<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2000
REGISTRATION NO. 333-95473
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
FORM S-1
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 Number)
</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)
------------------------------
COPIES OF ALL COMMUNICATIONS TO BE SENT TO:
<TABLE>
<S> <C>
Karen A. Andersen, Esq. Steven Della Rocca, Esq.
Laura A. Bertin, Esq. Peter M. Labonski, Esq.
Mark F. Worthington, Esq. Kashif Z. Sheikh, Esq.
Neil I. Chang, Esq. Latham & Watkins
Summit Law Group, PLLC 885 Third Avenue, Suite 1000
1505 Westlake Avenue North, Suite 300 New York, NY 10022
Seattle, WA 98109 (212) 906-1200
(206) 281-9881
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Subject to Completion. Dated February 7, 2000.
23,500,000 Shares
[LOGO]
Class A Common Stock
------------------
This is an initial public offering of shares of Class A common stock of
Nextel Partners, Inc. This prospectus relates to an offering of shares in
the United States. In addition, shares are being offered outside the
United States in an international offering. All of the 23,500,000 shares of
Class A common stock are being sold by Nextel Partners.
Prior to this offering, there has been no public market for the Class A
common stock. It is currently estimated that the initial public offering price
per share will be between $16.00 and $18.00. We have applied to list our
Class A common stock for quotation on the Nasdaq National Market under the
symbol "NXTP".
SEE "RISK FACTORS" BEGINNING ON PAGE 10 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF THE CLASS A COMMON STOCK.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ---------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts...................................... $ $
Proceeds, before expenses, to Nextel Partners............... $ $
</TABLE>
To the extent that the U.S. underwriters sell more than shares of
Class A common stock, the U.S. underwriters have the option to purchase up to an
additional shares from Nextel Partners at the initial public
offering price less the underwriting discount. The international underwriters
may similarly purchase up to an additional shares.
------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on February , 2000.
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
MORGAN STANLEY DEAN WITTER
DLJDIRECT INC.
------------------
Prospectus dated February , 2000.
<PAGE>
MAP DEPICTING THE FOLLOWING:
- OUR TERRITORY
- OUR OPTION TERRITORY
- NEXTEL'S TERRITORY
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS BUT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN OUR CLASS A COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, ESPECIALLY "RISK FACTORS" BEGINNING ON PAGE 10. AS USED IN
THIS PROSPECTUS, "WE," "US" AND "OUR" REFER TO NEXTEL PARTNERS, INC., "NEXTEL"
REFERS TO NEXTEL COMMUNICATIONS, INC. (AND/OR, WHERE APPROPRIATE, ITS
SUBSIDIARIES), AND "NEXTEL WIP" REFERS TO NEXTEL WIP CORP., AN INDIRECT WHOLLY
OWNED SUBSIDIARY OF NEXTEL.
NEXTEL PARTNERS
We provide digital wireless communications services in mid-sized and smaller
markets throughout the United States. We hold broadband wireless licenses that
cover 40 million persons, or Pops, in 46 markets. We are licensed to operate in
12 of the top 100 metropolitan statistical areas in the United States ranked by
population and 51 of the top 200 metropolitan statistical areas. We also have
the option, under certain circumstances, to acquire from a subsidiary of Nextel
licenses that cover an additional 13 million Pops, of which we currently intend
to acquire licenses covering 2.3 million Pops. In January 1999, we entered into
an affiliation with Nextel, whose wholly owned subsidiary owns 36.5% of our
common stock prior to this offering and is our largest stockholder. This
affiliation was created to accelerate the build-out of the Nextel digital mobile
network by granting us the exclusive right to offer wireless communications
services under the Nextel brand in selected mid-sized and smaller markets.
The Nextel digital mobile network utilizes a single digital transmission
technology called integrated digital enhanced network, or iDEN, which was
developed by Motorola, Inc. This network constitutes one of the largest
fully-integrated wireless communications systems in the United States. By the
end of 2000, we and Nextel together plan to provide service in 99 of the top 100
metropolitan statistical areas in the United States. We offer a differentiated
package of services under the Nextel brand name targeted to business users. We
currently offer the following fully-integrated services accessible through a
single wireless telephone:
- digital mobile, or interconnect, telephone service;
- Nextel Direct Connect service that allows users to contact co-workers
instantly, on private one-to-one calls or on a group call; and
- the ability to receive pages and short-text messages.
In addition, Nextel has announced its plan to offer users access to digital
two-way mobile data and Internet connectivity services, expected to be
commercially available in mid-2000. As part of our agreements with Nextel WIP,
we expect to offer these same data services in our markets after their
commercial implementation by Nextel.
Our senior management team has substantial operating experience, averaging
over 15 years in the communications industry. Each member of senior management
has significant experience working at AT&T Wireless, McCaw Cellular and/or
Nextel. Our senior management and employees collectively own 6.7% of our common
stock on a fully diluted basis prior to this offering. Other key stockholders,
in addition to Nextel's subsidiary, include DLJ Merchant Banking Partners,
Madison Dearborn Capital Partners, Eagle River Investments, an investment
company controlled by Craig O. McCaw, and Motorola.
STRATEGIC ALLIANCE WITH NEXTEL
Our affiliation with Nextel is an integral part of our strategy. Nextel WIP
has contributed to us
3
<PAGE>
licenses and cash in exchange for an ownership stake in our company. Pursuant to
our agreements with Nextel WIP, we enjoy numerous important benefits, including
the following:
- NEXTEL BRAND AND DIFFERENTIATED MARKETING PROGRAMS. We have the exclusive
right to offer digital wireless communications services using the Nextel
brand in all of our markets. We believe the Nextel brand is among the most
recognized wireless brands in the United States. In particular, we believe
that the Nextel brand represents a differentiated and value-added product
in the wireless marketplace. In using the Nextel brand name, we also
benefit from Nextel's national marketing campaigns.
- INTEGRATED NATIONWIDE NETWORK. Our systems are operationally seamless with
those of Nextel, enabling customers of both companies to roam on each
other's portion of the Nextel digital mobile network. As customers
increasingly choose national rate plans, we believe that the ability to
offer national coverage is a competitive advantage. Additionally, we
believe that offering users a full digital interconnect feature set
wherever they travel within the Nextel digital mobile network
differentiates our service from the services of many of our competitors.
- EXCLUSIVE ROAMING PARTNERSHIP. Under our agreements with Nextel WIP, we
are the exclusive provider of wireless communication services to Nextel's
iDEN/800 MHz frequency customers who roam into our markets. We believe
this affiliation will continue to provide us with a consistent base of
recurring roaming services revenue and allow us to offer our customers
roaming services on Nextel's portion of the Nextel digital mobile network
in a cost-effective manner.
- INFRASTRUCTURE AND RELATIONSHIPS. In exchange for a fee, we have the right
to utilize Nextel's current infrastructure, including certain switching
facilities and network monitoring systems, until such time as our customer
volume indicates that we should build our own. While we have implemented
our own customer activation, billing and customer care systems, we use
Nextel's systems to offer our national account subscribers seamless
customer service. Additionally, we expect that Nextel's strong
relationships with its vendors and national account customers will allow
us in many cases to secure wireless equipment at competitive rates and
penetrate national accounts within our service area. For example, under
our agreement with Motorola, we purchase wireless telephones and
infrastructure equipment from Motorola at the same prices as Motorola
offers such equipment to Nextel.
BUSINESS STRATEGY
Our goal is to become the leading provider of integrated digital wireless
communication services 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:
- PROVIDE DIFFERENTIATED PACKAGE OF WIRELESS SERVICES. We offer a package of
services and features that combines multiple wireless communications
options in a single wireless telephone. We will continue to emphasize the
differentiated features of iDEN technology and implement advancements in
this technology platform as they become available. In addition, we
maintain uniformity with Nextel by offering consistent rates to our
customers anywhere on the Nextel digital mobile network, billing based
upon the actual numbers of seconds of airtime after the first minute, and
rate plans that do not distinguish between "peak" and "off-peak" minutes.
- TARGET BUSINESS CUSTOMERS. We believe that our focus on business customers
will result in higher monthly average revenue per unit and lower average
monthly service cancellations or terminations. This is a market segment
for which we believe our product has high utility, and
4
<PAGE>
we further believe that we and Nextel are the only major U.S. wireless
carriers directing fully integrated, nationwide offerings to this segment.
- DEPLOY ROBUST NETWORK RAPIDLY. Our objective is to build robust wireless
systems that cover all key areas of a given market before we launch our
network in that market. We are deploying these systems rapidly to capture
the current and projected growth in wireless usage in the United States.
We are also building our customer care and internal systems to support
future anticipated demand.
- OPERATE IN MID-SIZED AND SMALLER MARKETS. We focus on mid-sized and
smaller markets with demographics we believe to be similar to those served
by Nextel. We believe that this strategy will allow us to rapidly increase
penetration within our targeted customer base, which we believe has
historically been underserved in these markets. We believe that this
focus, combined with our differentiated service offerings, will give us
the ability to sustain our pricing strategy.
MARKETS
As of January 15, 2000, we had commercial operations in markets with total
Pops of 9.9 million and the ability to offer service to, or cover, 7.7 million
Pops. These operational markets are in Hawaii, New York, Texas and Pennsylvania.
As of December 31, 1999, we had approximately 46,000 digital subscribers with a
covered market penetration of approximately 0.75%. We intend to be able to
provide service to over 20 million Pops by the end of 2000 and over 27 million
Pops by the end of 2001. The following table sets forth those markets with over
one million Pops in which we have launched or intend to launch digital wireless
service:
<TABLE>
<CAPTION>
MARKETS TOTAL POPS MARKET LAUNCH
- ------- ---------- --------------
<S> <C> <C>
Kentucky (Lexington-Fayette, Louisville).................... 2,543,523 1st Half 2000
Syracuse/Utica-Rome/Binghamton/Elmira, NY................... 2,308,433 Launched
Eastern Iowa (Waterloo, Dubuque, Davenport, Cedar Rapids,
Iowa City)................................................ 1,829,046 1st Half 2000
Arkansas (Fayetteville, Ft. Smith, Pine Bluff).............. 1,804,738 1st Half 2001
Central Illinois (Peoria, Springfield, Champaign,
Bloomington, Decatur)..................................... 1,757,899 1st Half 2000
Evansville/Owensboro, IN.................................... 1,652,709 1st Half 2001
Harrisburg/York/Lancaster, PA............................... 1,641,088 Launched
Shreveport/Monroe/Tyler/Longview, LA/TX..................... 1,597,763 2nd Half 2000
Green Bay/Fond du Lac/Appleton/Sheboygan, WI................ 1,435,451 1st Half 2001
Albany/Glens Falls, NY...................................... 1,407,264 Launched
Hattiesburg/Jackson, MS..................................... 1,390,583 1st Half 2001
Central Pennsylvania (Altoona, Williamsport, State
College).................................................. 1,366,464 2nd Half 2001
Buffalo, NY................................................. 1,282,387 Launched
Hawaii (all islands)........................................ 1,197,687 Launched
Roanoke/Lynchburg/Charlottesville, VA....................... 1,175,872 1st Half 2001
Rochester, NY............................................... 1,049,391 Launched
</TABLE>
We have calculated total Pops for a given market by utilizing the 1990
census data for each county within the market and extrapolating such data
through 1997 based on estimated population growth rates. Future launch schedules
for our markets are subject to the various factors discussed under the heading
"Risk Factors" in this prospectus.
5
<PAGE>
RECENT DEVELOPMENTS--FOURTH QUARTER RESULTS
We recently announced our fourth quarter operating results. At December 31,
1999, we had approximately 46,000 digital subscribers, an increase of 38% from
the approximately 33,400 digital subscribers at September 30, 1999. Monthly
average revenue per unit, or ARPU, was $66 for the year ended December 31, 1999.
Service revenues grew about 27% to $10.5 million for the three months ended
December 31, 1999, as compared with $8.3 million for the three months ended
September 30, 1999. Earnings before interest, taxes, depreciation, amortization
and stock-based compensation, or EBITDA as adjusted, for the three months ended
December 31, 1999 was $(10.5) million, as compared to $(8.0) million for the
three months ended September 30, 1999. For the year ended December 31, 1999,
EBITDA as adjusted was $(31.6) million as compared to $(17.3) million for the
year ended December 31, 1998. EBITDA is commonly used to analyze companies, but
is not a measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income or loss as
a measure of performance or to cash flow as a measure of liquidity. EBITDA as
adjusted, as calculated by us, may not be comparable to other similarly entitled
measures reported by other companies.
Our loss from operations for the three months ended December 31, 1999 was
$40.7 million which includes an amount for stock-based compensation expense of
$25.6 million. This represents an increase of $29.5 million from our loss of
$11.2 million for the three months ended September 30, 1999. Our capital
expenditures during the fourth quarter of 1999 were $90 million.
------------------------
We were incorporated in the State of Delaware in July 1998. Our principal
executive offices are located at 4500 Carillon Point, Kirkland, Washington
98033. Our telephone number is (425) 828-1713.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Total Class A common stock offered:
U.S. offering............................................. shares
International offering.................................... shares
Total Class A common stock to be outstanding after this
offering.................................................. 158,927,974 shares
Total Class A common stock and Class B common stock to be
outstanding after this offering........................... 236,710,600 shares
</TABLE>
<TABLE>
<S> <C>
Use of proceeds............... We expect to use the estimated $376.5 million in net
proceeds from this offering for our general corporate
purposes, including:
- capital expenditures in connection with the build-out
and expansion of our portion of the Nextel digital
mobile network, including build-out of the territories
for which we have an option and intend to acquire;
- future acquisition of additional frequencies; and
- introduction of new services, sales and marketing
activities and working capital.
</TABLE>
<TABLE>
<S> <C>
Proposed Nasdaq National Market Symbol...................... "NXTP"
</TABLE>
Except where otherwise indicated, all information in this prospectus:
- reflects the conversion of all outstanding Series A preferred stock into
shares of Class A common stock and the conversion of all outstanding
shares of Series C preferred stock and Series D preferred stock into
shares of Class B common stock upon the closing of this offering; our
Class B common stock is convertible on a one-for-one basis into shares of
our Class A common stock at any time, at the option of the holder, upon a
transfer to a person other than Nextel, a majority-owned Nextel subsidiary
or a person or entity controlling Nextel, and is otherwise identical in
all respects to our Class A common stock; the holders of our Class A and
Class B common stock are entitled to one vote per share on all matters;
- gives effect to a six-for-one stock split to be effective prior to the
closing of this offering;
- excludes 5,049,600 shares of Class A common stock issuable upon exercise
of options outstanding as of January 15, 2000 at a weighted average
exercise price of $1.78 per share;
- excludes 2,434,260 shares of Class A common stock issuable upon exercise
of outstanding warrants at an exercise price of less than $0.01 per share;
and
- assumes no exercise of the underwriters' over-allotment options.
Please see "Capitalization" on page 24 for a more complete discussion
regarding the outstanding shares of Class A common stock and other related
matters.
------------------------
This prospectus contains registered trademarks and service marks of Nextel,
including "Nextel," "Nextel Direct Connect" and "Nextel Online"; Motorola,
including "Motorola," "i1000 plus," "i500 plus," and "i700 plus"; and other
companies.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
You should read the following consolidated summary financial data together
with "Management's Discussion and Analysis" and our consolidated financial
statements and the related notes, all of which appear elsewhere in this
prospectus. Our historical financial results discussed throughout this
prospectus include the operations we acquired from Nextel WIP on January 29,
1999 in connection with our initial capitalization, which operations had
previously been managed by Nextel. See Note 1 of our audited consolidated
financial statements for a discussion of our formation, capitalization and basis
of presentation. The as adjusted balance sheet information set forth below
reflects:
- the receipt of estimated net proceeds from this offering; and
- the reclassification of the Series B preferred stock, plus accrued
dividends, from stockholders' equity to the section of the balance sheet
between liabilities and stockholders' equity.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------------------
1998 1998 1999
-------------- ------------- -------------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Operating revenues:
Service revenues..................................... $3,745 $1,501 $17,617
Equipment revenues................................... 1,564 632 2,977
------------- ------------ ------------
Total revenues......................................... 5,309 2,133 20,594
------------- ------------ ------------
Operating expenses:
Cost of service revenues............................. 6,108 3,461 11,786
Cost of equipment revenues........................... 2,935 1,149 7,424
Selling, general and administrative.................. 13,531 7,342 22,591
Stock-based compensation............................. 447 -- 1,579
Depreciation and amortization........................ 4,586 1,860 8,162
------------- ------------ ------------
Total operating expenses............................... 27,607 13,812 51,542
------------- ------------ ------------
Loss from operations................................... (22,298) (11,679) (30,948)
Interest expense, net.................................. -- -- (44,571)
Interest income........................................ -- -- 16,416
------------- ------------ ------------
Loss before income tax provision....................... (22,298) (11,679) (59,103)
Income tax provision................................... -- -- --
------------- ------------ ------------
Net loss............................................... $(22,298) $(11,679) $(59,103)
============= ============ ============
Basic and diluted net loss per common share(1)......... $(27.30)
============
Weighted average common shares outstanding(1).......... 2,164,771
Pro forma basic and diluted net loss per common
share(1)(2).......................................... $(0.39)
============
Pro forma weighted average common shares
outstanding(1)....................................... 157,043,210
</TABLE>
- --------------------------
(1) Weighted average common shares outstanding above were calculated assuming
that the shares of Class A and Class B common stock were issued and split on
January 29, 1999, the date of the initial capitalization transactions. Pro
forma weighted average common shares outstanding above were calculated
assuming that the shares of Series A preferred stock were converted into
shares of Class A common stock and shares of Series C and Series D preferred
stock were converted into shares of Class B common stock, after giving
effect to the six-for-one stock split, on January 29, 1999. Per share
information is not included for periods prior to 1999 because the
capitalization transactions that occurred on January 29, 1999 substantially
altered our capital structure.
8
<PAGE>
(2) Pro forma basic and diluted net loss per common share was calculated
assuming a $1,825 accrued dividend on the Series B preferred stock. Upon
consummation of this offering, the Series B preferred stock becomes subject
to mandatory redemption in February 2010. This accrued dividend increases
the net loss attributable to common stockholders to $60,928.
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, SEPTEMBER 30, 1999
1998 ------------------------
ACTUAL ACTUAL AS ADJUSTED
-------------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents, short-term investments and
restricted cash(1)........................................ $16 $582,346 $958,874
Plant, property and equipment, net.......................... 107,948 167,647 167,647
FCC operating licenses, net................................. 133,180 148,600 148,600
Total assets.............................................. 247,666 934,634 1,311,162
Current liabilities......................................... 8,995 25,469 25,469
Long-term debt.............................................. -- 770,308 770,308
Series B redeemable preferred stock......................... -- -- 23,675
Total stockholders' equity.................................. 238,671 138,857 491,710
Total liabilities and stockholders' equity............ $247,666 $934,634 $1,311,162
</TABLE>
- --------------------------
(1) Short-term investments include marketable debt securities and corporate
commercial paper with original purchase maturities greater than three
months. Restricted cash reflects the cash collateral account maintained
under our credit facility equal to borrowings outstanding under one of our
term loans, until the FCC approved Nextel WIP's transfer of the broadband
wireless licenses to us.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------
1998 1998 1999
-------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER DATA:
Covered Pops (end of period) (millions)..................... 5.4
Subscribers (end of period)................................. 33,401
EBITDA as adjusted (1)...................................... $(17,265) $(9,819) $(21,207)
Capital expenditures (2).................................... $104,334 $101,623 $52,756
</TABLE>
- --------------------------
(1) Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA as
adjusted, represents net loss before interest expense, interest income,
depreciation, amortization and stock-based compensation expense. EBITDA is
commonly used to analyze companies on the basis of operating performance,
leverage and liquidity. While EBITDA as adjusted 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 as
adjusted to provide additional information with respect to our ability to
meet future debt service, capital expenditure and working capital
requirements. EBITDA as adjusted is not a measure determined under generally
accepted accounting principles. Also, as calculated above, EBITDA as
adjusted may not be comparable to similarly titled measures reported by
other companies.
(2) 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.
9
<PAGE>
RISK FACTORS
INVESTING IN SHARES OF OUR CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AS WELL AS ALL THE
OTHER INFORMATION IN THIS PROSPECTUS--INCLUDING OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES--BEFORE INVESTING IN OUR CLASS A COMMON STOCK. OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD BE SERIOUSLY HARMED
DUE TO ANY OF THE FOLLOWING RISKS. THE TRADING PRICE OF OUR CLASS A COMMON STOCK
COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
RISK FACTORS RELATING TO NEXTEL PARTNERS
WE HAVE A HISTORY OF OPERATING LOSSES, EXPECT TO CONTINUE TO INCUR SUBSTANTIAL
OPERATING LOSSES AND MAY NOT BE ABLE TO GENERATE THE EARNINGS NECESSARY TO FUND
OUR OPERATIONS, SUSTAIN THE CONTINUED GROWTH OF OUR BUSINESS OR REPAY OUR DEBT
OBLIGATIONS.
We did not commence commercial operations until January 29, 1999, and the
portion of the Nextel digital mobile network we acquired on that date only had a
few months of operating history. Since then, we have had a history of operating
losses and, as of September 30, 1999, we had incurred cumulative operating
losses of approximately $30.9 million. We expect to continue to incur
substantial operating losses and to generate negative cash flow from operating
activities through 2003. We cannot assure you that we will become profitable or
sustain profitability in the future. If we fail to complete the commercial
launch of our portion of the Nextel 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 to fund our current
operations, sustain the continued growth of our business or repay our debt
obligations. Our failure to fund our operations or continued growth would have
an adverse impact on our financial condition and our failure to make any
required payments would result in defaults under all our debt agreements, which
could result in the cessation of our business.
WE MUST COMPLETE OUR PORTION OF THE NEXTEL DIGITAL MOBILE NETWORK BY SET
DEADLINES, OFFER CERTAIN SERVICES AND MEET PERFORMANCE REQUIREMENTS OR RISK
TERMINATION OF OUR AGREEMENTS WITH NEXTEL WIP, WHICH WOULD ELIMINATE OUR ABILITY
TO CARRY OUT OUR CURRENT BUSINESS PLAN AND STRATEGY.
Our operating agreements with Nextel WIP require us to construct our portion
of the Nextel digital mobile network to specific standards and by set deadlines,
offer certain services and meet performance requirements. Our failure to meet
any of these requirements could constitute a material default under the
operating agreements that would give Nextel WIP the right to terminate these
agreements, including the right to use the Nextel brand. The non-renewal or
termination of the Nextel WIP operating agreements would eliminate our ability
to carry out our current business plan and strategy and adversely affect our
financial condition. In addition, as described below, in certain circumstances,
upon a termination of the agreements by Nextel WIP, Nextel WIP could acquire all
of our outstanding stock, including shares of Class A common stock purchased in
this offering.
UNDER CERTAIN CIRCUMSTANCES, NEXTEL WIP HAS THE ABILITY TO PURCHASE, AND THE
MAJORITY OF OUR CLASS A STOCKHOLDERS CAN CAUSE NEXTEL WIP TO PURCHASE, ALL OF
OUR OUTSTANDING STOCK, INCLUDING THE CLASS A COMMON STOCK SOLD IN THIS OFFERING.
Under our restated certificate of incorporation and our operating
agreements, in certain circumstances and subject to certain limitations, Nextel
WIP has the ability to purchase, or to cause and fund a redemption by us, of all
of the outstanding shares of our Class A common stock, including shares sold in
this offering. In addition, under the provisions of our restated certificate of
incorporation, upon the occurrence of certain events, the holders of a majority
of our outstanding Class A common stock, can require Nextel WIP to purchase all
of the outstanding shares of our
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Class A common stock, including the shares sold in this offering. For a
description of these provisions of our restated certificate of incorporation,
see "Description of Capital Stock--Certain Obligations Under Our Charter."
NEXTEL WIP HAS APPROVAL RIGHTS THAT ALLOW IT TO EXERT SIGNIFICANT INFLUENCE OVER
OUR OPERATIONS AND IT CAN ACQUIRE ADDITIONAL SHARES OF OUR STOCK, WHICH COULD
ALLOW IT TO PROMOTE INTERESTS THAT MAY CONFLICT WITH THOSE OF OUR OTHER
STOCKHOLDERS.
Pursuant to our shareholders' agreement and operating agreements, the
approval of the director designated by Nextel WIP, and/or Nextel WIP itself, is
required in order for us to:
- make a material change in our technology;
- modify our business objectives in any way that is inconsistent with our
objectives under our material agreements, including our operating
agreements with Nextel WIP;
- dispose of all or substantially all of our assets;
- make a material change in or broaden the scope of our business beyond our
current business objectives; or
- enter into any agreement the terms of which would be materially altered in
the event that Nextel WIP either exercises or declines to exercise its
right to acquire greater than a majority of our stock under the terms of
the shareholders' agreement.
These approvals rights relate to significant transactions, and decisions by the
Nextel WIP-designated director could conflict with those of our other directors,
including our independent directors.
The shareholders' agreement does not prohibit Nextel WIP or any of our other
stockholders or any of their respective affiliates from purchasing shares of our
Class A common stock in the open market. Any such purchases would increase the
voting power and influence of the purchasing stockholder, and could result in a
change of control of us. Additionally, if we experience a change of control,
Nextel WIP could purchase all of our broadband licenses for $1.00, provided that
it enters into a royalty-free agreement with us to allow us to use the licenses
in our territory for as long as our operating agreements with Nextel WIP remain
in effect. Such an agreement could be subject to approval by the Federal
Communications Commission, or FCC.
OUR SUCCESS IS DEPENDENT, IN PART, ON NEXTEL COMPLETING ITS PORTION OF THE
NEXTEL DIGITAL MOBILE NETWORK AND CONTINUING TO BUILD AND SUSTAIN CUSTOMER
SUPPORT OF ITS BRAND AND THE MOTOROLA IDEN TECHNOLOGY, AND IF NEXTEL EXPERIENCES
FINANCIAL OR OPERATIONAL DIFFICULTIES OUR BUSINESS WOULD BE ADVERSELY AFFECTED.
Our business plan depends on Nextel completing its portion of the Nextel
digital mobile network on schedule and continuing to build and sustain customer
support of its brand and the Motorola iDEN technology. If Nextel encounters
financial problems or operating difficulties relating to its portion of the
Nextel digital mobile network or experiences a significant decline in customer
acceptance of its products or the Motorola iDEN technology, our affiliation with
and dependence on Nextel may adversely affect our business, including the
quality of our services, the ability of our customers to roam in the entire
network and our ability to attract and retain new customers. Additional
information regarding Nextel and its domestic digital mobile network business
can be found in Nextel's Annual Report on Form 10-K for the year ended
December 31, 1998 and Nextel's other filings made under the Securities Act of
1933 and the Securities Exchange Act of 1934 under SEC file number 0-19656. You
should read these filings to more fully understand the risks presented by our
affiliation with Nextel. For a description of where this information can be
obtained, see "Where You Can Find More Information."
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OUR BUSINESS STRATEGY DEPENDS ON THE SUCCESSFUL AND CONTINUED INTEGRATION OF OUR
PORTION OF THE DIGITAL MOBILE NETWORK WITH NEXTEL'S PORTION.
Pursuant to our operating agreements with Nextel WIP, Nextel WIP provides us
with important services and assistance, including a license to use the Nextel
brand name and the sharing of switches that direct calls to their destinations.
These services are critical to the successful integration of our portion of the
Nextel digital mobile network with Nextel's portion, which is essential to the
overall success of our business.
Moreover, our business plan depends on our ability to implement an
integrated customer service, network management and billing system with Nextel's
systems to allow our respective portions of the Nextel digital mobile network to
operate together, and provide our and Nextel's customers with seamless service.
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 results of operations.
DIFFICULTIES IN CONSTRUCTING AND OPERATING OUR PORTION OF THE NEXTEL DIGITAL
MOBILE NETWORK COULD INCREASE THE ESTIMATED COSTS AND DELAY THE SCHEDULED
COMPLETION OF THE NETWORK, THEREBY ADVERSELY AFFECTING OUR ABILITY TO GENERATE
REVENUE.
The development and operation of our portion of the Nextel digital mobile
network involves a high degree of risk. Before we are in a position to commence
operations in our undeveloped markets, we will need to:
- select and acquire appropriate sites for our transmission equipment, or
cell sites;
- purchase and install low-power transmitters, receivers and control
equipment, or base radio equipment;
- build out the physical infrastructure;
- obtain interconnection services from local telephone service carriers on a
timely basis; and
- test the network.
Our ability to perform these necessary steps successfully may be hindered
by, among other things, any failure:
- to lease or obtain rights to sites for the location of our base radio
equipment;
- to obtain necessary zoning and other local approvals with respect to the
placement, construction and modification of our facilities;
- to acquire additional necessary radio frequencies from third parties or to
exchange radio frequency licenses with Nextel WIP;
- 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 land use regulatory approvals and approval
from the Federal Aviation Administration with respect to the transmission
towers that we will be using.
Before fully implementing our portion of the Nextel digital mobile network
in a new market area or expanding coverage in an existing market area, we must
complete systems design work, find appropriate sites and construct necessary
transmission structures, receive regulatory approvals, free up frequency
channels now devoted to non-digital transmissions and begin systems
optimization. These processes may take weeks or months to complete, and may be
hindered or delayed by many factors, including unavailability of antenna sites
at optimal locations, land use and zoning
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controversies and limitations of available frequencies. 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 delivery and catastrophic occurrences. Any failure to construct our portion
of the Nextel 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. Moreover, 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 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 operating agreements with Nextel
WIP, which would impede our ability to execute our business plan and potentially
give Nextel WIP the right to purchase all of our outstanding stock for a price
per share equal to 80% of the average closing price of our stock for the 20
trading days prior to the default.
WE MAY BE REQUIRED TO IMPLEMENT MATERIAL CHANGES TO OUR BUSINESS OPERATIONS TO
THE EXTENT THESE CHANGES ARE ADOPTED BY NEXTEL, WHICH MAY NOT BE BENEFICIAL TO
OUR BUSINESS.
If Nextel adopts material changes to its operations, including the adoption
of new technology, our operating agreements with Nextel WIP give it the right to
require similar changes to our operations. The failure to implement required
changes could, under certain circumstances, trigger the ability of Nextel WIP to
terminate its operating agreements with us. Even if the required 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.
OUR HIGHLY LEVERAGED CAPITAL STRUCTURE LIMITS OUR ABILITY TO OBTAIN ADDITIONAL
FINANCING AND COULD ADVERSELY AFFECT OUR BUSINESS IN SEVERAL OTHER WAYS.
The level of our outstanding debt greatly exceeds the level of our revenues
and stockholders' equity. As of September 30, 1999, we had $770 million of total
indebtedness outstanding, including $325 million outstanding under our credit
facility and $445 million of senior discount notes outstanding at their accreted
value. This indebtedness represented approximately 85% of our total
capitalization at that date. As of September 30, 1999, we also had
$23.7 million of mandatorily redeemable preferred stock outstanding, including
accrued dividends.
Our large amount of indebtedness could significantly impact our business for
the following reasons:
- it limits our ability to obtain additional financing, if needed, to
complete the build-out of our portion of the Nextel digital mobile
network, to cover our cash flow deficit or for working capital, other
capital expenditures, debt service requirements or other purposes;
- it means that we will need to dedicate a substantial portion of our
operating cash flow to fund interest expense on our credit facility and
other indebtedness, thereby reducing funds available for our build-out,
operations or other purposes;
- it makes us vulnerable to interest rate fluctuations because our credit
facility term loan bears interest at variable rates;
- it limits our ability to compete with competitors who are not as highly
leveraged, especially those who may be able to price their service
packages at levels below that which we can or are willing to match; and
- it limits our ability to react to changing market conditions, changes in
our industry and economic downturns.
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OUR EXISTING DEBT INCLUDES RESTRICTIVE AND FINANCIAL COVENANTS THAT LIMIT OUR
OPERATING FLEXIBILITY.
Our credit facility and the indenture relating to our senior discount notes
contain covenants that, among other things, restrict our ability to take
specific actions even if we believe them to be in our best interest. These
include restrictions on our ability to:
- incur additional debt;
- pay dividends or distributions on, or redeem or repurchase, capital stock;
- create liens on assets;
- make investments, loans or advances;
- issue or sell capital stock of certain of our subsidiaries;
- enter into transactions with affiliates;
- enter into sale and leaseback transactions;
- enter into a merger, consolidation or sale of assets; or
- engage in any other business other than telecommunications.
In addition, the credit facility imposes financial covenants which require
our principal subsidiary to comply with specified financial ratios and tests,
including minimum interest coverage ratios, maximum leverage ratios, minimum
service revenues, minimum subscriber units and covered Pops, minimum EBITDA
requirements and minimum fixed charge coverage ratios. We cannot assure you that
we will be able to meet these requirements or satisfy these covenants in the
future and if we fail to do so, our debts could become immediately payable at a
time when we are unable to pay them, which could adversely affect our ability to
carry out our business plan and would have a negative impact on our financial
condition.
IF AN EVENT CONSTITUTING A CHANGE OF CONTROL OCCURS, WE MAY BE REQUIRED TO
REDEEM ALL OF OUR OUTSTANDING NOTES EVEN IF OUR CREDIT FACILITY PROHIBITS SUCH A
REDEMPTION OR WE LACK THE RESOURCES TO MAKE SUCH A REDEMPTION.
Upon the occurrence of a defined change of control under the indenture
relating to our senior discount notes, other than a change of control involving
certain of our existing stockholders, we could be required to redeem all
outstanding notes. Our credit facility prohibits us from redeeming any of our
notes before their stated maturity. In the event we become subject to a change
of control at a time when we are prohibited from redeeming the notes, our
failure to redeem the tendered notes would constitute an event of default under
the indenture, which would in turn result in a default under the credit
facility. Any default under our indenture or credit facility would harm our
financial condition and could adversely impact our ability to effectuate our
business plan. Moreover, even if we obtained consent under our credit facility,
we cannot assure you that we would have sufficient resources to redeem the notes
and still have sufficient funds available to successfully pursue our business
plan.
OUR FUTURE PERFORMANCE WILL DEPEND ON OUR AND NEXTEL'S ABILITY TO SUCCEED IN THE
HIGHLY COMPETITIVE WIRELESS COMMUNICATIONS TRANSMISSION INDUSTRY.
Our ability to compete effectively with established and prospective wireless
communications service providers depends on many factors, including:
- If the wireless communications technology used by Nextel and us does not
perform in a manner that meets customer expectations, we will be unable to
attract and retain customers, which would adversely affect your
investment. Customer acceptance of the services we offer is and will
continue to be affected by technology-based differences and by the
operational
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performance and reliability of system transmissions on the Nextel digital
mobile network. If we are unable to address and resolve satisfactorily,
performance or other transmission quality issues as they arise, including
transmission quality issues on Nextel's portion of the Nextel digital
mobile network, or if these issues limit our ability to expand our network
coverage or capacity as currently planned, or place either Nextel or us at
a competitive disadvantage to other wireless service providers in our
markets, we may have difficulty attracting and retaining customers, which
would adversely affect our revenues and have a negative impact on the
value of the Class A common stock.
- If we or Nextel cannot expand, provide and maintain our respective system
coverage on a nationwide basis in the United States, then our growth and
operations, and the value of your investment, would be adversely affected.
We will not be able to provide roaming system coverage comparable to that
currently available through roaming arrangements from cellular and some
personal communication services operators, unless and until we and Nextel
substantially complete a nationwide digital mobile network. This places us
at a competitive disadvantage, as some other providers currently have
roaming agreements that provide coverage of each other's markets
throughout the United States, including areas where our portion and/or
Nextel's portion of the Nextel digital mobile network has not been or will
not be built. In addition, some of our competitors provide their customers
with subscriber units with both digital and analog capability, which
expands their coverage, while we and Nextel have only digital capability.
We cannot assure you that we will be able to achieve sufficient system
coverage or that a sufficient number of customers or potential customers
will be willing to accept system coverage limitations as a trade-off for
the enhanced multi-function wireless communications package we provide on
our portion and Nextel's portion of the Nextel digital mobile network.
- Neither we nor Nextel have the extensive direct and indirect channels of
distribution for the Nextel digital mobile network products and services
that are available to some of our competitors. The lack of this
distribution channel could adversely affect our operating results and have
a negative impact on the value of your investment. Many of our competitors
have established extensive networks of retail locations and multiple
distribution channels, and so enjoy a competitive advantage over us in
these areas. We have increased the proportion of our digital mobile
network customers that we obtain through our indirect distributor network,
and we currently anticipate that we will rely more heavily on indirect
distribution channels to achieve greater market penetration for our
digital wireless service offerings. However, as we expand our retail
subscriber base through increased reliance on indirect distribution
channels and as price competition in the wireless industry intensifies,
our average revenue per digital subscriber unit may decrease and our
customer retention may be adversely affected.
- If we cannot offer pricing packages attractive to customers, our operating
results may be adversely affected, which could adversely affect the value
of your investment.
- If our competitors provide two-way radio dispatch services, we will lose a
competitive advantage. Our two-way radio dispatch services are currently
not available through traditional cellular or personal communication
services providers; however, if either personal communication services or
cellular operators provide two-way radio dispatch or comparable services
in the future, our competitive advantage may be impaired, which could have
an adverse effect on our revenue.
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WE MAY FACE PRESSURE TO REDUCE OUR PRICES, WHICH WOULD ADVERSELY AFFECT OUR
OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.
We expect that as the number of wireless communications providers in our
market areas increases, including providers of both digital and analog services,
our competitors' prices in these markets will decrease. We may encounter further
market pressures to:
- reduce our digital mobile network service offering prices;
- restructure our digital mobile network service offering packages to offer
more value; or
- respond to particular short-term, market-specific situations, for example,
special introductory pricing or packages that may be offered by new
providers launching their service in a particular market.
OUR EQUIPMENT IS MORE EXPENSIVE THAN THE EQUIPMENT OF SOME OF OUR COMPETITORS,
WHICH MAY ADVERSELY AFFECT OUR GROWTH AND OPERATING RESULTS.
We currently market multi-function digital wireless telephones, providing
mobile telephone and private and group dispatch service, in addition to paging
and alphanumeric short-text messaging. Our mobile telephones are, and are likely
to remain, significantly more expensive than mobile analog telephones and are,
and are likely to remain, somewhat more expensive than digital cellular or
personal communication services telephones that do not incorporate a comparable
multi-function capability. Although we believe that our multi-function wireless
telephones currently are competitively priced compared to multi-function digital
cellular and personal communication services telephones, the higher cost of our
equipment may make it more difficult or less profitable to attract customers who
do not place a high value on our unique multi-service offering. This may reduce
our growth opportunities or profitability and may adversely affect the value of
your investment.
OUR NETWORK MUST HAVE SUFFICIENT CAPACITY TO SUPPORT OUR ANTICIPATED CUSTOMER
GROWTH.
Our business plan depends on assuring that our portion of the Nextel digital
mobile network has adequate capacity to accommodate anticipated new customers
and the related increase in usage of our network. This plan relies on:
- the ability to obtain additional radio spectrum when and where required;
- the availability of wireless telephones of the appropriate model and type
to meet the demands and preferences of our customers; and
- the ability to obtain additional cell sites and other infrastructure
equipment.
We cannot assure you that we will not experience unanticipated difficulties
in obtaining these items which could adversely affect our ability to build our
network.
WE HAVE POTENTIAL SYSTEMS LIMITATIONS ON ADDING CUSTOMERS, WHICH MAY ADVERSELY
AFFECT OUR GROWTH AND PERFORMANCE.
Critical to our business plan is our success in attracting and retaining
large numbers of customers to our portion of the Nextel 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 basis, we may encounter other factors
that could adversely affect our ability to successfully add customers to our
portion of the Nextel digital mobile network, including:
- inadequate or inefficient information systems, business processes and
related support functions, especially as related to customer service and
accounts receivable collection; and
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- an inappropriately long length of time between a customer's order and
activation of service for that customer, especially since the current
activation time is longer than that of some of our competitors.
Customer reliance on our customer service functions may increase as we add
new customers. Our inability to timely and efficiently meet the demands for
services could decrease or postpone subscriber growth, or delay or otherwise
impede billing and collection of amounts owed, which would adversely affect our
revenues.
WE ARE DEPENDENT ON OUR CURRENT KEY PERSONNEL AND OUR SUCCESS DEPENDS UPON OUR
CONTINUED ABILITY TO ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED PERSONNEL.
The loss of one or more key officers could impair our ability to
successfully build out and operate our portion of the Nextel digital mobile
network. We believe that our future success will also depend on our continued
ability to attract and retain highly qualified technical and management
personnel. We believe that there is and will continue to be intense competition
for qualified personnel in the wireless communications industry. We may not be
successful in retaining our key personnel or in attracting and retaining other
highly qualified technical and management personnel.
THE TRANSMISSION TECHNOLOGY USED IN THE NEXTEL 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 Nextel 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 carriers only when Motorola developed a
proprietary technology it calls "iDEN." We and Nextel are currently the only
major U.S. wireless service providers utilizing iDEN technology on a nationwide
basis, and iDEN phones are not currently designed to roam onto other wireless
networks.
Our operating agreements with Nextel WIP require us to use the iDEN
technology in our system and prevent us from adopting any new communications
technology without Nextel WIP's consent. 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 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, because
of the restrictive provisions in our agreements, we will be less able to compete
effectively and could lose customers to our competitors.
WE ARE DEPENDENT ON MOTOROLA FOR TELECOMMUNICATIONS EQUIPMENT NECESSARY FOR THE
OPERATION OF OUR BUSINESS AND ANY FAILURE OF MOTOROLA TO PERFORM WOULD ADVERSELY
AFFECT OUR OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.
Motorola is currently our sole-source supplier of transmitters used in our
network and wireless telephone equipment used by our customers and we rely, and
expect to continue to rely, on Motorola to manufacture a substantial portion of
the equipment necessary to construct our portion of the Nextel digital mobile
network. We expect that for the next few years, Motorola, and competing
manufacturers who are licensed by Motorola, will be the only manufacturers of
wireless telephones that are compatible with the Nextel digital mobile network.
If Motorola becomes unable to deliver such equipment, or refuses to do so on
reasonable terms, then we may not be able to service our existing subscribers or
add new subscribers and our business would be adversely affected. Motorola and
its affiliates engage in wireless communications businesses and may in the
future engage in additional businesses that do or may compete with some or all
of the services we
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offer. We cannot assure you that any potential conflict of interest between us
and Motorola will not adversely affect our ability to receive equipment in the
future. In addition, the failure by Motorola to deliver necessary technology
improvements and enhancements and system infrastructure and subscriber equipment
on a timely, cost-effective basis would have an adverse effect on our growth and
operations and would adversely affect your investment. We generally have been
able to obtain adequate quantities of base radios and other system
infrastructure equipment from Motorola, and adequate volumes and mix of wireless
telephones and related accessories from Motorola, to meet subscriber and system
loading rates, but we cannot assure you that quantities will be sufficient in
the future. Additionally, in the event of shortages of that equipment, our
agreements with Nextel WIP provide that available supplies of this equipment
would be allocated proportionately among Nextel and us.
RISK FACTORS RELATING TO OUR INDUSTRY
CONCERNS THAT THE USE OF WIRELESS TELEPHONES MAY POSE HEALTH AND SAFETY RISKS
MAY DISCOURAGE THE USE OF OUR WIRELESS TELEPHONES.
Media reports have suggested that, and studies are currently being
undertaken to determine whether, radio frequency emissions from enhanced
specialized mobile radio, or ESMR, cellular and personal communications service,
or PCS, wireless telephones may be linked with health risks, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. The actual or perceived risk of portable telephones could
adversely affect us through a reduced subscriber growth rate, a reduction in
subscribers, reduced network usage per subscriber or through reduced financing
available to the mobile communications industry.
Some state and local legislatures have passed or are considering legislation
that would restrict the use of wireless telephones while driving automobiles due
to safety concerns. The passage or proliferation of this type of legislation
could decrease demand for our services.
REGULATORY AUTHORITIES EXERCISE CONSIDERABLE POWER OVER OUR OPERATIONS, WHICH
COULD BE EXERCISED AGAINST OUR INTERESTS AND IMPOSE ADDITIONAL UNANTICIPATED
COSTS.
The FCC and 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. The Telecommunications Act of
1996 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. FCC regulation may also
have the effect of adding new entrants into the telecommunications market as a
result of anticipated assignments of spectrum space.
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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RISK FACTORS RELATING TO OUR CAPITAL STRUCTURE AND COMMON STOCK
CERTAIN SIGNIFICANT STOCKHOLDERS REPRESENTED ON OUR BOARD OF DIRECTORS CAN EXERT
SIGNIFICANT INFLUENCE OVER US AND MAY HAVE INTERESTS THAT CONFLICT WITH THOSE OF
OTHER STOCKHOLDERS, INCLUDING PURCHASERS IN THIS OFFERING.
After this offering, our officers, directors and greater than 5%
stockholders will together control approximately 79.3% of our outstanding common
stock. As a result, these stockholders, if they act together, will be able to
control the management and affairs of our company and all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying or preventing a change in control of our company and might
affect the market price of our common stock.
In addition, under our amended shareholders' agreement, Nextel WIP, Madison
Dearborn Partners and Eagle River each have the right to designate a member to
our six-member board of directors. We cannot be certain that any conflicts that
arise between the interests of our company and those of these stockholders will
always be resolved in our favor. Moreover, as described above, Nextel WIP has
certain approval rights that allow it to exert significant influence over our
operations.
DLJ Merchant Banking, Madison Dearborn Partners and Eagle River each own
significant amounts of our capital stock and each currently has a representative
on our board of directors. Each of these entities or their affiliates has
significant investments in other telecommunications businesses, some of which
may compete with us currently or in the future. We do not have a noncompetition
agreement with any of our stockholders, and thus their or their affiliates'
current and future investments could create conflicts of interest.
ANTI-TAKEOVER PROVISIONS AFFECTING US COULD PREVENT OR DELAY A CHANGE OF CONTROL
THAT YOU MAY FAVOR.
Provisions of our organizational documents, shareholders' agreement,
operating agreements and Delaware law may discourage, delay or prevent a merger
or other change of control that stockholders may consider favorable. We have
authorized the issuance of "blank check" preferred stock and have imposed
certain restrictions on the calling of special meetings of stockholders. If we
experience a change of control, Nextel WIP could purchase all of our broadband
licenses for $1.00, provided that it enters into a royalty-free agreement with
us to allow us to use the licenses in our territory for as long as our operating
agreements remain in effect. Such an agreement would be subject to approval by
the FCC. Moreover, a change of control of us could trigger an event of default
under provisions in our credit facility and the indenture with respect to our
senior discount notes. These provisions could have the effect of delaying,
deferring or preventing a change of control in our company, discourage bids for
our Class A common stock at a premium over the market price, lower the market
price of, and the voting and other rights of the holders of, our Class A common
stock, or impede the ability of the holders of our Class A common stock to
change our management. See "Related-Party Transactions," "Description of Certain
Indebtedness" and "Description of Capital Stock--Selected Anti-Takeover
Matters."
OUR CERTIFICATE OF INCORPORATION CONTAINS PROVISIONS THAT ALLOW US TO REDEEM
SHARES OF OUR SECURITIES IN ORDER TO MAINTAIN COMPLIANCE WITH APPLICABLE FEDERAL
AND STATE TELECOMMUNICATIONS LAWS AND REGULATIONS.
Our business is subject to regulation by the FCC and state regulatory
commissions or similar state regulatory agencies in the states in which we
operate. This regulation may prevent some investors from owning our securities,
even if that ownership may be favorable to us. The FCC and some states have
statutes or regulations that would require an investor who acquires a specified
percentage of our securities or the securities of one of our subsidiaries to
obtain approval to own
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those securities from the FCC or the applicable state commission. Moreover, our
certificate of incorporation allows us to redeem shares of our stock from any
stockholder in order to maintain compliance with applicable federal and state
telecommunications laws and regulations.
OUR SERIES B PREFERRED STOCK HAS A PREFERENCE IN A LIQUIDATION TO OUR COMMON
STOCK, CAN BE REDEEMED BY US AT ANY TIME AND MUST BE REDEEMED FOR CASH IN 2010.
Upon any liquidation of our company, holders of our Series B preferred stock
would be entitled to receive, prior to receipt of any funds by the holders of
our common stock, an aggregate liquidation preference equal to $21,850,000, plus
dividends accrued on such amount from the date of issuance up to the liquidation
date equal to 12% per year, compounded quarterly. As of September 30, 1999, we
had $23.7 million of Series B preferred stock outstanding, including accrued
dividends. In addition, we can redeem all of our Series B preferred stock at any
time upon payment of the accreted liquidation preference. We must redeem all
such shares in February 2010, and we cannot guarantee that we will have
sufficient cash from operations at that time to make such redemption.
OUR STOCK PRICE IS LIKELY TO BE VOLATILE.
Prior to this offering, you could not buy or sell our Class A common stock
publicly. The market price of our Class A common stock is likely to be volatile
and could be subject to wide fluctuations in response to factors such as the
following, some of which are beyond our control:
- quarterly variations in our or Nextel's operating results;
- variations in our or Nextel's operating results from the expectations of
securities analysts and investors;
- changes in expectations as to our or Nextel's future financial
performance, including financial estimates by securities analysts and
investors;
- changes in laws and regulations affecting the telecommunications industry;
- announcements by third parties of significant claims or proceedings
against us;
- changes in market valuations of Nextel or other telecommunications
companies;
- announcements of technological innovations or new services by us, Nextel
or our competitors;
- announcements by us, Nextel or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- additions or departures of key personnel;
- future sales of our Class A common stock; and
- stock market price and volume fluctuations.
ADDITIONAL SHARES OF OUR CLASS A COMMON STOCK WILL BE ELIGIBLE FOR PUBLIC SALE
IN THE FUTURE AND MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR CLASS A COMMON
STOCK.
Sales of a substantial number of shares of our Class A common stock in the
public market following this offering could adversely affect the market price of
our Class A common stock. After this offering, we will have 158,927,974 shares
of Class A common stock outstanding, and 236,710,600 shares of Class A and
Class B common stock outstanding. Our Class B common stock is held by Nextel
WIP, is identical to our Class A common stock and is convertible at any time
into Class A common stock on a one-for-one basis upon a transfer to a person
other than Nextel, a majority-owned Nextel subsidiary or a person or entity
controlling Nextel.
20
<PAGE>
The following table shows the timing of when the shares of Class A common
stock outstanding as of January 15, 2000 may be eligible for resale in the
public market, assuming that certain contractual "lock-up" agreements are not
amended or waived:
<TABLE>
<CAPTION>
SHARES OF CLASS A COMMON
DATE STOCK FIRST ELIGIBLE FOR RESALE COMMENT
- ---------------------------------------- ------------------------------- ------------------------
<S> <C> <C>
- - Upon effectiveness.................... 23,500,000 - Freely tradable shares
sold in this offering
- - 181 days after date of this 44,478,234 - Shares eligible for
prospectus............................ sale under Rule 144
- - September 9, 2000..................... 8,300,316 - Shares eligible for
sale under Rule 144
- - 18 months after date of this 82,649,424 - Shares eligible for
prospectus............................ sale under Rule 144,
subject to certain
restrictions
</TABLE>
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
We expect the initial public offering price will be substantially higher
than the net tangible book value of each outstanding share of Class A common
stock. Purchasers of Class A common stock in this offering will suffer immediate
and substantial dilution. The dilution will be $15.41 per share in the net
tangible book value of the Class A common stock issued in the initial public
offering assuming an initial public offering price of $17.00 per share.
OUR FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A VARIETY OF FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM CURRENT BELIEFS.
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 other comparable words,
or by discussions of strategy that involve risks and uncertainties. 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 as a result of a variety of factors, including those set
forth under "Risk Factors." Such forward-looking statements include, but are not
limited to, statements with respect to the following:
- our plan for meeting our scheduled build-out for commercial launch of
markets within our portion of the Nextel digital mobile network;
- our business plan, its advantages and our strategy for implementing our
plan;
- general economic conditions in the geographic areas and occupational
markets that we are targeting in our portion of the Nextel digital mobile
network;
- our expectation regarding the continued successful performance and market
acceptance of the technology we use;
- our ability to attract and retain sufficient subscribers;
- our anticipated capital expenditures and funding requirements, including
our ability to access sufficient debt or equity capital to meet operating
and financing needs;
- the availability of adequate quantities of system infrastructure and
subscriber equipment and components to meet our service deployment,
marketing plans and customer demand;
21
<PAGE>
- the ability to achieve and maintain market penetration and average
subscriber revenue levels sufficient to provide financial viability;
- our ability to timely and successfully accomplish required scale-up of our
billing, collection, customer care and similar back-office operations to
keep pace with customer growth, increased system usage rates and growth in
levels of accounts receivables;
- the quality and price of similar or comparable wireless communications
services offered or to be offered by our competitors, including providers
of PCS and cellular services;
- future legislation or regulatory actions relating to specialized mobile
radio services, other wireless communications services or
telecommunications services generally; and
- other risks and uncertainties described from time to time in our reports
filed with the SEC.
22
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of Class A
common stock in this offering will be approximately $376.5 million after
deducting the underwriting discounts and estimated offering expenses. If the
underwriters exercise in full their options to purchase additional shares, we
estimate that our net proceeds in this offering will be approximately
$433.2 million.
We expect to use the net proceeds of this offering for our general corporate
purposes, including:
- capital expenditures in connection with the build-out and expansion of our
portion of the Nextel digital mobile network, including build-out of the
territories for which we intend to exercise our option;
- future acquisition of additional frequencies; and
- introduction of new services, sales and marketing activities and working
capital.
Pending these uses, the net proceeds of this offering will be invested in
short-term, interest-bearing government or investment grade securities.
DIVIDEND POLICY
We have never paid cash dividends on any of our capital stock, including our
Class A common stock. We currently intend to retain any future earnings to fund
the development and growth of our business. Therefore, we do not currently
anticipate paying any cash dividends on our Class A common stock in the
foreseeable future. In addition, our credit facility prohibits us from paying
dividends without our lender's consent, and the indenture pursuant to which our
senior discount notes were issued prohibits us from paying dividends without the
consent of the trustee. We will, however, be required, in a liquidation or upon
mandatory redemption in 2010, to pay dividends on our Series B preferred stock.
See "Description of Capital Stock."
23
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the conversion of all
outstanding shares of Series A preferred stock into shares of Class A
common stock and the conversion of the Series C and Series D preferred
stock into shares of Class B common stock; and
- on a pro forma basis as adjusted to show the effect of our receipt of the
net proceeds from the sale of 23,500,000 shares of Class A common stock at
an assumed initial public offering price of $17.00 per share in this
offering, the midpoint of the range set forth on the cover page of this
prospectus.
You should read this table in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus.
The outstanding share information excludes: 5,049,600 shares of Class A
common stock issuable upon exercise of options outstanding as of January 15,
2000 having a weighted average exercise price of $1.78 per share; and 2,434,260
shares of Class A common stock issuable upon the exercise of outstanding
warrants having an exercise price of less than $0.01 per share.
<TABLE>
<CAPTION>
ACTUAL AS OF PRO FORMA
SEPTEMBER 30, 1999 PRO FORMA AS ADJUSTED
-------------------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents, short-term
investments and restricted cash............ $582,346 $582,346 $ 958,874
======== ======== ==========
Debt:
Credit facility(1)......................... 325,000 325,000 325,000
14% senior discount notes due 2009(2)...... 445,308 445,308 445,308
-------- -------- ----------
Total long-term debt....................... 770,308 770,308 770,308
-------- -------- ----------
Series B redeemable preferred stock due
2010(3).................................... -- 23,675 23,675
-------- -------- ----------
Stockholders' equity:
Series B redeemable or convertible
preferred stock due 2010(3).............. 2 -- --
Convertible preferred stock................ 34 -- --
Class A common stock and additional paid-in
capital.................................. 7,474 215,637 592,165
Class B common stock and additional paid-in
capital.................................. 127,100 127,100
Warrants outstanding....................... 3,847 3,847 3,847
Other paid-in capital...................... 357,077 -- --
Subscription receivable.................... (142,489) (142,489) (142,489)
Deferred compensation...................... (5,432) (5,432) (5,432)
Accumulated deficit........................ (81,656) (83,481) (83,481)
-------- -------- ----------
Total stockholders' equity............... 138,857 115,182 491,710
-------- -------- ----------
Total capitalization..................... $909,165 $909,165 $1,285,693
======== ======== ==========
</TABLE>
- ------------------------
(1) One of our subsidiaries, Nextel Partners Operating Corp., entered into a
$425 million credit facility and, as of September 30, 1999, had drawn down
an aggregate of $325 million in term loans. See "Description of Certain
Indebtedness."
(2) Represents the accreted value of the notes as of September 30, 1999.
(3) Relates to Series B preferred stock subject to mandatory redemption by us as
a result of this offering in February 2010. Upon the closing of this
offering we will record a charge to accumulated deficit with a credit to the
Series B preferred stock representing the 12% dividend from issuance to date
of effectiveness. Through September 30, 1999 this amounted to $1.8 million
and is reflected above. The Series B preferred stock, plus accrued
dividends, is being reclassified from stockholders' equity to the section of
the balance sheet between liabilities and stockholders' equity.
24
<PAGE>
DILUTION
If you invest in our Class A common stock, your interest will be diluted to
the extent of the difference between the public offering price per share of our
Class A common stock and the pro forma as adjusted net tangible book value per
share of our Class A common stock after this offering. We calculate net tangible
book value per share by dividing the net tangible book value, which equals total
assets less intangible assets and total liabilities, by the number of
outstanding shares of our Class A and Class B common stock. All of our Class B
common stock is owned by Nextel WIP, has identical rights as the Class A common
stock and is convertible into Class A common stock at any time, at the option of
the holder, upon a transfer of such shares to a person other than Nextel, a
majority-owned Nextel subsidiary or a person or entity controlling Nextel.
At September 30, 1999, our pro forma net tangible book value, after giving
effect to the automatic conversion of all outstanding shares of Series A,
Series C and Series D preferred stock into an aggregate of 203,617,272 shares of
common stock upon the closing of this offering, was $(32,722), or $(.00015) per
share of common stock. After giving effect to the sale of the 23,500,000 shares
of Class A common stock at an assumed initial public offering price of
$17.00 per share, less estimated underwriting discounts and commissions and
estimated expenses we expect to pay in connection with this offering, our pro
forma as adjusted net tangible book value at September 30, 1999 would have been
$376,494,778, or $1.59 per share. This represents an immediate increase in the
as adjusted pro forma net tangible book value of $1.59 per share to existing
stockholders and an immediate dilution of $15.41 per share to new investors, or
approximately 91% of the assumed offering price of $17.00 per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 17.00
----------
Pro forma net tangible book value per share at September 30,
1999...................................................... $ (.00015)
Increase per share attributable to new investors............ 1.59
---------
Pro forma as adjusted net tangible book value per share
after this offering....................................... 1.59
----------
Dilution per share to new investors......................... $ 15.41
==========
</TABLE>
The following table shows on a pro forma as adjusted basis at September 30,
1999, after giving effect to the automatic conversion of all outstanding shares
of Series A, Series C and Series D preferred stock into shares of common stock
upon the closing of this offering, the number of shares of common stock
purchased from us, the total consideration paid to us and the average price paid
per share by existing stockholders and by new investors purchasing Class A
common stock in this offering, before deducting underwriting discounts and
commissions and estimated offering expenses payable by us, at an assumed public
offering price of $17.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ -------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 213,210,600 90.1% $342,949,000 46.2% $ 1.61
New investors.................... 23,500,000 9.9 399,500,000 53.8 17.00
----------- ---- ------------ ----
Total.......................... 236,710,600 100% $742,449,000 100%
==== ====
</TABLE>
The number of shares outstanding excludes: 5,049,600 shares of Class A
common stock issuable upon exercise of options outstanding as of January 15,
2000 having a weighted average exercise price of $1.78 per share; and 2,434,260
shares of Class A common stock issuable upon the exercise of outstanding
warrants having an exercise price of less than $0.01 per share. To the extent
that any shares are issued upon exercise of these options or warrants, there
will be further dilution to new investors.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
We have summarized below our historical consolidated financial data as of
December 31, 1998 and September 30, 1999 and for the year ended December 31,
1998 and for the nine-month periods ended September 30, 1998 and 1999. 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 historical operating data presented below is derived from our records.
Our historical financial results discussed in this section and throughout
this prospectus include the operations we acquired from Nextel WIP on
January 29, 1999 in connection with our initial capitalization, which operations
had previously been managed by Nextel. See Note 1 of our audited consolidated
financial statements for a discussion of our formation, capitalization and basis
of presentation.
Please read this table together with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our audited consolidated
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ---------------------------------
1998 1998 1999
---------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Operating revenues:
Service revenues..................................... $3,745 $1,501 $17,617
Equipment revenues................................... 1,564 632 2,977
-------------- ------------ ------------
Total revenues......................................... 5,309 2,133 20,594
-------------- ------------ ------------
Operating expenses:
Cost of service revenues............................. 6,108 3,461 11,786
Cost of equipment revenues........................... 2,935 1,149 7,424
Selling, general and administrative.................. 13,531 7,342 22,591
Stock-based compensation............................. 447 -- 1,579
Depreciation and amortization........................ 4,586 1,860 8,162
-------------- ------------ ------------
Total operating expenses............................... 27,607 13,812 51,542
-------------- ------------ ------------
Loss from operations................................... (22,298) (11,679) (30,948)
Interest expense....................................... -- -- (44,571)
Interest income........................................ -- -- 16,416
-------------- ------------ ------------
Loss before income tax provision....................... (22,298) (11,679) (59,103)
Income tax provision................................... -- -- --
-------------- ------------ ------------
Net loss............................................... $(22,298) $(11,679) $(59,103)
============== ============ ============
Basic and diluted net loss per common share(1)......... $(27.30)
============
Weighted average common shares outstanding(1).......... 2,164,771
Pro forma basic and diluted net loss per common
share(1)(2).......................................... $(0.39)
============
Pro forma weighted average common shares
outstanding(1)....................................... 157,043,210
</TABLE>
- ------------------------------
(1) Weighted average common shares outstanding above were calculated assuming
that the shares of Class A and Class B common stock were issued and split on
January 29, 1999, the date of the initial capitalization transactions. Pro
forma weighted average common shares outstanding were calculated assuming
that the shares of Series A preferred stock were converted into shares of
Class A common stock and the shares of Series C and Series D preferred stock
were converted into shares of Class B common stock, after giving effect to
the six-for-one stock split, on January 29, 1999. Per share information is
not included for periods prior to 1999 because the capitalization
transactions that occurred on January 29, 1999 substantially altered our
capital structure.
(2) Pro forma basic and diluted net loss per common share was calculated
assuming a $1,825 accrued dividend on the Series B preferred stock. The
Series B preferred stock becomes subject to mandatory redemption in
February 2010. This accrued dividend increases the net loss attributable to
common stockholders to $60,928.
26
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1998 SEPTEMBER 30, 1999 PRO FORMA(1)
------------------- -------------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents, short-
term investments and restricted
cash............................. $16 $582,346 $582,346
Plant, property and equipment,
net.............................. 107,948 167,647 167,647
FCC operating licenses, net........ 133,180 148,600 148,600
Total assets....................... 247,666 934,634 934,634
Current liabilities................ 8,995 25,469 25,469
Long-term debt..................... -- 770,308 770,308
Series B redeemable preferred
stock............................ -- -- 23,675
Total stockholders' equity......... $238,671 $138,857 $115,182
</TABLE>
- ------------------------
(1) Pro forma amounts reflect adjustments through September 30, 1999 for the
reclassification of the Series B preferred stock, plus accrued dividends,
from the stockholders' equity section of the balance sheet to between
liabilities and stockholders' equity. Upon consummation of this offering, we
will record a charge to accumulated deficit with a credit to Series B
preferred stock representing the 12% dividend accrued from the time of
issuance to the closing of this offering.
(2) Short-term investments include marketable securities and corporate
commercial paper with original purchase maturities greater than three
months. Restricted cash reflects the cash collateral account maintained
under the credit facility equal to borrowings outstanding, until the FCC has
approved the transfer applications relating to the licenses acquired by us
on January 29, 1999.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------------
1998 1998 1999
-------------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OTHER DATA:
Covered Pops (end of period) (millions).............. 5.4
Subscribers (end of period).......................... 33,401
EBITDA as adjusted(1)................................ $(17,265) $(9,819) $(21,207)
Capital expenditures(2).............................. $104,334 $101,623 $ 52,756
</TABLE>
- ------------------------
(1) EBITDA as adjusted represents net loss before interest expense, interest
income, depreciation, amortization and stock-based compensation expense.
EBITDA is commonly used to analyze companies on the basis of operating
performance, leverage and liquidity. While EBITDA as adjusted 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 as adjusted to provide additional information with respect to our
ability to meet future debt service, capital expenditure and working capital
requirements. EBITDA as adjusted is not a measure determined under generally
accepted accounting principles. Also, EBITDA as adjusted as calculated above
may not be comparable to similarly titled measures reported by other
companies.
(2) 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.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Some 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 Nextel 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 Selected Consolidated
Financial Data, the consolidated financial statements and the related notes
included elsewhere in this prospectus.
Our historical results discussed in this section and throughout this
prospectus include the operations we acquired from Nextel WIP on January 29,
1999 in connection with our initial capitalization, which operations had
previously been managed by Nextel. See Note 1 of our audited consolidated
financial statements for a discussion of our formation, capitalization and basis
of presentation.
OVERVIEW
We hold broadband wireless licenses that cover 40 million Pops in 46
markets. We also have the option to acquire from Nextel WIP licenses that cover
an additional 13 million Pops, of which we currently intend to acquire licenses
covering 2.3 million Pops. As of January 15, 2000, we had commercial operations
in markets with total Pops of 9.9 million and the ability to offer service to,
or cover, 7.7 million Pops. These operational markets are in Hawaii, New York,
Texas and Pennsylvania. We intend to be able to provide service to over
20 million Pops by the end of 2000 and over 27 million Pops by the end of 2001.
As of December 31, 1999, we had approximately 46,000 digital subscribers
with a covered market penetration of approximately 0.75%. We added, net of
deactivations, 12,682 subscriber units during the fourth quarter of 1999, and
35,902 subscriber units for the year ended December 31, 1999.
Due to the continued development, build-out and enhancement of our portion
of the Nextel digital mobile network, we expect to continue to experience
negative operating margins. In addition, we anticipate costs such as site
rentals, telecommunications expenses, network equipment and other capital items
to increase. Sales and marketing expenses and general and administrative costs
are also expected to increase with the commercialization of service in new
markets.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
REVENUES
Our primary sources of revenues are service revenues and equipment revenues.
Our service revenues consist of charges for airtime usage and monthly network
access fees from providing integrated wireless services within our territory,
particularly mobile telephone and two-way radio dispatch services. Service
revenues also include roaming revenues related to the use by Nextel subscribers
of our portion of the Nextel digital mobile network. Subject to quarterly
adjustment, we receive revenues from the payment of roaming fees by Nextel WIP
equal to 95% of the aggregate service revenue generated by Nextel subscribers
roaming on our portion of the Nextel digital mobile network through 1999, 90% in
2000, 85% in 2001 and 80% thereafter. For the nine-month period
28
<PAGE>
ended September 30, 1999, approximately $5.8 million of our $17.6 million in
service revenues resulted from roaming fees.
Our equipment revenues consist of revenues received for wireless telephones
purchased by our subscribers. Certain of our digital equipment sales are made
through independent distributors under agreements allowing rights of return on
merchandise unsold by the distributors. We defer recognition of such sales until
the merchandise is sold by the distributors.
For the nine months ended September 30, 1999 total revenues were primarily
generated from our upstate New York and Hawaii markets, which became operational
in July and September 1998, respectively. Revenues increased from 1998 to 1999
due to the growth in the number of subscribers since the initial launch. From
the period ended September 30, 1998 to the period ended September 30, 1999, our
subscriber base increased from 3,761 to 33,401.
Average revenue per unit, or ARPU, is an industry term that measures total
service revenues per month from our subscribers divided by the average number of
digital subscriber units in commercial service for that month. The following
table sets forth our recent revenues (in thousands, except for ARPU):
<TABLE>
<CAPTION>
FOR THE NINE FOR THE NINE
MONTHS ENDED PERCENT OF MONTHS ENDED PERCENT OF
SEPTEMBER 30, CONSOLIDATED SEPTEMBER 30, CONSOLIDATED
1998 REVENUES 1999 REVENUES
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Service revenues............. $1,501 70% $17,617 86%
Equipment revenues........... 632 30 2,977 14
------ --- ------- ---
Total revenues............... $2,133 100% $20,594 100%
====== === ======= ===
ARPU(1)...................... N/A $63
</TABLE>
- ------------------------
(1) ARPU does not include roaming revenues generated from the use by Nextel
subscribers of our portion of the Nextel digital mobile network. ARPU is not
calculated for September 30, 1998 due to the information not being
comparable to the period ending September 30, 1999.
COST OF SERVICE REVENUES
Expenses included in the cost of service revenues are site rent, utilities,
maintenance, engineering, personnel and interconnect charges, and amounts we
must pay Nextel WIP when our customers roam onto Nextel's portion of the Nextel
digital mobile network. These expenses depend primarily on the number of
operating cell sites, total minutes of use and mix of minutes of use between
interconnect and Nextel Direct Connect services.
For the nine-month period ended September 30, 1999 our cost of service
revenues was $11.8 million compared to $3.5 million for the same period in 1998.
The increase for 1999 compared to 1998 was primarily due to nine months of
operational activities in 1999 compared to initial operating expenses for
upstate New York and Hawaii that launched in July and September 1998,
respectively. When our subscribers roam onto Nextel's portion of the Nextel
digital mobile network, 80% of the aggregate revenue that is generated is paid
to Nextel WIP. For the nine months ended September 30, 1999, we paid Nextel WIP
approximately $653,000 in roaming revenues.
COST OF EQUIPMENT REVENUES
Cost of equipment revenues includes the cost of the subscriber wireless
telephones and accessories sold by us. For the nine-month period ended
September 30, 1999 our cost of
29
<PAGE>
equipment revenues was $7.4 million compared to $1.1 million for the same period
in 1998. The increase in cost in 1999 resulted primarily from the provision of
wireless telephones and accessories to new subscribers as we have expanded our
portion of the Nextel digital mobile network. As of September 30, 1999, we had
33,401 subscribers. As part of our business plan, we often offer our equipment
at a discount or as part of a promotion. As a result, the difference between
equipment revenues and cost of equipment revenues was $4.4 million and $500,000
for the nine-month periods ended September 30, 1999 and 1998, respectively. We
expect to continue to employ these discounts and promotions in an effort to grow
our number of subscribers. Therefore, for the forseeable future, we expect that
cost of equipment revenues will exceed our equipment revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist of sales and marketing
expenses, and general and administrative costs. Sales and marketing expenses
relate to salaries for sales representatives and sales support personnel, and
costs associated with indirect distribution channels, marketing and advertising
programs. We anticipate that our cost per gross additional customer will be
relatively high during our first several years of operation, but will decline as
sales representatives become more efficient, we expand our indirect distribution
channels and the cost of our sales infrastructure is distributed over a greater
base of customer additions.
General and administrative costs relate to corporate overhead personnel
including tax, legal, planning, human resources, information technology,
treasury and accounting functions. The nine-month period ended September 30,
1999 was a transition period during which Nextel WIP has made certain
accounting, payroll, customer care, purchasing, human resources and billing
functions available to us. For the nine-month period ended September 30, 1999 we
paid Nextel WIP approximately $1.8 million for transition services. In late
October 1999, our customer care center began operations and at the end of 1999,
we had transferred a majority of these services to our employees and systems.
For the nine-month period ended September 30, 1999, our selling, general and
administrative expenses were $22.6 million compared to $7.3 million for the same
period in 1998. Of the total $22.6 million for the nine months ended
September 30, 1999, $13.3 million pertained to our Hawaii and upstate New York
markets. The remaining amount reflects the costs to hire and set up functional
departments and offices in addition to increasing the sales and marketing
activities for new market launches. The $6.0 million increase in expenses for
the Hawaii and upstate New York markets for the same period reflects the growth
in sales and marketing activities to build the subscriber count to 33,401 at
September 30, 1999.
STOCK-BASED COMPENSATION EXPENSE
For the nine-month period ended September 30, 1999, we recorded stock-based
compensation expense associated with our restricted stock purchase agreements of
$1.6 million. This expense is a non-cash expense. These grants were approved by
our board in July 1998, but shares were not issued until November 1998. For this
reason, no expense was recorded for the nine-month period ended September 30,
1998. These grants are considered compensatory and we account for their deferred
compensation expenses on a basis similar to that used for stock appreciation
rights. We expect the charge for stock-based compensation to increase
substantially for the fourth quarter of 1999.
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<PAGE>
DEPRECIATION AND AMORTIZATION EXPENSE
For the nine-month period ended September 30, 1999, our depreciation and
amortization expenses were $8.2 million compared to $1.9 million for the same
period in 1998. The increase of $6.3 million relates primarily to depreciating
the wireless network assets for the launched Hawaii and upstate New York markets
and starting the amortization of our FCC-licensed radio spectrum.
NET LOSS
For the nine-month period ended September 30, 1999 we reported a net loss of
approximately $59.1 million compared to a net loss of $11.7 million for the same
period in 1998, an increase in net loss of $47.4 million. Expenses increased in
all categories as we have added subscriber usage to the network, hired staff,
set up functional departments and offices, and increased marketing and sales
activities for new launch markets. We anticipate reporting net losses for the
foreseeable future as we grow and expand to meet the requirements of the
business.
RECENT DEVELOPMENTS--FOURTH QUARTER RESULTS
At December 31, 1999, we had approximately 46,000 digital subscribers, an
increase of 38% from the approximately 33,400 digital subscribers at
September 30, 1999. Monthly average revenue per unit, or ARPU, was $66 for the
year ended December 31, 1999.
Service revenues grew by approximately 27% to $10.5 million for the three
months ended December 31, 1999, as compared with $8.3 million for the three
months ended September 30, 1999. Our loss from operations for the three months
ended December 31, 1999 was $40.7 million which includes an amount for
stock-based compensation expense of $25.6 million. This represents an increase
of $29.5 million from our loss of $11.2 million for the three months ended
September 30, 1999. Our capital expenditures during the fourth quarter of 1999
were $90 million.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs arise from the capital requirements necessary to
complete the build-out of our portion of the Nextel digital mobile network,
including the future acquisitions of additional frequencies and the introduction
of new services. We expect capital expenditures to include, among other things,
switches, base radios, transmission towers, antennae, radio frequency
engineering, cell site construction, and additional FCC licenses. Currently, we
estimate that capital requirements to build out our portion of the Nextel
digital mobile network, including build-out of the two markets that we intend to
exercise our option to purchase, and operating losses and working capital for
the period from inception through the end of 2003, will total approximately
$1.2 billion, including the in-kind contributions we have received or expect to
receive from Nextel WIP and Motorola.
For the nine-month period ended September 30, 1999, our capital expenditures
were approximately $67.5 million, including $14.7 million from the Motorola
vendor credit, spent primarily to build out the Nextel digital mobile network in
the upstate New York, Hawaii, Pennsylvania, Kentucky, Iowa, and Texas markets.
The capital expenditures for the nine-month period ended September 30, 1999 was
$34.1 million less than the same period for 1998 due to the construction in 1998
for the initial launch of the upstate New York and Hawaii markets. We estimate
capital expenditures for 1999 will total approximately $158 million. This
estimate excludes approximately $127 million of reimbursements paid to
Nextel WIP for the transactions on January 29, 1999 and September 9, 1999.
In addition, as of January 15, 2000 we had approximately $20 million in
commitments for additional frequency purchases.
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<PAGE>
BUILD-OUT SCHEDULE
For purposes of our build-out, we have divided our territory into 48
markets, including the two markets for which we intend to exercise our option to
build out. Our agreements with Nextel WIP require us to build out and provide
service in all of these markets by June 2001. The table below identifies our
historical and planned build-out schedule for these markets:
<TABLE>
<CAPTION>
NEXTEL PARTNERS BUILD-OUT SCHEDULE*
- ---------------------------------------------------------------------------------------------------
INCREMENTAL COVERED CUMULATIVE COVERED NUMBER OF MARKETS LAUNCHED
YEAR POPULATION POPULATION OR TO BE LAUNCHED
- ---- -------------------- -------------------- -----------------------------
<S> <C> <C> <C>
1998 4.6 million 4.6 million 5
1999 1.5 million 6.1 million 2
2000 14.4 million 20.5 million 27
2001 6.6 million 27.1 million 14**
</TABLE>
- ------------------------
* We have calculated Pops for purposes of our build-out schedule by using a
radio frequency propagation tool to predict reliable service area. We then
use a geographical information system product to determine Pops within such
reliable service area. Our geographical information system product uses 1990
county census data extrapolated through 1997 based on estimated population
growth rates.
** Including the two markets which we intend to exercise our option to acquire.
OPTION TERRITORIES
Under our agreements with Nextel WIP, we have the right, but not the
obligation, to elect to build out additional markets covering approximately
13 million Pops after we have launched services in five of our existing markets.
This option expires if not exercised prior to August 29, 2000. We intend to use
a portion of the proceeds of this offering to exercise our option to acquire
licenses covering 2.3 million Pops in two markets in Iowa, South Dakota and
Pennsylvania.
If and when we elect to build out any option territory we must comply with
the same launch criteria applicable in the rest of our markets. In addition, we
have the right to purchase from Nextel WIP all related fixed network equipment
and operational contracts existing, held or used by Nextel in such territories.
Moreover, subject to Nextel WIP's ability to obtain any appropriate waivers or
approvals from its financing entities and the FCC, Nextel WIP will transfer to
us licenses held by Nextel to operate certain frequencies in the option
territories in which we elect to build out.
EQUIPMENT AND OPERATING AGREEMENTS
We have entered into agreements with Motorola to purchase necessary
infrastructure equipment and other related software and services we use as well
as subscriber wireless telephones and other accessories. In addition, in
connection with the capitalization transactions, Motorola contributed to us a
total of $22 million credit against future purchases in exchange for shares of
our preferred stock. As of December 31, 1999 we had fully utilized this credit.
See "Related-Party Transactions--Motorola Purchase Agreements."
Currently, our agreements with Nextel WIP allow us access to Nextel's
switches and switching facilities. Nextel WIP 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:
- integration of our cell sites into Nextel's national switching
infrastructure;
- shared coverage of Nextel Direct Connect service to communities of
interest;
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<PAGE>
- minimized costs to us and to Nextel; and
- maximized quality of service to our customers and to Nextel customers.
These criteria provide for a flexible construction schedule of switches to
serve our territory, depending on the existing switches in Nextel's territory
and the amount of customer traffic handled by any one switch. We have the option
of installing our own switching facilities within our territory. However, our
deployment of any switching facility requires coordination with Nextel WIP and
may require Nextel WIP's approval. Our agreements with Nextel WIP require us to
implement and install appropriate switch elements as the number of our
subscribers and cell site levels increases. For example, we will need to install
a mobile switching office for every 120,000 subscriber units or a base site
controller for every 50 operational cell sites. We believe that we have
sufficient funds on hand for these installations under our current business
plans.
SOURCES OF FUNDING
To date, third-party financing activities have provided all of our funding.
For the nine-month period ended September 30, 1999 this totaled $799 million and
included:
- proceeds from cash equity contributions of $67.6 million;
- the offering of our 14% senior discount notes for $406.4 million; and
- term loans incurred by our operating subsidiary of $325 million.
For the nine-month period ended September 30, 1999, we also received:
- the contribution by Nextel WIP of FCC licenses valued at $142 million, in
exchange for preferred stock; and
- the contribution by Motorola of a $22.0 million credit to use against our
purchases of Motorola manufactured infrastructure equipment in exchange
for preferred stock, all of which had been used by December 31, 1999.
In addition, as of September 30, 1999, we had irrevocable commitments from
our current stockholders to contribute an additional $135.2 million. An
installment of $52.1 million was contributed in December 1999. The remaining
commitments will be paid in installments of $52.1 million in December 2000 and
$15.5 million in September of 2000 and 2001.
Our 14% senior discount notes due February 1, 2009 were sold in January
1999. The notes were issued at a discount to their aggregate principal amount at
maturity and generated aggregate gross proceeds to us of approximately
$406 million. In July 1999 these notes were exchanged by us for registered notes
having the same financial terms and covenants as the notes issued in January
1999. 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 million by February 1, 2004. Cash interest will not
accrue on the notes prior to February 1, 2004. As of September 30, 1999, the
accreted value of the outstanding senior notes was approximately $445 million.
Nextel Partners Operating Corp., one of our wholly owned subsidiaries,
entered into a credit facility in January 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. This credit facility was amended and restated
in September 1999. The credit facility, as amended, includes a $175 million term
loan, a $150 million term loan and a $100 million reducing revolving credit
facility. Subject to Nextel Partners Operating Corp.'s right in the future to
seek an increase of up to $50 million, the credit facility may not exceed
33
<PAGE>
$425 million. The $175 million term loan matures on January 29, 2008 and the
$150 million term loan matures on July 29, 2008. The revolving credit facility
will terminate on January 29, 2007.
On January 29, 1999, Nextel Partners Operating Corp. borrowed the full
amount of the $175 million term loan and on September 9, 1999, it borrowed the
full amount of the $150 million term loan. As of December 31, 1999, no amounts
were outstanding under the $100 million revolving credit facility.
The $175 million and the $150 million term loans both bear interest, at our
option, at the administrative agent's alternate base rate or reserve-adjusted
LIBOR plus, in each case, applicable margins. The applicable margin for the
$175 million term loan is 4.75% over LIBOR and 3.75% over the higher of 0.5% per
annum above the latest federal funds rate or the prime rate. The applicable
margin for the $150 million term loan is 4.25% over LIBOR and 3.25% over the
higher of 0.5% per annum above the latest federal funds rate or the prime 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, as adjusted, 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, as adjusted, and will range
between 2.25% and 3.75% over LIBOR and between 1.25% and 2.75% over the base
rate.
Borrowings under the term loans are secured by a first priority pledge of
all assets of our subsidiaries and a pledge of their capital stock. The credit
facility contains customary financial and other covenants for the wireless
industry. The credit facility also contains covenants requiring the maintainence
of certain defined financial ratios and meet operational targets including
service revenues, subscriber units and network coverage. As of December 31, 1999
Nextel Partners Operating Corp. was in compliance with all covenants associated
with this credit facility.
We believe the net proceeds from this offering, together with the equity
investments, the proceeds from the issuance of the senior discount notes and
borrowings under the credit facility, provide us with funds sufficient to
complete the build-out of our existing markets and the two markets for which we
intend to exercise our option to buildout, acquire additional frequencies and
provide us with the 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. As of
September 30, 1999, our cash and cash equivalents, short-term investments and
restricted cash balance was $582 million. 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 Nextel digital mobile network and acquire additional FCC
licenses, which might be expensive or impossible to obtain.
MARKET RISKS
We are subject to market risks arising from changes in interest rates. Our
primary interest rate exposure results from changes in LIBOR or the prime rate
which are used to determine the interest rate applicable to the term loans of
our subsidiary under its credit facility. In April 1999, we entered into an
interest rate swap agreement for $60 million 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
$2.7 million.
In January 1999, we issued our 14% senior discount 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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<PAGE>
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 us on January 1, 1999 and established accounting
standards for costs incurred in the acquisition or development and
implementation of computer software. This new standard requires the
capitalization of certain software implementation costs relating to software
acquired or developed and implemented for our use. The adoption of this
statement has not had a significant effect on our 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 has not had a significant effect on our 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 137, issued August 1999,
postpones for one year the mandatory effective date for SFAS 133 to January 1,
2001. We have not evaluated the effects of this change on our financial position
or results of operations.
REVENUE RECOGNITION IN FINANCIAL STATEMENTS--In November of 1999, the SEC
released Staff Accounting Bulletin Number 101--Revenue Recognition in Financial
Statements. This bulletin will become effective for us for the quarter ended
March 31, 2000. This bulletin establishes more clearly defined revenue
recognition criteria than previously existing accounting pronouncements, and
specifically addresses revenue recognition requirements for nonrefundable fees,
such as activation fees, collected by a company upon entering into an
arrangement with a customer, such as an arrangement to provide telecommunication
services. We believe that the effects of this bulletin will not be material to
our financial position or results of our operations.
35
<PAGE>
BUSINESS
OVERVIEW
We provide digital wireless communications services in mid-sized and smaller
markets throughout the United States. We hold broadband wireless licenses that
cover 40 million Pops in 46 markets. We are licensed to operate in 12 of the top
100 metropolitan statistical areas in the United States ranked by population and
51 of the top 200 metropolitan statistical areas. We also have the option, under
certain circumstances, to acquire from N-WIP licenses that cover an additional
13 million Pops, of which we currently intend to acquire licenses covering
2.3 million Pops. In January 1999, we entered into an affiliation with Nextel,
whose wholly owned subsidiary owns 36.5% of our common stock prior to this
offering and is our largest stockholder. This affiliation was created to
accelerate the build-out of the Nextel digital mobile network by granting us the
exclusive right to offer wireless communications services under the Nextel brand
in selected mid-sized and smaller markets.
The Nextel digital mobile network utilizes a single digital transmission
technology called integrated digital enhanced network, or iDEN, which was
developed by Motorola. This network constitutes one of the largest
fully-integrated wireless communications systems in the United States. By the
end of 2000, we and Nextel together plan to provide service covering 99 of the
top 100 metropolitan statistical areas. We offer a differentiated package of
services under the Nextel brand name targeted to business users. We currently
offer the following fully-integrated services accessible through a single
wireless telephone:
- digital mobile, or interconnect, telephone service;
- Nextel Direct Connect service that allows users to contact co-workers
instantly, on private one-to-one calls or on a group call; and
- the ability to receive pages and short text messages.
In addition, Nextel has announced its plan to offer users access to new,
digital two-way mobile data and Internet connectivity services, expected to be
commercially available in mid-2000. As part of our agreements with Nextel WIP,
we expect to offer these same data services in our markets after their
commercial implementation by Nextel.
Our senior management team has substantial operating experience, averaging
over 15 years in the communications industry. Each member of senior management
has significant experience working at AT&T Wireless, McCaw Cellular and/or
Nextel. Our senior management and employees collectively own 6.7% of our common
stock on a fully diluted basis prior to this offering. Other key stockholders,
in addition to Nextel's subsidiary, include DLJ Merchant Banking, Madison
Dearborn Partners, Eagle River Investments, an investment company controlled by
Craig O. McCaw, and Motorola.
BUSINESS STRATEGY
Our goal is to become the leading provider of integrated digital wireless
communication services in each market in our territory by offering
high-capacity, high-quality, advanced communications services on our portion of
the Nextel digital mobile network and implementing key elements of Nextel's
business strategy in our markets. In addition to our relationship with Nextel,
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:
- PROVIDE DIFFERENTIATED PACKAGE OF WIRELESS SERVICES. We offer a package of
services and features that combines multiple wireless communications
options in a single wireless telephone. We will continue to emphasize the
differentiated features of iDEN technology and implement advancements in
this technology platform as they become available. In addition, we
maintain uniformity with Nextel by offering consistent rates to our
customers anywhere on
36
<PAGE>
the Nextel digital mobile network, billing based upon the actual numbers
of seconds of airtime after the first minute, and rate plans that do not
distinguish between "peak" and "off-peak" minutes.
- TARGET BUSINESS CUSTOMERS. We believe that our focus on business customers
will result in higher monthly average revenue per unit and lower average
monthly service cancellations or terminations. This is a market segment
for which we believe our product has high utility, and we further believe
that we and Nextel are the only major U.S. wireless carriers directing
fully integrated, nationwide offerings to this segment.
- DEPLOY ROBUST NETWORK RAPIDLY. Our objective is to build robust wireless
systems that cover all key areas of a given market before we launch our
network in that market. We are deploying these systems rapidly to capture
the current and projected growth in wireless usage in the United States.
We are also building our customer care and internal systems to support
future anticipated demand.
- OPERATE IN MID-SIZED AND SMALLER MARKETS. We focus on mid-sized and
smaller markets with demographics we believe to be similar to those served
by Nextel. We believe that this strategy will allow us to rapidly increase
penetration within our targeted customer base, which we believe has
historically been underserved in these markets. We believe that this
focus, combined with our differentiated service offerings, will give us
the ability to sustain our pricing strategy.
MARKETS
We hold broadband wireless licenses that cover 40 million Pops in 46
markets. We also have the option to acquire from Nextel WIP licenses that cover
an additional 13 million Pops, of which we currently intend to acquire licenses
covering 2.3 million Pops. We consider these markets to be attractive because:
- based on our understanding of Nextel's plans, these markets are integral
to Nextel's strategy of providing digital wireless services;
- we believe that Nextel has experienced rapid subscriber growth and
competitive success in markets with similar economic and demographic
characteristics;
- we believe that our markets generally contain fewer wireless competitors
than do large urban markets; and
- a number of our markets are adjacent to operational Nextel markets and
include numerous offices and branches of Nextel national account customers
that we expect will become our customers as soon as we launch service in
their vicinity.
The table below lists the 48 markets in which we have launched or intend to
launch digital wireless service:
<TABLE>
<CAPTION>
PLANNED
REGION MARKET NAME TOTAL POPS LAUNCH
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
NORTHEAST Syracuse/Utica-Rome/Binghamton/Elmira, NY 2,308,433 2nd Half 1998
Harrisburg/York/Lancaster, PA 1,641,088 1st Half 2000
Albany/Glens Falls, NY 1,407,264 2nd Half 1998
Central Pennsylvania (Altoona, Williamsport,
State College)* 1,366,464 2nd Half 2001
Buffalo, NY 1,282,387 2nd Half 1998
Rochester, NY 1,049,391 2nd Half 1998
Wilkes-Barre/Scranton, PA 795,694 1st Half 2000
Erie, PA 369,863 2nd Half 1999
Jamestown, NY 140,541 1st Half 2000
---------------------------
Total 10,361,125
----------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
PLANNED
REGION MARKET NAME TOTAL POPS LAUNCH
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
MIDWEST Eastern Iowa (Waterloo, Dubuque, Davenport,
Cedar Rapids, Iowa City) 1,829,046 1st Half 2000
Central Illinois (Peoria, Springfield,
Champaign, Bloomington, Decatur) 1,757,899 1st Half 2000
Evansville/Owensboro, IN 1,652,709 1st Half 2001
Green Bay/Fond du Lac/Appleton/Sheboygan, WI 1,435,451 1st Half 2001
Sioux City, IA/Sioux Falls, SD* 982,519 2nd Half 2001
Nebraska (Omaha, Lincoln) 936,888 1st Half 2000
Des Moines, IA 842,622 1st Half 2000
Idaho (Boise, Twin Falls) 606,139 1st Half 2000
Eau Claire/La Crosse, WI 524,868 2nd Half 2000
Terre Haute, IN 337,121 1st Half 2001
Duluth, MN 263,627 1st Half 2001
Rochester, MN 238,733 1st Half 2001
----------
Total 11,407,622
----------
SOUTH Kentucky (Lexington-Fayette, Louisville) 2,543,523 1st Half 2000
Arkansas (Fayetteville, Ft. Smith, Pine
Bluff) 1,804,738 1st Half 2001
Shreveport/Monroe/Tyler/Longview, LA/TX 1,597,763 2nd Half 2000
Hattiesburg/Jackson, MS 1,390,583 1st Half 2001
Roanoke/Lynchburg/Charlottesville, VA 1,175,872 1st Half 2001
McAllen/Harlingen/Brownsville, TX 963,565 1st Half 2001
Montgomery, MS 931,668 1st Half 2000
Pensacola/Panama City/Fort Walton Beach, FL 839,162 1st Half 2000
Macon/Warner Robins, GA 743,012 2nd Half 2000
Lafayette/Lake Charles, LA 719,335 1st Half 2000
Temple/Killeen/Waco, TX 672,352 2nd Half 1999
Albany, GA 651,977 2nd Half 2000
Corpus Christi/Victoria, TX 619,954 2nd Half 2000
Little Rock, AR 560,297 1st Half 2001
Mobile, AL 530,315 1st Half 2000
Alexandria, LA 462,765 2nd Half 2000
Bristol/Johnson City/Kingsport, TN 455,691 2nd Half 2000
Tallahassee, FL 442,904 1st Half 2000
Beaumont, TX 373,194 1st Half 2000
Pascagoula, MS 351,431 1st Half 2000
Columbus, GA 338,865 2nd Half 2000
Texarkana, TX/AR 331,145 2nd Half 2000
Laredo, TX 284,574 1st Half 2001
Dothan/Auburn-Opelika, GA 248,951 2nd Half 2000
Abilene, TX 186,379 1st Half 2001
Bryan/College Station, TX 174,624 1st Half 2000
----------
Total 19,394,639
----------
NONCONTINENTAL US Hawaii (all islands) 1,197,687 2nd Half 1998
----------
Combined Total 42,361,073
==========
</TABLE>
* Markets for which we expect to exercise our option to build out.
We have calculated total Pops for a given market by utilizing the 1990
census data for each county within the market and extrapolating such data
through 1997 based on estimated population growth rates. Future launch schedules
for our markets are subject to the various factors discussed under the heading
"Risk Factors" in this prospectus.
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<PAGE>
In addition to the 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 populations, 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 NEXTEL DIGITAL MOBILE NETWORK
We are constructing our portion of the Nextel digital mobile network using
the same technology used by Nextel. This technology, referred to as iDEN, was
developed by Motorola.
We are required and intend to build and operate our portion of the Nextel
digital mobile network in accordance with Nextel's standards, which will enable
both companies to achieve a consistent level of service throughout the United
States. By the end of 2000, together with Nextel, we plan to provide service
covering 99 of the top 100 metropolitan statistical areas in the United States
ranked by population.
Our customers are assured of digital quality and advanced features whether
they are using our or Nextel's portion of the Nextel digital mobile network.
This contrasts to the hybrid analog/digital networks of cellular competitors
that do not support all features in the analog-only portions of their networks.
DIGITAL MOBILE NETWORK SERVICES. We offer a bundled product consisting of
the following fully-integrated services accessible through a single wireless
telephone:
- digital mobile, or interconnect, telephone service;
- Nextel Direct Connect service that allows users to contact co-workers
instantly, on private one-to-one calls or on a group call; and
- the ability to receive pages and short-text messages.
In addition, the Nextel 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.
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
wireless telephone 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
certain business users' communications involves 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 currently generates approximately 50% of our network traffic.
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 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.
39
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Nextel has announced its plans to offer customers access to new digital
two-way mobile data and Internet connectivity services. Three new wireless
telephones developed and manufactured by Motorola, the "i1000plus," "i500plus"
and "i700plus," have been available since May 1999. These new wireless
telephones are expected to be the first in a product line that incorporates
micro-browsers and wireless Internet capability, and are designed to be combined
with other mobile data applications to be used in connection with Nextel's
planned wireless data service offering. Nextel has begun testing the underlying
technology for these services in several U.S. markets and has announced that it
currently plans to commercially launch the wireless data service offering in
mid-2000.
In May 1999, Nextel announced an agreement with Microsoft Corporation to
deploy Nextel Online, a wireless Internet service offering that enables Nextel
subscribers to access a customized set of Internet services offered through a
version of Microsoft's MSN portal anytime, anywhere on the Nextel digital mobile
network. Concurrent with this agreement, Microsoft invested $600 million in
Nextel.
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 its performance in the following
areas:
- SUBSCRIBER GROWTH. Nextel reported in its quarterly report that as of
September 30, 1999, it provided digital service to about 4.1 million
subscriber units in the United States. Based on information reported by
cellular and digital service providers, in seven of the eight quarters
through September 30, 1999, Nextel has been one of the top two U.S.
wireless industry growth leaders as measured by net customer additions.
- SUBSCRIBER REVENUES. As reported in its quarterly report for the period
ended September 30, 1999, Nextel's average monthly ARPU for its services
was approximately $74 for the three months ended September 30, 1999, as
compared with a wireless industry average of approximately $40 for the six
months ended June 30, 1999, as reported by the Cellular Telecommunications
Industry Association.
INTERNATIONAL ROAMING AGREEMENTS. We expect to enter into international
roaming agreements with carriers operating outside of the United States. To the
extent that we are unable to obtain an independent agreement due to a
technological issue, our agreements with Nextel WIP allow us to earn revenue
when non-U.S. subscribers roam on our portion of the Nextel digital mobile
network.
Currently, our and Nextel's subscribers can roam on Clearnet Communications
Inc.'s network in Canada and Clearnet's subscribers can roam on the Nextel
digital mobile network.
DIGITAL MOBILE NETWORK TECHNOLOGY. The Nextel digital mobile network
combines the iDEN 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. Nextel currently uses iDEN
technology throughout its portion of the Nextel digital mobile network, and we
are required to use iDEN technology exclusively. iDEN technology is a
proprietary format for delivering signals over scattered, non-contiguous
specialized mobile radio, or SMR, frequencies.
The iDEN technology shares the same basic platform as the wireless standards
underlying global system for mobile communications, or GSM, and time division
multiple access, or TDMA. iDEN 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. iDEN differs in a number of
significant respects from the TDMA technology versions being assessed or
deployed by many
40
<PAGE>
cellular and PCS providers in the United States. The iDEN technology, when
utilized for the two-way radio dispatch function, can be significantly more
efficient than TDMA technology formats.
The design of the Nextel 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 transfer 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.
Under our agreements, we and Nextel WIP are required to cooperate to
optimize the location of the switching centers to support both its existing and
planned Nextel digital mobile network service and our launch of service. In
areas where we do not have our own switch, we obtain switching services from
Nextel WIP for a fee.
The implementation of the Nextel digital mobile network design and
technology increases the capacity of a SMR channel significantly, as compared to
analog technology, in two ways:
- 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.
- Each cell site provides service on our licensed frequencies to a
particular geographic area permitting the customer's telephone to
communicate with our network. By designing our system with multiple cell
sites, we are able 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 one mile and up to 30 miles. This process
avoids interference, while permitting significantly more customers to use
the frequencies allotted to us.
The system 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.
NETWORK BUILD-OUT AND CAPITAL EXPENDITURE PLAN
For purposes of our build-out, we have divided our territory into 48
markets, including the two markets which we intend to exercise our option to
build out. Our agreements with Nextel WIP
41
<PAGE>
require us to build out and provide service in all of these markets by
June 2001. The table below identifies our historical and planned build-out
schedule for these markets:
<TABLE>
<CAPTION>
NEXTEL PARTNERS BUILD-OUT SCHEDULE*
- ---------------------------------------------------------------------------------------------------
INCREMENTAL COVERED CUMULATIVE COVERED NUMBER OF MARKETS LAUNCHED
YEAR POPULATION POPULATION OR TO BE LAUNCHED
- ---- -------------------- -------------------- -----------------------------
<S> <C> <C> <C>
1998 4.6 million 4.6 million 5
1999 1.5 million 6.1 million 2
2000 14.4 million 20.5 million 27
2001 6.6 million 27.1 million 14**
</TABLE>
- ------------------------
* We have calculated Pops for purposes of our build-out schedule by using a
radio frequency propagation tool to predict reliable service area. We then
use a geographical information system product to determine Pops within such
reliable service area. Our geographical information system product uses 1990
county census data extrapolated through 1997 based on estimated population
growth rates.
** Including the two markets which we intend to exercise our option to acquire.
Under the terms of the operating agreements with Nextel WIP, specific areas,
including metropolitan areas, smaller communities and corridors, are "required
build" areas. Our agreements with Nextel WIP require us to launch commercial
service in these areas and we have ongoing requirements to complete additional
build-outs in subsequent years.
In addition, we have the option to elect to build out certain additional
markets covering approximately 13 million Pops once we have launched services in
five of our existing markets. We currently intend to exercise this option with
respect to licenses covering 2.3 million Pops. This option expires if not
exercised prior to August 2000. Nextel may build out option markets prior to our
exercise of an option if Nextel WIP provides us with notice of Nextel's intent
to build out an optioned market and, in response to the notice, we decline to
exercise our option to build out that market. If our required 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 timely completes the build-
out of these areas, we will have no right to acquire or operate in those areas.
CELL SITE ACQUISITION AND CONSTRUCTION. As of December 31, 1999, we had
leasehold interests in 1,010 cell site locations for our transmission equipment
throughout our territory, which is more than 56% of the 1,800 sites that we
estimate will be required to complete the initial system build-out of our
portion of the Nextel digital mobile network. Of these sites, 530 were equipped
and operational at December 31, 1999.
Initially, we leased approximately 40 of these sites from Nextel WIP. In
April 1999, Nextel WIP sold these towers to SpectraSite Holdings, Inc., along
with other towers, and entered into agreements pursuant to which SpectraSite
agreed to build or purchase additional towers, including towers in our
territory. We have entered into leasing arrangements with SpectraSite on agreed
terms for space on all towers controlled by SpectraSite located in our territory
and upon which we require space. With respect to all SpectraSite towers in our
territory on which we lease space, Nextel WIP has agreed to subsidize us for
lease rates owed by us to SpectraSite in excess of the lease rates we had
initially agreed to pay under our master lease agreement with Nextel WIP.
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
42
<PAGE>
of iDEN technology to efficiently employ base radio equipment for less
densely-populated areas and for coverage along interstate highways.
BUILD-OUT CRITERIA Our agreements with Nextel WIP 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's U.S. 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 specific frequencies, their 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 digital mobile network customers who roam into our market and
the ability to support additional features as required by Nextel.
RELATIONSHIP WITH NEXTEL
We intend to capitalize on our relationship with Nextel, and believe our
relationship provides strategic and cost-saving advantages, including the
following:
- NEXTEL 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.
- NATIONWIDE ROAMING. Our subscribers and subscribers of Nextel are able to
use interconnect service to roam throughout the Nextel digital mobile
network at no additional charge. Nextel provides our subscribers the same
basic mobile telephone functionality and related features available to
them in our markets when they roam into Nextel's markets. Pursuant to our
operating agreements with Nextel WIP, Nextel's subscribers generate
revenue for us when they roam into our markets and we pay Nextel when our
subscribers roam into its markets.
- SUPPORT SERVICES. The operating agreements with Nextel WIP enable us to:
- use Nextel's switching facilities and network monitoring center;
- use Nextel's back-office systems to support customer activation and
billing; and
- access technology improvements from Nextel's research and development.
Prices for these services are based on Nextel's cost to provide us these
services.
- NEXTEL'S EXISTING RELATIONSHIPS WITH VENDORS AND DISTRIBUTORS. Nextel WIP
has agreed to assist us in obtaining the same terms it receives from its
vendors of equipment and services. For example, under our agreement with
Motorola, we purchase wireless telephones and infrastructure equipment
from Motorola at the same prices as Motorola offers such equipment 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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<PAGE>
- NEXTEL'S NATIONAL ACCOUNTS. We anticipate that individuals in numerous
offices and branches of Nextel's national accounts will become our
subscribers when we launch service in their area. On January 29, 1999,
Nextel national accounts' subscribers who were located in our operational
markets became our subscribers.
SALES AND MARKETING
BUSINESS CUSTOMER FOCUS. Our marketing strategy targets business users who
we believe are particularly attracted to the Nextel 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.
As we launch in each of our markets, we receive 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 continue to benefit from Nextel's national
advertising campaigns. We utilize a direct sales force as well as indirect sales
channels, direct mail and telemarketing to market our services and products.
We believe that this focus on business customers and our unique bundle of
services have resulted in higher monthly average revenue per unit and a lower
average monthly cancellation or termination rate than other wireless services
providers have experienced.
PRICING PLANS. Although we set our price levels in each of our markets
independently of Nextel, we are required to adopt Nextel's pricing strategies.
We believe these strategies are both profitable and attractive to customers.
These pricing features include home-rate roaming, one-second rounding after the
first minute and flat-rate pricing, which we believe differentiate our services
from competitors, and enable us to benefit from Nextel's national advertising of
these features:
- 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 Nextel digital
mobile network, without the complex dialing procedures, access fees or
higher roaming airtime rates frequently encountered by roaming customers
of cellular providers.
- 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.
- 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.
CUSTOMER CARE
In October 1999, our customer care call center in Las Vegas, Nevada became
operational and began to provide services to our subscribers. Our subscribers
can reach customer service by dialing 611 from their wireless telephones or by
calling the national 800 number advertised by Nextel. Nextel's call center
routes all calls from our customers to us. In addition to customer care, we have
strategically located our credit and activation, order fulfillment, and
collection services in the call center.
44
<PAGE>
THE NEXTEL WIP OPERATING AGREEMENTS
The operating agreements define the relationship, rights and obligations
between Nextel WIP and us. The agreements began January 29, 1999, have initial
terms of ten years, and may be extended for up to two and a half years, with
four ten-year renewals available at our option.
Pursuant to the agreements, Nextel WIP is obligated to share with us
Nextel's experience in operating iDEN networks by granting us access to meetings
and employee training sessions and providing specified services upon our
request. The most significant services Nextel WIP may provide us are:
- 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;
- 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;
- use of Nextel's back-office systems in order to support customer
activation, billing and customer care for national accounts in exchange
for fees based on Nextel's national average cost for such services;
- 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;
- access to technology enhancements and improvements; and
- assisting us in contracting with Nextel's vendors on the same terms as
Nextel obtains wherever possible.
To further support us in our efforts, Nextel WIP has also agreed that:
- 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;
- the switch monitoring services will be supplied for a fee based on
Nextel's average costs of providing such service;
- no marketing services fee is due until the later of January 2002 or the
first month of the quarter beginning after we achieve two consecutive
quarters of positive EBITDA as adjusted, 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
- when a Nextel subscriber roams on our system we receive a percentage of
the service revenues generated by the roaming subscriber. The percentage
is 90% of the service revenues 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 addition, the operating agreements demand that we adhere to certain key
operating requirements, including the following:
- we generally are required to offer the full complement of products and
services offered by Nextel in comparable service areas;
- 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;
- we must meet minimum network performance and customer care thresholds; and
45
<PAGE>
- we must adhere to standards in other operating areas, such as frequency
design, site acquisition, construction, cell site maintenance and
marketing and advertising.
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 Nextel 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.
The provision of cellular telephone service began with providers utilizing
the 800 MHz band of radio frequency in 1982 when the FCC began issuing two
licenses per market throughout the United States. In 1993, the FCC allocated a
portion of the radio spectrum, 1850-1990 MHz, for a new wireless communications
service commonly known as PCS. The FCC's stated objectives in auctioning
bandwidth for PCS were to foster competition among existing cellular carriers,
increase availability of wireless services to a broader segment of the public,
and bring innovative technology to the U.S. wireless industry. From 1995 through
1997, the FCC conducted auctions in which industry participants were awarded PCS
licenses for designated areas throughout the United States.
The demand for wireless telecommunications has grown rapidly, driven by the
increased availability of services, technological advancements, regulatory
changes, increased competition and lower prices. According to the Cellular
Telecommunications Industry Association, the number of wireless subscribers in
the United States, including cellular, PCS and ESMR, has grown from
approximately 200,000 at June 30, 1985 to over 76 million at June 30, 1999,
which reflected a penetration rate of 27.6%.
46
<PAGE>
The following graph and table set forth certain U.S. wireless industry
statistics:
U.S. WIRELESS SUBSCRIBERS
1992 - JUNE 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NUMBER OF SUBSCRIBER
<S> <C>
(in millions)
1992 11,000
1993 16,000
1994 24,100
1995 33,800
1996 44,000
1997 55,300
1998 69,200
June 30,1999 76,300
</TABLE>
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------------------- JUNE 30,
WIRELESS INDUSTRY STATISTICS(1) 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total service revenues (in
billions)..................... $ 7.8 $ 10.9 $ 14.2 $ 19.1 $ 23.6 $ 27.5 $ 33.1 $ 19.4
Wireless subscribers at end of
period (in millions).......... 11.0 16.0 24.1 33.8 44.0 55.3 69.2 76.3
Subscriber growth............... 46.0% 45.1% 50.8% 40.0% 30.4% 25.6% 25.1% 25.5%
Average monthly revenues per
subscriber.................... $68.68 $61.49 $56.21 $51.00 $47.70 $42.78 $39.43 $40.24
Ending penetration.............. 4.3% 6.2% 9.2% 12.9% 16.6% 20.0% 25.0% 27.6%
Digital subscribers at end of
period (in millions).......... -- -- -- -- -- 6.5 18.3 --
</TABLE>
- ------------------------
Source: Cellular Telecommunications Industry Association and Census Bureau Data.
(1) Reflects domestic U.S. commercially operational cellular, ESMR and PCS
providers.
47
<PAGE>
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 buildings and other physical
obstacles and spread or "propagate" through air, thereby reducing infrastructure
costs since fewer base radios are needed to cover a given area.
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, single band telephone. On the other hand, analog technology has several
disadvantages, including less efficient use of spectrum, which reduces effective
call capacity; inconsistent service quality; decreased privacy, security and
reliability as compared to digital technologies; and the inability to offer
services such as voice mail, call waiting or caller identification.
All PCS services, like ESMR, are all-digital systems which convert 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, and improved voice quality and system flexibility, as compared with
analog technologies. Call forwarding, call waiting and greater call privacy are
among the enhanced services that digital systems provide. In addition, due to
the reduced power consumption of digital handsets, users benefit from an
extended battery life.
The FCC has also assigned non-contiguous portions of the 800 MHz band to
SMR, which was initially dedicated to analog two-way radio dispatch services.
This service only became viable 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)
telephones 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 GSM, 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
Nextel deployed a second generation of Motorola's iDEN technology beginning
in the third quarter of 1996. In its quarterly and annual reports, Nextel has
reported a high rate of customer growth since that time, making it one of the
industry's growth leaders as compared to information reported by other cellular
and digital service providers. Based on Nextel's quarterly and annual reports,
over the past three years the number of Nextel's ESMR customers in the United
States has grown at a 106.9% compounded growth rate quarter over quarter, and as
of September 30, 1999
48
<PAGE>
the number of Nextel's ESMR customers in the United States is estimated to have
grown to about 4.1 million.
The following chart illustrates the quarterly growth of Nextel's ESMR
customers in the United States 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, 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEXTEL - QUARTERLY DIGITAL SUBSCRIBERS*
<S> <C>
(in thousands)
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 2,789.9
Q1 99 3,152.9
Q2 99 3,592.9
Q3 99 4,050.9
</TABLE>
- ------------------------
* As reported in Nextel's quarterly and annual reports on Forms 10-Q and 10-K as
filed with the SEC.
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 data reported by the Cellular
Telecommunications Industry Association, monthly average revenue per unit
declined from 1993 to 1998 with a slight increase in the first half of 1999.
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 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.
49
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEXTEL - MONTHLY AVERAGE REVENUE PER DIGITAL
<S> <C>
Subscriber Unit (ARPU)*
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
Q2 99 $74
Q3 99 $74
</TABLE>
- ------------------------
* As reported in Nextel's quarterly and annual reports on Forms 10-Q and 10-K
filed with the SEC.
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 its service an integral part of their business
operations, which we believe contributes to high usage and improved customer
satisfaction. 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 service 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, 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 "hot-sync"
programming (on certain subscriber unit models), differentiate Nextel's digital
service from those of 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. "Hot-sync"
programming allows users to quickly and easily program their subscriber units
with the data necessary to form a Direct Connect work group by inserting each
unit into a cradle connected to a personal computer. 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.
50
<PAGE>
COMPETITION
In each of the markets where our portion of the Nextel 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, Sprint PCS,
Bell Atlantic, VoiceStream, BellSouth, SBC Communications, PrimeCo and AirTouch.
Our ability to compete effectively with other wireless communications service
providers depends on a number of factors, including:
- the continued satisfactory performance of iDEN technology;
- the establishment and maintenance of roaming service among our market
areas and those of Nextel; and
- the development of cost-effective direct and indirect channels of
distribution for our portion of the Nextel digital mobile network and our
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 us, 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.
We believe that the mobile telephone service currently being provided on the
Nextel 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 communications service providers in our market areas.
There are, however, 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 our respective systems. The all-digital networks that we
and Nextel operate provide customers with digital quality and advanced features
wherever they roam on the Nextel 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 the Nextel digital mobile network expands to cover a greater
geographic area, this disadvantage will be reduced, but we can give no assurance
that the Nextel digital mobile network will ever cover the same geographic areas
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.
Telephones utilized on the Nextel 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 telephones manufactured by Motorola,
and in the future, other manufacturers including Kyocera Corporation, who may
license the iDEN technology from Motorola. These telephones are and are likely
to remain significantly more expensive than analog telephones, and are and are
likely to remain somewhat more expensive than digital cellular or PCS telephones
that do not incorporate a comparable multi-function capability. We therefore
expect to
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charge higher prices for the telephones to be used by our customers than those
charged by operators for analog cellular telephones and possibly than those
charged by operators for digital cellular telephones. However, we believe that
our multi-function telephones currently are competitively priced compared to
multi-function--mobile telephone service and short text messaging--digital,
cellular and PCS telephones.
During the transition to digital technology, certain participants in the
U.S. cellular industry are offering telephones 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--telephones, 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 telephones 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 Nextel
digital mobile network.
Over the past several years as the number of wireless communications
providers in our market areas has increased, 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 service offering
prices or to restructure our 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, they may be
able to offer prospective customers equipment subsidies or discounts that are
substantially greater than 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 our digital mobile network telephones 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. Specifically, 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, the ability to serve 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 Nextel digital
mobile network currently and for the reasonably foreseeable 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. The FCC has announced that
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it intends to auction this spectrum in April 2000. 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.
The FCC has recently announced plans to reauction over 150 PCS licenses on
July 26, 2000. However, these licenses are presently subject to ongoing
litigation in federal court. If and when these licenses go into service, they
may be purchased by our competitors, subject to FCC's spectrum cap discussed
below, and may increase the level of competition in our markets. The FCC may
also allocate additional spectrum at any time and create rules that would make
services provided on that spectrum competitive with our ESMR service.
EMPLOYEES
As of December 31, 1999, we had approximately 530 employees. None of our
employees are or are 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 own no material real property. We lease our headquarters located in
Kirkland, Washington. This facility is approximately 10,000 square feet and we
have a lease commitment on the facility through July 25, 2001. We lease
administrative offices of approximately 12,700 square feet in Minnetonka,
Minnesota under a lease expiring March 31, 2002. We lease office space of
approximately 23,000 square feet in Las Vegas, Nevada for operation of our
customer service call center under a lease expiring May 11, 2004. We lease cell
sites for the transmission of radio service under various master site lease
agreements as well as individual site leases. The terms of these leases
generally range from five to 25 years at monthly rents ranging from $300 to
$2,200. As of December 31, 1999, we had approximately 530 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:
- the smaller portion of the radio spectrum allocated to SMR;
- the assignment of SMR frequencies on a non-contiguous basis;
- 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
- 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, we, or a Nextel subsidiary, hold EA licenses for all
of the territories that we intend to serve.
EA licenses 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 WIP 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
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renewal from the FCC. EA licensees can generally expect to obtain renewal of
their licenses if they are otherwise in good standing before the FCC.
All of our SMR licenses are subject to FCC build-out requirements. The FCC
recently modified the build-out deadlines for our pre-1997 site-by-site SMR
licenses permitting us to utilize the same build-out schedule as our EA
licenses. Our EA licenses must provide coverage to at least one-third of the
population of the license area within three years of the initial grant and
two-thirds of the population within five years. 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
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, including us,
collectively regulated as "CMRS" providers, from restricting another carrier's
ability to resell its services until November 24, 2002. The FCC also has adopted
requirements for CMRS providers, including covered SMR providers, to implement
various enhanced 911 capabilities. 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 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 our network to be delivered to telephone numbers which have been
switched from one wireline carrier to another. 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. An
acceleration of this schedule could result in significant costs on us and other
carriers.
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
has recently upheld this 45 MHz cap, while increasing the cap in rural areas to
55 MHz. 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. These rules may affect our ability to obtain
additional spectrum.
Wireless providers, including us, 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 necessary for the offering of our services.
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
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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.
These rules and policies are applicable to our operations and we intend to
comply with the FCC's promulgations.
In August 1996, the FCC adopted rules implementing certain Communications
Act provisions that impose a number of obligations for local exchange carriers
to interconnect their network to other carriers' networks which affect wireless
service providers. Established local exchange carriers must provide for
co-location of equipment necessary for interconnection, as well as any
technically feasible method of interconnection requested by a CMRS provider. In
addition, all local exchange carriers are obligated to enter into reciprocal,
cost-based compensation arrangements with CMRS providers for the transmission of
local calls. If we cannot successfully negotiate an interconnection agreement
with an established local exchange carrier, 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. Implementation of certain capabilities
required by the FCC must be completed by September 30, 2001. These requirements
are presently subject to appeal in Federal court. Compliance with the
requirements of this Act and the FCC's rules 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 our SMR licenses, we may also utilize other
carriers' facilities to connect base radio sites and to link them to their
respective main switching offices. These facilities may be separately licensed
by the FCC and may be 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 such as
ourselves, 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 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. Additional costs may be
incurred by us and ultimately by our subscribers as a result of our compliance
with these required contributions.
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.
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In addition, other regulations may be promulgated pursuant to the
Communications Act or the Telecommunications Act which would significantly raise
our cost of providing service. In response, we may be required to modify our
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.
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, state 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 their 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 sites 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. Pursuant to Congressional directive, or on its own, the FCC may
allocate additional spectrum, at any time, which may lead to the offering by
others of services competitive with ours.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEE
The following table sets forth certain information with respect to our
executive officers, directors and director nominee:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
John Chapple.............................. 46 President, Chief Executive Officer and
Chairman of the Board
John Thompson............................. 46 Vice President, Chief Financial Officer
and Treasurer
David Thaler.............................. 44 Vice President--Business Operations
David Aas................................. 46 Vice President--Engineering and Technical
Operations
Perry Satterlee........................... 39 Vice President--Sales and Marketing
Mark Fanning.............................. 40 Vice President--People Development
Donald Manning............................ 39 Vice President, General Counsel and
Secretary
Timothy Donahue........................... 51 Director
Andrew Rush............................... 42 Director
Andrew Sinwell............................ 35 Director
Dennis Weibling........................... 47 Director
Steven Dodge.............................. 54 Director Nominee
</TABLE>
JOHN CHAPPLE worked to organize Nextel Partners throughout 1998 and has been
the President, Chief Executive Officer and Chairman of the Board of Nextel
Partners and our subsidiaries since August 1998. Mr. Chapple was elected to our
board of directors pursuant to the terms of our shareholders' agreement.
Mr. Chapple, a graduate of Syracuse University and Harvard University's Advanced
Management Program, has nearly 20 years of 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, past Vice-Chairman
of the Cellular Telecommunications Industry Association and has been on the
Board of Governors of the NHL and NBA. Mr. Chapple is currently on the Syracuse
University Maxwell School Board of Advisors.
JOHN THOMPSON has been the Chief Financial Officer and Treasurer of Nextel
Partners and our subsidiaries since August 1998 and has approximately 20 years
of finance experience, including 12 years in the wireless communications
industry. In March 1999 he became a Vice President. Mr. Thompson holds both a
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.
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DAVID THALER has been the Vice President-Business Operations of Nextel
Partners and our subsidiaries since August 1998 and has nearly 17 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 14
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 and our subsidiaries since August 1998. Prior to joining
Nextel Partners, Mr. Aas served as Vice President of Engineering and Operations
of AT&T Wireless' Messaging Division. Mr. Aas has 21 years of 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. From 1989 to August 1998, he was with
AT&T Wireless, where he led the design, development, construction and operation
of AT&T Wireless' 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-Sales and Marketing of Nextel
Partners and our subsidiaries since August 1998 and has approximately 12 years
of wireless industry experience. He spent the prior 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 and our subsidiaries since August 1998 and has over 17 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 Cellular's
California/Nevada region.
DONALD MANNING has been the Vice President, General Counsel and Secretary of
Nextel Partners and our subsidiaries since August 1998. From July 1996 to July
1998, he served as Regional Attorney for the Western Region of AT&T Wireless
Services, an 11-state business unit generating over $400 million in revenues
annually. Prior to joining AT&T Wireless Services, from September 1989 to July
1998, Mr. Manning was an attorney with Heller Ehrman White & McAuliffe
specializing in corporate and commercial litigation. From September 1985 to
September 1989, he was an attorney with the Atlanta-based firm of Long,
Aldridge & Norman.
TIMOTHY DONAHUE has been a director of Nextel Partners and our subsidiaries
since January 1999. Mr. Donahue was elected to our board of directors as the
designee of Nextel WIP pursuant to the terms of our shareholders' agreement.
Mr. Donahue has been a director of Nextel since June 1996, was the President and
Chief Operating Officer from February 1996 to July 1999, and has been the
President and Chief Executive Officer since July 1999. From 1986 to January
1996, Mr. Donahue held various senior management positions with AT&T Wireless
Services.
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ANDREW RUSH has been a director of Nextel Partners and Nextel Partners
Operating Corp. since January 1999. Mr. Rush was elected to our board of
directors as the designee of DLJ Merchant Banking pursuant to the terms of our
shareholders' agreement. 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
boards of directors of Societe d'Ethanol de Synthese, American Tissue, Inc. and
Worldwide Fiber, Inc.
ANDREW SINWELL has been a director of Nextel Partners and Nextel Partners
Operating Corp. since January 1999. Mr. Sinwell was elected to our board of
directors as the designee of Madison Dearborn Partners pursuant to the terms of
our shareholders' agreement. Mr. Sinwell is currently a Director of Madison
Dearborn Partners, which he joined in August 1996. From 1994 to 1996,
Mr. Sinwell was a Senior Policy Advisor at the FCC. He currently serves on the
boards of directors of @Link Networks, Inc., Enews.com, Hotwire Services, Inc.,
Reiman Holding Company, LLC and Western Integrated Network, LLC.
DENNIS WEIBLING has been a director of Nextel Partners and Nextel Partners
Operating Corp. since January 1999. Mr. Weibling was elected to our board of
directors as the designee of Eagle River pursuant to the terms of our
shareholders' agreement. Mr. Weibling has been a director of NEXTLINK since
January 1997. Mr. Weibling has also 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 for Nextel. Mr. Weibling
serves on the board and executive committee of Teledesic Corporation, a
satellite telecommunications company backed by Craig O. McCaw and William H.
Gates III.
STEVEN DODGE has been nominated to be a director of our company. Mr. Dodge
is currently the Chairman and Chief Executive Officer of American Tower
Corporation, an independent owner and operator of communications towers in the
United States. American Tower Corporation was organized in July 1995 as a
subsidiary of American Radio Systems Corporation, of which Mr. Dodge was the
founder and Chief Executive Officer, and was spun off to the American Radio
stockholders at the time of American Radio's merger with CBS in June 1998. At
that time, American Tower Corporation began trading publicly. Mr. Dodge was
employed with American Radio from March 1988 to June 1998, and prior to that
time, from 1978 to 1988, Mr. Dodge was the founder and Chief Executive Officer
of American Cablesystems, a publicly traded cable television company which was
merged into Continental Cable in 1988, now Media One. Mr. Dodge also serves on
the boards of directors of WebLink Wireless Inc., a publicly traded provider of
wireless messaging services, TD Waterhouse Group, Inc., a publicly traded
brokerage firm, and Sensitech, Inc., a supplier of environmentally-sensitive
products.
BOARD OF DIRECTORS
Upon consummation of this offering, our board of directors will be comprised
of six directors. Pursuant to the shareholders' agreement, as amended, certain
parties to the agreement, who together will own approximately 79% of our
outstanding common stock upon completion of this offering, have agreed to vote
their shares of our common stock to elect as directors:
- one person selected by Madison Dearborn Partners: currently, Andrew
Sinwell;
- one person selected by Nextel WIP: currently, Timothy Donahue;
- one person selected by Eagle River: currently, Dennis Weibling; and
- our chief executive officer: currently, John Chapple.
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Prior to this offering, DLJ Merchant Banking had the right to designate two
directors, one of whom was in turn designated by Madison Dearborn Partners, and
all of the parties to the shareholders' agreement had agreed to vote to elect
such designees as directors. Andrew Rush was elected to our board as a result of
his designation by DLJ Merchant Banking prior to the amendment to the
shareholders' agreement, which amendment was completed in contemplation of this
offering. Many of the provisions of the shareholders' agreement, as amended,
will be in effect following closing of this offering.
All directors will hold office until the next annual meeting of stockholders
and until their successors are duly elected.
COMMITTEES
Upon consummation of this offering, our audit committee will consist of
Messrs. Rush, Sinwell and Dodge. The audit committee will make recommendations
to our board of directors regarding the selection of independent auditors,
review the scope of audit and other services by our independent auditors, review
the accounting principles and auditing practices and procedures to be used for
our financial statements and review the results of those audits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not currently have a compensation committee, and, instead, our entire
board of directors makes compensation determinations. John Chapple, our Chief
Executive Officer and Chairman of the Board, participated in our board's
deliberations of executive officer compensation in 1999. No interlocking
relationship exists between any member of our board of directors and any member
of the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.
DIRECTOR COMPENSATION
To date, none of our directors has received compensation for services
provided to us as a director. Mr. Dodge will receive compensation of $2,500 per
quarter, plus $1,000 for each meeting he attends in person and $500 for each
meeting he attends via conference call. In addition, we intend to grant to
Mr. Dodge an option to purchase 25,000 shares of Class A common stock, which
option will vest in three equal annual installments and have an exercise price
equal to the price at which the Class A common stock is initially offered to the
public in this offering. All directors are reimbursed for their out-of-pocket
expenses in serving on the board of directors.
EXECUTIVE COMPENSATION
Our executive officers are appointed by, and serve at the discretion of, our
board of directors. There are no family relationships among our directors and
officers.
SUMMARY COMPENSATION TABLE. Prior to January 29, 1999, we did not pay any
compensation to our 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 and Termination of
Employment Arrangements."
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The following table sets forth the compensation paid by us for services
rendered during fiscal year 1999 by our chief executive officer and our other
four most highly compensated executive officers.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION ---------------------------------
-------------------- RESTRICTED SECURITIES
BASE STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY $ BONUS $ AWARDS(1)($) OPTIONS/SARS(#) COMPENSATION(9)($)
- --------------------------- --------- -------- ------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
John Chapple
Chief Executive Officer........... $150,000 -- $491,111(2) 105,000(7) $87,500
John Thompson
Chief Financial Officer and
Treasurer......................... 150,000 -- 339,444(3) 315,000(8) 87,500
David Thaler
Vice President--Business
Operations........................ 150,000 -- 195,000(4) 60,000(7) 87,500
David Aas
Vice President--Engineering and
Technical Operations.............. 140,000 -- 162,500(5) 60,000(7) 10,000
Perry Satterlee
Vice President--Sales and
Marketing......................... 150,000 -- 137,222(6) 120,000(7) 44,000
</TABLE>
- ------------------------------
(1) Represents an estimated value of $0.17 per share as of the date of grant,
less price paid per share by such officer for shares of Class A common stock
sold to such officer at a purchase price of $0.002 per share pursuant to
restricted stock purchase agreements. As of January 1, 2000, 44.5% of these
shares had vested. Assuming continued employment with us, the remaining
shares vest pursuant to the following schedule: an additional 19.5% vest as
of December 31, 2000 and an additional 18% vest as of each of December 31,
2001 and December 31, 2002. See "--Restricted Stock Purchase Agreements and
Change of Control Arrangements."
(2) Represents 2,946,666 shares of Class A common stock, of which 1,311,264
shares have vested as of January 1, 2000.
(3) Represents 2,036,664 shares of Class A common stock, of which 906,318 shares
have vested as of January 1, 2000.
(4) Represents 1,170,000 shares of Class A common stock, of which 520,650 shares
have vested as of January 1, 2000.
(5) Represents 975,000 shares of Class A common stock, of which 433,878 shares
have vested as of January 1, 2000.
(6) Represents 823,332 shares of Class A common stock, of which 366,384 shares
have vested as of January 1, 2000.
(7) Represents options to purchase shares of Class A common stock granted on
December 31, 1999, which options have an exercise price of $1.85 per share
and vest in three equal annual installments.
(8) Represents an option to purchase up to 210,000 shares of Class A common
stock granted to Mr. Thompson on January 29, 1999, which option has an
exercise price of $1.67 per share and is fully vested, as well as an option
to purchase up to 105,000 shares granted on December 31, 1999, which option
has an exercise price of $1.85 per share and vests in three equal annual
installments. See "--Option Grants in Fiscal Year 1999."
(9) Represents lump sum payments made to officers on January 29, 1999 for
services rendered to us prior to that date. See "--Executive Employment
Contracts and Termination of Employment Arrangements."
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information with respect to stock
options granted to each of our named executive officers during the fiscal year
ended December 31, 1999. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over the
term of the option, the period from the grant date to the expiration date, based
on assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are mandated by the Securities and Exchange Commission and do not
represent our estimate of future stock price. Actual gains, if any, on stock
option exercises will depend on the future performance of our Class A common
stock. In fiscal year 1999, we granted options to acquire up to an aggregate of
5,049,600 shares to employees and directors, excluding options that were
subsequently forfeited due to termination, all under our stock option plan and
all at an
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exercise price equal to the fair market value of our Class A common stock on the
date of grant as determined in good faith by our board of directors.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OPTION TERM
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED (#) FISCAL 1999 SHARE DATE 5%($) 10%($)
- ------------------------------- --------------------- ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John Chapple................... 105,000 2.1% $1.85 12/31/09 $2,907,577 $4,629,830
John Thompson.................. 210,000(1) 4.2 1.67 1/29/09 5,538,242 8,417,873
105,000 2.1 1.85 12/31/09 2,907,577 4,629,830
David Thaler................... 60,000 1.2 1.85 12/31/09 1,661,473 2,645,617
David Aas...................... 60,000 1.2 1.85 12/31/09 1,661,473 2,645,617
Perry Satterlee................ 120,000 2.4 1.85 12/31/09 3,322,945 5,291,235
</TABLE>
(1) After the fourth anniversary of the stock option agreement pursuant to which
this option was granted, Mr. Thompson may surrender, without payment of the
exercise price, all or a portion of the option for payment in cash by us of
$2.38 per share. The option is currently fully vested and exercisable by
Mr. Thompson and will expire on January 29, 2009.
AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
None of our named executive officers exercised any options in fiscal 1999.
With respect to our named executive officers, the following table sets forth
information concerning exercisable and unexercisable options held as of
December 31, 1999. The "Value of Unexercised In-the-Money Options at
December 31, 1999" is based upon an assumed initial public offering price of
$17.00 per share minus the per share exercise price multiplied by the number of
shares underlying the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999 ($)(1)
--------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
John Chapple...................................... 0 105,000 $ -- $1,590,750
John Thompson..................................... 210,000 105,000 3,219,300 1,590,750
David Thaler...................................... 0 60,000 -- 909,000
David Aas......................................... 0 60,000 -- 909,000
Perry Satterlee................................... 0 120,000 -- 1,818,000
</TABLE>
EXECUTIVE EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
We have entered, through our wholly owned subsidiary, 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 or about
January 29, 1999, each received a lump sum ranging from $70,000 to $90,000 in
recognition of services rendered to us prior to such date. Upon completion of
the build-out of initial portions and applicable optional portions of the Nextel
digital mobile network on or before March 1, 2002, each may receive a raise in
his base salary and a performance-based bonus. In addition, each has agreed that
while employed by us, and for one year thereafter, he will not compete against,
or solicit employees or business from, us or Nextel, or any of our affiliates.
Each agreement has an initial four-year term and further provides that in
the event the employee is terminated without cause or resigns for good reason,
as defined in the agreements, the employee shall be entitled to receive up to
one year's base salary plus an amount equal to the employee's most recent annual
bonus.
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RESTRICTED STOCK PURCHASE AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
On November 20, 1998, we entered into restricted stock purchase agreements
with each of Messrs. Chapple, Thompson, Thaler, Aas, Satterlee and Fanning in
consideration of their employment, which agreements were amended on January 29,
1999. We also entered into a restricted stock purchase agreement with Donald
Manning on September 9, 1999. Pursuant to these agreements, we sold an aggregate
of 8,834,994 shares of Class A common stock to these executive officers at a
price of $0.002 per share. These shares are subject to vesting provisions and,
subject to certain conditions, unvested shares may be repurchased by us for
$0.002 per share upon termination of the individual's employment, and vested
shares may be repurchased by us upon termination for cause or resignation
without good reason at varying prices.
As of January 1, 2000, 44.5% of these shares had vested. Assuming continued
employment with us, the remaining shares vest pursuant to the following
schedule: an additional 19.5% vest as of December 31, 2000 and an additional 18%
vest as of each of December 31, 2001 and December 31, 2002. In addition, the
vesting of the shares may be accelerated upon:
- a change of control of us or Nextel;
- termination of employment on account of death or disability, or by us
without cause;
- resignation for good reason as defined in the agreements; or
- subject to certain conditions, upon the sale or other disposition by
affiliates of DLJ Merchant Banking of 75% or greater of their Class A
common stock.
EMPLOYEE STOCK OPTION PLAN
Our nonqualified stock option plan was adopted by our board of directors in
January 1999 and is anticipated to be approved by our stockholders in
February 2000. This plan offers employees the opportunity to purchase shares of
Class A common stock at a price equal to the fair market value of the stock as
of the date of the option grant. The total number of shares that has been
reserved for issuance under the plan is 16,545,354 shares of Class A common
stock, provided that this number will be increased by the amount of shares
repurchased by us under the restricted stock purchase agreements or our
shareholders' agreement.
Under our stock option plan, no options may be granted to senior managers
unless we achieve certain performance criteria based on build-out, revenue and
EBITDA targets. The grants to employees, other than senior managers, may be
subject to similar performance criteria or other criteria established by our
board of directors. Under the terms of the plan, it is contemplated that
approximately 25% of the options subject to the plan will be granted in
connection with the recruitment of new employees and that senior managers will
receive in the aggregate approximately 20% of the total number of options
granted each year.
Moreover, under the terms of the plan, no more than 30% of the total number
of authorized options may be granted in any year and no options may be granted
under the plan after January 1, 2003. The options granted are exercisable for
ten years. The options are generally non-transferable, and the right to exercise
terminates concurrently with termination of employment. The plan contemplates
the acceleration of vesting of some or all outstanding options upon a change of
control of us.
EMPLOYEE STOCK PURCHASE PLAN
Our employee stock purchase plan was adopted by our board of directors in
January 2000 and is anticipated to be approved by our stockholders in February
2000. The employee stock purchase
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plan will be effective upon the completion of this offering. Initially, a total
of 3,000,000 shares of Class A common stock will be reserved for issuance under
the employee stock purchase plan.
The employee stock purchase plan, which is intended to qualify under Section
423 of the Internal Revenue Code of 1986, will be administered by a committee
appointed by our board. Our employees, including officers and employee
directors, are eligible to participate in the employee stock purchase plan if
they are employed for at least 20 hours per week.
The employee stock purchase plan will be implemented by consecutive offering
periods ranging in duration from three to 12 months. We currently anticipate
that the initial offering period under the employee stock purchase plan will
begin on April 1, 2000 and terminate on or before June 30, 2000. Our board of
directors may change the timing or duration of the offering periods. The
employee stock purchase plan permits eligible employees to purchase shares of
common stock through payroll deductions at 85% of the lesser of the fair market
value per share of the common stock on the first day of the offering period or
on the purchase date. Participants generally may not purchase shares if,
immediately after the grant, the participant would own stock or options to
purchase shares of Class A common stock totaling 5% or more of the total
combined voting power of all of our outstanding capital stock, or more than
$25,000 of our outstanding capital stock in any calendar year.
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RELATED-PARTY TRANSACTIONS
Prior to January 29, 1999, we had limited financial resources and Nextel and
Eagle River funded our operations. On January 29, 1999, we reimbursed Nextel and
Eagle River $1.5 million and $1.2 million, respectively, for operating advances
previously made to us, and we made a return of capital payment to Nextel WIP of
$130.9 million representing the reimbursement of net operating expenses of
$15.1 million and capital expenditures of $115.8 million incurred by our
operations prior to January 29, 1999. As of September 30, 1999, we owed Nextel
WIP $2.7 million.
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 14% senior discount notes and borrowings by our principal operating
subsidiary. On September 9, 1999 we raised an additional $209 million through
cash and in-kind equity contribution and commitments and borrowings. In
connection with these transactions, we or one of our subsidiaries entered into
several agreements with our majority stockholders, including new and/or revised
operating agreements with Nextel WIP and equipment purchase agreements with
Motorola.
CAPITALIZATION TRANSACTIONS
JANUARY 29, 1999 TRANSACTIONS. On January 29, 1999, Nextel WIP assigned to
us, subject to approval by the FCC, certain licenses and equipment in exchange
for 13,110,000 shares of Series B preferred stock, 52,440,000 shares of
Series C preferred stock, 13,110,000 shares of Series D preferred stock and cash
of $130.9 million. Nextel WIP is the owner of 36.5% of our common stock prior to
this offering, and two of our directors, Timothy Donahue and Dennis Weibling,
are affiliated with Nextel WIP.
Simultaneously, we sold equity securities in a private placement in the
amount of $174.8 million and issued 14% senior discount notes for aggregate
proceeds of approximately $406 million. The equity securities sold consisted of
104,879,826 shares of Series A preferred stock, valued at $170.9 million, and
warrants to purchase 2,434,260 shares of Class A common stock for an exercise
price of less than $0.01 per share, valued at $3.9 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 of $18.4 million towards the purchase
of infrastructure equipment. As of December 31, 1999 the Company had used all
$18.4 million of the vendor credit from Motorola. Motorola is the beneficial
owner of 6.1% of our outstanding common stock prior to this offering.
In addition to Motorola, purchasers of the Series A preferred stock and
warrants in the January 29, 1999 transaction included:
- DLJ Merchant Banking and its affiliates, who are the beneficial owners of
13.3% of our outstanding common stock prior to this offering. One of our
directors, Andrew Rush, is affiliated with DLJ Merchant Banking;
- Madison Dearborn Partners, which is the beneficial owner of 12.7% of our
outstanding common stock prior to this offering. One of our directors,
Andrew Sinwell, is affiliated with Madison Dearborn Partners;
- Eagle River, which is the beneficial owner of 9.1% of our outstanding
common stock prior to this offering. One of our directors, Dennis
Weibling, is affiliated with Eagle River;
- The Huff Alternative Income Fund, L.P., which is the beneficial owner of
6.7% of our outstanding common stock prior to this offering and holds a
portion of our 14% senior discount notes; and
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- John Chapple, our chief executive officer and a director, and the
beneficial owner of 1.6% of our outstanding common stock prior to this
offering.
SEPTEMBER 9, 1999 EXPANSION TRANSACTIONS. On September 9,1999, one of our
subsidiaries entered into an expansion territory asset transfer and
reimbursement agreement with Nextel WIP to acquire for $10.6 million certain
assets, properties, rights and interests to be used in connection with the
construction and operation of additional territories. To accomplish the
build-out and operation of this expansion territory, we issued 5,330,142 shares
of Series C preferred stock to Nextel WIP having an aggregate value of
$8.9 million in exchange for the contribution of certain licenses and an
extension of an operating agreement governing the build-out of the Nextel
digital mobile network in the expansion territory. We also issued 20,954,820
shares of Series A preferred stock, valued at $37.2 million, to investors, and
6,902,484 shares of Series C preferred stock, valued at $12.8 million, to Nextel
WIP. The equity securities were issued in exchange for cash of $15.5 million, an
irrevocable cash equity commitment of $30.9 million to be received over the
subsequent two-year period, and a vendor credit from Motorola of $3.6 million
towards the purchase of infrastructure equipment. In addition to Motorola,
purchasers of the Series A preferred stock in the September 9,1999 transaction
included DLJ Merchant Banking and its affiliates, Madison Dearborn Partners,
Eagle River, The Huff Alternative Income Fund, John Chapple, David Aas, our vice
president--engineering and technical operations, Mark Fanning, our vice
president--people development, Perry Satterlee, our vice president--sales and
marketing, David Thaler, our vice president--business operations, and John
Thompson, our chief financial officer and treasurer.
Upon the closing of this offering, each outstanding share of Series A
preferred will convert into one share of Class A common stock and each share of
Series C and Series D preferred stock will convert into one share of Class B
common stock.
SHAREHOLDERS' AGREEMENT
GENERAL. On January 29, 1999, we entered into a shareholders' agreement
with Nextel WIP, DLJ Merchant Banking, Madison Dearborn Partners, Eagle River,
Motorola and our senior management stockholders. In that agreement, 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 stockholders. This
agreement was amended in connection with the transactions contemplated by this
prospectus, and many of its provisions will survive closing of this offering.
MANAGEMENT. Under the terms of the shareholders' agreement, as amended, we
have agreed that our board of directors will consist of six persons. The parties
to the shareholders' agreement other than DLJ Merchant Banking, who together
will own approximately 79% of our outstanding common stock upon completion of
this offering, have agreed to vote to elect as directors:
- one person selected by Madison Dearborn Partners;
- one person selected by Nextel WIP;
- one person selected by Eagle River; and
- our chief executive officer.
Prior to this offering, DLJ Merchant Banking had the right to designate two
directors, one of whom was designated by Madison Dearborn Partners, and all of
the parties to the shareholders' agreement had agreed to vote to elect such
designees as directors. The obligation of the other parties to the shareholders'
agreement to vote in favor of the DLJ Merchant Banking designee terminated upon
the amendment of the shareholders' agreement.
On January 29, 1999, the parties to the shareholders' agreement elected John
Chapple, our chief executive officer, Timothy Donahue, Nextel WIP's designee,
Andrew Rush and Andrew Sinwell,
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DLJ Merchant Banking's designees, and Dennis Weibling, Eagle River's designee,
to our board of directors. The right of a stockholder to designate a director
terminates when the stockholder and its affiliates own, in the aggregate, less
than 50% of their original ownership of our capital stock.
Certain matters, including a sale of substantially all of our assets, the
entering into of any agreement the terms of which would be materially altered in
the event Nextel or Nextel WIP exercised or failed to exercise its right to
acquire a majority of our outstanding stock, changes in our business strategy or
objectives, a material change in the technology we use, or a decision to broaden
the scope of our business, require the approval of the director designated by
Nextel WIP, although these approval rights terminate if, after January 29, 2011,
Nextel WIP transfers all of its shares to a third party.
RESTRICTIONS ON TRANSFER. The shareholders' agreement imposes numerous
restrictions with respect to the sale, transfer or other disposition of our
capital stock by the parties to the shareholders' agreement. Generally, prior to
the completion of our portion of the Nextel digital mobile network and the
achievement of positive EBITDA for two consecutive fiscal quarters, excluding
the effects of any optional markets acquired by us, Eagle River and the
management stockholders may transfer shares only to family members, affiliates
and certain other permitted transferees; provided, however, that after this
offering, each such stockholder may sell up to 30% of its shares subject to
certain rights of first offer and rights of first refusal available to DLJ
Merchant Banking, Madison Dearborn Partners, Eagle River, Motorola, Nextel WIP,
the management stockholders and their permitted transferees. Prior to
January 29, 2011, Nextel WIP may not transfer its shares other than to permitted
transferees or to us in return for frequencies that it repurchases. Other
stockholders who are parties to the shareholders' agreement may transfer their
shares to third parties, subject to the rights of first offer and rights of
first refusal described above.
REGISTRATION RIGHTS. Following this offering, entities affiliated with DLJ
Merchant Banking and Madison Dearborn Partners, will have the following
registration rights, provided in each case that the aggregate proceeds from the
sale of the amount of securities demanded to be registered must be expected to
exceed $50,000,000:
- DLJ Merchant Banking and Madison Dearborn Partners may collectively demand
one registration, at our expense, of up to all of their shares if the
stockholder making the request then holds at least 5% of our outstanding
common stock at the time of demand, assuming conversion of any outstanding
warrants, options and convertible stock; and
- DLJ Merchant Banking and Madison Dearborn Partners may collectively demand
a second and third registration, at their expense, if the stockholder
making the request then holds at least 2.5% of our outstanding common
stock at the time of demand, assuming conversion of any outstanding
warrants, options and convertible stock.
If DLJ Merchant Banking or Madison Dearborn Partners exercises any of their
demand rights, all of the other parties to the shareholders' agreement would be
entitled to include their shares in such registration, subject to cutback by the
underwriters in any underwritten offering.
Additionally, under the terms of the shareholders' agreement, if we propose
to register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, the parties to the shareholders' agreement are entitled to notice of the
registration and to include their shares of common stock in the registration at
our expense. All of these registration rights are subject to the right of the
underwriters of an offering to limit the number of shares included in such
registration.
Each of Nextel WIP, DLJ Merchant Banking and its affiliates, Madison
Dearborn Partners, Eagle River and the management stockholders have entered into
a lock-up agreement with us and have
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agreed generally not to transfer their shares or exercise their registration
rights for a period of 18 months following this offering.
PREEMPTIVE AND ANTIDILUTIVE RIGHTS. Prior to the later of completion of the
initial build-out of scheduled sections of our territory and January 29, 2003,
Nextel WIP has the right to preempt any public offering of our stock by us or by
DLJ Merchant Banking and to purchase all of the stock being offered. Nextel WIP
has waived its preemptive right with respect to this offering.
REIMBURSEMENT OF CERTAIN EXPENSES. In 1999 we 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 Nextel digital mobile network. We also
reimbursed the actual out-of-pocket transaction costs, including fees and
expenses of counsel, incurred by Nextel WIP, Eagle River and DLJ Merchant
Banking in connection with the consummation of the capitalization transactions
on January 29, 1999.
TERMINATION. The shareholders' agreement continues until January 29, 2014,
and thus remains in effect following the closing of this offering, except that
certain provisions related to the right of Nextel WIP to purchase all of the
outstanding shares of Class A common stock, the right of other stockholders to
cause Nextel WIP to purchase all of the outstanding shares of Class A common
stock, and the right of Nextel WIP to sell all of its shares to a third party
after 2011 will be governed by our restated certificate of incorporation after
this offering.
NEXTEL OPERATING AGREEMENTS
We, through our principal subsidiary, entered into agreements with Nextel
WIP which govern the build-out and operation of our portion of the Nextel
digital mobile network. Except as specifically set forth below, these operating
agreements were executed on January 29, 1999 and, in some cases, were amended on
September 9, 1999, and 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.
JOINT VENTURE AGREEMENT
BUILD-OUT AND OPERATIONS. Our agreements with Nextel WIP require us to
build our portion of the Nextel digital mobile network on time and make it
compatible with Nextel's systems. We have agreed to meet or exceed quality
standards applicable from time to time to Nextel's subsidiaries operating in the
United States. We are also required to offer a set of core service features and
to upgrade our system to comply with future Nextel standards. If we determine
that implementation of an upgrade required by Nextel WIP would be materially
adverse to us, then we will not be required to implement the upgrade unless
Nextel WIP agrees to pay a subsidy to us in an amount not to exceed the lesser
of:
- our anticipated aggregate net losses resulting from the upgrade;
- our actual net losses associated with the upgrade through the date of the
subsidy payment;
- the anticipated cumulative losses for all the upgrades net of all
cumulative anticipated profits for all the upgrades; and
- the actual cumulative losses for all the upgrades net of all actual
cumulative profits for all the upgrades.
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Alternatively, if Nextel WIP elects not to pay us a subsidy in connection with
the required upgrade, then:
- Nextel WIP can agree under certain circumstances to waive the requirement
that we make the upgrade;
- we can exercise an option to provide all non-Nextel stockholders with the
opportunity to put their stock to Nextel WIP, as described below; or
- we can request arbitration to determine the subsidy that Nextel WIP will
be required to pay in connection with the implementation of the upgrade.
With respect to data and Internet connectivity services, Nextel WIP has
agreed to charge us only for development work necessary to enable us to offer
those services and not to charge us for any part of Nextel's development cost.
In return, we have agreed not to seek any subsidy under the operating agreements
when we offer the data and Internet connectivity services now being implemented
by Nextel.
ACQUISITION OF LICENSES. In October 1999, we received FCC approval of the
transfer of control of Nextel WIP's initial contribution of licenses to us, and
the transfer was completed in January 2000. We are currently awaiting FCC
approval of the licenses contributed to us in September 1999 by Nextel WIP. 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 WIP, 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 WIP.
EQUIPMENT, VENDORS AND DISCOUNTS. If we request, Nextel WIP has agreed to
assist us in obtaining 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 WIP's
approval prior to taking certain actions, including:
- making a material change in our technology or business objectives;
- broadening the scope of our business beyond our current business
objectives;
- disposing all or substantially all of our assets; or
- the entering into of any agreement the terms of which would be materially
altered in the event that Nextel WIP or Nextel exercises, or fails to
exercise, its right to obtain a majority of our stock.
EXCLUSIVITY. Nextel WIP has agreed that during the term of the joint
venture agreement, Nextel and/or its subsidiaries will not provide digital
mobile wireless communications services within our markets, except that Nextel
and/or its subsidiaries:
- have certain rights in any of the option territories we elect not to build
out;
- may continue to provide analog 800 MHz service in our markets so long as
the services do not use any of the marks licensed to us under our
trademark license agreement with Nextel WIP;
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- may provide digital wireless communications services in our markets on
non-800 MHz frequencies so long as these services:
- do not use any of the marks licensed to us under the trademark license
agreement, and
- do not use Motorola iDEN or other digital service on 800 MHz
frequencies.
In addition, Nextel WIP has agreed to negotiate with us to give us the first
right to own and operate businesses using the 900 MHz frequency in our
territory.
MARKETING, ADVERTISING AND PRICING. We are generally required to adhere to
the same standards for pricing structure, advertising, promotions, customer
care, telemarketing and related activities as the Nextel subsidiaries operating
in the United States. We do, however, set our own prices in our markets, except
that we are required to honor pricing plans established by Nextel for its
national account customers even with respect to subscribers of those national
accounts located in our markets, and we are required to support any of Nextel's
indirect distribution outlets located in our markets.
BACK OFFICE/MIS SERVICES. Nextel WIP provides us access to certain
back-office support and information systems on an ongoing basis. In exchange, we
pay Nextel WIP fees, based on its costs, for access to and use of these systems.
For the nine-month period ended September 30, 1999, we were charged
approximately $285,000 for these services.
MATERIAL BREACH; TERMINATION. In the case of certain material breaches,
including, without limitation, a delay in the completion of the build-out of the
Nextel digital mobile network and our failure to offer services required by
Nextel WIP or to meet performance requirements, Nextel WIP may have the right to
terminate the joint venture agreement and the other operating agreements
following an arbitration proceeding.
In the event of a termination of the joint venture agreement, Nextel WIP
could, in certain circumstances, purchase or be forced to purchase all of our
outstanding stock. In such event, Nextel WIP, at its option, would be entitled
to pay the purchase price therefor in cash or in shares of Nextel common stock.
See "Description of Capital Stock."
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. Royalties are due
to Nextel WIP for the use of the licensed marks, beginning January 1, 2002, if
and when, following January 1, 2002 we achieve two consecutive fiscal quarters
of positive EBITDA. In such event, we would pay 0.5% of our gross monthly
service revenues from the time of such event to December 31, 2004, and
thereafter we would pay 1.0% of our gross monthly service revenues from the
later of the time of such event and January 1, 2005. This agreement terminates
automatically upon termination of the joint venture agreement. Nextel WIP 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 materials.
ROAMING AGREEMENT
Through the roaming agreement, we and Nextel WIP (with respect to Nextel
subscribers) have agreed to provide ESMR service to each other's subscribers
when those subscribers are roaming in the territory of the other. Subject to
quarterly adjustment, we receive revenues from the payment of
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roaming fees by Nextel WIP equal to 95% of the aggregate service revenue
generated by Nextel customers roaming on our portion of the Nextel digital
mobile network through 1999, 90% in 2000, 85% in 2001 and 80% thereafter. When
our customers roam onto Nextel's portion of the Nextel digital mobile network,
80% of the aggregate service revenue generated by such customers is paid to
Nextel WIP. 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 Nextel digital mobile network. For the nine-month period
ended September 30, 1999, we earned approximately $5.8 million from Nextel
customers roaming on our portion of the Nextel digital mobile network and paid
Nextel WIP approximately $653,000 for our subscribers roaming on Nextel's
portion.
ANALOG MANAGEMENT AGREEMENT
Through the analog management agreement and the expansion territory
management agreement, we permit Nextel WIP to use SMR frequencies that are
covered by our licenses and licenses being transferred to us and that are not
being used by us to operate our portion of the Nextel digital mobile network, to
operate analog systems and to offer analog service. If we need to use these
frequencies for our portion of the Nextel digital mobile network, we may
terminate Nextel WIP's right to use any of these frequencies upon at least six
months notice. The analog management agreement requires Nextel WIP to, among
other things, comply with all applicable FCC rules and regulations governing the
licenses covering the managed frequencies.
ASSET AND STOCK TRANSFER AND REIMBURSEMENT AGREEMENTS
On January 29, 1999, we purchased from Nextel WIP assets located in our
markets at a cost of approximately $115.8 million through the asset transfer
reimbursement agreement. We also reimbursed Nextel WIP for operating losses
incurred by Nextel WIP prior to January 29, 1999 in the amount of
$15.1 million. On September 9, 1999, one of our subsidiaries entered into an
expansion territory asset transfer and reimbursement agreement with Nextel WIP
to acquire for $10.6 million certain assets, properties, rights and interests to
be used in connection with the construction and operation of additional
territories.
MASTER SITE LEASE AGREEMENT
On January 29, 1999 we entered into a master site lease agreement with
Nextel WIP for the lease of space on approximately 40 telecommunications towers.
We paid Nextel WIP monthly rental payments based on the number of sites subject
to the master site lease, and for the nine-month period ended September 30,
1999, we were charged approximately $407,000 by Nextel WIP under these
arrangements.
Nextel has reported that in April 1999, it and SpectraSite entered into an
agreement whereby SpectraSite purchased certain existing telecommunications
towers from Nextel, including those we leased. We have executed a master site
lease agreement with SpectraSite to replace our master lease with Nextel WIP.
Nextel WIP has agreed to compensate us for the difference between the lease
rates we pay to SpectraSite and the lease rates we paid to Nextel WIP under our
former master lease agreement.
TRANSITION SERVICES AGREEMENT
Under the transition services agreement, certain accounting, payroll,
customer care, purchasing, human resources and billing functions are made
available to us by Nextel WIP during a defined transition period. 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
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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 WIP following the expiration of the
transition services agreement, Nextel WIP may, at its election, agree to provide
certain services to us on an arm's length basis, at prices to be agreed upon.
We pay monthly fees based on Nextel WIP's cost of providing such services.
For the nine-month period ended September 30, 1999, we were charged
approximately $1.9 million for these services. We have terminated the majority
of the services provided under the transition services agreement as of
December 31, 1999.
SWITCH SHARING AGREEMENT
Nextel WIP provides certain telecommunications switching services to us
which permit us to link cell sites to, and electronically access, certain
switching equipment used and maintained by 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, while we develop our own infrastructure, we will pay
Nextel WIP monthly switching fees based on the estimated cost of providing such
services as of January 1, 2001 subject to adjustment. For the nine-month period
ended September 30, 1999, we were charged approximately $1.5 million for these
services.
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
WIP and its affiliates for switching services should decrease.
Nextel WIP is obligated, on the terms set forth in the switch sharing
agreement, to cause its affiliates 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 reaches
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 AND LIMITING LIABILITY OF, AND RECOURSE TO,
NEXTEL
All of our operating agreements are with Nextel WIP, not Nextel. Pursuant to
the terms of the agreement specifying obligations and limiting liability of, and
recourse to, Nextel, the maximum cumulative, aggregate cash liability of Nextel
and its controlled affiliates, other than Nextel WIP, 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 million.
The amount of the cap 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 to enable Nextel WIP 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 any commitments that Nextel
may make in the future to enable Nextel WIP to subsidize required upgrades and
to buy our stock from our other stockholders under certain circumstances, will
not be subject to the cap. This agreement will survive the expiration or
termination of any and all of the operating agreements.
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MOTOROLA PURCHASE AGREEMENTS
Under the iDEN infrastructure equipment purchase agreement and the
subscriber purchase and distribution agreement between us and Motorola, 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 Nextel digital mobile network, as well as telephones and other
accessories.
We obtained pricing for the Motorola equipment and telephones 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 telephones and accessories and over the same
period approximately $145 million worth of Motorola equipment. For the
nine-month period ended September 30, 1999 and the year ended December 31, 1998,
we purchased approximately $14.7 million and $47.5 million, respectively, of
infrastructure and other equipment, telephones, warranties and services from
Motorola.
We received, in connection with our purchases of Motorola equipment, an
aggregate $22 million credit from Motorola in return for the issuance of
13,076,376 shares of Series A preferred stock to Motorola as part of the
capitalization transactions consummated on January 29, 1999 and September 9,
1999.
EAGLE RIVER SUBLEASE
On August 1, 1999, one of our subsidiaries entered into an assignment and
assumption of lease agreement with Eagle River, one of our stockholders,
pursuant to which we assumed Eagle River's obligations in connection with our
leased property in Kirkland, Washington.
DLJ MERCHANT BANKING RELATIONSHIP
Donaldson, Lufkin & Jenrette Securities Corporation served as an initial
purchaser of our senior discount notes and received a customary underwriting
discount. Donaldson, Lufkin & Jenrette Securities Corporation also acted as our
financial advisor and as arranger, and DLJ Capital Funding, Inc., an affiliate
of Donaldson, Lufkin & Jenrette Securities Corporation, acted as syndication
agent under our credit facility, and received customary fees and reimbursements
in connection therewith. DLJ Merchant Banking and certain related parties, all
of which are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation,
own a significant amount of our equity and are represented on our board of
directors. The aggregate amount of all fees paid to the DLJ entities in
connection with the capitalization transactions was approximately
$14.7 million. Donaldson, Lufkin & Jenrette Securities Corporation is a co-lead
manager of this offering and we may from time to time enter into other
investment banking relationships with it or one of its affiliates. See
"Underwriting."
OTHER TRANSACTIONS WITH SENIOR MANAGEMENT
We have entered into restricted stock purchase agreements with each of
Messrs. Chapple, Thompson, Thaler, Aas, Satterlee, Fanning and Manning pursuant
to which we sold an aggregate of 8,834,994 shares of Class A common stock to
these executive officers at a price of $0.002 per share. See "--Restricted Stock
Purchase Agreements and Change of Control Arrangements." In addition, on
January 29, 1999, Mr. Thompson obtained an interest-free secured loan of
$2.2 million from us, evidenced by a non-negotiable promissory note due and
payable on January 29, 2003.
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We also granted options to purchase shares of Class A common stock under our
employee stock option plan to the following officers and directors on the date,
for the number of shares and with an exercise price indicated opposite each
person's name:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING EXERCISE
NAME GRANT DATE OPTIONS PRICE
---- ---------- ---------------- --------
<S> <C> <C> <C>
John Chapple............................................ 12/31/99 105,000 $ 1.85
John Thompson........................................... 1/29/99 210,000 1.67
12/31/99 105,000 1.85
David Thaler............................................ 12/31/99 60,000 1.85
David Aas............................................... 12/31/99 60,000 1.85
Perry Satterlee......................................... 12/31/99 120,000 1.85
Mark Fanning............................................ 12/31/99 90,000 1.85
Donald Manning.......................................... 1/29/99 180,000 1.67
12/31/99 90,000 1.85
</TABLE>
In addition, we intend to grant to our director nominee, Steven Dodge, an
option to purchase 25,000 shares of Class A common stock, which option will vest
in three equal annual installments and have an exercise price equal to the price
at which shares of Class A common stock are initially offered to the public in
this offering.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of shares of our common stock as of January 15, 2000,
consisting of Class A and Class B common stock, and as adjusted to reflect the
sale of the Class A common stock offered hereby, by:
- each stockholder known to us to be a beneficial owner of more than 5% of
the outstanding shares of our common stock;
- each of our directors and our director nominee;
- each of our named executive officers; and
- all executive officers, directors and our director nominee as a group.
Our Class B common stock is convertible on a one-for-one basis into shares
of our Class A common stock at any time upon a transfer by its current holder to
a third party and is otherwise identical in all respects to our Class A common
stock. The holders of our Class A and Class B common stock are entitled to one
vote per share on all matters.
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
securities convertible into common stock 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, we believe that each stockholder named
in the table has sole voting and investment power with respect to the shares set
forth opposite such stockholder's name, except to the extent shared by a spouse
under applicable law.
Unless otherwise noted, the address for each stockholder below is: c/o
Nextel Partners, Inc., 4500 Carillon Point, Kirkland, WA 98033.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK OUTSTANDING
SHARES OF UNDERLYING OPTIONS OR --------------------------------
NAME AND ADDRESS COMMON STOCK WARRANTS BEFORE OFFERING AFTER OFFERING
- ---------------- -------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
Nextel WIP Corp., Inc.
2001 Edmund Halley Drive
Reston, VA 20191.................... 77,782,626 -- 36.5% 32.9%
Entities affiliated with DLJ Merchant
Banking Partners II, L.P.(1)
277 Park Avenue
New York, NY 10172.................. 27,287,310 1,245,822 13.3 12.0
Madison Dearborn Capital Partners
II, L.P.
Three First National Plaza, Suite
3800
Chicago, IL 60602................... 26,030,466 1,188,438 12.7 11.4
Eagle River Investments, LLC
2300 Carillon Point
Kirkland, WA 98033.................. 19,500,012 -- 9.1 8.2
The Huff Alternative Income Fund, L.P.
1776 On The Green
67 Park Place
Morristown, NJ 07960................ 14,239,380 -- 6.7 6.0
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK OUTSTANDING
SHARES OF UNDERLYING OPTIONS OR --------------------------------
NAME AND ADDRESS COMMON STOCK WARRANTS BEFORE OFFERING AFTER OFFERING
- ---------------- -------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
Motorola, Inc.
1303 East Algonquin Road, 11th Floor
Schaumburg, IL 60196................ 13,076,376 -- 6.1 5.5
John Chapple(2)....................... 3,336,024 -- 1.6 1.4
John Thompson(3)...................... 2,210,664 210,000 1.1 1.0
David Thaler.......................... 1,254,000 -- * *
David Aas............................. 1,064,130 -- * *
Perry Satterlee(4).................... 1,003,332 -- * *
Mark Fanning.......................... 903,486 -- * *
Andrew Rush(5)........................ 27,287,310 1,245,822 13.3 12.0
Dennis Weibling(6).................... 97,282,638 -- 45.6 41.1
Timothy Donahue(7).................... 77,782,626 -- 36.5 32.9
Andrew Sinwell(8)..................... 26,030,466 1,188,438 12.7 11.4
Steven Dodge.......................... -- -- -- --
Directors and officers as a group (12
persons)(9)......................... 160,432,050 2,704,260 75.6% 68.1%
</TABLE>
- --------------------------
*Less than 1%
(1) Consists of shares held directly by DLJ Merchant Banking Partners 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, DLJ EAB
Partners, L.P., DLJ First ESC, L.P. and DLJ ESC II, L.P.
(2) Includes 736,667 shares held by JRC Coho LLC, an entity controlled by
Mr. Chapple.
(3) Includes 509,166 shares held by JDT-JRT, LLC, an entity controlled by
Mr. Thompson.
(4) Includes 165,000 shares held by PSS-MSS L.P., an entity controlled by Mr.
Satterlee.
(5) Consists of shares held by entities affiliated with DLJ Merchant Banking
Partners II, L.P., all of which are funds managed by DLJ Merchant Banking,
of which Mr. Rush is a Managing Director. Mr. Rush disclaims beneficial
ownership of such shares.
(6) Consists of shares held by Eagle River Investments, LLC, of which
Mr. Weibling serves as President, and by Nextel WIP, of which Mr. Weibling
serves as a director. Mr. Weibling disclaims beneficial ownership of such
shares.
(7) Consists of shares held by Nextel WIP, of which Mr. Donahue is president,
chief executive officer and director. Mr. Donahue disclaims beneficial
ownership of such shares.
(8) Consists of shares held by Madison Dearborn Partners II, L.P., of which
Mr. Sinwell serves as a director. Mr. Sinwell disclaims beneficial ownership
of such shares.
(9) See footnotes 2 through 8 above. Also includes an option to purchase up to
60,000 shares of Class A common stock granted to Mr. Manning, which option
is exercisable within 60 days of the date of this prospectus.
See "Description of Capital Stock" for a description of certain agreements
relating to potential change of control events.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
14% SENIOR DISCOUNT NOTES
In January 1999, we sold $800 million aggregate principal amount at maturity
14% senior discount notes due February 1, 2009. The notes were issued at a
discount to their aggregate principal amount at maturity and generated aggregate
gross proceeds to us of approximately $406 million. In July 1999 these notes
were exchanged by us for registered notes having the same financial terms and
covenants as the notes issued in January 1999. 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 million by
February 1, 2004. Cash interest will not accrue on the notes prior to
February 1, 2004. As of September 30, 1999, the accreted value of the
outstanding senior notes was approximately $445 million.
These notes:
- are subject to the provisions of an indenture;
- are senior unsecured obligations of ours;
- will mature on February 1, 2009; and
- bear interest at the rate of 14% per annum, which interest is to be paid
semi-annually on February 1 and August 1 of each year, commencing
August 1, 2004.
We may redeem the notes, in whole or in part, at any time on or after
February 1, 2004. If we choose this optional redemption, we are required to
redeem the notes at the redemption prices set forth below, plus an amount in
cash equal to all accrued and unpaid interest and liquidated damages, if any, to
the redemption date:
<TABLE>
<CAPTION>
REDEMPTION PRICE
(EXPRESSED AS PERCENTAGES OF THE PRINCIPAL
YEAR AMOUNT AT MATURITY OF THE NOTES)
- -------------------------------- ------------------------------------------
<S> <C>
2004............................ 107.000%
2005............................ 104.667%
2006............................ 102.333%
2007 and thereafter............. 100.000%
</TABLE>
Prior to February 1, 2002, we 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:
- we receive net proceeds of at least $75 million from one or more sales of
our capital stock, other than redeemable stock, prior to February 1, 2002;
- at least 65% of the aggregate accreted value of the notes originally
issued remain outstanding immediately after the redemption; and
- the redemption occurs within 60 days of such sale.
In the indenture relating to the notes, we agreed to certain restrictions
that limit our and our subsidiaries' ability to:
- incur additional debt;
- pay dividends, acquire our shares, make certain investments or redeem
outstanding debt which is subordinate in right of payment to the notes;
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- designate unrestricted subsidiaries;
- enter into transactions with affiliates;
- engage in any business other than telecommunications;
- create liens;
- pay dividends, make loans or advances to our subsidiaries or transfer any
of our property or assets to our subsidiaries;
- issue or sell shares of capital stock of our subsidiaries; and
- sell assets.
In addition, in the event of a change of control as defined in the
indenture, each holder of notes will have the right to require us to repurchase
all or part of such holder's notes at a price equal to 101% of the accreted
value plus any liquidated damages 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 any liquidated damages to any purchase date after February 1, 2004.
Events of default under the indenture include but are not limited to:
- the failure to pay principal of or premium, if any, on, any note when due;
- the failure to pay any interest on any note when due, such failure
continuing for 30 days;
- the default in the payment of principal and interest on notes required to
be purchased; and
- certain events of bankruptcy, insolvency or reorganization.
If an event of default, other than events of bankruptcy, insolvency or
reorganization, occurs and is continuing, the maturity date of all of the notes
may be accelerated. If a bankruptcy, insolvency or reorganization occurs, the
outstanding notes will automatically become immediately due and payable.
DESCRIPTION OF CREDIT FACILITY
Nextel Partners Operating Corp., one of our wholly owned subsidiaries,
entered into a credit facility in January 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. This credit facility was amended and restated
in September 1999. The credit facility includes a $175 million term loan, a
$150 million term loan and a $100 million reducing revolving credit facility.
Subject to Nextel Partners Operating Corp.'s right in the future to seek an
increase of up to $50 million, the credit facility will not exceed
$425 million. The $175 million term loan matures on January 29, 2008 and the
$150 million term loan matures on July 29, 2008. The revolving credit facility
will terminate on January 29, 2007.
On January 29, 1999, Nextel Partners Operating Corp. borrowed the full
amount of the $175 million term loan and on September 9, 1999, it borrowed the
full amount of the $150 million term loan. As of December 31, 1999, no amounts
were outstanding under the $100 million revolving credit facility.
The $175 million and the $150 million term loans both bear interest, at our
option, at the administrative agent's alternate base rate or reserve-adjusted
LIBOR plus, in each case, applicable margins. The applicable margin for the
$175 million term loan is 4.75% over LIBOR and 3.75% over the base rate of the
higher of 0.5% per annum above the latest federal funds rate or the prime 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 as adjusted is
positive, at which time the applicable margin will
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be initially 4.0% over LIBOR and 3.0% over the higher of 0.5% per annum above
the latest federal funds rate or the prime rate and thereafter will be
determined on the basis of the ratio of total debt to annualized EBITDA, as
adjusted, and will range between 2.25% and 3.75% over LIBOR and between 1.25%
and 2.75% over the higher of 0.5% per annum above the latest federal funds rate
or the prime rate. The applicable margin for the $150 million term loan is 4.25%
over LIBOR and 3.25% over the higher of 0.5% per annum above the latest federal
funds rate or the prime rate.
We pay a commitment fee calculated at a rate equal to 2.0% per annum,
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.
Prior to the date on which our portion of the Nextel digital mobile network
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.
PREPAYMENTS. The term loans are subject to mandatory prepayment:
- with 100% of the net cash proceeds from the issuance of debt, subject to
exceptions;
- with 100% of the net cash proceeds of asset sales, subject to exceptions;
- after December 31, 2002, with 50% of Nextel Partners Operating Corp.'s
excess earnings over interest expense, taxes, capital expenditures,
payments made in connection with the credit facility, and other
adjustments; and
- after January 29, 2004, with 50% of the net cash proceeds from the
issuance of equity by us.
Nextel Partners Operating Corp.'s obligations under the credit facility is
secured by:
- 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
- a first-priority pledge of its capital stock and the stock of its current
and future subsidiaries, including the subsidiary holding our FCC
licenses.
Our other subsidiaries have guaranteed the obligations of Nextel Partners
Operating Corp. under the credit facility.
The credit facility contains customary covenants and restrictions on our and
our subsidiaries' ability to engage in certain activities, including but not
limited to:
- limitations on the incurrence of liens and indebtedness;
- restrictions on sale lease-back transactions, consolidations, mergers,
sale of assets, capital expenditures, transactions with affiliates and
investments; and
- severe restrictions on dividends and distributions on, and redemptions and
repurchases of, capital stock, and other similar distributions.
In addition, Nextel Partners Operating Corp. is required to comply with
specified financial ratios and tests, including:
- certain defined ratios of senior debt and total debt to EBITDA as
adjusted;
- a minimum interest coverage ratio;
- a minimum fixed charge coverage ratio;
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- a maximum leverage ratio; and
- minimum service revenues, subscriber units and covered population
equivalents.
As of September 30, 1999, Nextel Partners Operating Corp. was in compliance
with all of its required covenants.
The credit facility contains customary events of default, including defaults
relating to payments, breach of representations, warranties 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:
- the change of control of us or Nextel Partners Operating Corp.;
- the early termination of our right to use the Nextel brand name or right
to acquire equipment incorporating iDEN technology;
- the termination of, revocation of, or failure to renew by the FCC of
licenses material to our business;
- the early termination or failure to renew of operating agreements with
Nextel WIP;
- certain material breaches of obligations under these operating agreements
or default by Nextel WIP of certain obligations to provide agreed upon
services; or
- the failure of certain of our stockholders to make funding or contribution
obligations in accordance with the subscription and contribution
agreement.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering, we will be authorized to issue up to
500,000,000 shares of Class A common stock, $.001 par value, 100,000,000 shares
of Class B convertible common stock, $.001 par value, and 113,110,000 shares of
preferred stock, $.001 par value. The following summary of our common stock and
preferred stock is not complete and may not contain all the information you
should consider before investing in the Class A common stock. This description
is subject to and qualified in its entirety by provisions of our restated
certificate of incorporation and bylaws, which are included as exhibits to the
registration statement of which this prospectus is a part, and by provisions of
applicable Delaware law.
COMMON STOCK
The common stock is classified into two classes: Class A common stock and
Class B convertible common stock.
As of January 15, 2000, assuming conversion of all outstanding shares of
Series A, Series C and Series D preferred stock, there were 135,427,974 shares
of Class A common stock outstanding that were held of record by 41 stockholders
and 77,782,626 shares of Class B common stock outstanding that were held of
record by one stockholder. After giving effect to the sale of Class A common
stock offered in this offering, there will be 236,710,600 shares of Class A and
Class B common stock outstanding, assuming no exercise of outstanding options or
warrants. As of January 15, 2000, there were outstanding options to purchase a
total of 5,049,600 shares of Class A common stock and outstanding warrants to
purchase a total of 2,434,260 shares of Class A common stock.
The holders of Class A common stock and Class B common stock will generally
vote as a single class on all matters upon which stockholders have a right to
vote, subject to the requirements of applicable laws. The holders of Class A and
Class B common stock are entitled to one vote per share on all matters to be
voted on by the stockholders except that holders of Class A common stock vote
separately as a class if deciding whether to require Nextel WIP to purchase all
the outstanding shares of Class A common stock or whether to participate in a
sale by Nextel WIP of its holdings of our stock, as described below. Any
amendment to the restated certificate of incorporation that would change the
provisions regarding Nextel WIP's ability or obligation to purchase all
outstanding shares of Class A common stock, including the redemption
alternative, the appraisal and challenge process, payment terms, or that would
change the ability of Class A stockholders to participate in a sale of our
equity by Nextel WIP, requires both the consent of Nextel WIP and the vote of
the holders of a majority of the Class A common stock voting separately as a
class.
Subject to preferences that may be granted to any outstanding shares of
preferred stock, the holders of Class A and Class B common stock are entitled to
receive ratably only those dividends our board of directors declares out of
funds legally available for the payment of dividends as well as any other
distributions to the stockholders.
If we are liquidated, dissolved or wound-up, the holders of common stock are
entitled to share pro rata all of our assets remaining after payment of our
liabilities and liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive rights and there are
no redemption or sinking fund provisions applicable to the common stock. In the
event of a merger or consolidation, holders of Class A and Class B common stock
are entitled to receive the same kind and amount of consideration per share. All
outstanding shares of common stock are fully paid and non-assessable, and the
shares of Class A common stock to be issued in this offering will be fully paid
and non-assessable.
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Shares of Class B common stock are convertible into shares of Class A common
stock on a one-for-one basis at the option of any holder of Class B common stock
concurrently with a sale or other transfer of such shares to a transferee that
does not hold any shares of Class B common stock prior to such transfer. Shares
of Class A common stock are immediately and automatically convertible into an
equal number of shares of Class B common stock upon the acquisition of such
shares of Class A common stock by Nextel, by any of its majority-owned
subsidiaries, or by any person or group that controls Nextel.
PREFERRED STOCK
GENERAL
Upon the closing of this offering, all outstanding shares of Series A
preferred stock will be converted into 125,834,646 shares of Class A common
stock and all outstanding shares of Series C and D preferred stock will be
converted into an aggregate of 77,782,626 shares of Class B common stock.
Thereafter, pursuant to our restated certificate of incorporation, our board of
directors will have the authority, without further action by the stockholders,
to issue up to 100,000,000 shares of preferred stock in one or more series and
to fix the relative designations, powers, preferences and privileges of the
preferred stock, any or all of which may be greater than the rights of the
common stock. Our board of directors, without stockholder approval, can issue
preferred stock with voting, conversion or other rights that could adversely
affect the voting power and other rights of the holders of common stock.
Preferred stock could thus be issued quickly with terms that could delay or
prevent a change in control of us or make removal of our management more
difficult. Additionally, the issuance of preferred stock may decrease the market
price of the Class A common stock and may adversely affect the voting and other
rights of the holders of Class A common stock. We have no present plans to issue
any preferred stock.
SERIES B PREFERRED STOCK
Upon the closing of this offering, our only preferred stock that will remain
issued and outstanding is 13,110,000 shares of our Series B preferred stock.
With respect to rights on liquidation, dissolution or winding up, the
Series B preferred stock ranks senior to the Class A and Class B common stock.
In addition, upon any liquidation of us, holders of the Series B preferred stock
will be entitled to receive a liquidation preference of approximately
$21.9 million, plus dividends of 12% per year.
The Series B preferred stock does not have any voting rights except with
respect to the following, in which case it shall vote as a separate class:
- amendments to our bylaws or restated certificate of incorporation,
including the authorization of additional shares of existing series of
preferred stock;
- the authorization of securities senior to any existing series of preferred
stock;
- approval of mergers or consolidations adverse to the rights of the holders
of the Series B preferred stock, subject to exceptions; or
- redemption of any outstanding shares of common or preferred stock, subject
to exceptions.
Except as set forth above, the holders of Series B preferred stock are not
entitled to receive dividends on their shares of preferred stock, and have no
conversion rights.
We may redeem the Series B preferred stock, in whole but not in part, at any
time in exchange for an aggregate amount equal to its accrued liquidation
preference. If the Series B preferred stock has not been redeemed by us by
February 11, 2010, we will be required to redeem it in exchange for an aggregate
amount equal to its accrued liquidation preference. Our ability to redeem the
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Series B preferred stock may be limited by the provisions of both the indenture
governing our outstanding notes and our credit facility.
WARRANTS
As of January 15, 2000, we had warrants outstanding to purchase 2,434,260
shares of Class A common stock at an exercise price of less than $0.01 per
share.
CERTAIN OBLIGATIONS UNDER OUR CHARTER
The following is a discussion of provisions of our restated certificate of
incorporation that, under certain circumstances, allow Nextel WIP, or allow a
majority of our Class A stockholders to cause Nextel WIP, to purchase all of our
outstanding Class A common stock. In such events, Nextel WIP will have the
choice of paying for any shares of Class A common stock in cash, in shares of
Nextel common stock, or in a combination of cash and Nextel common stock. We
believe that registration of common stock of Nextel that may be issued is not
required in connection with this offering because Nextel WIP has the right to
pay for our Class A common stock with cash, there is no certainty that an event
giving rise to a purchase possibility will take place, and no holder of Class A
common stock will have an opportunity to make a volitional act with respect to
acceptance of Nextel common stock. Any purchase will be a result of provisions
contained in our restated certificate of incorporation. If Nextel WIP purchases
all of our Class A common stock, we will cease to be a publicly traded company.
The following table sets forth the triggering events and the consideration
to be paid with regard to the ability of Nextel WIP to purchase all outstanding
shares of our Class A common stock:
<TABLE>
<CAPTION>
TRIGGERING EVENT CONSIDERATION PAID
- ---------------- ------------------
<S> <C> <C> <C>
- - January 28, 2008, subject to certain - Cash, Nextel stock or a combination of
postponements by our board of directors both, at Nextel WIP's option
- - If Nextel changes its digital transmission - Cash, Nextel stock or a combination of
technology for our frequency range, the both, at Nextel WIP's option
change is materially adverse to us and
Nextel WIP determines not to provide us
free of charge the equipment necessary to
provide our subscribers with service
comparable to what they had been receiving
- - If Nextel WIP requires a change in our - Cash, Nextel stock or a combination of
business, operations or systems, the change both, at Nextel WIP's option
is adverse to us and Nextel WIP does not
subsidize us for the costs of such change
and we decline to implement the required
change
- - Termination of our operating agreements - Cash, Nextel stock or a combination of
with Nextel WIP as a result of our breach both, at Nextel WIP's option
</TABLE>
If Nextel WIP is able to purchase all of our outstanding Class A common
stock for any reason other than as a result of the termination of the operating
agreements, then the purchase price will be the fair market value of the
Class A common stock. Under our restated certificate of incorporation, "fair
market value" is determined by the appraisal process described below, and is
defined as the price that a buyer would be willing to pay for all of our
outstanding capital stock, excluding the Series B preferred stock, in an
arm's-length transaction in a manner designed to maximize stockholder value, and
includes a control premium. In the event of a termination of the
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operating agreements, then Nextel WIP has the ability to purchase all of our
outstanding Class A common stock for an amount based on 80% of the average
closing price on the Nasdaq National Market of our Class A common stock on the
date of declaration of the event giving rise to the right of purchase for the 20
prior trading days prior to such event.
The following table sets forth the triggering events and the consideration
to be paid with regard to the ability of a majority of our stockholders to cause
Nextel WIP to purchase all outstanding Class A common stock. If a triggering
event occurs and a majority of our Class A common stockholders determine to
require Nextel WIP to purchase all of our outstanding Class A common stock, all
stockholders will be required to sell their shares to Nextel WIP.
<TABLE>
<CAPTION>
TRIGGERING EVENT CONSIDERATION PAID
- ---------------- ------------------
<S> <C> <C> <C>
- - Change of control of Nextel - Cash, Nextel stock or a combination of
both, at Nextel WIP's option
- - If prior to January 29, 2003, Nextel WIP - Cash, Nextel stock or a combination of
exercises its right under the shareholders' both, at Nextel WIP's option
agreement to preempt a public offering of
our stock by DLJ Merchant Banking and buys
all of our shares owned by DLJ Merchant
Banking
- - If we do not implement a change in our - Cash, Nextel stock or a combination of
business, operations or systems required by both, at Nextel WIP's option
Nextel WIP, the change is adverse to us,
and our board of directors provides
non-Nextel affiliated stockholders with the
opportunity to require Nextel WIP to buy
their shares of Class A common stock and a
majority of the stockholders vote to do so
- - Termination of our operating agreements - Cash, Nextel stock or a combination of
with Nextel WIP as a result of a breach by both, at Nextel WIP's option
Nextel WIP
</TABLE>
We currently have no majority stockholder. If the event giving rise to the
stockholders' right to cause Nextel WIP to buy all of the outstanding shares of
Class A common stock:
- is a change in control of Nextel, the purchase price that Nextel WIP is
required to pay for shares of Class A common stock is the fair market
value of the Class A common stock, as determined by the appraisal process
described below;
- is the preemption of a public offering of our stock by DLJ Merchant
Banking, the purchase price that Nextel WIP is required to pay for shares
of Class A common stock is the same per share price that was paid by N-WIP
to purchase the shares from DLJ Merchant Banking;
- is the election of a majority of our non-Nextel stockholders to require
Nextel WIP to buy all shares of Class A common stock after our failure to
implement changes in our business, operations or systems required by
Nextel WIP, the purchase price that Nextel WIP is required to pay for
shares of Class A common stock is an amount that would equal a 20% rate of
return on each tranche of invested capital in us, from the date of its
contribution, whether contributed in cash or in kind, through the purchase
date, which value will be divided over all our capital stock; or
- is the termination of our operating agreement with Nextel WIP as a result
of a breach by Nextel WIP, the purchase price that Nextel WIP is required
to pay for shares of Class A
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common stock is an amount based on 120% of the average closing price on
the Nasdaq National Market of our common stock on the date of declaration
of the event giving rise to the right to put for the 20 trading days prior
to such event.
REDEMPTION ALTERNATIVE. If Nextel WIP elects to purchase or is required to
purchase our shares pursuant to our restated certificate of incorporation,
Nextel WIP is entitled to cause the transaction to be effected as a redemption
by us of the Class A common stock.
APPRAISAL AND CHALLENGE PROCESS. When the fair market value of our Class A
common stock is to be determined using an appraisal, our restated certificate of
incorporation sets out a procedure binding on all our stockholders. Our board
first selects a nationally recognized investment banker or appraiser and then
Nextel WIP selects one. If the higher of the two values so determined is more
than 110% of the lower value, a third appraiser will be asked to value us. In
any event, the fair market value that will determine the per share price that
Nextel WIP will pay will be somewhere between the values determined by the first
two appraisers.
Our restated certificate of incorporation also allows either Nextel WIP or
our stockholders to challenge the value so determined. Our restated certificate
of incorporation sets a floor and a ceiling, binding on both Nextel WIP and all
other stockholders, for the price to be paid if there is a challenge. The
maximum value that can result from a challenge to the appraisal value is a value
equal to a 30% rate of return on each tranche of capital invested in us. The
lowest price that could result from a challenge would be a value that would
equal a 10% rate of return on each tranche of capital invested in us. Any
stockholder that joins the challenge is bound by the results of the challenge
process and receives the value so determined, not the value determined by the
appraiser.
In any purchase by Nextel WIP of all our outstanding stock, stockholders
will not otherwise be entitled to any statutory appraisal rights under Delaware
law.
RIGHT/OBLIGATION TO PARTICIPATE IN SALE BY NEXTEL WIP AND NEXTEL. Holders
of our Class A common stock also have the right and/or obligation to participate
in any sale by Nextel WIP of all of its shares of our capital stock to a third
party occurring after January 29, 2011. In the event that the holders of a
majority of the Class A common stock elect to participate in such sale, then
pursuant to our restated certificate of incorporation, all holders of Class A
common stock, including purchasers in this offering, will be required to
participate.
SHARE LEGEND. Certificates for Class A common stock are required by our
restated certificate of incorporation to bear the following legend:
The securities of the corporation evidenced hereby are subject to
certain options, described in the restated certificate of incorporation of
the corporation, as amended from time to time, of a person to purchase or to
cause the corporation to redeem such securities, or of the shareholders to
sell such securities, at a purchase price determined in accordance with the
provisions thereof, exercisable by written notice at any time during the
periods set forth therein. Copies of the restated certificate of
incorporation are available at the principal place of business of the
corporation located at 4500 Carillon Point, Kirkland, Washington, and will
be furnished without cost to shareholders on request.
OUR RESTATED CERTIFICATE OF INCORPORATION. Prospective investors in the
Class A common stock should know that our restated certificate of incorporation
has been filed as an exhibit to this registration statement and is incorporated
by reference into this prospectus.
REGISTRATION RIGHTS
Following this offering, entities affiliated with DLJ Merchant Banking and
Madison Dearborn Partners will have the following registration rights, provided
in each case that the aggregate
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proceeds from the sale of the amount of securities demanded to be registered
must be expected to exceed $50,000,000:
- DLJ Merchant Banking and Madison Dearborn Partners may collectively demand
one registration, at our expense, of up to all of their shares if the
stockholder making the request then holds at least 5% of our outstanding
common stock at the time of demand, assuming conversion of any outstanding
warrants, options and convertible stock; and
- DLJ Merchant Banking and Madison Dearborn Partners may collectively demand
a second and third registration, at their expense, if the stockholder
making the request then holds at least 2.5% of our outstanding common
stock at the time of demand, assuming conversion of any outstanding
warrants, options and convertible stock.
If DLJ Merchant Banking or Madison Dearborn Partners exercises any of their
demand rights, all of the other parties to our shareholders' agreement would be
entitled to include their shares in such registration, subject to cutback by the
underwriters in any underwritten offering.
Additionally, under the terms of the shareholders' agreement, if we propose
to register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, the parties to the shareholders' agreement are entitled to notice of the
registration and to include their shares of common stock in the registration at
our expense. All of these registration rights are subject to the right of the
underwriters of the offering to limit the number of shares included in such
registration. Each of Nextel WIP, DLJ Merchant Banking and its affiliates,
Madison Dearborn, Eagle River, and the management stockholders have entered into
a lock-up agreement and have waived their registration rights for a period of
18 months following this offering.
SELECTED ANTI-TAKEOVER MATTERS
RESTATED CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS. Our restated
certificate of incorporation and bylaws include provisions that may have the
effect of deterring, delaying or preventing a change of control of us. Our
bylaws provide that special meetings of our stockholders may only be called by
our board of directors, president, or holders of not less than 50% of our
outstanding capital stock, which could delay or prevent such meetings from
taking place altogether.
Our restated certificate of incorporation provides for 113,110,000
authorized shares of preferred stock and grants our board of directors broad
power to establish the rights and preferences of authorized and unissued, or
"blank check," preferred stock. Upon the closing of this offering, only
13,110,000 shares of preferred stock will be designated and issued and, thus, we
will have 100,000,000 authorized shares of "blank check" preferred stock
remaining. Preferred shares repurchased or redeemed by us may be reissued. The
existence of authorized but unissued preferred stock may enable our board of
directors to render more difficult or discourage an attempt to obtain control
over us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, the board of
directors were to determine that a takeover proposal is not in our best
interests, our board of directors could cause shares of preferred stock to be
issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed
acquirer or insurgent stockholder or stockholder group. The issuance of shares
of preferred stock pursuant to our board of directors' authority described above
could have the effect of delaying, deferring or preventing a change in control
of us.
SHAREHOLDERS AND OPERATING AGREEMENT PROVISIONS. Certain provisions of the
shareholders' agreement may also have the effect of deterring, delaying or
preventing a change of control of us. These include the rights of first offer
and first refusal among the parties to that agreement, the anti-
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dilutive rights that those parties have under certain circumstances, and their
agreements to vote for certain designees to serve on our board.
The approval rights granted to the Nextel WIP designee on our board as well
as certain rights granted to Nextel WIP, could also have these effects. For
example, among other things, if a business transaction or combination would
broaden our business, it would require approval by Nextel WIP and its designee
on our board.
DELAWARE ANTI-TAKEOVER LAW. Section 203 of the Delaware General Corporation
Law prohibits certain "business combination" transactions between a Delaware
corporation and any "interested stockholder" owning 15% or more of the
corporation's outstanding voting stock for a period of three years after the
date on which such stockholder became an interested stockholder, unless:
- the board of directors approves, prior to such date, either the proposed
business combination or the proposed acquisition of stock which resulted
in the stockholder becoming an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owned at least 85% of
those shares of the voting stock of the corporation which are not held by
the directors, officers or certain employee stock plans; or
- on or subsequent to the date on which such stockholder became an
interested stockholder, the business combination with the interested
stockholder is approved by the board of directors and also approved at a
stockholders' meeting by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the corporation's voting stock
other than shares held by the interested stockholder.
Under Delaware law, a "business combination" includes a merger, asset sale
or other transaction resulting in a financial benefit to the interested
stockholder. Section 203 does not apply, however, to those stockholders who own
15% or more of our voting stock prior to this offering.
FCC-RELATED REDEMPTION RIGHTS
Our certificate of incorporation allows us to redeem shares of our stock
from any stockholder in order to maintain compliance with applicable federal and
state telecommunications laws and regulations.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is The Bank of New
York. The transfer agent's address is 101 Barclay Street, 12W, New York, New
York 10286, and its telephone number is (212) 635-7134.
NATIONAL MARKET LISTING
We have applied to list our common stock on the Nasdaq National Market under
the symbol "NXTP."
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LIMITATION ON DIRECTORS' LIABILITIES
The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. In the absence of the limitations of
personal liability authorized by the Delaware statute, directors could be
accountable to corporations and their stockholders for monetary damages for
conduct that does not satisfy their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The restated
certificate of incorporation limits the liability of our directors to our
stockholders to the fullest extent permitted by the Delaware statute.
Specifically, our directors will not be personally liable for monetary damages
for breach of a director's fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding
liability for any unlawful payment of dividends or unlawful stock purchase
or redemption; or
- for any transaction from which a director derived an improper personal
benefit. The inclusion of this provision in the restated certificate of
incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for beach of their
duty of care, even though such an action, if successful, might otherwise
have benefited us and our stockholders.
In addition, we anticipate entering into indemnity agreements with all of
our directors indemnifying them to the fullest extent permitted under Delaware
law.
Certain of our outside directors may also be covered by indemnification
arrangements under the organizational documents of their employers and/or by
liability insurance policies provided by their employers.
To the extent the provisions of our restated certificate of incorporation
provide for indemnification of directors for liabilities arising under the
Securities Act, those provisions are, in the opinion of the SEC, against public
policy as expressed in the Securities Act and are therefore unenforceable.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
Class A common stock. Future sales of substantial amounts of our Class A common
stock in the public market could adversely affect the market price of our
Class A common stock.
Upon completion of this offering, assuming no exercise of outstanding
options or warrants and no conversion into shares of Class A common stock of the
77,782,626 shares of Class B common stock that will be outstanding after this
offering, we will have outstanding 158,927,974 shares of Class A common stock.
Of these shares, the 23,500,000 shares that we expect to sell in this offering,
will be freely tradable in the public market without restriction under the
Securities Act, unless such shares are held by our "affiliates," as that term is
defined in Rule 144 under the Securities Act.
The remaining 135,427,974 shares of Class A common stock that will be
outstanding after this offering will be restricted shares. We issued and sold
these restricted shares in private transactions in reliance on exemptions from
registration under the Securities Act. Restricted shares may be sold in the
public market only if they are registered or if they qualify for an exemption
from registration under Rule 144 under the Securities Act.
As a result of the contractual restrictions described below and the
provisions of Rule 144, the restricted shares will be available for sale in the
public market as follows:
- On the date of the expiration of the 180-day lock-up agreements described
below, 44,478,234 shares of the restricted securities will be eligible for
immediate sale in the public market under Rule 144, subject to the
transfer provisions in the shareholders' agreement.
- On September 9, 2000, an additional 8,300,316 shares of the restricted
securities will be eligible for immediate sale in the public market under
Rule 144, subject to the transfer provisions in the shareholders'
agreement.
- On the date of the expiration of the 18-month lock-up agreement described
below, the remaining 82,649,424 shares of the restricted securities will
be eligible for immediate sale in the public market under Rule 144,
subject to the transfer provisions of the shareholders' agreement, and
subject to certain volume, manner of sale and other limitations under
Rule 144.
EMPLOYEE STOCK OPTION AND STOCK PURCHASE PLANS
We have reserved 16,545,354 shares of Class A common stock for issuance
under our stock option plan. As of January 15, 2000, there were a total of
5,049,600 shares of Class A common stock subject to outstanding options under
our stock option plan, 210,000 of which were vested. All of these vested options
are subject to a lock-up agreement. There were no shares of stock reserved for
issuance pursuant to our employee stock purchase plan as of January 15, 2000;
upon completion of this offering, 3,000,000 shares of Class A common stock will
be reserved for issuance under this plan. Within 90 days after the completion of
this offering, we intend to file registration statements on Form S-8 under the
Securities Act to register all of the shares of common stock issued or reserved
for future issuance under our stock option plan and our employee stock purchase
plan. After the effective dates of the registration statements on Form S-8,
shares purchased upon exercise of options granted pursuant to our stock option
plan and employee stock purchase plan generally would be available for resale in
the public market.
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LOCK-UP AGREEMENTS
Pursuant to certain "lock-up" agreements, we and several of our stockholders
have agreed not to offer, sell, contract to sell, announce an intention to sell
or otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement under the Securities Act relating to, any shares of
common stock or securities convertible into or exchangeable or exercisable for
any common stock without the prior written consent of Goldman, Sachs & Co. for a
period of 180 days after the date of this prospectus.
In addition, Nextel WIP, DLJ Merchant Banking and its affiliates, Madison
Dearborn Partners, Eagle River and the management stockholders have entered into
a lock-up agreement with us pursuant to which they have agreed generally not to
transfer their shares or exercise their registration rights for a period of
18 months following this offering.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year would be entitled to sell in any three-month period
up to the greater of
- 1% of the then-outstanding shares of Class A common stock, approximately
1,589,280 shares immediately after this offering; and
- the average weekly trading volume of the Class A common stock during the
four calendar weeks preceding the filing of a Form 144 with respect to
such sale.
Sales under Rule 144 are also subject to certain manner of sale and notice
requirements and to the availability of current public information about us.
RULE 144(K)
Under Rule 144(k), a person who has not been one of our affiliates during
the preceding 90 days and who has beneficially owned the restricted shares for
at least two years is entitled to sell them without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
RULE 701
Any of our employees, directors, officers, consultants or advisors who
purchase shares from us in connection with a compensatory stock or option plan
or written agreement before the effective date of this offering is entitled to
rely on the resell provisions of Rule 701, subject to the lock-up provisions
described above. In general, Rule 701 permits non-affiliates to sell their
Rule 701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the
holding period of Rule 144.
REGISTRATION RIGHTS
Following this offering and the expiration of the 18-month lock-up
agreement, DLJ Merchant Banking and Madison Dearborn Partners, who together will
own 53,317,776 shares of Class A common stock upon completion of this offering,
will have rights to demand that we register their shares with the SEC.
Additionally, under the terms of the shareholders' agreement, if we propose to
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, the parties to the shareholders' agreement are entitled to notice of the
registration and to include their shares of common stock in the
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<PAGE>
registration at our expense. All of these registration rights are subject to the
right of the underwriters of the offering to limit the number of shares included
in such registration. Each of Nextel WIP, DLJ Merchant Banking and its
affiliates, Madison Dearborn, Eagle River, and the management stockholders have
entered into a lock-up agreement and have waived their registration rights for a
period of 18 months following this offering.
SHAREHOLDERS' AGREEMENT
The shareholders' agreement imposes numerous restrictions with respect to
the sale, transfer or other disposition of our capital stock by the parties to
the shareholders' agreement. Generally, prior to the completion of our portion
of the Nextel digital mobile network and the achievement of positive EBITDA for
two consecutive fiscal quarters, excluding the effects of any option markets
acquired by us, Eagle River and the management stockholders may transfer shares
only to family members, affiliates and certain other permitted transferees;
provided, however, that after this offering, each such stockholder may sell up
to 30% of its shares subject to certain rights of first offer and rights of
first refusal available to DLJ Merchant Banking, Madison Dearborn Partners,
Eagle River, Motorola, Nextel WIP, the management stockholders and their
permitted transferees. Nextel WIP may not transfer its shares (other than to
permitted transferees, or to us, in return for frequencies that it repurchases)
prior to the exercise of its right described herein to acquire or cause us to
redeem all of the outstanding shares of Class A common stock or the expiration
of such right 90 days after the ninth anniversary of the shareholders' agreement
(subject to certain postponements). Other stockholders who are parties to the
shareholders' agreement may transfer their shares to third parties, subject to
the rights of first offer and rights of first refusal described above.
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<PAGE>
MATERIAL U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
Following is a general discussion of material U.S. federal income and estate
tax consequences of the ownership and disposition of the Class A common stock
applicable to non-U.S. holders of Class A common stock. For purposes of this
discussion, a non-U.S. holder is any holder or other beneficial owner of
Class A common stock that, for U.S. federal income tax purposes, is not a U.S.
person. This discussion does not address all aspects of U.S. federal income and
estate taxation that may be relevant in light of a non-U.S. holder's particular
facts and circumstances, such as being a U.S. expatriate, and does not address
any tax consequences arising under the laws of any state, local or non-U.S.
taxing jurisdiction. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986 and administrative and judicial
interpretations thereof, all as in effect on the date of this prospectus, and
all of which are subject to change, possibly with retroactive effect. We have
not and will not seek a ruling from the Internal Revenue Service with respect to
the U.S. federal income and estate tax consequences described below, and as a
result, there can be no assurance that the Internal Revenue Service will agree
with and not challenge any of the conclusions set forth in this discussion. For
purposes of this discussion, the term U.S. person means:
- a citizen or resident of the United States;
- a corporation, partnership or other entity treated as a corporation or a
partnership for U.S. federal income tax purposes created or organized in
the United States or under the laws of the United States or any state
thereof including the District of Columbia;
- an estate whose income is included in gross income for U.S. federal income
tax purposes regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust.
DIVIDENDS
We have not paid any dividends on our common stock, and we do not plan to
pay any dividends on our common stock for the foreseeable future. However, if we
do pay dividends on our common stock, those dividends generally will constitute
dividends for U.S. federal income tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under U.S. federal
income tax principles. To the extent such dividends exceed our current and
accumulated earnings and profits, the dividends will constitute a return of
capital that will be applied against and will reduce your basis in our Class A
common stock, but not below zero, and then will be treated as gain from the sale
of the stock. Dividends paid to a non-U.S. holder that are not effectively
connected with a U.S. trade or business of the non-U.S. holder will, to the
extent paid out of earnings and profits, be subject to U.S. withholding tax at a
30% rate or, if a tax treaty applies, a lower rate specified by the treaty.
Under currently applicable Treasury regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such country,
unless the payor has knowledge to the contrary, for purposes of withholding
discussed above, and, under the current interpretation of these Treasury
regulations, for purpose of determining the applicability of a tax treaty rate.
Under Treasury regulations scheduled to be effective for payments after
December 31, 2000, to receive a reduced treaty rate, a non-U.S. holder must
furnish to us or our paying agent a duly completed Form W-8BEN, or substitute
form, certifying to its qualification for such rate.
Dividends that are effectively connected with the conduct of a trade or
business within the United States of a non-U.S. holder are generally exempt from
U.S. federal withholding tax, provided that the non-U.S. holder furnishes to us
or our paying agent a duly completed Form 4224 or Form W-8ECI, or substitute
form, certifying the exemption. A Form 4224 is replaced with a
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<PAGE>
Form W-8ECI for payments after December 31, 2000. However, dividends exempt from
U.S. withholding because they are effectively connected with the conduct of a
trade or business within the United States are subject to U.S. federal income
tax on a net income basis at the regular graduated U.S. federal income tax
rates. Any such effectively connected dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30 % rate or a lower rate specified by an applicable
income tax treaty.
GAIN ON DISPOSITION OF CLASS A COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain realized upon the sale or other disposition of Class A common stock
unless:
- the gain is effectively connected with a trade or business of the non-U.S.
holder in the United States. In this case, the non-U.S. holder will,
unless an applicable treaty provides otherwise, be taxed on its net gain
derived from the sale under regular graduated U.S. federal income tax
rates. If the non-U.S. holder is a foreign corporation, it may be subject
to an additional branch profits tax equal to 30% of its effectively
connected earnings and profits within the meaning of the Internal Revenue
Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable income tax treaty and duly
demonstrates such qualification;
- the non-U.S. holder is an individual who holds his or her Class A common
stock as a capital asset, which generally means as an asset held for
investment purposes, and who is present in the United States for a period
or periods aggregating 183 days or more during the calendar year in which
the sale or disposition occurs and certain other conditions are met; or
- we are or have been a U.S. real property holding corporation for U.S.
federal income tax purposes at any time within the shorter of the
five-year period preceding the disposition or the holder's holding period
for its Class A common stock. We believe that we are not and will not
become a U.S. real property holding corporation for U.S. federal income
tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, we would be required to report annually to the Internal Revenue
Service the amount of dividends, if any, paid on the Class A common stock, the
name and address of the recipient, and the amount, if any, of tax withheld. A
similar report would be sent to the recipient. Pursuant to applicable income tax
treaties or other agreements, the Internal Revenue Service may make its reports
available to tax authorities in the recipient's country of residence.
Dividends paid to a non-U.S. holder, other than an exempt holder, at an
address within the United States may be subject to backup withholding at a rate
of 31% if the non-U.S. holder fails to certify its foreign status or otherwise
establish an exemption. Backup withholding will generally not apply to dividends
paid to non-U.S. holders at an address outside the United States on or prior to
December 31, 2000 unless the payer has knowledge that the payee is a U.S.
person. Under the recently finalized Treasury regulations regarding withholding
and information reporting, payment of dividends to non-U.S. holders at an
address outside the United States after December 31, 2000 may be subject to
backup withholding at a rate of 31% unless such non-U.S. holder satisfies
various certification requirements.
Under current Treasury regulations, the payment of the proceeds of the
disposition of Class A common stock to or through the U.S. office of a broker is
subject to information reporting and backup withholding at a rate of 31% unless
the holder certifies its non-U.S. status under penalties of perjury or otherwise
establishes an exemption. Generally, the payment of the proceeds of the
disposition by a non-U.S. holder of Class A common stock outside the United
States to or through
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a foreign office of a broker will not be subject to backup withholding but will
be subject to information reporting requirements if the broker is:
- a U.S. person;
- a controlled foreign corporation for U.S. federal income tax purposes; or
- a foreign person 50% or more of whose gross income for certain periods is
from the conduct of a U.S. trade or business,
unless the broker has documentary evidence in its files of the holder's non-U.S.
status and certain other conditions are met, or the non-U.S. holder otherwise
establishes an exemption. Neither backup withholding nor information reporting
generally will apply to a payment of the proceeds of a disposition of Class A
common stock by or through a foreign office of a foreign broker not subject to
the preceding sentence.
In general, the recently finalized Treasury regulations, described above, do
not significantly alter substantive withholding and information reporting
requirements but would alter procedures for claiming benefits of an income tax
treaty and change the certification procedures relating to the receipt by
intermediaries of payments on behalf of the beneficial owner of shares of
Class A common stock. Non-U.S. holders should consult their tax advisors
regarding the effect, if any, of those final Treasury regulations on an
investment in the Class A common stock. Those final Treasury regulations are
generally effective for payments made after December 31, 2000.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
ESTATE TAX
An individual non-U.S. holder who owns Class A common stock at the time of
his or her death, or who had made certain lifetime transfers of an interest in
Class A common stock while retaining certain powers, rights or interests in the
stock, will be required to include the value of that Class A common stock in his
or her gross estate for U.S. federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
The foregoing discussion is a summary of the principal U.S. federal income
and estate tax consequences of the ownership, sale or other disposition of
Class A common stock by non-U.S. holders. Accordingly, investors are urged to
consult their own tax advisors with respect to the income and estate tax
consequences of the ownership and disposition of Class A common stock, including
the application and effect of the laws of any state, local, foreign or other
taxing jurisdiction.
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UNDERWRITING
We and the underwriters for the U.S. offering (the "U.S. Underwriters")
named below have entered into an underwriting agreement with respect to the
shares of Class A common stock being offered in the United States. Subject to
certain conditions, each U.S. Underwriter has severally agreed to purchase the
number of shares of Class A common stock indicated in the following table.
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., First
Union Securities, Inc., Morgan Stanley & Co. Incorporated and DLJDIRECT Inc. are
the representatives of the U.S. Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ -----------------
<S> <C>
Goldman, Sachs & Co.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Credit Suisse First Boston Corporation......................
Deutsche Bank Securities Inc................................
First Union Securities, Inc.................................
Morgan Stanley & Co. Incorporated...........................
DLJDIRECT Inc...............................................
----------
Total.....................................................
==========
</TABLE>
If the U.S. Underwriters sell more shares of Class A common stock than the
total number set forth in the table above, the U.S. Underwriters have an option
to buy up to an additional shares of Class A common stock from us
to cover such sales. They may exercise that option for 30 days. If any shares of
Class A common stock are purchased pursuant to this option, the U.S.
Underwriters will severally purchase shares of Class A common stock in
approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the U.S. Underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the U.S. Underwriters' option to
purchase additional shares of Class A common stock.
<TABLE>
<CAPTION>
Paid by Nextel Partners
---------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares of Class A common stock sold by the underwriters to the public will
initially be offered at the initial public offering price set forth on the cover
of this prospectus. Any shares of Class A common stock sold by the underwriters
to securities dealers may be sold at a discount of up to $ per share
from the initial public offering price. Any such securities dealers may resell
any shares of Class A common stock purchased from the underwriters to certain
other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares of Class A common stock are not
sold at the initial public offering price, the representatives may change this
offering price and the other selling terms.
We have entered into an underwriting agreement with the underwriters for the
international offering for the sale of shares outside of the United
States. The terms and conditions of both offerings are the same and the sale of
shares in both offerings are conditioned on each other. Goldman Sachs
International, Donaldson, Lufkin & Jenrette International, Credit Suisse First
Boston
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(Europe) Limited, Deutsche Bank AG London, First Union Securities, Inc., and
Morgan Stanley & Co. International Limited are representatives of the
underwriters for the international offering outside the United States (the
"International Underwriters"). We have granted the International Underwriters a
similar option to purchase up to an aggregate of an additional shares.
The underwriters for both of the offerings have entered into an agreement in
which they have agreed to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters have also agreed that they may sell shares among each
of the underwriting groups.
Our company, all of our directors and executive officers and certain of our
stockholders have agreed with the underwriters not to dispose of or hedge any of
their common stock or securities convertible into or exchangeable for shares of
Class A common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except
with the prior written consent of Goldman, Sachs & Co. This agreement does not
apply to the issuance of shares under our existing employee benefit plans. See
"Shares Eligible for Future Sale" for a description of certain transfer
restrictions.
In addition, Nextel WIP, DLJ Merchant Banking, Madison Dearborn Partners,
Eagle River and the management stockholders have each entered into a lock-up
agreement with us and have agreed generally not to transfer their shares or
exercise their registration rights for a period of 18 months after the date of
this prospectus.
Prior to this offering, there has been no public market for our shares of
Class A common stock. The initial public offering price will be negotiated among
us and the underwriters. Among the factors to be considered in determining the
initial public offering price of the shares of Class A common stock, in addition
to prevailing market conditions, will be our historical performance, estimates
of our business potential and earnings prospects, an assessment of our
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
We have applied to have our Class A common stock included for quotation on
the Nasdaq National Market under the symbol "NXTP."
In connection with this offering, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares of Class A common stock than they are required to
purchase in this offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the Class A common stock while this offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares of
Class A common stock sold by or for the account of such underwriter in
stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Class A common stock. As a result, the price of
the Class A common stock may be higher than the price that otherwise might exist
in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of Class A common stock offered.
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We currently anticipate that we will request the underwriters to reserve up
to 10% of the shares of our Class A common stock for sale at the initial public
offering price to persons designated by us through a directed share program. The
number of shares available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby.
We estimate that our share of the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $1,000,000.
Certain of the underwriters and their affiliates have in the past provided,
and may in the future from time to time provide, investment banking and general
financing and banking services to us and our affiliates for which they have in
the past received, and may in the future receive, customary fees and
reimbursement of expenses. Donaldson, Lufkin & Jenrette Securities Corporation
and First Union Securities, Inc. (formerly known as First Union Capital Markets)
served as initial purchasers of our senior discount notes and received a
customary underwriting discount. Donaldson, Lufkin & Jenrette Securities
Corporation also acted as our financial advisor and as arranger, and DLJ Capital
Funding, Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation, acted as syndication agent under our credit facility, and received
customary fees and reimbursements in connection therewith. DLJ Merchant Banking
and certain related parties, all of which are affiliates of Donaldson, Lufkin &
Jenrette Securities Corporation, currently own 13.3% of our equity. See
"Principal Stockholders" and "Related-Party Transactions."
Also because of our relationship with Donaldson, Lufkin & Jenrette
Securities Corporation, the offering is being conducted in accordance with
Rule 2720 of the National Association of Securities Dealers. That rule requires
that the initial public offering price can be no higher than that recommended by
a "qualified independent underwriter," as defined by the NASD.
Goldman, Sachs & Co. will serve in this capacity and will perform due diligence
investigations and review and participate in the preparation of the registration
statement of which this prospectus forms a part. Goldman, Sachs & Co. has
received $10,000 from us as compensation for such role.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares of Class A common stock,
including sales of shares initially sold by the underwriters in the offering
being made outside of the United States, to persons located in the United
States.
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LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for Nextel
Partners by Summit Law Group, PLLC, Seattle, Washington. Certain legal matters
will be passed upon for the underwriters by Latham & Watkins, New York, New
York. Certain other legal matters will be passed upon for us by our special FCC
counsel, Willkie Farr & Gallagher, Washington, D.C.
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.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1. This
prospectus, which forms part of the registration statement, does not contain all
of the information included in that registration statement. Certain information
is omitted and you should refer to the registration statement and its exhibits.
With respect to references made in this prospectus to any of our contracts or
other documents, such references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract or document. You may review a copy of the registration
statement, including its exhibits and schedules, at the SEC's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the SEC located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of such materials from the Public Reference Section of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The SEC maintains a website (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as us, that file electronically with the SEC.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999 (unaudited), and Pro forma
Stockholders' Equity as of September 30, 1999
(unaudited)............................................... F-3
Consolidated Statements of Operations for the year ended
December 31, 1998 and for the nine month periods ended
September 30, 1998 and 1999 (unaudited)................... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the year ended December 31, 1998 and for the nine
month period ended September 30, 1999 (unaudited)......... F-5
Consolidated Statements of Cash Flows for the year ended
December 31, 1998 and for the nine month periods ended
September 30, 1998 and 1999 (unaudited)................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
After the stock split discussed in Note 2 to the Nextel Partners, Inc.
consolidated financial statements is effected, we expect to be in a position to
render the following audit report.
/s/ Arthur Andersen LLP
January 27, 2000
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.
Seattle, Washington,
January 27, 2000
F-2
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDER'S
EQUITY
AS OF
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1999
-------------- -------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 16 $ 214,173
Short-term investments.................................... -- 193,173
Accounts receivable, net of allowance of $254 and $839,
respectively............................................ 1,546 5,013
Subscriber equipment inventory............................ 1,353 1,439
Other current assets...................................... 325 4,410
Restricted cash........................................... -- 175,000
-------- ---------
Total current assets........................................ 3,240 593,208
-------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost...................... 112,334 179,805
Less--accumulated depreciation............................ 4,386 12,158
-------- ---------
Property, plant and equipment, net...................... 107,948 167,647
-------- ---------
OTHER NON-CURRENT ASSETS:
FCC operating licenses, net of accumulated amortization of
$200 and $590, respectively............................. 133,180 148,600
Debt issuance costs and other assets...................... 3,298 22,979
Receivable from officer................................... -- 2,200
-------- ---------
Total non-current assets.................................... 136,478 173,779
-------- ---------
TOTAL ASSETS................................................ $247,666 $ 934,634
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 1,043 $ 8,045
Accrued expenses.......................................... 4,554 14,678
Due to Nextel WIP......................................... 3,398 2,746
-------- ---------
Total current liabilities................................... 8,995 25,469
-------- ---------
LONG-TERM DEBT
Credit facility--term B and C............................. -- 325,000
14% Senior discount notes, due 2009....................... -- 445,308
-------- ---------
Total long-term debt...................................... -- 770,308
-------- ---------
Total liabilities........................................... 8,995 795,777
-------- ---------
COMMITMENTS AND CONTINGENCIES (See Notes)
REDEEMABLE PREFERRED STOCK, Series B redeemable 2010, par
value $.001 per share, 12% cumulative annual dividend;
13,110,000 shares issued and outstanding.................. $ 23,675
=========
STOCKHOLDERS' EQUITY
Preferred stock, Series A convertible, par value $.001 per
share, 125,834,646 shares issued and outstanding........ -- 21 $ --
Preferred stock, Series B redeemable or convertible to
Series C preferred stock 2010, par value $.001 per
share, 12% cumulative annual dividend; 13,110,000 shares
issued and outstanding.................................. -- 2 --
Preferred stock, Series C convertible, par value $.001 per
share 64,672,626 shares issued and outstanding.......... -- 11 --
Preferred stock, Series D convertible, par value at $.001
per share, 13,110,000 shares issued and outstanding..... -- 2 --
Common stock, Class A, par value $.001 per share,
9,533,328, 9,593,328 and 135,427,974 shares,
respectively, issued and outstanding, and paid-in
capital................................................. 1,604 7,474 215,637
Warrants outstanding...................................... -- 3,847 3,847
Common stock, Class B, par value $.001 per share
convertible, 77,782,626 shares issued and outstanding,
and paid-in capital..................................... -- -- 127,100
Other paid-in capital..................................... 260,761 357,077 --
Accumulated deficit....................................... (22,553) (81,656) (83,481)
Subscriptions receivable from stockholders................ -- (142,489) (142,489)
Deferred compensation..................................... (1,141) (5,432) (5,432)
-------- --------- ---------
Total stockholders' equity.................................. 238,671 138,857 $ 115,182
-------- --------- =========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $247,666 $ 934,634
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTH PERIODS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- ---------------------------
1998 1998 1999
-------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Service revenues ($5,770 received from Nextel
WIP in 1999)................................ $ 3,745 $ 1,501 $ 17,617
Equipment revenues............................ 1,564 632 2,977
-------- -------- ------------
Total revenues.............................. 5,309 2,133 20,594
-------- -------- ------------
OPERATING EXPENSES:
Cost of service revenues ($2,911 paid to
Nextel WIP in 1999)......................... 6,108 3,461 11,786
Cost of equipment revenues.................... 2,935 1,149 7,424
Selling, general and administrative ($1,936
paid to
Nextel WIP in 1999)........................ 13,531 7,342 22,591
Stock based compensation...................... 447 -- 1,579
Depreciation and amortization................. 4,586 1,860 8,162
-------- -------- ------------
Total operating expenses.................... 27,607 13,812 51,542
-------- -------- ------------
LOSS FROM OPERATIONS............................ (22,298) (11,679) (30,948)
Interest expense, net......................... -- -- (44,571)
Interest income............................... -- -- 16,416
-------- -------- ------------
LOSS BEFORE INCOME TAX PROVISION................ (22,298) (11,679) (59,103)
Income tax provision.......................... -- -- --
-------- -------- ------------
Net loss...................................... $(22,298) $(11,679) $ (59,103)
======== ======== ============
LOSS PER SHARE
Basic and diluted loss per share.............. $ (27.30)
============
Weighted average shares outstanding........... 2,164,771
============
PRO FORMA LOSS PER SHARE
Series B Redeemable preferred stock
dividend.................................... $ (1,825)
============
Basic and diluted loss per share.............. $ (0.39)
============
Weighted average shares outstanding........... 157,043,210
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK
AND
PREFERRED STOCK PAID-IN CAPITAL OTHER
---------------------- -------------------- WARRANTS PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT OUTSTANDING CAPITAL DEFICIT
----------- -------- --------- -------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE
January 1, 1998........................ -- $-- -- $ -- $ -- $ 8,255 $ (255)
Equity contributions................... -- -- -- -- -- 252,506 --
Issuance of common stock under
restricted stock purchase plan....... -- -- 9,533,328 1,604 -- -- --
Vesting of deferred compensation....... -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- (22,298)
----------- --- --------- ------ ------ --------- --------
BALANCE
December 31, 1998...................... -- -- 9,533,328 1,604 -- 260,761 (22,553)
Issuance of common stock............... 60,000 61
Issuance of Series A preferred stock... 125,834,646 21 -- -- -- 208,142 --
Issuance of warrants................... -- -- -- -- 3,847 -- --
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... 13,110,000 2 -- -- -- 21,848 --
Issuance of Series C preferred stock... 64,672,626 11 -- -- -- 110,731 --
Issuance of Series D preferred stock... 13,110,000 2 -- -- -- 22,264 --
Return of capital to Nextel WIP........ -- -- -- -- -- (130,900) --
Deferred compensation.................. -- -- -- 5,809 -- -- --
Vesting of deferred compensation....... -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- (59,103)
Equity issuance costs.................. -- -- -- -- -- (2,589) --
Motorola credit........................ -- -- -- -- -- -- --
----------- --- --------- ------ ------ --------- --------
BALANCE
September 30, 1999 (unaudited)......... 216,727,272 $36 9,593,328 $7,474 $3,847 $ 357,077 $(81,656)
=========== === ========= ====== ====== ========= ========
<CAPTION>
SUBSCRIPTIONS DEFERRED
RECEIVABLE COMPENSATION TOTALS
-------------- -------------- ---------
<S> <C> <C> <C>
BALANCE
January 1, 1998........................ $ -- $ -- $ 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)
--------- ------- ---------
BALANCE
December 31, 1998...................... -- (1,141) 238,671
Issuance of common stock............... (61) --
Issuance of Series A preferred stock... -- -- 208,163
Issuance of warrants................... -- -- 3,847
Subscriptions receivable from
stockholders......................... (157,203) -- (157,203)
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... -- -- 110,742
Issuance of Series D preferred stock... -- -- 22,266
Return of capital to Nextel WIP........ -- -- (130,900)
Deferred compensation.................. -- (5,809) --
Vesting of deferred compensation....... -- 1,579 1,579
Net loss............................... -- -- (59,103)
Equity issuance costs.................. -- -- (2,589)
Motorola credit........................ 14,714 14,714
--------- ------- ---------
BALANCE
September 30, 1999 (unaudited)......... $(142,489) $(5,432) $ 138,857
========= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTH PERIODS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- -------------------------
1998 1998 1999
-------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (22,298) $ (11,679) $ (59,103)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities..........................
Depreciation and amortization............................. 4,586 1,860 8,162
Amortization of debt issuance costs....................... -- -- 1,464
Interest accretion for senior discount notes.............. -- -- 38,932
Stock-based compensation.................................. 447 -- 1,579
Allowance for doubtful accounts........................... 254 -- 585
Change in current assets and liabilities:
Accounts receivable..................................... (1,800) (809) (4,052)
Subscriber equipment inventory.......................... (1,353) (1,778) (86)
Other current assets.................................... (325) (430) (4,085)
Accounts payable and accrued expenses................... 2,300 1,043 20,426
Operating advances from Nextel WIP...................... 3,398 -- (652)
--------- --------- ---------
Net cash provided by (used in) operating activities....... (14,791) (11,793) 3,170
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to officer........................................... -- -- (2,200)
Capital expenditures...................................... (104,334) (101,623) (52,756)
FCC licenses.............................................. -- -- (6,950)
Purchase of short-term investments........................ -- -- (193,173)
--------- --------- ---------
Net cash used in investing activities................... (104,334) (101,623) (255,079)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................. 16 -- --
Equity contributions from Nextel WIP...................... 119,125 113,416 --
Proceeds from borrowings.................................. -- -- 731,376
Restricted cash transfer.................................. -- -- (175,000)
Proceeds from equity contributions........................ -- -- 67,596
Return of capital to Nextel WIP........................... -- -- (130,900)
Equity costs.............................................. -- -- (2,589)
Debt issuance costs....................................... -- -- (24,417)
--------- --------- ---------
Net cash provided by financing activities............... 119,141 113,416 466,066
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 16 -- 214,157
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. -- -- 16
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 16 $ -- $ 214,173
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Contribution of FCC licenses from Nextel WIP.............. $ 133,380 $ 133,380 $ 8,884
========= ========= =========
Accrued debt and equity issuance costs.................... $ 3,298 $ 3,298 $ --
========= ========= =========
Equipment purchased from Motorola's equity contribution
credit.................................................. $ -- $ -- $ 14,714
========= ========= =========
CASH PAID FOR INTEREST...................................... $ -- $ -- $ 12,644
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 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.
and its subsidiaries ("Nextel") through Nextel WIP Corp. ("Nextel WIP"), an
indirect wholly owned subsidiary of Nextel, and Eagle River Investments LLC
("Eagle River") through intercompany advances amounting to $3.4 million at
December 31, 1998, which were repaid by using proceeds from the Capitalization
Transactions. The only common stock issuance of the Partners shell entity in
1998 consisted of issuance of restricted stock to key employees of the Partners
shell entity as part of its compensation plan and to Eagle River.
Prior to January 29, 1999, Nextel formed and began to operate the digital
wireless communication service business in upstate New York and Hawaii 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.
INITIAL CAPITALIZATION TRANSACTIONS
On January 29, 1999, Nextel WIP contributed the Nextel Carve-Out to the
Company in exchange for 13,110,000 shares of Series B Preferred Stock,
52,440,000 shares of Series C Preferred Stock, 13,110,000 shares of Series D
Preferred Stock and cash of $130.9 million. Simultaneously, the Company sold
equity securities in a private placement in the amount of $174.8 million and
debt securities in the aggregate principal amount at maturity of $800 million.
The equity securities sold consisted of 104,879,826 shares of Series A Preferred
Stock (valued at $170.9 million) and warrants to purchase 2,434,260 shares of
Class A Common Stock for an exercise price of $.000167 per share (valued at
$3.9 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. ("Motorola") of $18.4 million towards the purchase of
infrastructure equipment. As of September 30, 1999 the Company has used
approximately $14.7 million of the vendor credit from Motorola and expects to
utilize the remaining amount before the end of 1999.
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 filed for approval with
the FCC to transfer to the Company all the rights to the use of and benefits of
these licenses. Pending receipt of FCC approval, the Company has the right to
use the frequencies pursuant to a frequency management agreement (the "Frequency
Management Agreement") between the Company and Nextel WIP. The Company expects
to receive the FCC's approval of the transfer of the FCC licenses in the fourth
quarter of 1999 (see Note 11).
EXPANSION TERRITORY CAPITALIZATION TRANSACTIONS
On September 9, 1999, Nextel Partners Operating Corporation ("OPCO"), a
wholly owned subsidiary of Nextel Partners, entered into an Expansion Territory
Asset Transfer and
F-7
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
1. FORMATION, CAPITALIZATION AND BASIS OF PRESENTATION (CONTINUED)
Reimbursement Agreement with Nextel WIP to acquire certain assets, properties,
rights and interests to be used in connection with the construction and
operation of additional territories ("Expansion Territory") for $10.6 million.
To accomplish the build-out and operation of the Expansion Territory, the
Company issued 5,330,142 shares of Series C Preferred Stock to Nextel WIP having
an aggregate implied value of $8.9 million in exchange for the contribution of
certain licenses and an extension of an operating agreement governing the
build-out of the Network in the Expansion Territory. The Company also issued
Series A and C Preferred Stock for equity contributions of $50 million. The
issuance of Series A Preferred Stock consisted of 20,954,820 shares (valued at
$37.2 million) and Series C Preferred stock of 6,902,484 shares (valued at
$12.8 million). The equity securities were issued in exchange for cash of
$15.5 million, an irrevocable cash equity commitment of $30.9 million to be
received over the subsequent two-year period, and a vendor credit from Motorola
of $3.6 million towards the purchase of infrastructure equipment.
The following summarizes the dollar amount and number of shares issued as
part of the Initial and Expansion Territory Capitalization Transactions
described above.
<TABLE>
<CAPTION>
SHARES EQUITY
ISSUED CONTRIBUTIONS
----------- -------------
<S> <C> <C>
Series A Preferred Shares................................... 125,834,646 $208,160,194
Series B Preferred Shares................................... 13,110,000 21,850,000
Series C Preferred Shares................................... 64,672,626 110,740,170
Series D Preferred Shares................................... 13,110,000 22,266,000
Subscription Receivable..................................... -- (157,203,019)
Warrants to purchase Class A common shares issued for a
purchase price of $.000167 per share...................... 2,434,260 3,847,000
</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
F-8
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
1. FORMATION, CAPITALIZATION AND BASIS OF PRESENTATION (CONTINUED)
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 WIP Preferred--Series B Redeemable or
Convertible 0.00% 5.61%
Nextel WIP Preferred--Series C Convertible 31.93% 27.66%
Nextel WIP Preferred--Series D Convertible 0.00% 5.61%
----- -----
Subtotal--Nextel WIP 31.93% 38.88%
===== =====
DLJ Merchant Banking Partners II, Preferred--Series A Convertible
L.P. and affiliates ("DLJ and warrants to buy Class A
Merchant Banking") common stock 14.09% 12.20%
===== =====
Madison Dearborn Capital Partners Preferred--Series A Convertible
II, L.P. and warrants to buy Class A
common stock 13.44% 11.64%
===== =====
Eagle River Common--Class A 0.37% 0.32%
Eagle River Preferred--Series A Convertible 9.25% 8.02%
----- -----
Subtotal--Eagle River 9.62% 8.34%
===== =====
Motorola Preferred--Series A Convertible 6.46% 5.59%
===== =====
Management Common--Class A 4.36% 3.78%
Management Preferred--Series A Convertible .49% .43%
----- -----
Subtotal--Management 4.85% 4.21%
===== =====
</TABLE>
BASIS OF PRESENTATION
In substance, the Capitalization Transactions on January 29, 1999
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 WIP, and (4) sales of Nextel Carve-Out
securities to outsiders in exchange for cash and irrevocable commitments.
Accordingly, the accompanying financial statements reflect the accounts of the
Nextel Carve-Out at Nextel WIP's historical cost basis for all periods
presented. These accounts include Nextel WIP's cost basis in the FCC licenses
discussed above, as all of the rights to the use of and the benefits of
ownership of the FCC licenses were held by the Nextel Carve-Out prior to the
Capitalization Transactions. In the Capitalization Transactions, the rights to
the use of and the benefits of the FCC licenses were transferred to the Company
through the Frequency Management Agreement in exchange for the issuance of
preferred stock to Nextel WIP for $133.2 million. Since the Frequency Management
Agreement is analogous to a capital lease, the cost basis of the FCC licenses
continue to be reflected in the Company's accounts in a manner similar to the
accounting for a capital lease under Statement of Financial Accounting Standards
("SFAS") No. 13 "Accounting for Leases." The accompanying financial statements
also include the accounts of Partners prior to the Capitalization Transactions,
as Nextel WIP funded the operations of Partners and they were incurred for the
F-9
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
1. FORMATION, CAPITALIZATION AND BASIS OF PRESENTATION (CONTINUED)
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 accompanying financial statements also reflect the acquisition of the
Expansion Territory for $10.6 million from Nextel WIP and related Capitalization
Transactions on September 9, 1999 as described above.
INTERIM FINANCIAL STATEMENT PRESENTATION
The financial statements as of and for the nine month periods ended
September 30, 1998 and 1999 have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
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
period. The results of operations for the nine month period ended September 30,
1999 are not necessarily indicative of the results to be expected for the full
year.
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
OPCO, a wholly owned subsidiary of Partners.
Partners' digital network ("Nextel digital mobile network") has been
developed with advanced mobile communication systems employing digital
technology with a multi-site configuration permitting frequency reuse utilizing
digital technology developed by Motorola (such technology is referred to as the
"integrated Digital Enhanced Network" or "iDEN"). Partners' principal business
objective is to offer high-capacity, high-quality, advanced communication
services in its territories throughout the United States targeted towards
mid-sized and smaller markets. Various operating agreements entered into by
subsidiaries of the Company and Nextel WIP (see Note 9) provide for support
services to be provided by Nextel WIP. Additionally, the Company plans to use
Nextel WIP's back-office systems initially to support customer activation,
billing and customer care as well as other services during a transition period.
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 mobile telephone handsets
and accessories.
F-10
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
As previously discussed, the Company is reliant on Nextel WIP for the
provision of certain services. For the foreseeable future, the Company will need
to rely on Nextel WIP 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.
PRO FORMA STOCKHOLDERS' EQUITY
In December 1999, the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
(the "SEC") that would permit the Company to sell shares of the Company's common
stock in connection with a proposed initial public offering (IPO). If the
offering is consummated under the terms presently anticipated, all the
outstanding shares of the Company's Series A preferred stock will automatically
convert into 125,834,646 shares of Class A common stock and all outstanding
shares of the Company's Series C and D preferred stock will automatically
convert into 77,782,626 shares of Class B common stock, upon the closing of the
proposed IPO. The unaudited pro forma stockholders' equity at September 30, 1999
is adjusted for the conversion of preferred stock. In addition, the Series B
convertible/redeemable preferred stock held by Nextel WIP becomes subject to
mandatory cash redemption 375 days after February 1, 2009, upon effectiveness of
this registration statement. The pro forma stockholders' equity at
September 30, 1999 is adjusted to reflect a change to accumulated deficit
representing the 12% dividend accrued as of September 30, 1999, and the
reclassification of the Series B preferred stock, plus accrued dividends, from
stockholders' equity to the section of the balance sheet between liabilities and
stockholders' equity.
PRO FORMA NET LOSS PER SHARE
In accordance with SFAS No. 128, "Computation of Earnings Per Share," basic
earnings per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
per share is computed by dividing net loss by the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of shares of common stock issuable upon the
conversion of the convertible preferred stock (using the if-converted method)
and shares issuable upon the exercise of stock options and warrants (using the
treasury stock method); common equivalent shares are excluded from the
calculation as their effects are antidilutive. The
F-11
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROFORMA NET LOSS PER SHARE (CONTINUED)
Company has not had any issuances or grants for nominal consideration as defined
under Staff Accounting Bulletin 98. Diluted net loss per share for all periods
shown does not include the effects of the convertible preferred stock and shares
issuable upon the exercise of stock options, warrants and restricted stock as
the effect of their inclusion is antidilutive during each period. Pro forma
basic and diluted net loss per share is computed based on the weighted average
number of shares of common stock outstanding giving effect to the conversion of
convertible preferred stock outstanding that will automatically convert upon
completion of the Company's initial public offering (using the if-converted
method from the original issue date). In addition, net loss available to common
stockholders increased by the amount of the accrued dividend on the Series B
redeemable preferred stock. Pro forma diluted net loss per share excludes the
impact of stock options, warrants and restricted stock as the effect of their
inclusion would be antidilutive.
PROPOSED STOCK SPLIT
The Company intends to effect a 6-for-1 stock split or dividend of its
common stock. The split/ dividend will be effective prior to the consummation of
the initial public offering. Accordingly, all common and convertible preferred
shares have been adjusted to reflect the proposed split.
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.
INVESTMENTS IN SHORT-TERM INVESTMENTS
Marketable debt securities and certificates of deposit with original
purchase maturities greater than three months are classified as Short-term
investments. Marketable debt securities include corporate commercial paper,
which the Company holds to maturity. These held to maturity securities are
valued on the Company's balance sheet at amortized cost.
RESTRICTED CASH
Restricted cash reflects the cash collateral account maintained under the
credit facility equal to the $175.0 million borrowings outstanding at
September 30, 1999 under one of the Company's term loans. These funds will not
be available until the FCC has approved the transfer of control to the Company
of the licenses held by Nextel WIP License Corp., a wholly owned subsidiary of
Nextel WIP.
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 and
F-12
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 Nextel 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 SFAS No. 34, "Capitalization of Interest
Cost." The Company capitalized interest of approximately $6.3 million for the
year ended December 31, 1998 and approximately, $3.8 and $9.7 million for the
nine month periods ended September 30, 1998 and 1999, respectively.
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. The
Company's FCC licenses and the requirements to maintain the licenses are similar
to other licenses granted by the FCC, including Personal Communications Services
("PCS") and cellular licenses in that they are subject to renewal after the
initial 10-year term. Historically, the renewal process associated with these
FCC licenses has been perfunctory. The accounting for these licenses has
historically not been constrained by the renewal and operational requirements.
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 approximately
$200,000 was recorded in relation to these markets for the year ended
December 31, 1998 and approximately $71,200 and $390,000 was recorded for the
nine month periods ended September 30, 1998 and 1999, respectively.
INTEREST RATE RISK MANAGEMENT
The Company uses derivative financial instruments consisting of interest
rate swap and interest rate protection agreements in the management of its
interest rate exposures. In April 1999, the Company entered into an interest
rate swap agreement for $60 million to partially hedge interest rate exposure
with respect to its $175 million term loan. This interest rate swap agreement
has the effect of converting certain of the Company's variable rate obligations
to fixed or other variable rate obligations. Amounts paid or received under the
interest rate swap agreement is accrued as interest rates change and is
recognized over the life of the swap agreement as an adjustment to interest
F-13
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
expense. The fair value of the swap agreement is not recognized in the
consolidated financial statements, since the swap agreement meets the criteria
for hedge 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 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.
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 and approximately, $0.8 and $2.3 million for the nine
month periods ended September 30, 1998 and 1999, respectively.
DEBT ISSUANCE COSTS
In relation to the issuance of long-term debt discussed in Note 4, the
Company has incurred a total of $24.4 million ($1.3 million had been incurred as
of December 31, 1998) in deferred financing costs related to the issuance of the
Notes and the bank credit facility. These debt issuance costs will be amortized
over the terms of the underlying obligation using the effective interest method.
No debt issuance costs were amortized for the nine-month period ended
September 30, 1998. For the nine-month period ended September 30, 1999,
$1.5 million of amortization on debt issuance costs was included in interest
expense.
STOCK BASED COMPENSATION
As allowed by SFAS No. 123, "Accounting for Stock Based Compensation"
("SFAS123"), 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 and the nine month period ended September 30, 1999
compensation expense under SFAS 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 123.
F-14
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Deferred tax assets and liabilities are determined based on the temporary
differences 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.
SEGMENT REPORTING
The Company adopted SFAS 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. This new standard requires 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 has not had 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 has not had 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 137 issued
August 1999, postpones for one year the mandatory effective date for SFAS 133 to
January 1, 2001. The Company has not evaluated the effects of this change on its
financial position or results of operations.
F-15
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION IN FINANCIAL STATEMENTS--In November of 1999, the SEC
released Staff Accounting Bulletin Number 101--Revenue Recognition in Financial
Statements. This bulletin will become effective for the Company for the quarter
ended March 31, 2000. This bulletin establishes more clearly defined revenue
recognition criteria, than previously existing accounting pronouncements, and
specifically addresses revenue recognition requirements for nonrefundable fees,
such as activation fees, collected by a company upon entering into an
arrangement with a customer, such as an arrangement to provide telecommunication
services. The Company believes that the effects of this bulletin will not be
material to its financial position or the results of its operations.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Building and improvements................................... $ 320 $ 537
Equipment................................................... 87,523 129,214
Furniture and fixtures...................................... 2,926 2,989
Less--accumulated depreciation and amortization............. (4,386) (12,158)
-------- --------
86,383 120,582
Construction in progress.................................... 21,565 47,065
-------- --------
$107,948 $167,647
======== ========
</TABLE>
4. LONG-TERM DEBT:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, SEPTEMBER 30,
1998 1999
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
14% Senior Redeemable Discount Notes due 2009, net of
unamortized discount of $354.7 million at September 30,
1999...................................................... $ -- $445,308
Bank Credit Facility--Term B Loan, interest at Company's
option, calculated on Administrative Agent's alternate
base rate or reserve adjusted London Interbank Offered
Rate ("LIBOR")............................................ -- 175,000
Bank Credit Facility--Term C Loan, interest at Company's
option, calculated on Administrative Agent's alternate
base rate or reserve adjusted LIBOR....................... -- 150,000
-------- --------
Total Long-term Debt........................................ $ -- $770,308
======== ========
</TABLE>
F-16
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
4. LONG-TERM DEBT: (CONTINUED)
SENIOR REDEEMABLE DISCOUNT NOTES
On January 29, 1999, the Company completed the issuance of Senior Redeemable
Discount Notes due 2009 (the "Notes"). 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 at maturity
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 all of its assets, (iv) create liens on assets, and
(v) enter into certain transactions with affiliates or related persons. As of
September 30, 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
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.
In accordance with the requirements of SFAS 107 -- "Disclosure about Fair
Value of Financial Instruments", the Company estimates the fair market value of
its redeemable discount notes to be approximately $462 million, based upon
quoted market prices of the notes.
BANK CREDIT FACILITY
On January 29, 1999, the Company, through OPCO, entered into a credit
facility ("Term B Loan") with a syndicate of banks and other financial
institutions led by Donaldson, Lufkin and Jenrette Securities Corporation, as
arranger ("DLJSC"), and DLJ Capital Funding, Inc., as syndication agent ("DLJ
Capital"). The Term B Loan includes a $175 million term loan facility and
initially, a $100 million revolving credit facility. The Term B Loan has a
maturity of nine years. The revolving credit facility terminates eight years
from the initial funding.
F-17
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
4. LONG-TERM DEBT: (CONTINUED)
On September 9, 1999, the Company, through OPCO entered into an Amended and
Restated Credit Agreement (the "Amended and Restated Credit Agreement") with a
syndicate of banks and other financial institutions with DLJ Capital
Funding, Inc., as syndication agent. The parties agreed to amend and restate in
its entirety the credit agreement to, among other things, obtain from certain of
the Lenders an additional term loan commitment ("Term C Loan") in the maximum
aggregate principle amount of $150.0 million. The Term C Loan facility has a
maturity of nine years.
The Term B and Term C Loans bear 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 B Loan is
4.75% over LIBOR and 3.75% over the base rate. For the revolving credit
facility, which is part of Term B Loan, the initial applicable margin is 4.25%
over LIBOR and 3.25% over the base rate until consolidated EBITDA as adjusted 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 as adjusted and will range between
2.25% and 3.75% over LIBOR and between 1.25% and 2.75% over the base rate. The
applicable margin for the Term C Loan is 4.25% over LIBOR and 3.25% 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 Nextel digital
mobile network 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 B and C Loans are 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),
(iv) with 50% of the net cash proceeds from the issuance of equity at any time
after the fifth anniversary of the credit facility, and (v) with 100% of net
casualty proceeds, subject to certain exceptions.
The Company's obligations under the Term B and C Loans are secured by a
first-priority perfected lien on 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 Term B and C Loans. 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 Term B and C Loans.
The Term B and C Loans contain covenants and restrictions on the ability of
the Company to engage in certain activities, including but not limited to:
(i) limitations on the incidence of liens and
F-18
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
4. LONG-TERM DEBT: (CONTINUED)
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.
Additionally, the Term B and C Loans contain financial covenants requiring
the Company to maintain (i) certain defined ratios of senior debt and total debt
to EBITDA (net loss before interest expense, interest income, depreciation,
amortization and deferred compensation expense) as adjusted, (ii) a minimum
interest coverage ratio, (iii) a minimum fixed charge coverage ratio, (iv) a
maximum leverage ratio, and (v) minimum service revenues, subscriber units and
covered population equivalents. As of September 30, 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 and September 9, 1999, as
discussed above, for the years subsequent to December 31, 1998, scheduled annual
maturities of long-term debt outstanding as of September 30, 1999, under
existing long-term debt agreements are as follows (in thousands):
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
1999....................................................... $ --
2000....................................................... --
2001....................................................... --
2002....................................................... --
2003....................................................... 1,688
Thereafter................................................. 1,123,312
----------
1,125,000
Less- unamortized discount................................. (354,692)
----------
$ 770,308
==========
</TABLE>
F-19
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
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 Nextel Carve-Out, had conducted operations
in 1998:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<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 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 Nextel 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 offset 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.
F-20
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
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 September 30, 1999, future minimum payments for all
operating lease obligations that have initial noncancellable lease terms
exceeding one year are as follows (in thousands):
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1999 (3 months)............................................. $ 3,474
2000........................................................ 12,257
2001........................................................ 12,037
2002........................................................ 11,195
2003........................................................ 8,275
2004........................................................ 4,605
Thereafter.................................................. 8,638
-------
$60,481
=======
</TABLE>
Total rental expense was approximately $3 million for the year ended
December 31, 1998 and $1.9 and $6.1 million for the nine month periods ended
September 30, 1998 and 1999, respectively.
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 credit 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 credit facility.
Failure of the Company to obtain such FCC approval prior to January 29, 2000,
would constitute an event of default under the credit facility and any
indebtedness outstanding thereunder may be accelerated. On October 29, 1999 the
FCC issued an order approving the transfer as described in Note 11.
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
F-21
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
and renewal of its SMR licenses subsequent to the FCC approved transfer of the
licenses from Nextel WIP.
7. CAPITAL STOCK AND STOCK RIGHTS:
Pursuant to the Restated Certificate of Incorporation, the Company has the
authority to issue 1,020 million shares of capital stock, divided into five
classes as follows: (i) 600 million shares of Common Stock, par value, $.001 per
share; (ii) 150 million shares of Series A Convertible Preferred Stock, par
value $.001 per share ("Series A Preferred Stock"); (iii) 150 million shares of
Series B Redeemable or Convertible Preferred Stock, par value $.001 per share
("Series B Preferred Stock"); (iv) 90 million shares of Series C Convertible
Preferred Stock, stated value $.001 per share ("Series C Preferred Stock"); and
(v) 30 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 A Common Stock (other than Class B
Common Stock) are callable at the option of Nextel WIP or may be put to
Nextel WIP 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 upon a transfer by Nextel or Nextel WIP to a third party who is not
a holder of Class B 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 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.
F-22
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
7. CAPITAL STOCK AND STOCK RIGHTS: (CONTINUED)
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 PREFERRED STOCK--The Series B Preferred Stock is subject to
mandatory redemption by the Company 375 days after February 1, 2009. 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 as long as an IPO has not
occurred. The Series B Preferred Stock is subject to voluntary redemption for
cash at the Company's option at any time at its then current liquidation value.
SERIES C PREFERRED STOCK AND SERIES D PREFERRED STOCK--Each share of
Series C and Series D Preferred Stock will be convertible into one share of
Class B Common Stock upon the closing of the proposed initial public offering.
COMMON STOCK RESERVED FOR ISSUANCE
As of the closing of the Capitalization Transactions and as of
September 30, 1999, the Company had reserved Common Stock for future issuance as
detailed below.
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 29, SEPTEMBER 30,
1999 1999
------------ --------------
<S> <C> <C>
Preferred Stock conversion rights............. 183,539,826 216,727,272
Warrants outstanding.......................... 2,434,260 2,434,260
Employee options outstanding.................. 1,572,000 1,912,200
Employee options available for grant.......... 10,771,332 11,633,154
----------- -----------
Total......................................... 198,317,418 232,706,886
=========== ===========
</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 8,774,994 shares of Class A Common Stock to senior
managers of the Company and 758,334 shares of Class A Common Stock to Eagle
River at $.00167 per share. During 1999 an additional 60,000 shares were issued
to senior management of the Company at $.00167 per share. 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 as adjusted and the successful build-out of the Company's
Network. As of December 31, 1998, 2,679,282 shares were considered fully vested,
including the 758,334 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 nine month period ended
F-23
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
8. STOCK AND EMPLOYEE BENEFIT PLANS: (CONTINUED)
September 30, 1999 and for the year ended December 31, 1998 was approximately
$1,579,000 and $447,000, respectively.
NONQUALIFIED STOCK OPTION PLAN
In January 1999, the Company adopted the Nonqualified Stock Option Plan (the
"Plan"). Under the Plan, the Board of Directors may grant nonqualified stock
options to eligible employees at a price equal to the fair market value as of
the date of grant. Options have a term of up to 10 years and vest over 3 years
with 1/3 vesting at the end of each year. No more than 30% of the number of
authorized options will be granted in any year and no options under this plan
may be granted after January 1, 2003.
The following table includes all stock options granted by the Company
including options issued outside of the nonqualified stock option plan.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS AVAILABLE EXERCISE
OUTSTANDING FOR ISSUANCE PRICE
------------ ------------ ---------
<S> <C> <C> <C>
Balance December 31, 1998........... -- -- --
Authorized.......................... -- 13,545,354 --
Granted............................. 1,929,000 (1,929,000) $ 1.67
Exercised........................... -- -- --
Canceled............................ (16,800) 16,800 $ 1.67
--------- ---------- ------
Balance September 30, 1999.......... 1,912,200 11,633,154 $ 1.67
========= ==========
</TABLE>
The outstanding stock options all have an exercise price of $1.67 per share,
and average remaining contractual life of approximately 9 years.
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 210,000 options for
the Company's unrestricted Class A Common Stock with an exercise price of $1.67
per share which was more than the estimated fair value at that time ($1.25 per
share). These options 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. Beginning with the period after January 29, 1999, the date of
issuance of these shares, the Company will recognize compensation expense on a
straight-line basis over the four year life of the put contract (up to a maximum
of $500,000) adjusted for actual exercises, if any, by the executive.
F-24
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
8. STOCK AND EMPLOYEE BENEFIT PLANS: (CONTINUED)
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 $103,000 for the nine month period ended September 30, 1999 and
approximately $50,000 for the year ended December 31, 1998. At September 30,
1999 and December 31,1998, the Company had no other pension or post employment
benefit plans.
9. RELATED PARTY TRANSACTIONS:
Prior to January 29, 1999, Nextel WIP and Eagle River funded the operations
of the Company and accordingly all transactions were considered to be related
party transactions. The Company made a return of capital payment to Nextel WIP
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. In order to fund the operations
of the Company prior to the Capitalization Transactions, Nextel WIP 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. In conjunction with the Expansion Territory
Capitalization Transactions the Company reimbursed Nextel WIP approximately
$10.6 million for capital expenditures. As of September 30, 1999 the Company
owed Nextel WIP $2.7 million under the same terms discussed above.
MOTOROLA PURCHASE AGREEMENTS
Pursuant to the equipment purchase agreements between Partners and Motorola,
and prior to the Capitalization Transactions, pursuant to purchase agreements
between Nextel WIP and Motorola, 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 portion of the
Nextel 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.
F-25
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
For the nine month period ended September 30, 1999 and the year ended
December 31,1998, the Company purchased approximately $14.7 million (unaudited)
and $47.5 million, respectively, of infrastructure and other equipment,
handsets, warranties and services from Motorola.
THE JOINT VENTURE AGREEMENT
The Company, OPCO and Nextel WIP 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--Under the initial and option territory
capitalization transactions, Nextel has transferred SMR licenses to Nextel WIP
License Corp. and Nextel WIP Expansion Corp. (both Delaware corporations and
wholly owned subsidiaries of Nextel WIP). Upon approval of the FCC, Nextel WIP
will transfer the stock of Nextel WIP License Corp. and Nextel WIP Expansion
Corp. to Partners. These licenses will allow the Company to provide wireless
communication service to customers in 46 mid-sized and smaller markets
throughout the United States.
NEXTEL WIP VENDOR RELATIONSHIPS--If requested by the Company, Nextel WIP 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 WIP APPROVAL RIGHTS--Subject to Nextel WIP maintaining a certain
percentage ownership in Partners, and without the approval of Nextel WIP, 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.
EXCLUSIVITY--Nextel WIP has agreed that during the term of the Joint Venture
Agreement, Nextel will not provide digital wireless communication services
within the Company's territory (the "Territory") using 800 MHz frequencies.
Nextel 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 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),
F-26
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
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 WIP 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 WIP has agreed to provide
services to the Company that are not provided to subsidiaries of Nextel,
Nextel WIP 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 WIP 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 nine month period ended
September 30, 1999, the Company was charged approximately $285,000 for these
services.
TRADEMARK LICENSE AGREEMENT--Pursuant to a trademark license agreement (the
"Trademark License Agreement"), Nextel WIP 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 WIP 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 after the Company
has achieved two consecutive fiscal quarters of positive EBITDA as adjusted.
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 WIP is allowed to, at any time upon or following the
termination of the Joint Venture Agreement, terminate the Trademark License
Agreement, and Nextel WIP 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.
F-27
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
ROAMING AGREEMENT--Pursuant to a roaming agreement (the "Roaming Agreement")
entered into between Nextel WIP and OPCO, Nextel WIP 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 nine month period ended
September 30, 1999, the Company earned approximately $5.8 million from Nextel
customers roaming on the Company's system and was charged approximately $653,000
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 WIP, its right to utilize those
frequencies are governed by the Frequency Management Agreement. The Frequency
Management Agreement entitles the Company to utilize those licenses without the
payment of a management fee or other charge throughout the term of 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 WIP relating to the construction,
implementation and operation of the Nextel digital mobile network. Pending FCC
approval of the license transfer, Nextel WIP 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 WIP, under a master
site lease agreement 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 WIP 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 WIP monthly
rental payments based on the number of telecommunication towers leased by OPCO.
For the nine month period ended September 30, 1999, the Company was charged
approximately $407,000 by Nextel WIP under these arrangements.
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 WIP 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 WIP will be entitled to assign or transfer the Master
Site Lease to any affiliate or any tower aggregator.
F-28
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
TRANSITION SERVICES AGREEMENT--Nextel WIP, through its affiliates, provides
certain services to OPCO for a limited period under a transition services
agreement entered into between OPCO and Nextel WIP (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 WIP,
OPCO pays monthly fees to Nextel WIP based on Nextel WIP's cost. For the nine
month period ended September 30, 1999, the Company was charged approximately
$1,852,000 for these services.
The services provided under the Transition Services Agreement have different
variable terms agreed to by OPCO and Nextel WIP. 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 WIP following the expiration
of the Transition Services Agreement, Nextel WIP 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 WIP provides certain telecommunications
switching services to OPCO pursuant to a switch sharing agreement entered into
between Nextel WIP 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 WIP in the
operation of the Nextel digital mobile network, which facilitates OPCO provision
of ESMR service to the Company's subscribers. Under the Switch Sharing
Agreement, OPCO pays Nextel WIP 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 nine month period ended September 30, 1999,
the Company was charged approximately $1,529,000 for these services.
AGREEMENT LIMITING LIABILITY AND RECOURSE TO NEXTEL--Pursuant to the terms
of an agreement (the "Limitation on Liability and Recourse Agreement") entered
into by Nextel, OPCO and the Company, the maximum cumulative, aggregate cash
liability of Nextel and its controlled affiliates (other than Nextel WIP) 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 WIP to enable Nextel WIP to perform its obligations
relating to the Operating Agreements. Among other things, the Limitation on
Liability and Recourse Agreement also provides 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 operating
agreements.
DLJMB AFFILIATION WITH INITIAL PURCHASER/BANK SYNDICATE--DLJ Capital, an
affiliate of DLJ Merchant Banking, 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 DLJ Merchant Banking, has
F-29
<PAGE>
NEXTEL PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND SEPTEMBER 30,1998 AND 1999
(AMOUNTS AS OF AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
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.
10. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS):
<TABLE>
<CAPTION>
BALANCE
BEGINNING COSTS AND AT END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998 Allowance for
doubtful accounts......................... $ -- $ 254 $ -- $254
==== ====== ==== ====
Period Ended September 30, 1999 Allowance
for doubtful accounts..................... $254 $1,064 $479 $839
==== ====== ==== ====
</TABLE>
11. SUBSEQUENT EVENTS
On or about October 29, 1999 the FCC issued an order approving the transfer
of FCC licenses from Nextel to the Company. This order was issued and made
public by the FCC. On January 21, 2000, Nextel transferred all of its interests
in the licenses from the January 29, 1999 Capitalization Transaction, to the
Company.
F-30
<PAGE>
Inside Back Cover
[Four pictures, each depicting an individual using Nextel Partners' products
and services, with a center inset picture depicting a close-up of the
telephone sold to Nextel Partners' subscribers.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares of Class A common stock offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 10
Use of Proceeds................................ 23
Dividend Policy................................ 23
Capitalization................................. 24
Dilution....................................... 25
Selected Consolidated Financial Data........... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 28
Business....................................... 36
Regulation..................................... 54
Management..................................... 58
Related-Party Transactions..................... 66
Principal Stockholders......................... 76
Description of Certain Indebtedness............ 78
Description of Capital Stock................... 82
Limitation on Directors' Liabilities........... 89
Shares Eligible For Future Sale................ 90
Material U.S. Tax Consequences to Non-U.S.
Holders...................................... 93
Underwriting................................... 96
Legal Matters.................................. 99
Experts........................................ 99
Where You Can Find More Information............ 99
Index to Consolidated Financial Statements..... F-1
</TABLE>
------------------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.
23,500,000 Shares
NEXTEL PARTNERS, INC.
Class A Common Stock
------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
MORGAN STANLEY DEAN WITTER
DLJDIRECT INC.
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, payable by the registrant in connection
with the sale of the securities being registered. All amounts are estimates
except the Securities and Exchange Commission registration fee, the NASD filing
fee and The Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 135,558
NASD Filing Fee............................................. 30,500
Nasdaq National Market Filing Fee........................... 95,000
Printing Costs.............................................. 200,000
Legal Fees and Expenses..................................... 225,000
Accounting Fees and Expenses................................ 200,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent and Registrar Fees........................... 12,000
Miscellaneous............................................... 91,942
----------
Total..................................................... $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant is a Delaware corporation. In its restated certificate of
incorporation, the registrant 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 registrant has also adopted indemnification provisions in its restated
certificate of incorporation and bylaws 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 attorneys' fees) that
such officer or director actually and reasonably incurred.
II-1
<PAGE>
The registrant intends to enter into indemnification agreements with each of
the registrant's officers and directors.
The Underwriting Agreement (Exhibits 1.1(a) and (b) hereto) provides for
indemnification between the underwriters and the registrant from and against
certain liabilities arising in connection with the offering which is the subject
of this registration statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a description of all securities that the registrant has
sold within the past three years without registering the securities under the
Securities Act:
On November 20, 1998, the registrant sold 9,533,328 shares of its common
stock to six of its senior executive officers and one accredited investor at a
price of $0.002 per share for an aggregate offering price of $15,888.88. These
issuances were exempt from registration pursuant to Section 4(2) of the
Securities Act.
On January 29, 1999, the registrant sold 13,110,000 shares of Series B
preferred stock, 52,440,000 shares of Series C preferred stock and, 13,110,000
shares of Series D Preferred Stock to Nextel WIP, an accredited investor, in
exchange for certain licenses valued at $133.2 million. This issuance was exempt
from registration pursuant to Rule 506 of Regulation D under Section 4(2) of the
Securities Act.
On January 29, 1999, the registrant also sold to 34 accredited investors
equity securities in a private placement in the amount of $174.8 million. The
equity securities sold consisted of 104,879,826 shares of Series A preferred
stock (valued at $170.9 million) and warrants to purchase 2,434,260 shares of
Class A common stock for an exercise price of $.0002 per share (valued at
$3.9 million). This issuance was exempt from registration pursuant to Rule 506
of Regulation D under Section 4(2) of the Securities Act.
On January 29, 1999, the registrant sold to 45 accredited investors
$800 million aggregate principal amount at maturity 14% senior discount notes
due February 1, 2009. This issuance was exempt from registration pursuant to
Rule 506 of Regulation D under Section 4(2) of the Securities Act. In July 1999
these notes were exchanged by the registrant for notes registered under the
Securities Act having the same financial terms and covenants as the notes issued
in January 1999.
On September 9, 1999, the registrant sold 5,330,142 shares of Series C
preferred stock to Nextel WIP having an aggregate implied value of $8.9 million
in exchange for the contribution of certain licenses and an extension of an
operating agreement. The registrant also sold to 38 of its existing accredited
investors shares of Series A and Series C preferred stock for $50 million. The
issuance consisted of 20,954,820 shares of Series A preferred stock (valued at
$37.2 million) and 6,902,484 shares of Series C preferred stock (valued at
$12.8 million). This issuance was exempt from registration pursuant to Rule 506
of Regulation D under Section 4(2) of the Securities Act.
On September 9, 1999, the registrant sold 60,000 shares of Series A common
stock to one of its senior executive officers at a price of $0.002 per share for
an aggregate offering price of $100. This issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act
From November 1998 to December 31, 1999, the registrant granted to
approximately 300 individuals stock options to purchase up to 5,049,600 shares
of its Class A common stock pursuant to its stock option plan, with at a
weighted average exercise price of $1.78 per share. These issuances were exempt
from registration pursuant to Rule 701 under the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1(a) Form of U.S. Underwriting Agreement.
1.1(b) Form of International Underwriting Agreement.
3.1* Restated Certificate of Incorporation.
3.1.1+ Restated Certificate of Incorporation filed with the
Delaware Secretary of State in February 2000.
3.2* Bylaws.
4.1 See Exhibits 3.1 and 3.2 for provisions defining the rights
of the holders of common stock.
5.1# Form of opinion of Summit Law Group, PLLC.
10.1* Purchase Agreement dated January 22, 1999 by and among
Nextel Partners, Donaldson, Lufkin & Jenrette Securities
Corporation, Barclays Capital Inc., First Union Capital
Markets, BNY Capital Markets, Inc. and Nesbitt Burns
Securities Inc.
10.2+ Amended and Restated Shareholders' Agreement dated February
2000 by and among Nextel Partners and the stockholders named
therein.
10.3* Joint Venture Agreement dated as of January 29, 1999 by and
among Nextel Partners, 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 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 by and
among Nextel Partners, 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 by and
between Nextel Partners Operating Corp. and John Chapple.
10.15* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and John Thompson.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.16* Stock Option Agreement dated as of January 29, 1999 by and
between Nextel Partners and John Thompson.
10.17* Non-Negotiable Promissory Note dated January 29, 1999 by
John Thompson to Nextel Partners.
10.18* 1999 Nonqualified Stock Option Plan of Nextel Partners
10.19* Form of Restricted Stock Purchase Agreement dated as of
November 20, 1998 by and between Nextel Partners and each of
John Chapple, John Thompson, David 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 by and between Nextel
Partners and each of John Chapple, John Thompson, David
Thaler, David Aas, Perry Satterlee and Mark Fanning.
10.21* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and David Aas.
10.22* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and Perry Satterlee.
10.23* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and David Thaler.
10.24* Subscription and Contribution Agreement dated as of January
29, 1999 by and among Nextel Partners and the Buyers named
therein.
10.25(1) Indenture dated January 29, 1999 by and between Nextel
Partners and The Bank of New York, as trustee, relating to
the 14% Senior Discount Notes due 2009.
10.26(2) Registration Rights Agreement dated as of January 29, 1999
by and among Nextel Partners, Donaldson, Lufkin & Jenrette
Securities Corporation, Barclays Capital Inc., First Union
Capital Markets, BNY Capital Markets, Inc. and Nesbitt Burns
Securities Inc.
10.27(3) Credit Agreement dated as of January 29, 1999 by and among
Nextel Partners Operating Corp., DLJ Capital Fund, Inc., The
Bank of New York, Bank of Montreal and certain other
financial institutions.
10.28(4) Borrower Security and Pledge Agreement dated as of January
29, 1999 by and between Nextel Partners Operating Corp. and
Bank of Montreal.
10.29(5) Subsidiary Security and Pledge Agreement dated as of January
29, 1999 by and among the subsidiaries of Nextel Partners
and Bank of Montreal.
10.30(6) Parent Guaranty and Pledge Agreement dated as of January 29,
1999 by and between Nextel Partners and Bank of Montreal.
10.31(7) Subsidiary Guaranty dated as of January 29, 1999 by and
among the subsidiaries of Nextel Partners and Bank of
Montreal.
10.32# Restricted Stock Purchase Agreement dated September 9, 1999
by and between Nextel Partners and Donald J. Manning.
10.33# Agreement in Support of Charter Obligations dated as of
January 29, 1999 by and between Nextel Partners and Nextel
WIP Corp.
10.34# Assignment and Assumption of Lease dated as of August 1,
1999 by and between Nextel WIP Lease Corp. and Eagle River
Investments, LLC.
10.35# Lease Agreement dated May 11, 1999 by and between Nextel WIP
Lease Corp. and McCarran Center, LC.
10.36# First Amendment to Lease dated as of September 10, 1999 by
and between Nextel WIP Lease Corp. and McCarran Center, LC.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.37# Lease Agreement dated as of March 25, 1999 by and between
Nextel WIP Lease Corp. and Nesbitt Operating Associates,
L.P.
10.38# Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and Mark P. Fanning.
10.39# Letter Agreement dated October 13, 1999 by and among Nextel
WIP Corp., Nextel Partners Operating Corp. and Nextel
Partners, Inc.
10.40# Expansion Territory Management Agreement dated as of
September 9, 1999 by and between Nextel Partners Operating
Corp. and Nextel WIP Corp.
10.41# Expansion Territory Asset Transfer and Reimbursement
Agreement dated as of September 9, 1999 by and between
Nextel Partners Operating Corp. and Nextel WIP Corp.
10.42# Assignment and Security Agreement dated as of September 9,
1999 by Nextel Partners Operating Corp. in favor of Bank of
Montreal.
10.43# First Amendment to Analog Management Agreement dated as of
September 9, 1999 by and between Nextel WIP Corp. and Nextel
Partners Operating Corp.
10.44# Form of Warrant for the Purchase of Shares of Class A Common
Stock of Nextel Partners dated January 29, 1999.
10.45# Employee Stock Purchase Plan.
10.46 Form of Indemnity Agreement.
10.47 Letter Agreement dated October 13, 1999 by and among Nextel
Communication, Inc., Nextel of New York, Inc., Nextel
Communications of the Mid-Atlantic, Inc., Nextel South
Corp., Nextel of Texas, Inc., Nextel West Corp., Nextel of
California, Inc., Tower Parent Corp., SpectraSite
Holdings, Inc., Tower Asset Sub, Inc., Nextel Partners
Operating Corp. and Nextel Partners.
10.48 Supplement No. 1 to iDEN Infrastructure Equipment Purchase
Agreement dated September 1999 by and between Nextel
Partners Operating Corp. and Motorola, Inc.
10.49 Expansion Subscription and Contribution Agreement dated as
of September 9, 1999 by and among Nextel Partners and the
Buyers named therein.
21# Subsidiaries of the registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Summit Law Group, PLLC (included in their opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney (included on signature page to
Registration Statement on Form S-1).
27.1 Financial Data Schedule.
99.1# Consent To Be Named in Registration Statement dated
January 25, 2000 by Steven Dodge.
</TABLE>
- ------------------------
+ To be filed by amendment.
# Previously filed.
* Incorporated by reference to the Exhibit of the same number to Registration
Statement on Form S-4 declared effective July 30, 1999 (File Number
333-78459).
(1) Incorporated by reference to Exhibit 4.1 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(2) Incorporated by reference to Exhibit 4.2 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(3) Incorporated by reference to Exhibit 4.3 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
II-5
<PAGE>
(4) Incorporated by reference to Exhibit 4.4 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(5) Incorporated by reference to Exhibit 4.5 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(6) Incorporated by reference to Exhibit 4.6 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(7) Incorporated by reference to Exhibit 4.7 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kirkland, State of Washington, on the 7th day of February, 2000.
<TABLE>
<S> <C> <C>
NEXTEL PARTNERS, INC.
BY: *
-----------------------------------------
John Chapple, President and Chief
Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities indicated below on the 7th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
------------------------------------------- Chief Executive Officer, President (Principal
John Chapple Executive Officer) and Director
/s/ JOHN D. THOMPSON
------------------------------------------- Chief Financial Officer (Principal Financial
John D. Thompson and Accounting Officer)
*
------------------------------------------- Director
Timothy M. Donahue
*
------------------------------------------- Director
Andrew H. Rush
*
------------------------------------------- Director
Andrew E. Sinwell
*
------------------------------------------- Director
Dennis M. Weibling
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ JOHN D. THOMPSON
--------------------------------------
John D. Thompson
AS ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
NEXTEL PARTNERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
EXHIBIT VOLUME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1(a) Form of U.S. Underwriting Agreement.
1.1(b) Form of International Underwriting Agreement.
3.1* Restated Certificate of Incorporation.
3.1.1+ Restated Certificate of Incorporation filed with the
Delaware Secretary of State in February 2000.
3.2* Bylaws.
4.1 See Exhibits 3.1 and 3.2 for provisions defining the rights
of the holders of common stock.
5.1# Form of opinion of Summit Law Group, PLLC.
10.1* Purchase Agreement dated January 22, 1999 by and among
Nextel Partners, Donaldson, Lufkin & Jenrette Securities
Corporation, Barclays Capital Inc., First Union Capital
Markets, BNY Capital Markets, Inc. and Nesbitt Burns
Securities Inc.
10.2+ Amended and Restated Shareholders' Agreement dated February
2000 by and among Nextel Partners and the stockholders named
therein.
10.3* Joint Venture Agreement dated as of January 29, 1999 by and
among Nextel Partners, 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 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 by and
among Nextel Partners, 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 by and
between Nextel Partners Operating Corp. and John Chapple.
10.15* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and John Thompson.
10.16* Stock Option Agreement dated as of January 29, 1999 by and
between Nextel Partners and John Thompson.
10.17* Non-Negotiable Promissory Note dated January 29, 1999 by
John Thompson to Nextel Partners.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.18* 1999 Nonqualified Stock Option Plan of Nextel Partners
10.19* Form of Restricted Stock Purchase Agreement dated as of
November 20, 1998 by and between Nextel Partners and each of
John Chapple, John Thompson, David 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 by and between Nextel
Partners and each of John Chapple, John Thompson, David
Thaler, David Aas, Perry Satterlee and Mark Fanning.
10.21* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and David Aas.
10.22* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and Perry Satterlee.
10.23* Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and David Thaler.
10.24* Subscription and Contribution Agreement dated as of January
29, 1999 by and among Nextel Partners and the Buyers named
therein.
10.25(1) Indenture dated January 29, 1999 by and between Nextel
Partners and The Bank of New York, as trustee, relating to
the 14% Senior Discount Notes due 2009.
10.26(2) Registration Rights Agreement dated as of January 29, 1999
by and among Nextel Partners, Donaldson, Lufkin & Jenrette
Securities Corporation, Barclays Capital Inc., First Union
Capital Markets, BNY Capital Markets, Inc. and Nesbitt Burns
Securities Inc.
10.27(3) Credit Agreement dated as of January 29, 1999 by and among
Nextel Partners Operating Corp., DLJ Capital Fund, Inc., The
Bank of New York, Bank of Montreal and certain other
financial institutions.
10.28(4) Borrower Security and Pledge Agreement dated as of January
29, 1999 by and between Nextel Partners Operating Corp. and
Bank of Montreal.
10.29(5) Subsidiary Security and Pledge Agreement dated as of January
29, 1999 by and among the subsidiaries of Nextel Partners
and Bank of Montreal.
10.30(6) Parent Guaranty and Pledge Agreement dated as of January 29,
1999 by and between Nextel Partners and Bank of Montreal.
10.31(7) Subsidiary Guaranty dated as of January 29, 1999 by and
among the subsidiaries of Nextel Partners and Bank of
Montreal.
10.32# Restricted Stock Purchase Agreement dated September 9, 1999
by and between Nextel Partners and Donald J. Manning.
10.33# Agreement in Support of Charter Obligations dated as of
January 29, 1999 by and between Nextel Partners and Nextel
WIP Corp.
10.34# Assignment and Assumption of Lease dated as of August 1,
1999 by and between Nextel WIP Lease Corp. and Eagle River
Investments, LLC.
10.35# Lease Agreement dated May 11, 1999 by and between Nextel WIP
Lease Corp. and McCarran Center, LC.
10.36# First Amendment to Lease dated as of September 10, 1999 by
and between Nextel WIP Lease Corp. and McCarran Center, LC.
10.37# Lease Agreement dated as of March 25, 1999 by and between
Nextel WIP Lease Corp. and Nesbitt Operating Associates,
L.P.
10.38# Employment Agreement dated as of January 29, 1999 by and
between Nextel Partners Operating Corp. and Mark P. Fanning.
10.39# Letter Agreement dated October 13, 1999 by and among Nextel
WIP Corp., Nextel Partners Operating Corp. and Nextel
Partners, Inc.
10.40# Expansion Territory Management Agreement dated as of
September 9, 1999 by and between Nextel Partners Operating
Corp. and Nextel WIP Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.41# Expansion Territory Asset Transfer and Reimbursement
Agreement dated as of September 9, 1999 by and between
Nextel Partners Operating Corp. and Nextel WIP Corp.
10.42# Assignment and Security Agreement dated as of September 9,
1999 by Nextel Partners Operating Corp. in favor of Bank of
Montreal.
10.43# First Amendment to Analog Management Agreement dated as of
September 9, 1999 by and between Nextel WIP Corp. and Nextel
Partners Operating Corp.
10.44# Form of Warrant for the Purchase of Shares of Class A Common
Stock of Nextel Partners dated January 29, 1999.
10.45# Employee Stock Purchase Plan.
10.46 Form of Indemnity Agreement.
10.47 Letter Agreement dated October 13, 1999 by and among Nextel
Communication, Inc., Nextel of New York, Inc., Nextel
Communications of the Mid-Atlantic, Inc., Nextel South
Corp., Nextel of Texas, Inc., Nextel West Corp., Nextel of
California, Inc., Tower Parent Corp., SpectraSite
Holdings, Inc., Tower Asset Sub, Inc., Nextel Partners
Operating Corp. and Nextel Partners.
10.48 Supplement No. 1 to iDEN Infrastructure Equipment Purchase
Agreement dated September 1999 by and between Nextel
Partners Operating Corp. and Motorola, Inc.
10.49 Expansion Subscription and Contribution Agreement dated as
of September 9, 1999 by and among Nextel Partners and the
Buyers named therein.
21# Subsidiaries of the registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Summit Law Group, PLLC (included in their opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney (included on signature page to
Registration Statement on Form S-1).
27.1 Financial Data Schedule.
99.1# Consent To Be Named in Registration Statement dated
January 25, 2000 by Steven Dodge.
</TABLE>
- ------------------------
+ To be filed by amendment.
# Previously filed.
* Incorporated by reference to the Exhibit of the same number to Registration
Statement on Form S-4 declared effective July 30, 1999 (File Number
333-78459).
(1) Incorporated by reference to Exhibit 4.1 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(2) Incorporated by reference to Exhibit 4.2 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(3) Incorporated by reference to Exhibit 4.3 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(4) Incorporated by reference to Exhibit 4.4 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(5) Incorporated by reference to Exhibit 4.5 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(6) Incorporated by reference to Exhibit 4.6 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
(7) Incorporated by reference to Exhibit 4.7 to Registration Statement on
Form S-4 declared effective July 30, 1999 (File Number 333-78459).
<PAGE>
Exhibit 1.1(a)
NEXTEL PARTNERS, INC.
CLASS A COMMON STOCK,
PAR VALUE $0.001 PER SHARE
-------------------------------------
UNDERWRITING AGREEMENT
(U.S. Version)
---------------------------------------------
February __, 2000
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation,
Credit Suisse First Boston Corporation,
Deutsche Bank Securities Inc.,
First Union Securities, Inc.
Morgan Stanley & Co. Incorporated, and
DLJDIRECT Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Nextel Partners, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of _____ shares (the "Firm Shares") and, at the election of the Underwriters, up
to _____ additional shares (the "Optional Shares") of Class A Common Stock, par
value $0.001 per share ("Stock") of the Company (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of _____
shares of Stock (the "International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters outside the United
States (the "International Underwriters"), for whom Goldman Sachs International,
Donaldson, Lufkin & Jenrette International, Credit Suisse First Boston (Europe)
Limited, Deutsche Bank AG London, First Union Securities, Inc. and Morgan
Stanley & Co. International Limited are acting as lead managers. Anything herein
or therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Agreement are hereby
<PAGE>
expressly made conditional on one another. The Underwriters hereunder and the
International Underwriters are simultaneously entering into an Agreement between
U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages as included in the registration
statement and amendments thereto as mentioned below. Except as used in Sections
2, 3, 4, 9 and 11 herein, and except as the context may otherwise require,
references hereinafter to the Shares shall include all the shares of Stock which
may be sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the U.S.
and the international versions thereof.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-_____)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the
time it was declared effective, each as amended at the time such part
of the Initial Registration Statement became effective or such part of
the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus";
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein
2
<PAGE>
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification,
3
<PAGE>
or is subject to no material liability or disability by reason of the
failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except as
set forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(h) The unissued Shares have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein and in the International Underwriting Agreement, will be duly
and validly issued and fully paid and non-assessable and will conform
to the description of the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company hereunder
and under the International Underwriting Agreement and the compliance
by the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
International Underwriters or as may be required by the National
Association of Securities Dealers, Inc. (the "NASD");
(j) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
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(k) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the captions
"Risk Factors--Risk Factors Relating To Our Industry--Regulatory
authorities exercise considerable power over our operations, which
could be exercised against our interests and impose additional
unanticipated costs", "Business--Regulation", "Related-Party
Transactions", "Material U.S. Tax Consequences to Non-U.S. Holders",
"and under the caption "Underwriting"(except for statements provided by
the Underwriters for use therein), insofar as they purport to describe
the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
general affairs, management, the current or future consolidated
financial position, business prospects, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"), on the current or future consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company",
as such term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act");
(n) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(o) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(p) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries has been or will be affected by the Year 2000 Problem. As
a result of such review, the Company does not believe that the Year
2000 Problem has had or will have a Material Adverse Effect or has
resulted or will result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind is not
functioning or will not function, in the case of dates or time periods
occurring after December 31, 1999, at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000;
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(q) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any provisions of
the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in
the aggregate, would not have a Material Adverse Effect;
(r) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean up, closure of properties or
compliance with Environmental Laws or any Authorization, any related
constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material
Adverse Effect; and
(s) Except as disclosed in the Prospectus, each of the Company
and its subsidiaries has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without
limitation, under any applicable Environmental Laws, as are necessary
to own, lease, license and operate its respective properties and to
conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice would not, singly or
in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the
Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to
the Company or any of its subsidiaries; except where such failure to be
valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect;
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $__________, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name
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of such Underwriter in Schedule I hereto and the denominator of which is the
maximum number of Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to _____ Optional Shares, at the purchase price per share set
forth in the paragraph above, for the purpose of covering sales of shares in
excess of the number of Firm Shares. Any such election to purchase Optional
Shares may be exercised only by written notice from you to the Company, given
within a period of 30 calendar days after the date of this Agreement, setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through the facilities of the Depository Trust Company,
("DTC") for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to Goldman, Sachs & Co.
at least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on __________, 2000 or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on
the date specified by Goldman, Sachs & Co. in the written notice given by
Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery," such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof, will be delivered at the offices
of [Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022]
(the "Closing Location"), and the Shares will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the Closing
Location at 5 p.m., New York City time, on the New York Business Day next
preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is
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not a day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M. New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to time,
to furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the offering or sale of
the Shares and if at such time any event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as
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many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any securities of
the Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans or employee stock
purchase plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
the prior written consent of Goldman, Sachs & Co.;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), to make available to its stockholders
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use of
Proceeds";
(i) To use its best efforts to list for quotation the Shares
on the National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q
or Form 10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by
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10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission the filing fee
for the Rule 462(b) Registration Statement or give irrevocable instructions for
the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to, and disbursements of counsel for the
Underwriters in connection with, securing any required review by the NASD of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; and (viii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that, except as provided in this Section, and Sections 8
and 11 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Latham & Watkins, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions dated such Time of
Delivery, with respect to the matters covered in paragraphs [(i), (ii),
(vii), (xi) and (xiii)] of subsection (c) below as well
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as such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Summit Law Group, PLLC, counsel for the Company, shall
have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Delaware, with requisite corporate power
and authority to own its properties and conduct its business
as described in the Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and validly
authorized and issued and are fully paid and nonassessable;
and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so
as to require such qualification, or is subject to no material
liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation;
and all of the issued shares of capital stock of each such
subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and (except as otherwise
set forth in the Prospectus) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local
counsel and in respect to matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and
certificates);
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all material real property
owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such
exceptions as are not material and
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do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such
counsel may state that no examination of record titles for the
purpose of such opinion has been made, and that they are
relying upon a general review of the titles of the Company and
its subsidiaries, upon opinions of local counsel and
abstracts, reports and policies of title companies rendered or
issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of
counsel to the lessors of such property and, in respect to
matters of fact, upon certificates of officers of the Company
or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in
relying upon such opinions, abstracts, reports, policies and
certificates);
(vi) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(vii) This Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Company;
(viii) The issue and sale of the Shares being
delivered at such Time of Delivery by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument required to be
filed as an exhibit to the Registration Statement, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or
any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the
International Underwriting Agreement, except the registration
under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters or as may
be required by the NASD;
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(x) Neither the Company nor any of its subsidiaries
is in violation of its Certificate of Incorporation or By-laws
or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock,
under the caption "Related-Party Transactions" and under the
caption "Underwriting" (except for statements provided by the
Underwriters for use therein), insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(xii) The Company is not an "investment company", as
such term is defined in the Investment Company Act; and
(xiii) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the rules and regulations thereunder, although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in
the opinion in subsection (xi) of this Section 7(c); they have
no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time
of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed
or described as required;
13
<PAGE>
In rendering such opinion, such counsel may state
that they express no opinion as to the laws of any
jurisdiction outside the United States.
(d) Willkie Farr & Gallagher, special FCC counsel to the
Company shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The statements set forth in the Prospectus under
captions "Risk Factors--Risk Factors Relating To Our
Industry--Regulatory authorities exercise considerable power
over our operations, which could be exercised against our
interests and impose additional unanticipated costs" and
"Business--Regulation", insofar as they purport to describe
the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
[Others?]
(e) Donald Manning, Esq., general counsel to the Company,
shall have furnished to you his written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) Each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices
to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its
business, except where the failure to have any such
Authorization or to make any such filing or notice would not
reasonably be expected to, singly or in the aggregate, have a
Material Adverse Effect and except for such matters as are
disclosed in the Prospectus. Each such Authorization is valid
and in full force and effect and each of the Company and its
subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with
respect thereto; and to the best of such counsel's knowledge,
no event has occurred (including the receipt of any notice
from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or
results, after notice of lapse of time or both, would result
in any other impairment of the rights of the holder of any
such Authorization; except where such failure to be valid and
in full force and effect or to be in compliance or the
occurrence of any such event would not reasonably be expected
to, singly or in the aggregate, have a Material Adverse Effect
and except for such matters as are disclosed in the
Prospectus;
(ii) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance by
the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation
of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
14
<PAGE>
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its
subsidiaries is subject nor will such action result in any
violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(f) Davis Wright Tremaine LLP, special tax counsel to the
Company, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The statements set forth in the Prospectus under
the caption "Material U.S. Tax Consequences to Non-U.S.
Holders," insofar as they purport to describe the provisions
of the laws and documents referred to therein, are accurate,
complete and fair;
(g) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto;
(h) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have
been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any change, or any development involving
a prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities or preferred stock;
(j) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in
trading in securities generally on the
15
<PAGE>
New York Stock Exchange or on NASDAQ; (ii) a suspension or material
limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either
Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered
at such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(k) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on NASDAQ;
(l) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each director, officer and
stockholder of the Company substantially to the effect set forth in
Subsection 5(e) hereof in form and substance satisfactory to you;
(m) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
(n) The Company shall have furnished or caused to be furnished
to you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder
to be performed at or prior to such Time of Delivery, as to the matters
set forth in subsections (a) and (e) of this Section and as to such
other matters as you may reasonably request;
(o) The Shareholders' Agreement (as defined in the Prospectus)
shall have been amended in form and substance satisfactory to the
Underwriters; and
(p) The Company shall have provided to the Underwriters,
copies of the necessary waivers obtained from the Company's existing
stockholders pursuant to the Shareholders' Agreement.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon
16
<PAGE>
an untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through Goldman,
Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
17
<PAGE>
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (d) were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
18
<PAGE>
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery,
you may in your discretion arrange for you or another party or other parties
to purchase such Shares on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the
purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the Company
notifies you that it has so arranged for the purchase of such Shares, you or
the Company shall have the right to postpone such Time of Delivery for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or
in any other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the Prospectus which
in your opinion may thereby be made necessary. The term "Underwriter" as used
in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this
Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
number of Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares
which remains unpurchased exceeds one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, or if the Company shall
not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the Company
to sell the Optional Shares) shall thereupon terminate, without liability on
the part of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
19
<PAGE>
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
20
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and for each of the Representatives plus
one for each counsel counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Nextel Partners, Inc.
By:
--------------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
First Union Securities, Inc.
Morgan Stanley & Co. Incorporated
DLJDIRECT Inc.
By:
------------------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
--------------- --------------
<S> <C> <C>
Goldman, Sachs & Co................................................
Donaldson, Lufkin & Jenrette Securities Corporation................
Credit Suisse First Boston Corporation.............................
Deutsche Bank Securities Inc.......................................
First Union Securities, Inc........................................
Morgan Stanley & Co. Incorporated..................................
DLJDIRECT Inc......................................................
--------------- ------------------
Total.............................................
--------------- ------------------
--------------- ------------------
</TABLE>
SCHED I-1
<PAGE>
SCHEDULE II
SCHED II-1
<PAGE>
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
FOR REGISTRATION STATEMENTS ON FORM S-1
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the representatives of
the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives and on
the basis of specified procedures including inquiries of officials of
the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference
in the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the
A-1
<PAGE>
foregoing procedures that caused them to believe that this information
does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications
should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in clause (B)
were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the
A-2
<PAGE>
latest financial statements included in the Prospectus) or any
increase in the consolidated long-term debt of the Company and
its subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
A-3
<PAGE>
Exhibit 1.1(b)
NEXTEL PARTNERS, INC.
CLASS A COMMON STOCK,
PAR VALUE $0.001 PER SHARE
----------------------
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
-----------------------
February __, 2000
Goldman Sachs International,
Donaldson, Lufkin & Jenrette International,
Credit Suisse First Boston (Europe) Limited,
Deutsche Bank AG London,
First Union Securities, Inc. and
Morgan Stanley & Co. International Limited
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
Nextel Partners, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of ________ shares (the "Firm Shares") and, at the election of the
Underwriters, up to ________ additional shares (the "Optional Shares") of
Class A Common Stock, par value $0.001 per share (the "Stock") of the Company
(the Firm Shares and the Optional Shares which the Underwriters elect to
purchase pursuant to Section 2 hereof being collectively called the "Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement, a copy of which is attached hereto
(the "U.S. Underwriting Agreement"), providing for the offering by the
Company of up to a total of ________ shares of Stock (the "U.S. Shares")
including the overallotment option thereunder through arrangements with
certain underwriters in the United States (the "U.S. Underwriters"), for whom
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., First
Union Securities, Inc., Morgan Stanley & Co. Incorporated and DLJDIRECT Inc.
are acting as representatives. Anything herein and therein to the contrary
notwithstanding, the respective closings under this Agreement and the U.S.
Underwriting Agreement are hereby expressly made conditional on one another.
The Underwriters hereunder and the U.S. Underwriters are simultaneously
entering into an Agreement between U.S. and International Underwriting
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates
<PAGE>
and for consultation by the Lead Managers hereunder with Goldman, Sachs & Co.
prior to exercising the rights of the Underwriters under Section 7 hereof.
Two forms of prospectus are to be used in connection with the offering and
sale of shares of Stock contemplated by the foregoing, one relating to the
Shares hereunder and the other relating to the U.S. Shares. The latter form
of prospectus will be identical to the former except for certain substitute
pages as included in the registration statement and amendments thereto as
mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and
except as the context may otherwise require, references hereinafter to the
Shares shall include all of the shares of Stock which may be sold pursuant to
either this Agreement or the U.S. Underwriting Agreement, and references
herein to any prospectus whether in preliminary or final form, and whether as
amended or supplemented, shall include both of the U.S. and the international
versions thereof.
In addition, this Agreement incorporates by reference certain
provisions from the U.S. Underwriting Agreement (including the related
definitions of terms, which are also used elsewhere herein) and, for purposes
of applying the same, references (whether in these precise words or their
equivalent) in the incorporated provisions to the "Underwriters" shall be to
the Underwriters hereunder, to the "Shares" shall be to the Shares hereunder
as just defined, to "this Agreement" (meaning therein the U.S. Underwriting
Agreement) shall be to this Agreement (except where this Agreement is already
referred to or as the context may otherwise require) and to the
representatives of the Underwriters or to Goldman, Sachs & Co. shall be to
the addressees of this Agreement and to Goldman Sachs International ("GSI"),
and, in general, all such provisions and defined terms shall be applied
mutatis mutandis as if the incorporated provisions were set forth in full
herein having regard to their context in this Agreement as opposed to the
U.S. Underwriting Agreement.
1. The Company hereby makes with the Underwriters the same
representations, warranties and agreements as are set forth in Section 1 of
the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price per share of $______, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and
sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase
price per share set forth in clause (a) of this Section 2, that portion of
the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase
at their election up to ________ Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
sales of shares in excess of the number of Firm Shares. Any such election to
purchase Optional Shares may be exercised only by written notice from you to
the Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First
2
<PAGE>
Time of Delivery (as defined in Section 4 hereof) or, unless you and the
Company otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus and in the forms of
Agreement among Underwriters (International Version) and Selling Agreements,
which have been previously submitted to the Company by you. Each Underwriter
hereby makes to and with the Company the representations and agreements of
such Underwriter as a member of the selling group contained in Sections 3(d)
and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as GSI may request upon at least forty-eight hours' prior notice to the
Company shall be delivered by or on behalf of the Company to GSI, through the
facilities of the Depository Trust Company ("DTC"), for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company to Goldman, Sachs & Co. at least forty-eight
hours in advance. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto
at the office of DTC or its designated custodian (the "Designated Office").
The time and date of such delivery and payment shall be, with respect to the
Firm Shares, 9:30 a.m., New York City time, on ________, 2000 or such other
time and date as GSI and the Company may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by GSI in the written notice given by GSI of the Underwriters'
election to purchase such Optional Shares, or such other time and date as GSI
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery,
is herein called the "Second Time of Delivery", and each such time and date
for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross receipt for the Shares and any additional
documents requested by the Underwriters pursuant to Section 7(l) of the U.S.
Underwriting Agreement hereof, will be delivered at the offices of [Latham &
Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at
_____p.m., New York City time, on the New York Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents to
be delivered pursuant to the preceding sentence will be available for review
by the parties hereto. For the purposes of this Section 4, "New York Business
Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in New York are generally authorized
or obligated by law or executive order to close.
5. The Company hereby makes to the Underwriters the same agreements
as are set forth in Section 5 of the U.S. Underwriting Agreement, which
Section is incorporated herein by this reference.
3
<PAGE>
6. The Company and the Underwriters hereby agree with respect to
certain expenses on the same terms as are set forth in Section 6 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this
reference.
7. Subject to the provisions of the Agreement between Syndicates,
the obligations of the Underwriters hereunder shall be subject, in their
discretion, at each Time of Delivery, to the condition that all
representations and warranties and other statements of the Company herein
are, at and as of such Time of Delivery, true and correct, the condition that
the Company shall have performed all of its obligations hereunder theretofore
to be performed, and additional conditions identical to those set forth in
Section 7 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through GSI expressly
for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any
such action shall be brought against
4
<PAGE>
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus relating to
such Shares. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by PRO RATA allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount
5
<PAGE>
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of
6
<PAGE>
Delivery, or if the Company shall not exercise the right described in subsection
(b) above to require non-defaulting Underwriters to purchase Shares of a
defaulting Underwriter or Underwriters, then this Agreement (or, with respect to
the Second Time of Delivery, the obligation of the Underwriters to purchase and
of the Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Section 6 and Section 8 hereof, but, if for any other reason any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through GSI for all out-of-pocket
expenses approved in writing by GSI, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; and if to the
Company shall be delivered or sent by registered mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; PROVIDED, HOWEVER, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by GSI upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
7
<PAGE>
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
8
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and one for each of the Co-Lead Managers or
Lead Managing Underwriters plus one for each counsel counterparts hereof, and
upon the acceptance hereof by you, on behalf of each of the Underwriters, this
letter and such acceptance hereof shall constitute a binding agreement among
each of the Underwriters and the Company. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is pursuant to the
authority set forth in a form of Agreement among Underwriters (International
Version), the form of which shall be furnished to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
Nextel Partners, Inc.
By: ____________________
Name:
Title:
Accepted as of the date hereof:
Goldman Sachs International
Donaldson, Lufkin & Jenrette International
Credit Suisse First Boston (Europe) Limited
Deutsche Bank AG London
First Union Securities, Inc.
Morgan Stanley & Co. International Limited
By: Goldman Sachs International
By:____________________________
(Attorney-in-fact)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman Sachs International........................
Donaldson, Lufkin & Jenrette International.........
Credit Suisse First Boston (Europe) Limited........
Deutsche Bank AG London............................
First Union Securities, Inc........................
Morgan Stanley & Co. International Limited.........
----------- ----------
=========== ==========
</TABLE>
<PAGE>
Exhibit 10.46
INDEMNITY AGREEMENT
This Indemnification Agreement ("Agreement") is made as of
________________, 2000 by and between Nextel Partners, Inc., a Delaware
corporation (the "Company"), and ______________ ("Indemnitee").
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation.
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The By-laws of
the Company require indemnification of the officers and directors of the
Company. Indemnitee may also be entitled to indemnification pursuant to the
Delaware General Corporation Law ("DGCL"). The By-laws and the DGCL expressly
provide that the indemnification provisions set forth therein are not exclusive,
and thereby contemplate that contracts may be entered into between the Company
and members of the board of directors, officers and other persons with respect
to indemnification.
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons.
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified.
<PAGE>
WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws
of the Company and any resolutions adopted pursuant thereto, and shall not be
deemed a substitute therefor, nor to diminish or abrogate any rights of
Indemnitee thereunder.
WHEREAS, Indemnitee does not regard the protection available under the
Company's Bylaws and insurance as adequate in the present circumstances, and may
not be willing to serve as an officer or director without adequate protection,
and the Company desires Indemnitee to serve in such capacity. Indemnitee is
willing to serve, continue to serve and to take on additional service for or on
behalf of the Company on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to serve,
at the will of the Company, as an officer, director or key employee of the
Company for so long as Indemnitee is duly elected or appointed or until
Indemnitee tenders his or her resignation.
2. DEFINITIONS. As used in this Agreement:
(1) A "Change in Control" shall be deemed to occur upon the earliest
to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Company representing fifteen percent (15%) or
more of the combined voting power of the Company's then outstanding securities;
(ii) Change in Board of Directors. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a least
a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 51% of the combined voting power
of the voting securities of the surviving entity outstanding immediately after
such merger or consolidation and with the power to elect at least a majority of
the board of directors or other governing body of such surviving entity;
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(iv) Liquidation. The approval by the shareholders of the
Company of a complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
and
(v) Other Events. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not the
Company is then subject to such reporting requirement.
(vi) Certain Definitions. For purposes of this Section 2(a),
the following terms shall have the following meanings:
(A) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(B) "Person" shall have the meaning as set
forth in Sections 13(d) and 14(d) of the Exchange
Act; provided, however, that Person shall exclude
(i) the Company, (ii) any trustee or other
fiduciary holding securities under an employee
benefit plan of the Company, and (iii) any
corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the
same proportions as their ownership of stock of
the Company.
(C) "Beneficial Owner" shall have the
meaning given to such term in Rule 13d-3 under the
Exchange Act; provided, however, that Beneficial
Owner shall exclude any Person otherwise becoming
a Beneficial Owner by reason of the shareholders
of the Company approving a merger of the Company
with another entity.
(2) "Corporate Status" describes the status of a person who is or was
a director, officer, employee or agent of the Company or of any other
corporation, partnership or joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(3) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(4) "Enterprise" shall mean the Company and any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise of
which Indemnitee is or was serving at the request of the Company as a director,
officer, employee, agent or fiduciary.
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(5) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness in, or
otherwise participating in, a Proceeding. Expenses also shall include Expenses
incurred in connection with any appeal resulting from any Proceeding, including
without limitation the premium, security for, and other costs relating to any
cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses,
however, shall not include amounts paid in settlement by Indemnitee or the
amount of judgments or fines against Indemnitee.
(6) Reference to "other enterprise" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
(7) The term "Proceeding" shall include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or
otherwise and whether of a civil, criminal, administrative or investigative
nature, in which Indemnitee was, is or will be involved as a party or otherwise
by reason of the fact that Indemnitee is or was a director or officer of the
Company, by reason of any action taken by him or of any action on his part while
acting as director or officer of the Company, or by reason of the fact that he
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, in each case whether or not serving in such capacity at the time any
liability or expense is incurred for which indemnification, reimbursement, or
advancement of expenses can be provided under this Agreement.
(8) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees and expenses of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
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3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is,
or is threatened to be made, a party to or a participant in any Proceeding,
other than a Proceeding by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified
against all Expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Indemnitee or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding had no
reasonable cause to believe that his conduct was unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is, or is threatened to be made, a party to or a
participant in any Proceeding by or in the right of the Company to procure a
judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. No
indemnification for Expenses shall be made under this Section 4 in respect of
any claim, issue or matter as to which Indemnitee shall have been finally
adjudged by a court to be liable to the Company, unless and only to the extent
that any court in which the Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is a party to (or a participant in) and is successful, on
the merits or otherwise, in any Proceeding or in defense of any claim, issue or
matter therein, in whole or in part, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
If the Indemnitee is not wholly successful in such Proceeding, the Company also
shall indemnify Indemnitee against all Expenses reasonably incurred in
connection with a claim, issue or matter related to any claim, issue, or matter
on which the Indemnitee was successful. For purposes of this Section and
without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding to which Indemnitee is not a
party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
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7. ADDITIONAL INDEMNIFICATION.
(1) Notwithstanding any limitation in Sections 3, 4, or 5, the
Company shall indemnify Indemnitee to the fullest extent permitted by law if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgment
in its favor) against all Expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with the
Proceeding. No indemnity shall be made under this Section 7(a) on account of
Indemnitee's conduct which constitutes a breach of Indemnitee's duty of loyalty
to the Company or its shareholders or is an act or omission not in good faith or
which involves intentional misconduct or a knowing violation of the law.
(2) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the
Company shall indemnify Indemnitee to the fullest extent permitted by law if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgement
in its favor) against all Expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with the
Proceeding.
(3) For purposes of Sections 7(a) and 7(b), the meaning of the phrase
"to the fullest extent permitted by law" shall include, but not be limited to:
1. to the fullest extent permitted by the provision of the DGCL
that authorizes or contemplates additional indemnification by agreement, or the
corresponding provision of any amendment to or replacement of the DGCL, and
2. to the fullest extent authorized or permitted by any
amendments to or replacements of the DGCL adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify its
officers and directors.
8. EXCLUSIONS. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:
(1) for which payment has actually been made to or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except with
respect to any excess beyond the amount paid under any insurance policy or other
indemnity provision; or
(2) for an accounting of profits made from the purchase and sale (or
sale and purchase) by Indemnitee of securities of the Company within the meaning
of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of state statutory law or common law; or
(3) in connection with any Proceeding (or any part of any Proceeding)
initiated by Indemnitee, including any Proceeding (or any part of any
Proceeding) initiated by Indemnitee against the Company or its directors,
officers, employees or other indemnitees, unless (i) the Board
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of Directors of the Company authorized the Proceeding (or any part of any
Proceeding) prior to its initiation or (ii) the Company provides the
indemnification, in its sole discretion, pursuant to the powers vested in the
Company under applicable law.
9. ADVANCES OF EXPENSES. Notwithstanding any provision of this
Agreement to the contrary, the Company shall advance the expenses incurred by
Indemnitee in connection with any Proceeding within 30 days after the receipt by
the Company of a statement or statements requesting such advances from time to
time, whether prior to or after final disposition of any Proceeding. Advances
shall be unsecured and interest free. Advances shall be made without regard to
Indemnitee's ability to repay the expenses and without regard to Indemnitee's
ultimate entitlement to indemnification under the other provisions of this
Agreement. Advances shall include any and all reasonable Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. The Indemnitee shall qualify for advances solely upon the
execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company.
This Section 9 shall not apply to any claim made by Indemnitee for which
indemnity is excluded pursuant to Section 8.
10. PROCEDURE FOR NOTIFICATION AND DEFENSE OF CLAIM.
(1) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification, not later than thirty (30) days after receipt by
Indemnitee of notice of the commencement of any Proceeding. The omission to
notify the Company will not relieve the Company from any liability which it may
have to Indemnitee otherwise than under this Agreement. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(2) The Company will be entitled to participate in the Proceeding at
its own expense.
11. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
(1) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 10(a), a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not
have occurred, (A) by a majority vote of the Disinterested Directors, even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made
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within ten (10) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Company (irrespective
of the determination as to Indemnitee's entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(2) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 11(a) hereof, the
Independent Counsel shall be selected as provided in this Section 11(b). If a
Change in Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change in Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection; PROVIDED,
HOWEVER, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 2 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. Absent a proper
and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is so made and substantiated, the Independent Counsel
so selected may not serve as Independent Counsel unless and until such objection
is withdrawn or a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 10(a) hereof, no Independent Counsel shall
have been selected and not objected to, either the Company or Indemnitee may
petition a court of competent jurisdiction for resolution of any objection which
shall have been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 11(a)
hereof. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 13(a) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
12. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
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(1) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 10(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including by its directors or independent
legal counsel) to have made a determination prior to the commencement of any
action pursuant to this Agreement that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct, nor
an actual determination by the Company (including by its directors or
independent legal counsel) that Indemnitee has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.
(2) If the person, persons or entity empowered or selected under
Section 11 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional thirty (30) days, if the person,
persons or entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining
or evaluating of documentation and/or information relating thereto; and
provided, further, that the foregoing provisions of this Section 12(b) shall not
apply (i) if the determination of entitlement to indemnification is to be made
by the stockholders pursuant to Section 11(a) of this Agreement and if (A)
within fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such determination
to the stockholders for their consideration at an annual meeting thereof to be
held within seventy five (75) days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within fifteen
(15) days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 11(a) of this Agreement.
(3) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
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(4) RELIANCE AS SAFE HARBOR. For purposes of any determination of
good faith, Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with the reasonable care
by the Enterprise. The provisions of this Section 12(d) shall not be deemed to
be exclusive or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of conduct set
forth in this Agreement.
(5) ACTIONS OF OTHERS. The knowledge and/or actions, or failure to
act, of any director, officer, agent or employee of the Enterprise shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.
13. REMEDIES OF INDEMNITEE.
(1) In the event that (i) a determination is made pursuant to Section
11 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 9 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 11(a) of this Agreement
within 45 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 5, 6, 7 or the
last sentence of Section 11(a) of this Agreement within ten (10) days after
receipt by the Company of a written request therefor, or (v) payment of
indemnification pursuant to Section 3 or 4 of this Agreement is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudication by a court of
his entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. The Company shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
(2) In the event that a determination shall have been made pursuant
to Section 11(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 13 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 13 the Company shall have the burden of proving
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(3) If a determination shall have been made pursuant to Section 11(a)
of this Agreement that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
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(4) In the event that Indemnitee, pursuant to this Section 13, seeks
a judicial adjudication of or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all Expenses actually and reasonably incurred by him in such
judicial adjudication or arbitration. If it shall be determined in said
judicial adjudication or arbitration that Indemnitee is entitled to receive part
but not all of the indemnification or advancement of Expenses sought, the
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all Expenses reasonably incurred by
Indemnitee in connection with such judicial adjudication or arbitration.
(5) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 13 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement. The Company
shall indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after receipt by the Company of a
written request therefore) advance such expenses to Indemnitee, which are
incurred by Indemnitee in connection with any action brought by Indemnitee for
indemnification or advance of Expenses from the Company under this Agreement or
under any directors' and officers' liability insurance policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advancement of Expenses or insurance recovery,
as the case may be.
14. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(1) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Articles of Incorporation, the Company's Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise.
No amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his Corporate Status prior
to such amendment, alteration or repeal. To the extent that a change in
Delaware law, whether by statute or judicial decision, permits greater
indemnification or advancement of Expenses than would be afforded currently
under the Company's Bylaws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.
(2) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which
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such person serves at the request of the Company, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee or
agent under such policy or policies. If, at the time of the receipt of a notice
of a claim pursuant to Section 2(b) of Section 2 hereof, the Company has
director and officer liability insurance in effect, the Company shall give
prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of
such proceeding in accordance with the terms of such policies.
(3) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(4) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable (or for which advancement is provided
hereunder) hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
(5) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee who is or was serving at the request of the Company as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
15. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date that Indemnitee shall
have ceased to serve as a director or officer of the Company or as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which Indemnitee served at the
request of the Company; or (b) 1 year after the final termination of any
Proceeding then pending in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 13 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of Indemnitee and his heirs,
executors and administrators.
16. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; (b) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable law and to give
the maximum effect to the intent of the parties hereto; and (c) to the fullest
extent
-12-
<PAGE>
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
thereby.
17. ENFORCEMENT.
(1) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as a director or officer of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as a director or officer of the Company.
(2) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
18. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
thereto. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions of this Agreement nor shall
any waiver constitute a continuing waiver.
19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement or otherwise.
20. NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (b) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(1) If to Indemnitee, at the address indicated on the signature page
of this Agreement, or such other address as Indemnitee shall provide to the
Company.
(2) If to the Company to
or to any other address as may have been furnished to Indemnitee by the Company.
21. CONTRIBUTION. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount
-13-
<PAGE>
incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes,
amounts paid or to be paid in settlement and/or for Expenses, in connection with
any claim relating to an indemnifiable event under this Agreement, in such
proportion as is deemed fair and reasonable in light of all of the circumstances
of such Proceeding in order to reflect (i) the relative benefits received by the
Company and Indemnitee as a result of the event(s) and/or transaction(s) giving
cause to such Proceeding; and/or (ii) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).
22. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the
legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its conflict of laws rules. Except with respect to any arbitration commenced
by Indemnitee pursuant to Section 10(a) of this Agreement, the Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the "Delaware Court"), and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction
of the Delaware Court for purposes of any action or proceeding arising out of or
in connection with this Agreement, (iii) appoint, to the extent such party is
not otherwise subject to service of process in the State of Delaware,
irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King
Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as
such party's agent for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force and validity
as if served upon such party personally within the State of Delaware, (iv) waive
any objection to the laying of venue of any such action or proceeding in the
Delaware Court, and (v) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or inconvenient forum.
23. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate. The headings of the
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
thereof.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the day and year first above written.
NEXTEL PARTNERS, INC. INDEMNITEE
By:
-------------------------------- -----------------------------------
Chief Executive Officer Name:
Address:
-15-
<PAGE>
Exhibit 10.47
October 13,1999
Mr. Stephen H. Clark
SpectraSite Communications, Inc.
8000 Regency Park
Cary, NC 27511
Donald Manning, Esq.
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Re: Master Site Commitment Agreement (the "Site Commitment Agreement")
dated as of April 20, 1999 among Nextel Communications, Inc., Nextel
of New York, Inc., Nextel Communications of the Mid-Atlantic, Inc.,
Nextel South Corp., Nextel of Texas, Inc., Nextel West Corp., Nextel
of California, Inc., Tower Parent Corp. (collectively, "Nextel"),
SpectraSite Holdings, Inc. ("Tower Aggregator"), and Tower Asset
Sub, Inc. ("Tower Sub")
Dear Gentlemen:
This letter (the "Letter") sets forth the agreement of the
above-referenced parties and Nextel Partners Operating Corp. ("Partners")
regarding the Site Commitment Agreement and that certain designation letter
attached hereto as Annex A and incorporated herein by reference (the
"Designation") among Nextel WIP Corp. ("NWIP"), Partners, and Nextel Partners,
Inc. Capitalized terms used in this Letter but not otherwise defined herein
shall have the same meanings assigned to them in the Site Commitment Agreement.
With respect to any Work (as defined in the Designation) performed by or
on behalf of Partners, as the designee of NWIP under the terms and conditions of
the Designation, the parties hereto agree as follows:
o Pursuant to the Designation, Partners shall be responsible for the
performance of all obligations of Nextel relating to the development
and construction of the New Sites in the Partner Area.
o Pursuant to Section 2.1 of the Site Commitment Agreement, Nextel
Communications, Inc. hereby designates Partners as a "Transferring
Subsidiary" for purposes of the Site Commitment Agreement.
o As a Transferring Subsidiary only, Partners shall be bound by and
subject to the terms and conditions and benefits of the Site
Commitment Agreement as though it were an original party thereto.
o Annex B to this Letter sets forth a complete list of all New Sites
currently under development or construction in the Partner Area as
of the date hereof, including the location (or search area, if
applicable), status, and expected completion dates of such New
Sites. Unless otherwise specified on Annex B, all such New Sites
shall be deemed to be Purchased New Sites pursuant to Section 2.2 of
the Site Commitment Agreement, and this Letter shall constitute, and
otherwise satisfy the requirements of, the "Initial Notice" for
purposes of Section 2.2(b) of the Site Commitment Agreement with
respect to such New Sites.
<PAGE>
Mr. Stephen H. Clark
Donald Manning, Esq.
October 13, 1999
Page 2
o All Work shall be performed by Partners and the Contractors (as
defined in the Designation) in accordance with the terms and
conditions of the Site Commitment Agreement.
o Without limiting the generality of the foregoing, it is expressly
agreed and acknowledged that all New Sites that are Purchased New
Sites developed and constructed by Partners pursuant to the
Designation that meet the Minimum Specifications of the Site
Commitment Agreement, all New Sites designated by Partners as
Constructed New Sites, and all Proposed Tower Sub Co-Location Sites
leased by Partners shall constitute "Qualifying Sites" as defined in
Section 2.6 of the Site Commitment Agreement and shall count towards
any and all commitments by Nextel to Tower Aggregator and Tower Sub
under Section 3.3 of the Site Commitment Agreement. Partners shall
convey each Purchased New Site in accordance with the terms of
Section 2.4 of the Site Commitment Agreement and shall execute all
agreements, documents, instruments, and the like which are
contemplated by Section 2.4 to effectuate such conveyance; provided,
however, that notwithstanding anything to the contrary contained in
Section 2.4, Partners shall convey each Purchased New Site directly
to Tower Sub rather than to Tower Parent Corp.
o Tower Sub shall provide Nextel and NWIP with copies of any notices
delivered by it to Partners pursuant to the Site Commitment
Agreement.
o Each of the parties represents and warrants to the others that (i)
it is duly authorized to execute, deliver, and perform its
obligations under this Letter, the Designation, and the Site
Commitment Agreement, (ii) no consents, authorizations, approvals,
or notices are needed to affect the transactions contemplated by
this Letter, the Designation, or the Site Commitment Agreement, and
(iii) the execution and delivery of this Letter and the Designation,
and performance of its obligations under this Letter, the
Designation, and the Site Commitment Agreement will not contravene
any applicable laws, rules, or regulations, and will not conflict
with or result in any material breach of, or constitute a material
default under any indenture, mortgage, deed of trust, or other
instrument or agreement to which it is a party or by which any of
its assets may be subject.
o Nextel shall have no liability or obligation, under the Site
Commitment Agreement or otherwise, with respect to the Work,
including, without limitation, any liability whatsoever for any
delays, deficiencies or other defaults relating to Partners'
performance of the Work. Tower Sub, for itself and its successors
and assigns, hereby releases and forever discharges Nextel and each
of its affiliates, subsidiaries, predecessors, officers, directors,
agents, shareholders, employees, insurers, and representatives
(other than Partners) from and against any and all liability,
claims, demands or actions in any way relating to the Work, and
Tower Sub agrees that Partners shall be solely liable for any breach
of the Site Commitment Agreement (including, without limitation, the
terms of Section 2.1 thereof) relating to New Sites in the Partner
Area, provided that the foregoing shall not limit the obligations of
the Transferring Subsidiaries under Section 3.3 of the Site
Commitment Agreement. This paragraph shall survive the termination
or expiration of this Letter.
<PAGE>
Mr. Stephen H. Clark
Donald Manning, Esq.
October 13, 1999
Page 3
o This Letter shall remain in effect for so long as the Designation
remains in effect and shall terminate automatically upon the
revocation or expiration of the Designation; provided, however, that
the termination of this Letter shall not discharge, affect, or
otherwise modify the rights and obligations of the parties with
respect to the completion of construction or sale and purchase of
any Constructed New Sites or Purchased New Sites in progress as of
the termination date.
o Except as provided herein, the terms and conditions of the Site
Commitment Agreement shall remain unchanged and in full force and
effect.
Please indicate your acceptance of the foregoing by causing this letter to
be signed by a duly authorized representative and returned to me at your
earliest convenience.
NEXTEL COMMUNICATIONS, INC.
NEXTEL OF NEW YORK, INC.
NEXTEL COMMUNICATIONS OF
THE MID-ATLANTIC, INC.
NEXTEL SOUTH CORP.
NEXTEL OF TEXAS, INC.
NEXTEL WEST CORP.
NEXTEL OF CALIFORNIA, INC.
TOWER PARENT CORP.
By: /s/ Thomas J. Sidman
-------------------------------------
Name: Thomas J. Sidman
-----------------------------------
Title: Vice President
----------------------------------
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
SPECTRASITE HOLDINGS, INC. TOWER ASSET SUB, INC.
By: /s/ Stephen H. Clark By: /s/ Stephen H. Clark
-------------------------------- -------------------------------------
Name: Stephen H. Clark Name: Stephen H. Clark
------------------------------ -----------------------------------
Title: President/CEO Title: President/CEO
----------------------------- ----------------------------------
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
NEXTEL PARTNERS NEXTEL PARTNERS, INC.
OPERATING CORP.
By: /s/ Donald J. Manning By: Donald J. Manning
-------------------------------- -------------------------------------
Name: Donald J. Manning Name: Donald J. Manning
------------------------------ -----------------------------------
Title: Vice President Title: Vice President
----------------------------- ----------------------------------
<PAGE>
ANNEX A
October 13, 1999
Donald Manning, Esq.
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Re: Appointment of Nextel Partners Operating Corp. ("Partners") as
Designee of Nextel WIP Corp. ("NWIP") to Perform Specified Duties
under Section 6.9 of Joint Venture Agreement (the "JVA") dated as of
January 29, 1999 by and among Partners, NWIP, and Nextel Partners,
Inc. ("NPI")
Dear Don:
This letter (the "Designation") sets forth the agreement with respect to
(i) the appointment of Partners to perform specified duties on behalf of NWIP
and as NWIP's designee under and for purposes of Section 6.9 of the JVA, and
(ii) the designation of Partners as a "Transferring Subsidiary" for purposes of
the Site Commitment Agreement (as defined below). Capitalized terms used in this
Designation but not otherwise defined herein shall have the same meanings
assigned to them in the JVA.
o In exercising its rights under Section 6.9 of the JVA, NWIP hereby
authorizes and appoints Partners to perform specified duties on its
behalf and as its designee for the sole purpose of contracting
directly with one or more third parties (the "Contractors"),
including Tower Asset Sub, Inc. ("Tower Sub"), to perform (subject
to Section 6.9A of the JVA) the Site Acquisition Work and tower
construction work referenced in Section 6.9B of the JVA
(collectively, the "Work").
o The authorization and appointment set forth in the preceding
paragraph is revocable by NWIP in its sole and absolute discretion
upon ten (10) calendar days prior written notice to Partners;
provided, however, that in the event NWIP exercises its right to
revoke this Designation for convenience, NWIP, in accordance with
and to the extent set forth in Section 6.9B of the JVA, shall be
liable for any delays in Site Acquisition Work or construction
caused by such revocation on and after such revocation, and any such
delays shall constitute an Excusable Delay as set forth in Sections
6.9B and 12.5 of the JVA.
o For so long as and to the extent this Designation is in effect, as
concerns all actions taken or omitted, and all Work performed by
Partners as designee of NWIP hereunder, Partners acknowledges and
agrees that such actions are taken or omitted, and such Work is
performed, by Partners in place of and in substitution for NWIP, and
that, notwithstanding anything to the contrary in Section 6.9 of the
JVA or any other provision of the JVA relating to liability or
responsibility for the consequences of failure to timely and
properly take or complete any such action or Work, (i) NWIP shall
have no liability or responsibility of any nature whatsoever to
Partners in connection with any such action, omission, or Work, and
(ii) Partners' failure to timely and properly take or complete (or
arrange for the taking or completion of) any such action or Work
(other than because of any act of any government in its sovereign
capacity (including zoning or licensing actions), war or
insurrection, strike or slow down, extreme weather, fire,
earthquake, flood, epidemic, quarantine restriction, or acts of God
or other such occurrences or events beyond the control of Partners)
shall not constitute an Excusable Delay for purposes of the
<PAGE>
Donald Manning, Esq.
October 13,1999
Page 2
JVA or otherwise relieve or release Partners from any of its
obligations under the JVA, including without limitation, those
relating to the scheduled Build Out of its ESMR Network.
o Pursuant to this Designation and the terms of Section 2.1 of the
Master Site Commitment Agreement (the "Site Commitment Agreement")
dated as of April 20, 1999 among Nextel Communications, Inc., Nextel
of New York, Inc., Nextel Communications of the Mid-Atlantic, Inc.,
Nextel South Corp., Nextel of California, Inc., Tower Parent Corp.,
SpectraSite Holdings, Inc., and Tower Asset Sub, Inc., Partners
shall be designated as, and shall be deemed to be, a "Transferring
Subsidiary" as that term is defined in the Site Commitment
Agreement. All Work shall be arranged and/or performed strictly in
accordance with the terms of the Site Commitment Agreement, and all
towers that are the subject of the Work shall meet the Minimum
Specifications of the Site Commitment Agreement, except as otherwise
expressly consented to in writing by NWIP, which consent shall not
be unreasonably withheld or delayed. Partners shall cause all
Contractors engaged by it or with its authorization to perform the
Work in compliance with this paragraph.
o Partners shall report monthly to NWIP on the status of the Work for
each tower site that is or has been constructed by Partners pursuant
to Section 6.9 of the JVA and this Designation or by Tower Sub in
the Partner Area pursuant to the Site Commitment Agreement. Such
report shall be in the form of Annex I attached hereto, which form
may be modified from time to time with the mutual agreement of the
parties. Partners shall maintain all records and information,
including, without limitation, site leases, construction plans,
permits, and the like, required to be maintained or provided by a
Transferring Subsidiary under the Site Commitment Agreement. In
addition, Partners shall provide NWIP with copies of any notices
delivered or received by it pursuant to the Site Commitment
Agreement and shall, on NWIP's request and at NWIP's expense,
provide NWIP with copies of and access to any and all information
and materials relating to Partner's performance of the Work or
relating to the Site Commitment Agreement.
o Each of NPI and Partners represents and warrants that (i) it is duly
authorized to execute, deliver, and perform its obligations under
this Designation, (ii) no consents, authorizations, approvals, or
notices are needed to effect the transactions contemplated by this
Designation, and (iii) the execution, delivery, and performance by
it of its obligations under this Designation will not contravene any
applicable laws, rules, or regulations, and will not conflict with
or result in any material breach of, or constitute a material
default under, any indenture, mortgage, deed of trust, or other
instrument or agreement to which it is a party or by which it is
bound or to which any of its assets may be subject.
o For so long as and to the extent this Designation is in effect,
Partners shall be solely liable for all costs associated with the
Work. Nextel shall have no liability or obligation to any party,
under the JVA, the Site Commitment Agreement, or otherwise, with
respect to the Work, including, without limitation, any liability
whatsoever for any delays, deficiencies or other defaults relating
to the Work. Without limiting the generality of the foregoing, so
long
<PAGE>
Donald Manning, Esq.
October 13, 1999
Page 3
as Partners is responsible for, or is authorized to make
arrangements with Contractors for, conducting the Work, and except
as expressly set forth in the second paragraph of this Designation,
Partners shall not be entitled to any remedy contemplated by Section
6.9B of the JVA with respect to such Work. This paragraph shall
survive the revocation or expiration of this Designation to the
extent it relates to Work performed or in progress during the term
of this Designation.
o Partners, for itself and its successors and assigns, hereby releases
and forever discharges, and agrees to indemnify and hold harmless,
Nextel and each of its affiliates, subsidiaries, predecessors,
officers, directors, agents, shareholders, employees, insurers, and
representatives from and against any and all liability, claims,
demands, or actions in any way relating to Partners' activities as
contemplated by this Designation or to the Work or arising from
Partners' noncompliance with the terms and conditions of this
Designation. NPI is and shall remain jointly and severally liable
with Partners for the full and punctual performance of the
indemnification obligations set forth in this paragraph. This
paragraph shall survive the revocation or expiration of this
Designation to the extent it relates to any acts or omissions
arising or occurring during the term of this Designation.
o This Designation shall remain in effect until the earlier of (i)
NWIP's revocation of its appointment of Partners in accordance with
the second paragraph hereof, and (ii) the Build Stop Date.
o Nothing in this Designation shall be construed to create the
relationship of partners, joint venturers, employer/employee,
principal/agent, or any other joint enterprise.
o The parties each shall deliver such further documents or assurances
as may be reasonably required by the other to effect the
authorization and appointment contemplated hereby.
o Except as provided herein, the terms and conditions of the JVA shall
remain unchanged and in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Donald Manning, Esq.
October 13,1999
Page 4
Please indicate your acceptance of the foregoing by causing this letter to
be signed by a duly authorized representative and returned to me at your
earliest convenience.
NEXTEL WIP CORP.
By: /s/ Alan Strauss
-------------------------------------
Name: Alan Strauss
-----------------------------------
Title: Vice President
----------------------------------
ACCEPTED AND AGREED:
NEXTEL PARTNERS
OPERATING CORP.
By: /s/ Donald J. Manning
--------------------------------
Name: Donald J. Manning
------------------------------
Title: Vice President
-----------------------------
ACCEPTED AND AGREED:
NEXTEL PARTNERS, INC.
By: /s/ Donald J. Manning
--------------------------------
Name: Donald J. Manning
------------------------------
Title: Vice President
-----------------------------
<PAGE>
ANNEX B
<TABLE>
<CAPTION>
SITEID_840 SITE NAME SITE ADDRESS CITY STATE
- ---------- --------- ------------ ---- -----
<S> <C> <C> <C> <C>
AL8001 Cottage Hill-New 13370-A Ezell Rd Grand Bay AL
FL1031 Lake City WOLF RD OFF 41 N LAKE CITY FL
FL1036 White Springs 41 N & SUWANNEE VALLEY ROAD LAKE CITY FL
FL1038 Lacrosse EAST COUNTY ROAD 18 & I-75 COLUMBIA COUNTY FL
HI0011 CAPTAIN COOK - Jones Halekii & Kekee South Kona HI
IA0526 Davenport - Sundholm 3111 Hickory Grove Road Davenport IA
ID5003 TABLE ROCK - JB Trust Bowler Top of Table Rock Road
APN: S0918314910, Sec 18, BOISE ID
ID5011 CALDWELL DWTN - Weymouth 824 ALBANY STREET CALDWELL ID
ID5022 NAMPA - Adzem 1st Street South Nampa ID
ID5030 BOISE TOWNE SQUARE - Holman 711 North Allumbaugh St. Boise ID
IL3102 Odell 20361 East 2600 North Road Odell IL
IL3104 Normal RR 8 Normal IL
IL3107 LeRoy Rural Route 1 Box 237A Downs IL
IL3120 McLean 401 East South Street McLean IL
IL3121 Lincoln 1895 Old Route 121 Lincoln IL
IL3135 Ashkum 2577 N 700 East Rd. Ashkum IL
LA1486 Vinton 5256 Gray Road Vinton LA
LA1487 Sulphur 3209 West Highway 90 Sulphur LA
LA8004 LaFayette - Herbert 2413 W. Willow Road Scott LA
LA8005 Henderson - Talley 1031-B Irma Drive Breaux Bridge LA
LA8031 Rayne-Sewer Plant Rayne Sewer Treatment Plant
1301 - AW Jeff Davis Rayne LA
LA8032 Egan - Reed 1507 Riverside Rd Jennings LA
LA8035 Fenton-Gillory,LA 15218 Frederick Rd Iowa LA
MS8000 Vidalia-Juneau 27127 Bradley Rd Pass Christian MS
NY5024 Acker 77 Louden Road Alexander Louden Ghent NY
NY5180 Pattersonville 1243 Waters Road Pattersonville Scotia NY
NY5206 Brewerton 858 Brewerton Rd Brewerton NY
NY5226 Eastwood 201 Midler Park Drive Dewitt NY
NY5230 Hancock 5676 Taft Road Cicero NY
NY5306 Farmington 1000 County Road 8 Farmington NY
NY5322 Batavia 8106 State Rd. Batavia NY
NY5340 Brighton 3195 Brighton-Henrietta Town L Henrietta NY
NY5385 Mount Read 1766 Latta Road Greece NY
TX0138 City of West 1107 S. Harrison West TX
TX1354 Fannet 6849 Smith Road Beaumont TX
TX1356 Vidor 265 Rearick Road Vidor TX
TX1358 Orange 2703 Eddleman Road Orange TX
TX1534 Stark 9550 I-10 West Orange TX
TX2723 Temple 1206 N 31st Street Temple TX
WI5000 Knapp N7205 Highway Q Knapp WI
WI5002 Chippewa Falls 7503 123rd Street Chippewa Falls WI
WI5004 Old Town Road 4985 Old Town Hall Road Eau Claire WI
</TABLE>
<PAGE>
Tower Sites
<TABLE>
<CAPTION>
Partner Site ID Information Nextel Site ID Information Market Build Status
- ----------------------------------- ---------------------------------------------- -------------------------------------------
Partner's Nextel's
Region Section Service Service Project Project Name Site ID Market Build-out RF Design Search Ring Site
# # Area # Area Name Code (Site Name) (with prefix) Name Year Complete Released Leased
- ------ ------- ------- --------- ------- ------------ ------------- -------- --------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3 34 559 I-75 South GA1047 Forsyth Southeast 1 Complete Complete Complete
3 34 561 I-75 South GA1048 Bolingbroke Southeast 1 Complete Complete Complete
3 34 561 I-75 South GA1115 Smarr Southeast 1 Complete Complete Complete
3 34 561 I-75 South GA1116 Johnstonville Southeast 1 Complete Complete Complete
3 34 561 I-75 South GA1170 Hutchinson St. Southeast 1 Complete Complete Complete
<CAPTION>
Partner Market Build Status
- ------- --------------------------------------------------------------------------------------------------------
Lease
Region Site Build Permit Lease Commencement Colo / Raw Land / Construction Construction
# Zoned Obtained Rate Date Tenant Improvement Started Complete Site On-Air
- ------ ------ ------------ ----- ------------ ------------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3 Complete Complete $500 10/1/94 RL Complete Complete Complete
3 Complete Complete $300 12/1/94 RL Complete Complete Complete
3 Complete Complete $250 11/1/94 RL Complete Complete Complete
3 Complete Complete $167 12/1/94 RL Complete Complete Complete
3 Complete Complete $420 6/1/98 RL Complete Complete Complete
</TABLE>
<PAGE>
Exhibit 10.48
Execution Copy
Supplement No. 1 to
iDEN Infrastructure Equipment Purchase Agreement
This SUPPLEMENT NO. 1 TO iDEN INFRASTRUCTURE EQUIPMENT PURCHASE AGREEMENT
(this "Supplement") is made as of the __ day of September, 1999, between
Motorola, Inc., a Delaware corporation, by and through its Network Solutions
Sector, Customer Solutions Group with offices at 1301 East Algonquin Road,
Schaumburg, Illinois 60196 ("Motorola") and Nextel Partners Operating Corp., a
Delaware corporation, with offices at 4500 Carillon Pt., Kirkland, Washington
98033 ("Customer").
WHEREAS, Motorola and Customer are all of the parties to that certain iDEN
Infrastructure Equipment Purchase Agreement dated January 29, 1999 (the
"Agreement"), which provides for the sale to and purchase by Customer from
time-to-time of certain equipment, products and services;
WHEREAS, Section 7.6 of the Agreement grants to Customer the Equipment
Credit in the amount and to purchase the items set forth therein in exchange for
the issuance to Motorola of equity interests of Customer, all in accordance with
the terms of the Subscription and Contribution Agreement of even date therewith
between Nextel Partners, Inc., a Delaware corporation and the parent of Customer
("Partners"), and each of the investors named therein;
WHEREAS, each of Motorola and Customer currently desires to supplement the
Agreement to grant to Customer an additional equipment credit in the amount and
to purchase the items set forth herein in exchange for the issuance to Motorola
of additional equity interests of Customer, all in accordance with the terms of
the Expansion Subscription and Contribution Agreement of even date herewith
between Partners and each of the investors named therein (the "Expansion
Subscription Agreement");
The parties hereto agree to supplement the Agreement as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them under the Agreement.
2. Additional In-Kind Capital Contribution. As a result of the issuance of
additional equity interests to Motorola pursuant to the Expansion Subscription
Agreement, Customer will have an additional EBTS equipment credit (the
"Additional Equipment Credit") under the Agreement in the amount of Three
Million Six Hundred Forty Four Thousand Seventy-Nine and 00/000 Dollars
($3,644,079.00) that may be used as set forth below:
<PAGE>
Upon the placing of each order in accordance with the terms of the Agreement,
the parties shall calculate the percentage of the total dollar value of the
order comprised by the dollar value of the EBTS equipment in the order. Each
payment thereafter on such order, for as long as either the Equipment Credit or
the Additional Equipment Credit is still in existence, shall be made by a
combination of cash and either the Equipment Credit or the Additional Equipment
Credit. The cash amount shall be (100% - EBTS percentage) x payment due. The
Equipment Credit or the Additional Equipment Credit shall be the EBTS percentage
x payment due, and the Equipment Credit or the Additional Equipment Credit shall
be reduced by a like amount. Customer may at any time choose to apply less than
the above stated maximum Equipment Credit amount or the above stated maximum
Additional Equipment Credit amount to any order and increase the cash portion.
3. Expansion Subscription Agreement. The execution and delivery of the
Expansion Subscription Agreement by each of Motorola and Customer is a condition
precedent to the obligations of the parties hereunder.
4. Ratification of Agreement. As supplemented hereby, the Agreement and
its terms and provisions are hereby ratified and confirmed for all purposes and
in all respects.
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Supplement as of the date first set forth above.
MOTOROLA, INC.
By: /s/ Charles Wright
--------------------------
Name: CHARLES WRIGHT
Title: VICE PRESIDENT
NEXTEL PARTNERS OPERATING
CORP.
By:__________________________
Name:
Title:
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Supplement as of the date first set forth above.
MOTOROLA, INC.
By:__________________________
Name:
Title:
NEXTEL PARTNERS OPERATING
CORP.
By: /s/ John D. Thompson
--------------------------
Name:
Title:
3
<PAGE>
Exhibit 10.49
Execution Copy
EXPANSION
SUBSCRIPTION AND CONTRIBUTION AGREEMENT
dated as of
September 9, 1999
among
NEXTEL PARTNERS, INC.,
and
THE BUYERS NAMED HEREIN
relating to the purchase and sale
of
Series A Convertible Preferred Stock
and
Series C Convertible Preferred Stock
of
Nextel Partners, Inc.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS .........................................................1
ARTICLE 2 PURCHASE AND SALE ...................................................4
SECTION 2.01 Purchase and Sale .....................................4
SECTION 2.02 Closing ...............................................4
SECTION 2.03 Subsequent Payments ...................................5
SECTION 2.04 Remedies ..............................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER ............................7
SECTION 3.01 Corporate Existence and Power .........................7
SECTION 3.02 Corporate Authorization ...............................7
SECTION 3.03 Governmental Authorization ............................8
SECTION 3.04 Noncontravention ......................................8
SECTION 3.05 Capitalization and Voting Rights ......................8
SECTION 3.06 Valid Issuance of Securities ..........................9
SECTION 3.07 Litigation ............................................9
SECTION 3.08 Financial Information .................................9
SECTION 3.09 Representations of Buyers .............................9
SECTION 3.10 Use of Proceeds ......................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYERS ...........................10
SECTION 4.01 Existence and Power ..................................10
SECTION 4.02 Authorization ........................................10
SECTION 4.03 Governmental Authorization ...........................10
SECTION 4.04 Noncontravention .....................................10
SECTION 4.05 Purchase for Investment ..............................11
SECTION 4.06 Private Placement ....................................11
SECTION 4.07 Litigation ...........................................12
SECTION 4.08 Brokers or Finders' Fees .............................12
SECTION 4.09 Capital of DLJMB .....................................12
SECTION 4.10 Capital Commitment ...................................13
SECTION 4.11 FCC Compliance; NWIP FCC Licenses ....................13
SECTION 4.12 Newly Formed Corporation .............................13
-i-
<PAGE>
ARTICLE 5 CONDITIONS TO CLOSING ..............................................14
SECTION 5.01 Conditions to Obligations of each Buyer
and Seller ...........................................14
SECTION 5.02 Conditions to Obligation of each Buyer ...............15
SECTION 5.03 Conditions to Obligation of Seller ...................15
ARTICLE 6 SURVIVAL; INDEMNIFICATION ..........................................16
SECTION 6.01 Survival .............................................16
SECTION 6.02 Indemnification ......................................16
SECTION 6.03 Exclusivity ..........................................17
ARTICLE 7 MISCELLANEOUS ......................................................17
SECTION 7.01 Notices ..............................................17
SECTION 7.02 Amendments and Waivers ...............................18
SECTION 7.03 Expenses .............................................18
SECTION 7.04 Successors and Assigns ...............................18
SECTION 7.05 Governing Law ........................................18
SECTION 7.06 Jurisdiction .........................................18
SECTION 7.07 Waiver of Jury Trial .................................19
SECTION 7.08 Counterparts; Third Party Beneficiaries ..............19
SECTION 7.09 Entire Agreement .....................................19
SECTION 7.10 Captions .............................................19
SECTION 7.11 Severability .........................................19
SECTION 7.12 Interpretation .......................................19
SECTION 7.13 Remedies Cumulative ..................................19
SECTION 7.14 Subrogation ..........................................20
-ii-
<PAGE>
Schedule A Schedule of Investors
Schedule B Seller's Account Information
Schedule C NWIP FCC Licenses
Schedule D Transaction Documents
Schedule 3.04 Consents
Schedule 3.05 Capitalization
Schedule 4.11 Exceptions to Section 4.11
Exhibit A Amendment to Infrastructure Equipment Purchase Agreement
-iii-
<PAGE>
EXPANSION SUBSCRIPTION AND CONTRIBUTION AGREEMENT
AGREEMENT dated as of September 9, 1999 between Nextel Partners, Inc., a
Delaware corporation (the "Company" or "Seller"), and each of the Persons named
on Schedule A hereto (each a "Buyer" and, collectively, the "Buyers").
WITNESSETH:
WHEREAS, pursuant to the terms of the Subscription and Contribution
Agreement dated as of January 29, 1999 among the Company and the investors party
thereto (the "Original Subscription Agreement"), each of the Buyers purchased
the securities of the Company specified therein;
WHEREAS, to further finance, in part, the building and operation of an 800
MHZ digital wireless communications network (including, without limitation, the
expansion of the Territory to include certain Special and non-Special Option
Sections (as such terms are defined in the Joint Venture Agreement)), the
Company intends to issue shares of Series A Convertible Preferred Stock, par
value $0.001 per share (the "Series A Preferred") and Series C Convertible
Preferred Stock, par value $0.001 per share (the "Series C Preferred" and,
together with the Series A Preferred, the "Securities");
WHEREAS, the Company desires to issue and sell the relevant Securities to
each of the Buyers, and each of the Buyers desires to purchase the relevant
Securities from Seller, upon the terms and subject to the conditions hereinafter
set forth;
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person. For purposes of this definition, the terms "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to vote or direct the voting of more than
50% of the outstanding shares of voting stock (or other ownership interests) of
such Person, or to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
<PAGE>
"Asset Transfer Agreement" means the Expansion Asset Transfer and
Reimbursement Agreement, dated as of the date hereof, between Opco and NWIP.
"Cash Investor" means each Buyer (including NWIP with respect to the cash
portion of its Purchase Price) other than Motorola.
"Company Capital Stock" has the meaning set forth in the Shareholders'
Agreement.
"Closing Date" means the date of the Closing.
"Credit Facility" means the Credit Agreement, dated as of January 29,
1999, between Opco and the lenders named therein, as amended and restated on the
Closing Date.
"Custodial Agreement" means the Custodial Agreement, dated as of January
29, 1999, among the Bank of Montreal Trust Company, the Company and the other
investors listed on the signature pages thereof.
"DLJ Entities" means DLJMB, DLJ Offshore Partners II, C.V., DLJ
Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II - A, L.P., DLJ Diversified Partners - A, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners - A, L.P., UK Investment Plan 1997
Partners, DLJ EAB Partners, L.P., DLJ ESC II L.P., DLJ First ESC L.P., and
Madison Dearborn Capital Partners II, L.P. ("Madison Dearborn").
"DLJMB" means DLJ Merchant Banking Partners II, L.P., a Delaware limited
partnership.
"Expansion Co." means Nextel WIP Expansion Corp., a Delaware corporation
and wholly-owned subsidiary of Nextel.
"FCC" means the Federal Communications Commission or similar regulatory
authority established in replacement thereof.
"FCC Law" means the Communications Act of 1934, as amended, including as
amended by the Telecommunications Act of 1996, and the rules, regulations and
policies promulgated thereunder.
"Financings" means (i) the $150,000,000 Term C Loan advanced to Opco under
the Credit Facility and (ii) the issuance and sale of the Securities hereunder.
"Joint Venture Agreement" means that certain Joint Venture Agreement,
dated as of January 29, 1999, by and among NWIP, the Company and Opco, as such
may be amended from time to time.
2
<PAGE>
"License Transfer" means the transfer of the capital stock of Expansion
Co. to the Company or a Subsidiary thereof.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance in respect of such property or
asset, or any right of others therein.
"Management Agreement" means that certain Expansion Territory Management
Agreement, dated as of the date hereof, by and between Opco and NWIP as such may
be amended from time to time.
"Motorola" means Motorola, Inc.
"Nextel" means Nextel Communications, Inc.
"Nextel Controlled Group" means Nextel and its controlled Affiliates,
whether now existing or hereafter created or acquired.
"NWIP" means Nextel WIP Corp., a Delaware corporation.
"NWIP FCC Licenses" means those FCC licenses set forth on Schedule C.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Opco" means Nextel Partners Operating Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Shareholders' Agreement" means that certain Shareholders' Agreement,
dated as of January 29, 1999, by and among the Company, NWIP, DLJMB, Eagle River
Investments, LLC ("Eagle River"), Motorola and certain other investors listed on
the signature pages thereof.
"Transaction Documents" means those documents listed on Schedule D.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
3
<PAGE>
Term Section
Accredited Investor 4.06(h)
Buyers Preamble
Buyer Indemnified Party 6.02(a)
Closing 2.02(a)
Company Preamble
Damages 6.02(a)
DLJ 4.09
DLJMB II, Inc. 4.09
Initial Cash Contribution 2.02(a)
Manning 7.15
Original Subscription Agreement Recitals
Permits 3.01
Purchase Price 2.01
Restated Certificate 3.05
Seller Preamble
Seller Indemnified Party 6.02(b)
Series A Preferred Recitals
Series C Preferred Recitals
Subsequent Cash Contribution 2.03(a)
Subsequent Payment Date 2.03(a)
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to issue and sell to each Buyer and
each Buyer irrevocably agrees in its own name severally and not jointly, to
purchase from Seller the Securities set forth opposite such Buyer's name on
Schedule A hereto at the Closing. In the event that any DLJ Entity fails to
purchase from Seller the Securities set forth opposite such DLJ Entity's name on
Schedule A hereto at the Closing, DLJMB agrees to purchase such Securities at
the Closing. The aggregate purchase price for the Securities (the "Purchase
Price") payable by each Buyer is the amount in cash or in assets specified
opposite such Buyer's name on Schedule A hereto. The Purchase Price shall be
paid as provided in Section 2.02.
SECTION 2.02 Closing. The closing (the "Closing") of the purchase and sale
of the Securities hereunder shall take place at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, NY 10019, as soon as possible, but in no event
later than five business days, after
4
<PAGE>
satisfaction of the conditions set forth in Article 5, or at such other time or
place as Buyers and Seller may agree. At the Closing:
(a) Each Cash Investor shall deliver to Seller, in immediately available
funds, one-third (1/3) of the Purchase Price (the "Initial Cash Contribution")
set forth opposite such Buyer's name on Schedule A hereto, by wire transfer (or
other means acceptable to Seller) to the account of Seller described on Schedule
B.
(b) NWIP will (i) execute and deliver to the Custodian one or more stock
certificates, together with stock powers duly executed in blank, representing
all the outstanding stock of Expansion Co., together with irrevocable
instructions to release the stock of Expansion Co. to Seller upon receipt of a
written notice from Seller and NWIP that FCC approval of the License Transfer
has been received and (ii) execute and deliver the Management Agreement. The
transfer of the stock of Expansion Co. to Seller will occur immediately upon
receipt by the Custodian of the notice referred to above.
(c) Motorola will execute and deliver to the Company Supplement No.1 to
the Infrastructure Equipment Purchase Agreement by and between Opco and
Motorola, in substantially the form of Exhibit A.
(d) Seller shall deliver to each Buyer certificates, or other appropriate
documentation, for the relevant Securities duly registered in the name of such
Buyer.
SECTION 2.03 Subsequent Payments. (a) Each Cash Investor shall deliver
additional payments of one-third (1/3) of such Cash Investor's Purchase Price
(each, a "Subsequent Cash Contribution") to Seller in immediately available
funds, by wire transfer (or other means acceptable to Seller) to the account
described on Schedule B (or such other account as the Seller may from time to
time designate) on each of September 9, 2000 and September 9, 2001 (each, a
"Subsequent Payment Date").
(b) Seller has the right to (i) accelerate payment of each of the
Subsequent Cash Contributions by up to 60 days prior to the relevant Subsequent
Payment Date by providing the relevant Buyers with notice at least 30 days
before the proposed payment date and (ii) assign the right to receive any unpaid
Subsequent Cash Contribution to a lender as security for an interim advance to
the Company by such lender.
(c) Each Cash Investor acknowledges and agrees that, if the Closing
occurs, its obligation to make payments to Seller of the relevant Subsequent
Cash Contributions constitutes an absolute, irrevocable and unconditional
obligation, and shall not be subject to claim, set-off, or other rights which
such Buyer may have at any time against the Seller. If a Buyer fails to pay a
Subsequent Cash Contribution to the Seller more than two business days after the
Subsequent Payment Date: (i) such defaulting party will be subject to liquidated
damages in the amount of
5
<PAGE>
25% of its Company Capital Stock (including all of the Company Capital Stock
acquired under the Original Subscription Agreement) (which liquidated damages,
in the case of the DLJ Entities, shall be paid to DLJMB (in lieu of the
Company), if DLJMB timely paid (or caused to be paid timely) the Subsequent Cash
Contribution), (ii) all remaining Subsequent Cash Contributions of such
defaulting party shall become immediately due and payable in full, (iii) the
outstanding amount shall accrue interest at a rate per annum equal to 200 basis
points over the highest rate of interest charged from time to time by the
Seller's senior lenders, (iv) the rights of such defaulting party under the
Shareholders' Agreement but none of its obligations will terminate and (v) the
Series A Preferred of such defaulting party (including all of the Series A
Preferred acquired under the Original Subscription Agreement) will convert to
Class A Common Stock and, in the case of NWIP, the Series C Preferred (including
all of the Series C Preferred acquired under the Original Subscription
Agreement) will convert to Class B Common Stock, in each case in accordance with
the Restated Certificate.
(d) (i) Without limiting Section 2.03(c), in the event that any DLJ Entity
fails to make any Subsequent Cash Contribution on the applicable Subsequent
Payment Date, DLJMB shall make (or shall cause to be made) such Subsequent Cash
Contribution within two business days of such Subsequent Payment Date. DLJMB
acknowledges and agrees that, if the Closing occurs, its obligation to make
payments to Seller of Subsequent Cash Contributions of other DLJ Entities
pursuant to the preceding sentence constitutes an absolute, irrevocable and
unconditional obligation, and shall not be subject to claim, set-off, or other
rights which DLJMB may have at any time against the Seller nor shall the Seller
be required to exhaust any remedies against the defaulting party before
proceeding against DLJMB to enforce this Section 2.03(d) against DLJMB. In the
event of a payment default by DLJMB under this paragraph (d), (i) all remaining
Subsequent Cash Contributions of DLJMB shall become immediately due and payable
in full, (ii) the outstanding amount shall accrue interest at a rate per annum
equal to 200 basis points over the highest rate of interest charged from time to
time by the Seller's senior lenders, (iii) the Series A Preferred of DLJMB
(including all of the Series A Preferred acquired under the Original
Subscription Agreement) will convert to Class A Common Stock in accordance with
the Restated Certificate and (iv) the rights of DLJMB but none of its
obligations under the Shareholders' Agreement will terminate.
(ii) Without limiting Section 2.03(c), in the event that NWIP fails
to make any Subsequent Cash Contribution on the applicable Subsequent Payment
Date, Seller shall have the right, until all remaining Subsequent Cash
Contributions of NWIP are made in accordance with the terms hereof, to set-off
the full amount of all remaining Subsequent Cash Contributions of NWIP against
any and all amounts which Seller, Opco or any subsidiary thereof owes to NWIP
under the Collateral Agreements (as such term is defined in the Joint Venture
Agreement), regardless of whether any such amounts owed to NWIP arose prior to
or following NWIP's failure to make a Subsequent Cash Contribution hereunder.
6
<PAGE>
(e) In the event that a Cash Investor transfers all or part of its
Securities in advance of completing its payment obligations under Article 2,
such Cash Investor shall remain primarily liable for the transferee's remaining
Subsequent Cash Payments.
(f) NWIP covenants and agrees that it will cause the representations and
warranties in Section 4.12 to remain true and correct at all times from the date
hereof until the License Transfer has been consummated and shall also use its
commercially reasonable best efforts to cause the representations and warranties
set forth in Section 4.11 to remain true and correct at all times from the date
hereof until the License Transfer has been consummated. NWIP agrees that, upon
such approval of the FCC as will permit the License Transfer to be lawfully
consummated, such transfer will thereupon be deemed to be accomplished without
any further action on the part of NWIP, and the Company and the Custodian are
hereby irrevocably authorized at such time to deliver the stock certificates and
completed stock power in such manner as necessary and appropriate to consummate
(i) the License Transfer and (ii) the pledge of the stock of Expansion Co. to
Opco's senior lenders as contemplated by the terms of the Credit Facility.
SECTION 2.04 Remedies. Each Buyer acknowledges that the Seller is a
start-up company and agrees that as such the Seller would suffer irreparable
harm, including great harm to its ability to operate in accordance with its
business plan during its critical start-up phase, in the event that such Buyer
failed to pay in full, as and when due, its portion of the Purchase Price. The
parties agree that if any provision of this Article 2 is not performed by a
Buyer in accordance with its specific terms or is otherwise breached,
irreparable damage to the Seller would occur, no adequate remedy at law would
exist and damages would be difficult to determine, and that the Seller will
therefore be entitled to (i) specific performance of the terms of this Article
2, (ii) the remedies set forth in Sections 2.03(c) and 2.03(d), including,
liquidated damages in the amount of 25% of such Buyer's Securities (which
damages are intended by the parties to compensate the Seller for the harm
suffered by reason of such Buyer's failure to pay when due its portion of the
Purchase Price, it being understood and agreed that recovery of damages in an
amount equal to such portion of the Purchase Price plus accrued interest thereon
shall not be sufficient to adequately compensate the Seller for such harm) and
(iii) any other remedy available under this Agreement or otherwise at law or in
equity.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to each Buyer as of the date hereof that:
SECTION 3.01 Corporate Existence and Power. Each of Seller and Opco is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals ("Permits"), required
to carry on its business as now conducted.
7
<PAGE>
SECTION 3.02 Corporate Authorization. The execution, delivery and
performance by each of Seller and Opco of each of the Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby (including the issuance and sale of the Securities) are within
Seller's or Opco's (as applicable) corporate powers and have been duly
authorized by all necessary corporate action on the part of such corporation.
Each of the Transaction Documents to which it is a party constitutes or, when
executed, will constitute a valid and binding agreement of each of Seller and
Opco, enforceable against Seller and Opco in accordance with its respective
terms, except (i) as limited by the applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, or (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
SECTION 3.03 Governmental Authorization. The execution, delivery and
performance by Seller and Opco of each of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated hereby and
thereby 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 such as have
been made or obtained and, with respect to its conduct of business after the
Closing as contemplated by the Joint Venture Agreement, such of the foregoing as
Seller reasonably expects to obtain in the ordinary course of business.
SECTION 3.04 Noncontravention. The execution, delivery and performance by
Seller and Opco of each of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate the Restated Certificate or the by-laws of the Seller or
the Certificate of Incorporation or by-laws of Opco, (ii) violate any applicable
law, rule, regulation, judgment, injunction, order or decree, (iii) except as
set forth on Schedule 3.04 hereto, 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 Seller or Opco or to a loss of any material benefit
to which Seller or Opco is entitled under any provision of any agreement or
other instrument binding upon Seller or Opco or any of Seller's or Opco's assets
or properties or (iv) result in the creation or imposition of any material Lien
on any property or asset of Seller or Opco, other than under the Credit
Facility.
SECTION 3.05 Capitalization and Voting Rights. (a) The authorized capital
stock of Seller consists of 75,000,000 shares of Class A Common Stock,
25,000,000 shares of Class B Common Stock and 70,000,000 shares of preferred
stock. The outstanding equity securities of Seller immediately prior to the
Closing are set forth on Schedule 3.05. The rights, privileges and preferences
of the Class A and Class B Common Stock and the Series A, Series B, Series C and
Series D Preferred Stock are set forth in the Restated Certificate of
Incorporation (the "Restated Certificate").
8
<PAGE>
(b) Immediately following the Closing the outstanding equity securities of
Seller will be as set forth on Schedule 3.05.
(c) The authorized capital stock of Opco consists of 200 shares of common
stock. The outstanding capital stock of Opco is 100 shares of common stock. The
Seller owns all the outstanding capital stock of Opco.
(d) Except as set forth in this Section 3.05 or on Schedule 3.05, there
are, and immediately after the Closing there will be, no outstanding (i) shares
of capital stock or voting securities of the Seller or Opco, (ii) securities of
the Seller or Opco convertible into or exchangeable for shares of capital stock
or voting securities of the Seller or Opco, as the case may be, (iii) options or
other rights to acquire from the Seller or Opco, or other obligation of the
Seller or Opco to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Seller or Opco, or (iv) other than as expressly permitted in the Transaction
Documents, no obligation of the Seller or Opco 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).
SECTION 3.06 Valid Issuance of Securities. Each of the Securities which
are being issued to the Buyers hereunder has been duly and validly authorized
and when issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be fully paid and nonassessable.
SECTION 3.07 Litigation. (a) There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Seller, threatened against or
affecting Seller or any of its properties before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or which could reasonably be expected to have a material adverse
effect on the business, financial condition, properties or operations of Seller,
nor is Seller aware that there is any basis for the foregoing.
(b) There is no action, suit, investigation or proceeding pending against,
or to the knowledge of Opco, threatened against or affecting Opco or any of its
properties before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement or which could
reasonably be expected to have a material adverse effect on the business,
financial condition, properties or operations of Opco, nor is Opco aware that
there is any basis for the foregoing.
SECTION 3.08 Financial Information. The financial statements of the
Company contained in Amendment No. 4 to the Form S-4 Registration Statement
filed by the Company
9
<PAGE>
with the Securities and Exchange Commission on July 30, 1999 present fairly, in
all material respects, the financial position of the Company and its
consolidated 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.
SECTION 3.09 Representations of Buyers. Seller has not relied on any
representations or warranties of Buyers or any Affiliate of Buyers not made in
this Agreement or any of the other Transaction Documents. Seller has not relied
on and acknowledges that no representations have been made by any Buyers or any
officers, employees, Affiliates, agents or representatives of Buyers, or any
Management Stockholder, except for representations and warranties expressly set
forth in this Agreement and the other Transaction Documents.
SECTION 3.10 Use of Proceeds. The proceeds from the Financings will be
used to fund the build out of, and operating and transaction expenses relating
to, the Seller's wireless communications network.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer (or in the case of Section 4.09, DLJMB only, and Sections 4.11
and 4.12, NWIP only) represents and warrants to Seller (or in the case of
Section 4.06, to Seller, NWIP and Nextel), severally as to itself only and not
jointly or as to any other Buyer, that as of the date hereof (and in the case of
Sections 4.11 and 4.12, as of the date of the completion of the License
Transfer):
SECTION 4.01 Existence and Power. Such Buyer, if not an individual, is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all powers (corporate, partnership or
otherwise) and all Permits required to carry on its business as now conducted.
Such Buyer, if an individual, has the legal capacity to enter into this
Agreement and the Transaction Documents to which it is a party.
SECTION 4.02 Authorization. The execution, delivery and performance by
such Buyer of this Agreement and each of the other Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby are or, when executed, will be within the powers (corporate,
partnership or otherwise) of such Buyer and have been or will have been duly
authorized by all necessary action on the part of such Buyer. This Agreement and
each other Transaction Document to which such Buyer is a party constitutes a
valid and binding agreement of such Buyer, each enforceable in accordance with
its respective terms, except (i) as limited by the applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement or creditors' rights
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generally, or (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
SECTION 4.03 Governmental Authorization. The execution, delivery and
performance by such Buyer of this Agreement and each other Transaction Document
to which such Buyer is a party and the consummation of the transactions
contemplated hereby and thereby 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 Section 2.02(b)(i) and as set forth in
Article 5.
SECTION 4.04 Noncontravention. The execution, delivery and performance by
such Buyer of this Agreement and each of the relevant Transaction Documents and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate the organizational documents of such Buyer, (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
such Buyer (or, in the case of NWIP, NWIP or Expansion Co.) or to a loss of any
material benefit to which such Buyer (or, in the case of NWIP, NWIP or Expansion
Co.) is entitled under any provision of any agreement or other instrument
binding upon such Buyer (or, in the case of NWIP, NWIP or Expansion Co.) or any
of its assets or properties, to the extent that any of the foregoing would have
a material adverse effect on such Buyer or would prevent or otherwise render
such Buyer unable to perform its obligations under this Agreement or any other
Transaction Document to which it is a party or (iv) result in the creation or
imposition of any material Lien on any property or asset of such Buyer (or, in
the case of NWIP, NWIP or Expansion Co.), to the extent that any of the
foregoing would have a material adverse effect on such Buyer or would prevent or
otherwise render such Buyer unable to perform its obligations under this
Agreement or any other Transaction Document to which it is a party.
SECTION 4.05 Purchase for Investment. Such Buyer is purchasing the
relevant Securities for investment for its own account and not with a view to,
or for sale in connection with, any distribution thereof.
SECTION 4.06 Private Placement. (a) Such Buyer understands that (i) the
offering and sale of the Securities hereby is intended to be exempt from
registration under the 1933 Act and (ii) there is only a limited market for the
Securities, and there can be no assurance that any Buyer will be able to sell or
dispose of the Securities to be purchased by such Buyer.
(b) Such Buyer's financial situation is such that such Buyer can afford to
bear the economic risk of holding the relevant Securities acquired hereunder for
an indefinite period of time, and such Buyer can afford to suffer the complete
loss of the investment in such Securities.
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(c) Such Buyer's knowledge and experience in financial and business
matters are such that it is capable of evaluating the merits and risks of the
investment in the relevant Securities, or such Buyer has been advised by a
representative possessing such knowledge and experience.
(d) Such Buyer understands that the Securities 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 Securities as set forth in the Shareholders' Agreement,
and that for an indefinite period following the date hereof there will be no (or
only a limited) public market for the Securities and that, accordingly, it may
not be possible for such Buyer to sell the Securities in case of emergency or
otherwise.
(e) Such Buyer and its representatives, including, to the extent it deems
appropriate, its professional, financial, tax and other advisors, have reviewed
all documents provided to them in connection with the investment in the
Securities, and such Buyer understands and is aware of the risks related to such
investment.
(f) Such Buyer and its representatives have been given the opportunity to
examine all documents and to ask questions of, and to receive answers from,
Seller and its representatives and Nextel and its representatives concerning the
terms and conditions of the acquisition of the Securities and related matters
and to obtain all additional information which such Buyer or its representatives
deem necessary.
(g) All written information which such Buyer has provided to Seller and
its representatives and Nextel and its representatives concerning such Buyer and
such Buyer's financial position was true, complete and correct at the time it
was provided.
(h) Such Buyer is an "Accredited Investor" as such term is defined in
Regulation D under the 1933 Act.
(i) Such Buyer is not relying on and acknowledges that no representation
is being made by any other Buyer, or any of its officers, employees, Affiliates,
agents or representatives, the Seller or any of its officers, employees,
Affiliates, agents or representatives, Nextel or any of its officers, employees,
Affiliates, agents or representatives, or any Management Stockholder, except for
representations and warranties expressly set forth in this Agreement and the
other Transaction Documents.
SECTION 4.07 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of such Buyer threatened against
or affecting, such Buyer before any court or arbitrator or any governmental
body, agency or official which could be reasonably expected to have a material
adverse effect on its ability to consummate the transactions contemplated by
this Agreement or the other Transaction Documents.
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SECTION 4.08 Brokers or Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by, will be
retained by or is authorized to act on behalf of such Buyer who might be
entitled to any fee or commission from the Seller upon consummation of the
transactions contemplated by this Agreement.
SECTION 4.09 Capital of DLJMB. DLJ Merchant Banking II, Inc. ("DLJMB II,
Inc.") is an indirect wholly-owned subsidiary of Donaldson Lufkin & Jenrette,
Inc. ("DLJ") and is the managing general partner of DLJMB and certain affiliated
investment vehicles that coinvest with DLJMB. DLJMB and the other DLJ Entities
were organized with committed capital of $3 billion, of which approximately 25%
remains available for investment. The scheduled term of DLJMB extends through
2005 and no event or circumstance has occurred that would reasonably be expected
to cause the term of DLJMB to expire or be subject to termination prior to the
last Subsequent Payment Date. Through DLJMB and the other DLJ Entities, DLJMB
II, Inc. has access to freely available cash in an amount sufficient to make in
full and in a timely manner all committed investments contemplated to be made by
it (including its transferees, if any) hereunder, including the Subsequent Cash
Contributions, in the aggregate amount of $7,951,499. As of the date hereof,
each of the DLJ Entities is an Affiliate of DLJ.
SECTION 4.10 Capital Commitment. Each Cash Investor has, and will have on
the Closing Date and on any Subsequent Payment Date, cash available to it in an
amount sufficient to make its Initial Cash Contribution or Subsequent Cash
Contribution, as the case may be, in accordance with the terms of Article 2.
SECTION 4.11 FCC Compliance; NWIP FCC Licenses. (a) Expansion Co. is the
holder of the NWIP FCC Licenses. Except as disclosed in Schedule 4.11, each of
the NWIP FCC Licenses is valid and in full force and effect. Except as disclosed
in Schedule 4.11, there are no conditions on the NWIP FCC Licenses that would
likely have a material adverse effect on such licenses or their use in an ESMR
network in the Territories as contemplated by the Joint Venture Agreement other
than those as set forth on the face of the NWIP FCC Licenses or in statutes and
FCC rules and policies of general applicability to the commercial mobile radio
industry. Except as disclosed in Schedule 4.11, there is no complaint,
investigation, notice of violation, or other proceeding against, or otherwise
relating to, the NWIP FCC Licenses, Expansion Co. or any member of the Nextel
Controlled Group pending or, to the knowledge of Expansion Co. or any member of
the Nextel Controlled Group, threatened by or before the FCC (i) that would
likely have a material adverse effect on the NWIP FCC Licenses or their use in
an ESMR network in the Territories as contemplated by the Joint Venture
Agreement, (ii) which questions or contests the validity of, or assignment to
the Company or any member of the Nextel Controlled Group, or seeks the
revocation, non-renewal or suspension of, any of the NWIP FCC Licenses, (iii)
which seeks the imposition of any modification or amendment with respect to any
of the NWIP FCC Licenses, or (iv) which could reasonably be expected to
adversely affect the ability of Seller to build and operate an iDEN system after
the Closing Date substantially as contemplated by the
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relevant Transaction Documents other than proceedings which generally affect the
commercial mobile radio industry. Except as disclosed in Schedule 4.11,
Expansion Co. and the Nextel Controlled Group are in compliance in all material
respects with the FCC Law, and the rules and regulations of the FCC, including
without limitation all applicable eligibility criteria for holding the NWIP FCC
Licenses, except to the extent that noncompliance would not likely have a
material adverse effect on the NWIP FCC Licenses or their use in an ESMR Network
in the Territories as contemplated by the Joint Venture Agreement.
(b) NWIP reaffirms the representations and warranties set forth in
Section 4.11(a) as of the date of the License Transfer, provided, that the
Seller acknowledges that NWIP is not responsible for a breach of such
representations and warranties under Section 4.11(a) resulting from any action
or inaction by the Seller or any of its subsidiaries with respect to such NWIP
FCC Licenses.
(c) NWIP has waived the requirement set forth in Section 6.2B of the
Joint Venture Agreement that, prior to the expansion of the Territory to include
some or all of the non-Special Option Sections, the Company shall have completed
the Build Out of all Year One Build Areas in the Initial Sections before the end
of the Election Period (as such terms are defined in the Joint Venture
Agreement).
SECTION 4.12 Newly Formed Corporation. Expansion Co. was incorporated on
August 11, 1999 in the State of Delaware solely for the purpose of effectuating
the transactions contemplated in this Agreement and the other Transaction
Documents and has not conducted any business or entered into any agreements or
commitments except with respect to the foregoing and 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. Expansion Co. has furnished to the Company a true and correct copy
of its Certificate of Incorporation and by-laws as in effect on the Closing
Date. The authorized capital stock of Expansion Co. consists of 100 shares of
common stock, no par value. The outstanding capital stock of Expansion Co. is
100 shares of common stock, all of which shares have been duly and validly
authorized, and are fully paid and nonassessable. NWIP owns all the outstanding
capital stock of Expansion Co. free and clear of any liens, and Expansion Co.
has no subsidiaries. Except as set forth in this Section 4.12, there are no
outstanding (i) shares of capital stock or voting securities of Expansion Co.,
(ii) securities of Expansion Co. convertible into or exchangeable for shares of
capital stock or voting securities of Expansion Co., (iii) options or other
rights to acquire from Expansion Co., or other obligation of Expansion Co. to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Expansion Co., or (iv)
obligation of Expansion 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). Expansion Co. (x) has obtained such
proper authorization as may be required from its Board of Directors and its
shareholders of all corporate action taken by Expansion Co., (y) keeps its
assets and liabilities
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separate from those of other entities (including Nextel and the Affiliates
thereof) and (z) does not hold itself out as being liable for the debts of
Nextel or any Affiliate thereof.
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01 Conditions to Obligations of each Buyer and Seller. The
obligations of each Buyer and Seller to consummate the Closing are subject to
the satisfaction of the following conditions:
(a) No provision of any applicable law, rule or regulation and no
effective or pending judgment, injunction, order or decree by any governmental
entity of competent jurisdiction shall prohibit the consummation of the Closing.
(b) All material actions by or in respect of, or filings, with, any
governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been taken, made or obtained.
(c) Subject to Section 2.01, each other Buyer shall have purchased the
Securities to be purchased by it hereunder by taking the action applicable to
such Buyer in accordance with Sections 2.02(a), (b) and (c).
(d) The closing of the Term C Loan under the Credit Facility shall have
occurred.
(e) Seller shall have received from NWIP true and correct copies of all
the documentation relating to (i) the transfer of assets contemplated by the
Asset Transfer Agreement and (ii) the provision by Nextel and/or its
subsidiaries to NWIP of the rights necessary to perform its obligations under
the Management Agreement.
ARTICLE 6
SURVIVAL; INDEMNIFICATION
SECTION 6.01 Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate delivered pursuant
hereto or in connection herewith shall survive the Closing until three years
after the Closing Date, provided that any party's representations and warranties
herein relating to payment in full of the Purchase Price or issuance or delivery
of Securities upon payment therefore, shall survive until such payments,
issuances and deliveries have been made or performed in full. Notwithstanding
the preceding sentence, any representation or warranty in respect of which
indemnity may be sought under this Agreement shall survive the time at which it
would otherwise terminate pursuant to the preceding
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sentence, if written notice of the inaccuracy or breach thereof giving rise to
such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time, but only as to such inaccuracy or
breach. Any actual or alleged breach of any representation or warranty made in
this Agreement shall not affect in any manner whatsoever the relative rights and
obligations of the parties to and under the Shareholders' Agreement.
SECTION 6.02 Indemnification. (a) Seller hereby indemnifies, severally and
not jointly, each Buyer and its Affiliates, limited partners, general partners,
directors, officers and employees (each, a "Buyer Indemnified Party") against
and agrees to hold each of them harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by any Buyer
Indemnified Party arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Seller pursuant to this
Agreement except to the extent (but only to the extent) any such Damages arise
out of or result from the gross negligence or willful misconduct of such Buyer
Indemnified Party or its Affiliates.
(b) Each Buyer hereby indemnifies, severally and not jointly, Seller and
its Affiliates, limited partners, general partners, directors, officers and
employees (each, a "Seller Indemnified Party") against and agrees to hold each
of them harmless from any and all Damages incurred or suffered by any Seller
Indemnified Party arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by such Buyer pursuant to this
Agreement except to the extent (but only to the extent) any such Damages arise
out of or result from the gross negligence or willful misconduct of such Seller
Indemnified Party or its Affiliates.
SECTION 6.03 Exclusivity. After the Closing, Section 6.02 will provide the
exclusive remedy for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the transactions
contemplated hereby except that Sections 2.03 and 2.04 will also provide
remedies for any breach under Article 2 (it being understood that the remedial
provisions of the other Transaction Documents shall apply to any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising thereunder).
ARTICLE 7
MISCELLANEOUS
SECTION 7.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to any Buyer, to such Buyer at the address specified by such Buyer on
the signature pages of this Agreement or in a notice given by such Buyer to
Seller for such purpose, provided that in the case of Buyers that are DLJ
Entities, a copy shall be sent to:
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Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: 212-450-4800
Attention: John Buttrick
if to Seller, to:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Fax: 425-828-8098
Attention: General Counsel
with a copy to:
Friedman Kaplan & Seiler LLP
875 Third Avenue, 8th Floor
New York, NY 10022
Fax: 212-355-6401
Attention: Gary D. Friedman
or to such other address or telecopy number and with such other copies as such
party may hereafter specify for the purpose of notice.
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding business day in the place of
receipt.
SECTION 7.02 Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 7.03 Expenses. All costs and expenses incurred in connection with
the preparation, negotiation, execution and delivery of this Agreement shall be
borne by the party incurring such cost or expense. Notwithstanding the preceding
sentence, any Buyer that defaults in its payment obligations under Article 2
shall pay on demand the Seller's costs (including reasonable attorney's fees and
expenses) of enforcement.
SECTION 7.04 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns and indemnified persons; provided
that except as provided in Section 2.03 no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of each other party hereto; provided however, that the Company may
collaterally assign its rights and interest in this Agreement to Opco's senior
lenders that have granted to members of the Nextel Group the rights described on
Exhibit 4.13 to the Joint Venture Agreement (or other rights as Nextel may
agree).
SECTION 7.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 7.06 Jurisdiction. The parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7.01 shall be deemed
effective service of process on such party.
SECTION 7.07 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.
SECTION 7.08 Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto. No
provision of this Agreement shall confer upon any Person other than the
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parties hereto (and Persons entitled to indemnification under Article 6 and
Nextel, which is entitled to rely on the representations and warranties made in
Section 4.06) any rights or remedies hereunder.
SECTION 7.09 Entire Agreement. This Agreement along with the Transaction
Documents constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
SECTION 7.10 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation hereof
SECTION 7.11 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforced in accordance with its
terms to the maximum extent permitted by law.
SECTION 7.12 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 7.13 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 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.
SECTION 7.14 Subrogation. Madison Dearborn acknowledges that DLJMB is a
third party beneficiary of its obligations to make Subsequent Cash Contributions
pursuant to Section 2.03. Upon a payment to Seller by DLJMB of a Madison
Dearborn Subsequent Cash Contribution pursuant to Section 2.03(d), DLJMB shall
be subrogated to the rights of Seller against Madison Dearborn with respect to
such Subsequent Cash Contribution payment obligations.
SECTION 7.15 Shareholders' Agreement.
(a) The Company and each of the Buyers approves and consents to, and
hereby effects (subject to the final proviso of this sentence), the amendment of
the Shareholders' Agreement to include Donald J. Manning ("Manning") as a party
thereto and a Shareholder and a Management Shareholder (as such terms are
defined therein) thereunder, entitled and subject to all of the rights, duties
and obligations of the same specified therein; provided, however, that Manning
shall not be deemed to be a Management Shareholder for purposes of Section 4.05
of
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the Shareholders' Agreement; provided, further, that the foregoing amendment
shall not be effective until Manning has delivered to the Company, in a form
acceptable to the Company, a written agreement setting forth his agreement to be
bound by the terms and conditions of the Shareholders' Agreement.
(b) The Company and each of the Buyers approves and consents to, and
hereby effects, the amendment of the Shareholders' Agreement to amend and
restate the definition of "Transaction Documents" therein to read in its
entirety as follows:
"Transaction Documents' means, collectively, the Transaction
Documents as defined in the Subscription Agreement and the Transaction
Documents as defined in the Expansion Subscription and Contribution
Agreement dated as of September 9, 1999 among the Company and the buyers
named therein."
(c) The Company and each of the Buyers acknowledges and agrees that the
Securities issued hereunder are subject to the Shareholders' Agreement, the
terms and conditions of which, as modified by this Section 7.15, are hereby
ratified in all respects.
SECTION 7.16 Custodial Agreement. The Company and each of the Buyers
acknowledges and agrees that the Securities issued hereunder are subject to the
Custodial Agreement and, in accordance with the terms of Section 5 thereof,
shall become and be delivered as Deposited Shares thereunder (as such term is
defined therein). The Company and each of the Buyers consents to the
supplementation of the Custodial Agreement to appoint the Custodian thereunder
the holder of all of the outstanding shares of Expansion Co. until the License
Transfer may be consummated or it is determined in accordance with the
Transaction Documents that such shares are to be returned to NWIP.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NEXTEL PARTNERS, INC., a Delaware corporation
By: /s/ John Chapple
----------------------------------------------
Name: John Chapple
Title: President and Chief Executive Officer
NEXTEL WIP CORP., a Delaware corporation
By:
----------------------------------------------
Name: Thomas J. Sidman
Title: President
Address: 2001 Edmund Halley Drive
Reston, VA 20191
Attn: General Counsel
Fax: (703) 433-4231
With a copy of notice to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attn: Jeanne Rickert
Fax: 216-579-0212
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NEXTEL PARTNERS, INC., a Delaware corporation
By:
----------------------------------------------
Name: John Chapple
Title: President and Chief Executive Officer
NEXTEL WIP CORP., a Delaware corporation
By: /s/ Alan Strauss
----------------------------------------------
Name: Alan Strauss
Title: Vice President
Address: 2001 Edmund Halley Drive
Reston, VA 20191
Attn: General Counsel
Fax: (703) 433-4231
With a copy of notice to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attn: Jeanne Rickert
Fax: 216-579-0212
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DLJ MERCHANT BANKING PARTNERS II, L.P., a
Delaware Limited Partnership
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
With a copy of notice to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attn: John Buttrick
Fax: 212-450-5426
DLJ MERCHANT BANKING PARTNERS II-A, L.P.,
a Delaware Limited Partnership
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
<PAGE>
DLJ OFFSHORE PARTNERS II, C.V., a Netherlands
Antilles Limited Partnership
By: DLJ Merchant Banking II, Inc., as advisory
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ DIVERSIFIED PARTNERS L.P., a Delaware
Limited Partnership
By: DLJ Diversified Partners, Inc., as managing
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
<PAGE>
DLJ DIVERSIFIED PARTNERS-A, L.P., a Delaware
Limited Partnership
By: DLJ Diversified Partners, Inc., as managing
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ MILLENNIUM PARTNERS, L.P., a Delaware
Limited Partnership
By: DLJ Merchant Banking II, Inc., as managing
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
<PAGE>
DLJ MILLENNIUM PARTNERS-A, L.P.
By: DLJ Merchant Banking II, Inc., as managing
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJMB FUNDING II, INC., a Delaware corporation
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ FIRST ESC, L.P.
By: DLJ LBO Plans Management Corporation, as
manager
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
<PAGE>
DLJ EAB PARTNERS, L.P.
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation, as
manager
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
UK INVESTMENT PLAN 1997 PARTNERS, a
Delaware Limited Partnership
By: UK Investment Plan 1997 Partners, Inc., as
general partner
By: /s/ Andrew H. Rush
----------------------------------------------
Name: Andrew H. Rush
Title: Managing Director
Address: c/o DLJ Merchant Banking II, Inc.
277 Park Avenue
New York, NY 10172
Fax: 212-892-7272
<PAGE>
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By: Madison Dearborn Partners II, L.P.,
its General Partner
By: Madison Dearborn Partners, Inc.,
its General Partner
By: /s/ [ILLEGIBLE]
----------------------------------------------
Name:
Title:
Address: 3 First National Plaza
Suite 3800
Chicago, Illinois 60602
Fax: 312-895-1226
EAGLE RIVER INVESTMENTS, LLC, a Washington
limited liability company
By:
----------------------------------------------
Name:
Title:
Address: 2300 Carillon Point
Kirkland, WA 98033-7355
Fax: 425-828-8060
MOTOROLA, INC., a Delaware corporation
By:
----------------------------------------------
Name:
Title:
Address: 1303 E. Algonquin Road
Schaumberg, Illinois 60196
Attn: General Counsel
Fax: 847-576-3628
<PAGE>
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By: Madison Dearborn Partners II, L.P.,
its General Partner
By: Madison Dearborn Partners, Inc.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 3 First National Plaza
Suite 3800
Chicago, Illinois 60602
Fax: 312-895-1226
EAGLE RIVER INVESTMENTS, LLC, a Washington
limited liability company
By: /s/ Dennis Weibling
----------------------------------------------
Name: Dennis Weibling
Title: Manager/President
Address: 2300 Carillon Point
Kirkland, WA 98033-7355
Fax: 425-828-8060
MOTOROLA, INC., a Delaware corporation
By
----------------------------------------------
Name:
Title:
Address: 1303 E. Algonquin Road
Schaumberg, Illinois 60196
Attn: General Counsel
Fax: 847-576-3628
<PAGE>
MADISON DEARBORN CAPITAL PARTNERS II,
L.P.
By: Madison Dearborn Partners II, L.P.,
its General Partner
By: Madison Dearborn Partners, Inc.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 3 First National Plaza
Suite 3800
Chicago, Illinois 60602
Fax: 312-895-1226
EAGLE RIVER INVESTMENTS, LLC, a Washington
limited liability company
By:
----------------------------------------------
Name:
Title:
Address: 2300 Carillon Point
Kirkland, WA 98033-7355
Fax: 425-828-8060
MOTOROLA, INC., a Delaware corporation
By: /s/ Charles F. Wright
----------------------------------------------
Name: Charles F. Wright
Title: Sr. Vice President
Address: 1303 E. Algonquin Road
Schaumberg, Illinois 60196
Attn: General Counsel
Fax: 847-576-3628
<PAGE>
CASCADE INVESTMENTS, L.L.C.
By: /s/ [ILLEGIBLE]
----------------------------------------------
Name:
Title:
Address: 2365 Carillon Point
Kirkland, Washington 98033
Attention: Michael Larson
Fax: 425-889-0288
MADRONA INVESTMENT GROUP, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, Washington 98014
Attention: Tom Alberg
Fax: 206-674-3010
AMPERSAND HOLDINGS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1301 Santa Barbara Street
Santa Barbara, California 93101
Attention: Gregory Parker
Fax: 805-963-7801
STEVE HOOPER
By:
----------------------------------------------
Address: 3500 Carillon Point
Kirkland, Washington 98033
Fax: 425-602-0001
<PAGE>
CASCADE INVESTMENTS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 2365 Carillon Point
Kirkland, Washington 98033
Attention: Michael Larson
Fax: 425-889-0288
MADRONA INVESTMENT GROUP, L.L.C.
By: /s/ [ILLEGIBLE]
----------------------------------------------
Name:
Title: Partner
Address: 1000 Second Avenue
Suite 3700
Seattle, Washington 98014
Attention: Tom Alberg
Fax: 206-674-3010
AMPERSAND HOLDINGS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1301 Santa Barbara Street
Santa Barbara, California 93101
Attention: Gregory Parker
Fax: 805-963-7801
<PAGE>
CASCADE INVESTMENTS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 2365 Carillon Point
Kirkland, Washington 98033
Attention: Michael Larson
Fax: 425-889-0288
MADRONA INVESTMENT GROUP, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, Washington 98014
Attention: Tom Alberg
Fax: 206-674-3010
AMPERSAND HOLDINGS, L.L.C.
By: /s/ Gregory J. Parker
----------------------------------------------
Name: Gregory J. Parker
Title: President
Address: 1301 Santa Barbara Street
Santa Barbara, California 93101
Attention: Gregory Parker
Fax: 805-963-7801
STEVE HOOPER
By:
----------------------------------------------
Address: 3500 Carillon Point
Kirkland, Washington 98033
Fax: 425-602-0001
<PAGE>
CASCADE INVESTMENTS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 2365 Carillon Point
Kirkland, Washington 98033
Attention: Michael Larson
Fax: 425-889-0288
MADRONA INVESTMENT GROUP, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, Washington 98014
Attention: Tom Alberg
Fax: 206-674-3010
AMPERSAND HOLDINGS, L.L.C.
By:
----------------------------------------------
Name:
Title:
Address: 1301 Santa Barbara Street
Santa Barbara, California 93101
Attention: Gregory Parker
Fax: 805-963-7801
STEVE HOOPER
By: /s/ Steve Hooper
----------------------------------------------
Address: 3500 Carillon Point
Kirkland, Washington 98033
Fax: 425-602-0001
<PAGE>
ARTHUR HARRIGAN
By: /s/ Arthur Harrigan
----------------------------------------------
Address: 2300 Carillon Point
Kirkland, Washington
Fax: 425-828-8061
JOHN CHAPPLE
By:
----------------------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
GENERAL ELECTRIC CAPITAL CORPORATION
By:
----------------------------------------------
Name:
Title:
Address: c/o GE Capital Services
Structured Finance Group, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: Portfolio-Operations
Fax: 203-961-2017
<PAGE>
ARTHUR HARRIGAN
By:
----------------------------------------------
Address: 2300 Carillon Point
Kirkland, Washington
Fax: 425-828-8061
JOHN CHAPPLE
By: /s/ John Chapple
----------------------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
GENERAL ELECTRIC CAPITAL CORPORATION
By:
----------------------------------------------
Name:
Title:
Address: c/o GE Capital Services
Structured Finance Group, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: Portfolio-Operations
Fax: 203-961-2017
<PAGE>
ARTHUR HARRIGAN
By:_________________________________
Address: 2300 Carillon Point
Kirkland, Washington
Fax: 425-828-8061
JOHN CHAPPLE
By:_________________________________
Address: 2300 Carillon Point
Kirkland, Washington
Fax: 425-828-8098
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Molly S. Fergusson
---------------------------------
Name: Molly S. Fergusson
Title: Manager, Operations
Address: % GE Capital Services
Structured Finance Group, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: Portfolio-Operations
Fax: 203-961-2017
<PAGE>
ARES LEVERAGED INVESTMENT FUND, L.P.
By: ARES Management, L.P.
By: ARES Operating Member, LLC, its General
Partner
By: /s/ Jeff Serota
---------------------------------
Name: Jeff Serota
Title: Vice President
Address: 1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Fax: 310-201-4170
ARES LEVERAGED INVESTMENT
FUND II, L.P.
By: ARES Management II, L.P.
By: ARES Operating Member II, LLC, its
General Partner
By: /s/ Jeff Serota
---------------------------------
Name: Jeff Serota
Title: Vice President
Address: 1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Fax: 310-201-4170
<PAGE>
THE HUFF ALTERNATIVE INCOME
FUND, L.P.
By: /s/ Donna B. Charlton
---------------------------------
Name: Donna B. Charlton
Title: President of General Partner
Address: 1776 On the Green
67 Park Place
Morristown, NJ 07960
Fax: 973-984-5818
TCW
By:_________________________________
Name:
Title:
Address: 11100 Santa Monica Blvd.,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
TCW/CRESCENT MEZZANINE PARTNERS II, L.P.
TCW/CRESCENT MEZZANINE TRUST II
By: TCW/CRESCENT MEZZANINE II, L.P., its
general partner or managing owner
By: TCW/CRESCENT MEZZANINE, L.L.C., its
general partner
By:_________________________________
Name:
Title:
Address: 11100 Santa Monica Blvd.,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
<PAGE>
THE HUFF ALTERNATIVE INCOME
FUND, L.P.
By:_________________________________
Name: Donna B. Charlton
Title: President of General Partner
Address: 1776 On the Green
67 Park Place
Morristown, NJ 07960
Fax: 973-984-5818
TCW
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
TCW/CRESCENT MEZZANINE PARTNERS II, L.P.
TCW/CRESCENT MEZZANINE TRUST II
By: TCW/CRESCENT MEZZANINE II, L.P., its
general partner or managing owner
By: TCW/CRESCENT MEZZANINE, L.L.C., its
general partner
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
<PAGE>
TCW SHARED OPPORTUNITY FUND III, L.P.
By: TCW ASSET MANAGEMENT COMPANY, an
Investment Advisor
By: /s/ Robert D. Beyer
---------------------------------
Name: Robert D. Beyer
Title: Group Managing Director
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
SHARED OPPORTUNITY FUND IIB, LLC
By: TCW ASSET MANAGEMENT COMPANY, as
Investment Advisor
By: /s/ Robert D. Beyer
---------------------------------
Name: Robert D. Beyer
Title: Group Managing Director
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
<PAGE>
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW ASSET MANAGEMENT COMPANY, an
Investment Advisor
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
By: /s/ Robert D. Beyer
---------------------------------
Name: Robert D. Beyer
Title: Group Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
TCW LEVERAGED INCOME TRUST II, L.P.
By: TCW (LINC II), L.P., as General Partner
By: TCW ADVISORS (BERMUDA), LTD., as
General Partner
By: /s/ Robert D. Beyer
---------------------------------
Name: Robert D. Beyer
Title: Group Managing Director
By: TCW INVESTMENT MANAGEMENT
COMPANY, as Investment Advisor
By: /s/ Jean-Marc Chapus
---------------------------------
Name: Jean-Marc Chapus
Title: Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW (BERMUDA), LIMITED, as General
Partner
By: /s/ Robert D. Beyer
---------------------------------
Name: Robert D. Beyer
Title: Group Managing Director
Address: 11100 Santa Monica Blvd,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW (BERMUDA), LIMITED, as General
Partner
By:_________________________________
Name:
Title:
Address: 11100 Santa Monica Blvd.,
Suite 2000
Los Angeles, CA 90025
Fax: 310-235-5967
JOHN THOMPSON
By: /s/ John Thompson
---------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
DAVID AAS
By: David Aas
---------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
PERRY SATTERLEE
By: Perry Satterlee
---------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
34
<PAGE>
MARK FANNING
By: Mark Fanning
---------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
DAVID THALER
By: /s/ David Thaler
---------------------------------
Address: 4500 Carillon Point
Kirkland, Washington 98033
Fax: 425-828-8098
35
<PAGE>
SCHEDULE A
Schedule of Investors
Ampersand Holdings, LLC
ARES Leveraged Investment Fund II, LP
ARES Leveraged Investment Fund, LP
Arthur Harrigan
Cascade Investments, LLC
DLJ EAB Partners, LP
DLJ Diversified Partners-A, LP
DLJ First ESC, LP
DLJ Millenium Partners, LP
DUJ Millenium Partners-A, LP
DLJ Merchant Banking Partners II-A, LP
DLJ Diversified Partners, LP
DLJ Offshore Partners II, CV
DLJ Merchant Banking Partners II, LP
DLJESC II, LP
DLJMB Funding II, Inc.
Eagle River Investments, LLC
General Electric Capital Corp.
John Chapple
Madison Dearborn Capital Partners II, LP
Madrona Investment Group, LLC
Motorola, Inc.
Nextel Communications, Inc.
Steve Hooper
TCW Shared Opportunity Fund IIB, LLC
TCW Shared Opportunity Fund III, LP
TCW Leveraged Income Trust, LP
TCW/Crescent Mezzanine Partners II, LP
TCW/Crescent Mezzanine Trust
TCW Shared Opportunity Fund II, LP
TCW Leveraged Income Trust II, LP
The Huff Alternative Income Fund, LP
<PAGE>
SCHEDULE B
Seller's Account Information
Name: Nextel Partners Operating Corp.
Bank: The Bank of New York
Address: One Wall Street, NY, NY 10286
ABA#: 021 000 018
GLA#: 111 363
Acct#:
Attn: Tom Bosh
<PAGE>
SCHEDULE C
Option FCC Licenses/Option Territories
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Service Service Nextel PTNR PTNR Service
Area Area Section Section Launch Build Area
Number Category Number Name Quarter Year Name State Type
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18 Option 9 North Arkansas Q101 3 FAYETTEVILLE-SPRINGDALE AR Urban
- -----------------------------------------------------------------------------------------------------------------------
34 Option 9 North Arkansas Q101 3 FORT SMITH (AR-OK) AR Urban
- -----------------------------------------------------------------------------------------------------------------------
136 Option 30 Little Rock Q400 2 LITTLE ROCK-NORTH LITTLE RO AR Urban
- -----------------------------------------------------------------------------------------------------------------------
137 Option 30 Little Rock Q101 3 PINE BLUFF AR Urban
- -----------------------------------------------------------------------------------------------------------------------
182 Option 30 Little Rock Q101 3 I 30 AR Roadway
- -----------------------------------------------------------------------------------------------------------------------
212 Option 30 Little Rock Q101 3 Arkadelphia AR Urban
- -----------------------------------------------------------------------------------------------------------------------
213 Option 30 Little Rock Q101 3 Hope AR Urban
- -----------------------------------------------------------------------------------------------------------------------
224 Option 9 North Arkansas Q101 3 Clarksville AR Urban
- -----------------------------------------------------------------------------------------------------------------------
225 Option 30 Little Rock Q101 3 Conway AR Urban
- -----------------------------------------------------------------------------------------------------------------------
227 Option 9 North Arkansas Q101 3 Russellville AR Urban
- -----------------------------------------------------------------------------------------------------------------------
325 Option 30 Little Rock Q400 2 Hot Springs AR Urban
- -----------------------------------------------------------------------------------------------------------------------
442 Option 30 Little Rock Q101 3 I 40 AR Roadway
- -----------------------------------------------------------------------------------------------------------------------
443 Option 9 North Arkansas Q101 3 I 40 AR Roadway
- -----------------------------------------------------------------------------------------------------------------------
444 Option 30 Little Rock Q400 2 I 40 AR Roadway
- -----------------------------------------------------------------------------------------------------------------------
89 Option 34 Georgia Cities Q300 2 MACON GA Urban
- -----------------------------------------------------------------------------------------------------------------------
100 Option 20 Dothan Q400 2 COLUMBUS (GA-AL) GA Urban
- -----------------------------------------------------------------------------------------------------------------------
110 Option 34 Georgia Cities Q400 2 WARNER ROBINS GA Urban
- -----------------------------------------------------------------------------------------------------------------------
145 Option 20 Dothan Q300 2 ALBANY GA Urban
- -----------------------------------------------------------------------------------------------------------------------
163 Option 34 Georgia Cities Q300 2 I 16 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
236 Option 34 Georgia Cities Q300 2 Dublin GA Urban
- -----------------------------------------------------------------------------------------------------------------------
261 Option 20 Dothan Q400 2 I 185 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
265 Option 20 Dothan Q400 2 US Hwy 82 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
378 Option 20 Dothan Q400 2 Moultrie GA Urban
- -----------------------------------------------------------------------------------------------------------------------
396 Option 34 Georgia Cities Q300 2 Valdosta GA Urban
- -----------------------------------------------------------------------------------------------------------------------
555 Option 20 Dothan Q400 2 I 85 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
559 Option 34 Georgia Cities Q300 2 I 75 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
561 Option 34 Georgia Cities Q300 2 I 75 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
815 Option 36 East Georgia Q300 2 I 16 GA Roadway
- -----------------------------------------------------------------------------------------------------------------------
102 Option 3 Evansville Q101 3 EVANSVILLE (IN-KY) IN Urban
- -----------------------------------------------------------------------------------------------------------------------
122 Option 4 Central IL Q400 2 I 70 IN Roadway
- -----------------------------------------------------------------------------------------------------------------------
134 Option 4 Central IL Q400 2 TERRE HAUTE IN Urban
- -----------------------------------------------------------------------------------------------------------------------
149 Option 3 Evansville Q101 3 I 64 IN Roadway
- -----------------------------------------------------------------------------------------------------------------------
228 Option 4 Central IL Q400 2 Crawfordsville IN Urban
- -----------------------------------------------------------------------------------------------------------------------
274 Option 4 Central IL Q400 2 US Hwy 41 IN Roadway
- -----------------------------------------------------------------------------------------------------------------------
289 Option 3 Evansville Q101 3 US Hwy 41 IN Roadway
- -----------------------------------------------------------------------------------------------------------------------
339 Option 3 Evansville Q101 3 Vincennes IN Urban
- -----------------------------------------------------------------------------------------------------------------------
355 Option 3 Evansville Q101 3 Mount Vernon IN Urban
- -----------------------------------------------------------------------------------------------------------------------
366 Option 4 Central IL Q101 3 Russelville IN Urban
- -----------------------------------------------------------------------------------------------------------------------
369 Option 3 Evansville Q101 3 Princeton IN Urban
- -----------------------------------------------------------------------------------------------------------------------
824 Option 4 Central IL Q400 2 I 74 IN Roadway
- -----------------------------------------------------------------------------------------------------------------------
86 Option 3 Evansville Q101 3 OWENSBORO KY Urban
- -----------------------------------------------------------------------------------------------------------------------
574 Option 3 Evansville Q101 3 US Hwy 41 KY Roadway
- -----------------------------------------------------------------------------------------------------------------------
805 Option 9 North Arkansas Q101 3 I 40 OK Roadway
- -----------------------------------------------------------------------------------------------------------------------
90 Option 13 Central Texas Q101 3 ABILENE TX Urban
- -----------------------------------------------------------------------------------------------------------------------
469 Option 13 Central Texas Q101 3 I 20 TX Roadway
- -----------------------------------------------------------------------------------------------------------------------
609 Option 11 South Texas Q400 2 LAREDO TX Urban
- -----------------------------------------------------------------------------------------------------------------------
611 Option 11 South Texas Q400 2 MCALLEN-EDINBURG-MISSION TX Urban
- -----------------------------------------------------------------------------------------------------------------------
612 Option 11 South Texas Q400 2 BROWNSVILLE TX Urban
- -----------------------------------------------------------------------------------------------------------------------
613 Option 11 South Texas Q400 2 HARLINGEN TX Urban
- -----------------------------------------------------------------------------------------------------------------------
641 Option 11 South Texas Q400 2 I 35 TX Roadway
- -----------------------------------------------------------------------------------------------------------------------
807 Option 11 South Texas Q400 2 US Hwy 77 TX Roadway
- -----------------------------------------------------------------------------------------------------------------------
809 Option 11 South Texas Q400 2 US Hwy 281 TX Roadway
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Service
Area Avail Avail
Number Start End SQ_MI '97 POP
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
18 454 132,776
- ------------------------------------------------------------------------------------------------------------------------------
34 417 140,428
- ------------------------------------------------------------------------------------------------------------------------------
136 758 393,323
- ------------------------------------------------------------------------------------------------------------------------------
137 328 73,077
- ------------------------------------------------------------------------------------------------------------------------------
182 Texarkana, TX LITTLE ROCK-NORTH LITTLE ROCK, AR 806 56,687
- ------------------------------------------------------------------------------------------------------------------------------
212 77 12,811
- ------------------------------------------------------------------------------------------------------------------------------
213 77 13,165
- ------------------------------------------------------------------------------------------------------------------------------
224 77 10,159
- ------------------------------------------------------------------------------------------------------------------------------
225 77 40,819
- ------------------------------------------------------------------------------------------------------------------------------
227 77 32,985
- ------------------------------------------------------------------------------------------------------------------------------
325 77 41,550
- ------------------------------------------------------------------------------------------------------------------------------
442 CONWAY, FAUKNER COUNTY LITTLE ROCK-NORTH LITTLE ROCK, AR 89 10,890
- ------------------------------------------------------------------------------------------------------------------------------
443 CONWAY, FAUKNER COUNTY FORT SMITH, AR-OK 696 41,370
- ------------------------------------------------------------------------------------------------------------------------------
444 ST. FRANCIS COUNTY BORDER, WEST LITTLE ROCK-NORTH LITTLE ROCK, AR 412 17,179
- ------------------------------------------------------------------------------------------------------------------------------
89 516 222,174
- ------------------------------------------------------------------------------------------------------------------------------
100 815 260,788
- ------------------------------------------------------------------------------------------------------------------------------
110 168 48,801
- ------------------------------------------------------------------------------------------------------------------------------
145 441 116,140
- ------------------------------------------------------------------------------------------------------------------------------
163 MACON, GA Candler COUNTY, WEST 642 33,175
- ------------------------------------------------------------------------------------------------------------------------------
236 77 27,621
- ------------------------------------------------------------------------------------------------------------------------------
261 I-85 INTERSECTION COLUMBUS, GA-AL 180 4,848
- ------------------------------------------------------------------------------------------------------------------------------
265 TIFF COUNTY BORDER, WEST ALBANY, GA 134 12,478
- ------------------------------------------------------------------------------------------------------------------------------
378 77 20,924
- ------------------------------------------------------------------------------------------------------------------------------
396 27 3,739
- ------------------------------------------------------------------------------------------------------------------------------
555 COWETA COUNTY BORDER, SOUTH AUBURN-OPELIKA, AL 348 68,423
- ------------------------------------------------------------------------------------------------------------------------------
559 BUTTS COUNTY BORDER, SOUTH MACON, GA 167 10,095
- ------------------------------------------------------------------------------------------------------------------------------
561 MACON, GA Floridia Border 1141 152,616
- ------------------------------------------------------------------------------------------------------------------------------
815 Bryan COUNTY BORDER, NORTHWEST Candler COUNTY BORDER, WEST 336 9,437
- ------------------------------------------------------------------------------------------------------------------------------
102 625 244,359
- ------------------------------------------------------------------------------------------------------------------------------
122 Putnam County - Morgan County Border Terre Haute, IN 231 11,644
- ------------------------------------------------------------------------------------------------------------------------------
134 453 112,881
- ------------------------------------------------------------------------------------------------------------------------------
149 HARRISON COUNTY BORDER, EAST WASHINGTON COUNTY BORDER, WEST 1256 63,446
- ------------------------------------------------------------------------------------------------------------------------------
228 77 20,849
- ------------------------------------------------------------------------------------------------------------------------------
274 TERRE HAUTE, IN KNOX COUNTY BORDER, NORTH 221 15,324
- ------------------------------------------------------------------------------------------------------------------------------
289 SULLIVAN COUNTY BORDER, SOUTH I-64 INTERSECTION, GIBSON COUNTY 259 11,329
- ------------------------------------------------------------------------------------------------------------------------------
339 77 24,777
- ------------------------------------------------------------------------------------------------------------------------------
355 77 9,791
- ------------------------------------------------------------------------------------------------------------------------------
366 77 1,994
- ------------------------------------------------------------------------------------------------------------------------------
369 77 11,992
- ------------------------------------------------------------------------------------------------------------------------------
824 CRAWFORDVILLE, IN DANVILLE, IL 310 14,856
- ------------------------------------------------------------------------------------------------------------------------------
86 285 80,502
- ------------------------------------------------------------------------------------------------------------------------------
574 EVANSVILLE, IN-KY Western Kentucky Pkwy INTERSECTION, HOPKINS COUNTY 217 7,883
- ------------------------------------------------------------------------------------------------------------------------------
805 FORT SMITH, AR-OK Muskogee COUNTY BORDER, EAST 273 22,068
- ------------------------------------------------------------------------------------------------------------------------------
90 507 119,550
- ------------------------------------------------------------------------------------------------------------------------------
469 ABILENE, TX PALO PINTO COUNTY BORDER, SOUTH 505 22,126
- ------------------------------------------------------------------------------------------------------------------------------
609 389 171,182
- ------------------------------------------------------------------------------------------------------------------------------
611 630 472,159
- ------------------------------------------------------------------------------------------------------------------------------
612 189 168,130
- ------------------------------------------------------------------------------------------------------------------------------
613 203 112,190
- ------------------------------------------------------------------------------------------------------------------------------
641 Medina County BORDER, SOUTH Laredo, TX 804 18,863
- ------------------------------------------------------------------------------------------------------------------------------
807 Kleberg COUNTY BORDER, NORTH HARLINGEN, TX 671 19,293
- ------------------------------------------------------------------------------------------------------------------------------
809 Jim Wells COUNTY BORDER, SOUTH MCALLEN-EDINBURG-MISSION, TX 501 9,545
- ------------------------------------------------------------------------------------------------------------------------------
Arkansas Total: 4,422 1,017,219
Georgia Total: 5,069 991,259
Indiana Total: 3,740 543,242
Kentucky Total: 502 88,385
Oklahoma Total: 273 22,068
Texas Total: 4,399 1,113,038
------ ---------
Optional Territory: 18,405 3,775,211
</TABLE>
<PAGE>
SCHEDULE D
Transaction Documents
o this Agreement
o the Asset Transfer and Reimbursement Agreement
o Supplement No. 1 to Custodial Agreement of even date herewith among the
Company, NWIP and Harris Trust Company of New York
o Supplement No. 1 to iDEN Infrastructure Equipment Purchase Agreement of
even date herewith between Opco and Motorola
o the Management Agreement
o First Amendment to Analog Management Agreement of even date herewith
between Opco and NWIP
<PAGE>
SCHEDULE 3.04
Consents
NWIP must waive the condition set forth in the second sentence of Section 6.2B
of the Joint Venture Agreement
<PAGE>
Schedule 3.05
Equity Capitalization (1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Shareholder Pre-Closing Expansion Post-Closing
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Madison Dearborn Capital Partners II, LP 3,624,972 713,439 4,338,411
- ----------------------------------------------------------------------------------------------
DLJ Merchant Banking Ptr. II, LP 2,393,716 471,113 2,864,829
- ----------------------------------------------------------------------------------------------
DLJ Merchant Banking Ptr. II-A, LP 95,329 18,762 114,091
- ----------------------------------------------------------------------------------------------
DLJ Offshore Partners II, CV 117,710 23,167 140,877
- ----------------------------------------------------------------------------------------------
DLJ Diversified Partners, LP 139,947 27,543 167,490
- ----------------------------------------------------------------------------------------------
DLJ Diversified Partners-A, LP 51,972 10,229 62,201
- ----------------------------------------------------------------------------------------------
DLJ EAB Partners LP 10,747 2,116 12,863
- ----------------------------------------------------------------------------------------------
DLJ ESC II, LP 451,394 88,839 540,233
- ----------------------------------------------------------------------------------------------
DLJ First ESC, LP 4,606 907 5,513
- ----------------------------------------------------------------------------------------------
DLJ Millenium Partners, LP 38,704 7,617 46,321
- ----------------------------------------------------------------------------------------------
DLJ Millenium Partners-A, LP 7,549 1,485 9,034
- ----------------------------------------------------------------------------------------------
DLJMB Funding II, Inc. 424,993 96,107 521,100
- ----------------------------------------------------------------------------------------------
UK Investment Plan 1997 Partners 63,333 0 63,333
- ----------------------------------------------------------------------------------------------
The Huff Alternative Income Fund, LP 2,000,000 373,230 2,373,230
- ----------------------------------------------------------------------------------------------
TCW/Crescent Mezzanine Partners II, LP 482,521 90,046 572,567
- ----------------------------------------------------------------------------------------------
TCW/Crescent Mezzanine Trust II 117,479 21,924 139,403
- ----------------------------------------------------------------------------------------------
TCW Leveraged Income Trust, LP 150,000 27,992 177,992
- ----------------------------------------------------------------------------------------------
TCW Leveraged Income Trust II, LP 150,000 27,992 177,992
- ----------------------------------------------------------------------------------------------
TCW Shared Opportunity Fund II, LP 51,304 9,574 60,878
- ----------------------------------------------------------------------------------------------
TCW Shared Opportunity Fund IIB, LLC 34,348 6,410 40,758
- ----------------------------------------------------------------------------------------------
TCW Shared Opportunity Fund III, LP 214,348 40,001 254,349
- ----------------------------------------------------------------------------------------------
Ares Leveraged Investment Fund, LP 150,000 27,992 177,992
- ----------------------------------------------------------------------------------------------
Ares Leveraged Investment Fund II, LP 150,000 27,992 177,992
- ----------------------------------------------------------------------------------------------
Madrona Investment Group, LLC 69,861 13,037 82,898
- ----------------------------------------------------------------------------------------------
Ampersand Holdings, LLC 419,271 78,243 497,514
- ----------------------------------------------------------------------------------------------
Steve Hooper 19,960 3,725 23,685
- ----------------------------------------------------------------------------------------------
John Chapple 19,960 3,725 23,685
- ----------------------------------------------------------------------------------------------
Arthur Harrigan 9,979 1,862 11,841
- ----------------------------------------------------------------------------------------------
GE Capital Services Structured Finance Group, Inc. 439,248 160,213 599,461
- ----------------------------------------------------------------------------------------------
NMS Capital, LP 419,271 0 419,271
- ----------------------------------------------------------------------------------------------
Cascade Investments, LLC 698,800 130,406 829,206
- ----------------------------------------------------------------------------------------------
Eagle River Investments, LLC 2,622,000 501,613 3,123,613
- ----------------------------------------------------------------------------------------------
Motorola, Inc. 1,836,649 342,747 2,179,396
- ----------------------------------------------------------------------------------------------
Nextel Partners - Management 0 142,422 142,422
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Nextel- Series B Preferred 2,185,000 2,185,000
- ----------------------------------------------------------------------------------------------
Nextel- Series C Preferred 8,740,000 2,038,771 10,778,771
- ----------------------------------------------------------------------------------------------
Nextel- Series D Preferred 2,185,000 0 2,185,000
- ----------------------------------------------------------------------------------------------
0
- ----------------------------------------------------------------------------------------------
Nextel Partners Management - Common 1,462,499 0 1,462,499
- ----------------------------------------------------------------------------------------------
Eagle River - Common 126,389 0 126,389
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) All shares are Series A Preferred Stock unless otherwise indicated.
<PAGE>
SCHEDULE 4.11
SCHEDULE OF EXCEPTIONS
Pursuant to Section 4.1 of the Agreement, the following sets forth certain
disclosures and other exceptions to the representations made at Section 4.1 of
the Agreement regarding the validity of the FCC Licenses. This schedule is
divided into two parts: Part I addresses issues that may affect multiple
licenses among the FCC Licenses, while Part II addresses issues that affect only
individual licenses among the FCC Licenses.
Part I: Issues Affecting Multiple Licenses
1. Different Types of Licenses Carry Different FCC Obligations: The
licensee rights and obligations applicable to the FCC Licenses are not uniform
but rather depend upon the conditions under which each license was granted. The
FCC Licenses generally fall into three categories as follows:
a. EA Licenses: Some of the FCC Licenses are authorizations, or
geographically "partitioned" portions of authorizations, that were issued to
Nextel as a result of an FCC spectrum auction.
b. Wide Area Licenses: Other licenses among the FCC Licenses were granted
at specific sites, as opposed to Economic Areas. These licenses authorized
Nextel to build out the related channels in analog or digital mode and were
granted five-year waivers of the traditional one-year construction deadline
applicable to site-specific licenses. These site-specific, five-year,
analog/digital authorizations are known as Nextel's "wide-area" licenses. On May
20, 1997 the FCC issued an order (DA 97-1059) finding that the wide-area
licenses of Nextel and other parties qualified for "rejustification" of their
extended construction periods but also shortened the length of the construction
periods from five years to two with a final deadline of May 20, 1999 or the
earlier expiration date of the license, whichever comes first. On April 15,
1999, the FCC announced through a Public Notice (DA 99-698) that the FCC was
temporarily suspending the May 20, 1999 construction deadline for wide-area
licensees due to a decision by the U.S. Court of Appeals for the District of
Columbia in Fresno Mobile Radio v. FCC, 165 F.3d 965 (D.C. Cir., Feb 5, 1999).
On May 21, 1999, the FCC solicited comments on the construction requirements for
800 MHz wide area licensees (Public Notice, DA 99-974). The FCC has not released
a decision in this proceeding.
<PAGE>
c. Analog Licenses: Another group of licenses reflected among the FCC
Licenses were granted on a site-specific basis and authorized only analog
operations. No waiver of the traditional one-year construction deadline was
requested or granted. Other analog licenses among the FCC Licenses may appear on
the FCC's database as owned by Nextel, but because Nextel has not yet closed on
the purchase and sale of the facility, it may still be deemed subject to a
Nextel management agreement and therefore not qualified for assignment from
Nextel to any third party. Nextel is currently working to resolve these issues
by closing on the related transactions.
2. Chadmoore Request for Finders Preference against Southeast Wide Area
Licenses: On September 18, 1995 Chadmoore Communications ("Chadmoore") filed a
request for a finder's preference (the "Chadmoore Request") against the
"wide-area" authorizations initially granted to Transit Communications
("Transit"), which were subsequently assigned to Dial Call, Inc. and then
assigned to Nextel. (Case No. 95F860). The Chadmoore Request alleged that
Transit misrepresented the number of analog channels it had constructed on
several analog stations, and that therefore the resulting wide-area grants on
the same channels were improper. Chadmoore claimed that it should be awarded all
of the wide-area licenses that were granted to Transit and now held by Nextel.
Thus, if successful, Chadmoore may become a short-spaced co-channel licensee or
an incumbent licensee in areas where Nextel is either assigning wide-area
licenses or EA licenses as part of the FCC Licenses. In support of the Chadmoore
Request, Chadmoore incorporated by reference numerous finder's preference
requests filed against Transit's analog stations. The individual analog requests
were filed by Chadmoore itself and by Peacock's Radio and Wild's Computer,
Partnership ("Peacock"). On November 22, 1995, Dial Call, Inc. filed a Motion to
Dismiss demonstrating numerous procedural defects with Chadmoore's filing.
Chadmoore opposed the Motion. On January 31, 1997, the FCC requested further
information from Nextel regarding Chadmoore's substantive allegations. On March
18, 1997, Nextel responded. Chadmoore replied to Nextel's filing on April 7,
1997. The Motion to Dismiss has not been ruled upon by the FCC and the FCC has
not reached a decision in this proceeding. Further, through an agreement between
Nextel and Peacock, Peacock has withdrawn 33 of the analog finder's preference
requests that it had filed against the Transit stations. The FCC announced the
withdrawal of the 33 Peacock cases by Public Notice, dated June 30, 1999 (DA
99-1123).
2
<PAGE>
Part II: Issues Affecting Individual Licenses
1. WPDX385 in Worthington, IN (861, 863, 864, 865.1125, 862.6125): Nextel and
the former licensee have not yet consummated the transaction. Thus, Nextel
is not yet the legal owner of the subject facility. Nextel expects to
close the transaction in due course. Until consummation of the underlying
transaction, Partner is subject to the FCC's rules regarding protection of
"incumbent" SMR licensees.
2. WPLM745 (C Block EA License)/KNRU551, Clay City, IN (865.7375): The
KNRU551 865.7375 MHz channel is not on the list of assets to be assigned.
On July 16, 1997, Nextel filed an informal request for reinstatement of
channel 865.7375 MHz due to an error by the FCC in superseding the
license. The FCC has yet to act on this request. However, Nextel was
awarded and is assigning the C Block EA license (WPLM745) to Partner. To
moot this issue, Nextel will withdraw its informal request for action with
the FCC to clear use of this channel pursuant to the EA license and to
make clear that the KNRU551 license is no longer subject to any
reinstatement request.
3
<PAGE>
EXHIBIT A
Supplement No. 1 to
iDEN Infrastructure Equipment Purchase Agreement
This SUPPLEMENT NO. 1 TO iDEN INFRASTRUCTURE EQUIPMENT PURCHASE AGREEMENT
(this "Supplement") is made as of the 9th day of September, 1999, between
Motorola, Inc., a Delaware corporation, by and through its Network Solutions
Sector, Customer Solutions Group with offices at 1301 East Algonquin Road,
Schaumburg, Illinois 60196 ("Motorola") and Nextel Partners Operating Corp., a
Delaware corporation, with offices at 4500 Carillon Pt., Kirkland, Washington
98033 ("Customer").
WHEREAS, Motorola and Customer are all of the parties to that certain iDEN
Infrastructure Equipment Purchase Agreement dated January 29, 1999 (the
"Agreement"), which provides for the sale to and purchase by Customer from
time-to-time of certain equipment, products and services;
WHEREAS, Section 7.6 of the Agreement grants to Customer the Equipment
Credit in the amount and to purchase the items set forth therein in exchange for
the issuance to Motorola of equity interests of Customer, all in accordance with
the terms of the Subscription and Contribution Agreement of even date therewith
between Nextel Partners, Inc., a Delaware corporation and the parent of Customer
("Partners"), and each of the investors named therein;
WHEREAS, each of Motorola and Customer currently desires to supplement the
Agreement to grant to Customer an additional equipment credit in the amount and
to purchase the items set forth herein in exchange for the issuance to Motorola
of additional equity interests of Customer, all in accordance with the terms of
the Expansion Subscription and Contribution Agreement of even date herewith
between Partners and each of the investors named therein (the "Expansion
Subscription Agreement");
The parties hereto agree to supplement the Agreement as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them under the Agreement.
2. Additional In-Kind Capital Contribution. As a result of the issuance of
additional equity interests to Motorola pursuant to the Expansion Subscription
Agreement, Customer will have an additional EBTS equipment credit (the
"Additional Equipment Credit") under the Agreement in the amount of Three
Million Six Hundred
<PAGE>
Forty Four Thousand Seventy-Nine and 00/000 Dollars ($3,644,079.00) that may be
used as set forth below:
Upon the placing of each order in accordance with the terms of the Agreement,
the parties shall calculate the percentage of the total dollar value of the
order comprised by the dollar value of the EBTS equipment in the order. Each
payment thereafter on such order, for as long as either the Equipment Credit or
the Additional Equipment Credit is still in existence, shall be made by a
combination of cash and either the Equipment Credit or the Additional Equipment
Credit. The cash amount shall be (100% - EBTS percentage) x payment due. The
Equipment Credit or the Additional Equipment Credit shall be the EBTS percentage
x payment due, and the Equipment Credit or the Additional Equipment Credit shall
be reduced by a like amount. Customer may at any time choose to apply less than
the above stated maximum Equipment Credit amount or the above stated maximum
Additional Equipment Credit amount to any order and increase the cash portion.
3. Expansion Subscription Agreement. The execution and delivery of the
Expansion Subscription Agreement by each of Motorola and Customer is a condition
precedent to the obligations of the parties hereunder.
4. Ratification of Agreement. As supplemented hereby, the Agreement and
its terms and provisions are hereby ratified and confirmed for all purposes and
in all respects.
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Supplement as of the date first set forth above.
MOTOROLA, INC.
By:________________________________________
Name:
Title:
NEXTEL PARTNERS OPERATING
CORP.
By:________________________________________
Name:
Title:
3
<PAGE>
EX-23.1
CONSENT OF ARTHUR ANDERSEN LLP
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
February 4, 2000
<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-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0001085707
<NAME> NEXTEL PARTNERS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> SEP-30-1998 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 0 214,173
<SECURITIES> 0 0
<RECEIVABLES> 0 5,852
<ALLOWANCES> 0 839
<INVENTORY> 0 1,439
<CURRENT-ASSETS> 0 593,208
<PP&E> 0 179,805
<DEPRECIATION> 0 12,158
<TOTAL-ASSETS> 0 934,634
<CURRENT-LIABILITIES> 0 25,469
<BONDS> 0 770,308
0 0
0 36
<COMMON> 0 7,474
<OTHER-SE> 0 131,347
<TOTAL-LIABILITY-AND-EQUITY> 0 934,634
<SALES> 632 2,977
<TOTAL-REVENUES> 2,133 20,594
<CGS> 1,149 7,424
<TOTAL-COSTS> 11,952 41,801
<OTHER-EXPENSES> 1,860 9,741
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 44,571
<INCOME-PRETAX> (11,679) (59,103)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,679) (59,103)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,679) (59,103)
<EPS-BASIC> 0 (27.30)
<EPS-DILUTED> 0 (27.30)
</TABLE>
