<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1999
REGISTRATION NO. 333-78459
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NEXTEL PARTNERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4813 91-1930918
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
---------------
4500 CARILLON POINT, KIRKLAND, WASHINGTON 98033, (425) 828-1713
(Address, including ZIP code, and telephone number, including area code, of
the Registrant's principal executive offices)
---------------
DONALD MANNING, ESQ.
4500 CARILLON POINT
KIRKLAND, WASHINGTON 98033
(425) 828-1713
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPY TO:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
(212) 728-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 30, 1999.
[NEXTEL PARTNERS INC LOGO OMITTED]
EXCHANGE OFFER FOR
14% SENIOR DISCOUNT NOTES DUE 2009
- --------------------------------------------------------------------------------
This is an offer to exchange the outstanding, unregistered Nextel Partners
14% Senior Discount Notes you now hold for new, substantially identical 14%
Senior Discount Notes that will be free of the transfer restrictions that apply
to the old notes. This offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we extend it.
The new notes will not trade on any established exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF MATTERS THAT
PARTICIPANTS IN THE EXCHANGE OFFER SHOULD CONSIDER.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a criminal offense.
, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
Nextel Partners ......................... 1
Risk Factors ............................ 10
Use of Proceeds ......................... 17
Capitalization .......................... 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............ 19
Where You Can Find More
Information .......................... 30
Delivery of Prospectus .................. 30
Business ................................ 31
Regulation .............................. 51
Management .............................. 55
Certain Relationships and Related
Transactions ......................... 60
PAGE
Ownership of Capital Stock and
Principal Stockholders ............... 68
The Exchange Offer ...................... 72
Description of the Notes ................ 82
Book-Entry, Delivery and Form ........... 119
Description of Credit Facility .......... 121
Material United States Federal
Income Tax Consequences .............. 123
Plan of Distribution .................... 126
Legal Matters ........................... 127
Experts ................................. 127
Index to Consolidated Financial
Statements ........................... F-1
Index to Pro Forma Unaudited
Consolidated Financial
Statements ........................... P-1
i
<PAGE>
NEXTEL PARTNERS
Nextel Partners provides, or is preparing to provide, digital wireless
communications services in mid-sized and smaller markets throughout the United
States. We are the only wireless service provider licensed to use the Nextel
(Registered Trademark) brand name in these markets, and offer the same package
of digital wireless communications services that Nextel Communications uses in
its own markets.
We are building our systems to be operationally seamless with those of
Nextel, so that customers of each company are able to roam within and between
the two companies' systems with equal ease and at no additional charge.
Together, our facilities and those of Nextel will operate as a single,
nationwide wireless communications system that we call the Digital Mobile
Network.
We currently offer three services accessible through a single device:
o cellular telephone service;
o the Nextel Direct Connect(SM) feature that allows users to contact
co-workers instantly, one-to-one or on a conference call
o the ability to receive pages and short text messages.
We have rights to use the Nextel brand name and radio frequencies in our
territory which includes markets where 33 million people live or work and will
use the same Motorola iDEN(TM) technology Nextel uses in our network. We also
have operating agreements with Nextel that give us access to facilities which
monitor the network, including the switches that direct calls to their
destinations, customer activation, billing, customer care and other back-office
support services, technology improvements and employee training at prices based
on Nextel's costs.
We currently operate in five markets in Hawaii and upstate New York, where
4.5 million people live or work. We expect to launch service in four additional
markets by the end of 1999, and expect to serve a total of 39 markets where
22.4 million people live or work by the end of 2001.
On January 29, 1999, we raised, or had irrevocable commitments for, $989.4
million in debt and equity capital, which we believe will be sufficient to fund
our network build-out plans and anticipated operating losses through 2003.
Our principal executive offices are located at 4500 Carillon Point,
Kirkland, Washington 98033. Our telephone number is (425) 828-1713.
BUSINESS STRATEGY
Our current strategy for success in the competitive market for wireless
communications services includes the following key elements:
o concentrating our sales efforts on mobile workers, including personnel
in the transportation, delivery, real property and facilities
management, construction and building trades, and landscaping and
other service sectors;
o adopting pricing strategies which we believe will prove both
profitable and attractive to customers;
o developing efficient, uniform operations to support our customer
activation, billing and customer care activities; and
o developing relationships with vendors and distributors similar to
those agreed to with Nextel.
1
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount at maturity of Nextel Partners 14% Senior
Discount Notes due 2009 which have been
registered under the Securities Act for each
$1,000 principal amount at maturity of Nextel
Partners outstanding 14% Senior Discount Notes
due 2009 which were issued on January 29, 1999 in
a private offering. In order to be exchanged, an
old note must be properly tendered and accepted.
We will exchange all notes validly tendered and
not validly withdrawn. There is $800.0 million
aggregate principal amount at maturity of old
notes outstanding.
Expiration and
Exchange Dates.............. This offer will expire at 5:00 p.m., New York
City time, on , 1999 unless we extend it,
and we will consummate the exchange on the next
business day.
Registration Rights......... You have the right to exchange the old notes
that you now hold for new notes with
substantially identical terms. This exchange
offer is intended to satisfy these rights. After
the exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your notes.
Conditions.................. This offer is subject to various conditions. We
reserve the right to terminate or amend the offer
at any time before the expiration date if
specified events occur.
Withdrawal Rights........... You may withdraw your tender of old notes at
any time before the offer expires.
Material Federal Income Tax
Consequences of
the Exchange................. Willkie Farr & Gallagher has acted as our
counsel in rendering an opinion as to all
material federal income tax consequences of the
exchange. It is their opinion that the exchange
will not be a taxable event for United States
federal income tax purposes and thus, you will
not recognize any taxable gain or loss or any
interest income as a result of such exchange.
Resale Without Further
Registration............... We believe that the new notes may be offered
for resale, resold and otherwise transferred by
you without compliance with the registration and
prospectus delivery provisions of the Securities
Act so long as the following statements are true:
2
<PAGE>
o you acquire the new notes issued in the
exchange offer in the ordinary course of your
business;
o you are not one of our "affiliates," as
defined in Rule 405 of the Securities Act of
1933, as amended; and
o you are not participating, and do not intend
to participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the new notes issued
to you in the exchange offer.
By tendering your notes as described below, you
will be making representations to this effect.
Transfer Restrictions on
New Notes.................. You may incur liability under the Securities
Act if:
(1) any of the representations listed above
are not true; and
(2) you transfer any new note issued to you in
the exchange offer without:
o delivering a prospectus meeting the
requirements of the Securities Act, or
o qualifying for an exemption under the
Securities Act's requirements to
register your new notes.
We do not assume or indemnify you against any
such liability. Each broker-dealer that is
issued new notes for its own account in exchange
for old notes that were acquired as a result of
market-making or other trading activities, must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of the new notes.
A broker-dealer may use this prospectus for an
offer to resell, a resale or other transfer of
the new notes issued to it in the exchange
offer.
Procedures for Tendering
Old Notes.................. Each holder of old notes who wishes to accept
the exchange offer must:
o complete, sign and date the accompanying
letter of transmittal, or a facsimile
thereof; or
o arrange for The Depository Trust Company to
transmit certain required information to the
exchange agent in connection with a
book-entry transfer.
3
<PAGE>
You must mail or otherwise deliver such
documentation and your old notes to The Bank of
New York, the exchange agent, at the address set
forth under "The Exchange Offer-- Exchange
Agent."
Failure to Exchange Will
Affect You Adversely....... If you are eligible to participate in the
exchange offer and you do not tender your old
notes, you will not have any further registration
or exchange rights and your old notes will
continue to be subject to some restrictions on
transfer. Accordingly, the liquidity of the old
notes could be adversely affected.
Special Procedures for
Beneficial Owners.......... If you beneficially own old notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender your old notes in the exchange offer, you
should contact the registered holder promptly and
instruct it to tender on your behalf. If you wish
to tender on your own behalf, you must, before
completing and executing the letter of
transmittal for the exchange offer and delivering
your old notes, either arrange to have your old
notes registered in your name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time.
Guaranteed Delivery
Procedures.................. You may comply with the procedures described in
this prospectus under the heading "The Exchange
Offer--Guaranteed Delivery Procedures" if you
wish to tender your old notes and:
o time will not permit your required documents
to reach the exchange agent by the expiration
date of the exchange offer,
o you cannot complete the procedure for
book-entry transfer on time, or
o your old notes are not immediately
available.
4
<PAGE>
THE NEW NOTES
The new notes have the same financial terms and covenants as the old
notes, which are as follows:
Issuer...................... Nextel Partners, Inc.
Maturity.................... February 1, 2009.
Accreted Value
and Interest................ The aggregate accreted value of the notes will
increase from $406.4 million at issuance on
January 29, 1999 at a rate of 14% per year,
compounded semi-annually, to their aggregate
principal amount of $800 million at February 1,
2004.
Beginning on and after February 1, 2004, cash
interest will accrue at the rate of 14% per
year, payable semi-annually in arrears on
February 1 and August 1 of each year, beginning
on August 1, 2004.
Ranking..................... The new notes are:
(1) senior unsecured indebtedness of Nextel
Partners, ranking equally in right of
payment with all existing and future senior
unsecured obligations of Nextel Partners;
(2) senior in right of payment to all existing
and future subordinated obligations of
Nextel Partners; and
(3) effectively subordinated to all secured
obligations of Nextel Partners to the
extent of the value of the assets securing
those obligations.
Our operations are conducted through our
subsidiaries, effectively subordinating the new
notes to all existing and future obligations of
our subsidiaries, including the borrowings under
the credit facility and trade payables of our
subsidiaries. At March 31, 1999, our subsidiaries
had $193.8 million in outstanding liabilities,
including trade payables, of which $175 million
were secured obligations.
Optional Redemption......... On or after February 1, 2004, we will have the
right to redeem any or all of the new notes at
their principal amount at maturity plus accrued
interest and a premium initially equal to 7.0%
and declining annually after that date.
In addition, before February 1, 2002, we have
the right to use the net cash proceeds of
qualifying offerings of stock to redeem up to
35% of the sum of the issue price of the old
notes plus any principal or interest that shall
5
<PAGE>
have accrued from the issue date of the old
notes at a redemption price equal to 114% of
their accreted value. For more information, see
"Description of the Notes--Optional Redemption."
Material Federal Income Tax
Consequences of Holding
the Notes.................. Willkie Farr & Gallagher has acted as our
counsel in rendering an opinion as to all
material federal income tax consequences
of holding the notes. It is their opinion that
the accretion of the notes from their original
issue price to their principal amount will
produce taxable ordinary interest income in the
amount of the accretion for holders of the notes
during the accretion period. The Internal
Revenue Code calls this original issue discount.
For more information, see "Material United
States Federal Income Tax Consequences."
Change of Control........... If an event treated as our change of control
occurs, we must make an offer to purchase any and
all of the new notes then outstanding from you at
a cash purchase price equal to 101% of the
accreted value of the new notes to the purchase
date (if prior to February 1, 2004) or 101% of
the aggregate principal amount of the new notes,
plus accrued and unpaid interest, if any, to the
date of purchase (if on or after February 1,
2004). For a summary of what constitutes a change
of control, see "Description of the
Notes--Covenants--Change of Control."
Covenants................... The indenture under which the old notes have
been and the new notes are being issued contains
covenants for your benefit which, among other
things and subject to certain exceptions,
restrict our ability and the ability of our
subsidiaries to:
o incur indebtedness;
o make certain payments;
o enter into certain transactions, including
transactions with affiliates;
o engage in any business other than
telecommunications;
o create liens;
o pay dividends or make other distributions;
o issue or sell shares of capital stock of
certain subsidiaries; and
6
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o consolidate, merge or sell all or
substantially all of our assets or the assets
of our subsidiaries.
The indenture allows modification and amendment
of these and other covenants by a vote of
holders of a
majority in aggregate principal amount of the
notes, subject to exceptions described in the
indenture. Also, holders of a majority in
aggregate principal amount of the notes may
waive our compliance with certain other
restrictive covenants in the indenture.
For additional information regarding the notes, see "Description of the
Notes" and "Material United States Federal Income Tax Consequences."
RISK FACTORS
See "Risk Factors" immediately following this summary for a discussion of
risks relating to the new notes, all of which apply to the old notes as well.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION AND OPERATING DATA
(DOLLARS IN THOUSANDS)
We have summarized below our historical consolidated financial data as of
March 31, 1999 and December 31, 1998 and for the three month periods ended
March 31, 1999 and 1998 and for the year ended December 31, 1998 and the
unaudited pro forma financial and other data for the three month period ended
March 31, 1999 and the year ended December 31, 1998. The pro forma financial
information gives effect to the partial issuance of senior redeemable discount
notes with proceeds of $130.9 million and the application of these proceeds for
the return of capital dividend payment made to Nextel on January 29, 1999 as if
the payment had occurred on January 1, 1999 and January 1, 1998, respectively.
We believe the unaudited historical interim consolidated financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, which consist only of normal recurring
adjustments necessary for the fair presentation of our financial position and
results of operations. The pro forma operating results shown below are not
necessarily indicative of what actual results would have been for the three
month period ended March 31, 1999 and for the full year ended December 31,
1998. The historical operating data presented below are derived from our
records.
Please read this table together with Management's Discussion and Analysis
of Financial Condition and Results of Operations, our audited consolidated
financial statements and the notes thereto and the pro forma unaudited
financial statements and accompanying discussion and notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE
MONTH PERIODS ENDED MARCH 31,
---------------------------------------------
1999
1999 AS ADJUSTED FOR 1998
ACTUAL THE OFFERING ACTUAL
------------- ----------------- -------------
CONSOLIDATED STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating revenues:
Service revenues ......................................... $ 3,493 $ 3,493 $ 153
Equipment revenues ....................................... 811 811 --
--------- --------- ---------
Total revenues ............................................ 4,304 4,304 153
--------- --------- ---------
Operating expenses:
Cost of service revenues ................................. 3,106 3,106 301
Cost of equipment revenues ............................... 1,718 1,718 --
Selling, general and administrative ...................... 5,231 5,231 713
Deferred compensation .................................... 641 641 --
Depreciation and amortization ............................ 2,515 2,515 229
--------- --------- ---------
Total operating expenses .................................. 13,211 13,211 1,243
--------- --------- ---------
Loss from operations ...................................... (8,907) (8,907) (1,090)
Interest expense .......................................... 12,529 14,114 --
Interest income ........................................... 4,013 4,013 --
--------- --------- ---------
Loss before income tax provision .......................... (17,423) (19,008) (1,090)
Income tax provision ...................................... -- -- --
--------- --------- ---------
Net loss .................................................. $ (17,423) $ (19,008) $ (1,090)
========= ========= =========
OTHER DATA:
Ratio of earnings to fixed charges (1) .................... $ -- $ --
Working capital (2) ....................................... $ 463,446
EBITDA (3) ................................................ $ (5,751) $ (5,751) $ (861)
Capital expenditures (4) .................................. $ 7,385 $ 7,385 $ 45,476
Cash flows provided by (used in) operating activities ..... $ 5,727 $ 5,727 $ 473
Cash flows used in investing activities ................... $ (9,585) $ (9,585) $ (45,476)
Cash flows provided by financing activities ............... $ 304,654 $ 304,654 $ 45,003
<CAPTION>
AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1998
-----------------------------------
AS ADJUSTED FOR THE
ACTUAL OFFERING
-------------- --------------------
CONSOLIDATED STATEMENT OF OPERATIONS DATA: (UNAUDITED)
<S> <C> <C>
Operating revenues:
Service revenues ......................................... $ 3,745 $ 3,745
Equipment revenues ....................................... 1,564 1,564
---------- ----------
Total revenues ............................................ 5,309 5,309
---------- ----------
Operating expenses:
Cost of service revenues ................................. 6,108 6,108
Cost of equipment revenues ............................... 2,935 2,935
Selling, general and administrative ...................... 13,531 13,531
Deferred compensation .................................... 447 447
Depreciation and amortization ............................ 4,586 4,586
---------- ----------
Total operating expenses .................................. 27,607 27,607
---------- ----------
Loss from operations ...................................... (22,298) (22,298)
Interest expense .......................................... -- 20,020
Interest income ........................................... -- --
---------- ----------
Loss before income tax provision .......................... (22,298) (42,318)
Income tax provision ...................................... -- --
---------- ----------
Net loss .................................................. $ (22,298) $ (42,318)
========== ==========
OTHER DATA:
Ratio of earnings to fixed charges (1) .................... $ -- $ --
Working capital (2) ....................................... $ (5,755)
EBITDA (3) ................................................ $ (17,265) $ (17,265)
Capital expenditures (4) .................................. $ 104,334 $ 104,334
Cash flows provided by (used in) operating activities ..... $ (14,791) $ (14,791)
Cash flows used in investing activities ................... $ (104,334) $ (104,334)
Cash flows provided by financing activities ............... $ 119,141 $ 119,141
</TABLE>
8
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<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 1999 DECEMBER 31, 1998
ACTUAL ACTUAL
---------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and restricted cash (5) ......... $475,812 $ 16
Current assets ............................................ $482,207 $ 3,240
Plant, property and equipment, net ........................ $112,950 $107,948
FCC operating licenses, net ............................... $133,048 $133,180
Non current assets ........................................ $155,391 $136,478
Total assets .............................................. $750,548 $247,666
Current liabilities ....................................... $ 18,761 $ 8,995
Long term debt ............................................ $591,178 $ --
Total shareholders' equity ................................ $140,609 $238,671
</TABLE>
- ----------
(1) "Earnings" is defined as earnings before extraordinary items and
accounting changes, interest expense, amortization of deferred financing
costs, and taxes. Fixed charges consist of interest expense, amortization
of deferred financing costs and a portion of rent expense under operating
leases representative of interest. For the year ended December 31, 1998,
earnings were insufficient to cover fixed charges by $28.6 million. On a
pro forma basis for the same period, earnings would have been
insufficient to cover fixed charges by $48.6 million. For the three month
period ended March 31, 1999, earnings were insufficient to cover fixed
charges by $18.2 million. On a pro forma basis for the three month period
ended March 31, 1999, earnings would have been insufficient to cover
fixed charges by $19.8 million. The difference between all amounts
disclosed above and net loss represents interest capitalized by us.
(2) Working capital is defined as the excess (deficiency) of current assets
over current liabilities.
(3) EBITDA represents net loss before interest expense, interest income,
depreciation, amortization and deferred compensation expense. EBITDA is
commonly used to analyze companies on the basis of operating performance,
leverage and liquidity. While EBITDA should not be construed as a
substitute for operating income or a better measure of liquidity than
cash flow from operating activities, which are determined in accordance
with generally accepted accounting principles, we have presented EBITDA
to provide additional information with respect to our ability to meet
future debt service, capital expenditure and working capital
requirements. EBITDA is not a measure determined under generally accepted
accounting principles. Also, EBITDA as calculated above may not be
comparable to similarly titled measures reported by other companies.
(4) Capital expenditures are cash outlays during the period related to
depreciable property, plant and equipment. Capital expenditures are
required to purchase network equipment, such as switching and radio
transmission equipment. Capital expenditures also include purchases of
other equipment used for administrative purposes, such as office
equipment and computer and telephone systems.
(5) Restricted cash reflects the cash collateral account maintained under the
credit facility equal to borrowings outstanding, until the FCC has
approved the transfer applications.
9
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RISK FACTORS
Before tendering the old notes in the exchange offer, you should carefully
consider the following risk factors. The new notes, like the old notes, entail
the following risks:
WE NEED TO BUILD SUBSTANTIAL NETWORK FACILITIES AND DEVELOP A CUSTOMER BASE
BEFORE WE CAN GENERATE EARNINGS TO SERVICE OUR DEBT
Nextel Partners had no operating history until January 29, 1999, and the
networks we acquired on that date only had a few months of operating history.
We expect to spend significant amounts for site acquisition, construction,
testing and deployment before our commencement of full-scale commercial
operations. If we fail to complete the commercial launch of our portion of the
Digital Mobile Network on schedule or if we fail to achieve significant and
sustained growth in our revenues and earnings from operations, we will not have
sufficient cash from operations to repay or refinance the notes and our other
debt.
OUR SUBSIDIARIES MAY NOT BE IN A POSITION TO PAY US THE CASH WE NEED TO MAKE
PAYMENTS ON THE NOTES
We are a holding company and conduct our business principally through
operating subsidiaries. Accordingly, we depend on payments from our
subsidiaries to provide the cash necessary to make the payments on the notes.
Our subsidiaries may not generate earnings sufficient to enable us to meet our
payment obligations.
Our principal operating subsidiary is the primary obligor on a $275.0
million credit facility that is structurally senior to the notes, secured by
the operating assets and a pledge of the stock of our subsidiaries, and
contains covenants that restricts dividends and other payments to us by our
subsidiaries. Future debt agreements of our subsidiaries likely will also
impose significant restrictions on the ability of our subsidiaries to pay
dividends or make other payments to us that would be necessary to make interest
payments on the notes or to repay the notes at maturity.
BECAUSE THE NOTES ARE STRUCTURALLY SUBORDINATED TO THE OBLIGATIONS OF OUR
SUBSIDIARIES, YOU MAY NOT BE FULLY REPAID IF WE BECOME INSOLVENT
All of our operating assets are held directly by our subsidiaries. As a
result, the notes are structurally subordinated to the debts and other
obligations of our subsidiaries. This means that creditors of our subsidiaries,
including trade creditors, have and will have direct claims against our
subsidiaries and would receive payments from the assets of our subsidiaries or
assets pledged as security before you would receive any payments if we become
insolvent. The indenture relating to the notes permits our subsidiaries to
incur additional debt that would be structurally senior to the notes.
BECAUSE THE NOTES THAT YOU HOLD ARE UNSECURED, YOU MAY NOT BE FULLY REPAID IF
WE BECOME INSOLVENT
The notes are not secured by any of our assets or those of our
subsidiaries. Therefore, you may not be fully repaid if we become insolvent. In
addition, the indenture relating to the notes permits us to incur additional
secured debt. If we incur secured debt, and we become insolvent, the holders of
the secured debt would receive payments from the assets used as security before
you receive payments.
WE HAVE SUBSTANTIAL EXISTING DEBT AND WILL INCUR SUBSTANTIAL ADDITIONAL DEBT,
SO WE MAY BE UNABLE TO MAKE PAYMENTS ON THE NOTES THAT YOU HOLD
As of March 31, 1999, we had approximately $609.9 million of indebtedness,
of which $591.2 million were secured obligations. The indenture relating to the
notes permits us to
10
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incur additional indebtedness, and if we expand the scope of our business plan,
we would expect to borrow substantial additional funds, which may include
secured borrowings. A higher level of debt may make it more difficult for us to
repay you.
WE MIGHT NOT HAVE CASH FROM OPERATIONS FROM WHICH TO MAKE PAYMENTS ON THE NOTES
YOU HOLD
For the period ended March 31, 1999, we had a deficiency in our ratio of
earnings to fixed charges of approximately $18.2 million. We expect to incur
substantial operating losses and negative cash flows during our first several
years of operation and, according to our business plan, we do not contemplate a
positive cash flow from operations until 2003. We cannot assure you that we
will become profitable or sustain profitability in the future. Accordingly, we
may not have sufficient funds to make payments on the notes that you hold when
cash interest payments begin in 2004.
WE MAY BE UNABLE TO REFINANCE OUR DEBT WHEN PAYMENTS ON THE NOTES BEGIN
To prevent a default under the notes, we might need additional financing
or refinancing. Our failure to pay cash interest on the notes as required would
result in defaults under our other debt agreements, including our principal
operating subsidiary's credit facility. We cannot assure you that we will be
able to effect such a financing transaction on acceptable terms, if at all.
IF AN EVENT CONSTITUTING A CHANGE IN CONTROL OF NEXTEL PARTNERS OCCURS, WE MAY
BE UNABLE TO FULFILL OUR OBLIGATION TO PURCHASE YOUR NOTES
The credit facility prohibits us from purchasing any of the notes before
their stated maturity. In the event we become subject to a change of control at
a time when we are prohibited from purchasing the notes, we intend to seek the
consent of our lenders to purchase the notes or attempt to refinance the
borrowings that contain such prohibition. If we do not obtain a consent or
repay the borrowings, our failure to purchase the tendered notes would
constitute an event of default under the indenture, which would in turn result
in a default under the credit facility. Even if we obtain the consent, we
cannot assure you that we will have sufficient resources to repurchase the
notes following the change of control.
THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, SO YOU MAY BE UNABLE TO SELL THE
NEW NOTES
The new notes are new securities for which there is currently no public
market. We do not intend to apply for listing of the new notes on any national
securities exchange or for the inclusion of the new notes in any automated
quotation system. Accordingly, we cannot assure you that an active market for
the new notes will develop. Consequently, the new notes will be relatively
illiquid, and you may be unable to sell your new notes, even though they will
not be subject to the transfer restrictions that apply to the old notes.
ORIGINAL ISSUE DISCOUNT WILL BE INCLUDED IN YOUR GROSS INCOME FOR U.S. FEDERAL
TAX PURPOSES BEFORE YOU RECEIVE ANY CASH PAYMENTS ON THE NOTES
Cash interest on the notes generally will not be payable prior to August
1, 2004. However, because the old notes were issued at a substantial discount
from their stated principal amount at maturity, original issue discount will be
includible in the gross income of a holder of the notes for U.S. federal income
tax purposes in advance of the receipt of cash payments on the notes.
11
<PAGE>
IF BANKRUPTCY PETITION WERE FILED BY OR AGAINST US, YOU MAY RECEIVE A LESSER
AMOUNT FOR YOUR CLAIM THAN YOU WOULD BE ENTITLED TO UNDER THE INDENTURE, AND
YOU MAY REALIZE TAXABLE GAIN OR LOSS UPON PAYMENT OF YOUR CLAIM
If a bankruptcy petition were filed by or against us under the U.S.
Bankruptcy Code after issuance of the notes, the claim of a holder of notes
with respect to the accreted value of the notes may be limited to an amount
equal to the sum of:
(1) the initial offering price for the notes; and
(2) that portion of the original issue discount that is not deemed to
constitute "unmatured interest" within the meaning of the U.S.
Bankruptcy Code.
Any original issue discount that was not amortized as of the date of the
bankruptcy filing would constitute unmatured interest. Accordingly, holders of
the notes under these circumstances may receive a lesser amount than they would
be entitled to under the terms of the indenture, even if sufficient funds are
available. In addition, to the extent that the U.S. Bankruptcy Code differs
from the Internal Revenue Code in determining the method of amortization of
original issue discount, holder of notes may realize taxable gain or loss upon
payment of the holder's claim in bankruptcy.
DIFFICULTIES IN CONSTRUCTING AND OPERATING OUR PORTION OF THE DIGITAL MOBILE
NETWORK COULD INCREASE ITS ESTIMATED COSTS AND DELAY ITS SCHEDULED COMPLETION,
THEREBY ADVERSELY AFFECTING OUR ABILITY TO GENERATE REVENUE
The development and operation of our portion of the Digital Mobile Network
involves a high degree of risk. Before we are in a position to commence
operations in our unbuilt markets, we will need to:
o select and acquire appropriate sites for our transmission equipment,
commonly called cell sites,
o purchase and install low-power transmitters, receivers and control
equipment, which are collectively referred to as the base radio,
o build out the physical infrastructure, and
o test the network.
Our ability to successfully perform these necessary steps may be hindered
by, among other things, any failure:
o to lease or obtain rights to sites for the location of our base radio
equipment;
o to obtain necessary zoning and other local approvals with respect to
the placement, construction and modification of our facilities;
o to acquire additional necessary radio frequencies from third parties or
to exchange radio frequency licenses with Nextel;
o to commence and complete the construction of sites for our equipment in
a timely and satisfactory manner; and
o to obtain necessary approvals, licenses and permits from federal, state
and local agencies, including land use regulatory approvals and
approval from the Federal Aviation Administration with respect to the
transmission towers that we will be using.
In addition, we may experience cost overruns and delays not within our
control caused by acts of governmental entities, design changes, material and
equipment shortages, delays in
12
<PAGE>
delivery and catastrophic occurrences. Any failure to construct our portion of
the Digital Mobile Network on a timely basis may affect our ability to provide
services in our markets on a schedule consistent with our current business
plan, and any significant delays could have a material adverse effect on our
business.
WE COULD NEED ADDITIONAL FINANCING IN ORDER TO COMPLETE OUR PORTION OF THE
DIGITAL MOBILE NETWORK, WHICH MIGHT BE EXPENSIVE OR IMPOSSIBLE TO OBTAIN
If we encounter unanticipated construction cost overruns or incur
additional costs beyond those currently reflected in our business plan, we
would require additional financing that may not be permitted by the financial
covenants in our debt agreements. If that financing is unavailable, we could
have inadequate cash flow to service our debt.
Such failure could also result in the delay or abandonment of some or all
of our acquisition, development and expansion plans and expenditures and
thereby adversely affect our business.
OUR NETWORK MUST HAVE SUFFICIENT CAPACITY TO SUPPORT OUR ANTICIPATED CUSTOMER
GROWTH
Our business plan depends on the proper and timely construction of our
portion of the Digital Mobile Network with adequate capacity to accommodate
anticipated new customers and the related increase in usage of our network.
This plan relies on:
o the availability of a sufficient quantity of sites for our
transmission equipment,
o the availability and quality of the infrastructure equipment necessary
to operate our network,
o the availability of subscriber units used by our customers to receive
our services, and
o the ability to add capacity to serve additional customers as they are
added to the network.
We cannot assure you that we will not experience delays in the
availability of, or unanticipated difficulties in obtaining, these items, which
may adversely affect our ability to attract customers.
WE MUST DEVELOP EFFECTIVE BUSINESS PRACTICES AND PROCEDURES TO MAINTAIN
CUSTOMER SATISFACTION
Critical to our business plan is our success in attracting and retaining
large numbers of customers to our portion of the Digital Mobile Network to
generate revenue.
In order to do so, we must develop effective procedures for customer
activation, customer service, billing and other support services. Even if our
system is functional on a technical level, we could lose customers if they are
displeased with the quality of our customer service operations.
OUR BUSINESS STRATEGY DEPENDS ON THE SUCCESSFUL AND CONTINUED INTEGRATION OF
OUR PORTION OF THE DIGITAL MOBILE NETWORK WITH NEXTEL'S PORTION
Pursuant to operating agreements, Nextel provides us with important
services and assistance, including a license to use the Nextel brand name and
the sharing of switches, devices that direct calls to their destinations. These
services are critical to the successful integration of our network with
Nextel's as well as to the overall success of our business.
Our business plan depends on our ability to implement an integrated
customer service, network management and billing system with Nextel's systems
that allows our network to operate with Nextel's network to provide our and
Nextel's customers with "seamless" service.
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<PAGE>
Integration requires that numerous and diverse computer hardware and software
systems work together. Any failure to integrate these information systems on
schedule may have an adverse effect on our ability to achieve the revenues
contemplated by the plan.
WE MUST COMPLETE OUR PORTION OF THE DIGITAL MOBILE NETWORK BY SET DEADLINES OR
OTHERWISE RISK LOSING NEXTEL'S SUPPORT
Our agreements with Nextel require us to construct our portion of the
Digital Mobile Network to specific standards and by set deadlines. Our failure
to do so may constitute a material default under the operating agreements that
would give Nextel the right to terminate these agreements. The non-renewal or
termination of the operating agreements would adversely affect our financial
condition and eliminate our ability to carry out our current business plan and
strategy.
WE MAY BE REQUIRED TO IMPLEMENT MATERIAL CHANGES ADOPTED BY NEXTEL WHICH MAY
NOT BE BENEFICIAL TO OUR BUSINESS
If Nextel adopts material changes to its operations, including the
adoption of new technologies, the operating agreements give Nextel the right to
require similar changes to our operations. Even if the change is beneficial to
Nextel, the effect on our business may differ due to differences in markets and
customers. We cannot assure you that such changes would not adversely affect
our business.
IF NEXTEL EXPERIENCES BUSINESS PROBLEMS IT COULD ADVERSELY AFFECT OUR BUSINESS
Our business plan depends on Nextel completing its portion of the Digital
Mobile Network on schedule. If Nextel encounters financial problems or
operating difficulties relating to its portion of the Digital Mobile Network,
our affiliation and dependence on Nextel may adversely affect our business,
including the quality of our services and the ability of our customers to roam
in the entire network.
WE ARE ENTIRELY DEPENDENT ON MOTOROLA FOR TELECOMMUNICATIONS EQUIPMENT
NECESSARY FOR THE OPERATION OF OUR BUSINESS
Motorola, Inc. is our sole-source supplier of transmitters used in our
network and handset equipment used by our customers and we rely on Motorola to
manufacture a substantial portion of the equipment necessary to construct our
portion of the Digital Mobile Network. We expect that for the foreseeable
future, Motorola and competing manufacturers who are licensed by Motorola will
be the only manufacturers of this equipment. If Motorola becomes unable to
deliver such equipment, or refuses to do so on reasonable terms, our business
would be adversely affected.
THE TRANSMISSION TECHNOLOGY USED IN THE DIGITAL MOBILE NETWORK IS DIFFERENT
FROM THAT USED BY MOST OTHER WIRELESS CARRIERS, AND, AS A RESULT, WE MIGHT NOT
BE ABLE TO KEEP PACE WITH INDUSTRY STANDARDS IF MORE WIDELY-USED TECHNOLOGIES
ADVANCE.
The Digital Mobile Network uses scattered, non-contiguous radio spectrum
near the frequencies used by cellular carriers. Because of their fragmented
character, these frequencies traditionally were only usable for two-way radio
calls, such as those used to dispatch taxis and delivery vehicles. Nextel
became able to use these frequencies to provide a wireless telephone service
competitive with cellular only when Motorola developed a proprietary technology
it calls "iDEN (Trade Mark) ". We and Nextel are currently the only major
wireless service providers utilizing iDEN technology in the United States, and
iDEN phones are not currently designed to roam onto other wireless networks.
Future technological advancements may enable other wireless technologies
to equal or exceed our current levels of service, and render iDEN technology
obsolete. If Motorola is
14
<PAGE>
unable to upgrade or improve iDEN technology or develop other technology to
meet future advances in competing technologies on a timely basis, or at an
acceptable cost, we will be less able to compete effectively and could lose
customers to our competitors.
OUR ABILITY TO CHANGE TECHNOLOGY IS LIMITED BY THE TECHNOLOGICAL REQUIREMENTS
OF OUR FRAGMENTED RADIO SPECTRUM AND OUR AGREEMENTS WITH NEXTEL
The iDEN technology is currently the only wireless industry technology in
general use on the spectrum we control. Our agreements with Nextel require us to
use the iDEN technology in the deployment of our system and prevent us from
adopting any new communications technology without Nextel's consent. Therefore,
even if we wished to change our technology for competitive reasons, our options
to do so might be limited by the unavailability of alternative technologies, or
by Nextel's decision not to consent.
WE FACE COMPETITION FROM OTHER WIRELESS SERVICE PROVIDERS AND OTHER
COMMUNICATIONS TECHNOLOGIES, PUTTING DOWNWARD PRESSURE ON PRICES
We compete for market share and customers with current or potential
cellular and digital wireless communications service providers, including AT&T
Wireless Services, Sprint PCS, Bell Atlantic, BellSouth, Southwestern Bell,
PrimeCo Personal Communications and Airtouch. Many of our competitors have
financial resources, subscriber bases and name recognition greater than ours.
Our competitors may offer prospective customers equipment subsidies or
discounts that are substantially greater than those, if any, that we could
offer and may offer services to customers at prices that are below prices that
we are able or willing to offer. Such competition may cause downward pressures
on prices, which may adversely affect our profits.
In the future, wireless services may also compete more directly with
traditional wireline telephone service providers and with cable operators who
may expand their services by offering traditional telecommunications services
over their cable systems. In addition, we expect to compete with other
communications technologies, such as paging and global satellite networks.
Moreover, we may face competition from technologies that may be introduced in
the future. All such competition is expected to be intense. We cannot assure
you that we will be able to attract enough customers either to compete
successfully or implement our business plan in this environment.
REGULATORY AUTHORITIES EXERCISE CONSIDERABLE POWER OVER OUR OPERATIONS, WHICH
COULD BE EXERCISED AGAINST OUR INTERESTS AND IMPOSE ADDITIONAL UNANTICIPATED
COSTS
The FCC and relevant state telecommunications authorities regulate our
business to a substantial degree. The regulation of the wireless
telecommunications industry is subject to constant change. New rules and
regulations may be adopted pursuant to the Communications Act of 1934, as
amended by Telecommunications Act of 1996. The Telecommunications Act provided
for significant deregulation of the U.S. telecommunications industry and such
legislation remains subject to judicial review and additional FCC rulemaking.
As a result, we cannot predict the effect that the legislation and any FCC
rulemaking may have on our future operations. We must comply with all
applicable regulations to conduct our business. Modifications of our business
plans or operations to comply with changing regulations or certain action taken
by regulatory authorities might increase our costs of providing service and
adversely affect our financial condition.
The FCC has the right to revoke licenses at any time for cause, including
failure to comply with the terms of the licenses, failure to continue to
qualify for the licenses, malfeasance or other misconduct. In addition, at the
end of a ten-year term, we will have to apply to the FCC for renewal of some of
our licenses to provide our core services which combine wireless telephone
service with dispatch and paging features. We cannot assure you that these
licenses will be renewed.
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<PAGE>
THE COMPLETION OF OUR PORTION OF THE DIGITAL MOBILE NETWORK DEPENDS ON APPROVAL
BY THE FCC OF THE TRANSFER OF LICENSES TO US FROM NEXTEL
As an equity contribution to Nextel Partners, Nextel has contributed
certain licenses for use in the operation of our markets to a wholly owned
subsidiary, whose shares will be transferred to us following approval by the
FCC. Pending FCC approval, we have the right to use the frequencies covered by
these licenses under a management agreement. However, failure to obtain FCC
approval by January 29, 2000 constitutes an event of default under the credit
facility and any indebtedness outstanding under the credit facility may be
accelerated. We cannot assure you that the FCC will grant approval of the
transfer of control of these licenses.
WE MAY FACE ADDITIONAL COST AND OTHER ADVERSE EFFECTS DUE TO YEAR 2000 ISSUES
Many computer systems and software programs may not function properly in
the year 2000 and beyond because of a once common programming standard which
used two digits instead of four digits to signify a year. These computer
systems and software programs read the year "1999" as "99" and not "1999."
Because of this, the year 2000 may appear as the year 1900, which could result
in system failures or disruptions. This problem is often referred to as the
"Year 2000" issue.
If we are unable to fix a material Year 2000 problem, we could experience
an interruption or failure of our business operations. Likewise, if parties
upon which we depend for products or service, especially Motorola, Nextel or
the operators of public telephone networks in markets where we operate, are
unable to fix a material Year 2000 problem, a resulting interruption or failure
of their ability to provide products or services could hurt us.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are forward-looking statements. They can be identified by
the use of forward-looking words such as "believes", "expects", "plans", "may",
"will", "would", "could", "should" or "anticipates" or the negative or other
variations of these words or other comparable words, or by discussions of
strategy that involve risks and uncertainties. Such forward-looking statements
include, but are not limited to:
o our business plan, its advantages and our strategy for implementing our
plan and meeting our scheduled build-out for commercial launch of our
portion of the Digital Mobile Network;
o general economic conditions in the geographic areas and occupational
markets that represent our portion of the Digital Mobile Network;
o our expectation regarding the continued successful performance and
market acceptance of the technology we use;
o our ability to attract and retain sufficient customers; and
o our anticipated capital expenditures, funding and levels of debt and
our expectations regarding additional debt, including our ability to
access to sufficient debt or equity capital to meet our operating and
financing needs.
We warn you that these forward-looking statements are only predictions,
subject to risks and uncertainties, including financial, regulatory
environment, industry growth and trend predictions. Actual events or results
can differ materially from those expressed or implied, including those set
forth under "Risk Factors."
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<PAGE>
USE OF PROCEEDS
Nextel Partners will not receive any cash proceeds from the issuance of
the new notes as described in this prospectus. Nextel Partners will receive in
exchange for the new notes, old notes in like principal amount. The old notes
surrendered in exchange for the new notes will be retired and canceled and
cannot be reissued. Accordingly, the issuance of the new notes will not result
in any change in the indebtedness of Nextel Partners.
The net proceeds from the offering of the old notes, the cash equity
contributions, the capital contributions by Nextel and Motorola and the
borrowings under the credit facility which we received on January 29, 1999, the
closing date of these capitalization transactions, are being used to complete
our portion of the Digital Mobile Network and to fund operating losses and
working capital through 2003, when we expect to achieve positive operating cash
flow for the full fiscal year.
The following table shows the sources and anticipated uses of the proceeds
from the capitalization transactions through 2003:
SOURCES AND ANTICIPATED USES OF FUNDS AND ASSETS
(IN MILLIONS)
SOURCES:
Gross proceeds of the offering of
old notes ........................ $ 406.4
Revolving borrowings under credit
facility (1) ..................... 100.0
Term borrowings under credit
facility (1) ..................... 175.0
Cash equity contributed ............. 52.1
Committed cash equity (2) ........... 104.3
Motorola contribution ............... 18.4
Nextel contribution ................. 133.2
--------
Total sources ....................... $ 989.4
========
USES:
Nextel capital expenditure
reimbursement ...................... $ 115.8
Nextel and Eagle River operating
loss reimbursement ................. 17.6
Capital expenditures .................. 486.5
Operating losses ...................... 71.9
Transaction expenses, net cash
interest and working capital ....... 97.8
FCC licenses .......................... 133.2
Excess cash ........................... 66.6
--------
Total uses ............................ $ 989.4
========
- ----------
(1) Nextel Partners' principal operating subsidiary entered into a $275.0
million credit facility of which $100.0 million is a reducing revolving
credit facility and $175.0 million is a term loan facility. The term loan
was drawn down on January 29, 1999. See "Description of Credit Facility."
(2) Of the $104.3 million of committed cash equity, the subscription and
contribution agreement provides that $52.1 million will be funded no
later than December 31, 1999 and the remainder will be funded no later
than December 31, 2000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Certain Relationships and Related Transactions--The
Subscription and Contribution Agreement."
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CAPITALIZATION
(Dollars in thousands)
The following table sets forth as of March 31, 1999, the capitalization of
Nextel Partners. This table should be read in conjunction with the unaudited
Summary Historical and Pro Forma Consolidated Financial Information and
Operating Data and the audited and pro forma unaudited consolidated financial
statements and notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
ACTUAL
AS OF
MARCH 31, 1999
---------------
(UNAUDITED)
<S> <C>
Cash and cash equivalents and restricted cash (1) ........................ $ 475,812
==========
Debt:
Credit facility (2) .................................................... $ 175,000
14% senior discount notes due 2009 (3) ................................. 416,178
----------
Total long-term debt ................................................... 591,178
----------
Shareholders' equity:
Series B redeemable or convertible preferred stock due 2010 (4) ........ 2
Convertible preferred stock ............................................ 28
Class A common stock and additional paid-in capital .................... 6,733
Warrants outstanding ................................................... 3,847
Other paid-in capital .................................................. 298,259
Subscription receivable ................................................ (122,655)
Deferred compensation .................................................. (5,629)
Accumulated deficit .................................................... (39,976)
----------
Total shareholders' equity ............................................ 140,609
----------
Total capitalization .................................................. $ 731,787
==========
</TABLE>
- ----------
(1) Restricted cash reflects the cash collateral account maintained under the
credit facility equal to the $175.0 million borrowings outstanding at
March 31, 1999. These funds will not be available until the FCC has
approved the transfer of control of the licenses held by Nextel WIP
License Corp. from Nextel to Nextel Partners.
(2) Nextel Partners Operating Corp. entered into a $275.0 million credit
facility, and on January 29, 1999, it drew down the $175.0 million term
loan facility. See "Description of Credit Facility."
(3) Represents the accreted value of the notes as of March 31, 1999.
(4) Relates to redeemable or convertible preferred stock held by a subsidiary
of Nextel. The stock is subject to mandatory redemption by Nextel
Partners 375 days after the stated maturity of the notes. Nextel Partners
may elect under certain circumstances to pay the redemption price by
issuing Series C convertible preferred stock for each share of Series B
redeemable or convertible preferred stock so redeemed.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain of the statements contained in the following discussion of our
financial condition and results of operations are forward-looking statements.
For a discussion of important factors, including but not limited to, the
build-out of our portion of the Digital Mobile Network, actions of regulatory
authorities and competitors, and other factors that could cause results to
differ materially from the forward-looking statements, see "Risk Factors."
Please read this discussion together with the unaudited Summary Historical
and Pro Forma Consolidated Financial Information and Operating Data, the
audited consolidated financial statements and the notes thereto and the pro
forma unaudited financial statements and accompanying discussion and notes
thereto included elsewhere in this prospectus.
Our historical results discussed in this section and throughout this
prospectus include the Nextel operations we assumed as part of our initial
capitalization which occurred on January 29, 1999. See Note 1 of our audited
consolidated financial statements for a discussion of the basis of presentation.
GENERAL
We currently operate in five markets in Hawaii and upstate New York where
4.5 million people live or work. We expect to launch service in four additional
markets by the end of 1999, and expect to serve a total of 39 markets where
22.4 million people live or work by the end of 2001. Our upstate New York and
Hawaii markets launched commercial service in July and September of 1998,
respectively.
At March 31, 1998, we had no subscribers. Our revenue for the three month
period then ended consisted of fees we received for Nextel's customers roaming
on our portion of the Digital Mobile Network. At December 31, 1998, we had
11,000 subscribers, and at March 31, 1999, we had 16,200 subscribers, all in
our Hawaii and upstate New York markets.
We expect to continue to experience negative operating margins while we
are developing, building out, enhancing and expanding our Digital Mobile
Network and implementing related commercialization activities. As additional
markets are added to our Digital Mobile Network we expect to incur increased
costs such as site rentals, telecommunications expenses, system and other
capital expenses. Sales and marketing and general and administrative expenses
are also expected to increase with the commercialization of service in
additional markets.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs arise principally from the capital
requirements to complete the initial build-out of our portion of the Digital
Mobile Network. Currently, we estimate that capital requirements to build our
initial systems in our portion of the Digital Mobile Network, including
operating losses and working capital for the period from inception through the
end of 2003, when we expect to achieve positive EBITDA for a full fiscal year,
will total approximately $989.4 million, including the in-kind contributions by
Nextel and Motorola in exchange for equity interests in Nextel Partners. We
expect capital expenditures to include, among other things, switches, base
radios, transmission towers, antennae, radio frequency engineering and cell
site construction. We estimate capital expenditures will total approximately
$602.1 million from inception through 2003, including approximately $115.8
million of reimbursements paid to Nextel, $201.6 million of capital
expenditures in 1999 and $151.5 million of capital expenditures in 2000.
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The capital expenditure reimbursement paid to Nextel in January 1999 was
for purchases of existing network equipment and capitalized expenses incurred
by Nextel on our behalf in certain markets including upstate New York and
Hawaii. Actual amounts of capital required to complete our portion of the
initial build-out may vary materially from these estimates. For the year ended
December 31, 1998, our capital expenditures were approximately $104.3 million
spent primarily in the upstate New York and Hawaii markets to build out the
Digital Mobile Network and make these markets operational. Capital expenditures
were approximately $45.5 million and $7.4 million for the three month periods
ended March 31, 1998, and March 31, 1999, respectively. This decrease was due
to the construction for the initial launch of the upstate New York and Hawaii
markets which took place primarily during 1998.
Build-out Schedule
For purposes of our build-out, we have divided our territory into 39
markets. Our agreements with Nextel require us to build out and provide service
in all of these markets by June 2001. We currently plan to complete the
build-out of each market on a staggered basis over the next three years. The
table below identifies our currently planned build-out schedule for the
markets.
<TABLE>
<CAPTION>
NEXTEL PARTNERS BUILD-OUT SCHEDULE
- ------------------------------------------------------------------------------------------------------------------
YEAR INCREMENTAL COVERED POPULATION CUMULATIVE COVERED POPULATION NUMBER OF MARKETS TO BE LAUNCHED
- --------- -------------------------------- ------------------------------- ---------------------------------
<S> <C> <C> <C>
1999 1.4 million 6.0 million 4
2000 12.5 million 18.5 million 21
2001 3.6 million 22.1 million 9
</TABLE>
Build-out Criteria
Our agreements with Nextel require us to build out our markets in
compliance with the site acquisition, frequency design, launch criteria and
construction standards that are in effect from time to time and generally
applicable to Nextel and its operating subsidiaries. These standards evolve
with changes in technology and are subject to modification or adjustments to
comply with local rules and laws.
In general, the site acquisition and construction standards include the
use of standard lease or license agreements, appropriate environmental testing
of sites for our transmission equipment, compliance with local zoning and
building permit requirements and compliance with applicable FAA and FCC
registration and other requirements applicable to site construction and
operation.
Frequency design requirements relate to required signal strength and
performance levels in a given area.
Similarly, the launch criteria include the ability to provide service in
the designated market at specified performance levels to both new customers and
existing Nextel customers who roam into our market and the ability to support
additional features such as voice mail.
Delays in the build-out and launch of our markets will result in a delay
in our ability to acquire customers and generate revenue. Depending on the
length of the delay and the particular market involved, a delay could impede
our ability to attract customers and generate revenue in accordance with our
business plan. In addition, if we fail to launch two or more markets in any
year within 180 days of the scheduled launch date, or if we fail to
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<PAGE>
complete the build-out of two or more markets in any year within 180 days of
the scheduled build-out date, we could be in default of our agreements with
Nextel. Nextel may then have the right to terminate our agreements and acquire
all of our outstanding shares of capital stock.
Option Territories
Under our agreements with Nextel, we have the right, but not the
obligation, to elect to build out certain additional markets within the United
States. These additional markets are referred to as "option territories." There
are two types of option territories: special option territories and option
territories. With respect to the special option territories, we have the right
to elect to build out these territories at any time so long as we make this
election before August 29, 2000. With respect to the remainder of the option
territories, we have the right to elect to build out these territories as long
as we make that election before August 29, 1999 and we have completed the
build-out of our non-option markets scheduled for launch in our first year.
If we elect to build out any option territory, special or otherwise, we
must comply with the same launch criteria applicable to our non-option markets.
In addition, we have the right to purchase from Nextel all related fixed
network equipment and operational contracts existing in such territories.
Moreover, subject to Nextel's ability to obtain appropriate waivers from its
financing entities, Nextel will transfer to us Nextel's licenses to operate
certain frequencies in the option territories.
In order to exercise our rights to build out any option territory we will
have to raise additional capital. We currently anticipate exercising our rights
to build out a portion of the option territories where 7.5 million people live
or work. These option territories include markets in Arkansas, Georgia, Indiana
and south Texas. Our exercise of this option will require us to incur
additional indebtedness of approximately $280 million. This financing will
require, among other things, that we obtain consents from our current financing
entities and may require amendments to our operation agreements with Nextel to
allow us to exercise this option earlier than is currently permitted under our
agreements with Nextel.
Equipment and Operating Agreements
In connection with our build-out, we have entered into agreements with
Motorola to purchase necessary infrastructure equipment and other related
software and services to implement the Motorola technology we use as well as
subscriber handset units and other accessories. In addition, in connection with
the capitalization transactions, Motorola contributed to us an $18.4 million
credit against future purchases in exchange for shares of our preferred stock.
See "Certain Relationships and Related Transactions--The Subscription and
Contribution Agreement,--Motorola Purchase Agreements."
Currently, our agreements with Nextel allow us access to Nextel's switches
and switching facilities. Nextel has agreed to cooperate with us to establish a
switch facility for our network and to deploy switches in our territory in a
manner which best meets the following criteria:
o integration of our cell sites into Nextel's national switching
infrastructure;
o shared coverage of Nextel Direct Connect service to communities of
interest; and
o minimized costs to us and to Nextel, and
o maximized quality of service to our customers and to Nextel's customers.
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These criteria provide for a flexible construction schedule of switches in
our territory, depending on the existing switches in Nextel's territory and the
amount of customer traffic handled by any one switch so that the call switching
on our network is completed through those switches and facilities. We are still
required to install our own switches, subject to these criteria, and install
other switch elements when we acquire a threshold number of customers.
In addition, as we implement our business strategy, our operating
agreements with Nextel provide us with certain services, such as access to
billing, customer care, information systems and other back-office support
services and with access to Nextel's vendor relationships. We have entered into
agreements for back-office support systems, such as customer activation and
billing, and day-to-day operational support with some vendors who provide these
services to Nextel.
Sources of Funds
Our primary sources of funding are the proceeds from the cash equity
contributions and commitments, the offering of the old notes and the credit
facility which we received on January 29, 1999. See "Business--The
Capitalization Transactions." Concurrently, we also received:
(1) the contribution by Nextel of FCC licenses to Nextel WIP License
Corp., and the grant of the right to use these licenses and Nextel's agreement
to transfer the stock of Nextel WIP License Corp. to us, all in exchange for
$133.2 million of our redeemable preferred stock and convertible preferred
stock, and
(2) the contribution by Motorola of an $18.4 million credit to Nextel
Partners against our future purchases of Motorola-manufactured infrastructure
equipment.
The cash equity contributions consist of irrevocable commitments of an
aggregate of $156.4 million of cash in exchange for equity in the form of
convertible preferred stock. Our cash equity investors contributed $52.1
million on January 29, 1999, with an additional $52.1 million to be funded no
later than December 31, 1999 and the remaining $52.1 million to be funded no
later than December 31, 2000.
The following table reflects the issuance of preferred stock to major
shareholders after these capitalization transactions.
<TABLE>
<CAPTION>
MAJOR SHAREHOLDER NEXTEL PARTNERS' PREFERRED STOCK
- ----------------- ---------------------------------
<S> <C>
Nextel 2,185,000 shares of Series B redeemable or convertible preferred stock
8,740,000 shares of Series C convertible preferred stock
2,185,000 shares of Series D convertible preferred stock
DLJ Merchant Banking 3,800,000 shares of Series A convertible preferred stock
Partners II, L.P. and affiliates
Madison Dearborn Capital 3,624,972 shares of Series A convertible preferred stock
Partners II, L.P.
Eagle River Investments, LLC 2,622,000 shares of Series A convertible preferred stock
Motorola 1,836,649 shares of Series A convertible preferred stock
</TABLE>
See also "Ownership of Capital Stock and Principal Stockholders."
Nextel Partners Operating Corp., our wholly owned subsidiary, has entered
into a $275.0 million credit facility which provides for a $100.0 million,
eight-year revolving credit facility and a $175.0 million, nine-year term loan
facility. On January 29, 1999, it borrowed
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<PAGE>
the $175.0 million term loan under the credit facility. We are exposed to
changes in interest rates under the term loan facility. For every 1/8% change in
the underlying interest rate associated with the term loan, annual interest
expense changes by approximately $220,000. Borrowings under the credit facility
are secured by a first priority pledge of all assets of our subsidiaries and a
pledge of their capital stock, including the stock of Nextel WIP License Corp.
following approval by the FCC. The credit facility contains customary financial
and other covenants for the wireless industry. Our subsidiary established a cash
collateral account in which it maintains a balance equal to the amount of any
borrowings until we receive FCC approval. Failure to obtain such approval by
January 29, 2000 constitutes an event of default under the credit facility. In
addition, the credit facility contains covenants requiring us to maintain
certain defined financial ratios and meet operational targets including service
revenues, subscriber units and network coverage. As of March 31, 1999, we were
in compliance with all covenants associated with our credit facility. See
"Business--The Capitalization Transactions" and "Description of Credit
Facility."
We believe the net proceeds from the offering of the old notes, together
with the equity investments and borrowings under the credit facility, provide
us with funds sufficient to complete our build-out and for working capital
necessary to cover our debt service requirements and operating losses, through
2003, which is when we anticipate achieving positive operating cash flow for
the full fiscal year. See "Use of Proceeds." Although we estimate that we will
have sufficient funds through 2003, we cannot assure you that additional
funding will not be necessary. We could need additional financing in order to
complete our portion of the Digital Mobile Network or if we elect to build out
optional territories, which might be expensive or impossible to obtain.
OPERATIONS
Revenues. Our primary source of revenues consist of service, roaming and
equipment sales revenues. Our service revenues consist of charges for airtime
usage and monthly network access fees from providing integrated wireless
services within our territory, particularly from the provision of mobile
telephone and two-way radio dispatch services. The service revenues are the
product of the number of customers that subscribe to our service and our
monthly average revenue per unit. Average revenue per unit is an industry
measure of total service revenue from subscribers divided by the average number
of digital subscriber units in service.
Over the past few years the wireless industry has experienced a decline in
prices generally as a result of competition from other wireless providers,
including new entrants into the market. In contrast, Nextel's reported monthly
average revenue per unit has increased over the past few years and remains
above the industry average. We cannot assure you that our results will
duplicate Nextel's since we set our prices independently and our markets are
distinct from Nextel's.
Recently, service plans containing large blocks of included minutes of
airtime have been introduced by wireless service providers as a means to gain
market share from established cellular carriers with relative coverage
advantages. This has dramatically increased subscriber usage in the industry.
These service plans have had the effect of dramatically increasing subscriber
usage while slowing the rate of decline in average revenue per unit during
1998. We believe that the decline in effective rates per minute and the
corresponding increase in subscriber usage relative to historical levels will
not materially affect our ability to meet our revenue projections under our
business plan.
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We also believe that data services and other future service enhancements
will improve wireless communications overall value proposition and help prevent
further erosion of average revenue per unit. Nextel recently announced an
agreement with Microsoft Corp. to deploy Nextel Online(SM), a wireless internet
service offering which enables Nextel subscribers to access a customized set of
internet services offered through a version of Microsoft's MSN(TM) portal
anytime, anywhere on Nextel's network. We will have the ability to send and
retrieve data over a handheld unit as it becomes available. However, we have not
yet determined when and how to offer this service to our customers. We intend to
observe Nextel's deployment of these services and then decide whether to make it
available to our customers.
Currently, roaming revenues make up a significant portion of our total
revenues. As we construct and launch all our markets, we anticipate that
roaming revenue will become a less significant portion of our total revenues.
By 2002 we expect roaming revenues to be less than 5% of our total revenues.
During 1999, we collect 95% of the service revenue generated by a Nextel
customer roaming in one of our markets. This percentage decreases to 90% in the
year 2000, 85% in the year 2001 and 80% in the year 2002 and afterwards. When
our customers roam onto Nextel's portion of the Digital Mobile Network, we pay
80% of the aggregate service revenue per minute generated by such customer to
Nextel.
During any year, the percentage we are allowed to collect and the
percentage that we pay can be adjusted up or down depending on the results of
customer satisfaction surveys. Customer satisfaction survey results are
expressed as percentages. Our customer satisfaction survey results will be
compared to the customer satisfaction survey results for Nextel. For every five
full percentage points by which our customer satisfaction survey results exceed
Nextel's customer satisfaction survey results, our roaming percentage is
increased by 1%. On the other hand, for every five full percentage points by
which Nextel's customer satisfaction survey exceeds our customer satisfaction
survey results, our roaming percentage is decreased by 1%. However, our roaming
percentage can never be greater than 100% and can never be less than our cost
to provide roaming service to a Nextel customer. The same limits apply to our
payments to Nextel.
In recent years cellular providers have increased the use of discounts on
phone equipment as competition between service providers has intensified. As a
result we have incurred, and expect to continue to incur, losses on equipment
sales, which result in increased marketing and selling costs per gross
additional subscriber. We expect to continue these discounts and promotions,
because we believe that the use of such promotions will result in increased
revenue from increases in the number of our subscribers. Revenues for the year
ended December 31, 1998 were $5.3 million of which $3.7 million was related to
service and roaming revenues and $1.6 million was related to equipment
revenues. These revenues were generated primarily from our upstate New York and
Hawaii markets which became operational during 1998. For the year ending
December 31, 1998, we had a loss on equipment sales of $(1.4) million which
resulted from our subsidies of sales of subscriber handsets and accessories.
Revenues for the three month period ended March 31, 1999 were $4.3
million, of which $3.5 million related to service and roaming revenues and $0.8
million related to equipment revenues. For the three month period ended March
31, 1999, we had a loss on equipment sales of $(0.9) million in connection with
our sales of subscriber handsets and accessories. Revenues for the three month
period ended March 31, 1998 were $0.2 million and related only to roaming by
Nextel's customers on our portion of the Digital Mobile Network.
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For the three months ended March 31, 1999, service, roaming, and equipment
sales revenues represented 56.5%, 24.6% and 18.9%, respectively, of total
revenues. For the year ended December 31, 1998, service, roaming, and equipment
sales revenues represented 35.4%, 35.2% and 29.4%, respectively, of total
revenues. As we continue to launch additional markets, cell sites brought into
service will immediately be available for use by Nextel's subscriber base while
we begin to acquire customers within our service area. Therefore, in the short
term, roaming revenues on a consolidated basis will comprise a greater
percentage of total revenues. However, we anticipate that once all of our
markets are launched and our covered penetration increases, roaming revenues as
a percentage of total revenues will decline to approximately 5% by 2002.
Equipment revenues are expected to be immaterial to total revenues in the
future, once our market become fully operational.
Our agreements with Nextel permit us to establish our own local pricing in
our markets. However, we must provide national customers who have a national
rate with Nextel the same rates as they receive in Nextel's markets. For
example, if a national company has an agreement with Nextel for a certain rate,
and that company has a branch office in one of our markets, we must offer the
branch office the same national rate plan. In addition, our pricing must
conform with guidelines that ensure that our pricing structure is consistent
with Nextel's national marketing strategy. For example, according to the
guidelines:
o We offer per second billing. This means that we do not round up partial
minutes of use to the next full minute except in the first minute of
use.
o We do not charge an additional amount for roaming. Customers receive
their same home market rate anywhere in the United States where there is
coverage. Domestic long distance is charged at a flat rate, and all
direct connect minutes generated by multiple customers within the same
account are pooled for billing purposes.
We believe these guidelines will positively affect our business as they
serve to differentiate our service from our competitors.
Operating Expenses. Our primary operating expenses include network
operations, switching, marketing and sales, management information systems,
customer billing and care, and general and administrative expenses. We believe
that we are in the process of establishing a more efficient cost structure than
we would otherwise have been able to set up due to our relationship with Nextel
and our ability to take advantage of services and other benefits, such as:
o Switch sharing--We have the ability to use Nextel's switching facilities
at costs based on Nextel's cost until the time that our growth in
subscribers requires us to construct our own switch facility.
o National advertising--We are able to benefit from Nextel's national
advertising campaigns which are developed and paid for by Nextel. We also
have the ability to use any creative advertising work that is developed
by Nextel at no additional cost to us.
o Equipment pricing--We are able to purchase subscriber handsets and
infrastructure equipment from Motorola and other Nextel vendors at
pricing tied to Nextel's pricing volumes.
Network expenses include site rent, utilities and maintenance, engineering
personnel and interconnect charges. Network expenses depend primarily on the
number of cell sites, total minutes of use and mix of minutes of use between
interconnect and Nextel Direct Connect services.
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Switching costs include the cost of operating switches to direct calls to
their destinations and network elements we own as well as rent, utilities and
maintenance and payments to Nextel for sharing its switches. We currently
utilize Nextel's switches in all of our operational markets, except for Hawaii.
In exchange for switch sharing services, we pay switching fees at a rate per
minute reflecting Nextel's estimated costs as of January 2001. This rate is paid
through January 1, 2001 at which time the rate will be adjusted based on
Nextel's cost thereafter. At any time (subject to certain operational
comparability and performance requirements), we may develop and utilize our own
switch infrastructure. Accordingly, as the number of customers in any particular
area grows and based on other economic factors, we intend to buy and operate our
own switches. Nextel also provides network signaling and twenty-four hour per
day monitoring for switches we own for a per-switch monitoring fee based on
Nextel's cost. For the three month period ended March 31, 1999, and for the year
ended December 31, 1998, our cost of service revenues from network expenses and
switching costs were $3.1 million and $6.1 million, respectively, incurred
primarily from our upstate New York and Hawaii markets. For the three month
period ended March 31, 1998, our cost of service revenues was $0.3 million and
related only to roaming by Nextel's customers on our portion of the Digital
Mobile Network.
Selling, general and administrative expenses consist of sales and marketing
expenses, and general and administrative costs. Sales and marketing expenses
relate to sales representatives, sales support personnel, indirect distribution
channels, marketing and advertising programs and equipment subsidies. We expect
our cost per gross additional customer to be relatively high in our first
several years of operation and to decline as sales representatives become more
efficient, as we expand our indirect distribution channels and as cost of our
sales infrastructure is distributed over a greater base of customer additions.
We will benefit from the use of the Nextel brand, national advertising and other
marketing programs. We will not pay Nextel a marketing service fee until the
later of January 2002 or the first month of the quarter beginning after we
achieve two consecutive quarters of positive EBITDA, at which time the marketing
service fee will be 0.5% of gross monthly service revenues for the next three
years and 1.0% of gross monthly service revenues after.
General and administrative costs relate to corporate overhead personnel
including tax, legal, planning, human resources, treasury and accounting
functions. While we have directly hired key personnel in such areas, during a
defined transition period, Nextel has made certain accounting, payroll,
customer care, purchasing, human resources and billing functions available to
us. In return for these services during the transition period, we pay monthly
fees based on Nextel's cost of providing them. We are currently negotiating
agreements with vendors for these services. See "Certain Relationships and
Related Transactions--Nextel Operating Agreements."
We have entered into agreements with vendors for back-office systems
services to support customer activation, billing and customer care with vendors
who have experience providing these services to Nextel.
For the three month period ended March 31, 1999, and for the year ended
December 31, 1998, our selling, general and administrative expenses were $5.2
million and $13.5 million, respectively, incurred primarily from the upstate New
York and Hawaii markets which launched commercial service during 1998. Selling,
general and administrative expense for the three month period ended March 31,
1998 was $0.7 million, related only to roaming by Nextel's customers on our
portion of the Digital Mobile Network.
We recorded deferred compensation expense associated with our restricted
stock purchase plan of $0.6 million and $0.4 million, for the three month period
ended March 31,
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1999 and the year ended December 31, 1998, respectively. The plan is considered
compensatory and we account for its deferred compensation expenses on a basis
similar to that used for stock appreciation rights.
Depreciation and amortization expense for the year ended December 31, 1998
was approximately $4.6 million. Amortization expense related to amortization of
our FCC-licensed radio spectrum in Hawaii and upstate New York, which became
operational in the second half of 1998. The majority of the depreciation
expense for the period related to the portion of our wireless fixed asset
network placed into service in Hawaii and upstate New York.
Depreciation and amortization expense for the three months ended March 31,
1999 was approximately $2.5 million, an increase of $2.3 million from the same
period in 1998. The increase was primarily a result of amortization of our
FCC-licensed radio spectrum and depreciation recorded on our wireless fixed
asset network placed in service in the Hawaii and upstate New York markets.
We have not recorded income tax expense for the year ended December 31,
1998 or for the three month periods ended March 31, 1999 and 1998. We have
recorded a full valuation allowance against our deferred tax assets as required
by Statement of Financial Accounting Standards No. 109 as we believe that it is
more likely than not that we will not be able to realize these assets. As of
December 31, 1999, we had recorded a deferred tax asset of approximately $1.5
million related to start-up operational costs that were capitalized for tax
purposes, which will be amortized over 60 months for income tax purposes. We
have established a valuation allowance against our net deferred tax assets of
approximately $1.1 million. Beginning with fiscal year 1999, we are expecting
to generate significant operating losses, which may be carried forward for 20
years for income tax purposes to offset taxable income in future periods. We
expect to record a full valuation allowance against our net deferred tax
assets, including net operating losses, for the foreseeable future.
For the year ended December 31, 1998, we reported a net loss of
approximately $22.3 million. The loss generated was primarily associated with
the roll-out of operations in Hawaii and upstate New York, including
depreciation and amortization expense, as well as other start-up operational,
sales and marketing, general and administrative expenses and deferred
compensation expense associated with our restricted stock purchase plan.
We reported a net loss of approximately $17.4 million for the three month
period ended March 31, 1999, an increase of approximately $16.3 million from
the approximately $1.1 million reported in the same period one year ago.
Increased expenses in all categories of expense occurred as we began ramping up
our operations in anticipation of additional markets becoming operational, as
well as the increase in costs associated with the Hawaii and upstate New York
markets which became operational in the second half of 1998. We anticipate
reporting net losses for the foreseeable future.
YEAR 2000 DATE CONVERSION
As is the case with most other businesses using computers in their
operations, we are in the process of evaluating and addressing Year 2000
compliance of our computer systems. Such Year 2000 compliance efforts are
designed to identify, address and resolve issues that may be created by
computer programs being written using two digits rather than four to define the
applicable year. Any of our computer programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
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To the extent we implement our own computer systems and software, we will
endeavor to ensure that such systems and software are Year 2000 compliant by
the end of the third quarter of 1999. This process will involve assessing
overall Year 2000 risk and modifying or replacing certain hardware and software
maintained by us, as well as communicating with external service providers to
ensure that they are taking the appropriate action to remedy certain Year 2000
compliance issues of their own. However, our ability to reach our Year 2000
compliance goal is, and will continue to be, dependent on the parallel efforts
of certain third party vendors, suppliers and business partners. In particular,
we rely on services and products offered by Motorola, for our system
infrastructure equipment and subscriber handset units, and Nextel and third
party providers of services and products to Nextel, for sales, distribution and
back-office support services, and information systems, including customer
activation, billing and customer care. We have begun the process of requesting
from these third parties detailed action plans and timetables for achieving
Year 2000 compliance.
Since we are in the process of gathering information to determine the Year
2000 compliance of Motorola, Nextel and relevant third parties, we have not
fully assessed the impact on our information systems of such third parties'
non-compliance. Any failure by Motorola or Nextel to become Year 2000 compliant
may have a material adverse effect on our ability to become Year 2000 compliant
if such failure were to adversely impact the ability of either party to provide
products or services that it is obligated to provide to us or products or
services that are critical to our operations. To the extent we are not in a
position to validate or certify that technology provided by third parties,
including Motorola, is Year 2000 compliant, we will seek assurances from such
third parties that their systems are or will be Year 2000 compliant no later
than the third quarter of 1999. We cannot assure you that the costs of
modifying, upgrading or replacing our information systems and equipment will
not have a material adverse effect on our ability to complete our portion of
the Digital Mobile Network on schedule, to conduct our operations or to
implement our business plans as currently contemplated.
Moreover we cannot independently assess the impact of Year 2000 risks,
issues and compliance activities and programs involving operators of public
telephone networks or other service providers, such as electric utilities. We
therefore must rely on these operators' estimates of their own Year 2000 risks,
issues and the status of their related compliance activities and programs in
our own risk assessment process. Because our systems are interconnected with
public telephone networks and are dependent upon the systems of other service
providers, the failure of these third parties to address their own Year 2000
risks and the disruption of operations in their computer programs may result in
material adverse effect on our operations, including:
o the inability of subscribers to make or receive phone calls;
o the inability of sites, switches and other interfaces to accurately
record call details of subscriber phone calls; and
o the inability of billing systems to accurately report and bill
subscribers for phone usage.
We believe that the costs of modifying, upgrading or replacing our systems
and equipment will not have a material effect on our liquidity, financial
condition or results of operations. We currently estimate that our expenditures
in connection with our Year 2000 compliance efforts will not exceed $2 million.
To date, we have not deferred any specific projects, goals or objectives
relating to our operations as a result of our efforts.
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SUPPLEMENTAL FINANCIAL DATA
The following unaudited quarterly financial data for the year ended
December 31, 1998 represents our operations during our initial build-out phase.
The results for any quarter are not necessarily indicative of results for any
future quarterly or annual results.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 FIRST SECOND THIRD FOURTH TOTAL
- ------------------------------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues ...................... $ 153 $ 284 $ 1,697 $ 3,175 $ 5,309
Operating expenses ............ 1,243 2,709 9,860 13,795 27,607
-------- -------- -------- --------- ---------
Operating loss ................ (1,090) (2,425) (8,163) (10,620) (22,298)
Income tax provision .......... -- -- -- -- --
-------- -------- -------- --------- ---------
Net loss ...................... $ (1,090) $ (2,425) $ (8,163) $ (10,620) $ (22,298)
======== ======== ======== ========= =========
</TABLE>
MARKET RISKS
We are subject to market risks arising from changes in interest rates. Our
primary interest rates exposure results from changes in LIBOR or the prime rate
which are used to determine the interest rate applicable to borrowings by our
subsidiary under its credit facility. As of March 31, 1999, our subsidiary had
$175 million outstanding under its credit facility. In April 1999, we entered
into an interest rate swap agreement for approximately one-third of these
borrowings to partially hedge our interest rate exposure. Interest rate swaps
have the effect of converting the applicable variable rate obligations to fixed
or other variable rate obligations. Our potential loss over one year that would
result from a hypothetical, instantaneous and unfavorable change of 100 basis
points in the interest rate of all our variable rate obligations would be
approximately $2 million.
In January 1999, we issued the old notes. While fluctuations in interest
rates may affect the fair value of this debt, interest expense will not be
affected due to the fixed interest rate of the notes.
We do not use financial instruments for trading or other speculative
purposes.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 to
register this exchange offer. This prospectus, which forms part of the
registration statement, does not contain all of the information included in
that registration statement. For further information about Nextel Partners and
the new notes offered in this prospectus, you should refer to the registration
statement and its exhibits.
Upon consummation of this exchange offer and so long as the notes remain
outstanding, we will file annual, quarterly and current reports with the SEC.
In addition, so long as the notes remain outstanding, we will make available to
any prospective purchaser of the notes or beneficial owner of the notes in
connection with any sale of the notes, the information required by Rule
144A(d)(4) under the Securities Act.
You may read and copy any document we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the Public Reference Room. We will file our SEC materials
electronically with the SEC, so you can also review our filings by accessing
the web site maintained by the SEC at http://www.sec.gov. This site contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC.
Our principal executive offices are located at 4500 Carillon Point,
Kirkland, Washington, 98033. Our telephone number is (425) 828-1713.
DELIVERY OF PROSPECTUS
We remind professional securities dealers of their obligation under the
securities laws to deliver a copy of this prospectus to anyone who buys new
notes from them until , 1999, which is the 90th day after the date of this
prospectus. Securities dealers who were initial purchasers of the old notes and
are acting as underwriters of unsold allotments have additional prospectus
delivery requirements.
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BUSINESS
OVERVIEW
We are the only service provider licensed to use the Nextel (Registered
Trademark) brand name and market Nextel digital wireless communications
service based on technology developed by Motorola in 39 mid-sized and smaller
markets throughout the United States. Our markets contain places where
approximately 33 million people live or work and include Albany, Binghamton,
Buffalo, Corpus Christi, Des Moines, Green Bay, Harrisburg, Louisville, Mobile,
Omaha, Peoria, Rochester, Shreveport and Syracuse, as well as the State of
Hawaii, the Florida Panhandle and selected corridors along interstate highways.
We consider these markets to be attractive because:
o based on our understanding of Nextel's plans, these markets are
integral to Nextel's strategy of providing digital wireless services
nationwide;
o we believe that Nextel has experienced rapid subscriber growth and
competitive success in markets with similar economic and demographic
characteristics;
o our markets generally contain fewer wireless competitors than do large
urban markets; and
o a number of our markets are adjacent to operational Nextel markets and
include numerous offices and branches of Nextel's national accounts that
are expected to become our customers as soon as we launch service in
their vicinity.
We have operational systems in five markets covering places where
approximately 4.5 million people live or work in Hawaii and upstate New York
and our other markets are in various stages of design or construction. We
expect to have operational systems in 34 additional markets by the end of 2001.
We offer or plan to offer a differentiated, integrated package of digital
wireless communications services under the Nextel (Registered Trademark) brand
name, initially targeting business users. This package of wireless services
currently is identical to the package of services that Nextel has used to
achieve success in its own markets. Our services include:
o cellular telephone service,
o Nextel Direct Connect(SM) service that allows users to contact
co-workers instantly, one-to-one or on a conference call,
o paging and short text messaging service, and
o in the future, the ability to send and receive data through the user's
handheld unit.
We plan to make our service offerings operationally seamless with those of
Nextel, so that our services and services of Nextel will be substantially
identical from the customer's point of view, and customers of each company will
be able to roam both within and between the two companies' systems with equal
ease and at no additional charge. To achieve seamless integration, we will
build our portion of the Digital Mobile Network using the same technology used
by Nextel. This technology, developed by Motorola, is referred to as
"integrated Digital Enhanced Network" or "iDEN(TM)".
We will operate our portion of the Digital Mobile Network in accordance
with Nextel's standards to enable both companies to achieve a consistent level
of service throughout the United States. Based on Nextel's current reported
coverage and our expected coverage of our markets, the overall Digital Mobile
Network is expected to cover places where approximately 195 million people live
or work. Nextel's all-digital network provides
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customers with digital quality and advanced features wherever they roam on the
Digital Mobile Network, in contrast to the hybrid analog/digital networks of
cellular competitors which do not support these features in the large
analog-only portions of their networks.
Nextel reported in its quarterly report that as of March 31, 1999, it
provides digital service to more than 3.1 million subscriber units in the
United States, and that its network constitutes one of the largest wireless
networks in the United States providing fully integrated, all-digital wireless
service using a single transmission technology. Based on information reported
by cellular and digital service providers, in four of the five quarters through
March 31, 1999, Nextel has been one of the top two U.S. wireless industry
growth leaders as measured by net customer additions.
We also believe that the Nextel Direct Connect feature is an integral part
of doing business in its targeted industry groups, contributing to both its
high rate of growth and subscriber loyalty. Nextel has had an average monthly
churn rate in each of the four quarters through March 31, 1999 lower than the
industry average. "Churn" is an industry term referring to the percentage of a
service provider's customer base that cancels service or whose service is
terminated during a given month.
As reported in its quarterly reports, Nextel's monthly average revenue per
subscriber unit for Nextel's services was $70 for each of the third and fourth
quarters of 1998, as compared with a wireless industry average reported by CTIA
of $39 for the same periods. We believe Nextel's focus on business customers,
particularly those customers who employ a mobile workforce with high demand for
wireless communications services, accounts, in part, for this superior
performance.
We intend to achieve the initial system build-out in our portion of the
Digital Mobile Network to cover places where approximately 22.4 million people
live or work within our territory by the end of the third quarter of 2001. We
have completed the initial design for the initial build-out, subject to
on-going review. At the time we were capitalized, Nextel had already launched
commercial operations covering places where approximately 4.5 million people
who live or work in Hawaii and upstate New York. We acquired the assets
relating to these operational networks on January 29, 1999, along with other
plans, surveys and capital assets in our territory in various stages of
completion. We expect to launch service in four additional markets by the end
of 1999 and to complete the initial system build-out in our portion of the
Digital Mobile Network by the end of 2001.
On January 29, 1999, we acquired leasehold interests in 563 cell site
locations for our transmission equipment throughout our territory, which is more
than one-third of the 1,450 sites that we estimate will be required to complete
the initial system build-out of our portion of the Digital Mobile Network. Of
these acquired sites, 220 were already equipped and operational at the time of
acquisition. Under the terms of our agreements with Nextel, Nextel is
responsible for the development of towers used for these sites and provides us
with space on these towers for our equipment. We have agreed, at Nextel's
request, to enter into leasing arrangements with purchasers of Nextel's towers
on agreed terms. Nextel has entered into a transaction with SpectraSite
communications in which Nextel sold towers to SpectraSite and entered into
agreements pursuant to which SpectraSite would build or purchase additional
towers, including towers in our territory. For these future towers and towers
transferred to SpectraSite, we will lease space on the towers either as a
sub-lessee under our agreement with Nextel or enter into a direct lease with
SpectraSite on economic terms similar to our arrangements with Nextel.
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Through our relationship with Nextel, we expect to have access to many of
Nextel's vendors and distributors and have agreed on terms with Motorola for
the purchase of base radios to be installed on sites, hand-held subscriber
units and other related iDEN technology-based items.
To reduce the risk of zoning and other local regulatory delays,
construction delays and site acquisition costs, we intend to locate our cell
sites on existing transmission towers owned by third parties wherever possible
or if necessary on towers constructed or purchased by SpectraSite or other
contracted third parties at our request. In addition, we plan to take advantage
of the capacity of iDEN technology to efficiently employ base radio equipment
for less densely-populated areas and for coverage along interstate highways.
We have attracted an experienced senior management team including former
managers of AT&T Wireless Services (formerly McCaw Cellular Communications) and
believe that our dedicated management focus will enable us to complete the
initial system build-out in our portion of the Digital Mobile Network and
operate effectively.
THE CAPITALIZATION TRANSACTIONS
On January 29, 1999, we raised $989.4 million in debt and equity capital
through cash and in-kind equity contributions and commitments, issuance of the
old notes and borrowings by our principal operating subsidiary under a secured
credit facility. As a result of these transactions, we have assets and
financial resources that we believe will be sufficient to accomplish the
initial build-out of the Digital Mobile Network, and fund our anticipated
operating losses and working capital requirements through 2003, when we expect
to achieve positive operating cash flow for the full fiscal year.
(1) Equity Investments. In consideration for the issuance of our capital
stock and warrants and pursuant to a subscription agreement:
o The cash equity investors, including DLJ Merchant Banking, Eagle
River, and Madison Dearborn Partners, contributed $52.1 million and
agreed to contribute an additional $104.3 million, for a total of
$156.4 million in cash equity contributions;
o Nextel contributed 800 MHz licenses in our territory, with a book
value of $133.2 million, to Nextel WIP License Corp., and we entered
into management agreements that allow us to use these licenses pending
FCC approval of the transfer of the capital stock of Nextel WIP
License Corp. to us; and
o Motorola granted us an $18.4 million credit against our future
purchases of Motorola infrastructure equipment.
(2) Operating Agreements. Through our principal operating subsidiary, we
entered into agreements with a subsidiary of Nextel, which:
o provide for mutual roaming ability and marketing;
o provide for the sharing of switches so that Nextel's switches and any
switches we purchase in the future can be integrated and used for both
our and Nextel's networks;
o set standards for network quality and support;
o provide us with our access to billing, customer care, information
systems and other back-office support used by Nextel; and
o contemplate our access to Nextel's vendor relationships.
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(3) Credit Facility. Our principal operating subsidiary entered into the
$275.0 million credit facility with various financial institutions. We
drew down $175.0 million, an amount representing the entire term loan
portion of the credit facility on January 29, 1999, and we established a
cash collateral account in which we must maintain a balance equal to the
amount of such borrowings until we obtain FCC approval of the transfer of
control of the licenses from Nextel to us.
(4) Offering of the Old Notes. We sold the old notes and received gross
proceeds from this sale of approximately $406.4 million.
BUSINESS STRATEGY
Our principal business objective is to become a leading provider of
wireless communications services in each market in our territory by offering
high-capacity, high-quality, advanced communications services on our portion of
the Digital Mobile Network and implementing key elements of Nextel's business
strategy in our markets. We believe the following elements of our business
strategy will distinguish our wireless service offerings from those of our
competitors and will enable us to compete successfully in the wireless
communications marketplace.
CAPITALIZE ON RELATIONSHIP WITH NEXTEL. We intend to capitalize on our
relationship with Nextel, employing the same iDEN technology as Nextel, and, in
concert with Nextel, accelerating iDEN service coverage under the Nextel brand.
We believe our relationship with Nextel provides strategic and cost saving
advantages, including the following:
o Nextel (Registered Trademark) brand awareness and marketing
programs. We benefit from the broad scope and geographic coverage of
Nextel's marketing efforts and related advertising campaigns, which are
designed to increase awareness of the Nextel brand name and stimulate
interest in and demand for Nextel service by stressing its versatility,
value, simplicity and quality.
o Nationwide roaming. Our customers and customers of Nextel are able to
use interconnect service to roam on both networks at no additional charge
to the customer. Nextel provides our customers the same basic mobile
telephone functionality and related features available to them in our
markets when they roam into Nextel's markets. Conversely, Nextel's
customers generate revenue for us when they roam into our markets.
o Nextel support services. The operating agreements enable us to:
(1) use Nextel's switching facilities and network monitoring center,
(2) use Nextel's back-office systems to support customer activation,
billing and customer care,
(3) access technology improvements from Nextel's research and development
program, and
(4) use Nextel's employee training sessions.
Prices for these services are based on Nextel's costs.
o Nextel's existing relationships with vendors and distributors. Through
our relationship with Nextel, we have access to many of Nextel's vendors
that provide the goods and services that we need in our business.
Additionally Motorola sells base radios and other related iDEN-based
technology items to us at the same prices it offers to Nextel. We intend
to develop our own relationships with vendors and seek from Nextel's
distributors terms similar to those agreed to with Nextel.
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o Nextel's national accounts. We anticipate that numerous offices and
branches of Nextel's national accounts will become our customers when we
launch service in their vicinity. Nextel national accounts that had
subscribers in our operational markets became our subscribers on January
29, 1999.
FOCUS ON MID-SIZED AND SMALLER MARKETS. We believe that our focus on mid-sized
and smaller markets represents an opportunity to capture market share as a
result of the competitive advantages of our service offering. We believe that
price competition for our services in our markets may not be as intense as in
major metropolitan areas where a larger number of wireless service providers
compete.
PROVIDE DIFFERENTIATED, INTEGRATED PACKAGE OF WIRELESS SERVICES INCLUDING
DIRECT CONNECT. We offer a bundled product consisting of the following services
accessible through a single device:
o cellular telephone service;
o Nextel Direct Connect service; and
o paging and short text messaging service.
We believe that Nextel's experience demonstrates that a significant degree
of overlap exists in the customer population for these separate wireless
communications services and that business customers are attracted to the
convenience of combining multiple wireless communications options in a single
handset and consolidating all wireless service charges into a single package
price and billing statement.
Nextel's experience and market research show that a sizable portion of
business users' communications involve contacting others within the same
organization. Nextel Direct Connect service is especially well-suited to
address these intracompany wireless communications needs. Nextel Direct Connect
service enables a user to instantly set up a conference on either a one-to-one
or group basis within the same geographic area. This is a feature that is not
included in any integrated service package currently available from competing
cellular and digital operators. We believe that the Nextel Direct Connect
feature generated a majority of Nextel's network traffic as of March 31, 1999.
To further expand the flexibility and convenience offered by Nextel Direct
Connect service to users outside a single organization but within a single
industry or interest group in a particular dispatch service area, Nextel has
introduced the Nextel Business Networks(sm) service. Nextel Business Networks
extends Nextel Direct Connect service beyond a company's employees to
suppliers, customers and other parties involved in the same transaction,
industry or work site. Nextel reported in its 1998 annual report its estimate
that as of December 31, 1998 over 700,000 digital subscriber units were
utilizing Nextel Business Networks offerings.
In 1998, Nextel introduced Motorola's fourth-generation iDEN phone: the
i1000 (Trade Mark) . The i1000 delivers the full functionality of the Nextel
range of services in a compact, lighter, folding-form handset designed to
appeal to business professionals. In addition, this palm-sized unit offers
longer battery life, functions as a wireless speakerphone and has a second line
capability. We offer a full range of iDEN subscriber equipment, including the
i1000 phone, to our customers.
Nextel recently announced an agreement with Microsoft Corp. to deploy
Nextel Online(SM), a wireless internet service offering which enables Nextel
subscribers to access a customized set of internet services offered through a
version of Microsoft's MSN(TM) portal anytime, anywhere on Nextel's network.
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FOCUS ON BUSINESS CUSTOMERS. Our marketing strategy targets business users who
we believe are particularly attracted to the Digital Mobile Network's potential
for increasing efficiencies and reducing costs. Following Nextel's marketing
approach, we have initially concentrated our sales efforts on a number of
distinct groups of mobile workers, including personnel in the transportation,
delivery, real property and facilities management, construction and building
trades, landscaping and other service sectors. We will gradually expand our
target customer group to include additional industry groups.
We believe, based on Nextel's experience, that this focus on business
customers and its unique bundle of services will result in higher monthly
average revenue per unit and lower average monthly churn rate than other
wireless services providers experience.
OFFER COMPETITIVE AND SIMPLIFIED PRICING FEATURES. We have adopted several of
Nextel's pricing strategies that we believe to be both profitable and
attractive to customers, although we set our price levels in each of our
markets independently of Nextel. These pricing features include home-rate
roaming, one-second rounding after the first minute and flat-rate pricing,
which we believe differentiates our services from competitors, and enables us
to benefit from Nextel's national advertising of these features:
o Home-rate roaming. Our customers pay the same rates they pay at home
when traveling anywhere on either Nextel's or our portion of the Digital
Mobile Network, without the complex dialing procedures, access fees or
higher roaming airtime rates frequently encountered by roaming customers
of cellular providers. As a result of our planned build-out and Nextel's
existing and planned build-out in its own markets, the Digital Mobile
Network is expected to cover approximately 195 million people in the
United States.
o One-second rounding. We bill our mobile telephone service customers
based on the actual number of seconds of airtime used after the first
minute, in contrast to the common cellular industry practice of rounding
call lengths up to the next minute.
o Flat-rate pricing. Our rate plans do not distinguish between "peak" and
"off-peak" minutes, charging one airtime rate and a single nationwide
long distance rate, regardless of the time of day a call is made.
EFFICIENT, STANDARDIZED OPERATIONS. We intend to develop efficient,
standardized operations to support customer activation, billing and customer
care. We intend to use our flexibility under the operating agreements to
minimize overhead costs and provide high-quality customer service by utilizing
Nextel's back-office support systems and practices for these services, or
implementing our own when appropriate. For example, we believe that our ability
to establish consistent pricing and billing across our territory will enable us
to offer cost-effective, high-quality customer care. Customers are able to
contact us through the national 800 number advertised by Nextel and Nextel's
call center automatically routes all calls from our customers to us.
EXPERIENCED MANAGEMENT. We have assembled the following senior management team
with significant experience in the telecommunications industry:
o John Chapple, Chief Executive Officer. Mr. Chapple has nearly twenty
years of experience in the wireless communications and cable television
industries. His experience includes serving from 1988 to 1995 as
Executive Vice President of Operations for McCaw Cellular Communications
and subsequently AT&T Wireless Services following the merger of those
companies. He is the past Chairman of Cellular One Group and the Personal
Communications Industry Association, as well as Vice-Chairman of the
Cellular Telecommunications Industry Association, commonly referred to as
the "CTIA".
o John Thompson, Chief Financial Officer. Mr. Thompson has twenty years
of finance experience including twelve years in the wireless
communications industry. Mr.
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Thompson served as Vice President of Tax for McCaw Cellular
Communications and, more recently, as Senior Vice President of McCaw
Cellular Communications and as Chief Financial Officer of AT&T Wireless
Services. Mr. Thompson played a significant role in a number of key
initiatives for the company including McCaw Cellular Communications'
acquisition of LIN Broadcasting, the merger of McCaw Cellular
Communications and AT&T and AT&T's PCS license acquisitions.
o David Thaler, Vice President--Field Operations. Mr. Thaler has nearly
seventeen years of experience in the wireless and cable television
industries. Mr. Thaler served as Vice President of Operations for AT&T
Wireless Services' Central Region business unit and, more recently, as
Senior Vice President and Managing Director of International Development
and Operations for AT&T Wireless Services.
o David Aas, Vice President--Engineering and Technical Operations. Mr.
Aas has over twenty years of experience in the wireless industry. Mr. Aas
led the design, development, construction and operation of AT&T Wireless
Services' national messaging network. He has also served in a number of
senior technical management positions with Airsignal, MCI and MobileComm.
o Perry Satterlee, Vice President--Business Operations. Mr. Saterlee has
approximately ten years of wireless industry experience. Mr. Satterlee
has spent the last two years at Nextel as President-Pacific Northwest
Area, and prior thereto, served as Vice President and General Manager of
AT&T Wireless Service's Central California District.
For more information on the senior management team, see "Management."
FCC MATTERS
As an equity contribution, Nextel assigned specific 800 MHz specialized
mobile radio licenses that cover areas in our territory and that are or will be
used by us in our network to Nextel WIP License Corp., whose capital stock will
be transferred to us following FCC approval. The transfer applications were
filed with the FCC on or around January 29, 1999. The FCC received no comments
from third parties during the public comment period on these applications, and
we anticipate receiving FCC approval by the fall of 1999. Pending FCC approval,
we have the right to use the frequencies we need under a frequency management
agreement. After FCC approval, we will pledge all of the outstanding shares of
Nextel WIP License Corp. to secure borrowings under the credit facility.
NETWORK BUILD-OUT AND CAPITAL EXPENDITURE PLAN
On January 29, 1999, Nextel sold us operational systems that had been
offering service in upstate New York since July 1998 and in Hawaii since
September 1998. In addition, Nextel, in return for a cash reimbursement,
provided its preliminary design work, construction work in progress and design
and construction contracts for the systems within other parts of our territory.
We currently plan to launch additional commercial operations in our
selected markets so that we cover places where a total of approximately 22.4
million people live or work in our territory by the end of 2001. The table
below indicates the number of markets expected to be commercially launched in
our markets and the total number of people who live or work in such markets.
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<TABLE>
<CAPTION>
NUMBER OF
LAUNCH YEAR MARKETS COVERED POPULATION
- ------------- ---------- -------------------
<S> <C> <C>
1998 5 4.5 million
1999 4 1.5 million
2000 21 12.6 million
2001 9 3.8 million
</TABLE>
We believe that our total projected capital requirements from inception through
year-end 2003 are approximately $922.8 million. These requirements include
capital expenditures related to building out the initial systems in our portion
of the Digital Mobile Network, customer acquisition costs, operating losses
incurred through the initial build-out phase, debt service and closing costs.
Our markets contain places where approximately 33 million people live or
work. Under the terms of the operating agreements, specific build areas,
including metropolitan areas, smaller communities and corridors, are "required
build" areas. Our agreements with Nextel require us to launch commercial
service in the required build areas of our territory within one, two or three
years from January 29, 1999, and have ongoing requirements to complete
additional build-outs in subsequent years. In addition, we have the right to
elect to build out certain additional markets covering places where
approximately 20.4 million people live or work in the aggregate. With respect
to a portion of these optional markets, we have the right to elect to build out
these territories at any time prior to August 29, 2000. For the remaining
optional territories, we have the right to elect to build out before August 29,
1999 so long as we have completed the build-out of our required build areas
scheduled for launch in our first year. Nextel may build out the option markets
prior to our election if we choose not to build out these markets after notice
of Nextel's intent. If our required build markets are not timely built out or
if we choose not to build out optional markets, Nextel will have the right to
build out these markets. If Nextel completes the build-out of these areas, we
will have no right to acquire or operate our network in those areas.
MARKETS
Nextel License Corp. holds licenses in our markets where 33 million people
live or work, of which four markets have populations greater than 1 million and
13 markets have populations between 500,000 and 1 million. The table below
lists the markets in which we intend to provide digital wireless service.
<TABLE>
<CAPTION>
REGION MARKETS
- ------------------------------------------------------------------------------
<S> <C>
NORTHEAST Albany
Binghamton/Elmira
Buffalo
Erie
Glens Falls
Harrisburg/York/Lancaster
Ithaca/Norwich
Jamestown
Rochester
Syracuse
Wilkes-Barre/Scranton/Berwick
- ------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SOUTH Alexandria
Beaumont/Lafayette/Lake Charles
Bristol/Johnson City/Kingsport
Bryan-College Station
Corpus Christi
Florida Panhandle
Gieger/Dothan/Auburn-Opelika
Jackson/Hattiesburg
Lynchburg/Louisville/Lexington
Mobile/Montgomery
Pascagoula
Pensacola/Panama City/Fort Walton Beach
Roanoke/Blacksburg
Shreveport/Texarkana
Tallahassee
Temple-Killeen/Waco
- ------------------------------------------------------------------------------
MIDWEST & WEST Boise/Sun Valley
Davenport/Dubuque
Des Moines/Ames
Duluth
Eau Claire
Green Bay/Fond du Lac
Independence
Omaha/Lincoln
Peoria/Springfield
Rochester
Twin Falls
- ------------------------------------------------------------------------------
NONCONTINENTAL U.S. Hawaii
- ------------------------------------------------------------------------------
</TABLE>
In addition to medium-sized and smaller markets, our markets include
selected corridors along interstate highways and state highways. While these
corridors do not have large business or residential population, we believe that
significant revenues will be earned from travelers on such highways.
Accordingly, the population of a given area may not fully indicate the amount
of the revenues that may be generated in such area.
THE U.S. WIRELESS COMMUNICATIONS INDUSTRY
OVERVIEW
Wireless communications systems use a variety of radio frequencies to
transmit voice and data, and include cellular telephone services, ESMR, PCS and
paging. ESMR stands for enhanced specialized mobile radio, and is the
regulatory term applied to the services, including those provided by the
Digital Mobile Network, that combine wireless telephone service with a dispatch
feature and paging. PCS stands for personal communications service, and refers
to digital wireless telephone service.
Since the first commercial cellular systems became operational in 1983,
wireless telecommunications services have grown dramatically as these services
have become widely available and increasingly affordable. This growth has been
driven by technological advances, changes in consumer preferences and increased
availability of spectrum to new operators.
Wireless telephone service has been one of the fastest growing market
segments in the telecommunications industry. According to the CTIA, between
1994 and 1998, the number of wireless customers and associated industry
revenues grew at compounded annual growth
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rates of 30.8% and 23.3%, respectively, and in 1998, cellular, ESMR and PCS
service providers together added approximately 13.9 million new customers, an
increase of 23.3% from 1997 totals. The following chart illustrates the annual
growth in wireless customers and total industry revenues during the period
indicated.
U.S. WIRELESS SUBSCRIBERS AND TOTAL INDUSTRY REVENUES*
(Subscribers in thousands, $ in billions)
Year Revenues Subscribers
- ---- -------- -----------
1985 $0.5 340
1986 $0.8 662
1987 $1.2 1,231
1988 $2.0 2,069
1989 $3.3 3,509
1990 $4.5 5,283
1991 $5.7 7,557
1992 7.8 11,033
1993 10.9 16,009
1994 14.2 24,134
1995 19.1 33,786
1996 23.6 44,043
1997 27.5 55,312
1998 33.1 69,209
Source: CTIA *Includes cellular, PCS and ESMR
According to the CTIA, as of December 31, 1998, there were over 69 million
mobile telephone users in the United States. Industry sources estimate that
U.S. mobile wireless penetration rates will continue to grow significantly and
reach 64% by 2008.
WIRELESS COMMUNICATIONS SYSTEMS
In the U.S. wireless communications industry, there are three wireless
telephone services: cellular, ESMR and PCS. Currently, cellular is the
predominant service available and has several competitive advantages. Cellular
and ESMR services utilize radio spectrum in the 800 MHz band while PCS operates
at higher frequencies of 1850 to 1990 MHz. Use of the 800 MHz band gives
cellular and ESMR superior ability to penetrate objects and structures and
spread or "propagate" through air, reducing infrastructure costs since fewer
base radios are needed to cover a given area and increasing the ability to
penetrate buildings and other physical obstacles.
All cellular services transmissions were originally analog-based, although
some cellular providers have now overlaid digital systems alongside their
analog systems in many markets. Analog cellular technology has the advantage of
using a consistent standard nationwide, permitting nationwide roaming using a
single mode (i.e., analog), single band (i.e., cellular) handset. On the other
hand, analog technology has several disadvantages, including less efficient use
of spectrum, which reduces effective call capacity, inconsistent service
quality, reduced privacy, security and reliability as compared to digital
technologies and the inability to offer services such as voice mail, call
waiting or caller identification.
Beginning in 1995, the FCC allocated the 1850 to 1990 MHz portion of the
radio spectrum for PCS service. All PCS services, like ESMR, are all-digital
systems which convert
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voice or data signals into a stream of binary 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, improved voice quality and system flexibility, as compared
with analog technologies. Call forwarding, call waiting and greater call
privacy are among the enhanced services digital systems provide. In addition,
due to the reduced power consumption of digital handsets, users benefit from an
extended battery life.
The FCC assigned non-contiguous portions of the 800 MHz band to
specialized mobile radio service or "SMR", which was initially dedicated to
analog two-way radio dispatch services. This service only became a competitor
in the wireless telephone market with the introduction in 1993 of ESMR, which
applies digital technology to make use of the 800 MHz spectrum band and its
superior propagation characteristics to deliver the advantages of a digital
wireless mobile telephone system while retaining and significantly enhancing
the value of SMR's traditional dispatch feature.
Unlike analog cellular, which has been implemented in a uniform manner
across the United States, several mutually incompatible digital technologies
are currently in use in the United States. Roaming into different areas often
requires multi-mode (analog/digital) and/or multi-band (PCS/cellular) handsets
that function at both cellular and PCS frequencies and/or are equipped for more
than one type of modulation technology. Time-division technologies, which
include Global System for Mobile Communications or "GSM", Time Division
Multiple Access or "TDMA" and iDEN break up each transmission channel into time
slots that increase effective capacity. Code Division Multiple Access or "CDMA"
technology is a spread-spectrum technology which transmits portions of many
messages over a broad portion of the available spectrum rather than a single
channel. iDEN phones presently operate only in the iDEN mode within SMR
frequencies, and therefore cannot roam onto other digital or analog wireless
networks.
NEXTEL
Subscriber and Revenue Growth. Nextel deployed a second generation of
Motorola's iDEN technology beginning in the third quarter of 1996. Nextel has
reported a high rate of customer growth since that time, making it one of the
industry's growth leaders. Based on Nextel's quarterly reports, over the past
two years, the number of Nextel's ESMR customers has grown at a 34.5%
compounded growth rate, quarter over quarter and as of March 31, 1999, the
number of Nextel's ESMR customers is estimated to have grown to more than 3.1
million. The following chart illustrates the quarterly growth of Nextel's ESMR
customers over the past four years. Because our physical network will take
several years to build out fully, and because of the smaller size of our
territory as compared to Nextel's, our rate of customer growth may not equal or
exceed Nextel's results. Moreover, we cannot assure you that Nextel itself,
whose growth we believe has been driven primarily by its success in penetrating
its core market of industries dependent upon mobile work groups, will sustain
its recent growth rates in the future.
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NEXTEL - QUARTERLY DIGITAL SUBSCRIBERS*
(In thousands)
Quarter Subscribers
- ------- -----------
Q4 94 13.5
Q1 95 22.6
Q2 95 37.0
Q3 95 61.0
Q4 95 85.0
Q1 96 129.1
Q2 96 176.0
Q3 96 228.0
Q4 96 300.3
Q1 97 422.9
Q2 97 624.4
Q3 97 946.6
Q4 97 1,270.7
Q1 98 1,641.5
Q2 98 2,042.1
Q3 98 2,417.4
Q4 98 2,956.0
Q1 99 3,152.9
* As reported in Nextel's quarterly reports
Nextel's reported monthly average revenue per unit has generally increased
since 1993, a fact that stands in notable contrast to the overall trend in the
wireless industry, where, according to the CTIA data, monthly average revenue
per unit has been declining since 1993 as a result of increasing competition.
Nextel's monthly average revenue per unit may be adversely affected in the
future as it attempts to broaden its customer base and faces increasing
competition. There can be no assurance that our monthly average revenue per
unit will duplicate that of Nextel, because we set our prices independently,
and our markets are geographically and demographically distinct from Nextel's.
The following chart illustrates the quarterly growth of Nextel's monthly
average revenue per unit rates over the past three years.
NEXTEL - MONTHLY AVERAGE REVENUE PER DIGITAL SUBSCRIBER UNIT*
Quarter ARPU
- ------- ----
Q2 96 $52
Q3 96 $56
Q4 96 $56
Q1 97 $59
Q2 97 $63
Q3 97 $70
Q4 97 $68
Q1 98 $66
Q2 98 $69
Q3 98 $70
Q4 98 $70
Q1 99 $71
* As reported in Nextel's quarterly reports
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Differentiated Product Offering We believe that Nextel has maintained and
increased its monthly ARPU as a result of the unique features of its
differentiated product and its focus on mobile work groups. In its 1998 annual
report, Nextel reported that it believes that these groups have made Nextel's
service an integral part of their business operations, which we believe
contributes to high usage and lower rates of churn. Nextel's iDEN service offers
the same mobile telephone features as digital cellular and PCS service,
including call forwarding, call waiting and greater call privacy. Moreover,
iDEN technology's unique differentiation from other digital standards is its
dispatch service, which is marketed by Nextel and us, as Nextel Direct Connect
service.
The Nextel Direct Connect dispatch capability allows any member of a
mobile team to immediately communicate with any or all of a prearranged Nextel
phone-equipped team of up to 100 members with the push of a button. This
"push-to-talk" feature works like a two-way radio, but, in contrast to analog
dispatch SMR radios, digital iDEN technology allows only the person or persons
being called to hear the conversation.
Nextel Direct Connect service, together with other enhancements, including
call alert, speakerphone capability, short text paging and automatic
synchronization capability commonly referred to as "hot-sync" programming with
personal computers (on certain subscriber unit models), differentiate Nextel's
digital service from cellular and PCS providers, and we believe it has been
responsible for Nextel's strong appeal to business users in mobile occupations,
including transportation, delivery, real property and facilities management,
construction and building, landscaping, and other service sectors. In addition
to its advantages to users, Nextel Direct Connect service uses only half the
bandwidth that an interconnected call over an iDEN network would use, and this
efficient use of spectrum gives the iDEN service provider the opportunity to
offer attractive pricing for Nextel Direct Connect service.
THE OPERATING AGREEMENTS
The operating agreements define the relationship between Nextel and us.
The operating agreements demand that we adhere to certain key operating
requirements, including the following:
o we generally are required to offer the full complement of products and
services offered by Nextel in comparable service areas;
o we must abide by Nextel's standard pricing structure (principally
home-rate pricing, per-second billing, and flat-rate pricing), but we
need not charge the same prices as Nextel;
o we must meet minimum network performance and customer care thresholds;
and
o we must adhere to standards in other operating areas, such as frequency
design, site acquisition, construction, cell site maintenance, and
marketing and advertising.
The initial terms of the operating agreements, except for the master site
lease, are for ten years which may be extended for up to two and a half years,
with four, ten-year renewals at our option. The master site lease has an
initial term of five years with nine, five-year renewals at our option.
As an equity contribution, Nextel assigned SMR licenses in our territory
to Nextel WIP License Corp. The capital stock of Nextel WIP License Corp. will
be transferred to us following FCC approval and will then be pledged to secure
borrowings under the credit facility. Pending FCC approval, our use of SMR
frequencies covered by these licenses is governed by the frequency management
agreement. Nextel agreed, as part of its contribution, to pay for future SMR
licenses acquired from third parties in exchange for our
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assignment of previously transferred licenses of equivalent value back to
Nextel. The aggregate value of all such exchanges of the transferred licenses
may not exceed $25.0 million. We are responsible for the cost of migrating
customers off of the frequencies if necessary.
In addition, Nextel shares with us its experience and know-how in
operating iDEN networks, by granting us access to meetings and employee
training sessions, and will provide specified services upon our request. The
most significant services we can ask Nextel to provide are:
o use of certain of Nextel's switching facilities in exchange for a
per-minute fee based on Nextel's national average cost for such service,
including financing and depreciation costs;
o monitoring of switches owned by us on a 24-hour per day basis by
Nextel's network monitoring center in exchange for a fee based on
pro-rata costs;
o use of Nextel's back-office systems for a transitional period in order
to support customer activation, billing and customer care in exchange
for fees based on Nextel's national average cost for such services and,
if necessary after the transitional period, for fees to be mutually
determined;
o use of the Nextel brand name and certain trademarks and service marks,
and the marketing and advertising materials developed by Nextel in
exchange for a marketing services fee described below;
o lease space on transmission towers developed by Nextel or purchasers of
Nextel's towers;
o access to technology enhancements and improvements in exchange for
pro-rata sharing of any research and development costs; and
o access to Nextel vendor contracts and terms wherever possible,
including Motorola infrastructure and subscriber unit pricing.
To further support us in our efforts, Nextel has also agreed that:
o the per-minute switching fees through the year 2001 will be based on
the estimated national average cost for such services in the year 2001;
o the switch monitoring services will be supplied for a fee based on
Nextel's average costs of providing such service;
o the marketing services fee will be deferred until the later of January
2002 or the first month of the quarter beginning after we achieve two
consecutive quarters of positive EBITDA, at which time the fee will be
0.5% of gross monthly service revenues for the next three years of
operation and 1.0% of gross monthly service revenues thereafter; and
o the roaming rate payable to us when Nextel subscribers use our system
will be 95% of the average revenue per minute through 1999, 90% in 2000,
85% in 2001 and 80% thereafter, subject to upward or downward adjustment
based on the relative customer satisfaction levels of Nextel and us.
In exchange for its equity contribution, Nextel received equity interests
in Nextel Partners. Subject to certain conditions, Nextel has the option to
acquire 100% of the outstanding equity interests of Nextel Partners which it
does not already own upon the occurrence of any of the following:
o on certain dates beginning on the seventh anniversary of the
commencement of the operating agreements;
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o in the event Nextel materially changes its technology and does not
elect to replace our equipment; or
o in the event of a material breach by us of our joint venture agreement
with Nextel.
On the other hand, subject to certain conditions, our shareholders have
the right to put their entire interest to Nextel if:
o there is a change of control of Nextel, such right exercisable at any
time during the 18-month period following such change of control;
o Nextel implements operational changes, technology improvements, or
pricing structure changes that adversely impact our business, and
Nextel does not elect to compensate us for net losses attributable to
such changes; or
o Nextel exercises its right to preempt certain demand registrations of
our stock by DLJ Merchant Banking.
The determination of the purchase price to be paid to interest holders
other than Nextel varies for each of the above scenarios, but is generally
based on formula prices or some variation of "fair market value" or a
percentage thereof as determined by independent appraisers.
We are managed by a board of directors. The board of directors currently
consists of one member designated by each of Nextel and Eagle River, two
members designated by DLJ Merchant Banking (one of whom can be an officer or
director of Madison Dearborn Partners) and our chief executive officer. While
the board of directors will set forth the general policies, decisions regarding
certain matters require the consent of DLJ Merchant Banking, and Nextel's
approval must be obtained before any change in technology, any change in our
business scope and any sale of all or substantially all of our assets. See
"Management" and "Certain Relationships and Related Transactions--Shareholders'
Agreement."
MARKETING
At the time of launch in each of our markets, we expect to market our
services to leads and prospects previously generated by the Nextel marketing
organization within our territory, either as a result of offices or branches of
Nextel national accounts located within our territory or as a result of
inquiries directed to Nextel prior to the launch of services. We expect to
benefit from Nextel's national advertising campaign and utilize a direct sales
force as well as indirect sales channels, such as a "store-within-a-store" at
building supply superstores, direct mail and telemarketing.
CUSTOMER CARE
Our customers can reach customer service for our markets through the
national 800 number advertised by Nextel. Nextel's call center automatically
routes all calls from our customers to us. We will initially provide customer
care through a dedicated team based at Nextel's customer care center, and
intend to establish one or more separate customer care centers when our
business base is large enough to justify the expenditures involved.
THE DIGITAL MOBILE NETWORK
Digital Mobile Network Services. We are designing and constructing our
portion of the Digital Mobile Network to generally support the same variety of
service offerings as Nextel, including:
o mobile telephone service, including access to features competitive with
those offered by current wireless communications services, such as the
transfer or "hand-off" of calls as a customer travels from one site
range to another and signal penetration of objects and structures for
improved mobile performance in selected high usage areas;
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o Nextel Direct Connect service; and
o signaling or paging capability, which also has been built into each
subscriber unit, to enable a customer to receive alphanumeric
short-text messages.
In addition, the Digital Mobile Network has been designed to offer customers
additional features, such as voicemail, call hold, call waiting, no-answer or
busy-signal transfer, call forwarding and three-way calling.
Roaming Agreements. We expect to enter into international roaming
agreements with carriers operating outside of the United States. To the extent
that we, independently, are unable to obtain any such agreements due to a
technological issue, our operating agreements with Nextel requires us to
cooperate with Nextel WIP Corp. to provide us with the benefit of Nextel's
international roaming arrangement.
Nextel International, Inc., which is a substantially wholly-owned
subsidiary of Nextel, owns significant equity interests in a number of entities
that provide wireless communications services (primarily using the iDEN
technology) outside the United States. Nextel International's operating
subsidiaries and affiliated entities plan to construct and operate digital
networks employing iDEN technology in major metropolitan market areas located
in Brazil, Mexico, Argentina, Peru and the Philippines.
Nextel has entered into a roaming agreement with Clearnet Communications,
Inc., which has constructed and operates a digital wireless communications
network in Canada using iDEN technology. Nextel also may enter into a roaming
agreement with Nextel International's wholly owned subsidiary which has
constructed and operates a digital wireless communications network in Mexico
using iDEN technology. Such roaming agreements are expected to provide, among
other things, the coordination of customer identification and validation
necessary to facilitate cross-border roaming service in North America.
Digital Mobile Network Technology. The Digital Mobile Network, as
currently deployed by Nextel, combines the iDEN digital technology developed
and designed by Motorola, with a low-power, multi-site deployment of base
radios similar to that used by cellular service, that permits us to reuse the
same frequency in different cells, increasing our system's effective capacity.
The iDEN technology that we are deploying shares many common components with
the GSM technology that has been established as the digital cellular
communications standard in Europe and is a variant of the GSM technology that
is being deployed by certain PCS operators in the United States.
The design of the Digital Mobile Network is premised on dividing a service
area into multiple sites. Each site will contain the base radio connected by a
microwave, fiber optic or telephone line to a computer controlled switching
center. In the case of mobile telephone calls, the switching center controls
the automatic hand-off of calls from site to site as a customer travels,
coordinates calls to and from a customer unit and connects calls to the public
switched telecommunications network. In the case of two-way dispatch calls, the
switching center connects the customer initiating the call directly to the
other customer (in the case of a private call) and directly to a number of
other customers (in the case of a group call) to whom the call is directed in
the geographic service areas.
Northern Telecom, Inc. has supplied the mobile telephone switches for
Nextel's Digital Mobile Network. Nextel reported in its 1998 annual report that
as of the end of that year, it had 31 operational switches and approximately
6,200 cell sites constructed and in operation in its portion of the Digital
Mobile Network. As of March 31, 1999, we had one operational switch and
approximately 203 cell sites constructed and in operation in our portion of the
Digital Mobile Network.
Under our agreements, Nextel is required to cooperate with us to optimize
the location of the switching centers to support both Nextel's existing and
planned Digital Mobile
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Network Service and our launch of service until such time, if ever, that we
attract a customer base in a region sufficient to justify our own purchase of a
switch in that region. In areas where we do not have our own switch, we obtain
switching services from Nextel. See "Certain Relationships and Related
Transactions--Switch Sharing Agreement."
Nextel now uses iDEN technology throughout its portion of the Digital
Mobile Network, and we intend to use it exclusively. iDEN technology is a
proprietary format for delivering signals over scattered, non-contiguous SMR
frequencies. Although iDEN is based on the TDMA technology format, it differs
in a number of significant respects from the TDMA technology versions being
assessed or deployed by many cellular operators and PCS providers in the United
States, and their differences may have important consequences. The iDEN
technology, when utilized for the two-way radio dispatch function, can be
significantly more efficient than TDMA technology formats utilized by certain
cellular providers.
The implementation of the Digital Mobile Network design and technology
increases the capacity of a SMR channel significantly (as compared to analog
technology) in two ways:
(1) The content of every call made by a digital subscriber is converted
into a stream of data bits that are encoded and compressed before
being transmitted over the airwaves. By converting the call into
digital bits, both the content and the processing information used to
route the call can be transmitted over the same channel without
causing interference with other calls. Upon receipt of the coded data
bits, the subscriber's handset will decode the signal into an audible
voice.
By using the iDEN digital technology instead of analog technology on
our systems, we achieve an approximate six times improvement in
efficiency in the use of our spectrum for two-way radio dispatch
service and an approximate three times improvement in efficiency for
mobile telephone service.
(2) Each cell site provides service in our licensed frequencies to a
particular geographic area by permitting the customer's handset to
communicate with our network. By designing our system with multiple
cell sites, we are able to use our spectrum more efficiently. This
enables us to reuse the frequency channels many times throughout the
same license area by placing our transmitters at low elevation sites
and restricting the power of each transmitter to a directed geographic
area, which may be less than a mile and up to thirty miles. This
process avoids interference, while permitting significantly more
customers to use the frequencies allotted to us.
The use of the spectrum in the manner described above, combining digital
compression technology with the reuse of spectrum throughout our license area,
allows us to support more customer calls than would otherwise be the case.
SYSTEM CONSTRUCTION AND SUPPLIERS
The first step required to build our network in a new market is the
completion of the radio design plan, which typically takes about four months.
This stage involves the selection of specific areas in the market for the
placement of base radio sites and the identification of specific frequencies
that will be employed at each site in the initial configuration. Sites are
selected on the basis of their proximity to targeted customers, the ability to
acquire and build the site and frequency transmission characteristics. Site
procurement efforts include obtaining leases and permits, and in many cases,
zoning approvals. This site acquisition process for the initial system to be
constructed in a market, depending on the number of sites, typically takes from
two to eighteen months.
Preparation of each site for equipment installation, including
construction of equipment shelters, transmission towers and power systems,
grounding, ventilation and air conditioning, typically takes six weeks, while
equipment installation, testing and pre-operational systems
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optimization generally takes an additional six weeks prior to commencement of
system operation. Following commencement of system operations in a selected
market, we expect to add new sites to the system continually in order to
improve coverage and capacity.
Our ability to successfully perform these necessary steps may be hindered
by, among other things, any failure to acquire additional necessary radio
frequencies from third parties or to exchange radio frequency licenses with
Nextel, to commence and complete the construction of sites for our equipment in
a timely and satisfactory manner and to obtain necessary approvals, licenses
and permits from federal, state and local agencies, including zoning or other
land use regulatory approvals and approval from the FAA with respect to the
transmission towers that we will be using. We may also experience cost overruns
and delays not within our control caused by acts of governmental entities,
design changes, material and equipment shortages, delays in delivery and
catastrophic occurrences.
To avoid risks of zoning and construction delays and to minimize site
acquisition costs, we locate our sites on existing transmissions towers
wherever possible. In the event we need a transmission tower, and an existing
site is not available, SpectraSite, through its arrangements with Nextel, or
other third parties with whom we have agreements, will purchase or build towers
for us.
Moreover, Motorola is our sole supplier of transmitters and handset
equipment and we rely on Motorola to manufacture a substantial portion of the
equipment necessary to construct the initial build out of our market. Thus, we
are highly dependent on Motorola's ability to deliver this equipment and on
reasonable terms. See "Certain Relationships and Related Transactions--Motorola
Purchase Agreements."
COMPETITION
In each of the markets where our portion of the Digital Mobile Network
will operate, we will compete with the two established cellular licensees and
as many as six PCS licensees, including AT&T Wireless Services, Sprint PCS,
Bell Atlantic, BellSouth, Southwestern Bell and PrimeCo and Airtouch. Our
ability to compete effectively with other wireless communications service
providers depends on a number of factors, including:
o the continued satisfactory performance of iDEN technology;
o the establishment and maintenance of roaming service among our market
areas and those of Nextel; and
o the development of cost-effective direct and indirect channels of
distribution for our Digital Mobile Network products and services.
A substantial number of the entities that have been awarded PCS licenses
are current cellular communications service providers and joint ventures of
current and potential wireless communications service providers, many of which
have financial resources, customer bases and name recognition greater than
ours. PCS operators will likely compete with us in providing some or all of the
services available through our network. Additionally, we expect that existing
cellular service providers, some of which have been operational for a number of
years and have significantly greater financial and technical resources,
customer bases and name recognition than ours, will continue to upgrade their
systems to provide digital wireless communications services competitive with
those available on our network. Moreover, cellular and wireline companies have
been granted authority to participate in dispatch and SMR services,
respectively. We also expect our business to face competition from other
technologies and services developed and introduced in the future.
While we believe that the mobile telephone service currently being
provided on the Digital Mobile Network utilizing the iDEN technology is similar
in function to and achieves performance levels competitive with those being
offered by other current wireless
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communications service providers in our market areas, there are and will in
certain cases continue to be differences between the services provided by us
and by cellular and/or PCS system operators and the performance of their
respective systems. The all-digital networks that we and Nextel operate provide
customers with digital quality and advanced features wherever they roam on the
Digital Mobile Network, in contrast to hybrid analog/digital networks of
cellular competitors, which do not support these features in the large
analog-only portion of their networks. Nevertheless, our ability to provide
roaming services will be more limited than that of carriers whose subscribers
use handsets that can operate on both analog and digital cellular networks and
who have roaming agreements covering larger parts of the country. As we, with
the assistance of Nextel, make progress toward building out the Digital Mobile
Network nationwide, this disadvantage will be reduced, but we can give no
assurance that the Digital Mobile Network will ever be as ubiquitous as other
mobile telephone services. In addition, if either PCS or cellular operators
provide two-way radio dispatch services in the future, our competitive
advantage in being uniquely able to combine that service with our mobile
telephone service would be impaired.
Subscriber units on the Digital Mobile Network are not compatible with
those employed on cellular or PCS systems, and vice versa. This lack of
interoperability may impede our ability to attract cellular or PCS customers or
those new mobile telephone customers that desire the ability to access
different service providers in the same market.
We plan to market the multi-function subscriber units manufactured by
Motorola, which are and are likely to remain significantly more expensive than
analog handsets and are and are likely to remain somewhat more expensive than
digital cellular or PCS handsets that do not incorporate a comparable
multi-function capability. We therefore expect to charge higher prices for the
subscriber handsets to be used by our Digital Mobile Network customers than
those charged by operators for analog cellular handsets and possibly more than
those charged by operators for digital cellular handsets. However, we believe
that our multi-function subscriber units currently are competitively priced
compared to multi-function (mobile telephone service and short text messaging)
digital, cellular and PCS handsets.
During the transition to digital technology, certain participants in the
United States cellular industry are offering subscriber units with dual mode
(analog and digital) compatibility. Additionally, certain analog cellular
system operators that directly or through their affiliates also are
constructing and operating digital PCS systems have made available to their
customers dual mode/dual band (800 MHz cellular/1900 MHz PCS) subscriber units,
to combine the enhanced feature set available on digital PCS systems within
their digital service coverage areas with the broader wireless coverage area
available on the analog cellular network. We do not have comparable hybrid
subscriber units available to our customers.
We can give no assurances that potential customers will be willing to
accept system coverage limitations as a trade-off for the enhanced
multi-function wireless communications package we plan to provide on our
portion of the Digital Mobile Network.
Over the past several years as the number of wireless communications
providers in our market areas has increased and the prices of such providers'
wireless service offerings to customers in those markets have generally been
decreasing. We may encounter market pressures to reduce our Digital Mobile
Network service offering prices or to restructure our Digital Mobile Network
service offering packages to respond to particular short-term, market-specific
situations, such as special introductory pricing or packages that may be
offered by new providers launching their service in a market, or to remain
competitive in the event that wireless service providers generally continue to
reduce the prices charged to their customers, particularly if PCS operators
enter the smaller markets that we intend to serve.
Because many of the cellular operators and certain of the PCS operators in
our markets have substantially greater financial resources than us, such
operators may be able to offer prospective customers equipment subsidies or
discounts that are substantially greater than
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those, if any, that could be offered by us and may be able to offer services to
customers at prices that are below prices that we are able to offer for
comparable services. Thus, our ability to compete based on the price of its
Digital Mobile Network subscriber units and service offerings will be limited.
We cannot predict the competitive effect that any of these factors, or any
combination thereof, will have on us.
Cellular operators and certain PCS operators and entities that have been
awarded PCS licenses each control more spectrum than is allocated for SMR
service in each of the relevant market areas. Each cellular operator is
licensed to operate 25 MHz of spectrum and certain PCS licensees have been
licensed for 30 MHz of spectrum in the markets in which they are licensed,
while no more than 21.5 MHz is available in the 800 MHz band to all SMR
systems, including our systems, in those markets. The control of more spectrum
gives cellular operators and such PCS licensees the potential for more system
capacity and, therefore, more subscribers than SMR operators, including Nextel
and us. We believe that we generally have adequate spectrum to provide the
capacity needed on our portion of the Digital Mobile Network currently and for
the reasonably foreseeable future.
Nextel has told us that it expects to increase over time the proportion of
its Digital Mobile Network customers that it obtains through its indirect
distributor network, and we anticipate that our own marketing efforts will
follow the same pattern of Nextel's, with an initial reliance on direct sales,
followed by increasing reliance on indirect distribution channels. In its 1998
annual report, Nextel reported that, as it expands its retail subscriber base
through increased reliance on indirect distribution channels, and as price
competition in the wireless industry intensifies, its monthly average revenue
per unit is expected to decrease and its average monthly churn rate is expected
to increase, and we may be affected by similar factors in the future.
In 1997, the FCC reallocated and auctioned 30 MHz of 2.3 GHz spectrum to
wireless services. However, the strict operational and technical limitations
the FCC placed on use of the spectrum will likely prohibit the provision of
mobile services using current technology. Additionally, the FCC has reallocated
220 MHz of radio spectrum for use by "emerging telecommunications
technologies," such as PCS, low-earth orbit satellites and mobile satellite
systems. The FCC has authorized a consortium of communications companies to
provide nationwide mobile satellite services. Additionally, the FCC recently
reallocated 36 MHz of the former analog television channels to commercial
services, including broadcasts, fixed and mobile services. We cannot predict
how these technologies will develop or what impact, if any, they will have on
our ability to compete for wireless communications services customers.
EMPLOYEES
As of March 31, 1999, we had approximately 200 employees, which includes
our upstate New York territory and Hawaii operations. None of our employees is
or is expected to be represented by a labor union or subject to a collective
bargaining agreement, nor have we experienced any work stoppage due to labor
disputes. We believe that our relations with our employees are good.
PROPERTIES
We lease our headquarters located at 4500 Carillon Point in Kirkland,
Washington. This facility is approximately 14,000 square feet and we have a
lease commitment on the facility through December 31, 2002. We also lease
administrative offices of approximately 12,700 square feet in Minnetonka,
Minnesota under a lease expiring March 31, 2002. We lease cell sites for the
transmission of radio service. These sites are located on transmission towers
generally at heights ranging from 150 to 300 feet above the ground. The terms
of these leases generally range from month-to-month to 20 years at monthly
rents ranging from $300 to $2,200. As of March 31, 1999, we had approximately
245 constructed sites at leased locations.
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REGULATION
Federal Regulation
SMR Regulation. We are an SMR operator regulated as such by the FCC. The
FCC also regulates the licensing, construction, operation and acquisition of
all other wireless telecommunications systems in the United States, including
cellular and PCS operators. We are generally subject to the same FCC rules and
regulations as cellular and PCS operators, but our status as an SMR operator
creates some important regulatory differences.
Within the limitations of available spectrum and technology, SMR operators
are authorized to provide mobile communications services to business and
individual users, including mobile telephone, two-way radio dispatch, paging
and mobile data services. SMR regulations have undergone significant changes
during the last five years and continue to evolve as new FCC rules and
regulations are adopted.
The first SMR systems became operational in 1974, but these early systems
were not permitted or designed to provide mobile telephone service competitive
with that provided by cellular operators. SMR operators originally emphasized
two-way dispatch service, which involves shorter duration communications than
mobile telephone service and places less demand on system capacity. SMR system
capacity and quality was originally limited by:
o the smaller portion of the radio spectrum allocated to SMR,
o the assignment of SMR frequencies on a non-contiguous basis,
o regulations and procedures that initially served to spread ownership of
SMR licenses among a large number of operators in each market, thereby
further limiting the amount of SMR spectrum available to any particular
operator, and
o older SMR technology, which employed analog transmission and a single
site, high-power transmitter configuration, thus precluding the use of
any given SMR frequency by more than one caller at a time within a
given licensed service area.
The original analog SMR market, therefore, was oriented largely to
customers such as contractors, service companies and delivery services that
have significant field operations and need to provide their personnel with the
ability to communicate directly with one another, either on a one-to-one or
one-to-many basis, within a limited geographic area. SMR licenses granted prior
to 1997 have several unfavorable characteristics, as compared with cellular or
PCS licenses. Because these SMR licenses were on a site-by-site basis, numerous
SMR licenses were required to cover the metropolitan area typically covered by
a single cellular or PCS license.
SMR licenses granted in 1997 and later were granted to cover a large area
(known as an economic area, or EA) rather than a particular antenna at a
particular site. EA licenses, therefore, are more like cellular or PCS licenses
in this regard, and eliminate one of the former regulatory disadvantages of SMR
licenses. Nextel was the largest successful bidder in the FCC's auction of EA
licenses, and, as a result, Nextel WIP License Corp. holds EA licenses for all
of the territory that we intend to serve.
EA licences grant the licensee exclusive use of the frequencies in the EA
territory. To the extent that another SMR site-by-site licensee may be
operating in the same frequencies in the EA pursuant to another license, the EA
licensee has priority, but must compensate the incumbent for the cost of
changing to another frequency. Most of our EA licenses are free of incumbent
carriers other than Nextel. Nextel has transferred to us those site-by-site
licenses located in our EA territories operating at the same frequencies. EA
licenses to operate on these frequencies were granted pursuant to a one time
auction and are issued for ten years, after which we will need to apply for
renewal from the FCC. EA licensees generally expect to obtain renewal of its
licenses.
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All of our SMR licenses are subject to FCC build-out requirements,
although the FCC recently suspended the build-out deadlines for pre-1997 SMR
licenses. Failure to comply with the build-out requirements for both
site-by-site licenses and EA licenses may result in a revocation of these
licenses by the FCC. We will be acquiring and utilizing both site-by-site
licenses and EA licenses.
Federal Regulation of Wireless Operators. SMR regulations have undergone
significant changes during the last five years and continue to evolve as new
FCC rules and regulations are adopted pursuant to the Omnibus Budget
Reconciliation Act of 1993 and the Telecommunications Act. Since 1996 SMR
operators like us and Nextel have been subject to common carrier obligations
similar to those of cellular and PCS operators. This regulatory change
recognized the emergence of Nextel's type of SMR service as competitive with
the wireless service provided by cellular and PCS providers.
As a result, SMR providers like us now have many of the same rights (such
as the right to interconnect with other carriers) and are subject to many of
the same obligations applicable to cellular and PCS operators.
The FCC prohibits any SMR, cellular, or PCS provider, collectively
regulated as "CMRS" providers, from restricting another carrier's ability to
resell our services until November 24, 2002. The FCC also has adopted
requirements for CMRS providers, including covered SMR providers, to implement
various enhanced 911 capabilities by October 2001. The FCC also requires CMRS
providers to deploy technology that would allow customers to keep their
telephone numbers when switching to another carrier. Covered SMR providers,
including Nextel and us, along with other CMRS services providers, must offer
this number portability service in the 100 largest metropolitan areas,
including the ability to support nationwide roaming, by November 2002. This
requirement also includes enabling calls from the Company's network to be
delivered to ported wireline numbers. The FCC is presently considering whether
to accelerate this deployment schedule so that CMRS providers could use this
technology to foster more efficient utilization of telephone numbers.
The FCC's spectrum cap regulations limit any entity from holding
attributable interests in more than 45 MHz of licensed broadband PCS, cellular
or covered SMR spectrum with significant overlap in any geographic area. The
FCC is presently reviewing these spectrum cap regulations. An interest of 20%
or more of the equity or voting rights in a PCS, SMR or cellular licensee may
subject an investor to restrictions on ownership of overlapping wireless
providers.
Wireless providers also must satisfy FCC requirements relating to
technical and reporting matters. One such requirement is the coordination of
proposed frequency usage with adjacent wireless users, permittees and licensees
in order to avoid electrical interference between adjacent networks. In
addition, the height and power of base radio transmitting facilities of certain
wireless providers and the type of signals they emit must fall within specified
parameters.
The FCC is responsible for the other rules and policies which govern the
operations over the SMR spectrum which we intend to use. This includes the
terms under which CMRS providers interconnect their networks and the networks
of wireline and other wireless providers of interstate communications services.
The FCC also has the authority to adjudicate complaints filed under the
Communications Act with respect to service providers subject to its
jurisdiction among other matters. Under its broad oversight authority with
respect to market entry and the promotion of a competitive marketplace for
wireless providers, the FCC regularly conducts rulemaking and other types of
proceedings to determine rules and policies that could affect SMR operations.
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In August 1996, the FCC adopted rules implementing certain Communications
Act provisions which impose a number of interconnection obligations for local
exchange carriers or "LECs" which affect wireless service providers.
Established LECs must provide for collocation of equipment necessary for
interconnection, as well as any technically feasible method of interconnection
requested by a CMRS provider. In addition, all LECs are obligated to enter into
reciprocal, cost-based compensation arrangements with CMRS providers for the
transmission "local" traffic. If we cannot successfully negotiate an
interconnection agreement with an established LEC, it may require the relevant
state public utilities commission to serve as arbitrators.
In addition, the Communications Assistance for Law Enforcement Act of 1994
requires all telecommunications carriers, including wireless carriers, as of
June 30, 2000, to ensure that their equipment is capable of permitting the
government, pursuant to a court order or other lawful authorization, to
intercept any wire and electronic communications carried by the carrier to or
from its subscribers and to access certain call-identifying information that is
reasonably available to the carriers. Although final standards have yet to be
promulgated, compliance with the requirements of this act could impose
significant additional direct and/or indirect costs on us and other wireless
carriers.
Wireless networks are also subject to certain FCC and FAA regulations
respecting the relocation, lighting and construction of transmitter towers and
antennas and are subject to regulation under the National Environmental Policy
Act and the environmental regulations of the FCC. The FCC's rules require
antenna structure owners to notify the FAA of structures that may require
marking or lighting. In addition to its SMR licenses, we may also utilize
common carrier point-to-point microwave and traditional landline facilities to
connect base radio sites and to link them to their respective main switching
offices. These microwave facilities are separately licensed by the FCC and are
subject to regulation as to technical parameters, service, and transfer or
assignment.
Pursuant to the Telecommunications Act, all telecommunications carriers
that provide interstate telecommunications services, including SMR providers,
are required to make an "equitable and non-discriminatory contribution" to
support the cost of federal universal service programs. These programs are
designed to achieve a variety of public interest goals, including affordable
telephone service nationwide, as well as subsidizing telecommunications
services for schools and libraries. Contributions are calculated on the basis
of each carrier's interstate and, for certain programs, intrastate end-user
telecommunications revenue. The Telecommunications Act also permits states to
adopt universal service regulations not inconsistent with the
Telecommunications Act or the FCC's regulations. The FCC has concluded that
states can require CMRS providers to contribute to their universal services
funds. This decision is presently pending before the United States Court of
Appeals for the Fifth Circuit.
The Telecommunications Act also requires all telecommunications carriers,
including SMR licensees, to ensure that their services are accessible to and
useable by persons with disabilities, if readily achievable. Compliance with
the Telecommunications Act requirements, and the regulations promulgated
thereunder, could impose additional direct and/or indirect costs on us and
other licensees.
In addition, other regulations may be promulgated pursuant to the
Communications Act or the Telecommunications Act which would significantly
raise the cost of providing service. In response, we may be required to modify
its business plans or operations in order to comply with any such regulations.
Moreover, the FCC or other federal government agencies or any state regulatory
agency having jurisdiction over our business may adopt or change regulations or
take other action that could adversely affect our financial condition or
results of operations.
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State Regulation and Local Approvals
The states in which we operate generally have state agencies or
commissions charged under state law with regulating telecommunications
companies, and local governments generally seek to regulate placement of
transmitters and rights of way. While the powers of state and local governments
to regulate wireless carriers are limited to some extent by federal law, we
will have to devote resources to comply with state and local requirements. For
example, state and local governments generally may not regulate our rates or
our entry into a market, but are permitted to manage public rights of way, for
which they can require fair and reasonable compensation.
Under the Communications Act, states and local authorities maintain
authority over the zoning of sites where our antennas are located. These
authorities, however, may not discriminate against or prohibit our services
through its use of zoning authority. Therefore, while we may need approvals for
particular sites or may not be able to choose the exact location for our site
we do not foresee significant problems in placing our antennas at sites in our
territory.
Pending Regulatory Initiatives
The FCC and a number of state regulatory authorities have initiated
proceedings or indicated their intention to examine the implementation of
number portability to permit customers to retain their telephone numbers when
they change service providers, the implementation of various number
conservation mechanisms, and alterations in the structure of universal service
funding, among other matters. These initiatives could impose significant
financial obligations on us and other wireless service providers, the magnitude
of which we cannot predict.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
The Communications Act requires us to obtain FCC approval before we can
assume full control of the licenses Nextel is transferring to us. We began the
approval process by filing transfer applications with the FCC. The period for
third parties to file petitions to deny these applications has closed with no
petitions filed. The FCC, however, may accept late filed petitions under
exceptional circumstances. At the conclusion of the process, the FCC may
approve the transfer of the licenses as in the public interest, or may conclude
that there are substantial and material issues of fact that prevent approval of
the transfer. The latter determination requires the FCC to convene a hearing on
the transfer. However, the FCC is not required to complete its assessment
within any time limit, and any determination it reaches is subject to judicial
review. While neither we nor Nextel are aware of any basis for the FCC to deny
the transfer, we cannot be absolutely certain that the transfer will be
granted.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of Nextel Partners:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John Chapple ................ 45 President, Chief Executive Officer and Director
John D. Thompson ............ 45 Chief Financial Officer and Treasurer
David Thaler ................ 43 Vice President--Field Operations
David Aas ................... 45 Vice President--Engineering and Technical
Operations
Perry Satterlee ............. 38 Vice President--Business Operations
Mark Fanning ................ 39 Vice President--People Development
Donald Manning .............. 38 Vice President, General Counsel and Secretary
Timothy M. Donahue .......... 49 Director
Andrew H. Rush .............. 40 Director
Andrew E. Sinwell ........... 34 Director
Dennis M. Weibling .......... 47 Director
</TABLE>
The board of directors is comprised of five directors. The members of the
board of directors were elected in accordance with the provisions of a
shareholders' agreement where the shareholders agreed to elect:
o two directors selected by DLJ Merchant Banking, one of whom is a
director of Madison Dearborn Partners: Andrew Rush and Andrew Sinwell,
respectively,
o one director selected by Nextel: Timothy Donahue,
o one director selected by Eagle River: Dennis Weibling, and
o the chief executive officer of Nextel Partners: John Chapple.
See "Certain Relationships and Related Transaction--The Shareholders'
Agreement."
Each director shall hold office until the next annual meeting of
shareholders or until his successor has been elected or qualified. All
executive officers of Nextel Partners are elected by, and serve at the
discretion of, the board of directors.
John Chapple has worked to organize Nextel Partners throughout 1998 and
has been the President, Chief Executive Officer and a director of Nextel
Partners since August 1998. Mr. Chapple, a graduate of Syracuse University and
Harvard University's Advanced Management Program, has nearly twenty years
experience in the cable television and wireless communications industries. From
1978 to 1983, he served on the senior management team of Rogers Cablesystems
before moving to American Cablesystems as Senior Vice President of Operations
from 1983 to 1988. From 1988 to 1995, he served as Executive Vice President of
Operations for McCaw Cellular Communications and subsequently AT&T Wireless
Services following the merger of those companies. From 1995 to 1997, Mr.
Chapple was the President and Chief Operating Officer for Orca Bay Sports and
Entertainment in Vancouver, B.C. Orca Bay owns and operates Vancouver's
National Basketball Association and National Hockey League sports franchises in
addition to the General Motors Place sports arena and retail interests. Mr.
Chapple is the past Chairman of Cellular One Group and the Personal
Communications Industry Association, as well as Vice-Chairman of the CTIA.
John D. Thompson has been the Chief Financial Officer and Treasurer of
Nextel Partners since August 1998 and has approximately twenty years of finance
experience including twelve years in the wireless communications industry. Mr.
Thompson holds both a
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B.A. in Accounting and a Juris Doctor from the University of Puget Sound. From
1978 to 1986, he served as Tax Manager for Laventhol & Horwath. In 1986, he
joined McCaw Cellular Communications as Vice President of Tax. In 1990, he
became Senior Vice President of McCaw Cellular Communications and assumed a
significant role in a number of key initiatives for the company, including its
acquisition of LIN Broadcasting in 1990, the merger of it and AT&T in 1993 and
AT&T's PCS license acquisitions in 1996. In 1997, he became Chief Financial
Officer for AT&T Wireless Services. Mr. Thompson has served on the boards of a
number of AT&T Wireless Services joint ventures, including Bay Area Cellular
Telephone Company.
David Thaler has been the Vice President-Field Operations of Nextel
Partners since August 1998 and has nearly seventeen years of management
experience in the wireless and cable television industries. From February 1997
to 1998, he served as Senior Vice President and Managing Director of
International Development and Operations for AT&T Wireless Services. In this
role, Mr. Thaler had overall responsibility for all operating facets related to
AT&T Wireless joint ventures in Brazil, Hong Kong, India, Colombia and Taiwan.
From 1995 to 1997, Mr. Thaler was Vice President of Operations for AT&T
Wireless Services' Central Region business unit. From 1988 to 1995, Mr. Thaler
served as Vice President and General Manager of McCaw Cellular Communications'
Minnesota District providing overall leadership for an operation consisting of
fourteen metropolitan areas. From 1983 to 1988, he served as General Manager
and Regional Vice President for American Cablesystems.
David Aas has been the Vice President-Engineering and Technical Operations
of Nextel Partners since August 1998. Prior to joining Nextel Partners, Mr. Aas
served as Vice President of Engineering and Operations of AT&T Wireless
Services' Messaging Division. Mr. Aas has twenty-one years experience in the
wireless industry and has held a number of senior technical management
positions, including positions with Airsignal from 1977 to 1981, MCI from 1981
to 1986 and MobileComm from 1986 to 1989. Since 1989, he has been with AT&T
Wireless Services, where he has led the design, development, construction and
operation of AT&T Wireless Services' national messaging network. Mr. Aas served
on the Technical Development Committee of the Personal Communications Industry
Association and led the development and deployment of the PACT two-way
messaging system.
Perry Satterlee has been the Vice President-Business Operation of Nextel
Partners since August 1998 and has approximately ten years of wireless industry
experience. He has spent the last two years with Nextel, where he held the
position of President-Pacific Northwest Area since its inception in 1996. Prior
to joining Nextel, Mr. Satterlee served from 1992 to 1996 as Vice President and
General Manager of AT&T Wireless Services' Central California District. From
1990 to 1992, he was General Manager of McCaw Cellular Communications'
Ventura/Santa Barbara market. From 1988 to 1990, Mr. Satterlee was Director of
Planning for McCaw Cellular Communications, where he led the company's planning
and budgeting processes.
Mark Fanning has been the Vice President-People Development of Nextel
Partners since August 1998 and has over seventeen years of human resources
experience, including nine years in the wireless industry with McCaw Cellular
Communications and AT&T Wireless Services. From 1995 to 1998, Mr. Fanning
served as Vice President for People Development Operations for AT&T Wireless
Services. From 1991 to 1995, he served as Director and later as Vice President
of Compensation & Benefits for AT&T Wireless Services. From 1989 to 1991, he
was the Director of People Development for McCaw's California/Nevada region.
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Donald Manning has been the Vice President, General Counsel and Secretary
of Nextel Partners since July 1998. Prior thereto, he served as Regional
Attorney for AT&T Wireless Services' Western Region, an eleven state business
unit generating over $400 million in revenues annually. Prior to joining AT&T
Wireless Services, Mr. Manning was a Senior Associate with Heller, Ehrman, White
and McAuliffe specializing in corporate and commercial litigation. From 1985
through 1989, he was an Associate with the Atlanta-based firm of Long, Aldridge
& Norman.
Timothy M. Donahue has been a director of Nextel Partners since January
1999. Mr. Donahue has been a director of Nextel since May 1996 and has been the
President of Nextel since February 1996. From 1986 to January 1996, Mr. Donahue
held various senior management positions with AT&T Wireless Services.
Andrew H. Rush has been a director of Nextel Partners since January 1999.
Mr. Rush has been a Managing Director of DLJ Merchant Banking since January
1997. From 1992 to 1997, Mr. Rush was an officer of DLJ Merchant Banking and
its predecessors. Mr. Rush currently serves as a member of the advisory board
of Triax Midwest Associates, L.P. and as a member of the board of directors of
Societe d'Ethanol de Synthese.
Andrew E. Sinwell has been a director of Nextel Partners since January
1999. Mr. Sinwell has been a Director of Madison Dearborn Partners since August
1996. From 1994 to 1996, Mr. Sinwell was a Senior Policy Advisor at the FCC.
Dennis M. Weibling has been a director of Nextel Partners since January
1999. Mr. Weibling has been a director of NEXTLINK since January 1997. Mr.
Weibling also has been President of Eagle River, Inc. since October 1993. Mr.
Weibling is a director of Nextel and a member of the operations, audit, finance
and compensation committees. Mr. Weibling serves on the board and executive
committee of Teledesic Corporation, a satellite telecommunications company
backed by Craig McCaw and Bill Gates.
DIRECTOR COMPENSATION
Directors of Nextel Partners do not receive compensation for services
provided as a director. All directors are reimbursed for their out-of-pocket
expenses in serving on the board of directors.
EXECUTIVE COMPENSATION
Summary Compensation Table. Prior to January 29, 1999, Nextel Partners did
not pay any compensation to its executive officers, and on January 29, 1999,
certain executive officers received a lump sum in recognition of such officer's
service prior to such date. See "--Executive Employment Contracts." The
following table sets forth the estimated compensation to be paid by Nextel
Partners to the chief executive officer and the other four most highly
compensated executive officers of Nextel Partners for fiscal year 1999.
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SUMMARY COMPENSATION TABLE
ESTIMATED COMPENSATION FOR FISCAL YEAR 1999
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- --------------------------
OTHER RESTRICTED VESTED
BASE ANNUAL STOCK RESTRICTED
NAME AND PRINCIPAL POSITION YEAR SALARY ($) COMPENSATION AWARDS (2) STOCK (3)
- ----------------------------- ------ ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
John Chapple ................
Chief Executive Officer 1999 $150,000 -- 491,111 122,778
John D. Thompson ............
Chief Financial Officer and
Treasurer 1999 $150,000 -- 339,444 84,861
David Thaler ................
Vice President--Field
Operation 1999 $150,000 -- 195,000 48,750
David Aas ...................
Vice President--Engineering
and Technical Operations 1999 $140,000 -- 162,500 40,625
Perry Satterlee .............
Vice President--Business
Operations 1999 $150,000 -- 137,222 34,306
</TABLE>
- ----------
(1) Does not include bonuses that may be paid to these officers. See
"--Executive Employment Contracts."
(2) Represents number of shares of Class A common stock, $.001 par value,
sold to such officer at $0.01 per share pursuant to restricted stock
purchase agreement. These shares will vest over a four-year period based
on the continued employment during the relevant vesting period, the
achievement of certain performance goals related to revenue, EBITDA and
the scheduled build-out of the Digital Mobile Network. See "--Restricted
Stock Purchase Agreements." These shares are entitled to distributions to
the extent paid by Nextel Partners.
(3) Represents number of shares of Class A common stock which have vested to
date.
EXECUTIVE EMPLOYMENT CONTRACTS
Nextel Partners has entered into employment agreements with Messrs.
Chapple, Thompson, Thaler, Aas, Satterlee and Fanning in connection with their
employment. Each receives an annual base salary ranging from $125,000 to
$150,000 with an additional cash payment of up to 40% of his then current base
salary if certain performance targets are met. On January 29, 1999, each
received a lump sum ranging from $70,000 to $90,000 in recognition of his
service prior to such date. Each agreement has an initial 4 year term. Upon
completion of the build-out of initial sections and applicable optional
sections of the Digital Mobile Network on or before March 1, 2002, each may
receive a raise in his base salary and performance based bonus. In addition,
each has agreed that while employed by Nextel Partners, and for one year
thereafter, he will not compete against, or solicit employees or business of,
Nextel Partners or Nextel, or their affiliates.
In addition, on January 29, 1999, Nextel Partners entered into a stock
option agreement whereby Nextel Partners granted Mr. Thompson the option to
purchase up to 35,000 shares of Class A common stock at an exercise price of
$10.00 per share. After the fourth anniversary of the agreement, Mr. Thompson
may surrender, without payment of the exercise price, all or a portion of the
option for payment in cash by the Company of $14.286 per share. Moreover, Mr.
Thompson obtained a secured loan of $2.2 million from Nextel Partners,
evidenced by the non-negotiable promissory note delivered by Mr. Thompson on
January 29, 1999 to Nextel Partners. The option is vested and exercisable by
Mr. Thompson, and will expire on January 29, 2009.
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RESTRICTED STOCK PURCHASE AGREEMENTS
On November 20, 1998, Nextel Partners entered into restricted stock
purchase agreements with Messrs. Chapple, Thompson, Thaler, Aas, Satterlee and
Fanning in consideration of their employment, which were amended on January 29,
1999. Nextel Partners issued an aggregate of 1,462,499 shares of Class A common
stock to these purchasers at a price of $0.01 per share.
As of January 29, 1999, the majority of the initial time shares
representing 25% of the total restricted shares issued to the executive
officers were vested. A percentage of the remaining issued shares vest annually
over a four-year period through December 31, 2002 based on the continued
employment of the officer during the relevant vesting period and the
achievement of performance goals related to revenue, EBITDA and the build-out
of the Digital Mobile Network.
The vesting of the shares may be accelerated upon a change of control of
Nextel Partners or Nextel or, subject to certain conditions, upon the sale or
disposition by DLJ Merchant Banking of Series A convertible preferred stock,
par value $0.001 per share or the Class A common stock issuable upon conversion
thereof.
Subject to certain conditions, these shares may be repurchased due to
termination of the employment of such officer or on account of death or
disability.
EMPLOYEE STOCK OPTION PLAN
Nextel Partners has established a stock option plan which offers employees
the opportunity to purchase shares of Class A common stock at a price equal to
the fair market value of a share of such stock as of the date of grant of such
options. The total number of shares that could be acquired under the plan would
be approximately 2,022,222 shares.
The grant of options to senior managers is conditioned on Nextel Partners'
achievement of performance criteria based on buildout, revenue and EBITDA
targets. The grants to employees, other than senior managers, may be subject to
similar performance criteria or other criteria established by Nextel Partners'
board of directors. Nextel Partners expects 25% of the options subject to the
plan to be granted in connection with the recruitment of new employees and that
senior managers will receive in the aggregate 20% of the total number of
options granted in each year.
No more than 30% of the number of authorized options will be granted in
any year. The first options will be awarded as of December 31, 1999. No options
may be granted after January 1, 2003.
The options granted will be exercisable and vested in whole or in part
depending on the number of years such option holder has worked at Nextel
Partners.
The plan contemplates the acceleration of vesting of some or all options
upon a change of control of Nextel Partners.
The options granted would be exercisable for 10 years. The options would
be generally non-transferable and the right to exercise can terminate
concurrently with termination of employment.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of the initial capitalization transactions which were
consummated on January 29, 1999, we raised $989.4 million in debt and equity
capital through cash and in-kind equity contribution and commitments, issuance
of the notes and borrowings by our principal operating subsidiary. See
"Business--The Capitalization Transactions" and "Use of Proceeds." In
connection with these transactions, we or our subsidiary entered into several
agreements with our shareholders, including operating agreements with a
subsidiary of Nextel, and equipment purchase agreements with Motorola.
THE SUBSCRIPTION AND CONTRIBUTION AGREEMENT
As discussed under "Business--The Capitalization Transactions," through a
subscription agreement, Nextel agreed to assign certain licenses to its wholly
owned subsidiary, Nextel WIP License Corp. Upon approval by the FCC, we will
receive the capital stock of Nextel WIP License Corp. The book value of these
licenses was approximately $133.2 million as of January 29, 1999. In exchange,
Nextel received 2,185,000 shares of Series B redeemable or convertible
preferred stock 8,740,000 shares of Series C convertible preferred stock and
2,185,000 shares of Series D convertible preferred stock.
The cash equity investors, including DLJ Merchant Banking and its
affiliates, Eagle River and Madison Dearborn Partners, made irrevocable
commitments to contribute to Nextel Partners an aggregate of $156.4 million in
cash in exchange for a total of 15,643,322 shares of Series A convertible
preferred stock. See "Ownership of Capital Stock and Principal Stockholders."
As of January 29, 1999, these investors contributed an aggregate of $52.1
million of their $156.4 million commitment and are required to contribute the
unfunded portion of their respective commitments in installments of $52.1
million on each of December 31, 1999 and December 31, 2000.
In addition, we issued to DLJ Merchant Banking and its affiliates,
including Madison Dearborn Partners, warrants to purchase in the aggregate
405,710 shares of our Class A common stock. These warrants are exercisable at a
price of $0.01 per share, subject to adjustment, starting March 30, 1999 and
expire on January 29, 2004, subject to early termination as a result of the
exercise of certain rights by other shareholders.
Motorola contributed to us an $18.4 million credit against future
purchases of certain Motorola system infrastructure equipment in exchange for
1,836,649 shares of Series A convertible preferred stock.
THE SHAREHOLDERS' AGREEMENT
General. As set forth in a shareholders' agreement, the shareholders,
including executive officers who own restricted shares of Class A common stock,
and we agreed to certain matters in connection with our management and
operations and the sale, transfer or other disposition of our capital stock by
these shareholders.
Management. We are governed by the board of directors consisting of five
persons, and, unless otherwise required, actions of the board of directors
require the affirmative vote of a majority of the board of directors at a duly
convened meeting. The shareholders agreed to vote for the five persons as
follows: (i) two directors selected by DLJ Merchant Banking (one of whom can be
an officer of Madison Dearborn Partners); (ii) one director selected by Nextel;
(iii) one director selected by Eagle River; and (iv) our chief executive
officer. See "Management." DLJ Merchant Banking also has the right to have two
non-voting observers present at board meetings. On January 29, 1999, the
shareholders elected John Chapple, our
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chief executive officer, Timothy Donahue, Nextel's designee, Andrew Rush and
Andrew Sinwell, DLJ Merchant Banking's designees and Dennis Weibling, Eagle
River's designee. The right of a shareholder to designate a director terminates
when the shareholder and its affiliates own, in the aggregate, less than 50% of
their original ownership of our capital stock. DLJ Merchant Banking loses its
right to designate a second board member when its ownership of us, combined
with its affiliates, is less than 12% of their original ownership.
Until our initial public offering of equity or when DLJ Merchant Banking
owns less than 80% of its initial capital ownership of us, the approval of at
least one of the directors designated by DLJ Merchant Banking is required for
certain significant matters, including:
o the determination of compensation and benefits of senior management,
o modifications of long-term business strategy or scope of business, or
o material modifications of any material customer relationships.
Other matters, including a material change in the technology we use, a
disposition of all or substantially all of our assets, or a decision to broaden
the scope of business, require the approval of the director selected by Nextel,
although these approval rights terminate if and when Nextel transfers all of
its shares to a third party after the twelfth anniversary of the shareholders'
agreement.
Restrictions on Transfer. The shareholders' agreement imposes numerous
restrictions with respect to the sale, transfer or other disposition of our
capital stock. Generally, prior to the completion of our portion of the Digital
Mobile Network and the achievement of positive EBITDA for two consecutive
fiscal quarters (excluding the effects of optional markets on earnings), Eagle
River, Nextel and the management shareholders may transfer shares only to
family members (in the case of individuals), affiliates and certain other
permitted transferees. Other shareholders may transfer shares to third parties,
subject to rights of first offer, rights of first refusal available to DLJ
Merchant Banking, Eagle River, Motorola, Nextel, the management shareholders
and their permitted transferees.
Registration Rights. DLJ Merchant Banking has certain demand registration
rights after June 29, 2003 and prior to an initial public offering so long as
DLJ Merchant Banking does not cease to own 80% of its initial ownership of our
capital stock. After the initial public offering, DLJ Merchant Banking has
demand registration rights so long as its holdings of our stock are above
certain thresholds. The parties to the shareholders' agreement are entitled to
register their securities at any time if and when we propose to register our
own securities.
Preemptive and Antidilutive Rights. Prior to the completion of the initial
build-out of scheduled sections of our territory and the fourth anniversary of
the shareholders' agreement, Nextel has the right to preempt any public
offering of our stock by us or DLJ Merchant Banking and to purchase all of the
stock being offered. If, on or prior to the initial public offering, we propose
to issue any equity security (other than pursuant to any warrant, stock option
or stock appreciation rights plan) for cash, each shareholder has an
antidilutive right to purchase its pro rata portion of such securities.
Certain Rights and Obligations of Nextel. Subject to certain limitations,
Nextel has the right to purchase all of our outstanding stock:
(1) on January 29, 2006, and specified dates thereafter,
(2) if Nextel changes technology and we do not implement the new
technology, or
(3) upon the termination of the joint venture agreement resulting from our
breach.
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The parties to the shareholders' agreement, other than Nextel, have the
right, with some exceptions, to require Nextel to purchase all of our
outstanding stock:
(1) upon a change of control of Nextel,
(2) if Nextel exercises certain rights under the shareholders' agreement,
(3) upon a change of technology used by Nextel,
(4) upon a sale by Nextel of its interest in us, or
(5) upon the termination of the joint venture agreement resulting from a
breach by Nextel.
In addition, the parties to the shareholders' agreement, other than Nextel have
the right to participate in any sale by Nextel of all of its shares to a third
party.
Reimbursement of Certain Expenses. We have reimbursed Nextel and Eagle
River $16.6 million and $1.2 million, respectively, for operating expenses made
and incurred by them prior to January 29, 1999 in order to facilitate the
construction of our portion of the Digital Mobile Network. We also reimbursed
the actual out-of-pocket transaction costs, including reasonable fees and
expenses of counsel, for Nextel, Eagle River and DLJ Merchant Banking in
connection with the consummation of the capitalization transactions on January
29, 1999.
Repurchase Rights. Under the joint venture agreement, we have the right to
extend our build-out of the Digital Mobile Network to include option markets
within a specified time period. If we do not elect to construct option markets
covering a specified number of people prior to the expiration of such period,
or upon our earlier merger or consolidation with another entity or sale of all
or substantially all of our assets, we are obligated to purchase from Eagle
River and each of the management shareholders, and Eagle River and each of the
management shareholders is obligated to sell, at $.01 per share, up to 12.6% of
the shares of Class A common stock that Eagle River and such management
shareholders purchased from us on November 20, 1998.
Termination. The shareholders' agreement will terminate on January 29,
2014.
NEXTEL OPERATING AGREEMENTS
As described under "Business--The Capitalization Transactions, --The
Operating Agreements," we, through our principal subsidiary, entered into
agreements with a wholly owned subsidiary of Nextel, which govern the build-out
and operation of our portion of the Digital Mobile Network. Except as
specifically set forth below, these operating agreements executed on January
29, 1999 have an initial term of ten years, which may be extended for up to an
additional two and a half years and renewed for up to four ten-year renewal
terms at our option. Summarized below are some important terms of these
agreements. Copies of these agreements have been filed with the SEC as part of
our registration statement of which this prospectus is a part.
THE JOINT VENTURE AGREEMENT
Build-Out and Operations. Our agreements with Nextel require us to build
our portion of the Digital Mobile Network on time and make it compatible with
Nextel's systems. We are also required to offer a set of core service features
and to upgrade our system to comply with future Nextel standards. We have also
agreed to meet or exceed Nextel's quality standards. If we determine that
implementation of a required upgrade would be materially adverse to us, then we
will not be required to implement the upgrade unless Nextel agrees to pay a
subsidy to us in an amount not to exceed the lesser of:
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(1) Nextel Partners' anticipated aggregate net losses resulting from the
upgrade,
(2) Nextel Partners' actual net losses associated with the upgrade through
the date of the subsidy payment,
(3) the anticipated cumulative losses for all the upgrades net of all
cumulative anticipated profits for all the upgrades, and
(4) the actual cumulative losses for all the upgrades net of all actual
cumulative profits for all the upgrades.
Alternatively, Nextel can agree under certain circumstances to waive the
requirement that we make the upgrade or can exercise an option to buy all of
our capital stock. In the event that we do not make the upgrade, our operations
may become less compatible with the operations of Nextel, and this could affect
us adversely incompatibility may have a material adverse effect on Nextel
Partners.
Acquisition of Licenses. We are awaiting FCC approval of Nextel's initial
contribution of licenses. To the extent that we require additional frequencies
to operate our business, the joint venture agreement sets forth the terms under
which we may acquire such frequencies from Nextel, from third parties or from
FCC auctions of spectrum. All of the frequencies we use are subject to transfer
restrictions and rights of first refusal in favor of Nextel. See "--Frequency
Management Agreement."
Equipment, Vendors and Discounts. If we request, Nextel will to try to
obtain for us the same discounts as are available to Nextel from any Nextel
vendor or service provider with whom we are negotiating for the purchase of
equipment, advertising, media buying, telemarketing and related services.
Nextel Approval Rights. We have agreed that we will obtain Nextel's
approval prior to taking certain action, including:
o making a material change in the technology,
o disposing all or substantially all of our assets, or
o broadening the scope of our business beyond set limits prior to the
occurrence of specified events.
Exclusivity. Nextel has agreed that during the term of the joint venture
agreement, Nextel will not provide digital mobile wireless communications
services within our markets, except that Nextel :
(1) may continue to provide analog 800 MHz service in our markets without
using the marks licensed to us under the trademark license agreement,
and
(2) may provide digital wireless communications services in our markets on
non-800 MHz frequencies so long as these services:
(a) do not use any of the marks licensed to us under the trademark
license agreement,
(b) do not use Motorola iDEN or other digital service on 800 MHz
frequencies, and
(c) do not provide interconnection with the landline
telecommunications providers.
Marketing, Advertising, Pricing etc. We are generally required to adhere
to Nextel standards for pricing structure, advertising, promotions, customer
care, telemarketing and
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related activities. We do, however, set our own prices in our markets, except
that we are required to honor pricing plans established by Nextel for Nextel's
national accounts even with respect to subscribers of those national accounts
located in our markets.
Back Office/MIS Services. Nextel provides us access to certain back-office
support and information systems on an ongoing basis. We pay Nextel fees, based
on Nextel's cost, for access to and use of these systems.
Material Breach; Termination. In the case of certain material breaches of
the operating agreements, including without limitation a delay in the
completion of the build-out of the Digital Mobile Network, failing to offer
services required by Nextel and failing to meet performance requirements,
Nextel may have the right to terminate the joint venture agreement and the
other operating agreements following an arbitration proceeding.
If Nextel were to be awarded termination of the operating agreements at a
time when Nextel owned an equity interest in us, Nextel is required to acquire
all outstanding shares of our capital stock as set forth in our restated
certificate of incorporation. Alternatively, if we are awarded termination of
the operating agreements at a time when Nextel owned an equity interest in us,
we would have the right to require Nextel to acquire all the outstanding shares
of our capital. In any case, termination of the operating agreements may be
materially adverse to us, and such purchases by Nextel would not constitute a
change of control as defined in the indenture.
TRADEMARK LICENSE AGREEMENT
Under the trademark license agreement, Nextel granted us a license to use
certain Nextel trademarks and service marks.
We can sublicense the licensed marks to our subsidiaries and authorized
dealers in connection with the marketing, promotion and sale of our services
and equipment. We will pay royalties to Nextel for the use of the licensed
marks, beginning on a date that is the later of January 1, 2002 or the first
day of the month after we have achieved two consecutive fiscal quarters of
positive EBITDA. For the first three years after such date, the royalty is
equal to 0.5% of gross monthly service revenues, and will be equal to 1% of
gross monthly service revenues thereafter.
This agreement terminates automatically upon termination of the joint
venture agreement. Nextel is entitled to seek termination of the trademark
license agreement upon the occurrence of certain material defaults under the
joint venture agreement, even if the joint venture agreement and other
operating agreements remain in effect. Termination of the trademark license
agreement would require, among other things, that we change our corporate name
and all of our promotional material.
ROAMING AGREEMENT
Through the roaming agreement, we and Nextel provide ESMR service to
subscribers and certain other designated users of the other, in either case,
the "Home Service Provider," while the subscribers or designated users are out
of the Home Service Provider's territory and roaming in the territory of the
other.
Subject to quarterly adjustment, we receive revenues from the payment of
roaming fees by Nextel equal to 95% of the aggregate service revenue generated
by Nextel's customers roaming on our portion of the Digital Mobile Network
through 1999, 90% in 2000, 85% in 2001 and 80% thereafter. When our customers
roam onto Nextel's portion of the Digital Mobile Network, 80% of the aggregate
service revenue generated by such customers will be paid to Nextel. In either
case, such percentage payments are subject to adjustment based on a comparison
between customer satisfaction levels attained in Nextel's and our portions of
the Digital Mobile Network.
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FREQUENCY MANAGEMENT AGREEMENT
Pending FCC approval, our right to utilize the frequencies covered by
these licenses is governed by the frequency management agreement. This
agreement obligates us to, among other things, comply with all applicable FCC
rules and regulations governing the licenses and with various standards and
criteria established by Nextel relating to the construction, implementation and
operation of the Digital Mobile Network. Pending FCC approval of the transfer
applications, Nextel will represent us before the FCC with respect to any
matters relating to the managed frequencies. The frequency management agreement
will terminate upon FCC approval.
ANALOG MANAGEMENT AGREEMENT
Through the analog management agreement, we permit Nextel to use SMR
frequencies that are covered by the licenses being transferred to us and that
are not being used by us to operate our portion of the Digital Mobile Network,
to operate analog systems and to offer analog service. If we need to use these
frequencies for our portion of the Digital Mobile Network, we may terminate
Nextel's right to use any of these frequencies upon at least six months notice.
The analog management agreement requires Nextel to, among other things, comply
with all applicable FCC rules and regulations governing the licenses covering
the managed frequencies.
ASSET TRANSFER AND REIMBURSEMENT AGREEMENT
We purchased from Nextel assets located in our markets at a cost of
approximately $115.8 million through the asset transfer reimbursement
agreement. We also reimbursed Nextel for operating losses incurred by Nextel
prior to January 29, 1999 in the amount of $15.1 million.
Nextel agreed to indemnify us for undisclosed assumed liabilities incurred
outside the ordinary course of business arising from the ownership or operation
of the assets transferred if those liabilities exceed $1.5 million and if we
give notice in reasonable detail within 180 days after January 29, 1999.
MASTER SITE LEASE AGREEMENT
Under the master site lease agreement, we lease space on
telecommunications towers from Nextel. The joint venture agreement provides
that, as the build-out of the Digital Mobile Network progresses, Nextel will
have the right to construct additional telecommunications towers for us and to
acquire towers constructed by us in our markets. These towers would then be
leased back to us under the master site lease agreement. We pay Nextel monthly
rental payments based on the number of sites subject to the master site lease.
Nextel and SpectraSite have entered into an agreement whereby SpectraSite
purchased certain existing telecommunications towers from Nextel and will build
or purchase, and lease back, additional towers, including in each case cell
sites and towers located in our territory. Concurrent with these transactions,
Nextel and its subsidiaries entered into a master site lease agreement with
SpectraSite in order to lease space on the transferred towers. Currently we
lease space on these towers from Nextel and its affiliates which in turn leases
the towers from SpectraSite. We plan to execute a master site lease agreement
with SpectraSite to replace, and which will contain substantially similar
economic terms as, the current master lease with Nextel. In addition, Nextel has
agreed that certain economic terms, such as the rental amounts due for the first
three years, will be the same under the SpectraSite master lease and, if such
terms are less favorable to us, Nextel will compensate us for the difference.
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TRANSITION SERVICES AGREEMENT
Under the transition services agreement, certain accounting, payroll,
customer care, purchasing, human resources and billing functions are made
available during a defined transition period to us by Nextel. We pay monthly
fees based on Nextel's cost of providing such services.
The services provided under the transition services agreement have
different variable terms agreed to by the parties. Subject to notice
requirements, we have the right to terminate any services covered by the
transition services agreement before the end of any term of service. The
parties contemplate that in the event we desire to purchase any services from
Nextel following the expiration of the transition services agreement, Nextel
may, at its election, agree to provide certain services to us on an arm's
length basis, at prices to be agreed upon.
SWITCH SHARING AGREEMENT
Nextel provides certain telecommunications switching services to us which
permits us to link cell sites to and electronically access certain switching
equipment used and maintained by affiliates of Nextel and thereby allows us to
provide ESMR service to our customers in areas in which we do not own a switch.
Until January 1, 2001, we pay Nextel monthly switching fees based on Nextel's
cost of providing such services at a rate reflecting Nextel's estimated cost as
of January 1, 2001 subject to adjustment, while we develop our own
infrastructure.
As Nextel's and our operations expand and customer bases grow, the monthly
switching fees are expected to increase in the aggregate, but decrease on a per
customer basis (assuming a reduction in the minute of use charge). We are
entitled to a credit against our monthly switching fee charges based on the
operation of certain owned switching network elements as described in the
switch sharing agreement. If and when we install or acquire additional
switching equipment to serve additional areas within our markets, our
dependency on Nextel and its affiliates for switching services should decrease.
Nextel is obligated, on the terms set forth in the switch sharing
agreement, to implement upgrades so that sufficient switching capacity is
available to meet our predicted customer growth and increased service use
during the term of the joint venture agreement. We are also obligated to
install our own equipment when our customer usage reach certain levels. At any
time upon or following termination or expiration of the joint venture
agreement, either party will be allowed to terminate the switch sharing
agreement upon notice to the other.
AGREEMENT SPECIFYING OBLIGATIONS OF AND LIMITING LIABILITY AND RECOURSE TO
NEXTEL
Pursuant to the terms of this agreement, the maximum cumulative, aggregate
cash liability of Nextel and its controlled affiliates, other than Nextel WIP
Corp., for any and all actual or alleged claims or causes of action arising in
connection with any aspect of the agreements governing or otherwise relating to
the operating agreements is capped at $200.0 million.
The cap amount will be reduced, dollar for dollar, by the aggregate amount
that Nextel and its affiliates have advanced, expended or otherwise provided to
or for the benefit of Nextel WIP Corp. to enable Nextel WIP Corp. to perform
its obligations relating to the operating agreements other than contributions
for which Nextel has received equity securities or has received consideration
equal to Nextel's cost to provide the contribution.
Some significant Nextel obligations, including Nextel's commitments to
subsidize required upgrades and to buy our stock from our other shareholders
under certain
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circumstances, will not be subject to the cap. This agreement will survive the
expiration or termination of any and all of the agreements governing or
otherwise relating to the operating agreements.
MOTOROLA PURCHASE AGREEMENTS
Under the iDEN infrastructure equipment purchase agreement and the
subscriber purchase and distribution agreement between us and Motorola, dated
as of January 29, 1999, we agreed to purchase, and Motorola agreed to sell,
certain infrastructure equipment and related software and services required for
the build-out of our portion of the Digital Mobile Network, as well as
subscriber handsets and other accessories.
We obtained pricing for the Motorola equipment and subscriber units on
financial and other terms that we believe are substantially similar to those
obtained by Nextel. Under these purchase agreements, we expect to purchase over
a three year period $98.5 million worth of subscriber units and accessories and
over the same period approximately $145.0 million worth of Motorola equipment.
We received, in connection with our purchases of Motorola equipment, an $18.4
million credit from Motorola in return for the issuance of 1,836,649 shares of
Series A convertible preferred stock to Motorola as part of the capitalization
transactions consummated on January 29, 1999. See "Business--The Capitalization
Transactions,--Business Strategy."
DLJMB AFFILIATION WITH INITIAL PURCHASER/BANK SYNDICATE
DLJ Capital Funding, Inc. has received customary fees and reimbursement of
expenses in connection with the arrangement and syndication of the credit
facility and will receive other fees and reimbursements as a lender thereunder.
Donaldson, Lufkin & Jenrette Securities Corporation acted as our financial
advisor, as arranger under the credit facility and as an initial purchaser in
the offering of the old notes. The aggregate amount of all fees paid to the DLJ
entities in connection with the capitalization transactions was approximately
$14.7 million. We may from time to time enter into other investment banking
relationships with Donaldson, Lufkin & Jenrette Securities Corporation or one
of its affiliates for which Donaldson, Lufkin & Jenrette Securities Corporation
or its affiliate will receive customary fees and will be entitled to
reimbursement of reasonable disbursements and out-of-pocket expenses incurred
in connection with such services. We expect that any such arrangement will
include provisions for the indemnification of Donaldson, Lufkin & Jenrette
Securities Corporation against certain liabilities, including liabilities under
the federal securities laws. See "Plan of Distribution."
DLJ Capital Funding and Donaldson, Lufkin & Jenrette Securities
Corporation are affiliates of DLJ Merchant Banking, which, along with its
affiliates, is a significant shareholder of, and is represented on our board of
directors. See "--The Subscription and Contribution Agreement" and "--The
Shareholders' Agreement."
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OWNERSHIP OF CAPITAL STOCK AND PRINCIPAL STOCKHOLDERS
CAPITAL STOCK
General. Nextel Partners is authorized to issue 170 million shares of
capital stock consisting of:
(1) 100 million shares of common stock, of which:
(a) 75 million shares are designated as Class A common stock, par
value $.001 per share, and
(b) 25 million are designated as Class B convertible common stock,
par value $.001 per share.
(2) 70 million shares of preferred stock, of which:
(a) 25 million shares are designated as Series A convertible
preferred stock, par value $.001 per share,
(b) 25 million shares are designated as Series B redeemable or
convertible preferred stock, par value $.001 per share,
(c) 15 million shares are designated as Series C convertible
preferred stock, par value $.001 per share, and
(d) 5 million shares are designated as Series D convertible preferred
stock, par value $.001 per share.
Currently, the following shares of each class and series are outstanding:
(1) 1,558,888 shares of Class A common stock,
(2) 17,479,971 shares of Series A convertible preferred stock,
(3) 2,185,000 shares of Series B redeemable or convertible preferred
stock,
(4) 8,740,000 shares of Series C convertible preferred stock, and
(5) 2,185,000 shares of Series D convertible preferred stock.
The following is a summary of certain of the rights and privileges
pertaining to the common stock and the preferred stock. A copy of our restated
certificate of incorporation is filed as an exhibit to the registration
statement of which this prospectus is a part.
COMMON STOCK
The common stock is classified into two classes: Class A common stock and
Class B convertible common stock. As of March 31, 1999, all outstanding shares
of common stock are Class A common stock. The holders of common stock are
entitled to one vote per share on all matters submitted for action by the
shareholders. There is no provision for cumulative voting with respect to the
election of directors. Holders of common stock are entitled to share equally,
share for share, and on a parity with the Series A, Series C and Series D
preferred stock, if and when dividends are declared on common stock, whether
payable in cash, property or securities.
Class A Common Stock. Under certain circumstances, shares of Class A
common stock and securities convertible into Class A common stock, other than
Class B convertible common stock, are callable at the option of Nextel or may
be put to Nextel at the option of the holders.
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Class B Convertible Common Stock. Shares of Class B convertible common
stock are convertible at any time at the option of the holder into an equal
number of shares of Class A common stock.
PREFERRED STOCK
Ranking. With respect to rights on liquidation, dissolution or winding up
the order of preference is as follows:
(1) the Series B redeemable or convertible preferred stock;
(2) the Series A convertible preferred stock;
(3) the Series C and Series D convertible preferred stock; and
(4) the Class A common stock and Class B convertible common stock.
The holders of the Series A and Series C convertible preferred stock are
entitled to vote on an as converted basis on all matters submitted for action
by the shareholders. Series D convertible preferred stock and Series B
redeemable or convertible preferred stock do not have any voting rights other
than to approve mergers or consolidations adverse to the rights of holders of
such securities. The holders of Series A, Series C and Series D convertible
preferred stock are entitled to share equally, share for share, on an as
converted basis, if and when dividends are declared on common stock, whether
payable in cash, property or securities.
Series A Convertible Preferred Stock. Each share of Series A convertible
preferred stock is convertible into one share of Class A common stock at any
time.
Series B Redeemable or Convertible Preferred Stock. The Series B
redeemable or convertible preferred stock is subject to mandatory redemption by
us 375 days after the stated maturity of the notes. The price for redemption
will be the liquidation value, which accretes at an annual rate of 12% from the
date of issuance. We may elect under certain circumstances to pay the
redemption price by issuing Series C convertible preferred stock for each share
of Series B redeemable or convertible preferred stock so redeemed. The Series B
redeemable or convertible preferred stock is subject to voluntary redemption
for cash at our option, at any time at its then current liquidation value.
Series C Convertible Preferred Stock. Each share of Series C convertible
preferred stock is convertible into one share of Class B common stock at any
time.
Series D Convertible Preferred Stock. Each share of Series D convertible
preferred stock is convertible into one share of Class B common stock at any
time.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of March 31, 1999,
with respect to the beneficial ownership of shares of Series A and Series C
convertible preferred stock, Class A and Class B common stock by:
(1) certain persons known to us to be a beneficial owner of more than 5%
of the outstanding shares of such stock,
(2) each of our directors and executive officers, and
(3) all executive officers and directors as a group.
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<TABLE>
<CAPTION>
NUMBER AND
NUMBER AND PERCENTAGE OF
PERCENTAGE OF SERIES C
SERIES A CONVERTIBLE CONVERTIBLE
NAME AND ADDRESS PREFERRED STOCK(1) PREFERRED STOCK(1)
- ---------------------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Nextel
2001 Edmund Halley Drive
Reston, VA 20191 ................ 8,740,000 100%
Motorola, Inc.
1303 East Algonquin Road,
11th Floor
Schaumburg, IL 60196 ............ 1,836,649 10.5%
Eagle River Investments,
LLC
2300 Carillon Point
Kirkland, WA 98033 .............. 2,622,000 15.0
DLJMB Funds(5)
277 Park Avenue
New York, NY 10172 .............. 3,800,000 21.7
Madison Dearborn Partners
Three First National Plaza
Chicago, IL 60602 ............... 3,624,972 20.7
GE Capital Services
Structured Finance Group,
Inc.
120 Long Ridge Road
Stamford, CT 06927 ..............
NMS Capital L.P.
9 West 57th Street
New York, NY 10019 ..............
Cascade Investments, L.L.C.
2365 Carillon Point
Kirkland, WA 98033 ..............
Ampersand Holdings, L.L.C.
1301 Santa Barbara Street
Santa Barbara, CA 93101 .........
John Chapple ..................... 19,960 *
John D. Thompson .................
David Thaler .....................
David Aas ........................
Perry Satterlee ..................
Mark Fanning .....................
Andrew H. Rush(7) ................
Dennis M. Weibling(8) ............
Timothy M. Donahue(9) ............
Andrew E. Sinwell(10) ............
Directors and officers of
Nextel
Partners as a group
(10 persons) ....................
<CAPTION>
NUMBER AND
NUMBER AND FULLY DILUTED
PERCENTAGE OF PERCENTAGE OF
CLASS B CLASS A
NAME AND ADDRESS COMMON STOCK(1) COMMON STOCK(1)
- ---------------------------------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Nextel
2001 Edmund Halley Drive
Reston, VA 20191 ................ 10,925,000 100%(2) 10,925,000(3) 33.7%
Motorola, Inc.
1303 East Algonquin Road,
11th Floor
Schaumburg, IL 60196 ............ 1,836,649(4) 5.7
Eagle River Investments,
LLC
2300 Carillon Point
Kirkland, WA 98033 .............. 2,748,389(4) 8.5
DLJMB Funds(5)
277 Park Avenue
New York, NY 10172 .............. 3,800,000(4) 12.3
Madison Dearborn Partners
Three First National Plaza
Chicago, IL 60602 ............... 3,624,972(4) 11.8
GE Capital Services
Structured Finance Group,
Inc.
120 Long Ridge Road
Stamford, CT 06927 .............. 439,248(4) 1.4
NMS Capital L.P.
9 West 57th Street
New York, NY 10019 .............. 419,271(4) 1.3
Cascade Investments, L.L.C.
2365 Carillon Point
Kirkland, WA 98033 .............. 698,800(4) 2.2
Ampersand Holdings, L.L.C.
1301 Santa Barbara Street
Santa Barbara, CA 93101 ......... 419,271(4) 1.3
John Chapple ..................... 511,071(4) 1.6
John D. Thompson ................. 374,444(6) 1.2
David Thaler ..................... 195,000 *
David Aas ........................ 162,500 *
Perry Satterlee .................. 137,222 *
Mark Fanning ..................... 137,222 *
Andrew H. Rush(7) ................
Dennis M. Weibling(8) ............
Timothy M. Donahue(9) ............
Andrew E. Sinwell(10) ............
Directors and officers of
Nextel
Partners as a group
(10 persons) .................... 1,517,459 4.7
</TABLE>
- ----------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares subject to options,
warrants and convertible securities held by that person that are
currently exercisable or exercisable within 60 days are deemed
outstanding. Except as indicated in the footnotes to this table, each
shareholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such shareholder's names.
(2) Includes shares of Class B common stock which Nextel has the right to
acquire upon conversion of its Series C convertible preferred stock and
Series D convertible preferred stock.
(3) Includes shares of Class A common stock which Nextel has the right to
acquire upon conversion of its Series C convertible preferred stock and
Series D convertible preferred stock into Class B convertible common
stock which is convertible into Class A common stock.
(4) Includes shares of Class A common stock which it has the right to acquire
upon conversion of its or its affiliates' Series A convertible preferred
stock.
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(5) Consists of shares held directly by DLJ Merchant Banking Partners II,
L.P. and the following related investors: DLJ Merchant Banking Partners
II-A, L.P., DLJ Offshore Partners II, C.V., DLJ Diversified Partners,
L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium Partners, L.P.,
DLJ Millennium Partners-A, L.P., DLJMB Funding II, Inc., UK Investment
Plan 1997 Partners, Inc., DLJ EAB Partners, L.P., DLJ First ESC L.P. and
DLJ ESC II L.P. The address of UK Investment Plan 1997 Partners, Inc., is
2121 Avenue of the Stars, Fox Plaza, Suite 3000, Los Angeles, California
90067. The address of the others is 277 Park Avenue, New York, New York
10172.
(6) Includes 35,000 shares of Class A common stock issuable upon exercise of
options exercisable within 60 days of January 29, 1999.
(7) Does not include shares beneficially owned by DLJMB Funds. Mr. Rush is a
Managing Director of DLJ Merchant Banking and, as a result, may be deemed
to beneficially own the shares owned by DLJMB Funds. Mr. Rush disclaims
beneficial ownership of such shares.
(8) Does not include shares beneficially owned by Eagle River or Nextel. Mr.
Weibling is the president of Eagle River and a director of Nextel and may
be deemed to beneficially own the shares owned by Eagle River and Nextel.
Mr. Weibling disclaims beneficial ownership of the such shares.
(9) Does not include shares beneficially owned by Nextel. Mr. Donahue is
President, Chief Operating Officer and a Director of Nextel and, as a
result, may be deemed to beneficially own the shares owned by Nextel. Mr.
Donahue disclaims beneficial ownership of such shares.
(10) Does not include shares beneficially owned by Madison Dearborn Partners.
Mr. Sinwell is a director of Madison Dearborn and, as a result, may be
deemed to beneficially own the shares owned by Madison Dearborn. Mr.
Sinwell disclaims beneficial ownership of such shares.
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THE EXCHANGE OFFER
BACKGROUND
On January 29, 1999, Nextel Partners privately placed the old notes in a
transaction exempt from the registration under the Securities Act. Accordingly,
the old notes may not be reoffered, resold or otherwise transferred in the
United States unless so registered or unless an exemption from the Securities
Act registration requirements is available.
In the registration rights agreement, we agreed with the initial
purchasers to, at our own cost:
o file an exchange offer registration statement within 120 days after
January 29, 1999,
o use our commercially reasonable efforts to cause the exchange offer
registration statement to become effective under the Securities Act at
the earliest possible time, but no later than 180 days following
January 29, 1999, and
o upon effectiveness of the exchange offer registration statement, offer
new notes in exchange for surrender of the old notes.
In addition, we agreed to keep the exchange offer open for at least 30
days, or longer if required by applicable law, after the date notice of the
exchange offer is mailed to holders of the old notes. The new notes are being
offered under this prospectus to satisfy these obligations of Nextel Partners
under the registration rights agreement.
A copy of the registration rights agreement is filed as an exhibit to the
registration statement of which this prospectus is a part.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions contained in this prospectus
and in the letter of transmittal that accompanies this prospectus, Nextel
Partners will accept any and all old notes validly tendered and not withdrawn
before 5:00 p.m., New York City time, on the expiration date of the exchange
offer. Nextel Partners will issue an equal principal amount at maturity of new
notes in exchange for the principal amount of old notes accepted in the
exchange offer. Old notes may be tendered only in integral multiples of $1,000.
The form and terms of the new notes are substantially identical to the
form and terms of the old notes, except that:
(1) the new notes will be freely transferable, other than as described in
this prospectus, and will not contain any legend restricting their
transfer;
(2) holders of the new notes will not be entitled to certain rights of
holders of old notes under the registration rights agreement, which
rights will terminate on consummation of the exchange offer; and
(3) the new notes will not contain any provisions regarding the payment of
liquidated damages.
The new notes will evidence the same debt as the old notes and will be
entitled to the benefits of the indenture. See "Description of the Notes."
The exchange offer is not conditioned on any minimum aggregate principal
amount at maturity of old notes being tendered for exchange.
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RESALE OF THE NEW NOTES
Based on interpretations by the staff of the SEC in no-action letters
issued to third parties, Nextel Partners believes that the new notes issued
pursuant to the exchange offer in exchange for the old notes may be offered for
resale, resold and otherwise transferred by holders of the new notes without
complying with the registration and prospectus delivery requirements of the
Securities Act if:
(1) the holders acquired the new notes in the ordinary course of its
business;
(2) the holders are not engaged in, and do not intend to engage in, and
have no arrangement or understanding with any person to participate
in, a distribution of the new notes;
(3) the holders are not "affiliates" of Nextel Partners within the
meaning of Rule 405 under the Securities Act;
(4) the holders are not broker-dealers who acquired the old notes
directly from Nextel Partners; and
(5) the holders are not broker-dealers who acquired the old notes as a
result of market-making or other trading activities.
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those new notes. The letter of transmittal that accompanies
this prospectus states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an underwriter within
the meaning of the Securities Act. A participating broker-dealer must
acknowledge that it acquired the old notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus
meeting the requirements of the Securities Act. The broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, in
connection with resales of new notes received in exchange for old notes. Nextel
Partners will make this prospectus available to any participating broker-dealer
in connection with any resale of this kind for a period of 365 days after the
consummation of the exchange offer.
See "Plan of Distribution."
SHELF REGISTRATION STATEMENT
If applicable law or interpretations of the staff of the SEC are changed
such that either:
(1) the exchange offer is no longer permitted or
(2) the new notes received by holders who make all of the above
representations in the letter of transmittal are not, or would not be,
upon receipt, transferable by each such holder without restriction
under the Securities Act,
Nextel Partners will, at its cost:
o file a shelf registration statement covering resales of the old notes,
within 60 days after
(a) Nextel Partners determines clause (1) above or
(b) Nextel Partners receives notice of clause (2) above.
o use all commercially reasonable efforts to cause the shelf
registration statement to be declared effective under the Securities
Act within 90 days after the filing deadline, and
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o use all commercially reasonable efforts to keep effective the shelf
registration statement until the earlier of January 29, 2001 or the
time when all of the applicable old notes are no longer outstanding.
Nextel Partners will, if and when it files the shelf registration
statement, provide to each holder of the old notes copies of the prospectus
which is a part of the shelf registration statement, notify each holder when
the shelf registration statement has become effective and take other actions as
are required to permit unrestricted resales of the old notes. A holder that
sells old notes pursuant to the shelf registration statement generally:
o must be named as a selling security holder in the related prospectus,
o must deliver a prospectus to purchasers,
o will be subject to civil liability provisions under the Securities Act
in connection with these sales, and
o will be bound by the provisions of the registration rights agreement
which are applicable to the holder, including certain indemnification
obligations.
In addition, each holder of old notes must deliver information to be used
in connection with the shelf registration statement and provide comments on the
shelf registration statement in order to have its old notes included in the
shelf registration statement and benefit from the provisions regarding any
liquidated damages described below.
LIQUIDATED DAMAGES
Liquidated damages will accrue on the principal amount at maturity of the
old notes, in addition to the stated interest on the old notes, from the date
on which a registration default occurs to the date such registration default is
cured.
The occurrence of any of the following is a registration default:
(1) neither the exchange offer registration statement nor the shelf
registration statement has been filed with the SEC on or before the
applicable deadline described above,
(2) neither the exchange offer registration statement nor the shelf
registration statement has been declared effective by the SEC on or
before the applicable deadline described above,
(3) the exchange offer has not been consummated by the 30th business day
after the exchange offer registration statement has become effective,
or
(4) after either the exchange offer registration statement or the shelf
registration statement has been declared effective, that registration
statement ceases to be effective or usable, subject to certain
exceptions, without being succeeded within two days by an amendment to
that registration statement that cures such failure and is declared
effective within five days of such filing.
Liquidated damages will accrue at a rate of $0.05 per week per $1,000 in
principal amount at maturity of the notes during the 90-day period after the
occurrence of the registration default and will increase by an additional $0.05
per week per $1,000 in principal amount at maturity at the end of each
subsequent 90-day period until all registration defaults have been cured. In no
event will the rate exceed $0.50 per week per $1,000 in principal amount at
maturity of the notes.
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The sole remedy available to the holders of the old notes will be the
immediate assessment of liquidated damages on the old notes as described above.
Any amount of liquidated damages due as described above will be payable in cash
on the same interest payment dates as the old notes.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date of the exchange offer is 5:00 p.m., New York City
time, on , 1999, unless Nextel Partners, in its reasonable discretion,
extends the exchange offer, in which case the expiration date shall be the
latest date and time to which the exchange offer is extended.
In order to extend the exchange offer, Nextel Partners will notify the
exchange agent of any extension by oral or written notice and will make a
public announcement of the extension prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
Nextel Partners reserves the right, in its reasonable discretion:
o to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if, in its reasonable judgment, any of
the conditions described below under "--Conditions" shall not have
been satisfied, by giving oral or written notice of the delay,
extension or termination to the exchange agent, or
o to amend the terms of the exchange offer in any manner.
Nextel Partners will promptly announce any such event by making a timely
release to the Dow Jones News Service and may or may not do so by other means
as well.
PROCEDURES FOR TENDERING
To tender old notes in the exchange offer, the holder must:
o properly complete, sign and date the letter of transmittal, or a
facsimile of the letter of transmittal,
o have the signatures thereon guaranteed if required by the letter of
transmittal, and
o except as discussed in "Guaranteed Delivery Procedures," mail or
otherwise deliver the letter of transmittal, or facsimile, together
with the old notes and any other required documents, to the exchange
agent prior to 5:00 p.m., New York City time, on the expiration date
of the exchange offer.
The exchange agent must receive the old notes, a completed letter of
transmittal and all other required documents at the address listed below under
"--Exchange Agent" before 5:00 p.m., New York City time, on the expiration date
for the tender to be effective. You may deliver your old notes by using the
book-transfer procedures described below, as long as the exchange agent
receives confirmation of the book-entry transfer before the expiration date.
The Depository Trust Company has authorized its participants that hold old
notes on behalf of beneficial owners of old notes through The Depository Trust
Company to tender their old notes as if they were holders. To effect a tender
of old notes, The Depository Trust Company participants should either:
(1) complete and sign the letter of transmittal, have the signature
thereon guaranteed if required by the instructions to the letter of
transmittal and mail or deliver the letter of transmittal (or the
manually signed facsimile) to the exchange agent according to the
procedure described above, or
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(2) transmit their acceptance to The Depository Trust Company through its
automated tender offer program for which the transaction will be
eligible and follow the procedure for book-entry transfer as described
in "Book-Entry; Delivery and Form."
By tendering, each holder will make the representations contained in the
first paragraph under the heading "--Resale of the New Notes." Each
participating broker-dealer must acknowledge that it will deliver a prospectus
in connection with any resale of such new notes. See "Plan of Distribution."
The tender by a holder and the acceptance of the tender by Nextel Partners
will constitute the agreement between the holder and Nextel Partners set forth
in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF THE OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW
SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES OR BOOK-ENTRY CONFIRMATION SHOULD
BE SENT TO NEXTEL PARTNERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS ON THEIR BEHALF.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the letter of transmittal. If
the beneficial owner wishes to tender on his own behalf, such owner must, prior
to completing and executing the letter of transmittal and delivering his old
notes, either make appropriate arrangement to register ownership of the old
notes in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution that is a member of a
recognized signature guarantee medallion program unless the old notes are
tendered:
o by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal, or
o for the account of an eligible guarantor institution.
If signatures on a letter of transmittal or notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be by a member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an eligible guarantor
institution.
If a letter of transmittal is signed by a person other than the registered
holder of any old notes listed in the letter of transmittal, the old notes must
be endorsed or accompanied by a properly completed bond power and signed by the
registered holder as the registered holder's name appears on the old notes.
If a letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others
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acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by Nextel Partners, evidence
satisfactory to Nextel Partners of their authority to so act must be submitted
with the letter of transmittal.
Promptly after the date of this prospectus, the exchange agent will
establish a new account or utilize an existing account with respect to the old
notes at the book-entry transfer facility, The Depository Trust Company, for
the purpose of facilitating the exchange offer. Subject to the establishment of
the accounts, any financial institution that is a participant in The Depository
Trust Company's system may make a book-entry tender of old notes by causing The
Depository Trust Company to transfer such old notes into the exchange agent's
account in accordance with procedures. Although delivery of the old notes may
be effected through book-entry transfer into the exchange agent's account at
The Depository Trust Company, an appropriate letter of transmittal properly
completed and duly executed or an agent's message with any required signature
guarantee and all other required documents, must be received by the exchange
agent at its address listed below on or prior to the expiration date of the
exchange offer, or, if the guaranteed delivery procedures described below must
be complied with, within the time period provided under such procedures.
Delivery of documents to The Depository Trust Company does not constitute
delivery to the exchange agent.
The term "agent's message" means a message transmitted by The Depository
Trust Company to, and received by, the exchange agent, which states that The
Depository Trust Company has received an express acknowledgment from the
participant in The Depository Trust Company tendering the old notes stating:
o the aggregate principal amount at maturity of old notes which have
been tendered by such participant,
o that such participant has received and agrees to be bound by the term
of the letter of transmittal, and
o that Nextel Partners may enforce such agreement against the
participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered old notes will be determined by
Nextel Partners, which determination shall be final and binding. Nextel
Partners reserves the absolute right to reject any and all old notes not
properly tendered or any old notes the acceptance of which would, in the
opinion of counsel for Nextel Partners, be unlawful. Nextel Partners also
reserves the absolute right to waive any defects, irregularities or conditions
of tender as to particular old notes. Nextel Partners' interpretation of the
terms and conditions of the exchange offer, including the instructions in the
letter of transmittal, will be final and binding on all parties. Unless waived,
any defects of irregularities in connection with tenders of old notes must be
cured within such time as Nextel Partners shall determine. Neither Nextel, the
exchange agent nor any other person shall incur any liability for failure to
give notice of any defect or irregularity with respect to any tender of old
notes. Tender of old notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any old notes received by
the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the
exchange agent to the tendering holders, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender old notes and:
o whose old notes are not immediately available,
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o who cannot deliver the old notes, the letter of transmittal or any
other required documents to the exchange agent prior to the expiration
date, or
o who cannot complete the procedures for book-entry transfer before the
expiration date may effect a tender if:
(1) the tender is made through an eligible guarantor institution,
(2) before the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly
executed notice of guaranteed delivery by facsimile transmission,
mail or hand delivery setting forth the name and address of the
holder, the certificate number(s) of the old notes and the
principal amount of the old notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the expiration date,
the letter of transmittal (or facsimile thereof) together with
the certificate(s) representing the old notes (or a confirmation
of book-entry transfer of the old notes into the exchange agent's
account at The Depository Trust Company), and any other documents
required by the letter of transmittal will be deposited by the
eligible guarantor institution with the exchange agent, and
(3) the exchange agent receives, within three New York Stock Exchange
trading days after the expiration date, a properly completed and
executed letter of transmittal or facsimile, as well as the
certificate(s) representing all tendered old notes in proper form
for transfer or a confirmation of book-entry transfer of the old
notes into the exchange agent's account at The Depository Trust
Company, and all other documents required by the letter of
transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date of
the exchange offer.
To withdraw a tender of old notes in the exchange offer, a letter or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the expiration date. Any notice of withdrawal must:
o specify the name of the person having deposited the old notes to be
withdrawn,
o identify the old notes to be withdrawn, including the certificate
number(s) and principal amount of such old notes, or in the case of
old notes transferred by book-entry transfer, the name and number of
the account at the book-entry transfer facility to be credited, and
otherwise comply with the procedures of the exchange agent,
o be signed by the holder in the same manner as the original signature
on the letter of transmittal by which such old notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee under the
indenture governing the old notes register the transfer of the old
notes into the name of the person withdrawing the tender, and
o specify the name in which any such old notes are to be registered, if
different from that of the person who deposited the notes.
If certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, before the release of the certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible guarantor.
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All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by Nextel Partners, whose
determination shall be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer, and no new notes will be issued, unless the old notes so
withdrawn are validly retendered. Any old notes which have been tendered but
which are not accepted for exchange will be returned to the holder of the notes
without cost to the holder as soon as practicable after withdrawal, rejection
of tender or termination of the exchange offer. Properly withdrawn old notes
may be retendered by following any of the procedures described above under
"--Procedures for Tendering" at any time prior to the expiration date.
CONDITIONS
Despite any other term of the exchange offer, Nextel Partners shall not be
required to accept for exchange, or exchange new notes for, any old notes, and
may terminate the exchange offer as provided in this prospectus prior to the
expiration date if:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange
offer which, in the reasonable judgment of Nextel Partners, might
materially impair the ability of Nextel Partners to proceed with the
exchange offer or materially impair the contemplated benefits of the
exchange offer to Nextel Partners, or any material adverse development
has occurred in any existing action or proceeding with respect to
Nextel Partners or any of its subsidiaries;
(2) any change, or any development involving a prospective change, in the
business or financial affairs of Nextel Partners or any of its
subsidiaries has occurred which, in the reasonable judgment of Nextel
Partners, might materially impair the ability of Nextel Partners to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to Nextel Partners;
(3) any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the reasonable judgment of Nextel Partners, might materially
impair the ability of Nextel Partners to proceed with the exchange
offer or materially impair the contemplated benefits of the exchange
offer to Nextel Partners; or
(4) any governmental approval has not been obtained, which approval Nextel
Partners shall, in its reasonable discretion, deem necessary for the
consummation of the exchange offer as contemplated hereby.
The conditions listed above are for the sole benefit of Nextel Partners
and may be asserted by Nextel Partners regardless of the circumstances giving
rise to any of these conditions. Nextel Partners may waive these conditions in
its reasonable discretion in whole or in part from time to time. The failure by
Nextel Partners at any time to exercise any of the above rights shall not be
deemed a waiver of such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
If Nextel Partners determines in its reasonable discretion that any of the
conditions are not satisfied, Nextel Partners may:
(1) refuse to accept any old notes and return all tendered old notes to
the tendering holders,
(2) extend the exchange offer and retain all old notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights
of holders to withdraw these old notes (see "--Withdrawal of Tenders"
above), or
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(3) waive unsatisfied conditions with respect to the exchange offer and
accept all properly tendered old notes which have not been withdrawn.
If this waiver constitutes a material change to the exchange offer,
Nextel Partners will promptly disclose the waiver by means of a
prospectus supplement that will be distributed to the registered
holders. Nextel Partners will also extend the exchange offer for a
period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders,
if the exchange offer would otherwise expire during such five to ten
business day period.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance and requests for additional copies
of this prospectus or of the letter of transmittal should be directed to The
Bank of New York addressed as follows:
For Information by Telephone:
(212) 815-2824
By Hand or Overnight Delivery Service:
The Bank of New York
101 Barclay Street, Floor 7 East
New York, NY 10286
Attention: Tolutope Adeyoju
By Facsimile Transmission:
(212) 815-4699
(Telephone Confirmation)
(212) 815-2824
The Bank of New York also acts as trustee under the
indenture governing the notes.
FEES AND EXPENSES
Nextel Partners will bear the expenses of soliciting. Nextel Partners has
not retained any dealer-manager in connection with the exchange offer and will
not make any payments to brokers, dealers or others soliciting acceptances of
the exchange offer. Nextel Partners, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with providing the services.
The cash expenses to be incurred in connection with the exchange offer
will be paid by Nextel Partners. Such expenses include fees and expenses of The
Bank of New York as exchange agent and as trustee under the indenture governing
the notes, accounting and legal fees and printing costs, among others.
Tendering holders of the old notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes relating to the exchange of old notes for new notes
in the exchange offer.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the old notes
as reflected in Nextel Partners' accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by
Nextel Partners. The expenses of the exchange offer and the unamortized
expenses related to the issuance of the old notes will be amortized over the
term of the notes.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who are eligible to participate in the exchange offer
but who do not tender their old notes will not have any further registration
rights, and their old notes will continue to be subject to restrictions on
transfer. Accordingly, such old notes may be resold only:
o to Nextel Partners, upon redemption of these notes or otherwise,
o so long as the old notes are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person inside the United States whom
the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A,
o in accordance with Rule 144 under the Securities Act, or under another
exemption from the registration requirements of the Securities Act,
and based upon an opinion of counsel reasonably acceptable to Nextel
Partners,
o outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, or
o pursuant to an effective registration statement under the Securities
Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
REGULATORY APPROVALS
Nextel Partners does not believe that the receipt of any material federal
or state regulatory approvals will be necessary in connection with the exchange
offer, other than the effectiveness of the exchange offer registration
statement under the Securities Act.
OTHER
Participation in the exchange offer is voluntary and holders of old notes
should carefully consider whether to accept the terms and conditions of this
offer. Holders of the old notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take with respect to
the exchange offer.
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DESCRIPTION OF THE NOTES
The new notes, like the old notes, will be issued under the indenture,
dated January 29, 1999, between Nextel Partners and The Bank of New York, as
trustee. The new notes are the same as the old notes except that the new notes:
o will not bear legends restricting their transfer, and
o will not contain certain terms providing for the payment of liquidated
damages under the circumstances described in the registration rights
agreement.
The indenture and its associated documents contain the full legal text of
the matters described in this section. A copy of the indenture has been filed
with the SEC as part of our registration statement of which this prospectus
forms a part. See "Where You Can Find More Information" on page 30 for
information on how to obtain a copy.
Because this section is a summary of the material provisions of the
indenture, it does not describe every aspect of the indenture or the notes.
This summary is subject to and qualified in its entirety by reference to the
Trust Indenture Act. In this section we use capitalized words to signify
defined terms that have been given special meaning in the indenture. We
describe the meaning for only the more important terms under "Certain
Definitions." We also include references in parentheses to certain sections of
the indenture.
In this description of the notes, the term "Nextel Partners" refers to
Nextel Partners, Inc. and does not include its subsidiaries except for purposes
of financial data determined on a consolidated basis.
BRIEF DESCRIPTION OF THE NOTES
These notes:
o will be senior unsecured obligations of Nextel Partners;
o will be limited to $1.0 billion in aggregate principal amount at
maturity, of which $800 million in aggregate principal amount at
maturity has been issued;
o will mature on February 1, 2009; and
o will bear interest at the rate of 14% per annum.
The old notes were issued at a discount to their aggregate principal
amount at maturity to generate aggregate gross proceeds of approximately
$406,376,000. The notes will accrete in value representing the amortization of
original issue discount at a rate of 14%, compounded semiannually, to an
aggregate principal amount of $800.0 million by February 1, 2004. Cash interest
will not accrue on the notes prior to February 1, 2004.
Interest will be paid semi-annually on February 1 and August 1 of each
year, commencing August 1, 2004, to the registered holder at the close of
business on the preceding January 15 or July 15.
Interest on the notes will be computed on the basis of a 360-day year of
twelve 30-day months. (Sections 3.01, 3.09 and 3.12) Accretion of
original issue discount will be computed on a basis of a 360-day year of twelve
30-day months, compounded semiannually.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Nextel
Partners may change the paying agent or registrar without prior notice to the
holders, and Nextel Partners or any of its subsidiaries may act as paying agent
or registrar.
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TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
Nextel Partners and The Bank of New York, the exchange agent and trustee, may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents, and Nextel Partners may require a holder to pay any taxes
and fees required by law or permitted by the indenture. (Section 3.05)
METHODS OF RECEIVING PAYMENTS ON THE NOTES
Nextel Partners will pay interest, principal and any other money due on
the notes at the corporate trust office of the trustee in New York City. That
office is currently located at 101 Barclay Street, New York, New York 10286.
You must make arrangements to have your payments picked up at or wired from
that office. Nextel Partners may also choose to pay interest by mailing checks.
(Sections 3.01 and 10.02)
The notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. (Section 3.02)
You will not be required to pay a service charge to transfer or exchange notes,
but you may be required to pay for any tax or other governmental charge
associated with the exchange or transfer. (Section 3.05)
RANKING
The notes:
o will be senior unsecured obligations of Nextel Partners;
o will rank equally in right of payment to all existing and future
senior unsecured obligations of Nextel Partners; and
o will rank senior in right of payment to all existing and future
subordinated obligations of Nextel Partners.
Holders of secured obligations of Nextel Partners will, however, have
claims that are prior to the claims of the holders of the notes with respect to
the assets securing those other obligations.
Nextel Partners' principal operations are conducted through its
subsidiaries, and Nextel Partners is therefore dependent upon the cash flow of
its subsidiaries to meet its obligations. The payment of dividends and making
of payments to Nextel Partners by its subsidiaries are subject to restrictions
imposed by the credit facility. Future debt of some of the subsidiaries may
prohibit the payment of dividends or payments to Nextel Partners. In addition,
the ability of subsidiaries of Nextel Partners to make these payments to Nextel
Partners is limited by laws of the relevant states in which the subsidiaries
are organized or located.
Nextel Partners' subsidiaries will have no obligation to guarantee or
otherwise pay amounts due under the notes. Therefore, the notes will be
effectively subordinated to all indebtedness and other liabilities and
commitments, including borrowings under the credit facility and trade payables,
of Nextel Partners' subsidiaries. Any right of Nextel Partners to receive
assets of any subsidiary upon any liquidation or reorganization of that
subsidiary (and the resulting right of holders of the notes to participate in
those assets) will be effectively subordinated to the claims of the
subsidiary's creditors, except to the extent that Nextel Partners itself is
recognized as a creditor of the subsidiary. See "Risk Factors--Our subsidiaries
may not be in a position to pay us the cash we need to make payments on the
notes."
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As of March 31, 1999:
o the total amount of outstanding consolidated liabilities of Nextel
Partners and its subsidiaries, including trade payables, was
approximately $609.9 million, of which $591.2 million were secured
obligations, and
o the total amount of outstanding liabilities of Nextel Partners'
subsidiaries, including trade payables, were $193.8 million, of which
$175 million were secured obligations.
For more information, see "Description of Credit Facility" and "Nextel
Partners--Summary Historical and Pro Forma Consolidated Financial Information
and Operating Data."
OPTIONAL REDEMPTION
Nextel Partners may opt to redeem the notes, in whole or in part, at any
time on or after February 1, 2004. If Nextel Partners chooses this optional
redemption, it is required to mail a notice of redemption not less than 30 nor
more than 60 days prior to the redemption to each holder of notes at the
holder's address as it appears in the note register at the redemption prices
set forth below, plus an amount in cash equal to all accrued and unpaid
interest and any liquidated damages, if any, to the redemption date, if
redeemed during the twelve-month period beginning on February 1 of each of the
years set forth below.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- --------------------------------------- -----------------
<S> <C>
2004 ................................ 107.000%
2005 ................................ 104.667%
2006 ................................ 102.333%
2007 and thereafter ................. 100.000%
</TABLE>
The prices are expressed as percentages of the principal amount at
maturity of the notes. (Sections 2.03, 11.01, 11.05 and 11.07)
Prior to February 1, 2002, Nextel Partners may redeem up to 35% of the
notes at a redemption price of 114% of the accreted value of the notes on the
redemption date, plus liquidated damages, if any, to the redemption date if:
o Nextel Partners receives net proceeds of at least $75 million from one
or more sales of its capital stock (other than redeemable stock) prior
to February 1, 2002,
o at least 65% of the aggregate accreted value of the notes originally
issued remain outstanding immediately after the redemption; and
o the redemption occurs within 60 days of such sale.
If less than all the notes are to be redeemed, the trustee shall select
the particular notes to be redeemed or any portion thereof that is an integral
multiple of $1,000. The trustee will make this selection on a pro rata basis,
by lot or by such other method as it will deem fair and appropriate.
MANDATORY REDEMPTION; SINKING FUND
Except as described under "--Covenants--Limitation on Asset Sales" and
"--Covenants--Change of Control" below, Nextel Partners is not required to
purchase or make mandatory redemption payments or sinking fund payments with
respect to the notes.
COVENANTS
In the indenture, Nextel Partners agreed to certain restrictions that
limit its and its restricted subsidiaries' ability to:
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(1) incur additional debt;
(2) to pay dividends, acquire shares of Nextel Partners, make certain
investments or redeem debt of Nextel Partners which is subordinate in right
of payment to the notes;
(3) designate unrestricted subsidiaries;
(4) enter into transactions with affiliates;
(5) engage in any business other than telecommunications;
(6) create liens;
(7) pay dividends, to make loans or advances to Nextel Partners or its
restricted subsidiaries or to transfer any of its property or assets to
Nextel Partners or its restricted subsidiaries;
(8) issue or sell shares of capital stock of its restricted
subsidiaries; and
(9) sell assets.
In addition, if a Change of Control occurs, each holder of notes will have
the right to require Nextel Partners to repurchase all or part of such holder's
notes at a price equal to 101% of the accreted value plus liquidated damages,
if any, to any purchase date prior to February 1, 2004 or 101% of the aggregate
principal amount of the notes, plus accrued and unpaid interest and liquidated
damages, if any, to any purchase date thereafter. The above limitations are
restrictive covenants that are promises that we make to you about how we will
run our business, or business actions that we promise not to take. A more
detailed description of the restrictive covenants and the exceptions to them
follows below.
All of the current subsidiaries of Nextel Partners are restricted
subsidiaries for purposes of the indenture.
Limitation on Consolidated Debt
Nextel Partners may not, and may not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless
immediately after giving effect to the Incurrence of such Debt and the receipt
and application of the net proceeds therefrom (including, without limitation,
the application or use of the net proceeds therefrom to repay Debt or make any
Restricted Payment):
(1) the Consolidated Debt to Annualized Operating Cash Flow Ratio
would be less than 7.0 to 1.0, or
(2) in the case of any incurrence of Debt prior to January 1, 2005
only, Consolidated Debt would be equal to or less than 80% of Total
Invested Capital. (Section 10.08)
Limitation on Restricted Payments
Nextel Partners may not:
(1) directly or indirectly, declare or pay any dividend on, or make
any distribution in respect of, its Capital Stock or to holders thereof,
excluding any dividends or distributions payable solely in its shares of
Capital Stock (other than Redeemable Stock) or in options, warrants or
other rights to purchase any such Capital Stock (other than Redeemable
Stock);
(2) and may not permit any Restricted Subsidiary to, purchase, redeem
or otherwise acquire or retire for value (other than value consisting
solely of its Capital Stock of
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Nextel Partners that is not Redeemable Stock or options, warrants or other
rights to acquire such Capital Stock that is not Redeemable Stock), any of
its Capital Stock (including options, warrants or other rights to acquire
such Capital Stock);
(3) and may not permit any Restricted Subsidiary to, redeem,
repurchase, defease or otherwise acquire or retire for value, or permit any
Restricted Subsidiary to, directly or indirectly, redeem, repurchase,
defease or otherwise acquire or retire for value (other than value
consisting solely of its Capital Stock that is not Redeemable Stock or
options, warrants or other rights to acquire such Capital Stock that is not
Redeemable Stock), prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Debt that is subordinate (whether
pursuant to its terms or by operation of law) in right of payment to the
notes; or
(4) and may not permit any Restricted Subsidiary to, directly or
indirectly, make any Investment, except for Permitted Investments, in any
Person, other than in a Restricted Subsidiary or a Person that becomes a
Restricted Subsidiary as a result of such Investment (each of clauses (1)
through (4), other than any such action that is a Permitted Investment or a
Permitted Distribution, being referred to as a "Restricted Payment")
unless, at the time of such Restricted Payment, and upon giving effect to
such Restricted Payment:
(a) no Default or Event of Default has occurred and be
continuing;
(b) Nextel Partners would have been permitted to Incur at least
$1.00 of additional Debt pursuant to the terms of the indenture
described in clause (2) under the caption "Limitation on Consolidated
Debt" above; and
(c) the aggregate amount of all Restricted Payments made from
January 29, 1999 does not exceed:
(A) the amount of the Operating Cash Flow of Nextel Partners
after December 31, 2002 through the end of the latest full fiscal
quarter for which consolidated financial statements of Nextel
Partners are available preceding the date of such Restricted
Payment (treated as a single accounting period) less 150% of the
cumulative Consolidated Interest Expense of Nextel Partners after
December 31, 2002 through the end of the latest full fiscal
quarter for which consolidated financial statements of Nextel
Partners are available preceding the date of such Restricted
Payment (treated as a single accounting period), plus
(B) the aggregate net proceeds (other than proceeds from a
Committed Capital Contribution), including the fair market value
of property other than cash, as determined:
(x) in the case of any property other than cash with a
value less than $25.0 million, by Nextel Partners' board of
directors, whose good faith determination will be conclusive
and as evidenced by a board resolution, or
(y) in the case of any property other than cash with a
value equal to or greater than $25.0 million, by an
accounting, appraisal or investment banking firm of national
standing and evidenced by a written opinion of such firm,
received by Nextel Partners from the issuance and sale
(other than to a Restricted Subsidiary) after January 29,
1999 of shares of its Capital Stock (other than Redeemable
Stock), or any options, warrants or other rights to purchase
such Capital Stock (other than Redeemable Stock), other than
shares of Capital Stock or options, warrants or other rights
to
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purchase Capital Stock (or shares issuable upon exercise
thereof), the proceeds of the issuance of which is used to
make a Directed Investment, unless such designation has been
revoked by Nextel Partners' board of directors and Nextel
Partners is able to make such Investment pursuant to this
covenant (other than as a Directed Investment), plus
(C) the aggregate net proceeds, including the fair market
value of property other than cash, as determined:
(x) in the case of any property other than cash with a
value less than $25.0 million, by Nextel Partners' board of
directors, whose good faith determination will be conclusive
and as evidenced by a board resolution, or
(y) in the case of any property other than cash with a
value equal to or greater than $25.0 million, by an
accounting, appraisal or investment banking firm of national
standing and evidenced by a written opinion of such firm,
received by Nextel Partners from the issuance or sale (other
than to a Restricted Subsidiary) after January 29, 1999 of
any Capital Stock of Nextel Partners (other than Redeemable
Stock), or any options, warrants or other rights to purchase
such Capital Stock (other than Redeemable Stock), upon the
conversion of, or exchange for, Debt of Nextel Partners or a
Restricted Subsidiary.
Nothing contained in this section limits or restricts Nextel Partners from
making of any Permitted Distribution, Permitted Investment or Directed
Investment, and neither a Permitted Distribution or Permitted Investment will
be counted as a Restricted Payment for purposes of clause (c) above.
In addition, the foregoing limitations do not prevent Nextel Partners from:
(1) paying any dividend on its Capital Stock within 60 days after the
declaration thereof if, on the date when the dividend was declared, Nextel
Partners could have paid such dividend in accordance with the provisions of
the indenture,
(2) repurchasing its Capital Stock (including options, warrants or
other rights to acquire such Capital Stock) from former employees or
directors of Nextel Partners or any Subsidiary thereof for consideration
not to exceed:
(a) in the case of all such employees or directors (other than
Itemized Executives), $500,000 in the aggregate in any fiscal year, with
amounts not used in any given fiscal year being carried over into
subsequent fiscal years, and
(b) in the case of any Itemized Executive, $2.0 million per Itemized
Executive (plus the amount of any proceeds of any key man life insurance
received by Nextel Partners in respect to such Itemized Executive) in
any fiscal year, with the aggregate amount of such repurchases not to
exceed $5.0 million in any fiscal year;
provided that the aggregate amount of all such repurchases made pursuant to
this paragraph (2) does not exceed $17.0 million in the aggregate (not
including the amount of any proceeds of key man life insurance received by
Nextel Partners in respect to any Itemized Executive),
(3) the repurchase, redemption or other acquisition for value of
Capital Stock of Nextel Partners to the extent necessary to prevent the
loss or secure the renewal or reinstatement of any license or franchise
held by Nextel Partners or any of its Subsidiaries from any governmental
agency,
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(4) making a loan in the aggregate principal amount of approximately
$2.2 million to certain officers of Nextel Partners as described in this
prospectus (with Restricted Payments pursuant to this clause not being
counted as Restricted Payments for purposes of clause (c) above),
(5) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the notes, including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for:
(a) the proceeds of a capital contribution or a substantially
concurrent offering of, shares of Capital Stock of Nextel Partners
(other than Redeemable Stock) or options, warrants or other rights to
acquire such Capital Stock, the proceeds of which are not designated
as a Directed Investment, or
(b) Debt that is at least as subordinated in right of payment to
the notes, including premium, if any, and accrued and unpaid interest,
as the Debt being purchased (with Restricted Payments pursuant to this
paragraph not being counted as Restricted Payments for purposes of
clause (c) above),
(6) the repurchase, redemption or other acquisition of Capital Stock
of Nextel Partners, or options, warrants or other rights to acquire such
Capital Stock, in exchange for, or out of the proceeds of a capital
contribution or a substantially concurrent offering of, shares of Common
Stock of Nextel Partners (other than Redeemable Stock), or options,
warrants or other rights to acquire such Capital Stock) the proceeds of
which are not designated as a Directed Investment, or
(7) other Restricted Payments not to exceed $5.0 million in the
aggregate at any time outstanding (with Restricted Payments pursuant to
this paragraph not being counted as Restricted Payments for purposes of
clause (c) above).
Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary will be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person will no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) above or the aggregate
amount of Investments pursuant to paragraph (5)(a) above, in each case to the
extent such Investments would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by Nextel
Partners from the issuance or sale of its Capital Stock either upon the
conversion of, or exchange for, Debt of Nextel Partners or any Restricted
Subsidiary will be deemed to be an amount equal to:
(a) the sum of the principal amount or accreted value (whichever is
less) of such Debt on the date of such conversion or exchange and the
additional cash consideration, if any, received by Nextel Partners upon
such conversion or exchange, less any payment on account of fractional
shares, minus
(b) all expenses incurred in connection with such issuance or sale.
In addition, for purposes of clause (c)(3) above, the net proceeds
received by Nextel Partners from the issuance or sale of its Capital Stock upon
the exercise of any options or warrants of Nextel Partners or any Restricted
Subsidiary will be deemed to be an amount equal to the additional cash
consideration, if any, received by Nextel Partners upon such exercise, minus
all expenses incurred in connection with such issuance or sale.
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For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment will be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such
Restricted Payment, as determined by Nextel Partners' board of directors (whose
good faith determination shall be conclusive and evidenced by a board
resolution).
The amount of any Investment outstanding at any time will be deemed to be
equal to the amount of such Investment on the date made, less the return of
capital, repayment of loans and return on capital (including interest and
dividends), in each case, received in cash, up to the amount of such Investment
on the date made. (Section 10.09)
Restricted Subsidiaries
Subject to compliance with the "Limitation on Restricted Payments"
covenant, Nextel Partners' board of directors may designate any Restricted
Subsidiary as an Unrestricted Subsidiary.
The designation by the board of directors of a Restricted Subsidiary as an
Unrestricted Subsidiary will, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of Nextel Partners'
ownership interest in such Subsidiary (including, without duplication, such
indirect ownership interest in all Subsidiaries of such Subsidiary), as
determined by Nextel Partners' board of directors in good faith and evidenced
by a board resolution.
Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the board of directors may not designate a Subsidiary of Nextel
Partners to be an Unrestricted Subsidiary if, after such designation:
(a) Nextel Partners or any of its other Restricted Subsidiaries:
(i) provides credit support for, or a Guarantee of, any Debt of
such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such
Subsidiary,
(b) a default with respect to any Debt of such Subsidiary (including
any right which the holders thereof may have to take enforcement action
against such Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Debt of Nextel Partners or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity,
or
(c) such Subsidiary owns any Capital Stock of, or owns or holds any
Lien on any property of, any Restricted Subsidiary which is not a
Subsidiary of the Subsidiary to be so designated.
Nextel Partners' board of directors, from time to time, may designate any
Person that is about to become a Subsidiary of Nextel Partners as an
Unrestricted Subsidiary, and may designate any newly-created Subsidiary as an
Unrestricted Subsidiary, if at the time such Subsidiary is created it contains
no assets (other than such de minimis amount of assets then required by law for
the formation of corporations) and no Debt. Subsidiaries of Nextel Partners
that are not designated by Nextel Partners' board of directors as Restricted or
Unrestricted Subsidiaries shall be deemed to be Restricted Subsidiaries.
Notwithstanding any
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provisions of this "Restricted Subsidiaries" covenant, all Subsidiaries of an
Unrestricted Subsidiary shall be Unrestricted Subsidiaries. (Section 10.10)
Transactions with Affiliates
Nextel Partners may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of Nextel Partners on terms
that are less favorable to Nextel Partners or such Restricted Subsidiary, as
the case may be, than those which might be obtained at the time of such
transaction from a Person that is not such an Affiliate. However, this
"Transactions with Affiliates" covenant will not limit, or be applicable to:
(1) any transaction between Unrestricted Subsidiaries not involving
Nextel Partners or any Restricted Subsidiary,
(2) any transaction between Nextel Partners and any Restricted
Subsidiary or between Restricted Subsidiaries, or
(3) any Permitted Transactions.
In addition, any transaction or series of related transactions, other than
Permitted Transactions, between Nextel Partners or any Restricted Subsidiary
and any Affiliate of Nextel Partners (other than a Restricted Subsidiary)
involving an aggregate consideration of $5 million or more must be approved in
good faith by:
(a) a majority of Nextel Partners' Disinterested Directors (of
which there must be at least one) and evidenced by a board resolution,
or
(b) if there is no Disinterested Director at such time or such
transaction involves aggregate consideration of $25.0 million or more,
by an opinion as to fairness to Nextel Partners or such Subsidiary
from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
For purposes of this "Transactions with Affiliates" covenant, any
transaction or series of related transactions between Nextel Partners or any
Restricted Subsidiary and an Affiliate of Nextel Partners that is approved by a
majority of the Disinterested Directors (of which there must be at least one to
utilize this method of approval) and evidenced by a board resolution or for
which a fairness opinion has been issued will be deemed to be on terms as
favorable as those that might be obtained at the time of such transaction (or
series of transactions) from a Person that is not such an Affiliate and thus
will be permitted under this "Transactions with Affiliates" covenant.
(Section 10.11)
Limitation on the Activities of Nextel Partners and its Restricted
Subsidiaries
Nextel Partners may not, and may not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
Nextel Partners and the Restricted Subsidiaries were engaged in on January 29,
1999. (Section 10.15)
Limitation on Liens
Nextel Partners may not and may not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all payments
due under the indenture and the notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligations are no
longer secured by a Lien. (Section 10.12)
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Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
Nextel Partners may not, and may not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions to Nextel Partners
or any of its Restricted Subsidiaries with respect to its Capital Stock or
any other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to Nextel Partners or any of its Restricted
Subsidiaries,
(2) make loans or advances to Nextel Partners or any of its Restricted
Subsidiaries, or
(3) transfer any of its properties or assets to Nextel Partners or any
of its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(a) existing Debt as in effect on the date of the indenture,
(b) any Credit Facility as in effect as of the date of the
indenture (or in the case of the New Credit Facility, as initially
executed by the parties thereto), and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment
restrictions than those contained in such Credit Facility as in effect
on the date of the indenture (as conclusively determined in good faith
by Nextel Partners' board of directors and set forth in a board
resolution),
(c) the indenture and the notes,
(d) applicable law,
(e) any instrument governing Debt and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and
payment restrictions other than those contained in such Debt as in
effect on the date of its incurrence by Nextel Partners or any
Restricted Subsidiary (as conclusively determined in good faith by an
executive officer of Nextel Partners) or Capital Stock of a Person
acquired by Nextel Partners or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Debt was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that, in the case of Debt, such Debt was permitted by the terms of the
indenture to be incurred,
(f) customary non-assignment provisions in leases entered into in
the ordinary course of business,
(g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (3) above on the property so acquired,
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(h) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that Subsidiary
pending its sale or other disposition,
(i) Liens securing Debt otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "Limitation on Liens" that limit the right of Nextel Partners
or any of its Restricted Subsidiaries to dispose of the assets subject
to such Lien,
(j) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, and
(k) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business. (Section 10.14)
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
Nextel Partners may not and may not permit any of its Restricted
Subsidiary to:
(1) transfer, convey, sell or otherwise dispose of any Capital Stock
in any Wholly Owned Restricted Subsidiary of Nextel Partners to any Person
(other than Nextel Partners or any Wholly Owned Restricted Subsidiary of
Nextel Partners) unless:
(a) such transfer is of all the Capital Stock in such Wholly
Owned Restricted Subsidiary and
(b) the cash Net Proceeds from such transfer are applied in
accordance with the covenant described under the caption "--Limitation
on Asset Sales," and
(2) will not permit any Wholly Owned Restricted Subsidiary of Nextel
Partners to issue any of its Capital Stock (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to
any Person other than to Nextel Partners or a Wholly Owned Restricted
Subsidiary of Nextel Partners.
The foregoing restrictions shall not apply to:
(1) the creation of Permitted Joint Ventures,
(2) any transfer required by applicable law or regulation,
(3) the issuance of Redeemable Stock that is otherwise permitted to be
issued pursuant to the terms of the indenture, and
(4) transfers in which Nextel Partners or a Restricted Subsidiary
acquires at the same time not less than its proportionate share in such
issuance of Capital Stock. (Section 10.20)
Limitation on Asset Sales
Nextel Partners may not, and may not permit any Restricted Subsidiary to,
make any Asset Sale unless:
(1) Nextel Partners or the Restricted Subsidiary, as the case may be,
receives consideration for such Asset Sale at least equal to the fair
market value for the assets or Capital Stock issued or sold or otherwise
disposed of as determined by the board of directors in good faith and
evidenced by a board resolution set forth in an officers' certificate
delivered to the trustee, which determination shall be conclusive, and
(2) at least 80% of the consideration for such disposition consists of
cash; provided that the amount of:
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(a) any liabilities (as shown on Nextel Partners' or such
Restricted Subsidiary's most recent balance sheet), of Nextel Partners
or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the notes or any
guarantee thereof) that are assumed by the transferee of any such
assets and
(b) any securities, notes or other obligations received by Nextel
Partners or any such Restricted Subsidiary from such transferee that
are contemporaneously (subject to ordinary settlement periods)
converted by Nextel Partners or such Subsidiary into cash (to the
extent of the cash received) shall be deemed to be cash for purposes
of this provision.
At its option, Nextel Partners may, within 360 days after receipt, apply
the Net Proceeds from such Asset Sale:
(1) to repay Debt under a Credit Facility or any Vendor Financing
Debt,
(2) to make a capital expenditure in the same or similar line of
business as Nextel Partners is engaged in on the date of the indenture or
in a business reasonably related thereto, or
(3) to acquire Capital Stock of an entity that is or becomes a
Restricted Subsidiary or other long-term assets that are used or useful in
the same or similar line of business as Nextel Partners or such Restricted
Subsidiaries were engaged in on the date of the indenture or in businesses
reasonably related thereto.
Pending the final application of any such Net Proceeds, Nextel Partners
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, Nextel
Partners will be required to make an offer to all holders of notes and all
holders of other Debt that is pari passu with the notes containing provisions
similar to those set forth in the indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum
principal amount at maturity of notes and such other pari passu Debt that may
be purchased out of the Excess Proceeds. The offer price for such offer shall
be an amount in cash equal to 100% of the principal amount (or Accreted Value,
if applicable) thereof plus accrued and unpaid interest thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the indenture
and the instrument or instruments governing such other pari passu Debt,
respectively.
To the extent that any Excess Proceeds remain after consummation of an
offer, Nextel Partners may use such Excess Proceeds for any purpose not
otherwise prohibited by the indenture. If the aggregate principal amount of
notes tendered into such offer surrendered by holders thereof exceeds the
amount of Excess Proceeds, the trustee shall select the notes to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero. (Section 10.22)
Change of Control
Within 30 days of the occurrence of a Change of Control, Nextel Partners
will be required to make an offer to purchase in accordance with the indenture
all outstanding notes at a cash purchase price equal to 101% of the Accreted
Value of the notes plus liquidated
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damages, if any purchase date prior to February 1, 2004 or 101% of the
aggregate principal amount at maturity of the notes, plus accrued and unpaid
interest and liquidated damages, if any, to the purchase date on or after
February 1, 2004. (Section 10.13)
Except as described above with respect to a Change of Control, the
indenture does not contain provisions that permit the holders of the notes to
require Nextel Partners to repurchase or redeem the notes in the event of a
takeover, recapitalization or similar restructuring.
Restrictions in the indenture on the ability of Nextel Partners and its
Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on its
or their property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of Nextel Partners, whether
favored or opposed by the management of Nextel Partners. Consummation of any
such transaction in certain circumstances may require redemption or repurchase
of the notes, and there can be no assurance that Nextel Partners or the
acquiring party will have sufficient financial resources to effect such
redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of Nextel Partners or any of its
Subsidiaries by the management of Nextel Partners or other Persons. While such
restrictions cover a variety of arrangements which have traditionally been used
to effect highly leveraged transactions, the indenture may not afford the
holders of notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
A Change of Control constitutes an event of default under the credit
facility and would require repayment of all loans outstanding. Nextel Partners
does not currently have adequate financial resources to effect such repurchases
and repurchase the notes upon a Change of Control and there can be no assurance
that Nextel Partners will have such resources in the future. The inability of
Nextel Partners to repurchase the notes upon a Change of Control would
constitute an Event of Default.
There may be restrictions contained in instruments evidencing Indebtedness
incurred by Nextel Partners or its Restricted Subsidiaries permitted under the
indenture which restrict or prohibit the ability of Nextel Partners to effect
any repurchase required under the indenture in connection with a Change of
Control.
In the event that Nextel Partners makes an offer to purchase the notes in
accordance with the indenture, Nextel Partners intends to comply with any
applicable securities laws and regulations, including any applicable
requirements relating to tender offers set forth in Section 14(e) of, and Rule
l4e-1 under, the Exchange Act.
In addition, one of the events that constitutes a Change of Control under
the indenture is a sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all of the assets of Nextel Partners. The
indenture will be governed by New York law, and there is no established
definition under New York law of substantially all of the assets of a
corporation. Accordingly, if Nextel Partners were to engage in a transaction in
which it disposed of less than all of its assets, a question of interpretation
could arise as to whether such disposition was of substantially all of its
assets and whether Nextel Partners was required to make an offer to purchase in
accordance with the indenture.
Provision of Financial Information
Nextel Partners has agreed that, for so long as any notes remain
outstanding, it will file with the SEC copies of the annual and quarterly
reports and the information, documents,
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and other reports that Nextel Partners would have been required to file with
the SEC pursuant to the Exchange Act if Nextel Partners were subject thereto on
or prior to dates by which Nextel Partners would have been required to file
such document. Nextel Partners also agreed that it will, within 15 days of such
filing, transmit by mail to all holders without cost to such holders and file
with the trustee the required filings. If under the Exchange Act Nextel
Partners is not permitted to file such documents with the SEC, upon written
request of any prospective holder, Nextel Partners shall supply copies of these
documents. (Section 10.16)
MERGERS, SALES OF ASSETS, ETC.
Nextel Partners may not, in any transaction or series of related
transactions:
(1) merge or consolidate with or into, or sell, assign, convey,
transfer or otherwise dispose of its properties and assets substantially as
an entirety to, any Person, and
(2) permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer or other disposition of the properties and assets of
Nextel Partners and its Restricted Subsidiaries, taken as a whole,
substantially as an entirety to any Person,
unless:
(a) either:
(A) if the transaction or series of transactions is a consolidation
of Nextel Partners with or a merger of Nextel Partners with or into
any other Person, Nextel Partners shall be the surviving Person of
such merger or consolidation, or
(B) the Person formed by any consolidation with or merger with or
into Nextel Partners, or to which the properties and assets of Nextel
Partners or Nextel Partners and its Restricted Subsidiaries, taken as
a whole, as the case may be, substantially as an entirety are sold,
assigned, conveyed or otherwise transferred shall be a corporation,
partnership, limited liability company or trust organized and
existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume by a
supplemental indenture executed and delivered to the trustee, in form
satisfactory to the trustee, all the obligations of Nextel Partners
under the notes and the indenture and, in each case, the indenture,
as so supplemented, shall remain in full force and effect, and
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including
any Debt Incurred or anticipated to be Incurred in connection with or in
respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing, and
(c) Nextel Partners or the successor entity to Nextel Partners will,
at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the
applicable period:
(A) have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of Nextel
Partners immediately preceding the transaction and
(B) be permitted to Incur at least $1.00 of additional Debt
pursuant to clause (1) of the covenant described above under
"--Covenants--Limitation on Consolidated Debt."
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The foregoing requirements shall not apply to any transaction or series of
transactions involving the sale, assignment, conveyance, transfer or other
disposition of the properties and assets by any Restricted Subsidiary to any
other Restricted Subsidiary, or the merger or consolidation of any Restricted
Subsidiary with or into any other Restricted Subsidiary.
The indenture also provides that Nextel Partners may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer or other disposition contemplated by the foregoing
provisions, Nextel Partners shall deliver, or cause to be delivered, to the
trustee, in form and substance reasonably satisfactory to the trustee, an
officers' certificate stating that such consolidation, merger, sale,
assignment, conveyance, transfer, or other disposition and the supplemental
indenture in respect thereof (required under clause (a)(B) of the preceding
paragraph) comply with the requirements of the indenture and an opinion of
counsel. Each such officers' certificate shall set forth the manner of
determination of Nextel Partners' compliance with clause (c) of the preceding
paragraph.
For all purposes of the indenture and the notes (including the provisions
described in the two immediately preceding paragraphs and the "Limitation on
Consolidated Debt" and "Restricted Subsidiaries" covenants), Subsidiaries of
any successor entity will, upon such transaction or series of transactions,
become Restricted Subsidiaries or Unrestricted Subsidiaries as provided
pursuant to the "Restricted Subsidiaries" covenant and all Debt of the
successor entity and its Subsidiaries that was not Debt of Nextel Partners and
its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
The successor entity shall succeed to, and be substituted for, and may
exercise every right and power of Nextel Partners under the indenture, and the
predecessor company shall be released from all its obligations and covenants
under the indenture and the notes. (Sections 8.01 and 8.02)
CERTAIN DEFINITIONS
Set forth below is a summary of some of the definitions used in the
indenture. Reference is made to the indenture for the definition of all such
terms. (Section 1.01)
"Accreted Value" of any note as of or to any date of determination means
an amount equal to the sum of:
(1) the issue price of such note as determined in accordance with Section
1273 of the Internal Revenue Code plus
(2) the aggregate of the portions of the original issue discount (the
excess of the amounts considered as part of the "stated redemption price at
maturity" of such note within the meaning of Section 1273(a)(2) of the
Internal Revenue Code or any successor provisions, whether denominated as
principal or interest, over the issue price of such note) that shall
theretofore have accrued pursuant to Section 1272 of the Internal Revenue
Code (without regard to Section 1272(a)(7) of the Internal Revenue Code)
from the date of issue of such note to the date of determination plus
(3) accrued and unpaid interest to the date such Accreted Value is paid
(without duplication of any amount set forth in (2) above) and minus
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(4) all amounts theretofore paid in respect of such note, which amounts
are considered as part of the "stated redemption price at maturity" of such
note within the meaning of Section 1273(a)(2) of the Internal Revenue Code
or any successor provisions (whether such amounts paid were denominated
principal or interest).
"Acquired Debt" means Debt of a Person:
(1) existing at the time such Person becomes a Restricted Subsidiary or
assumed by Nextel Partners or a Restricted Subsidiary in connection with
the acquisition of assets from such Person, and
(2) secured by a Lien encumbering any asset of such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of the covenant described under
"--Covenants--Transactions with Affiliates" only, "affiliate" shall be deemed
to include, any Person owning, directly or indirectly,
(1) 10% or more of the outstanding Common Stock of Nextel Partners, or
(2) securities having 10% or more of the total voting power of the Voting
Stock of Nextel Partners.
For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. No individual shall be
deemed to be controlled by or under common control with any specified Person
solely by virtue of his or her status as an employee or officer of such
specified Person or of any other Person controlled by or under common control
with such specified Person.
"Annualized Operating Cash Flow" means, for any fiscal quarter, the
Operating Cash Flow for such fiscal quarter multiplied by four.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, including, without limitation, by way of a sale and leaseback other
than sales of inventory and obsolete equipment in the ordinary course of
business, provided that the sale, conveyance or other disposition of all or
substantially all of the assets of Nextel Partners and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
indenture described above under the caption "--Covenants--Change of
Control" and/or the provisions described above under the caption "--Merger,
Sale of Assets, Etc." and not by the provisions of the Asset Sale covenant,
and
(2) the issue or sale by Nextel Partners or its Restricted Subsidiaries
of Capital Stock of any of Nextel Partners' Subsidiaries
provided in each case, the transaction or a series of related transactions has
a fair market value in excess of $5.0 million or net proceeds in excess of $5.0
million.
The following items shall not be deemed to be Asset Sales:
(a) a transfer of assets by Nextel Partners to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
Nextel Partners or to another Wholly Owned Restricted Subsidiary;
(b) an issuance of Capital Stock by a Wholly Owned Restricted
Subsidiary to Nextel Partners or to another Wholly Owned Restricted
Subsidiary;
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(c) a Restricted Payment that is permitted by the covenant described
under "--Covenants--Limitation on Restricted Payments";
(d) Permitted Joint Ventures, and
(e) any License Exchange.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing:
(1) the sum of the products of the number of years from such date of
determination to the dates of each successive scheduled principal payment
of such Debt and the amount of such principal payment by
(2) the sum of all such principal payments.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act or any successor rules, including the provision of
such Rules that a person shall be deemed to have beneficial ownership of all
securities that such person has a right to acquire within 60 days, provided
that a person shall not be deemed a beneficial owner of, or to own
beneficially, any securities if such beneficial ownership arises solely as a
result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and the
applicable rules and regulations thereunder and is not also then reportable on
Schedule 13D or any successor schedule under the Exchange Act.
"Capital Lease Obligations" of any Person means the obligations to pay
rent or other amounts under lease of or other Debt arrangements conveying the
right to use real or personal property of such Person which are required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person determined in accordance with generally accepted
accounting principles and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents of stock of, or other ownership interests
in, such Person.
"Change of Control" means the occurrence of any of the following events:
(1) any person or group of persons, as such term is used in Section
13(d)(3) of the Exchange Act and the regulations thereunder, other than a
Permitted Holder is or becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the total Voting Stock or Total Common
Equity of Nextel Partners; provided that no Change of Control shall be
deemed to occur pursuant to this clause (1) if the person is a corporation
with outstanding debt securities having a maturity at original issuance of
at least one year and if such debt securities are rated at least BBB- by
S&P or Baa3 by Moody's for a period of at least 90 consecutive days,
beginning on the date of such event (which period will be extended up to 90
additional days for as long as the rating of such debt securities is under
publicly announced consideration for possible downgrading by the applicable
rating agency); or
(2) Nextel Partners consolidates with, or merges with or into, another
Person other than a Permitted Holder or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to
any Person other than a Permitted Holder, or
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any Person other than a Permitted Holder consolidates with, or merges with
or into, Nextel Partners, in any such event pursuant to a transaction in
which the outstanding Voting Stock of Nextel Partners is converted into or
exchanged for cash, securities or other property, other than any such
transaction where:
(a) the outstanding Voting Stock of Nextel Partners is converted into
or exchanged for:
(A) Voting Stock (other than Redeemable Stock) of the surviving or
transferee Person or
(B) cash, securities and other property in an amount which could be
paid by Nextel Partners as a Restricted Payment under the indenture,
and
(b) immediately after such transaction no person or group of persons
(as such term is used in Section 13(d)(3) of the Exchange Act and the
regulations thereunder) is the Beneficial Owner, directly or indirectly,
of more than 50% of the total Voting Stock or Total Common Equity of the
surviving or transferee Person; provided that no Change of Control shall
be deemed to occur pursuant to this clause (2), if the surviving or
transferee Person or the person referred to in clause (2)(b) is a
corporation with outstanding debt securities having a maturity at
original issuance of at least one year and if such debt securities are
rated at least BBB- by S&P or Baa3 by Moody's for a period of at least
90 consecutive days, beginning on the date of such event (which period
will be extended up to 90 additional days for as long as the rating of
such debt securities is under publicly announced consideration for
possible downgrading by the applicable rating agency); or
(3) during any consecutive two-year period, individuals who at the
beginning of such period constituted the board of directors together with:
(a) any directors who are members of the board of directors on January
29, 1999,
(b) any new directors whose election by such board of directors or
whose nomination for election by the stockholders of Nextel Partners was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election
or nomination for election was previously so approved, and
(c) any new directors appointed or selected by a Permitted Holder,
whether pursuant to a transaction of a type described in either of the
preceding paragraphs (a) and (b), pursuant to a contractual right or
pursuant to a right granted under Nextel Partners' certificate of
incorporation or by-laws) cease for any reason to constitute a majority
of the board of directors then in office; or
(4) the adoption of a plan relating to the liquidation or dissolution of
Nextel Partners.
Any event that would constitute a Change of Control pursuant to clause (1)
or (2) above but for the exceptions thereto shall not be deemed to be a Change
of Control until such time, if any, as the conditions described in such
exceptions cease to have been met.
"Closing Price" on any trading day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are
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not listed or admitted to trading on such exchange, on the principal national
securities exchange on which such shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on
the Nasdaq Stock Market or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on the Nasdaq Stock
Market but the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the
Exchange Act) and the principal securities exchange on which such shares are
listed or admitted to trading is a Designated Offshore Securities Market (as
defined in Rule 902(a) under the Securities Act), the average of the reported
closing bid and asked prices regular way on such principal exchange, or, if
such shares are not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq Stock Market and the issuer and principal
securities exchange do not meet such requirements, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm of national standing that is selected from time
to time by Nextel Partners for that purpose.
"Committed Capital Contribution" means the irrevocable cash commitments
pursuant to that certain subscription and contribution agreement by and among
Nextel Partners, Nextel WIP Corp., Motorola and the other investors named
therein, as in effect on the date of the indenture.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Debt" means the aggregate amount of Debt of Nextel Partners
and its Restricted Subsidiaries on a Consolidated basis outstanding at the date
of determination.
"Consolidated Debt to Annualized Operating Cash Flow Ratio" means, as at
any date of determination, the ratio of Consolidated Debt to the Annualized
Operating Cash Flow of Nextel Partners for the most recently completed fiscal
quarter of Nextel Partners for which financial statements are available.
"Consolidated Interest Expense" of any Person means, for any period:
(1) the aggregate interest expense and fees and other financing costs in
respect of Debt (including amortization of original issue discount and
non-cash interest payments and accruals),
(2) the interest component in respect of Capital Lease Obligations and
any deferred payment obligations of such Person and its Restricted
Subsidiaries, determined on a Consolidated basis in accordance with
generally accepted accounting principles,
(3) all commissions, discounts, other fees and charges owed with respect
to letters of credit and bankers' acceptance financing and net costs
(including amortizations of discounts) associated with interest rate swap
and similar agreements and with foreign currency hedge, exchange and
similar agreements and
(4) the product of:
(a) all dividend payments, whether or not in cash, on any series of
Preferred Capital Stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Capital Stock payable
solely in Capital Stock of Nextel Partners (other than Redeemable Stock)
or to Nextel Partners or its Restricted Subsidiary, times
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(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case,
on a Consolidated basis in accordance with generally accepted accounting
principles.
"Consolidated Net Income" and "Consolidated Net Loss" mean, for any
period, the net income or net loss, as the case may be, of Nextel Partners and
its Restricted Subsidiaries for such period, all as determined on a
Consolidated basis in accordance with generally accepted accounting principles,
adjusted, to the extent included in calculating such net income or net loss, as
the case may be, by excluding without duplication:
(1) any after-tax gain or loss attributable to the sale, conversion or
other disposition of assets other than in the ordinary course of business,
(2) any after-tax gains resulting from the write-up of assets and any
loss resulting from the write-down of assets,
(3) any after-tax gain or loss on the repurchase or redemption of any
securities including in connection with the early retirement or defeasance
of any Debt,
(4) any foreign exchange gain or loss,
(5) all payments in respect of dividends on shares of Preferred Capital
Stock of Nextel Partners,
(6) any other extraordinary, non-recurring or unusual items incurred by
Nextel Partners or any Restricted Subsidiary,
(7) the net income or loss of any Person acquired by Nextel Partners or
any Restricted Subsidiary in a pooling-of-interests transaction for any
period prior to the date of such transaction,
(8) all income or losses of Unrestricted Subsidiaries and Persons (other
than Subsidiaries) accounted for by Nextel Partners using the equity method
of accounting, and
(9) the net income, but not net loss, of any Restricted Subsidiary which
is subject to any judgment, decree, order or governmental regulation which
prevent the payment of dividends or the making of distributions to Nextel
Partners but only to the extent of such restrictions.
"Consolidated Net Income (Loss)" means, for any period, Nextel Partners'
Consolidated Net Income or Consolidated Net Loss for such period, as
applicable.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with respect to
Nextel Partners, no effect shall be given to adjustments following January 29,
1999 to the accounting books and records of Nextel Partners in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 or successor opinions
thereto or otherwise resulting from the acquisition of control of Nextel
Partners by another Person.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of Nextel Partners, if and to the extent
that the accounts of each such Restricted Subsidiary would normally be
consolidated with those of Nextel Partners in accordance with generally
accepted accounting principles; provided, however, that
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"Consolidation" shall not include consolidation of the accounts of any
Unrestricted Subsidiary, but the interest of Nextel Partners or any Restricted
Subsidiary in any Unrestricted Subsidiary shall be accounted for as an
investment. The term "Consolidated" has a correlative meaning.
"Credit Facility" means any credit facility whether a term or revolving
type or both, including the New Credit Facility or letter of credit facility of
the type customarily entered into with banks or any Hedging Agreement (as
defined), between Nextel Partners and/or any of its Restricted Subsidiaries, on
the one hand, and any banks or other lenders or affiliates thereof, on the
other hand (and any renewals, refundings, extensions or replacements of any
such credit facility), which credit facility is designated by Nextel Partners
as a "Credit Facility" for purposes of the indenture, and shall include all
such credit facilities in existence on January 29, 1999 whether or not so
designated.
"Debt" means, without duplication, with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent:
(1) every obligation of such Person for money borrowed, including without
limitation, in each case, premium, interest, including interest accruing
subsequent to the filing of, or which would have accrued but for the filing
of, a petition for bankruptcy, whether or not such interest is an allowable
claim in such bankruptcy proceeding, fees and expenses relating thereto,
(2) every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments, including obligations Incurred in connection
with the acquisition of property, assets or businesses,
(3) every reimbursement obligation of such Person with respect to letters
of credit, bankers' acceptances or similar facilities issued for the
account of such Person,
(4) every obligation of such Person issued or assumed as the deferred
purchase price of property or services but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business which are
not overdue or which are being contested in good faith,
(5) every Capital Lease Obligation of such Person,
(6) the maximum fixed redemption or repurchase price of Redeemable Stock
of such Person at the time of determination plus accrued but unpaid
dividends,
(7) every obligation of such Person under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements of
such Person (collectively, "Hedging Agreements"), and
(8) every obligation of the type referred to in clauses (1) through (7)
of another Person and all dividends of another Person the payment of which,
in either case, such Person has Guaranteed or is liable, directly or
indirectly, as obligor, Guarantor or otherwise.
The amount of Debt of any Person issued with original issue discount is the
face amount of such Debt less the unamortized portion of the original issue
discount of such Debt at the time of its issuance as determined in conformity
with generally accepted accounting principles, and money borrowed at the time
of the Incurrence of any Debt in order to pre-fund the payment of interest on
such Debt shall be deemed not to be "Debt." The amount of Debt represented by
an obligation under an agreement referred to in clause (7) shall be equal to:
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(a) zero if such obligation has been Incurred under clause (5)(b) of
the definition of Permitted Debt, and
(b) the notional amount of such obligation if it is not so Incurred.
"Default" means an event that is, or after notice or passage of time, or
both, would be, an Event of Default.
"Default Amount" means, in respect of any note:
(1) as of any particular date prior to February 1, 2004, the Accreted
Value of the note as of such date, or
(2) as of any particular date on and after February 1, 2004, 100% of
the principal amount payable in respect of the note at the Stated Maturity
thereof.
"Directed Investment" by Nextel Partners or any of its Restricted
Subsidiaries means any Investment for which the cash or property used for such
Investment is received by Nextel Partners from the issuance and sale (other
than to a Restricted Subsidiary) on or after the date of the indenture of
shares of its Capital Stock (other than any of the Preferred Stock), or any
options, warrants or other rights to purchase such Capital Stock (other than
any of the Preferred Stock) designated by Nextel Partners' board of directors
as a "Directed Investment" to be used for one or more specified investments in
the telecommunications business including related activities and services and
is so designated and used at any time within 365 days after the receipt
thereof; provided that the aggregate amount of any such Directed Investments
may not at any time exceed 50% of the aggregate amount of such cash or property
received by Nextel Partners on or after the date of the indenture from any such
issuance and sale or capital contribution; and provided further that any
proceeds from any such issuance or sale may not be used for such an Investment
if such proceeds were, prior to being designated for use as a Directed
Investment, used to make a Restricted Payment.
"Disinterested Director" means, with respect to any proposed transaction
between Nextel Partners and an Affiliate thereof, a member of Nextel Partners'
board of directors who is not an officer or employee of Nextel Partners, would
not be a party to, or have a financial interest in, such transaction and is not
an officer, director or employee of, and does not have a financial interest in,
such Affiliate. For purposes of this definition, no person would be deemed not
to be a Disinterested Director solely because such person holds Capital Stock
of Nextel Partners.
"Fair Market Value" means, for purposes of clause (1) of the "Limitation
on Consolidated Debt" covenant, the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by Nextel Partners' board of directors, whose determination shall be
conclusive if evidenced by a board resolution, provided that:
(a) the Fair Market Value of any security registered under the
Exchange Act shall be the average of the closing prices, regular way, of
such security for the 20 consecutive trading days immediately preceding
the sale of Capital Stock, and
(b) in the event the aggregate Fair Market Value of any other property
received by Nextel Partners exceeds $10 million, the Fair Market Value
of such property shall be determined in good faith by Nextel Partners'
board of directors, including a majority of the Disinterested Directors
who are then members of such board of directors, which determination
shall be conclusive if evidenced by a board resolution.
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"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing any Debt of any other Person in any manner, whether
directly or indirectly, and including any obligation of such Person:
(1) to purchase or pay or advance or supply funds for the purchase or
payment of such Debt or to purchase or to advance or supply funds for the
purchase of any security for the payment of such Debt,
(2) to purchase property, securities or services for the purpose of
assuring the holder of such Debt of the payment of such Debt, or
(3) to maintain working capital, equity capital or other financial
statement condition or liquidity of such Person so as to enable such Person
to pay such Debt;
provided, however, that the Guarantee by any Person shall not include
endorsements by such Person for collection or deposit, in either case, in the
ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur by conversion, exchange or otherwise, assume pursuant
to a merger, consolidation, acquisition or other transaction, Guarantee or
otherwise become liable in respect of such Debt or other obligation or the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt or other obligation on the balance sheet of such
Person; provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such
time becoming Debt shall not be deemed an Incurrence of such Debt; provided
further, however, that the accretion of original issue discount on Debt shall
not be deemed to be an Incurrence of Debt. Debt otherwise Incurred by a Person
before it becomes a Subsidiary of Nextel Partners shall be deemed to have been
Incurred at the time it becomes such a Subsidiary.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise, or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by, any other Person or the designation of a Subsidiary as an Unrestricted
Subsidiary; provided that a transaction will not be an Investment to the extent
it involves:
(1) the issuance or sale by Nextel Partners of its Capital Stock (other
than Redeemable Stock), including options, warrants or other rights to
acquire such Capital Stock (other than Redeemable Stock),
(2) a transfer, assignment or contribution by Nextel Partners of shares
of Capital Stock or any options, warrants or rights to acquire Capital
Stock, or all or substantially all of the assets of, any Unrestricted
Subsidiary of Nextel Partners to another Unrestricted Subsidiary of Nextel
Partners, or
(3) extensions of trade credit by Nextel Partners and its Restricted
Subsidiaries on commercially reasonable terms in the ordinary course of
business and consistent with their normal practice.
"Itemized Executive" means any of the following individuals:
(1) John Chapple;
(2) John Thompson;
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(3) David Thaler;
(4) David Aas;
(5) Perry Satterlee; and
(6) Mark Fanning.
"License Exchange" means:
(1) any exchange of Licenses between Nextel Partners and Nextel or any
Affiliates of Nextel which Nextel Partners' board of directors determines
in good faith, on the date of such exchange, are, in the aggregate, of at
least equivalent value; provided, however, that the aggregate value of all
such Licenses exchanged pursuant to this clause (1) shall not exceed $25.0
million, or
(2) any transaction pursuant to which Nextel Partners transfers certain
of its specialized mobile radio licenses to Nextel or any Affiliates of
Nextel in exchange for licenses from a third party, the purchase price for
which was funded by Nextel or any Affiliates of Nextel; provided, however,
that the aggregate value of all such licenses exchanged pursuant to this
clause (2) shall not exceed $25.0 million.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement, encumbrance, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property or assets, including any conditional sale
or other title retention agreement having substantially the same economic
effect as any of the foregoing.
"Marketable Securities" means:
(1) securities either issued directly or fully guaranteed or insured by
the government of the United States of America or any agency or
instrumentality thereof having maturities of not more than one year;
(2) time deposits and certificates of deposit, having maturities of not
more than six months from the date of deposit, of any domestic commercial
bank having capital and surplus in excess of $500 million and having
outstanding long-term debt rated A or better or the equivalent thereof by
S&P or Aaa or better or the equivalent thereof by Moody's;
(3) commercial paper rated A-1 or the equivalent thereof by S&P or P-1 or
the equivalent thereof by Moody's, and in each case maturing within one
year;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above; and
(5) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (1) through (4).
"Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Moody's Investors Service, Inc. ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business
with respect thereto shall not have been transferred to any successor Person,
then "Moody's" shall mean any other national recognized rating agency other
than S&P that rates debt securities having a maturity at original issuance of
at least one year and that shall have been designated by Nextel Partners by a
written notice given to the trustee.
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"Net Proceeds" means the aggregate cash proceeds received by Nextel
Partners or any of its Restricted Subsidiaries in respect of any Asset Sale
including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale, net of:
(1) the direct costs relating to such Asset Sale including, without
limitation, legal, accounting, appraisal, investment banking fees, and
sales and brokerage commissions,
(2) any relocation expenses incurred as a result thereof,
(3) taxes paid or payable as a result thereof,
(4) amounts required to be applied to the repayment of Debt secured by
a Lien on the asset or assets that were the subject of such Asset Sale,
(5) amounts required to be paid in order to obtain a necessary consent
to such Asset Sale,
(6) distributions made to minority interest holders, based on their
pro rata ownership, in Subsidiaries or Permitted Joint Ventures of such
Person as a result of an Asset Sale by such Subsidiaries or Permitted Joint
Ventures, and
(7) appropriate amounts to be provided by such Person or any
Subsidiary thereof, as the case may be, as a reserve in accordance with
generally accepted accounting principles against any liabilities associated
with such assets that are the subject thereof, as the case may be, after
such Asset Sale, including liabilities under any indemnification
obligations and severance and other employee termination costs associated
with such Asset Sale, in each case, as conclusively determined by the board
of directors of such Person.
"New Credit Facility" means that certain credit agreement, dated as of
January 29, 1999, by and among Nextel Partners and or its Subsidiaries and a
syndicate of banks and other financial institutions led by Donaldson, Lufkin &
Jenrette Securities Corporation, as arranger, DLJ Capital Funding, as
syndication agent and the Bank of Montreal, as administrative agent, governing
a $175.0 million term loan facility and $100.0 million revolving credit
facility, and Hedging Agreements with Persons that were lenders under the New
Credit Facility or were affiliates of such lenders at the time such Hedging
Agreements were entered into, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such credit agreement, Hedging Agreements and/or related
documents may be amended, restated, supplemented, renewed, replaced or
otherwise modified from time to time whether or not with the same agent or
lenders and irrespective of any changes in the terms and conditions thereof.
"Operating Cash Flow" means, for any fiscal quarter:
(1) Nextel Partners' Consolidated Net Income (Loss) plus depreciation,
amortization and other non-cash charges in respect thereof for such fiscal
quarter, plus
(2) all amounts deducted in calculating Consolidated Net Income (Loss)
for such fiscal quarter in respect of Consolidated Interest Expense, and
all income taxes, whether or not deferred, applicable to such income
period, all as determined on a Consolidated basis in accordance with
generally accepted accounting principles.
For purposes of calculating Operating Cash Flow for the fiscal quarter
most recently completed for which financial statements are available prior to
any date on which an action is taken that requires a calculation of the
Operating Cash Flow to Consolidated Interest Expense Ratio or Consolidated Debt
to Annualized Cash Flow Ratio:
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(A) any Person that is a Restricted Subsidiary on such date, or
would become a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio, will be
deemed to have been a Restricted Subsidiary at all times during such
fiscal quarter,
(B) any Person that is not a Restricted Subsidiary on such date, or
would cease to be a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio, will be
deemed not to have been a Restricted Subsidiary at any time during
such fiscal quarter, and
(C) if Nextel Partners or any Restricted Subsidiary shall have in
any manner acquired, including through commencement of activities
constituting such operating business, or disposed, including through
termination or discontinuance of activities constituting such
operating business, of any operating business during or subsequent to
the most recently completed fiscal quarter, such calculation will be
made on a pro forma basis on the assumption that such acquisition or
disposition had been completed on the first day of such completed
fiscal quarter and may give effect to projected quantifiable
improvements in operating results on an annualized basis due to cost
reductions calculated in accordance with Regulation S-X of the
Securities Act and evidenced by:
(x) in the case of cost reductions of less than $10.0 million,
an officers' certificate delivered to the trustee, and
(y) in the case of cost reductions of $10.0 million or more, a
resolution of Nextel Partners' board of directors set forth in an
officers' certificate delivered to the trustee.
"Permitted Debt" means:
(1) any Debt, including Guarantees thereof, outstanding on January 29,
1999 (including the old notes and the new notes) and any accretion of
original issue discount and accrual of interest with respect to such Debt;
(2) any additional Debt outstanding under a Credit Facility in
aggregate principal amount at any one time outstanding under this clause
(2) not to exceed $325.0 million in the aggregate for all such credit
facilities, less permanent repayments of Debt under such Credit Facilities
made by Nextel Partners or any of its Restricted Subsidiaries pursuant to
the covenant described above under the caption "Asset Sales";
(3) any Vendor Financing Debt in an aggregate principal amount
outstanding at any time not to exceed $100.0 million;
(4) Debt to Nextel Partners or to any Restricted Subsidiary; provided
that any event which results in any such Restricted Subsidiary ceasing to
be a Restricted Subsidiary or any subsequent transfer of such Debt (other
than to Nextel Partners or another Restricted Subsidiary) will be deemed,
in each case, to constitute an Incurrence of such Debt not permitted by
this clause (4);
(5) Debt:
(a) in respect of performance, surety or appeal bonds or bankers'
acceptances provided in the ordinary course of business,
(b) under foreign currency hedge, foreign currency exchange,
interest rate swap or similar agreements; provided that such
agreements:
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(A) are designed solely to protect Nextel Partners or its
Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates and
(B) do not increase the Debt of the obligor outstanding at
any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder; and
(c) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of Nextel Partners or any Restricted
Subsidiary pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary other than Guarantees of Debt Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition, in a
principal amount not to exceed the gross proceeds actually received by
Nextel Partners or any Restricted Subsidiary in connection with such
disposition;
(6) renewals, refundings or extensions of any Debt referred to in
clause (1) or (3) above or Incurred pursuant to clause (2) under the
caption "Limitation on Consolidated Debt" and any renewals, refundings or
extensions thereof, plus:
(a) the amount of any premium reasonably determined by Nextel
Partners as necessary to accomplish such renewal, refunding or
extension, and
(b) such other fees and expenses of Nextel Partners reasonably
incurred in connection with the renewal, refunding or extension,
provided that such renewal, refunding or extension shall constitute
Permitted Debt only:
(A) to the extent that it does not result in an increase in the
aggregate principal amount (or, if such Debt provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, in an amount not
greater than such lesser amount) of such Debt (except as permitted by
paragraphs (a) or (b) above), and
(B) to the extent such renewed, refunded or extended Debt does not
have a mandatory redemption date prior to the mandatory redemption
date of the Debt being renewed, refunded or extended or have an
Average Life shorter than the remaining Average Life of the Debt
being renewed, refunded or extended;
(7) Debt payable solely in, or mandatorily convertible into, Capital
Stock (other than Redeemable Stock) of Nextel Partners;
(8) all new notes issued pursuant to the terms of the registration
rights agreement for the notes;
(9) Debt (in addition to Debt permitted under clauses (1) through (8)
above) in an aggregate principal amount outstanding at any time not to
exceed $50.0 million.
In the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness specified in the above clauses (1) through
(9), Nextel Partners shall have the right, at any time in its sole discretion,
to classify such item as one of the types and shall only be required to include
such item under the clause permitting such Indebtedness as so classified.
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"Permitted Distribution" of a Person means:
(1) the exchange by such Person of Capital Stock (other than
Redeemable Stock) for outstanding Capital Stock, and
(2) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Debt of Nextel Partners that is subordinate in
right of payment to the notes,
in exchange for, including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu of
the issuance of fractional shares or scrip, or out of the proceeds of a
substantially concurrent issue and sale other than to a Restricted Subsidiary
of, either:
(a) Capital Stock of Nextel Partners (other than Redeemable
Stock) or
(b) Debt of Nextel Partners that is subordinate in right of
payment to the notes on subordination terms no less favorable to the
holders of the notes in their capacities as such than the
subordination terms or other arrangement applicable to the Debt that
is redeemed, repurchased, defeased or otherwise acquired or retired
for value, provided that such new Debt does not mature prior to the
Stated Maturity or have a mandatory redemption date prior to the
mandatory redemption date of the Debt being redeemed, repurchased,
defeased or otherwise acquired or retired for value or have an Average
Life shorter than the remaining Average Life of the Debt being
redeemed, repurchased, defeased or otherwise acquired or retired for
value.
"Permitted Holder" means each of:
(1) Nextel Communications, Inc., and any entity or entities controlled
by, directly or indirectly, Nextel Communications, Inc.
(2) Craig O. McCaw and any entity or entities:
(A) controlled, directly or indirectly, by Craig O. McCaw or the
estate of Craig O. McCaw and
(B) a majority of the equity interests of which are owned,
directly or indirectly, by Craig O. McCaw and his family, his brothers
and estates of, or trusts for the primary benefit of, the foregoing
persons,
(3) Motorola, Inc.,
(4) DLJMB, and any of their respective Affiliates and the respective
successors by merger, consolidation, transfer or otherwise to all or
substantially all of the respective businesses and assets of any of the
foregoing, and
(5) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act) controlled by one or more persons identified
in clauses (1) through (4) of this definition.
"Permitted Investment" means any Investment in Marketable Securities or a
Permitted Joint Venture.
"Permitted Joint Venture" means any joint venture entered into by Nextel
Partners or any of its Restricted Subsidiaries with a third party:
(1) for the purpose of financing the acquisition or lease of
telecommunications towers for use in the Nextel Partners' markets; provided
that the aggregate value of all assets contributed by Nextel Partners or
any of its Restricted Subsidiaries to any joint venture pursuant to this
clause (1) shall not exceed $15.0 million as determined in good faith by
Nextel Partners' board of directors or
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(2) in which Nextel Partners or any of its Restricted Subsidiaries:
(a) is responsible for the managerial control of such joint
venture and
(b) owns at least 40% of the outstanding Capital Stock of such
joint venture; provided that such joint venture, together with all
other Permitted Joint Ventures described in this clause (2), does not
cover or service more than 10.0% of the population computed by
including only a percentage of the total population equal to Nextel
Partners' percentage ownership in that joint venture covered by Nextel
Partners at the date of determination (as determined in good faith by
the board of directors).
"Permitted Liens" means:
(1) Liens securing Debt or other monetary obligations under a Credit
Facility to the extent the principal amount of such obligations was
permitted by the terms of the indenture to be Incurred;
(2) Liens in favor of Nextel Partners or a Wholly Owned Restricted
Subsidiary;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Nextel Partners or any Subsidiary
of Nextel Partners; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
Nextel Partners;
(4) Liens on property existing at the time of acquisition thereof by
Nextel Partners or any Subsidiary of Nextel Partners, provided that such
Liens were in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness including Capital Lease Obligations
permitted by clause (3) of the definition of "Permitted Debt";
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as will be
required to be in conformity with generally accepted accounting principles
shall have been made therefor;
(9) Liens, including zoning restrictions, servitudes, easements and
rights-of-way, incurred in the ordinary course of business of Nextel
Partners or its Subsidiary that:
(a) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit other than trade credit in the
ordinary course of business, and
(b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of
business by Nextel Partners or such Subsidiary;
(10) Liens of a lessor under a lease, other than a capitalized lease;
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(11) Liens not otherwise permitted by the foregoing clauses (1)
through (7) securing Debt in an aggregate amount not to exceed 5% of Nextel
Partners' consolidated tangible assets; and
(12) Liens to secure Debt incurred to refinance, in whole or in part,
Debt secured by any Lien referred to in the foregoing clauses (1), (3),
(4), (5) or this clause (12) so long as such Lien does not extend to any
other property other than improvements and accessions to the original
property and the principal amount of Debt so secured is not increased
except as otherwise permitted by the indenture.
"Permitted Transaction" means:
(1) any transaction pursuant to written agreements existing on January
29, 1999 and described in or incorporated by reference into this
prospectus,
(2) any transaction or transactions with any vendor or vendors, other
than Motorola, of property or materials used in the telecommunications
business including related activities and services of Nextel Partners or
any Restricted Subsidiary, provided such transactions are in the ordinary
course of business and such vendor does not beneficially own more than 10%
of the voting power of the Voting Stock of Nextel Partners,
(3) any amendment, modification or other change to the purchase
agreement between Nextel Partners and Motorola, dated as of January 29,
1999, or any other similar agreement with Motorola that has been approved
by a majority of the Disinterested Directors of Nextel Partners,
(4) agreements and transactions contemplated by the joint venture
agreement entered into by and among Nextel Partners and Nextel and their
respective Subsidiaries as of January 29, 1999,
(5) any License Exchange, and
(6) any issuance of equity by Nextel Partners (other than Redeemable
Stock).
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Capital Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes that ranks prior, as
to the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of such Person,
to shares of Capital Stock of any other class of such Person.
"Preferred Stock" means each of Nextel Partners' Series A convertible
preferred stock, the Series B redeemable preferred stock, the Series C
convertible preferred stock, and the Series D convertible preferred stock.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms or otherwise is:
(1) required to be redeemed prior to the Stated Maturity of the notes,
(2) redeemable at the option of the holder thereof at any time prior
to the Stated Maturity of the notes, or
(3) convertible into or exchangeable for Capital Stock referred to in
clause (1) or (2) above or Debt having a scheduled maturity prior to the
Stated Maturity of the notes; provided that any Capital Stock that would
not constitute Redeemable Stock but for
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provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of a "change
of control" occurring prior to the Stated Maturity of the notes shall not
constitute Redeemable Stock if the "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of
such Capital Stock than the provisions contained in the "Change of Control"
covenant described herein and such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to Nextel Partners' repurchase of such notes as are
required to be repurchased pursuant to the covenant described under the
caption "Change of Control".
"Required Consent" means except as otherwise expressly provided in the
indenture with respect to matters requiring the consent of each holder of notes
affected thereby, the consent of holders of not less than a majority in
aggregate principal amount at Stated Maturity of the notes.
"Restricted Subsidiary" means any Subsidiary of Nextel Partners, whether
existing on January 29, 1999 or created subsequent thereto, designated from
time to time by the board of directors as, or otherwise deemed to be, a
"Restricted Subsidiary" in accordance with the covenant described under the
caption "Restricted Subsidiaries".
"S&P" means Standard & Poor's Ratings Services or, if Standard & Poor's
Ratings Services shall cease rating debt securities having a maturity at
original issuance of at least one year and such ratings business shall have
been transferred to a successor Person, such successor Person; provided,
however, that if Standard & Poor's Ratings Services ceases rating debt
securities having a maturity at original issuance of at least one year and its
ratings business with respect thereto will not have been transferred to any
successor Person, then "S&P" will mean any other nationally recognized rating
agency, other than Moody's, that rates debt securities having a maturity at
original issuance of at least one year and that will have been designated by
Nextel Partners by a written notice given to the trustee.
"Stated Maturity", when used with respect to any Debt security or any
installment of interest thereon, means the date specified in such Debt security
as the fixed date on which the principal of such Debt security or such
installment of interest is due and payable.
"Subsidiary" of any Person means:
(1) a corporation more than 50% of the outstanding Voting Stock of
which is owned, directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or
(2) any other Person (other than a corporation) in which such Person,
or one or more other Subsidiaries of such Person or such Person and one or
more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs
thereof.
"Total Common Equity" of any Person means, as of any day of determination
and as modified for purposes of the definition of "Change of Control", the
product of:
(1) the aggregate number of outstanding primary shares of Common Stock
of such Person on such day which will not include any options or warrants
on, or securities convertible or exchangeable into, shares of Common Stock
of such Person and
(2) the average Closing Price of such Common Stock over the 20
consecutive Trading Days immediately preceding such day.
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If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (2) of the preceding sentence
shall be determined by Nextel Partners' board of directors in good faith and
evidenced by a board resolution.
"Total Invested Capital" means at any time of determination, the sum of,
without duplication:
(1) the total amount of equity contributed to Nextel Partners as of
January 29, 1999, plus
(2) the aggregate net cash proceeds received by Nextel Partners from
capital contributions or the issuance or sale of Capital Stock, other than
Redeemable Stock but including Capital Stock issued upon the conversion of
convertible Debt or from the exercise of options, warrants or rights to
purchase Capital Stock, other than Redeemable Stock, including cash
payments under the Committed Capital Contribution, subsequent to January
29, 1999, other than to a Restricted Subsidiary, plus
(3) the aggregate net cash proceeds received by Nextel Partners or any
Restricted Subsidiary from the sale, disposition or repayment of any
Investment made after the Closing Date and constituting a Restricted
Payment in an amount equal to the lesser of:
(a) the return of capital with respect to such Investment and
(b) the initial amount of such Investment, in either case, less
the cost of the disposition of such Investment, plus
(4) an amount equal to the Consolidated net Investment as of the date
of determination Nextel Partners and/or any of its Restricted Subsidiaries
has made in any Subsidiary that has been designated as an Unrestricted
Subsidiary after January 29, 1999 upon its redesignation as a Restricted
Subsidiary in accordance with the covenant described above under the
caption "Restricted Subsidiaries", plus
(5) Consolidated Debt,
minus
(6) the aggregate amount of all Restricted Payments declared or made
on or after the Closing Date.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"U.S. Government Obligation" means:
(1) any security which is:
(a) a direct obligation of the United States of America for the
payment of which the full faith and credit of the United States of
America is pledged or
(b) an obligation of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and
credit obligation of the United States of America, which, in either
case, is not callable or redeemable at the option of the issuer
thereof, and
(2) any depository receipt issued by a bank as custodian with respect
to any U.S. Government Obligation and held by such bank for the account of
the holder of such depository receipt, or with respect to any specific
payment of principal of or interest on any U.S. Government Obligation which
is so specified and held, provided that, except as
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required by law, such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depository receipt.
"Unrestricted Subsidiary" means any Subsidiary that is not a Restricted
Subsidiary and includes any Restricted Subsidiary that becomes an Unrestricted
Subsidiary in accordance with the covenant described above under the caption
"Restricted Subsidiaries."
"Vendor Financing Debt" means any Debt owed to:
(1) a vendor or supplier of any property or materials used by Nextel
Partners or its Restricted Subsidiaries in their telecommunications
business,
(2) any Affiliate of such a vendor or supplier,
(3) any assignee of such a vendor, supplier or Affiliate of such a
vendor or supplier, or
(4) a bank or other financial institution that has financed or
refinanced the purchase of such property or materials from such a vendor,
supplier, Affiliate of such a vendor or supplier or assignee of such a
vendor or supplier; provided that the aggregate amount of such Debt does
not exceed the sum of:
(a) the purchase price of such property or materials, including
transportation, installation, warranty and testing charges, as well as
applicable taxes paid, in respect of such property or materials,
(b) the cost of design, development, site acquisition and
construction,
(c) any interest or other financing costs accruing or otherwise
payable in respect of the foregoing, and
(d) the cost of any services provided by such vendor, supplier or
Affiliate of such vendor or supplier.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of Nextel Partners means a Restricted
Subsidiary all of the outstanding Capital Stock of which, other than directors'
qualifying shares, is at the time owned by Nextel Partners or by one or more
Wholly Owned Restricted Subsidiaries or by Nextel Partners and one or more
Wholly Owned Restricted Subsidiaries.
EVENTS OF DEFAULT
The following are events of default under the indenture:
(1) failure to pay principal of (or premium, if any, on) any note when
due;
(2) failure to pay any interest on any note when due, continued for 30
days;
(3) default in the payment of principal and interest on notes required
to be purchased pursuant to an offer to purchase the notes in accordance
with the indenture as described under "Covenants--Change of Control" when
due and payable;
(4) failure to perform or comply with the provisions described under
"Mergers, Sales of Assets, Etc.";
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(5) failure to perform any other covenant or agreement of Nextel
Partners under the indenture or the notes continued for 60 days after
written notice to Nextel Partners by the trustee or holders of at least 25%
in aggregate principal amount at maturity of the outstanding notes;
(6) failure to pay when due the principal of, or acceleration of, any
Debt of Nextel Partners or any Restricted Subsidiary having an outstanding
principal amount of at least $25 million, individually or in the aggregate;
(7) the rendering of a final judgment or judgments for the payment of
money against Nextel Partners or any Restricted Subsidiary in an aggregate
amount in excess of $25 million which remains undischarged or unstayed for
a period of 60 days after the date on which the right to appeal all such
judgments has expired; and
(8) certain events of bankruptcy, insolvency or reorganization
affecting Nextel Partners or any Restricted Subsidiary. (Section 5.01)
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default occurs and is continuing, the trustee will
be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such
holders shall have offered to the trustee reasonable indemnity. (Section
6.03) Subject to such provisions for the indemnification of the trustee, the
holders of a majority in aggregate principal amount of the outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee. The trustee may refuse, however, to follow any
direction that the trustee, in its sole discretion, determines may be unduly
prejudicial to the rights of another holder or that may subject the trustee to
any liability or expense if the trustee determines, in its sole discretion,
that it lacks indemnification against such loss or expense. (Section 5.12)
If an event of default, other than an as described in clause (8) above,
occurs and is continuing, either the trustee or the holders of at least 25% in
aggregate principal amount of the outstanding notes at maturity may accelerate
the maturity of all notes; provided, however, that after such acceleration, but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount at maturity of outstanding notes may, under certain
circumstances, rescind and annul such acceleration if all events of default,
other than the nonpayment of accelerated principal, have been cured or waived
as provided in the indenture. If an event of default specified in clause (8)
above occurs, the outstanding notes will ipso facto become immediately due and
payable without any declaration or other act on the part of the trustee or any
holder. (Section 5.02) For information as to waiver of defaults, see
"Modification and Waiver."
No holder of any note will have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless such holder has
previously given to the trustee written notice of a continuing event of default
and unless also the holders of a majority in aggregate principal amount at
maturity of the outstanding notes have made written request, and offered
reasonable indemnity, to the trustee to institute such proceeding as trustee,
and the trustee will not have received from the holders of a majority in
aggregate principal amount at maturity of the outstanding notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. (Section 5.07) However, such limitations do not
apply to a suit instituted by a holder of a note for enforcement of payment of
the principal of and premium, if any, or interest on such note on or after the
respective due dates expressed in such note. (Section 5.08)
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The indenture provides that if a default occurs and is continuing,
generally the trustee must, within 90 days after the occurrence of such
default, give to the holders notice of such default. The trustee may withhold
from holders of the notes notice of any continuing default or event of default
(except a default or event of default relating to the payment of principal of,
premium, if any or interest) if it determines that withholding notice is in
their interest; provided, however, that in the case of any default of a
character specified in clause (e) above, no such notice to holders shall be
given until at least 30 days after the occurrence thereof. (Section 6.02)
Nextel Partners will be required to furnish to the trustee annually a
statement as to the performance by Nextel Partners of certain of its
obligations under the indenture and Nextel Partners is required upon becoming
aware of any default or event of default to deliver to the trustee a statement
specifying such default or event of default. (Section 10.17)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The indenture will cease to be of further effect as to all outstanding
notes except as to:
(1) rights of registration of transfer and exchange and Nextel
Partners' right of optional redemption,
(2) substitution of apparently mutilated, defaced, destroyed, lost or
stolen notes,
(3) rights of holders to receive payment of principal of and premium,
if any, and interest on the notes,
(4) rights, obligations and immunities of the trustee under the
indenture, and
(5) rights of the holders of the notes as beneficiaries of the
indenture with respect to any property deposited with the trustee payable
to all or any of them), if:
(a) Nextel Partners will have paid or caused to be paid the
principal of and premium, if any, and interest on the notes as and
when the same will have become due and payable or
(b) all outstanding notes (except lost, stolen or destroyed notes
which have been replaced or paid) have been delivered to the trustee
for cancellation. (Section 4.01)
DEFEASANCE
The indenture will provide that, at the option of Nextel Partners:
(1) if applicable, Nextel Partners will be discharged from any
and all obligations in respect of the outstanding notes or
(2) if applicable, Nextel Partners may omit to comply with
certain restrictive covenants, and that such omission shall not be
deemed to be an event of default under the indenture and the notes, in
either case (1) or (2) upon irrevocable deposit with the trustee, in
trust, of money and/or U.S. government obligations which will provide
money in an amount sufficient in the opinion of a nationally
recognized firm of independent certified public accountants to pay the
principal of each installment of interest, if any, on the outstanding
notes at maturity. With respect to clause (2), the obligations under
the indenture other than with respect to such covenants and the events
of default other than the events of default relating to such covenants
above shall remain in full force and effect. Such trust may only be
established if, among other things:
(a) with respect to clause (1), Nextel Partners has received
from, or there has been published by, the Internal Revenue
Service a ruling or there has been a change
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in law, which in the opinion of counsel provides that holders of
the notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge
and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge were not to occur; or,
with respect to clause (2), Nextel Partners has delivered to the
trustee an opinion of counsel to the effect that the holders of
the notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
deposit and defeasance were not to occur;
(b) no default or event of default will have occurred or be
continuing;
(c) the deposit shall not cause the trustee or the trust so
created to be subject to the Investment Company Act of 1940, as
amended; and
(d) certain other customary conditions precedent are
satisfied. (Section 12.04)
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by Nextel
Partners and the trustee with the consent of the holders of a majority in
aggregate principal amount at maturity of the outstanding notes; provided,
however, that no such modification or amendment may, without the consent of the
holder of each outstanding note affected thereby:
(1) change the due date of the principal of, or any installment of
interest on, any note;
(2) reduce the principal amount of, or the premium or interest on, any
note;
(3) change the place or currency of payment of principal of, or
premium or interest on, any note;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any note;
(5) waive a default in the payment of, or the premium or interest on,
any note;
(6) reduce the above stated percentage of outstanding notes necessary
to modify or amend the indenture;
(7) reduce the percentage of aggregate principal amount of outstanding
notes necessary for waiver of compliance with certain provisions of the
indenture or for waiver of certain defaults;
(8) modify any provisions of the indenture relating to the calculation
of the accreted value of the notes; or
(9) following the mailing of any offer to purchase the notes in
accordance with the indenture and until the Expiration Date of that offer
to purchase, modify any offer to purchase for the notes required under the
"Limitation on Asset Dispositions" and the "Change of Control" covenants
contained in the indenture in a manner materially adverse to the holders of
the notes. (Section 9.02)
Notwithstanding the foregoing, without the consent of any holder of notes,
Nextel Partners and the trustee may amend or supplement the indenture or the
notes:
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o to cure any ambiguity, defect or inconsistency,
o to provide for uncertificated notes in addition to or in place of
certificated notes,
o to provide for the assumption of Nextel Partners' obligations to
holders of notes in the case of a merger or consolidation,
o to make any change that would provide any additional rights or
benefits to holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder, or
o to comply with requirements of the SEC in order to maintain the
qualification of the indenture under the Trust Indenture Act.
(Section 9.01)
The holders of a majority in aggregate principal amount at maturity of the
outstanding notes, on behalf of all holders of notes, may waive compliance by
Nextel Partners with certain restrictive provisions of the indenture. (
Section 10.18) Subject to certain rights of the trustee, as provided in the
indenture, the holders of a majority in aggregate principal amount at maturity
of the outstanding notes, on behalf of all holders of notes, may waive any past
default under the indenture, except a default in the payment of principal,
premium or interest or a default arising from failure to purchase any note
tendered pursuant to an offer to purchase the notes in accordance with the
indenture. (Section 5.13)
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Nextel
Partners, as such, will have any liability for any obligations of Nextel
Partners under the notes or the indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each holder of notes
by accepting a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the SEC that such waiver is against public policy.
GOVERNING LAW
The indenture and the notes will be governed by the laws of the State of
New York.
THE TRUSTEE
The indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an event of default, the
trustee will exercise such rights and powers vested in it under the indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. (Section 6.01)
The indenture and provisions of the Trust Indenture Act, incorporated by
reference in the indenture, contain limitations on the rights of the trustee,
should it become a creditor of Nextel Partners, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claim as security or otherwise. The trustee is permitted to engage in
other transactions with Nextel Partners or any Affiliate, provided, however,
that if it acquires any conflicting interest, it must eliminate such conflict
or resign. (Sections 6.08 and 6.13)
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BOOK-ENTRY; DELIVERY AND FORM
The new notes initially will be represented by one or more permanent
global certificates in definitive, fully registered form. This global note will
be deposited upon issuance with The Depository Trust Company, New York, New
York and registered in the name of a nominee of The Depository Trust Company.
THE GLOBAL NOTE. We expect that pursuant to procedures established by The
Depository Trust Company:
(1) upon the issuance of the global note, The Depository Trust Company
or its custodian will credit, on its internal system, the principal
amount of the individual beneficial interests represented by the
global note to the respective accounts of persons who have accounts
with such depositary, and
(2) ownership of beneficial interests in the global note will be shown on,
and the transfer of ownership will be effected only through, records
maintained by The Depository Trust Company or its nominee, with
respect to interests of participants, and the records of participants,
with respect to interests of persons other than participants.
Ownership of beneficial interests in the global notes will be limited to
persons who have accounts with The Depository Trust Company or persons who hold
interests through participants.
So long as The Depository Trust Company or its nominee is the registered
owner or holder of the new notes, The Depository Trust Company or its nominee
will be considered the sole owner or holder of the new notes represented by the
global note for all purposes under the indenture. No beneficial owner of an
interest in the global note will be able to transfer that interest except in
accordance with The Depository Trust Company's procedures.
Payments of interest, principal and other amounts due on the global note
will be made to The Depository Trust Company or its nominee as the registered
owner. None of Nextel Partners, the trustee or any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global note
or for maintaining, supervising or reviewing any records relating to this
beneficial ownership interest.
We expect that The Depository Trust Company or its nominee, upon receipt
of any payment of interest, principal or other amounts due on the global note,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the global note as shown on the
records of The Depository Trust Company. We also expect that payments by
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practice, as is the case with securities held for the accounts of customers
registered in the names of nominees for those customers. These payments will be
the responsibility of the participants.
Transfers between participants in The Depository Trust Company will be
effected in the ordinary way through The Depository Trust Company's settlement
system in accordance with The Depository Trust Company rules and will be
settled in same day funds.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of new notes, including the presentation of
new notes for exchange as described below, only at the direction of a
participant to whose account The Depository
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Trust Company interests in the global note are credited. Further, The
Depository Trust Company will take action only as to such portion of the notes
as to which the participant has given such direction. However, if there is an
event of default under the indenture, the Depository Trust Company will
exchange the global note for certificated notes, which it will distribute to
its participants.
The Depository Trust Company has advised us as follows: The Depository
Trust Company is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "Clearing
Agency" registered under the provisions of Section 17A of the Exchange Act. The
Depository Trust Company was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to The Depository Trust Company system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Although The Depository Trust Company has agreed to the foregoing
procedures in order to facilitate transfers of interests in the global note
among participants of The Depository Trust Company, it is under no obligation
to perform those procedures, and those procedures may be discontinued at any
time. Neither Nextel Partners nor the trustee will have any responsibility of
the performance by The Depository Trust Company or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. If The Depository Trust Company is at any time
unwilling or unable to continue as a depositary for the global note and a
successor depositary is not appointed by Nextel Partners within 90 days,
certificated notes will be issued in exchange for the global note.
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DESCRIPTION OF CREDIT FACILITY
Nextel Partners Operating Corp., a wholly owned subsidiary of Nextel
Partners, entered into a credit facility dated as of January 29, 1999 with a
syndicate of banks and other financial institutions led by Donaldson, Lufkin &
Jenrette Securities Corporation, as arranger, DLJ Capital Funding, as
syndication agent and Bank of Montreal, as administrative agent. The credit
facility includes a $175.0 million term loan facility and a $100.0 million
reducing revolving credit facility. Subject to the borrower's right in the
future to seek an increase of up to $50.0 million, the credit facility will not
exceed $275.0 million. The term loan facility has a maturity of nine years. The
revolving credit facility will terminate eight years after the date of initial
funding of the credit facility.
On January 29, 1999, Nextel Partners Operating Corp. borrowed the full
amount of the term loan facility and established an account which maintains a
balance equal to the lesser of:
(x) $275.0 million or
(y) the aggregate outstanding principal amount borrowed under the credit
facility,
until the earlier of FCC approval of the transfer applications for
licenses being transferred from Nextel or 395 days after the initial borrowings
under the credit facility. The failure of the FCC to approve the transfer
within 365 days after the initial borrowings under the credit facility
constitutes an event of default under the credit facility.
Interest. At the borrower's option, the term loan facility bears interest
at reserve-adjusted LIBOR plus 4.75% or at the administrative agent's alternate
base rate plus 3.75%. The revolving credit facility bears interest at LIBOR
plus 4.25% or the base rate plus 3.25% until consolidated EBITDA is positive at
which time the applicable margin will be initially 4.0% over LIBOR and 3.0%
over the base rate and thereafter will be determined on the basis of the ratio
of total debt to annualized EBITDA and will range between 2.25% and 3.75% over
LIBOR and between 1.25% and 2.75% over the base rate.
Fees. The borrower pays a commitment fee calculated at a rate equal to the
lower of:
(x) 2.00% per annum and
(y) one-half of the applicable margin for LIBOR loans,
in each case, calculated on the daily average unused commitment under the
revolving credit facility (whether or not then available). Such fee is payable
quarterly in arrears. The commitment fee is subject to reduction based on
utilization of the revolving credit facility.
Reduction of Commitments. Beginning on the fifth anniversary of the
closing of the credit facility, commitments under the revolving credit facility
automatically reduces in quarterly installments. The term loan facility
amortizes in quarterly installments aggregating in the percentage outlined in
the following schedule:
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<TABLE>
<CAPTION>
% OF TERM LOAN
YEAR FACILITY
- ------ ---------------
<S> <C>
1 --
2 --
3 --
4 --
5 1%
6 1%
7 1%
8 1%
9 96%
</TABLE>
Prepayments. The term loan facility is subject to mandatory prepayment:
(1) with 100% of the net cash proceeds from the issuance of debt, subject
to exceptions,
(2) with 100% of the net cash proceeds of asset sales, subject to
exceptions,
(3) after December 31, 2002, with 50% of the borrower's excess earnings
over interest expense, taxes, capital expenditures, payments made in
connection with the credit facility, and other adjustments, and
(4) after the fifth anniversary of the closing of the credit facility,
with 50% of the net cash proceeds from the issuance of equity, subject
to exceptions.
Security; Guarantees. The borrower's obligations under the credit facility
is secured by:
(1) a first-priority lien on all property and assets, tangible and
intangible, of the borrower and its subsidiaries, including accounts
receivable, inventory, equipment, intellectual property, general
intangibles, cash and proceeds of the foregoing, and
(2) a first-priority pledge of the capital stock of the borrower and its
current and future subsidiaries, including the subsidiary holding the
FCC licenses after the FCC approves the transfer of control.
Nextel Partners and the borrower's current and future subsidiaries have
guaranteed or will guarantee the obligations of the borrower under the credit
facility. Nextel Partners and the borrower's subsidiaries have guaranteed, and
will cause future subsidiaries to guarantee, the obligations of the borrower
under the credit facility. In its guarantee, Nextel Partners agreed to certain
restrictions, including among others, restrictions that limit its ability to:
o incur additional debt, other than unsecured debt in the ordinary
course of business;
o engage in any business activity other than in connection with its
ownership of the capital stock of, and the holding of permitted
investments in, the borrower; or
o merge or consolidate with any person.
Covenants. The credit facility contains customary covenants and
restrictions on the borrower's ability to engage in certain activities,
including but not limited to:
o limitations on the incurrence of liens and indebtedness,
o restrictions on sale lease-back transactions, consolidations, mergers,
sale of assets, capital expenditures, transactions with affiliates and
investments, and
o restrictions on dividends and distributions on, and redemptions and
repurchases of, capital stock, and other similar distributions.
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In addition, the borrower is required to comply with specified financial
ratios and tests, including minimum interest coverage ratios, maximum leverage
ratios, minimum service revenues, minimum subscriber units and covered
populations, minimum EBITDA requirements and minimum fixed charge coverage
ratios.
Events of Default
The credit facility contains customary event of default, including
defaults relating to payments, breach of representations, warrants and
covenants, cross-defaults and cross-acceleration to other indebtedness,
bankruptcy and insolvency, judgments, and actual or asserted invalidity of
security, as well as, among others, events of default relating to:
o the change of control of Nextel Partners or the borrower;
o the failure to obtain approval by the FCC of the transfer of control
of licenses from Nextel to Nextel Partners;
o the early termination of Nextel Partner's right to use Nextel brand
name or acquire equipment incorporating iDEN technology;
o the termination, revocation or failure to renew by the FCC licenses
material to the borrower's business;
o the early termination or failure to renew operating agreements with
Nextel, certain material breaches of obligations under these operating
agreements or default by Nextel WIP Corp. of certain obligations to
provide agreed upon services; or
o the failure of shareholders to make funding or contribution
obligations in accordance with the subscription and contribution
agreement.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Willkie Farr & Gallagher has acted as our counsel in rendering an opinion
as to all material federal income tax consequences of the exchange and holding
the new notes. This section constitutes the opinion of our counsel.
Prospective holders of notes should consult their own tax advisors with
regard to the application of the tax considerations discussed below to their
particular situations as well as the application of any state, local, foreign
or other tax laws, including gift and estate tax laws.
This section discusses the rules applicable to U.S. holders only. A U.S.
holder is any of the following:
o citizens and residents of the United States for U.S. federal income
tax purposes;
o corporations, partnerships, and other entities created or organized in
or under the laws of the United States or any political subdivision
thereof;
o estates, if the income of the estate is subject to U.S. federal income
taxation regardless of its source, and trusts, if a U.S. court can
exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial
decisions of the trust; and
o other persons whose worldwide income or gain is otherwise subject to
U.S. federal income taxation on a net income basis.
Non-U.S. holders are subject to substantially different rules. Because the
new notes are not being offered to non-U.S. holders, the rules applicable to
non-U.S. holders are not described here. Non-U.S. holders should not consult
their own tax advisors.
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The Exchange Offer
It is counsel's opinion that the exchange of old notes for new notes under
the exchange offer will be treated as a continuation of the corresponding old
notes because the terms of the new notes are substantially the same as the
terms of the old notes. Accordingly, it is counsel's opinion that the exchange
will not constitute a taxable event to holders and, therefore:
o no gain or loss will be realized by holders upon receipt of a new
note;
o the holding period of the new note will include the holding period
of the old note; and
o the adjusted tax basis of the new note will be the same as the
adjusted tax basis of the old note immediately before the exchange.
Original Issue Discount on the Notes
It is counsel's opinion that the notes will be issued with original issue
discount. Holding notes will result in taxable ordinary interest income in an
amount equal to the original issue discount that accrues during each accrual
period. Original issue discount is defined as the excess of:
(1) the stated redemption price at maturity of a note
over
(2) its issue price.
The "stated redemption price at maturity" of a note is the sum of all
payments, including cash interest, provided by the note. The "issue price" of a
note is the first price at which a substantial amount of the notes are sold to
the public for cash, excluding sales to bond houses, brokers or similar persons
or organizations acting in the capacity as underwriters, placement agents or
wholesalers.
A holder is required to include original issue discount in income as
ordinary interest as it accrues under the constant yield method in advance of
receipt of the cash payments attributable to such income, regardless of the
holder's regular method of accounting. Because the calculation of the amount of
original issue discount takes the cash interest payments into account as part
of the stated redemption price at maturity, the cash interest payments need not
be reported separately as taxable income when received.
In general, the amount of original issue discount included in income by
the holder of a note is the sum of the daily portions of original issue
discount for each day during the taxable year or portion of the taxable year on
which such holder held such note. The "daily portion" is determined by
allocating the original issue discount for the actual period ratably to each
day in that accrual period. The "accrual period" for a note may be of any
length and may vary in length over the term of a note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the first or final day of an accrual
period.
The amount of original issue discount for an accrual period is generally
equal to the product of the note's adjusted issue price at the beginning of
such accrual period and its yield to maturity. The "adjusted issue price" of a
note at the beginning of any accrual period is the sum of the issue price of
the note plus the amount of original issue discount allocable to all prior
accrual periods minus the amount of any prior payments on the note, such as the
cash interest payments. Under the constant yield method of determining original
issue discount, a holder will have to include increasingly greater amounts of
original issue discount in income in successive accrual periods.
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Sale, Exchange and Retirement of Notes
A holder will recognize gain or loss upon the sale, retirement or other
taxable disposition of a note. Such gain or loss will equal the difference
between:
o the amount of cash and the fair market value of property
received for the note, other than amounts representing accrued but
unpaid stated interest, and
o the holder's adjusted tax basis in the note.
A holder's adjusted tax basis in notes will equal the holder's purchase
price, increased by any accrued original issue discount, and reduced by any
cash payments on the notes. Gain or loss will be capital gain or loss and will
be long-term capital gain or loss if the holder has held such notes for more
than one year. Long-term capital gain of a non-corporate holder is subject to a
maximum tax rate of 20%. There are limits on the deductibility of capital
losses. Any amounts paid with respect to accrued but unpaid stated interest
will be taxable as ordinary interest income. Gain or loss realized on the sale,
retirement or other taxable disposition of a note derived by a holder will be
treated as U.S. source income or loss for foreign tax credit purposes.
Backup Withholding and Information Reporting
Information reporting requirements will apply to certain payments of
principal, premium, if any, and interest; they will also apply to the proceeds
of sale of a note made to holders other than exempt recipients, such as
corporations. Backup withholding and information reporting will not apply to
payments of principal, premium, if any, and interest on notes made outside the
United States, other than payments made to an address in the United States or
by transfer to an account maintained by the holder with a bank in the United
States, by us or any paying agent, acting in its capacity as such, to a holder.
A 31% backup withholding tax may apply to such payments if a U.S. holder fails
to provide a taxpayer identification number or certification of foreign or
other exempt status or is notified by the Internal Revenue Service that it has
failed to report its full dividend and interest income.
This opinion is based on the tax law as it exists today, but the law could
change at any time, and any change could be applied retroactively in a manner
that could adversely affect a holder of the notes. This opinion does not
address the special rules applicable to holders such as insurance companies and
other financial institutions, dealers in securities, tax-exempt organizations
and persons holding the notes as part of a "straddle," "hedge" or "conversion
transaction," and deals only with notes held as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code.
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PLAN OF DISTRIBUTION
Each holder desiring to participate in the exchange offer will be required
to represent, among other things, that:
(1) it is not an "affiliate" (as defined in Rule 405 of the Securities
Act) of Nextel Partners,
(2) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the new notes, and
(3) it is acquiring the new notes in the ordinary course of its business.
A holder unable to make the above representations is referred to as a
restricted holder. A restricted holder will not be able to participate in the
exchange offer, and may only sell its old notes pursuant to a registration
statement containing the selling securityholder information required by Item
507 of Regulation S-K of the Securities Act, or pursuant to an exemption from
the registration requirement of the Securities Act.
Each participating broker-dealer is required to acknowledge in the letter
of transmittal that it acquired the old notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such new notes. Based upon interpretations by the
staff of the SEC, Nextel Partners believes that new notes issued through the
exchange offer to participating broker-dealers may be offered for resale,
resold, and otherwise transferred by a participating broker-dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. Nextel Partners has
agreed that for a period of 365 days following consummation of the exchange
offer, it will make this prospectus available to participating broker-dealers
for use in connection with any such resale. During such period of time,
delivery of this prospectus, as it may be amended or supplemented, will satisfy
the prospectus delivery requirements of a participating broker-dealer engaged
in market making or other trading activities.
Based upon interpretations by the staff of the SEC, Nextel Partners
believes that new notes issued pursuant to the exchange offer may be offered
for resale, resold and otherwise transferred by their holder, other than a
participating broker-dealer, without compliance with the registration and
prospectus delivery requirements of the Securities Act.
Nextel Partners will not receive any proceeds from any sale of new notes
by broker-dealers. New notes received by participating broker-dealers for their
own account pursuant to the exchange offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such participating broker-dealer and/or the purchasers of any such new
notes. Any participating broker-dealer that resells new notes that were
received by it for its own account through the exchange offer and any broker or
dealer that participates in a distribution of such new notes may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The
126
<PAGE>
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a participating broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
Nextel Partners has agreed to pay all expenses incidental to the exchange
offer other than commissions and concessions of any brokers or dealers and will
indemnify holders of the notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act, as set forth in
the registration rights agreement.
LEGAL MATTERS
The validity of the new notes will be passed upon for Nextel Partners by
Willkie Farr & Gallagher, New York, New York.
EXPERTS
The consolidated financial statements of Nextel Partners, Inc. and
Subsidiaries as of and for the year ended December 31, 1998 included in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants .......................................... F-2
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and as of
December 31, 1998 ................................................................ F-3
Consolidated Statements of Operations for the three-months ended March 31, 1999
and 1998 (unaudited) and for the year ended December 31, 1998 .................... F-5
Consolidated Statements of Changes in Shareholders' Equity for the three-months
ended March 31, 1999 (unaudited) and for the year ended December 31, 1998 ........ F-6
Consolidated Statements of Cash Flows for the three-months ended March 31,
1999 and 1998 (unaudited) and for the year ended December 31, 1998 ............... F-7
Notes to Consolidated Financial Statements ........................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Nextel Partners, Inc.:
We have audited the accompanying consolidated balance sheet of Nextel
Partners, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1998 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nextel Partners, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Seattle, Washington,
May 13, 1999
F-2
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................... $300,812 $ 16
Accounts receivable, net of $346 and $254, respectively ......... 2,369 1,546
Subscriber equipment inventory .................................. 1,047 1,353
Other current assets ............................................ 2,979 325
Restricted cash ................................................. 175,000 --
-------- --------
Total current assets ........................................... 482,207 3,240
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost ........................... 119,749 112,334
Less-accumulated depreciation ................................... 6,799 4,386
-------- --------
Property, plant and equipment, net ............................. 112,950 107,948
-------- --------
OTHER NON-CURRENT ASSETS:
FCC operating licenses, net of accumulated amortization of
$332 and $200, respectively .................................... 133,048 133,180
Debt issuance costs and other assets ............................ 20,143 3,298
Receivable from officer ......................................... 2,200 --
-------- --------
Total non-current assets ....................................... 155,391 136,478
-------- --------
TOTAL ASSETS ..................................................... $750,548 $247,666
======== ========
</TABLE>
F-3
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ................................................. $ 219 $ 1,043
Accrued expenses ................................................. 5,592 4,554
Due to Nextel and Eagle River .................................... 12,950 3,398
---------- ---------
Total current liabilities ......................................... 18,761 8,995
---------- ---------
LONG-TERM DEBT
Credit facility .................................................. 175,000 --
14% Senior discount notes, due 2009 .............................. 416,178 --
---------- ---------
Total long-term debt ............................................ 591,178 --
---------- ---------
Total liabilities ................................................. 609,939 --
---------- ---------
COMMITMENTS AND CONTINGENCIES (See Notes)
STOCKHOLDERS' EQUITY:
Preferred stock, Series A convertible, par value $.001 per share,
17,479,971 shares issued and outstanding at January 29, 1999 ..... 17 --
Preferred stock, Series B redeemable or convertible to
Series C preferred stock 2010, par value $.001 per share, 12%
cumulative annual dividend; 2,185,000 shares issued and
outstanding at January 29, 1999 .................................. 2 --
Preferred stock, Series C convertible, par value $.001 per share,
8,740,000 shares issued and outstanding at January 29, 1999 ...... 9 --
Preferred stock, Series D convertible, par value $.001 per share,
2,185,000 shares issued and outstanding at January 29, 1999 ...... 2 --
Common stock, Class A, par value $.001 per share, 1,588,888
shares issued and outstanding, and paid-in capital ............... 6,733 1,604
Warrants outstanding .............................................. 3,847 --
Common stock, Class B, par value $.001 per share, convertible...... -- --
Other paid-in capital ............................................. 298,259 260,761
Accumulated deficit ............................................... (39,976) (22,553)
Subscriptions receivable from stockholders ........................ (122,655) --
Deferred compensation ............................................. (5,629) (1,141)
---------- ---------
Total stockholders' equity ...................................... 140,609 238,671
---------- ---------
$ 750,548 $ 247,666
========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-4
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
----------------------------- -------------
1999 1998 1998
------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Service revenues ............................ $ 3,493 $ 153 $ 3,745
Equipment revenues .......................... 811 -- 1,564
--------- -------- ---------
Total revenues ............................. 4,304 153 5,309
--------- -------- ---------
OPERATING EXPENSES:
Cost of service revenues .................... 3,106 301 6,108
Cost of equipment revenues .................. 1,718 -- 2,935
Selling, general and administrative ......... 5,231 713 13,531
Deferred compensation ....................... 641 -- 447
Depreciation and amortization ............... 2,515 229 4,586
--------- -------- ---------
Total operating expenses .................. 13,211 1,243 27,607
--------- -------- ---------
LOSS FROM OPERATIONS ......................... (8,907) (1,090) (22,298)
--------- -------- ---------
Interest expense, net ....................... (12,529) -- --
--------- -------- ---------
Interest income ............................. 4,013 -- --
--------- -------- ---------
LOSS BEFORE INCOME TAX PROVISION ............. (17,423) (1,090) (22,298)
Income tax provision ........................ -- -- --
--------- -------- ---------
Net loss ................................... $ (17,423) $ (1,090) $ (22,298)
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-5
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK AND
PAID-IN CAPITAL PREFERRED STOCK
--------------------- ---------------------- OTHER
PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1998 .......................... -- $ -- -- $ -- $ 8,255
Equity contributions ..................... -- -- -- -- 252,506
Issuance of common stock under
restricted stock purchase plan .......... 1,588,888 1,604 -- -- --
Vesting of deferred compensation ......... -- -- -- -- --
Net loss ................................. -- -- -- -- --
--------- ------ ----------- ----- --------
BALANCE,
December 31, 1998 ........................ 1,588,888 1,604 -- -- 260,761
Issuance of Series A preferred stock ..... -- -- 17,479,971 17 170,935
Issuance of warrants ..................... -- -- -- -- --
Subscriptions receivable from
stockholders ............................ -- -- -- -- --
Reclass of other paid-in capital to
Preferred Series B, C and D ............. -- -- -- -- (133,180)
Issuance of Series B preferred stock ..... -- -- 2,185,000 2 21,848
Issuance of Series C preferred stock ..... -- -- 8,740,000 9 89,055
Issuance of Series D preferred stock ..... -- -- 2,185,000 2 22,264
Return of capital to Nextel .............. -- -- -- -- (130,900)
Deferred compensation .................... -- 5,129 -- -- --
Vesting of deferred compensation ......... -- -- -- -- --
Net loss ................................. -- -- -- -- --
Equity issuance costs .................... -- -- -- -- (2,524)
--------- ------ ---------- ----- --------
BALANCE,
March 31, 1999 (unaudited) ............... 1,588,888 $6,733 30,589,971 $ 30 $298,259
========= ====== ========== ===== ========
<CAPTION>
WARRANTS SUBSCRIPTIONS ACCUMULATED DEFERRED
OUTSTANDING RECEIVABLE DEFICIT COMPENSATION TOTALS
------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1998 .......................... $ -- $ -- $ (255) $ -- $ 8,000
Equity contributions ..................... -- -- -- -- 252,506
Issuance of common stock under
restricted stock purchase plan .......... -- -- -- (1,588) 16
Vesting of deferred compensation ......... -- -- -- 447 447
Net loss ................................. -- -- (22,298) -- (22,298)
------ ---------- --------- -------- --------
BALANCE,
December 31, 1998 ........................ -- -- (22,553) (1,141) 238,671
Issuance of Series A preferred stock ..... -- -- -- -- 170,952
Issuance of warrants ..................... 3,847 -- -- -- 3,847
Subscriptions receivable from
stockholders ............................ -- (122,655) -- -- (122,655)
Reclass of other paid-in capital to
Preferred Series B, C and D ............. -- -- -- -- (133,180)
Issuance of Series B preferred stock ..... -- -- -- -- 21,850
Issuance of Series C preferred stock ..... -- -- -- -- 89,064
Issuance of Series D preferred stock ..... -- -- -- -- 22,266
Return of capital to Nextel .............. -- -- -- -- (130,900)
Deferred compensation .................... -- -- -- (5,129) --
Vesting of deferred compensation ......... -- -- -- 641 641
Net loss ................................. -- -- (17,423) -- (17,423)
Equity issuance costs .................... -- -- -- -- (2,524)
------ ---------- --------- -------- --------
BALANCE,
March 31, 1999 (unaudited) ............... $3,847 $ (122,655) $ (39,976) $ (5,629) $140,609
====== ========== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-6
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED
-------------------------- DECEMBER 31,
1999 1998 1998
------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................. $ (17,423) $ (1,090) $(22,298)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation and amortization ............................ 2,515 229 4,586
Amortization debt issuance costs ......................... 356 -- --
Interest accretion for senior discount notes ............. 9,802 -- --
Deferred compensation .................................... 641 -- 447
Allowance for doubtful accounts .......................... 92 -- 254
Change in current assets and liabilities:
Accounts receivable ..................................... (915) -- (1,800)
Subscriber equipment inventory .......................... 306 -- (1,353)
Other current assets .................................... (2,654) (327) (325)
Accounts payable and accrued expenses ................... 3,512 1,661 2,300
Operating advances from Nextel and Eagle River .......... 9,495 -- 3,398
---------- --------- --------
Net cash provided by (used in) operating activities ...... 5,727 473 (14,791)
---------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to officer ........................................... (2,200) -- --
Capital expenditures ...................................... (7,385) (45,476) (104,334)
---------- --------- --------
Net cash used in investing activities .................... (9,585) (45,476) (104,334)
---------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock .................................. -- -- 16
Equity contributions from Nextel .......................... -- 45,003 119,125
Proceeds from borrowings .................................. 581,376 -- --
Restricted cash transfer .................................. (175,000) -- --
Proceeds from equity contributions ........................ 52,144 -- --
Return of capital to Nextel ............................... (130,900) -- --
Equity costs .............................................. (2,524) -- --
Debt issuance costs ....................................... (20,442) -- --
---------- --------- --------
Net cash provided by financing activities ................ 304,654 45,003 119,141
---------- --------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 300,796 -- 16
CASH AND CASH EQUIVALENTS, beginning of period ............. 16 -- --
---------- --------- --------
CASH AND CASH EQUIVALENTS, end of period ................... $ 300,812 $ -- $ 16
========== ========= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS
Contribution of FCC licenses from Nextel Communications,
Inc. ...................................................... $ -- $ -- $133,380
========== ========= ========
Accrued debt and equity issuance costs ..................... $ -- $ -- $ 3,298
========== ========= ========
Cash paid for interest ..................................... $ -- $ -- $ --
========== ========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-7
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
1. FORMATION, CAPITALIZATION AND BASIS OF PRESENTATION
Formation
Nextel Partners, Inc., which together with its subsidiaries is referred to as
Partners or the Company, was formed as a shell corporation on July 8, 1998,
solely to facilitate the Capitalization Transactions discussed below. From July
8, 1998 to January 29, 1999, the activities of Partners were solely focused on
this objective. These activities were funded by Nextel Communications, Inc.
through its subsidiary (Nextel) and Eagle River Investments LLC (Eagle River)
through intercompany advances amounting to $3.4 million at December 31, 1998, a
majority of which were repaid by using proceeds from the Capitalization
Transactions. The only common stock issuances of the Partners shell entity in
1998 consisted of issuances of restricted stock to key employees of the
Partners shell entity as part of its compensation plan (see Note 8) and to
Eagle River.
Prior to January 29, 1999, Nextel formed and began to operate the digital
wireless communications service business described in Note 2, which is referred
to as the Nextel Carve-Out. The unincorporated operations of the Nextel
Carve-Out constitute the Company's business and were contributed to the Company
in the Capitalization Transactions.
Capitalization Transactions
On January 29, 1999, Nextel contributed the Nextel Carve-Out to the Company in
exchange for 2,185,000 shares of Series B Preferred Stock, 8,740,000 shares of
Series C Preferred Stock, 2,185,000 shares of Series D Preferred Stock and cash
of $130.9 million. Simultaneously, the Company sold equity securities in the
amount of $174.8 million and debt securities in the gross amount of $800
million. The equity securities sold consisted of 17,479,971 shares of Series A
Preferred Stock (valued at $170.9 million) and warrants to purchase 405,710
shares of Class A Common Stock for an exercise price of $.001 per share (valued
at $3.8 million). The equity securities were sold in exchange for cash of $52.1
million, an irrevocable cash equity commitment of $104.3 million to be received
over the subsequent two-year period, and a vendor credit from Motorola, Inc. of
$18.4 million towards the purchase of infrastructure equipment, which the
Company expects to utilize during 1999. See Note 7, Capital Stock and Stock
Rights, for a description of the equity securities issued in the Capitalization
Transactions and Note 4, Long-Term Debt, for a description of the debt
securities sold.
Some of the principal assets used in the Nextel Carve-Out are Federal
Communications Commission ("FCC") licenses. To effect the contribution of the
business of the Nextel Carve-Out to the Company, Nextel transferred the rights
to the benefits of these licenses to the Company. These rights were transferred
pursuant to the Frequency Management Agreement between the Company and a wholly
owned subsidiary of Nextel described further in Note 9. Nextel has applied to
the FCC for approval of the transfer of the FCC licenses to the Company. The
Company expects to receive that approval and transfer legal ownership of the
FCC licenses during 1999.
F-8
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
The following summarizes the dollar amount and number of shares issued as part
of the Capitalization Transactions described above.
<TABLE>
<CAPTION>
EQUITY
SHARES ISSUED CONTRIBUTIONS
--------------- -----------------
<S> <C> <C>
Series A Preferred Shares .................................... 17,479,971 $ 170,952,810
Series B Preferred Shares .................................... 2,185,000 21,850,000
Series C Preferred Shares .................................... 8,740,000 89,064,000
Series D Preferred Shares .................................... 2,185,000 22,266,000
Subscription Receivable ...................................... (122,655,000)
Warrants to purchase Class A Common Shares issued for purchase
price of $.001 per share..................................... 405,710 3,846,900
</TABLE>
Approximately $2.5 million of issuance costs were charged to equity as part of
the Capitalization Transactions.
The following chart reflects ownership by major shareholders after the
Capitalization Transactions. Prior to the Capitalization Transactions, the
Company had only Class A Common Stock outstanding. This stock was owned by
management employees, subject to restrictions, and Eagle River. The Company
had no preferred stock outstanding.
<TABLE>
<CAPTION>
MAJOR SHAREHOLDER CLASS OF STOCK VOTING % EQUITY %
- --------------------------------------- --------------------------------- ---------- ---------
<S> <C> <C> <C>
Nextel Preferred--Series B Redeemable 0.00% 6.31%
or Convertible
Nextel Preferred--Series C Convertible 30.98% 25.23%
Nextel Preferred--Series D Convertible 0.00% 6.31%
----- -----
Subtotal--Nextel 30.98% 37.85%
===== =====
DLJMB Funds Preferred--Series A Convertible 14.20% 11.56%
Madison Dearborn Capital
Partners II, L.P. Preferred--Series A Convertible 13.55% 11.04%
===== =====
Eagle River Investments LLC Common--Class A 0.45% 0.36%
Eagle River Investments LLC Preferred--Series A Convertible 9.29% 7.57%
----- -----
Subtotal--Eagle River Investments LLC 9.74% 7.93%
===== =====
Motorola, Inc. Preferred--Series A Convertible 6.51% 5.30%
===== =====
Management Common--Class A 5.18% 4.22%
===== =====
</TABLE>
Basis of Presentation
In substance, the Capitalization Transactions constituted (1) the incorporation
of the Nextel Carve-Out, (2) the formal assumption by the Nextel Carve-Out of
Partners' liabilities, (3) a $130.9 million distribution to Nextel, and (4)
sales of Nextel Carve-Out securities to outsiders. Accordingly, the
accompanying financial statements reflect the accounts of the
F-9
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Nextel Carve-Out at Nextel's historical cost basis for all periods presented.
These accounts include Nextel's cost basis in the FCC licenses discussed above,
as all of the rights and benefits of ownership were used by the Nextel
Carve-Out prior to and were transferred to the Company in the Capitalization
Transactions. The accompanying financial statements also include the net
expenses and related liabilities incurred by Partners prior to the
Capitalization Transactions, as Nextel funded these expenses, they were
incurred for the benefit of the Nextel Carve-Out, and Partners had no substance
apart from the Nextel Carve-Out. The distribution and sale of securities
transactions have been reflected in the accompanying financial statements on
January 29, 1999.
The operations of the Nextel Carve-Out generally began in 1998. Prior to
January 1, 1998, the most significant activity associated with the Nextel
Carve-Out operations was fixed asset purchases of approximately $8 million.
Revenues, operating expenses and net loss related to the operations of the
Nextel Carve-Out for the period from inception through December 31, 1997, are
estimated to be $195,000, $450,000 and $255,000, respectively. Because these
operating results are not material, financial statements for periods prior to
January 1, 1998 have not been presented.
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
The Company provides a wide array of digital wireless communications services
throughout the United States, primarily to business users, utilizing frequencies
licensed by the FCC. Partners' operations are primarily conducted by Nextel
Partners Operations Corp. ("OPCO"), a wholly owned subsidiary of Partners.
Partners' digital network has been developed with advanced mobile communication
systems employing digital technology with a multi-site configuration permitting
frequency reuse ("Digital Mobile Network") utilizing digital technology
developed by Motorola, Inc. ("Motorola") (such technology is referred to as the
"integrated Digital Enhanced Network" or "iDEN" (Trade Mark) ). Partners'
principal business objective is to offer high-capacity, high-quality, advanced
communication services in its territory throughout the United States targeted
towards mid-sized and smaller markets. Various operating agreements entered
into by subsidiaries of the Company and Nextel (See Note 9) provide for support
services to be provided by Nextel. Additionally, the Company plans to use
Nextel's back-office systems initially to support customer activation, billing
and customer care as well as other services during a transition period.
Interim Financial Statement Presentation
The financial statements as of and for the three month periods ended March 31,
1999 and March 31, 1998 have been prepared without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto.
F-10
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
The financial information included herein reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the results of the interim periods. The
results of operations for the three month period ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
Concentration of Risk
The Company believes that the geographic and industry diversity of its customer
base minimizes the risk of incurring material losses due to concentration of
credit risk.
The Company is party to certain equipment purchase agreements with Motorola
(see Notes 2 and 9). For the foreseeable future the Company expects that it
will need to rely on Motorola for the manufacture of a substantial portion of
the infrastructure equipment necessary to construct and make operational its
Digital Mobile Network as well as for the provision of digital subscriber
hand-sets and accessories.
As previously discussed, the Company is reliant on Nextel for the provision of
certain services. For the foreseeable future, the Company will need to rely on
Nextel for the provision of these services as the Company will not have the
infrastructure to support those services.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Partners and its
wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Cash and Cash Equivalents
Cash equivalents include time deposits and highly liquid investments with
remaining maturities of three months or less at the time of purchase.
Subscriber Equipment Inventory
Subscriber equipment is valued at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment, including improvements that extend useful lives,
are recorded at cost, while maintenance and repairs are charged to operations
as incurred. Depreciation
F-11
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
and amortization are computed using the straight-line method based on estimated
useful lives of three to ten years for equipment and three to seven years for
furniture and fixtures. Leasehold improvements are amortized over the shorter
of the respective lives of the leases or the useful lives of the improvements.
Construction in progress includes labor, material, transmission and related
equipment, engineering, site design, interest and other costs relating to the
construction of the Digital Mobile Network.
The Company periodically reviews the carrying value of its long-lived assets
(including property, plant and equipment and operating licenses) whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. If the estimated future cash inflows attributable to the asset,
less estimated future cash outflows is less than the carrying amount, an
impairment loss will be recognized.
Capitalized Interest
The Company's wireless communications systems and FCC operating licenses
represent qualifying assets pursuant to Statement of Financial Accounting
Standards (SFAS) No. 34, "Capitalization of Interest Cost." The Company
capitalized interest of approximately $6.3 million for the year ended December
31, 1998.
FCC Operating Licenses
FCC operating licenses are recorded at historical cost and are amortized using
the straight-line method based on estimated useful lives of 40 years.
Amortization begins with the commencement of service to customers in a
particular market. During the second half of 1998, the Upstate New York and
Hawaii markets became operational. Amortization expense of $178,000 and
$22,000, respectively was recorded in relation to these markets for the year
ended December 31, 1998.
Interest Rate Risk Management
The Company intends to use derivative financial instruments consisting of
interest rate swap and interest rate protection agreements in the management of
its interest rate exposures. These interest rate swap agreements will have the
effect of converting certain of the Company's variable rate obligations to
fixed or other variable rate obligations. Amounts to be paid or received under
interest rate swap agreements will be accrued as interest rates change and will
be recognized over the life of the swap agreements as an adjustment to interest
expense. The fair value of the swap agreements will not be recognized in the
consolidated financial statements, since the swap agreements will meet the
criteria for matched swap accounting.
The Company will not use financial instruments for trading or other speculative
purposes, nor will it be a party to any leveraged derivative instrument. The
use of derivative financial instruments will be monitored through regular
communication with senior management. The Company will be exposed to credit
loss in the event of nonperformance by the
F-12
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
counterparties. This credit risk is minimized by dealing with a group of major
financial institutions with which the Company has other financial
relationships. The Company does not anticipate nonperformance by these
counterparties. As of December 31, 1998 and March 31, 1999, the Company did not
hold any derivative financial instruments.
Revenue Recognition
Revenue net of customer discounts and rebates is recognized for airtime and
other services over the period earned and for sales of equipment when
delivered.
Certain of the Company's digital equipment sales are made through independent
distributors under agreements allowing rights of return on merchandise unsold
by the distributors. The Company defers recognition of such sales until the
merchandise is sold by the distributors.
Advertising Costs
Costs related to advertising and other promotional expenditures are expensed as
incurred. Advertising costs totaled approximately $1.5 million for the year
ended December 31, 1998.
Debt Issuance Costs
In relation to the issuance of long-term debt discussed in Note 4, the Company
has incurred a total of $20.4 million ($1.3 million had been incurred as of
December 31, 1998) in deferred financing costs related to the issuances of the
Notes and the Facility. These debt issuance costs will be amortized over the
terms of the underlying obligation using the effective interest method. For the
three months ended March 31, 1999, $356,000 of amortization on debt issuance
costs was included in interest expense.
Stock Based Compensation
As allowed by SFAS No. 123 (SFAS 123), "Accounting for Stock Based
Compensation," the Company has chosen to account for compensation cost
associated with its stock compensation plans in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations. For
the year ended December 31, 1998, compensation expense under SFAS No. 123 and
APB Opinion No. 25 were identical. In the future, the Company will disclose pro
forma net loss as if compensation expense costs had been determined consistent
with SFAS No. 123. The Company had no stock options outstanding as of December
31, 1998.
Income Taxes
Deferred tax assets and liabilities are determined based on the temporary
difference between the financial reporting and tax bases of assets and
liabilities applying enacted statutory tax rates in effect for the year in
which the differences are expected to reverse. Future tax benefits, such as net
operating loss carryforwards, are recognized to the extent that realization of
such benefits is considered to be more likely than not. Net operating losses
incurred by the Nextel Carve-Out prior to the closing of the Capitalization
Transactions will be retained by Nextel.
F-13
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Segment Reporting
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information," (SFAS
131) during 1998. SFAS 131 requires companies to disclose certain information
about operating segments. Based on the criteria within SFAS 131, the Company
has determined that it has one reportable segment, wireless services.
Recently Issued Accounting Pronouncements
Software Costs -- In March 1998, the American Institute of Certified Public
Accountants (the "AICPA") issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." This
statement became effective for the Company on January 1, 1999 and established
accounting standards for costs incurred in the acquisition or development and
implementation of computer software. These new standards require the
capitalization of certain software implementation costs relating to software
acquired or developed and implemented for the Company's use. The adoption of
this statement will not have a significant effect on the Company's financial
position or results of operations.
Accounting for Start-Up Activities -- In April 1998, the AICPA issued Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities." This
statement became effective on January 1, 1999 and required that costs of
start-up activities and organization costs be expensed as incurred. This
statement will not have a significant effect on the Company's financial
position or results of operations.
Accounting for Derivative Instrument and Hedging Activities -- In June 1998,
the Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
which establishes accounting and reporting standards for derivative instruments
and for hedging activities by requiring that all derivatives be recognized in
the balance sheet and measured at fair value. SFAS 133 is effective for fiscal
years beginning after June 15, 1999. The Company has not evaluated the effects
of this change on its financial position or results of operations.
3. PROPERTY AND EQUIPMENT (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
1998
-------------
<S> <C>
Building and improvements .............................. $ 998
Equipment .............................................. 87,523
Furniture and fixtures ................................. 2,248
Less-accumulated depreciation and amortization ......... (4,386)
--------
86,383
--------
Construction in progress ............................... 21,565
--------
$107,948
========
</TABLE>
F-14
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
4. LONG-TERM DEBT:
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
1999 1998
---------------- -------------
(IN THOUSANDS)
<S> <C> <C>
14% Senior Redeemable Discount Notes 2009, net of
unamortized discount of $383.8 million ....................... $416,178 $ --
Bank Credit Facility, interest at Company's option, calculated
on Administrative Agent's alternate base rate or
reserve-adjusted London Interbank Offered Rate (LIBOR)........ 175,000 --
-------- ------
$591,178 $ --
======== ======
</TABLE>
Senior Redeemable Discount Notes
On January 29, 1999, the Company completed the issuance of $406.4 million
Senior Redeemable Discount Notes (the "Notes") due 2009. The aggregate accreted
value of the Notes will increase from $406.4 million at issuance at a rate of
14%, compounded semi-annually to a final accreted value equal to a principal
amount of $800 million. Thereafter, the Notes bear interest at a rate of 14%
per annum payable semi-annually in arrears.
The Notes represent senior unsecured obligations of the Company, and rank
equally in right of payment to all existing and future senior unsecured
indebtedness of the Company and senior in right of payment to all existing and
future subordinated indebtedness of the Company. The Notes are effectively
subordinated to (i) all secured obligations of the Company, including
borrowings under the bank credit facility, to the extent of assets securing
such obligations and (ii) all indebtedness including borrowings under the bank
credit facility and trade payables of OPCO.
The indenture contains certain covenants that limit, among other things, the
ability of the Company to: (i) pay dividends, redeem capital stock or make
certain other restricted payments or investments, (ii) incur additional
indebtedness or issue preferred equity interests, (iii) merge, consolidate or
sell all or substantially of its assets, (iv) create liens on assets, and (v)
enter into certain transactions with affiliates or related persons. As of March
31, 1999, the Company was in compliance with applicable covenants.
The Notes are redeemable at the option of the Company, in whole or in part, any
time on or after February 1, 2004 in cash at the redemption price on that date,
plus accrued and unpaid interest and liquidated damages if any, at the date of
liquidation. In addition, prior to February 1, 2002, the Company may on any one
or more occasions redeem up to 35% of the aggregate principal amount at
maturity of Notes originally issued at a redemption price equal to 114% of the
accreted value at that date, plus accrued and unpaid interest and liquidated
damages if any, with the net cash proceeds of one or more public equity
offerings; provided that at least 65% of the aggregate principal amount at
maturity of Notes originally issued remain outstanding immediately after the
occurrence of such redemption.
F-15
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Bank Credit Facility
On January 29, 1999, the Company, through OPCO, entered into a credit facility
(the "Facility") with a syndicate of banks and other financial institutions led
by Donaldson, Lufkin and Jenrette Securities Corporation ("DLJ"). Effective
January 29, 1999, DLJ also holds an equity investment in the Company. The
Facility includes a $175 million term loan facility and initially, a $100
million revolving credit facility. The term loan facility has a maturity of
nine years. The revolving credit facility terminates eight years from the
initial funding of the Facility.
The Facility bears interest, at the option of the Company, at the
Administrative Agent's alternate base rate or reserve-adjusted LIBOR plus, in
each case, applicable margins. The applicable margin for the term loan facility
is 4.75% over LIBOR and 3.75% over the base rate. For the revolving credit
facility, the initial applicable margin is 4.25% over LIBOR and 3.25% over the
base rate until consolidated EBITDA is positive at which time the applicable
margin will be initially 4.0% over LIBOR and 3.0% over the base rate and
thereafter will be determined on the basis of the ratio of total debt to
annualized EBITDA and will range between 2.25% and 3.75% over LIBOR and between
1.25% and 2.75% over the base rate.
The Company pays a commitment fee calculated at a rate equal to 2.00% per
annum, calculated on the daily average unused commitment under the revolving
credit Facility (whether or not then available). Such fee will be payable
quarterly in arrears. The commitment fee is subject to reduction based on
utilization of the revolving credit Facility.
Prior to the date on which the Company's portion of the digital mobile system
is substantially complete and operations and services are offered to customers
over a minimum coverage area, loans under the revolving credit facility will be
made subject to satisfaction of certain financial covenants and certain
build-out covenants.
The term loan facility is subject to mandatory prepayment: (i) with 100% of the
net cash proceeds from the issuance of debt, subject to certain exceptions,
(ii) with 100% of net cash proceeds of asset sales, subject to certain
exceptions, (iii) with 50% of the Company's excess cash flow (as defined), and
(iv) with 50% of the net cash proceeds from the issuance of equity.
The Company's obligations under the Facility are secured by a first-priority
perfected lien on (i) all property and assets, tangible and intangible, of the
Company's subsidiaries including a pledge of the capital stock of all the
Company's subsidiaries. The Company and its subsidiaries guarantee the
obligations of OPCO under the Facility. Such guarantee will only be recourse to
the Company's pledge of all of the outstanding capital stock of the Company's
subsidiaries to secure the obligations of the Company under the Facility.
The Facility contains covenants and restrictions on the ability of the Company
to engage in certain activities, including but not limited to: (i) limitations
on the incurrence of liens and indebtedness, (ii) restrictions on sale
lease-back transactions, consolidations, mergers, sale of assets, capital
expenditures, transactions with affiliates and investments, and (iii) severe
restrictions on dividends, and other similar distributions.
F-16
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Additionally, the Facility also contains financial covenants requiring the
Company to maintain certain defined ratios of senior debt and total debt to
EBITDA as defined by the Facility; a minimum interest coverage ratio; a minimum
fixed charge coverage ratio; a maximum leverage ratio; and minimum service
revenues, subscriber units and covered population equivalents. As of March 31,
1999, the Company was in compliance with all of its required covenants.
Future Maturities of Long-Term Debt
Based on the debt issued on January 29, 1999, as discussed above, for the years
subsequent to December 31, 1998, scheduled annual maturities of long-term debt
outstanding as of December 31, 1998, under existing long-term debt agreements
are as follows (in thousands):
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
-------------
<S> <C>
1999 ............................... $ --
2000 ............................... --
2001 ............................... --
2002 ............................... --
2003 ............................... 1,312
Thereafter ......................... 973,688
----------
975,000
Less--Unamortized discount ......... (393,624)
----------
$ 581,376
==========
</TABLE>
5. INCOME TAXES:
Deferred tax assets and liabilities consist of the following and are presented
as if Nextel Partners holding company, which was incorporated in 1998 to serve
as the parent company of the "carve-out," had conducted operations in 1998 (in
thousands):
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
------------------
<S> <C>
Deferred tax assets:
Operating loss carryforwards .......... $ 14,731
Valuation allowance ................... (8,182)
--------
6,549
--------
Deferred tax liabilities:
Property, plant and equipment ......... (6,097)
Other ................................. (452)
--------
(6,549)
--------
Net deferred tax liability ............. $ --
========
</TABLE>
At December 31, 1998, the Company would have had approximately $39.8 million of
consolidated net operating loss ("NOL") carryforwards for federal income tax
purposes
F-17
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
expiring through 2018. The Company would have recorded a valuation allowance of
approximately $8.2 million for 1998 because available objective evidence would
have created sufficient uncertainty regarding the realization of the net
deferred tax assets. Such factors primarily would have included anticipated
recurring operating losses resulting from the development of the Company's
business. On a stand-alone Company basis, ignoring the tax effects of the
"carve-out" whose tax impacts will be included in the consolidated tax return
of Nextel for the year ended December 31, 1998 and for the period through
January 29, 1999, and given that the Company had no actual operations in 1998,
the Company would have reported a deferred tax asset of $1.5 million, a
deferred tax liability of $400,000 off set by a valuation allowance on the net
deferred tax asset of $1.1 million. The Company prior to January 29, 1999, had
no operations on a stand-alone basis. As a result, the Company capitalized and
amortized over future periods for tax purposes costs incurred by the Company
prior to January 29, 1999, which were expensed for financial reporting purposes
resulting in the deferred tax asset. The Company, on a stand-alone basis, did
not generate any NOL for the year ended December 31, 1998.
The difference between the statutory tax rate of approximately 37% (35% federal
and 2% state, net of federal benefits) and the tax benefit of zero disclosed
above by the Company is primarily due to the Company's full valuation allowance
against the net deferred tax assets. The Company's ability to utilize the NOL
in any given year may be limited by certain events, including a significant
change in ownership interest.
6. COMMITMENTS AND CONTINGENCIES:
Operating Lease Commitments
The Company leases various equipment and office facilities under operating
leases. Leases for antenna sites are typically five years with renewal options.
Office facilities and equipment other than antenna sites are leased under
agreements with terms ranging from one month to 20 years. The leases normally
provide for the payment of minimum annual rentals and certain leases include
provisions for renewal options of up to five years.
For years subsequent to December 31, 1998, future minimum payments for all
operating lease obligations that have initial noncancellable lease terms
exceeding one year are as follows (in thousands):
<TABLE>
<S> <C>
1999 .................... $ 5,798
2000 .................... 5,850
2001 .................... 5,618
2002 .................... 4,976
2003 .................... 2,551
Thereafter .............. 5,271
-------
$30,064
=======
</TABLE>
Total rental expense was approximately $3 million for the year ended December
31, 1998.
F-18
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Regulatory Matters
The FCC issues Specialized Mobile Radio ("SMR") licenses on both a
site-specific and wide-area basis. Each license enables SMR carriers to provide
service either on a site-specific basis, in specific 800 MHz Economic Areas
("EA") or 900 MHz Metropolitan Trading Areas ("MTA") in the U.S. Currently, SMR
licenses are issued for a period of 10 years, and are subject to certain
construction and operational requirements.
Pursuant to the Facility, until FCC approval of the ownership transfer, the
Company has established a cash collateral account in which it maintains a
balance equal to amounts outstanding under the Facility. Failure of the Company
to obtain such FCC approval within one year of the closing date prior to
January 29, 2000, would constitute an event of default under the Facility and
any indebtedness outstanding thereunder may be accelerated. The FCC has
routinely granted license renewals providing the licensees have complied with
applicable rules, policies and the Communications Act of 1934, as amended. The
Company believes that it has met and will continue to meet all requirements
necessary to secure the retention and renewal of its SMR licenses subsequent to
the FCC approved transfer of the licenses from Nextel.
7. CAPITAL STOCK AND STOCK RIGHTS:
Pursuant to the Restated Certificate of Incorporation, the Company has the
authority to issue 170 million shares of capital stock, divided into five
classes as follows: (i) 100 million shares of Common Stock, par value, $.001
per share; (ii) 25 million shares of Series A Convertible Preferred Stock, par
value $.001 per share ("Series A Preferred Stock"); (iii) 25 million shares of
Series B Mandatory Redeemable Preferred Stock, par value $.001 per share
("Series B Preferred Stock"); (iv) 15 million shares of Series C Convertible
Preferred Stock, stated value $.001 per share ("Series C Preferred Stock"); (v)
5 million shares of Series D Convertible Preferred Stock, par value, $.001 per
share ("Series D Preferred Stock").
The following is a summary description of the Company's capital stock.
Common Stock
The holders of Common Stock are entitled to one vote per share on all matters
submitted for action by the shareholders. There is no provision for cumulative
voting with respect to the election of directors. Holders of Common Stock are
entitled to share equally, share for share, if dividends are declared on Common
Stock, whether payable in cash, property or securities.
Class A Common Stock -- Under certain circumstances, shares of Class A Common
Stock and securities convertible into Class B Common Stock (other than Class B
Common Stock) are callable at the option of Nextel or may be put to Nextel at
the option of the holders.
Class B Common Stock -- Shares of Class B Common Stock are convertible at any
time at the option of the holder into an equal number of shares of Class A
Common Stock.
F-19
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Preferred Stock
Ranking -- With respect to rights on liquidation, dissolution or winding up the
order of preference is as follows:
1. the Series B Preferred Stock;
2. the Series A Preferred Stock;
3. the Series C and Series D Preferred Stock
4. the Class A and Class B Common Stock
The holders of the Series A and Series C Preferred Stock are entitled to vote
on an as converted basis on all matters submitted for action by the
shareholders. Series D and Series B Preferred Stock do not have any voting
rights other than to approve mergers or consolidations adverse to the rights of
holders of such securities. The holders of Series A, Series C and Series D
Preferred Stock are entitled to share equally, share for share on an as
converted basis, if dividends are declared on Common Stock, whether payable in
cash, property or securities.
Series A Preferred Stock -- Each share of Series A Preferred Stock is
convertible into one share of Class A Common Stock at any time.
Series B Redeemable Preferred Stock -- The Series B Preferred Stock is subject
to mandatory redemption by the Company 375 days after the stated maturity of
the Notes. The price for redemption will be the liquidation value, which
accretes at an annual rate of 12% from the date of issuance. The Company may
elect under certain circumstances to pay the redemption price by issuing Series
C Preferred Stock for each share of Series B Preferred Stock so redeemed. The
Series B Preferred Stock is subject to voluntary redemption.
Series C Preferred Stock and Series D Preferred Stock -- Each share of Series C
and Series D Preferred Stock is convertible into one share of Class B Common
Stock at any time.
Common Stock Reserved for Issuance
As of the closing of the Capitalization Transactions, the Company had reserved
Common Stock for future issuance as detailed below.
<TABLE>
<S> <C>
Preferred Stock conversion rights .......... 30,589,971
Warrants outstanding ....................... 405,710
Employee options outstanding ............... 262,000
Employee options available for grant ....... 1,795,222
----------
Total ...................................... 33,052,903
==========
</TABLE>
8. STOCK AND EMPLOYEE BENEFIT PLANS:
Restricted Stock Purchase Plan
Pursuant to the Company's Restricted Stock Purchase Plan (the Plan), in 1998,
the Company issued 1,462,499 shares of Class A Common Stock, to senior managers
of the Company and 126,389 shares of Class A Common Stock to Eagle River at $.01
per share.
F-20
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Pursuant to the Plan, the shares issued to senior managers vest over a
four-year period based on the passing of time and based on certain Company
performance goals related to revenue, EBITDA and the successful build-out of
the Company's Network. As of December 31, 1998, 446,547 shares were considered
fully vested, including the 126,389 shares issued to Eagle River which vested
immediately upon issuance. Compensation expense recognized by the Company,
which accounts for the Plan using variable accounting, for the three month
period ended March 31, 1999 and for the year ended December 31, 1998 was
approximately $641,000 and $447,000, respectively.
Stock Option Grant
On January 29, 1999, pursuant to an employment agreement entered into by the
Company and an officer of the Company, the Company issued 35,000 options with
an exercise price per share which was less than the estimated fair value at
that time ($5.50 per share) that vested immediately. The agreement provides
that the Company will be required to purchase the unexercised options on the
fourth anniversary for an aggregate purchase price of $500,000 if directed to
do so by the officer.
Officer Note Receivable
On January 29, 1999, the Company advanced $2.2 million to an officer of the
Company. The note does not bear interest and is collateralized by proceeds of
the loan and the restricted stock of the officer and is due on January 29,
2003. The advance was made to the same officer to whom the stock option grant
discussed in the previous paragraph was made. The advance was a separate
arrangement not related to the stock option grant discussed above.
Employee Benefit Plan
The Company has a defined contribution plan pursuant to Section 401(k) of the
Internal Revenue Code covering all eligible officers and employees. The Company
provides a matching contribution of $0.50 for every $1.00 contributed by the
employee up to 4% of each employee's salary. Such contributions were
approximately $50,000 for the year ended December 31, 1998. At December 31,
1998, the Company had no other pension or postemployment benefit plans.
9. RELATED PARTY TRANSACTIONS:
Prior to January 29, 1999, Nextel and Eagle River funded the operations of the
Company and accordingly all transactions were considered to be related party
transactions. On January 29, 1999, the Company reimbursed Nextel and Eagle
River $1.5 million and $1.2 million for operating advances previously made to
the Company. Additionally, the Company made a return of capital payment to
Nextel of $130.9 million representing the reimbursement of net operating
expenses of $15.1 million and capital expenditures of $115.8 million incurred
by the Nextel carve-out operations prior to January 29, 1999. As of December
31, 1998, total amounts owed to Nextel as a return of capital and for
reimbursement of net operating expenses and operating advances was $130.9
million. As of December 31, 1998, total amounts owed to Eagle River for
operating advances made to the Company was $1.0 million.
F-21
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Motorola Purchase Agreements
Pursuant to the equipment purchase agreements between Partners and Motorola,
and prior to the Capitalization Transactions, purchase agreements between
Nextel and Motorola dated January 29, 1999, Motorola provided the iDEN
infrastructure and subscriber handset equipment to Partners throughout its
markets (such equipment purchase agreements, are referred to herein as the
"Equipment Purchase Agreements"). The Company expects to rely on Motorola for
the manufacture of a substantial portion of the equipment necessary to
construct its Digital Mobile Network and handset equipment for the foreseeable
future. The Equipment Purchase Agreements govern Partners' rights and
obligations regarding purchases of system infrastructure equipment manufactured
by Motorola and others.
For the three month period ended March 31, 1999 and the year ended December 31,
1998, the Company purchased approximately $1.7 million (unaudited) and $47.5
million, respectively for infrastructure and other equipment, handsets,
warranties, rent and services from Motorola. As of December 31, 1998 and March
31, 1999, the Company did not owe any amounts to Motorola for the purchase of
equipment.
The Joint Venture Agreement
The Company, OPCO and a wholly owned subsidiary of Nextel ("Nextel Sub")
entered into a joint venture agreement (the "Joint Venture Agreement") dated
January 29, 1999. Summarized below are several of the important terms of the
Joint Venture Agreement.
Build-Out -- The Company is bound to certain operational obligations, including
meeting the construction requirements set forth in an agreed-upon minimum
build-out plan, ensuring compatibility of the Company's systems with the Nextel
Digital Mobile Network, offering certain core service features with respect to
its systems (including upgrading its system to comply with future Nextel
standards) and causing the Company's systems to comply with Nextel's iDEN
quality standards.
Acquisition of Licenses -- Nextel has transferred SMR licenses to Nextel WIP
License Corp. (a Delaware Corporation and currently a wholly owned subsidiary
of Nextel). Upon approval of the FCC, Nextel will transfer the stock of Nextel
WIP License Corp. to Partners. These licenses will allow the Company to provide
wireless communication service to customers in 39 mid-sized and smaller markets
throughout the United States.
Nextel Vendor Relationships -- If requested by the Company, Nextel Sub has
agreed to use reasonable efforts to assist the Company in obtaining access to
many of the goods and services available through Nextel's vendors with whom the
Company is negotiating for the purpose of obtaining equipment as well as
advertising, media buying, telemarketing and related services.
Nextel Approval Rights -- Subject to Nextel maintaining a certain percentage
ownership in Partners, and without the approval of Nextel Sub, the Company may
not (i) make a material change in the technology used in its business, (ii)
dispose of all or substantially all of its assets or (iii) prior to the
occurrence of certain specified events, broaden the scope of its business
beyond the limits provided for in the Joint Venture Agreement.
F-22
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
Exclusivity -- Nextel Sub has agreed, on behalf of Nextel and its affiliates,
that during the term of the Joint Venture Agreement, Nextel and its affiliates
will not provide digital wireless communication services within the Company's
territory (the "Territory") using 800 MHz frequencies. Nextel and its
affiliates may continue to provide analog 800 MHz service in the Territory
provided that such analog service is not offered under any of the trademarks
licensed to the Company under the parties Trademark License Agreement and do
not involve the use of iDEN or other digital transmission technology. In
addition, Nextel and its affiliates may offer digital services in the Territory
using non-800 MHz frequencies provided that these services are not offered
under the licensed trademarks and do not offer interconnection with landline
telecommunication providers. Nextel may engage in national advertising
(including print, television, radio and Internet), promotions and sponsorships
to promote Nextel service, but will coordinate with the Company to ensure that
customers in the Company service areas adjacent to Nextel service areas do not
switch between Nextel and Company territories. Nextel may continue to service
national accounts, accounts with virtual private networks and national indirect
distributors within the Territory.
Standard of Care -- Nextel Sub (on behalf of Nextel and its affiliates) has
agreed to provide services to the Company at the same level that such services
are provided to subsidiaries of Nextel and not to discriminate between the
Company and subsidiaries of Nextel with respect to providing such services. In
the event that Nextel Sub (on behalf of Nextel and its affiliates) has agreed
to provide services to the Company that are not provided to subsidiaries of
Nextel, Nextel Sub will only be liable in cases of gross negligence or willful
misconduct in the provision of such services.
Marketing, Advertising, Pricing, etc. -- The Company is generally required to
adhere to Nextel standards for pricing structure, advertising, promotions,
customer care, telemarketing and related activities.
Back Office/MIS Services -- Nextel provides the Company access to certain back
office and information systems platforms on an ongoing basis, as more fully
described in the Joint Venture Agreement. The Company pays to Nextel a fee,
based on Nextel's cost, for these services. For the three-month period ended
March 31, 1999, the Company was charged approximately $45,000 for these
services.
Trademark License Agreement -- Pursuant to a trademark license agreement (the
"Trademark License Agreement"), Nextel Sub has granted OPCO a non-exclusive
license to use certain trademarks and other intellectual property (the
"Licensed Marks") that are now or in the future may be used by or licensed to
Nextel.
The Trademark License Agreement allows OPCO to sublicense the Licensed Marks
solely to its wholly owned subsidiaries and to authorized dealers of OPCO in
connection with the marketing, promotion and sale of OPCO services, and the
marketing, promotion and sale of certain equipment to be used by OPCOs
customers. OPCO is obligated to pay royalties to Nextel Sub for its use of the
Licensed Marks, beginning on a date (the "Royalty Commencement Date") that is
the latter of January 1, 2002 or the first day of the month
F-23
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
after the Company has achieved two consecutive fiscal quarters of positive
EBITDA. After the Royalty Commencement Date and through December 31, 2004, the
royalty will be equal to 0.5% of gross monthly service revenues, and will equal
1% of the gross monthly service revenues from January 1, 2005 and thereafter.
Either OPCO or Nextel Sub is allowed to, at any time upon or following the
termination of the Joint Venture Agreement, terminate the Trademark License
Agreement, and Nextel Sub is entitled to seek to terminate the Trademark
License Agreement upon the occurrence of certain material defaults under the
Joint Venture Agreement, even if the Joint Venture Agreement and other
Operating Agreements remain in effect. Termination of the Trademark License
Agreement requires, among other things, that OPCO discontinue use of the
Licensed Marks as part of its corporate, assumed or trade name.
Roaming Agreement -- Pursuant to a roaming agreement (the "Roaming Agreement")
entered into between Nextel Sub and OPCO, Nextel Sub and OPCO provide ESMR
service to subscribers of the other (in either case, the "Home Service
Provider") while such subscribers are out of the Home Service Provider's
territory and roaming in the territory of the other (in either case, the
"Remote Service Provider"). Under the Roaming Agreement, each Home Service
Provider is responsible for billing its own subscribers and designated users
for roaming usage in accordance with its own subscriber plans and service
agreements. The Roaming Agreement provides that each party pays the others
monthly roaming fees in an amount based on the actual system minutes generated
by the respective subscribers of each Home Service Provider operating as
authorized roamers in the Remote Service Provider's territory. For the three
month period ended March 31, 1999, the Company earned approximately $7,500 from
Nextel customers roaming on the Company's system and was charged approximately
$3,300 for the Company's customers roaming on Nextel's system.
Frequency Management Agreement -- Pending FCC approval of the Company's
acquisition of SMR licenses from Nextel, its right to utilize those frequencies
are governed by a frequency management agreement (the "Frequency Management
Agreement"). The Frequency Management Agreement obligates the Company to, among
other things, comply with all applicable FCC rules and regulations governing
the licenses underlying the managed frequencies and with various standards and
criteria established by Nextel relating to the construction, implementation and
operation of the Digital Mobile Network. Pending FCC approval of the license
transfer, Nextel Sub will represent the Company before the FCC with respect to
any matters relating to the managed frequencies. The Frequency Management
Agreement will terminates upon FCC approval of the license transfer.
Master Site Lease Agreement -- OPCO will lease from Nextel Sub, under a master
site lease agreement to be entered into between them (the "Master Site Lease"),
telecommunications towers and sites and space on telecommunications towers,
which are owned or leased by affiliates of Nextel Sub in the Territory.
Pursuant to the Master Site Lease, as the network build-out progresses,
additional sites will become subject to the Master Site Lease. OPCO will pay
Nextel Sub monthly rental payments based on the number of telecommunication
towers leased by OPCO. For the three month period ended March 31, 1999, the
Company was charged approximately $94,000 by Nextel under these arrangements.
F-24
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
The Master Site Lease, and each Site lease thereunder, has an initial term of
five years, renewable at OPCO's option for up to nine additional terms of five
years. Either OPCO or Nextel Sub is allowed to, at any time upon or following
the termination of the Joint Venture Agreement, terminate the Master Site
Lease. Neither party is permitted to assign or transfer the Master Site Lease
or any of its rights or obligations thereunder without the consent of the
other, except that Nextel Sub will be entitled to assign or transfer the Master
Site Lease to any affiliate or any Tower Aggregator.
Transition Services Agreement -- Nextel Sub, through its affiliates, provides
certain services to OPCO for a limited period under a transition services
agreement entered into between OPCO and Nextel (the "Transition Services
Agreement"). Under the Transition Services Agreement, certain accounting,
payroll, customer care, purchasing, human resources and billing functions are
made available to OPCO. In return for the services received through Nextel,
OPCO pays monthly fees to Nextel based on Nextel's cost. For the three month
period ended March 31, 1999, the Company was charged approximately $327,000 for
these services.
The services provided under the Transition Services Agreement have different
variable terms agreed to by OPCO and Nextel Sub. OPCO has the sole discretion
to terminate its use of any services covered by the Transition Services
Agreement before the end of any term of service. The parties contemplate that
in the event OPCO desires to purchase any services from Nextel Sub following
the expiration of the Transition Services Agreement, Nextel Sub may, at its
election, agree to provide certain services to OPCO on an arm's length basis,
at prices to be agreed upon.
Switch Sharing Agreement -- Nextel, through its affiliates, provides certain
telecommunications switching services to OPCO pursuant to a switch sharing
agreement entered into between Nextel Sub and OPCO (the "Switch Sharing
Agreement"). The Switch Sharing Agreement permits OPCO to link cell sites to
and electronically access certain switching equipment used and maintained by
affiliates of Nextel in the operation of Nextel's Digital Mobile Network, which
facilitates OPCO provision of ESMR service to the Company's subscribers. Under
the Switch Sharing Agreement, OPCO pays Nextel Sub monthly switching fees based
on a pricing formula agreed to by the parties based on Nextel's cost of
providing such services in the year 2001. For the three month period ended
March 31, 1999, the Company was charged approximately $224,000 for these
services.
Agreement Limiting Liability and Recourse to Nextel -- Pursuant to the term of
an agreement (the "Limitation on Liability and Recourse Agreement") entered
into by Nextel and the Company, the maximum cumulative, aggregate cash
liability of Nextel and its controlled affiliates for any and all actual or
alleged claims or causes of action arising in connection with any aspect of the
agreements governing or otherwise relating to the operating agreements will be
capped at $200 million. The cap amount will be reduced, dollar for dollar, by
the cumulative, aggregate amount that Nextel and its controlled affiliates have
advanced, expended or otherwise provided to or for the benefit of Nextel Sub to
enable Nextel Sub to perform its obligations relating to the Operating
Agreements. Among other
F-25
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND MARCH 31, 1999
(AMOUNTS AS OF AND FOR THE PERIODS ENDED
MARCH 31, 1999 AND 1998 ARE UNAUDITED)
things, the Limitation on Liability and Recourse Agreement will also provide
that Nextel will have no obligation to pay any sum to the Company if the
Company has not pursued and exhausted all remedies available to the Company in
connection with any relevant claim or cause of action. The Limitation on
Liability and Recourse Agreement will survive the expiration or termination of
any and all of the agreements governing or otherwise relating to the operating
agreements.
DLJMB Affiliation with Initial Purchaser/Bank Syndicate -- DLJ Capital, an
affiliate of DLJMB, has received customary fees and reimbursement of expenses
in connection with the arrangement and syndication of the Facility and as a
lender thereunder. Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC"), which is also an affiliate of DLJMB, has acted as a financial
advisor to the Company, as an arranger under the Facility and as an initial
purchaser in the Notes offering. The aggregate amount of all fees paid to the
DLJ entities in connection with the Capitalization Transactions was
approximately $14.7 million. The Company and its affiliates may from time to
time enter into other investment banking relationships with DLJSC or one of its
affiliates pursuant to which DLJSC or its affiliate will receive customary fees
and will be entitled to reimbursement of reasonable disbursements and
out-of-pocket expenses incurred in connection therewith. The Company expects
that any such arrangement will include provisions for the indemnification of
DLJSC against certain liability, including liabilities under the federal
securities laws.
Payable to Nextel and Eagle River
Prior to the capitalization transactions discussed in Note 2, the Company had
limited financial resources. As a result, to fund the operations of the Company
prior to the capitalization transactions, Nextel and Eagle River advanced the
Company $3.4 million (as of December 31, 1998) to cover its costs during the
period. These advances did not bear interest and were repaid in majority on
January 29, 1999. As of March 31, 1999 the Company owed Nextel and Eagle River
$12.9 million under the same terms discussed above.
10: VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS):
<TABLE>
<CAPTION>
BALANCE
BEGINNING COSTS AND AT
OF PERIOD EXPENSES WRITE-OFFS END OF PERIOD
----------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for doubtful accounts ......... $ -- $254 $-- $254
==== ==== === ====
</TABLE>
F-26
<PAGE>
INDEX TO PRO FORMA UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Pro Forma Unaudited Consolidated Statement of Operations for
the three months ended March 31, 1999 and for the year
ended December 31, 1998 .................................... P-3
Notes to Pro Forma Unaudited Consolidated Statement of
Operations for the three months ended March 31, 1999 and for
the year ended December 31, 1998 ........................... P-4
</TABLE>
P-1
<PAGE>
PRO FORMA UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The Pro Forma Unaudited Consolidated Statement of Operations for the three
month period ended March 31, 1999 and for the year ended December 31, 1998
gives effect to the issuance of the senior redeemable discount notes and the
application of $130.9 million of the net proceeds therefrom representing the
return of capital dividend payment made to Nextel on January 29, 1999 as if
they had occurred on the first day of such period. The Company raised
approximately $633.5 million in gross cash proceeds on January 29, 1999 through
cash equity investments of $52.1 million, borrowings on the bank credit
facility of $175.0 million and the issuance of senior discount notes of
approximately $406.4 million. Since cash is not fungible, the Company was not
able to determine which source of cash actually paid the dividend for purposes
of the preparation of these pro forma unaudited consolidated financial
statements. The Company has assumed that the proceeds of the senior discount
notes were utilized, as this source of funds carries the highest interest rate
currently.
The Pro Forma Unaudited Consolidated Financial Statements have not been
audited by the independent auditors of the Company and are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the Company or of the
financial position or the results of operations of the Company that would have
been realized had the issuance of the preferred stock, the bank credit
facility, issuance of the senior redeemable discount notes, and the application
of the net proceeds therefrom occurred as of the dates presented.
P-2
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999 YEAR ENDED DECEMBER 31, 1998
------------------------------------------------ ------------------------------------------------
NEXTEL PRO FORMA NEXTEL PRO FORMA
PARTNERS, INC. ADJUSTMENTS TOTALS PARTNERS, INC. ADJUSTMENTS TOTALS
---------------- ----------------- ------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Service revenues ........... $ 3,493 $ -- $ 3,493 $ 3,745 $ -- $ 3,745
Equipment revenues ......... 811 -- 811 1,564 -- 1,564
--------- --------- --------- --------- ---------- ---------
Total revenues ............... 4,304 -- 4,304 5,309 -- 5,309
--------- --------- --------- --------- ---------- ---------
Operating expenses:
Cost of service
revenues .................. 3,106 -- 3,106 6,108 -- 6,108
Cost of equipment
revenues .................. 1,718 -- 1,718 2,935 -- 2,935
Selling, general and
administrative ............ 5,231 -- 5,231 13,531 -- 13,531
Deferred
compensation .............. 641 -- 641 447 -- 447
Depreciation and
amortization .............. 2,515 -- 2,515 4,586 -- 4,586
--------- --------- --------- --------- ---------- ---------
Total operating
expenses..................... 13,211 -- 13,211 27,607 -- 27,607
--------- --------- --------- --------- ---------- ---------
Loss from operations ......... (8,907) -- (8,907) (22,298) -- (22,298)
Interest expense ............. (12,529) (1,585)(3) (14,114) -- (20,020)(1) (20,020)
Interest income .............. 4,013 -- 4,013 -- -- --
--------- --------- --------- --------- ---------- ---------
Loss before income tax
provision .................... (17,423) (1,585) (19,008) (22,298) (20,020) (42,318)
Income tax provision ......... -- -- (2) -- -- -- (2) --
--------- --------- --------- --------- ---------- ---------
Net loss ..................... $ (17,423) $ (1,585) $ (19,008) $ (22,298) $ (20,020) $ (42,318)
========= ========= ========= ========= ========== =========
</TABLE>
See accompanying notes to pro forma unaudited consolidated financial statement.
P-3
<PAGE>
NOTES TO PRO FORMA UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND THE YEAR ENDED
DECEMBER 31, 1998
1) To reflect (i) accretion of $19.6 million in non-cash interest expense
associated with the 14% Senior Discount Notes whose proceeds were assumed
to have been used to pay a return of capital dividend to Nextel of $130.9
million, and (ii) an estimated $0.5 million of amortization of deferred
financing costs associated with the Company's 14% Senior Discount Notes.
2) No benefit for income tax has been recorded as the Company has determined
that a full valuation allowance is required.
3) To reflect (i) $1.5 million in non-cash interest on the accretion associated
with the 14% Senior Discount Notes and (ii) $0.1 million of amortization of
deferred financing costs.
P-4
<PAGE>
================================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO MAKE ANY
REPRESENTATION TO YOU THAT IS NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD NOT UNDER ANY CIRCUMSTANCES ASSUME THAT THE INFORMATION
IN THIS PROSPECTUS IS CORRECT ON ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
-----------------------------------
================================================================================
================================================================================
$800,000,000
Offer to Exchange
14% Senior Discount Notes
due 2009
that have been registered
under the
Securities Act of 1933
for outstanding
14% Senior Discount Notes
due 2009
--------------------------------------------
P R O S P E C T U S
DATED , 1999
--------------------------------------------
[NEXTEL PARTNERS INC LOGO OMITTED]
================================================================================
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. In its restated certificate of
incorporation, the Company has adopted the provisions of Section 102(b)(7) of
the Delaware General Corporation Law (the "Delaware Law"), which enables a
corporation in its original certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a director for monetary
damages for breach of the director's fiduciary duty, except (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware law
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
a director will personally receive a benefit in money, property or services to
which the director is not legally entitled.
The Company has also adopted indemnification provisions pursuant to
Section 145 of the Delaware Law, which provides that a corporation may
indemnify any persons, including officers and directors, who are, or are
threatened to be made, parties to any threatened, pending or completed legal
action, suit or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that such person was an officer, director, employee or agent
of the corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, with
respect to criminal proceedings, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify officers or
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against expenses (including attorney's fees) that such officer or
director actually and reasonably incurred.
The Company intends to enter into indemnification agreements with each of
the Company's officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<S> <C>
3.1* Restated Certificate of Incorporation of the Company.
3.2* Bylaws of the Company.
4.1* Indenture, dated January 29, 1999, by and between the Company and The Bank of New
York, as trustee, relating to the 14% Senior Discount Notes due 2009.
4.2* Registration Rights, dated as of January 29, 1999, by and among the Company,
Donaldson, Lufkin & Jenrette Securities Corporation, Barclays Capital Inc., First Union
Capital Markets, BNY Capital Markets, Inc. and Nesbitt Burns Securities Inc.
4.3* Credit Agreement, dated as of January 29, 1999, among Nextel Partners Operating Corp.,
DLJ Capital Fund, Inc., The Bank of New York, Bank of Montreal and other financial
institutions.
4.4* Borrower Security and Pledge Agreement, dated as of January 29, 1999, by and between
Nextel Partners Operating Corp. and Bank of Montreal.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.5* Subsidiary Security and Pledge Agreement, dated as of January 29, 1999, by and among
the subsidiaries of the Company and Bank of Montreal.
4.6* Parent Guaranty and Pledge Agreement, dated as of January 29, 1999, by and between
the Company and Bank of Montreal.
4.7* Subsidiary Guaranty, dated as of January 29, 1999, by and among the subsidiaries of the
Company and Bank of Montreal.
5.1* Opinion of Willkie Farr & Gallagher.
8.1 Opinion of Willkie Farr & Gallagher with respect to certain tax matters.
10.1* Purchase Agreement, dated January 22, 1999, by and among the Company, Donaldson,
Lufkin & Jenrette Securities Corporation, Barclays Capital Inc., First Union Capital
Markets, BNY Capital Markets, Inc. and Nesbitt Burns Securities Inc.
10.2* Shareholders' Agreement, dated as of January 29, 1999, among the Company and the
shareholders named therein.
10.3* Joint Venture Agreement, dated as of January 29, 1999, by and among the Company,
Nextel Partners Operating Corp., and Nextel WIP Corp.
10.4* Interim Management Agreement, dated as of January 29, 1999, by and between Nextel
Partners Operating Corp. and Nextel WIP Corp.
10.5* Analog Management Agreement, dated as of January 29, 1999, by and between Nextel
Partners Operating Corp. and Nextel WIP Corp.
10.6 Trademark License Agreement, dated as of January 29, 1999, by and between Nextel
Partners Operating Corp. and Nextel WIP Corp.
10.7 Roaming Agreement, dated as of January 29, 1999, by and between Nextel Partners
Operating Corp. and Nextel WIP Corp.
10.8 Switch Sharing Agreement, dated as of January 29, 1999, by and between Nextel Partners
Operating Corp. and Nextel WIP Corp.
10.9* * Transition Services Agreement, dated as of January 29, 1999, by and between Nextel
Partners Operating Corp. and Nextel WIP Corp.
10.10** iDEN (Registered Trademark) Infrastructure Equipment Purchase Agreement, dated as of
January 29, 1999, by and between Motorola, Inc. and Nextel Partners Operating Corp.
10.11** Subscriber Purchase and Distribution Agreement, dated as of January 29, 1999, by and
between Motorola, Inc. and Nextel Partners Operating Corp.
10.12 Agreement Specifying Obligations of, and Limiting Liability and Recourse to, Nextel,
dated as of January 29, 1999, among the Company, Nextel Partners Operating Corp. and
Nextel Communications, Inc.
10.13 Asset and Stock Transfer and Reimbursement Agreement, dated as of January 29, 1999,
by and between Nextel Partners Operating Corp. and Nextel WIP Corp.
10.14* Employment Agreement, dated as of January 29, 1999, between the Company and John
Chapple.
10.15* Employment Agreement, dated as of January 29, 1999, between the Company and John
Thompson.
10.16* Stock Option Agreement, dated as of January 29, 1999, between the Company and John
Thompson.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.17* Non-negotiable Promissory Note, dated January 29, 1999, by John Thompson to the
Company.
10.18* 1999 Nonqualified Stock Option Plan of the Company
10.19 Form of Restricted Stock Purchase Agreement, dated as of November 20, 1998, between
the Company and John Chapple, John Thompson, Daivd Thaler, David Aas, Perry
Satterlee and Mark Fanning.
10.20 Form of Amendment No. 1 to Restricted Stock Purchase Agreement, dated as of January
29, 1999, between the Company and John Chapple, John Thompson, David Thaler, David
Aas, Perry Satterlee and Mark Fanning.
10.21 Employment Agreement, dated as of January 29, 1999, between the Company and David
Aas.
10.22 Employment Agreement, dated as of January 29, 1999, between the Company and Perry
Satterlee.
10.23 Employment Agreement, dated as of January 29, 1999, between the Company and David
Thaler.
10.24** Subscription and Contribution Agreement, dated as of January 29, 1999, among the
Company and the Buyers named therein.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Willkie Farr & Gallagher (included in their opinions filed as Exhibits 5.1
and 8.1).
24.1* Powers of Attorney (included on signature page to Registration Statement on Form S-4).
25.1 Statement on Form T-1 of Eligibility of Trustee.
27 Financial Data Schedule.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Letter to Clients.
99.4* Form of Letter to Nominees.
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES:
None.
ITEM 22. UNDERTAKINGS.
Insofar as indemnifications for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
II-3
<PAGE>
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the option of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing a Form S-4 and has duly caused this Amendment No. 1 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Kirkland, State of Washington, on the
29th day of June, 1999.
NEXTEL PARTNERS, INC.
By: /s/ John Chapple
------------------------------------
John Chapple
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------- --------------
<S> <C> <C>
/s/ John Chapple President, Chief Executive June 29, 1999
- ----------------------------- Officer and Director
John Chapple
/s/ John D. Thompson Chief Financial Officer June 29, 1999
- ----------------------------- and Treasurer
John D. Thompson
* Director June 29, 1999
- -----------------------------
Timothy M. Donahue
* Director June 29, 1999
- -----------------------------
Andrew H. Rush
* Director June 29, 1999
- -----------------------------
Andrew E. Sinwell
* Director June 29, 1999
- -----------------------------
Dennis M. Weibling
</TABLE>
*By: /s/ John Chapple
-------------------------
John Chapple
Attorney-in-Fact
II-5
<PAGE>
June 29, 1999
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, Washington 98033
Re: $800,000,000 14% Senior Discount Notes
due 2009 Exchange Offer
Ladies and Gentlemen:
We have acted as counsel to Nextel Partners, Inc., a Delaware
corporation (the "Company"), in connection with the filing by the Company with
the Securities and Exchange Commission (the "Commission") of a Registration
Statement on Form S-4 (File No. 333-78459) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the proposed issuance, in exchange
for $800,000,000 aggregate principal amount at maturity of the Company's 14%
Senior Discount Notes due 2009 (the "Old Notes"), of $800,000,000 aggregate
principal amount at maturity of the Company's 14% Senior Discount Notes due 2009
(the "New Notes"). The New Notes are to be issued pursuant to an Indenture dated
January 29, 1999 (the "Indenture") between the Company and The Bank of New York,
as trustee (the "Trustee"). Capitalized terms used herein and not defined have
the meanings ascribed thereto in the Indenture.
In connection with the proposed issuance of the New Notes, we are
opining as to the material tax consequences of (i) the exchange of the Old Notes
for New Notes and (ii) the holding of New Notes:
(i) With regard to the exchange of the Old Notes for New
Notes, it is our opinion that there are no material federal income tax
consequences, because the exchange will not be a taxable event for
federal income tax purposes. This opinion is based on our analysis of
the New Notes, the Old Notes and federal income tax law in effect as of
the date of this opinion.
(ii) With regard to the holders of New Notes who acquired the
Old Notes upon original issuance, it is our opinion that the sole
material federal income tax consequence to holders of the New Notes is
that they will be
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subject to the "original issue discount" rules of the Internal Revenue
Code of 1986, as amended. Under these rules, the accretion of the Notes
from their original issue price to their principal amount will produce
taxable ordinary interest income in the amount of such accretion during
each accretion period. This opinion is based on our analysis of the New
Notes, the Old Notes and federal income tax law in effect as of the
date of this opinion.
Accordingly, based upon the foregoing, we hereby confirm that the
statements set forth in the prospectus (the "Prospectus") forming a part of the
Registration Statement under the subheading "Material United States Federal
Income Tax Consequences" accurately describes our opinion as to the material
federal income tax consequences to the holders of the New Notes issued pursuant
to the Prospectus.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus, and we hereby consent to such use of our name therein and to
the use of this opinion for filing with the Registration Statement as Exhibit
8.1 thereto.
Very truly yours,
/s/ Willkie Farr & Gallagher
---------------------------------
Willkie Farr & Gallagher
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TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement") is made as of
January 29, 1999 ("Effective Date") by and between NEXTEL WIP CORP., a Delaware
corporation ("NWIP"), and NEXTEL PARTNERS OPERATING CORP., a Delaware
corporation (the "Company"). Defined terms used herein and not otherwise defined
have the meanings ascribed thereto in the JV Agreement.
RECITALS
A. Nextel, through its Subsidiaries, operates an iDEN-based wireless
communications system through which it provides wireless communications services
in various markets throughout the United States. To enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations, and objectives, Nextel, through NWIP, is
entering into a contractual joint venture with NPI and its wholly owned
Subsidiaries, including the Company.
B. The agreement of the parties with respect to the formation and
operation of the contractual joint venture is set forth in the JV Agreement and
various Collateral Agreements. This Agreement is a Collateral Agreement.
C. NWIP and the Company desire to establish and implement an
arrangement that will allow the Company to use certain trademarks in the
Territory.
In consideration of the mutual promises and covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NWIP and the Company hereby agree as follows:
AGREEMENT
1. DEFINITIONS.
1.1 Authorized Dealers means any distributors or other agents of the Company
authorized to market, promote or otherwise offer the Company's Business in the
Territory.
1.2 Business means offering, marketing and providing services (provided in
accordance with the relevant provisions of the JV Agreement and the other
applicable Collateral Agreements) using the Partner Frequencies (as defined in
the JV Agreement) in an ESMR Network.
1.3 EBITDA means, with respect to any fiscal year of the Company, earnings
of the Company for such year before interest (including, without limitation, the
interest component of any capital lease obligation), taxes, depreciation and
amortization for such year.
1.4 Gross Monthly Service Revenue means all revenue derived in any month
from activation, access, usage, features and toll charges (including long
distance toll charges) and from
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credits/adjustments, promotions and subsidies. "Gross Monthly Service Revenue"
does not include revenue derived from equipment or product sales and shall not
be adjusted for product (as opposed to service) credits, adjustments, promotions
or subsidies. By mutual written agreement, NWIP and the Company may, from time
to time and at any time during the term hereof (including any renewal term),
revise the components of Gross Monthly Service Revenue.
1.5 JV Agreement means the Joint Venture Agreement, by and among NWIP, the
Company and NPI, of even date herewith, as the same may be amended and in effect
from time to time.
1.6 Nextel means Nextel Communications, Inc., a Delaware corporation.
1.7 NPI means Nextel Partners, Inc., a Delaware corporation and the sole
stockholder of the Company.
1.8 Roaming Agreement means the Roaming Agreement, by and between NWIP and
the Company, of even date herewith, as the same may be amended and in effect
from time to time.
1.9 Shareholders' Agreement means the Shareholders' Agreement, by and among
NPI, NWIP and certain other persons, of even date herewith, as the same may be
amended and in effect from time to time.
1.10 Territory means the "Territory" as described in the JV Agreement, as
modified and existing from time to time pursuant to the JV Agreement.
1.11 Trademarks means the "Nextel" trademark, and other trademarks, service
marks, logos and trade names set forth on the attached Exhibit A.
2. LICENSE.
2.1 Grant of License.
2.1.1 Trademarks. Subject to the terms and conditions of this
Agreement, NWIP grants to the Company (a) a nontransferable, exclusive license
to use the Trademarks solely to provide iDEN service in the Territory in
accordance with the JV Agreement, and (b) a nontransferable, nonexclusive
license to use the Trademarks solely in connection with the Business in the
Territory, including using the word "Nextel" on subscriber units sold or
otherwise provided in connection with the Business in the Territory. The
license(s) described in this Section 2.1.1 are royalty-bearing to the extent
provided in Section 6.
2.1.2 Use in Corporate Name. Subject to the terms and conditions of
this Agreement, NWIP grants to the Company a nontransferable, non-exclusive,
royalty-bearing (to the extent provided in Section 6) license to use the word
"Nextel" as part of its corporate name and to grant sublicenses under this
Section 2.1.2 solely to its wholly owned subsidiaries and NPI.
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2.2 Sublicenses.
2.2.1 Right to Grant Sublicenses. The Company may grant sublicenses to
wholly owned subsidiaries and to Authorized Dealers solely in connection with
the marketing, promotion and sale of the services in connection with the
Business in the Territory and the marketing, promotion and sale of subscriber
equipment and related accessories to be used by the Company's customers in
connection with the Business. Each sublicensee must sign an agreement consistent
with the terms and conditions of this Agreement, including without limitation,
Section 2.2.2. The Company may authorize Motorola, Inc. to place Trademarks on
subscriber equipment manufactured for the Company provided that the Trademarks
are used in the same manner on such equipment for the Company as they are on
such equipment for the NDS.
2.2.2 Sublicense Agreements. Each sublicense agreement must: (i) not
grant to sublicensees any rights greater than the rights granted to the Company
under this Agreement; (ii) subject the sublicensee to the restrictions imposed
on the Company under Article 8 of the JV Agreement; (iii) allow NWIP the right,
with reasonable prior notice and during regular business hours or at other
reasonable times, to audit the sublicensee's records in connection with the
licensed rights; and (iv) terminate automatically upon any termination of this
Agreement (including, without limitation, termination of all of sublicensee's
rights to use the Trademarks). Each sublicense agreement must be otherwise in
form and substance reasonably acceptable to NWIP. With respect to independent
sales professionals, NWIP has approved, and the Company shall use, the form
Independent Sales Professional Agreement ("ISP Agreement") attached hereto as
Exhibit D (with appropriate changes to make it an agreement between the Company
and a third party and to create an independent right for NWIP to enforce the
provisions indicated by bold print). The Company shall not modify the provisions
that are printed in bold print without the prior, written consent of NWIP, which
consent shall not be unreasonably withheld. The Company may modify or amend any
of the other provisions of the ISP Agreement in its discretion as long as such
amendments or modifications are consistent with the Joint Venture Agreement and
this Trademark License Agreement. Company shall submit all other form sublicense
agreements to NWIP for NWIP's prior approval, which approval shall not be
unreasonably withheld. All such agreements shall contain provisions comparable
to those indicated in bold print on Exhibit D and shall contain an independent
right by NWIP to enforce such provisions. NWIP shall have five (5) business days
(commencing on the first business day after the day on which NWIP receives the
agreement for review) to comment on any such sublicense agreement. If the
Company receives no comments within such five (5) business day period, the
agreement shall be deemed approved.
2.2.3 Additional Covenants. The Company shall notify NWIP promptly upon
the signing of each sublicense agreement. In addition, at NWIP's request, the
Company shall provide NWIP with complete copies of all sublicense agreements.
NWIP has the right to require the Company to terminate the sublicense agreement
and all rights thereunder of any Authorized Dealer that is not in compliance
with the quality standards set forth herein (after notice of noncompliance and a
reasonable opportunity to cure has been granted, to the extent required in
accordance with the terms of the sublicense agreement).
2.3 Reservation of Rights. No rights or licenses, express or implied,
other than those granted in Sections 2.1 and 2.2 are granted by this Agreement
to the Company under any
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intellectual property owned by, controlled by or licensed to any of NWIP, Nextel
or any NDS. Subject to the provisions of the JV Agreement limiting and defining
the rights of the Company, NWIP and Nextel with respect to marketing,
advertising and use and licensing of Trademarks and the rights granted to the
Company in this Agreement, NWIP expressly reserves for itself and Nextel the
right (i) to use the Trademarks anywhere in the world in connection with any
products and/or services, and (ii) to license the right to use the Trademarks to
any third parties for any purpose on any terms.
3. TERM AND TERMINATION.
3.1 Term. Unless terminated as provided in Section 3.2 or as extended
pursuant to Section 3.1 of the JV Agreement by an election under Section 4.02(a)
of the Shareholders' Agreement, this Agreement commences on the Effective Date
and continues for an initial term of ten (10) years. Thereafter, this Agreement
automatically renews for up to four additional ten (10) year terms unless the
Company elects not to renew by providing written notice to NWIP at least one
hundred and eighty (180) days prior to the end of the initial term or any
renewal term.
3.2 Earlier Termination.
3.2.1 Breach. Upon any breach of this Agreement by the Company, the
parties will proceed in accordance with Article 12 of the JV Agreement.
3.2.2 Termination of JV Agreement. This Agreement automatically
terminates upon any termination of the JV Agreement unless the arbitrator awards
the Company continuation of this Agreement in accordance with Section 12.9B of
the JVA.
3.2.3 Termination Upon Material Default. NWIP may terminate this
Agreement upon thirty (30) days' written notice to the Company in accordance
with Section 12.9B of the JV Agreement, and if the arbitrators determine taking
into account the harm that the material breach caused to the licensed marks that
termination of this Agreement (in whole or in part) is an appropriate remedy in
the circumstances.
3.3 Effect of Termination.
3.3.1 Royalties. All royalties owed are due immediately upon any
termination.
3.3.2 Termination of JV Agreement. If this Agreement was terminated in
accordance with Section 3.2.2, the Company has a limited right and license to
use the Trademarks (i) for the thirty (30) day period immediately following
termination, solely in connection with customer contracts, all advertising and
promotional efforts and related materials bearing the Trademarks, including,
without limitation, all signs, displays, storefront signs and billboards (except
for the current year's printed telephone directory advertisements and subscriber
equipment held on the date of termination in either the Company's inventory or
any sublicensee's inventory), and (ii) for the ninety (90) day period
immediately following termination, solely in connection with the distribution
and sale of subscriber equipment bearing the Trademarks held on the date of
termination in the Company's inventory and/or any sublicensee's inventory. In
addition, the
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Company must change its corporate or assumed name as soon as possible, but no
later than thirty (30) days from the date of termination.
3.3.3 Limited License. If this Agreement was terminated in accordance
with Section 3.2.1, the Company has a limited right and license to use the
Trademarks for the one hundred and eighty (180) day period immediately following
termination solely in connection with (i) customer contracts, (ii) all
advertising and promotional efforts and related materials bearing the
Trademarks, including, without limitation, all signs, displays, storefront signs
and billboards (except for the current year's telephone directory
advertisements) and, (iii) the distribution and sale of subscriber equipment
bearing the Trademarks held on the date of termination in the Company's
inventory and/or any sublicensee's inventory. In addition, the Company must
change its corporate or assumed name as soon as possible, but no later than one
hundred and eighty (180) days from the date of termination.
3.3.4 No Further Right. At the end of the time periods set forth in
Section 3.3.2 or 3.3.3, the Company shall immediately discontinue all use of the
Trademarks, including any use of the Trademarks as part of its corporate,
assumed or trade name. As promptly as possible, and in any event, by the end of
the time periods set forth in Section 3.3.2 or 3.3.3, the Company must notify
NWIP of all materials in the Company's possession that bear the Trademarks. The
Company shall destroy or return to NWIP all materials bearing the Trademarks
(except for subscriber equipment already delivered to subscribers) and an
officer of the Company shall certify in writing, delivered to NWIP by the final
day of the relevant period, that the Company has discontinued such use and has
either destroyed or returned to NWIP all such materials. Further, at NWIP's
discretion, NWIP may buy subscriber equipment held on the date of termination in
the Company's inventory or in any sublicensee's inventory at the Company's or
sublicensee's cost, as the case may be, or may require that the Company remove
or obliterate any and all Trademarks displayed on all such subscriber equipment.
4. LIMITATIONS ON LICENSE.
4.1 Usage. The Company shall not use any of the Trademarks except as
provided in Sections 2.1 and 2.2 and in Article 5. In addition, the Company
shall not use any term, phrase or design which is confusingly similar to,
deceptive or misleading with respect to, or a colorable imitation or derivative
of, the Trademarks, or any portion of the Trademarks.
4.2 Ownership of Trademarks. The Company shall not assert any claim of
ownership of, or any claim to, any goodwill or reputation associated with the
Trademarks, by reason of the Company's licensed use thereof or otherwise. NWIP,
Nextel or an NDS, as the case may be, is the exclusive owner of the Trademarks
and all right, title or interest in, to or under the Trademarks which may accrue
to the benefit of, or be acquired by, the Company as a result of its exercise of
the rights and licenses granted hereunder are hereby assigned to and inure to
the sole benefit of NWIP, Nextel or the NDS, as the case may be. The Company
shall not take and, to the extent reasonably within the Company's power to
control, shall not permit, any action which would impair ownership rights in the
Trademarks. In addition, during the term of this Agreement or thereafter, the
Company agrees not to register in any country any trademark, service mark, trade
name or logo resembling or confusingly similar to any of the Trademarks.
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4.3 No Disparagement. The Company acknowledges that the Trademarks are
valuable assets of NWIP or Nextel, as the case may be, and represent the highest
quality of products and services in the telecommunications industry.
Accordingly, the Company agrees not to use the Trademarks in any manner that,
directly or indirectly, would demean, ridicule or otherwise place in disrepute
the image of the Trademarks, NWIP or Nextel.
4.4 Sponsorship. Except for the events listed on Exhibit B, the Company
shall not use any of the Trademarks to sponsor, endorse, or claim affiliation
with any event, meeting, charitable endeavor, or other undertaking without
NWIP's prior written approval, such approval not to be unreasonably withheld.
The Company shall submit written requests regarding any event not listed on
Exhibit B to NWIP for approval. If NWIP does not respond to the Company's
written request within five business days of receipt of such request, then such
request is deemed approved.
5. QUALITY CONTROL.
5.1 Quality Standards. The Company shall maintain quality standards for all
of its uses of the Trademarks which are substantially equivalent to or stricter
than those standards applicable generally to the NDS for their products and
services and their trademarks, including without limitation, (i) adhering to
standards for the use of the radio frequencies in the ESMR Network as in effect
at the relevant time and applicable generally to the NDS ESMR Network operations
in accordance with the JV Agreement, (ii) complying with all federal, state and
local rules and regulations regarding the Business, and (iii) providing customer
service and monitoring customer satisfaction in accordance with the JV
Agreement, provided that the Company shall not be obligated to comply with any
such standards referred to in this Section 5.1 to the extent that the NDS is not
in compliance therewith during the same relevant period. Copies of all such
standards in effect from time to time are to be provided to the Company at the
same time and in the same manner as such requirements, procedures and standards
are communicated to the NDS; the schedule for the Company's implementation of,
or compliance with, the relevant standards are to be the schedule in effect at
the relevant time and applicable generally to the NDS. The Company acknowledges
and agrees that it has reviewed, and must comply with NWIP's Trademark Usage
Manual, as amended, from time to time, a current version of which is attached
hereto as Exhibit C.
5.2 Modifications to Quality Standards. NWIP has the right, at any time, to
modify or supplement the quality standards to be maintained by the Company as
provided in the JV Agreement. If NWIP elects to make a material change to the
Trademarks, NWIP will notify the Company and the Company will be required to
implement such change in accordance with the time frame set forth in Section 8.1
of the JV Agreement. If NWIP requires that changes to the Trademarks be
completed in a period of less than 12 months, NWIP will reimburse the Company
for all reasonable actual out-of-pocket expenditures made by the Company
directly attributable to the required change. The Company must submit itemized
statements and reasonably detailed supporting information regarding the
expenditures made by the Company in order to be reimbursed by NWIP.
5.3 New Uses. Except as otherwise provided in Article 8 of the JV Agreement,
the Company must submit to NWIP, for NWIP's prior written approval, all proposed
new uses of the
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Trademarks or any portion of the Trademarks in connection with any other
trademarks, service marks, logos or trade names, or in connection with any other
activity or agreement. All proposed new uses of the Trademarks must be submitted
to the Vice President of Strategic Initiatives at Nextel or such other position
at Nextel or NWIP as NWIP may identify from time to time. NWIP will provide to
the Company either written approval of the proposed use or a written rejection
within five (5) business days of receipt from the Company. If NWIP does not
respond within the five (5) business day period, then such use of the Trademark
is deemed approved for the specific purpose in the proposal. The Company is not
required to seek additional approval for all uses approved in accordance with
this Section 5.3 unless it makes a material change to the subject Trademark or
to the use for which the Trademark is intended.
5.4 Inspection. At the reasonable request of NWIP, the Company shall provide
NWIP, at the Company's expense, copies, photographs or representative samples of
advertising copy, promotional materials, products or other materials bearing the
Trademarks, and shall permit representatives of NWIP to inspect, at NWIP's
expense, the Company's facilities upon reasonable notice and during normal
business hours to determine whether the Company is maintaining the quality
standards set forth in Section 5.1.
6. ROYALTY.
6.1 Payment Obligation.
6.1.1 Royalty Rate. No royalties are payable with respect to any period
prior to the time that the Company has had two consecutive fiscal quarters of
positive EBITDA. After the time the Company has had two consecutive fiscal
quarters of positive EBITDA, the Company shall pay the following royalties:
(i) from the Effective Date through December 31, 2001 -- no
royalty;
(ii) from January 1, 2002 through December 31, 2004 -- 0.5% of the
Company's total Gross Monthly Service Revenues; and
(iii) from January 1, 2005 and thereafter -- 1.0% of the Company's
total Gross Monthly Service Revenues.
6.1.2 Time of Payment. All royalty payments by the Company to NWIP must
be made monthly, within thirty (30) days after the last day of each month. In
addition, not more than thirty (30) days after the Company's certified public
accountants complete their audit of a fiscal year, the Company will deliver to
NWIP the audit report. If the total Gross Monthly Service Revenues per audit is
different from the unaudited Gross Monthly Service Revenues figures in and for
such year on which the royalties were paid, then the Company shall pay to NWIP
any amounts due (without interest), or, if the Company has overpaid royalties,
the Company is entitled to take a credit (without interest) against subsequent
royalty payments.
6.2 Royalty Reports.
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6.2.1 Reports. Each royalty payment is to be accompanied by a written
royalty report stating the unaudited Gross Monthly Service Revenues figure on
which such royalty payment is based. If inconsistencies or mistakes are
discovered, they must be rectified and (i) in the case of underpayment, the
Company must make the appropriate payments on demand; or (ii) in the case of
overpayment, the Company may deduct such amount from the next royalty payment
due. Any royalty payments, including accrued royalties, not paid when due must
be paid immediately upon demand.
6.2.2 Maintenance of Records. For a period of five (5) years from the
date of creation of any record, the Company shall keep complete and accurate
records with respect to the Monthly Gross Service Revenues, including all
independent auditor reports relating thereto and all information necessary to
confirm the gross service revenue calculations used in the preparation of each
royalty report.
6.2.3 Audit Rights. At NWIP's request and expense, the Company shall
permit NWIP or its authorized representative to periodically review, but not
more often than once a year, the Company's books and records relevant to this
Agreement to determine the amount of royalties under this Agreement.
7. REGISTRATION AND ENFORCEMENT.
7.1 Registration. NWIP, Nextel and any NDS, as the case may be, have the
exclusive right (but no obligation) to obtain registrations and any other form
of protection for their respective Trademarks. The Company shall furnish NWIP
with all reasonably requested information (including specimens and samples
illustrative of the manner of use of the Trademarks) and documentation
(including the execution and delivery of any and all true and correct
affidavits, declarations, oaths and other documentation) to assist NWIP, Nextel
or any NDS in obtaining and maintaining such trademark protection and
registrations.
7.2 Enforcement. The Company shall take all reasonable steps and shall
provide such materials, cooperation and assistance as may be reasonably required
to assist NWIP, Nextel or the NDS in maintaining and enforcing the Trademarks.
The Company shall promptly notify NWIP of any actual or suspected infringement
or misuse of the Trademarks by third parties of which it becomes aware. NWIP,
Nextel or the NDS, as the case may be, has the sole right (but no obligation) to
take action against such infringers or suspected infringers. Any recovery with
respect to any action taken under this Section 7.2 is to be divided between the
parties as NWIP may reasonably determine, taking into account royalties paid by
the Company hereunder, and the damage each party suffered as a result of the
infringement and the expense of the enforcement; provided, that any such
recoveries shall be applied first to fully reimburse all expenses of the
enforcement. The Company has no right to take any action with respect to any
third party in an attempt to enforce any rights regarding the Trademarks without
the prior written approval of NWIP.
7.3 The Company's Rights. If no action is taken against infringers or
suspected infringers in accordance with Section 7.2, then the Company, in its
commercially reasonable discretion, may request NWIP to do so at the Company's
sole expense. NWIP has the absolute
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right to deny the Company's request. If NWIP does not take any action with
respect to a particular Trademark pursuant to this Section 7.3, then the Company
is under no further obligation to use such Trademark.
8. INDEMNIFICATION AND INSURANCE.
8.1 NWIP Indemnity.
8.1.1 Notice and NWIP Election If a third party brings a claim against
the Company or any of its subsidiaries or authorized sublicensees (collectively,
the "Indemnified Parties") alleging that the use of a Trademark by the
Indemnified Parties as authorized hereunder is contrary to or otherwise
infringes on such third party's rights, then not more than 60 days after
receiving the third-party claim, NWIP shall notify the Company whether it
elects: (a) to notify the Company that NWIP requires that the Company continue
using such Trademark; or (b) to notify the Company that the NDS are ceasing to
use such Trademark and that NWIP requires that the Indemnified Parties cease
using such Trademark; or (c) not to require the Company to continue to use or to
cease to use such Trademark. If NWIP fails to make any such election within such
60-day period, it shall be deemed to have elected clause (c) of the preceding
sentence, until such time as NWIP makes an election, if any, under clause (a) or
(b); provided, however, that NWIP may not make such an election under clause (a)
if the Company has discontinued use of such Trademark.
8.1.2 Election to Require Continued Use. If NWIP gives notice under
Section 8.1.1(a), then NWIP will indemnify, defend and hold harmless the
Indemnified Parties from and against any and all liabilities, claims, damages,
costs, expenses (including reasonable attorneys' fees) or money judgments
(collectively, "Damages") that the Indemnified Parties incur in connection with
such claims. If the Company reasonably believes that NWIP does not have the
financial capacity to pay Damages associated with such claim, then, either
Nextel or one of its other Subsidiaries will make provision for or will provide
assurances of payment that are reasonably satisfactory to the Company, or the
Company will not be obligated to continue to use such Trademark.
8.1.3 Election to Require Use to Cease. If NWIP gives notice under
Section 8.1.1(b), then the Company will cease, and will cause the other
Indemnified Parties to cease using such Trademark, and NWIP will, subject to the
limit stated in Section 8.1.5, indemnify, defend and hold harmless the
Indemnified Parties from and against any Damages incurred in connection with
such claim.
8.1.4 Company Option to Use. If NWIP gives notice under Section
8.1.1(c), then NWIP will, subject to the limit stated in Section 8.1.5,
indemnify, defend and hold harmless the Indemnified Parties from and against any
Damages incurred in connection with such claim that relate to the period prior
to the notice from NWIP, but NWIP will have no obligation to indemnify the
Company for any claims of infringement based on use of such Trademark after the
notice.
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8.1.5 Limit on Indemnification. In no event shall NWIP's cumulative
indemnification obligations pursuant to Sections 8.1.3 and 8.1.4 exceed the
amount of the aggregate royalty payments actually received by NWIP pursuant to
this Agreement.
8.2 Company Indemnity. The Company shall indemnify, defend and hold harmless
NWIP and its subsidiaries and affiliates from and against any and all
liabilities, claims, damages, costs, expenses (including reasonable attorneys'
fees) or money judgments to the extent arising out of or relating to (i) a
breach by the Company of any of its obligations under this Agreement, (ii) any
claim of infringement or misappropriation based on the unauthorized use of any
of the Trademarks by the Company, any of its subsidiaries or any Authorized
Dealer; (iii), except as to matters as to which NWIP is obligated to indemnify
the Company under Section 8.1, claims asserted against any member of the Nextel
Group arising out of or relating to any activities by the Company or any of its
subsidiaries or Authorized Dealers in connection with this Agreement; or (iv)
the Company's continued use of a Trademark after NWIP notifies the Company in
writing of the NDS's election to cease using a Trademark due to third party
claims of infringement based on such use.
8.3 Procedure.
8.3.1 Notice. The indemnified party (the "Beneficiary") promptly shall
notify the indemnifying party (the "Indemnitor") of any third party claim.
Failure to notify the Indemnitor does not relieve the Indemnitor of any
liability that the Indemnitor may have, except to the extent that such failure
materially prejudices the Indemnitor's legal rights.
8.3.2 Indemnitor's Party's Obligations. The Indemnitor will conduct and
control, through its own counsel and at its expense, the settlement or defense
of such claim. The Beneficiary shall cooperate with the Indemnitor at the
Indemnitor's expense. The Beneficiary may not enter into any settlement without
consent of the Indemnitor, such consent not to be unreasonably withheld. The
Indemnitor may not, without the Beneficiary's consent, settle or compromise any
third party claim or consent to the entry of any judgment unless (i) such
settlement, compromise or judgment involves only the payment of money by the
Indemnitor, or provides for the unconditional release by the claimant or the
plaintiff of the Beneficiary from all liability in respect of such claim
(provided that such release may be conditioned on a parallel release or waiver
of all claims the Indemnitor and/or Beneficiary could assert, or has asserted,
against the claimant in connection with the claim or related claims and
disputes) or (ii) such settlement, compromise or judgment provides that the
Indemnitor and the Beneficiary will each be subject to the same restrictions and
that any payment will be shared by the Indemnitor and the Beneficiary based on
the ratio of their respective gross revenues for the most recent fiscal year and
taking into account royalties paid under this Agreement.
8.3.3 Insurance. The Company shall obtain and maintain, with reputable
carriers, adequate insurance coverage of types and subject to terms and
conditions normally maintained and procured by other comparable wireless service
providers, in connection with the activities contemplated under this Agreement.
The Company shall ensure that such policies name NWIP as an additional insured.
Promptly after the Effective Date, the Company will submit to NWIP proof of
insurance.
<PAGE>
9. ADDITIONAL REMEDIES. The Company acknowledges that a material breach or
material failure to comply with Articles 4, 5, 7 or 8 would cause irreparable
harm to NWIP's, Nextel's and/or the NDS's business and that none of NWIP, Nextel
or the NDS would have an adequate remedy at law for money damages. Therefore,
NWIP is entitled to specific performance and/or injunctive relief without the
posting of bond or other security in addition to any other remedy to which it
may be entitled hereunder or at law or in equity, in any court of competent
jurisdiction against any such breach or noncompliance. NWIP acknowledges that a
material breach or material failure to comply with Articles 2 and 8 would cause
irreparable harm to the Company's Business and that the Company would not have
an adequate remedy at law for money damages. Therefore, the Company is entitled
to specific performance and/or injunctive relief without the posting of bond or
other security in addition to any other remedy to which it may be entitled
hereunder or at law or in equity, in any court of competent jurisdiction against
any such breach or noncompliance. All remedies provided for herein are
cumulative and the exercise of any particular remedy by a party does not limit
or preclude the exercise of any other remedy available to such party.
10. MISCELLANEOUS.
10.1 Excusable Delay/Time Extension. Where performance by either party to
this Agreement is delayed by reason of an Excusable Delay (as defined in the JV
Agreement), the time for performance, and any otherwise applicable time limit,
schedule or deadline, shall be extended for a period of time equal to the period
of Excusable Delay.
10.2 Amendments. This Agreement may be amended only by a writing executed by
the parties.
10.3 Entire Agreement. This Agreement and the other Transaction Agreements
(as defined in the JV Agreement) set forth the entire understanding of the
parties hereto and thereto with respect to the subject matter hereof and
thereof, and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties, including but not limited to the Memorandum of
Agreement, dated as of May 1, 1998, among Wireless Investment Partners, L.L.C.,
NWIP and Nextel, as amended.
10.4 Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and is given: (a) when received if
personally delivered; (b) 12 hours after being sent by telecopy, with confirmed
answerback; or (c) 1 business day after being sent by priority delivery by
established overnight courier, to the parties at their respective addresses set
forth below.
To NWIP: Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Telecopy: (703) 394-3896
<PAGE>
With a copy (in the case of sublicense agreements submitted for review
pursuant to Section 2.2.2 hereof, and related materials) to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attention: Jeanne M. Rickert
Telecopy: (216) 579-0212
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman, Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Either party by written notice to the other given in accordance with this
Section 10.4 may change the address or the persons to whom notices or copies
thereof are to be directed.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument.
10.6 Waiver. Except as otherwise provided in this Agreement, any party may
waive, in writing, compliance by the other parties thereto (to the extent such
compliance is for the benefit of the party giving such waiver) with any of the
terms, covenants or conditions contained in this Agreement (except as may be
imposed by law). Any waiver by any party of any violation of, breach of, or
default under, any provision of any of this Agreement, by any other party will
not be construed as, or constitute, a continuing waiver of such provision, or
waiver of any other violation of, breach of, or default under, any other
provision of this Agreement.
10.7 Third Parties. Nothing expressed or implied in this Agreement is
intended, or may be construed, to confer upon or give any person or entity other
than the parties hereto any rights or remedies hereunder.
10.8 Severability. If any provision of this Agreement or the application of
such provision is invalid, illegal or unenforceable in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
of this Agreement or invalidate or render unenforceable such provision in any
other jurisdiction. The parties will, to the extent lawful and
<PAGE>
practicable, use their best reasonable efforts to enter into arrangements to
reinstate the intended benefits of any provision held invalid, illegal or
unenforceable.
10.9 Choice of Law. This Agreement shall be governed by New York law,
without regard to choice of law rules that would result in the application of
another state's law.
10.10 Construction.
(a) Words used in this Agreement, regardless of the number or gender
specifically used, will be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as
the context requires. The parties hereto have participated equally in the
drafting of this Agreement and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of authorship of any
provision of this Agreement.
(b) The schedules and exhibits attached to this Agreement are
incorporated herein and are part of this Agreement for all purposes.
Unless otherwise stated, any reference in this Agreement to an exhibit,
section or schedule is to an exhibit, section or schedule of this Agreement.
(c) The headings in this Agreement are solely for convenience of
reference and are not to be given any effect in the construction or
interpretation of this Agreement.
10.11 Agreement. This Agreement is one of the Collateral Agreements
identified in the JV Agreement. Accordingly, certain provisions of the JV
Agreement by their terms apply to this Agreement, including, without limitation,
Section 2.6, Article 12, and Sections 13.2, and 13.10.
10.12 Survival. The following provisions of this Agreement will survive
the expiration or termination hereof: Section 2.2.3 ("Additional Covenants");
Section 3.3 ("Effect of Termination"); Section 4.2 ("Ownership of Trademarks");
Section 6.2.2 ("Maintenance of Records"), Article 8 ("Indemnification and
Insurance") (excluding Section 8.4); Article 9 ("Additional Remedies"); and this
Article 10 ("Miscellaneous").
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
NEXTEL WIP CORP. NEXTEL PARTNERS OPERATING CORP.
By: /s/ Alan Strauss By: /s/ John Thompson
-------------------------------- --------------------------------
Name: Alan Strauss Name: John Thompson
Title: Vice President Title: Chief Financial Officer and
Treasuer
<PAGE>
ROAMING AGREEMENT
BY AND BETWEEN
NEXTEL WIP CORP.
AND
NEXTEL PARTNERS OPERATING CORP.
Dated as of January 29, 1999
<PAGE>
TABLE OF CONTENTS
Page
RECITALS......................................................................1
ARTICLE 1. DEFINITIONS.......................................................1
ARTICLE 2. PROVISION OF ROAMING SERVICES.....................................6
2.1 Required Services...........................................6
2.2 Optional Services...........................................6
2.3 Extent of Obligations.......................................8
2.4 Additional Roaming Contracts ...............................8
ARTICLE 3. VERIFICATION AND FRAUD PROTECTION.................................9
3.1 HLRs; Subscriber Status Verification........................9
3.2 Fraud Control...............................................9
3.3 Indemnification for Fraudulent Charges.....................10
3.4 NPA/NXX and IMSI Blocks....................................11
ARTICLE 4. BILLING, COLLECTIONS, AND PAYMENT................................11
4.1 Billing....................................................11
4.2 Additional Roaming Rates...................................12
4.3 Billing of Cross Region Calls .............................13
4.4 Billing Statements.........................................14
ARTICLE 5. CLEARINGHOUSE AND SETTLEMENT.....................................14
5.1 Clearinghouse Provider Designation.........................14
5.2 Settlement Provider Designation............................14
5.3 Clearinghouse and Settlement Data..........................14
5.4 Settlement and Clearinghouse Systems; Costs................14
ARTICLE 6. EXCLUSIVITY .....................................................15
6.1 Exclusivity................................................15
ARTICLE 7. BREACH...........................................................15
7.1 Breach; Dispute Resolution.................................15
ARTICLE 8. TERM AND TERMINATION.............................................15
8.1 Term.......................................................15
8.2 Termination................................................15
ii
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ARTICLE 9. MISCELLANEOUS...................................................16
9.1 Excusable Delay/Time Extension.............................16
9.2 Amendments.................................................16
9.3 Entire Agreement...........................................16
9.4 Notices....................................................16
9.5 Counterparts...............................................16
9.6 Waiver.....................................................17
9.7 Third Parties..............................................17
9.8 Severability...............................................17
9.9 Choice of Law..............................................17
9.10 Construction...............................................17
9.11 Agreement..................................................17
iii
<PAGE>
ROAMING AGREEMENT
This ROAMING AGREEMENT (this "Agreement"), dated as of January 29,
1999, is by and between NEXTEL WIP CORP., a Delaware corporation ("NWIP") and
NEXTEL PARTNERS OPERATING CORP., a Delaware corporation (the "Company"). Defined
terms are used herein as set forth in Article 1.
RECITALS:
A. Nextel, through its Subsidiaries, operates an iDEN-based wireless
communications system through which it provides wireless communications services
in various markets throughout the United States. To enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations, and objectives, Nextel, through NWIP, is
entering into a contractual joint venture with NPI and its wholly owned
Subsidiaries, including the Company.
B. The agreement of the parties with respect to the formation and
operation of the contractual joint venture is set forth in the JV Agreement and
various Collateral Agreements. This Agreement is a Collateral Agreement.
C. NWIP and the Company desire to establish and implement an
arrangement that will allow Subscribers and Designated Users of the NDS to use
certain iDEN-based wireless communications services provided by the Company
Operating Group when roaming in the Company Territory and Subscribers and
Designated Users of the Company Operating Group to use certain iDEN-based
wireless communications services provided by the NDS when roaming in the NDS
Territory.
In consideration of the mutual promises and covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NWIP and the Company hereby agree as follows:
AGREEMENT:
1. DEFINITIONS
1.1 "Applicable Percentage" means (a) with respect to payments made by
the Company, 80% and (b) with respect to payments made by NWIP, (i) 95% in 1999,
(ii) 90% in 2000, (iii) 85% in 2001, and (iv) 80% in 2002 and thereafter; in
each case as adjusted pursuant to Section 4.1(c) and as limited in accordance
with Section 4.1(d).
1.2 "Authorized Roamer" means a Roamer who (i) is a Subscriber or a
Designated User of any of the NDS or any member of the Company Operating Group,
(ii) has sought Roaming Services from a Remote Service Provider, and (iii)
through the RV process
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conducted by the Remote Service Provider has been confirmed by an HLR designated
by such Roamer's Home Service Provider to (x) have an account in good standing
with its Home Service Provider and (y) be eligible to receive Roaming Services
hereunder from the Remote Service Provider.
1.3 "Billable Minute" means each minute of interconnect or Direct
Connect service time that is captured by (x) the billing system of the NDS, as
such billing system may be in effect from time to time or (y) when instituted,
if ever, the billing system of the Company Operating Group, as such billing
system may be in effect from time to time, provided, that the Company will
ensure that the billing system of the Company Operating Group at all times
measures minutes of interconnect and Direct Connect service using the same
methodologies or formulas then employed by the billing system of the NDS and
that NWIP will provide notice to the Company of any changes to such
methodologies or formulas.
1.4 "Clearinghouse Provider" means any entity or entities designated by
NWIP, in NWIP's sole discretion, from time to time and at any time during the
term of this Agreement, including any renewal term(s), to provide Clearinghouse
Services, which entity or entities may, but are not required to be, the
Settlement Provider.
1.5 "Clearinghouse Services" means those services to be performed by
the Clearinghouse Provider pursuant to Article 4 and Article 5 hereof.
1.6 "Company" has the meaning set forth in the preamble to this
Agreement.
1.7 "Company Affiliates" means NPI and any and all other entities whose
equity or corresponding unit of ownership interest is fifty percent or more
beneficially owned (within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder)
by NPI, directly or indirectly.
1.8 "Company Operating Group" means the Company and, from time to time
and at any time during the term of this Agreement, including renewal term(s),
any and all entities constituting Company Affiliates who operate or are involved
in the operation of an ESMR Network in any portion of the Company Territory.
1.9 "Company Optional Services" means any wireless communications
services (i) that do not constitute Required Services; (ii) that are implemented
by the Company Operating Group anywhere in the Company Territory after the date
of this Agreement and that will be available to certain Subscribers of the
Company Operating Group, Designated Users and Authorized Roamers roaming in the
Company Territory; and (iii) that if implemented by the NDS, also will be
available to certain Subscribers of the NDS, Designated Users and Authorized
Roamers roaming in the NDS Territory; in any such case, subject to such persons
having the proper Subscriber equipment to utilize such services.
3
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1.10 "Company Territory" means the "Territory" (as such term is defined
in the JV Agreement), as such "Territory" may exist from time to time and at any
time under the JV Agreement during the term thereof, including any renewal
term(s).
1.11 "Cross Network Calls" has the meaning set forth in Section 4.5.
1.12 "Customer Satisfaction Level" means: (a) with respect to the
Company: the level of customer satisfaction, determined on the basis of the
annual SCI score of the Company Operating Group, expressed as a percentage, and
(b) with respect to NWIP: the level of customer satisfaction, determined on the
basis of the annual SCI score of the NDS, expressed as a percentage; in each
case, as measured by the appropriate Marketing Services Vendor pursuant to
Article 7.3 of the JV Agreement.
1.13 "Designated User" means a person, who is a customer or a
Subscriber of a Third-Party Carrier with whom the NDS or, subject to Section
2.4(b), the Company Operating Group, has entered into a roaming agreement and
who, (a) if identified as such by any of the NDS, is entitled to be provided
wireless services as an Authorized Roamer on the ESMR Network or any portion
thereof operated by the NDS and, (b) if identified as such by any member of the
Company Operating Group, is entitled to be provided wireless services as an
Authorized Roamer on the ESMR Network or any portion thereof operated by the
Company Operating Group, provided, that a person shall be identified as a
"Designated User" only by having the sponsoring wireless services provider
(i.e., any of the NDS or any member of the Company Operating Group, as the case
may be), as a Home Service Provider, entering such person's relevant identifying
information (including, without limitation, such person's subscriber unit
identifier, designation of eligibility for one or more Roaming Services and
current account status) in the HLR maintained by or for such Home Service
Provider or Third-Party Carrier.
1.14 "Direct Connect" means a two-way dispatch radio service provided
by the NDS and the Company Operating Group through their respective ESMR
Networks.
1.15 "Direct Connect Service Revenue" means that portion of Service
Revenue generated on a per minute basis by Direct Connect usage, plus the
appropriate amount of Service Revenue not derived on a per-minute basis and
allocable to Direct Connect usage, as calculated pursuant to Section 4.1(b).
1.16 "ESMR Network" has the meaning set forth in the JV Agreement.
1.17 "HLR" means the "home location register," that is, the databases
of Subscriber information (and comparable information concerning relevant
Designated Users) maintained by or for each Home Service Provider for the
purpose of performing RV and processing Inquiries by Remote Service Providers
regarding the identity, eligibility and status of potential Roamers.
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1.18 "Home Region" means the territory in the United States in which
any Home Service Provider provides wireless communications services to its
Subscribers, Authorized Roamers and others.
1.19 "Home Service Provider" means the person with whom a Subscriber
subscribes for wireless communications services, provided, that the Home Service
Provider of any Designated User shall be deemed to be (i) the NDS, if any member
of the NDS has identified the Designated User as such, or (ii) the Company
Operating Group, if any member of the Company Operating Group has identified the
Designated User as such.
1.20 "iDEN" has the meaning set forth in the JV Agreement.
1.21 "Inquiry" means any RV and related inquiry performed by the
relevant Remote Service Provider of an HLR maintained by or for the relevant
Home Service Provider, concerning a potential Roamer seeking to use Roaming
Services as an Authorized Roamer on such Remote Service Provider's ESMR Network;
provided, that each such Inquiry occurs immediately prior to the time that any
potential Roamer who is the subject of such Inquiry first uses Roaming Services
as an Authorized Roamer on such Remote Service Provider's ESMR Network and,
thereafter, a new Inquiry is conducted with respect to such Roamer on each
subsequent registration by such Roamer's Subscriber unit, with the Remote
Service Provider's ESMR Network, following any deregistration event (whether due
to a power-down of such unit, a departure from the service area or other cause).
1.22 "Interconnect Service Revenue" means that portion of Service
Revenue generated on a per minute basis by interconnect usage, plus the
appropriate amount of Service Revenue not derived on a per minute basis and
allocable to interconnect usage, as calculated pursuant to Section 4.1(b).
1.23 "JV Agreement" means the Joint Venture Agreement, of even date
herewith, by and among NWIP, NPI and the Company.
1.24 "Marketing Services Vendor" has the meaning set forth in the JV
Agreement.
1.25 "Motorola" has the meaning set forth in the JV Agreement.
1.26 "NDS" has the meaning set forth in the JV Agreement.
1.27 "NDS Optional Services" means any wireless communications services
(i) that do not constitute Required Services; (ii) that are implemented by the
NDS anywhere in the NDS Territory after the date of this Agreement and that will
be available to certain Subscribers of the NDS, Designated Users and Authorized
Roamers roaming in the NDS Territory; and (iii) that if implemented by the
Company Operating Group, also will be available to certain Subscribers of the
Company Operating Group, Designated Users and
5
<PAGE>
Authorized Roamers roaming in the Company Territory; in any such case, subject
to such persons having the proper Subscriber equipment to utilize such services.
1.28 "NDS Territory" means all areas within the United States that are
outside of the Company Territory.
1.29 "Nextel" means Nextel Communications, Inc., a Delaware
corporation.
1.30 "Non-U.S. Third-Party Carrier" has the meaning set forth in
Section 2.4(c).
1.31 "NPI" means Nextel Partners, Inc., a Delaware corporation, and the
sole stockholder of the Company.
1.32 "NWIP" has the meaning set forth in the preamble to this
Agreement.
1.33 "Optional Services" means either or both the NDS Optional Services
or the Company Optional Services, as the context requires.
1.34 "Pricing Structure" means the pricing structure set forth on
Exhibit 9.1 to the JV Agreement, as Exhibit 9.1 may be amended from time to
time.
1.35 "Remote Service Provider" means any person providing Roaming
Services in such person's Home Region.
1.36 "Required Services" means those wireless communications services
set forth on Exhibit 6.1 to the JV Agreement, as such Exhibit 6.1 may be amended
from time to time.
1.37 "Roamer" means a Subscriber or Designated User seeking Roaming
Services from a Remote Service Provider.
1.38 "Roamer Verification" or "RV" means the system and process used by
the NDS and to be used by or performed for the Company Operating Group when any
of them are acting as Remote Service Providers, to determine, among other
things, if Roamers seeking Roaming Services from them are in good standing with
their Home Service Providers and are otherwise entitled to receive Roaming
Services as Authorized Roamers, and, if so, those Roaming Services such
Authorized Roamers are entitled to receive (if such services are supported by
the applicable Remote Service Provider).
1.39 "Roaming Contacts" means those persons appointed by NWIP and the
Company under Section 10.1.
1.40 "Roaming Services" means such combination of Required Services and
Optional Services as any Authorized Roamer may from time to time be entitled to
receive from a Remote Service Provider hereunder, which combination of Required
Services and
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Optional Services may vary as a result of, without limitation, the market in
which an Authorized Roamer is located or the Subscriber equipment being used by
such Authorized Roamer.
1.41 "Service Revenue" means all revenue derived from activation,
access, usage, features and toll charges (including long distance toll charges)
and from credits, adjustments, promotions, and subsidies. "Service Revenue" does
not include revenue derived from equipment or product sales and shall not be
adjusted for equipment or product (as opposed to service) credits, adjustments,
promotions or subsidies. By mutual, written agreement, NWIP and the Company may,
from time to time and at any time during the term hereof, including any renewal
terms, revise the components and definition of Service Revenue.
1.42 "Settlement Provider" means any entity or entities designated by
NWIP, in NWIP's sole discretion, from time to time and at any time during the
term of this Agreement, including any renewal term(s), to provide Settlement
Services, which entity or entities may be, but are not required to be, the
Clearinghouse Provider.
1.43 "Settlement Services" means those services to be provided as part
of or in conjunction with the Clearinghouse Services, including, but not limited
to, settlement of accounts between the parties on a monthly basis, netting of
obligations between the parties and transferring of funds for the payment of
roaming revenues from one party to the other.
1.44 "Subscriber" means a revenue generating or non-revenue generating
customer of digital wireless communications services.
1.45 "Third-Party Carrier" has the meaning set forth in Section 2.4(a).
1.46 "VPN" means a virtual private network solution, which provides
certain corporate customers of the NDS and the Company Operating Group, whose
virtual private networks may be located in either the NDS Territory or the
Company Territory, both private system control and access to the respective ESMR
Networks of the NDS and the Company Operating Group.
2. PROVISION OF ROAMING SERVICES
2.1 Required Services. (a) The Company, through the Company Operating
Group, will make available to any Authorized Roamer who requests Roaming
Services in the Company Territory, each and every Required Service, in each case
at service and access levels in accordance with the terms and conditions of this
Agreement and the JV Agreement and any laws, regulations and court orders that
may be applicable to the provision thereof.
(b) NWIP, through the NDS, will make available to any Authorized Roamer
who requests Roaming Services in the NDS Territory, each and every Required
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Service, in each case at service and access levels in accordance with the terms
and conditions of this Agreement and the JV Agreement and any laws, regulations
and court orders that may be applicable to the provision thereof.
2.2 Optional Services. (a) The parties contemplate that, from time to
time and at any time during the term of this Agreement, including any renewal
terms, and in the sole discretion of NWIP, the NDS may choose to implement
certain NDS Optional Services in all or a portion of the NDS Territory and make
such NDS Optional Services available to certain Subscribers of the NDS, certain
Designated Users and certain Authorized Roamers roaming in the NDS Territory,
which group of Authorized Roamers may include certain Authorized Roamers who may
be Subscribers or Designated Users of the Company Operating Group. The Company
will have no obligation to (or to cause any members of the Company Operating
Group to) implement any NDS Optional Services in the Company Territory that are
implemented by the NDS, but may elect to do so on written notice to NWIP. Upon
receipt of any notice from the Company that the Company, through the Company
Operating Group, desires to implement any NDS Optional Service in all or a
portion of the Company Territory, NWIP will use its commercially reasonable
efforts in good faith to coordinate with the NDS, the Company and the other
applicable members of the Company Operating Group to exchange information and
data necessary to allow the Company to implement such NDS Optional Service as
soon as reasonably practicable, provided, however, that all costs and expenses
of or relating to the implementation of such NDS Optional Services that are
incurred by the Company Operating Group will be for the exclusive account of and
will be borne solely by the Company.
(b) The parties contemplate that, from time to time and at any time
during the term of this Agreement, including any renewal terms, and in the sole
discretion of the Company, the Company Operating Group may choose to implement
certain Company Optional Services in all or a portion of the Company Territory
and make such Company Optional Services available to certain Subscribers of the
Company Operating Group, certain Designated Users and certain Authorized Roamers
roaming in the Company Territory, which group of Authorized Roamers may include
certain Authorized Roamers who may be Subscribers or Designated Users of the
NDS. NWIP will have no obligation to (or to cause any of the NDS to) implement
any Company Optional Services in the NDS Territory that are implemented by the
Company Operating Group, but may elect to do so on written notice to the
Company. Upon receipt of any notice from NWIP that NWIP, through the NDS,
desires to implement any Company Optional Service in all or a portion of the NDS
Territory, the Company will use its commercially reasonable efforts in good
faith to coordinate with the Company Operating Group, NWIP and the applicable
members of the NDS to exchange information and data necessary to allow the NDS
to implement such Company Optional Service as soon as reasonably practicable,
provided, however, that all costs and expenses of or relating to the
implementation of such Company Optional Services that are incurred by NWIP or
the NDS will be for the exclusive account of and will be borne solely by NWIP.
8
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(c) Upon the mutual implementation of any Optional Services by both
NWIP, through the NDS, and the Company, through the Company Operating Group,
NWIP and Company, through the NDS and the Company Operating Group, respectively,
will make available to certain Authorized Roamers who request Roaming Services
in those areas of their respective Home Regions where such Optional Services
have been implemented, such Optional Services as either the Company or NWIP, in
the sole discretion of each, elects to make available. Where the Company or NWIP
elects to provide any Optional Services, each such Optional Service will be
provided at service and access levels in accordance with the terms and
conditions of this Agreement and the JV Agreement and any laws, regulations and
court orders that may be applicable to the provision thereof.
2.3 Extent of Obligations. Notwithstanding anything herein to the
contrary, neither the Company nor NWIP will be obligated to provide Roaming
Services in any portion of, in the Company's case, the Company Territory, or, in
NWIP's case, the NDS Territory, where build-out sufficient to support the
operation of the ESMR Networks being constructed by the Company Operating Group
and the NDS, respectively, has not been completed. Nothing in this Section 2.3
shall be interpreted or operate to affect any of the Company's or NPI's
obligations regarding the build-out of the Company Territory as set forth in the
JV Agreement.
2.4 Additional Roaming Contracts. (a) The parties contemplate that
Nextel or certain of the NDS will from time to time enter into roaming
arrangements with third-party wireless communications service providers (the
"Third-Party Carriers") that will permit certain Subscribers of the NDS to roam
in the markets served by the Third-Party Carriers. The parties further
contemplate that the Company or certain members of the Company Operating Group
will enter into similar roaming arrangements, for the benefit of the Subscribers
of the Company Operating Group, with such Third-Party Carriers.
(b) Any proposed agreement between any Third-Party Carrier and the
Company or any member of the Company Operating Group will require NWIP's prior
approval, which approval will not be unreasonably withheld.
(c) If the Company cannot obtain a roaming arrangement with any Third-
Party Carrier whose principal operations are located outside of the U.S. (each,
a "Non-U.S. Third-Party Carrier") with whom Nextel or the NDS have entered into
a roaming agreement because, as a result of the technology then used by the
Company and the NDS, such Non-U.S. Third-Party Carrier is unable to
differentiate between Subscribers of the NDS and Subscribers of the Company
Operating Group, then NWIP will cooperate with the Non-U.S. Third-Party Carrier,
the Company and Nextel or the appropriate NDS to implement procedures that will
permit certain Subscribers of the Company Operating Group to roam in the markets
served by such Non-U.S. Third-Party Carrier under the relevant agreement between
Nextel or the appropriate NDS; provided, that the implementation of such
procedures may be conditioned upon such Non-U.S. Third-Party Carrier's agreement
to assert claims against, and seek
9
<PAGE>
recourse from, only the Company and/or members of the Company Operating Group
arising out of any roaming activities or services provided by such Non-U.S.
Third-Party Carrier to Subscribers of the Company Operating Group, and upon the
Company's agreement that it and each member of the Company Operating Group will
assert claims against, and seek recourse from, only the relevant Non-U.S.
Third-Party Carrier arising out of any failure to provide roaming services or
any related defects or difficulties arising out of any Subscribers of the
Company Operating Group accessing or attempting to access wireless and/or other
telecommunications services offered or provided by such Non-U.S. Third-Party
Carrier. Neither NWIP nor Nextel or any of the NDS will have any liability
whatsoever to the Company or any member of the Company Operating Group in the
event that NWIP and Nextel or the appropriate NDS are unable to make suitable
arrangements to allow Subscribers of the Company Operating Group to roam in the
markets served by any Non-U.S. Carrier under this Section 2.4(c). The Company
accepts and acknowledges that the roaming service and other charges associated
with any such roaming arrangements with Non-U.S. Third-Party Carriers may be
substantially higher than those otherwise set forth herein and that the Company
will be solely responsible for all such charges, regardless of whether the
Company or the Company Operating Group actually collect any amounts due with
respect to roaming by the Subscribers of the Company Operating Group through any
arrangements provided for under this Section 2.4(c).
3. VERIFICATION AND FRAUD PROTECTION
3.1 HLRs; Subscriber Status Verification. (a) NWIP, through the NDS,
will maintain HLR capacity sufficient to service each market within the NDS
Territory and its HLRs will provide appropriate data regarding (i) Subscribers
and Designated Users of the NDS, and (ii) until such time, if ever, as the
Company Operating Group obtains sufficient HLR capacity, Subscribers and
Designated Users of the Company Operating Group, in each case, for use in
performing RV and related functions. The parties acknowledge that neither NWIP
nor the NDS are or will be responsible for supplying, obtaining, verifying or
otherwise collecting any data regarding the Subscribers and Designated Users of
the Company Operating Group necessary to populate their HLRs. The Company will
be solely responsible for doing so and for timely transmitting such data in
writing (or in appropriate form, such as confirmed electronic data transmission,
computer diskette or machine-readable tape, in any such case, in form accessible
to the NDS) to NWIP pursuant to the procedures generally applicable to and used
by the NDS in performing HLR updates and management, as such procedures may from
time to time be in effect. NWIP and the NDS will not be liable to any member of
the Company Operating Group, Subscribers or Designated Users of the Company
Operating Group, or any third party for inaccuracies reflected in the
information regarding Subscribers or Designated Users of the Company Operating
Group contained in or omitted from the HLRs maintained by the NDS to the extent
that such inaccuracies (x) are caused by incorrect data transmitted by the
Company or any other member of the Company Operating Group, (y) are the result
of any system error (as opposed to human error caused by NWIP), or (z) result
from any act or omission attributable to any member of the Company Operating
Group or to any third party.
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<PAGE>
(b) NWIP will provide notice to the Company of any changes subsequent
to the date of this Agreement to those procedures generally applicable to and
used by the NDS in performing HLR updates and management, at substantially the
same time and in substantially the same manner as notice of such changes is
provided to the NDS.
3.2 Fraud Control. (a) NWIP will cause the NDS to, and when they
develop, maintain or otherwise acquire HLRs, the Company will cause the Company
Operating Group to, configure their respective HLRs to have the capacity to
perform Inquiries of all of their respective Subscribers and Designated Users.
NWIP and the Company will cooperate in good faith to control fraudulent Roamer
usage and to attempt to solve any fraud problems that might arise during the
term, including any renewal term(s), of this Agreement. The parties promptly
will notify each other should fraudulent Roamer usage become apparent on the
respective ESMR Networks of the Company Operating Group and/or the NDS.
(b) The parties will bear the cost of fraudulent calls or calls made by
Roamers who are not Authorized Roamers in each other's territory as follows:
(i) The appropriate Home Service Provider will pay all transfer
charges as calculated in accordance with Section 4.1 for calls
completed by a Remote Service Provider after the Remote Service
Provider has made timely Inquiries of the HLR(s) maintained by
or for the Home Service Provider and such HLR(s) has indicated
that the Roamer should be treated as an Authorized Roamer, even
if it is subsequently determined that the Roamer was not in good
standing with its Home Service Provider, had sought Roaming
Services fraudulently, or otherwise was not entitled to use
Roaming Services. All calls covered by this Section 3.2(b)(i)
will be deemed for settlement purposes to have been made by
Authorized Roamers.
(ii) A Home Service Provider will have no obligation to make any
transfer payments for any calls completed by a Remote Service
Provider where the Remote Service Provider failed to make timely
Inquires of the HLR(s) maintained by or for the Home Service
Provider or performed the Inquiries improperly and it was
subsequently determined that any Roamers making such calls were
not in good standing with their respective Home Service
Providers, had sought Roaming Services fraudulently, or
otherwise were not entitled to use Roaming Services. Similarly,
a Home Service Provider will have no obligation to make any
transfer payments for any calls completed by a Remote Service
Provider where the Remote Services Provider ignored the Home
Service Provider's indication that a Roamer was not an
Authorized Roamer. All calls covered by this Section 3.2(b)(ii)
will be treated for settlement purposes not to have been made.
3.3 Indemnification for Fraudulent Charges. (a) NWIP will indemnify the
Company, NPI, the other members of the Company Operating Group and all other
controlled
11
<PAGE>
subsidiaries of the Company now or hereafter existing, together with all of
their respective officers, directors, employees, or agents (collectively, the
"Company Indemnified Parties"), against, and hold them harmless from, any and
all third-party claims, suits, demands, losses and expenses, including
attorneys' fees and disbursements, which may result in any way whatsoever from
the denial of Roaming Service by any of the Company Indemnified Parties to any
Subscriber or Designated User of the NDS that has been identified by the
appropriate HLR as not being an Authorized Roamer or in good standing with its
Home Service Provider or otherwise not to be entitled to receive Roaming
Services hereunder.
(b) The Company will indemnify NWIP, the NDS, Nextel and all other
controlled subsidiaries of Nextel now or hereafter existing, together with all
of their respective officers, directors, employees, or agents (collectively, the
"Nextel Indemnified Parties"), against, and hold them harmless from, any and all
third-party claims, suits, demands, losses and expenses, including attorneys'
fees and disbursements, which may result in any way whatsoever from the denial
of Roaming Service by any of the Nextel Indemnified Parties to any Subscriber or
Designated User of the Company or the Company Operating Group that has been
identified by the appropriate HLR as not being an Authorized Roamer or in good
standing with its Home Service Provider or otherwise not to be entitled to
receive Roaming Services hereunder.
3.4 NPA/NXX and IMSI Blocks. NWIP and the Company have exchanged
information identifying the NPA/NXX and IMSI blocks assigned to the NDS and the
Company Operating Group with respect to their ESMR Networks in the NDS Territory
and the Company Territory, respectively, as well as detailing the valid NPA/NXX
and IMSI combinations used by the respective Subscribers and Designated Users of
the NDS and the Company Operating Group as of the date hereof. Additions,
deletions or changes to such NPA/NXX and IMSI combinations will be delivered by
the Company to NWIP's Roaming Contact and to NWIP by the Company's Roaming
Contact promptly and the Company will itself or will cause other members of the
Company Operating Group to, and NWIP will cause the NDS to, update all
appropriate HLRs to reflect any such additions, deletions or changes at least as
promptly as required by the HLR update and management procedures generally
applicable to the NDS, as such procedures may be in effect from time to time and
at any time during the term of this Agreement, including any renewal term(s).
NWIP will provide to the Company notice of any changes to such procedures at
substantially the same time and in substantially the same manner as the NDS are
provided notice of such changes.
4. BILLING, COLLECTIONS, AND PAYMENT
4.1 Billing. The formula for the billing of Required Services provided
pursuant to this Agreement is as follows:
(a) The Company will charge Subscribers of the Company Operating Group
for operating as Roamers in the NDS Territory in accordance with the Pricing
Structure and will charge its Designated Users operating as Roamers in the NDS
Territory in accordance with the relevant terms and conditions of the applicable
agreement in place between any member of the Company Operating Group and such
Designated User and/or the wireless services provider of
12
<PAGE>
which each such Designated User is a customer in its home market. NWIP will
charge Subscribers of the NDS for operating as Roamers in the Company Territory
in accordance with the Pricing Structure and will charge its Designated Users
operating as Roamers in the Company Territory in accordance with the relevant
terms and conditions of the applicable agreement in place between any NDS and
such Designated User and/or the wireless services provider of which each such
Designated User is a customer in its home market. Aggregate usage by
Subscribers and Designated Users of both the Company Operating Group and of
the NDS in the other's Home Region will be compiled on a monthly basis by the
Clearinghouse Provider. NWIP and the Company will pay each other for Billable
Minutes generated by the respective Subscribers and Designated Users of the
Company Operating Group and the NDS operating as Authorized Roamers based on
the interconnect minutes and Direct Connect minutes used by each Authorized
Roamer during the prior month, multiplied by the per minute transfer rates
determined not more frequently than the closing date of each fiscal quarter of
Nextel, as follows:
(i) For Direct Connect Usage: the Applicable Percentage of (i) total
aggregate Direct Connect Service Revenue of both the Company
Operating Group and the NDS during the preceding 12-month
period; divided by (ii) total aggregate Direct Connect Billable
Minutes of Subscribers and Designated Users of both the Company
Operating Group and the NDS during the preceding 12-month
period.
(ii) For Interconnect Usage: the Applicable Percentage of (i) total
aggregate Interconnect Service Revenue of both the Company
Operating Group and the NDS during the preceding 12-month
period; divided by (ii) total aggregate interconnect Billable
Minutes of Subscribers and Designated Users of both the Company
Operating Group and the NDS during the preceding 12-month
period.
(b) For purposes of determining Direct Connect Service Revenue and
Interconnect Service Revenue for the calculations set forth in Section 4.1(a),
any Service Revenue not derived on a per minute basis will be allocated between
Direct Connect Service Revenue and Interconnect Service Revenue based on the
total aggregate Direct Connect Billable Minutes and interconnect Billable
Minutes of Subscribers and Designated Users of both the Company Operating Group
and the NDS during the preceding 12-month period as a percentage of total
Billable Minutes of Subscribers and Designated Users of both the Company
Operating Group and the NDS during the preceding 12-month period, provided,
however, that for purposes of this calculation long distance toll charges will
be fully allocated to Interconnect Service Revenue.
(c) The respective Applicable Percentages of the Company and the NDS
will be subject to change based on the results of customer satisfaction
interviews of Subscribers of both the NDS and the Company Operating Group.
Adjustments to reflect the results of such customer satisfaction interviewing
will occur annually on a calendar-year basis and will be calculated as follows:
(i) for every five full percentage points by which the Customer Satisfaction
Level of the Company Operating Group exceeds the Customer Satisfaction Level of
the NDS, in each case as determined pursuant to the provisions of Article 7 of
the JV Agreement, one full
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<PAGE>
percentage point will be added to the then current Applicable Percentage of
NWIP, and deducted from the then current Applicable Percentage of the Company;
and (ii) for every five full percentage points by which the Customer
Satisfaction Level of the Company Operating Group falls below the Customer
Satisfaction Level of the NDS, one full percentage point will be deducted from
the then current Applicable Percentage of NWIP and added to the then current
Applicable Percentage of the Company. Both the Company and NWIP will be
responsible for producing the information necessary to make the allocation
provided for in this Section 4.1, based on the relevant Customer Satisfaction
Level measurements compiled as provided in Article 7 of the JV Agreement.
(d) In no event will either the Applicable Percentage of NWIP or the
Applicable Percentage of the Company be greater than 100%, nor will the per
minute transfer rate be less than either the Company Operating Group's or the
NDS's respective costs of providing Roaming Services.
(e) Each of NWIP (through the NDS) and the Company (through the Company
Operating Group) will be responsible for the billing and collection of the
accounts of their Subscribers and Designated Users for the services provided
pursuant to this Agreement. The failure of the NDS or the Company Operating
Group to collect payments due from such Subscribers or Designated Users will in
no way affect the obligations of NWIP and the Company to pay to the other any
amounts due under this Agreement.
4.2 Additional Roaming Rates. (a) For any and all Optional Services
that the NDS and the Company Operating Group mutually agree to provide in the
respective Home Regions of the NDS and the Company Operating Group, and which
(in accordance with Section 2.2(c)) are required to be made available to
Authorized Roamers, the parties will establish appropriate transfer rates to be
used in connection with the settlement of accounts between the Company and NWIP,
provided, however, that each of them shall be entitled to exercise sole
discretion in establishing retail charges for such Optional Services that will
be charged to the Subscribers of the Company Operating Group and the NDS for
usage within their respective Home Regions.
(b) For any and all NDS Optional Services not implemented by the
Company Operating Group (i.e., for which there is no comparable Company Optional
Service), but which the NDS elect to make available for use by certain
Subscribers and Designated Users of the Company roaming in the NDS Territory,
the transfer rates applicable to such NDS Optional Services will be established
by NWIP, in NWIP's sole discretion, from time to time and at any time during the
term of this Agreement, including any renewal term(s), provided, however, that
the Company shall, subject to Article 9 of the JV Agreement, be entitled to
exercise its sole discretion in establishing retail rates to be charged to
Subscribers and Designated Users of the Company Operating Group for the use of
such NDS Optional Services.
(c) With respect to any Company Optional Services not implemented by
the NDS (i.e., for which there is no comparable NDS Optional Service), but which
the Company Operating Group elects to make available for use by certain
Subscribers and Designated Users of
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<PAGE>
the NDS roaming in the Company Territory, the transfer rates applicable to such
Company Optional Services will be established by the Company, in the Company's
sole discretion, from time to time and at any time during the term of this
Agreement, including any renewal term(s), provided, however, that NWIP shall be
entitled to exercise its sole discretion in establishing retail rates to be
charged to Subscribers and Designated Users of the NDS for the use of such
Company Optional Services.
(d) For any and all Required Services implemented after the date of
this Agreement, the parties will establish appropriate transfer rates to be used
in connection with the settlement of accounts between the Company and NWIP,
provided, however, that each of them shall, subject to Article 9 of the JV
Agreement, be entitled to exercise sole discretion in establishing retail
charges for such Required Services that will be charged to the Subscribers of
the Company Operating Group and the NDS for usage within their respective Home
Regions.
4.3 Billing of Cross Region Calls. Calls initiated on one ESMR Network,
but continuing and/or terminating on one or more other ESMR Networks ("Cross
Network Calls") will be handled as follow:
(a) Cross Network Calls originated by a Subscriber or Designated User
on its Home Service Provider's ESMR Network: for billing and settlement
purposes, such calls will not be treated as roaming calls, but will be treated
as if they were completed in full on the originating Home Service Provider's
ESMR Network; and
(b) Cross Network Calls originated by a Subscriber or Designated User
as a Roamer on a Remote Service Provider's ESMR Network: for billing and
settlement purposes, such calls will be treated as if they were completed in
full on the originating Remote Service Provider's ESMR Network.
4.4 Billing Statements. The parties' agreement concerning the
procedures governing billing and payment for the services provided and all other
charges and amounts assessed hereunder is set forth in Section 13.6 of the JV
Agreement.
5. CLEARINGHOUSE AND SETTLEMENT
5.1 Clearinghouse Provider Designation. The Clearinghouse Provider will
process all records relating to the provision of Roaming Services to Roamers
pursuant to this Agreement and perform related Clearinghouse Services. NWIP may,
in its sole discretion, from time to time and at any time during the term of
this Agreement, including any renewal term(s), remove and replace the
Clearinghouse Provider or undertake, by itself or through any one or more
affiliates, to perform Clearinghouse Services.
5.2 Settlement Provider Designation. The Settlement Provider will
perform Settlement Services, including the settlement of all accounts relating
to Roaming Services between the parties on a monthly basis, and will have the
authority to "net" the obligations of the parties on a monthly basis. NWIP may,
in its sole discretion, from time to time and at any time
15
<PAGE>
during the term of this Agreement, including any renewal term(s), remove and
replace the Settlement Provider or undertake, by itself or through any one or
more affiliates, to perform Settlement Services.
5.3 Clearinghouse and Settlement Data. All data required to enable the
Clearinghouse Provider or the Settlement Provider to process Roaming Services
records will be provided by each of NWIP and the Company to the Clearinghouse
Provider or the Settlement Provider whenever reasonably requested and in the
format required by the entity then designated as the Clearinghouse Provider or
Settlement Provider.
5.4 Settlement and Clearinghouse Systems; Costs. (a) NWIP and the
Company have agreed to jointly develop the settlement and clearinghouse systems
contemplated herein. Each party will be responsible for fifty percent (50%) of
the costs associated with the development and implementation of the basic
settlement and clearinghouse systems needed to perform the Settlement Services
and Clearinghouse Services described herein. The incremental costs of any
additional functionality desired in the settlement and clearinghouse systems
(i.e., functionality that is not necessary to the performance of the Settlement
Services or Clearinghouse Services) will be borne by and be the sole
responsibility of the party requesting such additional functionality, unless
such additional functionality is requested jointly, in which case any
incremental costs thereof will be shared equally by NWIP and the Company.
(b) Each of the Company and NWIP will pay their own costs with respect
to Clearinghouse Services and Settlement Services. Each of the Company and NWIP
will be invoiced directly by the Clearinghouse Provider and the Settlement
Provider during the time period for which such services are provided. All costs
billed to the parties hereto for Clearinghouse Services and Settlement Services
will be proportionately based on the volume of Roaming Services traffic
hereunder that is attributable to each of them individually during the period
covered by such invoice. Not more frequently than annually, each party may, upon
reasonable advance notice to the Clearinghouse Provider or the Settlement
Provider, and at reasonable times, review any records in the possession of
either the Clearinghouse Provider or the Settlement Provider relating to, as
appropriate, the Clearinghouse Services or Settlement Services performed by them
hereunder.
6. EXCLUSIVITY
6.1 Exclusivity. This Agreement is exclusive with respect to out-going
roaming traffic generated by Subscribers of the Company Operating Group and the
NDS, respectively. NWIP will send all of the roaming traffic generated by
Subscribers of the NDS in the Company Territory to the Company Operating Group,
with the exception of any traffic directed to any VPN located within the Company
Territory. The Company will send all of the roaming traffic generated by
Subscribers of the Company Operating Group in the NDS Territory to the NDS, with
the exception of any traffic directed to any VPN located within the NDS
Territory. Nothing herein shall be construed or operate to prohibit the Company
Operating Group or the NDS from providing Roaming Service to Roamers who are
Subscribers of other wireless communications service providers, including any
other operators of ESMR Networks, high site ESMR service
16
<PAGE>
providers or SMR service providers operating in their respective Home Regions
and nothing herein will restrict the NDS or, subject to Section 2.4, the Company
Operating Group, from providing Roaming Services to Roamers who are Subscribers
of any other wireless communications networks, including, without limitation,
ESMR Networks operated by Affiliates of Nextel outside the United States, or
wireless communication networks operated by any Third-Party Carrier within the
Company Territory or the NDS Territory.
7. BREACH
7.1 Breach; Dispute Resolution. Any breach or alleged breach of this
Agreement or dispute arising hereunder will be resolved by the parties pursuant
to the procedures set forth in Article 12 of the JV Agreement and, in cases
involving a billing dispute, Section 13.6 of the JV Agreement, which are
incorporated herein by this reference.
8. TERM AND TERMINATION
8.1 Term. The initial term of this Agreement will commence on the date
hereof and will continue for ten years, unless extended for an additional period
of up to two and one-half years, as described in Section 4.03 of the
Shareholders' Agreement. Following the initial term, this Agreement may be
extended for up to four additional ten-year renewal terms, which extensions will
occur automatically upon any extension of the JV Agreement pursuant to its
terms, unless the Company provides notice to NWIP of its intent not to renew
this Agreement not less than 60 days prior to the scheduled end of the initial
term or any renewal term.
8.2 Termination. At any time upon or following the expiration or
earlier termination of the JV Agreement, either party may terminate this
Agreement upon notice to the other. Notwithstanding termination, this Agreement
will remain in effect and fully enforceable in accordance with its terms (solely
for purposes of addressing rights existing and obligations incurred prior to the
effective date of termination as set forth in the termination notice) until all
amounts due to either party hereunder, at or prior to the effective date of
termination specified in the notice of termination, are paid in full in
accordance with the terms hereof. No such termination will operate to relieve or
release either party from any consequences of any breach by such party of any
provisions of this Agreement, and the indemnification obligations of each of the
parties pursuant to Section 3.3 hereof shall survive any such termination.
9. MISCELLANEOUS
9.1 Excusable Delay/Time Extension. Where performance by either party
to this Agreement is delayed by reason of an Excusable Delay (as defined in the
JV Agreement), the time for performance, and any otherwise applicable time
limit, schedule or deadline, shall be extended for a period of time equal to the
period of Excusable Delay.
9.2 Amendments. This Agreement may be amended only by a writing
executed by the parties.
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9.3 Entire Agreement. This Agreement and the other Transaction
Agreements (as defined in the JV Agreement) set forth the entire understanding
of the parties hereto and thereto with respect to the subject matter hereof and
thereof, and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties, including but not limited to the Memorandum of
Agreement, dated as of May 1, 1998, among Wireless Investment Partners, L.L.C.,
NWIP and Nextel, as amended.
9.4 Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and is given: (a) when received if
personally delivered; (b) 12 hours after being sent by telecopy, with confirmed
answerback; or (c) 1 business day after being sent by priority delivery by
established overnight courier, to the parties at their respective addresses set
forth below.
To NWIP: Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Telecopy: (703) 394-3896
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman Kaplan Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Either party by written notice to the other given in accordance with this
Section 9.4 may change the address or the persons to whom notices or copies
thereof are to be directed.
9.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument.
9.6 Waiver. Except as otherwise provided in this Agreement, any party
may waive, in writing, compliance by the other parties thereto (to the extent
such compliance is for the benefit of the party giving such waiver) with any of
the terms, covenants or conditions contained in this Agreement (except as may be
imposed by law). Any waiver by any party of any violation of, breach of, or
default under, any provision of any of this Agreement, by any other party will
not be
<PAGE>
construed as, or constitute, a continuing waiver of such provision, or waiver of
any other violation of, breach of, or default under, any other provision of this
Agreement.
9.7 Third Parties. Nothing expressed or implied in this Agreement is
intended, or may be construed, to confer upon or give any person or entity other
than the parties hereto any rights or remedies hereunder.
9.8 Severability. If any provision of this Agreement or the application
of such provision is invalid, illegal or unenforceable in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
of this Agreement or invalidate or render unenforceable such provision in any
other jurisdiction. The parties will, to the extent lawful and practicable, use
their best reasonable efforts to enter into arrangements to reinstate the
intended benefits of any provision held invalid, illegal or unenforceable.
9.9 Choice of Law. This Agreement shall be governed by New York law,
without regard to choice of law rules that would result in the application of
another state's law.
9.10 Construction.
a. Words used in this Agreement, regardless of the number or gender
specifically used, will be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. The parties hereto have participated equally in the drafting
of this Agreement and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any provision of this
Agreement.
b. The schedules and exhibits attached to this Agreement are
incorporated herein and are part of this Agreement for all purposes. Unless
otherwise stated, any reference in this Agreement to an exhibit, section or
schedule is to an exhibit, section or schedule of this Agreement.
c. The headings in this Agreement are solely for convenience of
reference and are not to be given any effect in the construction or
interpretation of this Agreement.
9.11 Agreement. This Agreement is one of the Collateral Agreements
identified in the JV Agreement. Accordingly, certain provisions of the JV
Agreement by their terms apply to this Agreement, including, without limitation,
Section 2.6, Article 12, and Sections 13.2, and 13.10.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the day and year
first above written.
NEXTEL WIP CORP.
By: /s/ Alan Strauss
---------------------------------
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John Thompson
---------------------------------
Name: John Thompson
Title: Chief Financial Officer and
Treasurer
<PAGE>
SWITCH SHARING AGREEMENT
BY AND BETWEEN
NEXTEL WIP CORP.
AND
NEXTEL PARTNERS OPERATING CORP.
DATED AS OF JANUARY 29, 1999
<PAGE>
Table of Contents
Page
RECITALS ............................................................1
ARTICLE 1: DEFINITIONS.................................................1
ARTICLE 2: OWNERSHIP OF FACILITIES & SYSTEMS...........................4
Section 2.1 Ownership of NDS Switches and the NDS System.......4
ARTICLE 3: OPERATION OF NDS SWITCHES; NWIP'S AND THE
COMPANY'S OBLIGATIONS.......................................4
Section 3.1 Services Offered by NWIP; System Compatibility.....4
Section 3.2 Company Operations; System Disruption..............5
Section 3.3 Maintenance of the NDS System and the
NDS Switches.....................................5
Section 3.4 Access to the NDS Switches.........................6
Section 3.5 Interconnection with the NDS Switches .............6
Section 3.6 Leased Lines; Telco Connections....................6
Section 3.7 Alarm Monitoring ..................................7
Section 3.8 Performance Monitoring ............................7
Section 3.9 Roamer Verification................................7
Section 3.10 Service Interruption...............................8
Section 3.11 Company Switches ..................................8
ARTICLE 4: SERVICE CHARGES AND COSTS...................................8
Section 4.1 Direct Connect and Interconnect Charges............8
Section 4.2 Telco Charges .....................................9
Section 4.3 Payment............................................9
Section 4.4 Annual Review; Audit Rights .......................9
ARTICLE 5: TERM AND TERMINATION.......................................10
Section 5.1 Term..............................................10
Section 5.2 Termination ......................................10
ARTICLE 6: BREACH ..........................................................10
Section 6.1 Breach; Dispute Resolution .......................10
ARTICLE 7: MISCELLANEOUS .............................................10
Section 7.1 Excusable Delay/Time Extension....................10
Section 7.2 Amendments........................................10
Section 7.3 Entire Agreement..................................10
Section 7.4 Notices...........................................10
Section 7.5 Counterparts......................................11
Section 7.6 Waiver............................................11
Section 7.7 Third Parties.....................................11
Section 7.8 Severability......................................11
i
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Section 7.9 Choice of Law.....................................12
Section 7.10 Construction......................................12
Section 7.11 Agreement.........................................12
EXHIBIT A: Interconnect and Direct Connect Charges
EXHIBIT B: Point of Demarcation Diagrams
ii
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SWITCH SHARING AGREEMENT
This SWITCH SHARING AGREEMENT (this "Agreement"), dated as of January
29, 1999, is by and between NEXTEL WIP CORP., a Delaware corporation ("NWIP")
and NEXTEL PARTNERS OPERATING CORP., a Delaware corporation (the "Company").
Defined terms are used herein as set forth in Article 1 or in the JV Agreement.
RECITALS:
A. Nextel, through its Subsidiaries, operates an iDEN-based wireless
communications system through which it provides wireless communications services
in various markets throughout the United States. To enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations, and objectives, Nextel, through NWIP, is
entering into a contractual joint venture with NPI and the Company.
B. The agreement of the parties with respect to the formation and
operation of the contractual joint venture is set forth in the JV Agreement and
various Collateral Agreements. This Agreement is a Collateral Agreement.
C. The Company desires to obtain access to certain iDEN-based wireless
communications switching capacity through NWIP and NWIP desires to provide such
iDEN-based wireless communications switching capacity for the Company's use.
AGREEMENT:
In consideration of the mutual promises and covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NWIP and the Company hereby agree as follows:
1. DEFINITIONS
1.1 "Backhaul Facilities" means, with respect to the Company,
facilities for delivering Traffic from the Company's cell sites to the
appropriate Point(s) of Demarcation.
1.2 "Billing Services Provider" means any provider(s) of billing and
customer information systems and services as may be selected by NWIP from time
to time and at any time, in NWIP's sole discretion, during the term of this
Agreement, including renewal term(s). NWIP may designate itself or one or more
of its Affiliates as a Billing Services Provider.
1.3 "Company" has the meaning set forth in the preamble to this
Agreement.
1.4 "Company Switches" has the meaning set forth in Section 3.11.
1.5 "Company System" means all Company Switches, DAP Complexes and all
other equipment, microwave equipment, hardware, software, antennae, transmitting
or receiving equipment, cell site equipment, and ancillary and related equipment
and facilities that the
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Company or NPI's other operating subsidiaries have purchased or leased in order
to construct and operate an ESMR Network in the Company Territory, to deliver
Traffic between and among cell sites and any points of interconnection to the
PSTN in the Company Territory, and to deliver Traffic to and from the cell sites
in the Company Territory to the appropriate Points of Demarcation or any
switches the Company may install subsequent to the date hereof.
1.6 "Company Territory" means the "Territory" (as such term is defined
in the JV Agreement), as such "Territory" may exist from time to time and at any
time under the JV Agreement during the term thereof, including any renewal
term(s).
1.7 "DAP Complex" means a grouping of one or more of DAPs, DAP HLRs,
MPSs or PDs.
1.8 "Direct Connect" means a two-way dispatch radio service provided by
the NDS and the Company through all-digital ESMR Networks.
1.9 "Direct Connect MOU Rate" means the per-minute Direct Connect
charge set forth on Exhibit A, as such charge may be adjusted annually to
reflect changes in the costs on which such Direct Connect charge is based.
1.10 "ESMR Network" has the meaning set forth in Article 1 of the JV
Agreement.
1.11 "FCC" has the meaning set forth in Article 1 of the JV Agreement.
1.12 "iDEN" has the meaning set forth in Article 1 of the JV Agreement.
1.13 "Interconnect MOU Rate" means the per-minute interconnect charge
set forth on Exhibit A, as such charge may be adjusted annually to reflect
changes in the costs on which such interconnect charge is based.
1.14 "JV Agreement" means the Joint Venture Agreement, of even date
herewith, by and among NWIP, NPI and the Company.
1.15 "Leased Lines" means lines that are leased for the purpose of
carrying Traffic.
1.16 "Long Distance Carrier" means the provider(s) of long distance
services as may be selected at any time and from time to time during the term of
this Agreement, including renewal terms by NWIP, in NWIP's sole discretion. NWIP
may designate one or more of its affiliates as a Long Distance Carrier.
1.17 "Management Agreement" has the meaning set forth in Article 1 of
the JV Agreement.
1.18 "MSC" means Mobile Switching Centers in which NDS Switches are
housed.
1.19 "NDS" has the meaning set forth in Article 1 of the JV Agreement.
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1.20 "NDS Switch" or "NDS Switches" means the BSC, DACS, HLR, VMS, SMS,
OMC, Northern Telecom Switch and associated equipment now or hereafter owned,
leased or otherwise used by the NDS, including, without limitation, all related
hardware, software and ancillary and related equipment and facilities collocated
with such switching equipment and required for such switching equipment to
operate in accordance with its specifications. The term "NDS Switch" or "NDS
Switches" does not include (a) any equipment and facilities that are part of the
Company System; (b) any equipment or facilities, whether owned, leased or
otherwise used by NWIP, the NDS or any of their respective affiliates or any
third party over which Traffic is carried between the cell sites in either the
NDS System or the Company System and the NDS Switches; or (c) any equipment or
facilities, whether owned, leased or otherwise used by the NDS, the Company, any
of their respective Affiliates, or any third party, that carry Traffic between
the NDS Switches and the PSTN.
1.21 "NDS System" means all NDS Switches, DAP Complexes and all other
equipment, microwave equipment, hardware, software, antennae, transmitting or
receiving equipment, cell site equipment, and ancillary and related equipment
and facilities that the NDS have purchased or leased or otherwise have rights to
use in order to construct and operate an ESMR Network to deliver Traffic between
and among cell sites and any points of interconnection to the PSTN and to
deliver Traffic to and from cell sites in the NDS Territory to the NDS Switches
and NDS-owned DAP Complexes.
1.22 "NDS Territory" means all areas within the United States that are
outside of the Company Territory.
1.23 "Network Element MOU Rate" has the meaning set forth in Section
4.1(b).
1.24 "Northern Telecom Switch" means any mobile switching computer
currently supplied by Northern Telecom and used in the operations of the NDS or
the Company Operating Group to switch interconnect Traffic, and any other mobile
switching computer used by the NDS or the Company Operating Group in the future
to perform the same or similar functions.
1.25 "NPI" means Nextel Partners, Inc., a Delaware corporation.
1.26 "NWIP" has the meaning provided in the preamble to this Agreement.
1.27 "Point of Demarcation" means each designated location where the
NDS System and the Company System physically interface. When any Traffic crosses
this interface, the parties transfer managerial and administrative
responsibilities for such Traffic. The Point of Demarcation with respect to each
such interface will be determined on a case-by-case basis upon the mutual
agreement of NWIP and the Company. Exhibit B hereto (as such Exhibit B may from
time to time and at any time during the term hereof be modified by agreement of
the parties) sets forth the parties' current agreement with regard to the Points
of Demarcation for the interfaces shown on such Exhibit B.
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1.28 "PSTN" means the public switched telephone network to which either
or both of the relevant portions of the NDS System or Company System are
interconnected.
1.29 "Roaming Agreement" means the Roaming Agreement, of even date
herewith, by and between NWIP and the Company.
1.30 "Service Threatening Disruption" means any degradation of service
on any NDS Switch or in any portion of the NDS System that (i) is caused in
whole or in part by the Company and arises from the interconnection of the
Company's cell sites with any NDS Switch or NDS-owned DAP Complex, and (ii) in
the sole discretion of NWIP, exercised reasonably and in good faith, poses an
immediate threat to the continued operation of any affected NDS Switch or
NDS-owned DAP Complex or any other material portion or component part of the NDS
System.
1.31 "SMS" means short message service, i.e., a service offering
text-based paging applications and related features.
1.32 "Subscriber" means a customer of digital wireless
telecommunications services.
1.33 "Traffic" means any voice, data, or associated signals permitted
by the FCC (or corresponding regulatory authority or governmental or
quasi-governmental body in jurisdictions outside of the United States) to be
carried over an ESMR Network or other digital wireless telecommunications
system.
1.34 "VMS" means voice mail service, i.e., a service by which, among
other things, voice messages can be left for Subscribers of such service and
retrieved remotely by telephone.
1.35 Abbreviations.
(a) "BSC" is the abbreviation for "Base Site Controller."
(b) "DACS" is the abbreviation for "Digital Access and Cross-Connect."
(c) "DAP" is the abbreviation for "Dispatch Application Processor."
(d) "HLR" is the abbreviation for "Home Location Register."
(e) "MPS" is the abbreviation for "Metro Packet Switch."
(f) "OMC" is the abbreviation for "Operations and Maintenance Center."
(g) "PD" is the abbreviation for "Packet Duplicator."
2. OWNERSHIP OF FACILITIES & SYSTEMS
2.1 Ownership of NDS Switches and the NDS System. This Agreement gives
the Company no right, title or interest in or with respect to the NDS System,
the NDS Switches or NDS- owned DAP Complexes and, upon request of NWIP, the
Company will promptly confirm in writing the substance of this Section 2.1 to
and for the benefit of any owner, lessor, trustee or other holder of any part or
component of any of the NDS System, the NDS Switches or other items included
within the NDS System, as well as to and for the benefit of any lender to (i)
Nextel Communications, Inc. or any of its controlled affiliates or (ii) any such
owner, lessor, trustee or other holder.
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3. OPERATION OF NDS SWITCHES; NWIP'S AND THE COMPANY'S OBLIGATIONS
3.1 Services Offered by NWIP; System Compatibility. (a) The NDS
Switches and NDS- owned DAP Complexes will be operated at a performance level
and quality consistent with the NDS national operating standards as in effect at
the relevant time, provided, however, that if such operating standards are not
being achieved with respect to the operations of the NDS, then the NDS Switches
and NDS-owned DAP Complexes may be operated, for the purposes of any services
provided to the Company under this Agreement, at any level that is not less than
the actual operating standard level then being achieved with respect to the
operations of the NDS.
(b) For as long as the Company is entitled to use any of the
NDS Switches and NDS-owned DAP Complexes NWIP will be responsible to provide,
or to cause the NDS to provide, such additional network upgrades as are
necessary to support the Company's forecasted growth in Traffic, provided,
however, that if such forecasts prove to be materially inaccurate and NWIP or
the NDS incur substantial expenses in providing such additional network
upgrades, then NWIP and the Company will agree on reasonable arrangements for
recovery of such expenses.
(c) Notwithstanding anything herein to the contrary, the
Company has no right to cause NWIP (i) to purchase or provide to the Company any
function, feature or improvement relating to the NDS Switches or NDS-owned DAP
Complexes that NWIP, in NWIP's sole discretion, chooses not to install for use
in serving the NDS Territory or (ii) to deploy or operate any NDS Switch or
NDS-owned DAP Complex solely for the purpose of serving the Company Territory.
3.2 Company Operations; System Disruption. In the event that the
interconnection of the Company's cell sites with any NDS Switch or NDS-owned DAP
Complex results in any observable service disruption (including, without
limitation, a measurable reduction of service levels, switch or system
malfunctions or failures, or excessive event alarms) and such disruption is
caused by or arises from acts or omissions of the Company or any of the Company
Operating Group, then the following procedures will apply:
(a) If such disruption is not a Service Threatening
Disruption, then NWIP will notify the Company promptly of such disruption and
the Company will have 24 hours (or such longer period as may be mutually agreed
to by NWIP and the Company) to eliminate the source of such disruption. If the
Company is unable to eliminate the source of disruption within the requisite
time period, then NWIP or the NDS may apply any operating procedures then in
effect and applicable generally to the NDS to eliminate disruptions similar in
nature and the Company will (i) cooperate with such efforts, and (ii) be
responsible for all reasonable out-of-pocket expenses incurred by NWIP or the
NDS in eliminating any such disruptions.
(b) If the disruption is a Service Threatening Disruption,
then NWIP or the NDS may at any time, without prior notice to the Company, but
in all cases in accordance with any operating procedures then in effect and
applicable generally to the NDS, take immediate action to eliminate such Service
Threatening Disruption, provided, however, that in taking any such action NWIP
will (and will cause any relevant NDS to) use their respective best reasonable
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efforts to minimize any disruption to the Company's operations and, without
limiting the generality of the foregoing, if such action involves the
disconnection of any cell sites of the Company from any NDS Switch or NDS-owned
DAP Complex NWIP will cooperate with the Company and will use its best
reasonable efforts to restore service to any affected Company cell sites as soon
as reasonably practicable. The Company will be responsible for all reasonable
out-of-pocket expenses incurred by NWIP or the NDS in resolving any Service
Threatening Disruptions.
3.3 Maintenance of the NDS System and the NDS Switches. NWIP will, at
its sole expense, maintain and repair the NDS System and NDS Switches and
NDS-owned DAP Complexes and all components thereof. Except for the payment of
fees and reimbursements of costs and expenses provided for in this Agreement,
the Company will have no responsibility for the maintenance or repair of any of
the NDS Switches, NDS-owned DAP Complexes or NDS System. If there is any failure
of the Backhaul Facilities between any of the NDS Switches or NDS-owned DAP
Complexes and any cell site in the Company Territory, NWIP will make any
necessary repairs from the applicable Point of Demarcation to the NDS Switch or
DAP Complex and the Company will make any necessary repairs from the applicable
Point of Demarcation to any affected cell sites in the Company Territory.
Promptly upon discovery of any such failure, the party discovering such failure
will notify the other party thereof.
3.4 Access to the NDS Switches. (a) NWIP will provide to the Company,
to the extent feasible, secured electronic access to the NDS Switches and
NDS-owned DAP Complexes for purposes of activating or deactivating telephone
numbers for the Company's Subscribers or, to the extent necessary, for
registration of roamers on the Company System. The Company will not be permitted
direct physical access to any NDS Switch or NDS-owned DAP Complex.
(b) The current procedures to be followed by the Company with
regard to electronic access to the NDS Switches and NDS-owned DAP Complexes
have been established by NWIP and the Company. NWIP will consult with the
Company regarding any future changes to such procedures, but any changes to
such procedures will be determined by NWIP, in NWIP's sole discretion,
provided, however, that any such changes required by NWIP will be comparable to
those being made at the relevant time and applicable generally to the NDS. The
Company will bear all reasonable costs incurred by NWIP to provide the Company
with electronic access to the NDS Switches and NDS-owned DAP Complexes and
security measures to ensure the privacy of the NDS's and the Company's
proprietary Subscriber information, provided, that NWIP will be responsible for
any maintenance costs associated with the provision of electronic access to the
NDS Switches and NDS-owned DAP Complexes from the relevant points of connection
to each affected NDS Switch or NDS-owned DAP Complexes as such points of
connection may be determined by mutual agreement of the Company and NWIP.
3.5 Interconnection with the NDS Switches. The Company is entitled to
integrate its cell sites with the NDS Switches and NDS-owned DAP Complexes
during the term, and any renewal term, of this Agreement. The procedures with
respect to such cell site integration will be substantially the same as the
procedures with respect to the integration of NDS cell sites with the NDS
Switches and NDS-owned DAP Complexes, as in effect from time to time and at any
time,
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and will be addressed in one or more service level agreements to be
cooperatively developed by the parties.
3.6 Leased Lines; Telco Connections. (a) NWIP will provide Leased Lines
from the NDS's MSCs to the relevant Points of Demarcation and from the NDS's
MSCs to the Long Distance Carrier. The Company will be responsible to NWIP for
its reasonable pro rata share of administration charges, including, but not
limited to, accounting, billing and maintenance charges for such Leased Lines.
There will be an additional charge to the Company for each Leased Line from the
NDS's MSCs to the Long Distance Carrier, which charge will be based on usage
that will be calculated proportionately on the basis of the Company's and the
NDS's respective shares of Traffic on each Leased Line in a particular month.
(b) If, as a result of growth in Company-generated Traffic and
demand on any Leased Line, such Leased Line is approaching its maximum capacity,
the Company will be required, at NWIP's request, to transition off of the
relevant Leased Line and, in cooperation with NWIP, acquire its own entrance
facilities to the relevant MSC, at the Company's sole expense.
(c) If the Company experiences operating problems between any
Point of Demarcation and any applicable MSC of the NDS, NWIP may, in its sole
discretion, assist (or cause the NDS to assist) the Company, in troubleshooting
such operating problems if such assistance is requested by the Company. NWIP
will be entitled to reimbursement of all actual, reasonable costs and expenses
incurred by NWIP or the NDS in providing any such assistance.
(d) In the event that the owner of any NDS Switch or NDS-owned
DAP Complexes is the only entity that can enter into contracts for connections
between any NDS Switch and the PSTN in the Company Territory, NWIP will
coordinate with the relevant NDS or third party owner to arrange for such
connections on the Company's behalf.
3.7 Alarm Monitoring. (a) Except as provided below, NWIP will monitor
or arrange for the monitoring of cell site alarms through a system or
arrangement selected by NWIP, in NWIP's sole discretion. The fees for cell site
alarm monitoring for cell sites interconnected with NDS Switches or NDS-owned
DAP Complex are included in the formulas set forth in Exhibit A. If a
service-threatening alarm signal is received that is related to any Company cell
site being monitored by the NDS hereunder, NWIP will notify the Company in
accordance with the procedures applicable with respect to the monitoring of NDS
cell site alarms.
(b) Subject to NWIP's prior approval of the system or
arrangement to be used by the Company, which approval will not be unreasonably
withheld, the Company may assume responsibility for the monitoring of some or
all of its cell site alarms. The Company and NWIP will coordinate to ensure
that there is no unintended redundancy in their alarm monitoring efforts and
that none of the Company's cell sites are left without alarm monitoring
coverage. NWIP's approval will not be required for arrangements made by the
Company for cell site alarm monitoring for cell sites not interconnected with
an NDS Switch or NDS-owned DAP Complex.
3.8 Performance Monitoring. Except as provided below, NWIP will perform
or arrange for the performance of cell site performance monitoring through a
system or arrangement
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selected by NWIP, in NWIP's sole discretion. The fees for cell site performance
monitoring for cell sites interconnected with NDS Switches or NDS-owned DAP
Complexes are included in the formulas set forth in Exhibit A. The Company will
at all times ensure that electronic access to all cell sites interconnected with
any NDS Switch or NDS-owned DAP Complex is available to NWIP or NWIP's designee
for performance monitoring or billing purposes. Subject to NWIP's prior
approval, which approval will not be unreasonably withheld, the Company may also
engage in or arrange for performance monitoring of any of its cell sites
interconnected with any NDS Switch or NDS-owned or DAP Complex.
3.9 Roamer Verification. NWIP will ensure that the NDS Switches are,
and the Company will ensure that the Company Switches are, in each case,
configured and programmed to perform roamer verification for calls placed by
Subscribers of the NDS and Subscribers of the Company and their respective
"Designated Users" (as such term is defined in the Roaming Agreement) and
carried on the NDS System or the Company System, without the necessity of
sending such calls to a third-party for roamer verification.
3.10 Service Interruption. The parties acknowledge that given the
complex nature of the Company System and the NDS System and their respective
components, service interruptions may be unavoidable. NWIP and the Company will
use their respective best reasonable efforts to avoid any unnecessary service
interruptions and, where required, will work with each other to plan and
coordinate necessary service interruptions so as to minimize disruptions to
their Subscribers. Subscribers of the Company and the NDS will be treated in a
comparable manner, and neither the Company nor the NDS will discriminate against
the other's Subscribers, for purposes of restoration of service pursuant to this
paragraph.
3.11 Company Switches. NWIP and the Company contemplate that the
Company will, subsequent to the date of this Agreement, for its own account or
through any of its direct or indirect wholly owned subsidiaries, develop,
purchase, lease or otherwise acquire and use its own switching facilities and
switches corresponding to the NDS Switches and NDS-owned DAP Complexes
(collectively, the "Company Switches") and certain other network elements.
Nothing in this Agreement shall be construed to prohibit the Company from
purchasing, leasing or otherwise acquiring, installing, or utilizing the Company
Switches or network elements.
4. SERVICE CHARGES AND COSTS
4.1 Direct Connect and Interconnect Charges. (a) The Company will be
charged for Direct Connect and interconnect usage of the NDS Switches, and
NDS-owned DAP Complexes as set forth below.
(i) Direct Connect Usage: The Company's monthly gross Direct Connect
charge will be calculated by multiplying (x) the total number of Direct Connect
minutes generated on the Company's cell sites during the applicable month that
are processed through an NDS-owned DAP Complex by (y) the then current Direct
Connect MOU Rate set forth in Part I of Exhibit A. The resulting product will
equal the total Direct Connect charge for the applicable month. The Company will
not be charged a Direct Connect charge for any and all Direct Connect Traffic
that does not use an NDS-owned DAP Complex or any components thereof. At such
time, if ever, as components that comprise a DAP Complex are owned in part by
the Company
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and in part by the NDS, and the Company's Direct Connect Traffic uses a DAP
Complex that is owned in part by the Company and in part by the NDS, then the
Company and NWIP will mutually agree on the appropriate Direct Connect charges
or credits to be applied in connection with the Company's use of the DAP Complex
components owned by the NDS and, if applicable, for the appropriate Direct
Connect charges or credits to be applied in connection with use by the NDS of
the DAP Complex components owned by the Company.
(ii) Interconnect Usage: the Company's monthly gross interconnect
charge will be calculated by multiplying (x) the total number of interconnect
minutes generated on the Company's cell sites during the applicable month that
are processed through an NDS Switch by (y) the then current Interconnect MOU
Rate set forth in Part I of Exhibit A. The resulting product will equal the
gross interconnect charge for the applicable month. The Company will be entitled
to a credit against each month's gross interconnect charge based on the
Company's use of certain non- NDS interconnect network elements. The credits
will be calculated each month pursuant to the provisions contained in Part I of
Exhibit A; provided, however, that in no event will the credit amount for any
month exceed that month's gross interconnect charge.
(b) The Interconnect MOU Rate only applies to that portion of the
Company's interconnect Traffic that uses a Northern Telecom Switch owned by the
NDS. For that portion of the Company's interconnect Traffic that does not use a
Northern Telecom Switch owned by the NDS, but that uses or is processed by
certain NDS interconnect network elements (as set forth in Part II of Exhibit
A), then the Company will be charged for its use of each such NDS interconnect
network element at the Network Element MOU Rate for each NDS interconnect
network element as set forth in Part II of Exhibit A. In such cases, the
Company's monthly charge shall be calculated by multiplying the total number of
Company-generated interconnect minutes during the applicable month that use any
NDS interconnect network element by the corresponding Network Element MOU Rate.
The sum of the resulting products will be the interconnect charges due from the
Company for the applicable month that will be billed to and payable by the
Company.
4.2 Telco Charges. Except as otherwise provided in Section 3.6, the
Company will be solely responsible for all LEC, CLEC, IXC and other telco
charges incurred as a result of the Company's connection to and/or use of the
NDS Switches and DAP Complexes including, without limitation, charges involved
in the installation and monthly lease costs for fixed trunks connecting any NDS
Switch or DAP Complexes to the PSTN in the Company Territory and the costs of
the termination or origination of local or long distance telephone calls in the
Company Territory. The Company will reimburse NWIP on a monthly basis for any
amounts associated with any telco charges, including, without limitation, those
relating to any connections to the PSTN established by Nextel or any of the NDS
for the benefit of the Company, as described in Section 3.6.
4.3 Payment. The parties' agreement concerning the procedures governing
billing and payment for the services provided and all other charges and amounts
assessed hereunder is set forth in and governed by Section 13.6 of the JV
Agreement.
4.4 Annual Review; Audit Rights. (a) NWIP and the Company will revise
the Direct Connect MOU Rate, Interconnect MOU Rate, Network Element MOU Rate,
and INECR (as
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defined on Exhibit A), each as then set forth on Exhibit A, as necessary on an
annual basis to reflect actual network costs and actual growth in network usage
by the Company and the NDS.
(b) Subject to appropriate confidentiality arrangements, the Company
may, at its sole cost and expense, on reasonable advance notice and at any
reasonable time, but no more frequently than annually, review the data
underlying the Direct Connect MOU Rate and Interconnect MOU Rate charges then in
effect hereunder for accuracy and propose an appropriate revision thereof. Any
revision of the Direct MOU Rate and Interconnect MOU Rate charges hereunder that
is mutually agreed to by the parties will take effect on such date(s) as the
parties mutually agree.
5. TERM AND TERMINATION
5.1 Term. The initial term of this Agreement will commence on the date
hereof and will continue for ten years, unless extended for an additional period
of up to two and one-half years, as described in Section 4.03(a) of the
Shareholders' Agreement, of even date herewith, by and among NWIP, NPI and the
other parties thereto. Following the initial term, this Agreement may be
extended for up to four additional ten-year renewal terms, which extensions will
occur automatically upon any extension of the JV Agreement pursuant to its
terms, unless the Company provides notice to NWIP of its intent not to renew
this Agreement not less than 60 days prior to the scheduled end of the initial
term or any renewal term.
5.2. Termination. (a) At any time upon or following the expiration or
earlier termination of the JV Agreement, either party may terminate this
Agreement upon written notice to the other. Notwithstanding termination, this
Agreement will remain in effect and fully enforceable in accordance with its
terms (solely for purposes of addressing rights existing and obligations
incurred prior to the effective date of termination as set forth in the
termination notice) until all amounts due to either party hereunder, at or prior
to such party's receipt of such termination notice, are paid in full in
accordance with the terms hereof. No such termination will operate to relieve or
release either party from any consequences of any breach by such party of any
provisions of this Agreement.
6. BREACH
6.1 Breach; Dispute Resolution. Any breach, alleged breach of this
Agreement or disputes arising hereunder will be resolved by the parties pursuant
to the procedures set forth in Article 12 of the JV Agreement and, in cases
involving a billing dispute, Section 13.6 of the JV Agreement, which are
incorporated herein by this reference.
7. MISCELLANEOUS
7.1 Excusable Delay/Time Extension. Where performance by either party
to this Agreement is delayed by reason of an Excusable Delay (as defined in the
JV Agreement), the time for performance, and any otherwise applicable time
limit, schedule or deadline, shall be extended for a period of time equal to the
period of Excusable Delay.
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7.2 Amendments. This Agreement may be amended only by a writing
executed by the parties.
7.3 Entire Agreement. This Agreement and the other Transaction
Agreements (as defined in the JV Agreement) set forth the entire understanding
of the parties hereto and thereto with respect to the subject matter hereof and
thereof, and supersede all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, between the parties, including but not limited to the Memorandum of
Agreement, dated as of May 1, 1998, among Wireless Investment Partners, L.L.C.,
NWIP and Nextel, as amended.
7.4 Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and is given: (a) when received if
personally delivered; (b) 12 hours after being sent by telecopy, with confirmed
answerback; or (c) 1 business day after being sent by priority delivery by
established overnight courier, to the parties at their respective addresses set
forth below.
To NWIP: Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Telecopy: (703) 394-3896
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman Kaplan Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Either party by written notice to the other given in accordance with this
Section 7.4 may change the address or the persons to whom notices or copies
thereof are to be directed.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument.
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7.6 Waiver. Except as otherwise provided in this Agreement, any party
may waive, in writing, compliance by the other parties thereto (to the extent
such compliance is for the benefit of the party giving such waiver) with any of
the terms, covenants or conditions contained in this Agreement (except as may be
imposed by law). Any waiver by any party of any violation of, breach of, or
default under, any provision of any of this Agreement, by any other party will
not be construed as, or constitute, a continuing waiver of such provision, or
waiver of any other violation of, breach of, or default under, any other
provision of this Agreement.
7.7 Third Parties. Nothing expressed or implied in this Agreement is
intended, or may be construed, to confer upon or give any person or entity other
than the parties hereto any rights or remedies hereunder.
7.8 Severability. If any provision of this Agreement or the application
of such provision is invalid, illegal or unenforceable in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
of this Agreement or invalidate or render unenforceable such provision in any
other jurisdiction. The parties will, to the extent lawful and practicable, use
their best reasonable efforts to enter into arrangements to reinstate the
intended benefits of any provision held invalid, illegal or unenforceable.
7.9 Choice of Law. This Agreement shall be governed by New York law,
without regard to choice of law rules that would result in the application of
another state's law.
7.10 Construction.
a. Words used in this Agreement, regardless of the number or gender
specifically used, will be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. The parties hereto have participated equally in the drafting
of this Agreement and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any provision of this
Agreement.
b. The schedules and exhibits attached to this Agreement are
incorporated herein and are part of this Agreement for all purposes. Unless
otherwise stated, any reference in this Agreement to an exhibit, section or
schedule is to an exhibit, section or schedule of this Agreement.
c. The headings in this Agreement are solely for convenience of
reference and are not to be given any effect in the construction or
interpretation of this Agreement.
7.11 Agreement. This Agreement is one of the Collateral Agreements
identified in the JV Agreement. Accordingly, certain provisions of the JV
Agreement by their terms apply to this Agreement, including, without limitation,
Section 2.6, Article 12, and Sections 13.2, and 13.10.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the day and year
first above written.
12
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NEXTEL WIP CORP.
By: /s/ Alan Strauss
----------------------------------
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John Thompson
----------------------------------
Name: John Thompson
Title: Chief Financial Officer
and Treasurer
13
<PAGE>
AGREEMENT SPECIFYING OBLIGATIONS OF, AND LIMITING LIABILITY
AND RECOURSE TO, NEXTEL
This AGREEMENT SPECIFYING OBLIGATIONS OF, AND LIMITING
LIABILITY AND RECOURSE TO NEXTEL (this "Agreement"), dated as of January 29,
1999, is by and among Nextel Communications, Inc., a Delaware corporation
("Nextel"), Nextel Partners, Inc., a Delaware corporation (the "Company"), and
Nextel Partners Operating Corp., a Delaware corporation ("Opco").
RECITALS
A. Nextel, through its subsidiaries, operates digital networks
for wireless communications services utilizing the integrated Dispatch Enhanced
Network ("iDEN") technology developed by Motorola, Inc. ("Motorola") in various
markets throughout the United States. Nextel desires to enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations, and objectives, through the medium of a
contractual joint venture with the Company (the "Joint Venture").
B. Nextel, through its subsidiary, Nextel WIP Corp., a
Delaware corporation ("NWIP"), has agreed to provide certain assets and rights
to the Company and its wholly-owned subsidiary, Opco, and certain other
investors have agreed to capitalize the Company, to enable the Company and Opco
to construct and operate a digital mobile network using Motorola's iDEN
technology to offer and provide wireless telecommunications services to
customers in areas of the United States that would otherwise remain without such
iDEN-based services for the foreseeable future.
C. As a condition to providing NWIP with the frequencies and
other rights necessary to make its contribution to the Company, and as a
condition to providing NWIP with the rights to enable it to enter into the
agreements with the Company that will integrate the Company's network with the
Nextel digital mobile network for wireless telecommunications services using
Motorola's iDEN technology, Nextel requires that the Company and those investing
in the Company recognize and agree to a limit on the maximum, aggregate
potential liability of Nextel and all of its controlled affiliates, other than
NWIP (Nextel and its controlled affiliates, whether now existing or hereafter
created or acquired, other than NWIP and the Applicable Entity, if any, the
"Nextel Group"), that arise, result from or are in any way connected with, the
organization, financing, operation of, provision of goods or services to or by
the Company, or other matters as provided for or contemplated in any of the
Transaction Documents (defined below) or any other arrangement or relationship,
contractual or otherwise, as amended and in effect from time to time, among or
involving the Company, NWIP or any member of the Nextel Group.
<PAGE>
AGREEMENT
NOW, THEREFORE, to induce Nextel to make available to NWIP the
frequencies and other rights to enable NWIP to participate in the organization,
capitalization, ongoing operation of the Company and Opco, and other matters
contemplated by the Transaction Documents, and to induce the Company to enter
into the Transaction Documents, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Nextel (on behalf
of itself and the other members of the Nextel Group) and the Company and Opco
(each on its own behalf, and on behalf of its controlled affiliates) agree:
1. Nextel Group to Give NWIP Rights to Perform, etc. (a) On
the terms and subject to the limitations and conditions set forth in this
Agreement, Nextel shall or shall cause the other members of the Nextel Group to:
(i) provide NWIP with the necessary frequencies and rights to
enable NWIP to perform such obligations as it is required to perform
under the documents that are identified on Exhibit A (each, as amended
and in effect from time to time, and, collectively, the "Transaction
Documents"); and
(ii) take whatever action is reasonable and necessary to cause
NWIP to perform its obligations under the Transaction Documents.
(b) Notwithstanding anything else set forth in this Agreement,
Nextel acknowledges that, subject to the limitations set forth in Sections 4 and
5, the Company and its controlled affiliates have the right to recover from
Nextel for any liability owed to the Company, Opco or their controlled
affiliates by NWIP or any member of the Nextel Group for the failure of NWIP or
such member of the Nextel Group to perform any obligations it may have under the
Transaction Documents.
(c) Without limiting Nextel's own obligations under Section 2,
the parties hereto agree that neither Nextel nor any other member of the Nextel
Group shall have any obligations to advance or otherwise contribute any funds to
NWIP to enable NWIP to perform its obligations under any of the Transaction
Documents, nor to expend any funds (or incur any liability) to finance or assist
in the financing of such obligations of NWIP.
2. Additional Nextel Obligations. Without regard to the
limitations of Sections 4 and 5, until the closing of a Section 3.08 Sale (as
defined in the Shareholders Agreement) and, as to the obligations referenced in
Subsections (a), (b), and (c) below, in those circumstances where Section
4.01(j) of the Shareholder's Agreement would be applicable:
(a) (i) Nextel will register "Nextel Securities" pursuant to,
and each of the Company and Nextel will otherwise comply with, the provisions
relating to registration of "Nextel Securities" as contemplated by, Section 6.13
of the Shareholders' Agreement identified on Exhibit A (but this clause (i) does
not extend to "Nextel Shares" under Section 7.05 of the Shareholders'
Agreement); and (ii) if NWIP elects to deliver "Nextel Shares" as contemplated
by
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<PAGE>
Section 7.05 of the Shareholders' Agreement, comply with Section 7.05(d) of the
Shareholders Agreement.
(b) If NWIP is required under the Shareholders' Agreement, the
Joint Venture Agreement or the Restated Certificate of Incorporation of the
Company to acquire the equity interests of other stockholders of the Company,
Nextel will, or will cause NWIP to, perform those obligations without regard to
the limitations of Sections 4 and 5 (provided, however Nextel may satisfy those
obligations by delivering freely tradeable "Nextel Shares" as provided in the
Shareholders' Agreement, Joint Venture Agreement or Restated Certificate of
Incorporation, as the case may be). Nextel agrees that those of the shareholders
of the Company who are signatory parties to the Shareholders' Agreement and the
Custodial Agreement from time to time are third party beneficiaries of Nextel's
obligations under this Section 2(b).
(c) The obligations of Nextel hereunder will continue to be
effective (or shall be reinstated), subject to the terms, conditions and
limitations set forth herein, if at any time the obligations of NWIP under the
Transaction Documents, including, without limitation, the obligation to acquire
the equity interests of the Company, are stayed, rescinded or otherwise
discharged as a result of the bankruptcy, insolvency or reorganization of NWIP.
Furthermore, for purposes of this Agreement, including Nextel's agreement in
Section 1(b), Nextel's own obligations, and the rights of the Company and its
controlled affiliates to recover from Nextel for obligations and liabilities
owed by NWIP, as the case may be, shall not be suspended or otherwise diminished
by the bankruptcy, insolvency or reorganization of NWIP or any other
circumstances relating to NWIP that could purport to render such obligations or
liabilities unenforceable against NWIP (such as, the fact that such obligation
or liability is asserted to be ultra vires on NWIP's part), provided, however,
it is expressly agreed that circumstances relating to the nature of the
obligation or liability rather than to NWIP (such as, non-performance by another
party entitling NWIP or Nextel not to perform its obligations) shall continue to
be applicable in determining the existence and scope of such obligation or
liability.
(d) Nextel will:
(i) own, directly or indirectly, free and clear of any lien,
pledge, encumbrance, charge or other security interest or right of
others therein (except such as may exist under or be granted pursuant
to any of the Transaction Documents), all the outstanding capital stock
of NWIP or such entity that owns the equity interests of the Company
originally held by NWIP (NWIP or such entity being referred to herein
as the "Applicable Entity");
(ii) cause NWIP or such other Applicable Entity not to
(except, in each case, as contemplated by or permitted pursuant to the
Transaction Documents) (A) pledge or otherwise encumber its assets for
the benefit of Nextel or any other person, (B) establish a subsidiary
of NWIP or an Applicable Entity (other than License Co. (as defined in
the Shareholders Agreement)), or commingle its assets with those of
Nextel or any other person, (C) assume or guarantee the liabilities or
obligations of Nextel or any other person, (D) acquire obligations or
securities of, or make loans or advances to, Nextel or any of its other
affiliates, (E) incur any indebtedness, liabilities or obligations
other than obligations to the Company and its affiliates under the
Transaction Documents and
3
<PAGE>
obligations to Nextel and other members of the Nextel Group pursuant to
the agreements identified in subparagraph (F)(2) below, or pursuant to
any agreements referred to in subparagraph (F)(3) below, or (F) enter
into any agreement, arrangement or transaction with any affiliate other
than (1) the Transaction Documents and the transactions required
thereunder and (2) an agreement with members of the Nextel Group in the
form attached as Exhibit B hereto (the "NWIP Rights Agreement"), an
agreement with members of the Nextel Group in the form of Exhibit C
hereto (the "ALLTA":), and an agreement with Nextel in the form of
Exhibit D hereto (the "Trademark Rights Agreement") and (3) any other
agreement between NWIP and Nextel and/or its affiliates that is
consented to by the Company; and
(iii) cause NWIP or such other Applicable Entity not to
(A) conduct any business other than exercising its rights and
performing its obligations under the Transaction Documents and
activities incidental thereto or (B) own or have any interest in any
properties or assets other than (1) capital stock, debt or other
securities of the Company or any of its subsidiaries and (2) the
assets and rights assigned to NWIP under the NWIP Rights Agreement and
(3) any assets and rights held or acquired by, or granted to NWIP or
such Applicable Entity under any Transaction Documents or other
agreement between the Company and/or any of its subsidiaries and NWIP
or such Applicable Entity.
3. Specific Performance and Other Equitable Relief. (a) The
rights and obligations of the parties enumerated in Section 1(a)(i) and (ii),
and Section 2 are so unique and fundamental to their bargain that, in the event
of non-performance, it is agreed that the appropriate remedy is injunctive or
other equitable relief. With respect to these obligations, the parties agree
that damages alone are an inadequate remedy, because not all damages will be
ascertainable with any reasonable degree of certainty, and because the essence
of the parties' bargain is for performance of these obligations. With respect to
these obligations, the complex interrelationship of the elements of the Joint
Venture is such that only performance (coupled with such other relief,
including, without limitation, money damages, as any court, arbitration panel,
or other appropriate tribunal may deem appropriate) can restore the benefit of
the bargain to the non-breaching party. The parties stipulate that, in the event
of a dispute over Section 1(a)(i) and (ii) or Section 2, neither party will
urge, argue or claim that damages alone are an adequate remedy or should be the
preferred remedy if the tribunal should determine that non-performance has
occurred.
(b) Where the non-breaching party cannot be fully restored to
the position it would have enjoyed in the event of timely performance of the
obligation to which an order of specific performance relates without additional
relief, including (subject to the other provisions of this Agreement) monetary
compensation, this subsection shall not preclude the award of such supplemental
relief in addition to (but, in any event, not in lieu of) specific performance.
(c) This Section is not intended to limit judicial or
arbitrator discretion in ordering specific performance with respect to other
obligations of the parties where such a remedy is determined by the tribunal to
be appropriate in the circumstances.
4
<PAGE>
4. Limited Monetary Recourse Against Nextel. (a) The maximum
cumulative, aggregate monetary liability of Nextel and any other members of the
Nextel Group for any and all actual or alleged claims or causes of action that
arise, result from or are in any way connected with the organization, financing,
operation of, provision of goods or services to or by the Company or Opco or
their controlled affiliates, or other matters provided for or contemplated in
any of the Transaction Documents or any other arrangement or relationship,
contractual or otherwise, as amended and in effect from time to time, among or
involving the Company, Opco or their controlled affiliates and NWIP or any
member of the Nextel Group, whether brought by the Company or Opco, or any of
their controlled affiliates or by others derivatively or otherwise on behalf of
any of them, is limited as provided in Section 4(b).
(b) Except as provided in Section 2 and except with respect to
obligations arising out of an event described in clauses (i) through (vi) below,
recourse for money damages against Nextel and the other members of the Nextel
Group for any and all actual or alleged claims or causes of action that arise,
result from or are in any way connected with the organization, financing,
operation of, provision of goods or services to or by the Company, Opco, or any
of their controlled affiliates, or other matters provided for or contemplated in
any of the Transaction Documents or any other arrangement or relationship,
contractual or otherwise, as amended and in effect from time to time, among or
involving the Company, Opco, or any of their controlled affiliates, and NWIP or
any member of the Nextel Group, whether brought by the Company, Opco, or any of
their controlled affiliates or by others derivatively or otherwise on behalf of
any of them (including, without limitation, actual or alleged claims that may be
based on, arise or result from, or are in any way connected with, any actual or
alleged failure by NWIP to perform its obligations under any of the Transaction
Documents due in whole or in part to NWIP's lack of, or inability to access,
sufficient funds or financing), is limited to a cumulative, aggregate maximum of
$200 million. Such $200 million will be reduced, dollar for dollar, by the
cumulative, aggregate amount that Nextel and the other members of the Nextel
Group have advanced, expended or otherwise provided to or for the benefit of
NWIP on or after May 2, 1998, to enable NWIP to perform its obligations under
any of the Transaction Documents (each a "Section 4 Contribution"), except that
Nextel and the other members of the Nextel Group will not be deemed to have made
a Section 4 Contribution to the extent that Nextel or another member of the
Nextel Group (i) makes a contribution to the Company on the date hereof or at
any subsequent time in exchange for equity securities of the Company;
(ii) receives from the Company or its controlled affiliates goods, services,
assets or other consideration that have a value not less than the amount paid
to or otherwise transferred by Nextel or the other members of the Nextel Group
to the Company or such controlled affiliates or for which Nextel or another
member of the Nextel Group pays the consideration specified therefor in the
Transaction Documents; (iii) receives consideration from the Company or its
controlled affiliates in exchange for the provision of goods, services, assets
or other consideration, that is not less than the cost to Nextel or another
member of the Nextel Group of providing such goods, services, assets or other
consideration or that is otherwise in the amount specified therefor in the
Transaction Documents; (iv) pays damages up to net amounts due for services
received by NWIP or by a member of the Nextel Group from Opco under the Switch
Sharing Agreement or the Roaming Agreement (each as identified on Exhibit A,
and as amended and in effect from time to time); (v) provides equipment,
resources or subsidy payments pursuant to Section 7.03 or Section 7.04 of the
Shareholders' Agreement; (vi) pays amounts under Section 4.18 of the Joint
Venture Agreement;
5
<PAGE>
or pays monetary damages, if any, for a breach of the obligation by NWIP or a
member of the Nextel Group to deliver frequencies when required under Section
4.1D of the Joint Venture Agreement.
(c) The parties acknowledge that, assuming the Transaction
Documents are consummated in accordance with their respective terms and
conditions, Nextel and the other members of the Nextel Group have not made any
Section 4 Contributions as of the date hereof. Nextel or NWIP may submit a
report from time to time as it deems appropriate or advisable, and, in any
event, will submit a report annually, or after such time that the Nextel Group
believes it has made Section 4 Contributions exceeding $20 million in any
calendar year, each of which reports will set forth a reasonably itemized list
of all Section 4 Contributions made in the period from (i) the date hereof
through the date immediately preceding such report (in the case of the first
such report) and (ii) the cut-off date for the most recently submitted report
through a date immediately preceding such report (in the case of each subsequent
report).
(d) Nothing in this Agreement shall in any manner limit,
restrict or otherwise affect the Company's ability to make direct claims against
and recover monetary damages or other equitable relief directly from NWIP in
accordance with the standards and procedures set forth in the Joint Venture
Agreement.
5. Dispute Resolution. Any dispute between the parties arising
out of or in connection with this Agreement will be resolved under the dispute
resolution procedures set forth in the Joint Venture Agreement.
6. Subsequent Reimbursement of the Nextel Group. If, at any
time and for any reason, the Company, Opco, or any of their controlled
affiliates recovers from NWIP, any insurer or any other person, reimbursement or
payment in any amount relating to any alleged or actual claim or cause of action
for which the Company, Opco, or any of their controlled affiliates has already
received payment from any member of the Nextel Group, the Company or Opco will
immediately pay to Nextel an amount equal to such duplicate payment received
with respect to such claim or cause of action, and the amount of any such
payment made to Nextel will then reduce the aggregate Section 4 Contribution
under Section 4 unless such payment is of a type specified in clauses
(i) through (vi) of Section 4(b).
7. Nextel Representations. Nextel represents and warrants to
the Company that:
(a) Nextel is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
corporate powers required to carry on its business as now conducted.
(b) The execution and delivery by Nextel of this Agreement and
the NWIP Rights Agreement and the performance by Nextel of its obligations
hereunder and thereunder are within the corporate powers of Nextel and have been
duly authorized by all necessary action on the part of Nextel. This Agreement
and the NWIP Rights Agreement, when executed, will constitute a valid and
binding agreement of Nextel, enforceable in accordance with its respective
terms,
6
<PAGE>
except (i) as limited by the applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement or
creditors' rights generally, or (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
(c) The execution and delivery by Nextel of this Agreement and
the NWIP Rights Agreement and the performance by Nextel of its obligations
hereunder and thereunder require no order, license, consent, authorization or
approval of, or exemption by, or action by or in respect of, or notice to, or
filing or registration with, any governmental body, agency or official, except
as contemplated by the Subscription Agreement.
(d) The execution and delivery by Nextel of this Agreement and
the NWIP Rights Agreement and the performance by Nextel of its obligations
hereunder and thereunder do not and will not (i) violate the organizational
documents of Nextel, (ii) violate any applicable law, rule, regulation,
judgment, injunction, order or decree, (iii) require any consent or other action
by any person under, constitute a default under (with due notice or lapse of
time or both), or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Nextel, any other member of the
Nextel Group or NWIP, or to a loss of any material benefit to which Nextel, any
other member of the Nextel Group or NWIP is entitled under any provision of any
agreement or other instrument binding upon Nextel, any other member of the
Nextel Group or NWIP or any of its assets or properties, to the extent that any
of the foregoing would have a material adverse effect on Nextel or would prevent
or otherwise render Nextel unable to perform its obligations hereunder or
thereunder or (iv) result in the creation or imposition of any material lien on
any property or asset of Nextel, any other member of the Nextel Group, or NWIP
to the extent that any of the foregoing would have a material adverse effect on
Nextel or would prevent or otherwise render Nextel unable to perform its
obligations hereunder or thereunder.
8. General. (a) This Agreement (i) is to be governed by, and
construed under the laws of the State of New York, without giving effect to its
principles of conflicts of laws, (ii) is binding upon the parties and their
successors and permitted assigns, (iii) contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, between the parties with respect
to such subject matter, and (iv) can only be amended by a writing executed by
the parties.
(b) Whenever possible, each provision of this Agreement is to
be interpreted to be effective and valid under applicable law, but if any
provision of this Agreement is invalid under applicable law, that provision is
ineffective to the extent of that invalidity, without invalidating the remainder
of that provision or the remaining provisions of this Agreement.
(c) The section and other headings in this Agreement are for
convenience only and do not define or limit any of its terms or affect the
meaning or interpretation of this Agreement.
(d) Neither the termination nor expiration of any of the
Transaction Documents or any other arrangements or relationships, contractual or
otherwise, as amended and in effect from time to time, among or involving the
Company, Opco, or any of their controlled affiliates, and
7
<PAGE>
NWIP or any member of the Nextel Group will have any effect on this Agreement,
which will remain in full force and effect following any such event.
(e) Under no circumstances may any party hereto assign or
delegate all or any of its rights or obligations under this Agreement, except
that the Company and Opco may collaterally assign their rights and interest in
this Agreement to senior lenders to the Company or Opco that have granted to
members of the Nextel Group the rights described in Section 4.13 of the Joint
Venture Agreement (or other rights as Nextel may agree).
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers, as of the day and year first
above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ Thomas J. Sidman
---------------------------------------
Name: Thomas J. Sidman
Title: Vice President
NEXTEL PARTNERS, INC.
By: /s/ John Chapple
---------------------------------------
Name: John Chapple
Title: President and Chief Executive Officer
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John Chapple
---------------------------------------
Name: John Chapple
Title: President and Chief Executive Officer
8
<PAGE>
ASSET AND STOCK TRANSFER AND REIMBURSEMENT AGREEMENT
Between
NEXTEL WIP CORP.
and
NEXTEL PARTNERS OPERATING CORP.
Dated as of January 29, 1999
<PAGE>
ASSET AND STOCK TRANSFER AND REIMBURSEMENT AGREEMENT
This ASSET AND STOCK TRANSFER AND REIMBURSEMENT AGREEMENT (this
"Agreement"), dated as of January 29, 1999, is between Nextel Partners Operating
Corp., a Delaware corporation (the "Company"), and Nextel WIP Corp., a Delaware
corporation ("NWIP"). Defined terms used in this Agreement have the meanings set
forth in Article 1 of the JV Agreement or in Schedule A attached hereto.
RECITALS
A. Nextel, through its Subsidiaries, operates an iDEN-based wireless
communications system through which it provides wireless communications services
in various markets throughout the United States. To enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations and objectives, Nextel, through NWIP, is
entering into a contractual joint venture with NPI and its wholly owned
Subsidiaries, including the Company.
B. The agreement of the parties with respect to the formation and
operation of the contractual joint venture is set forth in the JV Agreement and
various Collateral Agreements. This Agreement is a Collateral Agreement.
C. NWIP desires to transfer to the Company, and the Company desires to
acquire from NWIP, certain assets, properties, rights and interests to be used
in connection with the construction and operation of the Company's iDEN-based
wireless communications system in the Territory (the "Business"), all upon the
terms and conditions and in exchange for the consideration set forth herein.
In consideration of the mutual promises and covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NWIP and the Company hereby agree as follows:
AGREEMENT
1. TRANSFER OF ASSETS AND STOCK.
1.1 ASSET TRANSFER. On the terms and subject to the provisions
of this Agreement, NWIP hereby transfers, conveys and assigns to the Company,
and the Company hereby purchases, accepts and receives, all of NWIP's right,
title and interest in and to assets and rights described below (the "Assets"):
1.1(a) The owned tangible personal property and equipment used
in or relating to the operation of the Business including but not
limited to base radios, EBTS, combiners,
-1-
<PAGE>
other digital mobile radio transmission equipment, antennas, antenna
dishes, base units, GPS units, tower top amplifiers, controller racks,
converters, enclosures, RF distribution racks, test equipment, office
furniture and office equipment;
1.1(b) The leases for tangible personal property, the
subscriber agreements, other contracts and commitments, and other
agreements for the purchase or sale of goods or services relating to
the Business as identified on Schedule 1.1(b);
1.1(c) The billing and accounting records relating to
subscribers, the construction plans, site acquisition plans, RF design
plans and other records and plans relating exclusively to the Business,
customer deposits and prepayments made by customers of the Business,
other payables and receivables of the Business and permits relating
exclusively to the Business; and
1.1(d) The lessee's interest under the leases of real property
located in the Territory and used exclusively or acquired to be used
exclusively in the Business, together with any improvements owned by
NWIP or the lessee and located thereon, as identified on Schedule
1.1(d) (other than Raw Land Leases) (the "Leases") subject to Section
1.3. At the option of the Company, in lieu of a direct assignment of
such leases to Nextel WIP Lease Corp. ("Lease Co.") the Company, NWIP
may assign all of such leases to a wholly owned subsidiary of NWIP and
transfer the stock of that subsidiary to the Company. To the extent
that NWIP is not the holder of the lessee's or sublessee's interests
under the Leases, NWIP will cause such lessees or sublessees to execute
and deliver assignments of the Leases to the Company or, at the
election of the Company, to Lease Co. At the request of the Company,
NWIP will execute or cause to be executed confirmatory assignments by
the holder or holders of the possessory interests under the Leases
being assigned.
1.2 EXCLUDED ASSETS. No assets of NWIP, other than the Assets,
are transferred to the Company under this Agreement. No assets of any member of
the Nextel Group other than NWIP are transferred to the Company under this
Agreement. Additionally, the Assets transferred under this Agreement
specifically exclude any ownership or lease rights in:
1.2(a) FCC licenses;
1.2(b) Sites and Antenna Sites;
1.2(c) Any assets owned by third parties;
1.2(d) Trademarks, service marks, and all other intellectual
property owned by NWIP, Nextel or any member of the Nextel Group;
1.2(e) Any assets located outside the Territory owned by NWIP,
Nextel or any member of the Nextel Group;
-2-
<PAGE>
1.2(f) Any assets used by NWIP, Nextel or any other member of
the Nextel Group in the Territory in businesses other than the
Business, including, but not limited to, those used in the operation of
analog based communications services; and
1.2(g) Any leases of real property located in the Territory
and not identified on Schedule 1.1(d).
1.3 NONASSIGNABLE RIGHTS.
1.3(a) NONASSIGNABILITY. To the extent that any contract,
permit, right, lease or agreement enumerated in Section 1.1 cannot be
validly assigned, transferred or subleased without the consent or
waiver of the issuer thereof or another party thereto or any third
person (including a government or governmental unit), or if such
assignment, transfer or sublease or attempted assignment, transfer or
sublease would constitute a breach thereof or a violation of any law,
decree, order, regulation or other governmental edict, this Agreement
is not an assignment, transfer or sublease thereof, or an attempted
assignment, transfer or sublease thereof.
1.3(b) NWIP TO USE BEST REASONABLE EFFORTS. NWIP is not
obligated to transfer to the Company any of the Assets described in
Section 1.3(a) without first having obtained all necessary consents and
waivers. Upon request of the Company, NWIP shall use its best
reasonable efforts, and the Company shall reasonably cooperate with
NWIP, to obtain any consents and waivers necessary to convey or cause
to be conveyed to the Company or Lease Co. any of the Assets described
in Section 1.3(a). NWIP shall promptly convey to the Company or to
Lease Co. at the Company's election any Assets described in Section
1.3(a) for which NWIP has received the necessary consents and waivers.
NWIP will not be obligated to pay any additional consideration to the
person from whom any consent or waiver is requested unless the Company
requests in writing that NWIP make such payment and the parties agree
how to share that cost.
1.3(c) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. If, after
using its best reasonable efforts, NWIP is unable to obtain any of the
necessary consents or waivers described in Section 1.3(a), NWIP shall,
as to any particular contract, permit, right, lease or agreement, only
with respect to the current term thereof as of the date of this
Agreement (i) provide to the Company, to the fullest extent possible,
the benefits of any license, permit or approval and of any lease,
contract, license or other agreement or commitment, all as referred to
in Section 1.3(a), and (ii) cooperate in any reasonable and lawful
arrangement designed to provide such benefits to the Company. The
Company shall promptly pay or reimburse NWIP for all costs and expenses
paid by NWIP to the appropriate third party under the terms of such
contract, permit, right, lease or agreement. At the end of the current
term of any such contract, permit, right, lease or agreement, NWIP
shall have no further duties or obligations hereunder with respect to
such licenses, permits and approvals and such leases, contracts,
licenses and other agreements and commitments and the failure to obtain
any necessary consent or waiver with respect thereto will not be a
breach of this Agreement.
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1.3(d) COMPANY TO PERFORM. To the extent that the Company is
provided, pursuant to this Section 1.3, the benefits of any contract,
permit, right, lease or agreement (each a "Provided Obligation"), the
Company shall perform for the benefit of the issuer thereof or the
other party or parties thereto, the obligations of NWIP or of any other
member of the Nextel Group thereunder or in connection therewith as
such obligations relate to the Business or the Assets. If the Company
fails to perform as required by this Section 1.3(d), NWIP will
thereafter cease to be obligated under this Section 1.3 with respect of
the Provided Obligation that is the subject of the failure to perform
until the earliest of the following: (i) the situation is remedied,
(ii) at the sole option of NWIP, the Company promptly pays or
reimburses NWIP for all costs incurred by NWIP during the period of
failure of performance, or (iii) NWIP's responsibilities with respect
to the Provided Obligation expire under Section 1.3(c). The Company
shall indemnify NWIP and hold it harmless from and against any and all
loss, cost, damage or expense arising from or related to the Company's
failure to perform any Provided Obligation.
1.4 On the terms and subject to the provisions of this
Agreement, NWIP hereby transfers and sells, and the Company hereby purchases,
accepts and receives, all of the capital stock of Nextel WIP Lease Corp., a
Delaware corporation ("Lease Co.").
2. ASSUMPTION OF LIABILITIES.
2.1 DISCLOSED LIABILITIES. The Company hereby assumes and
agrees to pay, perform and discharge when due the liabilities and obligations of
NWIP and of any other member of the Nextel Group, whether primary or secondary,
absolute or contingent, direct or indirect, that are identified on Schedule 2.1.
2.2 ORDINARY COURSE LIABILITIES. The Company hereby assumes
and agrees to pay, perform and discharge when due the liabilities and
obligations of NWIP and of any other member of the Nextel Group, whether primary
or secondary, absolute or contingent, direct or indirect, that arose or were
incurred in the ordinary course of business consistent with the past practice of
the Nextel Group in connection with the construction, design or operation of an
ESMR Network in the Territory before the date of this Agreement or that arise
from the ownership or operation of the Assets including the rent and other
charges due under any Raw Land Lease. If there are any such liabilities that
relate to a particular asset that were not taken into account in the value of
the asset for purposes of the payment under Section 5.1(b) that will be
corrected in the True Up.
2.3 UNDISCLOSED LIABILITIES. Subject to its indemnity rights
under Section 2.4, the Company hereby assumes and agrees to pay, perform and
discharge when due the undisclosed liabilities and obligations of NWIP and of
any other member of the Nextel Group whether primary or secondary, absolute or
contingent, direct or indirect, that arose or were incurred outside the ordinary
course of business (including violations of law and breaches of contract) before
the date of this Agreement and that arise from the ownership or operation of the
Assets (collectively, "Undisclosed Liabilities").
2.4 LIMITATION ON COMPANY LIABILITY.
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2.4(a) The maximum aggregate liability of the Company and its
subsidiaries for Undisclosed Liabilities is $1.5 million, and NWIP
hereby agrees to defend, indemnify and hold the Company and its
subsidiaries harmless from and against any Undisclosed Liabilities in
excess of $1.5 million. To make a claim for indemnification under this
Section 2.4, the Company must provide written notice to NWIP, within
180 days after the date of this Agreement, describing in reasonable
detail (to the extent known) each Undisclosed Liability for which
indemnification is sought, including the nature and amount thereof, all
relevant parties and their relationships to the Assets, and copies of
any relevant documents. Promptly after receiving any additional
information about any claim made hereunder, the Company will forward
such information to NWIP. NWIP shall pay the Company the amount of any
such Undisclosed Liability (in excess of $1.5 million) in cash within
20 days after receipt of any such notice. Any dispute under this
Section 2.4 shall be resolved under the dispute resolution procedures
set forth in Article 12 of the JV Agreement.
2.4(b) The Company's right of indemnification under this
Section 2.4 relates only to Undisclosed Liabilities and is limited to
any claims made before the date that is 180 days from the date of this
Agreement. If any such claim for indemnification is asserted by the
Company, it may be made only in the manner and during the 180-day
period provided in Section 2.4(a). Indemnification may not be sought
under this Section 2.4 for any liabilities or obligations other than
Undisclosed Liabilities. Once the 180-day period expires, this right of
indemnification is then extinguished, and the Company may make no
further claims for indemnification regarding any liabilities (whether
undisclosed or otherwise) relating to the Assets against NWIP or any
other member of the Nextel Group except for continuing claims for
Undisclosed Liabilities for which the Company gave the notice required
by Section 2.4(a) within the 180-day period. If the Company fails to
make a claim for indemnification in compliance with this Section 2.4
within 180 days after the date of this Agreement, then this right of
indemnification will immediately expire and the Company may make no
claim for indemnification regarding any liabilities (whether
undisclosed or otherwise) relating to the Assets against NWIP or any
other member of the Nextel Group.
2.5 SUBROGATION OF COMPANY. The Company is subrogated to all
rights of NWIP and any other subsidiary of Nextel under any insurance policies
covering any liabilities assumed by the Company under this Article 2 and with
respect to such assumed liabilities, shall be named as an additional insured
under any such policies, and any proceeds of any such policies that are received
by NWIP or any other subsidiary of Nextel in respect of any such liability shall
be held in trust for the benefit of the Company. NWIP will use its best
reasonable efforts to ensure such subrogation of the Company. The Company may
assert any counterclaim of NWIP or of any other subsidiary of Nextel so long as
the counterclaim relates only to the Assets or the Business and does not relate
to any other business of any member of the Nextel Group in or outside the
Territory or to any assets retained by any other member of the Nextel Group.
2.6 LIABILITIES ARISING AFTER THE CLOSING. The Company is
responsible for all liabilities and obligations relating to the Assets, whether
known or unknown, primary or
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secondary, absolute or contingent, direct or indirect, that arise or are
incurred on or after the date of this Agreement.
2.7 RAW LAND LEASES. Notwithstanding anything in this
Agreement to the contrary, if the Company has not requested that NWIP build
towers on any parcel of real property covered by a Raw Land Lease within two
years after the date hereof, then on the second anniversary of this Agreement,
(i) each such Raw Land Lease will be transferred to the Company by NWIP, and
(ii) upon notice to the Company of any such transfer, the Company will be
irrevocably bound (x) to immediately assume all obligations and rights of NWIP
thereunder (other than liabilities that are not the responsibility of the
Company under this Article 2) and (y) to promptly reimburse NWIP (upon
presentation by NWIP of reasonable supporting detail) for any and all actual
costs and expenses incurred by NWIP or any member of the Nextel Group in
maintaining or performing under each such Raw Land Lease from date of this
Agreement through the date NWIP receives reimbursement from the Company in full
for such costs and expenses. Any payments with respect to the transfer to the
Company of any Raw Land Leases pursuant to this Section 2.7, although not
disclosed on Schedule 2.1, will be treated as disclosed liabilities under
Section 2.1 and will not be subject to (or reduce the amount of the funds
available for indemnity under) Section 2.4.
3. PERSONNEL MATTERS.
3.1 RETAINED LIABILITIES. Subject to reimbursement as
contemplated or provided herein, NWIP (or another member of the Nextel Group)
will retain responsibility for salary, wages, benefits and applicable
withholding taxes for its employees engaged in the Business through the date of
this Agreement.
3.2 COMPANY OBLIGATIONS. The Company has identified on
Schedule 3.2 the employees of NWIP (or of any other Nextel subsidiary) engaged
in the Business who will be offered employment by the Company or its
subsidiaries on the date of this Agreement. Each such individual will receive
credit under employee benefit plans and programs of the Company (and any plans
of its subsidiaries or parent in which such employee participates) for service
with Nextel or its subsidiaries through the date of this Agreement. Each such
individual will be offered medical insurance coverage under any such medical
insurance plans without exclusion for any pre-existing illness or condition.
3.3 NWIP OBLIGATIONS.
3.3(a) After the date hereof and until the termination of that
portion of the Transition Services Agreement related to Human Resources
(the "Transition Period"), the employees listed on Schedule 3.2 will
remain on the medical, dental, vision, long and short term disability,
accidental death, dismemberment, benefit plans that are currently in
place for such employees of the relevant members of the Nextel Group.
During the Transition Period, the Company will pay to NWIP the
transition services fees set forth in the Transition Services Agreement
and a benefits premium for each such employee equal to a premium the
Company would pay for each such employee under a fully-insured medical,
dental, vision, long and short term disability, accidental death,
dismemberment,
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benefits program provided by a third party provider. During the
Transition Period, NWIP will pay all legitimate medical, dental and
vision claims for all of the transferred employees who are covered by
such benefits in accordance with NWIP's or Nextel's existing policies
and procedures.
3.3(b) As of the date hereof, the Nextel Group has modified
its employee stock option plan to allow the stock options granted under
such plan to the transferred employees as of the date hereof to
continue to vest for so long as the transferred employees remain
employed by the Company.
3.3(c) Each employee that is listed on Schedule 3.2 as being
on long or short term disability or leave of absence as of the date
hereof, shall, after the date hereof, remain an employee of the member
of the Nextel Group with which he or she is presently employed until
such time, if ever, as he or she returns to full-time employment. At
that time, and subject to the last sentence of this Section 3.3(c), the
parties will take all appropriate and necessary actions to transfer
such employee to the Company. Each such employee will be offered
employment with the Company with a salary and benefits package
substantially the same as the benefits package such employee had with
its former Nextel Group employer. Any such employee who does not return
to full-time employment with NWIP within 90 days of the date hereof
shall not be offered employment with the Company.
4. REPRESENTATIONS AND WARRANTIES.
4.1 ASSETS. NWIP represents and warrants to the Company that
as of the date of this Agreement, it (or, in the case of any leases of
real property constituting Assets, one or more of its affiliates) has
good and marketable title to the Assets free and clear of all Liens
other than Permitted Liens. EXCEPT AS OTHERWISE STATED IN THIS SECTION
4.1, (i) THE ASSETS ARE TRANSFERRED TO THE COMPANY AS IS, WHERE IS, AND
(ii) NWIP DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
4.2 STOCK. NWIP represents and warrants to the Company that
Lease Co. was incorporated on January 21, 1998 in the State of Delaware
solely for the purpose of effectuating the transfer of certain leases
to the Company under this Agreement and as contemplated by the
Transaction Documents (as defined in the JV Agreement), and, as of the
date hereof, has not conducted any business or entered into any
agreements or commitments except with respect to the foregoing and, as
of the date hereof, has no obligations or liabilities other than
(i) those arising under, or contemplated by, the Transaction Documents
or the Financings, and (ii) other miscellaneous immaterial obligations
and liabilities that in the aggregate collectively amount to less than
$10,000. NWIP has furnished to the Company a true and correct copy of
the certificate of incorporation and by-laws of Lease Co. as in effect
on the date hereof. As of the date hereof, the authorized capital stock
of Lease Co. consists of 100 shares of common stock,
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and immediately following the execution hereof, the outstanding capital
stock of Lease Co. will be 100 shares of common stock, all of which
shares have been duly and validly authorized, and are fully paid and
nonassessable. As of the date hereof, NWIP owns all the outstanding
capital stock of Lease Co. free and clear of any Liens and Lease Co.
has no subsidiaries. Except as set forth in this Section 4.2, there
are, and immediately after the date hereof there will be, no
outstanding (i) shares of capital stock or voting securities of Lease
Co., (ii) securities of Lease Co. convertible into or exchangeable for
shares of capital stock or voting securities of Lease Co.,
(iii) options or other rights to acquire from Lease Co., or other
obligation of Lease Co. to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or
voting securities of Lease Co., or (iv) obligation of Lease Co. to
repurchase or otherwise acquire or retire any shares of capital stock
or any convertible securities, rights or options of the type described
in (i), (ii), or (iii).
5. PAYMENT AND ADJUSTMENTS.
5.1 PAYMENT. The Company shall pay to NWIP upon execution and
delivery hereof (the "Closing") the amount of $ 132,582,655 payable in
immediately available funds by wire transfer to an account designated by NWIP in
writing for this purpose. This payment (the "Closing Date Payment") is the sum
of the following:
(a) $13,942,878 as reimbursement for certain costs and
expenses; plus
(b) $118,639,777 as payment for the Stock and all of the other
Assets.
The parties acknowledge that this payment does not include all amounts that NWIP
is entitled to be reimbursed under Section 8.06(a) of the Shareholders'
Agreement and those amounts will be settled in accordance with a schedule and
process to be agreed to by the Company and NWIP promptly following the closing.
5.2 POST-CLOSING ADJUSTMENT. The Closing Date payment is
subject to a post-closing adjustment as set forth in Schedule 5.2.
5.3 TAXES. The Company must pay sales and use taxes and NWIP
must pay transfer taxes relating to or arising from the transfer of the Assets
and Stock to the Company.
6. MISCELLANEOUS.
6.1 FURTHER ASSURANCES.
6.1(a) After the date of this Agreement, NWIP shall, from time
to time, at the Company's request, execute and deliver to the Company
such other instruments of conveyance and transfer and take such other
action as the Company may reasonably request to more effectively
transfer, assign, deliver and vest in the Company title to and
possession of the Assets as provided in this Agreement or otherwise to
consummate the transactions contemplated by this Agreement. After the
date of this Agreement, the
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Company shall from time to time, at NWIP's request, execute and deliver
such other instruments of assumption and take such other action as NWIP
may reasonably request to more effectively assume the Assumed
Liabilities or otherwise to consummate the transactions contemplated by
this Agreement.
6.1(b) After the date of this Agreement, if NWIP learns of
agreements or permits that were used or acquired for use exclusively in
connection with the Business in the Territory, NWIP may identify them
in writing to the Company and the Company will, if such agreement or
permit does not conflict with obligations undertaken by the Company,
assume the new agreement as an additional Assumed Liability hereunder.
6.1(c) After the date of this Agreement, if NWIP learns of
Assets that were used or acquired for use exclusively in connection
with the Business in the Territory and were not transferred to the
Company on the date hereof, NWIP will identify them in writing to the
Company, and the Company may, if such Asset does not conflict with
obligations undertaken by the Company, accept such Assets as additional
Assets hereunder. Any consent required for the assignment of any such
Asset to the Company shall be obtained by and at the expense of NWIP.
6.2 WAIVER OF BULK SALES COMPLIANCE. To the extent they apply,
the Company waives compliance by NWIP with the provisions of the "bulk sales"
law of any state including, without limitation, the provisions of Article 6 of
the Uniform Commercial Code as enacted in any applicable state.
6.3 CHOICE OF LAW. This Agreement shall be governed by New
York law, without regard to choice of law rules that would result in the
application of another state's law.
6.4 EXCUSABLE DELAY/TIME EXTENSION. Where performance by any
party to this Agreement is delayed by reason of an Excusable Delay (as defined
in the JV Agreement), the time for performance, and any otherwise applicable
time limit, schedule or deadline, shall be extended for a period of time equal
to the period of Excusable Delay.
6.5 AMENDMENTS. This Agreement may be amended only by a
writing executed by the parties.
6.6 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents set forth the entire understanding of the parties hereto and thereto
with respect to the subject matter hereof and thereof, and supersede all prior
contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties,
including but not limited to the Memorandum of Agreement, dated as of May 1,
1998, among Wireless Investment Partners, L.L.C., NWIP and Nextel, as amended.
6.7 NOTICES. Any notice, request or other communication
required or permitted hereunder must be in writing and is given: (a) when
received if personally delivered; (b) 12 hours after being sent by telecopy,
with confirmed answerback; or (c) 1 business day after
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being sent by priority delivery by established overnight courier, to the parties
at their respective addresses set forth below.
To NWIP: Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Telecopy: (703) 394-3896
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Jeanne M. Rickert
Telecopy: (216) 579-0212
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Any party by written notice to the others given in accordance with this Section
6.7 may change the address or the persons to whom notices or copies thereof are
to be directed.
6.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original, and all of
which together will constitute one and the same instrument.
6.9 WAIVER. Except as otherwise provided in this Agreement,
any party may waive, in writing, compliance by the other parties thereto (to the
extent such compliance is for the benefit of the party giving such waiver) with
any of the terms, covenants or conditions contained in this Agreement (except as
may be imposed by law). Any waiver by any party of any violation of, breach of,
or default under, any provision of any of this Agreement, by any other party
will not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of, or default under, any other
provision of this Agreement.
6.10 THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended, or may be construed, to confer upon or give any person or
entity other than the parties hereto any rights or remedies hereunder.
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6.11 SEVERABILITY. If any provision of this Agreement or the
application of such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision of this Agreement or invalidate or render unenforceable
such provision in any other jurisdiction. The parties will, to the extent
lawful and practicable, use their best reasonable efforts to enter into
arrangements to reinstate the intended benefits of any provision held invalid,
illegal or unenforceable.
6.12 CONSTRUCTION.
6.12(a) Words used in this Agreement, regardless of the number
or gender specifically used, will be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires. The parties hereto have
participated equally in the drafting of this Agreement and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of authorship of any provision of this Agreement.
6.12(b) The schedules and exhibits attached to this Agreement
are incorporated herein and are part of this Agreement for all
purposes. Unless otherwise stated, any reference in this Agreement to
an exhibit, section or schedule is to an exhibit, section or schedule
of this Agreement.
6.12(c) The headings in this Agreement are solely for
convenience of reference and are not to be given any effect in the
construction or interpretation of this Agreement.
6.13 AGREEMENT. This Agreement is one of the Collateral
Agreements identified in the JV Agreement. Accordingly, certain provisions of
the JV Agreement by their terms apply to this Agreement, including, without
limitation, Section 2.6, Article 12, and Section 13.2, and Section 13.10.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the day and year
first above written.
NEXTEL WIP CORP.
By: /s/ Alan Strauss
------------------------------------------
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John Chapple
------------------------------------------
Name: John Chapple
Title: President and Chief Executive Officer
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RESTRICTED STOCK PURCHASE AGREEMENT, dated as of November 20, 1998,
between Nextel Partners, Inc., a Delaware corporation (the "Company"), and
________ (the "Purchaser").
WHEREAS, the Purchaser is an executive officer of each of the Company
and Nextel Partners Operating Corp., a Delaware corporation and a wholly owned
subsidiary of the Company, and his continued participation is considered by the
Company to be important for the development of the Company's business; and
WHEREAS, in recognition of Purchaser's anticipated and highly valued
contribution to the Company, the Company is willing to sell to the Purchaser,
and the Purchaser desires to purchase from the Company, shares of the Company's
Class A Common Stock, in accordance with the terms and conditions hereof.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Additional Time Shares" means Time Shares other than Initial Time
Shares.
"Adjusted IRR" means, with respect to any Initial DLJ Equity sold or
otherwise disposed of, the internal rate of return on such Initial DLJ Equity as
of the date of such sale or other disposition, determined after giving effect to
any resulting acceleration of vesting of any Shares and of any options to
purchase Class A Common Stock that occurs upon or in connection with either such
sale or disposition of Initial DLJ Equity or any event giving rising to or
causing such sale or disposition of Initial DLJ Equity.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3,
13d-5 or 16a-1 under the Exchange Act (or any successor rules), including the
provision of such Rules that a Person shall be deemed to have beneficial
ownership of all securities that such Person has a right to acquire within 60
days, but such provision of the Rules will apply only if (i) all conditions
(other than payment of the purchase or acquisition price of such securities) to
such Person's exercise of such rights have been satisfied and (ii) such
securities (if options, warrants, or similar derivatives) are "in-the-money,"
provided that in all cases a Person shall not be deemed a Beneficial Owner of,
or to own beneficially, any securities if such beneficial ownership (1) arises
solely as a result of a revocable proxy delivered in response to a proxy or
consent solicitation made pursuant to, and in accordance with, the Exchange Act
and the applicable rules and regulations thereunder, and (2) is not also then
reportable on Schedule 13D under the Exchange Act.
"Board" means the Board of Directors of the Company.
<PAGE>
"Build Shares" means Shares that vest in accordance with Schedule I
depending on the Company's achievement of the buildout-related performance
targets set forth on Annex A.
"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of stock of, or other
ownership interests in, such Person, but excluding any pay-in-kind preferred
stock, other "debt equivalents" and mandatorily redeemable "nominal equity"
securities.
"Cause" means (i) the Purchaser's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
the Purchaser's duty of loyalty to the Company or any of its subsidiaries or
(iii) after 20 business days following the Purchaser's receipt of a written
notification from the Company specifying the particulars in reasonable detail,
the Purchaser's failure to comply with or to cure, as applicable, (A) a willful
and material refusal to comply with specific written directions of the Board
consistent with the Purchaser's employment agreement with the Company or any
subsidiary of the Company and capable of being performed by him or (B) a willful
and material breach of the Purchaser's duty of due care to the Company.
"Change in Control of the Company" means the occurrence of any of the
following events:
(a) any person or group (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act and the regulations thereunder) (i) is or becomes
the Beneficial Owner of more than 50% of the total Voting Stock or Total
Common Equity of the Company, or (ii) otherwise has the power to direct the
management and policies of the Company, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract or otherwise, except that no change of control will be deemed to
have occurred under this clause (ii) as a result of customary rights granted
(A) in any indenture, credit agreement or other agreement for borrowed money
or (B) to holders of non-convertible, mandatorily redeemable, preferred
stock unless and until action occurs that would otherwise cause a "Change in
Control of the Company" as herein defined, provided that such rights were
granted pursuant to a transaction in the financial markets and not as part
of a strategic alliance or similar transaction;
(b) the Company sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person (other than
to a direct or indirect wholly owned subsidiary of the Company);
(c) the Company, directly or indirectly, consolidates with, or merges
with or into, another Person, or any Person, directly or indirectly,
consolidates with, or merges with or into, the Company, and pursuant to such
transaction (or series of transactions) either: (i) the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, but excluding a transaction (or series of transactions)
where (A) the outstanding Voting Stock of the Company is converted into or
exchanged for Voting Stock
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of the surviving or transferee Person and (B) the holders of Voting
Stock of the Company immediately preceding such transaction receive more
than 50% of the total Voting Stock and Total Common Equity of the surviving
or transferee Person in substantially the same relative proportions as such
holders had prior to such transaction; or (ii) new shares of Voting Stock of
the Company are issued so that immediately following such transaction, the
holders of Voting Stock of the Company immediately preceding such
transaction own less than 50% of the Voting Stock and Total Common Equity of
the surviving Person; or
(d) during any period of two consecutive years following the Closing
Date, individuals who at the beginning of such period constituted the board
of directors of the Company (together with any directors who are members of
the board of directors of the Company on the date of the Closing, and any
new directors whose election by such board of directors or whose nomination
for election by the stockholders of the Company was approved by a vote of
66-2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority of
the board of directors of the Company then in office; provided, that no
change in the composition of the Board in connection with the Closing, or by
reason of any substitution of one director for another so long as both
directors are nominated by the same Person, shall constitute a Change in
Control of the Company for purposes of this paragraph (d).
Notwithstanding the foregoing, no "Change of Control of the Company"
shall occur merely by reason of any creditor of the Company foreclosing on
or otherwise causing the sale, transfer or other disposition of all or any
substantial part of the Company's assets (including, without limitation, the
Company's equity interests in its subsidiaries).
"Change in Control of Nextel" means the occurrence of any of the
following events:
(a) any person or group (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act and the regulations thereunder) other than a
Permitted Holder (i) is or becomes the Beneficial Owner of more than 50% of
the total voting stock of Nextel ordinarily entitled to vote in the election
of directors ("Nextel Voting Stock") or Total Common Equity of Nextel, or
(ii) otherwise has the power to direct the management and policies of
Nextel, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract or otherwise, except that no
change of control will be deemed to have occurred under this clause (ii) as
a result of customary rights granted (A) in any indenture, credit agreement
or other agreement for borrowed money unless and until there has been a
default under the terms of that agreement and the trustee or lender
exercises the rights granted therein or (B) to holders of non-convertible,
mandatorily redeemable, preferred stock unless and until action occurs that
would otherwise cause a "Change in Control of Nextel" as herein defined,
provided that such rights were granted pursuant to a transaction in the
financial markets and not as part of a strategic alliance or similar
transaction;
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<PAGE>
(b) Nextel sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person (other than
a Permitted Holder or a direct or indirect wholly owned subsidiary of
Nextel);
(c) Nextel, directly or indirectly, consolidates with, or merges with
or into, another Person (other than a Permitted Holder), or any Person
(other than a Permitted Holder), directly or indirectly, consolidates with,
or merges with or into, Nextel, and pursuant to such transaction (or series
of transactions) either: (i) the outstanding Nextel Voting Stock is
converted into or exchanged for cash, securities or other property, but
excluding a transaction (or series of transactions) where (A) the
outstanding Nextel Voting Stock is converted into or exchanged for Voting
Stock of the surviving or transferee Person and (B) the holders of Nextel
Voting Stock immediately preceding such transaction receive more than 50% of
the total Voting Stock and Total Common Equity of the surviving or
transferee Person in substantially the same relative proportions as such
holders had prior to such transaction; or (ii) new shares of Nextel Voting
Stock are issued so that immediately following such transaction, the holders
of Nextel Voting Stock immediately preceding such transaction own less than
50% of the Voting Stock and Total Common Equity of the surviving Person; or
(d) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of Nextel
(together with any directors who are members of the board of directors of
Nextel on the date of the Closing, and any new directors whose election by
such board of directors or whose nomination for election by the stockholders
of Nextel was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of directors of Nextel then
in office;
provided that it is expressly understood and agreed that the direct or indirect
sale or other disposition of all or any portion of the Nextel Voting Stock
and/or the Capital Stock in Nextel held now or in the future by any Permitted
Holder to any Person other than another Permitted Holder shall not by itself be
a Change in Control of Nextel, unless such sale or disposition, alone or in
conjunction with other transactions, results in the occurrence of an event of
the type described in any of clauses (a), (b), (c) or (d) above.
"Class A Common Stock" means the Class A Common Stock, par value $.001
per share, of the Company.
"Closing" means the initial closing (if any) of the equity investments
contemplated by the Commitment Letter.
"Closing Price" on any Trading Day with respect to the per share price
of any shares of Capital Stock of any Person means the last reported sale price
regular way or, in case no such
4
<PAGE>
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case on the New York Stock exchange or
if such shares of Capital Stock are not listed or admitted to trading on such
exchange, on the principal national securities exchange on which such shares are
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the Nasdaq Stock Market or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq Stock Market and the issuer and principal securities exchange do
not meet such requirements, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any New York Stock Exchange member
firm of national standing that is selected from time to time by such Person for
that purpose.
"Commitment Letter" means the Commitment Letter, dated August 13, 1998,
among the Company and the investors named therein.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" has the meaning set forth in the preamble.
"control" of a Person means the power, direct or indirect, (i) to vote
or direct the voting of more than 50% of the outstanding shares of Voting Stock
of such Person, or (ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Deferred Shares" means, collectively, Unvested Revenue Shares and
Unvested EBITDA Shares (including but not limited to Eligible Shares).
"DLJ" means Donaldson, Lufkin & Jenrette, Inc.
"DLJ Investors" means, collectively, DLJ Merchant Banking Partners II,
L.P., Sprout Capital VIII, L.P. and certain other affiliates and/or clients of
DLJ, that purchase in the aggregate $125 million of Series A Preferred Stock at
the Closing.
"EBITDA" means, with respect to any fiscal year of the Company,
earnings of the Company for such year before interest (including without
limitation the interest component of any capital lease obligation), taxes,
depreciation and amortization for such year; provided, that for purposes of
determining whether EBITDA targets have been met hereunder, the following costs
and expenses of the Company shall, to the extent deducted from earnings in
calculating EBITDA in accordance with generally accepted accounting principles,
be added back to earnings in calculating EBITDA: (i) non-cash compensation
expenses resulting from the application of APB Opinion No. 25 to vesting of
Shares under the Restricted Stock Purchase Agreements, (ii) out-of-pocket costs
incurred by the Company (or incurred by others and reimbursed by the Company) in
connection with
5
<PAGE>
the transactions contemplated by the Commitment Letter to be consummated at the
Closing (whether such transactions are consummated at the Closing or
thereafter), including without limitation the contemplated offering of
high-yield bonds and the subsequent exchange of such privately issued bonds for
publicly registered bonds, (iii) prior to the IPO, the costs incurred in
complying with SEC reporting requirements relating to the Company's publicly
held bonds (if any), and (iv) other appropriate costs and expenses to be
determined by the Board (acting in the good faith exercise of its business
judgment), which may include expenses arising under the agreements relating to
the operation of the Company to the extent not contemplated by the Company's
business plan in effect on the date hereof (on which the EBITDA targets set
forth on Annex A are based). The parties agree that (i) non-cash charges shall,
to the extent deducted from earnings, be added back to earnings in calculating
EBITDA, and (ii) extraordinary non-cash revenue not in the ordinary course of
business shall be deducted from earnings in calculating EBITDA, unless the Board
(acting in the good faith exercise of its business judgment) determines such
adjustment to be inappropriate.
"EBITDA Shares" means Shares that vest in accordance with Schedule I
depending on the Company's achievement of the EBITDA-related performance targets
set forth on Annex A.
"Eligible Shares" means, collectively, Eligible EBITDA Shares and
Eligible Revenue Shares .
"Eligible EBITDA Shares" has the meaning set forth in Schedule I.
"Eligible Revenue Shares" has the meaning set forth in Schedule I.
"Escrow Agent" has the meaning set forth in Section 5(a).
"Escrow Shares" has the meaning set forth in Section 5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any Shares repurchased by
the Company hereunder, (i) if there has been no Closing, the fair market value
thereof as determined in good faith by the Board no more than ten days prior to
the consummation of such repurchase and (ii) if there has been a Closing, the
Spectrum Price in effect on the date of consummation of such repurchase, subject
to adjustment if the Board determines in good faith that such Spectrum Price no
longer reflects the fair market value of such Shares (it being understood that
the Board's determination of the Spectrum Price may be challenged by the
Purchaser as provided in the definition thereof). To the extent there is not a
recent determination of the Spectrum Price on the date of determination of Fair
Market Value, the Board will calculate the Spectrum Price as of such date in
good faith on the basis of available information.
"FCC" means the Federal Communications Commission.
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<PAGE>
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by Nextel Sub to the
Company thereunder, which changes are implemented in order to cause such
agreements to be in compliance with FCC requirements so as to reflect the intent
of the parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in the Purchaser's
duties, responsibilities or reporting relationships, (ii) a relocation of the
Purchaser's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by the Purchaser, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under the Purchaser's employment agreement with the Company
or a subsidiary of the Company that are not cured after 20 business days
following the Company's receipt of a written notification from the Purchaser
specifying the particulars in reasonable detail, and (v) from and after the
Closing, following the implementation of any FCC Modifications, if Nextel Sub
exercises control over day-to-day operating decisions, policy decisions or
personnel decisions of the Company pursuant to such FCC Modifications that
(before such modifications) would have been decisions made by the Company's
management and such control exercised by Nextel Sub is materially more extensive
(in the collective reasonable judgment of the Senior Managers then employed by
the Company) than that which Nextel Sub could have exercised under the
agreements to which Nextel Sub is a party relating to the governance and
operation of the Company before giving effect to the FCC Modifications.
Notwithstanding the foregoing, a termination with Good Reason under clause
(v) above shall not be deemed effective until 90 days following written notice
by the Purchaser to the Company of the occurrence of any of the foregoing.
"Initial DLJ Equity" means the shares of Series A Preferred Stock
contemplated by the Commitment Letter to be issued to the DLJ Investors at the
Closing, regardless of whether DLJ has transferred funds in respect of such
shares, together with any shares of Class A Common Stock issuable upon
conversion thereof, and any shares of Capital Stock of the Company or other
securities into which such shares are subdivided, combined or otherwise
converted or exchanged by the Company.
"Initial Time Shares" means the Time Shares subject to vesting in
1998-99 in accordance with Schedule I, which account for 25% of the Shares.
"IPO" means the initial underwritten public offering of the Company's
equity securities pursuant to a registration statement under the Securities Act.
"Nextel" means NEXTEL Communications, Inc. and its successors and
assigns.
7
<PAGE>
"Nextel Sub" means Nextel WIP Corp., a Delaware corporation and a
wholly owned indirect subsidiary of Nextel.
"Performance Shares" means, collectively, Build Shares, Revenue Shares
and EBITDA Shares.
"Permitted Holders" means, collectively, Craig O. McCaw and any entity
or entities (i) that is controlled directly or indirectly by Craig O. McCaw or
the estate of Craig O. McCaw and (ii) a majority of the equity interests of
which are owned, directly or indirectly, by Craig O. McCaw and his family, his
brothers and their families, officers and employees of such entities, ex-spouses
of such persons and estates of, or trusts for the primary benefit of, the
foregoing persons (collectively, the "McCaw Group"); provided that "Permitted
Holders" also includes a group of entities that is each controlled by
Craig O. McCaw or the estate of Craig O. McCaw and through which the McCaw Group
collectively own, directly or indirectly, a majority of the equity interests of
Nextel (it being understood that if the McCaw Group collectively owns 50% of an
entity that owns 20% of Nextel's equity interests, the McCaw Group will be
deemed to indirectly own 10% of Nextel's equity interest though such entity).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Purchaser" has the meaning set forth in the preamble.
"Required Build" means the Build Out of all Year One and Year Two Build
Areas in the Initial Sections (as such terms are defined in the Memorandum of
Agreement, dated as of May 1, 1998, among the Company, as successor in interest
to Wireless Investment Partners, L.L.C., Nextel Sub and Nextel, as amended by
the Commitment Letter).
"Revenue Shares" means Shares that vest in accordance with Schedule I
depending on the Company's achievement of the revenue-related performance
targets set forth on Annex A.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $.001 per share, of the Company.
8
<PAGE>
"Series C Preferred Stock" means the Series C Preferred Stock, par
value $.001 per share, of the Company.
"Shares" has the meaning set forth in Section 2(a).
"Spectrum Price" means (i) prior to the IPO, the price per share of
Series C Preferred Stock or Class A Common Stock as determined by the Board from
time to time for purposes of sales of 800 MHz spectrum by Nextel Sub to the
Company, subject to challenge by the Purchaser in accordance with the same
procedures and other provisions applicable to challenges by Nextel Sub of such
determination and (ii) following an IPO, the average Closing Price of the
Class A Common Stock over the 20 consecutive Trading Days immediately preceding
any day of determination.
"Target Return" means, with respect to a sale or other disposition of
Initial DLJ Equity consummated (i) in 1999 or 2000, a 50% Adjusted IRR, (ii) in
2001, a 35% Adjusted IRR, and (iii) after 2001, a 30% Adjusted IRR, in each case
based on the value of the consideration paid for the Initial DLJ Equity sold or
otherwise disposed of.
"Time Shares" means Shares that vest over time in accordance with
Section 3(a) and Schedule I, and shall include the Initial Time Shares and the
Additional Time Shares.
"Total Common Equity" of any Person means, as of any day of
determination, the product of (i) the aggregate number of outstanding primary
shares of common stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of Common Stock of such Person) and (ii) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (ii) of the preceding sentence
shall be determined by the Board of Directors of such Person in good faith and
evidenced by a resolution of such Board of Directors.
"Trading Days" with respect to a securities exchange or automated
quotation system means a day on which such exchange or system is open for a full
day of trading.
"Unvested Shares" means Shares (including EBITDA Shares, Performance
Shares, Revenue Shares and Time Shares) that are not Vested Shares.
"Vested Shares" means Shares that are vested in accordance with
Section 3.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
2. Purchase and Sale.
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<PAGE>
(a) The Company hereby agrees to sell to the Purchaser, and the
Purchaser hereby agrees to purchase from the Company, an aggregate
of ______[FN1] shares of the Company's Class A Common Stock, par value $.001
per share (the "Shares"), at the price of $.01 per share.
(b) The Purchaser is delivering to the Company herewith a check payable
to the Company in the amount of the aggregate purchase price of the Shares, and
the Company is herewith delivering to the Escrow Agent, to be held in escrow as
herein provided, a duly executed certificate evidencing the Shares issued in the
name of the Purchaser.
(c) This Agreement shall not confer upon the Purchaser any right with
respect to continuation of his employment with the Company, nor shall it
interfere with or affect in any manner the right or power of the Company, or a
parent or subsidiary of the Company, to terminate any agreement with the
Purchaser in accordance with the terms thereof.
3. Vesting.
(a) Ordinary Vesting. The parties agree that 25% of the Shares shall
vest as Initial Time Shares, 25% of the Shares shall vest on December 31, 1999,
25% of the Shares shall vest on December 31, 2000 and 25% of the Shares shall
vest on December 31, 2001; provided that in the event of a Closing, from and
after the date thereof, the Shares shall vest in accordance with Schedule I so
long as the Purchaser is continuously employed by the Company or a subsidiary of
the Company, subject to the provisions of Section 3(b) below; provided, further
that the Company agrees and acknowledges that, from and after the date hereof,
___% [FN2] of the Initial Time Shares shall be Vested Shares for purposes of
this Agreement.
(b) Accelerated Vesting. Notwithstanding the provisions of Section 3(a)
or Schedule I to the contrary:
(i) In the event of a Closing, upon a Change in Control of the
Company or a Change in Control of Nextel, all of the Unvested Shares
(including Eligible Shares, but excluding Deferred Shares that are not
Eligible Shares) shall vest immediately.
(ii) Upon termination of the Purchaser's employment on account of
death or disability, or by the Company without Cause, (A) all of his
Unvested Time Shares shall vest immediately and (B) in the event of a
Closing, all of his Unvested Performance Shares that are subject to vesting
in the year of termination (including any Performance Shares vesting in such
year pursuant to Section 3(c)) shall vest at the end of such year without
regard to whether the Company achieves the applicable performance targets.
(iii) Upon resignation of the Purchaser for Good Reason, all of
his Unvested Shares shall vest immediately.
- ----------------------------
[1] John Chapple 491,111
John Thompson 339,444
David Aas 162,500
David Thaler 195,000
Perry Satterlee 137,222
Mark Fanning 137,222
[2] John Chapple 100%
John Thompson 81.39%
David Aas 98.33%
David Thaler 72.78%
Perry Satterlee 64.44%
Mark Fanning 89.72%
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<PAGE>
(c) Vesting of Deferred Shares. In the event of a Closing and upon the
sale or other disposition by one or more of the DLJ Investors (other than to an
affiliate controlled by DLJ), in one or more transactions, of 75% of the Initial
DLJ Equity, if such DLJ Investors shall have achieved the applicable Target
Return in cash, promissory notes, freely tradable securities or other readily
marketable consideration, then 50% of the Deferred Shares will vest immediately.
For each additional one percent of Initial DLJ Equity sold or otherwise disposed
of at or above the applicable Target Return, an additional two percent of the
Deferred Shares will vest.
4. Repurchase Rights.
(a) Unvested Shares. Subject to the provisions of Section 3, in the
event of termination of the Purchaser's employment with the Company for any
reason or for no reason, the Company shall, for 90 days following the date of
termination, have the option to repurchase all or any portion of the Unvested
Shares at a repurchase price equal to the lesser of (i) Fair Market Value and
(ii) $.01 per share.
(b) Vested Shares/Termination on Account of Death or Disability. In the
event of termination of the Purchaser's employment with the Company on account
of death or disability prior to the IPO, for 180 days following the date of
termination (i) the Company shall have the option to purchase from the Purchaser
or his estate (and the Purchaser or his estate then shall be obligated to sell
to the Company) and (ii) the Purchaser shall have the option to require the
Company to purchase from the Purchaser or his estate, in each case all or any
portion of the Vested Shares at a repurchase price per share equal to Fair
Market Value.
(c) Vested Shares/Termination without Cause or Resignation for Good
Reason. In the event of termination of the Purchaser's employment with the
Company by the Company without Cause or by the Purchaser for Good Reason,
(i) prior to the IPO, for 90 days following the date of termination the Company
shall have the option to elect to purchase from the Purchaser (and the Purchaser
or his estate then shall be obligated to sell to the Company) all or any portion
of the Vested Shares at a repurchase price per share equal to Fair Market Value
(determined as of a date no more than ten days prior to the closing of such
repurchase), provided that the Purchaser shall have the right to elect, by
notice to the Company given within ten days after the Company's election to
purchase any of such Shares, to defer the closing of such purchase and sale for
up to 18 months following the date of termination, such purchase and sale to be
at a repurchase price per share equal to Fair Market Value (determined as of a
date no more than ten days prior to the closing of such repurchase), and
(ii) prior to the IPO, for 18 months following the date of termination the
Purchaser shall have the option to require the Company to purchase from the
Purchaser all or any portion of the Vested Shares at a repurchase price per
share equal to Fair Market Value (determined as of a date no more than ten days
prior to the closing of such repurchase), provided that in no event shall the
Company be required to repurchase more than $________ [FN3]in aggregate Fair
Market Value of Shares from the Purchaser pursuant to this clause (ii).
- ------------------
[3] John Chapple $5,000,000.00
John Thompson $3,455,878.50
David Aas $1,654,412.14
David Thaler $1,985,294.57
Perry Satterlee $1,397,056.88
Mark Fanning $1,397,056.88
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<PAGE>
(d) Vested Shares/Termination for Cause or Resignation without Good
Reason. In the event of termination of the Purchaser's employment with the
Company by the Company for Cause or by the Purchaser without Good Reason, for 90
days following the date of termination the Company shall have the option to
purchase from the Purchaser all or any portion of the Vested Shares (i) if there
has been no Closing, at a repurchase price per Share equal to Fair Market Value,
and (ii) if there has been a Closing, at a repurchase price per share equal
(A) in the case of the Initial Time Shares, Fair Market Value, and (B) in the
case of Shares other than the Initial Time Shares, (x) prior to the completion
of the Required Build, the lesser of Fair Market Value and $.01 per share, (y)
after completion of the Required Build, but prior to the fourth anniversary of
the Closing, 50% of Fair Market Value, and (z) after completion of the Required
Build, and on and after the fourth anniversary of the Closing, 100% of Fair
Market Value.
(e) Exercise by the Company. Any repurchase by the Company pursuant to
this Section 4 shall be exercisable by written notice to the Purchaser or his
executor (with a copy to the Escrow Agent) given within the applicable time
period, and such notice if given shall constitute an irrevocable offer by the
Company to repurchase the Shares covered thereby. Such notice shall set forth
the number of Shares to be repurchased and the aggregate repurchase price
thereof, as determined by the Board in good faith as of a date no more than ten
days prior to such repurchase. Within five days after delivery of such notice,
upon delivery by the Escrow Agent to the Company of the Shares being
repurchased, together with one or more related stock powers executed by the
Purchaser in blank, and upon receipt by the Company of a representation by the
Purchaser that he owns the Shares being repurchased, the Company shall pay to
the Purchaser in immediately available funds an amount equal to the aggregate
repurchase price of the Shares being repurchased.
(f) Exercise by the Purchaser. The Purchaser's right to require the
Company to repurchase Shares under Section 4(b) or (c) shall be exercisable by
written notice to the Company (with a copy to the Escrow Agent) given within the
applicable time period, and such notice if given shall constitute an irrevocable
offer by the Purchaser to sell the Shares covered thereby. Within five days
after receipt of such notice (i) the Company shall pay to the Purchaser in
immediately available funds (or as otherwise may be determined in accordance
with this Agreement) an amount equal to the aggregate repurchase price of the
Shares being repurchased and (ii) the parties agree that the Escrow Agent shall
deliver to the Company the certificate(s) for the Shares being repurchased,
together with one or more related stock powers executed by the Purchaser in
blank, which certifi cate(s) and power(s) are held by the Escrow Agent pursuant
to Section 5(a); provided that in the event of a repurchase of Shares pursuant
to Section 4(c)(ii), the Company shall have the option of paying the repurchase
price (i) in a single lump sum or (ii) in annual installments of $2 million so
long as the outstanding balance of the aggregate repurchase price is $2 million
or more, with the first installment payable within five days after delivery of
the Company's notice of repurchase and the final installment being equal to the
outstanding balance of the aggregate repurchase price; provided, further that if
the Board determines (pursuant to a duly adopted resolution of the Board or its
compensation committee, a copy of which shall be delivered to the Purchaser)
that the Company is unable to repurchase all or some portion of such Shares for
cash without breaching the terms of its debt instruments, or that such
repurchase would otherwise have a material adverse effect on the
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<PAGE>
financial condition of the Company, the Company will pay in cash the maximum
amount permitted under such debt instruments, or that would not result in such a
material adverse effect, and deliver to the Purchaser a promissory note for the
balance, payable as soon as (and in the maximum amounts that) the terms of such
debt instruments will permit or that will not have such a material adverse
effect, but in no event later than five years after the date of issuance,
bearing interest at the highest rate charged from time to time under the
Company's senior credit facility, secured by the Shares being repurchased
reasonably satisfactory to the Company and the Purchaser. The Purchaser agrees
that the Shares being repurchased, when so transferred to the Company, will be
free and clear of all liens, claims, encumbrances and charges caused or created
by the Purchaser.
(g) Notwithstanding anything herein to the contrary, if, prior to
completion of the Required Build, the Purchaser (i) resigns without Good Reason
or his employment with the Company is terminated for Cause and (ii) is employed
by a wireless voice communications service provider that competes (at the time
of commencement of his employment with such entity) in any of the markets of
Nextel or the Company, the Purchaser shall (upon the commencement of his
employment with such entity) refund in cash to the Company an amount equal to
the excess (if any) of (x) the price paid by the Company for any Shares
repurchased by the Company upon his termination over (y) the price paid by the
Purchaser for such Shares pursuant to this Agreement.
5. Escrow of Shares.
(a) Shares that are subject to repurchase by the Company pursuant to
Section 4 (collectively, "Escrowed Shares") shall be held in escrow by the
Secretary of the Company as escrow agent (the "Escrow Agent") together with one
or more stock powers executed by the Purchaser in blank and in form legally
sufficient to effect the transfer of such Shares. Shares that are no longer
subject to repurchase by the Company pursuant to Section 4 shall be released
from escrow at the Purchaser's request, and the Escrow Agent shall promptly
cause a new certificate to be issued for such released Shares and shall deliver
such certificate to the Purchaser.
(b) The Escrow Agent is hereby directed to permit transfers of Escrowed
Shares only in accordance with this Agreement or upon receipt of instructions
signed by both parties. In the event further instructions are desired by the
Escrow Agent, he shall be entitled to rely upon directions executed by a
majority of the authorized number of the Company's directors (excluding the
Purchaser if he is then a member of the Board). The Escrow Agent shall have no
liability for any act or omission hereunder while acting in good faith in the
exercise of his own judgment, and shall be entitled to indemnification from the
Company to the full extent permitted by applicable law in respect of his service
as Escrow Agent.
(c) If the Company or any assignee repurchases Shares pursuant to
Section 4, the Escrow Agent, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
13
<PAGE>
(d) Subject to the terms hereof, the Purchaser and each of his
permitted assigns shall, as a record owner of Shares, have all the rights of a
stockholder with respect to the Escrowed Shares while they are held in escrow,
including without limitation, the right to vote the Escrowed Shares and to
receive any cash dividends and other distributions declared thereon, provided
that any such dividends or distributions shall be immediately deposited with the
Escrow Agent to be held in escrow together with the Escrowed Shares in
accordance with this Section 5. If, from time to time prior to the termination
of the Company's repurchase rights, there is (i) any stock dividend, stock split
or like change in the Shares or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of his ownership of Escrowed Shares shall be immediately subject to this
escrow, deposited with the Escrow Agent and included thereafter as "Escrowed
Shares" for purposes of this Agreement.
6. Legends; Transfer Restrictions.
(a) The certificates evidencing the Shares shall be endorsed with the
following legend (and any other legend required to be placed thereon by
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
In addition, the certificates evidencing the Escrowed Shares shall be
endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Except as otherwise permitted by, and subject to the provisions of
each of, this Agreement, any stockholders' agreement to which the Purchaser is a
party, the restated certificate of incorporation of the Company, as amended from
time to time, or the Purchaser's employment agreement with the Company or a
subsidiary of the Company, none of the Escrowed Shares (or any beneficial
interest therein) shall be transferred, encumbered or otherwise disposed of in
any way.
7. Adjustments for Splits, Etc. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be automatically
adjusted to reflect any stock split, stock dividend or like change in the shares
of Class A Common Stock which may be made by the Company after the date of this
Agreement.
14
<PAGE>
8. Investment Representations; Restriction on Transfer. In connection
with the purchase of the Shares, the Purchaser represents to the Company the
following:
(a) He is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. He is purchasing
these securities for investment for his own account only and not with a view to,
or for resale in connection with, any "distribution" thereof within the meaning
of the Securities Act.
(b) He understands that the Shares have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of his investment intent
as expressed herein. In this connection, he understands that, in the view of the
SEC, the statutory basis for such exemption may not be present if his
representations meant that his present intention was to hold these securities
for a minimum capital gains period under the tax statutes, for a deferred sale,
for a market rise, for a sale if the market does not rise, or for a year or any
other fixed period in the future.
(c) He further acknowledges and understands that the Shares must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. He understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) The Purchaser is an "accredited investor" within the meaning of
Regulation 501 under the Securities Act of 1933, as amended, in that he is an
"executive officer" as defined in Regulation 501 or otherwise is an "accredited
investor", the Purchaser is aware that the Company is a "development stage"
company with no significant business operations or history and may be dependent
for its future success on matters that cannot now be foreseen or predicted, and
the Purchaser is not making this investment in the Company based on any
representation or warranty made to him by the Company.
(e) The Purchaser's financial situation is such that the Purchaser can
afford to bear the economic risk of holding the Shares acquired hereunder for an
indefinite period of time, the Purchaser has adequate means for providing for
his needs and contingencies and can afford to suffer the complete loss of the
investment in the Shares.
(f) The Purchaser's knowledge and experience in financial and business
matters are such that he is capable of evaluating the merits and risks of the
investment in the Shares, or the Purchaser has been advised by a representative
possessing such knowledge and experience.
(g) The Purchaser understands that the Shares acquired hereunder are a
speculative investment which involves a high degree of risk of loss of the
entire investment therein, that there are substantial restrictions on the
transferability of the Shares, and that for an indefinite
15
<PAGE>
period following the date hereof there will be no (or only a limited) public
market for the Shares and that, accordingly, it may not be possible for
Purchaser to sell the Shares in case of emergency or otherwise.
(h) The Purchaser and his representatives, including his professional,
financial, tax and other advisors, have carefully reviewed all documents
available to them in connection with the investment in the Shares, and the
Purchaser understands and has taken cognizance of all the risks related to such
investment.
(i) The Purchaser and his representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and its representatives concerning the terms and
conditions of the acquisition of the Shares and related matters and to obtain
all additional information which the Purchaser or his representatives deem
necessary.
(j) All information that the Purchaser has provided to the Company and
its representatives concerning the Purchaser and his financial position is true,
complete and correct.
9. General Provisions.
(a) This Agreement shall be governed by the internal laws of the State
of Delaware without regard to conflicts of law principles.
(b) This Agreement represents the entire agreement between the parties
with respect to the purchase of the Shares by the Purchaser and may be modified
or amended only by a writing signed by both parties.
(c) All notices given hereunder shall be in writing and shall be deemed
to have been duly given and received (i) when delivered personally, with receipt
acknowledged in writing by the recipient, (ii) on the tenth business day after
being sent by registered or certified mail (postage paid, return receipt
requested), (iii) one business day after being sent by a reputable overnight
delivery service, postage or delivery charges prepaid, or (iv) on the date on
which a facsimile is transmitted, in each case to the parties at their
respective addresses stated below; provided, that if the intended recipient of
any notice hereunder refuses to acknowledge receipt thereof in writing, such
notice shall be deemed to have been duly given on the date of such refusal. Any
party may change its address for notice by giving notice of the new address to
the other party in accordance with the provisions of this paragraph.
16
<PAGE>
If to the Company:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corporation
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
If to Executive:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
[Home Address]
(d) The rights and obligations of the Purchaser under this Agreement
may be assigned only with the prior written consent of the Company.
(e) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party thereafter from enforcing each and every other provision of this
Agreement. The rights granted both parties herein are cumulative and shall not
constitute a waiver of either party's right to assert all other legal remedies
available to it under the circumstances.
(f) Each party agrees, upon the reasonable request of the other party,
to execute any further documents or instruments necessary or desirable to carry
out the purposes or intent of this Agreement.
(g) Except as otherwise provided herein, any controversies or claims
arising out of, or relating to this Agreement or the breach thereof, shall be
settled by arbitration in accordance with the commercial rules of the American
Arbitration Association, which decision shall be final and
17
<PAGE>
binding on the parties, and judgment upon the award rendered shall be entered in
any court having jurisdiction thereof. Any party may demand such arbitration in
accordance with the procedures set out in those rules. The arbitration shall be
conducted in New York, New York, or such other location as may be mutually
agreed upon by the parties. Special, consequential, or punitive damages shall
not be awarded by the arbitrator. In the event of any arbitration proceeding
hereunder, the Company will (x) pay the fees and expenses of the arbitrator and
(y) advance the Purchaser's documented out-of-pocket costs (including reasonable
counsel fees and expenses) on a current basis, provided, that if the Purchaser
is determined not to be the substantially prevailing party on the matters
submitted for arbitration (which determination shall be made by the arbitrator
and included in his or her decision), the Purchaser will promptly reimburse the
Company for any expenses so advanced. The Purchaser acknowledges that the
Company is agreeing to make advances to him pursuant to the preceding sentence
in consideration of his agreement to reimburse the Company for any such advances
to the extent required by the preceding sentence. The Company will in all events
pay its own costs (including counsel fees and expenses) in connection with any
arbitration proceeding hereunder.
(h) The Purchaser understands that he (and not the Company) shall be
responsible for his own federal, state, local or foreign tax liability and any
of his other tax consequences that may arise as a result of the transactions
contemplated by this Agreement. The Purchaser shall rely solely on the
determinations of his tax advisors or his own determinations, and not on any
statements or representations by the Company or any of its agents, with regard
to all such tax matters. The Purchaser shall notify the Company and Nextel
Partners Operating Corp. in writing if the Purchaser files an election pursuant
to Section 83(b) of the Internal Revenue Code of 1986, as amended, with the
Internal Revenue Service within 30 days from the date of the sale of the Shares
hereunder; and the Company shall file its tax returns and reports in a manner
consistent with such election, provided that such election is made on the basis
disclosed to the Company. The Company intends, in the event it does not receive
from the Purchaser evidence of a proper filing, to claim a tax deduction for and
to calculate and withhold taxes on any amount which would be taxable to the
Purchaser in the absence of such an election.
(i) To the extent legally required, the Company shall have the right
and is authorized to withhold from any payments due or transfers in connection
with the purchase of the Shares hereunder or from any compensation or other
amount owing to the Purchaser the amount (in cash, Shares, other securities or
other property) of any applicable withholding taxes in respect of the Shares and
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes, if applicable.
* * *
18
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
NEXTEL PARTNERS, INC.
By
--------------------------------------
Name:
Title:
--------------------------------------
[PURCHASER]
Agreed to and accepted by:
- --------------------------------------
[SPOUSE OF PURCHASER]
<PAGE>
AMENDMENT NO. 1 TO RESTRICTED STOCK PURCHASE AGREEMENT, dated as of
January 29, 1999, between Nextel Partners, Inc., a Delaware corporation (the
"Company"), and (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Restricted
Stock Purchase Agreement, dated as of November 20, 1998 (the "Purchase
Agreement"); and
WHEREAS, the parties hereto desire to amend the Purchase Agreement as
hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Capitalized terms used in this Amendment without
definition shall have the meanings given to such terms in the Purchase
Agreement.
2. Amendments to Purchase Agreement. The Purchase Agreement is hereby
amended as follows:
(a) The reference in the definition of Commitment Letter to "August 13,
1998" shall be deleted and replaced with a reference to "December 4, 1998."
(b) The last paragraph of the definition of "Change in Control of the
Company" shall be deleted and replaced with the following:
"Notwithstanding the foregoing, no 'Change of Control of the Company'
shall occur (i) merely by reason of any creditor of the Company foreclosing
on or otherwise causing the sale, transfer or other disposition of all or
any substantial part of the Company's assets (including, without limitation,
the Company's equity interests in its subsidiaries) or (ii) merely by reason
of a transfer by Eagle River Investments, LLC ('Eagle River') to another
Person of the Capital Stock of the Company owned by Eagle River so long as
Craig O. McCaw ('McCaw') controls (as defined in Section 4.01(h) of the
Shareholders' Agreement) such Person whether or not McCaw owns a majority of
the equity interests of such Person, unless such transfer referred to in
this clause (ii), alone or in conjunction with other transactions, results
in the occurrence of an event of the type described in any of clauses (a),
(b), (c) or (d) above."
(c) (i) Paragraph (a) of the definition of "Change in Control of
Nextel" shall be amended by adding, after the words "by contract or otherwise",
and before the comma, the following:
<PAGE>
"(without limiting the generality of this clause (ii), any person or group
that succeeds to the rights currently held by Craig O. McCaw and his
Affiliates in respect of Nextel, or otherwise has powers and rights
comparable thereto, shall be deemed for purposes of this definition to have
the power to direct the management and policies of Nextel)"
(ii) The last paragraph of the definition of "Change in Control of
Nextel" shall be deleted and replaced with the following:
"provided that it is expressly understood and agreed that (A) the
transfer of Nextel Voting Stock and/or Capital Stock in Nextel by a
Permitted Holder to an Affiliate of Craig O. McCaw or the estate of
Craig O. McCaw, or any successive transfer by such or another Affiliate to
another Affiliate of Craig O. McCaw, or the estate of Craig O. McCaw, shall
not by itself be a Nextel Sale (provided that, for this purpose, any such
Affiliate shall not be controlled by any person or group other than Craig O.
McCaw or the estate of Craig O. McCaw) and (B) the direct or indirect sale
or other disposition of all or any portion of the Nextel Voting Stock and/or
the Capital Stock in Nextel held now or in the future by any Permitted
Holder to any Person other than another Permitted Holder shall not by itself
be a Change in Control of Nextel, unless such sale or disposition, alone or
in conjunction with other transactions, results in the occurrence of an
event of the type described in any of clauses (a), (b), (c) or (d) above."
(d) The reference in the definition of DLJ Investors to "Sprout Capital
VIII, L.P." shall be deleted, and the reference in such definition to "$125
million" shall be deleted and replaced with a reference to "$74,249,720."
(e) Clause (iv) of the proviso to the first sentence of the definition
of "EBITDA" shall be renumbered as clause (v), and a new clause (iv) shall be
added as follows:
"(iv) out-of-pocket costs and expenses incurred by the Company (or incurred
by others and reimbursed by the Company) in connection with (A) the
transactions contemplated by Section 4.18 of the Joint Venture Agreement,
dated as of January 29, 1999, among the Company, Nextel Partners Operating
Corp. and Nextel WIP Corp. and (B) the matters set forth on Schedule D to
the Subscription and Contribution Agreement, dated as of January 29, 1999,
among the Company and the investors named therein,"
2
<PAGE>
[(f) clause (i) of the first sentence of the definition of "Good
Reason" shall be deleted and replaced with the following:
"(i) a material adverse change in the Purchaser's duties,
responsibilities or reporting relationships, including without limitation
Purchaser's not being elected to the Board as contemplated by Section 2.01
of the Shareholders' Agreement or his removal from the Board other than
for "cause" in accordance with the provisions of Section 2.02 of the
Shareholders' Agreement."][FN1]
(f) The second sentence of the definition of "Good Reason" shall be
deleted and replaced with the following:
"Notwithstanding the foregoing, a termination with Good Reason under clause
(v) above shall not be deemed effective until 120 days following written
notice by the Purchaser to the Company of the occurrence of any of the
foregoing and only if the foregoing continue to occur as of such 120th day."
(g) A new definition of "Joint Venture Agreement" shall be added to
Section 1 as follows:
"'Joint Venture Agreement' means the Joint Venture Agreement of even
date herewith among the Company, Nextel Partners Operating Corp. and Nextel
Sub."
(h) The definition of "Required Build" shall be deleted and replaced
with the following:
"'Required Build' means the completion of the Build Out of all Initial
Sections (as defined in the Joint Venture Agreement) assigned to the first
or second Build Year (as defined in the Joint Venture Agreement), and of any
Option Sections (as defined in the Joint Venture Agreement) assigned to the
first or second Build Year that are included in the Territory (as defined in
the Joint Venture Agreement) through the Company's election under
Section 6.2B of the Joint Venture Agreement, but excluding any such Option
Sections that are included in the Territory as a result of the Company's
response to a notice given pursuant to Section 6.2C of the Joint Venture
Agreement."
(i) The definition of "Spectrum Price" shall be deleted, all references
in the Purchase Agreement shall be deleted and replaced with references to
"Equity Value," and a new definition of "Equity Value" shall be added to
Section 1 as follows:
"'Equity Value' has the meaning set forth in the Joint Venture
Agreement, provided, that Equity Value as determined thereunder shall be
subject to challenge by the Purchaser in accordance with the same procedures
and other provisions applicable to challenges by Nextel Sub of such
determination."
(j) Clause (i) of the first sentence of the definition of "Total Common
Equity" shall be deleted and replaced with the following:
"(i) the aggregate number of shares of fully diluted common stock of
the Company on such day and"
[FN1] Included in Amendment with John Chapple (with remaining provisions
renumbered accordingly).
3
<PAGE>
(k) The proviso to Section 4(c) shall be deleted and replaced with the
following:
"provided that in no event shall the Company be required to repurchase
Shares from the Purchaser pursuant to this clause (ii), together with
options and shares of Class A Common Stock issued upon exercise thereof
repurchased from the Purchaser pursuant to Section 6(c)(ii) of any Stock
Option Agreement between the Company and Purchaser in the form of Exhibit B
to the Company's 1999 Nonqualified Stock Option Plan, in excess of
$5,000,000 in aggregate Fair Market Value."
(l) The first proviso to the second sentence of Section 4(f) shall be
deleted and replaced with the following:
"provided that in the event of a repurchase of Shares pursuant to Section
4(c)(ii), the Company shall have the option of paying the repurchase price
for such Shares, together with the repurchase price for any options and
shares of Class A Common Stock issued upon exercise thereof repurchased from
the Purchaser pursuant to Section 6(c)(ii) of any Stock Option Agreement
between the Company and the Purchaser in the form of Exhibit B to the
Company's 1999 Nonqualified Stock Option Plan, (i) in a single lump sum or
(ii) in annual installments of $2 million so long as the outstanding balance
of the aggregate repurchase price is $2 million or more, with the first
installment payable within five days after delivery of the Company's notice
of repurchase and the final installment being equal to the outstanding
balance of the aggregate repurchase price;"
(m) The second proviso to Section 4(f) shall be deleted, Section 4(g)
shall be renumbered as Section 4(h), and a new Section 4(g) shall be added as
follows:
"(g) Promissory Note. If the Board determines (pursuant to a duly
adopted resolution of the Board or its compensation committee, a copy of
which shall be delivered to the Purchaser) that the Company is unable to
repurchase all or some portion of the Shares under this Section 4 for cash
without breaching the terms of any debt instruments or other agreements to
which the Company or any of its Subsidiaries is a party, or that such
repurchase would otherwise have a material adverse effect on the financial
condition of the Company, the Company will pay in cash the maximum amount
permitted under such debt instruments, or that would not result in such a
material adverse effect, and deliver to the Purchaser a promissory note for
the balance, payable as soon as (and in the maximum amounts that) the terms
of such debt instruments or other agreements will permit or that will not
have such a material adverse effect, but in no event later than five years
after the date of issuance (or such later date as may be required to comply
with such debt instruments or other agreements), bearing interest at the
highest rate charged from time to time under the Company's senior credit
facility, secured by the Shares being repurchased on terms reasonably
satisfactory to the Company and the Purchaser."
4
<PAGE>
(n) The words "(net of taxes payable by the Purchaser thereon)" shall
be added after the word "amount" in Section 4(g), renumbered as Section 4(h)
hereby.
(o) So long as the Custodial Agreement of even date herewith among the
Pur chaser, the Custodian named therein and the other parties thereto is in
effect, (i) the provisions of Section 5 of the Purchase Agreement shall have no
force or effect, (ii) the Shares shall be held in custody by the Custodian in
accordance with the terms of the Custodial Agreement, (iii) all references in
the Purchase Agreement to the Escrow Agent shall be replaced with references to
the Custodian, (iv) the words "to be held in escrow as herein provided" in
Section 2(b) shall be deleted and replaced with the words "to be held in custody
as provided in the Custodial Agreement," (v) the words "pursuant to Section
5(a)" in clause (ii) of the second sentence of Section 4(f) shall be deleted and
replaced with the words "pursuant to the Custodial Agreement" and (vi) the words
"Escrowed Shares" in Section 6(b) shall be deleted and replaced with the words
"shares subject to repurchase by the Company pursuant to Section 4."
(p) The words "such dividends or distributions" in the proviso to the
first sen tence of Section 5(d) shall be deleted and replaced with the words
"non-cash dividends or dis tributions."
(q) Schedule I to the Purchase Agreement shall be amended by adding at
the end of the section captioned "Build Shares" a new paragraph as follows:
"The cell site targets set forth in Annex A may be adjusted by the
Board (acting in the good faith exercise of its business judgment) to take
into account circumstances relating to the operation of the Company to the
extent not contem plated by the Company's business plan in effect on the
date hereof (on which the cell targets set forth on Annex A are based)."
(r) Schedule I to the Purchase Agreement shall be amended by adding at
the end of the section captioned "Revenue Shares" a new paragraph as follows:
"The revenue targets set forth in Annex A may be adjusted by the Board
(acting in the good faith exercise of its business judgment) to take into
account circumstances relating to the operation of the Company to the extent
not contem plated by the Company's business plan in effect on the date
hereof (on which the revenue targets set forth on Annex A are based)."
(s) Annex A to Schedule I to the Purchase Agreement shall be deleted
and replaced with a new Annex A in the form annexed hereto.
5
<PAGE>
[3. The Company hereby acknowledges and consents to the transfer of
Shares made by Purchaser prior to the date of this Amendment.][FN2]
3. Miscellaneous.
(a) No Novation. This Amendment is not intended to be, and shall not be
construed to create, a novation of the Purchase Agreement, which as hereby
modified shall continue in full force and effect.
(b) Entire Agreement. This Amendment (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both oral and written, among the
parties with respect to the subject matter hereof. This Amendment may not be
waived, modified or amended except by an instrument in writing signed on behalf
of each of the parties hereto.
(c) Governing Law. This Amendment shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware
without regard to its conflict of laws principles.
(d) Reference to Purchase Agreement. From and after the date of this
Amend ment, all references in the Purchase Agreement to the Purchase Agreement
shall be deemed to be references to the Purchase Agreement as amended hereby.
(e) Headings and Exhibits. The headings of the various Sections herein
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
(f) Assignment. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(g) Counterparts. This Amendment may be executed in two or more
counterparts each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
[FN2] Included in Amendment for John Chapple and John Thompson (with remaining
provisions renumbered accordingly).
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
NEXTEL PARTNERS, INC.
By
-------------------------------------
Name:
Title:
-------------------------------------
[Purchaser]
Agreed to and accepted by:
- -------------------------------------
[Purchaser's Spouse]
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, between Nextel
Partners Operating Corp., a Delaware corporation (the "Company"), and David L.
Aas ("Executive"). Capitalized terms used and not otherwise defined herein shall
have the meanings given to such terms in Section 9 or as otherwise set forth
below.
WHEREAS, the Company desires to employ Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement"), and
Executive desires to accept such employment and enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive, intending to be legally bound, hereby
agree as follows:
1. Employment. (a) Agreement to Employ. Upon the terms and subject to
the conditions hereof the Company shall employ Executive as Vice President -
Engineering and Technical Operations of the Company until the Expiration Date
(as defined in Section 1(b)), any date to which this Agreement shall have been
extended pursuant to Section 1(b) or any earlier termination of this Agreement
pursuant to Section 6. Executive's office shall be located in the Seattle,
Washington metropolitan area. During the term of his employment hereunder,
Executive will devote substantially all of his business time to the performance
of his duties hereunder.
(b) Employment Period. Unless earlier terminated pursuant to Section 6,
the initial term of Executive's employment with the Company shall be for a
period of four years, commencing on the date of this Agreement and continuing
until January 29, 2003 (the "Expiration Date"). The term of this Agreement may
be extended by the Company for successive one-year terms commencing on the
Expiration Date by providing Executive notice of such election not less than 60
days prior to the Expiration Date or the scheduled expiration date of any
renewal term.
2. Responsibility. Executive shall be responsible for supervising the
establishment, maintenance and operation of all engineering, system development
and technical operations functions at the Company and for such other duties
commensurate with his position that may be assigned from time to time by the
Board of Directors of the Company (the "Company") or (to the extent not
inconsistent with the duties assigned to him by the Board) by the chief
executive officer of the Company. Executive shall report directly to the chief
executive officer of the Company and shall be subject to the overall supervision
of the Board.
1
<PAGE>
3. Compensation and Benefits.
(a) Salary and Bonus.
(i) The Company shall pay Executive a base salary in the annual
amount of $140,000 payable in accordance with the Company's normal
payroll practices.
(ii) The Company shall (subject to the Board's review and
approval) establish a performance based program pursuant to which
Executive shall receive, if performance targets are met, an additional
annual cash payment of up to forty percent (40%) of Executive's then
current base salary (or such higher amount as the Board may approve),
and shall offer to Executive a benefits package equivalent to that
provided to the Company's other senior executives.
(iii) [Reserved]
(iv) Upon completion of the Required Build on or before the
Scheduled Completion Date, the Compensation Committee of the Board shall
review Executive's base salary and bonus payment in light of the
performance of Executive and the Company, and may, in its discretion,
increase (but not decrease) such base salary and bonus payment by an
amount it determines to be appropriate.
(v) If this Agreement is renewed by the Company upon expiration of
the initial four-year term, Executive's base salary and bonus payment
will be recalculated so as to place them at levels that are comparable
to prevailing market rates, based on the overall compensation packages
of executives holding comparable positions in similarly situated
companies (which shall include consideration of Executive's equity
compensation arrangements in comparison to those of executives holding
comparable positions in similarly situated companies).
(b) Expenses. Executive shall maintain his own automobile and shall
carry liability insurance in the minimum amount of $300,000. The Company shall
reimburse Executive monthly for business use of his automobile at the prevailing
IRS rate per mile. Executive shall also be reimbursed monthly for all other
reasonable out-of-pocket expenses incurred or paid by Executive while
representing the Company or conducting Company business. Executive shall be
responsible for maintaining records reasonably satisfactory to support all
claimed business usage of his automobile and to substantiate all out-of-pocket
expenses incurred for which reimbursement is sought and shall furnish such
records to the Company in accordance with its policies.
(c) Vacation. Executive shall be entitled to 15 vacation days each
calendar year, any or all of which may be carried over into a new calendar year,
for a maximum accrual of 30 days. Upon termination of Executive's services under
this Agreement, Executive will be paid for unused
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vacation time earned through the last completed month of service, computed at
the rate of ten hours per month.
(d) Indemnification. The Company shall indemnify and hold Executive
harmless in accordance with the terms of the Company's certificate of
incorporation and bylaws, in each case as in effect on the date hereof.
(e) D&O Insurance. The Company shall maintain directors and officers
liability insurance coverage covering Executive in amounts customary for
similarly situated companies in the telecommunications industry and with
reputable insurers. All such policies shall provide for coverage to Executive on
the same terms and conditions applicable to the coverage provided under such
policies to the Company's other directors and officers.
4. Nondisclosure of Proprietary and Confidential Information.
(a) Confidential Information. Executive agrees to refrain (whether
during or after his employment with the Company) from disclosing or using,
except as permitted by this Agreement, any secrets or confidential information
with respect to any Covered Entity, including without limitation its trade
secrets, patents, affairs, business plans, strategic, commercial or financial
information other than information that is or becomes publicly available through
no fault of Executive (the "Confidential Information"). Executive may disclose
or communicate only such information as is reasonably required or specifically
approved by the Board or authorized management personnel of the Company
designated by the Board in connection with Executive's services. Confidential
Information may be used solely for the benefit of the Company, and Executive
shall not make any other use of such information. Executive agrees that all
materials relating to the business of any Covered Entity that are provided or
made available to Executive, or created by Executive, during the course of
Executive's services to the Company shall be and remain the property of the
Company and/or the applicable Covered Entity (subject to the terms of any
separate agreement between the Company and/or its Parent Companies and the
affected Covered Entity), whether or not such materials constitute or contain
Confidential Information, and all copies of such materials shall be returned to
the Company immediately upon the termination of Executive's services to the
Company. In the event that the Company notifies the Executive that it has
entered into a confidentiality agreement with a Covered Entity or with any
Affiliate of the Company with respect to confidential information to be provided
to the Company, the Executive shall comply with such reasonable obligations
thereunder as are applicable to the Executive.
(b) Innovations; Inventions. Executive hereby sells, transfers and
assigns to the Company all right, title and interest of Executive in and to any
and all inventions, ideas, disclosures and improvements of any kind or nature
whatsoever, whether patented or unpatented, and any and all copyrightable
materials, in either case whether made or conceived in whole or in part by
Executive alone or together with others, from January 1, 1998 to the date of
this Agreement or during the initial term of this Agreement or any renewal term,
that (i) relate to any methods, designs, products, processes, apparatus, service
or devices sold, leased used or under construction or
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development by the Company or any of its subsidiaries or affiliates, (ii) relate
to the business, functions or operations of the Company or any of its
subsidiaries or affiliates or (iii) arise from, in whole or in part, the efforts
of Executive on behalf of the Company. Executive will communicate and disclose
to the Company promptly all information, data and details pertaining to any
inventions, ideas, disclosures and improvements described above, in such form or
format as the Company may reasonably request. During the term of this Agreement
or any renewal term and thereafter, Executive will execute, acknowledge or
deliver to the Company (at the Company's expense) such formal transfers and
assignments and such other papers and documents as may be required of Executive
to permit the Company to file and prosecute any patent applications to the
Company desires to file and prosecute relating to any of the foregoing, and, as
to copyrightable material, to obtain copyright thereon.
5. Non-Competition; Non-Solicitation.
(a) In view of the unique value to the Company of Executive's services
and because of the Confidential Information to be obtained by or disclosed to
Executive as described above, Executive agrees that, during the term of this
Agreement and for a period of six months thereafter, provided that this
Agreement is not terminated by the Company without Cause or by Executive for
Good Reason:
(i) Executive will not directly or indirectly assist or become
associated with any wireless voice communications service provider in
any business of such provider that competes in any of the markets of any
of the Restricted Entities, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of less than 5% of the
outstanding voting shares of any publicly traded company);
(ii) Executive will not directly or indirectly solicit for em
ployment or employ any employee of any of the Restricted Entities,
unless such solicited person shall have ceased to be employed by any
such entity for a period of at least six months; and
(iii) Executive will not directly or indirectly, solicit business
from customers of any of the Restricted Entities, provided that the
foregoing shall not restrict Executive or any entity with which
Executive is associated from soliciting or doing business with any
customer of any of the Restricted Entities, if such solicitation does
not interfere with any business relationship between such solicited
customer and any of the Restricted Entities.
(b) If Executive violates any provision of Section 4 or Section 5(a),
the Company shall be entitled to receive from Executive reimbursement for any
and all damages caused by such breach, provided that Executive shall not be
liable for indirect, special, consequential or punitive damages (it being
understood and agreed that this remedy is in addition to, and not a limitation
on, any injunctive relief or other rights or remedies to which the Company is or
may be entitled to at law or in equity). Executive acknowledges and agrees that
the Company's (and as applicable, each
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Restricted Entity's) remedies at law for a breach or threatened breach of any
provision of Section 4 or Section 5(a) would be inadequate and, in recognition
of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company and, as to Article 4,
each Covered Entity and, as to Article 5, each Restricted Entity, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available. As
provided in Section 10(b) hereof, the equitable remedies referenced in this
Section 5(b) shall be in addition to, and not in substitution for or exclusion
of, any other remedies available at law or in equity for any breach of either or
both of Sections 4 or 5. Executive and the Company each specifically acknowledge
and agree that the provisions of Sections 4 and 5 are for the express benefit of
each Covered Entity (in the case of Section 4) and each Restricted Entity and
that (i) no waiver, amendment or other modification of Sections 4 or 5 with
respect to a Covered Entity or Restricted Entity shall be effective unless it
has been consented to in writing by such Covered Entity or Restricted Entity, as
the case may be, and (ii) each such Covered Entity and Restricted Entity shall
be entitled to enforce the provisions of Section 4 and/or 5 hereof (as
appropriate) as fully and with the same rights and effect as if such Covered
Entity or Restricted Entity were a signatory party to this Agreement.
(c) If any provisions of Section 4 or Section 5(a) are held to be
invalid or unenforceable, the remaining provisions shall nevertheless continue
to be valid and enforceable as though the invalid or unenforceable parts had not
been included.
6. Noncontravention. The execution, delivery and performance by
Executive of this Agreement does not and will not (i) violate any applicable
law, rule, regulation, judgment, injunction, order or decree or (ii) require any
consent or other action by any person under, constitute a default under (with
due notice or lapse of time or both), or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Executive or to a
loss of any material benefit to which Executive is entitled under any provision
of any agreement or other instrument binding upon Executive, to the extent that
any of the foregoing would have a material adverse effect on Executive or would
prevent or otherwise render unable Executive to perform his obligations under
this Agreement.
7. Termination. This Agreement shall automatically terminate (and the
term of this Agreement shall thereupon terminate) upon the occurrence of any one
of the following events:
(a) Death of Executive.
(b) If Executive shall have been incapacitated from illness, accident
or other disability and unable to perform his normal duties hereunder for a
cumulative period of three months in any period of six consecutive months, and
no reasonable accommodation being available, upon either party giving the other
party not less than 30 days' written notice.
(c) The Expiration Date or the scheduled expiration date of any renewal
or extension thereof in compliance with Section 1(b).
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(d) By the Company for Cause.
(e) By Executive for Good Reason. Upon the occurrence of any event or
the existence of any condition or circumstance constituting Good Reason,
Executive may by notice to the Board, deem a constructive termination of this
Agreement to have occurred, whereupon Executive shall be entitled to the
compensation set forth in Section 7(b).
(f) Upon not less than 30 days' written notice from Executive to the
Company of his voluntary resignation; provided, that such voluntary resignation
shall not relieve or release Executive from any breach of this Agreement at or
prior to the time of such resignation.
8. Effect of Termination.
(a) Upon termination of this Agreement pursuant to Sections 7(a), (b),
(c), (d) or (f), the Company shall compensate Executive (or, in the event of
Executive's death, his surviving spouse, if any, or his estate), for (x) accrued
but unused vacation time, (y) any base salary earned, but unpaid, for services
rendered to the Company on or prior to the date of termination and (z) amounts
which Executive is otherwise entitled to receive under the terms of or in
accordance with any plan, policy, practice or program of, or contract or
agreement with the Company, as in effect immediately prior to the date of such
termination, (including but not limited to the Purchase Agreement), at or
subsequent to the date of termination without regard to the performance by
Executive of further services or the resolution of any contingency, but subject
to any and all rights, remedies and claims of the Company against Executive.
(b) If Executive resigns for Good Reason or his employment with the
Company is terminated without Cause, the Company shall thereupon pay Executive
the following amounts as severance benefits: (i) all amounts payable pursuant to
Section 8(a), and (ii) a lump sum equal to (x) if Executive resigns for Good
Reason, one year's base salary hereunder plus an amount equal to the most recent
annual bonus, if any, received by Executive pursuant to Section 3(a)(ii) or (y)
if Executive's employment is terminated without Cause, six months' base salary
hereunder plus an amount equal to one-half of the most recent annual bonus, if
any, received by Executive pursuant to Section 3(a)(ii).
9. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Affiliate" means, with respect to the Company, any person or entity
who or which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company or NPI.
"Cause" means (i) Executive's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
Executive's duty of loyalty to the Company
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or its parent Nextel Partners, Inc. or (iii) after 20 business days following
Executive's receipt of written notice from the Company specifying the
particulars in reasonable detail, Executive's failure to comply with or to cure,
as applicable, (A) a willful and material refusal to comply with specific
written directions of the Board (or specific written directions of the Chief
Executive Officer) consistent with Executive's employment agreement with NPI or
the Company or any of their respective subsidiaries and capable of being
performed by him or (B) a willful and material breach of Executive's duty of due
care to the Company.
"Class A Common Stock" means the Class A Common Stock, par value $.001
per share, of NPI.
"Closing" has the meaning specified in the Purchase Agreement.
"Covered Entities" means, collectively, the Restricted Entities and
such other entities as may from time to time be reasonably agreed to by the
Company and the Executive to be Covered Entities hereunder.
"FCC" means the Federal Communications Commission.
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by NWIP to the Company
thereunder, which changes are implemented in order to cause such agreements to
be in compliance with FCC requirements so as to reflect the intent of the
parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in Executive's
duties, responsibilities or reporting relationships, (ii) a relocation of
Executive's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by Executive, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under Executive's employment agreement with the Company or
a subsidiary of the Company that are not cured after 20 business days following
the Company's receipt of a written notification from Executive specifying the
particulars in reasonable detail, and (v) from and after the Closing, following
the implementation of any FCC Modifications, if NWIP exercises control over
day-to-day operating decisions, policy decisions or personnel decisions of the
Company pursuant to such FCC Modifications that (before such modifications)
would have been decisions made by the Company's management and such control
exercised by NWIP is materially more extensive (in the collective reasonable
judgment of the Senior Managers then employed by the Company) than that which
NWIP could have exercised under the agreements to which NWIP is a party relating
to the governance and operation of the Company before giving effect to the FCC
Modifications. Notwithstanding the
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foregoing, a termination with Good Reason under clause (v) above shall not be
deemed effective until 120 days following written notice by the Executive to the
Company of the occurrence of any of the foregoing and only if the foregoing
continue to occur as of such 120th day.
"Joint Venture Agreement" means the Joint Venture Agreement, to be
dated the date of the Closing, among Nextel, NPI and the Company.
"Nextel" means NEXTEL Communications, Inc., a Delaware corporation.
"NPI" means Nextel Partners, Inc., a Delaware corporation.
"NWIP" means Nextel WIP Corp., a Delaware corporation and a wholly
owned subsidiary of Nextel.
"Parent Companies" means NPI and any other entity that directly or
indirectly owns all or substantially all of the Company's outstanding voting
capital stock.
"Purchase Agreement" means the Restricted Stock Purchase Agreement,
dated as of November 20, 1998, between Executive and the Company.
"Required Build" means the completion of the build out of all Initial
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year (as defined in the Joint Venture Agreement), and of any Option
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year that are included in the Territory (as defined in the Joint
Venture Agreement) through the Company's election under Section 6.2B of the
Joint Venture Agreement, but excluding any such Option Sections that are
included in the Territory (as defined in the Joint Venture Agreement) as a
result of the Company's response to a notice given pursuant to Section 6.2C of
the Joint Venture Agreement.
"Restricted Entities" means, collectively, the Company, Nextel and the
Parent Companies and their respective subsidiaries.
"Scheduled Completion Date" means 60 days after December 31, 2001.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Shares" means the shares of Class A Common Stock purchased by
Executive pursuant to the Purchase Agreement.
10. Miscellaneous.
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(a) Merger; Amendment. This Agreement (together with the Purchase Agree
ment) constitutes the entire agreement between the parties with respect to the
subject matter hereof, and may be changed, extended or modified only by an
agreement in writing signed by the parties.
(b) Assignment. The rights and obligations of the Company in this
Agreement shall inure to its benefit and be binding upon its successors in
interest (whether by merger, consolidation, reorganization, sale of stock or
assets or otherwise), provided that Executive shall not remain bound by this
Agreement unless such successor assumes all of the obligations of the Company
hereunder. This Agreement shall also inure to the benefit of Executive's heirs,
executors, administrators and legal representatives. This Agreement, being for
the personal services of Executive, shall not be assignable by Executive.
Certain provisions of Section 4 and 5 of this Agreement are, for the purposes
specified therein, intended to inure to the benefit of certain affiliates of the
Company and to be enforceable separately by them as provided therein.
(c) Waiver of Breach. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
(d) Arbitration. Except as otherwise provided herein, any controversies
or claims arising out of, or relating to this Agreement or the breach thereof,
shall be settled by arbitration in accordance with the commercial rules of the
American Arbitration Association, which decision shall be final and binding on
the parties, and judgment upon the award rendered shall be entered in any court
having jurisdiction thereof. Any party may demand such arbitration in accordance
with the procedures set out in those rules. The arbitration shall be conducted
in Seattle, Washington, or such other location as may be mutually agreed upon by
the parties. Special, consequential, or punitive damages shall not be awarded by
the arbitrator. In the event of any arbitration proceeding hereunder, the
Company will (x) pay the fees and expenses of the arbitrator and (y) advance the
Executive's documented out-of-pocket costs (including reasonable counsel fees
and expenses) on a current basis, provided, that if Executive is determined not
to be the substantially prevailing party on the matters submitted for
arbitration (which determination shall be made by the arbitrator and included in
his or her decision), Executive will promptly reimburse the Company for any
expenses so advanced. Executive acknowledges that the Company is agreeing to
make advances to him pursuant to the preceding sentence in consideration of his
agreement to reimburse the Company for any such advances to the extent required
by the preceding sentence. The Company will in all events pay its own costs
(including counsel fees and expenses) in connection with any arbitration
proceeding hereunder.
(e) Notices. All notices given hereunder shall be in writing and shall
be deemed to have been duly given and received (i) when delivered personally,
with receipt acknowledged in writing by the recipient, (ii) on the tenth
business day after being sent by registered or certified mail (postage paid,
return receipt requested), (iii) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, or
(iv) on the date on which a facsimile is transmitted, in each case to the
parties at their respective addresses stated below; provided, that if the
intended recipient of any notice hereunder refuses to acknowledge receipt
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thereof in writing, such notice shall be deemed to have been duly given on the
date of such refusal. Any party may change its address for notice by giving
notice of the new address to the other party in accordance with the provisions
of this paragraph.
If to the Company:
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
If to Executive:
David L. Aas
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
David L. Aas
23602 S.E. 254th Street
Maple Valley, WA 98038
(f) Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
the Agreement shall be construed in all respects as though such invalid or
unenforceable provision were omitted.
(g) Survival. The provisions of Sections 3(d), 4, 5, 8 and 10 shall
survive any termination of this Agreement.
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(h) Governing Law. This Agreement shall be interpreted according to the
internal laws of the State of New York, without regard to choice of law rules
that would result in the application of the laws of another State.
(i) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or the beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(j) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEXTEL PARTNERS OPERATING CORP.
By /s/ John Chapple
-----------------------
Name: John Chapple
Title: President & CEO
/s/ David Aas
-------------------------
DAVID L. AAS
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, between Nextel
Partners Operating Corp., a Delaware corporation (the "Company"), and Perry S.
Satterlee ("Executive"). Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in Section 9 or as otherwise set
forth below.
WHEREAS, the Company desires to employ Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement"), and
Executive desires to accept such employment and enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive, intending to be legally bound, hereby
agree as follows:
1. Employment. (a) Agreement to Employ. Upon the terms and subject to
the conditions hereof the Company shall employ Executive as Vice President -
Business Operations of the Company until the Expiration Date (as defined in
Section 1(b)), any date to which this Agreement shall have been extended
pursuant to Section 1(b) or any earlier termination of this Agreement pursuant
to Section 6. Executive's office shall be located in the Seattle, Washington
metropolitan area. During the term of his employment hereunder, Executive will
devote substantially all of his business time to the performance of his duties
hereunder.
(b) Employment Period. Unless earlier terminated pursuant to Section 6,
the initial term of Executive's employment with the Company shall be for a
period of four years, commencing on the date of this Agreement and continuing
until January 29, 2003 (the "Expiration Date"). The term of this Agreement may
be extended by the Company for successive one-year terms commencing on the
Expiration Date by providing Executive notice of such election not less than 60
days prior to the Expiration Date or the scheduled expiration date of any
renewal term.
2. Responsibility. Executive shall be responsible for supervising the
establishment, maintenance and operation of all strategic marketing, customer
care, fulfillment and public affairs functions at the Company and for such other
duties commensurate with his position that may be assigned from time to time by
the Board of Directors of the Company (the "Board") or (to the extent not
inconsistent with the duties assigned to him by the Board) by the chief
executive officer of the Company. Executive shall report directly to the chief
executive officer of the Company and shall be subject to the overall supervision
of the Board.
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3. Compensation and Benefits.
(a) Salary and Bonus.
(i) The Company shall pay Executive a base salary in the annual
amount of $150,000 payable in accordance with the Company's normal
payroll practices.
(ii) The Company shall (subject to the Board's review and
approval) establish a performance based program pursuant to which
Executive shall receive, if performance targets are met, an additional
annual cash payment of up to forty percent (40%) of Executive's then
current base salary (or such higher amount as the Board may approve),
and shall offer to Executive a benefits package equivalent to that
provided to the Company's other senior executives.
(iii) [Reserved]
(iv) Upon completion of the Required Build on or before the
Scheduled Completion Date, the Compensation Committee of the Board shall
review Executive's base salary and bonus payment in light of the
performance of Executive and the Company, and may, in its discretion,
increase (but not decrease) such base salary and bonus payment by an
amount it determines to be appropriate.
(v) If this Agreement is renewed by the Company upon expiration
of the initial four-year term, Executive's base salary and bonus payment
will be recalculated so as to place them at levels that are comparable
to prevailing market rates, based on the overall compensation packages
of executives holding comparable positions in similarly situated
companies (which shall include consideration of Executive's equity
compensation arrangements in comparison to those of executives holding
comparable positions in similarly situated companies).
(b) Expenses. Executive shall maintain his own automobile and shall
carry liability insurance in the minimum amount of $300,000. The Company shall
reimburse Executive monthly for business use of his automobile at the prevailing
IRS rate per mile. Executive shall also be reimbursed monthly for all other
reasonable out-of-pocket expenses incurred or paid by Executive while
representing the Company or conducting Company business. Executive shall be
responsible for maintaining records reasonably satisfactory to support all
claimed business usage of his automobile and to substantiate all out-of-pocket
expenses incurred for which reimbursement is sought and shall furnish such
records to the Company in accordance with its policies.
(c) Vacation. Executive shall be entitled to 15 vacation days each
calendar year, any or all of which may be carried over into a new calendar year,
for a maximum accrual of 30 days. Upon termination of Executive's services under
this Agreement, Executive will be paid for unused
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vacation time earned through the last completed month of service, computed at
the rate of ten hours per month.
(d) Indemnification. The Company shall indemnify and hold Executive
harmless in accordance with the terms of the Company's certificate of
incorporation and bylaws, in each case as in effect on the date hereof.
(e) D&O Insurance. The Company shall maintain directors and officers
liability insurance coverage covering Executive in amounts customary for
similarly situated companies in the telecommunications industry and with
reputable insurers. All such policies shall provide for coverage to Executive on
the same terms and conditions applicable to the coverage provided under such
policies to the Company's other directors and officers.
4. Nondisclosure of Proprietary and Confidential Information.
(a) Confidential Information. Executive agrees to refrain (whether
during or after his employment with the Company) from disclosing or using,
except as permitted by this Agreement, any secrets or confidential information
with respect to any Covered Entity, including without limitation its trade
secrets, patents, affairs, business plans, strategic, commercial or financial
information other than information that is or becomes publicly available through
no fault of Executive (the "Confidential Information"). Executive may disclose
or communicate only such information as is reasonably required or specifically
approved by the Board or authorized management personnel of the Company
designated by the Board in connection with Executive's services. Confidential
Information may be used solely for the benefit of the Company, and Executive
shall not make any other use of such information. Executive agrees that all
materials relating to the business of any Covered Entity that are provided or
made available to Executive, or created by Executive, during the course of
Executive's services to the Company shall be and remain the property of the
Company and/or the applicable Covered Entity (subject to the terms of any
separate agreement between the Company and/or its Parent Companies and the
affected Covered Entity), whether or not such materials constitute or contain
Confidential Information, and all copies of such materials shall be returned to
the Company immediately upon the termination of Executive's services to the
Company. In the event that the Company notifies the Executive that it has
entered into a confidentiality agreement with a Covered Entity or with any
Affiliate of the Company with respect to confidential information to be provided
to the Company, the Executive shall comply with such reasonable obligations
thereunder as are applicable to the Executive.
(b) Innovations; Inventions. Executive hereby sells, transfers and
assigns to the Company all right, title and interest of Executive in and to any
and all inventions, ideas, disclosures and improvements of any kind or nature
whatsoever, whether patented or unpatented, and any and all copyrightable
materials, in either case whether made or conceived in whole or in part by
Executive alone or together with others, from January 1, 1998 to the date of
this Agreement or during the initial term of this Agreement or any renewal term,
that (i) relate to any methods, designs, products, processes, apparatus, service
or devices sold, leased used or under construction or
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development by the Company or any of its subsidiaries or affiliates, (ii) relate
to the business, functions or operations of the Company or any of its
subsidiaries or affiliates or (iii) arise from, in whole or in part, the efforts
of Executive on behalf of the Company. Executive will communicate and disclose
to the Company promptly all information, data and details pertaining to any
inventions, ideas, disclosures and improvements described above, in such form or
format as the Company may reasonably request. During the term of this Agreement
or any renewal term and thereafter, Executive will execute, acknowledge or
deliver to the Company (at the Company's expense) such formal transfers and
assignments and such other papers and documents as may be required of Executive
to permit the Company to file and prosecute any patent applications to the
Company desires to file and prosecute relating to any of the foregoing, and, as
to copyrightable material, to obtain copyright thereon.
5. Non-Competition; Non-Solicitation.
(a) In view of the unique value to the Company of Executive's services
and because of the Confidential Information to be obtained by or disclosed to
Executive as described above, Executive agrees that, during the term of this
Agreement and for a period of six months thereafter, provided that this
Agreement is not terminated by the Company without Cause or by Executive for
Good Reason:
(i) Executive will not directly or indirectly assist or become
associated with any wireless voice communications service provider in
any business of such provider that competes in any of the markets of any
of the Restricted Entities, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of less than 5% of the
outstanding voting shares of any publicly traded company);
(ii) Executive will not directly or indirectly solicit for
employment or employ any employee of any of the Restricted Entities,
unless such solicited person shall have ceased to be employed by any
such entity for a period of at least six months; and
(iii) Executive will not directly or indirectly, solicit business
from customers of any of the Restricted Entities, provided that the
foregoing shall not restrict Executive or any entity with which
Executive is associated from soliciting or doing business with any
customer of any of the Restricted Entities, if such solicitation does
not interfere with any business relationship between such solicited
customer and any of the Restricted Entities.
(b) If Executive violates any provision of Section 4 or Section 5(a),
the Company shall be entitled to receive from Executive reimbursement for any
and all damages caused by such breach, provided that Executive shall not be
liable for indirect, special, consequential or punitive damages (it being
understood and agreed that this remedy is in addition to, and not a limitation
on, any injunctive relief or other rights or remedies to which the Company is or
may be entitled to at law or in equity). Executive acknowledges and agrees that
the Company's (and as applicable, each Restricted Entity's) remedies at law for
a breach or threatened breach of any provision of Section 4
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or Section 5(a) would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, the Company and, as to Article 4, each Covered Entity and,
as to Article 5, each Restricted Entity, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available. As provided in Section 10(b)
hereof, the equitable remedies referenced in this Section 5(b) shall be in
addition to, and not in substitution for or exclusion of, any other remedies
available at law or in equity for any breach of either or both of Sections 4 or
5. Executive and the Company each specifically acknowledge and agree that the
provisions of Sections 4 and 5 are for the express benefit of each Covered
Entity (in the case of Section 4) and each Restricted Entity and that (i) no
waiver, amendment or other modification of Sections 4 or 5 with respect to a
Covered Entity or Restricted Entity shall be effective unless it has been
consented to in writing by such Covered Entity or Restricted Entity, as the case
may be, and (ii) each such Covered Entity and Restricted Entity shall be
entitled to enforce the provisions of Section 4 and/or 5 hereof (as appropriate)
as fully and with the same rights and effect as if such Covered Entity or
Restricted Entity were a signatory party to this Agreement.
(c) If any provisions of Section 4 or Section 5(a) are held to be
invalid or unenforceable, the remaining provisions shall nevertheless continue
to be valid and enforceable as though the invalid or unenforceable parts had not
been included.
6. Noncontravention. The execution, delivery and performance by
Executive of this Agreement does not and will not (i) violate any applicable
law, rule, regulation, judgment, injunction, order or decree or (ii) require any
consent or other action by any person under, constitute a default under (with
due notice or lapse of time or both), or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Executive or to a
loss of any material benefit to which Executive is entitled under any provision
of any agreement or other instrument binding upon Executive, to the extent that
any of the foregoing would have a material adverse effect on Executive or would
prevent or otherwise render unable Executive to perform his obligations under
this Agreement.
7. Termination. This Agreement shall automatically terminate (and the
term of this Agreement shall thereupon terminate) upon the occurrence of any one
of the following events:
(a) Death of Executive.
(b) If Executive shall have been incapacitated from illness, accident
or other disability and unable to perform his normal duties hereunder for a
cumulative period of three months in any period of six consecutive months, and
no reasonable accommodation being available, upon either party giving the other
party not less than 30 days' written notice.
(c) The Expiration Date or the scheduled expiration date of any renewal
or extension thereof in compliance with Section 1(b).
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(d) By the Company for Cause.
(e) By Executive for Good Reason. Upon the occurrence of any event or
the existence of any condition or circumstance constituting Good Reason,
Executive may by notice to the Board, deem a constructive termination of this
Agreement to have occurred, whereupon Executive shall be entitled to the
compensation set forth in Section 7(b).
(f) Upon not less than 30 days' written notice from Executive to the
Company of his voluntary resignation; provided, that such voluntary resignation
shall not relieve or release Executive from any breach of this Agreement at or
prior to the time of such resignation.
8. Effect of Termination.
(a) Upon termination of this Agreement pursuant to Sections 7(a), (b),
(c), (d) or (f), the Company shall compensate Executive (or, in the event of
Executive's death, his surviving spouse, if any, or his estate), for (x) accrued
but unused vacation time, (y) any base salary earned, but unpaid, for services
rendered to the Company on or prior to the date of termination and (z) amounts
which Executive is otherwise entitled to receive under the terms of or in
accordance with any plan, policy, practice or program of, or contract or
agreement with the Company, as in effect immediately prior to the date of such
termination, (including but not limited to the Purchase Agreement), at or
subsequent to the date of termination without regard to the performance by
Executive of further services or the resolution of any contingency, but subject
to any and all rights, remedies and claims of the Company against Executive.
(b) If Executive resigns for Good Reason or his employment with the
Company is terminated without Cause, the Company shall thereupon pay Executive
the following amounts as severance benefits: (i) all amounts payable pursuant to
Section 8(a), and (ii) a lump sum equal to (x) if Executive resigns for Good
Reason, one year's base salary hereunder plus an amount equal to the most recent
annual bonus, if any, received by Executive pursuant to Section 3(a)(ii) or (y)
if Executive's employment is terminated without Cause, six months' base salary
hereunder plus an amount equal to one-half of the most recent annual bonus, if
any, received by Executive pursuant to Section 3(a)(ii).
9. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Affiliate" means, with respect to the Company, any person or entity
who or which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company or NPI.
"Cause" means (i) Executive's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
Executive's duty of loyalty to the Company
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or its parent Nextel Partners, Inc. or (iii) after 20 business days following
Executive's receipt of written notice from the Company specifying the
particulars in reasonable detail, Executive's failure to comply with or to cure,
as applicable, (A) a willful and material refusal to comply with specific
written directions of the Board (or specific written directions of the Chief
Executive Officer) consistent with Executive's employment agreement with NPI or
the Company or any of their respective subsidiaries and capable of being
performed by him or (B) a willful and material breach of Executive's duty of due
care to the Company.
"Class A Common Stock" means the Class A Common Stock, par value $.001
per share, of NPI.
"Closing" has the meaning specified in the Purchase Agreement.
"Covered Entities" means, collectively, the Restricted Entities and
such other entities as may from time to time be reasonably agreed to by the
Company and the Executive to be Covered Entities hereunder.
"FCC" means the Federal Communications Commission.
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by NWIP to the Company
thereunder, which changes are implemented in order to cause such agreements to
be in compliance with FCC requirements so as to reflect the intent of the
parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in Executive's
duties, responsibilities or reporting relationships, (ii) a relocation of
Executive's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by Executive, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under Executive's employment agreement with the Company or
a subsidiary of the Company that are not cured after 20 business days following
the Company's receipt of a written notification from Executive specifying the
particulars in reasonable detail, and (v) from and after the Closing, following
the implementation of any FCC Modifications, if NWIP exercises control over
day-to-day operating decisions, policy decisions or personnel decisions of the
Company pursuant to such FCC Modifications that (before such modifications)
would have been decisions made by the Company's management and such control
exercised by NWIP is materially more extensive (in the collective reasonable
judgment of the Senior Managers then employed by the Company) than that which
NWIP could have exercised under the agreements to which NWIP is a party relating
to the governance and operation of the Company before giving effect to the FCC
Modifications. Notwithstanding the
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foregoing, a termination with Good Reason under clause (v) above shall not be
deemed effective until 120 days following written notice by the Executive to the
Company of the occurrence of any of the foregoing and only if the foregoing
continue to occur as of such 120th day.
"Joint Venture Agreement" means the Joint Venture Agreement, to be
dated the date of the Closing, among Nextel, NPI and the Company.
"Nextel" means NEXTEL Communications, Inc., a Delaware corporation.
"NPI" means Nextel Partners, Inc., a Delaware corporation.
"NWIP" means Nextel WIP Corp., a Delaware corporation and a wholly
owned subsidiary of Nextel.
"Parent Companies" means NPI and any other entity that directly or
indirectly owns all or substantially all of the Company's outstanding voting
capital stock.
"Purchase Agreement" means the Restricted Stock Purchase Agreement,
dated as of November 20, 1998, between Executive and the Company.
"Required Build" means the completion of the build out of all Initial
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year (as defined in the Joint Venture Agreement), and of any Option
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year that are included in the Territory (as defined in the Joint
Venture Agreement) through the Company's election under Section 6.2B of the
Joint Venture Agreement, but excluding any such Option Sections that are
included in the Territory (as defined in the Joint Venture Agreement) as a
result of the Company's response to a notice given pursuant to Section 6.2C of
the Joint Venture Agreement.
"Restricted Entities" means, collectively, the Company, Nextel and the
Parent Companies and their respective subsidiaries.
"Scheduled Completion Date" means 60 days after December 31, 2001.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Shares" means the shares of Class A Common Stock purchased by
Executive pursuant to the Purchase Agreement.
10. Miscellaneous.
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(a) Merger; Amendment. This Agreement (together with the Purchase Agree
ment) constitutes the entire agreement between the parties with respect to the
subject matter hereof, and may be changed, extended or modified only by an
agreement in writing signed by the parties.
(b) Assignment. The rights and obligations of the Company in this
Agreement shall inure to its benefit and be binding upon its successors in
interest (whether by merger, consolidation, reorganization, sale of stock or
assets or otherwise), provided that Executive shall not remain bound by this
Agreement unless such successor assumes all of the obligations of the Company
hereunder. This Agreement shall also inure to the benefit of Executive's heirs,
executors, administrators and legal representatives. This Agreement, being for
the personal services of Executive, shall not be assignable by Executive.
Certain provisions of Section 4 and 5 of this Agreement are, for the purposes
specified therein, intended to inure to the benefit of certain affiliates of the
Company and to be enforceable separately by them as provided therein.
(c) Waiver of Breach. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
(d) Arbitration. Except as otherwise provided herein, any controversies
or claims arising out of, or relating to this Agreement or the breach thereof,
shall be settled by arbitration in accordance with the commercial rules of the
American Arbitration Association, which decision shall be final and binding on
the parties, and judgment upon the award rendered shall be entered in any court
having jurisdiction thereof. Any party may demand such arbitration in accordance
with the procedures set out in those rules. The arbitration shall be conducted
in Seattle, Washington, or such other location as may be mutually agreed upon by
the parties. Special, consequential, or punitive damages shall not be awarded by
the arbitrator. In the event of any arbitration proceeding hereunder, the
Company will (x) pay the fees and expenses of the arbitrator and (y) advance the
Executive's documented out-of-pocket costs (including reasonable counsel fees
and expenses) on a current basis, provided, that if Executive is determined not
to be the substantially prevailing party on the matters submitted for
arbitration (which determination shall be made by the arbitrator and included in
his or her decision), Executive will promptly reimburse the Company for any
expenses so advanced. Executive acknowledges that the Company is agreeing to
make advances to him pursuant to the preceding sentence in consideration of his
agreement to reimburse the Company for any such advances to the extent required
by the preceding sentence. The Company will in all events pay its own costs
(including counsel fees and expenses) in connection with any arbitration
proceeding hereunder.
(e) Notices. All notices given hereunder shall be in writing and shall
be deemed to have been duly given and received (i) when delivered personally,
with receipt acknowledged in writing by the recipient, (ii) on the tenth
business day after being sent by registered or certified mail (postage paid,
return receipt requested), (iii) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, or
(iv) on the date on which a facsimile is transmitted, in each case to the
parties at their respective addresses stated below; provided, that if the
intended recipient of any notice hereunder refuses to acknowledge receipt
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thereof in writing, such notice shall be deemed to have been duly given on the
date of such refusal. Any party may change its address for notice by giving
notice of the new address to the other party in accordance with the provisions
of this paragraph.
If to the Company:
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
If to Executive:
Perry S. Satterlee
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
Perry S. Satterlee
12505 177th Avenue N.E.
Redmond, WA 98052
(f) Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
the Agreement shall be construed in all respects as though such invalid or
unenforceable provision were omitted.
(g) Survival. The provisions of Sections 3(d), 4, 5, 8 and 10 shall
survive any termination of this Agreement.
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(h) Governing Law. This Agreement shall be interpreted according to the
internal laws of the State of New York, without regard to choice of law rules
that would result in the application of the laws of another State.
(i) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or the beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(j) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEXTEL PARTNERS OPERATING CORP.
By /s/ John Chapple
------------------------
Name: John Chapple
Title: President & CEO
/s/ Perry Satterlee
-------------------------
PERRY S. SATTERLEE
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, between Nextel
Partners Operating Corp., a Delaware corporation (the "Company"), and David M.
Thaler ("Executive"). Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in Section 9 or as otherwise set
forth below.
WHEREAS, the Company desires to employ Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement"), and
Executive desires to accept such employment and enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive, intending to be legally bound, hereby
agree as follows:
1. Employment. (a) Agreement to Employ. Upon the terms and subject to
the conditions hereof the Company shall employ Executive as Vice President -
Field Operations of the Company until the Expiration Date (as defined in Section
1(b)), any date to which this Agreement shall have been extended pursuant to
Section 1(b) or any earlier termination of this Agreement pursuant to Section 6.
Executive's office shall be located in the Minneapolis, Minnesota metropolitan
area. During the term of his employment hereunder, Executive will devote
substantially all of his business time to the performance of his duties
hereunder.
(b) Employment Period. Unless earlier terminated pursuant to Section 6,
the initial term of Executive's employment with the Company shall be for a
period of four years, commencing on the date of this Agreement and continuing
until January 29, 2003 (the "Expiration Date"). The term of this Agreement may
be extended by the Company for successive one-year terms commencing on the
Expiration Date by providing Executive notice of such election not less than 60
days prior to the Expiration Date or the scheduled expiration date of any
renewal term.
2. Responsibility. Executive shall be responsible for supervising the
establishment, maintenance and operation of all field sales, marketing,
distribution, billing and information technology functions at the Company and
for such other duties commensurate with his position that may be assigned from
time to time by the Board of Directors of the Company (the "Board") or (to the
extent not inconsistent with the duties assigned to him by the Board) by the
chief executive officer of the Company. Executive shall report directly to the
chief executive officer of the Company and shall be subject to the overall
supervision of the Board.
<PAGE>
3. Compensation and Benefits.
(a) Salary and Bonus.
(i) The Company shall pay Executive a base salary in the annual
amount of $150,000 payable in accordance with the Company's normal
payroll practices.
(ii) The Company shall (subject to the Board's review and
approval) establish a performance based program pursuant to which
Executive shall receive, if performance targets are met, an additional
annual cash payment of up to forty percent (40%) of Executive's then
current base salary (or such higher amount as the Board may approve),
and shall offer to Executive a benefits package equivalent to that
provided to the Company's other senior executives.
(iii) In addition to the amounts payable pursuant to paragraphs
(i) and (ii) above, in recognition of Executive's services prior to the
date hereof, the Company will on the date of the Closing make a lump sum
payment to Executive in the amount of $87,500.
(iv) Upon completion of the Required Build on or before the
Scheduled Completion Date, the Compensation Committee of the Board shall
review Executive's base salary and bonus payment in light of the
performance of Executive and the Company, and may, in its discretion,
increase (but not decrease) such base salary and bonus payment by an
amount it determines to be appropriate.
(v) If this Agreement is renewed by the Company upon expiration
of the initial four-year term, Executive's base salary and bonus payment
will be recalculated so as to place them at levels that are comparable
to prevailing market rates, based on the overall compensation packages
of executives holding comparable positions in similarly situated
companies (which shall include consideration of Executive's equity
compensation arrangements in comparison to those of executives holding
comparable positions in similarly situated companies).
(b) Expenses. Executive shall maintain his own automobile and shall
carry liability insurance in the minimum amount of $300,000. The Company shall
reimburse Executive monthly for business use of his automobile at the prevailing
IRS rate per mile. Executive shall also be reimbursed monthly for all other
reasonable out-of-pocket expenses incurred or paid by Executive while
representing the Company or conducting Company business. Executive shall be
responsible for maintaining records reasonably satisfactory to support all
claimed business usage of his automobile and to substantiate all out-of-pocket
expenses incurred for which reimbursement is sought and shall furnish such
records to the Company in accordance with its policies.
(c) Vacation. Executive shall be entitled to 15 vacation days each
calendar year, any or all of which may be carried over into a new calendar year,
for a maximum accrual of 30 days.
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Upon termination of Executive's services under this Agreement, Executive will be
paid for unused vacation time earned through the last completed month of
service, computed at the rate of ten hours per month.
(d) Indemnification. The Company shall indemnify and hold Executive
harmless in accordance with the terms of the Company's certificate of
incorporation and bylaws, in each case as in effect on the date hereof.
(e) D&O Insurance. The Company shall maintain directors and officers
liability insurance coverage covering Executive in amounts customary for
similarly situated companies in the telecommunications industry and with
reputable insurers. All such policies shall provide for coverage to Executive on
the same terms and conditions applicable to the coverage provided under such
policies to the Company's other directors and officers.
4. Nondisclosure of Proprietary and Confidential Information.
(a) Confidential Information. Executive agrees to refrain (whether
during or after his employment with the Company) from disclosing or using,
except as permitted by this Agreement, any secrets or confidential information
with respect to any Covered Entity, including without limitation its trade
secrets, patents, affairs, business plans, strategic, commercial or financial
information other than information that is or becomes publicly available through
no fault of Executive (the "Confidential Information"). Executive may disclose
or communicate only such information as is reasonably required or specifically
approved by the Board or authorized management personnel of the Company
designated by the Board in connection with Executive's services. Confidential
Information may be used solely for the benefit of the Company, and Executive
shall not make any other use of such information. Executive agrees that all
materials relating to the business of any Covered Entity that are provided or
made available to Executive, or created by Executive, during the course of
Executive's services to the Company shall be and remain the property of the
Company and/or the applicable Covered Entity (subject to the terms of any
separate agreement between the Company and/or its Parent Companies and the
affected Covered Entity), whether or not such materials constitute or contain
Confidential Information, and all copies of such materials shall be returned to
the Company immediately upon the termination of Executive's services to the
Company. In the event that the Company notifies the Executive that it has
entered into a confidentiality agreement with a Covered Entity or with any
Affiliate of the Company with respect to confidential information to be provided
to the Company, the Executive shall comply with such reasonable obligations
thereunder as are applicable to the Executive.
(b) Innovations; Inventions. Executive hereby sells, transfers and
assigns to the Company all right, title and interest of Executive in and to any
and all inventions, ideas, disclosures and improvements of any kind or nature
whatsoever, whether patented or unpatented, and any and all copyrightable
materials, in either case whether made or conceived in whole or in part by
Executive alone or together with others, from January 1, 1998 to the date of
this Agreement or during the initial term of this Agreement or any renewal term,
that (i) relate to any methods, designs,
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products, processes, apparatus, service or devices sold, leased used or under
construction or development by the Company or any of its subsidiaries or
affiliates, (ii) relate to the business, functions or operations of the Company
or any of its subsidiaries or affiliates or (iii) arise from, in whole or in
part, the efforts of Executive on behalf of the Company. Executive will
communicate and disclose to the Company promptly all information, data and
details pertaining to any inventions, ideas, disclosures and improvements
described above, in such form or format as the Company may reasonably request.
During the term of this Agreement or any renewal term and thereafter, Executive
will execute, acknowledge or deliver to the Company (at the Company's expense)
such formal transfers and assignments and such other papers and documents as may
be required of Executive to permit the Company to file and prosecute any patent
applications to the Company desires to file and prosecute relating to any of the
foregoing, and, as to copyrightable material, to obtain copyright thereon.
5. Non-Competition; Non-Solicitation.
(a) In view of the unique value to the Company of Executive's services
and because of the Confidential Information to be obtained by or disclosed to
Executive as described above, Executive agrees that, during the term of this
Agreement and for a period of six months thereafter, provided that this
Agreement is not terminated by the Company without Cause or by Executive for
Good Reason:
(i) Executive will not directly or indirectly assist or become
associated with any wireless voice communications service provider in
any business of such provider that competes in any of the markets of any
of the Restricted Entities, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of less than 5% of the
outstanding voting shares of any publicly traded company);
(ii) Executive will not directly or indirectly solicit for
employment or employ any employee of any of the Restricted Entities,
unless such solicited person shall have ceased to be employed by any
such entity for a period of at least six months; and
(iii) Executive will not directly or indirectly, solicit business
from customers of any of the Restricted Entities, provided that the
foregoing shall not restrict Executive or any entity with which
Executive is associated from soliciting or doing business with any
customer of any of the Restricted Entities, if such solicitation does
not interfere with any business relationship between such solicited
customer and any of the Restricted Entities.
(b) If Executive violates any provision of Section 4 or Section 5(a),
the Company shall be entitled to receive from Executive reimbursement for any
and all damages caused by such breach, provided that Executive shall not be
liable for indirect, special, consequential or punitive damages (it being
understood and agreed that this remedy is in addition to, and not a limitation
on, any injunctive relief or other rights or remedies to which the Company is or
may be entitled to at law or in equity). Executive acknowledges and agrees that
the Company's (and as applicable, each
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Restricted Entity's) remedies at law for a breach or threatened breach of any
provision of Section 4 or Section 5(a) would be inadequate and, in recognition
of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company and, as to Article 4,
each Covered Entity and, as to Article 5, each Restricted Entity, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available. As
provided in Section 10(b) hereof, the equitable remedies referenced in this
Section 5(b) shall be in addition to, and not in substitution for or exclusion
of, any other remedies available at law or in equity for any breach of either or
both of Sections 4 or 5. Executive and the Company each specifically acknowledge
and agree that the provisions of Sections 4 and 5 are for the express benefit of
each Covered Entity (in the case of Section 4) and each Restricted Entity and
that (i) no waiver, amendment or other modification of Sections 4 or 5 with
respect to a Covered Entity or Restricted Entity shall be effective unless it
has been consented to in writing by such Covered Entity or Restricted Entity, as
the case may be, and (ii) each such Covered Entity and Restricted Entity shall
be entitled to enforce the provisions of Section 4 and/or 5 hereof (as
appropriate) as fully and with the same rights and effect as if such Covered
Entity or Restricted Entity were a signatory party to this Agreement.
(c) If any provisions of Section 4 or Section 5(a) are held to be
invalid or unenforceable, the remaining provisions shall nevertheless continue
to be valid and enforceable as though the invalid or unenforceable parts had not
been included.
6. Noncontravention. The execution, delivery and performance by
Executive of this Agreement does not and will not (i) violate any applicable
law, rule, regulation, judgment, injunction, order or decree or (ii) require any
consent or other action by any person under, constitute a default under (with
due notice or lapse of time or both), or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Executive or to a
loss of any material benefit to which Executive is entitled under any provision
of any agreement or other instrument binding upon Executive, to the extent that
any of the foregoing would have a material adverse effect on Executive or would
prevent or otherwise render unable Executive to perform his obligations under
this Agreement.
7. Termination. This Agreement shall automatically terminate (and the
term of this Agreement shall thereupon terminate) upon the occurrence of any one
of the following events:
(a) Death of Executive.
(b) If Executive shall have been incapacitated from illness, accident
or other disability and unable to perform his normal duties hereunder for a
cumulative period of three months in any period of six consecutive months, and
no reasonable accommodation being available, upon either party giving the other
party not less than 30 days' written notice.
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(c) The Expiration Date or the scheduled expiration date of any renewal
or extension thereof in compliance with Section 1(b).
(d) By the Company for Cause.
(e) By Executive for Good Reason. Upon the occurrence of any event or
the existence of any condition or circumstance constituting Good Reason,
Executive may by notice to the Board, deem a constructive termination of this
Agreement to have occurred, whereupon Executive shall be entitled to the
compensation set forth in Section 7(b).
(f) Upon not less than 30 days' written notice from Executive to the
Company of his voluntary resignation; provided, that such voluntary resignation
shall not relieve or release Executive from any breach of this Agreement at or
prior to the time of such resignation.
8. Effect of Termination.
(a) Upon termination of this Agreement pursuant to Sections 7(a), (b),
(c), (d) or (f), the Company shall compensate Executive (or, in the event of
Executive's death, his surviving spouse, if any, or his estate), for (x) accrued
but unused vacation time, (y) any base salary earned, but unpaid, for services
rendered to the Company on or prior to the date of termination and (z) amounts
which Executive is otherwise entitled to receive under the terms of or in
accordance with any plan, policy, practice or program of, or contract or
agreement with the Company, as in effect immediately prior to the date of such
termination, (including but not limited to the Purchase Agreement), at or
subsequent to the date of termination without regard to the performance by
Executive of further services or the resolution of any contingency, but subject
to any and all rights, remedies and claims of the Company against Executive.
(b) If Executive resigns for Good Reason or his employment with the
Company is terminated without Cause, the Company shall thereupon pay Executive
the following amounts as severance benefits: (i) all amounts payable pursuant to
Section 8(a), and (ii) a lump sum equal to (x) if Executive resigns for Good
Reason, one year's base salary hereunder plus an amount equal to the most recent
annual bonus, if any, received by Executive pursuant to Section 3(a)(ii) or (y)
if Executive's employment is terminated without Cause, six months' base salary
hereunder plus an amount equal to one-half of the most recent annual bonus, if
any, received by Executive pursuant to Section 3(a)(ii).
9. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Affiliate" means, with respect to the Company, any person or entity
who or which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company or NPI.
6
<PAGE>
"Cause" means (i) Executive's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
Executive's duty of loyalty to the Company or its parent Nextel Partners, Inc.
or (iii) after 20 business days following Executive's receipt of written notice
from the Company specifying the particulars in reasonable detail, Executive's
failure to comply with or to cure, as applicable, (A) a willful and material
refusal to comply with specific written directions of the Board (or specific
written directions of the Chief Executive Officer) consistent with Executive's
employment agreement with NPI or the Company or any of their respective
subsidiaries and capable of being performed by him or (B) a willful and material
breach of Executive's duty of due care to the Company.
"Class A Common Stock" means the Class A Common Stock, par value $.001
per share, of NPI.
"Closing" has the meaning specified in the Purchase Agreement.
"Covered Entities" means, collectively, the Restricted Entities and
such other entities as may from time to time be reasonably agreed to by the
Company and the Executive to be Covered Entities hereunder.
"FCC" means the Federal Communications Commission.
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by NWIP to the Company
thereunder, which changes are implemented in order to cause such agreements to
be in compliance with FCC requirements so as to reflect the intent of the
parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in Executive's
duties, responsibilities or reporting relationships, (ii) a relocation of
Executive's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by Executive, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under Executive's employment agreement with the Company or
a subsidiary of the Company that are not cured after 20 business days following
the Company's receipt of a written notification from Executive specifying the
particulars in reasonable detail, and (v) from and after the Closing, following
the implementation of any FCC Modifications, if NWIP exercises control over
day-to-day operating decisions, policy decisions or personnel decisions of the
Company pursuant to such FCC Modifications that (before such modifications)
would have been decisions made by the Company's management and such control
exercised by NWIP is materially more extensive (in the collective reasonable
judgment of the Senior Managers then employed by the Company) than that which
NWIP
7
<PAGE>
could have exercised under the agreements to which NWIP is a party relating to
the governance and operation of the Company before giving effect to the FCC
Modifications. Notwithstanding the foregoing, a termination with Good Reason
under clause (v) above shall not be deemed effective until 120 days following
written notice by the Executive to the Company of the occurrence of any of the
foregoing and only if the foregoing continue to occur as of such 120th day.
"Joint Venture Agreement" means the Joint Venture Agreement, to be
dated the date of the Closing, among Nextel, NPI and the Company.
"Nextel" means NEXTEL Communications, Inc., a Delaware corporation.
"NPI" means Nextel Partners, Inc., a Delaware corporation.
"NWIP" means Nextel WIP Corp., a Delaware corporation and a wholly
owned subsidiary of Nextel.
"Parent Companies" means NPI and any other entity that directly or
indirectly owns all or substantially all of the Company's outstanding voting
capital stock.
"Purchase Agreement" means the Restricted Stock Purchase Agreement,
dated as of November 20, 1998, between Executive and the Company.
"Required Build" means the completion of the build out of all Initial
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year (as defined in the Joint Venture Agreement), and of any Option
Sections (as defined in the Joint Venture Agreement) assigned to the first or
second Build Year that are included in the Territory (as defined in the Joint
Venture Agreement) through the Company's election under Section 6.2B of the
Joint Venture Agreement, but excluding any such Option Sections that are
included in the Territory (as defined in the Joint Venture Agreement) as a
result of the Company's response to a notice given pursuant to Section 6.2C of
the Joint Venture Agreement.
"Restricted Entities" means, collectively, the Company, Nextel and the
Parent Companies and their respective subsidiaries.
"Scheduled Completion Date" means 60 days after December 31, 2001.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Shares" means the shares of Class A Common Stock purchased by
Executive pursuant to the Purchase Agreement.
10. Miscellaneous.
8
<PAGE>
(a) Merger; Amendment. This Agreement (together with the Purchase Agree
ment) constitutes the entire agreement between the parties with respect to the
subject matter hereof, and may be changed, extended or modified only by an
agreement in writing signed by the parties.
(b) Assignment. The rights and obligations of the Company in this
Agreement shall inure to its benefit and be binding upon its successors in
interest (whether by merger, consolidation, reorganization, sale of stock or
assets or otherwise), provided that Executive shall not remain bound by this
Agreement unless such successor assumes all of the obligations of the Company
hereunder. This Agreement shall also inure to the benefit of Executive's heirs,
executors, administrators and legal representatives. This Agreement, being for
the personal services of Executive, shall not be assignable by Executive.
Certain provisions of Section 4 and 5 of this Agreement are, for the purposes
specified therein, intended to inure to the benefit of certain affiliates of the
Company and to be enforceable separately by them as provided therein.
(c) Waiver of Breach. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
(d) Arbitration. Except as otherwise provided herein, any controversies
or claims arising out of, or relating to this Agreement or the breach thereof,
shall be settled by arbitration in accordance with the commercial rules of the
American Arbitration Association, which decision shall be final and binding on
the parties, and judgment upon the award rendered shall be entered in any court
having jurisdiction thereof. Any party may demand such arbitration in accordance
with the procedures set out in those rules. The arbitration shall be conducted
in Seattle, Washington, or such other location as may be mutually agreed upon by
the parties. Special, consequential, or punitive damages shall not be awarded by
the arbitrator. In the event of any arbitration proceeding hereunder, the
Company will (x) pay the fees and expenses of the arbitrator and (y) advance the
Executive's documented out-of-pocket costs (including reasonable counsel fees
and expenses) on a current basis, provided, that if Executive is determined not
to be the substantially prevailing party on the matters submitted for
arbitration (which determination shall be made by the arbitrator and included in
his or her decision), Executive will promptly reimburse the Company for any
expenses so advanced. Executive acknowledges that the Company is agreeing to
make advances to him pursuant to the preceding sentence in consideration of his
agreement to reimburse the Company for any such advances to the extent required
by the preceding sentence. The Company will in all events pay its own costs
(including counsel fees and expenses) in connection with any arbitration
proceeding hereunder.
(e) Notices. All notices given hereunder shall be in writing and shall
be deemed to have been duly given and received (i) when delivered personally,
with receipt acknowledged in writing by the recipient, (ii) on the tenth
business day after being sent by registered or certified mail (postage paid,
return receipt requested), (iii) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, or
(iv) on the date on which a facsimile is transmitted, in each case to the
parties at their respective addresses stated below;
9
<PAGE>
provided, that if the intended recipient of any notice hereunder refuses to
acknowledge receipt thereof in writing, such notice shall be deemed to have been
duly given on the date of such refusal. Any party may change its address for
notice by giving notice of the new address to the other party in accordance with
the provisions of this paragraph.
If to the Company:
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
If to Executive:
David M. Thaler
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
David M. Thaler
3316 Williams Lane
Mound, MN 55364
(f) Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
the Agreement shall be construed in all respects as though such invalid or
unenforceable provision were omitted.
(g) Survival. The provisions of Sections 3(d), 4, 5, 8 and 10 shall
survive any termination of this Agreement.
10
<PAGE>
(h) Governing Law. This Agreement shall be interpreted according to the
internal laws of the State of New York, without regard to choice of law rules
that would result in the application of the laws of another State.
(i) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or the beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(j) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
* * *
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEXTEL PARTNERS OPERATING CORP.
By /s/ John Chapple
-------------------------
Name: John Chapple
Title: President & CEO
/s/ David Thaler
-------------------------
DAVID M. THALER
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
EXHIBIT 12
COMPUTATION OF RATIO TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED THREE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999 DECEMBER 31, 1998 MARCH 31, 1999
-------------------------------------------- -------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
EARNINGS (LOSS)
Pretax income (loss) ($22,298) ($17,423) ($42,318) ($19,008)
Add back:
Fixed charges as disclosed below 7,303 13,728 39,496 15,135
Less: Capitalized Interest (6,313) (799) (6,313) (799)
----------------- ----------------- ----------------- -----------------
EARNINGS (LOSS) AS ADJUSTED (21,308) (4,494) (9,135) (4,672)
----------------- ----------------- ----------------- -----------------
FIXED CHARGES:
Interest expense, net of
capitalized interest -- 12,173 31,723 13,535
Capitalized interest 6,313 799 6,313 799
Amortization of debt issuance costs -- 356 470 401
Portion of rent expense
representative of interest factor 990 400 990 400
----------------- ----------------- ----------------- -----------------
7,303 13,728 39,496 15,135
----------------- ----------------- ----------------- -----------------
DEFICIENCY OF EARNINGS TO FIXED CHARGES (28,611) (18,222) (48,631) (19,807)
================= ================= ================= =================
</TABLE>
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE COMPANY
---------------------------
NAME STATE OF INCORPORATION
---- ----------------------
Nextel Partners Operating Corp. Delaware
NPCR, Inc. Delaware
Nextel Partners of Upstate New York, Inc. Delaware
Nextel WIP Lease Corp. Delaware
Nextel Partners Equipment Corp. Nevada
1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Seattle, Washington
June 25, 1999
<PAGE>
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------------
NEXTEL PARTNERS, INC.
(Exact name of obligor as specified in its charter)
Delaware 91-1930918
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4500 Carillon Point
Kirkland, Washington 98033
(Address of principal executive offices) (Zip code)
---------------------------
14% Senior Discount Notes Due 2009
(Title of the indenture securities)
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
----------------------------------------------------------------------------
Name Address
----------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y.
10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed
with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to Form
T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 23rd day of June, 1999.
THE BANK OF NEW YORK
By: /s/ ILIANA A. ARCIPRETE
----------------------------
Name: ILIANA A. ARCIPRETE
Title: ASSISTANT TREASURER
-3-
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1999, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS In Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and currency and coin............................ $4,508,742
Interest-bearing balances..................................................... 4,425,071
Securities:
Held-to-maturity securities................................................... 836,304
Available-for-sale securities................................................. 4,047,851
Federal funds sold and Securities purchased under agreements to resell.......... 1,743,269
Loans and lease financing receivables:
Loans and leases, net of unearned income...................................... 39,349,679
LESS: Allowance for loan and lease losses..................................... 603,025
LESS: Allocated transfer risk reserve......................................... 15,906
Loans and leases, net of unearned income, allowance, and reserve.............. 38,730,748
Trading Assets.................................................................. 1,571,372
Premises and fixed assets (including capitalized leases)........................ 685,674
Other real estate owned......................................................... 10,331
Investments in unconsolidated subsidiaries and associated companies............. 182,449
Customers' liability to this bank on acceptances outstanding.................... 1,184,822
Intangible assets............................................................... 1,129,636
Other assets.................................................................... 2,632,309
-----------
Total assets.................................................................... $61,688,578
===========
LIABILITIES
Deposits:
In domestic offices........................................................... $25,731,036
Noninterest-bearing........................................................... 10,252,589
Interest-bearing.............................................................. 15,478,447
In foreign offices, Edge and Agreement subsidiaries, and IBFs................. 18,756,302
Noninterest-bearing........................................................... 111,386
Interest-bearing.............................................................. 18,644,916
Federal funds purchased and Securities sold under agreements to repurchase...... 3,276,362
Demand notes issued to the U.S.Treasury......................................... 230,671
Trading liabilities............................................................. 1,554,493
Other borrowed money:
With remaining maturity of one year or less................................... 1,154,502
With remaining maturity of more than one year through three years............. 465
With remaining maturity of more than three years.............................. 31,080
Bank's liability on acceptances executed and outstanding........................ 1,185,364
Subordinated notes and debentures............................................... 1,308,000
Other liabilities............................................................... 2,743,590
-----------
Total liabilities............................................................... 55,971,865
===========
EQUITY CAPITAL
Common stock.................................................................... 1,135,284
Surplus......................................................................... 764,443
Undivided profits and capital reserves.......................................... 3,807,697
Net unrealized holding gains (losses) on available-for-sale securities.......... 44,106
Cumulative foreign currency translation adjustments............................. (34,817)
-----------
Total equity capital............................................................ 5,716,713
-----------
Total liabilities and equity capital............................................ $61,688,578
===========
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
================================================================================
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni |
Alan R. Griffith | Directors
Gerald L. Hassell |
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS IN THE REGISTRANT'S REGISTRATION STATEMENT ON
FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998 DEC-31-1998
<CASH> 300,812 0 16
<SECURITIES> 0 0 0
<RECEIVABLES> 2,715 0 1,800
<ALLOWANCES> 346 0 254
<INVENTORY> 1,047 0 1,353
<CURRENT-ASSETS> 482,207 0 3,240
<PP&E> 119,749 0 112,334
<DEPRECIATION> 6,799 0 4,386
<TOTAL-ASSETS> 750,548 0 247,666
<CURRENT-LIABILITIES> 18,761 0 8,995
<BONDS> 0 0 0
2 0 0
28 0 0
<COMMON> 6,733 0 1,604
<OTHER-SE> 133,846 0 237,067
<TOTAL-LIABILITY-AND-EQUITY> 750,548 0 247,666
<SALES> 811 0 1,564
<TOTAL-REVENUES> 4,304 153 5,309
<CGS> 1,718 0 2,935
<TOTAL-COSTS> 4,824 301 9,043
<OTHER-EXPENSES> 8,387 942 18,564
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 12,529 0 0
<INCOME-PRETAX> (17,423) (1,090) (22,298)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (17,423) (1,090) (22,298)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (17,423) (1,090) (22,298)
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
