminate upon the earlier of (i) the Transfer
of such Common Stock to any Person other than a Permitted Affiliate Transferee,
and (ii) as to any Shareholder and its Permitted Affiliate Transferees, the
termination of this Agreement as to such Shareholder and its Permitted Affiliate
Transferees. Upon the occurrence of any event requiring the removal of a legend
hereunder, the Company, upon the surrender of certificates containing such
legend, shall, at its own expense, deliver to the holder of any such Common
Stock as to which the requirement for such legend shall have terminated, one or
more new certificates evidencing such Common Stock not bearing such legend.
3. Management of the Corporation.
3.1 Board of Directors. Pursuant to the Company's by-laws, the
Board shall be constituted of ten (10) directors, subject to increase as
provided in this Section 3.1. Each of the Shareholders (and its Permitted
Affiliate Transferees) agrees that it will vote, or cause to be voted, all of
the shares of Common Stock Beneficially Owned by it (whether now owned or
hereafter acquired), in person or by proxy (and shall take all other necessary
or desirable actions within such Shareholder's control, whether in the capacity
of a stockholder, director or member of a board
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<PAGE> 8
committee of the Company or otherwise, and including attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), for the election, removal and replacement of the
following ten (10) members: (a) JWS, for so long as he is the Chief Executive
Officer of the Company or he, together with his Permitted Affiliate Transferees,
Beneficially Own at least 4,500,000 shares of Common Stock; (b) two (2)
designees of Hutchison (or if Hutchison has Transferred all of its shares of
Common Stock to Permitted Affiliate Transferees of Hutchison, two (s) designees
of such Permitted Affiliate Transferees); (c) two (2) designees of H&F (or, if
H&F has Transferred all of its shares of Common Stock to Permitted Affiliate
Transferees of H&F, two (2) designees of such Permitted Affiliate Transferees);
(d) one (1) designee of GSC (or, if GSC has Transferred all of its shares of
Common Stock to Permitted Affiliate Transferees of GSC, one (1) designee of such
Permitted Affiliate Transferees); (e) one (1) designee selected by a majority
vote of Stanton (or, if Stanton has Transferred all of its shares of Common
Stock to Permitted Affiliate Transferees of Stanton, of such Permitted Affiliate
Transferees) and Providence (or, if Providence has Transferred all of its shares
of Common Stock to Permitted Affiliate Transferees of Providence, of such
Permitted Affiliate Transferees) (it being understood that such designee is in
addition to JWS for so long as JWS shall serve on the Board by reason of his
holding the office of Chief Executive Officer of the Company); and (f) three (3)
designees selected by the persons selected as provided above. Stanton (and its
Permitted Affiliate Transferees) agrees with respect to the designee to the
Board selected by the vote of Stanton and Providence (or their respective
Permitted Affiliate Transferees) that from and after the date hereof and for so
long as (i) JWS is serving as the Chief Executive Officer of the Company or he,
together with his Permitted Affiliate Transferees, Beneficially Own at least
4,500,000 shares of Common
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<PAGE> 9
Stock, (ii) Stanton and Providence (and their respective Permitted Affiliate
Transferees) shall collectively Beneficially Own at least 4,500,000 shares of
Common Stock, and (iii) Providence (or its Permitted Affiliate Transferees)
shall Beneficially Own at least 2,500,000 shares of Common Stock, Stanton (and
its Permitted Affiliate Transferees) shall so vote, or cause to be voted, all of
the shares of Common Stock owned or held of record by Stanton (and its Permitted
Affiliate Transferees) for one designee of Providence (and its Permitted
Affiliate Transferees). In addition, Hutchison shall have the right to designate
an additional director (and the Board shall in each case be expanded by one
member to accommodate such new designee) when Hutchison's aggregate Percentage
Ownership exceeds each of the following thresholds: 27.25%, 33.33%, 38.5%,
42.9%, 46.67% and 50%.
No designee to the Board shall be removed from the Board (except removal
for cause under applicable law) without the written consent of the Shareholder
or group of Shareholders who has the right to designate such Person to the Board
(or, if such Shareholder or group of Shareholders have Transferred all of their
shares of Common Stock to Permitted Affiliate Transferees of such Shareholder or
group of Shareholders without the written consent of Permitted Affiliate
Transferees holding a majority of the shares owned by all of such Permitted
Affiliate Transferees). Any Shareholder or group of Shareholders (or, if such
Shareholder or group of Shareholders have Transferred all of their shares of
Common Stock to Permitted Affiliate Transferees of such Shareholder or group of
Shareholders, Permitted Affiliate Transferees holding a majority of the shares
owned by all of such Permitted Affiliate Transferees) who has the right to
designate any member(s) of the Board shall have the right to replace any
member(s) so designated by it (whether or not such member is removed from the
Board with or without cause or ceases to be a member of
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the Board by reason of death, disability or for any other reason) upon written
notice to the Company and the other members of the Board, which notice shall set
forth the name of the member(s) being replaced and the name of the new
member(s). Each of the Shareholders (and their respective Permitted Affiliate
Transferees) agrees to vote its shares of Common Stock, or shall otherwise take
any action as is necessary, desirable or appropriate, so as to cause the
election of any successor director designated by any of the Shareholders (or any
of such Shareholder's Permitted Affiliate Transferees) pursuant to this Section
3.1. Notwithstanding the foregoing,
(a) if at any time H&F (and its Permitted Affiliate
Transferees) shall cease to Beneficially Own at least (i) 9,800,000 shares of
Common Stock, then in such event, H&F (or, if H&F has Transferred all of its
shares of Common Stock to Permitted Affiliate Transferees of H&F, its Permitted
Affiliate Transferees) shall be entitled to designate only one member of the
Board; and (ii) 4,500,000 shares of Common Stock, then in such event, H&F (or,
if H&F has Transferred all of its shares of Common Stock to Permitted Affiliate
Transferees of H&F, its Permitted Affiliate Transferees) shall not be entitled
to designate any member of the Board;
(b) if at any time GSC (or, if GSC has Transferred all of
its shares of Common Stock to Permitted Affiliate Transferees of GSC, its
Permitted Affiliate Transferees) shall cease to Beneficially Own at least
4,500,000 shares of Common Stock, then in such event, GSC (or, if GSC has
Transferred all of its shares of Common Stock to Permitted Affiliate Transferees
of GSC, its Permitted Affiliate Transferees) shall not be entitled to designate
any member of the Board;
(c) if at any time Stanton and Providence (and their
respective Permitted Affiliate Transferees) shall cease collectively to
Beneficially Own at least 4,500,000 shares of Common Stock, then in such event,
they shall not be entitled to designate any member of the Board
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<PAGE> 11
(except that JWS shall continue to serve on the Board for so long as he holds
the office of Chief Executive Officer of the Company); and
(d) if at any time Hutchison (and its Permitted Affiliate
Transferees) shall cease to Beneficially Own at least (i) 9,800,000 shares of
Common Stock, then in such event Hutchison (or, if Hutchison has Transferred all
of its shares of Common Stock to Permitted Affiliate Transferees of Hutchison,
its Permitted Affiliate Transferees) shall be entitled to designate only one
member of the Board; and (ii) 4,500,000 shares of Common Stock, then in such
event, Hutchison (or, if Hutchison has Transferred all of its shares of Capital
Stock to Permitted Affiliate Transferees of Hutchison, its Permitted Affiliate
Transferees) shall not be entitled to designate any member of the Board. In
addition, if Hutchison shall have designated additional director(s) (in excess
of the two (2) specified above) by reason of an increase in its Percentage
Ownership as set forth in this Section 3.1 above, and at any time thereafter the
Percentage Ownership of Hutchison (and its Permitted Affiliate Transferees)
shall be less than the Percentage Ownership entitling Hutchison to such
additional director(s), then in such event Hutchison (or, if Hutchison has
Transferred all of its shares of Common Stock to Permitted Affiliate Transferees
of Hutchison, its Permitted Affiliate Transferees) shall cease to be entitled to
designate such additional director(s). Any vacancies on the Board created by
reason of the provisions of subsections (a) through (d) above shall be filled by
the directors then in office to serve until the next annual meeting of
shareholders of the Company, and at the next annual meeting shall be filled by a
vote of a plurality of all shareholders (including the Shareholders and their
Permitted Affiliate Transferees) of the Company; provided, however, that in the
event that the size of the Board shall have increased by reason of Hutchison
having the right to
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<PAGE> 12
designate additional director(s) and thereafter Hutchison shall cease to have
the right to so designate such additional director(s), the size of the Board
shall be appropriately reduced.
(e) Notwithstanding anything to the contrary contained in
this Agreement, Hutchison's right to transfer its right to designate directors
to certain block transferees as set forth in Sections 14 and 15 of the
Shareholders Agreement of VoiceStream Wireless Corporation, dated February 17,
1998, as amended, among WWC, the Company and Hutchison PCS, shall continue in
full force and effect until terminated in accordance with the terms of such
Shareholders Agreement.
(f) The number of shares referred to in this Section 3.1
shall be appropriately adjusted for any stock dividends, stock splits, reverse
splits, combinations, recapitalizations and the like occurring after the date
hereof.
3.2 Company Covenant. The Company hereby agrees to use all
reasonable efforts to give effect to the provisions of Section 3.1. In this
regard, the Company shall, subject to the provisions of Section 3.1, duly
nominate the designees set forth above for election to the Board and shall
include in any proxy solicitation materials related to the election of members
of the Board such information and recommendations of the Board as are
appropriate in proxy solicitation materials. Each Shareholder shall vote such
Shareholder's shares of Common Stock at any regular or special meeting of the
Shareholders or in any written consent executed in lieu of such a meeting of
Shareholders for the election of such designees. The Company and each
Shareholder shall take all other actions necessary to ensure that the
certificate of incorporation and by-laws of the Company as in effect immediately
following the date hereof do not, at any time thereafter, conflict in any
respect with the provisions of this Agreement.
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4. Representations and Warranties.
Each of the Company, HFCP II, Orchard, International, JWS, TEG,
PN, SFT, SCC, GS, GSCP, BSF, SSF, Providence and Hutchison hereby represents and
warrants to the other parties as follows:
(a) Such Person has full power and authority to execute,
deliver and perform its obligations under this Agreement;
(b) This Agreement and all transactions contemplated
hereby have been duly and validly authorized by all necessary action on the part
of such Person and this Agreement constitutes the legal, valid and binding
obligation of such Person enforceable against it in accordance with its terms;
and
(c) Neither the execution, delivery or performance of this
Agreement by such Person, nor the consummation of the transactions contemplated
hereby will, with or without the giving of notice of passage of time, or both
conflict with, result in a default or loss of rights (or give rise to any right
of termination, cancellation or acceleration) under, (i) any provision of the
certificate of incorporation, by-laws, partnership agreement or comparable
constituent document of such Person, (ii) any material note, bond, indenture,
mortgage, deed of trust, contract, Agreement, lease or other instrument or
obligation to which any such Person is a party or by which it or its properties
may be bound or affected or (iii) any law, order, judgment, ordinance, rule,
regulation or decree to which any such Person is a party or by which it or any
of its properties are bound or affected.
5. Term.
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This Agreement shall terminate upon the earliest to occur of any
of the following events:
(a) Upon agreement by Shareholders retaining the right to
designate directors under this Agreement; or
(b) The filing by the Company of a petition in bankruptcy or the
expiration of sixty (60) days after a petition in bankruptcy shall have been
filed against the Company and such petition shall not have been stayed or
discharged during such sixty (60) day period; or upon the expiration of sixty
(60) days after the commencement of any proceeding under any law for the relief
of debtors seeking the relief or readjustment of the Company's indebtedness
either through reor ganization, winding-up, extension or otherwise, and such
proceedings involving the Company as debtor shall not have been vacated or
stayed within such sixty (60) day period; or upon the appointment of a receiver,
custodian or trustee for all or substantially all of the Company's property, or
the making by the Company of any general assignment for the benefit of
creditors, or the admitting in writing by the Company of its inability to pay
its debts as they mature; or upon the voluntary or involuntary liquidation or
dissolution of the Company; or
(c) The Beneficial Ownership of all of the Common Stock by only
one Shareholder (including its Permitted Affiliate Transferees).
6. Miscellaneous.
6.1 Successors, Assigns and Transferees. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their Permitted
Affiliate Transferees. Each of the Shareholders hereby agrees that prior to any
Transfer of any Common Stock to a Permitted Affiliate Transferee, such Permitted
Affiliate Transferee shall execute a counterpart of this Agreement
-14-
<PAGE> 15
agreeing to be bound by the provisions of this Agreement. No Transfer to a
Permitted Affiliate Transferee shall be effective unless such Permitted
Affiliate Transferee has executed such counterpart of this Agreement.
6.2 Specific Performance, Etc. Each of the parties hereto
acknowledges and agrees that, in the event of any breach of this Agreement, the
non-breaching parties would be irreparably harmed and could not be made whole by
monetary damages. Accordingly, each of the parties hereto agrees that the other
parties, in addition to any other remedy to which they may be entitled at law or
in equity, shall be entitled to compel specific performance of this Agreement
pursuant to Section 6.12(x).
6.3 Headings. The headings in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
6.4 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and, except to the extent otherwise
expressly provided in this Agreement, shall be deemed to have been duly given if
delivered by same day or next day courier (guaranteed delivery) or mailed,
registered mail, return receipt requested, or transmitted by telegram, telex or
facsimile (i) if to a Shareholder, at such Shareholder's address appearing below
or at any other address such Shareholder may have provided in writing to the
Company and the other Shareholders then party to this Agreement and (ii) if to
the Company, at 3650 131 Avenue SE, Bellevue, Washington 98006, U.S.A., Tel:
(425) 586-8014, Fax: (425) 586-8080; Attention: Alan R. Bender, Esq., or such
other address as the Company may have furnished to the Shareholders in writing,
with a copy (which shall not constitute notice) to Friedman Kaplan & Seiler LLP,
875 Third Avenue, New
-15-
<PAGE> 16
York, NY 10022, USA, Tel: (212) 833-1107, Fax: (212) 355-6401, Attention: Barry
A. Adelman. If a notice hereunder is transmitted by confirmed fax so as to
arrive during normal business hours during a Business Day at the place of
receipt, then such notice shall be deemed to have been given on such Business
Day at the place of receipt or, if so transmitted to arrive after normal
business hours during a Business Day at the place of receipt, then such notice
shall be deemed to have been given on the following Business Day at the place of
receipt. If such notice is sent by next-day courier it shall be deemed to have
been given on the third Business Day at the place of receipt following sending
and, if by registered air mail, on the tenth Business Day at the place of
receipt following sending, provided, that the date of sending shall be deemed to
be the date at the place of receipt at the time such notice is posted.
(a) if to JWS, TEG, PN, SFT or SCC:
c/o Stanton Communications, Inc.
131 Avenue SE
Bellevue, Washington 98006
Attention: John W. Stanton
Facsimile: (___) ___-____
with a copy to (which shall not constitute notice):
Barry A. Adelman, Esq.
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Facsimile: (212) 355-6401
(b) if to GS, GSCP, BSF or SSF:
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Terence M. O'Toole
Facsimile: (212) 357-5505
-16-
<PAGE> 17
with a copy to (which shall not constitute notice):
Alison S. Ressler, Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 683-0457
(c) if to Providence:
c/o Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Attention: Jonathan M. Nelson
Facsimile: (401) 751-1790
with a copy to (which shall not constitute notice):
David K. Duffell, Esq.
Edwards & Angell
2700 Hospital Tower
Providence, Rhode Island 02903
Facsimile: (401) 276-6611
(d) if to Hutchison:
Hutchison Telecommunications PCS (USA) Limited
c/o Offshore Incorporations Limited
P.O. Box 957
Offshore Incorporations Centre
Road Town, Tortola
British Virgin Islands
Tel: (809) 494-2233
Fax: (809) 494-4885
and
-17-
<PAGE> 18
Hutchison Telecommunications PCS (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Edith Shih
Tel: (852) 2128-1232
Fax: (852) 2128-1778
and
Hutchison Telecommunications Holdings (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Edith Shih
Tel: (852) 2128-1232
Fax: (852) 2128-1778
with a copy to (which shall not constitute notice):
Dewey Ballantine LLP
Suite 3907, Asia Pacific Finance Tower
Citibank Plaza
3 Garden Road
Central, Hong Kong
Attention: John A. Otoshi
Tel: (852) 2509-7000
Fax: (852) 2509-7088
6.5 Exchanges, Recapitalizations, Etc. Affecting the Company's
Common Stock. The provisions of this Agreement shall apply, to the full extent
set forth herein with respect to the shares of Common Stock now or hereinafter
owned by each Shareholder (and its Permitted Affiliate Transferees), to any and
all securities of the Company or any successor or assign of the Company (whether
by merger, consolidation or otherwise) that may be issued in respect of, in
exchange for, or in substitution of such shares of Common Stock, and shall be
appropriately adjusted for any stock
-18-
<PAGE> 19
dividends, stock splits, reverse splits, combinations, recapitalizations and the
like occurring after the date hereof.
6.6 Inspection and Compliance with Law. Copies of this Agreement
will be available for inspection or copying by any interested Person at the
offices of the Company through the Secretary of the Company. The Company will
otherwise take all actions as may be necessary or appropriate to comply with any
applicable law relating to the validity and enforceability of shareholders
agreements containing the provisions of this Agreement.
6.7 Waivers. Except as expressly provided otherwise herein,
neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Company and each of the Shareholders. The failure of any party hereto to
give notice of the breach or non-fulfillment of any term or condition of this
Agreement shall not constitute a waiver thereof, nor shall the waiver of any
breach or non- fulfillment of any term or condition of this Agreement constitute
a waiver of any other breach or non-fulfillment of that term or condition or any
other term or condition of this Agreement.
6.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall be considered one and the same agreement.
6.9 Obligations Several. The obligations of each of the
Shareholders under this Agreement shall be several with respect to each such
Shareholder.
6.10 Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior understandings among such parties with respect to such
subject matter.
-19-
<PAGE> 20
6.11 Applicable Law. The validity of this Agreement, its
construction, interpretation and enforcement, and the rights of the parties
hereunder, shall be determined under, governed by and construed in accordance
with the internal laws of the State of Washington applicable to contracts formed
in such State. Each party hereto agrees that, subject to Section 6.12 hereof,
any suit, action or other proceeding arising out of this Agreement shall be
brought and litigated in the courts of the State of Washington or the United
States District Court for the Western District of Washington and each party
hereto hereby irrevocably consents to personal jurisdiction and venue in any
such court and hereby waives any claim it may have that such court is an
inconvenient forum for the purposes of any such suit, action or other
proceeding.
6.12 Arbitration. Any and all disputes, controversies or claims
(each a "Dispute") between the Shareholders relating to the interpretation or
enforcement or performance of this Agreement shall be resolved by binding
arbitration by the American Arbitration Association in accordance with its
rules, subject to the following provisions:
(i) There shall be three arbitrators (the
"Arbitrators"). Each party shall appoint one arbitrator within 30 days after
giving or receiving notice of the submission of a Dispute to arbitration. The
two arbitrators appointed by the parties shall appoint the third arbitrator. If
a party does not appoint an arbitrator within such designated period, or if the
two appointed arbitrators fail to appoint a third arbitrator within 30 days
after their appointment, the relevant appointment shall be made by the American
Arbitration Association.
(ii) The expenses of the arbitration shall be borne
equally by the Shareholders involved in the arbitration, and each party shall
bear its own legal fees and expenses; provided, however, that the Arbitrators
shall have discretion to require that one party pay all or a
-20-
<PAGE> 21
portion of the expenses of arbitration or the other party's legal fees and
expenses in connection with any particular arbitration.
(iii) The Arbitrators shall determine whether and to
what extent any party shall be entitled to damages or equitable relief. No party
shall be entitled to punitive damages or consequential damages or shall be
required to post a bond in connection with equitable relief.
(iv) The Arbitrators shall not have the power to add
to nor modify any of the terms or conditions of this Agreement. The Arbitrators'
decision shall not go beyond what is necessary for the interpretation and
application of the provisions of this Agreement in respect of the issue before
the Arbitrators. The Arbitrators' decision and award or permitted remedy, if
any, shall be based upon the issue as drafted and submitted by the respective
parties and the relevant and competent evidence adduced at the hearing(s).
(v) The Arbitrators shall have the authority to award
any remedy or relief provided for in this Agreement, in addition to any other
remedy or relief (including provisional remedies and relief) that a court of
competent jurisdiction could order or grant (but subject to the remedial
limitations elsewhere set forth in this Agreement, including, but without
limitation, the aforesaid prohibition against punitive and consequential
damages). The Arbitrators written decision shall be rendered within sixty (60)
days of the hearing. The decision reached by the Arbitrators shall be final and
binding upon the parties as to the matter in dispute. To the extent that the
relief or remedy granted by the Arbitrators is relief or remedy on which a court
could enter judgement, a judgement upon the award rendered by the Arbitrators
may be entered in any court having jurisdiction thereof (unless in the case of
an award of damages, the full amount of the award is paid within ten (10) days
of its determination by the Arbitrators). Otherwise, the award shall be
-21-
<PAGE> 22
binding on the parties in connection with their continuing performance of this
Agreement and in any subsequent arbitral or judicial proceeding between the
parties.
(vi) The arbitration shall take place in Seattle,
Washington, unless otherwise agreed by the parties, and shall be conducted in
the English language.
(vii) The arbitration proceeding and all filing,
testimony, documents and information relating to or presented during the
arbitration proceeding shall be disclosed exclusively for the purpose of
facilitating the arbitration process and for no other purpose.
(viii) The parties shall continue performing their
respective obligations under this Agreement notwithstanding the existence of a
Dispute while the Dispute is being resolved unless and until such obligations
are terminated, expire or are suspended in accordance with the provisions
hereof.
(ix) The Arbitrators may, in their sole discretion,
order a pre- hearing exchange of information including production of documents,
exchange of summaries of testimony or exchange of statements of position, and
shall schedule promptly all discovery and other procedural steps and otherwise
assume case management initiative and control to effect an efficient and
expeditious resolution of the Dispute. At any oral hearing of evidence in
connection with an arbitration proceeding, each party and its counsel shall have
the right to examine its witnesses and to cross-examine the witnesses of the
other party. No testimony of any witness shall be presented in written form
unless the opposing party or parties shall have the opportunity to cross-examine
such witness, except as the parties otherwise agree in writing.
(x) Notwithstanding the dispute resolution procedures
contained in this Section 6.12, either party may apply to any court having
jurisdiction (a) to enforce this
-22-
<PAGE> 23
Agreement to arbitrate, (b) to seek provisional injunctive relief so as to
maintain the status quo until the arbitration award is rendered or the Dispute
is otherwise resolved, or (c) to challenge or vacate any final judgment, award
or decision of the Arbitrators that does not comport with the express provisions
of this Section 6.12.
6.13 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
6.14 Cumulative Remedies. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies
except as otherwise expressly provided in this Agreement. Such rights and
remedies are given in addition to any other rights the parties may have by law,
statute, ordinance or otherwise.
6.15 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
-23-
<PAGE> 24
IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
VOICESTREAM WIRELESS CORPORATION
By:
-------------------------------
Name:
Title:
HUTCHISON TELECOMMUNICATIONS PCS
(USA) LIMITED
By:
-------------------------------
Name:
Title:
HUTCHISON TELECOMMUNICATIONS
HOLDINGS (USA) LIMITED
By:
-------------------------------
Name:
Title:
HELLMAN & FRIEDMAN CAPITAL PARTNERS
II, L.P., a California limited partnership
By: Hellman & Friedman Investors, L.P., its
general partner
By: Hellman & Friedman Investors, Inc.,
its general partner
By:
-------------------------------
Name:
Title:
-24-
<PAGE> 25
H & F ORCHARD PARTNERS, L.P.,
a California limited partnership
By: H & F Orchard Investors, L.P., its
general partner
By: H & F Orchard Investors, Inc.,
its general partner
By:
-----------------------------
Name:
Title: Vice president
H & F INTERNATIONAL PARTNERS, L.P.,
a California limited partnership
By: H & F International Investors, L.P.,
its general partner
By: H & F International Investors, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
---------------------------------------------
JOHN W. STANTON
---------------------------------------------
THERESA E. GILLESPIE
PN CELLULAR, INC.
By:
-------------------------------
Name:
Title:
-25-
<PAGE> 26
STANTON FAMILY TRUST
By:
-------------------------------
Name: , Trustee
STANTON COMMUNICATIONS CORPORATION
By:
-------------------------------
Name:
Title:
THE GOLDMAN SACHS GROUP, L.P.
By:
-------------------------------
Name:
Title:
GS CAPITAL PARTNERS, L.P.
By: GS Advisors L.P., General Partner
By: GS Advisors, Inc., General Partner
By:
-------------------------------
Name:
Title:
BRIDGE STREET FUND 1992, L.P.
By: Stone Street Performance Corp., Managing
General Partner
By:
-------------------------------
Name:
Title:
-26-
<PAGE> 27
STONE STREET FUND 1992, L.P.
By: Stone Street Performance Corp., General
Partner
By:
-------------------------------
Name:
Title:
PROVIDENCE MEDIA PARTNERS L.P.
By: Providence Media GP Limited Partnership
Its: General Partner
By: Providence Ventures, L.P.
Its: General Partner
By:
-------------------------------
Name:
Title:
-27-
<PAGE> 28
VOTING AGREEMENT
BY AND AMONG
VOICESTREAM WIRELESS CORPORATION,
HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P.,
H&F ORCHARD PARTNERS, L.P., H&F INTERNATIONAL PARTNERS, L.P.,
JOHN W. STANTON and THERESA E. GILLESPIE,
PN CELLULAR, INC., STANTON FAMILY TRUST,
STANTON COMMUNICATIONS CORPORATION,
GS CAPITAL PARTNERS, L.P., THE GOLDMAN SACHS GROUP, L.P.,
BRIDGE STREET FUND 1992, L.P., STONE STREET FUND 1992, L.P.,
PROVIDENCE MEDIA PARTNERS L.P.,
HUTCHISON TELECOMMUNICATIONS HOLDINGS (USA) LIMITED,
AND
HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED
DATED: _____________, 1999
<PAGE> 29
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions................................................................. 2
1.1 "Agreement".................................................................. 2
1.3 "Beneficially Own"........................................................... 2
1.4 "Board"...................................................................... 3
1.5 "BSF"........................................................................ 3
1.6 "Business Day"............................................................... 3
1.7 "Common Stock"............................................................... 3
1.8 "Company".................................................................... 3
1.9 "Dispute".................................................................... 3
1.10 "Effective Date"............................................................. 3
1.11 "Exchange Act"............................................................... 3
1.12 "GS"......................................................................... 3
1.13 "GSC"........................................................................ 3
1.14 "GSCP"....................................................................... 3
1.15 "H&F"........................................................................ 4
1.16 "HFCP II".................................................................... 4
1.17 "HTL"........................................................................ 4
1.18 "Hutchison".................................................................. 4
1.19 "Immediate Family"........................................................... 4
1.20 "International".............................................................. 4
1.21 "JWS"........................................................................ 4
1.22 "Orchard".................................................................... 4
1.23 "Percentage Ownership"....................................................... 4
1.24 "Permitted Affiliate Transferee"............................................. 4
1.25 "Person"..................................................................... 5
1.26 "PN"......................................................................... 5
1.27 "Providence"................................................................. 5
1.28 "SCC"........................................................................ 5
1.29 "SFT"........................................................................ 5
1.30 "Shareholder"................................................................ 5
1.31 "Spin-Off" has the meaning .................................................. 5
1.32 "SSF"........................................................................ 5
1.33 "Stanton".................................................................... 5
1.34 "Subsidiary"................................................................. 5
1.35 "TEG"........................................................................ 5
1.36 "Transfer"................................................................... 6
1.37 "WWC"........................................................................ 6
1.38 "WWC Shareholders Agreement" has the meaning given in the preamble........... 6
2. Effectiveness; Legend............................................................... 6
</TABLE>
-i-
<PAGE> 30
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
3. Management of the Corporation....................................................... 7
3.1 Board of Directors........................................................... 7
3.2 Company Covenant............................................................. 11
4. Representations and Warranties...................................................... 12
5. Term................................................................................ 12
6. Miscellaneous....................................................................... 13
6.1 Successors, Assigns and Transferees.......................................... 13
6.2 Specific Performance, Etc.................................................... 14
6.3 Headings..................................................................... 14
6.4 Notices...................................................................... 14
6.5 Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock...... 17
6.6 Inspection and Compliance with Law........................................... 17
6.7 Waivers...................................................................... 18
6.8 Counterparts................................................................. 18
6.9 Obligations Several.......................................................... 18
6.10 Entire Agreement............................................................. 18
6.11 Applicable Law............................................................... 18
6.12 Arbitration.................................................................. 19
6.13 Failure to Pursue Remedies................................................... 22
6.14 Cumulative Remedies.......................................................... 22
6.15 Severability................................................................. 22
</TABLE>
- ii -
<PAGE> 31
Schedule 1
to
Voting Agreement
<TABLE>
<CAPTION>
No. of Shares
of Common Stock
Name of Shareholder Owned by Shareholders
- ------------------- ---------------------
<S> <C>
Hellman & Friedman Capital Partners II, L.P.
H&F Orchard Partners, L.P.
H&F International Partners, L.P.
GS Capital Partners, L.P.
Bridge Street Fund 1992, L.P.
Stone Street Fund 1992, L.P.
The Goldman Sachs Group, L.P.
PN Cellular, Inc.
Stanton Communications Corporation
John W. Stanton & Theresa E. Gillespie
Stanton Family Trust
Providence Media Partners L.P.
Hutchison Telecommunications PCS (USA) Limited
Hutchison Telecommunications Holdings (USA) Limited
</TABLE>
<PAGE> 1
EXHIBIT 10.43
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of this ____ day of ____________, 1999 by and among VoiceStream
Wireless Corporation, a Washington corporation (the "Company"), Hellman &
Friedman Capital Partners II, L.P., a California limited partnership ("HFCP
II"), H & F Orchard Partners, L.P., a California limited partnership
("Orchard"), H & F International Partners, L.P., a California limited
partnership ("International"; HFCP II, Orchard and International are hereinafter
referred to collectively as "H&F"), John W. Stanton ("JWS"), Theresa E.
Gillespie ("TEG"), PN Cellular, Inc., a Washington corporation ("PN"), Stanton
Family Trust, established November 1, 1990 by JWS and TEG, as settlors f/b/o the
settlors' children ("SFT"), Stanton Communications Corporation, a Washington
corporation ("SCC"; JWS, TEG, PN, SFT and SCC are hereinafter referred to
collectively as "Stanton"), GS Capital Partners, L.P., a Delaware limited
partnership ("GSCP"), The Goldman Sachs Group, L.P., a Delaware limited
partnership ("GS"), Bridge Street Fund 1992, L.P., a Delaware limited
partnership ("BSF"), Stone Street Fund 1992, L.P., a Delaware limited
partnership ("SSF"; GSCP, GS, BSF and SSF are hereinafter referred to
collectively as "GSC"), and Providence Media Partners L.P., a Delaware limited
partnership ("Providence") (each of H&F, Stanton, GSC, and Providence are
hereinafter referred to individually as a "Stockholder" and collectively as the
"Stockholders").
R E C I T A L S
WHEREAS, the Company and Western Wireless Corporation, a Washington
Corporation ("WWC"), are parties to that certain Agreement and Plan of
Distribution, dated as of ___________, 1999, pursuant to which, among other
things, WWC has agreed, upon the terms and conditions set
<PAGE> 2
forth therein, to distribute the shares of the Company's Common Stock, no par
value (the "Common Stock") owned by it, which shares represent 80.1% of the
issued and outstanding shares of Common Stock, to WWC's stockholders, which
include the Stockholders, on the basis of one share of Common Stock for each one
share of WWC's outstanding common stock (the "Spin-Off");
WHEREAS, certain of the Stockholders and certain other persons were
parties to that certain Stockholders Agreement, dated as of July 29, 1994, as
amended by the First Amendment to Stockholders Agreement, dated as of November
30, 1994 (as amended, the "WWC Stockholders Agreement"), relating to, among
other things, their ownership of shares of common stock of WWC and certain
registration rights with respect thereto;
WHEREAS, the Stockholders and WWC are parties to that certain Voting
Agreement, dated as of May 13, 1996 (the "WWC Voting Agreement"), setting forth,
among other things, certain agreements regarding the termination of the WWC
Stockholders Agreement (except as expressly set forth in Section 10.2 of the WWC
Stockholders Agreement with respect to the survival of certain registration and
other rights) upon the consummation of WWC's Public Offering (as defined in the
WWC Voting Agreement);
WHEREAS, the WWC Stockholders Agreement terminated upon the consummation
of WWC's Public Offering pursuant to the terms thereof and the terms of the WWC
Voting Agreement, except as expressly set forth in Section 10.2 of the WWC
Stockholders Agreement with respect to the survival of certain registration and
other rights granted to Stockholders and Minority Stockholders (as defined in
the WWC Stockholders Agreement) to the extent such persons were Stockholders or
Minority Stockholders immediately prior to the consummation of WWC's Public
Offering; and
-2-
<PAGE> 3
WHEREAS, simultaneously with the consummation of the Spin-Off (the date
of such consummation being hereinafter referred to as the "Spin-Off Effective
Date"), this Agreement shall be in full force and effect in accordance with its
terms in order, among other things, to clarify that the registration rights
which survive pursuant to Section 10.2 of the WWC Stockholders Agreement shall
extend, as well, and to the same extent, to the shares of Common Stock.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Stockholders and the Company agree as follows:
1. Effectiveness. This Agreement shall become effective on the Spin-Off
Effective Date. If the Spin-Off Effective Date does not occur on or before
December 31, 1999, this Agreement shall terminate and be of no further force or
effect whatsoever.
2. Registration Rights. (a) The Company and the Stockholders hereby
agree and affirm that the registration rights granted under the WWC Stockholders
Agreement to the Stockholders and the Minority Stockholders (to the extent such
persons were Stockholders and Minority Stockholders immediately prior to the
consummation of WWC's Public Offering), shall extend, to the same extent that
such rights survived the termination of the WWC Stockholders Agreement, to
shares of Common Stock held by each Stockholder and each such Minority
Stockholder. It being understood that, for purposes of this Agreement, each
reference set forth in the WWC Stockholders Agreement to (a) "Common Stock"
shall be deemed to mean shares of "Common Stock of VoiceStream Wireless
Corporation, no par value," (b) the "Company" shall be deemed to mean
"VoiceStream Wireless Corporation", (c) an "Investor" or the "Investors" shall
be deemed to mean a Stockholder or the Stockholders, respectively.
-3-
<PAGE> 4
3. Term; Survival.
(a) This Agreement shall terminate upon the earliest to occur of
any of the following events:
(i) The consent in writing of all of the parties hereto;
or
(ii) July 29, 2004; or
(iii) The filing by the Company of a petition in
bankruptcy or the expiration of sixty (60) days after a petition in bankruptcy
shall have been filed against the Company and such petition shall not have been
stayed or discharged during such sixty (60) day period; or upon the expiration
of sixty (60) days after the commencement of any proceeding under any law for
the relief of debtors seeking the relief or readjustment of the Company's
indebtedness either through reorganization, winding-up, extension or otherwise,
and such proceedings involving the Company as debtor shall not have been vacated
or stayed within such sixty (60) day period; or upon the appointment of a
receiver, custodian or trustee for all or substantially all of the Company's
property, or the making by the Company of any general assignment for the benefit
of creditors, or the admitting in writing by the Company of its inability to pay
its debts as they mature; or upon the voluntary or involuntary liquidation or
dissolution of the Company; or
(iv) The beneficial ownership of all of the Common Stock
by only one Stockholder.
(b) Nothing contained in this Section 3 shall affect or impair
any rights or obligations of any party hereto arising prior to the time of the
termination of this Agreement, or which may arise by an event causing the
termination of this Agreement.
-4-
<PAGE> 5
4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assigns.
5. Specific Performance. The Company and each Stockholder, in addition
to being entitled to exercise all of the rights provided herein or in the
Company's Certificate of Incorporation or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Each of the Company and the Stockholders agree that monetary damages
would not be adequate compensation for any loss incurred by it by reason of a
breach by any other party hereto of the provisions of this Agreement and hereby
agrees to waive the defense in any action for specific performance that a remedy
at law would be adequate.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applied to agreements
entered into and wholly to be performed within the State of Delaware.
7. Headings. The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Agreement.
8. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively received by the addressee
upon personal delivery, on the date of receipt if sent by facsimile or overnight
courier, charges prepaid, or five days after deposit in the United States mail,
by registered or certified mail, postage prepaid, addressed as follows:
(a) if to the
Company: VoiceStream Wireless Corporation
3650 131 Avenue SE
Bellevue, Washington 98005
Attention: General Counsel
Facsimile: (425) 586-8080
-5-
<PAGE> 6
with copies to: Alan R. Bender, Esq.
3650 131 Avenue SE
Bellevue, Washington 98005
Facsimile: (425) 586-8080
and:
Barry A. Adelman, Esq.
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Facsimile: (212) 355-6401
(b) if to HFCP II,
Orchard or
International: c/o Hellman & Friedman
One Maritime Plaza, Suite 1200
San Francisco, California 94111
Attention: John L. Bunce, Jr.
General Partner
Facsimile: (415) 788-0176
with a copy to: Paul J. Mundie, Esq.
Heller Ehrman White
& McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
Facsimile: (415) 772-6268
(c) if to JWS, TEG
PN or SCC: c/o Stanton Communications, Inc.
3650 131 Avenue SE
Bellevue, Washington 98006
Attention: John W. Stanton
Facsimile: ( )
with a copy to: Barry A. Adelman, Esq.
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022-6225
Facsimile: (212) 355-6401
-6-
<PAGE> 7
(d) if to GS, GSCP, GSC,
BSF or SSF: c/o Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Terence M. O'Toole
Facsimile: (212) 902-4103
with a copy to: Alison S. Ressler, Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 683-0457
(e) if to Providence: c/o Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Attention: Jonathan M. Nelson
Facsimile: (401) 751-1790
with a copy to: David K. Duffell, Esq.
Edwards & Angell
2700 Hospital Tower
Providence, Rhode Island 02903
Facsimile: (401) 276-6611
or to such other address or facsimile number as any party may have furnished in
writing to the other parties in the manner provided above.
9. Exchanges, Recapitalizations, Etc. Affecting the Company's Common
Stock. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the shares of Common Stock now or hereinafter owned
by each Stockholder, to any and all securities of the Company or any successor
or assign of the Company (whether by merger, consolidation or otherwise) that
may be issued in respect of, in exchange for, or in substitution of such shares
of
-7-
<PAGE> 8
Common Stock, and shall be appropriately adjusted for any stock dividends, stock
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date hereof.
10. Inspection and Compliance with Law. Copies of this Agreement will be
available for inspection or copying by any interested person at the offices of
the Company through the Secretary of the Company. The Company will otherwise
take all actions as may be necessary or appropriate to comply with any
applicable law relating to the validity and enforceability of stockholder
agreements containing the provisions of this Agreement.
11. Waivers. The failure of any party hereto to give notice of the
breach or non- fulfillment of any term or condition of this Agreement shall not
constitute a waiver thereof, nor shall the waiver of any breach or
non-fulfillment of any term or condition of this Agreement constitute a waiver
of any other breach or non-fulfillment of that term or condition or any other
term or condition of this Agreement.
12. Amendments. This Agreement may be amended or modified at any time by
a writing setting forth such amendment or modification, signed by all of the
parties hereto.
13. Multiple Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall constitute an original
copy hereof, but all of which together shall constitute one agreement.
14. Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other document, instrument or agreement
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
document, instrument or agreement.
-8-
<PAGE> 9
15. Entire Agreement. This Agreement contains the entire understanding
among the parties hereto concerning the subject matter hereof and supersedes all
prior agreements and undertakings, whether written or oral, with respect to the
subject matter hereof.
-9-
<PAGE> 10
IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
VOICESTREAM WIRELESS CORPORATION
By:
-------------------------------
Name:
Title:
HELLMAN & FRIEDMAN CAPITAL PARTNERS
II, L.P., a California limited partnership
By: Hellman & Friedman Investors, L.P., its
general partner
By: Hellman & Friedman Investors, Inc.,
its general partner
By:
-------------------------------
Name:
Title:
H & F ORCHARD PARTNERS, L.P.,
a California limited partnership
By: H & F Orchard Investors, L.P., its
general partner
By: H & F Orchard Investors, Inc.,
its general partner
By:
---------------------------
Name:
Title: Vice president
-10-
<PAGE> 11
H & F INTERNATIONAL PARTNERS, L.P.,
a California limited partnership
By: H & F International Investors, L.P.,
its general partner
By: H & F International Investors, Inc.,
its general partner
By:
-------------------------------
Name:
Title:
---------------------------------------
JOHN W. STANTON
----------------------------------------
THERESA E. GILLESPIE
PN CELLULAR, INC.
By:
-------------------------------
Name:
Title:
STANTON FAMILY TRUST
By:
-------------------------------
Name: , Trustee
STANTON COMMUNICATIONS CORPORATION
By:
-------------------------------
Name:
Title:
-11-
<PAGE> 12
THE GOLDMAN SACHS GROUP, L.P.
By:
-------------------------------
Name:
Title:
GS CAPITAL PARTNERS, L.P.
By: GS Advisors L.P., General Partner
By: GS Advisors, Inc., General Partner
By:
-------------------------------
Name:
Title:
BRIDGE STREET FUND 1992, L.P.
By: Stone Street Performance Corp., Managing
General Partner
By:
-------------------------------
Name:
Title:
STONE STREET FUND 1992, L.P.
By: Stone Street Performance Corp., General
Partner
By:
-------------------------------
Name:
Title:
-12-
<PAGE> 13
PROVIDENCE MEDIA PARTNERS L.P.
By: Providence Media GP Limited Partnership
Its: General Partner
By: Providence Ventures, L.P.
Its: General Partner
By:
-------------------------------
Name:
Title:
-13-
<PAGE> 14
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
VOICESTREAM WIRELESS CORPORATION,
HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P.,
H&F ORCHARD PARTNERS, L.P., H&F INTERNATIONAL PARTNERS, L.P.,
JOHN W. STANTON and THERESA E. GILLESPIE,
PN CELLULAR, INC., STANTON FAMILY TRUST,
STANTON COMMUNICATIONS CORPORATION,
GS CAPITAL PARTNERS, L.P., THE GOLDMAN SACHS GROUP, L.P.,
BRIDGE STREET FUND 1992, L.P., STONE STREET FUND 1992, L.P.
PROVIDENCE MEDIA PARTNERS L.P.;
DATED: _____________, 1999
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Effectiveness........................................................................ 3
2. Registration Rights.................................................................. 3
3. Term; Survival....................................................................... 4
4. Successors and Assigns............................................................... 5
5. Specific Performance................................................................. 5
6. Governing Law........................................................................ 5
7. Headings............................................................................. 5
8. Notices.............................................................................. 5
9. Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock.............. 7
10. Inspection and Compliance with Law................................................... 8
11. Waivers.............................................................................. 8
12. Amendments........................................................................... 8
13. Multiple Counterparts................................................................ 8
14. Severability......................................................................... 8
15. Entire Agreement..................................................................... 9
</TABLE>
- i -
<PAGE> 1
================================================================================
COOK INLET/VOICESTREAM PCS, LLC
LIMITED LIABILITY COMPANY AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article I Definitions...................................................................1
Article II Organization and Purpose......................................................8
2.1 Organization..................................................................8
2.2 Name of the Company...........................................................8
2.3 Purpose.......................................................................8
2.4 Term..........................................................................8
2.5 Principal Office..............................................................8
2.6 Registered Agent..............................................................8
2.7 Members.......................................................................8
2.8 Actions by Company............................................................9
Article III Capital.......................................................................9
3.1 Initial Capital Contributions.................................................9
3.2 Additional Capital Contributions..............................................9
3.3 No Interest on Capital Contributions..........................................9
3.4 Return of Capital Contributions...............................................9
3.5 Form of Return of Capital.....................................................9
3.6 Capital Accounts..............................................................9
4.2 Credits to Capital Accounts...................................................9
4.3 Charges to Capital Accounts..................................................10
4.4 Special Rules for Maintaining Capital Accounts...............................10
Article IV Allocations and Distributions................................................11
4.1 Allocation of Profits and Losses.............................................11
4.2 Distributions................................................................12
4.3 Special Allocations..........................................................12
4.3.1 Minimum Gain..........................................................12
4.3.2 Qualified Income Offset...............................................13
4.3.3 Nonrecourse Deductions................................................13
4.3.4 Member Nonrecourse Deductions.........................................13
4.3.5 Curative Allocation...................................................13
4.3.6 Overriding Allocation.................................................14
4.4 Tax Allocations..............................................................14
4.4.1 Tax Allocations Follow Book Allocations...............................14
4.4.2 Contributed Property and Book-ups.....................................14
4.4.3 Election Under Section 754 of the Code................................14
4.4.4 Guaranteed Payments...................................................15
4.4.5 Recapture.............................................................15
4.5 Withholding Obligations......................................................15
4.6 General......................................................................16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Article V Management...................................................................16
5.1 Manager......................................................................16
5.1.1 In General............................................................16
5.1.2 Specific Rights and Powers............................................17
5.1.3 Limitation of Authority of Manager....................................18
5.1.4 Affirmative Voting Obligations........................................18
5.1.5 Appointment of Manager................................................20
5.2 Meetings of and Voting by Members............................................20
5.3 Duty of Care, Indemnification................................................21
5.4 Technical Services Agreement.................................................22
5.5 Trademark License Agreement..................................................23
5.6 Time Devoted to Company......................................................23
5.7 Covenant Not to Compete......................................................23
5.8 Fees and Expenses............................................................23
5.9 Contracts With Members or Their Affiliates...................................24
5.10 Annual Budget................................................................25
5.11 Operating Officer............................................................25
5.12 No Participation in Management; No Authority.................................25
Article VI Admissions and Transfers.....................................................25
6.1 Admission of Additional Members..............................................25
6.2 Transfer of Members' Interest................................................26
6.3 Involuntary Transfer.........................................................28
6.4 Admission of Transferees as Members..........................................28
6.5 Tag-Along Rights.............................................................30
6.5.1 Trigger for Tag-Along Rights..........................................30
6.5.2 Tag-Along Notice......................................................30
6.5.3 Identical Terms.......................................................30
6.5.4 Notice of Sale........................................................30
6.5.5 Waiver of Inclusion Election..........................................30
6.5.6 Termination of 90-Day or 30-Day Period................................31
6.5.7 Permitted Transfers; Excluded Transfers...............................31
Article VII Sale of All or Substantially All of the Assets of the Company................31
7.1 Right to Initiate Sale of Assets.............................................31
7.2 Right of First Refusal.......................................................31
7.3 Sale of Assets by Auction....................................................32
7.4 Payment for Assets by VoiceStream............................................33
7.5 Purchase Price; Structure....................................................34
Article VIII Dissolution and Liquidation..................................................34
8.1 Dissolution..................................................................34
8.2 Event of Withdrawal..........................................................35
8.3 Dissolution and Termination..................................................35
8.4 Winding Up and Distribution of Assets........................................36
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Article IX Accounting; Books and Records................................................37
9.1 Books and Records............................................................37
9.2 Manager's Reports to Members.................................................37
9.3 Right to Examine Records.....................................................37
9.4 Tax Matters Member...........................................................37
9.5 Tax Elections................................................................38
Article X Dispute Resolution...........................................................38
10.1 Arbitration of Disputes......................................................38
10.2 Selection of Arbitrators.....................................................38
10.3 Rules of the Arbitration.....................................................39
10.4 Injunctive Relief............................................................39
10.5 No Punitive or Exemplary Damages.............................................39
10.6 Discovery and Conduct of Arbitration.........................................39
10.7 Prehearing Motions...........................................................39
10.8 Costs........................................................................39
10.9 Execution of Judgments.......................................................40
10.10 Waiver as to Jurisdiction....................................................40
Article XI Exchange Rights..............................................................40
11.1 Grant of Exchange Rights.....................................................40
11.2 Exchange Rights..............................................................40
11.3 Increase or Combination of VWC or WWC Common Stock...........................42
11.4 Reorganization, Reclassification, Consolidation, Merger of Sale..............43
11.5 Recapture of Bidding Credits and Acceleration of FCC Obligations.............45
11.6 Representations and Warranties...............................................45
11.7 Restriction on Sale of VWC Securities........................................46
11.8 Inability to Provide an Exchange.............................................46
Article XII General Provisions...........................................................46
12.1 Amendment of Agreement.......................................................46
12.2 Special Power-of-Attorney....................................................47
12.3 Notices......................................................................48
12.4 Agreement Binding Upon Successors and Assigns................................49
12.5 Governing Law................................................................49
12.6 Consents.....................................................................49
12.7 Legends......................................................................49
12.8 Entire Agreement.............................................................49
12.9 Counterparts.................................................................49
12.10 Severability.................................................................49
12.11 Intended Compliance; Savings Clause..........................................49
12.12 Liability of Limited to Assets...............................................50
</TABLE>
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<PAGE> 5
LIST OF EXHIBITS
Exhibit A Members of Cook Inlet/VoiceStream PCS, LLC, February 11, 1999
Exhibit B Certificate of Formation of Cook Inlet/VoiceStream PCS, LLC
Exhibit C Initial Budget
Exhibit D Form of Registration Rights Agreement
-iv-
<PAGE> 6
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE DEFINED
- ---- ------------
<S> <C>
AAA.......................................38
Act........................................1
Action....................................21
Adjusted Capital Account Deficit...........2
Affiliate..................................2
Agreement..................................1
Appraised Value............................2
Approved Acquisitions.....................44
Approved Certified Public Accountant.......3
Asset Registration Statement..............33
Auction.................................1, 3
Bidding Protocol...........................3
BTA........................................1
Capital Account............................3
Capital Contribution.......................3
Cash Available for Distribution............3
Cash Consideration........................43
Cash Election.............................44
Certificate of Formation...................4
Claims....................................21
Class A Member.............................4
Class B Member.............................4
Code.......................................4
Company....................................1
controls...................................2
Cook Inlet.................................1
Designated Market.........................23
Exchange...............................4, 40
Exchange Date..............................4
Echange Notice............................41
Echange Period.........................4, 41
Exchange Rights............................4
FCC.....................................1, 4
FCC Rules..................................5
Financing Benefits.........................5
Fiscal Year................................5
Guaranteed Rate...........................43
Historical Financial Statements...........45
Inclusion Election.....................5, 30
Indemnitee................................21
Initial Budget.............................5
Interest...................................5
Interest Holder............................5
Involuntary Withdrawal.....................5
is controlled by...........................2
is under common control with...............2
Issuance Date..............................5
Licenses...................................1
Listed Transactions.......................44
Loss.......................................7
Manager....................................5
Member.....................................5
Member Minimum Gain........................5
Member Nonrecourse Deductions..............5
Members....................................5
Minimum Gain...............................6
Negative Capital Account...................6
New Company...............................41
NMS.......................................33
Non-cash Consideration....................44
Nonrecourse Deductions.....................6
Nonrecourse Liability......................6
NYSE......................................33
Organic Change.............................6
Outside Delivery Date.....................42
PCS........................................1
PCS Systems................................6
Percentage.................................6
Percentages................................6
Person.....................................6
Positive Capital Account...................7
Profit.....................................7
Qualified Appraiser........................7
Regulation.................................7
Regulations................................7
Required Legal Opinion....................26
Rules.....................................39
Secretary..................................7
Securities Act............................33
Selling Member.........................7, 30
Spin-Off..................................46
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Successor..............................7, 28
Successor Entity..........................43
Tag-Along Interests....................7, 30
Tag-Along Notice.......................8, 30
Tax Matters Member........................37
Third Party................................8
Very Small Business........................5
VoiceStream................................1
VWC........................................1
VWC Common Stock...........................8
WWC........................................1
WWC Common Stock...........................8
</TABLE>
-vi-
<PAGE> 8
COOK INLET/VOICESTREAM PCS, LLC
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made as
of the 11th day of February, 1999, by and between COOK INLET GSM, INC., a
Delaware corporation ("Cook Inlet" ), and WESTERN PCS BTA I CORPORATION, a
Delaware corporation ("VoiceStream" ), which is a wholly-owned indirect
subsidiary of VoiceStream Wireless Corporation ("VWC"). Also made parties hereto
for certain purposes are VWC and Western Wireless Corporation, a Washington
Corporation ("WWC").
RECITALS
A. The Federal Communications Commission (the "FCC" ) has announced that
it will conduct a new auction (the "Auction" ) for the issuance by the FCC, in
certain markets, of Personal Communications Services ("PCS" ) licenses (the
"Licenses" ) to provide radio telecommunications services using either 15 MHz or
30 MHz of spectrum in the 30 MHz band of spectrum in the "C" block (1895-1910
MHz/1975-1990 MHz) and the 10 MHz band of spectrum in the "F" block (1890-1895
MHz/1970-1975 MHz) in various Basic Trading Areas, as designated by the FCC
("BTAs").
B. Cook Inlet and VoiceStream desire to form a new limited liability
company (the "Company") that will apply to the FCC for the right to participate
in the Auction and, at the election of the Members hereof, in any subsequent
auction or reauction of licenses of "C" block or "F" block spectrum and to bid
for and acquire Licenses. The Company may also, at the election of the Members
hereof, acquire from third parties PCS systems that operate using, and/or
Licenses of, "C" block or "F" block spectrum or such Licenses themselves.
C. The parties desire for the Company to operate all of the PCS systems
acquired from third parties or developed in connection with any acquired
Licenses.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, the parties, intending legally to be
bound, agree as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms shall have the meaning specified in this
Article I. Other terms are defined in the text of this Agreement, and throughout
this Agreement those terms shall have the meanings respectively ascribed to
them:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to
<PAGE> 9
time.
"Adjusted Capital Account Deficit" means, with respect to any Interest
Holder, the deficit balance, if any, in the Interest Holder's Capital Account as
of the end of the relevant taxable year, after giving effect to the following
adjustments:
(i) the Capital Account shall be credited with the amounts which the
Interest Holder is deemed obligated to restore pursuant to the penultimate
sentences of Regulation Sections 1.704-2(g)(1) and (i)(5) (i.e., the Interest
Holder's share of Minimum Gain and Member Minimum Gain); and
(ii) the Capital Account shall be debited with the items described in
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, alone or through one or more intermediaries, controls,
is controlled by or is under common control with such Person. For purposes of
this definition, the term "controls," "is controlled by," or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the control of voting interests, by contract or
otherwise.
"Appraised Value" means, with respect to any assets of the Company or an
Interest, the fair market value of such assets or Interest as determined in
accordance with the appraisal procedures set forth herein, which determination
shall be made as if such assets or Interest are unencumbered by any rights or
obligations of any party hereto or under any of the agreements executed in
connection herewith. Upon the right of, or exercise of an option by, a Person to
purchase Company assets or Interests at Appraised Value, the buyer and seller
thereof shall each appoint a Qualified Appraiser. Within thirty (30) days of
their appointment, the two appraisers shall meet to discuss their preliminary
findings, and, within forty-five (45) days of their appointment, they shall have
made their final valuations. If the higher of the two appraised values is not
more than 110% of the lower of the two appraised values, then Appraised Value
shall equal the average of the two appraised values. If the higher of the two
appraised values is greater than 110% of the lower of the two appraised values,
then the two appraisers shall appoint a third Qualified Appraiser, who shall
make its valuation determination within thirty (30) days of its appointment. In
such a case, Appraised Value shall equal either (a) the valuation as determined
by the third appraiser, but only if such appraised valuation is greater than (i)
the lower of the first two appraisal amounts plus one-third (1/3) of the
difference between the first two appraisal amounts, and is less than (ii) the
higher of the first two appraisal amounts minus one-third (1/3) of the
difference between the first two appraisal amounts, or (b) the average of the
third appraisal amount and the appraisal amount of the first two appraisal
amounts that is the
2
<PAGE> 10
closest (higher or lower) to that third appraisal amount, but only if the third
appraisal amount is not within the range set forth in clause (a) above. In
determining appraisal amounts, the Qualified Appraisers shall value the Company
as a going concern, but not less than the fair market value of the Company's
assets reduced by the full amount of its liabilities, and shall consider the
sale prices of comparable businesses, if available. The appraiser shall apply
its standard valuation policies and procedures, but shall take into account all
necessary factors that may affect the value of the Company, including, without
limitation, the following: (i) general economic conditions; (ii) the state of,
and any foreseeable changes in, the telecommunications industry; (iii) the
Company's past performance; and (iv) its current projections. The Company's
appraised value shall not be decreased or discounted for any lack of
marketability of the Interests or, if applicable, that the relevant underlying
Interests of the Company represent a minority interest.
"Approved Certified Public Accountant" means Arthur Andersen, L.L.P.,
unless a new firm of certified public accountants is appointed by the Manager;
provided, however, that approved certified public accounting firms are limited
to one of Deloitte & Touche, L.L.P., Arthur Andersen, L.L.P.,
PricewaterhouseCoopers, L.L.P., Ernst & Young, L.L.P., or KMPG Peat Marwick,
L.L.P.
"Auction" means the auction conducted by the FCC described in the
Recitals to this Agreement.
"Bidding Protocol" means the initial Bidding Protocol for the Auction as
agreed to by unanimous vote of the Class A Member and Class B Member, as the
same shall be amended from time to time by unanimous vote of the Class A Member
and Class B Member.
"Capital Account" means the account to be maintained by the Company for
each Interest Holder in accordance with the provisions of Article III.
"Capital Contribution" means the total amount of cash and the fair
market value of any other assets contributed to the Company by a Member, net of
liabilities assumed by the Company or to which the assets are subject.
"Cash Available for Distribution" means cash funds of the Company in
excess of amounts reasonably required for the repayment of Company borrowings
(including loans made to the Company by the Members), interest thereon, other
liabilities and expenses, capital expenditures, working capital and the
maintenance or restoration of reserves that the Manager deems reasonably
necessary or advisable for the proper operation of the business of the Company.
Cash Available for Distribution includes the Company's net cash flow,
irrespective of the source of the cash flow, and refers to net cash flow from
operations as well as net cash proceeds of all sales, exchanges, dispositions,
and financings or other extraordinary Company events, but shall exclude capital
contributions.
3
<PAGE> 11
"Certificate of Formation" means the certificate of formation of the
Company, as attached hereto as Exhibit B.
"Class A Member" means Cook Inlet or its successor or permitted assigns
admitted as Members hereunder.
"Class B Member" means VoiceStream or its successors or permitted
assigns admitted as Members hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"Exchange" means an exchange of ownership rights and Interest in the
Company for shares of VWC Common Stock, or in certain specified circumstances
WWC Common Stock, pursuant to the Exchange Rights described in Article XI.
"Exchange Date" means the date that is five (5) years from the date on
which the Company is initially granted Licenses that it wins in the Auction, the
winning bids for which equal in the aggregate eighty percent (80%) of the total
dollar value of its winning bids in the Auction; provided, the Exchange Date
will be automatically delayed 180 days if during such 180-day period the five
(5) year anniversary of the initial issuance of any additional Licenses won at
the Auction will take place; provided further that in the event that the FCC
Rules are amended such that License forfeiture and/or violation of the C and F
block eligibility requirements (as defined by the FCC Rules) would not occur as
a result of the Exchange occurring sooner than five (5) years after the date of
the initial License grant, then the Exchange Date shall be advanced to that
earliest date that the Exchange may take place without violation of the FCC
Rules. VoiceStream must provide a legal opinion from outside counsel to
VoiceStream addressed to the Company which counsel and opinion shall be
acceptable to Cook Inlet and the Company opining that an Exchange on the earlier
Exchange Date (such new Exchange Date to be set forth in such legal opinion)
would not result in License forfeiture and/or violation of the C and F block
eligibility requirements.
"Exchange Period" shall have the meaning set forth at Section 11.2.3.
"Exchange Rights" means the right to exchange an Interest in the Company
for shares of VWC Common Stock, or in certain specified circumstances WWC Common
Stock, in accordance with the provisions of Article XI.
"FCC" means the Federal Communications Commission or any successor
agency.
"FCC Rules" means the requirements or prohibitions contained at the
relevant time in all applicable laws (including the Communications Act of 1934,
as amended through such time), rules, regulations (including title 47 of the
Code of Federal Regulations), policies and orders of the FCC or any other
relevant governmental agency related to grant of the Licenses and operation
4
<PAGE> 12
of the PCS Systems.
"Financing Benefits" means those bidding credits against the cost of the
winning bids available in connection with the FCC's auctioning of the Licenses
to entities qualifying as a "Very Small Business" as such term is defined in the
FCC Rules governing the Licenses.
"Fiscal Year" means the period that commences on the date that the
Certificate of Formation is filed with the Secretary and ends on December 31,
1999, and thereafter the periods commencing on January 1 of each year and ending
on December 31 of that year.
"Inclusion Election" has the meaning set forth at Section 6.5.2.
"Initial Budget" means the initial budget of the Company, as approved by
the Members and attached hereto as Exhibit C.
"Interest" means a Person's share of the profits and losses of, and the
right to receive distributions from, the Company.
"Interest Holder" means any Person who holds an Interest, whether as a
Member or an unadmitted assignee of a Member.
"Issuance Date" means the date that the FCC issues to the Company the
first License awarded to the Company under the Auction.
"Involuntary Withdrawal" of a Member shall mean the death, retirement,
resignation, expulsion or bankruptcy of such Member and any other event which
terminates the continued membership of such Member in the Company.
"Manager" means the Class A Member appointed as such by the Class A
Members holding a majority of the Percentages owned by all Class A Members. The
Manager shall be the "manager" of the Company within the meaning of Section
18-101(10) of the Act. Cook Inlet shall be the initial Manager of the Company.
The parties agree that at all times that Cook Inlet or an Affiliate thereof is a
Class A Member, Cook Inlet or an Affiliate thereof shall be the Manager of the
Company.
"Member" means each Person signing this Agreement, including the
Manager, and any Person who subsequently is admitted as a member of the Company.
"Members" is the plural of Member. Upon execution hereof as of February 11,
1999, the Members are Cook Inlet, as the Class A Member, and VoiceStream as the
Class B Member.
"Member Minimum Gain" has the meaning and shall be determined as set
forth in Regulation Section 1.704-2(i) for "partner nonrecourse debt minimum
gain."
"Member Nonrecourse Deductions" has the meaning and shall be
determined as set
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forth in Regulation Section 1.704-2(i) for "partner nonrecourse deductions."
"Minimum Gain" has the meaning and shall be determined as set forth in
Regulation Sections 1.704-2(b)(2) and 1.704-2(d) for "partnership minimum gain."
"Negative Capital Account" means a Capital Account with a balance of
less than zero.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Regulation Sections
1.704-2(b)(3) and 1.752-1(a)(2).
"Organic Change" means with respect to a Person, any recapitalization,
reorganization, reclassification, spin-off, split-off, extraordinary dividend or
distribution, consolidation or merger with another Person of such Person, or any
successor(s) thereto, or sale of all or substantially all, in any or a series of
transactions, of the assets or stock of such Person, or any successor(s)
thereto, to another Person, or other transaction involving such Person, or any
successor(s) thereto, which is effected in such a manner that holders of such
Person's common stock, or of stock or other interests in any of the respective
successors to such Person, as the case may be, are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets or other
consideration with respect to or in exchange for such stock or interests. In
addition to the foregoing, Organic Change will mean any transaction, or series
of transactions, occurring after the effective date of the Spin-off, the result
of which is (a) with respect to VWC, that the total number of shares of VWC
Common Stock outstanding is less than twenty percent (20%) of the total number
of shares of VWC Common Stock outstanding at the effective date of the Spin-Off,
and (b) with respect to another Person, that the total number of shares of
common stock of such other Person outstanding is less than twenty percent (20%)
of the total number of shares of common stock outstanding prior to the
consummation of such transaction(s).
"PCS Systems" means wireless PCS systems using the "C" block and "F"
block spectrum licensed by the FCC, specifically including the wireless
communications systems developed, purchased or operated by the Company in
connection with any acquired Licenses.
"Percentage" means, as to a Member, the percentage set forth after the
Member's name on Exhibit A, as amended from time to time, and as to an Interest
Holder who is not a Member, the Percentage acquired by such Interest Holder from
a Member or Interest Holder, to the extent the acquiring Interest Holder has
succeeded to that Interest. "Percentages" is the plural of Percentage.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
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"Positive Capital Account" means a Capital Account with a balance of
zero or greater.
"Profit" and "Loss" means, for each taxable year of the Company (or
other period for which Profit or Loss must be computed), the Company's taxable
income or loss determined in accordance with Section 703(a) of the Code, with
the following adjustments:
(i) all items of income, gain, loss, deduction, or credit required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included;
and
(ii) any tax-exempt income of the Company, not otherwise taken into
account in computing Profit or Loss, shall be included; and
(iii) any expenditures of the Company described in Section 705(a)(2)(B)
of the Code (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted; and
(iv) gain or loss resulting from any taxable disposition of Company
property shall be computed by reference to the adjusted book value of the
property disposed of, notwithstanding the fact that the adjusted book value
differs from the adjusted basis of the property for federal income tax purposes;
and
(v) in lieu of the depreciation, amortization, or cost recovery
deductions allowable in computing taxable income or loss, there shall be taken
into account the depreciation or amortization computed for book purposes; and
(vi) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 4.3 hereof shall not be taken
into account.
"Qualified Appraiser" means a Person who is experienced in making
appraisals of companies in the cellular telecommunications industry and assets
used in the operations thereof.
"Regulation" or "Regulations" means the income tax regulations,
including any temporary regulations, from time to time promulgated under the
Code.
"Secretary" means the Secretary of State of Delaware.
"Selling Member" has the meaning set forth in Section 6.5.1.
"Successor" has the meaning set forth in Section 6.2.7.
"Tag-Along Interests" has the meaning set forth at Section 6.5.2.
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"Tag-Along Notice" has the meaning set forth at Section 6.5.2.
"Third Party" means any Person or Persons not a party to this Agreement.
"VWC Common Stock" means the common stock, $0.001 par value, of VWC.
"WWC Common Stock" means the Class A common stock, no par value, of WWC.
ARTICLE II
ORGANIZATION AND PURPOSE
2.1 Organization. The Members shall organize a limited liability company
pursuant to the Act and the provisions of this Agreement and, for that purpose,
shall cause the Certificate of Formation, in the form attached as Exhibit B, to
be executed and filed for record with the Secretary.
2.2 Name of the Company. The name of the Company shall be "COOK
INLET/VOICESTREAM PCS, LLC". The Company may do business under that name and
under any other name or names which the Manager selects. If the Company does
business under a name other than that set forth in its Certificate of Formation,
then the Company shall file an assumed business name notice as required by law.
2.3 Purpose. The Company is organized to bid on Licenses at the Auction,
to acquire and own Licenses, to acquire and own PCS Systems, and to develop,
operate and manage the PCS Systems acquired or developed in connection with any
Licenses, and engage in activities incidental thereto. The Company may also
undertake any other lawful activity authorized by the unanimous vote of the
Class A Member and the Class B Member.
2.4 Term. The term of the Company shall begin upon the acceptance of the
Certificate of Formation by the Secretary and shall continue until January 31,
2029, unless its existence is sooner terminated pursuant to Article VIII of this
Agreement or the mandatory provisions of the Act.
2.5 Principal Office. The principal office of the Company shall be in
the state of Alaska and shall be located at 2525 "C" Street, Anchorage, Alaska
99503, or at any other place that the Manager selects.
2.6 Registered Agent. The name and address of the Company's registered
agent in the state of Delaware is The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware.
2.7 Members. The name, present mailing address, taxpayer identification
number, and Percentage of each of the Members are set forth on Exhibit A, which
shall be amended from time to time to reflect any changes in the Members or
Percentages of the Members.
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2.8 Actions by Company. The Company may execute, deliver and perform all
contracts, agreements and other undertakings and engage in all activities and
transactions as may be necessary or advisable in the opinion of the Manager to
carry out the foregoing objectives and purposes.
ARTICLE III
CAPITAL
3.1 Initial Capital Contributions. Upon and after the execution of this
Agreement, each Member shall contribute to the Company cash in the amounts set
forth for such Member on Exhibit A.
3.2 Additional Capital Contributions. No Member shall be obligated, nor
shall any Member have a right, to contribute any additional capital to the
Company, other than as specified on Exhibit A, and no Member shall have any
personal liability for any obligation of the Company.
3.3 No Interest on Capital Contributions. Interest Holders shall not be
paid interest on their Capital Contributions.
3.4 Return of Capital Contributions. Except as otherwise provided in
this Agreement or on Exhibit A, no Interest Holder shall have the right to
receive any return of any Capital Contribution.
3.5 Form of Return of Capital. If an Interest Holder is entitled to
receive a return of a Capital Contribution, the Interest Holder shall not have
the right to receive anything but cash in return of the Interest Holder's
Capital Contribution.
3.6 Capital Accounts. The Company shall maintain a Capital Account for
each Member in accordance with the principles set forth in the Treasury
Regulations promulgated under Section 704(b) of the Code. Each Member's Capital
Account shall have an initial balance equal to such Member's initial
contributions to the capital of the Company.
3.7 Credits to Capital Accounts. Each Member's Capital Account shall be
credited with:
3.7.1 the amount of any additional capital contribution made by
such Member;
3.7.2 the amount of any Profits or gain (or items thereof)
allocated to such Member, including items of income or gain specially allocated
pursuant to Article IV;
3.7.3 the amount, if any, of any Company liabilities that are
assumed by such
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Member, other than liabilities that are secured by any Company property
distributed to such Member by the Company, as provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(c)(1); and
3.7.4..the fair market value of property contributed to the
capital of the Company by such Member (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Code Section 752).
3.8 Charges to Capital Accounts. Each Member's Capital Account shall be
charged with:
3.8.1 the amount of cash distributed to such Member by the
Company;
3.8.2 the amount of any Losses or deduction (or items thereof)
allocated to such Member, including items of loss or deduction specially
allocated pursuant to Article IV;
3.8.3 the fair market value of the property distributed to such
Member by the Company (net of liabilities secured by such distributed property
that such Member is considered to assume or take subject to under Code Section
752) (in accordance with Regulations Section 1.704-1(b)(2)(iv)(e), immediately
prior to any such distribution, the Capital Accounts of the Members shall first
be adjusted to reflect the manner in which the unrealized income, gain, loss and
deduction inherent in such property (that has not previously been reflected in
the Capital Accounts of the Members) would be allocated among the Members if
there were a taxable disposition of such property for the fair market value of
such property (taking Code Section 7701(g) into account) on the date of
distribution); and
3.8.4 the amount of individual liabilities of such Member that
are assumed by the Company other than liabilities secured by property
contributed by such Member to the Company as provided in Treasury Regulation
Section 1.704-(b)(2)(iv)(c)(2).
3.9 Special Rules for Maintaining Capital Accounts.
3.9.1 Notwithstanding any other provision in this Article III or
elsewhere in this Agreement, each Member's Capital Account shall be maintained
and adjusted in accordance with the Code and the Regulations, including
Regulations Sections 1.704-1(b) and 1.704-2. It is intended that appropriate
adjustments shall thereby be made to Capital Accounts to give effect to any
income, gain, loss or deduction (or items thereof) that is allocated pursuant to
this Agreement. Each Member's Capital Account shall include that of any
predecessor holders of the Company interest of such Member. In the event that
the Manager shall determine that it is prudent to modify the manner in which
Capital Accounts, or any additions or subtractions thereto (including, without
limitation, adjustments relating to liabilities that are secured by contributed
or distributed property or that are assumed by the Company or the Members), are
computed in order to comply with such Regulations, the Manager shall be entitled
to make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member
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pursuant to Section 8.4 upon dissolution of the Company. The Manager shall also
make (i) any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Members and the amount of Company capital
reflected on the Company's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) any
appropriate modifications in the event that unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b) or
Section 1.704-2.
3.9.2 The Manager in its discretion may increase or decrease the
Capital Accounts of the Members to reflect a revaluation of Company property on
the Company's books and records, but only in accordance with the rules set forth
in Regulations Section 1.704-1(b)(2)(iv)(f). Following any such revaluation, the
Members' Capital Accounts shall be adjusted in accordance with Regulations
Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization, and gain or loss as computed for book purposes with respect to
such property.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 Allocation of Profits and Losses.
4.1.1 Profits and Losses of the Company shall be determined and
allocated with respect to each Fiscal Year of the Company as of the end of each
such year. Subject to the other provisions of this Agreement, an allocation to
an Interest Holder of a share of Profits or Losses shall be treated as an
allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Profits or Losses.
4.1.2 After giving effect to the special allocations set forth
in Section 4.3, Profits for any Fiscal Year shall be allocated in the following
order and priority:
4.1.2.1 First, one hundred percent (100%) to the Interest
Holders in proportion to and to the extent of the excess, if any, of (x) the
cumulative Losses allocated pursuant to such Interest Holders (or their
predecessors in interest) pursuant to Section 4.1.4 for all prior Fiscal Years,
over (y) the cumulative Profits allocated to such Interests Holders (or their
predecessors in interest) under this Section 4.1.2.1 for all prior Fiscal Years;
4.1.2.2 Second, one hundred percent (100%) to the
Interest Holders, in proportion to and to the extent of the excess, if any, of
(x) the cumulative Losses allocated to such Interest Holders (or their
predecessors in interest) pursuant to Section 4.1.3.2 for all prior Fiscal
Years, over (y) the cumulative Profits allocated to each Interest Holder
pursuant to this Section 4.1.2.2 for all prior Fiscal Years; and
4.1.2.3 The balance, if any, to the Interest Holders in
accordance with each Interest Holder's Percentage.
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4.1.3 After giving effect to the special allocations set forth in
Section 4.3, Losses for any Fiscal Year shall be allocated in the following
order and priority, subject to the limitation in Section 4.1.4:
4.1.3.1 First, one hundred percent (100%) to the Interest
Holders, in proportion to and to the extent of the excess, if any, of (x) the
cumulative Profits allocated to each such Interest Holder (or its predecessor in
interest) pursuant to Section 4.1.2.3 for all prior Fiscal Years, over (y) the
cumulative Losses allocated to each such Interest Holder (or its predecessor in
interest) pursuant to this Section 4.1.3.1 for all prior Fiscal Years;
4.1.3.2 The balance, if any, among the Interest Holders
in accordance with each Interest Holder's Percentage.
4.1.4 The Losses allocated pursuant to Section 4.1.3. shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Interest Holder to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some but not all of the Interest Holders would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to 4.1.3, the limitation set forth in this Section 4.1.4 shall be
applied on an Interest Holder-by-Interest Holder basis so as to allocate the
maximum permissible Losses to each Interest Holder under Regulations Section
1.704-1(b)(2)(ii)(d).
4.2 Distributions.
To the extent that the Company has sufficient Cash Available for
Distribution, is permitted by law, and does not constitute a default or event of
default under any loan or other bank financing to which the Company is a party,
the Manager may distribute, within ninety (90) days of the end of each quarter
of the Fiscal Year, Cash Available for Distribution in an amount equal to at
least the product of (x) the maximum federal tax rate applicable to either
individuals or corporations, whichever is greater, during that Fiscal Year and
(y) the Company's Fiscal Year-to-date federal taxable income, including
separately stated items, less any distributions previously made to the Members
during the Fiscal Year. Subject to Sections 5.1.3 and 5.1.4, the Manager from
time to time may distribute Cash Available for Distribution in excess of the
aforementioned amounts. All distributions of Cash Available for Distribution
shall be made to the Interest Holders in accordance with their Percentages,
except as otherwise provided in Section 8.4.
4.3 Special Allocations.
4.3.1 Minimum Gain.
4.3.1.1 Minimum Gain Chargeback. Except as set forth in
Regulation Section 1.704-2(f), if, during any taxable year, there is a net
decrease in Minimum Gain, each Interest Holder, prior to any other allocation
pursuant to this Article IV, shall be specially allocated items of gross income
and gain for such taxable year (and, if necessary, subsequent
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taxable years) in an amount equal to that Interest Holder's share of the net
decrease of Minimum Gain, computed in accordance with Regulation Section
1.704-2(g). Allocations of items of gross income and gain pursuant to this
Section 4.3.1.1 shall be made as described in Regulation Sections 1.704-2(f) and
(j). This Section 4.3.1.1 is intended to comply with, and shall be interpreted
consistently with, the "minimum gain chargeback" provisions of Regulation
Section 1.704-2(f) and all other Regulation Sections relating thereto.
4.3.1.2 Member Minimum Gain Chargeback. Except as set
forth in Regulation Section 1.704-2(i)(4), if, during any taxable year, there is
a net decrease in Member Minimum Gain, each Interest Holder with a share of that
Member Minimum Gain as of the beginning of such year, prior to any other
allocation pursuant to this Article IV, shall be specially allocated items of
gross income and gain for such taxable year (and, if necessary, subsequent
taxable years) in an amount equal to that Interest Holder's share of the net
decrease of Member Minimum Gain, computed in accordance with Regulation Section
1.704-2(i)(4). Allocations of items of gross income and gain pursuant to this
Section 4.3.1.2 shall be made as described in Regulation Sections 1.704-2(i)(4)
and (j). This Section 4.3.1.2 is intended to comply with, and shall be
interpreted consistently with, the "minimum gain chargeback" provisions of
Regulation Section 1.704-2(i)(4) and all other Regulation Sections relating
thereto.
4.3.2 Qualified Income Offset. If an Interest Holder unexpectedly
receives any adjustments, allocations, or distributions described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which results in or increases an
Adjusted Capital Account Deficit at the end of any taxable year, then all items
of income and gain of the Company for that taxable year shall be allocated to
that Interest Holder, before any other allocation pursuant to this Article IV
(other than those pursuant to Sections 4.3.1.1 and 4.3.1.2), in an amount and
manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly
as possible. This Section 4.3.2 is intended to comply with, and shall be
interpreted consistently with, the "qualified income offset" provisions of the
Regulation Section 1.704-1(b)(2)(ii)(d) and all other Regulation Sections
relating thereto.
4.3.3 Nonrecourse Deductions. Nonrecourse Deductions for a
taxable year or other period shall be specially allocated among the Interest
Holders in proportion to their Percentages.
4.3.4 Member Nonrecourse Deductions. Any Member Nonrecourse
Deduction for any taxable year or other period shall be specially allocated to
the Interest Holder who bears the risk of loss with respect to the liability to
which the Member Nonrecourse Deduction is attributable in accordance with
Regulation Section 1.704-2(i).
4.3.5 Curative Allocation. The allocations set forth in Section
4.3.1 through 4.3.4 (the "Regulatory Allocations") are intended to comply with
certain requirements of Regulations Section 1.704-1(b) and Regulation 1.704-2.
Notwithstanding any other provisions of this Article IV, the Company shall take
the Regulatory Allocations into account in allocating
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other Profits, Losses, and items of income, gain, loss and deduction to the
Interest Holders so that, to the extent possible, the net amount of such
allocations of Profits and Losses and other items shall be equal to the amount
that would have been allocated to each Interest Holder if the Regulatory
Allocations had not occurred.
4.3.6 Overriding Allocation. It is the intent of the Company that
each Member's distributive share of income, gain, loss, deduction or credit (or
item thereof) shall be allocated in accordance with Section 4.1 to the fullest
extent permitted by Section 704(b) of the Code. To preserve and protect the
allocations provided for in Section 4.1, the Manager is authorized and directed
to allocate income, gain, loss, deduction or credit (or item thereof) arising in
any year differently than otherwise provided for in Section 4.1 if, and to the
extent that, the allocations under Section 4.1 would cause the allocations to
violate Section 704(b) of the Code. Any allocation made pursuant to this Section
4.3.6 shall be deemed to be a complete substitute for any allocation otherwise
provided for in Section 4.1 and no amendment of this Agreement or approval of
any Member shall be required.
4.4 Tax Allocations.
4.4.1 Tax Allocations Follow Book Allocations. Except as
otherwise provided herein, and to the extent permitted by Section
1.704-1(b)(4)(i) of the Regulations for federal and state income tax purposes
each item of Company income, gain, loss and deduction shall be allocated to the
Interest Holders in the same manner as its corresponding item of "book" income,
gain, loss or deduction has been allocated under Section 4.1.
4.4.2 Contributed Property and Book-ups. Notwithstanding the
foregoing provisions of this Article IV, income, gain, loss and deduction with
respect to property contributed to the Company by a Member shall be allocated
among the Members, pursuant to Regulations promulgated under Section 704(c) of
the Code, so as to take account of the variation, if any, between the adjusted
basis of such property to the Company and its initial value. The Company shall
account for such variation under any method approved under Section 704(c) of the
Code and the applicable Regulations as chosen by the Manager. In the event the
value of any Company asset is adjusted pursuant to Section 3.9.2, subsequent
allocations of income, gain, loss and deduction with respect to such asset shall
take into account the variation, if any, between the adjusted basis of such
asset for federal income tax purposes and its value in the same manner as under
Section 704(c) of the Code and the applicable Regulations, consistent with the
requirements of Regulations Section 1.704-1(b)(2)(iv)(g), using any method
approved under Section 704(c) of the Code and the applicable Regulations, as
chosen by the Manager. Allocations pursuant to this Section 4.4.2 are solely for
purposes of federal, state and local income taxes and shall not affect, or in
any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other tax items or distributions pursuant to any
provision of this Agreement.
4.4.3 Election Under Section 754 of the Code. To the extent an
adjustment to the
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tax basis of any Company asset pursuant to Section 734(b) or Section 743(b) of
the Code is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of the adjustment
to the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases basis),
and the gain or loss shall be specially allocated to the Interest Holders in a
manner consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to that Section of the Regulations.
4.4.4 Guaranteed Payments. To the extent any compensation paid to
any Member by the Company is determined by the Internal Revenue Service not to
be a guaranteed payment under Section 707(c) of the Code or is not paid to the
Member other than in the Person's capacity as a Member within the meaning of
Section 707(a) of the Code, the Member shall be specially allocated gross income
of the Company in an amount equal to the amount of that compensation, and the
Member's Capital Account shall be adjusted to treat the payment of that
compensation as a distribution.
4.4.5 Recapture. In making any allocation among the Interest
Holders of income or gain from the sale or other disposition of a Company asset,
the ordinary income portion, if any, of such income and gain resulting from the
recapture of cost recovery or other deductions shall be allocated among those
Interest Holders who were previously allocated (or whose
predecessors-in-interest were previously allocated) the cost recovery deductions
or other deductions resulting in the recapture items, in proportion to the
amount of such cost recovery deductions or other deductions previously allocated
to them.
4.5 Withholding Obligations.
4.5.1 If and to the extent the Company is required by law (as
determined in good faith by the Manager) to make payments ("Tax Payments") with
respect to any Interest Holder in amounts required to discharge any legal
obligation of the Company to make payments to any governmental authority with
respect to any federal, state or local tax liability of such Interest Holder
arising as a result of such Interest Holder's Interest in the Company, then the
amount of any such Tax Payments shall be deemed to be a loan by the Company to
such Interests Holder, which loan shall bear interest at the Prime Rate, and be
payable upon demand.
4.5.2 If and to the extent the Company is required to make any
Tax Payments with respect to any distribution to an Interest Holder, either (a)
such Interest Holder's proportionate share of such distribution shall be reduced
by the amount of such Tax Payments (provided that such Interest Holder's Capital
Account shall be adjusted for such Interest Holder's full proportionate share of
the distribution), or (b) such Interest Holder shall pay to the Company prior to
such distribution an amount of cash equal to such Tax Payments.
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4.6 General.
4.6.1 Except as otherwise provided in this Agreement, the timing
and amount of all distributions shall be determined by the Manager.
4.6.2 If any assets of the Company are distributed in kind to the
Interest Holders, those assets shall be valued on the basis of their fair market
value, as reasonably determined by the Manager, and any Interest Holder entitled
to any interest in those assets shall receive that interest as a
tenant-in-common with all other Interest Holders so entitled. The Profit or Loss
for each unsold asset shall be determined as if the asset had been sold at its
fair market value, as reasonably determined by the Manager, and the Profit or
Loss shall be allocated as provided in Section 4.1 and shall be properly
credited or charged to the Capital Accounts of the Interest Holders prior to the
distribution of the assets in liquidation pursuant to Section 8.4.
4.6.3 All Profit and Loss shall be allocated, and all
distributions shall be made, to the Persons shown on the records of the Company
to have been Interest Holders as of the last day of the taxable year for which
the allocation or distribution is to be made. Notwithstanding the foregoing if
there is a transfer or an Involuntary Withdrawal during the taxable year, the
Profit and Loss shall be allocated between the original Interest Holder and the
successor on any basis selected by the Manager, provided such basis is permitted
by Section 706 of the Code.
4.6.4 The Manager is hereby authorized, upon the advice of the
Company's tax counsel, to amend this Article IV to comply with the Code and the
Regulations promulgated under Section 704(b) of the Code; provided, however,
that no amendment shall materially affect distributions to an Interest Holder
without the Interest Holder's prior written consent.
ARTICLE V
MANAGEMENT
5.1 Manager.
5.1.1 In General. The Manager at all times shall exercise control
over the Company in compliance with FCC Rules. The Manager shall have the
exclusive right and power to manage, operate and control the Company and to make
all decisions necessary or appropriate to carry on the business and affairs of
the Company. In addition to the specific rights and powers herein granted to the
Manager, the Manager shall possess and enjoy and may exercise all the rights and
powers of a manager within the meaning of Section 18-101(10) of the Act, subject
to the limitations of this Agreement, including the full and exclusive power and
authority to act for and to bind the Company. In addition to any other rights
and powers that the Manager may possess, the Manager shall have all specific
rights and powers required or appropriate for the day-to-day management of the
Company's business.
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5.1.2 Specific Rights and Powers. Without limiting the generality
of the foregoing, the Manager shall have the right, power and authority, on
behalf of the Company, to:
5.1.2.1 acquire, by purchase or lease, contract for the
acquisition or construction of, property, including real property, and
improvements thereto, for Company use, hold Company properties in the name of
the Company, and transfer, sell, lease, or assign in the ordinary course of
business any Company property for any Company purpose;
5.1.2.2 borrow money from banks, other lending
institutions, or other sources, including the Manager and its Affiliates, for
Company purposes, issue evidences of indebtedness in connection therewith, and,
in connection therewith, mortgage, pledge or create other security interests in
any or all of the Company's properties and income therefrom to secure or provide
for the repayment of such borrowing;
5.1.2.3 employ and dismiss from employment any and all
employees, agents, independent contractors, attorneys and accountants;
5.1.2.4 operate the Company's businesses and enter into
contracts for the management or operation of such businesses, including
contracts for supplies, materials, labor, manufacture and distribution;
5.1.2.5 enter into license agreements as both licensor and
licensee for the license of technology, patents, trademarks, trade names,
copyrights and other intellectual property;
5.1.2.6 acquire and enter into any contract of insurance
which the Manager deems necessary and proper for the protection of the Company,
its properties and businesses;
5.1.2.7 enter into and carry out contracts and agreements
of all kinds and to execute on behalf of the Company any and all documents or
instruments of any kind which the Manager may deem appropriate for carrying out
the purposes of the Company;
5.1.2.8 make all payments required of the Company pursuant
to this Agreement and for all direct and indirect costs and expenses incurred in
the conduct of its business;
5.1.2.9 supervise the preparation and filing of all
federal, state and local tax and information returns which the Company may be
required to file;
5.1.2.10 institute, prosecute and compromise lawsuits and
proceedings in the name and on behalf of the Company;
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5.1.2.11 apply for and acquire any and all licenses,
permits or the like that are necessary to conduct the business of the Company,
including, without limitation, FCC approvals and licenses, and contest any
determination by any government agency, including, without limitation, those of
the FCC;
5.1.2.12 make temporary investments of the Company's
excess funds on behalf of the Company; and
5.1.2.13 execute, acknowledge and deliver any and all
instruments necessary to effectuate the foregoing.
5.1.3 Limitation of Authority of Manager. Notwithstanding
anything to the contrary in this Agreement, the Manager shall have no authority
to:
5.1.3.1 do any act in contravention of this Agreement or
the Act;
5.1.3.2 do any act which would make it impossible to carry
on the ordinary business of the Company which shall not include acts permitted
or contemplated by this Agreement;
5.1.3.3 possess Company property, or assign its Manager's
rights in specific Company property, for other than a Company purpose;
5.1.3.4 admit a person as a Member otherwise than pursuant
to the provisions of this Agreement; or
5.1.3.5 amend this Agreement or the Certificate of
Formation otherwise than pursuant to Section 12.1.
5.1.4 Affirmative Voting Obligations. Notwithstanding anything to
the contrary in this Agreement, the Company shall not undertake, and the Manager
shall not cause the Company to undertake, any of the following actions without
the approval of the unanimous vote of the Class A Member and the Class B Member:
5.1.4.1 issue Interests in the Company directly from the
Company to any Person and admit any such Person to the Company as a Member;
provided, however, that this provision shall not apply to transfers of existing
Interests in the Company, which shall be governed by Sections 6.2 through 6.5;
5.1.4.2 modify the Bidding Protocol after it has been
adopted by the Members;
5.1.4.3 enter into any agreement that provides for
payments by or to the
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Company in excess of $1,000,000 (or in excess of $200,000 during any period in
which the final award of any Licenses or the Auction is stayed, enjoined or
otherwise prohibited by any court or governmental body of competent
jurisdiction), except as contemplated by the Initial Budget attached hereto as
Exhibit C, or as approved by unanimous vote of the Class A Member and the Class
B Member, the then-current annual budget or any agreement or program properly
authorized by the Manager or previously approved pursuant to this Section 5.1.4,
as the case may be;
5.1.4.4 make any expenditure that would cause expenditures
to exceed those budgeted in the Company's Initial Budget or the then-current
annual budget in force at the time of the expenditure by more than ten percent
(10%), except for expenditures made pursuant to any agreement or program
properly authorized by the Manager or previously approved pursuant to this
Section 5.1.4, and expenditure increases consistent with corresponding increases
in revenues in excess of budgeted amounts;
5.1.4.5 incur any indebtedness in the name of the Company,
modify, extend, renew, refinance or restructure such debt, pledge, assign or
otherwise utilize any assets of the Company as security for any indebtedness
(except for (i) indebtedness arising out of an individual or a related series of
transactions from time to time in the aggregate principal amount of $1,000,000
or less (or in the aggregate principal amount of $200,000 or less during any
period in which the final award of any Licenses or the Auction is stayed,
enjoined or otherwise prohibited by any court or governmental body of competent
jurisdiction) or (ii) any indebtedness approved or authorized in the Initial
Budget, the then-current annual budget and incurred on a wholly non-recourse
basis as to all of the Members), or obligate the Company as a surety, guarantor
or accommodation party to any obligation of any other Person, other than as
contemplated by the Initial Budget or the then-current annual budget;
5.1.4.6 sell, transfer, exchange, lease, mortgage, pledge
or assign, or enter into any agreement for the sale, transfer, exchange, lease,
mortgage, pledge or assignment of, any of the Licenses, or all or substantially
all of the Company's assets, except pursuant to Article VII;
5.1.4.7 remove any Member or reclassify any Interest,
except as expressly contemplated by this Agreement;
5.1.4.8 liquidate or dissolve the Company or consolidate
or merge the Company into or with any other Person, or acquire any interest in
any other Person or, except in the ordinary course of business, any significant
portion of the assets of any other Person, or agree to enter into any
partnership or joint venture;
5.1.4.9 change in the Company's business to extend beyond
the scope of business defined in Section 2.3;
5.1.4.10 make, authorize, or adopt, subject to Section
5.9, any agreement
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between the Company and any Member or any Affiliate of any Member that provides
for payments in excess of $500,000 in the aggregate, or accept any loan from the
Manager or any Affiliate thereof;
5.1.4.11 make any change to the Initial Budget or the
then-current annual budget where such change exceeds $1,000,000 (or of more than
$200,000 during any period in which the final award of any Licenses or the
Auction is stayed, enjoined or otherwise prohibited by any court or governmental
body of competent jurisdiction);
5.1.4.12 modify the policy of the Company with respect to
distribution of cash flows pursuant to Article IV or determine that the Company
should make an extraordinary distribution, defined as a distribution in excess
of five percent (5%) of the fair market value of the Company, as reasonably
determined by the Manager;
5.1.4.13 appoint or terminate an accounting firm for the
Company other than an Approved Certified Public Accountant or select or change
an accounting method or election that may have a material impact on the
Company's Profit and Loss; or
5.1.4.14 pay or incur any costs, fees or expenses
(including without limitation legal fees or expenses) in excess of $600,000 in
the aggregate for or in connection with any action, suit or proceeding relating
to the final award or the validity of any Licenses or the Auction.
5.1.5 Appointment of Manager . So long as Cook Inlet holds an
Interest in the Company, Cook Inlet shall be the Class A Member and shall serve
as the Manager. In the event that Cook Inlet transfers all of its Interest
and/or any other ownership rights or interests in the Company to a party other
than an Affiliate of Cook Inlet, then the Class B Member shall have the right to
determine, subject to FCC Rules, the Person to become the Manager upon the
transfer of Cook Inlet's Interest, which Manager may or may not be a new or
substitute Class A Member. Pursuant to the foregoing, and in accordance with the
provisions of Section 6.2.3 which prohibits transfers of less than all of a
Member's Interest without unanimous approval of the Members, it is the express
intent of the Members that if at any time Cook Inlet transfers all of its
Interest to a party other than an Affiliate of Cook Inlet, the Class A Member,
if any, shall thereafter have no right or obligation to serve as Manager unless
specifically agreed to in writing by the Class B Member.
5.2 Meetings of and Voting by Members.
5.2.1 A meeting of the Members may be called at any time by the
Manager or by the Class A Member or the Class B Member. Meetings of Members
shall be held at the Company's principal place of business or at any other
location if agreed to by the Class A Member and the Class B Member. Not less
than ten (10) nor more than sixty (60) days before each meeting, the Person
calling the meeting shall give written notice of the meeting to each
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Member entitled to vote at the meeting. The notice shall state the time, place,
and purpose of the meeting. Notwithstanding the foregoing provisions, each
Member who is entitled to notice waives notice if before or after the meeting
the Member signs a waiver of the notice which is filed with the records of
Members' meetings, or is present at the meeting in person or by proxy. Unless
this Agreement provides otherwise, at a meeting of Members, the presence in
person (or, in the case of a Member other than a Class A Member, in person or by
proxy) of both the Class A Member and the Class B Member constitutes a quorum. A
Member may vote either in person (or by written proxy signed by a Member other
than a Class A Member) or by the Member's duly authorized attorney-in-fact.
5.2.2 In lieu of holding a meeting, the Members may vote or
otherwise take action by a written instrument indicating the consent of the
Members required for such vote or action.
5.3 Duty of Care; Indemnification.
5.3.1 No Member, including the Manager, shall be liable to the
Company or to any of its other Members for any loss or damage occasioned by any
act or omission in the performance of its duties or services, unless such loss
is due to the gross negligence, recklessness or willful misconduct of such
Member, or as otherwise required by law.
5.3.2 The Company shall indemnify and hold harmless each Member
(including the Manager), its Affiliates, and all officers, directors,
shareholders, employees, and agents of the Member and its Affiliates (each,
individually, an "Indemnitee") from and against any and all claims, losses,
demands, costs, damages, liabilities (joint and several), expenses of any nature
(including attorneys' fees and disbursements), judgments, fines, settlements and
other amounts (collectively, "Claims") arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative
(individually, an "Action"; collectively, "Actions"), in which the Indemnitee
may be involved, or threatened to be involved, as a party or otherwise, arising
out of or incidental to the Company's business or operations, a Member's alleged
actions or failures to act in its capacity as a Member of the Company, or the
Manager's alleged actions or failure to act in its capacity as a Manager of the
Company at the time such Claims are paid or incurred, if (i) the Indemnitee
acted in good faith and in a manner that it believed to be in, or not opposed
to, the interests of the Company, and, with respect to any criminal proceeding,
had no reasonable cause to believe that its conduct was unlawful, and (ii) the
Indemnitee's conduct did not constitute actual fraud, gross negligence, breach
of its fiduciary duty as a Member or any transaction in which a Member or such
Indemnitee received a personal benefit in violation or breach of this Agreement.
The termination of any action, suit or proceeding by judgment, order settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Member did not act in good faith and in
the manner which the Member believed to be in or not opposed to the interest of
the other Members or, with respect to any criminal action or proceeding, that
the Member had reasonable cause to believe its conduct was unlawful.
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5.3.3 The Company shall pay the expenses incurred by a Member in
defending an Action in advance of the final disposition of such Action upon
receipt of an undertaking by such Member to repay such payment if there shall be
an adjudication or determination that it is not entitled to indemnification as
provided herein. A Member may not satisfy any right of indemnity or
reimbursement granted in this Section 5.3 or to which it may be otherwise
entitled except out of the assets of the Company, and no Member shall be liable
personally with respect to any such claim for indemnity or reimbursement. The
Manager may obtain appropriate insurance on behalf of the Company to secure the
Company's obligations hereunder.
5.3.4 The indemnification provided by this Section 5.3 shall be
in addition to any other rights to which those indemnified may be entitled under
any agreement or vote of the Members, or as a matter of law or equity, or
otherwise, both as to an action in the Indemnitee's capacity as a Member or an
Affiliate thereof, and as to an action in another capacity, and shall continue
as to an Indemnitee who has ceased to serve in such capacity and shall inure to
the benefit of the heirs, successors, assigns and administrators of the
Indemnitee.
5.3.5 The Company may purchase and maintain insurance on behalf
of the Manager, and such other Indemnitees as the Manager may determine, against
any liability that may be asserted against, or expense that may be incurred by,
any such Indemnitee in connection with the Company's business or such
Indemnitee's actions or failures to act on behalf of the Company, regardless of
whether the Company would have the power to indemnify such Indemnitee against
such liability under the provisions of this Agreement.
5.3.6 The provisions of this Section 5.3 are for the benefit of
the Indemnitees and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitees and shall not be deemed to create any
rights for the benefit of other Persons and shall apply to any Action,
regardless of whether the claim is asserted by or on behalf of the Company. The
doing of any act or the failure to do any act by a Member, the effect of which
may cause loss or damage to the Company, if done pursuant to advice of
independent legal counsel retained by the Company, shall be conclusively
presumed not to constitute intentional misconduct or a knowing violation of law
on the part of such Member, or an intentional breach of the Member's fiduciary
duty, unless such advice was induced by the Member's intentional misconduct,
knowing violation of law or non-disclosure of material facts known to the
Member.
5.3.7 Notwithstanding the foregoing, no Member shall be liable to
the Company, any other Member or any other Person for any amount beyond the
amount of such Member's obligations set forth in this Agreement.
5.4 Technical Services Agreement. The Company may, and the Manager shall
have the authority to enter into an agreement with VWC or an Affiliate of VWC,
subject at all times to the Company's oversight, review and supervision, for the
provision of technical services with respect to the operation of, and the
adoption of specified technology for, the PCS Systems. Any such technical
services agreement shall be materially in the same form and substance as the
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existing Technical Services Agreement executed by and between Cook Inlet
Western Wireless PV/SS PCS, L.P. and Western Wireless Corporation and dated
November 5, 1996, as amended.
5.5 Trademark License Agreement. The Company may, and the Manager shall
have the authority to, enter into a trademark license agreement with VWC or an
Affiliate of VWC, for the use of certain specified trademarks of VWC and its
Affiliates, for the use by the Company for certain defined purposes in
connection with its primary brand name for providing PCS in the geographic
territory specified therein.
5.6 Time Devoted to Company. The Manager shall devote so much of its
time to the business of the Company as in its reasonable judgment the conduct of
the Company's business reasonably requires.
5.7 Covenant Not to Compete. The Manager represents, warrants and
covenants that, as of the date of this Agreement until one (1) year from the
earlier of the date that the Company is dissolved or the Manager is no longer a
Member, it has not obtained and will not obtain direct or indirect ownership or
control, or rights to obtain direct or indirect ownership or control, of (a) a
five percent (5%) or greater interest, in the aggregate, in any License for a
Designated Market (as defined below), or (b) any entity, other than VWC, an
Affiliate of VWC or the Company, that has a five percent (5%) or greater
interest, in the aggregate, in any License for a Designated Market. For the
purposes hereof, a "Designated Market" shall mean (i) a market in which, as of
the date of this Agreement, VWC or an Affiliate of VWC operates a cellular
telephone business or a PCS business using spectrum licensed by the FCC through
the A, B, C, D, E or F block PCS auctions, (ii) a market in which, in the
future, VWC or an Affiliate of VWC operates a PCS business using spectrum
licensed by the FCC through the A, B, C, D, E or F block PCS auctions, or (iii)
any market that has been named by Cook Inlet as a target market in its filings
with the FCC with respect to the Auctions for Licenses, which causes a
"significant overlap" as defined in FCC Rules provided, however, that nothing
herein shall prevent Cook Inlet or its Affiliates from owning an interest in
partnership with Bell South Corporation or its Affiliates in any of the states
within Bell South Corporation's operating region or in partnership with WWC or
its Affiliates; provided further that nothing in the immediately preceding
proviso shall be deemed to require VWC or any of its Affiliates to dispose of
any FCC license that it holds currently or at any time in the future.
5.8 Fees and Expenses.
(a) For five (5) years during the term of this Agreement
beginning on the Issuance Date, the Company shall pay to the Manager an annual
fee of $250,000, payable in equal biannual installments, for its services to the
Company. Management of the Manager shall not receive compensation from the
Company for their services as employees of the Manager or Company.
(b) All out-of-pocket expenses incurred directly in connection
with transactions effected or positions held for the Company's account
(including, without limitation,
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brokerage commissions, custodial fees, interest and commitment fees on loans
and debit balances and withholding or transfer taxes) shall be borne by the
Company. In addition, the Company, not the Manager, will pay all operating and
overhead costs of the Company.
(c) The Company shall reimburse the Manager for any expenses
incurred by it in the operation and management of the Company; provided,
however, that such expenses are contemplated by the Initial Budget, the
Company's then-effective annual budget or an agreement or program properly
authorized by the Manager or previously approved pursuant to Section 5.1.4. If
the Manager shall incur any expense jointly for the account of the Company and
any other Person, the Manager will allocate such expense among the Company and
each such other Person in proportion to the size of the investment made by each
in the activity or entity to which the expense relates, or in such other manner
as the Manager considers fair and reasonable.
5.9 Contracts With Members or Their Affiliates.
5.9.1 The Manager, on behalf of the Company, may enter into
contracts for goods, services or leases or transfers of property with either a
Member or any of its Affiliates. The validity of any transaction, agreement, or
payment involving the Company and a Member or any of its Affiliates otherwise
permitted by the terms of this Agreement shall not be affected by reason of the
relationship between the Company and a Member or any such Affiliate.
5.9.2 Notwithstanding the foregoing, any agreements, contracts
and arrangements between the Company and a Member or any of its Affiliates
whereby such party shall (i) render any services to the Company, (ii) sell or
lease goods to the Company, (iii) buy or lease any property from the Company, or
(iv) sell or lease any property to the Company, shall be subject to the
following conditions:
5.9.2.1 The compensation, price, lease payment, or fee paid by
or to a Member or any of its Affiliates must be comparable and competitive with
the compensation, price, lease payment, or fee of any other person who is
rendering comparable services, selling or buying comparable property or goods,
or leasing comparable property, as the case may be, which could reasonably be
made available to the Company and shall be on competitive terms, but in no event
greater than the most favorable compensation, prices, lease payments or fees
offered by a Member or any of its Affiliates;
5.9.2.2 All of the terms of such material agreements,
contracts, and arrangements shall be disclosed to the Members;
5.9.2.3 Any such material agreements, contracts and
arrangements shall be embodied in a written contract which describes the subject
matter thereof and all consideration to be paid pursuant thereto; and
5.9.2.4 No rebates or "give-ups" may be received by a Member
or any of its Affiliates, nor may a Member or any of its Affiliates participate
in any reciprocal business
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arrangements which would have the effect of circumventing any of the provisions
of this Agreement.
5.9.3 In no event shall the Manager cause the Company to
commingle the Company's funds with those of any other person or entity.
5.10 Annual Budget. Prior to the beginning of each Fiscal Year, the
Manager, following consultation with the Members, shall create and adopt an
annual budget of revenues, expenses and capital expenditures, which' shall be
distributed to each Member.
5.11 Operating Officer. The Company may employ a President or other
manager or operations officer at the will of the Manager and under such terms as
shall be determined by the Manager subject, with respect to salaries and
benefits, to amounts contemplated by the Initial Budget.
5.12 No Participation in Management; No Authority. No Member, other than
the Manager, shall take any active part in the management or control of the
business of the Company. No Member, other than the Manager, shall have any
authority to act in any way on behalf of, or to bind or obligate the Company.
Subject to the terms of this Agreement, any Member may lend money to the Company
or advance money for it, and as to such loans or advances, such Member shall
have the same rights as other general creditors, subject to the terms of the
documentation governing any such loan or advance.
ARTICLE VI
ADMISSIONS AND TRANSFERS
6.1 Admission of Additional Members.
6.1.1 Subject to the conditions of Sections 5.1.4.1 and 6.1.2,
the Manager may admit any Person as an additional Member. Effective upon such
admission, the Manager shall revise Exhibit A to this Agreement to reflect the
name and the required Capital Contribution of such additional Member.
6.1.2 The admission of an additional party as a Member shall be
conditioned upon:
6.1.2.1 The prior written consent of the Manager;
6.1.2.2 The additional party's written acceptance and
adoption of all of the terms and provisions of this Agreement, and any other
related agreements executed by the Members or the Manager in connection with
this Agreement, as if such additional party were an original signatory to this
Agreement and such other agreements, and grant to the Manager the
power-of-attorney set forth in Section 12.2 of this Agreement;
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6.1.2.3 The additional party executing and acknowledging
such other instrument or instruments as the Manager deems necessary or desirable
to effect such admission;
6.1.2.4 The additional party paying or obligating itself
to pay, as the Manager deems necessary or appropriate, all reasonable expenses
connected with such admission;
6.1.2.5 Compliance with all requirements of the FCC Rules
and the Act;
6.1.2.6 Compliance with all applicable state and federal
securities laws; and
6.1.2.7 The approval of the Members pursuant to Section
5.1.4.1.
6.2 Transfer of Members' Interest.
6.2.1 Subject to Section 6.4 and all applicable FCC Rules, a
Member may transfer all, but not less than all, of its Interest in the Company
to an Affiliate and, in the event of such a transfer, the Affiliate shall
receive and hold such Interest subject to the terms and conditions of this
Agreement.
6.2.2 Except for a transfer permitted under Section 6.2.1, a
Member (other than VoiceStream) may not transfer or encumber, either directly or
indirectly, any of its Interest in the Company without first offering in writing
to sell such Interest to VoiceStream pursuant to this Section 6.2; provided,
however, that such right of VoiceStream shall only exist if such sale to
VoiceStream will be consistent with FCC limitations on transfer of control under
FCC Rules; and further provided that in order for VoiceStream to exercise its
right to purchase Interests pursuant to this Section 6.2:
6.2.2.1 Prior to the Exchange Date, VoiceStream must
provide a legal opinion from outside counsel to VoiceStream addressed to the
Company, which counsel and opinion must be satisfactory to the Member proposing
the transfer and to the Company, opining that the transfer of such Interest to
VoiceStream would not cause the Company to violate the C and F block eligibility
requirements (as defined by the FCC Rules) or any other FCC Rules or to forfeit
the Financing Benefits ("Required Legal Opinion" ). Should VoiceStream be unable
to obtain the Required Legal Opinion within thirty (30) days following receipt
of the notice from the selling Member, VoiceStream shall be deemed to have
waived its rights to purchase such Interest; and
6.2.2.2 From the Exchange Date to the fifth anniversary of
the Exchange Date, either (A) VoiceStream must provide the Required Legal
Opinion, or (B) the Company must elect in writing to forfeit the Financing
Benefits. Should VoiceStream be unable to obtain the Required Legal Opinion or
fail to obtain written election of the Company to forfeit the Financing Benefits
within thirty (30) days following receipt of the notice from the selling
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Member, VoiceStream shall be deemed to have waived its rights to purchase such
Interest.
6.2.3 Except for a transfer pursuant to Section 6.2.1, if at any
time a Member (other than VoiceStream) has received an offer to purchase, and
desires to accept an offer to sell all, but not less than all, of its Interest
in the Company, it shall give a written notice to VoiceStream that sets forth
the name and address of the potential purchaser and the terms of the offer. In
no event shall a Member be entitled to transfer less than all its Interest in
the Company.
6.2.4 VoiceStream shall have the right to purchase all, but not
less than all, of the Interest that is covered by the notice referenced at
Section 6.2.3 at the price and terms set forth in the notice to VoiceStream.
VoiceStream shall exercise its right to purchase the Interest by giving a notice
to the selling Member within thirty (30) days following receipt of the notice
from the selling Member stating that it will purchase such Interest.
6.2.5 Closing on all purchases pursuant to Section 6.2.4 shall
occur within sixty (60) days from the exercise of the option by VoiceStream or
such date as may be agreed upon by the selling Member and VoiceStream; provided,
however, that, if FCC consent is required for the transfer of the Interest, then
provided such consent is promptly requested by VoiceStream, the purchase shall
close within sixty (60) days from receipt of the FCC consent. If FCC consent is
not obtained within twelve (12) months from the date the application for the
consent is filed with the FCC as a result of VoiceStream's failure to qualify or
due to any fault of VoiceStream, then VoiceStream shall lose its rights to
purchase and the selling Member may sell the Interest the subject of the notice
to a Third Party without further compliance with this Section.
6.2.6 If VoiceStream allows to expire, or waives in writing, the
right to purchase the offered Interest or does not elect to purchase all of the
offered Interest pursuant to Section 6.2.3, the selling Member, subject to
Section 6.4, may transfer its Interest to a Third Party; provided, however,
that, if the selling Member does not close the proposed sale or transfer within
sixty (60) days from the later of (a) the expiration or waiver in writing of
VoiceStream's right to purchase or (b) the receipt of required FCC approval, a
sale to a Third Party may not be made without such a transfer again being
subject this Section 6.2.
6.2.7 Any transferee of an Interest of a Member under this
Section 6.2 is a "Successor." In the case of a transfer pursuant to this Section
6.2, and subject to Section 6.4, the Successor shall receive and hold such
Interest subject to the terms of this Agreement and subject to the obligations
of the transferor under this Agreement, and there shall be no further transfer
of such Interest except in accordance with the terms of this Agreement.
6.2.8 Any purported transfer of a Member's Interest in the
Company that is not made in compliance with this Section 6.2 is hereby declared
to be null and void and of no force or effect whatsoever.
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6.3 Involuntary Transfer.
6.3.1 In the event of bankruptcy, death or, in the case of a
Member that is a corporation, trust, partnership, or other entity, dissolution
and termination of a Member, or in any event of attachment of an Interest, sale
of a pledged Interest, or garnishment of an Interest owned by a Member, or in
the event that said Interest is subject to judicial sale under the laws of any
local, state or federal government, or if any of the Interest standing in the
name of a Member or any part thereof is to be transferred out of its name by any
legal action brought by any person, including the spouse or former spouse of
said Member (or spouse of a partner in a Member which is a partnership), or by
reason of the death of said spouse, the Company shall have an option to purchase
any or all of said Interest that is subject to any such transfer or legal action
at the price described in Section 6.3.2. Such option shall be exercised in
writing within a period of thirty (30) days after the Company has received
notice of the transfer or legal action.
6.3.2 Upon exercise of the option granted in Section 6.3.1,
payment shall be made within sixty (60) days after the final determination of
the Appraised Value of the Company's assets and the option price shall be the
Appraised Value of such assets multiplied by the Percentage; provided, however,
that, if FCC consent is required for the transfer of the Interest, then payment
shall be made within sixty (60) days from receipt of the FCC consent.
6.3.3 If the Company's option to purchase any such Member's
Interest is waived in writing or expires, the remaining Members shall have
options to purchase pro rata any or all of such remaining Interest on the same
terms and conditions as those set forth in Section 6.3.2. Such option hereunder
must be exercised in writing within thirty (30) days from the date on which the
Company's option is waived in writing or expires.
6.3.4 If both the Company and the remaining Members allow to
expire, or waive in writing, their respective rights to purchase the offered
Interest then subject to Section 6.4, the involuntary transfer of the Interest
may proceed; provided, however, that any transferee in such involuntary transfer
shall comply with the terms of Section 6.5.
6.3.5 Any transferee of an Interest of a Member under this
Section 6.3 is a "Successor." In the case of a transfer pursuant to this Section
6.3, and subject to Section 6.4, the Successor shall receive and hold such
Interest subject to the terms of this Agreement and subject to the obligations
of the transferor under this Agreement, and there shall be no further transfer
of such Interest except in accordance with the terms of this Agreement.
6.3.6 Any purported transfer of a Member's Interest in the
Company that is not made in compliance with this Section 6.3 is hereby declared
to be null and void and of no force or effect whatsoever.
6.4 Admission of Transferees as Members. The Members, by unanimous
consent, may, but need not, permit an assignee or transferee (whether such
assignee or transferee has
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acquired its Interest by virtue of a voluntary assignment pursuant to Section
6.2, an involuntary transfer pursuant to Section 6.3 or a transfer by operation
of law or otherwise) of a Member's Interest (or a part thereof) to be admitted
as and become a Member in the Company entitled to all the rights and benefits
under this Agreement of the transferor or assignor of such Interest, but no such
assignee or transferee shall be or become a Member without:
6.4.1 The prior written consent of the Manager, which may be
granted or withheld by the Manager in its sole and absolute discretion;
6.4.2 The assignee's written acceptance and adoption of all of
the terms and provisions of this Agreement, as if such additional party were an
original signatory hereto, and such assignee's grant to the Manager the
power-of-attorney set forth in Section 12.2 of this Agreement;
6.4.3 The assignee executing and acknowledging such other
instrument or instruments as the Manager deems necessary or desirable to effect
such admission;
6.4.4 The assignee paying or obligating itself to pay, as the
Manager deems necessary or appropriate, all reasonable expenses connected with
such admission, including but not limited to the cost of preparing and filing an
amendment to the Certificate of Formation to effectuate such admission;
6.4.5 The transferor and transferee providing, if requested by
the Manager, an opinion of counsel (which counsel and opinion shall be
satisfactory to the counsel to the Company) that indicates that, in the opinion
of said counsel, such transfer would not jeopardize the status of the Company as
a limited liability company for federal or state income tax purposes, and would
not violate, or cause the Company to violate, any applicable law or governmental
rule or regulation, including, without limitation, any applicable federal or
state securities law or any applicable laws, rules or regulations of the FCC;
6.4.6 The transferor giving the transferee the right to become a
Member; and
6.4.7 All requirements of the Act regarding the admission of a
transferee member having been complied with by the transferee, the transferor
and the Company.
Until such time, if any, as a transferee of any permitted transfer
pursuant to this Article VI is admitted to the Company as a substitute Member
pursuant to this Section 6.4, (x) such transferee shall be an assignee only, and
only shall receive, to the extent transferred, the distributions and allocations
of income, gain, loss, deduction, credit, or similar item to which the Member
which transferred its Interest in the Company would be entitled, and (y) such
assignee shall not be entitled or enabled to exercise any other rights or powers
of a Member, such other rights remaining with the transferring Member. In such a
case, the transferring Member shall remain a Member even if it has transferred
its entire economic Interest in the Company to one or more assignees. In the
event any assignee desires to make a further assignment of any economic
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Interest in the Company, such assignee shall be subject to all of the provisions
of this Agreement to the same extent and in the same manner as any Member
desiring to make such an assignment.
6.5 Tag-Along Rights.
6.5.1 Trigger for Tag-Along Rights. In the event that a Member
(the "Selling Member" ) shall determine to sell directly, but not indirectly,
any of its Interest to a Third Party, except an Affiliate, in any one
transaction or series of related transactions, in addition to any other
applicable transfer restriction the subject of this Article VI, such sale or
other disposition shall not be permitted unless the Selling Member offers (or
causes the Third Party to offer) to the other Members the right to elect to
include, at the sole option of the other Members, up to a pro rata share of
their Interests in the sale or other disposition to such Third Party (determined
in accordance with the Members' Percentages).
6.5.2 Tag-Along Notice. The Selling Member shall give a notice to
the other Members that describes the transaction(s) (the "Tag-Along Notice" )
and at any time within fifteen (15) days after the giving of the Tag-Along
Notice, a Member may make an election to include up to the pro rata share of its
Interest in such a sale or other disposition (the "Inclusion Election" ) by
giving written notice thereof to the Selling Member and by delivering to the
Selling Member any certificate or certificates that represent the Member's
Interest to be sold (the "Tag-Along Interests" ), together with a limited
power-of-attorney that authorizes the Selling Member to sell or otherwise
dispose of such Tag-Along Interests pursuant to the terms of such Third Party's
offer.
6.5.3 Identical Terms. The purchase of a Member's Interests
pursuant to this Section 6.5 shall be on the same terms and conditions,
including the purchase price and the date of sale or other disposition, as are
received by the Selling Member and stated in the Tag-Along Notice.
6.5.4 Notice of Sale. Promptly (but in no event later than five
(5) business days) after the consummation of the sale or other disposition of
shares to the Third Party pursuant to the Third Party's offer, the Selling
Member shall: (i) notify the participating Members of the completion thereof;
(ii) cause to be remitted to such Members the total sales price attributable to
the Interests that such Members sold or otherwise disposed of pursuant thereto;
and (iii) furnish such other evidence of the completion and time of completion
of such sale or other disposition and the terms thereof as may be reasonably
requested by such Members.
6.5.5 Waiver of Inclusion Election. If within fifteen (15) days
after the Tag-Along Notice is given, any Member has not accepted the offer to
make an Inclusion Election, that Member shall be deemed to have waived any and
all of its rights with respect to the sale or other disposition of the Interests
that are described in the Tag-Along Notice. The Selling Member shall have the
lesser of ninety (90) days after such 15-day period or, if the Selling Member
reasonably believes that FCC consent, provided such consent was promptly
requested, is required, thirty (30) days after the receipt of such FCC consent
in which to sell or otherwise
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dispose of its Interests to the Third Party or any other person at a price and
on terms not more favorable to the Selling Member than were set forth in the
Tag-Along Notice.
6.5.6 Termination of 90-Day or 30-Day Period. If, at the end of
such 90-day or 30-day period, as applicable, the Selling Member shall not have
completed the sale of its Interests in accordance with the terms of the
Tag-Along Notice, each of the restrictions on sale contained in this Section 6.5
with respect to the Selling Member's Interests shall again be in effect (unless
such 90-day or 30-day period, as applicable, is extended with the consent of all
of the Members).
6.5.7 Permitted Transfers; Excluded Transfers. The rights
provided in this Section 6.5 shall not be applicable to or restrict in any way
any transfer of Interests by a Member under Section 6.2.1 of this Agreement, but
any such Interests so transferred by a Member shall thereafter continue to be
subject to the provisions of this Section 6.5. Nothing in this Agreement shall
limit or restrict any transfer, sale, hypothecation, assignment, or pledge by
the owner thereof of the stock or ownership rights of a Member or its parent
corporation.
ARTICLE VII
SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY
7.1 Right to Initiate Sale of Assets. At any time during the thirty (30)
day period that commences on the first, second and third anniversary of the
Exchange Date, the Manager may cause the Company to offer to sell all or
substantially all of the assets of the Company; provided, however, that the
Company must conduct such sale pursuant to the terms and conditions of this
Article 7.
7.2 Right of First Refusal.
7.2.1 The Manager shall not determine to cause the Company to
offer for sale or sell all or substantially all of the assets of the Company
(whether prior or subsequent to the dissolution of the Company) without first
offering in writing to sell such assets to VoiceStream pursuant to this Section
7.2.
7.2.2 If the Company desires to sell all or substantially all of
its assets, it shall give a written notice to VoiceStream that sets forth a
description of the assets that the Company proposes to sell.
7.2.3 VoiceStream shall have the right to purchase the assets
that are covered by the notice to VoiceStream at the Appraised Value of such
assets. VoiceStream shall exercise its right to purchase the assets by giving
notice to the Company within thirty (30) days after the determination of the
Appraised Value of the assets.
7.2.4 Closing on a purchase pursuant to this Section 7.2 shall
occur within sixty (60) days from the exercise of the option by VoiceStream or
such date as may be agreed upon by
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the Manager and VoiceStream; provided, however, that, if, in the reasonable
opinion of either the Company or VoiceStream, FCC consent is required for such a
transfer of the assets, then the purchase shall close within sixty (60) days
from receipt of the FCC consent. If FCC consent is not obtained within twelve
(12) months from the date the application for the consent is filed with the FCC
through no fault of the Company, then VoiceStream shall lose its right of first
refusal and the Company may sell to a Third Party without further compliance
with this Section 7.2.
7.2.5 If VoiceStream allows to expire, or waives in writing, the
right to purchase the assets, the Company may offer and sell pursuant to Section
7.3; provided, however, that, if the Company does not commence an auction for
the assets under Section 7.3 within sixty (60) days from the later of the waiver
in writing or expiration of VoiceStream's right to purchase or the receipt of
required FCC approval, a sale of the assets may not be made without such a
transfer again being subject to this Section 7.2.
7.3 Sale of Assets by Auction.
7.3.1 If VoiceStream allows to expire, or waives in writing, the
right to purchase the Company's assets under Section 7.2, the Company may offer
and sell the assets identified in the notice provided to VoiceStream under
Section 7.2, pursuant to this Section 7.3.
7.3.2 The Company shall offer and sell the assets subject to sale
by means of an auction, to be conducted on the terms and conditions established
by the Manager.
7.3.3 The Company shall give a written notice to VoiceStream of
the bid the Company intends to accept that sets forth the name and address of
the potential purchaser and the terms of the bid.
7.3.4 VoiceStream shall have the right to purchase the assets at
the price and terms set forth in the notice to VoiceStream; provided, however,
that in the event that the price or terms set forth in the notice to VoiceStream
involve the securities of another company or any other consideration that is not
reasonably available to VoiceStream, then VoiceStream shall have the right to
purchase the assets at a cash price equal to the Appraised Value of such
consideration. VoiceStream shall exercise its right to purchase the assets by
giving a notice to the Company within twenty (20) days following receipt of the
notice of a qualifying bid.
7.3.5 Closing on a purchase pursuant to this Section 7.3 shall
occur within sixty (60) days from the exercise of the option by VoiceStream or
such date as may be agreed upon by the Company and VoiceStream; provided,
however, that, if, in the reasonable opinion of either the Company or
VoiceStream, FCC approval is required for such a sale of assets, then the
purchase shall close within sixty (60) days from receipt of the FCC approval. If
FCC consent is not obtained within twelve (12) months from the date the
application for the consent is filed with the FCC through no fault of the
Company, then VoiceStream shall lose its rights to purchase and the Company may
sell to a Third Party without further compliance with this Section 7.3.
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7.3.6 If VoiceStream allows to expire, or waives in writing, the
right to purchase the assets, the Company may sell the assets to a Third Party;
provided, however, that, if the Company does not close the proposed sale or
transfer within sixty (60) days after the later of the waiver in writing or
expiration of VoiceStream's right to purchase or the receipt of required FCC
approval, a sale to a Third Party may not be made without such a transfer again
being subject this Article VII.
7.4 Payment for Assets by VoiceStream. VoiceStream shall pay to the
Company the purchase price for the assets identified in the Manager's notice to
VoiceStream in cash at the closing of such purchase and sale; provided, however,
that, in the event that any class of common stock of VWC is listed on the New
York Stock Exchange ("NYSE") or admitted for quotation on the Nasdaq National
Market System ("NMS"), and the reported average daily trading volume with
respect to such common stock exceeds $5 million, VoiceStream may pay the
purchase price to the Company in that number of shares of such stock of VWC
equal to the purchase price of the assets to be purchased divided by the price
of VWC's Common Stock, calculated as the average high and low trading price of
such common stock as reported by the NYSE Composite Tape or the average bid and
asked price of VWC Common Stock as quoted on NMS, as appropriate, for each of
the ten (10) consecutive trading days ending two (2) trading days before the
closing date of such purchase and sale; and further provided that in the event
that the requirements of the foregoing proviso are not met with respect to VWC
stock, then in the event that any class of common stock of WWC is listed on the
NYSE or NMS and the reported average daily trading volume with respect to such
common stock exceeds $5 million, VoiceStream may pay the purchase price to the
Company in that number of fully-registered shares of such stock of WWC equal to
the purchase price of the assets to be purchased divided by the price of WWC's
Common Stock, calculated as the average high and low trading price of such
common stock as reported by the NYSE Composite Tape or the average bid and asked
price of WWC Common Stock as quoted on NMS, as appropriate, for each of the ten
(10) consecutive trading days ending two (2) trading days before the closing
date of such purchase and sale; provided that at the time of such issuance (i)
such shares must be duly authorized, validly issued, fully paid and
non-assessable and free and clear of all liens, claims and encumbrances or
preemptive or similar rights, (ii) such shares must be delivered in compliance
with Federal and state securities laws, (iii) such shares are subject to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act") covering the offer and sale of such shares by the Company
(the "Asset Registration Statement") from time to time in negotiated
transactions, in market transactions or otherwise and (iv) such shares are
registered or qualified for offer of sale by the Company under the securities or
blue sky laws of such States as the Company shall reasonably request. VWC or
WWC, as appropriate, covenants and agrees that it shall (x) prepare and file
with the Securities and Exchange Commission such amendments as may be necessary
to keep the Asset Registration Statement effective until the earlier of the date
all of such shares have been sold by the Company or the date all of such shares
are freely tradable without registration or restriction (under Rule 144(k)
promulgated under the Securities Act or otherwise), but not before the
expiration of the 90-day period referred to in Section 4(3) of the Securities
Act and Rule 174 promulgated thereunder, (y) cause each such state securities or
blue sky registration or qualification to remain effective during the period the
Asset Registration Statement is required
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to be kept effective hereunder, and (z) cause the shares covered by the Asset
Registration Statement, by the date of the first sale by the Company thereunder,
to be listed or admitted for trading on each securities exchange (or, if
applicable, the NMS) on which VWC Common Stock is then listed or admitted for
trading. In the event that it is not possible for VWC or WWC, as appropriate, to
deliver shares to the Company in accordance with the requirements of this
Section, VWC or WWC, as appropriate, shall enter into a Registration Rights
Agreement in the form and substance of the agreement attached hereto as Exhibit
D, which the parties hereby agree shall be amended to give the Company the
benefit of the terms of any registration rights agreements entered into with
other shareholders of VWC subsequent to the date of this Agreement and prior the
date of the notice as required under Section 7.3.3, provided that no such
amendment shall reduce or diminish any of the rights of the Company as set forth
in the form attached hereto as Exhibit D.
7.5 Purchase Price; Structure. For a purchase and sale of assets
pursuant to Section 7.2, the purchase price shall equal the Appraised Value of
the assets, and, for a purchase and sale pursuant of assets pursuant to Section
7.3, the purchase price shall equal the auction price. VoiceStream, the Company
and the other Members agree to structure, to the extent reasonably possible, any
such purchase for VWC or WWC Common Stock, as applicable, in a way (such as a
stock for stock sale) that is tax free to all Members, provided that in doing so
there are no negative tax or accounting attributes that adversely impact the
other Members or the Company, as applicable, to a greater extent than would be
experienced in a direct exchange for assets (other than the receipt of a
carryover basis due to the tax free nature of the transaction), determined in
utmost good faith by the Manager at its reasonable discretion.
ARTICLE VIII
DISSOLUTION AND LIQUIDATION
8.1 Dissolution. The Company shall be deemed dissolved upon the
happening of any of the following events:
8.1.1 The expiration of the fixed term of the Company as set
forth at Section 2.4;
8.1.2 The giving of notice to the Members by the Manager of its
election finally to dissolve, terminate, and wind up the affairs of the Company;
8.1.3 The filing of a certificate of dissolution or its
equivalent for the Manager;
8.1.4 The sale of all or substantially all of the Company assets
and conversion into cash of any proceeds of sale originally received in any form
other than cash;
8.1.5 The entry by a court of competent jurisdiction of a decree
of judicial dissolution upon a finding that it is not reasonably practicable to
carry on the Company business
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in conformity with this Agreement.
8.1.6 The written consent of both the Class A Member and the
Class B Member to terminate the Company; or
8.1.7 The occurrence of an event of withdrawal set forth at
Section 8.2.
8.2 Event of Withdrawal. The following shall constitute events of
withdrawal:
8.2.1 The Manager withdraws from the Company by giving written
notice to the other Members;
8.2.2 The Manager assigns its entire Interest other than to an
Affiliate;
8.2.3 The Manager resigns as the Manager;
8.2.4 The Manager:
8.2.4.1 Makes an assignment for the benefit of creditors;
8.2.4.2 Is adjudicated bankrupt or insolvent;
8.2.4.3 Files a voluntary petition in bankruptcy;
8.2.4.4 Dissolves or liquidates; or
8.2.4.5 Seeks, consents, or acquiesces in the appointment
of a trustee, receiver, or liquidator of such Manager or of all or any
substantial part of such Manager's properties.
The Members hereby agree that, notwithstanding any provision of the Act,
the Company shall not dissolve prior to the occurrence of a dissolution event
set forth at Section 8.1. Subject to any applicable FCC Rules, upon the
occurrence of any event set forth in Section 8.1 or 8.2, the Company shall not
be dissolved or required to be wound up if (x) at the time of such event there
is at least one remaining Member and that Member carries on the business of the
Company, or (y) within ninety (90) days after such event all remaining Members
agree in writing to continue the business of the Company and, unless the Manager
is continued as the Manager, to the appointment, effective as of the date of
such event, of a new Manager.
8.3 Dissolution and Termination. Upon dissolution for any of the reasons
stated in Section 8.1, the Company shall terminate and be wound up in accordance
with the terms of Section 8.4. Dissolution of the Company shall be effective on
the day on which the event giving rise to the dissolution occurs, but the
Company shall not terminate until the Certificate of Formation shall have been
canceled and the assets of the Company shall have been distributed as
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provided in Section 8.4. Any dissolution shall be in compliance with FCC Rules.
Notwithstanding the dissolution of the Company prior to the termination of the
Company, the business of the Company and the affairs of the Members shall
continue to be governed by this Agreement.
8.4 Winding Up and Distribution of Assets. Upon dissolution and
termination under Section 8.3, the Manager or any other party designated by
written consent of both the Class A Member and the Class B Member, if the
Company is dissolved pursuant to Section 8.2 hereof, shall commence to wind up
the affairs of the Company and to liquidate its assets. The Members shall
continue to share income, gains, expenses, losses and all other items during the
period of liquidation in the same proportion as before the dissolution. The
Manager or such other party shall have the full right and unlimited discretion
to determine the time, manner and terms of any sale or sales of Company property
pursuant to such liquidation. Pending such sales, the Manager or such other
party shall have the right to continue to operate and otherwise deal with the
assets of the Company. A reasonable time shall be allowed for the orderly
winding up of the business of the Company and the liquidation of its assets and
the discharge of its liabilities to creditors so as to enable the Manager or
such other party to minimize the normal losses attendant upon a liquidation,
having due regard to the activity and condition of the relevant markets for the
Company properties and general financial and economic conditions. Any Member may
be a purchaser of any properties of the Company upon liquidation of the
Company's assets, including, without limitation, any liquidation conducted
pursuant to a judicial dissolution or otherwise under judicial supervision;
provided, however, that the purchase price and terms of sale are fair and
reasonable to the Company. The proceeds of such liquidation and any other funds
of the Company shall be applied and distributed in the following order of
priority:
8.4.1 to creditors, including Members who are creditors, to the
extent otherwise permitted by law, in satisfaction of liabilities of the Company
other than liabilities for distributions to Members;
8.4.2 to the setting up of any reserves which the Manager deems
reasonably necessary for any contingent or unforeseen liabilities or obligations
of the Company or of the Manager arising out of or in connection with the
Company; such reserves shall be segregated for the purpose of disbursing such
reserves in payment of any of the aforementioned contingencies and, at the
expiration of such period as the Manager shall deem advisable, for distribution
of the balance thereafter remaining in the manner hereinafter provided;
8.4.3 to the Members in proportion to the positive balances in
the Members' respective Capital Accounts, determined after taking into account
all Capital Account adjustments for the Fiscal Year during which such
liquidation occurs (other than those made as a result of the distributions set
forth in this Section 8.4.3), by the end of the Fiscal Year in which such
liquidation occurs or, if later, within 90 days after the date of the
liquidation.
No Member shall have any right to demand or receive property other than
cash upon dissolution and termination of the Company. Each Member shall look
solely to the assets of the
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Company for all distributions in respect of its Capital Account and its shares
of profits and shall have no recourse therefor against any other Member.
Accordingly, if any Member (including but not limited to the Manager) has a
deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which the liquidation occurs), then such Member shall have no
obligation to make any capital contribution with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
person for any purpose whatsoever.
ARTICLE IX
ACCOUNTING; BOOKS AND RECORDS
9.1 Books and Records. The Company shall maintain at such place as the
Manager shall designate proper and complete records and books of account of the
business of the Company. The Company shall adopt for tax accounting purposes the
accrual method of accounting provided by the Code and the applicable regulations
and authorities thereunder as the same may exist from time to time or any other
accounting method which the Manager shall decide in its sole discretion is in
the best interests of the Company. The financial statements of the Company shall
be prepared in accordance with generally accepted accounting principles.
9.2 Manager's Reports to Members. The Manager shall, at the Company's
expense, send to each Member or person who was a Member at any time during the
Fiscal Year, the following:
9.2.1 As early as practicable after the end of each Fiscal Year,
such information as shall be necessary for the preparation by such Member of its
federal and state income tax (if any) returns which shall include a computation
of the distributions to such Member and the allocation to such Member of Profit
and Loss, as the case may be; and
9.2.2 Within one hundred twenty (120) days after the end of each
Fiscal Year, an annual report that shall include a general description of the
activities of the Company during the period covered by the report, and
comparative financial statements for the current and prior Fiscal Year that are
audited by the Approved Certified Public Accountant, and such financial
statements shall include a balance sheet, a statement of income and expenses, a
statement of changes in Members' capital, and a statement of cash flow.
9.3 Right to Examine Records. Any Member shall be entitled, upon
reasonable written notice directed to the Manager and for a proper purpose, to
review the records of the Company at all reasonable times and at the location
where such records are kept by the Company.
9.4 Tax Matters Member. The Manager shall be the Company's tax matters
Member ("Tax Matters Member"). The Tax Matters Member shall have all powers and
responsibilities of a "tax matters partner" as defined in Section 6231 of the
Code. The Tax Matters Member shall keep all Members informed of all notices from
government taxing authorities that may come to
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the attention of the Tax Matters Member. The Company shall pay and be
responsible for all reasonable third-party costs and expenses incurred by the
Tax Matters Member in performing those duties. A Member shall be responsible for
any costs incurred by the Member with respect to any tax audit or tax-related
administrative or judicial proceeding against any Member, even though it relates
to the Company. The Tax Matters Member shall not compromise any dispute with the
Internal Revenue Service without the approval of the Members.
9.5 Tax Elections. The Manager shall have the authority to make and
revoke all Company elections permitted under the Code or state income tax laws,
including, without limitation, elections of methods of depreciation and
elections under Section 754 of the Code. The decision to make or not make an
election shall be at the Manager's sole and absolute discretion. Each of the
Members shall, upon request, supply any information necessary to give proper
effect to such election.
ARTICLE X
DISPUTE RESOLUTION
10.1 Arbitration of Disputes. Except as otherwise provided in this
Article X, any and all disputes arising out of or in connection with the
execution, interpretation, performance or nonperformance of this Agreement shall
be solely and finally settled by arbitration, which shall be conducted in
Washington, DC. The arbitration procedure may be initiated by any party by
written notice to the other parties, and such notice shall specify in reasonable
detail the dispute being submitted to arbitration. Subject to Section 10.4, the
parties hereby renounce all recourse to litigation and agree that the award of
the arbitrators shall be final and subject to no judicial review, except on one
or more of those grounds specified in the Federal Arbitration Act (9 USC Section
1, et seq.), as amended, or any successor provisions thereto.
10.2 Selection of Arbitrators. Each arbitration conducted pursuant to
this Article X shall be conducted before a panel of three (3) arbitrators, each
of whom shall meet the qualifications set forth herein. Each arbitrator shall be
impartial, shall not have been employed by or affiliated with any of the Members
or any of their respective Affiliates, and shall be admitted to the bar of any
state and further shall possess substantial accounting, telecommunications,
business or other professional experience relevant to the issues in dispute in
the arbitration as stated in the notice initiating such proceeding. The party
initiating arbitration pursuant to this Article X shall not later than twenty
(20) days after the delivery of the notice required under Section 10.1 hereof
appoint an arbitrator and notify the other party thereof. Within twenty (20)
days after delivery of the notice referenced in the immediately preceding
sentence, the other party shall appoint an arbitrator. The initiating party
promptly after the date on which the second arbitrator is appointed, if any,
shall ask the office of the American Arbitration Association ("AAA") closest to
Washington, DC, to appoint a third arbitrator who meets the qualifications set
forth herein. Notwithstanding the foregoing, if the second arbitrator is not
appointed within the time period required, the first arbitrator shall proceed to
determine the dispute.
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10.3 Rules of the Arbitration. The arbitrators shall conduct the
proceedings, including arguments and briefs, pursuant to the Rules of the AAA,
as now or hereafter amended (the "Rules" ), provided that the provisions of this
Agreement shall prevail in the event of any conflict between the Rules and the
provisions of this Agreement. The panel of arbitrators shall decide the issues
submitted to them in accordance with the provisions and commercial purposes of
this Agreement, provided that all substantive questions of law shall be
determined under the laws of the State of Delaware (without regard to the
principles of conflicts of laws of such jurisdiction). All questions and issues
in connection with the dispute, including procedural issues, shall be decided by
the concurrence of at least two arbitrators, and all decisions shall be in
writing and submitted to all parties.
10.4 Injunctive Relief. Notwithstanding anything to the contrary set
forth herein, a party without prejudice to the provisions hereof may file a
complaint to seek a preliminary injunction or other provisional judicial relief
if, in such party's sole judgment, such action is necessary to avoid irreparable
damage.
10.5 No Punitive or Exemplary Damages. In no event shall any party be
entitled to receive, and the arbitrators shall not be empowered to award,
punitive or exemplary damages. Each party hereby irrevocably waives any claim or
right for or to punitive or exemplary damages.
10.6 Discovery and Conduct of Arbitration. The parties shall facilitate
the arbitration by: (a) making available to one another and to the arbitrators,
on as expedited a basis as is practicable, for examination, deposition,
inspection and extraction all documents, books, records and personnel under
their control if determined by the arbitrators to be relevant to the dispute
(provided, however, that a party shall not be required to produce privileged
documents or documents otherwise not required to be produced under the Federal
Rules of Civil Procedure); (b) conducting arbitration hearings to the greatest
extent possible on successive days; and (c) observing strictly the time periods
established by the Rules or by the arbitrators for submission of evidence or
briefs.
10.7 Prehearing Motions. In any proceeding conducted under this Article
X the arbitrators shall have the authority to schedule, hear and determine any
and all prehearing motions (including without limitation summary judgment
motions on any or all of the issues in dispute) and shall do so on the motion of
any party.
10.8 Costs. In the final award, the panel of arbitrators shall divide
all costs, other than fees of counsel incurred in conducting the arbitration, in
such manner as the panel deems just and equitable under the circumstances. The
arbitrators shall have no authority to award fees of counsel. Judgment on the
award of the panel of arbitrators may be entered in any court having
jurisdiction over the party against which enforcement of the award is being
sought. Each party hereby irrevocably submits and consents to the jurisdiction
of any such court for the purpose of rendering a judgment on any such award.
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10.9 Execution of Judgments. Each party agrees that any award of the
panel of arbitrators against it and on which judgment is entered as provided in
the preceding Section 10.8 may be executed against the assets of such party in
any jurisdiction. By execution of this Agreement, each party hereby irrevocably
submits to the jurisdiction of any court in any such jurisdiction in any legal
action or proceeding relating to such executions.
10.10 Waiver as to Jurisdiction. Each party hereby irrevocably waives,
to the fullest extent permitted by law, any objection it may now or hereafter
have to any suit, action or proceeding arising out of or relating to this
Agreement that is brought in any of the jurisdictions designated in the
preceding Sections 10.8 and 10.9 for the purposes envisioned by those sections,
and hereby further irrevocably waives any claim that any such suit, action or
proceeding so brought has been brought in an inconvenient forum.
ARTICLE XI
EXCHANGE RIGHTS
11.1 Grant of Exchange Rights. In connection with the transactions
contemplated by this Agreement, VWC and WWC hereby grant to Cook Inlet, and Cook
Inlet hereby accepts from VWC and WWC, the Exchange Rights. The terms and
conditions of the Exchange Rights are set forth in this Article XI.
11.2 Exchange Rights. The Exchange Rights shall be exercisable (an
"Exchange") only on the following terms and only during the thirty (30) day
Exchange Period described below:
11.2.1 Cook Inlet may elect to exchange all, but not less than
all, of Cook Inlet's Interest in the Company so that for each $65,000 of cash
invested by Cook Inlet in the Company pursuant to Exhibit A on or before the
Exchange Date, Cook Inlet shall receive one (1) share of VWC Common Stock,
subject to Sections 11.3 and 11.4. No fractional shares shall be issued upon an
Exchange, and in lieu thereof, Cook Inlet shall receive a cash payment equal to
the product of (x) the fraction of a share of VWC Common Stock Cook Inlet would
have otherwise been entitled to receive and (y) the average high and low trading
price of VWC Common Stock as reported by the NYSE Composite Tape or the average
bid and asked price of VWC Common Stock as quoted on the NMS, as appropriate,
for each of the ten (10) consecutive trading days ending two (2) trading days
immediately prior to the date on which the Exchange occurs.
11.2.2 In the event that at the Exchange Date WWC directly or
indirectly owns 50.01% or more of the voting securities of VWC or its successor,
and further provided that VWC, or its successor, is unable to deliver, in
accordance with Section 11.2.7 shares of VWC Common Stock prior to the Outside
Delivery Date, then instead of the Exchange set forth in Section 11.2.1, WWC and
VWC jointly and severally agree that Cook Inlet may instead elect an Exchange of
all, but not less than all, of Cook Inlet's Interest in the Company such that
for each $13.89 of cash invested by Cook Inlet in the Company pursuant to
Exhibit A on or before the Exchange
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Date, Cook Inlet shall receive one (1) share of WWC Common Stock, subject to
Sections 11.3 and 11.4. No fractional shares shall be issued upon an Exchange,
and, in lieu thereof, Cook Inlet shall receive a cash payment equal to the
product of (x) the fraction of a share of WWC Common Stock Cook Inlet would have
otherwise been entitled to receive and (y) the average high and low trading
price of WWC Common Stock as reported by the NYSE Composite Tape or the average
bid and asked price of WWC Common Stock as quoted on the NMS, as appropriate,
for each of the ten (10) consecutive trading days ending two (2) trading days
immediately prior to the date on which the Exchange occurs. In the event WWC
Common Stock is delivered to Cook Inlet pursuant to this Section 11.2.2, such
shares of WWC Common Stock shall be delivered in accordance with Section 11.2.7
hereof, substituting "WWC Common Stock" for "VWC Common Stock" thereunder.
11.2.3 To cause an Exchange, Cook Inlet shall deliver an
irrevocable written notice of the same (an "Exchange Notice") to VWC by 5:00
p.m. Pacific time on the 30th day from the Exchange Date (such thirty (30)-day
period shall be "the Exchange Period"); provided that if as of such time on such
30th day Cook Inlet shall not have elected to cause the Exchange then the
Exchange Rights for Cook Inlet shall then immediately terminate.
11.2.4 If, immediately prior to an Exchange fewer than all of the
Licenses have passed the period by which, under the FCC Rules, the Licenses may
be held by a Person other than a Designated Entity, the Members shall form a new
company (the "New Company" ), under the terms and conditions described below,
and shall transfer, subject to the consent of the FCC, to the New Company all of
the Licenses (and all corresponding assets, liabilities, capital accounts, and
rights) other than the Licenses for which such period has run.
11.2.5 The New Company shall be a limited liability company
organized under the Act and shall be governed by a limited liability company
agreement that is identical to this Agreement, except that the agreement shall
provide that, in the event of any bona fide offer from a Third Party to purchase
all or substantially all of the assets of the New Company or to purchase the
interests in the New Company of any member of the New Company, VoiceStream shall
have a right of first refusal to purchase, at eighty-five percent (85%) of the
offer price included in the bona fide offer, such assets or interest. The New
Company shall have materially the same contract rights as the Company.
11.2.6 VWC, WWC and Cook Inlet agree to structure, to the extent
reasonably possible, the Exchange in a way that is tax free to Cook Inlet,
VoiceStream, VWC, and, if applicable, WWC. Such structure may include a stock
exchange that includes the stock of a special purpose corporation holding the
Interest of Cook Inlet; provided, however, that in doing so there are no
negative tax or accounting attributes of such an Exchange that adversely impact
VoiceStream, VWC, or WWC to a greater extent than would be experienced in a
direct exchange for an Interest (other than the receipt of a carry over basis
due to the tax free nature of the transaction), as determined in utmost good
faith by VWC and WWC in their reasonable discretion.
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11.2.7 Upon receipt of an Exchange Notice during the Exchange
Period, and if VWC Common Stock is listed or admitted for quotation on the NMS
or the NYSE, then WWC and VWC agree that VWC shall issue to Cook Inlet, as soon
as reasonably practicable but in any event no later than sixty (60) days
following delivery of the Exchange Notice (the "Outside Delivery Date") the
shares of VWC Common Stock issuable pursuant to Section 11.2.1, subject to
Sections 11.3 and 11.4, provided that at the time of such issuance (i) such
shares must be duly authorized, validly issued, fully paid and non-assessable
and free and clear of all liens, claims and encumbrances or preemptive or
similar rights, (ii) such shares must be delivered in compliance with Federal
and state securities laws, (iii) such shares are subject to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") covering the offer and sale of such shares by Cook Inlet (the
"Registration Statement") from time to time in negotiated transactions, in
market transactions or otherwise and (iv) such shares are registered or
qualified for offer of sale by Cook Inlet under the securities or blue sky laws
of such States as Cook Inlet shall reasonably request. VWC covenants and agrees
that it shall (x) prepare and file with the Securities and Exchange Commission
such amendments as may be necessary to keep the Registration Statement effective
until the earlier of the date all of such shares have been sold by Cook Inlet or
the date all of such shares are freely tradable without registration or
restriction (under Rule 144(k) promulgated under the Securities Act or
otherwise), but not before the expiration of the 90-day period referred to in
Section 4(3) of the Securities Act and Rule 174 promulgated thereunder, (y)
cause each such state securities or blue sky registration or qualification to
remain effective during the period the Registration Statement is required to be
kept effective hereunder, and (z) cause the shares covered by the Registration
Statement, by the date of the first sale by Cook Inlet thereunder, to be listed
or admitted for trading on each securities exchange (or, if applicable, the NMS)
on which VWC Common Stock is then listed or admitted for trading. In the event
that it is not possible for VWC to deliver shares to Cook Inlet in accordance
with the requirements of this Section 11.2.7, VWC shall enter into a
Registration Rights Agreement in the form and substance of the agreement
attached hereto as Exhibit D, which the parties hereby agree shall be amended to
give Cook Inlet the benefit of the terms of any registration rights agreements
entered into with other shareholders of VWC subsequent to the date of this
Agreement and prior the date of the Exchange Notice, provided that no such
amendment shall reduce or diminish any of the rights of Cook Inlet as set forth
in the form attached hereto as Exhibit D.
11.3 Increase or Combination of VWC or WWC Common Stock. If at any time
VWC or WWC (a) pays a dividend or makes a distribution in shares of its capital
stock or securities convertible or exchangeable for shares of its capital stock,
(b) issues by reclassification, or (c) subdivides (by any stock split,
recapitalization or otherwise) one or more classes of its outstanding shares of
VWC Common Stock or WWC Common Stock, into a greater number of shares, the
exchange ratio in effect immediately prior to such increase shall be adjusted
proportionately, and if VWC or WWC, as applicable, at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding shares
of common stock into a smaller number of shares, the exchange ratio in effect
immediately prior to such combination shall be
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adjusted proportionately, in each case, to allow Cook Inlet the full benefit and
effect of the increase or combination as if the Interest of Cook Inlet had been
exchanged for VWC Common Stock or WWC Common Stock immediately prior to the
increase or combination, as the case may be.
11.4 Reorganization, Reclassification, Consolidation, Merger or Sale.
VWC and WWC will not effect any Organic Change unless prior to the consummation
thereof, the successor entity (the "Successor Entity") (if other than VWC or
WWC) resulting from the Organic Change assumes by written instrument (in form
and substance reasonably satisfactory to Cook Inlet) the obligation to deliver
to Cook Inlet such cash, shares of stock, securities or assets or other
consideration of Cook Inlet may be entitled to acquire hereunder. In addition,
prior to such Organic Change, VWC or WWC, as the case may be, shall make
appropriate provisions (in form and substance reasonably satisfactory to Cook
Inlet) to insure that Cook Inlet continues to have the benefit of Sections 11.3
and 11.4 hereunder with respect to increases or combinations of the Successor
Entity's securities or Organic Changes of such Successor Entity. In particular,
VWC and WWC shall insure that at the Exchange Date Cook Inlet shall have the
right to exchange its Interest for securities, assets or other consideration
comparable to that which Cook Inlet would have received if Cook Inlet had
effected the Exchange immediately prior to such Organic Change in accordance
with the following:
11.4.1 In the event that through the Organic Change the Successor
Entity provides VWC or WWC shareholders with cash consideration, then the
Successor Entity shall, upon a subsequent Exchange, pay to Cook Inlet that
amount of cash Cook Inlet would have received if it had been a holder of VWC or
WWC Common Stock, as the case may be, at the time of the Organic Change (the
"Cash Consideration"), plus such amount of cash as is necessary to insure that
Cook Inlet receives, upon such Exchange, interest on such amount at an annual
rate equal to the yield, as of the date of the Organic Change, on the U.S.
Treasury security with a maturity date as close as practicable to the Exchange
Date plus 500 basis points (the "Guaranteed Rate") from the date of the Organic
Change to the date of the Exchange; provided, that the Successor Entity shall
establish and maintain, at its sole cost and expense, a letter of credit from a
reputable financial institution on terms, each reasonably satisfactory to Cook
Inlet (including without limitation Cook Inlet's ability to draw on such letter
of credit upon delivery of appropriate notice to such financial institution) to
secure the Successor Entity's obligation under this Section 11.4.1 to Cook Inlet
upon any such Exchange, which letter of credit shall remain outstanding from the
date of such Organic Change through the close of the Exchange Period. For
example, if in the event of a VWC Organic Change, the Successor Entity provides
VWC shareholders with XX Dollars of cash for every one (1) share of VWC Common
Stock, then for each $65,000 of cash invested by Cook Inlet in the Company
pursuant to Exhibit A on or before the Exchange Date, Cook Inlet shall receive
XX Dollars upon an Exchange, plus interest accumulated on XX Dollars at the
Guaranteed Rate from the date of the Organic Change to the Exchange Date.
11.4.2 In the event that through the Organic Change the Successor
Entity
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provides VWC or WWC shareholders with shares of stock, securities, assets or
other non-cash consideration ("Non-cash Consideration") then the Successor
Entity shall reserve for Cook Inlet such Non-cash Consideration in the amount
that Cook Inlet would have received if it had been a holder of VWC or WWC Common
Stock, as the case may be, at the time of the Organic Change. During the six
(6)-month period following the date of the Organic Change and during the thirty
(30)-day period beginning on the date that is two (2) years prior to the
Exchange Date, Cook Inlet may elect (a "Cash Election") to cause Successor
Entity, in lieu of reserving such Non-cash Consideration, to pay to Cook Inlet,
upon a subsequent Exchange, an amount of cash equal to the fair market value of
such Non-cash Consideration as of the date of the Cash Election, plus such
amount of cash as is necessary to insure that Cook Inlet receives, on the date
of such an Exchange, interest on such amount at the Guaranteed Rate from the
date of the Cash Election to the date of such Exchange; provided, that the
Successor shall establish and maintain, at its sole cost and expense, a letter
of credit from a reputable financial institution on terms, each reasonably
satisfactory to Cook Inlet (including without limitation Cook Inlet's ability to
draw on such letter of credit upon delivery of appropriate notice to such
financial institution) to secure the Successor Entity's obligation under this
Section 11.4.2, which letter of credit shall remain outstanding from the date of
such Organic Change through the close of the Exchange Period. For example, if in
the event of a VWC Organic Change the Successor Entity provides VWC shareholders
with two (2) shares of Successor Entity stock for every one (1) share of VWC
stock, then for each $65,000 of cash invested by Cook Inlet in the Company
pursuant to Exhibit A on or before the Exchange Date, Cook Inlet shall have the
right to receive two (2) shares of Successor Entity stock upon an Exchange with
the option of requiring the Successor Entity to establish a letter of credit in
accordance with the provisions hereof. Notwithstanding the foregoing, Cook Inlet
shall not have a Cash Election with respect to Non-Cash Consideration received
in certain Organic Changes described in a letter agreement between Cook Inlet
and VWC dated as of this Agreement (the "Listed Transactions") and, in addition,
with respect to the other Organic Changes specified in such letter agreement
(the "Approved Acquisitions"), provided that with respect to the Approved
Acquisitions, following such an Organic Change and for a period of one (1) year
thereafter (a) a majority of the Board of Directors of the Successor Entity is
comprised of individuals who were directors of VWC prior to such Organic Change
or are otherwise reasonably acceptable to Cook Inlet, and (b) John Stanton is
the Chairman of the Board of Directors of the Successor Entity.
11.4.3 In the event that through the Organic Change the Successor
Entity provides VWC or WWC shareholders with a combination of Non-cash
Consideration and Non-cash Consideration, Section 11.4.1 shall apply to that
portion of consideration that is Cash Consideration, and Section 11.4.2 shall
apply to that portion of consideration that is Non-cash Consideration.
11.4.4 In the event the Successor Entity is a Designated Entity
(as defined by the FCC Rules) then the Exchange Date, and Cook Inlet's Exchange
Rights pursuant thereto under this Agreement and in particular this Article 11,
shall be accelerated to the later of (i) that date on which the Organic Change
becomes effective and (ii) five (5) business days following the date
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VWC has provided to Cook Inlet (a) notice that the Exchange Date is to be
accelerated in accordance with this provision and (b) an opinion of counsel,
which counsel and opinion shall be satisfactory to Cook Inlet, opining that the
Successor Entity is a Designated Entity under the FCC Rules.
11.5 Recapture of Bidding Credits and Acceleration of FCC Obligations.
In the event that an Exchange results in either (a) the recapture by the FCC of
any bidding credits or other discounts received by the Company with respect to
the award of Licenses in connection with the Auction, or (b) the acceleration of
any obligation or debt owed to the FCC in connection with the Auction, the
Company solely shall be liable to the FCC for such amounts.
11.6 Representations and Warranties. WWC and VWC jointly and severally
represent and warrants to and covenant with Cook Inlet as follows:
11.6.1 VWC is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. VWC has all requisite corporate
power and authority and any necessary governmental approval to own, lease and
operate its properties and to carry on its business as now being conducted or as
proposed to be conducted following the Spin-Off (as defined in Section 11.6.4
below). VWC is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary. VWC has provided to Cook Inlet accurate
and complete copies of its Certificate of Incorporation and Bylaws as currently
in effect.
11.6.2 As of the date hereof and at the date of the Spin-Off, the
authorized capital stock of VWC consists of 50,000 shares of VWC Common Stock,
$0.001 par value, of which 12,484 shares are currently issued and outstanding,
and 10,000 shares of VoiceStream Preferred Stock, $0.001 par value, of which
none is currently issued and outstanding. WWC owns 10,000 shares of VWC Common
Stock and Hutchinson Telecommunications PCS (USA) Limited owns 2,484 shares of
VWC Common Stock. No other capital stock of VWC Common Stock are duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
or similar rights. As of the date hereof and at the date of the Spin-Off, there
are no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements of any kind relating to any of
the VWC Common Stock, and there is no authorized or outstanding security of any
kind convertible into or exchangeable for any such VWC Common Stock.
11.6.3 VWC has made available to Cook Inlet true and complete
copies of its most recent audited financial statements and unaudited interim
financial statements (the "Historical Financial Statements"), copies of which
are attached hereto as Exhibit A. The Historical Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and present fairly, in all material respects, the consolidated financial
position of VWC as at the dates thereof and the results of its operations and
cash flows for the periods then
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ended subject, in the case of unaudited interim financial statements, to normal
year-end audit adjustments. Except as disclosed in writing to Cook Inlet, since
December 31, 1997, VWC has conducted and will conduct its business only in the
ordinary course and in a manner consistent with past practice and since such
date, there has not been (i) any material adverse effect on the business,
assets, financial condition, liabilities or results of operations of VWC, (ii)
any material damage or loss to any material asset or property not covered by
insurance, (iii) any change in accounting principles or practices, (iv) any
revaluation of any material assets or liabilities other than in the ordinary
course of business or (v) any entry by VWC into any commitment or transactions
material to VWC (other than commitments or transactions entered into in the
ordinary course of business).
11.6.4 WWC currently intends to make a distribution of all of the
shares of VWC stock owned by it to the holders of its Class A Common Stock and
Class B Common Stock (the "Spin-Off"), subject to approval of the Board of
Directors of WWC and other applicable approvals. VWC currently owns, and at the
time of the Spin-Off will own, materially all of the assets, contracts, licenses
and rights relating to the PCS business owned by WWC and its subsidiaries and
affiliates.
11.7 Restriction on Sale of VWC Securities. At any time prior to the
Spin-Off, VWC may not issue to its existing shareholders or its or their
Affiliates any shares of its capital stock or securities convertible or
exchangeable for shares of its capital stock for less than $100,000 per share,
in the case of VWC Common Stock, or for less than fair market value (measured
taking into account a value of $100,000 per share for VWC Common Stock) for such
other capital stock or securities.
11.8 Inability to Provide an Exchange. Provided that Cook Inlet has
performed all of its obligations under this Article and this Agreement, it shall
be a breach of this Agreement by VoiceStream, VWC and, only to the extent
Section 11.2.2 is applicable, WWC, if Cook Inlet is unable to effect an
Exchange, in accordance with the terms and conditions of this Article 11 and
this Agreement. None of VoiceStream, VWC or WWC shall take any action or engage
in any transaction that might reasonably be deemed to have the effect of
frustrating Cook Inlet's right to consummate the Exchange upon the terms set
forth in this Article XI.
ARTICLE XII
GENERAL PROVISIONS
12.1 Amendment of Agreement.
12.1.1 Except as otherwise provided in this Section 12.1, this
Agreement may be amended, in whole or in part, only with the unanimous written
consent of the Class A Member and the Class B Member.
12.1.2 The written consent of each Member adversely affected
thereby shall be
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required for any amendment which would:
12.1.2.1 increase the obligation of such Member to make
any contribution to the capital of the Company,
12.1.2.2 reduce the Capital Account of such Member other
than in accordance with Article IV,
12.1.2.3 change the provisions of Articles III, IV, or
XIII to alter any such Member's rights with respect to allocation of Profit and
Loss or with respect to distributions.
12.1.3 The unanimous written consent of all of the Members shall
be required for any amendment that would cause the Company to cease to be a
limited liability company under and pursuant to the Act or that would amend the
provisions of this Section 12.1 for amending this Agreement.
12.1.4 The Manager may without the consent of any other Members:
12.1.4.1 amend Exhibit A to reflect any change required to
be made therein pursuant to this Agreement;
12.1.4.2 restate this Agreement together with any
amendments hereto which have been duly adopted in accordance herewith, to
incorporate such amendments in a single, integrated document;
12.1.4.3 amend this Agreement (other than with respect to
the matters set forth in Sections 12.1.2 and 12.1.3) to effect compliance with
any applicable law or regulation;
12.1.4.4 amend this Agreement to increase the
representations, duties or obligations of the Manager or to surrender any right
or power granted to the Manager herein; and
12.1.4.5 amend this Agreement to correct any printing,
stenographic or clerical errors or omissions, in order that this Agreement shall
accurately reflect the agreement among the Members hereto.
12.1.5 The Manager shall give prior written notice of any
proposed amendment to this Agreement to all of the Members, which notice shall
set forth the text of the proposed amendment.
12.2 Special Power-of-Attorney.
12.2.1 Each Member hereby irrevocably makes, constitutes and
appoints the Manager, acting singly, with full power of substitution, the true
and lawful representative and attorney-in-fact of, and in the name, place and
stead of such Member, with the power from time
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to time to make, execute, sign, acknowledge, swear to, verify, deliver, record,
file and or publish:
12.2.1.1 any amendment to this Agreement which complies
with the provisions of this Agreement (including the provisions of Section
12.1);
12.2.1.2 the Certificate of Formation and any amendment
thereof required because this Agreement is amended, including, without
limitation, an amendment to effectuate any change in the membership of the
Company or in the Capital Contributions of the Members; and
12.2.1.3 all such other instruments, documents and
certificates which, in the opinion of legal counsel to the Company, may from
time to time be required by the laws of the United States of America, the state
of Delaware, or any other jurisdiction in which the Company shall determine to
do business, or any political subdivision or agency thereof, or which such legal
counsel may deem necessary or appropriate to effectuate, implement and continue
the valid and subsisting existence and business of the Company as a limited
liability company.
12.2.2 Each Member is aware that the terms of this Agreement
permit certain amendments to this Agreement to be effected and certain other
actions to be taken or omitted by or with respect to the Company without its
consent. If an amendment of the Certificate of Formation or this Agreement or
any action by or with respect to the Company is taken by the Manager in the
manner contemplated by this Agreement, each Member agrees that, notwithstanding
any objection that such Member may assert with respect to such action, the
Manager is authorized and empowered, with full power of substitution, to
exercise the authority granted above in any manner which may be necessary or
appropriate to permit such amendment to be made or action lawfully taken or
omitted. Each Member is fully aware that each Member will rely on the
effectiveness of this special power-of-attorney with a view to the orderly
administration of the affairs of the Company. This power-of-attorney is a
special power-of-attorney and is coupled with an interest in favor of the
Manager and as such:
12.2.2.1 shall be irrevocable and continue in full force
and effect notwithstanding the subsequent death or incapacity of any party
granting this power-of-attorney, regardless of whether the Company or the
Manager shall have had notice thereof; and
12.2.2.2 shall survive the delivery of an assignment by a
Member of the whole or any portion of its Interest in the Company, except that
where the assignee thereof has been approved by the Manager for admission to the
Company as a substituted Member pursuant to Article VI, this power-of-attorney
given by the assignor shall survive the delivery of such assignment for the sole
purpose of enabling the Manager to execute, acknowledge and file any instrument
necessary to effect such substitution.
12.3 Notices. Notices which may or are required to be given under this
Agreement by any party to another shall be given by hand delivery, or by
registered or certified mail, return receipt requested by reputable overnight
delivery service or by facsimile. Notices shall be
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addressed to the respective parties hereto at their addresses as set forth on
Exhibit A or to such other addresses as may be designated by any party hereto by
notice addressed to the other parties. Notices shall be deemed to have been
given when delivered by hand, on the date indicated as the date of receipt on
the return receipt, two (2) business days after being sent by reputable
overnight delivery service, and when acknowledged if sent by facsimile.
12.4 Agreement Binding Upon Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, but the rights and obligations of the Manager hereunder
shall not be assignable, transferable or delegable except as provided in Section
5.1.5 and Article VI, and any attempted assignment, transfer or delegation
thereof which is not made pursuant to the terms of Section 5.1.5 and Article VI
shall be void.
12.5 Governing Law. This Agreement, and the rights of the Members
hereunder, shall be governed by and construed in accordance with the laws of the
state of Delaware, without regard to the conflict of laws rule thereof.
12.6 Consents. Any and all consents, agreements or approvals provided
for or permitted by this Agreement shall be in writing and a signed copy thereof
shall be filed and kept with the books of the Company.
12.7 Legends. If certificates for any Interest or Interests of the
Company are issued that evidence an Interest in the Company, each such
certificate shall bear such legends as may be required by applicable federal and
state laws, or as may be deemed necessary or appropriate by the Manager to
reflect restrictions upon transfer contemplated herein.
12.8 Entire Agreement. This Agreement represents the entire agreement
among the parties with respect to the transactions contemplated herein and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may be amended only in accordance with Section 12.1. The captions are
for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
12.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original hereof.
12.10 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement; provided that the parties shall, in good faith, negotiate
fair market-based compensation to any party which loses rights hereunder
pursuant to such interpretation.
12.11 Intended Compliance; Savings Clause. Notwithstanding anything in
this Agreement to the contrary, if the possession or exercise of any right of
the parties set forth in this
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Agreement would cause the Company to violate any applicable laws, including,
without limitation, any FCC Rules, as in effect from time to time, or result in
an adverse regulatory action or ruling by the FCC, such right shall be deemed
not to exist; provided that the Members shall, in good faith, negotiate fair
market-based compensation to any party which loses any right hereunder pursuant
to such right being deemed not to exist.
12.12 Liability of Manager Limited to Assets. Under no circumstances
will any director, officer, shareholder, member, manager, partner, employee,
agent or Affiliate of the Manager have any personal responsibility for any
liability or obligation of the Manager (whether on a theory of alter ego,
piercing the corporate veil, or otherwise), and any recourse permitted under
this Agreement or otherwise of the Members, any former Member or the Company
against a Manager will be limited to the assets of the Manager as they may exist
from time to time.
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<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
COOK INLET GSM, INC.
--------------------------------------
By:
WESTERN PCS BTA I CORPORATION
--------------------------------------
By:
VOICESTREAM WIRELESS CORPORATION
--------------------------------------
By:
WESTERN WIRELESS CORPORATION
--------------------------------------
By:
<PAGE> 59
EXHIBIT A
MEMBERS
OF
COOK INLET/VOICESTREAM PCS, LLC
FEBRUARY 11, 1999
<TABLE>
<CAPTION>
MAXIMUM REQUIRED
MEMBER/ADDRESS CAPITAL CONTRIBUTION AMOUNT PERCENTAGE
- -------------- --------------------------- ----------
<S> <C> <C>
CLASS A MEMBER
COOK INLET
GSM, INC. $35,000,000* 50.1%
2525 "C" Street
Anchorage, Alaska 99503
Attn: Vice President
Telephone: (907) 263-5149
Fax: (907) 263-5181
Taxpayer ID Number:
CLASS B MEMBER
WESTERN PCS BTA I
CORPORATION $50,000,000* 49.9%
3650 131st Avenue SE
Bellevue, WA 98006
Attention: General Counsel
Telephone: (425) 586-8044
Fax: (425) 586-8080
Taxpayer ID Number:
</TABLE>
* Capital Contributions shall be made in accordance with the following:
1. The first capital call shall be for $50,000,000, and each Member shall
make a $25,000,000 capital contribution in response to such capital
call.
2. If the Company determines that a second capital call is required, the
second capital call shall be for $20,000,000, and each Member shall make
a $10,000,000 capital contribution in response to such capital call.
3. If the Company determines that a third capital call is required, the
Class B Member shall
<PAGE> 60
make a capital contribution in the amount of not more than $15,000,000
in response to such capital call.
4. In the event that capital contributions made by the Members exceed 110%
of the cost of the acquired Licenses, the Manager shall return to the
Members such capital contributions in excess of 110% of the cost of the
acquired Licenses. The return of capital as provided in the foregoing
sentence shall be made to each Member as follows:
(a) in the event that total capital calls have exceeded $70,000,000, the
Manager shall return capital to the Class B Member until the total of
all remaining capital contributed equals $70,000,000
(b) for the remainder of any capital to be returned to the Members, the
Manager shall return capital to each Member in the same proportion as
each Member contributed to the total capital contributions.
Any return of capital to the Members pursuant to this paragraph shall
not be considered a distribution in accordance with Article IV of the
Agreement.
5. The amount of the initial contribution, or so much thereof as is made
from time to time, of each Member shall be recorded by the Manager as a
contribution to the capital of the Company at the time the same is made,
but no capital contribution shall in any way affect the Member's
Interest.
6. Each Member shall contribute capital to the Company at the times and in
such amounts as may be called for by the Manager (subject to the
provisions of this Exhibit A). In no event shall the Manager give less
than three (3) business days' notice of a capital call.
<PAGE> 61
EXHIBIT B
CERTIFICATE OF FORMATION
OF
COOK INLET/VOICESTREAM PCS, LLC
<PAGE> 62
EXHIBIT C
INITIAL BUDGET
<PAGE> 63
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
