<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
<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. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING AMOUNT OF
REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, par value $.001 per share............. $513,475,000 $135,557.40
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act and includes 3,525,000
shares of common stock that the underwriters have options to purchase solely
to cover over-allotments, if any.
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 January 27, 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 $15.00 and $19.00. We intend to apply to list our
Class A common stock for quotation on the Nasdaq National Market under the
symbol "NXTP".
SEE "RISK FACTORS" BEGINNING ON PAGE 9 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 , 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 , 2000.
<PAGE>
[MAP OF THE UNITED STATES MARKED TO
INDICATE LOCATION OF NEXTEL PARTNERS'
LICENSE/OPTION LICENSE TERRITORY AND
NEXTEL'S LICENSE 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. AS USED IN THIS PROSPECTUS, "WE,"
"US" AND "OUR" REFER TO NEXTEL PARTNERS, INC. AND "NEXTEL" REFERS TO NEXTEL
COMMUNICATIONS, INC. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY
"RISK FACTORS" BEGINNING ON PAGE 9.
NEXTEL PARTNERS
We provide digital wireless communications services in mid-sized and smaller
markets throughout the United States and are the only U.S. affiliate of Nextel.
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 ranked by population and 51 of the top 200 Metropolitan
Statistical Areas. We also have the option to acquire from 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 our
exclusive affiliation agreement with Nextel, which 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 strategic 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 covering all 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 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, 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 own 6.7% of our common stock on a
fully diluted basis prior to this offering. Other key stockholders, in addition
to Nextel, include DLJ Merchant Banking Partners, Madison Dearborn Capital
Partners, Motorola and Eagle River Investments, LLC, an investment company
controlled by Craig O. McCaw.
STRATEGIC ALLIANCE WITH NEXTEL
Our affiliation with Nextel is an integral part of our strategy. Nextel has
contributed to us licenses and cash in exchange for an ownership stake in our
company. As Nextel's only U.S. affiliate, 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
3
<PAGE>
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 networks. 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 this broad network
differentiates our service from the services of many of our competitors.
- EXCLUSIVE ROAMING PARTNERSHIP. Under our agreements with Nextel, we are
the exclusive provider of wireless communication services to Nextel
customers who roam into our markets. We believe our Nextel 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. We have the right to utilize Nextel's
current infrastructure, including certain switching facilities and network
monitoring systems. While we have implemented our own customer activation,
billing and customer care systems, we use Nextel's systems to offer
national accounts seamless customer service. Additionally, we benefit from
Nextel's strong relationships with its vendors and national account
customers to secure wireless equipment at competitive rates and penetrate
national accounts within our service area. For example, 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. 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 the same 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
having 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 wireless carriers directing fully-
integrated 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.
4
<PAGE>
- OPERATE IN MID-SIZED AND SMALLER MARKETS. We focus on mid-sized and
smaller markets with demographics similar to those served by Nextel. We
believe that this strategy will allow us to rapidly increase penetration
within our targeted segment, 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 our markets with over
one million Pops:
<TABLE>
<CAPTION>
MARKETS TOTAL POPS MARKET LAUNCH
- ------- ---------- --------------
<S> <C> <C>
Kentucky (Lexington, Louisville)............................ 2,543,523 1st Half 2000
Syracuse, NY................................................ 2,308,433 Launched
Eastern Iowa (Waterloo, Dubuque)............................ 1,829,046 1st Half 2000
Arkansas (Fayetville, Ft. Smith, Pine Bluff)................ 1,804,738 1st Half 2001
Central Illinois (Peoria, Springfield, Champagne)........... 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, WI................................... 1,435,451 1st Half 2001
Albany, 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 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.
5
<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
Use of proceeds............... We expect to use the estimated $376.5 million in net
proceeds from this offering for general corporate purposes,
including:
- capital expenditures in connection with the build-out
and expansion of our portion of the Nextel digital
mobile network, including the build-out of 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.
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 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;
- 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 23 for a more complete discussion
regarding the outstanding shares of Class A common stock and other related
matters.
------------------------
This prospectus contains registered trademarks of Nextel, Motorola and other
companies.
6
<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. The as adjusted balance sheet information set forth below reflects:
- the receipt of estimated net proceeds from this offering;
- the reclassification on our balance sheet of our Series B preferred stock
between liabilities and stockholders' equity; and
- the conversion of our Series A preferred stock into shares of Class A
common stock and conversion of our Series C and Series D preferred stock
into shares of Class B common stock.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------------------
1998 1998 1999
-------------- ------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
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 capitalization transactions. Pro forma
weighted average common shares outstanding above were calculated assuming
that the Series A, Series C and Series D preferred stock were converted into
shares of Class A and 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 available to
common stockholders to $60,928.
7
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, SEPTEMBER 30, 1999
1998 ------------------------
ACTUAL ACTUAL AS ADJUSTED
-------------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
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
Mandatorily 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 the transfer of the broadband wireless
licenses to us.
<TABLE>
<CAPTION>
AS OF
AS OF 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 deferred 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.
8
<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 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
networks 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 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, WHICH WOULD ELIMINATE OUR ABILITY TO
CARRY OUT OUR CURRENT BUSINESS PLAN AND STRATEGY.
Our operating agreements with Nextel 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 the right to terminate these
agreements, including the right to use the Nextel brand. The non-renewal or
termination of the 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, Nextel could acquire all of our
outstanding stock, including shares of Class A common stock purchased in this
offering.
UNDER CERTAIN CIRCUMSTANCES, NEXTEL HAS THE RIGHT, AND CERTAIN OF OUR
STOCKHOLDERS HAVE THE RIGHT TO CAUSE NEXTEL, TO PURCHASE ALL OF OUR OUTSTANDING
STOCK, INCLUDING THE CLASS A COMMON STOCK SOLD IN THIS OFFERING.
Under the provisions of our certificate of incorporation and subject to
certain limitations, Nextel has the right to purchase all of the outstanding
shares of our Class A common stock, including shares sold in this offering:
- on January 29, 2008, subject to certain postponements by our board of
directors;
9
<PAGE>
- if Nextel changes the digital transmission technology for our frequency
range and 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 requires a change in our business, operations or systems without
subsidizing us for the costs of such change and we decline to implement
the required change; or
- upon the termination of our joint venture agreement with Nextel as a
result of our breach.
In addition, under the provisions of our certificate of incorporation and
upon the occurrence of any of the events listed below, with some exceptions, the
holders of a majority of our outstanding Class A common stock, excluding shares
held by Nextel, can cause Nextel to purchase all of the outstanding shares of
our Class A common stock, including the shares sold in this offering:
- a change of control of Nextel;
- if prior to January 29, 2003, Nextel exercises its right under the
shareholders' agreement to preempt the public offering of our stock by one
of our major stockholders;
- if we do not implement a change in our business, operations or systems
required by Nextel and our board of directors provides all non-Nextel
stockholders with the opportunity to put their stock to Nextel; or
- upon the termination of our joint venture agreement with Nextel as a
result of a breach by Nextel.
In the event that Nextel purchases or is required to purchase all of our
outstanding stock, the purchase price may be paid in cash, shares of Nextel
common stock, or a combination of both. The purchase price depends, in part, on
the triggering event for the purchase. There can be no assurance that such
purchase price will equal or exceed the price at which the Class A common stock
is then trading.
In addition, in any sale by Nextel of all of its shares of our stock to a
third party after January 29, 2011, the holders of a majority of our Class A
common stock may elect to participate in such sale. In the event of such an
election, then pursuant to our certificate of incorporation, all holders of
Class A common stock, including purchasers in this offering, will be required to
participate. See "Description of Capital Stock" for a more detailed description
of the put and call rights described above.
NEXTEL HAS APPROVAL RIGHTS THAT ALLOW IT TO EXERT SIGNIFICANT CONTROL 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 joint venture agreement, the
approval of the director designated by Nextel is required in order for us to:
- make a material change in our technology or business objectives;
- modify our material agreements, including our agreement with Nextel;
- determine senior management compensation;
- change our tax status;
- dispose of all or substantially all of our assets; or
- broaden the scope of our business beyond our current business objectives.
These approvals rights relate to significant transactions, and decisions by
Nextel's designated director could conflict with those of our other directors,
including our independent directors.
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The shareholders' agreement does not prohibit Nextel or any of our other
stockholders from purchasing shares of our Class A common stock in the open
market. Additionally, if we experience a defined change of control, Nextel could
purchase all of our FCC 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 joint venture agreement is in effect. Such an agreement could
be subject to approval by the FCC.
OUR SUCCESS IS DEPENDENT ON NEXTEL COMPLETING ITS PORTION OF THE NEXTEL DIGITAL
MOBILE NETWORK AND CONTINUING TO BUILD AND SUSTAIN CUSTOMER SUPPORT OF ITS BRAND
AND 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 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 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 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 Commission file number 0-19656. For a
description of where this information can be obtained, see "Where You Can Find
More Information."
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, Nextel 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
to allow our network to operate with Nextel's digital mobile network 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
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- 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;
- 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.
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. Before
fully implementing our 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
controversies and limitations of available frequencies. 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.
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 technologies, our operating agreements with Nextel 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 to
terminate our operating agreements. 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 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.
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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 buildout 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.
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.
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IF AN EVENT CONSTITUTING A CHANGE OF CONTROL OCCURS, WE MAY BE REQUIRED TO
PURCHASE ALL OF OUR OUTSTANDING NOTES EVEN IF OUR CREDIT FACILITY PROHIBITS SUCH
A PURCHASE OR WE LACK THE RESOURCES TO MAKE SUCH A PURCHASE.
Upon the occurrence of a defined change of control under the indenture
relating to our senior discount notes, we could be required to purchase all
outstanding notes. Our credit facility prohibits us from purchasing 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 purchasing the notes, our
failure to purchase the tendered notes would constitute an event of default
under the indenture, which would in turn result in a default under the credit
facility. 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 repurchase 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 provided 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 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, 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 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 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
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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.
- Our inability to maintain pricing packages attractive to customers may
adversely affect operating results, 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.
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 telephones 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
the Class A common stock.
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 radio spectrum when and where required; and
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- the availability of wireless telephones of the appropriate model and type
to meet the demands and preferences of our customers.
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
- 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 only when Motorola developed a proprietary
technology it calls "iDEN." We and Nextel are currently the only major wireless
service providers utilizing iDEN technology in the United States, and iDEN
phones are not currently designed to roam onto other wireless networks.
Our agreements with Nextel require us to use the iDEN technology in the
deployment of our system and prevent us from adopting any new communications
technology without Nextel's consent. 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
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provisions in our agreements, we will be less able to compete effectively and
could lose customers to our competitors.
WE ARE ENTIRELY 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 which do or may compete with some or all
of the services we offer. We cannot assure you that the potential conflict of
interest 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, we have agreed with Nextel that, in the event of
shortages of that equipment, available supplies 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 ESMR, cellular
and 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 relevant state telecommunications authorities regulate our
business to a substantial degree. The regulation of the wireless
telecommunications industry is subject to constant change. New rules and
regulations may be adopted pursuant to the Communications Act of 1934, as
amended by the Telecommunications Act of 1996. The Telecommunications Act
provided for significant deregulation of the U.S. telecommunications industry
and such legislation remains subject to judicial review and additional FCC
rulemaking. As a result, we cannot predict the
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effect that the legislation and any FCC rulemaking may have on our future
operations. We must comply with all applicable regulations to conduct our
business. Modifications of our business plans or operations to comply with
changing regulations or certain action taken by regulatory authorities might
increase our costs of providing service and adversely affect our financial
condition.
The FCC has the right to revoke licenses at any time for cause, including
failure to comply with the terms of the licenses, failure to continue to qualify
for the licenses, malfeasance or other misconduct. In addition, at the end of a
ten-year term, we will have to apply to the FCC for renewal of some of our
licenses to provide our core services which combine wireless telephone service
with dispatch and paging features. We cannot assure you that these licenses will
be renewed.
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RISK FACTORS RELATING TO OUR CAPITAL STRUCTURE AND COMMON STOCK
CERTAIN SIGNIFICANT STOCKHOLDERS REPRESENTED ON OUR BOARD OF DIRECTORS CAN EXERT
CONTROL 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 the shareholders' agreement, Nextel, 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 has
certain approval rights that allow it to exert significant control over our
operations.
DLJ Merchant Banking, Madison Dearborn Partners and Eagle River each own
significent amounts of our capital stock and each currently has a representative
on our board of directors. Each of these entities 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 current and future investments could create
conflict of interests.
ANTI-TAKEOVER PROVISIONS AFFECTING US COULD PREVENT OR DELAY A CHANGE OF CONTROL
THAT YOU MAY FAVOR.
Provisions of our organizational documents, shareholders' agreement, joint
venture agreement 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 defined change of control, Nextel could purchase all of our FCC
licenses for $1.00, provided that Nextel enters into a royalty-free agreement
with us to allow us to use the licenses in our territory for as long as our
joint venture agreement is in effect. Such an agreement could 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, a liquidation preference equal to $21,850,000, plus interest
accrued on such amount from the date of issuance up to the liquidation date
equal to 12% per year, compounded quarterly. 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 effecting 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 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 transfers by its original holders to third parties.
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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:
<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 42,804,024 - Shares eligible for
prospectus............................ sale under Rule 144(k)
without restriction
- - September 9, 2000..................... 9,974,526 - Shares eligible for
sale under Rule 144(k)
without restriction
- - 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 and, consequently, the price in
the concurrent offering to certain of our existing stockholders 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.
21
<PAGE>
FORWARD-LOOKING STATEMENTS
Some statements and information contained in this prospectus are not
historical facts, but are forward-looking statements. They can be identified by
the use of forward-looking words such as "believes," "expects," "plans," "may,"
"will," "would," "could," "should" or "anticipates" or the negative or other
variations of these words or other comparable words, or by discussions of
strategy that involve risks and uncertainties. Such forward-looking statements
include, but are not limited to:
- our business plan, its advantages and our strategy for implementing our
plan and meeting our scheduled build-out for commercial launch of our
portion of the Nextel digital mobile network;
- general economic conditions in the geographic areas and occupational
markets that represent 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 customers; and
- our anticipated capital expenditures, funding and levels of debt and our
expectations regarding additional debt, including our ability to access
sufficient debt or equity capital to meet our operating and financing
needs.
We warn you that these forward-looking statements are only predictions,
subject to risks and uncertainties, including financial, regulatory environment,
industry growth and trend predictions. Actual events or results can differ
materially from those expressed or implied, including those set forth under
"Risk Factors."
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 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 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.
22
<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, Series C and Series D preferred stock into
shares of Class A and 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
$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 accompanying 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. Also excludes
2,434,260 shares of Class A common stock issuable upon the exercise of warrants
outstanding as of January 15, 2000 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 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) 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 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.
23
<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 by dividing the net tangible book value, 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 and
one of its subsidiaries, has identical rights as the Class A common stock and is
convertible into Class A common stock at any time upon a transfer of such shares
to a third party.
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 options or warrants, there will be
further dilution to new investors.
24
<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.
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 notes thereto 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 capitalization transactions. Pro forma
weighted average common shares outstanding were calculated assuming that the
Series A, Series C and Series D preferred stock were converted into shares
of Class A and 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 available to
common stockholders to $60,928.
25
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1998 SEPTEMBER 30, 1999 PRO FORMA(1)
------------------- -------------------- -------------
(DOLLARS 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
Mandatorily 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.
<TABLE>
<CAPTION>
AS OF
AS OF 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 deferred 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.
26
<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 unaudited Summary Historical
and Pro Forma Consolidated Financial Information and Operating Data, the audited
consolidated financial statements and the notes thereto and the pro forma
unaudited financial statements and accompanying discussion and notes included
elsewhere in this prospectus.
Our historical results discussed in this section and throughout this
prospectus include the operations we assumed from Nextel in connection with our
initial capitalization which occurred on January 29, 1999. See Note 1 of our
audited consolidated financial statements for a discussion of the formation,
capitalization and basis of presentation.
OVERVIEW
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 ranked by population and 51 of the top 200 Metropolitan
Statistical Areas. We also have the option to acquire from Nextel 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.
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.
At December 31, 1999, approximately 46,000 customer units subscribed to our
service. We added, net of deactivations, 12,682 subscriber units during the
fourth quarter, and 35,902 subscriber units for the year ended December 31,
1999.
Due to our continued development, build-out and enhancement of our portion
of the Nextel digital mobile network, including our launches in the fourth
quarter of 1999 and January 2000, 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 our four new
markets.
Until recently, the wireless industry had generally experienced a decline in
average revenue per unit, or ARPU, an industry measure, as a result of
competition from other wireless providers, including new entrants into the
market. In contrast, as reported in its quarterly reports filed with the
Commission, Nextel monthly ARPU has increased over the past few years and
remains above the industry average. We cannot assure you that our results will
duplicate those of Nextel since we set our prices independently and our markets
are distinct from Nextel's markets.
Recently, service plans offering large blocks of minutes of airtime have
been introduced by wireless service providers as a means to gain market share
from established cellular carriers with
27
<PAGE>
relative coverage advantages. These packages have increased subscriber usage in
the industry, while slowing the rate of decline in ARPU during 1998.
Our agreements with Nextel permit us to establish our own local pricing in
our markets. However, we must provide national customers who have a national
rate with Nextel the same rates as they receive in Nextel's markets. In
addition, we must offer our same rates 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.
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 and equipment sales revenues.
Our service revenues consist of charges for airtime usage, and monthly network
access fees from providing integrated wireless services within our territory,
particularly mobile telephone and two-way radio dispatch services. Service
revenues also include roaming revenues related to Nextel's customers using our
portion of the Nextel digital mobile network. Average revenue per unit, or ARPU,
measures total service revenues per month from our subscribers divided by the
average number of digital subscriber units for that month.
The following table sets forth our recent revenues (dollar amounts 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 and roaming
revenues................... $1,501 70% $17,617 86%
Equipment sales 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. ARPU is not calculated for
September 30, 1998 due to the information not being comparable to the period
ending September 30, 1999.
Our service and equipment sales revenues for the nine months ended
September 30, 1999 were primarily generated from our upstate New York and Hawaii
markets, which became operational July and September 1998, respectively. The
increase in revenues from 1998 to 1999 was 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. Since these markets were launched during the nine-month period ended
September 30, 1998, revenues for the nine-month period also include use of our
portion of the Nextel digital mobile network by Nextel customers.
COST OF SERVICE REVENUES
The network expenses included in the cost of service revenues are site rent,
utilities, maintenance, engineering, personnel and interconnect charges. Network
expenses depend
28
<PAGE>
primarily on the number of cell sites on-air, 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 network costs were
$11.8 million compared to $3.5 million for the same period ended 1998. The
increase in expenses for 1999 compared to 1998 was primarily related to nine
months of operational activities compared to initial operating expenses for
upstate New York and Hawaii that launched July and September 1998, respectively.
COST OF EQUIPMENT REVENUES
The cost of the subscriber wireless telephones and accessories sold during
the nine-month period ended September 30, 1999 was $7.4 million compared to
$1.1 million for the same period ended 1998. The increase in cost 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 loss on equipment was $4.4 million and $500,000 for
the nine-month period ended September 30, 1999 and 1998, respectively. We expect
to continue to employ these discounts and promotions, because we believe that
they will result in increased revenues as the number of our subscribers grows.
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 sales representatives, sales support personnel, 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. While we have directly hired key personnel in
such areas, the nine-month period has been a transition period during which
Nextel has made certain accounting, payroll, customer care, purchasing, human
resources and billing functions available to us. In return for these services,
we pay monthly fees based on Nextel's cost of providing them. For the nine-month
period ended September 30, 1999 we paid Nextel 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 from Nextel 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 ended 1998. Of the total $22.6 million for the nine months ended
September 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
29
<PAGE>
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 to increase substantially for the fourth quarter of 1999.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expenses were $8.2 million for the nine-month
period ended September 30, 1999. Compared to the same period in 1998, this was
an increase of $6.3 million from $1.9 million. The increase 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 the same period for 1998, the loss
increased $47.4 million from a total net loss of $11.7 million for the
nine-month period. 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.
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. 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 of Nextel
and Motorola. 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.
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 for the
initial launch of the upstate New York and Hawaii markets. We estimate capital
expenditures for 1999 will total approximately $153.0 million. This estimate
excludes approximately $127.0 million of reimbursements paid to Nextel for the
transactions on January 29, 1999 and September 9, 1999, respectively.
In addition, as of January 15, 2000 we had approximately $20 million in
commitments for additional frequency purchases.
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 require
30
<PAGE>
us to build out and provide service in all of these markets by June 2001. The
table below identifies our currently planned build-out schedule for these
markets:
<TABLE>
<CAPTION>
NEXTEL PARTNERS BUILD-OUT SCHEDULE
- -----------------------------------------------------------------------------------------------
INCREMENTAL COVERED CUMULATIVE COVERED NUMBER OF MARKETS TO BE
YEAR POPULATION POPULATION 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>
* including the two markets for which we intend to exercise our option to
acquire.
OPTION TERRITORIES
Under our agreements with Nextel, 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 to our non-option markets. In addition, we
have the right to purchase from Nextel all related fixed network equipment and
operational contracts existing in such territories. Moreover, subject to
Nextel's ability to obtain appropriate waivers or approvals from its financing
entities and the FCC, Nextel will transfer to us its licenses to operate certain
frequencies in the option territories.
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 allow us access to Nextel's switches
and switching facilities. Nextel has agreed to cooperate with us to establish a
switch facility for our network and to deploy switches in our territory in a
manner which best meets the following criteria:
- integration of our cell sites into Nextel national switching
infrastructure;
- shared coverage of Nextel Direct Connect service to communities of
interest;
- 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 in
our territory, depending on the existing switches in Nextel's territory and the
amount of customer traffic handled by any one switch so that the call switching
on our network is completed through those switches and facilities. We have the
option of installing our own switching facilities within our territory. However,
our deployment of any switching facility requires coordination with Nextel and
may require Nextel's approval. Our agreements with Nextel 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
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<PAGE>
every 50 operational cell sites. To the extent contemplated by our original
business plan, we believe that we have sufficient funds on hand for these
installations.
SOURCES OF FUNDING
Third-party financing activities have provided all of our funding which for
the nine-month period ended September 30, 1999 totaled $799 million. This
includes proceeds from cash equity contributions of $67.6 million, the offering
of our 14% senior discount notes for $406.4 million and term loans taken by our
operating subsidiary.
We also received:
(1) the contribution by Nextel of FCC licenses to Nextel WIP License Corp.,
and the grant of the right to use these licenses and Nextel agreement to
transfer the stock of Nextel WIP License Corp. to us, valued at $142 million,
all in exchange for our redeemable preferred stock and convertible preferred
stock, and
(2) the contribution by Motorola of a $22.0 million credit to use against
our purchases of Motorola manufactured infrastructure equipment in exchange for
our convertible preferred stock, all of which had been used by September 30,
1999.
In total, the equity contributions consisted of irrevocable commitments of
an aggregate of $202.8 million of cash in exchange for equity in the form of
convertible preferred stock. Our cash equity investors contributed
$52.1 million, $15.5 million, and $52.1 million in January, September and
December 1999, respectively. The remaining portions will be paid in installments
of $52.1 million in December 2000 and $15.5 million per year in September of
2000 and 2001.
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. 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. The applicable
margin for the $150 million term loan is 4.25% over LIBOR and 3.25% over the
base rate.
Borrowings under our 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
32
<PAGE>
other covenants for the wireless industry. The credit facility also contains
covenants requiring us to maintain certain defined financial ratios and meet
operational targets including service revenues, subscriber units and network
coverage. As of December 31, 1999 we were in compliance with all covenants
associated with our 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 FCC licenses 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. As of December 31, 1999, our
subsidiary had $325 million outstanding 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.
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
33
<PAGE>
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 its 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 operations.
34
<PAGE>
BUSINESS
OVERVIEW
We provide digital wireless communications services in mid-sized and smaller
markets throughout the United States and are the only U.S. affiliate of Nextel.
We also 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 ranked by population and 51 of the top 200 Metropolitan
Statistical Areas. We also have the option to acquire from 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 our
exclusive affiliation agreement with Nextel, which 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 strategic 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 all of the
top 100 Metropolitan Statistical Areas in the United States ranked by
population. 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, 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 own 6.7% of our common stock on a
fully diluted basis prior to this offering. Other key stockholders, in addition
to Nextel, include DLJ Merchant Banking, Madison Dearborn Partners, Motorola and
Eagle River, an investment company controlled by Craig O. McCaw.
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 the same rates to our
customers anywhere on the Nextel digital mobile network, billing based
upon the actual numbers of seconds of
35
<PAGE>
airtime after the first minute, and having 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 wireless carriers directing fully-
integrated 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 similar to those served by Nextel. We
believe that this strategy will allow us to rapidly increase penetration
within our targeted segment, which we believe has historically been
underserved in these markets. We believe that this focus, combined with
our differentiated service offering, 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 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 nationwide;
- we believe that Nextel has experienced rapid subscriber growth and
competitive success in markets with similar economic and demographic
characteristics;
- 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's national accounts that
are expected to become our customers as soon as we launch service in their
vicinity.
The table below lists the 48 markets in which we intend to provide digital
wireless service:
<TABLE>
<CAPTION>
PLANNED
REGION MARKET NAME TOTAL POPS LAUNCH
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
NORTHEAST Syracuse, NY 2,308,433 2nd Half 1998
Harrisburg/York/Lancaster, PA 1,641,088 1st Half 2000
Albany, 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, PA 140,541 1st Half 2000
---------------------------
TOTAL 10,361,125
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PLANNED
REGION MARKET NAME TOTAL POPS LAUNCH
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
MIDWEST Eastern Iowa (Waterloo, Dubuque) 1,829,046 1st Half 2000
Central Illinois (Peoria, Springfield,
Champagne) 1,757,899 1st Half 2000
Evansville/Owensboro, IN 1,652,709 1st Half 2001
Green Bay/Fond du Lac, 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, Sun Valley) 606,139 1st Half 2000
Eau Claire, WI 524,868 2nd Half 2000
Terre Haute, IN 337,121 1st Half 2001
Duluth, WN 263,627 1st Half 2001
Rochester, MN 238,733 1st Half 2001
----------
TOTAL 11,407,622
SOUTH Kentucky (Lexington, 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, 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>
* Territories for which we expect to exercise our option to build out.
37
<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, developed by Motorola, is
referred to as integrated Digital Enhanced Network or iDEN.
We plan to operate our portion of the Nextel digital mobile network in
accordance with Nextel's standards to 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 all 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 these features in the large 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.
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 addition, the "i2000," which is scheduled to be introduced in 2000,
will enable users to roam onto 900MHz GSM systems, which are widely deployed
outside of the U.S.
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
business users' communications involve contacting others within the same
organization. Nextel Direct Connect service is especially well suited to address
these intracompany wireless communications needs. Nextel Direct Connect service
enables a user to instantly set up a conference on either a one-to-one or group
basis within the same geographic area. This is a feature that is not included in
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<PAGE>
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. Nextel reported in October 1999, that more than 1.25 million members were
using more than 150 Nextel Business Networks.
Nextel recently announced an agreement with Microsoft Corp. to deploy Nextel
Online, a wireless Internet service offering which enables Nextel subscribers to
access a customized set of Internet services offered through a version of
Microsoft's MSN portal anytime, anywhere on the Nextel digital mobile network.
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 more than 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 LOYALTY. In addition, based on information reported by cellular
and digital service providers, Nextel has had an average monthly churn
rate in each of the four quarters through September 30, 1999 lower than
the industry average. "Churn" is an industry term referring to the
percentage of a service provider's customer base that cancels service or
whose service is terminated during a given month.
- SUBSCRIBER REVENUES. As reported in its quarterly and annual reports filed
with the Commission, Nextel's monthly average revenue per subscriber unit
for Nextel's services was approximately $71 for the first half of 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. In cooperation with Nextel, we expect to
enter into international roaming agreements with carriers operating outside of
the United States. To the extent that Nextel is unable to obtain an independent
agreement for us due to a technological issue, our agreements with Nextel
require us to cooperate with it so that we may obtain the benefit of its
international roaming arrangement.
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 digital technology developed and designed by Motorola with a
low-power, multi-site deployment of base radios similar to that used by cellular
service, that permits us to reuse the same frequency in different cells,
increasing our system's effective capacity. Nextel currently uses iDEN
technology throughout its portion of the Nextel digital mobile network, and we
intend to use it exclusively. iDEN technology is a proprietary format for
delivering signals over scattered, non-contiguous SMR frequencies.
39
<PAGE>
The iDEN technology shares the same basic platform as GSM and TDMA wireless
standards. 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 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 hand-off of calls from site to site as a customer
travels, coordinates calls to and from a customer unit and connects calls to the
public switched telecommunications network. In the case of two-way dispatch
calls, the switching center connects the customer initiating the call directly
to the other customer (in the case of a private call) and directly to a number
of other customers (in the case of a group call) to whom the call is directed in
the geographic service areas.
Nortel Networks supplied the mobile telephone switches for the Nextel
digital mobile network. Nextel reported in its 1998 annual report that as of the
end of that year, it had 31 operational switches and approximately 6,200 cell
sites constructed and in operation in its portion of the Nextel digital mobile
network. As of December 31, 1999, we had one operational switch and
approximately 530 cell sites constructed and in operation in our portion of the
Nextel digital mobile network.
Under our agreements, Nextel is required to cooperate with us 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 until such time,
if ever, that we attract a customer base in a region sufficient to justify our
own purchase of a switch in that region. In areas where we do not have our own
switch, we obtain switching services from Nextel. See "Related-Party
Transactions."
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:
(1) The content of every call made by a digital subscriber is converted into
a stream of data bits that are encoded and compressed before being
transmitted over the airwaves. By converting the call into digital bits,
both the content and the processing information used to route the call
can be transmitted over the same channel without causing interference
with other calls. Upon receipt of the coded data bits, the subscriber's
handset will decode the signal into an audible voice.
By using the iDEN digital technology instead of analog technology on our
systems, we achieve an approximate six times improvement in efficiency in
the use of our spectrum for two-way radio dispatch service and an
approximate three times improvement in efficiency for mobile telephone
service.
(2) Each cell site provides service in our licensed frequencies to a
particular geographic area by permitting the customer's handset to
communicate with our network. By designing our system with multiple cell
sites, we are able to reuse the frequency channels many times throughout
the same license area by placing our transmitters at low elevation sites
and restricting the power of each transmitter to a directed geographic
area, which may be less than a mile and up to thirty miles. This process
avoids interference, while permitting significantly more customers to use
the frequencies allotted to us.
The use of the spectrum in the manner described above, combining digital
compression technology with the reuse of spectrum throughout our license area,
allows us to support more customer calls than would otherwise be the case.
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<PAGE>
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 for which we intend to exercise our option to
build out. Our agreements with Nextel require us to build out and provide
service in all of these markets by June 2001. The table below identifies our
currently planned build-out schedule for these markets:
<TABLE>
<CAPTION>
NEXTEL PARTNERS BUILD-OUT SCHEDULE
- -----------------------------------------------------------------------------------------------
INCREMENTAL COVERED CUMULATIVE COVERED NUMBER OF MARKETS TO BE
YEAR POPULATION POPULATION 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>
- ------------------------
* Including the two markets for which we intend to exercise our option to
acquire.
Under the terms of the operating agreements, specific areas, including
metropolitan areas, smaller communities and corridors, are "required build"
areas. Our agreements with Nextel 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 29, 2000. Nextel may build out option markets prior to
our exercise of an option if Nextel provides us with notice of its 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 our
network in those areas.
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 acquire, 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 of Nextel and
Motorola.
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. In April 1999, Nextel sold its towers to
SpectraSite Communications and entered into agreements pursuant to which
SpectraSite would build or purchase additional towers, including towers in our
territory. At Nextel's request, we have entered into leasing arrangements with
SpectraSite on agreed terms for space on all towers we need in our territory
that SpectraSite controls. With respect to all SpectraSite towers in our
territory on which we lease space, Nextel has agreed to subsidize us for amounts
owed SpectraSite in excess of amounts we had initially agreed to pay under our
master lease agreement with Nextel.
To reduce the risk of zoning and other local regulatory delays, construction
delays and site acquisition costs, we intend to locate our cell sites on
existing transmission towers owned by third parties wherever possible or if
necessary on towers constructed or purchased by SpectraSite or other contracted
third parties at our request. In addition, we plan to take advantage of the
capacity of iDEN technology to efficiently employ base radio equipment for less
densely-populated areas and for coverage along interstate highways.
41
<PAGE>
BUILD-OUT CRITERIA
Our agreements with Nextel require us to build out our markets in compliance
with the site acquisition, frequency design, launch criteria and construction
standards that are in effect from time to time and generally applicable to
Nextel and its operating subsidiaries. These standards evolve with changes in
technology and are subject to modification or adjustments to comply with local
rules and laws.
In general, the site acquisition and construction standards include the use
of standard lease or license agreements, appropriate environmental testing of
sites for our transmission equipment, compliance with local zoning and building
permit requirements and compliance with applicable FAA and FCC registration and
other requirements applicable to site construction and operation.
Frequency design requirements relate to 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.
Delays in the build-out and launch of our markets will result in a delay in
our ability to acquire customers and generate revenue. Depending on the length
of the delay and the particular market involved, a delay could impede our
ability to attract customers and generate revenue in accordance with our
business plan. In addition, if we fail to launch two or more markets in any year
within 180 days of the scheduled launch date, or if we fail to complete the
build-out of two or more markets in any year within 180 days of the scheduled
build-out date, we could be in default of our agreements with Nextel.
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 customers and customers of Nextel are able to use
interconnect service to roam on both networks at no additional charge to
the customer. Nextel provides our customers the same basic mobile
telephone functionality and related features available to them in our
markets when they roam into Nextel's markets. Conversely, Nextel's
customers generate revenue for us when they roam into our markets.
- NEXTEL COMMUNICATIONS SUPPORT SERVICES. The operating agreements enable us
to:
- use Nextel's switching facilities and network monitoring center;
- use Nextel's back-office systems to support customer activation and
billing;
- access technology improvements from Nextel's research and development;
and
- use Nextel's employee training courses.
Prices for these services are based on Nextel's cost to provide us these
services.
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<PAGE>
- NEXTEL'S EXISTING RELATIONSHIPS WITH VENDORS AND DISTRIBUTORS. Through our
relationship with Nextel, we have access to many of Nextel's vendors that
provide the equipment and services that we need in our business.
Additionally Motorola sells base radios and iDEN-based wireless telephones
to us at the same prices it offers to Nextel. We intend to develop our own
relationships with vendors and seek from Nextel's distributors terms
similar to those agreed to with Nextel.
- 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, based on our experience, that this focus on business customers
and our unique bundle of services have resulted in higher monthly average
revenue per unit and lower average monthly churn 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 several of Nextel's pricing
strategies that we believe to be 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.
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<PAGE>
CUSTOMER CARE
In October 1999 our customer call center in Las Vegas, Nevada became
operational and began to provide services to all of 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.
THE NEXTEL OPERATING AGREEMENTS
The operating agreements define the relationship between Nextel and us. The
initial terms of the agreements are for 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 is obligated to share with us its
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 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
- access to Nextel vendor contracts and terms wherever possible, including
Motorola infrastructure and subscriber unit pricing.
To further support us in our efforts, Nextel has also agreed that:
- 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.
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<PAGE>
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
- 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. Since then, 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%.
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<PAGE>
The following graph and table set forth certain U.S. wireless industry
statistics:
U.S. WIRELESS SUBSCRIBERS
DECEMBER 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.
In 1993, the FCC allocated a portion of the radio spectrum, 1850-1990 MHz,
for the provision of a new wireless communications service commonly known as
PCS. The FCC has described PCS as radio communications that encompass mobile and
ancillary communication that provide services to individuals and businesses and
can be integrated with a variety of competing networks. The FCC's stated
objectives in auctioning bandwidth for PCS were to foster competition to
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.
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<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 objects and structures and
spread or "propagate" through air, reducing infrastructure costs since fewer
base radios are needed to cover a given area and increasing the ability to
penetrate buildings and other physical obstacles.
All cellular services transmissions were originally analog-based, although
some cellular providers have now overlaid digital systems alongside their analog
systems in many markets. Analog cellular technology has the advantage of using a
consistent standard nationwide, permitting nationwide roaming using a single
mode (i.e., analog), single band (i.e., cellular) handset. On the other hand,
analog technology has several disadvantages, including less efficient use of
spectrum, which reduces effective call capacity, inconsistent service quality,
reduced privacy, security and reliability as compared to digital technologies
and the inability to offer services such as voice mail, call waiting or caller
identification.
Beginning in 1995, the FCC allocated the 1850 to 1990 MHz portion of the
radio spectrum for PCS service. All PCS services, like ESMR, are all-digital
systems which convert voice or data signals into a stream of binary digits that
is compressed before transmission, enabling a single radio channel to carry
multiple simultaneous signal transmissions. This enhanced capacity, along with
improvements in digital signaling, allows digital-based wireless technologies to
offer new and enhanced services, improved voice quality and system flexibility,
as compared with analog technologies. Call forwarding, call waiting and greater
call privacy are among the enhanced services digital systems provide. In
addition, due to the reduced power consumption of digital handsets, users
benefit from an extended battery life.
The FCC assigned non-contiguous portions of the 800 MHz band to specialized
mobile radio service or "SMR," which was initially dedicated to analog two-way
radio dispatch services. This service only became 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) handsets
that function at both cellular and PCS frequencies and/or are equipped for more
than one type of modulation technology. Time-division technologies, which
include Global System for Mobile Communications or "GSM," Time Division Multiple
Access or "TDMA" and iDEN break up each transmission channel into time slots
that increase effective capacity. Code Division Multiple Access or "CDMA"
technology is a spread-spectrum technology which transmits portions of many
messages over a broad portion of the available spectrum rather than a single
channel. iDEN phones presently operate only in the iDEN mode within SMR
frequencies, and therefore cannot roam onto other digital or analog wireless
networks.
NEXTEL
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 reports, over the
47
<PAGE>
past three years, the number of Nextel's ESMR customers has grown at a 106.9%
compounded growth rate, quarter over quarter and as of September 30, 1999, the
number of Nextel's ESMR customers is estimated to have grown to more than 4.1
million.
The following chart illustrates the quarterly growth of Nextel's ESMR
customers over the past four years. Because our physical network will take
several years to build out fully, and because of the smaller size of our
territory as compared to Nextel's, our rate of customer growth may not equal or
exceed Nextel's results. Moreover, we cannot assure you that Nextel, 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.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF
EDGAR FILING.]
NEXTEL--QUARTERLY DIGITAL SUBSCRIBERS*
[(IN THOUSANDS)--2 COLUMNS]
<TABLE>
<S> <C>
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 96 175.0
Q3 96 228.0
Q4 96 300.3
Q1 97 422.9
Q2 97 624.4
Q3 97 946.8
Q4 97 1,270.7
Q1 98 1,641.5
Q2 98 2,042.1
Q3 98 2,417.4
Q4 98 2,956.0
Q1 99 3,152.9
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 Commission.
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 geographically and demographically distinct from Nextel's.
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<PAGE>
The following chart illustrates the quarterly growth of Nextel's monthly
average revenue per unit rates over the past three years.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF
EDGAR FILING.]
NEXTEL--MONTHLY AVERAGE REVENUE PER DIGITAL SUBSCRIBER UNIT*
<TABLE>
<S> <C>
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 as
filed with the Commission.
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 lower rates of churn.
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 Communications and us, as
Nextel Direct Connect service.
The Nextel Direct Connect dispatch capability allows any member of a mobile
team to immediately communicate with any or all of a prearranged Nextel
phone-equipped team of up to 100 members with the push of a button. This
"push-to-talk" feature works like a two-way radio, but, in contrast to analog
dispatch SMR radios, digital iDEN technology allows only the person or persons
being called to hear the conversation.
Nextel Direct Connect service, together with other enhancements, including
call alert, speakerphone capability, short text paging and "hot-sync"
programming (on certain subscriber unit models), differentiate Nextel's digital
service from cellular and PCS providers, and we believe it has been responsible
for Nextel's strong appeal to business users in mobile occupations, including
transportation, delivery, real property and facilities management, construction
and building, landscaping, and other service sectors. "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.
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<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 Nextel digital mobile network products and services.
A substantial number of the entities that have been awarded PCS licenses are
current cellular communications service providers and joint ventures of current
and potential wireless communications service providers, many of which have
financial resources, customer bases and name recognition greater than ours. PCS
operators will likely compete with us in providing some or all of the services
available through our network. Additionally, we expect that existing cellular
service providers, some of which have been operational for a number of years and
have significantly greater financial and technical resources, customer bases and
name recognition than ours, will continue to upgrade their systems to provide
digital wireless communications services competitive with those available on our
network. Moreover, cellular and wireline companies have been granted authority
to participate in dispatch and SMR services, respectively. We also expect our
business to face competition from other technologies and services developed and
introduced in the future.
While we believe that the mobile telephone service currently being provided
on the 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 and will in certain cases continue to be differences between the
services provided by us and by cellular and/or PCS system operators and the
performance of their respective systems. The all-digital networks that we and
Nextel operate provide customers with digital quality and advanced features
wherever they roam on the 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 we, with the assistance of Nextel, make progress toward building out
the Nextel digital mobile network nationwide, this disadvantage will be reduced,
but we can give no assurance that the Nextel digital mobile network will ever be
as ubiquitous as other mobile telephone services. In addition, if either PCS or
cellular operators provide two-way radio dispatch services in the future, our
competitive advantage in being uniquely able to combine that service with our
mobile telephone service would be impaired.
Subscriber units on the 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 subscriber units manufactured by
Motorola, and in the future, other manufacturers including Kyocera, who may
license the iDEN technology from Motorola. The subscriber units are and are
likely to remain significantly more expensive than analog handsets, and are and
are likely to remain somewhat more expensive than digital cellular or PCS
50
<PAGE>
handsets that do not incorporate a comparable multi-function capability. We
therefore expect to charge higher prices for the subscriber handsets to be used
by our customers than those charged by operators for analog cellular handsets
and possibly more than those charged by operators for digital cellular handsets.
However, we believe that our multi-function subscriber units currently are
competitively priced compared to multi-function (mobile telephone service and
short text messaging) digital, cellular and PCS handsets.
During the transition to digital technology, certain participants in the
United States cellular industry are offering subscriber units with dual mode
(analog and digital) compatibility. Additionally, certain analog cellular system
operators that directly or through their affiliates also are constructing and
operating digital PCS systems have made available to their customers dual
mode/dual band (800 MHz cellular/1900 MHz PCS) subscriber units, to combine the
enhanced feature set available on digital PCS systems within their digital
service coverage areas with the broader wireless coverage area available on the
analog cellular network. We do not have comparable hybrid subscriber units
available to our customers.
We can give no assurances that potential customers will be willing to accept
system coverage limitations as a trade-off for the enhanced multi-function
wireless communications package we plan to provide on our portion of the 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, such
operators 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 subscriber
units and service offerings will be limited. We cannot predict the competitive
effect that any of these factors, or any combination thereof, will have on us.
Cellular operators and certain PCS operators and entities that have been
awarded PCS licenses each control more spectrum than is allocated for SMR
service in each of the relevant market areas. Each cellular operator is licensed
to operate 25 MHz of spectrum and certain PCS licensees have been licensed for
30 MHz of spectrum in the markets in which they are licensed, while no more than
21.5 MHz is available in the 800 MHz band to all SMR systems, including our
systems, in those markets. The control of more spectrum gives cellular operators
and such PCS licensees the potential for more system capacity and, therefore,
more subscribers than SMR operators, including Nextel and us. We believe that we
generally have adequate spectrum to provide the capacity needed on our portion
of the 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.
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<PAGE>
Additionally, the FCC recently reallocated 36 MHz of the former analog
television channels to commercial services, including broadcasts, fixed and
mobile services. We cannot predict how these technologies will develop or what
impact, if any, they will have on our ability to compete for wireless
communications services customers.
The FCC has recently announced plans to reauction over 150 PCS licenses on
July 26, 2000. These licenses 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 14,000 square feet and we
have a lease commitment on the facility through December 31, 2002. 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
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, Nextel WIP License Corp. holds 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 has transferred to us those site-by-site licenses located in
our EA territories operating at the same frequencies. EA licenses to operate on
these frequencies were granted pursuant to a one time auction and are issued for
ten years, after which we will need to apply for renewal from
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<PAGE>
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
Nextel's type of SMR service as competitive with the wireless service provided
by cellular and PCS providers.
As a result, SMR providers like us now have many of the same rights (such as
the right to interconnect with other carriers) and are subject to many of the
same obligations applicable to cellular and PCS operators.
The FCC prohibits any SMR, cellular, or PCS provider, collectively regulated
as "CMRS" providers, from restricting another carrier's ability to resell our
services until November 24, 2002. The FCC also has adopted requirements for CMRS
providers, including covered SMR providers, to implement various enhanced 911
capabilities. The FCC also requires CMRS providers to deploy technology that
would allow customers to keep their telephone numbers when switching to another
carrier. Covered SMR providers, including Nextel and us, along with other CMRS
services providers, must offer this number portability service in the 100
largest metropolitan areas, including the ability to support nationwide roaming,
by November 2002. This requirement also includes enabling calls from 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 45MHz cap, while increasing the cap in rural areas to
55MHz. 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 which we intend to use. This includes the terms
under which CMRS providers interconnect their networks and the networks of
wireline and other wireless providers of interstate communications services. The
FCC also has the authority to adjudicate complaints filed under the
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Communications Act with respect to service providers subject to its jurisdiction
among other matters. Under its broad oversight authority with respect to market
entry and the promotion of a competitive marketplace for wireless providers, the
FCC regularly conducts rulemaking and other types of proceedings to determine
rules and policies that could affect SMR operations. 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
collocation 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 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, states and local authorities maintain
authority over the zoning of sites where our antennas are located. These
authorities, however, may not discriminate against or prohibit our services
through 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
site we do not foresee significant problems in placing our antennas at sites in
our territory.
PENDING REGULATORY INITIATIVES
The FCC and a number of state regulatory authorities have initiated
proceedings or indicated their intention to examine the implementation of number
portability to permit customers to retain their telephone numbers when they
change service providers, the implementation of various number conservation
mechanisms, and alterations in the structure of universal service funding, among
other matters. These initiatives could impose significant financial obligations
on us and other wireless service providers, the magnitude of which we cannot
predict. Pursuant to Congressional doctrine, 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 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, a graduate of
Syracuse University and Harvard University's Advanced Management Program, has
nearly 20 years experience in the cable television and wireless communications
industries. Mr. Chapple was elected to our board of directors pursuant to the
terms of our shareholders' agreement. 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. 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 fourteen
metropolitan areas. From 1983 to 1988, he served as General Manager and Regional
Vice President for American Cablesystems.
DAVID AAS has been the Vice President-Engineering and Technical Operations
of Nextel Partners 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 ten 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's California/Nevada
region.
DONALD MANNING has been the Vice President, General Counsel and Secretary of
Nextel Partners and our subsidiaries since July 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 and 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 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 Bill Gates.
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 prior to
this offering, certain parties to the agreement, who together will own
approximately 90% 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: currently, Timothy Donahue;
- one person selected by Eagle River: currently, Dennis Weibling; and
- our chief executive officer: currently, John Chapple.
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<PAGE>
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 appoint
such designees as directors. Andrew Rush was elected to our board as a result of
his designation by DLJ Merchant Banking prior to the amendement to the
shareholders' agreement.
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. All directors are reimbursed for their
out-of-pocket expenses in serving on the board of directors.
EXECUTIVE COMPENSATION
Our executive officers are elected 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, Nextel Partners did
not pay any compensation to its executive officers, and on January 29, 1999,
certain executive officers received a lump sum in recognition of such officer's
service prior to such date. See "--Executive Employment Contracts 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 ---------------------------------
NAME AND -------------------- RESTRICTED SECURITIES
PRINCIPAL BASE STOCK UNDERLYING ALL OTHER
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 estimated value of $.17 per share as of the date of grant (less
price paid per share by such officer) for shares of Class A common stock,
$.001 par value, sold to such officer at $.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."
(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.
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<PAGE>
(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 $1.85 per share and vests in three equal annual
installments. See "--Option Grants in Fiscal Year 1999."
(9) Represents lump sum payments made to officers on January 29, 1999 for
services rendered to us prior to that date. See "--Executive Employment
Contracts and Termination of Employment Arrangements."
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information with respect to stock
options granted to each of our named executive officers during the fiscal year
ended December 31, 1999. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over the
term of the option (the period from the grant date to the expiration date) based
on assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are mandated by the Securities and Exchange Commission and do not
represent our estimate of future stock price. Actual gains, if any, on stock
option exercises will depend on the future performance of our Class A common
stock. In fiscal year 1999, we granted options to acquire up to an aggregate of
5,049,600 shares to employees and directors, excluding options that were
subsequently forfeited due to termination, all under our stock option plan and
all at an exercise price equal to the fair market value of our Class A common
stock on the date of grant as determined in good faith by our board of
directors.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OPTION TERM
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED (#) FISCAL 1999 SHARE DATE 5%($) 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
$14.286 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
$17.00
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per share minus the per share exercise price multiplied by the number of shares
underlying the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999 ($)(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 sections and applicable optional sections 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.
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
$0.02 per share upon termination of the employment of such officer, 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 Series A preferred stock, or the
Class A common stock issuable upon conversion of the Series A preferred
stock.
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EMPLOYEE STOCK OPTION PLAN
Our nonqualified stock option plan was adopted by our board of directors
effective as of January 29, 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 such stock as of the date of grant of such options. The total number of
shares that has been reserved for issuance under the plan is 16,545,354 shares
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 buildout, revenue and
EBITDA targets. The grants to employees, other than senior managers, may be
subject to similar performance criteria or other criteria established by 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 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. However, 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 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
$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 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 operating agreements with Nextel WIP Corp.,
a subsidiary of Nextel, and equipment purchase agreements with Motorola.
CAPITALIZATION TRANSACTIONS
JANUARY 29, 1999 TRANSACTIONS. On January 29, 1999, Nextel assigned to us,
subject to approval by the FCC, certain licenses 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 a cash contribution of
$130.9 million. Nextel is the beneficial owner of 36.5% of our common stock on
an as-converted basis prior to this offering and two of our directors, Timothy
M. Donahue and Dennis M. Weibling, are affiliated with Nextel.
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 $3.8 million. The equity
securities were sold in exchange for cash of $52.1 million, an irrevocable cash
equity commitment of $104.3 million to be received over the subsequent two-year
period, and a vendor credit from Motorola of $18.4 million towards the purchase
of infrastructure equipment. As of September 30, 1999 the Company had used
approximately $14.7 million of the vendor credit from Motorola. Motorola is the
beneficial owner of 6.1% of our outstanding common stock on an as-converted
basis 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 collectively hold 27,287,310
shares of Series A preferred stock and warrants to purchase 1,245,822
shares of Class A common stock and are the beneficial owners of 13.3% of
our outstanding common stock on an as-converted basis prior to this
offering. One of our directors, Andrew H. Rush, is affiliated with DLJ
Merchant Banking;
- Madison Dearborn Partners, which holds 26,030,466 shares of Series A
preferred stock and warrants to purchase 1,188,438 shares of Class A
common stock, and is the beneficial owner of 12.7% of our outstanding
common stock on an as-converted basis prior to this offering. One of our
directors, Andrew E. Sinwell, is affiliated with Madison Dearborn
Partners;
- Eagle River, which holds 18,741,678 shares of Series A preferred stock and
758,334 shares of Common A common stock and is the beneficial owner of
9.1% of our outstanding
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common stock on an as-converted basis prior to this offering. One of our
directors, Dennis M. Weibling, is affiliated with Eagle River;
- The Huff Alternative Income Fund, LP, which holds 14,239,380 shares of
Series A preferred stock and is the beneficial owner of 6.7% of our
outstanding common stock on an as-converted basis prior to this offering
and a portion of our 14% senior discount notes; and
- John Chapple, our chief executive officer and a director, and the
beneficial owner of 1.6% of our outstanding common stock on an
as-converted basis 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 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 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 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, and 6,902,484 shares of
Series C preferred stock, 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. In addition to Motorola, purchasers of the Series A
preferred stock in the September 9,1999 transaction included DLJ Merchant Bank
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--business operations, David Thayler, our
vice president--field operations, and John D. 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.
THE SHAREHOLDERS' AGREEMENT
GENERAL. On January 29, 1999, we entered into a shareholders' agreement
with Nextel WIP Corp., a subsidiary of Nextel, 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 this offering.
MANAGEMENT. Under the terms of the shareholders' agreement, 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 appoint as directors:
- one person selected by Madison Dearborn Partners;
- one person selected by Nextel;
- one person selected by Eagle River; and
- our chief executive officer.
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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 appoint such
designees as directors.
On January 29, 1999, the parties to the shareholders' agreement elected John
Chapple, our chief executive officer, Timothy M. Donahue, Nextel's designee,
Andrew H. Rush and Andrew E. Sinwell, DLJ Merchant Banking's designees, and
Dennis M. 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 our liquidation, modification of our material
agreements, determination of senior management compensation, change in our tax
status, modification of our management agreement with Nextel, 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 selected by Nextel, although these approval rights terminate if, after
January 29, 2011, Nextel 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, Nextel 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, the
management stockholders and their permitted transferees. Other stockholders who
are parties to the shareholders' agreement may transfer their shares to third
parties, subject to these rights of first offer and rights of first refusal.
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 demand one
registration, at our expense, of up to all of their shares if they hold at
least 10% 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 demand a second and
third registration, at their expense, if they hold at least 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
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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, 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 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 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 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, for Nextel, Eagle River and DLJ Merchant Banking in
connection with the consummation of the capitalization transactions on
January 29, 1999.
TERMINATION. The shareholders' agreement terminates by its terms on
January 29, 2014, and thus will continue to remain in effect following the
closing of this offering.
NEXTEL OPERATING AGREEMENTS
We, through our principal subsidiary, entered into agreements with Nextel
WIP Corp. 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.
THE JOINT VENTURE AGREEMENT
BUILD-OUT AND OPERATIONS. Our agreements with Nextel require us to build
our portion of the Nextel digital mobile network on time and make it compatible
with Nextel systems. We have agreed to meet or exceed Nextel quality standards.
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 would be materially adverse to
us, then we will not be required to implement the upgrade unless Nextel agrees
to pay a subsidy to us in an amount not to exceed the lesser of:
- 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.
Alternatively, if Nextel elects not to pay us a subsidy in connection with the
required upgrade, then:
- Nextel can agree under certain circumstances to waive the requirement that
we make the upgrade;
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- we can exercise an option to provide all non-Nextel stockholders with the
opportunity to put their stock to Nextel, as described below; or
- we can request arbitration to determine the subsidy that Nextel will be
required to pay in connection with the implementation of the upgrade.
ACQUISITION OF LICENSES. In October 1999, we received FCC approval of the
transfer of control of Nextel's initial contribution of licenses to us. We are
currently awaiting FCC approval of the licenses contributed to us in
September 1999 by Nextel. To the extent that we require additional frequencies
to operate our business, the joint venture agreement sets forth the terms under
which we may acquire such frequencies from Nextel, from third parties or from
FCC auctions of spectrum. All of the frequencies we use are subject to transfer
restrictions and rights of first refusal in favor of Nextel.
EQUIPMENT, VENDORS AND DISCOUNTS. If we request, Nextel will try to obtain
for us the same discounts as are available to Nextel from any Nextel vendor or
service provider with whom we are negotiating for the purchase of equipment,
advertising, media buying, telemarketing and related services.
NEXTEL APPROVAL RIGHTS. We have agreed that we will obtain Nextel approval
prior to taking certain action, including:
- making a material change in our technology or business objectives;
- broadening the scope of our business beyond our current business
objectives; or
- disposing all or substantially all of our assets.
EXCLUSIVITY. Nextel has agreed that during the term of the joint venture
agreement, Nextel will not provide digital mobile wireless communications
services within our markets, except that Nextel:
- has 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 the
trademark license agreement;
- 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 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
Nextel's standards for pricing structure, advertising, promotions, customer
care, telemarketing and related activities. We do, however, set our own prices
in our markets, except that we are required to honor pricing plans established
by Nextel for their national account customers even with respect to subscribers
of those national accounts located in our markets.
BACK OFFICE/MIS SERVICES. Nextel provides us access to certain back-office
support and information systems on an ongoing basis. In exchange, we pay Nextel
fees, based on the cost to Nextel cost, 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.
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MATERIAL BREACH; TERMINATION. In the case of certain material breaches of
the operating agreements, including, without limitation, a delay in the
completion of the build-out of the Nextel digital mobile network and our failure
to offer services required by Nextel or to meet performance requirements, Nextel
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 could,
in certain circumstances, purchase or be forced to purchase, all of our
outstanding 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. We may pay royalties to Nextel 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 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 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
roaming fees by Nextel 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 portion of the Nextel digital mobile network, 80% of the
aggregate service revenue generated by such customers is paid to Nextel. In
either case, such percentage payments are subject to adjustment based on a
comparison between customer satisfaction levels attained in Nextel's and our
portions of the 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 network and paid approximately $653,000 for our customers roaming
on Nextel systems.
ANALOG MANAGEMENT AGREEMENT
Through the analog management agreement, we permit Nextel to use SMR
frequencies that are covered by the licenses being transferred to us and that
are not being used by us to operate our portion of the 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's right to use any of these frequencies upon at least six
months notice. The analog management agreement requires Nextel to, among other
things, comply with all applicable FCC rules and regulations governing the
licenses covering the managed frequencies.
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ASSET AND STOCK TRANSFER AND REIMBURSEMENT AGREEMENTS
On January 29, 1999, we purchased from Nextel assets located in our markets
at a cost of approximately $115.8 million through the asset transfer
reimbursement agreement. We also reimbursed Nextel for operating losses incurred
by Nextel prior to January 29, 1999 in the amount of $15.1 million. On
September 29, 1999, one of our subsidiaries entered into an expansion territory
asset transfer and reimbursement agreement with Nextel 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
Under a master site lease agreement, we lease space on telecommunications
towers from Nextel. We pay Nextel 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 under these
arrangements.
Nextel and SpectraSite Holdings, Inc. have entered into an agreement whereby
SpectraSite purchased certain existing telecommunications towers from Nextel and
will build or purchase, and lease back, additional towers, including in each
case towers located in our territory. Concurrent with these transactions, Nextel
and its subsidiaries entered into a master site lease agreement with SpectraSite
in order to lease space on the transferred towers. Currently we lease space on
these towers from Nextel and its affiliates which in turn leases the towers from
SpectraSite. We plan to execute a master site lease agreement with SpectraSite
to replace, and which will contain substantially similar economic terms as, the
current master lease with Nextel. In addition, Nextel has agreed that certain
economic terms, such as the rental amounts due for the first three years, will
be the same under the SpectraSite master lease and, if such terms are less
favorable to us, Nextel will compensate us for the difference.
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 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 to terminate any services covered by the transition services agreement
before the end of any term of service. The parties contemplate that in the event
we desire to purchase any services from Nextel following the expiration of the
transition services agreement, Nextel may, at its election, agree to provide
certain services to us on an arm's length basis, at prices to be agreed upon.
We pay monthly fees based on Nextel cost of providing such services. For the
nine-month period ended September 30, 1999, we were charged approximately
$1.9 million for these services.
SWITCH SHARING AGREEMENT
Nextel provides certain telecommunications switching services to us which
permits us to link cell sites to, and electronically access, certain switching
equipment used and maintained by affiliates of Nextel and thereby allows us to
provide ESMR service to our customers in areas in which we do not own a switch.
Until January 1, 2001, we pay Nextel monthly switching fees based on Nextel cost
of providing such services at a rate reflecting Nextel estimated cost as of
January 1, 2001 subject to adjustment, while we develop our own infrastructure.
For the nine-month period ended September 30, 1999, we were charged
approximately $1.5 million for these services.
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As Nextel and our operations expand and customer bases grow, the monthly
switching fees are expected to increase in the aggregate, but decrease on a per
customer basis (assuming a reduction in the minute of use charge). We are
entitled to a credit against our monthly switching fee charges based on the
operation of certain owned switching network elements as described in the switch
sharing agreement. If and when we install or acquire additional switching
equipment to serve additional areas within our markets, our dependency on Nextel
and its affiliates for switching services should decrease.
Nextel is obligated, on the terms set forth in the switch sharing agreement,
to implement upgrades so that sufficient switching capacity is available to meet
our predicted customer growth and increased service use during the term of the
joint venture agreement. We are also obligated to install our own equipment when
our customer usage 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
Pursuant to the terms of this agreement, the maximum cumulative, aggregate
cash liability of Nextel and its controlled affiliates, other than Nextel WIP
Corp., for any and all actual or alleged claims or causes of action arising in
connection with any aspect of the agreements governing or otherwise relating to
the operating agreements is capped at $200 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 Corp. to enable Nextel WIP Corp. to
perform its obligations relating to the operating agreements other than
contributions for which Nextel has received equity securities or has received
consideration equal to Nextel's cost to provide the contribution.
Some significant Nextel obligations, including Nextel commitments 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 agreements governing
or otherwise relating to the operating agreements.
MOTOROLA PURCHASE AGREEMENTS
Under the iDEN infrastructure equipment purchase agreement and the
subscriber purchase and distribution agreement between us and Motorola 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 subscriber handsets and other
accessories.
We obtained pricing for the Motorola equipment and subscriber units on
financial and other terms that we believe are substantially similar to those
obtained by Nextel. Under these purchase agreements, we expect to purchase over
a three-year period $98.5 million worth of subscriber units and accessories and
over the same period approximately $145 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, handsets, 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 convertible preferred stock to Motorola as part of
the capitalization transactions consummated on January 29, 1999 and
September 9, 1999.
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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." 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.
<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>
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of all shares of our common stock as of January 1, 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.(1)(2)
2001 Edmund Halley Drive
Reston, VA 20191.................... 77,782,626 -- 36.5% 32.9%
Entities affiliated with DLJ Merchant
Banking Partners II, L.P.(3)
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(4)....................... 3,336,024 -- 1.6 1.4
John Thompson(5)...................... 2,210,664 210,000 1.1 1.0
David Thaler.......................... 1,254,000 -- * *
David Aas............................. 1,064,130 -- * *
Perry Satterlee....................... 1,003,332 -- * *
Mark Fanning.......................... 903,486 -- * *
Andrew Rush(6)........................ 27,287,310 1,245,822 13.3 12.0
Dennis Weibling(7).................... 97,282,638 -- 45.6 41.1
Timothy Donahue(8).................... 77,782,626 -- 36.5 32.9
Andrew Sinwell(9)..................... 26,030,466 1,188,438 12.7 11.4
Steven Dodge.......................... -- -- -- --
Directors and officers as a group (12
persons)(10)........................ 160,432,050 2,704,260 75.6% 68.1%
</TABLE>
- --------------------------
*Less than 1%
(1) Nextel WIP Corp. is a wholly owned subsidiary of Nextel.
(2) Consists of shares of Class A common stock which Nextel WIP Corp. has the
right to acquire upon conversion of its Class B common stock. The rights of
the Class B common stock are otherwise identical in all respects to the
Class A common stock.
(3) 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.
(4) Includes 736,667 shares held by JRC Coho LLC, an entity controlled by
Mr. Chapple.
(5) Includes 509,166 shares held by JDT-JRT, LLC, an entity controlled by
Mr. Thompson.
(6) 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.
(7) Consists of shares held by Eagle River Investments, LLC, of which
Mr. Weibling serves as President, and by Nextel WIP Corp., a wholly owned
subsidiary of Nextel, of which Mr. Weibling serves as a director.
Mr. Weibling disclaims beneficial ownership of such shares.
(8) Consists of shares held by Nextel WIP Corp., a wholly owned subsidiary of
Nextel, of which Mr. Donahue is president, chief executive officer and
director. Mr. Donahue disclaims beneficial ownership of such shares.
(9) 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.
(10) See footnotes 4 through 9 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 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 $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 there after............ 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 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;
- designate unrestricted subsidiaries;
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- 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.
A change of control would occur under the indenture if any of the following
occurs:
(1) any person or group of persons, as such term is used in
Section 13(d)(3) of the Exchange Act and related regulations, other than Nextel,
Craig O. McCaw or entities affiliated with him, Motorola, DLJ Merchant Banking
or entities affiliated with it, and certain other corporations is or becomes the
beneficial owner, directly or indirectly, of more than 50% of our total voting
stock or total common equity; or
(2) we consolidate with, or merge with or into, another person other Nextel,
Craig O. McCaw or entities affiliated with him, Motorola, DLJ Merchant Banking
or entities affiliated with it, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of our assets to any person other
than Nextel, Craig O. McCaw or entities affiliated with him, Motorola, DLJ
Merchant Banking or entities affiliated with it, or any person other than
Nextel, Craig O. McCaw or entities affiliated with him, Motorola, DLJ Merchant
Banking or entities affiliated with it, consolidates with, or merges with or
into, us, in any such event pursuant to a transaction in which our outstanding
voting stock is converted into or exchanged for cash, securities or other
property, other than any such transaction where:
(a) our outstanding voting stock is converted into or exchanged for:
(A) voting stock of the surviving or transferee person or entity;
(B) cash, securities and other property in an amount which could be
paid by us as a "restricted payment" under the indenture; and
(b) immediately after such transaction no person or group of persons is
the beneficial owner, directly or indirectly, of more than 50% of the total
voting stock or total common equity of the surviving or transferee person;
(3) during any consecutive two-year period, individuals who at the beginning
of such period constituted the board of directors together with:
(a) any directors who are members of the board of directors on
January 29, 1999;
(b) any new directors whose election by such board of directors or whose
nomination for election by our stockholders was approved by a vote of
66 2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved; and
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(c) any new directors appointed or selected by a permitted holder,
whether pursuant to a transaction of a type described in either of the
preceding paragraphs (a) and (b), pursuant to a contractual right or
pursuant to a right granted under our certificate of incorporation or
by-laws,
cease for any reason to constitute a majority of the board of directors then in
office; or
(4) the adoption of a plan relating to the liquidation or dissolution of us.
In addition, one of the events that constitutes a change of control under
the indenture is a sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all of our assets. The indenture is governed
by New York law, and there is no established definition under New York law of
substantially all of the assets of a corporation. Accordingly, if we were to
engage in a transaction in which we disposed of less than all of our assets, a
question of interpretation could arise as to whether such disposition was of
substantially all of our assets and whether we were required to make an offer to
purchase in accordance with the indenture.
Under the indenture, we may not, in any transaction or series of related
transactions:
(1) merge or consolidate with or into, or sell, assign, convey, transfer or
otherwise dispose of our properties and assets substantially as an entirety to,
any person; or
(2) permit any of our subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer or other
disposition of our properties and assets and those of our subsidiaries, taken as
a whole, substantially as an entirety to any person,
unless:
(a) either:
(A) if the transaction or series of transactions is a consolidation
of us with or a merger of us with or into any other person, we shall be
the surviving person of such merger or consolidation; or
(B) the person formed by any consolidation with or merger with or
into us, or to which our properties and assets or those of our
subsidiaries, taken as a whole, as the case may be, substantially as an
entirety are sold, assigned, conveyed or otherwise transferred shall be a
corporation, partnership, limited liability company or trust, and shall
assure all our obligations under the notes and the indenture and, the
indenture, shall remain in full force and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including any
debt incurred or anticipated to be incurred in connection with or in respect
of such transaction or series of transactions), no default or event of
default shall have occurred and be continuing; and
(c) we or the successor entity, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable period:
(A) have consolidated net worth immediately after the transaction
equal to or greater than our consolidated net worth immediately preceding
the transaction; and
(B) be permitted to incur at least $1.00 of additional debt.
The indenture also provides that we may not, directly or indirectly, lease
all or substantially all of our properties or assets, in one or more related
transactions, to any other person.
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The following are events of default under the indenture:
- failure to pay principal of or premium, if any, on, any note when due;
- failure to pay any interest on any note when due, such failure continuing
for 30 days;
- default in the payment of principal and interest on notes required to be
purchased;
- failure to perform or comply with the provisions described under "Mergers,
Sales of Assets, Etc." of the indenture;
- failure to perform any other covenant or agreement under the indenture or
the notes continued for 60 days after written notice;
- failure to pay when due the principal of, or acceleration of, any debt
having an outstanding principal amount of at least $25 million;
- the rendering of a final judgment for the payment of money against us in
an aggregate amount in excess of $25 million; 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. 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. The applicable
margin for the $150 million term loan is 4.25% over LIBOR and 3.25% over the
base 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.
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<PAGE>
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. We and our other subsidiaries have
agreed to certain restrictions, including among others, restrictions that limit
our ability to:
- incur additional debt, other than unsecured debt in the ordinary course of
business;
- engage in any business activity other than in connection with its
ownership of the capital stock of, and the holding of permitted
investments in, the borrower; or
- merge or consolidate with any person.
The credit facility contains customary covenants and restrictions on Nextel
Partners Operating Corp.'s 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 the term loans contain financial
covenants requiring Nextel Partners Operating Corp. to maintain:
- certain defined ratios of senior debt and total debt to EBITDA, as
adjusted;
- a minimum interest coverage ratio;
- a minimum fixed charge coverage ratio;
- a maximum leverage ratio; and
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- 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.
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;
- certain material breaches of obligations under these operating agreements
or default by Nextel WIP Corp. 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 common stock, $.001 par value, and 102,185,000 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 two stockholders. 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
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. 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.
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 their acquisition by Nextel
or its affiliates or transferees.
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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
outstanding is 2,185,000 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 common stock 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 interest 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.
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
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.
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CERTAIN RIGHTS AND OBLIGATIONS OF NEXTEL
Under the provisions of our restated certificate of incorporation, and
subject to certain limitations, Nextel has the right to purchase for cash or
shares of its common stock, or a combination of both, all of the outstanding
shares of our Class A common stock:
- on January 29, 2008, subject to certain postponements by our board of
directors;
- if Nextel changes the digital transmission technology for our frequency
range and 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 requires a change in our business, operations or systems without
subsidizing us for the costs of such change and we decline to implement
the required change; or
- upon the termination of our joint venture agreement with Nextel as a
result of our breach.
If Nextel 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 joint venture
agreement, then the purchase price to be paid will be the fair market value of
the Class A common stock, "Fair market value" is determined by an appraisal
process, and is defined in our restated certificate 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 joint venture agreement, then Nextel may purchase the
Class A common stock for an amount based on 80% of the average closing price of
our common stock for the 20 prior trading days.
In addition, under the provisions of our restated certificate of
incorporation and upon the occurrence of any of the events listed below, with
some exceptions, the holders of a majority of our outstanding Class A common
stock, excluding Nextel, can cause Nextel to purchase for cash or shares of
Nextel common stock, or a combination of both, all of the outstanding shares of
our Class A common stock:
- a change of control of Nextel;
- if prior to January 29, 2003, Nextel exercises its right under the
shareholders' agreement to preempt the public offering of our stock by DLJ
Merchant Banking, as described below;
- if we do not implement a change in our business, operations or systems
required by Nextel and our board of directors provides all non-Nextel
stockholders with the opportunity to put their stock to Nextel; or
- upon the termination of our joint venture agreement with Nextel as a
result of a breach by Nextel.
If the event giving rise to the stockholders' right to cause Nextel to buy all
of the outstanding shares of Class A common stock:
- is a change in control of Nextel, the purchase price that Nextel 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 an appraisal process;
- is the preemption of a public offering of our stock by DLJ Merchant
Banking, the purchase price that Nextel is required to pay for shares of
Class A common stock is the same per share price that was paid by Nextel
to purchase the shares from DLJ Merchant Banking;
- is the election of such stockholders to put their stock to Nextel after
our failure to implement changes in our business, operations or systems
required by Nextel, the purchase price that
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Nextel is required to pay for shares of Class A common stock is an amount
that would equal a 20% rate of return on the amount of capital invested by
such stockholders to purchase such shares; or
- is the termination of the joint venture agreement as a result of a breach
by Nextel, the purchase price that Nextel is required to pay for shares of
Class A common stock is an amount based on 120% of the average closing
price of our Class A common stock for the 20 prior trading days.
In addition, holders of our Class A common stock have the right to
participate in any sale by Nextel of all of its shares 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.
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 demand one
registration, at our expense, of up to all of their shares if they hold at
least 10% 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 demand a second and
third registration, at their expense, if they hold at least 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, 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
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
Our 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.
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Our certificate of incorporation provides for 102,185,000 authorized shares
of preferred stock and grants our board of directors broad power to establish
the rights and preferences of authorized and unissued preferred stock. Upon the
closing of this offering, only 2,185,000 shares of preferred stock will be
designated and issued. 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. In addition, 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.
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 (1) 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, (2) upon consummation of the transaction in which the
stockholder becomes an interested stockholder, the interested stockholder
acquires 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
(3) on or subsequent to the consummation date, 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.
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 intend to apply to list our common stock on The Nasdaq Stock Market's
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 or 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.
Additionally, certain of our outside directors may 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, 42,804,024 shares of the restricted securities will be eligible for
immediate sale in the public market under Rule 144(k) without any
restrictions, subject to the transfer provisions in the shareholders'
agreement.
- On September 9, 2000, an additional 9,974,526 shares of the restricted
securities will be eligible for immediate sale in the public market under
Rule 144(k) without any restrictions, 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
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. 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.
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
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indirectly, or file with the Securities and Exchange Commission 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, 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 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, DLJ Merchant Banking and its affiliates, Madison
Dearborn, Eagle River, and the management
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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 optional markets
acquired by us, Eagle River, Nextel 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, the management stockholders and their
permitted transferees. Other stockholders who are parties to the shareholders'
agreement may transfer their shares to third parties, subject to these rights of
first offer and rights of first refusal.
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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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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
92
<PAGE>
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.
93
<PAGE>
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 (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
94
<PAGE>
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, 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 intend to apply 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.
We currently anticipate that we will request the underwriters to reserve up
to 5% of the shares of our Class A common stock for sale at the initial public
offering price to persons designated by us
95
<PAGE>
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, own a significant amount of our equity. See
"Principal Stockholders" and "Related-Party Transactions."
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.
96
<PAGE>
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 and Nextel Communications, that file electronically with the SEC.
97
<PAGE>
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 Proforma Stockholder's
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............................................. 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
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 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 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............ -- -- -- -- -- (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............ -- -- (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.......................... 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.......................... 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............................... -- -- (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 Communications,
Inc..................................................... $ 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.
through one of its subsidiaries ("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 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 $3.8 million). The
equity securities were sold in exchange for cash of $52.1 million, an
irrevocable cash equity commitment of $104.3 million to be received over the
subsequent two-year period, and a vendor credit from Motorola, Inc. ("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 a wholly owned subsidiary of
Nextel. 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). Upon receipt of FCC
approval, the Frequency Management Agreement will expire.
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)
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 Reimbursement Agreement with Nextel 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 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 Preferred--Series B Redeemable or
Convertible 0.00% 5.61%
Nextel Preferred--Series C Convertible 31.93% 27.66%
Nextel Preferred--Series D Convertible 0.00% 5.61%
----- -----
Subtotal--Nextel 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, 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's historical cost basis for all periods presented.
These accounts include Nextel's cost basis in the FCC licenses discussed above,
as all of the rights 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 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 funded
the operations of Partners and they were incurred for the benefit of
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)
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 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 (see Note 9) provide for support services
to be provided by Nextel. Additionally, the Company plans to use Nextel's
back-office systems initially to support customer activation, billing and
customer care as well as other services during a transition period.
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 for the provision
of certain services. For the foreseeable future, the Company will need to rely
on Nextel for the provision of these services as the Company will not have the
infrastructure to support those services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Partners and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
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 a subsidiary of Nextel
Communications, becomes subject to mandatory 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.
PROFORMA 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 from Nextel to
the Company, of the licenses held by Nextel WIP License Corp.
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 amortization are computed using the
straight-line method based on estimated useful lives of three
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)
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.
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
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)
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 London Interbank Offered
Rate ("LIBOR")............................................ -- 150,000
-------- --------
Total Long-term Debt........................................ $ -- $770,308
======== ========
</TABLE>
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
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)
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.
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
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)
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 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.
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)
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.
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 B Common Stock (other than Class B
Common Stock) are callable at the option of Nextel or may be put to Nextel at
the option of the holders.
CLASS B COMMON STOCK--Shares of Class B Common Stock are convertible at any
time at the option of the holder into an equal number of shares of Class A
Common Stock.
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
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)
adverse to the rights of holders of such securities. The holders of Series A,
Series C and Series D Preferred Stock are entitled to share equally, share for
share on an as converted basis, if dividends are declared on Common Stock,
whether payable in cash, property or securities.
SERIES A PREFERRED STOCK--Each share of Series A Preferred Stock is
convertible into one share of Class A Common Stock at any time upon transfer
from its current holder.
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. 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.
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)
7. CAPITAL STOCK AND STOCK RIGHTS: (CONTINUED)
SERIES C PREFERRED STOCK AND SERIES D PREFERRED STOCK--Each share of
Series C and Series D Preferred Stock is convertible into one share of Class B
Common Stock 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 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
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)
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.
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.
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)
8. STOCK AND EMPLOYEE BENEFIT PLANS: (CONTINUED)
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 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 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 and Eagle River
advanced the Company $3.4 million (as of December 31, 1998) to cover its costs
during the period. These advances did not bear interest and were repaid in
majority on January 29, 1999. As of September 30, 1999 the Company owed Nextel
and Eagle River $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, purchase agreements between Nextel
and Motorola dated January 29, 1999, Motorola provided the iDEN infrastructure
and subscriber handset equipment to Partners throughout its markets (such
equipment purchase agreements, are referred to herein as the "Equipment Purchase
Agreements"). The Company expects to rely on Motorola for the manufacture of a
substantial portion of the equipment necessary to construct its Digital Mobile
Network and handset equipment for the foreseeable future. The Equipment Purchase
Agreements govern Partners' rights and obligations regarding purchases of system
infrastructure equipment manufactured by Motorola and others.
For the 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 a wholly owned subsidiary of Nextel ("Nextel Sub")
entered into a joint venture agreement (the "Joint Venture Agreement") dated
January 29, 1999. Summarized below are several of the important terms of the
Joint Venture Agreement.
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)
BUILD-OUT--The Company is bound to certain operational obligations,
including meeting the construction requirements set forth in an agreed-upon
minimum build-out plan, ensuring compatibility of the Company's systems with the
Nextel digital mobile network, offering certain core service features with
respect to its systems (including upgrading its system to comply with future
Nextel standards) and causing the Company's systems to comply with Nextel's iDEN
quality standards.
ACQUISITION OF LICENSES--Nextel has transferred SMR licenses to Nextel WIP
License Corp. (a Delaware corporation and currently a wholly owned subsidiary of
Nextel). Upon approval of the FCC, Nextel will transfer the stock of Nextel WIP
License Corp. to Partners. These licenses will allow the Company to provide
wireless communication service to customers in 39 mid-sized and smaller markets
throughout the United States.
NEXTEL VENDOR RELATIONSHIPS--If requested by the Company, Nextel Sub has
agreed to use reasonable efforts to assist the Company in obtaining access to
many of the goods and services available through Nextel's vendors with whom the
Company is negotiating for the purpose of obtaining equipment as well as
advertising, media buying, telemarketing and related services.
NEXTEL APPROVAL RIGHTS--Subject to Nextel maintaining a certain percentage
ownership in Partners, and without the approval of Nextel Sub, the Company may
not (i) make a material change in the technology used in its business,
(ii) dispose of all or substantially all of its assets or (iii) prior to the
occurrence of certain specified events, broaden the scope of its business beyond
the limits provided for in the Joint Venture Agreement.
EXCLUSIVITY--Nextel Sub has agreed, on behalf of Nextel and its affiliates,
that during the term of the Joint Venture Agreement, Nextel and its affiliates
will not provide digital wireless communication services within the Company's
territory (the "Territory") using 800 MHz frequencies. Nextel and its affiliates
may continue to provide analog 800 MHz service in the Territory provided that
such analog service is not offered under any of the trademarks licensed to the
Company under the parties Trademark License Agreement and do not involve the use
of iDEN or other digital transmission technology. In addition, Nextel and its
affiliates may offer digital services in the Territory using non-800 MHz
frequencies provided that these services are not offered under the licensed
trademarks and do not offer interconnection with landline telecommunication
providers. Nextel may engage in national advertising (including print,
television, radio and Internet), promotions and sponsorships to promote Nextel
service, but will coordinate with the Company to ensure that customers in the
Company service areas adjacent to Nextel service areas do not switch between
Nextel and Company territories. Nextel may continue to service national
accounts, accounts with virtual private networks and national indirect
distributors within the Territory.
STANDARD OF CARE--Nextel Sub (on behalf of Nextel and its affiliates) has
agreed to provide services to the Company at the same level that such services
are provided to subsidiaries of Nextel and not to discriminate between the
Company and subsidiaries of Nextel with respect to providing such services. In
the event that Nextel Sub (on behalf of Nextel and its affiliates) has agreed to
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)
provide services to the Company that are not provided to subsidiaries of Nextel,
Nextel Sub will only be liable in cases of gross negligence or willful
misconduct in the provision of such services.
MARKETING, ADVERTISING, PRICING, ETC.--The Company is generally required to
adhere to Nextel standards for pricing structure, advertising, promotions,
customer care, telemarketing and related activities.
BACK OFFICE/MIS SERVICES--Nextel provides the Company access to certain back
office and information systems platforms on an ongoing basis, as more fully
described in the Joint Venture Agreement. The Company pays to Nextel a fee,
based on Nextel's cost, for these services. For the nine month periods ended
September 30, 1998 and 1999, the Company was charged approximately $139,000 and
$285,000, respectively, for these services.
TRADEMARK LICENSE AGREEMENT--Pursuant to a trademark license agreement (the
"Trademark License Agreement"), Nextel Sub has granted OPCO a non-exclusive
license to use certain trademarks and other intellectual property (the "Licensed
Marks") that are now or in the future may be used by or licensed to Nextel.
The Trademark License Agreement allows OPCO to sublicense the Licensed Marks
solely to its wholly owned subsidiaries and to authorized dealers of OPCO in
connection with the marketing, promotion and sale of OPCO services, and the
marketing, promotion and sale of certain equipment to be used by OPCOs
customers. OPCO is obligated to pay royalties to Nextel Sub for its use of the
Licensed Marks, beginning on a date (the "Royalty Commencement Date") that is
the latter of January 1, 2002 or the first day of the month 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 Sub is allowed to, at any time upon or following the
termination of the Joint Venture Agreement, terminate the Trademark License
Agreement, and Nextel Sub is entitled to seek to terminate the Trademark License
Agreement upon the occurrence of certain material defaults under the Joint
Venture Agreement, even if the Joint Venture Agreement and other Operating
Agreements remain in effect. Termination of the Trademark License Agreement
requires, among other things, that OPCO discontinue use of the Licensed Marks as
part of its corporate, assumed or trade name.
ROAMING AGREEMENT--Pursuant to a roaming agreement (the "Roaming Agreement")
entered into between Nextel Sub and OPCO, Nextel Sub and OPCO provide ESMR
service to subscribers of the other (in either case, the "Home Service
Provider") while such subscribers are out of the Home Service Provider's
territory and roaming in the territory of the other (in either case, the "Remote
Service Provider"). Under the Roaming Agreement, each Home Service Provider is
responsible for billing its own subscribers and designated users for roaming
usage in accordance with its own subscriber plans and service agreements. The
Roaming Agreement provides that each party pays the others monthly roaming fees
in an amount based on the actual system minutes generated by
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)
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, 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 relating to the construction, implementation and
operation of the Digital Mobile Network. Pending FCC approval of the license
transfer, Nextel Sub will represent the Company before the FCC with respect to
any matters relating to the managed frequencies. The Frequency Management
Agreement will terminates upon FCC approval of the license transfer.
MASTER SITE LEASE AGREEMENT--OPCO will lease from Nextel Sub, under a master
site lease agreement entered into between them (the "Master Site Lease"),
telecommunications towers and sites and space on telecommunications towers,
which are owned or leased by affiliates of Nextel Sub in the Territory. Pursuant
to the Master Site Lease, as the network build-out progresses, additional sites
will become subject to the Master Site Lease. OPCO will pay Nextel Sub monthly
rental payments based on the number of telecommunication towers leased by OPCO.
For the nine month period ended September 30, 1999, the Company was charged
approximately $407,000 by Nextel 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 Sub is allowed to, at any time upon or
following the termination of the Joint Venture Agreement, terminate the Master
Site Lease. Neither party is permitted to assign or transfer the Master Site
Lease or any of its rights or obligations thereunder without the consent of the
other, except that Nextel Sub will be entitled to assign or transfer the Master
Site Lease to any affiliate or any tower aggregator.
TRANSITION SERVICES AGREEMENT--Nextel Sub, through its affiliates, provides
certain services to OPCO for a limited period under a transition services
agreement entered into between OPCO and Nextel (the "Transition Services
Agreement"). Under the Transition Services Agreement, certain accounting,
payroll, customer care, purchasing, human resources and billing functions are
made available to OPCO. In return for the services received through Nextel, OPCO
pays monthly fees to Nextel based on Nextel's cost. For the nine month period
ended September 30, 1999, the Company was charged approximately $1,852,000 for
these services.
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)
The services provided under the Transition Services Agreement have different
variable terms agreed to by OPCO and Nextel Sub. OPCO has the sole discretion to
terminate its use of any services covered by the Transition Services Agreement
before the end of any term of service. The parties contemplate that in the event
OPCO desires to purchase any services from Nextel Sub following the expiration
of the Transition Services Agreement, Nextel Sub may, at its election, agree to
provide certain services to OPCO on an arm's length basis, at prices to be
agreed upon.
SWITCH SHARING AGREEMENT--Nextel, through its affiliates, provides certain
telecommunications switching services to OPCO pursuant to a switch sharing
agreement entered into between Nextel Sub and OPCO (the "Switch Sharing
Agreement"). The Switch Sharing Agreement permits OPCO to link cell sites to and
electronically access certain switching equipment used and maintained by
affiliates of Nextel in the operation of Nextel's Digital Mobile Network, which
facilitates OPCO provision of ESMR service to the Company's subscribers. Under
the Switch Sharing Agreement, OPCO pays Nextel Sub monthly switching fees based
on a pricing formula agreed to by the parties based on Nextel's cost of
providing such services in the year 2001. For the 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 and the Company, the maximum cumulative, aggregate cash liability
of Nextel and its controlled affiliates (other than Nextel Sub) for any and all
actual or alleged claims or causes of action arising in connection with any
aspect of the agreements governing or otherwise relating to the operating
agreements will be capped at $200 million. The cap amount will be reduced,
dollar for dollar, by the cumulative, aggregate amount that Nextel and its
controlled affiliates have advanced, expended or otherwise provided to or for
the benefit of Nextel Sub to enable Nextel Sub to perform its obligations
relating to the Operating Agreements. Among other 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 agreements
governing or otherwise relating to 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 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
F-30
<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)
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-31
<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................................... 9
Forward-Looking Statements..................... 22
Use of Proceeds................................ 22
Dividend Policy................................ 22
Capitalization................................. 23
Dilution....................................... 24
Selected Consolidated Financial Data........... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 27
Business....................................... 35
Regulation..................................... 53
Management..................................... 57
Related-Party Transactions..................... 65
Principal Stockholders......................... 74
Description of Certain Indebtedness............ 76
Description of Capital Stock................... 82
Limitation on Directors' Liabilities........... 87
Shares Eligible For Future Sale................ 88
Material U.S. Tax Consequences to Non-U.S.
Holders...................................... 91
Underwriting................................... 94
Legal Matters.................................. 97
Experts........................................ 97
Where You Can Find More Information............ 97
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 (Exhibit 1.1 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 $0.02 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, 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
$3.8 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 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+ Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation.
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* Shareholders' Agreement dated as of January 29, 1999 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>
II-3
<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.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
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.
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.
* 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).
(B) FINANCIAL STATEMENT SCHEDULES:
All schedules are omitted because they are inapplicable or the requested
information is shown in the consolidated financial statements of the registrant
or related notes thereto.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding), is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be a part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Kirkland, State of
Washington, on the 27th day of January, 2000.
<TABLE>
<S> <C> <C>
NEXTEL PARTNERS, INC.
BY: /S/ JOHN CHAPPLE
-----------------------------------------
John Chapple, President and Chief
Executive Officer
</TABLE>
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints John Chapple and John D. Thompson, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
true and lawful attorney-in-fact and agent to act in his name, place and stead
and to execute in the name and on behalf of each person, individually and in
each capacity stated below, and to file, any and all amendments to this
registration statement, including any and all post-effective amendments thereto
and any registration statement relating to the same offering as this
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below on the 27th day of January, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JOHN CHAPPLE
------------------------------------------- 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)
/s/ TIMOTHY M. DONAHUE
------------------------------------------- Director
Timothy M. Donahue
/s/ ANDREW H. RUSH
------------------------------------------- Director
Andrew H. Rush
/s/ ANDREW E. SINWELL
------------------------------------------- Director
Andrew E. Sinwell
/s/ DENNIS M. WEIBLING
------------------------------------------- Director
Dennis M. Weibling
</TABLE>
II-7
<PAGE>
EXHIBIT 5.1
January 27, 2000
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, Washington 98033
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 initially
filed by Nextel Partners, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on January 27, 2000 (Registration No.
333-_____) relating to the registration under the Securities Act of 1933, as
amended, of up to 27,025,000 shares of the Company's Class A Common Stock,
$0.001 par value per share, being offered by the Company (the "Shares"). The
Shares are to be sold to the underwriters named in the Registration Statement
for resale to the public.
As counsel to the Company, we have examined the proceedings taken by
the Company in connection with the issuance and sale by the Company of the
Shares.
We are of the opinion that the Shares to be offered and sold by the
Company have been duly authorized and, when issued and sold by the Company in
the manner described in the Registration Statement will be legally issued, fully
paid and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in the
Registration Statement, the prospectus constituting a part thereof and any
amendments thereto.
Very truly yours,
SUMMIT LAW GROUP
a professional limited liability company
<PAGE>
Exhibit 10.32
RESTRICTED STOCK PURCHASE AGREEMENT, dated as of September 9, 1999,
between Nextel Partners, Inc., a Delaware corporation (the "Company"), and
Donald J. Manning (the "Purchaser").
WHEREAS, the Purchaser is an executive officer of each of the
Company and Nextel Partners Operating Corp., a Delaware corporation and a wholly
owned subsidiary of the Company, and his continued participation is considered
by the Company to be important for the development of the Company's business;
and
WHEREAS, in recognition of Purchaser's anticipated and highly valued
contribution to the Company, the Company is willing to sell to the Purchaser,
and the Purchaser desires to purchase from the Company, shares of the Company's
Class A Common Stock, in accordance with the terms and conditions hereof.
Now, THEREFORE, the parties agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Additional Time Shares" means Time Shares other than Initial Time
Shares.
"Adjusted IRR" means, with respect to any Initial DLJ Equity sold or
otherwise disposed of, the internal rate of return on such Initial DLJ Equity as
of the date of such sale or other disposition, determined after giving effect to
any resulting acceleration of vesting of any Shares and of any options to
purchase Class A Common Stock that occurs upon or in connection with either such
sale or disposition of Initial DLJ Equity or any event giving rising to or
causing such sale or disposition of Initial DLJ Equity.
"Beneficial Owner" means a beneficial owner as defined in Rules
13d-3, 13d-5 or 16a-1 under the Exchange Act (or any successor rules),
including the provision of such Rules that a Person shall be deemed to have
beneficial ownership of all securities that such Person has a right to acquire
within 60 days, but such provision of the Rules will apply only if(i) all
conditions (other than payment of the purchase or acquisition price of such
securities) to such Person's exercise of such rights have been satisfied and
(ii) such securities (if options, warrants, or similar derivatives) are
"in-the-money," provided that in all cases a Person shall not be deemed a
Beneficial Owner of, or to own beneficially, any securities if such beneficial
ownership (1) arises solely as a result of a revocable proxy delivered in
response to a proxy or consent solicitation made pursuant to, and in accordance
with, the Exchange Act and the applicable rules and regulations thereunder, and
(2) is not also then reportable on Schedule 13D under the Exchange Act.
"Board" means the Board of Directors of the Company.
<PAGE>
"Build Shares" means Shares that vest in accordance with Schedule I
depending on the Company's achievement of the buildout-related performance
targets set forth on Annex A.
"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of stock of, or other
ownership interests in, such Person, but excluding any pay-in-kind preferred
stock, other "debt equivalents" and mandatorily redeemable "nominal equity"
securities.
"Cause" means (i) the Purchaser's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
the Purchaser's duty of loyalty to the Company or any of its subsidiaries or
(iii) after 20 business days following the Purchaser's receipt of a written
notification from the Company specifying the particulars in reasonable detail,
the Purchaser's failure to comply with or to cure, as applicable, (A) a willful
and material refusal to comply with specific written directions of the Board
consistent with the Purchaser's employment agreement with the Company or any
subsidiary of the Company and capable of being performed by him or (B) a willful
and material breach of the Purchaser's duty of due care to the Company.
"Change in Control of the Company" means the occurrence of any of
the following events:
(a) any person or group (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act and the regulations thereunder) (i) is or
becomes the Beneficial Owner of more than 50% of the total Voting Stock or
Total Common Equity of the Company, or (ii) otherwise has the power to
direct the management and policies of the Company, directly or through one
or more intermediaries, whether through the ownership of voting
securities, by contract or otherwise, except that no change of control
will be deemed to have occurred under this clause (ii) as a result of
customary rights granted (A) in any indenture, credit agreement or other
agreement for borrowed money or (B) to holders of non-convertible,
mandatorily redeemable, preferred stock unless and until action occurs
that would otherwise cause a "Change in Control of the Company" as herein
defined, provided that such rights were granted pursuant to a transaction
in the financial markets and not as part of a strategic alliance or
similar transaction;
(b) the Company sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person
(other than to a direct or indirect wholly owned subsidiary of the
Company);
(c) the Company, directly or indirectly, consolidates with, or
merges with or into, another Person, or any Person, directly or
indirectly, consolidates with, or merges with or into, the Company, and
pursuant to such transaction (or series of transactions) either: (i) the
outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, but excluding a transaction (or series
of transactions) where (A) the outstanding Voting Stock of the Company is
converted into or exchanged for Voting Stock
2
<PAGE>
of the surviving or transferee Person and (B) the holders of Voting Stock
of the Company immediately preceding such transaction receive more than
50% of the total Voting Stock and Total Common Equity of the surviving or
transferee Person in substantially the same relative proportions as such
holders had prior to such transaction; or (ii) new shares of Voting Stock
of the Company are issued so that immediately following such transaction,
the holders of Voting Stock of the Company immediately preceding such
transaction own less than 50% of the Voting Stock and Total Common Equity
of the surviving Person; or
(d) during any period of two consecutive years following the Closing
Date, individuals who at the beginning of such period constituted the
board of directors of the Company (together with any directors who are
members of the board of directors of the Company on the date of the
Closing, and any new directors whose election by such board of directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of 66-2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the board of directors of the Company then in
office; provided, that no change in the composition of the Board in
connection with the Closing, or by reason of any substitution of one
director for another so long as both directors are nominated by the same
Person, shall constitute a Change in Control of the Company for purposes
of this paragraph (d).
Notwithstanding the foregoing, no "Change of Control of the Company"
shall occur (i) merely by reason of any creditor of the Company
foreclosing on or otherwise causing the sale, transfer or other
disposition of all or any substantial part of the Company's assets
(including, without limitation, the Company's equity interests in its
subsidiaries) or (ii) merely by reason of a transfer by Eagle River
Investments, LLC ("Eagle River") to another Person of the Capital Stock of
the Company owned by Eagle River so long as Craig 0. McCaw ("McCaw")
controls (as defined in Section 4.01(h) of the Shareholders' Agreement)
such Person whether or not McCaw owns a majority of the equity interests
of such Person, unless such transfer referred to in this clause (ii),
alone or in conjunction with other transactions, results in the occurrence
of an event of the type described in any of clauses (a), (b), (c) or (d)
above.
"Change in Control of Nextel" means the occurrence of any of the
following events:
(a) any person or group (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act and the regulations thereunder) other than a
Permitted Holder (i) is or becomes the Beneficial Owner of more than 50%
of the total voting stock of Nextel ordinarily entitled to vote in the
election of directors ("Nextel Voting Stock") or Total Common Equity of
Nextel, or (ii) otherwise has the power to direct the management and
policies of Nextel, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract or
otherwise (without limiting the generality of this clause (ii), any person
or group that succeeds to the rights currently held by McCaw and
3
<PAGE>
his Affiliates in respect of Nextel, or otherwise has powers and rights
comparable thereto, shall be deemed for purposes of this definition to
have the power to direct the management and policies of Nextel), except
that no change of control will be deemed to have occurred under this
clause (ii) as a result of customary rights granted (A) in any indenture,
credit agreement or other agreement for borrowed money unless and until
there has been a default under the terms of that agreement and the trustee
or lender exercises the rights granted therein or (B) to holders of
non-convertible, mandatorily redeemable, preferred stock unless and until
action occurs that would otherwise cause a "Change in Control of Nextel"
as herein defined, provided that such rights were granted pursuant to a
transaction in the financial markets and not as part of a strategic
alliance or similar transaction;
(b) Nextel sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person (other
than a Permitted Holder or a direct or indirect wholly owned subsidiary of
Nextel);
(c) Nextel, directly or indirectly, consolidates with, or merges
with or into, another Person (other than a Permitted Holder), or any
Person (other than a Permitted Holder), directly or indirectly,
consolidates with, or merges with or into, Nextel, and pursuant to such
transaction (or series of transactions) either: (i) the outstanding Nextel
Voting Stock is converted into or exchanged for cash, securities or other
property, but excluding a transaction (or series of transactions) where
(A) the outstanding Nextel Voting Stock is converted into or exchanged for
Voting Stock of the surviving or transferee Person and (B) the holders of
Nextel Voting Stock immediately preceding such transaction receive more
than 50% of the total Voting Stock and Total Common Equity of the
surviving or transferee Person in substantially the same relative
proportions as such holders had prior to such transaction; or (ii) new
shares of Nextel Voting Stock are issued so that immediately following
such transaction, the holders of Nextel Voting Stock immediately preceding
such transaction own less than 50% of the Voting Stock and Total Common
Equity of the surviving Person; or
(d) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of Nextel
(together with any directors who are members of the board of directors of
Nextel on the date of the Closing, and any new directors whose election by
such board of directors or whose nomination for election by the
stockholders of Nextel was approved by a vote of 66-2/3% of the directors
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of Nextel then in office;
provided that it is expressly understood and agreed that (A) the transfer of
Nextel Voting Stock and/or Capital Stock in Nextel by a Permitted Holder to an
Affiliate of McCaw or the estate of McCaw, or any successive transfer by such or
another Affiliate to another Affiliate of McCaw, or the estate of McCaw, shall
not by itself be a Nextel Sale (provided that, for this purpose, any such
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<PAGE>
Affiliate shall not be controlled by any person or group other than McCaw or the
estate of McCaw) and (B) the direct or indirect sale or other disposition of all
or any portion of the Nextel Voting Stock and/or the Capital Stock in Nextel
held now or in the future by any Permitted Holder to any Person other than
another Permitted Holder shall not by itself be a Change in Control of Nextel,
unless such sale or disposition, alone or in conjunction with other
transactions, results in the occurrence of an event of the type described in any
of clauses (a), (b), (c) or (d) above.
"Class A Common Stock" means the Class A Common Stock, par value
$.001 per share, of the Company.
"Closing" means the initial closing of the equity investments
contemplated by the Commitment Letter.
"Closing Price" on any Trading Day with respect to the per share
price of any shares of Capital Stock of any Person means the last reported sale
price regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock exchange or if such shares of Capital Stock are not listed
or admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
Stock Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market and the issuer
and principal securities exchange do not meet such requirements, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm of national standing that is selected
from time to time by such Person for that purpose.
"Commitment Letter" means the Commitment Letter, dated December 4,
1998, among the Company and the investors named therein.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" has the meaning set forth in the preamble.
"control" of a Person means the power, direct or indirect, (i) to
vote or direct the voting of more than 50% of the outstanding shares of Voting
Stock of such Person, or (ii) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Deferred Shares" means, collectively, Unvested Revenue Shares and
Unvested EBITDA Shares (including but not limited to Eligible Shares).
5
<PAGE>
"DLJ" means Donaldson, Lufkin & Jenrette, Inc.
"DLJ Investors" means, collectively, DLJ Merchant Banking Partners
II, L.P. and certain other affiliates and/or clients of DLJ, that purchase in
the aggregate $74,249,720 of Series A Preferred Stock at the Closing.
"EBITDA" means, with respect to any fiscal year of the Company,
earnings of the Company for such year before interest (including without
limitation the interest component of any capital lease obligation), taxes,
depreciation and amortization for such year; provided, that for purposes of
determining whether EBITDA targets have been met hereunder, the following costs
and expenses of the Company shall, to the extent deducted from earnings in
calculating EBITDA in accordance with generally accepted accounting principles,
be added back to earnings in calculating EBITDA: (i) non-cash compensation
expenses resulting from the application of APB Opinion No. 25 to vesting of
Shares under the Restricted Stock Purchase Agreements, (ii) out-of-pocket costs
incurred by the Company (or incurred by others and reimbursed by the Company) in
connection with the transactions contemplated by the Commitment Letter to be
consummated at the Closing (whether such transactions are consummated at the
Closing or thereafter), including without limitation the contemplated offering
of high-yield bonds and the subsequent exchange of such privately issued bonds
for publicly registered bonds, (iii) prior to the IPO, the costs incurred in
complying with SEC reporting requirements relating to the Company's publicly
held bonds (if any), (iv) out-of-pocket costs and expenses incurred by the
Company (or incurred by others and reimbursed by the Company) in connection with
(A) the transactions contemplated by Section 4.18 of the Joint Venture Agreement
and (B) the matters set forth on Schedule D to the Subscription and Contribution
Agreement, dated as of January 29, 1999, among the Company and the investors
named therein, and (v) other appropriate costs and expenses to be determined by
the Board (acting in the good faith exercise of its business judgment), which
may include expenses arising under the agreements relating to the operation of
the Company to the extent not contemplated by the Company's business plan in
effect on the date hereof (on which the EBITDA targets set forth on Annex A are
based). The parties agree that (i) non-cash charges shall, to the extent
deducted from earnings, be added back to earnings in calculating EBITDA, and
(ii) extraordinary non-cash revenue not in the ordinary course of business shall
be deducted from earnings in calculating EBITDA, unless the Board (acting in the
good faith exercise of its business judgment) determines such adjustment to be
inappropriate.
"EBITDA Shares" means Shares that vest in accordance with Schedule I
depending on the Company's achievement of the EBITDA-related performance targets
set forth on Annex A.
"Eligible Shares" means, collectively, Eligible EBITDA Shares and
Eligible Revenue Shares.
"Eligible EBITDA Shares" has the meaning set forth in Schedule I.
"Eligible Revenue Shares" has the meaning set forth in Schedule I.
6
<PAGE>
"Equity Value" has the meaning set forth in the Joint Venture
Agreement, provided, that Equity Value as determined thereunder shall be subject
to challenge by the Purchaser in accordance with the same procedures and other
provisions applicable to challenges by Nextel Sub of such determination.
"Escrow Agent" has the meaning set forth in Section 5(a).
"Escrow Shares" has the meaning set forth in Section 5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any Shares repurchased by
the Company hereunder, the Equity Value in effect on the date of consummation of
such repurchase, subject to adjustment if the Board determines in good faith
that such Equity Value no longer reflects the fair market value of such Shares
(it being understood that the Board's determination of the Equity Value may be
challenged by the Purchaser as provided in the definition thereof). To the
extent there is not a recent determination of the Equity Value on the date of
determination of Fair Market Value, the Board will calculate the Equity Value as
of such date in good faith on the basis of available information.
"FCC" means the Federal Communications Commission.
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by Nextel Sub to the
Company thereunder, which changes are implemented in order to cause such
agreements to be in compliance with FCC requirements so as to reflect the intent
of the parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in the Purchaser's
duties, responsibilities or reporting relationships, (ii) a relocation of the
Purchaser's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by the Purchaser, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under the Purchaser's employment agreement with the Company
or a subsidiary of the Company that are not cured after 20 business days
following the Company's receipt of a written notification from the Purchaser
specifying the particulars in reasonable detail, and (v) from and after the
Closing, following the implementation of any FCC Modifications, if Nextel Sub
exercises control over day-to-day operating decisions, policy decisions or
personnel decisions of the Company pursuant to such FCC Modifications that
(before such modifications) would have been decisions made by the Company's
management and such control exercised by Nextel Sub is materially more extensive
(in the collective
7
<PAGE>
reasonable judgment of the Senior Managers then employed by the Company) than
that which Nextel Sub could have exercised under the agreements to which Nextel
Sub is a party relating to the governance and operation of the Company before
giving effect to the FCC Modifications. Notwithstanding the foregoing, a
termination with Good Reason under clause (v) above shall not be deemed
effective until 120 days following written notice by the Purchaser to the
Company of the occurrence of any of the foregoing and only if the foregoing
continue to occur as of such 120th day.
"Initial DLJ Equity" means the shares of Series A Preferred Stock
contemplated by the Commitment Letter to be issued to the DLJ Investors at the
Closing, regardless of whether DLJ has transferred funds in respect of such
shares, together with any shares of Class A Common Stock issuable upon
conversion thereof, and any shares of Capital Stock of the Company or other
securities into which such shares are subdivided, combined or otherwise
converted or exchanged by the Company.
"Initial Time Shares" means the Time Shares subject to vesting in
1998-99 in accordance with Schedule I, which account for 25% of the Shares.
"IPO" means the initial underwritten public offering of the
Company's equity securities pursuant to a registration statement under the
Securities Act.
"Joint Venture Agreement" means the Joint Venture Agreement dated as
of January 29, 1999 among the Company, Nextel Partners Operating Corp. and
Nextel Sub.
"Nextel" means NEXTEL Communications, Inc. and its successors and
assigns.
"Nextel Sub" means Nextel WIP Corp., a Delaware corporation and a
wholly owned indirect subsidiary of Nextel.
"Performance Shares" means, collectively, Build Shares, Revenue
Shares and EBITDA Shares.
"Permitted Holders" means, collectively, McCaw and any entity or
entities (i) that is controlled directly or indirectly by McCaw or the estate of
McCaw and (ii) a majority of the equity interests of which are owned, directly
or indirectly, by McCaw and his family, his brothers and their families,
officers and employees of such entities, ex-spouses of such persons and estates
of, or trusts for the primary benefit of, the foregoing persons (collectively,
the "McCaw Group"); provided that "Permitted Holders" also includes a group of
entities that is each controlled by McCaw or the estate of McCaw and through
which the McCaw Group collectively own, directly or indirectly, a majority of
the equity interests of Nextel (it being understood that if the McCaw Group
collectively owns 50% of an entity that owns 20% of Nextel's equity interests,
the McCaw Group will be deemed to indirectly own 10% of Nextel's equity interest
though such entity).
8
<PAGE>
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Purchaser" has the meaning set forth in the preamble.
"Required Build" means the completion of the Build Out of all
Initial Sections (as defined in the Joint Venture Agreement) assigned to the
first or second Build Year (as defined in the Joint Venture Agreement), and of
any Option Sections (as defined in the Joint Venture Agreement) assigned to the
first or second Build Year that are included in the Territory (as defined in the
Joint Venture Agreement) through the Company's election under Section 6.2B of
the Joint Venture Agreement, but excluding any such Option Sections that are
included in the Territory as a result of the Company's response to a notice
given pursuant to Section 6.2C of the Joint Venture Agreement.
"Revenue Shares" means Shares that vest in accordance with Schedule
I depending on the Company's achievement of the revenue-related performance
targets set forth on Annex A.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $.00l per share, of the Company.
"Series C Preferred Stock" means the Series C Preferred Stock, par
value $.001 per share, of the Company.
"Shares" has the meaning set forth in Section 2(a).
"Target Return" means, with respect to a sale or other disposition
of Initial DLJ Equity consummated (i) in 1999 or 2000, a 50% Adjusted IRR, (ii)
in 2001, a 35% Adjusted IRR, and (iii) after 2001, a 30% Adjusted IRR, in each
case based on the value of the consideration paid for the Initial DLJ Equity
sold or otherwise disposed of.
"Time Shares" means Shares that vest over time in accordance with
Section 3(a) and Schedule I, and shall include the Initial Time Shares and the
Additional Time Shares.
"Total Common Equity" of any Person means, as of any day of
determination, the product of(i) the aggregate number of shares of fully diluted
common stock of the Company on such day and (ii) the average Closing Price of
such Common Stock over the 20 consecutive Trading Days
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<PAGE>
immediately preceding such day. If no such Closing Price exists with respect to
shares of any such class, the value of such shares for purposes of clause (ii)
of the preceding sentence shall be determined by the Board of Directors of such
Person in good faith and evidenced by a resolution of such Board of Directors.
"Trading Days" with respect to a securities exchange or automated
quotation system means a day on which such exchange or system is open for a full
day of trading.
"Unvested Shares" means Shares (including EBITDA Shares, Performance
Shares, Revenue Shares and Time Shares) that are not Vested Shares.
"Vested Shares" means Shares that are vested in accordance with
Section 3.
"Voting Stock" of any Person means Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
2. Purchase and Sale.
(a) The Company hereby agrees to sell to the Purchaser, and the
Purchaser hereby agrees to purchase from the Company, an aggregate of 10,000
shares of the Company's Class A Common Stock, par value $.001 per share (the
"Shares"), at the price of $.0l per share.
(b) The Purchaser is delivering to the Company herewith a check
payable to the Company in the amount of the aggregate purchase price of the
Shares, and the Company is herewith delivering to the Escrow Agent, to be held
in escrow as herein provided, a duly executed certificate evidencing the Shares
issued in the name of the Purchaser.
(c) This Agreement shall not confer upon the Purchaser any right
with respect to continuation of his employment with the Company, nor shall it
interfere with or affect in any manner the right or power of the Company, or a
parent or subsidiary of the Company, to terminate any agreement with the
Purchaser in accordance with the terms thereof.
3. Vesting.
(a) Ordinary Vesting. The parties agree that the Shares shall vest
in accordance with Schedule I so long as the Purchaser is continuously employed
by the Company or a subsidiary of the Company, subject to the provisions of
Section 3(b) below; provided, further that the Company agrees and acknowledges
that, from and after the date hereof, 100% of the Initial Time Shares shall be
Vested Shares for purposes of this Agreement.
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<PAGE>
(b) Accelerated Vesting. Notwithstanding the provisions of Section
3(a) or Schedule I to the contrary:
(i) Upon a Change in Control of the Company or a Change in
Control of Nextel, all of the Unvested Shares (including Eligible Shares,
but excluding Deferred Shares that are not Eligible Shares) shall vest
immediately.
(ii) Upon termination of the Purchaser's employment on account
of death or disability, or by the Company without Cause, (A) all of his
Unvested Time Shares shall vest immediately and (B) all of his Unvested
Performance Shares that are subject to vesting in the year of termination
(including any Performance Shares vesting in such year pursuant to Section
3(c)) shall vest at the end of such year without regard to whether the
Company achieves the applicable performance targets.
(iii) Upon resignation of the Purchaser for Good Reason, all
of his Unvested Shares shall vest immediately.
(c) Vesting of Deferred Shares. Upon the sale or other disposition
by one or more of the DLJ Investors (other than to an affiliate controlled by
DLJ), in one or more transactions, of 75% of the Initial DLJ Equity, if such DLJ
Investors shall have achieved the applicable Target Return in cash, promissory
notes, freely tradable securities or other readily marketable consideration,
then 50% of the Deferred Shares will vest immediately. For each additional one
percent of Initial DLJ Equity sold or otherwise disposed of at or above the
applicable Target Return, an additional two percent of the Deferred Shares will
vest.
4. Repurchase Rights.
(a) Unvested Shares. Subject to the provisions of Section 3, in the
event of termination of the Purchaser's employment with the Company for any
reason or for no reason, the Company shall, for 90 days following the date of
termination, have the option to repurchase all or any portion of the Unvested
Shares at a repurchase price equal to the lesser of(i) Fair Market Value and
(ii) $.0l per share.
(b) Vested Shares/Termination on Account of Death or Disability. In
the event of termination of the Purchaser's employment with the Company on
account of death or disability prior to the IPO, for 180 days following the date
of termination (i) the Company shall have the option to purchase from the
Purchaser or his estate (and the Purchaser or his estate then shall be obligated
to sell to the Company) and (ii) the Purchaser shall have the option to require
the Company to purchase from the Purchaser or his estate, in each case all or
any portion of the Vested Shares at a repurchase price per share equal to Fair
Market Value.
(c) Vested Shares/Termination without Cause or Resignation for Good
Reason. In the event of termination of the Purchaser's employment with the
Company by the Company
11
<PAGE>
without Cause or by the Purchaser for Good Reason, (i) prior to the IPO, for 90
days following the date of termination the Company shall have the option to
elect to purchase from the Purchaser (and the Purchaser or his estate then shall
be obligated to sell to the Company) all or any portion of the Vested Shares at
a repurchase price per share equal to Fair Market Value (determined as of a date
no more than ten days prior to the closing of such repurchase),provided that the
Purchaser shall have the right to elect, by notice to the Company given within
ten days after the Company's election to purchase any of such Shares, to defer
the closing of such purchase and sale for up to 18 months following the date of
termination, such purchase and sale to be at a repurchase price per share equal
to Fair Market Value (determined as of a date no more than ten days prior to the
closing of such repurchase), and (ii) prior to the IPO, for 18 months following
the date of termination the Purchaser shall have the option to require the
Company to purchase from the Purchaser all or any portion of the Vested Shares
at a repurchase price per share equal to Fair Market Value (determined as of a
date no more than ten days prior to the closing of such repurchase), provided
that in no event shall the Company be required to repurchase Shares from the
Purchaser pursuant to this clause (ii), together with options and shares of
Class A Common Stock issued upon exercise thereof repurchased from the Purchaser
pursuant to Section 6(c)(ii) of any Stock Option Agreement between the Company
and Purchaser in the form of Exhibit B to the Company's 1999 Nonqualified Stock
Option Plan, in excess of $10l,809.50 in aggregate Fair Market Value.
(d) Vested Shares/Termination for Cause or Resignation without Good
Reason. In the event of termination of the Purchaser's employment with the
Company by the Company for Cause or by the Purchaser without Good Reason, for 90
days following the date of termination the Company shall have the option to
purchase from the Purchaser all or any portion of the Vested Shares at a
repurchase price per share equal (A) in the case of the Initial Time Shares,
Fair Market Value, and (B) in the case of Shares other than the Initial Time
Shares, (x) prior to the completion of the Required Build, the lesser of Fair
Market Value and $.01 per share, (y) after completion of the Required Build, but
prior to the fourth anniversary of the Closing, 50% of Fair Market Value, and
(z) after completion of the Required Build, and on and after the fourth
anniversary of the Closing, 100% of Fair Market Value.
(e) Exercise by the Company. Any repurchase by the Company pursuant
to this Section 4 shall be exercisable by written notice to the Purchaser or his
executor (with a copy to the Escrow Agent) given within the applicable time
period, and such notice if given shall constitute an irrevocable offer by the
Company to repurchase the Shares covered thereby. Such notice shall set forth
the number of Shares to be repurchased and the aggregate repurchase price
thereof, as determined by the Board in good faith as of a date no more than ten
days prior to such repurchase. Within five days after delivery of such notice,
upon delivery by the Escrow Agent to the Company of the Shares being
repurchased, together with one or more related stock powers executed by the
Purchaser in blank, and upon receipt by the Company of a representation by the
Purchaser that he owns the Shares being repurchased, the Company shall pay to
the Purchaser in immediately available funds an amount equal to the aggregate
repurchase price of the Shares being repurchased.
12
<PAGE>
(f) Exercise by the Purchaser. The Purchaser's right to require the
Company to repurchase Shares under Section 4(b) or (c) shall be exercisable by
written notice to the Company (with a copy to the Escrow Agent) given within the
applicable time period, and such notice if given shall constitute an irrevocable
offer by the Purchaser to sell the Shares covered thereby. Within five days
after receipt of such notice (i) the Company shall pay to the Purchaser in
immediately available funds (or as otherwise may be determined in accordance
with this Agreement) an amount equal to the aggregate repurchase price of the
Shares being repurchased and (ii) the parties agree that the Escrow Agent shall
deliver to the Company the certificate(s) for the Shares being repurchased,
together with one or more related stock powers executed by the Purchaser in
blank, which certificate(s) and power(s) are held by the Escrow Agent pursuant
to Section 5(a); provided that in the event of a repurchase of Shares pursuant
to Section 4(c)(ii), the Company shall have the option of paying the repurchase
price for such Shares, together with the repurchase price for any options and
shares of Class A Common Stock issued upon exercise thereof repurchased from the
Purchaser pursuant to Section 6(c)(ii) of any Stock Option Agreement between the
Company and the Purchaser in the form of Exhibit B to the Company's 1999
Nonqualified Stock Option Plan, (i) in a single lump sum or (ii) in annual
installments of $2 million so long as the outstanding balance of the aggregate
repurchase price is $2 million or more, with the first installment payable
within five days after delivery of the Company's notice of repurchase and the
final installment being equal to the outstanding balance of the aggregate
repurchase price.
(g) Promissory Note. If the Board determines (pursuant to a duly
adopted resolution of the Board or its compensation committee, a copy of which
shall be delivered to the Purchaser) that the Company is unable to repurchase
all or some portion of the Shares under this Section 4 for cash without
breaching the terms of any debt instruments or other agreements to which the
Company or any of its subsidiaries is a party, or that such repurchase would
otherwise have a material adverse effect on the financial condition of the
Company, the Company will pay in cash the maximum amount permitted under such
debt instruments, or that would not result in such a material adverse effect,
and deliver to the Purchaser a promissory note for the balance, payable as soon
as (and in the maximum amounts that) the terms of such debt instruments or other
agreements will permit or that will not have such a material adverse effect, but
in no event later than five years after the date of issuance (or such later date
as may be required to comply with such debt instruments or other agreements),
bearing interest at the highest rate charged from time to time under the
Company's senior credit facility, secured by the Shares being repurchased on
terms reasonably satisfactory to the Company and the Purchaser. The Purchaser
agrees that the Shares being repurchased, when so transferred to the Company,
will be free and clear of all liens, claims, encumbrances and charges caused or
created by the Purchaser.
(h) Notwithstanding anything herein to the contrary, if, prior to
completion of the Required Build, the Purchaser (i) resigns without Good Reason
or his employment with the Company is terminated for Cause and (ii) is employed
by a wireless voice communications service provider that competes (at the time
of commencement of his employment with such entity) in any of the markets of
Nextel or the Company, the Purchaser shall (upon the commencement of his
employment with such entity) refund in cash to the Company an amount (net of
taxes payable by the
13
<PAGE>
Purchaser thereon) equal to the excess (if any) of(x) the price paid by the
Company for any Shares repurchased by the Company upon his termination over (y)
the price paid by the Purchaser for such Shares pursuant to this Agreement.
5. Escrow of Shares.
(a) Shares that are subject to repurchase by the Company pursuant to
Section 4 (collectively, "Escrowed Shares") shall be held in escrow by the
Secretary of the Company as escrow agent (the "Escrow Agent") together with one
or more stock powers executed by the Purchaser in blank and in form legally
sufficient to effect the transfer of such Shares. Shares that are no longer
subject to repurchase by the Company pursuant to Section 4 shall be released
from escrow at the Purchaser's request, and the Escrow Agent shall promptly
cause a new certificate to be issued for such released Shares and shall deliver
such certificate to the Purchaser.
(b) The Escrow Agent is hereby directed to permit transfers of
Escrowed Shares only in accordance with this Agreement or upon receipt of
instructions signed by both parties. In the event further instructions are
desired by the Escrow Agent, he shall be entitled to rely upon directions
executed by a majority of the authorized number of the Company's directors
(excluding the Purchaser if he is then a member of the Board). The Escrow Agent
shall have no liability for any act or omission hereunder while acting in good
faith in the exercise of his own judgment, and shall be entitled to
indemnification from the Company to the full extent permitted by applicable law
in respect of his service as Escrow Agent.
(c) If the Company or any assignee repurchases Shares pursuant to
Section 4, the Escrow Agent, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) Subject to the terms hereof, the Purchaser and each of his
permitted assigns shall, as a record owner of Shares, have all the rights of a
stockholder with respect to the Escrowed Shares while they are held in escrow,
including without limitation, the right to vote the Escrowed Shares and to
receive any cash dividends and other distributions declared thereon, provided
that any non-cash dividends or distributions shall be immediately deposited with
the Escrow Agent to be held in escrow together with the Escrowed Shares in
accordance with this Section 5. If, from time to time prior to the termination
of the Company's repurchase rights, there is (i) any stock dividend, stock split
or like change in the Shares or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of his ownership of Escrowed Shares shall be immediately subject to this
escrow, deposited with the Escrow Agent and included thereafter as "Escrowed
Shares" for purposes of this Agreement.
(e) So long as the Custodial Agreement of even date herewith among
the Custodian named therein and the other parties thereto is in effect, (i) the
provisions of this Section
14
<PAGE>
5 shall have no force or effect and (ii) the Shares shall be held in custody by
the Custodian in accordance with the terms of the Custodial Agreement.
6. Legends: Transfer Restrictions.
(a) The certificates evidencing the Shares shall be endorsed with
the following legend (and any other legend required to be placed thereon by
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
In addition, the certificates evidencing the Escrowed Shares shall be
endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Except as otherwise permitted by, and subject to the provisions
of each of, this Agreement, any stockholders' agreement to which the Purchaser
is a party, the restated certificate of incorporation of the Company, as amended
from time to time, or the Purchaser's employment agreement with the Company or a
subsidiary of the Company, none of the Escrowed Shares (or any beneficial
interest therein) shall be transferred, encumbered or otherwise disposed of in
any way.
7. Adjustments for Splits. Etc. All references to the number of
Shares and the purchase price of the Shares in this Agreement shall be
automatically adjusted to reflect any stock split, stock dividend or like change
in the shares of Class A Common Stock which may be made by the Company after the
date of this Agreement.
8. Investment Representations: Restriction on Transfer. In
connection with the purchase of the Shares, the Purchaser represents to the
Company the following:
(a) He is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. He is purchasing
these securities for investment for his own account only and not with a view to,
or for resale in connection with, any "distribution" thereof within the meaning
of the Securities Act.
(b) He understands that the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other
15
<PAGE>
things, the bona fide nature of his investment intent as expressed herein. In
this connection, he understands that, in the view of the SEC, the statutory
basis for such exemption may not be present if his representations meant that
his present intention was to hold these securities for a minimum capital gains
period under the tax statutes, for a deferred sale, for a market rise, for a
sale if the market does not rise, or for a year or any other fixed period in the
future.
(c) He further acknowledges and understands that the Shares must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. He understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) The Purchaser is an "accredited investor" within the meaning of
Regulation 501 under the Securities Act of 1933, as amended, in that he is an
"executive officer" as defined in Regulation 501 or otherwise is an "accredited
investor", the Purchaser is aware that the Company is a "development stage"
company with no significant business operations or history and may be dependent
for its future success on matters that cannot now be foreseen or predicted, and
the Purchaser is not making this investment in the Company based on any
representation or warranty made to him by the Company.
(e) The Purchaser's financial situation is such that the Purchaser
can afford to bear the economic risk of holding the Shares acquired hereunder
for an indefinite period of time, the Purchaser has adequate means for providing
for his needs and contingencies and can afford to suffer the complete loss of
the investment in the Shares.
(f) The Purchaser's knowledge and experience in financial and
business matters are such that he is capable of evaluating the merits and risks
of the investment in the Shares, or the Purchaser has been advised by a
representative possessing such knowledge and experience.
(g) The Purchaser understands tat the Shares acquired hereunder are
a speculative investment which involves a high degree of risk of loss of the
entire investment therein, that there are substantial restrictions on the
transferability of the Shares, and that for an indefinite period following the
date hereof there will be no (or only a limited) public market for the Shares
and that, accordingly, it may not be possible for Purchaser to sell the Shares
in case of emergency or otherwise.
(h) The Purchaser and his representatives, including his
professional, financial, tax and other advisors, have carefully reviewed all
documents available to them in connection with the investment in the Shares, and
the Purchaser understands and has taken cognizance of all the risks related to
such investment.
(i) The Purchaser and his representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and its
16
<PAGE>
representatives concerning the terms and conditions of the acquisition of the
Shares and related matters and to obtain all additional information which the
Purchaser or his representatives deem necessary.
(j) All information that the Purchaser has provided to the Company
and its representatives concerning the Purchaser and his financial position is
true, complete and correct.
9. General Provisions.
(a) This Agreement shall be governed by the internal laws of the
State of Delaware without regard to conflicts of law principles.
(b) This Agreement represents the entire agreement between the
parties with respect to the purchase of the Shares by the Purchaser and may be
modified or amended only by a writing signed by both parties.
(c) All notices given hereunder shall be in writing and shall be
deemed to have been duly given and received (i) when delivered personally, with
receipt acknowledged in writing by the recipient, (ii) on the tenth business day
after being sent by registered or certified mail (postage paid, return receipt
requested), (iii) one business day after being sent by a reputable overnight
delivery service, postage or delivery charges prepaid, or (iv) on the date on
which a facsimile is transmitted, in each case to the parties at their
respective addresses stated below; provided, that if the intended recipient of
any notice hereunder refuses to acknowledge receipt thereof in writing, such
notice shall be deemed to have been duly given on the date of such refusal. Any
party may change its address for notice by giving notice of the new address to
the other party in accordance with the provisions of this paragraph.
If to the Company:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
17
<PAGE>
If to Executive:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
721 18th Avenue E.
Seattle, WA 98112
(d) The rights and obligations of the Purchaser under this Agreement
may be assigned only with the prior written consent of the Company.
(e) Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
nor prevent that party thereafter from enforcing each and every other provision
of this Agreement. The rights granted both parties herein are cumulative and
shall not constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
(f) Each party agrees, upon the reasonable request of the other
party, to execute any further documents or instruments necessary or desirable to
carry out the purposes or intent of this Agreement.
(g) Except as otherwise provided herein, any controversies or claims
arising out of, or relating to this Agreement or the breach thereof, shall be
settled by arbitration in accordance with the commercial rules of the American
Arbitration Association, which decision shall be final and binding on the
parties, and judgment upon the award rendered shall be entered in any court
having jurisdiction thereof. Any party may demand such arbitration in accordance
with the procedures set out in those rules. The arbitration shall be conducted
in New York, New York, or such other location as may be mutually agreed upon by
the parties. Special, consequential, or punitive damages shall not be awarded by
the arbitrator. In the event of any arbitration proceeding hereunder, the
Company will (x) pay the fees and expenses of the arbitrator and (y) advance the
Purchaser's documented out-of-pocket costs (including reasonable counsel fees
and expenses) on a current basis, provided, that if the Purchaser is determined
not to be the substantially prevailing party on the matters submitted for
arbitration (which determination shall be made by the arbitrator and included in
his or her decision), the Purchaser will promptly reimburse the Company for any
expenses so advanced. The Purchaser acknowledges that the Company is agreeing to
make advances to him pursuant to the preceding sentence in consideration of his
agreement to reimburse the Company for any such advances to the extent required
by the preceding sentence. The Company will in all events pay its own costs
(including counsel fees and expenses) in connection with any arbitration
proceeding hereunder.
18
<PAGE>
(h) The Purchaser understands that he (and not the Company) shall be
responsible for his own federal, state, local or foreign tax liability and any
of his other tax consequences that may arise as a result of the transactions
contemplated by this Agreement. The Purchaser shall rely solely on the
determinations of his tax advisors or his own determinations, and not on any
statements or representations by the Company or any of its agents, with regard
to all such tax matters. The Purchaser shall notify the Company and Nextel
Partners Operating Corp. in writing if the Purchaser files an election pursuant
to Section 83(b) of the Internal Revenue Code of 1986, as amended, with the
Internal Revenue Service within 30 days from the date of the sale of the Shares
hereunder; and the Company shall file its tax returns and reports in a manner
consistent with such election, provided that such election is made on the basis
disclosed to the Company. The Company intends, in the event it does not receive
from the Purchaser evidence of a proper filing, to claim a tax deduction for and
to calculate and withhold taxes on any amount which would be taxable to the
Purchaser in the absence of such an election.
(i) To the extent legally required, the Company shall have the right
and is authorized to withhold from any payments due or transfers in connection
with the purchase of the Shares hereunder or from any compensation or other
amount owing to the Purchaser the amount (in cash, Shares, other securities or
other property) of any applicable withholding taxes in respect of the Shares and
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes, if applicable.
* * *
19
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
NEXTEL PARTNERS, INC.
By /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
/s/ Donald J. Manning
---------------------
DONALD J. MANNING
Agreed to and accepted by:
/s/ Melissa Manning
- -------------------
MELISSA MANNING
<PAGE>
Schedule I
Vesting Schedule
The Shares shall consist of Initial Time Shares (25%), Additional Time
Shares (10%), Build Shares (21%), Revenue Shares (22%) and EBITDA Shares (22%),
which shall vest in accordance with this Schedule I, subject to the Purchaser's
continued employment with the Company or a subsidiary of the Company on the
applicable vesting date (except as otherwise provided in Section 3).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Vesting (%) 1998-99 12/31/99 12/31/00 12/31/01 12/31/02 Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Initial Time Shares 25.00 0.00 0.00 0.00 0.00 25.00
Additional Time Shares 0.00 2.50 2.50 2.50 2.50 10.00
Build Shares 0.00 9.00 9.00 3.00 0.00 21.00
Revenue Shares 0.00 4.00 4.00 6.25 7.75 22.00
EBITDA Shares 0.00 4.00 4.00 6.25 7.75 22.00
- ----------------------------------------------------------------------------------------------------------------
Shares Vested (Annual) 25.00 19.50 19.50 18.00 18.00 22.00
- ----------------------------------------------------------------------------------------------------------------
Shares Vested (Cumulative) 25.00 44.50 64.00 82.00 100.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Initial Time Shares
Twenty-five percent (25%) of the Shares are Initial Time Shares. One
hundred percent (100%) of the Initial Time Shares shall vest on the date hereof.
Additional Time Shares
Ten percent (10%) of the Shares are Additional Time Shares. The Additional
Time Shares shall vest in four equal installments (except as otherwise provided
in Section 3) on December 31 in each of 1999, 2000, 2001 and 2002.
Build Shares
Twenty-one percent (21%) of the Shares are Build Shares. The number of
Build Shares (on a percentage basis) available for vesting on December 31 in
each of 1999, 2000 and 2001 is set forth in the chart above.
The number of Build Shares (on a percentage basis) available for vesting
in a given year ("Adjusted Build Shares") will be determined by reference to the
following table. The percentage of annual Buildout achieved will be calculated
by dividing (i) the number of cell sites constructed
<PAGE>
and placed (or capable of being placed) in service during such year, all as
determined by the Board, subject to a 60-day grace period into (ii) the number
of cell sites targeted for construction during such year as set forth in Annex
A.
% of Annual % of Build Shares
Buildout Achieved Available for Vesting
----------------- ---------------------
95-100 100
85-94.99 75
75-84.99 50
Less than 75 0
The number of Build Shares (on a percentage basis) that vest in a given
year will then be determined with reference to the following table:
% of Variance from % of Adjusted
Annual Build Budget Build Shares Vested
------------------- -------------------
0-9.99 100
10-14.99 90
15-19.99 80
20-25 70
Greater than 25 0
Build Shares that do not vest in accordance with the foregoing provisions
will not be eligible for vesting other than pursuant to Section 3(b).
The cell site targets set forth in Annex A may be adjusted by the Board
(acting in the good faith exercise of its business judgment) to take into
account circumstances relating to the operation of the Company to the extent not
contemplated by the Company's business plan in effect on the date hereof (on
which the cell targets set forth on Annex A are based).
Revenue Shares
Twenty-two percent (22%) of the Shares are Revenue Shares. The number of
Revenue Shares (on a percentage basis) available for vesting on December 31 in
each of 1999, 2000 and 2001 is set forth in the chart above, subject to
carry-over vesting as set forth below.
The number of Revenue Shares (on a percentage basis) that vest on December
31 in any given year, based on the percentage achievement of the annual or
cumulative (whichever results in the greater number of Revenue Shares vesting in
such year) revenue targets set forth in Annex A, will be determined by reference
to the following table:
2
<PAGE>
% of Revenue Target % of Revenue Shares
(Annual/Cumulative) Achieved Vested in Such Year
---------------------------- -------------------
95-100 100
90-94.99 85
85-89.99 75
75-84.99 50
Less than 75 0
For purposes of determining whether cumulative revenue targets have been
achieved, revenue of the Company in excess of a prior year's or years' target(s)
may be carried over and added to the revenue of the current year, but the
maximum carry-over to such current year is 10% of the cumulative revenue target
for such current year. Revenue means all revenue (including roaming revenue)
other than equipment revenue.
Revenue Shares that do not vest in a given year will be carried forward
and be available for vesting in the following two years (i.e., through 2004 at
the latest). Any Revenue Shares that, as of any date of determination, remain
eligible for vesting in accordance with the preceding sentence, are referred to
hereinafter as "Eligible Revenue Shares." Revenue Shares that do not vest in
accordance with the foregoing provisions will be subject to deferred vesting in
accordance with Section 3(c).
The revenue targets set forth in Annex A may be adjusted by the Board
(acting in the good faith exercise of its business judgment) to take into
account circumstances relating to the operation of the Company to the extent not
contemplated by the Company's business plan in effect on the date hereof (on
which the revenue targets set forth on Annex A are based).
EBITDA Shares
Twenty-two percent (22%) of the Shares are EBITDA Shares. The number of
EBITDA Shares (on a percentage basis) available for vesting on December 31 in
each of 1999, 2000 and 2001 is set forth in the chart above, subject to
carry-over vesting as set forth below.
The number of EBITDA Shares (on a percentage basis) that vest on December
31 in any given year, based on the percentage achievement of the positive annual
or cumulative (whichever results in the greater number of EBITDA Shares vesting
in such year) EBITDA targets set forth in Annex A, will be determined by
reference to the following table:
% of EBITDA Target % of EBITDA Shares
(Annual/Cumulative) Achieved Vested in Such Year
---------------------------- -------------------
95-100 100
90-94.99 85
85-89.99 75
75-84.99 50
3
<PAGE>
% of EBITDA Target % of EBITDA Shares
(Annual/Cumulative) Achieved Vested in Such Year
---------------------------- -------------------
Less than 75 0
The number of EBITDA Shares (on a percentage basis) that vest on December
31 in any given year, based on the variance between EBITDA achieved and the
negative annual or cumulative (whichever results in the greater number of EBITDA
Shares vesting in such year) EBITDA targets set forth in Annex A, will be
determined by reference to the following table:
% Variance of EBITDA Achieved % of EBITDA Shares
From (Annual/Cumulative) Target Vested in Such Year
------------------------------- -------------------
0-5 100
5.01-10 85
10.01-15 75
15.01-25 50
More than 25 0
For example, if the Company had EBITDA of $(80,000,000) in 1999, this would
represent a variation of 8.4% from the EBITDA target of ($73,803,000), and 85%
of the EBITDA Shares would vest.
For purposes of determining whether cumulative EBITDA targets have been
achieved, EBITDA of the Company in excess of a prior year's or years' target(s)
(which, in the case of a negative number, shall mean a smaller negative number)
may be carried over and added to the EBITDA of the current year, but the maximum
carry-over to such current year is 10% of the cumulative EBITDA target for such
current year.
EBITDA Shares that do not vest in a given year will be carried forward and
be available for vesting in the following two years (i.e., through 2004 at the
latest); provided that unless the Board determines otherwise, no EBITDA Shares
relating to fiscal year 1999 or fiscal year 2000 shall be carried forward if
negative EBITDA for such years is greater in the aggregate than 27% of the
cumulative EBITDA target for fiscal year 2000. Any EBITDA Shares that, as of any
date of determination, remain eligible for vesting in accordance with the
preceding sentence, are referred to hereinafter as "Eligible EBITDA Shares."
EBITDA Shares that do not vest in accordance with the foregoing provisions
will be subject to deferred vesting in accordance with Section 3(c).
4
<PAGE>
Annex A
Targets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Year 1998/99 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cell Sites(1) ......... 450 675 313 n/a n/a n/a
- ---------------------------------------------------------------------------------------------------------------
Revenue ($000)
Annual ................ 20,900 70,500 156,800 259,900 376,700 502,500
Cumulative ............ n/a 91,400 248,200 508,100 884,800 1,387,300
- ---------------------------------------------------------------------------------------------------------------
EBITDA ($000)
Annual ................ (31,900) (73,200) (42,600) 4,500 71,300 141,500
Cumulative ............ n/a (105,100) (147,700) (143,200) (71,900) 69,600
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) The cell site target for 2000 will be reduced by the number of cell
sites (if any) in excess of 450 constructed by the Company in 1998/99. The cell
site target for 2001 will be reduced by the number of cell sites (if any) in
excess of 675 (as such number may be reduced in accordance with the preceding
sentence) constructed by the Company in 2000.
<PAGE>
Exhibit 10.33
Agreement in Support of Charter Obligations
Agreement, dated as of January 29, 1999, between Nextel WIP Corp., a
Delaware corporation ("NWIP"), and Nextel Partners, Inc., a Delaware corporation
(the "Company").
Whereas, concurrently herewith the parties are entering into a
Shareholders' Agreement, dated as of the date hereof (the "Shareholders'
Agreement"), with the shareholders of The Company named therein, pursuant to
which NWIP has certain rights and obligations, under the circumstances specified
therein and subject to the terms and conditions thereof, to purchase all of the
outstanding capital stock of The Company not held by the Nextel Shareholders (as
defined in the Shareholders' Agreement);
Whereas, concurrently herewith The Company is filing with the office of
the Secretary of State of Delaware a Restated Certificate of Incorporation (the
"Restated Certificate") pursuant to which, after an initial public offering of
the Company's common stock, NWIP has certain rights and obligations, under the
circumstances specified therein and subject to the terms and conditions thereof,
to purchase, or to fund the redemption by The Company of, all of the outstanding
capital stock of The Company not held by the Nextel Shareholders;
Whereas, The Company has certain obligations under the Shareholders'
Agreement and the Restated Certificate to facilitate NWIP's exercise and
performance of its rights and obligations thereunder;
Now, therefore, in consideration of the mutual promises herein set forth,
the parties hereby agree as follows:
1. Agreement.
(a) NWIP acknowledges that it has reviewed the Restated Certificate
and that it will timely perform its obligations thereunder, including, subject
to the terms and conditions thereof, the obligation in certain circumstances to
purchase, or fund the redemption by the Company of, all of the outstanding
capital stock of the Company not held by the Nextel Shareholders. The Company
acknowledges that NWIP has certain rights set forth in the Restated Certificate,
including the right to exercise the NWIP Call Right (as defined therein).
(b) Each of NWIP and the Company agrees to be bound by the
provisions of the Restated Certificate and to take such actions as are
reasonably necessary to facilitate and consummate the transactions and
procedures contemplated thereby.
2. Transfers. NWIP agrees that it will not assign its rights under
Article V of the Restated Charter unless the assignee shall have agreed in
writing to be bound by the terms of this Agreement; provided, that NWIP will not
assign its rights under Article V of the Restated Certificate
<PAGE>
other than to a wholly owned Subsidiary (as defined therein) of Nextel
Communications, Inc., ("Nextel") without the prior written consent of the
Company; provided, further, that NWIP will remain primarily liable for its
obligations hereunder notwithstanding any such assignment.
3. Miscellaneous.
(a) Amendments. This Agreement may be amended only by a writing
executed by the parties.
(b) Entire Agreement. This Agreement and the other Transaction
Documents (as defined in the Shareholders' Agreement) set forth the entire
understanding of the parties hereto and thereto with respect to the subject
matter hereof and thereof, and supersede all prior contracts, agreements,
arrangements, communications, discussions, representations and warranties,
whether oral or written, between the parties, including but not limited to the
Memorandum of Agreement, dated as of May 1, 1998, among Wireless Investment
Partners, L.L.C., NWIP and Nextel, as amended.
(c) Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and is given: (a) when received if
personally delivered; (b) 12 hours after being sent by telecopy, with confirmed
answerback; or (c) 1 business day after being sent by priority delivery by
established overnight courier, to the parties at their respective addresses set
forth below.
To NWIP: Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Telecopy: (703) 394-3 896
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attention: Jeanne M. Rickert
Telecopy: (216) 579-0212
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman Kaplan & Seiler LLP
875 Third Avenue
2
<PAGE>
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Either party by written notice to the other given in accordance with this
Section 3(c) may change the address or the persons to whom notices or copies
thereof are to be directed.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument.
(e) Waiver. Except as otherwise provided in this Agreement, any
party may waive, in writing, compliance by the other parties thereto (to the
extent such compliance is for the benefit of the party giving such waiver) with
any of the terms, covenants or conditions contained in this Agreement (except as
may be imposed by law). Any waiver by any party of any violation of, breach of,
or default under, any provision of any of this Agreement, by any other party
will not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach or default under, any other
provision of this Agreement.
(f) Third Parties. Nothing expressed or implied in this Agreement is
intended, or may be construed, to confer upon or give any person or entity other
than the parties hereto any rights or remedies hereunder.
(g) Severability. If any provision of this Agreement or the
application of such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision of this Agreement or invalidate or render unenforceable such
provision in any other jurisdiction. The parties will, to the extent lawful and
practicable, use their best reasonable efforts to enter into arrangements to
reinstate the intended benefits of any provision held invalid, illegal or
unenforceable.
(h) Choice of Law. This Agreement shall be governed by New York law,
without regard to choice of law rules that would result in the application of
another state's law.
(i) Construction. Words used in this Agreement regardless of the
number or gender specifically used, will be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context requires. The parties hereto have participated equally in
the drafting of this Agreement and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of authorship of any provision of
this Agreement. The headings in this Agreement are solely for convenience of
reference and are not to be given any effect in the construction or
interpretation of this Agreement.
3
<PAGE>
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
NEXTEL WIP CORP.
/s/ Alan Strauss
----------------------------------
Name: ALAN STRAUSS
Title: VICE PRESIDENT
NEXTEL PARTNERS, INC.
/s/ John D. Thompson
----------------------------------
Name: John D. Thompson
Title: Chief Financial Officer
and Treasurer
4
<PAGE>
Exhibit 10.34
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment and Assumption of Lease ("Agreement") is entered into
effective as of August 1, 1999 (the "Effective Date") by and between EAGLE RIVER
INVESTMENTS, L.L.C., a Washington state limited liability company ("Assignor")
and NEXTEL WIP Lease Corp. a Delaware corporation ("Assignee").
RECITALS
A. PAKHOED DISTRIBUTION CORPORATION, a Washington corporation, formerly
known as UNIVAR CORPORATION ("Pakhoed"), on March 22, 1990, entered into an
Office Lease Agreement ("the Prime Lease"), with Carillon Properties, a
Washington general partnership (the "Prime Landlord") for premises (the "Prime
Premises") in the Carillon Point Development located at 4000 Carillon Point,
Kirkland, Washington (the "Building") all as further described in the Prime
Lease.
B. On September 22, 1994, AT&T WIRELESS SERVICES OF WASHINGTON, INC., a
Washington corporation ("Sublessor") entered into a Sublease Agreement
("Sublease Agreement #1") with Pakhoed to lease 13,987 rentable square feet of
the Prime Premises, which is a portion of the fifth floor of the Building, all
as further described in Sublease Agreement #1 (the "Premises").
C. On August 12, 1998, Assignor entered into a Sublease Agreement with
Sublessor to lease the Premises as further described in Sublease Agreement #2
(the "Lease").
D. Assignor has agreed to assign and transfer to Assignee, and Assignee
has agreed to accept, Assignor's leasehold interest in the Premises.
NOW THEREFORE, for good and valuable consideration, the receipt of which
is acknowledged, the parties agree as follows:
AGREEMENT
1. Assignment. Assignor hereby grants, transfers, conveys and assigns to
Assignee all of Assignor's rights, title and interest in and to the Lease,
together with the leasehold estate under the Lease. This assignment shall be
effective as of the Effective Date.
2. Assumption. Assignee hereby accepts the foregoing assignment of Assignor's
right, title and interest in the Lease, and hereby agrees to be bound by, and to
perform all the terms, covenants, and conditions of the Lease to be done, kept,
performed by the Tenant, including the payment of all amounts accruing and to
become due under the Lease from and after the Effective Date. Assignee does not
assume, and Assignor shall remain liable for and shall complete performance of,
any obligations which accrue or become due under the Lease prior to the
Effective Date.
1
<PAGE>
3. Indemnity. Assignee shall indemnify, defend and hold harmless Assignor
against any claims, liabilities or costs arising from Assignee's failure to
perform under the terms of the Lease which shall accrue on or after the
Effective Date. Assignor shall indemnify, defend and hold harmless Assignee
against any claims, liabilities or costs arising from Assignor's failure to
perform under the terms of the Lease or with respect to any matter concerning
the Lease prior to the Effective Date.
4. Transfer of Interest. Assignee shall acquire all of Assignor's interest in
the Premises, including without limitation, leasehold improvements and trade
fixtures, if any.
5. Representations and Warranties. Assignor hereby states, declares, represents
and warrants to Assignee as to the following matters, with such representations
and warranties being true and correct as of the date this Agreement is signed by
Assignor and as of the Effective Date:
A. The copy of the Prime Lease, attached hereto as Exhibit A, is a true
and correct copy and constitutes the entire agreement between Prime Landlord and
Pakhoed with respect to the Prime Premises described therein. The Prime Lease is
in full force and effect.
B. A copy of Sublease Agreement #1, attached hereto as Exhibit B, is a
true and correct copy and constitutes the entire agreement between Sublessor and
Pakhoed with respect to the Premises described therein. Sublease Agreement #1 is
in full force and effect.
C. A copy of the Lease, attached hereto as Exhibit C, is a true and
correct copy and constitutes the entire agreement between Assignor and Sublessor
with respect to the Premises described therein. The Lease is in full force and
effect and has not been amended, supplemented or otherwise changed.
D. No default or event that with the passage of time would constitute a
default on the part of the Assignor exists under the Lease in the performance of
the terms, covenants and conditions of the Lease required to be performed on the
part of the tenant.
E. To the best of Assignor's knowledge, no default or event that with the
passage of time would constitute a default on the part of the Prime Landlord
exists under the Lease in the performance of the terms, covenants, and
conditions of the Lease required to be performed on the part of the Prime
Landlord.
6. Miscellaneous.
A. The parties each agree that they will execute such further documents or
instruments as may be reasonably requested by the other party to document the
purpose and intent of this Agreement.
2
<PAGE>
B. This Agreement contains all of the covenants, agreements, terms,
provisions, conditions, warranties and understandings comprising the final and
entire agreement between the Assignor and Assignee. No waiver or modification of
any of the terms set forth herein shall be deemed to have been made or be
finding on the parties unless expressed in writing and signed by all parties.
C. Prime Landlord's consent to the Agreement and the assignment and
assumption of the Lease is attached hereto and incorporated herein by reference.
IN WITNESS WHEREOF, the parties have executed this Agreement as of 8/1, 1999.
Assignor: Assignee:
EAGLE RIVER INVESTMENTS, L.L.C., NEXTEL WIP LEASE CORP.
a Washington limited liability company a Delaware corporation
By: /s/ C James Judson By: /s/ Donald J. Manning
----------------------------------- ----------------------------------
Name: C James Judson Name: Donald J. Manning
Its: Manager Its: V. P. & General Counsel
State of Washington
County of King
I certify that I know or have satisfactory evidence C. James Judson is the
person who appeared before me, and said person acknowledged that he signed this
instrument, on oath stated that he was authorized to execute the instrument and
acknowledged it as the Manager of EAGLE RIVER INVESTMENTS, L.L.C., to be the
free and voluntary act of such party and purposes mentioned in the instrument.
Dated: 5/7/99 /s/ Teresa L. Biargo
----------------------------------
Notary Public
Teresa L. Biargo
----------------------------------
[Printed Name]
My appointment expires: 06/15/2000
3
<PAGE>
State of Washington
County of King
I certify that I know or have satisfactory evidence that Donald J. Manning
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the V.P. & General Counsel of NEXTEL WIP Lease
Corp., to be the free and voluntary act of such party for the uses and purposes
mentioned in the instrument.
Dated May 5, 1999 /s/ Gayle C. Toney
----------------------------------
Notary Public
Gayle C. Toney
----------------------------------
[Printed Name]
My commission expires: 3/29/2003
-------------------
GAYLE C. TONEY
NOTARY PUBLIC
STATE OF WASHINGTON
COMMISSION EXPIRES
MARCH 29, 2003
-------------------
4
<PAGE>
CONSENT BY PRIME LANDLORD
The Landlord under the Prime Lease hereby consents to the attached
Assignment and Assumption of Lease with the understanding that Pakhoed's
obligations under the Prime Lease are not modified or changed as it relates to
the Prime Landlord. By its consent, Prime Landlord agrees that the utilities,
services, maintenance and repair it is required to provide under the Prime Lease
to or for the space which is being assigned, will be provided by Prime Landlord
to Nextel WIP Lease Corp.
AGREED AND ACCEPTED this 29 day of July, 1999.
PRIME LANDLORD:
CARILLON PROPERTIES
By: /s/ Barbara Leland
------------------------------
[Signature of Officer]
Barbara Leland
------------------------------
[Printed Name of Officer]
Its: Vice President
------------------------------
[Title] Skinner Development
Agent for Carillon Properties
5
<PAGE>
CONSENT BY PAKHOED DISTRIBUTION CORPORATION
Pakhoed Distribution Corporation, the tenant under the Prime Lease and the
Sublessor under Sublease Agreement #1, hereby consents to the attached
Assignment and Assumption of Lease with the understanding that any obligation
under Sublease Agreement #1 are not modified or changed as it relates to Pakhoed
nor to AT&T's obligations under Sublease Agreement #1.
AGREED AND ACCEPTED this 22 day of July, 1999
PAKHOED DISTRIBUTION CORPORATION
By: /s/ William A. Butler
------------------------------
[Signature of Officer]
William A. Butler
------------------------------
[Printed Name of Officer]
Its: Sr. & Vice President
------------------------------
[Title]
6
<PAGE>
CONSENT BY AT&T WIRELESS SERVICES OF WASHINGTON, INC.
AT&T Wireless Services of Washington, Inc., the Sublesee under Sublease
Agreement #2, hereby consents to the attached Assignment and Assumption of Lease
with the understanding that any obligation under Sublease Agreement #2 are not
modified or changed as it relates to AT&T's obligations under Sublease Agreement
#2.
AGREED AND ACCEPTED this ____ day of ___________, 1999.
AT&T WIRELESS SERVICES OF WASHINGTON, INC.
By: /s/ Bob Mahlik
------------------------------
[Signature of Officer]
BOB MAHLIK
------------------------------
[Printed Name of Officer]
Its: VP, SM & Real Estate
------------------------------
[Title]
7
<PAGE>
Exhibit 10.35
================================================================================
LEASE AGREEMENT
McCarran Center, LC
and
Nextel WIP Lease Corp.
May 11, 1999
SS-NNN-42
================================================================================
<PAGE>
TABLE OF CONTENTS
1. BASIC LEASE TERMS 1
1.1 Premises Address 1
1.2 Rental Area 1
1.3 Building Designation 1
1.4 Project 1
1.5 Site Plan 1
1.6 Premises Floor Plan 1
1.7 Initial Term: 1
1.8 Commencement Date 2
1.9 Parking Allocation 2
1.10 Option to Renew 2
1.11 Base Rent 2
1.12 Rent Adjustments 3
1.13 Improvements 3
1.14 Rules and Regulations 3
1.15 Operating Expenses 3
1.16 Security Deposit 3
1.17 Permitted Use 3
1.18 Addresses for Payments, Notices and Deliveries: 4
1.19 Brokers: 4
2. PREMISES 4
2.1 Leased Premises: 4
2.2 Delivery and Acceptance of Premises: 4
2.3 Building Name and Address: 5
* * i * *
<PAGE>
3. TERM 5
3.1 General: 5
3.2 Delay in Possession: 5
3.3 Early Occupancy: 6
3.4 Option Term(s): 6
3.5 First Right of Refusal 6
3.6 Early Termination 7
4. RENT AND OPERATING EXPENSES 7
4.1 Base Rent: 7
4.2 Operating Expenses 7
4.3 Cost of Living Increases: 11
4.4 Security Deposit: 11
4.5 Option Rent: 11
5. USE 11
5.1 Use: 11
5.2 Hazardous Materials: 12
5.3 Signs and Roof Rights: 12
6. COMMON FACILITIES AND VEHICLE PARKING 13
6.1 Operation and Maintenance of Common Facilities: 13
6.2 Use of Common Facilities: 13
6.3 Parking: 14
6.4 Changes and Additions by Landlord: 14
7. MAINTENANCE, REPAIRS AND ALTERATIONS 14
7.1 Landlord's Obligations: 14
7.2 Tenant's Obligations: 15
7.3 Alterations and Additions: 16
* * ii * *
<PAGE>
7.4 Utility Additions: 17
7.5 Entry and Inspection: 17
7.6 Tenant's Non-Standard Building Improvements: 17
7.7 Landlord's Improvements: 18
8. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY 18
8.1 Taxes on Tenant's Property: 18
9. UTILITIES 18
9.1 Multi-Tenant Building 18
9.2 Liability of Landlord 18
10. ASSIGNMENT AND SUBLETTING 19
10.1 Rights of Parties: 19
10.2 Effect of Transfer: 20
11. INSURANCE AND INDEMNITY 20
11.1 Tenant's Insurance: 20
11.2 Landlord's Insurance: 21
11.3 Waiver of Subrogation: 21
11.4 Policies: 21
11.5 Tenant's Indemnity: 21
11.6 Landlord's Indemnity: 22
12. DAMAGE OR DESTRUCTION 22
12.1 Restoration: 22
13. EMINENT DOMAIN 23
13.1 Total or Partial Taking: 23
13.2 Temporary Taking: 23
13.3 Taking of Parking Area: 23
* * iii * *
<PAGE>
14. SUBORDINATION; ESTOPPEL CERTIFICATE 24
14.1 Subordination: 24
14.2 Estoppel Certificate: 24
15. DEFAULTS AND REMEDIES 24
15.1 Tenant's Default 24
15.2 Landlord's Remedies: 25
15.3 Expenses and Legal Fees: 28
16. END OF TERM 28
16.1 Holding Over: 28
16.2 Merger on Termination: 28
16.3 Surrender of Premises: Removal of Property: 29
16.4 Termination; Advance Payments: 29
17. PAYMENTS AND NOTICES 29
18. LIMITATION OF LIABILITY 29
19. TRANSFER OF LANDLORD'S INTEREST 29
20. MISCELLANEOUS 30
20.1 Gender and Number 30
20.2 Headings: 30
20.3 Joint and Several Liability: 30
20.4 Successors: 30
20.5 Time of Essence: 30
20.6 Severability: 30
20.7 Entire Agreement 30
20.8 Waiver of Trial by Jury. 30
20.9 Partial Invalidity 31
* * iv * *
<PAGE>
20.10 Recording 31
20.11 Waiver 31
20.12 Late Charges 31
20.13 Inability to Perform 31
20.14 Choice of Law 31
20.15 Independently Provided Services 31
20.16 Prior Agreements 32
EXHIBIT A PROJECT & PREMISES
EXHIBIT A-1 PROJECT SITE PLAN (McCarran II)
EXHIBIT A-2 BUILDING SITE PLAN
EXHIBIT B-1 FLOOR PLAN
EXHIBIT B-2 USE OF TENANT IMPROVEMENT ALLOWANCE
EXHIBIT B-3 STANDARD TENANT IMPROVEMENT SPECIFICATIONS
EXHIBIT C TENANT'S WORK LETTER
EXHIBIT D RULES AND REGULATIONS
EXHIBIT E OPERATING EXPENSES
EXHIBIT F PARKING
EXHIBIT I RENEWAL OPTIONS
EXHIBIT J BROKERAGE COMMISSION
EXHIBIT K COMMENCEMENT DATE
EXHIBIT L MASTER SIGN PLAN
EXHIBIT M SUBORDINATION AND NON-DISTURBANCE AGREEMENT
EXHIBIT N TENANT ESTOPPEL CERTIFICATE
* * v * *
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), dated May 11, 1999 is made by and between
McCarran Center, LC, a Nevada Limited Company, (herein called "Landlord") and
Nextel WIP Lease Corp., a Delaware Corporation (herein called "Tenant").
1. Basic Lease Terms
Each reference in this Lease to the "Basic Lease Terms" shall mean and
refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining articles of this Lease.
1.1 Premises Address
XXXX Bermuda Road (address to be provided by amendment)
Las Vegas, NV 89119
1.2 Rental Area
Building 42: 23,306 sq. ft., Phase I of 15,000 and Phase II of 8,306
(remainder).
Building 42A: 20,000 sq. ft.
1.3 Building Designation
Building 42
Building 42 Rentable Sq. Ft.: 23,306 sq. ft.
Building 42 Area Acreage: 2.02 acres (see Exhibit A-2).
Building 42A
Building 42A Rentable Sq. Ft.: A minimum of 20,000 sq. ft.
Building 42A Area Acreage: X.XX acres (see amendment to Exhibit
A-2).
1.4 Project
McCarran Center II - Exhibit A-1: 16.5 acres
1.5 Site Plan
EXHIBIT A-2
1.6 Premises Floor Plan
Building 42: EXHIBIT B-1
Building 42A: To be provided by amendment.
1.7 Initial Term:
Building 42: Eighty Four months.
Building 42A: Sixty Months
1
<PAGE>
1.8 Commencement Date
Building 42: October 1,1999, based upon receipt of an approved space
plan by May 17, 1999, (or for purposes of paying rent, upon
completion of construction).
Building 42A: October 1, 2001, (unless mutually agreed by the
parties due to Tenant's request for an earlier occupancy).
1.9 Parking Allocation
Building 42: 117 standard parking spaces (5 spaces per 1,000 sq.
ft.) from Oct. 1, 1999 to Oct. 1, 2000. Thereafter, 164 standard
parking spaces shall be provided (7 spaces per 1,000 sq. ft.).
Building 42A: 100 standard parking spaces (5 spaces per 1,000 sq.
ft.), unless Tenant shall request an increase of up to 40 additional
spaces on or before October 1, 2000.
1.10 Option to Renew
EXHIBIT "I": Two term(s) of Sixty months each which shall apply to
both Building 42 and 42A.
1.11 Base Rent
Building 42: $24,937.42 per month after full occupancy of 23,306 sq.
ft. in building 42 during the term of the Lease unless otherwise modified
herein. Where reference is made in this Lease to rent as provided in
Section 1.11, or where such reference is made to the term "Original
Monthly Rent", such rent shall be deemed to be the Base Rent.
Phase I Occupancy: From the Commencement Date through October
1, 2000, Tenant shall occupy Phase I (15,000 sq. ft.) and the
Base Rent shall be as follows:
Base Rent: $16,050 per month ($1.07 per sq. ft.
x 15,000 sq. ft.)
Over Std. Parking: $559.34 per month (parking at
5/1,000 on 23,306 sq. ft. @ $.024
per sq. ft. per month).
Total Base Rent: $16,609.34 per month to Sept. 30, 2000.
---------------------------------------
Phase II Occupancy: At such time as Tenant shall occupy Phase
II (8,306 sq. ft.) for business operations, but not later than
October 1, 2000, Tenant shall pay a Base Rent as follows:
Phase I Rent: $16,050 per month + adjustment per
Section 4.3.
Phase II Rent: $8,887.42 per month ($1.07 per sq. ft.
x 8,306 sq. ft.) + adjustment per
Section 4.3 as applied to the Phase I
Rent.
Over Std. Parking: $1,504.00 per month (Additional 47
spaces for 7/1,000 parking at $32 per
month per space).
Total Base Rent: $26,441.42 per month from Oct. 1, 2000.
---------------------------------------
Should Tenant choose not to utilize Landlord's Tenant
Improvement Allowance of $207,650 for Phase II (see
Exhibit B-2), the Phase II Rent shall be $5,731.14 per
month ($0.69 per sq. ft.) and the Total Base Rent from
Oct. 1, 2000, shall be $23,844.14 per month.
Building 42A: The base rent for the 20,000 sq. ft. expansion into
Building 42A shall be determined by multiplying the Base Rent (for
Building 42) by the percentage increase in the cost of construction of the
premises in Building 42A over and above the cost of constructing the
premises in Building 42 (hereafter the "42A Multiplier). The 42A
Multiplier shall be determined by comparing all costs associated with the
land, infrastructure, entitlements, permitting, design and construction of
the premises in Buildings 42 and 42A on a prorata, sq. ft. basis. Landlord
shall provide Tenant with a comparable cost summary and a determination of
the 42A Multiplier and the associated building 42A base Rent, in writing,
after January 15, 2001 but before March 31, 2001. Based on building
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42A being a single story, 20,000 sq. ft. structure with 5/1,000 parking,
should the 42A Multiplier be greater than 1.15 (a 15% increase over the
adjusted Base Rent for building 42 as of October 1, 2001), Tenant may
elect to cancel its lease obligation for Building 42A by providing written
notice thereof within Fifteen (15) days of receipt of the cost summary.
Such cancellation by Tenant shall release Landlord and Tenant of further
obligations with regard to Building 42A, except Tenant agrees to reimburse
Landlord for the costs of preparing the architectural drawings,
engineering and comparable cost summary, which the parties agree shall not
exceed $20,000. Landlord and Tenant agree to use best efforts to expedite
the design and plans associated with Building 42A and to "value engineer"
the overall costs while maintaining a first class quality building in
keeping with similar buildings within the Project. Building 42A shall be a
single story, 20,000 sq. ft. building unless additional space is requested
by Tenant. Should Tenant request in excess of 20,000 sq. ft. in building
42A (a two story building), the parties shall use best efforts to value
engineer the building and costs taking into account the increased costs
associated with a two story structure, additional land and parking and
Tenant shall not have the ability to cancel the lease commitment. The Base
Rent for the two story structure will be determined by the Multiplier
method previously set forth herein and applied on a prorata basis to the
space to be occupied by Tenant.
1.12 Rent Adjustments
See Section 4 below. CPI adjustments shall be capped at a one and
one half percent (1.5%) minimum and six and one half percent (6.5%)
maximum for any twelve (12) month period.
1.13 Improvements
EXHIBIT B-2
1.14 Rules and Regulations
EXHIBIT "D"
1.15 Operating Expenses
See EXHIBIT "E"
Group I Percentage: 12.24%
Group II Percentage: 100%
Controllable Operating Expenses capped at a seven (7) percent
increase per year (see Section 4.2.1).
1.16 Security Deposit
Waived
1.17 Permitted Use
Commercial Offices and as permitted under the applicable MD (light
industrial) zoning, including, but not limited to the operation of a
"call center", phone programming and the use of a loading dock with
interior warehouse storage.
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1.18 Addresses for Payments, Notices and Deliveries:
Landlord:
McCARRAN CENTER, LC
a Nevada Limited Liability Company
2300 W. Sahara, Suite 530
Las Vegas, NV 89102
Tenant:
Nextel Partners, Incorporated
4500 Carillon Point
Kirkland, WA 98033
Attn. Legal Department
1.19 Brokers:
EXHIBIT "J". Scott Riddles, Staubach Company
2. Premises
2.1 Leased Premises
Landlord leases to Tenant and Tenant rents from Landlord the
Premises (herein the "Premises") within buildings 42 and 42A, subject to
their corresponding Commencement Dates, Site Plans and Base Rents, and
containing the rental area set forth in Section 1.2 of the Basic Lease
Terms. Unless this Lease specifically refers to and differentiates between
the leased space within building 42 and building 42A, the term "Premises"
shall commonly refer to the use of the leased space within both such
buildings. The Premises is located within the buildings commonly referred
to as building 42 and building 42A (which two buildings, together with the
underlying real property, shall be referred to commonly as the
"Building"), and is a portion of the project including other buildings
described in Section 1.4 of the Basic Lease Terms (herein "Project"). The
Premises and the Project are indicated on Exhibits "A-2" and "A-1",
respectively. The rentable area of the Premises is determined under BOMA
standards for "flex" buildings by measuring: to the "drip line" of the
Building's exterior walls, which includes the area contained within
exterior entry alcoves.
2.2 Delivery and Acceptance of Premises:
Landlord shall deliver the Premises to Tenant, on the Commencement
Dates set forth in Section 1.8, and Landlord further warrants to Tenant
that the Common Facilities referred to in Article 6, (i.e. plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities
and equipment within the Building, fixtures, walls, foundations, ceilings,
roofs, floors, windows, access doors, loading doors, plate glass and
skylights) shall be in good operating condition on the Commencement Date.
In the event that it is determined that this warranty has been violated,
then it shall be the obligation of the Landlord, after receipt of written
notice from Tenant setting forth with specificity the nature of the
violation, to promptly, at Landlord's sole cost, rectify such violation.
Tenant's failure to give such written notice to Landlord within six (6)
months after the corresponding Commencement Date shall cause the
conclusive presumption that Landlord has complied with all of Landlord's
obligations regarding the delivery of the Premises as set forth in this
Section 2.2, unless said defect cannot be ascertained within six (6)
months of that Commencement Date, in which case Tenant shall notify
Landlord of such defect within thirty (30) days of detection of the defect
or notice of a violation of the aforementioned warranties.
Except as otherwise provided in this Lease, Tenant hereby accepts
the Premises in their existing condition (punch list items excepted) as of
the corresponding Commencement Date or the date that Tenant takes
possession of the Premises, whichever is earlier, subject to all
applicable zoning,
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municipal, county and state laws, ordinances and regulations governing and
regulating the use of the Premises and any covenants or restrictions of
record, and accepts this Lease subject thereto as to all matters disclosed
thereby and by any exhibits attached hereto. Tenant acknowledges that
neither Landlord nor Landlord's agent has made any representation or
warranty as to the present or future suitability of the Premises for the
conduct of Tenant's business.
2.3 Building Name and Address:
Tenant shall not utilize any name selected by Landlord from time to
time for the Building and/or the Project as any part of Tenant's corporate
or trade name. Landlord shall have the right to change the name, number or
designation of the Building and/or the Project without notice or
liability. Landlord agrees not to utilize the name or trademark of Tenant,
its subsidiaries or affiliates without Tenant's written approval, which
Tenant may withhold without cause or reason.
3. Term
3.1 General:
The term shall be for the corresponding periods shown in Section 1.7
("Initial Term"). Subject to the provisions of Section 3.3, the term shall
commence on the corresponding commencement date (herein "Commencement
Date") on the earliest of:
a. the Commencement Date as set forth in Section 1.8 of the Basic
Lease Terms for the Building in question, subject to Tenant's
rights set forth in Section 3.2 below, or
b. the date Tenant commences use of the corresponding Premises
for business operations.
Within twenty (20) days after possession of the Premises is tendered
to Tenant, the parties shall execute the Exhibit "K" Certificate form
provided by Landlord, which shall state the Commencement Date and the
expiration date ("Expiration Date") of the Lease. Tenant's failure to
execute that form shall not affect the validity of Landlord's
determination of those dates. It is the intent of the parties that the
expiration date for the leased space with buildings 42 and 42A shall be
coterminous.
The Premises shall be deemed ready for occupancy upon the tendered
date, but only if and when Landlord, to the extent applicable:
a. has provided reasonable access to the Premises for Tenant so
that it may be used without unnecessary interference,
b. has substantially completed all the work required to be done
by Landlord in this Lease as defined in Exhibit "C", and
c. has obtained the necessary certificates for Tenant's legal
occupancy of the Premises in question.
3.2 Delay in Possession:
Notwithstanding the provision of Section 3.1, if Landlord, for any
reason whatsoever, cannot deliver possession of the Premises in either
Building 42 or 42A to Tenant on/or before the corresponding Commencement
Date, this Lease shall not be void or voidable nor shall Landlord be
liable to Tenant for any resulting loss or damage. However, Tenant shall
not be liable for any rent and the Commencement Date (for purposes of the
payment of rent) shall not occur until Landlord delivers possession of the
Premises and the Premises are in fact ready for occupancy in accordance
with Section 3.1; and Tenant shall receive after it is able to take
possession of the Premises, in addition to any free rent period, one (day)
of free rent for each day past the Commencement Date that Landlord delays
(subject to Section 20.13) in so delivering the Premises of the Building
in question. However, if Landlord's failure to so
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deliver possession on the applicable Commencement Date is attributable to,
(i) Tenant's delays in reasonably fulfilling Tenant's obligations and
approvals related to the design or construction of the Premises, or (ii)
Tenant's gross negligence or willful misconduct, then Landlord shall be
entitled to full performance by Tenant (including the payment of rent)
from the corresponding Commencement Date. If Landlord does not deliver
possession of the Building 42 to Tenant within thirty (30) days after the
corresponding Commencement Date, Tenant may elect to cancel this Lease by
giving written notice to Landlord within ten (10) days after the thirty
(30) day period ends or Tenant may independently take such reasonable
action as necessary to complete the Premises and charge the cost of such
action against the first due rents. If Landlord does not deliver
possession of the Building 42A to Tenant within thirty (30) days after the
corresponding Commencement Date, Tenant may elect to cancel this Lease as
to Building 42A only by giving written notice to Landlord within ten (10)
days after the thirty (30) day period ends or Tenant may independently
take such reasonable action as necessary to complete the Premises and
charge the cost of such action against the first due rents. If Tenant
gives such notice of cancellation, the Lease or the Lease as to Building
42A shall be canceled and neither Landlord nor Tenant shall have any
further obligations to the other with respect to the Lease or Building
42A, as applicable.
3.3 Early Occupancy:
If Tenant occupies the Premises prior to the Commencement Date for
business operations, then Tenant's occupancy of the Premises shall be
subject to all of the provisions of this Lease. Early occupancy of the
Premises shall not advance the expiration date of this Lease.
3.4 Option Term(s):
Tenant is hereby granted the right and option to extend this Lease
for the additional term or terms as provided in Exhibit I (hereinafter
"Option Term(s)"), attached hereto and incorporated herein, commencing at
the expiration of the Initial Term. Such option is granted upon the
following terms and conditions:
1. Terms and Conditions
Except as set forth in Section 3.4.4 below, the Option
Term(s) shall be on the same terms, covenants, conditions,
provisions and agreements as in this Lease and any amendments
thereto.
2. Uncured Defaults
No uncured default exists at the time of the exercise of
the Option Term.
3. Written Notice
Tenant gives to Landlord and Landlord receives from
Tenant written notice of the exercise of each option to extend
this Lease no later than six (6) months prior to the
expiration of the term immediately preceding the Option
Term(s) to be exercised. If said notification is not given and
received, the option to be exercised shall automatically
expire. Failure to exercise an option shall result in
automatic expiration of all successive options.
4. Payable Rent
The rent payable during the Option Term(s) shall be
payable and computed as provided in Exhibit "I" attached
hereto.
3.5 First Right of Refusal
Should building 42A be larger than 20,000 sq. ft.,
Tenant may elect to lease additional space in the building 42A under
the following continuing First Right of Refusal ("First Right").
Landlord will provide Tenant with a proposed lease offer ("Offer")
setting forth at a minimum the location, square feet, term,
improvement allowance and rent for the proposed lease, that Landlord
is willing to accept from a viable tenant. Tenant shall commit to
exercise this First Right for such space within ten (10) business
days of receiving the Offer. Should Tenant exercise it's First
Right, the expansion space set forth in the Offer shall be leased to
Tenant under the same terms and at the same rent as are then
applicable to Tenant's Premises. If the First Right is exercised
during the Tenant's Initial Term and the space is unimproved,
Landlord shall provide a tenant improvement allowance for the
expansion space equal to the amount per sq. ft. originally provided
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for in the Premises (see Exhibit B-2 for Building 42), with an
adjustment for the shortened amortization based on the remaining
lease term. If Tenant exercises its First Right during a renewal
term or if the space is improved, Landlord shall provide a tenant
improvement allowance equal to $12.00 per sq. ft. for a five (5)
year amortization period, with an adjustment for a remaining lease
term of less than five (5) years. The First Right shall be subject
to the rights of existing tenants to renew or sublease their
premises. The addition of rental space to the Premises shall be
memorialized by an amendment which shall also amend Tenant's prorata
share of the operating expenses for the building and Project as set
forth in Exhibit E and subject the additional space to all other
conditions as set forth under this Lease. Landlord may not lease
space in building 42A under terms more favorable than those
presented to Tenant in the Offer without first giving Tenant the
option to rent the space under the more favorable terms.
3.6 Early Termination
During the Initial Term, Tenant shall have the right to cancel
the Lease after October 1, 2004, by providing written notice
to Landlord at least 180 days prior to the effective early
termination date and by paying Landlord the present value of
the unamortized costs of the Tenant Improvement Allowance and
brokerage commission which shall be amortized over a seven (7)
year period from the corresponding commencement date of the
leased premises, at a 10% rate of interest.
4. Rent and Operating Expenses
4.1 Base Rent
From and after the corresponding Commencement Date, Tenant shall pay
without deduction or offset, unless such offset of deduction is
specifically provided for in this Lease, a Base Rent for the Premises in
the total amount shown (including subsequent adjustments, if any) in
Section 1.11 of the Basic Lease Terms. The rent shall be due and payable
in equal monthly installments on the first day of each month. If the
Commencement Date occurs on a day other than the first day of the month,
the first installment of Base Rent shall include rent for both the
fractional month, if any, starting with the Commencement Date and the
following calendar month. No demand, notice or invoice shall be required.
4.2 Operating Expenses
4.2.1 Payment of Operating Expenses
Tenant shall pay to Landlord during the term hereof, in addition to
the Base Rent, Tenant's prorata share of all Operating Expenses (as
hereinafter defined) during each year of the term of this Lease.
Notwithstanding the above, the total cost of Operating Expenses, excluding
therefrom Non-Controllable Operating Expenses, shall not increase by more
than seven percent (7%) per annum. Non-Controllable Operating Expenses
shall mean: (i) real estate taxes as defined in Section 4.2.7, (ii)
insurance (Section 11), (iii) Special Improvements (Section 4.2.6), (iv)
utility services, including electricity, sewer gas and water, (v) trash
removal and those services which are the responsibility of the Tenant
(directly metered utilities, janitorial and communications facilities).
Tenant may elect to assume responsibility for any of the Operating
Expenses provided by Landlord, in which case Landlord's cost for such
service shall be deducted from Tenant's prorata share.
4.2.2 Tenant's Prorata Share Defined
The services provided by Landlord for the maintenance, operation and
repair of the Building, Building Area and Project are set forth in Section
4.2.3 and Exhibit "E". It is understood and agreed that the measurements
(rentable square feet, usable square feet and acreage) set forth in this
Lease and Exhibits are calculations provided by the Landlord's engineers
and architects (see Section 2.1) which Landlord and Tenant agree are
reasonable and shall only be subject to revision by common agreement of
the Landlord and Tenant.
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4.2.3 Operating Expenses
Unless the Landlord and Tenant have mutually agreed to an
alternative operating expense allocation, which alternative shall be set
forth in Exhibit E, Operating Expenses shall mean all costs of any kind
paid or incurred by Landlord in operating, cleaning, equipping,
protecting, lighting, repairing, replacing, heating, air-conditioning, and
maintaining the Building as a first class office project, and a proration
of Operating Expenses for all common areas within the Project as provided
in Exhibit E or as otherwise reasonably determined by Landlord, including
by way of illustration but not limitation, all of the following: (i) the
cost of providing, managing, maintaining and repairing all structural and
mechanical portions and components of the Building including, without
limitation, heating and air conditioning systems, plumbing and all other
utilities and the cost of supplies, equipment, maintenance and service
contracts in connection therewith; (ii) a pro rata portion of the cost of:
repairs and general maintenance of all landscaping, parking areas,
structures and signs, and trash removal; (iii) the cost of fire, extended
coverage, boiler, sprinkler, apparatus, public liability, property damage,
and other insurance; (iv) wages, salaries and other labor costs including
taxes, insurance, retirement, medical and other employee benefits for
individuals employed by Landlord or the property manager to solely provide
the direct repair, maintenance and upkeep services to the Building and
Project on either a part or full time basis and only in proportion to the
actual services so rendered; (v) a management fee consistent with the
industry standard for office park management by a national or regional
office management company providing such services in Clark County
(currently 2.5 % of gross rents) whether such management services are
provided by Landlord or a third party, but limited to any actual fee so
incurred; (vi) the cost of supplying, replacing and cleaning employee
uniforms; (vii) a pro rata portion of the actual cost of the Project
manager's offices or maintenance space in the Project provided said
offices and space are devoted solely to the management, operation,
maintenance or repair of the Project and the costs of the office are
shared by all areas within the Project being serviced thereby; (viii) the
cost of business licenses and similar taxes; (ix) any costs or fees
imposed, assessed or levied pursuant to any applicable laws; (x) a prorata
portion of any charges which are payable by Landlord pursuant to a service
agreement with the County of Clark for services which are provided
directly to the Project; (xi) the reasonable costs of contesting the
validity or applicability of any governmental enactment which would
increase Operating Expenses, which costs shall not exceed the monetary
relief to be obtained from such enactment over a two year period; (xii)
personal property taxes and the cost of depreciation or the rental expense
of personal property used in the maintenance, operation and repair of the
Building and Project. For purposes of computing rent adjustments pursuant
to this Article, Operating Expenses for the entire Project shall be
allocated and charged to Tenant in accordance with generally accepted
accounting principals (GAAP) and expressed as an amount per square foot of
Rentable Area.
4.2.4 Exclusion from Operating Expenses
The following items shall not be included in Operating Expenses: (i)
any expenses which under generally accepted accounting principles would
not be considered a maintenance, repair and/or operating expense for a
multi-tenant commercial office facility, (ii) costs associated with the
operation of the business of the entity which constitutes the "Landlord",
as distinguished from the costs of the Building operations, maintenance
and repair; including, but not limited to, the legal and accounting costs
associated with the selling, syndicating, financing, mortgaging, or
hypothecating of any of Landlord's interest in the Building or Project,
the costs of disputes between Landlord and its employees, tenants or
contractors, expenses incurred by Landlord to prepare, renovate, repaint,
redecorate or perform any other work within any space leased to an
existing or prospective tenant of the Building, (iii) expenses for any
item or service which Tenant pays directly to a third party or separately
reimburses Landlord and expenses incurred by Landlord to the extent the
same are reimbursable or reimbursed from any other tenants or third
parties, (iv) expenses in connection with services provided solely to the
premises of other tenants or prospective tenants which are of no benefit
to Tenant, (v) depreciation and/or amortization of
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the Building, (vi) the cost of repairs or other work incurred by reason of
fire, windstorm or other casualty, except for deductibles paid under
insurance contracts, (vii) Landlord's gross receipts taxes, personal and
corporate taxes, inheritance and estate taxes, franchise, gift or transfer
taxes, (viii) the cost of alterations or capital improvements which under
generally accepted accounting principles are properly classified as
capital expenditures, (ix) expenses for the replacement of any item
covered under warranty, (x) the cost of repair necessitated by Landlord's
negligence or willful misconduct, or to correct any latent defects or
original design defects in the Building construction, materials or
equipment, (xi) salaries of employees above the grade of Manager or
Superintendent for the Building or Project and/or salaries of employees
whose time or cost billed as an Operating Expense was not exclusively
devoted to the Building or Project, (xii) fees paid to Landlord or its
affiliates to the extent that such fees exceed the customary amount
charged for the service provided in Clark County, Nevada, (xiii) HVAC
modifications or replacements necessary to comply with federal, state and
local laws which were in existence at the time of the Lease Commencement,
including the Environmental Protection Agency requirements and ASHRE
standards for the maintenance of fresh air and HCVFC/CFC within the
Premises.
The inclusion of the improvements, facilities and services set forth
in Section 4.2, or in Exhibit "E", shall not be deemed to impose an
obligation upon Landlord to either have said improvements or facilities or
to provide those services unless; (i) the Project already has the same, or
(ii) Landlord already provides the services, or (iii) Landlord has agreed
elsewhere in this Lease to provide the same or some of them.
4.2.5 Annual Statement of Operating Expenses
By March 1 of each calendar year, or as soon thereafter as
practicable, but no later than April 1, Landlord shall furnish to Tenant a
statement showing the actual Operating Expenses for the previous calendar
year, and any charge or credit to Tenant necessary to adjust the
Additional Rent previously paid by Tenant to reflect the actual Operating
Expenses. If such statement reveals an underpayment, Tenant shall promptly
pay, within thirty (30) days of written notice, to Landlord an amount
equal to such underpayment (whether or not this Lease has expired or been
terminated), and if such statement shows an overpayment, Landlord shall
credit the next monthly rental payment of Tenant, or, if the Term has
expired, refund the overpayment to Tenant within thirty (30) days of this
determination.
In the event of any good faith dispute as to the amount or nature of
any Operating Expense, Tenant or its agents shall have the right, not more
frequently than once per calendar year, after notice to Landlord and at
reasonable times, to inspect and photocopy Landlord's Operating Expense
records at Landlord's office. Should Tenant dispute such Operating
Expenses, Tenant shall be entitled, not later than one year following the
operating year in question, to retain an independent certified public
accountant or other competent real estate professional applying GAAP, to
audit Landlord's Operating Expense records for the calendar year in
question, which audit shall be completed within sixty (60) days of
commencement. Tenant shall be entitled to escrow any payments for
increases in operating expenses while completing its audit, which escrow
shall not exceed sixty (60) days. Should the audit determine that Tenant
was overcharged, then, within fifteen (15) days of Landlord's inspection
of the audit, Landlord shall credit Tenant the amount of such over-charge
toward the payments of Base Rent and Additional Rent next coming due under
the Lease. Should the audit determine that Tenant has been undercharged,
Tenant shall reimburse Landlord for such amount as Additional Rent next
coming due under the Lease. Tenant agrees to pay the cost of the audit,
unless the audit determines that Landlord's calculation of Operating
Expenses was in error by more than five percent (5%), in which case
Landlord shall pay for the audit.
4.2.6 Cost Saving or Mandated Special Improvements
(a) For any Lease Year during the Term which is included
in the useful life of a "Special Improvement," Tenant shall
pay as Additional Rent an amount equal to the
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product of (i) the "Special Improvement Amortization" per
square foot of Rentable Area in the Building, multiplied by
(ii) the number of square feet of Rentable Area in the
Premises.
(b) "Special Improvements" shall be allowable to pass
through expenditure only in as much as they pertain to any
equipment, device or other improvement acquired or installed
subsequent to the commencement of the construction of Building
42 or 42A, as the case may be, which benefits all tenants in
Building 42 or 42A and is necessary: (i) to achieve economies
in the operation, maintenance and repair of the Buildings (42
and 42A), but only to the extent the improvements in this
subsection (i) are approved by Tenant; (ii) to comply with any
statute, ordinance, code, or government mandated guidelines
which shall be enacted after the execution of this lease
document, or (iii) to comply with any other future
governmental requirement with respect to the Building or any
such relevant portion of the Building's common areas (42 and
42A), including without limitation, fire, health, safety or
construction requirements, as it pertains to the common areas
of the Buildings (42 and 42A).
(c) "Special Improvement Amortization" shall mean the
amount determined by multiplying the actual cost, including
financing costs, of each Special Improvement acquired by
Landlord by the constant annual percentage required to fully
amortize such cost over the useful life of the Special
Improvement (as reasonably determined by Landlord at the time
of acquisition). The Special Improvement Amortization shall be
allocated and charged to Tenant in accordance with generally
accepted accounting and management practices and as an amount
per square foot of Rentable Area.
4.2.7 Real Property Taxes
"Real Property Taxes" shall mean all taxes, assessments (special or
otherwise) and charges levied upon or with respect to the Building and its
underlying property. Real Property Taxes shall include, without
limitation, any tax, fee or excise on the act of entering into this Lease,
on the occupancy of Tenant, the rent hereunder or in connection with the
business of owning and/or renting space in the Project which are now or
hereafter levied or assessed against Landlord by the United States of
America, the State of Nevada or any political subdivision, public
corporation, district or other political or public entity, and shall also
include any other tax, assessment, fee or excise, however described
(whether general or special, ordinary or extraordinary, foreseen or
unforeseen), which may be levied or assessed in lieu of, as a substitute
for, or as an addition to, any other Real Property Taxes. Landlord may pay
any such special assessments in installments when allowed by law, in which
case Real Property Taxes shall include any interest charged thereon,
however, Landlord and Tenant shall mutually agree as to the reasonable
method or paying such installments. Real Property Taxes shall also include
reasonable legal fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce Real Property Taxes, as
mutually agreed to by Landlord and Tenant. Real Property Taxes shall not
include those taxes set forth in Section 4.2.4 (vii), income, franchise,
transfer, inheritance or capital stock taxes, unless such taxes are levied
or assessed solely against the Building and underlying property in lieu
of, or as a substitute for the Real Property Tax.
4.2.8 Final Determination
When the final determination is made of Tenant's share of Operating
Expenses for any prior calendar year in which the Lease terminates, Tenant
shall, within thirty (30) days of receipt of written notice pay the entire
increase due over the estimated expenses paid. Conversely, any overpayment
made in the event expenses decrease shall be, within thirty (30) days,
rebated by Landlord to Tenant.
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4.3 Cost of Living Increases:
After the Commencement Date and upon the expiration of each twelve
(12) calendar month period thereafter during the Initial Term hereof, but
subject to the limitations set forth in Section 1.12, rent shall be
adjusted by multiplying the Base Rent by a fraction, which fraction shall
have as its numerator the Consumer Price Index For All Urban Consumers
using the U.S. City Average (Base Period 1982-84=100), as published by the
U.S. Department of Labor, Bureau of Labor Statistics, for the calendar
month which is four (4) months prior to the expiration of the applicable
twelve (12) month period, and which such fraction shall have as its
denominator said Consumer Price Index, as published for the calendar month
which is four (4) months prior to the commencement of the Term. If the
present base of said Index should hereafter be changed, then the new base
shall be converted to the base now used. In the event that the Bureau
should cease to publish said Index figure, then any similar Index
published by any other branch or department of the U.S. Government shall
be used. In the event said Bureau shall publish more than one such index,
the index showing the greater proportionate increase shall be used, and if
none is so published, then another Index generally recognized as
authoritative shall be substituted by agreement of the parties hereto, or
if no such agreement is reached within a reasonable time, either party may
make application to any court of competent jurisdiction to designate such
other index. In any event, the base used by any new index shall be
reconciled to the 1982-84=100 Base Index. In no event shall the rent to be
paid by Tenant pursuant hereto be less than the Base Rent or the Base Rent
as adjusted with respect to the next preceding twelve (12) month period,
whichever is the greater. In the event the numerator of said fraction is
not available at the time of adjustment of the rent as provided herein,
Tenant shall continue to pay the rent established for the next prior
twelve (12) month period; provided, however, Tenant shall promptly pay to
Landlord any deficiency at such time as said rent is adjusted.
4.4 Security Deposit:
Waived.
4.5 Option Rent
As set forth in Exhibit "I" attached hereto and incorporated herein.
5. Use
5.1 Use:
Tenant shall use the Premises for the purposes stated in Section
1.17. Tenant shall not do or permit or suffer anything to be done in or
about the Premises which will obstruct or interfere with the rights of
other tenants or occupants of the Building or Project and Tenant shall
take all necessary action to prevent odors, emissions, fumes, liquids or
other substances or excessive noise from escaping or extending beyond the
Premises. Tenant shall not use or allow the Premises to be used for any
improper, unlawful or extra hazardous purpose or other activity which will
increase the insurance rates on the Building. Tenant shall refrain from
using or permitting the use of the Premises or any portion thereof as
living quarters, sleeping quarters or for lodging purposes. Tenant shall,
at its sole cost and expense, promptly comply with all federal, state,
county, borough or municipal laws, ordinances, rules, regulations,
directives, orders and/or requirements now in force or which may hereafter
be in force with respect to the Premises (other than those that apply to
structural elements of the Building), Tenant's use and occupancy of the
Premises and Tenant's business conducted thereon and with the requirements
of any board of fire underwriters or other similar bodies now or hereafter
constituted relating to or affecting the condition, use or occupancy of
the Premises. Tenant shall be solely responsible for and pay, and shall
indemnify and hold Landlord harmless from and against, all costs, expenses
(including attorneys' fees), fines, damages, penalties and surcharges
incurred or arising by reason of Tenant's failure to promptly and
completely perform Tenant's obligations under this Section.
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5.2 Hazardous Materials:
Landlord shall not cause or permit any Hazardous Materials (as
defined below) to be brought upon, kept or used in or about the Building,
Project or Tenant's Premises, by Landlord, its agents, employees, or
contractors unless such Hazardous Materials are (i) necessary to
Landlord's business or for the maintenance, repair or cleaning of the
Project and Buildings situated therein, and (ii) will be used, kept and
stored in a manner that complies with all Hazardous Material Laws (as
defined below). Should Landlord fail to fulfill its obligations as stated
herein with regard to Hazardous Materials brought on the Project
previously to or during the term of this Lease, Landlord shall indemnify
Tenant as set forth in this Section 5.2 except that the references to
Landlord and Tenant shall be reversed accordingly.
Except for ordinary cleaning and office supply materials, gas for
emergency generators, handset and other batteries used in Tenant's
business, Tenant shall not cause, permit or allow any Hazardous Materials
(as defined below) to be brought upon, kept or used in or about the
Premises, Building and/or Project, by Tenant, its agents, employees,
contractors or invitees, without the prior written consent of Landlord
(which consent Landlord shall not unreasonably withhold as long as Tenant
demonstrates to Landlord reasonable satisfaction that such Hazardous
Materials are necessary to Tenant's business, and will be used, kept and
stored in a manner that complies with all Hazardous Materials Laws (as
defined below) regulating any such Hazardous Materials so brought upon,
used or kept in or about the Premises.)
Indemnification: If (i) Tenant breaches any obligation stated in the
preceding sentence, or (ii) the presence of Hazardous Materials in the
Premises caused or permitted by Tenant results in contamination of the
Premises, the Building, any other Building in the Project, any structure,
system or improvement in the Project, any soil or water in, on, under or
about the Project (collectively, the "Property"), or (iii) contamination
of the Property by Hazardous Materials otherwise occurs for which Tenant
is legally liable to Landlord for damage resulting therefrom, then Tenant
shall indemnify, defend and hold Landlord and landlord's partners,
affiliates, employees, contractors, representatives, lenders, successors
and assigns (collectively, the "Indemnified Parties") harmless from any
and all claims, judgments, damages, penalties, fines, costs, liabilities,
losses, actions or causes of action (including, without limitation,
diminution in value of the Premises, the Building, or any other building
in the Project, any structure, system or improvement in the Project,
damages for the loss of restriction on use of rentable or usable space or
of any amenity, damages arising from any adverse impact on marketing any
of the foregoing, and sums paid in settlement of claims, attomeys' fees
and costs incurred, consultant fees and expert fees) made, brought or
sought against or suffered or incurred by the Indemnified Parties, or any
of them, which arise during or after the Term of this Lease as a result of
such contamination. This indemnification includes, without limitation,
costs incurred in connection with any investigation of site conditions or
any cleanup, remedial, removal or restoration work required by any
federal, state or local governmental agency or political subdivision or
required to return the property to the condition existing prior to the
introduction of any such Hazardous Materials for which Tenant is
responsible. Tenant's obligations hereunder shall survive the expiration
or earlier termination of the Term of this Lease.
Tenant and Landlord shall at all times and in all respects comply
with all federal, state and local laws, ordinances and regulations
("Hazardous Materials Laws") relating to industrial hygiene, environmental
protection or the use, analysis, generation, manufacture, storage,
disposal or transportation of any oil or petrochemical products, PCB,
flammable materials, explosives, asbestos, urea formaldehyde, radioactive
materials or waste, or other hazardous, toxic, contaminated or polluting
materials, substances or wastes, including, without limitation, any
substances defined as or included in the definition of "Hazardous
Materials", "toxic substances" or "chemicals known to the State to cause
cancer or reproductive toxicity" under any such Hazardous Materials Laws
(collectively, "Hazardous Materials").
5.3 Signs and Roof Rights:
Tenant shall be permitted to place up to three (3) parapet signs on
the Building (42 and 42A as one building) consistent with Landlord's
master sign policy. Tenant shall be solely responsible for the cost and
installation of all signs on the Building and shall remove such signs
within thirty (30) days of the
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termination/expiration of the Lease and repair any damage to the Building
occasioned thereby. Tenant shall not place any other signs, awnings, or
advertising matter on the Premises or Building without Landlord's prior
written consent and in conformance with Exhibit L. In the event Tenant
shall install any sign which does not meet Landlord's sign criteria and
the Master Sign Plan, Landlord shall notify Tenant of the non-conformance
and Tenant shall have thirty (30) days in which to cure or diligently
pursue the correction of the non-conformance, after which Landlord shall
have the right, without liability to Tenant to enter upon the Premises,
remove the subject sign and repair all damage caused by the removal of the
sign. All costs and expenses incurred by Landlord shall be immediately
paid by Tenant as additional rent. Landlord reserves the right to remove
Tenant's sign during any reasonable period when Landlord repairs,
restores, constructs or renovates the Premises or the Building of which
the Premises is a part. Landlord agrees to expedite such repair or
renovation and replace Tenant's sign immediately thereafter. Tenant shall
not conduct, nor permit to be conducted, either voluntarily or
involuntarily, any auctions or sheriff's sales from the Premises.
Tenant shall have the right (at no additional rent) to place
communications devises, antennas, cabling, dishes and related equipment
(Roof Equipment) on the roof of the Building under the following
conditions: (i) the Roof Equipment shall be reasonably shielded or
camouflaged from the view of the surrounding Buildings and shall be
permitted in conformance with all applicable local, state and federal
requirements, (ii) Tenant shall be solely responsible for the cost all
installations and shall indemnify Landlord against breaches of the roof
membrane warranties or damage occasioned thereby, and (iii) Tenant shall,
upon the expiration of this Leases, remove all Roof Equipment and repair
the roof membrane and structure to original conditions, normal wear and
tear excepted.
6. Common Facilities and Vehicle Parking
6.1 Operation and Maintenance of Common Facilities:
During the Term, Landlord shall operate and maintain in a first
class condition all Common Facilities within the Project. The term "Common
Facilities" shall mean all areas outside of the exterior walls, glass or
partitions of the Building and other buildings in the Project and all
other appurtenant areas and improvements provided by Landlord for the
common use of Landlord and tenants and their respective employees and
invitees, including, without limitation, parking areas and structures,
driveways, or private streets, sidewalks, landscaped and planted areas not
located within the premises of any tenant.
6.2 Use of Common Facilities:
The occupancy by Tenant of the Premises shall include
the use of the Common Facilities in common with Landlord and
with others for whose convenience and use the Common
Facilities may be provided by Landlord, subject, however, to
compliance with all rules and regulations as are prescribed
from time to time by Landlord. Landlord shall at all times
during the Term have exclusive control of the Common
Facilities, and may temporarily and reasonably restrain any
use or occupancy, except as authorized by Landlord's rules and
regulations. Such restraint of the Common Facilities shall not
impair Tenant's parking rights or occupancy rights as set
forth in the Lease. Except in the event of Landlord's
negligence or willful misconduct, nothing in this Lease shall
be deemed to impose liability upon Landlord for any damage to
or loss of the property, or for any injury to, Tenant, its
invitees or employees. Landlord may, temporarily close any
portion of the Common Facilities for repairs or alterations,
to prevent a public dedication or the accrual of prescriptive
rights. Under no circumstances shall the right herein granted
to use the Common Facilities be deemed to include the right to
store any property, temporarily or permanently, on the Common
Facilities. Any such storage shall be permitted only by the
prior written consent of Landlord or Landlord's designated
agent, which consent may be revoked at any time. In the event
that any unauthorized storage shall occur, then Landlord shall
have the right, without notice, in addition to such other
rights and remedies that it may have, to remove the property
and charge the cost to Tenant, which cost shall be immediately
payable upon demand by Landlord.
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6.3 Parking:
Subject to Landlord's right to adopt reasonable, nondiscriminatory
modifications and additions to the regulations by written notice to
Tenant, Tenant shall have the parking rights set forth in Exhibit "F".
6.3.1 Parking Maintenance
Landlord shall cause to be maintained, an automobile
parking area ("Parking Area") within the Project for the
benefit and use of the visitors and patrons and employees of
Tenant, and other tenants and occupants of the Project. The
Parking Area shall include the automobile parking stalls,
driveways, entrances, exits, sidewalks and attendant
pedestrian passageways and other areas designated for parking.
Landlord shall have the right and privilege of determining the
nature and extent of the Parking Area, and of making such
changes to the Parking Area from time to time which in its
opinion are desirable and for the best interests of all
persons using the Parking Area, provided however that the
parking allocation set forth in Exhibit F shall not be reduced
or adversely impacted except by improvements, temporary
repairs and maintenance. Nothing contained in this Lease shall
be deemed to create liability upon Landlord for any damage to
motor vehicles of visitors or employees, unless ultimately
determined to be caused by the negligence or willful
misconduct of Landlord, its agents, servants and employees.
Unless otherwise instructed by Landlord, every user of the
Parking Area shall park and lock his or her own motor vehicle.
Landlord shall also have the right to establish, amend and
enforce against all users of the Parking Area reasonable rules
and regulations as Landlord may deem necessary and advisable
for the proper and efficient operation and maintenance of the
Parking Area subject to the rights of Tenant as specified
herein.
6.4 Changes and Additions by Landlord:
Landlord reserves the right to make alterations or additions to the
Building(s) or the Project, or to the attendant fixtures, equipment and
Common Facilities. Landlord may at any time relocate or remove any of the
various buildings (other than Building 42 or 42A after construction is
completed) and may add buildings and areas to the Project from time to
time. Except for those portions of the Premises physically affected by a
change or alteration, no change shall entitle Tenant to any abatement of
rent or other claim against Landlord, provided that the change does not
deprive Tenant of reasonable access to or use of the Premises. Due to the
expansion phasing of the Premises in multiple Buildings, Landlord shall
have the right to reasonably adjust Tenants Parking Area, without
diminishing the number of parking spaces or reasonable adjacency to the
Buildings, to accommodate the construction and "bulk-up" of Tenant's
operations.
7. Maintenance, Repairs and Alterations
7.1 Landlord's Obligations:
1. Building Maintenance and Repair
Except for damage caused by any negligent or willful misconduct of
Tenant, Tenant's employees, suppliers, shippers, customers or invitees,
(in which event Tenant shall repair the damage), Landlord at Landlord's
expense, shall keep in good condition and repair the foundations, exterior
walls, structural condition of interior bearing walls, roof structure of
the Building, utility installations of the Common Facilities and all parts
thereof, as well as providing the services for which there is an Operating
Expense pursuant to Section 4.2. Landlord shall not be obligated to paint
the Building's interior walls. Landlord shall not be required to maintain,
repair or replace windows, Tenant's signs, the doors or plate glass of the
Building unless damage thereto was caused by Landlord or its agents or the
damage/repair covered under the insurance policy maintained by Landlord on
the Premises. Landlord shall use best efforts to begin repairs under this
Section 7.1 as soon as reasonably possible, but later than ten (10) days
after receipt of written notice from Tenant of the need for such repairs.
If Landlord has not
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performed or undertaken to perform maintenance or repair services required
under this Lease within ten (10) days of receipt of written notice from
Tenant, Tenant may take such reasonable action as is necessary to make
repairs or perform such services and deduct the cost of such performance
from any sums due Landlord hereunder. In case of emergencies, the
aforesaid ten (10) day period shall be reduced to such period as is
reasonable under the circumstances and Tenant shall only be required to
provide oral notice to Landlord. Landlord shall not be liable for damages
or loss of any kind or nature by reason of Landlord's failure to furnish
any such services when such failure is caused by strikes, lockout or any
other labor disturbances or disputes of any character beyond the
reasonable control of Landlord.
2. ADA and Health Laws
Landlord represents and warrants that upon the Commencement Date,
the Premises shall be in compliance with the requirements of the Americans
with Disabilities Act of 1990 ("ADA"), and other Federal, State or local
laws relating to environmental, health and safety matters ("Health Laws").
Landlord further represents and warrants that future construction, repairs
or alterations to the Building, Plaza or Project shall be in compliance
with the requirements of the ADA and Health Laws, as then recognized and
applied. If alterations to the Premises, Building, Plaza or Project are
required due to Landlord's failure to comply with the ADA or Health Laws,
as they were applied at the time of construction or alteration, then
Landlord shall be fully responsible for compliance at Landlord's sole cost
and expense, which shall not be passed through to Tenant. However, should
Federal, State or Local Authorities enact changes to the ADA or Health
Laws such that alterations to the Building, Plaza or Project are required
to accommodate Tenant, its employees and/or visitors, those necessary and
required alterations shall be made by Landlord and amortized as an
Operating Expense under generally acceptable accounting principals. My
modifications to the Premises which are required under the ADA or Health
Laws due to Tenant's floor plan or specific use thereof shall be made by
Tenant, at Tenants sole cost and expense, in a good and workmanlike
manner.
7.2 Tenant's Obligations:
7.2.1 Premises Repair and Maintenance
At Tenant's expense, Tenant shall keep in good order,
condition and repair the Premises and every part thereof,
including, without limiting the generality of the foregoing,
all plumbing, heating, ventilating and air conditioning
systems, electrical and lighting facilities and equipment
within the Premises, fixtures, interior walls (excluding
structural and bearing walls) and interior surfaces of
exterior walls, ceilings, windows (including glass and
casings), doors (including casings), plate glass and skylights
located within the Premises. Landlord reserves the right to
procure and maintain a full service ventilating and air
conditioning system maintenance contract for the entire
Project, including the Premises, and if Landlord so elects,
the cost thereof shall be an Operating Expense. Should
Landlord assign any of Tenant's obligations hereunder to an
independent contractor, Tenant's shall be relieved of any
further responsibility pertaining to such obligation and the
contractor shall assume the responsibility of performance.
7.2.2 Remedy for Failure to Perform
If Tenant fails to perform Tenant's obligations under
this Section 7.2, Landlord may enter upon the Premises after
ten (10) days' prior written notice to Tenant (except in the
case of emergency, in which event, no notice shall be
required), perform such obligations on Tenant's behalf and put
the Premises in good order, condition and repair, and the cost
thereof shall be due and payable as additional rent to
Landlord together with Tenant's next Base Rent installment.
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7.3 Alterations and Additions:
7.3.1 Consent
Tenant shall not, without Landlord's prior written
consent, which shall not be unreasonably withheld, make any
alterations, improvements, additions or Utility Installations,
on or about the Premises, or the Project, except for
nonstructural alterations to the interior of Premises, the
annual cost of which shall not exceed One Hundred Thousand
Dollars ($100,000). In any event, Tenant shall make no change
or alteration to the exterior of the Premises, the exterior of
the Building, or the Project without Landlord's prior written
consent. As used in this Lease, the term "Utility
Installations" shall mean window coverings, air lines, power
panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing, but
shall specifically exclude Tenant's communications facilities
and roof top equipment used in the operation of Tenant's
business. Landlord may require that Tenant remove any and all
of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the
Premises and the Project to their prior condition provided
that Landlord shall have so notified Tenant at the time it
grants consent therefore. Tenant, Tenant's contractor and
materialmen agree to abide by the reasonable terms and
conditions for construction within the Building or on the
Project set forth by Landlord. Should Tenant make any
alterations, improvements, additions or Utility Installations
without the prior approval of Landlord, Landlord may, at any
time during the term of this Lease, require that Tenant remove
any or all of same. In the event that either Landlord or
Tenant, during the Term, shall be required by the order or
decree of any court, or any other governmental authority, or
by law, code or ordinance, (including but not limited to the
Americans With Disabilities Act as amended) to repair, alter,
remove, reconstruct, or improve any part of the interior area
of the Premises due to Tenant's specific use, interior space
plan or alteration of the Premises, then Tenant shall make or
Tenant shall be required to permit Landlord to perform such
repairs, alterations, removals, reconstruction's, or
improvements without effect whatsoever to the obligations or
covenants of Tenant herein contained, at Tenant's sole cost
and expense, and Tenant hereby waives all claims for damages
or abatement of rent because of such repairing, alteration,
removal, reconstruction, or improvement to the interior area
of the Premises. Should government mandated alterations or
improvements to the exterior of the Premises or parking areas
impair Tenant's use or access to the Premises to the extent
that Tenant is unable to operate its business, then rent shall
abate during such period of impairment.
7.3.2 Written Notice
Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Project that
Tenant shall desire to make and which requires the consent of
Landlord, shall be presented to Landlord in written form with
proposed detailed plans. Landlord's consent shall be provided
no later than five (5) business days after requested, shall
not be unreasonably withheld and shall be deemed conditioned
upon Tenant acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to
Landlord prior to the commencement of the work and the
compliance by Tenant of all conditions of said permit in a
prompt and expeditious manner.
7.3.3 Payment of Labor
Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or
for Tenant at or for use in the Premises, which claims are, or
may be secured by, any mechanic's or materialman's lien
against the Premises, or the Project, or any interest therein.
Tenant shall give Landlord not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and
Landlord shall have the right to post notices of
non-responsibility in or on the Premises or the Building as
provided by law. If Tenant shall in good faith contest the
validity of any such lien, claim or demand, then Tenant shall,
at its sole expense, defend itself and Landlord against the
same and shall pay and satisfy any such adverse judgment that
may be rendered thereon, before the enforcement thereof
against Landlord or the Premises or the Project upon the
condition that if Landlord shall require,
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Tenant shall furnish to Landlord a surety bond satisfactory to
Landlord in an amount equal to such contested lien claim or
demand indemnifying Landlord against liability for the same
and holding the Premises and the Project free from the effect
of such lien or claim.
7.3.4 Alterations Property of Landlord
All alterations, improvements, additions and Utility
Installations (excluding therefrom any roof top
installations), which may be permanently attached to the
Premises, shall be the property of Landlord and shall remain
upon and be surrendered with the Premises at the expiration of
the Term, unless Landlord requires their removal at the time
of installation. Notwithstanding the provisions of this
paragraph, Tenant's machinery, equipment and trade fixtures
(including, without limitation, rooftop equipment, all
antennas, coaxial cabling equipment and related hardware
installed on the roof or in or about the Premises), other than
that which is permanently affixed to the Premises, and other
than Utility Installations, shall remain the property of
Tenant and may be removed by Tenant subject to the provisions
of Section 7.2
7.4 Utility Additions:
Landlord reserves the right to install new or additional utility
facilities throughout the Building and the Common Facilities for the
benefit of Landlord or Tenant, or any other tenant of the Project,
including, but not limited to, such utilities as plumbing, electrical
systems, security systems, communication systems and fire protection and
detection systems, so long as such installations do not unreasonably
interfere with Tenant's use of the Premises and provided that all such
installations are coordinated with Tenant and, if necessary to avoid
unreasonable interference with Tenant's operations, such installations are
carried out during non-business hours.
7.5 Entry and Inspection:
Landlord shall at all times have the reasonable right, provided
reasonable advance notice is given to Tenant except where Landlord
determines an emergency exists and provided that Landlord abides by
Tenant's reasonable security and privacy requirements, to enter the
Premises to inspect them, to supply services in accordance with this
Lease, to protect the interests of Landlord in the Premises, (or, during
the last one hundred and eighty (180) days of the Term, or when an uncured
tenant default exists, to prospective tenants), to alter, improve or
repair the Premises or any other portion of the Building (with Tenant's
prior acknowledgment and concurrence), or as otherwise permitted in this
Lease, all without being deemed to have caused an eviction of Tenant and
without abatement of rent except as provided elsewhere in this Lease. If
Tenant permanently vacates the Premises and fails to pay rent, Landlord
may enter the Premises and alter them without abatement of rent and
without liability to Tenant. Landlord shall at all times have and retain a
key or code which unlocks all of the doors in the Premises, excluding
Tenant's vaults and safes, and Landlord shall have the right to use any
and all means which Landlord may deem proper to open the doors in an
emergency in order to obtain entry to the Premises. Any entry to the
Premises obtained by Landlord pursuant to this Section 7.5 shall not under
any circumstances be deemed to be a forcible or unlawful entry into, or a
detainer of the Premises, or an eviction of Tenant from the Premises.
7.6 Tenant's Non-Standard Building Improvements:
Tenant shall commence the installation of fixtures, equipment and
any other Tenant's Work as set forth in Exhibits "B" or "C" promptly upon
substantial completion of Landlord's Work and Tenant shall diligently
pursue such installation and work to completion. All of Tenant's Work
shall be at Tenant's sole cost and expense and shall be pursuant to plans
and specifications which meet Landlord's reasonable approval. If required
by Landlord, Tenant shall provide its own trash container(s) as needed for
containment and removal of construction debris and remove said trash
containers prior to opening for business. The location of the trash
containers shall be designated by Landlord. During the Tenant improvement
period, Tenant and its contractor, if any, shall keep the Common
Facilities free of all construction and related debris. Prior to opening
for business, Tenant shall remove all construction and related debris from
the Premises and Common Facilities, and all
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such areas shall be in broom clean condition. Tenant's contractor shall
name Landlord, its employees and agents as additional named insureds on
contractor's insurance policies. All Tenant's Work shall be undertaken and
completed in a good, workmanlike manner, and Tenant shall obtain all
necessary governmental permits, licenses and approvals with respect
thereto and shall fully comply with all governmental statutes, ordinances,
rules and regulations pertaining thereto. Tenant covenants that no work by
Tenant or Tenant's employees, agents or contractors shall disrupt or cause
a slowdown or stoppage of any work conducted by Landlord on the Premises
or Project of which it is a part except in cases of "Force Majeure" as set
forth on Section 20.13.
7.7 Landlord's Improvements:
If the Premises is not presently complete, Landlord shall deliver to
Tenant, and Tenant agrees to accept from Landlord, possession of the
Premises upon substantial completion of Landlord's Work as described in
Landlord's Guidelines for Standard Tenant Improvements (Exhibit "C"
attached hereto and made a part hereof.) Landlord shall, as soon as is
reasonably possible after the execution of this Lease, commence and pursue
to completion the improvements to be erected by Landlord. The term
substantial completion of Landlord's Work' is defined as the date on which
Landlord, or its project architect, notifies Tenant in writing that the
Premises is substantially complete to the extent of Landlord's work, with
the exception of such work as Landlord cannot complete until Tenant
performs necessary portions of its work.
8. Taxes and Assessments on Tenant's Property
8.1 Taxes on Tenant's Property:
Tenant shall be liable for and shall pay all taxes and assessments
levied against all personal property of Tenant located in the Premises. If
any taxes on Tenant's personal property are levied against Landlord or
Landlord's property is increased by the inclusion of a value placed upon
the personal property of Tenant, Landlord shall timely notify Tenant of
such levy and cooperate with Tenant in contesting the validity thereof If
Landlord is thereafter required to pay the taxes based upon the increased
assessment, Tenant shall pay to Landlord the taxes so levied against
Landlord or the proportion of the taxes resulting from the increase in the
assessment.
9. Utilities
9.1 Multi-Tenant Building
Landlord shall provide and maintain necessary easements and, to the extent
enforceable by law, cause public utilities to furnish at all times during the
term of this Lease, as appropriate, electricity, telephone, gas, water and
sewage utilized in operating any and all facilities serving the Premises. Tenant
shall pay, prior to any delinquency, for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises. If any such
services are not separately metered to the Premises, Tenant shall pay, prior to
any delinquency, Tenant proportion of those charges jointly metered with other
premises in the Project.
9.2 Liability of Landlord
Except in the event of Landlord's negligence or willful misconduct,
Landlord shall not be liable for failure to furnish, or for suspension or delays
in furnishing, any such utility services caused by breakdown, maintenance or
repair work, strike, civil commotion, governmental regulations or any other
cause or reason whatever beyond the control of Landlord. Likewise, except in the
event of Landlord's negligence or willful misconduct, the suspension
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or interruption of services shall not result in abatement of rent, be deemed an
eviction or release Tenant of performance of Tenant's obligations under this
Lease.
Notwithstanding any other provisions of this Lease, in the event there is
an interruption of essential services by reason of Landlord's negligence, or due
to Landlord's performance of repairs, additions, alterations, or replacements,
which interruption of essential services prevents Tenant from using all of the
Premises for the conduct of its business for a period in excess of two (2)
business days, and provided Tenant does not occupy the Premises during such
period, except for such limited times and purposes as do not invoke any
exclusion in Landlord's applicable insurance policy, then Tenant shall be
entitled to abate the payment of all Rent and additional rent routinely due
pursuant to the terms and provisions of this Lease for the period commencing on
the third (3rd) business day of the interruption of such essential services and
ending on the earlier of (i) the date Tenant reoccupies the Premises for the
conduct of its business therein or (ii) the date Landlord shall have restored
the essential services so interrupted.
10. Assignment and Subletting
10.1 Rights of Parties:
10.1.1 Non-Assignable
Neither Tenant, nor Tenant's legal representatives,
successors or assigns, shall assign, mortgage or encumber this
Lease, or sublet or permit the Premises or any part thereof to
be used or occupied by others, without the prior written
consent of Landlord in each instance, which shall not be
unreasonably withheld or delayed, and any such assignment,
mortgage, encumbrance, sublease or permission without such
consent shall be voidable at the option of Landlord. If this
Lease is assigned, or if the Premises or any part thereof is
sublet or occupied by any party other than Tenant, Landlord
may, after default by Tenant, collect rent from the assignee,
subtenant or occupant, and apply the net amount collected to
the rent herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver by Landlord
of Tenant's default, or the acceptance of the assignee,
subtenant or occupant as a tenant, or a release of Tenant from
the further performance by Tenant of the obligations on the
part of Tenant set forth herein. The consent by Landlord to an
assignment or subletting shall not be construed to relieve
Tenant, the assignee or the subtenant from obtaining the
express consent in writing of Landlord to any further
assignment or subletting or to release Tenant from any
liability, whether past, present or future, under this Lease
or from any liability under this Lease because of Landlord's
failure to give notice of default by Tenant (or by the
assignee or subleases pursuant to the assumption agreement
described below) under any of the terms, covenants,
conditions, provisions or agreements of this Lease.
Notwithstanding the foregoing, no consent shall be required
for an assignment or subletting by Tenant to any subsidiary of
Tenant, its affiliate or related company. Notwithstanding
anything to the contrary contained in this Agreement, Tenant
may assign, mortgage, pledge, hypothecate or otherwise
transfer without consent its interest in this Agreement to any
financing entity, or agent on behalf of any financing entity
to whom Tenant (i) has obligations for borrowed money or in
respect of guaranties thereof, (ii) has obligations evidenced
by bonds, debentures, notes or similar instruments, or (iii)
has obligations under or with respect to letters of credit,
bankers acceptances and similar facilities or in respect of
guaranties thereof.
10.1.2 Notice
If Tenant desires to transfer an interest in this Lease,
it shall first notify Landlord of its desire and shall first
offer such space to the Landlord for recapture by sending
notification to Landlord of the amount of space and the date
the space will become available (the Recapture Notice). If
Landlord fails to accept recapture of the space by notice to
Tenant within ten (10) business days from the Recapture
Notice, Tenant shall be entitled to effect such a transfer
subject to existing use exclusions exercised by other existing
tenants and
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Landlord's reasonable approval, which shall not be
unreasonably withheld, conditioned or delayed; and if such
transfer be in the form of a sublease, Landlord's approval
shall not be required provided that Tenant shall continue to
be liable under this Lease. Prior to the effectiveness of any
transfer hereunder, and as a precondition of any approval
required hereunder, Tenant shall submit in writing to
Landlord: (i) the name and address of the proposed transferee;
(ii) the nature of any proposed subtenant's or assignee's
business to be carried on in the Premises; (iii) the terms and
provisions of any proposed sublease or assignment; and (iv)
any other information requested by Landlord and reasonably
related to the transfer.
If Landlord consents to the proposed transfer, Tenant
may within ninety (90) days after the date of the consent
effect the transfer upon the terms described in the
information furnished to Landlord; provided that any material
change in the terms shall be subject to Landlord's consent as
set forth in this Section. Landlord shall approve or
disapprove any requested transfer within fifteen (15) days
following receipt of Tenant's written request and the
information set forth above.
10.1.3 Reimbursement of Costs
Tenant shall reimburse Landlord for Landlord's
reasonable costs and attorneys' fees incurred in connection
with the processing and documentation of any requested
transfer, not to exceed Five Hundred Dollars ($500).
10.2 Effect of Transfer:
No subletting or assignment, even with the consent of Landlord,
shall relieve Tenant of its obligation to pay rent and to perform all its
other obligations under this Lease unless Landlord accepts the transferee
as a reasonable replacement for Tenant which acceptance shall be based
upon, the transferee's demonstrated ability to meet the financial
obligations of Tenant under this Lease. Moreover, Tenant shall indemnify
and hold Landlord harmless, as provided in Section 11.5, for any acts or
omission by an assignee or subtenant unless Landlord accepts the
transferee as a replacement for Tenant. Each transferee, other than
Landlord, shall assume all obligations of Tenant under this Lease and
shall be liable jointly and severally with Tenant for the payment of all
rent, and for the due performance of all of Tenant's obligations under
this Lease. No transfer shall be binding upon Landlord unless any document
memorializing the transfer is delivered to Landlord and, if the transfer
is an assignment of sublease, both the assignee/subtenant and Tenant
deliver to Landlord an executed document which contains: (i) a covenant of
assumption by the assignee/subtenant, and (ii) an indemnification
agreement by Tenant, both satisfactory in substance and form to Landlord
and consistent with the requirements of this Article; provided that the
failure of the assignee/subtenant or Tenant to execute the instrument of
assumption shall not release either from any obligation under this Lease.
The acceptance by Landlord of any payment due under this Lease from
any other person shall not be deemed to be a waiver by Landlord of any
provision of this Lease to be a consent to any transfer. Consent by
Landlord to one or more transfers shall not operate as a waiver or
estoppel to the future enforcement by Landlord of its rights under this
Lease.
11. Insurance and Indemnity
11.1 Tenant's Insurance:
Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect policies of casualty insurance covering
trade fixtures, merchandise and other personal property from time to time
in on or about the Premises, in amounts reasonable in relation to the
value of the property insured and Tenant's financial condition, from time
to time, providing protection against any peril included with the
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classification "Fire and Extended Coverage," together with insurance
against sprinkler damage, vandalism and malicious mischief
Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term (and any other Option
Term(s)), Tenant shall provide, pay for and maintain in effect workers
compensation insurance as required by law and comprehensive public
liability and property damage insurance with respect to the construction
of improvements on the Premises and the operations of Tenant in, on or
about the Project, providing personal injury and broad form property
damage coverage for not less than One Million Dollars ($1,000,000.00)
combined single limit for bodily injury, death and property damage
liability. Such liability insurance shall name Landlord as an additional
insured on such insurance policy. Tenant shall also procure adequate
insurance to cover all of Tenant's obligations under this Lease,
including, but not limited to Tenant's obligations to indemnify Landlord
as set forth in Section 11.5 below.
11.2 Landlord's Insurance:
Landlord shall provide the following types of insurance, with or
without deductible, reasonable in relation to the value of the property
insured and Landlord's financial condition from time to time, and the
common practice of landlords of comparable properties in the Las Vegas
area: "all risk" property insurance, subject to standard exclusions,
covering the Building, Premises and Tenant Improvements, and such other
risks as Landlord or its mortgages may from time to time deem appropriate.
Landlord shall not be required to carry insurance of any kind on Tenant's
property, including leasehold improvements, trade fixtures, furnishings,
equipment, plate glass, signs and all other items of personal property,
and shall not be obligated to repair or replace the property should damage
occur. All proceeds of insurance maintained by Landlord upon the Premises
and Project shall be the property of Landlord.
11.3 Waiver of Subrogation:
Landlord and Tenant hereby waive any rights each may have against
the other on account of any loss or damage occasioned to Landlord or
Tenant, as the case may be, or to the Premises or its contents, and which
may arise out of or incident to the perils insured against under Section
11.2, which perils occur in, on or about the Premises, whether due to the
negligence of Landlord or Tenant or their agents, contractors and/or
invitees to the extent of such insurance (including any deductibles). The
parties shall obtain from their respective insurance companies insuring
the property a waiver of any right of subrogation which said insurance
companies may have against Landlord or Tenant as the case may be.
11.4 Policies:
All insurance to be maintained by Tenant or Landlord under this
Lease shall be procured from an insurance company or companies rated
"A-11" or better in "Best's Insurance Guide" and admitted in the State of
Nevada, and Tenant shall deliver to Landlord, prior to taking occupancy of
the Premises, Certificates of Insurance required to be maintained by
Tenant hereunder, together with evidence of the payment of the premiums
thereof The policies evidencing such insurance shall provide that they
shall not be canceled except after thirty (30) days prior written notice
of intention to modify or cancel has been given to Landlord and any lien
holder named as beneficiary thereunder. At least ninety (90) days prior to
the expiration date of any policy to be maintained by Tenant hereunder,
Tenant shall deliver to Landlord a renewal policy or "binder" therefor.
11.5 Tenant's Indemnity:
Tenant shall defend, indemnify and hold harmless Landlord, its
agents and any and all affiliates of Landlord, including, without
limitation, any partners, co-venturers, corporations or other entities
controlling, controlled by or under common control with Landlord, from and
against any and all claims or liabilities arising from Tenant's use or
occupancy of the Premises, the Building, the Project or the Common
Facilities, or from the conduct of its business, or from any activity,
work or thing done, permitted or suffered by Tenant or its agents,
employees, invitees or licensees in or about the Premises, the Building,
the Project or the Common Facilities, or from any default in the
performance of
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any obligation on Tenant's part to be performed under this Lease, or from
any act of negligence or willful misconduct of Tenant or its agents,
employees, visitors, patrons, guests, invitees, or licensees. In case
Landlord, its agent or affiliates are made a party to litigation commenced
by or against Tenant and related to Tenant's occupancy of the Premises,
then Tenant shall protect and hold Landlord harmless and shall pay all
reasonable costs, expenses and attorneys' fees incurred or paid by
Landlord in connection with the litigation.
11.6 Landlord's Indemnity:
Landlord shall defend, indemnify and hold harmless Tenant, its
agents and any and all affiliates of Tenant, including, without
limitation, any partners, co-venturers, corporations or other entities
controlling, controlled by or under common control with Tenant, from and
against any and all claims or liabilities arising from the negligent acts
or willful misconduct of Landlord, its agents or affiliates. Except for
the performance of Landlord's responsibilities as set forth herein,
Landlord shall not be liable to Tenant, its employees, agents and
invitees, and Tenant hereby waives all claims against Landlord for loss of
or damage to any property, or any injury to any person, or loss or
interruption of business or income, resulting from, but not limited to
Tenant's failure to properly maintain the Premises and Building in a
commercially safe and reasonable manner, from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak or flow
from or into any part of the Premises or from the breakage, leakage,
obstruction or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, electrical works or other fixtures in the
Building, whether the damage or injury results from conditions arising in
the Premises or in other portions of the Building. Tenant shall
immediately notify Landlord in case of fire or accident in the Premises,
the Building or the Project and of defects in any improvements or
equipment.
12. Damage or Destruction
12.1 Restoration:
12.1.1 Damage Repair
If the Building of which the Premises are a part is
damaged, Landlord shall repair that damage as soon as
reasonably possible, at its expense, unless: (i) Landlord
reasonably determines that the cost of repair would exceed ten
percent (10%) of the full replacement cost of the Building
("Replacement Cost") and the damage is not covered by
Landlord's fire and extended coverage insurance (or by normal
extended coverage policy should Landlord fail to carry that
insurance); or (ii) Landlord reasonably determines that the
cost of repair would exceed twenty-five percent (25%) of the
Replacement Cost; or (iii) Landlord reasonably determines that
the cost of repair would exceed ten percent (10%) of the
Replacement Cost and the damage occurs during the final twelve
(12) months of the Term.
Should Landlord elect not to repair the damage for one
of the preceding reasons, Landlord shall so notify Tenant in
writing within fifteen (15) days after the damage occurs and
this Lease shall terminate as of the date of that notice and
the obligations of the parties shall terminate as if the Lease
term had naturally expired.
12.1.2 Termination of Lease
Unless Landlord elects to terminate this Lease in
accordance with subsection 12.1.1 above, this Lease shall
continue in effect for the remainder of the Term. However,
provided that if the damage is so extensive as to reasonably
prevent Tenant's substantial use and enjoyment of the Premises
for more than fifteen (15) days, then Tenant may elect to
terminate this Lease by written notice to Landlord within
fifteen (15) days of receiving Landlord's notice of intent not
to repair.
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12.1.3 Rent Abatement
Commencing on the date of any damage to the Premises,
and ending on the date the damage is repaired or this Lease is
terminated, whichever occurs first, the rental to be paid
under this Lease shall be abated in the same proportion that
the floor area of the Premises that is rendered unusable by
the damage from time to time bears to the total floor area of
the Premises.
12.1.4 Cost of Repair
Notwithstanding the provisions of the above subsections
of this Section, if the damage is due to the negligence or
willful misconduct of Tenant or its employees, subtenants,
invitees or representatives, the cost of any repairs not
covered by Landlord's insurance on the Building shall be borne
by Tenant, and Tenant shall not be entitled to rental
abatement or termination rights. In addition, the provisions
of this Section shall not be deemed to require Landlord to
repair any improvements or fixtures that Tenant is obligated
to repair or insure pursuant to any other provision of this
Lease, however Landlord shall pass through to Tenant any
reimbursements from insurance for such repairs.
13. Eminent Domain
13.1 Total or Partial Taking:
If all or a material portion of the Premises is taken by any lawful
authority by exercise of the right of eminent domain, or sold to prevent a
taking, either Tenant or Landlord may terminate this Lease effective as of
the date possession is required to be surrendered to the authority. In the
event title to a portion of the Building or Project, other than the
Premises, is taken or sold in lieu of taking, and if Landlord elects to
restore the Building in such a way as to alter the Premises materially,
Landlord or Tenant may terminate this Lease, by written notice to the
other, effective on the date of vesting of title. In the event neither
party has elected to terminate this Lease as provided above, then Landlord
shall promptly, after receipt of a sufficient condemnation award, proceed
to restore the Premises to substantially their condition prior to the
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration. In the
event of a taking, Landlord shall be entitled to the entire amount of the
condemnation award without deduction for any estate or interest of Tenant;
provided that nothing in this Section shall be deemed to give Landlord any
interest in, or prevent Tenant from seeking any award against the taking
authority for the taking of personal property and fixtures belonging to
Tenant or for relocation or business interruption expenses recoverable
from the taking authority.
13.2 Temporary Taking:
No temporary taking of the Premises by governmental authority shall
terminate this Lease or give Tenant any right to abatement of rent,
however, any award specifically attributable to a temporary taking of the
Premises shall belong entirely to Tenant. A temporary taking shall be
deemed to be a taking of the use or occupancy of the Premises for a period
not to exceed ten (10) days.
13.3 Taking of Parking Area:
In the event there shall be a taking of the Tenant's Parking Area
such that Landlord can no longer provide sufficient parking to comply with
this Lease, Landlord may substitute reasonably equivalent parking in a
location within three minutes walking distance of the Building; provided
that if Landlord fails to make that substitution within fifteen (15) days
following the taking and if the taking materially impairs Tenant's use and
enjoyment of the Premises, Tenant may, at its option, terminate this Lease
by notice to Landlord. If this Lease is not so terminated by Tenant, there
shall be no abatement of rent and this Lease shall continue in effect.
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14. Subordination; Estoppel Certificate
14.1 Subordination:
14.1.1 Subordinate to all underlying encumbrances
At the option of Landlord, this Lease shall be either superior
or subordinate to all ground or underlying Leases, mortgages,
deeds of trust and conditions, covenants and restrictions,
reciprocal easements and rights of way, if any, which may
hereafter affect the Premises or Project, and to all renewals,
modifications, consolidations, replacements and extensions
thereof; provided, that so long as Tenant is not in default
under this Lease, this Lease shall not be terminated nor shall
Tenant's quiet enjoyment of the Premises be disturbed. Tenant
shall also, upon the reasonable written request of Landlord,
execute and deliver those instruments, including the Estoppel
Certificate attached as Exhibit N, as may be required from
time to time to subordinate the rights of Tenant under this
Lease to any ground or underlying Lease or to the lien of any
mortgage or deed of trust, or if requested by Landlord to
subordinate in whole or in part, any ground or underling Lease
or the lien of any mortgage or deed to trust to this Lease.
14.1.2 Attornment
Tenant convenants and agrees to attorn to any successor to
Landlord's interest in any ground or underlying lease, and in
the event, this Lease shall continue as a direct lease between
Tenant herein and such landlord or its successor and provided
that such landlord shall be subject to the obligations and
responsibilities due Tenant under this Lease
14.1.3 Failure to Perform
Waived.
14.2 Estoppel Certificate:
14.2.1 Time Limit
Tenant shall, at any time not more than twenty (20) days
after receipt from Landlord, execute, acknowledge and deliver
to Landlord the Estoppel Certificate attached hereto as
Exhibit N. The Estoppel Certificate may be relied upon by any
prospective purchaser or encumbrance of all or any portion of
the Building or Project.
14.2.2 Failure to Perform
Tenant's failure to deliver the Estoppel Certificate
within the provided time shall be conclusive upon Tenant that:
(i) this Lease is in full force and effect without
modification except as may be represented by Landlord, (ii)
there are no uncured defaults in Landlord's performance, and
(iii) not more than one month's rental has been paid in
advance.
15. Defaults and Remedies
15.1 Tenant's Default
In addition to any other event of default set forth in this Lease,
the occurrence of any one or more of the following events shall constitute
a default by Tenant:
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15.1.1 Abandonment
The abandonment of the Premises by Tenant. Abandonment
is defined to include, but not limited to, any absence by
Tenant from the Premises for reasons other than a default by
Landlord or the Premises being determined unusable under
Section 12 for fifteen (15) consecutive days (or longer) or
sixty (60) days (whether consecutive or not) in any calendar
year accompanied by Tenant's failure to pay rent covering the
abandonment period.
15.1.2 Failure to Pay Rent
The failure by Tenant to make any payment of rent or
additional rent required to be made by Tenant, where the
failure continues for a period of five (5) days notice thereof
from Landlord. For purposes of this default and remedy
provision, the term "additional rent" shall be deemed to
include all amounts of any type whatsoever, other than Base
Rent, to be paid by Tenant pursuant to the terms of this
Lease.
15.1.3 Assignment
Assignment, sublease, encumbrance or other transfer of
the Lease by Tenant, either voluntarily or by operation of
law, whether by judgment, execution transfer by intestacy or
testacy, or other means, without the prior written consent of
Landlord, if necessary.
15.1.4 Materially False Financial Statements
The discovery by Landlord that any financial statement
provided by Tenant was materially false.
15.1.5 Failure to Observe Covenants
The failure or inability by Tenant to observe or perform
any of the express or implied covenants or provisions of this
Lease to be observed or performed by Tenant, other than as
specified in any other subsection of this Section, where the
failure continues for a period of thirty (30) days after
written notice from Landlord to Tenant. However, if the nature
of the failure is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commences the cure within
thirty (30) days and thereafter diligently pursues the cure to
completion.
15.1.6 Assignment to Creditors/Bankruptcy
The making by Tenant of any general assignment for the
benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a debtor under the Bankruptcy
Code or to have debts discharged or a petition for
reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days; the
appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets or of Tenant's interest
in this Lease, if possession is not restored to Tenant within
thirty (30) days; the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interests in this Lease where the
seizure is not discharged within thirty (30) days; or Tenant's
convening of a meeting of its creditors for the purpose of
effecting a moratorium upon or composition of its debts.
Landlord shall not be deemed to have knowledge of any
event described in this subsection unless notification in
writing is received by Landlord, nor shall there be any
presumption attributable to Landlord of Tenant's insolvency.
In the event that any provision of this subsection is contrary
to applicable law, the provision shall be of no force or
effect.
15.2 Landlord's Remedies:
In the event that Landlord elects to declare a breach of this Lease,
then Landlord shall have the right to give Tenant notice of intention to
end the term of this Lease and, after any cure period provided in this
Lease, thereupon the term of this Lease shall expire as fully and
completely as if that day were the
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day herein definitely fixed for the expiration of the Term and Tenant
shall then quit and surrender the Premises to Landlord, but Tenant shall
remain liable as hereinafter provided. If Tenant fails to so quit and
surrender the Premises as aforesaid, Landlord shall have the right as
provided by law to evict Tenant and the legal representatives of Tenant
and all other occupants of the Premises by unlawful detainer or other
summary proceedings, or otherwise, and remove their effects and regain
possession of the Premises (but Landlord shall not be obligated to effect
such removal).
In the event of any breach of this Lease by Tenant (and regardless
of whether or not Tenant has abandoned the Premises) this Lease shall not
terminate unless Landlord, at Landlord's option, elects at any time when
Tenant is in breach of this Lease to terminate Tenant's right to
possession or, at Landlord's further option, by the giving of any notice
(including but not limited to any notice preliminary or prerequisite to
the bringing of legal proceedings in unlawful detainer) terminating
Tenant's right to possession. For so long as this Lease continues in
effect, Landlord may enforce all of Landlord's rights and remedies under
this Lease, including the right to recover all rent as it becomes due
hereunder. For the purposes of this paragraph, the following shall not
constitute termination of Tenant's right to possession: acts of
maintenance or preservation or efforts to relet the Premises, or the
appointment of a receiver upon initiative of Landlord to protect
Landlord's interest under this Lease.
In the event of termination of this Lease, or termination of
Tenant's right to possession as the result of Tenant's breach of this
Lease, Landlord shall have the right:
a. To relet the Premises for such rent and upon such terms as are
reasonable under the circumstances. If the full rent reserved under this
Lease (and any of the costs, expenses or damages indicated below) shall
not be realized by Landlord, Tenant shall be liable for all damages
sustained by Landlord, including, without limitation, deficiency in rent,
reasonable attorneys' fees, other collection costs, brokerage fees, and
expenses of placing the Premises in first-class rentable condition.
Landlord's putting the Premises in good order or preparing the same for
rerental shall not operate or be construed to release Tenant from
liability hereunder. Landlord shall not be liable for failure to relet the
Premises. In no event shall Tenant be entitled to receive any excess of
such net rent collected over the sums payable by Tenant to Landlord
hereunder. Any damage or loss of rent sustained by Landlord may be
recovered by Landlord, at Landlord's option, at the time of the reletting,
or in separate actions, from time to time, as said damages shall have been
ascertained by successive reletting, or, at Landlord's option, may be
deferred until the expiration of the term of this Lease (in which event
Tenant hereby agrees that the cause of action shall not be deemed to have
accrued until the date of expiration of said term). All rights and
remedies of Landlord under this Lease shall be cumulative and shall not be
exclusive if any other rights and remedies provided to Landlord under
applicable law.
b. To remove any and all persons and property from the Premises, with or
without legal process, and pursuant to such rights and remedies as the
laws of the State of Nevada shall then provide or permit, but Landlord
shall not be obligated to effect such removal. Said property may, at
Landlord's option, be stored or otherwise dealt with as such laws may then
provide or permit, including but not limited to the right of Landlord to
store the same, or any part thereof, in a warehouse or elsewhere at the
expense and risk of and for the account of Tenant.
c. To enforce, to the extent permitted by the laws of the State of Nevada
then in force and effect, any other rights or remedies set forth in this
Lease or otherwise applicable hereto by operation of law or contract.
In the event of a breach by Tenant of any of the terms, covenants,
conditions, provisions or agreements of this Lease, Landlord shall have
the right of injunction. Mention in this Lease of any particular remedy
shall not preclude Landlord from any other remedy, at law or in equity.
If Tenant vacates or abandons the Premises, any property that Tenant
leaves in the Premises shall be deemed to have been abandoned and may
either be retained by Landlord as the property of Landlord or may be
disposed of at public or private sale in accordance with applicable law as
Landlord sees fit. The proceeds of any public or private sale of Tenant's
property, or the then
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current fair market value of any property retained by Landlord shall be
applied by Landlord against (i) the expenses of Landlord for removal,
storage or sale of the property; (ii) the arrears of rent or future rent
payable under this Lease; and (iii) any other damages to which Landlord
may be entitled hereunder. Further, Landlord may, upon presentation of
evidence of a claim valid upon its face of ownership or for security
interest in any of Tenant's property abandoned in the Premises, turn over
such property to the claimant with no liability to Tenant.
The following shall be Events of Bankruptcy under this Lease: (1)
Tenant's becoming insolvent, as that terms defined in Title 11 of the
United States Code, entitled Bankruptcy, 11 U.S.C. Sec 101 et seq. (the
"Bankruptcy Code"), or under the insolvency laws of any State, District,
Commonwealth or territory of the United States ("insolvency Laws"); (2)
The appointment of a receiver or custodian for any or all of Tenant's
property or assets, or the institution of a foreclosure action upon any of
Tenant's real or personal property; (3) The filing of a voluntary petition
under the provisions of the Bankruptcy Code or Insolvency Laws; (4) The
filing of an involuntary petition against Tenant as the subject debtor
under the Bankruptcy Code or Insolvency Laws, which is either not
dismissed within sixty (60) days of filing, or results in the issuance of
an order for relief against the debtor, whichever is later; or (5)
Tenant's making or consenting to an assignment for the benefit of
creditors or a common law composition of creditors.
Upon occurrence of an Event of Bankruptcy, Landlord shall have the
right to terminate this Lease by giving written notice to Tenant,
provided, however, that this section shall have no effect while a case in
which Tenant is the subject debtor under the Bankruptcy Code is pending,
unless Tenant or its Trustee is unable to comply with the provisions
below. At all other times this Lease shall automatically cease and
terminate, and Tenant shall be immediately obligated to quit the Premises
upon the giving of notice pursuant to this section. My other notice to
quit, or notice of Landlord's intention to re-enter is hereby expressly
waived.
If Landlord elects to terminate this Lease, everything contained in
this Lease on the part of Landlord to be done and performed shall cease
without prejudice, subject, however, to the rights of Landlord to recover
from Tenant all rent and any other sums accrued up to the time of
termination or recovery of possession by Landlord, whichever is later, and
any other monetary damages or loss of reserved rent sustained by Landlord.
Without regard to any action by Landlord as authorized above,
Landlord may at its discretion exercise all the additional provisions set
forth below.
In the event Tenant becomes the subject debtor in a case pending
under the Bankruptcy Code, Landlord's right to terminate this Lease
pursuant to this section shall be subject to the rights of the Trustee in
Bankruptcy to assume or assign this Lease. The Trustee shall not have the
right to assume or assign this Lease unless the Trustee (i) promptly cures
all defaults under this Lease, (ii) properly compensates Landlord for
monetary damages, incurred as a result of such default, and (iii) provide
adequate assurance of future performance on the part of Tenant as debtor
in possession or on the part of the assignee of Tenant.
Landlord and Tenant hereby agree in advance that adequate assurance
of future performance, as used herein, shall mean that all of the
following minimum criteria must be met; (i) Tenant must pay its estimated
pro rata share of Adjustments (whether provided directly or through agents
or contractors and whether or not previously included as part of the
minimum rent), in advance of the performance or provisions of such
services, (ii) The Trustee must agree that Tenant's business shall be
conducted in a first class manner, and that no liquidating sales, auction,
or other non-first class business operations shall be conducted in the
Premises; (iii) The Trustee must agree that the use of the Premises as
stated in this Lease will remain unchanged and that no prohibited use
shall be permitted; and (iv) The Trustee must agree that the assumption of
this Lease will not violate or affect the right of other tenants in the
Project.
In the event Tenant is unable to (i) cure its defaults, (ii)
reimburse the Landlord for its monetary damages, (iii) pay the rent due
under this Lease, and all other payments required by Tenant
27
<PAGE>
under this Lease on time (or within five (5) days), or (iv) meet the
criteria and obligations imposed above, Tenant agrees in advance that it
has not met its burden to provide adequate assurance of future
performance, and this Lease may be terminated by Landlord.
15.3 Expenses and Legal Fees:
Tenant shall reimburse Landlord upon demand, for any costs or
expenses incurred by Landlord in connection with any breach or default of
Tenant under this Lease, whether or not suit is commenced or judgment
entered. Such costs shall include reasonable legal fees and costs incurred
for the negotiation of a settlement, enforcement of rights or otherwise.
Tenant shall also indemnify Landlord against and hold Landlord harmless
from all costs, expenses, demands and liability incurred by Landlord if
Landlord becomes or is made a party to any claim or action:
a. by or against any person holding any interest under or using the
Premises by license of or agreement with Tenant;
b. for foreclosure for any lien for labor or material furnished to or
for Tenant or such other person;
c. otherwise arising out of or resulting from any act or transaction of
Tenant or such other person; or
d. necessary to protect Landlord's interest under this Lease in a
bankruptcy proceeding, or other proceeding under Title 11 of the
United States Code, as amended.
Landlord shall likewise reimburse Tenant for any costs or expenses
incurred by Tenant in connection with any breach or default by Landlord
under this Lease and indemnify Tenant to the same extent as set forth in
this Section 15.3 should Tenant be made a party to any claim or action
occasioned by Landlord's breach or default.
16. End of Term
16.1 Holding Over:
Tenant shall have the right to extend the Initial Term of the Lease
for an additional six (6) months at 110% of the then applicable rent by
providing Landlord four (4) months written notice. Otherwise, this Lease
shall terminate without further notice upon the expiration of the Term
(herein "Expiration Date"), and any holding over by Tenant after the
expiration the term or the six month extension, if exercised, shall not
constitute a renewal or extension of this Lease, or give Tenant any rights
under this Lease, except when in writing, signed by both parties. If
Tenant holds over for any period after the expiration (or earlier
termination) of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, commencing on the first (1st) day following the
termination of this Lease and subject to all of the terms of this Lease,
except that the monthly rental shall be one hundred fifty percent (150%)
of the amount of the last monthly rental installment:
If Tenant fails to surrender the Premises upon the expiration of
this Lease despite demand to do so by Landlord, Tenant shall indemnify and
hold Landlord harmless from all loss or liability, including, without
limitation, any claims made by any succeeding tenant relating to such
failure to surrender. Acceptance by Landlord of rent after the termination
shall not constitute a consent to a holdover or result in a renewal of
this Lease. The foregoing provisions of this Section are in addition to,
and do not effect, Landlord's right to re-entry or any other rights of
Landlord under this Lease or at law.
16.2 Merger on Termination:
The voluntary or other surrender of this Lease by Tenant, or mutual
termination of this Lease, shall terminate any or all existing subleases
unless Landlord, at its option, elects in writing to treat the surrender
or termination as an assignment to it of any or all subleases affecting
the Premises.
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16.3 Surrender of Premises: Removal of Property:
Upon the Expiration Date, or upon any earlier termination of this
Lease, Tenant shall quit and surrender possession of the Premises to
landlord in as good order, condition and repair as when received or as
hereafter may be improved by Landlord or Tenant, reasonable wear and tear
excepted, and shall, without expense to Landlord, remove or caused to be
removed from the Premises all personal property and debris. Tenant shall
repair all damage to the premises resulting from the removal, which repair
shall include the patching and filling of holes and repair of structural
damage. If Tenant shall fail to comply with the provisions of this
Section, Landlord may effect the removal and/or make any repairs, and the
cost to Landlord shall be additional rent payable by Tenant upon demand.
16.4 Termination; Advance Payments:
Upon termination of this Lease under Article 12 (Damage or
Destruction), Article 13 (Eminent Domain) or any other termination not
resulting from Tenant's default, and after Tenant has vacated the Premises
in the manner required by this Lease, and equitable adjustment shall be
made concerning advance rent, and any other advance payments made by
Tenant or Landlord, and Landlord shall refund the unused portion of the
security deposit to Tenant or Tenant's successor.
17. Payments and Notices
All sums payable by Tenant to Landlord shall be paid in lawful money of
the United States to Landlord at its address set forth in Section 1.18 of the
Basic Lease Terms, or at any other place as Landlord may reasonably designate in
writing. Unless this Lease expressly provides otherwise, as for example in the
payment of rent, all payments shall be due and payable within ten (10) days
after demand. All payments requiring proration shall be prorated on the basis of
a thirty (30) day month and a three hundred sixty (360) day year. An notice,
election, demand, consent, approval or other communication to be given, or other
document to be delivered by either party to the other, may be delivered in
person to an officer or duly authorized representative of the other party, or
may be deposited in the United States mail or with a nationally recognized
overnight carrier to the address set forth in Section 1.18. Either party may, by
written notice to the other, designate a different address. If any notice or
other document is sent by mail, it shall be deemed served or delivered when
received. If more than one Tenant is named under this Lease, service of any
notice upon any one of them shall be deemed as service upon all of them.
18. Limitation of Liability
In the event of any actual or alleged failure, breach or default of this
Lease by Landlord, Tenant's sole and exclusive remedy shall be against the
Project and its assets, it being intended that Landlord shall not otherwise be
personally liable for any monetary judgment or deficiency therein.
Tenant agrees that the foregoing provision shall be applicable to any
covenant or agreement either expressly contained in this Lease or imposed by
statute or at common law.
19. Transfer of Landlord's Interest
In the event of any transfer of Landlord's interest in the Premises,
including a so-called "sale-Leaseback", the transferor shall be automatically
relieved of all obligations on the part of Landlord accruing under this Lease
from and after the date of the transfer, provided that any funds held by the
transferor, in which Tenant has an interest, shall be turned over, subject to
that interest, to the transferee, and Tenant is notified of the transfer as
required by law. No holder of a mortgage and/or deed of trust to which this
Lease is, or may be, subordinate, and no landlord under a so-called
sale-Leaseback shall be responsible in connection with the security deposit,
unless the mortgagee or holder of the deed of trust or the landlord actually
receives the security deposit. It is intended that the covenants and obligations
contained in this Lease on the part of the Landlord shall, subject to the
foregoing, be binding on the Landlord, its successors and assigns, only in
respect to their respective successive periods of ownership.
29
<PAGE>
20. Miscellaneous
20.1 Gender and Number
Whenever the context of this Lease requires, the words "Landlord"
and "Tenant" shall include the plural as well as the singular, and words
used in neuter, masculine or feminine genders shall include the others.
20.2 Headings:
The captions and headings of the Articles and Sections of this Lease
are for convenience only, and are not a part of this Lease and shall have
no effect upon its construction or interpretation.
20.3 Joint and Several Liability:
If there is more than one Tenant, the obligations imposed upon
Tenant shall be joint and several, and the act of, or notice from, or
notice or refund to, or the signature of, any one or more of them shall be
binding on all of them with respect to the tenancy of this Lease,
including, but not limited to, any renewal, extension, termination, or
modification of this Lease.
20.4 Successors:
Subject to Articles 10 and 19, all rights and liabilities given to
or imposed upon Landlord and Tenant shall extend to and bind their
respective heirs, executors, administrators, successors and assigns.
Nothing contained in this Section is intended, or shall be construed, to
grant to any person other than Landlord and Tenant and their successors
and assigns any rights or remedies under this Lease.
20.5 Time of Essence:
Time is of the essence with respect to the performance of every
provision of this Lease, in which time of performance is a factor.
20.6 Severability:
If any term or provision of this Lease, the deletion of which would
not adversely affect the receipt of any material benefit by either party
or the deletion of which is consented to by the party adversely affected,
shall be held invalid or unenforceable to any extent, the remainder of
this Lease shall not be affected and each term and provision of this Lease
shall be valid and enforceable to the fullest extent permitted by law.
20.7 Entire Agreement
The parties hereto declare and represent that no promise, inducement
or agreement not herein expressed has been made to them, that this
document embodies and sets forth the entire agreement and understanding
between them relating to the subject matter hereof, and that it merges and
supersedes all prior discussions, agreements, understandings,
representations, conditions, warranties and covenants between them on said
subject matter.
20.8 Waiver of Trial by Jury.
The respective parties hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against
the other on any matter whatsoever arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, or any claim of injury or damage, or the
enforcement of any remedy under any statute, emergency or otherwise.
30
<PAGE>
20.9 Partial Invalidity
If any term, covenant, or condition of this Lease is, to any extent,
invalid or unenforceable, the remainder of this Lease shall not be
affected thereby and this Lease shall be valid and enforced to the fullest
extent permitted by law.
20.10 Recording
Tenant shall not record or file this Lease or any form of Memorandum
of Lease, or any assignment or security document pertaining to this Lease
or all or any part of Tenant's interest therein without the prior written
consent of Landlord, which consent shall not be unreasonably withheld. If
such consent is granted Tenant will pay all recording fees, costs, taxes
and other expenses for the recording. However, upon the request of
Landlord, both parties shall execute a memorandum or "short form" of this
Lease for the purposes of recordation in a form customarily used for such
purposes. Said memorandum or short form of this Lease shall describe the
parties, the Premises and the Lease Term and shall incorporate this Lease
by reference.
20.11 Waiver
The waiver by either party of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or
condition for any subsequent breach of the same or any other term,
covenant or condition herein contained.
20.12 Late Charges
If any installment of rent or any sum due from Tenant shall not be
received by Landlord or Landlord's designee on or within three (3) days of
the date such sum is due then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of the amount past due, but in no event more
than the legal maximum on such past due amount, plus any attorneys' fees
incurred by Landlord by reason of Tenant's failure to pay rent and/or
other charges when due hereunder. My late charges shall be added to the
next installment of Base Rent due under the Lease. The parties hereby
agree that such late charges represent a fair and reasonable estimate of
the cost that Landlord will incur by reason of the late payment by Tenant.
20.13 Inability to Perform
This Lease and the obligations of the Parties hereunder shall not be
affected or impaired because either Party is unable to fulfill any of its
obligations hereunder or is delayed in doing so, if such inability or
delay is caused by reason of strike, labor troubles, acts of God,
governmental laws, ordinances, rules or regulations, or other cause beyond
the reasonable control of the Party.
20.14 Choice of Law
This Lease shall be governed by the laws of the State of Nevada.
20.15 Independently Provided Services
This Lease is entirely separate and distinct from and independent of
any and all agreements that Tenant may at any time enter into with any
third party for the provision of services, which include, but are not
limited to, telecommunications, office automation, repair, maintenance
services, computer and photocopying ("Independent Services"). Tenant
acknowledges that Landlord has no obligation of any type concerning the
provision of Independent Services, and agrees that any cessation or
interruption of Independent Services or any other act or neglect by the
third party providing the Independent Services shall not constitute a
default or constructive eviction by Landlord.
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<PAGE>
20.16 Prior Agreements
THIS LEASE CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND ANY AND
ALL ORAL AND WRITTEN AGREEMENTS, UNDERSTANDINGS, REPRESENTATIONS,
WARRANTIES, PROMISES AND STATEMENTS OF THE PARTIES HERETO AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, PARTNERS, AGENTS AND BROKERS WITH RESPECT
TO THE SUBJECT MATTER OF THIS LEASE AND ANY MATTER COVERED OR MENTIONED IN
THIS LEASE SHALL BE MERGED IN THIS LEASE AND NO SUCH PRIOR ORAL OR WRITTEN
AGREEMENT, UNDERSTANDING, REPRESENTATION, WARRANTY, PROMISE OR STATEMENT
SHALL BE EFFECTIVE OR BINDING FOR ANY REASON OR PURPOSE UNLESS
SPECIFICALLY SET FORTH IN THIS LEASE. NO PROVISION OF THIS LEASE MAY BE
AMENDED OR ADDED TO EXCEPT BY AN AGREEMENT IN WRITING SIGNED BY THE
PARTIES HERETO OR THEIR RESPECTIVE SUCCESSORS IN INTEREST. THIS LEASE
SHALL NOT BE EFFECTIVE OR BINDING ON ANY PARTY UNTIL FULLY EXECUTED BY
BOTH PARTIES HERETO.
LANDLORD: TENANT:
McCARRAN CENTER L.C. NEXTEL WIP LEASE CORP.
A Nevada Limited Liability Company
By: /s/ Thomas A. Thomas By: /s/ Donald J. Manning
---------------------------------- --------------------------
Thomas A. Thomas Its: Vice President and General
Its: Managing Partner Counsel
--------------------------
On this 17th day of May, 1999, before me, the undersigned, a Notary Public in
and for the County of Clark, State of Nevada, duly commissioned and sworn,
personally appeared Thomas A. Thomas in his capacity as Managing Partner, known
to me to be the person that executed within instrument and known to me to be the
person who affixed his name hereto and who acknowledged to me that he executed
the same freely and voluntarily and for the uses and purposes therein mentioned.
[SEAL]
GAIL PETERSEN /s/ Gail Petersen
Notary Public, State of Nevada -----------------------------
Clark County NOTARY PUBLIC in and for said
My Appt. Expires Aug 21, 1999 Country and State
On this 13th day of May, 1999, before me, the undersigned, a Notary Public in
and for the County of Kind, State of Washington, duly commissioned and sworn,
personally appeared Donald J. Manning, in his capacity as V.P. & General Counsel
known to me to be the person that executed within instrument and known to me to
be the person who affixed his name hereto and who acknowledged to me that he
executed the same freely and voluntarily and for the uses and purposes therein
mentioned.
[SEAL]
GAYLE C. TONEY /s/ Gayle C. Toney
NOTARY PUBLIC -----------------------------
STATE OF WASHINGTON NOTARY PUBLIC in and for said
COMMISSION EXPIRES Country and State
MARCH 29, 2003
32
<PAGE>
LEASE EXHIBITS
A Project & Premises
A-1 Project Site Plan: McCarran II
A-2 Building Site Plan
B-1 Floor Plan
B-2 Use of Tenant Improvement Allowance
B-3 Standard Tenant Improvement Specifications
C Tenant's Work Letter
D Rules and Regulations
E Operating Expenses - Multi Tenant
F Parking
I Renewal Options
J Brokerage Commission
K Commencement Date
L Master Sign Plan
M Subordination and Non-Disturbance Agreement
N Tenant Estoppel Certificate
<PAGE>
EXHIBIT A
PROJECT & PREMISES
PROJECT: McCarran Center II McCarran Center II consisting of 16.50 Net Acres
BUILDING 42 & 42A Building 42: 23,306 sq. ft.
Building 42A: A minimum of 20,000 sq. ft.
PREMISES Building 42 Premises: 23,306 sq. ft.
Building 42A Premises: A minimum of 20,000 sq. ft.
<PAGE>
EXHIBIT A-1
CONCEPTUAL MASTERPLAN
McCARRAN CENTER II
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT B-2
USE OF TENANT IMPROVEMENT ALLOWANCE
A. Tenant Improvement Allowance
Landlord agrees to construct tenant improvements in the Premises (Tenant
Improvements) for Tenant's exclusive use during the term of the Lease in
accordance with the Space Plan and Conceptual Cost Estimate as approved and
signed by Tenant either prior to or following the execution of this Lease.
Landlord's contribution to such improvements in Building 42 (23,306 sq. ft.)
shall be $25.00 per square foot or $582,650 and in Building 42A (20,000 sq. ft.)
shall be $25.00 per sq. ft. or $500,000 (the Tenant Improvement Allowance).
Landlord's contribution for Building 42 shall be provided in the Phase I and
Phase II build-outs as set forth in Section 1.11 and Tenant shall have the right
to forgo Landlord's contribution for Phase II and receive the stated reduction
in Base Rent. Tenant shall be responsible for the cost of Tenant Improvements
exceeding the Tenant Improvement Allowance, which costs shall be initially
determined and set forth in the Conceptual Cost Estimate for the corresponding
building and paid for by Tenant to Landlord based on the following schedule:
o Twenty percent (20%) at the start of construction.
o Forty percent (40%) within 60 days after the start of
construction
o Thirty percent (30%) within 90 days after the start of
construction. Payment is due in full if construction is
completed within 90 days after the start of construction.
o Ten percent (10%) within 10 days after the completion of the
punch list items.
The Tenant Improvement Allowance shall be used for and include the cost of:
design & engineering, plan check and permit fees, special fees (such as sewer
fixture fee for Tenant's over-standard requirements), insurance and the tenant
improvement construction cost. Tenant shall be responsible for the cost of any
Tenant approved change orders or alterations to the Space Plan or Conceptual
Cost Estimate. Should Tenant fail to fully utilize the Tenant Improvement
Allowance, the remainder shall be applied as a credit to the Base Rent.
Building 42, Phase II Improvements:
As set forth in Section 1.11 of the Lease, Tenant has the option to
construct the improvements in Phase II (8,306 sq. ft.) at Tenants sole
cost and expense and receive a reduced rent. Tenant may also request that
such improvements for Phase II(8,306 sq. ft.) be built simultaneously with
the Phase I improvements. Should Tenant expedite the Phase II
improvements, the Base Rent payable on the October 1, 1999 commencement
date shall be increased to include the amortization of such improvements
at 11% over 8 years ($0.386 x 8,306 sq. ft.) or $3,232.23 per month.
B. Premises Design and Construction Documents
Landlord and Tenant agree that both parties shall use best efforts and
diligently pursue the preparation and completion of the Premises space plan and
construction documents. Should Landlord's authorized space planner and engineers
be utilized, the Tenant Improvement Allowance shall be charged as follows:
Space Plan (Approved) $.15 per USF
Architectural Drawings $.70 per USF
Mechanical & Plumbing $.50 per USF
Electrical $.50 per USF
Tenant shall have the right to utilize its own architect and/or space planner
(Tenant's Designer) for the design and preparation of the tenant improvement
construction documents. Tenant's Designer shall be contracted by Landlord and
compensated from the Tenant Improvement Allowance as set forth above. In all
cases the Mechanical, Plumbing and Electrical engineers designated by Landlord
shall be utilized. Should Tenant elect to have Landlord retain Tenant's
Designer, Landlord shall charge a fee of $.15 per USF, from the Tenant
Improvement Allowance, for the coordination of Tenant's Designer with Landlord's
engineers and general contractors. Tenant's Designer shall submit dimensioned
plans and construction drawings in the CADD 12, 13 or 14 format on an updated
basis to Landlord with final space plans including, at a minimum, a fully
dimensioned space plan, a reflective ceiling plan and an electrical
<PAGE>
and data outlet plan. Tenant's Designer shall be required to attend a minimum of
three (3) space plan design meetings with Landlord's engineers and staff as well
as a minimum of three (3) meetings to coordinate the construction drawings.
Tenant's Designer shall be a licensed Nevada architect and responsible for "wet
stamping" all drawings submitted to the permitting government agency.
C. Construction of Tenant Improvements
Upon completion of Tenant's space plan, Landlord shall immediately obtain a bid
for construction from its general contractor. Landlord's general contractor
shall obtain at least three (3) bids in each major trade from subcontractors
unless Tenant waives this provision in the interest of meeting the time
constraints of the construction schedule. Tenant shall have the right to seek
independent bids from Nevada licensed and bonded contractors.
Tenant may, at Tenant's sole option, be responsible for the construction of the
Tenant Improvements, in which event Tenant shall contract for the construction
services and be responsible for meeting the payment of all costs for the Tenant
Improvements from an escrow account into which Landlord shall deposit the Tenant
Improvement Allowance no later than five (5) days prior to the commencement of
the Tenant Improvement construction. The escrow agent shall be selected by
Landlord and shall maintain the funds in customary investment vehicles with all
interest to belong to Landlord, provided that funds shall be available to meet
Tenant's obligations during the construction process. Withdrawals shall require
the written approval of both Landlord and Tenant, which approval shall be
delivered to Tenant within fifteen (15) business days of Landlord's receipt of
proper invoices and conditional lien waivers. In the event that Tenant does not
utilize the available Tenant Improvement Allowance, Tenant may use the remainder
as prepayment of rent.
Tenant shall be responsible for maintaining the same construction schedule as
committed to by Landlord's general contractor, unless Tenant's performance is
delayed by events of "Force Majeure" outside of Tenant's control. Tenant's
contractors shall not interfere with the shell and core construction of the
Building or the construction of other tenant improvements in the Building.
Construction performed by Tenant or it's contractors which causes such noise as
to be a nuisance to the adjacent tenant's shall be carried out during evening
hours. Tenant shall be responsible for its own trash containers and shall
promptly remove all construction and related debris from all Common Areas or
Facilities. Immediately following the completion of construction, Tenant shall
return the Building and Common Areas to the condition they were in immediately
prior to the construction, including, if necessary, parking lot sweeping and
repair to the Building and Common Areas damaged by Tenant's contractors. Tenant
agrees to indemnify Landlord against the actions of its contractors as they
relate to construction activities in the Building (including costs of repair,
reasonable attorneys' fees and liens) and to obtain either a "Builders Risk" or
"Cost of Construction" insurance policy covering the total cost of Tenant
Improvements.
All construction, whether by Landlord or Tenant, shall be in a good,
workmanlike manner and all necessary governmental permits, licenses and
approvals shall be obtained by the party responsible for the construction.
<PAGE>
EXHIBIT B-3
STANDARD
TENANT IMPROVEMENT SPECIFICATIONS
FOR INDUSTRIAL/OFFICE BUILDINGS
I. GENERAL IMPROVEMENTS:
The following information is provided to establish standard specifications and
guidelines for Tenant Improvements in Industrial/Office Buildings. The standards
set forth in this Exhibit (or equivalent material at Tenant's election) are
subject to Tenant's Improvement Allowance. Landlord does not warrant that the
Tenant Improvement Allowance shall be sufficient to construct the following
standards. Landlord's reasonable approval is necessary should Tenant desire to
materially alter the following standards or use the Tenant Improvement Allowance
for non-standard improvements.
A. PARTITIONS:
1. One lineal foot of building standard for each fifteen (15)
square feet.
Demising partitions shall be one layer of 5/8" gypsum
wallboard screw applied to each side of 2-1/2" metal studs
spaced at 24" on center. Installation to include 1-1/2" sound
attenuation blankets will extend from floor to deck above.
2. Interior partitions shall be one layer of 5/8" gypsum wall
board screw applied to each side of 2-1/2" metal studs spaced
at 24" on center. Wall board is to extend to 6" above finish
ceiling grid to a height of approximately 9'6".
3. All partitions and column enclosures will be taped and sanded
to receive paint.
B. DOORS FRAMES AND HARDWARE:
1. One (1) door per twenty-five (25) lineal feet of interior
partition allowance.
2. Interior doors shall be 3'0" wide by 7'0" high and 1-3/4"
thick, solid core door with frame, prefinished, with a
standard Mendecino Oak finish, both sides.
3. Interior door hardware will include lever-handled latch sets,
1-1/2" pair of 4-1/2" butts, floor stop and three (3)
silencers.
4. Hardware finish to be Schlage Brushed Aluminum or equal.
C. CEILING
1. Ceiling throughout the office area will be a 2' x 4'
mechanically suspended, acoustical system using
flush-finished, lay-in tile with a mineral fiber. Nominal
ceiling height is 9'0".
2. The Building Standard for a Multi-tenant office is Armstrong
769 (2767 White or equal.)
3. The Building Standard Allowance for this item is $1.25 per
s.f.
<PAGE>
D. FLOOR COVERING AND BASE:
1. Carpeting: The Building Standard Allowance for Multi-tenant
industrial office space is $1.22 per s.f. This is for 22 oz.
Glue down carpet, Queen Commercial Carpet, "Commitment 26"
solution dyed nylon or equal.
2. V.C.T. The Building Standard Allowance for Multi-tenant
industrial office space is $1.25 per s.f. This is for an 12" x
12" Azrock Vinyl Composition Tile 1/8" thick or equal.
3. Rubber Base: The Building Standard Allowance for Multi-tenant
industrial office space is $1.25 l.f. This is for Burke
standard 4" top set rubber base or equal.
E. WINDOW TREATMENT:
1. The Building Standard Allowance for Multi-Tenant industrial
office space is $.50 s.f. This is for Riviera Levelor blinds,
alabaster number 112 horizontal 1" slats or equal.
F. PAINT:
1. The Building Standard for Multi-Tenant industrial office space
is Frazee eggshell 5900w, Arctic, or equal.
G. TOILET PARTITIONS:
1. The Building Standard for this item is Boberick, American
Standard, or Bradley, metal, gray in color.
II. STRUCTURAL IMPROVEMENTS:
A. STANDARD DESIGN:
1. The structural floor system of the Building is designed to
accommodate up to one hundred (100) pounds per square foot,
including eight of partitions and up to seven (7) pounds of
ceiling and suspended mechanical equipment load.
III. HEATING VENTILATION, AIR CONDITIONING AND FIRE PROTECTION SERVICES.
A. H.V.A.C. SYSTEM:
1. The following operation standards are based upon population
not to exceed one (1) person per 150 square feet of usable
floor area.
2. This system shall be at the sole cost of the tenant.
3. The system will include a series of individual roof pack
units.
4. The system shall be designed to deliver one ton of air for
each 300 s.f. of useable floor space. The system design should
also assume a maximum lighting and appliance distribution of 5
watts per rentable s.f. of Multi Tenant Industrial Office
Space.
5. Tenant H.V.A.C. work shall conform to the master system design
and include, but not necessarily be limited to providing
thermostatically controlled zones, all required ducting, all
required diffusers and grilles, and other items as necessary
to complete the system.
6. The tenant shall provide return ductwork on floors without
ceiling plenum provisions. (Contact Landlord for exact
location of lease spaces requiring such.)
<PAGE>
B. FIRE PROTECTION:
1. The base system, the "up system", is included in the shell and
core and is to be composed of risers, mains, and heads that
are turned "up" in order to comply with Building Codes for
unoccupied Multi-Tenant Industrial Office Space. Modification
of the sprinklers is required as a basic part of Tenant
Improvements. This work is to include, but not be limited to;
additional headers as required, and the down system to allow
for protection of the tenant improvement space.
2. The "down" system is to include semi-recessed type heads with
chrome finish as required by code.
3. The standard allowance for this item is $.90 s.f. Any cost
above this amount is considered above standard.
IV. ELECTRICAL AND TELEPHONE SERVICES:
A. LIGHTING:
1. One 2' x 4' fluorescent light fixture per ninety useable
square feet shall be the standard. One single pole, wall
mounted light switch at 48"+/- per each twelve light fixtures
shall be provided.
2. The light fixture shall be a recessed prismatic fluorescent 3
tube light fixture, 2' x 4' by Lithonia or equal, with energy
saving ballast's.
3. Lamps which complete the building standard fixtures shall be
initially furnished and installed as a part of the tenant
improvement allowance standard. Subsequent relamping shall be
performed at the tenant's expense.
4. Lights, as required by code, shall be connected to an
emergency circuit and comply with said code.
5. One (1) 20 amp, 120 volt, single phase, wall type duplex
electrical outlet per each one hundred fifty square feet of
useable floor space in the Multi Tenant Industrial Office
Building.
6. All cover plates to be ivory with no back to back outlets.
B. TELEPHONE:
1. Single gang telephone outlet box in stud wall with conduit
from outlet to telephone board.
2. All cover plates to be ivory with no back to back outlets.
3. The standard distribution for Multi Tenant Industrial Office
Building space is one box for one hundred fifty square feet of
useable office space.
4. Installation of telephones and wiring shall be at Tenant's
sole arrangement and expense.
V. PLUMBING:
A. GENERAL
1. Plumbing wet stacks, containing sanitary waste and vent piping
will be available on each floor. Tenant's connection shall be
at Tenant's expense.
2. Domestic water is available at building core. Tenant's
connection shall be at Tenant's expense.
<PAGE>
3. Sanitation:
For every 10,000 s.f. of office space:
Men: 2 Water Closets Women: 3 Water Closets
1 Urinal 1 Lavatory
1 Lavatory
For every 60,000 s.f. of Warehouse
Men: 1 Water Closet Women: 1 Water Closet
1 Lavatory 1 Lavatory
VI. ABOVE STANDARD TENANT IMPROVEMENTS:
1. Any Above Standard Tenant Improvement; i.e., improvements which
exceed the standards described above, in design, quantity, quality,
structurally, mechanically, electrically, or in cost (which includes
the design fees) shall be deemed above standard. Also, Tenant
designs which require fire alarm systems or special emergency
lighting above and beyond that provided by the Landlord shall be at
Tenant's cost and expense.
<PAGE>
EXHIBIT C
TENANT'S WORK LETTER
(Construction Rules)
1. The Tenant's Contractors and subcontractors are required to check in
with the Landlord's Property Manager for instructions and
coordination prior to going on the site.
2. All Tenant Contractors are to follow all instructions set forth by
Landlord.
3. Tenant's Contractors will not be permitted to start work until they:
A. Have all necessary building permits and have posted such permits on the
wall in the Tenant's space.
B. Furnish proper evidence of required insurance coverage.
C. Sign for and take possession of keys to service doors of premises (if any)
and acknowledge proper installation and operation of said service door.
D. Furnish names and phone numbers (office and home) of contractor's
supervisory personnel.
E. Have a set of Landlord approved drawings in the space at all times.
F. Acknowledge receipt of a copy of these Construction Rules.
G. Furnish proper evidence that all fees and/or deposits required to commence
work have been fully paid.
4. Insurance:
A. All contractors are required to furnish the Landlord's Property Manager
with certificates showing evidence of the following insurance coverage
prior to commencing any work.
B. The insurance shall: (i) be issued by insurance companies authorized to do
business in the State of Nevada with a current financial rating of at
least an A+ Class XV or better as rated in the most recent edition of
Best's Key Rating Guide; (ii) be issued as a primary policy; (iii) contain
an endorsement requiring thirty (30) days written notice from the
insurance company to Landlord before cancellation or material change and,
(iv) shall be written with minimum coverages and limits as required by law
and the following:
(1) "All risk" builders' risk insurance in an amount
equal to 100% of the replacement cost of the
Improvements on a non-reporting, completed value
basis, coverage against the perils or damage
resulting from water damage;
(2) Owner's Protective Liability Insurance in an
amount of not less than $1,000,000 naming Landlord
as a Named Insured;
(3) Unless otherwise waived, in writing, by Landlord,
a performance bond from Tenant's general
contractor in an amount equal to the contract sum
or contract amount set forth in the construction
contract between Tenant and its general contractor
providing for the construction;
(4) Independent Contractors coverage; and
<PAGE>
(5) Comprehensive General Liability in an amount of, not
less than $1,000,000 evidenced by a Certificate of
Insurance (said policies hereinafter referred to as the
"Construction Period Insurance Policies"). From and
after the date of issuance of said certificate of
occupancy, the term "Insurance Policies" shall mean: (i)
All Risk Property coverage naming Landlord as an
Additional Named Insured with Replacement Cost and
Agreed Amount endorsements, and including Increased Cost
of Construction coverage, Demolition, Clean Up and
Clearance coverage, Extra Expense coverage and providing
that collection of a total loss recovery will not
require reconstruction; (ii) Broad Form Comprehensive
General Liability, naming Landlord as an Additional
Named Insured, in an amount of, not less than
$1,000,000, combined single limit, containing Broad Form
Contractual Liability coverage.
C. Liability insurance may be arranged by Comprehensive General
Liability and Comprehensive Automobile Liability policies for the
full limits required or by a combination of underlying comprehensive
liability policies for lesser limits with the remaining limits
provided by an Excess or Umbrellas Liability policy.
D. All policies shall include the following organizations as additional
Named Insureds:
Landlord: McCarran Center, LC
Landlord's Lender: None at time of Lease execution
All policies shall provide for thirty (30) days prior written
notice of expiration or cancellation to the additional
insureds.
5. Parking: All contractors will be assigned a parking area for their
workmen by the Landlord's Property Manager. No parking will be
permitted in other than the designated area. Vehicles improperly
parked are subject to removal by Landlord at Tenant's sole risk and
cost.
6. Tools and Equipment: All contractors are expected to arrive at the
site with all necessary tools and equipment. No tools or machinery
are to be requested of the Landlord's General Contractor.
7. Deliveries:
A. All deliveries of supplies and materials delivered to a
contractor must include the store name and space number to
facilitate delivery.
B. Deliveries will be made only through entrances and routs
designated by the Landlord's Property Manager. Contractors
should verify routes daily, since routes may have to be
changed from time to time. Roadways, loading docks and curb
front delivery is at the discretion of the Landlord.
C. The Landlord's General Contractor will not accept or unload
supplies or materials for any Tenant work.
8. Curb Service:
To the greatest extent possible, curbs adjacent to the Buildings
will be kept open for deliveries. Parking therein is strictly
PROHIBITED. Vehicles delivering materials or merchandise must be
completely unloaded at curbside, and immediately removed. Unattended
parked vehicles in Loading Courts will be tagged or towed at the
expense of the Tenant being served by the vehicles.
9. Fire Protection:
Each Tenant Contractor shall provide and maintain fire extinguishers
within the premises as required by Public Safety Officials.
<PAGE>
10. Material Storage/Work Area:
All materials used for Tenant's work must be stored at all times
within the Tenant's demised premises. Under no circumstances will
any other portion of the Building or Project area be used as a work
area, construction office or to store Tenant materials or Tenant
Contractors equipment.
11. Trash Removal:
Each Tenant Contractor is responsible for his own trash removal
during construction. Contractors are expected to remove debris from
the premises on a daily basis.
12. Roof Openings:
All coordination required with Landlord's General Contractor, i.e.,
any openings in the Building roof, are to be scheduled well in
advance of anticipated need. Landlord's General Contractor shall not
be responsible for delays to Tenant work caused by failure of Tenant
Contractor to give adequate notice of work needed. The penetration
and flashing of all roof openings shall be by Landlord's Contractor
at Tenant's expense.
13. Signage:
No signs are to be placed on a Tenant's storefront without approval
of the Landlord.
14. Compliance with Regulations:
Contractors are to comply with all federal and local safety
regulations in the execution of their work as well as any safety
requirements of the Center Contractor. Hard hats are required for
all workmen and visitors to the site.
15. Approved Working Plans:
The Tenant Contractor must maintain one set of Approved Working
Plans displaying signatures of Landlord and Plans Examiner on the
job at all times during construction.
16. Permits:
The Tenant Contractor is required to obtain all necessary permits
prior to the start of construction on the Tenant space.
17. Protection of Work and Property:
Tenant and Tenant's Contractor shall protect their work from damage
and shall protect the work of other Tenants and Landlord from damage
by Tenant, Tenant's Contractor and their employees and
sub-contractors.
18. Strictly Prohibited Work and Practices:
A. Combustible materials above finished ceilings or in any other
concealed, non-sprinklered space are prohibited.
B. Imposing any structural load, temporary or permanent, on any
part of the Landlord's work or structure without the approval
of Landlord's Engineer and Property Manger is prohibited.
C. Cutting any holes in Landlord-installed floor slabs, walls, or
roof is prohibited unless written approval is provided by the
Property Manager.
19. Required Documents at Occupancy:
Contractor must furnish to Tenant a Certificate of Occupancy (if
applicable) and a Contractors Waiver of Lien upon completion of
construction.
20. Liens:
If any mechanic's lien shall at any time be filed against any part
of the Premises by reason of work, labor, services or materials
performed for or furnished to Tenant, Tenant shall forthwith
<PAGE>
cause the lien to be discharged or bonded off to the satisfaction of
Landlord. If Tenant shall fail to cause such lien to be discharged
or bonded off within fifteen (15) days after being notified of the
filing thereof then, in addition to any other right or remedy of
Landlord, Landlord may discharge the lien by paying the amount
claimed to be due. The amount paid by Landlord, and all costs and
expenses, including reasonable attorney's fees incurred by Landlord
in procuring the discharge of the lien, shall be due and payable by
Tenant to Landlord as additional rent on the first day of the next
following month, or if the Lease term has expired, upon demand.
21. Plans:
Ten (10) days prior to the commencement of any construction Tenant
shall submit to Landlord for Landlord's approval preliminary plans
and specifications for the construction ("preliminary Plans"). As
promptly as possible after submission of the Preliminary Plans, but
in any event within twenty (20) days after receipt thereof, the
Landlord will notify the Tenant of any objections thereto
(specifying in reasonable detail such objections) and Tenant shall
cause such objections to be rectified and to promptly resubmit the
revised Preliminary Plans to the Landlord. If Landlord fails to
respond within such twenty (20) days, the Preliminary Plans shall be
deemed approved.
Landlord's right to object to the Preliminary Plans shall be limited
to objections that the submitted Preliminary Plans do not provide
for a quality first class structure, workmanship and materials, or
functional or architectural harmony with existing improvements,
or-otherwise do not meet the requirements of this Lease or any
applicable Governmental Requirements. Tenant will, immediately after
receipt of written notice of objections from Landlord, undertake to
amend or modify the Preliminary Plans to conform to the requirements
of this Lease and to cure any objections from the Landlord. In the
event of Landlord's failure to give written notice of any objections
within any of the requisite time periods, the Preliminary Plans as
submitted to Landlord shall be deemed approved by the Landlord.
Tenant shall submit one (1) copy of the "Final Plans" to Landlord
prior to submission to the Building Department for a Building Permit
(the "Final Plans").
Within ten (10) days after the Final Plans have been received by
Landlord for final approval, Landlord shall give written notice of
its approval or disapproval thereof, specifying in the latter event,
its reasons therefor. Such approval shall not be unreasonably
withheld and the right to disapprove the Final Plans shall be
limited to objections that they are not consistent developments of
the Preliminary Plans, or do not meet the requirements of this Lease
or applicable Governmental Requirements.
In the event the Landlord fails to give notice of its approval or
disapproval of the Final Plans, as submitted to Landlord, within
said ten (10) day period, the Final Plans shall be deemed approved
by the Landlord.
Notwithstanding anything contained in this Lease which is or may be
construed to be to be contrary, Landlord shall have no liability or
obligation whatsoever in connection with any of the Plans and no
responsibility for the adequacy thereof or for the construction of
all or any portion of the Premises contemplated by the Plans.
Landlord has no duty to inspect the Premises, and if Landlord should
inspect the Premises, Landlord shall have no liability or obligation
to Tenant or any other Person arising out of such inspection. No
such inspection, or any failure by Landlord to make objections after
any such inspection, shall constitute an agreement or a
representation by Landlord that the Premises is in accordance with
the Plans or constitute a waiver of Landlord's right thereafter to
insist that the Premises be constructed in accordance with the
Plans.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1.00 PROJECT & PREMISES
1.01 Industrial and Commercial Use: The Premises shall be used for
industrial and commercial purposes permitted under the Clark County, Nevada "MD"
Zoning Ordinance and Guidelines or as further permitted in Lease, and for no
other use.
1.02 Oil Drilling: No oil drilling, oil development operations, oil
refining, holding tanks, quarrying or mining operations of any kind, shall be
permitted upon or in the Project. No derrick or other structure designed for use
in boring for water, oil or natural gas shall be erected, maintained or
permitted upon the Project.
1.03 Offensive Conduct - Nuisance: Tenant, Renters, Occupiers and Guests
within the Project shall conform to all applicable Codes of the County of Clark,
and no noxious or offensive activities shall be carried on, upon or within the
Project. Any obstruction of Common Access areas is hereby deemed to be a
nuisance and is prohibited except for reasonable periods in connection with
repairs to the driveway, parking, walkway and Common Facilities. Objects which
create or emit loud noise, vibrations or obnoxious odors shall not be located,
used or placed on any portion of the Project other than temporarily for
landscape, driveway, parking, walkway or building maintenance. No Tenant shall
permit or cause anything to be done or kept on its Premises which may increase
the rate or cause the cancellation of insurance because of the dangerous or
volatile nature of such activity or substance, nor shall any Tenant violate or
permit the violation of any law on its Premises. Each Tenant shall comply and
require the Occupants and Permittees of its Premises to comply with all the
requirements of the local or state health authorities and with all other
governmental authorities with respect to the occupancy and use of a building or
any portion thereof. The Landlord shall be entitled, but shall not be obligated,
to take any action to abate an unlawful nuisance, including without limitation
the right to enter into a Premises or Building to exercise the abatement of the
unlawful nuisance.
1.04 Vehicular Maintenance: No person shall conduct repairs, restorations,
or painting of any motor vehicle, boat, trailer, aircraft or other vehicle upon
any portion of the Project except wholly within an enclosed building.
1.05 Antenna, External Fixtures, Etc.: Tenant shall have the right to use
the roof of the Building as set forth in the Lease.
1.06 Fences, Etc.: No fences, awnings, ornamental screens, screen doors,
sunshades or walls of any nature shall be erected or maintained on or around any
portion of any structure or elsewhere within the Premises except those installed
in accordance with the original construction of the Premises, and any
replacement thereof, or as are authorized and approved by the Landlord.
1.07 Animals: No animals, reptiles, rodents, livestock or poultry shall be
kept in any Premises or elsewhere within the Project, without the express
written consent of the Landlord.
1.08 No Storage or Living Use of Recreational Vehicles: No boat, truck,
trailer, camper, recreational vehicle or tent shall be stored on the Project or
used as a living area.
1.09 Trash Disposal: Trash, garbage, or other waste shall be kept only in
sanitary containers in the enclosures provided. No Tenant shall permit or cause
any trash or refuse to be kept on any portion of the Project other than in the
receptacles customarily used therefor, and placed or maintained as required by
Landlord.
1.10 Exterior Alterations: No Tenant shall, at his expense or otherwise,
make any alterations or modifications to the exterior of the buildings, fences,
railings or walls situated within the Project without the prior written consent
of the Landlord and approval by the County.
1.11 Parking Restrictions: No parking shall be permitted which may
obstruct free traffic flow within the Common Facilities, constitute a nuisance,
or otherwise create a safety hazard. Notwithstanding the forgoing, this document
shall not be interpreted in such a manner so as to permit an activity which
would be contrary to any ordinance. Provided the requirements are not violated,
construction activity shall be exempt from this section where applicable. The
Landlord is hereby empowered to established "no parking" areas within Common
Access areas of the Project as well as to enforce parking limitations through
its officers and agents by all means lawful for such enforcement on private
drives, including the removal of any violating vehicle; provided that the
parking allotment provided to Tenant in the Lease shall not be adversely
impacted other than on a temporary basis for maintenance or emergencies as
provided in the Lease. Adequate off-street parking is provided to accommodate
all parking needs for employees, visitors and company vehicles on the site.
1.12 Building Maintenance: Unless otherwise provided in the Lease, each
Tenant shall be responsible for maintaining its building, including the
equipment and fixtures therein and the interior and exterior walls, ceiling and
<PAGE>
roof private restrooms contained within the Building, (if any), windows and
doors thereof in a first class, clean, sanitary, workable and attractive
condition. Tenant shall have complete discretion as to the choice of furniture,
furnishings, and interior decorating; provided, that:
a) Windows may only be covered by drapes, shades or shutters and may
not be painted or covered by foil, cardboard, or other similar materials. Each
Tenant shall be responsible for repair, replacement and cleaning of the interior
windows and glass of his building.
b) Decoration of the exterior of the doors to the Building shall be
of uniform design to be adopted and approved by the Landlord.
1.13 Signs: The Landlord shall adopt as part of the Project rules, rules
for signage established by Landlord for a signage program pertaining to the use
of signs by the Tenant. The Landlord shall have the right to approve all signs
posted within the Project, including signs on the building doors. No Tenant
shall permit or cause any advertising, identifications, or other sign to be
constructed, installed or maintained on the Premises or on any property adjacent
to the Premises and visible from the Premises until the plans and specifications
therefor, including the height, size, coloring, design and location of
installation, have been submitted to and approved in writing by the Landlord and
the County of Clark. All signs installed on the Premises or on any property
adjacent to the Premises and visible from the Premises shall be consistent with
the character and architectural style of the buildings located on the Premises
upon which they are placed. In addition, no sign, poster, display, or other
advertising device shall be placed in the public view upon any portion of the
Premises and/or Building or on any property adjacent to the Premises and visible
from the Premises unless it complies with all applicable County ordinances. No
Tenant shall permit or cause any sign advertising a person, firm, company, or
corporation which does not operate, conduct a business, or sell products on such
Premises to be constructed, installed, or maintained on such Premises. Landlord,
consultants, or contractors may use signs of a size, design and location as
determined by the Landlord for the purposes of developing, constructing,
marketing and improving the Project.
1.14 Maintenance of Drainage Facilities: The Premises upon which drainage
ditches and/or related facilities are located, or which may be hereafter be
located, shall keep and maintain any improvements constructed thereon, in a
reasonable condition according to their design, purpose and/or function,
including, but not limited to, the removal of all obstructions which may or
reasonably might cause redirection or impedance of the flow of the drainage
thereon regardless of the source or cause of such obstruction or impedance.
1.15 Retention of Lot Grade: Unless specifically approved in writing by
both the County and the Landlord, the grade of any Premises shall not be
modified, altered or otherwise changed.
1.16 Storage and Loading Areas: No materials, trash, supplies or
equipment, including company-owned or operated trucks, shall be stored on the
Premises except inside a closed building, or behind a visual barrier screening
such areas form the view of adjoining properties and/or private streets subject
to the approval of the County of Clark and the Landlord; provided, however, that
this provision shall not apply during the course of construction of a building.
1.17 Canvassing, soliciting and peddling in the Project are prohibited.
2.00 RECIPROCAL EASEMENTS
2.01 Premises Included: Certain Premises, located within the Project,
because of unique characteristics regarding the relationship of each of these
Premises to the other, are encumbered by this document with a special set of
easements. These special easements provide for reciprocal surface access and
reciprocal subsurface utility access on and under the affected Premises.
2.02 Special Reciprocal Surface Access Easements: Each Tenant of the
affected Premises, does covenant for itself and its successors, a nonexclusive
special reciprocal surface access easement over portions of his property for the
purpose of providing landscape planting and on-going maintenance and utility
maintenance and repair. Such surface access shall be reciprocal from one to
another, and shall provide continuous access to each Premises, Landlord/Tenant,
his tenant(s), guest(s), vendors, suppliers and to landscape maintenance
personnel employed by the Landlord or by authorized personnel of Public
Utilities servicing a given utility located within the Reciprocal Easement Area.
2.03 Reciprocal Subsurface Utility Easements: Each Tenant of the affected
Premise does covenant for itself and its successors, a nonexclusive reciprocal
subsurface easement beneath the surface of its Leasehold Premise for the purpose
of providing a satisfactory location for subsurface utility lines servicing all
or some of the Project. Such utilities would be for, but not limited to: water
lines, sanitary sewer lines, storm drainage lines, electrical lines, gas lines,
fiber optic lines, telephone lines or cable TV lines. Such subsurface access
shall be reciprocal from one Leasehold Premise to another and shall provide the
necessary reciprocal easement for the utility line in question and provide
continuous access to authorized personnel of the utility companies providing the
services.
<PAGE>
2.04 Subsurface Easements: The utility company or public agency utilizing
the subsurface portion of the Reciprocal Easement Area shall be responsible for
the continuous upkeep and maintenance of the utility facilities.
3.00 BUILDING
3.01 Without limitation upon any of the provisions of the Lease, Tenant
shall not mark, paint, drill into, cut, string wires within, or in any way
deface any part of the Building or Premises, without the prior written consent
of Landlord, and as Landlord may direct. Upon removal of any wall decorations or
installments or floor coverings by Tenant, any damage to the walls or floors
shall be repaired by Tenant at Tenant's sole cost and expense. Tenant shall not
lay linoleum or similar floor coverings so that the same shall come into direct
contact with the floor of the Premises and, if linoleum or other similar floor
covering is to be used, an interlining of builder's deadening felt shall be
first affixed to the floor, by a paste or other materials soluble in water. The
use of cement or other similar adhesive material is expressly prohibited. Floor
distribution boxes for electric and telephone wires must remain accessible at
all times.
3.02 Tenant shall not install or permit the installation of any awnings,
shades, mylar films or sunfilters on windows. Tenant shall not obstruct, alter
or in any way impair the efficient operation of Landlord's heating, ventilating,
air conditioning, electrical, fire, safety or lighting systems.
3.03 Tenant shall, upon the termination of its tenancy, provide Landlord
with the combinations to all combination locks on safes, safe cabinets and
vaults and deliver to Landlord all keys to the Building and all interior doors,
cabinets, and other key-controlled mechanisms therein, whether or not such keys
were furnished to Tenant by Landlord.
3.04 These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the agreements,
covenants, conditions and provisions of any lease of Premises in the Project.
Should there be any inconsistency between the Lease and these Rules and
Regulations, the provisions of the Lease shall prevail.
<PAGE>
EXHIBIT E
OPERATING EXPENSES
For the purposes of this Lease, "Operating Expenses" shall include those items
and services set forth in Section 4.2 and further defined in Section 9 of the
Lease. Operating Expenses associated with the Project Common Facilities and the
Building occupied by the Tenant are calculated and prorated as set forth
hereafter:
Group I - Project Common Area
o Consists of the maintenance and up-keep of perimeter
Landscaping Areas generally located parallel to the public
streets within the Project to a average depth of 15 to 20 feet
from the public right-of-way.
o Categories covered include: Landscape Maintenance and
Utilities (Electrical and Water), and Property Management.
Perimeter Landscaping Areas in the Project shall be constructed and
maintained along public streets and private streets within the Project.
The method for calculation of the Building's prorata share of Project
Operating Expenses shall be based on the number of acres of land assigned
to the Building divided by the total number of acres in that phase of the
Project. The calculation for the Premises prorata share of the Buildings
Operating Expenses shall be based on the square feet of the Premises
divided by the total square feet in the Building (See Section 2.1 of the
Lease for measurement guidelines). The calculation for the Building and
Premises Group I Operating Expense is set forth below.
Building Acreage: 2.02
McCarran II Project Acreage: 16.50 Building/Project: 12.24 percent
Premises sq. ft.: 23,306sq. ft.
Building sq. ft.: 23,306 sq. ft. Premises/Building: 100 percent
Group I Premises Allocation percent (Prem/Bldg x Bldg/Proj)
<PAGE>
Group II - Provided by Landlord to the Building and Premises.
Operating Expense obligations of the Building include, but are not limited
to:
o Real Property Taxes including special assessments as indicated
on a separate tax bill for the Building but exclusive of any
increased taxes due to the sale of the Building.
o All Risk Property Insurance.
o Property Management for the Building (including, but not
limited to: parking facilities and landscaping) as provided by
Landlord (see Lease, Section 4.2).
o Tenant shall be responsible for its prorata share of the
Building Area's Group II expenses.
The Building's share of Group II Operating Expenses shall be based upon
the Acreage of the Building Area divided by the Acreage of the Project:
Building Area Acreage: 2.02 acres
Building Area Responsibility: 12.24 percent
Operating Expense Obligations of the Premises:
- On-Site-Water and Sewer (unless separately metered to
the Premises)
- Building Maintenance & Repair
- HVAC Maintenance and Repair under a Guaranteed Service
Contract
- Fire Sprinkler Maintenance and Monitoring
- Building Area Trash Removal
- Prorata share of exterior Building area Expenses
Group II Expenses are allocated to the Premises on a prorata basis. The
Building is grossed up to reflect at least 95% occupancy.
Premises sq. ft.: 23,306
Building sq. ft.: 23,306 sq. ft.
Premises Percentage Allocation: 100 Percent. (same as
Premises/Bldg.)
Group III - Provided by Tenant
Operational Expenses which are the sole responsibility of the Tenant are:
- Utility - Electrical: (HVAC, Lighting & Wall Outlets on
separate meter)
- Utility - Telephone (In-Suite)
- Janitorial and Premises Trash Removal (In-Suite)
- All other utilities separately metered to the Premises
Future Expansion
At such time as Tenant shall occupy Building 42A, this Exhibit B shall be
amended to include the additional land associated with Tenant's expansion
and parking requirements.
<PAGE>
EXHIBIT F
PARKING
On the October 1,1999 commencement date for building 42, Tenant shall be
provided 117 unrestricted regular size parking stalls (5/1,000 on 23,306 sq.
ft.), free of charge, for the use by Tenant's employees and visitors. On October
1, 2000, Tenant shall receive an additional 47 unrestricted regular size
parking stalls. On the October 1, 2001 commencement date for building 42A,
Tenant shall be provided and additional 100 unrestricted regular size parking
stalls (5/1,000 on 20,000 sq. ft.), free of charge, for the use by Tenant's
employees and visitors.
The rules and regulations governing the use of these spaces are contained in
Exhibit "D" of this Lease. Tenant shall not use more parking spaces than said
number, or any spaces (a) which have been specifically assigned by Landlord to
other tenants or for such other uses as visitor parking or (b) which have been
designated by governmental entities of competent jurisdiction as being
restricted to certain uses. Landlord reserves the right to erect such security
and access and egress control devices as it may reasonably deem to be
appropriate (including, without limitation card controlled gates) and Tenant
agrees to cooperate fully with Landlord in such matters.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to
be loaded, unloaded, or parked in areas other than those designated by Landlord
for such activities. If Tenant permits or allows any of such prohibited
activities, then Landlord shall have the right, without notice, in addition to
such other rights and remedies that it may have, to remove or tow away the
vehicle involved and charge the cost to Tenant, which cost shall be immediately
payable upon demand by Landlord.
Tenant may, at any time during the Lease term, request additional parking spaces
for use by Tenant's employees and customers. Such spaces shall be provided on a
"first come -- first serve" basis at a rental rate of $32 per space per month
through October 1, 2001 and thereafter subject to the same percentage increases
as set forth in the Lease for the Base Rent. Tenant may also request that
Landlord construct covered parking improvements for Tenant's unrestricted
spaces. The rental rate for such improvements shall be the monthly amortization
of the associated costs over the remaining applicable term of the Lease at
twelve percent (12%) interest and shall be payable monthly with the each
installment of Base Rent due under the Lease.
Landlord shall have the right to reasonably relocate portions of Tenant's
parking to other areas which are adjacent to the Building (within 300 feet) in
order to accommodate repairs, modifications to ingress and egress or Project
construction.
<PAGE>
EXHIBIT I
RENEWAL OPTIONS
If immediately prior to the expiration of the operative term, this Lease
shall be in full force and effect, and if written notice is given to Landlord no
later than one hundred and eighty (180) days prior to the expiration of the
operative term of Tenant's intent to renew, the giving of such notice by Tenant
shall be effective to renew this Lease and extend the term hereof as to the
Premises without the necessity for execution of any further instrument by either
party. Tenant shall have the right to extend the Lease for Two (2) additional
periods of sixty (60) months each (Option Terms) from and after the expiration
of the Initial Term. The Option Terms shall be under the same covenants,
agreements, terms, provisions and conditions as are contained herein for the
Initial Term. Base Rent for each year during the entirety of such Option Terms
on the Premises shall, however, be at the "Extension Rate" (as hereinafter
defined).
The "Extension Rate" for purposes of calculating the Base Rent payable
during each twelve (12) month period of an Option Term shall be the amount equal
to the Base Rent applicable for the last month of the operative term multiplied
by a fraction, which fraction shall have as its numerator the Consumer Price
Index For All Urban Consumers using the U.S. City Average (1982-84 = 100), or
alternative thereto as hereinafter provided, as published by the U.S. Department
of Labor, Bureau of Labor Statistics, for the calendar month which is four (4)
months prior to the expiration of the last applicable twelve (12) month period
of tenancy, and which shall have as its denominator the Consumer Price Index, as
published for the calendar month which is four (4) months prior to the
commencement of the final twelve month period of the operative term (Initial
Term or the first Option Term, as the case may be). If the present base of said
Index should hereafter be changed, then the new base shall be converted to the
base now used. In the event that the Bureau should cease to publish the Consumer
Price Index, then a similar Index published by any other branch or department of
the U.S. Government shall be used. In the event the Bureau shall publish more
than one such index, then the index showing the greater proportionate increase
shall be used, and if none is so published, then another index generally
recognized as authoritative shall be substituted by agreement of the parties
hereto, or if no such agreement is reached within a reasonable time, either
party may make application to any court of competent jurisdiction to designate
such other index. In any event, the base used by any new index shall be
reconciled to the 1982-84=100 Base Index. In no event shall the Extension Rate
to be paid by Tenant pursuant hereto be less than the Base Rent as adjusted with
respect to the last twelve (12) month period of the prior operative term. In the
event the numerator of said fraction is not available at the time of adjustment
of the rent as provided herein, Tenant shall continue to pay the rent
established for the next prior twelve (12) month period; provided, however,
Tenant shall promptly pay to Landlord any deficiency at such time as said rent
is adjusted.
The Extension Rate shall be subject to all rent adjustments and increases
as set forth in the Lease, including, but not limited to, Sections 1.12 and 4.
Refurbishment Allowance: Should Tenant exercise its right to extend the
Lease during either of the Option Terms, Landlord shall contribute a
refurbishment allowance, payable on the first day of such Option Term, of $3.50
per rentable sq. ft. to be used solely for the refurbishment and/or alterations
to the Premises, including, but not limited to new carpet, painting or wall
relocation. The refurbishment allowance shall not be used for the purchase of
furniture, fixtures or equipment or payment of rent.
<PAGE>
EXHIBIT J
BROKERS COMMISSION
The parties recognize as the broker(s) who negotiated this Lease, the
firm(s), if any, whose name(s) is (are) Scott Riddles, Staubach Company, and
agree that Landlord shall be solely responsible for the payment of brokerage
commissions to those broker(s), and that the other party shall have no
responsibility for the commissions unless otherwise provided in this Lease.
Tenant warrants that it has had no dealings with any other real estate broker or
agent in connection with the negotiation of this Lease, and the Tenant agrees to
indemnify and hold Landlord harmless from any cost, expense or liability
(including reasonable attorneys' fees) for any compensation, commissions or
charges claimed by any other real estate broker or agent employed or claiming to
represent or to have been employed by Tenant in connection with the negotiation
of this Lease. The foregoing agreement shall survive the termination of this
Lease. If Tenant fails to take possession of the Premises or if this Lease
otherwise terminates prior to the expiration date, Landlord shall be entitled to
recover the unamortized portion of any brokerage commission funded by Landlord
in addition to any other damages to which Landlord may be entitled.
It is the Landlord's express policy not to pay commissions for the extensions,
renewals, options or expansions of an existing Tenant.
<PAGE>
EXHIBIT K
COMMENCEMENT DATE
The Commencement date of that Lease by and between McCarran Center, LC, as
Landlord, and Nextel Partners, Inc., as Tenant, is hereby acknowledged and
agreed to be October 1,1999.
Accordingly, the Expiration Date is acknowledged and agreed to be ________
199__.
LANDLORD: TENANT:
McCarran Center, LC Nextel Partners, Inc.
a Nevada Limited Liability Company
By:________________________________ By: _____________________________________
Its:_______________________________ Its: ____________________________________
<PAGE>
EXHIBIT L
MASTER SIGN PLAN
MULTI-TENANT
SIGNAGE STANDARDS
A. GENERAL REQUIREMENTS - ALL BUILDINGS:
1. All sign plans shall be reviewed and approved in writing by the Landlord
for conformity with this criteria and overall design quality prior to
installation. Approval or disapproval of sign submittals shall remain the
sole right of the Landlord.
2. All permits for signs and installation thereof shall be approved by the
Landlord or its representative. The expense of obtaining permits, the
fabrication and the installation of all signs shall be the responsibility
of the Tenant.
B. GENERAL SPECIFICATIONS - ALL BUILDINGS:
1. No projections beyond the sign area will be permitted. Signage area is to
be within limits as indicated by the Landlord in this criteria.
2. Except as provided herein, no advertising placards, banners, pennants,
name insignia, trademarks or other described material shall be affixed or
maintained upon the glass panels and supports of the windows and doors or
upon the exterior walls of the building or office front.
3. All signs and their installation shall comply with all local building
codes.
4. Signs shall be composed of individual lettering. Logos will be considered
on a case by case basis.
C. GENERAL CONSTRUCTION REQUIREMENTS - ALL BUILDINGS:
1. Tenant shall be responsible for the manufacture, complete installation and
maintenance of the building letters and vinyl lettering.
2. All signs are to be installed under the direction of the Project
Contractor's superintendent or representative.
3. Tenant shall be fully responsible for the Tenant's sign contractor.
4. Tenant's sign contractor shall execute Landlord's Right of Entry Agreement
prior to installation of signage.
5. Tenant's sign contractor shall repair any damage to any portion of the
structure and finish caused by its work.
6. All penetrations of the building structure required for sign installation
shall be sealed in a water tight condition and shall be patched to match
Building finish adjacent to the installation.
7. No sign-maker's label or other identification will be permitted on an
exposed surface of the sign, except for those required by ordinance, which
shall be placed in an inconspicuous location.
8. No signs or lettering will be permitted on the building roof other than as
required by applicable laws or regulations in connection with Tenant's
Roof Top Equipment.
<PAGE>
D. SIGN CONTRACTOR GENERAL REQUIREMENTS - ALL BUILDINGS:
1. Tenant shall use YESCO (Young Electric Sign Company) or other licensed and
Landlord approved sign contractor to produce and install signage for
aesthetic consistency. Landlord's approval shall be reasonable and timely.
2. All companies bidding to manufacture signs are to be advised by Tenant
that no substitutes will be accepted unless indicated in the
specifications and approved by the Landlord.
3. All manufacturers are to be advised by Tenant that prior to acceptance and
final payment, each unit will be inspected for conformity with approved
plans. Any signs found not in conformity will be rejected and removed at
the Tenant's expense.
4. Entire display shall be guaranteed for 90 days against defects in material
and workmanship. Defective parts shall be replaced without charge.
5. Sign company shall carry workman's compensation and public liability
insurance against all damage suffered or done to any and all persons
and/or property while engaged in the construction or erection of signs in
the amount of $1,000,000.
E. SINGLE-STORY MULTI-TENANT BUILDINGS - SIGNAGE:
1. Building signage to be flush mounted, non-illuminated, individual letters,
with both upper and lower case permitted.
2. The width of the Tenant sign facia shall not exceed the width of the Sign
Band (as delineated on the exterior elevations). Lettering shall center on
demised premises unless otherwise approved by Landlord.
3. Size of the Building signage letters shall be 18" maximum and logos 24"
maximum in height by 3/4" in depth. Any exceptions will require prior
written consent of the Landlord.
4. Building signage letters will be Helvetica medium or as approved by the
Landlord and painted to match McCarran Center - Navarro Red, available at
Silver State Paint Center.
5. Tenant will be permitted to place at the main entrance of its demised
premises not more than 144 inches of vinyl lettering, not to exceed two
and three fourths inches (2-3/4") in height, maximum of four (4) lines,
indicating suite number and name. An exceptions will require prior written
consent of the Landlord.
6. Tenant's non-customer door for private, employee or merchandise entry may
have uniformly applied in two and three-fourths inches (2-3/4") high vinyl
block letters, the Tenant's name and suite number.
7. Building address (excluding suite number) shall be provided by Landlord.
Address shall be individual 3/4" deep 12" high numbers (Helvetica medium)
flush mounted where indicated on exterior elevations.
F. MULTI-STORY BUILDINGS - PARAPET SIGN:
1. Parapet Wall Sign
Shall mean a logo symbol and/or sign text consisting of individual symbols
or letters installed directly to the parapet of the Building. The use of
"Raceways" for letter attachment to the Building is not permitted.
2. Signable Area
Shall mean the display surface of a sign encompassed within a single
continuous perimeter, which encloses the extreme limits of the display
face of that graphic.
3. Location
Shall be above the upper-most window line, and as indicated on the Sign
Location Plan (if provided), or as otherwise designated by Landlord.
<PAGE>
4. Number
Landlord shall determine the number of individual tenants and signs
permitted on a Building.
5. Display
Parapet signs shall use a single line of text.
6. Alignment
Parapet signs shall be located a distance equal to the height of the wall
sign (but not less that 3'0") from the vertical edge of the building, a
minimum of 18" above the highest ceiling line and a minimum of 18" below
the top of the parapet. The sign shall insure the geometric relationship
to the vertical and horizontal features of the building.
7. Height
Wall sign height shall not exceed the height as listed in the table below.
Number of Stories Maximum Height
----------------- --------------
1 2'-0"
2 2'-6"
3 or more 3'-0"
8. Area
Wall sign area shall be as listed in the table below.
Number of Stories Maximum Square Footage
----------------- ----------------------
1 64
2 100
3 or more 144
9. Materials and Construction
Parapet signs shall utilize dark anodized bronze aluminum or other
materials as approved by Landlord. Returns and trim shall match color of
sign face unless otherwise approved. All signs shall consist of individual
letters and/or symbols. No continuous sign cabinets or raceways shall be
permitted.
10. Colors
Colors of parapet sign materials shall be consistent with the Building and
be subject to the approval of the Landlord prior to issuance of the
required building permit. Registered trademark/logo colors are allowed.
11. Illumination and Lighting Control
Parapet signs shall be either non-illuminated or interior or halo
illuminated with no exposed conduit, raceway or similar cabinets and shall
be wired in such a manner that if any one portion and/or letter of the
sign were to burn out, the illumination of the entire sign will
automatically turn off.
12. Submittal
All parapet signs must be submitted to the Landlord for approval. Upon
receiving approval from the Landlord, the Tenant's sign contractor shall
obtain all required permits.
<PAGE>
EXHIBIT M
WHEN RECORDED, RETURN TO:
__________________________________________
__________________________________________
__________________________________________
SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
(Modify as Necessary for Ground Lease, if Any)
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") is made and entered into as of ____________, 19__, by and between
_________________________________, a(n) _____________________________("Lender")
and ______________________________,a(n) ________________________________________
("Tenant").
Recitals
This Agreement is made with respect to the following facts:
A. Pursuant to Loan Agreement dated as of ____________,19__ (the "Loan
Agreement") entered into among _________, a ___________, and _____________, a
_____________,the Lenders made a loan to Landlord (the "Loan").
B. The loan is secured by a Deed of Trust, Security Agreement, Assignment
of Leases, Rents and Profits, Financing Statement and Fixture Filing (the "Deed
of Trust") which was recorded in the Official Records of Clark County, Nevada,
as Instrument No. __________, encumbers certain real property owned by Landlord
located in Clark County, Nevada, and more particularly described in the Deed of
Trust (the "Property").
C. Lender is [the holder of 100% of the rights/has purchased the Loan and
succeeded to 100% of the rights] of the Landlord under the Loan Agreement, the
Deed of Trust and the other documents evidenced the Loan [pursuant to, inter
alia, (i) an Assignment of Loan Documents dated ___________________, and (ii)
and Assignment of Beneficial Interest under Deed of Trust and under Assignment
of Leases and Rents recorded in the Official Records of Clark County, Nevada, on
_________________ as Instrument No. ].
D. Pursuant to a Lease Agreement dated ______________________ between
McCarran Center, LC, a Nevada limited liability company, as landlord
("Landlord"), and Tenant (the "Lease"), Landlord leased to Tenant [a portion of]
the Property consisting of approximately ___________________ rentable square
feet of office space commonly know as _________________________________,as more
particularly described in the Lease as the "Premises".
E. Lender and Tenant now desire to clarify their respective rights with
respect to the Premises, to confirm the right of Tenant to quiet and peaceable
possession of the Premises under the Lease, and to further define the terms,
covenants and conditions precedent to such right of quiet and peaceable
possession.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. The recitals set forth above are incorporated herein by reference.
<PAGE>
2. Tenant covenants and agrees that the Lease now is and at all times
shall continue to be subject and subordinate in each and every respect to the
lien of the Deed of Trust, to the full extent of the principal, interest and
other sums secured thereby. Tenant, upon request, shall execute and deliver any
a certificate or other instrument whether or not in recordable form which Lender
reasonably may request to confirm such subordination.
3. As long as Tenant is in compliance with the terms of this Agreement and
is not in default in the performance of its obligations under the Lease, which
default remains uncured beyond the expiration of any applicable grace or cure
periods, (i) Lender shall not name Tenant as a party defendant in any action for
foreclosure or other enforcement of the Deed of Trust (unless required by law),
nor shall the Lease be terminated by Lender in connection with, or by reason of,
foreclosure or other proceedings for the enforcement of the Deed of Trust, or by
reason of a transfer of the Landlord's interest under the Lease pursuant to the
taking of a deed or assignment in lieu of foreclosure (or similar device), and
in such event the Lease shall remain in full force and effect as a direct lease
between Tenant and any person, including without limitation Lender, acquiring or
succeeded to the interests of Landlord as a result of any such action or
proceeding (hereinafter referred to as a "Successor") and (ii) Tenant's use or
possession of the Premises shall not be interfered with by Lender or anyone
acting by or through Lender.
4. If any portion of the Property affected by the Lease is damaged by an
insured casualty or if any portion of the Property affected by the Lease is
taken under the power of eminent domain, or sold under the threat of the
exercise of said power, then Lender agrees that insurance or condemnation
proceeds otherwise payable to Lender as a result thereof shall be made available
to Landlord to repair and/or restore the Property.
5. If the interest of Landlord under the lease shall be transferred by
reason of foreclosure or other proceedings for enforcement of the Deed of Trust
or the obligations which it secures or pursuant to a taking of a deed or
assignment in lieu of foreclosure (or similar device), Tenant shall be bound to
the Successor and the Successor shall be bound to Tenant under all terms,
covenants and conditions of the Lease for the unexpired balance of the term
thereof remaining (and any extensions, if exercised), with the same force and
effect as if the Successor were the landlord, and Tenant does hereby (i) agree
to attorn to the Successor, including lender if it be the Successor, as its
landlord, (ii) affirm its obligation under the Lease and (iii) agree to make
payments of all sums due under the Lease to the Successor, said attornment,
affirmation and agreement to be effective and self-operative without the
execution of any further instruments, upon the Successor succeeding to the
interest of Landlord under the Lease.
6. Tenant agrees that this Agreement satisfies any condition or
requirement in the Lease relating to the granting of a non-disturbance agreement
with respect to the Deed of Trust. Tenant further agrees that in the event there
is any inconsistency between the terms and provisions hereof and the terms and
provisions of the Lease dealing with non-disturbance, the terms and provisions
hereof shall be controlling.
7. This Agreement may not be modified except by an agreement in writing
signed by the parties or their respective successors-in-interest. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns.
8. Nothing contained in this Agreement shall in any way impair or affect
the lien created by the Deed of Trust, except as specifically set forth herein.
9. If either party hereto shall bring suit to enforce the terms and
provisions hereof or to recover damages for breach, the prevailing party shall
be entitled to recover from the other party all reasonable costs, expenses and
attorneys' fees incurred in connection with the exercise by the prevailing party
of its rights and remedies hereunder. The amount of the attorneys' fees is to be
affixed by the court without a jury. For the purpose of this paragraph, the term
"prevailing party" shall mean, in the case of the claimant, one who is
successful in obtaining substantially all of the relief sought, and in the case
of the defendant or respondent, one who is successful in denying substantially
all of the relief sought by the claimant.
10. This Agreement may be executed in one or more counterparts, each of
which when taken together shall constitute one and the same instrument. This
Agreement has been executed in the State of Nevada, and the laws of the State of
Nevada shall govern its construction, performance and terms. This Agreement
shall be construed according to its plain meaning and shall not be strictly
construed either for or against any party hereto. Either party hereto may record
this document in the official records of the county in which the Property is
located.
<PAGE>
LENDER:
________________________________
a(n)___________________________
By:____________________________
Name:__________________________
Title:_________________________
TENANT:________________________
_______________________________
a(n)___________________________
By:____________________________
Name:__________________________
Title:_________________________
STATE OF NEVADA )
)ss.
County of Clark )
The foregoing instrument was acknowledged before me this ___ day of
__________, 19__, by _________________________ _______________________________
the _________________ of ___________________________________, on behalf of such
__________________________.
_______________________________
Notary Public
My Commission Expires:
STATE OF NEVADA )
)ss.
County of Clark )
The foregoing instrument was acknowledged before me this __________ day of
_________________, 19__, by the _________________ of _______________________, on
behalf of such ______________________.
_______________________________
Notary Public
My Commission Expires:
_______________________________
<PAGE>
EXHIBIT N
TENANT ESTOPPEL CERTIFICATE
TO: ______________________________
PREMISES: ________________________
LOCATION: ________________________
LEASE DATE: ______________________
DATE OF AMENDMENTS, IF ANY: ______
TENANT: __________________________
LANDLORD: McCarran Center, LC
Tenant is a tenant of the Premises pursuant to the lease described above
and any amendments thereto (the "Lease") and hereby certifies the following
information which you, exclusively, may rely upon in connection with your loan
to Landlord:
1. The Lease, a copy of which is attached hereto as Exhibit "A", is presently in
full force and effect and has not been modified, supplemented or amended except
as follows:
________________________________________________________________________________
2. (a) The commencement date of the Lease was or will be ___________________,
and the date of expiration of the Lease will be _______________________, subject
to extensions of the Commencement Date pursuant to Paragraph ________of the
Lease and subject to the Tenant's right, if any, to extend the term of the Lease
as follows: ____________________________________________________________________
_______________________________________________________________________________.
(b) The Premises consists of____________________ square feet for _________
________________________________________________________________ use(s).
3. (a) The base rent payable under the terms of the Lease is $__________.
(b) The base rent payable under the terms of the Lease has been paid
through _______________.
(c) The Lease provides for __________ months free rent, and Landlord has
not agreed to any other free rent periods except as follows:
______________________________.
5. Tenant has not assigned its rights under the Lease or sublet any portion of
the Premises except as follows: _______________________________________________.
6. There are no current actions, whether voluntary or otherwise, pending against
Tenant under any insolvency, bankruptcy or other debtor relief laws of the
United States.
7. Landlord is not currently in default in the performance of any covenants,
conditions, agreements, terms or provisions contained in the Lease. Landlord has
no current obligations to Tenant or agreements with Tenant, except as set forth
in writing in the Lease.
<PAGE>
8. Tenant has not been granted any rent abatements or concessions for the term
of the Lease, except as set forth in the Lease or in Paragraph 4 (c) of this
estoppel certificate, and Tenant is not owed any money by Landlord which can be
offset or otherwise deducted from the rental due under the Lease, except as
follows: _______________________________________________.
9. Tenant has deposited ________________ as a security deposit with Landlord.
10. Except as set forth in the Lease, landlord has no current obligations to or
agreements with Tenant with respect to the Premises, including, without
limitation, any obligations or agreements regarding any tenant improvement work
to be performed by Landlord.
THE STATEMENTS MADE HEREIN SHALL BE BINDING UPON US, OUR SUCCESSORS AND
ASSIGNS, AND SHALL INURE TO YOUR BENEFIT AND THE BENEFIT OF YOUR SUCCESSORS AND
ASSIGNS. THE OFFICER, PARTNER OR PERSON, AS APPLICABLE, EXECUTING THIS
CERTIFICATE HAS BEEN DULY EMPOWERED TO DO SO ON BEHALF OF THE UNDERSIGNED.
Tenant:
By: _________________________
Its: ________________________
<PAGE>
Exhibit 10.36
FIRST AMENDMENT TO LEASE
McCarran Center
THIS FIRST LEASE AMENDMENT ("Amendment") is entered into as of this 10TH
day of September, 1999, by and between McCarran Center, LC ("LANDLORD") and
Nextel WIP Lease Corp. ("TENANT") and amends the Lease Agreement between
Landlord and Tenant dated May 11, 1999. Landlord and Tenant hereby agree as
follows:
1. Precedence Over Lease
Except to the extent that terms are defined herein to the
contrary, all terms used in this Amendment shall have the same
meaning as the defined terms set forth in the Lease.
Original Lease:
Phase I Occupancy: From the Commencement Date through October 1,
2000, Tenant shall occupy Phase I (15,000 sq. ft.) and the Base Rent
shall be as follows:
Base Rent: $16,050 per month ($1.07 per sq. ft. x
15,000 sq. ft.)
Over Std. Parking: $559.34 per month (parking at 5/1,000 on
23,306 sq. ft. @ $.024 per sq. ft. per
month).
Total Base Rent: $16,609.34 per month to Sept. 30, 2000.
Phase II Occupancy: At such time as Tenant shall occupy Phase
II (8,306 sq. ft.) for business operations, but not later than
October 1, 2000, Tenant shall pay a Base Rent as follows:
Phase I Rent: $16,050 per month + adjustment per
Section 4.3.
Phase II Rent: $8,887.42 per month ($1.07 per sq. ft. x
8,306 sq. ft.)
+ adjustment per Section 4.3 as applied
to the Phase I Rent.
Over Std. Parking: $1,504.00 per month (Additional 47
spaces for 7/1,000 parking at $32 per
month per space).
Total Base Rent: $26,441.42 per month from Oct. 1, 2000.
Should Tenant choose not to utilize Landlord's Tenant
Improvement Allowance of $207,650 for Phase II (see
Exhibit B-2), the Phase II Rent shall be $5,731.14 per
month ($0.69 per sq. ft.) and the Total Base Rent from
Oct. 1, 2000, shall be $23,844.14 per month.
Change To:
Phase I Occupancy: From the Commencement Date through October 1,
2000, Tenant shall occupy Phase I (15,000 sq. ft.) and the Base Rent
shall be as follows:
Base Rent: $16,050 per month ($1.07 per sq. ft. x
15,000 sq. ft.)
Over Std. Parking: $559.34 per month (parking at 5/1,000 on
23,306 sq. ft. @ $.024 per sq. ft. per
month).
Loading Dock $1,156.10 per month
Improvements:
Total Base Rent: $17,765.44 per month to Sept. 30, 2000.
Phase II Occupancy: At such time as Tenant shall occupy Phase
II (8,306 sq. ft.) for business operations, but not later than
October 1, 2000, Tenant shall pay a Base Rent as follows:
Phase I Rent: $16,050 per month + adjustment per
Section 4.3.
<PAGE>
Phase II Rent: $8,887.42 per month ($1.07 per sq. ft.
x 8,306 sq. ft.)
+ adjustment per Section 4.3 as applied
to the Phase I Rent.
Over Std. $1,504.00 per month (Additional 47
Parking: spaces for 7/1,000 parking at $32 per
month per space).
Loading Dock $1,156.10 per month
Improvements:
Total Base $27,597.52 per month from Oct. 1, 2000.
Rent:
Should Tenant choose not to utilize Landlord's Tenant
Improvement Allowance of $207,650 for Phase II (see Exhibit
B-2), the Phase II Rent shall be $5,731.14 per month ($0.69
per sq. ft.) and the Total Base Rent from Oct. 1, 2000, shall
be $25,00024 per month.
2. Section: 1.1, Page 1, Premises Address
Add: 6880 Bermuda Road
Las Vegas, NV 89119
Comment: The Premises address was not assigned in the original
Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the date first above written.
LANDLORD: TENANT:
THOMAS & MACK CO., Nextel WIP Lease Corp.
A Nevada Limited Liability Company
BY: /s/ Thomas A. Thomas BY: /s/ John D. Harper
------------------------ ----------------------
Thomas A. Thomas
Its: Managing Partner Its: CFO
<PAGE>
LOADING DOCK SITE EXHIBIT
[GRAPHIC OMITTED]
<PAGE>
LOADING DOCK COST EXHIBIT
Building 42 Tenant Costs
<TABLE>
<CAPTION>
Tenant
---------- -----------------
Tenant
Truck Dock Design Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Site Costs
1. Additional site improvements truck
circulation (17,352 SF @ $2.53) 43,900 43,900
2. Add truck dock per Delta 2 design 22,666 22,656
---------------------------
Total Site Costs 66,556 66,566
---------------------------
Shell Costs
1. Additional concrete reinforcing for deeper panels and
different size panels at the dock area. 1,163 1,163
2. Additional concrete supervision for concrete changes. 1,550 1,550
3. Additional footings per Delta 2 design. 1,988 1,988
4. Additional concrete for panels in Delta 2 design. 3,765 3,765
5. Waste slab construction for additional panel construction -
cost split evenly between owner and tenant. 11,363 11,363
6. Above standard door jam channel. 300 300
---------------------------
Total Shell Costs 19,829 300 20,129
---------------------------
Permits & Fees --
---------------------------
Subtotal 86,385 300 86,685
---------------------------
Insurance 734 3 737
Overhead & Profit 4,792 17 4,808
Supervisory GC's 5,515 19 5,534
---------------------------
Total Hard Costs 97,425 338 97,763
---------------------------
Soft Costs
Architecture 590 5,289 5,879
Engineering 2,000 2,000
---------------------------
Total Soft Costs 2,590 5,289 7,879
---------------------------
Total Costs 100,015 5,627 105,643
===========================
</TABLE>
<PAGE>
Exhibit 10.37
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is entered into between Landlord and Tenant, each
as defined below in Section 1.
1. THE PARTIES
Landlord's Name and Nesbitt Operating Associates, Limited Partnership
type of entity: By BGK Nesbitt LLC, its General Partner
Landlord' Addresses
for Notices: 330 Garfield Street
Santa Fe, NM 87501
Landlord's Payment C/O Frauenshuh Companies
Address: 180 East Fifth Street
St. Paul, MN. 55101
Tenant's Name and Nextel WIP Lease Corporation,
type of entity: a Delaware Corporation
Tenant's Address Nextel WIP Lease Corporation
for Notices: 10901 Bren Road East
Minetonka, MN 55343
With a copy to:
Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
2. DEFINITIONS AND BASIC TERMS
The following definitions and basic terms shall have the indicated meanings when
used in this Lease:
a. Building: The building known as Bren Road East I located
or to be located on the land described on
Exhibit "A" attached hereto and whose street
address is 10901- 10952 Bren Road East,
Minnetonka, MN 55343
b. Premises: Suite No. 10901 in the Building. The Premises
are outlined on the plan attached to the Lease
as Exhibit "B".
c. Property: The Building, the parcel of land upon which the
Building is situated and any other improvements
located thereon.
d. Tenant's Rentable
Square Feet: 12,684
e. Total Rentable Square
Feet in the Building: 73,529
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f. Tenant's Proportionate
Share: 17.25 % which is the percentage obtained by
dividing (i) Tenant's Rentable Square Feet by
(ii) the total Rentable Square Feet in the
Building.
g. Scheduled
Commencement Date: April 1,1999
h. Commencement Date: The Commencement Date is defined in Section 4.
i. Term: Thirty-six (36) months, commencing on the
Commencement Date subject to adjustment and
earlier termination as provided in the Lease.
j. Base Rent: Lease Years Monthly Annual
Base Rent Base Rent
4/1/99 through 3/31/2000 $ 9,777.25 $117,327.00
4/1/00 through 3/31/2001 $10,070.57 $120,846.81
4/1/01 through 3/31/2002 $10,372.68 $124,472.21
k. Additional Rent: Additional Rent is defined in Section 6.
l. Rent: Base Rent, Additional Rent and all other sums
that Tenant may owe to Landlord under this
Lease.
m. Security Deposit: $ None
n. Expense Stop/
Base Year: Intentionally Omitted
o. Permitted Use: Tenant may use the Premises for all lawful
purposes in connection with its business of
operating a wireless communications company
including without limitation, general office
use, sales of wireless service and equipment
used in its business.
p. Property Management
Company/Address: Frauenshuh Companies
180 East 5th Street, Suite 160
St. Paul, MN 55101
q. Guarantor(s)
(name and address): Intentionally Omitted
r. Parking Spaces: thirty-four (34) unassigned, unreserved parking
spaces
3. LEASE OF PREMISES
Landlord, in consideration of the Rent to be paid and the covenants and
agreements to be performed by Tenant, does hereby lease unto Tenant the
Premises, together with the non-exclusive right and easement to use the
parking, if any, and any other common facilities in or on the Building and
the Property (including, without limitation, the driveways, sidewalks,
loading and unreserved parking areas, lobbies and hallways) which may from
time to time be furnished by Landlord, in common with Landlord and the
tenants and occupants of the Building, and their respective agents,
employees, customers and invitees; subject however to reasonable
restrictions by Landlord as to the use of the foregoing.
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4. TERM
The Commencement Date shall be the later of:
a. the Scheduled Commencement Date or;
b. the date of substantial completion of the Premises by Landlord, as
defined below; provided the Commencement Date shall not be extended
for delays which are due to (x) special changes or additions
required by Tenant; (y) delays of Tenant in submitting plans or
specifications, supplying information, giving authorization, or (z)
any default or other delay caused solely by Tenant (collectively,
"Tenant Delays"). Subject to an inspection of the Premises prior to
taking possession, the Tenant shall be bound by a written
certification by Landlord as to the date that the Premises are ready
for occupancy by the Tenant and, in the event that there are Tenant
Delays, the Landlord's architect shall determine in its reasonable
discretion the date that the Premises would have been ready for
occupancy but for such Tenant Delays.
If the Commencement Date is not the first day of a calendar month,
then the Term shall be extended by the time between the Commencement
Date and the first day of the next month. If this Lease is executed
before the Premises become vacant or otherwise available and ready
for occupancy by Tenant, or if any present occupant of the Premises
holds over and Landlord cannot acquire possession of the Premises
before the Commencement Date, then (a) Landlord shall not be in
default hereunder or be liable for damages therefore and (b) Tenant
shall accept possession of the Premises when Landlord tenders
possession thereof to Tenant. Notwithstanding the foregoing, by
occupying the Premises, Tenant shall be deemed to have accepted the
Premises in their condition as of the date of such occupancy, and
the Commencement Date shall be the date of such occupancy. Tenant
shall execute and deliver to Landlord, within ten days after
Landlord has requested same, a letter confirming (i) the
Commencement Date, (ii) that Tenant has accepted the Premises, and
(iii) that Landlord has performed all of its obligations with
respect to the Premises (except for punch-list items specified in
such letter). The term "substantial completion" (or "substantially
complete") as used in the Lease means the date when the Premises are
ready for occupancy by Tenant, subject to completion of minor
details of construction or minor mechanical adjustments that do not
materially interfere with Tenant's occupancy.
5. PAYMENT OF RENT
a. Payment. Tenant shall timely pay to Landlord, without demand
deduction, abatement or offset (except as otherwise expressly set
forth herein), the Base Rent, Additional Rent and all other rent at
Landlord's Payment Address. Base Rent shall be payable monthly in
advance in United States dollars.
The first monthly installment of Base Rent shall be due and payable
contemporaneously with the execution of this Lease; thereafter,
monthly installments of Base Rent shall be due on the first day of
the second full calendar month of the Term and continuing thereafter
on the first day of each succeeding calendar month during the Term.
Base Rent for any fractional month shall be prorated based on 1/365
of the current annual Base Rent for each day of the partial month
this Lease is in effect. If the Commencement Date does not fall on
the first (1st) day of a month, Base Rent for the fractional month
shall be due on the Commencement Date.
b. Late Payments. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Landlord by the terms of
any mortgage or Deed of Trust, covering the premises. Accordingly,
if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within five (5)
days after such amount shall be due, Tenant shall pay to Landlord a
late charge equal to 10% of such overdue amount or the maximum
allowed by law. Acceptance of such late charge by Landlord shall in
no event constitute a waiver of Tenant's default with respect to
such overdue amount, nor prevent Landlord from exercising any of the
other rights and remedies granted hereunder.
c. Tenant shall also pay to Landlord monthly as additional rent without
demand any rent tax,
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sales tax or other tax (other than Landlord's income tax) which may
be levied by any authorized governmental authority against the Base
Monthly Rent or any additional rent payable to Landlord under this
Lease.
d. Landlord may from time to time designate a lock box collection agent
for the collection of rents or other charges due Landlord. In such
event, the date of payment shall be the date of receipt by the lock
box collection agent of such payment (or the date of collection of
any such sum if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment); however, for the
purposes of this Lease, no such payment or collection shall be
deemed "accepted" by Landlord if an Event of Default shall have
occurred, and if Landlord thereafter remits a check payable to
Tenant in the amount received by the lock box collection agent
within twenty one (21) days after the amount sent by Tenant is
received by the lock box collection agent or, in the case of a
dishonored instrument, within twenty one (21) days after collection.
Neither the negotiation of Tenant's negotiable instrument by the
lock box collection agent, nor the possession of the funds by
Landlord during the twenty one (21) day period, nor the return of
any such sum to Tenant shall be deemed to be inconsistent with the
rejection of Tenant's tender of such payment (or collection), nor
shall any of such events be deemed to be a waiver of any breach by
Tenant of any terms, covenant or condition of this Lease nor a
waiver of any Landlord's rights or remedies.
6. ADDITIONAL RENT
a.) TAXES, INSURANCE AND ASSESSMENTS: As additional rent, Tenant shall
pay to Landlord on the first day of each month 1/12 Tenant's pro
rata share of the estimated real property tax on the leased premises
for the current year plus 1/12 Tenant's pro rata share of the
current premium for any liability or casualty insurance carried by
Landlord on the leased premises. If the actual property tax and
insurance is greater than that estimated by Landlord, Tenant shall
pay the excess amount within thirty (30) days after billing by
Landlord. If the actual real property tax and insurance is less than
that estimated by Landlord, Landlord shall refund the overpayment to
Tenant within thirty (30) days after payment of the tax and/or
insurance by Landlord. As used in this paragraph, "real property
tax" shall mean any form of assessment (both general and special),
levy, penalty, or tax (other than estate or inheritance tax) imposed
by any authority having direct or indirect power to tax any legal or
equitable interest of Landlord in the leased premises, including any
tax on rent (other than income tax) in lieu of or in addition to
normal real property taxes or assessments. Any such billings by
Landlord to Tenant that is not paid within 30 days shall bear
interest at 15% per annum. Owner shall have the exclusive right, but
not the obligation, to contest or appeal any assessment of Real
Estate Taxes levied on the Property by any governmental or
Quasigovernmental taxing agency.
The Tenant shall be responsible for the filing of all Personal
Property tax returns and the payment of taxes thereon, on all
contents and/or fixtures owned by the Tenant, that are considered
Personal Property by the Taxing authority or authorities having
jurisdiction over leased premises.
Tenant shall pay all sales and use taxes, other than those taxes
imposed upon the rents received by the Landlord hereunder.
In the case of non-payment by Tenant of any of the above taxes and
assessments, Landlord may at its option, recover from Tenant such
sums or elect to hold Tenant in default under the term of this lease
and exercise any or all remedies as indicated herein or permitted by
law. The fact that the Landlord may fail to bill the Tenant, under
the terms of this agreement, shall not constitute a waiver of
payment by the Tenant to the Landlord for future years or the year
omitted.
b.) COMMON AREA: i.) The "Common Area" is part of the property
designated by Landlord from time to time for the common use of all
Tenants, including among other facilities, parking area, sidewalks,
landscaping, curbs, loading areas, private streets, alleys, lighting
facilities, signs and other areas and improvements provided by
Landlord for the common use of all Tenants, all of which shall be
subject to Landlord's sole management and control and shall be
operated and maintained in reasonably good order and condition,
except for damage occasioned by Tenant, or its employees, agents or
invitees. Landlord
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reserves the right to change from time to time the dimensions and
location of the Common Area as well as the location, dimensions,
identity and type of any building shown on Exhibit B-1 and to
construct additional buildings or additional stories on existing
buildings or other improvements on the property and to eliminate
buildings from the plan shown on Exhibit B-1. Tenant and its
employees, customers, subtenants, licensees and concessionaires
shall have the nonexclusive right and license to use the Common Area
as constituted from time to time, such use to be in common with
Landlord, other Tenants of the building and other persons permitted
by Landlord to use the same, and subject to such reasonable rules
and regulations governing use as Landlord may from time to time
prescribe, including the designation of specific areas within the
property or in reasonable proximity thereto in which automobiles
owned by the Tenant, its employees, subtenants, licensees and
concessionaires shall be parked. Tenant will furnish to Landlord
upon request a complete list of license numbers of all automobiles
operated by Tenant, its employees, subtenants, licensees or
concessionaires. Tenant shall not solicit business or display
merchandise within the Common Area without the prior written consent
of the Landlord. Landlord may temporarily close any part of the
Common Area for such periods of time as may be necessary to prevent
the public from obtaining prescriptive rights or to make repairs or
alterations.
ii.) Tenant agrees to pay as an additional charge each month 1/12
Tenant's pro rata share of the cost of operation and maintenance of
the Common Area including, among other costs, those incurred for
lighting, (including that on the common area monument sign), water,
sewage, painting, cleaning, policing, inspecting, landscaping,
gardening, resurfacing, striping, bumpers, garbage disposal,
repairing, replacing, guarding and protecting all of which may be
incurred by Landlord in its discretion. Landlord shall make monthly
or other periodic charges to Tenant based upon the estimated annual
cost of operation and maintenance of the Common Area, payable in
advance but subject to adjustment after the end of the year on the
basis of the actual cost for such year. Any such periodic charges
shall be due and payable (within 30 days of receipt of such charges)
upon delivery of notice thereof.
c.) UTILITIES, HEAT, ETC.: Tenant shall pay as additional rent all rates
and charges for water, gas, electronic security protection, electric
current, steam, sewers, refuse removal, telephone or without
limitation any other service used during the full term of this
lease. If any such service is not separately metered by or for each
Tenant but rather is furnished through one master meter, the Tenant
shall pay a pro rata share of any charge based on Tenant's square
footage of leased premises as a percentage of the total square
footage of the building to which said charge is applicable. Tenant
or Landlord, at its own option and expense, shall have the right to
install separate meters for any utility.
7. SECURITY DEPOSIT
Intentionally Omitted
8. USE
Tenant shall continuously occupy and use the Premises only for the
Permitted Use and shall comply with all laws, orders, rules, and
regulations relating to the use, condition, and occupancy of the Premises.
The Premises shall not be used for any use which is disreputable or
creates extraordinary fire hazards or results in an increased rate of
insurance on the Building or its contents or the storage of any hazardous
materials or substances. If, after thirty (30) days prior written notice
and an opportunity to cure Tenant's acts cause, the rate of insurance on
the Building or its contents to increase, then, Tenant shall pay to
Landlord the amount of such increase on demand. Tenant shall conduct its
business and control its agents, employees, and invitees in such a manner
as not to create any nuisance or interfere with other tenants or Landlord
in its management of the Building.
9. TENANT IMPROVEMENTS
Improvements. Any tenant finish improvements to be provided by Landlord
for the Premises are described on Exhibit "E" attached hereto.
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10. ALTERATIONS
All improvements to the Premises made after the Commencement Date shall be
installed at the expense of Tenant only in accordance with plans and
specifications which have been previously submitted to and approved in
writing by Landlord. After the initial Tenant improvements are made, no
alterations or physical additions in or to the Premises may be made
without Landlord's prior written consent, which shall not be unreasonably
withheld or delayed; however, Landlord may withhold its consent to any
alteration or addition that would affect the Building's structure, or
would materially and adversely affect the Building's HVAC, plumbing,
electrical, or mechanical systems. Tenant shall not paint or install
lighting or decorations, signs, window or door lettering, or advertising
media of any type on or about the Premises without Landlord's prior
consent; provided however that Tenant may, without the prior written
consent of Landlord display in and about The Premises non-permanent
lighting ( e.g. Desk and floor lamps) decorations ( wall hangings,
posters, white boards, photographs, charts, etc.) Signs, posters internal
announcements and memoranda, advertising and marketing material, or other
similar items used in the ordinary course of Tenant's business. All
permanent alterations, additions, or improvements affixed to the Premises
either by Landlord or Tenant, shall be Landlord's property at the end of
the Term and shall remain on the Premises (unless Landlord requires
removal of same) without compensation to Tenant. Approval by Landlord of
Tenant's plans and specifications prepared in connection with any
improvements in the Premises shall not constitute a representation or
warranty as to the adequacy or sufficiency of such plans and
specifications, or the improvements to which they relate, for any use,
purpose, or condition, but such approval shall merely be the consent of
Landlord as required hereunder. Tenant shall be responsible for the cost
of all action required to comply with the requirements of the Americans
with Disabilities Act of 1990 (the "ADA"), and all rules, regulations, and
guidelines promulgated thereunder, as the same may be amended from time to
time, necessitated by any installations, additions, or alterations made in
or to the Premises at the request of or by Tenant or by Tenant's use of
the Premises (other than retrofit whose cost has been particularly
identified as being payable by Landlord in an instrument signed by
Landlord and Tenant). If Landlord's prior consent is required, such
consent shall not be unreasonably withheld or delayed; however, Landlord
may withhold its consent to any such painting or installation which would
affect the appearance of the exterior of the Building or of any common
areas of the Building. Landlord shall be responsible for the cost of
compliance with the ADA for all portions of the Property not subject to
the Premises or other leases with tenants.
11. LANDLORD'S SERVICES
a. Services. Provided no Event of Default exists, and subject to
interruptions beyond Landlord's control, Landlord shall use all
reasonable efforts to furnish to Tenant utility services to the
building (e.g. gas, water and electric). Landlord shall maintain the
common areas of the Building in reasonably good order and condition,
except for damage occasioned by Tenant, or its employees, agents or
invitees.
b. Excess Utility Use. Intentionally Omitted
c. Change or Discontinuance. Landlord's obligation to furnish services
under Section 11a shall be subject to the rules and regulations of
the supplier of such services and governmental rules and
regulations. Landlord may change or discontinue services as needed
to comply with such rules or regulations.
d. Restoration of Services; Abatement. Landlord shall use reasonable
efforts to restore any service that becomes unavailable. Any
unavailability shall not render Landlord liable for any damages
caused thereby, nor shall be a constructive eviction of Tenant,
constitute a breach of any implied warranty, or, except as provided
in the next sentence, entitle Tenant to any abatement of Tenant's
obligations hereunder. However, if Tenant is prevented from making
reasonable use of the Premises for more than forty-five (45)
consecutive days because of the unavailability of any such service,
Tenant shall, at its option, be entitled to terminate this Lease
Agreement or, be entitled to a reasonable abatement of Rent for each
consecutive day (after such forty-five (45) day period) that Tenant
is so prevented from making reasonable use of the Premises. Tenant
agrees to promptly notify Landlord in writing of any interruption of
services.
e. Additional Services. Should Tenant desire any additional services
beyond those described here or service outside the normal times
Landlord provides such services, Landlord may (at Landlord's
option), upon reasonable advance notice from Tenant, furnish such
services and
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Tenant shall pay Landlord such charges as may be agreed on between
Landlord and Tenant, but in no event at a charge less than
Landlord's actual cost plus overhead for the additional services
provided. By way of illustration and not limitation, special
equipment requiring abnormal use of water or electricity used as a
power source for data processing machines, including air
conditioning costs therefor, large business machines and similar
equipment of high electrical consumption shall not be standard and
the costs thereof shall be paid by Tenant within ten (10) days after
Landlord delivers to Tenant an invoice therefor. Landlord shall, at
Tenant's sole cost and expense, install separate meters for
measuring consumption of non-standard services within the Premises.
12. REPAIRS
a. Landlord's Repair Obligations. Within a thirty (30) days following
receipt of written notice from Tenant of the necessity therefor,
Landlord shall make necessary repairs to maintain the structure of
the Premises and the Building. "Structure" or "structural" for
purposes of this Lease shall mean only the following: foundation,
roof framing and roof, weight bearing columns and weight bearing
walls (specifically excluding interior surfaces). If any such repair
is required because of any act, neglect, or fault of Tenant, its
agents, employees, licensees, or contractors, then Tenant shall pay
all costs therefor within ten (10) days after Landlord has delivered
the Tenant an invoice therefor. Landlords failure to make such
repairs within thirty days, or if such repairs are not capable of
being completed within such thirty days, Landlord's failure to
diligently pursue completion of such repairs in a timely and
reasonable fashion shall constitute an Event of Default by Landlord
of this Lease Agreement. If the need for such repairs or the repair
process interferes with or disrupts Tenants use and enjoyment of the
Premises, in addition to all other rights available to Tenant under
this Lease, at law or in equity, Tenant shall be entitled to an
abatement of rent until such repairs are completed.
b. Tenant's Repairs. Tenant agrees to promptly make all repairs
(including replacements and alterations where necessary) necessary
to keep the interior of the Premises in good order, repair and
condition, except for those necessitated by reasonable use and wear
and to repair any damage caused by Tenant or Tenant's agents,
contractors, or invitees to any of the Property. The interior shall
include:
(i) interior faces of the exterior walls of the building;
(ii) interior face of the ceilings;
(iii) floor coverings;
(iv) portion of the wiring, plumbing, pipes, conduits and
other water, sewerage, utility, and sprinkler fixtures
and equipment in the Premises which serve the Premises
exclusively; and which are not located within the
floors, walls or ceiling; and
c. Performance of Work. All work described in Sections 9 and 10 above
and in this Section 12 shall be performed only by Landlord or by
contractors and subcontractors approved in writing by Landlord.
Prior to beginning any work, Tenant shall cause all contractors and
subcontractors hired by Tenant to procure and maintain insurance
against such risks, in such amounts, as set forth in Section 15c and
as Landlord may reasonably require, and shall procure payment and
performance bonds reasonably satisfactory to Landlord covering the
cost of the work. All such work shall place the Property in as good
or better condition as that which existed at the time of such repair
and shall be performed in accordance with all legal requirements and
in a good and workmanlike manner so as not to damage any portion of
the Property. Any such work which may affect the HVAC, electrical
system, or plumbing must be approved by an engineer acceptable to
Landlord.
d. Mechanic's Liens. Tenant shall not permit any mechanic's or other
liens to be filed against the Premises or the Property for any
obligation incurred by or at the request of Tenant. If such a lien
is filed, then Tenant shall, no later than ten (10) days after
Landlord has notified Tenant, either pay the amount of the lien or
diligently contest such lien and deliver to Landlord a bond or other
security reasonably satisfactory to Landlord. If Tenant fails to
timely take either such action, then Landlord may pay the lien claim
without inquiry as to the validity thereof, and any amounts so paid,
including expenses and interest, shall be paid by Tenant to Landlord
within ten (10) days after Landlord has delivered to Tenant an
invoice therefor.
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13. TRANSFERS
a. Transfers; Consent. Tenant shall not, without the prior written
consent of Landlord (which Landlord may grant or deny in its sole
discretion) except as per paragraph c. of this Article 13; (a)
advertise that any portion of the Premises is available for lease;
(b) assign, transfer, or encumber this Lease or any estate or
interest herein, whether directly or by operation of law; (c) permit
any other entity to become Tenant hereunder by merger,
consolidation, or other reorganization; (d) if Tenant is an entity
other than a corporation whose stock is publicly traded, permit the
transfer of an ownership interest in Tenant so as to result in a
change in the current control of Tenant; (e) sublet any portion of
the Premises; (f) grant any license, concession, or other right of
occupancy of any portion of the Premises; or (g) permit the use of
the Premises by any parties other than Tenant (any of the events
listed in clauses (b) through (g) being a "Transfer"). If Tenant
requests Landlord's consent to a Transfer, then Tenant shall provide
Landlord with a written description of all terms and conditions of
the proposed Transfer, copies of the proposed documentation, and the
following information about the proposed transferee: name and
address; reasonably satisfactory information about its business and
business history; its proposed use of the Premises; banking,
financial, and other credit information; and general references
sufficient to enable Landlord to determine the proposed transferee's
credit worthiness and character. Tenant shall reimburse Landlord for
its attorneys' fees, except for transfers or assignments as per
paragraph c of this Article 13 and other expenses incurred in
connection with considering any request for its consent to a
Transfer. If Landlord consents to a proposed Transfer, then the
proposed transferee shall deliver to Landlord a written agreement
whereby it expressly assumes Tenant's obligations hereunder;
however, any transferee of less than all of the space in the
Premises shall be liable only for obligations under this Lease that
are properly allocable to the space subject to the Transfer, and
only to the extent of the rent it has agreed to pay Tenant therefor.
Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease, but rather Tenant and
its transferee shall be jointly and severally liable therefor and
Tenant shall execute any documents reasonably required by Landlord
to confirm same. Landlord's consent to any Transfer shall not waive
Landlord's rights as to any subsequent Transfers. If an Event of
Default occurs while the Premises or any part thereof are subject to
a Transfer, then Landlord, in addition to its other remedies, may
collect directly from such transferee all rents becoming due to
Tenant and apply such rents against Rent. Tenant authorizes its
transferees to make payments of rent directly to Landlord upon
receipt of notice from Landlord to do so.
b. Additional Compensation. Tenant shall pay to Landlord, immediately
upon receipt thereof, all compensation received by Tenant for a
Transfer (whether permitted or not) that exceeds the Rent paid by
Tenant to Landlord for the applicable portion of the Premises
covered thereby. Landlord's acceptance of such Additional
Compensation shall not constitute Landlord's approval of any
Transfer that was not approved by Landlord or permitted by this
Lease.
c. Assignment and Subletting. Tenant may not assign, or otherwise
transfer all or any part of its interest in this Agreement or in the
Premises without prior written consent of Landlord; provided,
however, that Lessee may assign its interest to its parent company,
any subsidiary or affiliate of it or its parent company or to any
successor-in-interest or entity acquiring fifty-one percent (51%) or
more of its stock or assets. Notwithstanding anything to the
contrary contained in this Agreement, Tenant may assign, mortgage,
pledge, hypothecate or otherwise transfer without consent its
interest in this Agreement to any financing entity, or agent on
behalf of any financing entity to whom Tenant (i) has obligations
for borrowed money or in respect of guarantees thereof, (ii) has
obligations evidenced by bonds, debentures, notes or similar
instruments, or (iii) has obligations under or with respect to
letters of credit, bankers acceptances and similar facilities or in
respect of guaranties thereof.
14. INDEMNITY & LIABILITY L1MITATION
a.) Tenant shall indemnify, defend and hold harmless Landlord and
its officers, directors, partners, employees, attorneys and
agents (collectively, the "Tenant Indemnitees") from and
against any and all liability, claims, demands, causes of
action, judgments, costs, expenses, and all losses and damages
for bodily injury, death and property damage arising from any
activity in the Premises even if resulting from the negligent
act or omission, (but not willful misconduct), of any of the
Tenant Indemnitees, and from all costs, attorney fees and
disbursements, and liabilities incurred in the defense of any
such claim. Upon notice from Landlord, Tenant shall defend any
such claim, demand,
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cause of action or suit at Tenant's expense by counsel
satisfactory to Landlord in its reasonable discretion. The
provisions of this subsection (A) shall survive the expiration
or earlier termination of this Lease.
b.) Landlord shall indemnify, defend and hold harmless Tenant and
its officers, directors, partners, employees, attorneys and
agents (collectively, the "Landlord Indemnitees") from and
against any and all liability, claims, demands, causes of
action, judgments, costs, expenses, and all losses and damages
for bodily injury, death and property damage arising from any
activity in or about the Building (other than the Premises)
even if resulting from the negligent act or omission, (but not
willful misconduct), of any of Landlord Indemnitees, and from
all costs, attorney fees and disbursements, and liabilities
incurred in the defense of any such claim. Upon notice from
Tenant, Landlord shall defend any such claim, demand, cause of
action or suit at Landlord's expense by counsel satisfactory
to Tenant in its reasonable discretion. The provisions of this
subsection (B) shall survive the expiration or earlier
termination of this Lease
15. INSURANCE
a. Insurance by Landlord. Landlord shall insure the Building, including
the Premises, against loss or damage by fire or other hazards by
maintaining a broad form property insurance policy with extended
coverages and traditional business interruption coverage. Landlord
shall not be obligated to insure against damage to Tenant's personal
property, trade fixtures, or improvements to the Premises. If the
tenant finish improvements installed by or for Tenant are in excess
of those provided for in Exhibit F or if any alterations or
improvements made by Tenant result in an increase in Landlord's
insurance premiums, then such increase shall be borne by Tenant, who
shall reimburse Landlord within ten (10) days after being invoiced
therefor.
b. Insurance by Tenant. Tenant shall obtain and keep in effect the
following insurance insuring Tenant, Landlord and all mortgagees and
any other person or entity designated by Landlord as having an
interest in the Property (as their interests may appear):
(i) Insurance upon all property in the Premises owned by Tenant or
for which Tenant is legally liable and on fixtures and
improvements installed in the Premises. Such policies shall be
for an amount of the full replacement cost with broad form
property coverage with traditional "extended coverage",
including but not limited to vandalism, malicious mischief,
sprinkler leakage and water damage;
(ii) Business interruption insurance in an amount sufficient to
reimburse Tenant for direct or indirect loss of earnings
attributable to prevention of use or access to the Building or
Premises as a result of such perils;
(iii) Commercial general liability insurance including fire, fire
legal liability and "insured contracts" coverage with respect
to the Tenant's operations associated with the Building and
the Premises, including activities conducted by Tenant and any
other person associated with the Tenant in the Premises and
Tenant and any other person performing work on behalf of
Tenant and those for whom Tenant is by law responsible in any
other part of the Building. Such insurance shall be written
with inclusive limits of not less than One Million Dollars
($1,000,000) for each occurrence for bodily injury and
property damage, and personal injury, or such higher limits as
Landlord, acting reasonably, may require from time to time.
The limit of said insurance shall not, however, limit the
liability of Tenant hereunder. Landlord shall be added as
additional insured on all liability policies maintained by
Tenant;
(iv) Worker's compensation insurance for all Tenant's employees
working in the Premises in an amount sufficient to comply with
applicable laws or regulations, including employer's
liability; and
(v) Intentionally Omitted
All policies of insurance maintained by Tenant shall be in a form
acceptable to Landlord with an A.M. Best rating of at least
(A-)(VIII); issued by an insurer acceptable to Landlord and licensed
to do business in the State of Minnesota; require at least thirty
(30) days written notice to Landlord of termination or material
alteration; and provide that the interests of Landlord, its
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mortgagee or those insured parties designated by Landlord shall not
be invalidated because of any breach or violation of any warranties,
representations, declarations or conditions contained in the
policies. All policies must contain a severability of interest
clause, a cross-liability clause or similar policy language
incorporated within the controlling policy form, and shall be
primary and shall not provide for contribution of any other
insurance available to Landlord, its mortgagee, or those named
insured parties designated by Landlord. If requested by Landlord,
Tenant shall, upon the Commencement Date, and thereafter prior to
the expiration date of each such policy, promptly deliver to
Landlord, or Landlord's designated representative, certified copies
and written evidence satisfactory to Landlord that all premiums have
been paid and all polices are in effect. If Tenant fails to secure
or maintain any insurance coverage required by Landlord, or should
insurance secured not be approved by Landlord and such failure or
approval not be corrected within forty eight (48) hours after
written notice from Landlord, Landlord may, without obligation,
purchase such required insurance coverage at Tenant's expense.
Tenant shall promptly reimburse Landlord for any monies so expended
as additional rent.
c. Tenant's Contractor's Insurance. Tenant shall require any contractor
of Tenant permitted to perform work in, on, or about the Premises to
obtain and maintain the following insurance coverage at no expense
to Landlord:
(i) Commercial general liability insurance, including the
traditional broad form general liability coverages, in the
amount of One Million Dollars ($1,000,000), adding Landlord
and Tenant as additional insured parties;
(ii) Worker's compensation insurance for all contractor's employees
working in the Premises in an amount sufficient to comply with
applicable laws or regulations;
(iii) Employers liability insurance in an amount not less than One
Hundred Thousand Dollars ($100,000); and
(iv) Any other insurance as Tenant, Landlord or its mortgagee may
reasonably require from time to time.
d. Increase of Premiums. Tenant will not do anything or fail to do
anything which will cause the cost of Landlord's insurance to
increase or which will prevent Landlord from procuring policies
(including but not limited to public liability) from companies and
in a form satisfactory to Landlord. If any breach of this Section
15d by Tenant shall cause the rate of fire or other insurance to be
increased, Tenant shall pay the amount of such increase as
additional rent promptly upon being billed therefor.
e. Tenant's Additional Insurance. Landlord makes no representation that
the limits of liability specified to be carried by Tenant under the
terms of this Lease are adequate to protect Tenant against Tenant's
undertaking under this Section 15.
16. CASUALTY
a. Repair Estimate. If the Premises or the Building are damaged by fire
or other casualty (a "Casualty"), Landlord shall, within two (2)
full business days after such Casualty, deliver to Tenant a good
faith estimate (the "Damage Notice") of the time needed to repair
the damage caused by the Casualty.
b. Landlord's and Tenant's Rights. If, because of a Casualty, Tenant is
prevented from conducting its business in the Premises in a manner
reasonably comparable to that conducted immediately before such
Casualty and Landlord estimates that the damage caused thereby
cannot be repaired within one hundred eighty (180) days after the
commencement of repair ("Substantial Casualty"), then Landlord may,
at its expense, relocate Tenant within ten (10) days from the said
Casualty to office space reasonably comparable to the Premises,
provided that Landlord notifies Tenant of its intention to do so in
the Damage Notice. If Landlord relocates Tenant, Rent shall be
abated only from the date of such damage until Landlord has
successfully relocated Tenant, and thereafter, Tenant shall pay to
Landlord the lesser of the Rent or the fair market rental value of
the replacement premises (including all additional rent and expenses
associated therewith). Such relocation may be for a portion of or
the entire remaining Term. Landlord shall complete any such
relocation within ten (10) days after Landlord has delivered the
Damage
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Notice to Tenant. If Landlord does not elect to relocate Tenant
following such Substantial Casualty or if Landlord fails or is
otherwise incapable of relocating Tenant within such ten (10) days,
then, unless Tenant caused such damage, Tenant may terminate this
Lease by delivering written notice to Landlord of its election to
terminate within thirty (30) days after the Damage Notice has been
delivered to Tenant. Following a Substantial Casualty, if Landlord
does not relocate Tenant and Tenant does not terminate this Lease,
then Landlord shall repair the Building or the Premises, as the case
may be, as provided below, and Rent for any portion of the Premises
necessary for Tenant's business that was rendered untenantable shall
be reasonably abated from the date of damage until the completion of
the repair, unless Tenant caused such damage, in which case, Tenant
shall continue to pay Rent without abatement. Rent shall not be
abated or reduced for a Casualty which is not a Substantial
Casualty. Notwithstanding the foregoing, if a Casualty damages a
material portion of the Building, and Landlord makes a good faith
determination that restoring the Premises would be uneconomical, or
if Landlord is required to pay any insurance proceeds arising out of
the Casualty to Landlord's Mortgagee (defined below), then Landlord
may terminate this Lease by giving written notice of its election to
terminate within thirty (30) days after the Damage Notice has been
delivered to Tenant, and Rent shall be abated as of the date of the
Casualty.
c. Repair Obligation. If neither party so elects to terminate this
Lease following a Casualty, then Landlord shall, within a reasonable
time after such Casualty, restore the Building and Premises to
substantially the same or better condition as they existed
immediately before such Casualty; however, Landlord shall not be
required to repair or replace any part of the furniture, equipment,
fixtures, and other improvements which may have been placed by, or
at the request of, Tenant or other occupants in the Building or the
Premises, and Landlord's obligation to repair or restore shall be
limited to the extent of the insurance proceeds actually received by
Landlord for the Casualty in question.
17. CONDEMNATION
a. Eminent Domain. If any part of the Property is taken by right of
eminent domain or conveyed in lieu thereof (a "Taking"), and such
Taking prevents Tenant from conducting its business in the Premises
in a manner reasonably comparable to that conducted immediately
before such taking then Landlord may, at its expense, relocate
Tenant to space reasonably comparable to the Premises, provided that
Landlord notifies Tenant of its intention to do so within two (2)
full business days after the Taking. Such relocation shall be for
the remaining Term. Landlord shall complete any such relocation
within ten (10) days after Landlord has notified Tenant of its
intention to relocate Tenant. If Landlord does not elect to relocate
Tenant following such Taking or if Landlord fails or is otherwise
incapable of relocating Tenant within such ten (10) days, then
Tenant may terminate this Lease as of the date of such Taking by
giving written notice to Landlord within sixty (60) days after the
Taking, and Rent shall be prorated on the later of the date of such
Taking or the date Tenant actually vacates the Premises. After a
Taking, if Landlord does not terminate this Lease or relocate Tenant
and Tenant does not terminate this Lease, then Rent shall be abated
on a reasonable basis as to that portion of the Premises which was
necessary for Tenant's business and which was rendered untenantable
by the Taking. Rent shall not be reduced or abated for any
condemnation which does not constitute a Taking.
b. Taking - Landlord's Rights. If all or any material portion of the
Building becomes subject to a Taking, or if Landlord is required to
pay any of the proceeds received for a Taking to Landlord's
mortgagee, then this Lease, at the option of Landlord, exercised by
written notice to Tenant within thirty (30) days after such Taking,
shall terminate and Rent shall be apportioned as of the date of such
Taking.
c. Award. If any Taking occurs, then Landlord shall receive the entire
award or other compensation for the Property taken, and Tenant may
separately pursue a claim against the condemning party for the value
of Tenant's moving costs, loss of business, and other claims it may
have, so long as such claim does not in any way impair or adversely
affect the award that the Landlord is entitled to receive.
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18. RULES AND REGULATIONS
Tenant shall comply with the rules and regulations of the Building
which are attached hereto as Exhibit "C". Landlord may, from time to
time, change such rules and regulations for the safety, care, or
cleanliness of the Building and related facilities, provided that
such changes are reasonable and are applicable to all tenants of the
Building. Tenant shall be responsible for the compliance with such
rules and regulations by its employees, agents, and invitees.
19. SUBORDINATION & MORTGAGEES
a. Subordination. This Lease is subject and subordinate to any deeds of
trust, mortgages or other security instruments which now or
hereafter encumber all or any portion of the Property or any
interest of Landlord therein. No further instrument shall be
required to effect such subordination, but upon request Tenant shall
execute, acknowledge, and deliver to Landlord any further
instruments and certificates evidencing such subordination as
Landlord or any mortgagee of Landlord shall reasonably require.
b. Attornment. Notwithstanding Section 19a, any mortgagee of Landlord
shall have the right at any time to subordinate any such deed of
trust or mortgage to this Lease, or to any of the provisions hereof
on such terms and subject to such conditions as such mortgagee may
consider appropriate in its discretion. At any time, before or after
the institution of any proceedings for the foreclosure of any such
deed of trust or mortgage, or the sale of the Building under any
such deed of trust or mortgage, Tenant shall, upon request of such
mortgagee, any person succeeding to the interest of such mortgagee,
or the purchaser at any foreclosure sale ("Successor Landlord"),
automatically become the Tenant of the Successor Landlord, without
change in the terms or other provisions of this Lease; provided,
however, that the Successor Landlord shall not be bound by any
modification to this Lease made without the consent of the Successor
Landlord or by any payment of Rent more than one (1) month in
advance, except for a security deposit previously paid to Landlord
(and then only if such security deposit has been deposited with and
is under the control of the Successor Landlord). The agreement of
Tenant to attorn to a Successor Landlord shall survive any such
foreclosure sale, trustee's sale, or conveyance in lieu thereof.
Tenant shall, upon request, before or after any such foreclosure or
conveyance, execute, acknowledge, and deliver to the Successor
Landlord instruments evidencing such attornment as the Successor
Landlord may reasonably require.
c. Estoppel Certificates. Tenant shall, from time to time, within ten
(10) days after request from Landlord, or from any mortgagee of
Landlord, execute, acknowledge and deliver in recordable form a
certificate certifying, to the extent true and to the best of
Tenant's knowledge, that this Lease is in full force and effect and
unmodified (or, if there have been modifications, that the same is
in full force and effect as modified and stating the modifications);
that the Term has commenced and the full amount of the Rent then
accruing hereunder and the dates to which the Rent has been paid;
that Tenant has accepted possession of the Premises and that any
improvements required by the terms of this Lease to be made by
Landlord have been completed to the satisfaction of Tenant; the
amount, if any, that Tenant has paid to Landlord as a security
deposit; that no Rent under this Lease has been paid more than
thirty (30) days in advance of its due date; that the address for
notices to be sent to Tenant is as set forth in this Lease (or has
been changed by notice duly given and is as set forth in the
certificate); that Tenant, as of the date of such certificate, has
no charge, lien, or claim of offset under this Lease or otherwise
against Rent; that, to the knowledge of Tenant, Landlord is not then
in default under this Lease; and such other matters as may be
reasonably requested by Landlord or any mortgagee of Landlord. Any
such certificate may be relied upon by Landlord, any successor of
Landlord, any mortgagees of Landlord or any prospective purchaser of
the Building.
d. Notice to Mortgagee. No act or failure to act on the part of
Landlord which would entitle Tenant under the terms of this Lease,
or by law, to be relieved of Tenant's obligations hereunder or to
terminate this Lease, shall result in a release of Tenant's
obligations or termination of this Lease unless (i) Tenant has given
notice by certified mail to any mortgagee of Landlord whose address
has been furnished to Tenant, and (ii) Tenant offers such mortgagee
of Landlord a reasonable time to cure the default (in no event to be
less than thirty (30) days) but in no event more then ninety (90)
days, including time to obtain possession of the Building if such
should prove necessary to effect a cure. No such mortgagee of
Landlord shall be obligated to Tenant to cure any default by
Landlord
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hereunder, but if a mortgagee elects in its discretion to effect a
cure Tenant shall accept same as though done by Landlord, provided
such cure is effected timely and Tenants other rights have been
satisfied.
e. Non-Disturbance. Notwithstanding anything to the contrary herein,
Tenant's subordination agreement shall be subject to the requirement
that Landlord's mortgagee shall attorn to Tenant and shall not
disturb Tenant's possession of the Premises under this Lease if, at
the time of any such foreclosure, trustee's sale or conveyance in
lieu thereof, by Landlord's mortgagee, Tenant is not in default
hereunder.
20. TAXES
Tenant shall be liable for all taxes levied or assessed against personal
property, furniture, or fixtures placed by Tenant in the Premises. If any
taxes for which Tenant is liable are levied or assessed against Landlord
or Landlord's property and Landlord elects to pay the same, or if the
assessed value of Landlord's property is increased by inclusion of such
personal property, furniture or fixtures and Landlord elects to pay the
taxes based on such increase, then Tenant shall pay to Landlord, upon
demand, that part of such taxes for which Tenant is primarily liable
hereunder, Landlord shall not pay such amounts if Tenant notifies Landlord
that it will contest the validity or amount of such taxes and thereafter
diligently proceeds with such contest in accordance with applicable law
and in a manner that is not inconsistent with the rights of Landlord or
any other tenants of the Building and the non-payment thereof does not;
(a) pose a threat of loss or seizure of the Building or interest of
Landlord therein; or (b) result in the imposition of any fines, penalties
or interest against Landlord. Notwithstanding the foregoing, Landlord may
(but shall never be obligated to do so) contest the amount or validity of
any such taxes.
21. EVENTS OF DEFAULT
The occurrence of any one of the following events will be an event of
default by Tenant under this Lease:
a. Tenant shall fail to pay Landlord any rental or other sum of money
when due under this Lease or under any other agreement with Landlord
concerning the Premises after the expiration of five (5) days
written notice.
b. Tenant shall fail to maintain any insurance that this Lease requires
Tenant to maintain or shall fail to deliver any certificate of such
insurance when required by this Lease.
c. Tenant shall fail to perform or observe any term, covenant or
condition of this Lease or any other agreement with Landlord
concerning the Premises (other than a failure described in the
preceding subparagraphs 21.(a) and 21.(b)) and Tenant shall not cure
the failure within ten (10) days after Landlord notifies Tenant
thereof; but if the failure is of a nature that it cannot be cured
within such ten (10) day period, Tenant shall not have committed an
event of default if Tenant commences the curing of the failure
within such ten (10) day period and thereafter diligently pursues
the curing of same and completes the cure within thirty (30) days;
provided, however, that if Tenant fails to perform or observe any
such term, condition, covenant or provision 2 or more times in any
Lease year, then notwithstanding that such defaults have been cured
by Tenant, any further similar failure shall be deemed an event of
default without notice or opportunity to cure.
d. Tenant or any guarantor of Tenant's obligations under this Lease
shall become insolvent, or shall admit in writing its inability to
pay its debts when due, shall make a transfer in fraud of its
creditors, or shall make a general assignment or arrangement for the
benefit of creditors, or all or substantially all of Tenant's assets
or the assets of any guarantor of Tenant's obligations under this
Lease or Tenant's interest in this Lease are levied on by execution
or other legal process.
e. A petition shall be filed by Tenant or any guarantor of Tenant's
obligations under this Lease to have Tenant or such guarantor
adjudged a bankrupt, or a petition for reorganization or arrangement
under any law relating to bankruptcy shall be filed by Tenant or
such guarantor, or any such petitions shall be filed against Tenant
or such guarantor and shall not be removed within thirty (30) days.
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f. A receiver or trustee shall be appointed for all or substantially
all the assets of Tenant or of any guarantor of Tenant's obligations
under this Lease or for Tenant's interest in this Lease.
g. Tenant shall abandon or vacate any substantial portion of the
Premises or shall fail to occupy the Premises within thirty (30)
days after the Term commences and the Premises are ready for
occupancy.
22. REMEDIES
a. Upon the occurrence of any event of default by Tenant, Landlord
shall have the option, without any notice to Tenant (except as
expressly provided below) and with or without judicial process, to
pursue any one or more of the following remedies:
(i) Landlord may terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord.
(ii) Landlord may enter upon and take custodial possession of the
Premises by picking the locks if necessary, lock out or remove
Tenant and any other person occupying the Premises and alter
the locks and other security devices at the Premises, all
without Landlord being deemed guilty of trespass or becoming
liable for any resulting loss or damage and without causing a
termination or forfeiture of this Lease or of Tenant's
obligation to pay rent. Landlord shall not, in the event of a
lockout by the changing of locks, be required to provide new
keys to Tenant.
(iii) Landlord may terminate Tenant's possession and not this Lease
whereby Landlord may enter the Premises and take possession of
and remove any and all trade fixtures and personal property
situated in the Premises, without liability for trespass or
conversion. If Landlord takes possession of and removes
personal property from the Premises, then prior to any
disposition of the property by sale or until Tenant reclaims
the property if no foreclosure by public or private sale is
contemplated, Landlord may store the property in a public or
private warehouse or elsewhere at the cost of and for the
account of Tenant without the resort to legal process and
without becoming liable for any resulting loss or damage.
(iv) Landlord may perform on behalf of Tenant any obligation of
Tenant under this Lease which Tenant has failed to perform,
and the cost of the performance will be deemed additional
rental and will be payable by Tenant to Landlord upon demand.
b. In the event Landlord enters and takes possession of the Premises
without electing to terminate this Lease, Landlord will have the
right to relet the Premises for Tenant, in the name of Tenant or
Landlord or otherwise, on such terms as Landlord deems advisable.
But Landlord will not be required to incur any expense to relet the
Premises and the failure of Landlord to relet the Premises shall not
reduce Tenant's liability for monthly rentals and other charges due
under this Lease or for damages. Landlord will not be obligated to
relet for less than the then market value of the Premises or to
relet the Premises when other comparable rental space in the
Building is available for lease. Without causing a termination or
forfeiture of this Lease after an event of default by Tenant,
Landlord may: (i) relet the Premises for a term or terms to expire
at the same time as, earlier than, or subsequent to, the expiration
of the Term; (ii) remodel or change the use and character of the
Premises; (iii) grant rent concessions in reletting the Premises, if
necessary in Landlord's judgment, without reducing Tenant's
obligation for rentals specified in this Lease; and (iv) relet all
or any portion of the Premises as a part of a larger area. Subject
to the next subparagraph, Landlord may retain the excess, if any, of
the rent earned from reletting the Premises over the rentals
specified in this Lease.
c. After any failure by Tenant to pay rent, Landlord may, whether or
not it has chosen to re-enter and take possession of the Premises,
but only if Landlord has not notified Tenant of Landlord's election
to terminate this Lease, collect from and require Tenant to pay an
amount (a "Rental Deposit") equal to the then present value of all
Base Rent specified herein for the balance of the Term. However, if
Landlord has relet the Premises or relets thereafter without first
terminating this Lease, Landlord will apply any future rentals from
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reletting (but not rental representing reimbursement for Basic Costs
or rental allocable to any area outside the Premises or rental
allocable to the period following the Term) in the following manner:
first, to reduce any amounts then due from Tenant, including but not
limited to attorneys' fees, brokerage commissions and other expenses
Landlord may have incurred in connection with the collection of any
rent, recovery of possession, and redecorating, altering, dividing,
consolidating with adjoining premises, or otherwise preparing the
Premises for reletting; and, second, to the repayment of any Rental
Deposit collected from Tenant. The balance, if any, of the future
rentals from reletting shall be retained by Landlord as compensation
for reletting the Premises. Tenant will not be entitled to any
repayment of the Rental Deposit except as provided herein, but
Tenant will be relieved of its obligation to make future payments of
any Base Rent with respect to which it has paid a Rental Deposit to
Landlord. Landlord will notify Tenant if Landlord elects to collect
a Rental Deposit after an event of default by Tenant, whereupon the
Rental Deposit shall be immediately due and payable and may be
collected by Landlord 6y a suit to enforce payment.
d. No re-entry or reletting of the Premises or any filing or service of
an unlawful detainer action or similar action will be construed as
an election by Landlord to terminate or accept a forfeiture of this
Lease or to accept a surrender of the Premises after an event of
default by Tenant, unless a written notice of such intention is
given by Landlord to Tenant; but notwithstanding any such action
without such notice, Landlord may at any time thereafter elect to
terminate this Lease by notifying Tenant. In the event, however,
Landlord terminates this Lease after collecting a Rental Deposit as
provided in the preceding subparagraph, Landlord will reimburse
Tenant for the excess (if any) of (i) that portion of the Rental
Deposit collected and attributable to the Base Rent for the period
following such termination, over (ii) the amount that,
notwithstanding the termination, Landlord would have been entitled
to recover from Tenant with respect to such period if Landlord had
not collected the Rental Deposit.
e. Upon the termination of this Lease or termination of Tenant's
possession other than as a result of a breach or default by
Landlord, Landlord will be entitled to recover all unpaid rentals
that have accrued through the date of termination plus the costs of
performing any of Tenant's obligations (other than the payment of
rent) that should have been but were not satisfied as of the date of
such termination. In addition, if the termination follows a material
event of default (as described in the next subparagraph), Landlord
will be entitled to recover, not as rent or a penalty but as
compensation for Landlord's loss of the benefit of its bargain with
Tenant, the difference between (i) an amount equal to the present
value of the rental and other sums that this Lease provides Tenant
will pay for the remainder of the Term and for the balance of any
then effective extension of the Term, and (ii) the present value of
the net future rentals for such period that will be or with
reasonable efforts could be collected by Landlord by reletting the
Premises. For purposes of determining what could be collected by
Landlord by reletting under the preceding sentence, it will be
assumed that Landlord is not required to relet when other comparable
space in the Building is available for lease and that Landlord will
not be required to incur any cost to relet, other than customary
leasing commissions.
f. After a material event of default by Tenant, Landlord may recover
from Tenant from time to time and Tenant shall pay to Landlord upon
demand, whether or not Landlord has relet the Premises or terminated
this Lease, (i) such expenses as Landlord may incur in recovering
possession of the Premises, terminating this Lease, placing the
Premises in good order and condition and altering or repairing the
same for reletting; (ii) all other costs and expenses (including
brokerage commissions and legal fees) paid or incurred by Landlord
in exercising any remedy or as a result of the event of default by
Tenant; and (iii) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to
perform Tenant's obligations under this Lease. As used above, a
material event of default shall mean (i) any failure to pay rent
described in subparagraph 21 .(a) above; (ii) any failure to
maintain insurance required by this Lease.
g. In the event that any future amount owing to Landlord or offsetting
an amount owing to Landlord is to be discounted to present value
under this Lease, the present value shall be determined by
discounting at the rate of six percent (6%) per annum.
h. For the purposes of any suit by Landlord brought or based on this
Lease, this Lease may, at Landlord's option, be construed to be a
divisible contract to the end that successive actions
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may be maintained and successive periodic sums shall mature and
become due hereunder, and the failure to include in any suit or
action any sum or sums then matured shall not be a bar to the
maintenance of any suit or action for the recovery of the sum or
sums so omitted.
i. This Paragraph shall be enforceable to the extent not prohibited by
applicable law, and the unenforceability of any provision in this
Paragraph shall not render any other provision unenforceable. Tenant
will be presumed to have abandoned the Premises if goods, equipment,
or other property, in an amount substantial enough to indicate a
probable intent to abandon the Premises, is being or has been
removed from the Premises and the removal is not within the normal
course of Tenant's business.
j. Landlord's pursuit of any remedy specified in this Lease will not
constitute an election to pursue that remedy only, nor preclude
Landlord from pursuing any other remedy available at law or in
equity, nor constitute a forfeiture or a waiver of any rent or other
amount due to Landlord as described below.
23. LANDLORD'S LIEN
Intentionally Omitted
24. NON-WAIVER
Landlord's acceptance of Rent following an Event of Default shall not
waive Landlord's rights regarding such Event of Default. No waiver by
Landlord of any violation or breach of any of the terms contained herein
shall waive Landlord's rights regarding any future violation of that term
or any other term. No custom or practice which may occur or develop
between the parties in connection with the terms of this Lease shall be
construed to waive or lessen Landlord's right to insist upon strict
performance of the terms of this Lease.
25. SURRENDER OF PREMISES
No act by Landlord shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same is in writing and signed by Landlord. At the
expiration or termination of this Lease, Tenant shall immediately deliver
to Landlord the Premises with all improvements located thereon in good
repair and condition, reasonable wear and tear excepted (and condemnation
and Casualty damage not caused by Tenant, as to which Sections 16 and 17
shall control), and shall deliver to Landlord all keys to the Premises and
access cards to the Building. Provided that Tenant has performed all of
its obligations hereunder, Tenant may remove all unattached trade
fixtures, furniture, and personal property placed in the Premises by
Tenant (but Tenant shall not remove any such item which was paid for, in
whole or in part, by Landlord). Additionally, Tenant shall promptly remove
such alterations, additions, improvements, trade fixtures, equipment,
wiring, and furniture as Landlord may request; however, Tenant shall not
be required to remove any addition or improvement to the Premises if
Landlord has specifically agreed in writing that the improvement or
addition in question shall not be removed. Tenant shall repair all damage
caused by such removal. All items not so removed shall be deemed to have
been abandoned by Tenant and may be appropriated, sold, stored, destroyed,
or otherwise disposed of by Landlord without notice to Tenant and without
any obligation to account for such items. If Tenant fails to surrender the
Premises, Landlord shall have the right, without notice and without
resorting to legal process, to enter upon and take possession of the
Premises and to expel or remove Tenant and its effects. The provisions of
this Section shall survive the end of the Term.
26. HOLDING OVER
a. If, at the expiration of the Term of this Lease, Tenant continues to
occupy the Leased Premises with the written consent of Landlord,
then Tenant shall be a Tenant from month to month at a monthly rent
as established by Landlord and subject to all of the other terms and
conditions of this Lease.
b. If, at the expiration of the term of this Lease or other termination
of this Lease, Tenant continues to occupy the Leased Premises
without the written consent of Landlord, or if no new agreement
shall have been entered into by the parties hereto, then Tenant
shall be a Tenant at will only, and Tenant's continued occupancy
shall not defeat Landlord's right to possession of
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the Leased Premises at any time, with or without notice. Tenant
shall pay Rent equal to the greater of (a) 200% of the monthly Base
Rent and Additional Rent payable during the last month of the Term,
or (b) the prevailing rental rate in the Building for similar space.
In such event, Tenant shall pay Rent on a monthly basis and shall
not be entitled to a daily proration. In addition, Tenant shall pay
to Landlord all damages, costs and expenses incurred, directly or
indirectly, by Landlord by reason of Tenant's retention of
possession of the Leased Premises after such expiration or
termination. Tenant shall indemnify Landlord against all claims made
by any other tenant or prospective tenant against Landlord resulting
from delay by Landlord in delivering possession of the Leased
Premises to such other tenant or prospective tenant as a result of
such holdover.
No payments of money by Tenant to Landlord after the termination of
this Lease shall reinstate, continue, or extend the lease term and
no extension of this lease after the termination thereof shall be
valid unless and until the same shall be reduced to writing and
signed by both Landlord and Tenant.
27. RIGHTS RESERVED BY LANDLORD
Landlord has the following rights, exercisable without notice to Tenant
and without causing an eviction (constructive or actual) or disturbance of
Tenant's possession of the Premises and without giving rise to any claim
for setoff or abatement of rent:
a. to change the Building's name or street address;
b. to install signs on the exterior and interior of the Building,
excluding the interior of the Tenant's Premises;
c. to designate and approve, prior to installation, all types of window
shades, blinds, drapes, awnings, window ventilators and other
similar equipment, and to control all internal lighting that may be
visible from the exterior of the Building;
d. to enter upon the Premises at reasonable hours to inspect, clean or
make repairs or alterations (without implying any obligation to do
so) and upon reasonable notice to Tenant and without disrupting
Tenant's quiet use and enjoyment of the Premises to show the
Premises to prospective lenders, purchasers and tenants and, if the
Premises are vacated, to prepare them for reoccupancy;
e. to retain and use in appropriate instances keys to all doors into
and within the Premises (Tenant will not change or add locks without
the prior written consent of Landlord);
f. to decorate and to make repairs, alterations, additions or
improvements (whether structural or otherwise) to and about the
Building and, for such purposes, to enter upon the Premises, to
temporarily close doors, entryways, public space and corridors in
the Building, to temporarily suspend Building Services and
facilities and to change the arrangement and location of entrances
or passageways, doors and doorways, corridors, elevators, stairs,
toilets, or other Common Areas, all without abatement of rent or
impairing Tenant's obligations so long as the Premises remain
reasonable accessible and fit for the use expressly permitted in
this Lease;
g. to grant to anyone the exclusive right to conduct any business or
render any service in or to the Building (including the exclusive
right to sell any food or beverages), provided such exclusive right
does not exclude Tenant from the use expressly permitted in this
Lease;
h. to approve the weight, size and location of safes and other heavy
equipment and articles in the Premises and to require that all such
items and all furniture be moved into and out of the Building and
Premises at the times and in the manner directed by Landlord
(movements of Tenant's property into or out of the Building and
within the building are entirely at the risk and responsibility of
Tenant); and
i. to take any measures (without implying any obligation to do so)
Landlord deems advisable for the security of the Building and its
occupants, including the evacuation of the Building for
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drill purposes and the closing of the Building after normal business
hours, subject, however, to Tenant's right to admittance when the
Building is closed under reasonable regulations prescribed by
Landlord from time to time.
28. LANDLORD'S DEFAULT
a. All covenants of Tenant in this Lease are independent covenants, not
conditioned upon Landlord's satisfaction of its obligations
hereunder, except to the extent otherwise specifically provided
herein. Tenant waives any statutory lien it may have against the
rent due under this Lease or against Landlord's property in Tenant's
possession.
b. If Landlord defaults in the performance of any of its obligations
under this Lease, Landlord will have thirty (30) days to cure after
Tenant notifies Landlord of the default; or if the default is of a
nature to require more than thirty (30) days to remedy, Landlord
will have the time reasonably necessary to cure it. Provided that at
all such times Landlord is diligently working to cure such default
and provided further that this cure provision shall not affect or
waive Tenant's right to an abatement of Rent as set forth herein.
Notwithstanding anything in this paragraph 28b to the contrary if
Landlord defaults in the performance of any of its obligations under
this Lease more than twice in any Lease year, Tenant shall have the
right to terminate this lease with written notice, but without an
opportunity to cure.
c. Whenever a period of time is prescribed in this Lease for action to
be taken by Landlord, Landlord will not be liable or responsible
for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, Applicable Laws or any other
causes of any kind whatsoever which are beyond the control of
Landlord.
d. Tenant agrees to serve a notice of claimed default or breach by
Landlord upon the lender holding a first mortgage or deed of trust
against the Premises (herein called "Landlord's Mortgagee") if
Tenant has been provided written notice of the name and address of
such lender. Notwithstanding anything to the contrary contained
herein, provided that Landlord has given Tenant written notice of
the name and address of Landlords Mortgagee, Tenant will not
exercise any right to terminate this Lease because of a default by
Landlord before allowing such lender the same period following such
notice to cure the default or breach as is allowed Landlord. But
this subparagraph will not be interpreted as creating or broadening
any right of Tenant to terminate this Lease because of a default by
Landlord.
e. The liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease is limited to the interest of Landlord
in the Building and the Land, and Tenant agrees to look solely to
Landlord's interest in the Building and the Land for recovery of any
judgment from Landlord, it being intended that Landlord shall not be
personally liable for any judgment or deficiency.
f. If any litigation is initiated or defended by any party to the
Agreement against the other party to this Agreement relating to this
Agreement or the subject matter hereof, the party prevailing in such
litigation shall be entitled to recover, in addition to all damages
allowed and other relief, all reasonable attorneys' fees, court
costs and other litigation costs incurred in connection therewith.
29. RELOCATION
Intentionally Omitted
30. PARKING
Tenant shall be permitted to use its Parking Spaces in the parking lot
associated with the Building during the initial Term for vehicular
parking, subject to such terms, conditions and regulations as are from
time to time applicable to patrons of the parking lot. If Tenant sublets
any portion of the Premises or assigns any of its interest in this Lease,
then the parking spaces allocated to Tenant hereunder shall be reduced to
the extent the ratio between the rentable square feet of the Premises and
the parking spaces granted to Tenant hereunder exceeds the
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Building standard ratio of parking space per rentable square foot as
established by Landlord from time to time.
31. MISCELLANEOUS
a. Landlord Transfer. Landlord may transfer, in whole or in part, the
Building and any of its rights under this Lease. If Landlord assigns
its rights under this Lease, then Landlord shall thereby be released
from any further obligations hereunder-, provided that the assignee
assumes all of the Landlord's obligations hereunder.
b. Landlord's Liability. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited
to Tenant's actual direct, but not consequential, damages therefor
and shall be recoverable only from the interest of Landlord in the
Property, and Landlord and its directors, officers, employees,
agents, attorneys and representatives shall not be personally liable
for any deficiency.
c. Brokerage. Landlord and Tenant each warrant to the other that it has
not dealt with any broker or agent in connection with the
negotiation or execution of this Lease except Landlord's Broker,
Frauenshuh Companies and Tenant's Broker, Schoening Properties, Inc.
Tenant and Landlord shall each indemnify the other against all
costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or agent
claiming the same by, through, or under the indemnifying party.
Commissions payable to Tenant's Broker shall be paid by Landlord
only if a written commission agreement has been executed by and
between Landlord and such broker. Landlord shall be responsible for
payment of all commissions to Landlord's Broker.
d. Notices. All notices and other communications given pursuant to this
Lease shall be in writing and shall be (i) mailed by first class,
United States Mail, postage prepaid, certified, with return receipt
requested, and addressed to the parties hereto at the address
specified in Section 1 of the Lease, (ii) hand delivered by local
courier or national overnight delivery service to the intended
address, or (iii) sent by facsimile transmission or telex followed
by a confirmatory letter. All notices to Landlord shall be delivered
to the addresses set forth in the Section 1 and to Landlord's
property management company at the address set forth in the Section
2 and all notices to Tenant shall be to Tenant's address(es) set
forth in Section 1. Notice sent by certified mail, postage prepaid,
shall be effective three (3) days after being deposited in the
United States Mail; notices sent by hand delivery or overnight
courier shall be effective upon delivery to the address of the
addressee and notices sent by facsimile or telex shall be effective
when and if actually received by the individual to whom the notice
is to be directed. The parties hereto may change their addresses for
notice or payment by giving notice thereof to the other in
conformity with this provision.
e. Severability. It is the parties intention that this Lease be
enforceable and that it comply with all applicable laws. If any
clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws, then the remainder of
this Lease shall not be affected thereby and in lieu of such clause
or provision, there shall be added as a part of this Lease a clause
or provision as similar in terms to such illegal, invalid, or
unenforceable clause or provision as may be possible and be legal,
valid, and enforceable.
f. Amendments; and Binding Effect. This Lease may not be amended except
by instrument in writing signed by Landlord and Tenant. No provision
of this Lease shall be deemed to have been waived by Landlord unless
such waiver is in writing signed by Landlord. The terms and
conditions contained in this Lease shall inure to the benefit of and
be binding upon the parties hereto, and upon their respective
successors in interest and legal representatives, except as
otherwise herein expressly provided. This Lease is for the sole
benefit of Landlord and Tenant, and, other than Landlord's
mortgagee, no third party shall be deemed a third party beneficiary
hereof.
g. Tenant's Right of Possession. Provided Tenant has performed all of
the terms and conditions of this Lease to be performed by Tenant,
Tenant shall peaceably and quietly hold and enjoy the Premises for
the Term, without hindrance from Landlord or any party claiming by,
through, or under Landlord, subject to the terms and conditions of
this Lease.
h. Joint and Several Liability. If there is more than one Tenant, then
the obligations hereunder
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imposed upon Tenant shall be joint and several. If there is a
guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and such guarantor, and Landlord need not
first proceed against Tenant before proceeding against such
guarantor nor shall any such guarantor be released from its guaranty
for any reason whatsoever.
i. Captions. The captions contained in this Lease are for convenience
of reference only, and do not limit or enlarge the terms and
conditions of this Lease.
j. No Merger. There shall be no merger of the leasehold estate hereby
created with the fee estate in the Premises or any part thereof if
the same person or entity acquires or holds, directly or indirectly,
this Lease or any interest in this Lease and the corresponding fee
estate or any interest in such fee estate.
k. No Offer. The submission of this Lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights under this
Lease unless Landlord executes a copy of this Lease and delivers it
to Tenant.
l. Exhibits. All exhibits added and attachments attached hereto are
incorporated herein by this reference.
Exhibit A - Legal Description
Exhibit B - Outline of Premises
Exhibit B1 - Building Plan
Exhibit C - Building Rules and Regulations
Exhibit E - Tenant Improvements
m. Entire Agreement. This Lease constitutes the entire agreement
between Landlord and Tenant regarding the subject matter hereof and
supersedes all oral statements and prior writings relating thereto.
Except for those set forth in this Lease, no representations,
warranties, or agreements have been made by Landlord or Tenant to
the other with respect to this Lease or the obligations of Landlord
or Tenant in connection therewith.
n. Property Management. Landlord's Property Management Company is
identified in Section 2 of the Lease. Information may be changed
without notice to Tenant from time to time. Tenant acknowledges that
the Property Management Company is an independent contractor hired
by Landlord to operate the Building.
o. Choice of Law. This Lease shall be governed by the laws of the state
in which the Land is located and by the applicable laws of the
United States of America.
p. Construction and Interpretation. This Lease shall not be construed
in favor of either Landlord or Tenant regardless of who prepared the
same. Whenever the terms "hereof," "hereby," "herein," or words of
similar import are used herein they shall be construed as referring
to this Lease in its entirety rather than to a particular section or
provision. References to Sections and Exhibits refer to the sections
of, and exhibits to, this Lease. Whenever the term "including" is
used herein, it shall be interpreted as meaning "including, but not
limited to."
32. REPRESENTATIONS, WARRANTIES AND COVENANTS OF TENANT
Tenant represents, warrants and covenants that it is now in a solvent
condition; that no bankruptcy or insolvency proceedings are pending or
contemplated by or against Tenant or any guarantor of Tenant's obligations
under this Lease; that all reports, statements and other data furnished by
Tenant to Landlord in connection with this Lease are true and correct in
all material respects; that the execution and delivery of this Lease by
Tenant does not contravene, result in a breach of, or constitute a default
under any contract or agreement to which Tenant is a party or by which
Tenant may be bound and does not violate or contravene any law, order,
decree, rule or regulation to which Tenant is subject; and that there are
no material judicial or administrative actions, suits, or proceedings
pending or threatened against or affecting Tenant's obligations under this
Lease. If Tenant is a corporation or partnership, each of the persons
executing this Lease on behalf of Tenant represents and warrants that
Tenant is duly organized and existing, is qualified to do business in the
state in which the Premises are located, has full right and authority to
enter into this Lease, that the persons signing on behalf of Tenant are
20
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authorized to do so by appropriate corporate or partnership action and
that the terms, conditions and covenants in this Lease are enforceable
against Tenant. If Tenant is a corporation, Tenant shall deliver certified
resolutions to Landlord, upon request, evidencing that the execution and
delivery of this Lease has been duly authorized and properly executed, and
will deliver such other evidence of existence, authority and good standing
as Landlord shall require.
33. ENVIRONMENTAL PROVISIONS
a. Terms defined below in this Section shall have the following
meanings:
(i) "Applicable Environmental Laws" means all applicable federal,
state and other laws, ordinances, rules and regulations of any
governmental entity pertaining to health or the environment,
including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986
(as amended, hereinafter called "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Used
Oil Recycling act of 1980, the Solid Waste Disposal Act
Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, hereinafter called "RCRA").
(ii) "Expenses" means all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, proceedings,
costs, expenses (including reasonable attorneys' fees), costs
of settlement and disbursements of any kind and nature
whatsoever.
(iii) "Hazardous substance" and "release" shall have the meanings
specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") shall have the meanings specified
in RCRA; provided, in the event either CERCLA or RCRA is
amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and provide further, to the
extent that the laws of the State of Minnesota establish a
meaning for "hazardous substance", "release," `solid waste,"
or disposal" which is broader than that specified in either
CERCLA RCRA, such broader meaning shall apply.
(iv) "Indemnified Party" means each of Landlord and any successors
and assigns as to all or any portion of the Land or Premises
or any interest therein, and any affiliate, officer, agent,
director, employee or servant of any of them.
b. Tenant warrants and represents that to Tenant's knowledge Tenant's
intended use of the Premises will not violate Applicable
Environmental Laws. Tenant shall not cause or introduce to the
Premises, or do anything or permit anything to be done which will
subject the Landlord or the Premises or the Land to any remedial
obligations under, any Applicable Environmental Laws, assuming
disclosure to the applicable governmental authorities of all
relevant facts, conditions and circumstances, if any, pertaining to
the Premises, the Land and Tenant. Tenant shall promptly notify
Landlord in writing of any existing, pending or, to the knowledge of
Tenant, threatened investigation or inquiry by any governmental
authority in connection with any violation of Applicable
Environmental Laws by Tenant or the Premises. Tenant shall take all
steps necessary to determine during the term of this Lease that no
hazardous substances or solid wastes are being disposed of or
otherwise released on or to or from the Premises. Landlord may enter
upon the Premises at any time and without notice to verify
compliance with this Section if Landlord believes in good faith that
a violation of this Section may have occurred or be threatened. Any
violation of this Section by Tenant shall constitute an "event of
default' under this Lease which cannot be cured.
c. Tenant hereby agrees to assume liability for and to pay, indemnify,
protect and hold harmless every Indemnified Party on an aftertax
basis from any and all Expenses imposed, incurred or asserted
(regardless of whether the Indemnified Party shall be indemnified by
any other person or entity) in any way relating to or arising out of
(a) a violation by Tenant of Applicable Environmental Laws during
the term of this Lease or during any period of holdover by Tenant
after the term of the Lease, or (b) a disposal or other release by
Tenant of any hazardous substance or solid waste on, to or from the
Premises during the term of the Lease or during any such period of
holdover. The Tenant acknowledges that it has been given ample time
to consult with counsel in agreeing to the indemnity set forth in
this Lease and fully understands it.
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This indemnity shall survive the termination or expiration of this
Lease. The foregoing indemnity shall not render Tenant liable to any
Indemnified Party for any Expenses that such Indemnified Party may
incur as a result of its own negligence, willful misconduct or gross
negligence.
d. Tenant's payment or reimbursement of all Expenses to or for the
benefit of an Indemnified Party as required by this Lease shall be
supplemented by a further payment, to such Indemnified Party, in an
amount equal to any taxes imposed upon such Indemnified Party
because of Tenant's payment of reimbursement of Expenses and the
supplemental payment required by this Section. Taxes will be
computed for the purposes hereof after taking into account any
credits or deductions taken by the applicable Indemnified Party for
the Expenses paid by the Indemnified Party hereunder, based on the
actual tax return of the Indemnified Party (or, if no tax return is
filed for such party because it is a part of a consolidated or
combined group, on a proforma basis as if such Indemnified Party
filed a return only for itself and its subsidiaries if any).
e. If an Indemnified Party notifies Tenant of any claim or notice of
the commencement of any action, administrative or legal proceeding,
or investigation as to which the indemnity may apply, Tenant shall
assume on behalf of the Indemnified Party and conduct with due
diligence and in good faith the defense thereof with counsel
reasonable satisfactory to the Indemnified Party; provided, that the
Indemnified party shall have the right to be represented therein by
advisory counsel of its own selection and at its own expense; and
provided further, that if any such claim, action, proceeding or
investigation involves both Tenant and the Indemnified Party and the
Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it which are different from, additional
to, or inconsistent with those available to Tenant, then the
Indemnified Party shall have the right to select separate counsel to
participate in the defense of such claim, action, proceeding or
investigation on its own behalf at Tenant's expense.
f. If any claim, action, proceeding or investigation arises as to which
the indemnity provided for may apply, and Tenant fails to assume
promptly (and in any event within ten (to) days after being notified
of the claim, action, proceeding or investigation) the defense of
the Indemnified Party, then the Indemnified Party may contest (or,
with the prior written consent of Tenant, settle) the claim, action,
proceeding or investigation at Tenant's expense using counsel
selected by the Indemnified Party; provided, that no such contest
need be made by the Indemnified Party and settlement or full payment
of any claim may be made by the Indemnified Party without Tenant's
consent and without releasing Tenant from any obligations to the
Indemnified Party if, in the written opinion of the Indemnified
Party's counsel, the settlement or payment in full is advisable. All
costs and expenses incurred by the Indemnified Party in connection
with any such contest, settlement or payment shall be payable upon
demand.
g. Landlord represents to Tenant that to the best of Landlord's
knowledge no hazardous substance exists in or on the Premises.
Notwithstanding anything herein to the contrary, Landlord shall
indemnify and hold Tenant, its parent, subsidiaries and affiliated
corporations, and their respective officers, directors, employees
and representatives harmless from and against all damages, claims,
causes of action, fees and expenses, including without limitation
all legal fees, that arise out of or are related to any breach by
Landlord of the representation contained in this Paragraph 33.g.
34. AUTHORITY PARAGRAPH
The party executing this document on behalf of Tenant represents and
warrants that such party possesses all lawful rights and authority to
enter into this document on behalf of Tenant; that there are no judgments,
decrees or outstanding orders of any court prohibiting the execution of
this document; and that all required approvals, consents and resolutions
necessary to effectuate the terms and provisions of this document have
been obtained.
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TO THE EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD AND TENANT EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT'S
INTENDED COMMERCIAL PURPOSE.
EXECUTED as indicated below and effective on the latter of the dates indicated
below.
LANDLORD:
Nesbitt Operating Associates, Limited Partnership
By: BGK Nesbitt LLC, its General Partner
Name: Cheryl S. Willoughby
/s/ Cheryl S. Willoughby
--------------------------------------
Title: Senior Vice President
Date: 3/25/99
---------------------
TENANT:
Nextel WIP Lease Corporation
By David M Thaler
--------------------------------------
Signature: /s/ David M Thaler
--------------------------------------
Title: V.P. Field Operations
--------------------------------------
Date: March 11, 1999
--------------------------------------
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EXHIBIT "A"
LEGAL DESCRIPTION
Tax Parcel Identification Number: 36-117-22-31-0016
Tax Parcel Description
Block: 001
Addition Name: Opus 2 8TH ADDN
Metes & Bounds: Lots 3 And 4
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EXHIBIT "B"
OUTLINE OF PREMISES
[FLOOR MAP OMITTED]
25
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EXHIBIT "B1"
Building Plan
[FLOOR MAP OMITTED]
26
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EXHIBIT "C"
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways and similar areas shall
not be obstructed by tenants or their officers, agents, servants, and
employees, or used for any purpose other than ingress and egress to and
from their respective leased premises and for going from one part of the
Building to another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which constructed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed therein. Any stoppage or damage
resulting to any such fixtures or appliances from misuse on the part of a
tenant or such tenant's officers, agents, servants, and employees shall be
paid by such tenant.
3. No signs, posters, advertisements, or notices shall be painted or affixed
by or on behalf of any tenant on any of the windows or doors, or other
exterior part of the Building, except lettering of such color, size and
style and in such places, as shall be first approved in writing by the
Landlord's Building manager. No nails, hooks or screws shall be driven
into or inserted in any exterior part of the Building, except by building
maintenance personnel.
4. Directories may be placed by the Landlord, at Landlord's own expense, in
conspicuous places in the Building. No other directories shall be
permitted.
5. Tenants shall not do anything, or permit anything to be done, in or about
the Building, or bring or keep anything therein, that will in any way
increase the possibility of fire or other casualty or obstruct or
interfere with the rights of, or otherwise injure or annoy, other tenants,
or do anything in conflict with the valid pertinent laws, rules or
regulations of any governmental authority.
6. Corridor doors, when not in use, shall be kept closed.
7. All deliveries of furniture, freight, office-equipment or other materials
for dispatch or receipt by Tenant must be made by licensed commercial
movers via the service entrance of the Building in a manner and during
hours set by Landlord from time to time. Prior approval must be obtained
from the Landlord's Building manager for any deliveries that might
interfere with the free movement of others through the public corridors of
the Building. All hand trucks shall be equipped with rubber tires and
rubber side guards.
8. Each tenant shall cooperate with Building employees in keeping the
Building and their respective leased premises neat and clean.
9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals shall be brought into or kept in
or about the Building.
10. Should a tenant require telegraphic, telephonic, annunciator or any other
communication service, the Landlord will direct the electricians and
installers where and how the wires are to be introduced and placed, and
none shall be introduced or placed except as the Landlord shall direct.
11. Tenants shall not make or permit any unseemly, disturbing or improper
noises in the Building, or otherwise interfere in any way with other
tenants, or persons having business with them.
12. No equipment of any kind shall be operated on any tenant's leased premises
that could in any way annoy any other tenant in the Building without the
prior written consent of the Landlord.
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13. Tenants shall not use or keep in the Building any inflammable or explosive
fluid or substance, or any illuminating material, unless it is battery
powered, UL approved.
14. Tenants, employees, or agents, or anyone else who desire to enter the
Building after normal working hours will be required to close doors into
the Building behind them. Locks to such doors will not be tampered with.
15. All electrical fixtures hung in the Premises must be fluorescent and of a
quality, type, design, bulb color, size and general appearance approved by
Landlord.
16. No water cooler, air conditioning unit or system or other apparatus shall
be installed or used by a tenant without the prior written consent of
Landlord, such consent not to be unreasonably withheld.
17. Normal business hours for the Building shall be 7:00 a.m. through 6:00
p.m. on weekdays, excluding legal holidays.
18. References to "holidays" and "legal holidays" in the leases to tenants in
the Building shall include the following:
January 1st .......................................... New Year's Day
Last Monday in May ..................................... Memorial Day
July 4th ........................................... Independence Day
First Monday in September ................................. Labor Day
Fourth Thursday in November ............................ Thanksgiving
December 25th ............................................. Christmas
19. The Landlord reserves the right to rescind any of these rules (as to any
particular tenant or as to all tenants generally) and to make such other
and further rules and regulations as in the judgment of Landlord shall
from time to time b e needed for the safety, protection, care and
cleanliness of the Building, the operation thereof, the preservation of
good order therein, and the protection and comfort of its tenants, their
agents, employees and invitees, which rules when made and notice thereof
given to a tenant shall be binding upon him in like manner as if
originally herein prescribed. In the event of any conflict, inconsistency,
or other difference between the terms and provisions of these Rules and
Regulations (as now or hereafter in effect) and the terms and provisions
of any lease now or hereafter in effect between Landlord and any tenant in
the Building, Landlord shall have the right to rely on the term or
provision in either such lease or such Rules and Regulations which is most
restrictive on such tenant.
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EXHIBIT "E"
TENANT FINISH: ALLOWANCE
1. Except as set forth in this Exhibit, Tenant accepts the Premises in their
"as is" condition on the date that this Lease is entered into.
2. Within ten (10) days after the effective date of this Lease, Tenant shall
deliver to Landlord for its approval a space plan depicting improvements
to be installed in the Premises ("Space Plans"), which plans were or are
to be prepared by Tenant's architect.
3. Within ten (10) days after delivery of the Space Plans, Tenant shall
provide to Landlord for its approval final drawings (as hereinafter
defined) prepared by Tenant's architect in accordance with the Space Plans
showing all improvements (as hereinafter defined) that Tenant proposes to
install in the Premises; such drawings shall include the partition layout,
ceiling plan, electrical outlets and switches, telephone outlets, drawings
for any modifications to the mechanical and plumbing systems of the
Building, and detailed plans and specifications for the construction of
the improvements called for under this Exhibit in accordance with all
applicable governmental laws, codes, rules, and regulations. Further, if
any of Tenant's proposed construction will affect the Building's heating,
ventilation and air conditioning, electrical, mechanical, or plumbing
systems, then the drawings pertaining thereto shall be prepared by the
Building's engineer of record. Tenant shall, at Landlord's request, sign
and date the Drawings to evidence its review and approval thereof.
4. As used herein, "Drawings" shall mean the final drawings approved by
Landlord, as amended from time to time by any approved changes thereto,
and "Improvements" shall mean all improvements to be constructed in
accordance with and as indicated on the Drawings.
5. Landlord's approval of the Drawings shall not be unreasonably withheld,
provided that (a) they comply with all applicable governmental laws,
codes, rules, and regulations, (b) said Drawings are sufficiently detailed
to allow construction of the Improvements in a good and workmanlike
manner, and (c) the Improvements depicted thereon conform to the rules and
regulations promulgated from time to time by the Landlord for the
construction of tenant improvements. Approval by Landlord of the Drawings
shall not be a representation or warranty of Landlord that such Drawings
are adequate for any use, purpose, or condition, or that such Drawings
comply with any applicable law or code, but shall merely be the consent of
Landlord to the Drawings.
6. All changes in the Drawings must receive the prior written approval of
Landlord, and in the event of any such approved change and upon completion
of the Improvements, Tenant shall furnish Landlord with an accurate,
reproducible "as-built" plan of the Improvements as constructed, which
plan shall be incorporated into the Drawings and the Lease by this
reference for all purposes.
7. After the Drawings have been approved, Tenant shall cause the tenant
finish work to be performed in accordance with the Drawings. The work
shall be performed only by contractors and subcontractors approved in
writing by Landlord, which approval shall not be unreasonably withheld.
All contractors and subcontractors shall be required to procure and
maintain (a) insurance against such risks, in such amounts, and with such
companies as Landlord may reasonably require and (b) payment and
performance bonds covering the cost of the Improvements and otherwise
reasonably satisfactory to Landlord. Original certificates of insurance
evidencing such policies, with paid receipts therefore, and copies of such
bonds must be received by Landlord before the work is commenced. The work
shall be performed in a good and workmanlike manner that is free of
defects and is in strict conformance with the Drawings, and shall be
performed in such a manner and at such times as to maintain harmonious
labor relations and not to interfere with or delay Landlord's other
contractors, the operation of the Building, and the occupancy thereof by
other tenants. All contractors and subcontractors shall contact Landlord
and schedule time periods during which they may use Building facilities in
connection with the work (e.g., elevators, excess electricity, etc.).
8. If a delay in the performance of the work occurs (a) because of any change
by Tenant to the
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Drawings, (b) because of any specification by Tenant of materials or
installations in addition to or other than Landlord's standard finish-out
materials, or (c) if Tenant, any contractor or subcontractor, or Tenant's
agents otherwise delays completion of the work, then, notwithstanding any
provision to the contrary in this Lease, Tenant's obligation to pay Rent
hereunder shall commence on the scheduled Commencement Date. If the
Premises are not ready for occupancy and the Improvements are not
substantially completed (as reasonably determined by Landlord) on the
scheduled Commencement Date for any reason other than the reasons
specified in the immediately preceding sentence, then the obligations of
Landlord and Tenant shall continue in full force and Rent shall be abated
until the date the Improvements are substantially completed, which date
shall be the Commencement Date.
9. Tenant shall bear the entire cost of performing the work (including,
without limitation, design of the Improvements and preparation of the
Drawings, costs of construction labor and materials electrical usage
during construction, additional janitorial services, general tenant
signage, related taxes and insurance costs, all of which costs are herein
collectively called the "Total Construction Costs") in excess of the
Construction Allowance (as hereinafter defined). Upon approval of the
Drawings and selection of a contractor, Tenant shall promptly (a) execute
a work order agreement acceptable to Landlord which identifies such
Drawings, itemizes the Total Construction Costs and sets forth the
Construction Allowance, and (b) pay to Landlord the amount by which the
estimated Total Construction Costs exceed the Construction Allowance.
Without limitation, upon substantial completion of the Improvements,
Tenant shall pay to Landlord an amount equal to the Total Construction
Costs (as adjusted for any approved changes to the Drawings), less (i) the
amount of the payments already made by Tenant and (ii) the amount of the
Construction Allowance.
10. Landlord shall provide to Tenant a construction allowance ("Construction
Allowance") equal to $ 27,000.00 ($2.13 /rentable square foot); however,
if Tenant or its agent is managing the performance of the work, then
Tenant shall not become entitled to full credit for the Construction
Allowance until Tenant has caused to be delivered to Landlord (i) all
invoices from contractors, subcontractors, and suppliers evidencing the
cost of performing the work, together with lien waivers from such parties,
and a consent of the surety to the finished Improvements (if applicable)
and (ii) a certificate of occupancy from the appropriate governmental
authority, if applicable, and evidence of governmental inspection and
approval of the Improvements, if applicable.
11. Intentionally Omitted
12. Notwithstanding anything herein to the contrary, it shall be an Event of
Default under this Lease if Tenant has not completed the Improvements on
or before May 15, 1999.
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Exhibit 10.38
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, between Nextel
Partners Operating Corp., a Delaware corporation (the "Company"), and Mark P.
Fanning ("Executive"). Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in Section 9 or as otherwise set
forth below.
WHEREAS, the Company desires to employ Executive and to enter into
an agreement embodying the terms of such employment (this "Agreement"), and
Executive desires to accept such employment and enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive, intending to be legally bound, hereby
agree as follows:
1. Employment. (a) Agreement to Employ. Upon the terms and subject
to the conditions hereof the Company shall employ Executive as Vice President -
People Development of the Company until the Expiration Date (as defined in
Section 1(b)), any date to which this Agreement shall have been extended
pursuant to Section 1(b) or any earlier termination of this Agreement pursuant
to Section 6. Executive's office shall be located in the Seattle, Washington
metropolitan area. During the term of his employment hereunder, Executive will
devote substantially all of his business time to the performance of his duties
hereunder.
(b) Employment Period. Unless earlier terminated pursuant to Section
6, the initial term of Executive's employment with the Company shall be for a
period of four years, commencing on the date of this Agreement and continuing
until January 29, 2003 (the "Expiration Date"). The term of this Agreement may
be extended by the Company for successive one-year terms commencing on the
Expiration Date by providing Executive notice of such election not less than 60
days prior to the Expiration Date or the scheduled expiration date of any
renewal term.
2. Responsibility. Executive shall be responsible for supervising
the establishment, maintenance and operation of all human resources and
organizational development functions at the Company and for such other duties
commensurate with his position that may be assigned from time to time by the
Board of Directors of the Company (the "Board") or (to the extent not
inconsistent with the duties assigned to him by the Board) by the chief
executive officer of the Company. Executive shall report directly to the chief
executive officer of the Company and shall be subject to the overall supervision
of the Board.
<PAGE>
3. Compensation and Benefits.
(a) Salary and Bonus.
(i) The Company shall pay Executive a base salary in the
annual amount of $125,000 payable in accordance with the Company's normal
payroll practices.
(ii) The Company shall (subject to the Board's review and
approval) establish a performance based program pursuant to which
Executive shall receive, if performance targets are met, an additional
annual cash payment of up to forty percent (40%) of Executive's then
current base salary (or such higher amount as the Board may approve), and
shall offer to Executive a benefits package equivalent to that provided to
the Company's other senior executives.
(iii) In addition to the amounts payable pursuant to
paragraphs (i) and (ii) above, in recognition of Executive's services
prior to the date hereof, the Company will on the date of the Closing make
a lump sum payment to Executive in the amount of $72,917.
(iv) Upon completion of the Required Build on or before the
Scheduled Completion Date, the Compensation Committee of the Board shall
review Executive's base salary and bonus payment in light of the
performance of Executive and the Company, and may, in its discretion,
increase (but not decrease) such base salary and bonus payment by an
amount it determines to be appropriate.
(v) If this Agreement is renewed by the Company upon
expiration of the initial four-year term, Executive's base salary and
bonus payment will be recalculated so as to place them at levels that are
comparable to prevailing market rates, based on the overall compensation
packages of executives holding comparable positions in similarly situated
companies (which shall include consideration of Executive's equity
compensation arrangements in comparison to those of executives holding
comparable positions in similarly situated companies).
(b) Expenses. Executive shall maintain his own automobile and shall
carry liability insurance in the minimum amount of $300,000. The Company shall
reimburse Executive monthly for business use of his automobile at the prevailing
IRS rate per mile. Executive shall also be reimbursed monthly for all other
reasonable out-of-pocket expenses incurred or paid by Executive while
representing the Company or conducting Company business. Executive shall be
responsible for maintaining records reasonably satisfactory to support all
claimed business usage of his automobile and to substantiate all out-of-pocket
expenses incurred for which reimbursement is sought and shall furnish such
records to the Company in accordance with its policies.
(c) Vacation. Executive shall be entitled to 15 vacation days each
calendar year, any or all of [ILLEGIBLE] unused
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vacation time earned through the last completed month of service, computed at
the rate of ten hours per month.
(d) Indemnification. The Company shall indemnify and hold Executive
harmless in accordance with the terms of the Company's certificate of
incorporation and bylaws, in each case as in effect on the date hereof.
(e) D&O Insurance. The Company shall maintain directors and officers
liability insurance coverage covering Executive in amounts customary for
similarly situated companies in the telecommunications industry and with
reputable insurers. All such policies shall provide for coverage to Executive on
the same terms and conditions applicable to the coverage provided under such
policies to the Company's other directors and officers.
4. Nondisclosure of Proprietary and Confidential Information.
(a) Confidential Information. Executive agrees to refrain (whether
during or after his employment with the Company) from disclosing or using,
except as permitted by this Agreement, any secrets or confidential information
with respect to any Covered Entity, including without limitation its trade
secrets, patents, affairs, business plans, strategic, commercial or financial
information other than information that is or becomes publicly available through
no fault of Executive (the "Confidential Information"). Executive may disclose
or communicate only such information as is reasonably required or specifically
approved by the Board or authorized management personnel of the Company
designated by the Board in connection with Executive's services. Confidential
Information may be used solely for the benefit of the Company, and Executive
shall not make any other use of such information. Executive agrees that all
materials relating to the business of any Covered Entity that are provided or
made available to Executive, or created by Executive, during the course of
Executive's services to the Company shall be and remain the property of the
Company and/or the applicable Covered Entity (subject to the terms of any
separate agreement between the Company and/or its Parent Companies and the
affected Covered Entity), whether or not such materials constitute or contain
Confidential Information, and all copies of such materials shall be returned to
the Company immediately upon the termination of Executive's services to the
Company. In the event that the Company notifies the Executive that it has
entered into a confidentiality agreement with a Covered Entity or with any
Affiliate of the Company with respect to confidential information to be provided
to the Company, the Executive shall comply with such reasonable obligations
thereunder as are applicable to the Executive.
(b) Innovations; Inventions. Executive hereby sells, transfers and
assigns to the Company all right, title and interest of Executive in and to any
and all inventions, ideas, disclosures and improvements of any kind or nature
whatsoever, whether patented or unpatented, and any and all copyrightable
materials, in either case whether made or conceived in whole or in part by
Executive alone or together with others, from January 1, 1998 to the date of
this Agreement or during the initial term of this Agreement or any renewal term,
that (i) relate to any methods, designs, products, processes, apparatus, service
or devices sold, leased used or under construction or development by the Company
or any of its subsidiaries or affiliates, (ii) relate to the business,
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functions or operations of the Company or any of its subsidiaries or affiliates
or (iii) arise from, in whole or in part, the efforts of Executive on behalf of
the Company. Executive will communicate and disclose to the Company promptly all
information, data and details pertaining to any inventions, ideas, disclosures
and improvements described above, in such form or format as the Company may
reasonably request. During the term of this Agreement or any renewal term and
thereafter, Executive will execute, acknowledge or deliver to the Company (at
the Company's expense) such formal transfers and assignments and such other
papers and documents as may be required of Executive to permit the Company to
file and prosecute any patent applications to the Company desires to file and
prosecute relating to any of the foregoing, and, as to copyrightable material,
to obtain copyright thereon.
5. Non-Competition; Non-Solicitation.
(a) In view of the unique value to the Company of Executive's
services and because of the Confidential Information to be obtained by or
disclosed to Executive as described above, Executive agrees that, during the
term of this Agreement and for a period of six months thereafter, provided that
this Agreement is not terminated by the Company without Cause or by Executive
for Good Reason:
(i) Executive will not directly or indirectly assist or become
associated with any wireless voice communications service provider in any
business of such provider that competes in any of the markets of any of
the Restricted Entities, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of less than 5% of the
outstanding voting shares of any publicly traded company);
(ii) Executive will not directly or indirectly solicit for
employment or employ any employee of any of the Restricted Entities,
unless such solicited person shall have ceased to be employed by any such
entity for a period of at least six months; and
(iii) Executive will not directly or indirectly, solicit
business from customers of any of the Restricted Entities, provided that
the foregoing shall not restrict Executive or any entity with which
Executive is associated from soliciting or doing business with any
customer of any of the Restricted Entities, if such solicitation does not
interfere with any business relationship between such solicited customer
and any of the Restricted Entities.
(b) If Executive violates any provision of Section 4 or Section
5(a), the Company shall be entitled to receive from Executive reimbursement for
any and all damages caused by such breach, provided that Executive shall not be
liable for indirect, special, consequential or punitive damages (it being
understood and agreed that this remedy is in addition to, and not a limitation
on, any injunctive relief or other rights or remedies to which the Company is or
may be entitled to at law or in equity). Executive acknowledges and agrees that
the Company's (and as applicable, each Restricted Entity's) remedies at law for
a breach or threatened breach of any provision of Section 4 or Section 5(a)
would be inadequate and, in recognition of this fact, Executive agrees that, in
the
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event of such a breach or threatened breach, in addition to any remedies at law,
the Company and, as to Article 4, each Covered Entity and, as to Article 5, each
Restricted Entity, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available. As provided in Section 10(b) hereof, the equitable remedies
referenced in this Section 5(b) shall be in addition to, and not in substitution
for or exclusion of, any other remedies available at law or in equity for any
breach of either or both of Sections 4 or 5. Executive and the Company each
specifically acknowledge and agree that the provisions of Sections 4 and 5 are
for the express benefit of each Covered Entity (in the case of Section 4) and
each Restricted Entity and that (i) no waiver, amendment or other modification
of Sections 4 or 5 with respect to a Covered Entity or Restricted Entity shall
be effective unless it has been consented to in writing by such Covered Entity
or Restricted Entity, as the case may be, and (ii) each such Covered Entity and
Restricted Entity shall be entitled to enforce the provisions of Section 4
and/or 5 hereof (as appropriate) as fully and with the same rights and effect as
if such Covered Entity or Restricted Entity were a signatory party to this
Agreement.
(c) If any provisions of Section 4 or Section 5(a) are held to be
invalid or unenforceable, the remaining provisions shall nevertheless continue
to be valid and enforceable as though the invalid or unenforceable parts had not
been included.
6. Noncontravention. The execution, delivery and performance by
Executive of this Agreement does not and will not (i) violate any applicable
law, rule, regulation, judgment, injunction, order or decree or (ii) require any
consent or other action by any person under, constitute a default under (with
due notice or lapse of time or both), or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Executive or to a
loss of any material benefit to which Executive is entitled under any provision
of any agreement or other instrument binding upon Executive, to the extent that
any of the foregoing would have a material adverse effect on Executive or would
prevent or otherwise render unable Executive to perform his obligations under
this Agreement.
7. Termination. This Agreement shall automatically terminate (and
the term of this Agreement shall thereupon terminate) upon the occurrence of any
one of the following events:
(a) Death of Executive.
(b) If Executive shall have been incapacitated from illness,
accident or other disability and unable to perform his normal duties hereunder
for a cumulative period of three months in any period of six consecutive months,
and no reasonable accommodation being available, upon either party giving the
other party not less than 30 days' written notice.
(c) The Expiration Date or the scheduled expiration date of any
renewal or extension thereof in compliance with Section 1(b).
(d) By the Company for Cause.
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(e) By Executive for Good Reason. Upon the occurrence of any event
or the existence of any condition or circumstance constituting Good Reason,
Executive may by notice to the Board, deem a constructive termination of this
Agreement to have occurred, whereupon Executive shall be entitled to the
compensation set forth in Section 7(b).
(f) Upon not less than 30 days' written notice from Executive to the
Company of his voluntary resignation; provided, that such voluntary resignation
shall not relieve or release Executive from any breach of this Agreement at or
prior to the time of such resignation.
8. Effect of Termination.
(a) Upon termination of this Agreement pursuant to Sections 7(a),
(b), (c), (d) or (f) the Company shall compensate Executive (or, in the event of
Executive's death, his surviving spouse, if any, or his estate), for (x) accrued
but unused vacation time, (y) any base salary earned, but unpaid, for services
rendered to the Company on or prior to the date of termination and (z) amounts
which Executive is otherwise entitled to receive under the terms of or in
accordance with any plan, policy, practice or program of, or contract or
agreement with the Company, as in effect immediately prior to the date of such
termination, (including but not limited to the Purchase Agreement), at or
subsequent to the date of termination without regard to the performance by
Executive of further services or the resolution of any contingency, but subject
to any and all rights, remedies and claims of the Company against Executive.
(b) If Executive resigns for Good Reason or his employment with the
Company is terminated without Cause, the Company shall thereupon pay Executive
the following amounts as severance benefits: (i) all amounts payable pursuant to
Section 8(a), and (ii) a lump sum equal to (x) if Executive resigns for Good
Reason, one year's base salary hereunder plus an amount equal to the most recent
annual bonus, if any, received by Executive pursuant to Section 3(a)(ii) or (y)
if Executive's employment is terminated without Cause, six months' base salary
hereunder plus an amount equal to one-half of the most recent annual bonus, if
any, received by Executive pursuant to Section 3(a)(ii).
9. Definitions. As used herein, the following terms shall have the
following meanings set forth below:
"Affiliate" means, with respect to the Company, any person or entity
who or which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company or NPI.
"Cause" means (i) Executive's conviction of a felony evidencing
criminal dishonesty or moral turpitude, (ii) a willful and material breach of
Executive's duty of loyalty to the Company or its parent Nextel Partners, Inc.
or (iii) after 20 business days following Executive's receipt of written notice
from the Company specifying the particulars in reasonable detail, Executive's
failure to comply with or to cure, as applicable, (A) a willful and material
refusal to comply with specific
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written directions of the Board (or specific written directions of the Chief
Executive Officer) consistent with Executive's employment agreement with NPI or
the Company or any of their respective subsidiaries and capable of being
performed by him or (B) a willful and material breach of Executive's duty of due
care to the Company.
"Class A Common Stock" means the Class A Common Stock, par value
$.001 per share, of NPI.
"Closing" has the meaning specified in the Purchase Agreement.
"Covered Entities" means, collectively, the Restricted Entities and
such other entities as may from time to time be reasonably agreed to by the
Company and the Executive to be Covered Entities hereunder.
"FCC" means the Federal Communications Commission.
"FCC Modifications" means changes to the agreements relating to the
governance and operation of the Company that are implemented in response to any
assertion or finding by the FCC that such agreements constitute an impermissible
change of control of the FCC licenses made available by NWIP to the Company
thereunder, which changes are implemented in order to cause such agreements to
be in compliance with FCC requirements so as to reflect the intent of the
parties thereto that no impermissible change of control take place.
"Good Reason" means (i) a material adverse change in Executive's
duties, responsibilities or reporting relationships, (ii) a relocation of
Executive's principal office to a location more than 30 miles away from his then
current office, (iii) a reduction of salary not agreed to by Executive, or
material diminution of other employee benefits (other than any change in
employee benefits approved by the Board and implemented in a non-discriminatory
fashion with respect to all participating employees), or any other material
adverse change in his working conditions, (iv) a material breach by the Company
of other obligations under Executive's employment agreement with the Company or
a subsidiary of the Company that are not cured after 20 business days following
the Company's receipt of a written notification from Executive specifying the
particulars in reasonable detail, and (v) from and after the Closing, following
the implementation of any FCC Modifications, if NWIP exercises control over
day-to-day operating decisions, policy decisions or personnel decisions of the
Company pursuant to such FCC Modifications that (before such modifications)
would have been decisions made by the Company's management and such control
exercised by NWIP is materially more extensive (in the collective reasonable
judgment of the Senior Managers then employed by the Company) than that which
NWIP could have exercised under the agreements to which NWIP is a party relating
to the governance and operation of the Company before giving effect to the FCC
Modifications. Notwithstanding the foregoing, a termination with Good Reason
under clause (v) above shall not be deemed effective until 120 days following
written notice by the Executive to the Company of the occurrence of any of the
foregoing and only if the foregoing continue to occur as of such 120th day.
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"Joint Venture Agreement" means the Joint Venture Agreement, to be
dated the date of the Closing, among Nextel, NPI and the Company.
"Nextel" means NEXTEL Communications, Inc., a Delaware corporation.
"NPI" means Nextel Partners, Inc., a Delaware corporation.
"NWIP" means Nextel WIP Corp., a Delaware corporation and a wholly
owned subsidiary of Nextel.
"Parent Companies" means NPI and any other entity that directly or
indirectly owns all or substantially all of the Company's outstanding voting
capital stock.
"Purchase Agreement" means the Restricted Stock Purchase Agreement,
dated as of November 20, 1998, between Executive and the Company.
"Required Build" means the completion of the build out of all
Initial Sections (as defined in the Joint Venture Agreement) assigned to the
first or second Build Year (as defined in the Joint Venture Agreement), and of
any Option Sections (as defined in the Joint Venture Agreement) assigned to the
first or second Build Year that are included in the Territory (as defined in the
Joint Venture Agreement) through the Company's election under Section 6.2B of
the Joint Venture Agreement, but excluding any such Option Sections that are
included in the Territory (as defined in the Joint Venture Agreement) as a
result of the Company's response to a notice given pursuant to Section 6.2C of
the Joint Venture Agreement.
"Restricted Entities" means, collectively, the Company, Nextel and
the Parent Companies and their respective subsidiaries.
"Scheduled Completion Date" means 60 days after December 31, 2001.
"Senior Managers" means, collectively, John Chapple, John Thompson,
David Thaler, David Aas, Perry Satterlee and Mark Fanning.
"Shares" means the shares of Class A Common Stock purchased by
Executive pursuant to the Purchase Agreement.
10. Miscellaneous.
(a) Merger; Amendment. This Agreement (together with the Purchase
Agreement) constitutes the entire agreement between the parties with respect to
the subject matter hereof, and may be changed, extended or modified only by an
agreement in writing signed by the parties.
(b) Assignment. The rights and obligations of the Company in this
Agreement shall inure to its benefit and be binding upon its successors in
interest (whether by merger,
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consolidation, reorganization, sale of stock or assets or otherwise), provided
that Executive shall not remain bound by this Agreement unless such successor
assumes all of the obligations of the Company hereunder. This Agreement shall
also inure to the benefit of Executive's heirs, executors, administrators and
legal representatives. This Agreement, being for the personal services of
Executive, shall not be assignable by Executive. Certain provisions of Section 4
and 5 of this Agreement are, for the purposes specified therein, intended to
inure to the benefit of certain affiliates of the Company and to be enforceable
separately by them as provided therein.
(c) Waiver of Breach. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
(d) Arbitration. Except as otherwise provided herein, any
controversies or claims arising out of, or relating to this Agreement or the
breach thereof, shall be settled by arbitration in accordance with the
commercial rules of the American Arbitration Association, which decision shall
be final and binding on the parties, and judgment upon the award rendered shall
be entered in any court having jurisdiction thereof. Any party may demand such
arbitration in accordance with the procedures set out in those rules. The
arbitration shall be conducted in Seattle, Washington, or such other location as
may be mutually agreed upon by the parties. Special, consequential, or punitive
damages shall not be awarded by the arbitrator. In the event of any arbitration
proceeding hereunder, the Company will (x) pay the fees and expenses of the
arbitrator and (y) advance the Executive's documented out-of-pocket costs
(including reasonable counsel fees and expenses) on a current basis, provided,
that if Executive is determined not to be the substantially prevailing party on
the matters submitted for arbitration (which determination shall be made by the
arbitrator and included in his or her decision), Executive will promptly
reimburse the Company for any expenses so advanced. Executive acknowledges that
the Company is agreeing to make advances to him pursuant to the preceding
sentence in consideration of his agreement to reimburse the Company for any such
advances to the extent required by the preceding sentence. The Company will in
all events pay its own costs (including counsel fees and expenses) in connection
with any arbitration proceeding hereunder.
(e) Notices. All notices given hereunder shall be in writing and
shall be deemed to have been duly given and received (i) when delivered
personally, with receipt acknowledged in writing by the recipient, (ii) on the
tenth business day alter being sent by registered or certified mail (postage
paid, return receipt requested), (iii) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, or
(iv) on the date on which a facsimile is transmitted, in each case to the
parties at their respective addresses stated below; provided, that if the
intended recipient of any notice hereunder refuses to acknowledge receipt
thereof in writing, such notice shall be deemed to have been duly given on the
date of such refusal. Any party may change its address for notice by giving
notice of the new address to the other party in accordance with the provisions
of this paragraph.
9
<PAGE>
If to the Company:
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 08033
Attention: General Counsel
Facsimile: 425-828-8098
with a copy to:
Nextel WIP Corp.
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Facsimile: 703-394-3496
If to Executive:
Mark P. Fanning
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Facsimile: 425-828-8098
and
Mark P. Fanning
4867 Sunset Beach Road
Augurn, NY 13021
(f) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as though such
invalid or unenforceable provision were omitted.
(g) Survival. The provisions of Sections 3(d), 4, 5, 8 and 10 shall
survive any termination of this Agreement.
(h) Governing Law. This Agreement shall be interpreted according to
the internal laws of the State of New York, without regard to choice of law
rules that would result in the application of the laws of another State.
(i) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not
10
<PAGE>
alternative, and the exercise or the beginning of the exercise of any thereof by
any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(j) Waiver of Jury Trail. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
* * *
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
NEXTEL PARTNERS OPERATING CORP.
By /s/ John Chapple
---------------------------------
Name: John Chapple
Title: President and Chief Executive
Officer
------------------------------------
MARK P. FANNING
<PAGE>
IN WITNESS WHEREOF. the parties have executed this Agreement as of
the date first above written.
NEXTEL PARTNERS OPERATING CORP.
By /s/ John Chapple
---------------------------------
Name:
Title:
/s/ Mark P. Fanning
------------------------------------
MARK P. FANNING
<PAGE>
Exhibit 10.39
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>
Exhibit 10.40
EXPANSION TERRITORY
MANAGEMENT AGREEMENT
(Interim)
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into as of
September 9, 1999, by and between Nextel Partners Operating Corp., a Delaware
corporation, on behalf of itself and its wholly owned subsidiaries (the
"Manager"), and Nextel WIP Corp., a Delaware corporation (the "Licensee").
Licensee is an indirect wholly owned subsidiary of Nextel Communications, Inc.
("Nextel"). Manager and Licensee are hereinafter collectively referred to as the
"Parties."
RECITALS
A. Licensee has the right to use Federal Communications Commission (the
"FCC") Licenses (as defined below), held by one or more direct or indirect,
wholly owned subsidiaries of Nextel, to operate on the frequencies identified on
Attachment A hereto.
B. On January 29, 1999, the Parties and Nextel Partners, Inc., a Delaware
corporation that owns all of the outstanding stock of Manager ("NPI") entered
into the JV Agreement (as defined below) and other Operating Agreements (as
defined below) to enable Nextel to expand and enhance the geographic coverage of
its existing nationwide digital iDEN Specialized Mobile Radio ("SMR") network.
C. Manager and NPI have elected to expand and market Nextel's iDEN
wireless telecommunications services in the Expansion Territory (as defined
below) pursuant to the JV Agreement.
D. Simultaneously with the execution of the Agreement, Licensee will file
an appropriate application with the FCC for approval to transfer all the capital
stock of Expansion Co. (as defined below) to Manager.
E. Pursuant to other agreements, Nextel will maintain its approximate 34
percent equity interest in NPI in exchange for (among other things) authorizing
Manager, pursuant to prescribed terms, conditions, standards and procedures, to
manage the use of the frequencies authorized by the Licenses to build and
operate in the Expansion Territory an iDEN digital wireless communications
system interoperable with Nextel's national network, and to provide roaming
services to each other's customers
F. The corporate governance of NPI is by a Board of Directors (the
"Board") with a minimum of five members. Nextel has the right to designate one
Board member.
G. Pursuant to NPI's Restated Certificate of Incorporation and the JV
Agreement, for so long as Licensee owns an equity interest in NPI, without
Licensee's prior written approval neither NPI nor Manager will make any
decision: (1) to make a material change in technology;
<PAGE>
(2) to allow a sale, exchange or other disposition of all or substantially all
of its assets; or (3) to expand or broaden the scope of NPI's business beyond
the business described in Section 2.1 of the JV Agreement, including without
limitation, any decision to make any acquisition other than 800 MIHz or 900 MHz
SMR acquisitions within the term or renewal term of the JV Agreement.
H. Licensee has the option to acquire all ownership of NPI under certain
circumstances, and Licensee may have the right to acquire additional equity
interests in NPI, or be required to make additional contributions in exchange
for additional equity interests in NPI.
I. Licensee and Manager have each independently determined that their
respective business interests are best served by entering into this Agreement;
that Manager, in accordance with this Agreement, can build and implement iDEN
service in mid-sized and smaller cities more rapidly than Nextel acting alone,
and that the joint venture will expeditiously bring Nextel's unique wireless
communications services to persons living and working in the Expansion Territory
(as defined below) thereby facilitating expeditious deployment of Nextel's brand
of services on a ubiquitous nationwide basis.
J. The Parties are familiar with the FCC's rules and policies concerning
the responsibilities of SMR and Commercial Mobile Radio Service ("CMRS")
licensees and have structured this Agreement to be in compliance therewith.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the Parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms have
the meanings set forth or cross-referenced below:
Board -- see Recital F.
Effective Date -- see Section 2.
Expansion Co. means Nextel WIP Expansion Corp., a Delaware
corporation and wholly owned subsidiary of Nextel WIP Corp.
Expansion Territory means the expansion territory described on
Attachment B.
FCC -- see Recital A.
Initial Term -- see Section 2.
JV Agreement means the JV Agreement among Licensee, Manager and NPI
dated as of January 29, 1999, as it may be amended from time to time.
Licensee -- see Preamble.
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<PAGE>
Licenses mean the FCC licenses listed on Attachment A as the list
may be amended from time to time pursuant to the JV Agreement.
Management Term means the Initial Term together with any Renewal
Terms, until this Agreement is no longer in effect.
Manager -- see Preamble.
Nextel -- see Preamble
Operating Agreements means the JV Agreement together with the
Collateral Agreements (as defined in the JV Agreement).
Parties -- see Preamble.
Renewal Term -- see Section 2.
SMR -- see Recital B.
Shareholders' Agreement means the Shareholders' Agreement dated as
of January 29, 1999, by and among Licensee, NPI, and the other
stockholders of NPI.
2. Effective Date, Term, Renewals.
a. This Agreement shall become effective on the date hereof (the
"Effective Date"). Unless terminated pursuant to the provisions of Section 8
hereof, or the termination provisions of the JV Agreement, this Agreement shall
have an initial term of ten years from the Effective Date subject to extension
for up to an additional 42 months as set forth in Section 4.03(a) of the
Shareholders' Agreement (the "Initial Term").
b. So long as Manager is in compliance with the requirements of this
Agreement and the JV Agreement and so long as this Agreement remains in effect,
Manager may extend this Agreement for up to four consecutive 10-year renewal
terms (each a "Renewal Term"). To exercise its renewal option, Manager must give
written notice to Licensee, delivered not more than 180 days and not less 120
days before the Management Term would otherwise end, stating that Manager is
exercising its option to renew for an additional ten year period. Within 30 days
of receipt thereof, Licensee shall give written notice to Manager of its
acknowledgment of such renewal.
3. System Management Responsibilities. Pursuant to this Agreement,
Licensee grants Manager the right to manage the use of the frequencies
authorized by the Licenses to build out and operate an iDEN system in the
Expansion Territory pursuant to the specifications, operating and quality
standards and implementation timelines established by Licensee and set forth in
the JV Agreement and other Collateral Agreements.
- 3 -
<PAGE>
4. Brand Name.
a. Manager is required to use the Nextel brand name and other Nextel
trademarks to market digital iDEN services provided on Licensee's spectrum in
the Expansion Territory, subject to Nextel's standards and restrictions for use
of this intellectual property. In the event Nextel makes a material change in
its brand identity, Manager is required to implement such change as set forth in
the JV Agreement.
b. Nextel retains the exclusive right to advertise in national
publications or other national media. Manager's advertising is required to be
consistent with specific creative standards for advertising, which will be
substantially identical to those used by Nextel and its subsidiaries operating
an iDEN network in the United States. Manager may not deviate from such creative
standards unless it obtains Licensee's prior approval.
5. Licensee's System Standards. In carrying out the responsibilities
described in Paragraph (3) above, Manager must comply with the JV Agreement and
the other Operating Agreements setting forth Licensee's performance standards
and requirements to assure compatibility with Nextel's nationwide iDEN network
and a consistent level of customer service and satisfaction for services and
products using frequencies authorized to the Licensee and using the Nextel
brand. Subject to the more specific terms and conditions set forth in the JV
Agreement and the Collateral Agreements, Manager must comply with the
Licensee-specified standards and requirements described below (as they may be
modified from time to time pursuant to the JV Agreement and the Collateral
Agreements).
a. Required Services. Manager is required to offer all customers
operating in the Expansion Territory the products, services and capabilities
specified in Exhibit 6.1 of the JV Agreement as fundamental to Nextel's overall
product and service strategy. If Nextel provides a required service nationally,
Manager must implement the service; if Nextel provides the service in selected
areas, Manager must provide the service in comparable service areas in the
Expansion Territory, in each case no more than six months from Licensee
designating it a required service, or whenever a Nextel subsidiary implements
the service in comparable service areas, whichever occurs last.
b. Build-Out and Target Launch Dates. Manager must comply with
specific target dates for initial build out and for launching service in areas
within the Expansion Territory. This includes providing coverage to specific
areas and corridors. Prior to offering commercial service in an area, Manager
must notify Licensee at least 60 days prior to the proposed launch date at which
time Licensee has the right to promptly review Manager's operations for that
area in order to validate Manager's compliance with all launch criteria.
c. Frequency Design Standards. Manager is required to adhere to
Nextel-specified standards for use of the radio frequencies subject to the
licenses in the Expansion Territory. Licensee has the right to regularly monitor
the frequency designs and actual frequency signal performance levels to assure
compliance with such standards.
- 4 -
<PAGE>
d. Site Acquisition Standards. Manager must adhere to
Nextel-specified site acquisition standards. Licensee will have the right to
regular review of internal documents relating to such sites, including site
leases, title documents and other compliance documents to assure compliance with
such standards.
e. System Construction Standards. Manager must adhere to
Nextel-specific cell site construction standards, and, subject to the provisions
of the JV Agreement, Manager is required to choose from among a group of
Nextel-approved cell site equipment vendors. Licensee has the right to inspect
cell sites in the Expansion Territory to ensure compliance.
f. Telco Standards. Manager is required to comply with telephone
network interconnection requirements including the types of interconnection
permitted, the requirements for contracts with interconnecting
telecommunications providers and the manner in which such interconnections are
made both from cell sites to Nextel's mobile switching centers ("MSCs") and
DAPs, and to the public switched telephone network.
g. Access to Switching Facilities. Manager and Licensee will
cooperate to establish the optimum switch configuration for the Territory
(including the Expansion Territory) and to deploy DAPs so as to allow both
parties to provide seamless Direct Connect coverage to logical communities of
interest. This may include sharing switches or DAPs. Manager will participate in
regular meetings and planning with Licensee for overall network configuration
and will provide monthly forecasts of expected cell site build out and customer
traffic growth as described in the JV Agreement.
h. Network Performance Requirements. To maintain the integrity of
Nextel's national network and reputation in the marketplace, Manager must meet
specific criteria as specified in the Collateral Agreement or JV Agreement
related to the performance of the iDEN network and the level of customer
satisfaction. Manager will be required to measure and provide periodic reporting
of its performance in a format satisfactory to Licensee.
i. Customer Care Standards. Manager is responsible for providing a
minimum level of care to its customers and to use customer satisfaction
monitoring systems or vendors to carry out this function as specified in the JV
Agreement. Additionally, in order to maintain a consistent "back office"
operating process and exchange of network, operating and customer information,
Manager may be required to use Nextel's "back office" systems platform for
activities such as order entry, order management, inventory management, customer
provisioning, and the production of call detail records for billing purposes.
j. Service and Equipment Pricing. Manager is permitted to manage the
use of the Licenses only for services that adhere to the service pricing
structure specified in the JV Agreement that Nextel considers fundamental to its
brand identity and that differentiates Nextel's services among wireless
communications providers. Manager will have the opportunity to participate in
discussions concerning modifications to the specific pricing structures and
introducing new specific pricing structures, but final decisions relating to
pricing structures will
- 5 -
<PAGE>
be in Licensee's sole discretion. Manager will be responsible for setting local
pricing plans consistent with Licensee's service pricing structure, as described
above.
6. FCC Compliance. The parties will comply with all applicable FCC rules
and regulations governing the Licenses or the Systems. Without limiting the
generality of the foregoing:
a. Licensee, at all times during which it continues to hold the
Licenses through its ownership of all of the capital stock of Expansion Co.,
retains ultimate supervisory control over the use of the Licenses. Manager will
not represent itself as the federal licensee of SMR service offered on the iDEN
systems in the Expansion Territory or otherwise on Nextel's nationwide iDEN
network.
b. With appropriate notice to, consultation with and participation
by Manager, Licensee will represent Manager (i) before all state regulatory
agencies with respect to matters within such agencies' jurisdiction that require
the representation or appearance of the owner of the Licenses and that have not
been or cannot be delegated to Manager pursuant to paragraph c. below; and (ii)
before the FCC with respect to any matters relating to the Licenses, the
operation of the systems in the Expansion Territory as it relates to any FCC
rules, regulations, policies or provisions of the Communications Act of 1934, as
amended, and any FCC correspondence and filings. Licensee will, with the
assistance and cooperation of Manager, take all actions necessary to keep the
Licenses in force and shall timely prepare and submit to the FCC or any other
relevant governmental authority all reports, applications, renewals, filings or
other documents necessary to keep the Licenses and any certificates of public
convenience and necessity or other state regulatory approvals in force and in
good standing.
c. Nothing in the preceding paragraph precludes Licensee from
delegating to Manager responsibility to obtain and maintain in good standing all
business licenses required by state, local or municipal governments, to file
annual or other reports required by such governments, and to prepare and file
all federal, state and local tax returns and tax payments. Additionally,
Licensee will require Manager to assure that the iDEN systems in the Expansion
Territory comply with all applicable governmentally-mandated regulatory programs
including, but not limited to, Federal Universal Service Fund assessments, state
universal service programs, Enhanced 911, Telecommunications Relay Services for
the Speech and Hearing Impaired, local number portability, calling party pays
services, and priority access requirements. Such compliance may include
collecting applicable fees from subscribers and payment of governmental
assessments for such programs.
d. Nothing in this Agreement or the Operating Agreements is intended
to diminish or restrict Licensee's (or any other wholly owned Nextel
subsidiary's) obligations as an FCC licensee and both parties desire that this
Agreement be in compliance with the rules and regulations of the FCC. In the
event that the FCC determines that any provision of this Agreement violates any
FCC rule, policy or regulation, both parties will implement in good faith the
provisions of the Operating Agreements consistent with the intent of this
Agreement to be in compliance with FCC rules, policies and regulations. In the
event of a dispute between the parties about such implementation, the dispute
will be resolved under the applicable provisions
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<PAGE>
of the JV Agreement (which may, depending on the relevant circumstances, include
Section 4.12C and/or Article 12 of the JV Agreement).
7. Systems Revenues and Expenses. Manager will independently finance its
build-out and operations. Manager will collect all revenues from the operation
of the iDEN systems in the Expansion Territory, subject to the terms of the
Operating Agreements. Licensee will benefit from these revenues by virtue of its
equity interest in NPI.
8. Termination. This Agreement will terminate upon the occurrence of any
of the following:
a. If Licensee acquires all equity ownership of NPI under the
Shareholders' Agreement, or the charter documents of NPI or otherwise.
b. Termination of the JV Agreement.
c. The FCC approves the transfer of all of the capital stock of
Expansion Co. to Manager, or Manager otherwise becomes the holder, or the
beneficial owner of all of the capital stock of the holder, of the Licenses.
9. Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and shall be deemed given: (a) when
received if personally delivered; (b) within 5 days after being sent by
registered or certified mail, return receipt requested, postage prepaid; (c)
within 12 hours after being sent by telecopy, with confirmed answerback; or (d)
within 1 business day of being sent by priority delivery by established
overnight courier, to the parties at their respective addresses set forth below.
Any party by written notice to the others given in accordance with this Section
9 may change the address or the persons to whom notices or copies thereof are to
be directed.
a. If to Licensee, to:
Nextel WIP Corp.
2001 Edmund Halley Drive
Reston,VA 20191
Attn:General Counsel
Telecopy: (703) 433-4231
b. If to Manager, to:
Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
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<PAGE>
10. Waivers; Amendment. Except as otherwise provided in this Agreement,
any party may waive, in writing, compliance by the other party thereto (to the
extent such compliance is for the benefit of the party giving such waiver) with
any of the terms, covenants or conditions contained in this Agreement (except as
may be imposed by law). Any waiver by any party of any violations of, breach of,
or default under, any provision of any of this Agreement, by any other party
will not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of, or default under, any other
provision of this Agreement. This Agreement may be amended only by a writing
executed by the parties.
11. Successors and Assigns. Manager's rights and obligations under this
Agreement are personal to Manager and Manager may not assign any rights or
delegate any duties under this Agreement except to a direct or indirect wholly
owned subsidiary (with which Manager agrees to remain jointly and severally
liable for performance of its obligations hereunder). Licensee may not assign
its rights herein except to a wholly-owned subsidiary of Licensee, or in
accordance with the provisions of Section 13.7 of the JV Agreement.
12. Governing Law; Severability. This Agreement is governed by and is to
be construed in accordance with the laws of the State of New York, except as to
matters governed by the rules and regulations of the FCC or the Communications
Act of 1934, as amended, which shall be governed thereby. In the event that any
provision herein is held to be invalid, void or illegal by the FCC or any court
of competent jurisdiction, the remaining provisions of this Agreement shall
remain in full force and effect and this Agreement is to be construed to
preserve the original intent of the parties hereto insofar as practical.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which is an original, but all of which together constitute
one and the same instrument.
14. Interpretation. a. This Agreement has been prepared and negotiations
in connection herewith have been carried on by the joint efforts of the parties.
This Agreement is to be construed fairly and simply and not strictly for or
against either of the parties hereto.
b. The headings contained in this Agreement are solely for
convenience of reference and are not given any effect in the construction or
interpretation of this Agreement.
c. This Agreement, including, without limitation, Sections 4 and 5,
contains descriptions of certain rights and obligations of the parties that are
more specifically detailed in the JV Agreement, the Operating Agreements and the
Shareholders' Agreement (together with the JV Agreement and the Operating
Agreements, the "Other Agreements"). In the event of any inconsistency between
the summary descriptions (including, without limitation, those in Sections 4 and
5 of this Agreement), and the corresponding provisions in the Other Agreements,
the provisions of the Other Agreements control. In the event that there are
additional provisions in the Other Agreements that supplement the summary
descriptions of this Agreement, the additional provisions of the Other
Agreements control.
15. Entire Agreement This Agreement and the Other Agreements embody the
entire agreement and understanding between the parties hereto relating to the
subject matter
- 8 -
<PAGE>
hereof and supersede all prior agreements and understandings relating to the
subject matter hereof.
* * *
- 9 -
<PAGE>
IN WITNESS WHEREOF. the parties hereto have executed this Agreement as of
the date first above written.
NEXTEL PARTNERS OPERATING CORP.
(as Manager)
By: /s/ John Thompson
-------------------------------------
Name: John Thompson
Title: Chief Financial Officer and
Treasurer
NEXTEL WIP CORP. (as Licensee)
By:
-------------------------------------
Name: Alan Strauss
Title: Vice President
<PAGE>
IN WITNESS WHEREOF. the parties hereto have executed this Agreement as of
the date first above written.
NEXTEL PARTNERS OPERATING CORP.
(as Manager)
By:
-------------------------------------
Name: John Thompson
Title: Chief Financial Officer and
Treasurer
NEXTEL WIP CORP. (as Licensee)
By: /s/ Alan Strauss
-------------------------------------
Name: Alan Strauss
Title: Vice President
<PAGE>
MANAGEMENT AGREEMENT
Attachment A
SMR LICENSES
[publicly available at
http://www.fcc.gov/searchtools.html]
<PAGE>
MANAGEMENT AGREEMENT
Attachment B
Expansion Territory
<PAGE>
Expansion Territory
<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
=======================================================================================================================
<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
==============================================================================================================================
</TABLE>
Page 1 of 2
<PAGE>
Expansion Territory
<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>
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>
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 2 of 2
<PAGE>
Exhibit 10.41
EXPANSION TERRITORY ASSET TRANSFER AND REIMBURSEMENT AGREEMENT
Between
NEXTEL WIP CORP.
and
NEXTEL PARTNERS OPERATING CORP.
Dated as of September 9, 1999
<PAGE>
EXPANSION TERRITORY ASSET TRANSFER AND
REIMBURSEMENT AGREEMENT
This EXPANSION TERRITORY ASSET TRANSFER AND REIMBURSEMENT AGREEMENT (this
"Agreement"), dated as of September 9, 1999, is between Nextel Partners
Operating Corp., a Delaware corporation (the "Company"), and Nextel WIP Corp., a
Delaware corporation ("NWIP"). Capitalized terms used in this Agreement, but not
defined herein or in Schedule A attached hereto, have the meanings set forth in
Article 1 of the JV Agreement.
RECITALS
A. Nextel, through its Subsidiaries, operates an iDEN-based wireless
communications system through which it provides wireless communications services
in various markets throughout the United States. To enhance its ability to
provide its customers with greater geographic coverage that is consistent with
its existing service, operations and objectives, Nextel, through NWIP, entered
into a contractual joint venture with NPI and its wholly owned Subsidiaries,
including the Company.
B. The agreement of the parties with respect to the formation and
operation of the contractual joint venture is set forth in the JV Agreement and
various Collateral Agreements.
C. Pursuant to the JV Agreement, NPI and the Company have elected to
expand and market Nextel's iDEN wireless telecommunications services in the
Expansion Territory.
D. NWIP desires to transfer to the Company, and the Company desires to
acquire from NWIP, certain assets, properties, rights and interests to be used
in connection with the construction and operation of the Company's iDEN-based
wireless communications system in the Expansion Territory (the "Business"), all
upon the terms and conditions and in exchange for the consideration set forth
herein.
In consideration of the mutual promises and covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NWIP and the Company hereby agree as follows:
AGREEMENT
1. TRANSFER OF ASSETS.
1.1 Asset Transfer. On the terms and subject to the provisions of
this Agreement, NWIP hereby transfers, conveys and assigns to the Company, and
the Company hereby purchases, accepts and receives, all of NWIP's right, title
and interest in and to assets and rights described below (the "Assets"):
1.1(a) The owned tangible personal property and equipment used in or
relating to the operation of the Business including but not limited to
base radios, EBTS, combiners, other digital mobile radio transmission
equipment, antennas, antenna dishes, base units,
<PAGE>
GPS units, tower top amplifiers, controller racks, converters, enclosures
and RF distribution racks;
1.1(b) The leases for tangible personal property, the subscriber
agreements, other contracts and commitments, and other agreements for the
purchase or sale of goods or services relating to the Business as
identified on Schedule 1.1(b);
1.1(c) The construction plans, site acquisition plans, RF design
plans and other records and plans relating exclusively to the Business,
customer deposits and prepayments made by customers of the Business, other
payables and receivables of the Business and permits relating exclusively
to the Business; and
1.1(d) The lessee's interest under the leases of real property
(including leases for raw land) located in the Expansion Territory and
used exclusively or acquired to be used exclusively in the Business,
together with any improvements owned by NWIP or the lessee and located
thereon, as identified on Schedule 1.1(d) (the "Leases") subject to
Section 1.3. At the option of the Company, in lieu of a direct assignment
of such leases to the Company, NWIP may assign all of the Leases to Nextel
WIP Lease Corp., a Delaware corporation ("Lease Co."). To the extent that
NWIP is not the holder of the lessee's or sublessee's interests under the
Leases, NWIP will cause such lessees or sublessees to execute and deliver
assignments of the Leases to the Company or, at the election of the
Company, to Lease Co. At the request of the Company, NWIP will execute or
cause to be executed confirmatory assignments by the holder or holders of
the possessory interests under the Leases being assigned.
1.2 Excluded Assets. No assets of NWIP, other than the Assets, are
transferred to the Company under this Agreement. No assets of any member
of the Nextel Group other than NWIP are transferred to the Company under
this Agreement. Additionally, the Assets transferred under this Agreement
specifically exclude any ownership or lease rights in:
1.2(a) FCC licenses;
1.2(b) Sites and Antenna Sites;
1.2(c) Any assets owned by third parties;
1.2(d) Trademarks, service marks, and all other intellectual
property owned by NWIP, Nextel or any member of the Nextel Group;
1.2(e) Any assets located outside the Territory or Expansion
Territory owned by NWIP, Nextel or any member of the Nextel Group;
1.2(f) Any assets used by NWIP, Nextel or any other member of the
Nextel Group in the Expansion Territory in businesses other than the
Business, including, but not limited to, those used in the operation of
analog based communications services;
-2-
<PAGE>
1.2(g) Any leases of real property located in the Expansion
Territory and not identified on Schedule 1.1(d);
1.2(h) Any subscribers and the relevant billing and accounting
records relating to such subscribers in the Expansion Territory. These
subscribers and records will be transferred at a later date and on terms
to be agreed upon by NWIP and the Company. Until that time, any
subscribers in the Expansion Territory will remain subscribers of Nextel;
and
1.2(i) The SMR Management Agreement, by and between Twin Cities
Technologies, Inc. and Pittencrieff Communications, Inc., dated as of July
1, 1999.
1.3 Nonassignable Rights.
1.3(a) Nonassignability. To the extent that any contract, permit,
right, lease or agreement enumerated in Section 1.1 cannot be validly
assigned, transferred or subleased without the consent or waiver of the
issuer thereof or another party thereto or any third person (including a
government or governmental unit), or if such assignment, transfer or
sublease or attempted assignment, transfer or sublease would constitute a
breach thereof or a violation of any law, decree, order, regulation or
other governmental edict, this Agreement is not an assignment, transfer or
sublease thereof, or an attempted assignment, transfer or sublease
thereof.
1.3(b) NWIP to Use Best Reasonable Efforts. NWIP is not obligated to
transfer to the Company any of the Assets described in Section 1.3(a)
without first having obtained all necessary consents and waivers. Upon
request of the Company, NWIP shall use its best reasonable efforts, and
the Company shall reasonably cooperate with NWIP, to obtain any consents
and waivers necessary to convey or cause to be conveyed to the Company or
Lease Co. any of the Assets described in Section 1.3(a). NWIP shall
promptly convey to the Company or to Lease Co. at the Company's election
any Assets described in Section 1.3(a) for which NWIP has received the
necessary consents and waivers. NWIP will not be obligated to pay any
additional consideration to the person from whom any consent or waiver is
requested unless the Company requests in writing that NWIP make such
payment and the parties agree how to share that cost.
1.3(c) If Waivers or Consents Cannot be Obtained. If, after using
its best reasonable efforts, NWIP is unable to obtain any of the necessary
consents or waivers described in Section 1.3(a), NWIP shall, as to any
particular contract, permit, right, lease or agreement, only with respect
to the current term thereof as of the date of this Agreement (i) provide
to the Company, to the fullest extent possible, the benefits of any
license, permit or approval and of any lease, contract, license or other
agreement or commitment, all as referred to in Section 1.3(a), and (ii)
cooperate in any reasonable and lawful arrangement designed to provide
such benefits to the Company. The Company shall promptly pay or reimburse
NWIP for all costs and expenses paid by NWIP to the appropriate third
party under the terms of such contract, permit, right, lease or agreement.
At the end of the current term of any such contract, permit, right, lease
or agreement, NWIP shall have no further duties or obligations hereunder
with respect to such licenses,
-3-
<PAGE>
permits and approvals and such leases, contracts, licenses and other
agreements and commitments and the failure to obtain any necessary consent
or waiver with respect thereto will not be a breach of this Agreement.
1.3(d) Company to Perform. To the extent that the Company is
provided, pursuant to this Section 1.3, the benefits of any contract,
permit, right, lease or agreement (each a "Provided Obligation"), the
Company shall perform for the benefit of the issuer thereof or the other
party or parties thereto, the obligations of NWIP or of any other member
of the Nextel Group thereunder or in connection therewith as such
obligations relate to the Business or the Assets. If the Company fails to
perform as required by this Section 1.3(d), NWIP will thereafter cease to
be obligated under this Section 1.3 with respect of the Provided
Obligation that is the subject of the failure to perform until the
earliest of the following: (i) the situation is remedied, (ii) at the sole
option of NWIP, the Company promptly pays or reimburses NWIP for all costs
incurred by NWIP during the period of failure of performance, or (iii)
NWIP's responsibilities with respect to the Provided Obligation expire
under Section 1.3(c). The Company shall indemnify NWIP and hold it
harmless from and against any and all loss, cost, damage or expense
arising from or related to the Company's failure to perform any Provided
Obligation.
2. ASSUMPTION OF LIABILITIES.
2.1 Disclosed Liabilities. The Company hereby assumes and agrees to
pay, perform and discharge when due the liabilities and obligations of NWIP and
of any other member of the Nextel Group, whether primary or secondary, absolute
or contingent, direct or indirect, that are identified on Schedule 2.1.
2.2 Ordinary Course Liabilities. The Company hereby assumes and
agrees to pay, perform and discharge when due the liabilities and obligations of
NWIP and of any other member of the Nextel Group, whether primary or secondary,
absolute or contingent, direct or indirect, that arose or were incurred in the
ordinary course of business consistent with the past practice of the Nextel
Group in connection with the construction, design or operation of an ESMR
Network in the Expansion Territory before the date of this Agreement or that
arise from the ownership or operation of the Assets. If there are any such
liabilities that relate to a particular asset that were not taken into account
in the value of the asset for purposes of the payment under Section 5.1(b), it
will be corrected in the True Up.
2.3 Undisclosed Liabilities. Subject to its indemnity rights under
Section 2.4, the Company hereby assumes and agrees to pay, perform and discharge
when due the undisclosed liabilities and obligations of NWIP and of any other
member of the Nextel Group whether primary or secondary, absolute or contingent,
direct or indirect, that arose or were incurred outside the ordinary course of
business (including violations of law and breaches of contract) before the date
of this Agreement and that arise from the ownership or operation of the Assets
(collectively, "Undisclosed Liabilities").
-4-
<PAGE>
2.4 Limitation on Company Liability.
2.4(a) The maximum aggregate liability of the Company and its
subsidiaries for Undisclosed Liabilities is $125,000, and NWIP hereby
agrees to defend, indemnify and hold the Company and its subsidiaries
harmless from and against any Undisclosed Liabilities in excess of
$125,000. To make a claim for indemnification under this Section 2.4, the
Company must provide written notice to NWIP, within 180 days after the
date of this Agreement, describing in reasonable detail (to the extent
known) each Undisclosed Liability for which indenmification is sought,
including the nature and amount thereof, all relevant parties and their
relationships to the Assets, and copies of any relevant documents.
Promptly after receiving any additional information about any claim made
hereunder, the Company will forward such information to NWIP. NWIP shall
pay the Company the amount of any such Undisclosed Liability (in excess of
$125,000) in cash within 20 days after receipt of any such notice. Any
dispute under this Section 2.4 shall be resolved under the dispute
resolution procedures set forth in Article 12 of the JV Agreement.
2.4(b) The Company's right of indemnification under this Section 2.4
relates only to Undisclosed Liabilities and is limited to any claims made
before the date that is 180 days from the date of this Agreement. If any
such claim for indemnification is asserted by the Company, it may be made
only in the manner and during the 180-day period provided in Section
2.4(a). Indemnification may not be sought under this Section 2.4 for any
liabilities or obligations other than Undisclosed Liabilities. Once the
180-day period expires, this right of indemnification is then
extinguished, and the Company may make no further claims for
indemnification regarding any liabilities (whether undisclosed or
otherwise) relating to the Assets against NWIP or any other member of the
Nextel Group except for continuing claims for Undisclosed Liabilities for
which the Company gave the notice required by Section 2.4(a) within the
180-day period. If the Company fails to make a claim for indemnification
in compliance with this Section 2.4 within 180 days after the date of this
Agreement, then this right of indemnification will immediately expire, and
the Company may make no claim for indemnification regarding any
liabilities (whether undisclosed or otherwise) relating to the Assets
against NWIP or any other member of the Nextel Group.
2.5 Subrogation of Company. The Company is subrogated to all rights
of NWIP and any other subsidiary of Nextel under any insurance policies covering
any liabilities assumed by the Company under this Article 2 ("Assumed
Liabilities") and with respect to such assumed liabilities, shall be named as an
additional insured under any such policies, and any proceeds of any such
policies that are received by NWIP or any other subsidiary of Nextel in respect
of any such liability shall be held in trust for the benefit of the Company.
NWIP will use its best reasonable efforts to ensure such subrogation of the
Company. The Company may assert any counterclaim of NWIP or of any other
subsidiary of Nextel so long as the counterclaim relates only to the Assets or
the Business and does not relate to any other business of any member of the
Nextel Group in or outside the Expansion Territory or to any assets retained by
any other member of the Nextel Group.
-5-
<PAGE>
2.6 Liabilities Arising After the Closing. The Company is
responsible for all liabilities and obligations relating to the Assets, whether
known or unknown, primary or secondary, absolute or contingent, direct or
indirect, that arise or are incurred on or after the date of this Agreement.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Assets. NWIP represents and warrants to the Company that as of
the date of this Agreement, it (or, in the case of any leases of real
property constituting Assets, one or more of its affiliates) has good and
marketable title to the Assets free and clear of all Liens other than
Permitted Liens. EXCEPT AS OTHERWISE STATED IN THIS SECTION 3.1, (i) THE
ASSETS ARE TRANSFERRED TO THE COMPANY AS IS, WHERE IS, AND (ii) NWIP
DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
4. PAYMENT AND ADJUSTMENTS.
4.1 Payment. The Company shall pay to NWIP upon execution and
delivery hereof (the "Closing") the amount of $10,593,033 payable in immediately
available funds by wire transfer to an account designated by NWIP in writing for
this purpose. This payment (the "Closing Date Payment") is the sum of the
following:
(a) $7,022,857 as reimbursement for certain costs and expenses; plus
(b) $3,570,176 as payment for the other Assets.
4.2 Post-Closing Adjustment. The Closing Date payment is subject to
a post-closing adjustment as set forth in Schedule 5.2.
4.3 Taxes. The Company must pay sales and use taxes, and NWIP must
pay transfer taxes relating to or arising from the transfer of the Assets to the
Company.
5. MISCELLANEOUS.
5.1 Further Assurances.
5.1(a) After the date of this Agreement, NWIP shall, from time to
time, at the Company's request, execute and deliver to the Company such
other instruments of conveyance and transfer and take such other action as
the Company may reasonably request to more effectively transfer, assign,
deliver and vest in the Company title to and possession of the Assets as
provided in this Agreement or otherwise to consummate the transactions
contemplated by this Agreement. After the date of this Agreement, the
Company shall from time to time, at NWIP's request, execute and deliver
such other
-6-
<PAGE>
instruments of assumption and take such other action as NWIP may
reasonably request to more effectively assume the Assumed Liabilities or
otherwise to consummate the transactions contemplated by this Agreement.
5.1(b) After the date of this Agreement, if NWIP learns of
agreements or permits that were used or acquired for use exclusively in
connection with the Business in the Expansion Territory, NWIP may identify
them in writing to the Company and the Company will, if such agreement or
permit does not conflict with obligations undertaken by the Company,
assume the new agreement as an additional Assumed Liability hereunder.
5.1(c) After the date of this Agreement, if NWIP learns of Assets
that were used or acquired for use exclusively in connection with the
Business in the Expansion Territory and were not transferred to the
Company on the date hereof, NWIP will identify them in writing to the
Company, and the Company may, if such Asset does not conflict with
obligations undertaken by the Company, accept such Assets as additional
Assets hereunder. Any consent required for the assignment of any such
Asset to the Company shall be obtained by and at the expense of NWIP.
5.2 Waiver of Bulk Sales Compliance. To the extent they apply, the
Company waives compliance by NWIP with the provisions of the "bulk sales" law of
any state including, without limitation, the provisions of Article 6 of the
Uniform Commercial Code as enacted in any applicable state.
5.3 Choice of Law. This Agreement shall be governed by New York law,
without regard to choice of law rules that would result in the application of
another state's law.
5.4 Excusable Delay/Time Extension. Where performance by any party
to this Agreement is delayed by reason of an Excusable Delay (as defined in the
JV Agreement), the time for performance, and any otherwise applicable time
limit, schedule or deadline, shall be extended for a period of time equal to the
period of Excusable Delay.
5.5 Amendments. This Agreement may be amended only by a writing
executed by the parties.
5.6 Entire Agreement. This Agreement and the other Expansion
Transaction Documents, together with the Transaction Documents, set forth the
entire understanding of the parties hereto and thereto with respect to the
subject matter hereof and thereof, and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, whether oral or written, between the parties.
5.7 Notices. Any notice, request or other communication required or
permitted hereunder must be in writing and is given: (a) when received if
personally delivered; (b) 12 hours after being sent by telecopy, with confirmed
answerback; or (c) 1 business day after being sent by priority delivery by
established overnight courier, to the parties at their respective addresses set
forth below.
-7-
<PAGE>
To NWIP: Nextel WIP Corp.
2001 Edmund Halley Drive
Reston, Virginia 20191
Attention: General Counsel
Telecopy: (703) 433-4231
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Jeanne M. Rickert
Telecopy: (216) 579-0212
To the Company: Nextel Partners Operating Corp.
4500 Carillon Point
Kirkland, WA 98033
Attention: General Counsel
Telecopy: (425) 828-8098
With a copy to: Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Gary D. Friedman
Telecopy: (212) 355-6401
Any party by written notice to the others given in accordance with this Section
6.7 may change the address or the persons to whom notices or copies thereof are
to be directed.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, and all of which
together will constitute one and the same instrument.
5.9 Waiver. Except as otherwise provided in this Agreement, any
party may waive, in writing, compliance by the other parties thereto (to the
extent such compliance is for the benefit of the party giving such waiver) with
any of the terms, covenants or conditions contained in this Agreement (except as
may be imposed by law). Any waiver by any party of any violation of, breach of,
or default under, any provision of any of this Agreement, by any other party
will not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of, or default under, any other
provision of this Agreement.
5.10 Third Parties. Nothing expressed or implied in this Agreement
is intended, or may be construed, to confer upon or give any person or entity
other than the parties hereto any rights or remedies hereunder.
5.11 Severability. If any provision of this Agreement or the
application of such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or
-8-
<PAGE>
unenforceability will not affect any other provision of this Agreement or
invalidate or render unenforceable such provision in any other jurisdiction. The
parties will, to the extent lawful and practicable, use their best reasonable
efforts to enter into arrangements to reinstate the intended benefits of any
provision held invalid, illegal or unenforceable.
5.12 Construction.
5.12(a) Words used in this Agreement, regardless of the number or
gender specifically used, will be deemed and construed to include any
other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires. The parties hereto have
participated equally in the drafting of this Agreement and no presumption
or burden of proof shall arise favoring or disfavoring any party by virtue
of authorship of any provision of this Agreement.
5.12(b) The schedules and exhibits attached to this Agreement are
incorporated herein and are part of this Agreement for all purposes.
Unless otherwise stated, any reference in this Agreement to an exhibit,
section or schedule is to an exhibit, section or schedule of this
Agreement.
5.12(c) The headings in this Agreement are solely for convenience of
reference and are not to be given any effect in the construction or
interpretation of this Agreement.
5.13 Agreement. This Agreement is to be construed as if it were one
of the Collateral Agreements identified in the JV Agreement, so that certain
provisions of the JV Agreement by their terms apply to this Agreement,
including, without limitation, Section 2.6, Article 12, and Section 13.2, and
Section 13.10.
[Remainder of page intentionally left blank]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the day and year first above
written.
NEXTEL WIP CORP.
By:__________________________________________
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John D. Thompson
------------------------------------------
Name: John Thompson
Title: Chief Financial Officer and Treasurer
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the day and year first above
written.
NEXTEL WIP CORP.
By: /s/ Alan Strauss
------------------------------------------
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By:__________________________________________
Name: John Thompson
Title: Chief Financial Officer and Treasurer
-10-
<PAGE>
DISCLOSURE SCHEDULES FOR THE
EXPANSION TERRITORY ASSET TRANSFER AND
REIMBURSEMENT AGREEMENT
BETWEEN NEXTEL WIP CORP. AND NEXTEL PARTNERS OPERATING CORP.
DATED AS OF SEPTEMBER 9, 1999
The Schedules attached hereto are subject to the following terms and conditions:
1. The introductory language and headings in the Schedules are inserted for
convenience only and shall not create a different standard for disclosure
than the language set forth in this Agreement.
2. The inclusion of any item in the Schedules when listing a "material" item
or an action "not in the ordinary course of business" is not deemed to be
an admission or representation that the included item is "material" or is
"not in the ordinary course of business."
3. Each capitalized term used herein and not otherwise defined shall have the
meaning given to such term in this Agreement.
4. Any matter disclosed in any section or subsection of the Schedules shall
be deemed disclosed for the purposes of any other schedule in which it is
reasonably clear that such disclosure may be relevant.
5. This Schedule is fully incorporated into and made a part of the Expansion
Territory Asset Transfer and Reimbursement Agreement, dated as of
September 9, 1999, between Nextel WIP Corp. and Nextel Partners Operating
Corp.
<PAGE>
SCHEDULE A
Defined Terms
"Agreement" has the meaning set forth in the preamble to this Agreement.
"Antenna Site" has the meaning set forth in the Master Site Lease.
"Assets" has the meaning set forth in Section 1.1.
"best reasonable efforts" has the meaning set forth in the JV Agreement.
"Business" has the meaning set forth in the recitals to this Agreement.
"Company" has the meaning set forth in the preamble to this Agreement.
"Expansion Territory" means the option sections described on Schedule B.
"Expansion Transaction Documents" means this Agreement, Expansion
Territory Interim Management Agreement, by and between the Company and NWIP, of
even date herewith and Expansion Subscription and Contribution Agreement by and
between NPI, NWIP, DLJ Merchant Banking Partners II, L.P., Eagle River
Investments, L.L.C., Motorola, Inc. and the other investors named therein, of
even date herewith.
"JV Agreement" means the Joint Venture Agreement, by and among NWIP, NPI
and the Company, dated as of January 29, 1999.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset unless the agreement related to such financing is listed
on any Schedule hereto, and (c) any purchase option or other right or interest
of a third party thereto.
"Master Site Lease" means the Master Site Lease, between NWIP and the
Company, dated as of January 29, 1999.
"Nextel" means Nextel Communications, Inc., a Delaware corporation.
"NPI" means Nextel Partners, Inc., a Delaware corporation.
"NWIP" has the meaning set forth in the preamble to this Agreement.
"Permitted Liens" means (i) liens imposed by law for taxes that are not
yet due or are being contested, (ii) carriers', warehouseman's, mechanics',
landlords', lessors', materialmans', repairman's and other like liens imposed by
law, arising in the ordinary course of business and
<PAGE>
securing obligations that are not overdue by more than 30 days, (iii) pledges
and deposits made in the ordinary course of business in compliance with workers
compensation, unemployment insurance and other social security laws or
regulations, (iv) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeals bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business, (v) easements, zoning restrictions, rights of way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of the Business, (vi) precautionary Uniform Commercial Code filings made
with respect to office and similar equipment, or vehicles, leased in the
ordinary course of business under operating leases (i.e., leases not required to
be classified and accounted for as capital leases on a balance sheet under
GAAP), and (vii) Uniform Commercial Code filings made with respect to the sale
or assignment of customer lease contracts (and related rental payments) or the
portion of accounts receivable and related payments due under customer service
contracts, or as set forth in customer account statements, that are attributable
to the rental or leasing of subscriber equipment leased to customers of Nextel
or the Business.
"Site" has the meaning set forth in the Master Site Lease.
"Subsidiary" of a specified person means a corporation, partnership,
limited liability company or other entity in which the specified person directly
or indirectly owns or controls the shares of stock having ordinary voting power
to elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company or other
entity.
-2-
<PAGE>
SCHEDULE B
Expansion Territory
<PAGE>
Expansion Territory
<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
=======================================================================================================================
<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
==============================================================================================================================
</TABLE>
Page 1 of 2
<PAGE>
Expansion Territory
<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>
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>
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 2 of 2
<PAGE>
SCHEDULE 1.1(b)
Contracts
None
<PAGE>
SCHEDULE 1.1(d)
Leases
<PAGE>
Midwest Territories
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------
Nextel Site ID Information
------------------------------------------------------
Service Partner's Service Project Project Name Nextel's Site
Region # Section # Area # Area Name Code (Site Name) Market Name Leased
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C> <C> <C>
2 4 122 I-70W: Indianapolis-Terre Haute IN2505 Terra Haute Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
2 4 122 I-70W: Indianapolis-Terre Haute IN2506 Prarrie City Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
2 4 122 I-70W: Indianapolis-Terre Haute IN2507 Reelsville Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Nextel Site ID Information
- -----------------------------------------------------------------
Project Project Name Lease Lease
Code (Site Name) Rate Commencement Date
- -----------------------------------------------------------------
<S> <C> <C> <C>
IN2505 Terra Haute $ 600 C or 7/1/99
- -----------------------------------------------------------------
IN2506 Prarrie City $3000 per yr ComOp* or 7/1/99
- -----------------------------------------------------------------
IN2507 Reelsville $ 334 C or 7/1/99
- -----------------------------------------------------------------
*Commerical Operation
</TABLE>
<PAGE>
LEASES
Arkansas Territories
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
------------------------------------------------------
Nextel Site ID Information
------------------------------------------------------
Service Partner's Service Project Project Name Nextel's Site
Region # Section # Area # Area Name Code (Site Name) Market Name Leased
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <S> <C> <C> <C>
3 30 182 I-30 AR8019 Taturn Blanket Complete
- ------------------------------------------------------------------------------------------------------------
3 30 182 I-30 AR8023 Huff Blanket Complete
- ------------------------------------------------------------------------------------------------------------
3 30 182 I-30 AR8024 Three Lakes Blanket Complete
- ------------------------------------------------------------------------------------------------------------
[ILLEGIBLE LINE]
- ------------------------------------------------------------------------------------------------------------
4 30 444 I-40 AR8010 Jacksonville Blanket Complete
- ------------------------------------------------------------------------------------------------------------
4 30 444 I-40 AR8011 Lonoke Blanket Complete
- ------------------------------------------------------------------------------------------------------------
4 30 444 I-40 AR8012 Greenwalt Blanket Complete
- ------------------------------------------------------------------------------------------------------------
4 30 444 I-40 AR8013 AG Pro Tank Blanket Complete
- ------------------------------------------------------------------------------------------------------------
[ILLEGIBLE LINE]
- ------------------------------------------------------------------------------------------------------------
4 30 182 I-30 AR8032 Cook Blanket Complete
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
- -------------------------------------------------------------
Nextel Site ID Information
- -------------------------------------------------------------
Project Project Name Lease Lease
Code (Site Name) Rate Commencement Date
- -------------------------------------------------------------
<S> <C> <C> <C>
AR8019 Taturn $ 500.00 C or 10/1/98
- -------------------------------------------------------------
AR8023 Huff $ 500.00 C or 10/1/98
- -------------------------------------------------------------
AR8024 Three Lakes $ 500.00 C or 10/1/98
- -------------------------------------------------------------
[ILLEGIBLE LINE]
- -------------------------------------------------------------
AR8010 Jacksonville $ 500.00 C or 10/1/98
- -------------------------------------------------------------
AR8011 Lonoke $ 500.00 C or 10/1/98
- -------------------------------------------------------------
AR8012 Greenwalt $ 500.00 C or 10/1/98
- -------------------------------------------------------------
AR8013 AG Pro Tank $ 500.00 C or 10/1/98
- -------------------------------------------------------------
[ILLEGIBLE LINE]
- -------------------------------------------------------------
AR8032 Cook $ 500.00 C or 10/1/98
- -------------------------------------------------------------
</TABLE>
<PAGE>
Texas Territories
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nextel Site ID Information
- --------------------------------------------------------------------------------
Project Project Name Nextel's Site Lease Lease
Code (Site Name) Market Name Leased Rate Commencement Date
- --------------------------------------------------------------------------------
[ILLEGIBLE LINE]
- --------------------------------------------------------------------------------
<PAGE>
Georgia Territories
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Nextel Site ID Information
----------------------------------------------------------------------------------
Service Partner's Service Project Project Name Nextel's Site Lease Lease
Region # Section # Area # Area Name Code (Site Name) Market Name Leased Rate Commencement Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
3 34 559 I-75 South GA1047 Forsyth Southeast Complete $ 500.00 10/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1048 Bolingbroke Southeast Complete $ 300.00 12/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1050 Buckeye Road Southeast Complete $ 800.00 8/25/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1052 Henderson Miller Southeast Complete $ 800.00 9/12/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1053 Unidilla Southeast Complete $ 800.00 9/10/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1054 Vienna Southeast Complete $ 800.00 8/2/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1055 Gurn Creek Southeast Complete $ 800.00 7/29/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1056 Ashburn Southeast Complete $ 800.00 11/18/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1057 Chula Southeast Complete $ 800.00 10/18/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1058 Unionville Southeast Complete $ 800.00 10/29/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1059 Barneyville Southeast Complete $ 800.00 11/25/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1060 Hahira West Southeast Complete $ 800.00 10/3/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1061 Remerton/Phipps Southeast Complete $1,345.00 10/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1062 Lake Park Southeast Complete $ 800.00 9/2/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 261 I-185 GA1063 Trimble Southeast Complete $ 350.00 10/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 261 I-185 GA1065 Oak Grove Southeast Complete $ 265.00 12/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 100 Columbus GA1066 Mountain Hill Southeast Complete $ 667.00 5/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 100 Columbus GA1067 Fortson Southeast Complete $ 250.00 10/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 555 I-85 GA1068 Dinglewood Southeast Complete $ 417.00 12/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 261 I-185 GA1094 Beech Creek Southeast Complete $ 333.00 1/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 145 Albany GA1095 Hopewell Southeast Complete $ 500.00 12/1/95
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1112 Adel Sumner Southeast Complete $ 800.00 9/20/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1113 Arabi Southeast Complete $ 800.00 8/14/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1114 Macon East Southeast Complete $1,500.00 8/1/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1115 Smarr Southeast Complete $ 250.00 11/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1116 Johnstonville Southeast Complete $ 167.00 12/1/94
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1170 Hutchinson St. Southeast Complete $ 420.00 6/1/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1232 Byron Southeast Complete $1,500.00 12/21/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1239 Payne Southeast Complete $1,500.00 11/1/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 89 Macon GA1266 Skipperton Southeast Complete $1,500.00 11/1/97
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 89 Macon GA1687 Bloomfield Southeast Complete $ 450.00 4/20/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 110 Warner Robbins GA1690 Farion Southeast Complete $ 500.00 4/3/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 89 Macon GA1691 Warner Southeast Complete $ 500.00 4/27/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 89 Macon GA1698 Dry Branch Southeast Complete $1,200.00 9/1/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 89 Macon GA1700 Strip Mines Southeast Complete $ 500.00 4/27/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 20 555 I-85 GA1701 St. Louis Southeast Complete $ 300.00 4/13/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1702 Bliss Southeast Complete $ 500.00 5/4/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 33 89 Macon GA1704 Rutland Southeast Complete $ 450.00 4/3/98
- -----------------------------------------------------------------------------------------------------------------------------------
3 34 561 I-75 South GA1741 FortValley Southeast Complete $ 500.00 9/1/98
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mid South Territories
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Nextel Site ID Information
---------------------------------------------------------------------------------
Service Partner's Service Project Project Name Nextel's Site Lease Lease
Region # Section # Area # Area Name Code (Site Name) Market Name Leased Rate Commencement Date
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
2 3 102 Evansville KY5150 Evansville - Hahn Blanket Complete $500.00 C or 8/19/99*
- -----------------------------------------------------------------------------------------------------------------------------------
2 3 102 Evansville KY5151 Hout Blanket Complete $400.00 5/1/99
- -----------------------------------------------------------------------------------------------------------------------------------
2 3 102 Evansville KY5152 Hardaway Blanket Complete $850.00 5/17/99
- -----------------------------------------------------------------------------------------------------------------------------------
*copy at NS
</TABLE>
<PAGE>
Midwest Territories
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------
Nextel Site ID Information
------------------------------------------------------
Service Partner's Service Project Project Name Nextel's Site
Region # Section # Area # Area Name Code (Site Name) Market Name Leased
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C> <C> <C>
2 4 122 I-70W: Indianapolis-Terre Haute IN2505 Terra Haute Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
2 4 122 I-70W: Indianapolis-Terre Haute IN2506 Prarrie City Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
2 4 122 I-70W: Indianapolis-Terre Haute IN2507 Reelsville Mid West Complete
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Nextel Site ID Information
- -----------------------------------------------------------------
Project Project Name Lease Lease
Code (Site Name) Rate Commencement Date
- -----------------------------------------------------------------
<S> <C> <C> <C>
IN2505 Terra Haute $ 600 C or 7/1/99
- -----------------------------------------------------------------
IN2506 Prarrie City $3000 per yr ComOp* or 7/1/99
- -----------------------------------------------------------------
IN2507 Reelsville $ 334 C or 7/1/99
- -----------------------------------------------------------------
*Commerical Operation
</TABLE>
<PAGE>
SCHEDULE 2.1
Disclosed Liabilities
None
<PAGE>
SCHEDULE 5.2
True-Up Procedures
Post Closing Adjustments to Closing Date Payment
1. Post Closing Adjustments. On or before the 60th day after the date of this
Agreement, NWIP and the Company will make adjustments to the Closing Date
Payment according to the procedures set forth on this Schedule 5.2.
2. Adjustments Related to Tangible Assets.
2.1 For purposes of the adjustments to be made in accordance with this
Schedule 5.2 only, NWIP and the Company agree that the portion of the Closing
Date Payment attributable to certain tangible assets transferred to the Company
on the date hereof and to be inventoried by the Company is $3,570,176 (the
"Tangible Asset Purchase Price").
2.2 After the date of this Agreement, the Company will conduct a physical
inventory of:
2.2(a) tangible assets of the type identified on Schedule 5.2A to the
Asset and Stock Transfer and Reimbursement Agreement, by and between the Company
and NWIP, dated as of January 29, 1999, located or installed in or at all cell
sites in the Expansion Territory; and
2.2(b) subscriber equipment, accessories and EBTS located or stored in any
sales offices in the Expansion Territory (the assets in clauses A and B,
collectively, the "Tangible Assets").
As part of the inventory process, the Company will count only the Tangible
Assets that were transferred to the Company by NWIP as part of this Agreement
and will exclude any Tangible Assets purchased or acquired by the Company after
the date of this Agreement. The Company will notify NWIP of the time schedule
for the physical inventory, and NWIP may, at its election and its expense.
observe all or any part of the physical inventory.
2.3 The Company and NWIP acknowledge and agree that Nextel is currently
undertaking a similar inventory of its fixed assets and is utilizing a fixed
asset tracking system that, among other things, identifies certain types or
categories of fixed assets and assigns a value to each such asset. To assist the
Company in its inventory, the parties created Schedule 5.2D, attached to the
Asset and Stock Transfer and Reimbursement Agreement, by and between the Company
and NWIP, dated as of January 29, 1999. Schedule 5.2D utilizes the fixed asset
tracking methodologies currently used by Nextel to describe the categories or
types of Tangible Assets to be inventoried and the value to be ascribed to each
inventoried item. The Company and NWIP agree that the Tangible Assets to be
inventoried by the Company and the values to be ascribed to such assets will, to
the greatest extent possible, conform to the tracking and valuation methodology
currently employed by Nextel as set forth on Schedule 5.2D.
2.4 On or before the 60th day after the date of this Agreement, the
Company shall submit to NWIP in writing the results of the Company's inventory
of the Tangible Assets. The
<PAGE>
results shall include, based on the methodology set forth in section 2.3 above,
a description of the Tangible Assets found, the quantities of each, the value
ascribed to each and a total dollar value for all of the inventoried Tangible
Assets (the "Tangible Assets Inventory Value").
3. Adjustments Related to Capitalized Interest.
3.1 The parties acknowledge that as of the date hereof: (1) NWIP will
transfer to the Company certain cell sites in various stages of development; (2)
that Nextel assigns capitalized interest charges to such sites pursuant to a
formula based on milestones in the site's development, and (3) that the
capitalized interest charges related to the transferred sites have been
reimbursed by the Company to NWIP (the "Reimbursed Capitalized Interest
Charges"). For purposes of the adjustments to be made in accordance with this
Schedule 5.2 only, the parties acknowledge and agree that the following sites
have achieved at Closing the development milestones indicated below and that the
Company has reimbursed NWIP for the capitalized interest charges set forth next
to each listed site:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Milestone Capitalized Number Total Capitalized
Achieved as of Interest Charged of Interest Reimbursed
Closing for that Milestone Sites by Company
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Designed and/or Leased 2400 46 110,400
- ----------------------------------------------------------------------------------------------------
Zoned and/or Building Permit 9600 11 105,600
Issued and/or Construction Started
- ----------------------------------------------------------------------------------------------------
Construction Complete 14,400 0 -0-
- ----------------------------------------------------------------------------------------------------
On-Air 16,000 24 384.000
- ----------------------------------------------------------------------------------------------------
Totals 81 600,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
3.2 After the date hereof, the Company will perform an inspection of each
of the sites transferred to the Company hereunder and of the records relating to
that site to verify the development milestone attained by each site as of the
date hereof. Based on this inspection, the Company will prepare a written chart
in substantially the same format as shown above, which shall list for each
inspected site the actual development milestone achieved as of the Closing.
Based on the actual milestones achieved, the Company will calculate the total
capitalized interest associated with the actual milestones achieved (the "Actual
Capitalized Interest Charges"). On or before the 60th day after the date of this
Agreement, the Company shall submit to NWIP in writing the results of the
Company's inspection of the transferred cell sites.
4. Adjustments Related to Operating Expenses.
4.1 NWIP and the Company will adjust the amounts paid by the Company at
Closing to reflect revenues related to the transferred Assets generated prior to
Closing and which were not credited to the Company at closing and operating
expenses accrued by NWIP and reimbursed by Company at Closing but that are
actually paid by Company after Closing. An example is accounts payable accrued
by NWIP and reimbursed to NWIP by the Company at Closing, but subsequently paid
by the Company to the vendor or other third party after Closing.
4.2 NWIP will receive credit for operating expenses related to the
transferred Assets
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<PAGE>
that it incurred prior to transfer of the Assets and which were not reimbursed
by the Company at Closing. The parties will make all other similar adjustments
and pro-rations of operating expenses as necessary and appropriate.
5. Calculation and Payment of Adjustments.
5.1 Within 60 days after the date of this Agreement, the Company shall
submit to NWIP the written results of its physical inventory as described in
section 2 above, the written results of its site inspections and review of site
records as described in section 3 above and its determination of the adjustments
to revenue, operating expenses and current assets and current liabilities as
described in section 4 above together with any supporting documentation for all
such information as NWIP may reasonably request. In addition, the Company will
calculate the following: (1) the difference, if any, between the Tangible Asset
Purchase Price and the Tangible Asset Inventory Value (the "Tangible Asset
Adjustment"); (2) the difference, if any, between the Reimbursed Capitalized
Interest Charges and the Actual Capitalized Interest Charges (the "Capitalized
Interest Adjustment"); and (3) the net amount due to either party as a result of
the adjustment, credits and other pro-rations to be made as described in section
4 (the "Operating Expense Adjustment"). The Company will add the Tangible Asset
Adjustment, the Capitalized Interest Adjustment, and the Operating Expense
Adjustment in order to calculate a net adjustment (the "Net Adjustment").
5.2 If the Net Adjustment is less than two percent (2%) of the Closing
Date Payment, neither party will be obligated to pay to the other party the
amount of the Net Adjustment.
5.3 If the Net Adjustment is two percent (2%) or greater than the Closing
Date Payment, the party that owes the Net Adjustment shall pay the Net
Adjustment amount to the other party in cash within thirty days after the
Company submits to NWIP the written information and calculations detailed in
section 5.1 above.
5.4 NWIP will have thirty (30) days after receipt from the Company of the
information set forth in section 5.1 of this Schedule 5.2 to dispute the
information supplied by the Company. If NWIP does not raise any dispute within
such time period, the Company's calculation of the Net Adjustment will be deemed
accurate. If NWIP timely raises any such dispute, the Net Adjustment amount as
calculated by the Company shall nevertheless be paid by the appropriate party
within the time frame set forth in section 5.3; provided, however, the parties
will resolve such dispute in accordance with Article 12 of the JV Agreement.
Promptly upon resolution of any dispute, the parties shall make any and all
adjustments to the amount paid by either party consistent with the dispute
resolution.
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<PAGE>
Exhibit 10.42
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Assignment Agreement"),
dated as of September 9, 1999, made by NEXTEL PARTNERS OPERATING CORP., a
Delaware corporation (the "Grantor"), in favor of BANK OF MONTREAL, as
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for each of the Secured Parties (as defined below).
WITNESSETH:
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated as of
September 9, 1999 (the "Amended and Restated Credit Agreement"), amending and
restating in its entirety the Credit Agreement, dated as of January 29, 1999 (as
amended, supplemented, amended and restated or otherwise modified prior to the
Restatement Effective Date (as defined in the Amended and Restated Credit
Agreement), the "Credit Agreement"), among the Grantor, the various commercial
lending institutions (individually a "Lender" and collectively the "Lenders") as
are, or may from time to time become, parties thereto, DLJ Capital Funding,
Inc., as syndication agent, The Bank of New York, as documentation agent, and
the Administrative Agent, the Lenders have extended a Term-C Loan Commitments to
make Term-C Loans to the Grantor;
WHEREAS, as a condition precedent to the making of the Term-C Loans under
the Amended and Restated Credit Agreement, the Grantor is required to execute
and deliver this Assignment Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Assignment Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make the Term-C Loans to the Grantor pursuant to the Amended and Restated
Credit Agreement, the Grantor agrees, for the benefit of each Secured Party, as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Assignment Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Amended and Restated Credit Agreement" is defined in the preamble.
"Assigned Agreements" is defined in Section 2.1.
"Assignment Agreement" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Grantor" is defined in the preamble.
"Lenders" is defined in the first recital.
"Secured Obligations" is defined in Section 2.2.
"Secured Party" means, as the context may require, any Lender or the
Administrative Agent and each of its respective successors, transferees and
assigns.
"U.C.C." means the Uniform Commercial Code, as in effect in the State of
New York.
SECTION 1.2. Amended and Restated Credit Agreement Definitions. Unless
otherwise defined herein or the context otherwise requires, terms used in this
Assignment Agreement, including its preamble and recitals, have the meanings
provided in the Amended and Restated Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Assignment Agreement, including its preamble and recitals, with
such meanings.
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<PAGE>
ARTICLE II
ASSIGNMENT, ETC.
SECTION 2.1. Assignment. The Grantor hereby assigns to the Administrative
Agent for its benefit and the ratable benefit of each of the Secured Parties,
and hereby grants to the Administrative Agent for its benefit and the ratable
benefit of each of the Secured Parties a security interest in, all of the
Grantor's right, title and interest, whether now existing or hereafter arising
or acquired, in and to the following (collectively, the "Collateral"):
(a) each agreement described on Schedule I hereto, as each such
agreement may be amended or otherwise modified from time to time (as so
amended or modified, collectively, the "Assigned Agreements")
(b) all of the Grantor's rights and benefits (whether monetary or
otherwise), whether benefits due or to become due, under or pursuant to
any Assigned Agreement,
(c) all rights of the Grantor to receive proceeds of any insurance,
indemnity, warranty, guaranty or collateral security with respect to any
Assigned Agreement,
(d) all claims of the Grantor for damages arising out of or for
breach of or default under any Assigned Agreement,
(e) all rights of the Grantor to terminate any Assigned Agreement,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder, and
(f) to the extent not included in the foregoing, all proceeds of any
and all of the foregoing collateral.
SECTION 2.2. Security for Obligations. This Assignment Agreement secures
the payment of all Obligations now or hereafter existing under the Amended and
Restated Credit Agreement and each other Loan Document to which any Obligor is
or may become a party, whether for principal, interest, costs, fees, expenses or
otherwise (all such obligations, collectively, the "Secured Obligations").
SECTION 2.3. Continuing Assignment and Security Interest; Transfer of
Notes. This Assignment Agreement shall create a continuing assignment of and
security interest in the Collateral and shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations then due, the termination or expiration of all
Letters of Credit and the termination of all Commitments,
-3-
<PAGE>
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall,
to the extent of such transfer, thereupon become vested with all the rights and
benefits in respect thereof granted to such Lender under any Loan Document
(including this Assignment Agreement) or otherwise, subject, however, to any
contrary provisions in such assignment, or transfer, and to the provisions of
Section 10.11 and Article IX of the Credit Agreement. Upon the payment in full
in cash of all Secured Obligations then due, the termination or expiration of
all Letters of Credit and the termination of all Commitments, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Grantors. Upon any such termination, the Administrative Agent
will, at the sole expense of the Grantor, execute and deliver to the Grantor
such instruments as the Grantor shall reasonably request to evidence such
termination.
SECTION 2.4. Grantor Remain Liable. Anything herein to the contrary
notwithstanding,
(a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as
if this Assignment Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral,
and
(c) neither the Administrative Agent nor any other Secured Party
shall have any obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Assignment
Agreement, nor shall the Administrative Agent or any other Secured Party
be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Administrative
Agent and the security interests granted to the Administrative Agent hereunder,
and all obligations of the Grantor hereunder, shall be absolute and
unconditional, irrespective of
(a) any lack of validity or enforceability of the Amended and
Restated Credit Agreement or any other Loan Document,
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<PAGE>
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Amended and Restated Credit Agreement,
any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Obligations of the Grantor
or any other Obligor,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other extension,
compromise or renewal of any Obligation of the Grantor or any other
Obligor,
(d) any reduction, limitation, impairment or termination of any
Obligations of the Grantor or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Grantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of the Grantor, any other Obligor or
otherwise,
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the Amended and
Restated Credit Agreement or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver
or release of or addition to or consent to departure from any guaranty,
for any of the Obligations, or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Grantor,
any other Obligor, any surety or any guarantor.
-5-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants unto each Secured Party as set forth
in this Article.
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants unto each Secured Party as set forth in this Section 3.2.
(a) Validity, etc. This Assignment Agreement constitutes, and each other
Loan Document executed by the Grantor will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of the Grantor
enforceable in accordance with their respective terms, in each case, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(b) Validity of Assigned Agreements. Each Assigned Agreement, a true and
complete copy of which has been furnished to each Lender, has been duly
authorized, executed and delivered by the parties thereto, has not been amended
or otherwise modified except as set forth in Section 2.1, and is in full force
and effect and is binding upon and enforceable against the parties thereto in
accordance with its terms. As of the date hereof, the Grantor has fully
performed all of its obligations under each Assigned Agreement, to the extent
required under such Assigned Agreement to be performed on or prior to the date
hereof, and no other party to any Assigned Agreement has any defense, setoff or
counterclaim arising under such Assigned Agreement. There exists no default
under any Assigned Agreement by any party thereto.
(c) Location of Collateral. The place(s) of business and chief executive
office of the Grantor and the office(s) where the Grantor keep their respective
records concerning the Collateral, and the original copies of all chattel paper
which evidences the Collateral, are located at the address specified for the
Grantor opposite its name on Schedule II hereto. The Grantor has no trade name
other than as set forth on Schedule II hereto. The Grantor has not been known by
any legal name different from the one set forth on the signature page hereto,
nor has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth on Schedule II hereto. To the extent that
any Assigned Agreement or other Collateral constitutes chattel paper, such
chattel paper has been delivered to the Administrative Agent. None of the
Collateral is evidenced by a promissory note or other instrument.
(d) Ownership, No Liens, etc. The Grantor owns the Collateral free and
clear of any Lien, security interest, charge or encumbrance except for the
security interest created by this Assignment Agreement. No effective financing
statement or other instrument similar in effect
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<PAGE>
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of the Administrative Agent relating
to this Assignment Agreement.
(e) Validity, etc. This Assignment Agreement creates a valid first
priority security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
(f) Authorization, Approval, etc. No authorization, approval or other
action by, and no notice to or filing (other than U.C.C. filings which will be
made on or prior to the Closing Date) with, any governmental authority or
regulatory body is required either
(i) for the grant by the Grantor of the assignment and security
interest granted hereby or for the execution, delivery and performance of
this Assignment Agreement by the Grantor, or
(ii) for the perfection of or the exercise by the Administrative
Agent of its rights and remedies hereunder.
(g) Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every governmental authority, the non-compliance with which could reasonably be
expected to have a Material Adverse Effect or which could reasonably be expected
to materially adversely affect the value of any Collateral or the worth of the
Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that,
until payment in full of all Secured Obligations then due, the termination or
expiration of all Letters of Credit and the termination of all Commitments, such
Grantor will, unless the Required Lenders shall otherwise consent in writing,
perform, comply with and be bound by the Obligations set forth in this Article
IV.
SECTION 4.1.1 As to the Assigned Agreements. The Grantor shall at its
expense:
(a) perform and observe all the terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain each Assigned
Agreement in full force and effect except as otherwise permitted by the
Credit Agreement, enforce each Assigned Agreement in accordance with its
terms, and take all such action to
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<PAGE>
such end as may be from time to time reasonably requested by the
Administrative Agent; and
(b) furnish to the Administrative Agent promptly upon receipt
thereof copies of all material notices, requests and other documents
delivered by or to the Grantor under or pursuant to any Assigned Agreement
which notice, request or document (x) relates to any default or
nonperformance of the Grantor or any counterparty to such Assigned
Agreement or any termination of such Assigned Agreement or (y) relates to
the occurrence (or nonoccurrence) of any event which could reasonably be
expected to have a Material Adverse Effect or a material adverse effect on
the ability of the Grantor or such counterparty to perform its obligations
under such Assigned Agreement, and from time to time
(i) furnish to the Administrative Agent such information and
reports regarding the Collateral as the Administrative Agent may
reasonably request and
(ii) upon request of the Administrative Agent make to any
other party to any Assigned Agreement such demands and requests for
information and reports or for action as the Grantor is entitled to
make under any Assigned Agreement.
SECTION 4.1.2 Transfers and Other Liens. The Grantor agrees for the
benefit of the Administrative Agent and the Secured Parties that it shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, or create or suffer to exist any Lien,
security interest or other charge or encumbrance upon or with respect to
any of the Collateral to secure Indebtedness of any Person or entity,
except for the assignment and security interest created by this Assignment
Agreement;
(b) cancel or terminate any Assigned Agreement or consent to or
accept any cancellation or termination thereof other than in accordance
with its terms; or
(c) amend or otherwise modify any Assigned Agreement, waive any
default under or breach of any Assigned Agreement, or take any other
action in connection with any Assigned Agreement which, in any case, would
reasonably be expected to impair the value of the interest or rights of
the Grantor thereunder or which would impair the interest or rights of the
Administrative Agent.
SECTION 4.1.3 Further Assurances. The Grantor agrees that from time to
time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may request, in
order to perfect and protect the assignment and
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<PAGE>
security interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, the Grantor will
(a) if any Collateral shall be evidenced by a promissory note or
other instrument, negotiable document or chattel paper, deliver and pledge
to the Administrative Agent hereunder such promissory note or instrument,
negotiable document or chattel paper duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Administrative Agent; and
(b) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Administrative Agent may request, in
order to perfect and preserve the assignment and security interest granted
or purported to be granted hereby; and
(c) mark conspicuously each copy of any Collateral that constitutes
chattel paper and, at the request of the Administrative Agent, each of its
records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Administrative Agent, indicating that such Collateral
has been assigned and are subject to the security interest pursuant
hereto.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A carbon, photographic or other reproduction of this Assignment
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
SECTION 4.1.4 Place of Perfection; Records; Prior Notice of Name Change.
The Grantor shall keep its place(s) of business and chief executive office and
the office(s) where it keeps its records concerning the Collateral, and the
original copies of any chattel paper which evidences any Collateral, at the
location therefor specified in Section 3.1.2 or, upon 30 days' prior written
notice to the Administrative Agent, at such other location in a jurisdiction
where all action required by Section 4.1.3 shall have been taken with respect to
the Collateral. The Grantor will hold and preserve such records and will permit
representatives of the Administrative Agent at any time during normal business
hours to inspect and make abstracts from such records. The Grantor agrees that
it will not change its name except upon 30 days' prior written notice to the
Administrative Agent.
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<PAGE>
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Administrative Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time following the
occurrence and during the continuance of an Event of Default, to take any action
(including any action under any Assigned Agreement that the Grantor is entitled
to take) and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Assignment Agreement,
including, without limitation:
(a) after the occurrence and continuance of an Event of Default, to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
(b) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (a)
above;
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem to be necessary or
desirable for the collection thereof or to enforce compliance with the
terms and conditions of the Assigned Agreements; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.1 and
Section 4.1.3).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent May Perform. If the Grantor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 6.2.
SECTION 5.3. Administrative Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4 the powers conferred on the Administrative Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
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<PAGE>
SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) the Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may exercise any and all rights and
remedies of the Grantor under or in connection with any Assigned Agreement
or otherwise in respect of the Collateral, including, without limitation,
any and all rights of the Grantor to demand or otherwise require payment
of any amount under, or performance of any provision of, any Assigned
Agreement;
(b) all payments received by the Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of the Grantor and shall be forthwith paid
over to the Administrative Agent in the same form as so received (with any
necessary indorsement); and
(c) all payments made under or in connection with any Assigned
Agreement or otherwise in respect of the Collateral and received by the
Administrative Agent may, in the discretion of the Administrative Agent,
be held by the Administrative Agent as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 6.2) in whole or in part by the
Administrative Agent for the ratable benefit of the Secured Parties
against, all or any part of the Secured Obligations in such order as the
Administrative Agent shall elect. Any surplus of such payments held by the
Administrative Agent and remaining after payment in full of all the
Secured Obligations shall be paid over to the Grantor or to whomsoever may
be lawfully entitled to receive such surplus.
- 11 -
<PAGE>
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor hereby agrees, jointly and severally, to indemnify the
Administrative Agent from and against any and all claims, losses and liabilities
arising out of or resulting from this Assignment Agreement (including, without
limitation, enforcement of this Assignment Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or wilful
misconduct.
(b) The Grantor agrees, jointly and severally, that it will upon demand
pay to the Administrative Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Administrative Agent may incur in connection with
(i) the administration of this Assignment Agreement,
(ii) the custody or preservation of, or the collection from or other
realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Administrative Agent or the Secured Parties hereunder, or
(iv) the failure by the Grantor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Assignment Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision
of this Assignment Agreement nor consent to any departure by the Grantor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 7.3. Addresses for Notices. All notices, requests and other
communications provided to any party hereto under this Agreement shall be in
writing or by facsimile and addressed, delivered or transmitted to such party as
follows: (x) in the case of the Grantor or the Administrative Agent, at its
address or facsimile number set forth on
- 12 -
<PAGE>
Schedule II to the Credit Agreement and (y) in the case of any party, at such
other address or facsimile number as may be designated by such party in a notice
to the other parties. Any notice, (i) if mailed and properly addressed with
postage prepaid or (ii) if properly addressed and sent by pre-paid courier
service, shall be deemed given when received, or (iii) if transmitted by
facsimile, shall be deemed given when transmitted (and telephonic confirmation
of receipt thereof has been received).
SECTION 7.4. Captions. Section captions used in this Assignment Agreement
are for convenience of reference only, and shall not affect the construction of
this Assignment Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Assignment Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Assignment Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Assignment Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS ASSIGNMENT
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS
ASSIGNMENT AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.7. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS ASSIGNMENT
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES OR THE GRANTOR SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
- 13 -
<PAGE>
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GRANTOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE GRANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT ANY GRANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE GRANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS ASSIGNMENT AGREEMENT.
SECTION 7.8. Waiver of Jury Trial. THE SECURED PARTIES AND THE GRANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS ASSIGNMENT AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GRANTOR. THE GRANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
- 14 -
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Assignment Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John D. [ILLEGIBLE]
-------------------------------------
Title: CFO
<PAGE>
SCHEDULE I
Assigned Agreements
Expansion Territory Asset Transfer and Reimbursement Agreement dated as of
September 9, 1999 between Nextel WIP Corp. and Nextel Partners Operating Corp.
Expansion Territory Management Agreement dated as of September 9, 1999 between
Nextel WIP Corp. and Nextel Partners Operating Corp.
Supplement No. 1 to Infrastructure Equipment Purchase Agreement between the
Borrower and Motorola, Inc.
First Amendment to Analog Management Agreement between the Borrower and NWIP
<PAGE>
SCHEDULE II
Location of Collateral, etc.
Grantor: Nextel Partners Operating Corp.
Item 1. Place(s) of business and chief executive office of such Grantor and the
office(s) where such Grantor keeps its records concerning the Collateral, and
the original copies of all chattel paper which evidences the Collateral:
4500 Carillon Point
Kirkland, WA 98033
Item 2. Trade Names:
None
Item 3. Other Legal Names:
None
Item 4. Mergers or other corporate reorganizations
None
Grantor: Nextel Partners, Inc.
Item 1. Place(s) of business and chief executive office of such Grantor and the
office(s) where such Grantor keeps its records concerning the Collateral, and
the original copies of all chattel paper which evidences the Collateral:
4500 Carillon Point
Kirkland, WA 98033
Item 2. Trade Names:
None
Item 3. Other Legal Names:
None
<PAGE>
Item 4. Mergers or other corporate reorganizations
None
- 2 -
<PAGE>
ANNEX I
CONSENT AND AGREEMENT
This CONSENT AND AGREEMENT (this "Consent"), dated as of September 9,
1999, is made by and between [NEXTEL WIP CORP., a Delaware corporation][NEXTEL
WIP LEASE CORP., a Delaware corporation] [MOTOROLA, INC., a Delaware
corporation] [NEXTEL COMMUNICATIONS, INC., a Delaware corporation] (the
"Counterparty") and BANK OF MONTREAL, as Administrative Agent (the
"Administrative Agent") for the Lenders (as defined below). Capitalized terms
used herein, and not otherwise defined herein, shall have the meanings ascribed
to them in the Credit Agreement referred to below.
WHEREAS, the Counterparty has entered into the agreements listed on
Schedule I hereto (as amended, supplemented, amended and restated or otherwise
modified from time to time, collectively, the "Assigned Agreements")
WHEREAS, Nextel Partners Operating Corp., a Delaware corporation (the
"Borrower") has entered into an Amended and Restated Credit Agreement, dated as
of September 9, 1999 (the "Amended and Restated Credit Agreement"), amending and
restating in its entirety the Credit Agreement, dated as of January 29, 1999 (as
amended, supplemented, amended and restated, restructured or otherwise modified
from time to time, including any refinancing in whole or in part thereof, the
"Credit Agreement"), among the Borrower, certain commercial lending institutions
(the "Lenders") and the Administrative Agent, pursuant to which the Lenders have
agreed to make Credit Extensions to the Borrower;
WHEREAS, as security for the Obligations, Nextel Partners, Inc., a
Delaware corporation (the "Parent"), the Borrower and Nextel WIP Lease Corp.,
("Realco") (each, an "Assignor" and collectively, the "Assignors") have assigned
to the Administrative Agent, for the benefit of the Secured Parties (as defined
in the Assignment Agreement referred to below), all of their respective right,
title and interest under (but not any of their obligations, liabilities or
duties with respect thereto) the Assigned Agreements (the "Assigned Rights")
pursuant to the Assignment and Security Agreement dated as of September 9, 1999
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "Assignment Agreement") made by the Parent, the Borrower and Realco
in favor of the Administrative Agent for the benefit of the Secured Parties;
WHEREAS, the execution and delivery by the Counterparty of this Consent is
a condition precedent to the effectiveness of the transactions contemplated by
the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. The Counterparty hereby irrevocably consents to:
<PAGE>
(a) the assignment by the Assignors to the Administrative Agent for
the benefit of the Secured Parties of the Assigned Rights as security for
the performance of the Obligations;
(b) any subsequent transfer by the Administrative Agent of the
Assigned Rights to any Person that may become a successor Administrative
Agent; and
(c) to the extent any such transfer would have been permitted to
have been made by the applicable Assignor under the applicable Assigned
Agreement, any subsequent transfer of the Assigned Rights to any Person in
connection with the Administrative Agent's or any successor Administrative
Agent's exercise of its rights and remedies, at law, in equity or
otherwise; provided, that each such Person shall have assumed in writing
all of the duties and obligations of the applicable Assignor under the
Assigned Agreement arising on or after the date of such assumption.
SECTION 2. The Counterparty agrees as set forth below:
(a) the assignments referred to in Section 1 shall be fully binding
and effective against the Counterparty and shall not constitute a breach
or default under the Assigned Agreement;
(b) upon the transfer of the Assigned Rights to any Person pursuant
to Section 1(c) above, such Person shall succeed to all rights and
benefits of the Assignors under the Assigned Agreement to the same extent
as if such Person were named in place of the applicable Assignor in the
Assigned Agreement;
(c) notwithstanding the assignments referred to in Sections 1(a)
through 1(c) above, no Assignor shall be relieved of any duty or
obligation under the Assigned Agreement;
(d) the Counterparty shall send to the Administrative Agent a copy
of any written notice provided by the Counterparty to any Assignor
regarding any event, occurrence or omission (a "Breach") giving rise to
the Counterparty's right to exercise any remedies under the Assigned
Agreement, and the Administrative Agent will have the same right, if any,
to cure the Breach as the applicable Assignor (but will have no obligation
to cure) during the same time period afforded to the applicable Assignor;
and
(e) in the event that either (i) the Assigned Agreement is rejected,
in whole or in part, by a trustee or debtor-in-possession in any
bankruptcy or insolvency proceeding regarding any Assignor or (ii) the
Assigned Agreement is deemed to be in whole or in part a contract to
extend "financial accommodations" within the meaning of Section 365 of the
United States Bankruptcy Code, 11 U.S.C. ss. 365, and the order regarding
an event described in clause (i) or (ii) has not been stayed, within 60
days
-2-
<PAGE>
after an event described in clause (i) or (ii) has occurred, the
Administrative Agent or its assignee or designee may undertake in writing
to the Counterparty that it intends and is legally authorized to perform
the obligations of the applicable Assignor under the Assigned Agreement
and shall otherwise satisfy the conditions of clauses (i) and (ii) above,
and in such event the Counterparty will execute and deliver to the
Administrative Agent or such assignee or designee a new agreement (a "New
Agreement") with regard to that portion of the Assigned Agreement affected
by an event described in clause (i) or (ii) above, as the case may be,
upon the same terms and conditions as set forth in such affected portion
of the Assigned Agreement. Such New Agreement shall be for the balance of
the then remaining term under the Assigned Agreement before giving effect
to such event described in clause (i) or (ii) above, as the case may be,
and shall contain the same conditions, agreements, terms, provisions and
limitations as the Assigned Agreement (except for any requirements that
have been fulfilled by the applicable Assignor prior to such rejection).
References in this Section 2 to "the Assigned Agreement" shall be deemed
also to refer to the New Agreement.
SECTION 3. Miscellaneous.
(a) Separate Counterparts: Amendments. Waiver. This Consent may be
executed in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts shall constitute
one and the same instrument. Neither this Consent nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified except
by an instrument in writing signed by each of the Counterparty and the
Administrative Agent or any successor Administrative Agent, as the case
may be.
(b) Severability of Provisions. Any provision of this Consent which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
(c) Successors and Assigns. This Consent shall be binding upon and
shall inure to the benefit of the Counterparty and its permitted
successors and assigns and the Administrative Agent and any successor
Administrative Agent.
(d) Governing Law. THIS CONSENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
-3-
<PAGE>
(e) Obligations Absolute and Unconditional. The Counterparty's
obligations hereunder are absolute and unconditional, except as otherwise
provided herein, and the Counterparty has no right, and shall have no
right, to terminate this Consent or to be released, relieved or discharged
from any obligation hereunder except for material default by the
Administrative Agent of its obligations hereunder or upon the earlier of
(i) the expiration or other termination of the Assigned Agreement or (ii)
the repayment in full of all Secured Obligations then due, the termination
or expiration of all Letters of Credit and the termination of all
Commitments under the Credit Agreement.
(f) No Duty of Administrative Aaent to Direct Proceeds. etc. Nothing
herein shall be construed to impose upon the Administrative Agent or the
Counterparty any duty to direct the application of the Loans contemplated
by the Credit Agreement. The Counterparty acknowledges and agrees that the
Administrative Agent is not obligated under the Credit Agreement to the
Counterparty or any of its subcontractors, materialmen, suppliers or
laborers. The Administrative Agent acknowledges and agrees that the
Counterparty is not obligated under the Credit Agreement to the
Administrative Agent or any of its subcontractors, materialmen, suppliers
or laborers. The Counterparty is executing this Consent to induce the
Lenders to make the Credit Extensions under the Credit Agreement.
(g) Addresses for Notices. All notices and other communications
provided to any party hereto under this Consent shall be in writing or
facsimile and addressed, delivered or transmitted (receipt confirmed
telephonically) to such party at its address or facsimile number set forth
below its signature hereto or at such other address or facsimile number as
may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be
deemed given when transmitted.
(h) Waiver of Jury Trial. EACH OF THE COUNTERPARTY AND THE
ADMINISTRATIVE AGENT (ON BEHALF OF ITSELF, ANY SUCCESSOR ADMINISTRATIVE
AGENT AND EACH LENDER) HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS CONSENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES OR THE
COUNTERPARTY HEREUNDER THE COUNTERPARTY ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS MAKING CREDIT
EXTENSIONS UNDER THE CREDIT AGREEMENT.
-4-
<PAGE>
(i) Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
CONSENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES OR THE COUNTERPARTY
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
NEW YORK, COUNTY OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK. EACH OF THE COUNTERPARTY AND THE
ADMINISTRATIVE AGENT (ON BEHALF OF ITSELF, ANY SUCCESSOR ADMINISTRATIVE
AGENT AND EACH LENDER) HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK,
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSE OF ANY SUCH LITIGATION SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGEMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION TO WHICH IT IS A PARTY. EACH OF THE
COUNTERPARTY AND THE ADMINISTRATIVE AGENT (ON BEHALF OF ITSELF ANY
SUCCESSOR ADMINISTRATIVE AGENT AND EACH LENDER) FURTHER IRREVOCABLY
CONSENTS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE, TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF THE COUNTERPARTY
AND THE ADMINISTRATIVE AGENT (ON BEHALF OF ITSELF, ANY SUCCESSOR
ADMINISTRATIVE AGENT AND EACH LENDER) HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
COUNTERPARTY OR THE ADMINISTRATIVE AGENT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURTS OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE COUNTERPARTY OR THE ADMINISTRATIVE AGENT, AS APPLICABLE,
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS CONSENT.
-5-
<PAGE>
IN WITNESS WHEREOF, each of undersigned parties has caused this Consent to
be executed by its officer thereunto duly authorized as of the day and year
first above written.
[NEXTEL WIP CORP.]
[NEXTEL WIP LEASE CORP.]
[MOTOROLA, INC.]
[NEXTEL COMMUNICATIONS, INC.]
By:_____________________________________
Title:
Address:
Facsimile No.:
Attention:
BANK OF MONTREAL, as
Administrative Agent
By:_____________________________________
Title:
Address: 115 S. LaSalle St.
11th Floor
Chicago, IL 60603
Facsimile No.: (3 12)-750-3456
Attention: Terri Perez-Ford
-6-
<PAGE>
SCHEDULE I TO
CONSENT AND AGREEMENT
Assigned Agreements
Asset Transfer and Reimbursement Agreement dated as of September 9, 1999 between
the Borrower and NWIP
Expansion Territory Management Agreement dated as of September 9, 1999 between
the Borrower and NWIP
Supplement No. 1 to iDEN Infrastructure Equipment Purchase Agreement between the
Borrower and Motorola, Inc.
First Amendment to Analog Management Agreement between the Borrower and NWIP
<PAGE>
Exhibit 10.43
FIRST AMENDMENT TO ANALOG MANAGEMENT AGREEMENT
This is the FIRST AMENDMENT to the Analog Management Agreement, and is
made and entered into as of September 9, 1999 (this "Amendment"), by and between
Nextel WIP Corp., a Delaware corporation, on behalf of itself and other
subsidiaries of Nextel Communications, Inc., a Delaware corporation (the
"Manager"), and Nextel Partners Operating Corp., a Delaware corporation, on
behalf of itself and its wholly owned subsidiaries (the "Licensee"). This
Amendment amends the Analog Management Agreement dated as of January 29, 1999,
by and between Manager and Licensee (the "Agreement"). Unless otherwise defined
in this Amendment, capitalized terms used in this Amendment have the same
meanings as in the Agreement.
RECITALS
A. Pursuant to the Agreement, Manager has the right to manage the use of
the Licenses that are not being used by Licensee to operate analog systems and
offer analog services on 800 MHz frequencies in the ESMR Network.
B. The Territory in which Licensee will construct and operate the ESMR
Network is being expanded, and the Parties desire to subject additional licenses
to the Agreement so that Manager will have the right to manage the use of such
additional licenses described in Schedule 1 ("Expansion Licenses") that are not
being used by Licensee to operate analog systems and offer analog services on
800 MHz frequencies in the ESMR Network in the expanded Territory.
C. The Parties are familiar with the FCC's rules and policies concerning
the responsibilities of Specialized Mobile Radio and Commercial Mobile Radio
Service licensees and have structured this Agreement to be in compliance
therewith.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the Parties agree as follows:
1. Attachment A. Attachment A to the Agreement is hereby amended to add
the Expansion Licenses listed on Schedule 1.
2. Miscellaneous. The Agreement will, as modified by this Amendment,
continue in full force and effect. All and any references in any of the
Collateral Documents to the Agreement will be deemed references to the
Agreement, as amended by this Amendment.
<PAGE>
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, and all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
NEXTEL WIP CORP, (as Manager)
By:_________________________________________
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By: /s/ John D. Thompson
-----------------------------------------
Name: John Thompson
Title: Chief Financial Officer and Treasurer
-2-
<PAGE>
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, and all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
NEXTEL WIP CORP, (as Manager)
By: /s/ Alan Strauss
-----------------------------------------
Name: Alan Strauss
Title: Vice President
NEXTEL PARTNERS OPERATING CORP.
By:_________________________________________
Name: John Thompson
Title: Chief Financial Officer and Treasurer
-2-
<PAGE>
Schedule 1
Expansion Licenses
[publicly available at
http://www.fcc.gov/searchtools.html]
<PAGE>
Exhibit 10.44
NEXTEL PARTNERS, INC.
Warrant for the Purchase of Shares of
Class A Common Stock of Nextel Partners, Inc.
No. 1 Warrant to Purchase
198,073 Shares
NEITHER THIS SECURITY NOR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, VOTING AND
OTHER MATTERS AS SET FORTH IN THE SHAREHOLDERS' AGREEMENT AND THE
CUSTODIAL AGREEMENT (AS SUCH TERMS ARE HEREIN DEFINED), COPIES OF
WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY.
FOR VALUE RECEIVED, NEXTEL PARTNERS, INC., a Delaware corporation (the
"Company"), hereby certifies that MADISON DEARBORN CAPITAL PARTNERS II, L.P.,
its successor or permitted assigns (the "Holder"), is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at the times specified
herein, 198,073 fully paid and non-assessable shares of common stock of the
Company, par value $0.00l per share (the "Warrant Shares"), at a purchase price
per share equal to the Exercise Price (as hereinafter defined). The number of
Warrant Shares to be received upon the exercise of this Warrant and the price to
be paid for a Warrant Share are subject to adjustment from time to time as
hereinafter set forth.
<PAGE>
(a) DEFINITIONS.
(1) The following terms, as used herein, have the following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Common Stock" means the authorized Class A Common Stock, par value $0.001
per share, of the Company.
"Custodial Agreement" means the agreement between the Bank of Montreal
Trust Company and the Company dated as of the date hereof.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons in
whose name a stock certificate is registered or accompanied by a duly executed
stock assignment separate from the certificate with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Exercise Price" means $0.01 per Warrant Share, such Exercise Price to be
adjusted from time to time as provided herein.
"Expiration Date" means January 29, 2004 at 5:00 p.m. New York City time.
"Fair Market Value" means, with respect to one share of Common Stock on
any date, the Current Market Price Per Common Share (as defined in paragraph
(h)(3)).
"Person" means an individual, partnership, corporation, limited liability
company, trust, joint stock company, association, joint venture, or any other
entity or organizations including a government or political subdivision or an
agency or instrumentality thereof.
"Preferred Stock" means the Series A Convertible Preferred Stock, par
value $0.001 per share, of the Company.
"Principal Holders" means, on any date, the Holders of at least 25% of the
Warrants.
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<PAGE>
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the date hereof among Nextel Partners, Inc., Nextel WIP Corp., Eagle River
Investments, LLC, Motorola, Inc., DLJ Merchant Banking Partners II, L.P., and
the other shareholders named therein.
"transfer" shall have the meaning assigned to such term in the
Shareholders' Agreement.
"Warrants" means the Warrants issued to Madison Dearborn Capital Partners
II, L.P. under the Subscription Agreement dated January 29, 1999 among the
Company and the subscribers listed on the signature pages thereof.
(2) Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Shareholders' Agreement.
(b) EXERCISE OF WARRANT.
(1) The Holder is entitled to exercise this Warrant in whole
or in part at any time, or from time to time, beginning 60 days
after the date hereof until the Expiration Date or, if such day is
not a Business Day, then on the next succeeding day that shall be a
Business Day. Notwithstanding the preceding sentence, if the
Non-Nextel Shareholders (as defined in the Shareholders' Agreement)
exercise their Put Right (as defined in the Shareholders' Agreement)
or NWIP elects to exercise its NWIP Call Right (as defined in the
Shareholders' Agreement) this Warrant shall terminate upon the
closing of the exercise of the Put Right or the NWIP Call Right and
the Company's book and records shall reflect such termination unless
the Holder has exercised this Warrant prior to such closing. To
exercise this Warrant, the Holder shall execute and deliver to the
Company a Warrant Exercise Notice substantially in the form annexed
hereto. No earlier than ten days after delivery of the Warrant
Exercise Notice, the Holder shall deliver to the Company this
Warrant Certificate, including the Warrant Exercise Subscription
Form forming a part hereof duly executed by the Holder, together
with payment of the applicable Exercise Price, provided however,
that in connection with a public offering of the Common Stock, a
Holder may deliver the Warrant Exercise Notice, the Warrant Exercise
Subscription Form and this Warrant Certificate to the Company
simultaneously and provided further that if such exercise is in
connection with a Put Right or NWIP Call Right a Holder shall
deliver the Warrant Exercise Notice, the Warrant Exercise
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<PAGE>
Subscription Form and this Warrant Certificate to the Company
simultaneously prior to the closing of such purchase of Preferred
Stock or Common Stock. Upon such delivery and payment, the Holder
shall be deemed to be the holder of record of the Warrant Shares
subject to such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually
delivered to the Holder. Notwithstanding anything herein to the
contrary, in lieu of payment in cash of the applicable Exercise
Price, the Holder may elect (i) to receive upon exercise of this
Warrant, the number of Warrant Shares reduced by a number of shares
of Common Stock having the aggregate Fair Market Value equal to the
aggregate Exercise Price for the Warrant Shares, (ii) to deliver as
payment, in whole or in part of the aggregate Exercise Price, shares
of Common Stock having the aggregate Fair Market Value equal to the
applicable non-cash portion of the aggregate Exercise Price for the
Warrant Shares, (iii) to deliver as payment, in whole or in part of
the aggregate Exercise Price, shares of Preferred Stock, having the
aggregate Liquidation Value (as defined in the Certificate of
Designations for the Preferred Stock) equal to the applicable
non-cash portion of the aggregate Exercise Price for the Warrant
Shares or (iv) to deliver as payment, in whole or in part of the
aggregate Exercise Price, such number of Warrants which, if
exercised, would result in a number of shares of Common Stock having
an aggregate Fair Market Value equal to the applicable non-cash
portion of the aggregate Exercise Price for the Warrant Shares.
Notwithstanding anything to the contrary in this paragraph (b)(1),
if the aggregate Fair Market Value of the Common Stock or
Liquidation Value of the Preferred Stock applied or delivered
pursuant to (i), (ii), (iii) or (iv) above exceeds the aggregate
Exercise Price, in no event shall the Holder be entitled to receive
any amounts from the Company.
(2) The Exercise Price may be paid in cash or by certified or
official bank check or bank cashier's check payable to the order of
the Company or by any combination of such cash or check. The Company
shall pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of the
Warrant Shares to the Holder.
(3) If the Holder exercises this Warrant in part, this Warrant
Certificate shall be surrendered by the Holder to the Company and a
new Warrant Certificate of the same tenor and for the
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<PAGE>
unexercised number of Warrant Shares shall be executed by the
Company. The Company shall register the new Warrant Certificate in
the name of the Holder or in such name or names of its transferee
pursuant to paragraph (f) hereof as may be directed in writing by
the Holder and deliver the new Warrant Certificate to the Person or
Persons entitled to receive the same. No exercise of this Warrant
shall be for less than five per cent of the total shares then
purchasable under this Warrant.
(4) Upon surrender of this Warrant Certificate in conformity
with the foregoing provisions, the Company shall transfer to the
Holder of this Warrant Certificate appropriate evidence of ownership
of the shares of Common Stock or other securities or property
(including any money) to which the Holder is entitled, registered or
otherwise placed in, or payable to the order of, the name or names
of the Holder or such transferee as may be directed in writing by
the Holder, and shall deliver such evidence of ownership and any
other securities or property (including any money) to the Person or
Persons entitled to receive the same, together with an amount in
cash in lieu of any fraction of a share as provided in paragraph (e)
below.
(c) RESTRICTIVE LEGEND. Certificates representing shares of Common Stock
issued pursuant to this Warrant shall bear a legend substantially in the form of
the legend set forth on the first page of this Warrant Certificate to the extent
that and for so long as such legend is required pursuant to the Shareholders'
Agreement.
(d) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of its authorized but unissued shares of Common Stock or other
securities of the Company from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encumbrances or restrictions on
sale and free and clear of all preemptive rights, except to the extent set forth
in the Shareholders' Agreement.
(e) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the
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<PAGE>
Current Market Price Per Common Share (as defined in paragraph (h)(3)) at the
date of such exercise.
The Company further agrees that it will not change the par value of the
Common Stock from par value $0.001 per share to any higher par value which
exceeds the Exercise Price then in effect, and will reduce the par value of the
Common Stock upon any event described in paragraph (h), that (i) provides for an
increase in the number of shares of Common Stock subject to purchase upon
exercise of this Warrant, in inverse proportion to and effective at the same
time as such number of shares is increased, but only to the extent that such
increase in the number of shares, together with all other such increases after
the date hereof, causes the aggregate Exercise Price of all Warrants (without
giving effect to any exercise thereof) to be greater than $25,000.00 or (ii)
would, but for this provision, reduce the Exercise Price below the par value of
the Common Stock.
(f) EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT.
(1) This Warrant and the Warrant Shares are subject to the
provisions of the Shareholders' Agreement and the Custodial
Agreement, including the restrictions on transfer. Each taker and
holder of this Warrant Certificate by taking or holding the same,
consents and agrees that the registered holder hereof may be treated
by the Company and all other persons dealing with this Warrant
Certificate as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented hereby. The
Holder, by its acceptance of this Warrant, will be subject to the
provisions of, and will have the benefits of, the Shareholders'
Agreement and the Custodial Agreement to the extent set forth
therein.
(2) Subject to compliance with the transfer restrictions set
forth in the Shareholders' Agreement, upon surrender of this Warrant
to the Company, together with the attached Warrant Assignment Form
duly executed, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee or assignees named
in such instrument of assignment and, if the Holder's entire
interest is not being assigned, in the name of the Holder and this
Warrant shall promptly be canceled.
(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
6
<PAGE>
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.
(h) ANTI-DILUTION PROVISIONS. The Exercise Price of this Warrant and the
number of shares of Common Stock for which this Warrant may be exercised shall
be subject to adjustment from time to time upon the occurrence of certain events
as provided in this paragraph (h); provided that notwithstanding anything to the
contrary contained herein, the Exercise Price shall not be less than the par
value of the Common Stock, as such par value may be reduced from time to time in
accordance with paragraph (e).
(1) in case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on Common Stock
payable in Common Stock, (ii) subdivide or split the outstanding
Common Stock, (iii) combine or reclassify the outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares of
its capital stock in a reclassification of Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), the
Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such
subdivision, split, combination or reclassification shall be
proportionately adjusted so that, giving effect to paragraph (h)(6),
the exercise of this Warrant after such time shall entitle the
holder to receive the aggregate number of shares of Common Stock or
other securities of the Company (or shares of any security into
which such shares of Common Stock have been reclassified pursuant to
clause (iii) or (iv) above) which, if this Warrant had been
exercised immediately prior to such time, such holder would have
owned upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, split, combination or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) In case the Company shall fix a record date for the making
of a distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of
indebtedness, cash, assets or other property (other than dividends
payable in Common Stock), the Exercise Price to be in effect after
such record date shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date
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<PAGE>
by a fraction, the numerator of which shall be the Current Market
Price Per Common Share on such record date, less the fair market
value (such fair market value shall be determined by the Board of
Directors of the Company; provided that if the Principal Holders
shall object to any such determination, the Board of Directors shall
retain an independent appraiser reasonably satisfactory to the
Principal Holders to determine such fair market value) of the
portion of the assets, cash, other property or evidence of
indebtedness so to be distributed which is applicable to one share
of Common Stock, and the denominator of which shall be such Current
Market Price Per Common Share. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event
that such distribution is not so made, the Exercise Price shall
again be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed.
(3) For the purpose of any computation, on any determination
date, the Current Market Price Per Common Share shall be deemed to
be the avenge (weighted by daily trading volume) of the Daily Prices
(as defined below) per share of the Common Stock for the 20
consecutive trading days ending three days prior to such date.
"Daily Price" means (1) if the shares of Common Stock then are
listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the
closing price on such day as reported on the NYSE Composite
Transactions Tape; (2) if the shares of Common Stock then are not
listed and traded on the NYSE, the closing price on such day as
reported by the principal national securities exchange on which the
shares are listed and traded; (3) if the shares of Common Stock then
are not listed and traded on any such securities exchange, the last
reported sale price on such day on the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ"); (4) if the shares of Common Stock then are not
listed and traded on any such securities exchange and not traded on
the NASDAQ National Market, the average of the highest reported bid
and lowest reported asked price on such day as reported by NASDAQ;
or (5) if such shares are not listed and traded on any such
securities exchange, not traded on the NASDAQ National Market and
bid and asked prices are not reported by NASDAQ, then the average of
the closing bid and asked prices, as reported by The Wall Street
Journal for the over-the-counter market. If on any determination
date the shares of Common Stock are not quoted by any such
organization, the Current Market Price Per Common
8
<PAGE>
Share shall be (X) during the first 24 months following the date
hereof, the price per share of Series C Preferred Stock of the
Company issued on the date hereof compounded on a monthly basis at
an annual rate of 20% per annum and (Y) thereafter, a value that is
set annually by the Board, without regard to considerations of the
lack of liquidity, applicable regulatory restrictions or any of the
transfer restrictions or other obligations imposed on such shares
set forth in the Shareholders' Agreement and the Custodial
Agreement. If the Principal Holders shall object to any
determination by the Board of Directors of the Current Market Price
Per Common Share, the Current Market Price Per Common Share shall be
the fair market value per share of the applicable class of Common
Stock as determined by an independent appraiser retained by the
Company at its expense and reasonably acceptable to the Principal
Holders. For purposes of any computation under this paragraph (h),
the number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Company.
(4) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one percent in such price; provided that any adjustments which
by reason of this paragraph (h)(4) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (h) shall be made
to the nearest one tenth of a cent or to the nearest hundredth of a
share, as the case may be.
(5) In the event that, at any time as a result of the
provisions of this paragraph (h), the holder of this Warrant upon
subsequent exercise shall become entitled to receive any shares of
capital stock or other securities of the Company other than Common
Stock, the number of such other shares so receivable upon exercise
of this Warrant shall thereafter be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained herein.
(6) Upon each adjustment of the Exercise Price as a result of
the calculations made in paragraphs (h)(l) and (2) hereof, the
number of shares for which this Warrant is exercisable immediately
prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of
shares of Common Stock obtained by (i) multiplying the
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<PAGE>
number of shares covered by this Warrant immediately prior to this
adjustment of the number of shares by the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
(7) The Company shall notify all Holders of the fixing a
record date for the purpose of payment of a cash dividend to holders
of Common Stock as soon as reasonably practicable, but in no event
less than 20 days prior to any such record date.
(8) Not less than 10 nor more than 30 days prior to the record
date or effective date, as the case may be, of any action which
requires or might require an adjustment or readjustment pursuant to
this paragraph (h), the Company shall forthwith file in the custody
of this Secretary or an Assistant Secretary at its principal
executive office and with its stock transfer agent or its warrant
agent, if any, an officers' certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment and the manner
of computing such adjustment. Each such officers' certificate shall
be signed by the chairman, president or chief financial officer of
the Company and by the secretary or any assistant secretary of the
Company. Each such officers' certificate shall be made available at
all reasonable times for inspection by the Holder or any holder of a
Warrant executed and delivered pursuant to paragraph (f) and the
Company shall, forthwith after each such adjustment, mail a copy, by
first-class mail, of such certificate to the Holder.
(9) The Holder shall, at its option, be entitled to receive,
in lieu of the adjustment pursuant to paragraph (h)(2) otherwise
required thereof, on the date of exercise of the Warrants, the
evidences of indebtedness, other securities, cash, property or other
assets which such Holder would have been entitled to receive if it
had exercised its Warrants for shares of Common Stock immediately
prior to the record date with respect to such distribution. The
Holder may exercise its option under this paragraph (h)(9) by
delivering to the Company a written notice of such exercise within
seven days of its receipt of the certificate of adjustment required
pursuant to paragraph (h)(8) to be delivered by the Company in
connection with such distribution.
10
<PAGE>
(i) CONSOLIDATION, MERGER, OR SALE OF ASSETS. In case of any
consolidation of the Company with, or merger of the Company into,
any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock) or any sale or transfer of all or substantially all of the
assets of the Company or of the Person formed by such consolidation
or resulting from such merger or which acquires such assets, as the
case may be, the Holder shall have the right thereafter to exercise
this Warrant for the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock for
which this Warrant may have been exercised immediately prior to such
consolidation, merger, sale or transfer, assuming (i) such holder of
Common Stock is not a Person with which the Company consolidated or
into which the Company merged or which merged into the Company or to
which such sale or transfer was made, as the case may be
("constituent Person"), or an Affiliate of a constituent Person and
(ii) in the case of a consolidation merger, sale or transfer which
includes an election as to the consideration to be received by the
holders, such holder of Common Stock failed to exercise its rights
of election, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or
transfer (provided that if the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, sale
or transfer is not the same for each share of Common Stock held
immediately prior to such consolidation, merger, sale or transfer by
other than a constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this
paragraph (i) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or
transfer by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the
non-electing shares). Adjustments for events subsequent to the
effective date of such a consolidation, merger and sale of assets
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. In any such event,
effective provisions shall be made in any contract of sale,
conveyance, lease or transfer, or otherwise so that the provisions
set forth herein for the protection of the rights of the Holder
shall thereafter continue to be applicable; and any such resulting
or surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash
and property. The provisions of this paragraph (i) shall similarly
apply to successive consolidations, mergers, sales, leases or
transfers.
(j) NOTICES. Any notice, demand or delivery authorized by this
Warrant Certificate shall be in writing and shall be given to the
Holder or the Company as the case may be, at its address (or
telecopier number) set forth below, or such
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<PAGE>
other address (or telecopier number) as shall have been furnished to
the party giving or making such notice, demand or delivery:
If to the Company: Nextel Partners, Inc.
4500 Carillon Point
Kirkland, WA 98033
Telecopy: (425) 828-8098
Attention: General Counsel
with a copy to: Friedman Kaplan & Seiler LLP
875 Third Avenue, 8th Floor
New York, NY 10022
Telecopy: (212) 355-6501
Attention: Gary D. Friedman
If to the Holder: Madison Dearborn Capital Partners II, L.P.
3 First National Plaza
Suite 3800
Chicago, IL 60602
Telecopy: (312) 895-1226
Each such notice, demand or delivery shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy
number specified herein and the intended recipient confirms the
receipt of such telecopy or (ii) if given by any other means, when
received at the address specified herein.
(k) RIGHTS OF THE HOLDER. Prior to the exercise of any
Warrant, the Holder shall not, by virtue hereof, be entitled to any
rights of a shareholder of the Company, including, without
limitation, the right to vote, to receive dividends or other
distributions or to receive any notice of meetings of shareholders
or any notice of any proceedings of the Company except as may be
specifically provided for herein.
(l) GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS
ARISING HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND THE PERFORMANCE
THEREOF SHALL BE GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS.
(m) JURISDICTION. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based
on any matter arising out
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<PAGE>
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 paragraph (j) shall
be deemed effective service of process on such party.
(n) 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.
(o) AMENDMENTS; WAIVERS. Any provision of this Warrant
Certificate may be amended or waived if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by
the Holder and the Company, or in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by
either 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.
(p) SUCCESSORS AND ASSIGNS. This Warrant and the rights
evidenced thereby shall inure to the benefit of and be binding upon
the Company and the Holder and their respective successors and
assigns.
(q) HEADINGS. The heading used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
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<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant Certificate
to be signed by its duly authorized officer and to be dated as of
January 29, 1999.
NEXTEL PARTNERS, INC.
By /s/ John D. [ILLEGIBLE]
-------------------------------------
Name:
Title:
Acknowledged and Agreed:
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/ John D. [ILLEGIBLE]
----------------------------------
Title: Managing Director
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<PAGE>
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant by execution of
the Warrant Exercise Subscription Form)
To: Nextel Partners, Inc.
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Common Stock, par value $0.001 per share, of
Nextel Partners, Inc.
The undersigned intends to exercise the Warrant to purchase _____ shares
of Common Stock (the "Shares") at $0.01 per Share (the Exercise Price currently
in effect pursuant to the Warrant). The undersigned intends to pay the aggregate
Exercise Price for the Shares in cash, certified or official bank or bank
cashier's check (or a combination of cash and check) as indicated below.
-OR-
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") and wishes, in lieu of paying the Exercise
Price of $0.01 per share currently in effect pursuant to the Warrant, to receive
that number of shares reduced by a number of shares of Common Stock having an
aggregate Fair Market Value (as defined in the Warrant) equal to the aggregate
Exercise Price for the Shares.
Date: _______________ ____, ______.
___________________________________
(Signature of Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
Payment: $___________ cash
$___________ check
<PAGE>
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant after delivery of the
Warrant Exercise Notice)
To: Nextel Partners, Inc.
The undersigned irrevocably exercises the Warrant for the purchase of
______ shares of Common Stock (the "Shares"), par value $0.001 per share, of
Nextel Partners, Inc. (the "Company") at $0.01 per Share (the Exercise Price
currently in effect pursuant to the Warrant) and herewith makes payment of
$___________ (such payment being made in cash or by certified or official bank
or bank cashier's check payable to the order of the Company or by any permitted
combination of such cash or check), all on the terms and conditions specified in
the within Warrant Certificate, surrenders this Warrant Certificate and all
right, title and interest therein to the Company and directs that the Shares
deliverable upon the exercise of this Warrant be registered or placed in the
name and at the address specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
___________ shares of Common Stock (the "Shares"), par value $0.001 per share,
of Nextel Partners, Inc. (the "Company") at $0.01 per Share (the Exercise Price
currently in effect pursuant to the Warrant) (provided that in lieu of payment
of $________, the undersigned will receive a number of Shares reduced by a
number of shares of Common Stock having an aggregate Fair Market Value (as
defined in the Warrant) equal to the aggregate Exercise Price for the Shares),
all on the terms and conditions specified in the within Warrant Certificate,
surrenders this Warrant Certificate and all right, title and interest therein to
the Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
<PAGE>
Date: _______________ ____, ______.
___________________________________
(Signature of Owner)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
17
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Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised portion of the Warrant evidenced by the
within Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
WARRANT ASSIGNMENT FORM
Dated ________
FOR VALUE RECEIVED, ___________________________________________________
hereby sells, assigns and transfers unto,
______________________________________________________________ (the "Assignee"),
(please type or print in block letters)
_______________________________________________________________________
(insert address)
its right to purchase up to shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the same on the books
of the Company, with full power of substitution in the premises.
Signature ________________
<PAGE>
Exhibit 10.45
NEXTEL PARTNERS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1. PURPOSE
This Employee Stock Purchase Plan (this "Plan") is intended to advance
the interests of Nextel Partners, Inc. (the "Company") and its stockholders by
strengthening the Company's ability to attract and retain employees who have the
training, experience and ability to enhance the profitability of the Company and
to reward employees of the Company and its subsidiaries upon whose judgment,
initiative and effort the successful conduct and development of their business
largely depend. It is further intended that options granted pursuant to this
Plan shall constitute options granted pursuant to an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
Section 2. ADMINISTRATION
This Plan shall be administered by a committee (the "Committee")
comprised of two or more members of the Board of Directors. The members of the
Committee shall be appointed by, and shall serve at the pleasure of, the Board
of Directors, and each of the members of the Committee shall be a "disinterested
person" within the meaning of Rule 16b-3 under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule to
the same effect. A majority of the Committee shall constitute a quorum, and the
action of a majority of the members of the Committee present at any meeting at
which a quorum is present, or acts unanimously approved in writing, shall be the
acts of the Committee. The interpretation and construction by the Committee of
any provision of this Plan or any option granted hereunder shall be final. No
member of the Committee shall be liable for any action or determination made in
good faith with respect hereto or any option granted hereunder.
The Committee may establish any policies or procedures that in its
discretion are relevant to the operation and administration of this Plan and may
adopt rules for the administration of this Plan. The Committee may also engage
the services of a professional plan administrator on such terms and conditions
as the Committee deems appropriate for the purposes of establishing custodial
accounts and holding shares of Common Stock acquired by employees upon the
exercise of options granted under this Plan and otherwise operating this Plan.
Section 3. ELIGIBILITY
All full-time employees of the Company or of any subsidiary of the
Company shall be offered options under this Plan to purchase shares of the
Company's Class A Common Stock, par value $.001 per share ("Common Stock"),
except that no employee
<PAGE>
shall be granted an option under this Plan if, immediately after the option was
granted, the employee would own stock possessing five percent or more of the
total combined voting power or value of all classes of stock of the Company or
of any subsidiary of the Company. For the purposes of the foregoing, stock
ownership of an individual shall be determined under the rules of Section 425(d)
of the Code, and stock that an employee may purchase under outstanding options
shall be treated as owned by the employee. For the purposes of this Plan,
"full-time employee" shall mean an employee whose customary employment is more
than 20 hours per week, and "subsidiary" shall mean any corporation that the
Company controls directly or indirectly through one or more intermediaries, by
ownership or 50 percent or more of the corporation's outstanding voting
securities.
Section 4. STOCK
The stock covered by options granted under this Plan shall be shares of
authorized but unissued or reacquired Common Stock. The aggregate number of
shares of Common Stock that may be purchased under this Plan shall not exceed
3,000,000. In the event that the number of shares covered by options to be
granted pursuant to any offering under this Plan exceeds the number of shares
available to be purchased hereunder, the shares available to be purchased shall
be allocated on a pro rata basis among the options to be granted. Shares of
Common Stock covered by options that are granted under this Plan and are
cancelled prior to exercise shall again be available for future grants under
this Plan.
Section 5. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Plan shall be evidenced by agreements
in such form as the Committee shall from time to time approve, provided that all
employees granted options hereunder shall have the same rights and privileges,
except as otherwise provided in subparagraphs (a) and (e) of this Section 5, and
provided further that such options shall comply with and be subject to the
following terms and conditions:
(a) Number of Shares. An option granted hereunder shall pertain to such
number of shares of Common Stock as shall be determined by dividing (i) the
aggregate amount of payroll deductions on behalf of the optionee during the term
of the option or, if permitted by the Committee pursuant to subparagraph (c) of
this Section 5, the aggregate amount of any lump-sum payment by the optionee to
the Company on or before the date of exercise by (ii) the "option price" (as
defined in subparagraph (b) of this Section 5). An employee may authorize annual
payroll deductions of, or (if permitted by the Committee pursuant subparagraph
(c) of this Section 5) may make lump-sum payments to the Company in an aggregate
annual amount equivalent to, not less than one percent and not more than ten
percent of his or her basic compensation. If the number of shares computed in
accordance with the foregoing includes a fraction, it will be rounded down to
the next whole number. Notwithstanding the foregoing, prior to any offering
pursuant to this Plan, the Committee may set a maximum aggregate number of
shares, subject to the aggregate Plan limitation set forth Section 4 hereof,
that may be purchased upon the
<PAGE>
exercise of options granted pursuant to the offering. In the event that
employees elect to be granted options to purchase shares in excess of such
maximum offering limitation, the number of shares purchased by optionees upon
the exercise of such options shall be reduced on a pro rata basis. For the
purposes of this Plan, "basic compensation" shall mean annual base salary and,
if applicable, commissions paid pursuant to any ongoing sales incentive
compensation program, excluding cash bonuses and all forms of noncash
compensation.
(b) Option Price. The option price per share payable upon the exercise
of an option granted under this Plan shall be an amount equal to 85 percent of
the lesser of (i) the fair market value of a share of Common Stock on the date
on which the option is granted or (ii) the fair market value of a share of
Common Stock on the date on which the option is exercised. For the purposes of
this Plan, "fair market value" shall mean the closing price of the Common Stock
on the NASDAQ National Market System on the last trading date preceding the date
of grant or the date of exercise, as the case may be.
(c) Medium and Time of Payment of Option Price. The option price shall
be payable in full on the date of exercise pursuant to uniform policies and
procedures established by the Committee. The funds required for such payment
shall be derived by regular withholding from an optionee's basic compensation in
approximately equal installments over the term of the option or, at the
discretion of the Committee, by a lump-sum payment by the optionee to the
Company on or before the date of exercise. Any funds withheld from an optionee's
compensation in excess of the actual option price shall be refunded to the
optionee. No interest shall accrue on the optionee funds held by the Company
during the term of the option. An optionee shall have the right at any time to
terminate such withholding, or to increase or decrease the amount thereof
(subject to the limitations set forth in subparagraph (a) of this Section 5), by
delivering written notice thereof to the Company within such period of time
prior to the next payroll withholding date as the Committee may specify in any
grant of options under this Plan. An optionee shall have the right to cancel his
or her option in whole or in part, and to obtain a refund of amounts withheld
from his or her compensation, by delivering written notice thereof to the
Company within such period of time prior to the date of exercise as the
Committee may specify in any grant of options under this Plan. Such amounts
shall thereafter be paid to the optionee within a reasonable period of time. No
interest shall accrue on such amounts. Any written notice provided for in this
subparagraph (c) shall be addressed to such officer, employee, department or
agent of the Company as the Committee may specify in any grant of options under
this Plan and shall not be deemed to have been delivered until received by such
officer, employee, department or agent.
(d) Exercise and Term of Options. The date of exercise on which the
shares of Common Stock covered by an option are to be purchased by the optionee
shall be the last day of the term of the option, except as otherwise provided in
this Plan. The Committee shall establish the term of each option granted
hereunder, which shall not be more than one year or less than three months from
the date of grant; provided, however, that all options granted to employees
pursuant to any offering hereunder must be for the same term. Except to the
extent that an option has been cancelled by the optionee prior to
<PAGE>
the date of exercise in accordance with subparagraph (c) of this Section 5, it
shall be deemed automatically exercised on the date of exercise to the extent of
payments received from the optionee in accordance with subparagraph (c) of this
Section 5.
(e) Accrual Limitation. No option shall permit the rights of an
optionee to purchase stock under all "employee stock purchase plans" (as defined
in Section 423 of the Code) of the Company and its subsidiaries to accrue at a
rate that exceeds $25,000 of fair market value of such stock (determined at the
time the option is granted) for each calendar year in which the option is
outstanding at any time. For the purposes of this subparagraph (e) and
subparagraphs (f) - (i) of this Section 5: (i) the right to purchase stock under
an option accrues when the option (or any portion thereof) first becomes
exercisable during the calendar year (ii) the right to purchase stock under an
option accrues at the rate provided in the option, but in no case may such rate
exceed $25,000 of fair market value of such stock (determined at the time the
option is granted) for any one calendar year; and (iii) a right to purchase
stock that has accrued under an option granted pursuant to this Plan may not be
carried over to any other option.
(f) Termination of Employment. In the event that an optionee shall
cease to be employed by the Company or any subsidiary of the Company for any
reason (including, without limitation, death or disability) before the date of
exercise, his or her option shall terminate immediately upon cessation of his or
her employment, and any amounts withheld from the optionee's compensation for
purposes of this Plan shall be refunded. No interest shall accrue on such
amounts.
(g) Transfer of Options. No option granted under this Plan may be sold,
assigned, hypothecated, pledged or otherwise transferred by operation of law or
otherwise by an optionee, and no option granted under this Plan shall be subject
to attachment or similar process.
(h) Adjustments. The Committee may make or provide for such adjustments
in the option price and in the number or kind of shares of Common Stock or other
securities covered by outstanding options as the Committee may determine to be
equitably required in order to prevent dilution or expansion of the rights of
optionees that would otherwise result from (i) any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, (ii) any merger, consolidation, separation, reorganization,
partial or complete liquidation, issuance of rights or warrants to purchase
stock or (iii) any other corporate transaction or event having an effect similar
to any of the foregoing. The Committee may also make or provide for such
adjustments in the number or kind of shares of Common Stock or other securities
that may be sold under this Plan as the Committee may determine is appropriate
to reflect any transaction or event described in clause (i) of the preceding
sentence.
(i) Rights as a Stockholder. An optionee shall have no rights as a
stockholder with respect to any Common Stock covered by his or her option until
the date of exercise following payment in full. No adjustment shall be made for
dividends or distributions of
<PAGE>
any kind or other rights for which the record date is prior to the date of
exercise, except as provided in subparagraph (h) of this Section 5.
(j) Nondistribution Purpose. Unless the shares of Common Stock covered
by options granted under this Plan are registered under the Securities Act of
1933, as amended (the "Securities Act"), each option granted hereunder shall be
granted on the condition that the purchases of shares of Common Stock hereunder
shall not be with a view to resale or distribution or any participation therein.
Resales of such shares without registration under the Securities Act may not be
made unless, in the opinion of counsel for the Company, such resale is
permissible under the Securities Act and any other applicable laws or applicable
rules or regulations of any governmental agency.
(k) Other Provisions. The option agreements authorized under this Plan
may contain such other provisions as the Committee may deem advisable, including
but not limited to a holding period of such duration as the Committee may deem
appropriate before shares of Common Stock purchased upon exercise of options
granted under this Plan may be resold or otherwise disposed of by the employee
and such penalty as the Committee may deem appropriate for failure to satisfy
any such holding period, provided that no such provision may in any way be in
conflict with the terms of this Plan or Section 423 of the Code.
Section 6. TERM OF PLAN
Options may be granted under this Plan for a period of 10 years from
the date on which this Plan is adopted by the Board of Directors.
Section 7. AMENDMENT OF PLAN
This Plan may be amended from time to time by the Board of Directors,
but without further approval of the stockholders, no such amendment shall
increase the aggregate number of shares of Common Stock that may be issued and
sold hereunder (except as provided in the last sentence of subparagraph (h) of
Section 5 hereof) or change the designations in Section 3 hereof of the class of
employees eligible to be granted options hereunder. Furthermore, without further
approval of the stockholders, this Plan may not be amended in any manner that
would cause options granted hereunder to fail to meet the requirements
applicable to "employee stock purchase plans" as defined in Section 423 of the
Code or cause Rule 16b-3 under Section 16(b) of the Exchange Act (or any
successor rule to the same effect) to cease to be applicable to this Plan.
Section 8. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to options granted under this Plan shall be used for general corporate
purposes.
Section 9. APPROVAL OF STOCKHOLDERS
<PAGE>
This Plan shall not take effect until approved by the affirmative vote
of a majority of the shares of Common Stock represented in person or by proxy at
a meeting of the holders of Common Stock at which a quorum is present. Such
approval must be obtained within 12 months after the on which this Plan is
adopted by the Board of Directors.
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Nextel Partners Operating Corp., Inc., a Delaware corporation
Nextel WIP Lease Corp., a Delaware corporation
NPCR, Inc., a Delaware corporation
NPFC, Inc., a Nevada corporation
Nextel Partners Equipment Corporation, a Nevada corporation
Nextel Partners of Upstate New York, Inc., a Delaware corporation
Nextel WIP License Corp., a Delaware corporation
<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
January 27, 2000
<PAGE>
Exhibit 99.1
CONSENT TO BE NAMED IN REGISTRATION STATEMENT
I, the undersigned, hereby consent to be named as a nominee for election
as a director of Nextel Partners, Inc. (the "Company") in the Form S-1
Registration Statement to be filed by the Company with the Securities and
Exchange Commission on or about January 26, 2000.
Dated: January 25, 2000
Signature: /s/ Steven Dodge
---------------------------------
Steven Dodge
